As filed with the Securities and Exchange Commission on April 10, 2012
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Registration No. 333-180562
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UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
Form S-3
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
SYNTHETIC BIOLOGICS, INC.
(Exact Name of Registrant as Specified
in Its Charter)
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Nevada
(State or Other Jurisdiction
of
Incorporation or Organization)
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13-3808303
(I.R.S. Employer
Identification Number)
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3985 Research Park Drive, Suite 200
Ann Arbor, Michigan 48108
(734) 332-7800
(Address, Including Zip Code, and Telephone
Number, Including Area Code, of Registrant’s Principal Executive Offices)
Jeffrey Riley
Chairman, Chief Executive Officer and President
Synthetic Biologics, Inc.
3985 Research Park Drive, Suite 200
Ann Arbor, MI 48108
(734) 332-7800
(Name, Address, Including Zip Code, and
Telephone Number, Including Area Code of Agent for Service)
With copies to:
Leslie Marlow, Esq.
Gracin & Marlow, LLP
405 Lexington Avenue, 26th Floor
New York, New York 10174
(212) 907-6457
Approximate date of commencement of proposed sale to the
public:
From time to time after the effective date of this registration statement.
If the only securities being registered on this form are being
offered pursuant to dividend or interest reinvestment plans, please check the following box.
¨
If
any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans,
check the following box.
x
If this form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering.
¨
If this form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering.
If this Form is a registration statement pursuant to General
Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to
Rule 462(e) under the Securities Act, check the following box.
¨
If this Form is a post-effective amendment to a registration
statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities
pursuant to Rule 413(b) under the Securities Act, check the following box.
¨
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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(Do not check if a smaller reporting
company)
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Smaller reporting
company
x
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CALCULATION OF REGISTRATION FEE
Title of Each Class of
Securities to be Registered
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Amount to be
Registered (1)(2)
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Proposed Maximum
Offering
Price per Security(3)
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Proposed Maximum
Aggregate
Offering
Price
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Amount of
Registration
Fee
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Common stock, par value $.001 per share
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3,223,558 shares
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$
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2.21
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$
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7,124,063.80
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$
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816.42(4)
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(1)
(2)
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There is also being registered hereunder an indeterminate number
of additional shares of common stock as shall be issuable pursuant to Rule 416 to prevent dilution resulting from stock splits,
stock dividends or similar transactions.
Includes (a) 3,123,558 shares of common stock currently outstanding
and (b) 100,000 shares of common stock issuable upon exercise of warrants.
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(3)
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Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c) of the Securities Act based upon a $2.21 per share average of high and low prices of the registrant’s common stock on the NYSE Amex on April 3, 2012.
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(4)
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Previously paid
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The registrant hereby amends this registration
statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment
which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant
to said Section 8(a), may determine.
The information contained in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
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PROSPECTUS SUBJECT TO COMPLETION,
DATED APRIL 10, 2012
3,223,558 Shares
Common Stock
This prospectus relates to a total of 3,223,558
shares of our common stock, of which 3,123,558 shares of common stock are currently outstanding and 100,000 shares of common stock
are issuable upon exercise of warrants. We are filing the registration statement of which this prospectus forms a part in order
to fulfill contractual obligations that we have to certain selling stockholders. All of the outstanding shares and warrants described
above were previously issued in private placement transactions completed prior to the filing of the registration statement of which
this prospectus forms a part. We will not receive any proceeds from the disposition of such shares.
Our common stock is traded on NYSE
Amex under the symbol “SYN”. On April 9, 2012, the last reported sale price for the common stock was $2.05 per share.
We urge prospective purchasers of our common stock to obtain current information about the market prices of our common stock.
The prices at which the selling stockholders may sell the shares of common stock in this offering will be determined by the prevailing
market price for the shares of common stock or in negotiated transactions.
Our executive offices are located at 3985 Research Park Drive,
Suite 200, Ann Arbor, Michigan 48108. Our telephone number is (734) 332-7800.
Investing in our common stock involves
risks. Risks associated with an investment in our common stock are described in “Risk Factors” on page 10.
Neither the Securities and Exchange
Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy
of the prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is April
__, 2012.
TABLE OF CONTENTS
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Page
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About this Prospectus
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1
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The Offering
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1
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Prospectus Summary
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1
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Risk Factors
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10
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Special Note Regarding Forward-Looking Statements
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20
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Use of Proceeds
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21
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Selling Stockholders
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21
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Plan of Distribution
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22
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Legal Matters
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23
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Experts
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23
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Where You Can Find More Information
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23
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Incorporation of Certain Documents by Reference
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23
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Disclosure of Commission Position on Indemnification for Securities Act Liabilities
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24
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The registration statement containing
this prospectus, including the exhibits to the registration statement, provides additional information about us and the common
stock offered under this prospectus. The registration statement, including the exhibits and the documents incorporated herein by
reference, can be read on the Securities and Exchange Commission website or at the Securities and Exchange Commission offices mentioned
under the heading “Where You Can Find More Information.”
ABOUT THIS PROSPECTUS
This prospectus is not an offer or solicitation
in respect to these securities in any jurisdiction in which such offer or solicitation would be unlawful. This prospectus
is part of a registration statement that we filed with the Securities and Exchange Commission. The registration statement
that contains this prospectus (including the exhibits to the registration statement) contains additional information about our
company and the securities offered under this prospectus. That registration statement can be read at the Securities
and Exchange Commission website or at the Securities and Exchange Commission’s offices listed under the heading “Where
You Can Find More Information.” We have not authorized anyone else to provide you with different information or
additional information. You should not assume that the information in this prospectus, or any supplement or amendment
to this prospectus, is accurate at any date other than the date indicated on the cover page of such documents.
The Offering
Common stock offered by selling stockholders:
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3,223,558 shares
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Use of proceeds:
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We will not receive any proceeds from the sale of shares in this offering.
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NYSE Amex Symbol:
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SYN
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PROSPECTUS SUMMARY
The following is a summary of this prospectus. Because
it is only a summary, it does not contain all of the detailed information contained elsewhere in this prospectus or in the documents
incorporated by reference into this prospectus or included as exhibits to the registration statement of which this prospectus is
a part. Accordingly, you should carefully review this prospectus, including all documents incorporated by reference
into this prospectus, in its entirety. Unless otherwise indicated, “Synthetic Biologics,” “Synthetic”
“we,” “us,” and “our” refer to Synthetic Biologics, Inc., a Nevada corporation, and each of
its subsidiaries, considered as a single enterprise.
We are a biotechnology company focused
on the development of synthetic DNA-based therapeutics and innovative disease-modifying medicines for serious illnesses. Our initial
synthetic biologic product candidate is intended to treat pulmonary arterial hypertension (PAH), a serious life-threatening lung
disease, by locally delivering therapeutic DNA to the lungs of PAH patients and controlling long-term expression of such DNA via
an oral daily pill. We also intend to expand new and existing collaborations in the area of DNA-based therapeutics. In addition,
we have several small molecule clinical-stage programs, the majority of which are being funded, or partially funded, by grants,
charitable organizations and corporate partners. In this area we are developing, or have partnered the development of, product
candidates to treat relapsing-remitting multiple sclerosis (MS), cognitive dysfunction in MS, fibromyalgia and amyotrophic lateral
sclerosis (ALS).
Product Pipeline:
Synthetic Biologics:
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Our initial synthetic biologic
product candidate is intended to treat PAH, a serious life-threatening lung disease. This product is designed to deliver DNA that
encodes a therapeutic protein called prostacyclin synthase (PGIS) locally to the pulmonary arteries of PAH patients via a single
procedure, and, via an oral daily pill, control the long-term local expression of such therapeutic protein. We are developing this
initial product candidate pursuant a global exclusive channel collaboration that we entered into with the private synthetic biology
company Intrexon Corporation (Intrexon) in November 2011. As part of this collaboration, we have access to Intrexon's UltraVector
®
platform and RheoSwitch Therapeutic System
®
for this product application. We anticipate that by continuously producing
and delivering prostacyclin directly where it is needed, in the pulmonary arteries of PAH patients, this product candidate may
overcome the dose limiting side effects of systemic prostacyclin treatments for PAH, a mainstay of PAH treatment. According to
GlobalData, the global market for PAH treatments is estimated to exceed $3.6 billion by 2015.
(UltraVector
®
and RheoSwitch Therapeutic System
®
are registered trademarks of Intrexon Corporation)
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Funded/Small Molecule Clinical Programs:
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Trimesta
TM
(oral estriol) is being developed as an oral once-daily treatment for relapsing-remitting MS in women. Patient enrollment of 164 patients is complete in this randomized, double-blind, placebo-controlled Phase II clinical trial being conducted at 15 centers in the U.S. Patients are being dosed and monitored for two years. This clinical trial is supported by grants exceeding $8 million, which should be sufficient to fund the trial through completion. Current sales of injectable disease-modifying therapies for MS are estimated at $8.9 billion annually. According to various reports, sales of oral disease-modifying therapies for MS, of which Trimesta™, if and when approved, would be in such class, are anticipated to grow from $500 million in 2010 to $5 billion annually by 2017.
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Trimesta
TM
(oral estriol)
is also being developed for the treatment of cognitive dysfunction in female MS patients. In January 2012, patient enrollment began
in a randomized, double-blind, placebo-controlled Phase II clinical trial being conducted at University of California, Los Angeles
(UCLA). The majority of the costs of this trial are being funded by grants from foundations and charitable organizations and we
have pledged approximately $500,000 to UCLA to partially fund this trial payable over three years. An estimated 50-65% of MS patients
are expected to develop disabilities due to cognitive dysfunction and there is currently no approved treatment.
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Effirma
TM
(flupirtine) is being developed for the treatment of fibromyalgia. On May 6, 2010, we entered into a sublicense agreement with Meda AB, a multi-billion dollar international pharmaceutical company, covering all of our patents’ rights on the use of flupirtine for fibromyalgia in the U.S., Canada and Japan. According to Meda’s 2010 Annual Report, flupirtine for fibromyalgia is currently in Phase II development. The sublicense agreement provides that all ongoing and future development costs are to borne by Meda and we are entitled to receive certain payments if milestones are achieved and royalties on sales. Based on an estimated annual price of $1,200 per fibromyalgia patient, we estimate that the total market potential in the U.S. is $6 billion.
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AEN-100 (gastroretentive zinc acetate) is being developed under an investigator-initiated Investigational New Drug (IND) application for the treatment of ALS, also known as Lou Gehrig’s disease. We intend to sponsor a multi-center, double-blind, placebo-controlled, adaptively designed Phase II/III clinical trial in ALS patients. It is anticipated that the clinical trial will comprise two phases. The first phase of the trial is anticipated to enroll at least 65 patients randomized to receive either AEN-100 or placebo for a period of six months at which time the average change in functional rating between the groups will be compared via an interim analysis conducted on a blinded basis. Should the interim analysis meet the threshold criteria in favor of the treatment group, the second phase of the study will be initiated and will seek to enroll approximately 50 additional subjects to receive treatment for nine months. This study is intended to be conducted by PNA Center for Neurological Research (PNA) which previously sponsored and completed a successful pilot Phase I/II study of oral zinc therapy for ALS. Separately, PNA intends to conduct a Phase I study of AEN-100 in normal volunteers prior to initiating the Phase II/III clinical trial in ALS patients. We have committed to support approximately $400,000 to PNA for the first phase of the Phase II/III clinical trial, payable based upon study enrollment and milestones. There is only one approved therapy for ALS, the efficacy of which is considered to be marginal. Based on an estimated annual price of $10,000 per ALS patient, we estimate that the total market potential in the U.S. is $300 million.
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Product Candidates and Medical Indications
Synthetic Biologic Products
We are engaged in the emerging field of
synthetic biology directed for the purpose of developing new human therapeutic products. Synthetic biology in an emerging field
that combines molecular biology and automation to design, optimize and construct new biological systems and functions. These technologies
utilize a combination of automated processes including, DNA sequencing, computer-aided design, DNA synthesis, fabrication of modular
transgenes and high throughput testing to create and optimize biologic products.
Our initial efforts in this area are being
conducted in collaboration with Intrexon, and are directed towards the design, optimization and development of synthetic DNA-based
therapeutic product candidates utilizing Intrexon’s UltraVector
®
platform for the treatment of PAH. Synthetic
DNA-based therapeutics comprise constructs of DNA that can be administered to patients via a single procedure. Once introduced,
they are intended to continuously produce therapeutic proteins
in vivo
in a controllable and localized fashion for up to
a period of years.
An important feature of our product candidates
developed in collaboration with Intrexon may be the incorporation of Intrexon’s RheoSwitch Therapeutic System
®
.
Such system is intended to provide unprecedented control of therapeutic protein expression through the use of a highly specific
orally available activating ligand that can be taken by patients on a daily basis as one or more pills. In this way, the levels
of
in vivo
protein expression may be adjusted from time to time by treating physicians through simple dose adjustment of
the oral activating ligand. Such system also provides an important safety mechanism not previously available in gene therapy clinical
trials since in the absence of taking an oral pill, protein expression would not be expected to occur.
Pulmonary Arterial Hypertension (PAH)
Synthetic DNA-based Therapy
Disease
PAH is a progressive, disabling and life-threatening
disorder characterized by abnormally high blood pressure (hypertension) in the pulmonary artery, the blood vessel that carries
blood from the heart to the lungs. Hypertension occurs when most of the very small arteries throughout the lungs narrow in diameter,
therefore constricting blood flow through the lungs. The constriction of blood flow causes the pressure to increase in the pulmonary
artery and in the right ventricle (the heart chamber that pumps blood into the pulmonary artery). Signs and symptoms of PAH take
place when the increased pressure cannot overcome the constriction and there is insufficient blood flow to the body. Shortness
of breath during exertion and fainting spells are the most common early symptoms of PAH. Despite current treatments, PAH generally
has a very poor outcome and is associated with high rates of mortality within three to five years of diagnosis.
