| aggregate dollar amount of shares we are offering. Each increase (decrease) of $1.0 million of shares offered by us would increase (decrease) the as adjusted amount of cash and cash equivalents, working capital, total assets and total shareholders’ equity by approximately $0.9 million, assuming that the assumed public offering price remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma information discussed above is illustrative only and will be adjusted based on the actual public offering price and other terms of this offering determined between us and the underwriters at pricing. |
The number of shares of our common stock to be outstanding after this offering is based on 17,757,167 shares of common stock outstanding as of January 31, 2018 and includes all necessary adjustments related to the Merger and excludes:
406,13573,202,299 shares of common stock issuable upon the exercise of stock options outstanding as of January 31, 2018 at a weighted-average exercise price of $30.95 per share;
the Warrants.We are registering the shares of common stock issuable uponin order to permit the exercise of common stock warrants outstanding as of January 31, 2018 at a weighted average exercise price of $8.62 per share;
118,825Selling Securityholders to offer the shares of common stock available for future issuance under our 2014 Employee Stock Purchase Plan asresale from time to time. The registration of January 31, 2018;
458,586such common stock does not necessarily mean, however, that any of the shares of common stock availablewill be offered or sold by the Selling Securityholders. We will not receive any proceeds from the sale of the common stock by the Selling Securityholders, and we have borne and will continue to bear the costs relating to the registration of these shares of common stock, other than commissions and discounts of agents or broker-dealers and transfer taxes, if any.
The Warrants held by the Selling Securityholders contain limitations which prevent the holder from exercising those Warrants if such exercise would cause the Selling Securityholders, together with certain related parties, to beneficially own a number of shares of common stock which would exceed 4.99% of our then outstanding common stock following such exercise, excluding for future issuance under our 2014 Equity Incentive Plan, or the 2014 Plan, aspurposes of January 31, 2018; and
825,309 sharessuch determination, common stock issuable upon exercise of the underwriters’ option.
Warrants which have not been exercised.On March 9, 2018, our board
The table below sets forth, as of directors approved, subject to stockholder approval, and recommended our stockholders approve at our annual meeting to be held on May 8, 2018,September 20, 2022, the amendment and restatement of our 2014 Plan, orfollowing information regarding the Amended and Restated 2014 Plan, which, among other things, increases Selling Securityholders:
•the number of authorized shares under the 2014 Plan from 749,305 to an aggregate of 5,300,000 shares. In March 2018, options to purchase up to an aggregate of 3,136,030 shares of our common stock were approved for grant, by our board of directors, subject to stockholder approval, to certain of our directors, officers, employees and consultants providing services to us. The number of shares outstanding after this offering does not include any additional shares to be reserved pursuant to our Amended and Restated 2014 Plan.
DILUTION
If you invest in our common stock in this offering, your ownership interest will be diluted immediately to the extentname of the difference between the public offering price per share of our common stock and the as adjusted net tangible book value per share of our common stock after this offering.
Our historical net tangible book deficit as of January 31, 2018 was ($8.8) million, or ($0.50) per share of our common stock. Historical net tangible book deficit per share represents the amount of our total tangible assets less total liabilities, divided by Selling Securityholders;
•the number of shares of our common stock outstanding as of January 31, 2018.After giving effectowned by the Selling Securityholders prior to the issuance and sale of $40,000,000 of shares of our common stock in this offering, at an assumed public offering price of $7.27 per share, the last reported sale price of our common stock on The Nasdaq Capital Market on April 23, 2018, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, our as adjusted net tangible book value as of January 31, 2018 would have been $27.9 million, or $1.20 per share. This represents an immediate increase in net tangible book value per share of $1.70without regard to existing stockholders and immediate dilution of $6.07 per share to new investors purchasing common stock in this offering. Dilution per share to new investors is determined by subtracting as adjusted net tangible book value per share after this offering from the public offering price per share paid by new investors. The following table illustrates this dilution on a per share basis:
| | | | | | | | |
Assumed public offering price per share | | | | | | $ | 7.27 | |
Historical net tangible book deficit, post-Merger per share | | $ | (0.50 | ) | | | | |
Increase in net tangible book value per share attributable to new investors | | $ | 1.70 | | | | | |
As adjusted net tangible book value per share after this offering | | | | | | $ | 1.20 | |
| | | | | | | | |
Dilution per share to new investors | | | | | | $ | 6.07 | |
| | | | | | | | |
Each $1.0 increase (decrease)any beneficial ownership limitations contained in the assumed public offering price of $7.27 per share, the last reported sale price of our common stock on The Nasdaq Capital Market on April 23, 2018, would (decrease) increase Warrants;
•the number of shares of common stock to be issuedoffered by usthe Selling Securityholders in this offering by 665,304 and 877,522, respectively, assuming the aggregate dollar amount of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us, and result in an increase (decrease) of dilution per share to new investors purchasing shares in this offering of $0.03 and $0.05, respectively. We may also increase or decrease the aggregate dollar amount of shares we are offering. Each increase (decrease) of $1.0 million in offering;
•the number of shares offeredof common stock to be owned by us would increase (decrease)the Selling Securityholders assuming the sale of all of the shares of common stock covered by this prospectus; and
•the percentage of our pro forma as adjusted net tangible book value per shareissued and outstanding shares of common stock to be owned by $0.9 million, which would result in an increase (decrease)the Selling Securityholders assuming the sale of dilution per share to new investors purchasing shares inall of the common stock covered by this offering of $0.03 and $0.04, respectively, assuming that the assumed public offering price remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. The information discussed above is illustrative only and will be adjustedprospectus based on the actual public offering price and other terms of this offering as determined between us and the underwriters at pricing.If the underwriters exercise their option to purchase additional shares in full, the as adjusted net tangible book value per share after this offering would be $1.39 per share, the increase in net tangible book value per share to existing stockholders would be $1.89 per share and the dilution to new investors purchasing shares in this offering would be $5.88 per share.
The number of shares of common stock issued and outstanding as of September 20, 2022.
Except as described above, the number of shares of common stock beneficially owned by the Selling Securityholders have been determined in accordance with Rule 13d-3 under the Exchange Act and includes, for such purpose, shares of common stock that the Selling Securityholders have the right to acquire within 60 days after September 20, 2022.
Because the Selling Securityholders identified in the table may sell some or all of the shares of common stock beneficially owned and covered by this prospectus, and because there are currently no agreements, arrangements or understandings with respect to the sale of any of the shares of common stock, no estimate can be given as to the number of shares of common stock available for resale hereby that will be held by the Selling Securityholders upon termination of this offering. In addition, the Selling Securityholders may have sold, transferred or otherwise disposed of, or may sell, transfer or otherwise dispose of, at any time and from time to time, the shares of common stock they beneficially own in transactions exempt from the registration requirements of the Securities Act after the date on which they provided the information set forth in the table below. We have, therefore, assumed for the purposes of the following table, that the Selling Securityholders will sell all of the shares of common stock owned beneficially that are covered by this prospectus, but will not sell any other shares of common stock that they presently own. The Selling Securityholders have not held any position or office, or otherwise had a material relationship, with us or any of our subsidiaries within the past three years other than as a result of the ownership of our common stock to be outstanding after this offeringor other securities.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name of Selling Securityholder | | Shares of Common Stock Beneficially Owned prior to the Offering | | Maximum Number of Shares of Common Stock to be Sold Pursuant to this Prospectus | | Shares of Common Stock Beneficially Owned after Offering | | Percentage of Shares Beneficially Owned after Offering(1) |
| Baker Bros. Advisors LP | | 75,785,915 | | 73,202,299 (2) | | 2,583,616 (3) | | 1.55 | % |
(1) Percentage is based on
17,757,16793,508,419 shares of common stock outstanding as of
January 31, 2018 and includesSeptember 20, 2022, assuming the resale of all
necessary adjustments related toof the
Merger and excludes:406,135 shares of common stock issuable uponcovered by this prospectus and giving effect to the exercise4.99% beneficial ownership blockers in the Warrants.
(2) Consists of stock options outstanding as of January 31, 2018 at a weighted-average exercise price of $30.95 per share;
2,011,87567,052,142 shares of common stock issuable upon the exercise of common stock warrants outstanding as of January 31, 2018 at a weighted average exercise price of $8.62 per share;
118,825underlying Warrants held by Baker Brothers Life Sciences, L.P (BBLS) and 6,150,157 shares of common stock available for future issuance under our 2014 Employeeunderlying Warrants held by 667, L.P. (667; together with BBLS, the BBA Funds). Baker Bros. Advisors LP (“the Adviser”) is the investment adviser to the BBA Funds and has the sole voting and investment power with respect to the securities held by the BBA Funds and thus may be deemed to beneficially own such securities. Baker Bros. Advisors (GP) LLC (the “Adviser GP”) is the sole general partner of the Adviser and thus may be deemed to beneficially own the securities held by the BBA Funds. The managing members of the Adviser GP are Julian C. Baker and Felix J. Baker, who may be deemed to beneficially own the securities held by the BBA Funds. Julian C. Baker, Felix J. Baker, the Adviser and the Adviser GP disclaim beneficial ownership of all shares held by the Funds, except to the extent of their indirect pecuniary interest therein. The business address of the Adviser, the Adviser GP, Julian C. Baker and Felix J. Baker is 860 Washington Street, 3rd Floor, New York, NY 10014.
(3) Common stock holdings as per Form 13F filed with the SEC on August 15, 2022.
DESCRIPTION OF SECURITIES
Capital Stock Purchase Plan, as of January 31, 2018; and
458,586 shares of common stock available for future issuance under our 2014 Equity Incentive Plan, or the 2014 Plan, as of January 31, 2018.
On March 9, 2018, our board of directors approved, subject to stockholder approval, and recommended our stockholders approve at our annual meeting to be held on May 8, 2018, the amendment and restatementFor a description of our 2014 Plan, orcapital stock, please see the Amended and Restated 2014 Plan, which, among other things, increases the numberDescription of authorized shares under the 2014 Plan from 749,305Securities included as Exhibit 4.22 to an aggregate of 5,300,000 shares. In March 2018, options to purchase up to an aggregate of 3,136,030 shares of our common stock were approved for grant, by our board of directors, subject to stockholder approval, to certain of our directors, officers, employees and consultants providing services to us. The amounts of future grants under the Amended and Restated 2014 Plan are not currently determinable and will be granted at the sole discretion of our Compensation Committee, our board of directors or other delegated persons, and we cannot currently determine either the persons who will receive awards, which may include the persons referred to above, under the Amended and Restated 2014 Plan or the amount or types of any such awards. The number of shares outstanding after this offering does not include any additional shares to be reserved pursuant to our Amended and Restated 2014 Plan. To the extent any options or warrants are exercised, new options are issued under our equity incentive plans or we otherwise issue additional shares of common stock in the future at a price less than the public offering price, there may be further dilution to new investors purchasing common stock in this offering.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is that of Private Evofem and, therefore, is not consistent with the Management’s Discussion and Analysis appearing in our Annual Report on Form 10-K for the year ended December 31, 2017 as2021, filed with the SEC on February 26, 2018, andMarch 10, 2022, which is incorporated by reference into this prospectus.herein. See “Incorporation of Documents by Reference” and “Where You should read the following discussion and analysis of our financial condition and results of operations together with our audited consolidated financial statements as of December 31, 2017 and 2016 and related notes and our unaudited pro forma condensed combined financial statements appearing in our Current Report on Form 8-K/A as filed with the SEC on April 6, 2018 and is incorporated by reference into this prospectus. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. The actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth under “Risk Factors” beginning on page 11 of this prospectus. Unless otherwise defined in this section, the defined terms in this section have the meanings set forth in the audited consolidated financial statements and our unaudited pro forma condensed combined financial statements appearing in our Current Report on Form 8-K/A as filed with the SEC on April 6, 2018 and is incorporated by reference into this prospectus.
Overview
Can Find More Information.”
Common Stock
We are
a San Diego-based clinical-stage biopharmaceutical company committed to developing and commercializing innovative products to address unmet needs in women’s sexual and reproductive health. We are currently developing product candidatesregistering for
contraception, sexually transmitted infections, or STIs and bacterial vaginosis, or BV.Our lead product candidate, Amphora (L-lactic acid, citric acid, and potassium bitartrate) is currently being developed for three potential indications: as a contraceptive, for the prevention of urogenitalChlamydia trachomatis infection, or chlamydia, in women and for the prevention of urogenitalNeisseria gonorrhoeae infection, or gonorrhea, in women. Amphora is in a confirmatory Phase 3 clinical trial for contraception and in a Phase 2b/3 clinical trial for prevention of chlamydia.
Our confirmatory, Phase 3 clinical trial for Amphora as a contraceptive is an open-label, single-arm trial in 1,400 women in the United States. We expect to report top-line results from this trial in the first quarter of 2019 and, if positive, to resubmit the New Drug Application, or NDA, to the United States Food and Drug Administration, or the FDA, shortly thereafter. Subject to acceptance and timely approval of the NDA by the FDA, we plan to commercialize Amphora in early 2020.
We are also conducting a Phase 2b/3 clinical trial of Amphora for the prevention of certain STIs. The primary endpoint of this trial is prevention of chlamydia in women and the secondary endpoint is prevention of gonorrhea in women. We envision our STI program as developing label expansion opportunities to further differentiate Amphora from other contraceptive products in the market.
In addition, we are advancing a second MPT vaginal gel product candidate for the treatment of recurrent BV and plan to conduct a Phase 2b/3 clinical trial to evaluate the efficacy in recurrent BV. In a recently completed Phase 1 dose-finding trial for this product candidate, the highest dose formulation of our BV product candidate (5-gram) reduced vaginal pH for up to seven days following a single administration.
Since inception, we have devoted substantially all our efforts on developing product candidates leveraging our MPT vaginal gel technology, including conducting preclinical and clinical trials and providing general and administrative support for these operations. We do not have any approved products
and have not generated any revenue from product sales. Although our lead product candidate, Amphora, is in a later stage of clinical development, it has not yet been approved for use as a contraceptive or any other targeted indications. Additionally, Amphora and our BV product candidate are still in early stage clinical development for the prevention of certain STIs and for recurrent BV, respectively. We do not currently expect to generate any significant revenues prior to 2020. To finance our current strategic plans, including the conduct of ongoing and future clinical trials, further research and development and anticipated pre-commercialization activities in 2019, we will require significant additional capital. Assuming we have sufficient liquidity, we will incur significantly higher costs in the foreseeable future.
As previously discussed, on January 17, 2018, Private Evofem completed a reverse merger, or the Merger, with Neothetics, Inc., or Neothetics, and upon completion of the Merger, Neothetics changed its name to Evofem Biosciences, Inc. Since Private Evofem was determined to be the accounting acquirer, it recorded Neothetics’ assets and liabilities, as of the closing date, at fair value. In addition, as part of the closing entries, Private Evofem:
Recorded the issuance of 154,593,455 shares of Private Evofem’s common stock upon the cashless exercise of warrants, or the Invesco Warrants, issued to funds affiliated with Invesco Ltd., or Invesco, immediately prior to the closing of the Merger and recognized the fair value of the Invesco Warrants upon issuance.
Reclassified the net proceeds from Private Evofem’s issuance of an aggregate of 40,016,067 shares of Private Evofem’s convertible preferred stock to common stock and additional paid-in capital, net of par value, upon conversion to Private Evofem common stock immediately prior to the closing of the Merger.
Recorded the cancellation of 4,759,091 shares of Private Evofem’s unvested restricted common stock, which were cancelled upon closing of the Merger.
Recognized the exchange of 270,969,445 shares of Private Evofem common stock and 80 shares of Private Evofem Series D redeemable convertible preferred stock outstanding immediately prior to the closing of the Merger for 83,006,735 shares of Neothetics’ common stock in exchange for 87% ownership in Neothetics upon closing of the Merger.
Adjusted for the final change in fair value of Private Evofem’s Series D 2X liquidation preference;
Reclassified the Series D 2X liquidation preference upon the exchange of 80 shares of Private Evofem’s Series D redeemable convertible preferred stock to additional paid-in capital;
Recorded the fair value of the WIM Warrants and related capital contribution upon issuance of the WIM Warrants; and
Recorded cash dividends, in lieu of additional Series D liquidation preference between January 6, 2018 and the closing of the Merger, paid upon closing of the merger to WIM.
Recognized $20.0 million in proceeds from the sale of Evofem Biosciences, Inc., common stock to Invesco in a private placement completed immediately after the closing of the Merger, or the Private Placement.
Adjusted common stock and additional paid-in capital associated with shares issued in the Merger and Private Placement due to the 6:1 reverse stock split.
We have funded our operations primarily through sales of our common stock, convertible preferred stock, related-party advances and a related-party note payable from Cosmederm Biosciences, Inc., or Cosmederm.
Financial Operations Overview
Revenue
To date, we have not generated any revenue from our lead product candidate. We do not expect to generate any revenue from any product candidates we develop unless and until we obtain regulatory approval and commercialize our products or enter into collaborative agreements with third parties. In the future, if Amphora is approved for commercial sale in the United States, we may generate revenue from product sales. We do not expect to commercialize Amphora before 2020, if ever.
Operating Expenses
Research and development expenses
Our research and development expenses primarily consist of costs associated with the preclinical and clinical development of our product candidates. Our research and development expenses include:
external development expenses incurred under arrangements with third parties, such as fees paid to CROs relating to our clinical trials, costs of acquiring and evaluating clinical trial data such as investigator grants, patient screening fees, laboratory work and statistical compilation and analysis, and fees paid to consultants and our scientific advisory board;
costs to acquire, develop and manufacture clinical trial materials, including fees paid to contract manufacturers;
payments related to licensed products and technologies;
costs related to compliance with drug development regulatory requirements;
employee-related expenses, including salaries, benefits, travel and stock-based compensation expense; 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 research and other supplies.
We expense internal and third-party development costs as incurred.
The following table summarizes research and development expenses by product candidate (in thousands):
| | | | | | | | |
| | | Years Ended
December 31, | |
| | | 2017 | | | 2016 | |
Third-party development costs: | | | | | | | | |
Amphora, as a contraceptive | | $ | 17,700 | | | $ | 4,298 | |
Chlamydia/Gonorrhea | | | 1,687 | | | | — | |
Bacterial vaginosis | | | 358 | | | | 1,629 | |
Terminated development costs | | | — | | | | 6,000 | |
| | | | | | | | |
Total third-party development costs | | | 19,745 | | | | 11,927 | |
Unallocated internal research and development costs | | | 3,794 | | | | 2,928 | |
| | | | | | | | |
Total research and development expenses | | $ | 23,539 | | | $ | 14,855 | |
| | | | | | | | |
Completion dates and costs for our clinical development programs can vary significantly for each current and any future product candidates and are difficult to predict. Therefore, we cannot estimate with
any degree of certainty the aggregate costs we will incur regarding the development of our product candidates. We anticipate we will make determinations as to which programs and product candidates to pursue as well as the most appropriate funding allocations for each program and product candidate on an ongoing basis in response to the results of ongoing and future clinical trials, regulatory developments, and our ongoing assessments as to each current or future product candidates’ commercial potential. We will need to raise substantial additional capital in the future to complete clinical development for our current and future product candidates. We may enter into collaborative agreements in the future to conduct clinical trials and gain regulatory approval of our product candidates, particularly in markets outside of the United States. We cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and overall capital requirements.
The costs of clinical trials may vary significantly over the life of a program owing to the following:
the number of sites included in the trials;
the length of time required to enroll eligible patients;
the number of patients participating in the trials;
the number of doses patients receive;
patient drop-out or discontinuation rates;
potential additional safety monitoring or other trials requested by regulatory agencies;
the phase of development of the product candidate; and
the efficacy and safety profile of the product candidate.
General and administrative expenses
Our general and administrative expenses consist primarily of salaries, benefits, travel, business development expense and stock-based compensation expense, and other related costs for our employees and consultants in executive, administrative, finance and human resource functions. Other general and administrative expenses include facility-related costs not otherwise included in research and development and professional fees for accounting, auditing, tax and legal fees, and other costs associated with obtaining and maintaining our patent portfolio, and conducting commercial assessments for our product candidates.
Other Income (Expense)
Other income (expense) consists primarily of the change in fair value of the Series D 2X liquidation preference, which for each share of Series D redeemable convertible preferred stock (Series D) is equal to two times the issuance price per share of Series D, plus accrued and unpaid dividends, and became payable upon the closing of the Merger, loss on issuance of Series D redeemable convertible preferred stock and loss on the extinguishment of a related-party note payable.
The Series D 2X liquidation preference expired upon closing of the Merger in January 2018, at which time the final fair value of the Series D 2X liquidation preference will be estimated. The final change in fair value of the Series D 2X liquidation preference will be recognized within change in fair value of the Series D 2X liquidation preference and the Series D 2X liquidation preference liability will be reclassified to additional paid-in capital in our consolidated balance sheets. Prior to the closing of the Merger, the Series D 2X liquidation preference was revalued at each reporting date and changes in fair value were recognized as increases in or decreases to other income (expense).
Our loss on issuance of Series D redeemable convertible preferred stock and loss on extinguishment of related-party note payable were recognized upon issuance of the related Series D, as the Series D was determined to have been issued at less than fair value. In addition to the 60 shares of Series D outstanding as of December 31, 2016, in August 2017 and November 2017, we issued an aggregate of 15 and 5 additional shares, respectively, of Series D for which we also recognized losses on issuance.
