UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 31, 2014
or
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____________ to _____________
Commission File No. 001-31326
SEVION THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
Delaware | 84-1368850 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
4045 Sorrento Valley Boulevard
San Diego, CA 92121
(Address of principal executive offices)
(858) 909-0749
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes: x | No: ¨ |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes: x | No: ¨ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ | Accelerated filer ¨ |
Non-accelerated filer ¨ | Smaller reporting company x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes: ¨ | No: x |
13,866,627 shares of the issuer’s common stock, par value $0.01 per share, were outstanding as of January 31, 2015.
SEVION THERAPEUTICS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
i |
PART I. FINANCIAL INFORMATION.
Item 1. | Financial Statements (Unaudited). |
Certain information and footnote disclosures required under United States generally accepted accounting principles have been condensed or omitted from the following consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. However, Sevion Therapeutics, Inc., a Delaware corporation, and its wholly owned subsidiaries, Senesco, Inc., a New Jersey corporation and Fabrus, Inc., a Delaware corporation (collectively, “Sevion” or the “Company”), believe that the disclosures are adequate to assure that the information presented is not misleading in any material respect.
The results of operations for the interim periods presented herein are not necessarily indicative of the results to be expected for the entire fiscal year.
1 |
SEVION THERAPEUTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
December 31, | June 30, | |||||||
2014 | 2014 | |||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 2,107,452 | $ | 6,111,340 | ||||
Accounts receivable | 203,915 | 43,133 | ||||||
Prepaid research supplies and expenses | 62,447 | 1,069,925 | ||||||
Total Current Assets | 2,373,814 | 7,224,398 | ||||||
Equipment, furniture and fixtures, net | 259,277 | 233,475 | ||||||
Patent costs, net | 283,393 | 2,178,867 | ||||||
Acquired research and development | 9,800,000 | 9,800,000 | ||||||
Goodwill | 5,780,951 | 13,902,917 | ||||||
Security deposits | 55,941 | 5,171 | ||||||
TOTAL ASSETS | $ | 18,553,376 | $ | 33,344,828 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable | $ | 1,305,241 | $ | 901,180 | ||||
Accrued expenses | 1,094,017 | 923,990 | ||||||
Deferred revenue | 150,000 | - | ||||||
Total Current Liabilities | 2,549,258 | 1,825,170 | ||||||
Deferred tax liability | 3,920,000 | 3,920,000 | ||||||
Deferred rent | 45,224 | - | ||||||
Other liabilities | 99,728 | 99,728 | ||||||
TOTAL LIABILITIES | 6,614,210 | 5,844,898 | ||||||
STOCKHOLDERS' EQUITY: | ||||||||
Convertible preferred stock, $0.01 par value, authorized 5,000,000 shares Series A 10,297 shares issued and 580 and 580 shares outstanding, respectively (liquidation preference of $594,500 at December 31, 2014 and June 30, 2014) | 6 | 6 | ||||||
Common stock, $0.01 par value, authorized 500,000,000 shares, issued and outstanding 13,866,627 and 13,846,361, respectively | 138,666 | 138,463 | ||||||
Capital in excess of par | 116,042,917 | 115,631,726 | ||||||
Accumulated deficit | (104,242,423 | ) | (88,280,265 | ) | ||||
Total Stockholders' Equity | 11,939,166 | 27,489,930 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 18,553,376 | $ | 33,334,828 |
See Notes to Condensed Consolidated Financial Statements
2 |
SEVION THERAPEUTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(unaudited)
Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Licensing Revenue | $ | - | $ | - | $ | - | $ | 100,000 | ||||||||
Operating expenses: | ||||||||||||||||
General and administrative | 1,253,226 | 858,090 | 2,027,826 | 1,714,721 | ||||||||||||
Research and development | 1,371,930 | 730,817 | 3,492,086 | 1,541,754 | ||||||||||||
Impairment of goodwill | 8,121,966 | - | 8,121,966 | - | ||||||||||||
Write-off of patents | - | - | 2,290,836 | 185,161 | ||||||||||||
Total operating expenses | 10,747,122 | 1,588,907 | 15,932,714 | 3,441,636 | ||||||||||||
Loss from operations | (10,747,122 | ) | (1,588,907 | ) | (15,932,714 | ) | (3,341,636 | ) | ||||||||
Interest income (expense) - net | 995 | (30,731 | ) | 2,780 | (62,335 | ) | ||||||||||
Net loss | (10,746,127 | ) | (1,619,638 | ) | (15,929,934 | ) | (3,403,971 | ) | ||||||||
Preferred dividends | (17,722 | ) | (20,617 | ) | (32,222 | ) | (42,240 | ) | ||||||||
Loss applicable to common shares | (10,763,849 | ) | (1,640,255 | ) | (15,962,156 | ) | (3,446,211 | ) | ||||||||
Other comprehensive loss | - | - | - | - | ||||||||||||
Comprehensive loss | $ | (10,763,849 | ) | $ | (1,640,255 | ) | $ | (15,962,156 | ) | $ | (3,446,211 | ) | ||||
Basic and diluted net loss per common share | $ | (0.78 | ) | $ | (0.48 | ) | $ | (1.15 | ) | $ | (1.20 | ) | ||||
Basic and diluted weighted-average number of common shares outstanding | 13,866,627 | 3,443,109 | 13,856,439 | 2,875,517 |
See Notes to Condensed Consolidated Financial Statements
3 |
SEVION THERAPEUTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31, 2014
(unaudited)
Capital in Excess | Accumulated | Stockholders' | ||||||||||||||||||||||||||
Preferred Stock | Common Stock | of Par Value | Deficit | Equity | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Balance at June 30, 2014 | 580 | $ | 6 | 13,846,361 | $ | 138,463 | $ | 115,631,726 | $ | (88,280,266 | ) | $ | 27,489,929 | |||||||||||||||
Stock-based compensation | - | - | - | - | 379,171 | - | 379,171 | |||||||||||||||||||||
Dividends paid | - | - | 20,266 | 203 | 32,020 | (17,723 | ) | 14,500 | ||||||||||||||||||||
Dividends accrued and unpaid at December 31, 2014 | - | - | - | - | - | (14,500 | ) | (14,500 | ) | |||||||||||||||||||
Net loss | - | - | - | - | - | (15,929,934 | ) | (15,929,934 | ) | |||||||||||||||||||
Balance at December 31, 2014 | 580 | $ | 6 | 13,866,627 | $ | 138,666 | $ | 116,042,917 | $ | (104,242,423 | ) | $ | 11,939,166 |
See Notes to Condensed Consolidated Financial Statements
4 |
SEVION THERAPEUTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended December 31, | ||||||||
2014 | 2013 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (15,929,934 | ) | $ | (3,403,971 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Stock-based compensation expense | 379,171 | 467,257 | ||||||
Depreciation and amortization | 100,220 | 153,223 | ||||||
Impairment of goodwill | 8,121,966 | - | ||||||
Write-off of intangibles | 2,290,836 | 185,161 | ||||||
Write-off of prepaid research supplies | 669,750 | - | ||||||
Deferred rent | 45,224 | - | ||||||
(Increase) decrease in operating assets: | ||||||||
Accounts receivable | (160,782 | ) | - | |||||
Prepaid expenses and other current assets | 337,728 | 430,755 | ||||||
Security deposit | (50,770 | ) | - | |||||
Increase (decrease) in operating liabilities: | ||||||||
Accounts payable | 404,061 | (159,692 | ) | |||||
Accrued expenses | 170,026 | 234,863 | ||||||
Deferred revenue | 150,000 | - | ||||||
Net cash used in operating activities | (3,472,504 | ) | (2,092,404 | ) | ||||
Cash flows from investing activities: | ||||||||
Capitalized Patent costs | (420,339 | ) | (253,232 | ) | ||||
Purchase of equipment, furniture and fixtures | (111,045 | ) | - | |||||
Net cash used in investing activities | (531,384 | ) | (253,232 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of common stock and warrants, net and exercise of warrants and options | - | 6,865,237 | ||||||
Net cash provided by financing activities | - | 6,865,237 | ||||||
Net (decrease) increase in cash and cash equivalents | (4,003,888 | ) | 4,519,601 | |||||
Cash and cash equivalents at beginning of period | 6,111,340 | 1,602,294 | ||||||
Cash and cash equivalents at end of period | $ | 2,107,452 | $ | 6,121,895 | ||||
Supplemental disclosure of non-cash transactions: | ||||||||
Conversion of preferred stock into common stock | $ | - | $ | 731 | ||||
Issuance of common stock for dividend payments on preferred stock | $ | 32,222 | $ | 47,739 | ||||
Dividends accrued on preferred stock | $ | (14,500 | ) | $ | (14,500 | ) | ||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest | $ | 132 | $ | 64,351 |
See Notes to Condensed Consolidated Financial Statements
5 |
SEVION THERAPUETICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited)
Note 1 - Basis of Presentation:
The financial statements included herein have been prepared by Sevion Therapeutics, Inc. (the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2014.
On September 29, 2014, the Company changed its name from Senesco Technologies, Inc. to Sevion Therapeutics, Inc.
In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting solely of those which are of a normal recurring nature, necessary to present fairly its financial position as of December 31, 2014 and the results of its operations for the three and six months ended December 31, 2014 and cash flows for the six months ended December 31, 2014.
Certain prior year amounts have been reclassified from general and administrative expenses to research and development expenses for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations or cash flows from operations in the Consolidated Condensed Statement of Cash Flows, and had no effect on the previously reported Consolidated Condensed Statement of Operations for any period.
Interim results are not necessarily indicative of results for the full fiscal year.
Note 2 – Liquidity:
As shown in the accompanying condensed consolidated financial statements, the Company has a history of losses with an accumulated deficit of $104,242,423 and has generated minimal revenues by licensing its technology to companies willing to share in its development costs. In addition, the Company’s technology may not be ready for commercialization for several years. The Company expects to continue to incur losses for the next several years because it anticipates that its expenditures on research and development and administrative activities will significantly exceed its revenues during that period. The Company cannot predict when, if ever, it will become profitable.
On October 22, 2014, the Company’s board of directors decided to suspend all development of the Company’s Factor 5A technology based on the Company’s limited capital resources and the totality of the safety and efficacy data resulting from our Phase 1b/2a clinical trial. Depending on the Company’s future capital resources, possible options for the program are to (i) reformulate the drug to alleviate some of the adverse events observed in the clinical trial and to enhance the efficacy, (ii) partner or sell the program or (iii) discontinue development. The Company’s board of directors continues to evaluate these alternatives.
6 |
Also, on October 22, 2014, the Company’s board of directors decided to close the Company’s Bridgewater, New Jersey office on November 30, 2014 and to terminate the research agreement with the University of Waterloo on December 31, 2014 in order to consolidate all of the Company’s operations in its San Diego, California location. In connection with the closure and the termination of the agreement with the University of Waterloo, the Company accrued $65,000 of termination benefits and associated employee costs. These costs are reported as research and development expenses and as accrued expenses at December 31, 2014.
In addition, given the Company’s limited capital resources, in December 2014, the Company decided to temporarily reduce its research and development spending on the Company’s antibody program. In the meantime, the Company continues to evaluate all strategic alternatives, including strategic partnering arrangements, acquiring additional assets, divesting certain existing assets, and/or equity or debt financings. We cannot assure you that the Company will be able to consummate a strategic transaction or a financing transaction.
As of December 31, 2014, the Company had cash and cash equivalents in the amount of $2,107,452, which consisted of checking accounts. The Company estimates that its cash as of December 31, 2014 will cover its expenses through at least March 31, 2015.
The Company will need additional capital to operate and expand its research program and plans to raise additional capital possibly through the exercise of outstanding warrants, placement of debt instruments, equity instruments or any combination thereof. However, the Company may not be able to obtain adequate funds for its operations when needed or on acceptable terms. If the Company is unable to raise additional funds, it will need to do one or more of the following:
· | delay, scale-back or eliminate some or all of its research and product development programs; |
· | license third parties to develop and commercialize products or technologies that it would otherwise seek to develop and commercialize itself; |
· | seek strategic alliances or business combinations; |
· | attempt to sell the Company; |
· | cease operations; or |
· | declare bankruptcy. |
Note 3 – Intangibles
The Company conducts research and development activities, the cost of which is expensed as incurred, in order to generate patents that can be licensed to third parties in exchange for license fees and royalties. Because the patents are the basis of the Company’s future revenue, the patent costs are capitalized. The capitalized patent costs represent the outside legal and filing fees incurred by the Company to submit and undertake all necessary efforts to have such patent applications issued as patents. The Company incurred $159,862 and $110,289 of such costs for the three months ended December 31, 2014 and 2013, respectively. The Company incurred $420,339 and $253,232 of such costs for the six months ended December 31, 2014 and 2013, respectively.
The length of time that it takes for an initial patent application to be approved is generally between four to six years. However, due to the unique nature of each patent application, the actual length of time may vary. If a patent application is denied, the associated cost of that application would be written off. Additionally, should a patent application become impaired during the application process, the Company would write down or write off the associated cost of that patent application.
7 |
Issued patents are being amortized over a period of 17 years from inception, the expected economic life of the patent. During the three months ended December 31, 2014 and 2013, the Company recorded amortization expense in the amount of $0 and $77,910, respectively. During the six months ended December 31, 2014 and 2013, the Company recorded amortization expense in the amount of $24,977 and $152,180, respectively.
The Company assesses the impairment in value of intangible assets whenever events or circumstances indicate that their carrying value may not be recoverable. Factors the Company considers important which could trigger an impairment review include the following:
• | significant negative industry trends; |
• | significant underutilization of the assets; |
• | significant changes in how the Company uses the assets or its plans for their use; and |
• | changes in technology and the appearance of competing technology. |
If a triggering event occurs and the Company's review determines that the future undiscounted cash flows related to the asset group will not be sufficient to recover their carrying value, the Company will reduce the carrying values of these assets down to its estimate of fair value and continue amortizing them over their remaining useful lives.
Due to the decrease in the market value of the Company, the Company determined that there was a triggering event that required the Company to review if there had been an impairment to the Acquired Research and Development in the amount of $9,800,000, capitalized patent costs in the amount of $283,393 and the Goodwill in the amount of $13,902,917 as of December 31, 2014. The Company first evaluated the Company’s Acquired Research and Development and Capitalized Patent Costs for impairment. Based on that review, the Company determined that no impairment exists at December 31, 2014. The Company then evaluated its goodwill. The Company’s evaluation used its market capitalization plus a control premium (which is considered a level 2 input in the fair value hierarchy) in determining the amount of the impairment. The Company concluded that there is an impairment based on the significant change in the Company’s market value during the period. As a result of this evaluation, the Company determined that the Goodwill was impaired and recorded an impairment charge in the amount of $8,121,966 at December 31, 2014.
In October 2014, the Company decided to continue to develop its intellectual property only with respect to the human health therapeutic targets and would be reviewing such patents on a patent by patent basis to determine which specific ones to continue to develop. Also, in October 2014, the Company decided to suspend all development of the Factor 5A technology based on the Company’s limited capital resources and the totality of the safety and efficacy data resulting from our Phase 1b/2a clinical trial. As the Company is unable to determine if or when the development will be resumed, the Company was unable to determine what the future undiscounted cash flows from these patents could be. Therefore, as of September 30, 2014, the Company determined that carrying value of its patents and patent applications related to Factor 5A were impaired. Accordingly, the Company recorded an impairment of the full carrying value of its patents related to Factor 5A in the amount of $2,290,836 on September 30, 2014.
Additionally, during the quarter ended September 30, 2014, the Company concluded its Phase 1b/2a clinical trial but did not use all of the material purchased for the clinical trial. As the Company has put the clinical program for this product candidate on hold, the Company wrote-off the cost of the remaining material in the amount of $669,750 at September 30, 2014.
Note 4 - Loss Per Share:
Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of the Company’s Common Stock assumed to be outstanding during the period of computation. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional shares of Common Stock that would have been outstanding if the potential shares of Common Stock had been issued and if the additional shares of Common Stock were dilutive.
8 |
For all periods presented, basic and diluted loss per share are the same, as any additional Common Stock equivalents would be anti-dilutive. Potentially dilutive shares of Common Stock have been excluded from the calculation of the weighted average number of dilutive shares of Common Stock as follows:
December 31, | ||||||||
2014 | 2013 | |||||||
Common Stock to be issued upon conversion of convertible preferred stock | 290,000 | 232,000 | ||||||
Outstanding warrants | 3,977,744 | 5,682,661 | ||||||
Outstanding options | 1,568,223 | 275,319 | ||||||
Total potentially dilutive shares of Common Stock | 5,835,967 | 6,189,980 |
Note 5 – Stock-Based Compensation:
The terms and vesting schedules for share-based awards vary by type of grant and the employment status of the grantee. Generally, the awards vest based upon time-based conditions or achievement of specified goals and milestones.
During the six months ended December 31, 2014, the Company issued 421,000 options that are subject to vesting first based upon specified goals and milestones and then based upon time-based conditions. On the issuance date, such options had an aggregate Black-Scholes value of $256,929. As of December 31, 2014, the Company reviewed the specified goals and milestones on an employee by employee basis. Based upon the review, the Company has estimated that it was probable that, on average, the employees would achieve 36% of the target goals. As a result, the Company has is recognizing 36% of the fair value of the options ratably over the time-based period.
Also, during the six months ended December 31, 2014, the Company issued an additional 244,484 options that are either vested immediately or subject to time-based conditions only. On the issuance date, such options had an aggregate Black-Scholes value of $144,042.
On November 30, 2014, Leslie J. Browne Ph.D.’s employment with the Company was terminated. Under the terms of his retention agreement, all of his unvested options were accelerated and became immediately exercisable. Accordingly, the Company recognized the full Black-Scholes value of the options granted to Dr. Browne on November 18, 2014 in the amount of $25,495.
Other employees that held options were also terminated by the Company on November 30, 2014. As such, all unvested performance options that were granted to such employees on November 18, 2014 will not vest and the Company will not be recognizing the Black-Scholes value of those options in the amount of $17,601.
Additionally, on January 8, 2015, Ronald A. Martell resigned from the Company. In connection with his resignation, all unvested options granted to Mr. Martell will not vest and the Company will not be recognizing the Black-Scholes value of those options in the amount of $34,044.
The fair value of each stock option granted or vesting has been determined using the Black-Scholes model. The material factors incorporated in the Black-Scholes model in estimating the value of the options include the following:
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Three Months Ended December 31, | Six Months Ended December 31, | |||||||
2014 | 2013 | 2014 | 2013 | |||||
Risk-free interest rate (1) | 1.63 - 2.32% | 1.75 - 2.66% | 1.63 - 2.32% | 1.65 - 2.66% | ||||
Expected volatility (2) | 85% | 99% | 85% | 99% | ||||
Dividend yield | None | None | None | None | ||||
Expected life (3) | 5.0 - 10.0 | 6.25 - 10.0 | 5.0 - 10.0 | 5.5 - 10.0 |
(1) | Represents the interest rate on a U.S. Treasury security with a maturity date corresponding to that of the option term. |
(2) | Estimated volatility was determined based upon the historical volatility of the Company’s common stock. |
(3) | Expected life for time based stock options was estimated using the “simplified” method, as allowed under the provisions of the Securities and Exchange Commission Staff Accounting Bulletin No. 110. Expected life for performance based stock options was the actual term of the option. |
The economic values of the options will depend on the future price of the Company's Common Stock, which cannot be forecast with reasonable accuracy.
Stock option activity under the Company’s 2008 Plan and 1998 Plan for the six months ended December 31, 2014 is summarized as follows:
Weighted | ||||||||||
Aggregate | Average | Exercise Price | ||||||||
Number | Exercise Price | Range | ||||||||
Outstanding, June 30, 2014 | 979,304 | $ | 9.49 | $ 2.65 – $ 345.00 | ||||||
Granted | 665,484 | 0.83 | 0.83 | |||||||
Exercised | - | - | - | |||||||
Cancelled | (73,168 | ) | 2.02 | 0.83 - 23.00 | ||||||
Expired | (3,397 | ) | 301.70 | 29.00 - 345.00 | ||||||
Outstanding, December 31, 2014 | 1,568,223 | $ | 9.52 | $ 0.83 - $ 140.00 | ||||||
Options exercisable at December 31, 2014 | 659,208 | $ | 10.58 | |||||||
Weighted average fair value of options granted during the six months ended December 31, 2014 | $ | 0.60 |
As of December 31, 2014, the aggregate intrinsic value of stock options outstanding was $0, with a weighted-average remaining term of 9.4 years. The aggregate intrinsic value of stock options exercisable at that same date was $0, with a weighted-average remaining term of 8.4 years. As of December 31, 2014, the Company has 3,351,701 shares available for future stock option grants.
Stock-based compensation expense for the three months ended December 31, 2014 and December 31, 2013 amounted to $240,038 and $342,791, respectively. Stock based compensation expense for the six months ended December 31, 2014 and December 31, 2013 amounted to $379,171 and $467,257, respectively.
10 |
As of December 31, 2014, total stock-based compensation expense not yet recognized related to stock option grants amounted to approximately $995,000, which will be recognized over the next 47 months.
Note 6 – Income Taxes:
No provision for income taxes has been made for the three months and six months ended December 31, 2014 and 2013 given the Company’s losses in 2014 and 2013 and available net operating loss carryforwards. A benefit has not been recorded as the realization of the net operating losses is not assured and the timing in which the Company can utilize its net operating loss carryforwards in any year or in total may be limited by provisions of the Internal Revenue Code regarding changes in ownership of corporations.
The deferred tax liability in the amount of $3,920,000 was recorded in connection with the related intangible assets from the Company’s acquisition of Fabrus, Inc. in May 2014.
Note 7 - Fair Value Measurements:
The following tables provide the assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2014 and June 30, 2014:
Carrying | Fair Value Measurement at December 31, 2014 | |||||||||||||||
Value | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets: | ||||||||||||||||
Cash and cash equivalents | $ | 2,107,452 | $ | 2,107,452 | $ | - | $ | - |
Carrying | Fair Value Measurement at June 30, 2014 | |||||||||||||||
Value | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets: | ||||||||||||||||
Cash and cash equivalents | $ | 6,111,340 | $ | 6,111,340 | $ | - | $ | - |
Note 8 – Revenue Recognition
During the three month period ended December 31, 2014, the Company received certain nonrefundable upfront fees in connection with a collaboration agreement. The Company has determined that the upfront fees do not have standalone value and was not separable from the research and development services to be delivered. Due to the lack of standalone value for the collaboration agreement and research and development services, the upfront payment is being recognized ratably using the straight line method through December 2015, the expected term of the agreement. For the quarter ended December 31, 2014, the Company did not recognize any revenue, under this agreement.
Note 9 – Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.
In August 2014, the FASB issued Accounting Standard Update (“ASU”) 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. Under the new guidance, management will be required to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances. The provisions of this ASU are effective for annual periods beginning after December 15, 2016, and for annual and interim periods thereafter. We are currently evaluating the potential impact that this ASU may have on our financial statements or disclosures.
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In June 2014, the FASB issued ASU No. 2014-12, “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period.” This ASU requires a reporting entity to treat a performance target that affects vesting and that could be achieved after the requisite service period as a performance condition, and apply existing guidance under the Stock Compensation Topic of the ASC as it relates to awards with performance conditions that affect vesting to account for such awards. The provisions of this ASU are effective for interim and annual periods beginning after December 15, 2015. We are currently evaluating the potential impact that this ASU may have on our financial position and results of operations.
In May 2014, FASB issued an ASU that amends the FASB ASC by creating a new Topic 606, Revenue from Contracts with Customers. The new guidance will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance on revenue recognition throughout the Industry Topics of the Codification.
The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps:
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
In addition, an entity should disclose sufficient qualitative and quantitative information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue, and cash flows arising from contracts with customers.
The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is not permitted. This amendment is to be either retrospectively adopted to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this ASU recognized at the date of initial application. We are currently evaluating the impact of the adoption of this guidance to our consolidated financial statements.
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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and the related notes thereto included in this Quarterly Report on Form 10-Q. The discussion and analysis may contain forward-looking statements that are based upon current expectations and entail various risks and uncertainties. Our actual results and the timing of events could differ materially from those anticipated in the forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this report.
Our Business
On September 29, 2014, we changed our name from Senesco Technologies, Inc. to Sevion Therapeutics, Inc.
The primary business of Sevion Therapeutics, Inc., a Delaware corporation incorporated in 1999, and its wholly-owned subsidiaries, Senesco, Inc., a New Jersey corporation incorporated in 1998, and Fabrus, Inc., a Delaware corporation incorporated in 2011, collectively referred to as “Sevion,” “we,” “us” or “our,” is to discover, develop and acquire innovative product candidates for the treatment of cancer and immunological diseases by utilizing our patented and patent-pending technology related to antibody genes, antibody discovery technology, modified cow antibodies, and antibody drug candidates, and certain genes, primarily eukaryotic translation initiation Factor 5A, or Factor 5A.
Antibody Technology
Antibody Genes - We believe our antibody platforms have broad applicability to human health by allowing the discovery of unique monoclonal antibodies against difficult membrane targets in several therapeutic areas. Our antibody therapeutic candidates target the Kv1.3 ion channel, which is important in the pathogenesis of several autoimmune and inflammatory disorders. Other antibodies in our pipeline target important cell surface molecules involved in cancer progression.
Antibody Discovery Technology - Traditional antibody drug discovery methods, such as phage/yeast display or immunization, rely on competitive selection from a pool of antibodies to identify a lead therapeutic candidate. In these methods, a mixture of antibodies compete for binding to a purified target, and the antibody molecules that bind the strongest to the target, referred to as high affinity, are ultimately discovered. While these approaches have led to many successful antibody therapeutics, there are at least two drawbacks. First, the drug targets have been limited to only those proteins which can be easily purified. Many important target classes, including multispanning membrane proteins, cannot be easily purified in functional form. Secondly, when discovery is driven by selection based on competitive binding and affinity, the result is a significant limitation in the number of functional lead antibodies. However, the highest affinity antibody isn’t always the best therapeutic because lower affinity molecules may have unique activities or lower toxicities than the highest affinity binder. Thus, modulating a pathway more subtly to treat disease is often preferable to affecting it in a binary fashion through competition related to high-affinity binding. We believe the technology to identify (i) antibodies against unpurified targets, particularly multispanning membrane proteins like G Protein Coupled Receptors, or GPCR’s, and ion channels, and (ii) a range of antibodies with different affinities and activities will enable us to discover new antibody drug leads compared to existing technologies.
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We have developed the world’s first “spatially addressed” antibody library with an expansive combinatorial collection of recombinant antibodies in which each well contains a single species of antibody of known concentration, composition and sequence. Our spatially addressed library allows us to evaluate the therapeutic potential of each antibody individually in a non-competitive way and allows direct discovery on the cell surface. This approach is more analogous to traditional small molecule drug discovery and allows us to screen antibodies for functional drug activity as opposed to simple binding properties. This next generation discovery system unlocks epitopes, targets, and functions that are only identifiable in the context of a living cell.
