UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) For the fiscal year ended September 30, |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) For the transition period from to . |
Delaware (State or Other Jurisdiction of | 90-0136863 (I.R.S. Employer | |||||||
100 Saw Mill Road (Address of Principal Executive Offices) | 06810 (Zip Code) |
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Name of Each Exchange on Which Registered | |||||||
Common Stock, par value $0.01 per share | The NASDAQ Capital Market |
Large accelerated filero | Accelerated filero |
Non-accelerated filero | Smaller reporting companyþ |
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PART I | ||||||||||||||
Item 1: | Business | 3 | ||||||||||||
Item 1A: | Risk Factors | 19 | ||||||||||||
Item 1B: | ||||||||||||||
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Item 2: | ||||||||||||||
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Item 3: | ||||||||||||||
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PART II | ||||||||||||||
Item 5: | Market for | |||||||||||||
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Item 6: | ||||||||||||||
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Item 7: | Management's Discussion and Analysis of Financial Condition and Results of Operations | |||||||||||||
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Item 7A: | Quantitative and Qualitative Disclosures About Market Risk | |||||||||||||
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Item 8: | Financial Statements and Supplementary Data | |||||||||||||
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Item 9: | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure | |||||||||||||
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Item 9A: | Controls and Procedures | 52 | ||||||||||||
Item 9B: | Other Information | 52 | ||||||||||||
PART III | ||||||||||||||
Item 10: | Directors, Executive Officers and Corporate Governance | 54 | ||||||||||||
Item 11: | 54 | |||||||||||||
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | ||||||||||||||
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Item 13: | Certain Relationships and Related Transactions, and Director Independence | |||||||||||||
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Item 14: | Principal Accountant Fees and Services | |||||||||||||
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PART IV | ||||||||||||||
Item 15: | Exhibits and Financial Statement Schedules | |||||||||||||
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•the progress, timing or success of our research and development and clinical programs for our product candidates, particularly our glucagon emergency management, or GEM, product candidate, which comprises lyophilized glucagon and an aqueous diluent in an automatic reconstitution device, and our concentrated ultra-rapid-acting insulin product candidate, BIOD-531, which uses regular human insulin, or RHI, as the active pharmaceutical ingredient in a concentration of 400 units per milliliter;
•our ability to conduct the development work necessary to finalize the formulation and presentation of our GEM product candidate, as well as the preclinical studies, clinical trials and manufacturing activities necessary to support the submission of a new drug application, or NDA, to the U.S. Food and Drug Administration, or FDA, for that product candidate;
•the ability and willingness of our existing strategic partners, service providers and suppliers, upon which we rely in the advancement of our product candidates, to meet the obligations set forth in our agreements with them, including Unilife Medical Solutions, Inc., or Unilife, which is responsible for designing and manufacturing the device intended for use with our GEM product candidate, as well as delivering three registration lots of the filled and finished GEM device required for submitting an NDA to the FDA;
•the success of our formulation development work to improve the stability of our newer ultra-rapid-acting insulin analog-based formulations while maintaining the pharmacokinetic and injection site toleration characteristics associated with earlier formulations;
•the results of our real-time stability programs for our glucagon-, RHI-, and insulin analog-based product candidates, including the reproducibility of earlier, smaller scale, stability studies and our ability to accurately project long term stability on the basis of accelerated testing;
•our ability to accurately anticipate technical challenges that we may face in the development of our glucagon-, RHI-, and insulin analog-based product candidates;
•our ability to secure approval by the FDA for our product candidates under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act, or FFDCA;
•our ability to enter into collaboration arrangements for the commercialization of our product candidates and the success or failure of any such collaborations into which we enter, or our ability to commercialize our product candidates ourselves;
•our ability to enforce our patents for our product candidates and our ability to secure additional patents for our product candidates;
•our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others;
•the degree of clinical utility of our product candidates, particularly with regard to our ultra-rapid-acting insulin formulations, which have not yet been shown to be clinically superior to existing rapid-acting insulin analogs;
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•the emergence of competing technologies and products and other adverse market developments, such as advancements in glucagon stabilization technologies that could enable a room-temperature rescue product in a portable, easy to use presentation;
•the ability of our contract manufacturing organizations or collaborators to properly produce our products in our final dosage form and in the quantities we may require;
•our ability to secure adequate supplies of active pharmaceutical ingredients to support our product development programs and, if successful, the commercialization one or more product candidates;
•our capabilities and strategies for manufacturing, marketing and commercializing a product candidate; and
•our ability to accurately estimate anticipated operating losses, future revenues, capital requirements and our needs for additional financing.
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In the third calendar quarter of 2014, we submitted an Investigational New Drug application, or IND, to the U.S. Food and Drug Administration, or FDA, for our GEM product candidate. We have initiated a Phase 1 clinical trial to assess the pharmacokinetic and pharmacodynamic profiles of BIOD-961, the reconstituted glucagon formulation intended for use in the GEM device, in the fourth calendar quarter of 2014. If the Phase 1 clinical trial is successful, we intend to complete the pivotal trial for our GEM product candidate by the end of calendar year 2015 and submit a New Drug Application, or NDA, to the FDA in calendar year 2016.
In addition to our GEM product candidate, we are developing ultra-rapid-acting proprietary insulin formulations that are designed to be more rapid-acting than the formulations currently available to Type 1 and Type 2 diabetes patients. For example, BIOD-123, which was evaluated in a Phase 2 clinical trial, combines recombinant human insulin, or RHI, with our proprietary combination of excipients to increase the rate of absorption following subcutaneous injection when compared to other commercially available insulin formulations, including "rapid-acting" mealtime insulin analogs such as Humalog®, marketed by Eli Lilly, NovoLog®, marketed by Novo Nordisk, and Apidra®, marketed by Sanofi. Similarly, we have not selecteddeveloped BIOD-531, a lead formulationconcentrated ultra-rapid-acting insulin formulation. BIOD-531 contains 400 units of RHI per milliliter (instead of the standard 100 units per milliliter), and, like BIOD-123, is formulated with ethylenediaminetetraacetic acid, or EDTA, citrate and magnesium sulfate. When delivered by subcutaneous injection, BIOD-531 is characterized by a rapid onset of action and a prolonged duration of action, which we believe could address an unmet medical need for an insulin with an initial rate of absorption superior to advance into clinical trials. Wethat of existing concentrated insulins and prandial/basal premixed insulins.
In addition to our RHI-based ultra-rapid-acting insulin formulations, we are continuing to conduct preclinical testingusing our proprietary excipients to develop analog-based ultra-rapid-acting insulin formulations that achieve a combination ofusing either insulin lispro, the active pharmaceutical ingredient in Humalog®, or insulin aspart, the active pharmaceutical ingredient in NovoLog®.
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blood from digestion of the meal, the first-phase insulin release acts as a signal to the liver to stop making glucose while digestion of the meal is taking place. Because the liver is not producing glucose and there is sufficient additional insulin to process the glucose from digestion, the blood glucose levels of healthy individuals remain relatively constant and their blood glucose levels do not become too high.
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insulin analogs, peak insulin levels typically occur within 50 to 70 minutes following the injection. Because the rapid-acting insulin analogs do not adequately mimic the first-phase insulin release, diabetic patients using insulin therapy continue to have inadequate levels of insulin present at the initiation of a meal and too much insulin present between meals. This lag in insulin delivery can result in hyperglycemia early after meal onset. Furthermore, the excessive insulin between meals may result in hypoglycemia.
Additional complications of insulin therapy can arise if a patient's response to insulin diminishes with the progression of the disease. Some patients with Type 2 diabetes have severe insulin resistance, resulting in the need to take more than 150 units of insulin per day to control blood glucose elevations. In order to reduce the volume of insulin needed for each injection, many of these patients use Humulin® R U-500, a presentation of Humulin® R containing 500 units of RHI per milliliter (instead of the standard 100 units per milliliter). Humulin® R U-500, which is indicated for Type 1 and Type 2 diabetes patients who require more than 200 units of insulin per day, has a long duration of action, but its onset of action is very slow and therefore is not ideally suited to cover the elevation of glucose levels associated with meals. Humulin® R U-500 is currently the only concentrated insulin on the U.S. market. Many other patients with Type 2 diabetes and lesser degrees of insulin resistance use mixes of prandial and basal insulins, which offer a combination of shorter- and longer-acting insulins in the convenience of one injection. However, the mealtime component of these "pre-mixed" insulin formulations is typically absorbed more slowly than what is required to optimally cover the elevation of glucose levels associated with meals. Examples of these "pre-mixed" insulins include Humalog® Mix 75/25, Humalog® Mix 50/50 and NovoLog® Mix 70/30.
We believe that the complexity of the currently available rescue kits and the training required for proper administration of glucagon using those kits has resulted in the underuse of glucagon as a rescue treatment for diabetes patients experiencing severe hypoglycemia. In June 2013, we announced plans to develop our GEM product candidate in collaboration with Unilife. The GEM device is a dual-chamber design that automatically reconstitutes lyophilized glucagon immediately prior to injection and features automatic needle retraction on full dose delivery. We have designed the GEM device with the goal of optimizing its ease of use for patient caregivers in an emergency.
BIOD-961 is our reconstituted formulation of glucagon intended for use in the GEM device. Our design in formulating BIOD-961 was to make it comparable to the glucagon formulations used in the marketed rescue kits. We believe that in order to receive approval from the FDA to market our GEM product candidate we must, among other things, demonstrate that BIOD-961 meets the FDA's requirements for pharmacokinetic and pharmacodynamic bioequivalence when compared to a reconstituted glucagon formulation from either of the two marketed rescue kits as well as conduct a summative human factors study with the GEM device to validate the instructions for use and operation of the device.
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We submitted an IND to the FDA for our GEM product candidate in the third calendar quarter of 2014. In the fourth calendar quarter of 2014, we initiated initiated Study 6-101, a Phase 1 clinical trial that assesses the pharmacokinetic and pharmacodynamic profiles of BIOD-961 compared to both of the marketed glucagon rescue formulations. Study 6-101 is designed as a single center, double-blind, six-way crossover study with twelve healthy volunteers. If Study 6-101 is successful, we intend to initiate Study 6-301, a pivotal clinical trial that would assess the pharmacokinetic and pharmacodynamic profiles of BIOD-961 compared to one of the marketed glucagon rescue formulations. Based on our current projections, we anticipate announcing top line data from Study 6-101 in the first calendar quarter of 2015, announcing top line data from Study 6-301 in the second half of 2015, and filing a Section 505(b)(2) NDA for our GEM product candidate with the FDA in calendar year 2016.
We also believe that the development of novel room temperature stable liquid formulations of glucagon could overcome the limitations of the marketed rescue kits. In addition to our GEM product candidate, we are currently assessing several formulations of liquid glucagon in preclinical studies that we intend for use with Becton Dickinson and Company's Uniject disposable injection system.
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was intended to improve the formulation's tolerability upon injection, as compared to Linjeta™. The clinical trial is designed to assess the clinical impact of BIOD-123 relative to Humalog®. The
The Phase 2 clinical trial of BIOD-123 completed patient dosing in the thirdsecond calendar quarter of 2013.
Development of BIOD-531 and Insulin Analog-Based Formulations
In May 2012,November 2013, we announced that we had selected twoBIOD-531 as our lead candidate for a concentrated ultra-rapid-acting insulin analog-based formulations, BIOD-238formulation. In preclinical studies in diabetic swine, BIOD-531 demonstrated a more rapid rate of absorption and BIOD-250,onset of action, along with a similar duration of action, when compared to evaluate inHumulin® R U-500, a presentation containing 500 units of RHI per millimeter. In other preclinical studies, BIOD-531 also demonstrated a more rapid rate of absorption and onset of action when compared to Humalog® Mix 75/25. We believe BIOD-531 could address an unmet medical need for an insulin with an initial rate of absorption superior to that of Humulin® R U-500 and prandial/basal pre-mixed insulins. BIOD-531 contains 400 units of RHI per milliliter (instead of the standard 100 units per milliliter), and, like BIOD-123, is formulated with EDTA, citrate and magnesium sulfate.
Study 3-150—Phase 1 clinical trial comparing BIOD-531 to Humulin® R U-500 and Humalog® Mix 75/25. In February 2014, we announced the results from Study 3-150, a Phase 1 clinical trial. We formulated BIOD-238trial comparing BIOD-531 to the marketed products Humulin® R U-500 and BIOD-250 by adding our proprietary combination of excipients to a marketed presentation of a rapid-acting insulin analog. BIOD-238 and BIOD-250 generally useHumalog® Mix 75/25. Study 3-150 assessed the same or similar excipients as BIOD-123 and are intended to be optimized for rapid absorption and injection site toleration. We began enrolling patients in the Phase 1 clinical trial of BIOD-238 and BIOD-250 in the third calendar quarter of 2012. This trial, which is being conducted in Australia, is designed to compare the pharmacokinetic, pharmacodynamic and injection site toleration profiles of BIOD-238single doses of the study drugs in non-diabetic obese volunteers. The clinical trial included 1.0 unit per kilogram and BIOD-250 relative0.5 unit per kilogram doses of BIOD-531, as well as a 1.0 unit per kilogram dose of Humulin® R U-500 and a 0.5 unit per kilogram dose of Humalog® Mix 75/25. Topline results from the clinical study were as follows:
•When comparing 1.0 unit per kilogram doses of BIOD-531 and Humulin® R U-500, BIOD-531 was associated with an increased rate of absorption as measured by multiple pharmacokinetic parameters, including a 92% shorter time to Early ½ Tmax (11.0 ± 1.9 min) versus Humulin® R U-500 (135.3 ± 34.9 min), a 43% shorter time to Tmax (223.8 ± 62.3 min) versus Humulin® R U-500 (393.3 ± 58.3 min) and a 765% increase in early insulin exposure as measured by AUCins0-30min (2966 ± 383 mU*min/L) versus Humulin® R U-500 (343 ± 74 mU*min/L). BIOD-531 was associated with a more rapid glucose lowering effect as measured by multiple pharmacodynamic parameters including a 169% increase in AUCGIR0-60min (108.5 ± 22.0 mg/kg) versus Humulin® R U-500 (40.4 ± 10.0 mg/kg). These differences were all statistically significant.
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•When comparing 0.5 unit per kilogram doses of BIOD-531 and Humalog® Mix 75/25, BIOD-531 was associated with an increased rate of absorption as measured by multiple pharmacokinetic parameters, including a 66% shorter time to Early ½ Tmax (16.4 ± 4.9 min) versus Humalog® Mix 75/25 (47.9 ± 2.6 min), an 18% shorter time to Tmax (131.3 ± 43.4 min) versus Humalog® Mix 75/25 (160.0 ± 11.9 min) and a 917% increase in early insulin exposure as measured by AUCins0-30min (1200 ± 141 min) versus Humalog® Mix 75/25 (118 ± 22 mU*min/L). BIOD-531 was associated with a more rapid glucose lowering effect as measured by multiple pharmacodynamic parameters including a 375% increase in AUCGIR0-60min (68.9 ± 13.4 mg/kg) versus Humalog® Mix 75/25 (14.5 ± 4.7 mg/kg). With the exception of Tmax, these differences were all statistically significant.
•Pharmacodynamic measurements for BIOD-531, including time to the rapid-actingend of the glucose lowering effect (TGIR Last), at both 1 U/kg (1170.0 ± 59.3 min) and 0.5 U/kg (1076.2 ± 50.7 min) doses, suggested the potential for BIOD-531 to provide basal insulin needs. Mean visual analog scores and absolute severity scores were very low for all participants, suggesting excellent injection site tolerability. There were no statistically significant differences among the treatment groups.
•Mean visual analog scores and absolute severity scores were very low for all participants, suggesting excellent injection site tolerability. There were no statistically significant differences among the treatment groups.
Study 3-152—Phase 2a clinical trial comparing BIOD-531 to Humalog® Mix 75/25 and Humulin® R U-500. In August 2014, we announced the results from Study 3-152, a Phase 2a clinical trial comparing BIOD-531 to the marketed products Humalog® Mix 75/25 and Humulin® R U-500. Study 3-152 assessed glucose profiles of Type 2 diabetic subjects who use between 50 and 110 units of insulin per day after a single subcutaneous injection of 0.6 U/kg doses of the study drugs administered with a standardized breakfast on separate days in a randomized four arm cross-over sequence in which subjects received pre-meal BIOD-531, pre-meal Humalog® Mix 75/25, pre-meal Humulin® R U-500 and post meal BIOD-531. In order to assess the formulationsduration of glucose lowering, subjects received a standardized lunch at 330 minutes (5.5 hours) after test insulin dosing at breakfast, but with no insulin administered at that time. Blood glucose levels were based.measured every five minutes during the 720 minutes (12 hours) after test insulin dosing at breakfast. Topline results from the clinical study were as follows:
•When comparing 0.6 unit per kilogram doses of BIOD-531 and Humalog® Mix 75/25 administered prior to a meal, BIOD-531 was associated with superior glucose control throughout the day of observation. A single dose of BIOD-531 administered immediately before breakfast (pre-meal) achieved significantly lower mean glucose concentrations than did Humalog® Mix 75/25 administered immediately before breakfast. The mean glucose concentration after breakfast was 167.8 ± 10.4 mg/dl with BIOD-531 treatment compared to 205.1 ± 8.3 mg/dl with Humalog® Mix 75/25 treatment (p < 0.001). Mean glucose concentrations were also significantly improved after lunch with pre-meal BIOD-531. Over the course of the entire day of observation, pre-meal BIOD-531 was associated with an average glucose concentration of 177.8 ± 11.9 mg/dl compared to 225.1± 10.7 mg/dl with Humalog® Mix 75/25 treatment (p < 0.001). The percentage of glucose readings within the target range of 70-180 mg/dl was increased more than two-fold following BIOD-531 treatment (46.3 ± 8.4%) compared to Humalog® Mix 75/25 treatment (20.6 ± 5.9 %; p=0.002). Likewise, the post-breakfast area under the curve for the glucose excursion and the mean maximal glucose concentrations after breakfast and after lunch were significantly improved with pre-meal BIOD-531 treatment compared to Humalog® Mix 75/25 treatment.
