Table
of Contents
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 10-Q
x
|
Quarterly report pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934.
|
|
|
For the quarterly period ended March 31,
2010.
|
|
|
o
|
Transition report pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934.
|
|
|
For the transition period from
to
.
|
Commission
File Number 000-29815
Allos
Therapeutics, Inc.
(Exact name of
Registrant as specified in its charter)
Delaware
|
|
54-1655029
|
(State or other
jurisdiction of
|
|
(I.R.S. Employer
|
incorporation or
organization)
|
|
Identification No.)
|
11080
CirclePoint Road, Suite 200
Westminster, Colorado 80020
(303) 426-6262
(Address,
including zip code, and telephone number,
including area code, of principal executive offices)
Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes
x
No
o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit
and post such files). Yes
o
No
o
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):
Large accelerated
filer
o
|
|
Accelerated filer
x
|
|
|
|
Non-accelerated
filer
o
|
|
Smaller reporting
company
o
|
(Do not check if a
smaller reporting company)
|
|
|
Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes
o
No
x
As of April 30,
2010, there were 105,229,081 shares of the registrants Common Stock, par value
$0.001 per share, outstanding.
Table
of Contents
ALLOS THERAPEUTICS, INC.
FORM 10-Q
TABLE OF CONTENTS
NOTE:
Allos Therapeutics, Inc.,
the Allos Therapeutics, Inc. logo,
FOLOTYN, the FOLOTYN logo and all other Allos names are trademarks of
Allos Therapeutics, Inc. in the United States and in other selected
countries. All other brand names or trademarks appearing in this report are the
property of their respective holders. Unless the context requires otherwise,
references in this report to Allos, the Company, we, us, and our
refer to Allos Therapeutics, Inc.
2
Table
of Contents
PART I. FINANCIAL
INFORMATION
ITEM
1. FINANCIAL STATEMENTS
ALLOS THERAPEUTICS, INC.
BALANCE SHEETS
(Dollars in thousands, except share and per share
amounts)
(unaudited)
|
|
March 31,
2010
|
|
December 31,
2009
|
|
ASSETS
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
84,376
|
|
$
|
141,185
|
|
Short-term
investments
|
|
52,794
|
|
17,016
|
|
Restricted cash
|
|
238
|
|
238
|
|
Accounts
receivable
|
|
8,753
|
|
4,862
|
|
Inventory
|
|
258
|
|
36
|
|
Prepaid expenses
and other assets
|
|
4,278
|
|
3,808
|
|
Total current
assets
|
|
150,697
|
|
167,145
|
|
Property and
equipment, net
|
|
2,152
|
|
2,169
|
|
Long-term
investments
|
|
341
|
|
343
|
|
Intangible
asset, net
|
|
5,566
|
|
5,679
|
|
Other assets
|
|
48
|
|
48
|
|
Total assets
|
|
$
|
158,804
|
|
$
|
175,384
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Trade accounts
payable
|
|
$
|
2,783
|
|
$
|
2,035
|
|
Deferred revenue
|
|
1,150
|
|
669
|
|
Accrued
liabilities
|
|
10,576
|
|
13,136
|
|
Total current
liabilities
|
|
14,509
|
|
15,840
|
|
Commitments and
contingencies (Note 10)
|
|
|
|
|
|
Stockholders
equity:
|
|
|
|
|
|
Preferred stock,
$0.001 par value; 10,000,000 shares authorized; no shares issued or
outstanding
|
|
|
|
|
|
Series A
Junior Participating Preferred Stock, $0.001 par value; 1,500,000 shares
designated from authorized preferred stock at March 31, 2010 and
December 31, 2009; no shares issued or outstanding
|
|
|
|
|
|
Common stock,
$0.001 par value; 150,000,000 shares authorized; 104,904,837 and 104,234,409
shares issued and outstanding at March 31, 2010 and
December 31, 2009, respectively
|
|
105
|
|
104
|
|
Additional
paid-in capital
|
|
537,949
|
|
532,652
|
|
Accumulated
deficit
|
|
(393,759
|
)
|
(373,212
|
)
|
Total
stockholders equity
|
|
144,295
|
|
159,544
|
|
Total
liabilities and stockholders equity
|
|
$
|
158,804
|
|
$
|
175,384
|
|
The accompanying notes are an integral part of these
financial statements.
3
Table
of Contents
ALLOS THERAPEUTICS, INC.
STATEMENTS OF OPERATIONS
(Dollars in thousands, except share and per share
amounts)
(unaudited)
|
|
Three Months Ended
March 31,
|
|
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
Net product
sales
|
|
$
|
7,407
|
|
$
|
|
|
|
|
|
|
|
|
Operating costs
and expenses:
|
|
|
|
|
|
Cost of sales,
excluding amortization expense
|
|
689
|
|
|
|
Research and
development
|
|
9,285
|
|
8,360
|
|
Selling, general
and administrative
|
|
17,932
|
|
6,963
|
|
Amortization of
intangible asset
|
|
113
|
|
|
|
Total operating
costs and expenses
|
|
28,019
|
|
15,323
|
|
Operating loss
|
|
(20,612
|
)
|
(15,323
|
)
|
Interest and
other income, net
|
|
65
|
|
173
|
|
Net loss
|
|
$
|
(20,547
|
)
|
$
|
(15,150
|
)
|
Net loss per
share: basic and diluted
|
|
$
|
(0.20
|
)
|
$
|
(0.19
|
)
|
Weighted average
shares: basic and diluted
|
|
104,602,134
|
|
81,096,293
|
|
The accompanying notes are an integral part of these financial
statements.
4
Table
of Contents
ALLOS
THERAPEUTICS, INC.
STATEMENTS OF CASH FLOWS
(Dollars in
thousands)
(unaudited)
|
|
Three Months Ended
March 31,
|
|
|
|
2010
|
|
2009
|
|
Cash
Flows From Operating Activities:
|
|
|
|
|
|
Net
loss
|
|
$
|
(20,547
|
)
|
$
|
(15,150
|
)
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
Depreciation
and amortization
|
|
215
|
|
93
|
|
Stock-based
compensation expense
|
|
2,907
|
|
2,378
|
|
Amortization
of intangible asset
|
|
113
|
|
|
|
Realized
loss on sale of marketable securities
|
|
|
|
157
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
Accounts
receivable
|
|
(3,410
|
)
|
|
|
Prepaid
expenses and other assets
|
|
(378
|
)
|
1,538
|
|
Interest
receivable on investments
|
|
(75
|
)
|
363
|
|
Inventory
|
|
(217
|
)
|
|
|
Trade
accounts payable
|
|
742
|
|
1,719
|
|
Accrued
liabilities
|
|
(2,658
|
)
|
(2,987
|
)
|
Net
cash used in operating activities
|
|
(23,308
|
)
|
(11,889
|
)
|
Cash
Flows From Investing Activities:
|
|
|
|
|
|
Acquisition
of property and equipment
|
|
(191
|
)
|
(207
|
)
|
Purchases
of investments
|
|
(45,197
|
)
|
(134
|
)
|
Proceeds
from maturities of investments
|
|
9,496
|
|
23,720
|
|
Proceeds
from sales of marketable securities
|
|
|
|
3,894
|
|
Net
cash (used in) provided by investing activities
|
|
(35,892
|
)
|
27,273
|
|
Cash
Flows From Financing Activities:
|
|
|
|
|
|
Proceeds
from issuance of common stock associated with stock options, stock warrants
and employee stock purchase plan
|
|
2,359
|
|
1,190
|
|
Proceeds
from issuance of common stock, net of issuance costs
|
|
32
|
|
|
|
Net
cash provided by financing activities
|
|
2,391
|
|
1,190
|
|
Net
(decrease) increase in cash and cash equivalents
|
|
(56,809
|
)
|
16,574
|
|
Cash
and cash equivalents, beginning of period
|
|
141,185
|
|
30,458
|
|
Cash
and cash equivalents, end of period
|
|
$
|
84,376
|
|
$
|
47,032
|
|
Supplemental
Schedule of Cash and Non-cash Activities:
|
|
|
|
|
|
Deferred
revenue in accounts receivable
|
|
$
|
481
|
|
$
|
|
|
Assets
recorded for which payment has not yet occurred
|
|
104
|
|
|
|
The accompanying notes are an integral part of these
financial statements.
5
Table
of Contents
ALLOS THERAPEUTICS, INC.
NOTES TO FINANCIAL
STATEMENTS
(Dollars shown in tables are in thousands, except per
share amounts)
(unaudited)
1.
Basis of Presentation
The unaudited financial
statements of Allos Therapeutics, Inc. (referred to herein as the Company,
we, us or our) included herein reflect all adjustments, consisting only
of normal recurring adjustments, which in the opinion of management are
necessary to fairly state our financial position, results of operations and
cash flows for the periods presented.
Certain information and footnote disclosures normally included in
audited financial information prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or
omitted pursuant to the rules and regulations of the Securities and
Exchange Commission, or SEC. Operating
results for the three months ended March 31, 2010 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2010. These financial statements should
be read in conjunction with the audited financial statements and notes thereto
which are included in our Annual Report on Form 10-K for the year ended December 31,
2009 for a broader discussion of our business and the opportunities and risks
inherent in such business.
Liquidity
As of March 31, 2010, we had $137.5 million
in cash, cash equivalents, and investments. Based upon the current status of
our product development and commercialization plans, we believe that our cash,
cash equivalents, and investments as of March 31, 2010 will be adequate to
support our operations through at least the next 12 months, although there can
be no assurance that this can, in fact, be accomplished.
Our ability to generate revenue and achieve
profitability is dependent on our ability to successfully commercialize FOLOTYN®
(pralatrexate injection) for the treatment of patients with relapsed or
refractory peripheral T-cell lymphoma, or PTCL, in the United States. The amount of our future product sales are
subject to significant uncertainty. We
may never generate sufficient revenue from product sales to become profitable.
We expect to continue to spend substantial amounts on
research and development, including amounts spent on conducting clinical trials
and seeking additional regulatory approvals for FOLOTYN. We also expect to continue to spend
substantial amounts on selling, general and administrative expenses in order to
commercialize FOLOTYN for the treatment of patients with relapsed or refractory
PTCL. Therefore, we may need to raise
additional capital to support our future operations. Our actual capital
requirements will depend on many factors, including:
·
the timing and amount of revenues
generated from sales of FOLOTYN;
·
the timing and costs associated with our
sales and marketing activities for the commercialization of FOLOTYN;
·
the timing and costs associated with
manufacturing clinical and commercial supplies of FOLOTYN;
·
the timing and costs associated with
conducting preclinical and clinical development of FOLOTYN, including the
post-approval clinical studies required by the U.S. Food and Drug
Administration, or FDA, as well as our evaluation of, and decisions with
respect to, additional therapeutic indications for which we may develop
FOLOTYN;
·
the timing, costs and potential revenue
associated with any co-promotion or other partnering arrangements entered into
to commercialize FOLOTYN; and
·
our evaluation of, and decisions with
respect to, potential in-licensing or product acquisition opportunities or
other strategic alternatives.
6
Table
of Contents
We may seek to obtain this additional capital through
equity or debt financings, arrangements with corporate partners, or from other
sources. Such financings or arrangements, if successfully consummated, may be
dilutive to our existing stockholders. However, there is no assurance that
additional financing will be available when needed, or that, if available, we
will obtain such financing on terms that are favorable to our stockholders or
us. In the event that additional funds are obtained through arrangements with
collaborative partners or other sources, such arrangements may require us to
relinquish rights to some of our technologies, product candidates or products
under development, which we might otherwise seek to develop or commercialize
ourselves, on terms that are less favorable than might otherwise be
available. If we are unable to generate meaningful amounts of revenue
from future product sales or cannot otherwise raise sufficient additional funds
to support our operations, we may be required to delay, reduce the scope of or
eliminate one or more of our development programs and our business and future
prospects for revenue and profitability may be harmed.
2.
Fair Value of
Financial Instruments
Cash, Cash Equivalents and Investments
All highly liquid investments with
original maturities of three months or less are considered to be cash
equivalents. The carrying values of our cash equivalents and investments
approximate their market values based on quoted market prices. Investments are
classified as held to maturity and are carried at cost plus accrued interest.
Our cash and cash equivalents are maintained in a financial institution in
amounts that, at times, may exceed federally insured limits. The weighted
average duration of the remaining time to maturity for our portfolio of
investments as of March 31, 2010 was approximately eight months. As of March 31, 2010, our investments
were held in a variety of interest-bearing instruments, consisting mainly of
U.S. Treasury bills and certificates of deposit. We did not hold any derivative
instruments, foreign exchange contracts, asset backed securities, mortgage
backed securities, auction rate securities, or securities of issuers in
bankruptcy in our investment portfolio as of March 31, 2010.
Fair Value of Financial Instruments
Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The following
fair value hierarchy prioritizes the inputs into valuation techniques used to
measure fair value. Accordingly, we use valuation techniques that maximize the
use of observable inputs and minimize the use of unobservable inputs when
determining fair value. The three levels of the hierarchy are as follows:
Level 1: Inputs that
reflect unadjusted quoted prices in active markets that are accessible to us
for identical assets or liabilities;
Level 2: Inputs include
quoted prices for similar assets and liabilities in active and inactive markets
or that are observable for the asset or liability either directly or
indirectly; and
Level 3: Unobservable
inputs that are supported by little or no market activity.
We
have no assets or liabilities that were measured using quoted prices for
similar assets and liabilities or significant unobservable inputs (Level 2 and
Level 3 assets and liabilities, respectively) as of March 31, 2010. Our financial instruments include cash and
cash equivalents, investments, accounts receivable, prepaid expenses, accounts
payable and accrued liabilities. The carrying amounts of financial instruments
approximate their fair value due to their short maturities. The carrying value
of our cash held in money market funds totaling $83.4 million as of March 31,
2010 is included in cash and cash equivalents on our Balance Sheet and
approximates market values based on quoted market prices, or Level 1 inputs.
7
Table
of Contents
The
carrying value of investments consisted of the following as of March 31,
2010:
|
|
Amortized
cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
|
Short-term
held-to-maturity securities:
|
|
|
|
|
|
|
|
|
|
U.S. Treasury bills
|
|
$
|
49,286
|
|
$
|
8
|
|
$
|
(33
|
)
|
$
|
49,261
|
|
Certificates of deposit
|
|
3,508
|
|
1
|
|
|
|
3,509
|
|
Total due in one year
or less
|
|
$
|
52,794
|
|
$
|
9
|
|
$
|
(33
|
)
|
$
|
52,770
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
held-to-maturity securities:
|
|
|
|
|
|
|
|
|
|
U. S. Government agency
securities
|
|
$
|
272
|
|
$
|
10
|
|
$
|
|
|
$
|
282
|
|
Corporate notes
|
|
307
|
|
15
|
|
|
|
322
|
|
Sub-total
|
|
$
|
579
|
|
$
|
25
|
|
$
|
|
|
$
|
604
|
|
Less: Amounts
classified as restricted cash
|
|
(238
|
)
|
|
|
|
|
(238
|
)
|
Total due in one to
three years
|
|
$
|
341
|
|
$
|
25
|
|
$
|
|
|
$
|
366
|
|
The
carrying value of investments consisted of the following as of December 31,
2009:
|
|
Amortized
cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
|
Short-term
held-to-maturity securities:
|
|
|
|
|
|
|
|
|
|
U.S. Treasury
bills
|
|
$
|
8,006
|
|
$
|
11
|
|
$
|
|
|
$
|
8,017
|
|
Certificates of
deposit
|
|
9,010
|
|
5
|
|
|
|
9,015
|
|
Total due in one
year or less
|
|
$
|
17,016
|
|
$
|
16
|
|
$
|
|
|
$
|
17,032
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
held-to-maturity securities:
|
|
|
|
|
|
|
|
|
|
U. S. Government
agency securities
|
|
$
|
273
|
|
$
|
11
|
|
$
|
|
|
$
|
284
|
|
Corporate notes
|
|
308
|
|
13
|
|
|
|
321
|
|
Sub-total
|
|
$
|
581
|
|
$
|
24
|
|
$
|
|
|
$
|
605
|
|
Less: Amounts
classified as restricted cash
|
|
(238
|
)
|
|
|
|
|
(238
|
)
|
Total due in one
to three years
|
|
$
|
343
|
|
$
|
24
|
|
$
|
|
|
$
|
367
|
|
We
realized a loss of approximately $0 and $157,000 on the sale of certain of our
investments during the three months ended March 31, 2010 and 2009,
respectively, which were sold in order to preserve our principal as the issuers
of these securities experienced significant deteriorations in their
creditworthiness as evidenced by investment rating downgrades. Market values were determined for each
individual security in the investment portfolio. If a decline in fair value below the
amortized cost basis of an investment is judged to be other-than-temporary, the
cost basis of the investment is written down to fair value. Additionally,
management assesses whether it intends to sell or would more-likely-than-not
not be required to sell the investment before the expected recovery of the
amortized cost basis. Management has asserted that it has no intent to sell and
that it believes it is more-likely-than-not that it will not be required to
sell the investment before recovery of its amortized cost basis. All of the investments as of March 31,
2010 that were in a loss position, have been in a continuous unrealized loss
position for less than 12 months. There
were no investments in an unrealized loss position as of December 31,
2009. As of March 31, 2010, we
have an unrealized loss of $33,000 on two of our U.S. Treasury bill investments
with an aggregate fair value of $35.3 million.
As of March 31, 2010, no other than temporary impairment has been
recorded on any of our investments since these unrealized losses are on U.S.
government issued securities maturing within one year. The decline in value of
the investments as of March 31, 2010 was caused by primarily by changes in
interest rates. We do not intend to sell
and we do not believe that it is more likely than not that we will be required
to sell our investments before recovering the cost of securities, nor do we
expect not to recover the entire amortized cost basis of our investments as of March 31,
2010. We have the ability and intent to
hold our remaining investments to recover the entire amortized cost basis of
the investments as of March 31, 2010.
8
Table
of Contents
3.
Inventory
Inventory
Costs associated with the production of FOLOTYN bulk
drug substance and formulated drug product by our third party manufacturers are
recorded as either research and development expense or inventory.
Costs associated with the production of FOLOTYN by our
third party manufacturers are expensed to research and development expense at
the time of production when:
·
the formulated drug product is packaged
for clinical trial use;
·
the bulk drug substance and formulated
drug product is produced prior to receiving regulatory approval to market the
product candidate; and
·
the bulk drug substance and formulated
drug product is produced prior to receiving FDA approval for the respective
third party manufacturing facilities.
