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0000950123-09-028920.txt : 20090803
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20090803161941
ACCESSION NUMBER: 0000950123-09-028920
CONFORMED SUBMISSION TYPE: 8-K
PUBLIC DOCUMENT COUNT: 4
CONFORMED PERIOD OF REPORT: 20090803
ITEM INFORMATION: Other Events
ITEM INFORMATION: Financial Statements and Exhibits
FILED AS OF DATE: 20090803
DATE AS OF CHANGE: 20090803
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: ARIAD PHARMACEUTICALS INC
CENTRAL INDEX KEY: 0000884731
STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836]
IRS NUMBER: 223106987
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 8-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-21696
FILM NUMBER: 09980448
BUSINESS ADDRESS:
STREET 1: 26 LANDSDOWNE ST
CITY: CAMBRIDGE
STATE: MA
ZIP: 02139
BUSINESS PHONE: 6174940400
MAIL ADDRESS:
STREET 1: 26 LANDSDOWNE
CITY: CAMBRIDGE
STATE: MA
ZIP: 02139
8-K
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b76544e8vk.htm
FORM 8-K
e8vk
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): August 3, 2009
ARIAD Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)
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Delaware
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0-21696
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22-3106987 |
(State or other jurisdiction
of incorporation)
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(Commission
File Number)
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(I.R.S. Employer
Identification No.) |
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26 Landsdowne Street, Cambridge, Massachusetts
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02139 |
(Address of principal executive offices)
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(Zip Code) |
Registrants telephone number, including area code: (617) 494-0400
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 (see General Instruction
A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c)) |
ITEM 8.01 Other Events.
On August 3, 2009, the Company issued a press release announcing its intention to offer,
subject to market and other conditions, 17,000,000 shares of its common stock in an underwritten
public offering. The Company expects to grant the underwriters a 30 day option to purchase up to
2,550,000 additional shares to cover over-allotments, if any. Oppenheimer & Co. Inc. is acting as
sole bookrunning manager and Lazard Capital Markets LLC is acting as co-manager for the offering. A
copy of the press release dated August 3, 2009 is being filed herewith as Exhibit 99.1, and
the information contained therein is incorporated by reference into this Current Report on Form
8-K.
In connection with the proposed offering, the Company intends to file a prospectus supplement that
will contain recent developments and updated risk factors relating to the Companys business, which
recent developments and updated risk factors are being filed herewith as Exhibit 99.2 and
incorporated by reference into this Current Report on Form 8-K.
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ITEM 9.01 Financial Statements and Exhibits.
(d) Exhibits.
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Exhibit |
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Description |
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99.1
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Press Release dated August 3, 2009 regarding the Companys intention to commence an
underwritten public offering. |
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99.2
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Recent Developments and Updated Risk Factors relating to the Companys Business. |
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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.
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ARIAD Pharmaceuticals, Inc.
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By: |
/s/ Edward M. Fitzgerald
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Edward M. Fitzgerald |
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Senior Vice President, Chief Financial Officer |
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Date: August 3, 2009
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EX-99.1
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b76544exv99w1.htm
EX-99.1
exv99w1
Exhibit 99.1
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News Release |
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FOR IMMEDIATE RELEASE
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CONTACT: Maria E. Cantor
(617) 621-2208
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ARIAD ANNOUNCES PROPOSED PUBLIC OFFERING OF COMMON STOCK
Cambridge, MA, August 3, 2009 ARIAD Pharmaceuticals, Inc. (NASDAQ: ARIA) announced today that it
intends to offer, subject to market and other conditions, 17,000,000 shares of its common stock in
an underwritten public offering. ARIAD expects to grant the underwriters a thirty-day option to
purchase up to 2,550,000 additional shares to cover over-allotments, if any.
Harvey J. Berger, M.D., chairman and chief executive officer of ARIAD, plans to purchase between $3
million and $5 million of stock in the offering.
Oppenheimer & Co. Inc. is acting as the sole bookrunner and lead manager for the offering. Lazard
Capital Markets, LLC is acting as the co-manager of the offering.
The securities described above are being offered by ARIAD pursuant to a registration statement
previously filed and declared effective by the Securities and Exchange Commission. This press
release does not constitute an offer to sell or a solicitation of an offer to buy the securities in
this offering. The offering may be made only by means of a prospectus, copies of which may be
obtained, when available, from Oppenheimer & Co. Inc., Attention: Syndicate Prospectus Department,
300 Madison Avenue, 5th Floor, New York, NY 10017, by telephone at (212) 667-8563, by
facsimile at (212) 667-6141 or via e-mail at EquityProspectus@opco.com
This press release includes forward-looking statements. For these statements, ARIAD claims the
protection of the safe harbor for forward-looking statements provided by the Private Securities
Litigation Reform Act of 1995. It should be noted that there are risks and uncertainties related to
the public offering. A review of these risks can be found in ARIADs Annual Report on Form 10-K for
the fiscal year ended December 31, 2008, the prospectus to be filed with the Securities and
Exchange Commission in connection with the offering and other reports and documents filed with the
Securities and Exchange Commission.
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EX-99.2
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b76544exv99w2.htm
EX-99.2
exv99w2
Exhibit 99.2
ARIAD PHARMACEUTICALS, INC.
AUGUST 3, 2009
RECENT DEVELOPMENTS
Ridaforolimus
On July 30, 2009, we announced that, based on current enrollment rates, the global, Phase 3
SUCCEED trial of oral ridaforolimus, in patients with metastatic soft tissue and bone sarcomas
remains on track for full patient enrollment by year-end 2009. The 650-patient SUCCEED trial is
now over two-thirds enrolled with approximately 450 patients in the study. One-third of the
disease progression events in the trial occurred by the end of the second quarter of 2009, and we
expect to receive the report on the first interim analysis of efficacy from the independent Data
Safety Monitoring Board, or DSMB, in September 2009. In addition, we expect that two-thirds of the
progression events will occur by approximately year-end 2009 and that we will receive the report on
the second interim analysis from the DSMB by the end of the first quarter of 2010.
In addition, on July 28, 2009, we announced preliminary findings, summarized below, from two
ongoing clinical trials evaluating ridaforolimus in combination with trastuzumab
(Herceptin®) in patients with resistant, metastatic breast cancer and with bevacizumab
(Avastin®) in heavily pretreated patients with refractory, metastatic solid tumors.
Phase 2 Clinical Trial of Ridaforolimus Combined with Trastuzumab in Metastatic Breast Cancer
The trial started one year ago and is expected to enroll 33 patients. All patients enrolled
in the trial had documented disease progression on trastuzumab alone or in combination with other
agents. Study treatment consists of oral ridaforolimus and trastuzumab at standard doses and
intervals. None of the patients have received chemotherapy during the trial. The primary objective
of the trial is to estimate the objective response rate, or ORR, defined by Response Evaluation
Criteria in Solid Tumors, or RECIST, criteria (complete or partial responses). According to the
study protocol, the trial will be considered positive if at least a 15 percent ORR is achieved
(five objective responses out of a total of 33 patients enrolled). Clinical-benefit response, or
CBR, (objective responses and durable stable disease) will also be assessed.
Preliminary findings to date show:
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Of 28 refractory patients enrolled thus far, 15 patients currently remain on study
without disease progression, either with objective evidence of control of their disease
or awaiting further assessment; |
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At least five partial responses have been observed thus far, which would meet the
trials pre-specified criterion for a positive outcome, pending independent review of
radiologic findings; |
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The preliminary CBR rate in these patients with progressive, refractory disease is
35 percent; and |
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No new or unexpected safety signals due to the combination regimen were observed in
the trial. |
Phase 1 Clinical Trial of Ridaforolimus Combined with Bevacizumab in Solid Tumors
This Phase 1 clinical trial is designed to test the hypothesis that the addition of
ridaforolimus to bevacizumab in heavily pretreated patients with metastatic solid tumors who have
become resistant to bevacizumab could be achieved safely and would result in evidence of clinical
benefit. All patients had refractory, extensively pre-treated metastatic solid tumors such as
ovarian, pancreatic, colorectal, head and neck, and uterine cancers. Prior to enrollment in the
current trial, all patients had received multiple regimens of chemotherapy and targeted agents, as
appropriate for their tumor type. The primary endpoint of the study is to determine whether the
standard dose of oral ridaforolimus could be used safely in combination with each of the two
approved bevacizumab dosing
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regimens. None of the patients have received chemotherapy during the trial. Patient enrollment in
this trial is now complete. Seventeen patients have been enrolled and treated in this trial to
date, and all are included in the preliminary analysis. Clinical anti-tumor activity was assessed
using RECIST criteria.
