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SECURITIES AND EXCHANGE COMMISSION
PROXY STATEMENT
o | Preliminary Proxy Statement | |
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
þ | Definitive Proxy Statement | |
o | Definitive Additional Materials | |
o | Soliciting Material Pursuant to § 240.14a-12 |
o | No fee required. | |
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |
(1 | ) | Title of each class of securities to which transaction applies: | ||||
(2 | ) | Aggregate number of securities to which transaction applies: | ||||
(3 | ) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | ||||
(4 | ) | Proposed maximum aggregate value of transaction: | ||||
(5 | ) | Total fee paid: | ||||
þ | Fee paid previously with preliminary materials. | |
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
(1 | ) | Amount Previously Paid: | ||||
(2 | ) | Form, Schedule or Registration Statement No.: | ||||
(3 | ) | Filing Party: | ||||
(4 | ) | Date Filed: | ||||
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![(COLUMBIA LABORATORIES, INC LOGO)](https://capedge.com/proxy/DEFM14A/0000950123-10-054461/y83374dy8337402.gif)
Plaza 1, Second Floor
Livingston, NJ 07039
(973) 994-3999
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Chief Executive Officer
Chairman of the Board of Directors
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![(COLUMBIA LABORATORIES, INC LOGO)](https://capedge.com/proxy/DEFM14A/0000950123-10-054461/y83374dy8337402.gif)
Plaza 1, Second Floor
Livingston, NJ 07039
(973) 994-3999
STOCKHOLDERS
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Corporate Secretary
June 1, 2010
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Annex A | Purchase and Collaboration Agreement | |
Annex B | Charter Amendment | |
Annex C | Opinion of RBC Capital Markets Corporation | |
Annex D | Note Purchase Agreement(s) | |
Annex E | Annual Report on Form 10-K/A for our fiscal year ended December 31, 2009 | |
Annex F | Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 | |
Annex G | Current Report on Form 8-K, dated June 1, 2010 |
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• | upon the completion of the statistical analysis and delivery of results from our Phase III PREGNANT study designed to evaluate the ability of PROCHIEVE 8% to reduce the risk of preterm birth in women with a short cervix of between 1.0 and 2.0 centimeters (the “PTB Indication”) as measured by transvaginal ultrasound at mid-pregnancy (the “PREGNANT Study”)and (A) if the results of the PREGNANT Study reflect the achievement of a primary endpoint, reduction in preterm birth, p-value that is less than or equal to 0.05 and greater than 0.01, $6 million, or (B) if the results of the PREGNANT Study reflect the achievement of a primary endpoint, reduction |
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in preterm birth, p-value that is less than or equal to 0.01, $8 million; provided, however, in each case, the results reflect the achievement of a secondary endpoint, infant outcomes composite score, p-value that is less than or equal to 0.05; | |||
• | upon acceptance by the United States Food and Drug Administration (the “FDA”) of a new drug application (or a supplemental new drug application) to market PROCHIEVE 8% for the PTB Indication, $5 million; | ||
• | upon the first commercial sale of PROCHIEVE 8% in the United States for the PTB Indication, $30 million; | ||
• | upon filing with and acceptance by a Regulatory Authority (as defined herein) of an application for the authorization to market a pharmaceutical product containing Progesterone as an active pharmaceutical ingredient (“Progesterone Products”) for the PTB Indication in a country or jurisdiction outside the United States, $0.5 million; and | ||
• | upon a grant by any Regulatory Authority of an approval to market a Progesterone Product for the PTB Indication in a country or jurisdiction outside of the United States, $2 million. |
• | any pharmaceutical product containing Natural Progesterone (as defined herein) or 17-alpha-hydroxyprogesterone caproate that is delivered transvaginally, except Generic Equivalents (as defined herein) of Progesterone Products that are not (and never were) Commercialized pursuant to the Purchase and Collaboration Agreement (each a “Royalty Product”); and | ||
• | any pharmaceutical product that contains Progesterone as an active pharmaceutical ingredient covered by a Regulatory Approval (as defined herein) indicated for preterm birth, except Generic Equivalents of Progesterone Products that are not (and never were) Commercialized pursuant to the Purchase and Collaboration Agreement (each, a “PTB Royalty Product”) (the Purchase and Collaboration Agreement contains limitations on Buyer’s and Buyer’s affiliates ability to introduce Generic Equivalents of Progesterone Products, see “The Purchase and Collaboration Agreement—Purchase Price—Adjustments to Royalty Payments—Generic Entry,” beginning on page 87). | ||
• | Royalty rates are: |
• | 10% of the portion of annual U.S. Net Sales which are less than or equal to $150,000,000; | ||
• | 15% of the portion of annual U.S. Net Sales which are greater than $150,000,000 and less than or equal to $250,000,000; |
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• | 20% of the portion of annual U.S. Net Sales which are greater than $250,000,000; and | ||
• | 10% of annual Net Sales outside of the United States in a country where Buyer or its affiliates are Commercializing any Royalty Product or PTB Royalty Product; provided, however, that: |
• | if Generic Entry by a third party with respect to any Royalty Product or PTB Royalty Product occurs in any country such that quarterly Net Sales of such Royalty Product or PTB Royalty Product in such country are reduced by 50% from the average quarterly Net Sales for such Product in such country over the preceding four quarters and such reduction is directly attributable to the marketing or sale in such country of such Generic Equivalent, the royalty rate shall be reduced by 50% in such country (a “Generic Entry”); | ||
• | if Buyer or any of its affiliates grants any licenses, sublicenses, distribution or marketing rights or otherwise collaborates with a third party to Commercialize any Royalty Product or PTB Royalty Product in a country outside of the United States, in lieu of royalties payable in respect of Net Sales, we will be entitled to 20% of Gross Profits (as defined herein) associated with such Commercialization in such country; and | ||
• | in the event that a Generic Entry by Buyer or its affiliates with respect to any Royalty Product or PTB Royalty Product in a country occurs in the circumstances permitted by the Purchase and Collaboration Agreement, in lieu of royalties payable in respect of Net Sales for such generic product, we will be entitled to 20% of Gross Profits associated with the Commercialization of such generic product in such country. |
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proposal(s) to approve the Asset Sale and/or the Charter Amendment if there are insufficient votes to approve the Asset Sale and/or the Charter Amendment, as applicable. If you hold your Shares in “street name,” the failure to instruct your bank, broker or other nominee how to vote your Shares will have the same effect as a vote “AGAINST” the proposal to approve the Asset Sale and the proposal to approve the Charter Amendment but will not have an effect on the Adjournment proposal. Your prompt cooperation is greatly appreciated.
• | if you hold your Shares in your name as a stockholder of record, by written notice of revocation to our Corporate Secretary at 354 Eisenhower Parkway, Plaza 1, Second Floor, Livingston, NJ 07039; | ||
• | timely delivery of a valid, later-dated proxy; or | ||
• | by attending the Special Meeting and voting by ballot in person (your attendance at the Special Meeting will not, by itself, revoke your previously granted proxy, unless you give written notice of revocation to our Corporate Secretary (as described above) before the vote at the Special Meeting, or you vote by written ballot at the Special Meeting). |
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• | Pursuant to the License Agreement, the parties granted each other certain licenses to use certain intellectual property. | ||
• | Pursuant to the Supply Agreement, we will be the exclusive supplier of PROCHIEVE 4%, PROCHIEVE 8% and CRINONE 8% to Buyer for sale in the United States at a price equal to 110% of the cost of goods sold. | ||
• | Pursuant to the Investor’s Rights Agreement we will grant to Buyer certain rights with respect to the registration of the Acquisition Shares under the Securities Act of 1933, as amended (the “Securities Act”), and the right to appoint a designee to our board of directors until such time as Buyer ceases to hold at least 10% of our outstanding shares of Common Stock. In connection with these rights, Buyer will become subject to certain restrictions on transfer relating to the Acquisition Shares, subject to certain exceptions. |
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• | by mutual agreement of each of Columbia and Buyer (the “Parties”); | ||
• | if the Closing has not occurred on or before August 30, 2010 (the “Outside Date”), provided, that the failure to close is not due to a failure of the party seeking to terminate the Purchase and Collaboration Agreement to comply in all material respects with its obligations under the Purchase and Collaboration Agreement (the “Outside Date Clause”); | ||
• | if the Special Meeting is held and our stockholders do not approve the Asset Sale proposal and the Charter Amendment proposal (the “No Vote Clause”); or | ||
• | the transactions contemplated by the Purchase and Collaboration Agreement are permanently prohibited to be consummated by an order of a governmental authority. |
• | in the event of certain material breaches of the Purchase and Collaboration Agreement by us that would cause certain conditions to Closing under the Purchase and Collaboration Agreement to be incapable of being fulfilled; or | ||
• | if, prior to our stockholders approving the Asset Sale proposal and the Charter Amendment proposal, a Change of Board Recommendation (as defined herein) shall have occurred (provided, that Buyer must terminate the Purchase and Collaboration Agreement within five business days following the Change |
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of Board Recommendation) (the “Change of Board Recommendation Clause”). |
• | if an Acquisition Proposal (as described herein) has been publicly announced; and | ||
• | thereafter, the Purchase and Collaboration Agreement is terminated by either party under the Outside Date Clause or the No Vote Clause; and | ||
• | within 12 months after the termination of the Purchase and Collaboration Agreement, we shall have entered into an agreement regarding or consummate a transaction which would have constituted an Acquisition Proposal (excluding an Equity Financing (as defined herein) and/or any agreement relating thereto). |
• | the then fair value of the Acquisition Shares; and | ||
• | the elimination of the remaining book value of the CRINONE intangible assets (which was $18.8 million as of December 31, 2009). |
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THE ASSET SALE AND THE AMENDMENT
Q: | Why am I receiving this proxy statement and proxy card? | |
A: | You are receiving this proxy statement (and related materials) and proxy card because, as of May 25, 2010, the record date for the Special Meeting, you owned Shares of Columbia. We have entered into a Purchase and Collaboration Agreement with Buyer and Watson. A copy of the Purchase and Collaboration Agreement (and certain related agreements) is attached to this proxy statement as Annex A. | |
In order to consummate the Asset Sale, our stockholders must vote to approve the Asset Sale and Charter Amendment. Our board of directors is providing this proxy statement to give you information for use in determining how to vote on the proposals submitted to our stockholders at the Special Meeting. Your vote is very important. We encourage you to vote as soon as possible. | ||
Q: | What do I need to do now? | |
A: | We urge you to carefully read this proxy statement, including the other documents which are attached as annexes to this proxy statement, and to consider how the Asset Sale and Charter Amendment will affect you. Even if you plan to attend the Special Meeting, if you hold your Shares in your own name as the stockholder of record, please vote your Shares by signing, dating and returning the enclosed proxy card. You can also attend the Special Meeting and vote by ballot in person. If you hold your Shares in “street name,” follow the procedures provided by your bank, broker or other nominee. | |
Q: | When and where is the Special Meeting? | |
A: | The Special Meeting will be held at the Westminster Hotel, 550 West Mt. Pleasant Avenue, Livingston, New Jersey 07039, on July 1, 2010 at 10:00 am local time. | |
Q: | Who is entitled to vote at the Special Meeting? | |
A: | Only stockholders of Columbia as of the close of business on the Record Date are entitled to receive notice of the Special Meeting and to vote the Shares that they held at that time at the Special Meeting. If you hold your Shares through a bank, broker or other nominee, you must obtain from such bank, broker or other nominee a “legal proxy” issued in your name in order to vote in person at the Special Meeting. |
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Q: | What am I being asked to vote on at the Special Meeting? | |
A: | You will be asked to consider and vote upon the following proposals: |
1. | to approve the Asset Sale pursuant to the Purchase and Collaboration Agreement; | ||
2. | to approve the Charter Amendment to increase the number of our authorized shares of Common Stock from 100,000,000 to 150,000,000; | ||
3. | to adjourn the Special Meeting to a later date, if necessary or appropriate, to allow for the solicitation of additional proxies in favor of the proposal(s) to approve the Asset Sale and/or the Charter Amendment if there are insufficient votes to approve the Asset Sale and/or the Charter Amendment, as applicable; and | ||
4. | to transact such other business as may properly come before the Special Meeting. |
The approval of the Asset Sale proposal is conditioned upon the approval of the Charter Amendment proposal, but not upon the approval of the Adjournment proposal. Neither the approval of the Charter Amendment proposal nor the Adjournment proposal are conditioned upon the approval of any other proposal. | ||
Q: | How does the board of directors recommend that I vote? | |
A: | After careful consideration of a variety of factors described in this proxy statement, our board of directors unanimously recommends that you vote “FOR” the proposal to approve the Asset Sale, “FOR” the proposal to approve the Charter Amendment and “FOR” adjourning the Special Meeting to a later date, if necessary or appropriate. You should read “The Asset Sale (Proposal No. 1)—Reasons for the Asset Sale; Recommendation of Our Board of Directors” beginning on page 45 for a discussion of the factors that our board considered in deciding to recommend approval of the Asset Sale. In addition, you should carefully read “The Asset Sale (Proposal No. 1)—Recent Developments,” beginning on page 59 for a discussion of certain matters that ocurred after we entered into the Purchase and Collaboration Agreement. | |
Q: | Will we be required to submit the Asset Sale proposal and the Charter Amendment proposal for approval by our stockholders even if our board of directors has withdrawn, modified or qualified its recommendation? | |
A: | Yes. Unless the Purchase and Collaboration Agreement is terminated, we are required to submit the Asset Sale proposal and the Charter Amendment proposal to our stockholders, even if our board of directors has withdrawn, modified or qualified its recommendation with respect to the Watson Transactions. | |
Q: | Who will buy the Assets and for what price? | |
A: | If the Asset Sale proposal and the Charter Amendment proposal are approved by our stockholders, Buyer, a wholly owned subsidiary of Watson, will acquire the Assets in connection with the Asset Sale and the Acquisition Shares for the Upfront Payment of $47 million pursuant to the terms of the Purchase and Collaboration Agreement, and assume certain of our liabilities. Prior to the Closing, Buyer shall assign to a wholly-owned subsidiary of Watson the rights and obligations of Buyer to purchase certain non- |
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U.S. intellectual property rights that constitute part of the Assets. These non-U.S. Assets include the rights to Develop or Commercialize the Assets outside of the United States and the income, royalties, damages and payments made, due or payable with respect to such rights. Under the Purchase and Collaboration Agreement, Buyer also agreed to make up to $45.5 million in payments to us upon the achievement of certain contingent milestones under the circumstances and on the terms set forth in the Purchase and Collaboration Agreement as well as certain royalty payments on the terms set forth in the Purchase and Collaboration Agreement. See “The Purchase and Collaboration Agreement—Purchase Price,” beginning on page 84. | ||
Q: | What assets are being sold and what liabilities will be assumed by Buyer? | |
A: | The assets we propose to sell consist of substantially all of our assets primarily relating to the research, development, regulatory approval, manufacture, distribution, marketing, sale and promotion of the Progesterone Products, including certain intellectual property, promotional materials, contracts, product data and regulatory approvals and regulatory filings. In addition, Buyer will assume certain liabilities related to the Progesterone Products and certain liabilities arising under any assigned contracts. | |
Q: | What will the Upfront Payment from the Watson Transactions be used for? Will any of the proceeds from the Watson Transactions be distributed to me as a stockholder? | |
A: | We intend to use a portion of the Upfront Payment to pay approximately $16 million in satisfaction of certain amounts owed to PharmaBio pursuant to the PharmaBio Agreement. On March 3, 2010, we entered into the PharmaBio Amendment with PharmaBio to provide for the early termination of the PharmaBio Agreement and permit us to make certain payments thereunder on an accelerated and discounted basis under certain circumstances. See “The Asset Sale (Proposal No. 1)—Senior Debt,” beginning on page 66. | |
In addition, we will use approximately $26 million of the Upfront Payment toward the repurchase of all $40 million in outstanding principal amount of our Notes (and to pay accrued and unpaid interest thereon) pursuant to the Note Purchase Agreements, attached as Annex D to this proxy statement. The Note Purchase Agreements provide for us, at the time of the Closing, to repurchase the Notes for an aggregate purchase price of $26 million in cash, plus accrued and unpaid interest through (but excluding) the date of Closing, warrants to purchase 7.75 million shares of Common Stock and 7,407,407 shares of our Common Stock. Pursuant to the Note Purchase Agreements, the Notes were amended so that the Watson Transactions would not trigger the rights of the Note holders to compel us to redeem the Notes. The closings of the transactions contemplated by the Note Purchase Agreements are subject to various conditions including the Closing of the Watson Transactions, the filing of the Charter Amendment with the Secretary of State of the State of Delaware and the satisfaction of certain of our obligations owing to PharmaBio under the PharmaBio Agreement. See “The Asset Sale (Proposal No. 1)—Purchase of our Convertible Subordinated Notes,” beginning on page 67. | ||
We may use up to $600,000 of the Upfront Payment to redeem the outstanding shares of our Series C Preferred Stock. Upon a triggering event (the Watson Transactions would be a triggering event), the holders of our shares of Series C Preferred Stock have the right to require us to redeem their shares of Series C Preferred Stock in cash for the value of the shares of Series C Preferred Stock plus all accrued and unpaid dividends thereon on the date such redemption is demanded. As of the date hereof, 600 shares of our Series C Preferred Stock are outstanding, each with a value of $1,000. See “The Asset Sale (Proposal No. 1)—Preferred Stock,” beginning on page 73. |
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Additionally, we expect to use a portion of the Upfront Payment (not to exceed $7 million incurred after January 1, 2010) to pay for completion of the PREGNANT Study and the preparation, filing and approval process of the related new drug application (or supplemental new drug application). Pursuant to the Purchase and Collaboration Agreement, we are required to maintain a separate bank account for the purpose of paying those costs. See “The Purchase and Collaboration Agreement—Development and the Joint Development Committee—Development of PROCHIEVE for the PTB Indication,” beginning on page 103. | ||
We will also use a portion of the Upfront Payment to pay fees and expenses incurred in connection with the transactions described herein. | ||
To the extent the payments set forth above exceed the amount of the Upfront Payment, we will make such payments from our existing cash, which includes the cash proceeds from the Watson Note. See “The Asset Sale (Proposal No. 1)—The Watson Note,” beginning on page 64. | ||
No proceeds from the Watson Transactions will be distributed to our stockholders. | ||
Q: | What will happen if the Asset Sale or Charter Amendment proposal is not approved by Columbia’s stockholders or the Watson Transactions are not completed for any other reason? | |
A: | If the Asset Sale or the Charter Amendment proposal is not approved by Columbia’s stockholders, or if the Watson Transactions are not completed for any other reason, then: |
• | in certain circumstances, we may be required to pay a termination fee of $2 million to Buyer; | ||
• | we will be required to repay the Watson Note, and in certain circumstances, we will be required to pay Watson a prepayment fee of $2 million; | ||
• | we may have difficulty recouping the costs incurred in connection with negotiating the Watson Transactions and the other transactions described in this proxy statement; | ||
• | we would have limited liquidity and may have difficulties continuing the PREGNANT Study as well as other business operations; | ||
• | our relationships with our customers, suppliers and employees may be damaged and our business may be harmed; and | ||
• | the market price for the shares of our Common Stock may decline. |
If the Asset Sale is not completed, we may explore other potential transactions with other parties on such terms as our board of directors may approve. The terms of an alternative transaction may be less favorable to us than the terms of the Watson Transactions and there can be no assurance that we will be able to reach agreement with or complete an alternative transaction with another party. | ||
Approval of the Charter Amendment proposal is not conditioned on approval of any other proposal. Accordingly, if the Charter Amendment proposal is approved but the Asset Sale proposal is not, we will increase the number of our authorized shares of Common |
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Stock but not effectuate the Asset Sale. These additional shares of Common Stock would be available to use for future issuances or capital raising activities or acquisitions, and for conversions or exercises of outstanding convertible securities. See “Approval of the Amendment to the Restated Certificate of Incorporation (Proposal No. 2),” beginning on page 140. | ||
Q: | When are the Watson Transactions expected to be completed? | |
A: | If the Asset Sale and the Charter Amendment proposals are approved by our stockholders, we expect to complete the Asset Sale as soon as reasonably practicable after all of the conditions in the Purchase and Collaboration Agreement have been satisfied or waived. We currently anticipate that the Watson Transactions will be completed during the third quarter of 2010. The exact timing of the completion of the Asset Sale, however, cannot be predicted. See “The Purchase and Collaboration Agreement—Closing(s),” beginning on page 80, and “The Purchase and Collaboration Agreement—Conditions to the Closing(s),” beginning on page 97. | |
Q: | How will Columbia’s stock options and restricted stock be treated in the Asset Sale? | |
A: | Any unvested restricted stock and unvested and unexercised stock options granted and outstanding under either of our 1996 Plan or our 2008 Plan will become immediately and fully vested and exercisable upon a change in control of Columbia. Consummation of the Asset Sale will constitute a change in control for this purpose. | |
Q: | Will Columbia continue to be publicly traded following the Watson Transactions? Will it change its name? Will its ticker symbol change? | |
A: | We will continue to be a publicly traded company whether or not the Asset Sale closes and we will continue to be subject to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and the NASDAQ Global Market. Whether or not the Asset Sale is consummated, our name will remain “Columbia Laboratories, Inc.” and our NASDAQ Global Market ticker symbol will remain “CBRX.” | |
Q: | What will be the nature of Columbia’s business following completion of the Asset Sale? | |
A: | After the Closing, we will continue the PREGNANT Study and the preparation of a new drug application or supplemental new drug application to market PROCHIEVE 8% for the PTB Indication. In addition, if the PREGNANT Study is successful, we expect to receive (at least a portion of) the milestone payments described herein. We also expect to receive the royalty payments contemplated by the Purchase and Collaboration Agreement and perform our obligations and receive payments under the Supply Agreement. | |
Additionally, we will retain certain assets and rights relating to our Progesterone business, including all rights necessary to perform our obligations under the Merck Serono Agreement. The terms of the Merck Serono Agreement are not materially different from the license and supply agreement between us and Merck Serono, which expired on May 19, 2010, pursuant to its terms. | ||
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If the PREGNANT Study is successful and we achieve milestones set forth in the Purchase and Collaboration Agreement, we intend to become a focused development company, with research and development centered on products to address women’s health needs, subject to the covenant not to compete in the Purchase and Collaboration Agreement (discussed herein). Our aim would be to take new product candidates through proof-of-concept and then to enter into new partnership arrangements with respect to them. In addition, we would expect to enter into partnership discussions for STRIANT, and through a partner, attempt to build revenue from STRIANT and explore the potential to expand its labeling. We also would expect to continue to leverage our proprietary drug delivery systems to expand our product portfolio. | ||
As of May 28, 2010, 458 patients have enrolled in the PREGNANT Study. We currently expect enrollment to be completed during the second quarter of 2010, and the last infant in the PREGNANT Study to be born during the fourth quarter of 2010. In addition, we currently anticipate that we will report the topline results for the PREGNANT Study around the end of 2010, and that, if the outcomes of the PREGNANT Study are successful, the PTB NDA or the PTB Supplemental NDA would be filed with the FDA during the first half of 2011 and that the FDA would decide whether to approve the PTB NDA (or the PTB Supplemental NDA) by late 2011 or early 2012. | ||
If the PREGNANT Study is not successful, our resources will be limited and our board of directors will have to reassess our strategy. | ||
Q: | Am I entitled to appraisal rights in connection with the Asset Sale? | |
A: | No. Delaware law does not provide for stockholder appraisal rights in connection with the sale of a company’s assets. | |
Q: | What vote is required for Columbia’s stockholders to approve the Asset Sale? | |
A: | The affirmative vote of the holders of a majority of the Voting Power of the outstanding shares of our Common Stock, Series B Preferred Stock and Series E Preferred Stock is required to approve the Asset Sale. | |
Q: | What vote is required for Columbia’s stockholders to approve the Charter Amendment? | |
A: | The affirmative vote of (i) the holders of a majority of the outstanding shares of our Common Stock, and (ii) the holders of a majority of the Voting Power of the outstanding shares of our Common Stock, shares of our Series B Preferred Stock and shares of our Series E Preferred Stock, voting together as a single class, is required to approve the Charter Amendment. | |
Q: | What vote is required for Columbia’s stockholders to approve the Adjournment proposal? | |
A: | Approval of the Adjournment proposal requires the affirmative vote of a majority of the votes cast by holders of our Common Stock, Series B Preferred Stock and Series E Preferred Stock present in person or by proxy at the Special Meeting, whether or not a quorum is present. |
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Q: | What shares may I vote? | |
A: | You may vote all shares of Common Stock, Series B Preferred Stock, and Series E Preferred Stock that you owned as of the close of business on the Record Date. These Shares include (i) those held directly in your name as thestockholder of recordand (ii) those held for you as thebeneficial ownerthrough a bank, broker or other nominee at the close of business on the Record Date. | |
Each share of Common Stock is entitled to one vote. Each share of Series B Preferred Stock is entitled to 20 votes (which is the number of shares of Common Stock into which each share of Series B Preferred Stock is convertible). Each share of Series E Preferred Stock is entitled to 50 votes (which is the number of shares of Common Stock into which each share of Series E Preferred Stock is convertible). Columbia’s shares of Series C Preferred Stock have no voting rights. | ||
As of the close of business on the Record Date, there were approximately 65,567,198 shares of Common Stock issued and outstanding (each of which is entitled to one vote per share), 130 shares of Series B Preferred Stock issued and outstanding having aggregate voting power equal to 2,600 shares of Common Stock, and 59,000 shares of Series E Preferred Stock issued and outstanding having aggregate voting power equal to 2,950,000 shares of Common Stock. | ||
Q: | What is a quorum? | |
A: | A quorum must be present for the Special Meeting to be held. The quorum requirement for holding the Special Meeting and transacting business is the presence, in person or by proxy, of the holders of a majority of the shares entitled to vote at the Special Meeting. The Shares may be present in person or represented by proxy at the Special Meeting. Votes withheld, abstentions and “broker non-votes” are counted as present and entitled to vote for purposes of determining a quorum. | |
Q: | What happens if I abstain from voting? | |
A: | If an executed proxy card is returned and the stockholder has explicitly abstained from voting on any proposal, the Shares represented by the proxy will be considered present at the Special Meeting for the purpose of determining a quorum. In addition, while they will not count as votes cast in favor of the Asset Sale proposal, the Charter Amendment proposal or the Adjournment proposal, they will count as votes cast on the Asset Sale proposal, the Charter Amendment proposal and the Adjournment proposal. As a result, an abstention on a proposal will have the same effect as a vote “AGAINST” the proposal to approve the Asset Sale and the proposal to approve the Charter Amendment but will not have an effect on the Adjournment proposal. | |
Q: | What is a “broker non-vote”? | |
A: | A “broker non-vote” occurs when a broker submits a proxy that does not indicate a vote for one or more of the proposals because the broker has not received instructions from the beneficial owner on how to vote on such proposals and does not have discretionary |
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authority to vote in the absence of instructions. While broker non-votes will be counted for the purposes of determining whether a quorum exists at the Special Meeting, they will not be considered to have voted on any of the proposals on which such instructions have been withheld. As a result, a broker non-vote will have the same effect as a vote “AGAINST” the proposal to approve the Asset Sale and the proposal to approve the Charter Amendment but will not have an effect on the Adjournment proposal. | ||
Q: | What is the difference between holding shares as a stockholder of record and as a beneficial owner? | |
A: | Most Columbia stockholders hold their Shares through a bank, broker or other nominee rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and those owned beneficially. | |
Stockholder of Record | ||
If your Shares are registered directly in your name with Columbia’s transfer agent, American Stock Transfer & Trust Company (the “Transfer Agent”), you are considered, with respect to those Shares, thestockholder of recordand we are sending these proxy materials directly to you. As thestockholder of record, you have the right to grant your proxy directly to Columbia or to vote in person at the Special Meeting. Columbia has enclosed a proxy card for you to use. | ||
Beneficial Owner | ||
If you hold Shares in a stock brokerage account or through a bank, broker or other nominee, you are considered thebeneficial ownerof Shares heldin “street name”and your bank, broker or other nominee is forwarding these proxy materials to you. Your bank, broker or other nominee is considered, with respect to those Shares, thestockholder of record. As the beneficial owner, you have the right to direct your bank, broker or other nominee on how to vote, but because you are not thestockholder of record, you may not vote these Shares in person at the Special Meeting unless you obtain a signed proxy from the record holder giving you the right to vote the Shares. As a beneficial owner, you are, however, welcome to attend the Special Meeting. Your bank, broker or other nominee has enclosed a voting instruction card for you to use. | ||
Q: | How do I vote? | |
A: | You may vote: |
• | by signing and dating each proxy card you receive and returning it in the enclosed prepaid envelope; | ||
• | by attending the Special Meeting and voting by ballot in person (your attendance at the Special Meeting will not, by itself, revoke your proxy; you must vote by ballot at the Special Meeting); or |
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• | if you hold your shares in “street name,” by following the procedures on the voting instruction card provided by your bank, broker or other nominee. See “—How can I vote without attending the Special Meeting,” beginning on page 23. |
If you return your signed and dated proxy card but do not mark the boxes showing how you wish to vote, your Shares will be voted “FOR” the proposal to approve the Asset Sale, “FOR” the proposal to approve the Charter Amendment and “FOR” the Adjournment proposal. The failure of any stockholder to submit a signed proxy card or to vote in person by ballot at the Special Meeting will have the same effect as a vote “AGAINST” the proposal to approve the Asset Sale and the Charter Amendment proposal but will not have an effect on the Adjournment proposal. If you hold your Shares in “street name,” the failure to instruct your bank, broker or other nominee how to vote your Shares will have the same effect as a vote “AGAINST” the proposal to approve the Asset Sale and the Charter Amendment proposal but will not have an effect on the Adjournment proposal. | ||
Q: | If my Shares are held in “street name” by my bank, broker or other nominee, will my bank, broker or other nominee vote my Shares for me? | |
A: | Your bank, broker or other nominee will only be permitted to vote your Shares if you instruct your bank, broker or other nominee how to vote. You should follow the procedures on the voting instruction card provided by your bank, broker or other nominee regarding the voting of your Shares. | |
Q: | How can I vote my Shares without attending the Special Meeting? | |
A: | Whether you hold Shares directly as the stockholder of record or beneficially in “street name,” you may direct your vote without attending the Special Meeting. If you hold your Shares directly, you may vote by granting a proxy. If you hold your Shares in “street name,” you may submit voting instructions to your bank, broker or other nominee. Please refer to the summary instructions below and those included on your proxy card or, for Shares held in “street name,” the voting instruction card included by your bank, broker or other nominee. | |
By Mail— You may vote by mail by signing your proxy card and mailing it in the enclosed, postage prepaid and addressed envelope or, for Shares held in “street name,” by following the instructions on the voting instruction card included by your bank, broker or other nominee and mailing it in the enclosed, postage prepaid and addressed envelope. If you provide specific voting instructions, your Shares will be voted as you instruct. If you sign but do not provide instructions, your Shares will be voted as described below in “How are votes counted?” | ||
On the Internet— If you hold your Shares in “street name” and the bank, broker or other nominee that holds your Shares offers Internet voting, your voting instruction card will contain instructions on how to vote online. If you vote online, you do not need to mail in your proxy card. If you hold your Shares directly in your name as the stockholder of record, you may not vote online. |
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By Telephone— If you hold your Shares in “street name” and the bank, broker or other nominee that holds your Shares offers voting by telephone, your voting instruction card will contain instructions on how to vote by telephone. If you hold your Shares directly in your name as the stockholder of record, you may not vote by telephone. | ||
Q: | How do I access proxy materials on the Internet? | |
A: | Stockholders can access our Notice of Special Meeting and proxy statement (and the other documents which are attached as annexes to this proxy statement) and a form of a proxy card on the Internet at: | |
http://amstock.com/ProxyServices/ViewMaterial.asp?CoNumber=25479 | ||
Our public filings can also be accessed at the SEC’s web site at www.sec.gov. See “Where You Can Find More Information,” beginning on page 148. | ||
Q: | How are votes counted? | |
A: | If you return your signed and dated proxy card but do not mark the boxes showing how you wish to vote, your Shares will be voted “FOR” the proposal to approve the Asset Sale, “FOR” the proposal to approve the Charter Amendment and “FOR” adjourning the Special Meeting to a later date, if necessary or appropriate, to allow for the solicitation of additional proxies in favor of the proposal(s) to approve the Asset Sale and/or the Charter Amendment if there are insufficient votes to approve the Asset Sale and/or the Charter Amendment, as applicable. The failure of any stockholder to submit a signed proxy card or to vote in person by ballot at the Special Meeting will have the same effect as a vote “AGAINST” the proposal to approve the Asset Sale and the proposal to approve the Charter Amendment but will not have an effect on the proposal to adjourn the Special Meeting to a later date. If you hold your Shares in “street name,” the failure to instruct your bank, broker or other nominee how to vote your Shares will have the same effect as a vote “AGAINST” the proposal to approve the Asset Sale and the proposal to approve the Charter Amendment but will not have an effect on the Adjournment proposal. | |
Q: | May I change or revoke my vote? | |
A: | Yes, you may change or revoke your proxy instructions at any time prior to the vote at the Special Meeting. | |
If you hold your Shares directly and returned your proxy by mail, you must (a) mail a written notice of revocation to our Corporate Secretary at 354 Eisenhower Parkway, Plaza 1, Second Floor, Livingston, NJ 07039 or (b) timely deliver a valid, later-dated proxy. Your attendance at the Special Meeting will not by itself revoke your previously granted proxy unless you give written notice of revocation to our Corporate Secretary (as described above) before the vote at the Special Meeting or you vote by written ballot at the Special Meeting. Any proxy submitted by a stockholder of record may be revoked at any time prior to its exercise at the Special Meeting. | ||
For Shares you own beneficially in “street name,” through a bank, broker or other nominee, you have the right to change or revoke your proxy at any time before it is voted |
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at the Special Meeting by following the directions received from your bank, broker or other nominee to change or revoke those instructions. | ||
Q: | What does it mean if I receive more than one proxy or voting instruction card? | |
A: | It means your Shares are registered differently or are held in more than one account. Please provide voting instructions for all proxy and voting instruction cards you receive. | |
Q: | Who will bear the cost of this solicitation? | |
A: | We will pay the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials. In addition to the mailing of these proxy materials, the solicitation of proxies or votes may be made in person, by telephone or by electronic communication by our directors, officers, and employees, who will not receive any additional compensation for such solicitation activities. We have retained the services of Georgeson Shareholder Communications, Inc. (“Georgeson”) to aid in the solicitation of proxies. We estimate that we will pay Georgeson a fee of $7,500 for its services plus per-call fees for any individual solicitations and reimbursement of reasonable out-of-pocket expenses. We will also reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to stockholders. | |
Q: | Will a proxy solicitor be used? | |
A: | Yes. We have engaged Georgeson to assist in the solicitation of proxies for the Special Meeting and we estimate that we will pay Georgeson a fee of approximately $12,500 for such assistance. We have also agreed to reimburse Georgeson for reasonable out-of-pocket expenses incurred in connection with the proxy solicitation and to indemnify Georgeson against certain losses, costs and expenses. | |
Q: | Who can help answer any other questions that I have? | |
A: | If you have additional questions about the Asset Sale or the Charter Amendment, need assistance in submitting your proxy or voting your Shares, or need additional copies of this proxy statement or the enclosed proxy card, please contact Georgeson, our proxy solicitor: |
Call Toll Free: (866) 482-5136
Banks and Brokerage Firms Call Collect: (212) 440-9800
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FORWARD-LOOKING STATEMENTS
• | the occurrence of any event, change or other circumstances that could give rise to the termination of the Purchase and Collaboration Agreement; | ||
• | the effect of the announcement of the Asset Sale on our business relationships (including with employees, customers and suppliers), operating results and business generally; | ||
• | the failure of our stockholders to approve the Asset Sale and/or the Charter Amendment; | ||
• | the failure of the Asset Sale to close for any reason; | ||
• | in certain circumstances, we may be required to repay the Watson Note, together with a prepayment fee of $2 million; | ||
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• | the outcome of pending or future litigation and governmental proceedings that may have the effect of delaying or preventing the consummation of the Asset Sale; | ||
• | the amount of the costs, fees, expenses and charges related to the Asset Sale and the Charter Amendment; | ||
• | adverse developments in general business, economic and political conditions or any outbreak or escalation of hostilities on a national, regional or international basis; | ||
• | our failure to comply with regulations and any changes in regulations; | ||
• | the loss of any of our senior management; and | ||
• | increased competitive pressures that may reduce revenues or increase costs. |
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1. | to approve the Asset Sale pursuant to the Purchase and Collaboration Agreement; | ||
2. | to approve the Charter Amendment to increase the number of our authorized shares of Common Stock from 100,000,000 to 150,000,000; | ||
3. | to adjourn the Special Meeting to a later date, if necessary or appropriate, to allow for the solicitation of additional proxies in favor of the proposal(s) to approve the Asset Sale and/or the Charter Amendment if there are insufficient votes to approve the Asset Sale and/or the Charter Amendment, as applicable; and | ||
