8-K

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): March 17, 2005

Avanir Pharmaceuticals
__________________________________________
(Exact name of registrant as specified in its charter)

California	001-15803	33-0314804
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)
11388 Sorrento Valley Road, San Diego, California		92121
_________________________________ (Address of principal executive offices)		___________ (Zip Code)

Registrant’s telephone number, including area code: 858-622-5200

Not Applicable
______________________________________________
Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

On March 17, 2005, Avanir Pharmaceuticals (the "Company") held its 2005 Annual Meeting of Shareholders (the "Annual Meeting"). At the Annual Meeting, the shareholders of the Company approved the adoption of the Company's 2005 Equity Incentive Plan (the "Plan"). The full text of the Plan, and a summary of the Plan's material terms, is contained in the Company's definitive proxy statement on Schedule 14A, filed with the SEC on January 28, 2005 (the "Proxy Statement"). Attached as Exhibit 10.1 to this Form 8-K is the form of Stock Option Agreement for use pursuant to the Plan.

Pursuant to the terms of the Plan and immediately following the Annual Meeting, two newly elected non-employee directors (Paul G. Thomas and Dennis G. Podlesak) each received a one-time option grant to purchase 25,000 shares of Class A common stock. Each of the other non-employee directors who served on the Board for at least six months as of the Annual Meeting (Stephen G. Austin, Dennis J. Carlo, Ph.D., Charles A. M athews, Harold F. Oberkfell, Kenneth E. Olson and Jonathan T. Silverstein) was awarded an option to purchase 10,000 shares of Class A common stock. Additionally, Mr. Silverstein was awarded an option to purchase 25,000 shares of Class A common stock, which is the award customarily granted by the Company to newly elected directors, but that had not been previously awarded when he was first elected to the Board in September 2004. All option grants were awarded with an exercise price equal to the fair market value of the Class A common stock on the date of grant. The options awarded to the newly elected directors (including the option to purchase 25,000 shares awarded to Mr. Silverstein) vest over three years from the commencement of Board service, with one-third vesting on the first anniversary of his election to the Board, and then with respect to one-twelfth of the underlying shares quarterly thereafter. The other options awarded to incumbent directors were fully vested as of the date of grant.

On March 17, 2005, the Avanir Pharmaceuticals' Compensation Committee recommended, and the Board approved, a change in the annual retainer fee paid to the Chairman of the Board and other non-employee directors, as well as the reimbursement of reasonable out-of-pocket expenses incurred by non-employee directors in attending certain continuing education seminars for directors. A summary of the Board compensation arrangements is attached to this Form 8-K as Exhibit 10.2.

Also on March 17, 2005, the Compensation Committee recommended, and the Board approved, the payment of a discretionary performance-based cash bonus to the Company's President and Chief Executive Officer, Gerald J. Yakatan, Ph.D., in the amount of $102,000, a portion of which was paid in lieu of the retroactive base salary increase for Dr. Yakatan that was previously disclosed in the Proxy Statement. The bonus was paid for Dr. Yakatan's performance in the fiscal year ended September 30, 2004. The Compensation Committee previously aw arded discretionary performance-based bonuses to each of the Company's named executive officers. These bonuses were based on performance in fiscal 2004 and were paid in the following respective amounts:

Name Principal Position(s) Bonus Amount
J. David Hansen Senior Vice President, Corporate Development $20,000
Gregory P. Hanson, CMA Vice President and Chief Financial Officer $35,000
James E. Berg Vice President, Clinical Affairs and Product Development $35,000
Jagadish Sircar, Ph.D. Vice President, Drug Discovery $35,000

Item 8.01. Other Events.

On March 17, 2005, the Company issued a press release announcing the voting results of the proposals presented for shareholder approval at the Annual Meeting. A copy of this press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Also on March 17, 2005, the Board elected Charles A. Mathews as Chairman of the Board, to serve in such capacity at the pleasure of the Board.

Item 9.01. Financial Statements and Exhibits.

(c) Exhibits
10.1 Form of Stock Option Agreement for use with 2005 Equity Incentive Plan
10.2 Summary of Non-Employee Director Compensation
99.1 Press release, dated March 17, 2005

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Avanir Pharmaceuticals
March 23, 2005	By:	Gregory P. Hanson, CMA
		Name: Gregory P. Hanson, CMA
		Title: VP Finance & CFO

Exhibit Index

Exhibit No.	Description
10.1	Form of Stock Option Agreement
10.2	Summary of Board Compensation
99.1	Press Release, dated March 17, 2005

EX-10.1

Exhibit 10.1

Form of Stock Option Agreement

[AVANIR PHARMACEUTICALS LETTERHEAD]

[Date]
[Name]
[Address]
Re:


Grant of [Incentive][Non-statutory] Stock Option

Option Shares:	Grant Date:
Price per share:	Vesting Base Date:
	Fully-Vested Date:
Option control no.:	Expiration Date:

Dear [Name]:

I am pleased to confirm that the Company has granted you an option to purchase shares of our Class A common stock under the Avanir Pharmaceuticals 2005 Equity Incentive Plan (the “Plan”). To accept your stock option, please sign the enclosed copy of this letter and return it to [     ].

