As filed with the Securities and Exchange
Commission on October 7, 2016.
Registration No.
333-_________
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
_______________
SOLIGENIX, INC.
(Exact name of registrant as specified in its charter)
_______________
Delaware
|
|
2834
|
|
41-1505029
|
(State or other
jurisdiction of incorporation or organization)
|
|
(Primary Standard
Industrial Classification Code Number)
|
|
(I.R.S. Employer
Identification No.)
|
Soligenix, Inc.
29 Emmons Drive, Suite C-10
Princeton, New Jersey 08540
(609) 538-8200
(Address, including zip code, and
telephone number, including area code, of registrant’s
principal executive offices)
Christopher J. Schaber, Ph.D.
President and Chief Executive Officer
Soligenix, Inc.
29 Emmons Drive, Suite C-10
Princeton, New Jersey 08540
(609) 538-8200
(Name, address, including zip code,
and telephone number, including area code, of agent for
service)
_______________
with copies to:
|
Leslie J. Croland, Esq.
Driscoll R. Ugarte, Esq.
Duane Morris
LLP
200 South Biscayne
Boulevard
Suite 3400
Miami, Florida
33131-2318
(305)
960-2200
|
|
Leslie Marlow, Esq.
Hank Gracin, Esq.
Patrick J. Egan, Esq.
Gracin & Marlow, LLP
The Chrysler Building
405 Lexington Avenue, 26
th
Floor
New York, NY 10174
(212) 907-6457
|
_______________
Approximate date of commencement of
proposed sale to the public: As soon as practicable after the
effective date hereof.
If any of the securities being
registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box:
x
If this Form is filed to register
additional securities for an offering pursuant to Rule 462(b) under
the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement for the same offering.
¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement for the same offering.
¨
If this Form
is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective
registration statement for the same offering.
¨
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
definitions of “large accelerated filer,”
“accelerated filer,” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated
filer
|
|
¨
|
|
Accelerated
filer
|
|
¨
|
Non-accelerated
filer
|
|
¨
|
|
Smaller reporting
company
|
|
x
|
(Do not check if a
smaller reporting company)
|
CALCULATION OF
REGISTRATION FEE
Title of each class of securities to be
registered
|
|
Proposed maximum aggregate offering
price
(1)
|
|
Amount of registration
fee
(1)(3)
|
Common Stock, $0.001
par value
(2)(3)
|
|
$
|
17,250,000
|
|
$
|
1,999.28
|
Common Stock Purchase
Warrants
(4)
|
|
$
|
11,500
|
|
$
|
1.34
|
Shares of Common
Stock, $0.001 par value per share, underlying Common Stock Purchase
Warrants
(2)(3)(7)
|
|
$
|
10,781,250
|
|
$
|
1,249.55
|
Representative’s
Warrants
(5)
|
|
|
—
|
|
|
—
|
Shares of Common Stock
underlying Representative’s Warrants
(2)(3)(6)
|
|
$
|
375,000
|
|
$
|
43.47
|
Total
|
|
$
|
28,417,750
|
|
$
|
3,293.64
|
The Registrant hereby amends this Registration
Statement on such date or dates as may be necessary to delay its
effective date until the Registrant shall file a further amendment
which specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the
Securities Act or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to
Section 8(a), may determine.
The information in this preliminary
prospectus is not complete and may be changed. We may not sell
these securities until the Registration Statement filed with the
Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any jurisdiction
where the offer or sale is not permitted.
PRELIMINARY
PROSPECTUS
|
|
SUBJECT TO
COMPLETION
|
|
DATED
October 7,
2016
|
Shares of
Common Stock
Warrants to Purchase
up to Shares of Common
Stock
_____________________________________________________________________________________________
We are offering
shares of our common stock and
warrants to purchase up to an aggregate of ______ shares of our
common stock pursuant to this prospectus (and the shares of our
common stock that are issuable from time to time upon exercise of
the warrants). The warrants will have a per share exercise price of
$ [[125%] of the public offering price of the common stock]. Each
warrant will have the right to purchase one-half of one share of
our common stock. The shares of our common stock and the warrants
will be separately issued. The warrants are exercisable immediately
and will expire [five] years from the date of issuance. On October
7, 2016, we effected a one-for-ten reverse stock split of our
issued and outstanding common stock.
Our common
stock is quoted on the OTCQB market under the symbol
“SNGX.” We have applied to list our common stock on The
NASDAQ Capital Market under the symbol “SNGX.” No
assurance can be given that our application will be approved. On
October 6, 2016, the last quoted sale price for our common stock on
the OTCQB was $7.50 per share, adjusted for the one-for-ten reverse
stock split we effected on October 7, 2016.
Our business and an investment in our
securities involves a high degree of risk. See “Risk
Factors” beginning on page 8 of this prospectus for a
discussion of information that you should consider before investing
in our securities.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of
these securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
|
|
|
|
|
|
|
Public offering
price
|
|
$
|
|
$
|
|
$
|
Discounts and
commissions to underwriters
(1)
|
|
$
|
|
$
|
|
$
|
Offering proceeds to
us, before expenses
|
|
$
|
|
$
|
|
$
|
We have granted a 45-day option to
the representative of the underwriters to purchase up to additional
shares of common stock and/or
warrants from us solely to cover
over-allotments, if any.
The underwriters expect to deliver
the shares and warrants against payment therefor on or about
, 2016.
Lead Book-Running
Manager
Aegis Capital Corp
Co-Manager
Maxim Group LLC
, 2016
Table of
Contents
PROSPECTUS SUMMARY
|
|
1
|
RISK FACTORS
|
|
8
|
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS AND INDUSTRY DATA AND MARKET INFORMATION
|
|
28
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USE OF PROCEEDS
|
|
30
|
DIVIDEND POLICY
|
|
30
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MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
|
|
31
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DILUTION
|
|
33
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CAPITALIZATION
|
|
35
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
36
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BUSINESS
|
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45
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MANAGEMENT
|
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65
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EXECUTIVE COMPENSATION
|
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71
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CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
|
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74
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
|
|
75
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UNDERWRITING
|
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77
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DESCRIPTION OF CAPITAL STOCK
|
|
85
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DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
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90
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LEGAL MATTERS
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90
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EXPERTS
|
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90
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WHERE YOU CAN FIND MORE INFORMATION
|
|
91
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INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE
|
|
91
|
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
F-1
|
__________________________
You should rely only on the information contained in this
prospectus or in any free writing prospectus that we may
specifically authorize to be delivered or made available to you. We
have not, and the underwriters have not, authorized anyone to
provide you with any information other than that contained in this
prospectus or in any free writing prospectus we may authorize to be
delivered or made available to you. We take no responsibility for,
and can provide no assurance as to the reliability of, any other
information that others may give you. This prospectus may only be
used where it is legal to offer and sell our securities. The
information in this prospectus is accurate only as of the date of
this prospectus, regardless of the time of delivery of this
prospectus or any sale of our securities. Our business, financial
condition, results of operations and prospects may have changed
since that date. We are not, and the underwriters are not, making
an offer of these securities in any jurisdiction where the offer is
not permitted.
For investors outside the United States: We have not and the
underwriters have not done anything that would permit this offering
or possession or distribution of this prospectus in any
jurisdiction where action for that purpose is required, other than
in the United States. Persons outside the United States who come
into possession of this prospectus must inform themselves about,
and observe any restrictions relating to, the offering of the
securities and the distribution of this prospectus outside the
United States.
i
PROSPECTUS
SUMMARY
This summary
highlights information contained elsewhere in this prospectus. This
summary does not contain all of the information you should consider
before investing in our securities. You should read this entire
prospectus carefully, especially the “Risk Factors”
section of this prospectus and the financial statements and related
notes appearing at the end of this prospectus before making an
investment decision. References in this prospectus to
“we,” “us,” “our,” and
“Soligenix” refer to Soligenix, Inc. You should read
both this prospectus together with additional information described
below under the heading “Where You Can Find More
Information.”
Business
Overview
We are a late-stage biopharmaceutical company focused on developing
and commercializing products to treat rare diseases where there is
an unmet medical need. We maintain two active business segments:
BioTherapeutics and Vaccines/BioDefense.
Our BioTherapeutics business segment is developing a novel
photodynamic therapy (SGX301) utilizing topical synthetic hypericin
activated with safe visible light for the treatment of cutaneous
T-cell lymphoma (“CTCL”), our first-in-class innate
defense regulator technology, dusquetide (SGX942) for the treatment
of oral mucositis in head and neck cancer, and proprietary
formulations of oral beclomethasone 17,21-dipropionate
(“BDP”) for the prevention/treatment of
gastrointestinal (“GI”) disorders characterized by
severe inflammation, including pediatric Crohn’s disease
(SGX203) and acute radiation enteritis (SGX201).
Our Vaccines/BioDefense business segment includes active
development programs for RiVax
™
,
our ricin toxin vaccine candidate, OrbeShield
®
,
our GI acute radiation syndrome (“GI ARS”) therapeutic
candidate and SGX943, our melioidosis therapeutic candidate. The
development of our vaccine programs currently is supported by our
heat stabilization technology, known as ThermoVax
®
,
under existing and on-going government contract funding. With the
government contract from the National Institute of Allergy and
Infectious Diseases (“NIAID”), we will attempt to
advance the development of RiVax™ to protect against exposure
to ricin toxin. We plan to use the funds received under our awarded
government contracts with the Biomedical Advanced Research and
Development Authority (“BARDA”) and grants from NIAID
to advance the development of OrbeShield
®
for the treatment of GI ARS.
An outline for our business strategy follows:
•
Complete enrollment and report preliminary results in our pivotal
Phase 3 clinical trial of SGX301 for the treatment of CTCL;
•
Continue to collect the long-term follow-up safety data from the
SGX942 Phase 2 proof-of-concept study for the treatment of oral
mucositis in head and neck cancer patients and publish the findings
from this study;
•
Obtain agreement from the United States Food and Drug
Administration (the “FDA”) on a pivotal Phase 2b/3
protocol of SGX942 for the treatment of oral mucositis in head and
neck cancer patients;
•
Initiate a pivotal Phase 3 clinical trial of SGX203 for the
treatment of pediatric Crohn’s disease;
•
Continue development of RiVax™ in combination with our
ThermoVax
®
technology to develop new heat stable vaccines in biodefense with
NIAID funding support;
•
Advance the preclinical and manufacturing development of
OrbeShield
®
as a biodefense medical countermeasure for the treatment of GI ARS
under the BARDA contract and with NIAID funding support;
•
Continue to apply for and secure additional government funding for
each of our BioTherapeutics and Vaccines/BioDefense programs
through grants, contracts and/or procurements;
•
Pursue business development
opportunities for our pipeline programs, as well as explore
merger/acquisition strategies; and
•
Acquire or in-license new clinical-stage compounds for
development.
1
Product Candidates in
Development
The following tables summarize our product candidates under
development:
BioTherapeutic Product Candidates
|
Soligenix Product
Candidate
|
|
|
|
|
SGX301
|
|
Cutaneous T-Cell Lymphoma
|
|
Phase 2 trial completed; demonstrated
significantly higher response rate compared to placebo; Phase 3
clinical trial initiated in the second half of 2015, with data
expected in the second half of 2017
|
|
|
|
|
|
SGX942
|
|
Oral Mucositis in Head and Neck
Cancer
|
|
Phase 2 trial initiated in the second half of
2013, with positive preliminary results reported in the second half
of 2015 and long-term data expected in the second half of 2016;
seek to obtain FDA agreement on the Phase 2b/3 protocol in the
first half of 2017
|
|
|
|
|
|
SGX203**
|
|
Pediatric Crohn’s disease
|
|
Phase 1/2
clinical trial completed in June 2013, efficacy data,
pharmacokinetic (PK)/pharmacodynamic (PD) profile and safety
profile demonstrated; Phase 3 clinical trial planned for the first
half of 2017, with data expected in the second half of
2018
|
|
|
|
|
|
SGX201**
|
|
Acute Radiation Enteritis
|
|
Phase 1/2 clinical trial complete; safety
profile and preliminary efficacy demonstrated
|
Vaccine Thermostability Platform**
|
Soligenix Product
Candidate
|
|
|
|
|
ThermoVax
®
|
|
Thermostability of aluminum adjuvanted
vaccines
|
|
Pre-clinical
|
BioDefense Product Candidates**
|
Soligenix Product
Candidate
|
|
|
|
|
RiVax™
|
|
Vaccine against Ricin Toxin Poisoning
|
|
Phase 1b trial
complete, safety and neutralizing antibodies for protection
demonstrated; Phase 1/2 trial planned for the second half of
2017
|
|
|
|
|
|
OrbeShield
®
|
|
Therapeutic against GI ARS
|
|
Pre-clinical
|
|
|
|
|
|
SGX943
|
|
Melioidosis
|
|
Pre-clinical
|
Corporate
Information
We were incorporated in Delaware in 1987 under the name Biological
Therapeutics, Inc. In 1987, we merged with Biological Therapeutics,
Inc., a North Dakota corporation, pursuant to which we changed our
name to “Immunotherapeutics, Inc.” We changed our name
to “Endorex Corp.” in 1996, to “Endorex
Corporation” in 1998, to “DOR BioPharma, Inc.” in
2001, and finally to “Soligenix, Inc.” in 2009. Our
principal executive offices are located at 29 Emmons Drive, Suite
C-10, Princeton, New Jersey 08540 and our telephone number is (609)
538-8200.
2
Recent
Developments
License Agreement and Stock Sale
On September 9, 2016, we and SciClone Pharmaceuticals, Inc.
(“SciClone”) entered into an exclusive license
agreement, pursuant to which we granted rights to SciClone to
develop, promote, market, distribute and sell SGX942 in the
People’s Republic of China, including Hong Kong and Macau, as
well as Taiwan, South Korea and Vietnam. Under the terms of the
license agreement, SciClone will be responsible for all aspects of
development, product registration and commercialization in the
territory, having access to data generated by us. In exchange for
exclusive rights, SciClone will pay us royalties on net sales, and
we will supply commercial drug product to SciClone on a cost-plus
basis, while maintaining worldwide manufacturing rights.
In connection with the execution of the license agreement, we
entered into a common stock purchase agreement with SciClone
pursuant to which we sold 352,942 shares of our common stock to
SciClone for approximately $8.50 per share, for an aggregate price
of $3,000,000. As additional consideration for expanded territorial
rights in South Korea, Taiwan and Vietnam, SciClone agreed to
purchase the shares of common stock at a premium above the current
market price, with the purchase price being equal to one hundred
thirty five percent (135%) of the average trading price of the
common stock over the ten trading days prior to September 9, 2016.
As part of the transaction, we granted SciClone certain demand
registration rights and SciClone agreed, subject to certain
exceptions, not to pledge, sell or otherwise transfer or dispose
of, or enter into any swap or other arrangement that transfers any
of the economic consequences of ownership of, the shares purchased
for at least one year from September 9, 2016.
Reverse Stock Split
Pursuant to the authority granted to our Board of Directors by our
stockholders at the 2016 Annual Meeting of Stockholders, our Board
of Directors authorized a one-for-ten reverse stock split of our
common stock for all stockholders of record as of the close of
business on October 6, 2016 and proportionately reduced the number
of shares of our common stock authorized for issuance. As a result
of the reverse split, the total number of outstanding shares of
common stock was reduced to approximately 3.8 million shares and
the conversion ratio for all instruments convertible into or
exercisable for shares of common stock, including stock options and
warrants, was proportionately adjusted.
The reverse split was implemented in preparation for the proposed
up-listing of our common stock to The NASDAQ Capital Market
(“NASDAQ”). The NASDAQ listing is expected to
facilitate more liquidity in the stock as well as enable broader
access to the investment community, many participants of which are
unable to buy stock listed on the bulletin board.
The reverse split was intended to fulfill the stock price
requirements for listing on NASDAQ since the requirements include,
among other things, that our common stock must maintain a minimum
closing price per share of $3.00 or higher for five consecutive
trading days immediately prior to up-listing. Before any listing of
our common stock on NASDAQ could occur, NASDAQ will need to approve
our application for listing. We believe that we will meet all of
the listing requirements for listing our common stock on NASDAQ;
however, there is no assurance that our application will be
approved.
Our common stock began trading on the OTCQB on a reverse split
basis on October 7, 2016. All share and per share data set forth
herein have been adjusted to reflect this reverse stock split.
3
The Offering
Securities offered by us
|
|
shares of
our common stock and warrants to purchase up to an aggregate of
shares of common
stock.
|
|
|
|
Over-allotment option
|
|
We have granted the underwriters a 45-day option
to purchase up to additional
shares of our common stock from us at the public offering price
less underwriting discounts and commissions and/or additional
warrants to purchase up to
shares of our common stock from us at the purchase price of $
per warrant.
|
|
|
|
Representative’s warrants
|
|
We will issue to
Aegis Capital Corp. (“Aegis”), the representative of
the underwriters, upon closing of this offering, compensation
warrants entitling Aegis or its designees to purchase 2.0% of the
aggregate number of the shares of common stock that we issue in
this offering (excluding any shares issued upon exercise of the
underwriters’ over-allotment option). The
representative’s warrants will be exercisable for no more
than 5 years from the effective date of this offering and may be
exercised commencing 12 months after the date of effectiveness of
the registration statement of which this prospectus forms a part.
The representative’s warrants may be exercised on a cashless
basis.
|
|
|
|
Common stock outstanding after this
offering
|
|
shares of common stock
( if the warrants are exercised
in full). If the underwriters’ over-allotment option is
exercised in full, the total number of shares of common stock
outstanding immediately after this offering would be
( if the warrants are exercised
in full). This prospectus also includes the shares of our common
stock issuable upon exercise of the warrants.
|
|
|
|
Description of the warrants
|
|
The warrants will have a per share exercise
price equal to $
[[125%] of public offering price of the common stock]. The warrants
are exercisable immediately and expire [five] years from the date
of issuance.
|
|
|
|
Use of proceeds
|
|
We estimate that the net proceeds from our sale
of our securities in this offering will be approximately
$ million, or approximately
$ million if the underwriters
exercise their over-allotment option in full, after deducting
estimated underwriting discounts and commissions and estimated
offering expenses payable by us. We intend to use the net proceeds
received from this offering to fund our pivotal Phase 3 clinical
trial of SGX301 for the treatment of CTCL and our pivotal Phase
2b/3 protocol of SGX942 for the treatment of oral mucositis in head
and neck cancer patients, as well as for general working capital
purposes. See “Use of Proceeds” on page 30.
|
|
|
|
Risk Factors
|
|
See the section entitled “Risk
Factors” beginning on page 8 of this prospectus for a
discussion of factors you should carefully consider before deciding
to invest in our securities.
|
|
|
|
OTC Markets (OTCQB) symbol
|
|
SNGX
|
|
|
|
Proposed symbol and listing
|
|
We have applied to list our common stock on The
NASDAQ Capital Market under the symbol
“SNGX”.
|
4
Unless we indicate otherwise, all information in this
prospectus:
•
reflects a one-for-ten reverse stock split of our issued and
outstanding shares of common stock, options and warrants effected
on October 7, 2016 and the corresponding adjustment of all common
stock prices per share and stock option and warrant exercise prices
per share;
•
is based on 3,764,529 shares of common stock issued and outstanding
as of October 6, 2016;
•
assumes no exercise by the underwriters of their option to purchase
up to an additional
shares of common
stock and warrants to cover over-allotments, if any;
•
excludes
shares of our
common stock underlying warrants to be issued to the representative
of the underwriters in connection with this offering;
•
excludes
shares of our
common stock underlying warrants to be issued in this offering;
•
excludes 303,693 shares of common stock issuable upon conversion of
outstanding warrants to purchase shares of our common stock
exercisable at $5.10 per share, which warrants are subject to
anti-dilution protection upon certain equity issuances below $5.10
per share (as may be further adjusted as set forth in the warrant)
as of October 6, 2016;
•
excludes 188,919 shares of our common stock issuable upon exercise
of other outstanding warrants at a weighted average exercise price
of $11.00 per share as of October 6, 2016; and
•
excludes 311,651 shares of our
common stock issuable upon exercise of outstanding stock options
under our equity compensation plans at a weighted average exercise
price of $19.60 per share as of October 6, 2016.
5
SUMMARY FINANCIAL
DATA
The following table sets forth our summary statement of operations
data for the fiscal years ended December 31, 2015 and 2014 derived
from our audited financial statements and related notes included
elsewhere in this prospectus. The summary financial data for the
six months ended June 30, 2016 and 2015, and as of June 30, 2016,
are derived from our unaudited financial statements appearing
elsewhere in this prospectus and are not indicative of results to
be expected for the full year. Our financial statements are
prepared and presented in accordance with generally accepted
accounting principles in the United States. The results indicated
below are not necessarily indicative of our future performance. You
should read this information together with the sections entitled
“Capitalization,” “Management’s Discussion
and Analysis of Financial Condition and Results of
Operations” and our financial statements and related notes
included elsewhere in this prospectus.
|
|
Six Months Ended June 30,
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract revenue
|
|
$
|
5,791,037
|
|
|
$
|
1,794,547
|
|
|
$
|
8,641,348
|
|
|
$
|
5,545,468
|
|
Grant revenue
|
|
|
—
|
|
|
|
121,566
|
|
|
|
127,042
|
|
|
|
1,497,548
|
|
Total revenues
|
|
|
5,791,037
|
|
|
|
1,916,113
|
|
|
|
8,768,390
|
|
|
|
7,043,016
|
|
Cost of revenues
|
|
|
(4,574,874
|
)
|
|
|
(1,344,101
|
)
|
|
|
(6,882,204
|
)
|
|
|
(5,313,855
|
)
|
Gross profit
|
|
|
1,216,163
|
|
|
|
572,012
|
|
|
|
1,886,186
|
|
|
|
1,729,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
2,256,332
|
|
|
|
2,472,798
|
|
|
|
5,399,839
|
|
|
|
5,086,535
|
|
Acquired in-process research and
development
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,000,000
|
|
General and administrative
|
|
|
1,875,494
|
|
|
|
1,692,232
|
|
|
|
3,596,623
|
|
|
|
3,403,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
4,131,826
|
|
|
|
4,165,030
|
|
|
|
8,996,462
|
|
|
|
12,490,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(2,915,663
|
)
|
|
|
(3,593,018
|
)
|
|
|
(7,110,276
|
)
|
|
|
(10,761,349
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of warrant
liability
|
|
|
1,285,485
|
|
|
|
(4,955,110
|
)
|
|
|
(1,201,870
|
)
|
|
|
3,436,195
|
|
Other income
|
|
|
390,599
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Interest income (expense), net
|
|
|
(2,629
|
)
|
|
|
1,112
|
|
|
|
(8,017
|
)
|
|
|
1,310
|
|
Total other income (expense)
|
|
|
1,673,455
|
|
|
|
(4,953,998
|
)
|
|
|
(1,209,887
|
)
|
|
|
3,437,505
|
|
Net loss
|
|
$
|
(1,242,208
|
)
|
|
$
|
(8,547,016
|
)
|
|
$
|
(7,831,230
|
)
|
|
$
|
(6,706,972
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net loss per share
(1)
|
|
$
|
(0.39
|
)
|
|
$
|
(3.41
|
)
|
|
$
|
(3.00
|
)
|
|
$
|
(3.25
|
)
|
Diluted net loss per share
(1)
|
|
$
|
(0.77
|
)
|
|
$
|
(3.41
|
)
|
|
$
|
(3.00
|
)
|
|
$
|
(4.30
|
)
|
Basic weighted average common shares
outstanding
(1)
|
|
|
3,152,439
|
|
|
|
2,506,604
|
|
|
|
2,606,577
|
|
|
|
2,063,842
|
|
Diluted weighted average common shares
outstanding
(1)
|
|
|
3,267,981
|
|
|
|
2,506,604
|
|
|
|
2,606,577
|
|
|
|
2,358,494
|
|
6
|
|
|
|
|
|
|
Pro Forma,
As Adjusted
(1)
|
Balance Sheet Data:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
3,183,289
|
|
|
Total assets
|
|
$
|
5,416,047
|
|
|
Total liabilities
|
|
$
|
5,382,161
|
|
|
Total shareholders’ equity
|
|
$
|
33,886
|
|
|
7
RISK FACTORS
An investment in our
securities involves a high degree of risk. You should carefully
consider the following information about these risks, together with
the other information about these risks contained in this
prospectus, as well as the other information contained in this
prospectus generally, before deciding to buy our securities. Any of
the risks we describe below could adversely affect our business,
financial condition, operating results or prospects. The market
prices for our securities could decline if one or more of these
risks and uncertainties develop into actual events and you could
lose all or part of your investment. Additional risks and
uncertainties that we do not yet know of, or that we currently
think are immaterial, may also impair our business operations. You
should also refer to the other information contained in this
prospectus, including our financial statements and the related
notes.
Risks Related to our Business
We have had significant losses and anticipate future losses; if
additional funding cannot be obtained, we may reduce or discontinue
our product development and commercialization efforts.
We have experienced significant losses since inception and, at June
30, 2016, had an accumulated deficit of approximately $148.1
million. We expect to incur additional operating losses in the
future and expect our cumulative losses to increase. As of June 30,
2016, we had approximately $3.2 million in cash available. Based on
our projected budgetary needs, funding from existing contracts and
grants over the next two years and sales to the purchasers under
our existing equity lines, we expect to be able to maintain the
current level of our operations for at least the next 12
months.
We have sufficient funds through our existing biodefense grant
facilities from the NIAID, a division of the National Institutes of
Health (the “NIH”), and BARDA to finance our biodefense
projects for the next six years. In September 2014, we entered into
a contract with the NIH for the development of RiVax
TM
to protect against exposure to ricin toxin that would provide up to
$24.7 million of funding in the aggregate if options to extend the
contract are exercised by the NIH. In September 2013, we entered
into contracts with the NIH and BARDA for the development of
OrbeShield
®
that would provide up to $32.7 million of funding in the aggregate
if options to extend the contracts are exercised by BARDA and the
NIH. In September 2009, we received a NIAID grant for approximately
$9.4 million for the development of our biodefense programs. In
July 2012, we received an additional Small Business Innovation and
Research (“SBIR”) grant from NIAID for $600,000 and in
February 2014, we were awarded a one-year NIAID SBIR grant award of
approximately $300,000 to further evaluate SGX943 as a treatment
for melioidosis. Our biodefense grants have an overhead component
that allows us an agency-approved percentage over our incurred
costs. We estimate that the overhead component associated with our
existing contracts and grants will fund some fixed costs for direct
employees working on these contracts and grants as well as other
administrative costs. As of June 30, 2016, we had approximately
$37.1 million in awarded contract funding, assuming all options are
exercised.
Our product candidates are positioned for or are currently in
clinical trials, and we have not yet generated any significant
revenues from sales or licensing of these product candidates. From
inception through June 30, 2016, we have expended approximately
$68.5 million developing our current product candidates for
pre-clinical research and development and clinical trials, and we
currently expect to spend at least $13 million over the next 12
months in connection with the development of our therapeutic and
vaccine products, licenses, employment agreements, and consulting
agreements of which approximately $7.6 million is expected to be
reimbursed through our existing government contracts and
grants.
We have no control over the resources and funding NIH, BARDA and
NIAID may devote to our programs, which may be subject to periodic
renewal and which generally may be terminated by the government at
any time for convenience. Any significant reductions in the funding
of U.S. government agencies or in the funding areas targeted by our
business could materially and adversely affect our biodefense
program and our results of operations and financial condition. If
we fail to satisfy our obligations under the government contracts,
the applicable Federal Acquisition Regulations allow the government
to terminate the agreement in whole or in part, and we may be
required to perform corrective actions, including but not limited
to delivering to the government any incomplete work. If NIH, BARDA
or NIAID do not exercise future funding options under the contracts
or grants, terminate the funding or fail to perform their
responsibilities under the agreements or grants, it could
materially impact our biodefense program and our financial
results.
8
Unless and until we are able to generate sales or licensing revenue
from one of our product candidates, we will require additional
funding to meet these commitments, sustain our research and
development efforts, provide for future clinical trials, and
continue our operations. There can be no assurance we can raise
such funds. If additional funds are raised through the issuance of
equity securities, stockholders may experience dilution of their
ownership interests, and the newly issued securities may have
rights superior to those of the common stock. If additional funds
are raised by the issuance of debt, we may be subject to
limitations on our operations. If we cannot raise such additional
funds, we may have to delay or stop some or all of our drug
development programs.
If we are unable to develop our product candidates, our ability to
generate revenues and viability as a company will be significantly
impaired.
In order to generate revenues and profits, our organization must,
along with corporate partners and collaborators, positively
research, develop and commercialize our technologies or product
candidates. Our current product candidates are in various stages of
early clinical and pre-clinical development and will require
significant further funding, research, development, pre-clinical
and/or clinical testing, regulatory approval and commercialization,
and are subject to the risks of failure inherent in the development
of products based on innovative or novel technologies.
Specifically, each of the following is possible with respect to any
of our product candidates:
•
we may not be able to maintain our current research and development
schedules;
•
we may be unable to secure procurement contracts on beneficial
economic terms or at all from the U
.S. g
overnment or others for our
biodefense products;
•
we may encounter problems in clinical trials; or
•
the technology or product may
be found to be ineffective or unsafe, or may fail to obtain
marketing approval.
If any of the risks set forth above occur, or if we are unable to
obtain the necessary regulatory approvals as discussed below, we
may be unable to develop our technologies and product candidates
and our business will be seriously harmed. Furthermore, for reasons
including those set forth below, we may be unable to commercialize
or receive royalties from the sale of any other technology we
develop, even if it is shown to be effective, if:
•
it is not economical or the market for the product does not develop
or diminishes;
•
we are not able to enter into arrangements or collaborations to
manufacture and/or market the product;
•
the product is not eligible for third-party reimbursement from
government or private insurers;
•
others hold proprietary rights that preclude us from
commercializing the product;
•
we are not able to manufacture the product reliably;
•
others have brought to market similar or superior products; or
•
the product has undesirable or unintended side effects that prevent
or limit its commercial use.
We expect a number of factors to cause our operating results to
fluctuate on a quarterly and annual basis, which may make it
difficult to predict our future performance.
We are a late-stage biopharmaceutical company. Our operations to
date have been primarily limited to developing our technology and
undertaking preclinical studies and clinical trials of our product
candidates in our two active business segments, BioTherapeutics and
Vaccines/BioDefense. We have not yet obtained regulatory approvals
for any of our product candidates. Consequently, any predictions
made about our future success or viability may not be as accurate
as they could be if we had commercialized products. Our financial
condition has varied significantly in the past and will continue to
fluctuate from quarter-to-quarter or year-to-year due to a variety
of factors, many of which are beyond our control. Factors relating
to our business that may contribute to these fluctuations include
other factors described elsewhere in this prospectus and also
include:
•
our ability to obtain additional funding to develop our product
candidates;
•
delays in the commencement, enrollment and timing of clinical
trials;
9
•
the success of our product candidates through all phases of
clinical development;
•
any delays in regulatory review and approval of product candidates
in clinical development;
•
our ability to obtain and maintain regulatory approval for our
product candidates in the United States and foreign
jurisdictions;
•
potential side effects of our product candidates that could delay
or prevent commercialization, limit the indications for any
approved drug, require the establishment of risk evaluation and
mitigation strategies, or cause an approved drug to be taken off
the market;
•
our dependence on third-party
contract manufacturing organizations to supply or manufacture our
products;
•
our dependence on contract research organizations to conduct our
clinical trials;
•
our ability to establish or maintain collaborations, licensing or
other arrangements;
•
market acceptance of our product candidates;
•
our ability to establish and maintain an effective sales and
marketing infrastructure, either through the creation of a
commercial infrastructure or through strategic collaborations;
•
competition from existing products or new products that may
emerge;
•
the ability of patients or healthcare providers to obtain coverage
of or sufficient reimbursement for our products;
•
our ability to discover and develop additional product
candidates;
•
our ability and our licensors’ abilities to successfully
obtain, maintain, defend and enforce intellectual property rights
important to our business;
•
our ability to attract and retain key personnel to manage our
business effectively;
•
our ability to build our finance infrastructure and improve our
accounting systems and controls;
•
potential product liability claims;
•
potential liabilities associated with hazardous materials; and
•
our ability to obtain and maintain adequate insurance policies.
Accordingly, the results of any quarterly or annual periods should
not be relied upon as indications of future operating
performance.
We have no approved products on the market and therefore do not
expect to generate any revenues from product sales in the
foreseeable future, if at all.
To date, we have no approved product on the market and have not
generated any significant product revenues. We have funded our
operations primarily from sales of our securities and from
government grants. We have not received, and do not expect to
receive for at least the next several years, if at all, any
revenues from the commercialization of our product candidates. To
obtain revenues from sales of our product candidates, we must
succeed, either alone or with third parties, in developing,
obtaining regulatory approval for, manufacturing and marketing
drugs with commercial potential or successfully obtain government
procurement or stockpiling agreements. We may never succeed in
these activities, and we may not generate sufficient revenues to
continue our business operations or achieve profitability.
Our business is subject to extensive governmental regulation, which
can be costly, time consuming and subjects us to unanticipated
delays.
Our business is subject to very stringent federal, foreign, state
and local government laws and regulations, including the Federal
Food, Drug and Cosmetic Act, the Environmental Protection Act, the
Occupational Safety and Health Act, and state and local
counterparts to these acts. These laws and regulations may be
amended, additional laws and regulations may be enacted, and the
policies of the FDA and other regulatory agencies may change.
10
The regulatory process
applicable to our products requires pre-clinical and clinical
testing of any product to establish its safety and efficacy. This
testing can take many years is uncertain as to outcome, and
requires the expenditure of substantial capital and other
resources. We estimate that the clinical trials of our product
candidates that we have planned will take at least several years to
complete. Furthermore, failure can occur at any stage of the
trials, and we could encounter problems that cause us to abandon or
repeat clinical trials. Favorable results in early studies or
trials, if any, may not be repeated in later studies or trials.
Even if our clinical trials are initiated and completed as planned,
we cannot be certain that the results will support our product
candidate claims. Success in preclinical testing, Phase 1 and Phase
2 clinical trials does not ensure that later Phase 2 or Phase 3
clinical trials will be successful. In addition, we, the FDA or
other regulatory authorities may suspend clinical trials at any
time if it appears that we are exposing participants to
unacceptable health risks or the FDA or other regulatory
authorities find deficiencies in our submissions or conduct of our
trials.
We may not be able to obtain, or we may experience difficulties and
delays in obtaining, necessary domestic and foreign governmental
clearances and approvals to market a product. Also, even if
regulatory approval of a product is granted, that approval may
entail limitations on the indicated uses for which the product may
be marketed.
Following any regulatory approval, a marketed product and its
manufacturer are subject to continual regulatory review. Later
discovery of problems with a product or manufacturer may result in
restrictions on such product or manufacturer. These restrictions
may include product recalls and suspension or withdrawal of the
marketing approval for the product. Furthermore, the advertising,
promotion and export, among other things, of a product are subject
to extensive regulation by governmental authorities in the U.S. and
other countries. If we fail to comply with applicable regulatory
requirements, we may be subject to fines, suspension or withdrawal
of regulatory approvals, product recalls, seizure of products,
operating restrictions and/or criminal prosecution.
There may be unforeseen challenges in developing our biodefense
products.
For development of biodefense vaccines and therapeutics, the FDA
has instituted policies that are expected to result in accelerated
approval. This includes approval for commercial use using the
results of animal efficacy trials, rather than efficacy trials in
humans, referred to as the Animal Rule. However, we will still have
to establish that the vaccines we are developing are safe in humans
at doses that are correlated with the beneficial effect in animals.
Such clinical trials will also have to be completed in distinct
populations that are subject to the countermeasures; for instance,
the very young and the very old, and in pregnant women, if the
countermeasure is to be licensed for civilian use. Other agencies
will have an influence over the risk benefit scenarios for
deploying the countermeasures and in establishing the number of
doses utilized in the Strategic National Stockpile. We may not be
able to sufficiently demonstrate the animal correlation to the
satisfaction of the FDA, as these correlates are difficult to
establish and are often unclear. Invocation of the Animal Rule may
raise issues of confidence in the model systems even if the models
have been validated. For many of the biological threats, the animal
models are not available and we may have to develop the animal
models, a time-consuming research effort. There are few historical
precedents, or recent precedents, for the development of new
countermeasure for bioterrorism agents. Despite the Animal Rule,
the FDA may require large clinical trials to establish safety and
immunogenicity before licensure and it may require safety and
immunogenicity trials in additional populations. Approval of
biodefense products may be subject to post-marketing studies, and
could be restricted in use in only certain populations. The
government’s biodefense priorities can change, which could
adversely affect the commercial opportunity for the products we are
developing. Further, other countries have not, at this time,
established criteria for review and approval of these types of
products outside their normal review process, i.e., there is no
Animal Rule equivalent, and consequently there can be no assurance
that we will be able to make a submission for marketing approval in
foreign countries based on such animal data.
Additionally, few facilities in the United States and
internationally have the capability to test animals with anthrax or
ricin, or otherwise assist us in qualifying the requisite animal
models. We have to compete with other biodefense companies for
access to this limited pool of highly specialized resources. We
therefore may not be able to secure contracts to conduct the
testing in a predictable timeframe or at all.
We are dependent on government funding, which is inherently
uncertain, for the success of our biodefense operations.
We are subject to risks specifically associated with operating in
the biodefense industry, which is a new and unproven business area.
We do not anticipate that a significant commercial market will
develop for our biodefense products. Because we anticipate that the
principal potential purchasers of these products, as well as
potential sources of research and development funds, will be the
U.S. government and governmental agencies, the success of our
biodefense
11
division will be dependent in large part upon government spending
decisions. The funding of government programs is dependent on
budgetary limitations, congressional appropriations and
administrative allotment of funds, all of which are inherently
uncertain and may be affected by changes in U.S. government
policies resulting from various political and military
developments. Our receipt of government funding is also dependent
on our ability to adhere to the terms and provisions of the
original grant documents and other regulations. We can provide no
assurance that we will receive or continue to receive funding for
grants we have been awarded. The loss of government funds could
have a material adverse effect on our ability to progress our
biodefense business.
If the parties we depend on for supplying our drug substance raw
materials and certain manufacturing-related services do not timely
supply these products and services, it may delay or impair our
ability to develop, manufacture and market our products. We do not
have or anticipate having internal manufacturing
capabilities.
We rely on suppliers for our drug substance raw materials and third
parties for certain manufacturing-related services to produce
material that meets appropriate content, quality and stability
standards, which material will be used in clinical trials of our
products and, after approval, for commercial distribution. To
succeed, clinical trials require adequate supplies of drug
substance and drug product, which may be difficult or uneconomical
to procure or manufacture. We and our suppliers and vendors may not
be able to (i) produce our drug substance or drug product to
appropriate standards for use in clinical studies, (ii) perform
under any definitive manufacturing, supply or service agreements
with us or (iii) remain in business for a sufficient time to be
able to develop, produce, secure regulatory approval of and market
our product candidates. If we do not maintain important
manufacturing and service relationships, we may fail to find a
replacement supplier or required vendor or develop our own
manufacturing capabilities which could delay or impair our ability
to obtain regulatory approval for our products and substantially
increase our costs or deplete profit margins, if any. If we do find
replacement manufacturers and vendors, we may not be able to enter
into agreements with them on terms and conditions favorable to us
and, there could be a substantial delay before a new facility could
be qualified and registered with the FDA and foreign regulatory
authorities.
We rely on third parties for pre-clinical and clinical trials of
our product candidates and, in some cases, to maintain regulatory
files for our product candidates. If we are not able to maintain or
secure agreements with such third parties on acceptable terms, if
these third parties do not perform their services as required, or
if these third parties fail to timely transfer any regulatory
information held by them to us, we may not be able to obtain
regulatory approval for, or commercialize, our product
candidates.
We rely on academic institutions, hospitals, clinics and other
third-party collaborators for preclinical and clinical trials of
our product candidates. Although we monitor, support, and/or
oversee our pre-clinical and clinical trials, because we do not
conduct these trials ourselves, we have less control over the
timing and cost of these studies and the ability to recruit trial
subjects than if we conducted these trials wholly by ourselves. If
we are unable to maintain or enter into agreements with these third
parties on acceptable terms, or if any such engagement is
terminated, we may be unable to enroll patients on a timely basis
or otherwise conduct our trials in the manner we anticipate. In
addition, there is no guarantee that these third parties will
devote adequate time and resources to our studies or perform as
required by a contract or in accordance with regulatory
requirements, including maintenance of clinical trial information
regarding our product candidates. If these third parties fail to
meet expected deadlines, fail to timely transfer to us any
regulatory information, fail to adhere to protocols or fail to act
in accordance with regulatory requirements or our agreements with
them, or if they otherwise perform in a substandard manner or in a
way that compromises the quality or accuracy of their activities or
the data they obtain, then preclinical and/or clinical trials of
our product candidates may be extended, delayed or terminated, or
our data may be rejected by the FDA or regulatory agencies.
The manufacturing of our products is a highly exacting process, and
if we or one of our materials suppliers encounter problems
manufacturing our products, our business could suffer.
The FDA and foreign regulators require manufacturers to register
manufacturing facilities. The FDA and foreign regulators also
inspect these facilities to confirm compliance with current Good
Manufacturing Practice (“cGMP”) or similar requirements
that the FDA or foreign regulators establish. We, or our materials
suppliers, may face manufacturing or quality control problems
causing product production and shipment delays or a situation where
we or the supplier may not be able to maintain compliance with the
FDA’s cGMP requirements, or those of foreign regulators,
necessary to continue manufacturing our drug substance. Any failure
to comply with cGMP requirements or other FDA or foreign regulatory
requirements could adversely affect our clinical research
activities and our ability to market and develop our products.
12
We may use our financial and human resources to pursue a particular
research program or product candidate and fail to capitalize on
programs or product candidates that may be more profitable or for
which there is a greater likelihood of success.
Because we have limited financial and human resources, we are
currently focusing on the regulatory approval of certain product
candidates. As a result, we may forego or delay pursuit of
opportunities with other product candidates or for other
indications that later prove to have greater commercial potential.
Our resource allocation decisions may cause us to fail to
capitalize on viable commercial products or profitable market
opportunities. Our spending on existing and future product
candidates for specific indications may not yield any commercially
viable products. If we do not accurately evaluate the commercial
potential or target market for a particular product candidate, we
may relinquish valuable rights to that product candidate through
strategic alliance, licensing or other royalty arrangements in
cases in which it would have been more advantageous for us to
retain sole development and commercialization rights to such
product candidate, or we may allocate internal resources to a
product candidate in an area in which it would have been more
advantageous to enter into a partnering arrangement.
Even if approved, our products will be subject to extensive
post-approval regulation.
Once a product is approved, numerous post-approval requirements
apply. Among other things, the holder of an approved New Drug
Application (“NDA”) is subject to periodic and other
FDA monitoring and reporting obligations, including obligations to
monitor and report adverse events and instances of the failure of a
product to meet the specifications in the NDA. Application holders
must submit new or supplemental applications and obtain FDA
approval for certain changes to the approved product, product
labeling, or manufacturing process. Application holders must also
submit advertising and other promotional material to the FDA and
report on ongoing clinical trials.
Depending on the circumstances, failure to meet these post-approval
requirements can result in criminal prosecution, fines,
injunctions, recall or seizure of products, total or partial
suspension of production, denial or withdrawal of pre-marketing
product approvals, or refusal to allow us to enter into supply
contracts, including government contracts. In addition, even if we
comply with FDA and other requirements, new information regarding
the safety or effectiveness of a product could lead the FDA to
modify or withdraw product approval.
Even if we obtain regulatory approval to market our product
candidates, our product candidates may not be accepted by the
market.
Even if the FDA approves one or more of our product candidates,
physicians and patients may not accept it or use it. Even if
physicians and patients would like to use our products, our
products may not gain market acceptance among healthcare payors
such as managed care formularies, insurance companies or government
programs such as Medicare or Medicaid. Acceptance and use of our
products will depend upon a number of factors including:
perceptions by members of the health care community, including
physicians, about the safety and effectiveness of our drug or
device product; cost-effectiveness of our product relative to
competing products; availability of reimbursement for our product
from government or other healthcare payers; and effectiveness of
marketing and distribution efforts by us and our licensees and
distributors, if any.
The degree of market acceptance of any product that we develop will
depend on a number of factors, including:
•
cost-effectiveness;
•
the safety and effectiveness of our products, including any
significant potential side effects, as compared to alternative
products or treatment methods;
•
the timing of market entry as compared to competitive products;
•
the rate of adoption of our products by doctors and nurses;
•
product labeling or product insert required by the FDA for each of
our products;
•
reimbursement policies of government and third-party payors;
•
effectiveness of our sales, marketing and distribution capabilities
and the effectiveness of such capabilities of our collaborative
partners, if any; and
•
unfavorable publicity concerning our products or any similar
products.
13
Our product candidates, if successfully developed, will compete
with a number of products manufactured and marketed by major
pharmaceutical companies, biotechnology companies and manufacturers
of generic drugs. Our products may also compete with new products
currently under development by others. Physicians, patients,
third-party payors and the medical community may not accept and
utilize any of our product candidates. If our products do not
achieve market acceptance, we will not be able to generate
significant revenues or become profitable.
Because we expect sales of our current product candidates, if
approved, to generate substantially all of our product revenues for
the foreseeable future, the failure of these products to find
market acceptance would harm our business and could require us to
seek additional financing.
We do not have extensive sales and marketing experience and our
lack of experience may restrict our success in commercializing some
of our product candidates.
We do not have extensive experience in marketing or selling
pharmaceutical products whether in the U.S. or internationally. To
obtain the expertise necessary to successfully market and sell any
of our products, the development of our own commercial
infrastructure and/or collaborative commercial arrangements and
partnerships will be required. Our ability to make that investment
and also execute our current operating plan is dependent on
numerous factors, including, the performance of third party
collaborators with whom we may contract.
Our products, if approved, may not be commercially viable due to
change in health care practice and third party reimbursement
limitations.
Recent initiatives to reduce the federal deficit and to change
health care delivery are increasing cost-containment efforts. We
anticipate that Congress, state legislatures and the private sector
will continue to review and assess alternative benefits, controls
on health care spending through limitations on the growth of
private health insurance premiums and Medicare and Medicaid
spending, price controls on pharmaceuticals, and other fundamental
changes to the health care delivery system. Any changes of this
type could negatively impact the commercial viability of our
products, if approved. Our ability to successfully commercialize
our product candidates, if they are approved, will depend in part
on the extent to which appropriate reimbursement codes and
authorized cost reimbursement levels of these products and related
treatment are obtained from governmental authorities, private
health insurers and other organizations, such as health maintenance
organizations. In the absence of national Medicare coverage
determination, local contractors that administer the Medicare
program may make their own coverage decisions. Any of our product
candidates, if approved and when commercially available, may not be
included within the then current Medicare coverage determination or
the coverage determination of state Medicaid programs, private
insurance companies or other health care providers. In addition,
third-party payers are increasingly challenging the necessity and
prices charged for medical products, treatments and services.
Our product candidates may cause serious adverse events or
undesirable side effects which may delay or prevent marketing
approval, or, if approval is received, require them to be taken off
the market, require them to include safety warnings or otherwise
limit their sales.
Serious adverse events or undesirable side effects from any of our
product candidates could arise either during clinical development
or, if approved, after the approved product has been marketed. The
results of future clinical trials may show that our product
candidates cause serious adverse events or undesirable side
effects, which could interrupt, delay or halt clinical trials,
resulting in delay of, or failure to obtain, marketing approval
from the FDA and other regulatory authorities.
If any of our product candidates cause serious adverse events or
undesirable side effects:
•
regulatory authorities may impose a clinical hold which could
result in substantial delays and adversely impact our ability to
continue development of the product;
•
regulatory authorities may require the addition of labeling
statements, specific warnings, a contraindication or field alerts
to physicians and pharmacies;
•
we may be required to change the way the product is administered,
conduct additional clinical trials or change the labeling of the
product;
14
•
we may be required to implement a risk minimization action plan,
which could result in substantial cost increases and have a
negative impact on our ability to commercialize the product;
•
we may be required to limit the patients who can receive the
product;
•
we may be subject to limitations on how we promote the product;
•
sales of the product may decrease significantly;
•
regulatory authorities may require us to take our approved product
off the market;
•
we may be subject to litigation or product liability claims;
and
•
our reputation may suffer.
Any of these events could prevent us from achieving or maintaining
market acceptance of the affected product or could substantially
increase commercialization costs and expenses, which in turn could
delay or prevent us from generating significant revenues from the
sale of our products.
If we fail to obtain or maintain orphan drug exclusivity for our
product candidates, our competitors may sell products to treat the
same conditions and our revenue will be reduced.
Under the Orphan Drug Act, the FDA may designate a product as an
orphan drug if it is intended to treat a rare disease or condition,
defined as a patient population of fewer than 200,000 in the United
States, or a patient population greater than 200,000 in the United
States where there is no reasonable expectation that the cost of
developing the drug will be recovered from sales in the United
States. In the European Union, the European Medicines
Agency’s Committee for Orphan Medicinal Products grants
orphan drug designation to promote the development of products that
are intended for the diagnosis, prevention, or treatment of a
life-threatening or chronically debilitating condition affecting
not more than five in 10,000 persons in the European Union.
Additionally, designation is granted for products intended for the
diagnosis, prevention, or treatment of a life-threatening,
seriously debilitating or serious and chronic condition when,
without incentives, it is unlikely that sales of the drug in the
European Union would be sufficient to justify the necessary
investment in developing the drug or biological product or where
there is no satisfactory method of diagnosis, prevention, or
treatment, or, if such a method exists, the medicine must be of
significant benefit to those affected by the condition.
In the United States, orphan drug designation entitles a party to
financial incentives such as opportunities for grant funding
towards clinical trial costs, tax advantages, and user-fee waivers.
In addition, if a product receives the first FDA approval for the
indication for which it has orphan designation, the product is
entitled to orphan drug exclusivity, which means the FDA may not
approve any other application to market the same drug for the same
indication for a period of seven years, except in limited
circumstances, such as a showing of clinical superiority over the
product with orphan exclusivity or where the manufacturer is unable
to assure sufficient product quantity. In the European Union,
orphan drug designation entitles a party to financial incentives
such as reduction of fees or fee waivers and ten years of market
exclusivity following drug or biological product approval. This
period may be reduced to six years if the orphan drug designation
criteria are no longer met, including where it is shown that the
product is sufficiently profitable not to justify maintenance of
market exclusivity.
Even though we have orphan drug designation for SGX301 in the
United States and Europe, and SGX203, RiVax™ and
OrbeShield
®
in the United States, we may not be the first to obtain marketing
approval for any particular orphan indication due to the
uncertainties associated with developing drugs or biologic
products. Further, even if we obtain orphan drug exclusivity for a
product, that exclusivity may not effectively protect the product
from competition because different drugs with different active
moieties can be approved for the same condition. Absent patent or
other intellectual property protection, even after an orphan drug
is approved, the FDA or European Medicines Agency may subsequently
approve the same drug with the same active moiety for the same
condition if the FDA or European Medicines Agency concludes that
the later drug is safer, more effective, or makes a major
contribution to patient care.
Federal and/or state health care reform initiatives could
negatively affect our business.
The availability of reimbursement by governmental and other
third-party payers affects the market for any pharmaceutical
product. These third-party payers continually attempt to contain or
reduce the costs of healthcare. There
15
have been a number of legislative and regulatory proposals to
change the healthcare system and further proposals are likely.
Medicare’s policies may decrease the market for our products.
Significant uncertainty exists with respect to the reimbursement
status of newly approved healthcare products.
In addition, third-party payers are increasingly challenging the
price and cost-effectiveness of medical products and services. Once
approved, we might not be able to sell our products profitably or
recoup the value of our investment in product development if
reimbursement is unavailable or limited in scope, particularly for
product candidates addressing small patient populations. On July
15, 2008, the Medicare Improvements for Patients and Providers Act
of 2008 became law with a number of Medicare and Medicaid reforms
to establish a bundled Medicare payment rate that includes services
and drug/labs that were separately billed at that time. Bundling
initiatives that have been implemented in other healthcare settings
have occasionally resulted in lower utilization of services that
had not previously been a part of the bundled payment.
In addition, in some foreign countries, the proposed pricing for a
drug must be approved before it may be lawfully marketed. The
requirements governing drug pricing vary widely from country to
country. We expect that there will continue to be a number of U.S.
federal and state proposals to implement governmental pricing
controls. While we cannot predict whether such legislative or
regulatory proposals will be adopted, the adoption of such
proposals could have a material adverse effect on our business,
financial condition and profitability.
We may not be able to retain rights licensed to us by third parties
to commercialize key products or to develop the third party
relationships we need to develop, manufacture and market our
products.
We currently rely on license agreements from New York University,
Yeda Research and Development Company Ltd., the University of Texas
Southwestern Medical Center, the University of British Columbia,
Harvard University, the University of Colorado, and George B.
McDonald, MD for the rights to commercialize key product
candidates. Our existing license agreements impose, and we expect
that future license agreements will impose, various diligence,
milestone payment, royalty, and other obligations on us. If we fail
to comply with our obligations under these agreements, or we are
subject to a bankruptcy, we may be required to make certain
payments to the licensor, we may lose the exclusivity of our
license, or the licensor may have the right to terminate the
license, in which event we would not be able to develop or market
products covered by the license. Additionally, the milestone and
other payments associated with these licenses will make it less
profitable for us to develop our drug candidates. See
“Business — Patents and Other Proprietary Rights”
for a description of our license agreements.
Licensing of intellectual property is of critical importance to our
business and involves complex legal, business, and scientific
issues. Disputes may arise regarding intellectual property subject
to a licensing agreement, including but not limited to:
•
the scope of rights granted under the license agreement and other
interpretation-related issues;
•
the extent to which our technology and processes infringe on
intellectual property of the licensor that is not subject to the
licensing agreement;
•
the sublicensing of patent and other rights;
•
our diligence obligations under the license agreement and what
activities satisfy those diligence obligations;
•
the ownership of inventions and know-how resulting from the joint
creation or use of intellectual property by our licensors and us
and our collaborators; and
•
the priority of invention of patented technology.
If disputes over intellectual property and other rights that we
have licensed prevent or impair our ability to maintain our current
licensing arrangements on acceptable terms, we may be unable to
successfully develop and commercialize the affected product
candidates.
Additionally, the research resulting in certain of our licensed
patent rights and technology was funded by the U.S. government. As
a result, the government may have certain rights, or march-in
rights, to such patent rights and technology. When new technologies
are developed with government funding, the government generally
obtains certain rights in any resulting patents, including a
non-exclusive license authorizing the government to use the
invention for non-commercial purposes. The government can exercise
its march-in rights if it determines that action is necessary
16
because we fail to achieve practical application of the
government-funded technology, because action is necessary to
alleviate health or safety needs, to meet requirements of federal
regulations or to give preference to U.S. industry. In addition,
our rights in such inventions may be subject to certain
requirements to manufacture products embodying such inventions in
the United States. Any exercise by the government of such rights
could harm our competitive position, business, financial condition,
results of operations and prospects.
Furthermore, we currently have very limited product development
capabilities and no manufacturing, marketing or sales capabilities.
For us to research, develop and test our product candidates, we
need to contract or partner with outside researchers, in most cases
with or through those parties that did the original research and
from whom we have licensed the technologies. If products are
successfully developed and approved for commercialization, then we
will need to enter into additional collaboration and other
agreements with third parties to manufacture and market our
products. We may not be able to induce the third parties to enter
into these agreements, and, even if we are able to do so, the terms
of these agreements may not be favorable to us. Our inability to
enter into these agreements could delay or preclude the
development, manufacture and/or marketing of some of our product
candidates or could significantly increase the costs of doing so.
In the future, we may grant to our development partners rights to
license and commercialize pharmaceutical and related products
developed under the agreements with them, and these rights may
limit our flexibility in considering alternatives for the
commercialization of these products. Furthermore, third-party
manufacturers or suppliers may not be able to meet our needs with
respect to timing, quantity and quality for the products.
Additionally, if we do not enter into relationships with additional
third parties for the marketing of our products, if and when they
are approved and ready for commercialization, we would have to
build our own sales force or enter into commercialization
agreements with other companies. Development of an effective sales
force in any part of the world would require significant financial
resources, time and expertise. We may not be able to obtain the
financing necessary to establish a sales force in a timely or cost
effective manner, if at all, and any sales force we are able to
establish may not be capable of generating demand for our product
candidates, if they are approved.
We may suffer product and other liability claims; we maintain only
limited product liability insurance, which may not be
sufficient.
The clinical testing, manufacture and sale of our products involves
an inherent risk that human subjects in clinical testing or
consumers of our products may suffer serious bodily injury or death
due to side effects, allergic reactions or other unintended
negative reactions to our products. As a result, product and other
liability claims may be brought against us. We currently have
clinical trial and product liability insurance with limits of
liability of $10 million, which may not be sufficient to cover our
potential liabilities. Because liability insurance is expensive and
difficult to obtain, we may not be able to maintain existing
insurance or obtain additional liability insurance on acceptable
terms or with adequate coverage against potential liabilities.
Furthermore, if any claims are brought against us, even if we are
fully covered by insurance, we may suffer harm such as adverse
publicity.
We may use hazardous chemicals in our business. Potential claims
relating to improper handling, storage or disposal of these
chemicals could affect us and be time consuming and
costly.