Results of Operations
Year Ended December 31, 2017 Compared to Year Ended December 31, 2016 (in thousands):
| | | | | | | | | | | | |
| | | Year Ended
December 31, | | | | |
| | | 2017 | | | 2016 | | | $ Change | |
Research and development | | $ | 23,539 | | | $ | 14,855 | | | $ | 8,684 | |
Research and development expenses. The overall increase in research and development expenses is primarily due to a $16.5 million increase in clinical trial costs due to the commencement of our confirmatory Phase 3 clinical trial for Amphora for the prevention of pregnancy and our Phase 2b/3 for prevention of chlamydia and gonorrhea in 2017 and a $0.6 million increase in personnel costs due to an increase in headcount and changes to our annual bonus plan. These increases were partially offset by a $6.0 million decrease in license fees during 2017 associated with our sublicenses with WomanCare Global Trading CIC, or WCGT CIC, which sublicenses were terminated in December 2016, a $2.1 million decrease in chemistry, manufacturing and controls support due to the suspension of pre-commercialization activities for Amphora upon receipt of a complete response letter from the FDA in April 2016, and $0.3 million decrease in other costs due primarily to decreased utilization of consultants and other outside services.
| | | | | | | | | | | | |
| | | Year Ended
December 31, | | | | |
| | | 2017 | | | 2016 | | | $ Change | |
Abandoned initial public offering costs | | $ | — | | | $ | 4,705 | | | $ | (4,705 | ) |
Abandoned initial public offering costs. During 2016, we abandoned our late 2015 and early 2016 efforts of pursuing a public listing on the alternative investment market, or AIM, of the London stock exchange, at which time we expensed all previously deferred offering costs.
| | | | | | | | | | | | |
| | | Year Ended
December 31, | | | | |
| | | 2017 | | | 2016 | | | $ Change | |
General and administrative | | $ | 12,148 | | | $ | 15,083 | | | $ | (2,935 | ) |
General and administrative expenses. The overall decrease in general and administrative expenses was primarily driven by suspension of our pre-commercialization activities for Amphora in April 2016 upon receipt of a complete response letter from the FDA resulting in decreases of $1.6 million in business development expenses and $1.2 million in outside services. Additionally, there was a decrease of $0.7 million in salaries and related costs due to a June 2016 reduction in workforce so we could refocus our efforts on research and development activities rather than the anticipated commercialization of Amphora. Other decreases between periods were attributable to the recognition of $0.6 million in severance expense associated with the September 2016 departure of our president and chief operating officer, $0.5 million in stock-based compensation due to the September 2016 issuance of stock options of which a significant portion were fully vested at issuance, $0.4 million in personnel costs utilized under our shared services
agreement with WomanCare Global International and $0.1 million of general travel and other costs. These decreases were partially offset by a $1.1 million increase in professional services mainly attributable to legal fees associated with our Merger and a $1.1 million increase in our annual bonus accrual due to changes to our bonus plan.
| | | | | | | | | | | | |
| | | Year Ended
December 31, | | | | |
| | | 2017 | | | 2016 | | | $ Change | |
Loss on issuance of Series D redeemable convertible preferred stock | | $ | (8,522 | ) | | $ | (26,635 | ) | | $ | 18,113 | |
Loss on extinguishment of related-party note payable | | $ | — | | | $ | (6,651 | ) | | $ | 6,651 | |
Loss on issuance of Series D redeemable convertible preferred stock and loss on extinguishment of related-party note payable. During 2017 and 2016, we issued 20 shares and 60 shares, respectively, of our Series D. During 2016, 10 of the 60 shares issued resulted in the extinguishment of a related-party note payable with Cosmederm, an entity previously under common control. Due to the existence of the Series D liquidation preference, our financial position at the time of the initial closing and the existence of the warrant rights, we determined the Series D was not the result of an arms-length transaction. We had an external valuation completed at each closing date which determined the Series D was issued below fair value. For the December 2016, August 2017 and November 2017 issuances, since no unstated rights and/or privileges were identified with the Series D, the loss on issuance of Series D redeemable convertible preferred stock, of $6.0 million, $5.7 million and $2.8 million, respectively, was recognized in our consolidated statements of operations appearing in our Current Report on Form 8-K/A as filed with the SEC on April 6, 2018 and is incorporated by reference into this prospectus. For the July 2016 issuance, since no unstated rights and/or privileges were identified with our Series D, the aggregate loss of $27.3 million was allocated between loss on issuance of Series D redeemable convertible preferred stock, of $20.6 million, and loss on extinguishment of related-party note payable, of $6.7 million.
| | | | | | | | | | | | |
| | | Year Ended
December 31, | | | | |
| | | 2017 | | | 2016 | | | $ Change | |
Change in fair value of Series D 2X liquidation preference | | $ | (61,175 | ) | | $ | (543 | ) | | $ | (60,632 | ) |
Change in fair value of Series D 2X liquidation preference. The Series D shares will receive their 2X liquidation preference, of $85.2 million, in shares, in the Merger. As such, as of September 30, 2017, we introduced a reverse take-over scenario, in the probability-weighted expected return model, or PWERM, used to determine the fair value of the Series D 2X liquidation preference. The introduction of the reverse take-over scenario generated significant value related to the Series D shares and thereby significantly increased the Series D 2X liquidation preference liability beginning September 30, 2017. During 2017 and 2016, the change in fair value of our Series D 2X liquidation preference represents an unfavorable change in the fair value of the Series D 2X liquidation preference due primarily to assumption changes regarding the timing of additional financings, potential exit scenarios, as well as revisions to our financial forecast.
Liquidity and Capital Resources
We have incurred losses and negative cash flows from operating activities since inception. As of December 31, 2017, we had $1.2 million in unrestricted cash, a working capital deficit of $101.0 million and an accumulated deficit of $307.3 million.
We anticipate we will continue to incur net losses for the foreseeable future and incur additional costs associated with being a public company. We expect our research and development expenses will increase
for the foreseeable future due to our confirmatory Phase 3 clinical trial for Amphora for the prevention of pregnancy, our Phase 2b/3 clinical trials for prevention of chlamydia and gonorrhea and planned clinical trials for our BV product candidate. According to management estimates, liquidity resources as of December 31, 2017 are not sufficient to maintain our planned level of operations for the next 12 months. In addition, the uncertainties associated with our ability to (i) obtain additional equity financing on terms that are favorable to us, (ii) enter into collaborative agreements with strategic partners and (iii) succeed in our future operations, raise substantial doubt about our ability to continue as a going concern. The opinion of our independent registered public accounting firm on our audited financial statements as of and for the years ended December 31, 2017 and 2016 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. Future reports on our financial statements may include an explanatory paragraph with respect to our ability to continue as a going concern. Our audited consolidated financial statements as of and for the years ended December 31, 2017 and 2016 appearing in our Current Report on Form 8-K/A as filed with the SEC on April 6, 2018 and is incorporated by reference into this prospectus do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts of liabilities that might be necessary should we be unable to continue our operations.
If we are not able to obtain the required funding in the near term, through equity financings or other means, or are not able to obtain funding on terms favorable to us, it will have a material adverse effect on our operations and strategic development plan for future growth. If we cannot successfully raise additional funding and implement our strategic development plan, we may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, and/or suspend or curtail planned programs. Any of these could materially and adversely affect our liquidity, financial condition and business prospects and we would not be able to continue as a going concern. If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our financial statements. We may obtain additional financing in the future through the issuance of our common stock from other equity or debt financings or through collaborations or partnerships with other companies.
Summary Statement of Cash Flows
The following table sets forth a summary of our net cash flow activity for each of the periods set forth below (in thousands):
| | | | | | | | |
| | | Year Ended
December 31, | |
| | | 2017 | | | 2016 | |
Net cash and restricted cash used in operating activities | | $ | (19,242 | ) | | $ | (24,417 | ) |
Net cash and restricted cash provided by (used in) investing activities | | | 244 | | | | (498 | ) |
Net cash and restricted provided by financing activities | | | 9,212 | | | | 18,061 | |
| | | | | | | | |
Net cash and restricted cash used in continuing operations | | | (9,786 | ) | | | (6,854 | ) |
Net cash and restricted cash provided by discontinued operations | | | — | | | | 1,219 | |
| | | | | | | | |
Net decrease in cash and restricted cash | | $ | (9,786 | ) | | $ | (5,635 | ) |
| | | | | | | | |
Cash Flows from Operating Activities. Since inception, the primary use of cash and restricted cash was to fund further development of our lead product candidate, Amphora, as a contraceptive, as well as potential other indications and to support general and administrative operations.
Cash Flows from Investing Activities. During 2017, the primary source of cash and restricted cash resulted from the receipt of a note payment from the sale of our Softcup line of business in 2016. During
2016, the primary use of cash and restricted cash was for the purchase of research equipment to support our clinical trials.
Cash Flows from Financing Activities. During 2017, the primary source of cash and restricted cash was the sale of 20 shares of Series D, which was partially offset by the payment of deferred financing costs. During 2016, the primary source of cash and restricted cash was the sale of 50 shares of Series D. This 2016 source of cash and restricted cash was partially offset by cash payments related to (1) our note payable with Cosmederm and (2) financing costs associated with our abandoned IPO on the AIM and other financing activities.
Cash Flows from Discontinued Operations. In June 2016, our board of directors committed to a plan to sell our Softcup line of business, or Softcup, and redirect cash resources to further develop Amphora. In July 2016, we entered an asset purchase agreement whereby a third party acquired assets and assumed certain liabilities associated with Softcup (see Note 3 —Discontinued Operationsof our audited consolidated financial statements, appearing in our Current Report on Form 8-K/A as filed with the SEC on April 6, 2018 and is incorporated by reference into this prospectus). Total consideration for the Softcup sale was $1.9 million, with $0.6 million in cash at closing. All other cash and restricted cash provided by discontinued operations related to changes in the major classes of assets and liabilities identified with the discontinued operations.
Operating and Capital Expenditure Requirements
Our future capital requirements are difficult to forecast. We expect to incur additional capital expenditures for serialization equipment to be utilized in the manufacturing of Amphora prior to commercialization, but cannot adequately predict the cost of the equipment in the future or other potential capital expenditure requirements, if any.
We expect research and development expenses to increase substantially for the foreseeable future as we advance Amphora as a contraceptive, pursue expanded indications for Amphora and advance our BV product candidate through additional clinical development programs. In addition, we expect to incur costs as we make improvements to our manufacturing process. The process of conducting preclinical and clinical trials necessary to obtain regulatory approval is costly and time consuming and we may never succeed in achieving regulatory approval for any of our product candidates. The probability of success for each product candidate will be affected by numerous factors, including preclinical data, clinical trial data, competition, manufacturing capability and commercial viability. We are responsible for all research and development costs for our programs.
We expect general and administrative expenses to increase substantially as we hire additional personnel to support commercialization of our product candidates, if any. We also anticipate increased expenses related to audit, legal, regulatory, and tax-related services associated with maintaining compliance with stock exchange listing and SEC requirements, director’s and officer’s liability insurance premiums, and investor relations-related expenses.
When we believe regulatory approval of a product candidate appears likely, we expect to incur significant costs as we establish a sales and marketing infrastructure for distribution, promotion and sales of our products.
Off-Balance Sheet Arrangements
As of December 31, 2017 and 2016, we do not have any off-balance sheet arrangements, as such term is defined under Item 303 of Regulation S-K, that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Recently Issued Accounting Pronouncements
For information with respect to recent accounting pronouncements, see Note 2 —Summary of Significant Accounting Policiesto our audited consolidated financial statements appearing in our Current Report on Form 8-K/A as filed with the SEC on April 6, 2018 and is incorporated by reference into this prospectus.
Critical Accounting Policies
Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the applicable periods. Management bases its estimates, assumptions and judgments, on historical experience and on various other factors it believes to be reasonable under the circumstances. Different estimates, assumptions and judgments may change the estimated used in the preparation of our consolidated financial statements, which, in turn, could materially change our results from those reported. Management evaluates its estimates, assumptions and judgments on an ongoing basis. However, if our assumptions change, we may need to revise our estimates, or take other corrective actions, either of which may also have a material adverse effect on our consolidated statements of operations, liquidity and financial condition. We believe the following critical accounting policies involve significant areas where management applies estimates, assumptions and judgments in the preparation of our consolidated financial statements. See Note 2 to our audited consolidated financial statements for the years ended December 31, 2017 and 2016 appearing in our Current Report on Form 8-K/A as filed with the SEC on April 6, 2018 and is incorporated by reference into this prospectus for our additional accounting policies.
Clinical Trial Accruals
As part of the process of preparing our financial statements, we are required to estimate expenses resulting from our obligations under contracts with vendors, CROs and consultants and under clinical site agreements relating to conducting our clinical trials. The financial terms of these contracts vary and may result in payment flows that do not match the periods over which materials or services are provided under such contracts.
Our objective is to reflect the appropriate clinical trial expenses in our consolidated financial statements by recording those expenses in the period in which services are performed and efforts are expended. We account for these expenses according to the progress of the clinical trial as measured by patient progression and the timing of various aspects of the trial. We determine accrual estimates through financial models and discussions with applicable personnel and outside service providers as to the progress of clinical trials. During a clinical trial, we adjust the clinical expense recognition if actual results differ from estimates. We make estimates of accrued expenses as of each balance sheet date based on the facts and circumstances known at that time. Our clinical trial accruals are partially dependent upon accurate reporting by CROs and other third-party vendors. Although we do not expect estimates to differ materially from actual amounts, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low for any reporting period. For the years ended December 31, 2017 and 2016 there were no material adjustments to our prior period estimates of accrued expenses for clinical trials.
Determining Fair Value of Stock Options
The fair value ofresale the shares of our common stock underlying stock-based awards are estimated on each grant date by our board of directors. Prior to completion of the Merger, to determine the fair value of the
common stock underlying option grants, the board of directors considered, among other things, valuations of our common stock prepared by an unrelated valuation firm in accordance with the guidance provided by the American Institute of Certified Public Accountants Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Given the absence of a public trading market for our common stock prior to the completion of the Merger, the BOD exercised reasonable judgment and considered a number of objective and subjective factors to determine the best estimate of the fair value of our common stock, including our stage of development; progress of our R&D efforts; our operating and financial performance, including levels of available capital resources; the rights, preferences and privileges of our convertible preferred stock relative to those of our common stock; sales of our convertible preferred stock; the valuation of publicly traded companies in our industry, equity market conditions affecting comparable public companies and the lack of marketability of our common stock. We obtained valuations on at least an annual basis or when we determined significant value generating or diminishing internal and/or external events have occurred, which would significantly increase or decrease the fair value of the common stock underlying our stock-based awards. Post-Merger, the fair value of our common stock will be equal to the closing price of our stock.
Series D 2X Liquidation Preference Liability
Prior to completion of the Merger, we valued our Series D 2X liquidation preference liability in accordance with Accounting Standards Codification No. 815 —Derivatives and Hedging, using a PWERM, which is sensitive to changes in assumptions regarding the timing of additional financings, potential exit scenarios and revisions in our financial forecast. Changes in any one of the assumptions could have had a material impact on the fair value of the Series D 2X liquidation preference liability. Our management used the most reliably available information at each valuation date in determining the fair value of the Series D 2X liquidation preference liability. Due to the nature of the assumptions and the sensitive nature of the PWERM, management could not reliably provide sensitivity analysis around the impact of changes in assumptions utilized in the PWERM used to estimate the fair value of our Series D 2X liquidation preference liability.
Fair Value of Series D Redeemable Convertible Preferred Stock
Prior to completion of the Merger, we valued our Series D redeemable convertible preferred stock using a PWERM, which is sensitive to changes in assumptions regarding the timing of additional financings, potential exit scenarios and revisions in our financial forecast. Changes in any one of the assumptions could have had a material impact on the estimated fair value of the Series D. Our management used the most reliably available information at each issuance of Series D to determine the fair value of the Series D. Due to the nature of the assumptions and the sensitive nature of the PWERM, management could not reliably provide sensitivity analysis around the impact of changes in assumptions utilized in the PWERM used to estimate the fair value of our Series D.
BUSINESS
Overview
We are a clinical-stage biopharmaceutical company committed to developing and commercializing innovative products to address unmet needs in women’s sexual and reproductive health. We leverage our proprietary Multi-purpose Prevention Technology, or MPT, vaginal gel to develop product candidates for multiple indications, including contraception, sexually transmitted infections, or STIs, and recurrent bacterial vaginosis, or BV.
Our MPT vaginal gel technology is an acid-buffering vaginal gel with bioadhesive properties, designed to maintain an optimal vaginal pH of 3.5 to 4.5. This vaginal pH range is inhospitable to spermatozoa, or sperm, as well as certain viral and bacterial pathogens associated with STIs, and it is integral to the survival of healthy bacteria in the vagina.
We are developing our lead product candidate, Amphora (L-lactic acid, citric acid, and potassium bitartrate), for three potential indications: contraception, the prevention of urogenitalChlamydia trachomatis infection, or chlamydia, in women and the prevention of urogenitalNeisseria gonorrhoeae infection, or gonorrhea, in women.
In 2014, we completed a randomized, Phase 3 non-inferiority trial for Amphora as a contraceptive in 3,389 women. Amphora was shown to be non-inferior to control, when the complete data set was analyzed in accordance with the pre-specified statistical analysis plan, with a six-month cumulative pregnancy rate of 10.5% with typical use and 4.1% with perfect use. It was also well-tolerated with less than 2% of patients experiencing possible treatment-related adverse events, or AEs, and no treatment-related serious adverse events, or SAEs.
We are conducting a confirmatory, open-label, single-arm Phase 3 trial for Amphora as a contraceptive in 1,400 women in the United States. We expect to report top-line results from this trial in the first quarter of 2019 and, if positive, to resubmit the New Drug Application, or NDA, to the United States Food and Drug Administration, or the FDA, shortly thereafter. Subject to acceptance and timely approval of the NDA by the FDA, we plan to commercialize Amphora in early 2020.
We believe Amphora is highly differentiated from other forms of contraceptives currently available or in development. Amphora is hormone-free and, based on our clinical data collected to date, does not exhibit known side effects of traditional hormonal-based contraceptives, such as weight gain, headaches, sore breasts, irregular periods, mood changes, decreased sexual desire and nausea. Amphora is self-administered and we intend to seek regulatory approval for product labeling stating Amphora can be used on-demand, immediately before or up to one hour before intercourse. In addition, we anticipate Amphora may provide additional benefits beyond its primary use as a contraceptive, including its lubricant effect for enhanced sexual satisfaction.
We are also conducting a Phase 2b/3 clinical trial of Amphora for the prevention of certain STIs. The primary endpoint of this trial is prevention of chlamydia in women; the secondary endpoint is prevention of gonorrhea in women. We envision our STI program as developing label expansion opportunities to further differentiate Amphora from other contraceptive products in the market.
Preclinical studies conducted by Rush University Medical Center, or Rush University, suggest Amphora may suppress many of the pathogens responsible for sexually transmitted and commonly occurring bacterial infections while leaving the beneficial bacteria unaffected. Amphora has been granted Qualified Infectious Disease Product, or QIDP, designation by the FDA for the prevention of gonorrhea in women, and has been granted QIDP designation by the FDA for the prevention of the recurrence of BV. QIDP designation provides several key potential advantages, including qualification for the FDA Fast Track
program and longer market exclusivity, among others. We also received Fast Track designation from the FDA for the development of Amphora for the prevention of chlamydia.
We are also advancing a vaginal gel product candidate for the treatment of recurrent BV, and intend to conduct a Phase 2b/3 clinical trial to evaluate efficacy of this product candidate in this indication. In a recently completed Phase 1 dose-finding trial for this product candidate, the highest dose formulation of our BV product candidate (5-gram) reduced vaginal pH for up to seven days following a single administration.
We have assembled a very strong management team with significant operational experience in the biopharmaceutical market. Specifically, our senior executives have built a successful track record of developing and commercializing women’s health products including Mirena, Plan B One-Step, Yasmin, YAZ, NuvaRing, Paragard and Seasonique, among others.
Our Strategy
We are committed to providing women with direct control and management of their sexual and reproductive health. Key elements of our strategy include:
| • | | Gain regulatory approval of and subsequently commercialize Amphora. Our initial focus is the development and successful commercialization of Amphora as a hormone-free, woman-controlled contraceptive. We intend to build an internal sales force to commercialize Amphora in the United States, if approved. Outside the United States, we intend to evaluate collaborations for commercialization. We believe this approach will allow us to effectively deploy our capital to maximize the inherent value of Amphora for the benefit of all stakeholders.
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| • | | Leverage our MPT vaginal gel technology to develop and commercialize novel, first-in-class products for women. We intend to expand on our potential contraceptive indication by being the first company to market a contraceptive product with additional indications for the prevention of chlamydia and gonorrhea. In addition, we are developing a product candidate for the reduction of recurrent BV, which, if approved, would be the only FDA-approved product for this indication.
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| • | | Expand our intellectual property position by pursuing opportunities to extend the exclusivity of our highly differentiated and proprietary product candidates. We intend to aggressively pursue additional and new patent applications to broaden our intellectual property portfolio. We will continue seeking domestic and international patent protection and endeavor to promptly file patent applications for new commercially valuable inventions.
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| • | | Build our product portfolio through business development. We intend to opportunistically acquire additional products or product candidates to enhance our offerings and complement our core competencies in women’s health. We will focus on business development in the near to intermediate term to identify compelling acquisition and licensing candidates.
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| • | | Establish a world-class organization committed to the discovery, development and commercialization of products addressing unmet needs in women’s sexual and reproductive health. We have assembled a world-class team with industry-recognized expertise in the development and commercialization of products in women’s health. We intend to continue to build on our leadership position and grow a culture dedicated to the development and commercialization of medicines addressing the unmet needs of women.
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Contraceptive Market Overview
In 2016, the global revenue for contraceptive products was $21.2 billion and projected to grow at 6.8% per annum to $35.8 billion by 2024, making contraception a substantial and growing subset of the
overall healthcare market. This growth is expected to continue to be driven by the United States and Europe, where favorable government policies aimed at preventing unwanted pregnancies are in place.
Current contraceptive options include devices designed to prevent pregnancy through physical means such as condoms, diaphragms and intrauterine devices, or IUDs, and hormone-based pharmaceutical products, including oral contraceptives, vaginal rings, intramuscular injections, subcutaneous implants and transdermal patches.
Existing contraceptive options can have significant side effects or other limitations. Long-acting options such as IUDs, injections and implants require medical procedures and are not quickly or easily reversible. Hormonal approaches can be associated with undesirable side effects such as weight gain, loss of libido and mood changes, which may lead women to seek alternative contraceptive technologies or decide not to use any form of contraceptive options currently available. Besides condoms, the only currently available over-the-counter, or OTC, products are spermicides, including Conceptrol. These products are based on surfactants, which can cause genital irritation and inflammation that may increase the risk of contracting human immunodeficiency virus, or HIV, or other STIs from an infected partner. As such, spermicides were pulled from most of the European market and are rarely used in the United States. In contrast to most existing contraceptive methods, Amphora is hormone-free; its mechanism of action is to maintain the vaginal pH at the normal healthy level, even in the presence of semen. It can be easily self-administered when needed, and has lubricating properties for enhanced sexual satisfaction. Unlike other vaginal gel contraceptives currently on the market, Amphora is manufactured with ingredients that are generally recognized as safe, and is free of surfactants such as nonoxynol-9. We believe these combined attributes may make Amphora a more desirable option than currently marketed products.
The unmet needs in the contraception market and the shift away from traditional methods of contraception such as oral contraceptives make the entry of a non-hormonal contraceptive option like Amphora timely and desirable. Currently, the only non-hormonal prescription contraceptive methods approved in the United States market are a copper IUD and a diaphragm. A copper IUD requires an invasive, sometimes painful, medical procedure for insertion and may cause heavy menstrual bleeding. In addition, it could remain in the user’s body for up to 10 years. A diaphragm can be difficult to insert and must be used with contraceptive gel.
We believe the growing concern associated with the increasing prevalence of sexually transmitted diseases along with the recognized need for MPTs and the growing demand for new innovative contraception options will drive further growth in the global contraceptive market.
