Mail Stop 6010
December 14, 2005
David S. Barlow, Chairman
Molecular Insight Pharmaceuticals, Inc.
160 Second Street
Cambridge, Massachusetts 02142
Re: Molecular Insight Pharmaceuticals, Inc.
Form S-1 Registration Statement
File No. 333-129570
Dear Mr. Barlow:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Comments applicable to the entire document
1. We note that your filing contains numerous omissions throughout
the prospectus which relate to the offering price range or the
number
of shares you will sell. These omissions include but are not
limited
to:
* Summary Financial Data
* Use Of Proceeds
* Capitalization
* Dilution
* The Option Grants Table
* Shares Eligible For Future Sale
* The Principal Stockholders Table
* Description of Capital Stock
Rule 430A requires you to include this information in your filing
based upon an estimate of the offering price within a bona fide
range
you disclose on the cover page and based upon an estimate of the
number of shares you will sell. We consider a bona fide range to
be
$2 if the price is under $20 and 10% if it is above $20. You
should
include the required information in an amendment prior to
circulating
a "red herring" prospectus.
2. Provide us with copies of all the graphic, photographic or
artistic materials you intend to include in the prospectus prior
to
its printing and use. Please note that we may have comments.
Please
also note that all textual information in the graphic material
should
be brief and comply with the plain English guidelines regarding
jargon and technical language.
3. Comments on your application for confidential treatment will be
provided in a separate letter when they are available. Please
note
that we will not be in a position to accelerate effectiveness
until
all issues relating to your confidential treatment request have
been
resolved.
4. In a number of places in your document you have used technical
jargon that is not likely to be understood by your readers.
Technical jargon should not appear in the forefront of the
prospectus. Please refer to Rule 421 of Regulation C. In the
remainder of the prospectus you should minimize the use of jargon.
If you cannot convey information without using jargon, please
explain
what the jargon means at the first place the terms appear. Here
are
some examples of technical jargon that need to be addressed:
* radiotherapeutics
* radiolabeled fatty acid analog
* Phase 2b
* Phase 2a
* Neuroendocrine tumors
* Pheochromocytoma
* Carcinoid
* Tumor angiogenesis
* Neuroblastoma
* Negative predictive value
* Metabotropic glutamate receptors and inhibitors
* Polymer precursers
To the extent that these terms cannot be replaced by suitable
alternatives, please revise to explain the meaning of these terms
the
first time each one is used.
Prospectus Summary - page 1
5. The disclosure here and in the "Business" section contains a
number of statistical claims as well as claims regarding the size
of
the market for your proposed products. Please provide us with
copies of the documents you are relying on in support of these
claims. You should mark them to show the location of the
information
supporting each claim in the prospectus. We may have additional
comments after reviewing the supporting materials.
6. The disclosure currently included in your summary is
unbalanced.
While you have included a discussion of your positive opinions and
beliefs regarding your proposed products and anticipated results
of
clinical studies, you have not included any discussion of the
negative aspects of your business, and have not clearly indicated
that positive results are not assured. Please limit the
discussion
of your disclosed products to the targeted indication and the
stage
of clinical trials. Move the remaining details, including any
discussion of the results of clinical trials, to the Business
section
and balance this disclosure with a discussion explaining that
later
stage testing might not support the results of earlier testing.
Additionally, revise the disclosure to discuss the negative
aspects
of your business. The negative aspects should include your
history
of losses, expect to incur additional losses for at least the next
several years and the fact that you do not have FDA approval for
any
for any of your products. The discussion of the negative aspects
should be disclosed as prominently as the positive aspects and
should
not be separated from the discussion of the positive aspects.
7. Additionally, balance the discussion of your business strategy
with a discussion of risks and obstacles you will encounter in
implementing this strategy.
Risk Factors - page 8
If approved, the commercialization of our product candidates,
including Zemiva, may not be profitable. - page 9
8. Please revise the subheading to be more descriptive of the
actual
risk described in the body of the risk factor.
We do not have patent rights to the composition of Zemiva, and if
we
cannot gain and exploit a period of marketing exclusivity... -
page
10
9. In the first full paragraph of page 56 you indicate that the
original patent protecting the composition of BMIPP expired in
2003.
Please address this fact in the risk factor.
Our proprietary rights may not adequately protect our technologies
and product candidates. - page 10
10. Currently, this subheading states a simple fact but does not
identify a specific risk or its potential adverse consequences.