•When comparing 0.6 unit per kilogram doses of BIOD-531 and Humulin® R U-500 administered prior to the meal, BIOD-531 was associated with superior glucose control. Mean glucose concentrations after the standardized breakfast were 167.8 ± 10.4 mg/dl with BIOD-531 treatment compared to 193.1 ± 8.3 mg/dl with Humulin® R U-500 treatment (p=0.006). Over the entire day of observation, mean glucose concentrations were 177.8 ± 11.9 mg/dl with BIOD-531 treatment compared to 197.2 ± 8.8 mg/dl with Humulin® R U-500 treatment (p=0.042). Over the course of the entire day of observation, glucose concentrations were in the target range of 70-180 mg/dl 46.3 ± 8.4% of the time with BIOD-531 treatment compared to 29.1 ± 6.1% of the time with Humulin® R U-500 treatment (p=0.032).
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•When comparing 0.6 unit per kilogram doses of BIOD-531 administered twenty minutes after the start of the meal to 0.6 unit per kilogram doses of both Humalog® Mix 75/25 and Humulin® R U-500 administered prior to a meal, BIOD-531 demonstrated superior glucose control compared to either comparator. Mean glucose concentrations over the course of the day were 178.3 ± 11.2 mg/dl for post-meal BIOD-531 treatment compared to 225.1 ± 10.7 for pre-meal Humalog® Mix 75/25 treatment (p < 0.001). The percentage of readings within the 70-180 mg/dl target range was 46.2 ± 7.6% for post-meal BIOD-531 treatment compared to 20.6 ± 5.9% for pre-meal Humalog® Mix 75/25 treatment (p=0.003) and 29.1 ± 6.1% for pre-meal Humulin® R U-500 treatment (p=0.040).
•Mean visual analog scores and absolute severity scores were low for all participants, suggesting excellent injection site tolerability. There were no statistically significant differences in 100 mm visual analog scores among the treatment groups.
BIOD-531 is the subject of ongoing Study 3-151, a Phase 2a clinical trial iscomparing BIOD-531 to the marketed products Humalog® Mix 75/25 and Humulin® R U-500 in diabetes patients who use greater than 150 units of insulin per day or greater than 100 units of insulin at a single-center, randomized, double-blind, three-period crossoversingle dosing session. During each visit, subjects in the clinical trial will receive three standardized meals and two doses of the study drug, one dose with breakfast and the other dose with dinner. Blood glucose levels will be measured over a period of 24 hours. Furthermore, we are making preparations to initiate Study 3-250, a parallel group study in approximately 12 patients with Type 1 diabetes.
In addition to BIOD-531, we do not expectcontinue to study thesedevelop ultra-rapid-acting insulin analog-based formulations, in additional clinical trials, including multiple injection Phase 2 clinical trials, because they were formulated by addingusing our proprietary excipients to a marketed presentation of anin combination with either insulin analog and because they do not demonstrate stability characteristics consistent with our target product profile. Accordingly, in parallel with the Phase 1 clinical trial of BIOD-238 and BIOD-250, we are continuing our formulation development work to improve the stability characteristics of our ultra-rapid-acting insulin analog-based formulations. We are also developing formulations usinglispro, the active pharmaceutical ingredient rather than a marketed presentation, of anin Humalog®, or insulin analog.aspart, the active pharmaceutical ingredient in NovoLog®.
•completion of extensive nonclinical laboratory tests, animal studies and formulation studies, all performed in accordance with the FDA's Good Laboratory Practice, or GLP, regulations;
•submission to the FDA of an investigational new drug application, or IND, which must become effective before human clinical trials may begin;
•for some products, performance of adequate and well-controlled human clinical trials in accordance with the FDA's regulations, including Good Clinical Practices, to establish the safety and efficacy of the product candidate for each proposed indication;
•submission to the FDA of an NDA, and the acceptance for filing of the NDA by the FDA;
•satisfactory completion of an FDA preapproval inspection of the manufacturing facilities at which the product is produced to assess compliance with current Good Manufacturing Practice, or cGMP, regulations; and
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•FDA review and approval of the NDA prior to any commercial marketing, sale or shipment of the drug.
•Phase 1 clinical trials typically involve the initial introduction of the product candidate into human volunteers. In Phase 1 clinical trials, the product candidate is typically tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and pharmacodynamics.
•Phase 2 clinical trials are conducted in a limited patient population to gather evidence about the efficacy of the product candidate for specific, targeted indications, to determine dosage tolerance and optimal dosage, and to identify possible adverse effects and safety risks.
•Phase 3 clinical trials are undertaken to evaluate clinical efficacy and to test for safety in an expanded patient population at geographically dispersed clinical trial sites. The size of Phase 3 clinical trials depends upon clinical and statistical considerations for the product candidate and proposed indications, but sometimes can include several thousand patients. Phase 3 clinical trials are intended to establish the overall risk-benefit ratio of the product candidate and provide an adequate basis for product labeling.
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The FDA reviews all NDAs submitted before it accepts them for filing. The FDA may request additional information rather than accept an NDA for filing. In this event, the NDA must be resubmitted with the additional information and is subject to review before the FDA accepts it for filing. After an application is filed, the FDA may refer the NDA to an advisory committee for review, evaluation and recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but it considers them carefully when making decisions. The FDA may deny approval of an NDA if the applicable regulatory criteria are not satisfied. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret the same data. The FDA may issue a complete response letter, which may require additional clinical or other data or impose other conditions that must be met in order to secure final approval of the NDA. An applicant receiving a complete response letter may resubmit the application with data and information addressing the FDA’sFDA's concerns or requirements, withdraw the application without prejudice to a subsequent submission of a related application or request a hearing on whether there are grounds for denying approval of the application. If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require us to conduct Phase 4 testing which involves clinical trials designed to further assess a drug’sdrug's safety and effectiveness after NDA approval, and may require surveillance programs to monitor the safety of approved products which have been commercialized. Once issued, the FDA may withdraw product approval if ongoing regulatory requirements are not met or if safety or efficacy questions are raised after the product reaches the market. The agency may also impose requirements that the NDA holder conduct new studies, make labeling changes, implement Risk Evaluation and Mitigation Strategies, and take other corrective measures.
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products, as claiming the reference drug or an approved method of use of the reference drug, the Section 505(b)(2) applicant must certify that: (1) there is no patent information listed by the FDA for the reference drug; (2) the listed patent has expired; (3) the listed patent has not expired, but will expire on a particular date; (4) the listed patent is invalid, unenforceable, or will not be infringed by the manufacture, use, or sale of the product in the Section 505(b)(2) NDA; or (5) if the patent is a use patent, that the applicant does not seek approval for a use claimed by the patent. If the applicant files a certification to the effect of clause (1), (2) or (5), FDA approval of the Section 505(b)(2) NDA may be made effective immediately upon successful FDA review of the application, in the absence of marketing exclusivity delays, which are discussed below. If the applicant files a certification to the effect of clause (3), the Section 505(b)(2) NDA approval may not be made effective until the expiration of the relevant patent and the expiration of any marketing exclusivity delays.
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product that has orphan drug designation and that receives the first FDA approval for the indication for which the drug has such designation. Orphan drug exclusivity prevents approval of another application for the same drug for the same orphan indication, for a period of seven years, regardless of whether the application is a full NDA or a Section 505(b)(2) NDA, except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity. Pediatric exclusivity, if granted, provides an additional six months to an existing exclusivity or statutory delay in approval resulting from a patent certification. This six-month exclusivity, which runs from the end of other exclusivity protection or patent delay, may be granted based on the completion of a pediatric study in accordance with an FDA-issued “Written Request”"Written Request" for such a study.
•record-keeping requirements;
•reporting of adverse experiences with the drug;
•providing the FDA with updated safety and efficacy information;
•reporting on advertisements and promotional labeling;
•drug sampling and distribution requirements; and
•complying with electronic record and signature requirements.
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marketing of the product in those countries. The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement also vary between jurisdictions.
If approved, the primary competition for our BIOD-123 ultra-rapid-acting insulin formulationsproduct candidate will be rapid-acting mealtime injectable insulins such asinsulins. There are several approved injectable rapid-acting mealtime insulin analogs currently on the market including Humalog®, which is marketed by Eli Lilly and Company, NovoLog®, which is marketed by Novo Nordisk, and Apidra®, which is marketed by Sanofi-Aventis.Sanofi. These rapid-acting insulin analogs provide improvement over regular forms of"regular" mealtime insulin, including faster subcutaneous absorption, an earlier and greater insulin peak and more rapid post-peak decrease. Both Humalog® and NovoLog® have limited remaining patent protection in the United States and Europe. The possible introduction of lower priced brands
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or substitutable generic versions of these products could negatively impact the revenue potential of our ultra-rapid-acting product candidates should any be approved.
Our concentrated ultra-rapid acting insulin product candidate, BIOD-531, if approved, would face significant competition from insulin formulations currently on the market and, potentially, from development stage insulin formulations and other treatment systems. Humulin® R U-500 is commonly used to treat diabetes patients with severe insulin resistance, and pre-mixed insulins, such as Humalog® Mix 75/25, is commonly used to treat diabetes patients and lesser degrees of insulin resistance. Newer combination products may also compete with BIOD-531. For example, a combination of insulin degludec, an ultra-long-acting basal insulin developed by Novo Nordisk, and NovoLog® is approved in Europe and may be approved in the United States within the next few years. Also, combinations of basal insulin and GLP-1 analogs have either been approved or are in late 2012 or early 2013.
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We have entered into an agreement with Aegis Therapeutics, LLC, or Aegis, to acquire an exclusive, sublicensable, worldwide license to the protein stabilization technology that we are using in the development of our liquid glucagon formulations. Under the terms of the agreement, Aegis will prepare, file, prosecute and maintain patents and patent applications that are specific to our liquid glucagon formulations in jurisdictions that we may designate from time to time.
We require our employees and consultants to execute confidentiality agreements upon the commencement of employment, consulting or collaborative relationships with us. These agreements provide that all confidential information developed or made known during the course of the relationship with us be kept
We have entered into a customization and commercial supply agreement with Unilife Medical Solutions, Inc., a wholly owned subsidiary of Unilife Corporation, to acquire an exclusive, sublicensable, worldwide license to a proprietary device platform of dual-chamber devices for use with glucagon. Under the terms of the agreement, Unilife will develop and be the sole supplier of the device intended for use with our dual-chamber glucagon rescue product candidate. Additionally, Unilife is responsible for delivering three registration lots of the filled and finished GEM device required for submitting an NDA to the FDA. The initial term of our agreement with Unilife Medical Solutions, Inc. will expire in 2028.
We have entered into manufacturing agreement with Cangene bioPharma Inc., doing business as Emergent BioSolutions, or Emergent, under which Emergent will fill and finish the GEM device, using lyophilized glucagon and an aqueous diluent. During the term of the agreement following validation of the manufacturing process, we are required to purchase, and Emergent is obligated to deliver to us, one manufactured lot of the GEM device every quarter. We would expect to reserve and commit to additional
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manufacturing capacity with Emergent following the commercial launch of our GEM product candidate, if successful. Either party may terminate the agreement without cause upon thirty-six months prior written notice.
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Name | ||||||||||||||
Position | ||||||||||||||
Dr. Errol B. De Souza | 61 | President and Chief Executive Officer | ||||||||||||
Gary G. Gemignani | 49 | Chief Financial Officer | ||||||||||||
Dr. Alan S. Krasner | 51 | Chief Medical Officer | ||||||||||||
Paul S. Bavier | 42 | General Counsel and Secretary, Chief Administrative Officer and Vice President |
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•conduct the development work necessary to finalize the formulation and design of our GEM product candidate and undertake manufacturing activities in support our earlier stage clinical trials with that product candidate;
•produce registration batches of our GEM product candidate to support the submission of an NDA with the FDA;
•conduct later stage clinical trials with our GEM product candidate, including at least one pivotal clinical trial required for FDA approval of an NDA, and commence targeted commercialization activities;
•conduct clinical trials with our BIOD-531 product candidate, including a planned Phase 2, parallel group study in patients with Type 2 diabetes over a six-month treatment period;
•conduct the required stability, preclinical and human factors and user acceptability studies to support the approval of GEM device and one or more insulin injection devices intended for use with BIOD-531; and
•purchase active pharmaceutical ingredients and other materials in support of our product candidates.
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not be available on terms acceptable to us, or at all. If we are unable to obtain financing on favorable terms, our business, results of operations and financial condition may be materially adversely affected.
•the progress, timing or success of our research and development and clinical programs for our product candidates, particularly our GEM product candidate and our BIOD-531 product candidate;
•our ability to conduct the development work necessary to finalize the formulation and presentation of our GEM product candidate, as well as the preclinical studies, clinical trials and manufacturing activities necessary to support the submission of an NDA for that candidate;
•the ability and willingness of our existing strategic partners, service providers and suppliers, upon which we rely in the advancement of our product candidates, to meet the obligations set forth in our agreements with them, including Unilife, which is responsible for designing and manufacturing the device intended for use with our GEM product candidate, as well as delivering three registration lots of the filled and finished GEM device required for submitting an NDA to the FDA;
•the success of our formulation development work to improve the stability of our newer ultra-and rapid-acting insulin analog-based formulations while maintaining the pharmacokinetic and injection site toleration characteristics associated with earlier formulations;
•the results of our real-time stability programs for our glucagon-, RHI-, and insulin analog-based product candidates, including the reproducibility of earlier, smaller scale, stability studies and our ability to accurately project long term stability on the basis of accelerated testing;
•our ability to accurately anticipate technical challenges that we may face in the development of our glucagon-, RHI-, and insulin analog-based product candidates;
•our ability to secure approval by the FDA for our product candidates under Section 505(b)(2) of the FFDCA;
•our ability to enter into collaboration arrangements for the commercialization of our product candidates and the success or failure of any such collaborations into which we enter, or our ability to commercialize our product candidates ourselves;
•our ability to enforce our patents for our product candidates and our ability to secure additional patents for our product candidates;
•our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others;
•the degree of clinical utility of our product candidates, particularly with regard to our ultra-rapid-acting insulin formulations, which have not yet been shown to be clinically superior to existing rapid-acting insulin analogs;
•the emergence of competing technologies and products and other adverse market developments, such as advancements in glucagon stabilization technologies that could enable a room-temperature rescue product in a portable, easy to use presentation;
•the ability of our contract manufacturing organizations or collaborators to produce our products in our final dosage form and in the quantities we may require;
•our ability to secure adequate supplies of active pharmaceutical ingredients to support our product development programs and, if successful, the commercialization one or more product candidates;
•our capabilities and strategies for manufacturing, marketing and commercializing a product candidate; and
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•our ability to accurately estimate anticipated operating losses, future revenues, capital requirements and our needs for additional financing.
Our consolidated financial statements as of September 30, 2014 were prepared under the assumption that we will continue as a going concern for the next twelve months. Our independent registered public accounting firm has issued a report that included an explanatory paragraph referring to our recurring and expected continuing future losses from operations and expressing substantial doubt in our ability to continue as a going concern without additional capital becoming available. While we have access to certain amounts of financing through our At-the-Market Issuance Sales Agreement, or the sales agreement, with MLV & Co., LLC, or MLV, and our stock purchase agreement with Lincoln Park Capital Fund, LLC, or LPC, there are certain factors, such as volume of trading in our common stock, our stock price and the ability to terminate the agreement with notice, which limit the amount that can be raised in a short period of time through our agreement with LPC. Our ability to continue as a going concern is dependent upon our ability to obtain additional equity or debt financing, attain further operating efficiencies, reduce expenditures, and, ultimately, to generate revenue. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Our short operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.
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The results of our earlier stage clinical trials may not be predictive of results we may generate in later stage clinical trials, which may be more representative of the product candidate's intended use as a long-term therapy. Additionally, we have manufactured a limited number of larger-scale batches of BIOD-531 from which to generate real-time stability data with this formulation.
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addition, interim or preliminary results of a clinical trial do not necessarily predict final results. We cannot assure you that the clinical trials of any of our RHI- or insulin analog-based formulationsproduct candidates will ultimately be successful. New information regarding the safety, efficacy, toleration and stability of our RHI- or insulin analog-based formulations may arise that may be less favorable than the data observed to date. Furthermore, much of the clinical data we have generated to date has compared one or more of our ultra-rapid-acting formulations to recombinant human insulin, which is known to have a slower onset of action than the currently marketed rapid acting insulin analogs. In the future, we plan to conduct all of our clinical trials using an insulin analog as the comparator. We have limited ability to predict how our RHI- or insulin analog-based formulations will perform when compared to an insulin analog.
•successful completion of preclinical development and clinical trials;
•our ability to identify and enroll patients who meet clinical trial eligibility criteria;
•receipt of marketing approvals from the FDA and similar regulatory authorities outside the United States;
•establishing that, with regard to our ultra-rapid-acting insulin formulations, the formulations are well-tolerated in chronic use;
•establishing that, with regard to our GEM product candidate, the commercial presentation can be administered effectively by patient caregivers with limited or no training;
•establishing commercial manufacturing capabilities through arrangements with third-party manufacturers;
•launching commercial sales of the products, whether alone or in collaboration with others;
•competition from other products; and
•continued acceptable safety profiles of the products following approval.
•the number of patients required for our clinical trials may be larger than we anticipate, enrollment in our clinical trials may be slower than we currently anticipate, or participants may drop out of our clinical trials at a higher rate than we anticipate, any of which would result in significant delays;
•our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner;
•we might have to suspend or terminate our clinical trials if the participants are being exposed to unacceptable health risks;
•regulators or institutional review boards may require that we hold, suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements;
•the cost of our clinical trials may be greater than we anticipate;
•the supply, stability or quality of our product candidates or other materials necessary to conduct our clinical trials may be insufficient or inadequate; and
•the effects of our product candidates may not be the desired effects, may include undesirable side effects or the product candidates may have other unexpected characteristics.
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If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete our clinical trials or other testing, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:
•be delayed in obtaining or discontinue our efforts to obtain marketing approval;
•not be able to obtain marketing approval;
•obtain approval for indications that are not as broad as intended; or
•have the product removed from the market after obtaining marketing approval.
•a change in the labeling statements or withdrawal of FDA or other regulatory approval of the product;
•a change in the way the product is administered; or
•the need to conduct additional clinical trials.
•the willingness and ability of patients and the healthcare community to adopt our products;
•the ability to manufacture our product candidates in sufficient quantities with acceptable quality and to offer our product candidates for sale at competitive prices;
•the perception of patients and the healthcare community, including third-party payors, regarding the safety, efficacy and benefits of our product candidates compared to those of competing products or therapies;
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•the convenience and ease of administration of our product candidates relative to existing treatment methods;
•the label and promotional claims allowed by the FDA, such as, in the case of an RHI- or insulin analog-based formulation, claims relating to glycemic control, hypoglycemia, weight gain, injection site discomfort, expiry dating and required handling conditions;
•the pricing and reimbursement of our product candidates relative to existing treatments; and
•marketing and distribution support for our product candidates.