Synthetic DNA-based Therapeutic for
PAH
Our initial synthetic DNA-based
therapeutic product candidate is intended for the treatment of PAH, a serious life-threatening lung disease. This product candidate
is designed to deliver DNA that encodes a therapeutic protein called PGIS locally to the pulmonary arteries of PAH patients via
a single pulmonary catheter procedure and via an oral daily pill, control the long-term local expression of such therapeutic protein.
We are developing this initial
product candidate in collaboration with Intrexon. Under the collaboration, we intend to utilize Intrexon's advanced transgene engineering
platform for the controlled, precise and continuous
in vivo
cellular production of PGIS. PGIS is a specific effector enzyme
that regulates the production of prostacyclin, a potent mediator of arterial dilation that also prevents smooth muscle proliferation
and arterial wall thickening. PGIS expression is decreased in the lungs of PAH patients and deficiency in prostacyclin production
is strongly implicated in PAH. We anticipate that by continuously producing and delivering prostacyclin directly where it is needed,
in the pulmonary arteries of PAH patients via PGIS, this product candidate may overcome the dose limiting side effects of systemic
prostacyclin-based treatments for PAH. While systemic prostacyclin-based treatments for PAH are currently a mainstay of PAH therapy,
their considerable systemic side effects limit their dose and ultimate long-term utility.
The global market potential for the treatment
of PAH is estimated to be up to $3.6 billion by 2015, according to GlobalData, Pulmonary Arterial Hypertension (PAH) – Drug
Pipeline Analysis and Market Forecasts for 2016.
Relapsing-Remitting Multiple Sclerosis
(MS) in Women
Trimesta (oral estriol)
Disease
MS is a progressive neurological disease
in which the body loses the ability to transmit messages along central nervous system nerve cells, leading to a loss of muscle
control, paralysis, cognitive impairment and in some cases death. According to the National Multiple Sclerosis Society (NMSS),
currently, more than 2.5 million people worldwide (approximately 400,000 patients in the U.S. of which 70% are estimated to be
women) have been diagnosed with MS. Young adults, ages 20 to 50, and two to three times as many women than men are predominantly
diagnosed with MS. According to the NMSS, approximately 85% of MS patients are initially diagnosed with the relapsing-remitting
form, compared to 10-15% with other progressive forms.
There are currently eight Food &
Drug Administration (FDA) approved therapies for the treatment of relapsing-remitting MS: Betaseron
®
, Rebif
®
,
Avonex
®
, Novantrone
®
, Copaxone
®
, Tysabri
®
, Gilenya
®
and
Extavia
®
. These therapies provide only a modest benefit for patients with relapsing-remitting MS and therefore serve
to only delay progression of the disease. All of these drugs except Gilenya
®
require frequent (daily, weekly &
monthly) injections (or infusions) on an ongoing basis and can be associated with unpleasant side effects (such as flu-like symptoms),
high rates of non-compliance among users, and eventual loss of efficacy due to the appearance of resistance in approximately 30%
of patients. Despite the availability of multiple FDA-approved therapies for the treatment of relapsing-remitting MS, the disease
is highly underserved and exacts a heavy economic toll.
Current sales of injectable disease-modifying
therapies for MS are estimated at $8.9 billion annually. According to various reports, sales of oral disease-modifying therapies
for MS, of which Trimesta™, if and when approved, would be in such class, are anticipated to grow from $500 million in 2010
to in excess of $5 billion annually by 2017.
Background
It has been scientifically documented that
pregnant women with certain autoimmune diseases experience a spontaneous reduction of disease symptoms during pregnancy, particularly
in the third trimester. The PRIMS (Pregnancy In MS) study, a landmark clinical study published in the
New England Journal of
Medicine
followed 254 women with MS during 269 pregnancies and for up to one year after delivery. The PRIMS study demonstrated
that relapse rates were significantly reduced by 71 percent (p < 0.001) through the third trimester of pregnancy compared to
pre-pregnancy-rates, and that relapse rates increased by 120 percent (p < 0.001) during the first three months after birth (post-partum)
before returning to pre-pregnancy rates. It has been hypothesized that the female hormone, estriol, produced by the placenta during
pregnancy, plays a role in “fetal immune privilege”, a process that prevents a mother’s immune system
from attacking and rejecting her fetus. Maternal levels of estriol increase in a linear fashion through the third trimester
of pregnancy until birth, whereupon they abruptly return to low circulating levels. The anti-autoimmune effects of esteriol is
thought to be responsible for the therapeutic effects of pregnancy on MS.
Rhonda Voskuhl, M.D., Director, UCLA MS
program, UCLA Department of Neurology, has found that pregnancy levels of estriol have potent immunomodulatory effects. She further
postulated and tested in pilot clinical studies that oral doses of estriol may have a therapeutic benefit when administered to
non-pregnant female MS patients by, in essence, mimicking the spontaneous reduction in relapse rates seen in MS patients during
pregnancy.
Estriol has been approved and marketed
for over 40 years throughout Europe and Asia for the oral treatment of post-menopausal symptoms. It has never been approved by
the U.S. FDA for any indication.
Clinical Development
Our Trimesta (oral estriol) drug candidate
is for the treatment of relapsing-remitting MS in women. An investigator-initiated, 10-patient, 22-month, single-agent, crossover
clinical trial to study the therapeutic effects of 8 mg of oral Trimesta taken daily in non-pregnant female relapsing-remitting
MS patients was completed in the U.S. The total volume and number of gadolinium-enhancing lesions were measured by brain magnetic
resonance imaging (an established neuroimaging measurement of disease activity in MS). Over the next three months of treatment
with Trimesta, the median total enhancing lesion volumes decreased by 79% (p = 0.02) and the number of lesions decreased by 82%
(p = 0.09). They remained decreased during the next 3 months of treatment, with lesion volumes decreased by 82% (p = 0.01), and
numbers decreased by 82% (p =0.02). Following a six-month drug holiday during which the patients were not on any drug therapies,
median lesion volumes and numbers returned to near baseline pretreatment levels. Trimesta therapy was reinitiated during a four-month
retreatment phase of this clinical trial. The relapsing-remitting MS patients again demonstrated a decrease in enhancing lesion
volumes of 88% (p = 0.008) and a decrease in the number of lesions by 48% (p = 0.04) compared with original baseline scores.
A Phase II randomized, double-blind, placebo-controlled
clinical trial is currently underway at 15 centers in the U.S. The purpose of this clinical trial is to study whether 8 mg of oral
Trimesta taken daily over a two year period will reduce the rate of relapses in a large population of female patients with relapsing-remitting
MS. Investigators are administering either Trimesta or matching placebo, in addition to a standard of care, glatiramer acetate
(Copaxone
®
) injections, an FDA-approved therapy for MS, to women between the ages of 18 to 50 who have been recently
diagnosed with relapsing-remitting MS. The primary endpoint in this clinical trial being run under an investigator-initiated IND
application, is relapse rates at two years. As of January 23, 2012, 164 patients have been enrolled in the clinical trial and the
trial enrollment has been closed. The patients will be dosed and monitored for two years.
With over $8 million in grant funding to
date, the ongoing Trimesta clinical trial should be funded to its completion.
Cognitive Dysfunction in Multiple Sclerosis
Trimesta (oral estriol)
Disease
According to the NMSS and the Multiple
Sclerosis Society of Canada publication,
Hold that Thought! Cognition and MS
, it is fairly common for people with MS to
complain of problems remembering things, finding the right words, concentrating on a task or something they are reading, or following
a conversation. These are all cognitive symptoms of MS. Of those affected by MS, 50-65% have cognitive dysfunction issues. Despite
the fact that most symptoms are mild to moderate, they can have a significant impact on a person’s ability to normally function.
The overall cognitive dysfunction can be described as a reduction in mental “sharpness.”
The major areas of cognition that can be
dysfunctional include what are termed complex attention and executive functions
.
Complex attention involves multitasking,
the speed with which information can be processed, learning and memory, and perceptual skills; executive functions include problem
solving, organizational skills, the ability to plan, and word finding. Just as the nature, frequency, and severity of MS-related
physical problems can widely vary, not all people with MS will display these cognitive issues, and no two people will experience
exactly the same types or severity of problems.
Background
In the investigator-initiated, 10-patient,
22-month, single-agent, crossover clinical trial conducted by Dr. Rhonda Voskuhl, a statistically significant 14% improvement from
baseline in Paced Auditory Serial Addition Test (PASAT) cognitive testing scores (p = 0.04) was observed in relapsing-remitting
MS patients after six months of Trimesta therapy. PASAT is a routine cognitive test performed in patients with a wide variety of
neuropsychological disorders such as MS. The PASAT scores are expressed as a mean percent change from baseline.
Clinical Development
Our Trimesta (oral estriol) drug candidate
is also being developed for the treatment of cognitive dysfunction in female MS patients. This randomized, double-blind, placebo-controlled
Phase II clinical trial to evaluate Trimesta’s potential neuroprotective and therapeutic effect on cognitive dysfunction
in female MS patients is currently enrolling relapsing-remitting or secondary-progressive female MS patients at UCLA. Up to 64
patients between the ages of 18 and 50 will be randomized 1:1 into the treatment and placebo groups. Dr. Voskuhl will administer
either oral Trimesta or a matching placebo, in addition to any FDA-approved MS treatment. Each patient will be dosed and monitored
for one year after being enrolled. The primary endpoint in this clinical trial being run under an investigator-initiated IND application
is expected to be improvement in PASAT cognitive testing scores versus matching placebo.We and a private foundation have pledged
to equally support this new clinical trial, and we will also provide Trimesta drug supply. The trial also received contributions
from several other supporters.
Fibromyalgia
Effirma (flupirtine)
Disease
Fibromyalgia is a chronic and debilitating
condition characterized by widespread pain and stiffness throughout the body, often accompanied by severe fatigue, insomnia and
mood symptoms. Fibromyalgia affects an estimated 3-6% of the population worldwide, including an estimated 10 million people in
the U.S. There are presently three FDA products approved for this indication in the U.S. – Lyrica
®
, Cymbalta
®
and Savella
®
. Flupirtine is differentiated from these products in that it employs a unique mode of action.
Based on an estimated annual price of $1,200 per fibromyalgia
patient, we estimate that the total market potential in the U.S. is $6 billion.
Clinical Development
Our Effirma (flupirtine) product candidate
is for the treatment of fibromyalgia. Effirma is a selective neuronal potassium channel opener that also has NMDA receptor antagonist
properties. Effirma is a non-opioid, non-NSAID, non-steroidal, analgesic. Preclinical data and clinical experience suggest that
Effirma should also be effective for neuropathic pain since it acts in the central nervous system via a mechanism of action distinguishable
from most marketed analgesics. Effirma is especially attractive because it operates through non-opiate pain pathways, exhibits
no known abuse potential, and lacks withdrawal effects. In addition, no tolerance to its antinocioceptive effects has been observed.
One common link between neuroprotection, nocioception and Effirma may be the N-methyl-D-aspartic acid glutamate system, a major
receptor subtype for the excitotoxic neurotransmitter, glutamate. Effirma has strong inhibitory actions on N-methyl-D-aspartic
acid-mediated neurotransmission. Flupirtine was originally developed by Asta Medica (subsequently acquired by Meda AB) and has
been approved and is marketed by Meda AB in Europe since 1984, as well as other countries, for the treatment of pain. It has never
been approved by the FDA for any indication.
Meda Corporate Partnership
On May 6, 2010, we entered into a sublicense
agreement with Meda AB, a multi-billion dollar international pharmaceutical company, pursuant to which Meda AB assumed all future
development costs and may commercialize flupirtine for fibromyalgia in the U.S. As consideration for such sublicense, we received
an up-front payment of $2.5 million and are entitled to milestone payments of $5 million upon the FDA’s acceptance of the
New Drug Application (NDA) for flupirtine for fibromyalgia and $10 million upon FDA approval of such NDA. Pursuant to the sublicense
agreement, we will also receive a 7% royalty on net sales of flupirtine for fibromyalgia in the U.S., Canada and Japan, with such
royalties being shared equally with our licensor, McLean Hospital, a Harvard teaching hospital.
Flupirtine is approved and marketed by
Meda AB and its distributors in Europe and other countries for indications other than fibromyalgia and has been prescribed to millions
of patients worldwide. We believe that such substantial human experience with flupirtine should greatly assist the FDA in its evaluation
of the safety of flupirtine upon review of an NDA of flupirtine for fibromyalgia. According to Meda’s 2010 Annual Report,
flupirtine for fibromyalgia is currently in Phase II development.
Amyotrophic Lateral Sclerosis (ALS)
AEN-100 (gastroretentive zinc acetate)
Disease
ALS, also known as Lou Gehrig’s Disease,
is a devastating progressive neurodegenerative disease that affects the motor nerve cells in the brain and the spinal cords. It
is estimated that as many as 30,000 Americans may have the disease at any given time. The progressive degeneration of the motor
neurons in ALS eventually leads to the death of the patient. Motor neurons reach from the brain to the spinal cord and from the
spinal cord to the muscles throughout the body. When motor neurons die, the ability of the brain to initiate and control muscle
movement is lost. With voluntary muscle action progressively affected, patients in the later stages of the disease may become totally
paralyzed. While non-invasive ventilation and gastrostomy tubes prolong life by 6-12 months, the average lifespan from time of
symptom onset is 2-5 years. Currently, RILUTEK
®
is the only FDA-approved drug for ALS. RILUTEK is a N-methyl d-aspartate
(NMDA) receptor antagonist and has been shown to prolong life in patients with ALS by 3 months. Presently, there is no cure for
ALS.
Based on an estimated annual price of $10,000 per ALS patient,
we estimate that the total market potential in the U.S. is $300 million.
Background
Clinical investigators at the PNA cite
multiple lines of scientific research that suggest a potential benefit of zinc therapy for ALS patients, including:
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The use of zinc therapy for ALS patients is supported in animal models of ALS. Approximately 2% of ALS diagnoses are associated with a mutation in the copper/zinc superoxide dismutase (SOD1) gene. In ALS mutant SOD1 animal models, zinc supplementation has been shown to delay death.