Preliminary results include:
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Of the 17 patients enrolled in the trial, five patients currently remain on study
without disease progression, evidence of the control of their disease; |
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The preliminary CBR rate in these patients with progressive, refractory disease is
35 percent; |
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The longest duration of stable disease currently observed in the trial is 10 cycles
of therapy in a patient with advanced pancreatic cancer; |
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The combination of oral ridaforolimus and bevacizumab at standard doses was well
tolerated. No dose-limiting toxicity of the combination was seen; and |
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No new or unexpected safety signals due to the combination regimen were observed in
the trial. |
The above statements relating to the timing of the enrollment in and interim analyses of the
SUCCEED trial, as well as the enrollment in, preliminary clinical data from and potential clinical
or commercial implications of the preliminary results of the other clinical trials of
ridaforolimus, are subject to numerous risks and uncertainties common to our business, including
the risks identified in Risk Factors set forth below. Decisions to proceed with any additional
clinical trials of ridaforolimus based on the preliminary or final results of these Phase 2 and
Phase 1 clinical trials, and, therefore, the receipt of additional milestone payments, are subject
to the governance provisions relating to global development in our collaboration agreement with
Merck. At this time, the joint development committee of the partnership has not reached a decision as to
the optimal registration strategy for ridaforolimus in patients with breast cancer. Merck has advised us that it does not intend to recommend that the partners conduct
a Phase 3 clinical trial of ridaforolimus in combination with trastuzumab in patients with
metastatic breast cancer based on Mercks evaluation of the expected future market environment.
AP24534
On July 27, 2009, we announced preliminary clinical data from an ongoing Phase 1 clinical
trial of AP24534 in patients with advanced hematological cancers. The preliminary trial results
provide initial clinical evidence of hematologic, cytogenetic and molecular anti-cancer activity of
AP24534 in heavily pretreated patients with resistant and refractory chronic myeloid leukemia, or
CML and Philadelphia chromosome positive acute lymphoblastic leukemia, or Ph+ ALL, including those
with the T315I mutant variant of the target protein, Bcr-Abl.
Thirty-two patients have been enrolled to date in this trial in six dosing groups at five
medical centers in the United States; 28 of the patients have resistant and refractory CML or Ph +
ALL. All patients have previously been treated with the currently available first and
second-generation targeted therapies for CML and in most instances, other investigational agents as
well. The study commenced patient enrollment in the second quarter of 2008 and will continue
enrolling patients until approximately 50 patients have been enrolled. Dose-escalation will
continue until dose-limiting toxicity is observed.
Preliminary findings to date include:
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In patients with a variety of Bcr-Abl mutations, hematologic responses, cytogenetic
responses, and molecular responses have been observed with AP24534 treatment.
Hematologic and cytogenetic responses have also been seen in patients with the T315I
mutation, which is resistant to all approved Bcr-Abl inhibitors. Collectively, these
data suggest a significant degree of anti-tumor activity of AP24534 in highly resistant
CML patients. |
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In addition, of 23 CML patients in the four highest dosing groups, 19 patients
remain on study without disease progression, evidence of control of their disease.
Most importantly, of 12 CML patients with the T315I mutation, nine patients remain on
study without disease progression, providing further evidence of control of their
disease. |
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For many of the patients in the highest dosing groups, the duration of treatment
with AP24534 has been relatively short. In these patients, it is still early for
complete-response assessment. Even in spite of this, evidence of significant
improvement in multiple blood-cell lineages has been observed. |
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Preliminary safety assessment shows that AP24534 is well tolerated without
dose-limiting toxicity at doses studied to date. The most common drug-related adverse
events have been thrombocytopenia and neutropenia, which the Company believes reflects
the underlying disease and the extensive pre-treatment of the patients in the trial. |
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To date, pharmacokinetic data indicate that blood levels predicted preclinically to
be associated with complete inhibition of Bcr-Abl mutations have been surpassed.
Pharmacodynamic data show evidence that AP24534 is acting mechanistically as designed. |
The above statements relating to the preliminary clinical data for AP24534, the continued
enrollment in the Phase 1 clinical trial, and the potential clinical or commercial implications of
these preliminary results and related matters are subject to risks and uncertainties common to our
business, including the risks identified in Risk Factors set forth below.
Litigation
As disclosed in Part II, Item 1 of our Quarterly Report on Form 10-Q for the quarter ended
March 31, 2009, we have been engaged in litigation with Eli Lilly and Company, or Lilly, and Amgen,
Inc. and certain affiliated entities, or Amgen, regarding claims in our U.S. Patent No. 6,410,516,
as well as a reexamination proceeding before the PTO regarding aspects of patentability of this
patent. Other than as noted below, no other litigation activity is occurring in the Lilly and
Amgen matters.
In the Lilly litigation, we filed a petition on June 2, 2009 requesting en banc rehearing of
this matter before the full Court of Appeals for the Federal Circuit, or CAFC, and Lilly filed an
opposition to our petition on July 2, 2009. A decision on the petition is pending. In the Amgen
litigation, on June 1, 2009, the CAFC affirmed the district courts claim interpretation and
summary judgment of non-infringement with respect to etanercept (Enbrel®), and we did not file a
petition for rehearing in this case. In the PTO reexamination, we have appealed the final office
action of the USPTO issued on October 16, 2008 to the Patent Office Board of Appeals and
Interferences and filed our appeal brief on May 18, 2009.
Sources and Uses of Funds
In May 2009, we announced that approximately $27 million in milestone payments related to the
start of Phase 3 clinical trials of ridaforolimus originally expected to be received in the fourth
quarter of 2009 under the ridaforolimus collaboration agreement with Merck would likely be delayed
until the first or second quarter of 2010. We also indicated that we would be evaluating measures
to reduce spending in 2009 on activities not critical to the achievement of our key corporate
objectives, as well as actively pursuing various partnering opportunities in order to mitigate the
impact of the change in the anticipated timing of receipt of the ridaforolimus milestone payments.
Subsequent to that announcement, we have implemented measures to reduce our previously projected
operating expenses by approximately $7.5 million during the second half of 2009. As part of our
annual review of the global development plan with Merck, we are currently working together to
revise the clinical trial program in the global development plan for ridaforolimus in
cancer indications beyond sarcomas. At this time, the joint development committee of the partnership has not reached a decision as to
the optimal registration strategy for ridaforolimus in patients with breast cancer. Merck has
advised us that it does not intend to recommend that the partners conduct
a Phase 3 clinical trial of ridaforolimus in combination with trastuzumab in patients with
metastatic breast cancer based on Mercks evaluation of the
expected future market environment. As a result, we currently expect
that milestones related
to the initiation of the Phase 3 trials discussed above will to be delayed
beyond the first half of 2010, and the timing of receipt of any Phase 3 related milestones and the future cost of the
ridaforolimus program will depend upon revisions to the global development plan currently under
discussion with Merck. We have also
continued to evaluate additional potential sources of funding and various operating scenarios with
the goal of continuing to advance our key corporate objectives to the maximum extent possible.
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We are undertaking the common stock offering described in the prospectus supplement we will
file with the Securities and Exchange Commission in order to provide us with additional funding to
offset the impact of the delay in the clinical milestones that we had expected to receive in 2009
or the first half of 2010. We believe that there are potential sources of funding under our
collaboration with Merck and other business development opportunities, which we are actively pursuing. While there can be no assurance that any or all of these nearer-term
potential sources of funding will become available in 2009 or 2010, or at all, if we are able to
secure sufficient funds for our operations through 2010 and are successful in obtaining FDA
approval of ridaforolimus in sarcomas in late 2010 or early 2011, we will begin
generating revenues from ridaforolimus sales and also expect to have access to a $200 million funding
facility from Merck to fund development costs under our collaboration agreement with Merck.