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initially be able to field a sales force as large as our competitors or provide the same degree of market research or marketing support. In addition, our competitors would have a greater ability to devote research and development resources toward expansion of the indications for their products. We cannot assure our investors that we will succeed in entering into acceptable collaborations, that any such collaboration will be successful or, if not, that we will successfully develop our own sales, marketing and distribution capabilities.
•a covered benefit under its health plan;
•safe, effective and medically necessary;
•appropriate for the specific patient;
•cost-effective; and
•neither experimental nor investigational.
•decreased demand for any product candidates or products that we may develop;
•injury to our reputation;
•withdrawal of clinical trial participants;
•costs to defend the related litigation;
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•substantial monetary awards to trial participants or patients;
•loss of revenue; and
•the inability to commercialize any products that we may develop.
If approved, our GEM product candidate would face significant competition. Eli Lilly and Novo Nordisk currently market injectable glucagon rescue kit products. We are aware of several glucagon rescue product candidates in early stage development, such as a potentially competitive auto-injector device being developed by Enject Corporation that integrates glucagon powder and a diluent into a dual-chamber cartridge within that device. Xeris Corporation, or Xeris, is developing glucagon formulations that are stabilized using non-aqueous solvents to suppress glucagon fibrillation. At the 2014 Annual Meeting of the American Diabetes Association, Xeris presented data from a Phase 2, double-blind, crossover, comparative pharmacology study in healthy non-diabetic volunteers in which the Xeris candidate formulation demonstrated pharmacodynamic bioequivalence to a marketed comparator (although the pharmacokinetic profiles of the 2 glucagon formulations were significantly different). In addition, other companies with expertise in protein stabilization, including Latitude Pharmaceuticals, have announced that they have developed a stable glucagon formulation using FDA-approved injectable ingredients. We believe that an intranasal formulation of glucagon is being studied in one or more clinical trials, as is a glucagon formulation delivered intra-dermally by a micro needle patch. All of these programs utilize the same active pharmaceutical ingredient as the stable glucagon presentations that we are developing and offer, or may offer, presentations allowing for room temperature storage. In addition, Eli Lilly, Novo Nordisk and Zealand Pharma A/S, a pharmaceutical company based in Denmark, may be developing glucagon analogs, which may also offer advantages over our stable glucagon presentations.
If approved, the primary competition for our BIOD-123 ultra-rapid-acting insulin product candidate will be rapid-acting mealtime injectable insulins. There are several approved injectable rapid-acting mealtime insulin analogs currently on the market including Humalog®Humalog®, marketed by Eli Lilly and Company, NovoLog®NovoLog®, marketed by Novo Nordisk, and Apidra®, marketed by Sanofi-Aventis.Sanofi. These rapid-acting insulin analogs provide improvement over regular forms of"regular" mealtime insulin, including faster subcutaneous absorption, an earlier and greater insulin peak and more rapid post-peak decrease. Both Humalog® and NovoLog® have limited remaining patent protection in the United States and Europe. The possible introduction of lower priced brands or substitutable generic versions of these products could negatively impact the revenue potential of our ultra-rapid-acting product candidates should any be approved.
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and glucodynamics that better mimicked physiologic mealtime insulin release and activity than RHI, Humalog® or NovoLog® alone. Novo Nordisk has reported that they have initiated clinical development of an insulin analog intended to provide faster onset of action than the currently available rapid-acting insulin analogs and that ais studying candidate formulation will enterformulations in Phase 3 clinical trialstrials. A French biotechnology company, Adocia Inc., announced positive preliminary results in September 2014 from a Phase 2a dose response clinical trial evaluating an "ultra-fast" formulation of insulin lispro. Furthermore, the company announced plans to develop a concentrated formulation of insulin lispro using its absorption enhancing technologies.
Our concentrated ultra-rapid acting insulin product candidate, BIOD-531, if approved, would face significant competition from insulin formulations currently on the market and, potentially, from development stage insulin formulations and other treatment systems. Humulin® R U-500 is commonly used to treat diabetes patients with severe insulin resistance, and pre-mixed insulins, such as Humalog® Mix 75/25, is commonly used to treat diabetes patients and lesser degrees of insulin resistance. Newer combination products may also compete with BIOD-531. For example, a combination of insulin degludec, an ultra-long-acting basal insulin developed by Novo Nordisk, and NovoLog® is approved in Europe and may be approved in the United States within the next few years. Also, combinations of basal insulin and GLP-1 analogs have either been approved or are in late 2012 or early 2013.
•significantly greater financial, technical and human resources than we have and may be better equipped to discover, develop, manufacture and commercialize product candidates;
•more extensive experience in preclinical testing and clinical trials, obtaining regulatory approvals and manufacturing and marketing pharmaceutical products;
•product candidates that have been approved or are in late-stage clinical development; or
•collaborative arrangements in our target markets with leading companies and research institutions.
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Our business activities involve the storage and use of hazardous materials, which require compliance with environmental and occupational safety laws regulating the use of such materials. If we violate these laws, we could be subject to significant fines, liabilities or other adverse consequences.
Under our customization and commercial supply agreement with Unilife, Unilife will develop and be the sole supplier of the GEM device. Additionally, Unilife is responsible for delivering three registration lots of the filled and finished GEM device required for submitting an NDA to the commercial productionFDA. The initial term of our agreement with Unilife will expire in 2028.
We have entered into a manufacturing agreement with Emergent, under which Emergent will fill and finish the GEM device, using lyophilized glucagon and an aqueous diluent. During the term of our agreement with Emergent following validation of the manufacturing process, we are required to purchase, and Emergent is obligated to deliver to us, one manufactured lot of the GEM device every quarter. However, we would likely require additional manufacturing capacity in order for any commercial launch of our GEM product candidates ifcandidate to be successful.
With regard to our ultra-rapid-acting insulin formulations, including BIOD-531, we succeed in obtaining necessary regulatory approvals. We have recently relied on the University of Iowa to manufacture our product candidates, but wefor manufacturing services. We do not have any commercial manufacturing agreements in place with third parties.
•reliance on the third party for regulatory compliance and quality assurance;
•the possible breach of the manufacturing agreement by the third party because of factors beyond our control; and
•the possible refusal by or inability of the third party to support our manufacturing programs in a time frame that we would otherwise prefer.
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manufacturers are subject to unannounced inspections by the FDA, state regulators and similar regulators outside the United States. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, failure of regulatory authorities to grant marketing approval of our product candidates, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our product candidates.
The success of certain of our product candidates is likely to depend heavily on the design of the devices being used for the administration of our pharmaceutical preparations. For example, the GEM device, which is based on an existing technology platform developed by Unilife Corporation, is being customized by Unilife for use in an emergency situation. We do not have internal engineering expertise relating to medical devices, and we therefore rely on Unilife to provide such expertise. If our collaboration with Unilife is not successful in this regard, our program to develop our GEM product candidate will be materially harmed. Additionally, in order to maximize the commercial potential of our ultra-rapid-acting insulin product candidates, we will likely depend on one or more manufacturers of insulin pen injection devices or syringes to supply us with a commercially acceptable device. To date, we have not entered into any agreements for the supply of insulin pen injection devices or syringes, and we cannot assure you that any such devices will be available on terms that will be acceptable to us, if at all.
We rely on third parties to conduct our clinical trials and those third parties may not perform satisfactorily, including failing to meet established timelines for the completion of such trials.
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We have terminated an earlier supply agreement with N.V. Organon (subsequently acquired by Amphastar Pharmaceuticals, Inc., a specialty pharmaceutical development programand manufacturing company), under which we have purchased the RHI we have used to formulate all of our RHI-based product candidates. We intend to use existing supplies of RHI to support the further development of BIOD-531, as well as enter into one or more development stage RHI supply agreements, as necessary. We do not have any plans, however, to commit to quantities of RHI that may be required byto support the FDA in order to receive approval to market ancommercial launch of one or more of our RHI-based formulation if we are successful in developing one. product candidates.
If we are unable to procure sufficient quantities of glucagon or insulin from our current or any future supplier, if supply of RHI, glucagon and other materials otherwise becomes limited, or if our suppliers do not meet relevant regulatory requirements, and if we were unable to obtain these materials in sufficient amounts, in a timely manner and at reasonable prices, we could be delayed in the manufacturing and possible commercialization of an ultra-rapid-acting insulin,our product candidates, which may have a material adverse effect on our business. We would incur substantial costs and manufacturing delays if our suppliers are unable to provide us with products or services approved by the FDA or other regulatory agencies.
•receiving patent protection for our product candidates;
•maintaining our trade secrets;
•not infringing on the proprietary rights of others; and
•preventing others from infringing on our proprietary rights.
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development of our stable liquid glucagon formulations. Under the terms of the agreement, Aegis will prepare, file, prosecute and maintain patents and patent applications that are specific to our liquidstable glucagon formulationspresentations in jurisdictions that we may designate from time to time.
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Claims by other parties that we infringe or have misappropriated their proprietary technology may result in liability for damages, royalties, or other payments, or stop our development and commercialization efforts.
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are not appropriate and that full NDAs are required for our product candidates, the time and financial resources required to obtain FDA approval for our product candidates could substantially and materially increase, and our product candidates might be less likely to be approved. If the FDA requires full NDAs for our product candidates, or requires more extensive testing and development for some other reason, our ability to compete with alternative products that arrive on the market more quickly than our product candidates would be adversely impacted.
•restrictions on such products' manufacturers or manufacturing processes;
•restrictions on the marketing or distribution of a product;
•requirements that we conduct new studies, make labeling changes, and implement Risk Evaluation and Mitigation Strategies;
•warning letters;
•withdrawal of the products from the market;
•refusal to approve pending applications or supplements to approved applications that we submit;
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•recall of products;
•fines, restitution or disgorgement of profits or revenue;
•suspension or withdrawal of regulatory approvals;
•refusal to permit the import or export of our products;
•product embargo and/or seizure;
•injunctions; or
•imposition of civil or criminal penalties.
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obtaining the approval of our product candidates. In addition, the public perception of our products might be adversely affected, which could harm our business and results of operations, even if the concern relates to another company’scompany's product.
•establish a classified board of directors such that not all members of the board are elected at one time;
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•allow the authorized number of our directors to be changed only by resolution of our board of directors;
•limit the manner in which stockholders can remove directors from the board;
•establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors;
•require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent;
•limit who may call stockholder meetings;
•authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a stockholder rights plan or "poison pill" that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors; and
•require the approval of the holders of at least 75% of the votes that all our stockholders would be entitled to cast to amend or repeal certain provisions of our charter or bylaws.
In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
•results of clinical trials of our product candidates or those of our competitors;
•regulatory or legal developments in the United States and other countries;
•variations in our financial results or those of companies that are perceived to be similar to us;
•developments or disputes concerning patents or other proprietary rights;
•the recruitment or departure of key personnel;
•changes in the structure of healthcare payment systems;
•market conditions in the pharmaceutical and biotechnology sectors and issuance of new or changed securities analysts' reports or recommendations;
•general economic, industry and market conditions; and
•the other factors described in this "Risk Factors" section.
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common stock would be substantially dilutive to the outstanding shares of common stock. Any dilution or potential dilution may cause our stockholders to sell their shares, which would contribute to a downward movement in the stock price of our common stock.
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Fiscal Quarter Ended High Low December 31, 2012 $ 2.98 $ 2.13 March 31, 2013 $ 2.97 $ 2.29 June 30, 2013 $ 5.11 $ 2.48 September 30, 2013 $ 6.08 $ 3.05 December 31, 2013 $ 3.23 $ 1.93 March 31, 2014 $ 3.71 $ 2.23 June 30, 2014 $ 2.94 $ 1.97 September 30, 2014 $ 2.21 $ 1.61
Fiscal Quarter Ended | High | Low | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
December 31, 2010 | $ | 21.28 | $ | 6.00 | ||||||
March 31, 2011 | $ | 11.88 | $ | 7.28 | ||||||
June 30, 2011 | $ | 10.36 | $ | 5.96 | ||||||
September 30, 2011 | $ | 8.52 | $ | 2.04 | ||||||
December 31, 2011 | $ | 3.48 | $ | 2.04 | ||||||
March 31, 2012 | $ | 2.96 | $ | 2.24 | ||||||
June 30, 2012 | $ | 4.00 | $ | 2.00 | ||||||
September 30, 2012 | $ | 3.82 | $ | 2.41 |
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Period | (a) Total number of shares (or units) purchased | (b) Average price paid per share (or unit) | (c) Total number of shares (or units) purchased as part of publicly announced plans or programs | (d) Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
July 1, 2012 to July 31, 2012 | — | $ | — | — | $ | — | ||||||||||||
August 1, 2012 to August 31, 2012 | — | — | — | — | ||||||||||||||
September 1, 2012 to September 30, 2012 | 82,470 | 2.87 | — | — | ||||||||||||||
Total | 82,470 | $ | 2.87 | — | $ | — |
Year Ended September 30, | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2008 | 2009 | 2010 | 2011 | 2012 | |||||||||||||||||||
(In thousands, except share and per share amounts) | |||||||||||||||||||||||
Statement of operations data: | |||||||||||||||||||||||
Revenue | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||
Operating expenses: | |||||||||||||||||||||||
Research and development | 32,554 | 32,325 | 26,177 | 13,901 | 12,571 | ||||||||||||||||||
Government grants | — | — | — | — | (88 | ) | |||||||||||||||||
General and administrative | 14,800 | 10,994 | 10,980 | 9,321 | 6,816 | ||||||||||||||||||
Total operating expenses | 47,354 | 43,319 | 37,157 | 23,222 | 19,299 | ||||||||||||||||||
Other (income) and expense: | |||||||||||||||||||||||
Interest and other income | (3,010 | ) | (386 | ) | (17 | ) | (60 | ) | (80 | ) | |||||||||||||
Adjustment to fair value of common stock warrant liability | — | — | 1,254 | (12,611 | ) | 1,510 | |||||||||||||||||
Loss before tax provision (benefit) | (44,344 | ) | (42,933 | ) | (38,394 | ) | (10,551 | ) | (20,729 | ) | |||||||||||||
Tax provision (benefit) | (983 | ) | 337 | (104 | ) | 41 | 18 | ||||||||||||||||
Net loss | (43,361 | ) | (43,270 | ) | (38,290 | ) | (10,592 | ) | (20,747 | ) | |||||||||||||
Net loss applicable to common stockholders | $ | (43,361 | ) | $ | (43,270 | ) | $ | (38,290 | ) | $ | (10,592 | ) | $ | (20,747 | ) | ||||||||
Net loss per share — basic and diluted* | $ | (7.76 | ) | $ | (7.28 | ) | $ | (6.34 | ) | $ | (1.36 | ) | $ | (1.91 | ) | ||||||||
Weighted average shares outstanding — basic and diluted* | 5,597,609 | 5,936,650 | 6,040,467 | 7,788,741 | 10,882,688 |
As of September 30, | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2008 | 2009 | 2010 | 2011 | 2012 | |||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
Balance sheet data: | |||||||||||||||||||||||
Cash, cash equivalents, and marketable securities | $ | 90,283 | $ | 54,640 | $ | 28,923 | $ | 38,701 | $ | 39,050 | |||||||||||||
Working capital | 84,377 | 46,787 | 25,178 | 35,907 | 36,756 | ||||||||||||||||||
Total assets | 97,511 | 59,625 | 32,616 | 41,505 | 41,134 | ||||||||||||||||||
Deficit accumulated during the development stage | (83,194 | ) | (126,464 | ) | (164,754 | ) | (175,346 | ) | (196,093 | ) | |||||||||||||
Total stockholders’ equity | 88,487 | 50,538 | 24,060 | 37,078 | 31,016 |
In the third quarter of calendar year 2014, we submitted an Investigational New Drug application, or IND, to the U.S. Food and Drug Administration, or FDA, for our GEM product candidate. We have initiated a Phase 1 clinical trial to assess the pharmacokinetic and pharmacodynamic profiles of BIOD-961, the reconstituted glucagon formulation intended for use in the GEM device, in the fourth calendar quarter of 2014. If the Phase 1 clinical trial is successful, we intend to complete the pivotal trial for our GEM product candidate by the end of calendar year 2015 and submit a New Drug Application, or NDA, to the FDA in calendar year 2016.
In addition to our GEM product candidate, we are developing ultra-rapid-acting proprietary insulin formulations that are designed to be more rapid-acting than the formulations currently available to Type 1 and Type 2 diabetes patients. For example, BIOD-123, which was evaluated in a Phase 2 clinical trial, combines recombinant human insulin, or RHI, with our proprietary combination of excipients to increase the rate of absorption following subcutaneous injection when compared to other commercially available insulin formulations, including "rapid-acting" mealtime insulin analogs such as Humalog®, marketed by Eli Lilly, NovoLog®, marketed by Novo Nordisk, and Apidra®, marketed by Sanofi. Similarly, we have not selecteddeveloped BIOD-531, a lead formulationconcentrated ultra-rapid-acting insulin formulation. BIOD-531 contains 400 units of RHI per milliliter (instead of the standard 100 units per milliliter), and, like BIOD-123, is formulated with EDTA, citrate and magnesium sulfate. When delivered by subcutaneous injection, BIOD-531 is characterized by a rapid onset of action and a prolonged duration of action, which we believe could address an unmet medical need for an insulin with an initial rate of absorption superior to advance into clinical trials. Wethat of existing concentrated insulins and prandial/basal premixed insulins.
In addition to our RHI-based ultra-rapid-acting insulin formulations, we are continuing to conduct preclinical testingusing our proprietary excipients to develop analog-based ultra-rapid-acting insulin formulations that achieve a combination of pharmacokinetic, pharmacodynamic and stability characteristics that we believe would be required for a glucagon rescue treatment product to be commercially successful.