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Genetic mutations affecting the ability of a protein known as copper/zinc SOD1 to properly bind zinc are associated with the familial form of ALS, which shares many of the same features as the more prevalent sporadic form of ALS.
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Zinc is an important modifier of glutamate toxicity, a neurotransmitter linked to cell death in ALS patients.
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Clinical Development
Preparations are underway to evaluate the
safety and efficacy of our proprietary drug candidate, AEN-100, a gastroretentive, sustained-release zinc-based tablet, in a multi-center,
double-blind, placebo-controlled clinical trial in ALS patients intended to be conducted under an investigator-initiated IND application.
Manufacturing of AEN-100 study material has been completed and stability studies are ongoing.
We intend to provide the study material
and support a multi-center, double-blind, placebo-controlled, adaptively designed Phase II/III clinical trial in ALS patients to
be conducted by PNA. It is anticipated that the Phase II/III clinical trial will comprise two phases. The first phase of the trial
is anticipated to enroll at least 65 patients randomized to receive either AEN-100 or placebo for a period of six months at which
time the average change in functional rating between the groups will be compared via an interim analysis conducted on a blinded
basis. Should the interim analysis meet the threshold criteria in favor of the treatment group the second phase of the study will
be initiated and seek to enroll up to a total of 114 patients, inclusive of the 65 subjects from the first phase who continue to
meet eligibility criteria at such time, to receive treatment for nine months.
In November 2011, PNA reported top-line
results from its pilot Phase I/II open label, three month safety study of oral high dose zinc therapy in ALS. The clinical study
met its primary outcome as no safety issues related to zinc therapy were observed. In addition, an average decrease in the monthly
rate of disease progression was observed in the ALS patients on zinc therapy, compared to published historical controls, as well
as compared to the average monthly rate of disease progression of the subjects prior to enrollment in the study. AEN-100 is not
the same zinc formulation untilized by PNA in its previously completed Phase I/II safety study of zinc for ALS, and PNA intends
to conduct a Phase I study of AEN-100 in normal volunteers prior to initiating the Phase II/III clinical trial in ALS patients.
We have committed to support approximately
$400,000 to PNA for the first phase of the Phase II/III clinical trial, payable based upon study enrollment and completion milestones.
Intellectual Property
Our goal is to (a) obtain, maintain, and
enforce patent protection for our products, formulations, processes, methods, and other proprietary technologies, (b) preserve
our trade secrets, and (c) operate without infringing on the proprietary rights of other parties, worldwide. We seek, where appropriate,
the broadest intellectual property protection for product candidates, proprietary information, and proprietary technology through
a combination of contractual arrangements and patents. Below is a description of our license and development agreements relating
to our product candidates.
McLean Hospital Exclusive License Agreement and Meda AB Sublicense
Agreement
In 2005, as amended in 2007 and 2010, we
entered into an exclusive license agreement with the McLean Hospital, a Harvard University teaching hospital, relating to U.S.
Patent No. 6,610,324 and its foreign equivalents, entitled “Flupirtine in the treatment of fibromyalgia and related conditions.”
Pursuant to this agreement, we paid an upfront fee and back patent costs of approximately $62,000 and agreed to pay McLean royalties
on net sales of oral flupirtine equal to 3.5% of net sales of oral flupirtine for indications covered by the issued patents, reduced
to 1.75% if we have a license to other intellectual property covering those indications. In addition, we agreed to use our best
efforts to commercialize oral flupirtine for the therapeutic uses embodied in the patent applications. Furthermore, we agreed to
reimburse McLean Hospital all future patent costs and pay the following milestone payments: $150,000 upon the initiation of a pivotal
Phase III clinical trial of oral flupirtine; $300,000 upon the filing of an NDA for oral flupirtine; and $600,000 upon FDA approval
of oral flupirtine. The due diligence requirements of the exclusive license agreement were amended in April of 2010 and further
amended by a Non-Disturbance Agreement that was signed with McLean Hospital, Meda and us. The agreement remains in effect
until the later of (i) the date all issued patents and filed patent applications within the Patent Rights (as defined in the agreement)
expire or are abandoned and (ii) one year after the last Commercial Sale (as defined in the agreement) for which royalty is due
or ten years after expiration or abandonment date set forth in clause (i) above, whichever is earlier. We have the right to
terminate the agreement at any time upon 90 days notice. In addition, McLean may terminate the agreement (i) upon 10 days notice
for nonpayment unless payment is made within such 10 days, (ii) immediately upon written notice if we fail to maintain required
insurance or become insolvent, make an assignment for the benefit of creditors or petition for bankruptcy is filed for or against
us or (ii) if we, our affiliates or our sublicensees default in performance of their obligations under the agreement and such default
is not cured within 60 days.
Effective May 6, 2010, we entered into
a Sublicense Agreement with Meda AB of Sweden. Pursuant to this agreement, Meda has been granted an exclusive sublicense to all
of our patents covering the use of oral flupirtine for fibromyalgia. These patents have been issued in the U.S. and are pending
in Canada and Japan (the “Territory”). This agreement provides that Meda will assume all future development costs for
the commercialization of oral flupirtine for fibromyalgia. As consideration for this sublicense, we received an up-front payment
of $2.5 million upon execution of this agreement and are entitled to milestone payments of $5 million upon filing of an NDA
with the FDA for oral flupirtine for fibromyalgia and $10 million upon marketing approval. This agreement also provides that we
are entitled to receive royalties of 7% of net sales of oral flupirtine approved for the treatment of fibromyalgia covered by issued
patent claims in the Territory. Pursuant to the terms of this agreement with our university licensor, we are obligated to share
half of the royalties we receive with the university licensor, McLean Hospital, and we were obligated to pay them $375,000 upon
receipt of an upfront payment, which we did pay in May 2010 when we received the payment from Meda. The agreement continues in
effect country by country until the earlier of the expiration of the Royalty Period (as defined in the agreement) or the termination
of the McLean license. Meda has the right to terminate the agreement at any time upon 90 days notice. In addition, a party
may terminate the agreement upon 30 days notice if the other party breached material obligations and such breach is not cured within
a period of time set forth in the agreement. The parties also have the right to terminate the agreement upon 60 days notice in
the event of the filing by a party of a bankruptcy petition, the filing of an involuntary petition not dismissed within 60 days,
a party proposes a written agreement of composition or extension of its debt, a party becomes Insolvent (as defined in the agreement),
liquidates, dissolves, ceases to conduct business or makes an assignment for the benefit of creditors. Upon a termination,
all licenses revert to us.
The Regents of University of California License Agreement
In July 2005, we were granted an exclusive
worldwide license agreement with the Regents of the University of California (Regents) relating to issued U.S. Patent No. 6,936,599
and pending patent applications covering the uses of the drug candidate Trimesta (oral esteriol). Pursuant to this agreement, we
paid an upfront license fee and reimbursed patent expenses totaling approximately $61,000 and agreed to pay a license fee of $25,000
during 2006. We also agreed to pay annual maintenance fees, milestone payments totaling $750,000 that are payable on filing
an NDA, and on approval of an NDA with the FDA, as well as royalties on net sales of Trimesta covered by the licensed patents.
We may be permitted to partially pay milestone payments in the form of equity. The duration of this agreement is from the
effective date of July 11, 2005 until the last-to-expire patent in Regent’s Patent Rights, or until the last patent application
licensed under this agreement is abandoned and no patent in Regent’s Patent Rights ever issues. We have the right to
terminate this agreement at any time and termination will be effective 90 days after the effective date of the termination notice. The
Regents may terminate the agreement with a written notice of default if we violate or fail to perform any material term or covenant
of this agreement. However, we have 60 days after the effective date of the notice of default to repair the default.
The Intrexon Collaboration
On November 18, 2011, we entered into a
Channel Agreement with Intrexon (the “Channel Agreement”) that governs an “exclusive channel collaboration”
arrangement in which we intend to use Intrexon’s technology directed towards the production of PGIS, through the use of
in
vivo
conditionally regulated embedded controllable bioreactors for the treatment of PAH. The Channel Agreement establishes
committees comprised of our and Intrexon representatives that will govern activities related to the PAH program in the areas of
project establishment, chemistry, manufacturing and controls, clinical and regulatory matters, commercialization efforts and intellectual
property.
The Channel Agreement grants us a worldwide
license to use specified patents and other intellectual property of Intrexon in connection with the research, development, use,
importing, manufacture, sale, and offer for sale of products involving the production of PGIS through the use of an
in vivo
conditionally regulated embedded controllable bioreactor for the treatment of PAH in humans. Such license is exclusive with respect
to any clinical development, selling, offering for sale or other commercialization of Products, and otherwise is non-exclusive.
We may not sublicense the rights described without Intrexon’s written consent.
Under the Channel Agreement, and subject
to certain exceptions, we are responsible for, among other things, the performance of the PAH program including the development,
commercialization and certain aspects of manufacturing products. Among other things, Intrexon is responsible for the costs of establishing
manufacturing capabilities and facilities for the bulk manufacture of products developed under the PAH program, certain other aspects
of manufacturing, costs of discovery-stage research with respect to platform improvements and costs of filing, prosecution and
maintenance of Intrexon’s patents.
Subject to certain expense allocations
and other offsets provided in the Channel Agreement, we will pay Intrexon 50% of the cumulative net quarterly profits derived from
the sale of products, calculated on a product-by-product basis. We have likewise agreed to pay Intrexon 50% of quarterly revenue
obtained from a sublicensor in the event of a sublicensing arrangement. During the first 18 months, neither we nor Intrexon may
terminate the Channel Agreement, except under limited circumstances. Following the first 18 months, we may voluntarily terminate
the Channel Agreement upon 90 days written notice to Intrexon. Following the first 18 months, Intrexon may also terminate the Channel
Agreement if we elect not to pursue the development of a PAH program identified by Intrexon that is a “Superior Therapy”
as defined in the Channel Agreement.
Upon termination of the Channel Agreement,
we may continue to develop and commercialize any Product that, at the time of termination:
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is being commercialized by us,
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has received regulatory approval,
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is a subject of an application for regulatory approval that is pending before the applicable regulatory authority,
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is the subject of at least an ongoing Phase II clinical trial (in the case of a termination by Intrexon due to our uncured breach or a voluntary termination by us ), or an ongoing Phase I clinical trial in the Field (as defined in the Channel Agreement) (in the case of a termination by us due to an Intrexon uncured breach or a termination by Intrexon following an unconsented assignment by us or our election not to pursue development of a Superior Therapy), or
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we have spent at least $4.5 million developing.
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We will be obligated to pay 50% of net
profits or revenue with respect to these “retained” products, which will survive termination of the Channel Agreement.
As partial consideration for execution
of the Channel Agreement, we entered into a Stock Purchase Agreement with Intrexon pursuant to which we issued to Intrexon a number
of shares of our common stock equal to 9.995% of the number of shares of our common stock issued and outstanding following and
giving effect to such issuance (the “First Tranche”) at a purchase price equal to the $0.001 par value of such shares,
which issuance was deemed paid in partial consideration for the execution and delivery of the Channel Agreement. We also agreed
to issue additional shares of our common stock to Intrexon upon dosing of the first patient in a Phase II clinical trial sponsored
by us in the U.S., or similar study as the parties may agree in a country other than the U.S.
Under the Stock Purchase Agreement, Intrexon
is entitled, at its election, to:
(i) participate in our future securities
offerings that constitute “Qualified Financings” and purchase securities equal to 19.99% of the number of shares of
common stock or other securities sold in such offering. For this purpose, a “Qualified Financing” means a sale of our
common stock or equity securities convertible into our common stock in a public or private offering, raising gross proceeds of
at least $5 million, where the sale of shares is either registered under the Securities Act of 1933, as amended (the “Securities
Act”), at the time of issuance or we agree to register the resale of such shares, and
(ii) without restriction, purchase an additional
number of shares of our common stock in the open market, or otherwise, that do not exceed an additional 10% of the number of shares
of common stock then issued and outstanding.
The Stock Purchase Agreement contains a
standstill provision pursuant to which, among other things, Intrexon has agreed that, for a period of three years, subject to certain
exceptions and unless invited in writing by us to do so, neither Intrexon nor its affiliates will, directly or indirectly: (i)
effect or seek, initiate, offer or propose to effect, or cause or participate in any acquisition of our securities or assets; any
tender or exchange offer, merger, consolidation or other business combination involving us; any recapitalization, restructuring,
liquidation, dissolution or other extraordinary transaction with respect to us; or any “solicitation” of “proxies”
or consents to vote any of our voting securities, or in any way advise or, assist any other person in doing so; (ii) form, join
or in any way participate in a “group” with respect to any of our securities; (iii) otherwise act to seek to control
or influence the management, Board of Directors or our policies; (iv) take any action reasonably expected to force us to make a
public announcement regarding any such matters; or (v) enter into any agreements, discussions or arrangements with any third party
with respect to any of the foregoing.
In connection with the transactions contemplated
by the Stock Purchase Agreement, and pursuant to a Registration Rights Agreement that was executed and delivered by the parties
at the First Tranche closing, we agreed to file a “resale” registration statement (the “Registration Statement”)
registering the resale of the First Tranche shares within 120 days of the First Tranche closing.
AEN-100 – Gastroretentive Zinc Acetate
We intend to file for orphan drug designation
in the U.S. and Europe for AEN-100 (gastroretentive, sustained-release zinc-based tablets) for the treatment of ALS. ALS qualifies
as an “orphan disease” in that it affects less than 200,000 people in the U.S. Orphan drug designation provides for
seven years of market exclusivity following approval in the U.S. and ten years of market exclusivity following approval in Europe.
AEN-100, is also the subject of U.S. and international patent pending applications that may provide exclusivity beyond the expiration
of orphan drug exclusivity, such as published U.S. patent application Ser. No. 11/621,962 and corresponding international applications
that claim priority to January 10, 2006, and additional patent applications. On October 26, 2011, we received a final rejection
letter with regard to U.S. patent application Ser. No. 11/621,962. On February 15, 2012, we filed a Request for Continued Examination.