These nearer-term potential sources of funding include the following:
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Upfront and milestone payments under partnering and licensing transactions. Based
on recently announced preliminary results from our ongoing Phase 1 clinical trial of
our second product candidate, AP24534, we believe that there is significant potential
for us to enter into a partnership agreement related to the development of AP24534
providing a substantial upfront payment. We believe that the potential for such a
collaboration could be further enhanced by the possibility that the data from the Phase
1 clinical trial may enable us to proceed directly to a pivotal registration trial of
AP24534 in certain patients with chronic myeloid leukemia, or CML, and Ph+ ALL. We
also are pursuing potential partnering of AP26113 and the licensing or sale of our
ARGENT technology for research and laboratory applications. |
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Milestone payments under the Merck collaboration. The Merck collaboration provides
for payments to us totaling up to $652 million upon the achievement of specified
milestones related to the development and commercialization of ridaforolimus in up to
five cancer indications. These include up to $40 million upon the initiation of Phase
2 clinical trials (all of which has been earned and received to date), $88 million upon
the initiation of Phase 3 clinical trials (of which $13.5 million has been earned and
received to date), up to $324 million upon regulatory filings and regulatory approvals
in various territories, and up to $200 million upon achievement of specified sales
thresholds. Based on the current status of enrollment and disease progression events
in the Phase 3 SUCCEED trial of ridaforolimus,as well as the statistical power and
design of the trial, we believe that there is a reasonable possibility that the
available clinical data at the time of the second interim analysis of efficacy by the
DSMB would be sufficient to demonstrate a statistically significant difference in the
primary endpoint of the trial, progression free survival, when comparing the
ridaforolimus and placebo treated patients. We believe that such an outcome would
enable us to submit an NDA to the FDA in mid-2010 and allow for the possibility of FDA
approval of ridaforolimus by the end of 2010 or early 2011. The acceptance by the FDA
of the submission of the NDA and subsequent FDA approval of ridaforolimus would each
trigger a $30 million milestone payment to us under the Merck collaboration.
Subsequent regulatory approvals of ridaforolimus for use in sarcomas in Europe and
Japan would also trigger milestone payments to us by Merck. If the results
from the outcome of the second interim analysis of our ongoing SUCCEED trial
demonstrate that the primary endpoint has been achieved, we believe that there is a reasonable likelihood that
we will receive at least $30 million in regulatory milestone payments from Merck in the
second half of 2010. |
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Costs and funding of global development plan. As part of our annual review of the
global development plan with Merck, the parties are currently working together to
revise the clinical trial program in the global development plan for ridaforolimus in
potential cancer indications beyond sarcomas. These discussions involve scientific, medical,
commercial and financial input from the partners. We anticipate that
these discussions will result in an
update to the existing global development plan that defines the scope, timing and costs
of ongoing development. In connection with any revision to the
global development plan, we may also consider revisions of the cost sharing and funding
provisions of the collaboration.
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including which Phase 3 clinical trials will be pursued and when they will likely be
initiated, and the expected timing and amounts of related milestone
payments. In connection with any revision to the global development plan, we may also consider revisions of
the cost sharing and funding provisions of the collaboration.
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While none of the foregoing sources or timing of funding is assured, we believe that the
number and variety of potential sources of funding under our collaboration agreement with Merck and
other business development opportunities increases the likelihood that we will
receive additional payments to help fund our operations. We will
continue to evaluate and pursue, as appropriate, other potential sources of capital to fund our operations.
Each of these potential sources of funding is subject to numerous risks and uncertainties, and
there is no assurance that such funding will become available in 2009 or 2010, or at all, as
discussed further in Risk Factors set forth below under the heading Risks Related to Our
Business Insufficient funding may jeopardize our research and development programs and may
require us to reduce our operations or prevent commercialization of our products and technologies.
There can be no assurance that we will receive any of such payments in the timeframes we have
identified, or at all, and if we cannot secure adequate funding from these sources, we may be
required, as discussed further in Risk Factors below under the heading describing risks relating to
insufficient funding, to reduce our operations, delay, scale back, eliminate or terminate clinical
trials for one or more of our research and development programs, or enter into licenses
or other arrangements with third parties on terms that may be unfavorable
to us, or to pursue other types of financings.
Unless we were able to obtain access to additional funds during the remainder of 2009,
without the net proceeds of this offering we would be required to scale back our
operations over the remainder of 2009, which would have a material adverse effect on
our business. Moreover, if we are not successful in our efforts to secure such
funding or reduce spending further to mitigate the impact of the delay in the expected milestone
payments from Merck, our cash, cash equivalents and marketable securities after giving effect to
the net proceeds of the common stock offering may not be sufficient to fund operations through at
least the next twelve months.
RISK FACTORS
Investing in our common stock involves a high degree of risk. Before purchasing our common
stock, you should carefully consider the following risk factors. The risks and uncertainties
described below are not the only ones facing us. Additional risks and uncertainties that we are
unaware of, or that we currently deem immaterial, also may become important factors that affect us.
If any of the following risks occur, our business, financial condition or results of operations
could be materially and adversely affected. In that case, the trading price of our common stock
could decline, and you may lose some or all of your investment.
Risks Relating to Our Business
We have no product candidates that have been approved by the FDA or any foreign regulatory
authority, and we and our partners may never succeed in obtaining regulatory approval for any
products, developing marketable products or generating product revenues.
We are a biopharmaceutical company focused on the discovery and development of drugs to
provide therapeutic intervention in treating human diseases at the cellular level. As with all
scientific endeavors, we face much trial and error, and we may fail at numerous stages along the
way, which would inhibit us from successfully developing, manufacturing and marketing our drug
candidates.
Our lead product candidate, ridaforolimus (previously known as deforolimus, and prior to that,
known as AP23573), is currently being developed by us in collaboration with Merck for potential
cancer indications and by our partners, Medinol and ICON, for use in stents or other medical
devices to reduce reblockage of injured vessels following interventions in which stents are used in
conjunction with balloon angioplasty. Ridaforolimus is currently being studied in a Phase 3
clinical trial in patients with metastatic sarcomas and in multiple Phase 1 and Phase 2
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clinical trials in various potential cancer indications and in combination with other agents. Our
second product candidate, AP24534, is currently being studied in a Phase 1 clinical trial in
patients with hematologic malignancies. We do not currently have any products on the market and
have no product revenues. Therefore, our success is substantially dependent on (1) our ability to
work in collaboration with Merck to obtain marketing approval for ridaforolimus for metastatic
sarcoma and other cancer indications, (2) the ability of our partners, Medinol and ICON, to obtain
marketing approval for stents or other medical devices delivering ridaforolimus, and (3) our
ability to successfully complete clinical development and obtain marketing approval for AP24534 and
our other product candidates, or enter into collaboration agreements for these product candidates
on terms favorable to us.
Neither we nor our partners have submitted any new drug applications for ridaforolimus,
AP24534 or any other product candidate of ours to the FDA or foreign regulatory authorities for
marketing approval. Factors which could affect the ability to obtain regulatory approval and to
achieve market acceptance and gain market share for ridaforolimus, AP24534 and any other product
candidate of ours include, among other factors, product formulation, dose, dosage regimen, the
ability to obtain timely and sufficient patient enrollment in clinical trials, the risk of
occurrence of adverse side effects in patients participating in clinical trials, the ability to
manufacture, directly or indirectly, sufficient and cost-effective quantities of product
candidates, the ability to fund commercial development and to build or access a sales force in the
marketplace, the ability to successfully differentiate product candidates from competitive
product(s) and to sell, market and distribute, directly or indirectly, such product candidates.
In addition, positive results from early-stage clinical trials may not be replicated in
later-stage Phase 2 or Phase 3 clinical trials. Similarly, positive results from preclinical
studies of a product candidate may not be predictive of similar results in humans during clinical
trials. A number of companies in the pharmaceutical and biotechnology industries have suffered
significant setbacks in late-stage clinical trials even after achieving promising results in
early-stage development. Accordingly, the results from the completed preclinical studies and
clinical trials for ridaforolimus may not be predictive of the results to be obtained in the Phase
3 SUCCEED trial, preliminary results of ongoing Phase 2 or completed Phase 1 trials of
ridaforolimus may not be predictive of the results obtained in subsequent clinical trials, if
conducted, and the promising activity we have seen in AP24534 in preclinical studies and initial
results from our Phase 1 clinical trial may not be predictive of the results obtained in the
remainder of the Phase 1 clinical trial or in subsequent clinical trials. Furthermore, potential
competitive commercial factors may influence future decisions and directions on which clinical
indications to pursue and when.
Although we have entered into a collaboration agreement with Merck for the joint global
development and commercialization of ridaforolimus, we do not currently have any partners to assist
in developing and commercializing our other cancer product candidates. We will depend heavily on
Merck for the successful development and commercialization of ridaforolimus, particularly with
respect to the commercialization of ridaforolimus outside of the United States. We would expect to
be dependent upon other partners, if we enter into arrangements with one or more of them, to
successfully develop and commercialize our other cancer product candidates, including AP24534.