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losses as we continue our efforts to develop and commercialize our product candidates. We have financed our operations and internal growth through various financing transactions, including our initial public offering in May 2007 and several subsequent transactions, including, most recently, our June 2012 private placement.2013 underwritten public offering. In addition, we recently raised funds pursuant to our At-the-Market Issuance Sales Agreement, or the sales agreement, with MLV & Co. LLC, or MLV, and our stock purchase agreement with Lincoln Park Capital Fund, LLC, or LPC, and we may issue shares of our common stock pursuant to these agreements in the future. We have devoted substantially all of our efforts to research and development activities, including clinical trials. Our net loss was $20.7$14.1 million for the year ended September 30, 2012.2014. As of September 30, 2012,2014 we had aan accumulated deficit accumulated during the development stage of $196.1$229.6 million. Research and development and general and administrative expenses, as a percentage of net loss applicable to common stockholders, represent approximately 73% and 33%, respectively, of the expenses that we have incurred since our inception.
•external research and development expenses incurred under agreements with third-party contract research organizations and investigative sites, third-party manufacturing organizations and consultants;
•employee-related expenses, which include salaries and benefits for the personnel involved in our preclinical and clinical drug development and manufacturing activities; and
•facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation of leasehold improvements and equipment and laboratory and other supplies.
•conduct the development work necessary to finalize the formulation and design of our GEM product candidate and undertake manufacturing activities in support of clinical trials with that product candidate;
•produce validation and registration batches of our GEM product candidate to support the submission of an NDA with the FDA;
•conduct clinical trials with our GEM product candidate, including at least one pivotal clinical trial required for FDA approval of an NDA;
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•conduct clinical trials with our BIOD-531 product candidate, including a planned Phase 2, parallel group study in patients with Type 2 diabetes over a six-month treatment period;
•conduct the required stability, preclinical and human factors and user acceptability studies to support the approval of our GEM device and one or more insulin injection devices intended for use with BIOD-531; and
•purchase active pharmaceutical ingredients and other materials consistent in support of our product candidates.
Over the longer term, we anticipate that these expenses will increase further as we:
•prepare and file an NDA for our GEM product candidate; and
•conduct later stage clinical trials of BIOD-531, including, potentially, pivotal clinical trials required for FDA approval of an NDA.
Year Ended September 30, 2014 2013 2014 (In thousands) Preclinical expenses $ 4,640 $ 4,734 Manufacturing expenses 2,428 3,403 Clinical/regulatory expenses 7,228 6,057 Total $ 14,296 $ 14,194
The following table illustrates, for each period presented, our research and development costs by project.
Year Ended September 30, 2014 2013 2014 (In thousands) Ultra-rapid-acting insulin formulations: RHI-based $ 5,390 $ 442 Insulin analog-based 1,694 1,377 Stable Glucagon 1,848 5,569 Concentrated RHI-based formulations 1,181 3,715 Other 4,183 3,091 Total $ 14,296 $ 14,194
42
Year Ended September 30, | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 | 2011 | 2012 | December 3, 2003 (Inception) to September 30, 2012 | |||||||||||||||
(In thousands) | ||||||||||||||||||
Research and development expenses: | ||||||||||||||||||
Preclinical expenses | $ | 2,746 | $ | 3,665 | $ | 3,974 | $ | 22,639 | ||||||||||
Manufacturing expenses | 8,894 | 5,332 | 2,644 | 38,931 | ||||||||||||||
Clinical/regulatory expenses | 14,537 | 4,904 | 5,953 | 81,130 | ||||||||||||||
Total | $ | 26,177 | $ | 13,901 | $ | 12,571 | $ | 142,700 |
The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, specific timing and estimated costs of the efforts that will be necessary to complete the remainder of the development of, or the period, if any, in which material net cash inflows may commence from our product candidates. This is due to the numerous risks and uncertainties associated with developing drugs, including the uncertainty of:
•the progress, timing or success of our research and development and clinical programs for our product candidates, particularly our GEM product candidate and our BIOD-531 product candidate;
•our ability to conduct the development work necessary to finalize the formulation and presentation of our GEM product candidate, as well as the preclinical studies, clinical trials and manufacturing activities necessary to support the submission of an NDA for that candidate;
•the ability and willingness of our existing strategic partners, service providers and suppliers, upon which we rely in the advancement of our product candidates, to meet the obligations set forth in our agreements with them, including Unilife, which is responsible for designing and manufacturing the device intended for use with our GEM product candidate, as well as delivering three registration lots of the filled and finished GEM device required for submitting an NDA to the FDA;
•the success of our formulation development work to improve the stability of our newer ultra-and rapid-acting insulin analog-based formulations while maintaining the pharmacokinetic and injection site toleration characteristics associated with earlier formulations;
•the results of our real-time stability programs for our glucagon-, RHI-, and insulin analog-based product candidates, including the reproducibility of earlier, smaller scale, stability studies and our ability to accurately project long term stability on the basis of accelerated testing;
•our ability to accurately anticipate technical challenges that we may face in the development of our glucagon-, RHI-, and insulin analog-based product candidates;
•our ability to secure approval by the FDA for our product candidates under Section 505(b)(2) of the FFDCA;
•our ability to enter into collaboration arrangements for the commercialization of our product candidates and the success or failure of any such collaborations into which we enter, or our ability to commercialize our product candidates ourselves;
•our ability to enforce our patents for our product candidates and our ability to secure additional patents for our product candidates;
•our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others;
•the degree of clinical utility of our product candidates, particularly with regard to our ultra-rapid-acting insulin formulations, which have not yet been shown to be clinically superior to existing rapid-acting insulin analogs;
•the emergence of competing technologies and products and other adverse market developments, such as advancements in glucagon stabilization technologies that could enable a room-temperature rescue product in a portable, easy to use presentation;
•the ability of our contract manufacturing organizations or collaborators to produce our products in our final dosage form and in the quantities we may require;
•our ability to secure adequate supplies of active pharmaceutical ingredients to support our product development programs and, if successful, the commercialization of one or more product candidates;
•our capabilities and strategies for manufacturing, marketing and commercializing a product candidate; and
•our ability to accurately estimate anticipated operating losses, future revenues, capital requirements and our needs for additional financing.
43
44
•fees paid to contract research organizations in connection with preclinical and toxicology studies and clinical trials;
•fees paid to investigative sites in connection with clinical trials;
•fees paid to contract manufacturers in connection with the production of clinical trial materials; and
•professional service fees.
45
We will continue to use the Black-Scholes pricing model to assist incalculate the calculationfair value of fair value.stock options. The expected life for these grants was calculated in accordance with the simplified method described in the Securities and Exchange Commission Staff Accounting Bulletin (SAB) Topic 14.D.2 in accordance with SAB No. 110. The simplified method was chosen due to our limited history. Until we have adequate history, we will continue to utilize the simplified method.
46
uncertain that it will be fully realized. If we determine in the future that we will be able to realize all or a portion of our net deferred tax asset, an adjustment to the deferred tax valuation allowance would increase net income in the period in which we make such a determination.
We believe that approximately $55.9 million of the $106.9$127.8 million federal losses will expire unused as a result of Section 382 limitations. The maximum annual limitation under Section 382 is approximately $2.5 million for 20 years. As of September 30, 2012, we have determined that ownership change, under Section 382, occurred as a result of the June 2012 financing and, therefore, the ability to utilize our current NOLs is further limited. To the extent our use of net operating loss carry-forwards is limited, future income could be subject to corporate income tax earlier than it would if we were able to use net operating loss carry-forwards, which could result in decreased net income.
Year Ended September 30, | Decrease | |||||||||||||||||||||||||
2013 | 2014 | $ | % | |||||||||||||||||||||||
In thousands, except per share amounts | ||||||||||||||||||||||||||
Research and Development | $ | 14,296 | $ | 14,194 | $ | 102 | 0.7 | % | ||||||||||||||||||
Percentage of net loss | 73.9 | % | 100.4 | % |
Year Ended September 30, | Decrease | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2011 | 2012 | $ | % | ||||||||||||||||
In thousands, except per share amounts | |||||||||||||||||||
Research and Development | $ | 13,901 | $ | 12,571 | $ | 1,330 | 10 | % | |||||||||||
Percentage of net loss | 131.2 | % | 60.6 | % |
47
For the year ended September 30, 2013, we reported $327 thousand in government grants for the high concentration ultra-rapid-insulin product candidate and $219 thousand for the glucagon formulation work.
Year Ended September 30, | Decrease | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2011 | 2012 | $ | % | ||||||||||||||||
In thousands, except per share amounts | |||||||||||||||||||
General and Administrative | $ | 9,321 | $ | 6,816 | $ | 2,505 | 27 | % | |||||||||||
Percentage of net loss | 88.0 | % | 32.9 | % |
Year Ended September 30, | Decrease | |||||||||||||||||||||||||
2013 | 2014 | $ | % | |||||||||||||||||||||||
In thousands, except per share amounts | ||||||||||||||||||||||||||
General and Administrative | $ | 6,843 | $ | 5,598 | $ | 1,245 | 18.2 | % | ||||||||||||||||||
Percentage of net loss | 35.4 | % | 39.6 | % |
General and administrative expenses were $5.6 million for the year ended September 30, 2014, a decrease of $1.2 million, or 18.2%, from $6.8 million for the year ended September 30, 2012, a decrease of $2.5 million, or 27%, from $9.3 million for the year ended September 30, 2011.2013. This decrease is primarily attributable to reductions of $0.2 milliona decrease in depreciation expense due primarily to fully depreciating our accounting software, $1.9 million in employeepersonnel and non-employee director stock-based compensation expenses and other expenses of $0.4$1.1 million.
General and administrative expenses for the yearyears ended September 30, 20122014 and 2013 include $1.1$0.5 million and $0.8 million, respectively, in stock-based compensation expense related to options granted to employees and non-employee directors.
Year Ended September 30, | Decrease | |||||||||||||||||||||||||
2013 | 2014 | $ | % | |||||||||||||||||||||||
In thousands, except per share amounts | ||||||||||||||||||||||||||
Interest and Other Income | $ | 56 | $ | 49 | $ | 7 | 12.5 | % | ||||||||||||||||||
Percentage of net loss | 0.29 | % | 0.35 | % |
Year Ended September 30, | Increase | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2011 | 2012 | $ | % | ||||||||||||||||
In thousands, except per share amounts | |||||||||||||||||||
Interest and Other Income | $ | 60 | $ | 80 | $ | 20 | 33 | % | |||||||||||
Percentage of net loss | 0.57 | % | 0.39 | % |
Year Ended September 30, | Decrease | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2011 | 2012 | $ | % | ||||||||||||||||
In thousands, except per share amounts | |||||||||||||||||||
Adjustments to fair value of common stock warrant liability | $ | (12,611 | ) | $ | 1,510 | $ | 14,121 | 112 | % | ||||||||||
Percentage of net loss | 119 | % | 7 | % |
Year Ended September 30, | Increase | ||||||||||||||||||||||||||||
2013 | 2014 | $ | % | ||||||||||||||||||||||||||
In thousands, except per share amounts | |||||||||||||||||||||||||||||
Adjustments to fair value of common stock warrant liability | |||||||||||||||||||||||||||||
May 2011 Warrants | $ | (542 | ) | $ | (1,143 | ) | $ | (601 | ) | ||||||||||||||||||||
June 2012 Warrants | (675 | ) | (3,964 | ) | (3,289 | ) | |||||||||||||||||||||||
Total | $ | (1,217 | ) | $ | (5,107 | ) | $ | 3,890 | 319.6 | % | |||||||||||||||||||
Percentage of net loss | 62.9 | % | 36.1 | % |
Year Ended September 30, | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2011 | 2012 | Net change | |||||||||||||
Warrant: | |||||||||||||||
August 2011 | $ | (4,169 | ) | $ | — | $ | 4,169 | ||||||||
May 2011 | (8,442 | ) | 709 | 9,151 | |||||||||||
June 2012 | — | 801 | 801 | ||||||||||||
Total | $ | (12,611 | ) | $ | 1,510 | $ | 14,121 |
Year Ended September 30, | Increase | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2011 | 2012 | $ | % | ||||||||||||||||
In thousands, except per share amounts | |||||||||||||||||||
Net loss | $ | (10,592 | ) | $ | (20,747 | ) | $ | 10,155 | 96 | % | |||||||||
Net loss per share | $ | (1.36 | ) | $ | (1.91 | ) |
Year Ended
September 30, Decrease 2013 2014 $ % In thousands, except per share amounts Net loss $ (19,335 ) $ (14,131 ) $ 5,204 26.9 %
48
Net loss per share $ (1.24 ) $ (0.66 )
Net loss was $20.7$14.1 million, or $(1.91)$(0.66) per share, for the year ended September 30, 2012,2014, compared to $10.6$19.3 million, or $(1.36)$(1.24) per share, for the year ended September 30, 2011.2013. The increasedecrease in net loss was primarily due to an increase in adjustments to fair value of common stock warrant liability as noted above.
Year Ended September 30, | Decrease | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 | 2011 | $ | % | ||||||||||||||||
In thousands, except per share amounts | |||||||||||||||||||
Research and Development | $ | 26,177 | $ | 13,901 | $ | 12,276 | 46.9 | % | |||||||||||
Percentage of net loss | 68.4 | % | 131.2 | % |
Year Ended September 30, | Decrease | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 | 2011 | $ | % | ||||||||||||||||
In thousands, except per share amounts | |||||||||||||||||||
General and Administrative | $ | 10,980 | $ | 9,321 | $ | 1,659 | 15 | % | |||||||||||
Percentage of net loss | 28.7 | % | 88 | % |
Year Ended September 30, | Increase | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 | 2011 | $ | % | ||||||||||||||||
In thousands, except per share amounts | |||||||||||||||||||
Interest and Other Income | $ | 17 | $ | 60 | $ | 43 | 253 | % | |||||||||||
Percentage of net loss | 0.04 | % | 0.57 | % |
Year Ended September 30, | Increase | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 | 2011 | $ | % | ||||||||||||||||
In thousands, except per share amounts | |||||||||||||||||||
Adjustments to fair value of common stock warrant liability | $ | 1,254 | $ | (12,611 | ) | $ | 13,865 | 1,106 | % | ||||||||||
Percentage of net loss | 3.3 | % | 119 | % |
Year Ended September 30, | Decrease | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 | 2011 | $ | % | ||||||||||||||||
In thousands, except per share amounts | |||||||||||||||||||
Net loss | $ | (38,290 | ) | $ | (10,592 | ) | $ | 27,698 | 72.3 | % | |||||||||
Net loss per share | $ | (6.34 | ) | $ | (1.36 | ) |
In May 2013, we entered into the sales agreement with MLV, under which we may initially issue and sell up to $14 million in shares of our common stock from time to time through MLV as our sales agent. On July 2, 2014 we began selling shares pursuant to this agreement. As of September 30, 2014 we sold an aggregate of 1,564,821 shares of common stock pursuant to the sales agreement and received proceeds, net of sales commissions, of $3.0 million.
In June 2012,2013, we completed a private placementan underwritten public offering of securities in which we issued 4,250,0204,482,760 shares of our common stock 3,605,607at a price to the public of $4.35 per share. In July 2013 we issued 236,007 additional shares of our Series B preferredcommon stock, and warrants to purchase 2,749,469 sharesat the public offering price of our common stock.$4.35 per share, in connection with the underwriters' exercise of a portion of their over-allotment. We received net proceeds, after deducting placement agentunderwriting fees and other offering expenses of approximately $17.1$19.2 million from this financing.
49
•the progress, timing or success of our research and development and clinical programs for our product candidates, particularly our GEM product candidate and our BIOD-531 product candidate;
•our ability to conduct the development work necessary to finalize the formulation and presentation of our GEM product candidate, as well as the preclinical studies, clinical trials and manufacturing activities necessary to support the submission of an NDA for that candidate;
•the ability and willingness of our existing strategic partners, service providers and suppliers, upon which we rely in the advancement of our product candidates, to meet the obligations set forth in our agreements with them, including Unilife, which is responsible for designing and manufacturing the device intended for use with our GEM product candidate, as well as delivering three registration lots of the filled and finished GEM device required for submitting an NDA to the FDA;
•the success of our formulation development work to improve the stability of our newer ultra-and rapid-acting insulin analog-based formulations while maintaining the pharmacokinetic and injection site toleration characteristics associated with earlier formulations;
•the results of our real-time stability programs for our glucagon-, RHI-, and insulin analog-based product candidates, including the reproducibility of earlier, smaller scale, stability studies and our ability to accurately project long term stability on the basis of accelerated testing;
•our ability to accurately anticipate technical challenges that we may face in the development of our glucagon-, RHI-, and insulin analog-based product candidates;
•our ability to secure approval by the FDA for our product candidates under Section 505(b)(2) of the FFDCA;
•our ability to enter into collaboration arrangements for the commercialization of our product candidates and the success or failure of any such collaborations into which we enter, or our ability to commercialize our product candidates ourselves;
•our ability to enforce our patents for our product candidates and our ability to secure additional patents for our product candidates;
•our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others;
•the degree of clinical utility of our product candidates, particularly with regard to our ultra-rapid-acting insulin formulations, which have not yet been shown to be clinically superior to existing rapid-acting insulin analogs;
•the emergence of competing technologies and products and other adverse market developments, such as advancements in glucagon stabilization technologies that could enable a room-temperature rescue product in a portable, easy to use presentation;
•the ability of our contract manufacturing organizations or collaborators to produce our products in our final dosage form and in the quantities we may require;
50
•our ability to secure adequate supplies of active pharmaceutical ingredients to support our product development programs and, if successful, the commercialization of one or more product candidates;
•our capabilities and strategies for manufacturing, marketing and commercializing a product candidate; and
•our ability to accurately estimate anticipated operating losses, future revenues, capital requirements and our needs for additional financing.
We do not anticipate generating product revenue for the next few years. In the absence of additional funding, we expect our continuing operating losses to result in increases in our cash used in operations over the next several years. To the extent our capital resources are insufficient to meet our future capital requirements, we will need to finance our future cash needs through public or private equity offerings, debt financings or corporate collaboration and licensing arrangements. WeOther than our agreements with MLV and LPC, we do not currently have any commitments for future external funding.
Going Concern Consideration
Our consolidated financial statements as of September 30, 2014 have been prepared under the assumption that we will continue as a going concern. Our independent registered public accounting firm has issued a report on our financial statements that included an explanatory paragraph referring to our recurring and expected continuing future losses from operations and expressing substantial doubt in our ability to continue as a going concern without additional capital becoming available. While we could sell an additional $9.2 million worth of common shares through the sales agreement with MLV or direct LPC to purchase up to $14 million worth of shares of common stock under our stock purchase agreement with LPC, there are certain factors, such as volume of trading in the stock, the stock price and the ability to terminate the agreement with notice, which could limit the amount we could raise in a short period of time. Our ability to continue as a going concern is dependent upon our ability to obtain additional equity or debt financing, attain further operating efficiencies and, ultimately, to generate revenue. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
51
None.
•pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
•provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
•provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.
52
Our management assessed the effectiveness of our internal control over financial reporting as of September 30, 2012.2014. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.
None.
53
54
BIODEL INC. | ||||||||
By: | /s/ Errol De Souza | |||||||
Dr. Errol De Souza |
Signature | Title | Date | ||||||||||||
/s/ Errol De Souza | President and Chief Executive Officer (Principal Executive Officer), Director | |||||||||||||
December | ||||||||||||||
/s/ | ||||||||||||||
Chief Financial Officer (Principal Financial and Accounting Officer) | December | |||||||||||||
/s/ | ||||||||||||||
December |
Julia R. Brown | ||||||||||||||
/s/ Barry H. Ginsberg | Director | December 19, 2014 | ||||||||||||
Barry H. Ginsberg | ||||||||||||||
/s/ Ira W. Lieberman | Director | December 19, 2014 | ||||||||||||
Ira W. Lieberman | ||||||||||||||
/s/ Daniel Lorber | Director | December 19, 2014 | ||||||||||||
Daniel Lorber | ||||||||||||||
/s/ Brian J.G. Pereira | Director | December 19, 2014 | ||||||||||||
Brian J.G. Pereira | ||||||||||||||
/s/ Davey S. Scoon | Director | December 19, 2014 | ||||||||||||
Davey S. Scoon |
55
Exhibit Number | Description of Document | |||||||
3.1 | Registrant's Second Amended and Restated Certificate of Incorporation (Incorporated by reference to | |||||||
3.2 | Certificate of Designation of Series A Convertible Preferred Stock of the Registrant (Incorporated by reference to | |||||||
3.3 | Certificate of Amendment to | |||||||
3.4 | Certificate of Designation of Series B Convertible Preferred Stock of the Registrant (Incorporated by reference to Exhibit 4.8 to the | |||||||
3.5 | Certificate of Amendment of | |||||||
3.6 | Registrant's Amended and Restated Bylaws (Incorporated by reference to | |||||||
4.1 | Specimen Common Stock Certificate (Incorporated by reference to | |||||||
4.2 | Form of Warrant to Purchase Shares of Common Stock issued in the | |||||||
4.3 | Form of Warrant issued in the | |||||||
10.1* | 2010 Stock Incentive Plan, as amended March 8, 2012 (Incorporated by reference to Exhibit A of the | |||||||
10.2* | 2010 Incentive Stock Option Agreement (Incorporated by reference to | |||||||
10.3* | 2010 Non Statutory Stock Option Agreement (Incorporated by reference to | |||||||
10.4* | 2010 Restricted Stock Unit Agreement (Incorporated by reference to | |||||||
10.5* | Form of | |||||||
10.6* | Amended and Restated 2004 Stock Incentive Plan (Incorporated by reference to | |||||||
10.7* | 2005 Employee Stock Purchase Plan (Incorporated by reference to |
56
Exhibit Number | Description of Document | |||||||
10.8* | 2005 Non-Employee | |||||||
10.9* | Employment Agreement, dated March 26, 2010, between the Registrant and Errol B. De Souza (Incorporated by reference to the |
10.10* | Change of Control Agreement entered into between the Registrant and certain of its executive officers (Incorporated by reference to | |||||||
10.11* | Executive Severance Agreement entered into between the Registrant and certain of its executive officers (Incorporated by reference to | |||||||
10.12 | Commercial Lease, | |||||||
10.13 | Commercial Lease, dated October 19, 2006, by and between the Registrant and Mulvaney Properties, LLC (for the premises located at 8 Christopher Columbus Avenue, Danbury, CT 06810) (Incorporated by reference to Exhibit 10.15 to the Registrant's Registration Statement on Form S-1, Amendment No. 1 (333-140504), filed on May 10, 2007). | |||||||
10.14 | Amendment to Commercial Lease, dated July 23, 2007 by and between the Registrant and Mulvaney Properties, | |||||||
10.15 | Amendment to Commercial Lease, | |||||||
10.16 | Commercial Lease, dated July 23, 2007, by and between the Registrant and Mulvaney Properties, LLC (for the premises located at 100 Saw Mill Road, Danbury, CT 06810) (Incorporated by reference to Exhibit 10.1 the Registrant's Current Report on Form 8-K filed on July 27, 2007). | |||||||
10.17 | Lease Amendment, dated October 1, 2007, to Commercial Lease, dated July 23, 2007, by and between the Registrant and Mulvaney Properties, LLC (for the premises located at 100 Saw Mill Road, Danbury, CT 06810) (Incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on October 4, 2007). | |||||||
10.18 | Option to Renew, dated as of November 6, 2013, to Commercial Lease, | |||||||
10.19* | Offer Letter, dated November 12, 2007, by and between the Registrant and Gerard J. | |||||||
10.20* | Form of Incentive Stock Option Agreement for 2004 Amended and Restated Stock Incentive |
57
Exhibit Number | Description of Document | |||||||
10.21* | Form of Option Agreement for 2005 Non-Employee | |||||||
10.22 | ||||||||
10.23 | Underwriting Agreement, dated | |||||||
10.24 | Purchase Agreement, dated as of July 25, | |||||||
10.25 | Registration Rights Agreement, dated as of July 25, 2014, by and between the Registrant and Lincoln Park Capital Fund, LLC (Incorporated by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed on July 28, 2014). | |||||||
10.26* | Employment Agreement, dated August 21, 2014, by and between the Registrant and Gary G. Gemignani (Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed on August 27, 2014). | |||||||
10.27† | License Agreement, effective as of June 8, 2012, between Aegis Therapeutics, LLC and the Registrant (Incorporated by reference to Exhibit 10.01 to the | |||||||
10.28† | Commercial Supply Agreement for Glucagon, dated July 17, 2012, among Bachem Americas, Inc., Bachem AG and the Registrant (Incorporated by reference to Exhibit 10.25 to Registrant's Annual Report on Form 10-K filed on December 20, 2013). | |||||||
10.29† | Customization and Commercial Supply Agreement, effective April 8, 2013, between Unilife Medical Solutions, Inc. and the Registrant (Incorporated by reference to Exhibit 10.26 to Registrant's Annual Report on Form 10-K filed on December 20, 2013). | |||||||
10.30 | Securities Purchase Agreement, dated as of June 21, 2012, among the Registrant and the purchasers named therein (Incorporated by reference to Exhibit 10.1 to the | |||||||
21.1 | Subsidiaries of the Registrant. |
23.1 | Consent of BDO USA, LLP, Independent Registered Public Accounting Firm. | |||||||
31.01 | Chief Executive Officer — Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||||
31.02 | Chief Financial Officer — Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||||
32.01 | Chief Executive Officer and Chief Financial Officer — Certification pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||||||
101.INS | XBRL Instance Document. | |||||||
101.SCH | XBRL Taxonomy Extension Schema Document. | |||||||
101.CAL | XBRL Taxonomy Calculation Linkbase Document. |
58
Exhibit Number | Description of Document | |||||||
101.LAB | XBRL Taxonomy Label Linkbase Document. | |||||||
101.PRE | XBRL Taxonomy Presentation Linkbase Document. | |||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. |
† Confidential treatment granted with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission.
†† Confidential treatment requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission.
* Indicates a management contract or compensatory plan or arrangement.
Attached as Exhibit 101 to this are the following formatted in XBRL (Extensible Business Reporting Language): (i) Balance Sheets; (ii) Statements of Operations, (iii) Statements of Stockholders’Stockholders' Equity; (iv) Statements of Comprehensive Loss; (v) Statements of Cash Flows; and (vi) Notes to Financial Statements.
59
Page | ||||||||
Report of | F-2 | |||||||
Consolidated balance sheets | F-3 | |||||||
Consolidated statements of | F-4 | |||||||
Consolidated statements of | F-5 | |||||||
Consolidated statements of cash flows | F-6 | |||||||
Notes to consolidated financial statements | F-7 |
F-1
/s/ BDO USA, LLP
New York, New York
December 21, 201219, 2014
F-2
September 30, 2013 2014 ASSETS Current: Cash and cash equivalents $ 39,781 $ 24,588 Taxes receivable 6 5 Grant receivable 26 - Prepaid and other assets 264 311 Total current assets 40,077 24,904 Property and equipment, net 1,031 481 Intellectual property, net 43 40 Total assets $ 41,151 $ 25,425 LIABILITIES AND STOCKHOLDERS' EQUITY Current: Accounts payable $ 246 $ 172 Accrued expenses: Clinical trial expenses 181 214 Payroll and related 1,139 958 Accounting and legal fees 226 131 Severance 255 - Other 319 141 Income taxes payable 75 - Total current liabilities 2,441 1,616 Common stock warrant liability 6,121 1,014 Severance payable, long term portion 26 - Total liabilities 8,588 2,630 Commitments Stockholders' equity: Convertible preferred stock, $.01 par value; 50,000,000 shares authorized, 1,950,000 and 1,950,000 issued and outstanding 19 19 Common stock, $.01 par value; 62,500,000 shares authorized; 21,070,824 and 23,079,543 issued and outstanding, respectively 211 231 Additional paid-in capital 247,761 252,104 Accumulated deficit (215,428 ) (229,559 ) Total stockholders' equity 32,563 22,795 Total liabilities and stockholders' equity $ 41,151 $ 25,425
September 30, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2011 | 2012 | ||||||||||
ASSETS | |||||||||||
Current: | |||||||||||
Cash and cash equivalents | $ | 38,701 | $ | 39,050 | |||||||
Restricted cash | 60 | 60 | |||||||||
Taxes receivable | 35 | 34 | |||||||||
Grant receivable | — | 88 | |||||||||
Other receivable | 1 | 9 | |||||||||
Prepaid and other assets | 399 | 295 | |||||||||
Total current assets | 39,196 | 39,536 | |||||||||
Property and equipment, net | 2,253 | 1,552 | |||||||||
Intellectual property, net | 49 | 46 | |||||||||
Long term other assets | 7 | — | |||||||||
Total assets | $ | 41,505 | $ | 41,134 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
Current: | |||||||||||
Accounts payable | $ | 222 | $ | 285 | |||||||
Accrued expenses: | |||||||||||
Clinical trial expenses | 763 | 488 | |||||||||
Payroll and related | 1,118 | 1,248 | |||||||||
Accounting and legal fees | 191 | 244 | |||||||||
Severance | 688 | 141 | |||||||||
Other | 204 | 273 | |||||||||
Income taxes payable | 103 | 101 | |||||||||
Total current liabilities | 3,289 | 2,780 | |||||||||
Common stock warrant liability | 996 | 7,338 | |||||||||
Severance payable, long term portion | 142 | — | |||||||||
Total liabilities | 4,427 | 10,118 | |||||||||
Commitments | |||||||||||
Stockholders’ equity: | |||||||||||
Convertible preferred stock, $.01 par value; 50,000,000 shares authorized, 1,813,944 and 5,419,551 issued and outstanding | 18 | 54 | |||||||||
Common stock, $.01 par value; 25,000,000 shares authorized; 9,661,868 and 14,174,545 issued and outstanding | 96 | 142 | |||||||||
Additional paid-in capital | 212,310 | 226,913 | |||||||||
Deficit accumulated during the development stage | (175,346 | ) | (196,093 | ) | |||||||
Total stockholders’ equity | 37,078 | 31,016 | |||||||||
Total liabilities and stockholders’ equity | $ | 41,505 | $ | 41,134 |
F-3
September 30, 2013 2014 Revenue $ — $ — Operating expenses: Research and development 14,296 14,194 Government grants (546 ) (531 ) General and administrative 6,843 5,598 Total operating expenses 20,593 19,261 Other (income): Interest and other income (56 ) (49 ) Adjustments to fair value of common stock warrant liability (1,217 ) (5,107 ) Loss before tax provision (19,320 ) (14,105 ) Tax provision 15 26 Net loss $ (19,335 ) $ (14,131 ) Net loss per share — basic and diluted $ (1.24 ) $ (0.66 ) Weighted average shares outstanding — basic
and diluted 15,650,538 21,404,258
Year Ended September 30, | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 | 2011 | 2012 | December 3, 2003 (Inception) to September 30, 2012 | |||||||||||||||
Revenue | $ | — | $ | — | $ | — | $ | — | ||||||||||
Operating expenses: | ||||||||||||||||||
Research and development | 26,177 | 13,901 | 12,571 | 142,700 | ||||||||||||||
Government grants | — | — | (88 | ) | (88 | ) | ||||||||||||
General and administrative | 10,980 | 9,321 | 6,816 | 63,762 | ||||||||||||||
Total operating expenses | 37,157 | 23,222 | 19,299 | 206,374 | ||||||||||||||
Other (income) and expense: | ||||||||||||||||||
Interest and other income | (17 | ) | (60 | ) | (80 | ) | (5,646 | ) | ||||||||||
Interest expense | — | — | — | 78 | ||||||||||||||
Adjustments to fair value of common stock warrant liability | 1,254 | (12,611 | ) | 1,510 | (9,847 | ) | ||||||||||||
Loss on settlement of debt | — | — | — | 627 | ||||||||||||||
Loss before tax provision (benefit) | (38,394 | ) | (10,551 | ) | (20,729 | ) | (191,586 | ) | ||||||||||
Tax provision (benefit) | (104 | ) | 41 | 18 | (553 | ) | ||||||||||||
Net loss | (38,290 | ) | (10,592 | ) | (20,747 | ) | (191,033 | ) | ||||||||||
Charge for accretion of beneficial conversion rights | — | — | — | (603 | ) | |||||||||||||
Deemed dividend — warrants | — | — | — | (4,457 | ) | |||||||||||||
Net loss applicable to common stockholders | $ | (38,290 | ) | $ | (10,592 | ) | $ | (20,747 | ) | $ | (196,093 | ) | ||||||
Net loss per share — basic and diluted* | $ | (6.34 | ) | $ | (1.36 | ) | $ | (1.91 | ) | |||||||||
Weighted average shares outstanding — basic and diluted* | 6,040,467 | 7,788,741 | 10,882,688 |
F-4
Common Stock
$.01 Par Value
Series A
Preferred stock
$.01 Par Value
Series B
Preferred stock
$.01 Par Value Additional
Paid in
Capital Accumulated
Deficit Total
Stockholders'
Equity Shares Amount Shares Amount Shares Amount Balance, September 30, 2012 14,174,545 $ 142 1,813,944 $ 18 3,605,607 $ 36 $ 226,913 $ (196,093 ) $ 31,016 Proceeds from sale of common stock 4,718,767 47 — — — — 19,192 — 19,239 Preferred stock conversion 2,109,090 22 (1,813,944 ) (18 ) (1,655,607 ) (17 ) 13 — — Stock-based compensation — — — — — — 1,538 — 1,538 Proceeds from the sale of stock — ESPP 13,395 — — — — — 30 — 30 Stock options exercised 30,250 — — — — — 75 — 75 RSUs granted 24,777 — — — — — — — — Net loss — — — — — — — (19,335 ) (19,335 ) Balance, September 30, 2013 21,070,824 $ 211 — $ — 1,950,000 $ 19 $ 247,761 $ (215,428 ) $ 32,563 Proceeds from ATM facility 1,564,821 16 — — — — 3,010 — 3,026 Proceeds from equity line 395,000 4 — — — — 486 — 490 Stock-based compensation — — — — — — 784 — 784 Proceeds from the sale of stock — ESPP 8,189 — — — — — 15 — 15 Stock options exercised 19,241 — — — — — 48 — 48 RSUs converted to common stock 21,468 — — — — — — — — Net loss — — — — — — — (14,131 ) (14,131 ) Balance, September 30, 2014 23,079,543 $ 231 — $ — 1,950,000 $ 19 $ 252,104 $ (229,559 ) $ 22,795
Common Stock $01 Par Value | Series A Preferred stock $.01 Par Value | Series B Preferred stock $.01 Par Value | ||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Shares | Amount | Shares | Amount | Shares | Amount | Additional Paid in Capital | Accumulated Other Comprehensive Income (loss) | Deficit Accumulated During the Development Stage | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||
Balance at Inception (December 3, 2003) | — | $ | — | — | $ | — | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||
Shares issued to employees | 183,126 | 2 | — | — | — | — | (2 | ) | — | — | — | |||||||||||||||||||||||||||||||
January 2004 Proceeds from sale of common stock | 1,145,306 | 11 | — | — | — | — | 1,343 | — | — | 1,354 | ||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | (774 | ) | (774 | ) | ||||||||||||||||||||||||||||||
Balance, September 30, 2004 | 1,328,432 | $ | 13 | — | $ | — | — | $ | — | $ | 1,341 | $ | — | $ | (774 | ) | $ | 580 | ||||||||||||||||||||||||
Additional stockholder contributions | — | — | — | — | — | — | 514 | — | — | 514 | ||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | 353 | — | — | 353 | ||||||||||||||||||||||||||||||||
Shares issued to employees and directors for services | 10,658 | — | — | — | — | — | 61 | — | — | 61 | ||||||||||||||||||||||||||||||||
July 2005 Private placement — Sale of Series A preferred stock, net of issuance costs of $379 | — | — | 569,000 | 6 | — | — | 2,460 | — | — | 2,466 | ||||||||||||||||||||||||||||||||
Founder’s compensation contributed to capital | — | — | — | — | — | — | 63 | — | — | 63 | ||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | (3,383 | ) | (3,383 | ) | ||||||||||||||||||||||||||||||
Balance, September 30, 2005 | 1,339,090 | $ | 13 | 569,000 | $ | 6 | — | $ | — | $ | 4,792 | $ | — | $ | (4,157 | ) | $ | 654 | ||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | 1,132 | — | — | 1,132 | ||||||||||||||||||||||||||||||||
July 2006 Private placement — Sale of Series B preferred stock, net of issuance costs of $1,795 | — | — | — | — | 5,380,711 | 54 | 19,351 | — | — | 19,405 | ||||||||||||||||||||||||||||||||
July 2006 — Series B preferred stock units issued July 2006 to settle debt | — | — | — | — | 817,468 | 8 | 3,194 | — | — | 3,202 | ||||||||||||||||||||||||||||||||
Shares issued to employees and directors for services | 988 | — | — | — | — | — | 23 | — | — | 23 | ||||||||||||||||||||||||||||||||
Accretion of fair value of beneficial conversion charge | — | — | — | — | — | — | 603 | — | (603 | ) | — | |||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | (8,068 | ) | (8,068 | ) | ||||||||||||||||||||||||||||||
Balance, September 30, 2006 | 1,340,078 | $ | 13 | 569,000 | $ | 6 | 6,198,179 | $ | 62 | $ | 29,095 | $ | — | $ | (12,828 | ) | $ | 16,348 | ||||||||||||||||||||||||
May 2007 Proceeds from sale of common stock | 1,437,500 | 14 | — | — | — | — | 78,741 | — | — | 78,755 | ||||||||||||||||||||||||||||||||