Please revise it so that does.
11. The information in the body of the risk factor is so generic
that
it could be included in a prospectus for any company in your
industry
without losing any meaning. Please revise it so that it discusses
a
risk that is specific to you and your proposed products. That is,
the discussion of proprietary rights should be discussing the
actual
risks involved with your proposed products rather than trade
secrets
law in general.
12. The revised risk factor should also include a factual context
for
the risk and its consequences. For example, do you have any
reason
to believe that there might be a problem with any of your proposed
products? Is the risk described in this risk factor simply a more
general discussion of the specific risk discussed in the risk
factor
immediately above it? If so, the two risk factors should be
combined, and the specific risk should be identified as an example
of
the broader risk. As currently written the risk factor is too
amorphous to be meaningful.
Our ability to commercialize our potential products will depend on
our ability to sell such products without infringing the patent or
proprietary rights of third parties... - page 12
13. The information in the body of this risk factor is also so
generic that it could be included in a prospectus for any company
in
your industry without losing any meaning. Please revise it in the
same manner as we requested that you revise the one above. If you
have any reason to believe that there might be a problem with one
of
your proposed products, you should identify the problem and
discuss
it specifically.
If another party obtains orphan drug exclusivity for the drugs and
indications we are targeting, we may be precluded from
commercializing our product candidates for those indications. -
page
12
14. Since the risk factor relates solely to Ultratrace MIBG, you
should revise the risk factor subheading to be specific about what
the risk actually is.
15. Although you mentioned this product on page 3 of the summary,
you
have not provided the reader with any information that would put
this
risk factor in context. You should revise the risk factor to
clarify
whether the disease it is intended to target falls within the
statutory criteria. You should also disclose whether you have any
knowledge regarding whether any other companies are developing
products to address the same disease indication as you are. If
you
do, you need to briefly disclose this information in the risk
factor
so that a potential investor can fully analyze the risk.
We may need to raise additional funds in order to finance the
commercialization of our potential products... - page 13
16. Please relocate this risk factor so that it appears with all
of
the other risk factors related to your financial condition.
We have no commercial manufacturing facility and no experience in
manufacturing products for commercial purposes. - page 14
17. This risk factor subheading is a simple statement of fact that
does not identify a specific risk or its potential adverse
consequences. Please revise the subheading so that it briefly
summarizes the risk and adverse consequences discussed in the risk
factor.
18. Please identify the manufacturer referenced in the risk factor
and indicate whether you plan on expanding the agreement with this
manufacturer to cover your other needs, and whether you anticipate
developing your own manufacturing facility. Also indicate whether
there are a limited number, or a large number, of manufacturers
capable of producing the BMIPP molecule. If there are a limited
number, discuss the potential adverse impact this could have on
your
future operations.
19. Under "Use of Proceeds" on page 27 you state that you may use
a
portion of the proceeds from this offering to "fund investment in
manufacturing capacity...in collaboration with our anticipated
commercial manufacturing partner(s)." Please expand the risk
factor
to address this use of proceeds and the adequacy of the sums
available for this purpose.
There are a limited number of manufacturers that can produce our
lead
product candidate, Zemiva. - page 14
20. On page 2 you state that Zemiva is a radiolabeled fatty acid
analog "that is also known as BMIPP." Accordingly, we don`t
understand why this is a separate risk from the one identified
immediately above it in the prospectus and commented on above.
Please revise or advise.
21. It is unclear from the risk factor and disclosure elsewhere in
the document as to whether you are competing with other companies
to
find manufacturers for this product. Are you, or will you be, the
only company looking for a manufacturer for this product? Is
there
something about this product that makes it difficult to
manufacture?
Does it require ingredients that are difficult to obtain? You
need
to expand the factual context to include enough information to
fully
appreciate the risk and its consequences.
We have a limited operating history and potential financial
results
are uncertain. - page 15
22. Since you have been in business since 1997, we do not
understand
why you say you have a limited "operating history." Are you
trying
to say that you have not generated revenue? If so, this appears
to
be the same risk discussed in the risk factor immediately above
this
one. Also, it is unclear what you mean when you say that your
"business model is still emerging." Please explain what this
means.
If this is the same risk as the one immediately preceding it,
please
combine them and eliminate the overlap. If it is a separate risk,
please provide an appropriate subheading and expand the risk
factor
to clearly identify and discuss a specific risk. As currently
written, this risk factor is too ambiguous to be meaningful. The
disclosure in the revised risk factor should also be quantified to
the extent practicable.