There can be no assurance that our collaboration with Merck will be successful or that we will be
able to secure any other partners on terms favorable to us, or at all.
We and our medical device partners have limited experience in designing, conducting and
managing the clinical trials necessary to obtain regulatory approval of stents or other medical
devices that deliver small-molecule drugs. We are dependent upon the success of Medinol and ICON
and any future medical device partner to successfully develop, manufacture and market stents or
other medical devices to deliver ridaforolimus to reduce blockage of injured vessels following
interventions in which stents are used in conjunction with balloon angioplasty. If Medinol or ICON
is not successful and/or if we are not able to enter into an agreement with an additional medical
device company experienced in the development, manufacture, and marketing of medical devices to
deliver ridaforolimus, we will not be able to generate revenues from the marketing of stents or
other medical devices that deliver ridaforolimus.
We do not expect to have any products on the market before the end of 2010, at the earliest,
and, ultimately, we and our partners may not succeed in developing or commercializing any products
which will generate product revenues for our company. If we and our partners are not successful in
developing or marketing ridaforolimus or other product candidates, we will not be profitable.
6
If our collaboration with Merck relating to the development and commercialization of ridaforolimus
is unsuccessful, our ability to commercialize ridaforolimus on a timely basis, or at all, could be
affected and our business could be materially harmed.
In July 2007, we entered into a collaboration agreement with Merck for the joint global
development and commercialization of ridaforolimus, our lead product candidate, for use in cancer.
Other than with respect to our collaborative efforts in developing ridaforolimus to date, we do not
have a history of working together with Merck and cannot predict the success of this collaboration.
The collaboration involves a complex allocation of responsibilities, costs and benefits and
provides for milestone payments to us upon the achievement of specified clinical, regulatory and
sales milestones.
With respect to responsibilities and control over decisions, we and Merck have established a
series of joint committees which are responsible for the development and commercialization of
ridaforolimus. Under the committee structure, if the committees are unable to reach a decision,
the matter is referred to senior executives of the parties. Each party has ultimate
decision-making authority with respect to a specified limited set of issues, and for all other
issues, the matter must be resolved by consensus of the parties. For example, we are currently in
discussions with Merck about the Phase 3 clinical development plan for ridaforolimus in potential
clinical indications beyond sarcomas, and we and Merck must reach agreement about the scope, timing
and costs for the ongoing clinical development of ridaforolimus in order to finalize the global
development plan for 2010. The joint development committee of the partnership has not reached a decision as to
the optimal registration strategy for ridaforolimus in patients with breast cancer. Merck has advised us that it does not intend to recommend that the partners conduct
a Phase 3 clinical trial of ridaforolimus in combination with trastuzumab in patients with
metastatic breast cancer based on Mercks evaluation of the
expected future market environment. The failure of the parties to reach consensus on development or
commercialization activities of ridaforolimus may delay its clinical development, which could lead
to the delay in payment of, or the failure to earn, clinical and regulatory milestones under the
collaboration agreement and may delay commercialization of ridaforolimus.
The collaboration agreement provides that, in certain circumstances, either party may opt out
of conducting and funding certain late-stage clinical trials, which would result in changes in
development and commercialization responsibilities and compensation arrangements. Furthermore, the
collaboration agreement may be terminated by Merck (i) based on an uncured breach by us, (ii) on or
after the third anniversary of the effective date of the agreement by providing at least 12 months
prior written notice, (iii) upon the failure of ridaforolimus to meet certain developmental and
safety requirements, or (iv) after discussions between the parties, in the event Merck concludes
that it is not advisable to continue the development of ridaforolimus for use in a potential cancer
indication. In addition, unrelated to our ridaforolimus collaboration, Mercks research and
development plans may be affected by its corporate, business or other developments, such as its
recently announced pending merger with Schering-Plough Corporation, which may impact the joint
development plans for ridaforolimus. Any loss of Merck as a collaborator in the development or
commercialization of ridaforolimus, any dispute over the terms of, or decisions regarding, the
collaboration, or any other adverse developments in our relationship with Merck could result in our
inability to fully develop and/or commercialize ridaforolimus, or at all, could materially harm our
business and could accelerate our need for additional capital.
Insufficient funding may jeopardize our research and development programs and may require us to
reduce our operations or prevent commercialization of our products and technologies.
We have funded our operations to date through sales of equity securities, debt, the upfront
and milestone payments received from Merck since July 2007, and, to a limited extent, operating
revenues. Most of our operating revenue to date has been generated through previous collaborative
research and development agreements and existing licenses. Although our collaboration agreement
with Merck for the global development and commercialization of ridaforolimus is structured to
provide substantial funding for the remaining development of ridaforolimus if we are successful in
meeting specified milestones, we will require substantial additional funding for our other research
and development programs (including pre-clinical development and clinical trials), for the pursuit
of regulatory approvals and for establishing or accessing manufacturing, marketing and sales
capabilities related to our other product candidates, and for other operating expenses (including
intellectual property protection and enforcement), as well as capital expenditures to maintain and
improve our facility, equipment and systems. We may
7
from time to time access funding by issuing common stock or other securities in private placements
or public offerings, including under our universal shelf registration statement under which we
currently have approximately $40 million available for issuance prior to the common stock offering.
We may also from time to time seek additional funding from other product-based collaborations,
technology licensing, issuance of debt, and public or private financings. However, such additional
funding may not be available on terms acceptable to us, or at all. Accordingly, we may not be able
to secure the significant funding which is required to maintain our operations or continue to fund
current or future research and development programs at their current levels or at levels that may
be required in the future.
In May 2009, we announced that approximately $27 million in milestone payments related to the
start of Phase 3 clinical trials of ridaforolimus originally expected to be received in the fourth
quarter of 2009 under the ridaforolimus collaboration agreement with Merck would likely be delayed
until the first or second quarter of 2010. We also indicated that we would be evaluating measures
to reduce spending in 2009 on activities not critical to the achievement of our key corporate
objectives, as well as actively pursuing various partnering opportunities in order to mitigate the
impact of the change in the anticipated timing of receipt of the ridaforolimus milestone payments.
Subsequent to that announcement, we have implemented measures to reduce our previously projected
operating expenses by approximately $7.5 million during the second half of 2009. As part of our
annual review of the global development plan with Merck, we are currently working together to
revise the clinical trial program in the global development plan for ridaforolimus in
potential cancer indications beyond sarcomas. At this time, the joint development committee of the partnership has not reached a decision as to
the optimal registration strategy for ridaforolimus in patients with breast cancer. Merck has advised us that it does not intend to recommend that the partners conduct
a Phase 3 clinical trial of ridaforolimus in combination with trastuzumab in patients with
metastatic breast cancer based on Mercks evaluation of the
expected future market environment. As a result, we currently expect that milestones related to the initiation of Phase 3 trials discussed above will be delayed beyond the first half of 2010. We have also
continued to evaluate additional potential sources of funding and various operating scenarios with
the goal of continuing to advance our key corporate objectives to the maximum extent possible.
We are undertaking the common stock offering described in the prospectus supplement we will
file with the Securities and Exchange Commission in order to provide us with additional funding to
offset the impact of the delay in the clinical milestones that we had expected to receive in 2009
or the first half of 2010. We believe that there are potential sources of funding under our
collaboration with Merck and other business development opportunities, as disclosed in further
detail above in Recent Developments Sources and Uses of Funds. While there can be no
assurance that any or all of these nearer-term potential sources of funding will become available
in 2009 or 2010, or at all, they include the following:
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Upfront and milestone payments under partnering and licensing transactions. We
believe that we may be able to enter into a partnership agreement related to the
development of AP24534 providing a substantial upfront payment, and we also are
actively pursuing the licensing or sale of our ARGENT technology for research and
laboratory applications. Our ability to successfully enter into such transactions will
be dependent on numerous factors, including the successful outcome of our Phase 1
clinical trial of AP24534 in CML and Ph+ ALL, and we may not succeed in entering into
such transactions on attractive terms providing substantial near-term funding, or at
all. In addition, if the data from the Phase 1 clinical trial does not enable us to
proceed directly to a pivotal registration trial of AP24534 in certain patients with
CML and Ph+ ALL, we may need to spend further resources developing this product
candidate or our ability to enter into a collaboration agreement on terms acceptable to
us, if at all, could be adversely affected. |
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Milestone payments under the Merck collaboration. We believe that the available
clinical data at the time of the second interim analysis of our ongoing Phase 3 SUCCEED
trial could be sufficient to enable us to submit an NDA to the FDA in mid-2010, and
allow for the possibility of FDA approval of ridaforolimus by the end of 2010 or early
2011, which would each trigger an additional $30 million milestone payment to us.