4. | to transact such other business as may properly come before the Special Meeting. |
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• | if you hold your Shares in your name as a stockholder of record, by written notice of revocation to our Corporate Secretary at 354 Eisenhower Parkway, Plaza 1, Second Floor, Livingston, NJ 07039; |
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• | timely delivery of a valid, later-dated proxy; or | ||
• | by attending the Special Meeting and voting by ballot in person (your attendance at the Special Meeting will not, by itself, revoke your previously granted proxy, unless you give written notice of revocation to our Corporate Secretary (as described above) before the vote at the Special Meeting or you vote by written ballot at the Special Meeting). |
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http://amstock.com/ProxyServices/ViewMaterial.asp?CoNumber=25479
Call Toll Free: (866) 482-5136
Banks and Brokerage Firms Call Collect: (212) 440-9800
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354 Eisenhower Parkway
Plaza 1, Second Floor
Livingston, NJ 07039
(973) 994-3999
311 Bonnie Circle
Corona, CA 92880 — 2882
(951) 493-5300
311 Bonnie Circle
Corona, CA 92880 — 2882
(951) 493-5300
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• | approximately $16.5 million payable to PharmaBio by the end of November 2010 (subject to extension); and | ||
• | $40 million owed under the Notes payable on December 31, 2011. |
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• | the necessity to package the infertility indication and the PTB Opportunity together; | ||
• | the fact that our Progesterone delivery patent for our currently marketed product expires in 2013; and |
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• | the costs and timing for development and approval of a second generation product for lifecycle management. |
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• | Strategic Review Process. Our board of directors considered the rigorous process (which began approximately 15 months earlier) through which we had explored various strategic alternatives. Our board considered that this process involved our announcing that we were exploring strategic alternatives for the sale or license of the PTB Indication and during 2009, Torreya Partners contacting more than 50 parties, our conducting management presentations for 11 parties and receiving indications of interest to acquire or enter into strategic partnering arrangements from seven parties. | ||
• | Uncertainties With Respect to Other Proposals. Our board of directors considered the uncertainties in connection with pursuing a transaction with any of Parties A through F as opposed to Watson. With respect to Party A, our board was concerned that it had not previously conducted significant business in the United States, the inferiority of its offer with respect to royalty streams and its lack of commitment to funding for the Development of the Progesterone Products. With respect to Parties B, C and D, our board considered that the consideration offered was not competitive with the other offers received. Our board also considered that Party E withdrew from the partnering process due to a lack of internal support for the offer it had previously made and the possibility of Party E re-engaging in the partnering process. With respect to Party F, a start-up company sponsored by a financial institution, our board was concerned with its capabilities to Develop and Commercialize the Progesterone Products. In the judgment of the board, continuing the partnering process by continuing negotiations with any other parties, including Party A or Party F, was likely to place in jeopardy the proposal received from Watson. Our board also, in contrast, considered Watson’s capabilities to Develop and Commercialize the Progesterone Products with its sales and marketing force, Watson’s recognized name and financial capabilities as well as Watson’s plans to expand the Commercialization of the Progesterone Products outside of the United States and Watson’s willingness to fund the Development of a second generation Progesterone Product. | ||
• | Consideration. Our board of directors considered a variety of valuation methodologies relating to our Progesterone Products and the likelihood of receiving (all or a portion of) an amount of the contingent parts of the |
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consideration contemplated by the various proposals. Our board also noted the fact that the Upfront Payment payable at the Closing was all cash, which provides certainty of value to Columbia. In addition, our board considered the contingent milestone and royalty payments by Watson and the likelihood of obtaining such payments, which provided Columbia with an opportunity to share in a significant portion of the future upside and performance of the Progesterone Products. Our board concluded, based upon all of the factors described in this proxy statement, that the Watson Transactions were the best reasonably attainable alternative for Columbia. | |||
• | Risks Related to Alternatives to Sale. Our board of directors considered our business, financial condition, results of operations, cash flows, products, intellectual property, markets and marketing capability, management and competitive position, financial performance, outlook and prospects, as well as current industry, economic, stock and credit market conditions and our strategic direction and alternatives, and business plan. Our board also considered certain strategic alternatives to the Watson Transactions, as well as the possibility of not engaging in a transaction at all. In that regard, our board considered our long- and short-term strategic plan and initiatives, including the risks associated with a negative outcome to the PREGNANT Study. Our board considered that significant resources would be needed in order to successfully Develop, Launch and Commercialize PROCHIEVE 8% for the PTB Indication (assuming that the PREGNANT Study was successful). Our board also considered that our Progesterone delivery patent for the current formulation of CRINONE/PROCHIEVE expires in September 2013 and a Second Generation Delivery System (as defined herein) with a longer patent life would need to be Developed, approved by FDA, and Launched, requiring significant additional | ||
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capital. Moreover, our board considered that we have approximately $57 million in debt obligations that will mature on or prior to December 31, 2011 and our need for resources to satisfy such obligations. Our board considered the risks of not being able to raise sufficient capital to Develop, Launch and Commercialize PROCHIEVE 8% for the PTB Indications and satisfy our debt obligations. Our board also considered the benefits and potential risks, including execution risks, of pursuing other strategic alternatives available to Columbia. Our board considered that the Upfront Payment from the Watson Transactions, together with our available cash, would provide us with the necessary resources to continue the PREGNANT Study, and satisfy our debt obligations. Our board also considered that, in connection with the Watson Transactions, the Development Costs we would be responsible for would be “capped” at $7 million and that Watson would be responsible for funding most of the future Development Costs and costs to Launch and Commercialize PROCHIEVE 8% for the PTB Indication as well as for the Second Generation Delivery System (if the decision is made to Launch and Commercialize the same). | |||
• | Ability to Change Recommendation to Stockholders. Our board of directors considered its ability to make a Change of Board Recommendation, in the circumstances and subject to certain limitations described herein, including but not limited to its endorsement of a Superior Proposal. | ||
• | Other Terms of the Purchase and Collaboration Agreement. Our board of directors considered the other terms and conditions of the Purchase and Collaboration Agreement (in addition to the consideration), including the number and nature of the conditions to the Buyer’s obligation to consummate the Watson Transactions and the likelihood that those conditions would be satisfied. | ||
• | Likelihood of Consummation. Our board of directors considered the likelihood that the Watson Transactions would be completed, including its belief that there would not be any antitrust or other regulatory impediments to the Watson Transactions as well as the fact that Buyer’s receipt of financing is not a condition to the completion of the Watson Transactions. Our board noted that the receipt of third party consents was not a condition to the completion of the Watson Transactions. The board also considered the fact that Buyer did not need to obtain stockholder approval for the Watson Transactions. | ||
• | Identity of Watson. Our board of directors considered the fact that Watson is a leading United States pharmaceutical company that invests in the research, development and marketing of innovative and effective treatments to improve patient well-being and quality of life. Our board noted that Watson had done an extensive due diligence review of Columbia and accordingly was very familiar with our business. | ||
• | Reduction of Debt. Our board considered the fact that, at the Closing, we would pay our obligations owing to PharmaBio under the PharmaBio Agreement and to the holders of our Notes. As a result, we would be free of debt and debt service obligations. | ||
• | Transformation of Columbia. Our board of directors noted that upon consummation of the Watson Transactions we would initially continue our focus on conducting the PREGNANT Study and performing our obligations |
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under the Merck Serono Agreement. If the PREGNANT Study is successful however and we achieve the milestones set forth in the Purchase and Collaboration Agreement, our board considered that by selling the Progesterone Products, Columbia management would be able to focus on our other product candidates and drug development program and pipeline. However, our board did consider that if the PREGNANT Study is not successful, our resources would be limited and our board of directors would have to reassess our strategy. | |||
• | Opinion of Columbia’s Financial Advisor. Our board of directors considered the financial analysis presented by RBC and RBC’s fairness opinion that was presented to the board that, as of the date given and based upon and subject to the factors and assumptions set forth therein, the Upfront Payment and the Contingent Payments to be received pursuant to the terms of the Purchase and Collaboration Agreement, was fair from a financial point of view to Columbia, which opinion was confirmed in writing. See “—Opinion of Columbia’s Financial Advisor,” beginning on page 53. The full text of RBC’s opinion, which set forth the assumptions made, matters considered and limitations of the review undertaken by RBC, is attached as Annex C to this proxy statement and is incorporated herein by reference. You are urged to, and should, read the opinion of RBC carefully. |
• | Future Growth and Risk Profile. Our board of directors considered the fact that if the Watson Transactions are consummated, except with respect to the contingent milestone and royalty payments by Buyer, Columbia and its stockholders will no longer participate in the future growth of the Progesterone Products, including any growth as a result of the marketing of PROCHIEVE 8% for the PTB Indication (assuming positive results for the PREGNANT Study) (except in connection with certain retained assets and rights relating to our Progesterone business, including all rights necessary to perform our obligations under the Merck Serono Agreement). Our board believed that the Asset Sale provided certain value for Columbia and that the contingent right to receive milestone and royalty payments allowed Columbia to participate in a significant portion of the growth of Progesterone Products in the coming years. Our board recognized that the Asset Sale would largely eliminate the more predictable cash flows that we had traditionally received from the sale of Progesterone Products and, as a result, the risk/reward profile of Columbia following the transaction would be changed accordingly. | ||
• | Risk of Non-Completion. Our board of directors considered the risk that the Watson Transactions might not be completed and the effect of the resulting public announcement of termination of the Purchase and Collaboration Agreement on: |
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• | The market price of our Common Stock. In that regard, the market price could be affected by many factors, including the reason or reasons why the Purchase and Collaboration Agreement was terminated and whether such termination resulted from factors adversely affecting Columbia or the Progesterone Products and the possibility that, as a result of the termination of the Purchase and Collaboration Agreement, the marketplace would consider Columbia and its assets to be an unattractive acquisition candidate; | ||
• | Our ability to effectively implement our current business strategies, including the continuation of the PREGNANT Study. It is evident that significant resources would be necessary, in order to successfully Develop, Launch and Commercialize the PROCHIEVE 8% for the PTB Indication (assuming that the PREGNANT Study is successful) and there can be no assurances that we will have the capital to meet these needs. Moreover, our board considered that if the Watson Transactions are not consummated, our stockholders will bear the entire risk that the PREGNANT Study may not be successful; | ||
• | Our available liquidity. We have approximately $57 million in debt obligations that would be satisfied upon the completion of the Watson Transactions, or in the alternative, would mature on or prior to December 31, 2011 and there can be no assurances that we would have the means to satisfy such obligations or raise additional capital in the absence of the consummation of the Watson Transactions; | ||
• | The value of our patents. The value of our delivery patent for the current formulation of CRINONE/PROCHIEVE, which expires in September 2013 may decrease in value as such date nears; | ||
• | Possible Payment of Termination Fee. Our board of directors considered the termination fee that would be payable by us to Buyer if the Purchase and Collaboration Agreement was to be terminated in certain circumstances. Our board believed that the termination fee was customary and reasonable and would not unduly preclude a third party from making a Superior Proposal; | ||
• | Personnel.Our ability to attract and retain key personnel; and | ||
• | Contracts/Customers. Our ability to enter into agreements relating to Progesterone Products or obtain new customers. |
• | Inability to Solicit Competing Proposals or to Terminate the Purchase and Collaboration Agreement or Vote on a Superior Proposal in the Event of a Change of Board Recommendation.Our board of directors considered that the Purchase and Collaboration Agreement contains provisions that make it |
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more difficult for us to engage in a material strategic transaction with any party other than Buyer. These provisions could discourage a third party that might have an interest in Columbia or the Progesterone Products, even if that party were prepared to pay consideration with a higher value than that to be paid by Watson. Our board of directors also recognized our obligation to call, give notice of, convene and hold the Special Meeting, and to hold a vote of our stockholders on the Asset Sale proposal and the Charter Amendment proposal regardless of the commencement, disclosure, announcement or submission to us of any Acquisition Proposal (whether or not a Superior Proposal), and that we will not be entitled to terminate the Purchase and Collaboration Agreement if a Change of Board Recommendation occurs. Our board was mindful that the Purchase and Collaboration Agreement significantly limits our ability to pursue alternatives to the Watson Transactions. See “The Purchase and Collaboration Agreement—Termination of the Purchase and Collaboration Agreement,” beginning on page 116 “The Purchase and Collaboration Agreement—Procedure and Effect of Termination,” beginning on page 117 and “The Purchase and Collaboration Agreement—No Solicitation of Other Offers,” beginning on page 112. | |||
• | Possible Disruption of our Business. Our board considered the possible disruption to our business that might result from the announcement of the Watson Transactions and the resulting distraction of the attention of Columbia management and employees. Our board also considered the fact that the Purchase and Collaboration Agreement contains certain limitations regarding our operations during the period between the signing of the Purchase and Collaboration Agreement and the Closing. See “The Purchase and Collaboration Agreement—Conduct of Business Prior to Closing,” beginning on page 93. Our board believed that such limitations were customary for transactions similar to the Watson Transactions and appropriately tailored to the specific requirements of the assets being sold. | ||
• | Non-Competition Restrictions. Our board of directors considered the non-competition obligation that would be imposed on us as a result of the Watson Transactions. See “The Purchase and Collaboration Agreement—Non-Compete,” beginning on page 112. Based on the status of our development pipeline and the fact that the obligations were only minimally restrictive of our activities with respect to women’s healthcare, taken as a whole, our board did not believe that these obligations would materially interfere with the growth and development of our business. | ||
• | Indemnification Obligations. Our board of directors was aware that the Purchase and Collaboration Agreement placed certain indemnification obligations on us. Our board considered the customary nature of such indemnification obligations in the Watson Transactions and the risk of liability to Buyer following the Closing. |
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• | Transaction Consideration Taxable. Our board of directors considered that the gain we would recognize on the sale of the Assets in connection with the Asset Sale would be taxable. In that regard, the board noted that we have the opportunity to shield substantially all such gain through our existing net operating loss carryforwards. | ||
• | Acceleration of the Notes. Our board of directors was aware that consummation of the Asset Sale would trigger certain rights in the Notes, that could force us to redeem the Notes for a cash price equal to the principal amount of the outstanding Notes, plus accrued and unpaid interest. In recognition of this risk, all of the Notes have been amended and will be repurchased contemporaneously with the Closing. See “—Purchase of our Convertible Subordinated Notes,” beginning on page 67. In addition, our board was aware that our obligations owing to PharmaBio under the PharmaBio Agreement were senior to the Notes. Therefore, our obligations to PharmaBio under the PharmaBio Agreement would also needed to be prepaid at the Closing. | ||
• | Rights of Our Series C Preferred Stockholders. Our board of directors was aware that the consummation of the Watson Transactions would result in a “triggering event” for the holders of our Series C Preferred Stock, providing such holders with the right to require us to redeem their shares of Series C Preferred Stock for the cash value of the Series C Preferred Stock, plus all accrued and unpaid dividends thereon on the date such redemption is demanded. See “—Preferred Stock,” beginning on page 73. |
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• | reviewed the financial terms of a draft of the Purchase and Collaboration Agreement provided to RBC on March 3, 2010; | ||
• | reviewed financial information and estimates related to the Progesterone Products and to the operations associated therewith that were provided to RBC by Columbia’s management, including estimates as to corporate overhead costs attributable thereto and Columbia’s payment of the first $7,000,000 of development costs associated with the PTB Indication and other mutually agreed-upon product development (the “Forecast”); | ||
• | conducted discussions with members of our senior management with respect to the prospects and financial outlook of the Assets; and | ||
• | performed such other studies and analyses as it deemed appropriate. |
• | reviewed selected market valuations of publicly-traded companies that it deemed comparable to the Assets; and | ||
• | performed a discounted cash flow analysis using the Forecasts. |
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• | all conditions to the consummation of the Watson Transactions would be satisfied without waiver thereof; | ||
• | the representations and warranties of each party contained in the Purchase and Collaboration Agreement were true and correct; | ||
• | each party would perform all of the covenants and agreements required to be performed by it under the Purchase and Collaboration Agreement; and | ||
• | the executed version of the Purchase and Collaboration Agreement would not differ, in any respect material to the RBC opinion, from the latest draft reviewed by RBC. |
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• | Cornerstone Therapeutics, Inc. | ||
• | Inspire Pharmaceuticals, Inc. | ||
• | Cumberland Pharmaceuticals, Inc. | ||
• | Spectrum Pharmaceuticals, Inc. | ||
• | BioSante Pharmaceuticals, Inc. |
Peer Group Mean | Peer Group Median | |||
Enterprise value as a multiple of calendar year 2009 revenue | 3.5x | 3.9x | ||
Enterprise value as a multiple of calendar year 2010 revenue | 2.5x | 2.5x | ||
Enterprise value as a multiple of calendar year 2011 revenue | 1.9x | 1.6x |
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• | a non-exclusive, non-transferable, royalty-free and fully paid-up license to the Patents and know-how included among the Assets and the know-how arising from the Development activities pursuant to the Purchase and Collaboration Agreement for the purpose of supplying the Progesterone Products to Buyer under the terms and conditions of the Supply Agreement; | ||
• | a non-exclusive, non-transferable, royalty-free and fully paid-up license to the Patents and know-how included among the Assets, the know-how arising from the Development activities and the Patents and know-how controlled by Buyer but identified for our use in writing, for the purposes of conducting our Development activities under the Purchase and Collaboration Agreement; | ||
• | an exclusive, irrevocable, perpetual, royalty-free and fully paid-up license, with the right to grant sublicenses to the Patents and know-how included among the Assets and certain know-how arising from the Development |
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activities pursuant to the Purchase and Collaboration Agreement for the purposes of our compliance with our agreements with Dimera Incorporated and Merck Serono; and |
• | a non-exclusive, irrevocable, perpetual, royalty-free and fully paid-up license, with the right to grant sublicenses to Develop, manufacture, have manufactured, use, import, export, market, sell, offer to sell or otherwise Commercialize the Second Generation Delivery System to the extent that it incorporates or delivers any product other than the Progesterone Products in any and all fields. |
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• | December 31, 2011; | ||
• | following the occurrence of a Fundamental Transaction (as defined below) other than the Watson Transactions, the earlier of (i) the date upon which all of the obligations in respect of our Notes have been paid in full or (ii) 21 Trading Days (as defined in our Notes) after the occurrence of such Fundamental Transaction; or | ||
• | the acceleration of all amounts payable under the Watson Note due to a default by Columbia. |
• | we shall, directly or indirectly, in one or more related transactions: |
• | consolidate or merge with or into (whether or not we are the surviving corporation) another person or persons, or | ||
• | sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of ours to another person, or |
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• | allow another person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of the capital stock of such person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers or trustees of such person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency) (“Voting Stock”) (not including any shares of Voting Stock held by the person or persons making or party to, or associated or affiliated with the persons making or party to, such purchase, tender or exchange offer), or | ||
• | consummate a stock purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another person whereby such other person acquires more than the 50% of the outstanding shares of Voting Stock (not including any shares of Voting Stock held by the other person or other persons making or party to, or associated or affiliated with the other persons making or party to, such stock purchase agreement or other business combination), or | ||
• | reorganize, recapitalize or reclassify our Common Stock, or |
• | any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of our aggregate Voting Stock. |
• | the obligations then subject to the Watson Note Senior Default have been paid in full; | ||
• | the Watson Note Senior Default has been cured by us or waived by PharmaBio and/or the holders of the Notes then subject to the Watson Note Senior Default; or | ||
• | PharmaBio and each of the holders of the Notes have terminated the Watson Note Payment Suspension Period. |
a. | the occurrence and continuance (after any applicable grace period) of a default in payment of all or any part of the obligations under the PharmaBio Agreement or the Notes; or | ||
b. | the occurrence and continuance (after any applicable grace period) of any other default of the terms and conditions of the PharmaBio Agreement or the Notes (other than a default under any Note that is described in the clause c. below) if the effect of such default is (1) to cause all or any portion of our obligations under the PharmaBio Agreement or the Notes to become due prior to its stated maturity or (2) to permit PharmaBio or any holder of a Note to cause any of our obligations under the PharmaBio Agreement or our Notes to become due prior to its stated maturity; provided, that, any Senior Default described in clause b.(2) arising as a result of a default under any of our Notes shall expire if and when the applicable holder does not exercise its right to cause such Note to become due within thirty five (35) days after it obtains knowledge of such default; or | ||
c. | the occurrence of any event that provides any holder of our Notes with cash redemption rights prior to the stated maturity of such Notes; provided, that, in the case of this clause c., the holders of our Notes have exercised such redemption rights within the time period provided in our Notes. |
• | PharmaBio and the holders of the Notes will be entitled to receive payment in full of amounts due under the PharmaBio Agreement and the Notes, respectively, before the holder of the Watson Note is entitled to receive any payment thereon; and |
• | any payment or distribution of our assets of any kind or character, whether in cash, property or securities, by set-off or otherwise, to which the holder of the Watson Note would be entitled but for the subordination provisions of the Watson Note will be paid by the liquidating trustee or agent or other person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to PharmaBio and the holders of the Notes, ratably according to the aggregate amounts remaining unpaid on account of the principal of, interest on and any premium or other amounts payable with respect to the PharmaBio Agreement and the Notes, to the extent necessary to make payment in full of all amounts owing to PharmaBio under the PharmaBio Agreement and to the holders of the Notes under the Notes remaining unpaid, after giving effect to any concurrent payment or distribution to PharmaBio under the PharmaBio Agreement and to the holders of the Notes under the Notes. |
• | all of our obligations issued, undertaken or assumed as the deferred purchase price of property or services, including (without limitation) “capital leases” in accordance with GAAP; | ||
• | all of our reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, incurred in the ordinary course of our business; | ||
• | unsecured indebtedness between us and any of our subsidiaries or between our subsidiaries; and | ||
• | indebtedness existing on the date of the Watson Note. |
• | the then fair value of the Acquisition Shares; and | ||
• | the elimination of the remaining book value of the CRINONE intangible assets (which was $18.8 million as of December 31, 2009). |
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• | agreed that during the period from July 22, 2009 through November 30, 2010, we will place in escrow any proceeds from sales of assets outside the ordinary course of business in excess of $15.0 million but not exceeding the difference |
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between the amount of royalties actually received by PharmaBio under the PharmaBio Agreement and $30.0 million; and |
• | granted PharmaBio a warrant to purchase 900,000 shares of Common Stock. |
• | the time we have paid in full our obligations owing to PharmaBio under the PharmaBio Agreement; |
• | the Senior Default has been cured by us or waived by PharmaBio; or |
• | PharmaBio has terminated the Payment Suspension Period. |
• | the occurrence and continuance (after any applicable grace period) of a default in payment of all or any part of the Senior Debt; |
• | the breach or default by us of any term of any Notes if the effect of such breach or default is to cause an amount exceeding $500,000 to become due prior to its stated maturity or to permit the holder of any Note to cause an amount exceeding $500,000 to become due prior to the stated maturity of our Notes; or |
• | the occurrence of any event that provides the holder of any Note with cash redemption rights prior to the stated maturity of our Notes. |
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• | the holders of our Senior Debt will be entitled to receive payment in full of the principal thereof, the interest due thereon and any premium or other payment obligation with respect thereto before the holders of our Notes are entitled to receive any payment; and |
• | any payment or distribution of our assets of any kind or character, whether in cash, property or securities, by set-off or otherwise, to which the holders of our Notes would be entitled but for the subordination provisions of our Notes will be paid by the liquidating trustee or agent or other person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of Senior Debt, ratably according to the aggregate amounts remaining unpaid on account of the principal of, interest on and any premium or other amounts payable with respect to the Senior Debt held or represented by each such holder, to the extent necessary to make payment in full of all Senior Debt remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of the Senior Debt. |
• | the indebtedness evidenced by our Notes; |
• | the Senior Debt; and |
• | Permitted Indebtedness. |
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• | all of our obligations issued, undertaken or assumed as the deferred purchase price of property or services, including (without limitation) “capital leases” in accordance with GAAP; |
• | all of our reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, incurred in the ordinary course of our business; |
• | unsecured indebtedness between us and any of our subsidiaries or between our subsidiaries; and |
• | any other indebtedness of ours in an aggregate original principal amount not to exceed $4,000,000 at any one time outstanding. |
• | we or one of our subsidiaries makes an assignment for the benefit of creditors or admits in writing its inability to pay its debts generally as they become due; or an order, judgment or decree is entered adjudicating us or any of our subsidiaries bankrupt or insolvent; or any order for relief with respect to us or any of our subsidiaries is entered under the Federal Bankruptcy Code; or we or any of our subsidiaries petitions or applies to any tribunal for the appointment of a custodian, trustee, receiver or liquidator in respect of us or any of our subsidiaries, or of any substantial part of the assets of ours or of any of our subsidiaries, or we or any of our subsidiaries commence any proceeding (other than a proceeding for the voluntary liquidation and dissolution of any of our subsidiaries) relating to us or any of our subsidiaries under any bankruptcy reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction; or any such petition or application is filed, or any such proceeding is commenced, against us or any of our subsidiaries and either (i) we or any of our subsidiaries by any act indicates its approval thereof, consents thereto or acquiesces therein or (ii) such petition, application or proceeding is not dismissed within 60 days (each an “Insolvency Default”); |
• | a judgment, to the extent not covered under an insurance policy, in excess of $1,000,000 is rendered against us or any of our subsidiaries and, within 60 days after entry thereof, such judgment is not discharged in full or execution thereof stayed pending appeal, or within 60 days after the expiration of any such stay, such judgment is not discharged in full; or |
• | we or any of our subsidiaries defaults in the performance of any obligation if the effect of such default is to cause an amount exceeding $500,000 to become due prior to its stated maturity or to permit the holder or holders of such obligation to cause an amount exceeding $500,000 to become due prior to its stated maturity; |
• | we fail to pay when due and payable (whether at maturity or otherwise) any principal, interest or other payment on any Note, and such failure to pay any such amount, other than principal, is not cured within 30 days after the occurrence thereof; |
• | we breach any covenant or other term or condition in our Notes or in the Securities Purchase Agreement, dated December 21, 2006 (the “Securities Purchase Agreement”), subject to certain limited exceptions, with such breach not being cured within 30 days from our knowledge thereof; or |
• | the representations and warranties contained in the Securities Purchase Agreement should not be true and correct on the date of the issuance of our Notes (except to the extent expressly made as of an earlier date, in which case, as of such earlier date) and such failure, individually or in the aggregate, results in a material adverse effect on our business, results of operations or financial condition, taken as a whole. |
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• | pay cash to such holder in an amount equal to such holder’s total purchase price (including brokerage commissions and other out of pocket expenses, if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point our obligation to deliver such certificate (and to issue such Common Stock) will terminate; or |
• | promptly honor our obligation to deliver to such holder a certificate or certificates representing such Common Stock and pay cash to such holder in an amount equal to the excess (if any) of the Buy-In Price over the product of such number of shares of Common Stock, times the closing bid price of our Common Stock on the conversion date. |
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• | August 31, 2010, only if the closings contemplated under the Note Purchase Agreements do not occur on or prior to August 31, 2010; | ||
• | the date, if any, after the date of the Note Purchase Agreements and prior to the closings contemplated under the Note Purchase Agreements, on which holders of at least 25% of the aggregate principal amount of our Notes have not consented to the Note Amendment or have terminated Note Purchase Agreements to which they are a party (in accordance with their terms); and | ||
• | the business day after the Closing (of the Watson Transactions) if the closings under the Note Purchase Agreements do not occur on or prior to such business day. | ||
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• | we may experience a significant liquidity shortage; | ||
• | the failure to complete the Watson Transactions may create substantial doubt as to our ability to effectively implement our current business strategies, including the continuation of the PREGNANT Study; | ||
• | our costs related to the Watson Transactions, such as legal, financial advisor and accounting fees, must be paid even if the Watson Transactions are not completed; and | ||
• | we may not be able to sell any of our assets to another party on terms as favorable to us as the terms of the Purchase and Collaboration Agreement, if at all. |
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• | Certain of our United States and non-United States patents, patent applications, and other similar enforceable rights relating to the protection of inventions worldwide (and all rights related thereto, including all reissues, reexaminations, divisions, continuations, continuations-in-part, extensions or renewals of any of the foregoing) (“Patents”); | ||
• | Certain of our trademarks, service marks, certification marks, trade dress, Internet domain names, trade names, identifying symbols, designs, product names, company names, slogans, logos or insignia, whether registered or unregistered, and all common law rights, applications and registrations therefor, and all goodwill associated therewith (“Trademarks”); | ||
• | The advertising, promotional and media materials, sales training materials, trade show materials and videos primarily used by us for the importing, marketing, detailing, promoting, advertising, distributing and selling (the “Commercialization”, or as applicable, “Commercializing” or “Commercialize”) the Progesterone Products in our possession and control and the copyrights and copyrightable works, including all rights of authorship, use, publication, reproduction, distribution, performance, transformation, moral rights and rights of ownership of copyrightable works, copyright registrations, or any application therefore, in the United States or any foreign country, and all rights to register and obtain renewals and extensions of registrations, to the extent relating thereto; | ||
• | All submissions, primarily relating to the Progesterone Products, to Regulatory Authorities of regulatory applications and any approval, |
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registration, license, permit, certificate, exemption, consent, confirmation, order, waiver, clearance or authorization from a Regulatory Authority in a jurisdiction that is necessary to market and sell the Progesterone Products (“Regulatory Approval”); |
• | All rights and interest of Columbia under its contracts primarily related to the Progesterone Products; | ||
• | The books, files, documents, data, information, records and complete and correct copies of all tax returns and other documents pertaining to taxes, if any, primarily related to the Assets in our possession or the research, development, regulatory approval, manufacture, distribution, marketing, sale and promotion of the Progesterone Products (the “Business”), in our possession or control; provided, that we shall be entitled to exclude or appropriately redact such documents, information, materials and data from the applicable books and records to the extent not related to Assets or the Business and retain the original (in the case of such exclusion) or a copy (in the case of such redaction) thereof; provided, further, that any such exclusion or redaction may not degrade or impair Buyer’s ability to use any such books and records; | ||
• | To the extent in our possession or control, all pre-clinical, clinical and process development data and reports primarily relating to the research, Commercialization or Development of the Progesterone Products, including all raw data from clinical trials of our marketed 8% vaginal gel Progesterone Product “PROCHIEVE” or other Progesterone Products, all case report forms relating thereto and all statistical programs developed (or modified in a manner material to the use or function thereof (other than through user preferences)) to analyze data from such clinical trials; all market research data, market intelligence reports, statistical programs (if any) used for marketing and sales research primarily related to the marketing and sale of Progesterone Products; data contained in laboratory notebooks primarily relating to the Progesterone Products; all adverse experience reports and files primarily related to the Progesterone Products (including source documentation) and all periodic adverse experience reports and all data contained in electronic data bases primarily relating to adverse experience reports and periodic adverse experience reports for the Progesterone Products; all analytical and quality control data for the Progesterone Products; and all correspondence with the FDA primarily relating to the Progesterone Products; and | ||
• | All refunds, credits and claims for refunds or credits relating to property taxes allocable to any tax period beginning after the date of the Closing, in our favor or any of our affiliates or any of their respective employees to the extent relating to any Asset or any Assumed Liability (as herein defined). |
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• | Prior to the Closing, Buyer shall assign to a wholly-owned subsidiary of Watson the rights and obligations of Buyer to purchase certain non-U.S. intellectual property rights that constitute part of the Assets. These non-U.S. Assets include the rights to Develop or Commercialize the Assets outside of the United States and the income, royalties, damages and payments made, due or payable with respect to such rights. |
• | All Liabilities arising out of or relating to the Assets on and after the Closing; and |
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• | All Liabilities under the contracts assigned to Buyer to the extent such Liabilities arise on or after the date of the Closing. |
Milestone Payment | ||
Milestone | (the “Clinical Trial Results | |
(the “Clinical Trial Results Milestone”) | Milestone Payment”) | |
Upon completion of the statistical analysis, and delivery to Buyer of a report from our third party statistician for the “PREGNANT Study” in accordance with the Purchase and Collaboration Agreement, if the primary endpoint, reduction in preterm birth (as currently prespecified in the clinical trial protocol), achieves a p value of ≤ 0.01 and the secondary endpoint, infant outcomes composite score (to be agreed to with the FDA in the final statistical analysis plan), achieves a p value of ≤ 0.05; OR | U.S. $8,000,000; OR | |
Upon completion of the statistical analysis, and delivery to Buyer of a report from our third party statistician for the PREGNANT Study in accordance with the Purchase and Collaboration Agreement, if the primary endpoint, reduction in preterm birth (as currently prespecified in the clinical trial protocol), achieves a p value of > 0.01 and ≤ 0.05 and the secondary endpoint, infant outcomes composite score (to be agreed to with the FDA in the final statistical analysis plan), achieves a p value of ≤ 0.05. | U.S. $6,000,000 | |
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Milestone | Milestone Payment | |
Acceptance by the FDA of a PTB NDA or a PTB Supplemental NDA filed by or on behalf of Seller or Buyer with the approval of the Joint Development Committee (the “PTB NDA Acceptance Milestone”) | U.S. $5,000,000 (“PTB NDA Acceptance Milestone Payment”) | |
First commercial sale of a PTB Product by or on behalf of Buyer in the United States (the “PTB Product Launch Milestone”) | U.S. $30,000,000 (“PTB Product Launch Milestone Payment”) | |
Milestone | ||
(the “Ex-U.S. Filing/Approval Milestone”) | Milestone Payment | |
Filing and acceptance by the applicable Regulatory Authority of an MAA in a country or jurisdiction outside the United States seeking Regulatory Approval to market a Progesterone Product for the PTB Indication (the “Ex-U.S. Filing Milestone”) | U.S. $500,000 | |
Grant by the applicable Regulatory Authority in a country or jurisdiction outside the United States of regulatory approval to market a Progesterone Product for the PTB Indication (the “Ex-U.S. Approval Milestone”) | U.S. $2,000,000 | |
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Total Net Sales in any Calendar Year | Royalty Rate | |||
Portion of aggregate Net Sales (as defined below) of Royalty Products and PTB Royalty Products which are less than or equal to U.S. $150,000,000 | 10 | % | ||
Portion of aggregate Net Sales of Royalty Products and PTB Royalty Products which are greater than U.S. $150,000,000 but less than or equal to U.S. $250,000,000 | 15 | % | ||