General terms

Your option is intended to be [an incentive][a non-statutory] option. The basic terms of your option grant are identified in the information block at the top of this offer letter, but other important terms and conditions are described in the Plan. We encourage you to carefully review the Plan, a copy of which is enclosed.

Purchase and payment

Subject to the Plan, your option vests (becomes exercisable) [insert vesting schedule], calculated to the closest whole share, so that all shares will become purchasable on the Fully-Vested Date shown above.

If you decide to purchase shares under this option, you will be required to submit a completed exercise agreement on a form approved by the Company, together with payment for the shares. You may pay for the shares (plus any associated withholding taxes) using cash, a check, a wire transfer or any other form of payment set forth in the Plan and permitted by the Administrator at the time you wish to exercise. Shares available under this option must be purchased, if at all, no later than the Expiration Date.

[Specify any other special provisions.]

We value your efforts and look forward to your continued contribution.

Sincerely,

[name]

[title]

I accept this option and agree to the terms of this offer letter and the Plan.

     
Optionee signature      , 200_
Date

Avanir Pharmaceuticals

Avanir Pharmaceuticals 2005 Equity Incentive Plan

OPTION EXERCISE
AND
STOCK PURCHASE AGREEMENT

Instructions

1. Read the entire Agreement carefully. This is a legally binding agreement between you and the Company.

2. Items A – C: insert your name and identifying information.

3. Items D-G: identify the stock option you want to exercise.

4. Item H: identify how many shares you want to purchase.

5. Item I: Calculate the Option Price by multiplying the share number in Item H by the purchase price per share in Item E.

6. Item J: Confirm with the Company whether a tax withholding amount should be entered in this space.

7. Item K: Add the Option Price in Item I to the tax withholding amount, if any, in Item J. Insert the resulting Purchase Price in Item K.

8. Item L: Identify your approved method of payment for the Shares.

9. Signatures: Sign the Agreement in the space provided on page 10. Important note: If you are married, your spouse also is required to sign.

10. Submit your fully completed and signed Agreement, together with payment of the Purchase Price, to [     ].

R

Avanir Pharmaceuticals
2005 Equity Incentive Plan

OPTION EXERCISE AND
STOCK PURCHASE AGREEMENT

Date:_____________

Optionholder / Purchaser

(A) Name:
(B) Employee number:
(C) Residence address:

Stock option
(D) Option Shares (total) subject to this Option:
(E) Purchase Price per Share:
(F) Grant Date:
(G) Option Control Number:

Option shares purchased under this Agreement

(H) Shares purchased:

(I) Option Price [ (E) x (H) ]:

(J) Tax withholding (if applicable):

(to be calculated by Company)

(K) Purchase Price [ (I) + (J) ]:

Payment method (select one or more)

(L) Cash or check (enclosed):

Wire transfer:

(Identify sending bank and wire transfer number)

“Cashless exercise”:

(Identify approved NASD broker-dealer and attach agreement)

Other:

(Attach Company approval for other form of payment)

1. Exercise of Option.

1.1. I am exercising my right to purchase the number of shares of Class A common stock of Avanir Pharmaceuticals indicated on Line (H) by exercising the option identified on Lines (D) through (G). The per share purchase price of the option is indicated on Line (E) and the aggregate purchase price of the shares I am purchasing is indicated on Line (I). I acknowledge that I may be responsible for tax withholding on the shares, in which case the aggregate purchase price would be as indicated on Line (K) (which the Company will complete). The shares that I am purchasing by exercising my option are referred to in this agreement as the “Shares”. The total purchase price of the shares is referred to in this agreement as the “Purchase Price”. I acknowledge that the option I am exercising was issued under and is subject to the rules of the 2005 Equity Incentive Plan of Avanir Pharmaceuticals (the “Plan”).

1.2. With this signed agreement, I have submitted either (a) cash or a check for the amount of the Purchase Price or (b) irrevocable wire transfer instructions for the Purchase Price, or (c) a certificate or certificates (or designation of such certificates if permitted by the Plan) representing shares of Avanir Pharmaceuticals Class A common stock that I have owned for at least six months if the shares were acquired by me through exercise of an option, and that have a fair market value (as determined in accordance with the Plan) as of this date equal to the Purchase Price. I recognize that other forms of payment may be permitted by the written approval of the Administrator.