Our Executive Offices
Our principal executive offices are located
at 3985 Research Park Drive, Suite 200, Ann Arbor, Michigan 48108 and we also maintain executive offices in Rockville, Maryland.
RISK FACTORS THAT MAY AFFECT FUTURE
RESULTS
An investment in our common stock involves
a high degree of risk. You should carefully consider the risks described below and the other information before deciding to invest
in our common stock. The risks described below are not the only ones facing our company. Additional risks not presently known to
us or that we currently consider immaterial may also adversely affect our business. We have attempted to identify below the major
factors that could cause differences between actual and planned or expected results, but we cannot assure you that we have identified
all of those factors.
If any of the following risks actually happen, our business,
financial condition and operating results could be materially adversely affected. In this case, the trading price of our common
stock could decline, and you could lose all or part of your investment.
RISKS RELATING TO OUR COMPANY
We will need to raise additional
capital to operate our business.
With the exception of the quarter ended
June 30, 2010, we have experienced significant losses since inception and have a significant accumulated deficit. We expect to
incur additional operating losses in the future and therefore our cumulative losses to increase. To date, other than the licensing
fee we received from Meda AB for the development of and commercialization of Effirma (flupirtine) for fibromyalgia in the U.S.,
Canada and Japan and limited laboratory revenues from Adeona Clinical Laboratory, which we have recently sold, we have generated
very minimal revenues. Inasmuch as our sole source of revenue (with the exception of the Meda licensing fee) has been our laboratory
revenue and our laboratory was sold recently, we do not expect to derive revenue from any source in the near future until we or
our partners successfully commercialize our products. As of December 31, 2011, our accumulated deficit totaled approximately $51.9
million on a consolidated basis. Until such time as we receive approval from the FDA and other regulatory authorities for our product
candidates, we will not be permitted to sell our products and therefore will not have product revenues from the sale of products.
For the foreseeable future we will have to fund all of our operations and capital expenditures from equity and debt offerings,
cash on hand, licensing fees and grants. If our current cash, cash equivalents and short-term investments are not sufficient to
sustain our operations, we will need to seek additional sources of financing and such additional financing may not be available
on favorable terms, if at all. If we do not succeed in raising additional funds on acceptable terms, we may be unable to complete
planned preclinical and clinical trials or obtain approval of our product candidates from the FDA and other regulatory authorities.
In addition, we could be forced to discontinue product development, forego sales and marketing efforts, and forego licensing in
attractive business opportunities. Any additional sources of financing will likely involve the issuance of our equity or debt securities,
which will have a dilutive effect on our stockholders.
We have not been able to sustain
profitability.
Other than with respect to the quarter
ended June 30, 2010, we have a history of losses and we have incurred and continue to incur substantial losses and negative
operating cash flow. Even if we succeed in developing and commercializing one or more of our product candidates, we may still incur
substantial losses for the foreseeable future and may not sustain profitability. We also expect to continue to incur significant
operating and capital expenditures and anticipate that our expenses will substantially increase in the foreseeable future as we
do the following:
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continue to undertake preclinical development and clinical trials for our product candidates;
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seek regulatory approvals for our product candidates;
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develop our product candidates for commercialization;
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implement additional internal systems and infrastructure;
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lease additional or alternative office facilities; and
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hire additional personnel, including members of our management team.
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We may experience negative cash flow for the foreseeable future
as we fund our technology development with capital expenditures. As a result, we will need to generate significant revenues in
order to achieve and maintain profitability. We may not be able to generate these revenues or achieve profitability in the future.
Our failure to achieve or maintain profitability could negatively impact the value of our common stock and underlying securities.
Our research and development efforts
may not succeed in developing commercially successful products and technologies, which may limit our ability to achieve profitability.
We must continue to explore opportunities
that may lead to new products and technologies. To accomplish this, we must commit substantial efforts, funds, and other resources
to research and development. A high rate of failure is inherent in the research and development of new products and technologies.
Any such expenditures that we make will be made without any assurance that our efforts will be successful. Failure can occur at
any point in the process, including after significant funds have been invested.
Regardless of whether our clinical trials
are deemed to be successful, promising new product candidates may fail to reach the market or may only have limited commercial
success because of efficacy or safety concerns, failure to achieve positive clinical outcomes, inability to obtain necessary regulatory
approvals or satisfy regulatory criteria, limited scope of approved uses, excessive costs to manufacture, the failure to establish
or maintain intellectual property rights, or infringement of the intellectual property rights of others. Even if we successfully
develop new products or enhancements, they may be quickly rendered obsolete by changing customer preferences, changing industry
standards, or competitors' innovations. Innovations may not be quickly accepted in the marketplace because of, among other things,
entrenched patterns of clinical practice or uncertainty over third-party reimbursement. We cannot state with certainty when or
whether any of our products under development will be launched, whether we will be able to develop, license, or otherwise acquire
drug candidates or products, or whether any products will be commercially successful. Failure to launch successful new products
or new indications for existing products may cause our products to become obsolete, which may limit our ability to achieve profitability.
We have a limited operating history
on which investors can base an investment decision.
We have not yet demonstrated our ability
to perform the functions necessary for the successful commercialization of any of our product candidates. We have only recently
entered into the emerging field of synthetic biology, and there can be no assurance that we will be successful in commercializing
any products in such field. The successful commercialization of our product candidates will require us to perform a variety of
functions, including:
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continuing to undertake preclinical development and clinical trials;
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participating in regulatory approval processes;
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formulating and manufacturing products; and
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conducting sales and marketing activities.
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Our operations have been limited to organizing
and staffing our company, acquiring, developing, and securing our proprietary technology, and undertaking preclinical and clinical
trials of our principal product candidates. These operations provide a limited basis for you to assess our ability to commercialize
our product candidates and the advisability of investing in our securities.
The technology on which our channel
partnering arrangement with Intrexon is based on early stage technology in the field of synthetic DNA-based therapy.
Our exclusive channel collaboration arrangement
with Intrexon contemplates the use of Intrexon’s transgene engineering platform technology and regulatory control technology
for the
in vivo
cellular production of PGIS, a specific effector enzyme that regulates the production of prostacyclin. Such
technologies have a limited history of use in the design and development of human therapeutic product candidates and may therefore
involve unanticipated risks or delays.
DNA-based therapy has not yet been
proven to be successful.
The FDA has not yet approved any human
DNA-based therapy product for sale. The field of DNA-based therapy, also referred to as gene therapy or gene transfer, is experimental
and has not yet proven successful in many clinical trials. Clinical trials with DNA-based therapy have encountered a multitude
of significant technical problems in the past, including, unintended integration with host DNA, poor levels of protein expression,
transient protein expression, viral overload, immune reactions to either viral capsids utilized to deliver DNA, DNA itself, proteins
expressed or cells transfected with DNA. There can be no assurance that our preclinical animals studies or human clinical trials
will be successful or that we will receive the regulatory approvals necessary to initiate such studies. To the extent that we utilize
viral constructs or other systems to deliver our DNA-based therapies and same or similar delivery systems demonstrate unanticipated
and/or unacceptable side effects in preclinical or clinical trials conducted by ourselves or others we may be forced to, or elect
to, discontinue development of such product candidates.
We may not generate additional revenue
from our relationships with our corporate collaborators.
On May 6, 2010, we entered into a sublicense
agreement with Meda AB whereby we may receive milestone payments totaling $17.5 million (including an upfront payment of $2.5 million
that has already been received), plus royalties on our flupirtine program. There can be no assurance that Meda AB will successfully
develop flupirtine for fibromyalgia in the U.S., Canada or Japan that would allow us to receive such additional $15 million in
milestone payments and royalties on sales in connection with such agreement. The successful achievement of the various milestones
set forth in the sublicense agreement is not within our control and we will be dependent upon Meda AB for achievement of such milestones.
According to Meda’s 2010 Annual Report, flupirtine for fibromyalgia is currently in Phase II development.
We have experienced several management
changes.
We have had significant changes in management
in the past few years. Jeffrey Riley was appointed Chief Executive Officer and President on February 3, 2012; Mr. Riley remains
Chairman of our Board. Effective February 6, 2012, C. Evan Ballantyne was appointed Chief Financial Officer. James S. Kuo, M.D.,
served as Chief Executive Officer and President from February 6, 2010 until February 3, 2012. Max Lyon served as Chief Executive
Officer, President and director from June 26, 2009 until February 6, 2010. Changes in our key positions, as well as additions of
new personnel and departures of existing personnel, can be disruptive, might lead to additional departures of existing personnel
and could have a material adverse effect on our business, operating results, financial results and internal controls over financial
reporting.
We may not be able to retain rights
licensed to us by others to commercialize key products and may not be able to establish or maintain the relationships we need to
develop, manufacture, and market our products.
In addition to our own patent applications,
we also currently rely on licensing agreements with third party patent holders/licensors for our products. We have an exclusive
license agreement with the McLean Hospital relating to the use of flupirtine to treat fibromyalgia which was sublicensed to Meda
AB and an exclusive license agreement with the Regents of the University of California relating to our Trimesta technology. Each
of these agreements requires us or our sublicensee to use our best efforts to commercialize each of the technologies as well as
meet certain diligence requirements and timelines in order to keep the license agreement in effect. In the event we or our sublicensee
are not able to meet our diligence requirements, we may not be able to retain the rights granted under our agreements or renegotiate
our arrangement with these institutions on reasonable terms, or at all. Furthermore, we currently have very limited product development
capabilities, and limited marketing or sales capabilities. For us to research, develop, and test our product candidates, we would
need to contract with outside researchers, in most cases those parties that did the original research and from whom we have licensed
the technologies. Our exclusive channel collaboration agreement with Intrexon provides that Intrexon may terminate such agreement
if we do not perform certain specified requirements, including developing therapies considered superior.
We can give no assurances that any of our
issued patents licensed to us or any of our other patent applications will provide us with significant proprietary protection or
be of commercial benefit to us. Furthermore, the issuance of a patent is not conclusive as to its validity or enforceability, nor
does the issuance of a patent provide the patent holder with freedom to operate without infringing the patent rights of others.
We will incur additional expenses
in connection with our exclusive channel collaboration arrangement with Intrexon.
Pursuant to our exclusive channel collaboration
with Intrexon, we are responsible for future research and development expenses of product candidates developed under such collaboration,
the effect of which we expect will increase the level of our overall research and development expenses going forward. Although
all manufacturing, preclinical studies and human clinical trials are expensive and difficult to design and implement, costs associated
with the manufacturing, research and development of biologic product candidates are generally greater in comparison to small molecule
product candidates. We have added additional personnel and expect to add additional personnel to support our exclusive channel
collaboration with Intrexon.
Because our collaboration with Intrexon
is relatively new, we have only recently assumed development responsibility and costs associated with such program. In addition,
because development activities are determined pursuant to a joint steering committee comprised of Intrexon and ourselves and we
have limited experience, future development costs associated this program may be difficult to anticipate and exceed our expectations.
Our actual cash requirements may vary materially from our current expectations for a number of other factors that may include,
but are not limited to, unanticipated technical challenges, changes in the focus and direction of our development activities or
adjustments necessitated by changes in the competitive landscape in which we operate. If we are unable to continue to financially
support such collaboration due to our own working capital constraints, we may be forced to delay our activities. If we are unable
to obtain additional financing on terms acceptable to us or at all, we may be forced to seek licensing partners or discontinue
development.
Developments by competitors may render
our products or technologies obsolete or non-competitive.
Companies that currently sell or are developing
both generic and proprietary products to treat serious diseases include: Actelion Pharmaceuticals, Bayer Health Care, Biogen Idec,
Eli Lilly & Co., Genzyme, GlaxoSmithKline Pharmaceuticals, Merck & Co., Pfizer, Novartis, Teva Pharmaceuticals and United
Therapeutics. Many of our competitors have significant financial and human resources. The pulmonary arterial hypertension market
is highly competitive and several different product classes currently compete in this space, including prostacyclin-based therapies,
endothelin receptor antagonists and phosphodiesterase type 5 inhibitors. Prostacyclin-based therapies for PAH are available in
a number of delivery formats, including intravenous, subcutaneous and inhaled routes and an oral prostacyclin-based product candidate
is currently under NDA review in the U.S. In addition, academic research centers may develop technologies that compete with our
Trimesta, sustained-release zinc preparation - AEN-100, and flupirtine technologies. Should clinicians or regulatory authorities
view these therapeutic regiments as more effective than our products, this might delay or prevent us from obtaining regulatory
approval for our products, or it might prevent us from obtaining favorable reimbursement rates from payers, such as Medicare, Medicaid
and private insurers.
We operate in a highly competitive
environment
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The pharmaceutical and biotechnology industries
are characterized by rapidly evolving technology and intense competition. Our competitors include major multi-national pharmaceutical
companies and biotechnology companies developing both generic and proprietary therapies to treat serious diseases. Many of these
companies are well-established and possess technical, human, research and development, financial, and sales and marketing resources
significantly greater than ours. In addition, many of our potential competitors have formed strategic collaborations, partnerships
and other types of joint ventures with larger, well established industry competitors that afford these companies potential research
and development and commercialization advantages in the therapeutic areas we are currently pursuing.
Academic research centers, governmental
agencies and other public and private research organizations are also conducting and financing research activities which may produce
products directly competitive to those being developed by us. In addition, many of these competitors may be able to obtain patent
protection, obtain FDA and other regulatory approvals and begin commercial sales of their products before us.
Competitors could develop and/or
gain FDA approval of our products for a different indication.