Modified Cow Antibodies - Despite the enormous diversity of the antibody repertoire, human antibodies all have a similar geometry, shape and binding mode. Our scientists have discovered and humanized a novel class of therapeutic antibodies derived from cows that have a highly unusual structure for binding targets. This unique ultralong Complementary Determining Region 3, or CDR3, structural domain found in cow antibodies is comprised of a knob on a stalk that protrudes far from the antibody surface, creating the potential for entirely new types of therapeutic functionality. Using both our humanized spatially addressed antibody library and direct engineering of the knob, we are exploring the ability of utilizing the knob and stalk structure to functionally interact with important therapeutic targets, including GPCRs, ion channels and other multispanning membrane therapeutic targets on the cell surface. Our lead antibody, SVN001, was derived from these efforts.
Antibody Drug Candidates – We have created functional antibodies that modulate GPCRs and ion channels, two classes of targets that have proven difficult to address using conventional antibody discovery approaches.
SVN001
SVN001 is an ion channel blocking antibody that is potentially the first therapeutic antibody against this target class. SVN001 targets an ion channel, Kv1.3, which has been implicated in a number of different autoimmune disorders including rheumatoid arthritis, psoriasis and multiple sclerosis. By targeting a unique subset of immune cells, SVN001 is not believed to be broadly immunosuppressive, therefore potentially improving the safety profile compared to typical immunosuppressants.
SVN002
SVN002 is a unique antibody against an oncology target that holds the potential to significantly impact highly metastatic tumors that are resistant to the class of drugs that target vascular endothelial growth factor, or VEGF. The target is highly expressed in clear cell renal carcinoma, where it is associated with poor prognosis.
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Other Antibodies
We have discovered fully human antibodies against additional oncology targets, including ErbB2, ErbB3, CXCR4, and GLP1R which have been engineered to have activity in in vitro systems. Additionally, we have early stage antibodies against other undisclosed targets which were derived from our addressed library platform.
Factor 5A
On October 22, 2014, our board of directors decided to suspend all development of the Factor 5A technology based on our limited capital resources and the totality of the safety and efficacy data resulting from our Phase 1b/2a clinical trial. Depending on our future capital resources, possible options for the program are to (i) reformulate the drug to alleviate some of the adverse events observed in the clinical trial and to enhance the efficacy, (ii) partner or sell the program or (iii) discontinue development. Our board continues to evaluate these alternatives.
It is believed that our Factor 5A gene regulatory technology could have broad applicability in the human therapeutic field, by either inducing or inhibiting programmed cell death, also known as apoptosis, which is the natural process the human body goes through in order to eliminate redundant or defective cells.
We may enter into a collaboration with a biotechnology or pharmaceutical company to support the further development of SNS01-T now that we have completed our Phases 1b/2a clinical trial in multiple myeloma, MCL and DLBCL. We cannot assure you that we will be able to enter into such a collaboration or that one will be available on terms satisfactory to us.
SNS01-T for B-cell cancers
We have been developing a therapeutic candidate, SNS01-T, for the potential treatment of B-cell cancers such as multiple myeloma and non-Hodgkin B-cell lymphomas. SNS01-T utilizes our Factor 5A technology and comprises two active components: a DNA plasmid, or pDNA, expressing human eIF5A containing a lysine to arginine substitution at amino acid position 50, or eIF5AK50R, and a small inhibitory RNA, or siRNA. These two components are combined in a fixed ratio with a polymer, polyethyleneimine, or PEI, which enables self-assembly of the DNA and RNA into nanoparticles with demonstrated enhanced delivery to tissues and protection from degradation in the blood stream. Under the control of a B-cell selective promoter, SNS01-T’s DNA plasmid up-regulates the apoptotic pathways within cancer cells by preferentially expressing the stable arginine form of the Factor 5A death message in target cells. The siRNA, by silencing the eIF5A gene, reduces expression of the hypusine form of Factor 5A that supports cell survival and proliferation. The silencing of the eIF5A gene by an eIF5A siRNA also down-regulates anti-apoptotic proteins, such as NFkB, ICAM and pro-inflammatory cytokines, which protect malignant cells from apoptosis and promote cell growth in multiple myeloma. The PEI, a cationic polymer, promotes auto-assembly of a nanoparticle with the other two components for intravenous delivery and protects the combination from degradation in the bloodstream until the nanoparticle is taken up by the tumor cell, where the siRNA and DNA plasmid are released.
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We have been granted orphan drug status for SNS01-T by the United States Food and Drug Administration, or FDA, for the potential treatment of multiple myeloma, mantle cell lymphoma, or MCL, and diffuse large B-cell lymphoma, or DLBCL, and we have now completed a Phase 1b/2a clinical study to assess the effects of SNS01-T in patients with these indications. The clinical study was an open-label, multiple-dose, dose-escalation study, which is evaluating the safety and tolerability of SNS01-T when administered by intravenous infusion in patients with relapsed or refractory multiple myeloma and non-Hodgkin B-cell lymphoma. The study design called for four cohorts of three to six patients each. Patients in each cohort received twice-weekly dosing for six weeks followed by up to a four-week safety data review period before escalating to a higher dose level in the next cohort.
While the primary objective of this study was to evaluate safety and tolerability, the effect of SNS01-T on tumor response and time to relapse or progression was also assessed using multiple well-established metrics including measurement of monoclonal protein in multiple myeloma and CT/PET imaging in MCL and DLBCL.
The study was performed at Mayo Clinic in Rochester, MN, the University of Arkansas for Medical Sciences in Little Rock, AR, the Mary Babb Randolph Cancer Center in Morgantown, WV, the John Theurer Cancer Center at Hackensack University Medical Center in Hackensack, NJ, the Seattle Cancer Care Alliance in Seattle, WA, the Pretoria East Hospital, in Pretoria, South Africa and the Groote Schuur Hospital in Cape Town, South Africa.
In August 2014, the safety portion of the study established a maximum tolerated dose following the reporting of a second dose limiting toxicity, or DLT, in the fourth and highest dosing cohort (0.375 mg/kg). The first DLT observed was a Grade 4 infusion reaction that occurred in a patient who had not received the designated pre-medications. The second DLT, an uncomplicated Grade 4 neutropenia, occurred after eight doses in a lymphoma patient. A total of eight patients were enrolled into cohort 4. With the completion of the high dose cohort, the trial has completed recruitment. All patients that were enrolled were able to continue treatment at the recommended cohort 3 dose level of 0.2 mg/kg. All patients in the study have now completed their treatment.
Research Program
We were advancing SVN001 through preclinical development where it has demonstrated potent activity as well as advancing SVN002 through preclinical development. However, given the Company’s limited capital resources, in December 2014, we decided to temporarily reduce our research and development spending on our antibody program until we are able to consummate a strategic transaction or a financing transaction.
We have completed dosing patients in the Phase 1b/2a clinical trial and we are completing the remaining protocol. However, based on our limited capital resources and the totality of the safety and efficacy data resulting from our Phase 1b/2a clinical trial, we are suspending all development of the Factor 5A technology at this time.
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On December 18, 2014, we entered into a Collaboration Agreement with CNA Development, LLC, an affiliate of Janssen Pharmaceuticals, Inc. (“Janssen”) to discover antibodies using our spatially addressed library platform (the “Collaboration Agreement”). The collaboration facilitated by the Johnson & Johnson Innovation center in California will include discovery of antibodies against multiple targets in several therapeutic areas. We and Janssen will jointly conduct research on antibodies discovered by us, and Janssen will have an option to an exclusive license to develop, manufacture, and commercialize candidates resulting from the collaboration. Under the terms of the agreement, we will receive an up-front payment and research support payments for activities conducted in collaboration with Janssen. For candidates licensed by Janssen, we would be eligible to receive payments upon the achievement of certain development and commercial milestones potentially totaling up to $125 million as well as low single digit royalties on product sales.
On September 1, 1998, we entered into, and have extended through August 31, 2015, a research and development agreement with the University of Waterloo and Dr. John Thompson, our scientific founder, as the principal inventor. The Research and Development Agreement provides that the University of Waterloo will perform research and development under our direction, and we will pay for the cost of this work and make certain payments to the University of Waterloo. In return for payments made under the Research and Development Agreement, we have all rights to the intellectual property derived from the research. In accordance with the terms of the research and development agreement, on November 5, 2014, we provided the University of Waterloo that the agreement would be terminated on December 31, 2014.
In order to pursue the above research initiatives, as well as other research initiatives that may arise, we will use our cash reserves as of December 31, 2014. However, it will be necessary for us to raise a significant amount of additional working capital in the future. If we are unable to raise the necessary funds, we may be required to significantly curtail the future development of some or all of our research initiatives and we will be unable to pursue other possible research initiatives.
We may further expand our research and development program beyond the initiatives listed above to include other diseases and research centers.
Intellectual Property
As previously disclosed, our board of directors has decided to suspend all development of the agricultural applications of our intellectual property and to continue to develop our intellectual property only with respect to the human health therapeutic targets.
Currently, we have thirty-one (31) issued patents from the United States Patent and Trademark Office, or PTO, and eighty-two (82) issued patents from foreign countries. Of our one hundred and thirteen (113) domestic and foreign issued patents, seventy-two (72) are for the use of our technology in agricultural applications and forty-one (41) relate to human therapeutics applications.
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In addition to our one hundred and thirteen (113) patents, we have a wide variety of patent applications, including divisional applications and continuations-in-part, in process with the PTO and internationally. Additionally, we have entered into royalty bearing license agreements whereby we license certain worldwide patent rights. Under the licenses we may receive milestone payments upon our achievement of certain milestones and royalty payments based on net sales of a product containing technology covered by the patent rights.
We also in-license certain intellectual property related to our antibody platforms and our chimerasome technology.
Our core human therapeutic technology patents are set to expire in 2021 in the United States and 2025 outside the United States, and our patents related to multiple myeloma are set to expire, both in and outside the United States in 2029. Our agricultural patents are generally set to expire in 2019 in the United States and 2025 outside the United States.
In October 2014, we decided to continue to develop our intellectual property only with respect to the human health therapeutic targets and would be reviewing such patents on a patent by patent basis to determine which specific ones to continue to develop.
Also, in October 2014, we decided to suspend all development of the Factor 5A technology based on our limited capital resources and the totality of the safety and efficacy data resulting from our Phase 1b/2a clinical trial. As we are unable to determine if or when the development will be resumed, we were unable to determine what the future undiscounted cash flows from these patents could be. Therefore, as of September 30, 2014, we determined that the carrying value of our patents and patent applications related to Factor 5A were impaired. Accordingly, we recorded an impairment of the full carrying value of our patents related to Factor 5A in the amount of $2,290,836.
On June 13, 2013, the Supreme Court of the United States of America ruled that naturally-occurring DNA sequences are unpatentable because they are products of nature. The Supreme Court further found that cDNA sequences, which are copies of non-intron containing mRNA sequences created in the laboratory, are patent eligible. We believe that the Supreme Court ruling has little impact on our patent portfolio overall and no impact on our human therapeutic patents, which do not rely on claims on naturally-occurring DNA sequences. SNS01-T comprises two synthetic constructs, siRNA and a DNA plasmid, which are protected by composition of matter and method of use patent claims.
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Liquidity and Capital Resources
Overview
For the six months ended December 31, 2014, net cash of $3,472,504 was used in operating activities primarily due to a net loss of $15,929,934 which was reduced by non-cash expenses of $11,607,167. Cash used in operating activities was also decreased by changes in operating assets and liabilities in the amount of $850,263.
The $850,263 change in operating assets and liabilities was the result of a decrease in prepaid research supplies and expenses in the amount of $337,728, an increase in accounts payable and accrued expenses in the amount of $574,087 due to the timing of the expenses and payments and an increase in deferred revenue in the amount of $150,000. This was partially offset by an increase in accounts receivable and security deposits.
During the six months ended December 31, 2014, cash used for investing activities amounted to $531,384, which was related to capitalized patent costs and the purchase of equipment, furniture and fixtures.
As of December 31, 2014, our cash balance totaled $2,107,452, and we had a working capital deficit of $175,444.
We expect our capital requirements to increase significantly over the next several years as we commence new research and development efforts, increase our business and administrative infrastructure and embark on developing in-house business capabilities and facilities. Our future liquidity and capital funding requirements will depend on numerous factors, including, but not limited to, the levels and costs of our research and development initiatives and the cost and timing of the expansion of our business development and administrative staff.
We anticipate that, based upon our cash balance at December 31, 2014, we will be able to fund our operations through at least March 31, 2015. Over such period, we plan to fund our research and development and commercialization activities by:
· | utilizing our current cash balance and investments; |
· | the placement of additional equity or debt instruments; and |
· | the possible execution of additional licensing agreements for our technology. |
We cannot assure you that we will be able to raise money through any of the foregoing transactions on favorable terms, if at all.
Changes to Critical Accounting Policies and Estimates
There have been no changes to our critical accounting policies and estimates as set forth in our Annual Report on Form 10-K for the fiscal year ended June 30, 2014.
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Three Months Ended December 31, 2014 and Three Months Ended December 31, 2013
The results of operations for the three months ended December 31, 2014, include the results of operations of Fabrus, Inc., our wholly owned subsidiary that was acquired on May 16, 2014. The results of operations for the three months ended December 31, 2013 do not include the results of operations of Fabrus, Inc.
The net loss for the three months ended December 31, 2014 was $10,746,127. The net loss for the three months ended December 31, 2013 was $1,619,638. Such a change represents an increase in net loss of $9,126,489, or 563.5%. This increase in net loss was primarily the result of an impairment of goodwill and an increase in general and administrative and research and development expenses.
Revenue
There was no revenue during the three months ended December 31, 2014 and December 31, 2013.
We may receive future milestone payments in connection with our current license agreements. Additionally, we may receive future royalty payments from our license agreements if and when our partners commercialize their products containing our technology. However, it is difficult for us to determine our future revenue expectations because our future milestone payments are primarily contingent on our partners’ successful implementation of their development plan, we have no history of receiving royalties and the timing and outcome of our experiments, the timing of signing new partner agreements and the timing of our partners moving through the development process into commercialization is difficult to accurately predict.
General and Administrative Expenses
Three Months Ended December 31, | ||||||||||||||||
2014 | 2013 | Change | % | |||||||||||||
(in thousands, except % values) | ||||||||||||||||
Payroll and benefits | $ | 630 | $ | 149 | $ | 481 | 322.8 | % | ||||||||
Investor relations | 68 | 146 | (78 | ) | (53.4 | )% | ||||||||||
Professional fees | 223 | 90 | 133 | 147.8 | % | |||||||||||
Other general and administrative | 140 | 100 | 40 | 40.0 | % | |||||||||||
1,061 | 485 | 576 | 118.8 | % | ||||||||||||
Stock-based compensation | 192 | 373 | (181 | ) | (48.5 | )% | ||||||||||
Total general and administrative | $ | 1,253 | $ | 858 | $ | 395 | 46.0 | % |
· | Payroll and benefits were higher primarily as a result of severance payments due to terminated employees as a result of closing the New Jersey office. |
· | Investor relations fees were lower primarily due to the expenses incurred during the three months ended December 31, 2013 relating to an investor relations program that started in August 2013. We are not incurring those expenses this year, however, we entered into a lower cost investor relations consulting agreement in September 2014. |
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· | Professional fees were higher primarily as a result of an increase in legal fees due to the closing of the New Jersey office and an increase accounting fees due to the additional bookkeeping, consulting and auditing fees related to the acquisition of Fabrus, Inc. in May 2014. |
· | Other general and administrative expenses were higher primarily due to an increase in moving costs, travel and cash director fees, which were partially offset by a decrease in consultants. |
· | Stock-based compensation was lower primarily because stock was issued to certain investor relations and financial consultants during the three months ended December 31, 2013 and no similar grants were made during the three months ended December 31, 2014. |
We expect cash-based general and administrative expenses to be lower over the next twelve months because on October 22, 2014, our board of directors decided to close the New Jersey office and to terminate the research agreement with the University of Waterloo in order to consolidate all of our operations in our San Diego, California location.
Research and Development Expenses
Research and development expenses for the three months ended December 31, 2014 include costs incurred by Senesco, Inc. in the amount of $721,000 and costs incurred by Fabrus, Inc. in the amount of $651,000.
Research and development expenses for the three months ended December 31, 2013 do not include any costs incurred by Fabrus, Inc., as the Company acquired Fabrus, Inc. in May 2014.
Three Months Ended December 31, | ||||||||||||||||
2014 | 2013 | Change | % | |||||||||||||
(in thousands, except % values) | ||||||||||||||||
Payroll and benefits | $ | 345 | $ | 43 | $ | 302 | 702.3 | % | ||||||||
Phase 1b/2a clinical trial | 243 | 324 | (81 | ) | (25.0 | )% | ||||||||||
Research supplies | 43 | - | 43 | - | ||||||||||||
Research contract with the University of Waterloo | 184 | 117 | 67 | 57.3 | % | |||||||||||
Consultants | 86 | 121 | (35 | ) | 28.9 | % | ||||||||||
Rent | 87 | - | 87 | - | ||||||||||||
Legal | 179 | 6 | 173 | 2883.3 | % | |||||||||||
Depreciation and amortization | 38 | 78 | (40 | ) | (51.3 | )% | ||||||||||
Other research and development | 119 | 25 | 94 | 376.0 | % | |||||||||||
1,324 | 714 | 610 | 85.4 | % | ||||||||||||
Stock-based compensation | 48 | 17 | 31 | 182.4 | % | |||||||||||
Total research and development | $ | 1,372 | $ | 731 | $ | 641 | 87.7 | % |
· | Payroll and benefits were higher primarily due to an increase in headcount due to the acquisition of Fabrus, Inc. in May 2014. |
· | Phase 1b/2a clinical trial expenses were lower because we concluded patient dosing in the trial during the quarter ended September 30, 2014. |
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· | Research supplies were higher primarily due to the acquisition of Fabrus, Inc. research programs in May 2014. |
· | Research contract with the University of Waterloo is higher due to certain costs in connection with the termination of the agreement on December 31, 2014. |
· | Consultants were lower primarily due to the completion of patient dosing in our Phase 1b/2a clinical trial in September 2014 and the suspension of the SNS01-T program. This was partially offset by the addition of other consultants in connection with the acquisition of Fabrus, Inc. in May 2014. |
· | Rent was higher due to the addition of lab space in San Diego, California in connection with the acquisition of Fabrus, Inc. in May 2014. |
· | Legal was higher due to the impairment in the agricultural patent costs at June 30, 2014 and the Factor 5A human health patents in September 2014. As a result, the legal fees in connection with the prosecution of these patents are now being expensed as incurred instead of capitalized. |
· | Depreciation and amortization was lower due to the impairment of the agricultural patents at June 30, 2014 and the Factor 5A human health patents at September 30, 2014. As a result, we are no longer incurring amortization charges on those patents. This was partially offset by an increase in depreciation in connection with the equipment acquired in connection with the acquisition of Fabrus, Inc. in May 2014. |
· | Other research and development costs were higher primarily due to the acquisition of Fabrus, Inc. in May 2014 and moving the Fabrus, Inc. lab to a new facility in October 2014. |
· | Stock-based compensation was higher primarily due to the Black-Scholes value of options issued in connection with the acquisition of Fabrus, Inc. in May 2014, which is being charged to operations over the vesting period. |
We expect our research and development costs to be lower in the short-term as we conclude the final reporting of our Phase 1a / 2b clinical trial. However, if we are able to raise additional capital or complete a strategic transaction, we expect our research and development costs to increase as we resume development of our antibody program.
Impairment of Goodwill
As of December 31, 2014, we reviewed the underlying assumptions and current market conditions and determined that the goodwill recorded in connection with the acquisition of Fabrus, Inc. on May 16, 2014 was impaired. Accordingly, we recorded an impairment of goodwill in the amount of $8,121,966.
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Six Months Ended December 31, 2014 and Six Months Ended December 31, 2013
The results of operations for the six months ended December 31, 2014, include the results of operations of Fabrus, Inc., our wholly owned subsidiary that was acquired on May 16, 2014. The results of operations for the six months ended December 31, 2013 do not include the results of operations of Fabrus, Inc.
The net loss for the six months ended December 31, 2014 was $15,929,934. The net loss for the six months ended December 31, 2013 was $3,403,971. Such a change represents an increase in net loss of $12,525,963, or 368.0%. This increase in net loss was primarily the result of an impairment of goodwill, patents written off, an increase in general and administrative expenses and research and development expenses.
Revenue
There was no revenue during the six months ended December 31, 2014.
Total revenue in the amount of $100,000 during the six months ended December 31, 2013 consisted of a milestone payment in connection with an agricultural license agreement.
General and Administrative Expenses
Six Months Ended December 31, | ||||||||||||||||
2014 | 2013 | Change | % | |||||||||||||
(in thousands, except % values) | ||||||||||||||||
Payroll and benefits | $ | 867 | $ | 295 | $ | 572 | 193.9 | % | ||||||||
Investor relations | 141 | 525 | (384 | ) | (73.1 | )% | ||||||||||
Professional fees | 422 | 198 | 224 | 113.1 | % | |||||||||||
Other general and administrative | 313 | 174 | 139 | 79.9 | % | |||||||||||
1,743 | 1,192 | 551 | 46.2 | % | ||||||||||||
Stock-based compensation | 285 | 523 | (238 | ) | (45.5 | )% | ||||||||||
Total general and administrative | $ | 2,028 | $ | 1,715 | $ | 313 | 18.3 | % |
· | Payroll and benefits were higher primarily as a result of severance payments due to terminated employees as a result of closing the New Jersey office in November 2014 and as a result of hiring a new CEO in June 2014. |
· | Investor relations fees were lower primarily due to the expenses incurred during the three months ended December 31, 2013 relating to an investor relations program that started in August 2013. We are not incurring those expenses this year, however, we entered into a lower cost investor relations consulting agreement in September 2014. |
· | Professional fees were higher primarily as a result of an increase in accounting fees due to the additional bookkeeping, consulting and auditing fees related to the acquisition of Fabrus, Inc. in May 2014 and an increase in legal fees due to the closing of the New Jersey office. |
· | Other general and administrative expenses were higher primarily due to an increase in moving costs, travel, consultants and cash director fees. |
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· | Stock-based compensation was lower primarily because stock was issued to certain investor relations and financial consultants during the three months ended December 31, 2013 and no similar grants were made during the three months ended December 31, 2014. |
Research and Development Expenses
Research and development expenses for the six months ended December 31, 2014 include costs incurred by Senesco, Inc. in the amount of $2,283,000 and costs incurred by Fabrus, Inc. in the amount of $1,209,000.
Research and development expenses for the six months ended December 31, 2013 do not include any costs incurred by Fabrus, Inc., as the Company acquired Fabrus, Inc. in May 2014.
Six Months Ended December 31, | ||||||||||||||||
2014 | 2013 | Change | % | |||||||||||||
(in thousands, except % values) | ||||||||||||||||
Payroll and benefits | $ | 698 | $ | 87 | $ | 611 | 702.3 | % | ||||||||
Phase 1b/2a clinical trial | 670 | 750 | (80 | ) | (10.7 | )% | ||||||||||
Research supplies | 136 | 2 | 134 | 6700.0 | % | |||||||||||
Research contract with the University of Waterloo | 303 | 232 | 71 | 30.6 | % | |||||||||||
Consultants | 229 | 221 | 8 | 3.6 | % | |||||||||||
Rent | 145 | - | 145 | - | ||||||||||||
Legal | 254 | 15 | 239 | 1593.3 | % | |||||||||||
Depreciation and amortization | 98 | 152 | (54 | ) | (35.5 | )% | ||||||||||
Other research and development | 196 | 50 | 146 | 292.0 | % | |||||||||||
2,729 | 1,509 | 1,220 | 80.9 | % | ||||||||||||
Write-off of prepaid research supplies | 670 | - | 670 | - | ||||||||||||
Stock-based compensation | 93 | 33 | 60 | 181.8 | % | |||||||||||
Total research and development | $ | 3,492 | $ | 1,542 | $ | 1,950 | 126.5 | % |
· | Payroll and benefits were higher primarily due to an increase in headcount due to the acquisition of Fabrus, Inc. in May 2014. |
· | Phase 1b/2a clinical trial expenses were lower because we concluded patient dosing in the trial during the quarter ended September 30, 2014.Research supplies were higher primarily due to the acquisition of Fabrus, Inc. research programs in May 2014. |
· | Research contract with the University of Waterloo is higher due to certain costs in connection with the termination of the agreement on December 31, 2014. |
· | Consultants were higher primarily due to the addition of consultants in connection with the acquisition of Fabrus, Inc. in May 2014, which was mostly offset by a decrease in other consultants due to the completion of patient dosing in our Phase 1b/2a clinical trial in September 2014 and the suspension of the SNS01-T program. |
· | Rent was higher due to the addition of lab space in San Diego, California in connection with the acquisition of Fabrus, Inc. in May 2014. |
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· | Legal was higher due to the impairment in the agricultural patent costs at June 30, 2014 and the Factor 5A human health patents in September 2014. As a result, the legal fees in connection with the prosecution of these patents are now being expensed as incurred instead of capitalized. |
· | Depreciation and amortization was lower due to the impairment of the agricultural patents at June 30, 2014 and the Factor 5A human health patents at September 30, 2014. As a result, we are no longer incurring amortization charges on those patents. This was partially offset by an increase in depreciation in connection with the equipment acquired in connection with the acquisition of Fabrus, Inc. in May 2014. |
· | Other research and development costs were higher primarily due to the acquisition of Fabrus, Inc. in May 2014 and moving the Fabrus, Inc. lab to a new facility in October 2014. |
· | During the quarter ended September 30, 2014, we concluded our Phase 1b/2a clinical trial but did not use all of the material purchased for the clinical trial. As we have put the clinical program for this product candidate on hold, we wrote-off the cost of the remaining material at September 30, 2014. |
· | Stock-based compensation was higher primarily due to the Black-Scholes value of options issued in connection with the acquisition of Fabrus, Inc. in May 2014, which is being charged to operations over the vesting period. |
Impairment of Goodwill
As of December 31, 2014, we reviewed the underlying assumptions and current market conditions and determined that the goodwill recorded in connection with the acquisition of Fabrus, Inc. on May 16, 2014 was impaired. Accordingly we recorded an impairment of goodwill in the amount of $8,121,966.
Write-off of patents
In October 2014, we put the development of Factor 5A for human health applications on hold. As we do not know if or when the development will be resumed, we are unable to determine what the future undiscounted cash flows from these patents will be. As such, we recorded an impairment to all of these patent costs in the net amount of $2,290,836 at September 30, 2014 and are expensing any future patent costs related to Factor FA as incurred.