Conversion of preferred stock on May 16, 2007 | 1,601,749 | 16 | (569,000 | ) | (6 | ) | (6,198,179 | ) | (62 | ) | 52 | — | — | — | ||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | 4,224 | — | — | 4,224 | ||||||||||||||||||||||||||||||||
Shares issued to employees, non-employees and directors for services | 732 | — | — | — | — | — | 16 | — | — | 16 | ||||||||||||||||||||||||||||||||
Stock options exercised | 885 | — | — | — | — | — | 5 | — | — | 5 | ||||||||||||||||||||||||||||||||
March 2007 Warrants exercised | 659,226 | 7 | — | — | — | — | 416 | — | — | 423 | ||||||||||||||||||||||||||||||||
Deemed dividend — warrants | — | — | — | — | — | — | 4,457 | — | (4,457 | ) | — | |||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | (22,548 | ) | (22,548 | ) | ||||||||||||||||||||||||||||||
Balance, September 30, 2007 | 5,040,170 | $ | 50 | — | $ | — | — | $ | — | $ | 117,006 | $ | — | $ | (39,833 | ) | $ | 77,223 | ||||||||||||||||||||||||
Proceeds from sale of common stock | 815,000 | 8 | — | — | — | — | 46,809 | — | — | 46,817 | ||||||||||||||||||||||||||||||||
Issuance of restricted stock | 2,428 | — | — | — | — | — | 172 | — | — | 172 | ||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | 6,503 | — | — | 6,503 | ||||||||||||||||||||||||||||||||
Stock options exercised | 43,600 | 1 | — | — | — | — | 901 | — | — | 902 | ||||||||||||||||||||||||||||||||
Warrants exercised | 19,802 | — | — | — | — | — | 112 | — | — | 112 | ||||||||||||||||||||||||||||||||
Net unrealized loss on Marketable Securities | — | — | — | — | — | — | — | (62 | ) | — | (62 | ) | ||||||||||||||||||||||||||||||
Proceeds from sale of stock — ESPP | 3,596 | — | — | — | — | — | 181 | — | — | 181 | ||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | (43,361 | ) | (43,361 | ) | ||||||||||||||||||||||||||||||
Balance, September 30, 2008 | 5,924,596 | $ | 59 | — | $ | — | — | — | $ | 171,684 | $ | (62 | ) | $ | (83,194 | ) | $ | 88,487 | ||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | 5,064 | — | — | 5,064 | ||||||||||||||||||||||||||||||||
Stock options exercised | 4,413 | — | — | — | — | — | 25 | — | — | 25 | ||||||||||||||||||||||||||||||||
Net unrealized gain on Marketable Securities | — | — | — | — | — | — | — | 62 | — | 62 | ||||||||||||||||||||||||||||||||
Proceeds from the sale of stock — ESPP | 21,863 | — | — | — | — | — | 170 | — | — | 170 | ||||||||||||||||||||||||||||||||
Net loss | (43,270 | ) | (43,270 | ) | ||||||||||||||||||||||||||||||||||||||
Balance, September 30, 2009 | 5,950,872 | $ | 59 | — | $ | — | — | $ | — | $ | 176,943 | $ | — | $ | (126,464 | ) | $ | 50,538 | ||||||||||||||||||||||||
Registered direct financing | 599,550 | 6 | — | — | — | — | 8,706 | — | — | 8,712 | ||||||||||||||||||||||||||||||||
Initial value of warrants issued in a registered direct | — | — | — | — | — | — | (2,915 | ) | — | — | (2,915 | ) | ||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | 5,621 | — | — | 5,621 | ||||||||||||||||||||||||||||||||
Stock options exercised | 8,076 | — | — | — | — | — | 68 | — | — | 68 | ||||||||||||||||||||||||||||||||
Net unrealized gain on marketable securities | — | — | — | — | — | — | — | 1 | — | 1 | ||||||||||||||||||||||||||||||||
Proceeds from the sale of stock — ESPP | 41,393 | 1 | — | — | — | — | 324 | �� | — | — | 325 | |||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | (38,290 | ) | (38,290 | ) |
F-5
September 30, 2013 2014 Cash flows from operating activities: Net loss $ (19,335 ) $ (14,131 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 641 603 Stock-based compensation for employees and directors 1,538 784 Adjustment to fair value of common stock warrant liability (1,217 ) (5,107 ) (Increase) decrease in: Prepaid expenses and other assets 31 (47 ) Income taxes receivable 28 1 Grant receivable 63 26 Other receivable 8 — Increase (decrease) in: Accounts payable (39 ) (74 ) Income tax payable (26 ) (75 ) Accrued expenses and other liabilities (247 ) (703 ) Total adjustments 780 (4,592 ) Net cash used in operating activities (18,555 ) (18,723 ) Cash flows from investing activities: Purchase of property and equipment (118 ) (49 ) Net cash used in investing activities (118 ) (49 ) Cash flows from financing activities: Restricted cash 60 — Options exercised 75 48 Net proceeds from employee stock purchase plan 30 15 Net proceeds from ATM facility — 3,026 Net proceeds from equity line — 490 Net proceeds from sale of common stock 19,239 — Net cash provided by financing activities 19,404 3,579 Net increase (decrease) in cash and cash equivalents 731 (15,193 ) Cash and cash equivalents, beginning of period 39,050 39,781 Cash and cash equivalents, end of period $ 39,781 $ 24,588 Cash paid for interest and income taxes: Interest............................................................... $ — $ — Income taxes 12 25 Non-cash financing and investing activities Conversion of convertible preferred stock to common stock............................................................... $ 35 —
Common Stock $01 Par Value | Series A Preferred stock $.01 Par Value | Series B Preferred stock $.01 Par Value | ||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Shares | Amount | Shares | Amount | Shares | Amount | Additional Paid in Capital | Accumulated Other Comprehensive Income (loss) | Deficit Accumulated During the Development Stage | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||
Balance, September 30, 2010 | 6,599,891 | $ | 66 | — | $ | — | — | $ | — | $ | 188,747 | $ | 1 | $ | (164,754 | ) | $ | 24,060 | ||||||||||||||||||||||||
Registered direct financing | 3,018,736 | 30 | 1,813,944 | 18 | — | — | 27,913 | — | — | 27,961 | ||||||||||||||||||||||||||||||||
Initial value of warrants issued in a registered direct offering | — | — | — | — | — | — | (9,438 | ) | — | — | (9,438 | ) | ||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | 4,920 | — | — | 4,920 | ||||||||||||||||||||||||||||||||
Stock options exercised | 104 | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Warrants exercised | 10,549 | — | — | — | — | — | 50 | — | — | 50 | ||||||||||||||||||||||||||||||||
RSU’s granted | 15,537 | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Net unrealized loss on marketable securities | — | — | — | — | — | — | — | (1 | ) | — | (1 | ) | ||||||||||||||||||||||||||||||
Proceeds from the sale of stock — ESPP | 17,051 | — | — | — | — | — | 118 | — | — | 118 | ||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | (10,592 | ) | (10,592 | ) | ||||||||||||||||||||||||||||||
Balance, September 30, 2011 | 9,661,868 | $ | 96 | 1,813,944 | $ | 18 | — | $ | — | $ | 212,310 | $ | — | $ | (175,346 | ) | $ | 37,078 | ||||||||||||||||||||||||
Proceeds from the sale of unregistered securities | 4,250,020 | 43 | — | — | 3,605,607 | 36 | 16,999 | — | — | 17,078 | ||||||||||||||||||||||||||||||||
Initial value of warrants issued in private placement financing | — | — | — | — | — | — | (4,832 | ) | — | — | (4,832 | ) | ||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | 1,828 | — | — | 1,828 | ||||||||||||||||||||||||||||||||
Proceeds from the sale of stock — ESPP | 10,776 | — | — | — | — | — | 27 | — | — | 27 | ||||||||||||||||||||||||||||||||
RSUs issued to settle bonus liability | 191,719 | 2 | — | — | — | — | 582 | — | — | 584 | ||||||||||||||||||||||||||||||||
RSUs granted | 60,409 | 1 | — | — | — | — | (1 | ) | — | — | — | |||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | (20,747 | ) | (20,747 | ) | ||||||||||||||||||||||||||||||
Company re-purchase of fractional shares from the reverse stock split | (247 | ) | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Balance, Septermber 30, 2012 | 14,174,545 | $ | 142 | 1,813,944 | $ | 18 | 3,605,607 | $ | 36 | $ | 226,913 | $ | — | $ | (196,093 | ) | $ | 31,016 |
F-6
Year Ended September 30, | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 | 2011 | 2012 | |||||||||||||
Net loss | $ | (38,290 | ) | $ | (10,592 | ) | $ | (20,747 | ) | ||||||
Unrealized holding gains arising during the period | 1 | — | — | ||||||||||||
Comprehensive loss | $ | (38,289 | ) | $ | (10,592 | ) | $ | (20,747 | ) |
Year Ended September 30, | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 | 2011 | 2012 | December 3, 2003 (Inception) to September 30, 2012 | |||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||
Net loss | $ | (38,290 | ) | $ | (10,592 | ) | $ | (20,747 | ) | $ | (191,033 | ) | ||||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||||
Depreciation and amortization | 991 | 938 | 725 | 4,803 | ||||||||||||||
Founder’s compensation contributed to capital | — | — | — | 271 | ||||||||||||||
Share-based compensation for employees and directors | 5,628 | 4,964 | 1,828 | 27,624 | ||||||||||||||
Share-based compensation for non-employees | (7 | ) | (44 | ) | — | 2,274 | ||||||||||||
Loss on settlement of debt | — | — | — | 627 | ||||||||||||||
Write-off of capitalized patent expense | — | — | 38 | 246 | ||||||||||||||
Write-off of loan to related party | — | — | — | 41 | ||||||||||||||
Adjustment to fair value of common stock warrant liability | 1,254 | (12,611 | ) | 1,510 | (9,847 | ) | ||||||||||||
(Increase) decrease in: | �� | |||||||||||||||||
Prepaid expenses and other assets | 117 | (41 | ) | 111 | (295 | ) | ||||||||||||
Income taxes receivable | 636 | 81 | 1 | (34 | ) | |||||||||||||
Grant receivable | — | — | 88 | 88 | ||||||||||||||
Other receivable | (11 | ) | 10 | (8 | ) | (9 | ) | |||||||||||
Increase (decrease) in: | ||||||||||||||||||
Accounts payable | 982 | (1,767 | ) | 63 | 285 | |||||||||||||
Income tax payable | (120 | ) | 58 | (2 | ) | 101 | ||||||||||||
Accrued expenses and other liabilities | (5,561 | ) | 753 | (128 | ) | 3,199 | ||||||||||||
Total adjustments | 3,909 | (7,659 | ) | 4,052 | 29,198 | |||||||||||||
Net cash used in operating activities | (34,381 | ) | (18,251 | ) | (16,695 | ) | (161,835 | ) | ||||||||||
Cash flows from investing activities: | ||||||||||||||||||
Purchase of property and equipment | (292 | ) | (189 | ) | (59 | ) | (6,349 | ) | ||||||||||
Purchase of marketable securities | (6,000 | ) | — | — | (31,614 | ) | ||||||||||||
Sale of marketable securities | — | 6,000 | — | 31,614 | ||||||||||||||
Capitalized intellectual properties | — | — | — | (298 | ) | |||||||||||||
Loan to related party | — | — | — | (41 | ) | |||||||||||||
Net cash (used in) provided by investing activities | (6,292 | ) | 5,811 | (59 | ) | (6,688 | ) | |||||||||||
Cash flows from financing activities: | ||||||||||||||||||
Restricted cash | (150 | ) | 90 | — | (60 | ) | ||||||||||||
Options exercised | 68 | — | — | 1,000 | ||||||||||||||
Warrants exercised | — | 50 | — | 585 | ||||||||||||||
Net proceeds from employee stock purchase plan | 325 | 118 | 27 | 821 | ||||||||||||||
Deferred public offering costs | — | — | — | (1,458 | ) | |||||||||||||
Stockholder contribution | — | — | — | 1,660 | ||||||||||||||
Net proceeds from sale of Series A preferred stock 2005 | — | — | — | 2,466 | ||||||||||||||
Net proceeds from sale of Series A preferred stock 2011 | — | 2,685 | — | 2,685 | ||||||||||||||
Net proceeds from sale of common stock | 8,712 | 25,276 | — | 161,018 | ||||||||||||||
Proceeds from bridge financing | — | — | — | 2,575 | ||||||||||||||
Net proceeds from sale of Series B preferred stock 2006 | — | — | — | 19,205 | ||||||||||||||
Net proceeds from sale of Series B preferred stock 2012 | — | — | 8,491 | 8,491 | ||||||||||||||
Net proceeds from sale of unregistered common stock — private placement | — | — | 8,585 | 8,585 | ||||||||||||||
Net cash provided by financing activities | 8,955 | 28,219 | 17,103 | 207,573 | ||||||||||||||
Net (decrease) increase in cash and cash equivalents | (31,718 | ) | 15,779 | 349 | 39,050 | |||||||||||||
Cash and cash equivalents, beginning of period | 54,640 | 22,922 | 38,701 | — | ||||||||||||||
Cash and cash equivalents, end of period | $ | 22,922 | $ | 38,701 | $ | 39,050 | $ | 39,050 | ||||||||||
Cash paid for interest and income taxes was: | ||||||||||||||||||
Interest | $ | — | $ | — | $ | — | $ | 9 | ||||||||||
Income taxes | 60 | — | 20 | 326 |
Year Ended September 30, | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 | 2011 | 2012 | December 3, 2003 (Inception) to September 30, 2012 | |||||||||||||||
Non-cash financing and investing activities: | ||||||||||||||||||
Warrants issued in connection with registered direct offering | $ | 2,915 | $ | 9,438 | $ | — | $ | 12,353 | ||||||||||
Warrants issued in connection with unregistered common stock — private placement | — | — | 4,832 | 4,832 | ||||||||||||||
Settlement of debt with Series B preferred stock | — | — | — | 3,202 | ||||||||||||||
Accrued expenses settled with Series B preferred stock | — | — | — | 150 | ||||||||||||||
Deemed dividend — warrants | — | — | — | 4,457 | ||||||||||||||
Accretion of fair value of beneficial charge on preferred stock | — | — | — | 603 | ||||||||||||||
Conversion of convertible preferred stock to common stock | — | — | — | 68 | ||||||||||||||
Issuance of restricted stock units to settle accrued bonus | — | — | 584 | 584 |
(In thousands, except share and per share amounts)
In June 2014, the FASB issued ASU No. 2014-10, to eliminate the concept of a development stage entity (DSE) from U.S. GAAP, effective for interim periods and years beginning after December 15, 2014. The issuance of ASU No. 2014-10 rescinds certain financial reporting requirements that have historically applied to DSEs, such as inception-to-date information in the statements of income, cash flows, and stockholder equity. Additionally, the financial statements no longer need to be labeled as those of a DSE. ASU No. 2014-10 was early adopted and the adoption of this standard did not have a material effect on the Company's financial statements.
These consolidated financial statements as of September 30, 2014 have been prepared under the assumption that the Company will continue as a going concern. Due to the Company’s recurring and expected continuing losses from operations, the Company has concluded there is substantial doubt in the Company’s ability to continue as a going concern without additional capital becoming available. While the Company could sell an additional $9.2 million worth of common stock through its Sales Agreement with MLV & Co. LLC or direct Lincoln Park Capital Fund, LLC to purchase up to $14 million worth of shares of common stock under the Company’s stock purchase agreement with Lincoln Park Capital Fund, LLC, there are certain factors, such as volume of trading in the stock, the stock price and the ability to terminate the agreement with notice, which could limit the amount the Company could raise in a short period of time (see Note 9). The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The Company focuses onwill be required to raise additional capital within the next year to continue the development and commercialization of innovative treatments for diabetes that may be safer, more effectivecurrent product candidates and more convenient for patients. The Company’s most advanced program involves developing proprietary formulations of injectable recombinant human insulin (“RHI”) designed to be more rapid-acting thancontinue to fund operations at the “rapid-acting” mealtime insulin analogs presently used to treat patients with Type 1 and Type 2 diabetes.current cash expenditure levels. The Company therefore, refers to these formulations as its “ultra-rapid-acting” insulin formulations. In addition tocannot be certain that additional funding will be available on acceptable terms, or at all. To the Company’s RHI-based formulations,extent that the Company raises additional funds by issuing equity securities, the Company's stockholders may experience significant dilution. If the Company is using its formulationunable to raise additional capital when required or on acceptable terms, the Company may have to (i) significantly delay, scale back or discontinue the development and/or commercialization of one or more product candidates; (ii) seek collaborators for product candidates at an earlier stage than otherwise would be desirable and on terms that are less favorable than might otherwise be available; or (iii) relinquish or otherwise dispose of rights to technologies, product candidates or products that the Company would otherwise seek to develop new ultra-rapid-acting formulations of insulin analogs. These insulin analog-based formulations generally use the same or similar excipients as the Company’s RHI-based formulations and are designed to be more rapid-acting than the “rapid-acting” mealtime insulin analogs, but they may present characteristics that are different from those offered by the Company’s RHI-based formulations.commercialize ourselves on unfavorable terms.
F-7
Notes to Consolidated Financial Statements — (Continued)
(In thousands, except share and per share amounts)
Health grants for the development of a concentrated ultra-rapid-acting insulin formulation and a stable glucagon formulation respectively, for use in an artificial pancreas. Both awards arepancreas, in the amounts of $582 and $583, respectively. Each award was for two years and total approximately $580 each. years.
Work on the grant for the development of concentrated ultra-rapid-acting insulin formulation started in August 2012 and expensescompleted in June 2014. Expenses incurred and grant income were $88 during$327 and $167, for the twelve monthsyears ended September 30, 2012,2013 and corresponding2014, respectively.