Our research and development processes and/or those of our third
party contractors involve the controlled use of hazardous materials
and chemicals. These hazardous chemicals are reagents and solvents
typically found in a chemistry laboratory. Our operations also may
produce hazardous waste products. Federal, state and local laws and
regulations govern the use, manufacture, storage, handling and
disposal of hazardous materials. While we attempt to comply with
all environmental laws and regulations, including those relating to
the outsourcing of the disposal of all hazardous chemicals and
waste products, we cannot eliminate the risk of contamination from
or discharge of hazardous materials and any resultant injury. In
the event of such an accident, we could be held liable for any
resulting damages and any liability could materially adversely
affect our business, financial condition and results of
operations.
Compliance with environmental laws and regulations may be
expensive. Current or future environmental regulations may impair
our research, development or production efforts. We might have to
pay civil damages in the event of an improper or unauthorized
release of, or exposure of individuals to, hazardous materials. We
are not insured against these environmental risks.
We may agree to indemnify our collaborators in some circumstances
against damages and other liabilities arising out of development
activities or products produced in connection with these
collaborations.
17
In addition, the federal, state and local laws and regulations
governing the use, manufacture, storage, handling and disposal of
hazardous or radioactive materials and waste products may require
us to incur substantial compliance costs that could materially
adversely affect our business, financial condition and results of
operations.
We may not be able to compete with our larger and better financed
competitors in the biotechnology industry.
The biotechnology industry is intensely competitive, subject to
rapid change and sensitive to new product introductions or
enhancements. Most of our existing competitors have greater
financial resources, larger technical staffs, and larger research
budgets than we have, as well as greater experience in developing
products and conducting clinical trials. Our competition is
particularly intense in the gastroenterology and transplant areas
and is also intense in the therapeutic area of inflammatory bowel
diseases. We face intense competition in the biodefense area from
various public and private companies and universities as well as
governmental agencies, such as the U.S. Army, which may have their
own proprietary technologies that may directly compete with our
technologies. In addition, there may be other companies that are
currently developing competitive technologies and products or that
may in the future develop technologies and products that are
comparable or superior to our technologies and products. We may not
be able to compete with our existing and future competitors, which
could lead to the failure of our business.
Additionally, if a competitor receives FDA approval before we do
for a drug that is similar to one of our product candidates, FDA
approval for our product candidate may be precluded or delayed due
to periods of non-patent exclusivity and/or the listing with the
FDA by the competitor of patents covering its newly-approved drug
product. Periods of non-patent exclusivity for new versions of
existing drugs such as our current product candidates can extend up
to three and one-half years. See “Business — The Drug
Approval Process.”
These competitive factors could require us to conduct substantial
new research and development activities to establish new product
targets, which would be costly and time consuming. These activities
would adversely affect our ability to commercialize products and
achieve revenue and profits.
Competition and technological change may make our product
candidates and technologies less attractive or obsolete.
We compete with established pharmaceutical and biotechnology
companies that are pursuing other forms of treatment for the same
indications we are pursuing and that have greater financial and
other resources. Other companies may succeed in developing products
earlier than us, obtaining FDA approval for products more rapidly,
or developing products that are more effective than our product
candidates. Research and development by others may render our
technology or product candidates obsolete or noncompetitive, or
result in treatments or cures superior to any therapy we develop.
We face competition from companies that internally develop
competing technology or acquire competing technology from
universities and other research institutions. As these companies
develop their technologies, they may develop competitive positions
that may prevent, make futile, or limit our product
commercialization efforts, which would result in a decrease in the
revenue we would be able to derive from the sale of any
products.
There can be no assurance that any of our product candidates will
be accepted by the marketplace as readily as these or other
competing treatments. Furthermore, if our competitors’
products are approved before ours, it could be more difficult for
us to obtain approval from the FDA. Even if our products are
successfully developed and approved for use by all governing
regulatory bodies, there can be no assurance that physicians and
patients will accept our product(s) as a treatment of choice.
Furthermore, the pharmaceutical research industry is diverse,
complex, and rapidly changing. By its nature, the business risks
associated therewith are numerous and significant. The effects of
competition, intellectual property disputes, market acceptance, and
FDA regulations preclude us from forecasting revenues or income
with certainty or even confidence.
Our business could be harmed if we fail to retain our current
personnel or if they are unable to effectively run our
business.
We currently have 19 employees and we depend upon these employees,
in particular Dr. Christopher Schaber, our President and Chief
Executive Officer, to manage the day-to-day activities of our
business. Because we have such limited personnel, the loss of any
of them or our inability to attract and retain other qualified
employees in a timely
18
manner would likely have a negative impact on our operations. We
may be unable to effectively manage and operate our business, and
our business may suffer, if we lose the services of our
employees.
Instability and volatility in the financial markets could have a
negative impact on our business, financial condition, results of
operations, and cash flows.
During recent years, there has been substantial volatility in
financial markets due at least in part to the uncertainty with
regard to the global economic environment. In addition, there has
been substantial uncertainty in the capital markets and access to
additional financing is uncertain. Moreover, customer spending
habits may be adversely affected by current and future economic
conditions. These conditions could have an adverse effect on our
industry and business, including our financial condition, results
of operations, and cash flows.
To the extent that we do not generate sufficient cash from
operations, we may need to issue stock or incur indebtedness to
finance our plans for growth. Recent turmoil in the credit markets
and the potential impact on the liquidity of major financial
institutions may have an adverse effect on our ability to fund our
business strategy through borrowings, under either existing or
newly created instruments in the public or private markets on terms
we believe to be reasonable, if at all.
We may not be able to utilize all of our net operating loss
carryforwards.
The State of New Jersey’s Technology Business Tax Certificate
Program allows certain high technology and biotechnology companies
to sell unused net operating loss (“NOL”) carryforwards
to other New Jersey-based corporate taxpayers. In accordance with
this program, during the year ended December 31, 2015, we sold New
Jersey NOL carryforwards, resulting in the recognition of $488,933
of income tax benefit. If there is an unfavorable change in the
State of New Jersey’s Technology Business Tax Certificate
Program (whether as a result of a change in law, policy or
otherwise) that terminates the program or eliminates or reduces our
ability to use or sell our NOL carryforwards, our cash taxes may
increase which may have an adverse effect on our financial
condition.
Risks Related to our Intellectual Property
We may be unable to commercialize our products if we are unable to
protect our proprietary rights, and we may be liable for
significant costs and damages if we face a claim of intellectual
property infringement by a third party.
Our near and long term prospects depend in part on our ability to
obtain and maintain patents, protect trade secrets and operate
without infringing upon the proprietary rights of others. In the
absence of patent and trade secret protection, competitors may
adversely affect our business by independently developing and
marketing substantially equivalent or superior products and
technology, possibly at lower prices. We could also incur
substantial costs in litigation and suffer diversion of attention
of technical and management personnel if we are required to defend
ourselves in intellectual property infringement suits brought by
third parties, with or without merit, or if we are required to
initiate litigation against others to protect or assert our
intellectual property rights. Moreover, any such litigation may not
be resolved in our favor.
Although we and our licensors have filed various patent
applications covering the uses of our product candidates, patents
may not be issued from the patent applications already filed or
from applications that we might file in the future. Moreover, the
patent position of companies in the pharmaceutical industry
generally involves complex legal and factual questions, and
recently has been the subject of much litigation. Any patents we
own or license, now or in the future, may be challenged,
invalidated or circumvented. To date, no consistent policy has been
developed in the U.S. Patent and Trademark Office (the
“PTO”) regarding the breadth of claims allowed in
biotechnology patents.
In addition, because patent applications in the U.S. are maintained
in secrecy until patent applications publish or patents issue, and
because publication of discoveries in the scientific or patent
literature often lags behind actual discoveries, we cannot be
certain that we and our licensors are the first creators of
inventions covered by any licensed patent applications or patents
or that we or they are the first to file. The PTO may commence
interference proceedings involving patents or patent applications,
in which the question of first inventorship is contested.
Accordingly, the patents owned or licensed to us may not be valid
or may not afford us protection against competitors with similar
technology, and the patent applications licensed to us may not
result in the issuance of patents.
19
It is also possible that our owned and licensed technologies may
infringe on patents or other rights owned by others, and licenses
to which may not be available to us. We may be unable to obtain a
license under such patent on terms favorable to us, if at all. We
may have to alter our products or processes, pay licensing fees or
cease activities altogether because of patent rights of third
parties.
In addition to the products for which we have patents or have filed
patent applications, we rely upon unpatented proprietary technology
and may not be able to meaningfully protect our rights with regard
to that unpatented proprietary technology. Furthermore, to the
extent that consultants, key employees or other third parties apply
technological information developed by them or by others to any of
our proposed projects, disputes may arise as to the proprietary
rights to this information, which may not be resolved in our
favor.
We may be involved in lawsuits to protect or enforce our patents,
which could be expensive and time consuming.
The pharmaceutical industry has been characterized by extensive
litigation regarding patents and other intellectual property
rights, and companies have employed intellectual property
litigation to gain a competitive advantage. We may become subject
to infringement claims or litigation arising out of patents and
pending applications of our competitors, or additional interference
proceedings declared by the PTO to determine the priority of
inventions. The defense and prosecution of intellectual property
suits, PTO proceedings, and related legal and administrative
proceedings are costly and time-consuming to pursue, and their
outcome is uncertain. Litigation may be necessary to enforce our
issued patents, to protect our trade secrets and know-how, or to
determine the enforceability, scope, and validity of the
proprietary rights of others. An adverse determination in
litigation or interference proceedings to which we may become a
party could subject us to significant liabilities, require us to
obtain licenses from third parties, or restrict or prevent us from
selling our products in certain markets. Although patent and
intellectual property disputes might be settled through licensing
or similar arrangements, the costs associated with such
arrangements may be substantial and could include our paying large
fixed payments and ongoing royalties. Furthermore, the necessary
licenses may not be available on satisfactory terms or at all.
Competitors may infringe our patents, and we may file infringement
claims to counter infringement or unauthorized use. This can be
expensive, particularly for a company of our size, and
time-consuming. In addition, in an infringement proceeding, a court
may decide that a patent of ours is not valid or is unenforceable,
or may refuse to stop the other party from using the technology at
issue on the grounds that our patents do not cover its technology.
An adverse determination of any litigation or defense proceedings
could put one or more of our patents at risk of being invalidated
or interpreted narrowly.
Also, a third party may assert that our patents are invalid and/or
unenforceable. There are no unresolved communications, allegations,
complaints or threats of litigation related to the possibility that
our patents are invalid or unenforceable. Any litigation or claims
against us, whether or not merited, may result in substantial
costs, place a significant strain on our financial resources,
divert the attention of management and harm our reputation. An
adverse decision in litigation could result in inadequate
protection for our product candidates and/or reduce the value of
any license agreements we have with third parties.
Interference proceedings brought before the PTO may be necessary to
determine priority of invention with respect to our patents or
patent applications. During an interference proceeding, it may be
determined that we do not have priority of invention for one or
more aspects in our patents or patent applications and could result
in the invalidation in part or whole of a patent or could put a
patent application at risk of not issuing. Even if successful, an
interference proceeding may result in substantial costs and
distraction to our management.
Furthermore, because of the substantial amount of discovery
required in connection with intellectual property litigation or
interference proceedings, there is a risk that some of our
confidential information could be compromised by disclosure. In
addition, there could be public announcements of the results of
hearings, motions or other interim proceedings or developments. If
investors perceive these results to be negative, the price of our
common stock could be adversely affected.
If we infringe the rights of third parties we could be prevented
from selling products, forced to pay damages, and defend against
litigation.
If our products, methods, processes and other technologies infringe
the proprietary rights of other parties, we could incur substantial
costs and we may have to: obtain licenses, which may not be
available on commercially
20
reasonable terms, if at all; abandon an infringing product
candidate; redesign our products or processes to avoid
infringement; stop using the subject matter claimed in the patents
held by others; pay damages; and/or defend litigation or
administrative proceedings which may be costly whether we win or
lose, and which could result in a substantial diversion of our
financial and management resources.
Risks Related to our Securities and this Offering
The price of our common stock and warrants may be highly
volatile.
The market price of our common stock, like that of many other
research and development public pharmaceutical and biotechnology
companies, has been highly volatile and the price of our common
stock and warrants may be volatile in the future due to a wide
variety of factors, including:
•
announcements by us or others of results of pre-clinical testing
and clinical trials;
•
announcements of technological innovations, more important
bio-threats or new commercial therapeutic products by us, our
collaborative partners or our present or potential competitors;
•
our quarterly operating results and performance;
•
developments or disputes concerning patents or other proprietary
rights;
•
acquisitions;
•
litigation and government proceedings;
•
adverse legislation;
•
changes in government regulations;
•
our available working capital;
•
economic and other external factors; and
•
failure of our common stock to be listed or quoted on The NASDAQ
Stock Market, NYSE Amex Equities or other national market
system;
•
general market conditions.
Since January 1, 2015, the closing stock price (split adjusted) of
our common stock has fluctuated between a high of $29.50 per share
to a low of $4.40 per share. On October 6, 2016, the last quoted
sale price of our common stock as reported on the OTCQB was $7.50
per share. The fluctuation in the price of our common stock has
sometimes been unrelated or disproportionate to our operating
performance. In addition, potential dilutive effects of future
sales of shares of common stock by the Company, as well as
potential sale of common stock by the holders of warrants and
options, could have an adverse effect on the market price of our
shares.
A limited public trading market may cause volatility in the price
of our common stock and warrants.
Our common stock trades on the OTCQB securities market under the
symbol “SNGX.” The OTCQB is a decentralized market
regulated by the Financial Industry Regulatory Authority in which
securities are traded via an electronic quotation system that
serves more than 3,000 companies, but provides significantly less
liquidity than national market systems such as the NYSE MKT. On the
OTCQB, securities are traded by a network of brokers or dealers who
carry inventories of securities to facilitate the buy and sell
orders of investors, rather than providing the order matchmaking
service seen in specialist exchanges. OTCQB securities include
national, regional, and foreign equity issues. Companies traded on
the OTCQB must be current in their reports filed with the
Securities and Exchange Commission (the “SEC”) and
other regulatory authorities.
Since our common stock is not listed on a national exchange or
market, the trading market for our common stock may become
illiquid, and even if listed on a national exchange or market, it
may be illiquid. If the price of our common stock falls, our common
stock may become subject to the penny stock rules of the SEC, which
generally
21
are applicable to equity securities with a price of less than $5.00
per share, other than securities registered on certain national
securities exchanges provided that current price and volume
information with respect to transactions in such securities is
provided by the exchange or system. The penny stock rules require a
broker-dealer, before a transaction in a penny stock not otherwise
exempt from the rules, to deliver a standardized risk disclosure
document prepared by the SEC that provides information about penny
stocks and the nature and level of risks in the penny stock market.
The broker-dealer also must provide the customer with bid and ask
quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction and monthly
account statements showing the market value of each penny stock
held in the customer’s account. In addition, the penny stock
rules require that, before a transaction in a penny stock that is
not otherwise exempt from such rules, the broker-dealer must make a
special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser’s
written agreement to the transaction. As a result of these
requirements, our common stock could be priced at a lower price and
our stockholders could find it more difficult to sell their
shares.
Although one reason we implemented a reverse stock split was to
increase the price per share of our common stock such that it would
not be subject to the “penny stock” rules, and our
stock closed at $7.50 per share on October 6, 2016, no assurance
can be given that the per share price of our common stock will
maintain such levels such that our stock will not be subject to
these rules in the future.
The warrants are speculative in nature.
The warrants offered hereby do not confer any rights of common
stock ownership on their holders, such as voting rights or the
right to receive dividends, but rather merely represent the right
to acquire shares of common stock at a fixed price for a limited
period of time. Specifically, commencing on the date of issuance,
holders of the warrants may exercise their right to acquire the
common stock and pay an exercise price of $ per share [125% of the
public offering price of the common stock], prior to [five] years
from the date of issuance, after which date any unexercised
warrants will expire and have no further value. Moreover, following
this offering, the market value of the warrants is uncertain and
there can be no assurance that the market value of the warrants
will equal or exceed their public offering price. There can be no
assurance that the market price of the common stock will ever equal
or exceed the exercise price of the warrants, and consequently,
whether it will ever be profitable for holders of the warrants to
exercise the warrants.
The warrants may not have any value.
Each warrant will have an exercise price of $ per share [125%] of
the public offering price of the common stock and will expire on
the fifth anniversary of the original issuance date. In the event
our common stock price does not exceed the exercise price of the
warrants during the period when the warrants are exercisable, the
warrants may not have any value.
Investors will experience immediate and substantial dilution as a
result of this offering and may suffer substantial dilution related
to issued stock warrants and options.
Investors will incur immediate and substantial dilution as a result
of this offering. After giving effect to the sale by us of up to
shares of common stock and
warrants to purchase up to an aggregate of
shares of common stock offered
in this offering at a public offering price of $
per share and $
per warrant, and after
deducting the underwriters’ discount and estimated offering
expenses payable by us, investors in this offering can expect an
immediate dilution of $ per
share.
In addition, as of June 30, 2016, we had a number of agreements or
obligations that may result in dilution to investors. These
include:
•
warrants to purchase a total of approximately 492,612 shares of our
common stock at a current weighted average exercise price of
approximately $7.40; and
•
options to purchase approximately 311,651 shares of our common
stock at a current weighted average exercise price of approximately
$19.60.
22
We also have an incentive compensation plan for our management,
employees and consultants. We have granted, and expect to grant in
the future, options to purchase shares of our common stock to our
directors, employees and consultants. To the extent that warrants
or options are exercised, our stockholders will experience dilution
and our stock price may decrease.
Additionally, the sale, or even the possibility of the sale, of the
shares of common stock underlying these warrants and options could
have an adverse effect on the market price for our securities or on
our ability to obtain future financing.
Anti-takeover provisions in our stockholder rights plan and under
Delaware law could make a third party acquisition of the Company
difficult.
Our stockholder rights plan contains provisions that could make it
more difficult for a third party to acquire us, even if doing so
might be deemed beneficial by our stockholders. These provisions
could limit the price that investors might be willing to pay in the
future for shares of our common stock. We are also subject to
certain provisions of Delaware law that could delay, deter or
prevent a change in control of the Company. The rights issued
pursuant to our stockholder rights plan will become exercisable the
tenth day after a person or group announces acquisition of 15% or
more of our common stock or commences, or announces an intention to
make, a tender or exchange offer, the consummation of which would
result in ownership by the person or group of 15% or more of our
common stock. If the rights become exercisable, the holders of the
rights (other than the person acquiring 15% or more of our common
stock) will be entitled to acquire, in exchange for the
rights’ exercise price, shares of our common stock or shares
of any company in which we are merged, with a value equal to twice
the rights’ exercise price.
Our shares of common stock are thinly traded, so stockholders may
be unable to sell at or near ask prices or at all if they need to
sell shares to raise money or otherwise desire to liquidate their
shares.
Our common stock has from time to time been
“thinly-traded,” meaning that the number of persons
interested in purchasing our common stock at or near ask prices at
any given time may be relatively small or non-existent. This
situation is attributable to a number of factors, including the
fact that we are a small company that is relatively unknown to
stock analysts, stock brokers, institutional investors and others
in the investment community that generate or influence sales
volume, and that even if we came to the attention of such persons,
they tend to be risk-averse and would be reluctant to follow an
unproven company such as ours or purchase or recommend the purchase
of our shares until such time as we become more seasoned and
viable. As a consequence, there may be periods of several days or
more when trading activity in our shares is minimal or
non-existent, as compared to a seasoned issuer which has a large
and steady volume of trading activity that will generally support
continuous sales without an adverse effect on share price. We
cannot give stockholders any assurance that a broader or more
active public trading market for our common shares will develop or
be sustained, or that current trading levels will be sustained.
If the price of our common stock falls, it may be deemed to be a
“penny stock,” which may make it more difficult for
investors to sell their shares due to suitability
requirements.
Our common stock is subject to Rule 15g-1 through 15g-9 under the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”), which imposes certain sales practice requirements on
broker-dealers which sell our common stock to persons other than
established customers and “accredited investors”
(generally, individuals with a net worth in excess of $1,000,000 or
annual incomes exceeding $200,000 (or $300,000 together with their
spouses)). For transactions covered by this rule, a broker-dealer
must make a special suitability determination for the purchaser and
have received the purchaser’s written consent to the
transaction prior to the sale. This rule adversely affects the
ability of broker-dealers to sell our common stock and the ability
of our stockholders to sell their shares of common stock.
Additionally, if the price of our common stock falls, our common
stock may become subject to the SEC regulations for “penny
stock.” Penny stock includes any equity security that is not
listed on a national exchange and has a market price of less than
$5.00 per share, subject to certain exceptions. The regulations
require that prior to any non-exempt buy/sell transaction in a
penny stock, a disclosure schedule set forth by the SEC relating to
the penny stock market must be delivered to the purchaser of such
penny stock. This disclosure must include the amount of
commissions
23
payable to both the broker-dealer and the registered representative
and current price quotations for the common stock. The regulations
also require that monthly statements be sent to holders of penny
stock that disclose recent price information for the penny stock
and information of the limited market for penny stocks. These
requirements may adversely affect the market liquidity of our
common stock.
We do not currently intend to pay dividends on our common stock in
the foreseeable future, and consequently, our stockholders’
ability to achieve a return on their investment will depend on
appreciation in the price of our common stock.
We have never declared or paid cash dividends on our common stock
and do not anticipate paying any cash dividends to holders of our
common stock in the foreseeable future. Consequently, our
stockholders must rely on sales of their common stock after price
appreciation, which may never occur, as the only way to realize any
future gains on their investments. There is no guarantee that
shares of our common stock will appreciate in value or even
maintain the price at which our stockholders have purchased their
shares.
Upon dissolution of the Company, our stockholders may not recoup
all or any portion of their investment.
In the event of a liquidation, dissolution or winding-up of the
Company, whether voluntary or involuntary, the proceeds and/or
assets of the Company remaining after giving effect to such
transaction, and the payment of all of our debts and liabilities
will be distributed to the holders of common stock on a pro rata
basis. There can be no assurance that we will have available assets
to pay to the holders of common stock, or any amounts, upon such a
liquidation, dissolution or winding-up of the Company. In this
event, our stockholders could lose some or all of their
investment.
The sale or issuance of our common stock to Lincoln Park may cause
dilution and the sale of the shares of common stock acquired by
Lincoln Park, or the perception that such sales may occur, could
cause the price of our common stock to fall.
On November 18, 2013, we entered into a purchase agreement (the
“2013 Purchase Agreement”) with Lincoln Park, pursuant
to which Lincoln Park has committed to purchase up to $10.6 million
of our common stock, of which approximately $8.2 million worth of
our common stock remains issuable as of the date of this
prospectus. Concurrently with the execution of the 2013 Purchase
Agreement, we issued 9,766 shares of our common stock to Lincoln
Park as a partial fee for its commitment to purchase shares of our
common stock under the 2013 Purchase Agreement and 28,572 shares of
common stock for an aggregate price of $600,000. From November 18,
2013 through the date of this prospectus, we sold 105,000
additional shares to Lincoln Park and issued 2,210 additional
shares to Lincoln Park as additional commitment shares under the
2013 Purchase Agreement and received proceeds of $1,809,652. The
shares that may be sold pursuant to the 2013 Purchase Agreement in
the future may be sold by us to Lincoln Park at our discretion from
time to time over the remaining term of approximately one month
from the date of this prospectus, provided the registration
statement registering the resale of shares sold to Lincoln Park
under the 2013 Purchase Agreement remains effective. The purchase
price for the shares that we may sell to Lincoln Park under the
2013 Purchase Agreement will fluctuate based on the price of our
common stock. We generally have the right to control the timing and
amount of any sales of our shares to Lincoln Park, except that,
pursuant to the terms of the 2013 Purchase Agreement, we would be
unable to sell shares to Lincoln Park if and when the closing sale
price of our common stock is below $10.00 per share, subject to
adjustment as set forth in the 2013 Purchase Agreement.
On March 22, 2016, we entered into an additional purchase agreement
(the “2016 Purchase Agreement”) with Lincoln Park.
Pursuant to the 2016 Purchase Agreement, Lincoln Park has committed
to purchase up to $12 million of our common stock, of which
approximately $10.29 million worth of our common stock remains
issuable as of the date of this prospectus. Concurrently with the
execution of the 2016 Purchase Agreement, we issued 10,000 shares
of our common stock to Lincoln Park as a partial fee for its
commitment to purchase shares of our common stock under the 2016
Purchase Agreement. From March 22, 2016 through the date of this
prospectus, we sold 260,000 shares to Lincoln Park and issued 7,135
additional shares to Lincoln Park as additional commitment shares
under the 2016 Purchase Agreement and received proceeds of
$1,712,320. The shares that may be sold pursuant to the 2016
Purchase Agreement may be sold by us to Lincoln Park at our sole
discretion from time to time over the remaining term of
approximately 29 months from the date of this prospectus, provided
the registration statement registering the resale of shares sold to
Lincoln Park under the 2016 Purchase Agreement remains effective.
The purchase price for the shares that we may sell to Lincoln Park
under the 2016 Purchase Agreement will fluctuate based on the price
of our common stock. We have the right to control the timing and
amount of any sales of our shares to Lincoln Park, except that,
24
pursuant to the terms of our agreements with Lincoln Park, we would
be unable to sell shares to Lincoln Park that would cause Lincoln
Park to beneficially own more than 4.99% of our issued and
outstanding common stock.
Depending on market liquidity at the time, sales of shares under
the 2013 Purchase Agreement or the 2016 Purchase Agreement may
cause the trading price of our common stock to fall. Additionally,
further sales of our common stock, if any, to Lincoln Park under
the 2013 Purchase Agreement or the 2016 Purchase Agreement will
depend upon market conditions and other factors to be determined by
us. Lincoln Park may ultimately purchase all, some or none of the
shares of our common stock that may be sold pursuant to the 2013
Purchase Agreement or the 2016 Purchase Agreement and, after it has
acquired shares, Lincoln Park may sell all, some or none of those
shares. Therefore, sales to Lincoln Park by us could result in
substantial dilution to the interests of other holders of our
common stock. Additionally, the sale of a substantial number of
shares of our common stock to Lincoln Park, or the anticipation of
such sales, could make it more difficult for us to sell equity or
equity-related securities in the future at a time and at a price
that we might otherwise wish to effect sales.
The issuance of our common stock pursuant to the terms of the asset
purchase agreement with Hy Biopharma Inc. may cause dilution and
the issuance of such shares of common stock, or the perception that
such issuances may occur, could cause the price of our common stock
to fall.
On April 1, 2014, we entered into an option agreement pursuant to
which Hy Biopharma Inc. (“Hy Biopharma”) granted us an
option to purchase certain assets, properties and rights (the
“Hypericin Assets”) related to the development of Hy
Biopharma’s synthetic hypericin product candidate for the
treatment of CTCL, which we refer to as SGX301, from Hy Biopharma.
In exchange for the option, we paid $50,000 in cash and issued
4,307 shares of common stock in the aggregate to Hy Biopharma and
its assignees. We subsequently exercised the option, and on
September 3, 2014, we entered into an asset purchase agreement with
Hy Biopharma, pursuant to which we purchased the Hypericin Assets.
Pursuant to the purchase agreement, we paid $275,000 in cash and
issued 184,912 shares of common stock in the aggregate to Hy
Biopharma and its assignees, and the licensors of the license
agreement acquired from Hy Biopharma, and may issue up to an
aggregate of $10 million worth of our common stock (subject to a
cap equal to 19.99% of our issued and outstanding common stock) in
the aggregate upon attainment of specified milestones. The next
milestone payment will be payable if the Phase 3 clinical trial of
SGX301 is successful in demonstrating efficacy and safety in the
CTCL patient population. Also on September 3, 2014, we entered into
the Registration Rights Agreement with Hy Biopharma, pursuant to
which we have filed a registration statement with the SEC.
The number of shares that we may issue under the purchase agreement
will fluctuate based on the market price of our common stock.
Depending on market liquidity at the time, the issuance of such
shares may cause the trading price of our common stock to fall.
We may ultimately issue all, some or none of the additional shares
of our common stock that may be issued pursuant to the purchase
agreement. We are required to register any shares issued pursuant
to the purchase agreement for resale under the Securities Act.
After any such shares are registered, the holders will be able to
sell all, some or none of those shares. Therefore, issuances by us
under the purchase agreement could result in substantial dilution
to the interests of other holders of our common stock.
Additionally, the issuance of a substantial number of shares of our
common stock pursuant to the purchase agreement, or the
anticipation of such issuances, could make it more difficult for us
to sell equity or equity-related securities in the future at a time
and at a price that we might otherwise wish to effect sales.
Our management will have broad discretion over the use of the net
proceeds from this offering and we may use the net proceeds in ways
with which you disagree or which do not produce beneficial
results.
We currently intend to use the net proceeds from this offering to
fund our research and development activities and for working
capital and general corporate purposes (see “Use of
Proceeds”). We have not allocated specific amounts of the net
proceeds from this offering for any of the foregoing purposes.
Accordingly, our management will have significant discretion and
flexibility in applying the net proceeds of this offering. You will
be relying on the judgment of our management with regard to the use
of these net proceeds, and you will not have the opportunity, as
part of your investment decision, to assess whether the proceeds
are being used appropriately. It is possible that the net proceeds
will be invested in a way that does not yield a favorable, or any,
return for us or our stockholders. The failure of our management to
use such funds effectively could have a material adverse effect on
our business, financial condition, and results of operation.
25
Randall J. Kirk and Paolo Cavazza, together with their affiliates,
will collectively beneficially own approximately % of our
outstanding common stock after this offering and will continue to
have substantial control over the company.
Upon completion of this
offering, assuming shares of
common stock are sold in this offering, Randall J. Kirk and Paolo
Cavazza, together with their affiliates, will beneficially own, in
the aggregate, approximately %
of our outstanding common stock. As a result, these stockholders,
acting together, would have the ability to strongly influence the
outcome of matters submitted to our stockholders for approval,
including the election of directors and any merger, consolidation
or sale of all or substantially all of our assets. Accordingly,
this concentration of ownership might harm the market price of our
common stock by:
•
delaying, deferring or preventing a change in control;
•
impeding a merger, consolidation, takeover or other business
combination involving us; or
•
discouraging a potential acquirer from making a tender offer or
otherwise attempting to obtain control.
Risks Related to Our Reverse Stock Split
On October 7, 2016, we effected a one-for-ten reverse stock split
of our outstanding common stock. However, the reverse stock split
may not increase our stock price sufficiently and we may not be
able to list our common stock on NASDAQ, in which case this
offering may not be completed.
We expect that the reverse stock split of our outstanding common
stock will increase the market price of our common stock
sufficiently so that we will be able to meet the minimum listing
requirements of NASDAQ. However, the effect of a reverse stock
split upon the market price of our common stock cannot be predicted
with certainty, and the results of reverse stock splits by
companies in similar circumstances have been varied. It is possible
that the market price of our common stock following the reverse
stock split will not increase sufficiently for us to be in
compliance with the minimum bid price requirement, or if it does,
that such price will be sustained. If we are unable meet the
minimum listing requirements, we will be unable to list our shares
on NASDAQ, in which case this offering may not be completed.
Even if the reverse stock split achieves the requisite increase in
the market price of our common stock, we cannot assure you that we
will be able to continue to comply with the minimum listing
requirements of NASDAQ.
Even if the reverse stock split achieves the requisite increase in
the market price of our common stock to be in compliance with the
minimum listing requirements of NASDAQ, there can be no assurance
that the market price of our common stock following the reverse
stock split will remain at the level required for continuing
compliance with that requirement. It is not uncommon for the market
price of a company’s common stock to decline in the period
following a reverse stock split. If the market price of our common
stock declines following the reverse stock split, the percentage
decline may be greater than would occur in the absence of the
reverse stock split. In any event, other factors unrelated to the
number of shares of our common stock outstanding, such as negative
financial or operational results, could adversely affect the market
price of our common stock and adversely affect our ability to meet
or maintain NASDAQ’s minimum listing requirements. In
addition to specific listing and maintenance standards, NASDAQ has
broad discretionary authority over the initial and continued
listing of securities, which it could exercise with respect to the
listing of our common stock.
Even if the reverse stock split increases the market price of our
common stock, there can be no assurance that we will be able to
comply with other continued listing standards of NASDAQ.
Even if the market price of our
common stock increases sufficiently so that we comply with the
minimum initial listing requirements, we cannot assure you that we
will be able to comply with the other standards that we are
required to meet in order to maintain a listing of our common stock
on NASDAQ. Our failure to meet these requirements may result in our
common stock being delisted from NASDAQ, irrespective of our
compliance with the minimum bid price requirement.
26
The reverse stock split may decrease the liquidity of the shares of
our common stock.
The liquidity of the shares of our common stock may be affected
adversely by the reverse stock split given the reduced number of
shares that will be outstanding following the reverse stock split,
especially if the market price of our common stock does not
increase as a result of the reverse stock split. In addition, the
reverse stock split may increase the number of stockholders who own
odd lots (less than 100 shares) of our common stock, creating the
potential for such stockholders to experience an increase in the
cost of selling their shares and greater difficulty effecting such
sales.
Following the reverse stock split, the resulting market price of
our common stock may not attract new investors, including
institutional investors, and may not satisfy the investing
requirements of those investors. Consequently, the trading
liquidity of our common stock may not improve.
Although we believe that a higher market price of our common stock
may help generate greater or broader investor interest, there can
be no assurance that the reverse stock split will result in a share
price that will attract new investors, including institutional
investors. In addition, there can be no assurance that the market
price of our common stock will satisfy the investing requirements
of those investors. As a result, the trading liquidity of our
common stock may not necessarily improve.
27
CAUTIONARY NOTE
REGARDING FORWARD-LOOKING STATEMENTS
AND INDUSTRY DATA AND MARKET INFORMATION
The information contained in this prospectus includes
forward-looking statements. These forward-looking statements are
often identified by words such as “may,”
“expect,” “intend,”
“anticipate,” “believe,”
“estimate,” “continue,” “plan,”
“potential” and similar expressions. These statements
involve estimates, assumptions and uncertainties that could cause
actual results to differ materially from those expressed for the
reasons described in this prospectus. You should not place undue
reliance on these forward-looking statements.
You should be aware that our actual results could differ materially
from those contained in the forward-looking statements due to a
number of factors, including:
•
our dependence on the expertise, effort, priorities and contractual
obligations of third parties in the clinical trials, manufacturing,
marketing, sales and distribution of our products;
•
the domestic and international regulatory process and related laws,
rules and regulations governing our technologies and our proposed
products, including: (i) the timing, status and results of our or
our commercial partners’ filings with the FDA and its foreign
equivalents, (ii) the timing, status and results of non-clinical
work and clinical studies, including regulatory review thereof and
(iii) the heavily regulated industry in which we operate our
business generally;
•
uncertainty as to whether our product candidates will be safe and
effective to support regulatory approvals;
•
significant uncertainty inherent in developing vaccines against
bioterror threats, and manufacturing and conducting preclinical and
clinical trials of vaccines;
•
our ability to obtain future financing or funds when needed, either
through the raising of capital, the incurrence of convertible or
other indebtedness or through strategic financing or
commercialization partnerships;
•
that product development and commercialization efforts will be
reduced or discontinued due to difficulties or delays in clinical
trials or a lack of progress or positive results from research and
development efforts;
•
our ability to obtain further grants and awards from the U.S.
Government and other countries, and maintenance of our existing
grants;
•
our ability to enter into any biodefense procurement contracts with
the U.S. Government or other countries;
•
our ability to patent, register and protect our technology from
challenge and our products from competition;
•
maintenance or expansion of our license agreements with our current
licensors;
•
the protection and control afforded by our patents or other
intellectual property, and any interest in patents or other
intellectual property that we license, or our or our
partners’ ability to enforce our rights under such owned or
licensed patents or other intellectual property;
•
changes in healthcare regulation;
•
changes in the needs of biodefense procurement agencies;
•
maintenance and progression of our business strategy;
•
the possibility that our products under development may not gain
market acceptance;
•
our expectations about the potential market sizes and market
participation potential for our product candidates may not be
realized;
•
our expected revenues (including sales, milestone payments and
royalty revenues) from our product candidates and any related
commercial agreements of ours may not be realized;
28
•
the ability of our manufacturing partners to supply us or our
commercial partners with clinical or commercial supplies of our
products in a safe, timely and regulatory compliant manner and the
ability of such partners to address any regulatory issues that have
arisen or may in the future arise; and
•
competition existing today or that may arise in the future,
including the possibility that others may develop technologies or
products superior to our products.
You should also consider carefully the statements under “Risk
Factors” and other sections of this prospectus, which address
additional factors that could cause our actual results to differ
from those set forth in the forward-looking statements and could
materially and adversely affect our business, operating results and
financial condition. All subsequent written and oral
forward-looking statements attributable to us or persons acting on
our behalf are expressly qualified in their entirety by the
applicable cautionary statements.
The forward-looking statements speak only as of the date on which
they are made, and, except to the extent required by federal
securities laws, we undertake no obligation to update any
forward-looking statement to reflect events or circumstances after
the date on which the statement is made or to reflect the
occurrence of unanticipated events. In addition, we cannot assess
the impact of each factor on our business or the extent to which
any factor, or combination of factors, may cause actual results to
differ materially from those contained in any forward-looking
statements.
Industry Data and Market
Information
This prospectus contains estimates, projections and other
statistical data made by independent parties and by us relating to
market size and growth, the potential value of government
procurement contracts, the incidence of certain medical conditions
and other industry data. These data, to the extent they contain
estimates or projections, involve a number of subjective
assumptions and limitations, and you are cautioned not to give
undue weight to such estimates or projections. Industry
publications and other reports we have obtained from independent
parties generally state that the data contained in these
publications or other reports have been obtained in good faith or
from sources considered to be reliable, but they do not guarantee
the accuracy or completeness of such data. While we believe that
the data from these industry publications and other reports are
generally reliable, we have not independently verified the accuracy
or completeness of such data. These and other factors could cause
results to differ materially from those expressed in these
publications and reports.
We have provided estimates of the potential worldwide market or
value of potential government procurement contracts for certain of
our product candidates. These estimates are based on a number of
factors, including our expectation as to the number of patients
with a certain medical condition that would potentially benefit
from a particular product candidate, the current costs of treating
patients with the targeted medical condition, our expectation that
we will be able to demonstrate to the FDA’s satisfaction in
our clinical trials that the product candidate is safe and
effective, our belief that our product candidate would, if
approved, have an assumed treatment cost per patient, historic
values of government procurement contracts for vaccines, and our
expectation of the dosage of the product candidate. While we have
determined these estimates based on assumptions that we believe are
reasonable, there are a number of factors that could cause our
expectations to change or not be realized. Among these factors are
the following: there is no assurance that the product candidate
will prove to be safe and effective or will ultimately be approved
for sale by the FDA; any FDA approval of the product candidate may
contain restrictions on its use or require warning labels; third
party payors may not be willing to provide reimbursement for the
product candidate at the assumed price per patient; the government
may not be willing to procure our vaccine candidates in amounts or
at costs similar to its historic procurement activities; the dosage
that ultimately may be approved may be different from the assumed
dosage; and doctors may not adopt the product candidate for use as
quickly or as broadly as we have assumed. It is possible that the
ultimate market for a product candidate or value of procurement
contracts will differ significantly from our expectations due to
these or other factors. As a result of these and other factors,
investors should not place undue reliance on such estimates. See
“Risk Factors.”
29
USE OF
PROCEEDS
We estimate that our net proceeds from the sale of the common stock
and warrants offered pursuant to this prospectus will be
approximately $ million, or
approximately $ million if the
underwriters exercise in full their option to purchase additional
shares of common stock and additional warrants, assuming a public
offering price of $ per share of
common stock, which is based on the closing price of our common
stock on , 2016, and an
assumed public offering price of $0.01 per warrant, and after
deducting the underwriting discount and the estimated offering
expenses that are payable by us.
A $1.00 increase (decrease) in the assumed public offering price of
$__ per share and $0.01 per warrant would increase (decrease) the
expected net cash proceeds to us from this offering by
approximately $__, assuming that the number of shares of common
stock and warrants offered by us, as set forth on the cover page of
this prospectus, remains the same and after deducting the
underwriting discounts and commissions and estimated offering
expenses payable by us. Similarly, each 20% increase (decrease) in
the assumed number of shares of common stock and warrants offered
by us, as set forth on the cover page of this prospectus, would
increase (decrease) the expected net proceeds to us from this
offering by approximately $__, assuming the public offering price
of $__ per share and $0.01 per warrant remain the same, and after
deducting underwriting discounts and commissions and estimated
offering expenses payable by us. See the sections entitled
“Risk Factors” and “Management’s Discussion
and Analysis of Financial Condition and Results of
Operations.”
We currently intend to use the net proceeds from this offering to
fund our pivotal Phase 3 clinical trial of SGX301 for the treatment
of CTCL and our pivotal Phase 2b/3 protocol of SGX942 for the
treatment of oral mucositis in head and neck cancer patients, as
well as for general working capital purposes. We have not yet
determined the amount of the net proceeds to be used specifically
for any purposes. Accordingly, our management will have significant
discretion and flexibility in applying the net proceeds from this
offering. Pending any use as described above, we intend to invest
the net proceeds in high-quality, short-term, interest-bearing
securities.
DIVIDEND
POLICY
We have never declared nor paid any cash dividends, and currently
intend to retain all our cash and any earnings for use in our
business and, therefore, do not anticipate paying any cash
dividends in the foreseeable future. Any future determination to
pay cash dividends will be at the discretion of the Board of
Directors and will be dependent upon our consolidated financial
condition, results of operations, capital requirements and such
other factors as the Board of Directors deems relevant.
30
MARKET FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Market
Information
Our common stock is quoted on the OTCQB under the symbol
“SNGX.” The following table sets forth, as adjusted for
the reverse stock split of one-for-ten effective October 7, 2016,
for the periods indicated, the high and low sales prices per share
of our common stock as reported by the OTCQB. Prior to this
offering, there was no trading market for the warrants.
|
|
|
|
|
|
|
|
Year Ended December 31, 2014:
|
|
|
|
|
|
|
First Quarter
|
|
$
|
25.00
|
|
$
|
17.50
|
Second Quarter
|
|
$
|
22.90
|
|
$
|
16.50
|
Third Quarter
|
|
$
|
22.50
|
|
$
|
16.70
|
Fourth Quarter
|
|
$
|
20.90
|
|
$
|
9.10
|
Year Ended December 31, 2015:
|
|
|
|
|
|
|
First Quarter
|
|
$
|
23.00
|
|
$
|
9.80
|
Second Quarter
|
|
$
|
29.50
|
|
$
|
13.60
|
Third Quarter
|
|
$
|
24.80
|
|
$
|
9.10
|
Fourth Quarter
|
|
$
|
14.40
|
|
$
|
4.40
|
Year Ending December 31, 2016:
|
|
|
|
|
|
|
First Quarter
|
|
$
|
12.50
|
|
$
|
6.20
|
Second Quarter
|
|
$
|
9.00
|
|
$
|
6.10
|
Third Quarter
|
|
$
|
8.50
|
|
$
|
5.60
|
Fourth Quarter (through October 6,
2016)
|
|
$
|
8.10
|
|
$
|
7.30
|
On October 6, 2016, the last reported price of our common stock
quoted on the OTCQB was $7.50 per share. The OTCQB prices set forth
above represent inter-dealer quotations, without adjustment for
retail mark-up, mark-down or commission, and may not represent the
prices of actual transactions. An application has been made to list
the common stock on NASDAQ under the symbol “SNGX”.
Transfer
Agent
Shares of our common stock are issued in registered form. American
Stock Transfer & Trust Company, LLC, 6201 15
th
Avenue, Brooklyn, NY 11219 (Telephone: (718) 921-8200; Facsimile:
(718) 765-8719) is the registrar and transfer agent for shares of
our common stock.
Holders of Common
Stock
As of October 6, 2016, there were 345 holders of record of our
common stock. As of such date, shares of our common stock were
issued and outstanding.
Equity Compensation Plan
Information
In December 2005, our Board of Directors approved the 2005 Equity
Incentive Plan, which was approved by stockholders on December 29,
2005. In September 2013, our stockholders approved an amendment to
the 2005 Equity Incentive Plan to increase the maximum number of
shares of our common stock available for issuance under the plan by
125,000 shares, bringing the total shares reserved for issuance
under the plan to 300,000 shares. In April 2015, our Board of
Directors approved the 2015 Equity Incentive Plan, which was
approved by stockholders on June 18, 2015. A maximum of 300,000
shares of our common stock are available for issuance under the
2015 Equity Incentive Plan. The following table provides
information, as of December 31, 2015 with respect to options
outstanding under our 2005 Equity Incentive Plan and our 2015
Equity Incentive Plan. All share numbers in this paragraph and in
the following table have been adjusted for the one-for-ten reverse
stock split effective October 7, 2016.
31
|
|
Number of Securities to be Issued upon Exercise
of Outstanding Options, Warrants and Rights
|
|
Weighted-Average Exercise Price of Outstanding
Options, Warrants and Rights
|
|
Number of Securities Remaining Available for
Future Issuance Under Equity Compensation Plans
(excluding securities reflected in the first column)
|
Equity compensation plans approved by security
holders
(1)
|
|
276,861
|
|
$
|
21.30
|
|
252,300
|
Equity compensation plans not approved by
security holders
|
|
—
|
|
|
—
|
|
—
|
Total
|
|
276,861
|
|
$
|
21.30
|
|
252,300
|
32
DILUTION
If you invest in our securities in this offering, your interest
will be diluted to the extent of the difference between the public
offering price per share of our common stock in this offering and
our pro forma as adjusted net tangible book value per share
immediately after this offering. Net tangible book value per share
is determined by dividing our total tangible assets less total
liabilities by the number of outstanding shares of our common
stock.
Our pro forma net tangible book value as of June 30, 2016 was
$ or
$ per share of common stock,
based upon shares outstanding,
after giving effect to issuances of common stock from July 1, 2016
through and immediately prior to the date of this prospectus. After
giving effect to the sale of the shares of common stock and
warrants in this offering at the assumed public offering price of
$ per share and $0.01 per
warrant, after deducting underwriting discounts and commissions and
other estimated offering expenses payable by us, our pro forma as
adjusted net tangible book value at June 30, 2016 would have been
approximately $ , or
$ per share. This represents an
immediate increase in pro forma net tangible book value of
approximately $ per share to our
existing stockholders, and an immediate dilution of
$ per share to investors
purchasing shares and warrants in this offering. The following
table illustrates the per share dilution:
Assumed public offering price per share of
common stock together with a warrant
|
|
|
|
|
$
|
|
Pro forma net tangible book value per share as
of June 30, 2016
|
|
$
|
|
|
|
|
Increase in pro forma net tangible book value
per share after this offering
|
|
$
|
|
|
|
|
Pro forma as adjusted net tangible book value
per share after this offering
|
|
|
|
|
$
|
|
Dilution in pro forma net tangible book value
per share to new investors
|
|
|
|
|
$
|
|
Assuming that our common stock in this offering is sold to the
underwriters at a price of $___ per share, based on the closing
price on _______, 2016, the number of outstanding shares of our
common stock, and without counting shares issued in this offering
or the conversion or exercise of any notes, warrants or options,
would increase by _________ shares (rounded to the nearest whole
share), for a total of _________ shares of our common stock
outstanding. After taking into account these additional outstanding
shares, the as adjusted net tangible book value per share after the
offering would be $__, or $__ per share. This amount represents an
immediate increase in net tangible book value of $__ per share to
the existing stockholders and an immediate dilution in net tangible
book value of $__ per share to purchasers of our common stock in
this offering.
The information above assumes that the underwriters do not exercise
their over-allotment option. If the underwriters exercise their
over-allotment option in full, the pro forma as adjusted net
tangible book value will increase to
$ per share, representing an
immediate increase to existing stockholders of
$ per share and an immediate
dilution of $ per share to new
investors. If any shares are issued upon exercise of outstanding
options or warrants, new investors will experience further
dilution.
A $1.00 increase (decrease) in the assumed public offering price of
$ per share and $0.01 per
warrant would increase (decrease) the pro forma as adjusted net
tangible book value per share by
$ , assuming the number of shares
and warrants offered by us, as set forth on the cover page of this
prospectus, remains the same and after deducting the underwriting
discounts and commissions and estimated offering expenses payable
by us. Each 20% increase (decrease) of in the assumed number of
shares of common stock and warrants offered by us, as set forth on
the cover page of this prospectus, would increase (decrease) our
pro forma as adjusted net tangible book value by
$ , our pro forma as adjusted net
tangible book value per share after this offering by
$ per share and the dilution per
share to new investors in this offering by
$ , assuming a public offering
price of $__ per share and $0.01 per warrant remain the same, and
after deducting underwriting discounts and commissions and
estimated offering expenses payable by us.
33
The following table summarizes, on a pro forma as adjusted basis
described above as of June 30, 2016, the differences between the
number of shares of common stock purchased from us, the total
consideration paid and the average price per share paid by existing
stockholders and by investors purchasing in this offering assuming
a public offering price of $__ per share, deducting underwriting
discounts and commissions and estimated offering expenses payable
by us.
|
|
Shares
|
|
Total
|
|
Average Price
|
|
|
|
|
|
|
Per Share
|
|
|
|
|
|
|
|
|
|
|
|
Existing stockholders before this
offering
|
|
[___]
|
|
%
|
|
$
|
[___]
|
|
%
|
|
$
|
[___]
|
Investors purchasing in this offering
|
|
|
|
%
|
|
|
[___]
|
|
[___]
|
%
|
|
$
|
[___]
|
Total
|
|
[___]
|
|
[___]
|
%
|
|
$
|
[___]
|
|
[___]
|
%
|
|
$
|
[___]
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A $1.00 increase or decrease in the assumed public offering price
of $ per share and $0.01 per
warrant would increase or decrease the total consideration paid by
new investors by $ and increase
(decrease) the percentage of total consideration paid by new
investors by approximately %,
assuming that the number of shares and warrants offered by us, as
set forth on the cover page of this prospectus, remains the same.
Similarly, each 20% increase (decrease) of in the assumed number of
shares of common stock and warrants offered by us, as set forth on
the cover page of this prospectus, would increase (decrease) the
total consideration paid by new investors by
$ and increase or decrease the
percentage of total consideration paid by new investors by
approximately %, assuming a
public offering price of $__ per share and $0.01 per warrant remain
the same.
34
CAPITALIZATION
The following table sets forth our capitalization, as of June 30,
2016:
•
on an actual basis, adjusted to reflect the reverse stock split of one-for-ten effective October 7, 2016;
•
on a pro forma basis to give effect to the issuance of common stock
from July 1, 2016 through and immediately prior to the date of this
prospectus; and
•
on a pro forma as adjusted basis to give effect to (i) the issuance
of common stock from July 1, 2016 through and immediately prior to
the date of this prospectus and (ii) the sale of the securities in
this offering at the assumed public offering price of $ per share
and $0.01 per warrant, after deducting underwriting discounts and
commissions and other estimated offering expenses payable by
us.
Investors should consider this table in conjunction with our
financial statements and the notes to those financial statements
included elsewhere in this prospectus.
|
|
|
|
|
|
|
|
|
Pro Forma
As Adjusted
(1)
|
Shareholders’ equity:
|
|
|
|
|
|
|
|
Preferred stock, 350,000 shares authorized; none
issued or outstanding
|
|
—
|
|
|
|
|
|
Common stock, $.001 par value; 10,000,000 shares
authorized; issued and outstanding at June 30, 2016, 3,285,963
shares actual,
pro forma
and
pro forma, as adjusted
|
|
3,286
|
|
|
|
|
|
Additional paid-in capital
|
|
148,150,387
|
|
|
|
|
|
Accumulated deficit
|
|
(148,119,787
|
)
|
|
|
|
|
Total shareholders’ equity
|
|
33,886
|
|
|
|
|
|
Total capitalization
|
|
33,886
|
|
|
|
|
|
35
MANAGEMENT’S
DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following
discussion and analysis provides information that we believe is
relevant to an assessment and understanding of our results of
operations and financial condition. You should read this analysis
in conjunction with our audited consolidated financial statements
and related notes and our unaudited consolidated interim financial
statements and their notes. This discussion and analysis contains
statements of a forward-looking nature relating to future events or
our future financial performance. These statements are only
predictions, and actual events or results may differ materially. In
evaluating such statements, you should carefully consider the
various factors identified in this prospectus, which could cause
actual results to differ materially from those expressed in, or
implied by, any forward-looking statements, including those set
forth in “Risk Factors” in this prospectus. See
“Cautionary Note Regarding Forward-Looking Statements and
Industry Data and Market Information.”
Our Business Overview
We are a late-stage biopharmaceutical company focused on developing
and commercializing products to treat rare diseases where there is
an unmet medical need. We maintain two active business segments:
BioTherapeutics and Vaccines/BioDefense.
Our BioTherapeutics business segment is developing a novel
photodynamic therapy (SGX301) utilizing topical synthetic hypericin
activated with safe visible light for the treatment of cutaneous
T-cell lymphoma (“CTCL”), our first-in-class innate
defense regulator technology, dusquetide (SGX942) for the treatment
of oral mucositis in head and neck cancer, and proprietary
formulations of oral beclomethasone 17,21-dipropionate
(“BDP”) for the prevention/treatment of
gastrointestinal (“GI”) disorders characterized by
severe inflammation, including pediatric Crohn’s disease
(SGX203) and acute radiation enteritis (SGX201).
Our Vaccines/BioDefense business segment includes active
development programs for RiVax™, our ricin toxin vaccine
candidate, OrbeShield
®
,
our GI acute radiation syndrome (“GI ARS”) therapeutic
candidate and SGX943, our melioidosis therapeutic candidate. The
development of our vaccine programs currently is supported by our
heat stabilization technology, known as ThermoVax
®
,
under existing and on-going government contract funding. With the
government contract from the National Institute of Allergy and
Infectious Diseases (“NIAID”), we will attempt to
advance the development of RiVax™ to protect against exposure
to ricin toxin. We plan to use the funds received under our awarded
government contracts with the Biomedical Advanced Research and
Development Authority (“BARDA”) and grant from NIAID to
advance the development of OrbeShield
®
for the treatment of GI ARS.
An outline for our business strategy follows:
•
Complete enrollment and report preliminary results in our pivotal
Phase 3 clinical trial of SGX301 for the treatment of CTCL;
•
Continue to collect the long-term follow-up safety data from the
SGX942 Phase 2 proof-of-concept study for the treatment of oral
mucositis in head and neck cancer patients and publish the findings
from this study;
•
Obtain agreement from the United States Food and Drug
Administration (the “FDA”) on a pivotal Phase 2b/3
protocol of SGX942 for the treatment of oral mucositis in head and
neck cancer patients;
•
Initiate a pivotal Phase 3 clinical trial of SGX203 for the
treatment of pediatric Crohn’s disease;
•
Continue development of RiVax™ in combination with our
ThermoVax
®
technology to develop new heat stable vaccines in biodefense with
NIAID funding support;
•
Advance the preclinical and manufacturing development of
OrbeShield
®
as a biodefense medical countermeasure for the treatment of GI ARS
under the BARDA contract and with NIAID funding support;
•
Continue to apply for and secure additional government funding for
each of our BioTherapeutics and Vaccines/BioDefense programs
through grants, contracts and/or procurements;
36
•
Pursue business development opportunities for our pipeline
programs, as well as explore merger/acquisition strategies; and
•
Acquire or in-license new clinical-stage compounds for
development.
Critical Accounting
Policies
Our discussion and analysis of our financial condition and results
of operations are based upon our consolidated financial statements,
which have been prepared in accordance with accounting principles
generally accepted in the U.S. The preparation of these financial
statements requires us to make estimates and judgments that affect
the reported amounts of assets, liabilities and expenses, and
related disclosure of contingent assets and liabilities. We
evaluate these estimates and judgments on an on-going basis.
Intangible Assets
One of the most significant estimates or judgments that we make is
whether to capitalize or expense patent and license costs. We make
this judgment based on whether the technology has alternative
future uses, as defined in Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification
(“ASC”) 730,
Research and
Development
. Based on this consideration, we capitalized
payments made to legal firms that are engaged in filing and
protecting rights to intellectual property and rights for our
current product candidates in both the domestic and international
markets. We believe that patent rights are one of our most valuable
assets. Patents and patent applications are a key component of
intellectual property, especially in the early stage of product
development, as their purchase and maintenance gives us access to
key product development rights from our academic and industry
partners. These rights can also be sold or sub-licensed as part of
our strategy to partner our product candidates at each stage of
development as the intangible assets have alternative future use.
The legal costs incurred for these patents consist of work
associated with filing new patents designed to protect, preserve
and maintain our rights, and perhaps extend the lives of the
patents. We capitalize such costs and amortize intangibles on a
straight-line basis over their expected useful life —
generally a period of 11 to 16 years.
These intangible assets are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount may
not be recoverable or if the underlying program is no longer being
pursued. If the sum of the expected undiscounted cash flows is less
than the carrying value of the related asset or group of assets, a
loss is recognized for the difference between the fair value and
carrying value of the related asset or group of assets.
Fair Value of Financial Instruments
FASB ASC 820 —
Fair Value
Measurements and Disclosures,
defines fair value 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. FASB ASC 820 requires disclosures about the
fair value of all financial instruments, whether or not recognized,
for financial statement purposes. Disclosures about the fair value
of financial instruments are based on pertinent information
available to us on December 31, 2015 and on June 30, 2016.
Accordingly, the estimates presented in the financial statements
are not necessarily indicative of the amounts that could be
realized on disposition of the financial instruments.