Since we do not have composition of matter
patent claims for flupirtine, estriol or zinc acetate, others may obtain approvals for other uses of these products that are not
covered by our issued or pending patents. For example, the active ingredients in both Effirma (flurpirtine) and Trimesta (estriol)
have been approved for marketing in overseas countries for different uses and an oral immediate release form of zinc is approved
in the U.S. and Europe for the treatment of Wilson’s disease. Other companies, including the original developers or licensees
or affiliates may seek to develop Effirma or Trimesta or their respective active ingredient(s) for other uses in the U.S. or any
country we are seeking approval for. We cannot provide any assurances that any other company may obtain FDA approval for products
that contain flupirtine, estriol or zinc in various formulations or delivery systems that might adversely affect our ability or
the ability of Meda to develop and market these products in the U.S. We are aware that other companies have intellectual property
protection using the active ingredients and have conducted clinical trials of flupirtine, estriol and zinc for different applications
than what we are developing. Many of these companies may have more resources than us. We cannot provide any assurances that our
products will be FDA-approved prior to our competitors.
If a product containing our active ingredients
is already marketed or if the FDA approves other products containing our active ingredients in the future to treat indications,
physicians may elect to prescribe and substitute a competitor’s products to treat the diseases for which we are intending
to commercialize; this is commonly referred to as “off-label” use. While under FDA regulations a competitor is not
allowed to promote off-label uses of its product, the FDA does not regulate the practice of medicine and, as a result, cannot direct
physicians to select certain products for their patients. Consequently, we might be limited in our ability to prevent off-label
use of a competitor’s product to treat the diseases we are intending to commercialize, even if we have issued method of use
patents for that indication. If we are not able to obtain and enforce our patents, if any, or otherwise receive orphan drug protection
in the case of ALS, a competitor could develop and commercialize similar products for the same indications that we are pursuing.
We cannot provide any assurances that a competitor will not obtain FDA approval for a product that contains the same active ingredients
as our products.
We rely on method patents and patent
applications and various regulatory exclusivities to protect some of our product candidates and our ability to compete may be limited
or eliminated if we are not able to protect our products.
Our competitiveness may be adversely affected
if we are unable to protect our proprietary technologies. We do not have composition of matter patents for Trimesta or Effirma,
or their respective active ingredients estriol and flupirtine. We rely on issued patent and pending patent applications for use
of Trimesta to treat MS (issued U.S. Patent No. 6,936,599) and various other therapeutic indications, which have been exclusively
licensed to us. We have exclusively licensed an issued patent for the treatment of fibromyalgia with flupirtine, which we have
sublicensed to Meda AB.
Our AEN-100 drug candidate (gastroretentive
zinc acetate) is the subject of U.S. and international pending patent applications, such as published U.S. patent application Ser.
No. 11/621,962 and corresponding international applications that claim priority to January 10, 2006 as well as additional patent
applications. On October 26, 2011, we received a final rejection letter with regard to U.S. patent application Ser. No. 11/621,962.
On February 15, 2012, we filed a Request for Continued Examination.
The patent positions of pharmaceutical
companies are uncertain and may involve complex legal and factual questions. We may incur significant expense in protecting our
intellectual property and defending or assessing claims with respect to intellectual property owned by others. Any patent or other
infringement litigation by or against us could cause us to incur significant expense and divert the attention of our management.
Others may file patent applications or
obtain patents on similar technologies or compounds that compete with our products. We cannot predict how broad the claims in any
such patents or applications will be, and whether they will be allowed. Once claims have been issued, we cannot predict how they
will be construed or enforced. We may infringe intellectual property rights of others without being aware of it. If another party
claims we are infringing their technology, we could have to defend an expensive and time consuming lawsuit, pay a large sum if
we are found to be infringing, or be prohibited from selling or licensing our products unless we obtain a license or redesign our
product, which may not be possible.
We also rely on trade secrets and proprietary
know-how to develop and maintain our competitive position. Some of our current or former employees, consultants, scientific advisors,
current or prospective corporate collaborators, may unintentionally or willfully disclose our confidential information to competitors
or use our proprietary technology for their own benefit. Furthermore, enforcing a claim alleging the infringement of our trade
secrets would be expensive and difficult to prove, making the outcome uncertain. Our competitors may also independently develop
similar knowledge, methods, and know-how or gain access to our proprietary information through some other means.
We may fail to retain or recruit
necessary personnel, and we may be unable to secure the services of consultants.
As of March 26, 2012, we had eight employees.
We have also engaged regulatory consultants to advise us on our dealings with the FDA and other foreign regulatory authorities
and have been and will be required to retain additional consultants and employees in order to fulfill our obligations under our
exclusive channel collaboration with Intrexon. Our future performance will depend in part on our ability to successfully integrate
newly hired officers into our management team and our ability to develop an effective working relationship among senior management.
Certain of our directors Jeffrey Kraws,
James S. Kuo, Nelson K. Stacks, Scott L. Tarriff, and Jeffrey Wolf, scientific advisors, and consultants serve as officers,
directors, scientific advisors, or consultants of other biopharmaceutical or biotechnology companies that might be developing competitive
products to ours. Other than corporate opportunities, none of our directors are obligated under any agreement or understanding
with us to make any additional products or technologies available to us. Similarly, we can give no assurances, and we do not expect
and stockholders should not expect, that any biomedical or pharmaceutical product or technology identified by any of our directors
or affiliates in the future would be made available to us other than corporate opportunities. We can give no assurances that any
such other companies will not have interests that are in conflict with our interests.
Losing key personnel or failing to recruit
necessary additional personnel would impede our ability to attain our development objectives. There is intense competition for
qualified personnel in the drug-development field, and we may not be able to attract and retain the qualified personnel we would
need to develop our business.
We rely on independent organizations, advisors,
and consultants to perform certain services for us, including handling substantially all aspects of regulatory approval, clinical
management, manufacturing, marketing, and sales. We expect that this will continue to be the case. Such services may not always
be available to us on a timely basis when we need them.
If the parties we depend on for supplying
our drug substance raw materials and certain manufacturing-related services do not timely supply these products and services, it
may delay or impair our ability to develop, manufacture and market our products.
We rely on suppliers for our drug substance
raw materials and third parties for certain manufacturing-related services to produce material that meets appropriate content,
quality and stability standards and use in clinical trials of our products and, after approval, for commercial distribution. Our
AEN-100 product candidate has limited stability data to date and is the subject of ongoing stability studies. To succeed, clinical
trials require adequate supplies of drug substance and drug product, which may be difficult or uneconomical to procure or manufacture.
We and our suppliers and vendors may not be able to (i) produce our drug substance or drug product to appropriate standards for
use in clinical studies, (ii) perform under any definitive manufacturing, supply or service agreements with us or (iii) remain
in business for a sufficient time to successfully produce and market our product candidates. If we do not maintain important manufacturing
and service relationships, we may fail to find a replacement supplier or required vendor or develop our own manufacturing capabilities
which could delay or impair our ability to obtain regulatory approval for our products and substantially increase our costs or
deplete profit margins, if any. If we do find replacement manufacturers and vendors, we may not be able to enter into agreements
with them on terms and conditions favorable to us and, there could be a substantial delay before a new facility could be qualified
and registered with the FDA and foreign regulatory authorities.
If successful large-scale manufacturing
of DNA-based products is not possible, we or our collaborators may be unable to manufacture enough of our product candidates to
achieve regulatory approval or market our DNA-based products.
Few companies to date have demonstrated
successful large-scale manufacturing of DNA-based products, including those that have had significantly more resources than us
and it is anticipated that significant challenges will be faced in the scale-up of our manufacturing process for commercial production.
There are a limited number of contract manufacturers qualified to perform large-scale manufacturing of DNA-based products. We or
our collaborators may be unable to manufacture commercial-scale quantities of DNA-based products or receive appropriate government
approvals on a timely basis or at all. Failure to successfully manufacture or obtain appropriate government approvals on a timely
basis or at all would prevent us from achieving our business objectives.
Clinical trials are very expensive,
time-consuming, and difficult to design and implement.
Human clinical trials are very expensive
and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. The clinical trial
process is also time-consuming. We estimate that clinical trials of our product candidates would take at least several years to
complete. Furthermore, failure can occur at any stage of the trials, and we could encounter problems that cause us to abandon or
repeat clinical trials. Commencement and completion of clinical trials may be delayed by several factors, including:
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obtaining an IND application with the FDA to commence clinical trials;
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identification of, and acceptable arrangements with, one or more clinical sites;
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obtaining IRB approval to commence clinical trials;
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unforeseen safety issues;
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determination of dosing;
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lack of effectiveness during clinical trials;
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slower than expected rates of patient recruitment;
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inability to monitor patients adequately during or after treatment;
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inability or unwillingness of medical investigators to follow our clinical protocols; and
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unwillingness of the FDA or IRBs to permit the clinical trials to be initiated.
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In addition, we, IRBs or the FDA may suspend
our clinical trials at any time if it appears that we are exposing participants to unacceptable health risks or if IRBs or the
FDA finds deficiencies in our submissions or conduct of our trials.
The results of our clinical trials
may not support our product candidate claims and the results of preclinical studies and completed clinical trials are not necessarily
predictive of future results.
To date, long-term safety and efficacy
have not yet been demonstrated in clinical trials for any of our diagnostic product candidates. Favorable results in our early
studies or trials may not be repeated in later studies or trials. Even if our clinical trials are initiated and completed as planned,
we cannot be certain that the results will support our product candidate claims. Success in preclinical testing and Phase II clinical
trials does not ensure that later Phase II or Phase III clinical trials will be successful. We cannot be sure that the results
of later clinical trials would replicate the results of prior clinical trials and preclinical testing. In particular, the limited
results that we have obtained for our diagnostic tests may not predict results from studies in larger numbers of subjects drawn
from more diverse populations over a longer period of time. Clinical trials may fail to demonstrate that our product candidates
are safe for humans and effective for indicated uses. Any such failure could cause us or our sublicensee to abandon a product candidate
and might delay development of other product candidates. Preclinical and clinical results are frequently susceptible to varying
interpretations that may delay, limit or prevent regulatory approvals or commercialization. Any delay in, or termination of, our
clinical trials would delay our obtaining FDA approval for the affected product candidate and, ultimately, our ability to commercialize
that product candidate.
We depend on third parties, including
researchers and sublicensees, who are not under our control.
Since we have in-licensed some of our product
candidates, have sublicensed a product candidate and have a collaboration agreement for the development of another product candidate,
we depend upon our sublicensee and independent investigators and scientific collaborators, such as universities and medical institutions
or private physician scientists, to conduct our preclinical and clinical trials under agreements with us. These collaborators are
not our employees and we cannot control the amount or timing of resources that they devote to our programs or the timing of their
procurement of clinical-trial data or their compliance with applicable regulatory guidelines. Should any of these scientific inventors/advisors
or those of our sublicensee become disabled or die unexpectedly, or should they fail to comply with applicable regulatory guidelines,
we or our sublicensee may be forced to scale back or terminate development of that program. They may not assign as great a priority
to our programs or pursue them as diligently as we would if we were undertaking those programs ourselves. Failing to devote sufficient
time and resources to our drug-development programs, or substandard performance and failure to comply with regulatory guidelines,
could result in delay of any FDA applications and our commercialization of the drug candidate involved.
These collaborators may also have relationships
with other commercial entities, some of which may compete with us. Our collaborators assisting our competitors at our expense could
harm our competitive position. For example, we are highly dependent on scientific collaborators for our Trimesta development program.
Specifically, all of the clinical trials have been conducted under physician-sponsored IND applications, not corporate-sponsored
INDs. Generally, we have experienced difficulty in collecting data generated from these physician-sponsored clinical trials for
our programs. We cannot provide any assurances that we will not experience any additional delays in the future.
We are also highly dependent on government
and private grants to fund certain of our clinical trials for our product candidates. For example, Trimesta (estriol) has received
grants totaling over $8 million, predominantly from the Southern California Chapter of the NMSS and the National Institutes
of Health which funds a majority of the ongoing clinical trial in relapsing-remitting MS for women. Although we believe that the
grant funding received to date is sufficient to complete the current clinical trial based upon current cost estimates, if we experience
any additional unanticipated costs or require further clinical trials, and our scientific collaborator is unable to maintain or
receive additional grants, we might be forced to scale back or terminate the development of this product candidate. We will also
need to cross reference our IND with the inventor/IND holder for this program should we elect to file our own corporate IND for
our Trimesta (estriol) program. The on-going and future development and commercialization of Effirma (flupirtine) for fibromyalgia
is the responsibility of Meda AB and no assurance can be given that Meda will gain the FDA’s acceptance of the NDA or obtain
NDA approval from the FDA of flupirtine for fibromyalgia.
Our AEN-100 program for ALS is reliant
on the investigator-initiated IND of PNA as well as their clinical trial capabilities. Although the planned Phase II/III clinical
trial that we intend to conduct with PNA has received regulatory approval to proceed, such clinical trial is still the subject
of further protocol development and IRB approval, either of which may alter the anticipated timing and budget of such clinical
trial. In addition, because AEN-100 is not the same zinc formulation utilized by PNA in its previously completed Phase I/II safety
study of zinc for ALS, PNA intends to conduct a Phase I study of AEN-100 in normal volunteers prior to initiating the Phase II/III
clinical trial in ALS patients. The IRB approval process is ongoing for the planned Phase I study of AEN-100 and the planned Phase
II/III clinical trial in ALS patients. Such Phase I study of AEN-100 may produce unanticipated and unacceptable safety, tolerability
or bioavailability results that may substantially delay initiation of the planned Phase II/III clinical trial in ALS patients.
With respect to our synthetic biologic
product candidates, we are dependent upon Intrexon’s synthetic biology facilities and capabilities as we have no such facilities
and capabilities of our own. We are also reliant on their vector engineering platform, gene expression switch technology and know-how.
If any of the foregoing were to become inaccessible or terminated, it would be difficult for us to develop and commercialize our
synthetic biologic product candidates.
We may incur substantial costs as
a result of litigation or other proceedings relating to patent and other intellectual property rights, as well as costs associated
with lawsuits.
If any other person files patent applications,
or is issued patents, claiming technology also claimed by us in pending applications, we may be required to participate in interference
proceedings in the U.S. Patent and Trademark Office to determine priority of invention. We, or our licensors, may also need to
participate in interference proceedings involving our issued patents and pending applications of another entity.