Portion of aggregate Net Sales of Royalty Products and PTB Royalty Products which are greater than U.S. $250,000,000 | 20 | % | ||
• | trade, quantity and cash discounts; | ||
• | adjustments for price adjustments, billing errors, rejected goods, returns, product recalls and damaged goods (excluding goods damaged while under the control of Buyer or its affiliates or their respective licensees, sub-licensees or distributors); | ||
• | credits, charge-backs, reimbursements, and similar payments provided to wholesalers and other distributors, buying groups, health care insurance carriers, pharmacy benefit management companies, health maintenance organizations, other institutions or health care organizations or other customers; | ||
• | rebates or other price reductions provided to any Regulatory Authority with respect to any state or federal Medicare, Medicaid or similar programs; | ||
• | any invoiced charge for freight, insurance, handling or other transportation costs directly related to delivery of the Progesterone Products; | ||
• | distributor fees per contract based solely as a percentage of gross sales; and |
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• | taxes that are in the nature of tariffs, duties, excise, sales, use or value-added taxes; |
• | the expiration of the last to expire Valid Claim (as defined below) of any Patent in the Assets or licensed by Buyer under the License Agreement, and covering such Royalty Product in such country; | ||
• | the expiration of any period of any exclusive marketing rights or data exclusivity rights conferred by any Regulatory Authority with respect to a |
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Progesterone Product other than Patents, including rights conferred in the United States under the Hatch-Waxman Act or the FDA Modernization Act of 1997 or rights similar thereto outside the United States (“Regulatory Exclusivity”), applicable to such Royalty Product in such country; and | |||
• | the tenth anniversary of the date of Launch by Buyer of such Royalty Product in such country (or, if no such Launch of a Royalty Product occurs, the tenth anniversary of the Closing) (the “Royalty Product Term”). | ||
Royalties and payments by Buyer to us with respect to sharing of Gross Profits with respect to a PTB Royalty Product sold in any country will be payable on a country-by-country basis from the Closing until the latest of: | |||
• | the expiration of the last to expire Valid Claim of any Patent in the Assets or licensed by Buyer under the License Agreement and covering such PTB Royalty Product in such country; | ||
• | the expiration of any period of Regulatory Exclusivity applicable to such PTB Royalty Product in such country; and | ||
• | the tenth anniversary of the date of Launch by Buyer of such PTB Royalty Product in such country (or, if no such Launch occurs, the tenth anniversary of the Closing) (the “PTB Royalty Product Term”). | ||
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calendar year constituting Buyer’s good faith estimate of the royalty (or share of Gross Profits) owed for such quarter, and with the payment made in respect of the fourth calendar quarter of such calendar year including a “true up” for the first three calendar quarters’ payments, based on actual amounts owed by Buyer in respect of such three calendar quarters relative to amounts paid by Buyer). |
• | finally determined claims for indemnification made by Buyer and | ||
• | breach of our obligation to use the cash in the Development Bank Account exclusively for Development Costs during the Seller Expense Period. See “—Development and the Joint Development Committee,” beginning on page 102. |
• | our organization, existence and power and authority to own our assets, including the Assets; and operate our business as currently conducted; qualification to do business and good standing; | ||
• | our corporate power and authority to enter into the Purchase and Collaboration Agreement and Other Agreements to be executed by us pursuant to the Purchase and Collaboration Agreement and to consummate the transactions contemplated by the Purchase and Collaboration Agreement and the Other Agreements; |
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• | the lack of a violation of our charter documents, certain contracts or any law as a result of entering into the Purchase and Collaboration Agreement and the consummation of the transactions contemplated by the Purchase and Collaboration Agreement and the Other Agreements; | ||
• | the requirement of any required governmental approvals or consents; | ||
• | our and our subsidiaries’ title and sufficiency with respect to the Assets; | ||
• | our capitalization; | ||
• | our intellectual property; | ||
• | the absence of litigation; | ||
• | our real and personal property; | ||
• | tax matters; | ||
• | environmental, safety and health matters; | ||
• | our compliance with all applicable laws and permits; | ||
• | regulatory matters; | ||
• | our suppliers; | ||
• | the filing of required company reports and other documents with the SEC, compliance of such reports and documents and with applicable requirements of federal securities laws, rules and regulations, the accuracy and completeness of such reports and documents, including the content of our financial statements included in such reports and documents; | ||
• | the absence of certain changes or events since December 31, 2008; | ||
• | our material contracts; | ||
• | the absence of brokers; | ||
• | certain insurance related matters; | ||
• | certain investment company related matters; | ||
• | the listing of our Common Stock on the NASDAQ Global Market; | ||
• | application of takeover protections; and |
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• | the receipt of a fairness opinion from our financial advisor. |
• | its corporate organization, existence and power and authority to own, lease and operate its properties and carry on its business; | ||
• | its corporate power and authority to enter into the Purchase and Collaboration Agreement and Other Agreements to be executed by it pursuant to the Purchase and Collaboration Agreement and to consummate the transactions contemplated by the Purchase and Collaboration Agreement and the Other Agreements; | ||
• | its investment purpose in the Acquisition Shares and its status as an accredited investor; | ||
• | its acknowledgment regarding the securities laws; | ||
• | its ownership of our securities; | ||
• | its acknowledgment of risk in holding the Acquisition Shares; | ||
• | its capitalization; | ||
• | the lack of violation of its charter documents, certain contracts or any law as a result of entering into the Purchase and Collaboration Agreement and the consummation of the transactions contemplated by the Purchase and Collaboration Agreement and the Other Agreements; | ||
• | the absence of litigation; | ||
• | the availability of financing; | ||
• | lack of short sales; | ||
• | absence of brokers; and | ||
• | its independent investigation of the Assets and other matters relating to entering into the Purchase and Collaboration Agreement. |
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• | changes, effects or events that generally affect the industr(ies) in which we operate (including the pharmaceutical industry and Progesterone products industry) or the manufacture, Development or Commercialization of Progesterone Products (including legal and regulatory changes) to the extent that they do not disproportionately affect us relative to other industry participants; | ||
• | general economic or political changes, effects or events affecting the financing or securities markets generally to the extent that they do not disproportionately affect us relative to other industry participants; | ||
• | changes, developments or events caused by an act of God or by acts of terrorism or war (whether or not declared) occurring after the execution date of the Purchase and Collaboration Agreement (including a material worsening of current conditions); | ||
• | changes, effects or events arising from, or in connection with, the consummation (or anticipated consummation) of the transactions contemplated by the Purchase and Collaboration Agreement or any of them, or the announcement of the execution of, the Purchase and Collaboration Agreement or the Other Agreements related thereto and the pendency or public disclosure of the Purchase and Collaboration Agreement or the Watson Transactions; | ||
• | any change in our accounting practices or policies required by United States GAAP; | ||
• | any changes, effects or events that result from any action taken pursuant to or in accordance with the Purchase and Collaboration Agreement, the Other Agreements contemplated thereby or at the written request of Buyer; | ||
• | any failure of Columbia to meet estimates or expectations of our revenues or earnings (it being understood that the facts or occurrences giving rise or contributing to such failure may be deemed to constitute, or be taken into account in determining, whether there has been or will be a Material Adverse Effect); or | ||
• | any claim, action, suit, arbitration, inquiry, audit, proceeding or investigation by or before any Regulatory Authority made or brought (whether before or after the date of the Purchase and Collaboration Agreement) by any of our current or former stockholders, arising out of the Purchase and Collaboration Agreement or the Watson Transactions. |
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• | use commercially reasonable efforts to keep in full force and effect, without amendment, all material rights relating to the Business, except those that expire in accordance with their terms; | ||
• | use commercially reasonable efforts to comply in all material respects with all requirements of law and contractual obligations, in each case applicable to the operation of the Business; | ||
• | maintain all books and records related to the Business in accordance with past practice; | ||
• | not fail to maintain our existing insurance coverage to the extent relating to the Business in all material respects in effect as of the date of the Purchase and Collaboration Agreement; and | ||
• | confer with Buyer prior to (A) effecting any material personnel changes that would affect Development of the Progesterone Products, (B) amending the PROCHIEVE PTB Development Plan or otherwise making any material decision with respect to Development of the Progesterone Products, or (C) entering into any discussions with, or making any commitments to, any Regulatory Authority with respect to the Progesterone Products or the Business. |
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• | declare, set aside or pay any dividend or distribution or other capital return in respect of any shares of our capital stock, except with respect to our preferred stock to the extent required by the terms thereof, or redeem, purchase or acquire any shares of our capital stock other than preferred stock to the extent required by the terms thereof, in connection with any of our existing equity plans or in the ordinary course of business consistent with past practice; | ||
• | subject any Assets to any material security interest, pledge, hypothecation, mortgage, lien or encumbrance, other than any licenses of intellectual property rights and encumbrances set forth on a schedule to the Purchase and Collaboration Agreement; | ||
• | sell, transfer, lease, sublease, license or otherwise dispose of or grant any option or rights in, to or under any Assets; | ||
• | enter into any Material Contract (as defined in the Purchase and Collaboration Agreement) primarily relating to the Progesterone Products or terminate (other than in accordance with its terms), extend or amend any such Material Contract; | ||
• | abandon, terminate or materially alter the administration of any Development activities relating to any Progesterone Product (other than for safety concerns or in accordance with the terms of existing agreements with respect to such clinical trials) or terminate or materially alter our support of clinical trials sponsored by clinical investigators with respect to any Progesterone Product; | ||
• | abandon, terminate or materially reduce our marketing activities (including expenditures for promotional activities and sales force activity) for any Progesterone Product or materially change the size of, or our business relationship with, the sales force for PROCHIEVE; | ||
• | commence, sponsor or commit to participate in any clinical trials or investigator sponsored trials with respect to any Progesterone Product or provide any clinical grants with respect to any Progesterone Product; | ||
• | commit to comply with any obligations imposed by a Regulatory Authority with respect to any Progesterone Product; | ||
• | abandon any Patents or any litigation seeking to enforce our interest in any of our intellectual property that is an Asset or Excluded Asset that would (if not abandoned) be licensed to Buyer under the terms of the License Agreement other than in the ordinary course of business consistent with past practice; |
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• | to the extent that doing so would relate to the Assets or the Business and would have a material effect on the Assets or the Business after the Closing, make any election or change to any election with respect to taxes, adopt or change any accounting method with respect to taxes, enter into any tax allocation agreement, tax sharing agreement, tax indemnity agreement or Closing agreement relating to any tax, settle or compromise on any claim, notice, audit report or assessment in respect of taxes, consent to any extension or waiver of the limitation period applicable to any claim or assessment with respect to taxes, change any annual tax accounting period, file any amended tax return, or surrender any right to claim a tax refund; or | ||
• | agree, whether in writing or otherwise, to do any of the foregoing. |
• | Columbia, on the one hand, and Buyer, on the other hand, shall promptly notify the other party in writing of any fact, change, condition, matter, circumstance, claim, event or occurrence or nonoccurrence of any event of which it is aware that will or is reasonably likely to result in any of the conditions to Closing set forth in the Purchase and Collaboration Agreement becoming incapable of being satisfied. | ||
• | We shall give prompt notice to Buyer of (i) the existence, occurrence or non-occurrence of any fact, change, condition, matter, circumstance, claim or event the existence, occurrence or non-occurrence of which would cause our representations or warranties contained in the Purchase and Collaboration Agreement to be untrue or inaccurate in any material respect at or prior to the Closing and (ii) any material failure by us to perform, comply with or satisfy any covenant, condition or agreement to be performed, complied with or satisfied by it thereunder. With respect to a notice contemplated by clause (i) above if the notice expressly acknowledges that the facts, changes, |
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conditions, matters, circumstances claims and/or events (occurrence or nonoccurrence of which) described therein occurred after the date of the Purchase and Collaboration Agreement and would give rise to the failure of a condition in favor of Buyer set forth in the Purchase and Collaboration Agreement (a “MAE Notice”) the Schedules (the “Schedules”) included in the disclosure letter delivered to Buyer in connection with the Purchase and Collaboration Agreement will be deemed to include the information contained in any such MAE Notice (other than for purposes of the conditions and termination provisions of the Purchase and Collaboration Agreement) and no claim may be made by any Buyer Indemnitee for losses under the Purchase and Collaboration Agreement with respect to any of the facts, changes, conditions, matters, circumstances, claims or other events (or the existence, occurrence or nonoccurrence thereof) described in any such MAE Notice. A notice contemplated by clause (i) (other than a MAE Notice) or clause (ii) of the first sentence of this paragraph will not be deemed to update the Schedules or adversely affect Buyer’s rights with respect to the conditions to Closing, termination or indemnification under the Purchase and Collaboration Agreement, including Buyer’s rights under the Purchase and Collaboration Agreement. |
• | We may, by delivery to Buyer, update the Schedules to correct typographical or immaterial errors and, upon Buyer’s written approval, any such updated Schedule shall replace the corresponding Schedule delivered by us in connection with the execution of the Purchase and Collaboration Agreement. |
• | to satisfy or cause to be satisfied all the conditions precedent that are set forth as conditions to Closing of the Purchase and Collaboration Agreement, as applicable to each of them; | ||
• | to cause the Watson Transactions to be consummated; and | ||
• | without limiting the generality of the foregoing, to obtain all consents and authorizations of third parties and to make all filings with, and give all notices to, third parties that may be necessary or reasonably required on its part in order to consummate the Watson Transactions. |
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• | No Regulatory Authority of competent jurisdiction shall have issued an order, decree or ruling, or taken any other action permanently restraining, enjoining or otherwise prohibiting the Watson Transactions to be consummated on the Closing. | ||
• | Our stockholders shall have approved the Asset Sale and the Charter Amendment. | ||
• | The Charter Amendment shall have been filed with the Secretary of State of the State of Delaware. |
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• | Each of the representations and warranties made by us in the Purchase and Collaboration Agreement, shall be true and correct as of the date thereof and as of the Closing as though made on and as of the Closing (unless any such representation or warranty expressly relates to a particular date, in which case such representation or warranty shall be true and correct only as of such date) except where the failure of such representations and warranties to be true and correct would not, individually or in the aggregate, be expected to have a Material Adverse Effect. | ||
• | We shall have performed and complied in all material respects with each of the covenants, agreements and obligations we are required to perform, at or prior to the Closing, under the Purchase and Collaboration Agreement. | ||
• | We shall have made or caused to be made certain deliveries required to be made by us under the Purchase and Collaboration Agreement. | ||
• | No Material Adverse Effect shall have occurred since the date of the Purchase and Collaboration Agreement. | ||
• | We shall have established the Development Bank Account (as defined herein). |
• | Each of the representations and warranties of Buyer contained in the Purchase and Collaboration Agreement shall be true and correct in all material respects, as of the date of the Purchase and Collaboration Agreement and as of the Closing as though made on and as of the Closing (unless any such representation or warranty expressly relates to a particular date, in which case such representation or warranty shall be true and correct only as of such date), except where the failure of any representation or warranty to be true and correct would not prevent or materially delay the consummation of the Watson Transactions. |
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• | Buyer shall have performed and complied in all material respects with each of the covenants, agreements and obligations Buyer is required to perform at or prior to the Closing. | ||
• | Buyer shall have made or caused to be made certain deliveries required under the Purchase and Collaboration Agreement. |
• | Completion of PTB US Development shall have occurred; |
• | No Regulatory Authority of competent jurisdiction shall have issued an order, decree or ruling, or taken any other action permanently restraining, enjoining or otherwise prohibiting the transactions which are contemplated by this Purchase and Collaboration Agreement to be consummated on the second closing date; and |
• | The Closing shall have occurred. |
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• | taking all actions, paying all fees and conducting all communication with the appropriate Regulatory Authority required by law in respect of Regulatory Approvals, including preparing and filing all reports (including adverse drug experience reports, product deviation reports, annual reports) with the appropriate Regulatory Authority; |
• | submitting all applications for marketing authorizations of new drugs, where such authorizations have not yet been granted, and variation of existing authorizations; and |
• | investigating all complaints and adverse drug experiences with respect to Progesterone Products sold pursuant to such regulatory approvals. |
• | taking all actions, paying all fees and conducting all communication with the appropriate Regulatory Authority required by law in respect of regulatory approvals solely for the PTB Indication, including preparing and filing all |
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reports (including adverse drug experience reports, product deviation reports, annual reports) with the appropriate Regulatory Authority; |
• | submitting all applications for marketing authorizations of new drugs solely for the PTB Indication, where such authorizations have not yet been granted, and variation of existing authorizations; and |
• | investigating all complaints and adverse drug experiences with respect to Progesterone Products sold pursuant to such regulatory approvals. |
• | conducting all voluntary and mandatory recalls of units of Progesterone Products sold pursuant to such regulatory approvals (whether sold before or after transfer of such regulatory approval), including recalls required by any Regulatory Authority and recalls of units of Progesterone Products sold by us deemed necessary by us in its reasonable discretion; |
• | conducting all communications and submitting all required reports to any Regulatory Authority concerning the recalls; and |
• | notifying customers and consumers about the recalls. |
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• | to modify or amend the terms and conditions of the Purchase and Collaboration Agreement or to determine any such issue in a manner that would conflict with the express terms and conditions of the Purchase and Collaboration Agreement; or | ||
• | to approve or adopt any amendment, modification or update to the Development Plan or Development Budget or take any other action that would (A) unilaterally impose an obligation (financial or otherwise) on Columbia beyond those expressly provided in the Purchase and Collaboration Agreement, (B) excuse Buyer from any of its obligations specifically enumerated under the Purchase and Collaboration Agreement, or (C) reduce the rights of Columbia specifically enumerated under the Purchase and Collaboration Agreement. |
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• | all out-of-pocket costs incurred by the Parties or their affiliates, including payments made to third parties with respect to any of the foregoing; | ||
• | the cost of clinical supply, including without limitation (i) costs of manufacturing or procuring clinical supplies, including reasonable costs incurred in connection with the development of the manufacturing process for such clinical supplies, but excluding any capital expenditures or qualification or validation expenses relating to any manufacturing facility and (ii) expenses incurred to purchase and/or package placebos and comparator drugs, and costs and expenses of disposal of clinical samples; and | ||
• | the costs of Regulatory Filings. | ||
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• | us, from performing our obligations under the Purchase and Collaboration Agreement or the Other Agreements; | ||
• | any investment by us or our subsidiaries in any class of publicly traded debt or equity securities of any Competing Business so long as we do not hold at any time during such period more than 5% of such class of issued and outstanding voting securities of such publicly traded company, and so long as we do not otherwise exercise any management or control with respect to such Competing Business; or | ||
• | certain other agreed upon activities. |
• | solicit, initiate or knowingly or intentionally facilitate any inquiry with respect to, or the making, submission or announcement of, any Acquisition Proposal (as defined below) or any proposal that would reasonably be expected to lead to any Acquisition Proposal; | ||
• | furnish to any person any non-public information relating to us or any of our subsidiaries in connection with an Acquisition Proposal, except as permitted below; | ||
• | participate or engage in discussions or negotiations with any person with respect to any Acquisition Proposal, except to notify such person as to the existence of the provisions of the Purchase and Collaboration Agreement or to the extent specifically permitted below; | ||
• | approve, endorse or recommend any Acquisition Proposal, except as permitted below; or | ||
• | enter into any letter of intent or similar document or any agreement, commitment or understanding contemplating or otherwise relating to any Acquisition Proposal or a transaction contemplated thereby, except as permitted below. |
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• | furnish information (including non-public information) with respect to us and our subsidiaries to the person or group making such Acquisition Proposal; | ||
• | participate in discussions or negotiations with the person or group making such Acquisition Proposal regarding such Acquisition Proposal; provided, that we: |
• | will not, and will not allow our subsidiaries to (and will use commercially reasonable efforts to cause our representatives not to), disclose any non-public information to such person or group without first entering or having entered into a confidentiality agreement with such person or group that is at least as restrictive on such person or group as that certain Mutual Non-Disclosure Agreement, dated as of April 15, 2009, between us and Watson (including any amendments or supplements thereto) is on Buyer; and | ||
• | will promptly provide to Buyer any material non-public information concerning us or our subsidiaries provided by us to such other person or group which was not previously made available to Buyer, except to the extent restricted by applicable laws. |
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• | determination that the sale of the Assets and the transfer of the Assumed Liabilities on the terms and subject to the conditions of the Purchase and Collaboration Agreement are expedient and in the best interests of Columbia; | ||
• | approval of the sale and issuance of the Acquisition Shares on the terms and subject to the conditions of the Purchase and Collaboration Agreement; | ||
• | determination that the approval of the Charter Amendment is advisable and in the best interests of our stockholders; | ||
• | approval of the Purchase and Collaboration Agreement and the Watson Transactions; and/or | ||
• | its resolution to recommend the approval of the asset sale contemplated by the Purchase and Collaboration Agreement, the Charter Amendment (the “Seller Board Recommendation”) and/or endorse or recommend to our stockholders any Superior Proposal (a “Change of Board Recommendation”) if, but only if: |
• | our board of directors concludes in good faith, after consultation with outside counsel, that failure to take such action would be inconsistent with its fiduciary obligations under applicable law; and | ||
• | in the case of any Superior Proposal, we have given Buyer five business days’ prior written notice that the board of directors intends to make a Change of Board Recommendation (the “Superior Proposal Notice”) and for a period of not less than five business days after Buyer’s receipt of such Superior Proposal Notice, we will, if requested by Buyer, negotiate in good faith with Buyer to revise the Purchase and Collaboration Agreement so that the Acquisition Proposal that constituted a Superior Proposal no longer constitutes a Superior Proposal (a “Former Superior Proposal”). |
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• | failure to make such disclosure would be inconsistent with its fiduciary duties under applicable law or | ||
• | we are otherwise required to make such disclosure. |
“Acquisition Proposal” means any inquiry, offer or proposal, or any indication of interest in making an offer or proposal, made by a person or group at any time which is structured to permit such person or group to acquire beneficial ownership of any Assets or at least 25% of the assets of, or equity interest in, us and our subsidiaries, taken as a whole, pursuant to a merger, consolidation or other business combination, sale of shares of capital stock, sale of assets, tender offer or exchange offer or similar transaction, in each case other than the Watson Transactions, and |
“Superior Proposal” means any bona fide Acquisition Proposal made by a person or group (except that references in the definition thereof to “at least 25% of the assets of, or equity interest in, us and our subsidiaries, taken as a whole,” shall be replaced by “more than 50% of the assets of, or equity interests in, us and our subsidiaries, taken as a whole,”) in each case other than the Watson Transactions, made in writing that our board of directors has determined in its good faith judgment (after consultation with its financial advisors and outside counsel and after taking into account all legal, financial, regulatory and other aspects of the proposal, including the financing terms thereof) is more favorable to us and/or our stockholders than the Watson Transactions. |
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• | at any time before the Closing by mutual written consent of the Parties; or | ||
• | by either Party, by delivery of written notice of termination to the other, if the Closing has not occurred on or before the Outside Date; provided, that such failure is not due to the failure of the Party seeking to terminate the Purchase and Collaboration Agreement to comply in all material respects with its obligations under the Purchase and Collaboration Agreement; or | ||
• | by either Party, by delivery of written notice of termination to the other, if our Special Meeting of the stockholders is held and the Required Seller Stockholders Vote is not obtained at the Seller Stockholders’ Meeting (or at any adjournment thereof); or | ||
• | by either Party, by delivery of written notice of termination to the other, if any Regulatory Authority of competent jurisdiction shall have issued an order, decree or ruling, or taken any other action permanently restraining, enjoining or otherwise prohibiting the Watson Transactions and such order, decree, ruling or other action shall have become final and non-appealable; provided, that, in order for either party to seek to terminate the Purchase and Collaboration Agreement pursuant to this reason, it must have used its commercially reasonable efforts to lift and rescind such order, decree, ruling or other action. |
• | (A) any representation or warranty of Buyer set forth in the Purchase and Collaboration Agreement shall have become untrue, (B) such misrepresentation is not capable of being cured prior to the Outside Date and (C) as a result of the preceding clauses (A) and (B), the closing conditions with respect to the accuracy of Buyer’s representation and warranties are not capable of being met; or | ||
• | (A) a material breach of any covenant or obligation in the Purchase and Collaboration Agreement has been committed by Buyer, (B) such breach has not been waived by us and such breach is not cured by Buyer within 10 days after written notice thereof is delivered by us to Buyer or is incapable of being |
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cured by Buyer and (C) as a result of the preceding clauses (A) and (B), the closing conditions with respect to Buyer’s performance are not capable of being met. |
• | (A) any representation or warranty of ours set forth in the Purchase and Collaboration Agreement shall have become untrue, (B) such misrepresentation is not capable of being cured prior to the Outside Date and (C) as a result of the preceding clauses (A) and (B), the closing condition with respect to the accuracy of our representation and warranties is not capable of being met; | ||
• | (A) a material breach of any covenant or obligation in the Purchase and Collaboration Agreement has been committed by us, (B) such breach has not been waived by Buyer and such breach is not cured by us within 10 days after written notice thereof is delivered by Buyer to us or is incapable of being cured by us and (C) as a result of the preceding clauses (A) and (B), the closing condition with respect to our performance is not capable of being met; or | ||
• | if, prior to obtaining the Required Seller Stockholders Vote a Change of Board Recommendation shall have occurred; provided, that any such termination must occur within five business days following the occurrence of any Change of Board Recommendation (the “Change of Board Recommendation Clause”). |
• | an Acquisition Proposal has been publicly announced; |
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• | thereafter, the Purchase and Collaboration Agreement is terminated by either Party following the Outside Date or if Required Seller Stockholders Vote is not obtained; and | ||
• | within 12 months after the termination of the Purchase and Collaboration Agreement, we have entered into an agreement regarding or consummated a transaction which would have constituted an Acquisition Proposal (excluding an Equity Financing and/or any agreement relating thereto), then we will pay to Buyer the Termination Fee upon the earlier of: |
• | two business days following entering into any such agreement; and | ||
• | immediately upon the consummation of any such transaction. |
• | shall terminate and no longer survive at the close of business on the 18th month anniversary of the Closing (the “Basic Survival Period”); | ||
• | provided, however, that our representations and warranties pertaining to power, authorization, board action to enter into the Purchase and Collaboration Agreement, and title and sufficiency of assets and capitalization (collectively, the “Fundamental Representations”) and the tax representations and warranties shall survive the Closing until the expiration of the applicable statute of limitations (with extensions) with respect to the matters addressed in such sections. The period of time a representation, warranty or Pre-Closing Covenant survives the Closing pursuant to the preceding sentence shall be the “Survival Period” with respect to such representation, warranty or Pre-Closing Covenant; |
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• | subject to certain procedures set forth in the Purchase and Collaboration Agreement, so long as a Party gives written notice of an indemnification claim notice, including a description of the claim and the amount of claimed Losses (as defined below) for such claim on or before the expiration of the applicable Survival Period, such Indemnified Party shall be entitled to pursue its rights to indemnification under the Purchase and Collaboration Agreement, as applicable; | ||
• | subject to certain procedures set forth in the Purchase and Collaboration Agreement, in the event notice of any claim(s) for indemnification shall have been given within the applicable Survival Period and such claim(s) have not been finally resolved by the expiration of such Survival Period, the representations, warranties or Pre-Closing Covenants, as applicable, that are the subject of such claim(s) shall survive the end of the Survival Period of such representations, warranties or Pre-Closing Covenants until such claim(s) are finally resolved, but such representations, warranties and Pre-Closing Covenants shall only survive with respect to such asserted claim(s); and | ||
• | the covenants and agreements contained in the Purchase and Collaboration Agreement that require by their terms performance or compliance on and after the Closing shall continue in force thereafter in accordance with their terms or if no term is specified, indefinitely. | ||
• | subject to the applicable Survival Period, any breach of any representation or warranty made by us contained in the Purchase and Collaboration Agreement (“Seller Representation Indemnification”); | ||
• | any breach of any representation and warranty made by us under any Other Agreement or any covenant, agreement or obligation of ours contained in the Purchase and Collaboration Agreement or in any Other Agreement; | ||
• | any Excluded Liability; and |
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• | any fees, expenses or other payments incurred or owed by us to any brokers, financial advisors or other comparable Persons retained or employed by us in connection with the Watson Transactions. |
• | subject to the limitations set forth in the Purchase and Collaboration Agreement, any breach of any representation or warranty of Buyer contained in the Purchase and Collaboration Agreement (“Buyer Representation Indemnification”); | ||
• | any breach of any representation or warranty of Buyer under any Other Agreement or any covenant, agreement or obligation of Buyer contained in the Purchase and Collaboration Agreement or in any Other Agreement; | ||
• | any Assumed Liability; | ||
• | any fees, expenses or other payments incurred or owed by Buyer to any brokers, financial advisors or other comparable persons retained or employed by Buyer in connection with the Watson Transactions; and | ||
• | Certain of our Losses arising out of or resulting from certain agreed upon circumstances. |
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($ in millions) | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | |||||||||||||||||||||||||||||||||
United States Infertility Sales | $ | 18.8 | $ | 27.5 | $ | 25.6 | $ | 27.7 | $ | 29.6 | $ | 32.3 | $ | 34.9 | $ | 37.7 | $ | 40.8 | $ | 44.1 | $ | 47.6 | ||||||||||||||||||||||
United States Pre-term Birth Sales | 0.0 | 20.3 | 82.0 | 134.4 | 180.4 | 193.8 | 205.7 | 216.0 | 226.8 | 238.1 | 250.0 | |||||||||||||||||||||||||||||||||
Ex-United States Infertility Royalties | 8.7 | 10.0 | 12.7 | 12.9 | 12.2 | 11.8 | 11.3 | 10.8 | 10.2 | 9.6 | 9.0 | |||||||||||||||||||||||||||||||||
Ex-United States Pre-term Birth Sales | 0.0 | 0.0 | 6.7 | 27.0 | 44.4 | 59.5 | 63.9 | 67.9 | 71.3 | 69.1 | 66.5 | |||||||||||||||||||||||||||||||||
Other Continuing Revenues | 2.0 | 1.7 | 1.7 | 1.8 | 2.0 | 1.7 | 1.7 | 1.7 | 1.7 | 1.7 | 1.7 | |||||||||||||||||||||||||||||||||
Total Revenues | $ | 29.5 | $ | 59.5 | $ | 128.7 | $ | 203.8 | $ | 268.6 | $ | 299.1 | $ | 317.5 | $ | 334.1 | $ | 350.8 | $ | 362.6 | $ | 374.8 | ||||||||||||||||||||||
(1) | The data set forth under “Stand-Alone Product Revenue Projections” represents our revenues that would be derived from sales of our products on a stand-alone basis, without giving effect to the Watson Transactions. | ||
(2) | We would have sufficient funds to effect the transactions contemplated by the Note Purchase Agreements at the closing thereunder and the satisfaction of our payment obligations owing to PharmaBio under the PharmaBio Agreement (as amended by the PharmaBio Amendment)(collectively, the "Debt Retirement"), pay for the completion of the PREGNANT Study, fund the Launch and Commercialization of PROCHIEVE 8% for the PTB Indication, and to pay for the Development, Launch and Commercialization of a Second Generation Product. | ||
(3) | Continued growth in our United States infertility business through life cycle management. | ||
(4) | The PREGNANT Study is successful and the Launch and Commercialization of PROCHIEVE 8% in the United States for the PTB Indication occurs during the third quarter of 2011. | ||
(5) | Launch and Commercialization of PROCHIEVE 8% outside the United States for the PTB Indication commences in 2012. | ||
(6) | Ex-United States Infertility Royalties represents royalties for CRINONE. | ||
(7) | Infertility royalties of Progesterone Products outside the United States decline as a result of the loss of patent protection in 2014. |
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(8) | Other Continuing Revenues include primarily revenues relating to STRIANT. |
($ in millions) | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | |||||||||||||||||||||||||||||||||
Revenues | $ | 54.6 | $ | 27.1 | $ | 45.4 | $ | 52.3 | $ | 44.3 | $ | 37.3 | $ | 40.0 | $ | 42.6 | $ | 45.8 | $ | 48.6 | $ | 51.4 | ||||||||||||||||||||||
Operating Income | $ | 3.8 | $ | 6.0 | $ | 30.6 | $ | 37.1 | $ | 29.1 | $ | 28.2 | $ | 30.6 | $ | 32.8 | $ | 35.7 | $ | 38.1 | $ | 40.6 | ||||||||||||||||||||||
Net Income | $ | 0.4 | $ | 6.8 | $ | 31.9 | $ | 38.8 | $ | 31.4 | $ | 31.2 | $ | 33.2 | $ | 23.5 | $ | 25.6 | $ | 27.5 | $ | 29.5 | ||||||||||||||||||||||
Cash Flows from Operations | ($8.0 | ) | ($0.2 | ) | $ | 16.9 | $ | 25.7 | $ | 35.0 | $ | 34.8 | $ | 36.8 | $ | 27.1 | $ | 29.2 | $ | 31.1 | $ | 33.1 | ||||||||||||||||||||||
Cash Flows from Upfront Payment/Milestones | $ | 41.6 | $ | 35.5 | $ | 2.0 | $ | 0.0 | $ | 0.0 | $ | 0.0 | $ | 0.0 | $ | 0.0 | $ | 0.0 | $ | 0.0 | $ | 0.0 |
(1) | The assumptions in notes (3), (4), (5) and (7) set forth under “Stand-Alone Product Revenue Projections.” | ||
(2) | Data presented gives effect to the Watson Transactions and the Debt Retirement as if they were consummated during the second quarter of 2010. | ||
(3) | Revenues include royalty streams from Watson and Merck Serono, receipt of the Upfront Payment (to the extent described in note (4) below), receipt of the milestone payments (as described in note (4) below, some portion of which is deferred for revenue recognition purposes) and receipt of payments under the Supply Agreement. | ||
(4) | Cash flow from Upfront Payment/Milestones reflects receipt by us of the following under the Purchase and Collaboration Agreement: |
• | $33.6 million in initial Upfront Payment, after allocating $13.4 million to the purchase of the Acquisition Shares (determined by using a share price of $1.20 per share, which was the share price on the date the Projections were made). | ||
• | $8.0 million in respect of the Clinical Trial Results Milestone Payment. | ||
• | $5.0 million in respect of the PTB NDA Acceptance Milestone Payment. | ||
• | $30 million in respect of the PTB Product Launch Milestone Payment. | ||
• | $0.5 million in respect of the Ex-U.S. Filing Milestone. | ||
• | $2.0 million in respect of the Ex-U.S. Approval Milestone. |
(5) | Our sales, marketing and certain administrative support costs are eliminated following consummation of the Watson Transactions. | ||
(6) | Our research and development activities are limited to completion of the PREGNANT Study and the preparation, filing and approval process of the related new drug application (or supplemental new drug application). | ||
(7) | We do not engage in new product Development or in-licensing activities other than in respect of the Commercialization of Progesterone Products for the PTB Indication. | ||
(8) | Our tax net operating loss carryforwards are fully utilized by 2016 and we become a taxpayer thereafter. |
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March 31, | December 31, | |||||||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||||||
(000’s except per share data) | ||||||||||||||||||||||||||||
Net revenues | $ | 7,173 | $ | 7,321 | $ | 32,196 | $ | 36,229 | $ | 29,627 | $ | 17,393 | $ | 22,041 | ||||||||||||||
Gross profit | 5,996 | 5,541 | 23,002 | 25,294 | 20,613 | 9,573 | 13,929 | |||||||||||||||||||||
Operating expenses | 10,979 | 8,788 | 36,165 | 32,552 | 28,721 | 20,733 | 21,160 | |||||||||||||||||||||
Interest expense | 2,303 | 2,048 | 8,851 | 7,882 | 7,946 | 2,670 | 3,491 | |||||||||||||||||||||
Change in fair value of derivative | 2,782 | — | — | — | — | — | — | |||||||||||||||||||||
Net loss | (10,179 | ) | (5,334 | ) | (21,870 | ) | (14,077 | ) | (14,292 | ) | (12,485 | ) | (10,104 | ) | ||||||||||||||
Loss per common share | (0.16 | ) | (0.10 | ) | (0.39 | ) | (0.27 | ) | (0.28 | ) | (0.26 | ) | (0.25 | ) | ||||||||||||||
Weighted average number of common shares outstanding-basic and diluted | 65,389 | 54,297 | 56,359 | 52,439 | 51,124 | 48,089 | 41,752 | |||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||||||
(000’s) | ||||||||||||||||||||||||||||
Working capital (deficiency) | $ | 7,522 | $ | 10,672 | $ | 14,256 | $ | 12,305 | $ | 14,461 | $ | 23,410 | $ | (3,471 | ) | |||||||||||||
Total assets | 38,261 | 42,880 | 43,757 | 45,622 | 56,589 | 65,839 | 14,732 | |||||||||||||||||||||
Notes payable | 33,749 | 30,763 | 32,966 | 30,075 | 27,536 | 25,299 | — | |||||||||||||||||||||
Long-term portion of financing agreements | 15,868 | 13,587 | 15,234 | 13,126 | 11,426 | 13,277 | 10,921 | |||||||||||||||||||||
