UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2006
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File # 0-24875
BIOENVISION, INC.
(Exact name of issuer as specified in its charter)
Delaware 13-4025857
---------------- ----------------
State or other jurisdiction IRS Employer ID No.
of incorporation or organization
345 Park Avenue, 41st Floor, New York, NY 10154
-----------------------------------------------
(Address of principal executive offices)
(212) 750-6700
--------------
(Issuer's Telephone Number)
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the preceding
twelve months (or such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes _X_ No ___
Indicate by checkmark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer ___ Accelerated filer _X_ Non accelerated filer ___
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes___ No__X__
As of January 19, 2007, there were 43,051,406 shares of the issuer's common
stock, par value $.001 per share (the "Common Stock") outstanding.
C O N T E N T S
PART I FINANCIAL INFORMATION Page
Item 1. Consolidated Financial Statements ----
Condensed Consolidated Balance Sheets -
As of December 31, 2006 (Unaudited) and June 30, 2006 2
Condensed Consolidated Statements of Operations (Unaudited) -
For the three and six months ended December 31, 2006 and 2005 3
Condensed Consolidated Statement of Stockholders' Equity (Unaudited) -
For the six months ended December 31, 2006 4
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - 4
For the three and six months ended December 31, 2006 and 2005
Condensed Consolidated Statements of Cash Flows (Unaudited) -
For the six months ended December 31, 2006 and 2005 5
Notes to Condensed Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition 14
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
Item 4. Controls and Procedures 20
PART II OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 1A. Risk Factors 21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits 22
SIGNATURES
BIOENVISION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, June 30,
2006 2006
-------------- ----------
ASSETS (unaudited) (Note 1)
Current assets
Cash and cash equivalents $ 7,721,121 $ 3,377,937
Short-term investments 21,393,202 41,637,106
Accounts receivable, net of allowances of $871,000 and $899,000,
respectively 5,559,085 2,369,446
Inventories 887,269 427,514
Other current assets 1,707,092 844,810
--------------- -------------
Total current assets 37,267,769 48,656,813
Property and equipment, net 329,278 273,632
Intangible assets, net 7,130,065 7,549,520
Goodwill 1,540,162 1,540,162
Other assets 242,771 706,840
Deferred costs 3,402,897 3,523,497
------------ -------------
Total assets $ 49,912,942 $ 62,250,464
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 3,654,581 $ 1,557,507
Accrued expenses 9,114,318 6,464,445
Accrued dividends payable 57,328 56,404
Deferred revenue 513,662 513,662
------------ -------------
Total current liabilities 13,339,889 8,592,018
Deferred revenue 6,813,888 7,070,725
--------- -------------
Total liabilities 20,153,777 15,662,743
-------------- --------------
Commitments and contingencies
Stockholders' equity
Convertible participating preferred stock - $0.001 par value;
20,000,000 shares authorized; 2,250,000 shares issued and 2,250 2,250
outstanding at December 31, 2006 and June 30, 2006 (liquidation
preference $6,750,000)
Common stock - par value $0.001; 70,000,000 shares authorized; 42,983 41,457
42,982,740 and 41,456,616 shares issued and outstanding at
December 31, 2006 and June 30, 2006, respectively
Additional paid-in capital 135,780,446 133,604,996
Accumulated deficit (105,775,507) (86,567,268)
Receivable from stockholder - (340,606)
Accumulated other comprehensive loss (291,007) (153,108)
------------------ -----------------
Total stockholders' equity 29,759,165 46,587,721
-------------------- --------------------
Total liabilities and stockholders' equity $ 49,912,942 $ 62,250,464
================ ================
The accompanying notes are an integral part of these financial statements.