Contractual Obligations and Contingent Liabilities
During the three months ended December 31, 2014, there were changes to our contractual obligations and commitments as follows:
On November 17, 2014, we entered into a Retention Agreement with our VP-Preclinical Research and our Administrative Assistant, whereby they began receiving severance payments and additional benefits for six (6) months and four (4) months, respectively, following their termination of employment on November 30, 2014.
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On November 30, 2014, we entered into a Retention Agreement with our Chief Financial Officer, whereby he will receive severance payments and additional benefits through December 15, 2015 following his separation from the Company (subject to certain restrictions). If he were to voluntarily terminate his employment or be terminated for cause prior to earlier of the filing of our quarterly report on Form 10-Q for the period ended March 31, 2015 or May 29, 2015, then he would not receive the severance payments and additional benefits.
On November 19, 2014, the Company, as subtenant, executed a sublease agreement dated October 8, 2014 (the “Sublease Agreement”), effective as of October 10, 2014 (the “Effective Date”), relating to the rental of approximately 10,571 square feet of office and laboratory space located at 4045 Sorrento Valley Boulevard, San Diego, California 92121. The term of the Sublease Agreement will begin on the Effective Date and will continue through October 31, 2016. The Sublease Agreement provides for monthly base rental payments of $22,728 per month, payable in advance on the first day of each month, with a free rent period for months 2 through 6. Monthly base rental payments will increase by 3% on each anniversary of the Effective Date of the Sublease Agreement. In addition, the Company has paid a security deposit in an amount equal to $30,000.
Effective December 31, 2014, we terminated our Research Agreement with the University of Waterloo.
The following table lists our cash contractual obligations as of December 31, 2014:
Payments Due by Period | ||||||||||||||||||||
Contractual Obligations | Total | Less than 1 year | 1 - 3 years | 3 - 5 years | More than 5 years | |||||||||||||||
Facility, Rent and Operating Leases | $ | 568,997 | $ | 276,197 | $ | 292,800 | $ | — | $ | — | ||||||||||
Employment and Consulting Agreements | $ | 1,075,987 | $ | 1,075,987 | $ | — | $ | — | $ | — | ||||||||||
Total Contractual Cash Obligations | $ | 1,644,984 | $ | 1,352,184 | $ | 292,800 | $ | — | $ | — |
Also, on January 8, 2015, Ronald A. Martell delivered to us notice of his resignation as Chief Executive Officer and as a member of the Board, effective upon delivery of the notice. The Board accepted Mr. Martell’s notice of resignation and thanked him for his service to the Company. Mr. Martell had served as Chief Executive Officer and as a member of the Board since June 2014. The table above reflects the full severance amount due to Mr. Martell reserved as of December 31, 2014, prior to his resignation. Mr. Martell and the Company are currently discussing the terms of Mr. Martell’s separation from the Company. For the quarter ended March 31, 2015, the Company will determine whether to continue any reserve in connection with Mr. Martell’s separation from the Company.
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Off Balance-Sheet Arrangements
We do not have any off balance-sheet arrangements.
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Item 3. | Quantitative and Qualitative Disclosures about Market Risk. |
Foreign Currency Risk
Our financial statements are denominated in United States dollars and, except for our agreement with the University of Waterloo, which is denominated in Canadian dollars, all of our contracts are denominated in United States dollars. Therefore, we believe that fluctuations in foreign currency exchange rates will not result in any material adverse effect on our financial condition or results of operations. In the event we derive a greater portion of our revenues from international operations or in the event a greater portion of our expenses are incurred internationally and denominated in a foreign currency, then changes in foreign currency exchange rates could affect our results of operations and financial condition.
Interest Rate Risk
We invest in high-quality financial instruments, primarily money market funds, with an effective duration of the portfolio of less than one year, which we believe are subject to limited credit risk. We currently do not hedge our interest rate exposure. Due to the short-term nature of our investments, we do not believe that we have any material exposure to interest rate risk arising from our investments.
Item 4. | Controls and Procedures. |
(a) | Evaluation of disclosure controls and procedures. |
The principal executive officer and principal financial officer have evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of December 31, 2014. Based on this evaluation, they have concluded that our disclosure controls and procedures were effective to ensure that the information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive and principal financial officers, to allow timely decisions regarding required disclosure.
(b) | Changes in internal controls. |
No change in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) occurred during the three month period ended December 31, 2014 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
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None.
The more prominent risks and uncertainties inherent in our business are described below. However, additional risks and uncertainties may also impair our business operations. If any of the following risks actually occur, our business, financial condition or results of operations may suffer.
Risks Related to Our Business
Recurring losses and negative cash flows from operations raise substantial doubt about our ability to continue as a going concern and we may not be able to continue as a going concern.
Our recurring losses from operations and negative cash flows from operations raise substantial doubt about our ability to continue as a going concern and as a result, our independent registered public accounting firm included an explanatory paragraph in its report on our consolidated financial statements for the fiscal year ended June 30, 2014. Substantial doubt about our ability to continue as a going concern may create negative reactions to the price of the common shares of our stock and we may have a more difficult time obtaining financing.
We have prepared our financial statements on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts of liabilities that might be necessary should we be unable to continue in existence.
As of December 31, 2014, we believe we have enough cash to fund operations through at least March 31, 2015.
We have a limited operating history and have incurred substantial losses and expect to incur future losses.
We are a development stage biotechnology company with a limited operating history and limited assets and capital. We have incurred losses each year since inception and had an accumulated deficit of $104,242,423 at December 31, 2014. We have generated minimal revenues by licensing our technology for certain crops to companies willing to share in our development costs. In addition, our technology may not be ready for commercialization for several years. We expect to continue to incur losses for the next several years because we anticipate that our expenditures on research and development and administrative activities will significantly exceed our revenues during that period. We cannot predict when, if ever, we will become profitable.
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We will need additional capital to fund our operations until we are able to generate a profit.
Our operations to date have required significant cash expenditures. Our future capital requirements will depend on the results of our research and development activities, preclinical and clinical studies, and competitive and technological advances.
We will need to obtain more funding in the future through collaborations or other arrangements with research institutions and corporate partners, or public and private offerings of our securities, including debt or equity financing. We may not be able to obtain adequate funds for our operations from these sources when needed or on acceptable terms. Future collaborations or similar arrangements may require us to license valuable intellectual property to, or to share substantial economic benefits with, our collaborators. If we raise additional capital by issuing additional equity or securities convertible into equity, our stockholders may experience dilution and our share price may decline. Any debt financing may result in restrictions on our spending.
If we are unable to raise additional funds, we will need to do one or more of the following:
· | delay, scale-back or eliminate some or all of our research and product development programs; |
· | provide licenses to third parties to develop and commercialize products or technologies that we would otherwise seek to develop and commercialize ourselves; |
· | seek strategic alliances or business combinations; |
· | attempt to sell our company; |
· | cease operations; or |
· | declare bankruptcy. |
We believe that at the projected rate of spending we should have sufficient cash to maintain our present operations at least through March 31, 2015.
We may be adversely affected by the current economic environment.
Our ability to obtain financing, invest in and grow our business, and meet our financial obligations depends on our operating and financial performance, which in turn is subject to numerous factors. In addition to factors specific to our business, prevailing economic conditions and financial, business and other factors beyond our control can also affect our business and ability to raise capital. We cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.
Materials necessary to manufacture some of our compounds currently under development may not be available on commercially reasonable terms, or at all, which may delay our development and commercialization of these compounds.
Some of the materials necessary for the manufacture of our compounds under development may, from time to time, be available either in limited quantities, or from a limited number of manufacturers, or both. Our contract manufacturers need to obtain these materials for our clinical trials and, potentially, for commercial distribution when and if we obtain marketing approval for these compounds. Suppliers may not sell us these materials at the time we need them or on commercially reasonable terms. If we are unable to obtain the materials needed to conduct our clinical trials, product testing and potential regulatory approval could be delayed, adversely affecting our ability to develop the product candidates. Similarly, if we are unable to obtain critical manufacturing materials after regulatory approval has been obtained for a product candidate, the commercial launch of that product candidate could be delayed or there could be a shortage in supply, which could materially affect our ability to generate revenues from that product candidate. If suppliers increase the price of manufacturing materials, the price for one or more of our products may increase, which may make our products less competitive in the marketplace. If it becomes necessary to change suppliers for any of these materials or if any of our suppliers experience a shutdown or disruption at the facilities used to produce these materials, due to technical, regulatory or other reasons, it could harm our ability to manufacture our products.
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We depend on a limited number of technologies and, if our technologies are not commercially successful, we will have no alternative source of revenue.
Our primary business is the development and licensing of technology to (i) discover and engineer monoclonal antibodies and (ii) identify, isolate, characterize and promote or silence genes which control the death of cells in humans and plants. Our future revenue and profitability critically depend upon our ability, or our licensees’ ability, to successfully develop apoptosis and senescence gene technology and later license or market such technology. We have conducted experiments on certain crops with favorable results and have conducted certain preliminary cell-line and animal experiments, which have provided us with data upon which we have designed additional research programs. However, we cannot give any assurance that our technology will be commercially successful or economically viable for any crops or human therapeutic applications.
In addition, no assurance can be given that adverse consequences might not result from the use of our technology such as the development of negative effects on humans or plants or reduced benefits in terms of crop yield or protection. Our failure to obtain market acceptance of our technology or the failure of our current or potential licensees to successfully commercialize such technology would have a material adverse effect on our business.
We outsource much of our research and development activities and, if we are unsuccessful in maintaining our alliances with these third parties, our research and development efforts may be delayed or curtailed.
We rely on third parties to perform much of our research and development activities. At this time, we have limited internal capabilities to perform our own research and development activities. Accordingly, the failure of third party research partners to perform under agreements entered into with us, or our failure to renew important research agreements with these third parties, may delay or curtail our research and development efforts.
We have significant future capital needs and may be unable to raise capital when needed, which could force us to delay or reduce our research and development efforts.
As of December 31, 2014, we had a cash balance of $2,107,452 and a working capital deficit of $175,444. Using our available reserves as of December 31, 2014, we believe that we can operate according to our current business plan at least through March 31, 2015.
To date, we have generated minimal revenues and anticipate that our operating costs will exceed any revenues generated over the next several years. Therefore, we will be required to raise additional capital in the future in order to operate in accordance with our current business plan, and this funding may not be available on favorable terms, if at all. If we are unable to raise additional funds, we will need to do one or more of the following:
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· | delay, scale back or eliminate some or all of our research and development programs; |
· | provide a license to third parties to develop and commercialize our technology that we would otherwise seek to develop and commercialize ourselves; |
· | seek strategic alliances or business combinations; |
· | attempt to sell our company; |
· | cease operations; or |
· | declare bankruptcy. |
In addition, in connection with any funding, if we need to issue more equity securities than our certificate of incorporation currently authorizes we will need stockholder approval. If stockholder approval is not obtained or if adequate funds are not available, we may be required to curtail operations significantly or to obtain funds through arrangements with collaborative partners or others that may require us to relinquish rights to certain of our technologies, product candidates, products or potential markets. Investors may experience dilution in their investment from future offerings of our common stock. For example, if we raise additional capital by issuing equity securities, such an issuance would reduce the percentage ownership of existing stockholders. In addition, assuming the exercise of all options and warrants outstanding and the conversion of the preferred stock into common stock, as of December 31, 2014, we had 476,799,469 shares of common stock authorized but unissued and unreserved, which may be issued from time to time by our board of directors. Furthermore, we may need to issue securities that have rights, preferences and privileges senior to our common stock. Failure to obtain financing on acceptable terms would have a material adverse effect on our liquidity.
Since our inception, we have financed all of our operations through equity and debt financings. Our future capital requirements depend on numerous factors, including:
· | the scope of our research and development; |
· | our ability to attract business partners willing to share in our development costs; |
· | our ability to successfully commercialize our technology; |
· | competing technological and market developments; |
· | our ability to enter into collaborative arrangements for the development, regulatory approval and commercialization of other products; and |
· | the cost of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights. |
Our business depends upon our patents and proprietary rights and the enforcement of these rights. Our failure to obtain and maintain patent protection may increase competition and reduce demand for our technology.
As a result of the substantial length of time and expense associated with developing products and bringing them to the marketplace in the biotechnology and agricultural industries, obtaining and maintaining patent and trade secret protection for technologies, products and processes is of vital importance. Our success will depend in part on several factors, including, without limitation:
· | our ability to obtain patent protection for our technologies and processes; |
· | our ability to preserve our trade secrets; and |
· | our ability to operate without infringing the proprietary rights of other parties both in the United States and in foreign countries. |
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As of December 31, 2014, we have been issued thirty-one (31) patents by the PTO and eighty-two (82) patents from foreign countries. We have also filed numerous patent applications for our technology in the United States and in several foreign countries, which technology is vital to our primary business, as well as several continuations in part on these patent applications. Our success depends in part upon the grant of patents from our pending patent applications. In addition, we have licensed certain antibody technology from The Scripps Research Institute, or Scripps, pursuant to a license agreement dated August 8, 2014. If we are in breach of this license agreement, and Scripps elects to terminate the agreement, this termination could have a material adverse effect to our business in the future.
Although we believe that our technology is unique and that it will not violate or infringe upon the proprietary rights of any third party, we cannot assure you that these claims will not be made or if made, could be successfully defended against. If we do not obtain and maintain patent protection, we may face increased competition in the United States and internationally, which would have a material adverse effect on our business.
Since patent applications in the United States are maintained in secrecy until patents are issued, and since publication of discoveries in the scientific and patent literature tend to lag behind actual discoveries by several months, we cannot be certain that we were the first creator of the inventions covered by our pending patent applications or that we were the first to file patent applications for these inventions.
In addition, among other things, we cannot assure you that:
· | our patent applications will result in the issuance of patents; |
· | any patents issued or licensed to us will be free from challenge and if challenged, would be held to be valid; |
· | any patents issued or licensed to us will provide commercially significant protection for our technology, products and processes; |
· | other companies will not independently develop substantially equivalent proprietary information which is not covered by our patent rights; |
· | other companies will not obtain access to our know-how; |
· | other companies will not be granted patents that may prevent the commercialization of our technology; or |
· | we will not incur licensing fees and the payment of significant other fees or royalties to third parties for the use of their intellectual property in order to enable us to conduct our business. |
Our competitors may allege that we are infringing upon their intellectual property rights, forcing us to incur substantial costs and expenses in resulting litigation, the outcome of which would be uncertain.
Patent law is still evolving relative to the scope and enforceability of claims in the fields in which we operate. We are like most biotechnology companies in that our patent protection is highly uncertain and involves complex legal and technical questions for which legal principles are not yet firmly established. In addition, if issued, our patents may not contain claims sufficiently broad to protect us against third parties with similar technologies or products, or provide us with any competitive advantage.
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The PTO and the courts have not established a consistent policy regarding the breadth of claims allowed in biotechnology patents. The allowance of broader claims may increase the incidence and cost of patent interference proceedings and the risk of infringement litigation. On the other hand, the allowance of narrower claims may limit the scope and value of our proprietary rights.
The laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the United States, and many companies have encountered significant problems and costs in protecting their proprietary rights in these foreign countries.
We could become involved in infringement actions to enforce and/or protect our patents. Regardless of the outcome, patent litigation is expensive and time consuming and would distract our management from other activities. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we could because they have substantially greater resources. Uncertainties resulting from the initiation and continuation of any patent litigation could limit our ability to continue our operations.
If our technology infringes the intellectual property of our competitors or other third parties, we may be required to pay license fees or damages.
The current patent landscape surrounding siRNA technology is unclear due to the recent proliferation of siRNA-related patent litigation and grants of third-party patents encompassing this technology. If any relevant claims of third party patents that are adverse to us are upheld as valid and enforceable, we could be prevented from commercializing our technology or could be required to obtain licenses from the owners of such patents. We cannot assure you that such licenses would be available or, if available, would be on acceptable terms. Some licenses may be non-exclusive and, therefore, our competitors may have access to the same technology licensed to us. In addition, if any parties successfully claim that the creation or use of our technology infringes upon their intellectual property rights, we may be forced to pay damages, including treble damages.
Our security measures may not adequately protect our unpatented technology and, if we are unable to protect the confidentiality of our proprietary information and know-how, the value of our technology may be adversely affected.
Our success depends upon know-how, unpatentable trade secrets, and the skills, knowledge and experience of our scientific and technical personnel. We require all employees to disclose and assign to us the rights to their ideas, developments, discoveries and inventions. All of the current employees have also entered into Non-disclosure, Non-competition and Invention Assignment Agreements. We also attempt to enter into similar agreements with our consultants, advisors and research collaborators. We cannot assure you that adequate protection for our trade secrets, know-how or other proprietary information against unauthorized use or disclosure will be available.
We occasionally provide information to research collaborators in academic institutions and request that the collaborators conduct certain tests. We cannot assure you that the academic institutions will not assert intellectual property rights in the results of the tests conducted by the research collaborators, or that the academic institutions will grant licenses under such intellectual property rights to us on acceptable terms, if at all. If the assertion of intellectual property rights by an academic institution is substantiated, and the academic institution does not grant intellectual property rights to us, these events could limit our ability to commercialize our technology.
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As we evolve from a company primarily involved in the research and development of our technology into one that is also involved in the commercialization of our technology, we may have difficulty managing our growth and expanding our operations.
As our business grows, we may need to add employees and enhance our management, systems and procedures. We may need to successfully integrate our internal operations with the operations of our marketing partners, manufacturers, distributors and suppliers to produce and market commercially viable products. We may also need to manage additional relationships with various collaborative partners, suppliers and other organizations. Expanding our business may place a significant burden on our management and operations. We may not be able to implement improvements to our management information and control systems in an efficient and timely manner and we may discover deficiencies in our existing systems and controls. Our failure to effectively respond to such changes may make it difficult for us to manage our growth and expand our operations.
We are in the process of combining the assets and operations of Fabrus into our company, which will increase our infrastructure and reporting burden.
The integration of the business and assets of Fabrus is of critical importance to our future success. The success of the integration will depend, in a large part, on our ability to realize the anticipated benefits, including synergies, cost savings, innovation and operational efficiencies, from combining Fabrus and Senesco. To realize these anticipated benefits, these businesses must be successfully integrated. The failure to integrate successfully and to manage successfully the challenges presented by the integration process may prevent us from achieving the anticipated benefits of this acquisition. Any difficulties in successfully integrating these businesses, or any delays in the integration process, could adversely affect our business, financial results and financial condition.
We have no marketing or sales history and depend on third party marketing partners. Any failure of these parties to perform would delay or limit our commercialization efforts.
We have no history of marketing, distributing or selling biotechnology products, and we are relying on our ability to successfully establish marketing partners or other arrangements with third parties to market, distribute and sell a commercially viable product both here and abroad. Our business plan envisions creating strategic alliances to access needed commercialization and marketing expertise. We may not be able to attract qualified sub-licensees, distributors or marketing partners, and even if qualified, these marketing partners may not be able to successfully market human therapeutic applications developed with our technology. If our current or potential future marketing partners fail to provide adequate levels of sales, our commercialization efforts will be delayed or limited and we may not be able to generate revenue.
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We will depend on joint ventures and strategic alliances to develop and market our technology and, if these arrangements are not successful, our technology may not be developed and the expenses to commercialize our technology will increase.
In its current state of development, our technology is not ready to be marketed to consumers. We intend to follow a multi-faceted commercialization strategy that involves the licensing of our technology to business partners for the purpose of further technological development, marketing and distribution. We have and are seeking business partners who will share the burden of our development costs while our technology is still being developed, and who will pay us royalties when they market and distribute products incorporating our technology upon commercialization. The establishment of joint ventures and strategic alliances may create future competitors, especially in certain regions abroad where we do not pursue patent protection. If we fail to establish beneficial business partners and strategic alliances, our growth will suffer and the continued development of our technology may be harmed.
Competition in the human therapeutic industry is intense and technology is changing rapidly. If our competitors market their technology faster than we do, we may not be able to generate revenues from the commercialization of our technology.
There are many large companies working in the therapeutic antibody field and similarly may develop technologies related to antibody discovery. These companies include Genentech, Inc., Amgen, Inc., Biogen Idec, Inc., Novartis AG, Janssen Biotech, Inc., Sanofi-aventis U.S. LLC, Regeneron Pharmaceuticals, Inc., Bristol-Myers Squibb Company, Teva Pharmaceutical Industries Ltd, Pfizer, Inc., Takeda Pharmaceutical Company Limited, Kyawa Hokko Kirin Pharma, Inc., Daiichi Sankyo Company Limited, Astellas Pharma, Inc., Merck & Co. Inc., AbbVie, Inc., Seattle Genetics, Inc., and Immunogen, Inc. Similarly, there are several small companies developing technologies for antibody discovery, including Adimab LLC, X-body Biosciences, Inc., Innovative Targeting Solutions, Inc., Heptares Therapeutics Ltd, Kymab Ltd., and Novimmune SA. Other companies are working on unique scaffolds, including Ablynx NV and ArGen-X N.V.
Many human therapeutic companies are engaged in research and development activities relating to apoptosis and senescence. We may be unable to compete successfully against our current and future competitors, which may result in price reductions, reduced margins and the inability to achieve market acceptance for products containing our technology. Some of our competitors that are involved in apoptosis research include: Celgene Corporation; Takeda/Millennium; ONYX Pharmaceuticals, Inc.; Amgen Inc.; Janssen Biotech, Inc.; Novartis AG; and Pharmacyclics, Inc. Many of these competitors have substantially greater financial, marketing, sales, distribution and technical resources than us and have more experience in research and development, clinical trials, regulatory matters, manufacturing and marketing. We anticipate increased competition in the future as new companies enter the market and new technologies become available. Our technology may be rendered obsolete or uneconomical by technological advances or entirely different approaches developed by one or more of our competitors, which will prevent or limit our ability to generate revenues from the commercialization of our technology.
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Our business is subject to various government regulations and, if we or our licensees are unable to obtain regulatory approval, we may not be able to continue our operations.
Use of our technology, if developed for human therapeutic applications, is subject to FDA regulation. The FDA must approve any drug or biologic product before it can be marketed in the United States. In addition, prior to being sold outside of the United States, any products resulting from the application of our human therapeutic technology must be approved by the regulatory agencies of foreign governments. Prior to filing a new drug application or biologics license application with the FDA, we would have to perform extensive clinical trials, and prior to beginning any clinical trial, we would need to perform extensive preclinical testing which could take several years and may require substantial expenditures.
We have performed clinical trials in connection with our human therapeutic applications, which is subject to FDA approval. Additionally, federal, state and foreign regulations relating to human therapeutic applications developed through biotechnology are subject to public concerns and political circumstances, and, as a result, regulations have changed and may change substantially in the future. Accordingly, we may become subject to governmental regulations or approvals or become subject to licensing requirements in connection with our research and development efforts. We may also be required to obtain such licensing or approval from the governmental regulatory agencies described above, or from state agencies, prior to the commercialization of our human therapeutic technology. If unfavorable governmental regulations are imposed on our technology or if we fail to obtain licenses or approvals in a timely manner, we may not be able to continue our operations.
Preclinical studies of our human therapeutic applications may be unsuccessful, which could delay or prevent regulatory approval.
Preclinical studies may reveal that our human therapeutic technology is ineffective or harmful, and/or may be unsuccessful in demonstrating efficacy and safety of our human therapeutic technology, which would significantly limit the possibility of obtaining regulatory approval for any drug or biologic product manufactured with our technology. The FDA requires submission of extensive preclinical, clinical and manufacturing data to assess the efficacy and safety of potential products. Any delay in receiving approval for any applicable IND from the FDA would result in a delay in the commencement of the related clinical trial. Additionally, we could be required to perform additional preclinical studies prior to the FDA approving any applicable IND. Furthermore, the success of preliminary studies does not ensure commercial success, and later-stage clinical trials may fail to confirm the results of the preliminary studies.
Our success will depend on the success of our clinical trials of our human therapeutic applications.
It may take several years to complete the clinical trials of a product candidate, and failure of one or more of our clinical trials can occur at any stage of testing. We believe that the development of our product candidate involves significant risks at each stage of testing. If clinical trial difficulties and failures arise, our product candidate may never be approved for sale or become commercially viable.
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There are a number of difficulties and risks associated with clinical trials. These difficulties and risks may result in the failure to receive regulatory approval to sell our product candidate or the inability to commercialize our product candidate. The possibility exists that:
· | we may discover that the product candidate does not exhibit the expected therapeutic results in humans, may cause harmful side effects or have other unexpected characteristics that may delay or preclude regulatory approval or limit commercial use if approved; |
· | the results from early clinical trials may not be statistically significant or predictive of results that will be obtained from expanded advanced clinical trials; |
· | institutional review boards or regulators, including the FDA, may hold, suspend or terminate our clinical research or the clinical trials of our product candidate for various reasons, including noncompliance with regulatory requirements or if, in their opinion, the participating subjects are being exposed to unacceptable health risks; |
· | subjects may drop out of our clinical trials; |
· | our preclinical studies or clinical trials may produce negative, inconsistent or inconclusive results, and we may decide, or regulators may require us, to conduct additional preclinical studies or clinical trials; and |
· | the cost of our clinical trials may be greater than we currently anticipate. |
Clinical trials for our human therapeutic technology will be lengthy and expensive and their outcome is uncertain.
Before obtaining regulatory approval for the commercial sales of any product containing our technology, we must demonstrate through clinical testing that our technology and any product containing our technology is safe and effective for use in humans. Conducting clinical trials is a time-consuming, expensive and uncertain process and typically requires years to complete. In our industry, the results from preclinical studies and early clinical trials often are not predictive of results obtained in later-stage clinical trials. Some products and technologies that have shown promising results in preclinical studies or early clinical trials subsequently fail to establish sufficient safety and efficacy data necessary to obtain regulatory approval. At any time during clinical trials, we or the FDA might delay or halt any clinical trial for various reasons, including:
· | occurrence of unacceptable toxicities or side effects; |
· | ineffectiveness of the product candidate; |
· | negative or inconclusive results from the clinical trials, or results that necessitate additional studies or clinical trials; |
· | delays in obtaining or maintaining required approvals from institutions, review boards or other reviewing entities at clinical sites; |
· | delays in patient enrollment; or |
· | insufficient funding or a reprioritization of financial or other resources. |
Any failure or substantial delay in successfully completing clinical trials and obtaining regulatory approval for our product candidates could severely harm our business.
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If our clinical trials for our product candidates are delayed, we would be unable to commercialize our product candidates on a timely basis, which would materially harm our business.