If and when we receive the related regulatory
approval, we capitalize those manufacturing costs for our marketed products at
the lower of cost (first-in, first-out method) or market (current replacement
cost) with cost determined on the first-in, first-out basis and then expense
the sold inventory as a component of cost of goods sold.
Prior to receiving FDA approval of FOLOTYN, all costs
related to purchases of the active pharmaceutical ingredient and the
manufacturing of the product were recorded as research and development expense. As such, we have remaining supplies of drug
substance and drug product that are not recorded on our Balance Sheet as
inventory as of March 31, 2010.
Until we sell the inventory for which the costs were previously
expensed, our cost of product sales will reflect only incremental costs
incurred subsequent to FDA approval. We
continue to expense costs associated with clinical trial material as research
and development expense. Inventory as of
March 31, 2010 consists of work in process of $120,000 and finished goods
of $138,000.
4.
Prepaid Expenses and Other Assets
Prepaid expenses
and other assets are comprised of the following:
|
|
March 31,
2010
|
|
December 31,
2009
|
|
Prepaid sales,
marketing and medical affairs expenses
|
|
$
|
2,285
|
|
$
|
1,839
|
|
Prepaid expenses
and other assets
|
|
1,167
|
|
1,251
|
|
Prepaid research
and development expenses
|
|
826
|
|
718
|
|
|
|
$
|
4,278
|
|
$
|
3,808
|
|
5.
Intangible asset, net
Costs incurred for
products or product candidates not yet approved by the FDA and for which no
alternative future use exists are recorded as expense. In the event a product
or product candidate has been approved by the FDA or an alternative future use
exists for a product or product candidate, patent and license costs are
capitalized and amortized over the shorter of the expected patent life and the
expected life cycle of the related product or product candidate.
As a result of the FDAs
approval to market FOLOTYN
on September 24, 2009, we met a milestone under
our license agreement with Memorial Sloan-Kettering Cancer Center, SRI
International and Southern Research Institute, discussed in Note 10, which
required us to make a milestone payment of $5.8 million. We capitalized
the $5.8 million payment as an intangible asset and began amortizing the asset
immediately following the FDA approval of FOLOTYN. Amortization expense is
being recorded on a straight line basis over the remaining expected life of the
patent for FOLOTYN, which we expect to last until July 16, 2022. This
includes the anticipated Hatch-Waxman extension that provides patent protection
for drug compounds for a period of up to five years to compensate for time
spent in development. This term is our best estimate of the life of the patent.
If, however, the Hatch-Waxman extension is not granted, the intangible asset
will be amortized over a shorter period. Amortization expense of $113,000 for
the three months ended March 31, 2010 was recorded as amortization
9
Table of Contents
of intangible asset in
the Statement of Operations. The
estimated annual amortization expense for the intangible asset is approximately
$454,000 per year during 2010 through 2021 and $234,000 in 2022.
The carrying values of intangible assets are periodically
reviewed to determine if the facts and circumstances suggest that a potential
impairment may have occurred. No trigger
events occurred for the three months ended March 31, 2010 on the
$5,566,000 of intangible asset, net.
6.
Accrued Liabilities
Accrued liabilities are
comprised of the following:
|
|
March 31,
2010
|
|
December 31,
2009
|
|
Accrued research
and development expenses
|
|
$
|
3,590
|
|
$
|
3,363
|
|
Accrued
personnel costs
|
|
3,405
|
|
5,133
|
|
Accrued
royalties, government rebates, chargebacks and distribution fees
|
|
1,529
|
|
963
|
|
Accrued sales
and marketing expenses
|
|
1,131
|
|
2,407
|
|
Accrued
expensesother
|
|
921
|
|
1,270
|
|
|
|
$
|
10,576
|
|
$
|
13,136
|
|
7.
Product Sales
Product Sales
We generate revenue from
product sales. We recognize product revenue when it is realized or
realizable and earned. Revenue is realized or realizable and earned when all of
the following criteria are met: (1) persuasive evidence of an arrangement
exists; (2) delivery has occurred or services have been rendered; (3) our
price to the buyer is fixed and determinable; and (4) collectability is
reasonably assured. Revenue from sales transactions where the buyer has the
right to return the product is recognized at the time of sale only if (1) our
price to the buyer is substantially fixed or determinable at the date of sale, (2) the
buyer has paid us, or the buyer is obligated to pay us and the obligation is
not contingent on resale of the product, (3) the buyers obligation to us
would not be changed in the event of theft or physical destruction or damage of
the product, (4) the buyer acquiring the product for resale has economic
substance apart from that provided by us, (5) we do not have significant
obligations for future performance to directly bring about resale of the
product by the buyer, and (6) the amount of future returns can be
reasonably estimated.
We sell FOLOTYN to a
limited number of pharmaceutical wholesale distributors, or distributors, three
of which are affiliates under common control of an unrelated party. These distributors then resell FOLOTYN to the
patients respective health care providers.
Given our limited sales history, we are unable to estimate returns.
Therefore, we have determined that domestic shipments of FOLOTYN made to distributors
do not meet the criteria for revenue recognition at the time of shipment, and
therefore such shipments are accounted for using the sell-through method. Under
the sell-through method, we do not recognize revenue upon shipment of FOLOTYN
to the distributor. For these product sales, we invoice the distributor and
record deferred revenue equal to the gross invoice sales price. We then
recognize revenue when the product is sold through, or upon shipment of the
product from the distributors to the distributors customers. Because of the price of FOLOTYN, the limited
number of patients, the short period from sale of product to patient infusion
and limited contractual return rights, FOLOTYN distributors and their customers
generally carry limited inventory.
Through March 31, 2010, we have had no refunds or returns. Deferred revenue results from amounts
receivable in advance of revenue recognition and totaled $1,150,000 as of March 31,
2010.
We estimate sell-through
revenue and certain gross to net sales adjustments based upon analysis of
third-party information, including information obtained from certain
distributors with respect to their inventory levels and sell-through to the
distributors customers. Our estimates are subject to the inherent limitations
of estimates that rely on third-party data. The information received from
distributors is a product of their record-keeping process and their internal
controls surrounding such processes. Our
sales and revenue recognition under the sell-through method reflect our
estimate of actual product sold through the distribution channel.
10
Table
of Contents
Net
Product Sales
Our net product sales represent total sell-through
revenue less estimated allowances for rebates and chargebacks to be incurred on
the selling price of FOLOTYN related to the respective revenue. In addition, we
incur certain distributor fees related to the management of our product by
distributors. These distributor fees are recorded within net revenues and are
known at the time of sale. Due to estimates and assumptions inherent in
determining the amount of rebates and chargebacks, the actual amount of claims
for rebates and chargebacks may be different from our estimates, at which time
we would adjust our reserves accordingly.
Product sales allowances and accruals are based on definitive
contractual agreements or legal requirements (such as Medicaid laws and
regulations) related to the purchase and/or utilization of the product by these
entities. Allowances and accruals are
generally recorded in the same period that the related revenue is recognized.
Classification of Product Sales
Allowances and Accruals
Accruals related to Medicaid rebates, government
chargebacks and distributor fees are recognized at the time sell-through
revenue is recorded, resulting in a reduction in product sales revenue and the
recording of an increase in accrued expenses.
Medicaid
Rebates
Our product is subject to state government-managed
Medicaid programs whereby discounts and rebates are provided to participating
state governments. We record estimated rebates payable under governmental
programs, including Medicaid, as a reduction of revenue at the time
sell-through revenues are recorded. Our calculations related to these rebate
accruals require estimates, including estimates of customer mix primarily based
on a combination of market and clinical research, to determine which sales will
be subject to rebates and the amount of such rebates. During the first quarter
of 2010, we obtained additional market research and were able to refine our
estimated Medicaid utilization, which resulted in a reversal of Medicaid rebate
allowances related to 2009 sales totaling $208,000. We also consider any legal interpretations of
the applicable laws related to Medicaid and qualifying federal and state
government programs and any new information regarding changes in the Medicaid
programs regulations and guidelines that would impact the amount of the
rebates. In March 2010, the Patient
Protection and Affordable Care Act, as modified by the Health Care and
Education Affordability Reconciliation Act of 2010, or PPACA, was enacted,
which increased the Medicaid rebate percentage from 15.1% to 23.1%, retroactive
to January 1, 2010. In addition,
the states ability to early adopt portions of PPACA, and any implementing
regulations, could impact future estimates related to our Medicaid rebate
allowances. We update our estimates and assumptions each period and record any
necessary adjustments to our reserves. Although allowances and accruals are recorded
at the time of product sale, certain rebates are typically paid out, on
average, up to six months or longer after the sale. We account for Medicaid
rebates by establishing an accrual in an amount equal to our estimate of
Medicaid rebate claims attributable to sales recognized in that period. If actual future results vary from our
estimates, we may need to adjust our previous estimates, which would affect our
earnings in the period of the adjustment.
For reference purposes, a 10% to 20% variance in Medicaid utilization
estimates for state Medicaid rebates as of March 31, 2010 would result in
an approximate $164,000 to $327,000 adjustment to cumulative net product sales.
Government
Chargebacks
Our
products are subject to certain programs with federal government qualified
entities whereby pricing on products is discounted below distributor list price
to participating entities. These entities purchase products through
distributors at the discounted price, and the distributors charge the
difference between their acquisition cost and the discounted price back to us.
We account for chargebacks by establishing an accrual in an amount equal to our
estimate of maximum chargeback claims. We determine our chargeback estimates
based on actual
FOLOTYN sell-through
sales data
from third-party information. Chargeback amounts are determined at the time of
resale to the federal government qualified entities, and we generally issue
credits for such amounts within several weeks of receiving claims from the
distributor. We do not expect the impact of the 340B program expansion included
in the PPACA to significantly change our estimated government chargeback
accruals because drugs approved under an Orphan Drug designation were
specifically excluded from the provisions of the PPACA. The FDA has awarded orphan drug status to
FOLOTYN for the treatment of patients with T-cell lymphoma, which includes
patients with relapsed or refractory PTCL.
Estimated
chargeback amounts are recorded at the time the sell-through sale occurs and we
adjust the accrual quarterly to reflect actual experience. Due to estimates and
assumptions inherent in determining the amount of government chargebacks, the
actual amount of claims for chargebacks may be different from our estimates, at
which time we would adjust our reserves accordingly
.
11
Table
of Contents
Balances
and activity in the deferred revenue account and a reconciliation of gross to
net product sales for the three months ended March 31, 2010 and 2009 are
as follows:
|
|
Three Months
Ended
March 31,
|
|
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
Deferred revenue
as of December 31, 2009
|
|
$
|
669
|
|
$
|
|
|
Gross product
sales to distributors
|
|
8,701
|
|
|
|
Less: Gross
product sales recognized
|
|
(8,220
|
)
|
|
|
Deferred revenue
as of March 31, 2010
|
|
$
|
1,150
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross product
sales
|
|
$
|
8,220
|
|
$
|
|
|
Less:
Gross to Net Sales Adjustments
|
|
|
|
|
|
Government
rebates and chargebacks
|
|
(574
|
)
|
|
|
Distribution
fees
|
|
(239
|
)
|
|
|
Net product
sales
|
|
$
|
7,407
|
|
$
|
|
|
Balances and activity in the government rebates and
chargebacks and distribution fees payable accounts for the three months ended March 31,
2010 are as follows:
|
|
Government
Rebates and
Chargebacks
|
|
Distribution
Fees
|
|
Balance at December 31, 2009
|
|
$
|
487
|
|
$
|
86
|
|
Reserve for current period sales
|
|
782
|
|
239
|
|
Change in estimated Medicaid utilization for 2009
sales
|
|
(208
|
)
|
|
|
Credits/payments made for current period sales
|
|
(99
|
)
|
(100
|
)
|
Credits/payments made for prior period sales
|
|
(249
|
)
|
(77
|
)
|
Balance at March 31, 2010
|
|
$
|
713
|
|
$
|
148
|
|
Major Customers and Concentration of Credit Risk
We sell FOLOTYN to a limited number of pharmaceutical
wholesale distributors, or distributors, three of which are affiliates under
common control of an unrelated party, without requiring collateral. We periodically assess the financial strength
of these customers and establish allowances for anticipated losses, if
necessary. Substantially all of our 2010
sales were made in the United States.
|
|
% of total
trade accounts
receivable at
|
|
% of total gross
product sales for the
three months ended
|
|
|
|
March 31,
2010
|
|
March 31,
2010
|
|
Customer
A
|
|
51.4
|
%
|
51.6
|
%
|
Customer
B
|
|
22.0
|
%
|
22.9
|
%
|
Customer
C
|
|
26.4
|
%
|
25.3
|
%
|
Cost of sales
Cost of sales, excluding
amortization expense, includes royalties, inventory packaging and labeling,
warehousing and shipping costs associated with FOLOTYN product sales. See discussion in Note 10 regarding the royalty
rates under our license agreement for FOLOTYN.
Prior to receiving FDA approval of FOLOTYN, all costs related to
purchases of the active pharmaceutical ingredient and the manufacturing of the
product were recorded as research and development expense.
12
Table
of Contents
Until we sell the
inventory for which the costs were previously expensed, our cost of sales will
reflect only incremental costs incurred subsequent to FDA approval.
Under the sell-through
method, royalties paid to our licensors of FOLOTYN based on the unit shipments
to distributors are deferred and recognized as royalty expense when those units
are sold through and recognized as revenue. Royalties paid are deferred as we
have the right to offset royalties paid for product that are later returned
against subsequent royalty obligations.
8.
Stock-Based
Compensation
Stock-based compensation expense for the three months
ended March 31, 2010 and 2009 has been recognized in the accompanying
Statements of Operations as follows:
|
|
Three Months Ended
March 31,
|
|
|
|
2010
|
|
2009
|
|
Research and
development
|
|
$
|
682
|
|
$
|
973
|
|
Selling, general
and administrative
|
|
2,225
|
|
1,405
|
|
Total
stock-based compensation expense
|
|
$
|
2,907
|
|
$
|
2,378
|
|
We did not recognize a related tax benefit during the
three months ended March 31, 2010 and 2009, as we maintain net operating
loss carryforwards and we have established a valuation allowance against the
entire tax benefit as of March 31, 2010.
No stock-based compensation expense was capitalized on our Balance Sheet
as of March 31, 2010 and December 31, 2009.
The following
table summarizes activity and related information for stock option awards
granted under our equity incentive plans:
|
|
Options Outstanding
|
|
Options Exercisable
|
|
|
|
Number of
Shares
|
|
Weighted
Average
Exercise Price
|
|
Number of
Shares
|
|
Weighted
Average
Exercise Price
|
|
Outstanding
at December 31, 2009
|
|
8,292,496
|
|
$
|
5.83
|
|
3,823,683
|
|
$
|
5.02
|
|
Granted
|
|
1,840,631
|
|
7.53
|
|
|
|
|
|
Exercised
|
|
(633,947
|
)
|
3.66
|
|
|
|
|
|
Forfeited
|
|
(125,339
|
)
|
7.47
|
|
|
|
|
|
Outstanding
at March 31, 2010
|
|
9,373,841
|
|
$
|
6.29
|
|
3,875,452
|
|
$
|
5.43
|
|
During the three months ended March 31, 2010, we
granted 1,840,631 stock options with a weighted-average
grant-date fair value of $4.27 per share.
During the three months ended March 31, 2010 and 2009, we
recorded stock-based compensation related to our stock option plans of
$2,605,000 and $2,225,000, respectively.
As of March 31, 2010, the unrecorded stock-based compensation
balance related to stock option awards was $12,509,000 and will be recognized
over an estimated weighted-average amortization period of 1.9 years.
The following
table summarizes information about outstanding stock options that are fully vested
and currently exercisable, and outstanding stock options that are expected to
vest in the future:
|
|
Number
Outstanding
|
|
Weighted Average
Remaining
Contractual Term
|
|
Weighted
Average
Exercise Price
|
|
Aggregate
Intrinsic Value
|
|
As of
March 31, 2010:
|
|
|
|
|
|
|
|
|
|
Options fully
vested and exercisable
|
|
3,875,452
|
|
6.7
|
|
$
|
5.43
|
|
$
|
7,975,000
|
|
Options expected
to vest, including effects of expected forfeitures
|
|
4,608,789
|
|
9.0
|
|
$
|
6.89
|
|
2,958,000
|
|
Options fully
vested and expected to vest
|
|
8,484,241
|
|
8.0
|
|
$
|
6.22
|
|
$
|
10,933,000
|
|
The aggregate intrinsic value in the tables above
represents the total pretax intrinsic value, based on our closing stock price
of $7.43 as of March 31, 2010, which would have been received by the
option holders had all option holders with in-the-money
13
Table
of Contents
options exercised their options as of that date. The total number of in-the-money options
exercisable as of March 31, 2010 was 3,084,816.
The total intrinsic value of options exercised during
the three months ended March 31, 2010 and 2009 was $2,318,000 and
$1,544,000, respectively, determined as of the date of option exercise. We settle employee stock option exercises
with newly issued common shares. No tax
benefits were realized by us in connection with these exercises during the
three months ended March 31, 2010 and 2009 as we maintain net operating
loss carryforwards and we have established a valuation allowance against the
entire tax benefit as of March 31, 2010.
The following table summarizes activity and related
information for restricted stock, or RS, awards:
|
|
Number of
Shares
|
|
Weighted
Average
Grant-Date
Fair Value
|
|
Nonvested
RS at December 31, 2009
|
|
125,000
|
|
$
|
3.72
|
|
Granted
|
|
|
|
|
|
Vested
|
|
(82,500
|
)
|
3.39
|
|
Nonvested
RS at March 31, 2010
|
|
42,500
|
|
$
|
4.38
|
|
The shares of restricted
stock vest in four equal annual installments from the date of grant. D
uring the three months ended March 31,
2010 and 2009, we recorded stock-based compensation related to restricted stock
awards of $26,000 and $85,000, respectively.
As of March 31, 2010, the unrecorded stock-based compensation
balance related to restricted stock awards was $31,000 and will be recognized
over an estimated weighted-average amortization period of 1.4 years.