However, there can be no assurance that the second interim analysis will demonstrate
the efficacy of ridaforolimus with statistical significance, and it may be necessary to |
8
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continue with the trial until a final analysis of clinical data is available, which
would, even if the trial were ultimately successful, delay our receipt of the first of
these milestone payments until late 2010, at the earliest. |
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Costs and funding of global development plan. As part of our annual review of the
global development plan with Merck, the parties are currently working together to revise the clinical trial program in the global development plan for ridaforolimus in
potential cancer indications beyond sarcomas. We anticipate that these discussions will result in an update to the
existing global development plan that defines the scope, timing and costs of ongoing
development, including which Phase 3 clinical trials will be pursued and when they will
likely be initiated, and the expected timing and amounts of related
milestone payments. In connection with any revision to the global development plan, we may also consider revisions of
the cost sharing and funding provisions of the collaboration. However, there can be no assurance as to when our discussions with Merck will be
completed and whether they will result in the availability of additional funding under
the collaboration agreement on terms acceptable to us, or at all, and the initiation of
Phase 3 trials with the related milestone payments could be delayed pending the
resolution of these discussions or the completion of other clinical trials that may be
needed prior to commencing Phase 3 clinical trials. |
There can be no assurance that we will receive any of such payments in the timeframes we have
identified, or at all, and if we cannot secure adequate funding from these sources, we may be
required to pursue other types of financing, as described in the first paragraph of this risk
factor above, or to reduce our operations, delay, scale back, eliminate or terminate clinical
trials for one or more of our research and development programs, or enter into licenses or other arrangements with third parties on terms that may be unfavorable to us. Unless we were able to obtain access to additional funds during the remainder of 2009,
without the net proceeds of this offering we would be required to scale back our
operations over the remainder of 2009, which would have a material adverse effect on
our business.
Moreover, if we are not successful in our efforts to secure such
funding or reduce spending further to mitigate the impact of the delay in the expected milestone
payments from Merck, our cash, cash equivalents and marketable securities after giving effect to
the net proceeds of the common stock offering may not be sufficient to fund operations through at
least the next twelve months.
Raising additional capital by issuing securities or through collaboration and licensing
arrangements may cause dilution to existing stockholders, restrict our operations or require us to
relinquish proprietary rights.
We may seek to raise the additional capital necessary to fund our operations through public or
private equity offerings, debt financings, and collaboration and licensing arrangements. To the
extent that we raise additional capital through the sale of equity or convertible debt securities,
our stockholders ownership interest will be diluted, and the terms of such securities may include
liquidation or other preferences that adversely affect our stockholders rights. Under an existing
loan agreement with a bank, we are required to maintain certain financial and non-financial
covenants, including covenants limiting or restricting our ability to incur additional debt or
declare dividends. If we raise additional funds through collaboration and licensing arrangements
with third parties, we may have to relinquish valuable rights to our technologies or product
candidates, or grant licenses on terms that are not favorable to us.
9
We have incurred significant losses to date and may never be profitable.
We have incurred significant losses in each year since our formation in 1991, including a net
loss of $71.1 million in 2008 and a net loss of $20.2 million for the three month period ended
March 31, 2009, and have an accumulated deficit of $458.8 million through March 31, 2009. Our
losses have resulted principally from costs incurred in research and development of our product
candidates, including clinical development of ridaforolimus and AP24534, and from general and
administrative costs, including costs incurred to prosecute and protect our intellectual property,
associated with our operations. Although the collaboration with Merck is structured so that the
expected milestone payments to be paid by Merck to us should largely offset our share of the costs
of development of ridaforolimus over the period of development, it is likely that we will incur
significant operating losses for the foreseeable future, and we expect such losses to increase as
we continue our research and development activities and begin to build a sales and marketing
organization in anticipation of obtaining regulatory approval to market ridaforolimus in the United
States, which approval may never occur. We currently have no product revenues, limited license
revenues and limited commitments for future licensing revenues, and may not be able to generate
such revenues in the future. If our losses continue and we and our existing partners or potential
future partners are unable to successfully develop, commercialize, manufacture and market our
product candidates and/or we are unable to enter into agreements and licenses of our intellectual
property, we may never generate sufficient revenues to achieve profitability. Even if we and our
partners are able to commercialize products and we are able to enter into agreements or licenses in
the future, we may never generate sufficient revenues to have profitable operations.
We have limited manufacturing experience and are dependent upon the ability of third parties,
including Merck, to manufacture our product candidates, which raises uncertainty as to our ability
to develop and commercialize our product candidates.
Under our collaboration with Merck, we are responsible for providing the active pharmaceutical
ingredient used in ridaforolimus drug product and Merck is responsible for the formulation of the
finished product. Under our agreements with Medinol and ICON, we are responsible for providing the
ridaforolimus to be delivered by the stents or medical devices being developed by Medinol and ICON.
We have no experience in manufacturing any of our product candidates on a large scale and have
contracted and expect to continue to contract with third-party manufacturers, including Merck, to
provide material for clinical trials and potential commercial launch, and to assist in the
development and optimization of our manufacturing processes and methods. Our ability to conduct
clinical trials and commercialize our product candidates will depend on the ability of such third
parties to manufacture our products on a large scale at a competitive cost and in accordance with
current good manufacturing practices, or cGMPs, and other regulatory requirements. If we are not
able to obtain contract manufacturing on commercially reasonable terms, obtain or develop the
necessary materials and technologies for manufacturing, or obtain intellectual property rights
necessary for manufacturing, or if our contract manufacturers fail to provide us with the
quantities and quality of the products we require in a timely manner, we may not be able to conduct
or complete clinical trials or commercialize our product candidates, including ridaforolimus.
There can be no assurance that we will be able to obtain such requisite terms, materials,
technologies and intellectual property necessary to successfully manufacture our product candidates
for clinical trials or commercialization.
We have limited experience in conducting clinical trials and are dependent upon the ability of
third parties, including Merck, contract research organizations, collaborative academic groups,
clinical trial sites and investigators, to conduct or to assist us in conducting clinical trials
for our product candidates, which raises uncertainty as to our ability to develop and commercialize
our product candidates.
We have limited experience in designing, initiating, conducting and monitoring the clinical
trials necessary to obtain regulatory approval of our product candidates. Our collaboration
agreement with Merck provides that the development and commercialization of ridaforolimus, our lead
product candidate, will be jointly conducted pursuant to a global development plan. Pursuant to
the global development plan, we are conducting multiple clinical trials of ridaforolimus in
multiple potential cancer indications. Together with the efforts of Merck, contract research
organizations, advisory boards, review committees, collaborative academic groups, clinical trial
sites and investigators, we are heavily dependent on our and their ability to successfully
initiate, enroll, conduct and monitor our Phase 3 SUCCEED trial and other clinical trials of
ridaforolimus. In particular, we are dependent upon the review, advice and/or services of several
independent committees, consultants and contractors with respect to protocol design, patient
enrollment, data monitoring, radiology review, pathology and drug distribution to clinical
10
trial sites for our SUCCEED trial and other clinical trials of ridaforolimus. We are also dependent
upon our ability and the ability of Merck and our contractors to coordinate with us and to timely
and accurately collect and report to regulatory authorities worldwide the patient data generated in
our SUCCEED trial and other clinical trials of ridaforolimus. We, Merck, and our respective
contractors, collaborative academic groups, clinical trial sites or investigators may lack
sufficient personnel, technology, expertise, experience or resources to effectively initiate
clinical trial sites, recruit and enroll patients, conduct and monitor clinical trials, and to
collect and report patient data relating to our SUCCEED trial or other clinical trials of
ridaforolimus, either generally or in specific countries.