FASB ASC 820 specifies a hierarchy of valuation techniques based on
whether the inputs to those valuation techniques are observable or
unobservable. Observable inputs reflect market data obtained from
independent sources, while unobservable inputs reflect market
assumptions. The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities
(Level 1 measurement) and the lowest priority to unobservable
inputs (Level 3 measurement).
The three levels of the fair value hierarchy are as follows:
•
Level 1 — Quoted prices in active markets for identical
assets or liabilities that the reporting entity has the ability to
access at the measurement date. Level 1 primarily consists of
financial instruments whose value is based on quoted market prices
such as exchange-traded instruments and listed equities.
•
Level 2 — Inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly or indirectly. Level 2 includes financial instruments that
are valued using models or other valuation methodologies. These
models consider various assumptions, including volatility
factors,
37
current market prices and contractual prices for the underlying
financial instruments. Substantially all of these assumptions are
observable in the marketplace, can be derived from observable data
or are supported by observable levels at which transactions are
executed in the marketplace.
•
Level 3 — Unobservable inputs for the asset or liability.
Financial instruments are considered Level 3 when their fair values
are determined using pricing models, discounted cash flows or
similar techniques and at least one significant model assumption or
input is unobservable.
The carrying amounts reported in the consolidated balance sheet for
cash and cash equivalents, contracts and grants receivable,
accounts payable, notes payable and accrued compensation
approximate their fair value based on the short-term maturity of
these instruments. We recognize all derivative financial
instruments as assets or liabilities in the financial statements
and measure them at fair value with changes in fair value reflected
as current period income or loss unless the derivatives qualify as
hedges. As a result, certain warrants issued in connection with our
June 2013 registered public offering were accounted for as
derivatives.
Revenue Recognition
Our revenues are primarily generated from government contracts and
grants. The revenue from government contracts and grants is based
upon subcontractor costs and internal costs incurred that are
specifically covered by the contracts and grants, plus a facilities
and administrative rate that provides funding for overhead expenses
and management fees. These revenues are recognized when expenses
have been incurred by subcontractors or when we incur reimbursable
internal expenses that are related to the government contracts and
grants.
Research and Development Costs
Research and development costs are charged to expense when incurred
in accordance with FASB ASC 730, Research and Development. Research
and development includes costs such as clinical trial expenses,
contracted research and license agreement fees with no alternative
future use, supplies and materials, salaries, share-based
compensation, employee benefits, equipment depreciation and
allocation of various corporate costs. Purchased in-process
research and development expense represents the value assigned or
paid for acquired research and development for which there is no
alternative future use as of the date of acquisition.
Accounting for Warrants
We considered FASB ASC 815, Evaluating Whether an Instrument is
Considered Indexed to an Entity’s Own Stock, which provides
guidance for determining whether an equity-linked financial
instrument (or embedded feature) issued by an entity is indexed to
the entity’s stock and, therefore, qualifying for the first
part of the scope exception in paragraph 815-10-15. We evaluated
the provisions and determined that warrants issued in connection
with our June 2013 registered public offering contain provisions
that protect holders from a decline in the issue price of our
common stock (or “down-round” provisions) and contain
net settlement provisions. Consequently, these warrants are
recognized as liabilities at their fair value on the date of grant
and remeasured at fair value on each reporting date. All other
warrants issued were indexed to our own stock and therefore are
accounted for as equity instruments for 2016, 2015 and 2014.
Share-Based Compensation
Stock options are issued with an exercise price equal to the market
price on the date of grant. Stock options issued to directors upon
re-election vest quarterly for a period of one year (new director
issuances are fully vested upon issuance). Stock options issued to
employees vest 25% on the grant date, then 25% each subsequent year
for a period of three years. Stock options vest over each
three-month period from the date of issuance to the end of the
three year period. These options have a ten year life for as long
as the individuals remain employees or directors. In general, when
an employee or director terminates their position, the options will
expire within three months, unless otherwise extended by the
Board.
From time to time, we issue restricted shares of common stock to
vendors and consultants as compensation for services performed.
Typically these instruments vest upon issuance and therefore the
entire share-based compensation expense is recognized upon issuance
to the vendors and/or consultants.
38
Share-based compensation expense for options, warrants and shares
of common stock granted to non-employees has been determined in
accordance with FASB ASC 718, Stock Compensation, and FASB ASC
505-50, Equity-Based Payments to Non-Employees, and represents the
fair value of the consideration received, or the fair value of the
equity instruments issued, whichever may be more reliably measured.
For options that vest over future periods, the fair value of
options granted to non-employees is amortized as the options vest.
The fair value is remeasured each reporting period until
performance is complete.
The fair value of each option grant made during 2016, 2015 and 2014
was estimated on the date of each grant using the Black-Scholes
option pricing model and amortized ratably over the option vesting
periods, which approximates the service period.
Income Taxes
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. A valuation allowance is established
when it is more likely than not that all or a portion of a deferred
tax asset will not be realized. A review of all available positive
and negative evidence is considered, including our current and past
performance, the market environment in which we operate, the
utilization of past tax credits, and the length of carryback and
carryforward periods. Deferred tax assets and liabilities are
measured utilizing tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be
recovered or settled. No current or deferred income taxes have been
provided through June 30, 2016 due to the net operating losses
incurred by us since its inception. We recognize accrued interest
and penalties associated with uncertain tax positions, if any, as
part of income tax expense. There were no tax related interest and
penalties recorded for 2016, 2015 and 2014. Additionally, we have
not recorded an asset for unrecognized tax benefits or a liability
for uncertain tax positions at June 30, 2016 and December 31, 2015
and 2014.
Earnings Per Share
Basic earnings per share (“EPS”) excludes dilution and
is computed by dividing income (loss) available to common
stockholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or
resulted in the issuance of common stock that shared in the
earnings of the entity. Since there is a significant number of
options and warrants outstanding, fluctuations in the actual market
price can have a variety of results for each period presented.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with
accounting principles generally accepted in the U.S. requires
management to make estimates and assumptions such as the fair value
of warrants and stock options and recovery of the useful life of
intangibles that affect the reported amounts in the financial
statements and accompanying notes. Actual results could differ from
those estimates.
Material Changes in
Results of Operations
Three and Six Months Ended June 30, 2016 Compared to June 30,
2015
For the three months ended June 30, 2016, we had a net loss of
$92,775 as compared to a net loss of $3,977,694 for the same period
in the prior year, representing a decrease in the net loss of
$3,884,919 or 98%. For the six months ended June 30, 2016, we had a
net loss of $1,242,208 as compared to a net loss of $8,547,016 for
the same period in the prior year, representing a decrease of
$7,304,808 or 85%. Included in the net loss for the three months
and six months ended June 30, 2016 is the change in the fair value
of the warrant liability related to warrants issued in connection
with our June 2013 registered public financing. The change in the
fair value of the warrant liability for the three months ended June
30, 2016 and 2015 resulted in $525,328 of income and $(1,943,494)
of expense, respectively. For the six months ended June 30, 2016
and 2015, the change in fair value resulted in $1,285,485 of income
and ($4,955,110) of expense, respectively.
For the three and six months ended June 30, 2016, revenues related
to government contracts and grants awarded in support of our
development of OrbeShield
®
for the treatment of GI ARS and RiVax™, and other
development
39
programs. For the three months ended June 30, 2016, we had revenues
of $3,160,050 as compared to $1,099,827 for the same period in the
prior year, representing an increase of $2,060,223 or 187%. For the
six months ended June 30, 2016, we had revenues of $5,791,037 as
compared to $1,916,113 for the same period in the prior year,
representing an increase of $3,874,924 or 202%. The increase in
revenues was a result of increased activities performed under our
government contracts associated with OrbeShield
®
and RiVax™.
We incurred costs related to those revenues for the three months
ended June 30, 2016 and 2015 of $2,342,539 and $816,702,
respectively, representing an increase of $1,525,837, or 187%. For
the six months ended June 30, 2016, costs related to revenues were
$4,574,874 as compared to $1,344,101 for the same period in the
prior year, representing an increase of $3,230,773 or 240%. These
costs relate to allocated employee costs and payments due to
subcontractors in connection with research performed pursuant to
the contracts and grants.
Our gross profit for the three months ended June 30, 2016 was
$817,511 or 25.9%, as compared to $283,125 or 25.7%, for the same
period in 2015, representing an increase of $534,386 or 189%. For
the six months ended June 30, 2016, gross profit was $1,216,163 or
21.0%, as compared to $572,012 or 29.9%, for the same period in the
prior year, representing an increase of $644,151 or 113%. The
decrease in gross profit percentage is attributable to a larger
percent of reimbursable costs not available for contracted fixed
management fee reimbursement. The management fee associated with
this contract is payable upon the achievement of development
milestones.
Research and development expenses decreased by $615,082 or 43%, to
$827,832 for the three months ended June 30, 2016 as compared to
$1,442,914 for the same period in 2015. For the six months ended
June 30, 2016, research and development expenses were $2,256,332
compared to $2,472,798 for the same period in 2015, reflecting a
decrease of $216,466 or 9%. The decrease is primarily due to
completion of the patient enrollment in the Phase 2 trial of SGX942
for the treatment of oral mucositis in head and neck cancer.
General and administrative expenses increased by $124,675 or 14%,
to $999,637 for the three months ended June 30, 2016 as compared to
$874,962 for the same period in 2015. For the six months ended June
30, 2016, general and administrative expenses were $1,875,494
compared to $1,692,232, reflecting an increase of $183,262 or 11%.
The increase is primarily related to outside professional
services.
Total other income (expense) for the three months ended June 30,
2016 was $917,183 as compared $(1,942,943) for the same period in
2015, reflecting a change of $2,860,126. For the six months ended
June 30, 2016 and 2015, total other income (expense) was $1,673,455
and ($4,953,998), respectively, reflecting a change of $6,627,453.
The change in both the three and six months ended June 30, 2016 is
primarily due to the change in the fair value of the warrant
liability related to warrants issued in connection with our June
2013 registered public offering. In addition, $390,599 is included
in other income for the three and six months ended June 30, 2016
related to an amount that had previously been accrued. We were
notified during the quarter that the amount was no longer
considered outstanding by the counterparty and therefore reversed
the amount accrued, resulting in other income.
Year Ended December 31, 2015 Compared to the Year Ended December
31, 2014
For the year ended December 31, 2015, we had a net loss of
$7,831,230 as compared to a net loss of $6,706,972 for the prior
year, representing an increased loss of $1,124,258 or 17%. Included
in the net loss for December 31, 2015 is a non-cash expense of
$1,201,870 versus a non-cash gain of $3,436,195 for December 31,
2014 which represents the change in the fair value of the warrant
liability related to warrants issued in connection with our
registered public offering in June 2013.
For the year ended December 31, 2015 and 2014, revenues and
associated costs relate to government contracts and grants awarded
in support of the development of ThermoVax
®
,
RiVax™ GI-ARS and OrbeShield
®
in GI ARS. For the year ended December 31, 2015, we had revenues of
$8,768,390 as compared to $7,043,016 for the prior year,
representing an increase of $1,725,374 or 24%. The increase in
revenues was a result of research and development activities
performed under our government contracts associated with
OrbeShield
®
and RiVax™.
We incurred costs related to contract and grant revenues in the
year ended December 31, 2015 and 2014 of $6,882,204 and $5,313,855,
respectively, representing an increase of $1,568,349 or 30%. These
costs primarily relate to payments made to subcontractors and
allocated employee costs in connection with research performed
pursuant to contracts and grants. The fluctuations are due to the
development activity performed on the contracts and grants
discussed above.
40
Our gross profit for the year ended December 31, 2015 was
$1,886,186 as compared to $1,729,161 for the prior year,
representing an increase of $157,025 or 9%. This increase is due
primarily to the increased activity in our OrbeShield
®
and RiVax™ contracts.
Research and development, including acquired in-process research
and development costs, decreased by $3,686,696 or 41%, to
$5,399,839 for the year ended December 31, 2015 as compared to
$9,086,535 for the prior year. This decrease is primarily related
to the 2014 acquisition of Hypericin, SGX301, for which we issued
common stock with a value of $3,750,000 and paid cash of $250,000
which was recognized as acquired in-process research and
development expense. During 2015, we also completed the Phase 2
clinical trial with SGX942 for patients suffering from oral
mucositis associated with their chemoradiation therapy
(“CRT”) for head and neck cancer and in December 2015,
initiated the pivotal Phase 3 clinical trial of SGX301 for the
treatment of CTCL.
General and administrative expenses increased by $192,648 or 6%, to
$3,596,623 for the year ended December 31, 2015, as compared to
$3,403,975 for the prior year. This increase is primarily related
to an increase in outside professional services.
Other income (expense) for the year ended December 31, 2015 was
$(1,209,887) as compared to $3,437,505 for the prior year. The
change is primarily related to non-cash expense of $(1,201,870)
which represents the change in the fair value of the warrant
liability related to warrants issued in connection with our June
2013 registered public offering for the year ended December 31,
2015 as compared to non-cash income of $3,436,195 from the change
for the year ended December 31, 2014.
The State of New Jersey’s Technology Business Tax Certificate
Program allows certain high technology and biotechnology companies
to sell unused net operating loss (“NOL”) carryforwards
to other New Jersey-based corporate taxpayers. In accordance with
this program, during the year ended December 31, 2015, we sold New
Jersey NOL carryforwards, resulting in the recognition of $488,933
of income tax benefit, net of transaction costs as compared to
$616,872 for the year ended December 31, 2014. There can be no
assurance as to the continuation or magnitude of this program in
future years.
Business Segments
We maintain two active business segments for the year ended
December 31, 2015 and December 31, 2014: Vaccines/BioDefense and
BioTherapeutics.
Revenues for the Vaccines/BioDefense business segment for the year
ended December 31, 2015 were $8,754,418 as compared to $6,756,388
for the year ended December 31, 2014, representing an increase of
$1,998,030 or 30%. This increase in revenues was a result of our
OrbeShield
®
and RiVax™ contracts. Revenues for the BioTherapeutics
business segment for the year ended December 31, 2015 were $13,972
as compared to $286,628 for the year ended December 31, 2014,
representing a decrease of $272,656 or 95%. This decrease is
primarily related to work performed under our oral mucositis grant
which expired in early 2015.
Income from operations for the Vaccines/BioDefense business segment
for the year ended December 31, 2015 was $1,263,709 as compared to
$807,164 for the year ended December 31, 2014. Income from
operations is primarily attributable to our gross margins related
to our government contracts. Loss from operations for the
BioTherapeutics business segment for the year ended December 31,
2015 was $4,487,988 as compared to $7,674,381 for the year ended
December 31, 2014, representing a decrease of $3,186,393. This
decreased loss is due primarily to the 2014 acquisition of
Hypericin, SGX 301, for which we issued common stock with a value
of $3,750,000 and paid cash of $275,000 which was recognized as
acquired in-process research and development expense, offset by
expenses in 2015 related to the Phase 2 clinical trial with SGX942
for patients suffering from oral mucositis associated with their
CRT for head and neck cancer and the initiation of the pivotal
Phase 3 clinical trial of SGX301 for the treatment of CTCL.
Amortization and depreciation expense for the Vaccines/BioDefense
business segment for the year ended December 31, 2015 was $39,925
as compared to $39,625 for the year ended December 31, 2014.
Amortization and depreciation expense for the BioTherapeutics
business segment for the year ended December 31, 2015 was $199,661
as compared to $199,196 for the year ended December 31, 2014.
41
Financial Condition and
Liquidity
Cash and Working Capital
As of June 30, 2016, we had cash and cash equivalents of $3,183,289
as compared to $4,921,545 as of December 31, 2015, representing a
decrease of $1,738,256 or 35%. As of June 30, 2016, we had working
capital of $984,679 which excludes a non-cash warrant liability of
$1,148,616, as compared to working capital of $2,179,694 which
excludes a non-cash warrant liability of $2,434,101, as of December
31, 2015, representing a decrease of $1,195,015 or 55%. The
decrease is primarily related to expenditures to support the
collection of long-term follow-up safety data from the Phase 2
clinical trial of SGX942 for the treatment of oral mucositis in
head and neck cancer and to support the pivotal Phase 3 clinical
trial of SGX301 for the treatment of CTCL.
Based on our current rate of cash outflows, cash on hand, proceeds
from government contract and grant programs, proceeds available
from the equity line with Lincoln Park Capital Fund, LLC and
proceeds from the State of New Jersey Technology Business Tax
Certificate Transfer Program, management believes that its current
cash will be sufficient to meet the anticipated cash needs for
working capital and capital expenditures for at least the next
twelve months.
Our plans with respect to our liquidity management include, but are
not limited to, the following:
•
We have up to approximately $37.1 million in active contract and
grant funding still available to support our associated research
programs in 2016 and beyond, provided the federal agencies exercise
all options and do not elect to terminate the contracts or grants
for convenience. We plan to submit additional contract and grant
applications for further support of these programs with various
funding agencies;
•
We have continued to use equity instruments to provide a portion of
the compensation due to vendors and collaboration partners and
expect to continue to do so for the foreseeable future;
•
We will pursue NOL sales in the State of New Jersey pursuant to its
Technology Business Tax Certificate Transfer Program. Based on the
receipt of $488,933 in proceeds from the sale of NJ NOL in 2015, we
expect to participate in the program during 2016 and beyond as the
program is available;
•
We plan to pursue potential partnership for our pipeline programs.
However, there can be no assurances that we can consummate such
transactions;
•
We have $8.2 million available from equity facilities expiring in
November 2016 and $11.0 million from equity facilities expiring in
March 2019; and
•
We may seek additional capital in the private and/or public equity
markets to continue our operations, respond to competitive
pressures, develop new products and services, and to support new
strategic partnerships. We are currently evaluating additional
equity financing opportunities on an ongoing basis and may execute
them when appropriate. However, there can be no assurances that we
can consummate such a transaction, or consummate a transaction at
favorable pricing.
Reverse Stock Split
On October 7, 2016, we completed a reverse stock split of our
issued and outstanding shares of common stock at a ratio of
one-for-ten, whereby, every ten shares of our common stock were
exchanged for one share of our common stock. Our common stock began
trading on the OTCQB on a reverse split basis on October 7, 2016.
All share and per share data have been restated to reflect this
reverse stock split.
Expenditures
Under our budget and based upon our existing product development
agreements and license agreements pursuant to letters of intent and
option agreements, we expect our total research and development
expenditures for the next 12 months to be approximately $11.2
million before any contract or grant reimbursements, of which $4.5
million relates to the BioTherapeutics business and $6.7 million
relates to the Vaccines/BioDefense business. We anticipate contract
and grant revenues in the next 12 months of approximately $6.7
million to offset research and development expenses of the
Vaccines/BioDefense business segment.
42
The table below details our costs for research and development by
program and amounts reimbursed for the six months ended June
30:
|
|
|
|
|
Research & Development
Expenses
|
|
|
|
|
|
|
Oral BDP
|
|
$
|
212,682
|
|
$
|
—
|
RiVax™ and ThermoVax
®
Vaccines
|
|
|
161,638
|
|
|
176,219
|
Dusquetide (SGX942)
|
|
|
258,712
|
|
|
1,116,234
|
SGX943
|
|
|
1,614
|
|
|
10,671
|
SGX301
|
|
|
1,407,912
|
|
|
1,024,153
|
Other
|
|
|
213,774
|
|
|
145,521
|
Total
|
|
$
|
2,256,332
|
|
$
|
2,472,798
|
|
|
|
|
|
|
|
Reimbursed under Government Contracts and
Grants
|
|
|
|
|
|
|
OrbeShield
®
|
|
$
|
2,261,724
|
|
$
|
959,627
|
RiVax™ and ThermoVax
®
Vaccines
|
|
|
2,313,150
|
|
|
303,397
|
Other
|
|
|
—
|
|
|
81,077
|
Total
|
|
|
4,574,874
|
|
|
1,344,101
|
Grand Total
|
|
$
|
6,831,206
|
|
$
|
3,816,899
|
The table below details our costs for research and development by
program and amounts reimbursed for the years ended December 31,
2015 and 2014:
|
|
|
|
|
Research & Development
Expenses
|
|
|
|
|
|
|
Oral BDP
|
|
$
|
74,543
|
|
$
|
561,655
|
RiVax™ & ThermoVax
®
Vaccines
|
|
|
622,908
|
|
|
846,870
|
Dusquetide (SGX94)
|
|
|
2,216,632
|
|
|
2,820,807
|
SGX943
|
|
|
10,671
|
|
|
19,378
|
SGX301
|
|
|
2,141,175
|
|
|
4,369,585
|
Other
|
|
|
333,910
|
|
|
468,240
|
Total
|
|
$
|
5,399,839
|
|
$
|
9,086,535
|
|
|
|
|
|
|
|
Reimbursed under Government Contracts and
Grants
|
|
|
|
|
|
|
OrbeShield
®
|
|
$
|
5,240,377
|
|
$
|
4,100,663
|
RiVax™ & ThermoVax
®
Vaccines
|
|
|
1,557,082
|
|
|
930,573
|
Other
|
|
|
84,745
|
|
|
282,619
|
Total
|
|
$
|
6,882,204
|
|
$
|
5,313,855
|
Grand Total
|
|
$
|
12,282,043
|
|
$
|
14,400,390
|
Contractual
Obligations
We have commitments of approximately $433,333 as of June 30, 2016
relating to several licensing agreements with consultants and
universities. Additionally, we have collaboration and license
agreements, which upon clinical or commercialization success may
require the payment of milestones of up to $7.9 million and/or
royalties up to 6% of net sales of covered products, if and when
achieved. However, there can be no assurance that clinical or
commercialization success will occur. As of June 30, 2016, no
milestone or royalty payments have been paid or accrued.
In December 2014, we entered into a lease agreement through May 31,
2018 for existing and expanded office space. The rent for the first
12 months was approximately $12,300 per month, or approximately
$20.85 per square foot. This rent increased to approximately
$12,375 per month, or approximately $20.95 per square foot, for the
next 12 months, and thereafter increased to approximately $12,460
per month, or approximately $21.13 per square foot for the
remainder of the lease.
43
On September 3, 2014, we entered into an asset purchase agreement
with Hy Biopharma, Inc. (“Hy Biopharma”) pursuant to
which we acquired certain intangible assets, properties and rights
of Hy Biopharma related to the development of Hy BioPharma’s
synthetic hypericin product. As consideration for the assets
acquired, we paid $250,000 in cash and issued 184,912 shares of
common stock with a fair value of $3,750,000. These amounts were
charged to research and development expense during the third
quarter of 2014 as the assets will be used in our research and
development activities and do not have alternative future use
pursuant to generally accepted accounting principles in the United
States. Provided all future success-oriented milestones are
attained, we will be required to make payments of up to $10.0
million, if and when achieved. Payments will be payable in
restricted securities of the Company not to exceed 19.9% ownership
of our outstanding stock. As of June 30, 2016, no milestone
payments have been made or accrued.
In February 2007, our Board of Directors authorized the issuance of
5,000 shares of our common stock to Dr. Schaber immediately prior
to the completion of a transaction, or series or a combination of
related transactions negotiated by our Board of Directors whereby,
directly or indirectly, a majority of our capital stock or a
majority of our assets are transferred from us and/or our
stockholders to a third party. Dr. Schaber’s amended
employment agreement includes our obligation to issue such shares
if such event occurs.
As a result of these above agreements, we have future contractual
obligations over the next five years as follows:
|
|
|
|
Property
and
Other Leases
|
|
|
July 1 through December 31, 2016
|
|
$
|
33,333
|
|
$
|
78,667
|
|
$
|
112,000
|
2017
|
|
|
100,000
|
|
|
151,000
|
|
|
251,000
|
2018
|
|
|
100,000
|
|
|
52,000
|
|
|
152,000
|
2019
|
|
|
100,000
|
|
|
—
|
|
|
100,000
|
2020
|
|
|
100,000
|
|
|
—
|
|
|
100,000
|
Total
|
|
$
|
433,333
|
|
$
|
281,667
|
|
$
|
715,000
|
44
BUSINESS
Our Business
Overview
We are a late-stage biopharmaceutical company focused on developing
and commercializing products to treat rare diseases where there is
an unmet medical need. We maintain two active business segments:
BioTherapeutics and Vaccines/BioDefense.
Our BioTherapeutics business segment is developing a novel
photodynamic therapy (SGX301) utilizing topical synthetic hypericin
activated with safe visible light for the treatment of cutaneous
T-cell lymphoma (“CTCL”), our first-in-class innate
defense regulator technology, dusquetide (SGX942) for the treatment
of oral mucositis in head and neck cancer, and proprietary
formulations of oral beclomethasone 17,21-dipropionate
(“BDP”) for the prevention/treatment of
gastrointestinal (“GI”) disorders characterized by
severe inflammation, including pediatric Crohn’s disease
(SGX203) and acute radiation enteritis (SGX201).
Our Vaccines/BioDefense business segment includes active
development programs for RiVax™, our ricin toxin vaccine
candidate, OrbeShield
®
,
our GI acute radiation syndrome (“GI ARS”) therapeutic
candidate and SGX943, our melioidosis therapeutic candidate. The
development of our vaccine programs currently is supported by our
heat stabilization technology, known as ThermoVax
®
,
under existing and on-going government contract funding. With the
government contract from the National Institute of Allergy and
Infectious Diseases (“NIAID”), we will attempt to
advance the development of RiVax™ to protect against exposure
to ricin toxin. We plan to use the funds received under our awarded
government contracts with the Biomedical Advanced Research and
Development Authority (“BARDA”) and grants from NIAID
to advance the development of OrbeShield
®
for the treatment of GI ARS.
An outline for our business strategy follows:
•
Complete enrollment and report preliminary results in our pivotal
Phase 3 clinical trial of SGX301 for the treatment of CTCL;
•
Continue to collect the long-term follow-up safety data from the
SGX942 Phase 2 proof-of-concept study for the treatment of oral
mucositis in head and neck cancer patients and publish the findings
from this study;
•
Obtain agreement from the United States Food and Drug
Administration (the “FDA”) on a pivotal Phase 2b/3
protocol of SGX942 for the treatment of oral mucositis in head and
neck cancer patients;
•
Initiate a pivotal Phase 3 clinical trial of SGX203 for the
treatment of pediatric Crohn’s disease;
•
Continue development of RiVax™ in combination with our
ThermoVax
®
technology to develop new heat stable vaccines in biodefense with
NIAID funding support;
•
Advance the preclinical and manufacturing development of
OrbeShield
®
as a biodefense medical countermeasure for the treatment of GI ARS
under the BARDA contract and with NIAID funding support;
•
Continue to apply for and secure additional government funding for
each of our BioTherapeutics and Vaccines/BioDefense programs
through grants, contracts and/or procurements;
•
Pursue business development opportunities for our pipeline
programs, as well as explore merger/acquisition strategies; and
•
Acquire or in-license new clinical-stage compounds for
development.
45
Product Candidates in
Development
The following tables summarize our product candidates under
development:
BioTherapeutic Product Candidates
|
Soligenix Product
Candidate
|
|
|
|
|
SGX301
|
|
Cutaneous T-Cell Lymphoma
|
|
Phase 2 trial
completed; demonstrated significantly higher response rate compared
to placebo; Phase 3 clinical trial initiated in the second half of
2015, with data expected in the second half of 2017
|
|
|
|
|
|
SGX942
|
|
Oral Mucositis in Head and Neck
Cancer
|
|
Phase 2 trial initiated in the second half of
2013, with positive preliminary results reported in the second half
of 2015 and long-term data expected in the second half of 2016;
seek to obtain FDA agreement on the Phase 2b/3 protocol in the
first half of 2017
|
|
|
|
|
|
SGX203**
|
|
Pediatric Crohn’s disease
|
|
Phase 1/2
clinical trial completed in June 2013, efficacy data,
pharmacokinetic (PK)/pharmacodynamic (PD) profile and safety
profile demonstrated; Phase 3 clinical trial planned for the first
half of 2017, with data expected in the second half of
2018
|
|
|
|
|
|
SGX201**
|
|
Acute Radiation Enteritis
|
|
Phase 1/2 clinical trial complete; safety
profile and preliminary efficacy demonstrated
|
Vaccine Thermostability Platform**
|
Soligenix Product
Candidate
|
|
|
|
|
ThermoVax
®
|
|
Thermostability of aluminum adjuvanted
vaccines
|
|
Pre-clinical
|
BioDefense Product Candidates**
|
Soligenix Product
Candidate
|
|
|
|
|
RiVax™
|
|
Vaccine against Ricin Toxin Poisoning
|
|
Phase 1b trial complete, safety and neutralizing
antibodies for protection demonstrated; Phase 1/2 trial planned for
the second half of 2017
|
|
|
|
|
|
OrbeShield
®
|
|
Therapeutic against GI ARS
|
|
Pre-clinical
|
|
|
|
|
|
SGX943
|
|
Melioidosis
|
|
Pre-clinical
|
Corporate
Information
We were incorporated in Delaware in 1987 under the name Biological
Therapeutics, Inc. In 1987, we merged with Biological Therapeutics,
Inc., a North Dakota corporation, pursuant to which we changed our
name to “Immunotherapeutics, Inc.” We changed our name
to “Endorex Corp.” in 1996, to “Endorex
Corporation” in 1998, to “DOR BioPharma, Inc.” in
2001, and finally to “Soligenix, Inc.” in 2009. Our
principal executive offices are located at 29 Emmons Drive, Suite
C-10, Princeton, New Jersey 08540 and our telephone number is (609)
538-8200.
BioTherapeutics Overview
SGX301 — for Treating Cutaneous T-Cell Lymphoma
SGX301 is a novel, photodynamic therapy that utilizes safe visible
light for activation. The active ingredient in SGX301 is synthetic
hypericin, a photosensitizer which is topically applied to skin
lesions and then activated
46
by fluorescent light 16 to 24 hours later. Hypericin is also found
in several species of
Hypericum
plants, although the drug used in SGX301 is chemically synthesized
by a proprietary manufacturing process and not extracted from
plants. Importantly, hypericin is optimally activated with visible
light thereby avoiding the negative consequences of ultraviolet
light. Other light therapies using UVA light result in serious
adverse effects including secondary skin cancers.
Combined with photoactivation, in clinical trials hypericin has
demonstrated significant anti-proliferative effects on activated
normal human lymphoid cells and inhibited growth of malignant
T-cells isolated from CTCL patients. In both settings, it appears
that the mode of action is an induction of cell death in a
concentration as well as a light dose-dependent fashion. These
effects appear to result, in part, from the generation of singlet
oxygen during photoactivation of hypericin.
Hypericin is one of the most efficient known generators of singlet
oxygen, the key component for phototherapy. The generation of
singlet oxygen induces necrosis and apoptosis in adjacent cells.
The use of topical hypericin coupled with directed visible light
results in generation of singlet oxygen only at the treated site.
We believe that the use of visible light (as opposed to
cancer-causing ultraviolet light) is a major advance in
photodynamic therapy. In a published Phase 2 clinical study in
CTCL, after six weeks of twice weekly therapy, a majority of
patients experienced a statistically significant improvement
(p≤0.04) with topical hypericin treatment whereas the placebo
was ineffective: 58.3% compared to 8.3%, respectively.
SGX301 has received orphan drug designation as well as Fast Track
designation from the FDA. The Orphan Drug Act is intended to assist
and encourage companies to develop safe and effective therapies for
the treatment of rare diseases and disorders. In addition to
providing a seven-year term of market exclusivity for SGX301 upon
final FDA approval, orphan drug designation also positions us to be
able to leverage a wide range of financial and regulatory benefits,
including government grants for conducting clinical trials, waiver
of FDA user fees for the potential submission of a New Drug
Application (“NDA”) for SGX301, and certain tax
credits. In addition, Fast Track is a designation that the FDA
reserves for a drug intended to treat a serious or life-threatening
condition and one that demonstrates the potential to address an
unmet medical need for the condition. Fast Track designation is
designed to facilitate the development and expedite the review of
new drugs. For instance, should events warrant, we will be eligible
to submit a NDA for SGX301 on a rolling basis, permitting the FDA
to review sections of the NDA prior to receiving the complete
submission. Additionally, NDAs for Fast Track development programs
ordinarily will be eligible for priority review. SGX301 also was
granted orphan drug designation from the European Medicines Agency
Committee for Orphan Medical Products.
We initiated our pivotal Phase 3 clinical study of SGX301 for the
treatment of CTCL during December 2015 and are actively enrolling
patients. The Phase 3 protocol is expected to be a highly powered,
double-blind, randomized, placebo-controlled, multicenter trial and
will seek to enroll 120 evaluable subjects. The trial will consist
of three treatment cycles, each of eight weeks duration. Treatments
will be administered twice weekly for the first six weeks and
treatment response will be determined at the end of the eighth
week. In the first treatment cycle, approximately 80 subjects will
receive SGX301 and 40 will receive placebo treatment of their index
lesions. In the second cycle, all subjects will receive SGX301
treatment of their index lesions, and in the third cycle all
subjects will receive SGX301 treatment of all of their lesions.
Subjects will be followed for an additional six months after the
completion of treatment. The primary efficacy endpoint will be
assessed on the percentage of patients in each of the two treatment
groups (i.e., SGX301 and placebo) achieving a partial or complete
response of the treated lesions, defined as a ≥ 50% reduction
in the total Composite Assessment of Index Lesion Disease Severity
(“CAILS”) score for three index lesions at the Cycle 1
evaluation visit (Week 8) compared to the total CAILS score at
baseline. Other secondary measures will assess treatment response,
including duration, degree of improvement, time to relapse and
safety.
We estimate the potential worldwide market for SGX301 is in excess
of $250 million for all applications, including the treatment of
CTCL. This potential market information is a forward-looking
statement, and investors are urged not to place undue reliance on
this statement. While we have determined this potential market size
based on assumptions that we believe are reasonable, there are a
number of factors that could cause our expectations to change or
not be realized. See “Risk Factors” and
“Cautionary Note Regarding Forward-Looking Statements —
Industry Data and Market Information.”
47
Cutaneous T-Cell
Lymphoma
CTCL is a class of non-Hodgkin’s lymphoma
(“NHL”), a type of cancer of the white blood cells that
are an integral part of the immune system. Unlike most NHLs, which
generally involve B-cell lymphocytes (involved in producing
antibodies), CTCL is caused by an expansion of malignant T-cell
lymphocytes (involved in cell-mediated immunity) normally
programmed to migrate to the skin. These skin-trafficking malignant
T-cells migrate to the skin, causing various lesions to appear that
may change shape as the disease progresses, typically beginning as
a rash and eventually forming plaques and tumors. Mycosis fungoides
(“MF”) is the most common form of CTCL. It generally
presents with skin involvement only, manifested as scaly,
erythematous patches. Advanced disease with diffuse lymph node and
visceral organ involvement is usually associated with a poorer
response rate to standard therapies. A relatively uncommon
sub-group of CTCL patients present with extensive skin involvement
and circulating malignant cerebriform T-cells, referred to as
Sézary syndrome. These patients have substantially graver
prognoses than those with MF.
CTCL mortality is related to stage of disease, with median survival
generally ranging from about 12 years in the early stages to only
2.5 years when the disease has advanced. There is currently no
FDA-approved drug for front-line treatment of early stage CTCL.
Treatment of early-stage disease generally involves skin-directed
therapies. One of the most common unapproved therapies used for
early-stage disease is oral 5 or 8-methoxypsoralen
(“Psoralen”) given with ultraviolet A
(“UVA”) light, referred to as PUVA, which is approved
for dermatological conditions such as disabling psoriasis not
adequately responsive to other forms of therapy, idiopathic
vitiligo and skin manifestations of CTCL in persons who have not
been responsive to other forms of treatment. Psoralen is a
mutagenic chemical that interferes with DNA causing mutations and
other malignancies. Moreover, UVA is a carcinogenic light source
that when combined with the Psoralen, results in serious adverse
effects including secondary skin cancers; therefore, the FDA
requires a Black Box warning for PUVA.
CTCL constitutes a rare group of NHLs, occurring in about 4% of the
approximate 500,000 individuals living with NHL. We estimate, based
upon review of historic published studies and reports and an
interpolation of data on the incidence of CTCL, that it affects
over 20,000 individuals in the U.S., with approximately 2,800 new
cases seen annually.
Dusquetide
Dusquetide (research name: SGX94) is an innate defense regulator
(“IDR”) that regulates the innate immune system to
simultaneously reduce inflammation, eliminate infection and enhance
tissue healing.
Dusquetide is based on a new class of short, synthetic peptides
known as IDRs that have a novel mechanism of action in that it is
simultaneously anti-inflammatory and anti-infective. IDRs have no
direct antibiotic activity but modulate host responses, increasing
survival after infections with a broad range of bacterial
Gram-negative and Gram-positive pathogens including both antibiotic
sensitive and resistant strains, as well as accelerating resolution
of tissue damage following exposure to a variety of agents
including bacterial pathogens, trauma and chemo- or
radiation-therapy. IDRs represent a novel approach to the control
of infection and tissue damage via highly selective binding to an
intracellular adaptor protein, sequestosome-1, also known as p62,
which has a pivotal function in signal transduction during
activation and control of the innate defense system. Preclinical
data indicate that IDRs may be active in models of a wide range of
therapeutic indications including life-threatening bacterial
infections as well as the severe side-effects of chemo- and
radiation-therapy.
Dusquetide has demonstrated efficacy in numerous animal disease
models including mucositis, colitis, skin infection and other
bacterial infections and has been evaluated in a double-blind,
placebo-controlled Phase 1 clinical trial in 84 healthy volunteers
with both single ascending dose and multiple ascending dose
components. Dusquetide was shown to have a good safety profile and
well-tolerated in all dose groups when administered by IV over 7
days and was consistent with safety results seen in pre-clinical
studies. Dusquetide is the subject of an open Investigational New
Drug (“IND”) application which has been cleared by the
FDA. We believe that market opportunities for dusquetide include
mucositis, acute methicillin resistant
Staphylococcus
aureus
(MRSA) bacterial infections, acinetobacter,
melioidosis and acute radiation syndrome.
48
SGX942 — for Treating Oral Mucositis in Head and Neck
Cancer
SGX942 is our product candidate containing our IDR technology,
dusquetide, targeting the treatment of oral mucositis in head and
neck cancer patients. Oral mucositis in this patient population is
an area of unmet medical need where there are currently no approved
drug therapies. Accordingly, we received Fast Track designation for
the treatment of oral mucositis as a result of radiation and/or
chemotherapy treatment in head and neck cancer patients from the
FDA.
We initiated a Phase 2 clinical study of SGX942 for the treatment
of oral mucositis in head and neck cancer patients in the second
half of 2013. We completed enrollment in this trial in the second
half of 2015, and in December 2015 released positive preliminary
results. In this Phase 2 proof-of-concept clinical study that
enrolled 111 patients, SGX942, at a dose of 1.5 mg/kg, successfully
reduced the median duration of severe oral mucositis by 50%, from
18 days to 9 days (p=0.099) in all patients and by 67%, from 30
days to 10 days (p=0.040) in patients receiving the most aggressive
chemoradiation therapy for treatment of their head and neck cancer.
The p-values met the prospectively defined statistical threshold of
p<0.1 in the study protocol. In addition to identifying the
optimal dose of 1.5 mg/kg, this study achieved all objectives,
including increased incidence of “complete response” of
tumor at the one month follow-up visit (47% in placebo vs. 63% in
SGX942 at 1.5 mg/kg). Decreases in mortality and decreases in
infection rate were also observed with SGX942 treatment, consistent
with the preclinical results observed in animal models, and are
being further evaluated. SGX942 was found to be generally safe and
well tolerated, consistent with the safety profile observed in the
prior Phase 1 study conducted in 84 healthy volunteers. Long-term
follow-up evaluations are ongoing with final results expected in
the fourth quarter of 2016. Data from this Phase 2 trial is
expected to be submitted for future presentation and
publication.
We estimate the potential worldwide market for SGX942 is in excess
of $500 million for all applications, including the treatment of
oral mucositis. This potential market information is a
forward-looking statement, and investors are urged not to place
undue reliance on this statement. While we have determined this
potential market size based on assumptions that we believe are
reasonable, there are a number of factors that could cause our
expectations to change or not be realized. See “Risk
Factors” and “Cautionary Note Regarding Forward-Looking
Statements — Industry Data and Market Information.”
Oral
Mucositis
Mucositis is the clinical term for damage done to the mucosa by
anticancer therapies. It can occur in any mucosal region, but is
most commonly associated with the mouth, followed by the small
intestine. We estimate, based upon our review of historic studies
and reports, and an interpolation of data on the incidence of
mucositis, that mucositis affects approximately 500,000 people in
the U.S. per year and occurs in 40% of patients receiving
chemotherapy. Mucositis can be severely debilitating and can lead
to infection, sepsis, the need for parenteral nutrition and
narcotic analgesia. The GI damage causes severe diarrhea. These
symptoms can limit the doses and duration of cancer treatment,
leading to sub-optimal treatment outcomes.
The mechanisms of mucositis have been extensively studied and have
been recently linked to the interaction of chemotherapy and/or
radiation therapy with the innate defense system. Bacterial
infection of the ulcerative lesions is regarded as a secondary
consequence of dysregulated local inflammation triggered by
therapy-induced cell death, rather than as the primary cause of the
lesions.
We estimate, based upon our review of historic studies and reports,
and an interpolation of data on the incidence of oral mucositis,
that oral mucositis is a subpopulation of approximately 90,000
patients in the U.S., with a comparable number in Europe. Oral
mucositis almost always occurs in patients with head and neck
cancer treated with radiation therapy (greater than 80% incidence
of severe mucositis) and is common in patients undergoing high dose
chemotherapy and hematopoietic cell transplantation, where the
incidence and severity of oral mucositis depends greatly on the
nature of the conditioning regimen used for myeloablation.
Oral BDP
Oral BDP (beclomethasone 17,21-dipropionate) represents a
first
-
of
-
its
-
kind oral,
locally acting therapy tailored to treat GI inflammation. BDP has
been marketed in the U.S. and worldwide since the early 1970s as
the active pharmaceutical ingredient in a nasal spray and in a
metered-dose inhaler for the treatment of patients with
allergic
49
rhinitis and asthma. Oral BDP is specifically formulated for oral
administration as a single product consisting of two tablets. One
tablet is intended to release BDP in the upper sections of the GI
tract and the other tablet is intended to release BDP in the lower
sections of the GI tract.
Based on its pharmacological characteristics, oral BDP may have
utility in treating other conditions of the gastrointestinal tract
having an inflammatory component. We are planning to pursue
development programs for the treatment of pediatric Crohn’s
disease, acute radiation enteritis and GI ARS pending further grant
funding. We are also exploring the possibility of testing oral BDP
for local inflammation associated with ulcerative colitis, among
other indications.
We are pursuing orphan drug designations for relevant indications
as appropriate in both the U.S. and Europe. An orphan drug
designation provides for seven years and ten years of market
exclusivity upon approval in the U.S. and Europe, respectively.
SGX203 — for Treating Pediatric Crohn’s
Disease
SGX203 is a proprietary two tablet delivery system of BDP
specifically designed for oral use that allows for administration
of immediate and delayed release BDP throughout the small bowel and
the colon. The FDA has given SGX203 orphan drug designation as well
as Fast Track designation for the treatment of pediatric
Crohn’s disease.
We estimate the potential worldwide market for oral BDP is in
excess of $500 million for all applications, including the
treatment of pediatric Crohn’s disease. This potential market
information is a forward-looking statement, and investors are urged
not to place undue reliance on this statement. While we have
determined this potential market size based on assumptions that we
believe are reasonable, there are a number of factors that could
cause our expectations to change or not be realized. See
“Risk Factors” and “Cautionary Note Regarding
Forward-Looking Statements and Industry Data and Market
Information.”
Pediatric Crohn’s
Disease
Crohn’s disease causes inflammation of the GI tract.
Crohn’s disease can affect any area of the GI tract, from the
mouth to the anus, but it most commonly affects the lower part of
the small intestine, called the ileum. The swelling caused by the
disease extends deep into the lining of the affected organ. The
swelling can induce pain and can make the intestines empty
frequently, resulting in diarrhea. Because the symptoms of
Crohn’s disease are similar to other intestinal disorders,
such as irritable bowel syndrome and ulcerative colitis, it can be
difficult to diagnose. People of Ashkenazi Jewish heritage have an
increased risk of developing Crohn’s disease.
Crohn’s disease can appear at any age, but it is most often
diagnosed in adults in their 20s and 30s. However, approximately
30% of people with Crohn’s disease develop symptoms before 20
years of age. We estimate, based upon our review of historic
published studies and reports, and an interpolation of data on the
incidence of Pediatric Crohn’s disease, that Pediatric
Crohn’s disease is a subpopulation of approximately 80,000
patients in the U.S. with a comparable number in Europe.
Crohn’s disease tends to be both severe and extensive in the
pediatric population and a relatively high proportion
(approximately 40%) of pediatric Crohn’s patients have
involvement of their upper gastrointestinal tract.
Crohn’s disease presents special challenges for children and
teens. In addition to bothersome and often painful symptoms, the
disease can stunt growth, delay puberty, and weaken bones.
Crohn’s disease symptoms may sometimes prevent a child from
participating in enjoyable activities. The emotional and
psychological issues of living with a chronic disease can be
especially difficult for young people.
SGX201 — for Preventing Acute Radiation Enteritis
SGX201 is a delayed-release formulation of BDP specifically
designed for oral use. In 2012, we completed a Phase 1/2 clinical
trial testing SGX201 in prevention of acute radiation enteritis.
Patients with rectal cancer scheduled to undergo concurrent
radiation and chemotherapy prior to surgery were randomized to one
of four dose groups. The objectives of the study were to evaluate
the safety and maximal tolerated dose of escalating doses of
SGX201, as well as the preliminary efficacy of SGX201 for
prevention of signs and symptoms of acute radiation enteritis. The
study demonstrated that oral administration of SGX201 was safe and
well tolerated across all four dose groups. There was also evidence
of a potential dose response with respect to diarrhea, nausea and
vomiting and the assessment
50
of enteritis according to National Cancer Institute Common
Terminology Criteria for Adverse Events for selected
gastrointestinal events. In addition, the incidence of diarrhea was
lower than that seen in recent published historical control data in
this patient population. This program was supported in part by a
$500,000 two-year Small Business Innovation and Research
(“SBIR”) grant awarded by the National Institutes of
Health (“NIH”). We continue to work with our Radiation
Enteritis medical advisory board to identify additional funding
opportunities to support the clinical development program.
We have received Fast Track designation from the FDA for SGX201 for
acute radiation enteritis.
We estimate the potential worldwide market for oral BDP is in
excess of $500 million for all applications, including the
treatment of acute radiation enteritis. This potential market
information is a forward-looking statement, and investors are urged
not to place undue reliance on this statement. While we have
determined this potential market size based on assumptions that we
believe are reasonable, there are a number of factors that could
cause our expectations to change or not be realized. See
“Risk Factors” and “Cautionary Note Regarding
Forward-Looking Statements and Industry Data and Market
Information.”
Acute Radiation
Enteritis
External radiation therapy is used to treat most types of cancer,
including cancer of the bladder, uterine, cervix, rectum, prostate,
and vagina. During delivery of treatment, some level of radiation
will also be delivered to healthy tissue, including the bowel,
leading to acute and chronic toxicities. The large and small bowels
are very sensitive to radiation and the larger the dose of
radiation the greater the damage to normal bowel tissue. Radiation
enteritis is a condition in which the lining of the bowel becomes
swollen and inflamed during or after radiation therapy to the
abdomen, pelvis, or rectum. Most tumors in the abdomen and pelvis
need large doses, and almost all patients receiving radiation to
the abdomen, pelvis, or rectum will show signs of acute
enteritis.
Patients with acute enteritis may have nausea, vomiting, abdominal
pain and bleeding, among other symptoms. Some patients may develop
dehydration and require hospitalization. With diarrhea, the
gastrointestinal tract does not function normally, and nutrients
such as fat, lactose, bile salts, and vitamin B12 are not well
absorbed.
Symptoms will usually resolve within two to six weeks after therapy
has ceased. Radiation enteritis is often not a self-limited
illness, as over 80% of patients who receive abdominal radiation
therapy complain of a persistent change in bowel habits. Moreover,
acute radiation injury increases the risk of development of chronic
radiation enteropathy, and overall 5% to 15% of the patients who
receive abdominal or pelvic irradiation will develop chronic
radiation enteritis.
We estimate, based upon our review of historic published studies
and reports, and an interpolation of data on the treatment courses
and incidence of cancers occurring in the abdominal and pelvic
regions, there to be over 100,000 patients annually in the U.S.,
with a comparable number in Europe, who receive abdominal or pelvic
external beam radiation treatment for cancer, and these patients
are at risk of developing acute and chronic radiation
enteritis.
Vaccines/BioDefense Overview
ThermoVax
®
—
Thermostability Technology
Our thermostability technology, ThermoVax
®,
is a novel method of rendering aluminum salt, (known colloquially
as Alum), adjuvanted vaccines stable at elevated temperatures. Alum
is the most widely employed adjuvant technology in the vaccine
industry. The value of ThermoVax
®
lies in its potential ability to eliminate the need for cold-chain
production, transportation, and storage for Alum adjuvanted
vaccines. This would relieve companies of the high costs of
producing and maintaining vaccines under refrigerated conditions.
Based on historical reports from the World Health Organization and
other scientific reports, we believe that a meaningful proportion
of vaccine doses globally are wasted due to excursions from
required cold chain temperature ranges. This is due to the fact
that most Alum adjuvanted vaccines need to be maintained at between
2 and 8 degrees Celsius (“C”) and even brief excursions
from this temperature range (especially below freezing) usually
necessitates the destruction of the product or the initiation of
costly stability programs specific for the vaccine lots in
question. We believe that the savings realized from the elimination
of cold chain costs and related product losses would significantly
increase the profitability of vaccine products. We believe that
elimination of the cold chain could further facilitate the use of
these vaccines in the lesser developed parts of the world.
ThermoVax
®
has the potential to facilitate easier storage and distribution of
strategic national stockpile vaccines in emergency settings.
51
ThermoVax
®
development was supported pursuant to our $9.4 million NIAID grant
enabling development of thermo-stable ricin (RiVax™) and
anthrax (VeloThrax
®
)
vaccines. Proof-of-concept preclinical studies with
ThermoVax
®
indicate that it is able to produce stable vaccine formulations
using adjuvants, protein immunogens, and other components that
ordinarily would not withstand long temperature variations
exceeding customary refrigerated storage conditions. These studies
were conducted with our aluminum-adjuvanted ricin toxin vaccine,
RiVax™ and our aluminum-adjuvanted anthrax vaccine,
VeloThrax
®
.
Each vaccine was manufactured under precise lyophilization
conditions using excipients that aid in maintaining native protein
structure of the key antigen. When RiVax™ was kept at 40
degrees C (104 degrees Fahrenheit) for up to one year, all of the
animals vaccinated with the lyophilized RiVax™ vaccine
developed potent and high titer neutralizing antibodies. In
contrast, animals that were vaccinated with the liquid RiVax™
vaccine kept at 40 degrees C did not develop neutralizing
antibodies and were not protected against ricin exposure. The ricin
A chain is extremely sensitive to temperature and rapidly loses the
ability to induce neutralizing antibodies when exposed to
temperatures higher than 8 degrees C. When VeloThrax
®
was kept for up to 16 weeks at 70 degrees C, it was able to develop
a potent antibody response, unlike the liquid formulation kept at
the same temperature. Moreover, we have also demonstrated the
compatibility of our thermostabilization technology with other
secondary adjuvants such as TLR-4 agonists. Additionally, the
University of Colorado conducted a study that demonstrated a heat
stable vaccine formulation of a human papillomavirus
(“HPV”) vaccine. The work was conducted by Drs.
Randolph and Garcea and demonstrated the successful conversion of a
commercial virus-like particle-based vaccine requiring cold chain
storage to a subunit, alum-adjuvanted, vaccine which is stable at
ambient temperatures. This work, funded by a University of Colorado
seed grant and the Specialized Program of Research Excellence in
cervical cancer, is the first demonstration of the utility of
ThermoVax
®
technology for the development of a subunit based commercial
vaccine. The HPV vaccine formulation was found to be stable for at
least 12 weeks at 50 degrees C. In the study, mice immunized with
the ThermoVax
®-
stabilized
HPV subunit vaccine were also found to achieve immune responses
similar to the commercial HPV vaccine, Cervarix
®
,
as measured by either total antibody levels or neutralizing
antibody levels. Moreover, whereas the immune responses to
Cervarix
®
were reduced after storage for 12 weeks at 50 degrees C, the
ThermoVax
®
formulated vaccine retained its efficacy. The results were
published online in the European Journal of Pharmaceutics and
Biopharmaceutics. See
http://www.sciencedirect.com/science/article/pii/S0939641115002416.
We also entered into a collaboration agreement with Axel Lehrer,
PhD of the Department of Tropical Medicine, Medical Microbiology
and Pharmacology, John A. Burns School of Medicine, University of
Hawai‘i at M
a
noa and Hawaii Biotech, Inc.
(“HBI”) to develop a heat stable subunit Ebola vaccine.
Dr. Lehrer, a co-inventor of the Ebola vaccine with HBI, has shown
proof of concept efficacy with subunit Ebola vaccines in non-human
primates. The most advanced Ebola vaccines involve the use of
vesicular stomatitis virus and adenovirus vectors – live,
viral vectors which complicate the manufacturing, stability and
storage requirements. Dr. Lehrer’s vaccine candidate is based
on highly purified recombinant protein antigens, circumventing many
of these manufacturing difficulties. Dr. Lehrer and HBI have
developed a robust manufacturing process for the required proteins.
Application of ThermoVax
®
may allow for a product that can avoid the need for cold chain
distribution and storage, yielding a vaccine ideal for use in both
the developed and developing world. Although this agreement has
expired in accordance with its terms, we expect to extend the
period of the agreement or enter into another agreement with Dr.
Lehrer and HBI to replace this agreement.
We intend to seek out potential partnerships with companies
marketing FDA/ex-U.S. health authority approved Alum adjuvanted
vaccines and currently developing Alum adjuvanted vaccines that are
interested in eliminating the need for cold chain for their
products. We believe that ThermoVax
®
also will enable us to expand our vaccine development expertise
beyond biodefense into the infectious disease space and also has
the potential to allow for the development of multivalent vaccines
(e.g., combination ricin-anthrax vaccine).
RiVax™ — Ricin Toxin Vaccine
RiVax™ is our proprietary vaccine candidate being developed
to protect against exposure to ricin toxin and, if approved, would
be the first ricin vaccine. The immunogen in RiVax™ induces a
protective immune response in animal models of ricin exposure and
functionally active antibodies in humans. The immunogen consists of
a genetically inactivated subunit ricin A chain that is
enzymatically inactive and lacks residual toxicity of the
holotoxin. RiVax™ has demonstrated statistically significant
(p < 0.0001) preclinical survival results in a lethal aerosol
exposure non-human primate model (Roy et al, 2015, Thermostable
ricin vaccine protects rhesus macaques against aerosolized ricin:
Epitope-specific neutralizing antibodies correlate with protection,
PNAS USA March 24, 2015), and has also been shown to be well
tolerated and immunogenic in two Phase 1 clinical trials in healthy
volunteers. Results of the first Phase 1 human trial of
RiVax™ established that the immunogen was safe and induced
antibodies that we believe may protect humans from ricin exposure.
The antibodies generated from vaccination, concentrated and
purified, were
52
capable of conferring immunity passively to recipient animals,
indicating that the vaccine was capable of inducing functionally
active antibodies in humans. The outcome of this study was
published in the Proceedings of the National Academy of Sciences
(Vitetta et al., 2006, A Pilot Clinical Trial of a Recombinant
Ricin Vaccine in Normal Humans, PNAS, 103:2268-2273). The second
trial, which was completed in September 2012 and was sponsored by
University of Texas Southwestern Medical Center
(“UTSW”), evaluated a more potent formulation of
RiVax™ that contained an aluminum adjuvant (Alum). The
results of the Phase 1b study indicated that Alum adjuvanted
RiVax™ was safe and well tolerated, and induced greater ricin
neutralizing antibody levels in humans than adjuvant-free
RiVax™. The outcomes of this second study were published in
the
Clinical and Vaccine
Immunology
(Vitetta et al., 2012, Recombinant Ricin Vaccine
Phase 1b Clinical Trial, Clin. Vaccine Immunol. 10:1697-9). We have
adapted the original manufacturing process for the immunogen
contained in RiVax™ for thermostability and large scale
manufacturing and are further establishing correlates of the human
immune response in non-human primates. We have initiated a
development agreement with Emergent BioSolutions, Inc. to implement
a commercially viable, scalable production technology for the
RiVax
™
drug substance protein antigen.
The development of RiVax™ has been sponsored through a series
of overlapping challenge grants, UC1, and cooperative grants, U01,
from the NIH, granted to us and to UTSW where the vaccine
originated. The second clinical trial was supported by a grant from
the FDA’s Office of Orphan Products to UTSW. To date, we and
UTSW have collectively received approximately $25 million in grant
funding from the NIH for the development of RiVax™. In
September 2014, we entered into a contract with the NIH for the
development of RiVax™ that would provide up to an additional
$24.7 million of funding in the aggregate if options to extend the
contract are exercised by the NIH.
RiVax™ has been granted orphan drug designation by the FDA
for the prevention of ricin intoxication.
Assuming development efforts are successful for RiVax™, we
believe potential government procurement contract(s) could reach
$200 million. This potential procurement contract information is a
forward-looking statement, and investors are urged not to place
undue reliance on this statement. While we have determined this
potential procurement contract value based on assumptions that we
believe are reasonable, there are a number of factors that could
cause our expectations to change or not be realized. See
“Risk Factors” and “Cautionary Note Regarding
Forward-Looking Statements and Industry Data and Market
Information.”