The following table summarizes activity and related
information for restricted stock unit, or RSU, awards:
|
|
Number of
Shares
|
|
Weighted
Average
Grant-Date
Fair Value
|
|
Nonvested
RSU at December 31, 2009
|
|
155,479
|
|
$
|
6.48
|
|
Granted
|
|
329,403
|
|
7.56
|
|
Vested
|
|
(30,856
|
)
|
6.40
|
|
Nonvested
RSU at March 31, 2010
|
|
454,026
|
|
$
|
7.27
|
|
The shares of restricted
stock unit awards vest in four equal annual installments from the date of grant. D
uring the three months ended March 31,
2010 and 2009, we recorded stock-based compensation related to restricted stock
unit awards of $225,000 and $47,000, respectively. As of March 31, 2010, the unrecorded
stock-based compensation balance related to restricted stock unit awards was
$2,572,000 and will be recognized over an estimated weighted-average
amortization period of 2.4 years.
9.
Net
Loss Per Share
Basic net loss per share is computed by dividing the
net loss attributable to common stockholders for the period by the weighted
average number of common shares outstanding during the period. Diluted earnings per share is computed by
giving effect to all dilutive potential common stock outstanding during the period,
including stock options, restricted stock, restricted stock unit awards and
shares to be issued under our employee stock purchase plan.
14
Table
of Contents
Diluted
net loss per share is the same as basic net loss per share for all periods
presented because any potential dilutive common shares were anti-dilutive due
to our net loss (as including such shares would decrease our basic net loss per
share). Such potentially dilutive shares are excluded when the effect would be
to reduce net loss per share. Because we reported a net loss for the three
months ended March 31, 2010 and 2009, all potentially dilutive common
shares have been excluded from the computation of the dilutive net loss per
share for all periods presented. Such potentially dilutive common shares
consist of the following:
|
|
March 31,
|
|
|
|
2010
|
|
2009
|
|
Common stock options
|
|
9,373,841
|
|
8,484,730
|
|
Unvested restricted stock
|
|
42,500
|
|
192,500
|
|
Unvested restricted stock units
|
|
454,026
|
|
151,941
|
|
|
|
9,870,367
|
|
8,829,171
|
|
10.
Commitments
and Contingencies
Royalty and License Fee Commitments
In December 2002, we entered into a license
agreement with Memorial Sloan-Kettering Cancer Center, SRI International and Southern
Research Institute, as amended, under which we obtained exclusive worldwide
rights to a portfolio of patents and patent applications related to FOLOTYN and
its uses. Under the terms of the agreement, we paid an up-front license fee of
$2.0 million upon execution of the agreement and have made aggregate milestone
payments of $2.5 million based on the passage of time. Additionally, in May and
September 2009, we made milestone payments of $1.5 million based on the
FDA accepting our New Drug Application for review and $5.8 million based on the
FDA approval to market FOLOTYN, respectively.
The up-front license fee and all milestone payments under the agreement
prior to FDA approval to market FOLOTYN were recorded to research and
development expense as incurred. As
discussed in Note 5, the $5.8 million milestone payment based on the FDA
approval was capitalized as an intangible asset and is being amortized over the
expected useful life of the composition of matter patent for FOLOTYN, which we
expect to last until July 16, 2022. The only remaining potential milestone
payment under the license agreement is for $3.5 million upon regulatory
approval to market FOLOTYN in Europe, which, if made would be capitalized and
amortized over the expected useful life of the licensed patents. Under the
terms of the agreement, we are required to fund all development programs and
will have sole responsibility for all commercialization activities. In
addition, we will pay the licensors royalties based on graduated annual levels
of net sales of FOLOTYN to our distributors, net of actual rebates and
chargebacks, or distributor sales, which may be different than our net product
revenue recognized in accordance with U.S. generally accepted accounting
principles, or GAAP, or sublicense revenues arising from sublicensing the
product, if and when such sales or sublicenses occur. Royalties are 8% of annual distributor sales
up to $150.0 million; 9% of annual distributor sales of $150.0 million through
$300.0 million; and 11% of annual distributor sales in excess of $300.0
million. In 2010 and 2009, our royalties
were 8% of our net distributor sales. As
of March 31, 2010, accrued royalties were $668,000 and are included in
accrued liabilities on the Balance Sheet.
15
Table of Contents
ITEM
2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The
following Managements Discussion and Analysis of Financial Condition and
Results of Operations, as well as information contained elsewhere in this
report,
contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended. These forward-looking
statements include, but are not limited to, statements regarding our
commercialization of FOLOTYN for patients with relapsed or refractory
peripheral T-cell lymphoma; our projected timeline to present and the potential
implications of the top line results from our Phase 2b trial comparing FOLOTYN
and erlotinib in patients with advanced non-small cell lung cancer, our intent
and projected timeline to submit a Marketing Authorization Application, or MAA,
in Europe for FOLOTYN; our projected operating costs and expenses for fiscal
year 2010; other statements regarding our future product development and
regulatory strategies, including our intent to develop or seek regulatory
approval for FOLOTYN for additional indications; the ability of our third-party
manufacturers to support our requirements for drug supply; any statements
regarding our future financial performance, results of operations or
sufficiency of capital resources to fund our operating requirements; and any
other statements that are other than statements of historical fact. In some
cases, these statements may be identified by terminology such as may, will,
should, expects, plans, anticipates, believes, estimates, predicts,
potential or continue, or the negative of such terms and other comparable
terminology. Although we believe that the expectations reflected in the
forward-looking statements contained herein are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements. These
statements involve known and unknown risks and uncertainties that
may cause our, or our industrys results, levels of activity, performance
or achievements to be materially different from those expressed or implied by
the forward-looking statements. Factors that may cause or contribute to such
differences include, among other things, those discussed in Part II, Item
1A of this report under the caption Risk Factors. All forward-looking
statements included in this report are based on information available to us as
of the date hereof and we undertake no obligation to revise any forward-looking
statements in order to reflect any subsequent events or circumstances.
Forward-looking statements not specifically described above also may be found
in these and other sections of this report.
Overview
We are a
biopharmaceutical company committed to the development and commercialization of
innovative anti-cancer therapeutics. Our
goal is to build a profitable company by generating income from products we
develop and commercialize, either alone or with one or more potential strategic
partners. We strive to develop
proprietary products that have the potential to improve the standard of care in
cancer therapy.
We are currently focused
on the development and commercialization of FOLOTYN® (pralatrexate
injection). FOLOTYN is a targeted
antifolate inhibitor designed to accumulate preferentially in cancer cells. FOLOTYN targets the inhibition of
dihydrofolate reductase, or DHFR, an enzyme critical in the folate pathway,
thereby interfering with DNA and RNA synthesis and triggering cancer cell
death. FOLOTYN can be delivered as a single agent, for which we currently
have approval for the treatment of patients with relapsed or refractory
peripheral T-cell lymphoma, or PTCL, and has the potential to be used in
combination therapy regimens. We believe
that FOLOTYNs unique mechanism of action offers us the ability to target the
drug for development in a variety of hematological malignancies and solid tumor
indications. We currently retain
exclusive worldwide commercial rights to FOLOTYN for all indications. We may also seek to grow our product
portfolio through product acquisition and in-licensing efforts.
On September 24, 2009, the U.S. Food and Drug
Administration, or FDA, granted accelerated approval of FOLOTYN for use as a
single agent for the treatment of patients with relapsed or refractory PTCL.
This approval was based on overall response rate from our pivotal PROPEL trial.
Clinical benefit such as improvement in progression-free survival or overall
survival has not been demonstrated.
FOLOTYN represents our first drug approved for marketing in the United
States. FOLOTYN is the first and only
drug approved by the FDA for this indication.
In connection with the accelerated approval, we are required to conduct
several post-approval studies
that are intended to verify and describe FOLOTYNs clinical benefit in
patients with T-cell lymphoma and assess whether FOLOTYN poses a serious risk
of altered drug levels resulting from organ impairment.
We began making FOLOTYN
available for commercial sale in the United States in October 2009 and
commenced our commercial launch of FOLOTYN in January 2010. We have established a commercial
organization, including sales, marketing, supply chain management and
reimbursement capabilities, for sales of FOLOTYN in the United States. We
16
Table
of Contents
believe the market for
relapsed or refractory PTCL is addressable with a targeted U.S. sales and
marketing organization, and we intend to promote FOLOTYN ourselves in the
United States.
Based
on the results of the PROPEL trial, we intend to seek regulatory approval to
market FOLOTYN in Europe for the treatment of patients with relapsed or
refractory PTCL. Our current intention
is to submit a MAA in Europe in the fourth quarter of 2010. We may also seek regulatory approval to
market FOLOTYN for the treatment of patients with relapsed or refractory PTCL
in Japan and other countries. We intend
to enter into co-promotion or out-licensing arrangements with other pharmaceutical
or biotechnology partners where necessary to reach foreign market segments and
when deemed strategically and economically advisable.
We are committed
to evaluating FOLOTYN for oncology use as a single agent and in combination
with other therapies. We currently are
conducting clinical trials involving FOLOTYN in multiple indications and plan
to initiate additional trials in the future to evaluate FOLOTYNs potential
utility in other hematologic malignancies and solid tumor indications. The following table summarizes the target
indications and clinical development status of the FOLOTYN development program,
including our planned post-approval studies:
Line
of Therapy / Indication
|
|
Phase
|
|
Status
|
HEMATOLOGIC MALIGNANCIES
|
|
|
|
|
Peripheral T-cell Lymphoma
|
|
|
|
|
2
nd
line+: PROPEL
Pivotal Study
|
|
2
|
|
FDA accelerated
approval on 9/24/09; Marketed in U.S.
|
1
st
Line: CHOP
sequential study*
|
|
3
|
|
Planned initiation in
2010
|
Cutaneous T-cell Lymphoma
|
|
|
|
|
2
nd
Line+: Single
agent study in relapsed or refractory CTCL
|
|
1
|
|
Patient enrollment
completed
|
2
nd
Line:
Bexarotene combination*
bexarotene +/- FOLOTYN
|
|
1/3
|
|
Phase 1 MTD study to
begin in 2010
|
Lymphoma
|
|
|
|
|
2
nd
Line+:
non-Hodgkins lymphoma combination
FOLOTYN + gemcitabine
|
|
1/2a
|
|
Phase 2a patient
enrollment ongoing
|
2
nd
Line+: B-cell
non-Hodgkins lymphoma
|
|
2
|
|
Patient enrollment
ongoing
|
SOLID TUMORS
|
|
|
|
|
Non-Small Cell Lung Cancer
|
|
|
|
|
2
nd
& 3
rd
Line: Current
or former smokers, Stage IIIB/IV
FOLOTYN vs. erlotinib
|
|
2b
|
|
Enrollment complete;
top line results expected 3Q 2010**
|
Bladder Cancer
|
|
|
|
|
2
nd
Line:
Metastatic relapsed transitional cell carcinoma (TCC) of the urinary bladder
|
|
2
|
|
Patient enrollment
ongoing
|
Breast Cancer
|
|
|
|
|
2
nd
Line+:
Previously treated advanced or metastatic breast cancer
|
|
2
|
|
Patient enrollment
ongoing
|
*
These studies are required by the FDA as
a condition of the accelerated approval of FOLOTYN for the treatment of
patients with relapsed or refractory PTCL and must verify the clinical benefit
of FOLOTYN.
**
Our Phase 2b trial in non-small cell lung
cancer is fully enrolled and we currently expect to announce top line results
of this in the third quarter of 2010, although the actual timing may vary based
upon a number of factors.
Results
of Operations
We have incurred
significant net losses and negative cash flows from operations. We have
incurred these losses principally from costs incurred in our research and
development programs and from our selling, general and administrative
expenses. Our primary business
activities have been focused on the development of FOLOTYN and other programs
that we discontinued in previous years.
Our ability to generate significant revenue and achieve profitability is
dependent on our ability to successfully commercialize FOLOTYN for the
treatment of patients with relapsed or refractory PTCL in the United
States. The amount of our future product
sales are subject to significant uncertainty.
We may never generate sufficient revenue from product sales to become
profitable.
We expect to continue to
spend substantial amounts on research and development, including amounts spent
on conducting clinical trials and seeking additional regulatory approvals for
FOLOTYN. We also expect to continue to
spend
17
Table
of Contents
substantial amounts on selling, general and
administrative expenses in order to commercialize FOLOTYN for the treatment of
patients with relapsed or refractory PTCL.
Therefore, we may need to raise additional capital to support our future
operations. Our actual capital
requirements will depend on many factors, including those discussed under the Liquidity
and Capital Resources section below. If
we are unable to generate meaningful amounts of revenue from future product
sales or cannot otherwise raise sufficient additional funds to support our
operations, we may be required to delay, reduce the scope of or eliminate one
or more of our development programs and our business and future prospects for
revenue and profitability may be harmed.
Comparison
of three months ended March 31, 2010 and 2009
Net product sales.
Net product sales represent total
sell-through revenue less distributor fees and estimated allowances for rebates
and chargebacks to be incurred on the selling price of FOLOTYN related to the
respective revenue, as further described in the Critical Accounting Policies
section below. We began making FOLOTYN available for commercial sale in the
United States in October 2009.
We sell FOLOTYN to a
limited number of pharmaceutical wholesale distributors, or distributors, three
of which are affiliates under common control of an unrelated party. These distributors then resell FOLOTYN to the
patients respective health care providers.
We have determined that domestic shipments of FOLOTYN made to
distributors do not meet the criteria for revenue recognition at the time of
shipment, and therefore such shipments are accounted for using the sell-through
method. Under the sell-through method, we do not recognize revenue upon
shipment of FOLOTYN to the distributor. For these product sales, we invoice the
distributor and record deferred revenue equal to the gross invoice sales price.
We then recognize revenue when the product is sold through, or upon shipment of
the product from the distributors to the distributors customers. Because of the price of FOLOTYN, the limited
number of patients, the short period from sale of product to patient infusion
and limited contractual return rights, FOLOTYN distributors and their customers
generally carry limited inventory.
Through March 31, 2010, we have had no refunds or returns. Deferred revenue results from amounts
receivable in advance of revenue recognition and totaled $1.2 million as of March 31,
2010.
Balances and activity in the deferred revenue account and a
reconciliation of gross to net product sales for the three months ended March 31,
2010 and 2009 are as follows:
|
|
Three
Month Ended
March 31,
|
|
|
|
2010
|
|
2009
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|
Deferred revenue
as of December 31, 2009
|
|
$
|
0.7
|
|
$
|
|
|
Gross product
sales to distributors
|
|
8.7
|
|
|
|
Less: Gross
product sales recognized
|
|
(8.2
|
)
|
|
|
Deferred revenue
as of March 31, 2010
|
|
$
|
1.2
|
|
$
|
|
|
|
|
|
|
|
|
Gross product
sales
|
|
$
|
8.2
|
|
$
|
|
|
Less:
Gross to Net Sales Adjustments
|
|
|
|
|
|
Government
rebates and chargebacks
|
|
(0.6
|
)
|
|
|
Distribution
fees
|
|
(0.2
|
)
|
|
|
Net product
sales
|
|
$
|
7.4
|
|
$
|
|
|
There were no
corresponding net product sales in the three months ended March 31, 2009,
as sales of FOLOTYN commenced in the fourth quarter of 2009. We expect sales of FOLOTYN to increase over
the next several years as we increase our penetration of the market for
relapsed or refractory PTCL.
18
Table of Contents
Balances and
activity in the government rebates and chargebacks and distribution fees
payable accounts for the three months ended March 31, 2010 are as follows:
|
|
Government
Rebates and
Chargebacks
|
|
Distribution
Fees
|
|
|
|
(in millions)
|
|
|
|
|
|
Balance at December 31, 2009
|
|
$
|
0.5
|
|
$
|
0.1
|
|
Reserve for current period sales
|
|
0.8
|
|
0.2
|
|
Change in estimated Medicaid utilization for 2009 sales
|
|
(0.2
|
)
|
|
|
Credits/payments made for current period sales
|
|
(0.1
|
)
|
(0.1
|
)
|
Credits/payments made for prior period sales
|
|
(0.3
|
)
|
(0.1
|
)
|
Balance at March 31, 2010
|
|
$
|
0.7
|
|
$
|
0.1
|
|
Government rebates and chargebacks reflect management
estimates which are further discussed in the Critical Accounting Policies
section below
.
Cost of sales, excluding
amortization expense.
Cost
of sales, excluding amortization expense, includes royalties, inventory
packaging and labeling, warehousing and shipping costs associated with FOLOTYN
product revenue.
|
|
Three
Months Ended
March 31,
|
|
|
|
2010
|
|
2009
|
|
|
|
(in millions)
|
|
Cost of sales, excluding
amortization expense
|
|
$
|
0.7
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Prior to receiving FDA
approval of FOLOTYN on September 24, 2009, all costs related to purchases
of the active pharmaceutical ingredient and manufacturing of the product were
recorded as research and development expense.
Until we sell the inventory for which the costs were previously
expensed, our cost of sales will reflect only royalties and other incremental
costs incurred subsequent to the FDA approval date. Accordingly, our cost of sales of FOLOTYN
will be lower with respect to product that was manufactured prior to FDA
approval. This occurred with respect to
all sales of FOLOTYN in the first quarter of 2010 and is expected to occur for
a significant amount of sales of FOLOTYN in 2010. After the inventory has been sold that was
already expensed to research and development prior to FDA approval, we expect
cost of sales, excluding amortization expense to approximate 10% of net product
sales, which includes our current 8% royalty.
The $689,000 of cost of
sales, excluding amortization expense for the three months ended March 31,
2010 was primarily due to an 8% royalty on gross product sales payable to the
licensors of FOLOTYN under the terms of our license agreement. There were no corresponding cost of sales for
the three months ended March 31, 2009.
Research
and Development.
Research
and development expenses include the costs of certain personnel, preclinical
studies, clinical trials, regulatory affairs, biostatistical data analysis,
third-party manufacturing costs for development of drug materials for use in
preclinical studies and clinical trials and, manufacturing costs and licensing
fees incurred for FOLOTYN prior to receipt of FDA approval.
|
|
Three
Months Ended
March 31,
|
|
|
|
2010
|
|
2009
|
|
|
|
(in millions)
|
|
Research
and development
|
|
$
|
9.3
|
|
$
|
8.4
|
|
|
|
|
|
|
|
|
|
The $925,000 increase in
research and development expenses in the three months ended March 31, 2010
as compared to the same period in 2009 was primarily due to:
·
a
$1.6 million increase in costs related to clinical trials involving FOLOTYN,
including start-up costs for the post-approval studies required by the FDA and
other trials with ongoing enrollment; and
19
Table
of Contents
·
a
$415,000 increase in personnel and related travel costs, mainly attributable to
additional headcount and increases in compensation costs year over year.