Planned clinical trials may not begin on time or may need to be restructured after they have begun. Clinical trials can be delayed for a variety of reasons, including delays related to:
· | obtaining an effective IND or regulatory approval to commence a clinical trial; |
· | negotiating acceptable clinical trial agreement terms with prospective trial sites; |
· | obtaining institutional review board approval to conduct a clinical trial at a prospective site; |
· | recruiting qualified subjects to participate in clinical trials; |
· | competition in recruiting clinical investigators; |
· | shortage or lack of availability of supplies of drugs for clinical trials; |
· | the need to repeat clinical trials as a result of inconclusive results or poorly executed testing; |
· | the placement of a clinical hold on a study; |
· | the failure of third parties conducting and overseeing the operations of our clinical trials to perform their contractual or regulatory obligations in a timely fashion; and |
· | exposure of clinical trial subjects to unexpected and unacceptable health risks or noncompliance with regulatory requirements, which may result in suspension of the trial. |
We believe that our product candidates have significant milestones to reach, including the successful completion of clinical trials, before commercialization. If we have significant delays in or termination of clinical trials, our financial results and the commercial prospects for our product candidates or any other products that we may develop will be adversely impacted. In addition, our product development costs would increase and our ability to generate revenue could be impaired.
Any inability to license from third parties their proprietary technologies or processes which we use in connection with the development of our technology may impair our business.
Other companies, universities and research institutions have or may obtain patents that could limit our ability to use our technology in a product candidate or impair our competitive position. As a result, we would have to obtain licenses from other parties before we could continue using our technology in a product candidate. Any necessary licenses may not be available on commercially acceptable terms, if at all. If we do not obtain required licenses, we may not be able to develop our technology into a product candidate or we may encounter significant delays in development while we redesign methods that are found to infringe on the patents held by others.
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We face potential product liability exposure far in excess of our limited insurance coverage.
We may be held liable if any product we or our collaborators develop causes injury or is found otherwise unsuitable during product testing, manufacturing, marketing or sale. Regardless of merit or eventual outcome, product liability claims could result in decreased demand for our product candidates, injury to our reputation, withdrawal of patients from our clinical trials, substantial monetary awards to trial participants and the inability to commercialize any products that we may develop. These claims might be made directly by consumers, health care providers, pharmaceutical companies or others selling or testing our products. We have obtained limited product liability insurance coverage for our clinical trials; however, our insurance may not reimburse us or may not be sufficient to reimburse us for expenses or losses we may suffer. Moreover, if insurance coverage becomes more expensive, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. If we obtain marketing approval for any of our product candidates, we intend to expand our insurance coverage to include the sale of commercial products, but we may be unable to obtain commercially reasonable product liability insurance for any products approved for marketing. On occasion, juries have awarded large judgments in class action lawsuits for claims based on drugs that had unanticipated side effects. In addition, the pharmaceutical and biotechnology industries, in general, have been subject to significant medical malpractice litigation. A successful product liability claim or series of claims brought against us could harm our reputation and business and would decrease our cash reserves.
We depend on our key personnel and, if we are not able to attract and retain qualified scientific and business personnel, we may not be able to grow our business or develop and commercialize our technology.
We are highly dependent on our scientific advisors, consultants and third-party research partners. Our success will also depend in part on the continued service of our key employees and our ability to identify, hire and retain additional qualified personnel in an intensely competitive market. Additionally, we do not have employment agreements with our key employees. We do not maintain key person life insurance on any member of management. The failure to attract and retain key personnel could limit our growth and hinder our research and development efforts.
Certain provisions of our charter, by-laws, Delaware law and stock plans could make a takeover difficult.
Certain provisions of our certificate of incorporation and by-laws could make it more difficult for a third party to acquire control of us, even if the change in control would be beneficial to stockholders. Our certificate of incorporation authorizes our board of directors to issue, without stockholder approval, 5,000,000 shares of preferred stock with voting, conversion and other rights and preferences that could adversely affect the voting power or other rights of the holders of our common stock.
In addition, we are subject to the Business Combination Act of the Delaware General Corporation Law which, subject to certain exceptions, restricts certain transactions and business combinations between a corporation and a stockholder owning 15% or more of the corporation’s outstanding voting stock for a period of three years from the date such stockholder becomes a 15% owner. These provisions may have the effect of delaying or preventing a change of control of us without action by our stockholders and, therefore, could adversely affect the value of our common stock.
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Furthermore, in the event of our merger or consolidation with or into another corporation, or the sale of all or substantially all of our assets in which the successor corporation does not assume our outstanding equity awards or issue equivalent equity awards, our current equity plans require the accelerated vesting of such outstanding equity awards.
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Risks Related to Our Common Stock
Penny stock regulations may impose certain restrictions on marketability of our securities.
The SEC has adopted regulations which generally define a “penny stock” to be any equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. As a result, our common stock is subject to rules that impose additional sales practice requirements on broker dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse). For transactions covered by such rules, the broker dealer must make a special suitability determination for the purchase of such securities and have received the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the SEC relating to the penny stock market. The broker dealer must also disclose the commission payable to both the broker dealer and the registered representative, current quotations for the securities and, if the broker dealer is the sole market maker, the broker dealer must disclose this fact and the broker dealer’s presumed control over the market.
Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Broker-dealers must wait two business days after providing buyers with disclosure materials regarding a security before effecting a transaction in such security. Consequently, the “penny stock” rules restrict the ability of broker dealers to sell our securities and affect the ability of investors to sell our securities in the secondary market and the price at which such purchasers can sell any such securities, thereby affecting the liquidity of the market for our common stock.
Stockholders should be aware that, according to the SEC, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include:
· | control of the market for the security by one or more broker-dealers that are often related to the promoter or issuer; |
· | manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; |
· | “boiler room” practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons; |
· | excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and |
· | the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses. |
Our management is aware of the abuses that have occurred historically in the penny stock market.
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Our management and other affiliates have significant control of our common stock and could significantly influence our actions in a manner that conflicts with our interests and the interests of other stockholders.
As of December 31, 2014, our executive officers and directors together beneficially own approximately 27% of the outstanding shares of our common stock, assuming the exercise of options and warrants which are currently exercisable or will become exercisable within 60 days of December 31, 2014, held by these stockholders. Additionally, there are four shareholders that each beneficially own more than 5% of the outstanding shares of our common stock. As a result, these stockholders, acting together, will be able to exercise significant influence over matters requiring approval by our stockholders, including the election of directors, and may not always act in the best interests of other stockholders. Such a concentration of ownership may have the effect of delaying or preventing a change in control of us, including transactions in which our stockholders might otherwise receive a premium for their shares over then-current market prices.
A significant portion of our total outstanding shares of common stock may be sold in the market in the near future, which could cause the market price of our common stock to drop significantly.
As of December 31, 2014, we had 13,866,627 shares of our common stock issued and outstanding and 580 shares of convertible preferred stock outstanding which can convert into 290,000 shares of common stock. As of December 31, 2014, all of our outstanding shares of common stock are registered pursuant to registration statements on Forms S-1 or S-3 or are either eligible to be sold under Rule 144 of the Securities Act of 1933, as amended, or are in the public float. In addition, we have registered 1,876,722 shares of our common stock underlying warrants previously issued and still outstanding and we registered 1,845,976 shares of our common stock underlying options granted or to be granted under our stock option plans. Consequently, sales of substantial amounts of our common stock in the public market, or the perception that such sales could occur, may have a material adverse effect on our stock price.
Our common stock has a limited trading market, which could limit your ability to resell your shares of common stock at or above your purchase price.
Our common stock is currently quoted on the OTCQB Marketplace, operated by the OTC Markets Group, or OTCQB, and our common stock currently has a limited trading market. We cannot assure you that an active trading market will develop or, if developed, will be maintained. As a result, our stockholders may find it difficult to dispose of shares of our common stock and, as a result, may suffer a loss of all or a substantial portion of their investment.
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The market price of our common stock may fluctuate and may drop below the price you paid.
We cannot assure you that you will be able to resell the shares of our common stock at or above your purchase price. The market price of our common stock may fluctuate significantly in response to a number of factors, some of which are beyond our control. These factors include:
· | quarterly variations in operating results; |
· | the progress or perceived progress of our research and development efforts; |
· | changes in accounting treatments or principles; |
· | announcements by us or our competitors of new technology, product and service offerings, significant contracts, acquisitions or strategic relationships; |
· | additions or departures of key personnel; |
· | future offerings or resales of our common stock or other securities; |
· | stock market price and volume fluctuations of publicly-traded companies in general and development companies in particular; and |
· | general political, economic and market conditions. |
For example, during the quarter ended December 31, 2014, our common stock traded between $0.51 and $1.60 per share.
Because we do not intend to pay, and have not paid, any cash dividends on our shares of common stock, our stockholders will not be able to receive a return on their shares unless the value of our common stock appreciates and they sell their shares.
We have never paid or declared any cash dividends on our common stock, and we intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. Therefore, our stockholders will not be able to receive a return on their investment unless the value of our common stock appreciates and they sell their shares.
Our stockholders may experience substantial dilution as a result of the conversion of convertible preferred stock, the exercise of options and warrants to purchase our common stock, or due to anti-dilution provisions relating to any on the foregoing.
As of December 31, 2014, we have outstanding 580 shares of convertible preferred stock which may convert into 290,000 shares of our common stock and warrants to purchase 3,977,744 shares of our common stock. In addition, as of December 31, 2014, we have reserved 3,351,701 shares of our common stock for issuance upon the exercise of options granted or available to be granted pursuant to our stock option plan, all of which may be granted in the future. Furthermore, in connection with the preferred stock agreements, we are required to reserve an additional 146,236 shares of common stock. The conversion of the convertible preferred stock and the exercise of these options and warrants will result in dilution to our existing stockholders and could have a material adverse effect on our stock price. The conversion price of the convertible preferred stock is also subject to certain anti-dilution adjustments.
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Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
None.
Item 3. | Defaults Upon Senior Securities. |
None.
Item 4. | Mine Safety Disclosures. |
None.
Item 5. | Other Information. |
None. |
Item 6. | Exhibits. |
Exhibits.
Exhibit No. | Description | ||
3.1 | Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Sevion Therapeutics, Inc. filed with the State of Delaware on September 29, 2014. (Incorporated by reference to Exhibit 3.1 on Form 8-K filed on October 3, 2014) | ||
10.1 | Sublease agreement by and between Pathway Genomics Corporation, as Sublandlord, and Fabrus, Inc., as Subtenant, effective as of October 10, 2014. (filed herewith) | ||
10.2 | + | Collaboration Agreement by and between Fabrus, Inc. and CNA Development, LLC, dated December 18, 2014. (filed herewith). | |
10.3 | Retention Agreement, dated as of November 30, 2014, by and between Sevion Therapeutics, Inc. and Joel Brooks. (Incorporated by reference to Exhibit 10.1 on Form 8-K filed on December 3, 2014). | ||
10.4 | Retention Agreement, dated as of November 17, 2014, by and between Sevion Therapeutics, Inc. and Richard Dondero. (filed herewith). | ||
10.5 | Retention Agreement, dated as of November 17, 2014, by and between Sevion Therapeutics, Inc. and Heather Branham. (filed herewith). | ||
10.6 | Consulting Agreement, dated as of January 9, 2015, by and between Sevion Therapeutics, Inc. and The David Stephen Group LLC. (filed herewith). | ||
31.1 | Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith). | ||
31.2 | Certification of principal financial and accounting officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith). | ||
32.1 | Certification of principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350. (furnished herewith). | ||
32.2 | Certification of principal financial and accounting officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350. (furnished herewith). | ||
101.1 | Financial Statements from the Quarterly Report on Form 10-Q of Sevion Therapeutics, Inc. for the quarter ended December 31, 2014, filed on February17, 2015, formatted in XBRL: (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Operations; (iii) the Condensed Consolidated Statements of Stockholder’s Equity; (iv) the Condensed Consolidated Statements of Cash Flows and (v) the Notes to Condensed Consolidated Financial Statements. (filed herewith). | ||
+ Confidential Treatment Requested. Confidential Materials omitted and filed separately with the Securities and Exchange Commission. |
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In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SEVION THERAPEUTICS, INC. | ||
DATE: February 17, 2015 | By: | /s/ David Rector |
David Rector | ||
Chief Executive Officer | ||
(Principal Executive Officer) | ||
DATE: February 17, 2015 | By: | /s/ Joel Brooks |
Joel Brooks | ||
Chief Financial Officer, Secretary and Treasurer | ||
(Principal Financial and Accounting Officer) |
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Exhibit 10.1
SUBLEASE AGREEMENT
This Sublease Agreement (“Sublease”) is made as of the 10th day of October, 2014, by and between Pathway Genomics Corporation, a Delaware corporation (“Sublandlord”), and Fabrus, Inc., a wholly-owned subsidiary of Senesco Technologies, Inc., a Delaware corporation (“Subtenant”).
RECITALS
This Sublease is made with regard to the following facts:
A. Sublandlord is the assignee tenant under the Lease dated December 1, 2003, as amended by the Assignment and First Amendment to Lease Agreement dated November 1, 2008, the Second Amendment to Lease dated April 14, 2011, and as further amended or assigned (collectively the “Master Lease”) with Alexandria Real Estate Equities as the successor landlord (the “Master Landlord”). A copy of that Master Lease (including amendments) is attached to this Sublease and marked as Exhibit A. Under the Master Lease, Sublandlord leases a one-story building containing approximately 10,571 square feet of Rentable Area (as defined in the Master Lease) of office and laboratory space located at 4045 Sorrento Valley Blvd., San Diego, California 92121 (the “Premises”).
B. Subtenant desires to sublease from Sublandlord the entire Premises, which Premises is more particularly described in Exhibit B attached to this Sublease. Sublandlord has agreed to sublease the Premises to Subtenant on the terms, covenants and conditions stated in this Sublease.
C. Capitalized terms used herein which are not expressly defined in this Sublease shall have the meanings given in the Master Lease.
NOW, THEREFORE, in consideration of the mutual covenants contained in this Sublease, and for valuable consideration, the receipt and sufficiency of which are acknowledged by the parties, the parties agree as follows:
1. Sublease. Sublandlord subleases to Subtenant and Subtenant subleases from Sublandlord the Premises, subject to the terms, covenants, and conditions contained in this Sublease. Sublandlord and Subtenant agree that the Premises contain 10,571 square feet of Rentable Area.
2. Term and Possession.
2.1 Term. Subject to the condition set forth in Section 13.6 below, the terms and provisions of this Sublease shall be effective between Sublandlord and Subtenant as of the date of this Sublease. The term of this Sublease will commence on October 10, 2014, and will expire, unless sooner terminated as provided in the Master Lease, on October 31, 2016. In no event shall the expiration date of the Sublease exceed the Term Expiration Date of the Master Lease.
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2.2 Possession. Sublandlord will deliver possession of the Premises to Subtenant no later than the date set forth in Section 2.1 above. Sublandlord may allow Subtenant early possession of the Premises conditioned upon the Premises being available for such possession prior to the commencement date set forth in Section 2.1. Any grant of early possession only conveys a non-exclusive right to occupy the Premises. If Subtenant totally or partially occupies the Premises prior to the commencement date, the obligation to pay Basic Rent shall be abated for the period of such early possession. All other terms of this Sublease (including but not limited to the obligations to pay Additional Rent and obtain insurance) shall, however, be in effect during such period. Any such early possession shall not affect the expiration date of the term hereof. Sublandlord shall not be required to tender possession of the Premises to Subtenant until Subtenant complies with its obligation to provide evidence of insurance. Pending delivery of such evidence, Subtenant shall be required to perform all of its obligations under this Sublease from and after the date set forth in Section 2.1, including the payment of Basic Rent and Additional Rent, notwithstanding Sublandlord's election to withhold possession pending receipt of such evidence of insurance. Further, if Subtenant is required by this Sublease to perform any other conditions prior to or concurrent with the commencement date, the commencement date shall occur but Sublandlord may elect to withhold possession until such conditions are satisfied.
3. Basic Rent. Subtenant will pay Basic Rent during the term of this Sublease in the initial amount of $22,728.00 per month, payable monthly in advance on the first day of each month. Basic Rent will be abated to the amount of $0.00 for months two (2) through six (6) of the term; however, Additional Rent shall not be abated. The monthly Basic Rent will be increased by 3% on each anniversary of the commencement date stated in Section 2.1 above. Furthermore, in the event that the term of this Sublease begins or ends on a date that is not the first day of a month, Basic Rent will be prorated as of that date. Concurrent with Subtenant’s execution of this Sublease, Subtenant will deliver to Sublandlord the following:
First monthly Basic Rent: | $ | 15,396.39 | ||
Security Deposit: | $ | 30,000.00 | ||
Estimated Operating Expense | ||||
for October 2014: | $ | 5,800.00 | ||
Total: | $ | 58,528.00 |
The Security Deposit will be held by Sublandlord under the terms of Section 5.8 of the Master Lease.
4. Additional Rent. Subtenant acknowledges that pursuant to the terms of the Master Lease, Sublandlord is obligated to pay as Additional Rent a share of Operating Expenses and other amounts due to the Master Landlord by Sublandlord pursuant to the Master Lease. Subtenant agrees that in addition to the Basic Rent due under Section 3 above, Subtenant shall pay to Sublandlord as Additional Rent 100% of all amounts of Additional Rent Sublandlord is obligated to pay Master Landlord pursuant to the Master Lease other than Additional Rent payable under the Master Lease that arises from Sublandlord's Default under the Master Lease or any other failure by Sublandlord to comply with the agreements, terms, covenants and conditions of the Master Lease. Subtenant shall pay such Additional Rent to Sublandlord at least five days prior to the date Sublandlord must pay such Additional Rent to Master Landlord pursuant to the terms of the Master Lease. Subtenant’s obligation to pay Additional Rent hereunder shall be subject to adjustment as provided in the Master Lease.
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5. Use. Subtenant agrees to use the Premises in accordance with the provisions of the Master Lease and this Sublease, and for no other purpose.
6. Master Lease. Subject to Section 7.1 below, as applied to this Sublease, the words “Landlord” and “Tenant” in the Master Lease will be deemed to refer to Sublandlord and Subtenant, respectively, under this Sublease.
Except as otherwise expressly provided in Section 8 of this Sublease, the covenants, agreements, provisions, and conditions of the Master Lease are made a part of, and incorporated into, this Sublease as if recited in full in this Sublease.
Subject to Section 7.1 below, the rights and obligations of the “Landlord” and the “Tenant” under the Master Lease will be deemed the rights and obligations of Sublandlord and Subtenant, respectively, under this Sublease, and will inure to the benefit of, and be binding on, Sublandlord and Subtenant, respectively. As between the parties to this Sublease only, in the event of a conflict between the terms of the Master Lease and the terms of this Sublease, the terms of this Sublease will control, except to the extent that adherence to a conflicting provision of this Sublease would (a) constitute a breach of the Master Lease, (b) require Sublandlord to take some action, provide a benefit, or refrain from taking action in violation of, or not provided by, the Master Lease, or (c) that would result in Subtenant paying to Sublandlord less than 100% of all Additional Rent Sublandlord is required to pay to Master Landlord under the Master Lease.
7. Performance by Sublandlord; Status of Master Lease.
7.1. Sublandlord’s Performance Conditioned on Master Landlord’s Performance. Subtenant recognizes that Sublandlord is not in a position to render any of the services or to perform any of the obligations required of Master Landlord by the terms of the Master Lease. Therefore, despite anything to the contrary in this Sublease and the Master Lease, Subtenant agrees that performance by Sublandlord of its obligations under this Sublease is conditioned on performance by the Master Landlord of its corresponding obligations under the Master Lease, and Sublandlord will not be liable to Subtenant for any default of the Master Landlord under the Master Lease.
Subtenant will not have any claim against Sublandlord based on the Master Landlord’s failure or refusal to comply with any of the provisions of the Master Lease unless that failure or refusal is a result of Sublandlord’s act or failure to act. Despite the Master Landlord’s failure or refusal to comply with any of those provisions of the Master Lease, this Sublease will remain in full force and effect and Subtenant will pay the Basic Rent and Additional Rent and all other charges provided for in this Sublease without any abatement, deduction or setoff. Except as expressly provided in this Sublease, Subtenant agrees to be subject to, and bound by, all of the covenants, agreements, terms, provisions, and conditions of the Master Lease, as though Subtenant was the Tenant under the Master Lease.
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7.2. Obtaining Master Landlord’s Consent. Whenever the consent of the Master Landlord is required under the Master Lease, and whenever the Master Landlord fails to perform its obligations under the Master Lease, Sublandlord agrees to use its reasonable, good faith efforts to obtain, at Subtenant’s sole cost and expense, that consent or performance on behalf of Subtenant.
7.3. No Existing Defaults. Sublandlord represents and warrants to Subtenant that the Master Lease is in full force and effect, and Sublandlord has neither given nor received a notice of default under the Master Lease.
7.4. Preservation of Master Lease. Sublandlord agrees not to terminate the Master Lease voluntarily, or modify the Master Lease in a manner that adversely affects Subtenant’s rights under this Sublease. Subtenant and Sublandlord will each refrain from any act or omission that would result in the failure or breach of any of the covenants, provisions, or conditions of the Master Lease on the part of the Tenant under the Master Lease.
8. Variations From Master Lease. As between Sublandlord and Subtenant, the terms and conditions of the Master Lease are modified as stated below in this Section 8:
8.1. Basic Rent; Term; Security Deposit. Despite anything to the contrary stated in the Master Lease, the term of this Sublease, Basic Rent payable under this Sublease, and the amount of the Security Deposit required of the Subtenant are as stated in Sections 2 and 3 above.
8.2. Brokers. The parties to this Sublease warrant to each other that neither party dealt with any broker or finder in connection with the consummation of this Sublease other than Cassidy Turley and Cushman & Wakefield (“Brokers”) and each party agrees to protect, defend, indemnify and hold the other party harmless from and against any and all claims or liabilities for brokerage commissions or finder’s fees arising out of that party’s acts in connection with this Sublease to anyone other than Brokers. The provisions of this Section 8.2 will survive the expiration or earlier termination of this Sublease. A commission of 6.5% of the total Basic Rent payable for the original term of this Sublease will be paid to Brokers (2.5% to Cassidy Turley and 4.0% to Cushman & Wakefield) by Sublandlord 50% upon execution and delivery of this Sublease and all required monetary amounts by both parties and 50% upon Subtenant taking possession of the Premises.
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8.3. Insurance and Condemnation Proceeds. Subtenant will comply with all insurance requirements set forth in the Master Lease, and shall provide Sublandlord evidence of such insurance prior to taking possession of the Premises. Additionally, and despite anything contained in the Master Lease to the contrary, as between Sublandlord and Subtenant only, in the event of damage to or condemnation of the Premises, all insurance proceeds or condemnation awards received by Sublandlord under the Master Lease will be deemed to be the property of Sublandlord, and Sublandlord will have no obligation to rebuild or restore the Premises.
8.4. Notices. Any notice that may or must be given by either party under this Sublease will be delivered (i) personally, (ii) by certified mail, return receipt requested, or (iii) by a nationally recognized overnight courier, addressed to the party to whom it is intended. Any notice given to Sublandlord or Subtenant shall be sent to the respective address set forth on the signature page below, or to such other address as that party may designate for service of notice by a notice given in accordance with the provisions of this Section 8.4. A notice sent pursuant to the terms of this Section 8.4 shall be deemed delivered (A) upon receipt, if delivered personally, (B) three (3) business days after deposit into the United States mail, or (C) the day following deposit with a nationally recognized overnight courier.
8.5. Amounts Payable. All amounts payable under this Sublease by Subtenant are payable directly to Sublandlord.
8.6. Condition of Premises; Furniture and Equipment; Disability Access; Energy Use Disclosure.
8.6.1. “As-Is.” Sublandlord will deliver the Premises to Subtenant in its current “as is” condition without any representations or warranties by Sublandlord as to condition, suitability, zoning, or compliance with building or disability access codes. Subtenant acknowledges that: (a) it has been given an opportunity to inspect and measure the Premises, (b) it has been advised by Sublandlord and/or Brokers to satisfy itself with respect to the size and condition of the Premises (including but not limited to the electrical, HVAC and fire sprinkler systems, security, environmental aspects, and compliance with applicable building codes and disability access laws such as the Americans with Disabilities Act), and their suitability for Subtenant's intended use, (c) Subtenant has made such investigation as it deems necessary with reference to such matters and assumes all responsibility therefor as the same relate to its occupancy of the Premises, (d) Subtenant is not relying on any representation as to the size of the Premises made by Brokers or Sublandlord, (e) the square footage of the Premises was not material to Subtenant's decision to sublease the Premises and pay the rent stated herein, and (f) neither Sublandlord, Sublandlord's agents, nor Brokers have made any oral or written representations or warranties with respect to said matters other than as set forth in this Sublease.
8.6.2. Furniture and Equipment. Sublandlord and Subtenant agree that the Premises contain the furniture and equipment listed on Exhibit C to this Sublease (the “Furniture and Equipment”). Subtenant will not remove any of the Furniture and Equipment from the Premises during the term of this Sublease. Provided that Subtenant faithfully performs all of its obligations under this Sublease, at the expiration of the term set forth in Section 2 above, title to the Furniture and Equipment shall pass to Subtenant upon payment to Sublandlord of consideration in the amount of $1.00.
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8.6.3. Disability Access Laws. The Premises have not undergone an inspection by a Certified Access Specialist (CASp). Since compliance with the Americans with Disabilities Act and similar laws and regulations (“Disability Access Laws”) is dependent upon Subtenant’s specific use of the Premises, Sublandlord makes no warranty or representation as to whether or not the Premises complies with Disability Access Laws. In the event that, as a result of Subtenant's use, or intended use, of the Premises, the Disability Access Laws require modifications or the construction or installation of improvements in or to the Premises, Project and/or Common Areas, the parties agree that such modifications, construction or improvements shall be made at Subtenant's expense. In no event shall subtenant be responsible to cure existing Disability Access Law violations, unless triggered by any Subtenant modifications or construction activities other than the planned installation of an autoclave, steam dishwasher, generator and reception lighting. In the event that Subtenant’s installation of an autoclave, steam dishwasher, generator and/or reception lighting triggers an obligation to cure existing Disability Access Law violations, and if the cost to execute such cure is more than $20,000.00, then Subtenant shall be responsible for the costs over $20,000.
8.6.4. Energy Disclosures. Subtenant waives any remedies it may have for Sublandlord’s failure to comply with the energy usage disclosure requirements of AB 1103.
8.7 Maintenance. Subtenant acknowledges and agrees that it will be solely responsible for all maintenance obligations of “Tenant” under the Master Lease, and Subtenant covenants with Sublandlord that Subtenant will employ sufficient and qualified facilities personnel to maintain the Premises as required under the Master Lease.