Ricin Toxin
Ricin toxin can be cheaply and easily produced, is stable over long
periods of time, is toxic by several routes of exposure and thus
has the potential to be used as a biological weapon against
military and/or civilian targets. As a bioterrorism agent, ricin
could be disseminated as an aerosol, by injection, or as a food
supply contaminant. The potential use of ricin toxin as a
biological weapon of mass destruction has been highlighted in a
Federal Bureau of Investigation Bioterror report released in
November 2007 titled
Terrorism
2002-2005
, which states that “Ricin and the bacterial
agent anthrax are emerging as the most prevalent agents involved in
WMD investigations”
(h
ttp://www.fbi.gov/stats-services/publications/terrorism-2002-2005/terror02_05.pdf)
.
In recent years, Al Qaeda in the Arabian Peninsula has threatened
the use of ricin toxin to poison food and water supplies and in
connection with explosive devices. Domestically, the threat from
ricin remains a concern for security agencies. As recently as April
2013, letters addressed to the President of the United States, a
U.S. Senator and a judge tested positive for ricin.
The Centers for Disease Control and Prevention has classified ricin
toxin as a Category B biological agent. Ricin works by first
binding to glycoproteins found on the exterior of a cell, and then
entering the cell and inhibiting protein synthesis leading to cell
death. Once exposed to ricin toxin, there is no effective therapy
available to reverse the course of the toxin. The recent ricin
threat to government officials has heightened the awareness of this
toxic threat. Currently, there is no FDA approved vaccine to
protect against the possibility of ricin toxin being used in a
terrorist attack, or its use as a weapon on the battlefield, nor is
there a known antidote for ricin toxin exposure.
OrbeShield
®
—
for Treating GI Acute Radiation Syndrome
OrbeShield
®
is an oral immediate and delayed release formulation of the
topically active corticosteroid BDP and is being developed for the
treatment of GI ARS. Corticosteroids are a widely used class of
anti-inflammatory drugs. BDP is a corticosteroid with predominantly
topical activity that is approved for use in asthma, psoriasis and
allergic rhinitis.
53
OrbeShield
®
has demonstrated positive preclinical results in a canine GI ARS
model which indicate that dogs treated with OrbeShield
®
demonstrated statistically significant (p=0.04) improvement in
survival with dosing at either two hours or 24 hours after exposure
to lethal doses of total body irradiation (“TBI”) when
compared to control dogs. OrbeShield
®
appears to significantly mitigate the damage to the GI epithelium
caused by exposure to high doses of radiation using a
well-established canine model of GI ARS.
The GI tract is highly sensitive to ionizing radiation and the
destruction of epithelial tissue is one of the first effects of
radiation exposure. The rapid loss of epithelial cells leads to
inflammation and infection that are often the primary cause of
death in acute radiation injury. This concept of GI damage also
applies to the clinical setting of oncology, where high doses of
radiation cannot be administered effectively to the abdomen because
radiation is very toxic to the intestines. We are seeking to treat
the same type of toxicity in our acute radiation enteritis clinical
program with SGX201. As a result, we believe that
OrbeShield
®
has the potential to be a “dual use” compound, a
desirable characteristic which is a specific priority of BARDA for
ARS and other medical countermeasure indications. The FDA has
cleared the IND application for OrbeShield
®
for the mitigation of morbidity and mortality associated with GI
ARS.
In September 2013, we received two government contracts from BARDA
and NIAID for the advanced preclinical and manufacturing
development of OrbeShield
®
leading to FDA approval to treat GI ARS. The BARDA contract
contains a two year base period with two contract options,
exercisable by BARDA, for a total of five years and up to $26.3
million. The NIAID contract consists of a one year base period and
two contract options, exercisable by NIAID, for a total of three
years and up to $6.4 million. Previously, development of
OrbeShield
®
had been largely supported by a $1 million NIH grant to our
academic partner, the Fred Hutchinson Cancer Research Center. In
July 2012, we received an SBIR grant from NIAID of approximately
$600,000 to support further preclinical development of
OrbeShield
®
for the treatment of acute GI ARS. The FDA has given
OrbeShield
®
orphan drug designation and Fast Track designation for the
prevention of death following a potentially lethal dose of total
body irradiation during or after a radiation disaster.
Assuming development efforts are successful for
OrbeShield
®
,
we believe potential government procurement contracts could reach
as much as $450 million. This potential procurement contract
information is a forward-looking statement, and investors are urged
not to place undue reliance on this statement. While we have
determined this potential procurement contract value based on
assumptions that we believe are reasonable, there are a number of
factors that could cause our expectations to change or not be
realized. See “Risk Factors” and “Cautionary Note
Regarding Forward-Looking Statements and Industry Data and Market
Information.”
GI Acute Radiation
Syndrome
ARS occurs after toxic radiation exposure and involves several
organ systems, notably the bone marrow, the GI tract and, later,
the lungs. In the event of a nuclear disaster or terrorist
detonation of a nuclear bomb, casualties exposed to greater than 2
grays (“Gy”) of absorbed radiation are at high risk for
development of clinically significant ARS. Exposure to high doses
of radiation exceeding 10-12 Gy causes acute GI injury which can
result in death. The GI tract is highly sensitive due to the
continuous need for crypt stem cells and production of mucosal
epithelium. The extent of injury to the bone marrow and the GI
tract are the principal determinants of survival after exposure to
TBI. Although the hematopoietic syndrome can be rescued by bone
marrow transplantation or growth factor administration, there is no
established treatment or preventive measure for the GI damage that
occurs after high-dose radiation. As a result, we believe there is
an urgent medical need for specific medical counter measures
against the lethal pathophysiological manifestations of
radiation-induced GI injury.
SGX943 — for Treating Melioidosis
SGX943 uses the same active ingredient, dusquetide, as contained in
SGX942. SGX943 is being developed in preclinical studies as a
potential treatment for melioidosis. Because SGX943 directly
targets the innate immune system (and does not attempt to kill the
bacteria directly), we believe it is particularly relevant for
antibiotic-resistant bacteria. The bacteria which causes
melioidosis,
Burkholderia
pseudomallei,
is known to be resistant to most antibiotics
and to require prolonged treatment with the few antibiotics that do
work. In February 2014, we were awarded a one-year NIAID SBIR award
of approximately $300,000 to further evaluate SGX943 as a potential
treatment for melioidosis. Preclinical results to date have
demonstrated that SGX943 treatment, in combination with standard of
care antibiotics such as doxycycline, can statistically
significantly enhance survival in a lethal murine pneumonic
melioidosis model (p< 0.001).
54
Melioidosis
Melioidosis is a potentially fatal infection caused by the
Gram-negative bacillus,
Burkholderia
pseudomallei
(“Bp”). Highly resistant to many
antibiotics, Bp can cause an acute disease characterized by a
fulminant pneumonia and a chronic condition that can recrudesce.
There is no preventive vaccine or effective immunotherapy for
melioidosis. We believe that there is an unmet medical need for
improved prevention and therapy.
Bp infection (melioidosis) is a major public health concern in the
endemic regions of Southeast Asia and Northern Australia. In
Northeast Thailand, which has the highest incidence of melioidosis,
the mortality rate associated with Bp infection is over 40 percent,
making it the third most common cause of death from infectious
disease in that region after HIV/AIDS and tuberculosis. Bp activity
is seen in Southeast Asia, South America, Africa, the Middle East,
India, and Australia. The highest pockets of disease activity occur
in Northern Australia and Northeast Thailand with increasing
recognition of disease activity in coastal regions of India.
Beyond its public health significance, Bp and the closely-related
Burkholderia
mallei
(“Bm”) are considered possible biological
warfare agents by the DHHS because of the potential for widespread
dissemination through aerosol. Bp like its relative Bm, the cause
of Glanders, was studied by the U.S. as a potential biological
warfare agent, but was never weaponized. It has been reported that
the Soviet Union was also experimenting with Bp as a biological
warfare agent. Both Bp and Bm have been designated high priority
threats by the DHHS in its PHEMCE Strategy released in 2012 and are
classified as Category B Priority Pathogens by NIAID.
The Drug Approval
Process
The FDA and comparable regulatory agencies in state, local and
foreign jurisdictions impose substantial requirements on the
clinical development, manufacture and marketing of new drug and
biologic products. The FDA, through regulations that implement the
Federal Food, Drug, and Cosmetic Act, as amended (the
“FDCA”), and other laws and comparable regulations for
other agencies, regulate research and development activities and
the testing, manufacture, labeling, storage, shipping, approval,
recordkeeping, advertising, promotion, sale, export, import and
distribution of such products. The regulatory approval process is
generally lengthy, expensive and uncertain. Failure to comply with
applicable FDA and other regulatory requirements can result in
sanctions being imposed on us or the manufacturers of our products,
including holds on clinical research, civil or criminal fines or
other penalties, product recalls, or seizures, or total or partial
suspension of production or injunctions, refusals to permit
products to be imported into or exported out of the United States,
refusals of the FDA to grant approval of drugs or to allow us to
enter into government supply contracts, withdrawals of previously
approved marketing applications and criminal prosecutions.
Before human clinical testing in the U.S. of a new drug compound or
biological product can commence, an Investigational New Drug
(“IND”), application is required to be submitted to the
FDA. The IND application includes results of pre-clinical animal
studies evaluating the safety and efficacy of the drug and a
detailed description of the clinical investigations to be
undertaken.
Clinical trials are normally
done in three phases, although the phases may overlap. Phase 1
trials are smaller trials concerned primarily with metabolism and
pharmacologic actions of the drug and with the safety of the
product. Phase 2 trials are designed primarily to demonstrate
effectiveness and safety in treating the disease or condition for
which the product is indicated. These trials typically explore
various doses and regimens. Phase 3 trials are expanded clinical
trials intended to gather additional information on safety and
effectiveness needed to clarify the product’s benefit-risk
relationship and generate information for proper labeling of the
drug, among other things. The FDA receives reports on the progress
of each phase of clinical testing and may require the modification,
suspension or termination of clinical trials if an unwarranted risk
is presented to patients. When data is required from long-term use
of a drug following its approval and initial marketing, the FDA can
require Phase 4, or post-marketing, studies to be
conducted.
With certain exceptions, once successful clinical testing is
completed, the sponsor can submit a New Drug Application
(“NDA”), for approval of a drug, or a Biologic License
Application (“BLA”), for biologics such as vaccines,
which will be reviewed, and if successful, approved by the FDA,
allowing the product to be marketed. The process of completing
clinical trials for a new drug is likely to take a number of years
and require the expenditure of substantial resources. Furthermore,
the FDA or any foreign health authority may not grant an approval
on a timely basis, if at all. The FDA may deny the approval of an
NDA or BLA, in its sole discretion, if it determines that its
regulatory criteria have not been satisfied or may require
additional testing or information. Among the conditions for
marketing approval,
55
is the requirement that the prospective manufacturer’s
quality control and manufacturing procedures conform to good
manufacturing practice regulations. In complying with standards
contained in these regulations, manufacturers must continue to
expend time, money and effort in the area of production, quality
control and quality assurance to ensure full technical compliance.
Manufacturing facilities, both foreign and domestic, also are
subject to inspections by, or under the authority of, the FDA and
by other federal, state, local or foreign agencies.
Even after initial FDA or foreign health authority approval has
been obtained, further studies, including Phase 4 post-marketing
studies, may be required to provide additional data on safety and
will be required to gain approval for the marketing of a product as
a treatment for clinical indications other than those for which the
product was initially tested. For certain drugs intended to treat
serious, life-threatening conditions that show great promise in
earlier testing, the FDA can also grant conditional approval.
However, drug developers are required to study the drug further and
verify clinical benefit as part of the conditional approval
provision, and the FDA can revoke approval if later testing does
not reproduce previous findings. The FDA may also condition
approval of a product on the sponsor agreeing to certain mitigation
strategies that can limit the unfettered marketing of a drug. Also,
the FDA or foreign regulatory authority will require post-marketing
reporting to monitor the side effects of the drug. Results of
post-marketing programs may limit or expand the further marketing
of the product. Further, if there are any modifications to the
drug, including any change in indication, manufacturing process,
labeling or manufacturing facility, an application seeking approval
of such changes will likely be required to be submitted to the FDA
or foreign regulatory authority.
In the U.S., the FDCA, the Public Health Service Act, the Federal
Trade Commission Act, and other federal and state statutes and
regulations govern, or influence the research, testing,
manufacture, safety, labeling, storage, record keeping, approval,
advertising and promotion of drug, biological, medical device and
food products. Noncompliance with applicable requirements can
result in, among other things, fines, recall or seizure of
products, refusal to permit products to be imported into the U.S.,
refusal of the government to approve product approval applications
or to allow the Company to enter into government supply contracts,
withdrawal of previously approved applications and criminal
prosecution. The FDA may also assess civil penalties for violations
of the FDCA involving medical devices.
For biodefense development, such as with RiVax™ and
OrbeShield
®
,
the FDA has instituted policies that are expected to result in
shorter pathways to market. This potentially includes approval for
commercial use utilizing the results of animal efficacy trials,
rather than efficacy trials in humans. However, the Company will
still have to establish that the vaccine and countermeasures it is
developing are safe in humans at doses that are correlated with the
beneficial effect in animals. Such clinical trials will also have
to be completed in distinct populations that are subject to the
countermeasures; for instance, the very young and the very old, and
in pregnant women, if the countermeasure is to be licensed for
civilian use. Other agencies will have an influence over the
benefit-risk scenarios for deploying the countermeasures and in
establishing the number of doses utilized in the Strategic National
Stockpile. We may not be able to sufficiently demonstrate the
animal correlation to the satisfaction of the FDA, as these
correlates are difficult to establish and are often unclear.
Invocation of the animal rule may raise issues of confidence in the
model systems even if the models have been validated. For many of
the biological threats, the animal models are not available and the
Company may have to develop the animal models, a time-consuming
research effort. There are few historical precedents, or recent
precedents, for the development of new countermeasure for
bioterrorism agents. Despite the animal rule, the FDA may require
large clinical trials to establish safety and immunogenicity before
licensure and it may require safety and immunogenicity trials in
additional populations. Approval of biodefense products may be
subject to post-marketing studies, and could be restricted in use
in only certain populations.
Vaccines are approved under the BLA process that exists under the
Public Health Service Act. In addition to the greater technical
challenges associated with developing biologics, the potential for
generic competition is lower for a BLA product than a small
molecule product subject to an NDA under the Federal Food, Drug and
Cosmetic Act. Under the Patient Protection and Affordable Care Act
enacted in 2010, a “generic” version of a biologic is
known as a biosimilar and the barriers to entry — whether
legal, scientific, or logistical — for a biosimilar version
of a biologic approved under a BLA are higher.
Orphan Drug Designation
Under the Orphan Drug Act, the FDA may grant orphan drug
designation to drugs or biologics intended to treat a rare disease
or condition — generally a disease or condition that affects
fewer than 200,000 individuals in the United States. Orphan drug
designation must be requested before submitting an NDA or BLA.
After the FDA grants orphan drug designation, the generic identity
of the drug or biologic and its potential orphan use are disclosed
publicly by the
56
FDA. Orphan drug designation does not convey any advantage in, or
shorten the duration of, the regulatory review and approval
process. The first NDA or BLA applicant to receive FDA approval for
a particular active ingredient to treat a particular disease with
FDA orphan drug designation is entitled to a seven-year exclusive
marketing period in the United States for that product, for that
indication. During the seven-year exclusivity period, the FDA may
not approve any other applications to market the same drug or
biologic for the same disease, except in limited circumstances,
such as a showing of clinical superiority to the product with
orphan drug exclusivity. Orphan drug exclusivity does not prevent
the FDA from approving a different drug or biologic for the same
disease or condition, or the same drug or biologic for a different
disease or condition. Among the other benefits of orphan drug
designation are tax credits for certain research and a waiver of
the NDA or BLA application user fee.
Fast Track Designation and Accelerated Approval
The FDA is required to facilitate the development, and expedite the
review, of drugs or biologics that are intended for the treatment
of a serious or life-threatening disease or condition for which
there is no effective treatment and which demonstrate the potential
to address unmet medical needs for the condition. Under the fast
track program, the sponsor of a new drug or biologic candidate may
request that the FDA designate the candidate for a specific
indication as a fast track drug or biologic concurrent with, or
after, the filing of the IND for the candidate. The FDA must
determine if the drug or biologic candidate qualifies for fast
track designation within 60 days of receipt of the sponsor’s
request. Unique to a fast track product, the FDA may initiate
review of sections of a fast track product’s NDA or BLA
before the application is complete. This rolling review is
available if the applicant provides, and the FDA approves, a
schedule for the submission of the remaining information and the
applicant pays applicable user fees. However, the FDA’s time
period goal for reviewing an application does not begin until the
last section of the NDA or BLA is submitted. Additionally, the fast
track designation may be withdrawn by the FDA if the FDA believes
that the designation is no longer supported by data emerging in the
clinical trial process.
Any product submitted to the FDA for marketing, including under a
fast track program, may be eligible for other types of FDA programs
intended to expedite development and review, such as accelerated
approval. Drug or biological products studied for their safety and
effectiveness in treating serious or life-threatening illnesses and
that provide meaningful therapeutic benefit over existing
treatments may receive accelerated approval, which means the FDA
may approve the product based upon a surrogate endpoint that is
reasonably likely to predict clinical benefit, or on a clinical
endpoint that can be measured earlier than irreversible morbidity
or mortality, that is reasonably likely to predict an effect on
irreversible morbidity or mortality or other clinical benefit,
taking into account the severity, rarity, or prevalence of the
condition and the availability or lack of alternative
treatments.
In clinical trials, a surrogate endpoint is a measurement of
laboratory or clinical signs of a disease or condition that
substitutes for a direct measurement of how a patient feels,
functions, or survives. Surrogate endpoints can often be measured
more easily or more rapidly than clinical endpoints. A drug or
biologic candidate approved on this basis is subject to rigorous
post-marketing compliance requirements, including the completion of
Phase 4 or post-approval clinical trials to confirm the effect on
the clinical endpoint. Failure to conduct required post-approval
studies, or confirm a clinical benefit during post-marketing
studies, will allow the FDA to withdraw the drug or biologic from
the market on an expedited basis. All promotional materials for
drug candidates approved under accelerated regulations are subject
to prior review by the FDA.
Pediatric Information
Under the Pediatric Research Equity Act (“PREA”), NDAs
or BLAs or supplements to NDAs or BLAs must contain data to assess
the safety and effectiveness of the drug for the claimed
indications in all relevant pediatric subpopulations and to support
dosing and administration for each pediatric subpopulation for
which the drug is safe and effective. The FDA may grant full or
partial waivers, or deferrals, for submission of data. Unless
otherwise required by regulation, PREA does not apply to any drug
for an indication for which orphan designation has been
granted.
False Claims Laws
The federal False Claims Act prohibits, among other things, any
person or entity from knowingly presenting, or causing to be
presented, a false claim for payment to, or approval by, the
federal government or knowingly making, using, or causing to be
made or used a false record or statement material to a false or
fraudulent claim to the federal government. As a result of a
modification made by the Fraud Enforcement and Recovery Act of
2009, a claim includes “any request or demand” for
money or property presented to the US government.
57
Anti-Kickback Laws
The federal Anti-Kickback Statute prohibits, among other things,
any person or entity, from knowingly and willfully offering,
paying, soliciting or receiving any remuneration, directly or
indirectly, overtly or covertly, in cash or in kind, to induce or
in return for purchasing, leasing, ordering or arranging for the
purchase, lease or order of any item or service reimbursable under
Medicare, Medicaid or other federal healthcare programs. The term
remuneration has been interpreted broadly to include anything of
value. The Anti-Kickback Statute has been interpreted to apply to
arrangements between pharmaceutical manufacturers on one hand and
prescribers, purchasers, and formulary managers on the other.
United States Healthcare Reform
Federal Physician Payments Sunshine Act and its implementing
regulations require that certain manufacturers of drugs, devices,
biological and medical supplies for which payment is available
under Medicare, Medicaid or the Children’s Health Insurance
Program (with certain exceptions) to report information related to
certain payments or other transfers of value made or distributed to
physicians and teaching hospitals, or to entities or individuals at
the request of, or designated on behalf of, the physicians and
teaching hospitals and to report annually certain ownership and
investment interests held by physicians and their immediate family
members.
In addition, we may be subject to data privacy and security
regulation by both the federal government and the states in which
we conduct our business. The Health Insurance Portability and
Accountability Act (“HIPAA”), as amended by the Health
Information Technology for Economic and Clinical Health Act
(“HITECH”), and its implementing regulations, imposes
certain requirements relating to the privacy, security and
transmission of individually identifiable health information. Among
other things, HITECH makes HIPAA’s privacy and security
standards directly applicable to “business associates”
— independent contractors or agents of covered entities that
receive or obtain protected health information in connection with
providing a service on behalf of a covered entity. HITECH also
created four new tiers of civil monetary penalties, amended HIPAA
to make civil and criminal penalties directly applicable to
business associates and possibly other persons, and gave state
attorneys general new authority to file civil actions for damages
or injunctions in federal courts to enforce the federal HIPAA laws
and seek attorneys’ fees and costs associated with pursuing
federal civil actions. In addition, state laws govern the privacy
and security of health information in certain circumstances, many
of which differ from each other in significant ways and may not
have the same effect, thus complicating compliance efforts.
Third-Party Suppliers
and Manufacturers
Drug substance and drug product manufacturing is outsourced to
qualified suppliers. We do not have manufacturing
capabilities/infrastructure and do not intend to develop the
capacity to manufacture drug products substances. We have
agreements with third-party manufacturers to supply bulk drug
substances for our product candidates and with third parties to
formulate, package and distribute our product candidates. Our
employees include professionals with expertise in pharmaceutical
manufacturing development, quality assurance and third party
supplier management who oversee work conducted by third-party
companies. We believe that we have on hand or can easily obtain
sufficient amounts of product candidates to complete our currently
contemplated clinical trials. All of the drug substances used in
our product candidates currently are manufactured by single
suppliers. While we have not experienced any supply disruptions,
the number of manufacturers of the drug substances is limited. In
the event it is necessary or advisable to acquire supplies from
alternative suppliers, assuming commercially reasonable terms could
be reached, the challenge would be the efficient transfer of
technology and know-how from current manufactures to the new
supplier. Formulation and distribution of our finished product
candidates also currently are conducted by single suppliers but we
believe that alternative sources for these services are readily
available on commercially reasonable terms, subject to the
efficient transfer of technology and know-how from current
suppliers to the new supplier.
All of the current agreements for the supply bulk drug substances
for our product candidates and for the formulation or distribution
of our product candidates relate solely to the development
(including preclinical and clinical) of our product candidates.
Under these contracts, our product candidates are manufactured upon
our order of a specific quantity. In the event that we obtain
marketing approval for a product candidate, we will qualify
secondary suppliers for all key manufacturing activities supporting
the marketing application.
58
Marketing and
Collaboration
We do not currently have any sales and marketing capability, other
than to potentially market our biodefense vaccine products directly
to government agencies. With respect to other commercialization
efforts, we currently intend to seek distribution and other
collaboration arrangements for the sales and marketing of any
product candidate that is approved, while also evaluating the
potential to commercialize on our own in orphan disease
indications. From time to time, we have had and are having
strategic discussions with potential collaboration partners for our
biodefense vaccine product candidates, although no assurance can be
given that we will be able to enter into one or more collaboration
agreements for our product candidate on acceptable terms, if at
all. We believe that both military and civilian health authorities
of the U.S. and other countries will increase their stockpiling of
therapeutics and vaccines to treat and prevent diseases and
conditions that could ensue following a bioterrorism attack.
On December 20, 2012, we re-acquired the North American and
European commercial rights to oral BDP through an amendment of our
collaboration and supply agreement with Sigma-Tau Pharmaceuticals,
Inc. (“Sigma-Tau”). The amendment requires us to make
certain approval and commercialization milestone payments to
Sigma-Tau which could reach up to $6 million. In addition, we have
agreed to pay Sigma-Tau: (a) a royalty amount equal to 3% of all
net sales of oral BDP made directly by us, and any third-party
partner and/or their respective affiliates in the U.S., Canada,
Mexico and in each country in the European Territory for the later
to occur of: (i) a period of ten years from the first commercial
sale of oral BDP in each country, or (ii) the expiration of our
patents and patent applications relating to oral BDP in such
country (the “Payment Period”); and (b) 15% of all
up-front payments, milestone payments and any other consideration
(exclusive of equity payments) received by us and/or a potential
partner from us and/or potential partner’s licensees,
distributors and agents for oral BDP in each relevant country in
the territory, which amount will be paid on a product-by-product
and a country-by-country basis for the Payment Period.
On August 25, 2013, we entered into an agreement with SciClone
Pharmaceuticals, Inc. (“SciClone”), pursuant to which
SciClone provided us with access to its oral mucositis clinical and
regulatory data library in exchange for exclusive commercialization
rights for SGX942 in the People’s Republic of China,
including Hong Kong and Macau, subject to the negotiation of
economic terms. SciClone’s data library was generated from
two sequential Phase 2 clinical studies conducted in 2010 and 2012
evaluating SciClone’s compound, SCV-07, for the treatment of
oral mucositis caused by chemoradiation therapy in head and neck
cancer patients, before SciClone terminated its program. By
analyzing data available from the placebo subjects in the SciClone
trials, we acquired valuable insight into disease progression,
along with quantitative understanding of its incidence and severity
in the head and neck cancer patient population. This information
assisted us with the design of the SGX942 Phase 2 clinical trial,
in which positive preliminary results were announced in December
2015.
On September 9, 2016, we and SciClone entered into an exclusive
license agreement, pursuant to which we granted rights to SciClone
to develop, promote, market, distribute and sell SGX942 in the
People’s Republic of China, including Hong Kong and Macau, as
well as Taiwan, South Korea and Vietnam. Under the terms of the
license agreement, SciClone will be responsible for all aspects of
development, product registration and commercialization in the
territory, having access to data generated by us. In exchange for
exclusive rights, SciClone will pay us royalties on net sales, and
we will supply commercial drug product to SciClone on a cost-plus
basis, while maintaining worldwide manufacturing rights.
In connection with the execution of the license agreement, we
entered into a common stock purchase agreement with SciClone
pursuant to which we sold 352,942 shares of our common stock to
SciClone for approximately $8.50 per share, for an aggregate price
of $3,000,000. As additional consideration for expanded territorial
rights in South Korea, Taiwan and Vietnam, SciClone agreed to
purchase the shares of common stock at a premium above the current
market price, with the purchase price being equal to one hundred
thirty five percent (135%) of the average trading price of the
common stock over the ten trading days prior to September 9, 2016.
As part of the transaction, we granted SciClone certain demand
registration rights, and SciClone agreed, subject to certain
exceptions, not to pledge, sell or otherwise transfer or dispose
of, or enter into any swap or other arrangement that transfers any
of the economic consequences of ownership of, the shares purchased
for at least one year from September 9, 2016..
Competition
Our competitors are pharmaceutical and biotechnology companies,
most of whom have considerably greater financial, technical, and
marketing resources than we do. Universities and other research
institutions, including
59
the U.S. Army Medical Research Institute of Infectious Diseases,
also compete in the development of treatment technologies, and we
face competition from other companies to acquire rights to those
technologies.
SGX301 Competition
The FDA has approved several treatments for later stages (IIB-IV)
of CTCL and/or in conditions that are unresponsive to prior
treatment. Two are targeted therapies (Targretin
®
-caps
and Ontak
®
),
two are histone deacetylases inhibitors (Zolina
®
and Istodax
®
)
and the remaining two are topical therapies (Valchor
®
and Targretin
®
-gel).
There are currently no FDA approved therapies for the treatment of
front-line, early stage (I-IIA) CTCL; however certain topical
chemotherapies and topical, radiation, photo and other therapies
which are approved for indications other than CTCL are prescribed
off-label for the treatment of early stage CTCL. These include
psoralen combined with ultraviolet A (UVA) light therapy
(“PUVA”); however, PUVA treatments are usually limited
to three times per week and 200 times in total due to the
potentially carcinogenic side effect. There are other drugs
currently in development that may have the potential to be used in
early stage (I-IIA) CTCL — one in phase 2 (vorinostat) and
others in phase 1. Vorinostat has been approved by the FDA to treat
CTCL patients who have conditions that are unresponsive to other
therapies. It currently is being studied in a phase 2 trial for the
treatment of all stages of CTCL, with an estimated completion date
for the phase 2 trial during the second half of 2016.
SGX94/942 Competition
Because SGX94 (dusquetide) uses a novel mechanism of action in
combating bacterial infections, there are no direct competitors at
this time. Bacterial infections are routinely treated with
antibiotics and SGX94 treatment is anticipated to be utilized
primarily where antibiotics are insufficient (e.g., due to
antibiotic resistance) or contra-indicated (e.g., in situations
where the development of antibiotic resistance is a significant
concern). Many groups are working on the antibiotic resistance
problem and research into the innate immune system is intensifying,
making emerging competition likely (from companies such as
Celtaxsys Inc., Innaxon Therapeutics and Innate Pharma SA).
There is currently one drug approved for the treatment of oral
mucositis in hematological cancer (palifermin). There are currently
no approved drugs for treatment of oral mucositis in cancers with
solid tumors (e.g., head and neck cancer). There are several drugs
in clinical development for oral mucositis — one in Phase 3
(under development by Daewoong Pharmaceutical Co., Ltd.), four in
Phase 2 (under development by Cellceutix Corporation, BioAlliance
Pharma S.A., Onxeo S.A., and Alder Biopharmaceuticals Inc.) and one
in Phase 1 (under development by ActoGenix N.V.). In addition,
there are medical devices approved for the treatment of oral
mucositis including MuGard, GelClair, Episil and Caphosol. These
devices attempt to create a protective barrier around the oral
ulceration, with no biologic activity in treating the underlying
disease.
Oral BDP Competition
There are a number of approved treatments for Crohn’s disease
and additional compounds are in late-stage development.
Remicade (infliximab) and Humira (adalimumab) are currently
approved for the treatment of pediatric Crohn’s disease;
however, both carry significant Black Box warnings in their
labeling for increased risk of serious infection and malignancy,
and therefore are approved for treatment of moderate to severe
patients. There is one other marketed biologic, Tysabri
(natalizumab), in a Phase 2 study for pediatric Crohn’s.
Entocort (enteric-coated budesonide) also has completed Phase 3
trials in pediatric Crohn’s disease.
ThermoVax
®
Competition
Multiple groups and companies are working to address the unmet need
of vaccine thermostability using a variety of technologies. In
addition, other organizations, such as the Bill and Melinda Gates
Foundation and PATH, have programs designed to advance technologies
to address this need.
Several stabilization technologies currently being developed
involve mixing vaccine antigen +/- adjuvant with various
proprietary excipients or co-factors that either serve to stabilize
the vaccine or biological product in a liquid or dried
(lyophilized) form. Examples of these approaches include the use of
various plant-derived sugars and macromolecules being developed by
companies such as Stabilitech Ltd. Variation Biotechnologies, Inc.
(“VBI”) is
60
developing a lipid system (resembling liposomes) to stabilize viral
antigens, including virus-like particles (VLPs), and for potential
application to a conventional influenza vaccine among others.
Other approaches involve process variations to freeze-dry live
virus vaccines. For example, PaxVax, Inc. is seeking to employ a
spray drying technology in concert with enteric coating to achieve
formulations for room temperature stability of live virus vaccines
using adenovirus vectors. VBI is seeking to utilize their
proprietary stabilization technology for a number of vaccines (as a
co-development service, similar to the business model being
developed by Stabilitech Ltd.), whereas PaxVax is applying the
technology to their own proprietary vaccine development programs.
Stabilitech uses combinations of excipients, which include
glassifying sugars similar to the ThermoVax
®
technology, and variations in drying cycles during lyophilization,
as does the ThermoVax
®
technology.
Additionally, companies like Pharmathene, Inc., Panacea Biotec
Ltd., and Compass Biotech Inc. are developing proprietary vaccines
with the application of some form of stabilization technology.
Vaccines/BioDefense Competition
We face competition in the area of biodefense product development
from various public and private companies, universities and
governmental agencies, such as the U.S. Army, some of whom may have
their own proprietary technologies which may directly compete with
our technologies.
The U.S. Army Medical Research Institute of Infectious Diseases,
the DoD’s lead laboratory for medical research to counter
biological threats is also developing a ricin vaccine candidate,
RVEc™. RVEc™ has been shown to be fully protective in
mice exposed to lethal doses of ricin toxin by the aerosol route.
Further studies, in both rabbits and nonhuman primates, were
conducted to evaluate RVEc™’s safety as well as its
immunogenicity, with positive results observed.
In the area of radiation-protective antidotes such as
OrbeShield
®
,
various companies, such as Cleveland Biolabs, Inc., Aeolus
Pharmaceuticals, Inc., Boulder Biotechnology, Inc., RxBio, Inc.,
Avaxia Biologics, Inc., Exponential Biotherapies Inc., Osiris
Therapeutics, Inc., ImmuneRegen BioSciences, Inc., Neumedicines,
Inc., Cellerant Therapeutics, Inc., Onconova Therapeutics, Inc.,
Araim Pharmaceuticals, Inc., EVA Pharmaceuticals, Terapio
Corporation, Cangene Corporation, Humanetics Corporation and the
University of Arkansas Medical Sciences Center are developing
biopharmaceutical products that may directly compete with
OrbeShield
®,
even though their approaches to such treatment are different.
RxBio, Avaxia Biologics and the University of Arkansas have
programs specifically for GI ARS. RxBio’s Rx100 is a stem
cell protectant designed as a single dose (oral or injection) which
has shown promise in nonhuman primate studies. Avaxia is developing
an orally delivered anti-TNF antibody as a treatment agent for
exposure to radiation following a nuclear accident, attack or
explosion. Pasireotide, a drug in development by Novartis for
Cushing’s disease, is being developed at the University of
Arkansas to protect the intestine by reducing pancreatic secretions
that exacerbate intestinal inflammation.
Patents and Other
Proprietary Rights
Our goal is to obtain,
maintain and enforce patent protection for our products,
formulations, processes, methods and other proprietary
technologies, preserve our trade secrets, and operate without
infringing on the proprietary rights of other parties, both in the
U.S. and in other countries. Our policy is to actively seek to
obtain, where appropriate, the broadest intellectual property
protection possible for our product candidates, proprietary
information and proprietary technology through a combination of
contractual arrangements and patents, both in the U.S. and
elsewhere in the world.
We also depend upon the skills, knowledge and experience of our
scientific and technical personnel, as well as that of our
advisors, consultants and other contractors, none of which is
patentable. To help protect our proprietary knowledge and
experience that is not patentable, and for inventions for which
patents may be difficult to enforce, we rely on trade secret
protection and confidentiality agreements to protect our interests.
To this end, we require all employees, consultants, advisors and
other contractors to enter into confidentiality agreements, which
prohibit the disclosure of confidential information and, where
applicable, require disclosure and assignment to us of the ideas,
developments, discoveries and inventions important to our
business.
61
In 2014, we acquired a novel photodynamic therapy that utilizes
safe visible light for activation, which we refer to as SGX301. The
active ingredient in SGX301 is synthetic hypericin, a
photosensitizer which is topically applied to skin lesions and then
activated by fluorescent light 16 to 24 hours later. As part of the
acquisition, we acquired a license agreement relating to the use of
photo-activated hypericin, composition of matter patent for SGX301
(U.S. patent 8,629,302) and additional issued and pending
applications, both in the US and abroad. U.S. patent 8,629,302 is
expected to expire in June 2032.
In addition to issued and pending patents, we also have
“Orphan Drug” designations for SGX301 in the U.S. and
the EU for CTCL, SGX203 in the U.S. for pediatric Crohn’s
disease, and OrbeShield
®
in the U.S. for GI ARS, as well as for RiVax™ in the U.S. Our
Orphan Drug designations provide for seven years of post-approval
marketing exclusivity in the U.S. and ten years exclusivity in
Europe. We have pending patent applications for this indication
that, if granted, may extend our anticipated marketing exclusivity
beyond the U.S. seven year or E.U. ten year post-approval
exclusivity provided by Orphan Drug legislation.
In 2013, we expanded our patent portfolio to include innate defense
regulation through the acquisition of the novel drug technology,
known as SGX94 (dusquetide). By binding to the pivotal regulatory
protein p62, also known as sequestosome-1, SGX94 regulates the
innate immune system to reduce inflammation, eliminate infection
and enhance healing. As part of the acquisition, we acquired all
rights, including composition of matter patents for SGX94 as well
as other analogs and crystal structures of SGX94 with its protein
target p62, including U.S. patent 8,124,721 and additional issued
and pending applications, both in the US and abroad. SGX94 was
developed pursuant to discoveries made by Professors B. Brett
Finlay and Robert Hancock of University of British Columbia
(“UBC”). U.S. patent 8,124,721 is expected to expire in
April 2028.
We have issued U.S. patents 8,263,582 and 6,096,731 that cover the
use of oral BDP for treating inflammatory disorders of the
gastrointestinal tract and the prevention and treatment of GI GVHD,
respectively. U.S. patent numbers 8,263,582 and 6,096,731 are
expected to expire in March 2022 and June 2018, respectively. We
also have European patent EP 1392321 claiming the use of topically
active corticosteroids in orally administered dosage forms that act
concurrently to treat inflammation in the upper and lower
gastrointestinal tract, as well as European patent EP 2242477
claiming the use of orally ingested BDP for treatment of
interstitial lung disease. European patents EP 1392321 and EP
2242477 are expected to expire in March 2022 and January 2029.
The subject of U.S. patent application number 12/633,631 filed
December 8, 2009 and corresponding European patent application
number 09836727.9 is the use of topically active BDP in radiation
and chemotherapeutics injury. Additionally, we have numerous patent
filings currently issued or pending in foreign jurisdictions
covering this subject matter, including Australia, Canada, China,
Hong Kong, Israel, India, Japan, South Korea and New Zealand.
ThermoVax
®
is the subject of U.S. patent 8,444,991 issued on May 21, 2013
titled “Method of Preparing an Immunologically-Active
Adjuvant-Bound Dried Vaccine Composition” and also U.S.
patent application number 13/474,661 filed May 17, 2012 titled
“Thermostable Vaccine Compositions and Methods of Preparing
Same.” The patent application and the corresponding foreign
filings for both patents are pending and licensed to us by the
University of Colorado (“UC”) and they address the use
of adjuvants in conjunction with vaccines that are formulated to
resist thermal inactivation. The license agreement covers
thermostable vaccines for biodefense as well as other potential
vaccine indications. U.S. patent 8,444,991 is expected to expire in
December 2031.
RiVax™ is the subject of three issued U.S. patent numbers
6,566,500, 6,960,652, and 7,829,668, all titled “Compositions
and methods for modifying toxic effects of proteinaceous
compounds.” This patent family includes composition of matter
claims for the modified ricin toxin A chain which is the immunogen
contained in RiVax™, and issued in 2003, 2005 and 2010
respectively. The initial filing date of these patents is March
2000 and they are expected to expire in March 2020. The issued
patents contain claims that describe alteration of sequences within
the ricin A chain that affect vascular leak, one of the deadly
toxicities caused by ricin toxin. Another U.S. patent number
7,175,848 titled “Ricin A chain mutants lacking enzymatic
activity as vaccines to protect against aerosolized ricin,”
was filed in October of 2000 and is expected to expire in October
2020.
SGX301 License Agreement
In September 2014, we acquired a worldwide exclusive license
agreement with New York University and Yeda Research and
Development Company Ltd. for the rights to a novel, first-in-class,
photodynamic therapy that utilizes safe visible light for
activation, which we refer to as SGX301. To maintain this license
we are obligated to pay $25,000
62
in annual license fees. In addition, we will pay the licensors: (a)
a royalty amount equal to 3% of all net sales of SGX301 made
directly by us and/or any affiliates; (b) a royalty amount equal to
2.5% of all net sales of SGX301 made by our sublicensees, subject
to stated maximums and (c) 20% of all payments, not based on net
sales, received by us from our sublicensees. This license may be
terminated by either party upon notice of a material breach by the
other party that is not cured within the applicable cure period.
The exclusive license includes rights to several issued US patents,
including U.S. patent numbers 6,867,235 and 7,122,518, among other
domestic and foreign patent applications. U.S. Patent numbers
6,867,235 and 7,122,518 are expected to expire in January 2020 and
November 2023, respectively.
We acquired the license agreement for SGX301 and related intangible
assets, including U.S. patent 8,629,302, properties and rights
pursuant to an asset purchase agreement with Hy Biopharma Inc.
(“Hy Biopharma”). As consideration for the assets
acquired, we paid $275,000 in cash and issued 184,912 shares of
common stock with a market value of $3,750,000. Provided all future
success-orientated milestones are attained, we will be required to
make payments of up to $10.0 million, if and when achieved, payable
in common stock of the Company.
SGX94 License Agreements
On December 18, 2012, we announced the acquisition of a
first-in-class drug technology, known as SGX94 (dusquetide),
representing a novel approach to modulation of the innate immune
system. SGX94 is an IDR that regulates the innate immune system to
reduce inflammation, eliminate infection and enhance tissue healing
by binding to the pivotal regulatory protein p62, also known as
sequestosome-1. As part of the acquisition, we acquired all rights,
including composition of matter patents, preclinical and Phase 1
clinical study datasets for SGX94. We also assumed a license
agreement with UBC to advance the research and development of the
SGX94 technology. The license agreement with UBC provides us with
exclusive worldwide rights to manufacture, distribute, market sell
and/or license or sublicense products derived or developed from
this technology. Under the license agreement we are obligated to
pay UBC (i) an annual license maintenance fee of CAN $1,000, and
(ii) milestone payments which could reach up to CAN $1.2 million.
This license agreement (a) will automatically terminate if we file,
or become subject to an involuntary filing, for bankruptcy, and (b)
may be terminated by UBC in the event of, among other things, our
insolvency, dissolution, grant of a security interest in the
technology licensed to us pursuant to the license agreement, or
material breach of or failure to perform material obligations under
the license agreement or other research agreements between us and
UBC.
Oral BDP License Agreement
On November 24, 1998, the Company, known at the time as Enteron
Pharmaceuticals, Inc. (“Enteron”) and George B.
McDonald (“Dr. McDonald”) entered into an exclusive
license agreement for the rights to intellectual property,
including know-how, relating to oral BDP. The Company has an
exclusive license to commercially exploit the covered products
worldwide, subject to Dr. McDonald’s right to make and use
the technology for research purposes and the U.S.
Government’s right to use the technology for government
purposes. Pursuant to the license agreement, as amended, the
Company is required to (i) reimburse Dr. McDonald for certain
out-of-pocket expenses incurred by Dr. McDonald in connection with
the patent applications and issued patents, (ii) pay Dr. McDonald
$300,000 upon approval by the FDA of the Company’s first NDA
incorporating oral BDP; (iii) pay Dr. McDonald royalty payments
equal to 3% of net sales of the covered products and (iv) pay Dr.
McDonald $400,000 in cash upon an approval of oral BDP by the
European Medicines Agency.
Additionally, in the event that the Company sublicenses its rights
under the license agreement, the Company will be required to pay
Dr. McDonald 10% of any sublicense fees and royalty payments paid
by the sublicense to the Company.
The term of the license agreement expires upon the expiration of
the licensed patent applications or patents. Dr. McDonald has the
right to terminate the license agreement in its entirety or to
terminate exclusivity under the agreement if the Company or its
sublicense has not commercialized or are not actively attempting to
commercialize a covered product.
Additionally, the agreement terminates: (i) automatically upon the
Company becoming insolvent; (ii) upon 30 days’ notice, if the
Company breaches any obligation under the agreement without curing
such breach during the notice period; and (iii) upon 90 days’
notice by the Company. After any termination, the Company will have
the right to sell its inventory for a period not to exceed three
months following the date of termination, subject to the payment of
the amounts owed under the agreement.
63
ThermoVax
®
License
Agreement
On December 21, 2010, we executed a worldwide exclusive license
agreement with the UC for ThermoVax
®
,
which is the subject of U.S. patent number 8,444,991 issued on May
21, 2013 titled “Method of Preparing an
Immunologically-Active Adjuvant-Bound Dried Vaccine
Composition.” This patent and its corresponding foreign
filings are licensed to us by the UC and they address the use of
adjuvants in conjunction with vaccines that are formulated to
resist thermal inactivation. U.S. Patent 8,444,991 is expected to
expire in December 2031. The license agreement also covers
thermostable vaccines for biodefense as well as other potential
vaccine indications. In addition, we, in conjunction with UC, filed
domestic and foreign patent applications claiming priority back to
a provisional application filed on May 17, 2011 titled:
“Thermostable Vaccine Compositions and Methods of Preparing
Same.” To maintain this license we are obligated to pay
minimum annual license fees of $15,000 until the initiation of
clinical trials, $20,000 following the initiation of a Phase 1
clinical trial, and $50,000 following the first commercial sale of
a product incorporating ThermoVax
®
.
Under the license agreement we are obligated to pay the UC (i)
royalty payments equal to 2% of net sales of the covered products,
(ii) 15% of all income from sublicenses and (iii) milestone
payments which could reach up to $1.25 million.
RiVax™ License Agreement
In June 2003, we executed a worldwide exclusive option to license
patent applications with UTSW for the nasal, pulmonary and oral
uses of a non-toxic ricin vaccine. In June 2004, we entered into a
license agreement with UTSW for the injectable rights to the ricin
vaccine and, in October 2004, we negotiated the remaining oral
rights to the ricin vaccine. To maintain this license we are
obligated to pay $50,000 in annual license fees. Through this
license, we have rights to the issued patent number 7,175,848
titled “Ricin A chain mutants lacking enzymatic activity as
vaccines to protect against aerosolized ricin.” This patent
includes methods of use and composition claims for
RiVax™.
Research and Development
Expenditure
We spent approximately $2.3 million and $2.5 million in the six
months ended June 30, 2016 and 2015, respectively, and $5.4 million
and $9.1 million in the years ended December 31, 2015 and 2014,
respectively, on research and development. The amounts we spent on
research and development per product during the six months ended
June 30, 2016 and 2015 and the years ended December 31, 2015, and
2014 are set forth in “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” in
this prospectus.
Employees
As of June 30, 2016, we had 20 full-time employees, 8 of whom are
MDs/PhDs.
Properties
We currently lease approximately 5,200 square feet of office space
at 29 Emmons Drive, Suite C-10, Princeton, New Jersey 08540. This
office space currently serves as our corporate headquarters. In
December 2014, we entered into a lease agreement through May 31,
2018 for existing and expanded office space. The rent for the first
12 months was approximately $12,300 per month, or approximately
$20.85 per square foot. This rent increased to approximately
$12,375 per month, or approximately $20.95 per square foot, for the
next 12 months, and thereafter will increase to approximately
$12,460 per month, or approximately $21.13 per square foot for the
remainder of the lease. Our office space is sufficient to satisfy
our current needs.
Legal
Proceedings
From time to time, we are a party to claims and legal proceedings
arising in the ordinary course of business. Our management
evaluates our exposure to these claims and proceedings individually
and in the aggregate and allocates additional monies for potential
losses on such litigation if it is possible to estimate the amount
of loss and if the amount of the loss is probable.
64
MANAGEMENT
The table below contains information regarding the current members
of the Board of Directors and executive officers. The ages of
individuals are provided as of the date of this prospectus:
|
|
|
|
|
Christopher J. Schaber, PhD
|
|
50
|
|
Chairman of the Board, Chief Executive Officer
and President
|
Keith L. Brownlie, CPA
|
|
64
|
|
Director
|
Marco M. Brughera, DVM
|
|
61
|
|
Director
|
Gregg A. Lapointe, CPA
|
|
57
|
|
Director
|
Robert J. Rubin, MD
|
|
70
|
|
Director
|
Jerome B. Zeldis, MD, PhD
|
|
66
|
|
Director
|
Oreola Donini, PhD
|
|
44
|
|
Chief Scientific Officer and Senior Vice
President
|
Karen R. Krumeich
|
|
62
|
|
Chief Financial Officer and Senior Vice
President
|
Richard Straube, MD
|
|
64
|
|
Chief Medical Officer and Senior Vice
President
|
Christopher J. Schaber,
PhD
has over 26 years of experience in the pharmaceutical
and biotechnology industry. Dr. Schaber has been our President and
Chief Executive Officer and a director since August 2006. He was
appointed Chairman of the Board on October 8, 2009. He also serves
on the board of directors of the Biotechnology Council of New
Jersey (“BioNJ”) since January 2009 and the Alliance
for Biosecurity since October 2014, and has been a member of the
corporate councils of both the National Organization for Rare
Diseases (“NORD”) and the American Society for Blood
and Marrow Transplantation (“ASBMT”) since October 2009
and July 2009, respectively. Prior to joining us, Dr. Schaber
served from 1998 to 2006 as Executive Vice President and Chief
Operating Officer of Discovery Laboratories, Inc., where he was
responsible for overall pipeline development and key areas of
commercial operations, including regulatory affairs, quality
control and assurance, manufacturing and distribution, pre-clinical
and clinical research, and medical affairs, as well as coordination
of commercial launch preparation activities. From 1996 to 1998, Dr.
Schaber was a co-founder of Acute Therapeutics, Inc., and served as
its Vice President of Regulatory Compliance and Drug Development.
From 1994 to 1996, Dr. Schaber was employed by Ohmeda PPD, Inc., as
Worldwide Director of Regulatory Affairs and Operations. From 1989
to 1994, Dr. Schaber held a variety of regulatory, development and
operations positions with The Liposome Company, Inc., and
Elkins-Sinn Inc., a division of Wyeth-Ayerst Laboratories. Dr.
Schaber received his BA degree from Western Maryland College, his
MS degree in Pharmaceutics from Temple University School of
Pharmacy and his PhD degree in Pharmaceutical Sciences from the
Union Graduate School. Dr. Schaber was selected to serve as a
member of our Board of Directors because of his extensive
experience in drug development and pharmaceutical operations,
including his experience as an executive senior officer with our
Company and Discovery Laboratories, Inc., and as a member of the
board of directors of BioNJ; because of his proven ability to raise
funds and provide access to capital; and because of his advanced
degrees in science and business.
Keith L. Brownlie,
CPA
has been a director since June 2011. Mr. Brownlie
currently serves on the Board of Directors of Rxi Pharmaceuticals
Corporation, a publicly traded biotechnology company involved in
the research and development of RNAi products for the diagnosis,
prevention and treatment of human diseases, a position he has held
since June 2012. From July 2013 until December 2014, Mr. Brownlie
served on the Board of Directors of Cancer Genetics, Inc., a
publicly traded, early stage diagnostics company. Mr. Brownlie
served as a member of the Board of Directors of Epicept
Corporation, a publicly traded, specialty pharmaceutical company
focused on the clinical development and commercialization of
pharmaceutical products for the treatment of cancer and pain, from
April 2011 to August 2013 when Epicept Corporation merged with
Immune Pharmaceuticals, Inc. From 1974 to 2010, Mr. Brownlie worked
with the accounting firm of Ernst & Young LLP where he served
as audit partner for numerous public companies and was the Life
Sciences Industry Leader for the New York metro area. Mr. Brownlie
received a BS in Accounting from Lehigh University and is a
Certified Public Accountant in the state of New Jersey. Mr.
Brownlie co-founded the New Jersey Entrepreneur of the Year Program
and was Vice President and Trustee of the New Jersey Society of
CPAs. In addition, he served as accounting advisor to the board of
the Biotechnology Council of New Jersey. Mr. Brownlie was selected
to serve as a member of our Board of Directors because of his vast
experience as an audit partner for numerous public companies and as
a director of publicly traded specialty pharmaceutical and
biotechnology companies.
Marco M. Brughera,
DVM
joined the Board of Directors in October 2013. He is the
Global Head of the Rare Disease Business Unit for Sigma Tau
Finanziaria S.p.A. Group. He currently serves as President in
Sigma-Tau Pharmaceuticals, Inc. and in Sigma-Tau Research
Switzerland S.A. and as Chief Executive Officer in Sigma-Tau
Rare
65
Disease Ltd. From December 2011 through January 2014, Dr. Brughera
served on the Board of Directors of Gentium S.p.A., a publicly
traded biopharmaceutical company. From January 2011 through October
2012, Dr. Brughera held several other positions with the Sigma-Tau
Group, including Corporate Research and Development Managing
Director of Sigma-Tau Industrie Farmaceutiche Riunite S.p.A.. From
2004 to 2010, Dr. Brughera served as the Vice President of
Preclinical Development at Nerviano Medical Sciences S.r.l.
(“NMS Group”), a pharmaceutical oncology-focused
integrated discovery and development company. He also served as the
Managing Director at Accelera, S.r.l., an independent contract
research organization affiliated with the NMS Group. From 1999 to
2004, Dr. Brughera held several senior level positions in the areas
of discovery and development toxicology with Pharmacia Corporation
and Pfizer, Inc. Prior to 1999, he held various positions at
Pharmacia & Upjohn Company, Inc., and Farmitalia Carlo Erba
S.p.A., an Italian pharmaceutical company. Dr. Brughera earned his
degree in veterinary medicine from the University of Milan and is a
European Registered Toxicologist. Dr. Brughera was selected to
serve as a member of our Board of Directors because of his
background in the areas of drug discovery and development and his
experience as an executive officer and a director in the
pharmaceutical industry.
Gregg A. Lapointe, CPA,
MBA
has been a director since March 2009. Mr. Lapointe is
currently CEO of Cerium Pharmaceuticals, Inc. and serves on the
Board of Directors of SciClone Pharmaceuticals, Inc., Raptor
Pharmaceuticals, Inc., ImmunoCellular Therapeutics Ltd. and the
Board of Trustees of the Keck Graduate Institute of Applied Life
Sciences. He has previously served on the Board of Directors of the
Pharmaceuticals Research and Manufacturers of America (PhRMA) and
Questcor Pharmaceuticals, Inc. He previously served in varying
roles for Sigma-Tau Pharmaceuticals, Inc., a private
biopharmaceutical company, from September 2001 through February
2012, including Chief Operating Officer from November 2003 to April
2008 and Chief Executive Officer from April 2008 to February 2012.
From May, 1996 to August 2001, he served as Vice President of
Operations and Vice President, Controller of AstenJohnson, Inc.
(formerly JWI Inc.). Prior to that, Mr. Lapointe spent several
years in the Canadian medical products industry in both
distribution and manufacturing. Mr. Lapointe began his career at
Price Waterhouse. Mr. Lapointe received his B.A. degree in Commerce
from Concordia University in Montreal, Canada, a graduate diploma
in Accountancy from McGill University and his M.B.A. degree from
Duke University. He is a C.P.A. in the state of Illinois. Mr.
Lapointe was selected to serve as a member of our Board of
Directors because of his significant experience in the areas of
global strategic planning and implementation, business development,
corporate finance, and acquisitions, and his experience as an
executive officer and board member in the pharmaceutical and
medical products industries.
Robert J. Rubin,
MD
has been a director since October 2009. Dr. Rubin was a
clinical professor of medicine at Georgetown University from 1995
until 2012 when he was appointed a Distinguished Professor of
Medicine. From 1987 to 2001, he was president of the Lewin Group
(purchased by Quintiles Transnational Corp. in 1996), an
international health policy and management consulting firm. From
1994 to 1996, Dr. Rubin served as Medical Director of ValueRx, a
pharmaceutical benefits company. From 1992 to 1996, Dr. Rubin
served as President of Lewin-VHI, a health care consulting company.
From 1987 to 1992, he served as President of Lewin-ICF, a health
care consulting company. From 1984 to 1987, Dr. Rubin served as a
principal of ICF, Inc., a health care consulting company. From 1981
to 1984, Dr. Rubin served as the Assistant Secretary for Planning
and Evaluation at the Department of Health and Human Services and
as an Assistant Surgeon General in the United States Public Health
Service. Dr. Rubin has served on the Board of BioTelemetry, Inc.
(formerly known as CardioNet, Inc.) since 2007. He is a board
certified nephrologist and internist. Dr. Rubin received an
undergraduate degree in Political Science from Williams College and
his medical degree from Cornell University Medical College. Dr.
Rubin was selected to serve as a member of our Board of Directors
because of his vast experience in the health care industry,
including his experience as a nephrologist, internist, clinical
professor of medicine and Assistant Surgeon General, and his
business experience in the pharmaceutical industry.
Jerome B. Zeldis, MD, PhD
has been a director since
June 2011. Dr. Zeldis is currently Chief Executive Officer of
Celgene Global Health and Chief Medical Officer of Celgene
Corporation, a publicly traded, fully integrated biopharmaceutical
company, where he has been employed since 1997. From September 1994
to February 1997, Dr. Zeldis worked at Sandoz Research Institute
and the Janssen Research Institute in both clinical research and
medical development. He has been a board member of several
biotechnology companies and is currently on the boards of the NJ
Chapter of the Arthritis Foundation, the Castleman’s Disease
Organization, PTC Therapeutics, Inc. and Alliqua, Inc.
Additionally, he has served as Assistant Professor of Medicine at
the Harvard Medical School (from July 1987 to September 1988),
Associate Professor of Medicine at University of California, Davis
from (September 1988 to September 1994), Clinical Associate
Professor of Medicine at Cornell Medical School (January 1995 to
December 2003) and Professor of Clinical Medicine at the Robert
Wood Johnson Medical School (July 1998 to June 2010). Dr.