United States Contraceptive Market
The total United States prescription contraceptive market was valued at $5.5 billion in 2016 and is expected to grow at a compound annual growth rate of 5.4% from 2013 to 2024 reaching approximately $8.4 billion in 2024. The United States represented the largest segment of the global prescription contraceptives market in 2016 at 29.4% and is currently dominated by hormonal methods including birth control pills and other reversible methods such as hormone-releasing IUDs and injectables. Approximately four out of every five women with sexual experience in the United States have used the pill at least one time, which has remained stable since 1995.
As shown in the chart below, more than 15 million women in the United States use a form of hormone-based prescription contraception, an additional 9 million women in the United States rely on condoms or some other form of non-hormonal contraception (e.g., copper IUD, diaphragm, rhythm, withdrawal), and another 16 million use no method of contraception, putting them at risk of pregnancy.
European Union Contraceptive Market
The European Union, or EU, contraceptive market was valued at approximately $5 billion in 2016, representing 23.5% of the global market, and is expected to grow at an average compound annual growth rate of 5.4% from 2013 to 2024, reaching approximately $7.6 billion in 2024. Approximately 30% of women in the EU use no contraception and 16.7% use condoms. Among newer products, only IUDs have a double-digit market share in the EU.
Market Opportunity
Innovation and new product introduction in women’s reproductive healthcare and contraception have been limited when compared to other therapeutic categories. There have been no innovative contraceptives introduced in the United States since NuvaRing was approved in 2001. There are currently no FDA-approved contraceptive products that are indicated for the prevention of chlamydia or gonorrhea, nor for the reduction of the recurrence of BV.
According to the Centers for Disease Control and Prevention, or CDC, reducing the percentage of all unintended pregnancies has been one of the National Health Promotion Objectives since their establishment in 1980. Despite efforts to reduce their incidence, over two million unintended pregnancies occur in the
United States annually. Following decades of minimal change or increase, the percentage of unintended pregnancies in the United States decreased slightly in the period from 2008 to 2011. Despite this decrease, 45% of pregnancies in the United States are still unintended. Nearly all women with sexual experience in the United States have used some form of contraception in their lives. However, many women may not use contraception consistently or correctly, which may result in an unintended pregnancy. According to research conducted by the CDC, approximately 40% of women surveyed after giving birth to a child resulting from an unintended pregnancy who were not using contraception noted one of the following three reasons for nonuse: did not expect to have sex, worried about side effects of birth control, or male partner did not want to use birth control.
Hundreds of millions of women worldwide seek contraceptive products during their, on average, 30 plus years of fertility. As such, women utilizing contraception consider the most appropriate methods for their purposes and intended use. According to the United Nations, in 2017, model-based estimates indicate approximately 75% of women of reproductive age (18 to 49), worldwide, required some form of family planning. According to the Guttmacher Institute, there are 60 million women of reproductive age in the United States. There are approximately 69 million women of reproductive age located in the United Kingdom, Germany, France, Italy and Spain, or the EU5. Additional attractive markets for global expansion include Brazil, India, the Russian Federation and China, in which there are an aggregate of 688 million women of reproductive age.
Our Product Candidates
Amphora as a Contraceptive
We believe Amphora, our lead product candidate, addresses significant gaps in the contraceptive market. If approved by the FDA, Amphora will be the only hormone-free, woman-controlled contraceptive drug product available by prescription in the United States not requiring in-office placement by a healthcare provider, or HCP.
We believe Amphora has significant attributes that will make it an attractive contraceptive choice for women:
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Key Attributes
| | Potential Benefits
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Hormone-free
| | Amphora is hormone-free and designed to avoid known side effects of hormone-based contraceptives, including weight gain, headaches, sore breasts, irregular periods, mood changes, decreased sexual desire, acne and nausea. These side effects have been shown to discourage women from continuing to use hormonal contraception on a long-term basis, leading them to seek alternative methods or decide to use nothing at all. |
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On-Demand/Woman-controlled
| | Amphora is designed to be used as needed – no need for consistent daily, weekly, or monthly routine – immediately before or up to one hour before intercourse at a woman’s discretion. |
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Ease of Use
| | The pre-filled Amphora applicator is designed for convenience and to be stored at room temperature for ease of handling and use. |
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Bioadhesive Properties
| | Amphora has bioadhesive and viscosity-retaining properties to form a long-lasting layer of gel over the vaginal and cervical surfaces, which may reduce leakage from the vagina. |
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No Weight Restrictions
| | Amphora is designed to be used by women of any body mass index with no weight restrictions, unlike many traditional hormonal contraceptive options. |
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No Surgical Procedures
| | No physician insertion or removal required. The use of Amphora is private and discrete, requiring no need for recurring doctor appointments, or clinical or surgical procedures. |
Personal Lubricant Properties
| | Amphora has benefits for use as a personal vaginal lubricant, beyond the primary contraceptive function. We believe Amphora’s personal lubricant properties can reduce friction and ease penetration, enhancing sexual satisfaction. |
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Cost Effective
| | We anticipate mandated coverage in the United States under the Affordable Care Act, or the ACA. Amphora is only used when needed, thereby eliminating cost for daily use methods. |
The CDC’s recommendations for use of combined hormonal contraception, as shown below, define numerous conditions that create unacceptable health risks if hormonal contraception is used. The number of women impacted by these conditions is significant. We believe Amphora, if approved by the FDA, will provide women an attractive solution to avoid hormones and certain other negative side effects from current prescription contraceptives.
Category 4 (a condition that represents an unacceptable health risk if the
contraceptive method is used)
Deep venous thrombosis (current or history with higher risk of recurrence)
Pulmonary embolism (current or history with higher risk of recurrence)
Cardiovascular disease or multiple cardiovascular risk factors (preexisting)
Uncontrolled hypertension
Major surgery with prolonged immobilization
Known thrombogenic mutations
| • | | Migraine headaches with aura or without aura in women >/= 35
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Viral Hepatitis (acute or flare)
Cirrhosis (decompensated)
| • | | Age > 35 years and smoke 15 cigarettes or more per day
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Valvular heart disease (complicated)
Impaired cardiac function (moderate or severe)
Systemic lupus erythematosus with positive or unknown antiphospholipid antibodies
Ischemic heart disease (current or history)
Solid organ transplantation (complicated)
If approved by the FDA, Amphora is potentially disruptive to the existing contraceptive landscape and is designed to address underserved and unmet needs in the women’s healthcare market, as seen in the table below. We expect to benefit from a favorable shift away from the daily use of oral forms of hormonal contraception to more innovative technologies that underpin the large and growing global contraceptive market.
| | | | | | | | | | | | | | | | |
Product Class
| | Non-Hormonal | | | No Systemic
Side Effects | | | Non-invasive | | | Convenient | |
Amphora*
| | ✓ | | | | ✓ | | | | ✓ | | | | ✓ | | |
28 Day Oral Contraceptives
| | | | | | | | | | ✓ | | | | | | |
Extended Regimen Oral Contraceptives
| | | | | | | | | | ✓ | | | | | | |
Hormone Releasing IUDs
| | | | | | | | | | | | | | ✓ | | |
Copper IUD
| | ✓ | | | | | | | | | | | | ✓ | | |
Implant
| | | | | | | | | | | | | | ✓ | | |
Vaginal Ring
| | | | | | | | | | ✓ | | | | ✓ | | |
Transdermal Patch
| | | | | | | | | | ✓ | | | | | | |
We conducted market research with 152 HCPs and 100 obstetrician/gynecologists, or OB/GYNs, in two separate studies. On a scale of 1-10, approximately 40% of HCPs rated their likelihood to prescribe a contraceptive-only version of Amphora as an 8, 9 or 10. With the added ability to prevent an STI, over 50% of OB/GYNs rated their likelihood to prescribe Amphora as an 8, 9 or 10 on a 10-point scale.
Similar to our HCP and OB/GYN research, we conducted two separate studies with women of reproductive age and HCPs in the United States to evaluate potential interest in Amphora. The market research provided insight on the reasons why Amphora is appealing, which included the attributes of being non-hormonal and woman-controlled. In one of our market research studies, 71% of the women expressed concerns about hormonal exposure and 58% were not currently satisfied with their contraceptive choice. Our research confirmed there are multiple consumer segments of interest including women seeking prevention of pregnancy and STIs, or older, monogamous women seeking an alternative to hormones and condoms. Overall, approximately 40% of women in two different samples of 287 and 206 consumers rated their likelihood to use Amphora as an 8, 9, or 10 on a 10-point scale.
Mechanism of Action in Contraception
A normal vaginal pH of 3.5 to 4.5 is important for maintaining good vaginal health. At this optimal pH level, the vagina contains a balance of necessary healthy bacteria. Additionally, a vaginal pH in this range is inhospitable to sperm as well as certain viral and bacterial pathogens. Amphora was developed to have acid-buffering (pH 3.5), bioadhesive, and viscosity-retaining properties to provide effective acidification of the male ejaculate in the vagina and to form a long-lasting layer of gel over the vaginal and cervical surfaces. Typically, the introduction of semen (pH = 7.2-8.0) into the vagina causes a rise in pH above 6.0 due to the alkalinity of the ejaculate, which neutralizes the normally acidic vaginal environment, and allows for the survival of sperm. Amphora acts as a vaginal contraceptive by maintaining a normal vaginal pH(pH = 3.5-4.5) even in the presence of semen, inhibiting sperm from reaching the ovum to form a zygote. This buffering capacity is due to Amphora’s active pharmaceutical ingredients. Other properties contributing to the contraceptive effect of Amphora are its capacity to reduce/inhibit cervical mucus penetration, to maintain sufficient viscosity even upon dilution with the introduction of semen into the vagina and its bioadhesive strength. After proper use of Amphora, postcoital testing shows Amphora remains protective for up to 10 hours, based on a lack of progressively motile sperm.
The diagram below shows the respective pH levels of the vagina and semen.
Amphora Clinical Trials
AMP001 Phase 3 Clinical Trial
A key stage in the development of Amphora was the completion of a large-scale Phase 3 clinical trial comparing the contraceptive effectiveness, safety and acceptability of Amphora to Conceptrol, a surfactant-based spermicidal gel containing 4% nonoxynol-9, which is currently available over-the-counter for use as a vaginal contraceptive. The primary endpoint of the trial was the six-month cumulative pregnancy rate. Secondary endpoints included local and systemic signs and symptoms reported by participants or observed upon medical examination, such as itching, burning, irritation, inflammation or lesions to the cervical or vaginal epithelia and vaginal infections.
AMP001 enrolled 3,389 women at 62 research centers in the United States and Russia. This open-label, randomized, non-inferiority trial evaluated the repeated use of Amphora compared to Conceptrol over seven menstrual cycles. After completing the first seven cycles, some of the women randomized to Amphora continued for up to a total of 13 cycles (n=341). In a subset of women (75 in each treatment arm) the lower genital tract (cervix, vagina, and vulva) was observed and photographed by colposcopy. The subset was blinded to avoid possible observer bias. A second subset was also examined microbiologically to document any changes in the vaginal flora, particularly the onset of any infection by Escherichia coli or yeast.
The trial was fully enrolled in July 2013 and completed during the first half of 2014. In the primary efficacy analysis, the six-month cumulative pregnancy rate for typical use (defined as trial subjects who had at least one episode of coitus without using the product correctly during the study and without any backup or emergency contraception), was approximately 10.5% for Amphora, as compared to 10.0% for Conceptrol. For those subjects with perfect use (defined as trial subjects who used the product correctly at every episode of coitus within a given cycle), the cumulative pregnancy rate was approximately 4.1% for Amphora, as compared to 4.2% for Conceptrol. In summary, Amphora met its primary endpoint of non-inferiority to Conceptrol when the combined United States and Russian data were analyzed in accordance with the pre-specified statistical analysis plan.
Less than 2% of patients using Amphora experienced an AE that was “definitely” related to treatment. There were no SAEs deemed “definitely” or “probably” related to Amphora. Of the 30 subjects who experienced at least one SAE, 11 were treated with Amphora (0.8%) and 19 were treated with Conceptrol
(1.3%). The AE reporting for the 13-cycle extension did not identify additional SAEs; therefore, no subject treated with Amphora experienced an SAE with an additional six cycles of exposure to Amphora. Significantly more subjects were highly satisfied Amphora as compared to Conceptrol and significantly more Amphora users would use the product again if it were available (p<0.05 for both comparisons).
Adverse events in greater than 5% of Amphora treated subjects in the AMP001 Phase 3 Clinical Trial in the seven-cycle study in all subjects:
| | | | | | | | | | | | |
| | Amphora | | | Conceptrol | | | All Subjects | |
| | | (N=1458) | | | | (N=1477) | | | | (N=2935) | |
Preferred term
| | | n (%) | | | | n (%) | | | | n (%) | |
Total number (%) of subjects with at least one AE
| | | 793 (54.4) | | | | 857 (58.0) | | | | 1650 (56.2) | |
Urinary tract infection
| | | 140 (9.6) | | | | 193 (13.1) | | | | 333 (11.3) | |
Vaginitis bacterial
| | | 160 (11.0) | | | | 170 (11.5) | | | | 330 (11.2) | |
Vulvovaginal mycotic infection
| | | 156 (10.7) | | | | 168 (11.4) | | | | 324 (11.0) | |
Headache
| | | 96 (6.6) | | | | 80 (5.4) | | | | 176 (6.0) | |
Vulvovaginal pruritus (vaginal infection)
| | | 55 (3.8) | | | | 76 (5.1) | | | | 131 (4.5) | |
Nasopharyngitis (common cold)
| | | 76 (5.2) | | | | 48 (3.2) | | | | 124 (4.2) | |
Summary of Initial NDA Submission (Contraceptive Indication)
On July 2, 2015, pursuant to section 505(b)(2) of the Federal Food, Drug and Cosmetic Act we submitted an NDA for Amphora to the FDA for the proposed indication of prevention of pregnancy. The submission included, among other things, data from the initial Phase 3 clinical trial (AMP001) as well as other safety and efficacy information.
A Complete Response Letter, or CRL, was issued by the FDA on April 28, 2016. A CRL is issued if the agency determines an application cannot be approved in its present form and will describe all the specific deficiencies identified by the agency. A CRL will also recommend actions the applicant might take to place the application or abbreviated application in condition for approval.
The primary approvability issue was the difference in results between the United States and Russian cohorts. Although the study met its primary endpoint when the combined United States and Russian data were analyzed per the statistical plan, the FDA deemed the data from Russian subjects (approximately 20% of the study population) not generalizable to the United States population. Additionally, the FDA excluded analysis data from certain cycles, specifically data from: cycle 0 (the time from enrollment until the subject’s first menstrual cycle); cycles <21 days or >42 days in duration; cycles past 196 days (the aggregate length of seven cycles of 28 days in duration); and cycles in which there was no intercourse.
A Type A meeting was held on October 31, 2016, with the FDA, during which the FDA indicated a confirmatory efficacy trial focused on participants in North America would be required. After further consultation with the FDA, the FDA confirmed a single-arm trial (non-comparative) would be sufficient to address the CRL clinical deficiency. All feedback received from the FDA was incorporated into a protocol for a single-arm trial which was submitted to the FDA on June 30, 2017 (AMP002).
AMP002 Confirmatory Phase 3 Trial (AMPOWER)
We are conducting a confirmatory, single-arm, Phase 3 trial entitled “A Single-Arm, Phase III, Open Label, Multicenter, Study in Women Aged 18-35 Years of the Contraceptive Efficacy and Safety of Amphora Contraceptive Vaginal Gel.” We refer to this trial as AMPOWER or AMP002. This study enrolled 1,400 women aged 18 to 35 at 112 sites in the United States. The first subject enrolled in this trial
on July 28, 2017, and enrollment was completed in February 2018. We expect to report top-line data from AMP002 in the first quarter of 2019 and, if positive, to resubmit the NDA for Amphora for contraception to the FDA in the second quarter of 2019. Per the FDA Performance Goals under PDUFA VI, the FDA review timeline for this type of Class 2 resubmitted NDA is six months.
The primary endpoint of this trial is a seven-cycle cumulative pregnancy rate as assessed by the Kaplan-Meier statistical method. To meet this endpoint, Amphora must demonstrate a typical use failure rate of less than 16.5%, with an upper limit of the 95% confidence interval of 21%, meaning no more than 21% of trial subjects may become pregnant with typical use of Amphora during the study.
In addition to the primary efficacy outcome and secondary safety outcomes, this trial also includes an exploratory endpoint of sexual satisfaction as assessed by the Female Sexual Function Index, which could be further explored in future trials and potentially utilized in our labeling and marketing materials for Amphora. We believe this is the first contraceptive registration trial to include sexual satisfaction as an outcome.
Scientific Advice Process in the EU
We previously conducted a regulatory gap analysis with Pharmalex GmbH to determine how the EU regulatory bodies were likely to view its marketing authorization application, or MAA, upon submission to the EU. Scientific advice was previously sought in April 2016 from the Medical Products Agency of Sweden and the Agency of Medicine and Sanitary Products of Spain, but an MAA was not pursued due to a lack of resources to support a filing at that time. We have reinitiated the scientific advice process and seek marketing authorization for Amphora in the EU through a decentralized procedure.
Amphora for STI Prevention
In the United States, the CDC reported there were 1.6 million new cases of chlamydia and approximately 468,000 new cases of gonorrhea in 2016. We believe this represents a significant commercial opportunity for Amphora.
Preclinical tests conducted in the early developmental stages by Rush University and later by us, suggest Amphora has the potential to suppress many of the pathogens responsible for sexually transmitted and commonly occurring bacterial infections while not affecting lactobacilli, a normal and beneficial bacterium found in a healthy vagina.
Researchers at Rush University conducted preclinical studies to assess the ability of Amphora to prevent transmission of chlamydia in mice. Data from these studies showed Amphora was highly effective at preventing upper and lower genital tract infection when compared to various vaginally-administered controls containing nonoxynol-9. The following table summarizes the results from the mouse study showing the protective effect of Amphora compared to several other vaginal gels or no treatment in the upper and lower genital tract.
| | | | | | | | |
Treatment
| | Lower Genital Tract
Protected/inoculated1 | | | Upper Genital Tract
Protected/Inoculated | |
No Treatment
| | | 2/29 (7 | %) | | | 4/29 (14 | %) |
Gynol II
| | | 6/16 (38 | %)2 | | | 6/16 (38 | %) |
K-Y Plus
| | | 0/16 (0 | %) | | | 1/16 (6 | %) |
Advantage-S
| | | 3/16 (19 | %) | | | 3/16 (19 | %) |
Conceptrol
| | | 0/16 (0 | %) | | | 0/16 (0 | %) |
Amphora
| | | 13/16 (81 | %)3 | | | 8/8 (100 | %)4 |
1 | Animals Defined as infected ifC. trachomatis was isolated by culture from samples collected on day 3 or 6 post challenge |
2 | p < 0.05 vs. No Treatment |
3 | p < 0.001 vs. No Treatment |
4 | p < 0.01 vs. No Treatment |
In another study, Amphora (at the time called ACIDFORM) was tested for its ability to prevent transmission of gonorrhea in the genital tract compared to other vaginal microbicides in mice. Amphora displayed significant protection against transmission of gonorrhea, with only 1 of 17 Amphora-treated mice having positive gonorrhea culture results, compared with 13 of 15 untreated control mice. The following table represents recovery rates from gonorrhea in mice receiving pretreatment or no treatment before intravaginal challenge with gonorrhea strain FA1090:
| | | | |
Test Agent
| | Number of mice culture positive for gonorrhea/
total number of mice |
| Test Agent | | No. Treatment |
PRO2000 (0.5%)
| | 0/17 | | 11/12 (91.7%) |
CAP gel
| | 0/7 | | 13/15 (86.7%) |
Cellulose sulfate
| | 2/11 | | 8/10 (80.0%) |
BufferGel
| | 10/23 | | 14/14 (100%) |
CarraGuard
| | 3/20 | | 13/17 (76.5%) |
T-PSS (5%)
| | 0/17 | | 11/12 (91.7%) |
Carbopol 1382
| | 10/23 | | 14/14 (100%) |
Methylcellulose
| | 16/20 | | 13/17 (76.5%) |
Amphora
| | 1/17 | | 13/15 (86.7%) |
Of all agents tested, Amphora was the most highly active against gonorrheain vitro. The following table representsin vitroactivity of test articles and control agents against seven strains of gonorrhea:
| | | | | | | | | | | | | | | | | | | | |
Test Agent | | Number of gonorrhea strains inhibited/
total number of strains tested | |
| | | Dilution of formulated agent | |
| | | 10 | % | | | 5 | % | | | 2.5 | % | | | 1.25 | % | | | 0.625 | % |
PRO2000 | | | 6/7 | | | | 4/7 | | | | 2/7 | | | | 0/7 | | | | 0/7 | |
CAP gel | | | 6/7 | | | | 0/7 | | | | 0/7 | | | | 0/7 | | | | 0/7 | |
Cellulose sulfate | | | 1/7 | | | | 1/7 | | | | 1/7 | | | | 0/7 | | | | 0/7 | |
BufferGel | | | 7/7 | | | | 3/7 | | | | 0/7 | | | | 0/7 | | | | 0/7 | |
CarraGuard | | | 0/7 | | | | 0/7 | | | | 0/7 | | | | 0/7 | | | | 0/7 | |
T-PSS1 (5%) | | | 6/7 | | | | 5/7 | | | | 3/7 | | | | 2/7 | | | | 1/7 | |
Carbopol 1382 | | | 0/7 | | | | 0/7 | | | | 0/7 | | | | 0/7 | | | | 0/7 | |
Methylcellulose | | | 0/7 | | | | 0/7 | | | | 0/7 | | | | 0/7 | | | | 0/7 | |
Amphora | | | 7/7 | | | | 7/7 | | | | 7/7 | | | | 6/7 | | | | 6/7 | |
1 | T-PSS =polysodium 4-styrene sulfonate |
Building on the microbicide potential of Amphora demonstrated in preclinical trials, we are currently conducting a double-blinded, placebo-controlled pivotal Phase 2b/3 trial to evaluate the efficacy of Amphora for the prevention of sexual transmission of two common STIs, chlamydia (primary endpoint) and gonorrhea (secondary endpoint). This trial is designed to enroll 844 women 18 to 45 years of age at approximately 50 sites in the United States. Should this trial meet its primary endpoint, the FDA has indicated it may be considered as one of two pivotal trials required for approval of Amphora for the prevention of chlamydia in women, for which it has been granted Fast Track designation by the FDA. The
FDA’s Fast Track program is intended to expedite or facilitate the process of reviewing new drugs and provides eligibility for priority review, if relevant criteria are met.
As previously noted, Amphora has been granted QIDP designation by the FDA for the prevention of gonorrhea in women.