We also initiated in 2008 and are conducting a Phase 1 clinical trial of AP24534 in patients
with hematologic malignancies. We do not currently have a partner for the development and
commercialization of AP24534 and are dependent upon our ability and/or the ability of our
contractors, collaborative academic groups, clinical trial sites and investigators, to successfully
design, initiate, conduct and monitor clinical trials of AP24534, including the ongoing Phase 1
trial. Failure by us or our partners, contractors, collaborative academic groups, clinical trial
sites or investigators to timely and effectively initiate, conduct and monitor our clinical trials
could significantly delay or materially impair our ability to complete clinical trials and/or
obtain regulatory approval of ridaforolimus, AP24534 or our other product candidates and,
consequently, could delay or materially impair our ability to generate revenues therefrom.
We may be unable to generate material revenues from the licensing of our NF-kB patent portfolio if
we are unable to enforce against, or license our NF-kB patents to, pharmaceutical and biotechnology
companies.
We are the exclusive licensee of a family of patents, three in the U.S. and one in Europe,
including a pioneering U.S. patent covering methods of treating human disease by regulating NF-kB
cell-signaling activity, hereinafter referred to as the 516 Patent, awarded to a team of inventors
from The Whitehead Institute for Biomedical Research, Massachusetts Institute of Technology and
Harvard University. Dr. David Baltimore, the former president of the California Institute of
Technology and one of our consultants and scientific founders, is a lead inventor of the 516
Patent and a member of the board of directors of Amgen Inc. We have a licensing program to
generate revenues from the discovery, development, manufacture and sale of products covered by our
NF-kB patent portfolio. These patents have been, and in the future may be, challenged and may be
subsequently narrowed, invalidated, declared unenforceable or circumvented, any of which could
materially impact our ability to generate licensing revenues from them.
As disclosed above under the heading Recent Developments and in Part II, Item 1 of our
Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, we have been engaged in two
litigations concerning the 516 Patent against Lilly and Amgen. In the Amgen case, on June 1, 2009
the Court of Appeals for the Federal Circuit (CAFC) affirmed a lower courts claim interpretation
and summary judgment of non-infringement with respect to the Amgen product, Enbrel. No issues of
claim validity were decided in that case. In the Lilly case, a lower court decision in our favor
was overturned on appeal by the CAFC based on an adverse decision on a claim validity issue. A
petition for rehearing is currently pending with the CAFC. The 516 Patent was also the subject of
reexamination at the United States Patent and Trademark Office (PTO) which issued a final
rejection of a number of the claims, including those involved in the Amgen and Lilly cases. An
appeal of that decision is pending at the Patent Office Board of Appeals and Interferences. We
cannot provide any assurance that other third parties, who may be infringing our NF-kB patents,
will not seek to initiate similar, further proceedings for declaratory relief or reexamination with
regard to the 516 Patent or other NF-kB patents. As exclusive licensee of the 516 Patent, we are
obligated for the costs expended for its prosecution in the PTO, for its enforcement in the above
noted litigations and otherwise. If other third parties initiate proceedings with regard to the
516 Patents, we may need to expend additional significant capital and management resources
pursuing these matters in court or in the PTO.
In addition, if no claims which cover commercially significant subject matter survive, we will
not realize any further sublicensing revenues based on the 516 Patent, and could be liable under
certain limited circumstances for litigation costs and potentially attorneys fees. Those
financial consequences could adversely impact our ability to further our clinical programs and our
research and development programs at the current levels or at levels that may be required in the
future.
11
The loss of key members of our scientific and management staff could delay and may prevent the
achievement of our research, development and business objectives.
Our performance as a specialized scientific business is substantially dependent on our key
officers and members of our scientific staff responsible for areas such as drug development,
clinical trials, regulatory affairs, drug discovery, manufacturing, marketing, business development
and intellectual property protection and licensing. We also are dependent upon a few of our
scientific advisors to assist in formulating our research and development strategy. While we have
entered into employment agreements with all of our executive officers, these officers may terminate
their employment with us at any time. The loss of, and failure to promptly replace, any member of
our management team could significantly delay and may prevent the achievement of our research,
development and business objectives.
We are dependent upon the ability of our medical device partners to develop, manufacture, test and
market stents or other medical devices to deliver ridaforolimus.
We have no experience in the development of medical devices and do not intend ourselves to
develop stents or other medical devices to deliver ridaforolimus. Instead, we have granted two
licenses (to Medinol and to ICON) and, under those license agreements, we may grant one additional
license, under our rights to ridaforolimus to a medical device company for its use in developing
and commercializing such medical devices to reduce blockage of injured vessels following
stent-assisted angioplasty.
While we expect to supply ridaforolimus to our medical device partners and any additional
partner, we will be otherwise dependent upon them to develop and commercialize stents or other
medical devices to deliver ridaforolimus. Such medical device partners have varying degrees of
scientific, technical, medical and regulatory experience and resources to, directly or through
third parties, develop, manufacture, test or market stents or other medical devices to deliver
ridaforolimus. Their ability to conduct clinical trials and commercialize such medical devices
will be dependent on both the safety profile of their medical devices and ridaforolimus, as well as
their ability to manufacture and supply medical devices for clinical trials and marketing purposes
and our ability to manufacture and supply ridaforolimus, either directly or through third parties,
at a competitive cost and in accordance with cGMPs and other regulatory requirements. Although,
under our collaboration with Merck, Merck is responsible for the formulation of ridaforolimus
finished product for potential indications covered by the collaboration, we depend upon third-party
manufacturers or collaborative partners for the production of ridaforolimus for clinical trials to
be conducted by our medical device partners, and we intend to use third-party manufacturers to
produce ridaforolimus on a commercial scale, if any partner receives regulatory approval. Our
reliance on third-party manufacturers and their potential inability to meet our supply commitments
to one or more of our partners could adversely impact the ability of our partners to commercialize
stents or other medical devices to deliver ridaforolimus.
We anticipate that our partners will seek to develop and commercialize stents or other medical
devices to deliver ridaforolimus that do not infringe third-party patents. However, there can be
no assurance that the devices delivering ridaforolimus marketed by our partners will not be subject
to third-party claims. Furthermore, the patents issued to us or our partners covering
ridaforolimus and/or medical devices, including stents, may be subject to challenge and may be
subsequently narrowed, invalidated or circumvented. Any such event would adversely impact the
ability of one or more of our partners to market their stents or other medical devices to deliver
ridaforolimus.
Our existing license agreements with Medinol and ICON allow either party to terminate under
certain circumstances, including our partners reasonable business judgment that development of a
medical device to deliver ridaforolimus is not feasible. Medinol or ICON may be unable to develop
a medical device to deliver ridaforolimus and we may also not be able to enter into any additional
licensing agreements with any other medical device companies to develop such devices on terms,
which are acceptable to us, or at all. Our inability to enter into such transactions, or the
inability of one or more of our partners to develop or commercialize stents or other medical
devices to deliver ridaforolimus for any reason, will adversely impact our ability to generate
revenues from any licenses of ridaforolimus.
12
We may not be able to protect our intellectual property relating to our research programs,
technologies and product candidates.
We and our licensors have issued patents and pending patent applications covering research
methods useful in drug discovery, new chemical compounds discovered in our drug discovery programs
including, among others, ridaforolimus, certain components, configurations and uses of our
cell-signaling regulation technologies and products-in-development, methods and materials for
manufacturing our products-in-development and other pharmaceutical products and methods and
materials for conducting pharmaceutical research. Pending patent applications may not issue as
patents and may not issue in all countries in which we develop, manufacture or sell our products or
in countries where others develop, manufacture and sell products using our technologies. In
addition, patents issued to us or our licensors may be challenged, as is the case with the PTO
proceeding and the Lilly and Amgen litigations regarding the NF-kB 516 Patent, and they may be
subsequently narrowed, invalidated or circumvented. In that event, such patents may not afford
meaningful protection for our technologies or product candidates, which would materially impact our
ability to develop and market our product candidates and to generate licensing revenues from our
patent portfolio. Certain technologies utilized in our research and development programs are
already in the public domain. Moreover, a number of our competitors have developed technologies,
filed patent applications or obtained patents on technologies, compositions and methods of use that
are related to our business and may cover or conflict with our patent applications, technologies or
product candidates. Such conflicts could limit the scope of the patents that we may be able to
obtain or may result in the denial of our patent applications. If a third party were to obtain
intellectual property protection for any of the foregoing, we may be required to challenge such
protection, terminate or modify our programs impacted by such protection or obtain licenses from
such third parties, which might not be available on acceptable terms, or at all. Also, if a third
party were to introduce a product into the market which we believe infringes our patents, we may be
required to enforce our patent rights or seek to obtain an injunction or other relief, which could
be time-consuming and expensive.