9. Indemnity. Subtenant agrees to protect, defend, indemnify, and hold Sublandlord harmless from and against any and all liabilities, claims, expenses, losses and damages (including reasonable attorney fees and costs), that may at any time be asserted against Sublandlord by (a) the Master Landlord for failure of Subtenant to perform any of the covenants, agreements, terms, provisions, or conditions contained in the Master Lease that Subtenant is obligated to perform under the provisions of this Sublease; or (b) any person as a result of Subtenant’s use or occupancy of the Premises, except to the extent any of the foregoing is caused by the negligence or willful misconduct of Sublandlord. Sublandlord agrees to protect, defend, indemnify, and hold Subtenant harmless from and against any and all liabilities, claims, expenses, losses and damages (including reasonable attorney fees and costs), that may at any time be asserted against Subtenant due to Sublandlord's failure to perform any of the covenants, agreements, terms, provisions, or conditions contained in this Sublease. The provisions of this Section 9 will survive the expiration or earlier termination of the Master Lease or this Sublease.
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10. Cancellation of Master Lease. In the event the Master Lease is canceled or terminated for any reason, or involuntarily surrendered by operation of law before the expiration date of this Sublease, Subtenant agrees, at the sole option of the Master Landlord, to attorn to the Master Landlord for the balance of the term of this Sublease and on the then executory terms of this Sublease.
That attornment will be evidenced by an agreement in form and substance reasonably acceptable to the Master Landlord and Subtenant. Subtenant agrees to execute and deliver such an agreement at any time within ten (10) business days after request by the Master Landlord. Subtenant waives the provisions of any law now or later in effect that may provide Subtenant any right to terminate this Sublease or to surrender possession of the Premises in the event any proceeding is brought by the Master Landlord to terminate the Master Lease.
11. Estoppel Certificates. Each party to this Sublease will, from time to time as requested by the other party, on not less than ten (10) days prior written notice, execute, acknowledge, and deliver to the other party a statement in writing certifying that this Sublease is unmodified and in full force and effect (or if there have been modifications that this Sublease is in full force and effect as modified and stating the modifications). That statement will certify the dates to which Basic Rent, Additional Rent, and any other charges have been paid. That statement will also state whether, to the knowledge of the person signing the certificate, the other party is in default beyond any applicable grace period provided in this Sublease in the performance of any of its obligations under this Sublease. If the other party is in default beyond any applicable grace period, the statement will specify each default of which the signer then has knowledge. It is intended that this statement may be relied on by others with whom the party requesting that certificate may be dealing.
12. Assignment or Subleasing. Subject to the rights of the Master Landlord and the restrictions contained in the Master Lease in connection with a Transfer, Subtenant is not entitled to assign this Sublease or to sublet all or any portion of the Premises without the prior written consent of Sublandlord. That consent may be withheld by Sublandlord in its sole discretion.
13. General Provisions.
13.1. Severability. If any provision of this Sublease or the application of any provision of this Sublease to any person or circumstance is, to any extent, held to be invalid or unenforceable, the remainder of this Sublease or the application of that provision to persons or circumstances other than those as to which it is held invalid or unenforceable, will not be affected, and each provision of this Sublease will be valid and be enforced to the fullest extent permitted by law.
13.2. Entire Agreement; Waiver. This Sublease constitutes the final, complete and exclusive statement between the parties to this Sublease pertaining to the Premises, supersedes all prior and contemporaneous understandings or agreements of the parties, and is binding on and inures to the benefit of their respective heirs, representatives, successors, and assigns. No party has been induced to enter into this Sublease by, nor is any party relying on, any representation or warranty outside those expressly set forth in this Sublease. Any agreement made after the date of this Sublease is ineffective to modify, waive, release, terminate, or effect an abandonment of this Sublease, in whole or in part, unless that agreement is in writing, is signed by the parties to this Sublease, and specifically states that that agreement modifies this Sublease.
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13.3. Captions. Captions to the sections in this Sublease are included for convenience only and do not modify any of the terms of this Sublease.
13.4. Further Assurances. Each party to this Sublease will at its own cost and expense execute and deliver such further documents and instruments and will take such other actions as may be reasonably required or appropriate to evidence or carry out the intent and purposes of this Sublease.
13.5. Governing Law and Attorney’s Fees. This Sublease will be governed by and in all respects construed in accordance with the laws of the State of California. In the event of a legal proceeding due to a breach of this Sublease, or to enforce or interpret this Sublease, the prevailing party shall be entitled to an award of reasonable attorney’s fees, expert fees, and other costs incurred in such legal proceeding.
13.6. Consent of Landlord. The Master Landlord’s written consent to this Sublease in accordance with the terms of the Master Lease is a condition subsequent to the validity of this Sublease. If the Master Landlord’s consent has not been obtained and a copy of that consent delivered to Subtenant by the fifteenth (15th) day following the date of this Sublease, Subtenant shall thereafter have the ongoing right, subject to the terms of this Section 13.6, to terminate this Sublease pursuant to a notice (the “Termination Notice”) so stating delivered to Sublandlord. If Sublandlord fails to deliver to Subtenant the consent of Master Landlord to this Sublease within ten (10) days following receipt of the Termination Notice (the “Termination Date”), this Sublease shall automatically terminate and the parties shall be released from any further obligations under this Sublease. If, however, Sublandlord delivers to Subtenant the consent of Master Landlord on or before the Termination Date, the condition subsequent set forth in this Section 13.6 shall be satisfied and this Sublease shall continue in full force and effect. Master Landlord’s signature below constitutes consent to this Sublease and agreement with the terms of this Sublease.
[CONTINUED ONTO NEXT PAGE]
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13.7. Capitalized Terms. All terms spelled with initial capital letters in this Sublease that are not expressly defined in this Sublease will have the respective meanings given such terms in the Master Lease.
The parties have executed this Sublease as of the date specified above.
“Sublandlord” | Pathway Genomics Corporation | |
A Delaware Corporation | ||
/s/ James Plante | ||
James Plante | ||
Print Name | ||
President & CEO | ||
Title | ||
“Subtenant” | Fabrus, Inc., a wholly-owned | |
subsidiary of Senesco Technologies, Inc. | ||
A Delaware Corporation | ||
/s/ James Graziano | ||
James Graziano | ||
Print Name | ||
Chief Technology Officer | ||
Title |
MASTER LANDLORD’S CONSENT
Master Landlord hereby consents to this Sublease pursuant to Section 13.6 above.
Alexandria Real Estate Equities | ||
/s/ Gary Dean | ||
Gary Dean | ||
Print Name | ||
Vice President | ||
Title |
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EXHIBIT A
Master Lease
EXHIBIT B
Legal Description of Premises
EXHIBIT C
List of Furniture and Equipment
Exhibit 10.2
Confidential Treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as “***”. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.
COLLABORATION AND OPTION AGREEMENT
This Collaboration and Option Agreement (the “Agreement”) is entered into as of December 18, 2014 (the “Effective Date”) by and between Fabrus, Inc., a Delaware corporation (“Company”), having an address of 4045 Sorrento Valley Blvd, San Diego, California 92121, U.S.A., and CNA Development, LLC, a Delaware Limited Liability Company corporation with its office at Street C #475, Los Frailes Industrial Park, Guaynabo PR 00969 (“Janssen”).
Recitals
Whereas, Company has expertise relating to its spatially addressed library of antibodies and cell-based screening technology to reveal certain antibodies against targets of interest;
Whereas, Janssen is engaged in the research, development and commercialization of pharmaceutical products;
Whereas, Company and Janssen wish to enter into a collaboration to research and develop antibodies from Company’s spatially addressed library against targets of interest to Janssen on the terms and conditions set forth herein; and
Whereas, Company wishes to grant to Janssen, and Janssen wishes to accept, an exclusive, time-limited option from Company to obtain certain license rights under Company’s interest in the Joint Foreground (as defined below) to develop and commercialize the Licensed Products (as defined in Exhibit C) on a worldwide basis in accordance with the terms and conditions of this Agreement, subject to the terms and conditions set forth herein.
Agreement
Now, Therefore, in consideration of the foregoing premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the parties agree as follows:
1. Definitions
1.1 “Additional Target” shall mean any of the *** that may to be designated by Janssen and accepted by Company, in accordance with Section 2.2.
1.2 “Affiliate” shall mean, in reference to a particular corporation or other entity, any other entity that directly or indirectly controls or is controlled by or is under common control with such entity. For purposes of this definition, “control” or “controlled” shall mean ownership, directly or indirectly, of more than fifty percent (50%) of the shares of stock entitled to vote for the election of directors in the case of a corporation, or more than fifty percent (50%) of the equity interest in the case of any other type of legal entity (or if the jurisdiction where such corporation or other entity is domiciled prohibits foreign ownership of such entity, the maximum foreign ownership interest permitted under such laws, provided that such ownership interest provides actual control over such entity), status as a general partner in any partnership, or any other arrangement whereby an entity controls or has the right to control the Board of Directors or equivalent governing body of the entity.
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Confidential Treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as “***”. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.
1.3 “Antibody” shall mean a molecule or gene encoding such a molecule comprising or containing at least one immunoglobulin variable domain or parts of such domain.
1.4 “Background” shall mean Company Background or Janssen Background, as applicable.
1.5 “Calendar Quarter” shall mean a calendar quarter based on the Janssen Universal Calendar.
1.6 “Collaboration Antibody” shall mean any Antibody identified, discovered, validated or optimized in the performance the Collaborative Activities that specifically binds to a Designated Target, and any fragment, modification or variant of such Antibody that *** specifically binds to such Designated Target.
1.7 “Collaborative Activities” shall mean all activities to be undertaken by or on behalf of the parties as contemplated by the Collaborative Research Plan for each Designated Target, including any screening, identifying, validating and optimizing of Antibodies from Company’s library of Antibodies that specifically bind to a Designated Target.
1.8 “Collaborative Research Plan” or “CRP” shall mean the high-level, summary workplan describing the research, discovery and pre-clinical development activities to be performed by or on behalf of the parties with respect to screening, identifying, validating and optimizing Antibodies from Company’s library of Antibodies directed to any Designated Target, including the budget for such activities, as such plan may be amended in accordance with the terms of this Agreement.
1.9 “Commercially Reasonable Efforts” shall mean that level of efforts and resources consistent with the efforts the applicable Party devotes to the research or development of a similarly situated pharmaceutical product at a similar stage of research or development, taking into account measures of patent coverage, relative safety and efficacy, the strategic value resulting from its own research efforts, product profile, the competitiveness of the marketplace, the proprietary position of such product, the regulatory structure involved, the market potential of such product and other relevant factors, including comparative technical, legal, scientific, and/or medical factors, based on conditions then prevailing.
1.10 “Company Background” shall mean any Materials or Information (including data) that is controlled by Company prior to, on or after entering into this Agreement and is reasonably necessary or useful for carrying out the Collaborative Research Plan, and Intellectual Property Rights in or to such Materials or Information, including any such Materials or Information relating to Company Platform, but excluding (a) all Foreground and (b) any technology or Intellectual Property Rights in-licensed under the In-License Agreement.
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Confidential Treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as “***”. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.
1.11 “Company Foreground” shall mean all Foreground to the extent related solely to Company Background, including any improvements or enhancements to Company Platform including any Intellectual Property Rights to any such Foreground or Foreground improvements or enhancements.
1.12 “Company Indemnitee” shall have the meaning provided in Section 8.2.
1.13 “Company Platform” shall mean Company’s proprietary target discovery platform that allows multiplexed screening for new Antibodies.
1.14 “Confidential Information” shall mean all Information generated by or on behalf of a party or its Affiliates or which one party or any of its Affiliates furnishes or otherwise makes available to the other party or its Affiliates, whether made available orally, in writing, or in electronic form.
1.15 “Confidentiality Agreement” shall mean the Nondisclosure Agreement between Company and Janssen dated August 23, 2013, as amended August 17, 2014.
1.16 “Control” shall mean, with respect to any Information, Patent or other intellectual property, possession by a party of the ability (whether by ownership, license or otherwise, but without taking into account any rights granted by one party to the other party under the terms of this Agreement) to grant access, a license or a sublicense to such Information, Patent or other intellectual property right without violating the terms of any agreement or other arrangement with any Third Party. If a Party has the ability to grant a non-exclusive license or sublicense (but not an exclusive license or sublicense) under any such Information, Patent or other intellectual property, and this Agreement specifies that an exclusive license is granted, such Information, Patent or other intellectual property shall be considered “Controlled” and such license shall be a non-exclusive license to the extent required to comply with the agreement with or legally binding obligation to the relevant Third Party.
1.17 “CPR Mediation Procedures” shall have the meaning provided in Section 9.2(b).
1.18 “CPR Rules” shall have the meaning provided in Section 9.2(c).
1.19 “CRP Costs” shall have the meaning provided in Section 2.7.
1.20 “Designated Target” shall mean any of Target 1, Target 2, Target 3 and any Additional Target.
1.21 “Dispute” shall mean any dispute, claim, or controversy arising from or regarding this Agreement, including the interpretation, application, breach, termination or validity of any provision hereof.
1.22 “Excluded Claim” shall have the meaning provided in Section 9.2(a).
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Confidential Treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as “***”. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.
1.23 “Foreground” shall mean all Materials or Information (including data), whether patentable or not, conceived or reduced to practice, whether solely by or on behalf of Company, solely by or on behalf of Janssen or jointly by or on behalf of Company and Janssen, in the course of activities contemplated by this Agreement, including Collaborative Activities, including any Collaboration Antibody, and Intellectual Property Rights in or to any of the foregoing.
1.24 “Hits” shall have the meaning provided in Section 2.1(a).
1.25 “Information” shall mean all tangible and intangible techniques, technology, practices, , discoveries, inventions (whether patentable or not), methods, protocols, processes, knowledge, know-how, skill, experience, data (including pharmacological, toxicological, clinical, analytical and quality control data), regulatory filings, software, algorithms and other scientific, marketing, financial or commercial information or data.
1.26 “In-License Agreement” shall mean the license agreement between Company and The Scripps Research Institute, dated August 8, 2014, as may be amended, a copy (with proprietary information redacted) of which has been provided to Janssen.
1.27 “Intellectual Property Rights” or “IPR” shall mean Patents, Information, know-how, copyright and trade secrets and any other intellectual property or intangible right of any kind, excluding trademarks and trade dress.
1.28 “Janssen Background” shall mean any Materials or Information (including data) that is controlled by Janssen prior to, on or after entering into this Agreement and is necessary or useful for carrying out the Collaborative Research Plan, and Intellectual Property Rights in or to such Materials or Information, but excluding all Foreground.
1.29 “Janssen Foreground” shall mean all Foreground to the extent related solely to Janssen Background including any Intellectual Property Rights to any such Foreground.
1.30 “Janssen Indemnitee” shall have the meaning provided in Section 8.1.
1.31 “Joint Foreground” shall mean all Foreground that is not Janssen Foreground or Company Foreground including any Intellectual Property Rights thereto.
1.32 “License” shall have the meaning provided in Section 3.1.
1.33 “License Agreement” shall have the meaning provided in Section 3.1.
1.34 “License Option” shall have the meaning provided in Section 3.1.
1.35 “License Option Term” shall have the meaning provided in Section 3.2.
1.36 “Losses” shall have the meaning provided in Section 8.1.
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Confidential Treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as “***”. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.
1.37 “Materials” shall mean any all biological, chemical or other materials and any constituents, progeny, mutants, derivatives or replications thereof or therefrom.
1.38 “Notice Date” shall have the meaning provided in Section 9.2(b).
1.39 “Option Exercise Payment” shall have the meaning provided in Section 3.2.
1.40 “Option Notice” shall have the meaning provided in Section 3.2.
1.41 “Patents” shall mean (a) all patents, including design patents, certificates of invention, applications for certificates of invention, priority patent filings and patent applications, including provisional patent applications and design patent applications, and (b) any renewal, divisional, continuation, continuation-in-part, or request for continued examination of any of such patents, certificates of invention and patent applications, and any and all patents or certificates of invention issuing thereon, and any and all reissues, reexaminations, extensions, certificates of correction, divisions, renewals, substitutions, confirmations, registrations, revalidations, revisions, and additions of or to any of the foregoing.
1.42 “Research Term” shall mean, with respect to a given CRP for a Designated Target, the time period agreed by the parties for the performance of such CRP, commencing on the date indicated in such CRP (but no earlier than the Effective Date) and ending on the date indicated in such CRP, which shall in no event exceed *** months in each case from the commencement date indicated in such CRP unless agreed in writing by the parties, unless earlier terminated upon termination of this Agreement.
1.43 “Results” shall mean all results, of any nature and form, including any Information, Materials and deliverables.
1.44 “SEC” shall have the meaning provided in Section 6.5(a).
1.45 “Stage 1” shall have the meaning provided in Section 2.1(a).
1.46 “Stage 2” shall have the meaning provided in Section 2.1(b).
1.47 “Stage 3” shall have the meaning provided in Section 2.1(c).
1.48 “Tax or Taxes” shall mean any present or future taxes, levies, imposts, duties, charges, assessments or fees of any nature (including any interest thereon).
1.49 “Target 1” shall mean ***.
1.50 “Target 2” shall mean ***.
1.51 “Target 3” shall mean ***.
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Confidential Treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as “***”. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.
1.52 “Target Designation Period” shall mean the *** period starting at the conclusion of the Research Term for a CRP, unless earlier terminated upon termination of this Agreement.
1.53 “Term” shall have the meaning provided in Section 7.1.
1.54 “Third Party” shall mean any entity other than Company or Janssen or an Affiliate of Company or Janssen.
2. Collaborative Activities
2.1 Collaborative Research Plans. The research, discovery and pre-clinical development activities to be undertaken by or on behalf of the parties for the purpose of screening, identifying, validating and optimizing Antibodies from Company’s spatially addressed library directed to Designated Targets are set forth in the Collaborative Research Plans on a Designated Target-by-Designated Target basis. Company and Janssen shall work collaboratively to design and carry out the CRP for each Designated Target. For the avoidance of doubt, one CRP may cover more than a single target. A CRP may be amended only by written agreement of Company and Janssen (except for modification of the related budget to the extent permitted by Section 2.7). The initial Collaborative Research Plan has been agreed to by the parties with respect to Target 1 and attached hereto as Exhibit A, the form of which shall be used for the CRP(s) for Target 2, Target 3 and Additional Targets. Without limiting the foregoing, the parties envision the activities set forth in the Collaborative Research Plans to be comprised of the following steps:
(a) (i) screening of cell lines to identify initial Antibody hits from Company’s spatially arrayed library against the applicable Designated Target (“Hits”) and (ii) evaluation of strength, specificity, sequences and expression levels of Hits conducted by or on behalf of Company or Janssen (“Stage 1”);
(b) (i) joint validation of Hits from Stage 1 and (ii) confirmation of binding specificity conducted by or on behalf of Company or Janssen (“Stage 2”); and
(c) (i) optimization of validated Hits from Stage 2 and (ii) completion of full developability experiments conducted by or on behalf of Company or Janssen (“Stage 3”).
2.2 Additional Targets. During the Target Designation Period, Janssen shall have the right, but not the obligation, to designate *** Additional Targets, in addition to Target 1, Target 2 and Target 3, by providing written notice to Company identifying the proposed target (each an “Additional Target Designation Notice”); provided that such Additional Target Designation Notice is delivered to Company no later than *** from the conclusion of the Research Term of the last-to-end CRP that is currently in effect. Company shall provide Janssen written notice within thirty (30) days after receipt of the Additional Target Designation Notice whether it accepts the proposed target identified in such Additional Target Designation Notice as an Additional Target, such acceptance not to be unreasonably withheld. Following acceptance of an Additional Target by Company, the parties shall work collaboratively to design and agree on a CRP for such Additional Target, including an associated budget and a list of Materials for Collaborative Activities relating to such Additional Target.
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Confidential Treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as “***”. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.
2.3 Performance of Collaborative Activities. During the Research Term, each party shall use Commercially Reasonable Efforts to perform the Collaborative Activities. Each party may perform some or all of the Collaborative Activities through one or more subcontractors, including through its respective Affiliates; provided that each party shall remain responsible for the performance by its subcontractors and the compliance of its subcontractors with the provisions of this Agreement in connection with such performance. The parties acknowledge that Company’s obligations to perform the Collaborative Activities shall be subject to compliance by Janssen with its payment obligations in this Agreement. Each party shall perform the Collaborative Activities in accordance with this Agreement and all applicable laws, rules and regulations, and shall maintain records, in sufficient detail and in good scientific manner appropriate for patent and regulatory purposes, which shall fully and properly reflect all work done and results achieved in its performance of the Collaborative Activities.
2.4 Materials. All Materials provided by one party to another party as contemplated by this Agreement will remain the sole property of the providing party, will not be used or delivered to or for the benefit of any Third Party without the prior written consent of the providing party, and will be used only for the Collaborative Activities and in compliance with all applicable laws, rules and regulations. Each party acknowledges that any Materials provided to it by or on behalf of the other party (a) are experimental in nature and not for use in humans, and (b) must be used with prudence and appropriate caution in any experimental work because not all of their characteristics may be known. Except as expressly set forth herein, THE MATERIALS ARE PROVIDED “AS IS” AND WITHOUT ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE OR ANY WARRANTY THAT THE USE OF THE MATERIALS WILL NOT INFRINGE OR VIOLATE ANY PATENT OR OTHER PROPRIETARY RIGHTS OF ANY THIRD PARTY.
2.5 Limited Research License. Subject to the terms and conditions of this Agreement, (a) Company hereby grants to Janssen a non-exclusive, royalty-free license, with no right to sublicense except to Janssen’s Affiliates and subcontractors who are conducting Collaborative Activities, under Company Foreground and Company Background (excluding Company Platform) that are reasonably necessary or useful for Janssen to practice in order to perform its obligations under the applicable CRP, solely to conduct Collaborative Activities to be conducted by Janssen under such CRP during the applicable Research Term, and (b) Janssen hereby grants to Company a non-exclusive, royalty-free license, with no right to sublicense except to Company’s Affiliates and subcontractors that are conducting Collaborative Activities, under Janssen Foreground and Janssen Background that are reasonably necessary or useful for Company to practice in order to perform its obligations under the applicable CRP, solely to conduct Collaborative Activities to be conducted by Company under such CRP during the applicable Research Term. Each party shall have the right to practice the Joint Foreground to conduct Collaborative Activities to be conducted by such party under such CRP during the applicable Research Term.
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Confidential Treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as “***”. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.
2.6 Reports. Each party shall keep the other party reasonably informed and updated regarding the Collaborative Activities performed by it or on its behalf and provide the other party such other information required under the Collaborative Research Plan relating to the progress of the goals or performance of the Collaborative Activities. The parties shall meet on a regular basis, but in any event no less than once per month, via teleconference, videoconference or face-to-face meetings to discuss progress of the CRP(s). Upon achievement of a research and development milestone event defined in the applicable CRP, Company shall submit to Janssen a written status report describing the research and the Results of such milestone event and, if requested by Janssen, transfer to Janssen any deliverable associated with such milestone event. Company and Janssen shall work together to prepare and acknowledge a final study report as indicated in each CRP, and if requested by Janssen, Company shall provide a description of each Collaboration Antibody as agreed to by the parties and including the amino acid sequence of such Collaboration Antibody.
2.7 Funding of Collaborative Activities and Reimbursement. Janssen shall reimburse Company for direct and indirect costs incurred by Company in the performance of the Collaborative Activities (“CRP Costs”). The budget for the CRP for Targets 1, 2 and 3 has been agreed to by the parties and attached hereto as Exhibit B. The budget for Target 4 and Additional Targets shall include direct and indirect costs and rates such as those included in Exhibit B and shall be included in the CRP(s) for Target 4 and Additional Target(s). During the Research Term, Company shall invoice Janssen on a Calendar Quarterly basis for CRP Costs incurred during such quarter in performing Collaborative Activities in accordance with the applicable budget as may be increased by an amount up to ten percent (10%) of such budget. Any modification of the budget to increase such budget by more than ten percent (10%) shall be subject to written approval by Janssen. Janssen shall pay such invoices within sixty (60) days of receipt of such invoice. Invoices must be sent to the Johnson & Johnson Accounts Payable Department via www.ap.jnj.com if Company establishes a web invoice account or sent by postal mail to the address indicated in the PO. Company may contact the Johnson & Johnson Accounts Payable Hotline at (877) 557-4487 with any questions related to the status of payments on invoices. Copies of all invoices shall be sent concurrently to: Janssen CFC PR / CNA Development LLC, Attention - *** Road #2, Km. 45.6, Bo. Campo Alegre, Manatí, PR 00674, ***. Janssen reserves the right to return to Company unprocessed and unpaid those invoices that do not reference the applicable PO number. Invoices shall include the nature and amount of research and development services rendered or deliverables provided and Company will provide proper support for invoiced FTE costs. Janssen Research & Development, L.L.C. may act as paying agent for Janssen under this Agreement.
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Confidential Treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as “***”. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.
2.8 Target Exclusivity.
(a) Company. On a Designated Target-by-Designated Target basis, during the License Option Term with respect to a Designated Target, Company shall not, alone or in collaboration with an Affiliate or Third Party, conduct any work on its own behalf, for, or with a Third Party, on such Designated Target. In no event shall this Section 2.8(a) apply to any acquirer of Company or any Affiliate of such acquirer (other than Company) so long as Company does not engage any such activities with or on behalf of such acquirer or its Affiliate and no Company Background, Company Foreground or Joint Foreground is used by such acquirer or its Affiliate in connection with such activities.
(b) Janssen. At any time during or after the Term, Janssen and its Affiliates are authorized to work, independently of Company, alone or in collaboration with an Affiliate or Third Party, to discover research, develop, manufacture and commercialize products (other than any Collaboration Antibody) directed against any Designated Target.
2.9 Intellectual Property.
(a) Inventions. Inventorship of inventions made in the course of the Collaborative Activities shall be determined in accordance with U.S. patent law, regardless of where any such invention is made.
(b) Ownership of Background. As between the parties, (i) Janssen has, and shall retain, all right, title and interest in and to Janssen Background, and (ii) Company has, and shall retain, all rights in and to Company Background.
(c) Ownership of Foreground. Company shall own all right, title and interest in and to Company Foreground. Janssen shall own all right, title and interest in and to Janssen Foreground. Company and Janssen shall own jointly all right, title and interest in and to Joint Foreground. Each party hereby assigns to the other party such rights as it may acquire in Foreground as may be necessary or appropriate to cause such Foreground to be owned by the applicable party or by the parties jointly as provided in this Section 2.9(c), or if assignment is not permitted by law, waives such rights as to the other party or grants to the other party an exclusive (or co-exclusive in the case of Joint Foreground), fully-paid, perpetual, irrevocable, worldwide license under such rights (with the right to sublicense) for any and all purposes. Each party agrees to execute any assignment or other documents reasonably necessary to convey to the other party any right, title or other interest to Foreground as necessary to effect the ownership of Foreground as provided in this Section 2.9(c), and, upon request, will assist the other party in connection with the preparation and prosecution of any application for Intellectual Property Rights in or to any Foreground owned by such other party pursuant hereto.