-2-
BIOENVISION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three months ended Six months ended
December 31, December 31,
2006 2005 2006 2005
----------- ----------- ----------- -----------
Revenue
Net product sales $ 3,687,285 $ 173,980 $ 5,561,779 $ 368,976
Licensing and royalty revenue 809,355 543,919 1,799,433 944,049
Research and development contract revenue - 373,408 - 448,500
------------ -------------- ------------- -------------
Total revenue 4,496,640 1,091,307 7,361,212 1,761,525
--------- --------- ----------- -----------
Costs and expenses
Cost of products sold, including royalty expense of $759,000 897,593 438,018 1,320,321 766,309
and $331,000 for the three months ended December 31, 2006
and 2005, respectively, and $1,120,000 and $532,000 for the
six months ended December 31, 2006 and 2005, respectively
Research and development 4,314,851 2,011,263 13,584,433 4,442,181
Selling, general and administrative 6,322,151 2,582,191 11,791,042 5,469,653
Depreciation and amortization 240,133 256,872 481,833 481,155
----------- ----------- ----------- -----------
Total costs and expenses 11,774,728 5,288,344 27,177,629 11,159,298
------------ ----------- ------------ ------------
Loss from operations (7,278,088) (4,197,037) (19,816,417) (9,397,773)
Interest and finance charges (9,384) - (57,068) (66,761)
Interest income 375,064 403,175 835,383 866,080
------------ ------------- -------------- -------------
Net loss (6,912,408) (3,793,862) (19,038,102) (8,598,454)
Preferred stock dividend (85,069) (85,069) (170,137) (170,137)
------------ ------------- ------------- ------------
Loss applicable to common stockholders $ (6,997,477) $ (3,878,931) $(19,208,239) $ (8,768,591)
============ ============ ============ ============
Basic and diluted net loss per share applicable to common
stockholders $ (0.16) $ (0.10) $ (0.46) $ (0.22)
============ ============= ============ ============
Weighted average shares used in computing
basic and diluted net loss per share 42,455,186 40,762,508 41,956,064 40,761,636
============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
-3-
BIOENVISION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31, 2006
(unaudited)
Accumulated
Additional Receivable Other Total
Convertible Comprehensi
Participating Common Stock ve
Preferred Stock Paid-in Accumulated from Stockholders'
Shares Amount Shares Amount Capital Deficit Stockholder Loss Equity
------ ------ ------ ------ ------- ------- ----------- ---- ------
Balance at July 1, 2006 2,250,000 $ 2,250 41,456,616 $ 41,457 $133,604,996 $ (86,567,268) $ (340,606) $ (153,108) $46,587,721
Net loss for the period (19,038,102) (19,038,102)
Cumulative preferred
stock dividend (170,137) (170,137)
Currency translation
adjustment (137,899) (137,899)
Due from stockholder 340,606 340,606
Employee and board of
director stock-based
compensation 31,100 31 1,666,945 1,666,976
Warrants exercised for
common stock 1,495,024 1,495 508,505 510,000
----------- -------- ----------- -------- ------------ --------------- ----------- ----------- -----------
Balance at December 31,
2006 2,250,000 $ 2,250 42,982,740 $ 42,983 $135,780,446 $(105,775,507) $ - $ (291,007)$ 29,759,165
=========== ======== =========== ======== ============ =============== =========== =========== ===========
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(unaudited)
Three months ended Six months ended
December 31, December 31,
2006 2005 2006 2005
---- ---- ---- ----
Loss applicable to common stockholders $ (6,997,477) $ (3,878,931) $ (19,208,239) $ (8,768,591)
Foreign currency translation loss (82,759) (49,269) (137,899) (98,709)
--------------- ----------------- --------------- --------------
Comprehensive Loss $ (7,080,236) $ (3,928,200) $ (19,346,138) $ (8,867,300)
=============== ================= =============== ==============
The accompanying notes are an integral part of these financial statements.