Redeemable preferred series C stock | 600 | 600 | 600 | 775 | 1,125 | 3,200 | 3,250 | |||||||||||||||||||||
Shareholders’ equity (deficiency) | $ | (23,426 | ) | $ | (9,866 | ) | $ | (13,766 | ) | $ | (5,893 | ) | $ | 2,015 | $ | 12,616 | $ | (20,573 | ) |
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FOR U.S. PROGESTERONE PRODUCTS
FOR THE FISCAL YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
AND THE QUARTERS ENDED MARCH 31, 2009 AND 2010
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FOR U.S. PROGESTERONE PRODUCTS
FOR THE FISCAL YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
AND THE QUARTERS ENDED MARCH 31, 2009 AND 2010
Year Ended December 31, | Quarter Ended March 31, | ||||||||||||||||||||||
2007 | 2008 | 2009 | 2009 | 2010 | |||||||||||||||||||
NET REVENUES1, 4 | $ | 12,471,894 | $ | 15,833,265 | $ | 15,182,828 | $ | 3,252,773 | $ | 4,356,251 | |||||||||||||
COST OF REVENUES1 | 1,226,311 | 1,491,390 | 1,116,754 | 283,352 | 329,872 | ||||||||||||||||||
Gross profit | 11,245,583 | 14,341,875 | 14,066,074 | 2,969,421 | 4,026,379 | ||||||||||||||||||
OPERATING EXPENSES: | |||||||||||||||||||||||
Selling and distribution2 | 10,111,796 | 12,685,618 | 11,982,229 | 2,793,236 | 3,250,319 | ||||||||||||||||||
Amortization of licensing right3 | 5,044,728 | 5,044,728 | 5,044,728 | 1,261,182 | 1,261,182 | ||||||||||||||||||
Total operating expenses | 15,156,524 | 17,730,346 | 17,026,957 | 4,054,418 | 4,511,501 | ||||||||||||||||||
Direct expenses in excess of net revenues | $ | (3,910,941 | ) | $ | (3,388,471 | ) | $ | (2,960,883 | ) | $ | (1,084,997 | ) | $ | (485,122 | ) | ||||||||
1. | Represents the unaudited revenues and direct cost of revenues for the U.S. Progesterone Products. | |
2. | Represents direct sales, marketing and distribution costs in support of U.S. Progesterone Products revenues. | |
3. | Amortization of acquired intangible assets for the U.S. Progesterone Products. | |
4. | Net revenues are derived from gross sales of U.S. Progesterone Products, net of returns, allowances, distributor fees and discounts. |
Revenues from the sale of U.S. Progesterone Products are recorded at the time goods are shipped to customers. We believe that we have not made any shipments in excess of our customers’ ordinary course of business inventory levels. Our return policy allows U.S. Progesterone Products to be returned for a period beginning three months prior to the expiration date of the U.S. Progesterone Products and ending twelve months after the expiration date. Provisions for returns on sales to wholesalers, distributors and retail chain stores are estimated based on a percentage of sales, using such factors as historical sales information, distributor inventory levels and U.S. Progesterone Products prescription data, and are recorded as a reduction to sales in the same period as the related sales are recognized. We assume that our customers are using the first-in, first-out method in filling orders so that the oldest saleable U.S. Progesterone Products are used first. We record a provision for returns on a quarterly basis using an estimated rate and adjust the provision if our analysis indicates that the potential for U.S. Progesterone Products non-saleability exists. |
We estimate fees we pay to our distributors and specialty pharmacies for customer services that include supplemental sales calling, providing information about their customers and the processing of sales returns. |
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FINANCIAL STATEMENTS
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For the Quarter Ended March 31, 2010
For the Quarter Ended March 31, 2010A | ||||||||||||||||
Pro Forma Adjustments | ||||||||||||||||
Historical | ||||||||||||||||
Columbia | Sale of U.S. | Pro Forma | ||||||||||||||
Laboratories, | Progesterone | Adjustments | ||||||||||||||
Inc. | Products (-) B | (+) | Pro Forma | |||||||||||||
NET REVENUES | $ | 7,172,899 | $ | 4,356,251 | $ | 798,484 | C | $ | 3,615,132 | |||||||
COST OF REVENUES | 1,176,579 | 329,872 | 329,872 | D | 1,176,579 | |||||||||||
Gross profit | 5,996,320 | 4,026,379 | 468,612 | 2,438,553 | ||||||||||||
OPERATING EXPENSES: | ||||||||||||||||
Selling and distribution | 3,250,319 | 3,250,319 | — | — | ||||||||||||
General and administrative | 4,126,318 | — | (1,525,000) | E | 2,601,318 | |||||||||||
Research and development | 2,341,818 | — | — | 2,341,818 | ||||||||||||
Amortization of licensing right | 1,261,182 | 1,261,182 | — | — | ||||||||||||
Total operating expenses | 10,979,637 | 4,511,501 | (1,525,000) | 4,943,136 | ||||||||||||
Loss from operations | (4,983,317 | ) | (485,122 | ) | 1,993,612 | (2,504,583 | ) | |||||||||
OTHER INCOME (EXPENSE): | ||||||||||||||||
Interest income | 1,620 | — | — | 1,620 | ||||||||||||
Interest expense | (2,302,794 | ) | — | 2,302,794 | F | — | ||||||||||
Change in fair value of derivative | (2,781,660 | ) | — | 2,781,660 | G | — | ||||||||||
Other, net | (110,685 | ) | — | — | (110,685 | ) | ||||||||||
(5,193,519 | ) | — | 5,084,454 | (109,065 | ) | |||||||||||
Net loss before income tax | (10,176,836 | ) | (485,122 | ) | 7,078,066 | (2,613,648 | ) | |||||||||
State income tax benefits | (2,200 | ) | — | — | (2,200 | ) | ||||||||||
Net loss | $ | (10,179,036 | ) | $ | (485,122 | ) | 7,078,066 | (2,615,848 | ) | |||||||
LOSS PER COMMON SHARE — BASIC AND DILUTED | $ | (0.16 | ) | (0.03 | ) | |||||||||||
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING — BASIC AND DILUTED | 65,388,921 | 18,607,407 | X,Y | 83,996,328 | X,Y | |||||||||||
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For the Year Ended December 31, 2009
For the Year Ended December 31, 2009A | ||||||||||||||||
Pro Forma Adjustments | ||||||||||||||||
Historical | ||||||||||||||||
Columbia | Sale of U.S. | Pro Forma | ||||||||||||||
Laboratories, | Progesterone | Adjustments | ||||||||||||||
Inc. | Products (-) B | (+) | Pro Forma | |||||||||||||
NET REVENUES | $ | 32,196,381 | $ | 15,182,828 | $ | 2,746,712 | C | $ | 19,760,265 | |||||||
COST OF REVENUES | 9,194,538 | 1,116,754 | 1,116,754 | D | 9,194,538 | |||||||||||
Gross profit | 23,001,843 | 14,066,074 | 1,629,958 | 10,565,727 | ||||||||||||
OPERATING EXPENSES: | ||||||||||||||||
Selling and distribution | 11,982,229 | 11,982,229 | — | — | ||||||||||||
General and administrative | 10,559,298 | — | — | 10,559,298 | ||||||||||||
Research and development | 8,579,035 | — | — | 8,579,035 | ||||||||||||
Amortization of licensing right | 5,044,728 | 5,044,728 | — | — | ||||||||||||
Total operating expenses | 36,165,290 | 17,026,957 | — | 19,138,333 | ||||||||||||
Loss from operations | (13,163,447 | ) | (2,960,883 | ) | 1,629,958 | (8,572,606 | ) | |||||||||
OTHER INCOME (EXPENSE): | ||||||||||||||||
Interest income | 33,830 | — | — | 33,830 | ||||||||||||
Interest expense | (8,851,253 | ) | — | 8,848,828 | F | (2,425 | ) | |||||||||
Other, net | (243,720 | ) | — | — | (243,720 | ) | ||||||||||
(9,061,143 | ) | — | 8,848,828 | (212,315 | ) | |||||||||||
Net loss before income tax | (22,224,590 | ) | (2,960,883 | ) | 10,478,786 | (8,784,921 | ) | |||||||||
State income tax benefits | 355,032 | — | — | 355,032 | ||||||||||||
Net loss | $ | (21,869,558 | ) | $ | (2,960,883 | ) | 10,478,786 | (8,429,889 | ) | |||||||
LOSS PER COMMON SHARE — BASIC AND DILUTED | $ | (0.39 | ) | (0.11 | ) | |||||||||||
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING — BASIC AND DILUTED | 56,358,843 | 18,607,407 | X, Y | 74,966,250 | X, Y | |||||||||||
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As of March 31, 2010
As of March 31, 2010A | ||||||||||||
Historical | ||||||||||||
Columbia | ||||||||||||
Laboratories, | Pro Forma | |||||||||||
Inc. | Adjustments | Pro Forma | ||||||||||
CURRENT ASSETS | ||||||||||||
Cash and cash equivalents of which $9,220,493 is interest bearing | $ | 11,284,243 | $ | $ | ||||||||
Upfront Payment from Watson | — | 47,000,000 | H | |||||||||
Payment for Notes | — | (25,999,999) | I | |||||||||
Payment for Notes accrued interest | — | (800,000) | J | |||||||||
Payment for PharmaBio | — | (16,028,197) | K | |||||||||
Payment for Series C preferred stock | — | (600,000) | L | |||||||||
Transaction costs | — | (2,475,000) | M | |||||||||
Sale of finished goods inventory to Watson | — | 598,560 | N | |||||||||
Watson Note | — | 15,000,000 | O | |||||||||
Cash and cash equivalents | 11,284,243 | 16,695,364 | 27,979,607 | |||||||||
Accounts receivable, net of allowances for doubtful accounts of $100,000 | 3,297,668 | — | 3,297,668 | |||||||||
Inventories | 3,088,990 | (598,560) | N | 2,490,430 | ||||||||
Prepaid expenses and other current assets | 1,009,323 | — | 1,009,323 | |||||||||
Total current assets | 18,680,224 | 16,096,804 | 34,777,028 | |||||||||
PROPERTY AND EQUIPMENT | 637,812 | — | 637,812 | |||||||||
INTANGIBLE ASSETS — NET | 17,509,150 | (17,509,150 | )P | — | ||||||||
Deposits/long term investments | 483,328 | — | 483,328 | |||||||||
Deferred charges | 950,696 | (950,696) | Q | — | ||||||||
OTHER ASSETS | 1,434,024 | (950,696 | ) | 483,328 | ||||||||
TOTAL ASSETS | $ | 38,261,210 | $ | (2,363,042 | ) | $ | 35,898,168 | |||||
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As of March 31, 2010
Historical | ||||||||||||
Columbia | As of March 31, 2010A | |||||||||||
Laboratories, | Pro Forma | |||||||||||
Inc. | Adjustments | Pro Forma | ||||||||||
CURRENT LIABILITIES: | ||||||||||||
Current portion of financing agreements | $ | 58,563 | $ | (58,563 | ) R | $ | — | |||||
Accounts payable | 2,805,472 | — | 2,805,472 | |||||||||
Accrued expenses | 5,512,142 | (800,000 | ) J | 4,712,142 | ||||||||
Derivative embedded within convertible notes, fair value | 2,781,660 | (2,781,660 | ) G | — | ||||||||
Total current liabilities | 11,157,837 | (3,640,223 | ) | 7,517,614 | ||||||||
NOTES PAYABLE | 33,749,209 | (33,749,209 | ) S | — | ||||||||
DEFERRED REVENUE | 312,181 | 15,000,000 | O | 32,819,031 | ||||||||
17,506,850 | T | |||||||||||
LONG-TERM PORTION OF FINANCING AGREEMENTS | 15,867,735 | (15,867,735 | ) U | — | ||||||||
REDEEMABLE WARRANTS | — | 2,456,798 | V | 2,456,798 | ||||||||
TOTAL LIABILITIES | 61,086,962 | (18,293,519 | ) | 42,793,443 | ||||||||
COMMITMENTS AND CONTINGENCIES | ||||||||||||
Contingently redeemable series C preferred stock, 600 shares issued and outstanding in 2009 (liquidation preference of $600,000) | 600,000 | (600,000 | ) L | — | ||||||||
SHAREHOLDERS’ EQUITY (DEFICIENCY): | ||||||||||||
Preferred stock, $.01 par value; 1,000,000 shares authorized | — | — | ||||||||||
Series B convertible preferred stock, 130 shares issued and outstanding (liquidation preference of $13,000) | 1 | — | 1 | |||||||||
Series E convertible preferred stock 59,000 shares issued and outstanding (liquidation preference of $5,900,000) | 590 | — | 590 | |||||||||
Common Stock $.01 par value; 100,000,000 shares authorized; 65,761,986 shares issued (footnotes W, X, and Y) | 657,619 | 186,074 | X, Y | 843,693 | ||||||||
Capital in excess of par value | 243,191,797 | 19,723,851 | X, Y | 264,916,425 | ||||||||
2,000,777 | AA | |||||||||||
Less cost of 152,795 treasury shares | (306,369 | ) | — | (306,369 | ) | |||||||
Accumulated deficit | (267,158,299 | ) | (904,448 | ) Z | (272,538,524 | ) | ||||||
(2,000,777 | ) AA | |||||||||||
(2,475,000 | ) M | |||||||||||
Accumulated other comprehensive income | 188,909 | — | 188,909 | |||||||||
Shareholders’ equity (deficiency) | (23,425,752 | ) | 16,530,477 | (6,895,275 | ) | |||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIENCY) | $ | 38,261,210 | $ | (2,363,042 | ) | $ | 35,898,168 | |||||
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FINANCIAL STATEMENTS
• | We will no longer be directly involved in the Commercialization of Progesterone Products and will primarily be in the business of supplying Progesterone Products to Buyer and Merck Serono. See “The Asset Sale (Proposal No. 1)—Nature of Columbia’s Business Following the Watson Transactions,” beginning on page 61; | ||
• | The (a) satisfaction of our payment obligations owing to PharmaBio under the PharmaBio Agreement (as amended by the PharmaBio Amendment) and (b) transactions contemplated to occur at the closings under the Note Purchase Agreements, and the resulting elimination of substantially all of our debt, including the payment by us to PharmaBio of $16,028,197 in cash (which represents the net present value of our payment obligations under the PharmaBio Agreement (as amended by the PharmaBio Amendment) of $16,500,000 due in November 2010, discounted at a rate of 4.6% to March 31, 2010), and payment by us of approximately $26,800,000 in cash (including accrued and unpaid interest), and the issuance by us of Warrants to purchase 7,750,000 shares of Common Stock and the 7,407,407 NPA Shares under the Note Purchase Agreements. See “The Asset Sale (Proposal No. 1)—Senior Debt,” beginning on page 66 and “The Asset Sale (Proposal No. 1)—Purchase of our Convertible Subordinated Notes,” beginning on page 67; | ||
• | The sale by us of the Assets, our receipt of the $47,000,000 cash Upfront Payment from Buyer and the issuance of the 11,200,000 Acquisition Shares to Buyer; and | ||
• | The issuance of the Watson Note pursuant to which Watson loaned us $15,000,000 and the forgiveness of such amount upon the closing of the Watson Transactions. See “The Asset Sale (Proposal No. 1)—The Watson Loan,” beginning on page 59. |
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• | Each of the other Pro Forma Adjustments described in the notes below. |
Upfront Payment from Buyer | $ | 47,000,000 | ||
Acquisition Shares | (11,984,000 | ) | ||
Write-off of Net Book Value of Intangible Assets to be sold by us pursuant to the Purchase and Collaboration Agreement | (17,509,150 | ) | ||
Net Proceeds (Deferred Revenue) | $ | 17,506,850 |
A. | The pro forma information is presented on the basis that the Watson Transactions, the issuance and forgiveness of the Watson Note and the Debt Retirement had occurred (x) as of January 1, 2009 for the Unaudited Pro Forma Consolidated Statements of Operations for the year ended as of December 31, 2009 and the quarter ended March 31, 2010, and (y) at March 31, 2010 for the Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 2010, including that as of such dates we transferred the Assets to Buyer, received the $47,000,000 cash Upfront Payment from Buyer, received the $15,000,000 proceeds of the Watson Note and the Watson Note was forgiven, issued the 11,200,000 Acquisition Shares to Buyer, paid to PharmaBio $16,028,197 in cash (which represents the net present value of our payment obligations under the PharmaBio Agreement (as amended by the PharmaBio Amendment) of $16,500,000 due in November 2010, discounted at a rate of 4.6% to March 31, 2010), paid approximately $26,800,000 in cash (including accrued and unpaid interest) and issued the Warrants to purchase 7,750,000 shares of Common Stock and the 7,407,407 NPA Shares under the Note Purchase Agreements, and that, after the Closing, we are no longer directly involved in the Commercialization of the Progesterone Products and we will primarily be involved in the supplying of Progesterone Products to Buyer and Merck Serono. The unaudited pro forma information does not give effect to our receipt of any portion of the up to $45,500,000 in contingent milestone payments that may be payable to us pursuant to the Purchase and Collaboration Agreement. In addition, the Unaudited Pro Forma Financial Statements do not give effect to any adjustments in respect of potential reductions in our Research and Development or General and Administrative expenses that may occur following the consummation of the Watson Transaction. These Unaudited Pro Forma Financial Statements reflect all adjustments that, in the opinion of our management, are necessary to present fairly the pro forma results of operations and financial position presented herein. |
B. | Represents the unaudited net revenues and direct expenses for the U.S. Progesterone Products for the year ended December 31, 2009 and the quarter ended March 31, 2010. | |
C. | Represents the Net Sales that we would have made to Buyer under the Supply Agreement and royalties that we would have received under the Purchase and Collaboration Agreement had all Progesterone Products sold by us in the U.S. during the fiscal year ended December 31, 2009 and the quarter ended March 31, 2010 been manufactured by us and sold to Buyer under the Supply Agreement during 2009 and the first quarter of 2010, respectively (at the pricing set forth in that Agreement), and then sold during 2009 and the first quarter of 2010, respectively, by Buyer to its customers at the prices that we sold Progesterone Products to our customers during the relevant period. | |
D. | Represents cost of revenues that we would have incurred had all Progesterone Products sold by us in the U.S. during the fiscal year ended December 31, 2009 and the quarter ended March 31, 2010, respectively, been manufactured by us and sold to Buyer under the Supply Agreement during 2009 and the first quarter of 2010, respectively. | |
E. | Represents the reversal of the costs directly related to the Watson Transactions and the Debt Retirement incurred during the quarter ended March 31, 2010. | |
F. | Represents interest expense on the Notes and obligations owing to PharmaBio under the PharmaBio Agreement (as amended by the PharmaBio Amendment) as if the Debt Retirement had occurred on January 1, 2009. | |
G. | Represents the reversal of the non-cash charge for the embedded derivative related to the Notes which was booked during the first quarter of 2010 as it is a non-recurring charge directly related to the Watson Transaction and Debt Retirement that has no continuing impact. | |
H. | Represents the $47,000,000 Upfront Payment in cash that would be received by us from Buyer under the Purchase and Collaboration Agreement. | |
I. | Represents the approximately $26,000,000 cash payment that would be made by us to the Note holders at the closings under the Note Purchase Agreements. | |
J. | Represents the approximately $800,000 of accrued and unpaid interest on our Notes that would be paid by us at the closings under the Note Purchase Agreements. | |
K. | Represents the $16,028,197 in cash (which is the net present value of our payment obligations under the PharmaBio Agreement (as amended by the PharmaBio |
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Amendment) of $16,500,000 due in November 2010, discounted at a rate of 4.6% to March 31, 2010). |
L. | Assumes that all holders of our Series C Preferred Stock had exercised their rights, resulting from the Asset Sale, to have their shares of Series C Preferred Stock redeemed by us as of March 31, 2010 and that we had redeemed such shares on such date. | |
M. | Reflects the remaining estimated transaction related costs and expenses unpaid at March 31, 2010, which include fees and expenses relating to legal services, accounting services, investment advisory fees, fairness opinion fees and proxy statement printing and distribution. Total transaction costs are estimated to be $4,000,000. | |
N. | Represents the finished goods inventory of Progesterone Products to be sold by us to Buyer at the Closing pursuant to the Supply Agreement. | |
O. | Reflects the cash proceeds and the forgiveness of the $15,000,000 Watson Note. | |
P. | Reflects the write-off of net book value of intangible assets that would be sold by us pursuant to the Purchase and Collaboration Agreement. | |
Q. | Reflects the write-off of deferred charges related to financing costs for the Notes and obligations owing to PharmaBio under the PharmaBio Agreement. | |
R. | Represents payment of the current portion of our obligations owing to PharmaBio under the PharmaBio Agreement. | |
S. | Represents the settlement of our Notes which is $39,999,998, less the unamortized discount related to the relative fair market value of the warrants issued by us in connection with the sale of the Notes and the beneficial conversion feature. | |
T. | Reflects deferred revenue from the $47,000,000 Upfront Payment that would be received by us from Buyer under the Purchase and Collaboration Agreement less the value of the 11,200,000 Acquisition Shares as determined by the closing price of our Common Stock on March 31, 2010, and the write off of the net book value of intangible assets described in Note P. | |
U. | Represents the payment of the unpaid portion of the $30 million minimum royalty obligation payable under the PharmaBio Agreement (without giving effect to the PharmaBio Amendment), net of unamortized imputed interest and the value of certain warrants issued to PharmaBio. | |
V. | Represents the fair market of our contingent obligation as of March 31, 2010 under the Note Purchase Agreements to purchase the Warrants for an aggregate purchase price of $3,999,996 in the circumstances described under the “The Asset Sale (Proposal No. 1)—Repurchase Offer of our Convertible Subordinated Notes,” beginning on page 67. | |
W. | Assumes that, as of March 31, 2010, (a) the Charter Amendment proposal had been approved by our stockholders and (b) we had amended our Restated Certificate of Incorporation, as amended, to increase the number of our authorized shares of Common Stock from 100,000,000 to 150,000,000. |
X. | Assumes that we had issued the 11,200,000 Acquisition Shares to Buyer as of January 1, 2009 at a price of $1.07 per share (which was the closing price of our Common Stock on March 31, 2010). | |
Y. | Assumes that we had issued the 7,407,407 NPA Shares under the Note Purchase Agreements as of January 1, 2009 at a price of $1.07 (which was the closing price of our Common Stock on March 31, 2010). | |
Z. | Represents unamortized expense for options and restricted shares issued under our 2008 Plan or our 1996 Plan that would vest and/or become exercisable upon consummation and as a result of the Asset Sale. | |
AA. | Represents net loss on extinguishment of debt as of March 31, 2010, less the value of the embedded derivative related to the Notes. |
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Common Stock | ||||||||
High | Low | |||||||
YEAR ENDED DECEMBER 31, 2008 | ||||||||
First Quarter | $ | 2.51 | $ | 1.89 | ||||
Second Quarter | $ | 4.29 | $ | 2.13 | ||||
Third Quarter | $ | 4.47 | $ | 2.15 | ||||
Fourth Quarter | $ | 2.76 | $ | 0.92 | ||||
YEAR ENDED DECEMBER 31, 2009 | ||||||||
First Quarter | $ | 1.74 | $ | 1.09 | ||||
Second Quarter | $ | 1.70 | $ | 1.06 | ||||
Third Quarter | $ | 1.59 | $ | 1.08 | ||||
Fourth Quarter | $ | 1.51 | $ | 0.65 | ||||
YEAR ENDING DECEMBER 31, 2010 | ||||||||
First Quarter | $ | 1.43 | $ | 1.03 |
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Quarter Ended | Year Ended | |||||||||||||||
March 31, 2010 | December 31, 2009 | |||||||||||||||
Historical | Historical | |||||||||||||||
Columbia | Columbia | |||||||||||||||
Laboratories, | Laboratories, | |||||||||||||||
Inc. | Pro Forma | Inc. | Pro Forma | |||||||||||||
Loss per common share - -basic and diluted | $ | (0.16 | ) | $ | (0.03 | ) | $ | (0.39 | ) | $ | (0.11 | ) | ||||
Weighted Average Number of shares used in calculating loss per common share - -basic and diluted | 65,388,921 | 83,996,328 | 56,358,843 | 74,966,250 | ||||||||||||
Book value per share | $ | (0.36 | ) | $ | (0.08 | ) | $ | (0.21 | ) | $ | 0.01 | |||||
Outstanding shares used in calculating book value per share | 65,609,191 | 84,216,598 | 65,630,051 | 84,237,458 | ||||||||||||
Shareholders’ equity (deficiency) | (23,425,752 | ) | (6,895,275 | ) | (13,766,493 | ) | 1,211,051 |
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INCORPORATION (PROPOSAL NO. 2)
• | effectuate the terms of the Purchase Collaboration Agreement, including the issuance of the Acquisition Shares; | ||
• | effectuate the terms of the Note Purchase Agreement, including the issuance of the shares of Common Stock to be issued pursuant to the Note Purchase Agreements as well as in connection with the exercise of the warrants issued thereunder; and | ||
• | have additional shares available for future issuances for capital raising activities or acquisitions, for conversions or exercises of outstanding convertible securities (including our preferred stock) and for compensation of our directors, officers, employees and consultants, |
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• | each person known to us to be the beneficial owner of more than 5% of the shares of Columbia’s Common Stock; | ||
• | each of Columbia’s directors and director nominees; | ||
• | each of Columbia’s executive officers who were serving as executive officers at the end of the last fiscal year (collectively, the “named executive officers”); and | ||
• | all of Columbia’s current directors and named executive officers as a group. |
Number of Shares | ||||||||
Beneficially | Percentage | |||||||
Name and Address ofBeneficial Owner | Owned (1) | of Total (2) | ||||||
David M. Knott/Dorset Management Corporation (3) | 6,107,803 | 8.9 | % | |||||
485 Underhill Boulevard, Suite 205 Syosset, New York 11791 | ||||||||
John P. Curran (4) | 6,600,272 | 9.99 | % | |||||
230 Park Avenue New York, New York 10017 | ||||||||
Goldman Capital Management, Inc. (5) | 4,585,350 | 7.0 | % | |||||
320 Park Avenue New York, New York 10022 | ||||||||
Perry Corp. and Richard C. Perry (6) | 4,457,142 | 6.8 | % | |||||
767 Fifth Avenue, 19th Floor New York, NY 10153 |
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Number of Shares | ||||||||
Beneficially | Percentage | |||||||
Name and Address ofBeneficial Owner | Owned (1) | of Total (2) | ||||||
Directors and Named Executive Officers: | ||||||||
Valerie L. Andrews (7)(8)(9) | 48,981 | * | ||||||
Edward A. Blechschmidt (7)(8)(9) | 84,731 | * | ||||||
Anthony R. Campbell (7)(8)(9)(10) | 6,381,642 | 9.3 | % | |||||
Frank C. Condella, Jr. (9) | 162,764 | * | ||||||
James S. Crofton (7)(8)(9) | 48,981 | * | ||||||
Lawrence A. Gyenes (9) | 50,000 | * | ||||||
Stephen G. Kasnet (7)(8)(9) | 136,981 | * | ||||||
Michael McGrane (7)(8)(9) | 753,571 | 1.1 | % | |||||
Selwyn P. Oskowitz, M.D. (7)(8)(9) | 123,681 | * | ||||||
All Directors and Executive Officers asa Group (10 persons)(7) (8) (9) (10) | 7,791,332 | 11.7 | % |
* | Signifies less than 1% | |
(1) | Includes shares that may be acquired through the conversion of shares of convertible preferred stock or convertible debt or the exercise of warrants, stock options, or other rights, in each case, that are convertible or exercisable on or before July 24, 2010. | |
(2) | Based on 65,567,198 shares outstanding at May 25, 2010. In calculating the percentage of ownership, all shares of Common Stock of which the identified person or group has the right to acquire beneficial ownership on or before July 24, 2010 are deemed to be outstanding for the purpose of computing the percentage of the shares of Common Stock owned by that person or group. These shares are not, however, deemed to be outstanding for the purpose of computing the percentage of the shares of Common Stock owned by any other person or group. | |
(3) | Based on Schedule 13D/A, filed on March 18, 2010 with the SEC by Dorset Management Corporation and David M. Knott in which (a) Dorset Management Corporation reported beneficial ownership of 6,012,473 shares of Common Stock, which includes 2,152,381 shares of Common Stock issuable upon the conversion of the Notes and the conversion of shares of Series E Preferred Stock, and 657,002 shares of Common Stock that are issuable upon the exercise of warrants or options to purchase shares of Common Stock, and (b) David M. Knott reported beneficial ownership of the shares reported as beneficially owned by Dorset Management Corporation plus 95,330 additional shares of Common Stock. | |
(4) | Based on Schedule 13G/A filed on April 27, 2010 with the SEC by John P. Curran, which reported beneficial ownership of 6,600,272 shares of Common Stock. The Schedule 13G/A reported that Mr. Curran does not have sole voting and dispositive power over any shares of Columbia’s Common Stock and has shared voting and dispositive power over 6,600,272 of Columbia’s Common Stock. Mr. Curran disclaimed beneficial ownership in the securities reported in the Schedule 13G/A except to the extent of his pecuniary interest therein. | |
(5) | Based on a telephone conversation on March 17, 2010, between Frank C. Condella, Jr., Chief Executive Officer of the Company, and Neil Goldman, President of Goldman Capital Management, Inc., in which Mr. Goldman reported beneficial ownership of 4,585,350 shares of Common Stock. | |
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(6) | Based on a Schedule 13D filed on March 12, 2010 with the SEC by Perry Corp. and Richard C. Perry, which reported beneficial ownership of 4,457,142 shares of Common Stock issuable upon conversion of Notes or exercise of warrants to purchase Common Stock. | |
(7) | Includes shares which may be acquired upon the exercise of options exercisable within 60 days after May 25, 2010, as follows: Ms. Andrews, 12,000 shares; Mr. Blechschmidt, 15,000 shares; Mr. Campbell, 25,000 shares; Mr. Crofton, 12,000 shares; Mr. Kasnet, 12,000 shares; Mr. McGrane, 663,810 shares; and, Dr. Oskowitz, 83,000 shares. | |
(8) | Includes restricted shares that were unvested on May 25, 2010, as follows: Ms. Andrews, 19,230 shares; Mr. Blechschmidt, 19,230 shares; Mr. Campbell, 19,230 shares; Mr. Condella, 19,230 shares; Mr. Crofton, 19,230 shares; Mr. Kasnet, 19,230 shares; Mr. McGrane, 24,156 shares; and, Dr. Oskowitz, 19,230 shares. | |
(9) | Excludes (a) restricted stock that would not vest within 60 days after May 25, 2010 and (b) shares that may be acquired through the exercise of options that would not vest or become exercisable within 60 days after May 25, 2010, in each case, other than because vesting, exercisability or conversion will be accelerated in connection with the Asset Sale (because the Asset Sale constitutes a change of control under our 2008 Plan and our 1996 Plan). The number of shares subject to unvested options held by each director and/or executive officer that are excluded from the number of shares presented in the table above and that would vest and become exercisable (on an accelerated basis) at the Closing is as follows: Frank C. Condella, Jr., 100,000 shares; Lawrence A Gyenes, 125,000 shares; and Michael McGrane, 141,000 shares. The number of shares of restricted stock held by each director and/or executive officer that are excluded from the number of shares presented in the table above and that would vest (on an accelerated basis) at the Closing is as follows: Valerie L. Andrews, 19,230 shares; Edward A. Blechschmidt, 19,230 shares; Anthony R. Campbell, 19,230 shares; Frank C. Condella, Jr., 19,230 shares; James S. Crofton, 19,230 shares; Stephen G. Kasnet, 19,230 shares; Michael McGrane, 24,156 shares; and Selwyn P. Oskowitz, M.D., 19,230 shares. | |
(10) | Includes direct ownership of 122,265 shares of Common Stock and indirect ownership of 126,574 shares of Common Stock (including 100,000 shares that have been pledged as security). Also includes beneficial ownership of the shares described in footnote 3 above reported as beneficially owned by Dorset Management Corporation and David M. Knott. |
Number of Shares | Percentage | |||||||
Name and Address of Beneficial Owner | Beneficially Owned | of Total (1) | ||||||
Perry Corp. and Richard C. Perry (2) | 35,000 | 59.3 | % | |||||
767 Fifth Avenue, 19th Floor New York, NY 10153 | ||||||||
Knott Partners Offshore Master Fund, L.P. | 9,580 | 16.2 | % | |||||
485 Underhill Boulevard, Suite 205 Syosset, New York 11791 | ||||||||
Knott Partners, L.P. | 7,980 | 13.5 | % | |||||
485 Underhill Boulevard, Suite 205 Syosset, New York 11791 | ||||||||
Shoshone Partners, L.P. | 5,180 | 8.8 | % | |||||
485 Underhill Boulevard, Suite 205 Syosset, New York 11791 |
(1) | Based on 59,000 shares of Series E Preferred Stock outstanding at May 25, 2010. | |
(2) | Based on a Schedule 13D filed on March 12, 2010 with the SEC by Perry Corp. and Richard C. Perry, which reported beneficial ownership of 1,750,000 shares of Common Stock issuable upon conversion of Preferred Stock. |
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Filings | Period/Date | |
Annual Report on Form 10-K/A for the fiscal year ended December 31, 2009, attached as Annex E to this proxy statement | April 30, 2010 | |
Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, attached as Annex F to this proxy statement | May 6, 2010 | |
Current Report on Form 8-K, dated June 1, 2010, attached as Annex G to this proxy statement | June 1, 2010 |
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ARTICLE I. DEFINITIONS | 1 | |||||||
1.1 | Definitions | 1 | ||||||
1.2 | Other Definitional Provisions | 1 | ||||||
ARTICLE II. PURCHASE AND SALE | 2 | |||||||
2.1 | Purchase and Sale of Assets | 2 | ||||||
2.2 | Shares | 3 | ||||||
2.3 | Excluded and Other Assets | 3 | ||||||
2.4 | Assumed Liabilities | 4 | ||||||
2.5 | Excluded Liabilities | 4 | ||||||
2.6 | Nonassignable Assets | 5 | ||||||
2.7 | Purchase Price | 5 | ||||||
2.8 | Milestone and Royalty Payments | 6 | ||||||
2.9 | Purchase Price Allocation | 13 | ||||||
2.10 | Withholding | 14 | ||||||
ARTICLE III. CLOSING | 14 | |||||||
3.1 | Closing | 14 | ||||||
3.2 | Transactions at First Closing | 15 | ||||||
3.3 | Transactions at Second Closing | 17 | ||||||
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLER | 17 | |||||||
4.1 | Organization | 17 | ||||||
4.2 | Authority; Board Action | 18 | ||||||
4.3 | No Conflicts; Enforceability | 19 | ||||||
4.4 | Title; Sufficiency of Assets | 19 | ||||||
4.5 | Capitalization | 20 | ||||||
4.6 | Intellectual Property | 21 | ||||||
4.7 | Absence of Litigation | 22 | ||||||
4.8 | Real and Personal Property | 22 | ||||||
4.9 | Taxes | 22 | ||||||
4.10 | Environmental, Safety and Health | 23 | ||||||
4.11 | Compliance with Laws | 24 | ||||||
4.12 | Permits | 24 | ||||||
4.13 | Regulatory Matters | 24 | ||||||
4.14 | Suppliers | 26 | ||||||
4.15 | SEC Documents, Financial Statements | 26 | ||||||
4.16 | Absence of Certain Changes or Events | 27 | ||||||
4.17 | Contracts | 27 | ||||||
4.18 | Brokers, Etc. | 27 |
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4.19 | Insurance | 27 | ||||||
4.20 | Investment Company | 28 | ||||||
4.21 | Exchange | 28 | ||||||
4.22 | Application of Takeover Protections | 28 | ||||||
4.23 | Fairness Opinion | 28 | ||||||
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER | 28 | |||||||
5.1 | Organization | 28 | ||||||
5.2 | Authority | 28 | ||||||
5.3 | Investment Purpose; Status | 29 | ||||||
5.4 | Securities Laws | 29 | ||||||
5.5 | Ownership Cap | 30 | ||||||
5.6 | Acknowledgement of Risk | 30 | ||||||
5.7 | No Conflicts; Enforceability | 30 | ||||||
5.8 | Litigation | 31 | ||||||
5.9 | Financing | 31 | ||||||
5.10 | No Short Sales | 31 | ||||||
5.11 | Brokers, Etc. | 31 | ||||||
5.12 | Independent Investigation | 31 | ||||||
ARTICLE VI. COVENANTS PRIOR TO CLOSING | 31 | |||||||
6.1 | Access to Information | 31 | ||||||
6.2 | Conduct of the Business | 32 | ||||||
6.3 | [Omitted.] | 34 | ||||||
6.4 | Proxy Statement; Seller Stockholders’ Meeting | 34 | ||||||
6.5 | No Solicitation; Acquisition Proposals | 35 | ||||||
6.6 | Transition Activities | 37 | ||||||
6.7 | Trade Inventory | 38 | ||||||
6.8 | Cooperation Regarding Financial Statements; etc. | 38 | ||||||
6.9 | Notifications; Updated Schedules | 38 | ||||||
6.10 | Further Assurances; Further Documents | 38 | ||||||
6.11 | Listing | 39 | ||||||
6.12 | Ownership Cap | 39 | ||||||
ARTICLE VII. CONDITIONS TO CLOSING | 40 | |||||||
7.1 | Conditions Precedent to Obligations of Buyer and Seller at the First Closing | 40 | ||||||
7.2 | Conditions Precedent to Buyer’s Obligations at the First Closing | 40 | ||||||
7.3 | Conditions Precedent to Seller’s Obligations at the First Closing | 41 | ||||||
7.4 | Conditions Precedent to Obligations of Buyer and Seller at the Second Closing | 41 | ||||||
7.5 | Conditions Precedent to Buyer’s Obligations to the Second Closing | 41 | ||||||
7.6 | Conditions Precedent to Seller’s Obligations to the Second Closing | 42 | ||||||
ARTICLE VIII. ADDITIONAL COVENANTS | 42 | |||||||
8.1 | Confidentiality; Publicity | 42 |
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8.2 | Use of Trade or Service Marks; Name Change | 42 | ||||||
8.3 | Notification of Customers | 42 | ||||||
8.4 | Products Returns, Rebate Charges and Wholesaler Charges | 42 | ||||||
8.5 | Regulatory Matters | 43 | ||||||
8.6 | Tax Matters | 44 | ||||||
8.7 | Development | 46 | ||||||
8.8 | Commercialization | 50 | ||||||
8.9 | Joint Development Committee | 51 | ||||||
8.10 | Joint Commercialization Committee | 53 | ||||||
8.11 | Covenant Not to Compete | 54 | ||||||
ARTICLE IX. TERMINATION AND SURVIVAL | 55 | |||||||
9.1 | Termination | 55 | ||||||
9.2 | Procedure and Effect of Termination | 56 | ||||||
ARTICLE X. INDEMNIFICATION | 57 | |||||||
10.1 | Survival of Representations | 57 | ||||||
10.2 | Indemnification by Seller | 58 | ||||||
10.3 | Indemnification by Buyer | 59 | ||||||
10.4 | Limitation on Losses; Calculation of Losses; Treatment of Indemnification Payments | 59 | ||||||
10.5 | No Termination of Indemnification | 60 | ||||||
10.6 | Procedures | 60 | ||||||
10.7 | Sole Remedy | 62 | ||||||
10.8 | Effect of Investigation or Knowledge | 62 | ||||||
ARTICLE XI. MISCELLANEOUS | 62 | |||||||
11.1 | Assignment; Binding Effect | 62 | ||||||
11.2 | Guarantee of Obligations | 62 | ||||||
11.3 | Expenses | 63 | ||||||
11.4 | Notices | 63 | ||||||
11.5 | Severability | 64 | ||||||
11.6 | Amendments; Entire Agreement | 64 | ||||||
11.7 | No Third-Party Beneficiaries | 64 | ||||||
11.8 | Waiver | 64 | ||||||
11.9 | Governing Law | 65 | ||||||
11.10 | Arbitration | 65 | ||||||
11.11 | Injunctive Relief | 66 | ||||||
11.12 | Headings | 66 | ||||||
11.13 | Counterparts | 66 | ||||||
11.14 | Schedules | 66 | ||||||
11.15 | Construction | 67 |
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Annex 1.1 | Definitions | |
Exhibit A | Asset Transfer Documentation | |
Exhibit B | Form of Investor’s Rights Agreement | |
Exhibit C | Form of Supply Agreement | |
Exhibit D | Form of License Agreement | |
Exhibit E | Form of Charter Amendment |
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Milestone (the “Clinical Trial Results Milestone”) | Milestone Payment (the “Clinical Trial Results Milestone Payment”) | ||
Upon completion of the statistical analysis, and delivery to Buyer of a report from Seller’s Third Party statistician for the PREGNANT Study in accordance with Section 2.8(a)(ii), if the primary endpoint, reduction in preterm birth (as currently prespecified in the clinical trial protocol), achieves a p value of ≤ 0.01 and the secondary endpoint, infant outcomes composite score (to be agreed to with the FDA in the final statistical analysis plan), achieves a p value of ≤ 0.05; OR | U.S. $8,000,000; OR | ||
Upon completion of the statistical analysis, and delivery to Buyer of a report from Seller’s Third Party statistician for the PREGNANT Study in accordance with Section 2.8(a)(ii), if the primary endpoint, reduction in preterm birth (as currently prespecified in the clinical trial protocol), achieves a p value of > 0.01 and ≤ 0.05 and the secondary endpoint, infant outcomes composite score (to be agreed to by the FDA in the final statistical analysis plan), achieves a p value of ≤ 0.05. | U.S. $6,000,000 |
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Milestone | Milestone Payment | ||
Acceptance by the FDA of a PTB NDA or a PTB Supplemental NDA filed by or on behalf of Seller or Buyer with the approval of the Joint Development Committee (the “PTB NDA Acceptance Milestone”) | U.S. $5,000,000 (“PTB NDA Acceptance Milestone Payment”) | ||
First commercial sale of a PTB Product by or on behalf of Buyer in the U.S. (the “PTB Product Launch Milestone”) | U.S. $30,000,000 (“PTB Product Launch Milestone Payment”) |
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Milestone | Milestone Payment | |
(the “Ex-U.S. Filing/Approval Milestone”) | ||
Filing and acceptance by the applicable Regulatory Authority of an MAA in a country or jurisdiction outside the United States seeking Regulatory Approval to market a Product for the PTB Indication (the “Ex-U.S. Filing Milestone”) | U.S. $500,000 | |
Grant by the applicable Regulatory Authority in a country or jurisdiction outside the United States of Regulatory Approval to market a Product for the PTB Indication (the “Ex-U.S. Approval Milestone”) | U.S. $2,000,000 | |
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Total Net Sales in any Calendar Year | Royalty Rate | |
Portion of aggregate Net Sales of Royalty Products and PTB Royalty Products which are less than or equal to U.S. $150,000,000 | Ten percent (10%) | |
Portion of aggregate Net Sales of Royalty Products and PTB Royalty Products which are greater than U.S. $150,000,000 but less than or equal to U.S. $250,000,000 | Fifteen percent (15%) | |
Portion of aggregate Net Sales of Royalty Products and PTB Royalty Products which are greater than U.S. $250,000,000 | Twenty percent (20%) | |
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354 Eisenhower Parkway
Plaza 1, Second Floor
Livingston, NJ 07039
Attention: General Counsel
Facsimile: 973.994.3001
425 Park Avenue
New York, NY 10022
Attention: Adam H. Golden and Steven G. Canner
Facsimile: 212.836.8689
311 Bonnie Circle
Corona, CA 92880
Attention: General Counsel
Facsimile: 951.493.5817
650 Town Center Drive, 20th Floor
Costa Mesa, CA 92626-1925
Attention: R. Scott Shean
Facsimile: 714.755.8290
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COLUMBIA LABORATORIES, INC. | ||||
By: | /s/ Frank C. Condella, Jr. | |||
Name: | Frank C. Condella, Jr. | |||
Title: | Interim Chief Executive Officer | |||
COVENTRY ACQUISITION, INC. | ||||
By: | /s/ Paul M. Bisaro | |||
Name: | Paul M. Bisaro | |||
Title: | Authorized Signatory | |||
WATSON PHARMACEUTICALS, INC. (solely for purpose ofSection 11.2) | ||||
By: | /s/ Paul M. Bisaro | |||
Name: | Paul M. Bisaro | |||
Title: | President and Chief Executive Officer |
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Asset Transfer Documentation
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SECTION 1 DEFINITIONS | 1 | |||||
1.1 | Certain Definitions | 1 | ||||
SECTION 2 REGISTRATION RIGHTS | 4 | |||||
2.1 | Shelf-Registration | 4 | ||||
2.2 | Expenses | 5 | ||||
2.3 | Registration Procedures | 5 | ||||
2.4 | Indemnification | 7 | ||||
2.5 | Registration Covenants | 9 | ||||
2.6 | Rule 144 Reporting | 11 | ||||
SECTION 3 BOARD OF DIRECTORS | 11 | |||||
3.1 | Investor Designee | 11 | ||||
3.2 | Designation | 12 | ||||
3.3 | Change in Designee | 12 | ||||
3.4 | Information | 12 | ||||
3.5 | Termination of Rights | 12 | ||||
3.6 | No Compensation | 12 | ||||
3.7 | Confidentiality Agreement | 12 | ||||
SECTION 4 LOCK-UP AGREEMENT | 13 | |||||
4.1 | Lock-Up Agreement | 13 | ||||
4.2 | Stop-Transfer Instructions | 14 | ||||
4.3 | Termination of Lock-Up Agreement | 14 | ||||
SECTION 5 MISCELLANEOUS | 14 | |||||
5.1 | Amendment | 14 | ||||
5.2 | Notices | 14 | ||||
5.3 | Information | 15 | ||||
5.4 | Successors and Assigns | 15 | ||||
5.5 | Entire Agreement | 15 | ||||
5.6 | Delays or Omissions | 15 | ||||
5.7 | Severability | 15 | ||||
5.8 | Titles and Subtitles | 16 | ||||
5.9 | Counterparts | 16 | ||||
5.10 | Further Assurances | 16 | ||||
5.11 | Injunctive Relief | 16 | ||||
5.12 | Governing Law | 16 | ||||
5.13 | Arbitration | 16 | ||||
5.14 | Recapitalization, Exchanges, Etc. | 17 | ||||
5.15 | Conflict | 18 |
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COLUMBIA LABORATORIES, INC. | ||||
By: | ||||
Name: | ||||
Title: | ||||
Address: | 354 Eisenhower Parkway Plaza 1, Second Floor Livingston, New Jersey 07039 | |||
COVENTRY ACQUISITION, INC. | ||||
By: | ||||
Name: | ||||
Title: | ||||
Address: | 311 Bonnie Circle Corona, California 92880-2882 | |||
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354 Eisenhower Parkway
Plaza 1, Second Floor
Livingston, New Jersey 07039
Attention: General Counsel
Facsimile: 973.994.3001
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425 Park Avenue
New York, NY 10022
Attention: Adam H. Golden and Steven G. Canner
Facsimile: 212.836.8689
311 Bonnie Circle
Corona, CA 92880
Attention: General Counsel
Facsimile: 951.493.5817
650 Town Center Drive
20th Floor
Costa Mesa, CA 92626-1925
Attention: R. Scott Shean
Facsimile: 714.755.8290
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COLUMBIA LABORATORIES, INC. | ||||
By: | ||||
Name: | ||||
Title: | ||||
COVENTRY ACQUISITION, INC. | ||||
By: | ||||
Name: | ||||
Title: | ||||
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354 Eisenhower Parkway
Plaza 1, Second Floor
Livingston, NJ 07039
Attention: General Counsel
Facsimile: 973.994.3001
425 Park Avenue
New York, NY 10022
Attention: Adam H. Golden and Steven G. Canner
Facsimile: 212.836.8689
311 Bonnie Circle
Corona, CA 92880
Attention: General Counsel
Facsimile: 951.493.5817
650 Town Center Drive, 20th Floor
Costa Mesa, CA 92626-1925
Attention: R. Scott Shean
Facsimile: 714.755.8290
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COLUMBIA LABORATORIES, INC. | ||||
By: | ||||
Name: | ||||
Title: | ||||
COLUMBIA LABORATORIES (BERMUDA) LTD. | ||||
By: | ||||
Name: | ||||
Title: | ||||
COVENTRY ACQUISITION, INC. | ||||
By: | ||||
Name: | ||||
Title: | ||||
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OF
RESTATED CERTIFICATE OF INCORPORATION
OF
COLUMBIA LABORATORIES, INC.