We may be unable to develop or commercialize our product candidates if we are unable to obtain or
maintain certain licenses on commercial terms or at all.
We have entered, and will continue to enter, into agreements, with third parties to test
compounds, blood and tissue samples, to perform gene expression analysis and to develop biological
tests for use with our product candidates, which testing may yield new inventions and discoveries
requiring us to obtain licenses in order to exclusively develop or market new products, alone or in
combination with our product candidates, or to develop or market our product candidates for new
indications. We have also entered into license agreements for some of our technologies. We use
third parties to test blood and tissue samples and other biological materials in our clinical
programs and to develop biological tests, with respect to which we may be required to obtain
licenses or pay royalties or other fees in order to commercialize such tests for use with our
product candidates. We also use gene sequences or proteins encoded by those sequences and other
biological materials in each of our research programs which are, or may become, patented by others
and to which we would be required to obtain licenses in order to develop or market our product
candidates. Manufacturing and/or use of our products may also require licensing biological
materials, technologies and intellectual property from third parties. Our inability to obtain any
one or more of these licenses, on commercially reasonable terms, or at all, or to circumvent the
need for any such license, could cause significant delays and cost increases and materially affect
our ability to develop and commercialize or prevent us from developing and commercializing our
product candidates. Obtaining licenses for these discoveries, materials and technologies may
require us to make cumulative royalty payments or other payments to several third parties,
potentially reducing amounts paid to us or making the cost of our products commercially
prohibitive.
Some of our licenses obligate us to exercise diligence in pursuing the development of product
candidates, to make specified milestone payments and to pay royalties. In some instances, we are
responsible for the costs of filing and prosecuting patent applications and actions to enforce our
rights against infringers. These licenses generally expire upon the earlier of a fixed term of
years after the date of the license or the expiration of the applicable patents, but each license
is also terminable by the other party upon default by us of our obligations. Our inability or
failure to meet our diligence requirements or make any payments required under these licenses would
result in a reversion to the licensor of the rights granted which, with respect to the licenses
pursuant to which we have obtained exclusive rights, would materially and adversely affect our
ability to develop and market products based on our licensed technologies.
13
Competing technologies may render some or all of our programs or future products noncompetitive or
obsolete.
Many well-known pharmaceutical, healthcare and biotechnology companies, academic and research
institutions and government agencies, which have substantially greater capital, research and
development capabilities and experience than us or our potential partners, are presently engaged in
one or more of the following activities:
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developing products based on cell signaling, cancer biology, and computational
chemistry; |
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conducting research and development programs for the treatment of the various potential
disease indications in which we are focused; and |
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manufacturing, promoting, marketing and selling pharmaceutical or medical device
products for treatment of diseases in all of the various disease indications in which we or
our current or possible future partners are focused. |
Some of these entities already have competitive products on the market or product candidates
in clinical trials or in more advanced preclinical studies than we do. Many of these entities also
have substantially greater research, development, manufacturing and marketing resources and
experience than us. In particular, we are aware that Wyeth and Novartis have mTOR inhibitors on
the market, which are competitive with ridaforolimus, our lead product candidate. Decisions taken
by either of these parties regarding clinical initiatives, including Phase 3 trials, of their mTOR
inhibitors may impact on or block the clinical and commercial opportunities available to us and
Merck for ridaforolimus. Additionally, PharmaMar has a marine derived antitumoral agent currently
approved for the treatment of soft tissue sarcomas in Europe. By virtue of having or introducing
competitive products on the market before us, these entities may gain a competitive advantage.
Competing technologies may render some or all of our programs or future products noncompetitive or
obsolete, and we may not be able to make the enhancements to our technology necessary to compete
successfully with newly emerging technologies. Competing products on the market or in development
may also lead us and our collaborators to revise or cease development of our product candidates in
one or more indications for commercial reasons, even where clinical data may be promising. If we
are unable to successfully compete in our chosen markets, we will not become profitable.
If our product candidates are not accepted by patients, physicians and insurers, we will not be
successful.
Our success is dependent on the acceptance of any approved products. Our product candidates
may not achieve market acceptance among patients, physicians or third-party payors, even if we
obtain necessary regulatory and reimbursement approvals. Physicians and health care payors may
conclude that any of our product candidates are not as safe and/or effective as competing therapies
or are not as attractive based on a cost/benefit analysis as alternative treatments. Failure to
achieve significant market acceptance of our product candidates or to be paid an adequate amount
for our product candidates will harm our business. We believe that recommendations by physicians
and health care payors will be essential for market acceptance of any product candidates.
If we are unable to establish sales, marketing and distribution capabilities or to enter into
agreements with third parties to do so, we may be unable to successfully market and sell any
products.
Pursuant to our collaboration with Merck, we will distribute, sell and with Merck co-promote
ridaforolimus for all cancer indications in the United States, and Merck will distribute, sell and
promote ridaforolimus outside the United States. We are currently establishing a commercial
oncology organization, but we have no experience in marketing or selling any products.
Accordingly, we may be unable to successfully, directly or indirectly, sell ridaforolimus or any
other product candidates that we obtain marketing approval to sell. If we are unable to
effectively sell our products, our ability to generate revenues will be materially adversely
affected. We may not be able to hire, in a timely manner, the qualified sales and marketing
personnel we need, if at all. In addition, we may not be able to enter into any marketing or
distribution agreements on acceptable terms, if at all. If we cannot establish sales, marketing
and distribution capabilities as we intend, either by developing our own capabilities or entering
into agreements with third parties, sales of future products, if any, may be harmed.
14
If we develop a product for commercial use, a subsequent product liability-related claim or recall
could have an adverse effect on our business.
Our business exposes us to potential product liability risks inherent in the testing,
manufacturing and marketing of pharmaceutical products. Prior to obtaining regulatory approval to
market our products, we or our partners are required to test such products in human clinical trials
at health care institutions pursuant to agreements which indemnify such institutions in case of
harm caused to patients by our products. We may not be able to avoid significant product liability
exposure resulting from use of our products. A product liability-related claim or recall could be
detrimental to our business. In addition, except for insurance covering product use in our
clinical trials, we do not currently have any product liability insurance, and we may not be able
to obtain or maintain such insurance on acceptable terms, or we may not be able to obtain any
insurance to provide adequate coverage against potential liabilities, including liabilities arising
from our clinical trials. Our inability to obtain sufficient insurance coverage at an acceptable
cost or otherwise to protect against potential product liability claims could prevent or limit the
commercialization of any products that we or our partners may develop.
Significant additional losses or insufficient funding may cause us to default on certain covenants
of our loan documents.
At March 31, 2009, we had $12.6 million outstanding under a term loan agreement with a bank,
pursuant to which we are required to maintain certain financial and non-financial covenants,
including minimum cash, cash equivalents and investments of $15 million. For example, we would be
in default under the loan agreement if we issue our audited financial statements with a going
concern or like qualification or exception by our independent auditors. A default of any of these
covenants would allow the bank to demand payment of its loan. We currently have sufficient
liquidity to fund payment of this loan if demand for payment were made. However, if we are unable
to raise adequate financing to fund continuing operations or otherwise to refinance our loan, we
may not be able to maintain compliance with loan covenants, may be required to pay off the loan and
may be required to reduce our spending on operations.
Risks Relating to Governmental Approvals
We have limited experience in conducting clinical trials, which may cause delays in commencing and
completing clinical trials of our product candidates.
Clinical trials must meet applicable FDA and foreign regulatory requirements. We have limited
experience in designing, conducting and managing the preclinical studies and clinical trials
necessary to obtain regulatory approval for our product candidates in any country and no experience
in conducting and managing post-approval studies of any products. We or our collaborative partners
may encounter problems in clinical trials that may cause us or the FDA or foreign regulatory
agencies to delay, suspend or terminate our clinical trials at any phase. These problems could
include the possibility that we may not be able to manufacture sufficient quantities of cGMP
materials for use in our clinical trials, conduct clinical trials at our preferred sites, enroll a
sufficient number of patients for our clinical trials at one or more sites, or begin or
successfully complete clinical trials in a timely fashion, if at all. Furthermore, we, our
partners, the FDA or foreign regulatory agencies may suspend clinical trials of our product
candidates at any time if we or they believe the subjects participating in the trials are being
exposed to unacceptable health risks or if we or they find deficiencies in the clinical trial
process or conduct of the investigation. If clinical trials of any of our product candidates fail,
we or our partners will not be able to market the product candidate which is the subject of the
failed clinical trials. The FDA and foreign regulatory agencies could also require additional
clinical trials before or after granting of marketing approval for any products, which would result
in increased costs and significant delays in the development and commercialization of such products
and could result in the withdrawal of such products from the market after obtaining marketing
approval. Our failure, or the failure of our partners, to adequately demonstrate the safety and
efficacy of a product candidate in clinical development could delay or prevent obtaining marketing
approval of the product candidate and, after obtaining marketing approval, data from post-approval
studies could result in the product being withdrawn from the market, either of which would likely
have a material adverse effect on our business.