-4-
BIOENVISION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six months ended
December 31,
2006 2005
-------------- ---------
Cash flows from operating activities:
Net loss $(19,038,102) $(8,598,454)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation and amortization 481,833 481,155
Stock-based compensation 1,666,976 978,319
Deferred revenue (256,837) (249,305)
Deferred costs 120,600 115,583
Provision for bad debts and shareholder receivable 357,567 28,693
Changes in operating assets and liabilities:
Accrued interest on investments (732,207) (573,950)
Accounts receivable (2,972,771) 196,181
Inventories (412,327) (138,712)
Other current assets (799,451) (293,062)
Other assets 490,473 -
Accounts payable and accrued expenses 4,202,921 (2,463,248)
---------------- -----------------
Net cash used in operating activities (16,891,325) (10,516,800)
---------------- ----------------
Cash flows from investing activities:
Additions to intangible assets - (162,887)
Capital expenditures (112,630) (58,622)
Release of restricted cash - 290,000
Redemption of short-term investments 20,976,111 7,500,000
Purchase of short-term investments - (25,350,012)
---------------- -----------------
Net cash provided by (used in) investing activities 20,863,481 (17,781,521)
--------------- ---------------
Cash flows from financing activities:
Proceeds from exercise of warrants 510,000 -
Due from shareholder 40,606 -
Preferred dividends paid (169,213) (169,212)
----------------- -----------------
Net cash provided by (used in) financing activities 381,393 (169,212)
---------------- -----------------
Effect of exchange rates on cash and cash equivalents (10,365) 70,401
---------------- -----------------
Net increase (decrease) in cash and cash equivalents 4,343,184 (28,397,132)
Cash and cash equivalents, beginning of period 3,377,937 31,407,533
--------------- --------------
Cash and cash equivalents, end of period $ 7,721,121 $ 3,010,401
============= ==========
The accompanying notes are an integral part of these financial statements.
-5-
BIOENVISION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - Basis of Presentation
Description of Business
The Company is a product-oriented biopharmaceutical company primarily focused
upon the acquisition, development and marketing of compounds and technologies
for the treatment of cancer, autoimmune disease and infection. Its product
pipeline includes Evoltra(R) (Clofarabine), Modrenal(R) (for which Bioenvision
has obtained regulatory approval for marketing in the United Kingdom for the
treatment of post-menopausal breast cancer following relapse to initial hormone
therapy), and certain anti-infective technologies including the OLIGON(R)
technology; an advanced biomaterial that has been incorporated into various
Federal Drug Administration, or FDA, approved medical devices and Suvus(R), an
antimicrobial agent currently in clinical development for refractory chronic
hepatitis C infection.
Basis of Presentation
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments, consisting of normal recurring
adjustments, necessary to present fairly the condensed consolidated financial
position of the Company as of December 31, 2006, the condensed consolidated
statements of operations and comprehensive loss for the three and six months
ended December 31, 2006 and 2005, the condensed consolidated statement of
stockholders' equity for the six months ended December 31, 2006, and the
condensed consolidated statements of cash flows for the six months ended
December 31, 2006 and 2005.
The condensed consolidated balance sheet at June 30, 2006 has been derived from
the audited consolidated financial statements at that date, but does not include
all the information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements. For further
information, refer to the audited consolidated financial statements and
footnotes thereto included in the Form 10-K filed by the Company for the year
ended June 30, 2006.
The condensed consolidated results of operations for the three and six months
ended December 31, 2006 and 2005 are not necessarily indicative of the results
to be expected for any other interim period or for the full year. Certain
reclassifications of balances previously reported have been made to conform to
the current presentation.
Recent Accounting Pronouncements
In December 2006, the Financial Accounting Standards Board ("FASB") issued a
FASB Staff Position ("FSP") Emerging Issues Task Force ("EITF") Issue No.
00-19-2"Accounting for Registration Payment Arrangements" ("FSP 00-19-2") which
addresses an issuer's accounting for registration payment arrangements. FSP
00-19-2 specifies that the contingent obligation to make future payments or
otherwise transfer consideration under a registration payment arrangement,
whether issued as a separate agreement or included as a provision of a financial
instrument or other agreement, should be separately recognized and measured in
accordance with FASB Statement No.5 "Accounting for Contingencies". The guidance
in FSP 00-19-2 amends FASB Statements No. 133, "Accounting for Derivative
Instruments and Hedging Activities", and No.150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity", and
FASB Interpretation No.45, "Guarantor's Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others" to
include scope exceptions for registration payment arrangements. FSP 00-19-2 is
effective immediately for registration payment arrangements and the financial
instruments subject to those arrangements that are entered into or modified
subsequent to the date of issue of FSP 00-19-2. For registration payment
arrangements and financial instruments subject to those arrangements that were
entered into prior to the issuance of FSP 00-19-2, this is effective for
financial statements issued for fiscal years beginning after December 15, 2006,
and interim periods within those fiscal years. The Company has analyzed the
provisions of FSP 00-19-2 and determined that it will not have a material effect
on the Company's consolidated financial statements.
