ORGANIZATION AND DESCRIPTION OF BUSINESS

9 Months Ended

Sep. 30, 2011

ORGANIZATION AND DESCRIPTION OF BUSINESS [Abstract]

ORGANIZATION AND DESCRIPTION OF BUSINESS

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

We are a biopharmaceutical Company involved in the development of an injectable collagenase for multiple indications. We have a development and license agreement (the “Auxilium Agreement”) with Auxilium Pharmaceuticals, Inc. (“Auxilium”) for injectable collagenase (which Auxilium has named XIAFLEX (collagenase clostridium histolyticum)) for clinical indications in Dupuytren's contracture, Peyronie's disease and frozen shoulder (adhesive capsulitis), and Auxilium has an option to acquire additional indications that we may pursue, including human and canine lipoma and cellulite.  Auxilium has an agreement with Pfizer, Inc. (“Pfizer”), pursuant to which Pfizer has the right to market XIAFLEX for Dupuytren's contracture and Peyronie's disease in 27 member countries of the European Union and 19 other European and Eurasian countries, and will do so under the registered trademark XIAPEX (collagenase clostridium histolyticum). In addition, Auxilium has an agreement with Asahi Kasei Pharma Corporation (“Asahi”) pursuant to which Asahi has the right to commercialize XIAFLEX for the treatment of Dupuytren's contracture and Peyronie's disease in Japan.

Until March 2011, we received, pursuant to a March 2006 agreement (the “DFB Agreement”) between the Company and DFB Biotech, Inc. (“DFB”), payments for certain technical assistance and certain transition services that we provided to DFB.  Under the DFB Agreement, we continue to receive earn out payments based on the sales of certain products.  Our right to receive earn out payments with respect to the marketed topical product sold to DFB expires in June 2013, but earn out payments for second generation collagenase products, if any, continue indefinitely.

Operational Highlights

On October 3, 2011 Auxilium Pharmaceuticals, Inc announced that the first patients had been dosed in the Company's phase IIIb trial of XIAFLEX® for the treatment of adult Dupuytren's contracture patients with multiple palpable cords. The study is expected to enroll approximately 60 patients at eight sites throughout the U.S. and Australia and patients will be monitored for 60 days following their last injection. It is estimated by SDI Health, LLC that up to 40% of annual Dupuytren's surgeries are performed to treat two or more cords concurrently.

The phase IIIb study is an open-label study that is designed to assess the safety and efficacy of concurrent administration of two injections of XIAFLEX into the same hand of subjects with at least two Dupuytren's contractures caused by palpable cords. Safety assessments, including immunogenicity testing, will be made during all study visits. Efficacy assessments will include measuring finger goniometry and range of motion of the treated joints on days 1, 8, 30, and 60, following the first cycle of two injections. Upon completion of the day 60 follow-up visit following the first treatment cycle, subjects who require additional treatment in the treated hand may receive XIAFLEX in other individual cords, up to a total of five total injections.

On August 31, 2011, we and Auxilium announced that we have dismissed all pending litigation between the Companies and announced plans to move XIAFLEX forward in the clinic for cellulite and human and canine lipoma as well as to collaborate on the initiation of further studies for XIAFLEX for additional indications. Through an amendment and restatement of the Companies' 2008 development and license agreement, the Companies have clarified the rights and responsibilities of the Joint Development Committee.

Auxilium has been granted the right to initiate studies for the treatment of edematous fibrosclerotic panniculopathy, more commonly known as cellulite, and expects to begin phase Ib clinical studies in early 2012. We will initiate studies for the treatment of human and canine lipomas and plan to initiate clinical studies for both human and canine lipomas shortly. Auxilium will continue to have the option to exclusively license these indications upon completion of our development work. Auxilium and us also plan to collaborate on identifying further indications for treatment with XIAFLEX.

Based on the terms of the amended agreement, Auxilium will pay us an opt-in fee at the time of completion by Auxilium of Stage I development of cellulite and will be responsible for all development costs associated with cellulite. Auxilium's opt-in rights remain unchanged with respect to the two lipoma indications. In addition to the opt-in fees, we will continue to be entitled to regulatory milestones, low double digit royalties and a markup of cost of goods on all indications.