The intellectual property environment in
the area of DNA-based therapeutics is particularly complex, constantly evolving and highly fragmented. Other companies and institutions
have issued patents and have filed or will file patent applications that may issue into patents that cover or attempt to cover
genes, vectors, cell lines, and methods of making and using DNA and DNA-based therapy products used in, or similar to our product
candidate, and technologies. We have not conducted freedom-to-use patent searches on all aspects of our product candidates or potential
product candidates, and we may be unaware of relevant patents and patent applications of third parties. In addition, the freedom-to-use
patent searches that have been conducted may not have identified all relevant issued patents or pending patents. We cannot provide
assurance that our proposed products in this area will not ultimately be held to infringe one or more valid claims owned by third
parties which may exist or come to exist in the future or that in such case we will be able to obtain a license from such parties
on acceptable terms.
We cannot guarantee that the practice of
our technologies will not conflict with the rights of others. In some foreign jurisdictions, we could become involved in opposition
proceedings, either by opposing the validity of another’s foreign patent or by persons opposing the validity of our foreign
patents.
We may also face frivolous litigation or
lawsuits from various competitors or from litigious securities attorneys. The cost to us of any litigation or other proceeding
relating to these areas, even if deemed frivolous or resolved in our favor, could be substantial and could distract management
from our business. Uncertainties resulting from initiation and continuation of any litigation could have a material adverse effect
on our ability to continue our operations.
If we infringe the rights of others
we could be prevented from selling products or forced to pay damages.
If our products, methods, processes, and
other technologies are found to infringe the proprietary rights of other parties, we could be required to pay damages, or we may
be required to cease using the technology or to license rights from the prevailing party. Any prevailing party may be unwilling
to offer us a license on commercially acceptable terms.
RISKS RELATING TO OUR STOCK
We will seek to raise additional
funds in the future, which may be dilutive to stockholders or impose operational restrictions.
We expect to seek to raise additional capital
in the future to help fund development of our proposed products. If we raise additional capital through the issuance of equity
or of debt securities, the percentage ownership of our current stockholders will be reduced. We may also enter into strategic transactions,
issue equity as part of license issue fees to our licensors, compensate consultants or settle outstanding payables using equity
that may be dilutive. Our stockholders may experience additional dilution in net book value per share and any additional equity
securities may have rights, preferences and privileges senior to those of the holders of our common stock. If we cannot raise additional
funds, we will have to delay development activities of our products candidates.
We are substantially controlled by
our current officers, directors, and principal stockholders.
Currently, our directors, executive officers,
and principal stockholders beneficially own a substantial number of shares of our common stock. As a result, they will be able
to exert substantial influence over the election of our Board of Directors and the vote on issues submitted to our stockholders.
Our executive officers and directors beneficially owned approximately 8.7 million shares of our common stock, including stock options
and warrants exercisable within 60 days of March 26, 2012. Our executive officers, directors and principal stockholders together
beneficially owned approximately 12.1 million shares of our common stock, including the stock options and warrants exercisable
within 60 days of March 26, 2012. Because our common stock has from time to time been “thinly traded”, the sale of
a substantial number of shares by our executive officers, directors and principal stockholders would have an adverse effect on
the market for our stock and our share price.
Our shares of common stock are from
time to time thinly traded, so stockholders may be unable to sell at or near ask prices or at all if they need to sell shares to
raise money or otherwise desire to liquidate their shares.
Our common stock has from time to time
been “thinly-traded,” meaning that the number of persons interested in purchasing our common stock at or near ask prices
at any given time may be relatively small or non-existent. This situation is attributable to a number of factors, including the
fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors and others
in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons,
they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase
of our shares until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or
more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady
volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give
stockholders any assurance that a broader or more active public trading market for our common shares will develop or be sustained,
or that current trading levels will be sustained.
We cannot assure you that the common stock will be liquid
or that it will remain listed on the NYSE Amex.
We cannot assure you that we will be able
to maintain the continued listing standards of the NYSE Amex (formerly the American Stock Exchange). The NYSE Amex requires companies
to meet certain continued listing criteria including certain minimum stockholders' equity and equity prices per share as
outlined in the NYSE Amex Exchange Company Guide. We may not be able to maintain such minimum stockholders' equity or prices per
share or may be required to effect a reverse stock split to maintain such minimum prices and/or issue additional equity securities
in exchange for cash or other assets, if available, to maintain certain minimum stockholders' equity required by the NYSE Amex. If
we are delisted from the NYSE Amex then our common stock will trade, if at all, only on the over-the-counter market, such as the
OTC Bulletin Board securities market, and then only if one or more registered broker-dealer market makers comply with quotation
requirements. In addition, delisting of our common stock could depress our stock price, substantially limit liquidity of our common
stock and materially adversely affect our ability to raise capital on terms acceptable to us, or at all. Delisting from the NYSE
Amex could also have other negative results, including the potential loss of confidence by suppliers and employees, the loss of
institutional investor interest and fewer business development opportunities. In order to remain listed on NYSE Amex, we are required
to maintain a minimum stockholders’ equity of $6 million.
There may be issuances of shares
of preferred stock in the future.
Although we currently do not have preferred
shares outstanding, the Board of Directors could authorize the issuance of a series of preferred stock that would grant holders
preferred rights to our assets upon liquidation, the right to receive dividends before dividends would be declared to common stockholders,
and the right to the redemption of such shares, possibly together with a premium, prior to the redemption of the common stock.
To the extent that we do issue preferred stock, the rights of holders of common stock could be impaired thereby, including without
limitation, with respect to liquidation.
RISKS RELATED TO OUR INDUSTRY
We are subject to government regulation,
compliance with which can be costly and difficult.
In the U.S., the formulation, manufacturing,
packaging, storing, labeling, promotion, advertising, distribution and sale of our products are subject to regulation by various
governmental agencies, including (1) the FDA, (2) the Federal Trade Commission, or FTC, (3) the Consumer Product Safety Commission,
or CPSC, (4) the U.S. Department of Agriculture, or USDA. Our proposed activities may also be regulated by various agencies of
the states, localities and foreign countries in which our proposed products may be manufactured, distributed and sold. The FDA,
in particular, regulates the formulation, manufacture and labeling of over-the-counter, or OTC drugs, prescription drugs, medical
foods, conventional foods, homeopathic OTC drugs, dietary supplements, and cosmetics such as those that we intend to distribute.
FDA regulations require us and our suppliers to meet relevant cGMP regulations for the preparation, packing, labeling, and storage
of all drugs and foods.
Any products manufactured or distributed
by us pursuant to FDA approvals are subject to pervasive and continuing FDA regulation, including record-keeping requirements,
reporting of adverse experiences, submitting periodic reports, drug sampling and distribution requirements, manufacturing or labeling
changes, record-keeping requirements, and compliance with FDA promotion and advertising requirements. Drug manufacturers and their
subcontractors are required to register their facilities with the FDA and state agencies, and are subject to periodic unannounced
inspections for GMP compliance, imposing procedural and documentation requirements upon us and third-party manufacturers. Failure
to comply with these regulations could result, among other things, in suspension of regulatory approval, recalls, suspension of
production or injunctions, seizures, or civil or criminal sanctions. We cannot be certain that we or our present or future subcontractors
will be able to comply with these regulations.
The FDA regulates prescription drug labeling
and promotion activities. The FDA actively enforces regulations prohibiting the marketing of products for unapproved uses. The
FDA permits the promotion of drugs for unapproved uses in certain circumstances, subject to stringent requirements. We and our
product candidates are subject to a variety of state laws and regulations which may hinder our ability to market our products.
Whether or not FDA approval has been obtained, approval by foreign regulatory authorities must be obtained prior to commencing
clinical trials, and sales and marketing efforts in those countries. These approval procedures vary in complexity from country
to country, and the processes may be longer or shorter than that required for FDA approval. We may incur significant costs to comply
with these laws and regulations now or in the future.
We intend to develop our zinc candidate,
AEN-100, as a drug and intend to file an IND with the FDA in order to conduct necessary clinical trials to support new medical
claims and ultimately file one or more NDA with respect to such products which would subject us to time, expense and uncertainty
associated with achieving approval of such NDA by the FDA.
The FDA, comparable foreign regulators
and state and local pharmacy regulators impose substantial requirements upon clinical development, manufacture and marketing of
pharmaceutical products. These and other entities regulate research and development and the testing, manufacture, quality control,
safety, effectiveness, labeling, storage, record keeping, approval, advertising, and promotion of our products. The drug approval
process required by the FDA under the Food, Drug, and Cosmetic Act generally involves:
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preclinical laboratory and animal tests;
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submission of an IND, prior to commencing human clinical trials;
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adequate and well-controlled human clinical trials to establish safety and efficacy for intended use;
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submission to the FDA of an NDA or Biologics License Application (BLA); and
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FDA review and approval of an NDA or BLA.
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The testing and approval process requires
substantial time, effort, and financial resources, and we cannot be certain that any approval will be granted on a timely basis,
if at all.
Preclinical tests include laboratory evaluation
of the product candidate, its chemistry, formulation and stability, and animal studies to assess potential safety and efficacy.
Certain preclinical tests must be conducted in compliance with good laboratory practice regulations. Violations of these regulations
can, in some cases, lead to invalidation of the studies, requiring them to be replicated. In some cases, long-term preclinical
studies are conducted concurrently with clinical studies.
We will submit the preclinical test results,
together with manufacturing information and analytical data, to the FDA as part of an IND, which must become effective before we
begin human clinical trials. The IND automatically becomes effective 30 days after filing, unless the FDA raises questions about
conduct of the trials outlined in the IND and imposes a clinical hold, in which case, the IND sponsor and FDA must resolve the
matters before clinical trials can begin. It is possible that our submission may not result in FDA authorization to commence clinical
trials.
Clinical trials must be supervised by a
qualified investigator in accordance with good clinical practice (GCP) regulations, which include informed consent requirements.
An independent IRB at each medical center reviews and approves and monitors the study, and is periodically informed of the study’s
progress, adverse events and changes in research. Progress reports are submitted annually to the FDA and more frequently if adverse
events occur.
Human clinical trials of drug candidates
typically have three sequential phases that may overlap:
Phase I: The drug is initially tested
in healthy human subjects or patients for safety, dosage tolerance, absorption, metabolism, distribution, and excretion.
Phase II: The drug is studied in a
limited patient population to identify possible adverse effects and safety risks, determine efficacy for specific diseases and
establish dosage tolerance and optimal dosage.
Phase III: When phase II evaluations
demonstrate that a dosage range is effective with an acceptable safety profile,
Phase III trials to further
evaluate dosage, clinical efficacy and safety, are undertaken in an expanded patient population, often at geographically dispersed
sites.
We cannot be certain that we will successfully
complete Phase I, Phase II, or Phase III testing of our product candidates within any specific time period, if at all. Furthermore,
the FDA, an IRB or the IND sponsor may suspend clinical trials at any time on various grounds, including a finding that subjects
or patients are exposed to unacceptable health risk. Concurrent with these trials and studies, we also develop chemistry and physical
characteristics data and finalize a manufacturing process in accordance with good manufacturing practice (GMP) requirements. The
manufacturing process must conform to consistency and quality standards, and we must develop methods for testing the quality, purity,
and potency of the final products. Appropriate packaging is selected and tested, and chemistry stability studies are conducted
to demonstrate that the product does not undergo unacceptable deterioration over its shelf-life. Results of the foregoing are submitted
to the FDA as part of a NDA (or BLA in case of biologic products) for marketing and commercial shipment approval. The FDA reviews
each NDA or BLA submitted and may request additional information.
Once the FDA accepts the NDA or BLA for
filing, it begins its in-depth review. The FDA has substantial discretion in the approval process and may disagree with our interpretation
of the data submitted. The process may be significantly extended by requests for additional information or clarification regarding
information already provided. As part of this review, the FDA may refer the application to an appropriate advisory committee, typically
a panel of clinicians. Manufacturing establishments often are inspected prior to NDA or BLA approval to assure compliance with
GMPs and with manufacturing commitments made in the application.
Submission of an NDA or BLA with clinical
data requires payment of a fee. In return, the FDA assigns a goal of ten months for issuing its “complete response,”
in which the FDA may approve or deny the NDA or BLA, or require additional clinical data. Even if these data are submitted, the
FDA may ultimately decide the NDA or BLA does not satisfy approval criteria. If the FDA approves the NDA or BLA, the product becomes
available for physicians prescription. Product approval may be withdrawn if regulatory compliance is not maintained or safety problems
occur. The FDA may require post-marketing studies, also known as phase IV studies, as a condition of approval, and requires surveillance
programs to monitor approved products that have been commercialized. The agency has the power to require changes in labeling or
prohibit further marketing based on the results of post-marketing surveillance.
Satisfaction of these and other regulatory
requirements typically takes several years, and the actual time required may vary substantially based upon the type, complexity
and novelty of the product. Government regulation may delay or prevent marketing of potential products for a considerable period
of time and impose costly procedures on our activities. We cannot be certain that the FDA or other regulatory agencies will approve
any of our products on a timely basis, if at all. Success in preclinical or early-stage clinical trials does not assure success
in later-stage clinical trials. Data obtained from preclinical and clinical activities are not always conclusive and may be susceptible
to varying interpretations that could delay, limit or prevent regulatory approval. Even if a product receives regulatory approval,
the approval may be significantly limited to specific indications or uses.
Even after regulatory approval is obtained,
later discovery of previously unknown problems with a product may result in restrictions on the product or even complete withdrawal
of the product from the market. Delays in obtaining, or failures to obtain regulatory approvals would have a material adverse effect
on our business.
The FDA’s policies may change, and
additional government regulations may be enacted which could prevent or delay regulatory approval of our potential products. Increased
attention to the containment of health care costs worldwide could result in new government regulations materially adverse to our
business. We cannot predict the likelihood, nature or extent of adverse governmental regulation that might arise from future legislative
or administrative action, either in the U.S. or abroad.
We do not have a guarantee of patent restoration and marketing
exclusivity of the ingredients for our drugs even if we are granted FDA approval of our products.