2. Representations

2.1. Taxes. The Company has made no warranties or representations to me with respect to the income tax consequences of the transactions contemplated by this Agreement and I am not relying on the Company or its representatives for an assessment of such tax consequences. I have had adequate opportunity to consult with my personal tax advisor prior to submitting this Agreement to the Company.

2.2. Repurchase. If the Shares are subject to a right of repurchase in favor of the Company at their original purchase price when I cease to provide services for the Company, or if I could be subject to suit under Section 16(b) of the Securities Exchange Act of 1934 with respect to the purchase of the Shares, I will execute and deliver to the Company a copy of the Acknowledgment and Statement of Decision Regarding Election Pursuant to Section 83(b) of the Internal Revenue Code (the “Acknowledgment”) attached as Exhibit A. I acknowledge that I am primarily responsible for filing any Section 83(b) elections although the Company will, as an accommodation to me and without assuming any liability, file a duplicate election if I promptly provide an executed form with the Acknowledgement and Statement of Decision Regarding Section 83(b). I will consult with my own tax advisor to determine if there is a comparable election to file in the state of where I reside and whether filing a federal or state Section 83(b) election is desirable under my circumstances.

2.3. Disqualifying Dispositions of Incentive Stock Option Stock. I acknowledge that if the Stock acquired by exercise of an Incentive Stock Option (as defined in Section 2.1 of the Plan) is disposed of within two years after the Grant Date (as defined in the Option Grant) or within one year after such exercise, immediately prior to the disposition I will promptly notify the Company in writing of the date and terms of the disposition and will provide such other information regarding the disposition as the Company may reasonably require.

3. Miscellaneous Provisions.

3.1. Successors and Assigns. Subject to the limitations set forth in this Agreement, the benefits and obligations of this Agreement will be binding on the executors, administrators, heirs, legal representatives, successors, and assigns of the parties.

3.2. Costs. I will repay the Company for all costs and damages, including incidental and consequential damages and attorney’s fees, resulting from any transfer of the Shares which is not in compliance with the provisions of this Agreement.

3.3. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of California excluding those laws that direct the application of the laws of another jurisdiction.

3.4. Notices. All notices and other communications under this Agreement shall be in writing. Unless and until I am notified in writing to the contrary, all notices, communications, and documents directed to the Company and related to the Agreement, if not delivered by hand, shall be mailed, addressed to:

Avanir Pharmaceuticals
Attention: [Insert name]

at the Company’s principal office location.

3.5. Communications. Unless and until I notify the Company in writing to the contrary, all notices, communications, and documents intended for me and related to this Agreement, if not delivered by hand, shall be mailed to my last known address as shown on the Company’s books. Notices and communications shall be mailed by first class mail, postage prepaid; documents shall be mailed by registered mail, return receipt requested, postage prepaid. All mailings and deliveries related to this Agreement shall be deemed received when actually received, if by hand delivery, and three business days after mailing, if by mail.

3.6. Arbitration. All disputes arising out of this Agreement will be finally settled by arbitration in accordance with the then existing rules of the American Arbitration Association. The arbitration will be conducted in the county of San Diego, California. Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction over it; provided that nothing in this Agreement shall prevent a party from applying to a court of competent jurisdiction to obtain temporary relief pending resolution of the dispute through arbitration. The parties agree that service of any notices in the course of such arbitration at their respective addresses as provided for in this agreement shall be valid and sufficient.

3.7. This is not an employment contract. This Agreement is not to be interpreted as a guarantee or contract of continuing employment.

AVANIR PHARMACEUTICALS

By:      

Title:      

I hereby agree to be bound by all of the terms and conditions of this Agreement and the Plan.

Purchaser’s signature

Printed name

The purchaser’s spouse indicates by the execution of this Agreement his or her consent to be bound by the terms herein as to his or her interests, whether as community property or otherwise, if any, in the Shares hereby purchased.

Purchaser’s Spouse

Exhibit 10.2
Summary of Board Compensation

The following is a summary of the compensation for the non-employee directors serving on the Avanir Pharmaceuticals Board of Directors.

Annual Retainer Fee:	Dollars ($)
Chairman of the Board	$	35,000
All other non-employee directors	$	25,000
Committee Meeting Fees:	Dollars ($)
Audit Committee Chairman	$	2,000
All other Audit Committee members	$	1,500
Compensation Committee Chairman	$	1,250
All other Compensation Committee members	$	750
Corporate Governance Committee Chairman	$	1,250
All other Corporate Governance Committee members	$	750
Executive Committee Chairman	$	1,250
All other Executive Committee members	$	750
	Shares underlying
Equity-based compensation	options (#)
Initial option grant to newly elected directors *		25,000
Annual option grant to directors who have served at least 6 months **		10,000

* Option to purchase shares of Class A common stock granted with an exercise price equal to the fair market value of the common stock on the date of grant. Option vests (becomes exercisable) with respect to one-third of the underlying shares on the first anniversary of Board service and then with respect to one-twelfth of the underlying shares quarterly thereafter.