Zeldis
66
received a BA and an MS from
Brown University, and an MD, and a PhD in Molecular Biophysics and
Biochemistry from Yale University. Dr. Zeldis trained in Internal
Medicine at the UCLA Center for the Health Sciences and in
Gastroenterology at the Massachusetts General Hospital and Harvard
Medical School. Dr. Zeldis was selected to serve as a member of our
Board of Directors because of his experience as an executive
officer of a publicly traded biopharmaceutical company and in
clinical research and medical development, and his experience in
the health care industry, including his experience as an internist,
gastroenterologist and professor of medicine.
Oreola Donini,
PhD
, has been with our company since August 15, 2013 and is
currently our Chief Scientific Officer and Senior Vice President, a
position she has held since December 5, 2014. Dr. Donini served as
our Vice President of Preclinical Research and Development from
August 15, 2013 until December 4, 2014. She has more than 15
years’ experience in drug discovery and preclinical
development with start-up biotechnology companies. From 2012 to
2013, Dr. Donini worked with ESSA Pharma Inc. as Vice President
Research and Development. From 2004 to 2013, Dr. Donini worked with
Inimex Pharmaceuticals Inc., (“Inimex”), lastly as
Senior Director of Preclinical R&D from 2007-2013. Prior to
joining Inimex, she worked with Kinetek Pharmaceuticals Inc.,
developing therapies for infectious disease, cancer and cancer
supportive care. Dr. Donini is a co-inventor and leader of the
Company’s SGX94 innate defense regulator technology,
developed by Inimex and subsequently acquired by the Company. She
was responsible for overseeing the manufacturing and preclinical
testing of SGX94, which demonstrated efficacy in combating
bacterial infections and mitigating the effects of tissue damage
due to trauma, infection, radiation and/or chemotherapy treatment.
These preclinical studies resulted in a successful Phase 1 clinical
study and clearance to proceed with a Phase 2 trial for oral
mucositis in head and neck cancer and acute bacterial skin and skin
structure infections. While with ESSA Pharma Inc. as the Vice
President of Research and Development, Dr. Donini led the
preclinical testing of a novel N-terminal domain inhibitor of the
androgen receptor for the treatment of prostate cancer. While with
Kinetek Pharmaceuticals Inc., her work related to the discovery of
novel kinase and phosphatase inhibitors for the treatment of
cancer. Dr. Donini received her PhD from Queen’s University
in Kinston, Ontario, Canada and completed her post-doctoral work at
the University of California, San Francisco. Her research has
spanned drug discovery, preclinical development, manufacturing and
clinical development in infectious disease, cancer and cancer
supportive care.
Karen R. Krumeich
is currently our Chief Financial Officer and Senior Vice President,
a position she has held since June 16, 2016. From September 2013 to
June 2016, Ms. Krumeich has served as a consultant providing
finance, investor relations, business development and public
relations services to our company and other healthcare companies.
From May 2011 to May 2013, she worked as Vice President of Finance
of Cerecor, Inc., a publicly-traded biopharmaceutical company,
where she was responsible for equity financings, corporate
administrative functions, and investor relations. In addition to
these positions, Ms. Krumeich was a healthcare consultant partner
with Tatum, LLC, a national consulting firm, where she served as
Interim Chief Financial Officer of several private and public life
science and technology companies, and was Chief Financial Officer
of Mela Sciences, Inc., a publicly-traded medical device company.
Prior to these positions, she held positions of increasing
responsibility with several healthcare companies, including
Bristol-Myers Squibb Company, a public pharmaceutical company,
where she was Director of Health Systems and as Vice President of
Finance for a national pharmacy provider. Ms. Krumeich began her
career as a pharmacist and transitioned into finance after
successfully completing the CPA exam. Ms. Krumeich earned a B.Sc.
in Pharmacy from the University of Toledo, Ohio and completed her
post graduate work in accounting and finance at Cleveland State
University while pursuing her career as a pharmacist.
Richard Straube,
MD
has been with our company since January 2014 and is
currently our Senior Vice President and Chief Medical Officer. Dr.
Straube is a board-certified pediatrician with 35 years’
experience in both academia and industry, including clinical
research experience in host-response modulation. From 2009 until
joining our company, he was Chief Medical Officer of Stealth
Peptides Incorporated, a privately-held, clinical stage,
biopharmaceutical company. Prior to joining the Company, Dr.
Straube served from 1988 to 1993 in various capacities, including
most recently as Senior Director, Infectious Diseases and
Immunology, Clinical Research, for Centocor, Inc., a privately-held
biopharmaceutical company focused on developing monoclonal
antibody-based diagnostics. While at Centocor, Inc., Dr. Straube
was responsible for the initial anti-cytokine and anti-endotoxin
programs targeted at ameliorating inappropriate host responses to
infectious and immunologic challenges. Programs that he managed at
Centocor, Inc. include assessments of immunomodulation using
monoclonal removal of inciting molecular triggers, removal of
internal immune-messengers, augmentation of normal host defenses,
and maintenance of normal sub-cellular function in the face of
injury. From 1993 to 1995, Dr. Straube was Director of Medical
Affairs at T-cell Sciences, Inc., a privately-held biotechnology
company. From 1995 to 1997, he was Director of Clinical
Investigations of the Pharmaceutical Products Division of Ohmeda
Corp., a privately-held biopharmaceutical company. He served
67
from 1998 to 2007 as Executive Vice President of Research and
Development and Chief Scientific Officer at INO Therapeutics LLC, a
privately-held biotherapeutics company, where he was responsible
for the clinical trials and subsequent approval of inhaled nitric
oxide for the treatment of persistent pulmonary hypertension of the
newborn. From 2007 to 2009, Dr. Straube was the Chief Medical
Officer at Critical Biologics Corporation, a privately-held
biotechnology company. Dr. Straube received his medical degree and
residency training at the University of Chicago, completed a joint
adult and pediatrician infectious diseases fellowship at the
University of California, San Diego (“UCSD”), and as a
Milbank Scholar completed training in clinical trial design at the
London School of Hygiene and Tropical Medicine. While on the
faculty at the UCSD Medical Center, his research focused on
interventional studies for serious viral infections.
Board Leadership
Structure
Our Board of Directors believes that Dr. Schaber’s service as
both the Chairman of our Board of Directors and our Chief Executive
Officer is in the best interest of our Company and our
stockholders. Dr. Schaber possesses detailed and in-depth knowledge
of the issues, opportunities and challenges facing our Company and
our business and, therefore, is best positioned to develop agendas
that ensure that the Board of Directors’ time and attention
are focused on the most important matters. His combined role
enables decisive leadership, ensures clear accountability, and
enhances our ability to communicate our message and strategy
clearly and consistently to our stockholders, employees, and
collaborative partners.
Messrs. Brownlie and Lapointe, Dr. Brughera, Dr. Rubin, and Dr.
Zeldis are independent and the Board of Directors believes that the
independent directors provide effective oversight of management.
Moreover, in addition to feedback provided during the course of
meetings of the Board of Directors, the independent directors hold
executive sessions. Following an executive session of independent
directors, the independent directors report back to the full Board
of Directors regarding any specific feedback or issues, provide the
Chairman with input regarding agenda items for Board of Directors
and Committee meetings, and coordinate with the Chairman regarding
information to be provided to the independent directors in
performing their duties. The Board of Directors believes that this
approach appropriately and effectively complements the combined
Chairman/Chief Executive Officer structure.
Although the Company believes that the combination of the Chairman
and Chief Executive Officer roles is appropriate under the current
circumstances, our corporate governance guidelines do not establish
this approach as a policy, and the Board of Directors may determine
that it is more appropriate to separate the roles in the
future.
Role of the Board of
Directors in Risk Oversight
One of the key functions of our Board of Directors is informed
oversight of our risk management process. Our Board of Directors
does not have a standing risk management committee, but rather
administers this oversight function directly through the Board of
Directors as a whole, as well as through various standing
committees of our Board of Directors that address risks inherent in
their respective areas of oversight. In particular, our Board of
Directors is responsible for monitoring and assessing strategic
risk exposure and our Audit Committee has the responsibility to
consider and discuss our major financial risk exposures and the
steps our management has taken to monitor and control these
exposures, including guidelines and policies to govern the process
by which risk assessment and management is undertaken. The Audit
Committee also monitors compliance with legal and regulatory
requirements. Our Nominating and Corporate Governance Committee
monitors the effectiveness of our corporate governance practices,
including whether they are successful in preventing illegal or
improper liability-creating conduct. Our compensation committee
assesses and monitors whether any of our compensation policies and
programs has the potential to encourage excessive risk-taking.
Director
Independence
The Board of Directors has determined that Messrs. Brownlie and
Lapointe, Dr. Brughera, Dr. Rubin and Dr. Zeldis are
“independent” as such term is defined by the applicable
listing standards of NASDAQ. Our Board of Directors based this
determination primarily on a review of the responses of the
Directors to questionnaires regarding their employment,
affiliations and family and other relationships.
68
Committees of the Board
of Directors
Our Board of Directors has the following three committees: (1)
Compensation, (2) Audit and (3) Nominating and Corporate
Governance. Our Board of Directors has adopted a written charter
for each of these committees, which are available on our website at
www.soligenix.com
under the “Investors” section.
|
|
|
|
|
|
Nominating and Corporate Governance
Committee
|
Keith L. Brownlie, CPA
|
|
|
|
|
|
|
Marco M. Brughera, DVM
|
|
|
|
|
|
|
Gregg A. Lapointe, CPA
|
|
|
|
|
|
|
Robert J. Rubin, MD
|
|
|
|
|
|
|
Jerome Zeldis, MD, PhD
|
|
|
|
|
|
|
Audit Committee
Our Board of Directors has an Audit Committee, which is comprised
of Mr. Brownlie (Chair), Mr. Lapointe and Dr. Rubin. The Audit
Committee assists our Board of Directors in monitoring the
financial reporting process, the internal control structure and the
independent registered public accountants. Its primary duties are
to serve as an independent and objective party to monitor the
financial reporting process and internal control system, to review
and appraise the audit effort of the independent registered public
accountants and to provide an open avenue of communication among
the independent registered public accountants, financial and senior
management, and our Board of Directors. Our Board of Directors has
determined that Mr. Brownlie, Mr. Lapointe and Dr. Rubin are
“independent” directors, within the meaning of
applicable listing standards of NASDAQ and the Exchange Act and the
rules and regulations thereunder. Our Board of Directors has also
determined that the members of the Audit Committee are qualified to
serve on the committee and have the experience and knowledge to
perform the duties required of the committee and that Mr. Brownlie
qualifies as an “audit committee financial expert” as
that term is defined in the applicable regulations of the Exchange
Act.
Compensation Committee
Our Board of Directors has a Compensation Committee, which is
comprised of Dr. Rubin (Chair), Dr. Brughera and Dr. Zeldis. The
Compensation Committee is responsible for reviewing and approving
the executive compensation program, assessing executive
performance, setting salary, making grants of annual incentive
compensation and approving certain employment agreements. Our Board
of Directors has determined that Dr. Rubin, Dr. Brughera and Dr.
Zeldis are “independent” directors within the meaning
of applicable listing standards of NASDAQ and the Exchange Act and
the rules and regulations thereunder.
Nominating and Corporate Governance Committee
Our Board of Directors has a Nominating and Corporate Governance
Committee (“Nominating Committee”), which is comprised
of Dr. Zeldis (Chair), Mr. Brownlie and Mr. Lapointe. The
Nominating Committee makes recommendations to the Board of
Directors regarding the size and composition of our Board of
Directors, establishes procedures for the nomination process,
identifies and recommends candidates for election to our Board of
Directors. Our Board of Directors has determined that Dr. Zeldis,
Mr. Brownlie and Mr. Lapointe are “independent”
directors, as such term is defined by the applicable NASDAQ listing
standards.
Code of
Ethics
We have adopted a code of ethics that applies to all of our
executive officers and senior financial officers (including our
chief executive officer, chief financial officer, chief accounting
officer and any person performing similar functions). A copy of our
code of ethics is publicly available on our website at
www.soligenix.com
under the “Investors” section. If we make any
substantive amendments to our code of ethics or grant any waiver,
including any
69
implicit waiver, from a provision of the code to our chief
executive officer, chief financial officer or chief accounting
officer, we will disclose the nature of such amendment or waiver in
a Current Report on Form 8-K.
Diversity Considerations
in Identifying Director Nominees
We do not have a formal diversity policy or set of guidelines in
selecting and appointing directors that comprise our Board of
Directors. However, when making recommendations to our Board of
Directors regarding the size and composition of our Board of
Directors, our Nominating Committee does consider each individual
director’s qualifications, skills, business experience and
capacity to serve as a director and the diversity of these
attributes for the Board of Directors as a whole.
Compensation Committee
Interlocks and Insider Participation
No member of our Compensation Committee is or has at any time
during the past year been one of our officers or employees. None of
our executive officers currently serves or in the past year has
served as a member of the Board of Directors or Compensation
Committee of any entity that has one or more executive officers
serving on our Board of Directors or Compensation Committee.
Stock Ownership
Policy
In April 2012, our Board of Directors adopted a stock ownership
policy applicable to our non-employee directors to strengthen the
link between director and stockholder interests. Pursuant to the
stock ownership policy, each non-employee director is required to
hold a minimum ownership position in the common stock equal to the
annual cash compensation paid for service on the Board of
Directors, exclusive of cash compensation paid for service as a
chair or member of any committees of the Board of Directors.
Stock counted toward the ownership requirement includes common
stock held by the director, unvested and vested restricted stock,
and all shares of common stock beneficially owned by the director
held in a trust and by a spouse and/or minor children of the
director. The policy provides that the ownership requirement must
be attained within three years after the later of June 21, 2012 and
the date a director is first elected or appointed to the Board of
Directors. To monitor progress toward meeting the requirement, the
Nominating Committee will review director ownership levels at the
end of March of each year. Non-employee directors are prohibited
from selling any shares of common stock unless such director is in
compliance with the stock ownership policy. A copy of our director
compensation and stock ownership policy is publicly available on
our website at
www.soligenix.com
under the “Investors” section.
70
EXECUTIVE
COMPENSATION
Summary Compensation
Table
The following table contains information concerning the
compensation paid during each of the two years ended December 31,
2015 and December 31, 2014 to our Chief Executive Officer and each
of the two other most highly compensated executive officers during
2015 (collectively, the “Named Executive
Officers”).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher J. Schaber
1
|
|
CEO &
|
|
2015
|
|
$
|
424,360
|
|
$
|
101,846
|
|
$
|
158,200
|
|
$
|
36,201
|
|
$
|
720,607
|
|
|
President
|
|
2014
|
|
$
|
412,000
|
|
$
|
115,000
|
|
$
|
150,000
|
|
$
|
29,580
|
|
$
|
706,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph M. Warusz
2
|
|
Former VP &
|
|
2015
|
|
$
|
196,730
|
|
$
|
38,362
|
|
$
|
62,150
|
|
$
|
24,676
|
|
$
|
321,918
|
|
|
Acting CFO
|
|
2014
|
|
$
|
191,000
|
|
$
|
41,000
|
|
$
|
67,500
|
|
$
|
21,197
|
|
$
|
320,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard C. Straube
3
|
|
CMO &
|
|
2015
|
|
$
|
309,000
|
|
$
|
58,401
|
|
$
|
79,100
|
|
$
|
25,656
|
|
$
|
472,157
|
|
|
Senior VP
|
|
2014
|
|
$
|
300,000
|
|
$
|
62,000
|
|
$
|
276,000
|
|
$
|
21,328
|
|
$
|
659,328
|
Employment and Severance
Agreements
In August 2006, we entered into a three-year employment agreement
with Christopher J. Schaber, PhD. Pursuant to this employment
agreement we agreed to pay Dr. Schaber a base salary of $300,000
per year and a minimum annual bonus of $100,000. Dr.
Schaber’s employment agreement automatically renews every
three years, unless otherwise terminated, and was automatically
renewed in December 2007, December 2010 and December 2013 for an
additional three years. We agreed to issue him options to purchase
12,500 shares of our common stock, with one third immediately
vesting and the remainder vesting over three years. Upon
termination without “Just Cause” as defined by this
agreement, we would pay Dr. Schaber nine months of severance, as
well as any accrued bonuses, accrued vacation, and we would provide
health insurance and life insurance benefits for Dr. Schaber and
his dependents. No unvested options shall vest beyond the
termination date. Dr. Schaber’s monetary compensation (base
salary of $300,000 and bonus of $100,000) remained unchanged from
2006 with the 2007 renewal. Upon a change in control of the Company
due to merger or acquisition, all of Dr. Schaber’s options
shall become fully vested, and be exercisable for a period of five
years after such change in control (unless they would have expired
sooner pursuant to their terms). In the event of his death during
the term of the agreement, all of his unvested options shall
immediately vest and remain exercisable for the remainder of their
term and become the property of Dr. Schaber’s immediate
family.
In February 2007, our Board of Directors authorized the issuance of
5,000 shares to Dr. Schaber immediately prior to the completion of
a transaction, or series or a combination of related transactions
negotiated by our Board of Directors whereby, directly or
indirectly, a majority of our capital stock or a majority of our
assets are transferred from the Company and/or our stockholders to
a third party. The amended agreement with Dr. Schaber includes our
obligation to issue such shares to him if such event occurs.
On June 22, 2011, the Compensation Committee eliminated his fixed
minimum annual bonus payable and revised it to an annual targeted
bonus of 40% of his annual base salary. On December 4, 2013, the
Compensation Committee approved an increase in salary for Dr.
Schaber to $412,000. On December 4, 2014, the Compensation
Committee approved an increase in salary for Dr. Schaber to
$424,360. On December 10, 2015, the Compensation Committee approved
an increase in salary for Dr. Schaber to $434,969.
71
In May 2011, we entered into a one-year employment agreement with
Mr. Joseph M. Warusz, our Acting Chief Financial Officer, Vice
President Finance and Chief Accounting Officer. Pursuant to the
agreement, we have agreed to pay Mr. Warusz $175,000 per year and a
targeted annual bonus of 30% of base salary. We also agreed to
issue him options to purchase 4,000 shares of our common stock with
one-third immediately vesting and the remainder vesting over three
years. Mr. Warusz’s employment agreement automatically renews
each year, unless otherwise terminated, and was automatically
renewed each year since execution, until Mr. Warusz retired from
the Company effective June 30, 2016. In connection with his
retirement, we agreed to provide Mr. Warusz three months of salary
and three months of health insurance benefits and to accelerate the
vesting and extend the exercise period of certain options. On
December 6, 2012, the Compensation Committee approved an increase
in the targeted annual bonus to 35%. On December 4, 2013, the
Compensation Committee approved an increase in salary for Mr.
Warusz to $191,000. On December 4, 2014, the Compensation Committee
approved an increase in salary for Mr. Warusz to $196,730. On
December 10, 2015, the Compensation Committee approved an increase
in salary for Mr. Warusz to $201,648.
In December 2014, we entered into a one-year employment agreement
with Richard C. Straube, MD, our Chief Medical Officer and Senior
Vice President. Pursuant to the agreement, we have agreed to pay
Dr. Straube $300,000 per year and a targeted annual bonus of 30% of
base salary. We also agreed to issue him options to purchase 10,000
shares of our common stock with one-third immediately vesting and
the remainder vesting over three years. Dr. Straube’s
employment agreement automatically renews each year, unless
otherwise terminated, and has automatically renewed each year since
execution. Upon termination without “Just Cause”, as
defined in Dr. Straube’s employment agreement, we would pay
Dr. Straube three months of severance, accrued bonuses and
vacation, and health insurance benefits. No unvested options vest
beyond the termination date. On December 4, 2014, the Compensation
Committee approved an increase in salary for Dr. Straube to
$309,000. On December 10, 2015, the Compensation Committee approved
an increase in salary for Dr. Straube to $316,725.
In June 2016, we entered into a one-year employment agreement with
Karen R. Krumeich, our Chief Financial Officer and Senior Vice
President. Pursuant to the agreement, we have agreed to pay Ms.
Krumeich $222,000 per year and a targeted annual bonus of 30% of
base salary. We also agreed to issue her options to purchase 10,000
shares of our common stock with one-fourth immediately vesting and
the remainder vesting over three years. Ms. Krumeich’s
employment agreement automatically renews each year, unless
otherwise terminated. Upon termination without “Just
Cause”, as defined in Ms. Krumeich’s employment
agreement, we would pay Ms. Krumeich three months of severance,
accrued bonuses and vacation, and health insurance benefits. No
unvested options vest beyond the termination date.
Outstanding Equity
Awards at Fiscal Year-End
The following table contains information concerning unexercised
options, stock that has not vested, and equity incentive plan
awards for the Named Executive Officers outstanding at December 31,
2015, as adjusted for the reverse stock split of one-for-ten
effective October 7, 2016. We have never issued Stock Appreciation
Rights.
|
|
Number of Securities
Underlying Unexercised
Options
(#)
|
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options
|
|
Option
Exercise
Price
|
|
Option Expiration
|
|
|
|
|
|
|
|
|
|
|
|
Christopher J. Schaber
|
|
12,500
|
|
—
|
|
—
|
|
$
|
54.00
|
|
8/28/2016
|
|
|
4,500
|
|
—
|
|
—
|
|
$
|
94.00
|
|
8/9/2017
|
|
|
14,000
|
|
—
|
|
—
|
|
$
|
12.00
|
|
12/17/2018
|
|
|
11,000
|
|
—
|
|
—
|
|
$
|
46.40
|
|
6/30/2020
|
|
|
11,219
|
|
—
|
|
—
|
|
$
|
6.40
|
|
11/30/2021
|
|
|
13,000
|
|
—
|
|
2,500
|
|
$
|
6.80
|
|
12/04/2022
|
|
|
7,500
|
|
2,500
|
|
5,000
|
|
$
|
20.10
|
|
12/04/2023
|
|
|
5,000
|
|
5,000
|
|
10,500
|
|
$
|
15.00
|
|
12/04/2024
|
|
|
3,500
|
|
10,500
|
|
2,500
|
|
$
|
11.30
|
|
12/30/2025
|
72
|
|
Number of Securities
Underlying Unexercised
Options
(#)
|
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned
Options
|
|
Option
Exercise
Price
|
|
Option Expiration
|
|
|
|
|
|
|
|
|
|
|
|
Richard C. Straube
|
|
6,875
|
|
3,125
|
|
3,125
|
|
$
|
20.10
|
|
1/06/2024
|
|
|
2,500
|
|
2,500
|
|
2,500
|
|
$
|
15.00
|
|
12/04/2024
|
|
|
1,750
|
|
5,250
|
|
5,250
|
|
$
|
11.30
|
|
12/30/2025
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph M. Warusz
|
|
4,000
|
|
—
|
|
—
|
|
$
|
41.00
|
|
9/30/2016
|
|
|
2,531
|
|
—
|
|
—
|
|
$
|
6.40
|
|
6/30/2021
|
|
|
5,500
|
|
—
|
|
—
|
|
$
|
6.80
|
|
6/30/2021
|
|
|
3,376
|
|
1,125
|
|
1,125
|
|
$
|
20.10
|
|
6/30/2021
|
|
|
2,251
|
|
2,250
|
|
2,250
|
|
$
|
15.00
|
|
6/30/2021
|
|
|
1,375
|
|
4,125
|
|
4,125
|
|
$
|
11.30
|
|
6/30/2021
|
Compensation of
Directors
The following table contains information concerning the
compensation of the non-employee directors during the fiscal year
ended December 31, 2015.
|
|
Fees Earned Paid in Cash
1
|
|
|
|
|
Keith Brownlie
|
|
$
|
55,000
|
|
$
|
30,000
|
|
$
|
85,000
|
Marco Brughera
|
|
$
|
40,000
|
|
$
|
30,000
|
|
$
|
70,000
|
Gregg A. Lapointe
|
|
$
|
47,500
|
|
$
|
30,000
|
|
$
|
77,500
|
Robert J. Rubin
|
|
$
|
52,500
|
|
$
|
30,000
|
|
$
|
82,500
|
Jerome B. Zeldis
|
|
$
|
50,000
|
|
$
|
30,000
|
|
$
|
80,000
|
73
CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS
Our audit committee is responsible for the review, approval and
ratification of related party transactions. The audit committee
reviews these transactions under our Code of Ethics, which governs
conflicts of interests, among other matters, and is applicable to
our employees, officers and directors.
We are party to a common stock purchase agreement with Sigma-Tau
Pharmaceuticals, Inc. (“Sigma-Tau Pharmaceuticals”), a
corporation of which Paolo Cavazza, who beneficially owns 5% or
more of the shares of our outstanding common stock, indirectly owns
37.2%. The agreement provides that Sigma-Tau Pharmaceuticals has
the right to require that we register its shares under the
Securities Act of 1933 (the “Securities Act”) for sale
to the public, on not more than one occasion during any
twelve-month rolling period, and not more than two occasions in the
aggregate. We must pay all expenses incurred in connection with the
exercise of these demand registration rights. Additionally, the
agreement required us to use our best efforts to secure the
election of a Sigma-Tau Pharmaceuticals’ designee to our
Board of Directors as long as Sigma-Tau Pharmaceuticals
beneficially owned at least 10% of our issued and outstanding
shares of common stock. As of the date of this prospectus,
Sigma-Tau Pharmaceuticals beneficially owned 9.7% of our
outstanding common stock, and our obligation with respect to the
election of a Sigma-Tau Pharmaceuticals designee to our Board of
Directors has expired.
In addition, Sigma-Tau Pharmaceuticals has piggyback registration
rights, which means that they have the right to include their
shares in any registration that we effect under the Securities Act,
subject to specified exceptions. We must pay all expenses incurred
in connection with these piggyback registration rights.
We are party to a stock issuance agreement with Intrexon
Corporation (“Intrexon”), a corporation of which
Randall J. Kirk, who beneficially owns 5% or more of the shares of
our outstanding common stock, serves as the Chairman and Chief
Executive Officer. Under the agreement, Intrexon has piggyback
registration rights, which means that it has the right to include
its shares in any registration that we effect under the Securities
Act, subject to specified exceptions. We must pay all expenses,
except any broker or similar commissions, incurred in connection
with these piggyback registration rights.
We are party to a common stock purchase agreement with SciClone
Pharmaceuticals, Inc. (“SciClone”), which beneficially
owns 5% or more of the shares of our outstanding common stock.
Under the agreement, SciClone has demand registration rights, which
means that SciClone has the right to require that we register its
shares under the Securities Act for sale to the public, on not more
than one occasion, subject to specified exceptions. We must pay all
expenses incurred in connection with the exercise of these demand
registration rights.
We are unable to estimate the dollar value of the registration
rights to the holders of these rights. The amount of reimbursable
expenses under the agreements depends on a number of variables,
including whether registration rights are exercised incident to a
primary offering by us, the form on which we are eligible to
register such a transaction, and whether we have a shelf
registration in place at the time of a future offering.
Other than as described above, the employment agreements and
compensation paid to our directors, we did not engage in any
transactions with related parties since January 1, 2014.
74
SECURITY OWNERSHIP OF
MANAGEMENT AND OTHER BENEFICIAL OWNERS
The table below provides information regarding the beneficial
ownership of the common stock as of the date of this prospectus, of
(1) each person or entity who owns beneficially 5% or more of the
shares of our outstanding common stock, (2) each of our directors,
(3) each of the Named Executive Officers, and (4) our directors and
officers as a group. Except as otherwise indicated, and subject to
applicable community property laws, we believe the persons named in
the table have sole voting and investment power with respect to all
shares of common stock held by them.
|
|
Shares of Common Stock Beneficially
Owned**
|
|
|
Randall J. Kirk
(1)
|
|
686,782
|
|
17.15
|
%
|
NRM VII Holdings I, LLC
(1)
|
|
583,333
|
|
14.57
|
%
|
Paolo Cavazza
(2)
|
|
337,995
|
|
8.90
|
%
|
Sigma-Tau Pharmaceuticals, Inc.
(2)
|
|
306,846
|
|
8.10
|
%
|
SciClone Pharmaceuticals, Inc.
(3)
|
|
352,942
|
|
9.40
|
%
|
Intrexon Corporation
(1)
|
|
103,448
|
|
2.76
|
%
|
Christopher J. Schaber
(4)
|
|
97,756
|
|
2.54
|
%
|
Keith Brownlie
(5)
|
|
13,031
|
|
|
*
|
Marco Brughera
(6)
|
|
5,871
|
|
|
*
|
Gregg A. Lapointe
(7)
|
|
16,660
|
|
|
*
|
Robert J. Rubin
(8)
|
|
12,625
|
|
|
*
|
Jerry Zeldis
(9)
|
|
14,115
|
|
|
*
|
Richard Straube
(10)
|
|
15,875
|
|
|
*
|
Oreola Donini
(11)
|
|
16,250
|
|
|
*
|
Karen R. Krumeich
(12)
|
|
6,300
|
|
|
*
|
All directors and executive officers as a group
(9 persons)
|
|
198,483
|
|
5.06
|
%
|
75
76
UNDERWRITING
Aegis Capital Corp. is acting as the lead book-running manager of
the offering and as representative of the underwriters, or the
Representative. We have entered into an underwriting agreement,
dated , 2016, with the
Representative. Subject to the terms and conditions of the
underwriting agreement, we have agreed to sell to each underwriter
named below and each underwriter named below has severally and not
jointly agreed to purchase from us, at the public offering price
per share less the underwriting discounts set forth on the cover
page of this prospectus and as set forth below, the number of
shares of common stock and warrants listed next to its name in the
following table:
|
|
|
|
|
Aegis Capital Corp.
|
|
|
|
|
Maxim Group LLC
|
|
|
|
|
Total
|
|
|
|
|
The underwriters are committed to purchase all the shares of common
stock and warrants offered by us other than those covered by the
over-allotment option to purchase additional shares and warrants
described below, if they purchase any shares and warrants. The
obligations of the underwriters may be terminated upon the
occurrence of certain events specified in the underwriting
agreement. Furthermore, pursuant to the underwriting agreement, the
underwriters’ obligations are subject to customary
conditions, representations and warranties contained in the
underwriting agreement, such as receipt by the underwriters of
officers’ certificates and legal opinions.
We have agreed to indemnify the underwriters against specified
liabilities, including liabilities under the Securities Act, and to
contribute to payments the underwriters may be required to make in
respect thereof.
The underwriters are offering the shares and warrants, subject to
prior sale, when, as and if issued to and accepted by them, subject
to approval of legal matters by their counsel and other conditions
specified in the underwriting agreement. The underwriters reserve
the right to withdraw, cancel or modify offers to the public and to
reject orders in whole or in part.
We have granted the underwriters an over-allotment option. This
option, which is exercisable for up to 45 days after the date of
this prospectus, permits the underwriters to purchase a maximum of
_________ additional shares and/or ________ warrants (15% of the
shares and/or warrants sold in this offering) from us to cover
over-allotments, if any. If the underwriters exercise all or part
of this option, they will purchase shares and/or warrants covered
by the option at the public offering price per share that appears
on the cover page of this prospectus, less the 6% underwriting
discount. If this option is exercised in full, the total price to
the public will be $ and the
total net proceeds, before expenses, to us will be
$ .
Discount.
The
following table shows the public offering price, underwriting
discount and proceeds, before expenses, to us. The information
assumes either no exercise or full exercise by the underwriters of
their over-allotment option.
|
|
|
|
|
|
Total
Without Over-allotment Option
|
|
Total
With Over-allotment Option
|
Public offering price
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Underwriting discount (6%)
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting discount (3%)
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-accountable expense allowance
(1%)
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds, before expenses, to us
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
77
The underwriters propose to
offer the shares and warrants to the public at the public offering
price per share and per warrant set forth on the cover of this
prospectus. In addition, the underwriters may offer some of the
shares and warrants to other securities dealers at such price less
a concession of $ per share and warrant. If all of the shares and
warrants offered by us are not sold at the public offering price,
the underwriters may change the offering price and other selling
terms by means of a supplement to this prospectus.
We have paid an expense deposit of $20,000 to the Representative,
which will be applied against the accountable expenses that will be
paid by us to the Representative in connection with this offering.
The $20,000 expense deposit will be returned to us to the extent
not actually incurred. The underwriting agreement also provides
that in the event the offering is terminated, the $20,000 expense
deposit paid to the Representative will be returned to us to the
extent that offering expenses are not actually incurred by the
Representative.
We have also agreed to pay the Representative’s out-of-pocket
accountable expenses relating to the offering, including (a) all
fees, expenses and disbursements relating to background checks of
our officers and directors in an amount not to exceed $5,000 per
individual and $15,000 in the aggregate; (b) all filing fees
incurred in clearing this offering with FINRA; (c) all fees,
expenses and disbursements relating to the registration,
qualification or exemption of securities offered under the
securities laws of foreign jurisdictions designated by the
underwriters; (d) all fees, expenses and disbursements relating to
the registration, qualification or exemption of the securities in
the offering under the “blue sky laws (including all filing
and registration fees and reasonable fees of “blue sky”
counsel up to $5,000; (e) the fees and expenses of the
underwriters’ legal counsel not to exceed $50,000; (f)
$29,500 for the underwriters’ use of Ipreo’s
book-building, prospectus tracking and compliance software for this
offering; (g) up to $20,000 of the Representative’s actual
accountable road show expenses for the offering; and (h) the costs
associated with advertising the closing of the offering and bound
volumes of the public offering materials.
We estimate that the total expenses of the offering payable by us,
excluding underwriting discounts and commissions, will be
approximately $_______.
Discretionary
Accounts
. The underwriters do not intend to confirm
sales of the securities offered hereby to any accounts over which
they have discretionary authority.
Lock-Up
Agreements
. Pursuant to certain “lock-up”
agreements, we, our executive officers and directors, and holders
of 5% or more of our outstanding shares of common stock on a fully
diluted basis (including shares underlying options, warrants and
convertible securities) have agreed, subject to certain exceptions,
not to offer, sell, assign, transfer, pledge, contract to sell, or
otherwise dispose of or announce the intention to otherwise dispose
of, or enter into any swap, hedge or similar agreement or
arrangement that transfers, in whole or in part, the economic risk
of ownership of, directly or indirectly, engage in any short
selling of any common stock or securities convertible into or
exchangeable or exercisable for any common stock, whether currently
owned or subsequently acquired, without the prior written consent
of the Representative, for a period of 90 days from the date of
effectiveness of the offering. Notwithstanding the foregoing, we
will, at all times, be permitted to file any registration statement
with the SEC relating to the resale of shares of our capital stock
by Hy Biopharma, Inc., Yeda Research and Development Company, Ltd.
And New York University in order to satisfy our obligations under
that certain registration rights agreement with Hy Biopharma, Inc.,
dated September 3, 2014.
R
epresentative’s
Warrants.
We have agreed to issue to the
Representative warrants to purchase up to a total of _______ shares
of common stock (2% of the shares of common stock sold in this
offering, but excluding any shares sold to members of our Board
and/or our executive officers). The warrants will be exercisable at
any time, and from time to time, in whole or in part, during the
four-year period commencing one year from the effective date of the
offering, which period shall not extend further than five years
from the effective date of the offering in compliance with FINRA
Rule 5110(f)(2)(G)(i). The warrants are exercisable at a per share
price equal to $ per share, or 125% of the public offering price
per share in the offering. The warrants have been deemed
compensation by FINRA and are therefore subject to a 180 day
lock-up pursuant to Rule 5110(g)(1) of FINRA. The Representative
(or permitted assignees under Rule 5110(g)(1)) will not sell,
transfer, assign, pledge, or hypothecate these warrants or the
securities underlying these warrants, nor will they engage in any
hedging, short sale, derivative, put, or call transaction that
would result in the effective economic disposition of the warrants
or the underlying securities for a period of 180 days from the date
of effectiveness. In addition, the warrants provide for
registration rights upon request, in certain cases. The piggyback
registration right provided will not be greater than seven years
from the effective date of the offering in compliance with FINRA
Rule 5110(f)(2)(G)(v). We will bear all fees and expenses attendant
to registering the securities issuable on exercise of the warrants
other than underwriting commissions incurred and payable by the
holders. The exercise
78
price and number of shares issuable upon exercise of the warrants
may be adjusted in certain circumstances including in the event of
a stock dividend or our recapitalization, reorganization, merger or
consolidation. However, the warrant exercise price or underlying
shares will not be adjusted for issuances of shares of common stock
at a price below the warrant exercise price.
Electronic Offer,
Sale and Distribution of Securities.
A prospectus in
electronic format may be made available on the websites maintained
by one or more of the underwriters or selling group members, if
any, participating in this offering and one or more of the
underwriters participating in this offering may distribute
prospectuses electronically. The Representative may agree to
allocate a number of shares and warrants to underwriters and
selling group members for sale to their online brokerage account
holders. Internet distributions will be allocated by the
underwriters and selling group members that will make internet
distributions on the same basis as other allocations. Other than
the prospectus in electronic format, the information on these
websites is not part of, nor incorporated by reference into, this
prospectus or the registration statement of which this prospectus
forms a part, has not been approved or endorsed by us or any
underwriter in its capacity as underwriter, and should not be
relied upon by investors.
Determination of the
Initial Public Offering Price
. The public offering
price was determined through negotiations between us and the
Representative of the underwriters. In addition to prevailing
market conditions, the factors considered in determining the public
offering price included the following:
•
the information included in this prospectus and otherwise available
to the Representative;
•
the valuation multiples of publicly traded companies that the
Representative believe to be comparable to us;
•
our financial information;
•
our prospects and the history and the prospectus of the industry in
which we compete;
•
an assessment of our management, its past and present operations,
and the prospects for, and timing of, our future revenues;
•
the present state of our development; and
•
the above factors in relation to market values and various
valuation measures of other companies engaged in activities similar
to ours.
An active trading market for our common stock and our warrants may
not develop. It is also possible that, after the offering, the
shares and warrants will not trade in the public market at or above
the initial public offering price.
Stabilization.
In
connection with this offering, the underwriters may engage in
stabilizing transactions, over-allotment transactions,
syndicate-covering transactions, penalty bids and purchases to
cover positions created by short sales.
•
Stabilizing transactions permit bids to purchase securities so long
as the stabilizing bids do not exceed a specified maximum, and are
engaged in for the purpose of preventing or retarding a decline in
the market price of the securities while the offering is in
progress.
•
Over-allotment transactions involve sales by the underwriters of
securities in excess of the number of securities the underwriters
are obligated to purchase. This creates a syndicate short position
which may be either a covered short position or a naked short
position. In a covered short position, the number of securities
over-allotted by the underwriters is not greater than the number of
securities that they may purchase in the over-allotment option. In
a naked short position, the number of securities involved is
greater than the number of securities in the over-allotment option.
The underwriters may close out any short position by exercising
their over-allotment option and/or purchasing securities in the
open market.
•
Syndicate covering transactions involve purchases of securities in
the open market after the distribution has been completed in order
to cover syndicate short positions. In determining the source of
securities to close out the short position, the underwriters will
consider, among other things, the price of securities available for
purchase in the open market as compared with the price at which
they may purchase securities through exercise of the over-allotment
option. If the underwriters sell more securities than could be
covered by
79
exercise of the over-allotment option and, therefore, have a naked
short position, the position can be closed out only by buying
securities in the open market. A naked short position is more
likely to be created if the underwriters are concerned that after
pricing there could be downward pressure on the price of the
securities in the open market that could adversely affect investors
who purchase in the offering.
•
Penalty bids permit the Representative to reclaim a selling
concession from a syndicate member when the securities originally
sold by that syndicate member are purchased in stabilizing or
syndicate covering transactions to cover syndicate short
positions.
These stabilizing transactions, syndicate covering transactions and
penalty bids may have the effect of raising or maintaining the
market price of our securities or preventing or retarding a decline
in the market price of our securities. As a result, the price of
our securities in the open market may be higher than it would
otherwise be in the absence of these transactions. Neither we nor
the underwriters make any representation or prediction as to the
effect that the transactions described above may have on the price
of our securities. These transactions may be effected on The NASDAQ
Capital Market, in the over-the-counter market or otherwise and, if
commenced, may be discontinued at any time.
Passive market
making
. In connection with this offering, underwriters
and selling group members may engage in passive market making
transactions in our common stock on The NASDAQ Capital Market or in
the over-the-counter market in accordance with Rule 103 of
Regulation M under the Exchange Act, during a period before the
commencement of offers or sales of the securities and extending
through the completion of the distribution. A passive market maker
must display its bid at a price not in excess of the highest
independent bid of that security. However, if all independent bids
are lowered below the passive market maker’s bid, then that
bid must then be lowered when specified purchase limits are
exceeded.
Other
Relationships
. Certain of the underwriters and their
affiliates have provided, and may in the future provide, various
investment banking, commercial banking and other financial services
for us and our affiliates for which they have received, and may in
the future receive, customary fees. However, except as disclosed in
this prospectus, we have no present arrangements with any of the
underwriters for any further services.
Offer restrictions
outside the United States
Other than in the United States, no action has been taken by us or
the underwriters that would permit a public offering of the
securities offered by this prospectus in any jurisdiction where
action for that purpose is required. The securities offered by this
prospectus may not be offered or sold, directly or indirectly, nor
may this prospectus or any other offering material or
advertisements in connection with the offer and sale of any such
securities be distributed or published in any jurisdiction, except
under circumstances that will result in compliance with the
applicable rules and regulations of that jurisdiction. Persons into
whose possession this prospectus comes are advised to inform
themselves about and to observe any restrictions relating to the
offering and the distribution of this prospectus. This prospectus
does not constitute an offer to sell or a solicitation of an offer
to buy any securities offered by this prospectus in any
jurisdiction in which such an offer or a solicitation is
unlawful.
Australia
This prospectus is not a disclosure document under Chapter 6D of
the Australian Corporations Act, has not been lodged with the
Australian Securities and Investments Commission and does not
purport to include the information required of a disclosure
document under Chapter 6D of the Australian Corporations Act.
Accordingly, (i) the offer of the securities under this prospectus
is only made to persons to whom it is lawful to offer the
securities without disclosure under Chapter 6D of the Australian
Corporations Act under one or more exemptions set out in section
708 of the Australian Corporations Act, (ii) this prospectus is
made available in Australia only to those persons as set forth in
clause (i) above, and (iii) the offeree must be sent a notice
stating in substance that by accepting this offer, the offeree
represents that the offeree is such a person as set forth in clause
(i) above, and, unless permitted under the Australian Corporations
Act, agrees not to sell or offer for sale within Australia any of
the securities sold to the offeree within 12 months after its
transfer for the offeree under this prospectus.
80
China
The information in this document does not constitute a public offer
of the securities, whether by way of sale or subscription, in the
People’s Republic of China (excluding, for purposes of this
paragraph, Hong Kong Special Administrative Region, Macau Special
Administrative Region and Taiwan). The securities may not be
offered or sold directly or indirectly in the PRC to legal or
natural persons other than directly to “qualified domestic
institutional investors.”
European Economic Area — Belgium, Germany, Luxembourg and
Netherlands
The information in this document has been prepared on the basis
that all offers of securities will be made pursuant to an exemption
under the Directive 2003/71/EC (“Prospectus
Directive”), as implemented in Member States of the European
Economic Area (each, a “Relevant Member State”), from
the requirement to produce a prospectus for offers of
securities.
An offer to the public of securities has not been made, and may not
be made, in a Relevant Member State except pursuant to one of the
following exemptions under the Prospectus Directive as implemented
in that Relevant Member State:
(a)
to legal
entities that are authorized or regulated to operate in the
financial markets or, if not so authorized or regulated, whose
corporate purpose is solely to invest in securities;
(b)
to any legal entity that has two or more of (i) an average of at
least 250 employees during its last fiscal year; (ii) a total
balance sheet of more than € 43,000,000 (as shown on its last
annual unconsolidated or consolidated financial statements) and
(iii) an annual net turnover of more than € 50,000,000 (as
shown on its last annual unconsolidated or consolidated financial
statements);
(c)
to fewer
than 100 natural or legal persons (other than qualified investors
within the meaning of Article 2(1)(e) of the Prospectus Directive)
subject to obtaining the prior consent of the Company or any
underwriter for any such offer; or
(d)
in any other circumstances falling within Article 3(2) of the
Prospectus Directive, provided that no such offer of securities
shall result in a requirement for the publication by the Company of
a prospectus pursuant to Article 3 of the Prospectus Directive.
France
This document is not being distributed in the context of a public
offering of financial securities (offre au public de titres
financiers) in France within the meaning of Article L.411-1 of the
French Monetary and Financial Code (Code monétaire et
financier) and Articles 211-1 et seq. of the General Regulation of
the French Autorité des marchés financiers
(“AMF”). The securities have not been offered or sold
and will not be offered or sold, directly or indirectly, to the
public in France.
This document and any other offering material relating to the
securities have not been, and will not be, submitted to the AMF for
approval in France and, accordingly, may not be distributed or
caused to distributed, directly or indirectly, to the public in
France.
Such offers, sales and distributions have been and shall only be
made in France to (i) qualified investors (investisseurs
qualifiés) acting for their own account, as defined in and in
accordance with Articles L.411-2-II-2° and D.411-1 to D.411-3,
D.744-1, D.754-1 and D.764-1 of the French Monetary and Financial
Code and any implementing regulation and/or (ii) a restricted
number of non-qualified investors (cercle restreint
d’investisseurs) acting for their own account, as defined in
and in accordance with Articles L.411-2-II-2° and D.411-4,
D.744-1, D.754-1 and D.764-1 of the French Monetary and Financial
Code and any implementing regulation.
Pursuant to Article 211-3 of the General Regulation of the AMF,
investors in France are informed that the securities cannot be
distributed (directly or indirectly) to the public by the investors
otherwise than in accordance with Articles L.411-1, L.411-2,
L.412-1 and L.621-8 to L.621-8-3 of the French Monetary and
Financial Code.
81
Ireland
The information in this document does not constitute a prospectus
under any Irish laws or regulations and this document has not been
filed with or approved by any Irish regulatory authority as the
information has not been prepared in the context of a public
offering of securities in Ireland within the meaning of the Irish
Prospectus (Directive 2003/71/EC) Regulations 2005 (the
“Prospectus Regulations”). The securities have not been
offered or sold, and will not be offered, sold or delivered
directly or indirectly in Ireland by way of a public offering,
except to (i) qualified investors as defined in Regulation 2(l) of
the Prospectus Regulations and (ii) fewer than 100 natural or legal
persons who are not qualified investors.
Israel
The securities offered by this prospectus have not been approved or
disapproved by the Israeli Securities Authority, or the ISA, nor
have such securities been registered for sale in Israel. The shares
and warrants may not be offered or sold, directly or indirectly, to
the public in Israel, absent the publication of a prospectus. The
ISA has not issued permits, approvals or licenses in connection
with the offering or publishing the prospectus; nor has it
authenticated the details included herein, confirmed their
reliability or completeness, or rendered an opinion as to the
quality of the securities being offered. Any resale in Israel,
directly or indirectly, to the public of the securities offered by
this prospectus is subject to restrictions on transferability and
must be effected only in compliance with the Israeli securities
laws and regulations.
Italy
The offering of the securities in the Republic of Italy has not
been authorized by the Italian Securities and Exchange Commission
(Commissione Nazionale per le Societa e la Borsa,
“CONSOB” pursuant to the Italian securities legislation
and, accordingly, no offering material relating to the securities
may be distributed in Italy and such securities may not be offered
or sold in Italy in a public offer within the meaning of Article
1.1(t) of Legislative Decree No. 58 of 24 February 1998
(“Decree No. 58”), other than:
•
to Italian qualified investors, as defined in Article 100 of Decree
no. 58 by reference to Article 34-ter of CONSOB Regulation no.
11971 of 14 May 1999 (“Regulation no. 1197l”) as
amended (“Qualified Investors”); and
•
in other circumstances that are exempt from the rules on public
offer pursuant to Article 100 of Decree No. 58 and Article 34-ter
of Regulation No. 11971 as amended.
Any offer, sale or delivery of
the securities or distribution of any offer document relating to
the securities in Italy (excluding placements where a Qualified
Investor solicits an offer from the issuer) under the paragraphs
above must be:
•
made by investment firms, banks or financial intermediaries
permitted to conduct such activities in Italy in accordance with
Legislative Decree No. 385 of 1 September 1993 (as amended), Decree
No. 58, CONSOB Regulation No. 16190 of 29 October 2007 and any
other applicable laws; and
•
in compliance with all relevant Italian securities, tax and
exchange controls and any other applicable laws.
Any subsequent distribution of the securities in Italy must be made
in compliance with the public offer and prospectus requirement
rules provided under Decree No. 58 and the Regulation No. 11971 as
amended, unless an exception from those rules applies. Failure to
comply with such rules may result in the sale of such securities
being declared null and void and in the liability of the entity
transferring the securities for any damages suffered by the
investors.
Japan
The securities have not been and will not be registered under
Article 4, paragraph 1 of the Financial Instruments and Exchange
Law of Japan (Law No. 25 of 1948), as amended (the
“FIEL”) pursuant to an exemption from the registration
requirements applicable to a private placement of securities to
Qualified Institutional Investors (as defined in and in accordance
with Article 2, paragraph 3 of the FIEL and the regulations
promulgated thereunder).
82
Accordingly, the securities may not be offered or sold, directly or
indirectly, in Japan or to, or for the benefit of, any resident of
Japan other than Qualified Institutional Investors. Any Qualified
Institutional Investor who acquires securities may not resell them
to any person in Japan that is not a Qualified Institutional
Investor, and acquisition by any such person of securities is
conditional upon the execution of an agreement to that effect.
Portugal
This document is not being distributed in the context of a public
offer of financial securities (oferta pública de valores
mobiliários) in Portugal, within the meaning of Article 109 of
the Portuguese Securities Code (Código dos Valores
Mobiliários). The securities have not been offered or sold and
will not be offered or sold, directly or indirectly, to the public
in Portugal. This document and any other offering material relating
to the securities have not been, and will not be, submitted to the
Portuguese Securities Market Commission (Comissão do Mercado
de Valores Mobiliários) for approval in Portugal and,
accordingly, may not be distributed or caused to distributed,
directly or indirectly, to the public in Portugal, other than under
circumstances that are deemed not to qualify as a public offer
under the Portuguese Securities Code. Such offers, sales and
distributions of securities in Portugal are limited to persons who
are “qualified investors” (as defined in the Portuguese
Securities Code). Only such investors may receive this document and
they may not distribute it or the information contained in it to
any other person.
Sweden
This document has not been, and will not be, registered with or
approved by Finansinspektionen (the Swedish Financial Supervisory
Authority). Accordingly, this document may not be made available,
nor may the securities be offered for sale in Sweden, other than
under circumstances that are deemed not to require a prospectus
under the Swedish Financial Instruments Trading Act (1991:980) (Sw.
lag (1991:980) om handel med finansiella instrument). Any offering
of securities in Sweden is limited to persons who are
“qualified investors” (as defined in the Financial
Instruments Trading Act). Only such investors may receive this
document and they may not distribute it or the information
contained in it to any other person.
Switzerland
The securities may not be publicly offered in Switzerland and will
not be listed on the SIX Swiss Exchange (“SIX”) or on
any other stock exchange or regulated trading facility in
Switzerland. This document has been prepared without regard to the
disclosure standards for issuance prospectuses under art. 652a or
art. 1156 of the Swiss Code of Obligations or the disclosure
standards for listing prospectuses under art. 27 ff. of the SIX
Listing Rules or the listing rules of any other stock exchange or
regulated trading facility in Switzerland. Neither this document
nor any other offering material relating to the securities may be
publicly distributed or otherwise made publicly available in
Switzerland.
Neither this document nor any other offering material relating to
the securities have been or will be filed with or approved by any
Swiss regulatory authority. In particular, this document will not
be filed with, and the offer of securities will not be supervised
by, the Swiss Financial Market Supervisory Authority.
This document is personal to the recipient only and not for general
circulation in Switzerland.
United Arab Emirates
Neither this document nor the securities have been approved,
disapproved or passed on in any way by the Central Bank of the
United Arab Emirates or any other governmental authority in the
United Arab Emirates, nor has the Company received authorization or
licensing from the Central Bank of the United Arab Emirates or any
other governmental authority in the United Arab Emirates to market
or sell the securities within the United Arab Emirates.
This document does not constitute and may not be used for the
purpose of an offer or invitation. No services relating to the
securities, including the receipt of applications and/or the
allotment or redemption of such shares, may be rendered within the
United Arab Emirates by the Company.
No offer or invitation to subscribe for securities is valid or
permitted in the Dubai International Financial Centre.
83
United Kingdom
Neither the information in this document nor any other document
relating to the offer has been delivered for approval to the
Financial Services Authority in the United Kingdom and no
prospectus (within the meaning of section 85 of the Financial
Services and Markets Act 2000, as amended (“FSMA”)) has
been published or is intended to be published in respect of the
securities. This document is issued on a confidential basis to
“qualified investors” (within the meaning of section
86(7) of FSMA) in the United Kingdom, and the securities may not be
offered or sold in the United Kingdom by means of this document,
any accompanying letter or any other document, except in
circumstances which do not require the publication of a prospectus
pursuant to section 86(1) FSMA.
This document should not be distributed, published or reproduced,
in whole or in part, nor may its contents be disclosed by
recipients to any other person in the United Kingdom.
Any invitation or inducement to engage in investment activity
(within the meaning of section 21 of FSMA) received in connection
with the issue or sale of the securities has only been communicated
or caused to be communicated and will only be communicated or
caused to be communicated in the United Kingdom in circumstances in
which section 21(1) of FSMA does not apply to us.
In the United Kingdom, this document is being distributed only to,
and is directed at, persons (i) who have professional experience in
matters relating to investments falling within Article 19(5)
(investment professionals) of the Financial Services and Markets
Act 2000 (Financial Promotions) Order 2005 (“FPO”),
(ii) who fall within the categories of persons referred to in
Article 49(2)(a) to (d) (high net worth companies, unincorporated
associations, etc.) of the FPO or (iii) to whom it may otherwise be
lawfully communicated (together “relevant persons”).
The investments to which this document relates are available only
to, and any invitation, offer or agreement to purchase will be
engaged in only with, relevant persons. Any person who is not a
relevant person should not act or rely on this document or any of
its contents.
84
DESCRIPTION OF CAPITAL
STOCK
Our authorized capital stock consists of 10,350,000 shares of
capital stock, of which 10,000,000 shares are common stock, par
value $0.001 per share, 230,000 shares are undesignated preferred
stock, 10,000 shares are Series B Convertible Preferred Stock, par
value $0.05 per share (none of which are currently outstanding),
10,000 shares are Series C Convertible Preferred Stock, par value
$0.05 per share (none of which are currently outstanding) and
100,000 shares are Series A Junior Participating Preferred Stock,
par value $0.001 per share (which are available for issuance under
our shareholder rights plan). As of the date of this prospectus
there were issued and outstanding 3,764,529 shares of common stock,
options to purchase 311,651 shares of common stock and warrants to
purchase 492,612 shares of common stock.
On October 7, 2016, we effected a reverse stock split at a ratio of
one-for-ten of all the issued and outstanding shares of our common
stock. We also reduced our authorized shares of common stock from
100,000,000 to 10,000,000.
Common Stock
Holders of our common stock are entitled to one vote for each share
held in the election of directors and in all other matters to be
voted on by the stockholders. There is no cumulative voting in the
election of directors. Holders of common stock are entitled to
receive dividends as may be declared from time to time by our board
of directors out of funds legally available therefor. In the event
of liquidation, dissolution or winding up of the corporation,
holders of common stock are to share in all assets remaining after
the payment of liabilities. Holders of common stock have no
pre-emptive or conversion rights and are not subject to further
calls or assessments. There are no redemption or sinking fund
provisions applicable to the common stock. The rights of the
holders of the common stock are subject to any rights that may be
fixed for holders of preferred stock. All of the outstanding shares
of common stock are fully paid and non-assessable.
Preferred
Stock
Our Certificate of Incorporation authorizes the issuance of 230,000
shares of undesignated preferred stock, 10,000 shares of Series B
Convertible Preferred Stock, par value $0.05 per share
(“Series B Preferred Stock”), 10,000 shares of Series C
Convertible Preferred Stock, par value $0.05 per share
(“Series C Preferred Stock”), and 100,000 shares of
Series A Junior Participating Preferred Stock, par value $0.001 per
share (“Junior Preferred Stock”). The board of
directors is empowered, without stockholder approval, to designate
and issue additional series of preferred stock with dividend,
liquidation, conversion, voting or other rights, including the
right to issue convertible securities with no limitations on
conversion, which could adversely affect the voting power or other
rights of the holders of our common stock, substantially dilute a
common stockholder’s interest and depress the price of our
common stock.
No shares of the Series B Preferred Stock, the Series C Preferred
Stock or the Junior Preferred Stock are outstanding. Due to the
terms of the Series C Preferred Stock, no additional shares of
Series C Preferred Stock can be issued.
Series B Preferred Stock
Our Board of Directors has authorized the issuance of 10,000 shares
of Series B Preferred Stock, 6,411 of which have been converted to
common stock and therefore are not reissuable.
Voting
Each holder of Series B Preferred Stock is entitled to the number
of votes equal to the number of whole shares of common stock into
which the shares of Series Preferred Stock held by such holder is
then convertible (as adjusted from time to time pursuant to our
Certificate of Incorporation) with respect to any and all matters
presented to the stockholders for their action or consideration.
Except as provided by law, holders of Series B Preferred Stock vote
together with the holders of common stock as a single class.