This increase was
partially offset by:
·
a
$696,000 decrease in costs related to clinical trials involving FOLOTYN which
have closed enrollment, including decreased costs for our Phase 2b NSCLC study,
which completed patient enrollment in July 2009; and
·
a
$290,000 decrease in stock-based compensation, primarily related to the
resignation of our former Chief Medical Officer in September 2009,
resulting in no corresponding stock-based compensation expense in the first
quarter of 2010, as compared to first quarter of 2009.
For the remainder
of 2010, we expect our average quarterly research and development expenses to
increase relative to the amount recorded for the three months ended March 31,
2010 due to the following:
·
an
increase in clinical trial costs involving FOLOTYN, including start-up costs
for the post-approval studies required by the FDA;
·
an
increase in personnel and related travel costs primarily resulting from
additional headcount; and
·
an
increase in non-cash stock-based compensation expense related to our annual
equity grants to existing employees and grants to new employees.
Selling,
General and Administrative.
Selling, general and
administrative expenses include costs for sales and marketing activities,
corporate development, medical affairs, executive administration, corporate
offices and related infrastructure.
|
|
Three
Months Ended
March 31,
|
|
|
|
2010
|
|
2009
|
|
|
|
(in millions)
|
|
Selling,
general and administrative
|
|
$
|
17.9
|
|
$
|
7.0
|
|
|
|
|
|
|
|
|
|
The $11.0 million
increase in selling, general and administrative expenses in the three months
ended March 31, 2010 as compared to the same period in 2009 was primarily
due to the following:
·
a
$6.8 million increase in personnel and related travel and facilities costs, mainly
attributable to additional headcount to support the commercialization of
FOLOTYN, including our sales and marketing organization, and increases in
compensation costs year over year;
·
a
$2.4 million increase in sales and marketing costs associated with the
commercial launch, including promotional expenses, advisory boards, market
research and costs related to trade shows;
·
a
$913,000 increase in grants and sponsored medical education programs; and
·
an
$820,000 increase in non-cash stock-based compensation expense, as discussed in
more detail below.
For the remainder
of 2010, we expect our average quarterly selling, general and administrative
expenses to increase relative to the amount recorded for the three months ended
March 31, 2010 due to the following:
·
an increase in sales and marketing costs
associated with executing our marketing and promotional programs for the
commercialization of FOLOTYN;
·
an increase in costs associated with
medical affairs and medical education expenses to educate the medical community;
20
Table
of Contents
·
an increase in general and administrative
expenses associated with building and maintaining our administrative
infrastructure to support the commercialization of FOLOTYN;
·
an increase in personnel costs, primarily
resulting from additional headcount, including a full quarter of costs for
employees hired in the first quarter of 2010; and
·
an increase in non-cash stock-based
compensation expense related to grants for new employees and our annual equity
grants to existing employees.
Amortization of intangible asset.
Amortization of intangible asset
represents amortization expense of capitalized license costs over the expected
patent life of the related product.
Amortization expense of our intangible asset for the
three months ended March 31, 2010 was $113,000. There was no expense for the three months
ended March 31, 2009. The $113,000
expense in the three months ended March 31, 2010 was due to the
amortization of the $5.8 million intangible asset resulting from a milestone
payment under our license agreement for FOLOTYN in September 2009
discussed further in the Obligations and Commitments section below. Amortization expense is being recorded on a
straight line basis over the estimated remaining life of the composition of
matter patent for FOLOTYN, which we expect to last until July 16, 2022.
This includes the anticipated Hatch-Waxman extension that provides patent
protection for drug compounds for a period of up to five years to compensate
for time spent in development. This term is our best estimate of the life of
the patent. If, however, the Hatch-Waxman
extension is not granted, the intangible asset will be amortized over a shorter
period.
Stock-based Compensation Expense.
Stock-based compensation
expense for the three months ended March 31, 2010 and 2009 has been
recognized in our Statements of Operations as follows:
|
|
Three Months Ended
March 31,
|
|
|
|
2010
|
|
2009
|
|
|
|
(in millions)
|
|
Research and
development
|
|
$
|
0.7
|
|
$
|
1.0
|
|
Selling, general
and administrative
|
|
2.2
|
|
1.4
|
|
Total
stock-based compensation expense
|
|
$
|
2.9
|
|
$
|
2.4
|
|
Of the $2.9 million
of stock-based compensation recognized in the three months ended March 31,
2010, $2.6 million was related to our stock option plans, $251,000 related
to restricted stock and restricted stock units and $52,000 related to our
employee stock purchase plan. Of the
$2.4 million of stock-based compensation recognized in the three months
ended March 31, 2009, $2.2 million was related to our stock option
plans, $133,000 related to restricted stock and restricted stock units and
$21,000 related to our employee stock purchase plan. The $0.5 million increase in stock-based
compensation expense in the three months ended March 31, 2010 as compared
to the same period in 2009 was primarily due to an increase in the number of
options granted to new employees and to existing employees pursuant to our
annual grants in February 2010.
As of March 31,
2010, the unrecorded stock-based compensation balance related to stock option
awards was $12.5 million and will be recognized over an estimated
weighted-average amortization period of 1.9 years. As of March 31, 2010,
the unrecorded stock-based compensation balance related to restricted stock
unit awards was $2.6 million and will be recognized over an estimated
weighted-average amortization period of 2.4 years. As of March 31, 2010, the unrecorded
stock-based compensation balance related to restricted stock awards was $31,000
and will be recognized over an estimated weighted-average amortization period
of 1.4 years.
Stock-based compensation
expense in fiscal year 2010 is expected to be approximately $13 to $15 million.
Interest
and Other Income, Net
. Interest income, net of
interest expense, for the three months ended March 31, 2010 and 2009 was
$65,000 and $173,000, respectively. The
$108,000 decrease in net interest income in the three months ended March 31,
2010 as compared to the same period in 2009 was primarily due to lower yields
on our cash, cash equivalents and investments.
21
Table
of Contents
Liquidity
and Capital Resources
As of March 31, 2010, we had $137.5 million in
cash, cash equivalents, and investments.
Until required for use in our business, we invest our cash reserves in
bank deposits, money market funds, U.S. government instruments and certificates
of deposit in accordance with our investment policy. The weighted average duration of the
remaining time to maturity for our portfolio of investments as of March 31,
2010 was approximately eight months.
Our investments as of March 31, 2010 primarily consisted of U.S.
Treasury bills and certificates of deposit. We did not hold any derivative
instruments, foreign exchange contracts, asset backed securities, mortgage
backed securities, auction rate securities, or securities of issuers in bankruptcy
in our investment portfolio as of March 31, 2010. We have the ability and intent to hold our
remaining investments to recover the entire amortized cost basis of the
investments as of March 31, 2010, although we monitor our investment
portfolio with the primary objectives of preserving principal and maintaining
proper liquidity to meet our operating needs.
Since our inception, we
have financed our operations primarily through public and private sales of our
equity securities, which have resulted in net proceeds to us of
$475.9 million through March 31, 2010.
Net cash used to fund our
operating activities for the three months ended March 31, 2010 and 2009
was $23.3 million and $11.9 million, respectively.
For fiscal year 2010,
total operating costs and expenses are expected to be approximately $120 to
$130 million, excluding non-cash stock-based compensation expense. Stock-based compensation expense is expected
to be approximately $13 to $15 million.
Actual financial results for 2010 will vary based upon many factors,
including FOLOTYN sales and rate of patient enrollment in clinical trials that
are ongoing and planned for initiation in 2010.
Net cash used in
investing activities for the three months ended March 31, 2010 was $35.9
million and consisted primarily of purchases of investments offset by proceeds
from maturities of investments. Net cash
provided by investing activities for the three months ended March 31, 2009
was $27.3 million and consisted primarily of proceeds from maturities and sales
of investments.
Net cash provided by
financing activities for the three months ended March 31, 2010 was $2.4
million and consisted primarily of proceeds from the issuance of common stock
associated with stock options exercised by our employees. Net cash provided by financing activities for
the three months ended March 31, 2009 was $1.2 million and consisted
primarily of proceeds the issuance of common stock associated with stock
options exercised by our employees.
Based upon the current
status of our product development and commercialization plans, we believe that
our cash, cash equivalents, and investments as of March 31, 2010 will be
adequate to support our operations through at least the next 12 months,
although there can be no assurance that this can, in fact, be accomplished. Our
forecast of the period of time through which our financial resources will be
adequate to support our operations is a forward-looking statement that involves
risks and uncertainties, and actual results could vary materially.
We
anticipate continuing our current development programs and beginning other
long-term development projects involving FOLOTYN, including the post-approval
clinical studies required for FOLOTYN. These projects may require many years
and substantial expenditures to complete and may ultimately be
unsuccessful. In addition, we expect to incur significant costs relating
to the commercialization of FOLOTYN, including costs related to our sales and
marketing, medical affairs and manufacturing operations. Therefore, we
may need to raise additional capital to support our future operations.
Our actual capital requirements will depend on many factors, including:
·
the timing and amount of revenues
generated from sales of FOLOTYN;
·
the timing and costs associated with our
sales and marketing activities for the commercialization of FOLOTYN;
·
the timing and costs associated with
manufacturing clinical and commercial supplies of FOLOTYN;
·
the timing and costs associated with
conducting preclinical and clinical development of FOLOTYN, including the
post-approval clinical studies required by the FDA, as well as our evaluation
of, and decisions with respect to, additional therapeutic indications for which
we may develop FOLOTYN;
22
Table
of Contents
·
the timing, costs and potential revenue
associated with any co-promotion or other partnering arrangements entered into
to commercialize FOLOTYN; and
·
our evaluation of, and decisions with
respect to, potential in-licensing or product acquisition opportunities or
other strategic alternatives.
We may seek to obtain
this additional capital through equity or debt financings, arrangements with
corporate partners, or from other sources. Such financings or arrangements, if
successfully consummated, may be dilutive to our existing stockholders. However,
there is no assurance that additional financing will be available when needed,
or that, if available, we will obtain such financing on terms that are
favorable to our stockholders or us. In the event that additional funds are
obtained through arrangements with collaborative partners or other sources,
such arrangements may require us to relinquish rights to some of our
technologies, product candidates or products under development, which we might
otherwise seek to develop or commercialize ourselves, on terms that are less
favorable than might otherwise be available. If we are unable to generate
meaningful amounts of revenue from future product sales or cannot otherwise
raise sufficient additional funds to support our operations, we may be required
to delay, reduce the scope of or eliminate one or more of our development
programs and our business and future prospects for revenue and profitability
may be harmed.
Obligations and Commitments
Royalty and License Fee Commitments
In December 2002, we
entered into a license agreement with Memorial Sloan-Kettering Cancer Center,
SRI International and Southern Research Institute, as amended, under which we
obtained exclusive worldwide rights to a portfolio of patents and patent
applications related to FOLOTYN and its uses. Under the terms of the agreement,
we paid an up-front license fee of $2.0 million upon execution of the agreement
and have made aggregate milestone payments of $2.5 million based on the passage
of time. Additionally, in May and September 2009, we made milestone
payments of $1.5 million based on the FDA accepting our New Drug Application
for review and $5.8 million based on the FDA approval to market FOLOTYN,
respectively. The up-front license fee
and all milestone payments under the agreement prior to FDA approval to market
FOLOTYN were recorded to research and development expense as incurred. The $5.8 million milestone payment based on
the FDA approval was capitalized as an intangible asset and is being amortized
over the expected useful life of the composition of matter patent for FOLOTYN,
which we expect to last until July 16, 2022. The only remaining potential
milestone payment under the license agreement is for $3.5 million upon
regulatory approval to market FOLOTYN in Europe, which, if made would be
capitalized and amortized over the expected useful life of the licensed
patents. Under the terms of the agreement, we are required to fund all
development programs and will have sole responsibility for all
commercialization activities. In addition, we will pay the licensors royalties
based on graduated annual levels of net sales of FOLOTYN to our distributors,
net of actual rebates and chargebacks, or distributor sales, which may be
different than our net product revenue recognized in accordance with U.S.
generally accepted accounting principles, or GAAP, or sublicense revenues
arising from sublicensing the product, if and when such sales or sublicenses
occur. Royalties are 8% of annual
distributor sales up to $150.0 million; 9% of annual distributor sales of
$150.0 million through $300.0 million; and 11% of annual distributor sales in
excess of $300.0 million. In 2010 and
2009, our royalties were 8% of our net distributor sales.
Critical
Accounting Policies
Our discussion and
analysis of our financial condition and results of operations are based upon
our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation
of these financial statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, and expenses. We base our
estimates on historical experience, available information and assumptions that
we believe to be reasonable under the circumstances. Actual results may differ
from these estimates under different assumptions or conditions. We believe the
following policies to be the most critical to an understanding of our financial
condition and results of operations because they require us to make estimates,
assumptions and informed management judgments about matters that are inherently
uncertain:
·
revenue recognition;
·
accounting for research and development
expenses;
·
accounting for inventory; and
23
Table
of Contents
·
accounting for stock-based compensation
expense.
Revenue
Recognition.
We generate revenue from product sales.
We recognize product revenue when it is realized or realizable and
earned. Revenue is realized or realizable and earned when all of the following
criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery
has occurred or services have been rendered; (3) our price to the buyer is
fixed and determinable; and (4) collectability is reasonably assured.
Revenue from sales transactions where the buyer has the right to return the
product is recognized at the time of sale only if (1) our price to the
buyer is substantially fixed or determinable at the date of sale, (2) the
buyer has paid us, or the buyer is obligated to pay us and the obligation is
not contingent on resale of the product, (3) the buyers obligation to us
would not be changed in the event of theft or physical destruction or damage of
the product, (4) the buyer acquiring the product for resale has economic
substance apart from that provided by us, (5) we do not have significant
obligations for future performance to directly bring about resale of the
product by the buyer, and (6) the amount of future returns can be
reasonably estimated.
We sell FOLOTYN to a
limited number of pharmaceutical wholesale distributors, or distributors, three
of which are affiliates under common control of an unrelated party. These distributors then resell FOLOTYN to the
patients respective health care providers.
Given our limited sales history, we are unable to estimate returns.
Therefore, we have determined that domestic shipments of FOLOTYN made to
distributors do not meet the criteria for revenue recognition at the time of
shipment, and therefore such shipments are accounted for using the sell-through
method. Under the sell-through method, we do not recognize revenue upon
shipment of FOLOTYN to the distributor. For these product sales, we invoice the
distributor and record deferred revenue equal to the gross invoice sales price.
We then recognize revenue when the product is sold through, or upon shipment of
the product from the distributors to the distributors customers. Because of the price of FOLOTYN, the limited
number of patients, the short period from sale of product to patient infusion
and limited contractual return rights, FOLOTYN distributors and their customers
generally carry limited inventory.
Through March 31, 2010, we have had no refunds or returns. Deferred revenue results from amounts
receivable in advance of revenue recognition and totaled $1,150,000 as of March 31,
2010.
We estimate sell-through
revenue and certain gross to net sales adjustments based upon analysis of
third-party information, including information obtained from certain
distributors with respect to their inventory levels and sell-through to the
distributors customers. Our estimates are subject to the inherent limitations
of estimates that rely on third-party data. The information received from
distributors is a product of their record-keeping process and their internal
controls surrounding such processes. Our
sales and revenue recognition under the sell-through method reflect our
estimate of actual product sold through the distribution channel.
Additionally under the
sell-through method, royalties paid based on unit shipments to distributors are
deferred and recognized as royalty expense when those units are sold through
and recognized as revenue. Royalties paid are deferred as we have the right to
offset royalties paid for product that are later returned against subsequent
royalty obligations.
Net
Product Sales
Our net product sales represent total sell-through
revenue less estimated allowances for rebates and chargebacks to be incurred on
the selling price of FOLOTYN related to the respective revenue. In addition, we
incur certain distributor fees related to the management of our product by
distributors. These distributor fees are recorded within net revenues and are
known at the time of sale. Due to estimates and assumptions inherent in
determining the amount of rebates and chargebacks, the actual amount of claims
for rebates and chargebacks may be different from our estimates, at which time
we would adjust our reserves accordingly.
Product sales allowances and accruals are based on definitive contractual
agreements or legal requirements (such as Medicaid laws and regulations)
related to the purchase and/or utilization of the product by these
entities. Allowances and accruals are
generally recorded in the same period that the related revenue is recognized.
Classification of Product Sales
Allowances and Accruals
Accruals related to Medicaid rebates, government
chargebacks and distributor fees are recognized at the time sell-through
revenue is recorded, resulting in a reduction in product sales revenue and the
recording of an increase in accrued expenses.
24
Table
of Contents
Medicaid
Rebates
Our product is subject to state government-managed
Medicaid programs whereby discounts and rebates are provided to participating
state governments. We record estimated rebates payable under governmental
programs, including Medicaid, as a reduction of revenue at the time
sell-through revenues are recorded. Our calculations related to these rebate
accruals require estimates, including estimates of customer mix primarily based
on a combination of market and clinical research, to determine which sales will
be subject to rebates and the amount of such rebates. During the first quarter
of 2010, we obtained additional market research and were able to refine our
estimated Medicaid utilization, which resulted in a reversal of Medicaid rebate
allowances related to 2009 sales totaling $208,000. We also consider any legal interpretations of
the applicable laws related to Medicaid and qualifying federal and state
government programs and any new information regarding changes in the Medicaid
programs regulations and guidelines that would impact the amount of the
rebates. In March 2010, the Patient
Protection and Affordable Care Act, as modified by the Health Care and
Education Affordability Reconciliation Act of 2010, or PPACA, was enacted,
which increased the Medicaid rebate percentage from 15.1% to 23.1%, retroactive
to January 1, 2010. In addition,
the states ability to early adopt portions of PPACA, and any implementing
regulations, could impact future estimates related to our Medicaid rebate
allowances. We update our estimates and assumptions each period and record any
necessary adjustments to our reserves. Although allowances and accruals are
recorded at the time of product sale, certain rebates are typically paid out,
on average, up to six months or longer after the sale. We account for Medicaid
rebates by establishing an accrual in an amount equal to our estimate of
Medicaid rebate claims attributable to sales recognized in that period. If actual future results vary from our
estimates, we may need to adjust our previous estimates, which would affect our
earnings in the period of the adjustment.