In September 2006, the FASB issued Statement of Financial Accounting Standards
No.157, "Fair Value Measurements" ("SFAS 157"). SFAS 157 defines fair value,
establishes a framework for measuring fair value in accordance with generally
accepted accounting principles and expands disclosures about fair value
measurements. The provisions of SFAS 157 are effective for fiscal years
beginning after November 15, 2007. The Company is currently evaluating the
impact, if any, of the provisions of SFAS 157.
In September 2006, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulleting No. 108 ("SAB 108"). SAB 108 provides interpretive guidance
on how the effects of the carryover or reversal of prior year misstatements
should be considered in quantifying a potential current year misstatement. Prior
to SAB 108, companies might evaluate the materiality of financial statement
misstatements using either the income statement or balance sheet approach, with
the income statement approach focusing on new misstatements added in the current
year, and the balance sheet approach focusing on the cumulative amount of
-6-
BIOENVISION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - Basis of Presentation - continued
misstatement present in a company's balance sheet. Misstatements that would be
material under one approach could be viewed as immaterial under another
approach, and not be corrected. SAB 108 now requires that companies view
financial statement misstatements as material if they are material according to
either the income statement or balance sheet approach. The Company has analyzed
SAB 108 and determined that it will have no impact on the reported results of
operations or financial condition of the Company.
In June 2006, the FASB ratified the consensus of EITF Issue No. 06-3, "How Taxes
Collected from Customers and Remitted to Governmental Authorities Should Be
Presented in the Income Statement" ("EITF 06-3"). EITF 06-3 indicates that the
income statement presentation on either a gross basis or a net basis of the
taxes within the scope of the issue is an accounting policy decision. The
Company's accounting policy is to present the taxes within the scope of EITF
06-3 on a net basis. The adoption of EITF 06-3 in the second fiscal quarter of
2007 did not result in a change to the Company's accounting policy and,
accordingly, did not have any effect on the Company's consolidated financial
statements.
In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109 ("FIN
48"). This Interpretation clarifies the accounting for uncertainty in income
taxes recognized in an enterprise's financial statements in accordance with FASB
Statement No. 109, Accounting for Income Taxes. This Interpretation prescribes
that a company should use a more likely than not recognition threshold based on
the technical merits of the tax position taken. Tax positions that meet the more
likely than not recognition threshold should be measured in order to determine
the tax benefit to be recognized in the financial statements. FIN 48 is
effective in fiscal years beginning after December 15, 2006. We do not expect
the adoption of FIN 48 to have a material impact on the results of operations or
financial condition of the Company.
NOTE 2 - Accounting for Stock-based Compensation
The Company accounts for stock-based compensation in accordance with SFAS No.
123 (revised 2004), "Share-Based Payment" ("SFAS 123 (R)"). For the three months
ended December 31, 2006 and 2005, the Company recorded, as a component of net
loss, employee stock-based compensation expense of $1,120,000 and $482,000,
respectively. For the six months ended December 31, 2006 and 2005, the Company
recorded, as a component of net loss, employee stock-based compensation expense
of $1,733,000 and $941,000, respectively. As of December 31, 2006, the total
compensation cost related to unvested equity awards granted to employees but not
yet recognized is approximately $3,667,000. This cost will be amortized on a
straight-line basis over the remaining weighted average vesting period of 1.7
years. As required by SFAS 123 (R), management made an estimate of expected
forfeitures for all unvested awards and is recognizing compensation costs only
for those equity awards expected to vest.