COLUMBIA LABORATORIES, INC. | ||||
By: | ||||
Name: | ||||
Title: | ||||
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OF
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COLUMBIA LABORATORIES, INC. | ||||
By: | ||||
Name: | ||||
Title: | ||||
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![(RBC CAPITAL MARKETS LOGO)](https://capedge.com/proxy/DEFM14A/0000950123-10-054461/y83374dy8337401.gif)
Columbia Laboratories, Inc.
354 Eisenhower Parkway
Plaza I, Second Floor
Livingston, NJ 07039
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PURCHASE AND SALE
* | See Attachment A hereto for important information regarding the Note Purchase and Amendment Agreements. |
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OF THE HOLDERS
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OF THE COMPANY
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COVENANTS
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REGISTRATION RIGHTS
TERMINATION
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354 Eisenhower Parkway
Livingston, New Jersey 07039
Attention: Lawrence A. Gyenes
Senior Vice President, Chief Financial Officer & Treasurer
Telephone: (973) 486-8860
Telecopier: (866) 994-3001
425 Park Avenue
New York, New York 10022
Attention: Adam H. Golden, Esq.
Telecopier: (212) 836-8689
DEFINITIONS
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COLUMBIA LABORATORIES, INC. | ||||
By: | /s/ Lawrence A. Gyenes | |||
Name: | Lawrence A. Gyenes | |||
Title: | Senior Vice President, Chief Financial Officer and Treasurer | |||
PERRY PARTNERS INTERNATIONAL INC. By: Perry Corp., Investment Manager of Perry Partners International, Inc. | ||||
By: | /s/ Michael C. Neus | |||
Name: | Michael C. Neus | |||
Title: | General Counsel | |||
PERRY PARTNERS, L.P. By: Perry Corp., General Partner of Perry Partners L.P. | ||||
By: | /s/ Michael C. Neus | |||
Name: | Michael C. Neus | |||
Title: | General Counsel | |||
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No. W- | , 2010 |
1 | Legend shall be removed if the Certificate contemplated in Section 2(i)(i)(B) of the Note Purchase Agreement has been delivered to the Company in accordance with the terms therein (or omitted if the Certificate is delivered on or prior to the Closing Date). | |
2 | Insert five-year anniversary of Issuance Date. | |
3 | Insert applicable numbers from Schedule I to Note Purchase Agreement. |
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4 | Insert five-year anniversary of Issuance Date. | |
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X = | Y (B-A) | |||
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Where: | X = | the number of Exercise Shares to be issued to the Holder. | ||
Y = | the number of Exercise Shares purchasable upon exercise of all of the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised. |
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COLUMBIA LABORATORIES, INC. | ||||
By: | ||||
Name: | ||||
Title: | ||||
Address: | ||||
Attention: [•] | ||||
Facsimile: [•] | ||||
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WARRANT TO PURCHASE COMMON STOCK
Name of Registered Holder
By: | ||||
Name: | ||||
Title: | ||||
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COLUMBIA LABORATORIES, INC. | ||||
By: | ||||
Name: | ||||
Title: |
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Name: | ||
(Please Print) | ||
Address: | ||
(Please Print) |
Holder’s Signature:
Holder’s Address:
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TO
CONVERTIBLE SUBORDINATED NOTE
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COLUMBIA LABORATORIES, INC. | ||||
By: | ||||
Name: | ||||
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PHARMABIO DEVELOPMENT INC. | ||||
By: | ||||
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FORM OF
CERTIFICATE OF NON-AFFILIATE HOLDER
[HOLDER] | ||||
By: | ||||
Name: | ||||
Title: | ||||
1 | This Certificate shall be executed, in the case of an entity by a duly authorized officer or representative thereof or in the case of an individual, by such individual. | |
2 | Insert all applicable securities that the Holder is requiring the Company to issue without restrictive legends. |
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Allocation | ||||||||||||||||||||||
Number of Shares | ||||||||||||||||||||||
Name/Address of | Jurisdiction of | Principal Amount of | Warrant | Cash | Covered by | |||||||||||||||||
Holder | Organization | Holder Notes Owned | Percentage | Consideration* | Shares | Warrants | ||||||||||||||||
PERRY PARTNERS INTERNATIONAL INC. 767 5thAve. 19th Floor New York, NY 10153 (212) 583-4146 | British Virgin Islands | $ | 12,415,903.50 | 31.04 | % | $ | 8,070,337.28 | 2,299,257 | 2,406,182 | |||||||||||||
PERRY PARTNERS, L.P. 767 5thAve. 19th Floor New York, NY 10153 (212) 583-4146 | Delaware | $ | 5,584,094.25 | 13.96 | % | $ | 3,629,661.26 | 1,034,073 | 1,082,188 | |||||||||||||
Aggregate Principal Amount of Holder Notes Owned: | $ | 17,999,997.75 | ||||||||||||||||||||
Expenses Cap: | $ | 100,000 |
* | Excluding accrued and unpaid interest on the Notes. |
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Allocation | ||||||||||||||||||||||||
Principal | Number of | |||||||||||||||||||||||
Amount of | Shares | |||||||||||||||||||||||
Holder Notes | Warrant | Cash | Covered by | Common | ||||||||||||||||||||
Holder | Owned | Percentage | Consideration* | Warrants | Stock | Expenses Cap | ||||||||||||||||||
14159 L.P. | $ | 140,000 | 0.35 | % | $ | 91,000 | 27,132 | 25,909 | (1) | |||||||||||||||
BAKER BROTHERS LIFE SCIENCES, L.P. | $ | 4,256,000 | 10.64 | % | $ | 2,766,400 | 824,806 | 787,624 | (1) | |||||||||||||||
667, L.P. (#1) | $ | 805,000 | 2.01 | % | $ | 523,250 | 156,008 | 148,790 | (1) | |||||||||||||||
667, L.P. (#2) | $ | 719,000 | 1.80 | % | $ | 467,350 | 139,341 | 133,244 | (1) | |||||||||||||||
BAKER TISCH INVESTMENTS, L.P. (#1) | $ | 42,000 | 0.11 | % | $ | 27,300 | 8,140 | 8,143 | (1) | |||||||||||||||
BAKER TISCH INVESTMENTS, L.P. (#2) | $ | 38,000 | 0.10 | % | $ | 24,700 | 7,364 | 7,402 | (1) | |||||||||||||||
KENNETH E. BEEBE AND JANET E. BEEBE | $ | 100,000 | 0.25 | % | $ | 65,000 | 19,379 | 18,582 | (2) | |||||||||||||||
KIRK AND DANA BEEBE | $ | 100,000 | 0.25 | % | $ | 65,000 | 19,379 | 18,582 | (2) | |||||||||||||||
BEEBE 88 PARTNERS | $ | 30,000 | 0.08 | % | $ | 19,500 | 4,984 | 5,946 | (2) | |||||||||||||||
BEEBE 98 PARTNERS | $ | 40,000 | 0.08 | % | $ | 26,000 | 6,646 | 5,946 | (2) | |||||||||||||||
THE ASCEND FUND | $ | 1,500,000 | 3.75 | % | $ | 975,000 | 290,699 | 278,722 | (2) | |||||||||||||||
CURRAN FAMILY PARTNERS II | $ | 2,000,000 | 5.00 | % | $ | 1,300,000 | 387,597 | 370,371 | $ | 1,500 | ||||||||||||||
HIGHBRIDGE INTERNATIONAL LLC | $ | 6,000,000 | 15.00 | % | $ | 3,900,000 | 1,162,790 | 1,111,112 | $ | 15,000 | ||||||||||||||
KNOTT PARTNERS, LP | $ | 136,000 | 00.34 | % | $ | 88,400 | 26,355 | 25,165 | (3) | |||||||||||||||
KNOTT PARTNERS OFFSHORE MASTER FUND, LP | $ | 3,940,000 | 9.85 | % | $ | 2,561,000 | 763,566 | 729,047 | (3) | |||||||||||||||
SHOSHONE PARTNERS, LP | $ | 628,000 | 1.57 | % | $ | 408,200 | 121,705 | 116,203 | (3) |
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Allocation | ||||||||||||||||||||||||
Principal | Number of | |||||||||||||||||||||||
Amount of | Shares | |||||||||||||||||||||||
Holder Notes | Warrant | Cash | Covered by | Common | ||||||||||||||||||||
Holder | Owned | Percentage | Consideration* | Warrants | Stock | Expenses Cap | ||||||||||||||||||
FINDERNE, LLC | $ | 55,000 | 0.14 | % | $ | 35,750 | 10,661 | 10,362 | (3) | |||||||||||||||
COMMONFUND HEDGED EQUITY COMPANY | $ | 158,000 | 0.40 | % | $ | 102,700 | 30,619 | 29,606 | (3) | |||||||||||||||
MULSANNE PARTNERS, LP | $ | 83,000 | 0.21 | % | $ | 53,950 | 16,086 | 15,543 | (3) | |||||||||||||||
MORRISON FAMILY TRUST DTD 51593 | $ | 700,000 | 1.75 | % | $ | 455,000 | 135,659 | 129,420 | (4) | |||||||||||||||
MORRISON 1997 CRT | $ | 430,000 | 1.08 | % | $ | 279,500 | 83,333 | 79,870 | (4) | |||||||||||||||
LAURIE C. MORRISON TRUST | $ | 100,000 | 00.25 | % | $ | 65,000 | 19,381 | 18,488 | (4) |
* | Excluding accrued and unpaid interest on the Notes. | |
(1) | 14159 L.P., BAKER BROTHERS LIFE SCIENCES, L.P., 667, L.P. (#1), 667, L.P. (#2), BAKER TISCH INVESTMENTS, L.P. (#1) and BAKER TISCH INVESTMENTS, L.P. (#2) have an expense cap of $4,500, in the aggregate. | |
(2) | KENNETH E. BEEBE AND JANET E. BEEBE, KIRK AND DANA BEEBE, BEEBE 88 PARTNERS, BEEBE 98 PARTNERS and THE ASCEND FUND have an expense cap of $1,500, in the aggregate. | |
(3) | KNOTT PARTNERS, LP, KNOTT PARTNERS OFFSHORE MASTER FUND, LP, SHOSHONE PARTNERS, LP, FINDERNE, LLC, COMMONFUND HEDGED EQUITY COMPANY and MULSANNE PARTNERS, LP have an expense cap of $4,000, in the aggregate. | |
(4) | MORRISON FAMILY TRUST DTD 51593, MORRISON 1997 CRT and LAURIE C. MORRISON TRUST have an expense cap of $1,000, in the aggregate. |
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SECURITIES AND EXCHANGE COMMISSION
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware (State or other jurisdiction of incorporation or organization) | 59-2758596 (I.R.S. Employer Identification No.) | |
354 Eisenhower Parkway | ||
Livingston, New Jersey | 07039 | |
(Address of principal executive offices) | (Zip Code) |
Common Stock, $.01 par value | NASDAQ Global Market | |
(Title of each class) | (Name of exchange on which registered) |
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
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Products | ||||
Progesterone Products | • | CRINONE® 8% (progesterone gel) marketed and sold by the Company in the U.S. | ||
• | CRINONE® 8% sold to Merck Serono for resale outside the U.S. | |||
• | PROCHIEVE® 8% (progesterone gel) sold by the Company in the U.S. | |||
• | PROCHIEVE® 4% sold to Ascend Therapeutics, Inc., for resale in the U.S., pursuant to an agreement that will terminate on July 23, 2010. | |||
Other Products | • | STRIANT® (testosterone buccal system) marketed and sold by the Company in the U.S. | ||
• | STRIANT® sold to Mipharm, S.p.A. for resale in Italy. | |||
• | Royalty and licensing revenues. |
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(PROCHIEVE®ExtendingGestatioNANewTherapy) study. In 2007, we reported data from our completed clinical trial of PROCHIEVE 8% in pregnant women with a history of a prior preterm birth. In that clinical trial, the study endpoints were not met, and the trial demonstrated that there was no benefit from administering vaginal progesterone to that patient population. However, a secondary analysis of the data from that earlier study demonstrated a statistically significant improvement in the rate of preterm birth and infant outcomes in trial participants who had a short cervix at mid-pregnancy. This secondary analysis was conducted on a subset of patients with a short cervix at mid-pregnancy from the previous trial; the PREGNANT clinical trial is designed to confirm these data in a larger trial. The PREGNANT study was designed based in part on discussions with the FDA and the data published in the following articleVaginal Progesterone is Associated with a Decrease in Risk for Early Preterm Birth and Improved Neonatal Outcome in Women with a Short Cervix: a Secondary Analysis from a Randomized, Double-blind, Placebo-controlled Trial.DeFranco EA, O’Brien JM, Adair CD, et al., Ultrasound Obstet Gynecol 2007;30:697-705. Based on those positive data and our discussions with the U.S. Food and Drug Administration (“FDA”), we designed the Phase III PREGNANT study. The PREGNANT study is a randomized, double-blind, placebo-controlled Phase III clinical trial designed to evaluate the ability of PROCHIEVE 8% to reduce the risk of preterm birth in women with a short cervix of between 1.0 and 2.0 centimeters as measured by transvaginal ultrasound at mid-pregnancy. The primary endpoint of this clinical trial is a reduction in preterm births at less than or equal to 32 weeks versus placebo.
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Year Granted | Nature of Patent | |
2009 | Low concentration of peroxide for treating or preventing vaginal infections. | |
2006 | Bioadhesive progressive hydration tablets using desmopressin or prostaglandin E2 as the active ingredient. | |
2004 | Compositions and methods for safely preventing or treating premature labor using a beta-adrenergic agonist, such as terbutaline. | |
2004 | Methods of safely treating endometriosis or infertility, and for improving fertility, using a beta-adrenergic agonist. | |
2003 | Use of progestin therapy for maintaining amenorrhea. | |
2003 | Bioadhesive progressive hydration tablet. | |
2002 | Use of certain polycarboxylic acid polymers for vaginal pH buffering to prevent miscarriage and premature labor associated with bacterial vaginosis. |
Subject of patent | Year of Expiration | Product or Project | ||||
Progressive hydration tablets | 2019 | STRIANT — | ||||
testosterone progressive hydration vaginal tablet — | ||||||
peptide delivery system — | ||||||
progesterone progressive hydration vaginal product | ||||||
First Uterine Pass Effect™ | 2018 | vaginally administered lidocaine — | ||||
terbutaline vaginal gel — | ||||||
testosterone vaginal gel | ||||||
Progesterone delivery | 2013 | CRINONE /PROCHIEVE | ||||
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Products | ||||
Progesterone Products | • | CRINONE® 8% (progesterone gel) marketed and sold by the Company in the U.S. | ||
• | CRINONE® 8% sold to Merck Serono for resale outside the U.S. | |||
• | PROCHIEVE® 8% (progesterone gel) sold by the Company in the U.S. | |||
• | PROCHIEVE® 4% sold to Ascend Therapeutics, Inc. for resale in the U.S pursuant to an agreement that will terminate on July 23, 2010. | |||
Other Products | • | STRIANT® (testosterone buccal system) marketed and sold by the Company in the U.S. | ||
• | STRIANT® sold to Mipharm, S.p.A. for resale in Italy. | |||
• | Royalty and licensing revenues. |
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• | Perceived efficacy of our products; | ||
• | Convenience and ease of administration; | ||
• | Prevalence and severity of adverse side effects in both clinical trials and commercial use; | ||
• | Availability of alternative treatments; | ||
• | Cost effectiveness; | ||
• | The pricing of our products; and | ||
• | Our ability to obtain third party coverage or reimbursement for our products. |
• | The effectiveness of our production, distribution and marketing capabilities; | ||
• | The successful marketing of our products by our distribution and marketing partners; | ||
• | The success of competing products; and | ||
• | The availability and extent of reimbursement from third party payors. |
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2009 | 2008 | 2007 | ||||||||||
CRINONE® | 69 | % | 59 | % | 64 | % | ||||||
RepHresh® | 10 | % | 9 | % | 11 | % | ||||||
Replens® | 10 | % | 8 | % | 8 | % | ||||||
PROCHIEVE® | 5 | % | 7 | % | 5 | % | ||||||
STRIANT® | 5 | % | 6 | % | 7 | % | ||||||
Royalty income | 1 | % | 9 | % | 2 | % | ||||||
Licensing fees | 0 | % | 2 | % | 3 | % | ||||||
Total | 100 | % | 100 | % | 100 | % | ||||||
(in millions) | 2009 | 2008 | 2007 | |||||||||
Merck-Serono (formerly Serono) | $ | 8.6 | $ | 9.2 | $ | 8.2 | ||||||
Lil’ Drug Store Products, Inc. | 6.6 | 6.2 | 6.0 | |||||||||
Cardinal Healthcare | 5.7 | 5.6 | 6.0 | |||||||||
McKesson | 4.6 | 5.0 | 3.9 | |||||||||
All others (none over 5%) | 6.7 | 10.2 | 5.5 | |||||||||
Total | $ | 32.2 | $ | 36.2 | $ | 29.6 | ||||||
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(in millions) | 2009 | 2008 | 2007 | |||||||||
United States | $ | 20.0 | $ | 18.0 | $ | 15.2 | ||||||
Switzerland | 8.6 | 9.2 | 8.1 | |||||||||
Other European Countries | 3.6 | 9.0 | 6.3 | |||||||||
Subtotal International | 12.2 | 18.2 | 14.4 | |||||||||
Total | $ | 32.2 | $ | 36.2 | $ | 29.6 | ||||||
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• | Clinical trials may show our product candidates to be ineffective for the indications studied or to have harmful side effects; | ||
• | Product candidates may fail to receive regulatory approvals required to bring the products to market; | ||
• | Manufacturing costs or other factors may make our product candidates uneconomical; and | ||
• | The proprietary rights of others and their competing products and technologies may prevent our product candidates from being effectively commercialized. |
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• | The rate of patient enrollment which is a function of factors including the size of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the study, and the nature of the study protocol; | ||
• | Institutional review board, or IRB, approval of the study protocol and the informed consent form; | ||
• | Prior regulatory agency review and approval; | ||
• | Analysis of data obtained from clinical activities, which are susceptible to varying interpretations and which interpretations could delay, limit or prevent regulatory approval; | ||
• | Changes in the policies of regulatory authorities for drug approval during the period of product development; and | ||
• | The availability of skilled and experienced staff to conduct and monitor clinical studies and to prepare the appropriate regulatory applications. |
• | Our ability to raise any additional funds that we need to complete our trials; | ||
• | The number and outcome of clinical trials conducted by us and/or our collaborators; | ||
• | The number of products we may have in clinical development; | ||
• | In licensing or other partnership activities, including the timing and amount of related development funding, license fees or milestone payments; and | ||
• | Future levels of our revenue. |
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• | A product candidate may not be deemed to be safe or effective; | ||
• | The manufacturing processes or facilities we have selected may not meet the applicable requirements; and | ||
• | Changes in their approval policies or adoption of new regulations may require additional clinical trials or other data. |
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Location | Use | Square feet | Expiration | Annual Rent | ||||||||
Livingston, NJ | Corporate office | 9,450 | October, 2013 | $ | 217,350 | |||||||
Paris, France | European logistics office | 150 | 3 months notice | $ | 19,529 |
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Issuer Purchases of Equity Securities
High | Low | |||||||
Fiscal Year Ended December 31, 2008 | ||||||||
First Quarter | $ | 2.51 | $ | 1.89 | ||||
Second Quarter | 4.29 | 2.13 | ||||||
Third Quarter | 4.47 | 2.15 | ||||||
Fourth Quarter | 2.76 | 0.92 | ||||||
Fiscal Year Ended December 31, 2009 | ||||||||
First Quarter | $ | 1.74 | $ | 1.09 | ||||
Second Quarter | 1.70 | 1.06 | ||||||
Third Quarter | 1.59 | 1.08 | ||||||
Fourth Quarter | 1.51 | 0.65 |
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Number of securities | ||||||||||||
remaining available for | ||||||||||||
Number of securities to be | Weighted average | future issuance under | ||||||||||
issued upon exercise of | exercise price of | equity compensation plans | ||||||||||
outstanding options, | outstanding options, | [excluding securities reflected | ||||||||||
Plan Category | warrants and rights | warrants and rights | in column (a)] | |||||||||
(a) | (b) | (c) | ||||||||||
Equity compensation plans approved by security holders | 5,960,304 | $ | 2.20 | 6,071,254 | ||||||||
Equity compensation plans not approved by security holders | 450,000 | $ | 7.79 | — | ||||||||
Total | 6,410,304 | $ | 2.59 | 6,071,254 |
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![(PERFORMANCE GRAPH)](https://capedge.com/proxy/DEFM14A/0000950123-10-054461/y83374dy8337408.gif)
* | Assumes $100 invested at the close of trading on December 31, 2004 in Columbia Laboratories, Inc. Common Stock, Russell 2000 Index, Value Line Drug, and Peer Group. |
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December 31 | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Statement of Operations Data: (000’s except per share data) | ||||||||||||||||||||
Net revenues | $ | 32,196 | $ | 36,229 | $ | 29,627 | $ | 17,393 | $ | 22,041 | ||||||||||
Gross profit | 23,002 | 25,294 | 20,613 | 9,573 | 13,929 | |||||||||||||||
Operating expenses | 36,165 | 32,552 | 28,721 | 20,733 | 21,160 | |||||||||||||||
Interest expense | 8,851 | 7,882 | 7,946 | 2,670 | 3,491 | |||||||||||||||
Net loss | (21,870 | ) | (14,077 | ) | (14,292 | ) | (12,485 | ) | (10,104 | ) | ||||||||||
Loss per common share | (0.39 | ) | (0.27 | ) | (0.28 | ) | (0.26 | ) | (0.25 | ) | ||||||||||
Weighted average number of common shares outstanding-basic and diluted | 56,359 | 52,439 | 51,124 | 48,089 | 41,752 | |||||||||||||||
Balance Sheet Data: (000’s) | ||||||||||||||||||||
Working capital (deficiency) | $ | 14,256 | $ | 12,305 | $ | 14,461 | $ | 23,410 | $ | (3,471 | ) | |||||||||
Total assets | 43,757 | 45,622 | 56,589 | 65,839 | 14,732 | |||||||||||||||
Notes payable | 32,966 | 30,075 | 27,536 | 25,299 | — | |||||||||||||||
Long-term portion of financing agreements | 15,234 | 13,126 | 11,426 | 13,277 | 10,921 | |||||||||||||||
Redeemable preferred series C stock | 600 | 775 | 1,125 | 3,200 | 3,250 | |||||||||||||||
Shareholders’ equity (deficiency) | (13,766 | ) | (5,893 | ) | 2,015 | 12,616 | (20,573 | ) |
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• | Continued very strong presence at the annual meeting of the American Society of Reproductive Medicine in 2009. After three years of our strong presence at ASRM, we are receiving recognition as a major player in the market for infertility treatments. | ||
• | Emphasis in our marketing materials to four new clinical trials added to our previous 16 clinical trials that have been conducted to compare CRINONE to other forms of progesterone, which provide us with a compelling case for the efficacy of CRINONE. We believe that this data shows that CRINONE is as effective as, and in some cases numerically more effective, than other delivery systems for progesterone. Of particular note is the completion of the well powered, prospective randomized, Harvard-affiliated, Brigham & Women’s study which concluded that CRINONE’s efficacy is statistically equivalent to painful IM therapy, with significant patient preference. This is consistent with the other six clinical trials that included an arm evaluating patient preference. Patients statistically preferred CRINONE over the competing product in all seven clinical trials. |
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• | Meetings of our Infertility Advisory Committee of respected reproductive endocrinologists from around the U.S. who provide us with insight on how to best communicate to physicians and patients all the clinical information that is available for CRINONE. | ||
• | Numerous Speaker Programs where key opinion leaders and a number of reproductive endocrinologists speak on behalf of CRINONE. |
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Clinical development of vaginally-administered lidocaine for the treatment of dysmenorrhea. |
Products | ||||
Progesterone Products | • | CRINONE 8% progesterone gel marketed and sold by us in the U.S. | ||
• | CRINONE 8% sold by us to Merck Serono for resale outside the U.S. | |||
• | PROCHIEVE 8% progesterone gel sold by us in the U.S. | |||
• | PROCHIEVE 4% progesterone gel sold to Ascend for sale in the U.S pursuant to an agreement that will terminate on July 23, 2010. | |||
Other Products | • | STRIANT testosterone buccal system marketed and sold by us in the U.S. | ||
• | STRIANT sold to MiPharm for resale in Italy. | |||
• | Replens® Vaginal Moisturizer sold to Lil’ Drug Store for resale outside the U.S. | |||
• | RepHresh® Vaginal Gel sold to Lil’ Drug Store for resale on a worldwide basis. | |||
• | Royalty and licensing revenues. |
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Percentage | Percentage | |||||||||||||||||||
from prior | from prior | |||||||||||||||||||
(In thousands, except percentages) | 2009 | year | 2008 | year | 2007 | |||||||||||||||
Net revenues | $ | 32,196 | (11 | %) | $ | 36,229 | 22 | % | $ | 29,628 |
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Percentage | Percentage | |||||||||||||||||||
from prior | from prior | |||||||||||||||||||
(In thousands, except percentages) | 2009 | year | 2008 | year | 2007 | |||||||||||||||
Selling and distribution | $ | 11,982 | (6 | %) | $ | 12,685 | 25 | % | $ | 10,112 | ||||||||||
As a percentage of revenue | 37 | % | 2 | pp | 35 | % | 1 | pp | 34 | % |
Percentage | Percentage | |||||||||||||||||||
from prior | from prior | |||||||||||||||||||
(In thousands, except percentages) | 2009 | year | 2008 | year | 2007 | |||||||||||||||
General and administrative | $ | 10,559 | 23 | % | $ | 8,615 | 10 | % | $ | 7,825 | ||||||||||
As a percentage of revenue | 33 | % | 8 | pp | 25 | % | (1 | )pp | 26 | % |
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Percentage | Percentage | |||||||||||||||||||
from prior | from prior | |||||||||||||||||||
(In thousands, except percentages) | 2009 | year | 2008 | year | 2007 | |||||||||||||||
Research and development | $ | 8,579 | 38 | % | $ | 6,206 | 7 | % | $ | 5,779 | ||||||||||
As a percentage of revenue | 27 | % | 10 | pp | 17 | % | (3 | )pp | 20 | % |
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For the Fiscal Years Ended December 31, | ||||||||||||||||||||||||
Total | 2010 | 2011 | 2012 | 2013 | Beyond | |||||||||||||||||||
$40 million convertible notes | $ | 40,000 | $ | — | $ | 40,000 | $ | — | $ | — | $ | — | ||||||||||||
Interest on $40 million convertible notes | 7,200 | 3,200 | 4,000 | — | — | — | ||||||||||||||||||
PharmaBio Striant® finance agreement | 16,526 | 145 | 16,381 | — | — | — | ||||||||||||||||||
Operating lease obligations | 936 | 271 | 245 | 233 | 187 | — | ||||||||||||||||||
Executive agreements | 1,961 | 1,961 | — | — | — | — | ||||||||||||||||||
Total | $ | 66,623 | $ | 5,577 | $ | 60,626 | $ | 233 | $ | 187 | $ | — | ||||||||||||
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2009 | 2008 | 2007 | ||||||||||
Cash flows: | ||||||||||||
Operating activities | $ | (9,055,667 | ) | $ | (5,136,488 | ) | $ | (7,914,299 | ) | |||
Investing activities | (49,853 | ) | (375,926 | ) | (102,021 | ) | ||||||
Financing activities | 11,332,531 | 959,191 | (40,803 | ) |
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Columbia Laboratories, Inc.
Livingston, NJ
BDO Seidman, LLP
Woodbridge, NJ
March 12, 2010
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Name | Age | Position with the Company | ||||
Frank C. Condella | 55 | Interim Chief Executive Officer, Director | ||||
Lawrence A. Gyenes | 59 | Senior Vice President, Chief Financial Officer and Treasurer | ||||
Michael McGrane | 60 | Senior Vice President, General Counsel and Secretary | ||||
Stephen G. Kasnet | 64 | Chairman of the Board | ||||
Edward A. Blechschmidt | 57 | Vice Chairman of the Board | ||||
Valerie L. Andrews | 50 | Director | ||||
Anthony R. Campbell | 62 | Director | ||||
James S. Crofton | 58 | Director | ||||
Selwyn P. Oskowitz, M.D. | 64 | Director |
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• | Establishing the Company’s strategic plan; | ||
• | Establishing broad corporate policies and reviewing overall performance; | ||
• | Overseeing Company management; | ||
• | Management succession; | ||
• | Review and approval of the annual operating plan prepared by management; | ||
• | Monitoring performance in comparison to the operating plan; | ||
• | Consideration of topics relevant to the Company’s ability to carry out its strategic plan; | ||
• | Review of the Company’s investor relations program; and | ||
• | Review and approval of proposed major commitments of corporate resources. |
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354 Eisenhower Parkway
Plaza I, Second Floor
Livingston, NJ 07039
Attn: Board of Directors
- - or -
directors@columbialabs.com
• | Promptly forward any letter that deals with the function of the Board or committees of the Board (or is otherwise appropriate for Board attention) to the director or directors to whom it is addressed; | ||
• | Attempt to handle the inquiry directly if it relates to routine or ministerial matters, including requests for information about the Company and stock-related matters; or | ||
• | Not forward the letter if it relates to an improper or irrelevant topic. |
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• | Serve as an independent and objective party to monitor the Company’s financial reporting process, including the review of the financial reports and other financial information provided by the Company to governmental or regulatory bodies, the public or other users, and internal control systems (including any material weaknesses, significant deficiencies and significant changes in internal controls reported to the Audit Committee by the outside auditor or management); | ||
• | Approve the engagement of the Company’s independent registered public accounting firm; | ||
• | Review and appraise the audit efforts of the Company’s independent registered public accounting firm; | ||
• | Provide an open avenue of communication among the Company’s independent registered public accounting firm and financial and senior management of the Company; | ||
• | Review financial press releases; | ||
• | Review and address conflicts of interests of the Company’s directors and executive officers; and | ||
• | Monitor, review, and recommend actions relating to transactions and dealings with related parties. |
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• | Review and determination of the annual salary of the Company’s CEO and other officers; | ||
• | Review and approval of the Company’s management incentive compensation policies and programs; and | ||
• | Review and approval of equity compensation programs for the Company’s employees, directors and consultants, including grants of options, restricted stock and other awards thereunder. |
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• | to afford our executives a competitive total rewards opportunity comparable to organizations with which we compete for executive talent; | ||
• | to allow us to attract and retain executives who can perform and succeed in our fast-paced and challenging environment; and | ||
• | to deliver pay in a cost efficient manner that aligns employees’ rewards with stockholders’ long-term interests. |
• | Financial — We evaluate measures of our financial performance, including revenue growth and other matters such as expense management. | ||
• | Strategic — We monitor the performance of our executive officers in furthering the strategic success of the Company. This includes achieving targeted revenues, completing recruitment in a clinical study, ensuring talent is effectively managed, and evaluating and establishing new partnership opportunities. | ||
• | Operational — We include operational measures in our determination of success, including the quality of our leadership development and teamwork, and effective recruitment and retention of talented employees. |
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Adolor Corp.