For reference purposes, a 10% to 20% variance in Medicaid utilization
estimates for state Medicaid rebates as of March 31, 2010 would result in
an approximate $164,000 to $327,000 adjustment to cumulative net product sales.
Government
Chargebacks
Our products are subject to certain programs with federal
government qualified entities whereby pricing on products is discounted below
distributor list price to participating entities. These entities purchase
products through distributors at the discounted price, and the distributors
charge the difference between their acquisition cost and the discounted price
back to us. We account for chargebacks by establishing an accrual in an amount
equal to our estimate of maximum chargeback claims. We determine our chargeback
estimates based on actual
FOLOTYN sell-through
sales data from third-party information. Chargeback amounts are
determined at the time of resale to the federal government qualified entities,
and we generally issue credits for such amounts within several weeks of
receiving claims from the distributor. We do not expect the impact of the 340B
program expansion included in the PPACA to significantly change our estimated
government chargeback accruals because drugs approved under an Orphan Drug
designation were specifically excluded from the provisions of the PPACA. The FDA has awarded orphan drug status to
FOLOTYN for the treatment of patients with T-cell lymphoma, which includes
patients with relapsed or refractory PTCL.
Estimated
chargeback amounts are recorded at the time the sell-through sale occurs and we
adjust the accrual quarterly to reflect actual experience. Due to estimates and
assumptions inherent in determining the amount of government chargebacks, the
actual amount of claims for chargebacks may be different from our estimates, at
which time we would adjust our reserves accordingly.
Research
and Development.
Research and development expenditures are charged to expense as incurred.
Research and development expenses include the costs of certain personnel,
preclinical studies, clinical trials, regulatory affairs, biostatistical data
analysis, third party manufacturing costs for development of drug materials for
use in clinical trials and preclinical studies and licensing fees for our
product candidates prior to FDA approval.
All finished drug inventory costs associated with production activities
in our third party manufacturing facilities prior to receiving FDA approval for
such facilities and prior to receiving regulatory approval to market our
product are expensed to research and development expenses. Upon receipt of the
related regulatory approval, we capitalize those manufacturing costs for our
marketed products at the lower of cost or market and then expense the sold
inventory as a component of cost of sales. We accrue research and development
expenses for activity as incurred during the fiscal year and prior to receiving
invoices from clinical sites and third party clinical and preclinical research
organizations. We accrue external costs for clinical and preclinical studies
based on an evaluation of the following: the progress of the studies, including
patient enrollment, dosing levels of patients enrolled, estimated costs to dose
patients, invoices received, and contracted costs with clinical sites and third
party clinical and preclinical research organizations. Significant judgments
and estimates must be made and used in determining the accrued balance in any
accounting period. Actual results could differ from those estimates. During the
quarters ended March 31, 2010 and 2009, we did not have any changes in
estimates that would have resulted in material adjustments to research and
development expenses accrued in the prior period.
25
Table
of Contents
In accordance with certain research and development
agreements, we are obligated to make certain upfront payments upon execution of
the agreement. We record these upfront payments as prepaid research and
development expenses. Such payments are recorded to research and development
expense as services are performed. We evaluate on a quarterly basis whether
events and circumstances have occurred that may indicate impairment of
remaining prepaid research and development expenses.
Inventory
.
Costs associated with the production of FOLOTYN bulk drug
substance and formulated drug product by our third party manufacturers are
recorded as either research and development expense or inventory.
Costs associated with the production of FOLOTYN by our
third party manufacturers are expensed to research and development expense at
the time of production when:
·
the formulated drug product is packaged for clinical
trial use;
·
the bulk drug substance and formulated drug product is
produced prior to receiving regulatory approval to market the product candidate;
and
·
the bulk drug substance and formulated drug product is
produced prior to receiving FDA approval for the respective third party
manufacturing facilities.
If and when we receive the related regulatory
approval, we capitalize those manufacturing costs for our marketed products at
the lower of cost (first-in, first-out method) or market (current replacement
cost) with cost determined on the first-in, first-out basis and then expense
the sold inventory as a component of cost of goods sold.
Prior to receiving FDA approval of FOLOTYN, all costs
related to purchases of the active pharmaceutical ingredient and the
manufacturing of the product were recorded as research and development
expense. Until we sell the inventory for
which the costs were previously expensed, our cost of product sales will
reflect only incremental costs incurred subsequent to FDA approval. We continue
to expense costs associated with clinical trial material as research and
development expense. Inventory as of March 31, 2010 consists of work in
process of $120,000 and finished goods of $138,000.
Stock-based
Compensation Expense.
We have several stock-based compensation plans under which incentive and
non-qualified stock options, restricted stock units and restricted shares may
be granted, and an employee stock purchase plan. We measure the cost
of employee services received in exchange for an award of equity instruments
based on the grant date fair value of the award. That cost is recognized over
the period during which an employee is required to provide services in exchange
for the award, the requisite service period (usually the vesting period). We
provide an estimate of forfeitures at initial grant date.
During the three months
ended March 31, 2010 and 2009, we recorded stock-based compensation
expense of approximately $2.9 million and $2.4 million, respectively, related
to stock-based awards, including stock options, restricted stock units,
restricted stock and our employee stock purchase plan. As of March 31,
2010, the unrecorded deferred stock-based compensation balance related to these
stock-based awards was approximately $15.1 million and will be recognized over
the remaining vesting periods of the awards. Judgments and estimates must be
made and used in determining the factors used in calculating the fair value of
stock-based awards, including the expected forfeiture rate of our stock-based
awards, the expected life of our stock-based awards, and the expected
volatility of our stock price. For more information on stock-based compensation
expense during the three months ended March 31, 2010, refer to Note 8 Stock-Based
Compensation of the unaudited March 31, 2010 financial statements
included herein.
ITEM 3.
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our financial instruments
as of March 31, 2010 consisted of cash, cash equivalents, investments,
accounts receivable and accounts payable.
All highly liquid investments with original maturities of three months
or less are considered to be cash equivalents.
We invest in securities in accordance with our investment policy. The primary objectives of our investment
policy are to preserve principal and maintain proper liquidity to meet our
operating needs. Our investment policy
specifies credit quality standards for our investments and limits the amount of
credit exposure to any single issue, issuer or type of investment. The weighted average duration of the
remaining time to maturity for our portfolio of investments as of March 31,
2010 was approximately eight months. As
of March 31, 2010, our investments of $53.1 million were all
classified as held-to-maturity and were held in a variety of interest-bearing
instruments, consisting primarily of U.S. Treasury bills and
26
Table
of Contents
certificates of deposit. We did not hold any
derivative instruments, foreign exchange contracts, asset backed securities,
mortgage backed securities, auction rate securities, or securities of issuers
in bankruptcy in our investment portfolio as of March 31, 2010. We have the ability and intent to hold our
remaining investments to recover the entire amortized cost basis of the
investments as of March 31, 2010, although we monitor our investment
portfolio with the primary objectives of preserving principal and maintaining
proper liquidity to meet our operating needs.
Investments in fixed-rate
interest-bearing instruments carry varying degrees of interest rate risk. The fair market value of our fixed-rate
securities may be adversely impacted due to a rise in interest rates. In general, securities with longer maturities
are subject to greater interest-rate risk than those with shorter
maturities. Due in part to this factor,
our interest income may fall short of expectations or we may suffer losses in
principal if securities are sold that have declined in market value due to
changes in interest rates. Due to the
short duration of our investment portfolio, we believe an immediate 10% change
in interest rates would not be material to our financial condition or results
of operations.
ITEM 4.
CONTROLS AND
PROCEDURES
Disclosure Controls and
Procedures
As of the end of the
period covered by this report, an evaluation was carried out under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, of the
effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) of
the Securities Exchange Act of 1934, as amended, or the Exchange Act. Based on that evaluation, our management,
including our principal executive officer and principal financial officer,
concluded that our disclosure controls and procedures were effective as of March 31,
2010 to ensure that information required to be disclosed by us in reports that
we file or submit under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in Securities and Exchange
Commissions rules and forms, and that such information is accumulated and
communicated to our management, including our principal executive officer and
principal financial officer, as appropriate, to allow timely decisions
regarding required disclosure.
No
Changes in Internal Control over Financial Reporting
There were no changes in
our internal controls over financial reporting during the three months ended March 31,
2010 that have materially affected, or are reasonably likely to materially
affect, our internal controls over financial reporting.
PART II. OTHER
INFORMATION
ITEM
1. LEGAL PROCEEDINGS
None.
27
Table
of Contents
ITEM 1A. RISK FACTORS
Our business faces significant
risks. These risks include those described below and may include additional
risks of which we are not currently aware or which we currently do not believe
are material. If any of the events or circumstances described in the following
risk factors actually occurs, they may materially harm our business, financial
condition, operating results and cash flow. As a result, the market price of
our common stock could decline. Additional risks and uncertainties that are not
yet identified or that we think are immaterial may also materially harm our
business, operating results and financial condition.
Stockholders and potential investors
in shares of our common stock should carefully consider the following risk
factors, which hereby update those risks contained in the Risk Factors
section of our Annual Report on Form 10-K for the year ended December 31,
2009 in addition to other information and risk factors in this report. We are identifying these risk factors as
important factors that could cause our actual results to differ materially from
those contained in any written or oral forward-looking statements made by or on
behalf of the Company. We are relying
upon the safe harbor for all forward-looking statements in this report, and any
such statements made by or on behalf of the Company are qualified by reference
to the following cautionary statements, as well as to those set forth elsewhere
in this report. We consistently update and include our risk factors in our
Quarterly Reports on Form 10-Q. Risk factors that have been substantively
changed from those set forth in our Annual Report on Form 10-K for the
period ended December 31, 2009 have been marked with an asterisk
immediately following the heading of such risk factor.
We have a history of net losses
and an accumulated deficit, and we may never generate sufficient revenue to
achieve or maintain profitability in the future.
*
We have experienced
significant net losses and negative cash flows from operations. To date, we
have financed our operations primarily through the public and private sale of
securities. For the three months ended March 31,
2010, we had a net loss of $20.5 million.
As of March 31, 2010, we had accumulated a deficit of
$393.8 million. We have incurred
these losses principally from costs incurred in our research and development
programs and from our selling, general and administrative expenses.
On September 24,
2009, we obtained accelerated approval from the FDA for FOLOTYN for use as a
single agent for the treatment of patients with relapsed or refractory
PTCL. Our ability to generate revenue and achieve profitability is
dependent on our ability, alone or with partners, to successfully commercialize
FOLOTYN for the treatment of patients with relapsed or refractory PTCL.
We are also developing FOLOTYN for use as a single agent and in combination
therapy regimens in a range of hematologic malignancies and solid tumor
indications, which may or may not lead to obtaining the necessary regulatory
approvals to market FOLOTYN for additional indications. We expect to continue
to spend substantial amounts on research and development, including amounts
spent on conducting clinical trials and seeking additional regulatory approvals
for FOLOTYN, and commercializing FOLOTYN for the treatment of patients with
relapsed or refractory PTCL. As a result, we may never generate sufficient
revenue from product sales to become profitable or generate positive cash
flows.
Our near-term prospects are
dependent on FOLOTYN. If we are unable to successfully commercialize
FOLOTYN for the treatment of patients with relapsed or refractory PTCL, our
ability to generate significant revenue or achieve profitability will be
adversely affected.
FOLOTYN is our only product approved for marketing by
the FDA and our ability to generate revenue in the near term is entirely
dependent upon sales of FOLOTYN. We may
not be able to successfully commercialize FOLOTYN for a number of reasons,
including:
·
we may not be able to establish or
demonstrate in the medical community the safety and efficacy of FOLOTYN and its
potential advantages over existing therapeutics and products currently in
clinical development;
·
doctors may be hesitant to prescribe FOLOTYN
until results from our post-approval studies are available or other long term
data regarding efficacy and safety exists;
·
results from our Phase 3 post-approval
studies may fail to verify the clinical benefit of FOLOTYN for the treatment of
T-cell lymphoma;
·
our limited experience in marketing,
selling and distributing FOLOTYN;
28
Table
of Contents
·
reimbursement and coverage policies of government and
private payers such as Medicare, Medicaid, insurance companies, health
maintenance organizations and other plan administrators;
·
the relative price of FOLOTYN as compared to
alternative treatment options;
·
the relatively low incidence and prevalence rates of
relapsed or refractory PTCL, including the reliability of our estimates;
·
we may not have adequate financial or other resources
to successfully commercialize FOLOTYN; and
·
we may not be able to manufacture FOLOTYN in
commercial quantities or at acceptable costs.
If we
are unable to successfully commercialize FOLOTYN for the treatment of patients
with relapsed or refractory PTCL, our ability to generate revenue from product
sales to achieve profitability will be adversely affected and our stock price
would likely decline.
Our operating results are unpredictable and may fluctuate.
If our operating results are below the expectations of securities analysts or
investors, the trading price of our stock could decline.
Our operating results are
difficult to predict and will likely fluctuate from quarter to quarter and year
to year. Due to the recent approval of
FOLOTYN for the treatment of patients for relapsed or refractory PTCL in the
United States and the lack of historical sales data, FOLOTYN sales will be
difficult to predict from period to period.
We believe that our quarterly and annual results of operations may be
negatively affected by a variety of factors, including:
·
the level of patient demand for FOLOTYN;
·
the timing and level of investment in our sales and
marketing efforts to support FOLOTYN sales;
·
the timing and level of investment in our research and
development activities involving FOLOTYN; and
·
expenditures we may incur to acquire or develop
additional products.
In addition, we measure
compensation cost for stock-based awards made to employees at the grant date of
the award, based on the fair value of the award, and recognize the cost as an
expense over the employees requisite service period. As the variables that we
use as a basis for valuing these awards change over time, including our
underlying stock price, the magnitude of the expense that we must recognize may
vary significantly. Any such variance from one period to the next could cause a
significant fluctuation in our operating results.
For
these reasons, it is difficult for us to accurately forecast future profits or
losses. As a result, it is possible that in some quarters our operating results
could be below the expectations of securities analysts or investors, which
could cause the trading price of our common stock to decline, perhaps
substantially.
If we are unable to maintain adequate sales, marketing or distribution
capabilities or enter into agreements with third parties to perform some of
these functions, we will not be able to commercialize FOLOTYN effectively.
The
approval of FOLOTYN for the treatment of patients with relapsed or refractory
PTCL is our first U.S. indication. Accordingly, we have limited
experience in sales, marketing and distribution of pharmaceutical
products. We may not be able to adequately maintain the necessary sales,
marketing, supply chain management and reimbursement capabilities on our own or
enter into arrangements with third parties to perform these functions in a
timely manner or on acceptable terms. Additionally, maintaining sales,
marketing and distribution capabilities may be more expensive than we
anticipate, requiring us to divert capital from other intended purposes or
preventing us from building our sales, marketing and distribution capabilities
to the desired levels. To be successful we must:
·
recruit and retain adequate numbers of effective sales
personnel;
·
effectively train our sales personnel in the benefits
of FOLOTYN;
29
Table
of Contents
·
establish and maintain successful sales and marketing
and education programs that encourage physicians to recommend FOLOTYN to their
patients; and
·
manage geographically dispersed sales and marketing
operations.
The
commercialization of FOLOTYN requires us to manage relationships with an
increasing number of collaborative partners, suppliers and third-party
contractors. If we are unable to successfully establish and maintain the
required infrastructure, either internally or through third parties, and
successfully manage an increasing number of relationships, we will have
difficulty growing our business. In addition, we intend to enter into
co-promotion or out-licensing arrangements with other pharmaceutical or
biotechnology partners where necessary to reach foreign market segments and
when deemed strategically and economically advisable. To the extent that we
enter into co-promotion or other licensing arrangements, our product revenues
are likely to be lower than if we directly marketed and sold FOLOTYN, and some
or all of the revenues we receive will depend upon the efforts of third
parties, which may not be successful. If we are unable to develop and maintain
adequate sales, marketing and distribution capabilities, independently or with
others, we may not be able to generate significant product revenue or become
profitable.
Even though we have obtained accelerated approval to market FOLOTYN for
the treatment of patients with relapsed or refractory PTCL, we are subject to ongoing
regulatory obligations and review, including post-approval requirements.*
FOLOTYN
was approved for the treatment of patients with relapsed or refractory PTCL
under the FDAs accelerated approval program, which allows the FDA to approve
products for cancer or other life threatening diseases based on initial
positive clinical data. Under these provisions, we are subject to certain
post-approval requirements pursuant to which we have agreed to conduct two
randomized Phase 3 trials to verify and describe FOLOTYNs clinical benefit in
patients with T-cell lymphoma. The FDA has also required that we conduct
two Phase 1 trials to assess whether FOLOTYN poses a serious risk of altered
drug levels resulting from organ impairment. Failure to complete the studies
or adhere to the timelines established by the FDA could result in penalties,
including fines or withdrawal of FOLOTYN from the market. The FDA may
also initiate proceedings to withdraw approval if our Phase 3 studies fail to
verify clinical benefit. Further, the FDA may require us to strengthen
the warnings and precautions section of the FOLOTYN package insert or institute
a Risk Evaluation and Mitigation Strategy based on the results of these studies
or clinical experience. We are also subject to additional, continuing
post-approval regulatory obligations, including the possibility of additional
clinical studies required by the FDA, safety reporting requirements and
regulatory oversight of the promotion and marketing of FOLOTYN.
In
addition, we or our third-party manufacturers are required to adhere to
regulations setting forth the FDAs current Good Manufacturing Practices, or
cGMP. These regulations cover all aspects of the manufacturing, storage,
testing, quality control and record keeping relating to FOLOTYN. Furthermore,
we or our third-party manufacturers are subject to periodic inspection by the
FDA and foreign regulatory authorities to ensure strict compliance with cGMP or
other applicable government regulations and corresponding foreign standards. We
have limited control over a third-party manufacturers compliance with these
regulations and standards. If we or our third-party manufacturers fail to
comply with applicable regulatory requirements, we may be subject to fines,
suspension, modification or withdrawal of regulatory approvals, product
recalls, seizure of products, operating restrictions and criminal prosecution.