A summary of the Company's stock option activity for options issued to employees
and related information follows:
Weighted
Average
Weighted Remaining Aggregate
Number Average Contractual Intrinsic
of Shares Exercise Price Life Value
--------- -------------- ---- -----
Balance - June 30, 2006 4,641,000 $ 4.24 4.44 $ 11,270,000
Granted 435, 000 5.02 1,102,000
Exercised -
Cancelled (2,000) 8.05
Forfeited (10,000) 8.05
--------
Balance - December 31, 2006 5,064,000 4.30 7.55 $ 12,320,000
=========
Exercisable - December 31, 2006 3,382,000 $ 3.19 5.98 $ 6,393,000
Options granted to employees during the six months ended December 31, 2006
totaled 435,000 and had a weighted average fair value of $2.53. Options granted
to employees during the six months ended December 31, 2005 totaled 272,000 and
had a weighted average fair value per share of $4.04. The fair value of each
stock option grant is estimated on the date of grant using the Black-Scholes
option-pricing model which incorporates the following weighted average
assumptions:
-7-
BIOENVISION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 2 - Accounting for Stock-based Compensation - continued
Six Months Ended Six Months Ended
December 31, December 31,
-----------------------------------------------
2006 2005
-----------------------------------------------
Risk-free interest rate 4.43% - 4.84% 3.99% - 4.39%
Expected weighted average term (in years) 3.5 3.5
Expected weighted average volatility 66% 80%
Expected dividend yield 0% 0%
The Company accounts for equity instruments issued to non-employees in
accordance with the provisions of SFAS 123 (R) and EITF No. 96-18, "Accounting
for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or
in Conjunction with Selling Goods or Services." Under EITF No. 96-18, where the
fair value of the equity instrument is more reliably measurable than the fair
value of services received, such services will be valued based on the fair value
of the equity instrument.
Refer to Note 13 for further discussion of equity instruments granted.
NOTE 3 - Accounts Receivable
Our accounts receivable are primarily due from hospitals, clinical trial
centers, wholesale distributors and our co-development partners. One customer
comprises approximately 49% and 0% of revenues earned for the six months ended
December 31, 2006 and 2005, respectively. Another customer comprises
approximately 17% and 48% of revenues earned for the six months ended December
31, 2006 and 2005, respectively. Based on our evaluation of the collectibility
of the accounts receivable due from this customer, we believe that the balance
relating to research and development reimbursements may not be collectible and,
therefore, have reserved this balance at December 31, 2006 and June 30, 2006.
NOTE 4 - Inventories
Inventories are stated at the lower of cost or market, with cost being
determined under the first-in, first-out method. We only capitalize inventory
that is produced for commercial sale. Manufacturing costs incurred to produce
clofarabine prior to approval were recorded as research and development costs.
The Company periodically reviews inventory on hand. Items considered outdated or
obsolete are reduced to their estimated net realizable value.
December 31, June 30,
2006 2006
---- ----
Raw materials $ 127,472 $ 118,213
Work-in-progress 692,742 180,048
Finished goods 67,055 129,253
------ -------
Total inventories $ 887,269 $ 427,514
========= =========
NOTE 5 - Intangible Assets
Intangible assets at December 31, 2006 and June 30, 2006 are as follows:
December 31, June 30,
2006 2006
---- ----
Patents and licensing rights $9,382,450 $9,382,450
Other intangible assets 298,505 298,505
----------- -----------
9,680,955 9,680,955
Less: accumulated amortization (2,550,890) (2,131,435)
---------- ----------
Total intangible assets, net $7,130,065 $7,549,520
========== ==========
-8-
BIOENVISION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 5 - Intangible Assets - continued
Amortization of patents, licensing rights and other intangible assets amounted
to approximately $208,000 and $231,000 for the three months ended December 31,
2006 and 2005, respectively, and are amortized over periods generally ranging
from 1-20 years. Amortization amounted to $420,000 and $431,000 for the six
months ended December 31, 2006 and 2005, respectively. Amortization for each of
the next five fiscal years will amount to approximately $800,000 annually.