(d) Limitations on Joint Foreground. Janssen shall have the right to practice and use the Joint Foreground solely for internal research purposes whether or not it exercises the commercial License Option and takes a License to Company’s interest in the Joint Foreground (as described in Section 3.2), and Company shall have the right to practice and use the Joint Foreground solely for internal research purposes. Any rights by Janssen to commercialize or otherwise use the Joint Foreground in addition to internal research purposes shall be arranged under Section 3.2.
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Confidential Treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as “***”. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.
(e) Prosecution of Foreground. Company shall, at its own cost, be responsible for filing, prosecuting, maintaining, defending and enforcing Company Foreground IPR. Janssen shall, at its own cost, be responsible for filing, prosecuting, maintaining, defending and enforcing Janssen Foreground IPR and Joint Foreground IPR. Janssen shall keep Company informed regarding the filing, prosecution, maintenance, defense and enforcement of Joint Foreground IPR, and shall in good faith take into consideration any comments from Company with respect thereto. If (i) Janssen decides not to file a Patent application within Joint Foreground IPR, or (ii) ceases to diligently pursue prosecution or procurement of Joint Foreground IP, or fails to maintain the same, in any country, Janssen shall notify Company in writing in sufficient time for Company to be able to take action, and Company shall have the right, at its own discretion and cost and subject to the License Option, to file Patent applications, control prosecution and procurement, and maintain procured Patents within such Joint Foreground IPR. If Janssen chooses not to file a Patent application within Joint Foreground IPR and then exercises the License Option after Company filed a Patent application within such Joint Foreground IPR, then Janssen shall reimburse Company for reasonable costs incurred by Company with respect to filing and prosecuting such Joint Foreground IPR concurrently with execution of the License Agreement.
(f) Results. Company and Janssen shall jointly own the Results and any reports describing the Results. Each party shall be free to use the Results and such reports for its any purpose whatsoever.
2.10 Reservation of Rights. Subject to the License Option and to any licenses that are or may be granted pursuant to Section 2.9 or any License Agreement and the other terms and conditions of this Agreement, (a) Company will retain all rights under Company Background and Company Foreground and Company’s interest in Joint Foreground, and Janssen agrees not to practice any of the foregoing, except pursuant to the licenses expressly granted to Janssen in this Agreement or the License Agreement, and (b) Janssen will retain all rights under Janssen Background and Janssen Foreground and Janssen’s interest in Joint Foreground, and Company agrees not to practice any of the foregoing, except pursuant to the licenses expressly granted to Company in this Agreement. No right or license under any Intellectual Property Rights of either party is granted or shall be granted by implication. All such rights or licenses are or shall be granted only as expressly provided in the terms of this Agreement or the License Agreement.
3. License Option
3.1 Grant of License Option. On a Designated Target-by-Designated Target basis and subject to the terms and conditions of this Agreement, Company hereby grants to Janssen the exclusive option to obtain (a) an exclusive, worldwide, royalty-bearing license, with the right to sublicense, under Company’s interest in the Joint Foreground with respect to the applicable Designated Target to make, have made, use, import, offer for sale, sell, and have sold Licensed Products in the Field (as such terms are defined in Exhibit C) and (b) a non-exclusive, worldwide, royalty-bearing license, with the right to sublicense, under any Company Background and Company Foreground with respect to the applicable Designated Target (but only to the extent such Company Background and Company Foreground are reasonably necessary to make, have made, use, import, offer for sale, sell, and have sold Licensed Products in the Field (as such terms are defined in Exhibit C)) to make, have made, use, import, offer for sale, sell, and have sold Licensed Products in the Field (the “License”) pursuant to a written agreement (the “License Agreement”) on mutually agreed terms and conditions, including the terms set forth on Exhibit C (such option, the “License Option”). For clarification, nothing in this Agreement shall prevent Company from negotiating or completing any transaction for the sale of all or substantially all of the business or assets of Company, whether by merger, sale of stock, sale of assets or otherwise; provided, that any successor to Company in such transaction shall remain subject to the License Option during the License Option Term.
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Confidential Treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as “***”. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.
3.2 Exercise of License Option. On a Designated Target-by-Designated Target basis and subject to the terms and conditions of this Agreement, Janssen may exercise the License Option with respect to a Designated Target at any time during the applicable Research Term and for a period of *** thereafter unless earlier terminated upon written notice by Janssen to Company (the “License Option Term”) by sending to Company written notice of such exercise (“Option Notice”) and payment of *** (the “Option Exercise Payment”). If Janssen exercises the License Option during the License Option Term in accordance with this Section 3.1(b), the parties shall promptly negotiate in good faith the terms of the License Agreement (including those terms set forth in Exhibit C). In the event the parties are unable to enter License Agreement within ninety (90) days following the exercise of the License Option (or such longer period as may be agreed by the parties in writing), either party shall have the right to refer the matter to a third party mediator mutually agreed by the parties to determine the terms and conditions of the License Agreement, and the parties hereby agree ***.
3.3 Effect of Expiration or Termination of License Option Term. If Janssen does not exercise the License Option during the License Option Term in accordance with this Section 3.3, the License Option shall terminate and be of no further force or effect. In addition, upon termination of such License Option, Company and Janssen shall negotiate in good faith regarding the license by Janssen to Company of Janssen’s interest in the Joint Foreground on commercially reasonable terms to be agreed in good faith by the parties.
4. Payments
4.1 Access Fee. Within fifteen (15) days after the Effective Date, Janssen shall pay Company a one-time, non-refundable access fee of ***. Company shall invoice Janssen for such payment.
4.2 Project Initiation Fee. Upon initiation of each CRP, Janssen shall pay Company a one-time, non-refundable project initiation fee of ***. Company shall invoice Janssen for such payment, and Janssen shall pay within fifteen (15) days after receipt of invoice.
4.3 Payment Mechanics.
(a) Manner and Place of Payment. All payments hereunder shall be payable in U.S. dollars. All payments owed under this Agreement shall be made by wire transfer in immediately available funds to a bank and account designated in writing by the party receiving payment, unless otherwise specified in writing by such party.
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Confidential Treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as “***”. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.
(b) Income Tax Withholding. Janssen will make all payments to Company under this Agreement without deduction or withholding for Taxes except to the extent that any such deduction or withholding is required by law in effect at the time of payment. Any Tax required to be withheld on amounts payable under this Agreement will be paid by Janssen on behalf of Company to the appropriate governmental authority, and Janssen will furnish Company with proof of payment of such Tax. Any such tax required to be withheld will be an expense of and borne by Company. If any such tax is assessed against and paid by Janssen, then Company will indemnify and hold harmless Janssen from and against such tax. Janssen and Company will cooperate with respect to all documentation required by any taxing authority or reasonably requested by Janssen to secure a reduction in the rate of applicable withholding Taxes. On the date of execution of this Agreement, Company will deliver to Janssen an accurate and complete Internal Revenue Service Form W-9.
(c) Late Payments. In the event that any undisputed payment due under this Agreement is not made when due, the payment shall accrue interest from the date due at the rate of one and one-half percent (1.5%) per month; provided, however, that in no event shall such rate exceed the maximum legal annual interest rate. The payment of such interest shall not limit the party to whom payment is due from exercising any other rights it may have as a consequence of the lateness of any payment.
5. Representations and Warranties
5.1 Mutual Representations and Warranties. Each party represents and warrants to the other party as of the Effective Date that:
(a) Organization. It is duly organized and validly existing under the laws of its jurisdiction of incorporation or formation, and has full corporate or other power and authority to enter into this Agreement and to carry out the provisions hereof.
(b) Authorization. It is duly authorized to execute and deliver this Agreement and to perform its obligations hereunder, and the person or persons executing this Agreement on its behalf has been duly authorized to do so by all requisite corporate or partnership action.
(c) Binding Agreement. This Agreement is legally binding upon it, enforceable in accordance with its terms, and does not conflict with any agreement, instrument or understanding, oral or written, to which it is a party or by which it may be bound, nor violate any law or regulation of any court, governmental body or administrative or other agency having jurisdiction over it.
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Confidential Treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as “***”. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.
(d) No Conflict. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby do not and shall not (i) conflict with or result in a breach of any provision of its organizational documents, (ii) result in a breach of any agreement to which it is a party; or (iii) to its knowledge, violate any applicable laws, rules or regulations.
(e) Agreements with Employees and Contractors. All of such party’s employees or contractors acting on its behalf pursuant to this Agreement are and will be obligated under a binding written agreement to (i) assign to such party all Information generated in the course of performing activities on its behalf pursuant to this Agreement, and (ii) comply with obligations of confidentiality and non-use consistent with those set forth in Article 6.
(f) No Debarment. Except with regard to Janssen as reflected by, and subject to the terms of, the Corporate Integrity Agreement between The Office of Inspector General of the Department of Health and Human Services and Johnson & Johnson dated October 31, 2013 (publicly available at https://www.janssenbiotech.com/company/pharmaceutical-affiliate-corporate-integrity-agreement), as of the Effective Date, neither party is debarred under the United States Federal Food, Drug and Cosmetic Act or comparable laws in any other country or jurisdiction, and it does not, and will not during the Term, employ or use the services of any person or entity who is debarred, in connection with the Collaborative Activities. In the event that either party becomes aware of the debarment or threatened debarment of any person or entity providing services to such party, including the party itself and its Affiliates, which directly or indirectly relate to activities under this Agreement, the other party shall be immediately notified in writing.
5.2 Disclaimer. Except as expressly set forth herein, EACH PARTY EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, OR ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICES.
6. Confidentiality
6.1 Confidential Information. Except to the extent expressly authorized by this Agreement or otherwise agreed in writing by the parties, the parties agree that, during the Term and for ten (10) years thereafter, each party (in such capacity, the “receiving party”) shall keep confidential and shall not publish or otherwise disclose and shall not use for any purpose other than as expressly provided for in this Agreement or any other written agreement between the parties any Confidential Information of the other party (in such capacity, the “disclosing party”). For clarification, (a) all Company Foreground shall be Confidential Information of Company and Company shall be considered the disclosing party and Janssen shall be considered the receiving party with respect thereto; (b) all Janssen Foreground shall be Confidential Information of Janssen and Janssen shall be considered the disclosing party and Company shall be considered the receiving party with respect thereto; and (c) all Joint Foreground and Results shall be Confidential Information of both Company and Janssen and Company and Janssen shall both be considered the disclosing party and the receiving party with respect thereto. Except as expressly permitted in this Agreement, the receiving party may only disclose Confidential Information of the disclosing party to employees, agents, consultants and other representatives of the receiving party to the extent reasonably necessary for the purposes of, and for those matters undertaken pursuant to, this Agreement; provided that such persons and entities are bound to maintain the confidentiality of the Confidential Information in a manner consistent with the confidentiality provisions of this Agreement. The receiving party will use at least the same standard of care as it uses to protect proprietary or confidential information of its own (but not less than reasonable care) to ensure that its employees, agents, consultants and other representatives do not disclose or make any unauthorized use of the Confidential Information of the disclosing party. The receiving party will promptly notify the disclosing party upon discovery of any unauthorized use or disclosure of the Confidential Information of the disclosing party.
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Confidential Treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as “***”. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.
6.2 Exceptions. Confidential Information shall not include any information which the receiving party can demonstrate by competent evidence: (a) is now, or hereafter becomes, through no act or failure to act on the part of the receiving party, generally known or available; (b) is known by the receiving party at the time of receiving such information, as evidenced by its records; (c) is hereafter furnished to the receiving party by a Third Party, as a matter of right and without restriction on disclosure; or (d) is independently discovered or developed by the receiving party without the use of Confidential Information of the disclosing party. The exceptions in Section 6.2(b) and (d) shall not apply with respect to Company as the receiving party with respect to Janssen Foreground or Joint Foreground and shall not apply with respect to Janssen as the receiving party with respect to Company Foreground or Joint Foreground.
6.3 Authorized Disclosure. The receiving party may disclose Confidential Information of the disclosing party as expressly permitted by this Agreement and if and to the extent such disclosure is reasonably necessary in the following instances:
(a) prosecuting or defending litigation as permitted by this Agreement;
(b) complying with applicable court orders or governmental regulations; and
(c) disclosure in confidence to actual or bona fide potential Third Party investors or other Third Party transactional partners and to their bankers, lawyers, accountants, agents, provided, in each case that each such Third Party investor or other transactional partner or advisor thereof is bound to maintain the confidentiality of the Confidential Information in a manner consistent with the confidentiality provisions of this Agreement.
Notwithstanding the foregoing, in the event the receiving party is required to make a disclosure of the disclosing party’s Confidential Information pursuant to Section 6.3(a) or (b), it will, except where impracticable, give reasonable advance notice to the disclosing party of such disclosure and use efforts to secure confidential treatment of such information at least as diligent as the receiving party would use to protect its own confidential information, but in no event less than reasonable efforts. In any event, the receiving party agrees to take all reasonable action to avoid disclosure of Confidential Information of the disclosing party.
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Confidential Treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as “***”. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.
6.4 Confidentiality of this Agreement and its Terms. Except as otherwise provided in this Article 6, each party agrees not to disclose to any Third Party the existence of this Agreement or the terms of this Agreement without the prior written consent of the other party hereto, except that each party may disclose the terms of this Agreement that are not otherwise made public as contemplated by Section 6.5 as permitted under Section 6.3.
6.5 Publicity.
(a) Press Releases. Subject to the conditions below in this paragraph, Janssen consents to Company’s issuance of a press release after execution of this Agreement in a form to be agreed by the parties. Except for such press release and as required by law (including disclosure requirements of the U.S. Securities and Exchange Commission (“SEC”), the NASDAQ stock exchange or any other stock exchange on which securities issued by a party or its Affiliates are traded), neither party shall make any other public announcement concerning this Agreement or the subject matter hereof without the prior written consent of the other, which shall not be unreasonably withheld or delayed; provided, that it shall not be unreasonable for a Party to withhold consent with respect to any public announcement containing any of such Party’s Confidential Information. In the event of a required public announcement, to the extent practicable under the circumstances, the Party making such announcement shall provide the other Party with a copy of the proposed text of such announcement sufficiently in advance of the scheduled release to afford such other Party a reasonable opportunity to review and comment upon the proposed text.
(b) Filing of Agreement. The parties shall coordinate in advance with each other in connection with the filing of this Agreement (including redaction of certain provisions of this Agreement) with the SEC, the NASDAQ stock exchange or any other stock exchange or governmental agency on which securities issued by a party or its Affiliate are traded, and each party shall use reasonable efforts to seek confidential treatment for the terms proposed to be redacted; provided, that each party shall ultimately retain control over what information to disclose to the SEC, the NASDAQ stock exchange or any other stock exchange or governmental agency, as the case may be, and provided further that the parties shall use their reasonable efforts to file redacted versions with any governing bodies which are consistent with redacted versions previously filed with any other governing bodies. Other than such obligation, neither party (nor its Affiliates) shall be obligated to consult with or obtain approval from the other party with respect to any filings to the SEC, the NASDAQ stock exchange or any other stock exchange or governmental agency.
6.6 Publication. Company and Janssen may jointly publish regarding the Foreground after prior concurrence on content and timing of such publication. Each party shall individually have the right to issue such publication, subject to the following: (a) if a party decides to publish, it shall provide the other party with a complete draft of any proposed publication sixty (60) days in advance of the proposed submission date; (b) each party may request, and the other party hereby agrees to, delay such proposed publication for an additional period of thirty (30) days in order to remove the non-publishing party’s Confidential Information from the proposed publication prior to publication; and (c) Janssen will have an additional period of ninety (90) days in order to apply for a patent for any invention described in any publication proposed by Company, or to use or add Information in support of or to (an) existing patent application(s).
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Confidential Treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as “***”. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.
6.7 Equitable Relief. Given the nature of the Confidential Information and the competitive damage that could potentially result to the disclosing party upon authorized disclosure, use or transfer of its Confidential Information to any Third Party, the parties agree that monetary damages may, in certain circumstances not be a sufficient remedy for any breach of this Article 6. In addition to all other remedies, the disclosing party may, under such specific circumstances be entitled to seek specific performance and injunctive and other equitable relief as a remedy for any breach or threatened breach of this Article 6.
7. Term and Termination
7.1 Term. The term of this Agreement shall commence on the Effective Date and continue until the end of the last License Option Term, subject to earlier termination pursuant to Section 7.2 (the “Term”).
7.2 Early Termination.
(a) Termination for Cause.
(i) A party shall have the right to terminate this Agreement upon written notice to the other party if such other party is in material breach of this Agreement and has not cured such breach within sixty (60) days (ten (10) days with respect to any undisputed payment breach) after written notice from the terminating party requesting cure of such breach. Any such termination shall become effective at the end of such sixty (60) day (ten (10) day with respect to any undisputed payment breach) period unless the breaching party has cured any such breach prior to the end of such period.
(ii) A party shall have the right to terminate this Agreement upon written notice to the other party upon the bankruptcy, dissolution or winding up of such other party, or the making or seeking to make or arrange an assignment for the benefit of creditors of such other party, or the initiation of proceedings in voluntary or involuntary bankruptcy, or the appointment of a receiver or trustee of such other party’s property that is not discharged within ninety (90) days.
(b) Termination by Janssen Without Cause. Janssen shall have the right to terminate this Agreement at any time upon ninety (90) days’ advance written notice to Company.
7.3 Effect of Termination or Expiration; Surviving Obligations.
(a) Effect of Any Termination. Upon any termination of this Agreement by either party, all rights and obligations of the parties under this Agreement shall terminate, except as provided in Sections 7.3, 7.4 and 7.5.
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Confidential Treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as “***”. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.
(b) Surviving Terms. Expiration or termination of this Agreement shall not relieve the parties of any obligation (including any payment obligations in Sections 4.1 and 4.2 and any other payment obligations) accruing prior to such expiration or termination. Without limiting the foregoing, (i) the obligations and rights of the parties under Articles 1, 6, 8, and 9 and Sections 2.9(a), (b), (c), (d) and (f), 5.2, 7.3, 7.4 and 7.5 shall survive expiration or termination of this Agreement, (ii) any License Agreement entered into prior to expiration or termination of this Agreement shall continue in full force and effect, and (iii) if Janssen has exercised the License Option during the License Option Term in accordance with Section 3.1(b) prior to the expiration or termination of this Agreement, the rights and obligations of the parties with regard to negotiation and entry into a License Agreement in connection therewith shall survive expiration or termination of this Agreement as provided in Section 3.1(b).
(c) Return of Confidential Information. Within thirty (30) days following the expiration or termination of this Agreement, each party shall deliver to the other party or destroy any and all Confidential Information of the other party in its possession, unless and to the extent provided in any License Agreement and except that one (1) copy may be retained by the receiving party under a continuing obligation of confidentiality to ensure compliance under this Agreement.
7.4 Exercise of Right to Terminate. The use by either party hereto of a termination right provided for under this Agreement shall not give rise to the payment of damages or any other form of compensation or relief to the other party with respect thereto.
7.5 Damages; Relief. Subject to Section 7.4 above, termination of this Agreement shall not preclude either party from claiming any other damages, compensation or relief that it may be entitled to upon such termination.
8. Indemnification
8.1 Indemnification by Company. Company hereby agrees to save, defend and hold Janssen and its Affiliates and their respective directors, officers, employees and agents (each, a “Janssen Indemnitee”) harmless from and against any and all claims, suits, actions, demands, liabilities, expenses and/or loss, including reasonable legal expense and attorneys’ fees (collectively, “Losses”), to which any Janssen Indemnitee may become subject as a result of any claim, demand, action or other proceeding by any Third Party to the extent such Losses arise directly or indirectly out of (a) the gross negligence or willful misconduct of any Company Indemnitee, or (b) the breach by Company of any warranty, representation, covenant or agreement made by Company in this Agreement; except, in each case, to the extent such Losses result from the gross negligence or willful misconduct of any Janssen Indemnitee or the breach by Janssen of any warranty, representation, covenant or agreement made by Janssen in this Agreement.
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Confidential Treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as “***”. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.
8.2 Indemnification by Janssen. Janssen hereby agrees to save, defend and hold Company and its Affiliates and their respective directors, officers, employees and agents (each, a “Company Indemnitee”) harmless from and against any and all Losses to which any Company Indemnitee may become subject as a result of any claim, demand, action or other proceeding by any Third Party to the extent such Losses arise directly or indirectly out of (a) the gross negligence or willful misconduct of any Janssen Indemnitee, or (b) the breach by Janssen of any warranty, representation, covenant or agreement made by Janssen in this Agreement; except, in each case, to the extent such Losses result from the gross negligence or willful misconduct of any Company Indemnitee or the breach by Company of any warranty, representation, covenant or agreement made by Company in this Agreement.
8.3 Control of Defense. Any person entitled to indemnification under this Article 8 shall give notice to the indemnifying party of any Losses that may be subject to indemnification, promptly after learning of such Losses, and the indemnifying party shall assume the defense of such Losses with counsel reasonably satisfactory to the indemnified party. If such defense is assumed by the indemnifying party with counsel so selected, the indemnifying party will not be subject to any liability for any settlement of such Losses made by the indemnified party without its consent (but such consent will not be unreasonably withheld or delayed), and will not be obligated to pay the fees and expenses of any separate counsel retained by the indemnified party with respect to such Losses.
9. General Provisions
9.1 Governing Law. This Agreement shall be construed and enforced according to the laws of the State of California without regard to its conflicts or choice of law rules.
9.2 Dispute Resolution.
(a) Resolution of Disputes. The parties shall negotiate in good faith and use reasonable efforts to settle any Dispute arising from or related to this Agreement or the breach thereof. If the parties cannot resolve the Dispute within thirty (30) days of a written request by either party to the other party, the parties agree to hold a meeting, attended by designated senior representatives of the respective parties having decision-making authority, as appropriate in light of the subject matter of the Dispute, to attempt in good faith to negotiate a resolution of the Dispute prior to pursuing other available remedies. If, within thirty (30) days after such written request, the parties have not succeeded in negotiating a resolution of the Dispute, and a party wishes to pursue the matter, the remaining provisions of this Section 9.2 shall apply.
(b) Mediation. The parties shall attempt in good faith to resolve the Dispute by confidential mediation in accordance with the then current Mediation Procedure of the International Institute for Conflict Prevention and Resolution (“CPR Mediation Procedure”) (www.cpradr.org) before initiating arbitration. The CPR Mediation Procedure shall control, except where it conflicts with these provisions, in which case these provisions control. The mediator shall be chosen pursuant to CPR Mediation Procedure. The mediation shall be held in New York, New York. Either party may initiate mediation by written notice to the other party after following the procedures in Section 9.2(a). The parties agree to select a mediator within twenty (20) days of the notice and the mediation will begin promptly after the selection. The mediation will continue until the mediator, or either party, declares in writing, no sooner than after the conclusion of one (1) full day of a substantive mediation conference attended on behalf of each party by a senior business person with authority to resolve the Dispute, that the Dispute cannot be resolved by mediation. In no event, however, shall mediation continue more than sixty (60) days from the initial notice by a party to initiate meditation unless the parties agree in writing to extend that period. Any period of limitations that would otherwise expire between the initiation of mediation and its conclusion shall be extended until twenty (20) days after the conclusion of the mediation.
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Confidential Treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as “***”. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.
(c) Arbitration. If the parties fail to resolve the Dispute in mediation, and a party desires to pursue resolution of the Dispute, the Dispute shall be submitted by either party for resolution in arbitration pursuant to the then current CPR Non-Administered Arbitration Rules (“CPR Rules”) (www.cpradr.org), except where they conflict with these provisions, in which case these provisions control. The arbitration will be held in New York, New York. All aspects of the arbitration shall be treated as confidential except to the extent necessary to confirm or enforce an award or as may be required by Applicable Laws. The arbitrators will be chosen from the CPR Panel of Distinguished Neutrals, unless a candidate not on such panel is approved by both parties. Each arbitrator shall be a lawyer with at least fifteen (15) years’ experience with a law firm or corporate law department of over twenty-five (25) lawyers or who was a judge of a court of general jurisdiction. To the extent that the Dispute requires special expertise, the parties will so inform CPR prior to the beginning of the selection process. The arbitration tribunal shall consist of three (3) arbitrators, of whom each party shall designate one (1) in accordance with the "screened" appointment procedure provided in CPR Rule 5.4. The chair will be chosen in accordance with CPR Rule 6.4. If, however, the aggregate award sought by the parties is less than $5 million and equitable relief is not sought, a single arbitrator shall be chosen in accordance with the CPR Rules. Candidates for the arbitrator position(s) may be interviewed by representatives of the parties in advance of their selection, provided that all parties are represented. The parties agree to select the arbitrator(s) within forty-five (45) days of initiation of the arbitration. The hearing will be concluded within nine (9) months after selection of the arbitrator(s) and the award will be rendered within sixty (60) days of the conclusion of the hearing, or of any post-hearing briefing, which briefing will be completed by both sides within forty-five (45) days after the conclusion of the hearing. In the event the parties cannot agree upon a schedule, then the arbitrator(s) shall set the schedule following the time limits set forth above as closely as practical. The hearing will be concluded in ten (10) hearing days or less. Multiple hearing days will be scheduled consecutively to the greatest extent possible. A transcript of the testimony adduced at the hearing shall be made and shall be made available to each party. The arbitrator(s) shall be guided, but not bound, by the CPR Protocol on Disclosure of Documents and Presentation of Witnesses in Commercial Arbitration (www.cpradr.org) ("Protocol"). The parties will attempt to agree on modes of document disclosure, electronic discovery, witness presentation, etc. within the parameters of the Protocol. If the parties cannot agree on discovery and presentation issues, the arbitrator(s) shall decide on presentation modes and provide for discovery within the Protocol, understanding that the parties contemplate reasonable discovery. The arbitrator(s) shall decide the merits of any Dispute in accordance with the law governing this Agreement, without application of any principle of conflict of laws that would result in reference to a different law. The arbitrator(s) may not apply principles such as “amiable compositeur” or “natural justice and equity.” The arbitrator(s) are expressly empowered to decide dispositive motions in advance of any hearing and shall endeavor to decide such motions as would a United States District Court Judge sitting in the jurisdiction whose substantive law governs. The arbitrator(s) shall render a written opinion stating the reasons upon which the award is based. The parties consent to the jurisdiction of the United States District Court for the district in which the arbitration is held for the enforcement of these provisions and the entry of judgment on any award rendered hereunder. Should such court for any reason lack jurisdiction, any court with jurisdiction may act in the same fashion. Each party has the right to seek from the appropriate court provisional remedies such as attachment, preliminary injunction, replevin, etc. to avoid irreparable harm, maintain the status quo, or preserve the subject matter of the Dispute. Rule 14 of the CPR Rules does not apply to this Agreement.