The status of coverage and reimbursement from third-party payers for
newly approved health care drugs is uncertain and failure to obtain adequate
coverage and reimbursement could limit our ability to generate revenue.*
Our
ability to successfully commercialize FOLOTYN for the treatment of patients
with relapsed or refractory PTCL or for other future indications will depend,
in part, on the extent to which coverage and reimbursement for FOLOTYN is
available from government and health administration authorities, private health
insurers, managed care programs and other third-party payers. Significant
uncertainty exists as to the coverage and reimbursement of newly approved
health care products. In addition, the
U.S. Congress recently enacted legislation to reform the health care system
that includes cost containment measures that may adversely affect the amount of
reimbursement for pharmaceutical products, including FOLOTYN. These measures include increasing the minimum
rebates for products covered by Medicaid programs and extending such rebates to
drugs dispensed to Medicaid beneficiaries enrolled in Medicaid managed care organizations
as well as expansion of the 340(B) Public Health Services drug discount
program.
Healthcare
providers and third-party payers use coding systems to identify diagnoses,
procedures, services, drugs, pharmaceutical devices, equipment and other health-related
items and services. Proper coding is an integral component to receiving
appropriate reimbursement for the administration of FOLOTYN and related
services. The majority of payers use
30
Table
of Contents
nationally recognized
code sets to report medical conditions, services and drugs. We recently
obtained transitional pass-through status which enables FOLOTYN to be reimbursed
under the hospital outpatient prospective payment system. In addition, we
have applied for a permanent reimbursement J-code for FOLOTYN, although
healthcare providers prescribing FOLOTYN will initially be required to submit
claims for reimbursement using a temporary J-code, which may result in payment
delays or incorrect payment levels. We cannot predict at this time whether
our customers will receive adequate reimbursement for FOLOTYN, nor can we
predict whether FOLOTYN will receive a permanent J-code in the future.
Third-party
payers, including Medicare, are challenging the prices charged for medical
products and services. Government and other third-party payers increasingly are
attempting to contain health care costs by limiting both coverage and the level
of reimbursement for new drugs and by refusing, in some cases, to provide
coverage for uses of approved products for disease conditions for which the FDA
has not granted labeling approval. Third-party insurance coverage may not be
available to patients for FOLOTYN. If government and other third-party payers
do not provide adequate coverage and reimbursement levels for FOLOTYN, FOLOTYNs
market acceptance may be adversely affected.
We are dependent upon a small number of customers for a
significant portion of our revenue, and the loss of, or significant reduction
or cancellation in sales to, any one of these customers could adversely affect
our operations and financial condition.*
In the
United States, we sell FOLOTYN to a small number of distributors who in turn
sell-through to patient health care providers. These distributors also provide
multiple logistics services relating to the distribution of FOLOTYN, including
transportation, warehousing, cross-docking, inventory management, packaging and
freight-forwarding. We do not promote
FOLOTYN to these distributors and they do not set or determine demand for
FOLOTYN. For the three months ended March 31,
2010, three companies affiliated with AmerisourceBergen Corporation accounted
for substantially all of our FOLOTYN sales.
We expect significant customer concentration to continue for the
foreseeable future. Our ability to
successfully commercialize FOLOTYN will depend, in part, on the extent to which
these distributors are able to provide adequate distribution of FOLOTYN to
patient health care providers. Although
we believe we can find alternative distributors on a relatively short notice,
our revenue during that period of time may suffer and we may incur additional
costs to replace a distributor. The loss
of any large customer, a significant reduction in sales we make to them, any
cancellation of orders they have made with us or any failure to pay for the
products we have shipped to them could materially and adversely affect our
results of operations and financial condition.
If the distributors that we rely upon to sell FOLOTYN fail
to perform, our business may be adversely affected.
Our success depends on
the continued customer support efforts of our network of distributors. The use of distributors involves certain
risks, including, but not limited to, risks that these distributors will:
·
not provide us with accurate or timely information regarding their
inventories, the number of patients who are using FOLOTYN or complaints about
FOLOTYN;
·
not effectively distribute or support FOLOTYN;
·
reduce or discontinue their efforts to sell or support FOLOTYN;
·
be unable to satisfy financial obligations to us or others; and
·
cease operations.
Any
such failure may result in decreased sales of FOLOTYN, which would harm our
business.
If we fail to comply with healthcare fraud and abuse laws, we could
face substantial penalties and our business, operations and financial condition
could be adversely affected
.*
As a
biopharmaceutical company, even though we do not and will not control referrals
of health care services or bill directly to Medicare, Medicaid or other
third-party payers, certain federal and state healthcare laws and regulations
pertaining to fraud and abuse will be applicable to our business. These laws
and regulations, include, among others:
31
Table
of Contents
·
the federal Anti-Kickback statute, which prohibits,
among other things, persons from soliciting, receiving or providing
remuneration, directly or indirectly, to induce either the referral of an
individual for an item or service or the purchasing or ordering of a good or
service, for which payment may be made under federal health care programs such
as the Medicare and Medicaid programs;
·
federal false claims laws that prohibit, among other
things, individuals or entities from knowingly presenting, or causing to be
presented, claims for payment from Medicare, Medicaid, or other third-party
payers that are false or fraudulent;
·
the federal Health Insurance Portability and
Accountability Act of 1996, or HIPAA, which prohibits executing a scheme to
defraud any healthcare benefit program or making false statements relating to
healthcare matters and which also imposes certain requirements relating to the
privacy, security and transmission of individually identifiable health
information;
·
federal self-referral laws, such as STARK, which
prohibit a physician from making a referral to a provider of certain health
services with which the physician or the physicians family member has a
financial interest; and
·
state law equivalents of each of the above federal
laws, such as anti-kickback and false claims laws that may apply to items or
services reimbursed by any third-party payer, including commercial insurers,
and state laws governing the privacy of health information in certain circumstances,
many of which differ from each other in significant ways and often are not
preempted by HIPAA.
Although
there are a number of statutory exemptions and regulatory safe harbors
protecting certain common activities from prosecution under the federal Anti-Kickback
statute, the exemptions and safe harbors are drawn narrowly, and practices that
involve remuneration intended to induce prescriptions, purchases or
recommendations may be subject to scrutiny if they do not qualify for an
exemption or safe harbor. Further, the recently enacted health care reform law
known as the Patient Protection and Affordable Care Act (PPACA), enacted in
2010, amends the intent requirement of the federal anti-kickback and criminal
health care fraud statutes. A person or entity no longer needs to have actual
knowledge of this statute or specific intent to violate it. In addition, the
government may assert that a claim including items or services resulting from a
violation of the federal anti-kickback statute constitutes a false or
fraudulent claim for purposes of the false claims laws. Our practices may not
in all cases meet all of the criteria for safe harbor protection from
anti-kickback liability.
Although
physicians are permitted to, based on their medical judgment, prescribe
products for indications other than those cleared or approved by the FDA,
manufacturers are prohibited from promoting their products for such off-label
uses. We market FOLOTYN for the treatment of patients with relapsed or
refractory PTCL and provide promotional materials and training programs to
physicians regarding the use of FOLOTYN for the treatment of patients with
relapsed or refractory PTCL. Although we believe our marketing, promotional
materials and training programs for physicians do not constitute off-label
promotion of FOLOTYN, the FDA may disagree. If the FDA determines that our
promotional materials, training or other activities constitute off-label
promotion of FOLOTYN, it could request that we modify our training or
promotional materials or other activities or subject us to regulatory
enforcement actions, including the issuance of a warning letter, injunction,
seizure, civil fine and criminal penalties. It is also possible that other
federal, state or foreign enforcement authorities might take action if they
believe that the alleged improper promotion led to the submission and payment
of claims for an unapproved use, which could result in significant fines or
penalties under other statutory authorities, such as laws prohibiting false
claims for reimbursement. Even if it is later determined we are not in
violation of these laws, we may be faced with negative publicity, incur
significant expenses defending our position and have to divert significant
management resources from other matters.
The PPACA, enacted in 2010, imposes new reporting
and disclosure requirements for pharmaceutical and device manufacturers with
regard to payments or other transfers of value made to physicians and teaching
hospitals, effective March 30, 2013.
Such information will be made publicly available in a searchable format
beginning September 30, 2013. In
addition, pharmaceutical and device manufacturers will also be required to
report and disclose investment interests held by physicians and their immediate
family members during the preceding calendar year. Failure to submit required information may
result in civil monetary penalties of up to $150,000 per year (and up to $1
million per year for knowing failures), for all payments, transfers of value
or ownership or investment interests not reported in an annual submission.
In
recent years, several states and localities, including California, the District
of Columbia, Maine, Massachusetts, Minnesota, Nevada, Vermont, and West
Virginia, have enacted legislation requiring pharmaceutical companies to
establish marketing compliance programs, and file periodic reports with the
state or make periodic public disclosures on sales, marketing, pricing,
clinical trials, and other activities. Similar legislation is being considered
in other states. Many of these requirements are new and uncertain, and the
penalties for failure to comply with these requirements are unclear.
Nonetheless, if we are found not to be in full compliance with these laws, we
could face enforcement action and fines and other penalties, and could receive
adverse publicity.
If our
operations are found to be in violation of any of the healthcare fraud and
abuse laws described above or any other governmental regulations that apply to
us, we may be subject to penalties, including civil and criminal penalties,
damages, fines and the curtailment or restructuring of our operations. Any
penalties, damages, fines, curtailment or restructuring of our operations could
adversely affect our ability to operate our business and our financial results.
Although compliance programs can mitigate the risk of investigation and
prosecution for violations of these laws, the risks cannot be entirely
eliminated. Any action against us for violation of these laws, even if we
successfully defend against it, could cause us to incur significant legal
32
Table
of Contents
expenses and divert our managements
attention from the operation of our business. Moreover, achieving and
sustaining compliance with all applicable federal and state fraud and abuse
laws may be costly.
If our competitors develop and market products that are more effective
than FOLOTYN, our commercial opportunity will be reduced or eliminated.
Even
though we have obtained approval to market FOLOTYN for the treatment of
patients with relapsed or refractory PTCL, our commercial opportunity will be
reduced or eliminated if our competitors develop and market products that are
more effective, have fewer side effects or are less expensive than FOLOTYN for
this or any other potential indication. Our potential competitors include
large, fully-integrated pharmaceutical companies and more established
biotechnology companies, both of which have significant resources and expertise
in research and development, manufacturing, testing, obtaining regulatory
approvals and marketing. Academic institutions, government agencies, and other
public and private research organizations conduct research, seek patent
protection and establish collaborative arrangements for research, development,
manufacturing and marketing. It is possible that competitors will succeed in
developing technologies that are more effective than those being developed by
us or that would render our technology obsolete or noncompetitive.
We cannot predict when or if we will obtain regulatory approval to
market FOLOTYN in the United States for any additional indications or in any
other countries.
We are
subject to stringent regulations with respect to product safety and efficacy by
various international, federal, state and local authorities. FOLOTYN has not
been approved for marketing in the United States for any indication other than
the treatment of patients with relapsed or refractory PTCL. In addition,
FOLOTYN has not been approved for marketing for this or any other indication in
any other country. A pharmaceutical product cannot be marketed in the United
States or most other countries until it has completed a rigorous and extensive
regulatory review and approval process. Satisfaction of regulatory requirements
typically takes many years, is dependent upon the type, complexity and novelty
of the product and requires the expenditure of substantial resources. Of
particular significance are the requirements covering research and development,
preclinical and clinical testing, manufacturing, quality control, labeling and
promotion of drugs for human use. We may not obtain the necessary regulatory
approvals to market FOLOTYN in the United States for any additional indications
or in any other countries. If we fail to obtain or maintain regulatory
approvals to market FOLOTYN in the United States for any additional indications
or in any other countries, our ability to generate significant revenue or
achieve profitability may be adversely affected.
Reports of adverse events or safety concerns involving FOLOTYN or
similar small molecule chemotherapeutic agents could delay or prevent us from
obtaining or maintaining regulatory approval or negatively impact public
perception of FOLOTYN.*
FOLOTYN
may cause serious adverse events. These adverse events could interrupt, delay
or halt clinical trials of FOLOTYN, including the FDA-required post-approval
studies, and could result in the FDA or other regulatory authorities denying or
withdrawing approval of FOLOTYN for any or all indications, including for the
treatment of patients with relapsed or refractory PTCL. An independent data
safety monitoring board, the FDA, other regulatory authorities or we may
suspend or terminate clinical trials at any time. We may also be required to
strengthen the warnings and precautions section of the FOLOTYN package insert
based on reports of adverse events or safety concerns, or impose a Risk Evaluation
and Mitigation Strategy, which could adversely affect FOLOTYNs acceptance in
the market. We cannot assure you that
FOLOTYN will be safe for human use.
At
present, there are a number of clinical trials being conducted by other
pharmaceutical companies involving small molecule chemotherapeutic agents. If
other pharmaceutical companies announce that they observed frequent adverse
events or unknown safety issues in their trials involving compounds similar to,
or competitive with, FOLOTYN, we could encounter delays in the timing of our
clinical trials or difficulties in obtaining or maintaining the necessary
regulatory approvals for FOLOTYN. In addition, the public perception of FOLOTYN
might be adversely affected, which could harm our business and results of
operations and cause the market price of our common stock to decline, even if
the concern relates to another companys product or product candidate.
If FOLOTYN fails to meet safety or efficacy endpoints in clinical
trials for additional indications, it will not receive regulatory approval and
we will be unable to market FOLOTYN for those indications studied.
We
have ongoing clinical trials involving FOLOTYN and plan to initiate additional
trials to evaluate FOLOTYNs potential clinical utility in other hematologic
malignancies and solid tumor indications. FOLOTYN may not prove to be
safe
33
Table
of Contents
and efficacious in
clinical trials for other indications and may not meet all of the applicable
regulatory requirements needed to receive regulatory approval for those
indications. The clinical development and regulatory approval process is
expensive and takes many years. Failure can occur at any stage of development,
and the timing of any regulatory approval cannot be accurately predicted. In
addition, failure to comply with the FDA and other applicable U.S. and foreign
regulatory requirements applicable to clinical trials may subject us to
administrative or judicially imposed sanctions.
As
part of the regulatory approval process, we must conduct clinical trials for
FOLOTYN and any other product candidate to demonstrate safety and efficacy to
the satisfaction of the FDA and other regulatory authorities abroad. The number
and design of clinical trials that will be required varies depending on the
product candidate, the condition being evaluated, the trial results and
regulations applicable to any particular product candidate. The designs of our
clinical trials for FOLOTYN are based on many assumptions about the expected
effect of FOLOTYN, and if those assumptions prove incorrect, the clinical
trials may not demonstrate the safety or efficacy of FOLOTYN. Preliminary
results may not be confirmed upon full analysis of the detailed results of a
trial, and prior clinical trial program designs and results may not be
predictive of future clinical trial designs or results. Product candidates in
later stage clinical trials may fail to show the desired safety and efficacy
despite having progressed through initial clinical trials with acceptable
endpoints. For example, we terminated the development of EFAPROXYN, one of our
former product candidates, when it failed to demonstrate statistically
significant improvement in overall survival in the targeted patients in a
Phase 3 clinical trial. If FOLOTYN fails to show clinically significant
benefits in any clinical trial or for any particular indication, it may not be
approved for marketing for such indication. Additionally, if FOLOTYN is
demonstrated to be unsafe in clinical trials for other indications, such
demonstration could negatively impact FOLOTYNs existing approval for the
treatment of patients with relapsed or refractory PTCL.
Even
if we achieve positive interim results in clinical trials, these results do not
necessarily predict final results, and acceptable results in early trials may
not be repeated in later trials. Data obtained from preclinical and clinical
activities are susceptible to varying interpretations that could delay, limit
or prevent regulatory clearances, and the FDA can request that we conduct
additional clinical trials. A number of companies in the pharmaceutical
industry have suffered significant setbacks in advanced clinical trials, even
after promising results in earlier trials. In addition, negative or
inconclusive results or adverse safety events during a clinical trial could
cause a clinical trial to be repeated or terminated. Also, failure to construct
clinical trial protocols to screen patients for risk profile factors relevant
to the trial for purposes of segregating patients into the patient populations
treated with the drug being tested and the control group could result in either
group experiencing a disproportionate number of adverse events and could cause
a clinical trial to be repeated or terminated. If we have to conduct additional
clinical trials for FOLOTYN for any particular indication, it will
significantly increase our expenses and may delay marketing of FOLOTYN for such
indication.
Even if FOLOTYN meets safety and efficacy endpoints in clinical trials
for additional indications, regulatory authorities may not approve FOLOTYN, or
we may face post-approval problems that require withdrawal of FOLOTYN from the
market.
We
will not be able to market FOLOTYN in the United States for any additional
indications or in any other countries for any indications until we have
obtained the necessary regulatory approvals. Our receipt of approval of FOLOTYN
in the United States for the treatment of patients with relapsed or refractory
PTCL does not guarantee that we will obtain regulatory approval to market
FOLOTYN in the United States for any additional indications or in any other
countries. We have limited experience in filing and pursuing applications
necessary to gain regulatory approvals, which may place us at risk of delays,
overspending and human resources inefficiencies.
FOLOTYN
may not be approved for any additional indications even if it achieves its endpoints
in clinical trials. Regulatory agencies, including the FDA, or their advisors,
may disagree with our interpretations of data from preclinical studies and
clinical trials. The FDA has substantial discretion in the approval process,
and when or whether regulatory approval will be obtained for any drug we
develop. Regulatory agencies also may approve a product candidate for
fewer conditions than requested or may grant approval subject to the
performance of post-approval studies or risk evaluation and mitigation
strategies for a product candidate. In addition, regulatory agencies may not
approve the labeling claims that are necessary or desirable for the successful
commercialization of FOLOTYN.
Following
regulatory approval for any additional indication, FOLOTYN may later produce
adverse events that limit or prevent its widespread use or that force us to
withdraw FOLOTYN from the market for that indication or other indications. In
addition, a marketed product continues to be subject to strict regulation after
approval and may be required to undergo post-approval studies. For example, we
are required to conduct two randomized Phase 3 trials to verify and describe
FOLOTYNs
34
Table
of Contents
clinical benefit in
patients with T-cell lymphoma as well as two Phase 1 trials to assess whether
FOLOTYN poses a serious risk of altered drug levels resulting from organ
impairment. Any unforeseen problems with an approved product, any failure
to meet the post-approval study requirements or any violation of regulations
could result in restrictions on the product, including its withdrawal from the
market. Any delay in or failure to obtain or maintain regulatory approvals for
FOLOTYN in the United States for any additional indication or in any other
countries could harm our business and prevent us from ever generating
significant revenues or achieving profitability.