BV Product Candidate
BV effects an estimated 21 million women, or 29.2% of women of reproductive age in the United States, and is considered to be the most common reproductive tract infection for women. Data suggests BV recurs in up to 58% of women within the first 12 months of treatment. There are currently no FDA-approved products indicated for the reduction of recurrent BV.
Preclinical tests have shown our investigational product kills many of the microbes responsible for BV while not affecting lactobacilli, a normal and beneficial bacterium found in a healthy vagina. The inhibitory mechanism comprises our BV product candidate’s buffered acidity and the presence of active pharmaceutical ingredients in the MPT vaginal gel.
We filed an Investigational New Drug Application, or IND, with the FDA in March 2016 to study the ability of our BV product candidate to reduce recurrent BV. Following submission of the IND, we conducted a Phase 1 trial (EVO-002) to evaluate the ability of a single vaginal administration of our BV product candidate at three different doses to reduce vaginal pH. The trial was completed in late 2016 and revealed the highest dose evaluated (5-gram) reduced vaginal pH for up to seven days following a single administration compared to placebo gel or no gel. We are currently designing a Phase 2b/3 trial to examine the ability of a 5-gram dose of our BV product candidate to reduce recurrent BV over a 16-week intervention period versus placebo gel. We expect this phase 2b/3 trial to enroll approximately 230 women at up to 36 sites in the United States.
As previously noted, Amphora has been granted QIDP designation by the FDA for the prevention of the recurrence of BV.
Commercialization Strategy
We plan to implement a global strategy to commercialize Amphora, if approved. In the United States, our plan is to build our own integrated sales and marketing infrastructure. Outside of the United States, we expect to leverage global pharmaceutical companies or other qualified potential partners to license commercialization rights or enter collaborations for the commercialization and distribution of Amphora.
While awaiting the decision from the FDA as to the approval of Amphora, our planned pre-commercialization activities will include:
the selection of commercial suppliers, which includes agency of record for the Amphora brand, hiring of sales and sales support personnel to support our anticipated commercialization of Amphora, initiation of payer programs including the addition of medical science liaisons and national/key account managers, and the selection of third-party logistic provider(s); and
the optimization of manufacturing capabilities to include the installation of new equipment into manufacturers’ facilities, planning and preparing for all requisite inspections, planning for process validation and registration batch quantities, and establishing secondary (back-up) manufacturing capability.
United States
We estimate the United States market is the largest commercial opportunity for our product candidates. If Amphora is approved for commercialization by the FDA, we intend to establish a commercial sales force
to market Amphora directly to obstetricians and OB/GYNs who write the majority of prescriptions for contraceptive products.
The top 10% of prescribers (98% of which are OB/GYNs) account for 46% of the annual contraception prescriptions in the United States. The American Congress of Obstetricians and Gynecologists, or ACOG, reports there are approximately 36,000 fellows currently practicing in the United States. We intend to target the top 30% by deploying a sales force of approximately 85 sales representatives. Our direct sales force will be complemented by print and digital advertising, social media campaigns, access programs, educational campaigns, and non-personal promotion campaigns targeting both consumers and healthcare providers.
Successful prescription drug market launches require comprehensive and integrated pre-launch activities. During the pre-commercialization phase for Amphora, we intend to assemble an experienced team of key account managers and medical science liaisons expected to focus on ensuring key payer accounts, pharmacy benefit managers, key opinion leaders and medical associations who are educated about the need to offer a wider set of options to women seeking non-hormonal, woman-controlled contraceptive methods. We expect these educational activities will be supported by presentation of clinical data at key national congresses (such as the annual meetings of ACOG and the Society of Family Planning), clinical publications, and additional market development activities. Our pre- and post-commercialization activities are expected to include multi-channel marketing campaigns to raise brand awareness, including direct-to-consumer and health care professional campaigns. These key initiatives will be supported by awareness campaigns in social media, online and print advertisements, paid and earned social media support, and public relations efforts. We expect these campaigns to encourage patients to consult their healthcare providers and ensure payer and healthcare provider strategies are implemented.
Ex-United States Markets
In markets outside of the United States, if a product candidate is approved for marketing in an individual market, we intend to establish regional and/or global partnerships by either sublicensing the commercialization rights or entering into distribution agreements with one or more third parties for the commercialization of the applicable product candidate in that market.
Payer and Reimbursement Strategy
United States
We have conducted market research with 45 different healthcare plans covering approximately 80% of covered lives within the United States to better understand viable access and pricing strategies for Amphora. Overall, a majority of respondents were positive about the introduction of a new contraceptive method. These respondents cited the many unintended pregnancies, high costs associated with unwanted pregnancies, and the underlying limitations in the contraceptive category (i.e. the lack of non-hormonal options) as reasons a new contraceptive option is desirable. We aim to have approximately 60% of all commercial healthcare plans offering full access and complete coverage of Amphora for all the reproductive aged women’s lives they are managing by the end of the first year of commercialization of Amphora. This coverage is expected to build to approximately 85% to 90% at peak sales.
Pricing Strategy
Overall, healthcare plans appear receptive to the idea of pricing Amphora like that of branded oral contraceptives. Healthcare plans interviewed during market research expected Amphora to be priced between $100 and $200 for a monthly supply of a 12-applicator box (comparable to branded contraceptives), believing Amphora would ultimately offset other costs the payer may incur (i.e. unwanted pregnancies).
Third-party Payers
Market acceptance and sales of Amphora and our other product candidates, if approved, will depend in part on the extent to which reimbursement for these products will be available from third-party payers, including government health administration authorities, managed care organizations and private health insurers. Third-party payers decide which therapies they will pay for and establish reimbursement levels. Third-party payers in the United States often rely upon Medicare coverage policy and payment limitations in setting their own coverage and reimbursement policies. However, decisions regarding the extent of coverage and amount of reimbursement to be provided for any product candidates we develop will be made on a payer-by-payer basis. One payer’s determination to provide coverage for a drug does not assure other payers will also provide coverage and adequate reimbursement for the drug. Additionally, a third-party payer’s decision to provide coverage for a therapy does not imply that an adequate reimbursement rate will be approved.
Third-party payers are increasingly challenging the prices charged for pharmaceutical and medical device products. The United States government and other third-party payers are increasingly limiting both coverage and the level of reimbursement for new drugs and medical devices, in addition to questioning their safety and efficacy. We may incur significant costs to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of our product candidates, in addition to the costs required to obtain FDA approvals. Third-party payer coverage may not be available to patients for Amphora or any future product we may seek to commercialize. If third-party payers do not provide coverage and adequate reimbursement for Amphora or our other product candidates, healthcare providers may not prescribe them or patients may ask their healthcare providers to prescribe competing products with more favorable reimbursement.
Managed care organizations and other private insurers frequently adopt their own payment or reimbursement reductions. Consolidation among managed care organizations has increased the negotiating power of these entities. Third-party payers increasingly employ formularies, which might not include all the approved products for a particular indication, to control costs by negotiating discounted prices in exchange for formulary inclusion. We intend to target those healthcare plans managing the largest number of covered lives to achieve optimal access for our product portfolio.
Europe
Our market research found that EU consumers were interested in the unique benefits of Amphora product profiles, especially since Amphora is non-hormonal. Contraceptive products are not reimbursed in all the EU member countries. For example, in Italy there is no coverage for contraceptives, in France and Spain, only oral contraceptives are generally covered, and in Germany, individual reimbursement policies apply.
Pricing and reimbursement
In the EU, pricing and reimbursement strategies vary widely from country to country. Some countries mandate that drug products may be marketed only after a reimbursement price has been agreed, while others may require the completion of additional studies that compare the cost-effectiveness of a product candidate to currently available therapies. For example, the EU provides options for its member states to restrict the range of drug products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. EU member states may approve a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of offering a drug product on the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure on healthcare costs in general,
particularly prescription drugs, has become intense, creating increasingly high barriers for entry of new products. In addition, in some countries, cross-border imports from lower-priced markets exert competitive pressure that may reduce pricing within a country. Therefore, the development of new drug launch strategies has become very challenging to meet both patient need/demand while ensuring products are commercially viable in those markets.
Amphora Manufacturing
We plan to outsource the manufacturing of Amphora (and our other potential product candidates) to third parties. Currently, we have contracted with a third party to manufacture our clinical supplies of Amphora. This third party has agreed to manufacture Amphora and potential other product candidates in accordance with all applicable cGMP regulations, as well as in compliance with all applicable laws and other relevant regulatory agency requirements for manufacture of pharmaceutical drug products and combination drug-device products.
Competition
As shown below, the contraception market was established in 1960 with the introduction of “the pill,” the first oral contraceptive widely available to women in the United States. This high-dose hormonal option remained the primary form of available contraception on the market until 1988 when the copper IUD was introduced, offering the first non-hormonal option for birth control. As shown in the time line below, there was no notable innovation providing additional options in women’s reproductive health until 30 years after the introduction of “the pill,” when pharmaceutical companies introduced synthetic hormonal products with different hormonal delivery systems, including the hormonal IUD, implants, the patch, and vaginal ring.
If approved, Amphora would compete for market share in at least four categories: 1) oral contraception, 2) Long-Acting Reversible Contraception, or LARC, comprising IUDs, implants, and injectables, 3) non-oral hormonal contraceptives, comprising weekly or monthly options including the patch and vaginal ring, and 4) OTC methods, dominated primarily by the condom.
Oral Contraceptives (the “pill”)
The pill is the most commonly used form of birth control in the United States today. Birth control pills are marketed under a variety of brand names, and currently, there are only two promoted branded pills — Lo Lostrin® FE (Allergan) and Natazia® (Bayer). There are two main kinds of oral contraceptives — combination birth control pills, which contain estrogen and progestin, and the “mini pill,” which contains only progestin. Oral contraceptives typically must be taken on a regular or daily basis to be effective.
LARC
Implants
The contraception implant (principally marketed in the United States as Nexplanon® by a subsidiary of Merck & Co.), which must be implanted under the skin and removed by a qualified healthcare provider, requiring a medical procedure, provides contraception by releasing hormones over a three-year period. The
implant has realized an increase in market share over the past five years, outpacing the overall contraceptive category year-over-year, with annual sales in the United States of approximately $449 million.
IUDs
The copper IUD was introduced to the market in 1988 and provides protection by disrupting sperm motility and damaging sperm so that they are prevented from joining with an ovum. Today, the copper IUD is principally marketed by Cooper Surgical, Inc. as Paragard. The hormonal IUD is principally offered under the brand names, Kyleena®, Skyla® and Mirena, a family of products from Bayer Pharmaceuticals. IUDs have annual sales in North America of approximately $1.3 billion. All IUDs must be inserted or removed by a physician.
The LARCs are not dependent on user adherence, which appeals to those who benefit from a passive form of birth control with no daily requirement to take a pill. However, many women have decided to remove their LARC due to the hormonal side effects they experience.
Non-oral, Hormonal Contraceptives
Contraceptive Patch
The weekly contraceptive patch was introduced in 2000 by Johnson & Johnson’s Janssen division; however, deaths resulting from venous thromboembolism due to hormonal exposure had a significant negative impact on the patch and led to label changes restricting utilization. Following the loss of exclusivity, Johnson & Johnson’s Janssen division exited women’s healthcare and contraception as a promotional category.
Vaginal Ring
The hormonal vaginal ring by Merck & Co. was introduced to the market in 2001 and had annual sales in 2016 in the United States of approximately $576 million. The ring is used for three weeks and then removed for a week during menses and a new hormonal vaginal ring is inserted. The efficacy for the vaginal ring is similar to hormonal oral contraception. Users of the vaginal ring report the same incidence of hormonal related side effects as those using oral hormonal contraception.
Injectables
The primary injectable hormonal contraceptive on the market is Depo-Provera® offered by Pfizer Inc. Each injection provides protection for up to 12 to 14 weeks, but patients must receive injections once every 12 weeks to get full contraceptive protection. Depo-Provera was introduced to the market in 1992 and has annual sales in the United States of approximately $211 million.
Non-prescription OTC
Condoms are the dominate product offering in OTC sales. They are manufactured primarily by Trojan® (Church & Dwight) and Durex® (Reckitt Benckiser) brands, with approximately six million women who depend on condom use as their only method of birth control. The market size in the United States for condoms in 2017 was over $1.3 billion. In addition, spermicides are also available in sponges, jelly/creams, and foams and have very limited utilization.
The adoption of Amphora, if approved, is expected to come equally from each category discussed, as interest in Amphora falls into two distinct segments: (1) those women seeking an alternative to hormonal contraception; and (2) those women who are expected to utilize Amphora as added protection to their current form of birth control. Our market research has indicated that the hormone-free, woman-controlled aspect of Amphora makes it an attractive option across the entire competitive set.
Rush License Agreement
As discussed above, we entered the Rush License Agreement, pursuant to which Rush University granted us an exclusive, worldwide license of certain patents and know-how, or the Rush Licensed IP, related to our MPT vaginal gel technology authorizing us to make, distribute and commercialize products and processes for any and all therapeutic, prophylactic and/or diagnostic uses, including, without limitation, use for female vaginal health and/or contraception.
As further described in the Rush License Agreement, we are under an obligation to make tiered royalty payments in the mid-single digits to Rush University based on net sales of products and/or processes that are claimed in the patents or the know-how licensed to us under the Rush License Agreement. To the extent one of our products is not claimed in a licensed patent but does utilize the licensed know-how, the applicable royalty rate to such product and/or processes would be reduced.
In addition, if during the three years after one of our products or processes has received regulatory approval and is introduced to the market, if the amounts paid to Rush University as royalties or sublicensing fees do not total a minimum royalty amount, then we must pay a minimum annual royalty to Rush University. If we have to pay a royalty or other payment to a third party in order for us to avoid infringement of third-party rights, we may offset up to 50% owed to such third party by up to 50% of the amounts owed to Rush University under the Rush License. The above-described royalty payments expire upon termination of the Rush License Agreement in accordance with its terms.
We also have the right to sub-license our rights to affiliates (without the prior approval of Rush University) and to third parties (with the prior written approval of Rush University, not to be unreasonably delayed or conditioned). To the extent Rush University approves of a third-party sub-license, in lieu of any royalty payment obligation under the Rush License Agreement, we would then be under an obligation to pay Rush University a sub-license fee equal to a percentage of any sublicensing revenue received from any third-party sub-licensee.
Pursuant to the Rush License Agreement, Rush University, its affiliates and/or its sublicensees have the right in the form of a royalty free, non-exclusive license from us under the applicable patents and know-how to use the technology embodied by such patents and know-how for non-commercial research purposes.
The Rush License Agreement provides that we must use our best efforts to bring one or more products or processes based on the licensed patents to market, and to continue diligent marketing efforts for one or more such products or processes during the term of the agreement. Additionally, within one month of the end of each fiscal quarter until the date of first commercial sale of a product, we must provide Rush University with a written development report summarizing our product development activities since the prior such report, as well as any necessary adjustments to the plan of development.
The Rush License Agreement contains additional customary representations and warranties, insurance and confidentiality provisions and is governed by the laws of the State of Illinois, except that questions affecting the licensed patents will be determined in accordance with the national law of the country in which the applicable patent was granted. We have the first right, but not the obligation, to pursue potential infringers of the licensed patents technology and know-how and the prior written approval of Rush University is required to settle any related claim.
We have agreed to defend, indemnify and hold harmless Rush University, its employees and certain other related parties from and against any and all liabilities, damages, settlements, penalties, fines, costs or expenses arising out of any claim, complaint, suit, proceeding or cause of action brought against the relevant indemnity by a third party alleging damage arising from or occurring as a result of the activities performed by or under the authority of us, our affiliates or sub-licensees in connection with the exercise of
our licenses and rights under the Rush License Agreement, except to the extent caused by Rush University’s negligence or willful misconduct.
Unless terminated in accordance with its terms, the term of the Rush License Agreement continues until the expiration, revocation or invalidation of the last of the patents or the abandonment of the last patent application included within the licensed patents and technology, which includes any patent claiming an improvement made within the term of the Rush License Agreement in the course of research supported or developed by Rush University utilizing the technology.
The Rush License Agreement may be terminated upon mutual written consent of both parties or by a non-breaching party if the other party commits a breach or default of any covenant in the agreement and fails to cure such breach within thirty (30) days after receiving written notice of such breach or default.
If we are in default of our obligations under the Rush License Agreement and such default has not been cured within thirty (30) days, Rush University has the option to: (a) terminate the Rush License Agreement; or (b) convert the exclusive license to a non-exclusive license (subject to the rights of any pre-approved sub-licensee under any pre-approved sub-license). Termination of the Rush License Agreement or conversion to a non-exclusive license shall give Rush University the right to terminate all sub-licenses granted by us that were not approved by Rush University. If Rush University declines to terminate any such sub-license agreement (or such sub-license agreement was approved by Rush University) then: (a) in the case of termination of the Rush License Agreement, the sub-license agreement shall become a direct agreement between Rush University and the relevant sub-licensee; and (b) in the case of conversion of the Rush License Agreement license to a non-exclusive license, such license shall continue in full force and effect in accordance with its terms.
In addition, Rush University may terminate the agreement: (i) upon thirty (30) days’ notice in the event that the aggregate royalties paid under such agreement in any calendar year following March 27, 2017 do not equal a minimum of at least $50,000, except that we may pay to Rush University the difference between the royalties actually paid and $50,000 to prevent Rush University from so terminating the Rush License Agreement, and under such circumstances the Rush License Agreement will continue for an additional two (2) years beyond March 27, 2017, or until March 27, 2019; and (ii) in a given country as regards our rights in such country, upon sixty (60) days’ notice if, prior to March 27, 2022, we have not, in such country, engaged in certain specified activities in such country in an effort to exploit the products and processes covered by the licensed patents and technology in such country. To date, we have not paid any royalties pursuant to the Rush License Agreement. However, to the extent an extension of the Rush License Agreement is required, we believe we would be able to obtain such an extension on commercially reasonable terms.
Intellectual Property
We believe we have a strong and growing intellectual property portfolio. We strive to protect the proprietary technology we believe is important to our business, including seeking and maintaining patents intended to cover our product candidates, and their methods of use, as well as any other inventions that are commercially important to the development of our business. We seek to obtain domestic and international patent protection, and endeavor to promptly file patent applications for new commercially valuable inventions. We also may rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection.
Our success will depend on our ability to obtain and maintain patent and other proprietary protection for commercially important technology, inventions and know-how related to our business, defend and enforce our patents, and other intellectual property rights, preserve the confidentiality of our trade secrets
and operate without infringing the valid and enforceable patents and other proprietary rights of third parties. We will also rely on continuing technological innovation and in-licensing opportunities to develop and maintain our proprietary position.
As of March 2018, we own or have exclusively licensed approximately 27 issued patents and allowed applications in the United States and other countries and jurisdictions, and have approximately 33 applications pending in the United States and other countries and jurisdictions.
We have an exclusive worldwide license to a portfolio of licensed patents held by Rush University, which provide general protection for Amphora, which expire in 2021 and could be eligible for extensions to at least 2024 in the United States and to 2026 in certain European jurisdictions, if granted by those regulatory bodies. Further, we solely own several patent families relating to the composition and therapeutic use of Amphora, which, upon grant, would expire at the earliest in 2033. We believe that our licensed and solely owned non-hormonal contraceptive gel patent filings, combined with our substantial know-how in this field, will continue to provide opportunities for us to establish a significant barrier to competitor entry into the market.
In addition, we commissioned an expert opinion in 2015 whose view was that bioequivalence for Amphora would be difficult to show, thus making it potentially more difficult to develop a generic version of Amphora.
In addition to patents, we rely, and expect to rely, on trade secrets and know-how to develop and maintain our competitive positions. For example, certain aspects of the composition, manufacturing, and use of Amphora are protected by unpatented trade secrets and know-how. Although trade secrets and know-how can be difficult to protect we seek to protect our proprietary technology and processes, in part, by confidentiality agreements with our employees, consultants, scientific advisors, collaborators, and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, agreements or security measures may be breached and we may not have adequate remedies for any breach. In addition, our trade secrets and know-how may otherwise become known or may be independently discovered by competitors. To the extent our consultants, contractors or collaborators use intellectual property owned by third parties in their work for us, disputes may arise as to the rights in related or resulting intellectual property, including trade secret, know-how and inventions.
Trademark Basics and Strategy
We own or have rights to various trademarks, copyrights and trade names used in our business, including Evofem and Amphora. Our logos and trademarks are the property of Evofem Biosciences, Inc. All other brand names or trademarks appearing in this report are the property of their respective holders. Our use or display of other parties’ trademarks, trade dress, or products in this report is not intended to, and does not, imply a relationship with, or endorsement or sponsorship of us, by the trademark or trade dress owners.
Healthcare Laws and Regulations
Healthcare providers and third-party payers play a primary role in the recommendation and prescription of drug products that are granted marketing approval. Our current and future arrangements with healthcare professionals, principal investigators, consultants, third-party payers and customers may expose
us to broadly applicable fraud and abuse and other healthcare laws and regulations. Such restrictions under applicable federal and state healthcare laws and regulations, include but are not limited to the following:
Anti-Kickback Statute — the Federal Anti-Kickback Statute, among other things, prohibits persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federally funded healthcare programs such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate the statute in order to have committed a violation. In addition, the government may assert that a claim that includes items or services resulting from a violation of the Federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act.
Civil and Criminal False Claims Laws — the federal civil and criminal false claims laws, including the False Claims Act, which can be enforced by private citizens through civil whistleblower and qui tam actions, prohibit, among other things, individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government.
Health Insurance Portability and Accountability Act of 1996 — the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, prohibits, among other things, individuals or entities from executing a scheme to defraud any healthcare benefit program or making any false statements relating to healthcare matters; as in the case of the Federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate the statute in order to have committed a violation; additionally, HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their respective implementing regulations, impose certain obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information without appropriate authorization, on entities subject to the law, such as certain healthcare providers, health plans, and healthcare clearinghouses and their respective business associates that perform services for them that involve the creation, use, maintenance or disclosure of, individually identifiable health information;
False Statements Statute — the federal False Statements Statutes prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services.
Stark Law — the federal ban on physician self-referrals prohibits, subject to certain exceptions, physician referrals of Medicare or Medicaid patients to an entity providing certain “designated health services” if the physician or an immediate family member of the physician has any financial relationships, including compensation arrangements or ownership interests, with that entity.
Sunshine Act — the federal transparency or “sunshine” requirements of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or collectively, the ACA, requires certain manufacturers of drugs, devices, biologics and medical supplies to annually report to the Department of Health and Human Services, or the DHHS, information related to payments and other transfers of value made to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members.