NOTE 6 - Accrued Expenses
Below is a breakdown of our accrued expenses at December 31, 2006 and June 30,
2006.
December 31, June 30,
2006 2006
---- ----
Accrued research and development $6,072,375 $4,389,951
Accrued professional fees 114,775 493,924
Accrued compensation 828,640 702,097
Accrued other 2,098,528 878,473
---------- --------
Total accrued expenses $9,114,318 $6,464,445
========== ==========
Accrued research and development expenses include amounts relating to clinical
trials, pre-clinical operating costs and amounts due on the license to develop,
manufacture, market, distribute and sell Evoltra(R) in Japan and Southeast Asia.
Accrued other includes inventories, sales and marketing costs, royalties due on
product sales and other operating expense accruals.
NOTE 7 - Comprehensive Loss
Our comprehensive loss includes loss applicable to common stockholders and
unrealized gains (losses) from foreign currency translations to the US dollar,
the reporting currency of the Company. The functional currency of Bioenvision
Limited, the Company's wholly-owned subsidiary, organized under the laws of the
United Kingdom with offices in Edinburgh, Scotland, is the Pound Sterling. We
translate assets and liabilities to their US dollar equivalents at rates in
effect at the balance sheet date and record translation adjustments in
accumulated other comprehensive loss. We translate statement of operations
accounts at average rates for the period.
NOTE 8 - Net Loss Per Share of Common Stock Applicable to Common Stockholders
We compute loss per common share in accordance with SFAS No. 128, "Earnings Per
Share" ("SFAS 128"). Basic net loss per share is calculated by dividing net loss
applicable to common stockholders by the weighted average number of common
shares outstanding during the period. Diluted net loss per share is computed
using the weighted average number of common shares and potentially dilutive
common shares outstanding during the periods. As the Company incurred net losses
for the three and six months ended December 31, 2006 and 2005, the basic
earnings per share equals the diluted earnings per share. Options and warrants
to purchase 10,053,314 and 11,234,314 shares of common stock have not been
included in the calculation of net loss per share for the three and six months
ended December 31, 2006 and 2005, respectively, as their effect would have been
anti-dilutive. Additionally, convertible participating preferred stock that is
convertible into 4,500,000 shares of common stock have not been included in the
calculation of net loss per share for each of the three and six months ended
December 31, 2006 and 2005, as their effect would have been anti-dilutive.
NOTE 9 - Geographic Information
We have one operating segment and define geographical regions as countries in
which we operate. Our corporate headquarters in the United States collects
licensing, royalties and research & development contract revenue from our
arrangements with external customers and our co-development partners. Our
wholly-owned subsidiary, Bioenvision Limited, is located in the United Kingdom
and manages our product sales. The following table reconciles our revenues by
geographic region to the consolidated total:
-9-
BIOENVISION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 9 - Geographic Information - continued
Three Months Ended Three Months Ended Six Months Ended Six Months Ended
December 31, December 31, December 31, December 31,
--------------------------------------------------------------------------------------------------------
2006 2005 2006 2005
--------------------------------------------------------------------------------------------------------
United States $ 809,355 $ 543,920 $ 1,799,433 $ 944,050
United Kingdom 3,687,285 547,387 5,561,779 817,475
------------- ------------- --------------- -------------
Total Revenue $ 4,496,640 $ 1,091,307 $ 7,361,212 $ 1,761,525
============= ============= =============== =============
NOTE 10 - Short-term Financing
During the three months ended September 30, 2006, the Company borrowed
$5,000,000 in conjunction with a promissory note signed with our financial
institution. All amounts drawn were fully repaid as of September 30, 2006.
NOTE 11 - License and Co-Development Agreements
Clofarabine (Evoltra(R))
The Company has a license from Southern Research Institute ("SRI") to develop,
manufacture, market, distribute and sell a class of purine nucleoside analogs
which, based on third-party studies conducted to date, may be effective in the
treatment of leukemia, lymphoma and certain solid tumor cancers. The lead
compound of these purine-based nucleosides is known as clofarabine (Evoltra(R)).