We may experience delays in our clinical trials that could adversely
affect our financial position and our commercial prospects.
We do
not know when our current clinical trials will be completed, if at all. We also
cannot accurately predict when other planned clinical trials will begin or be
completed. Many factors affect patient enrollment, including the size of the
patient population, the proximity of patients to clinical sites, the
eligibility criteria for the trial, competing clinical trials and new drugs
approved for the conditions we are investigating. Other companies are
conducting clinical trials and have announced plans for future trials that are
seeking or likely to seek patients with the same diseases as those we are
studying. Competition for patients in some cancer trials is particularly
intense because of the limited number of leading specialist physicians and the
geographic concentration of major clinical centers.
As a
result of the numerous factors that can affect the pace of progress of clinical
trials, our trials may take longer to enroll patients than we anticipate, if
they can be completed at all. Delays in patient enrollment in the trials may
increase our costs and slow our product development and approval process. Our
product development costs will also increase if we need to perform more or
larger clinical trials than planned. If other companies product candidates
show favorable results, we may be required to conduct additional clinical
trials to address changes in treatment regimens or for our products to be
commercially competitive. Any delays in completing our clinical trials will
delay our ability to obtain regulatory approval to market FOLOTYN in the United
States for any additional indications or in any other countries, which may
adversely affect our ability to generate significant revenues or achieve
profitability.
We may be required to suspend, repeat or terminate our clinical trials
if they are not conducted in accordance with regulatory requirements, the
results are negative or inconclusive or the trials are not well designed.
Clinical
trials must be conducted in accordance with the FDAs current Good Clinical
Practices, or cGMP, or other applicable foreign government guidelines and are
subject to oversight by the FDA, other foreign governmental agencies and
Institutional Review Boards at the medical institutions where the clinical
trials are conducted. In addition, clinical trials must be conducted with
product candidates produced under cGMP and may require large numbers of test
subjects. Clinical trials may be suspended by the FDA, other foreign
governmental agencies, or us for various reasons, including:
·
deficiencies in the conduct of the clinical trials,
including failure to conduct the clinical trial in accordance with regulatory
requirements or clinical protocols;
·
deficiencies in the clinical trial operations or trial
sites;
·
the product candidate may have unforeseen adverse side
effects;
·
the time required to determine whether the product
candidate is effective may be longer than expected;
·
fatalities or other adverse events arising during a
clinical trial due to medical problems that may not be related to clinical
trial treatments;
·
the product candidate may not appear to be more
effective than current therapies;
·
the quality or stability of the product candidate may
fall below acceptable standards; or
·
insufficient quantities of the product candidate to
complete the trials.
In
addition, changes in regulatory requirements and guidance may occur and we may
need to amend clinical trial protocols to reflect these changes. Amendments may
require us to resubmit our clinical trial protocols to Institutional Review
Boards for reexamination, which may impact the costs, timing or successful
completion of a clinical trial. Due to these and
35
Table
of Contents
other factors, FOLOTYN
could take a significantly longer time to gain regulatory approval for any
additional indications than we expect or we may never gain approval for
additional indications, which could reduce our revenue by delaying or
terminating the commercialization of FOLOTYN for additional indications.
Due to our reliance on contract research organizations and other third
parties to conduct our clinical trials, we are unable to directly control the
timing, conduct and expense of our clinical trials.
We
rely primarily on third parties to conduct our clinical trials. As a result, we
have had and will continue to have less control over the conduct of our
clinical trials, the timing and completion of the trials, the required
reporting of adverse events and the management of data developed through the
trial than would be the case if we were relying entirely upon our own staff.
Communicating with outside parties can also be challenging, potentially leading
to mistakes as well as difficulties in coordinating activities. Outside parties
may have staffing difficulties, may undergo changes in priorities or may become
financially distressed, any of which may adversely affect their willingness or
ability to conduct our trials. We may experience unexpected cost increases that
are beyond our control. Problems with the timeliness or quality of the work of
a contract research organization may lead us to seek to terminate the
relationship and use an alternative service provider. However, making this
change may be costly and may delay our trials, and contractual restrictions may
make such a change difficult or impossible. Additionally, it may be impossible
to find a replacement organization that can conduct our trials in an acceptable
manner and at an acceptable cost.
We may need to raise additional capital to support our future
operations. If we fail to obtain the capital necessary to fund our
operations, we will be unable to successfully develop or commercialize
FOLOTYN.*
Based upon
the current status of our product development and commercialization plans, we
believe that our cash, cash equivalents, and investments as of March 31,
2010 should be adequate to support our operations through at least the next 12
months, although there can be no assurance that this can, in fact, be
accomplished. We anticipate continuing our current development programs
and beginning other long-term development projects involving FOLOTYN, including
the post-approval clinical studies required for FOLOTYN. These projects may
require many years and substantial expenditures to complete and may ultimately
be unsuccessful. In addition, we expect to incur significant costs
relating to the commercialization of FOLOTYN, including costs related to our
sales and marketing, medical affairs and manufacturing operations.
Therefore, we may need to raise additional capital to support our future
operations. Our actual capital requirements will depend on many factors,
including:
·
the timing and amount of revenues generated from sales
of FOLOTYN;
·
the timing and costs associated with our sales and
marketing and medical affairs activities involving FOLOTYN;
·
the timing and costs associated with manufacturing
clinical and commercial supplies of FOLOTYN;
·
the timing and costs associated with conducting
preclinical and clinical development of FOLOTYN, including the post-approval
studies required by the FDA, as well as our evaluation of, and decisions with
respect to, additional therapeutic indications for which we may develop
FOLOTYN;
·
the timing, costs and potential revenue associated
with any co-promotion or other partnering arrangements entered into to
commercialize FOLOTYN; and
·
our evaluation of, and decisions with respect to,
potential in-licensing or product acquisition opportunities or other strategic
alternatives.
We may
seek to obtain this additional capital through equity or debt financings,
arrangements with corporate partners, or from other sources. Such financings or
arrangements, if successfully consummated, may be dilutive to our existing
stockholders. However, there is no assurance that additional financing will be
available when needed, or that, if available, we will obtain such financing on
terms that are favorable to our stockholders or us. In the event that
additional funds are obtained through arrangements with collaborative partners
or other sources, such arrangements may require us to relinquish rights to some
of our technologies, product candidates or products under development, which we
might otherwise seek to develop or commercialize ourselves, on terms that are
less favorable than might otherwise be available. If we are unable to
generate meaningful amounts of revenue from future product sales or cannot
otherwise raise sufficient additional funds to support our
36
Table
of Contents
operations, we may be
required to delay, reduce the scope of or eliminate one or more of our
development programs and our business and future prospects for revenue and
profitability may be harmed.
Budget constraints may force us to delay our efforts to develop FOLOTYN
for additional indications while we complete the post-approval clinical studies
required by the FDA, which may prevent us from commercializing FOLOTYN for all
desired indications as quickly as possible.
Because
we have limited resources, and because research and development is an expensive
process, we must regularly assess the most efficient allocation of our research
and development budget. In particular, our approval of FOLOTYN in
patients with relapsed or refractory PTCL is conditioned upon us undertaking
two additional Phase 3 studies and two additional Phase 1 studies which will
result in significant additional expense. As a result of our limited
resources, we may have to prioritize the development of FOLOTYN for additional
indications and may not be able to fully realize the value of FOLOTYN for other
indications in a timely manner, if at all.
We do not have manufacturing facilities or capabilities and are
dependent on third parties to fulfill our manufacturing needs, which could
result in the delay of clinical trials, regulatory approvals, product
introductions and commercial sales.*
We are
dependent on third parties for the manufacture and storage of FOLOTYN for
clinical trials and for commercial sale. If we are unable to contract for a
sufficient supply of FOLOTYN on acceptable terms, or if we encounter delays or
difficulties in the manufacturing process or our relationships with our
manufacturers, we may not have sufficient product to conduct or complete our
clinical trials or support commercial requirements for FOLOTYN.
FOLOTYN
is cytotoxic, which requires the manufacturers of FOLOTYN to have specialized
equipment and safety systems to handle such a substance. In addition, the
starting materials for FOLOTYN require custom preparations, which require us to
manage an additional set of suppliers to obtain the needed supplies of FOLOTYN.
We
have entered into arrangements with two third-party manufacturers to produce
FOLOTYN bulk drug substance and two third-party manufacturers to produce
FOLOTYN formulated drug product. We believe these third-party manufacturers
have the capability to meet our projected worldwide clinical trial and
commercial requirements for FOLOTYN although we cannot assure you of this. In addition, we are in the process of
establishing additional supply agreements for the commercial production of
FOLOTYN bulk drug substance and formulated drug product. However, given
our current lack of formal supply agreements and the fact that in some cases
our components are supplied by a single source, our third party manufacturers
may not be able to fulfill our potential commercial needs or meet our
deadlines, or the components they supply to us may not meet our specifications
and quality policies and procedures. If we need to find additional alternative
suppliers of FOLOTYN or its components, we may not be able to contract for
those components on acceptable terms, if at all. Any such failure to supply or
delay caused by such suppliers would have an adverse effect on our ability to
continue clinical development of FOLOTYN or commercialize FOLOTYN.
Our
current or future manufacturers may be unable to accurately and reliably
manufacture commercial quantities of FOLOTYN at reasonable costs, on a timely
basis and in compliance with the FDAs cGMP. If our current or future contract
manufacturers fail in any of these respects, our ability to timely complete our
clinical trials, obtain or maintain required regulatory approvals and
successfully commercialize FOLOTYN may be materially and adversely affected.
This risk may be heightened with respect to FOLOTYN as there are a limited
number of manufacturers with the ability to handle cytotoxic products such as
FOLOTYN. Our reliance on contract manufacturers exposes us to additional risks,
including:
·
our current and future manufacturers are subject to
ongoing, periodic, unannounced inspections by the FDA and corresponding state
and international regulatory authorities for compliance with strictly enforced
cGMP regulations and similar state and foreign standards, and we do not have
control over our contract manufacturers compliance with these regulations and
standards;
·
our manufacturers may not be able to comply with
applicable regulatory requirements, which would prohibit them from
manufacturing products for us;
·
our manufacturers may have staffing difficulties, may
undergo changes in control or may become financially distressed, adversely
affecting their willingness or ability to manufacture products for us;
37
Table
of Contents
·
our manufacturers might not be able to fulfill our
commercial needs, which would require us to seek new manufacturing arrangements
and may result in substantial delays in meeting market demands;
·
if we need to change to other commercial manufacturing
contractors, the FDA and comparable foreign regulators must approve our use of
any new manufacturer, which would require additional testing, regulatory
filings and compliance inspections, and the new manufacturers would have to be
educated in, or themselves develop substantially equivalent processes necessary
for, the production of our products; and
·
we may not have intellectual property rights, or may
have to share intellectual property rights, to any improvements in the
manufacturing processes or new manufacturing processes for our products.
Any of
these factors could result in the delay of clinical trials, regulatory
submissions, required approvals or commercialization of FOLOTYN. They could
also entail higher costs and result in our being unable to effectively
commercialize FOLOTYN.
If we are unable to effectively protect our intellectual property, we
will be unable to prevent third parties from using our technology, which would
impair our competitiveness and ability to commercialize FOLOTYN. In addition,
enforcing our proprietary rights may be expensive and result in increased
losses.
Our
success will depend in part on our ability to obtain and maintain meaningful
patent protection for FOLOTYN, both in the United States and in other
countries. We rely on patents to protect a large part of our intellectual
property and our competitive position. Any patents issued to or licensed by us
could be challenged, invalidated, infringed, circumvented or held
unenforceable, based on, among other things, obviousness, inequitable conduct,
anticipation or enablement. In addition, it is possible that no patents will
issue on any of our licensed patent applications. It is possible that the
claims in patents that have been issued or licensed to us or that may be issued
or licensed to us in the future will not be sufficiently broad to protect our
intellectual property or that the patents will not provide protection against
competitive products or otherwise be commercially valuable. Failure to obtain
and maintain adequate patent protection for our intellectual property would
impair our ability to be commercially competitive.
Our
commercial success will also depend in part on our ability to commercialize
FOLOTYN without infringing patents or other proprietary rights of others or
breaching the licenses granted to us. We may not be able to obtain a license to
third-party technology that we may require to conduct our business or, if
obtainable, we may not be able to license such technology at a reasonable cost.
If we fail to obtain a license to any technology that we may require to
commercialize FOLOTYN, or fail to obtain a license at a reasonable cost, we
will be unable to commercialize FOLOTYN or to commercialize it at a price that
will allow us to become profitable.
In
addition to patent protection, we also rely upon trade secrets, proprietary
know-how and technological advances that we seek to protect through
confidentiality agreements with our collaborators, employees, advisors and
consultants. Our employees and consultants are required to enter into
confidentiality agreements with us. We also enter into non-disclosure
agreements with our collaborators and vendors, which agreements are intended to
protect our confidential information delivered to third parties for research
and other purposes. However, these agreements could be breached and we may not
have adequate remedies for any breach, or our trade secrets and proprietary
know-how could otherwise become known or be independently discovered by others.
Furthermore,
as with any pharmaceutical company, our patent and other proprietary rights are
subject to uncertainty. Our patent rights related to FOLOTYN might conflict
with current or future patents and other proprietary rights of others. For the
same reasons, the products of others could infringe our patents or other
proprietary rights. Litigation or patent interference proceedings, either of
which could result in substantial costs to us, may be necessary to enforce any
of our patents or other proprietary rights, or to determine the scope and
validity or enforceability of other parties proprietary rights. We may be dependent
on third parties, including our licensors, for cooperation and information that
may be required in connection with the defense and prosecution of our patents
and other proprietary rights. The defense and prosecution of patent and
intellectual property infringement claims are both costly and time consuming,
even if the outcome is favorable to us. Any adverse outcome could subject us to
significant liabilities to third parties, require disputed rights to be
licensed from third parties, or require us to cease selling our future
products. We are not currently a party to any patent or other intellectual
property infringement claims.
38
Table of Contents
We may explore strategic partnerships that may never materialize or may
fail.
We may, in the future, periodically explore a variety of possible
strategic partnerships in an effort to gain access to additional product
candidates or resources. At the current time, we cannot predict what form such
a strategic partnership might take. We are likely to face significant
competition in seeking appropriate strategic partners, and these strategic
partnerships can be complicated and time consuming to negotiate and document.
We may not be able to negotiate strategic partnerships on acceptable terms, or
at all. We are unable to predict when, if ever, we will enter into any additional
strategic partnerships because of the numerous risks and uncertainties
associated with establishing strategic partnerships.
If we enter into one or more strategic partnerships, we may be required
to relinquish important rights to and control over the development of FOLOTYN
or otherwise be subject to unfavorable terms.
Any future strategic partnerships we enter into could
subject us to a number of risks, including:
·
we may be required to undertake the expenditure of
substantial operational, financial and management resources in integrating new
businesses, technologies and products;
·
we may be required to issue equity securities that
would dilute our existing stockholders percentage ownership;
·
we may be required to assume substantial actual or
contingent liabilities;
·
we may not be able to control the amount and timing of
resources that our strategic partners devote to the development or
commercialization of FOLOTYN;
·
strategic partners may delay clinical trials, provide
insufficient funding, terminate a clinical trial or abandon a product
candidate, repeat or conduct new clinical trials or require a new version of a
product candidate for clinical testing;
·
strategic partners may not pursue further development
and commercialization of products resulting from the strategic partnering
arrangement or may elect to discontinue research and development programs;
·
strategic partners may not commit adequate resources
to the marketing and distribution of FOLOTYN or any other products, limiting
our potential revenues from these products;
·
disputes may arise between us and our strategic
partners that result in the delay or termination of the research, development
or commercialization of FOLOTYN or any other product candidate or that result
in costly litigation or arbitration that diverts managements attention and
consumes resources;
·
strategic partners may experience financial
difficulties;
·
strategic partners may not properly maintain or defend
our intellectual property rights or may use our proprietary information in a
manner that could jeopardize or invalidate our proprietary information or
expose us to potential litigation;
·
business combinations or significant changes in a
strategic partners business strategy may also adversely affect a strategic
partners willingness or ability to complete its obligations under any
arrangement;
·
strategic partners could independently move forward
with a competing product candidate developed either independently or in
collaboration with others, including our competitors; and
·
strategic partners could terminate the arrangement or
allow it to expire, which would delay the development and may increase the cost
of developing FOLOTYN or any other product candidate.
Health care reform measures could
adversely affect our business.*
The business and financial condition of pharmaceutical
and biotechnology companies are affected by the efforts of governmental and
third-party payers to contain or reduce the costs of health care. The U.S. Congress recently enacted
39
Table
of Contents
legislation
to reform the health care system. While
we anticipate that this legislation may, over time, increase the number of
patients who have insurance coverage for pharmaceutical products, it also
imposes cost containment measures that may adversely affect the amount of
reimbursement for pharmaceutical products, including FOLOTYN. These measures include increasing the minimum
rebates for products covered by Medicaid programs and extending such rebates to
drugs dispensed to Medicaid beneficiaries enrolled in Medicaid managed care
organizations as well as expansion of the 340(B) Public Health Services drug
discount program. In foreign
jurisdictions there have been, and we expect that there will continue to be, a
number of legislative and regulatory proposals aimed at changing the health
care system. For example, in some countries other than the United States,
pricing of prescription drugs is subject to government control and we expect to
see continued efforts to reduce healthcare costs in international markets.
Some states are also considering legislation that
would control the prices of drugs, and state Medicaid programs are increasingly
requesting manufacturers to pay supplemental rebates and requiring prior
authorization by the state program for use of any drug for which supplemental
rebates are not being paid. Managed care
organizations continue to seek price discounts and, in some cases, to impose
restrictions on the coverage of particular drugs. Government efforts to reduce Medicaid
expenses may lead to increased use of managed care organizations by Medicaid programs. This may result in managed care organizations
influencing prescription decisions for a larger segment of the population and a
corresponding constraint on prices and reimbursement for drugs, including
FOLOTYN. It is likely that federal and
state legislatures and health agencies will continue to focus on additional
health care reform in the future although we are unable to predict what
additional legislation or regulation, if any, relating to the health care
industry or third-party coverage and reimbursement may be enacted in the future
or what effect such legislation or regulation would have on our business. The
pendency or approval of such proposals or reforms could result in a decrease in
our stock price or limit our ability to raise capital or to obtain strategic
partnerships or licenses.