Federal Food, Drug, and Cosmetic Act — The Federal Food Drug and Cosmetic Act, or the FDCA, and the regulations promulgated pursuant to the FDCA by the FDA govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and import and export of pharmaceutical products as well as so-called combination products, such as those consisting of a drug and a delivery device. Failure to comply with applicable FDA pre-market, post-market, or other compliance requirements may subject a company to a variety of administrative or judicial sanctions, such as the FDA’s refusal to approve pending applications, a clinical hold, warning letters, recall or seizure of products, partial or total suspension of production, withdrawal of the product from the market, injunctions, fines, civil penalties or criminal prosecution.
State Transparency Laws — Some United States state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments to healthcare providers and other healthcare providers or marketing expenditures; some state laws require pharmaceutical companies to implement compliance programs and to track and report gifts, compensation and other remuneration provided to physicians, in addition to requiring drug manufacturers to report information related to payments to physicians and other healthcare providers or marketing expenditures and pricing information; and some state and local laws that require the registration of pharmaceutical sales representatives.
State and Foreign Regulatory Concerns — There are analogous State and foreign laws and regulations, such as State Anti-Kickback and False Claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payers, including private insurers. State and foreign laws also govern the privacy and security of health and personal information. These laws differ from each other in significant ways while applying simultaneously with HIPAA, thus complicating compliance efforts.
The scope and enforcement of these laws is uncertain and subject to rapid change. Regulatory authorities might challenge our current or future activities under these laws. Any such challenge could have a material adverse effect on our reputation, business, results of operations and financial condition. In addition, efforts to ensure that our business arrangements with third parties will comply with these laws will involve substantial costs. Any investigation of us or the third parties with whom we contract, regardless of the outcome, would be costly and time consuming. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, including, without limitation, damages, monetary fines, imprisonment, disgorgement of profits, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, debarment under the FDCA, additional reporting or oversight obligations if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with the law, contractual damages, reputational harm, diminished profits and future earnings, and curtailment or restructuring of our operations.
Healthcare Reform
In the United States and some foreign jurisdictions, there have been, and continue to be, several legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of product candidates, restrict or regulate post-approval activities, and affect our ability to profitably sell any product candidates for which we obtain marketing approval.
Among policy makers and payers in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives. In March 2010, the ACA was passed, which substantially changed the way healthcare is financed by both the government and private insurers, and significantly impacts the U.S. pharmaceutical industry. The ACA, among other things: (i) mandates that preventative services which have strong scientific evidence of health benefits, including in some cases contraception, must be fully covered certain private third-party payers when they are delivered by an in-network provider; (ii) increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extends the rebate program to individuals enrolled in Medicaid managed care organizations; (iii) established an annual, nondeductible fee on any entity that manufactures or imports certain specified branded prescription drugs and biologic agents apportioned among these entities according to their market share in some government healthcare programs; (iv) expanded the availability of lower pricing under the 340B drug pricing program by adding new entities to the program; (v) increased the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program, to 23.1% and 13% of the average manufacturer price for most branded and generic drugs, respectively and capped the total rebate amount for innovator drugs at 100% of the Average Manufacturer Price, or AMP; (vi) expanded the eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers’ Medicaid rebate liability; (vii) established a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% (and 70%, commencing January 1, 2019) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D; (viii) created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; and (ix) established a Center for Medicare Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug.
Some of the provisions of the ACA have yet to be implemented, and there have been judicial and Congressional challenges to certain aspects of the ACA, as well as recent efforts by the Trump administration to repeal or replace certain aspects of the ACA. Since January 2017, President Trump has signed two Executive Orders and other directives designed to delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passed comprehensive repeal legislation, two bills affecting the implementation of certain taxes under the ACA have been signed into law. The Tax Cuts and Jobs Act of 2017 includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”. Additionally, on January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain ACA-mandated fees, including the so-called “Cadillac” tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device excise tax on non-exempt medical devices. Further, the Bipartisan Budget Act of 2018, or the BBA, among other things, amends the ACA, effective January 1, 2019, to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole”. We continue to evaluate the potential impact of the ACA and its possible repeal or replacement on our business.
Other legislative changes have been proposed and adopted since the ACA was enacted. These changes include aggregate reductions to Medicare payments to providers of 2% per fiscal year pursuant to the Budget Control Act of 2011, which began in 2013, and due to subsequent legislative amendments to the statute, including the BBA, will remain in effect through 2027 unless additional Congressional action is taken. The American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other healthcare funding, which could have an adverse effect on customers for our product candidates, if approved, and, accordingly, our financial operations.
Additionally, there has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics. Such scrutiny has resulted in several recent congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. At the federal level, the Trump administration’s budget proposal for fiscal year 2019 contains further drug price control measures that could be enacted during the 2019 budget process or in other future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid, and to eliminate cost sharing for generic drugs for low-income patients. While any proposed measures will require authorization through additional legislation to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
Government Regulation and Product Approval
United States
The research, development, testing, manufacture, labeling, promotion, advertising, distribution and marketing, among other things, of our products are subject to extensive regulation by governmental authorities in the United States and other countries. In the United States, the FDA regulates drugs under the FDCA and its implementing regulations. Failure to comply with the applicable United States requirements may subject us to administrative or judicial sanctions, such as FDA refusal to approve pending NDA warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions and/or criminal prosecution. Medical products containing a combination of new drugs, biological products or medical devices are regulated as “combination products” in the United States. A combination product generally is defined as a product comprising of components from two or more regulatory categories (e.g., drug/device, device/biologic, drug/biologic). Each component of a combination product is subject to the requirements established by the FDA for that type of component, whether a new drug, biologic or device. To facilitate pre-market review of combination products, the FDA designates one of its centers to have primary jurisdiction for the pre-market review and regulation of the overall product based upon a determination by the FDA of the primary mode of action of the combination product. Amphora is subject to review by the FDA, and it is anticipated that Amphora will be regulated as a drug/device combination product with a drug mode of action that requires the submission and approval of a NDA prior to marketing.
FDA Drug Approval Process
Amphora and our other product candidates may not be marketed in the United States until the product has received FDA approval. The steps to be completed before a drug may be marketed in the United States include:
preclinical laboratory tests, animal studies, and formulation studies, all performed in accordance with the FDA’s Good Laboratory Practice regulations;
submission to the FDA of an IND for human clinical testing;
adequate and well-controlled human clinical trials to establish the safety and efficacy of the drug for each indication to the FDA’s satisfaction;
submission to the FDA of an NDA;
satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance with cGMP regulations;
Satisfactory completion of FDA bioresearch monitoring inspections of selected investigational sites at which the drug product was subject to clinical trials to assess compliance with GCP regulations; and
FDA review and approval of the NDA.
Preclinical tests include laboratory evaluation of product chemistry, toxicity and formulation, as well as animal studies. The results of the preclinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND, which must become effective before human clinical trials in the United States may begin and is required to be updated annually. An IND will automatically become effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions about issues such as the conduct of the trials as outlined in the IND and imposes a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding FDA concerns or questions before clinical trials can proceed. Our first IND submitted in 2011 relates to Amphora for the prevention of pregnancy (AMP001). Our second IND relates to our BV product candidate (EVO-002). We have also been allowed to conduct a clinical trial relating to prevention of chlamydia and gonorrhea (AMPREVENCE) under this second IND, and the first subject was enrolled in this trial in December 2017.
Clinical trials involve the administration of the investigational drug to human subjects under the supervision of qualified investigators. Clinical trials are conducted under protocols detailing the objectives of the trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND. Clinical trials necessary for product approval are typically conducted in three sequential phases, but the phases may overlap. The trial protocol and informed consent information for trial subjects in clinical trials must also be approved by an Institutional Review Board, or IRB, for each institution where the trials will be conducted, and each IRB must monitor the trial until completion; an IRB may halt a trial under its jurisdiction for safety reasons. Trial subjects must sign an informed consent form before participating in a clinical trial. Clinical testing also must satisfy extensive good clinical practice regulations and regulations for informed consent and privacy of individually identifiable information.
Assuming successful completion of the required clinical testing, the results of the preclinical studies and of the clinical trials, together with other detailed information, including information on the manufacture and composition of the drug, are submitted to the FDA in the form of an NDA requesting approval to market the product for one or more indications. An NDA must be accompanied by payment of a significant user fee to the FDA, and program user fees are payable annually after a drug’s approval. Section 505(b)(1)
and Section 505(b)(2) of the FDCA are the provisions governing the type of NDAs that may be submitted under the FDCA. Section 505(b)(1) is the traditional pathway for new chemical entities when no other new drug containing the same active pharmaceutical ingredient or active moiety, which is the molecule or ion responsible for the action of the drug substance, has been approved by the FDA. As an alternate pathway to FDA approval for new or improved formulations of previously approved products, a company may file a Section 505(b)(2) NDA. Section 505(b)(2) permits the submission of an NDA where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference. During the sixty days after submission, the FDA reviews any NDA submitted to ensure that it is sufficiently complete for substantive review before the FDA accepts the NDA for filing. The FDA may request additional information rather than accept the NDA for filing. Even if the NDA is filed by the FDA, companies cannot be sure that any approval will be granted on a timely basis, if at all. The FDA may also refer the application to an appropriate advisory committee, typically a panel of clinicians, for review, evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendations of the advisory committee, but it typically follows such recommendations.
The FDA may require that certain contraindications, warnings or precautions be included in the product labeling, or may condition the approval of an NDA on other changes to the proposed labeling, development of adequate controls and specifications, or a commitment to conduct post-marketing testing or clinical trials and Risk Evaluation and Mitigation Strategies and surveillance programs to monitor the safety of approved products that have been commercialized.
Post-Approval Requirements
Oftentimes, even after a drug has been approved by the FDA for sale, the FDA may require that certain post-approval requirements be satisfied, including the conduct of additional clinical trials. If such post-approval conditions are not satisfied, the FDA may withdraw its approval of the drug. In addition, holders of an approved NDA are required to (i) report certain adverse reactions to the FDA, (ii) comply with certain requirements concerning advertising and promotional labeling for their products, and (iii) continue to have quality control and manufacturing procedures conform to cGMP regulations after approval. Certain changes to the product, its manufacturing, or its labeling also require the NDA holder to submit a supplemental NDA to the Agency and, in many cases, to receive prior approval from FDA before implementing the proposed changes. The FDA periodically inspects the sponsor’s records related to safety reporting and/or manufacturing facilities. This latter effort includes assessment of ongoing compliance with cGMP regulations. In addition, discovery of problems with a product after approval may result in restrictions on a product, including withdrawal of the product from the market.
Hatch-Waxman Act
As part of the Drug Price Competition and Patent Term Restoration Act of 1984, otherwise known as the Hatch-Waxman Amendment, Section 505(b)(2) of the FDCA was enacted. Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference. A Section 505(b)(2) applicant may eliminate the need to conduct certain preclinical or clinical studies, if it can establish that reliance on studies conducted for a previously-approved product is scientifically appropriate. The FDA may also require companies to perform additional trials or measurements to support the change from the approved product. The FDA may then approve the new product for all or some of the label indications for which the referenced product has been approved, as well as for any new indication sought by the Section 505(b)(2) applicant.
To the extent the Section 505(b)(2) applicant is relying on trials conducted for an already approved product, which is referred to as the Listed Drug, the applicant is required to certify to the FDA concerning any listed patents in the FDA’s Orange Book publication that relate to the Listed Drug. Specifically, the applicant must certify for all listed patents one of the following certifications: (i) the required patent information has not been filed by the original applicant; (ii) the listed patent already has expired; (iii) the listed patent has not expired, but will expire on a specified date and approval is sought after patent expiration; or (iv) the listed patent is invalid or will not be infringed by the manufacture, use or sale of the new product.
If a Paragraph I or II certification is filed, the FDA may make approval of the application effective immediately upon completion of its review. If a Paragraph III certification is filed, the approval may be made effective on the patent expiration date specified in the application, although a tentative approval may be issued before that time. If an application contains a Paragraph IV certification, a series of events will be triggered, the outcome of which will determine the effective date of approval of the 505(b)(2) application. The Section 505(b)(2) application also will not be approved until any non-patent exclusivity, such as exclusivity for obtaining approval of a new chemical entity, listed in the Orange Book for the Listed Drug has expired.
A certification that the new product will not infringe the Listed Drug’s listed patents or that such patents are invalid is called a Paragraph IV certification. If the applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA and patent holders for the Listed Drug once the applicant’s NDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a legal challenge to the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days of their receipt of a Paragraph IV certification automatically prevents the FDA from approving the Section 505(b)(2) NDA by imposing a 30-month automatic statutory injunction, which may be shortened by the court in a pending patent case if either party fails to reasonably cooperate in expediting the case. The 30-month stay terminates if a court issues a final order determining that the patent is invalid, unenforceable or not infringed. Alternatively, if the listed patent holder does not file a patent infringement lawsuit within the required 45-day period, the applicant’s NDA will not be subject to the 30-month stay.
The Hatch-Waxman Amendments provide five years of data exclusivity for new chemical entities which prevents the FDA from accepting Abbreviated New Drug Applications and 505(b)(2) applications containing the protected active ingredient. The Hatch-Waxman Amendments also provide three years of exclusivity for applications containing the results of new clinical investigations (other than bioavailability studies) essential to the FDA’s approval of new uses of approved products such as new indications, delivery mechanisms, dosage forms, strengths, or conditions of use.
Other Governmental Regulations and Environmental Matters
The FDA regulates all advertising and promotion activities for products under its jurisdiction both prior to and after approval. A company can make only those claims relating to safety and efficacy that are approved by the FDA. Failure to comply with applicable FDA requirements may subject a company to adverse publicity, enforcement action by the FDA, corrective advertising, consent decrees and the full range of civil and criminal penalties available to the FDA.
In addition, under the Pediatric Research Equity Act, or the PREA, an NDA or supplement to an NDA must contain data that are adequate to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA has indicated that Amphora is covered by the PREA, but the FDA may, on its own initiative or at the request of an applicant, grant
deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements. We have requested a partial waiver of the PREA in our NDA.
If we establish international operations, we will be subject to compliance with the FCPA, which prohibits corporations and individuals from paying, offering to pay, or authorizing the payment of anything of value to any foreign government official, government staff member, political party, or political candidate to obtain or retain business or to otherwise influence a person working in an official capacity. We also may be implicated under the FCPA for activities by our partners, collaborators, contract research organizations, vendors or other agents.
Our present and future business has been and will continue to be subject to various other laws and regulations. Various laws, regulations and recommendations relating to safe working conditions, laboratory practices, the experimental use of animals, and the purchase, storage, movement, import and export and use and disposal of hazardous or potentially hazardous substances used in connection with our research work are or may be applicable to our activities. Certain agreements involving exclusive license rights, if any, or acquisitions, if any, may be subject to national or supranational antitrust regulatory control, the effect of which cannot be predicted. The extent of government regulation, which might result from future legislation or administrative action, cannot accurately be predicted.
Review and Approval of Drug Products in the European Union
We are currently assessing how Amphora is going to be regulated in the EU and expect that Amphora is going to be regulated as a drug. Pursuant to the European Clinical Trials Directive, a system for the approval of clinical trials in the EU has been implemented through national legislation of the member states. Under this system, an applicant must obtain approval from the competent national authority of an EU member state in which the clinical trial is to be conducted. Furthermore, the applicant may only start a clinical trial after a competent ethics committee has issued a favorable opinion. Clinical trial applications must be accompanied by an investigational medicinal product dossier with supporting information prescribed by the European Clinical Trials Directive and corresponding national laws of the member states and further detailed in applicable guidance documents.
To obtain marketing approval of a drug in the EU, an applicant must submit an MAA, either under a centralized or decentralized procedure. The centralized procedure provides for the grant of a single marketing authorization by the European Commission that is valid for all EU member states, Iceland, Lichtenstein and Norway. The centralized procedure is compulsory for specific products, including for medicines produced by certain biotechnological processes, products designated as orphan medicinal products, advanced therapy products and products with a new active substance indicated for the treatment of certain diseases. For products with a new active substance indicated for the treatment of certain diseases and products that are highly innovative or for which a centralized process is in the interest of patients, the centralized procedure may be optional.
The decentralized procedure is available to applicants who wish to market a product in specific EU member states where such product has not received marketing approval in any EU member states before. The decentralized procedure provides for an applicant to apply to one-member state to assess the application (the reference member state) and specifically list other member states in which it wishes to obtain approval (concerned member states). Under this procedure, an applicant submits an application based on identical dossiers and related materials, including a draft summary of product characteristics, and draft labelling and package leaflet, to the reference member state and each concerned member state. The reference member state prepares a draft assessment report and drafts of the related materials within 210 days after receipt of a valid application which is then reviewed and approved commented on by the concerned member states.
Within 90 days of receiving the reference member state’s assessment report and related materials, each concerned member state must decide whether to approve the assessment report and related materials.
In the EU, only products for which marketing authorizations have been granted may be promoted. Even if authorized, prescription-only medicines may only be promoted to healthcare professionals, not the general public. All promotion should be in accordance with the particulars listed in the summary of product characteristics. Promotional materials must also comply with various laws, and codes of conduct developed by pharmaceutical industry bodies in the EU which govern (amongst other things) the training of sales staff, promotional claims and their justification, comparative advertising, misleading advertising, endorsements, and (where permitted) advertising to the general public. Failure to comply with these requirements could lead to the imposition of penalties by the competent authorities of the EU member states. The penalties could include warnings, orders to discontinue the promotion of the medical device, seizure of promotional materials, fines and possible imprisonment.
Facilities
Our corporate headquarters are located in San Diego, California, where we lease approximately 16,000 square feet of office space. We have two five-year renewal options, but the sub-lessor is not expected to renew its lease. We believe that our existing facilities are adequate for our current needs.
Employees
As of March 20, 2018, we had a total of 24 full-time employees and engage consultants and contract workers on an as-needed basis. We believe the relations with our employees and consultants are good.
Legal Proceedings
From time to time we may be involved in various disputes and litigation matters that arise in the ordinary course of business. We are currently not a party to any material legal proceedings.
MANAGEMENT
The following table lists the names, ages as of March 20, 2018 and positions of the individuals who serve as our executive officers and directors:
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Name
| | Age | | | Position(s)
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Executive Officers
| | | | | | |
Saundra Pelletier
| | | 48 | | | Chief Executive Officer and Class III Director |
Justin J. File
| | | 47 | | | Chief Financial Officer |
Kelly Culwell, M.D.
| | | 44 | | | Chief Medical Officer |
Russ Barrans
| | | 58 | | | Chief Commercial Officer |
Alexander A. Fitzpatrick, Esq.
| | | 51 | | | General Counsel and Secretary |
Non-Employee Directors
| | | | | | |
Thomas Lynch
| | | 61 | | | Class III Director, Chairman of our board of directors |
Gillian Greer, Ph.D.
| | | 73 | | | Class II Director |
William Hall, Ph.D., M.D.
| | | 68 | | | Class II Director |
Tony O’Brien
| | | 54 | | | Class II Director |
Colin Rutherford
| | | 59 | | | Class I Director |
Kim P. Kamdar, Ph.D.
| | | 50 | | | Class I Director |
Our board of directors currently consists of seven members and is divided into three classes each serving staggered three-year terms until their respective successors are duly elected and qualified and their terms expire on a staggered basis as set forth below:
Class I directors’ terms expire at the annual meeting of our stockholders in 2018;
Class II directors’ terms expire at the annual meeting of stockholders in 2019; and
Class III directors’ terms expire at the annual meeting of stockholders in 2020.
There are no family relationships among any of our current directors and executive officers.
Executive Officers
Saundra Pelletier
Ms. Pelletier served as Private Evofem’s President and CEO since February 2013 and has served as our President and Chief Executive Officer since January 2018. From 2009 to 2016, Ms. Pelletier was the founding Chief Executive Officer of WomenCare Global International, or WCGI, an international non-profit organization focused on empowering, educating and enabling women and girls to make informed choices about their health. Under her leadership, WCGI secured approximately $68 million in committed funding from major foundations and governmental organizations and launched an innovative United States educational campaign with American actress/activist Jessica Biel. Since November 2017, Ms. Pelletier has served as the Chair of the board of WCG Cares, a non-profit California corporation whose primary purpose is to directly engage in and/or fund the development and implementation of programs that promote reproductive health, education, research and increased access to high-quality, innovative and affordable reproductive healthcare and healthcare products around the world. Ms. Pelletier also served as WCG Cares’ Chief Executive Officer and President from 2013 until November 2017. From 2005 to 2009, Ms. Pelletier was founder and Chief Executive Officer of Saundra Pelletier International, where she served as a management consultant, executive coach, entrepreneur, author and keynote speaker. From 2000 until 2004, Ms. Pelletier served as Vice President, Pharmaceuticals at Women First Healthcare, a specialty healthcare company dedicated to improving the health of women in mid-life, and from 1992 until 2000 she was Global
Franchise Leader (Vice President), with G.D. Searle, developer of the first female birth control pill and now a wholly owned trademark of Pfizer. In her capacity as a corporate vice president and global franchise leader, Ms. Pelletier managed a $250 million business unit, reorganized companies from the ground up, raised $40 million in capital, managed worldwide partnerships, negotiated cost saving licensing agreements, assessed country infrastructures, developed commercialization plans and hired full scale teams, including contract sales forces, to support women’s healthcare initiatives. Ms. Pelletier has launched pharmaceutical brands worldwide and expanded indications on female healthcare brands in multiple countries. She has had oversight and accountability for Sales, Marketing, Operations, Medical Affairs, Regulatory Affairs, Manufacturing, Customer Service, Business Development and Strategic Partnerships. In 2015, Ms. Pelletier was profiled by the United Nations Foundation as a New Champion for Reproductive Health, and in 2014 was awarded the Athena Pinnacle Award for Life Sciences, recognizing extraordinary leadership in the life sciences. She is a published author and an international keynote speaker on the economic return of investing in women and has spoken at the Clinton Global Initiative, Women Deliver, the Harvard School of Public Health, the Cavendish Global Health Impact Forum at Biocom, the University of Virginia’s Darden School of Business; and was the keynote speaker at the June 2016 Women’s Global Health Symposium. Her accomplishments have been frequently profiled in various media, including The New York Times, Inc. Magazine, Cosmopolitan, Devex, Refinery 29, Bustle, CNN, NBC News, Glamour, Marie Claire, BBC Radio, Global Grind and Vogue. Ms. Pelletier is the Chair of the Women Deliver Board of Directors and she is on the board of directors of ClearFast. We believe Ms. Pelletier’s service as our Chief Executive Officer and extensive professional experience in women’s healthcare qualifies her to serve as a member of our board of directors.