The U.S. Drug Price Competition and Patent
Term Restoration Act of 1984 (Hatch-Waxman) permits the FDA to approve Abbreviated New Drug Applications (ANDAs) for generic versions
of innovator drugs, as well as NDAs with less original clinical data, and provides patent restoration and exclusivity protections
to innovator drug manufacturers. The ANDA process permits competitor companies to obtain marketing approval for drugs with the
same active ingredient and for the same uses as innovator drugs, but does not require the conduct and submission of clinical studies
demonstrating safety and efficacy. As a result, a competitor could copy any of our drugs and only need to submit data demonstrating
that the copy is bioequivalent to gain marketing approval from the FDA. Hatch-Waxman requires a competitor that submits an ANDA,
or otherwise relies on safety and efficacy data for one of our drugs, to notify us and/or our business partners of potential infringement
of our patent rights. We and/or our business partners may sue the company for patent infringement, which would result in a 30-month
stay of approval of the competitor’s application. The discovery, trial and appeals process in such suits can take several
years. If the litigation is resolved in favor of the generic applicant or the challenged patent expires during the 30-month period,
the stay is lifted and the FDA may approve the application. Hatch-Waxman also allows competitors to market copies of innovator
products by submitting significantly less clinical data outside the ANDA context. Such applications, known as “505(b)(2)
NDAs” or “paper NDAs,” may rely on clinical investigations not conducted by or for the applicant and for which
the applicant has not obtained a right of reference or use and are subject to the ANDA notification procedures described above.
The law also permits restoration of a portion
of a product’s patent term that is lost during clinical development and NDA review, and provides statutory protection, known
as exclusivity, against FDA approval or acceptance of certain competitor applications. Restoration can return up to five years
of patent term for a patent covering a new product or its use to compensate for time lost during product development and regulatory
review. The restoration period is generally one-half the time between the effective date of an IND and submission of an NDA, plus
the time between NDA submission and its approval (subject to the five-year limit), and no extension can extend total patent life
beyond 14 years after the drug approval date. Applications for patent term extension are subject to U.S. Patent and Trademark Office
(USPTO) approval, in conjunction with FDA. Approval of these applications takes at least nine months, and there can be no guarantee
that it will be given at all.
Hatch-Waxman also provides for differing
periods of statutory protection for new drugs approved under an NDA. Among the types of exclusivity are those for a “new
molecular entity” and those for a new formulation or indication for a previously-approved drug. If granted, marketing exclusivity
for the types of products that we are developing, which include only drugs with innovative changes to previously-approved products
using the same active ingredient, would prohibit the FDA from approving an ANDA or 505(b)(2) NDA relying on our safety and efficacy
data for three years. This three-year exclusivity, however, covers only the innovation associated with the original NDA. It does
not prohibit the FDA from approving applications for drugs with the same active ingredient but without our new innovative change.
These marketing exclusivity protections do not prohibit the FDA from approving a full NDA, even if it contains the innovative change.
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This prospectus contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934.
You should not place undue reliance on these statements. These forward-looking statements include statements that reflect the current
views of our senior management with respect to our financial performance and future events with respect to our business and our
industry in general. Statements that include the words “expect,” “intend,” “plan,” “believe,”
“project,” “forecast,” “estimate,” “may,” “should,” “anticipate”
and similar statements of a future or forward-looking nature identify forward-looking statements. Forward-looking statements address
matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results
to differ materially from those indicated in these statements. We believe that these factors include, but are not limited to, the
following:
●
|
a failure of our product candidates to be demonstrably safe and effective;
|
●
|
a failure to obtain regulatory approval for our products or to comply with ongoing regulatory requirements;
|
●
|
a lack of acceptance of our product candidates in the marketplace;
|
●
|
a failure by us to become or remain profitable;
|
●
|
an inability by us to obtain the capital necessary to fund our research and development activities;
|
●
|
a loss of any of our key scientist or management personnel.
|
The foregoing factors should not be construed
as exhaustive and should be read together with the other cautionary statements included in this prospectus and other reports we
file with the Securities and Exchange Commission. The forward-looking statements speak as of the date made and are not guarantees
of future performance. If one or more events related to these or other risks or uncertainties materialize, or if our
underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. We undertake no obligation
to publicly update or revise any forward-looking statement, other than as required by law.
USE OF PROCEEDS
We will not receive any proceeds from the disposition
by the selling stockholders of any of the shares covered by this prospectus.
SELLING STOCKHOLDERS
This prospectus covers the disposition
by the selling stockholders identified below, or their transferee(s), of a total of 3,223,558 shares of our common stock comprised
of 3,123,558 shares of common stock issued and outstanding and 100,000 shares of common stock issuable upon exercise of warrants. All
of the shares included in this offering were issued as described below.
The following table sets forth the number
of shares of the common stock owned by the selling stockholder as of March 30, 2012 and after giving effect to this offering assuming
all of the shares covered hereby are sold by the selling stockholder. The percentage of beneficial ownership is based on 32,751,556
shares of our common stock outstanding as of March 30, 2012.
Selling Stockholder
|
|
Shares
Beneficially
Owned Before
Offering (1)
|
Percentage of
Beneficial
Ownership
Before
Offering (1)
|
|
Total Shares
Offered
By Selling
Stockholder (2)
|
|
Shares
Beneficially
Owned After
Offering (1)
|
|
Percentage of
Beneficial
Ownership
After
Offering (1)
|
|
|
|
|
|
|
|
|
|
|
Intrexon Corporation
|
|
3,123,558(3)
|
9.54%
|
|
3,123,558
|
|
0
|
|
0%
|
Griffin Securities, Inc.
|
|
100,000(4)
|
*
|
|
100,000
|
|
0
|
|
0%
|
Total
|
|
3,223,558
|
9.84%
|
|
3,223,558
|
|
0
|
|
0%
|
*less than 1%
(1)
|
Beneficial ownership is determined in accordance with SEC rules, beneficial ownership includes any shares as to which the security or stockholder has sole or shared voting power or investment power, and also any shares which the security or stockholder has the right to acquire within 60 days of the date hereof, whether through the exercise or conversion of any stock option, convertible security, warrant or other right. The indication herein that shares are beneficially owned is not an admission on the part of the security or stockholder that he, she or it is a direct or indirect beneficial owner of those shares.
|
|
|
(2)
|
Assumes the sale of all shares
offered under this prospectus by the selling stockholders.
|
(3)
|
Randal J. Kirk, the Chief Executive
Officer of the selling stockholder, Intrexon Corporation, directly and through certain affiliates, has voting and dispositive power
over a majority of the outstanding capital stock of Intrexon Corporation. Mr. Kirk may therefore be deemed to have voting and dispositive
power over the shares of the issuer owned by Intrexon Corporation. Mr. Kirk disclaims beneficial ownership of such shares, except
to the extent of any pecuniary interest therein.
|
(4)
|
All of these shares are issuable
upon the exercise of warrants. Adrian Stecyk, the Chairman and Chief Executive Officer of Griffin Securities, Inc. has voting and
dispositive power over the capital stock of Griffin Securities, Inc.
|
On November 18, 2011, we entered into a
Channel Agreement with Intrexon Corporation that governs a “channel collaboration” arrangement in which we intend to
use Intrexon’s technology directed towards the production of PGIS, through the use of
in vivo
conditionally regulated
embedded controllable bioreactors for the treatment of PAH. The Channel Agreement establishes committees comprised of our representatives
and Intrexon representatives that will govern activities related to the PAH Program in the areas of project establishment, chemistry,
manufacturing and controls, clinical and regulatory matters, commercialization efforts and intellectual property. As partial consideration
for execution of the Channel Agreement, we entered into a Stock Purchase Agreement with Intrexon pursuant to which we issued to
Intrexon a number of shares of our common stock equal to 9.995% of the number of shares of our common stock issued and outstanding
following and giving effect to such issuance (the “First Tranche”) at a purchase price equal to the $0.001 par value
of such shares, which issuance was deemed paid in partial consideration for the execution and delivery of the Channel Agreement.
We also agreed to issue additional shares of our common stock to Intrexon upon dosing of the first patient in a Phase II clinical
trial sponsored by us in the U.S., or similar study as the parties may agree in a country other than the U.S. Under the Stock Purchase
Agreement, Intrexon is entitled, at its election, to:
(i) participate in our future securities
offerings that constitute “Qualified Financings” and purchase securities equal to 19.99% of the number of shares of
common stock or other securities sold in such offering. For this purpose, a “Qualified Financing” means a sale of our
common stock or equity securities convertible into our common stock in a public or private offering, raising gross proceeds of
at least $5.0 million, where the sale of shares is either registered under the Securities Act of 1933, as amended (the “Securities
Act”), at the time of issuance or we agree to register the resale of such shares, and
(ii) without restriction, purchase an additional
number of shares of our common stock in the open market, or otherwise, that do not exceed an additional 10% of the number of shares
of common stock then issued and outstanding.
In connection with the transactions contemplated
by the Stock Purchase Agreement, and pursuant to a Registration Rights Agreement that was executed and delivered by the parties
at the First Tranche closing, we agreed to file a “resale” registration statement registering the resale of the First
Tranche shares within 120 days of the First Tranche closing.
On December 20, 2012, we entered into a
Financial Advisory Agreement with Griffin Securities, Inc. (“Griffin”), whereby Griffin agreed to act as a non-exclusive
financial advisor to us for a twelve month period of time. As compensation for such services, Griffin is paid a monthly fee of
Ten Thousand Dollars ($10,000) and was issued a warrant exercisable for 100,000 shares of our common stock. The warrant is exercisable
upon issuance, February 2, 2012, for a period of five years from such date at an exercise price equal to the price of our common
stock on the date of issue, has a cashless exercise feature and is entitled to piggyback registration rights.
PLAN OF DISTRIBUTION
The selling security holders of our common
stock and any of their transferees, pledgees, assignees, donees, and successors-in-interest may, from time to time, sell any or
all of their shares of common stock on the stock exchange, market or trading facility on which the shares are traded or in private
transactions. These sales may be at prevailing market prices or negotiated prices. A selling security holder may use any one or
more of the following methods when selling shares:
|
●
|
ordinary brokerage transactions and transactions in
which the broker-dealer solicits purchasers;
|
|
●
|
block trades in which the broker-dealer will attempt
to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
|
|
●
|
purchases by a broker-dealer as principal and resale
by the broker-dealer for its account;
|
|
●
|
an exchange distribution in accordance with the rules
of the applicable exchange;
|
|
●
|
privately negotiated transactions;
|
|
●
|
broker-dealers may agree with the selling security
holders to sell a specified number of such shares at a stipulated price per share;
|
|
●
|
a combination of any such methods of sale; or
|
|
●
|
any other method permitted pursuant to applicable
law.
|
The selling security holders may also sell shares under Rule
144 under the Securities Act, if available, rather than under this prospectus.
Broker-dealers engaged by the selling
security holders may arrange for other broker-dealers to participate in sales. Broker-dealers may receive commissions or discounts
from the selling security holders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts
to be negotiated. The selling security holders do not expect these commissions and discounts relating to their sales of shares
to exceed what is customary in the types of transactions involved.
The selling security holders and any broker-dealers
or agents that are involved in selling the shares of common stock may be deemed to be “underwriters” within the meaning
of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and
any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities
Act. Because the selling security holders may be deemed to be underwriters within the meaning of the Securities Act, they will
be subject to the prospectus delivery requirements of the Securities Act. Discounts, concessions, commissions and similar selling
expenses, if any, that can be attributed to the sale of common stock will be paid by the selling security holders and/or the purchasers.
Each of the selling security holders has represented and warranted to our company that it acquired the securities subject to this
registration statement in the ordinary course of such selling security holder’s business and, at the time of its purchase
of such securities such selling security holder had no agreements or understandings, directly or indirectly, with any person to
distribute any such securities.
There is no underwriter or coordinating
broker acting in connection with the proposed sale of the resale shares by the selling security holders. We are required to pay
certain fees and expenses incurred by us incident to the registration of the shares. We have agreed to indemnify the selling security
holders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.
The selling security holders may from time
to time pledge or grant a security interest in some or all of the shares owned by them and, if they default in the performance
of their secured obligations, the pledgees or secured parties may offer and sell shares of common stock from time to time under
this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities
Act amending the list of the selling security holders to include the pledgee, transferee or other successors-in-interest as selling
security holders under this prospectus. Upon our company being notified in writing by a selling security holder that any material
arrangement has been entered into with a broker-dealer for the sale of common stock through a block trade, special offering, exchange
distribution or secondary distribution or a purchase by a broker or dealer, a supplement to this prospectus will be filed, if required,
pursuant to Rule 424(b) under the Securities Act, disclosing (i) the name of the selling security holders and of the participating
broker-dealer(s), (ii) the number of shares involved, (iii) the price at which such the shares of common stock were sold, (iv)
the commissions paid or discounts or concessions allowed to such broker-dealer(s), where applicable, (v) that such broker-dealer(s)
did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus, and (vi) other
facts material to the transaction. In addition, upon our company being notified in writing by a selling security holder that a
donee or pledgee intends to sell more than 500 shares of common stock, a supplement to this prospectus will be filed if then required
in accordance with applicable securities law.
Under applicable rules and regulations
under the Exchange Act, any person engaged in the distribution of the resale shares may not simultaneously engage in market making
activities with respect to our common stock for a period of two business days prior to the commencement of the distribution. In
addition, the selling security holders will be subject to applicable provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of our common stock by the selling
security holders or any other person. We will make copies of this prospectus available to the selling security holders and have
informed it of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale.
LEGAL MATTERS
Gracin & Marlow, LLP, New York, New York will issue an opinion
about certain legal matters with respect to the securities.