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Confidential Treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as “***”. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.
(d) Waiver. EACH PARTY HERETO WAIVES: (1) ITS RIGHT TO TRIAL OF ANY ISSUE BY JURY, AND (2) ANY CLAIM FOR ATTORNEY FEES, COSTS AND PREJUDGMENT INTEREST.
9.3 Limitation of Liability. NEITHER PARTY SHALL BE ENTITLED TO RECOVER FROM THE OTHER PARTY ANY SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES (EVEN IF CLASSIFIED AS DIRECT DAMAGES) IN CONNECTION WITH THIS AGREEMENT, ANY LICENSE GRANTED HEREUNDER, OR TERMINATION THEREOF, INCLUDING THE LOSS OF PROSPECTIVE PROFITS OR ANTICIPATED SALES, OR ON ACCOUNT OF EXPENSES, INVESTMENTS, OR COMMITMENTS IN CONNECTION WITH THE BUSINESS OR GOODWILL FROM EITHER PARTY; provided, however, that this Section 9.3 shall not be construed to limit either party’s indemnification obligations under Article 8 or limit either party’s liability for breach of the confidentiality provisions in Article 6.
9.4 Entire Agreement; Modification. This Agreement, together with all Exhibits hereto, is both a final expression of the parties’ agreement and a complete and exclusive statement with respect to all of its terms. This Agreement supersedes all prior and contemporaneous agreements and communications, whether oral, written or otherwise, concerning any and all matters contained herein and therein, including the Confidentiality Agreement. This Agreement may only be modified or supplemented in a writing expressly stated for such purpose and signed by the parties to this Agreement.
9.5 Relationship Between the Parties. The parties’ relationship, as established by this Agreement, is solely that of independent contractors. This Agreement does not create any partnership, joint venture or similar business relationship between the parties. Neither party is a legal representative of the other party, and neither party can assume or create any obligation, representation, warranty or guarantee, express or implied, on behalf of the other party for any purpose whatsoever.
9.6 Non-Waiver. The failure of a party to insist upon strict performance of any provision of this Agreement or to exercise any right arising out of this Agreement shall neither impair that provision or right nor constitute a waiver of that provision or right, in whole or in part, in that instance or in any other instance. Any waiver by a party of a particular provision or right shall be in writing, shall be as to a particular matter and, if applicable, for a particular period of time and shall be signed by such party.
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Confidential Treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as “***”. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.
9.7 Assignment. Except as expressly provided hereunder, neither this Agreement nor any rights or obligations hereunder may be assigned or otherwise transferred by either party without the prior written consent of the other party (which consent shall not be unreasonably withheld); provided, however, that, either party may assign or otherwise transfer this Agreement and its rights and obligations hereunder without the other party’s consent:
(a) in connection with the transfer or sale of all or substantially all of the business or assets of such party to a Third Party, whether by merger, sale of stock, sale of assets or otherwise; or
(b) to an Affiliate, provided that the assigning party shall remain liable and responsible to the non-assigning party hereto for the performance and observance of all such duties and obligations by such Affiliate.
The rights and obligations of the parties under this Agreement shall be binding upon and inure to the benefit of the successors and permitted assigns of the parties. Any assignment not in accordance with this Agreement shall be void.
9.8 No Third Party Beneficiaries. This Agreement is neither expressly nor impliedly made for the benefit of any party other than those executing it, except as otherwise provided in this Agreement with respect to Janssen Indemnitees under Section 8.1 and Company Indemnitees under Section 8.2.
9.9 Severability. If, for any reason, any part of this Agreement is adjudicated invalid, unenforceable or illegal by a court of competent jurisdiction, such adjudication shall not affect or impair, in whole or in part, the validity, enforceability or legality of any remaining portions of this Agreement. All remaining portions shall remain in full force and effect as if the original Agreement had been executed without the invalidated, unenforceable or illegal part.
9.10 Cumulative Remedies. No remedy referred to in this Agreement is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to in this Agreement or otherwise available under law.
9.11 Notices. Any notice to be given under this Agreement must be in writing and delivered either in person, by any method of mail (postage prepaid) requiring return receipt, or by overnight courier or facsimile confirmed thereafter by any of the foregoing, to the party to be notified at its address(es) given below, or at any address such party has previously designated by prior written notice to the other. Notice shall be deemed sufficiently given for all purposes upon the earliest of: (a) the date of actual receipt; (b) if mailed, three (3) days after the date of postmark; or (c) if delivered by overnight courier, the next business day the overnight courier regularly makes deliveries.
21 |
Confidential Treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as “***”. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.
For Janssen: Janssen Biotech, Inc.
800 Ridgeview Drive
Horsham, PA 19044
***
***
with a copy to: Janssen Research & Development, LLC
Welsh & Mckean Roads
Spring House, PA 19477
***
***
and: Chief Intellectual Property Counsel
Johnson & Johnson
One Johnson & Johnson Plaza
New Brunswick, NJ 08933
***
and: Janssen CFC PR / CNA Development LLC
***
Road #2, Km. 45.6
Bo. Campo Alegre
Manatí, PR 00674
***
For Company: Fabrus, Inc.
4045 Sorrento Valley Blvd
San Diego, California 92121
Attention: Chief Executive Officer
With a copy to: Cooley llp
4401 Eastgate Mall
San Diego, California 92121
***
***
9.12 Force Majeure. Except for the obligation to make payment when due, each party shall be excused from liability for the failure or delay in performance of any obligation under this Agreement by reason of any event beyond such party’s reasonable control including but not limited to acts of God, fire, flood, explosion, earthquake, or other natural forces, war, civil unrest, accident, destruction or other casualty, any lack or failure of transportation facilities, any lack or failure of supply of raw materials, any strike or labor disturbance, or any other event similar to those enumerated above. Such excuse from liability shall be effective only to the extent and duration of the event(s) causing the failure or delay in performance and provided that the party has not caused such event(s) to occur. Notice of a party’s failure or delay in performance due to force majeure must be given to the other party within ten (10) days after its occurrence. All delivery dates under this Agreement that have been affected by force majeure shall be tolled for the duration of such force majeure. In no event shall any party be required to prevent or settle any labor disturbance or dispute.
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Confidential Treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as “***”. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.
9.13 Interpretation.
(a) Captions & Headings. The captions and headings of clauses contained in this Agreement preceding the text of the articles, sections, subsections and paragraphs hereof are inserted solely for convenience and ease of reference only and shall not constitute any part of this Agreement, or have any effect on its interpretation or construction.
(b) Interpretation. All references in this Agreement to the word “including” shall be deemed to be followed by the phrase “without limitation” or like expression. The word “or” means “and/or” unless the context dictates otherwise because the subject of the conjunction are mutually exclusive. The words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision. Unless otherwise specified, references in this Agreement to any article shall include all sections, subsections, and paragraphs in such article; references in this Agreement to any section shall include all subsections and paragraphs in such sections; and references in this Agreement to any subsection shall include all paragraphs in such subsection. All references to days, months, quarters or years are references to calendar days, calendar months, calendar quarters, or calendar years, unless stated otherwise. All references in this Agreement to the singular shall include the plural where applicable, and all references to gender shall include both genders and the neuter.
(c) Ambiguities. Ambiguities and uncertainties in this Agreement, if any, shall not be interpreted against either party, irrespective of which party may be deemed to have caused the ambiguity or uncertainty to exist.
(d) English Language. This Agreement has been prepared in the English language and the English language shall control its interpretation. In addition, all notices required or permitted to be given hereunder, and all written, electronic, oral or other communications between the parties regarding this Agreement shall be in the English language.
9.14 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original document, and all of which, together with this writing, shall be deemed one instrument. Signatures provided by facsimile transmission or in Adobe™ Portable Document Format (PDF) sent by electronic mail shall be deemed to be original signatures.
[Remainder of this page intentionally left blank.]
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Confidential Treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as “***”. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.
In Witness Whereof, the parties hereto have duly executed this Collaboration and Option Agreement as of the Effective Date.
Fabrus, Inc. | CNA Development, LLC | |||
By: | /s/ Ronald A. Martell | By: | /s/ Maria Gonzalez | |
Name: Ronald A. Martell | Name: Maria Gonzalez | |||
Title: Chief Executive Officer | Title: General Manager |
Signature Page to Collaboration and Option Agreement
Confidential Treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as “***”. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.
Exhibit A
Collaborative Research plan For Targets 1, 2 and 3
Work Plan (***)
***
A-1 |
Confidential Treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as “***”. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.
Exhibit B
Budget For Each of Target 1, 2 and 3
(***)
***
B-1 |
Confidential Treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as “***”. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.
Exhibit C
License Terms1
Parties | Fabrus, Inc. (“Company”) and [Janssen Biotech, Inc.] (“Janssen”) | |
Milestones and Milestone Payments | Janssen shall pay Company, the following non-creditable, non-refundable amounts for the achievement of the following development and commercial milestones on Licensed Products. Payments are due within thirty (30) days of the achievement of the applicable milestone event.
*** *** *** *** *** *** *** ***
For clarification, each of the foregoing milestone payments shall be payable one time only upon the first achievement of the specified milestone event by a Licensed Product (one Licensed Product per Designated Target), regardless of the number of Licensed Products to achieve the applicable milestone event. | |
Royalty | During the Royalty Term, ***, capped at *** per Licensed Product | |
Field | “Field” shall mean all uses. | |
Licensed Product | “Licensed Product” shall mean any pharmaceutical and diagnostic product (including, without limitation, vaccines) developed by Janssen or any of its Affiliates, licensees, or legal successors, comprising or containing at least one Collaboration Antibody, including and including all formulations, combination products, line extensions and modes of administration thereof. | |
Territory | “Territory” means worldwide. | |
Valid Claim | “Valid Claim” means (a) a claim of an unexpired issued patent that has not been disclaimed, revoked or held to be invalid or unenforceable by a court or other authority of competent jurisdiction, from which decision no appeal can be further taken; or (b) a claim of a pending patent application prosecuted in good faith for which no more than seven (7) years have elapsed from the earliest priority date to which such pending application is entitled. If a claim of a patent application that ceased to be a Valid Claim under clause (b) of this subsection later issues or grants as a patent within the scope of clause (a) of this subsection, then such claim shall again be considered to be a Valid Claim, effective as of the earlier of the grant or issuance of such patent. |
1 These terms do not apply to any Licensed Product that incorporates any cow antibody technology, including rights in-licensed under the In-License Agreement, which terms would need to be separately negotiated. If a sublicense to the rights in-licensed under the In-License Agreement is necessary to make and sell Licensed Products, then a separate sublicense of such rights would be granted on separate terms that comply with the In-License Agreement and cover the payments to The Scripps Research Institute thereunder.
C-1 |
Confidential Treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as “***”. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.
“Cover(ed)(ing)” shall mean, in the case of a Licensed Product or Collaboration Antibody and a Valid Claim, that, but for the grant of a license or right under, or ownership of, such Valid Claim, the making, using, selling, offering for sale or importation of such Licensed Product or Collaboration Antibody would infringe such Valid Claim (in the case of patent applications, assuming issuance thereof). | ||
Royalty Term | Janssen’s obligation to pay a royalty under this agreement for a Licensed Product in a given country shall be in effect in each country of sale from First Commercial Sale in the country and shall expire, on a country-by-country basis, on the later of ***.
Janssen shall have the right to terminate the License Agreement at any time upon ninety (90) days’ advance notice. The License Agreement shall also include other standard termination provisions. | |
First Commercial Sale | “First Commercial Sale” means, with respect to a Licensed Product in a particular country, the first commercial sale of such Licensed Product in such country after all needed Regulatory and Pricing Approvals have been obtained in such country. | |
Other Provisions | Parties agree that a final License agreement will contain other customary provisions as deemed necessary by both Parties. |
C-2 |
Exhibit 10.4
RETENTION AGREEMENT
This Retention Agreement (this “Agreement”) is made and entered into as of November 17, 2014 (the “Effective Date”), by and between Sevion Therapeutics, Inc., a Delaware corporation (the “Company”) and Richard Dondero (“Executive”).
WHEREAS, the Company completed its acquisition of Fabrus, Inc., a Delaware corporation (“Fabrus”), on May 16, 2014 (the “Transaction”);
WHEREAS, the Company has determined that it is in the best interests of the Company to retain Executive;
WHEREAS, the Company and Executive desire to enter into an agreement providing for the payment of severance benefits to Executive in the event of certain terminations of Executive’s employment; and
WHEREAS, by executing this Agreement, Executive will be acknowledging and agreeing that, as of the Effective Date, the Company has not experienced a “Change of Control” for purposes of the Company’s Retention Policy for Officers (or any other plan, policy or agreement providing for the payment of severance benefits) (the “Retention Policy”).
NOW, THEREFORE, in consideration of the mutual covenants, promises and obligations set forth herein, the parties agree as follows:
1. Qualifying Termination. Upon the occurrence of a Qualifying Termination (as defined in Section 6 below), Executive shall become eligible to receive the payments and benefits set forth in Section 2, subject to the limitations set forth in this Agreement (including, without limitation, Section 4), in addition to any unpaid salary and benefits earned through the effective date of the Qualifying Termination.
2. Severance Benefits upon Qualifying Termination.
(a) Base Salary Continuation. In the event of a Qualifying Termination, Executive will be entitled to a receive an aggregate amount equal to six (6) months of Executive’s annual base salary (as in effect on the date of Executive’s Qualifying Termination) payable in accordance with Section 3 and the regular payroll practices of the Company.
(b) Health Benefits. Provided Executive and his eligible dependents elect to continue medical and dental care coverage under the Company’s group health care plans pursuant to their rights under COBRA (or any similar state law) following Executive’s Qualifying Termination and subject to Executive’s compliance with the reimbursement procedures set forth in Section 5, the Company shall reimburse Executive for the costs Executive incurs to obtain such continued coverage for the six (6)-month period beginning on the first day of the month following Executive’s Qualifying Termination. The number of months of continued benefit coverage provided to Executive hereunder shall, to the maximum extent permitted by law, reduce the number of months of continued coverage that must be made available to Executive and his dependents under COBRA (or any similar state law).
(c) Option Exercisability. Notwithstanding anything to the contrary in the applicable award agreement, each of Executive’s options to acquire stock of the Company shall, to the extent vested and exercisable on the effective date of the Qualifying Termination, remain exercisable until the earlier of (i) the expiration of its maximum option term, or (ii) twelve months from the effective date of the Qualifying Termination. For purposes of clarity, any options to acquire stock of the Company which were awarded or granted that are subject to performance-based vesting shall no longer vest as a result of a Qualifying Termination, and shall terminate pursuant to their terms as a result of the Qualifying Termination.
3. Payment Timing. Subject to Section 8(f)(ii), the Company shall make the initial base salary continuation payment under Section 2(a) on the first regularly scheduled payroll date within the sixty (60)-day period measured from the date of Executive’s Qualifying Termination on which the General Release (as defined in Section 4 below) is effective and irrevocable. However, should such sixty (60)-day period span two taxable years, then the initial salary continuation payment will be made on the first regularly scheduled payroll date within the portion of that sixty (60)-day period that occurs in the second taxable year on which the General Release is effective and irrevocable. If one or more salary continuation payments are delayed pursuant to the preceding sentence, the initial salary continuation payment will include all amounts that otherwise would have been paid to Executive during the period beginning on the date of Executive’s Qualifying Termination and ending on the first payment date if no such delay had been imposed. Any remaining salary continuation payments due under this Agreement will be paid in accordance with the regular payroll practices of the Company.
4. Release Requirement. Notwithstanding anything herein to the contrary, in order to receive any severance payments or benefits pursuant to this Agreement, Executive must first execute and deliver to the Company, within twenty-one (21) days (or forty-five (45) days, if such longer period is required under applicable law) after the effective date of Executive’s Qualifying Termination, a general settlement and release agreement in such form as provided by the Company (a “General Release”), and such General Release must become effective and enforceable in accordance with its terms following the expiration of any applicable revocation period under federal or state law. If such General Release is not executed and delivered to the Company within the applicable twenty-one (21) (or forty-five (45))-day period hereunder or does not otherwise become effective and enforceable in accordance with its terms, then no severance benefits will be provided to Executive under this Agreement.
5. Reimbursement Procedure. In order to obtain reimbursement for the costs Executive incurs to obtain the continued medical and dental care coverage provided for under Section 2 (the “Health Insurance Costs”), Executive must submit appropriate evidence to the Company of each periodic payment within sixty (60) days after the required payment date for those Health Insurance Costs and the Company shall reimburse Executive for that payment within thirty (30) days after receipt of that submission. All such reimbursements shall be subject to the provisions of Section 8(f)(iii).
6. Definitions. For purposes of this Agreement, the following definitions shall be in effect:
(a) Cause. The term “Cause” shall mean any of the following:
(i) Failure by Executive, other than by reason of disability, to substantially perform duties consistent with those expected of a person holding Executive’s position within twenty (20) business days following Executive’s receipt of written notice of such failure (which notice shall have been authorized by the Board and shall set forth in reasonable detail the purported failure to perform and the specific steps to cure such failure, which shall be consistent with the terms hereof);
(ii) Executive’s misappropriation of the Company’s funds or willful misconduct which results in material damage to the Company; or
(iii) Executive’s conviction of, or plea of nolo contendere to, any crime constituting a felony under the laws of the United States or any State thereof, or any crime constituting a misdemeanor under any such law involving moral turpitude.
(b) Good Reason. The term “Good Reason” shall mean any action by the Company which results in:
(i) A material diminution of Executive’s position or Executive’s authority, duties or responsibilities;
(ii) A material reduction in Executive’s annual base salary; or
(iii) A change by the Company in the location at which Executive performs his principal duties for the Company to a new location that is outside a radius of 50 miles from Executive’s principal residence and outside a radius of 50 miles from the location at which Executive previously performed his principal duties for the Company;
provided, that, the foregoing events shall not be deemed to constitute Good Reason unless Executive shall have notified the Board in writing of the occurrence of such event(s) within ninety (90) days of the initial existence of the condition and the Board shall have failed to have cured or remedied such event(s) within thirty (30) days of its receipt of such written notice or which breach the Company shall have failed to begin to attempt to cure during said thirty (30)-day period if the breach is not curable during the thirty (30)-day period. If the event is not cured during the thirty (30)-day period (or the Company shall have failed to begin to attempt to cure the event during such thirty (30)-day period), Executive’s employment shall terminate on the ninetieth (90th) day following the date of Executive’s notice to the Board of the event constituting Good Reason, unless the Board and Executive agree in writing to an extension of Executive’s termination date.
(c) Qualifying Termination. The term “Qualifying Termination” shall mean any of the following:
(i) The Company terminates Executive’s employment without Cause during the twelve (12)-month period commencing with the Effective Date; or
(ii) Executive voluntarily terminates his employment with the Company for Good Reason (following the applicable notice and cure period requirements specified in Section 6(c)) on or after December 1, 2014, which termination becomes effective during the twelve (12)-month period commencing with the Effective Date.
7. Executive’s Acknowledgment. By executing this Agreement, Executive acknowledges and agrees that, as of the Effective Date, the Company has not experienced a “Change of Control” for purposes of the Retention Policy. Executive also specifically acknowledges and agrees that neither the Company’s acquisition of Fabrus nor the issuance of shares in connection with such acquisition resulted in a “Change of Control” for purposes of the Retention Policy.
8. Miscellaneous Provisions.
(a) Notice. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of Executive, mailed notices shall be addressed to Executive at the home address which Executive most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Secretary.
(b) Entire Agreement; Severance Benefits Not Duplicative. This Agreement and the Retention Policy contain the entire agreement of Executive and the Company with respect to severance or termination pay. If Executive becomes entitled to receive severance benefits under the Retention Plan or any other severance plan, policy, program or agreement as a result of a Qualifying Termination, Executive’s severance benefits under this Agreement will be reduced by the severance benefits paid to Executive under such other severance plan, policy, program or agreement, in the manner determined by the Company.
(c) Successors.
(i) The Company shall require any successor (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent as the Company would be required to perform it in the absence of a succession. Unless expressly provided otherwise, “Company” as used herein shall mean the Company as defined in this Agreement and any successor to its business and/or assets as described above.
(ii) This Agreement and all rights of Executive hereunder shall inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
(d) Taxes. All payments and benefits made pursuant to this Agreement (including all reimbursements for Health Insurance Costs, to the extent such reimbursements are treated as taxable wages) will be reported as taxable wages on a Form W-2 and will be subject to deduction of all required federal, state, local and foreign withholding taxes and any other employment taxes the Company may be required to collect or withhold.
(e) No Assignment. Executive’s rights hereunder may not be anticipated, assigned, attached, garnished, optioned, transferred or made subject to any creditor’s process, whether voluntarily, involuntarily or by operation of law, except by will or the laws of descent and distribution. Any action in violation of this Section 8(e) shall be void.
(f) Internal Revenue Code Section 409A.
(i) This Agreement is intended to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”), or an exemption thereunder and shall be interpreted, administered and applied in accordance with such intent. Any payments under this Agreement that may be excluded from Section 409A pursuant to Treasury Regulation 1.409A-1(b)(4) (the so-called “short-term deferral exception”) or Treasury Regulation 1.409A-1(b)(9)(iii) (the so-called “involuntary separation pay exception”) shall be excluded from Section 409A to the maximum extent possible.
(ii) Notwithstanding any provision in this Agreement to the contrary, no payment or benefit under this Agreement that constitutes an item of deferred compensation under Section 409A and becomes payable by reason of a Qualifying Termination will be made to Executive unless such Qualifying Termination constitutes a “separation from service,” within the meaning of Section 409A and the Treasury Regulations thereunder. For purposes of this Agreement, each amount to be paid or benefit to be provided to Executive shall be treated as a separate identified payment or benefit for purposes of Section 409A. In addition, no payment or benefit that constitutes an item of deferred compensation under Section 409A and becomes payable by reason of Executive’s separation from service will be made to Executive prior to the earlier of (i) the first day of the seventh month following the date of such separation from service or (ii) the date of Executive’s death, if Executive is deemed at the time of such separation from service to be a specified employee (as determined in accordance with Section 409A and the Treasury Regulations thereunder) and such delayed commencement is otherwise required in order to avoid a prohibited distribution under Section 409A. Upon the expiration of the applicable deferral period, all payments and benefits deferred pursuant to this paragraph (whether they would have otherwise been payable in a single sum or in installments in the absence of such deferral) shall be paid or provided to Executive in a lump sum on the first day of the seventh month after the date of Executive’s separation from service or, if earlier, the first day of the month immediately following the date the Company receives proof of Executive’s death. Any remaining payments or benefits due under this Agreement will be paid in accordance with the normal payment dates specified herein.
(iii) Any reimbursements or other in-kind benefits provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A, including, where applicable, the requirement that (1) all such reimbursements will be made on or before the last day of the your taxable year following the taxable year in which Executive incurred such reimbursed expense, (2) the right to reimbursement or in-kind benefits will not be subject to liquidation or exchange for another benefit, (3) the amount of expenses eligible for reimbursement, or the in-kind benefits provided, during any taxable year of Executive will not affect the expenses eligible for reimbursement, or the in-kind benefits to be provided, in any other taxable year of Executive, and (4) any reimbursement will be for expenses incurred only during the period of time specified in this Agreement.
(g) Amendments. This Agreement may not be amended or modified except by an instrument in writing executed by, or on behalf of, Executive and the Company.
(h) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which shall constitute the same instrument. Facsimile or other electronic copies of such signed counterparts may be used in lieu of the originals for any purpose.
(i) Choice of Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of New Jersey without regard to the conflicts of laws principles thereof.
IN WITNESS WHEREOF, each of the parties has executed this Retention Agreement, in the case of the Company by its duly authorized officer, as of the day and year first above written.
EXECUTIVE: | ||
/s/ Richard Dondero | ||
Richard Dondero | ||
Sevion therapeutics, Inc.: | ||
/s/ Joel Brooks | ||
By: | Joel Brooks | |
Its: | CFO |
Exhibit 10.5
RETENTION AGREEMENT
This Retention Agreement (this “Agreement”) is made and entered into as of November 17, 2014 (the “Effective Date”), by and between Sevion Therapeutics, Inc., a Delaware corporation (the “Company”) and Heather Branham (“Employee”).
WHEREAS, the Company completed its acquisition of Fabrus, Inc., a Delaware corporation (“Fabrus”), on May 16, 2014 (the “Transaction”);
WHEREAS, the Company has determined that it is in the best interests of the Company to retain Employee;
WHEREAS, the Company and Employee desire to enter into an agreement providing for the payment of severance benefits to Employee in the event of certain terminations of Employee’s employment; and
WHEREAS, by executing this Agreement, Employee will be acknowledging and agreeing that, as of the Effective Date, the Company has not experienced a “Change of Control” for purposes of the Company’s Retention Policy for Officers (or any other plan, policy or agreement providing for the payment of severance benefits) (the “Retention Policy”).
NOW, THEREFORE, in consideration of the mutual covenants, promises and obligations set forth herein, the parties agree as follows:
1. Qualifying Termination. Upon the occurrence of a Qualifying Termination (as defined in Section 6 below), Employee shall become eligible to receive the payments and benefits set forth in Section 2, subject to the limitations set forth in this Agreement (including, without limitation, Section 4), in addition to any unpaid salary and benefits earned through the effective date of the Qualifying Termination.
2. Severance Benefits upon Qualifying Termination.
(a) Base Salary Continuation. In the event of a Qualifying Termination, Employee will be entitled to a receive an aggregate amount equal to four (4) months of Employee’s annual base salary (as in effect on the date of Employee’s Qualifying Termination) payable in accordance with Section 3 and the regular payroll practices of the Company.
(b) Health Benefits. Provided Employee and her eligible dependents elect to continue medical and dental care coverage under the Company’s group health care plans pursuant to their rights under COBRA (or any similar state law) following Employee’s Qualifying Termination and subject to Employee’s compliance with the reimbursement procedures set forth in Section 5, the Company shall reimburse Employee for the costs Employee incurs to obtain such continued coverage for the four (4)-month period beginning on the first day of the month following Employee’s Qualifying Termination. The number of months of continued benefit coverage provided to Employee hereunder shall, to the maximum extent permitted by law, reduce the number of months of continued coverage that must be made available to Employee and her dependents under COBRA (or any similar state law).
(c) Option Exercisability. Notwithstanding anything to the contrary in the applicable award agreement, each of Employee’s options to acquire stock of the Company shall, to the extent vested and exercisable on the effective date of the Qualifying Termination, remain exercisable until the earlier of (i) the expiration of its maximum option term, or (ii) twelve months from the effective date of the Qualifying Termination. For purposes of clarity, any options to acquire stock of the Company which were awarded or granted that are subject to performance-based vesting shall no longer vest as a result of a Qualifying Termination, and shall terminate pursuant to their terms as a result of the Qualifying Termination.