We may not be able to obtain government regulatory approval to market our product candidates.
To date, neither we nor our partners have submitted a marketing application for any of our
product candidates to the FDA or any foreign regulatory agency, and none of our product candidates
has been approved for commercialization in any country. Prior to commercialization, each product
candidate will be subject to an
15
extensive and lengthy governmental regulatory approval process in the United States and in other
countries. We or our partners may not be able to obtain regulatory approval for any product
candidates, or even if approval is obtained, the labeling for such products may place restrictions
on their use that could materially impact the marketability and profitability of the product
subject to such restrictions. Satisfaction of these regulatory requirements, which includes
satisfying the FDA and foreign regulatory authorities that the product is both safe and effective
for its intended uses, typically takes several years or more depending upon the type, complexity,
novelty and safety profile of the product and requires the expenditure of substantial resources.
Uncertainty with respect to meeting the regulatory requirements governing our product candidates
may result in high costs and/or extensive delays in the regulatory review process. If regulatory
approval of a product is granted, such approval will be limited to those disease states and
conditions for which the product is proven safe and effective, as demonstrated by clinical trials,
and may not include all of the indications necessary to successfully market the product. Even
though we have obtained orphan drug designation from the FDA and EMEA for ridaforolimus in bone and
soft-tissue sarcomas, related marketing exclusivity periods may be challenged by others or may
prove to be of no practical benefit. In addition, even though we have reached agreement on a
Special Protocol Assessment, or SPA, with the FDA with respect to our SUCCEED Phase 3 clinical
trial of ridaforolimus for metastatic sarcoma, the FDA is not obligated to approve ridaforolimus as
a result of the SPA, even if the clinical outcome of the SUCCEED trial is positive. Therefore, we
cannot provide assurance that positive results in the SUCCEED trial will be sufficient for FDA
approval of ridaforolimus.
We will not be able to sell our product candidates if we, Merck or our third-party manufacturers
fail to comply with FDA manufacturing and quality requirements.
Under our collaboration with Merck, we are responsible for providing the active pharmaceutical
ingredient used in ridaforolimus drug product, and Merck will be responsible for the formulation of
the finished product. Under our agreements with Medinol and ICON, we are responsible for providing
the ridaforolimus to be delivered by the stents or other medical devices being developed by Medinol
and ICON. Before approving any of our product candidates, the FDA will inspect the facility or
facilities at which the drug product is manufactured and will not approve the drug candidate unless
it is satisfied with our or our third-party manufacturers compliance with manufacturing and
quality requirements. The manufacturing of our product candidates must comply with cGMP
requirements of the FDA and similar requirements of regulatory agencies in other countries. These
requirements govern, among other things, quality control and documentation procedures. We, Merck
or any third-party manufacturer of product candidates, may not be able to comply with these
requirements, which would prevent us from obtaining approval for or selling such products.
Material changes to the manufacturing processes of products after approvals have been granted are
also subject to review and approval by the FDA or other regulatory agencies. Following approval,
such facilities are subject to continuing FDA and foreign regulatory inspections and failure to
comply with cGMPs or similar regulations can result in regulatory action up to and including
cessation of shipment of product.
Even if we or our partners bring products to market, we or they may be unable to effectively price
the products or obtain adequate reimbursement for sales of the products, which would prevent the
products from becoming profitable.
If we or our partners succeed in bringing any product candidates to the market, they may not
be considered cost-effective, and coverage and adequate payments may not be available or may not be
sufficient to allow us to sell such products on a competitive basis. In both the United States and
elsewhere, sales of medical products and the availability or acceptance of treatments are
dependent, in part, on the availability of reimbursement from third-party payors, such as health
maintenance organizations and other private insurance plans and governmental programs such as
Medicare. Third-party payors are increasingly challenging the prices charged for pharmaceutical
products and medical procedures. Our business may be affected by the efforts of government and
third-party payors to contain or reduce the cost of health care through various means. In the
United States, there have been and will continue to be a number of federal and state proposals to
implement government controls on pricing. Similar government pricing controls exist in varying
degrees in other countries. In addition, the emphasis on managed care in the United States has
increased and will continue to increase the pressure on the pricing of pharmaceutical products. We
cannot predict whether any legislative or regulatory proposals will be adopted or the effect these
proposals or managed care efforts may have on our business.
16
On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment
Act of 2009. This law provides funding for the federal government to compare the effectiveness of
different treatments for the same illness. A plan for the research will be developed by the
Department of Health and Human Services, the Agency for Healthcare Research and Quality and the
National Institutes for Health, and periodic reports on the status of the research and related
expenditures will be made to Congress. Although the results of the comparative effectiveness
studies are not intended to mandate any policies for public or private payors, it is not clear what
if any effect the research will have on the sales of our product candidates if any such product or
the condition that it is intended to treat is the subject of a study. Decreases in third-party
reimbursement for our product candidates or a decision by a third-party payor to not cover our
product candidates could reduce physician usage of the product candidate and have a material
adverse effect on our sales, results of operations and financial condition.
In addition, President Obama has been advocating changes to the way in which healthcare is
provided in the United States and several proposals intended to achieve this goal are being
actively considered by Congress. It is not clear how such changes if enacted into law would affect
the commercialization of our product candidates, if they are approved.
We cannot predict whether any other legislative or regulatory proposals will be adopted or the
effect these proposals or healthcare efforts may have on our business.
Risks Relating to Our Common Stock
Results of our operations, general market conditions for biotechnology stocks and other factors
could result in a sudden change in the value of our stock.
As a biopharmaceutical company, we have experienced significant volatility in our common
stock. During the period July 1, 2008 through June 30, 2009, our stock price ranged from a high of
$3.55 to a low of $0.72. Factors that can contribute to such volatility may include: announcements
regarding results and timing of preclinical studies and clinical trials for our product candidates;
announcements regarding our collaborations and partnerships; evidence of the safety or efficacy of
our product candidates; announcements regarding product developments or regulatory approvals
obtained by companies developing competing products; decisions by regulatory agencies that impact
or may impact our product candidates; the results and timing of efforts by our partner or future
partners to develop stents or other medical devices to deliver ridaforolimus; announcements of new
collaborations or failure to enter into collaborations; our funding requirements; announcements of
new equity or debt financings; announcements of technological innovations or new therapeutic
products; developments relating to intellectual property rights, including licensing, litigation
and governmental regulation and, in particular, our litigation with Lilly and with Amgen and
reexamination proceedings in the PTO with respect to the 516 Patent; healthcare or
cost-containment legislation; general market trends for the biotechnology industry and related
high-technology industries; the impact of exchange rates for the U.S. dollar; the impact of
changing interest rates and policies of the Federal Reserve; and public policy pronouncements.
These and other factors could have a significant impact on the value and volatility of our common
stock in future periods.
Anti-takeover provisions of Delaware law, provisions in our charter and bylaws and our
stockholders rights plan, or poison pill, could make a third-party acquisition of us difficult.
Because we are a Delaware corporation, the anti-takeover provisions of Delaware law 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. We are subject to the provisions of Section 203 of the General
Corporation Law of Delaware, which prohibits us from engaging in certain business combinations,
unless the business combination is approved in a prescribed manner. In addition, our certificate
of incorporation and our bylaws, each as currently in effect, also contain certain provisions that
may make a third-party acquisition of us difficult, including:
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a classified board of directors, with three classes of directors each serving a
staggered three-year term; |
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the ability of the board of directors to issue preferred stock; and |
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the inability of our stockholders to call a special meeting. |
17
We also have implemented a stockholders rights plan, also called a poison pill, which could
make it uneconomical for a third party to acquire our company on a hostile basis. These
provisions, as well as Section 203, may discourage certain types of transactions in which our
stockholders might otherwise receive a premium for their shares over the current market price, and
may limit the ability of our stockholders to approve transactions that they think may be in their
best interests.
18
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