We have little control over the scientists and consultants at the
various academic and research institutions with whom we have
relationships. - page 17
23. Please revise the subheading to identify a specific risk and
its
potential adverse consequences.
24. Please expand and revise the body of the risk factor to
provide a
factual context for evaluating this risk. The information you
have
included is too vague and ambiguous to be meaningful. You say
that
these persons conduct research at your request. Does this mean
that
you subcontract your research and development activities out to
others, or are the persons you refer to members of an advisory
board
you have set up? Are these individuals or entities that
supplement
research done by your own employees? Also, describe the types of
agreements you have with these persons and entities. As currently
written, the risk factor raises more questions than it answers.
We depend on government funding, which if lost or reduced, could
have
an adverse effect on our research and development. - page 17
25. Please disclose what percentage the $4.5 million you have
received in grants represents to the total you have expanded on
research to date. While the subheading says you "depend" on
government funding, the first sentence says that you have relied
on
government research grants for a "portion" of your funding. In
addition, most of the information currently included in the body
of
the risk factor does not relate to the risk identified in the
subheading. Please revise the risk factor accordingly.
Our competitors may develop products that are less expensive,
safer
or more effective... - page 18
26. Please revise the risk factor to name your most significant
competitors. Also identify the products they are developing that
will compete with your potential products and compare the
development
stage of their products with your proposed products. With the
exception of the discussion of Cardiolite and Myoview, the
information in this risk factor is too vague and ambiguous to be
meaningful. If these products are your competition, we think you
can
safely delete a good deal of the information included in this risk
factor without losing any meaning.
We could be negatively impacted by the application or enforcement
of
federal and state fraud and abuse laws, including anti-kickback
laws
and other federal and state anti-referral laws, page 21
27. Please describe the activities that you engage in that may be
determined to be in violation of the anti-kickback and anti-
referral
laws.
If we choose to acquire new complementary businesses, products or
technologies, we may be unable to complete these acquisitions or
to
successfully integrate them in a cost-effective and non-disruptive
manner. - page 22
28. The information in the risk factor is both vague and
applicable
to every company that makes an acquisition. Please revise the
risk
factor to tie the risk to your particular situation, products,
etc.
If you cannot do this, you should consider deleting the risk
factor.
Use of Proceeds - page 27
29. In the second paragraph you say you intend to use the majority
of
the net proceeds of this offering to continue the development and
prepare for the commercialization of Zemiva, and to initiate and
expand the clinical development of Ultratrace MIBG. Please
disclose
the amounts you intend to use for each of these purposes and
discuss
how far you anticipate these proceeds will get you in your
progress
towards commercialization.
30. Please expand the fifth bullet to briefly discuss what you
mean
when you refer to funding "investment in manufacturing capacity."
We
also note that in your discussion of strategic agreements on page
41,
you indicate that you are required to make milestone payments to
MDS
Nordion in the amount of $427,000. Please clarify whether you
will
use proceeds of the offering for this purpose.
31. In the next to last paragraph on page 27 you indicate that you
may use a portion of the proceeds for acquisitions. Please
clarify
whether this is a different use than the one identified in the
fourth
bullet above.
Business - page 45
Strategic Agreements - page 54
32. Please expand the discussion of each agreement to include the
material terms of each, including, but not limited to, the
aggregate
amounts of any milestone payments, termination provisions,
guaranteed
minimum royalty payments, financial commitments, aggregate amounts
paid to date and any other material terms. We may have additional
comments after completing our review of your application for
confidential treatment.
33. Please revise the discussion of the agreements with Georgetown
University to identify your product candidate that is dependent on
this agreement.
Employees - page 62
34. Please describe the types of functions performed by your
employees and the number of employees performing each type of
function.
Management - page 63
35. Please file a consent for the use of Mr. Sterling`s name in
the
registration statement. Please refer to Rule 438 of Regulation C.
Executive Compensation - page 70
36. Please note that if you file an amendment after December 31,
2005, you will need to expand the compensation disclosure to add
the
compensation received by the named individuals during 2005.
37. We note that the summary compensation table, the options
granted
table, and the aggregate option exercise table appear to be
incomplete. Please include the required information when you file
your first amendment.