** Option to purchase shares of Class A common stock granted with an exercise price equal to the fair market value of the common stock on the date of grant. Option is fully vested (exercisable) immediately on the date of grant.

Additionally, non-employee directors are reimbursed for their reasonable out-of-pocket expenses incurred in connection with attending Board and committee meetings and in attending continuing education seminars, to the extent that attendance is required by the Board or the committee(s) on which that director serves.

Exhibit 99.1

[AVANIR LOGO]

NEWS RELEASE

FOR IMMEDIATE RELEASE
Contact:	At Avanir Pharmaceuticals:
	Patrice Saxon, Investor Relations 858-622-5202 psaxon@avanir.com

AVANIR PHARMACEUTICALS HOLDS ANNUAL MEETING OF SHAREHOLDERS AT COMPANY HEADQUARTERS

All Management Proposals Approved

San Diego, March 17, 2005 – Avanir Pharmaceuticals (AMEX:AVN) announced today that it received shareholder approval for all four proposals submitted to shareholders at its 2005 annual meeting held at the Company’s conference center in San Diego.

Dennis Podlesak, President and Chief Executive Officer of Peninsula Pharmaceuticals, and Paul G. Thomas, Director, President and Chief Executive Officer of LifeCell Corporation, were elected as new members of Avanir’s Board of Directors. They will join the Board as Class I Directors to serve a three-year term along with Stephen G. Austin, CPA, who was re-elected and who serves as the Company’s “audit committee financial expert”. In addition to the three Directors elected at this meeting, the Directors continuing in office are Dennis J. Carlo, Ph.D., Charles A. Mathews, Harold F. Oberkfell, Kenneth E. Olson, Jonathan Silverstein and Gerald J. Yakatan, Ph.D. All of the directors, with the exception of Gerald Yakatan, are independent outside directors.

In addition to electing the Directors at the Company’s 15^th annual meeting, the shareholders also approved the 2005 Equity Incentive Plan and renewed the authority of the Board of Directors to implement a reverse stock split within a prescribed range over the next twelve months. The shareholders also ratified the selection of Deloitte & Touche, LLP as the company’s independent accounting firm for the fiscal year ending September 30, 2005.

Gerald Yakatan the Company’s President and Chief Executive Officer, updated shareholders on the Company’s progress towards goals and provided information on pre-launch activities for Neurodex™, Avanir‘s late-stage product candidate for the treatment of pseudobulbar affect (PBA). Dr. Yakatan also recognized the contributions of James B. Glavin and Susan Golding for their years of service on the occasion of their retirement from Avanir’s Board of Directors.

Avanir Pharmaceuticals is a drug discovery and development company focused on the development of treatments for chronic diseases. The Company’s lead product candidate, Neurodex, successfully completed its second Phase III clinical trial for PBA in 2004 and Avanir began submission of a rolling new drug application to the U.S. Food and Drug Administration (FDA) in December 2004 for that indication. PBA, also known as emotional lability, is a condition that affects approximately 1 million patients with neurodegenerative diseases such as ALS or Lou Gehrig’s disease, multiple sclerosis (MS), Alzheimers, stroke, etc. Neurodex has also shown promise in treating neuropathic pain. A Special Protocol Assessment from the FDA was obtained for an upcoming Phase III clinical trial for this indication. An internally developed small molecule, AVP-13358, is in a Phase I clinical development for the treatment of allergy and asthma. The Company’s pre-clinical research is focused on small molecule drug candidates for the treatment of atherosclerosis and inflammation. Using its proprietary Xenerex™ technology, Avanir also develops human monoclonal antibodies for infectious diseases and other therapeutic applications. The Company’s first commercialized product, AbrevaÒ, is marketed in North America by GlaxoSmithKline and is the leading over-the-counter product for the treatment of cold sores. Further information about Avanir can be found at www.avanir.com.

# # # #

The information contained in this press release, including any forward-looking statements contained herein, should be reviewed in conjunction with the Company’s most recent Annual Report on Form 10-K and quarterly report on Form 10-Q and other publicly available information regarding the Company. Copies of such information are available from the Company upon request. Such publicly available information sets forth many risks and uncertainties related to the Company’s business and technology. Forward-looking statements often contain such words like “estimate,” “anticipate,” “believe,” “plan” or “expect”. Avanir disclaims any intent or obligation to update these forward-looking statements.