Justin J. File
Mr. File served as Private Evofem’s Chief Financial Officer since April 2015 and has served as our Chief Financial Officer since January 2018. Mr. File has also served as the CFO of the women’s health nonprofit organization WCG Cares since 2016. Mr. File has approximately 25 years of diverse accounting and finance experience within a variety of both public and private biotechnology and biopharmaceutical companies. Most recently, Mr. File provided executive financial and accounting oversight services to various biotechnology companies in San Diego, California, assisting in their initial public offering process and helping to establish and improve their accounting and finance operations as publicly-traded entities. Prior to this, Mr. File was Senior Director and Controller of Sequenom, Inc., a diagnostic company that developed and commercialized molecular diagnostics testing services for the women’s health market. During that time, Mr. File served as Treasurer of their diagnostic subsidiary and provided assistance in the raising of over $400 million in combined equity and convertible note offerings. Mr. File also assisted in the commercialization of four diagnostic tests in a two-year period, which included Sequenom’s revolutionary noninvasive prenatal test for Down syndrome. Earlier in his career Mr. File worked for approximately ten years in public accounting, primarily with Arthur Andersen LLP, where he worked with a variety of clients assisting with attestation and periodic reporting requirements, public offerings and acquisitions. Mr. File graduated from Central Washington University with a Bachelor of Science in Accounting and Business Administration and is a Certified Public Accountant (inactive).
Kelly Culwell, M.D.
Dr. Culwell is an Obstetrician/Gynecologist with over 16 years specializing in women’s health and contraceptive research. She served as Private Evofem’s Chief Medical Officer since April 2015 and has served as our Chief Medical Officer since January 2018. Dr. Culwell has also served as the Chief Medical Officer of WCG Cares since March 2014. Prior to joining WCG Cares, Dr. Culwell was the Medical Director of Planned Parenthood of the Pacific Southwest and maintained an academic clinical practice as
the Director of Family Planning and Associate Clinical Professor at University of California, Davis. Dr. Culwell previously served as a Medical Officer with the World Health Organization where she developed global guidelines for clinical practice and is widely published in peer reviewed journals. Dr. Culwell received a Bachelor of Science from California Lutheran University, a Medical Doctorate from the University of California, Davis and a Masters of Public Health from Northwestern University. Dr. Culwell completed her post-graduate training in Obstetrics and Gynecology at University of California San Diego and her Family Planning Fellowship at Northwestern University. Dr. Culwell maintains appointments as Volunteer Assistant Clinical Professor in the Departments of Obstetrics and Gynecology at the University of California, Davis and San Diego campuses. Dr. Culwell is qualified as a Diplomat from the American Board of Obstetrics and Gynecology.
Russ Barrans
Mr. Barrans served as Private Evofem’s Chief Commercial Officer since August 2016 and has served as our Chief Commercial Officer since January 2018. Mr. Barrans has over 25 years in the women’s healthcare pharmaceuticals and biotechnology space. As the Chief Commercial Officer, he is responsible for the commercial launch and lifecycle management of the Evofem Biosciences product portfolio, oversees manufacturing and supply chain, and provides executive leadership to the sales and marketing team. Prior to joining Evofem Biosciences, Mr. Barrans was the Senior Director of Women’s Healthcare Marketing for Teva Pharmaceuticals from 2012 to June 2015. With significant tenure in life sciences and pharmaceutical companies, Mr. Barrans has held senior level positions at global and domestic companies including Bayer Healthcare and Wyeth Pfizer (formerly Wyeth), as well as, being Chief Executive Officer of FusionRx, a strategic consulting firm servicing biotech and pharmaceutical brands of which Mr. Barrans was the founding partner. Mr. Barrans has overseen directed the launch of over half a dozen brands worldwide including the launch of Mirena, and Plan B One-Step OTC. Mr. Barrans graduated from California Coast University with a Bachelor of Science in Business Administration and holds an MBA from California Coast University. Mr. Barrans is an Accredited Pharmaceutical Manufactures Representative of Canada in General Healthcare and Oncology, and has earned his certification as a Business Coach from Brian Tracy International.
Alexander A. Fitzpatrick, Esq.
Mr. Fitzpatrick served as the Executive Vice President, General Counsel and Secretary of Private Evofem since October 2017 and has served as our Executive Vice President, General Counsel and Secretary since January 2018. Mr. Fitzpatrick is responsible for our corporate governance, legal, corporate development, intellectual property and risk management functions. Prior to joining Evofem, Mr. Fitzpatrick served as Chief Legal Officer of Kyriba Corporation from 2014 to 2015 and Senior Vice President, General Counsel, Compliance Officer and Secretary of Verenium Corporation, a publicly traded biotechnology company from 2010 to 2014. Prior to that, Mr. Fitzpatrick served as Senior Vice President, General Counsel and Secretary of Kintera, Inc., a publicly traded technology company. Following the sale of Kintera, Mr. Fitzpatrick continued to serve in a similar position for a major division of Blackbaud, Inc. Prior to that, as a member of the business, corporate and technology departments with the law firms Cooley LLP and Latham & Watkins LLP in San Diego, and Rogers & Wells LLP (now Clifford Chance) in London, Mr. Fitzpatrick represented pharmaceutical and other technology companies, investment banks and venture capitalists in a variety of transactions including numerous collaborations, mergers and acquisitions, intellectual property matters, licensing and financing activity. Mr. Fitzpatrick received a B.S. in mathematics from Georgetown University and a J.D. from the University of California, Berkeley.
Non-Employee Directors
Thomas Lynch
Mr. Lynch served as the Chairman of the board of directors of Private Evofem from November 2015 until January 2018 and has served as the Chairman of our board of directors since January 2018. Mr. Lynch also currently serves as Chairman of the Boards of Profectus Biosciences Inc. and Adherium Limited and as a non-executive director of GW Pharmaceuticals where he serves as Chairman of both its remuneration and audit committees. Mr. Lynch is also the non-executive chairman of the Ireland East Hospital Group and the Mater Misericordiae University Hospital, a non-profit charitable foundation providing acute hospital services to both public patients funded by the HSE (defined below) and private patients. Mr. Lynch serves on the board of a number of privately held biotechnology companies. Mr. Lynch previously served as Chairman of ICON PLC and was a member of its board for 21 years. Mr. Lynch was the Chairman and Chief Executive Officer of Amarin Corporation PLC from 2000 to 2010, Executive Vice President, Chief Financial Officer and director of Elan Corporation PLC from 1993 to 2004, and the founder and director of Warner Chilcott PLC from 1994 to 2002. From 2001 to 2010, Mr. Lynch was a member of the Board of IDA Ireland (an Irish government investment agency). Mr. Lynch received his B.Sc. in Economics from Queen’s University of Belfast in 1978, and qualified as a chartered accountant with KPMG in 1983 and served as a partner in that firm from 1990 to 1993. We believe Mr. Lynch is qualified to serve as a member of our board of directors because of his decades of business, operational and board of director experience with pharmaceutical and life sciences companies and because of his prior experience as Chairman of Private Evofem’s board of directors.
Gillian Greer, Ph.D.
Dr. Greer has served as a member of our board of directors since January 2018 and most recently served, from 2012 to 2017, as the Chief Executive Officer of Volunteer Service Abroad, a New Zealand non-profit organization that sends volunteers to work with partner organizations in the Pacific and Asia region. During this same period, she also served as a Trustee for WCGI. Dr. Greer is currently Chief Executive Officer of the National Council of Women of New Zealand. From 2006 to 2011 Dr. Greer served as Director General of the International Planned Parenthood Federation, or IPPF, the world’s largest international sexual and reproductive health non-profit organization, working in 172 countries providing advocacy, education and sexual and reproductive health services, including maternal health, HIV/AIDS, family planning and adolescent health. During this time Dr. Greer also worked closely with UN agencies and governments to advocate for investment in health and human rights and served on the Board of ICON PLC. Prior to her work with IPPF, Dr. Greer served as Executive Director of the Family Planning Association of New Zealand where she was involved in international and regional advocacy training and initiatives, including chairing the Asia Pacific Alliance, and was made a Member of the New Zealand Order of Merit for services to family planning in 2005. From 1996 to 1998 Dr. Greer was Assistant Vice Chancellor Equity and Human Resources, Victoria University of Wellington, New Zealand. Dr. Greer’s early career was in education at secondary and tertiary levels. Throughout her career Dr. Greer has demonstrated an ongoing commitment to health, education, sustainable development, women’s empowerment, and human rights. Dr. Greer is passionate about strengthening civil society and building high performing organizations that are effective, ethical, and accountable and can clearly demonstrate their impact. Dr. Greer has also served in a governance capacity for a number of charities and a university Council, as well as advisory panels to New Zealand Ministers of Foreign Affairs and Trade. Dr. Greer was made a Commander of the British Empire (CBE) for services to international health and women’s rights in 2011. Dr. Greer continues to be in high demand as a speaker, facilitator, chairperson, and board member. Dr. Greer holds a B.A. in English from the University of Auckland and a Ph.D. in New Zealand Literature from the Victoria University of Wellington. We believe Dr. Greer’s long experience as an executive officer
and board member of organizations dedicated to women’s sexual health qualifies her to serve as a member of our board of directors.
William Hall, Ph.D., M.D.
Professor Hall has served as a member of our board of directors since January 2018 and is a renowned expert in infectious diseases and virology. He currently serves as Distinguished Professor in Hokkaido University in Japan and is Professor Emeritus of Medical Microbiology and the Centre for Research in Infectious Diseases at University College Dublin’s, or UCD, School of Medicine and Medical Science. He is also Executive Chairman of the UCD National Virus Reference Laboratory and is a Consultant Microbiologist at St. Vincent’s University Hospital Dublin. Professor Hall also serves as a consultant to the Minister of Heath and Children in the Republic of Ireland, providing input on a range of topics including influenza pandemic preparedness and bioterrorism. Prior to his tenure at UCD, Professor Hall was Professor and Head of the Laboratory of Medical Virology, Senior Physician and Director of the Clinical Research Centre at the Rockefeller University in New York. Professor Hall previously served as an Assistant and Associate Professor of Medicine at Cornell University. Professor Hall is a board member of The Atlantic Philanthropies and is a co-founder of the Global Virus Network. Professor Hall has served as a non-executive director of ICON PLC, based in Dublin, Ireland, since February 2013. Professor Hall is a member of its audit committee and the compensation committee and is chair of the nominating and governance committee. Professor Hall holds a B.Sc. (Honors.) in Biochemistry and a Ph.D. in Biochemistry/Virology from Queen’s University Belfast. Professor Hall received his M.D. from Cornell University Medical College, New York and a Diploma of Tropical Medicine and Hygiene, from the London School of Hygiene and Tropical Medicine, London. We believe Professor Hall is qualified to serve on our board of directors based on his extensive experience working in infectious diseases and virology and prior experiences on other board of directors.
Tony O’Brien
Mr. O’Brien has served as a member of our board of directors since January 2018 and as the Director General of Ireland’s Health Service Executive, or HSE, an organization responsible for the provision of health and personal social services for the residents of Ireland, since July 2012. Prior to his role as Director General, Mr. O’Brien was the Chief Operating Officer of the Department of Health’s Special Delivery Unit and a member of the Department’s Management Board. From May 2011 to December 2011 Mr. O’Brien was Director of Clinical Strategy and Programs in the HSE. From December 2011 until October 2012 he held the post of Chief Executive Officer of the National Treatment Purchase Fund. Mr. O’Brien served as Chief Advisor to the HSE on the implementation of the National Cancer Control Strategy, Project Director for the National Plan for Radiation Oncology and is a former Chairman of the National Cancer Registry Board. Mr. O’Brien was the founding Chief Executive Officer of the National Cancer Screening Service from 2007 to May 2011, Director of BreastCheck, CervicalCheck and an Associate and Interim Director of the National Cancer Control Programme. Prior to joining the HSE, Mr. O’Brien served as Chief Executive of the Irish Family Planning Association and as the Chief Executive of the UK Family Planning Association. Mr. O’Brien is a Council Member of the Irish Management Institute, a Member of the Healthy Ireland Council and a Chartered Director of the Institute of Directors in Ireland. Mr. O’Brien holds a Master of Sciences in Management Practice from Trinity College, University of Dublin. Mr. O’Brien is Adjunct Assistant Professor in Health Strategy and Management at Trinity College Dublin. Mr. O’Brien is also Vice President of the Institute of Public Administration. We believe Mr. O’Brien’s extensive experience as an executive and member of the boards of directors for healthcare and life sciences companies qualifies him to be a member of our board of directors.
Colin Rutherford
Mr. Rutherford served as a member of the board of Private Evofem from November 2015 until January 2018 and has served as a member of our board of directors since January 2018. Mr. Rutherford currently serves as the audit committee chairman of Mitchells & Butlers’ PLC., and Renaissance Services SAOG. Mr. Rutherford is also serving as the Chairman of Brookgate, Limited, TPG and Teachers Media Group PLC. Prior to this, Mr. Rutherford worked for European Healthcare Group as Non-Executive Chairman from 2012 to 2014 until its acquisition by two hedge funds. From 2001 to 2011, Mr. Rutherford also worked as Chief Executive Officer and Chairman to restructure MAM Funds PLC that had significant debt. From 2003 to 2006, Mr. Rutherford was Chairman and oversaw the restructuring of Noble House Group Limited which was sold in 2006. In 2002, as Chairman and Chief Executive Officer, Mr. Rutherford led the restructuring and sale of Euro-Sales PLC. with 18 offices across Europe. While a director of Private Evofem, Mr. Rutherford was Chair of its audit committee and a member of its remuneration committee. Mr. Rutherford graduated in Accountancy and Finance from Heriot Watt University and qualified as a chartered accountant with Touche Ross in 1984. Mr. Rutherford is a Harvard Business School Alumni. We believe that Mr. Rutherford is qualified to serve as a member of our board of directors because of his prior experience as a member of Private Evofem’s board of directors and his many years of finance and operations leadership experience in the healthcare and life sciences industries.
Kim P. Kamdar, Ph.D.
Dr. Kamdar served as a member of our board of directors since April 2011. Dr. Kamdar is a Managing Partner of Domain Associates, LLC, a life sciences venture capital firm, which she joined in 2005. Dr. Kamdar is currently Chair of the board of directors of Obalon. She also serves on the board of directors of several private companies including Epic Sciences, Omniome, ROX Medical, Sera Prognostics and Singular Genomics. Dr. Kamdar is founder and Chairman of the board of directors, and formerly acting CEO of Truvian Sciences, a consumer-focused health and wellness company. Past investments include Ariosa (acquired by Roche), Corthera (acquired by Novartis), BiPar Sciences (acquired by Sanofi-Aventis) and Achaogen. Formerly, Dr. Kamdar was a Kauffman Fellow with MPM Capital. Prior to joining MPM, Dr. Kamdar was a research director at Novartis, where she built and led a research team that focused on the biology, genetics and genomics of model organisms. Dr. Kamdar is the author of ten papers as well as the inventor on seven patents. Dr. Kamdar received her B.A. from Northwestern University and her Ph.D. in biochemistry and genetics from Emory University. Dr. Kamdar serves as an advisory board member of Dr. Eric Topol’s NIH supported Clinical and Translational Science Award for Scripps Medicine and is also on the non-profit board for Access Youth Academy, an organization that is transforming the lives of underserved youth through academic enrichment, health and wellness, social responsibility and leadership through squash. We believe Dr. Kamdar is qualified to serve on our board of directors based on her extensive experience working and serving on the boards of directors of life sciences companies and her experience working in the venture capital industry.
Director Independence
Our board of directors has reviewed the materiality of any relationship that each of our directors has with the Company, either directly or indirectly. Based upon this review, our board of directors has determined that the following members of our board of directors are “independent directors” as defined by The Nasdaq Stock Market: Dr. Greer, Dr. Hall, Dr. Kamdar, Mr. O’Brien and Mr. Rutherford.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics that applies to our officers, directors and employees, which is available on our website at www.evofem.com. The Code of Business Conduct and Ethics contains general guidelines for conducting the business of our Company consistent with the highest standards of business ethics and is intended to qualify as a “code of ethics” within the meaning of Section 406 of the Sarbanes-Oxley Act of 2002 and Item 406 of Regulation S-K. In addition, we intend to promptly disclose (1) the nature of any amendment to our Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions and (2) the nature of any waiver, including an implicit waiver, from a provision of our code of ethics that is granted to one of these specified officers, the name of such person who is granted the waiver and the date of the waiver on our website in the future.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Described below are transactions occurring since January 1, 2015 and any currently proposed transactions to which we were a party and in which:
The amounts involved exceeded or will exceed $120,000 (or, if less, 1% of the average of our total assets amounts at December 31, 2016 and 2017); and
| • | | A director, executive officer, holder of more than 5% of our outstanding capital stock, or any member of such person’s immediate family had or will have a direct or indirect material interest, other than compensation, termination and change of control arrangements that are described under the section entitled “Management” beginning on page 104 of this prospectus.
|
Consulting Agreements
Thomas Lynch
During 2015, no consulting agreements were in effect between Mr. Lynch and Private Evofem. Mr. Lynch solely provided services in his capacity as Private Evofem’s chairman of the board of directors.
Effective April 1, 2016, Private Evofem entered into a one-year consulting agreement, or the 2016 Consulting Agreement, with Thomas Lynch, the chairman of Private Evofem’s board of directors. Pursuant to the 2016 Consulting Agreement, Mr. Lynch provided consulting services with respect to investor relations and business development activities as was requested from time to time. In exchange for these services, Mr. Lynch (i) accrued compensation of approximately $0.3 million during the year ended December 31, 2016, of which $45,000 related to his service as a member of the Evofem board of directors, (ii) received a stock option on October 13, 2016 exercisable for 150,000 shares of Private Evofem’s common stock with an exercise price of $1.19 per share subject to vesting in equal monthly installments on the first date of each calendar month beginning on April 1, 2016 and ending on March 1, 2017, and (iii) was issued a restricted stock unit for the rights to 100,000 shares of Private Evofem common stock, or the Lynch RSU, subject to a restricted stock unit agreement dated October 13, 2016. The Lynch RSU vests the later of March 1, 2017 or the date of completion of an initial public offering of shares of Evofem’s common stock. During the year ended December 31, 2017, Mr. Lynch received cash compensation of $0.3 million associated with his consulting services. As of December 31, 2017 and 2016, accrued and unpaid board fees to Mr. Lynch totaled $60,000 and $45,000, respectively. In connection with the merger with privately-held Private Evofem, or the Merger, and as an inducement for Neothetics, Inc. to enter into the Agreement and Plan of Merger and Reorganization, dated October 17, 2017, or the Merger Agreement, Mr. Lynch entered into an agreement with Private Evofem pursuant to which the Lynch RSU was cancelled prior to the completion of the Merger. The 2016 Consulting Agreement expired in accordance with its terms on April 1, 2017.
In August 2017, Evofem and Mr. Lynch entered into a new two-year consulting agreement, or the 2017 Consulting Agreement, which was retroactively effective as of April 1, 2017. This 2017 Consulting Agreement provides for annual compensation of $0.4 million, including $0.1 million related to his services as a member of Private Evofem’s board of directors, and pursuant to the 2017 Consulting Agreement, Mr. Lynch is entitled to be issued a stock option exercisable for up to 250,000 shares of Private Evofem’s common stock (subject to vesting on a quarterly basis through March 31, 2018) upon the completion of Private Evofem’s next 409A valuation, or the 2017 Consulting Agreement Option. Effective as of the closing of the Merger, the 2017 Consulting Agreement Option had not been issued. During the year ended December 31, 2017, Private Evofem paid Mr. Lynch $0.1 million in cash consideration pursuant to the 2017 Consulting Agreement for his consulting services. As of December 31, 2017, Evofem had accrued and
unpaid expenses of approximately $0.4 million and $45,000, related to Mr. Lynch’s consulting services, including a $0.3 million bonus, and board fees, respectively.
Affiliate Transactions
Prior to an October 2015 Reorganization, or the 2015 Reorganization, by EvoMed LLC, or EvoMed Evofem, Inc. and Cosmederm, Inc., or Cosmederm, were both wholly-owned subsidiaries of EvoMed. After the 2015 Reorganization and until the completion of the first issuance of shares of Private Evofem’s Series D Preferred Stock in July 2016 (seeSeries D Redeemable Convertible Preferred Stockdiscussion in Note 8 —Convertible Preferred Stockto our audited financial statements appearing in our Current Report on Form 8-K/A as filed with the SEC on April 6, 2018 and is incorporated by reference into this prospectus). As of July 18, 2016, Woodford Investment Management no longer owned any interest in Cosmederm and Evofem, Inc., and Evofem, Inc. and Cosmederm were no longer affiliated.
Cosmederm Lease
In November 2009, Evofem, Inc. entered into a lease for office space located at 8910 University Center Lane in San Diego, California under a noncancelable lease agreement that expired in March 2017, or the UTC Lease. Through January 2015, Evofem, Inc. shared this office space with Cosmederm. Effective in February 2017 Evofem, Inc. assigned its rights and obligations under the UTC Lease to Cosmederm, and Cosmederm took over the payments under the UTC Lease, however: (i) Evofem, Inc. continued to provide supplemental financial support under the UTC Lease and (ii) was still legally responsible for obligations pursuant to the lease in the event of default by Cosmederm. In March 2016, the UTC Lease was amended to reduce the rentable square footage under the lease at which time Evofem, Inc. agreed to pay a portion of the early termination fee due to this change (approximately $0.1 million).
In February 2015, Evofem, Inc. transferred certain property and equipment associated with the UTC Lease to Cosmederm. The estimated fair value of the property and equipment transferred to Cosmederm was approximately $0.1 million at the time of the transfer. In each of the years ended December 31, 2017 and 2016, Evofem, Inc. contributed approximately $0.1 million towards the UTC Lease.
Effective February 27, 2017, Evofem, Inc. entered into a lease termination agreement, or the UTC Lease Termination, with Cosmederm and the landlord for the UTC Lease. In exchange for Evofem, Inc. and Cosmederm being relieved of all further obligations under the UTC Lease, Cosmederm agreed to (i) pay an early termination fee of approximately $0.1 million, or the Early Termination Fee, to the landlord and (ii) surrender the security deposit of $17,000. In March 2017, Evofem, Inc. paid a portion of the Early Termination Fee ($55,000) directly to Cosmederm. Upon execution of the UTC Lease Termination, Evofem, Inc. was relieved of all further obligations under the UTC Lease.
Cosmederm Note
During 2015, Evofem, Inc. and Cosmederm entered a promissory note in favor of Cosmederm, or the Cosmederm Note, for an aggregate principal amount of $15.0 million. The interest rate on the Cosmederm Note was at the applicable federal rate as published by the Internal Revenue Service. Principal and accrued interest were due in a single lump sum payment upon maturity, August 28, 2016; however, the Cosmederm Note allowed for early repayment.