EXPERTS
The financial statements incorporated in
this prospectus from our Annual Report on Form 10-K for the year ended December 31, 2011 have been audited by Berman & Company,
P.A., an independent registered public accounting firm, as stated in their report, which is incorporated by reference, which report
expresses an unqualified opinion. The financial statements have been incorporated upon the authority of said firm as experts in
accounting and auditing in giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports,
proxy statements and other information with the Securities and Exchange Commission. You may read and copy any document we file
at the Commission’s public reference room located at 100 F Street N.E., Washington, D.C. 20549. Please call
the Commission at 1-800-SEC-0330 for further information on the operation of the public reference room. Our public filings are
also available to the public at the Commission’s web site at http://www.sec.gov.
This prospectus is part of a registration
statement on Form S-3 that we have filed with the Commission under the Securities Act. This prospectus does not contain all
of the information in the registration statement. We have omitted certain parts of the registration statement, as permitted by
the rules and regulations of the Commission. You may inspect and copy the registration statement, including exhibits, at the Commission’s
public reference room or Internet site.
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE
The Commission allows us to “incorporate
by reference” the information we file with it which means that we can disclose important information to you by referring
you to those documents instead of having to repeat the information in this prospectus. The information incorporated by reference
is considered to be part of this prospectus, and later information that we file with the Commission will automatically update and
supersede this information. We incorporate by reference the documents listed below and any future filings made with the Commission
under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act between the date of this prospectus and the termination of the
offering:
●
|
Our annual report on Form 10-K for the fiscal year ended December 31, 2011 filed with the Securities and Exchange Commission on March 30, 2012;
|
●
●
●
●
●
●
●
●
|
Our Definitive Schedule 14A Proxy
Statement
filed on January 4, 2012;
Our current report on Form 8-K/A
filed with the Securities and Exchange Commission on February 3, 2012;
Our current report on Form 8-K
filed with the Securities and Exchange Commission on February 6, 2012;
Our current report on Form 8-K
filed with the Securities and Exchange Commission on February 7, 2012
;
Our current report on Form 8-K
filed with the Securities and Exchange Commission on February 13, 2012
;
Our current report on Form 8-K
filed with the Securities and Exchange Commission on February 16, 2012
;
Our current report on Form 8-K
filed with the Securities and Exchange Commission on March 12, 2012
;
Our current report on Form 8-K
filed with the Securities and Exchange Commission on March 30, 2012
;
and
|
●
|
The description of our common stock set forth in our registration statement on Form 8-A, filed with the Commission on January 29, 1993 (File No. 000-21156).
|
You may obtain, free of charge, a copy
of any of these documents (other than exhibits to these documents unless the exhibits are specifically incorporated by reference
into these documents or referred to in this prospectus) by writing or calling us at the following address and telephone number:
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our amended and restated
bylaws contain provisions that permit us to indemnify our directors and officers to the full extent permitted by Nevada law,
and our Articles of Incorporation, as amended, contains provisions that eliminate the personal liability of our directors in
each case for monetary damages to us or our stockholders for breach of their fiduciary duties, except to the extent that
Nevada law prohibits indemnification or elimination of liability. These provisions do not limit or eliminate our rights or
the rights of any stockholder to seek an injunction or any other non-monetary relief in the event of a breach of a
director’s or officer’s fiduciary duty. In addition, these provisions apply only to claims against a director or
officer arising out of his or her role as a director or officer and do not relieve a director or officer from liability if he
or she engaged in willful misconduct or a knowing violation of the criminal law or any federal or state securities law.
The rights of indemnification provided in our amended and restated
bylaws are not exclusive of any other rights that may be available under any insurance or other agreement, by vote of stockholders
or disinterested directors or otherwise.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have
been informed that in the opinion of the SEC this type of indemnification is against public policy as expressed in the Securities
Act and is therefore unenforceable.
3985 Research Park Drive, Suite 200
Ann Arbor, MI 48108
Attention: Corporate Secretary
(734) 332-7800
3,223,558 Shares
Common Stock
PROSPECTUS DATED APRIL __, 2012
You should rely only on the information
contained or incorporated by reference in this prospectus. We have not authorized anyone to provide you with different information.
You should not assume that the information contained or incorporated by reference in this prospectus is accurate as of any date
other than the date of this prospectus. We are not making an offer of these securities in any state where the offer is not permitted.
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
|
|
Item 14.
|
Other Expenses of Issuance and Distribution.
|
The following table sets forth the estimated
fees and expenses in connection with the shelf registration of the common stock registered under this registration statement, other
than any underwriting discounts and commissions. The actual amounts of such fees and expenses will be determined from time to time.
All amounts shown are estimates except for the Securities and Exchange Commission registration fee.
SEC registration fee
|
|
$
|
816.42
|
|
Legal fees and expenses
|
|
|
2,500
|
|
Accounting fees and expenses
|
|
|
2,500
|
|
Transfer agent and registrar fees and expenses
|
|
|
1,000
|
|
Printing and engraving expenses
|
|
|
1,000
|
|
Miscellaneous
|
|
|
183.58
|
|
|
|
|
|
|
Total
|
|
$
|
8,000
|
|
Item 15.
|
Indemnification of Directors and Officers.
|
Section 78.138 of the Nevada Revised Statute
provides that a director or officer is not individually liable to the corporation or its stockholders or creditors for any damages
as a result of any act or failure to act in his capacity as a director or officer unless it is proven that (1) his act or failure
to act constituted a breach of his fiduciary duties as a director or officer and (2) his breach of those duties involved intentional
misconduct, fraud or a knowing violation of law.
This provision is intended to afford directors
and officers protection against and to limit their potential liability for monetary damages resulting from suits alleging a breach
of the duty of care by a director or officer. As a consequence of this provision, stockholders of our company will be unable to
recover monetary damages against directors or officers for action taken by them that may constitute negligence or gross negligence
in performance of their duties unless such conduct falls within one of the foregoing exceptions. The provision, however, does not
alter the applicable standards governing a director’s or officer’s fiduciary duty and does not eliminate or limit the
right of our company or any stockholder to obtain an injunction or any other type of non-monetary relief in the event of a breach
of fiduciary duty.
The Registrant’s Articles of
Incorporation, as amended, and amended and restated bylaws provide for indemnification of directors, officers, employees or
agents of the Registrant to the fullest extent permitted by Nevada law (as amended from time to time). Section
78.7502 of the Nevada Revised Statute provides that such indemnification may only be provided if the person acted in good
faith and in a manner he reasonably believed to be in, or not opposed to, the best interest of the Registrant and, with
respect to any criminal action or proceeding, had no reasonable cause to behave his conduct was unlawful.
3.1
|
Certificate of Incorporation, as amended (Incorporated by reference to (i) Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed October 16, 2008, (ii) Exhibit 3.1 of the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2001 filed August 14, 2001 and (iii) Exhibits 3.1, 4.1 and 4.2 of the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1998 filed August 14, 1998)
|
|
|
3.2
|
Articles of Merger (Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed October 19, 2009.)
|
|
|
3.3
|
Certificate of Merger filed with the Secretary of State of Delaware (Incorporated by reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K filed October 19, 2009.)
|
|
|
3.4
|
Articles of Incorporation filed with the Nevada Secretary of State (Incorporated by reference to Exhibit 3.3 of the Registrant’s Current Report on Form 8-K filed October 19, 2009.)
|
|
|
3.5
|
Bylaws (Incorporated by reference to (i) Exhibit 3.4 of the Registrant’s Current Report on Form 8-K filed October 19, 2009 and (ii) Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed June 3, 2010.)
|
|
|
3.6
|
Amended and Restated Bylaws Adopted and Effective October
31, 2011 (Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed October 2, 2011.)
|
|
|
3.7
|
Certificate of Amendment to Articles of Incorporation (Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed February 16, 2012.)
|
|
|
4.1
|
Form of Warrant to Purchase Common Stock by and between Griffin Securities, Inc. and Adeona Pharmaceuticals, Inc. (Incorporated by reference to Exhibit 4.10 of the Registrant’s Annual Report on Form 10-K filed March 30, 2012)
|
|
|
5.1
|
Legal opinion of Gracin & Marlow, LLP (Incorporated by reference to Exhibit 5.1 of the Registrant’s Form
S-3 filed on April 4, 2012)
|
|
|
10.1
|
Financial Advisory Agreement by and between Griffin Securities, Inc. and Adeona Pharmaceuticals, Inc. dated as of December 20, 2011. (Incorporated by reference to Exhibit 10.34 of the Registrant’s Annual Report on Form 10-K filed March 30, 2012 )
|
|
|
10.2
|
Registration Rights Agreement with Intrexon Corporation (Incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K filed November 21, 2011.)
|
|
|
23.1
|
Consent of Berman & Company, P.A.*
|
|
|
23.3
|
Consent of Gracin & Marlow, LLP (included
in Exhibit 5.1)
|
|
|
24.1
|
Powers of Attorney for our directors (Incorporated by reference to the Registrant’s
Form S-3 filed on April 4, 2012)
|
|
|
*
|
Filed herewith
|
(a) The undersigned registrant
hereby undertakes:
(1) To file, during
any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To
include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) To
reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering
price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii) To
include any material information with respect to the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
provided, however
, that the undertakings
set forth in paragraphs (1)(i), (1)(ii) and (1)(iii) above do not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement or
is contained in a form of prospectus filed pursuant to Rule 424(b) that is a part of the registration statement.
(2) That, for the
purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from
registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination
of the offering.
(4) That, for the
purpose of determining liability under the Securities Act of 1933 to any purchaser:
(i) Each prospectus
filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the
filed prospectus was deemed part of and included in the registration statement; and
(ii) Each prospectus
required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B
relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required
by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the
earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities
in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that
is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to
the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement
or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference
into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of
contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or
prospectus that was part of the registration statement or made in any such document immediately prior to such effective date.
(5) That, for the
purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution
of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant
pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if
the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant
will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary
prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing
prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned
registrant;
(iii) The portion
of any other free writing prospectus relating to the offering containing material information about the undersigned registrant
or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication
that is an offer in the offering made by the undersigned registrant to the purchaser.
(b) The undersigned registrant hereby
undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of
an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated
by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be the initial
bona fide
offering thereof.
(c) Insofar as indemnification
for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer, or controlling person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
(d) The registrant hereby undertakes
to file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of Section
310 of the Trust Indenture Act in accordance with the rules and regulations prescribed by the Securities and Exchange Commission
under Section 305(b)(2) of the Trust Indenture Act.
(6) That, for purposes of determining
any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of this registration statement as of the time
it was declared effective;
(7) That, for the purpose of determining
any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof; and
SIGNATURES
Pursuant to the requirements of the
Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Ann Arbor, State of Michigan, April 10, 2012.
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SYNTHETIC BIOLOGICS, INC.
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By:
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/s/ Jeffrey Riley
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Chairman, Chief Executive Officer
and President
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(Principal Executive Officer)
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By:
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/s/ C. Evan Ballantyne
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Chief Financial Officer (Principal
Financial and Accounting Officer)
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Signature
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Title
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Date
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/s/ Jeffrey Riley
Jeffrey Riley
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Chairman, Chief Executive Officer
and President
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April 10, 2012
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(Principal Executive
Officer)
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/s/ Steve H. Kanzer*
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Director
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April 10, 2012
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Steve H. Kanzer
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/s/ Jeffrey J. Kraws*
Jeffrey J. Kraws
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Director
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April 10, 2012
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/s/ Jeffrey Wolf *
Jeffrey Wolf
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Director
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April 10, 2012
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/s/ James S. Kuo*
James S. Kuo
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Director
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April 10, 2012
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/s/ Nelson Stacks*
Nelson Stacks
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Director
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April 10, 2012
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/s/ Scott Tarriff*
Scott Tarriff
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Director
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April 10, 2012
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*By: /s/ Jeffrey Riley
Jeffrey Riley
Chairman of the Board, Chief Executive Officer
and President
Attorney-in-fact
EXHIBIT INDEX
Exhibit
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Description
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3.1
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Certificate of Incorporation, as amended (Incorporated by reference to (i) Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed October 16, 2008, (ii) Exhibit 3.1 of the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2001 filed August 14, 2001 and (iii) Exhibits 3.1, 4.1 and 4.2 of the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1998 filed August 14, 1998)
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3.2
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Articles of Merger (Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed October 19, 2009.)
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3.3
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Certificate of Merger filed with the Secretary of State of Delaware (Incorporated by reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K filed October 19, 2009.)
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3.4
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Articles of Incorporation filed with the Nevada Secretary of State (Incorporated by reference to Exhibit 3.3 of the Registrant’s Current Report on Form 8-K filed October 19, 2009.)
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3.5
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Bylaws (Incorporated by reference to (i) Exhibit 3.4 of the Registrant’s Current Report on Form 8-K filed October 19, 2009 and (ii) Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed June 3, 2010.)
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3.6
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Amended and Restated Bylaws Adopted and Effective October
31, 2011 (Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed October 2, 2011.)
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3.7
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Certificate of Amendment to Articles of Incorporation (Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed February 16, 2012.)
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4.1
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Form of Warrant to Purchase Common Stock by and between Griffin Securities, Inc. and Adeona Pharmaceuticals, Inc. (Incorporated by reference to Exhibit 4.10 of the Registrant’s Annual Report on Form 10-K filed March 30, 2012)
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5.1
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Legal opinion of Gracin & Marlow, LLP (Incorporated by reference to Exhibit 5.1 of the Registrant’s
Form S-3 filed on April 4, 2012)
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10.1
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Financial Advisory Agreement by and between Griffin Securities, Inc. and Adeona Pharmaceuticals, Inc. dated as of December 20, 2011. (Incorporated by reference to Exhibit 10.34 of the Registrant’s Annual Report on Form 10-K filed March 30, 2012 )
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10.2
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Registration Rights Agreement with Intrexon Corporation (Incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K filed November 21, 2011.)
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23.1
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Consent of Berman & Company, P.A.*
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23.3
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Consent of Gracin & Marlow, LLP (included
in Exhibit 5.1)
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24.1
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Powers of Attorney for our directors (Incorporated by reference to the Registrant’s
Form S-3 filed on April 4, 2012)
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*
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Filed herewith
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