Dividends
The holders of the Series B Preferred Stock are entitled to a
dividend of 8% per annum, payable annually in shares of Series B
Preferred Stock. In addition, when and if the Board of Directors
shall declare a dividend payable
85
with respect to the then outstanding shares of common stock, the
holders of the Series B Preferred Stock are entitled to the amount
of dividends per share as would be payable on the largest number of
whole shares of common stock into which each share of Series B
Preferred Stock could then be converted.
Conversion
Each share of Series B Cumulative Convertible Preferred is
convertible into 1.333 shares of common stock. The conversion ratio
is subject to an adjustment upon the issuance of additional shares
of common stock for a price below the closing price of the common
stock and equitable adjustment for stock splits, dividends,
combinations, reorganizations and similar events.
Liquidation
In the event of liquidation, dissolution or winding up of the
company, the holders of Series B Preferred Stock then outstanding
will be entitled to be paid an amount equal to $1,000 per share
(subject to adjustment in the event of any stock dividend, stock
split, combination or other similar recapitalization affecting such
shares pursuant to our Certificate of Incorporation), plus any
dividends declared but unpaid thereon before any payment is made to
the holders of common stock, Junior Preferred Stock or any other
class or series of stock ranking on liquidation junior to the
Series B Preferred Stock. After the holders of the Series B
Preferred Stock have been paid in full, the remaining assets of the
company will be distributed to the holders of Junior Preferred
Stock and common stock, subject to the preferences of the Junior
Preferred Stock.
Redemption
Subject to certain conditions, after the second anniversary of the
issuance of the Series B Preferred Stock, the company will have the
right, but not the obligation, to redeem the then-outstanding
shares of Series B Preferred Stock for cash in an amount calculated
pursuant to the terms of our Certificate of Incorporation.
Junior Preferred Stock
Voting
The holders of the Junior Preferred Stock will have 10,000 votes
per share of Junior Preferred Stock on all matters submitted to a
vote of our stockholders, including the election of directors.
Dividends
If the Board of Directors declares or pays dividends on common
stock, the holders of the Junior Preferred Stock would be entitled
to receive a per share dividend payment of 10,000 times the
dividend declared per share of common stock. In the event we make a
distribution on the common stock, the holders of the Junior
Preferred Stock will be entitled to a per share distribution, in
like kind, of 10,000 times such distribution made per share of
common stock. In the event of any merger, consolidation or other
transaction in which shares of common stock are exchanged, each
share of Junior Preferred Stock will be entitled to receive 10,000
times the amount received per share of common stock. These rights
are protected by customary anti-dilution provisions.
Liquidation
Upon any liquidation, dissolution or winding up, no distribution
may be made to the holders of shares of stock ranking junior to the
Junior Preferred Stock unless the holders of the Junior Preferred
Stock have received the greater of (i) $37.00 per one
one-thousandth share plus an amount equal to accrued and unpaid
dividends and distributions thereon, and (ii) an amount equal to
10,000 times the aggregate amount to be distributed per share to
holders of common stock. Further, no distribution may be made to
the holders of stock ranking on a parity upon liquidation,
dissolution or winding up with the Junior Preferred Stock, unless
distributions are made ratably on the Junior Preferred Stock and
all other shares of such parity stock in proportion to the total
amounts to which the holders of the Junior Preferred Stock are
entitled above and to which the holders of such parity shares are
entitled.
86
Offering
Warrants
The following summary
of certain terms and provisions of the warrants offered hereby is
not complete and is subject to, and qualified in its entirety by
the provisions of the form of the warrant, which is filed as an
exhibit to the registration statement of which this prospectus is a
part. Prospective investors should carefully review the terms and
provisions set forth in the form of warrant.
Exercisability
. The
warrants are exercisable immediately upon issuance and at any time
up to the date that is five years from the date of issuance. The
warrants will be exercisable, at the option of each holder, in
whole or in part by delivering to us a duly executed exercise
notice accompanied by payment in full for the number of shares of
our common stock purchased upon such exercise (except in the case
of a cashless exercise as discussed below). Unless otherwise
specified in the warrant, the holder will not have the right to
exercise any portion of the warrant if the holder (together with
its affiliates) would beneficially own in excess of 4.99% of the
number of shares of our common stock outstanding immediately after
giving effect to the exercise, as such percentage ownership is
determined in accordance with the terms of the warrants.
Cashless
Exercise
. In the event that a registration statement
covering shares of common stock underlying the warrants, or an
exemption from registration, is not available for the resale of
such shares of common stock underlying the warrants, the holder
may, in its sole discretion, exercise the warrant in whole or in
part and, in lieu of making the cash payment otherwise contemplated
to be made to us upon such exercise in payment of the aggregate
exercise price, elect instead to receive upon such exercise the net
number of shares of common stock determined according to the
formula set forth in the warrant. In no event shall we be required
to make any cash payments or net cash settlement to the registered
holder in lieu of issuance of common stock underlying the
warrants.
Exercise
Price
. The initial exercise price per share of common
stock purchasable upon exercise of the warrants is
$ per share [[125%] of the
public offering price of the common stock]. The exercise price is
subject to appropriate adjustment in the event of certain stock
dividends and distributions, stock splits, stock combinations,
reclassifications or similar events affecting our common stock and
also upon any distributions of assets, including cash, stock or
other property to our stockholders.
Certain
Adjustments
. The exercise price and the number of
shares of common stock purchasable upon the exercise of the
warrants are subject to adjustment upon the occurrence of specific
events, including stock dividends, stock splits, combinations and
reclassifications of our common stock.
Transferability
. Subject
to applicable laws, the warrants may be transferred at the option
of the holders upon surrender of the warrants to us together with
the appropriate instruments of transfer.
Warrant Agent and
Exchange Listing
. The warrants will be issued in
registered form under a warrant agency agreement between American
Stock Transfer & Trust Company, LLC, as warrant agent and
us.
Fundamental
Transaction
. If, at any time while the warrants are
outstanding, (1) we consolidate or merge with or into another
corporation and we are not the surviving corporation, (2) we sell,
lease, license, assign, transfer, convey or otherwise dispose of
all or substantially all of our assets, (3) any purchase offer,
tender offer or exchange offer (whether by us or another individual
or entity) is completed pursuant to which holders of our shares of
common stock are permitted to sell, tender or exchange their shares
of common stock for other securities, cash or property and has been
accepted by the holders of 50% or more of our outstanding shares of
common stock, (4) we effect any reclassification or
recapitalization of our shares of common stock or any compulsory
share exchange pursuant to which our shares of common stock are
converted into or exchanged for other securities, cash or property,
or (5) we consummate a stock or share purchase agreement or other
business combination with another person or entity whereby such
other person or entity acquires more than 50% of our outstanding
shares of common stock, each, a “Fundamental
Transaction,” then upon any subsequent exercise of the
warrants, the holders thereof will have the right to receive the
same amount and kind of securities, cash or property as it would
have been entitled to receive upon the occurrence of such
Fundamental Transaction if it had been, immediately prior to such
Fundamental Transaction, the holder of the number of warrant shares
then issuable upon exercise of the warrant, and any additional
consideration payable as part of the Fundamental Transaction.
Rights as a
Stockholder
. Except as otherwise provided in the
warrants or by virtue of such holder’s ownership of shares of
our common stock, the holder of a warrant does not have the rights
or privileges of a holder of our common stock, including any voting
rights, until the holder exercises the warrant.
87
Representative’s
Warrants
Please see “Underwriting — Representative’s
Warrants” for a description of the warrants we have agreed to
issue to the representative of the underwriters in this offering,
subject to the completion of the offering. We expect to enter into
a warrant agreement in respect of the Representative’s
Warrants prior to the closing of this offering.
Shareholder Rights
Plan
On June 22, 2007, our board of directors adopted a shareholder
rights plan for our company and in connection therewith declared a
dividend of one preferred share purchase right for each outstanding
share of common stock. Each Right entitles the registered holder to
purchase one one-thousandth of a share of our Junior Preferred
Stock at a price of $37.00 per one one-thousandth of a share,
subject to certain adjustments. Initially, the rights are not
exercisable, but become exercisable upon the earlier of (i) 10 days
following a public announcement that a person or group of
affiliated or associated persons, with certain exceptions, has
acquired beneficial ownership of 15% or more of the then
outstanding common stock or (ii) 10 business days following the
commencement of, or announcement of an intention to make, a tender
offer or exchange offer the consummation of which would result in
the beneficial ownership by a person or group of 15% or more of
such outstanding common stock.
Our board may redeem all of the rights for $0.10 per right at any
time before the earlier of (i) the time the rights become
exercisable or (ii) July 1, 2017, the date the rights expire.
Anti-Takeover
Provisions
Provisions in our Certificate of Incorporation, by-laws and
stockholder rights plan may discourage certain types of
transactions involving an actual or potential change of control of
our company which might be beneficial to us or our security
holders.
As noted above, our Certificate of Incorporation permits our board
of directors to issue shares of any class or series of preferred
stock in the future without stockholder approval and upon such
terms as our board of directors may determine. The rights of the
holders of common stock will be subject to, and may be adversely
affected by, the rights of the holders of any class or series of
preferred stock that may be issued in the future.
Our bylaws generally provide that any board vacancy, including a
vacancy resulting from an increase in the authorized number of
directors, may be filled by a majority of the directors, even if
less than a quorum.
Additionally, our bylaws provide that stockholders must provide
timely notice in writing to bring business before an annual meeting
of shareholders or to nominate candidates for election as directors
at an annual meeting of shareholders. Notice for an annual meeting
is timely if our Secretary receives the written notice not less
than 45 days and no more than 75 days prior to the anniversary of
the date that we mailed proxy materials for the preceding
year’s annual meeting. However, if the date of the annual
meeting is advanced more than thirty (30) days prior to, or delayed
by more than thirty (30) days after, the anniversary of the
preceding year’s annual meeting, notice by the stockholder to
be timely must be delivered not later than the close of business on
the later of (i) the 90
th
day prior to such annual meeting or (ii) the 10
th
day following the day on which public announcement of the date of
such annual meeting is first made. Our bylaws also specify the form
and content of a shareholder’s notice. These provisions may
prevent shareholders from bringing matters before an annual meeting
of shareholders or from making nominations for directors at an
annual meeting of shareholders.
Outstanding
Warrants
On June 25, 2013, we consummated a public offering of an aggregate
of 677,400 shares of common stock, together with warrants to
purchase up to 508,050 shares of common stock. In connection with
the offering, we also issued the placement agent a warrant to
purchase up to 33,609 shares of common stock. If the registration
statement covering the shares issuable upon exercise of the
warrants issued to the investors is no longer effective, such
warrants may be exercised on a “cashless” basis. The
placement agent warrant has terms substantially similar to the
warrants issued to the investors but provide for a cashless
exercise feature without regard to status of the registration
statement covering the shares issuable upon exercise of the
warrants. We refer to the warrants issued to the investors and the
placement agent in connection with the offering as the “2013
Warrants.”
As a result of exercises, 303,693 shares of common stock remain
issuable upon the exercise of the 2013 Warrants as of the date of
this prospectus. The 2013 Warrants expire in June 2018.
88
As of the date of this prospectus, the 2013 Warrants were
exercisable to purchase shares of common stock at $5.10 per share.
The 2013 Warrants include a price protection provision pursuant to
which, in the event, and on each such occasion on or before the
expiration of the 2013 Warrants, we issue any shares of common
stock or convertible securities (other than shares issued or
issuable in certain transactions, including upon exercise of
employee stock options, upon conversion or exercise of
currently-outstanding convertible securities, or in connection with
acquisitions or strategic transactions) at a price less than the
then current exercise price (a “Dilutive Issuance”),
the exercise price of the 2013 Warrants will automatically be
reduced based upon the price at which such securities were deemed
to be issued and sold in the Dilutive Issuance in accordance with
the terms of the 2013 Warrants. Additionally, the exercise price
and the number of shares of common stock purchasable upon the
exercise of each 2013 Warrant are subject to adjustment upon the
happening of certain events, such as stock dividends,
distributions, and splits.
On December 24, 2014, we consummated a public offering of an
aggregate of 188,653 shares of common stock, together with warrants
to purchase up to 113,192 shares of common stock. In connection
with the offering, we also issued the underwriter a warrant to
purchase up to 3,740 shares of common stock. We refer to the
warrants issued to the investors and the placement agent in
connection with the offering as the “2014
Warrants.”
As of the date of this prospectus, 110,932 shares of common stock
remain issuable upon the exercise of the 2014 Warrants, which
expire in 2019.
As of the date of this prospectus, we also had outstanding
warrants, other than the 2013 Warrants and the 2014 Warrants, to
purchase 77,987 shares of common stock, all of which are
exercisable at a weighted average exercise price of approximately
$5.70 per share.
Delaware Anti-Takeover
Statute
We are subject to the provisions of Section 203 of the Delaware
General Corporation Law regulating corporate takeovers. In general,
Section 203 prohibits a publicly held Delaware corporation from
engaging, under certain circumstances, in a business combination
with an interested stockholder for a period of three years
following the date the person became an interested stockholder
unless:
•
prior to the date of the transaction, our Board of Directors
approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder;
•
upon completion of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, calculated as
provided under Section 203; or
•
at or subsequent to the date of the transaction, the business
combination is approved by our Board of Directors and authorized at
an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least two-thirds of the
outstanding voting stock which is not owned by the interested
stockholder.
Generally, a business combination includes a merger, asset or stock
sale, or other transaction resulting in a financial benefit to the
interested stockholder. An interested stockholder is a person who,
together with affiliates and associates, owns or, within three
years prior to the determination of interested stockholder status,
did own 15% or more of a corporation’s outstanding voting
stock. We expect the existence of this provision to have an
anti-takeover effect with respect to transactions our Board of
Directors does not approve in advance. We also anticipate that
Section 203 may also discourage attempts that might result in a
premium over the market price for the shares of common stock held
by stockholders.
Transfer
Agent
The transfer agent and registrar for our common stock is American
Stock Transfer & Trust Company, LLC. Its address is 6201
15
th
Avenue, Brooklyn, NY 11219 and its telephone number is (718)
921-8200.
Listing
Our common stock is quoted on the OTCQB market under the symbol
“SNGX”. We have applied to list our common stock on The
NASDAQ Capital Market under the symbol “SNGX”.
89
DISCLOSURE OF COMMISSION
POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Section 102(b)(7) of the Delaware General Corporation Law allows
companies to limit the personal liability of its directors to the
company or its stockholders for monetary damages for breach of a
fiduciary duty. Article IX of our Certificate of Incorporation, as
amended, provides for the limitation of personal liability of our
directors as follows:
“A Director of the Corporation shall have no personal
liability to the Corporation or its stockholders for monetary
damages for breach of his fiduciary duty as a Director; provided,
however, this Article shall not eliminate or limit the liability of
a Director (i) for any breach of the Director’s duty of
loyalty to the Corporation or its stockholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct
or a knowing violation of law; (iii) for the unlawful payment of
dividends or unlawful stock repurchases under Section 174 of the
General Corporation Law of the State of Delaware; or (iv) for any
transaction from which the Director derived an improper personal
benefit. If the General Corporation Law is amended after approval
by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by
the General Corporation Law of the State of Delaware, as so
amended.”
Article VIII of our Bylaws, as amended and restated, provide for
indemnification of directors and officers to the fullest extent
permitted by the Delaware General Corporation Law.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or
persons controlling the registrant pursuant to the foregoing
provisions, the registrant has been informed that in the opinion of
the SEC such indemnification is against public policy as expressed
in the Act and is therefore unenforceable.
LEGAL MATTERS
The validity of the shares of our common stock offered hereby will
be passed upon by the law firm of Duane Morris LLP, Miami, Florida.
Certain legal matters in connection with this offering will be
passed upon for the underwriters by Gracin & Marlow, LLP, New
York, New York.
EXPERTS
The consolidated balance sheets of Soligenix, Inc. and Subsidiaries
as of December 31, 2015 and 2014, and the related consolidated
statements of operations, changes in shareholders’
deficiency, and cash flows for each of the years then ended, have
been audited by EisnerAmper LLP, independent registered public
accounting firm, as stated in their report which is included
herein. Such financial statements have been included herein in
reliance on the report of such firm given upon their authority as
experts in accounting and auditing.
90
WHERE YOU CAN FIND MORE
INFORMATION
We have filed with the SEC, Washington, D.C. 20549, under the
Securities Act of 1933, a registration statement on Form S-1
relating to the shares offered hereby. This prospectus does not
contain all of the information set forth in the registration
statement and the exhibits and schedules thereto. For further
information with respect to our company and the shares offered by
this prospectus, you should refer to the registration statement,
including the exhibits and schedules thereto. You may inspect a
copy of the registration statement without charge at the Public
Reference Section of the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The public may obtain information on the
operation of the Public Reference Room by calling the SEC. The SEC
also maintains an Internet site that contains reports, proxy and
information statements and other information regarding registrants
that file electronically with the SEC. The SEC’s World Wide
Web address is
http://www.sec.gov
.
Statements contained in this prospectus as to the contents of any
contract or other document that we have filed as an exhibit to the
registration statement are qualified in their entirety by reference
to the exhibits for a complete statement of their terms and
conditions.
The representations, warranties and covenants made by us in any
agreement that is filed as an exhibit to the registration statement
of which this prospectus is a part were made solely for the benefit
of the parties to such agreement, including, in some cases, for the
purpose of allocating risk among the parties to such agreements,
and should not be deemed to be a representation, warranty or
covenant to you. Moreover, such representations, warranties or
covenants were made as of an earlier date. Accordingly, such
representations, warranties and covenants should not be relied on
as accurately representing the current state of our affairs.
We file periodic reports, proxy statements and other information
with the SEC in accordance with requirements of the Exchange Act.
These periodic reports, proxy statements and other information are
available for inspection and copying at the regional offices,
public reference facilities and Internet site of the SEC referred
to above. We make available through our website, free of charge,
copies of these reports as soon as reasonably practicable after we
electronically file or furnish them to the SEC. Our website is
located at
http://www.soligenix.com
.
You can also request copies of such documents, free of charge, by
contacting the company at (609) 538-8200 or sending an email to
info@soligenix.com.
Information contained on our website is not a prospectus and does
not constitute a part of this prospectus.
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE
The SEC allows us to “incorporate by reference” certain
information that we will file with it which means that we can
disclose important information to you by referring you to those
documents instead of having to repeat the information in this
prospectus. The later information that we file with the SEC will
automatically update and supersede this information. We incorporate
by reference any future filings made with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act between the date of
this prospectus and the termination of this offering, however, we
will not incorporate by reference any documents or portions thereof
that are not deemed “filed” with the SEC, or any
information furnished pursuant to Items 2.02 or 7.01 of Form 8-K or
related exhibits furnished pursuant to Item 9.01 of Form 8-K.
Any statement contained in a document incorporated by reference
into this Registration Statement will be deemed to be modified or
superseded for purposes of this Registration Statement to the
extent that a statement contained in this document, any
Registration Statement supplement or any other subsequently filed
document that is incorporated by reference into this Registration
Statement modifies or supersedes the statement. Any statement so
modified or superseded will not be deemed, except as so modified or
superseded, to constitute a part of this Registration
Statement.
We make available through our website, free of charge, copies of
these reports as soon as reasonably practicable after we
electronically file or furnish them to the SEC. Our website is
located at
http://www.soligenix.com
.
You can also request copies of such documents, free of charge, by
contacting the company at (609) 538-8200 or sending an email to
info@soligenix.com.
91
SOLIGENIX, INC. AND
SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
Table of
Contents
|
|
|
Financial Statements for the Quarter Ended June 30,
2016
|
|
|
Consolidated Balance Sheets as of June 30, 2016
(unaudited) and December 31, 2015
|
|
F-2
|
Consolidated Statements of Operations for the
Three and Six Months Ended June 30, 2016 and
2015 (unaudited)
|
|
F-3
|
Consolidated Statement of Changes in
Shareholders’ Equity (Deficiency) for the Six Months
Ended
June 30, 2016 (unaudited)
|
|
F-4
|
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 2016 and 2015 (unaudited)
|
|
F-5
|
Notes to Financial Statements (unaudited)
|
|
F-6
|
|
|
|
Financial Statements for the Year Ended December 31,
2015
|
|
|
Consolidated Balance Sheets as of December 31,
2015 and 2014
|
|
F-19
|
Consolidated Statements of Operations for the
Years Ended December 31, 2015 and 2014
|
|
F-20
|
Consolidated Statements of Changes in
Shareholders’ Deficiency for the Years Ended December 31,
2015 and 2014
|
|
F-21
|
Consolidated Statements of Cash Flows for the
Years Ended December 31, 2015 and 2014
|
|
F-22
|
Notes to Consolidated Financial
Statements
|
|
F-23
|
Report of Independent Registered Public
Accounting Firm
|
|
F-41
|
F-1
Soligenix, Inc. and
Subsidiaries
Consolidated Balance Sheets
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
3,183,289
|
|
|
$
|
4,921,545
|
|
Contracts and grants receivable
|
|
|
1,805,871
|
|
|
|
1,985,212
|
|
Prepaid expenses
|
|
|
229,064
|
|
|
|
244,267
|
|
Total current assets
|
|
|
5,218,224
|
|
|
|
7,151,024
|
|
Office furniture and equipment, net
|
|
|
39,927
|
|
|
|
47,366
|
|
Intangible assets, net
|
|
|
157,896
|
|
|
|
188,732
|
|
Total assets
|
|
$
|
5,416,047
|
|
|
$
|
7,387,122
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders’ equity
(deficiency)
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
4,177,376
|
|
|
$
|
4,379,936
|
|
Notes payable
|
|
|
—
|
|
|
|
292,719
|
|
Warrant liability
|
|
|
1,148,616
|
|
|
|
2,434,101
|
|
Accrued compensation
|
|
|
56,169
|
|
|
|
298,675
|
|
Total current liabilities
|
|
|
5,382,161
|
|
|
|
7,405,431
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Shareholders’ equity
(deficiency):
|
|
|
|
|
|
|
|
|
Preferred stock, 350,000 shares authorized; none
issued or outstanding
|
|
|
—
|
|
|
|
—
|
|
Common stock, $.001 par value; 10,000,000 shares
and 5,000,000 shares authorized at June 30, 2016 and December 31,
2015 respectively; 3,285,963 shares and 3,126,952 shares issued and
outstanding at June 30, 2016 and December 31, 2015,
respectively
(1)
|
|
|
3,286
|
|
|
|
3,127
|
|
Additional paid-in capital
(1)
|
|
|
148,150,387
|
|
|
|
146,856,143
|
|
Accumulated deficit
|
|
|
(148,119,787
|
)
|
|
|
(146,877,579
|
)
|
Total shareholders’ equity
(deficiency)
|
|
|
33,886
|
|
|
|
(18,309
|
)
|
Total liabilities and shareholders’ equity
(deficiency)
|
|
$
|
5,416,047
|
|
|
$
|
7,387,122
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
F-2
Soligenix, Inc. and
Subsidiaries
Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 2016 and 2015
(Unaudited)
|
|
Three
Months Ended
June 30,
|
|
Six
Months Ended
June 30,
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract revenue
|
|
$
|
3,160,050
|
|
|
$
|
1,082,141
|
|
|
$
|
5,791,037
|
|
|
$
|
1,794,547
|
|
Grant revenue
|
|
|
—
|
|
|
|
17,686
|
|
|
|
—
|
|
|
|
121,566
|
|
Total revenues
|
|
|
3,160,050
|
|
|
|
1,099,827
|
|
|
|
5,791,037
|
|
|
|
1,916,113
|
|
Cost of revenues
|
|
|
(2,342,539
|
)
|
|
|
(816,702
|
)
|
|
|
(4,574,874
|
)
|
|
|
(1,344,101
|
)
|
Gross profit
|
|
|
817,511
|
|
|
|
283,125
|
|
|
|
1,216,163
|
|
|
|
572,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
827,832
|
|
|
|
1,442,914
|
|
|
|
2,256,332
|
|
|
|
2,472,798
|
|
General and administrative
|
|
|
999,637
|
|
|
|
874,962
|
|
|
|
1,875,494
|
|
|
|
1,692,232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
1,827,469
|
|
|
|
2,317,876
|
|
|
|
4,131,826
|
|
|
|
4,165,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(1,009,958
|
)
|
|
|
(2,034,751
|
)
|
|
|
(2,915,663
|
)
|
|
|
(3,593,018
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of warrant
liability
|
|
|
525,328
|
|
|
|
(1,943,494
|
)
|
|
|
1,285,485
|
|
|
|
(4,955,110
|
)
|
Other income
|
|
|
390,599
|
|
|
|
—
|
|
|
|
390,599
|
|
|
|
—
|
|
Interest income (expense)
|
|
|
1,256
|
|
|
|
551
|
|
|
|
(2,629
|
)
|
|
|
1,112
|
|
Total other income (expense)
|
|
|
917,183
|
|
|
|
(1,942,943
|
)
|
|
|
1,673,455
|
|
|
|
(4,953,998
|
)
|
Net loss
|
|
$
|
(92,775
|
)
|
|
$
|
(3,977,694
|
)
|
|
$
|
(1,242,208
|
)
|
|
$
|
(8,547,016
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net loss per share
(1)
|
|
$
|
(0.03
|
)
|
|
$
|
(1.55
|
)
|
|
$
|
(0.39
|
)
|
|
$
|
(3.41
|
)
|
Diluted net loss per share
(1)
|
|
$
|
(0.19
|
)
|
|
$
|
(1.55
|
)
|
|
$
|
(0.77
|
)
|
|
$
|
(3.41
|
)
|
Basic weighted average common shares
outstanding
(1)
|
|
|
3,176,937
|
|
|
|
2,572,626
|
|
|
|
3,152,439
|
|
|
|
2,506,604
|
|
Diluted weighted average common shares
outstanding
(1)
|
|
|
3,273,379
|
|
|
|
2,572,626
|
|
|
|
3,267,981
|
|
|
|
2,506,604
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
F-3
Soligenix, Inc. and
Subsidiaries
Consolidated Statement of Changes in Shareholders’
Equity/(Deficiency)
For the Six Months Ended June 30, 2016
(Unaudited)
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2015
|
|
3,126,952
|
|
$
|
3,127
|
|
$
|
146,856,143
|
|
|
$
|
(146,877,579
|
)
|
|
$
|
(18,309
|
)
|
Issuance of common stock pursuant to Lincoln
Park Equity Line
|
|
154,011
|
|
|
154
|
|
|
962,446
|
|
|
|
—
|
|
|
|
962,600
|
|
Costs associated with Lincoln Park Equity
Line
|
|
—
|
|
|
—
|
|
|
(41,381
|
)
|
|
|
—
|
|
|
|
(41,381
|
)
|
Issuance of common stock to vendors
|
|
5,000
|
|
|
5
|
|
|
36,495
|
|
|
|
—
|
|
|
|
36,500
|
|
Share-based compensation expense
|
|
—
|
|
|
—
|
|
|
336,684
|
|
|
|
—
|
|
|
|
336,684
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(1,242,208
|
)
|
|
|
(1,242,208
|
)
|
Balance, June 30, 2016
|
|
3,285,963
|
|
$
|
3,286
|
|
$
|
148,150,387
|
|
|
$
|
(148,119,787
|
)
|
|
$
|
33,886
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
Soligenix, Inc. and
Subsidiaries
Consolidated Statements of Cash Flows
For the Six Months Ended June 30,
(Unaudited)
|
|
|
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,242,208
|
)
|
|
$
|
(8,547,016
|
)
|
Adjustments to reconcile net loss to net cash
used in operating activities:
|
|
|
|
|
|
|
|
|
Amortization and depreciation
|
|
|
45,436
|
|
|
|
121,657
|
|
Amortization of discount on debt
|
|
|
7,281
|
|
|
|
—
|
|
Share-based compensation
|
|
|
336,684
|
|
|
|
279,188
|
|
Gain on settlement liability
|
|
|
(390,599
|
)
|
|
|
—
|
|
Issuance of common stock for services
|
|
|
36,500
|
|
|
|
118,761
|
|
Change in fair value of warrant
liability
|
|
|
(1,285,485
|
)
|
|
|
4,955,110
|
|
Change in operating assets and
liabilities:
|
|
|
|
|
|
|
|
|
Contracts and grants receivable
|
|
|
179,341
|
|
|
|
61,202
|
|
Prepaid expenses
|
|
|
15,203
|
|
|
|
(70,610
|
)
|
Accounts payable
|
|
|
188,039
|
|
|
|
(367,098
|
)
|
Accrued compensation
|
|
|
(242,506
|
)
|
|
|
(266,943
|
)
|
Total adjustments
|
|
|
(1,110,106
|
)
|
|
|
4,831,267
|
|
Net cash used in operating activities
|
|
|
(2,352,314
|
)
|
|
|
(3,715,749
|
)
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
Purchases of office furniture and
equipment
|
|
|
(7,161
|
)
|
|
|
(13,706
|
)
|
Net cash used in investing activities
|
|
|
(7,161
|
)
|
|
|
(13,706
|
)
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock pursuant
to the equity line
|
|
|
962,600
|
|
|
|
1,115,025
|
|
Stock issuance costs associated with equity line
purchase agreement
|
|
|
(41,381
|
)
|
|
|
—
|
|
Repayment of notes payable
|
|
|
(300,000
|
)
|
|
|
—
|
|
Proceeds from exercise of warrants
|
|
|
—
|
|
|
|
1,113,164
|
|
Proceeds from exercise of stock
options
|
|
|
—
|
|
|
|
11,750
|
|
Net cash provided by financing
activities
|
|
|
621,219
|
|
|
|
2,239,939
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash
equivalents
|
|
|
(1,738,256
|
)
|
|
|
(1,489,516
|
)
|
Cash and cash equivalents at beginning of
period
|
|
|
4,921,545
|
|
|
|
5,525,094
|
|
Cash and cash equivalents at end of
period
|
|
$
|
3,183,289
|
|
|
$
|
4,035,578
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non cash financing
activities:
|
|
|
|
|
|
|
|
|
Reclassification of warrant liability to
additional paid in capital upon partial exercise of warrants issued
in unit offering
|
|
$
|
—
|
|
|
$
|
2,543,117
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
Soligenix, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Note 1.
Nature of
Business
Basis of
Presentation
Soligenix, Inc. (the “Company”) is a late-stage
biopharmaceutical company focused on developing and commercializing
products to treat rare diseases where there is an unmet medical
need. The Company maintains two active business segments:
BioTherapeutics and Vaccines/BioDefense.
The Company’s BioTherapeutics business segment is developing
a novel photodynamic therapy (SGX301) utilizing topical synthetic
hypericin activated with safe visible light for the treatment of
cutaneous T-cell lymphoma (“CTCL”), its first-in-class
innate defense regulator (“IDR”) technology, dusquetide
(SGX942) for the treatment of oral mucositis in head and neck
cancer, and proprietary formulations of oral beclomethasone
17,21-dipropionate (“BDP”) for the prevention/treatment
of gastrointestinal (“GI”) disorders characterized by
severe inflammation, including pediatric Crohn’s disease
(SGX203) and acute radiation enteritis (SGX201).
The Company’s Vaccines/BioDefense business segment includes
active development programs for RiVax™, its ricin toxin
vaccine candidate, OrbeShield
®
,
a GI acute radiation syndrome (“GI ARS”) therapeutic
candidate and SGX943, a melioidosis therapeutic candidate. The
development of the vaccine programs is currently supported by the
heat stabilization technology, known as ThermoVax
®
,
under existing and on-going government contract funding. With the
government contract from the National Institute of Allergy and
Infectious Diseases (“NIAID”), the Company will attempt
to advance the development of RiVax™ to protect against
exposure to ricin toxin. The Company plans to use the funds
received under the government contracts with the Biomedical
Advanced Research and Development Authority (“BARDA”)
and NIAID to advance the development of OrbeShield
®
for the treatment of GI ARS.
The Company generates revenues under government grants primarily
from the National Institutes of Health (the “NIH”) and
government contracts from BARDA and NIAID.
The Company is subject to risks common to companies in the
biotechnology industry including, but not limited to, development
of new technological innovations, dependence on key personnel,
protections of proprietary technology, compliance with the United
States Food and Drug Administration (“FDA”)
regulations, litigation, and product liability. Results for the
three and six months ended June 30, 2016 are not necessarily
indicative of results that may be expected for the full year.
Liquidity
As of June 30, 2016, the Company had cash and cash equivalents of
$3,183,289 as compared to $4,921,545 as of December 31, 2015,
representing a decrease of $1,738,256 or 35%. As of June 30, 2016,
the Company had working capital of $984,679, which excludes a
non-cash warrant liability of $1,148,616, as compared to working
capital of $2,179,694, which excludes a non-cash warrant liability
of $2,434,101, as of December 31, 2015, representing a decrease of
$1,195,015 or 55%. The decrease is primarily related to
expenditures to support the collection of long-term follow-up
safety data from the Phase 2 clinical trial of SGX942 for the
treatment of oral mucositis in head and neck cancer and to support
the pivotal Phase 3 clinical trial of SGX301 for the treatment of
CTCL.
Based on the Company’s current rate of cash outflows, cash on
hand, proceeds from its government contract and grant programs,
availability of funds from equity lines and proceeds from the state
of New Jersey Technology Business Tax Certificate Transfer Program,
management believes that its current cash will be sufficient to
meet the anticipated cash needs for working capital and capital
expenditures for at least the next twelve months.
Management’s business strategy can be outlined as
follows:
•
Complete enrollment and report preliminary results in the pivotal
Phase 3 clinical trial of SGX301 for the treatment of CTCL;
•
Continue to collect the long-term follow-up safety data from the
SGX942 Phase 2 proof-of-concept study for the treatment of oral
mucositis in head and neck cancer patients and publish the findings
from this study;
F-6
Soligenix, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Note 1.
Nature of
Business
(cont.)
•
Obtain agreement from the FDA on a pivotal Phase 2b/3 protocol of
SGX942 in the treatment of oral mucositis in head and neck cancer
patients;
•
Initiate a pivotal Phase 3 clinical trial of SGX203 for the
treatment of pediatric Crohn’s disease;
•
Continue development of RiVax™ in combination with the
Company’s ThermoVax® technology, to develop new heat
stable vaccines in biodefense, with NIAID funding support;
•
Advance the preclinical and manufacturing development of
OrbeShield® as a biodefense medical countermeasure for the
treatment of GI ARS under the BARDA contract and with NIAID funding
support;
•
Continue to apply for and secure additional government funding for
each of the Company’s BioTherapeutics and Vaccines/BioDefense
programs through grants, contracts and/or procurements;
•
Pursue business development opportunities for the Company’s
pipeline programs, as well as explore merger/acquisition
strategies; and
•
Acquire or in-license new clinical-stage compounds for
development.
The Company’s plans with respect to its liquidity management
include, but are not limited to, the following:
•
The Company has up to $37.1 million in active government contract
and grant funding still available to support its associated
research programs through 2016 and beyond, provided the federal
agencies exercise all options and do not elect to terminate the
contracts or grants for convenience. The Company plans to submit
additional contract and grant applications for further support of
its programs with various funding agencies;
•
The Company has continued to use equity instruments to provide a
portion of the compensation due to vendors and collaboration
partners and expects to continue to do so for the foreseeable
future;
•
The Company will pursue Net Operating Loss (“NOL”)
sales in the state of New Jersey pursuant to its Technology
Business Tax Certificate Transfer Program. Based on the receipt of
$488,933 in proceeds pursuant of the sale of NJ NOL in 2015, the
Company expects to participate in the program during 2016 and
beyond as the program is available;
•
The Company plans to pursue potential partnerships for pipeline
programs. However, there can be no assurances that we can
consummate such transactions;
•
The Company has $8.2 million available from equity facilities
expiring in November 2016, and $11.0 million from equity facilities
expiring in March 2019; and
•
The Company may seek additional capital in the private and/or
public equity markets to continue its operations, respond to
competitive pressures, develop new products and services, and to
support new strategic partnerships. The Company is currently
evaluating additional equity financing opportunities on an ongoing
basis and may execute them when appropriate. However, there can be
no assurances that the Company can consummate such a transaction,
or consummate a transaction at favorable pricing.
Reverse
Stock Split
On October 7, 2016, the Company completed a reverse stock split of
its issued and outstanding shares of common stock at a ratio of
one-for-ten, whereby, once effective, every ten shares of its
common stock was exchanged for one share of its common stock. The
Company’s common stock began trading on the OTCQB on a
reverse split basis at the market opening on October 7, 2016. All
share and per share data have been restated to reflect this reverse
stock split.
F-7
Soligenix, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Note 2.
Summary of Significant
Accounting Policies
Principles
of Consolidation
The consolidated financial statements include Soligenix, Inc., and
its wholly and majority owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated as a
result of consolidation.
Operating
Segments
Operating segments are defined as components of an enterprise about
which separate financial information is available that is evaluated
on a regular basis by the chief operating decision maker, or
decision making group, in deciding how to allocate resources to an
individual segment and in assessing the performance of the segment.
The Company divides its operations into two operating segments:
BioTherapeutics and Vaccines/BioDefense.
Cash and
cash equivalents
The Company considers all highly liquid investments with maturities
of three months or less when purchased to be cash equivalents.
Contracts
and Grants Receivable
Contracts and grants receivable consist of unbilled amounts due
from various grants from the NIH and contracts from BARDA and
NIAID, an institute of NIH, for costs incurred prior to the period
end under reimbursement contracts. The amounts were billed to the
respective governmental agencies in the month subsequent to period
end and collected shortly thereafter. Accordingly, no allowance for
doubtful amounts has been established. If amounts become
uncollectible, they are charged to operations.
Intangible
Assets
One of the most significant estimates or judgments that the Company
makes is whether to capitalize or expense patent and license costs.
The Company makes this judgment based on whether the technology has
alternative future uses, as defined in Financial Accounting
Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) 730,
Research and
Development
. Based on this consideration, the Company
capitalizes payments made to legal firms that are engaged in filing
and protecting rights to intellectual property and rights for its
current products in both the domestic and international markets.
The Company believes that patent rights are one of its most
valuable assets. Patents and patent applications are a key
component of intellectual property, especially in the early stage
of product development, as their purchase and maintenance gives the
Company access to key product development rights from
Soligenix’s academic and industry partners. These rights can
also be sold or sub-licensed as part of its strategy to partner its
products at each stage of development as the intangible assets have
alternative future use. The legal costs incurred for these patents
consist of work associated with filing new patents designed to
protect, preserve and maintain the Company’s rights, and
perhaps extend the lives of the patents. The Company capitalizes
such costs and amortizes intangibles on a straight-line basis over
their expected useful life — generally a period of 11 to 16
years.
The Company did not capitalize any patent related costs during the
six months ended June 30, 2016 and 2015.
These intangible assets are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount may
not be recoverable or if the underlying program is no longer being
pursued. If the sum of the expected undiscounted cash flows is less
than the carrying value of the related asset or group of assets, a
loss is recognized for the difference between the fair value and
carrying value of the related asset or group of assets. No such
write downs have occurred during the six months ended June 30, 2016
and 2015.
Impairment
of Long-Lived Assets
Office furniture and equipment and intangible assets are evaluated
and reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable. The Company recognizes
F-8
Soligenix, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Note 2.
Summary of Significant
Accounting Policies
(cont.)
impairment of long-lived assets in the event the net book value of
such assets exceeds the estimated future undiscounted cash flows
attributable to such assets. If the sum of the expected
undiscounted cash flows is less than the carrying value of the
related asset or group of assets, a loss is recognized for the
difference between the fair value and the carrying value of the
related asset or group of assets. Such analyses necessarily involve
significant judgment.
The Company did not record any impairment of long-lived assets for
the six months ended June 30, 2016 and 2015.
Fair Value
of Financial Instruments
FASB ASC 820 —
Fair Value
Measurements and Disclosures,
defines fair value 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. FASB ASC 820 requires disclosures about the
fair value of all financial instruments, whether or not recognized,
for financial statement purposes. Disclosures about the fair value
of financial instruments are based on pertinent information
available to the Company on June 30, 2016. Accordingly, the
estimates presented in these financial statements are not
necessarily indicative of the amounts that could be realized on
disposition of the financial instruments.
FASB ASC 820 specifies a hierarchy of valuation techniques based on
whether the inputs to those valuation techniques are observable or
unobservable. Observable inputs reflect market data obtained from
independent sources, while unobservable inputs reflect market
assumptions. The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities
(Level 1 measurement) and the lowest priority to unobservable
inputs (Level 3 measurement).
The three levels of the fair value hierarchy are as follows:
•
Level 1 — Quoted prices in active markets for identical
assets or liabilities that the reporting entity has the ability to
access at the measurement date. Level 1 primarily consists of
financial instruments whose value is based on quoted market prices
such as exchange-traded instruments and listed equities.
•
Level 2 — Inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly or indirectly. Level 2 includes financial instruments that
are valued using models or other valuation methodologies. These
models consider various assumptions, including volatility factors,
current market prices and contractual prices for the underlying
financial instruments. Substantially all of these assumptions are
observable in the marketplace, can be derived from observable data
or are supported by observable levels at which transactions are
executed in the marketplace.
•
Level 3 — Unobservable inputs for the asset or liability.
Financial instruments are considered Level 3 when their fair values
are determined using pricing models, discounted cash flows or
similar techniques and at least one significant model assumption or
input is unobservable.
The carrying amounts reported in the consolidated balance sheet for
cash and cash equivalents, contracts and grants receivable,
accounts payable, notes payable and accrued compensation
approximate their fair value based on the short-term maturity of
these instruments. The Company recognizes all derivative financial
instruments as assets or liabilities in the financial statements
and measures them at fair value with changes in fair value
reflected as current period income or loss unless the derivatives
qualify as hedges. As a result, certain warrants issued in
connection with the Company’s June 2013 registered public
offering were accounted for as derivatives. See Note 5,
Warrant
Liability
.
Revenue
Recognition
The Company’s revenues are primarily generated from
government contracts and grants. The revenue from government
contracts and grants is based upon subcontractor costs and internal
costs incurred that are specifically covered by the contracts and
grants, plus a facilities and administrative rate that provides
funding for overhead expenses and management fees. These revenues
are recognized when expenses have been incurred by subcontractors
or when the Company incurs reimbursable internal expenses that are
related to the government contracts and grants.
F-9
Soligenix, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Note 2.
Summary of Significant
Accounting Policies
(cont.)
Research
and Development Costs
Research and development costs are charged to expense when incurred
in accordance with FASB ASC 730,
Research and
Development
. Research and development includes costs such as
clinical trial expenses, contracted research and license agreement
fees with no alternative future use, supplies and materials,
salaries, share-based compensation, employee benefits, equipment
depreciation and allocation of various corporate costs. Purchased
in-process research and development expense represents the value
assigned or paid for acquired research and development for which
there is no alternative future use as of the date of
acquisition.
Accounting
for Warrants
The Company considered FASB ASC 815,
Evaluating Whether an
Instrument is Considered Indexed to an Entity’s Own
Stock
, which provides guidance for determining whether an
equity-linked financial instrument (or embedded feature) issued by
an entity is indexed to the entity’s stock and, therefore,
qualifying for the first part of the scope exception in paragraph
815-10-15. The Company evaluated the provisions and determined that
warrants issued in connection with the Company’s June 2013
registered public offering contain provisions that protect holders
from a decline in the issue price of the Company’s common
stock (or “down-round” provisions) and contain net
settlement provisions. Consequently, these warrants are recognized
as liabilities at their fair value on the date of grant and
remeasured at fair value on each reporting date. All other warrants
issued were indexed to the Company’s stock and therefore are
accounted for as equity instruments for 2016 and 2015.
Share-Based
Compensation
Stock options are issued with an exercise price equal to the market
price on the date of grant. Stock options issued to directors upon
re-election vest quarterly for a period of one year (new director
issuances are fully vested upon issuance). Stock options issued to
employees vest 25% on the grant date, then 25% each subsequent year
for a period of three years. Stock options vest over each
three-month period from the date of issuance to the end of the
three year period. These options have a ten year life for as long
as the individuals remain employees or directors. In general, when
an employee or director terminates their position, the options will
expire within three months, unless otherwise extended by the
Board.
From time to time, the Company issues restricted shares of common
stock to vendors and consultants as compensation for services
performed. Typically these instruments vest upon issuance and
therefore the entire share-based compensation expense is recognized
upon issuance to the vendors and/or consultants.
Share-based compensation expense for options, warrants and shares
of common stock granted to non-employees has been determined in
accordance with FASB ASC 718,
Stock
Compensation
, and FASB ASC 505-50,
Equity-Based
Payments to Non-Employees
, and represents the fair value of
the consideration received, or the fair value of the equity
instruments issued, whichever may be more reliably measured. For
options that vest over future periods, the fair value of options
granted to non-employees is amortized as the options vest. The fair
value is remeasured each reporting period until performance is
complete.
For the six months ended June 30, 2016 and 2015, the Company issued
stock options at a weighted average exercise price of $7.70 and
$14.50 per share, respectively. The fair value of options issued
during the six months ended June 30, 2016 and 2015 was estimated
using the Black-Scholes option-pricing model and the following
assumptions:
•
a dividend yield of 0%;
•
an expected life of 4 years;
•
volatility of 116% for 2016 and ranging from 136% – 141% for
2015;
•
forfeitures at a rate of 12%; and
•
risk-free interest rates ranging from 0.96% – 1.52% and 0.99%
– 1.34% for 2016 and 2015, respectively.
F-10
Soligenix, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Note 2.
Summary of Significant
Accounting Policies
(cont.)
The fair value of each option grant made during 2016 and 2015 was
estimated on the date of each grant using the Black-Scholes option
pricing model and amortized ratably over the option vesting
periods, which approximates the service period.
Income
Taxes
Deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases. A valuation allowance is established when it
is more likely than not that all or a portion of a deferred tax
asset will not be realized. A review of all available positive and
negative evidence is considered, including the Company’s
current and past performance, the market environment in which the
Company operates, the utilization of past tax credits, and the
length of carryback and carryforward periods. Deferred tax assets
and liabilities are measured utilizing tax rates expected to apply
to taxable income in the years in which those temporary differences
are expected to be recovered or settled. No current or deferred
income taxes have been provided through June 30, 2016 due to the
net operating losses incurred by the Company since its inception.
The Company recognizes accrued interest and penalties associated
with uncertain tax positions, if any, as part of income tax
expense. There were no tax related interest and penalties recorded
for 2016 and 2015. Additionally, the Company has not recorded an
asset for unrecognized tax benefits or a liability for uncertain
tax positions at June 30, 2016 and December 31, 2015.
Earnings
Per Share
Basic earnings per share (“EPS”) excludes dilution and
is computed by dividing income (loss) available to common
stockholders by the weighted-average number of common shares
outstanding for the period, as adjusted for the reverse stock split
of one-for-ten effective October 7, 2016. Diluted EPS reflects the
potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into
common stock or resulted in the issuance of common stock that
shared in the earnings of the entity. Since there is a significant
number of options and warrants outstanding, fluctuations in the
actual market price can have a variety of results for each period
presented.
|
|
Three
Months Ended June 30,
|
|
Six
Months Ended June 30,
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for basic earnings per share
|
|
$
|
(92,775
|
)
|
|
$
|
(3,977,694
|
)
|
|
$
|
(1,242,208
|
)
|
|
$
|
(8,547,016
|
)
|
Less change in fair value of warrant
liability
|
|
|
525,328
|
|
|
|
—
|
|
|
|
1,285,485
|
|
|
|
—
|
|
Net loss for diluted earnings per
share
|
|
|
(618,103
|
)
|
|
|
(3,977,694
|
)
|
|
|
(2,527,693
|
)
|
|
|
(8,547,016
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average basic common shares
outstanding
|
|
|
3,176,937
|
|
|
|
2,572,626
|
|
|
|
3,152,439
|
|
|
|
2,506,604
|
|
Assumed conversion of dilutive
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock purchase warrants
|
|
|
96,442
|
|
|
|
—
|
|
|
|
115,542
|
|
|
|
—
|
|
Denominator for diluted earnings per share
– adjusted weighted-average shares
|
|
|
3,273,379
|
|
|
|
2,572,626
|
|
|
|
3,267,981
|
|
|
|
2,506,604
|
|
Basic net loss per share
|
|
$
|
(0.03
|
)
|
|
$
|
(1.55
|
)
|
|
$
|
(0.39
|
)
|
|
$
|
(3.41
|
)
|
Diluted net loss per share
|
|
$
|
(0.19
|
)
|
|
$
|
(1.55
|
)
|
|
$
|
(0.77
|
)
|
|
$
|
(3.41
|
)
|
The following table summarizes potentially dilutive adjustments to
the weighted average number of common shares which were excluded
from the calculation because their effect would be
anti-dilutive.
|
|
Three
Months Ended June 30,
|
|
Six
Months Ended June 30,
|
|
|
|
|
|
|
|
|
|
Common stock purchase warrants
|
|
191,133
|
|
494,826
|
|
191,133
|
|
494,826
|
Stock options
|
|
311,651
|
|
233,824
|
|
311,651
|
|
233,824
|
Total
|
|
502,784
|
|
728,650
|
|
502,784
|
|
728,650
|
F-11
Soligenix, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Note 2.
Summary of Significant
Accounting Policies
(cont.)
The weighted average exercise price of the Company’s stock
options and warrants outstanding at June 30, 2016 were $19.60 and
$7.40 per share, respectively, and at June 30, 2015 were $23.10 and
$8.10 per share, respectively.
Use of
Estimates and Assumptions
The preparation of financial statements in conformity with
accounting principles generally accepted in the U.S. requires
management to make estimates and assumptions such as the fair value
of warrants and stock options and recovery of the useful life of
intangibles that affect the reported amounts in the financial
statements and accompanying notes. Actual results could differ from
those estimates.
Recently
Issued Accounting Pronouncements
In August 2014, the FASB issued Accounting Standards Update
(“ASU”) No. 2014-15, “Presentation of Financial
Statements — Going Concern (Subtopic 205-40): Disclosure of
Uncertainties about an Entity’s Ability to Continue as a
Going Concern.” The amendments in this ASU are intended to
define management’s responsibility to evaluate whether there
is substantial doubt about an entity’s ability to continue as
a going concern and to provide related footnote disclosures.
Specifically, this ASU provides a definition of the term
substantial doubt and requires an assessment for a period of one
year after the date that the financial statements are issued (or
available to be issued). It also requires certain disclosures when
substantial doubt is alleviated as a result of consideration of
management’s plans and requires an express statement and
other disclosures when substantial doubt is not alleviated. The new
standard will be effective for annual periods ending after December
15, 2016, and interim periods thereafter, with early adoption
permitted. The Company is currently evaluating the impact the
adoption of this standard will have on the Company’s
consolidated financial statements and disclosures.
In February 2016, the FASB issued ASU No. 2016-02,
“Leases” (topic 842). The FASB issued this update to
increase transparency and comparability among organizations by
recognizing lease assets and lease liabilities on the balance sheet
and disclosing key information about leasing arrangements. The
updated guidance is effective for annual periods beginning after
December 15, 2018, including interim periods within those fiscal
years. Early adoption of the update is permitted. The Company is
evaluating the impact of the adoption of this update on our
consolidated financial statements and related disclosures.
Note 3. Intangible
Assets
The following is a summary of intangible assets which consists of
licenses and patents:
|
|
Weighted Average Remaining Amortization Period
(years)
|
|
|
|
|
|
|
June 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
Licenses
|
|
3.2
|
|
$
|
462,234
|
|
$
|
347,314
|
|
$
|
114,920
|
Patents
|
|
0.8
|
|
|
1,893,185
|
|
|
1,850,209
|
|
|
42,976
|
Total
|
|
|
|
$
|
2,355,419
|
|
$
|
2,197,523
|
|
$
|
157,896
|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
Licenses
|
|
3.8
|
|
$
|
462,234
|
|
$
|
333,732
|
|
$
|
128,502
|
Patents
|
|
1.1
|
|
|
1,893,185
|
|
|
1,832,955
|
|
|
60,230
|
Total
|
|
|
|
$
|
2,355,419
|
|
$
|
2,166,687
|
|
$
|
188,732
|
Amortization expense was $15,418 and $55,321 for the three months
ended June 30, 2016 and 2015, respectively, and $30,836 and
$109,360 for the six months ended June 30, 2016 and 2015,
respectively.
F-12
Soligenix, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Note 3. Intangible
Assets
(cont.)
Based on the balance of licenses and patents at June 30, 2016, the
annual amortization expense for each of the succeeding four years
is expected to approximate as follows:
|
|
|
July 1 thru December 31, 2016
|
|
$
|
30,964
|
2017
|
|
$
|
61,800
|
2018
|
|
$
|
37,300
|
2019
|
|
$
|
27,832
|
License fees and royalty payments are expensed as incurred as the
Company does not attribute any future benefits to such
payments.
Note 4. Notes
Payable
On July 29, 2015, the Company entered into equity purchase
agreements (the “Equity Line Purchase Agreements”) and
registration rights agreements with certain accredited
institutional investors. Under the Equity Line Purchase Agreements,
the investors have agreed to purchase from the Company up to an
aggregate of $10 million worth of shares of common stock, from time
to time.
In consideration for entering into the Equity Line Purchase
Agreements, the Company issued to the investors promissory notes
having an aggregate principal amount of $300,000, which were
recorded as stock issuance costs. The promissory notes were paid on
April 15, 2016, and had an issuance date present value of $282,071.
The promissory notes did not include terms for interest, therefore
the interest was imputed at 9%. Total discount amortization of
$7,281 was recorded as interest expense for the six months ended
June 30, 2016. The discount was being accreted over the term of the
promissory notes using the effective interest rate method.
Note 5. Warrant
Liability
Warrants issued in connection with the Company’s June 2013
registered public offering contain provisions that protect holders
from a decline in the issue price of its common stock (or
“down-round” provision) and contain net settlement
provisions. As a result, the Company accounts for these warrants as
liabilities instead of equity instruments. Down-round provisions
reduce the exercise or conversion price of a warrant if the Company
issues equity shares for a price that is lower than the exercise or
conversion price of the warrants. Net settlement provisions allow
the holder of the warrant to surrender shares underlying the
warrant equal to the exercise price as payment of its exercise
price, instead of exercising the warrant by paying cash. The
Company evaluates whether warrants to acquire its common stock
contain provisions that protect holders from declines in the stock
price or otherwise could result in modification of the exercise
price and/or shares to be issued under the respective warrant
agreements based on a variable that is not an input to the fair
value of a “fixed for fixed” option. As a result of the
Company’s December 2014 registered public unit offering, the
exercise price of warrants outstanding in connection with the
public offering completed in June 2013 was adjusted to $6.10 per
share. As a result of the Company’s December 2015 drawings on
the Equity Line Purchase Agreements, the exercise price of warrants
outstanding in connection with the public offering conducted in
June 2013 was adjusted to $5.10 per share. The Company recognized
these warrants as liabilities at their fair value on the date of
grant and remeasures them to fair value on each reporting date.
The Company recognized an initial warrant liability for the
warrants issued in connection with the registered public offering
completed in June 2013 totaling $4,827,788, which was based on the
June 25, 2013 closing price of a share of the Company’s
common stock as reported on OTC Markets of $9.60. On June 30, 2016,
the closing price of the Company’s common stock as reported
on OTC Markets was $6.60. Due to the fluctuations in the market
value of the Company’s common stock from December 31, 2015
through June 30, 2016, the Company recognized non-cash income of
$1,285,485 for the change in the fair value of the warrant
liability for the six months ended June 30, 2016.
F-13
Soligenix, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Note 5. Warrant
Liability
(cont.)
The assumptions used in connection with the valuation of warrants
issued utilizing the binomial method were as follows:
|
|
|
|
|
Number of shares underlying the
warrants
|
|
|
303,693
|
|
|
|
303,693
|
|
Exercise price
|
|
$
|
5.10
|
|
|
$
|
5.10
|
|
Volatility
|
|
|
98
|
%
|
|
|
92
|
%
|
Risk-free interest rate
|
|
|
1.19
|
%
|
|
|
0.58
|
%
|
Expected dividend yield
|
|
|
0
|
|
|
|
0
|
|
Expected warrant life (years)
|
|
|
2.48
|
|
|
|
1.99
|
|
Stock Price
|
|
$
|
11.30
|
|
|
$
|
6.60
|
|
The table below provides a reconciliation of the beginning and
ending balances for the liability measured at fair value using
significant unobservable inputs (Level 3). The table reflects gains
for the six months ended June 30, 2016 for the financial liability
categorized as Level 3 as of June 30, 2016.
|
|
|
|
Decrease from Warrants Exercised in 2016
|
|
|
|
|
Warrant liability
|
|
$
|
2,434,101
|
|
—
|
|
$
|
1,285,485
|
|
$
|
1,148,616
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 6. Income
Taxes
The Company had gross NOLs at December 31, 2015 of approximately
$90,891,000 for federal tax purposes and approximately $5,273,000
of New Jersey NOL carry forwards remaining after the sale of unused
net operating loss carry forwards, portions of which will begin to
expire in 2018. In addition, the Company has $4,909,000 of various
tax credits which expire from 2018 to 2034. The Company may be able
to utilize its NOLs to reduce future federal and state income tax
liabilities. However, these NOLs are subject to various limitations
under Internal Revenue Code (“IRC”) Section 382. IRC
Section 382 limits the use of NOLs to the extent there has been an
ownership change of more than 50 percentage points. In addition,
the NOL carry forwards are subject to examination by the taxing
authority and could be adjusted or disallowed due to such exams.
Although the Company has not undergone an IRC Section 382 analysis,
it is likely that the utilization of the NOLs may be substantially
limited.