Ariad Pharmaceuticals, Inc.
ArQule, Inc.
Biosante Pharmaceuticals, Inc.
Cytokinetics, Incorporated
DepoMed, Inc.
GenVec Inc.
MiddleBrook Pharmaceuticals, Inc.
Neurocrine Biosciences, Inc.
SuperGen, Inc.
Unigene Laboratories Inc.
Vical, Inc.
Component | Purpose/Description | |
Base salary | Competitive fixed income for performance of day-to-day responsibilities, paid semi-monthly. | |
Annual incentive bonus | Rewards achievement of annual goals that support short-term (annual) business objectives, paid in cash after the relevant fiscal year. | |
Equity compensation | Fosters a culture of ownership, aligns compensation with stockholder interests, and promotes long-term retention with the Company. Consists primarily of the following equity-based awards. | |
• Stock options | Provides compensation tied to the price of our Common Stock. The awards generally vest in increments of 25% on each of the first four anniversaries of the grant date and have no value if our Common Stock price is below the exercise price. | |
• Restricted stock | Provides compensation tied to the price of our Common Stock. Supports an ownership mentality, encouraging our executives to act in a manner consistent with the long-term interests of the Company and its stockholders. Restricted stock grants vest over time. | |
Benefits | Standard employee benefits, such as health, dental, vision, disability, and life insurance. | |
Retirement Benefits | Standard employee 401(k) plan. The Company matches 50% of the first 4% of contributions. The Company suspended the matching contribution in February 2009 and reinstated it on January 1, 2010. | |
Perquisites | None |
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Ending 2009 | 2010 | Percentage (%) Increase | ||||||||||||
Name | Position | Salary | Salary | (Decrease) | ||||||||||
Frank C. Condella Jr. | Interim CEO | $ | 375,000 | $ | 375,000 | None | ||||||||
Robert S. Mills | President & Chief Operating Officer | $ | 390,000 | $ | 350,000 | (10 | %) | |||||||
Lawrence Gyenes | Senior Vice President, Chief Financial Officer & Treasurer | $ | 325,000 | $ | 325,000 | None | ||||||||
Michael McGrane | Senior Vice President, General Counsel & Secretary | $ | 295,700 | $ | 300,000 | 1.5 | % |
• | The extent to which corporate goals are achieved or exceeded; | |
• | The overall success of the Company throughout the year as determined by factors such as progress in key programs, execution of the strategic plan, and share price; and | |
• | Positive or negative events occurring throughout the year unrelated to pre-established corporate goals. |
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Company Goal | Weight | Results | Achievement | |||||||
Achieve 2009 targeted revenue and earnings before interest, taxes, depreciation, amortization, and stock compensation expense. | 30 | % | Goal partially met by earnings before interest, taxes, depreciation, amortization, and stock compensation expense | 20 | % | |||||
Complete enrollment in the PREGNANT Study by December 31, 2009. | 30 | % | Goal not met | 0 | % | |||||
Ensure Company’s capital structure is sufficient for ongoing activities. | 20 | % | Goal partially met through financing activities | 5 | % | |||||
Advance business development initiatives. | 10 | % | Goal met | 10 | % | |||||
Strengthen Financial Operations and Investor Relations function. | 10 | % | Goal met | 10 | % | |||||
Total | 100 | % | 45 | % |
Company | Individual | |||||||||||||||||
2009 Target | Performance | Performance | ||||||||||||||||
Name | Position | Bonus | Factor | Factor | 2009 Bonus | |||||||||||||
Robert S. Mills | President & Chief Operating Officer | $ | 195,000 | 45 | % | 90 | % | $ | 78,000 | |||||||||
Lawrence Gyenes | Senior Vice President, Chief Financial Officer & Treasurer | $ | 130,000 | 45 | % | 140 | % | $35,7501 | ||||||||||
Michael McGrane | Senior Vice President, General Counsel & Secretary | $ | 118,280 | 45 | % | 100 | % | $ | 53,226 |
1 | Mr. Gyenes’ 2009 bonus was prorated from his July 15, 2009 employment date. |
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Edward A. Blechschmidt
James S. Crofton
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Change in | ||||||||||||||||||||||||||||||||||||
Pension Value | ||||||||||||||||||||||||||||||||||||
and | ||||||||||||||||||||||||||||||||||||
Non-Equity | Nonqualified | |||||||||||||||||||||||||||||||||||
Incentive | Deferred | |||||||||||||||||||||||||||||||||||
Plan | Compen- | All other | ||||||||||||||||||||||||||||||||||
Stock | Option | Compen- | sation | compen- | ||||||||||||||||||||||||||||||||
Year | Salary | Awards1 | Awards2 | sation3 | Bonus4 | Earnings5 | sation6 | Total | ||||||||||||||||||||||||||||
Frank C. Condella Jr.,6 | 2009 | $ | 17,067 | $ | — | $ | 61,425 | $ | — | $ | — | $ | — | $ | 1,092 | $ | 79,584 | |||||||||||||||||||
Interim Chief Executive Officer | ||||||||||||||||||||||||||||||||||||
Robert S. Mills, | 2009 | $ | 390,000 | $ | 31,920 | $ | 130,806 | $ | 78,000 | $ | — | $ | — | $ | 1,300 | $ | 632,026 | |||||||||||||||||||
President and Chief | 2008 | $ | 383,933 | $ | 55,920 | $ | 263,837 | $ | — | $ | — | $ | — | $ | 4,600 | $ | 708,290 | |||||||||||||||||||
Operating Officer | 2007 | $ | 351,332 | $ | 28,000 | $ | 281,220 | $ | 123,760 | $ | — | $ | — | $ | 4,500 | $ | 788,812 | |||||||||||||||||||
Lawrence A. Gyenes,7 | 2009 | $ | 150,208 | $ | — | $ | 102,584 | $ | 35,750 | $ | — | $ | — | $ | — | $ | 288,542 | |||||||||||||||||||
Senior Vice President, Chief Financial Officer, and Treasurer | ||||||||||||||||||||||||||||||||||||
James A. Meer,8 | 2009 | $ | 138,022 | $ | 23,275 | $ | 100,907 | $ | — | $ | — | $ | — | $ | 372,167 | $ | 634,371 | |||||||||||||||||||
Senior Vice President, | 2008 | $ | 272,500 | $ | 40,775 | $ | 181,090 | $ | — | $ | — | $ | — | $ | 4,600 | $ | 498,965 | |||||||||||||||||||
Chief Financial Officer, and Treasurer | 2007 | $ | 260,000 | $ | 19,600 | $ | 196,854 | $ | 70,000 | $ | — | $ | — | $ | 3,444 | $ | 549,898 | |||||||||||||||||||
Michael McGrane, | 2009 | $ | 295,700 | $ | 23,275 | $ | 100,907 | $ | 53,226 | $ | — | $ | — | $ | 986 | $ | 474,094 | |||||||||||||||||||
Senior Vice President, | 2008 | $ | 294,867 | $ | 40,775 | $ | 182,305 | $ | — | $ | — | $ | — | $ | 4,600 | $ | 522,547 | |||||||||||||||||||
General Counsel, and Secretary | 2007 | $ | 288,883 | $ | 22,400 | $ | 224,976 | $ | 76,000 | $ | — | $ | — | $ | 3,911 | $ | 616,170 |
1 | This column represents the grant date fair values for restricted stock granted in 2007, 2008 and 2009 to the named executive officers. The 2007 and 2008 stock award values were recalculated from amounts shown in prior annual reports to reflect their grant date fair values, as required by SEC rules effective for 2010. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. The Company estimates that no forfeitures will occur. During the year ended December 31 2009, 37,625 restricted shares were forfeited for executive officers. The grant date fair values have been determined based on the assumptions and methodologies set forth in the Company’s 2009 Annual Report on Form 10-K (Note 9, Share-Based Payments). These amounts reflect the Company’s accounting expense for these awards, and do not correspond to the actual value that will be recognized by the named executive officers. | |
2 | This column represents the grant date fair values of the stock options awarded in 2009, 2008 and 2007, respectively, The 2007 and 2008 option award values were recalculated from the amounts shown in prior annual reports to reflect the grant date fair value, as required by SEC rules effective for 2010. The grant date fair values have been determined based on the assumptions and methodologies set forth in the Company’s 2009 Annual Report (Note 9, Share-Based Payments). The Company estimates a 10% rate for forfeitures; during the year ended December 31 2009, 300,500 options were forfeited for executive officers. | |
3 | The Company does not pay a bonus separate from the awards under the Company’s Incentive Plan. | |
4 | The Company does not have a pension plan and does not offer nonqualified deferred compensation. | |
5 | This column represents the Company’s matching contributions to Messrs. Mills, McGrane and Meer’s 401(k) savings account of 50% of the first 4% of pay. Mr. Condella receives an addition payment of $2,000 per month in lieu of his receiving group medical, dental and vision benefits which are available to other executive employees. The Company does not provide any additional perquisites for our executive officers. The Company does not pay other compensation and does not offer other perquisites. Mr. Meer received a severance payment from the Company of $371,250, due to his resignation from the Company effective June 11, 2009. | |
6 | Mr. Condella joined the Company on December 15, 2009. | |
7 | Mr. Gyenes joined the Company on July 15, 2009. | |
8 | Mr. Meer left the Company on June 11, 2009 |
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All Other Stock | All Other Option | Exercise or | Grant Date | |||||||||||||||||||||||||||||
Estimated Possible Payouts Under | Awards: | Awards: Number | Base Price | Fair Value of | ||||||||||||||||||||||||||||
Non-Equity Incentive Plan | Number of | of Securities | of Option | Stock and | ||||||||||||||||||||||||||||
Awards1 | Shares of Stock | Underlying | Awards | Option | ||||||||||||||||||||||||||||
Name of Executive | Grant Date | Threshold | Target | Maximum | or Units (#) | Options (#) | ($/share)2 | Awards3 | ||||||||||||||||||||||||
Mr. Condella, | — | — | — | |||||||||||||||||||||||||||||
Interim Chief | — | 100,000 | 5 | $ | 0.87 | $ | 61,420 | |||||||||||||||||||||||||
Executive Officer6 | 12/11/2009 | |||||||||||||||||||||||||||||||
Mr. Mills, | — | $ | 195,000 | $ | 292,500 | |||||||||||||||||||||||||||
President & Chief | 3/11/2009 | 24,000 | 4 | $ | 31,920 | |||||||||||||||||||||||||||
Operating Officer | 3/11/2009 | 105,000 | 5 | $ | 1.33 | $ | 98,104 | |||||||||||||||||||||||||
3/3/2009 | 35,000 | 5 | $ | 1.33 | $ | 32,701 | ||||||||||||||||||||||||||
Mr. Meer, | — | $ | 96,250 | $ | 144,375 | |||||||||||||||||||||||||||
Senior Vice President | 3/11/2009 | 17,500 | 4 | $ | 23,275 | |||||||||||||||||||||||||||
& Chief Financial | 3/11/2009 | 108,000 | 5 | $ | 1.33 | $ | 100,907 | |||||||||||||||||||||||||
Officer | 3/11/2009 | |||||||||||||||||||||||||||||||
Mr. Gyenes, | — | $ | 130,000 | $ | 195,000 | |||||||||||||||||||||||||||
Senior Vice President | 7/15/2009 | 125,000 | 5 | $ | 1.17 | $ | 102,585 | |||||||||||||||||||||||||
& Chief Financial Officer | ||||||||||||||||||||||||||||||||
Mr. McGrane, | — | $ | 118,280 | $ | 177,420 | |||||||||||||||||||||||||||
Senior Vice President | 3/11/2009 | 17,500 | 4 | $ | 23,275 | |||||||||||||||||||||||||||
& General Counsel | 3/11/2009 | 81,000 | 5 | $ | 1.33 | $ | 75,680 | |||||||||||||||||||||||||
3/11/2009 | 27,000 | 5 | $ | 1.33 | $ | 25,227 |
1 | These columns show the range of possible payouts for 2009 under the Incentive Plan as described in the section titled “2009 Annual Cash Incentive Bonus” in the “Compensation Discussion and Analysis” section above. Messrs. Mills, Gyenes and McGrane received payouts for 2009 under the Incentive Plan. The actual payouts for these named executive officers are reported in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table” above. | |
2 | Exercise price is the closing price on the NASDAQ Global Market on the date of grant. | |
3 | These amounts represent the grant date fair value of awards for fiscal years 2009, 2008 and 2007, computed in accordance with the Financial Accounting Standards Board Accounting Standards Codification Topic 718. See Note 8 to the consolidated financial statements in our Form 10-K for the fiscal year ended December 31, 2009 regarding assumptions underlying the valuation of equity awards. To see the value actually received by the named executive officers in fiscal year 2009, see the Option Exercises and Stock Vested in 2009 table. | |
4 | Represents restricted stock awards granted under the 2008 Plan, of which 25% vests on each of the first, second, third, and fourth anniversaries of the grant date. The shares are held by the Company in escrow until vested. The shares may not be sold, transferred, assigned, hypothecated, pledged, encumbered or otherwise disposed of, whether voluntarily or by operation of law, at any time before they vest. The shares vest immediately if the grantee dies or there is a change in control of the Company, and are canceled upon any other termination of service by the grantee to the Company. The grantee is responsible for any income or other taxes due with respect to the shares, including on account of the vesting of the shares. The grantee may elect to have shares withheld by the Company upon vesting for taxes. | |
5 | Represents stock option awards granted under the 2008 Plan that have a seven year term, of which 25% vests on each of the first, second, third, and fourth anniversaries of the grant date. | |
6 | Pursuant to his employment agreement, Mr. Condella does not participate in the Company’s Incentive Plan. |
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Stock Awards2 | ||||||||||||||||||||||||||||||||||||||||
Equity | Equity | |||||||||||||||||||||||||||||||||||||||
Incentive | Incentive | |||||||||||||||||||||||||||||||||||||||
Plan | Plan Awards: | |||||||||||||||||||||||||||||||||||||||
Option Awards1 | Market | Awards: | Market or | |||||||||||||||||||||||||||||||||||||
Number of | Number of | Number of | Value of | Number of | Payout Value | |||||||||||||||||||||||||||||||||||
Securities | Securities | Shares or | Shares or | Unearned | of Unearned | |||||||||||||||||||||||||||||||||||
Underlying | Underlying | Units of | Units of | Shares or | Shares or | |||||||||||||||||||||||||||||||||||
Unexercised | Unexercised | Option | Option | Stock | Stock That | Stock That | Units That | Units That | ||||||||||||||||||||||||||||||||
Option | Options | Options | Exercise | Expiration | Award | Have Not | Have Not | Have Not | Have Not | |||||||||||||||||||||||||||||||
Name of Executive | Grant Date | Exercisable | Un-Exercisable | Price | Date | Grant Date | Vested | Vested | Vested | Vested | ||||||||||||||||||||||||||||||
Mr. Condella | 12/11/2009 | 100,000 | $ | 0.87 | 12/11/2016 | |||||||||||||||||||||||||||||||||||
Interim CEO | ||||||||||||||||||||||||||||||||||||||||
Mr. Mills | 5/30/2001 | 50,000 | — | $ | 5.90 | 5/30/2011 | ||||||||||||||||||||||||||||||||||
President & Chief | 10/18/2001 | 18,750 | — | $ | 4.14 | 10/18/2011 | ||||||||||||||||||||||||||||||||||
Operating Officer | 1/18/2002 | 18,750 | — | $ | 3.68 | 1/18/2012 | ||||||||||||||||||||||||||||||||||
3/14/2003 | 39,375 | — | $ | 2.98 | 3/14/2013 | |||||||||||||||||||||||||||||||||||
10/28/2003 | 30,000 | — | $ | 10.68 | 10/28/2013 | |||||||||||||||||||||||||||||||||||
5/12/2004 | 60,000 | — | $ | 4.05 | 5/12/2014 | |||||||||||||||||||||||||||||||||||
2/25/2005 | 206,350 | — | $ | 2.05 | 2/25/2015 | |||||||||||||||||||||||||||||||||||
5/17/2005 | 65,000 | — | $ | 2.75 | 5/17/2012 | |||||||||||||||||||||||||||||||||||
5/15/2006 | 25,000 | $ | 2,700 | |||||||||||||||||||||||||||||||||||||
5/15/2006 | 37,500 | 12,500 | $ | 4.34 | 5/15/2013 | |||||||||||||||||||||||||||||||||||
2/28/2007 | 10,000 | $ | 10,800 | |||||||||||||||||||||||||||||||||||||
2/28/2007 | 225,000 | 75,000 | $ | 1.42 | 2/28/2014 | |||||||||||||||||||||||||||||||||||
3/3/2008 | 32,500 | 97,500 | $ | 2.40 | 3/3/2015 | |||||||||||||||||||||||||||||||||||
3/3/2008 | 11,250 | 33,750 | $ | 3.00 | 3/3/2015 | |||||||||||||||||||||||||||||||||||
3/11/2009 | 140,000 | $ | 1.33 | 3/11/2016 | ||||||||||||||||||||||||||||||||||||
3/11/2009 | 24,000 | $ | 25,920 | |||||||||||||||||||||||||||||||||||||
Mr. Gyenes | 7/15/2009 | 125,000 | $ | 1.17 | 7/15/2016 | |||||||||||||||||||||||||||||||||||
Senior Vice President & Chief Financial Officer | ||||||||||||||||||||||||||||||||||||||||
Mr. McGrane | 1/2/2002 | 125,000 | $ | 3.44 | 1/2/2012 | |||||||||||||||||||||||||||||||||||
Senior Vice President | 1/2/2002 | 50,000 | $ | 5.94 | 1/2/2012 | |||||||||||||||||||||||||||||||||||
& General Counsel | 3/14/2003 | 43,875 | $ | 2.98 | 3/14/2013 | |||||||||||||||||||||||||||||||||||
5/12/2004 | 50,000 | $ | 4.05 | 5/12/2014 | ||||||||||||||||||||||||||||||||||||
2/25/2005 | 12,435 | $ | 2.05 | 2/25/2015 | ||||||||||||||||||||||||||||||||||||
5/17/2005 | 55,000 | $ | 2.75 | 5/17/2012 | ||||||||||||||||||||||||||||||||||||
5/15/2006 | 1,719 | $ | 1,857 | |||||||||||||||||||||||||||||||||||||
5/15/2006 | 20,625 | 6,875 | $ | 4.34 | 5/15/2013 | |||||||||||||||||||||||||||||||||||
2/28/2007 | 8,000 | $ | 8,640 | |||||||||||||||||||||||||||||||||||||
2/28/2007 | 180,000 | 60,000 | $ | 1.42 | 2/28/2014 | |||||||||||||||||||||||||||||||||||
3/3/2008 | 26,000 | 78,000 | $ | 2.40 | 3/3/2015 | |||||||||||||||||||||||||||||||||||
3/3/2008 | 4,000 | 12,000 | $ | 3.00 | 3/3/2015 | |||||||||||||||||||||||||||||||||||
3/3/2008 | 13,125 | $ | 14,175 | |||||||||||||||||||||||||||||||||||||
3/11/2009 | 108,000 | $ | 1.33 | 3/11/2016 | ||||||||||||||||||||||||||||||||||||
3/11/2009 | 17,500 | $ | 18,900 |
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Grant Date | Vesting Schedule | |
05/30/2001 | 25% vested on each of the first, second, third, and fourth anniversaries from date of grant. | |
10/18/2001 | 25% vested on each of the first, second, third, and fourth anniversaries from date of grant. | |
01/02/2002 | 25% vested on each of the first, second, third, and fourth anniversaries from date of grant. | |
01/02/2002 | 25% vested on each of the first, second, third, and fourth anniversaries from date of grant. | |
01/18/2002 | 25% vested on each of the first, second, third, and fourth anniversaries from date of grant. | |
03/14/2003 | 50% vested on each of the first and second anniversaries from date of grant. | |
10/28/2003 | 25% vested on each of the first, second, third, and fourth anniversaries from date of grant. | |
05/12/2004 | 25%vested on each of the first, second, third, and fourth anniversaries from date of grant. | |
02/25/2005 | 100% vested on the date of grant, except in the case of Mr. Mills for whom 43,750 options vested on each of the first, second, third, and fourth anniversaries from date of grant for 175,000 shares. | |
05/17/2005 | 25% vested on each of the first, second, third, and fourth anniversaries from date of grant. | |
05/15/2006 | 25% vests on each of the first, second, third, and fourth anniversaries from date of grant. | |
02/28/2007 | 25% vested at date of grant and 25% vests on each of the first, second, and third anniversaries from date of grant. | |
03/03/2008 | 25% vests on each of the first, second, third, and fourth anniversaries from date of grant. | |
03/11/2009 | 25% vests on each of the first, second, third, and fourth anniversaries from date of grant. | |
07/15/2009 | 25% vests on each of the first, second, third, and fourth anniversaries from date of grant. | |
12/11/2009 | 100% vests on the first anniversary of the grant date; provided, however, that if a significant corporate transaction is consummated prior to the first anniversary, 50% of such options shall vest on the date such significant corporate transaction is consummated. The determination of whether a significant corporate transaction has been consummated shall be made by the Board in a timely fashion and upon a written request by the executive to the Company’s Chairman of the Board of Directors. |
Grant Date | Vesting Schedule | |
05/15/2006 | 25% vests on each of the first, second, third, and fourth anniversaries from date of grant. | |
02/28/2007 | 25% vests on each of the first , second, third, and fourth anniversaries from date of grant. | |
03/03/2008 | 25% vests on each of the first, second, third, and fourth anniversaries from date of grant. | |
03/11/2009 | 25% vests on each of the first, second, third, and fourth anniversaries from date of grant. |
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Option Awards | Stock Awards | |||||||||||||||
Number of Shares | Number of Shares | |||||||||||||||
Acquired on | Value Realized On | Acquired on | Value Realized on | |||||||||||||
Name | Exercise (#) | Exercise ($) | Vesting (#) | Vesting ($) | ||||||||||||
Frank C. Condella Jr. | 36,000 | (1) | $ | 46,440 | ||||||||||||
— | — | 12,000 | (2) | $ | 12,960 | |||||||||||
Robert S. Mills | 2,500 | (3) | $ | 3,750 | ||||||||||||
5,000 | (4) | $ | 6,850 | |||||||||||||
— | — | 6,000 | (5) | $ | 9,180 | |||||||||||
Lawrence Gyenes | — | — | — | — | ||||||||||||
James A. Meer | 3,500 | (4) | $ | 4,795 | ||||||||||||
— | — | 4,375 | (5) | $ | 6,694 | |||||||||||
Michael McGrane | 1,719 | (3) | $ | 2,579 | ||||||||||||
4,000 | (4) | $ | 5,480 | |||||||||||||
— | — | 4,375 | (5) | $ | 6,694 |
(1) | 36,000 shares of Common Stock vested on September 30, 2009, with a closing market price of $1.29. | |
(2) | 12,000 shares of Common Stock vested on December 31, 2009, with a closing market price of $1.08. | |
(3) | 2,500 and 1,719 shares of Common Stock vested for Mr. Mills and Mr. McGrane, respectively, on May 15, 2009, with a closing market price of $1.50 per share. | |
(4) | 5,000, 3,500, and 4,000 shares of Common Stock vested for Mr. Mills, Mr. Meer and Mr. McGrane, respectively, on February 28, 2009 with a closing market price of $1.37 per share. | |
(5) | 6,000, 4,375, and 4,375 shares of Common Stock vested for Mr. Mills, Mr. Meer and Mr. McGrane, respectively, on March 3, 2009, with a closing market price of $1.53 per share. |
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Severance Payment | Base salary plus the greater of such person’s cash bonus paid in the preceding year or his target bonus. | |
Benefits | (i) For a period of twelve months following the termination date, continuation of medical, dental and vision coverage in effect on the termination date and (ii) payment for accrued and unused vacation days. | |
Salary | Base salary through the date of termination. | |
Expenses | Reimbursement for any previously unreimbursed business expenses. |
Severance Payment | Base salary plus the greater of such person’s cash bonus paid in the preceding year or his target bonus. | |
Benefits | (i) A lump sum payment equal to the value of the fringe benefits provided to him for the year prior to the change in control and (ii) payment for accrued and unused vacation days. | |
Options | Full vesting of outstanding options. | |
Restricted Stock | Full vesting of all outstanding restricted stock grants. | |
Salary | Base salary through the date of termination. | |
Expenses | Reimbursement for any previously unreimbursed business expenses. |
1 | The executive employment agreements define “cause” as (i) the failure or refusal to perform, in any material respect, duties faithfully and diligently; (ii) gross negligence, recklessness or malfeasance; (iii) any criminal act; (iv) any act of fraud or other material misconduct resulting or intending to result directly or indirectly in gain or personal enrichment at the expense of Company; (v) any conduct relating to the business of Company that could reasonably be expected to have a materially detrimental effect on the business or financial condition of the Company; (vi) misconduct which materially discredits or damages Company, or violates Company’s policies or procedures, after Company has notified the executive of the actions Company deems to constitute non-compliance; and (vii) a material breach of obligations relating to confidential information, non-solicitation and non-competition.. | |
2 | The executive employment agreements define “good reason” as (i) a material diminution of responsibilities, or working conditions, or duties; (ii) a material diminution in base salary; (iii) a material negative change in the terms or status of an employment agreement; or (iv) an office relocation of more than 100 miles. | |
3 | The change-in-control provisions in the employment agreements for Messrs Mills and McGrane require the Company to pay them an excise tax gross up payment if an excise tax is imposed following a change-in-control. Mr. Gyenes’ employment agreement does not contain a similar provision. The Company currently estimates that no excise tax would be due. The executive employment agreements define “change in control” as a consolidation or merger of Company in which Company is not the continuing or surviving entity or pursuant to which shares of Company’s common stock would be converted to cash, securities or other property, other than a merger of Company in which the holders of Company’s common stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving entity immediately after the merger, or (ii) a sale, lease, exchange or transfer of all, or substantially all, of the assets of the company; (b) a stockholder approval of a plan or proposal for the liquidation or dissolution of the Company; (c) a person shall become a beneficial owner of 40% or more of Company’s outstanding common stock; or (d) during any period of two consecutive years, individuals who at the beginning of such period constitute the entire Board shall cease for any reason to constitute a majority thereof unless the election, or the nomination for election by Company’s stockholders, of each new director was approved by a vote of at least 50% of the directors eligible to vote who were directors at the beginning of the period. |
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Acceleration and | ||||||||||||||||||||||||
Continuation of | ||||||||||||||||||||||||
Equity Awards | ||||||||||||||||||||||||
Continuation of | (unamortized | |||||||||||||||||||||||
Cash | Medical/Welfare | expense as of | Excise | Total | ||||||||||||||||||||
Severance | Vacation | Benefits | December 31, | Tax | Termination | |||||||||||||||||||
Payment1 | Pay2 | (present value) | 2009)5,6 | Gross-up | Benefits | |||||||||||||||||||
Mr. Mills | ||||||||||||||||||||||||
• Voluntary resignation by employee without good reason | N/A | $ | 30,000 | N/A | $ | 0 | N/A | $ | 30,000 | |||||||||||||||
• Termination by the Company without cause or resignation by employee with good reason | $ | 585,000 | $ | 30,000 | $ | 1,176 | (3) | $ | 0 | N/A | $ | 616,176 | ||||||||||||
• Termination by the Company without cause or resignation by employee for good reason after change in control (CIC) | $ | 585,000 | $ | 30,000 | $ | 5,330 | (4) | $ | 58,860 | 7 | $ | 679,190 | ||||||||||||
Mr. Gyenes | ||||||||||||||||||||||||
• Voluntary resignation by employee without good reason | N/A | $ | 25,000 | N/A | $ | 0 | N/A | $ | 25,000 | |||||||||||||||
• Termination by the Company without cause or resignation by employee with good reason | $ | 455,000 | $ | 25,000 | $ | 15,674 | (3) | $ | 0 | N/A | $ | 495,674 | ||||||||||||
• Termination by the Company without cause or resignation by employee for good reason after CIC | $ | 455,000 | $ | 25,000 | $ | 18,476 | (4) | $ | 0 | 7 | $ | 498,476 | ||||||||||||
Mr. McGrane | ||||||||||||||||||||||||
• Voluntary resignation by employee without good reason | N/A | $ | 22,746 | N/A | $ | 0 | N/A | $ | 22,746 | |||||||||||||||
• Termination by the Company without cause or resignation by employee with good reason | $ | 413,980 | $ | 22,746 | N/A | $ | 0 | N/A | $ | 436,726 | ||||||||||||||
• Termination by the Company without cause or resignation by employee for good reason after CIC | $ | 413,980 | $ | 22,746 | $ | 3,305 | (4) | $ | 43,572 | 7 | $ | 483,603 |
N/A — Not Applicable | ||
1 | Payment of the amount of base salary and the greater of preceding year or target bonus based on such person’s 2009 base salary and target bonus. | |
2 | Assumes no vacation taken in year of termination, and a termination date of December 31, 2009. Unused and accrued vacation benefits are paid in a lump sum. | |
3 | Represents Company paid costs in 2009 for medical, dental and vision insurance. This benefit is for twelve months. | |
4 | Represents Company paid costs in 2009 for life, medical, dental, vision, and short- and long-term disability insurance, and 401(k) match. This benefit is paid in a lump sum. | |
5 | All stock options vest upon a change-in-control pursuant to the terms of the 1996 Plan and the 2008 Plan. Represents the intrinsic value of both vested and unvested stock options on December 31, 2009, based on the difference between the closing market price of the Company’s Common Stock on December 31, 2009 ($1.08) and the applicable exercise price of all stock options. | |
6 | All restricted stock shares vest upon a change-in-control pursuant to the terms of the 1996 Plan and the 2008 Plan. Assumes the value of all vesting shares of restricted stock at $1.08 a share, the closing market price of the Company’s Common Stock on December 31, 2009. | |
7 | Mr. Mills’ and Mr. McGrane’s change-in-control employment agreements provide for the Company to pay them an excise tax gross up payment if an excise tax is imposed following a change-in-control. Mr. Gyenes’ employment agreement does not contain a similar provision. The Company currently estimates that no excise tax would be due. |
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Fees Earned and | Stock | Option | ||||||||||||||
Name of Director | Paid in Cash1 | Awards2 | Awards3 | Total ($) | ||||||||||||
Stephen Kasnet | $ | 67,500 | $ | 25,000 | — | $ | 92,500 | |||||||||
Edward Blechschmidt | $ | 52,000 | $ | 25,000 | — | $ | 77,000 | |||||||||
Denis O’Donnell4 | $ | 16,417 | — | — | $ | 16,417 | ||||||||||
Valerie Andrews | $ | 45,000 | $ | 25,000 | — | $ | 70,000 | |||||||||
James Crofton | $ | 52,500 | $ | 25,000 | — | $ | 77,500 | |||||||||
Selwyn Oskowitz | $ | 38,583 | $ | 25,000 | — | $ | 63,583 | |||||||||
Anthony Campbell | $ | 44,917 | $ | 25,000 | $ | 16,984 | $ | 86,901 | ||||||||
Frank C. Condella, Jr.5 | $ | 32,833 | $ | 107,599 | — | $ | 140,432 |
1 | This column reports the amount of cash compensation earned in 2009 for Board and Committee service. The Company currently provides to the non-employee directors reimbursement for expenses and the following compensation. The Board has reduced retainers paid in calendar year 2010 by 20%. |
Annual Retainer, Chairman | $ | 45,000 | ||
Annual Retainer, Vice Chairman | $ | 30,000 | ||
Annual Director Retainer (except Chairman and Vice Chairman) | $ | 20,000 | ||
Annual Committee Retainer (except Audit Committee) | $ | 1,000 | ||
Annual Committee Retainer (Audit Committee) | $ | 2,000 | ||
Additional Annual Retainer: Committee Chair (except Audit and Compensation Committees) | $ | 1,000 | ||
Additional Annual Retainer: Audit Committee Chair | $ | 15,000 | ||
Additional Annual Retainer: Compensation Committee Chair | $ | 6,000 | ||
Meeting Attendance Fees (per day) | $ | 1,500 | (in person) | |
$ | 500 | (by telephone) | ||
Value of restricted stock granted upon election at annual meeting consists of a grant of the number of shares of restricted stock under the Company’s Long-term Performance Plans determined by dividing $25,000 by the fair market value of the Company’s Common Stock on the NASDAQ Global Market on the date of grant. | $ | 25,000 |
2 | This column represents the aggregate grant date fair value of awards of restricted stock granted during the 2009 fiscal year, computed in accordance with ASC 718. The aggregate grant date fair value for the restricted stock awards to each director upon his or her reelection to the Board at the 2009 Annual Meeting of Stockholders was $25,000. (See note 6 below for additional awards to Mr.Condella). Each director had an aggregate of 8,620 shares of unvested restricted Common Stock outstanding at 2009 fiscal year end. | |
3 | This column represents the aggregate grant date fair value of option awards made to during the 2009 fiscal year, computed in accordance with ASC 718. Mr. Campbellwas granted 25,000 stock options in 2009. | |
4 | Dr. Denis O’Donnell did not seek reelection to the Board at the 2009 Annual Meeting of Stockholders. | |
5 | The Board elected Frank C. Condella, Jr., as a director of the Company on March 10, 2009. Compensation in this table does not reflect compensation paid to him beginning December 15, 2009, as Interim Chief Executive Officer, which is reflected in the Summary Compensation Table. | |
6 | In addition to Mr. Condella’s restricted stock award described in Note 2 above, he received the following restricted stock awards in 2009 (i) 16,556 shares on March 10, 2009, valued at $25,000, upon his initial election to the Board, and (ii) 12,000 shares on July 20, 2009, valued at $13,320; 12,000 shares on August 3, 2009, valued at $14,040; 12,000 shares on September 1, 2009, |
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valued at $14,760; and 12,000 shares on October 1, 2009, valued at $15,480; each pursuant to his consulting agreement dated July 18, 2009, relating to partnering activities for the Company’s progesterone products. |
Number of Shares | ||||
Underlying | ||||
Name | Options | |||
Valerie Andrews | 12,000 | |||
Edward Blechschmidt | 15,000 | |||
James Crofton | 12,000 | |||
Stephen Kasnet | 12,000 | |||
Selwyn Oskowitz | 83,000 | |||
Anthony Campbell | 25,000 |
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Common Stock | ||||||||
Number of Shares | ||||||||
Name and Address of | Beneficially | Percentage | ||||||
Beneficial Owner | Owned (1) | of Total (2) | ||||||
David M. Knott/Dorset Management | 6,107,803 | 8.9 | % | |||||
Corporation (3) 485 Underhill Boulevard, Suite 205 Syosset, New York 11791 | ||||||||
John P. Curran (4) | 6,600,272 | 9.99 | % | |||||
230 Park Avenue New York, New York 10017 | ||||||||
Goldman Capital Management, Inc. (5) | 4,585,350 | 7.0 | % | |||||
320 Park Avenue New York, New York 10022 | ||||||||
Perry Corp. and Richard C. Perry (6) | 4,457,142 | 6.8 | % | |||||
767 Fifth Avenue, 19th Floor New York, NY 10153 | ||||||||
Directors and Named Executive Officers: | ||||||||
Valerie L. Andrews (7)(8) | 48,981 | * | ||||||
Edward A. Blechschmidt (7)(8) | 84,731 | * | ||||||
Anthony R. Campbell (8)(9) | 6,381,642 | 9.3 | % | |||||
Frank C. Condella, Jr. | 162,764 | * | ||||||
James S. Crofton (7)(8) | 48,981 | * | ||||||
Lawrence A. Gyenes | 50,000 | * | ||||||
Stephen G. Kasnet (7)(8) | 136,981 | * | ||||||
Michael McGrane (7)(8) | 754,259 | 1.1 | % | |||||
Robert S. Mills (7)(8) | 1,079,474 | 1.6 | % | |||||
Selwyn P. Oskowitz, M.D. (7)(8) | 123,681 | * | ||||||
All Directors and Executive Officers as a Group (10 persons)(7) (8) (9) | 8,871,494 | 13.2 | % |
* | Signifies less than 1% |
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(1) | Includes shares that may be acquired through the conversion of shares of convertible preferred stock or convertible debt or the exercise of warrants, stock options, or other rights, in each case, that are convertible or exercisable on or before June 26, 2010. | |
(2) | Based on 65,605,886 shares outstanding at April 27, 2010. In calculating the percentage of ownership, all shares of Common Stock of which the identified person or group has the right to acquire beneficial ownership on or before June 26, 2010 are deemed to be outstanding for the purpose of computing the percentage of the shares of Common Stock owned by that person or group. These shares are not, however, deemed to be outstanding for the purpose of computing the percentage of the shares of Common Stock owned by any other person or group. | |
(3) | Based on Schedule 13D/A, filed on March 18, 2010 with the SEC by Dorset Management Corporation and David M. Knott in which (a) Dorset Management Corporation reported beneficial ownership of 6,012,473 shares of Common Stock, which includes 2,152,381 shares of Common Stock issuable upon the conversion of the Notes and the conversion of shares of Series E Preferred Stock, and 657,002 shares of Common Stock that are issuable upon the exercise of warrants or options to purchase shares of Common Stock, and (b) David M. Knott reported beneficial ownership of the shares reported as beneficially owned by Dorset Management Corporation plus 95,330 additional shares of Common Stock. | |
(4) | Based on Schedule 13G/A filed on April 27, 2010 with the SEC by John P. Curran, which reported beneficial ownership of 6,600,272 shares of Common Stock. The Schedule 13G reported that Mr. Curran does not have sole voting and dispositive power over any shares of Columbia’s Common Stock and has shared voting and dispositive power over 6,600,272 of Columbia’s Common Stock. Mr. Curran disclaimed beneficial ownership in the securities reported in the Schedule 13G/A except to the extent of his pecuniary interest therein. | |
(5) | Based on a telephone conversation on March 17, 2010, between Frank C. Condella, Jr., Interim Chief Executive Officer of the Company, and Neil Goldman, President of Goldman Capital Management, Inc., in which Mr. Goldman reported beneficial ownership of 4,585,350 shares of Common Stock. | |
(6) | Based on a Schedule 13D filed on March 12, 2010 with the SEC by Perry Corp. and Richard C. Perry, which reported beneficial ownership of 4,457,142 shares of Common Stock issuable upon conversion of Notes or exercise of warrants to purchase Common Stock. | |
(7) | Includes shares which may be acquired upon the exercise of options exercisable within 60 days after April 27, 2010, as follows: Ms. Andrews, 12,000 shares; Mr. Blechschmidt, 15,000 shares; Mr. Campbell, 25,000 shares; Mr. Crofton, 12,000 shares; Mr. Kasnet, 12,000 shares; Mr. McGrane, 663,810 shares; Mr. Mills, 977,674 shares; and, Dr. Oskowitz, 83,000 shares. | |