Related Transactions - page 76
38. We note that you have not filed the consulting agreement with
William C. Eckelman as an exhibit to the registration statement.
Please either file the agreement or tell us the basis for your
belief
that it is not required to be filed. We may have further comment.
Principal Stockholders - page 79
39. Please tell us what the relationship is between David S. and
Ann
Barlow. If they are spouses, the ownership table should be
revised
to attribute ownership of 20% of the outstanding stock to each of
Mr.
Barlow and Ann Barlow, with appropriate disclosure regarding the
other party`s interest included in the footnotes.
40. We note that Mr. Frank is a managing director of Cerberus
Partners, LP. Please revise the table to attribute the shares
owned
by Cerberus to Mr. Frank with appropriate footnote disclosure
regarding any disclaimers.
Description of Capital Stock - page 81
Preferred Stock - page 81
41. Please include a discussion of the cash dividend to be paid to
some of the holders of preferred stock. We may have additional
comments.
Registration Rights - page 82
42. It appears that a number of individuals identified in the
first
full paragraph of page 83 have piggyback registration rights in
this
offering. Please tell us, and disclose in the registration
statement, whether any of those individuals will be exercising
their
rights in regard to this offering.
Underwriting - page 88
43. Confirm that you have described the nature and extent of any
possible short sales by the underwriters. To the extent
applicable,
address the points enumerated in Section VIII.A.3. of the Division
of
Corporation Finance`s "Current Issues Outline" regarding syndicate
short sales. The June 16, 2000 version is available on the SEC`s
website, www.sec.gov.
Financial Statements
44. Please update your financial information as required under
Rule
3-12 of Regulation S-X.
Notes to Consolidated Financial Statements
Revenue Recognition, page F-11
45. Please tell us if you have received other government grants
beside those awarded from NIH. If not, please clarify your
accounting
policy as you state that you recognize revenue from government
grants
for R&D as services are performed and NIH grant revenue is
recognized
on a proportional performance basis as costs are incurred.
46. Please clarify where you classify the reimbursement of expense
related to your cost sharing arrangements for R&D services.
Note 3. Stock Based Compensation
47. Please explain to us why there was no incremental stock-based
compensation resulting from the cancellation and re-grant of
employee
options. Please refer to paragraph 35 of FAS123 which states "A
modification of the terms of an award that makes it more valuable
shall be treated as an exchange of the original award for a new
award...incurring additional compensation cost."
48. Please expand your disclosure to include an itemized
chronological schedule covering all equity instruments issued
since
January 1, 2004 through the date of your response. Please also
provide an analysis of how you determined the fair value of the
underlying common stock and any related stock-based compensation
for
each equity issuance. In addition, please disclose the following
in
the financial statements:
* the date of the transaction;
* the number of shares/options/warrants granted or issued;
* the exercise price or per share amount paid;
* management`s fair market value per share and significant
factors,
assumptions and methodologies used in determining fair value;
* whether the valuation was contemporaneous or retrospective; and
* the intrinsic value, if any, per option and warrants;
* the identity of the recipient, indicating if the recipient was a
related party;
* the amount of any compensation expense recognized; and
* significant factors contributing to the difference between the
fair
value as of the date of each grant and your estimated IPO price.
Note 9. Stockholders` Deficit
49. Please tell us the basis of accounting for each of the
warrants
issued and provide us with the accounting literature that supports
your accounting treatment. Specifically, tell us if the warrants
contain a "cashless exercise" option. Please tell us what
consideration was given to SFAS 133, EITF 00-19 and other
applicable
literature.
Signatures
50. Please identify and include the signature of the controller or
principal accounting officer.
* * * * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. We may have
additional comments after reviewing your amendment and responses
to
our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
* the company may not assert this action as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please
provide
this request at least two business days in advance of the
requested
effective date and allow adequate time after the filing of any
amendment for further review before submitting a request for
acceleration.
You may contact Sasha Parikh at 202-551-3627 or Lisa
Vanjoske
at 202-551-3614 if you have questions regarding comments on the
financial statements and related matters. Please contact Mary
Fraser
at 202-551-3609 or me at 202-551-3710 with any other questions.
Regards,
Jeffrey P. Riedler
Assistant Director
Cc: Gabor Garai, Esq.
Foley & Lardner LLP
111 Huntington Avenue
Boston, Massachusetts 02199
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David S. Barlow
Molecular Insight Pharmaceuticals, Inc.
December 14, 2005
Page 12