In July 2016 and in conjunction with Private Evofem’s Series D financing (seeSeries D Redeemable Convertible Preferred Stockdiscussion in Note 8 —Convertible Preferred Stockto our audited financial statements appearing in our Current Report on Form 8-K/A as filed with the SEC on April 6, 2018 and incorporated by reference into this prospectus), (i) Private Evofem and Cosmederm amended the
Cosmederm Note which (a) reduced the principal amount of the Cosmederm Note to the then outstanding principal balance of $10.0 million and (b) extended the maturity date of the Cosmederm Note to August 28, 2018, or the Amended Cosmederm Note, and (ii) Cosmederm assigned the Amended Cosmederm Note to Woodford Investment Management. As a condition to closing Private Evofem’s Series D Financing, Woodford Investment Management immediately converted $5.0 million of the Amended Cosmederm Note into 10 shares of Evofem’s Series D Preferred Stock and cancelled the remaining $5.0 million owed pursuant to the Amended Cosmederm Note, or the Debt Cancellation. During the year ended December 31, 2016, Evofem, Inc. made principal and accrued interest cash payments of approximately $4.7 million and $0.1 million, respectively, pursuant to the Cosmederm Note and the Amended Cosmederm Note.
As of December 31, 2017, 2016 and 2015, Evofem had no receivables from Cosmederm. A summary of payables, payments and expenses related to Evofem Inc.’s transactions with Cosmederm as of and for the three years ended December 31, 2017 follows (in thousands):
| | | | | | | | | | | | |
| | | 2017 | | | 2016 | | | 2015 | |
Related-party payables | | $ | — | | | $ | — | | | $ | 37 | |
Related-party note payable(1) | | | — | | | | — | | | | 14,750 | |
Payments (including principal and interest on the Cosmederm Note) | | | — | | | | 4,976 | | | | 250 | |
UTC Lease expenses | | | 55 | | | | 109 | | | | 77 | |
Interest expense | | | — | | | | 49 | | | | 24 | |
(1) | Includes $10.0 million which was assigned to Woodford Investment Management during 2016, SeeCosmederm Notediscussion above for additional information. |
Transactions with WomanCare Global International and Related Entities, or the WCG Entities
In 2009, Saundra Pelletier, our Chief Executive Officer, founded WomanCare Global International, or WCGI, a non-profit organization registered in England and Wales, and became WCGI’s Chief Executive Officer. In February 2013, Private Evofem and WCGI formed an alliance, or the WCGI Alliance. Concurrent with the forming of the WCGI Alliance, Private Evofem and WCGI entered into (i) a service agreement, or the Service Agreement, pursuant to which the companies shared resources and employees and (ii) a three-year grant agreement, or the Grant Agreement, pursuant to which Private Evofem provided funding of $4.0 million per year to WCGI.
Effective in February 2015, Evofem, Inc. and WomanCare Global Trading Inc., or WCGT, a WCGI subsidiary, entered a sublease for office space where Evofem, Inc. sublet to WCGT a portion of the premises located at 12400 High Bluff Drive in San Diego, California. During the years ended December 31, 2017, 2016 and 2015, payments pursuant to the sublease totaled $0.2 million, $0.4 million and $0.2 million, respectively.
In October 2015, Evolution Pharma C.V. and Evofem North America, Inc. entered into two sublicense agreements, or the Sublicense Agreements, whereby Evolution Pharma C.V. and Evofem North America, Inc. licensed from WomanCare Global Trading CIC, or WCGCIC, also a WCGI affiliate, the ability to (i) sublicense the Nestorone/ethinyl estradiol ring, or the Ring, (ii) develop, make, have made, use, import, offer to sell, sell, have sold and distribute the Ring in the human contraceptive indications field, or the Field, within certain agreed upon regions, or the Territories, and (iii) sublicense all product-specific trademarks controlled by, WCGCIC and used in connection with the marketing and sale of the Ring. Evolution Pharma C.V. and Evofem North America, Inc. agreed to pay an upfront license fee of $4.1 million and $5.9 million, respectively, and annual sublicense fees of $2.1 million and $2.9 million, respectively, net of amounts paid under the Grant Agreement during 2015, to WCGCIC, and the Service Agreement and the Grant Agreement
were each cancelled. During the years ended December 31, 2017 and 2016, payments pursuant to the Sublicense Agreements totaled $1.0 million and $3.0 million, respectively. In addition, interest of $15,000 was paid during 2016. The Sublicense Agreements were terminated effective as of March 2017. During the years ended December 31, 2017 and 2016, accrued interest expense on unpaid sublicense fees total $77,000 and $15,000, respectively. As of December 31, 2017, Private Evofem had accrued sublicense fees of $2.0 million.
In early 2015, Evofem, Inc. became the corporate sponsor of a WCGI United States educational campaign, Then Who Will. During each of the years ended December 31, 2017, 2016 and 2015, corporate support payments totaled $0.3 million, $0.3 million and $0.4 million, respectively.
In January 2016, Private Evofem, formerly Evofem Holdings, Inc. and WCGI entered into a shared-services agreement, or the Shared Services Agreement. Under the terms of the Shared Services Agreement, Evofem Holdings and WCGI cross charge services provided by each entity (or its subsidiaries) on behalf of the other. The Shared Services Agreement also allows for netting of due to and due from shared-services fees. As of December 31, 2017 and 2016, net shared-services payments due to Evofem totaled approximately $13,000 and $26,000, respectively. Through December 31, 2016, Ms. Pelletier was being paid directly by each WCGI and Evofem. A summary of payables, payments and expenses related to Evofem’s transactions with WCGI related entities as of and for the three years ended December 31, 2017 follows (in thousands):
| | | | | | | | | | | | |
| | | 2017 | | | 2016 | | | 2015 | |
Receivables | | $ | 17 | | | $ | 30 | | | $ | 70 | |
Payables | | | 2,077 | | | | 3,012 | | | | 46 | |
Payments | | | 1,026 | | | | 3,230 | | | | 5,042 | |
Operating expenses | | | 12 | | | | 6,183 | | | | 4,088 | |
Interest expense | | | 77 | | | | 15 | | | | — | |
Transactions with WCG Cares
Since November of 2017, Ms. Pelletier has served as the Chair of the Board of WCG Cares and served as the Chief Executive Officer and President of WGC Cares from 2013 until November 2017. WCG Cares was formed in 2013, and its primary purpose is to directly engage in and/or fund the development and implementation of programs that promote reproductive health, education, research and increased access to high-quality, innovative and affordable reproductive healthcare and healthcare products around the world. Mr. File and Dr. Culwell also serve as the Chief Financial Officer and Chief Medical Officer of WCG Cares, respectively.
In August 2017, Private Evofem agreed to provide WCG Cares with $0.1 million in funding, which was paid to WCG Cares in October 2017, to support WCG Cares’ Women Deliver Young Leaders program. The Company also agreed to be a corporate sponsor of WCG Cares’ U.S. education campaign, the Tryst Network, which officially launched in February 2018. In March 2018, the Company paid WCG Cares $0.3 million as part of its corporate sponsorship of the Tryst Network.
In March 2018, the Company and WCG Cares entered a shared-services agreement, or the Cares Shared Services Agreement. Under the terms of the Cares Shared Services Agreement, the Company and WCG Cares cross charge services provided by each entity (or its subsidiaries) on behalf of the other. The Cares Shared Services Agreement also allows for netting of due to and due from shared-services fees.
Series C-1 Convertible Preferred Stock
Immediately prior to the 2015 Reorganization by EvoMed, Evofem, Inc. and EvoMed entered into a stock purchase agreement for the purchase of 8,660,572 shares of Evofem, Inc. Series C-1 at $3.97 per share. In exchange for the issuance of the Private Evofem Series C-1 shares, EvoMed agreed to cancel the EvoMed Debt (seeEvoMed Debtdiscussion in Note 7 —Related-party Transactionsto our audited financial statements appearing in our Current Report on Form 8-K/A as filed with the SEC on April 6, 2018 and incorporated by reference into this prospectus), of approximately $34.4 million. In the 2015 Reorganization, the Evofem, Inc. Series C-1 shares were exchanged for the same series of shares in Private Evofem. Immediately prior to the completion of the Merger, the Private Evofem Series C-1 convertible preferred stock then outstanding was converted into an equal number of Private Evofem common stock and was subsequently exchanged for Neothetics’ common stock under the terms of the Merger Agreement.
Series C Convertible Preferred Stock
In November 2015, the Private Evofem entered into a Series C preferred stock purchase agreement with certain existing investors, including Woodford Investment Management in which we authorized the issuance of an aggregate of 5,037,784 shares of Private Evofem’s Series C convertible preferred stock (Series C), at an issuance price of $3.97 per share. Net proceeds from the issuance of the Series C was approximately $19.5 million. Immediately prior to the completion of the Merger, the Private Evofem Series C convertible preferred stock was converted into an equal number of Private Evofem common stock and was subsequently exchanged for Neothetics’ common stock under the terms of the Merger Agreement.
Evofem Series D Preferred Stock Financings
In July 2016, Private Evofem completed the initial sale and issuance of shares of its Series D Preferred Stock to funds managed by Woodford Investment Management (seeSeries D Redeemable Convertible Preferred Stockdiscussion in Note 8 —Convertible Preferred Stockto our audited financial statements appearing in our Current Report on Form 8-K/A as filed with the SEC on April 6, 2018 and is incorporated by reference into this prospectus) issuing 31 shares of Private Evofem Series D Preferred Stock, at a purchase price of $500,000 per share, for gross cash proceeds to Private Evofem of $15.5 million and issuing 10 shares of Private Evofem Series D Preferred Stock upon cancellation of the Amended Cosmederm Note. See the section entitled “Cosmederm Note” above). In December 2016, Evofem issued to funds managed by Woodford Investment Management an additional 19 shares of Private Evofem’s Series D Preferred Stock at a purchase price of $500,000 per share and in exchange for gross cash proceeds to Private Evofem of $9.5 million. In July 2017, Private Evofem issued an additional 15 shares of Private Evofem Series D Preferred Stock to funds managed by Woodford Investment Management at a purchase price of $500,000 per share in exchange for gross cash proceeds to Private Evofem of $7.5 million. In November 2017, Evofem issued an additional 5 shares of Private Evofem Series D Preferred Stock to funds managed by Woodford Investment Management at a purchase price of $500,000 per share in exchange for gross cash proceeds to Private Evofem of $2.5 million.
In connection with these issuances of shares of Private Evofem Series D Preferred Stock, Private Evofem issued the Private Evofem Warrants to purchase shares of a class of Private Evofem capital stock to be created and issued in Private Evofem’s next completed equity financing. The number of shares of Private Evofem capital stock issuable upon full exercise of the Private Evofem Warrants was to equal (i) 75% of the aggregate purchase price to be paid by the purchasers of Private Evofem’s Series D Preferred Stock divided by (ii) the per share price of the shares of Private Evofem capital stock to be issued in such a next completed equity financing. Private Evofem did not complete any such next equity financing triggering the exercisability of the Private Evofem Warrants.
The exercise price per share for the Private Evofem Warrants
was to be the price per share paid by the other investors in a next equity financing. As of December 31, 2017, the Private Evofem Warrants remained outstanding, but were not yet exercisable for shares of Private Evofem capital stock. As such, the audited consolidated financial statements of Private Evofem for the years ended December 31, 2017 and 2016 refer to the Private Evofem Warrants as “Warrant Rights” in the financial notes set forth therein (seeWarrants Rightsdiscussion in Note 8 —Convertible Preferred Stockto our audited financial statements appearing in our Current Report on Form 8-K/A as filed with the SEC on April 6, 2018 and incorporated by reference into this prospectus).
Financing and the Merger
In connection with the Merger, we issued shares of our common stock to certain investors in Private Evofem, including funds affiliated with Invesco Ltd., at a purchase price of $12.389355 per share in the Financing. In addition, we issued shares of our common stock and, with respect to funds managed by Woodford Investment Management, the Post-Merger Warrants. As of March 20, 2018 and upon the closing of the Merger, the funds affiliated with Invesco Ltd and the funds managed by Woodford Asset Management each beneficially owned more than 10% of our issued and outstanding capital stock. The issuances to funds affiliated with Invesco Ltd. and to funds managed by Woodford Asset Management in connection with the Merger and Financing are reflected below:
| | | | | | | | | | | | |
Name | | Shares of Common
Stock Issued in the
Financing | | | Shares of
Common Stock
Issued in
Connection with
the Merger | | | Warrants to
Purchase Shares
of Common Stock
Issued in
Connection with
the Merger | |
Omnis Income & Growth Fund a sub-fund of Omnis Portfolio Investments ICVC | | | None. | | | | 171,975 | | | | 50,000 | |
Woodford Patient Capital Trust PLC | | | None. | | | | 1,672,611 | | | | 475,000 | |
CF Woodford Equity Income Fund, a sub fund of CF Woodford Investment Fund | | | None. | | | | 5,620,952 | | | | 1,475,000 | |
Invesco Perp High Income | | | 375,000 | | | | 3,144,366 | | | | None. | |
Invesco Perp Income | | | 1,239,289 | | | | 2,278,843 | | | | None. | |
Registration Rights Agreement
On January 17, 2018, we entered into the Registration Rights Agreement with funds affiliated with Invesco Ltd., Domain Partners VII, L.P., or Domain Partners, and Woodford Investment Management. Funds affiliated with Domain Partners were beneficial owners of more than 10% of our issued and outstanding common stock prior to the closing of the Merger. See the section entitled “Description of Capital Stock — Registration Rights Agreement” beginning on page 119 of this prospectus.
Voting Agreements
On January 17, 2018, we entered into voting agreement, or the Voting Agreements with funds managed by Woodford Investment Management, a beneficial owner of more than 10% of our issued and outstanding stock. See the section entitled “Description of Capital Stock — Voting Agreements” beginning on page 120 of this prospectus.
Indemnification Arrangements
We entered into indemnification agreements with each of our officers and directors and purchased directors’ and officers’ liability insurance. The indemnification agreements and bylaws of Evofem require us to indemnify our directors and officers to the fullest extent permitted under Delaware law.
Policies and Procedures Regarding Related-Party Transactions
While we do not have a formal written policy or procedure for the review, approval or ratification of related-party transactions, our board of directors review and consider the interests of its directors, executive officers and principal stockholders in its review and consideration of transactions and obtains the approval of non-interested directors when it determines that such approval is appropriate under the circumstances.
Employment Arrangements
We entered into employment and consulting arrangements with our named executive officers and directors as is further described in Item 11 of our Annual Report on Form 10-K as filed with the SEC on February 26, 2018.
DESCRIPTION OF CAPITAL STOCK
The following description of our common stock and preferred stock summarizes the material terms and provisions of our common stock and the preferred stock we may offer under this prospectus. For the complete termseach other class of our securities which qualifies or limits our common stock and preferred stock, please referare described in the Description of Securities included as Exhibit 4.22 to our amendedAnnual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 10, 2022.
Common Warrants
The following summary of certain terms and restated certificateprovisions of incorporationthe Warrants to purchase common stock (the Common Warrants) is not complete and is subject to, and qualified in its entirety by, the provisions of the Common Warrant, the form of which is filed as an exhibit to our amendedAnnual Report on Form 10-K for the fiscal year ended December 31, 2021 and restated bylaws, each as amended to date, that are incorporated by reference into the registration statement of which this prospectus issupplement forms a part or may be incorporated by reference into this prospectus. Thepart. Prospective investors should carefully review the terms and provisions of these securities may also be affected by the Delaware General Corporation Law, orform of Common Warrant for a complete description of the DGCL. The summary below is qualified in its entirety by referenceterms and conditions of the Common Warrants.
Warrants to
our certificate of incorporation and bylaws, as in effect at the time of any offering of securities under this prospectus.General
Our amended and restated certificate of incorporation authorizes us to issuepurchase up to 300,000,000an aggregate of 341,530 shares of common stock $0.0001 par value per share,were issued on April 23, 2020 and 5,000,000 shareswarrants to purchase up to an aggregate of preferred stock, $0.0001 par value per share.
As of January 31, 2018, there were:
17,757,16772,860,769 shares of common stock outstanding;
zerowere issued on June 28, 2022. As of September 20, 2022, the Warrants were exercisable for an aggregate of 73,202,299 shares of preferred stock outstanding;
common stock.406,135Duration and Exercise Price
Each Common Warrant has an exercise price per share equal to $0.21. The Common Warrants are immediately exercisable and will expire on the fifth anniversary of their respective original issuance dates. The exercise price is subject to adjustment for certain dilutive issuances with respect to the Warrants issued in June 2022 and the exercise price and number of shares of common stock issuable upon exercise of outstanding options; andthe Common Warrants is subject to adjustment in the event of stock dividends, stock splits, reorganizations or similar events.
warrants outstandingExercisability
The Common Warrants will be exercisable, at the option of each holder, in whole or in part, by delivering to us a duly executed exercise notice accompanied by payment in full for the purchasenumber of an aggregate of 2,011,875 shares of common stock.
Common Stock
Voting
Each holder of our common stock purchased upon such exercise (except in the case of a cashless exercise as discussed below). A holder (together with its affiliates) may not exercise any portion of such holder’s Common Warrant to the extent that the holder would own more than 4.99% of the outstanding shares of common stock immediately after exercise, except that upon at least 61 days’ prior notice from the holder to us, the holder may increase the amount of ownership of outstanding shares of common stock after exercising the holder’s Common Warrants up to 19.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is entitleddetermined in accordance with the terms of the Common Warrants. No fractional shares of common stock will be issued in connection with the exercise of a Common Warrant. In lieu of fractional shares, we will either pay the holder an amount in cash equal to one vote for each share on all matters submittedthe fractional amount multiplied by the exercise price or round up to the next whole share.
Cashless Exercise
A holder may elect to receive upon exercise (either in whole or in part) the net number of shares of common stock determined according to a voteformula set forth in the Common Warrants in lieu of making the cash payment otherwise contemplated upon such exercise in payment of the stockholders, including the election of directors. Our amended and restated certificate of incorporation and amended and restated bylaws which will become effective immediately prioraggregate exercise price; provided that, with respect to the completion of this offering do not provide for cumulative voting rights. Because of this absence of cumulative voting,Warrants issued in June 2022, such election shall only be applicable if, at the holders oftime a majorityholder exercises its Common Warrants, a registration statement registering the issuance of the shares of common stock entitled to voteunderlying the Common Warrants under the Securities Act is not then effective or available.
Fundamental Transaction
In the event of any fundamental transaction, as described in
the Common Warrants issued in June 2022 and generally including any
electionmerger with or into another entity, sale of
directors can elect all
the directors standing for election, if they should so choose.Dividends
Subject to preferences that may be applicable to any then outstanding preferred stock, holdersor substantially all of our assets, tender offer or exchange offer, or reclassification of our shares of common stock, are entitledthen upon any subsequent exercise of a Common Warrant issued in June 2022, the holder of the Common Warrants issued in June 2022 will have the right to receive ratably those dividends,as alternative consideration, for each
share of common stock that would have been issuable upon such exercise immediately prior to the occurrence of such fundamental transaction, the number of shares of common stock of the successor or acquiring corporation of our company, if
it is the surviving corporation, and any
additional consideration receivable upon or as
may be declared from timea result of such transaction by a holder of the number of shares of common stock for which the Common Warrant is exercisable immediately prior to
timesuch event. Notwithstanding the foregoing, in the event of a fundamental transaction, the holders of the Common Warrants issued in June 2022 have the right to require us or a successor entity to redeem the Common Warrants for cash in the amount of the Black-Scholes Value (as defined in each Common Warrant) of the unexercised portion of the Common Warrants concurrently with or within 30 days following the consummation of a fundamental transaction. However, in the event of a fundamental transaction which is not in our control, including a fundamental transaction not approved by our board of directors,
outthe holders of
legally available funds.these Common Warrants issued in June 2022 will only be entitled to receive from us or our successor entity, as of the date of consummation of such fundamental transaction the same type or form of consideration (and in the same proportion), at the Black Scholes Value of the unexercised portion of the Common Warrant that is being offered and paid to the holders of our common stock in connection with the fundamental transaction, whether that consideration is in the form of cash, stock or any combination of cash and stock, or whether the holders of our common stock are given the choice to receive alternative forms of consideration in connection with the fundamental transaction.
In the event of
any fundamental transaction as described in the Common Warrants issued in April 2020, and generally including any merger with or into another entity, sale of all or substantially all of our
liquidation, dissolutionassets, tender offer or
winding up, holdersexchange offer, or reclassification of our shares of common stock
will be entitled to share ratably infor which the
net assets legally available for distribution to stockholders after the paymentconsideration of
all our debts and other liabilities and the satisfaction of any liquidation preferences that may be grantedis payable to the holders of
anyour common stock solely in cash, the holder will be eligible to receive a share of this consideration as if the holder had fully exercised the Common Warrant prior to such fundamental transaction. If the Company completes a fundamental transaction where the consideration payable to the holders of its common stock is not comprised solely of cash, then
outstanding shares of preferred stock.Rightsthe Common Warrants issued in April 2020 will be assumed by the acquirer or surviving entity and Preferences
Holdersthe holder will have the right to receive the consideration for each underlying share of common stock the consideration that would have no preemptive, conversion or subscription rights, and there is no redemption or sinking fund provisions applicablebeen issuable upon exercise immediately prior to the common stock. The rights, preferences, and
privilegesclosing of the fundamental transaction. If the holders of our common stock are subjectgiven a choice as to and maythe securities, cash or property to be adversely affected by,received in the rights offundamental transaction, the holders of sharesthe Common Warrants issued in April 2020 will have the same choice of consideration.
Transferability
Subject to applicable laws, a Common Warrant may be transferred at the option of the holder upon surrender of the Common Warrant to us together with the appropriate instruments of transfer, opinions and payment of funds sufficient to pay any series of preferred stock, which we may designate and issuetransfer taxes (if applicable).
Exchange Listing
There is no trading market available for the Common Warrants on any securities exchange or nationally recognized trading system. We do not intend to list the Common Warrants on any securities exchange or nationally recognized trading system.
Right as a Stockholder
Except as otherwise provided in the
future.Fully-paid
All the outstandingCommon Warrants or by virtue of such holder’s ownership of shares of our common stock, are, and the holders of the Common Warrants do not have the rights or privileges of holders of our common stock, including any voting rights, until they exercise their Common Warrants.
PLAN OF DISTRIBUTION
The Selling Securityholders, which as used herein includes donees, pledgees, transferees or other successors-in-interest selling shares of common stock
issued upon the conversion of any securities convertible into our common stock will be, fully paid and non-assessable. Theor interests in shares of common stock
offered byreceived after the date of this prospectus
from the Selling Securityholders as a gift, pledge, partnership distribution or
upon the conversion of any preferred stock or debt securities or exercise of any warrants offered pursuant to this prospectus, when issued and paid for, will also be, fully paid and non-assessable.Our common stock is listed on The Nasdaq Capital Market under the symbol “EVFM.”