The Company and one or more of its subsidiaries files income tax
returns in the U.S. Federal jurisdiction, and various state and
local jurisdictions. During the year ended December 31, 2015, in
accordance with the State of New Jersey’s Technology Business
Tax Certificate Program, which allowed certain high technology and
biotechnology companies to sell unused net operating loss
carryforwards to other New Jersey-based corporate taxpayers, the
Company sold New Jersey net operating loss carryforwards, resulting
in the recognition of $488,933 of income tax benefit, net of
transaction costs. There can be no assurance as to the continuation
or magnitude of this program in the future.
The Company has no tax provision for the three and six month
periods ended June 30, 2016 and 2015 due to losses incurred and the
recognition of full valuation allowances recorded against net
deferred tax assets.
Note 7.
Shareholders’ Deficiency
Preferred
Stock
The Company has 350,000 shares of preferred stock authorized, none
of which are issued or outstanding.
F-14
Soligenix, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Note 7.
Shareholders’ Deficiency
(cont.)
Common
Stock
During the six months ended June 30, 2016, the Company issued the
following shares of common stock:
•
In several separate transactions the Company issued 154,011 shares
of common stock pursuant to the equity line with Lincoln Park
Capital Fund, LLC (“Lincoln Park”);
•
On May 31, 2016, the Company issued 5,000 shares of common stock to
a vendor for partial consideration for services performed. The
market price of the Company’s common stock was $7.30 on the
date issued and the shares were vested on the date of grant.
Equity
Line Facilities
In March 2016, the Company entered into a common stock purchase
agreement with Lincoln Park. The Lincoln Park equity facility
allows the Company to require Lincoln Park to purchase up to 10,000
shares (“Regular Purchase”) of the Company’s
common stock every two business days, up to an aggregate of $12.0
million over approximately a 36-month period with such amounts
increasing as the quoted stock price increases. The Regular
Purchase may be increased up to 15,000 shares of common stock if
the closing price of the common shares is not below $10.00, up to
20,000 shares of common stock if the closing price of the common
shares is not below $15.00 and up to 25,000 shares of common stock
if the closing price of the common shares is not below $20.00. The
purchase price for the Regular Purchase shall be equal to the
lesser of (i) the lowest sale price of the common shares during the
purchase date, or (ii) the average of the three lowest closing sale
prices of the common shares during the twelve business days prior
to the purchase date. Each Regular Purchase shall not exceed
$750,000. Furthermore, for each purchase by Lincoln Park,
additional commitment shares in commensurate amounts up to a total
of 50,000 shares will be issued based upon the relative proportion
of the aggregate amount of $12.0 million. In addition to the
Regular Purchase and provided that the closing price of the common
shares is not below $7.50 on the purchase date, the Company in its
sole discretion may direct Lincoln Park on each purchase date to
purchase on the next stock trading day (Accelerated Purchase
Date”) additional shares of Company stock up to the lesser of
(i) three times the number of shares purchased following a Regular
Purchase or (ii) 30% of the trading volume of shares traded on the
Accelerated Purchase Date at a price equal to the lesser of the
closing sale price on the Accelerated Purchase Date or 95% of the
Accelerated Purchase Date’s volume weighted average
price.
Upon entering into the agreement, the Company issued 10,000 shares
of common stock as consideration for its commitment to purchase
shares of our common stock under the purchase agreement. The value
of these shares on the date granted was $81,000, which was
accounted for as a stock issuance cost.
During the quarter ended June 30, 2016, the Company sold Lincoln
Park 140,000 shares of common stock for an aggregate price of
$962,600 and issued 4,011 additional shares of common stock with a
value of $27,634 to Lincoln Park as a commitment fee pursuant to
the terms of the agreement. The additional shares issued as a
commitment fee were accounted for as a stock issuance cost.
On July 29, 2015, the Company entered into Equity Line Purchase
Agreements and registration rights agreements with accredited
institutional investors, Kodiak Capital Group, LLC (“Kodiak
Capital”), Kingsbrook Opportunities Master Fund LP
(“Kingsbrook”) and River North Equity, LLC
(“River North” and, together with Kodiak Capital and
Kingsbrook, the “Investors”). Under the Equity Line
Purchase Agreements, the Investors agreed to purchase from the
Company up to an aggregate of $10 million worth of shares of common
stock, from time to time. In accordance with the registration
rights agreements, the Company has filed with the U.S. Securities
and Exchange Commission (the “SEC”) a registration
statement to register for resale under the Securities Act of 1933,
as amended, the shares of common stock that may be issued to the
Investors under the Equity Line Purchase Agreements.
From the date that the SEC declared the registration statement
effective, in August 2015, until December 31, 2016, the Company had
the right to sell up to $5 million, $4 million and $1 million worth
of shares of common stock to Kodiak Capital, Kingsbrook and River
North, respectively.
F-15
Soligenix, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Note 7.
Shareholders’ Deficiency
(cont.)
In consideration for entering into the Equity Line Purchase
Agreements, the Company issued to each of the Investors a
promissory note having a principal amount equal to 3% of the total
amount committed by such Investor. The principal amount due under
the promissory notes did not accrue interest and was paid on April
15, 2016 (see Note 4).
The initial drawdown under the Equity Line Purchase Agreements was
$500,000 offset by issuance cost of $453,162, which was included in
the Consolidated Statements of Changes in Shareholders’
Deficiency for the year ended December 31, 2015. Issuance costs
included professional fees, 3% commitment fee (promissory notes
payable by April 15, 2016) and SEC filing fees.
In December 2015, a second drawdown was made, whereby under the
Equity Line Purchase Agreements, the Company issued 393,624 shares
of common stock receiving proceeds of $2,000,000.
On March 7, 2016, in accordance with the terms of the Equity Line
Purchase Agreements, the Company exercised its right to terminate
the Purchase Agreements upon written notice to the Investors. The
Company did not incur any penalties as a result of this
termination.
Note 8. Commitments and
Contingencies
The Company has commitments of approximately $433,333 as of June
30, 2016 for several licensing agreements with consultants and
universities. Additionally, the Company has collaboration and
license agreements, which upon clinical or commercialization
success, may require the payment of milestones of up to $7.9
million and/or royalties up to 6% of net sales of covered products,
if and when achieved. However, there can be no assurance that
clinical or commercialization success will occur. As of June 30,
2016, no milestone or royalty payments have been paid or
accrued.
In December 2014, the Company entered into a lease agreement
through May 31, 2018 for existing and expanded office space. The
rent for the first 12 months is approximately $12,300 per month, or
approximately $20.85 per square foot. This rent increases to
approximately $12,375 per month, or approximately $20.95 per square
foot, for the next 12 months and approximately $12,460 per month,
or approximately $21.13 per square foot for the remainder of the
lease.
On September 3, 2014, the Company entered into an asset purchase
agreement with Hy Biopharma, Inc. (“Hy Biopharma”)
pursuant to which the Company acquired certain intangible assets,
properties and rights of Hy Biopharma related to the development of
Hy BioPharma’s synthetic hypericin product. As consideration
for the assets acquired, the Company paid $275,000 in cash and
issued 184,912 shares of common stock with a fair value based on
the Company’s stock price on the date of grant of $3,750,000.
These amounts were charged to research and development expense
during the third quarter of 2014 as the assets will be used in the
Company’s research and development activities and do not have
alternative future use pursuant to generally accepted accounting
principles in the United States. Provided all future
success-oriented milestones are attained, the Company will be
required to make additional payments of up to $10.0 million, if and
when achieved. Payments will be payable in restricted securities of
the Company not to exceed 19.9% ownership of Company’s
outstanding stock. As of June 30, 2016, no milestone or royalty
payments have been paid or accrued.
In February 2007, the Company’s Board of Directors authorized
the issuance of 5,000 shares of the Company’s common stock to
Dr. Schaber immediately prior to the completion of a transaction,
or series or a combination of related transactions, negotiated by
its Board of Directors whereby, directly or indirectly, a majority
of its capital stock or a majority of its assets are transferred
from the Company and/or its stockholders to a third party. Dr.
Schaber’s amended employment agreement includes the
Company’s obligation to issue such shares if such event
occurs.
F-16
Soligenix, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Note 8. Commitments and
Contingencies
(cont.)
As a result of the above agreements, the Company has future
contractual obligations over the next five years as follows:
|
|
|
|
Property
and
Other Leases
|
|
|
July 1 through December 31, 2016
|
|
$
|
33,333
|
|
$
|
78,667
|
|
$
|
112,000
|
2017
|
|
|
100,000
|
|
|
151,000
|
|
|
251,000
|
2018
|
|
|
100,000
|
|
|
52,000
|
|
|
152,000
|
2019
|
|
|
100,000
|
|
|
—
|
|
|
100,000
|
2020
|
|
|
100,000
|
|
|
—
|
|
|
100,000
|
Total
|
|
$
|
433,333
|
|
$
|
281,667
|
|
$
|
715,000
|
Note 9. Operating
Segments
The Company maintains two active operating segments:
BioTherapeutics and Vaccines/BioDefense. Each segment includes an
element of overhead costs specifically associated with its
operations, with its corporate shared services group responsible
for support functions generic to both operating segments.
|
|
Three
Months Ended
June 30,
|
|
|
|
|
|
Contract/Grant Revenue
|
|
|
|
|
|
|
|
|
Vaccines/BioDefense
|
|
$
|
3,160,050
|
|
|
$
|
1,099,827
|
|
BioTherapeutics
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
3,160,050
|
|
|
$
|
1,099,827
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Operations
|
|
|
|
|
|
|
|
|
Vaccines/BioDefense
|
|
$
|
734,120
|
|
|
$
|
302,531
|
|
BioTherapeutics
|
|
|
(668,260
|
)
|
|
|
(1,383,167
|
)
|
Corporate
|
|
|
(1,075,818
|
)
|
|
|
(954,115
|
)
|
Total
|
|
$
|
(1,009,958
|
)
|
|
$
|
(2,034,751
|
)
|
|
|
|
|
|
|
|
|
|
Amortization and Depreciation Expense
|
|
|
|
|
|
|
|
|
Vaccines/BioDefense
|
|
$
|
10,041
|
|
|
$
|
9,941
|
|
BioTherapeutics
|
|
|
10,564
|
|
|
|
49,866
|
|
Corporate
|
|
|
2,223
|
|
|
|
1,924
|
|
Total
|
|
$
|
22,828
|
|
|
$
|
61,731
|
|
|
|
|
|
|
|
|
|
|
Other
Income (Expense), Net
|
|
|
|
|
|
|
|
|
Corporate
|
|
$
|
917,183
|
|
|
$
|
(1,942,943
|
)
|
|
|
|
|
|
|
|
|
|
Share-Based Compensation
|
|
|
|
|
|
|
|
|
Vaccines/BioDefense
|
|
$
|
24,223
|
|
|
$
|
19,344
|
|
BioTherapeutics
|
|
|
30,985
|
|
|
|
30,179
|
|
Corporate
|
|
|
145,065
|
|
|
|
87,640
|
|
Total
|
|
$
|
200,273
|
|
|
$
|
137,163
|
|
F-17
Soligenix, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Note 9. Operating
Segments
(cont.)
|
|
Six
Months Ended
June 30,
|
|
|
|
|
|
Contract/Grant Revenue
|
|
|
|
|
|
|
|
|
Vaccines/BioDefense
|
|
$
|
5,791,037
|
|
|
$
|
1,902,141
|
|
BioTherapeutics
|
|
|
—
|
|
|
|
13,972
|
|
Total
|
|
$
|
5,791,037
|
|
|
$
|
1,916,113
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Operations
|
|
|
|
|
|
|
|
|
Vaccines/BioDefense
|
|
$
|
1,052,111
|
|
|
$
|
387,212
|
|
BioTherapeutics
|
|
|
(1,914,682
|
)
|
|
|
(2,148,043
|
)
|
Corporate
|
|
|
(2,053,092
|
)
|
|
|
(1,832,187
|
)
|
Total
|
|
$
|
(2,915,663
|
)
|
|
$
|
(3,593,018
|
)
|
|
|
|
|
|
|
|
|
|
Amortization and Depreciation Expense
|
|
|
|
|
|
|
|
|
Vaccines/BioDefense
|
|
$
|
20,060
|
|
|
$
|
19,727
|
|
BioTherapeutics
|
|
|
20,996
|
|
|
|
98,240
|
|
Corporate
|
|
|
4,380
|
|
|
|
3,690
|
|
Total
|
|
$
|
45,436
|
|
|
$
|
121,657
|
|
|
|
|
|
|
|
|
|
|
Other
Income (Expense), Net
|
|
|
|
|
|
|
|
|
Corporate
|
|
$
|
1,673,455
|
|
|
$
|
(4,953,998
|
)
|
|
|
|
|
|
|
|
|
|
Share-Based Compensation
|
|
|
|
|
|
|
|
|
Vaccines/BioDefense
|
|
$
|
52,229
|
|
|
$
|
43,936
|
|
BioTherapeutics
|
|
|
65,817
|
|
|
|
59,435
|
|
Corporate
|
|
|
218,638
|
|
|
|
175,817
|
|
Total
|
|
$
|
336,684
|
|
|
$
|
279,188
|
|
|
|
|
|
|
Identifiable Assets
|
|
|
|
|
|
|
Vaccines/BioDefense
|
|
$
|
1,921,812
|
|
$
|
2,123,676
|
BioTherapeutics
|
|
|
63,836
|
|
|
76,183
|
Corporate
|
|
|
3,430,399
|
|
|
5,187,263
|
Total
|
|
$
|
5,416,047
|
|
$
|
7,387,122
|
F-18
Soligenix, Inc. and
Subsidiaries
Consolidated Balance Sheets
As of December 31,
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
4,921,545
|
|
|
$
|
5,525,094
|
|
Contracts and grants receivable
|
|
|
1,985,212
|
|
|
|
794,767
|
|
Prepaid expenses
|
|
|
244,267
|
|
|
|
172,928
|
|
Total current assets
|
|
|
7,151,024
|
|
|
|
6,492,789
|
|
Office furniture and equipment, net
|
|
|
47,366
|
|
|
|
51,510
|
|
Intangible assets, net
|
|
|
188,732
|
|
|
|
409,949
|
|
Total assets
|
|
$
|
7,387,122
|
|
|
$
|
6,954,248
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders’
deficiency
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
4,379,936
|
|
|
$
|
3,003,545
|
|
Notes payable
|
|
|
292,719
|
|
|
|
—
|
|
Warrant liability
|
|
|
2,434,101
|
|
|
|
3,789,562
|
|
Accrued compensation
|
|
|
298,675
|
|
|
|
315,030
|
|
Total current liabilities
|
|
|
7,405,431
|
|
|
|
7,108,137
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Shareholders’ deficiency:
|
|
|
|
|
|
|
|
|
Preferred stock, 350,000 shares authorized; none
issued or outstanding
|
|
|
—
|
|
|
|
—
|
|
Common stock, $.001 par value; 5,000,000 shares
authorized; 3,126,952 and 2,393,657 shares issued and outstanding
in 2015 and 2014,
respectively
(1)
|
|
|
3,127
|
|
|
|
2,394
|
|
Additional paid-in capital
(1)
|
|
|
146,856,143
|
|
|
|
138,890,066
|
|
Accumulated deficit
|
|
|
(146,877,579
|
)
|
|
|
(139,046,349
|
)
|
Total shareholders’ deficiency
|
|
|
(18,309
|
)
|
|
|
(153,889
|
)
|
Total liabilities and shareholders’
deficiency
|
|
$
|
7,387,122
|
|
|
$
|
6,954,248
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
F-19
Soligenix, Inc. and
Subsidiaries
Consolidated Statements of Operations
For the Years Ended December 31,
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Grant revenue
|
|
$
|
127,042
|
|
|
$
|
1,497,548
|
|
Contract revenue
|
|
|
8,641,348
|
|
|
|
5,545,468
|
|
Total revenues
|
|
|
8,768,390
|
|
|
|
7,043,016
|
|
Cost of revenues
|
|
|
(6,882,204
|
)
|
|
|
(5,313,855
|
)
|
Gross profit
|
|
|
1,886,186
|
|
|
|
1,729,161
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
5,399,839
|
|
|
|
5,086,535
|
|
Acquired in-process research and
development
|
|
|
—
|
|
|
|
4,000,000
|
|
General and administrative
|
|
|
3,596,623
|
|
|
|
3,403,975
|
|
Total operating expenses
|
|
|
8,996,462
|
|
|
|
12,490,510
|
|
Loss from operations
|
|
|
(7,110,276
|
)
|
|
|
(10,761,349
|
)
|
Other income (expense):
|
|
|
|
|
|
|
|
|
Change in fair value of warrant
liability
|
|
|
(1,201,870
|
)
|
|
|
3,436,195
|
|
Interest income (expense), net
|
|
|
(8,017
|
)
|
|
|
1,310
|
|
Total other income (expense)
|
|
|
(1,209,887
|
)
|
|
|
3,437,505
|
|
Net loss before income taxes
|
|
|
(8,320,163
|
)
|
|
|
(7,323,844
|
)
|
Income tax benefit
|
|
|
488,933
|
|
|
|
616,872
|
|
Net loss
|
|
$
|
(7,831,230
|
)
|
|
$
|
(6,706,972
|
)
|
Basic net loss per share
(1)
|
|
$
|
(3.00
|
)
|
|
$
|
(3.25
|
)
|
Diluted net loss per share
(1)
|
|
$
|
(3.00
|
)
|
|
$
|
(4.30
|
)
|
Basic weighted average common shares
outstanding
(1)
|
|
|
2,606,577
|
|
|
|
2,063,842
|
|
Diluted weighted average common shares
outstanding
(1)
|
|
|
2,606,577
|
|
|
|
2,358,494
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
F-20
Soligenix, Inc. and
Subsidiaries
Consolidated Statements of Changes in Shareholders’
Deficiency
For the Years Ended December 31, 2015 and 2014
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2013
|
|
1,962,644
|
|
$
|
1,963
|
|
$
|
130,567,593
|
|
|
$
|
(132,339,377
|
)
|
|
$
|
(1,769,821
|
)
|
Issuance of common stock pursuant to Lincoln
Park Equity line
|
|
23,075
|
|
|
23
|
|
|
470,452
|
|
|
|
—
|
|
|
|
470,475
|
|
Issuance of common stock to vendors
|
|
12,100
|
|
|
12
|
|
|
256,028
|
|
|
|
—
|
|
|
|
256,040
|
|
Issuance of shares from exercise of stock
options
|
|
3,667
|
|
|
4
|
|
|
28,074
|
|
|
|
—
|
|
|
|
28,078
|
|
Reclassification of warrant liability upon
partial exercise of warrants issued in unit offering
|
|
—
|
|
|
—
|
|
|
1,055,490
|
|
|
|
—
|
|
|
|
1,055,490
|
|
Fair value of common stock warrants issued to
vendors
|
|
—
|
|
|
—
|
|
|
4,775
|
|
|
|
—
|
|
|
|
4,775
|
|
Issuance of common stock to collaboration
partner
|
|
4,307
|
|
|
4
|
|
|
99,998
|
|
|
|
—
|
|
|
|
100,002
|
|
Shares issued in connection with acquisition of
in-process research and development
|
|
184,911
|
|
|
185
|
|
|
3,749,815
|
|
|
|
—
|
|
|
|
3,750,000
|
|
Issuance of common stock from cashless exercise
of warrants
|
|
14,300
|
|
|
14
|
|
|
(14
|
)
|
|
|
—
|
|
|
|
—
|
|
Share-based compensation expense
|
|
—
|
|
|
—
|
|
|
720,150
|
|
|
|
—
|
|
|
|
720,150
|
|
Common stock issued in unit offering, net of
offering costs of $344,808
|
|
188,653
|
|
|
189
|
|
|
1,937,705
|
|
|
|
—
|
|
|
|
1,937,894
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(6,706,972
|
)
|
|
|
(6,706,972
|
)
|
Balance, December 31, 2014
|
|
2,393,657
|
|
$
|
2,394
|
|
$
|
138,890,066
|
|
|
$
|
(139,046,349
|
)
|
|
$
|
(153,889
|
)
|
Issuance of common stock pursuant to Lincoln
Park Equity line
|
|
84,135
|
|
|
84
|
|
|
1,339,093
|
|
|
|
—
|
|
|
|
1,339,177
|
|
Issuance of common stock pursuant to Equity Line
Purchase Agreement
|
|
454,577
|
|
|
455
|
|
|
2,499,545
|
|
|
|
—
|
|
|
|
2,500,000
|
|
Stock issuance
cost associated with Equity Line Purchase Agreement
|
|
—
|
|
|
—
|
|
|
(453,162
|
)
|
|
|
—
|
|
|
|
(453,162
|
)
|
Issuance of common stock to vendors
|
|
16,628
|
|
|
16
|
|
|
232,196
|
|
|
|
—
|
|
|
|
232,212
|
|
Issuance of shares from exercise of stock
options
|
|
3,312
|
|
|
3
|
|
|
19,247
|
|
|
|
—
|
|
|
|
19,250
|
|
Issuance of shares for exercise of
warrants
|
|
174,643
|
|
|
175
|
|
|
1,117,346
|
|
|
|
—
|
|
|
|
1,117,521
|
|
Reclassification of warrant liability upon
partial exercise of warrants issued in unit offering
|
|
—
|
|
|
—
|
|
|
2,557,331
|
|
|
|
—
|
|
|
|
2,557,331
|
|
Share-based compensation expense
|
|
—
|
|
|
—
|
|
|
654,481
|
|
|
|
—
|
|
|
|
654,481
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(7,831,230
|
)
|
|
|
(7,831,230
|
)
|
Balance, December 31, 2015
|
|
3,126,952
|
|
$
|
3,127
|
|
$
|
146,856,143
|
|
|
$
|
(146,877,579
|
)
|
|
$
|
(18,309
|
)
|
The accompanying notes are an integral part of these consolidated
financial statements.
F-21
Soligenix, Inc. and
Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended December 31,
|
|
|
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(7,831,230
|
)
|
|
$
|
(6,706,972
|
)
|
Adjustments to reconcile net loss to net cash
used in operating activities:
|
|
|
|
|
|
|
|
|
Amortization and depreciation
|
|
|
247,458
|
|
|
|
245,787
|
|
Charge for common stock issued for collaboration
agreement
|
|
|
—
|
|
|
|
100,002
|
|
Common stock issued in exchange for
services
|
|
|
232,212
|
|
|
|
256,040
|
|
Issuance of common stock for acquisition of
in-process research and development
|
|
|
—
|
|
|
|
4,000,000
|
|
Warrants issued to vendor
|
|
|
—
|
|
|
|
4,775
|
|
Amortization of discount on debt
|
|
|
10,648
|
|
|
|
—
|
|
Share-based compensation
|
|
|
654,481
|
|
|
|
720,150
|
|
Change in fair value of warrant
liability
|
|
|
1,201,870
|
|
|
|
(3,436,195
|
)
|
|
|
|
|
|
|
|
|
|
Change in operating assets and
liabilities:
|
|
|
|
|
|
|
|
|
Contracts and grants receivable
|
|
|
(1,190,445
|
)
|
|
|
72,319
|
|
Taxes receivable
|
|
|
—
|
|
|
|
750,356
|
|
Prepaid expenses
|
|
|
(71,339
|
)
|
|
|
(37,537
|
)
|
Accounts payable
|
|
|
1,376,391
|
|
|
|
1,483,255
|
|
Accrued compensation
|
|
|
(16,354
|
)
|
|
|
81,291
|
|
Total adjustments and change in operating assets
and liabilities
|
|
|
2,444,922
|
|
|
|
4,240,243
|
|
Net cash used in operating activities
|
|
|
(5,386,308
|
)
|
|
|
(2,466,729
|
)
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
Payments for acquisition of in-process research
and development
|
|
|
—
|
|
|
|
(250,000
|
)
|
Purchases of furniture and office
equipment
|
|
|
(22,098
|
)
|
|
|
(50,866
|
)
|
Net cash used in investing activities
|
|
|
(22,098
|
)
|
|
|
(300,866
|
)
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
Net proceeds from sale of units containing
common stock and warrants
|
|
|
—
|
|
|
|
1,937,894
|
|
Net proceeds from issuance of common stock
pursuant to the equity lines
|
|
|
3,839,177
|
|
|
|
470,475
|
|
Stock issuance cost associated with equity line
purchase agreement
|
|
|
(171,091
|
)
|
|
|
—
|
|
Proceeds from exercise of options and
warrants
|
|
|
1,136,771
|
|
|
|
28,078
|
|
Net cash provided by financing
activities
|
|
|
4,804,857
|
|
|
|
2,436,447
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash
equivalents
|
|
|
(603,549
|
)
|
|
|
(331,148
|
)
|
Cash and cash equivalents at beginning of
period
|
|
|
5,525,094
|
|
|
|
5,856,242
|
|
Cash and cash equivalents at end of
period
|
|
$
|
4,921,545
|
|
|
$
|
5,525,094
|
|
Supplemental disclosure of non cash investing and financing
activities:
|
|
|
|
|
|
|
|
|
Notes payable issued in connection with Equity
Purchase Agreement
|
|
$
|
282,071
|
|
|
$
|
—
|
|
Reclassification of warrant liability to
additional paid-in capital upon partial exercise of warrants issued
in unit offering
|
|
$
|
2,557,331
|
|
|
$
|
1,055,490
|
|
Supplemental information:
|
|
|
|
|
|
|
|
|
Cash paid for state income taxes
|
|
$
|
7,542
|
|
|
$
|
6,994
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
F-22
Soligenix, Inc. and
Subsidiaries
Notes to Consolidated
Financial Statements
Note 1. Nature of
Business
Basis of
Presentation
Soligenix, Inc. (the “Company”) is a late-stage
biopharmaceutical company focused on developing and commercializing
products to treat rare diseases where there is an unmet medical
need. The Company maintains two active business segments:
BioTherapeutics and Vaccines/BioDefense.
The Company’s BioTherapeutics business segment is developing
a first-in-class photodynamic therapy (SGX301) utilizing safe
visible light for the treatment of cutaneous T-cell lymphoma
(“CTCL”), proprietary formulations of oral
beclomethasone 17, 21-dipropionate (“BDP”) for the
prevention/treatment of gastrointestinal (“GI”)
disorders characterized by severe inflammation, including pediatric
Crohn’s disease (SGX203) and acute radiation enteritis
(SGX201), and it’s novel innate defense regulator
(“IDR”) technology dusquetide (SGX942) for the
treatment of oral mucositis in head and neck cancer.
The Company’s Vaccines/BioDefense business segment includes
active development programs for RiVax™, its ricin toxin
vaccine candidate, VeloThrax™, an anthrax vaccine candidate,
OrbeShield
®
,
a GI acute radiation syndrome (“GI ARS”) therapeutic
candidate and SGX943, a melioidosis therapeutic candidate. The
development of the vaccine programs currently supported by the heat
stabilization technology, known as ThermoVax
®
,
under existing and on-going government contract funding. With the
government contract from the National Institute of Allergy and
Infectious Diseases (“NIAID”), the Company will attempt
to advance the development of RiVax™ to protect against
exposure to ricin toxin. The Company plans to use the funds
received under the government contracts with the Biomedical
Advanced Research and Development Authority (“BARDA”)
and NIAID to advance the development of OrbeShield
®
for the treatment of GI ARS.
The Company generates revenues under government grants primarily
from the National Institutes of Health (the “NIH”) and
government contracts from BARDA and NIAID.
The Company is subject to risks common to companies in the
biotechnology industry including, but not limited to, development
of new technological innovations, dependence on key personnel,
protections of proprietary technology, compliance with the United
States Food and Drug Administration (the U.S. “FDA”)
regulations, litigation, and product liability.
Liquidity
As of December 31, 2015, the Company had cash and cash equivalents
of $4,921,545 as compared to $5,525,094 as of December 31, 2014,
representing a decrease of $603,549 or 11%. The decrease in cash
was primarily due to net cash used in operations of $5,386,308
partially offset by cash provided by financing activities of
$4,804,857. As of December 31, 2015, the Company had working
capital of $2,179,694, which excludes a non-cash warrant liability
of $2,434,101, as compared to working capital of $3,174,214 as of
December 31, 2014, representing a decrease of $994,520 or 31%. The
decrease in working capital was primarily the result of
expenditures to support the completion of the Phase 2 clinical
trial of SGX942 and the initiation of the pivotal Phase 3 clinical
trial of SGX301 for the treatment of CTCL offset by the $4,804,857
in various financing activities.
Based on the Company’s current rate of cash outflows, cash on
hand, proceeds from its government contract and grant programs,
availability of funds from equity lines and proceeds from the state
of New Jersey Technology Business Tax Certificate Transfer Program,
management believes that its current cash will be sufficient to
meet the anticipated cash needs for working capital and capital
expenditures for at least the next twelve months.
Management’s business plan can be outlined as follows:
•
Complete enrollment and report preliminary results in the pivotal
Phase 3 clinical trial of SGX301 for the treatment of CTCL;
•
Initiate a Phase 3 clinical trial of oral BDP, known as SGX203, for
the treatment of pediatric Crohn’s disease;
F-23
Soligenix, Inc. and
Subsidiaries
Notes to Consolidated
Financial Statements
Note 1. Nature of
Business
(cont.)
•
Continue to collect the long-term follow-up safety data from the
SGX942 Phase 2 proof-of-concept study for the treatment of oral
mucositis in head and neck cancer patients and publish the findings
from this study;
•
Obtain FDA agreement on a pivotal Phase 2b/3 protocol of SGX942 for
the treatment of oral mucositis in head and neck cancer
patients;
•
Continue development of RiVax™ in combination with
ThermoVax
®
technology to develop new heat stable vaccines in biodefense and
infectious diseases with the potential to collaborate and/or
partner with other companies in these areas;
•
Advance the preclinical and manufacturing development of
OrbeShield
®
as a biodefense medical countermeasure for the treatment of GI
ARS;
•
Continue to apply for and secure additional government funding for
each of our BioTherapeutics and Vaccines/BioDefense programs
through grants, contracts and/or procurements;
•
Acquire or in-license new clinical-stage compounds for development;
and
•
Explore other business development and merger/acquisition
strategies.
The Company’s plans with respect to its liquidity management
include, but are not limited to the following:
•
The Company has up to $43.0 million in active government contract
funding still available to support its associated research programs
through 2016 and beyond. The Company plans to submit additional
contract and grant applications for further support of its programs
with various funding agencies;
•
The Company has continued to use equity instruments to provide a
portion of the compensation due to vendors and collaboration
partners and expects to continue to do so for the foreseeable
future;
•
The Company will pursue Net Operating Loss (“NOL”)
sales in the state of New Jersey pursuant to its Technology
Business Tax Certificate Transfer Program. Based on the receipt of
$488,933 in proceeds of the sale of NJ NOL in 2015, the Company
expects to participate in the program during 2016 and beyond;
•
The Company has an aggregate of $20.2 million available from equity
facilities through 2019; and
•
The Company may seek additional capital in the private and/or
public equity markets, pursue government contracts and grants as
well as business development activities to continue its operations,
respond to competitive pressures, develop new products and
services, and to support new strategic partnerships. The Company is
currently evaluating additional equity financing opportunities on
an ongoing basis and may execute them when appropriate. However,
there can be no assurances that the Company can consummate such a
transaction, or consummate a transaction at favorable pricing.
Reverse
Stock Split
On October 7, 2016, the Company completed a reverse stock split of
its issued and outstanding shares of common stock at a ratio of
one-for-ten, whereby, once effective, every ten shares of its
common stock was exchanged for one share of its common stock. The
Company’s common stock began trading on the OTCQB on a
reverse split basis at the market opening on October 7, 2016. All
share and per share data have been restated to reflect this reverse
stock split.
Note 2. Summary of
Significant Accounting Policies
Principles
of Consolidation
The consolidated financial statements include Soligenix, Inc., and
its wholly and majority owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated as a
result of consolidation.
F-24
Soligenix, Inc. and
Subsidiaries
Notes to Consolidated
Financial Statements
Note 2. Summary of
Significant Accounting Policies
(cont.)
Operating
Segments
Operating segments are defined as components of an enterprise about
which separate financial information is available that is evaluated
on a regular basis by the chief operating decision maker, or
decision making group, in deciding how to allocate resources to an
individual segment and in assessing the performance of the segment.
The Company divides its operations into two operating segments:
BioTherapeutics and Vaccines/BioDefense.
Cash and
Cash Equivalents
The Company considers all highly liquid investments with maturities
of three months or less when purchased to be cash equivalents.
Contracts
and Grants Receivable
Contracts and grants receivable consist of unbilled amounts due
from various grants from the NIH and contracts from BARDA and
NIAID, an institute of NIH, for costs incurred prior to the period
end under reimbursement contracts. The amounts were billed to the
respective governmental agencies in the month subsequent to period
end and collected shortly thereafter. Accordingly, no allowance for
doubtful amounts has been established. If amounts become
uncollectible, they are charged to operations.
Intangible
Assets
One of the most significant estimates or judgments that the Company
makes is whether to capitalize or expense patent and license costs.
The Company makes this judgment based on whether the technology has
alternative future uses, as defined in Financial Accounting
Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) 730,
Research and
Development
. Based on this consideration, the Company
capitalizes payments made to legal firms that are engaged in filing
and protecting rights to intellectual property and rights for its
current products in both the domestic and international markets.
The Company believes that patent rights are one of its most
valuable assets. Patents and patent applications are a key
component of intellectual property, especially in the early stage
of product development, as their purchase and maintenance gives the
Company access to key product development rights from
Soligenix’s academic and industry partners. These rights can
also be sold or sub-licensed as part of its strategy to partner its
products at each stage of development as the intangible assets have
alternative future use. The legal costs incurred for these patents
consist of work associated with filing new patents designed to
protect, preserve and maintain the Company’s rights, and
perhaps extend the lives of the patents. The Company capitalizes
such costs and amortizes intangibles on a straight-line basis over
their expected useful life – generally a period of 11 to 16
years.
These intangible assets are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount may
not be recoverable or if the underlying program is no longer being
pursued. If the sum of the expected undiscounted cash flows is less
than the carrying value of the related asset or group of assets, a
loss is recognized for the difference between the fair value and
carrying value of the related asset or group of assets. No such
write downs have occurred during the years ended December 31, 2015
and 2014.
The Company did not capitalize any patent related costs during the
years ended December 31, 2015 or 2014.
Impairment
of Long-Lived Assets
Office furniture and equipment and intangible assets are evaluated
and reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable. The Company recognizes impairment of long-lived assets
in the event the net book value of such assets exceeds the
estimated future undiscounted cash flows attributable to such
assets. If the sum of the expected undiscounted cash flows is less
than the carrying value of the related asset or group of assets, a
loss is recognized for the difference between the fair value and
the carrying value of the related asset or group of assets. Such
analyses necessarily involve significant judgment.
F-25
Soligenix, Inc. and
Subsidiaries
Notes to Consolidated
Financial Statements
Note 2. Summary of
Significant Accounting Policies
(cont.)
The Company did not record any impairment of long-lived assets for
the years ended December 31, 2015 or 2014.
Fair Value
of Financial Instruments
FASB ASC 820 —
Fair Value
Measurements and Disclosures,
defines fair value 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. FASB ASC 820 requires disclosures about the
fair value of all financial instruments, whether or not recognized,
for financial statement purposes. Disclosures about the fair value
of financial instruments are based on pertinent information
available to the Company on December 31, 2015. Accordingly, the
estimates presented in these financial statements are not
necessarily indicative of the amounts that could be realized on
disposition of the financial instruments.
FASB ASC 820 specifies a hierarchy of valuation techniques based on
whether the inputs to those valuation techniques are observable or
unobservable. Observable inputs reflect market data obtained from
independent sources, while unobservable inputs reflect market
assumptions. The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities
(Level 1 measurement) and the lowest priority to unobservable
inputs (Level 3 measurement).
The three levels of the fair value hierarchy are as follows:
•
Level 1 — Quoted prices in active markets for identical
assets or liabilities that the reporting entity has the ability to
access at the measurement date. Level 1 primarily consists of
financial instruments whose value is based on quoted market prices
such as exchange-traded instruments and listed equities.
•
Level 2 — Inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly or indirectly. Level 2 includes financial instruments that
are valued using models or other valuation methodologies. These
models consider various assumptions, including volatility factors,
current market prices and contractual prices for the underlying
financial instruments. Substantially all of these assumptions are
observable in the marketplace, can be derived from observable data
or are supported by observable levels at which transactions are
executed in the marketplace.
•
Level 3 — Unobservable inputs for the asset or liability.
Financial instruments are considered Level 3 when their fair values
are determined using pricing models, discounted cash flows or
similar techniques and at least one significant model assumption or
input is unobservable.
The carrying amounts reported in the consolidated balance sheet for
cash and cash equivalents, contracts and grants receivable,
accounts payable, notes payable and accrued compensation
approximate their fair value based on the short-term maturity of
these instruments. The Company recognizes all derivative financial
instruments as assets or liabilities in the financial statements
and measures them at fair value with changes in fair value
reflected as current period income or loss unless the derivatives
qualify as hedges. As a result, certain warrants issued in
connection with the Company’s June 2013 registered public
offering were accounted for as derivatives. See Note 5,
Warrant
Liability
.
Revenue
Recognition
The Company’s revenues are primarily generated from
government contracts and grants. The revenue from government
contracts and grants is based upon subcontractor costs and internal
costs incurred that are specifically covered by the contracts and
grants, plus a facilities and administrative rate that provides
funding for overhead expenses and management fees. These revenues
are recognized when expenses have been incurred by subcontractors
or when the Company incurs reimbursable internal expenses that are
related to the government contracts and grants.
Research
and Development Costs
Research and development costs are charged to expense when incurred
in accordance with FASB ASC 730,
Research and
Development
. Research and development includes costs such as
clinical trial expenses, contracted research and license agreement
fees with no alternative future use, supplies and materials,
salaries, share-based compensation, employee benefits, equipment
depreciation and allocation of various corporate costs. Purchased
in-process research
F-26
Soligenix, Inc. and
Subsidiaries
Notes to Consolidated
Financial Statements
Note 2. Summary of
Significant Accounting Policies
(cont.)
and development expense represents the value assigned or paid for
acquired research and development for which there is no alternative
future use as of the date of acquisition.
Accounting
for Warrants
The Company considered FASB ASC 815,
Evaluating Whether an
Instrument is Considered Indexed to an Entity’s Own
Stock
, which provides guidance for determining whether an
equity-linked financial instrument (or embedded feature) issued by
an entity is indexed to the entity’s stock, and, therefore,
qualifying for the first part of the scope exception in paragraph
815-10-15. The Company evaluated the provisions in its outstanding
warrants and determined that warrants issued in connection with the
Company’s June 2013 registered public offering contains
provisions that protect holders from a decline in the issue price
of the Company’s common stock (or “down-round”
provisions) and contain net settlement provisions. Consequently,
these warrants are recognized as liabilities at their fair value on
the date of grant and remeasured at fair value on each reporting
date. All other warrants issued were indexed to the Company’s
stock and therefore are accounted for as equity instruments for
2015 and 2014.
Share-Based
Compensation
Stock options are issued with an exercise price equal to the market
price on the date of grant. Stock options issued to directors upon
re-election vest quarterly for a period of one year (new director
issuances are fully vested upon issuance). Stock options issued to
employees vest 25% on the grant date, then 25% each subsequent year
for a period of three years. Stock options vest over each
three-month period from the date of issuance to the end of the
three year period. These options have a ten year life for as long
as the individuals remain employees or directors. In general, when
an employee or director terminates their position, the options will
expire within three months, unless otherwise extended by the
Board.
From time to time, the Company issues restricted shares of common
stock to vendors and consultants as compensation for services
performed. Typically these instruments vest upon issuance and
therefore the entire share-based compensation expense is recognized
upon issuance to the vendors and/or consultants.
Share-based compensation expense for options, warrants and shares
of common stock granted to non-employees has been determined in
accordance with and FASB ASC 505-50,
Equity-Based Payments
to Non-Employees
, and represents the fair value of the
consideration received, or the fair value of the equity instruments
issued, whichever may be more reliably measured. For options that
vest over future periods, the fair value of options granted to
non-employees is amortized as the options vest. The fair value is
remeasured each reporting period until performance is complete.
For the year ended December 31, 2015 the Company issued 60,534
stock options at a weighted average exercise price of $11.90 per
share. The fair value of options issued during the years ended
December 31, 2015 and 2014 was estimated to be $12.20 and $14.80
per share, respectively, using the Black-Scholes option-pricing
model and the following assumptions:
•
a dividend yield of 0%;
•
an expected life of 4 years;
•
volatilities ranging from 121% – 141% and 128% – 165%
for 2015 and 2014, respectively;
•
forfeitures at a rate of 12%; and
•
risk-free interest rates ranging from .98% to 1.53% and 1.05% to
1.43% for 2015 and 2014, respectively.
F-27
Soligenix, Inc. and
Subsidiaries
Notes to Consolidated
Financial Statements
Note 2. Summary of
Significant Accounting Policies
(cont.)
The weighted average fair value of each option grant made during
2015 and 2014 was estimated on the date of each grant using the
Black-Scholes option pricing model and amortized ratably over the
option vesting periods, which approximates the service period.
Income
Taxes
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. A valuation allowance is established
when it is more likely than not that all or a portion of a deferred
tax asset will not be realized. A review of all available positive
and negative evidence is considered, including the Company’s
current and past performance, the market environment in which the
Company operates, the utilization of past tax credits, and the
length of carryback and carryforward periods. Deferred tax assets
and liabilities are measured utilizing tax rates expected to apply
to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The Company recognizes
accrued interest and penalties associated with uncertain tax
positions, if any, as part of income tax expense. There were no tax
related interest and penalties recorded for 2015 and 2014.
Additionally, the Company has not recorded an asset for
unrecognized tax benefits or a liability for uncertain tax
positions at December 31, 2015 and 2014.
Earnings
Per Share
Basic earnings per share (“EPS”) excludes dilution and
is computed by dividing income (loss) available to common
stockholders by the weighted-average number of common shares
outstanding for the period, as adjusted for the reverse stock split
of one-for-ten effective October 7, 2016. Diluted EPS reflects the
potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into
common stock or resulted in the issuance of common stock that
shared in the earnings of the entity. Since there is a significant
number of options and warrants outstanding, fluctuations in the
actual market price can have a variety of results for each period
presented.
|
|
For
the Year Ended
December 31, 2015
|
|
For
the Year Ended
December 31, 2014
|
Numerator:
|
|
|
|
|
|
|
|
|
Net loss for basic earnings per share
|
|
$
|
(7,831,230
|
)
|
|
$
|
(6,706,972
|
)
|
Less change in fair value of warrant
liability
|
|
|
—
|
|
|
|
3,436,195
|
|
Net loss for diluted earnings per
share
|
|
$
|
(7,831,230
|
)
|
|
$
|
(10,143,167
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted-average basic common shares
outstanding
|
|
|
2,606,577
|
|
|
|
2,063,842
|
|
Assumed conversion of dilutive
securities:
|
|
|
|
|
|
|
|
|
Common stock purchase warrants
|
|
|
—
|
|
|
|
294,652
|
|
Denominator for diluted earnings per share
– adjusted weighted-average
shares
|
|
|
2,606,577
|
|
|
|
2,358,494
|
|
Basic net loss per share
|
|
$
|
(3.00
|
)
|
|
$
|
(3.25
|
)
|
Diluted net loss per share
|
|
$
|
(3.00
|
)
|
|
$
|
(4.30
|
)
|
F-28
Soligenix, Inc. and
Subsidiaries
Notes to Consolidated
Financial Statements
Note 2. Summary of
Significant Accounting Policies
(cont.)
The following table summarizes potentially dilutive adjustments to
the weighted average number of common shares which were excluded
from the calculation because their effect would be
anti-dilutive.
|
|
For
the Year Ended December 31, 2015
|
|
For
the Year Ended December 31, 2014
|
Common stock purchase warrants
|
|
492,612
|
|
254,614
|
Stock options
|
|
276,861
|
|
248,828
|
Total
|
|
769,473
|
|
503,442
|
Shares issuable upon the exercise of options and warrants
outstanding at December 31, 2015 and 2014 were 276,861 and 248,828
shares issuable upon the exercise of options, and 492,612 and
726,950 shares issuable upon the exercise of warrants,
respectively. The weighted average exercise price of the
Company’s stock options and warrants outstanding at December
31, 2015 were $21.30 and $7.40 per share, respectively.
Use of
Estimates and Assumptions
The preparation of financial statements in conformity with
accounting principles generally accepted in the U.S. requires
management to make estimates and assumptions such as the fair value
of warrants and stock options and the useful life of intangibles
that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
Recently
Issued Accounting Pronouncements
In August 2014, FASB issued Accounting Standards Update
(“ASU”) No. 2014-15, “
Presentation of
Financial Statements — Going Concern (Subtopic 205-40):
Disclosure of Uncertainties about an Entity’s Ability to
Continue as a Going Concern.”
The amendments in this
ASU are intended to define management’s responsibility to
evaluate whether there is substantial doubt about an entity’s
ability to continue as a going concern and to provide related
footnote disclosures. Specifically, this ASU provides a definition
of the term substantial doubt and requires an assessment for a
period of one year after the date that the financial statements are
issued (or available to be issued). It also requires certain
disclosures when substantial doubt is alleviated as a result of
consideration of management’s plans and requires an express
statement and other disclosures when substantial doubt is not
alleviated. The new standard will be effective for annual periods
ending after December 15, 2016, and interim periods thereafter,
with early adoption permitted. The Company is currently evaluating
the impact the adoption of this standard will have on the
Company’s consolidated financial statements and
disclosures.
In February 2016, the FASB issued ASU No. 2016-02,
“
Leases
”
(topic 842)
.
The FASB
issued this update to increase transparency and comparability among
organizations by recognizing lease assets and lease liabilities on
the balance sheet and disclosing key information about leasing
arrangements. The updated guidance is effective for annual periods
beginning after December 15, 2018, including interim periods within
those fiscal years. Early adoption of the update is permitted. The
Company is evaluating the impact of the adoption of this update on
our consolidated financial statements and related disclosures.
F-29
Soligenix, Inc. and
Subsidiaries
Notes to Consolidated
Financial Statements
Note 3. Intangible
Assets
The following is a summary of intangible assets which consists of
licenses and patents:
|
|
Weighted Average Remaining Amortization Period
(Years)
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
Licenses
|
|
3.8
|
|
$
|
462,234
|
|
$
|
333,732
|
|
$
|
128,502
|
Patents
|
|
1.1
|
|
|
1,893,185
|
|
|
1,832,955
|
|
|
60,230
|
Total
|
|
1.9
|
|
$
|
2,355,419
|
|
$
|
2,166,687
|
|
$
|
188,732
|
December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
Licenses
|
|
4.7
|
|
$
|
462,234
|
|
$
|
306,495
|
|
$
|
155,739
|
Patents
|
|
1.9
|
|
|
1,893,185
|
|
|
1,638,975
|
|
|
254,210
|
Total
|
|
2.6
|
|
$
|
2,355,419
|
|
$
|
1,945,470
|
|
$
|
409,949
|
Amortization expense was $221,217 and $222,563 in 2015 and 2014,
respectively.
Based on the balance of licenses and patents at December 31, 2015,
the annual amortization expense for each of the succeeding four
years is expected to approximate as follows:
|
|
|
2016
|
|
$
|
61,800
|
2017
|
|
$
|
61,800
|
2018
|
|
$
|
37,300
|
2019
|
|
$
|
27,832
|
License fees and royalty payments are expensed annually as
incurred, as the Company does not attribute any future benefits of
such payments.
Note 4. Notes
Payable
On July 29, 2015, the Company entered into equity purchase
agreements (the “Equity Line Purchase Agreements”) and
registration rights agreements with certain accredited
institutional investors. Under the Equity Line Purchase Agreements,
the investors have agreed to purchase from the Company up to an
aggregate of $10 million worth of shares of common stock, from time
to time.
In consideration for entering into the Equity Line Purchase
Agreements, the Company issued to the investors promissory notes
having an aggregate principal amount of $300,000, which were
recorded as stock issuance costs. The promissory notes are payable
by April 15, 2016, with an issuance date present value of $282,071.
The promissory notes did not include terms for interest, therefore
the interest was imputed at 9%. Total discount amortization of
$10,648 was recorded as interest expense for the year ended
December 31, 2015. The discount is being accreted over the term of
the promissory notes using the effective interest rate method.
Note 5. Warrant
Liability
Warrants issued in connection with the Company’s June 2013
registered public offering contain provisions that protect holders
from a decline in the issue price of its common stock (or
“down-round” provision) and contain net settlement
provisions. As a result, the Company accounts for these warrants as
liabilities instead of equity instruments. Down-round provisions
reduce the exercise or conversion price of a warrant if the Company
issues equity shares for a price that is lower than the exercise or
conversion price of the warrants. Net settlement provisions allow
the holder of the warrant to surrender shares underlying the
warrant equal to the exercise price as payment of its exercise
price,
F-30
Soligenix, Inc. and
Subsidiaries
Notes to Consolidated
Financial Statements
Note 5. Warrant
Liability
(cont.)
instead of exercising the warrant by paying cash. The Company
evaluates whether warrants to acquire its common stock contain
provisions that protect holders from declines in the stock price or
otherwise could result in modification of the exercise price and/or
shares to be issued under the respective warrant agreements based
on a variable that is not an input to the fair value of a
“fixed for fixed” option. As a result of the
Company’s December 2014 registered public unit offering, the
exercise price of warrants outstanding in connection with the
public offering completed in June 2013 was adjusted to $6.10 per
share. As a result of the Company’s December 2015 drawdown on
the Equity Line Purchase Agreement, the exercise price of warrants
outstanding in connection with the public offering completed in
June 2013 was adjusted to $5.10 per share.
The Company recognized these warrants as liabilities at their fair
value on the date of grant and remeasures them to fair value on
each reporting date.
The Company recognized an initial warrant liability for the
warrants issued in connection with the registered public offering
completed in June 2013 totaling $4,827,788, which was based on the
June 25, 2013 closing price of a share of the Company’s
common stock as reported on OTC Markets of $9.60. During the year
ended December 31, 2014, 14,300 shares of common were issued upon
58,608 warrants exercised on a cashless basis. On January 22, 2014,
25,000 warrants were exercised and on August 19, 2014, 33,608
warrants were exercised. The fair value of the warrants exercised
in 2014, or $1,055,490 was reclassified from warrant liability to
additional paid-in capital on the respective exercise dates. During
the year ended December 31, 2015, 168,643 warrants were exercised.
The fair value of the warrants exercised in 2015, or $2,557,331 was
reclassified from warrant liability to additional paid-in capital
on the respective exercise dates. On December 31, 2015, the closing
price of the Company’s common stock as reported on OTC
Markets was $11.30. Due to the fluctuations in the market value of
the Company’s common stock from December 31, 2014 through
December 31, 2015, the Company recognized a non-cash expense of
$1,201,870 for the change in the fair value of the warrant
liability for 2015.
The assumptions used in connection with the valuation of warrants
issued, using the binomial method, were as follows:
|
|
Initial Measurement June 25,
2013
|
|
|
|
|
|
|
|
|
Number of shares underlying the
warrants
|
|
|
541,685
|
|
|
|
530,944
|
|
|
|
472,336
|
|
|
|
168,643
|
|
|
|
303,693
|
|
Exercise price
|
|
$
|
16.50
|
|
|
$
|
16.50
|
|
|
$
|
6.10
|
|
|
$
|
6.10
|
|
|
$
|
5.10
|
|
Volatility
|
|
|
140
|
%
|
|
|
135
|
%
|
|
|
128
|
%
|
|
|
117 – 119
|
%
|
|
|
98
|
%
|
Risk-free interest rate
|
|
|
1.49
|
%
|
|
|
1.75
|
%
|
|
|
1.38
|
%
|
|
|
.81 – 1.06
|
%
|
|
|
1.19
|
%
|
Expected dividend yield
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Expected warrant life (years)
|
|
|
5.0
|
|
|
|
4.5
|
|
|
|
3.5
|
|
|
|
3.01-3.33
|
|
|
|
2.48
|
|
Stock price
|
|
$
|
9.60
|
|
|
$
|
18.00
|
|
|
$
|
9.80
|
|
|
$
|
16.90 – $22.20
|
|
|
$
|
11.30
|
|
Recurring Level 3
Activity and Reconciliation
The table below provides a reconciliation of the beginning and
ending balances for the liability measured at fair value using
significant unobservable inputs (Level 3). The table reflects
losses for the year ended December 31, 2015 for the financial
liability categorized as Level 3 as of December 31, 2015.
F-31
Soligenix, Inc. and
Subsidiaries
Notes to Consolidated
Financial Statements
Note 5. Warrant
Liability
(cont.)
Fair Value Measurements Using Significant Unobservable Inputs
(Level 3):
|
|
|
|
Decrease from Warrants Exercised in 2015
|
|
|
|
|
Warrant liability
|
|
$
|
3,789,562
|
|
$
|
(2,557,331
|
)
|
|
$
|
1,201,870
|
|
$
|
2,434,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 6. Income
Taxes
The income tax benefit consisted of the following for the years
ended December 31, 2015 and December 31, 2014:
|
|
|
|
|
Federal
|
|
$
|
—
|
|
|
$
|
—
|
|
State
|
|
|
(488,933
|
)
|
|
|
(616,872
|
)
|
Income tax benefit
|
|
$
|
(488,933
|
)
|
|
$
|
(616,872
|
)
|
The significant components of the Company’s deferred tax
assets and liabilities at December 31, 2015 and 2014 are as
follows:
|
|
|
|
|
Net operating loss carry forwards
|
|
$
|
31,216,000
|
|
|
$
|
29,594,000
|
|
Orphan drug and research and development credit
carry forwards
|
|
|
4,909,000
|
|
|
|
3,556,000
|
|
Equity based compensation
|
|
|
1,923,000
|
|
|
|
2,049,000
|
|
Intangibles
|
|
|
2,090,000
|
|
|
|
2,140,000
|
|
Total
|
|
|
40,138,000
|
|
|
|
37,339,000
|
|
Valuation allowance
|
|
|
(40,138,000
|
)
|
|
|
(37,339,000
|
)
|
Net deferred tax assets
|
|
$
|
—
|
|
|
$
|
—
|
|
The Company has gross NOLs at December 31, 2015 of approximately
$90,891,000 for federal tax purposes and approximately $5,273,000
of New Jersey NOL carry forwards remaining after the sale of unused
net operating loss carry forwards, portions of which will begin to
expire in 2018. In addition, the Company has $4,909,000 of various
tax credits which expire from 2018 to 2034. The Company may be able
to utilize its NOLs to reduce future federal and state income tax
liabilities. However, these NOLs are subject to various limitations
under Internal Revenue Code (“IRC”) Section 382. IRC
Section 382 limits the use of NOLs to the extent there has been an
ownership change of more than 50 percentage points. In addition,
the NOL carry forwards are subject to examination by the taxing
authority and could be adjusted or disallowed due to such exams.
Although the Company has not undergone an IRC Section 382 analysis,
it is likely that the utilization of the NOLs may be substantially
limited.
The Company and one or more of its subsidiaries files income tax
returns in the U.S. Federal jurisdiction, and various state and
local jurisdictions. During the years ended December 31, 2015 and
2014, in accordance with the State of New Jersey’s Technology
Business Tax Certificate Program, which allowed certain high
technology and biotechnology companies to sell unused net operating
loss carryforwards to other New Jersey-based corporate taxpayers,
the Company sold New Jersey net operating loss carryforwards,
resulting in the recognition of $488,933 and $616,872 of income tax
benefit, net of transaction costs, respectively. There can be no
assurance as to the continuation or magnitude of this program in
the future.
F-32
Soligenix, Inc. and
Subsidiaries
Notes to Consolidated
Financial Statements
Note 6. Income
Taxes
(cont.)
Reconciliations of the difference between income tax benefit
computed at the federal and state statutory tax rates and the
provision for income tax benefit for the years ended December 31,
2015 and 2014 were as follows:
|
|
|
|
|
Income tax loss at federal statutory
rate
|
|
(34.00
|
)%
|
|
(34.00
|
)%
|
State tax benefits, plus sale of NJ NOLs, net of
federal benefit
|
|
(6.00
|
)
|
|
(6.00
|
)
|
Subtotal
|
|
(40.00
|
)
|
|
(40.00
|
)
|
Valuation allowance
|
|
34.12
|
|
|
31.58
|
|
Income tax benefit
|
|
(5.88
|
)%
|
|
(8.42
|
)%
|
Note 7.
Shareholders’ Deficiency
Preferred
Stock
The Company has 350,000 shares of preferred stock authorized, none
of which are issued or outstanding.
Common
Stock
The following items represent transactions in the Company’s
common stock for the year ended December 31, 2015:
•
In February 2015, the Company issued 70,179 shares of common stock
in connection with the exercise of stock warrants;
•
In March 2015, the Company issued 48,200 shares of common stock in
connection with the exercise of stock warrants;
•
In March 2015, the Company issued 15,301 shares of common stock
pursuant to the Lincoln Park facility;
•
In April 2015, the Company issued 35,679 shares of common stock in
connection with the exercise of stock warrants;
•
In April 2015, the Company issued 812 shares of common stock in
connection with the exercise of stock options;
•
In May 2015, the Company issued 7,636 shares of common stock
pursuant to the Lincoln Park facility;
•
In June 2015, the Company issued 38,425 shares of common stock
pursuant to the Lincoln Park facility;
•
In June 2015, the Company issued 19,871 shares of common stock in
connection with the exercise of stock warrants;
•
In July 2015, the Company issued 714 shares of common stock in
connection with the exercise of stock warrants;
•
In September 2015, the Company issued 60,954 shares of common stock
pursuant to an Equity Line Purchase Agreement;
•
In September 2015, the Company issued 2,500 shares of common stock
in connection with the exercise of stock options;
•
In October 2015, the Company issued 15,184 shares of common stock
pursuant to the Lincoln Park facility;
•
In November 2015, the Company issued 7,589 shares of common stock
pursuant to the Lincoln Park facility;
F-33
Soligenix, Inc. and
Subsidiaries
Notes to Consolidated
Financial Statements
Note 7.