Work on the grant for the stable glucagon formulation started in January 2013 and completed in June 2014. Expenses incurred and grant income were $219 and a receivable were recorded. In January 2011,$364 for the years ended September 30, 2013 and 2014, respectively.
The Company received $1,200 in tax credits underreported grant income of $546 and $531, for the Internal Revenue Service’s therapeutic tax credit program which was recorded as a credit to reduce our researchyears ended September 30, 2013 and development expenses.2014, respectively.
F-8
Notes to Consolidated Financial Statements — (Continued)
(In thousands, except share and per share amounts)
F-9
Notes to Consolidated Financial Statements — (Continued)
(In thousands, except share and per share amounts)
provided to reduce deferred tax assets to the amount of future tax benefit when it is more likely than not that some portion of the deferred tax assets will not be realized. Projected future taxable income and ongoing tax planning strategies are considered and evaluated when assessing the need for a valuation allowance. Any increase or decrease in a valuation allowance could have a material adverse or beneficial impact on the Company’sCompany's income tax provision and net income or loss in the period which the determination is made.
The Company will continue to useuses the Black-Scholes pricing model to assist incalculate the calculationfair value of fair value.stock options. The expected life for grants was calculated in accordance with the simplified method described in the Securities and Exchange Commission Staff Accounting Bulletin (SAB) Topic 14.D.2 in accordance with SAB No. 110. The simplified method was
F-10
Notes to the Company based on the line of business, stage of development, sizeConsolidated Financial Statements — (Continued)
(In thousands, except share and financial leverage.per share amounts)
Year Ended September 30, 2013 2014 Expected life (in years) 2.39 - 4.75 3.77-4.75 Expected volatility 80 - 96% 70-83% Expected dividend yield 0% 0% Risk-free interest rate 0.25 - 0.75% 0.58-1.63% Weighted-average grant date fair value $2.43 $2.35
Year Ended September 30, | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 | 2011 | 2012 | |||||||||||||
Expected life (in years) | 2.72 – 5.25 | 3.77 – 5.25 | 3.0 – 4.75 | ||||||||||||
Expected volatility | 64 – 77 | % | 65 – 72 | % | 58 – 76 | % | |||||||||
Expected dividend yield | 0 | % | 0 | % | 0 | % | |||||||||
Risk-free interest rate | 0.77 – 2.69 | % | 0.75 – 1.97 | % | 0.39 – 0.91 | % | |||||||||
Weighted-average grant date fair value | $ | 16.37 | $ | 6.36 | $ | 2.54 |
F-11
Notes to Consolidated Financial Statements — (Continued)
(In thousands, except share and per share amounts)
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
Description | Fair Value at September 30, 2012 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Market Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Assets: | ||||||||||||||||||
Cash and cash equivalents | $ | 39,050 | $ | 39,050 | $ | — | $ | — | ||||||||||
Restricted cash | 60 | 60 | — | — | ||||||||||||||
Subtotal | 39,110 | 39,110 | — | — | ||||||||||||||
Liabilities: | ||||||||||||||||||
Common stock warrant liability | (7,338 | ) | — | — | (7,338 | ) | ||||||||||||
Subtotal | (7,338 | ) | — | — | (7,338 | ) | ||||||||||||
Total | $ | 31,772 | $ | 39,110 | $ | — | $ | (7,338 | ) |
Description | Fair Value at September 30, 2011 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Market Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Assets: | ||||||||||||||||||
Cash and cash equivalents | $ | 38,701 | $ | 38,701 | $ | — | $ | — | ||||||||||
Restricted cash | 60 | 60 | — | — | ||||||||||||||
Subtotal | 38,761 | 38,761 | — | — | ||||||||||||||
Liabilities: | ||||||||||||||||||
Common stock warrant liability | (996 | ) | — | — | (996 | ) | ||||||||||||
Subtotal | (996 | ) | — | — | (996 | ) | ||||||||||||
Total | $ | 37,765 | $ | 38,761 | $ | — | $ | (996 | ) |
Description | Fair Value at September 30, 2014 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Market Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||
Cash and cash equivalents | $ | 24,588 | $ | 24,588 | — | — | ||||||||||||||||||||
Subtotal | 24,588 | 24,588 | — | — | ||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||
Common stock warrant liability | (1,014 | ) | — | — | (1,014 | ) | ||||||||||||||||||||
Subtotal | (1,014 | ) | — | — | (1,014 | ) | ||||||||||||||||||||
Total | $ | 23,574 | $ | 24,588 | $ | — | $ | (1,014 | ) |
Description Fair Value at
September 30,
2013 Quoted Prices in
Active Markets for
Identical Assets
(Level 1) Significant
Other
Observable
Market Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) Assets: Cash and cash equivalents $ 39,781 $ 39,781 $ — $ — Subtotal 39,781 39,781 — — Liabilities: Common stock warrant liability (6,121 ) — — (6,121 ) Subtotal (6,121 ) — — (6,121 ) Total $ 33,660 $ 39,781 $ — $ (6,121 )
The Company recognizes transfers into and out of the levels indicated above on the actual date of the event or change in circumstances that caused the transfer of change. All changes within Level 3 can be found in the following Level 3 reconciliation table:
Balance at September 30, 2012 | $ | (7,338 | ) | |||||
Decrease in fair value | 1,217 | |||||||
Balance at September 30, 2013 | (6,121 | ) | ||||||
Decrease in fair value | 5,107 | |||||||
Balance at September 30, 2014 | $ | (1,014 | ) |
Description | Quoted Prices in Active Markets for identical Assets and Liabilities (Level 1) | Significant other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Balance as of September 30, 2011 | Quoted Prices in Active Markets for identical Assets and Liabilities (Level 1) | Significant other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Balance as of September 30, 2012 | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Derivative liabilities related to Warrants | $ | — | $ | — | $ | 996 | $ | 996 | $ | — | $ | — | $ | 7,338 | $ | 7,338 |
Description | Balance at September 30, 2010 | Fair Value of warrants upon issuance | Unrealized (gains) or losses | Balance as of September 30, 2011 | Fair Value of warrants upon issuance | Unrealized (gains) or losses | Balance as of September 30, 2012 | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Derivative liabilities related to Warrants | $ | 4,169 | $ | 9,438 | $ | (12,611 | ) | $ | 996 | $ | 4,832 | �� | $ | 1,510 | $ | 7,338 |
F-12
Notes to Consolidated Financial Statements — (Continued)
(In thousands, except share and per share amounts)
value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. At each reporting period, the Company reviews the assets and liabilities that are subject to ASC Topic 815-40. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs or instruments which trade infrequently and therefore have little or no price transparency are classified as Level 3.
The Company has determined its warrant liability to be a Level 3 fair value measurement and used the Black Scholes valuation model to calculate the fair value for the fiscal year ended September 30, 2013 and 2014.
At the measurement date, the Company estimated the fair value for the June 2012 warrants using the Black-Scholes valuation model using the following assumptions:
September 30,
2013 September 30,
2014 June 2012 Financing Stock price $ 3.15 $1.67 Exercise price $ 2.66 $2.66 Risk-free interest rate 0.63 % 1.07% Expected remaining term 3.74 years 2.74 years Expected volatility 82 % 61% Dividend yield 0 % 0% Warrants outstanding June 2012 financing 2,749,469 2,749,469
The Company estimated the fair value for the May 2011 warrants using the Black-Scholes valuation model at the measurement dates of September 30, 2013 and 2014, respectively using the following assumptions:
September 30,
2013 September 30,
2014 May 2011 Financing Stock price $3.15 $1.67 Exercise price $9.92 $9.92 Risk-free interest rate 0.63% 0.58% Expected remaining term 2.63 years 1.63 years Expected volatility 77% 62% Dividend yield 0% 0% Warrants outstanding May 2011 financing 2,256,929 2,256,929
Risk-Free Interest Rate. This is the United States Treasury rate for the measurement date having a term equal to the expected remaining term of the warrant. An increase in the risk-free interest rate will increase the fair value and the associated derivative liability.
Expected Remaining Term. This is the remaining contractual life of the warrant.
Expected Volatility. This is a measure of the amount by which the stock price has fluctuated or is expected to fluctuate. Since the Company's stock has been traded for the expected remaining term of the warrants, the Company uses its own historic volatility over the retrospective period corresponding to the expected remaining term of the warrants on the measurement date. An increase in the expected volatility will increase the fair value and the associated derivative liability.
Dividend Yield. The Company has not made any dividend payments nor does it have plans to pay dividends in the foreseeable future. An increase in the dividend yield will decrease the fair value and the associated derivative liability.
F-13
Notes to Consolidated Financial Statements — (Continued)
(In thousands, except share and per share amounts)
Year Ended September 30, 2013 2014 Common shares issuable upon conversion of Series B
Preferred Stock 1,950,000 1,950,000 Common shares underlying warrants issued for common stock 5,006,398 5,006,398 Stock options 1,920,051 2,643,523 Restricted stock units 31,296 —
Year Ended September 30, | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 | 2011 | 2012 | |||||||||||||
Common shares issuable upon conversion of Series A Preferred Stock | — | 453,486 | 453,486 | ||||||||||||
Common shares issuable upon conversion of Series B Preferred Stock | — | — | 3,605,607 | ||||||||||||
Common shares underlying warrants issued for common stock | 629,254 | 2,875,647 | 5,006,398 | ||||||||||||
Stock options | 1,158,891 | 1,365,350 | 1,546,454 | ||||||||||||
Restricted stock units | 62,264 | 121,677 | 68,153 |
September 30, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2011 | 2012 | ||||||||||
Furniture and fixtures | $ | 324 | $ | 324 | |||||||
Leasehold improvements | 1,548 | 1,548 | |||||||||
Construction-in-progress | 38 | 0 | |||||||||
Laboratory equipment | 1,886 | 1,945 | |||||||||
Manufacturing equipment | 655 | 655 | |||||||||
Facility equipment | 65 | 65 | |||||||||
Computer equipment and other | 1,308 | 1,308 | |||||||||
Sub-Total | 5,824 | 5,845 | |||||||||
Less: Accumulated depreciation and amortization | 3,571 | 4,293 | |||||||||
Total | $ | 2,253 | $ | 1,552 |
September 30, | ||||||||||||||
2013 | 2014 | |||||||||||||
Furniture and fixtures | $ | 324 | $ | 324 | ||||||||||
Leasehold improvements | 1,548 | 1,548 | ||||||||||||
Laboratory equipment | 2,062 | 2,112 | ||||||||||||
Manufacturing equipment | 655 | 655 | ||||||||||||
Facility equipment | 65 | 65 | ||||||||||||
Computer equipment and other | 1,308 | 1,308 | ||||||||||||
Sub-Total | 5,962 | 6,012 | ||||||||||||
Less: Accumulated depreciation and amortization | 4,931 | 5,531 | ||||||||||||
Total | $ | 1,031 | $ | 481 |
Depreciation expense for the years ended September 30, 2010, 20112013, and 20122014 was $989, $935$638, and $722,$599, respectively.
F-14
Notes to Consolidated Financial Statements — (Continued)
(In thousands, except share and per share amounts)
Souza signed an employment agreement, dated March 26, 2010, setting forth the terms of his employment. The agreement providesprovided for an initial term of employment for the period from March 29, 2010 to March 28, 2014 and it continues for successive one-year terms unless the agreement is terminated by either party on 120 days prior written notice in accordance with the terms of the agreement. The agreement provides for an annual salary of $450 and eligibility for a target bonus of 50% of the annual salary. In addition, Dr. De Souza was granted options to purchase 175,000 Sharesshares of the Company’sCompany's common stock pursuant to the Company’sCompany's 2010 Plan. These options vest over a four-year period, with 25% vesting on the first anniversarywere fully vested as of the grant date and the rest vesting in equal monthly amounts over the next three years.
•two times his then current salary, plus two times his target annual bonus for the fiscal year in which he is terminated, plus the pro rata amount of his target annual bonus for the fiscal year in which he is terminated;
•COBRA benefits until the earlier of the end of the 24th month after the date his employment with the Company ends or the date his COBRA coverage expires;
•24 months of acceleration of his outstanding equity compensation awards; and
•full vesting of his outstanding equity compensation awards, if the Company terminates his employment without cause, or he resigns within 12 months following a change in control, as defined in the agreement.
Lease expense for the years ended September 2010, 2011,30, 2013, and 20122014 was $624, $633,$646, and $636,$627, respectively.
F-15
Years Ending September 30, | ||||||
---|---|---|---|---|---|---|
2013 | $ | 594 | ||||
2014 | 463 | |||||
2015 | — | |||||
Total | $ | 1,057 |
Notes to Consolidated Financial Statements — (Continued)
(In thousands, except share and per share amounts)
Years Ending September 30, 2015 683 2016 598 2017 558 2018 564 2019 480 Total $ 2,883
The Company has entered into a commercial supply agreement for the supply of glucagon with Bachem Americas, a supplier of glucagon. The Company is obligated to purchase certain quantities of glucagon pursuant to a rolling forecast submitted by the Company under this agreement. At this time, the Company is obligated to purchase $392 of glucagon in fiscal year 2015. There is no obligation after 2015.
Customization and Commercial Supply Agreement with Unilife Medical Solutions, Inc.
The Company has entered into a customization and commercial supply agreement with Unilife Medical Solutions, Inc. ("Unilife"), a wholly owned subsidiary of Unilife Corporation, a company which designs, develops and manufactures advanced drug delivery devices. The agreement obligates Unilife to develop and supply dual-chamber reconstitution devices to be used with the Company's glucagon rescue product candidate. The Company is obligated to make payments to Unilife on the achievement of certain development milestones, including a payment of $750 upon the delivery of registration batches for the Company's glucagon rescue product candidate. The Company anticipates the milestone to be met in fiscal year 2015.
Manufacturing Agreement with Cangene bioPharma
The Company has entered into manufacturing agreement with Cangene bioPharma Inc., doing business as Emergent BioSolutions, or Emergent, under which Emergent will fill and finish the GEM device, using lyophilized glucagon and an aqueous diluent. During the term of the agreement following validation of the manufacturing process, the Company is required to purchase, and Emergent is obligated to deliver to the Company, one manufactured lot of the GEM device every quarter of 2014. These commitments commencebeginning in the third calendar quarter of 2014fiscal year 2017. The Company expects to reserve and extend throughcommit to additional manufacturing capacity with Emergent following the second calendar quartercommercial launch of 2018 for a total purchase commitment of approximately 160 kilograms of RHI. Both parties have the right toour GEM product candidate, if successful. Either party may terminate the agreement without cause upon thirty-six months prior written notice.
Agreement with six months notice, with the Company having the option to purchase significant additional quantities if the supplier terminates the agreement prior toAegis Therapeutics
In June 30, 2018. As of September 30, 2012, the Company had purchase commitmentsentered into an agreement with Aegis Therapeutics, LLC, or Aegis, to acquire an exclusive, sublicensable, worldwide license to the protein stabilization technology that it is using in the development of approximately $18,020 associated withliquid glucagon formulations. Under the signingterms of the renewed contract with N.V. Organon.agreement, Aegis will prepare, file, prosecute and maintain patents and patent applications that are specific to the Company's liquid glucagon formulations in jurisdictions that the Company may designate from time to time. In October 2014, the Company amended this agreement to require the Company to pay Aegis $25 quarterly, beginning June 2015, subject to certain terms and conditions. The Company did not make any payments to Aegis during fiscal year 2014.
Years Ending September 30, | ||||||
---|---|---|---|---|---|---|
2013 | $ | — | ||||
2014 | 1,078 | |||||
2015 | �� | 4,367 | ||||
2016 | 4,488 | |||||
2017 | 4,577 | |||||
2018 | 3,510 | |||||
Total | $ | 18,020 |
The Company has entered into certain licensing and collaboration agreements for products currently under development. The Company may be obligated in future periods to make additional payments, which
F-16
Notes to Consolidated Financial Statements — (Continued)
(In thousands, except share and per share amounts)
would become due and payable only upon the achievement of certain research and development, regulatory, and approval milestones. The specific timing of such milestones cannot be predicted and depend upon future discretionary research and clinical developments, as well as, regulatory agency actions. Further, under the terms of certain agreements the Company may be obligated to pay commercial milestones contingent upon the realization of sales revenues and sublicense revenues. Due to the long range nature of such commercial milestones, they are neither probable at this time nor predictable, and consequently are not considered contingent milestone payment amounts.
The following table represents the Company's long term commitments:
Years Ending September 30, 2015(1) 1,219 2016 127 2017 630 2018 1,685 2019 3,271 Total $ 6,932
(1) Includes a $750 milestone payment
Year Ended September 30, | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 | 2011 | 2012 | |||||||||||||
Current expense | |||||||||||||||
Federal | $ | — | $ | — | $ | — | |||||||||
State | (104 | ) | 41 | 18 | |||||||||||
Actual tax provision (benefit) | $ | (104 | ) | $ | 41 | $ | 18 |
Year Ended September 30, | ||||||||||||||||||||
2013 | 2014 | |||||||||||||||||||
Current expense | ||||||||||||||||||||
Federal | $ | — | $ | — | ||||||||||||||||
State | 15 | 26 | ||||||||||||||||||
Tax provision | $ | 15 | $ | 26 |
The following reconciles the amount of tax expense at the federal statutory rate to the tax provision (benefit) in operations:
Year Ended September 30, 2013 2014 Federal statutory rate 34.00 % 34.00 % Federal taxes at statutory rate $ (6,569 ) $ (4,796 ) Tax expense on permanent differences (a) 163 (1,475 ) State taxes, net of federal tax effect 10 17 Valuation allowance increase (b) 6,439 6,316 Other (28 ) (36 ) Actual tax provision $ 15 $ 26
____________
(a) Permanent differences were derived from share based compensation and adjustments to common stock warrant liability.
(b) Net of the Section 382 Adjustment.