Preferred Stock
Our board of directors has the authority, without further action by the stockholders, to issue up to 5,000,000 shares of preferred stock in one or more series and:
to establishother transfer, may, from time to time, the number of shares to be included in each such series;
to fix the rights, preferences and privileges of the shares of each wholly unissued series and any qualifications, limitationssell, transfer or restrictions thereon; and
to increase or decrease the number of authorized shares of any such series (but not below the number of shares of such series then outstanding).
Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of our common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, delay, defer or prevent a change of control of the Company and may adversely affect the market price of the common stock and the voting and other rights of the holders of common stock. We have no current plans to issue any shares of preferred stock.
Warrants
Our outstanding warrants contain customary net exercise provisions and contain provisions for the adjustment of the exercise price and the number of shares issuable upon the exercise of the warrant in the event of certain stock dividends, stock splits, recapitalizations, reclassifications, consolidations and other fundamental transactions.
Registration Rights Agreement
On January 17, 2018 we entered into a registration rights agreement, or the Registration Rights Agreement, with certain of our stockholders, including funds managed by Invesco Ltd. and funds managed by Woodford Investment Management and funds managed by Domain Partners VII, L.P. Pursuant to the Registration Rights Agreement, we were required to file a shelf registration statement with respect to shares of our capital stock, or the Registrable Securities, held by the stockholders who are party to this agreement, or the Rights Holders. Subject to limited exceptions, we are required to maintain the effectiveness of this shelf registration statement until the Registrable Securities covered by this shelf registration have been disposed of or are no longer Registrable Securities. In addition, the Rights Holders have the right to demand we effect the registrationotherwise dispose of any or all the Registrable Securities and/or effectuate the distribution of any or all their Registrable Securities subject to certain exceptions and limitations. The Rights Holders also have customary piggyback registration rights, subject to the limitations set forth in the Registration Rights Agreement. In connection with these obligations, we filed a registration statement on Form S-3 (No. 333-223731) on March 21, 2018 which was declared effective on April 3, 2018.
Voting Agreements
On January 17, 2018 we entered into voting agreements, or the Voting Agreements, with funds managed by Woodford Investment Management, or the Voting Agreement Holders, holding shares of our common stock then representing more than 19.5% of our issued and outstanding common stock, or the Threshold. The Voting Agreements will grant us or our designee a proxy to vote on matters presented to our stockholders, or the Proxy Matters, any and all shares of our common stock held by a Voting Agreement Holder in excess of the Threshold, or the Proxy Shares. In accordance with the proxies granted to us by the Voting Agreements, the Proxy Shares shall be voted in the same proportions as the shares voted by all other stockholders voting on the Proxy Matters. The Voting Agreements may not be revoked by a Voting Agreement Holder so long as such holder holds shares of our common stock in excess of the Threshold.
Possible Anti-Takeover Effects of Delaware Law and Our Certificate of Incorporation and Bylaws
Provisions of the DGCL and our amended and restated certificate of incorporation and amended and restated bylaws could make it more difficult to acquire the Company by means of a tender offer, a proxy contest or otherwise, or to remove incumbent officers and directors. These provisions, summarized below, are expected to discourage certain types of coercive takeover practices and takeover bids that our board of directors may consider inadequate and to encourage persons seeking to acquire control of the Company to first negotiate with our board of directors. We believe that the benefits of increased protection of our ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure the Company outweigh the disadvantages of discouraging takeover or acquisition proposals because, among other things, negotiation of these proposals could result in an improvement of their terms.
Classified Board
Our amended and restated certificate of incorporation and our amended and restated bylaws provide that our board of directors is divided into three classes. The directors designated as Class I directors have terms expiring at the annual meeting of stockholders in 2018. The directors designated as Class II directors will have terms expiring at the annual meeting of stockholders in 2019, and the directors designated as Class III directors will have terms expiring at the annual meeting of stockholders in 2020. Directors for each class will be elected at the annual meeting of stockholders held in the year in which the term for that class expires and thereafter will serve for a term of three years. At any meeting of stockholders for the election of directors at which a quorum is present, the election will be determined by a plurality of the votes cast by the stockholders entitled to vote at the election. Under the classified board provisions, it would take at least two elections of directors for any individual or group to gain control of our board. Accordingly, these provisions could discourage a third party from initiating a proxy contest, making a tender offer or otherwise attempting to gain control of the Company.
Removal of Directors
Our amended and restated bylaws provide that our stockholders may only remove our directors with cause.
Amendment
Our amended and restated certificate of incorporation and our amended and restated bylaws provide that the affirmative vote of the holders of at least 80% of our voting stock then outstanding is required to amend certain provisions relating to the number, term, election and removal of our directors, the filling of our board vacancies, stockholder notice procedures, the calling of special meetings of stockholders and the indemnification of directors.
Size of Board and Vacancies
Our amended and restated bylaws provide that the number of directors on our board of directors is fixed exclusively by our board of directors. Newly created directorships resulting from any increase in our authorized number of directors will be filled by a majority of our board of directors then in office, provided that a majority of the entire board of directors, or a quorum, is present and any vacancies in our board of directors resulting from death, resignation, retirement, disqualification, removal from office or other cause will be filled generally by the majority vote of our remaining directors in office, even if less than a quorum is present.
Special Stockholder Meetings
Our amended and restated certificate of incorporation provides that only the Chairman of our board of directors, our Chief Executive Officer or our board of directors pursuant to a resolution adopted by a majority of the total number of directors we would have if there were no vacancies may call special meetings of our stockholders.
Stockholder Action by Unanimous Written Consent
Our amended and restated certificate of incorporation expressly eliminates the right of our stockholders to act by written consent other than by unanimous written consent.
Requirements for Advance Notification of Stockholder Nominations and Proposals
Our amended and restated bylaws provide advance notice procedures with respect to stockholder proposals and nomination of candidates for election as directors other than nominations made by or at the direction of board of directors or a committee of our board of directors.
No Cumulative Voting
The DGCL provides that stockholders are denied the right to cumulate votes in the election of directors unless our certificate of incorporation provides otherwise. Our amended and restated certificate of incorporation does not provide for cumulative voting.
Undesignated Preferred Stock
The authority that is possessed by our board of directors to issue preferred stock could potentially be used to discourage attempts by third parties to obtain control of the Company through a merger, tender offer, proxy contest, or otherwise by making it more difficult or costlier to obtain control of the Company. Our board of directors may issue preferred stock with voting rights or conversion rights that, if exercised, could adversely affect the voting power of the holders of common stock.
Authorized but Unissued Shares
Our authorized but unissued shares of common stock and preferred stock will be available for future issuance without stockholder approval. We may use additional shares for a variety of purposes, including future public offerings to raise additional capital, to fund acquisitions and as employee compensation. The existence of authorized but unissuedor interests in shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These dispositions may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices.
The Selling Securityholders may use any one or more of the following methods when disposing of shares or interests therein:
•ordinary brokerage transactions and preferred stock could render more difficult or discourage antransactions in which the broker-dealer solicits purchasers;
•block trades in which the broker-dealer will attempt to obtain controlsell the securities as agent, but may position and resell a portion of the Companyblock as principal to facilitate the transaction;
•purchases by means of a proxy contest, tender offer, merger or otherwise.The above provisions may deter a hostile takeover or delay a change in control or management ofbroker-dealer as principal and resale by the Company.
Transfer Agent and Registrar
The transfer agent and registrarbroker-dealer for our capital stock is Philadelphia Stock Transfer, Inc. The transfer agent and registrar’s address is 2320 Haverford Road, Suite 230, Ardmore, Pennsylvania 19003.
its account;PRINCIPAL STOCKHOLDERS•
The following table sets forth certain information concerning the ownership of our common stock as of March 20, 2018, by (i) those persons who are known to be the beneficial owner(s) of more than five percent of our common stock, (ii) each of our directors and named executive officers and (iii) all directors and executive officers as a group. The number of shares beneficially owned by each entity, person, director or executive officer is determinedan exchange distribution in accordance with the rules of the SEC,applicable exchange;
•privately negotiated transactions;
•short sales effected after the date the registration statement of which this prospectus is a part is declared effective by the SEC;
•through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
•broker-dealers may agree with the Selling Securityholders to sell a specified number of such shares at a stipulated price per share;
•a combination of any such methods of sale; and the information is not necessarily indicative of beneficial ownership for
•any other purpose. Under such rules, beneficial ownership generally includes any shares over which the individual has solemethod permitted pursuant to applicable law.
The Selling Securityholders may, from time to time, pledge or shared voting powergrant a security interest in some or investment power as well as any shares that the individual has the right to acquire within 60 days of March 20, 2018, through the exercise of stock options, warrants or other rights. Unless otherwise indicated in the footnotes to this table, we believe that eachall of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. Each stockholder’s percentage ownership is based on 17,763,340 shares of common stock outstandingowned by it and, if it defaults in the performance of its secured obligations, the pledgees or secured parties may offer and sell the shares of common stock, from time to time, under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of Selling Securityholders to include the pledgee, transferee or other successors in interest as Selling Securityholders under this prospectus. The Selling Securityholders also may transfer the shares of March 20, 2018. The informationcommon stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this table is based solely on statements in filingsprospectus.
In connection with the
SECsale of our common stock or interests therein, the Selling Securityholders may enter into hedging transactions with broker-dealers or other
reliable information. Unless otherwise indicated below, the address of each beneficial owner listed is c/o Evofem Biosciences, Inc., 12400 High Bluff Drive, Suite 600, San Diego, CA 92130. | | | | | | | | |
Name and Address of Beneficial Owner | | Shares
Beneficially
Owned | | | Percent of Shares
Beneficially
Owned | |
5% Stockholders | | | | | | | | |
Entities affiliated with Invesco Ltd(1)† | | | 7,037,498 | | | | 39.6 | % |
1555 Peachtree Street, N.E. Atlanta, GA 30309 | | | | | | | | |
| | |
Entities managed by Woodford Investment Management Limited(2)† | | | 7,465,538 | | | | 42.0 | % |
9400 Garsington Road Oxford, OX4 2HN, United Kingdom | | | | | | | | |
| | |
Directors and Named Executive Officers | | | | | | | | |
Thomas Lynch(3) | | | 138,554 | | | | * | |
Gillian Greer, Ph.D.(4) | | | 1,371 | | | | * | |
William Hall, Ph.D., M.D.(5) | | | 1,371 | | | | * | |
Kim Kamdar(6) | | | 551,560 | | | | 3.1 | % |
Tony O’Brien(7) | | | 1,371 | | | | * | |
Colin Rutherford(8) | | | 17,141 | | | | * | |
Saundra Pelletier(9) | | | 630,070 | | | | 3.4 | % |
Justin J. File(10) | | | 229,013 | | | | 1.3 | % |
Kelly Culwell, M.D.(11) | | | 192,747 | | | | 1.1 | % |
Directors and executive officers as a group (11 Persons)(12) | | | 2,039,913 | | | | 10.6 | % |
* | Includes beneficial ownership of less than 1% of the outstanding shares of our common stock. |
† | Party to the Voting Agreements, pursuant to which stockholder agreed to vote certain shares of our common stock held by stockholder or over which stockholder has voting control in a certain manner. See the section entitled “Description of Capital Stock —Voting Agreements” beginning on page 120 of this prospectus. |
(1) | Invesco Ltd., in its capacity as an investment adviser, may be deemed to beneficially own 7,037,498 shares. Invesco Ltd. is the parent issuer of Invesco UK limited, which is the parent issuer of Invesco Asset Management Limited, which is the manager of the funds and accounts that own the common stock consisting of (i) 3,519,366 shares of common stock owned by Invesco Perpetual High Income Fund and (ii) 3,518,132 shares of common stock held by Invesco Perpetual Income Fund. |
(2) | Includes (i) 5,620,952 shares of common stock held by CF Woodford Equity Income Fund, a sub fund of CF Woodford Investment Fund, or WEIF, (ii) 171,975 shares of common stock held by Omnibus Income & Growth Fund, a sub fund of Omnis Portfolio Investments ICVC, or OIGF, and (iii) 1,672,611 shares of common stock held by Woodford Patient Capital Trust PLC., or WPCT. Woodford Investment Management Limited acts as agent for and on behalf of WEIF, OIGF and WPCT, each as a discretionary managed client. Woodford Investment Management Limited has the power to direct the vote and disposition of the common stock held by WEIF, OIGF and WPCT. Accordingly, Woodford Investment Management Limited may be deemed to be the beneficial owner of an aggregate amount of 7,465,538 shares of common stock, consisting of the shares held by WEIF, OIGF and WPCT, as described above. |
(3) | Includes 3,850 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of March 20, 2018, and includes 134,704 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of March 20, 2018 granted subject to stockholder approval. |
(4) | Includes 1,371 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of March 20, 2018 granted subject to stockholder approval. |
(5) | Includes 1,371 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of March 20, 2018 granted subject to stockholder approval. |
(6) | Consists of (1) 515,273 shares of common stock owned by Domain Partners VII, L.P., (2) 8,004 shares of common stock owned by DP VII Associates, L.P, (3) 655 shares of common stock owned by Domain Associates, LLC and, with respect to Dr. Kamdar, options to purchase (4) 27,628 shares currently exercisable or exercisable within 60 days of March 20, 2018. One Palmer Square Associates VII, LLC, or One Palmer Square, is the general partner of Domain Partners VII and DP VII Associates. Dr. Kamdar is a member of One Palmer Square. The managing members of One Palmer Square are James Blair, Jesse Treu, Brian Dovey, Brian Halak and Nicole Vitullo. Each of James Blair, Jesse Treu, Brian Dovey, Brian Halak and Nicole Vitullo share voting and investment power with respect to the securities held by Domain Partners VII and DP VII Associates. The managing members of Domain Associates are James Blair, Brian Dovey, Nicole Vitullo, Brian Halak and Dr. Kamdar. Each of James Blair, Brian Dovey, Nicole Vitullo, and Brian Halak share voting and investment power with respect to the securities held by Domain Associates. Each of James Blair, Jesse Treu, Brian Dovey, Brian Halak and Nicole Vitullo disclaims beneficial ownership of the securities held by Domain Partners VII and DP VII Associates except to the extent of his or her pecuniary interest therein, if any. Each of James Blair, Brian Dovey, Nicole Vitullo, Brian Halak, and Dr. Kamdar disclaims beneficial ownership of the securities held by Domain Associates except to the extent of his or her pecuniary interest therein, if any. Dr. Kamdar is a member of our board of directors. One Palmer Square’s address is One Palmer Square, Suite 515, Princeton, NJ 08542. |
(7) | Includes 1,371 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of March 20, 2018 granted subject to stockholder approval. |
(8) | Includes 770 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of March 20, 2018, and includes 16,371 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of March 20, 2018 granted subject to stockholder approval. |
(9) | Includes 34,215 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of March 20, 2018, and includes 595,855 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of March 20, 2018 granted subject to stockholder approval. |
(10) | Includes 12,338 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of March 20, 2018, and includes 216,675 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of March 20, 2018 granted subject to stockholder approval. |
(11) | Includes 4,962 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of March 20, 2018, and includes 187,785 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of March 20, 2018 granted subject to stockholder approval. |
(12) | Includes (1) 515,273 shares of common stock owned by Domain Partners VII, L.P., but deemed to be beneficially owned by Dr. Kamdar, (2) 8,004 shares of common stock owned by DP VII Associates, L.P, but deemed to be beneficially owned by Dr. Kamdar, (3) 655 shares of common stock owned by Domain Associates, LLC, but deemed to be beneficially owned by Dr. Kamdar. Dr. Kamdar has a pecuniary interest in the securities held by Domain Associates as described in note 4, (4) 86,756 shares of common stock that may be acquired by our current executive officers and directors pursuant to the exercise of stock options within 60 days of March 20, 2018, and (5) 1,429,225 shares of common stock that may be acquired by our current officers and directors pursuant to the exercise of stock options within 60 days of March 20, 2018 granted subject to stockholder approval. |
MATERIAL U.S. FEDERAL INCOME AND
ESTATE TAX CONSEQUENCES TO NON-U.S. HOLDERS
The following is a summaryfinancial institutions, which may in turn engage in short sales of the material U.S. federal income tax consequencescommon stock in the course of hedging the positions they assume. The Selling Securityholders may also sell shares of our common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities. The Selling Securityholders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
The aggregate proceeds to the Selling Securityholders from the sale of the ownershipcommon stock offered by them will be the purchase price of the common stock less discounts or commissions, if any. The Selling Securityholders reserve the right to accept and, dispositiontogether with their agents from time to time, to reject, in whole or in part, any proposed purchase of common stock to be made directly or through agents. We will not receive any of the proceeds from this offering. Upon any exercise of the warrants by payment of cash, however, we will receive the exercise price of the warrants.
The Selling Securityholders also may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities Act, provided that it meets the criteria and conforms to the requirements of that rule.
The Selling Securityholders and any underwriters, broker-dealers or agents that participate in the sale of the common stock or interests therein may be “underwriters” within the meaning of Section 2(a)(11) of the Securities Act. Any discounts, commissions, concessions or profit they earn on any resale of the shares may be underwriting discounts and commissions under the Securities Act. Any Selling Securityholder who is an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act will be subject to the prospectus delivery requirements of the Securities Act.
To the extent required, the shares of our common stock to Non-U.S. Holders (defined below), but does not purport to be a complete analysis of allsold, the potential tax considerations relating thereto. This summary is based upon the provisionsname of the Internal Revenue CodeSelling Securityholder, the respective purchase prices and public offering prices, the names of 1986, as amended,any agents, dealer or the Code, Treasury regulations promulgated thereunder, administrative rulingsunderwriter, and judicial decisions, all as of the date hereof. These authorities may be changedany applicable
commissions or subject to differing interpretations, possibly with retroactive effect, so as to result in United States federal income tax consequences different from those set forth below. We have not sought and will not seek any ruling from the Internal Revenue Service, or the IRS,discounts with respect to a particular offer will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective amendment to the statements maderegistration statement that includes this prospectus.
In order to comply with the securities laws of certain states, if applicable, the common stock may be sold in these jurisdictions only through registered or licensed brokers or dealers. In addition, in some states, the common stock may not be sold unless (i) it has been registered or qualified for sale or (ii) an exemption from registration or qualification requirements is available and is complied with.
We have advised the
conclusions reachedSelling Securityholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of shares in the
following summary,market and
there can be no assurance that the IRS or a court will agree with such statements and conclusions.This summary also does not address the tax considerations arising under the laws of any United States state or local or any non-United States jurisdiction, the 3.8% Medicare tax on net investment income or any alternative minimum tax consequences. In addition, this discussion does not address tax considerations applicable to a Non-U.S. Holder’s particular circumstances or to a Non-U.S. Holder that may be subject to special tax rules, including, without limitation:
banks, insurance companies or other financial institutions;
tax-exempt or government organizations;
brokers of or dealers in securities or currencies;
traders in securities that elect to use a mark-to-market method of accounting for their securities holdings;
persons that own, or are deemed to own, more than five percent of our capital stock;
certain United States expatriates, citizens or former long-term residents of the United States;
persons who hold our common stock as a position in a hedging transaction, “straddle,” “conversion transaction,” synthetic security, other integrated investment, or other risk reduction transaction;
persons who do not hold our common stock as a capital asset within the meaning of Section 1221 of the Code (generally, for investment purposes);
persons deemed to sell our common stock under the constructive sale provisions of the Code;
real estate investment trusts or regulated investment companies;
partnerships, or other entities or arrangements treated as partnerships for United States federal income tax purposes, or investors in any such entities;
persons for whom our stock constitutes “qualified small business stock” within the meaning of Section 1202 of the Code;
integral parts or controlled entities of foreign sovereigns;
tax-qualified retirement plans;
controlled foreign corporations;
passive foreign investment companies and corporations that accumulate earnings to avoid United States federal income tax; or
persons that acquire our common stock as compensation for services.
In addition, if a partnership, including any entity or arrangement classified as a partnership for United States federal income tax purposes, holds our common stock, the tax treatment of a partner generally will depend on the status of the partner, the activities of the partnership,Selling Securityholders and certain determinations made attheir affiliates. In addition, to the partner level. Accordingly, partnerships that hold our common stock, and partners in such partnerships, should consult their tax advisors regardingextent applicable we will make copies of this prospectus (as it may be supplemented or amended from time to time) available to the United States federal income tax consequences to themSelling Securityholders for the purpose of satisfying the prospectus delivery requirements of the purchase, ownership, and disposition of our common stock.
You are urged to consult your tax advisor with respect toSecurities Act. The Selling Securityholders may indemnify any broker-dealer that participates in transactions involving the applicationsale of the United States federal income tax laws to your particular situation, as well as any tax consequences of the purchase, ownership and disposition of our common stockshares against certain liabilities, including liabilities arising under the U.S. federal estate or gift tax rules or under the laws of any United States state or local or any non-United States or other taxing jurisdiction or under any applicable tax treaty.
Definition of a Non-U.S. holder
For purposes of this summary, a “Non-U.S. Holder” is any beneficial owner of our common stock that is not a “U.S. person,” and is not a partnership, or an entity disregarded from its owner, each for U.S. federal income tax purposes. A U.S. person is any person that, for United States federal income tax purposes, is or is treated as any of the following:
Securities Act.an individual who is a citizen or resident of the United States;
a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States, any state thereof, or the District of Columbia;
an estate, the income of which is subject to United States federal income tax regardless of its source; or
a trust that (1) is subject to the primary supervision of a U.S. court and the control of one or more U.S. persons (within the meaning of Section 7701(a)(30) of the Code), or (2) has a valid election in effect to be treated as a U.S. person for U.S. federal income tax purposes.
Distributions
As discussed in the section entitled “Market Price and Dividend Information — Dividend Policy” beginning on page 61 of this prospectus, we do not anticipate paying any dividends on our capital stock in the foreseeable future. If we make distributions on our common stock, those payments will constitute dividends for United States income tax purposes to the extent we have current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed both our current and our accumulated earnings and profits, they will constitute a return of capital and will first reduce a Non-U.S. Holder’s basis in our common stock, but not below zero. Any excess will be treated as capital gain and will be treated as described below under the “— Gain on Sale or Other Disposition of Common Stock” section. Any such distributions would be subject to the discussions below regarding back-up withholding and Foreign Account Tax Compliance Act, or FATCA.
Subject to the discussion below on effectively connected income, any dividend paid to a Non-U.S. Holder generally will be subject to U.S. withholding tax either at a rate of 30% of the gross amount of the dividend or such lower rate as may be specified by an applicable income tax treaty. To receive a reduced treaty rate, a Non-U.S. Holder must provide us or our agent with an IRS Form W-8BEN (generally