(8) | Includes restricted shares that were unvested on April 27, 2010, as follows: Ms. Andrews, 19,230 shares; Mr. Blechschmidt, 19,230 shares; Mr. Campbell, 19,230 shares; Mr. Condella, 19,230 shares; Mr. Crofton, 19,230 shares; Mr. Kasnet, 19,230 shares; Mr. McGrane, 25,875 shares; Mr. Mills, 35,000 shares; and, Dr. Oskowitz, 19,230 shares. | |
(9) | Includes direct ownership of 122,265 shares of Common Stock and indirect ownership of 126,574 shares of Common Stock (including 100,000 shares that have been pledged as security). Also includes beneficial ownership of the shares described in footnote 3 above reported as beneficially owned by Dorset Management Corporation and David M. Knott. |
Series E Preferred Stock | ||||||||
Number of Shares | Percentage | |||||||
Name and Address of Beneficial Owner | Beneficially Owned | of Total (1) | ||||||
Perry Corp. and Richard C. Perry (2) | 35,000 | 59.3 | % | |||||
767 Fifth Avenue, 19th Floor New York, NY 10153 |
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Series E Preferred Stock | ||||||||
Number of Shares | Percentage | |||||||
Name and Address of Beneficial Owner | Beneficially Owned | of Total (1) | ||||||
Knott Partners Offshore Master Fund, L.P. | 9,580 | 16.2 | % | |||||
485 Underhill Boulevard, Suite 205 Syosset, New York 11791 | ||||||||
Knott Partners, L.P. | 7,980 | 13.5 | % | |||||
485 Underhill Boulevard, Suite 205 Syosset, New York 11791 | ||||||||
Shoshone Partners, L.P. | 5,180 | 8.8 | % | |||||
485 Underhill Boulevard, Suite 205 Syosset, New York 11791 |
(1) | Based on 59,000 shares of Series E Preferred Stock outstanding at April 27, 2010. | |
(2) | Based on a Schedule 13D filed on March 12, 2010 with the SEC by Perry Corp. and Richard C. Perry, which reported beneficial ownership of 1,750,000 shares of Common Stock issuable upon conversion of Preferred Stock. |
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2009 | 2008 | |||||||
Audit Fees (1) | $ | 420,700 | $ | 348,000 | ||||
Audit-Related Fees (2) | 16,000 | 2,500 | ||||||
Tax Fees (3) | 53,500 | — | ||||||
All Other Fees | — | — | ||||||
Total | $ | 490,200 | 350,500 | |||||
(1) | Audit fees consisted of fees for audit work performed in the audit of financial statements, including the audit of our internal controls over financial reporting required by Section 404 of the Sarbanes-Oxley Act, as well as fees for quarterly reviews and registration statements. | |
(2) | Audit-related fees consisted principally of fees for consulting on financial accounting and reporting standards for certain transactions and related matters. | |
(3) | Tax fees consisted principally of fees for work performed with respect to tax compliance and tax planning. |
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Exhibit | ||
No | Description | |
3.1 | Restated Certificate of Incorporation of the Company, as amended (14) | |
3.2 | Amended and Restated By-laws of Company (3) | |
4.1 | Certificate of Designations, Preferences and Rights of Series C Convertible Preferred Stock of the Company, dated as of January 7, 1999 (3) | |
4.2 | Securities Purchase Agreement, dated as of January 7, 1999, between the Company and each of the purchasers named on the signature pages thereto (3) | |
4.3 | Securities Purchase Agreement, dated as of January 19, 1999, among the Company, David M. Knott and Knott Partners, L.P. (3) | |
4.4 | Form of Warrant to Purchase Common Stock (3) | |
4.5 | Warrant to Purchase Common Stock granted to James J. Apostolakis on September 23, 1999 (5) | |
4.6 | Certificate of Designations of Series E Convertible Preferred Stock, filed May 10, 2005 with the Delaware Secretary of State (13) | |
4.7 | Preferred Stock Purchase Agreement, dated as of May 10, 2005, among Columbia Laboratories, Inc., Perry Partners L.P. and Perry Partners International, Inc. (13) | |
4.8 | Securities Purchase Agreement, dated March 10, 2006, by and between Columbia Laboratories, Inc. and the Purchasers listed on Exhibit A thereto (15) | |
4.9* | Form of Restricted Stock Agreement (17) | |
4.10* | Form of Option Agreement (24) | |
4.11 | Securities Purchase Agreement, dated December 21, 2006, by and between Columbia Laboratories, Inc. and the Purchasers listed on Exhibit A thereto (19) | |
10.1 | 1996 Long-term Performance Plan, as amended, of the Company (2) | |
10.2 | Asset Purchase, License and Option Agreement between Bio-Mimetics, Inc. and Columbia Laboratories, Inc., dated November 22, 1989 (1) | |
10.4 | Settlement Agreement and Release dated as of March 16, 2000 between Columbia Laboratories (Bermuda) Ltd. and Lake Consumer Products, Inc. (5) | |
10.5 | License Agreement dated April 18, 2000, between the Company and Lil’ Drug Store Products, Inc. (6) | |
10.6 | Rights Agreement dated as of March 13, 2002, by and between Columbia Laboratories, Inc. and First Union National Bank, as Rights Agent (7) | |
10.7† | Semi-Exclusive Supply Agreement dated May 7, 2002 between the Company and Mipharm S.p.A. (8) |
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Exhibit | ||
No | Description | |
10.8† | Amended and Restated License and Supply Agreement dated June 4, 2002 between the Company and Ares Trading S.A.(8) | |
10.9† | Investment and Royalty Agreement dated March 5, 2003 between the Company and PharmaBio Development Inc. (9) | |
10.10† | License and Supply Agreement Dated May 27, 2003 between the Company and Mipharm S.p.A. (10) | |
10.11* | Form of Indemnification Agreement for Officers and Directors (11) | |
10.12† | Asset Purchase Agreement Dated June 29, 2004, between the Company and Lil’ Drug Store Products, Inc. (12) | |
10.13† | Supply Agreement dated June 29, 2004, between the Company and Lil’ Drug Store Products, Inc.(12) | |
10.14 | Letter Agreement Supplement to STRIANT Investment and Royalty Agreement dated April 14, 2006 (16) | |
10.15* | Separation Agreement by and between Columbia Laboratories, Inc. and David L. Weinberg effective as of December 12, 2006 (18) | |
10.16† | Agreement, dated December 21, 2006, by and among Ares Trading S.A., Serono, Inc., the Company and its wholly-owned subsidiary, Columbia Laboratories (Bermuda), Ltd (19) | |
10.17 | Amendment No. 1 to the Amended and Restated License and Supply Agreement, entered into December 21, 2006, by and between Ares Trading S.A and Columbia Laboratories (Bermuda), Ltd. (19) | |
10.18 | Description of the Registrant’s Compensation and Reimbursement Practices for Non-employee Directors. (20) | |
10.19 | Lease Agreement between Allwood Associates I and Columbia Laboratories, Inc., dated July 6, 2007 (20) | |
10.20† | License and Supply Agreement between Columbia Laboratories, Inc. and Ascend Therapeutics, Inc., dated September 27, 2007 (21) | |
10.21 | Supply Agreement between Columbia Laboratories (Bermuda) Limited and Fleet Laboratories Limited, dated July 12, 1996 (22) | |
10.22 | Packaging Agreement between Columbia Laboratories (Ireland) Ltd. and Maropack AG, dated October 28, 1993 (22) | |
10.23* | Columbia Laboratories, Inc., 2008 Long-Term Incentive Plan (23) | |
10.24* | Columbia Laboratories, Inc., Amended and Restated Incentive Plan (24) | |
10.25* | Form of Executive Change of Control Severance Agreement (24) | |
10.26 | Stock Purchase Agreement, by and between the Company and Numoda Corporation, dated January 6, 2009 (25) | |
10.27* | Amended and Restated Employment Agreement by and between Columbia Laboratories, Inc. and Robert S. Mills dated March 11, 2009 (24) | |
10.28* | Amended and Restated Employment Agreement by and between Columbia Laboratories, Inc. and Michael McGrane dated March 11, 2009 (29) | |
10.29* | Amended and Restated Employment Agreement by and between Columbia Laboratories, Inc. and James A Meer dated March 11, 2009 (26) | |
10.30* | Separation and Release Agreement by and between Columbia Laboratories, Inc. and James A. Meer effective as of May 18, 2009 (26) | |
10.31* | Employment Agreement by and between Columbia Laboratories, Inc. and Lawrence Gyenes dated July 15, 2009 (27). |
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Exhibit | ||
No | Description | |
10.32 | Second Amendment to Investment and Royalty Agreement, by and between the Company and PharmaBio Development, Inc., July 22, 2009 (28) | |
10.33 | Placement Agent Agreement, by and among the Company, Oppenheimer & Co., Inc. and The Benchmark Company, LLC, dated October 22, 2009 (30) | |
10.34 | Form of Subscription Agreement (30) | |
10.35 | Form of Warrant to Purchase Common Stock (30) | |
10.36* | Columbia Laboratories Stock Ownership Guidelines for Officers and Directors (31) | |
10.37 | Manufacturing and Supply Agreement between Fleet Laboratories and Columbia Laboratories (Bermuda), Ltd., dated December 8, 2009 (32) | |
10.38* | Employment Agreement by and between Columbia Laboratories, Inc. and Frank C. Condella, Jr., dated December 11, 2009 (33) | |
10.39* | Addendum to Amended and Restated Employment Agreement by and between Columbia Laboratories, Inc. and Robert S. Mills dated December 11, 2009 (33) | |
10.40* | Addendum to Executive Change in Control Severance Agreement by and between Columbia Laboratories, Inc. and Robert S. Mills dated December 11, 2009 (33). | |
14 | Code of Ethics of the Company (11) | |
21 | Subsidiaries of the Company (34) | |
23.1 | Consent of BDO Seidman, LLP (35) | |
23.2 | Consent of McGladrey & Pullen, LLP (35) | |
31(i).1 | Certification of Chief Executive Officer of the Company (35) | |
31(i).2 | Certification of Chief Financial Officer of the Company (35) | |
32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (35) | |
32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (35) | |
† | Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC. | |
* | Management contract or compensatory plans or arrangements |
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1/ | Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 33-31962) declared effective on May 14, 1990 | |
2/ | Incorporated by reference to the Registrant’s Proxy Statement dated May 10, 2000 | |
3/ | Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1998 | |
4/ | Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1999 | |
5/ | Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1999 | |
6/ | Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2000 | |
7/ | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated March 12, 2002 | |
8/ | Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q dated August 14, 2002 | |
9/ | Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002 | |
10/ | Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q dated August 14, 2003 | |
11/ | Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003 | |
12/ | Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q dated August 4, 2004 | |
13/ | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated May 12, 2005 | |
14/ | Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005 | |
15/ | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated March 16, 2006 | |
16/ | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated April 17, 2006 | |
17/ | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated May 17, 2006 | |
18/ | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated December 15, 2006 | |
19/ | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated December 26, 2006 | |
20/ | Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q, dated August 8, 2007 | |
21/ | Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q, dated November 8, 2007 | |
22/ | Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007 | |
23/ | Incorporated by reference to the Registrant’s Proxy Statement dated April 8, 2008 | |
24/ | Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 | |
25/ | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated January 8, 2009 | |
26/ | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated May 12, 2009 | |
27/ | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated July 15, 2009 | |
28/ | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated July 24, 2009 | |
29/ | Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q dated August 6, 2009 | |
30/ | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated October 23, 2009 | |
31/ | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated November 17, 2009 |
76
Table of Contents
32/ | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated December 8, 2009 | |
33/ | Incorporated by reference to the Registrant’s Current Report Form 8-K, dated December 14, 2009 | |
34/ | Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2009 | |
35/ | Filed herewith |
77
Table of Contents
COLUMBIA LABORATORIES, INC. | ||||
Date: April 30, 2010 | By: | /s/ Mr. Lawrence A. Gyenes | ||
Lawrence A. Gyenes, Senior Vice President | ||||
/s/ Frank C. Condella, Jr. | Interim Chief Executive Officer (Principal Executive Officer) | April 30, 2010 | ||
/s/ Robert S. Mills | President and Chief Operating Officer | April 30, 2010 | ||
/s/ Mr. Lawrence A. Gyenes | Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) | April 30, 2010 | ||
/s/ Valerie L. Andrews | Director | April 30, 2010 | ||
Valerie L. Andrews | ||||
/s/ Edward A. Blechschmidt | Vice Chairman of the Board of Directors | April 30, 2010 | ||
/s/ Anthony R. Campbell | Director | April 30, 2010 | ||
Anthony R. Campbell | ||||
/s/ James S. Crofton | Director | April 30, 2010 | ||
James S. Crofton | ||||
/s/ Stephen G. Kasnet | Chairman of the Board of Directors | April 30, 2010 | ||
Stephen G. Kasnet | ||||
/s/ Selwyn P. Oskowitz | Director | April 30, 2010 | ||
Selwyn P. Oskowitz |
78
Table of Contents
INDEX TO FINANCIAL STATEMENTS
Page | ||
F-2— F-3 | ||
F-4 — F-5 | ||
F-6 | ||
F-7 | ||
F-8 | ||
F-9 — F-10 | ||
F-11 |
F-1
Table of Contents
Columbia Laboratories, Inc.
Livingston, NJ
BDO Seidman, LLP
Woodbridge, NJ
March 12, 2010
F-2
Table of Contents
Of Columbia Laboratories, Inc.
New York, New York
F-3
Table of Contents
2009 | 2008 | |||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents of which $12,225,732 and $12,099,318 is interest bearing | $ | 14,757,615 | $ | 12,497,382 | ||||
Accounts receivable, net of allowances for doubtful accounts of $100,000 and $100,000 | 4,262,851 | 3,562,277 | ||||||
Inventories | 2,532,722 | 2,377,139 | ||||||
Prepaid expenses and other current assets | 1,097,525 | 1,102,525 | ||||||
Total current assets | 22,650,713 | 19,539,323 | ||||||
PROPERTY AND EQUIPMENT | ||||||||
Machinery and equipment | 2,547,460 | 2,479,602 | ||||||
Computer software | 545,616 | 534,302 | ||||||
Office equipment and furniture and fixtures | 669,599 | 698,920 | ||||||
3,762,675 | 3,712,824 | |||||||
Less-accumulated depreciation and amortization | (3,071,196 | ) | (2,890,967 | ) | ||||
691,479 | 821,857 | |||||||
INTANGIBLE ASSETS — NET | 18,770,332 | 23,815,060 | ||||||
OTHER ASSETS | 1,644,695 | 1,446,249 | ||||||
TOTAL ASSETS | $ | 43,757,219 | $ | 45,622,489 | ||||
F-4
Table of Contents
2009 | 2008 | |||||||
CURRENT LIABILITIES: | ||||||||
Current portion of financing agreements | $ | 144,897 | $ | 168,034 | ||||
Accounts payable | 3,662,091 | 2,085,463 | ||||||
Accrued expenses | 4,588,088 | 4,980,643 | ||||||
Total current liabilities | 8,395,076 | 7,234,140 | ||||||
NOTES PAYABLE | 32,965,863 | 30,074,966 | ||||||
DEFERRED REVENUE | 328,367 | 305,433 | ||||||
LONG-TERM PORTION OF FINANCING AGREEMENTS | 15,234,406 | 13,126,210 | ||||||
TOTAL LIABILITIES | 56,923,712 | 50,740,749 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
Contingently redeemable series C preferred stock 600 and 775 shares issued and outstanding in 2009 and 2008, respectively (liquidation preference of $600,000 and $775,000) | 600,000 | 775,000 | ||||||
SHAREHOLDERS’ DEFICIENCY: | ||||||||
Preferred stock, $.01 par value; 1,000,000 shares authorized | ||||||||
Series B convertible preferred stock, 130 shares issued and outstanding (liquidation preference of $13,000) | 1 | 1 | ||||||
Series E convertible preferred stock 59,000 shares issued and outstanding (liquidation preference of $5,900,000) | 590 | 590 | ||||||
Common Stock $.01 par value; 100,000,000 shares authorized; 65,761,986 and 54,007,579 shares issued | 657,619 | 540,076 | ||||||
Capital in excess of par value | 242,637,646 | 228,686,942 | ||||||
Less cost of 131,935 and 63,644 treasury shares | (280,813 | ) | (189,229 | ) | ||||
Accumulated deficit | (256,979,263 | ) | (235,109,705 | ) | ||||
Accumulated other comprehensive income | 197,727 | 178,065 | ||||||
Shareholders’ deficiency | (13,766,493 | ) | (5,893,260 | ) | ||||
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIENCY | $ | 43,757,219 | $ | 45,622,489 | ||||
are an integral part of these statements
F-5
Table of Contents
2009 | 2008 | 2007 | ||||||||||
NET REVENUES | $ | 32,196,381 | $ | 36,229,114 | $ | 29,627,638 | ||||||
COST OF REVENUES | 9,194,538 | 10,934,615 | 9,014,540 | |||||||||
Gross profit | 23,001,843 | 25,294,499 | 20,613,098 | |||||||||
OPERATING EXPENSES: | ||||||||||||
Selling and distribution | 11,982,229 | 12,685,618 | 10,111,796 | |||||||||
General and administrative | 10,559,298 | 8,615,381 | 7,824,741 | |||||||||
Research and development | 8,579,035 | 6,206,157 | 5,778,641 | |||||||||
Amortization of licensing right | 5,044,728 | 5,044,728 | 5,005,768 | |||||||||
Total operating expenses | 36,165,290 | 32,551,884 | 28,720,946 | |||||||||
Loss from operations | (13,163,447 | ) | (7,257,385 | ) | (8,107,848 | ) | ||||||
OTHER INCOME (EXPENSE): | ||||||||||||
Interest income | 33,830 | 299,805 | 979,953 | |||||||||
Interest expense | (8,851,253 | ) | (7,882,183 | ) | (7,946,048 | ) | ||||||
Other, net | (243,720 | ) | (100,516 | ) | (5,440 | ) | ||||||
(9,061,143 | ) | (7,682,894 | ) | (6,971,535 | ) | |||||||
Net loss before taxes | (22,224,590 | ) | (14,940,279 | ) | (15,079,383 | ) | ||||||
State income tax benefits | 355,032 | 863,770 | 787,593 | |||||||||
Net loss | $ | (21,869,558 | ) | $ | (14,076,509 | ) | $ | (14,291,790 | ) | |||
LOSS PER COMMON SHARE — BASIC AND DILUTED | $ | (0.39 | ) | $ | (0.27 | ) | $ | (0.28 | ) | |||
WEIGHTED — AVERAGE NUMBER OF COMMON SHARES OUTSTANDING BASIC AND DILUTED | 56,358,843 | 52,439,327 | 51,124,266 | |||||||||
are an integral part of these statements.
F-6
Table of Contents
2009 | 2008 | 2007 | ||||||||||
NET LOSS | $ | (21,869,558 | ) | $ | (14,076,509 | ) | $ | (14,291,790 | ) | |||
Other comprehensive income (loss): | ||||||||||||
Foreign currency translation | 19,662 | (29,539 | ) | 8,560 | ||||||||
Comprehensive loss | $ | (21,849,896 | ) | $ | (14,106,048 | ) | $ | (14,283,230 | ) | |||
are an integral part of these statements.
F-7
Table of Contents
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIENCY)
FOR THE THREE YEARS ENDED DECEMBER 31, 2009
Series B Convertible | Series E Convertible | |||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Preferred Stock | Common Stock | Accumulated | |||||||||||||||||||||||||||||||||||||||||
Number | Number | Capital in | Other | |||||||||||||||||||||||||||||||||||||||||
of | of | Number of | Excess of | Treasury | Accumulated | Comprehensive | ||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Par Value | Stock | Deficit | Income (Loss) | Total | ||||||||||||||||||||||||||||||||||
Balance, December 31, 2006 | 130 | $ | 1 | 69,000 | $ | 690 | 49,694,213 | $ | 496,942 | $ | 218,687,977 | $ | (26,880 | ) | $ | (206,741,406 | ) | $ | 199,044 | $ | 12,616,368 | |||||||||||||||||||||||
Options exercised | 43,050 | 431 | 62,810 | 63,241 | ||||||||||||||||||||||||||||||||||||||||
Share based compensation expense | 155,690 | 1,557 | 1,646,365 | 1,647,922 | ||||||||||||||||||||||||||||||||||||||||
Conversion of Series C Preferred Stock | 1,564,548 | 15,645 | 2,059,355 | 2,075,000 | ||||||||||||||||||||||||||||||||||||||||
Conversion of Series E Preferred Stock | (5,453 | ) | (55 | ) | 272,650 | 2,727 | (2,672 | ) | — | |||||||||||||||||||||||||||||||||||
Purchase of treasury stock | (27,150 | ) | (27,150 | ) | ||||||||||||||||||||||||||||||||||||||||
Dividends on preferred stock | (76,894 | ) | (76,894 | ) | ||||||||||||||||||||||||||||||||||||||||
Translation adjustment | 8,560 | 8,560 | ||||||||||||||||||||||||||||||||||||||||||
Net loss | (14,291,790 | ) | (14,291,790 | ) | ||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2007 | 130 | $ | 1 | 63,547 | $ | 635 | 51,730,151 | $ | 517,302 | $ | 222,376,941 | $ | (54,030 | ) | $ | (221,033,196 | ) | $ | 207,604 | $ | 2,015,257 | |||||||||||||||||||||||
Issuance of common stock | 1,333,000 | 13,330 | 4,082,298 | 4,095,628 | ||||||||||||||||||||||||||||||||||||||||
Options exercised | 318,149 | 3,182 | 591,673 | 594,855 | ||||||||||||||||||||||||||||||||||||||||
Conversion of Series C Preferred Stock | 235,426 | 2,354 | 347,646 | 350,000 | ||||||||||||||||||||||||||||||||||||||||
Conversion of Series E Preferred Stock | (4,547 | ) | (45 | ) | 227,350 | 2,273 | (2,228 | ) | — | |||||||||||||||||||||||||||||||||||
Share based compensation expense | 163,503 | 1,635 | 1,345,756 | 1,347,391 | ||||||||||||||||||||||||||||||||||||||||
Purchase of treasury stock | (135,199 | ) | (135,199 | ) | ||||||||||||||||||||||||||||||||||||||||
Dividends on preferred stock | (55,144 | ) | (55,144 | ) | ||||||||||||||||||||||||||||||||||||||||
Translation adjustment | (29,539 | ) | (29,539 | ) | ||||||||||||||||||||||||||||||||||||||||
Net loss | (14,076,509 | ) | (14,076,509 | ) | ||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2008 | 130 | $ | 1 | 59,000 | $ | 590 | 54,007,579 | $ | 540,076 | $ | 228,686,942 | $ | (189,229 | ) | $ | (235,109,705 | ) | $ | 178,065 | $ | (5,893,260 | ) | ||||||||||||||||||||||
Issuance of common stock | 11,351,807 | 113,517 | 11,342,786 | 11,456,303 | ||||||||||||||||||||||||||||||||||||||||
Issuance of warrants | 719,904 | 719,904 | ||||||||||||||||||||||||||||||||||||||||||
Conversion of Series C Preferred Stock | 117,449 | 1,174 | 173,826 | 175,000 | ||||||||||||||||||||||||||||||||||||||||
Share based compensation expense | 285,151 | 2,852 | 1,746,376 | 1,749,228 | ||||||||||||||||||||||||||||||||||||||||
Purchase of treasury stock | (91,584 | ) | (91,584 | ) | ||||||||||||||||||||||||||||||||||||||||
Dividends on preferred stock | (32,188 | ) | (32,188 | ) | ||||||||||||||||||||||||||||||||||||||||
Translation adjustment | 19,662 | 19,662 | ||||||||||||||||||||||||||||||||||||||||||
Net loss | (21,869,558 | ) | (21,869,558 | ) | ||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2009 | 130 | $ | 1 | 59,000 | $ | 590 | 65,761,986 | $ | 657,619 | $ | 242,637,646 | $ | (280,813 | ) | $ | (256,979,263 | ) | $ | 197,727 | $ | (13,766,493 | ) | ||||||||||||||||||||||
F-8
Table of Contents
2009 | 2008 | 2007 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
Net loss | $ | (21,869,558 | ) | $ | (14,076,509 | ) | $ | (14,291,790 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities — | ||||||||||||
Depreciation and amortization | 5,737,242 | 5,510,802 | 5,462,888 | |||||||||
Amortization of beneficial conversion features | 1,658,981 | 1,466,591 | 1,265,496 | |||||||||
Amortization of warrants | 1,231,916 | 1,092,197 | 971,548 | |||||||||
Provision for doubtful accounts | — | 4,267 | 15,000 | |||||||||
Provision for sales returns | 1,226,357 | 1,399,991 | 992,502 | |||||||||
Write-down of inventories | 81,718 | 746,905 | 80,961 | |||||||||
Share based compensation | 1,749,228 | 1,347,391 | 1,647,922 | |||||||||
Non-cash interest expense on financing agreements | 2,085,059 | 1,702,842 | 1,381,407 | |||||||||
Recognition of deferred income (Ardana) | — | (2,891,188 | ) | — | ||||||||
Loss on disposal of fixed assets | — | 3,048 | — | |||||||||
Changes in assets and liabilities — | ||||||||||||
(Increase) decrease in: | ||||||||||||
Accounts receivable | (700,574 | ) | 244,449 | (1,520,937 | ) | |||||||
Inventories | (237,301 | ) | (76,915 | ) | (1,023,052 | ) | ||||||
Prepaid expenses and other current assets | 5,000 | 184,775 | (293,534 | ) | ||||||||
Other assets | 9,175 | 943 | (418,405 | ) | ||||||||
Increase (decrease) in: | ||||||||||||
Accounts payable | 1,576,628 | (130,480 | ) | (1,370,828 | ) | |||||||
Accrued expenses | (1,632,472 | ) | (1,281,338 | ) | (211,709 | ) | ||||||
Deferred revenue | 22,934 | (384,259 | ) | (601,768 | ) | |||||||
Net cash used in operating activities | (9,055,667 | ) | (5,136,488 | ) | (7,914,299 | ) | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
Purchase of property and equipment | (49,853 | ) | (375,926 | ) | (102,021 | ) | ||||||
Net cash used in investing activities | (49,853 | ) | (375,926 | ) | (102,021 | ) | ||||||
F-9
Table of Contents
2009 | 2008 | 2007 | ||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
Net proceeds from issuance of common stock | 11,456,303 | 4,095,628 | — | |||||||||
Proceeds from exercise of options | — | 594,855 | 63,241 | |||||||||
Payment for purchase of treasury stock | (91,584 | ) | (135,199 | ) | (27,150 | ) | ||||||
Payment pursuant to financing agreements | — | (3,540,949 | ) | — | ||||||||
Dividends paid | (32,188 | ) | (55,144 | ) | (76,894 | ) | ||||||
Net cash or provided by or (used in) financing activities | 11,332,531 | 959,191 | (40,803 | ) | ||||||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH | 33,222 | (171,206 | ) | 8,557 | ||||||||
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS | 2,260,233 | (4,724,429 | ) | (8,048,566 | ) | |||||||
CASH AND CASH EQUIVALENTS, | ||||||||||||
Beginning of year | 12,497,382 | 17,221,811 | 25,270,377 | |||||||||
CASH AND CASH EQUIVALENTS, | ||||||||||||
End of year | $ | 14,757,615 | $ | 12,497,382 | $ | 17,221,811 | ||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||||||
Interest paid | $ | 3,200,000 | $ | 3,200,000 | $ | 2,488,889 | ||||||
Taxes paid | $ | 52,000 | $ | 27,403 | $ | 34,759 | ||||||
Accrual of financing costs | $ | — | $ | — | $ | 25,000 | ||||||
Increase of US Crinone License Right cost | $ | — | $ | — | $ | 1,000,000 | ||||||
Conversion of Series C preference shares to common stock | $ | 175,000 | $ | 350,000 | $ | 2,075,000 | ||||||
Conversion of Series E preference shares to common stock | $ | — | $ | 454,700 | $ | 545,300 | ||||||
Issuance of Warrants for Option to Extend Pharmabio Debt | $ | 719,904 | $ | — | $ | — | ||||||
are an integral part of these statements
F-10
Table of Contents
F-11
Table of Contents
December 31, | ||||||||
2009 | 2008 | |||||||
Finished goods | $ | 1,343,742 | $ | 1,745,222 | ||||
Raw materials | 1,188,980 | 631,917 | ||||||
Total | $ | 2,532,722 | $ | 2,377,139 | ||||
Years | ||||
Software | 3 | |||
Machinery and equipment | 5-10 | |||
Furniture and fixtures | 5 |
F-12
Table of Contents
2009 | 2008 | |||||||
Balance at January 1 | $ | 34,000,000 | $ | 34,000,000 | ||||
Accumulated amortization | (15,229,668 | ) | (10,184,940 | ) | ||||
Balance at December 31 | $ | 18,770,332 | $ | 23,815,060 | ||||
Year | Amortization | |||
2010 | $ | 5,044,728 | ||
2011 | 5,044,728 | |||
2012 | 5,044,728 | |||
2013 | 3,636,148 | |||
Total | $ | 18,770,332 | ||
2009 | 2008 | |||||||
Sales returns & price adjustments | $ | 1,910,292 | $ | 2,789,316 | ||||
Salaries | 939,861 | 332,657 | ||||||
Interest | 800,000 | 800,000 | ||||||
Professional fees | 317,801 | 483,193 | ||||||
Inventory management fees | 265,012 | 359,376 | ||||||
Marketing expenses | 5,419 | 34,652 | ||||||
Royalties/Other | 349,703 | 181,449 | ||||||
Total | $ | 4,588,088 | $ | 4,980,643 | ||||
F-13
Table of Contents
2009 | 2008 | 2007 | ||||||||||
Balance at beginning of year | $ | 1,864,316 | $ | 1,923,765 | $ | 1,240,234 | ||||||
Addition related to Crinone® | — | — | 1,000,000 | |||||||||
Adjusted balance at beginning of year | 1,864,316 | 1,923,765 | 2,240,234 | |||||||||
Provision: | ||||||||||||
Related to current period sales | 671,259 | 674,020 | 527,819 | |||||||||
Related to prior period sales | 555,098 | 725,971 | 500,000 | |||||||||
1,226,357 | 1,399,991 | 1,027,819 | ||||||||||
Returns: | ||||||||||||
Related to current period sales | (28,092 | ) | (130,551 | ) | (61,125 | ) | ||||||
Related to 2006 Crinone® purchase | (31,793 | ) | (300,152 | ) | (328,896 | ) | ||||||
Related to prior period sales | (1,147,165 | ) | (1,028,737 | ) | (954,267 | ) | ||||||
(1,207,050 | ) | (1,459,440 | ) | (1,344,288 | ) | |||||||
Balance at end of period | $ | 1,883,623 | $ | 1,864,316 | $ | 1,923,765 | ||||||
F-14
Table of Contents
F-15
Table of Contents
F-16
Table of Contents
2009 | 2008 | 2007 | ||||||||||
Federal income tax rate | (34.0 | %) | (34.0 | %) | (35.0 | %) | ||||||
Statutory rate over expected future federal benefit | 0.0 | % | 0.0 | % | 1.0 | % | ||||||
Foreign income tax benefit/loss | (7.7 | %) | (18.2 | %) | (12.6 | %) | ||||||
State tax net of federal benefit | (5.2 | %) | (11.0 | %) | (9.9 | %) | ||||||
Permanent Items: | ||||||||||||
Incentive Stock Options | 1.7 | % | 1.0 | % | 0.0 | % | ||||||
R&D Credit | 0.0 | % | 0.0 | % | 0.0 | % | ||||||
Other | 0.1 | % | 1.0 | % | 1.6 | % | ||||||
Effect of permanent differences | 1.8 | % | 2.0 | % | 1.6 | % | ||||||
Effective income tax rate | (45.1 | %) | (61.2 | %) | (54.9 | %) | ||||||
Increase in valuation allowance | 43.5 | % | 55.4 | % | 49.7 | % | ||||||
Effective income tax rate | (1.6 | %) | (5.8 | %) | (5.2 | %) | ||||||
F-17
Table of Contents
Deferred Tax Assets (Liabilities) | 2009 | 2008 | ||||||
Share Based awards compensation | $ | 671,444 | $ | 533,937 | ||||
Allowance for doubtful accounts | 28,125 | 28,125 | ||||||
Allowance for returns | 706,359 | 591,241 | ||||||
Inventory reserve | 30,083 | 163 | ||||||
Book accumulated depreciation net of tax | (21,484 | ) | (19,096 | ) | ||||
Accum amortization — CRINONE license | 3,138,209 | 2,096,436 | ||||||
Vacation & bonus accrual | 24,652 | 15,000 | ||||||
Inventory capitalization | 40,253 | 25,604 | ||||||
Patents | 487,688 | 112,500 | ||||||
Long term debt (book amortization beneficial conversion) | (1,530,254 | ) | (2,152,372 | ) | ||||
Federal net operating loss | 55,055,721 | 50,962,090 | ||||||
State net operating loss | 2,948,608 | 2,573,071 | ||||||
Unused R&D credit | 1,383,187 | 1,323,385 | ||||||
Contributions | 488 | — | ||||||
Net Deferred Tax Assets | 62,963,079 | 56,090,084 | ||||||
Less Valuation Allowance: | ||||||||
Federal | (62,963,079 | ) | (56,090,084 | ) | ||||
Deferred Taxes Assets | $ | — | $ | — | ||||
F-18
Table of Contents
F-19
Table of Contents
December 31 | ||||||||
2009 | 2008 | |||||||
STRIANT Agreement | $ | 15,379,303 | $ | 13,294,244 | ||||
Less: current portion | 144,897 | 168,034 | ||||||
Total | $ | 15,234,406 | $ | 13,126,210 | ||||
F-20
Table of Contents
F-21
Table of Contents
Weighted Average | |||||||||
Exercise Price | Warrants | ||||||||
$ | 1.15 | 900,000 | |||||||
1.52 | 5,450,000 | ||||||||
5.39 | 1,857,041 | ||||||||
5.50 | 2,285,714 | ||||||||
5.85 | 100,000 | ||||||||
8.35 | 350,000 | ||||||||
$ | 3.24 | 10,942,755 | |||||||
F-22
Table of Contents
Twelve Months Ended | ||||||||||||
December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Employee stock-based compensation in: | ||||||||||||
Cost of revenue | $ | 73,630 | $ | 68,046 | $ | 148,589 | ||||||
Selling and distribution | 450,226 | 175,375 | 160,573 | |||||||||
General and administrative | 1,085,785 | 973,148 | 1,014,702 | |||||||||
Research and development | 139,587 | 98,002 | 166,195 | |||||||||
Total employee stock-based compensation in operating expenses | 1,675,598 | 1,246,525 | 1,341,470 | |||||||||
Total employee stock-based compensation | $ | 1,749,228 | $ | 1,314,571 | $ | 1,490,059 | ||||||
2009 | 2008 | 2007 | ||||||||||
Risk free interest rate | 1.71 | % | 2.25 | % | 4.53 | % | ||||||
Expected term | 4.2 years | 4.75 years | 4.52 years | |||||||||
Dividend yield | 0.0 | 0.0 | 0.0 | |||||||||
Expected volatility | 93.04 | % | 85.49 | % | 85.68 | % |
F-23
Table of Contents
2009 | 2008 | 2007 | ||||||||||||||||||||||
Weighted- | Weighted- | Weighted- | ||||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||
Exercise | Exercise | Exercise | ||||||||||||||||||||||
Price | Price | Shares | Price | |||||||||||||||||||||
Outstanding at beginning of year | 4,863,488 | $ | 3.47 | 4,936,335 | $ | 4.64 | 4,686,552 | $ | 8.57 | |||||||||||||||
Granted | 1,842,525 | 1.40 | 1,275,700 | 2.58 | 1,710,850 | 1.50 | ||||||||||||||||||
Exercised | — | — | (318,149 | ) | 1.87 | (43,050 | ) | 1.47 | ||||||||||||||||
Forfeited | (745,709 | ) | 4.05 | (1,030,398 | ) | 9.10 | (1,418,017 | ) | 12.84 | |||||||||||||||
Outstanding at end of year | 5,960,304 | 2.70 | 4,863,488 | 3.47 | 4,936,335 | 4.64 | ||||||||||||||||||
Options exercisable at year end | 3,168,023 | 2,688,841 | 3,196,121 | |||||||||||||||||||||
F-24
Table of Contents
2009 | 2008 | 2007 | ||||||||||||||||||||||
Weighted- | Weighted- | Weighted- | ||||||||||||||||||||||
Average Grant | Average Grant | Average Grant | ||||||||||||||||||||||
Shares | Date Fair Value | Shares | Date Fair Value | Shares | Date Fair Value | |||||||||||||||||||
Unvested at beginning of period | 238,115 | $ | 2.23 | 197,096 | $ | 2.36 | 146,875 | $ | 4.49 | |||||||||||||||
Granted | 326,776 | 1.31 | 172,553 | 2.36 | 159,390 | 1.79 | ||||||||||||||||||
Vested | (186,227 | ) | 3.70 | (122,484 | ) | 2.94 | (105,469 | ) | 1.69 | |||||||||||||||
Forfeited | (41,625 | ) | 1.66 | (9,050 | ) | 1.94 | (3,700 | ) | 1.40 | |||||||||||||||
Unvested at December 31, | 337,039 | $ | 1.55 | 238,115 | $ | 2.23 | 197,096 | $ | 2.36 | |||||||||||||||
2010 | $ | 271,226 | ||
2011 | 244,532 | |||
2012 | 233,066 | |||
2013 | 187,031 | |||
Beyond | — | |||
Total | $ | 935,855 | ||
F-25
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F-26
Table of Contents
(Loss) profit from | Identifiable | |||||||||||
Revenues | Operations | Assets | ||||||||||
As of and for the year ended December 31, 2009- | ||||||||||||
United States | $ | 19,997,178 | $ | (18,771,745 | ) | $ | 37,263,748 | |||||
Switzerland | 8,610,429 | 5,608,298 | 6,493,471 | |||||||||
Other | 3,588,774 | — | ||||||||||
Subtotal International | 12,199,203 | 5,608,298 | 6,493,471 | |||||||||
Total | $ | 32,196,381 | $ | (13,163,447 | ) | $ | 43,757,219 | |||||
As of and for the year ended December 31, 2008- | ||||||||||||
United States | $ | 17,950,995 | $ | (14,978,075 | ) | $ | 38,806,638 | |||||
Switzerland | 9,168,230 | 7,720,690 | 6,815,851 | |||||||||
Other | 9,109,889 | — | — | |||||||||
Subtotal International | 18,278,119 | 7,720,690 | 6,815,851 | |||||||||
Total | $ | 36,229,114 | $ | (7,257,385 | ) | $ | 45,622,489 | |||||
As of and for the year ended December 31, 2007- | ||||||||||||
United States | $ | 15,257,884 | $ | (14,339,632 | ) | $ | 49,253,642 | |||||
Switzerland | 8,101,831 | 6,231,784 | 7,335,635 | |||||||||
Other | 6,267,923 | — | — | |||||||||
Subtotal International | 14,369,754 | 6,231,784 | 7,335,635 | |||||||||
Total | $ | 29,627,638 | $ | (8,107,848 | ) | $ | 56,589,277 | |||||
F-27
Table of Contents
2009 | 2008 | 2007 | ||||||||||
MerckSerono | $ | 8,627,333 | $ | 9,168,230 | $ | 8,151,292 | ||||||
Lil’ Drug Store Products, Inc. | 6,592,945 | 6,218,949 | 5,958,925 | |||||||||
Cardinal Healthcare | 5,662,507 | 5,612,748 | 6,098,510 | |||||||||
McKesson | 4,574,128 | 4,990,960 | 3,888,354 | |||||||||
All others (none over 5%) | 6,739,468 | 10,238,227 | 5,530,557 | |||||||||
Total | $ | 32,196,381 | $ | 36,229,114 | $ | 29,627,638 | ||||||
2009 | 2008 | 2007 | ||||||||||
CRINONE® | $ | 22,166,867 | $ | 21,439,847 | $ | 18,904,512 | ||||||
RepHresh® | 3,021,944 | 3,316,193 | 3,326,927 | |||||||||
PROCHIEVE® | 1,642,161 | 2,697,255 | 1,527,727 | |||||||||
Other | 5,365,409 | 8,775,819 | 5,868,472 | |||||||||
Total | $ | 32,196,381 | $ | 36,229,114 | $ | 29,627,638 | ||||||
F-28
Table of Contents
First | Second | Third | Fourth | Full | ||||||||||||||||
Quarter | Quarter | Quarter | Quarter | Year | ||||||||||||||||
2009 | ||||||||||||||||||||
Net sales | $ | 7,224,370 | $ | 8,286,623 | $ | 7,807,944 | $ | 8,443,644 | $ | 31,762,581 | ||||||||||
Fee income and other income | 96,817 | 137,081 | 95,013 | 104,889 | 433,800 | |||||||||||||||
Gross profit | 5,541,169 | 6,084,353 | 5,341,397 | 6,034,924 | 23,001,843 | |||||||||||||||
Loss from operations | (3,247,187 | ) | (3,060,393 | ) | (3,422,766 | ) | (3,433,101 | ) | (13,163,447 | ) | ||||||||||
Net loss | (5,333,567 | ) | (5,240,661 | ) | (5,853,262 | ) | (5,442,068 | ) | (21,869,558 | ) | ||||||||||
Basic and diluted loss per common share* | $ | (0.10 | ) | $ | (0.10 | ) | $ | (0.11 | ) | $ | (0.09 | ) | $ | (0.39 | ) | |||||
2008 | ||||||||||||||||||||
Net sales | $ | 8,606,298 | $ | 8,827,369 | $ | 8,141,662 | $ | 6,893,915 | $ | 32,469,244 | ||||||||||
Fee income and other income | 306,637 | 320,252 | 2,975,696 | 157,285 | 3,759,870 | |||||||||||||||
Gross profit | 5,952,838 | 6,197,812 | 8,257,768 | 4,886,081 | 25,294,499 | |||||||||||||||
Loss from operations | (2,378,635 | ) | (2,399,902 | ) | (86,884 | ) | (2,391,964 | ) | (7,257,385 | ) | ||||||||||
Net loss | (4,248,795 | ) | (4,326,172 | ) | (2,050,136 | ) | (3,451,406 | ) | (14,076,509 | ) | ||||||||||
Basic and diluted loss per common share* | $ | (0.08 | ) | $ | (0.08 | ) | $ | (0.04 | ) | $ | (0.06 | ) | $ | (0.27 | ) |
* | The addition of earnings (loss) per share by quarter may not equal total earnings (loss) per share for the year. |
F-29
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F-30
Table of Contents
F-31
Table of Contents
F-32
Table of Contents
Columbia Laboratories, Inc.