Shareholders’ Deficiency
(cont.)
•
In December 2015, the Company issued 393,623 shares of common stock
pursuant to an Equity Line Purchase Agreement;
•
In nine separate transactions, the Company issued 16,628 fully
vested shares of common stock as partial consideration for services
performed.
The following items represent transactions in the Company’s
common stock for the year ended December 31, 2014:
•
In January 2014, the Company issued 7,788 shares of common stock in
connection with the cashless exercise of 25,000 stock warrants;
•
In March 2014, the Company issued 7,694 shares of common stock
pursuant to the Lincoln Park facility;
•
In April 2014, the Company issued 7,691 shares of common stock
pursuant to the Lincoln Park facility;
•
In May 2014, the Company issued 4,307 shares of common stock upon
the execution of an agreement to evaluate specific oncology
technology;
•
In May 2014, the Company issued 2,917 shares of common stock upon
the exercise of vested stock options;
•
In July 2014, the Company issued 7,690 shares of common stock
pursuant to the Lincoln Park facility;
•
In July 2014, the Company issued 750 shares of common stock upon
the exercise of vested stock options;
•
In August 2014, the Company issued 6,512 shares of common stock
with the cashless exercise of 33,608 stock warrants;
•
In September 2014, the Company issued 184,911 shares of common
stock in connection with the Hy BioPharma Acquisition of in process
research and development.
•
In December 2014, the Company issued 188,653 shares of common stock
and 116,932 warrants pursuant to a registered direct unit offering
of common stock and warrants. The Company received net proceeds of
$1,937,894 from this offering.
•
In four separate transactions, the Company issued 12,100 shares of
common stock as partial consideration for services performed.
Equity
Line Purchase Agreement
On July 29, 2015, the Company entered into the Equity Line Purchase
Agreements and a registration rights agreements with accredited
institutional investors, Kodiak Capital Group, LLC (“Kodiak
Capital”), Kingsbrook Opportunities Master Fund LP
(“Kingsbrook”) and River North Equity, LLC
(“River North” and, together with Kodiak Capital and
Kingsbrook, the “Investors”). Under the Equity Line
Purchase Agreements, the Investors agreed to purchase from the
Company up to an aggregate of $10 million worth of shares of common
stock, from time to time. In accordance with the registration
rights agreements, the Company has filed with the U.S. SEC a
registration statement to register for resale under the Securities
Act of 1933, as amended, the shares of common stock that may be
issued to the Investors under the Equity Line Purchase
Agreements.
From the date that the SEC declared the registration statement
effective, in August 2015, until December 31, 2016, the Company has
the right to sell up to $5 million, $4 million and $1 million worth
of shares of common stock to Kodiak Capital, Kingsbrook and River
North, respectively. The Company will control the timing and amount
of future sales, if any, of common stock to the Investors under the
Equity Line Purchase Agreements. The purchase price of the shares
will be equal to eighty percent (80%) of the lowest daily volume
weighted average price of the common stock for any trading day
during the five consecutive trading days immediately following the
date of the Company’s notice to the Investors requesting the
purchase. There is no minimum amount that the Company may require
the Investors to purchase at any one time. The Company may not
require the Investors to purchase more than $3 million
F-34
Soligenix, Inc. and
Subsidiaries
Notes to Consolidated
Financial Statements
Note 7.
Shareholders’ Deficiency
(cont.)
worth of shares of common stock during any seven day period and may
not require any of the Investors to purchase shares of common stock
if such purchase would result in such Investor’s beneficial
ownership exceeding 9.99% of the outstanding common stock.
The Equity Line Purchase Agreements contain customary
representations, warranties, covenants, closing conditions, and
indemnification and termination provisions. Each of the Investors
has covenanted not to cause or engage in any manner whatsoever any
direct or indirect short selling of the common stock.
In consideration for entering into the Equity Line Purchase
Agreements, the Company issued to each of the Investors a
promissory note having a principal amount equal to 3% of the total
amount committed by such Investor. The principal amount due under
the promissory notes does not accrue interest and is payable by
April 15, 2016 (see Note 4).
The Equity Line Purchase Agreements may be terminated by the
Company at any time at its discretion without any cost to the
Company.
The initial drawdown under the Equity Line Purchase Agreements was
$500,000 offset by issuance cost of $453,162, which is included in
the Consolidated Statements of Changes in Shareholders’
Deficiency. Issuance costs include professional fees, 3% commitment
fee (promissory notes payable by April 15, 2016) and SEC filing
fees.
In December 2015, a second drawdown was made, whereby under the
Equity Line Purchase Agreements, the Company issued 393,624 shares
of common stock receiving proceeds of $2,000,000.
On March 7, 2016, in accordance with the terms of the Equity Line
Purchase Agreements, the Company exercised its right to terminate
the Purchase Agreements upon written notice to the Investors. The
Company did not incur any penalties as a result of this
termination.
Equity
Line
In November 2013, the Company entered into a common stock purchase
agreement with Lincoln Park Capital Fund, LLC (“Lincoln
Park”). The Lincoln Park equity facility allows the Company
to require Lincoln Park to purchase up to 7,500 shares
(“Regular Purchase”) of the Company’s common
stock every two business days, up to an aggregate of $10.6 million
over approximately a 36-month period depending on certain
conditions, including the quoted market price of the
Company’s common stock on such date. The purchase price for
the Regular Purchase shall be equal to the lesser of (i) the lowest
sale price of the common shares during the purchase date, or (ii)
the average of the three lowest closing sale prices of common
shares during the twelve business days prior to the purchase date.
Each Regular Purchase shall not exceed $750,000. Furthermore, for
each additional purchase by Lincoln Park, additional commitment
shares in commensurate amounts up to a total of 12,207 shares will
be issued based upon the relative proportion of the aggregate
amount of $10.0 million. The Regular Purchase amount may be
increased up to 10,000 shares of common stock if the closing price
of the common shares is not below $25.00. In addition to the
Regular Purchase and provided that the closing price of the common
shares is not below $15.00 on the purchase date, the Company in its
sole discretion may direct Lincoln Park on each purchase date to
purchase on the next stock trading day (“Accelerate Purchase
Date”) additional shares of Company stock up to the lesser of
(i) two times the number of shares purchased following a Regular
Purchase or (ii) 30% of the trading volume of shares traded on the
Accelerated Purchase Date as a price equal to the lesser of the
closing sale price on the Accelerated Purchase Date or 95% of the
Accelerated Purchase Date’s volume weighted average
price.
During
the year ended December 31, 2014, in three separate transactions, the Company sold 22,500 shares of common stock and issued 575
commitment shares receiving net proceeds of $470,475. During the year ended December 31, 2015, in nine separate transactions,
the Company sold 82,500 shares of common stock and issued 1,635 commitment shares receiving net proceeds of $1,339,177.
F-35
Soligenix, Inc. and
Subsidiaries
Notes to Consolidated
Financial Statements
Note 8. Stock Option
Plans and Warrants to Purchase Common Stock
Stock
Option Plans
The Amended and Restated 2005 Equity Incentive Plan was replaced by
the 2015 Equity Incentive Plan (“2015 Plan”), approved
in June 2015, and is divided into four separate equity
programs:
1)
the
Discretionary Option Grant Program, under which eligible persons
may, at the discretion of the Plan Administrator, be granted
options to purchase shares of common stock,
2)
the
Salary Investment Option Grant Program, under which eligible
employees may elect to have a portion of their base salary invested
each year in options to purchase shares of common stock,
3)
the
Automatic Option Grant Program, under which eligible nonemployee
Board members will automatically receive options at periodic
intervals to purchase shares of common stock, and
4)
the
Director Fee Option Grant Program, under which non-employee Board
members may elect to have all, or any portion, of their annual
retainer fee otherwise payable in cash applied to a special option
grant.
The 2005 Equity Incentive Plan (“2005 Plan”) also was
divided into four separate equity programs:
1)
the
Discretionary Option Grant Program, under which eligible persons
may, at the discretion of the Plan Administrator, be issued common
stock or granted options to purchase shares of common stock,
2)
the
Salary Investment Option Grant Program, under which eligible
employees may elect to have a portion of their base salary invested
each year in options to purchase shares of common stock,
3)
the
Automatic Option Grant Program, under which eligible nonemployee
Board members will automatically receive options at periodic
intervals to purchase shares of common stock, and
4)
the
Director Fee Option Grant Program, under which non-employee Board
members may elect to have all, or any portion, of their annual
retainer fee otherwise payable in cash applied to a special option
grant.
In addition, under the 2005 Plan, the Board may elect to pay
certain consultants, directors, and employees in common stock. The
2005 Plan was amended in September 2007 to increase the number of
options available under the plan to 100,000, in 2010 to increase
the number of shares under the plan to 175,000 and again in 2013 to
increase the number shares available under the plan to 300,000. The
2015 Plan was approved in June 2015 with 300,000 shares available
under the plan.
The table below accounts only for transactions occurring as part of
the 2015 Plan.
|
|
|
|
|
|
|
|
Shares available for grant at plan
approval
|
|
300,000
|
|
|
—
|
Options granted
|
|
(47,700
|
)
|
|
—
|
|
|
|
|
|
|
Shares available for grant at end of year
|
|
252,300
|
|
|
—
|
F-36
Soligenix, Inc. and
Subsidiaries
Notes to Consolidated
Financial Statements
Note 8. Stock Option
Plans and Warrants to Purchase Common Stock
(cont.)
The total option activity for the amended 2005 Plan and the 2015
Plan for the years ended December 31, 2015 and 2014 was as
follows:
|
|
|
|
Weighted Average Options Exercise Price
|
Balance at December 31, 2013
|
|
205,151
|
|
|
$
|
26.30
|
Granted
|
|
63,750
|
|
|
|
17.90
|
Exercised
|
|
(3,667
|
)
|
|
|
7.70
|
Forfeited
|
|
(16,406
|
)
|
|
|
31.30
|
Balance at December 31, 2014
|
|
248,828
|
|
|
$
|
24.00
|
Granted
|
|
60,534
|
|
|
|
11.90
|
Exercised
|
|
(3,312
|
)
|
|
|
5.80
|
Forfeited
|
|
(29,189
|
)
|
|
|
31.30
|
Balance at December 31, 2015
|
|
276,861
|
|
|
$
|
21.30
|
As of December 31, 2015, there were 208,220 options exercisable
with a weighted average exercise price of $23.30, a weighted
average remaining contractual term of 7.28 years and an intrinsic
value of $256,347. The intrinsic value of options exercised during
the years ended December 31, 2015 and 2014 was $18,181 and $47,241,
respectively. As of December 31, 2015, there were 276,861 options
outstanding and expected to vest with a weighted average exercise
price of $21.30, weighted average remaining term of 7.28 years and
an intrinsic value of $257,369. The aggregate intrinsic value
represents the total pre-tax intrinsic value (the difference
between the closing price of our common stock on the last trading
day on December 31, 2015 and the exercise price, multiplied by the
number of in-the-money options) what would have been received by
the option holders had all option holders exercised their options
on December 31, 2015. This amount changes based on the fair market
value of our common stock.
The Company awarded 60,534 and 63,750 stock options to new
employees and existing Board members during the years ended 2015
and 2014, respectively. During the year ended 2015, under the 2005
Equity Incentive Plan, 2,900 option grants were issued to employees
and 9,934 option grants were issued to Board members, and under the
2015 Equity Incentive Plan 47,700 option grants were issued to
employees.
The weighted-average exercise price, by price range, for
outstanding options to purchase common stock at December 31, 2015
was:
|
|
Weighted Average Remaining Contractual Life in
Years
|
|
|
|
|
$3.00 – $22.00
|
|
8.03
|
|
217,084
|
|
148,443
|
$22.60 – $41.00
|
|
5.36
|
|
17,477
|
|
17,477
|
$46.40 – $94.00
|
|
3.22
|
|
42,300
|
|
42,300
|
Total
|
|
7.28
|
|
276,861
|
|
208,220
|
The Company’s share-based compensation expense for the years
ended December 31, 2015 and 2014 was recognized as follows:
|
|
|
|
|
Research and Development
|
|
$
|
260,204
|
|
$
|
308,847
|
General and Administrative
|
|
|
394,277
|
|
|
411,303
|
Total
|
|
$
|
654,481
|
|
$
|
720,150
|
At December 31, 2015, the total compensation cost for stock options
not yet recognized was approximately $773,197 and will be expensed
over the next three years.
F-37
Soligenix, Inc. and
Subsidiaries
Notes to Consolidated
Financial Statements
Note 8. Stock Option
Plans and Warrants to Purchase Common Stock
(cont.)
Warrants
to Purchase Common Stock
Warrant activity for the years ended December 31, 2015 and 2014 was
as follows:
|
|
|
|
Weighted Average Warrant Exercise Price
|
Balance at December 31, 2013
|
|
815,653
|
|
|
$
|
21.70
|
Granted
|
|
116,932
|
|
|
|
14.80
|
Exercised
|
|
(58,608
|
)
|
|
|
16.50
|
Expired
|
|
(147,027
|
)
|
|
|
34.90
|
Balance at December 31, 2014
|
|
726,950
|
|
|
$
|
11.50
|
Exercised
|
|
(174,643
|
)
|
|
|
6.40
|
Expired
|
|
(59,695
|
)
|
|
|
55.90
|
Balance at December 31, 2015
|
|
492,612
|
|
|
$
|
7.40
|
The weighted-average remaining life, by price range, for
outstanding warrants at December 31, 2015 was:
|
|
Weighted Average Remaining Contractual Life in
Years
|
|
|
|
|
$5.10 – $5.30
|
|
2.4
|
|
381,180
|
|
381,180
|
$14.80 – $20.50
|
|
4.0
|
|
111,432
|
|
111,432
|
Total
|
|
2.7
|
|
492,612
|
|
492,612
|
Note 9.
Concentrations
At December 31, 2015 and 2014, the Company had deposits in major
financial institutions that exceeded the amount under protection by
the Securities Investor Protection Corporation
(“SIPC”). Currently, the Company is covered up to
$1,000,000 by the SIPC and at times maintains cash balances in
excess of the SIPC coverage.
Note 10. Commitments and
Contingencies
The Company has commitments of approximately $500,000 at December
31, 2015 for several licensing agreements with consultants and
universities. Additionally, the Company has collaboration and
license agreements, which upon clinical or commercialization
success, may require the payment of milestones of up to $7.9
million and/or royalties up to 6% of net sales of covered products,
if and when achieved. However, there can be no assurance that
clinical or commercialization success will occur. As of December
31, 2015 no milestones or royalty payments have been paid or
accrued.
In December 2014, the Company entered into a lease agreement
through May 31, 2018 for existing and expanded office space. The
rent for the first 12 months was approximately $12,300 per month,
or approximately $20.85 per square foot. This rent increased to
approximately $12,375 per month, or approximately $20.95 per square
foot, for the next 12 months and will increase to approximately
$12,460 per month, or approximately $21.13 per square foot for the
remainder of the lease. The Company paid rent expense in the amount
of $142,935 and $94,400 for 2015 and 2014, respectively.
On September 3, 2014, the Company entered into an asset purchase
agreement with Hy Biopharma, Inc. (“Hy Biopharma”)
pursuant to which the Company acquired certain intangible assets,
properties and rights of Hy Biopharma related to the development of
Hy BioPharma’s synthetic hypericin product. As consideration
for the assets acquired, the
F-38
Soligenix, Inc. and
Subsidiaries
Notes to Consolidated
Financial Statements
Note 10. Commitments and
Contingencies
(cont.)
Company paid $275,000 in cash and issued 184,911 shares of common
stock with a fair value based on the Company’s stock price on
the date of grant of $3,750,000. These amounts were charged to
research and development expense during the third quarter of 2014
as the assets will be used in the Company’s research and
development activities and do not have alternative future use
pursuant to generally accepted accounting principles in the United
States. Provided all future success-oriented milestones are
attained, the Company will be required to make additional payments
of up to $10.0 million, if and when achieved. Payments will be
payable in restricted securities of the Company provided that Hy
BioPharma’s ownership is not to exceed 19.9% of the
Company’s outstanding stock. As of December 31, 2015, no
milestone payments have been paid or accrued.
In February 2007, the Company’s Board of Directors authorized
the issuance of 5,000 shares of the Company’s common stock to
Dr. Schaber immediately prior to the completion of a transaction,
or series or a combination of related transactions, negotiated by
its Board of Directors whereby, directly or indirectly, a majority
of its capital stock or a majority of its assets are transferred
from the Company and/or its stockholders to a third party. Dr.
Schaber’s amended employment agreement includes the
Company’s obligation to issue such shares if such event
occurs.
As a result of the above agreements, the Company has future
contractual obligations over the next five years as follows:
|
|
|
|
Property and Other Leases
|
|
|
2016
|
|
$
|
100,000
|
|
$
|
157,000
|
|
$
|
257,000
|
2017
|
|
|
100,000
|
|
|
151,000
|
|
|
251,000
|
2018
|
|
|
100,000
|
|
|
52,000
|
|
|
152,000
|
2019
|
|
|
100,000
|
|
|
—
|
|
|
100,000
|
2020
|
|
|
100,000
|
|
|
—
|
|
|
100,000
|
Total
|
|
$
|
500,000
|
|
$
|
360,000
|
|
$
|
860,000
|
Note 11. Operating
Segments
The Company maintains two active operating segments:
BioTherapeutics and Vaccines/BioDefense. Each segment includes an
element of overhead costs specifically associated with its
operations, with its corporate shared services group responsible
for support functions generic to both operating segments.
|
|
For
the Years Ended
December 31,
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
Vaccines/BioDefense
|
|
$
|
8,754,418
|
|
|
$
|
6,756,388
|
|
BioTherapeutics
|
|
|
13,972
|
|
|
|
286,628
|
|
Total
|
|
$
|
8,768,390
|
|
|
$
|
7,043,016
|
|
|
|
|
|
|
Income (Loss) from Operations
|
|
|
|
|
|
|
|
|
Vaccines/BioDefense
|
|
$
|
1,263,709
|
|
|
$
|
807,164
|
|
BioTherapeutics
|
|
|
(4,487,988
|
)
|
|
|
(7,674,381
|
)
|
Corporate
|
|
|
(3,885,997
|
)
|
|
|
(3,894,132
|
)
|
Total
|
|
$
|
(7,110,276
|
)
|
|
$
|
(10,761,349
|
)
|
|
|
|
|
|
|
|
|
|
Amortization and Depreciation Expense
|
|
|
|
|
|
|
|
|
Vaccines/BioDefense
|
|
$
|
39,925
|
|
|
$
|
39,625
|
|
BioTherapeutics
|
|
|
199,661
|
|
|
|
199,196
|
|
Corporate
|
|
|
7,872
|
|
|
|
6,966
|
|
Total
|
|
$
|
247,458
|
|
|
$
|
245,787
|
|
F-39
Soligenix, Inc. and
Subsidiaries
Notes to Consolidated
Financial Statements
Note 11. Operating
Segments
(cont.)
|
|
For
the Years Ended
December 31,
|
|
|
|
|
|
Other
Income (Expense), Net
|
|
|
|
|
|
|
|
Corporate
|
|
$
|
(1,209,887
|
)
|
|
$
|
3,437,505
|
|
|
|
|
|
|
|
|
Share-Based Compensation
|
|
|
|
|
|
|
|
Vaccines/BioDefense
|
|
$
|
111,960
|
|
|
$
|
114,920
|
BioTherapeutics
|
|
|
148,244
|
|
|
|
193,926
|
Corporate
|
|
|
394,277
|
|
|
|
411,304
|
Total
|
|
$
|
654,481
|
|
|
$
|
720,150
|
|
|
|
|
|
|
|
|
Identifiable Assets
|
|
|
|
|
|
|
Vaccines/BioDefense
|
|
$
|
2,123,676
|
|
$
|
1,025,220
|
BioTherapeutics
|
|
|
76,183
|
|
|
204,308
|
Corporate
|
|
|
5,187,263
|
|
|
5,724,720
|
Total
|
|
$
|
7,387,122
|
|
$
|
6,954,248
|
Note 12. Subsequent
Events
The Company entered into a purchase agreement with Lincoln Park on
March 22, 2016 pursuant to which Lincoln Park has committed to
purchase up to $12 million of the Company’s common stock.
Concurrently with the execution of the purchase agreement, the
Company issued 10,000 shares of its common stock to Lincoln Park as
a partial fee for its commitment to purchase shares of the
Company’s common stock under the purchase agreement. The
shares that may be sold pursuant to the purchase agreement may be
sold by the Company to Lincoln Park at the Company’s
discretion from time to time over the remaining term of
approximately 36 months, once the registration statement
registering the resale of the shares of common stock sold to
Lincoln Park under the purchase agreement is declared effective by
the SEC. The purchase price for the shares that the Company may
sell to Lincoln Park under the purchase agreement will fluctuate
based on the price of the Company’s common stock.
The Company has the right to control the timing and amount of any
sales of its shares to Lincoln Park, except that, pursuant to the
terms of the agreements with Lincoln Park, the Company would be
unable to sell shares to Lincoln Park that would cause Lincoln Park
to beneficially own more than 4.99% of the Company’s issued
and outstanding common stock. Sales of the Company’s common
stock, if any, to Lincoln Park will depend upon market conditions
and other factors to be determined by the Company.
The Company’s board of directors and stockholders approved a
one-for-ten reverse split of the Company’s common stock,
which was effected on October 7, 2016. The reverse split combined
every ten shares of the Company’s issued and outstanding
common stock into one share of common stock and correspondingly
adjusted the number of shares issuable and the exercise prices
under its outstanding options and warrants. No fractional shares
were issued in connection with the reverse split, and any
fractional shares resulting from the reverse split were rounded up
to the nearest whole share. The reverse split was effective upon
filing of the Certificate of Amendment to the Second Amended and
Restated Certificate of Incorporation on October 7, 2016. The
Company has reflected the effect of the one-for-ten reverse split
of its common stock (and the corresponding adjustment of the number
of shares issuable and the exercise prices under its outstanding
options and warrants) in these financial statements as if it had
occurred at the beginning of the earliest period presented.
F-40
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
Soligenix, Inc.
We have audited the accompanying consolidated balance sheets of
Soligenix, Inc. and subsidiaries (the “Company”) as of
December 31, 2015 and 2014, and the related consolidated statements
of operations, shareholders’ deficiency, and cash flows for
each of the years then ended. The financial statements are the
responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of Soligenix, Inc. and subsidiaries as of December 31,
2015 and 2014, and the consolidated results of their operations and
their cash flows for each of the years then ended, in conformity
with accounting principles generally accepted in the United States
of America.
/s/ EisnerAmper LLP
Philadelphia, PA
March 24, 2016, except for the effects of the reverse split of the
Company’s common stock discussed in Note 12 to the
consolidated financial statements, as to which the date is October
7, 2016
F-41
Shares Common Stock
Warrants to Purchase up to
Shares of Common Stock
___________________
PROSPECTUS
___________________
Lead Book-Running
Manager
Aegis Capital Corp
Co-Manager
Maxim Group LLC
PART II
INFORMATION NOT REQUIRED
IN PROSPECTUS
ITEM 13.
Other Expenses of
Issuance and Distribution.
The
following table sets forth the estimated costs and expenses of the Registrant in connection with the offering described in the
registration statement. All of the amounts shown are estimated except for the SEC registration fee.
SEC registration fee
|
|
$
|
3,293.64
|
FINRA filing fee
|
|
$
|
4,763.00
|
Nasdaq listing fees
|
|
$
|
*
|
Legal fees and expenses
|
|
$
|
*
|
Accounting fees and expenses
|
|
$
|
*
|
Miscellaneous
|
|
$
|
*
|
|
|
|
|
TOTAL
|
|
$
|
8,056.64
|
______________
* To be filed by amendment.
ITEM 14.
Indemnification of Directors and Officers.
Section 145(a) of the Delaware General Corporation Law provides, in
general, that a corporation may indemnify any person who was or is
a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by
or in the right of the corporation), because he or she is or was a
director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses
(including attorneys’ fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by the person
in connection with such action, suit or proceeding, if he or she
acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the corporation
and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
Section 145(b) of the Delaware General Corporation Law provides, in
general, that a corporation may indemnify any person who was or is
a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor because the person
is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against
expenses (including attorneys’ fees) actually and reasonably
incurred by the person in connection with the defense or settlement
of such action or suit if he or she acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification
shall be made with respect to any claim, issue or matter as to
which he or she shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of
Chancery or other adjudicating court determines that, despite the
adjudication of liability but in view of all of the circumstances
of the case, he or she is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or other
adjudicating court shall deem proper.
Section 145(g) of the Delaware General Corporation Law provides, in
general, that a corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against such person and
incurred by such person in any such capacity, or arising out of his
or her status as such, whether or not the corporation would have
the power to indemnify the person against such liability under
Section 145 of the Delaware General Corporation Law.
Section 102(b)(7) of the Delaware General Corporation Law grants
the Company the power to limit the personal liability of its
directors to the Company or its stockholders for monetary damages
for breach of a fiduciary duty. Article X of the Company’s
Certificate of Incorporation, as amended, provides for the
limitation of personal liability of the directors of the Company as
follows:
“A Director of the Corporation shall have no personal
liability to the corporation or its stockholders for monetary
damages for breach of his fiduciary duty as a Director; provided,
however, this Article shall not eliminate or limit the liability of
a Director (i) for any breach of the Director’s duty of
loyalty to the Corporation or its stockholders; (ii) for
II-1
acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (iii) for the unlawful
payment of dividends or unlawful stock repurchases under Section
174 of the General Corporation Law of the State of Delaware; or
(iv) for any transaction from which the Director derived an
improper personal benefit. If the General Corporation Law is
amended after approval by the stockholders of this Article to
authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest
extent permitted by the General Corporation Law of the State of
Delaware, as so amended.”
Article VIII of the Company’s Bylaws, as amended and
restated, provide for indemnification of directors and officers to
the fullest extent permitted by Section 145 of the Delaware General
Corporation Law.
The Company has a directors’ and officers’ liability
insurance policy.
The above discussion is qualified in its entirety by reference to
the Company’s Certificate of Incorporation and Bylaws.
ITEM 15.
Recent Sales of
Unregistered Securities.
On November 18, 2013, the Company entered into a purchase agreement
with Lincoln Park Capital Fund, LLC (“Lincoln Park”).
Pursuant to the terms of the agreement, the Company may require
Lincoln Park to purchase between 7,500 and 10,000 shares of common
stock depending on certain conditions, up to a total of $10,600,000
over approximately a 36-month period. The purchase price of the
shares of common stock will be based on the market price of our
common stock immediately preceding the time of sale as computed
under the purchase agreement without any fixed discount. The
Company does not have the right to require Lincoln Park to purchase
shares of common stock in the event that the price of the common
stock is less than $10.00 per share.
Pursuant to the purchase agreement, the Company issued to Lincoln
Park 9,766 shares of common stock as a partial commitment fee, and
28,572 shares of common stock for an aggregate price of $600,000.
From November 2013 through October 6, 2016, the Company has sold
Lincoln Park 105,000 more shares of common stock for an aggregate
price of approximately $1,809,652 million and issued to Lincoln
Park 2,210 additional shares of common stock as a commitment fee.
Such securities were issued pursuant to an exemption provided by
Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule
506 of Regulation D promulgated thereunder. Lincoln Park
represented to the Company that it is an “accredited
investor” as defined in Rule 501(a) of Regulation D
promulgated under the Securities Act; is knowledgeable,
sophisticated and experienced in making investment decisions of
this kind; and received adequate information about the Company or
had adequate access to information about the Company.
On January 2, 2014, the Company issued 600 shares of its common
stock to a consultant as partial consideration for services
performed. The per share closing price of the Company’s
common stock on January 2, 2014 was $19.90. The issuance of these
shares was exempt from registration pursuant to Section 4(a)(2) of
the Securities Act of 1933, as amended. The vendor is
knowledgeable, sophisticated and experienced in making investment
decisions of this kind and received adequate information about the
Company or had adequate access, including through the
vendor’s business relationship with the Company, to
information about the Company.
On February 21, 2014, the Company issued 5,000 shares of its common
stock to a consultant as partial consideration for services
performed. The per share closing price of the Company’s
common stock on February 21, 2014 was $21.90. The issuance of these
shares was exempt from registration pursuant to Section 4(a)(2) of
the Securities Act of 1933, as amended. The vendor is
knowledgeable, sophisticated and experienced in making investment
decisions of this kind and received adequate information about the
Company or had adequate access, including through the
vendor’s business relationship with the Company, to
information about the Company.
On February 24, 2014, the Company issued 1,500 shares of its common
stock to a consultant as partial consideration for services
performed. The per share closing price of the Company’s
common stock on February 24, 2014 was $21.40. The issuance of these
shares was exempt from registration pursuant to Section 4(a)(2) of
the Securities Act of 1933, as amended. The vendor is
knowledgeable, sophisticated and experienced in making investment
decisions of this kind and received adequate information about the
Company or had adequate access, including through the
vendor’s business relationship with the Company, to
information about the Company.
On May 6, 2014, the Company issued 4,307 shares of its common stock
upon execution of an option agreement to purchase certain assets
related to the development of a synthetic hypericin product
candidate for the treatment of
II-2
cutaneous T-cell lymphoma. The per share closing price of the
Company’s common stock on May 6, 2014 was $19.80. The
issuance of these shares was exempt from registration pursuant to
Section 4(a)(2) of the Securities Act of 1933, as amended. The
vendor is knowledgeable, sophisticated and experienced in making
investment decisions of this kind and received adequate information
about the Company or had adequate access, including through the
vendor’s business relationship with the Company, to
information about the Company.
On August 21, 2014, the Company issued 5,000 shares of its common
stock to a consultant as partial consideration for services
performed. The per share closing price of the Company’s
common stock on August 21, 2014 was $20.50. The issuance of these
shares was exempt from registration pursuant to Section 4(a)(2) of
the Securities Act of 1933, as amended. The vendor is
knowledgeable, sophisticated and experienced in making investment
decisions of this kind and received adequate information about the
Company or had adequate access, including through the
vendor’s business relationship with the Company, to
information about the Company.
On September 3, 2014, the Company issued 184,911 shares of its
common stock as partial payment for the purchase of certain assets
related to the development of a synthetic hypericin product
candidate for the treatment of cutaneous T-cell lymphoma. The per
share closing price of the Company’s common stock on
September 3, 2014 was $20.40. The issuance of these shares was
exempt from registration pursuant to Section 4(a)(2) of the
Securities Act of 1933, as amended. The vendor is knowledgeable,
sophisticated and experienced in making investment decisions of
this kind and received adequate information about the Company or
had adequate access, including through the vendor’s business
relationship with the Company, to information about the
Company.
On January 7, 2015, the Company issued 600 shares of its common
stock valued at $12.10 per share to a vendor as consideration for
services rendered. The per share closing price of the
Company’s common stock on January 7, 2015 was $11.20. The
issuance of these shares was exempt from registration pursuant to
Section 4(a)(2) of the Securities Act of 1933, as amended. The
vendor is knowledgeable, sophisticated and experienced in making
investment decisions of this kind and received adequate information
about the Company or had adequate access, including through the
vendor’s business relationship with the Company, to
information about the Company.
On January 12, 2015, the Company issued 1,000 shares of its common
stock valued at $12.10 per share to a vendor as consideration for
services rendered. The per share closing price of the
Company’s common stock on January 12, 2015 was $11.50. The
issuance of these shares was exempt from registration pursuant to
Section 4(a)(2) of the Securities Act of 1933, as amended. The
vendor is knowledgeable, sophisticated and experienced in making
investment decisions of this kind and received adequate information
about the Company or had adequate access, including through the
vendor’s business relationship with the Company, to
information about the Company.
On February 19, 2015, the Company issued 5,000 shares of its common
stock valued at $16.40 per share to a vendor as consideration for
services rendered. The per share closing price of the
Company’s common stock on February 19, 2015 was $16.40. The
issuance of these shares was exempt from registration pursuant to
Section 4(a)(2) of the Securities Act of 1933, as amended. The
vendor is knowledgeable, sophisticated and experienced in making
investment decisions of this kind and received adequate information
about the Company or had adequate access, including through the
vendor’s business relationship with the Company, to
information about the Company.
On April 16, 2015, the Company issued 1,000 shares of its common
stock valued at $15.30 per share to a consultant as consideration
for services rendered. The per share closing price of the
Company’s common stock on April 13, 2015 was $15.30. The
issuance of these shares was exempt from registration pursuant to
Section 4(a)(2) of the Securities Act of 1933, as amended. The
consultant is knowledgeable, sophisticated and experienced in
making investment decisions of this kind and received adequate
information about the Company or had adequate access, including
through the consultant’s business relationship with the
Company, to information about the Company.
On May 12, 2015, the Company issued 124 shares of its common stock
valued at $16.90 per share to a consultant as consideration for
services rendered. The per share closing price of the
Company’s common stock on May 12, 2015 was $14.50. The
issuance of these shares was exempt from registration pursuant to
Section 4(a)(2) of the Securities Act of 1933, as amended. The
consultant is knowledgeable, sophisticated and experienced in
making investment decisions of this kind and received adequate
information about the Company or had adequate access, including
through the consultant’s business relationship with the
Company, to information about the Company.
On July 29, 2015, the Company entered into purchase agreements with
Kodiak Capital Group, LLC (“Kodiak Capital”),
Kingsbrook Opportunities Master Fund LP (“Kingsbrook”)
and River North Equity, LLC (“River North”).
II-3
Pursuant to the terms of the agreements, the Company may require
Kodiak Capital, Kingsbrook and River North to purchase up to a
total of $5 million, $4 million and $1 million worth of shares of
common stock of the Company, respectively, until December 31, 2016,
provided certain conditions are met. The purchase price of the
shares of common stock will be equal to 80% of the lowest daily
volume weighted average price of the Company’s common stock
for the five consecutive trading days immediately following the
Company’s request for the purchase of the shares. Such
securities will be issued pursuant to an exemption provided by
Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule
506 of Regulation D promulgated thereunder. Each of the investors
represented to the Company that it (i) is an “accredited
investor” as defined in Rule 501(a) of Regulation D
promulgated under the Securities Act of 1933, as amended, (ii) is
knowledgeable, sophisticated and experienced in making investment
decisions of this kind, and (iii) has had adequate access to
information about the Company.
On August 31, 2015, the Company issued 5,000 shares of its common
stock valued at $14.30 per share to a consultant as consideration
for services rendered. The per share closing price of the
Company’s common stock on August 31, 2015 was $14.30. The
issuance of these shares was exempt from registration pursuant to
Section 4(a)(2) of the Securities Act of 1933, as amended. The
consultant is knowledgeable, sophisticated and experienced in
making investment decisions of this kind and received adequate
information about the Company or had adequate access, including
through the consultant’s business relationship with the
Company, to information about the Company.
On October 26, 2015, the Company issued 2,404 shares of its common
stock valued at $10.40 per share to a consultant as consideration
for services rendered. The per share closing price of the
Company’s common stock on October 26, 2015 was $10.40. The
issuance of these shares was exempt from registration pursuant to
Section 4(a)(2) of the Securities Act of 1933, as amended. The
consultant is knowledgeable, sophisticated and experienced in
making investment decisions of this kind and received adequate
information about the Company or had adequate access, including
through the consultant’s business relationship with the
Company, to information about the Company.
On December 31, 2015, the Company issued 1,000 shares of its common
stock valued at $11.30 per share to a consultant as consideration
for services rendered. The per share closing price of the
Company’s common stock on December 31, 2015 was $11.30. The
issuance of these shares was exempt from registration pursuant to
Section 4(a)(2) of the Securities Act of 1933, as amended. The
consultant is knowledgeable, sophisticated and experienced in
making investment decisions of this kind and received adequate
information about the Company or had adequate access, including
through the consultant’s business relationship with the
Company, to information about the Company.
On December 31, 2015, the Company issued 500 shares of its common
stock valued at $11.30 per share to a consultant as consideration
for services rendered. The per share closing price of the
Company’s common stock on December 31, 2015 was $11.30. The
issuance of these shares was exempt from registration pursuant to
Section 4(a)(2) of the Securities Act of 1933, as amended. The
consultant is knowledgeable, sophisticated and experienced in
making investment decisions of this kind and received adequate
information about the Company or had adequate access, including
through the consultant’s business relationship with the
Company, to information about the Company.
On March 22, 2016, the Company entered into a purchase agreement
with Lincoln Park. Pursuant to the terms of the agreement, the
Company may require Lincoln Park to purchase up to a total of $12
million worth of common stock over approximately a 36-month period.
The purchase price of the shares of common stock will be based on
the market price of our common stock immediately preceding the time
of sale as computed under the purchase agreement without any fixed
discount. The Company does not have the right to require Lincoln
Park to purchase shares of common stock in the event that such sale
would result in Lincoln Park’s beneficial ownership exceeding
4.99% of the then outstanding shares of the Company’s common
stock.
Pursuant to the purchase agreement, the Company issued to Lincoln
Park 10,000 shares of common stock as a partial commitment fee.
Since March 2016, the Company has sold Lincoln Park 260,000 shares
of common stock for an aggregate price of approximately $1.7
million and issued to Lincoln Park 7,135 additional shares of
common stock as a commitment fee. Such securities were issued
pursuant to an exemption provided by Section 4(a)(2) of the
Securities Act of 1933, as amended, and Rule 506 of Regulation D
promulgated thereunder. Lincoln Park represented to the Company
that it is an “accredited investor” as defined in Rule
501(a) of Regulation D promulgated under the Securities Act; is
knowledgeable, sophisticated and experienced in making investment
decisions of this kind; and received adequate information about the
Company or had adequate access to information about the
Company.
On May 31, 2016, the Company issued 5,000 shares of its common
stock to a consultant as consideration for services rendered. The
per share closing price of the Company’s common stock on May
31, 2016 was $7.30. The
II-4
issuance of these shares was exempt from registration pursuant to
Section 4(a)(2) of the Securities Act of 1933, as amended. The
consultant is knowledgeable, sophisticated and experienced in
making investment decisions of this kind and received adequate
information about the Company or had adequate access, including
through the consultant’s business relationship with the
Company, to information about the Company.
On September 9, 2016, the Company and SciClone Pharmaceuticals,
Inc. (“SciClone”) entered into an exclusive license
agreement, pursuant to which the Company granted rights to SciClone
to develop, promote, market, distribute and sell SGX942 in the
People’s Republic of China, including Hong Kong and Macau, as
well as Taiwan, South Korea and Vietnam. Under the terms of the
license agreement, SciClone will be responsible for all aspects of
development, product registration and commercialization in the
territory, having access to data generated by the Company. In
exchange for exclusive rights, SciClone will pay to the Company
royalties on net sales, and the Company will supply commercial drug
product to SciClone on a cost-plus basis, while maintaining
worldwide manufacturing rights.
In connection with the execution of the license agreement, the
Company entered into a common stock purchase agreement with
SciClone pursuant to which the Company sold 352,942 shares of the
Company’s common stock, to SciClone for approximately $8.50
per share, for an aggregate price of $3,000,000. As additional
consideration for expanded territorial rights in South Korea,
Taiwan and Vietnam, SciClone agreed to purchase the shares of the
Company’s common stock at a premium above the current market
price, with the purchase price being equal to one hundred thirty
five percent (135%) of the average trading price of the common
stock over the ten trading days prior to September 9, 2016. As part
of the transaction, the Company granted SciClone certain demand
registration rights, and SciClone agreed, subject to certain
exceptions, not to pledge, sell or otherwise transfer or dispose
of, or enter into any swap or other arrangement that transfers any
of the economic consequences of ownership of, the shares purchased
for at least one year from September 9, 2016.. The sale of
securities pursuant to the purchase agreement was exempt from
registration pursuant to the provisions of Section 4(a)(2) of the
Securities Act of 1933, as amended, and Rule 506 of Regulation D
promulgated thereunder. SciClone represented to the Company that it
(i) is an “accredited investor” as defined in Rule
501(a) of Regulation D promulgated under the Securities Act of
1933, as amended, (ii) is knowledgeable, sophisticated and
experienced in making investment decisions of this kind, and (iii)
has had adequate access to information about the Company.
ITEM 16.
Exhibits and Financial
Statement Schedules.
1.1
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Form of Underwriting Agreement.*
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2.1
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Agreement and Plan of Merger, dated May 10, 2006
by and among the Company, Corporate Technology Development, Inc.,
Enteron Pharmaceuticals, Inc. and CTD Acquisition, Inc.
(incorporated by reference to Exhibit 2.1 included in our
Registration Statement on Form SB-2 (File No. 333-133975) filed on
May 10, 2006).
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3.1
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Second Amended and Restated Certificate of
Incorporation (incorporated by reference to Exhibit 3.1 included in
our current report on Form 8-K filed on June 22, 2012).
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3.2
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By-laws (incorporated by reference to Exhibit
3.1 included in our Quarterly Report on Form 10-QSB, as amended,
for the fiscal quarter ended June 30, 2003).
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3.3
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Certificate of Amendment to Second Amended and
Restated Certificate of Incorporation (incorporated by reference to
Exhibit 3.1 included in our current report on Form 8-K filed on
June 22, 2016).
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3.4
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Certificate of Amendment to Second Amended and
Restated Certificate of Incorporation (incorporated by reference to
Exhibit 3.1 included in our current report on Form 8-K filed on
October 7, 2016).
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4.1
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Rights Agreement dated June 22, 2007, between
the Company and American Stock Transfer & Trust Company, as
Rights Agent (incorporated by reference to Exhibit 4.1 included in
our current report on Form 8-K filed on June 22, 2007).
|
II-5
4.2
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Form of Right Certificate (incorporated by
reference to Exhibit 4.2 included in our current report on Form 8-K
filed on June 22, 2007).
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4.3
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Form of Warrant issued to each investor in the
January 2009 private placement (incorporated by reference to
Exhibit 4.18 included in our Registration Statement on Form S-1
(File No. 333-149239) filed on February 14, 2008).
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4.4
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Form of Warrant issued to each investor in the
September 2009 private placement (incorporated by reference to
Exhibit 10.2 included in our current report on Form 8-K filed on
September 29, 2009).
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4.5
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Warrant dated April 19, 2010, issued to Fusion
Capital Fund II, LLC (incorporated by reference to Exhibit 4.10
included in our Post-Effective Amendment to Registration Statement
on Form S-1 filed on April 20, 2010).
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4.6
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Form of Common Stock Purchase Warrant issued to
each investor in the June 2010 private placement (incorporated by
reference to Exhibit 10.2 included in our current report on Form
8-K filed on June 18, 2010).
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4.7
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Warrant dated December 20, 2012 and issued to
Sigma-Tau to purchase 35,707 shares of the Company’s common
stock (incorporated by reference to Exhibit 10.2 of our current
report on Form 8-K filed on December 27, 2012).
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4.8
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Warrant dated December 20, 2012 and issued to
SINAF S.A. to purchase 8,781 shares of the Company’s common
stock (incorporated by reference to Exhibit 10.3 of our current
report on Form 8-K filed on December 27, 2012).
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4.9
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Warrant dated December 20, 2012 and issued to
McDonald to purchase 28,000 shares of the Company’s common
stock (incorporated by reference to Exhibit 10.6 of our current
report on Form 8-K filed on December 27, 2012).
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4.10
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Form of Common Stock Purchase Warrant issued to
each investor in the June 2013 registered public offering
(incorporated by reference to Exhibit 10.3 included in our current
report on Form 8-K filed on June 24, 2013).
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4.11
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Form of Warrant issued to Maxim Group LLC
(incorporated by reference to Exhibit 10.4 included in our current
report on Form 8-K filed on June 24, 2013).
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4.12
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Form of Warrant to Purchase Common Stock issued
to each investor in the December 2014 registered public offering
(incorporated by reference to Exhibit 4.12 included in our
Registration Statement on Form S-1 (File No. 333-199761) filed on
December 17, 2014).
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4.13
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Form of Warrant to Purchase Common Stock issued
to Roth Capital Partners, LLC (incorporated by reference to Exhibit
4.13 included in our Registration Statement on Form S-1 (File No.
333-199761) filed on December 17, 2014).
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4.14
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Form of Warrant Agency Agreement by and between
the Company and American Stock Transfer & Trust Company, LLC
and Form of Warrant Certificate.*
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|
|
|
4.15
|
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Form of Representative’s
Warrant.*
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5.1
|
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Opinion of Duane Morris LLP.*
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10.1
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|
License Agreement between the Company and the
University of Texas Southwestern Medical Center (incorporated by
reference to Exhibit 10.9 included in our Annual Report on Form
10-KSB filed March 30, 2004, as amended, for the fiscal year ended
December 31, 2004).
|
II-6
10.2
|
|
License Agreement between the Company and Thomas
Jefferson University (incorporated by reference to Exhibit 10.9
included in our Annual Report on Form 10-KSB, as amended, for the
fiscal year ended December 31, 2004).
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|
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10.3
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|
License Agreement between the Company and the
University of Texas Medical Branch (incorporated by reference to
Exhibit 10.10 included in our Annual Report on Form 10-KSB, as
amended, for the fiscal year ended December 31, 2004).
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|
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10.4
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|
Consulting Agreement between the Company and
Lance Simpson of Thomas Jefferson University (incorporated by
reference to Exhibit 10.43 included in our Annual Report on Form
10-KSB as amended for the fiscal year ended December 31,
2002).
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10.5
|
|
2005 Equity Incentive Plan, as amended on
September 25, 2013 (incorporated by reference to Exhibit 10.1
included in our current report on Form 8-K filed on September 30,
2013).**
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|
|
|
10.6
|
|
Letter of Intent dated January 3, 2007 by and
between the Company and Sigma-Tau Pharmaceuticals, Inc.
(incorporated by reference to Exhibit 10.1 included in our current
report on Form 8-K filed on January 4, 2007).
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10.7
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|
Employment Agreement dated December 27, 2007,
between Christopher J. Schaber, PhD and the Company (incorporated
by reference to Exhibit 10.30 included in our Annual Report on Form
10-K for the fiscal year ended December 31, 2008).**
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10.8
|
|
Exclusive License Agreement dated November 24,
1998, between Enteron Pharmaceuticals, Inc. and George B. McDonald,
MD and amendments (incorporated by reference to Exhibit 10.42
included in our Registration Statement on Form S-1 (File No.
333
-
157322) filed on
February 13, 2009).
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|
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10.9
|
|
Collaboration and Supply Agreement dated
February 11, 2009, between the Company and Sigma-Tau
Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.43
included in our Registration Statement on Form S-1 (File No.
333
-
157322) filed on
February 13, 2009).†
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|
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10.10
|
|
Employment Agreement dated as of May 31, 2011,
between Joseph M. Warusz and the Company (incorporated by reference
to Exhibit 10.1 of our current report on Form 8-K filed on June 2,
2011).**
|
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|
10.11
|
|
First Amendment to Employment Agreement dated as
of July 12, 2011, between the Company and Christopher J. Schaber,
PhD (incorporated by reference to Exhibit 10.1 of our current
report on Form 8-K filed on July 14, 2011).**
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10.12
|
|
Amendment to the Collaboration and Supply
Agreement dated July 26, 2011, between Sigma-Tau Pharmaceuticals,
Inc. and the Company (incorporated by reference to Exhibit 10.1 of
our current report on Form 8-K filed on July 28, 2011).
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|
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10.13
|
|
Amendment to the Exclusive License Agreement
dated as of July 26, 2011, between George McDonald, MD and the
Company (incorporated by reference to Exhibit 10.2 of our current
report on Form 8-K filed on July 28, 2011).
|
|
|
|
10.14
|
|
Amendment No. 2 to the Collaboration and Supply
Agreement between the Company, Enteron and Sigma-Tau dated as of
December 20, 2012 (incorporated by reference to Exhibit 10.1 of our
current report on Form 8-K filed on December 27,
2012).†
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|
|
|
10.15
|
|
Amendment to Exclusive License Agreement dated
as of December 20, 2012 between Enteron and McDonald (incorporated
by reference to Exhibit 10.4 of our current report on Form 8-K
filed on December 27, 2012).
|
II-7
10.16
|
|
Amendment to Consulting Agreement dated as of
December 20, 2012 between Enteron and McDonald (incorporated by
reference to Exhibit 10.5 of our current report on Form 8-K filed
on December 27, 2012).
|
|
|
|
10.17
|
|
Contract HHSO100201300023C dated September 18,
2013 between the Company and the U.S. Department of Health and
Human Services Biomedical Advanced Research and Development
Authority (incorporated by reference to Exhibit 10.1 of our current
report on Form 8-K filed on September 24, 2013).†
|
|
|
|
10.18
|
|
Contract HHSN272201300030C dated September 24,
2013 by and between the Company and the National Institutes of
Health (incorporated by reference to Exhibit 10.1 of our current
report on Form 8-K filed on September 30, 2013).†
|
|
|
|
10.19
|
|
Purchase Agreement dated as of November 18, 2013
between the Company and Lincoln Park Capital Fund, LLC
(incorporated by reference to Exhibit 10.1 of our current report on
Form 8-K filed on November 21, 2013).
|
|
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10.20
|
|
Registration Rights Agreement dated as of
November 18, 2013 between the Company and Lincoln Park Capital
Fund, LLC (incorporated by reference to Exhibit 10.2 of our current
report on Form 8-K filed on November 21, 2013)
|
|
|
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10.21
|
|
Employment Agreement dated as of January 6, 2014
between the Company and Richard Straube, M.D. (incorporated by
reference to Exhibit 10.1 of our current report on Form 8-K filed
on January 8, 2014).**
|
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|
10.22
|
|
Asset Purchase Agreement dated September 3, 2014
between the Company and Hy Biopharma, Inc. (incorporated by
reference to Exhibit 10.1 of our current report on Form 8-K filed
on September 5, 2014).†
|
|
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|
10.23
|
|
Registration
Rights Agreement dated September 3, 2014 between the Company and Hy
Biopharma, Inc. (incorporated by reference to Exhibit 10.2 of our
current report on Form 8-K filed on September 5, 2014).
|
|
|
|
10.24
|
|
Contract HHSN272201400039C dated September 17,
2014 by and between the Company and the National Institutes of
Health (incorporated by reference to Exhibit 10.1 of our current
report on Form 8-K filed on September 23, 2014).†
|
|
|
|
10.25
|
|
Lease Agreement dated November 21, 2014, between
the Company and CPP II, LLC (incorporated by reference to Exhibit
10.31 included in our Annual Report on Form 10-K for the fiscal
year ended December 31, 2014).
|
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|
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10.26
|
|
2015 Equity Incentive Plan, as amended on June
9, 2015 (incorporated by reference to Exhibit 10.1 of our current
report on Form 8-K filed on June 19, 2015).
|
|
|
|
10.27
|
|
Form of Equity Purchase Agreement dated as of
July 29, 2015 between the Company and Kodiak Capital Group, LLC,
Kingsbrook Opportunities Master Fund LP and River North Equity, LLC
(incorporated by reference to Exhibit 10.1 of our current report on
Form 8-K filed on July 31, 2015).
|
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10.28
|
|
Form of Registration Rights Agreement dated as
of July 29, 2015 between the Company and Kodiak Capital Group, LLC,
Kingsbrook Opportunities Master Fund LP and River North Equity, LLC
(incorporated by reference to Exhibit 10.2 of our current report on
Form 8-K filed on July 31, 2015).
|
|
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10.29
|
|
Form of Promissory Note dated as of July 29,
2015 made by the Company in favor of Kodiak Capital Group, LLC,
Kingsbrook Opportunities Master Fund LP and River North Equity, LLC
(incorporated by reference to Exhibit 10.3 of our current report on
Form 8-K filed on July 31, 2015).
|
|
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|
10.30
|
|
Purchase Agreement dated as of March 22, 2016
between the Company and Lincoln Park Capital Fund, LLC
(incorporated by reference to Exhibit 10.30 included in our Annual
Report on Form 10-K for the fiscal year ended December 31,
2015).
|
II-8
10.31
|
|
Registration Rights Agreement dated as of March
22, 2016 between the Company and Lincoln Park Capital Fund, LLC
(incorporated by reference to Exhibit 10.31 included in our Annual
Report on Form 10-K for the fiscal year ended December 31,
2015).
|
|
|
|
10.32
|
|
Employment Agreement dated as of June 16, 2016
between the Company and Karen R. Krumeich (incorporated by
reference to Exhibit 10.1 of our current report on Form 8-K filed
on June 22, 2016).
|
|
|
|
10.33
|
|
Common Stock Purchase Agreement dated September
9, 2016 between Soligenix, Inc. and SciClone Pharmaceuticals, Inc.
(incorporated by reference to Exhibit 10.1 of our current report on
Form 8-K filed on September 12, 2016).
|
|
|
|
21.1
|
|
Subsidiaries of the Company.***
|
|
|
|
23.1
|
|
Consent of EisnerAmper LLP.***
|
|
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|
23.2
|
|
Consent of Duane Morris LLP (contained in the
opinion filed as Exhibit 5.1 hereto).*
|
|
|
|
24.1
|
|
Power of Attorney (found on signature
page).
|
101.INS XBRL
|
|
Instance Document
|
|
|
|
101.SCHXBRL
|
|
Taxonomy Extension Schema Document
|
|
|
|
101.CALXBRL
|
|
Taxonomy Extension Calculation Linkbase
Document.
|
|
|
|
101.DEFXBRL
|
|
Taxonomy Extension Definition Linkbase
Document.
|
|
|
|
101.LABXBRL
|
|
Taxonomy Extension Label Linkbase
Document.
|
|
|
|
101.PRE XBRL
|
|
Taxonomy Extension Presentation Linkbase
Document.
|
II-9
ITEM 17.
Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information
set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the “Calculation of Registration
Fee” table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement; provided, however, that subparagraphs (i),
(ii) and (iii) do not apply if the information required to be
included in a post-effective amendment by those subparagraphs is
contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934, that are incorporated
by reference in this registration statement, or is contained in a
form of prospectus filed pursuant to Rule 424(b) that is part of
the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(4) That, for the purpose of determining liability of the
registrant under the Securities Act of 1933 to any purchaser in the
initial distribution of the securities:
The undersigned registrant undertakes that in a primary offering of
securities of the undersigned registrant pursuant to this
registration statement, regardless of the underwriting method used
to sell the securities to the purchaser, if the securities are
offered or sold to such purchaser by means of any of the following
communications, the undersigned registrant will be a seller to the
purchaser and will be considered to offer or sell such securities
to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned
registrant relating to the offering required to be filed pursuant
to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared
by or on behalf of the undersigned registrant or used or referred
to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating to
the offering containing material information about the undersigned
registrant or its securities provided by or on behalf of the
undersigned registrant; and
(iv) Any other communication that is an offer in the offering made
by the undersigned registrant to the purchaser.
The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements
certificates in such denominations and registered in such names as
required by the underwriter to permit prompt delivery to each
purchaser.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the SEC such indemnification is against public
policy as expressed in the Securities
II-10
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned registrant hereby undertakes that:
(1)
For
purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall
be deemed to be part of this registration statement as of the time
it was declared effective.
(2)
The
undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the Registrant’s annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan’s
annual report pursuant to section 15(d) of the Securities Exchange
Act of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-11
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement on Form S-1
to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Princeton, State of New Jersey, on the
7
th
day of October, 2016.
|
|
SOLIGENIX, INC.
|
|
|
|
|
|
|
|
By:
|
|
/s/ Christopher J. Schaber
|
|
|
|
|
Christopher J. Schaber, PhD
|
|
|
|
|
Chief Executive Officer and President
|
POWER OF
ATTORNEY
KNOW ALL BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Christopher J. Schaber and
Karen R. Krumeich, and each of them, as his or her true and lawful
attorneys-in-fact and agents, each with the full power of
substitution, for him or her and in his or her name, place or
stead, in any and all capacities, to sign any and all amendments to
this registration statement (including post-effective amendments),
and to sign any registration statement for the same offering
covered by this registration statement that is to be effective upon
filing pursuant to Rule 462(b) promulgated under the Securities
Act, and all post-effective amendments thereto, and to file the
same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this
registration statement has been signed by the following persons in
the capacities and on the dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Christopher J. Schaber
|
|
Chairman, President and Chief
Executive
|
|
October 7, 2016
|
|
|
Christopher J. Schaber, PhD
|
|
Officer (Principal Executive Officer)
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Keith L. Brownlie
|
|
Director
|
|
October 7, 2016
|
|
|
Keith L. Brownlie, CPA
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Marco M. Brughera
|
|
Director
|
|
October 7, 2016
|
|
|
Marco M. Brughera, DVM
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Gregg A. Lapointe
|
|
Director
|
|
October 7, 2016
|
|
|
Gregg A. Lapointe, CPA
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Robert J. Rubin
|
|
Director
|
|
October 7, 2016
|
|
|
Robert J. Rubin, MD
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Jerome Zeldis
|
|
Director
|
|
October 7, 2016
|
|
|
Jerome Zeldis, MD, PhD
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Karen R. Krumeich
|
|
Senior Vice President and
|
|
October 7, 2016
|
|
|
Karen R. Krumeich
|
|
Chief Financial Officer
(Principal Financial and Accounting Officer)
|
|
|
II-12