We may not obtain orphan drug exclusivity or we may not receive the
full benefit of orphan drug exclusivity even if we obtain such exclusivity.
The
FDA has awarded orphan drug status to pralatrexate, which we market under the
tradename FOLOTYN, for the treatment of patients with relapsed or refractory
PTCL. In addition, the FOA has awarded orphan drug designation to pralatrexate
for the treatment of patients with follicular lymphoma and diffuse large B-cell
lymphoma, for which we do not have approval. Under the Orphan Drug Act, the
first company to receive FDA approval for pralatrexate for the designated
orphan drug indication will obtain seven years of marketing exclusivity during
which the FDA may not approve another companys application for pralatrexate
for the same orphan indication. Because the FDA approved FOLOTYN for the
treatment of patients with relapsed or refractory PTCL, we have received seven
years of marketing exclusivity for that indication. Orphan drug
exclusivity does not prevent FDA approval of a different drug for the orphan
indication or the same drug for a different indication. In addition, the
FDA may void orphan drug exclusivity under certain circumstances.
If product liability lawsuits are successfully brought against us, we
may incur substantial liabilities and may be required to limit
commercialization of FOLOTYN.
The
testing and marketing of pharmaceutical products entail an inherent risk of
product liability. Product liability claims might be brought against us by consumers
or health care providers or by pharmaceutical companies or others selling
FOLOTYN or any future products. If we cannot successfully defend ourselves
against such claims, we may incur substantial liabilities or be required to
limit the commercialization of FOLOTYN. We have obtained limited product
liability insurance coverage for our human clinical trials and commercial sales
of FOLOTYN. However, product liability insurance coverage is becoming
increasingly expensive, and we may be unable to maintain such insurance
coverage at a reasonable cost or in sufficient amounts to protect us against
losses due to product liability. A successful product liability claim in excess
of our insurance coverage could have a material adverse effect on our business,
financial condition and results of operations.
Our success depends on the retention of our President and Chief
Executive
Officer and other key personnel.
We are
highly dependent on our President and Chief Executive Officer, Paul L. Berns,
and other members of our management team. We are named as the beneficiary on a
term life insurance policy covering Mr. Berns in the amount of
$10.0 million. We also depend on key employees and academic collaborators
for each of our research and development programs. The loss of any of our key
employees or academic collaborators could delay the development and
commercialization of FOLOTYN or result in the termination of our FOLOTYN
development program in its entirety. Mr. Berns and others on our executive
management team have employment agreements with us, but the agreements provide
for at-will employment with no specified term. Our future success also will
depend in large part on our continued ability to attract and retain other
highly qualified scientific, technical and management personnel, as well as
personnel with expertise in
40
Table
of Contents
clinical testing,
governmental regulation and commercialization of pharmaceutical products. We
face competition for personnel from other companies, universities, public and
private research institutions, government entities and other organizations. If
we are unsuccessful in our recruitment and retention efforts, our business will
be harmed.
We
also rely on consultants, collaborators and advisors to assist us in
formulating and conducting our research and development programs. All of our
consultants, collaborators and advisors are employed by other employers or are
self-employed and may have commitments to or consulting contracts with other
entities that may limit their ability to contribute to our company.
We cannot guarantee that we will be in compliance with all potentially
applicable regulations.
The
development, manufacturing, pricing, marketing, sale and reimbursement of
FOLOTYN, together with our general operations, are subject to extensive
regulation by federal, state and other authorities within the United States and
numerous entities outside of the United States. We have fewer employees than
many other companies that have one or more product candidates that are approved
for marketing and we rely heavily on third parties to conduct many important
functions.
As a
publicly-traded company, we are subject to significant regulations including
the Sarbanes Oxley Act of 2002. We cannot assure you that we are or will be in
compliance with all potentially applicable regulations. If we fail to comply
with the Sarbanes Oxley Act of 2002 or any other regulations, we could be
subject to a range of consequences, including restrictions on our ability to
sell equity securities or otherwise raise capital funds, the de-listing of our
common stock from The NASDAQ Global Market, suspension or termination of our
clinical trials, failure to obtain approval to market FOLOTYN, restrictions on
future products or our manufacturing processes, significant fines, or other
sanctions or litigation.
If our internal controls over financial reporting are not considered
effective, our business and stock price could be adversely affected.
Section 404
of the Sarbanes-Oxley Act of 2002 requires us to evaluate the effectiveness of
our internal controls over financial reporting as of the end of each fiscal
year, and to include a management report assessing the effectiveness of our
internal controls over financial reporting in our annual report on Form 10-K
for that fiscal year. Section 404 also requires our independent registered
public accounting firm to attest to, and report on, managements assessment of
our internal controls over financial reporting.
Our
management, including our chief executive officer and principal financial
officer, does not expect that our internal controls over financial reporting
will prevent all error and all fraud. A control system, no matter how well
designed and operated, can provide only reasonable, not absolute, assurance
that the control systems objectives will be met. Further, the design of a
control system must reflect the fact that there are resource constraints, and
the benefits of controls must be considered relative to their costs. Because of
the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud
involving a company have been, or will be, detected. The design of any system
of controls is based in part on certain assumptions about the likelihood of
future events, and we cannot assure you that any design will succeed in
achieving its stated goals under all potential future conditions. Over time,
controls may become ineffective because of changes in conditions or
deterioration in the degree of compliance with policies or procedures. Because
of the inherent limitations in a cost-effective control system, misstatements
due to error or fraud may occur and not be detected. We cannot assure you that
we or our independent registered public accounting firm will not identify a
material weakness in our internal controls in the future. A material weakness
in our internal controls over financial reporting would require management and
our independent registered public accounting firm to consider our internal
controls as ineffective. If our internal controls over financial reporting are
not considered effective, we may experience a loss of public confidence, which
could have an adverse effect on our business and on the market price of our
common stock.
Our revenue recognition model under the sell-through method
is complex and depends upon the accuracy and consistency of third party data as
well as dependence upon key finance and accounting personnel to maintain and
implement the surrounding controls.
We
have developed a revenue recognition model under the sell-through method that
is complex and incorporates a significant amount of third party data from our
wholesalers. To effectively maintain the revenue recognition model, we depend
to a considerable degree upon the timely and accurate reporting to us of such
data from these third parties and our key accounting and finance personnel to
accurately interpolate such data into the model. If the third party data is not calculated on
a consistent basis and reported to us on an accurate or timely basis or we lose
any of our key accounting and finance
41
Table
of Contents
personnel, the accuracy
of our consolidated financial statements could be materially affected. This
could cause future delays in our earnings announcements, regulatory filings
with the Securities and Exchange Commission, or SEC, and delisting with the
NASDAQ.
If we do not progress in our programs as anticipated, our stock price
could decrease.
For
planning purposes, we estimate the timing of a variety of clinical, regulatory
and other milestones, such as when a certain product candidate will enter
clinical development, when a clinical trial will be initiated or completed, or
when an application for regulatory approval will be filed. Some of our estimates
are included in this report. Our estimates are based on information available
to us as of the date of this report and a variety of assumptions. Many of the
underlying assumptions are outside of our control. If milestones are not
achieved when we estimated that they would be, investors could be disappointed
and our stock price may decrease.
Warburg Pincus Private Equity VIII, L.P. controls a substantial
percentage of the voting power of our outstanding common stock.*
On March 2,
2005, we entered into a Securities Purchase Agreement with Warburg Pincus
Private Equity VIII, L.P., or Warburg, and certain other investors in
connection with an equity financing. In
connection with this financing, Warburg and certain of its affiliates entered
into a standstill agreement pursuant to which they agreed not to pursue, for so
long as they continue to own a specified number of shares of our common stock,
certain activities the purpose or effect of which may be to change or influence
the control of our company.
As of April 30,
2010, we had 105,229,081 shares of common stock outstanding, of which Warburg
owned 26,124,430 shares, or approximately 25% of the voting power of our
outstanding common stock. Although Warburg has entered into a standstill
agreement with us, Warburg is, and will continue to be, able to exercise
substantial influence over any actions requiring stockholder approval.
Anti-takeover provisions in our charter documents and under Delaware
law could discourage, delay or prevent an acquisition of us, even if an
acquisition would be beneficial to our stockholders, and may prevent attempts
by our stockholders to replace or remove our current management.
Provisions
of our amended and restated certificate of incorporation and bylaws, as well as
provisions of Delaware law, could make it more difficult for a third party to
acquire us, even if doing so would benefit our stockholders. In addition, these
provisions may make it more difficult for stockholders to replace members of
our board of directors. Because our board of directors is responsible for
appointing the members of our management team, these provisions could in turn
affect any attempt by our stockholders to replace current members of our
management team. These provisions include:
·
authorizing the issuance of blank check preferred
stock that could be issued by our board of directors to increase the number of
outstanding shares or change the balance of voting control and thwart a
takeover attempt;
·
prohibiting cumulative voting in the election of
directors, which would otherwise allow for less than a majority of stockholders
to elect director candidates;
·
prohibiting stockholder action by written consent,
thereby requiring all stockholder actions to be taken at a meeting of our
stockholders;
·
eliminating the ability of stockholders to call a
special meeting of stockholders; and
·
establishing advance notice requirements for
nominations for election to the board of directors or for proposing matters
that can be acted upon at stockholder meetings.
In
addition, we are subject to Section 203 of the Delaware General
Corporation Law, which generally prohibits a Delaware corporation from engaging
in any of a broad range of business combinations with an interested stockholder
for a period of three years following the date on which the stockholder became
an interested stockholder. This provision could have the effect of delaying or
preventing a change of control, whether or not it is desired by or beneficial
to our stockholders. Notwithstanding the foregoing, the three-year moratorium
imposed on business combinations by Section 203 will not apply to Warburg
because, prior to the date on which Warburg became an interested stockholder,
our board of directors approved
42
Table
of Contents
the transactions that
resulted in Warburg becoming an interested stockholder. However, in connection
with Warburgs participation in an equity financing we completed in March 2005,
Warburg and certain of its affiliates entered into a standstill agreement
pursuant to which they agreed not to pursue, for so long as they continue to
own a specified number of shares of our common stock, certain activities the
purpose or effect of which may be to change or influence the control of our
company.
We have adopted a stockholder rights plan that may discourage, delay or
prevent a merger or acquisition that is beneficial to our stockholders.
In May 2003,
our board of directors adopted a stockholder rights plan that may have the
effect of discouraging, delaying or preventing a merger or acquisition of us
that our stockholders may consider beneficial by diluting the ability of a
potential acquirer to acquire us. Pursuant to the terms of the stockholder
rights plan, when a person or group, except under certain circumstances,
acquires 15% or more of our outstanding common stock or 10 business days after
announcement of a tender or exchange offer for 15% or more of our outstanding
common stock, the rights (except those rights held by the person or group who
has acquired or announced an offer to acquire 15% or more of our outstanding
common stock) would generally become exercisable for shares of our common stock
at a discount. Because the potential acquirers rights would not become
exercisable for our shares of common stock at a discount, the potential
acquirer would suffer substantial dilution and may lose its ability to acquire
us. In addition, the existence of the plan itself may deter a potential
acquirer from acquiring or making an offer to acquire us. As a result,
either by operation of the plan or by its potential deterrent effect, mergers
and acquisitions of our company that our stockholders may consider in their
best interests may not occur.
Because
Warburg owns a substantial percentage of our outstanding common stock, we
amended the stockholder rights plan in connection with Warburgs participation
in an equity financing we completed in March 2005 to provide that Warburg
and its affiliates will be exempt from the stockholder rights plan, unless
Warburg and its affiliates become, without the prior consent of our board of
directors, the beneficial owner of more than 44% of our common stock. Likewise,
in connection with our completion of an underwritten offering of 9,000,000
shares of common stock in February 2007, we amended the stockholder rights
plan to provide that Baker Brothers Life Sciences, L.P. and certain other
affiliated funds, which are collectively referred to herein as Baker, will be
exempt from the stockholder rights plan, unless Baker becomes, without the
prior consent of our board of directors, the beneficial owner of more than 20%
of our common stock. According to filings with the SEC, Baker owned less
than 10% of our outstanding common stock as of February 2009. Under the
stockholder rights plan, our board of directors has express authority to amend
the rights plan without stockholder approval.
Unstable market conditions may
have serious adverse consequences on our business.
The recent economic downturn and market instability
has made the business climate more volatile and more costly. Our general
business strategy may be adversely affected by unpredictable and unstable
market conditions. If the current equity and credit markets deteriorate
further, or do not improve, it may make any necessary equity or debt financing
more difficult, more costly, and more dilutive. While we believe we have
adequate capital resources to meet our expected working capital and capital
expenditure requirements for at least the next 12 months, a radical economic
downturn or increase in our expenses could require additional financing on less
than attractive rates or on terms that are excessively dilutive to existing
stockholders. Failure to secure any necessary financing in a timely manner and
on favorable terms could have a material adverse effect on our growth strategy,
financial performance and stock price and could require us to delay or abandon
clinical development plans. There is a risk that one or more of our current
service providers, manufacturers or other partners may encounter difficulties
during challenging economic times, which could have an adverse effect on our
business, results of operations and financial condition.
The market price for our common stock has been and may continue to be
highly volatile, and an active trading market for our common stock may never
exist.
We
cannot assure you that an active trading market for our common stock will exist
at any time. Holders of our common stock may not be able to sell shares quickly
or at the market price if trading in our common stock is not active. The
trading price of our common stock has been and is likely to continue to be
highly volatile and could be subject to wide fluctuations in price in response
to various factors, many of which are beyond our control, including:
·
the timing and amount of revenues generated from sales
of FOLOTYN;
·
actual or anticipated variations in quarterly
operating results;
43
Table
of Contents
·
actual or anticipated regulatory approvals or
non-approvals of FOLOTYN or of competing product candidates;
·
the loss of regulatory approval for FOLOTYN in
patients with relapsed or refractory PTCL;
·
actual or anticipated results of our clinical trials
involving FOLOTYN;
·
changes in laws or regulations applicable to FOLOTYN;
·
changes in the expected or actual timing of our
development programs;
·
announcements of technological innovations by us or
our competitors;
·
changes in financial estimates or recommendations by
securities analysts;
·
conditions or trends in the biotechnology and
pharmaceutical industries;
·
changes in the market valuations of similar companies;
·
announcements by us of significant acquisitions,
strategic partnerships, joint ventures or capital commitments;
·
additions or departures of key personnel;
·
disputes or other developments relating to proprietary
rights, including patents, litigation matters and our ability to obtain patent
protection for our technologies;
·
developments concerning any of our research and
development, manufacturing and marketing collaborations;
·
sales of large blocks of our common stock;
·
sales of our common stock by our executive officers,
directors and five percent stockholders; and
·
economic and other external factors, including
disasters or crises.
Public
companies in general and companies included on The NASDAQ Global Market in
particular have experienced extreme price and volume fluctuations that have
often been unrelated or disproportionate to the operating performance of those
companies. There has been particular volatility in the market prices of
securities of biotechnology and other life sciences companies, and the market
prices of these companies have often fluctuated because of problems or
successes in a given market segment or because investor interest has shifted to
other segments. These broad market and industry factors may cause the market
price of our common stock to decline, regardless of our operating performance.
We have no control over this volatility and can only focus our efforts on our
own operations, and even these may be affected due to the state of the capital
markets. In the past, following large price declines in the public market price
of a companys securities, securities class action litigation has often been
initiated against that company, including in 2004 against us. Litigation of
this type could result in substantial costs and diversion of managements
attention and resources, which would hurt our business. Any adverse
determination in litigation could also subject us to significant liabilities.
Substantial sales of shares may impact the market price of our common
stock.
If our stockholders sell
substantial amounts of our common stock, the market price of our common stock
may decline. These sales also might make it more difficult for us to sell
equity or equity-related securities in the future at a time and price that we
consider appropriate. We are unable to predict the effect that sales may have
on the then prevailing market price of our common stock. We have entered
into a Registration Rights Agreement with Warburg pursuant to which Warburg is
entitled to certain registration rights with respect to shares of our common stock.
On July 20, 2009, we filed a Registration Statement on Form S-3 with
the SEC providing for the registration for resale by Warburg of up to
26,124,430 shares of our common stock, which registration statement was
declared effective on August 28, 2009.
44
Table
of Contents
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE
OF PROCEEDS
|
None
|
|
|
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
None
|
|
|
|
ITEM 4.
|
RESERVED
|
None
|
|
|
|
ITEM 5.
|
OTHER INFORMATION
|
None
|
|
|
|
ITEM 6.
|
EXHIBITS
|
|
|
|
|
|
Incorporated by Reference
|
|
|
Exhibit
No.
|
|
Description
|
|
Form
|
|
Filing
Date
|
|
Number
|
|
Filed
Herewith
|
10.21
|
|
Executive Compensation and Equity Awards.
|
|
8-K
|
|
2/26/2010
|
|
10.1
|
|
|
31.1
|
|
Certification of principal executive officer
required by Rule 13a-14(a) / 15d-14(a).
|
|
|
|
|
|
|
|
X
|
31.2
|
|
Certification of principal financial officer
required by Rule 13a-14(a) / 15d-14(a).
|
|
|
|
|
|
|
|
X
|
32.1#
|
|
Section 1350 Certification.
|
|
|
|
|
|
|
|
X
|
Indicates
management contract or compensatory plan or arrangement.
#
The
certifications attached as Exhibit 32.1 that accompany this Quarterly
Report on Form 10-Q are not deemed filed with the Securities and Exchange
Commission and are not to be incorporated by reference into any filing of Allos
Therapeutics, Inc. under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, whether made before or after the
date of this Form 10-Q, irrespective of any general incorporation language
contained in such filing.
45
Table
of Contents
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Date: May 5, 2010
|
|
ALLOS THERAPEUTICS, INC.
|
|
|
|
|
|
/s/ Paul L. Berns
|
|
|
Paul L. Berns
|
|
|
President and Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
|
/s/ David C. Clark
|
|
|
David C. Clark
|
|
|
Vice President, Finance and Treasurer
|
|
|
(Principal Financial and Accounting Officer)
|
46
Allos Therapeutics, Inc. (MM) (NASDAQ:ALTH)
Historical Stock Chart
From May 2024 to Jun 2024
Allos Therapeutics, Inc. (MM) (NASDAQ:ALTH)
Historical Stock Chart
From Jun 2023 to Jun 2024