3. Payment Timing. Subject to Section 8(f)(ii), the Company shall make the initial base salary continuation payment under Section 2(a) on the first regularly scheduled payroll date within the sixty (60)-day period measured from the date of Employee’s Qualifying Termination on which the General Release (as defined in Section 4 below) is effective and irrevocable. However, should such sixty (60)-day period span two taxable years, then the initial salary continuation payment will be made on the first regularly scheduled payroll date within the portion of that sixty (60)-day period that occurs in the second taxable year on which the General Release is effective and irrevocable. If one or more salary continuation payments are delayed pursuant to the preceding sentence, the initial salary continuation payment will include all amounts that otherwise would have been paid to Employee during the period beginning on the date of Employee’s Qualifying Termination and ending on the first payment date if no such delay had been imposed. Any remaining salary continuation payments due under this Agreement will be paid in accordance with the regular payroll practices of the Company.
4. Release Requirement. Notwithstanding anything herein to the contrary, in order to receive any severance payments or benefits pursuant to this Agreement, Employee must first execute and deliver to the Company, within twenty-one (21) days (or forty-five (45) days, if such longer period is required under applicable law) after the effective date of Employee’s Qualifying Termination, a general settlement and release agreement in such form as provided by the Company (a “General Release”), and such General Release must become effective and enforceable in accordance with its terms following the expiration of any applicable revocation period under federal or state law. If such General Release is not executed and delivered to the Company within the applicable twenty-one (21) (or forty-five (45))-day period hereunder or does not otherwise become effective and enforceable in accordance with its terms, then no severance benefits will be provided to Employee under this Agreement.
5. Reimbursement Procedure. In order to obtain reimbursement for the costs Employee incurs to obtain the continued medical and dental care coverage provided for under Section 2 (the “Health Insurance Costs”), Employee must submit appropriate evidence to the Company of each periodic payment within sixty (60) days after the required payment date for those Health Insurance Costs and the Company shall reimburse Employee for that payment within thirty (30) days after receipt of that submission. All such reimbursements shall be subject to the provisions of Section 8(f)(iii).
6. Definitions. For purposes of this Agreement, the following definitions shall be in effect:
(a) Cause. The term “Cause” shall mean any of the following:
(i) Failure by Employee, other than by reason of disability, to substantially perform duties consistent with those expected of a person holding Employee’s position within twenty (20) business days following Employee’s receipt of written notice of such failure (which notice shall have been authorized by the Board and shall set forth in reasonable detail the purported failure to perform and the specific steps to cure such failure, which shall be consistent with the terms hereof);
(ii) Employee’s misappropriation of the Company’s funds or willful misconduct which results in material damage to the Company; or
(iii) Employee’s conviction of, or plea of nolo contendere to, any crime constituting a felony under the laws of the United States or any State thereof, or any crime constituting a misdemeanor under any such law involving moral turpitude.
(b) Good Reason. The term “Good Reason” shall mean any action by the Company which results in:
(i) A material diminution of Employee’s position or Employee’s authority, duties or responsibilities;
(ii) A material reduction in Employee’s annual base salary; or
(iii) A change by the Company in the location at which Employee performs her principal duties for the Company to a new location that is outside a radius of 50 miles from Employee’s principal residence and outside a radius of 50 miles from the location at which Employee previously performed her principal duties for the Company;
provided, that, the foregoing events shall not be deemed to constitute Good Reason unless Employee shall have notified the Board in writing of the occurrence of such event(s) within ninety (90) days of the initial existence of the condition and the Board shall have failed to have cured or remedied such event(s) within thirty (30) days of its receipt of such written notice or which breach the Company shall have failed to begin to attempt to cure during said thirty (30)-day period if the breach is not curable during the thirty (30)-day period. If the event is not cured during the thirty (30)-day period (or the Company shall have failed to begin to attempt to cure the event during such thirty (30)-day period), Employee’s employment shall terminate on the ninetieth (90th) day following the date of Employee’s notice to the Board of the event constituting Good Reason, unless the Board and Employee agree in writing to an extension of Employee’s termination date.
(c) Qualifying Termination. The term “Qualifying Termination” shall mean any of the following:
(i) The Company terminates Employee’s employment without Cause during the twelve (12)-month period commencing with the Effective Date; or
(ii) Employee voluntarily terminates her employment with the Company for Good Reason (following the applicable notice and cure period requirements specified in Section 6(c)) on or after December 1, 2014, which termination becomes effective during the twelve (12)-month period commencing with the Effective Date.
7. Employee’s Acknowledgment. By executing this Agreement, Employee acknowledges and agrees that, as of the Effective Date, the Company has not experienced a “Change of Control” for purposes of the Retention Policy. Employee also specifically acknowledges and agrees that neither the Company’s acquisition of Fabrus nor the issuance of shares in connection with such acquisition resulted in a “Change of Control” for purposes of the Retention Policy.
8. Miscellaneous Provisions.
(a) Notice. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of Employee, mailed notices shall be addressed to Employee at the home address which Employee most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Secretary.
(b) Entire Agreement; Severance Benefits Not Duplicative. This Agreement and the Retention Policy contain the entire agreement of Employee and the Company with respect to severance or termination pay. If Employee becomes entitled to receive severance benefits under the Retention Plan or any other severance plan, policy, program or agreement as a result of a Qualifying Termination, Employee’s severance benefits under this Agreement will be reduced by the severance benefits paid to Employee under such other severance plan, policy, program or agreement, in the manner determined by the Company.
(c) Successors.
(i) The Company shall require any successor (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent as the Company would be required to perform it in the absence of a succession. Unless expressly provided otherwise, “Company” as used herein shall mean the Company as defined in this Agreement and any successor to its business and/or assets as described above.
(ii) This Agreement and all rights of Employee hereunder shall inure to the benefit of, and be enforceable by, Employee’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
(d) Taxes. All payments and benefits made pursuant to this Agreement (including all reimbursements for Health Insurance Costs, to the extent such reimbursements are treated as taxable wages) will be reported as taxable wages on a Form W-2 and will be subject to deduction of all required federal, state, local and foreign withholding taxes and any other employment taxes the Company may be required to collect or withhold.
(e) No Assignment. Employee’s rights hereunder may not be anticipated, assigned, attached, garnished, optioned, transferred or made subject to any creditor’s process, whether voluntarily, involuntarily or by operation of law, except by will or the laws of descent and distribution. Any action in violation of this Section 8(e) shall be void.
(f) Internal Revenue Code Section 409A.
(i) This Agreement is intended to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”), or an exemption thereunder and shall be interpreted, administered and applied in accordance with such intent. Any payments under this Agreement that may be excluded from Section 409A pursuant to Treasury Regulation 1.409A-1(b)(4) (the so-called “short-term deferral exception”) or Treasury Regulation 1.409A-1(b)(9)(iii) (the so-called “involuntary separation pay exception”) shall be excluded from Section 409A to the maximum extent possible.
(ii) Notwithstanding any provision in this Agreement to the contrary, no payment or benefit under this Agreement that constitutes an item of deferred compensation under Section 409A and becomes payable by reason of a Qualifying Termination will be made to Employee unless such Qualifying Termination constitutes a “separation from service,” within the meaning of Section 409A and the Treasury Regulations thereunder. For purposes of this Agreement, each amount to be paid or benefit to be provided to Employee shall be treated as a separate identified payment or benefit for purposes of Section 409A. In addition, no payment or benefit that constitutes an item of deferred compensation under Section 409A and becomes payable by reason of Employee’s separation from service will be made to Employee prior to the earlier of (i) the first day of the seventh month following the date of such separation from service or (ii) the date of Employee’s death, if Employee is deemed at the time of such separation from service to be a specified employee (as determined in accordance with Section 409A and the Treasury Regulations thereunder) and such delayed commencement is otherwise required in order to avoid a prohibited distribution under Section 409A. Upon the expiration of the applicable deferral period, all payments and benefits deferred pursuant to this paragraph (whether they would have otherwise been payable in a single sum or in installments in the absence of such deferral) shall be paid or provided to Employee in a lump sum on the first day of the seventh month after the date of Employee’s separation from service or, if earlier, the first day of the month immediately following the date the Company receives proof of Employee’s death. Any remaining payments or benefits due under this Agreement will be paid in accordance with the normal payment dates specified herein.
(iii) Any reimbursements or other in-kind benefits provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A, including, where applicable, the requirement that (1) all such reimbursements will be made on or before the last day of the your taxable year following the taxable year in which Employee incurred such reimbursed expense, (2) the right to reimbursement or in-kind benefits will not be subject to liquidation or exchange for another benefit, (3) the amount of expenses eligible for reimbursement, or the in-kind benefits provided, during any taxable year of Employee will not affect the expenses eligible for reimbursement, or the in-kind benefits to be provided, in any other taxable year of Employee , and (4) any reimbursement will be for expenses incurred only during the period of time specified in this Agreement.
(g) Amendments. This Agreement may not be amended or modified except by an instrument in writing executed by, or on behalf of, Employee and the Company.
(h) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which shall constitute the same instrument. Facsimile or other electronic copies of such signed counterparts may be used in lieu of the originals for any purpose.
(i) Choice of Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of New Jersey without regard to the conflicts of laws principles thereof.
IN WITNESS WHEREOF, each of the parties has executed this Retention Agreement, in the case of the Company by its duly authorized officer, as of the day and year first above written.
EMPLOYEE: | ||
/s/ Heather Branham | ||
Heather Branham | ||
Sevion therapeutics, Inc.: | ||
/s/ Joel Brooks | ||
By: | Joel Brooks | |
Its: | CFO |
Exhibit 10.6
SEVION THERAPEUTICS, Inc.
Consulting Agreement
This Consulting Agreement (this “Agreement”) is entered into as of January 9, 2015 (the “Effective Date”), by and between Sevion Therapeutics, Inc., or successor thereof (the “Company”), and The David Stephen Group LLC, a limited liability company with a primary address as set forth on the signature page hereto (“Consultant”).
WHEREAS, the Company wishes to obtain the services of Consultant for certain purposes, and Consultant wishes to provide such services, all subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth, and intending to be legally bound, the Company and Consultant hereby agree as follows:
1. Services to be Provided. During the term of this Agreement, David Rector, a principal of Consultant, shall serve as the Company’s interim President and Chief Executive Officer (the “Services”). Consultant acknowledges that the obligations of Consultant shall also apply to Mr. Rector, as applicable.
2. Term. The initial term of this Agreement shall begin on the Effective Date and shall continue for a period ending twelve (12) months from the Effective Date, unless terminated prior thereto pursuant to paragraph 7. This Agreement may be renewed upon mutual agreement of the parties in writing.
3. Compensation; No Benefits.
(a) As compensation for Consultant’s performance of the Services to be performed pursuant to this Agreement, the Company shall pay Consultant $10,000 per month, payable by the Company within five (5) business days of the first (1st) business day of each month.
(b) Consultant is not an employee of the Company and will not be entitled to participate in or receive any benefit or right as a Company employee under any Company employee benefit and pension plans, including, without limitation, employee insurance, pension, savings and security plans, as a result of entering into this Agreement. Consultant is responsible for all income taxes, employment taxes and workers’ compensation insurance associated with the compensation received under this Agreement and agrees that the Company will not withhold or pay any of the foregoing in connection with Consultant’s services to the Company hereunder.
4. Independent Contractor; Performance.
(a) Independent Contractor Status. For purposes of this Agreement and all Services to be provided hereunder, Consultant shall not be considered a partner, co-venturer, agent, employee or representative of the Company, but shall remain in all respects an independent contractor, and neither party shall have any right or authority to make or undertake any promise, warranty or representation, to execute any contract, or otherwise to assume any obligation or responsibility in the name of or on behalf of the other party.
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(b) Performance Warranties. Consultant will perform all Services in a professional manner, consistent with industry standards. Consultant warrants that each work product that is produced as a result of Consultant’s performance of the Services, in whatever medium, shall be free from defects of material and workmanship under normal use and shall function properly and in conformity with the applicable specifications for such work product, as agreed upon by Consultant and the Company, and shall continue to be free from such defects and to so function during the one (1) year period beginning on the date that such work product is accepted by the Company. If during such warranty period any defect of material or workmanship arises or manifests itself in such work product or such work product fails to function properly and in conformity with the applicable specifications therefor, the Company will notify Consultant in writing of such defect or failure. Promptly upon Consultant’s receipt of any such notice, Consultant shall correct such defect or failure at Consultant’s sole cost and expense.
(c) Survival. The provisions of this paragraph 4 shall survive the expiration or earlier termination of this Agreement.
5. Confidentiality.
(a) Company Information. Consultant agrees at all times during the term of this Agreement and thereafter to hold in strictest confidence, and not to use, except in connection with Consultant’s performance of the Services, and not to disclose to any person or entity without written authorization of the Chairman of the Board of Directors of the Company, any Confidential Information of the Company. As used herein, “Confidential Information” means any Company proprietary or confidential information, technical data, trade secrets or know-how, including, but not limited to, research, product plans, products, services, customer lists and customers, markets, software, developments, inventions, processes, formulas, technology, designs, drawings, engineering, marketing, distribution and sales methods and systems, sales and profit figures, and financial and other business information disclosed to Consultant by the Company, either directly or indirectly, in writing, orally or by drawings or inspection of documents or other tangible property. However, Confidential Information does not include any information: (i) which was lawfully in the possession of Consultant without any obligation of confidentiality prior to receiving such information from the Company; (ii) which is obtained by Consultant from a source that is not prohibited from disclosing the information to Consultant by an obligation of confidentiality; (iii) which is or becomes generally available to the public other than as a result of a disclosure by Consultant or its agents; or (iv) which is developed independently by Consultant without use of the Confidential Information or reference thereto. In the event that Consultant is ordered to disclose Confidential Information pursuant to a judicial or governmental request or an order or in a judicial or governmental proceeding (“Required Disclosure”), Consultant shall: (i) immediately notify the Company; (ii) take reasonable steps to assist the Company in contesting such Required Disclosure or otherwise protecting the Company’s rights; and (iii) only disclose that portion of the Confidential Information specifically required to be disclosed pursuant to such Required Disclosure.
(b) Consultant-Restricted Information. Consultant agrees that during the term of this Agreement Consultant will not improperly use or disclose any proprietary or confidential information or trade secrets of any person or entity with whom Consultant has an agreement or duty to keep such information or secrets confidential.
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(c) Third-Party Information. Consultant recognizes that the Company has received and in the future will receive from third parties their confidential or proprietary information subject to a duty on the Company’s part to maintain the confidentiality of such information and to use it only for certain limited purposes. Consultant agrees at all times during the term of this Agreement and thereafter to hold such information in strict confidence, and not to use such information, except in connection with Consultant’s performance of the Services and as is consistent with the Company’s agreement with such third party, and not to disclose such information to any person or entity without written authorization.
(d) Survival. The provisions of this paragraph 5 shall survive the expiration or termination of this Agreement.
6. Ownership of Results.
(a) Assignment of Inventions. Consultant agrees that Consultant will promptly make full written disclosure to the Company, will hold in trust for the sole right and benefit of the Company, and hereby assigns, transfers, and conveys to the Company, or its designee, all of Consultant’s worldwide right, title, and interest in and to any and all inventions, original works of authorship, findings, conclusions, data, discoveries, developments, concepts, improvements, trade secrets, techniques, processes and know-how, whether or not patentable or registrable under copyright or similar laws, that Consultant may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, in the performance of the Services or that result, to any extent, from use of the Company’s premises or property (collectively, the “Inventions”), including any and all intellectual property rights inherent in the Inventions and appurtenant thereto including, without limitation, all patent rights, copyrights, trademarks, know-how and trade secrets (collectively, “Intellectual Property Rights”). Consultant further acknowledges and agrees that all original works of authorship that are made by Consultant (solely or jointly with others) in the performance of the Services and that are protectable by copyright are “works made for hire” as that term is defined in the United States Copyright Act. However, to the extent that any such work may not, by operation of any applicable law, be a work made for hire, Consultant hereby assigns, transfers, and conveys to the Company all of its worldwide right, title, and interest in and to such work, including all Intellectual Property Rights therein and appurtenant thereto.
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(b) Further Assurances. Upon the request and at the expense of the Company, Consultant shall execute and deliver any and all instruments and documents and take such other acts as may be necessary or desirable to document the assignment and transfer described in paragraph 6(a) or to enable the Company to secure its rights in the Inventions and any patents, trademarks, copyrights or other Intellectual Property Rights relating thereto in any and all jurisdictions, or to apply for, prosecute, and enforce patents, trademark registrations, copyrights or other Intellectual Property Rights in any and all jurisdictions with respect to any Inventions, or to obtain any extension, validation, reissue, continuance or renewal of any such Intellectual Property Rights. Without limiting the foregoing, Consultant shall disclose to the Company all pertinent information and data with respect thereto and shall execute all applications, specifications, oaths, and all other instruments that the Company shall deem necessary in order to apply for and obtain such rights and in order to assign and convey to the Company the sole and exclusive right, title, and interest in and to such Inventions, and any patents, copyrights, trademarks or other Intellectual Property Rights relating thereto. Consultant further agrees that Consultant’s obligation to execute or cause to be executed, when it is in Consultant’s power to do so, any such instruments or papers shall continue after the termination of this Agreement. If the Company is unable for any reason to secure Consultant’s signature to apply for or to pursue any application for any United States or foreign patent, trademark, copyright or other registration covering Inventions assigned to the Company, then Consultant hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as Consultant’s agent and attorney-in-fact to act for Consultant, and on Consultant’s behalf and stead to execute and file any such applications, and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent or trademark, copyright or other registrations thereon with the same legal force and effect as if executed by Consultant.
(c) Survival. The provisions of this paragraph 6 shall survive the expiration or earlier termination of this Agreement.
7. Termination. Notwithstanding the provisions of paragraph 2, the Company may terminate the term of this Agreement: (i) for any reason whatsoever upon ten (10) calendar days’ prior written notice to Consultant; or (ii) five (5) calendar days following written notice to Consultant that the Services are being performed in an unsatisfactory manner, if the Services remain unsatisfactory after such five (5) calendar day period. In the event of any termination of this Agreement, the Company shall be responsible for prompt payment of any portion of the compensation owed to Consultant under paragraph 3 for any Services rendered prior to the effective date of such termination. Within five (5) calendar days after any termination of this Agreement, Consultant shall deliver to the Company all work product resulting from the performance of the Services.
8. No Conflicting Agreements; Nonexclusive Engagement.
(a) Consultant represents that Consultant is not a party to any existing agreement that would prevent Consultant from entering into and performing this Agreement. Consultant will not enter into any other agreement that is in conflict with Consultant’s obligations under this Agreement. Subject to the foregoing, Consultant may from time to time act as a consultant to, perform professional services for, or enter into agreements similar to this Agreement with other persons or entities without the necessity of obtaining approval from the Company.
(b) The Company may from time to time: (i) engage other persons and entities to act as consultants to the Company and perform services for the Company, including services that are similar to the Services; and (ii) enter into agreements similar to this Agreement with other persons or entities, in all cases without the necessity of obtaining approval from Consultant.
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9. Return of Company Property. Promptly upon the expiration or earlier termination of this Agreement, and earlier if requested by the Company in writing at any time, Consultant shall, at Consultant’s election, either destroy or deliver to the Company (and will not keep in Consultant’s possession or deliver to anyone else) all Confidential Information of the Company and all devices, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, computer software, other documents or property, or reproductions of any aforementioned items developed by Consultant as part of or in connection with the Services or otherwise belonging to the Company. Consultant shall not remove any Company property from the Company’s premises without written authorization from the Company.
10. Solicitation of Employees. Consultant agrees that during the term of this Agreement and for the twelve (12) month period thereafter, Consultant shall not for any reason, either directly or indirectly, on Consultant’s own behalf or in the service or on behalf of others, solicit, recruit or attempt to persuade any person to terminate such person’s employment with the Company, whether or not such person is a full-time employee or whether or not such employment is pursuant to a written agreement or is at will. Notwithstanding the foregoing, Consultant shall not be precluded from hiring any person: (i) who responds to any general solicitation or advertisement; (ii) who contacts Consultant on his or her own initiative without any direct or indirect solicitation or encouragement from Consultant, other than any general solicitation or advertisement; (iii) whose employment with the Company is terminated by the Company; or (iv) with whom the Consultant has not had any contact in connection with performance of the Services.
11. Arbitration and Equitable Relief.
(a) Arbitration. Except as provided in paragraph 11(b), Consultant and the Company agree that any dispute or controversy arising out of or relating to any interpretation, construction, performance or breach of this Agreement shall be settled by arbitration to be held in New York, New York, before a single arbitrator and in accordance with the Commercial Arbitration Rules then in effect of the American Arbitration Association. Each party irrevocably and unconditionally consents to the jurisdiction of any such proceeding and waives any objection that it may have to personal jurisdiction or the laying of venue of any such proceeding. The parties will cooperate with each other in causing the arbitration to be held in as efficient and expeditious a manner as practicable. If the parties are unable to appoint a mutually acceptable arbitrator within thirty (30) calendar days after a party gives written notice to the other requesting resolution of a dispute in accordance with the provisions of this paragraph 11(a), the American Arbitration Association shall appoint the arbitrator in accordance with such Commercial Arbitration Rules. The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator shall be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator’s decision in any court having jurisdiction. The Company and Consultant shall each pay one-half of the costs and expenses of such arbitration, and each party shall separately pay the fees and expenses of its own counsel. Nothing herein shall prevent the parties from settling any dispute by mutual agreement at any time.
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(b) Equitable Remedies. Consultant agrees that it would be impossible or inadequate to measure and calculate the Company’s damages from any breach of the covenants set forth in paragraphs 5, 6, 9 and 10 of this Agreement. Accordingly, Consultant and the Company agree that if Consultant breaches or is accused of breaching any of such covenants, the Company will have available, in addition to any other right or remedy available, the right to seek an injunction from a court of competent jurisdiction restraining such breach or threatened breach and to order specific performance of any such provision of this Agreement, and Consultant will have available the right to seek declaratory relief from a court of competent jurisdiction regarding such alleged breach or threatened breach. Consultant further agrees that no bond or other security shall be required in obtaining such equitable relief and Consultant hereby consents to the issuance of such injunction and to the ordering of such specific performance.
12. Entire Agreement; Amendment and Assignment. This Agreement is the sole agreement between Consultant and the Company with respect to the Services to be performed hereunder and supersedes all prior agreements and understandings with respect thereto, whether oral or written. No modification to any provision of this Agreement shall be binding unless in writing and signed by both Consultant and the Company. No waiver of any rights under this Agreement will be effective unless in writing signed by the party to be charged. All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, executors, administrators, legal representatives, successors, and assigns of the parties hereto, except that the duties and responsibilities of Consultant hereunder are of a personal nature and shall not be assignable or delegable in whole or in part by Consultant.
13. Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of California, without giving effect to any conflict of laws provisions.
14. Notices. All notices and other communications required or permitted hereunder or necessary or convenient in connection herewith shall be in writing and shall be deemed to have been given when hand-delivered or mailed by registered or certified mail, as follows (provided that notice of change of address shall be deemed given only when received):
If to the Company, to:
Sevion Therapeutics, Inc.
4045 Sorrento Valley Blvd.
San Diego, CA 92121
Attention: Harlan W. Waksal, M.D., Chairman of the Board
If to Consultant, to Consultant’s address specified on the signature page hereto.
or to such other names or addresses as the Company or Consultant, as the case may be, shall designate by notice to the other entitled to receive notice in the manner specified in this paragraph.
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15. Counterparts. This Agreement shall become binding when any one or more counterparts hereof, individually or taken together, shall bear the signatures of Consultant and the Company. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.
16. Severability. If any provision of this Agreement or application thereof to anyone or under any circumstances is adjudicated to be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect any other provision or application of this Agreement that can be given effect without such invalid or unenforceable provision or application in any other jurisdiction.
17. Tax Identification Number. Consultant certifies that Consultant’s tax identification number is set forth on the signature page hereto. Consultant acknowledges that the Company will rely upon the foregoing certification in filing certain documents and instruments required by law in connection with this Agreement, including, without limitation, Form 1099 under the Internal Revenue Code of 1986, as amended, or any successor form.
[Signature Page Follows]
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IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have duly executed this Agreement as of the date first above written.
COMPANY: | ||
SEVION THERAPEUTICS, INC. | ||
By: | /s/ Harlan Waksal, M.D. | |
Name: | Harlan Waksal, M.D. | |
Title: | Chairman of the Board |
CONSULTANT: | ||
THE DAVID STEPHEN GROUP LLC | ||
By: | /s/ David Rector | |
(signature) | ||
Name: | David Rector | |
Title: | Principal | |
Address: | ||
Email: | ||
Phone: |
Tax Identification Number: |
[Signature Page To Consulting Agreement]
Exhibit 31.1
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, David Rector, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of Sevion Therapeutics, Inc.; |
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 registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and 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 registrant, 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) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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 registrant’s 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 registrant’s internal control over financial reporting. |
Date: February 17, 2015 | /s/ David Rector | |
David Rector | ||
Chief Executive Officer | ||
(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Joel Brooks, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of Sevion Therapeutics, Inc.; |
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 registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and 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 registrant, 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) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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 registrant’s 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 registrant’s internal control over financial reporting. |
Date: February 17, 2015 | /s/ Joel Brooks |
Joel Brooks | |
Chief Financial Officer, Secretary and | |
Treasurer | |
(Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Sevion Therapeutics, Inc. for the period ended December 31, 2014 as filed with the Securities and Exchange Commission on the date hereof, the undersigned, David Rector, President and Chief Executive Officer, hereby certifies, pursuant to 18 U.S.C. Section 1350, that:
(1) The Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of Sevion Therapeutics, Inc.
Dated: February 17, 2015 | /s/ David Rector * |
David Rector, Chief Executive Officer | |
(Principal Executive Officer) |
* A signed original of this written statement required by Section 906 has been provided to us and will be retained by us and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Sevion Therapeutics, Inc. for the period ended December 31, 2014 as filed with the Securities and Exchange Commission on the date hereof, the undersigned, Joel Brooks, Chief Financial Officer, Secretary and Treasurer, hereby certifies, pursuant to 18 U.S.C. Section 1350, that:
(1) The Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of Sevion Therapeutics, Inc.
Dated: February 17, 2015 | /s/ Joel Brooks * |
Joel Brooks | |
Chief Financial Officer, Secretary and | |
Treasurer | |
(Principal Financial and Accounting Officer) |
* A signed original of this written statement required by Section 906 has been provided to us and will be retained by us and furnished to the Securities and Exchange Commission or its staff upon request.
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