F-17
Year Ended September 30, | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 | 2011 | 2012 | |||||||||||||
Federal statutory rate | 34.00 | % | 34.00 | % | 34.00 | % | |||||||||
Federal taxes at statutory rate | $ | (13,054 | ) | $ | (3,587 | ) | $ | (7,028 | ) | ||||||
Tax expense on permanent differences (a) | 2,296 | (2,631 | ) | 1,137 | |||||||||||
Tax benefit on research and business credits | (425 | ) | — | — | |||||||||||
State taxes, net of federal tax effect | 23 | 19 | 12 | ||||||||||||
State benefit, net operating loss | (2,990 | ) | (163 | ) | (312 | ) | |||||||||
Valuation allowance increase (b) | 14,156 | 6,382 | 6,164 | ||||||||||||
Connecticut research and development refund | (30 | ) | — | — | |||||||||||
Reserve for uncertain tax positions | 4 | — | — | ||||||||||||
Other | (84 | ) | 21 | 45 | |||||||||||
Actual tax provision (benefit) | $ | (104 | ) | $ | 41 | $ | 18 |
Notes to Consolidated Financial Statements — (Continued)
(In thousands, except share and per share amounts)
Year Ended September 30, | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 | 2011 | 2012 | |||||||||||||
Balance, beginning of year | $ | 188 | $ | 86 | $ | 75 | |||||||||
Increase related to current year tax position | 5 | — | — | ||||||||||||
Increase related to prior year’s tax position | — | — | — | ||||||||||||
Decrease related to prior year’s tax position | (107 | ) | (11 | ) | — | ||||||||||
Balance, at end of year | $ | 86 | $ | 75 | $ | 75 |
Year Ended September 30, | ||||||||||||||||||||
2013 | 2014 | |||||||||||||||||||
Balance, beginning of year | $ | 75 | $ | 75 | ||||||||||||||||
Decrease related to prior year's tax position | — | (75 | ) | |||||||||||||||||
Balance, at end of year | $ | 75 | $ | — |
The Company files U.S. federal and state tax returns and has determined that its major tax jurisdictions are the United States and Connecticut. The tax years through 20112014 remain open due to net operating loss and are subject to examination by the appropriate governmental agencies in the United States and Connecticut carry-forwards.
September 30, 2013 2014 Deferred Tax Assets Net operating losses $ 25,149 $ 30,706 Capitalized expense 28,913 30,762 Research and development credits 224 230 Depreciation of fixed assets 445 467 Other 283 196 Total deferred tax asset 55,014 62,361 Valuation Allowance (55,014 ) (62,361 ) Net Deferred Tax Assets $ — $ —
F-18
Notes to Consolidated Financial Statements — (Continued)
(In thousands, except share and per share amounts)
September 30, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2011 | 2012 | ||||||||||
Deferred Tax Assets | |||||||||||
Net operating losses | $ | 23,699 | $ | 24,969 | |||||||
Capitalized expense | 16,936 | 21,907 | |||||||||
Research and development credits | 477 | 477 | |||||||||
Depreciation of fixed assets | 303 | 51 | |||||||||
Other | 765 | 453 | |||||||||
Total deferred tax asset | 42,180 | 47,857 | |||||||||
Valuation Allowance | (42,180 | ) | (47,857 | ) | |||||||
Net Deferred Tax Assets | $ | — | $ | — |
The Company's authorized common stock consists of 62,500,000 shares of a single class of common stock, having a par value of $0.01 per share. The holders of the common stock are entitled to one vote for each share and have no cumulative voting rights or preemptive rights.
The Company is authorized to issue up to 50,000,000 shares of preferred stock, having a par value of $0.01 per share. The Company's preferred stock may be realizedissued in one or more series, the terms of which may be determined at the time of issuance by the Company's Board of Directors, without further action by stockholders, and may include voting rights (including the right to vote as a series on particular matters), preferences as to dividends and liquidation and conversion, redemption rights and sinking fund provisions. The issuance of preferred stock could reduce the rights, including voting rights, of the holders of common stock and, therefore, has recordedcould reduce the value of the common stock. In particular, specific rights granted to holders of preferred stock could be used to restrict the Company's ability to merge with or sell the Company's assets to a valuation allowance against its deferred tax assets.third party, thereby preserving control of the Company by existing management.
On July 25, 2014, the Company entered into a purchase agreement (the "Purchase Agreement"), together with a registration rights agreement (the "Registration Rights Agreement") with Lincoln Park Capital Fund, LLC ("LPC"). Under the terms, and subject to the conditions of the Purchase Agreement, the Company has the right to sell to LPC, and LPC is obligated to purchase, up to $15 million in shares of common stock, subject to certain limitations, from time to time over the 36-month period commencing on the date that a registration statement, which the Company agreed to file with the SEC pursuant to the Registration Rights Agreement, is declared effective by the SEC and a final prospectus in connection therewith is filed. The Company's registration statement was declared effective on September 2, 2014. The Company was obligated, within twenty (20) calendar days, to file with the SEC an initial Registration Statement covering the maximum number of Registrable Securities as shall be permitted to be included thereon in accordance with applicable SEC rules, regulations and interpretations so as to permit the resale of such Registrable Securities by the Investor under Rule 415 under the Securities Act at then prevailing market prices (and not fixed prices), as mutually determined by both the Company and LPC in consultation with their respective legal counsel, subject to the aggregate number of authorized shares of the Company's Common Stock then available for issuance in its Certificate of Incorporation. The Company shall use its commercially reasonable efforts to keep the Registration Statement effective pursuant to Rule 415 promulgated under the Securities Act and available for the resale by the Investor of all of the Registrable Securities covered thereby at all times until the date on which LPC shall have resold all the Registrable Securities covered thereby and no Available Amount remains under the Purchase Agreement. The Company may direct LPC, at its sole discretion and subject to certain conditions, to purchase up to 150,000 shares of common stock in any business day, increasing to amounts of up to 250,000 shares, depending upon the closing sale price of the common stock. In addition, the Company may direct LPC to purchase additional shares as accelerated purchases if, on the date of a regular purchase, the closing sale price of the common stock is not below $2.50 per share (subject to adjustment). The purchase price of shares of common stock to be purchased under the Purchase Agreement are based on the prevailing market prices of such shares at the time of sales, but in no event will the Company be able to sell shares to
F-19
Notes to Consolidated Financial Statements — (Continued)
(In thousands, except share and per share amounts)
LPC on a day when the closing sale price of the common stock is less than a floor price of $1.50 per share (subject to adjustment). The Company will control the timing and amount of any sales of common stock to LPC under the Purchase Agreement. As consideration for LPC's commitment to purchase shares of common stock pursuant to the Purchase Agreement, the Company issued to LPC 95,000 shares of Common Stock as commitment shares, with a fair market value of $189, which is recorded as the cost of capital in additional paid in capital. As of September 30, 2014, the Company sold 300,000 shares of common stock pursuant to the Purchase Agreement, and received proceeds, net of expenses, of $490. During the period from October 1, 2014 through the date of this filing, the Company sold an aggregate of 300,000 shares of common stock pursuant to the Purchase Agreement, and received proceeds, net of expenses, of $468.
May 2013 At-the-Market Issuance Sales Agreement
In May 2013, the Company entered into an At-the-Market Issuance Sales Agreement (the "Sales Agreement") with MLV & Co. LLC ("MLV"), under which the Company may initially issue and sell shares of common stock having aggregate sales proceeds of up to $14 million from time to time through MLV as the Company's sales agent. For the year ended September 30, 2014, the Company sold an aggregate of 1,564,821 shares of common stock pursuant to the Sales Agreement and received proceeds, net of sales agent commissions and expenses, of $3.0 million. During the period from October 1, 2014 through the date of this filing, the Company sold an aggregate of 66,057 shares of common stock pursuant to the Sales Agreement, and received proceeds, net of expenses, of $100.
June 2013 Public Offering
On June 24, 2013, the Company completed an underwritten public offering of 4,482,760 shares of its common stock at a price to the public of $4.35 per share. On July 22, 2013, the Company issued 236,007 additional shares of common stock, at the public offering price of $4.35 per share, in connection with the underwriters' exercise of a portion of their over-allotment option. The Company received net proceeds from this offering, after deducting underwriting discounts, commissions and expenses, of $19.2 million.
June 2012 Private Placement
F-20
Notes to Consolidated Financial Statements — (Continued)
(In thousands, except share and per share amounts)
pay, dividends on shares of the Series B preferred stock equal (on an as-if-converted-to-common-stock basis) to and in the same form as dividends (other than dividends in the form of common stock) actually paid on shares of the common stock when, as and if such dividends (other than dividends in the form of common stock) are paid on shares of the common stock.
In the event that the Company enters into a merger or change of control transaction, the holders of the warrants issued in the 2012 Private Placement will be entitled to receive consideration as if they had exercised the warrants immediately prior to such transaction, or they may require the Company to purchase the unexercised warrants at the Black-Scholes value (as defined in the warrant) of the warrant on the date of such transaction. The holders have up to 30 days following any such transaction to exercise this right. As a result of this provision, the Company recognizes the warrants as liabilities at their fair value on each reporting date.
F-21
Notes to Consolidated Financial Statements — (Continued)
(In thousands, except share and per share amounts)
share of Series A preferred stock before any proceeds are distributed to the holders of the Company’sCompany's common stock. After the payment of this preferential amount, and subject to the rights of holders of any class or series of capital stock specifically ranking by its terms senior to the Series A preferred stock, holders of Series A preferred stock and holders of the Company's Series B preferred stock will participate ratably in the distribution of any remaining assets with the Company’sCompany's common stock and any other class or series of capital stock that participates with the common stock in such distributions. Shares of Series A preferred stock will generally have no voting rights, except as required by law and except that the consent of the holders of a majority of the outstanding Series A preferred stock will be required to amend the terms of the Series A preferred stock. The Series A preferred stock will not be entitled to receive any dividends, unless and until specifically declared by the Company’sCompany's board of directors.
In the event that the Company enters into a merger or change of control transaction, the holders of the warrants issued in the May 2011 financing will be entitled to receive consideration as if they had exercised the warrant immediately prior to such transaction, or they may require the Company to purchase the unexercised warrants at the Black-Scholes value (as defined in the warrant) of the warrant on the date of such transaction. As per the terms of the warrants, the holders have up to 30 days following any such transaction to exercise this right. As a result of this provision, the Company recognizes the warrants as liabilities at their fair value on each reporting date.
September 30, 2011 | September 30, 2012 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
May 2011 Financing | ||||||||||
Stock price | $ | 2.16 | $ | 2.97 | ||||||
Exercise price | $ | 9.92 | $ | 9.92 | ||||||
Risk-free interest rate | 0.96 | % | 0.31 | % | ||||||
Expected remaining term | 4.63 | years | 3.63 | years | ||||||
Expected volatility | 75 | % | 82 | % | ||||||
Dividend yield | 0 | % | 0 | % | ||||||
Warrants outstanding May 2011 registered direct | 2,256,929 | 2,256,929 |
F-22
Notes to Consolidated Financial Statements — (Continued)
(In thousands, except share and per share amounts)
shares of common stock subject to outstanding awards. The contractual life of options granted under the 2010 Plan may not exceed seven years. The 2010 Plan uses a “fungible share”"fungible share" concept under which any awards that are not a full-value award will be counted against the share limit as one (1) share for each share of common stock and any award that is a full-value award will be counted against the share limit as 1.61.5 shares for each one share of common stock. The Company has not made any new awards under any prior equity plans after March 2, 2010 — the effective date the 2010 Plan was approved by the Company’sCompany's stockholders. The 2010 Plan replaces the 2004 Stock Incentive Plan and 2005 Non-Employee Directors Stock Option Plan.
F-23
Options | Number | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life in Years | Aggregate Intrinsic Value | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance, September 30, 2004 | — | $ | — | $ | — | |||||||||||||
Granted | 96,358 | 5.64 | — | |||||||||||||||
Outstanding balance, September 30, 2005 | 96,358 | 5.64 | — | |||||||||||||||
Granted | 115,401 | 22.60 | — | |||||||||||||||
Forfeited, expired | 15,054 | 13.60 | — | |||||||||||||||
Outstanding balance, September 30, 2006 | 196,705 | 12.92 | — | |||||||||||||||
Granted | 238,961 | 55.84 | — | |||||||||||||||
Exercised | 886 | 5.64 | — | |||||||||||||||
Forfeited, expired | 13,283 | 22.60 | — | |||||||||||||||
Outstanding balance, September 30, 2007 | 421,497 | 27.20 | — | |||||||||||||||
Granted | 431,849 | 67.52 | — | |||||||||||||||
Exercised | 43,604 | 20.72 | — | |||||||||||||||
Forfeited, expired | 25,892 | 44.16 | — | |||||||||||||||
Outstanding balance, September 30, 2008 | 783,850 | 55.68 | — | |||||||||||||||
Granted | 152,875 | 10.76 | — | |||||||||||||||
Exercised | 4,416 | 5.64 | — | |||||||||||||||
Forfeited, expired | 80,398 | 55.52 | — |
Notes to Consolidated Financial Statements — (Continued)
(In thousands, except share and per share amounts)
Options Number Weighted
Average
Exercise Price Weighted
Average
Remaining
Contractual
Life in Years Aggregate
Intrinsic Value Outstanding balance September 30, 2012 1,546,454 $ 27.80 — Granted 486,000 2.43 — Exercised (30,250 ) 2.48 — Forfeited, expired (82,153 ) 15.37 — Outstanding balance September 30, 2013 1,920,051 $ 22.31 4 $ 445 Granted 1,427,000 2.35 6 — Exercised (19,241 ) 2.48 5 10 Forfeited, expired (684,287 ) 16.48 — Outstanding balance September 30, 2014 2,643,523 $ 13.15 5 — Exercisable shares, September 30, 2014 1,217,854 $ 25.81 3 —
Options | Number | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life in Years | Aggregate Intrinsic Value | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Outstanding balance, September 30, 2009 | 851,911 | 47.24 | — | |||||||||||||||
Granted | 328,530 | 16.37 | — | |||||||||||||||
Exercised | 8,081 | 8.43 | — | |||||||||||||||
Forfeited, expired | 13,469 | 52.16 | — | |||||||||||||||
Outstanding balance, September 30, 2010 | 1,158,891 | 38.72 | — | |||||||||||||||
Granted | 290,834 | 6.36 | — | |||||||||||||||
Exercised | 104 | 5.64 | — | |||||||||||||||
Forfeited, expired | 84,271 | 38.48 | — | |||||||||||||||
Outstanding balance, September 30, 2011 | 1,365,350 | 32.68 | — | |||||||||||||||
Granted | 215,877 | 2.54 | — | |||||||||||||||
Forfeited, expired | 34,773 | 32.09 | — | |||||||||||||||
Outstanding balance September 30, 2012 | 1,546,454 | $ | 27.80 | 4 | $ | — | ||||||||||||
Exercisable shares, September 30, 2012 | 1,197,230 | $ | 33.39 | 3 | $ | — |
September 30, | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 | 2011 | 2012 | |||||||||||||
Stock compensation expense — RSUs | $ | 205 | $ | 585 | $ | 1,202 |
September 30, | |||||||||||||||||||||||
2013 | 2014 | ||||||||||||||||||||||
Stock compensation expense — RSUs | $ | 363 | $ | 54 |
At September 30, 2012, there was $4182014, all of total unrecognized stock-based compensation expense related tothe RSU awards granted under the 2004 Stock Incentive Planhad vested and the 2010 Plan. This expense is expected to be recognized over the remaining vesting periods up to four years.
Shares | Weighted Average Grant-Date Fair Value |
F-24
Notes to Consolidated Financial Statements — (Continued)
(In thousands, except share and per share amounts)
Non-vested and outstanding balance at September 30, 2012 68,153 $ 10.51 Changes during the period: Shares granted — — Shares vested and issued (36,851 ) 10.26 Shares forfeited or expired (6 ) 15.80 Non-vested and outstanding balance at September 30, 2013 31,296 10.48 Changes during the period: Shares granted — — Shares vested and issued 31,296 10.48 Non-vested and outstanding balance at September 30, 2014 — —
As of September 30, 2014, the Company reserved shares of common stock for future issuance as follows:
2010 stock incentive plan | 5,240,202 | |||||||
2005 employee stock purchase plan | 500,000 | |||||||
Common stock issuable upon conversion of Series B Preferred Stock | 1,950,000 | |||||||
Warrants issued in connection with May 2011 registered direct offering | 2,256,929 | |||||||
Warrants issued in connection with June 2012 private placement | 2,749,469 | |||||||
Total | 12,696,600 |
Shares | Weighted Average Grant-Date Fair Value | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Non-vested and outstanding balance at September 30, 2009 | — | $ | — | |||||||
Shares granted | 62,510 | 15.80 | ||||||||
Shares forfeited or expired | 246 | 15.80 | ||||||||
Non-vested and outstanding balance at September 30, 2010 | 62,264 | 15.80 | ||||||||
Changes during the period: | ||||||||||
Shares granted | 90,639 | 7.56 | ||||||||
Shares vested and issued | 22,435 | 17.20 | ||||||||
Shares forfeited or expired | 8,791 | 9.40 | ||||||||
Non-vested and outstanding balance at September 30, 2011 | 121,677 | 9.40 | ||||||||
Changes during the period: | ||||||||||
Shares granted | 274,189 | 2.36 | ||||||||
Shares vested and issued | 327,713 | 3.45 | ||||||||
Non-vested and outstanding balance at September 30, 2012 | 68,153 | $ | 10.51 |
December 31, 2011 | March 31, 2012 | June 30, 2012 | September 30, 2012 | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenue | $ | — | $ | — | $ | — | $ | — | ||||||||||
Net loss | $ | (4,501 | ) | $ | (4,316 | ) | $ | (6,051 | ) | $ | (5,879 | ) | ||||||
Basic and diluted net loss per common share(1) | $ | (0.47 | ) | $ | (0.45 | ) | $ | (0.60 | ) | $ | (0.42 | ) | ||||||
Weighted average common shares basic and diluted | 9,673,529 | 9,688,384 | 10,152,194 | 13,982,826 |
December 31, 2010 | March 31, 2011 | June 30, 2011 | September 30, 2011 | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenue | $ | — | $ | — | $ | — | $ | — | ||||||||||
Net (loss) income | $ | (5,309 | ) | $ | (5,442 | ) | $ | (3,974 | ) | $ | 4,133 | |||||||
Basic net (loss) income per common share | $ | (0.80 | ) | $ | (0.82 | ) | $ | (0.48 | ) | $ | 0.43 | |||||||
Diluted net (loss) income per common share(1) | $ | (0.80 | ) | $ | (0.82 | ) | $ | (0.48 | ) | $ | 0.41 | |||||||
Weighted average common shares basic | 6,604,726 | 6,617,422 | 8,254,413 | 9,657,795 | ||||||||||||||
Weighted average common shares diluted | 6,604,726 | 6,617,422 | 8,254,413 | 10,111,336 |
See Note 9 for additional subsequent events for the fund raising relating to 62,500,000 shares.the July 2014 Purchase Agreement and May 2013 At-The Market Issuance Sales Agreement.
F-25