Livingston, NJ
F-33
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of Columbia Laboratories, Inc.
New York, New York
F-34
Table of Contents
Charged to | ||||||||||||||||
Balance at | (credited to) | Balance | ||||||||||||||
beginning | costs and | at end | ||||||||||||||
Description | of year | expenses | Deductions (A) | of year | ||||||||||||
YEAR ENDED DECEMBER 31, 2009: | ||||||||||||||||
Allowance for doubtful accounts | $ | 100,000 | $ | — | $ | — | $ | 100,000 | ||||||||
YEAR ENDED DECEMBER 31, 2008: | ||||||||||||||||
Allowance for doubtful accounts | $ | 95,733 | $ | 4,267 | $ | — | $ | 100,000 | ||||||||
YEAR ENDED DECEMBER 31, 2007: | ||||||||||||||||
Allowance for doubtful accounts | $ | 100,000 | $ | 15,000 | $ | 19,267 | $ | 95,733 | ||||||||
(A) | Deductions represent the write-off of uncollectible accounts. |
F-35
Table of Contents
Exhibit | ||
No | Description | |
3.1 | Restated Certificate of Incorporation of the Company, as amended (14) | |
3.2 | Amended and Restated By-laws of Company (3) | |
4.1 | Certificate of Designations, Preferences and Rights of Series C Convertible Preferred Stock of the Company, dated as of January 7, 1999 (3) | |
4.2 | Securities Purchase Agreement, dated as of January 7, 1999, between the Company and each of the purchasers named on the signature pages thereto (3) | |
4.3 | Securities Purchase Agreement, dated as of January 19, 1999, among the Company, David M. Knott and Knott Partners, L.P. (3) | |
4.4 | Form of Warrant to Purchase Common Stock (3) | |
4.5 | Warrant to Purchase Common Stock granted to James J. Apostolakis on September 23, 1999 (5) | |
4.6 | Certificate of Designations of Series E Convertible Preferred Stock, filed May 10, 2005 with the Delaware Secretary of State (13) | |
4.7 | Preferred Stock Purchase Agreement, dated as of May 10, 2005, among Columbia Laboratories, Inc., Perry Partners L.P. and Perry Partners International, Inc. (13) | |
4.8 | Securities Purchase Agreement, dated March 10, 2006, by and between Columbia Laboratories, Inc. and the Purchasers listed on Exhibit A thereto (15) | |
4.9* | Form of Restricted Stock Agreement (17) | |
4.10* | Form of Option Agreement (24) | |
4.11 | Securities Purchase Agreement, dated December 21, 2006, by and between Columbia Laboratories, Inc. and the Purchasers listed on Exhibit A thereto (19) | |
10.1 | 1996 Long-term Performance Plan, as amended, of the Company (2) | |
10.2 | Asset Purchase, License and Option Agreement between Bio-Mimetics, Inc. and Columbia Laboratories, Inc., dated November 22, 1989 (1) | |
10.4 | Settlement Agreement and Release dated as of March 16, 2000 between Columbia Laboratories (Bermuda) Ltd. and Lake Consumer Products, Inc. (5) | |
10.5 | License Agreement dated April 18, 2000, between the Company and Lil’ Drug Store Products, Inc. (6) | |
10.6 | Rights Agreement dated as of March 13, 2002, by and between Columbia Laboratories, Inc. and First Union National Bank, as Rights Agent (7) | |
10.7† | Semi-Exclusive Supply Agreement dated May 7, 2002 between the Company and Mipharm S.p.A. (8) | |
10.8† | Amended and Restated License and Supply Agreement dated June 4, 2002 between the Company and Ares Trading S.A.(8) | |
10.9† | Investment and Royalty Agreement dated March 5, 2003 between the Company and PharmaBio Development Inc. (9) | |
10.10† | License and Supply Agreement Dated May 27, 2003 between the Company and Mipharm S.p.A. (10) | |
10.11* | Form of Indemnification Agreement for Officers and Directors (11) |
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Exhibit | ||
No | Description | |
10.12† | Asset Purchase Agreement Dated June 29, 2004, between the Company and Lil’ Drug Store Products, Inc. (12) | |
10.13† | Supply Agreement dated June 29, 2004, between the Company and Lil’ Drug Store Products, Inc.(12) | |
10.14 | Letter Agreement Supplement to STRIANT Investment and Royalty Agreement dated April 14, 2006 (16) | |
10.15* | Separation Agreement by and between Columbia Laboratories, Inc. and David L. Weinberg effective as of December 12, 2006 (18) | |
10.16† | Agreement, dated December 21, 2006, by and among Ares Trading S.A., Serono, Inc., the Company and its wholly-owned subsidiary, Columbia Laboratories (Bermuda), Ltd (19) | |
10.17 | Amendment No. 1 to the Amended and Restated License and Supply Agreement, entered into December 21, 2006, by and between Ares Trading S.A and Columbia Laboratories (Bermuda), Ltd. (19) | |
10.18 | Description of the Registrant’s Compensation and Reimbursement Practices for Non-employee Directors. (20) | |
10.19 | Lease Agreement between Allwood Associates I and Columbia Laboratories, Inc., dated July 6, 2007 (20) | |
10.20† | License and Supply Agreement between Columbia Laboratories, Inc. and Ascend Therapeutics, Inc., dated September 27, 2007 (21) | |
10.21 | Supply Agreement between Columbia Laboratories (Bermuda) Limited and Fleet Laboratories Limited, dated July 12, 1996 (22) | |
10.22 | Packaging Agreement between Columbia Laboratories (Ireland) Ltd. and Maropack AG, dated October 28, 1993 (22) | |
10.23* | Columbia Laboratories, Inc., 2008 Long-Term Incentive Plan (23) | |
10.24* | Columbia Laboratories, Inc., Amended and Restated Incentive Plan (24) | |
10.25* | Form of Executive Change of Control Severance Agreement (24) | |
10.26 | Stock Purchase Agreement, by and between the Company and Numoda Corporation, dated January 6, 2009 (25) | |
10.27* | Amended and Restated Employment Agreement by and between Columbia Laboratories, Inc. and Robert S. Mills dated March 11, 2009 (24) | |
10.28* | Amended and Restated Employment Agreement by and between Columbia Laboratories, Inc. and Michael McGrane dated March 11, 2009 (29) | |
10.29* | Amended and Restated Employment Agreement by and between Columbia Laboratories, Inc. and James A. Meer dated March 11, 2009 (26) | |
10.30* | Separation and Release Agreement by and between Columbia Laboratories, Inc. and James A. Meer effective as of May 18, 2009 (26) | |
10.31* | Employment Agreement by and between Columbia Laboratories, Inc. and Lawrence Gyenes dated July 15, 2009 (27). | |
10.32 | Second Amendment to Investment and Royalty Agreement, by and between the Company and PharmaBio Development, Inc., July 22, 2009 (28) | |
10.33 | Placement Agent Agreement, by and among the Company, Oppenheimer & Co., Inc. and The Benchmark Company, LLC, dated October 22, 2009 (30) | |
10.34 | Form of Subscription Agreement (30) | |
10.35 | Form of Warrant to Purchase Common Stock (30) |
Table of Contents
Exhibit | ||
No | Description | |
10.36* | Columbia Laboratories Stock Ownership Guidelines for Officers and Directors (31) | |
10.37 | Manufacturing and Supply Agreement between Fleet Laboratories and Columbia Laboratories (Bermuda), Ltd., dated December 8, 2009 (32) | |
10.38* | Employment Agreement by and between Columbia Laboratories, Inc. and Frank C. Condella, Jr., dated December 11, 2009 (33) | |
10.39* | Addendum to Amended and Restated Employment Agreement by and between Columbia Laboratories, Inc. and Robert S. Mills dated December 11, 2009 (33) | |
10.40* | Addendum to Executive Change in Control Severance Agreement by and between Columbia Laboratories, Inc. and Robert S. Mills dated December 11, 2009 (33). | |
14 | Code of Ethics of the Company (11) | |
21 | Subsidiaries of the Company (34) | |
23.1 | Consent of BDO Seidman, LLP (35) | |
23.2 | Consent of McGladrey & Pullen, LLP (35) | |
31(i).1 | Certification of Chief Executive Officer of the Company (35) | |
31(i).2 | Certification of Chief Financial Officer of the Company (35) | |
32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (35) | |
32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (35) | |
† | Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC. | |
* | Management contract or compensatory plans or arrangements |
1/ | Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 33-31962) declared effective on May 14, 1990 | |
2/ | Incorporated by reference to the Registrant’s Proxy Statement dated May 10, 2000 | |
3/ | Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1998 | |
4/ | Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1999 | |
5/ | Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1999 | |
6/ | Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2000 | |
7/ | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated March 12, 2002 | |
8/ | Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q dated August 14, 2002 | |
9/ | Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002 |
Table of Contents
10/ | Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q dated August 14, 2003 | |
11/ | Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003 | |
12/ | Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q dated August 4, 2004 | |
13/ | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated May 12, 2005 | |
14/ | Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005 | |
15/ | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated March 16, 2006 | |
16/ | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated April 17, 2006 | |
17/ | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated May 17, 2006 | |
18/ | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated December 15, 2006 | |
19/ | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated December 26, 2006 | |
20/ | Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q, dated August 8, 2007 | |
21/ | Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q, dated November 8, 2007 | |
22/ | Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007 | |
23/ | Incorporated by reference to the Registrant’s Proxy Statement dated April 8, 2008 | |
24/ | Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 | |
25/ | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated January 8, 2009 | |
26/ | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated May 12, 2009 | |
27/ | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated July 15, 2009 | |
28/ | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated July 24, 2009 | |
29/ | Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q dated August 6, 2009 | |
30/ | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated October 23, 2009 | |
31/ | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated November 17, 2009 | |
32/ | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated December 8, 2009 | |
33/ | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated December 14, 2009 | |
34/ | Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2009 | |
35/ | Filed herewith |
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Livingston, NJ
/s/ BDO Seidman, LLP | ||||
BDO Seidman, LLP | ||||
Woodbridge, NJ April 30, 2010 |
Table of Contents
/s/ McGladrey & Pullen, LLP | ||||
McGLADREY & PULLEN, LLP | ||||
New York, New York April 30, 2010 |
Table of Contents
OF THE SECURITIES EXCHANGE ACT OF 1934
Date: April 30, 2010 | /s/ Frank C. Condella, Jr. | |||
Frank C. Condella, Jr. | ||||
Interim Chief Executive Officer |
Table of Contents
OF THE SECURITIES EXCHANGE ACT OF 1934
Date: April 30, 2010 | /s/ Lawrence A. Gyenes | |||
Lawrence A. Gyenes | ||||
Chief Financial Officer |
Table of Contents
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
/s/ Frank C. Condella, Jr. | ||||
Frank C. Condella, Jr. | ||||
Interim Chief Executive Officer April 30, 2010 |
Table of Contents
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
/S/ Lawrence A. Gyenes | ||||
Lawrence A. Gyenes | ||||
Chief Financial Officer April 30, 2010 | ||||
Table of Contents
SECURITIES AND EXCHANGE COMMISSION
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware (State or other jurisdiction of incorporation or organization) | 59-2758596 (I.R.S. Employer Identification No.) |
354 Eisenhower Parkway Livingston, New Jersey (Address of principal executive offices) | 07039 (Zip Code) |
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
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2
Table of Contents
March 31, | December 31, | |||||||
2010 | 2009 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents of which $9,220,493 in 2010 and $12,225,732 in 2009 is interest bearing | $ | 11,284,243 | $ | 14,757,615 | ||||
Accounts receivable, net of allowances for doubtful accounts of $100,000 in 2010 and 2009, respectively | 3,297,668 | 4,262,851 | ||||||
Inventories | 3,088,990 | 2,532,722 | ||||||
Prepaid expenses and other current assets | 1,009,323 | 1,097,525 | ||||||
Total current assets | 18,680,224 | 22,650,713 | ||||||
Property and equipment, net | 637,812 | 691,479 | ||||||
Intangible assets — net | 17,509,150 | 18,770,332 | ||||||
Other assets | 1,434,024 | 1,644,695 | ||||||
TOTAL ASSETS | $ | 38,261,210 | $ | 43,757,219 | ||||
LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
Current Liabilities: | ||||||||
Current portion of financing agreements | $ | 58,563 | $ | 144,897 | ||||
Accounts payable | 2,805,472 | 3,662,091 | ||||||
Accrued expenses | 5,512,142 | 4,588,088 | ||||||
Derivative embedded within convertible notes, fair value | 2,781,660 | — | ||||||
Total current liabilities | 11,157,837 | 8,395,076 | ||||||
Notes payable | 33,749,209 | 32,965,863 | ||||||
Deferred revenue | 312,181 | 328,367 | ||||||
Long-term portion of financing agreements | 15,867,735 | 15,234,406 | ||||||
TOTAL LIABILITIES | 61,086,962 | 56,923,712 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
Contingently Redeemable Series C Preferred Stock, 600 shares issued and outstanding in 2010 and 2009, respectively | 600,000 | 600,000 | ||||||
SHAREHOLDERS’ DEFICIT: | ||||||||
Preferred stock, $.01 par value;1,000,000 shares authorized | ||||||||
Series B Convertible Preferred Stock, 130 shares issued and outstanding (liquidation preference of $13,000) | 1 | 1 | ||||||
Series E Convertible Preferred Stock, 59,000 shares issued and outstanding (liquidation preference of $5,900,000) | 590 | 590 | ||||||
Common Stock $.01 par value; 100,000,000 shares authorized; 65,761,986 shares issued in 2010 and 2009, respectively | 657,619 | 657,619 | ||||||
Capital in excess of par value | 243,191,797 | 242,637,646 | ||||||
Less cost of 152,795 and 131,935 treasury shares in 2010 and 2009, respectively | (306,369 | ) | (280,813 | ) | ||||
Accumulated deficit | (267,158,299 | ) | (256,979,263 | ) | ||||
Accumulated other comprehensive income | 188,909 | 197,727 | ||||||
Shareholders’ deficit | (23,425,752 | ) | (13,766,493 | ) | ||||
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT | $ | 38,261,210 | $ | 43,757,219 | ||||
3
Table of Contents
(Unaudited)
Three Months Ended | ||||||||
March 31, | ||||||||
2010 | 2009 | |||||||
NET REVENUES | $ | 7,172,899 | $ | 7,321,187 | ||||
COST OF REVENUES | 1,176,579 | 1,780,018 | ||||||
Gross profit | 5,996,320 | 5,541,169 | ||||||
OPERATING EXPENSES: | ||||||||
Selling and distribution | 3,250,319 | 2,793,236 | ||||||
General and administrative | 4,126,318 | 2,488,553 | ||||||
Research and development | 2,341,818 | 2,245,385 | ||||||
Amortization of licensing right | 1,261,182 | 1,261,182 | ||||||
Total operating expenses | 10,979,637 | 8,788,356 | ||||||
Loss from operations | (4,983,317 | ) | (3,247,187 | ) | ||||
OTHER INCOME (EXPENSES): | ||||||||
Interest income | 1,620 | 19,197 | ||||||
Interest expense | (2,302,794 | ) | (2,048,101 | ) | ||||
Change in fair value of derivative | (2,781,660 | ) | — | |||||
Other, net | (110,685 | ) | (40,546 | ) | ||||
Total other expenses | (5,193,519 | ) | (2,069,450 | ) | ||||
Loss before taxes | (10,176,836 | ) | (5,316,637 | ) | ||||
State income taxes | (2,200 | ) | (16,930 | ) | ||||
NET LOSS | $ | (10,179,036 | ) | $ | (5,333,567 | ) | ||
NET LOSS PER COMMON SHARE: | ||||||||
Basic and diluted | $ | (0.16 | ) | $ | (0.10 | ) | ||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING: | ||||||||
Basic and diluted | 65,388,921 | 54,296,686 | ||||||
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(Unaudited)
Three Months Ended | ||||||||
March 31, | ||||||||
2010 | 2009 | |||||||
NET LOSS | $ | (10,179,036 | ) | $ | (5,333,567 | ) | ||
Other comprehensive income (loss): | ||||||||
Foreign currency translation | (8,818 | ) | 12,633 | |||||
COMPREHENSIVE LOSS | $ | (10,187,854 | ) | $ | (5,320,934 | ) | ||
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(Unaudited)
Three Months Ended March 31, | ||||||||
2010 | 2009 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (10,179,036 | ) | $ | (5,333,567 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities- | ||||||||
Depreciation and amortization | 1,526,916 | 1,385,300 | ||||||
Amortization on beneficial conversion features | 451,490 | 393,688 | ||||||
Amortization on warrant valuation | 331,857 | 294,219 | ||||||
Change in fair value of derivative | 2,781,660 | — | ||||||
Provision for sales returns | 1,063,993 | 404,027 | ||||||
Writedown of inventories | 14,001 | — | ||||||
Stock based compensation | 561,651 | 456,757 | ||||||
Non-cash interest expense on financing agreements | 546,995 | 444,263 | ||||||
Changes in assets and liabilities- | ||||||||
(Increase) decrease in: | ||||||||
Accounts receivable | 965,183 | (527,486 | ) | |||||
Inventories | (570,269 | ) | (637,570 | ) | ||||
Prepaid expenses and other current assets | 88,202 | (15,087 | ) | |||||
Other assets | (183 | ) | (2,711 | ) | ||||
Increase (decrease) in: | ||||||||
Accounts payable | (856,619 | ) | 211,125 | |||||
Accrued expenses | (133,833 | ) | (281,822 | ) | ||||
Deferred revenue | (16,186 | ) | (12,733 | ) | ||||
Net cash used in operating activities | (3,424,178 | ) | (3,221,597 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchase of property and equipment | (1,214 | ) | (4,946 | ) | ||||
Net cash used in investing activities | (1,214 | ) | (4,946 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Net proceeds from the sale of common stock | — | 750,000 | ||||||
Proceeds from exercise of options | — | — | ||||||
Payments for purchase of treasury stock | (25,556 | ) | (23,389 | ) | ||||
Payments pursuant to financing agreements | — | — | ||||||
Dividends paid | (7,500 | ) | (9,688 | ) | ||||
Net cash provided by (used in) financing activities | (33,056 | ) | 716,923 | |||||
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(Unaudited)
Three Months Ended March 31, | ||||||||
2010 | 2009 | |||||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH | (14,924 | ) | (35,368 | ) | ||||
NET DECREASE IN CASH | (3,473,372 | ) | (2,544,988 | ) | ||||
CASH, BEGINNING OF PERIOD | 14,757,615 | 12,497,382 | ||||||
CASH END OF PERIOD | $ | 11,284,243 | $ | 9,952,394 | ||||
SUPPLEMENTAL INFORMATION | ||||||||
Interest paid | $ | 800,000 | $ | 800,001 | ||||
Taxes paid | $ | 8,500 | $ | 31,617 | ||||
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(Unaudited)
Three Months Ended March 31, | ||||||||
2010 | 2009 | |||||||
Balance at beginning of year | $ | 1,883,623 | $ | 1,864,316 | ||||
Provision: | ||||||||
Related to current period sales | 319,078 | 154,027 | ||||||
Related to prior period sales | 744,915 | 250,000 | ||||||
1,063,993 | 404,027 | |||||||
Returns: | ||||||||
Related to current period sales | (7,879 | ) | (6,845 | ) | ||||
Related to prior period sales | (332,770 | ) | (538,498 | ) | ||||
(340,649 | ) | (545,343 | ) | |||||
Balance at end of quarter | $ | 2,606,967 | $ | 1,723,000 | ||||
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March 31, | December 31, | |||||||
2010 | 2009 | |||||||
Finished goods | $ | 2,058,683 | $ | 1,343,742 | ||||
Raw materials | 1,030,307 | 1,188,980 | ||||||
$ | 3,088,990 | $ | 2,532,722 | |||||
March 31, | December 31, | |||||||
2010 | 2009 | |||||||
STRIANT Agreement | $ | 15,926,298 | $ | 15,379,303 | ||||
Less: current portion | 58,563 | 144,897 | ||||||
$ | 15,867,735 | $ | 15,234,406 | |||||
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Net | Identifiable | |||||||
Revenues | Assets | |||||||
As of and for the three months ended March 31, 2010 | ||||||||
United States | $ | 4,649,037 | $ | 32,586,890 | ||||
Switzerland | 2,363,620 | 5,674,320 | ||||||
Other countries | 160,242 | — | ||||||
Total International | 2,523,862 | 5,674,320 | ||||||
Total | $ | 7,172,899 | $ | 38,261,210 | ||||
As of and for the three months ended March 31, 2009 | ||||||||
United States | $ | 5,157,187 | $ | 35,458,261 | ||||
Switzerland | 2,164,000 | 7,421,740 | ||||||
Other countries | — | — | ||||||
Total International | 2,164,000 | 7,421,740 | ||||||
Total | $ | 7,321,187 | $ | 42,880,001 | ||||
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Three Months Ended | ||||||||
March 31, | ||||||||
2010 | 2009 | |||||||
Net loss | $ | (10,179,036 | ) | $ | (5,333,567 | ) | ||
Less: Preferred stock dividends | (7,500 | ) | (9,688 | ) | ||||
Net loss applicable to common stock | $ | (10,186,536 | ) | $ | (5,343,255 | ) | ||
Basic and diluted: | ||||||||
Weighted average number of common shares outstanding | 65,388,921 | 54,296,686 | ||||||
Basic and diluted net loss per common share | $ | (0.16 | ) | $ | (0.10 | ) | ||
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Three Months Ended March 31, | ||||||||
Stock Based Compensation | 2010 | 2009 | ||||||
Cost of revenues | $ | 23,234 | $ | 32,492 | ||||
Selling and distribution | 231,290 | 92,003 | ||||||
General and administrative | 264,211 | 295,197 | ||||||
Research and development | 42,916 | 37,065 | ||||||
Total | $ | 561,651 | $ | 456,757 | ||||
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Products | ||||
Progesterone Products | • | CRINONE® 8% (progesterone gel) marketed and sold by us in the U.S. | ||
• | CRINONE® 8% sold to Merck Serono for resale outside the U.S. | |||
• | PROCHIEVE® 8% (progesterone gel) sold by us in the U.S. | |||
• | PROCHIEVE® 4% sold to Ascend Therapeutics, Inc., for resale in the U.S., pursuant to an agreement that will terminate on July 23, 2010. | |||
Other Products | • | STRIANT® (testosterone buccal system) marketed and sold by us in the U.S. | ||
• | STRIANT® sold to Mipharm, S.p.A. for resale in Italy. | |||
• | Royalty and licensing revenues. |
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Three Months Ended | ||||||||
March 31, | ||||||||
2010 | 2009 | |||||||
Cash flows: | ||||||||
Operating activities | $ | (3,424,178 | ) | $ | (3,221,597 | ) | ||
Investing activities | (1,214 | ) | (4,946 | ) | ||||
Financing activities | (33,056 | ) | 716,923 |
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Three Months Ended | ||||||||
March 31, | ||||||||
2010 | 2009 | |||||||
Risk free interest rate | — | 1.78 | % | |||||
Expected term | — | 4.6 years | ||||||
Dividend yield | — | 0 | ||||||
Expected volatility | — | 0.9295 |
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(a) | Exhibits |
2.1 | Purchase and Collaboration Agreement, dated as of March 3, 2010, by and among Columbia Laboratories, Inc., Watson Pharmaceuticals, Inc. and Coventry Acquisition, Inc. (1) | |
10.1 | Note Purchase and Amendment Agreements, each dated as of March 3, 2010, between Columbia Laboratories, Inc. and the Holders named therein (1) | |
10.2 | Amendment No. 1, dated as of March 3, 2010, to the Company’s Convertible Subordinated Notes due December 31, 2011 (1) | |
10.3 | Letter Agreement, dated March 3, 2010, between Columbia Laboratories, Inc. and PharmaBio Development Inc., relating to the Investment and Royalty Agreement, dated March 5, 2003, between Columbia Laboratories, Inc. and PharmaBio Development Inc., as previously amended and supplemented (1) | |
10.4† | Amended and Restated Employment Agreement by and between Columbia Laboratories, Inc. and Frank C. Condella, Jr., dated May 4, 2010. (2) | |
31.1 | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of the Company.* | |
31.2 | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of the Company.* |
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32.1 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* | |
32.2 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |
* | Filed herewith. | |
† | Management contract or compensatory plans or arrangements | |
(1) | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated March 4, 2010 | |
(2) | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated May 4, 2010 |
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COLUMBIA LABORATORIES, INC. | ||||
/s/ Lawrence A. Gyenes | ||||
Lawrence A. Gyenes | ||||
Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) | ||||
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OF THE SECURITIES EXCHANGE ACT OF 1934
Date: May 6, 2010 | /s/ Frank C. Condella, Jr. | |||
Frank C. Condella, Jr. | ||||
President and Chief Executive Officer |
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OF THE SECURITIES EXCHANGE ACT OF 1934
Date: May 6, 2010 | /s/ Lawrence A. Gyenes | |||
Lawrence A. Gyenes | ||||
Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) |
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18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | ||
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
/s/ Frank C. Condella, Jr. | ||||
Frank C. Condella, Jr. | ||||
President nad Chief Executive Officer May 6, 2010 |
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18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | ||
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
/s/ Lawrence A. Gyenes | ||||
Lawrence A. Gyenes | ||||
Senior Vice President, Chief Financial Officer and Treasurer May 6, 2010 | ||||
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SECURITIES AND EXCHANGE COMMISSION
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Delaware | 59-2758596 | |
(State of Incorporation) | (I.R.S. Employer Identification No.) | |
354 Eisenhower Parkway Livingston, New Jersey | 07039 | |
(Address of principal executive offices) | Zip Code |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
þ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Exhibit No. | Description | |
4.1 | Term Loan Promissory Note, dated June 1, 2010 | |
99.1 | Press Release, dated June 1, 2010 |
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COLUMBIA LABORATORIES, INC. | ||||
By: | /s/ Lawrence A. Gyenes | |||
Lawrence A. Gyenes | ||||
Senior Vice President, Chief Financial Officer & Treasurer | ||||
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Exhibit No. | Description | |
4.1 | Term Loan Promissory Note, dated June 1, 2010 | |
99.1 | Press Release, dated June 1, 2010 |
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$15,000,000.00 | June 1, 2010 |
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If to Lender: | Watson Pharmaceuticals, Inc. | |||||
311 Bonnie Circle | ||||||
Corona, California 92880 | ||||||
Attention: General Counsel | ||||||
Facsimile: 951.493.5817 | ||||||
If to Borrower: | Columbia Laboratories, Inc. | |||||
354 Eisenhower Parkway | ||||||
Plaza 1, Second Floor | ||||||
Livingston, NJ 07039 | ||||||
Attention: General Counsel | ||||||
Facsimile: 973.994.3001 | ||||||
with a copy to: | ||||||
Kaye Scholer LLP | ||||||
425 Park Avenue | ||||||
New York, New York 10022 | ||||||
Attention: Adam Golden, Esq. and Steven G. Canner, Esq. | ||||||
Facsimile: 212.836.8689 |
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BORROWER: COLUMBIA LABORATORIES, INC., a Delaware corporation | ||||
By: | /s/ Frank C. Condella, Jr. | |||
Name: | Frank C. Condella, Jr. | |||
Title: | President and CEO | |||
ACCEPTED AND AGREED TO on this 1st day of June, 2010 WATSON PHARMACEUTICALS, INC. | |||||
By: | /s/ David A. Buchen | ||||
Name: | David A. Buchen | ||||
Title: | Senior Vice-President, General Counsel & Secretary | ||||
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![(COLUMBIA LOGO)](https://capedge.com/proxy/DEFM14A/0000950123-10-054461/y83374dy8337400.gif)
Plaza I, Second Floor
Livingston, NJ 07039
FAX: (973) 994-3001
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Watson Pharmaceuticals for Progesterone Franchise
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Watson Pharmaceuticals for Progesterone Franchise
Senior Vice President, Chief Financial Officer & Treasurer
Columbia Laboratories, Inc.
(973) 486-8860
Vice President, The Trout Group LLC
(617) 583-1308
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TO BE HELDJULY 1, 2010
oFOR | oAGAINST | oABSTAIN |
oFOR | oAGAINST | oABSTAIN |
oFOR | oAGAINST | oABSTAIN |
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DATED: | ||||||
(Signature) | ||||||
(Signature, if held jointly) | ||||||
When shares are held jointly, each Stockholder named should sign. If only one signs, his or her signature will be binding. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If the Stockholder is a corporation, sign in full corporate name by a duly authorized officer, giving full title as such. If the Stockholder is a partnership, a partner should sign in full partnership name by authorized person(s). |
2