The Company received regulatory approval for Evoltra(R) from the European
Medicines Agency on May 31, 2006 under the centralized approval process for
treatment of acute lymphoblastic leukemia, or ALL, in pediatric patients who
have relapsed or are refractory to at least two prior regimens of treatment.
Under the terms of the agreement with SRI, the Company was granted the exclusive
worldwide license, excluding Japan and Southeast Asia, to make, use and sell
products derived from the technology for a term expiring on the date of
expiration of the last patent covered by the license (subject to earlier
termination under certain circumstances), and to utilize technical information
related to the technology to obtain patent and other proprietary rights to
products developed by the Company and by SRI from the technology. Initially, the
Company is developing Evoltra(R) for the treatment of leukemia and lymphoma and
studying its potential role in treatment of myelodysplastic syndrome (MDS) and
solid tumors.
In March 2001, to facilitate the development of Evoltra(R), the Company entered
into a co-development agreement with ILEX Oncology, Inc. our sub-licensor until
it was acquired by Genzyme Corporation ("Genzyme") on December 21, 2004, for the
development of Evoltra(R) in cancer indications. Under the terms of the
co-development agreement, Genzyme is required to pay all development costs in
the United States and Canada, and 50% of approved development costs worldwide
outside the U.S. and Canada (excluding Japan and Southeast Asia), in each case,
for the development of Evoltra(R) in cancer indications. Currently, the Company
has billed but not recorded as a receivable approximately $4,600,000 of revenue
relating to the reimbursement from our co-development partner for certain of our
ongoing research costs in the development of Evoltra(R) outside the United
States. If and when the Company has determined that collectibility is reasonably
assured, the Company will record the revenue. Under the co-development
agreement, the Company offsets these amounts against any royalty which otherwise
would be paid to Genzyme on our U.K. sales. Genzyme is responsible for
conducting all clinical trials and the filing and prosecution of applications
with applicable regulatory authorities in the United States and Canada for
certain cancer indications. The Company retains the right to handle those
matters in all territories outside the United States and Canada and retains the
right to handle these matters in the U.S. and Canada in all non-cancer
indications and certain cancer indications. The Company retained the exclusive
manufacturing and distribution rights in Europe and elsewhere worldwide, except
for the United States and Canada. Under the co-development agreement, Genzyme
will have certain rights if it performs its development obligations in
accordance with that agreement. Under the circumstances, the Company is required
to pay Genzyme a royalty on direct sales outside the U.S., Canada, Japan and
Southeast Asia. In turn, Genzyme, which would have U.S. and Canadian
distribution rights in cancer indications, is paying the Company a royalty on
sales in the U.S. and Canada. Under the terms of the co-development agreement,
Genzyme also pays royalties to SRI based on certain milestones. The Company also
is obligated to pay certain royalties to SRI with respect to Evoltra(R).
-10-
BIOENVISION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 11 - License and Co-Development Agreements - continued
The Company received a nonrefundable upfront payment of $1,350,000 when it
entered into the co-development agreement with Genzyme and received an
additional $3,500,000 in December 2003 when it converted Genzyme's option to
market clofarabine in the U.S. into a sublicense. Upon Genzyme's filing the New
Drug Application for clofarabine with the FDA, the Company received an
additional (i) $2,000,000 in April 2004 and (ii) $2,000,000 in September 2004.
The Company deferred the upfront payment and recognized revenues ratably, on a
straight-line basis over the related service period. The Company has deferred
the milestone payments received to date and recognizes revenues ratably, on a
straight-line basis over the related service period, through March 2021. For
each of the three months ended December 31, 2006 and 2005, the Company
recognized revenues of approximately $110,000 in connection with the milestone
payments received to date. For each of the six months ended December 31, 2006
and 2005, the Company recognized revenues of approximately $220,000 in
connection with the milestone payments received to date.
Deferred costs include royalty payments that became due and payable to SRI upon
the Company's execution of the co-development agreement with Genzyme. The
Company defers all royalty payments made to SRI and recognizes these costs
ratably, on a straight-line basis over the related service period, concurrent
with the revenue that is recognized in connection with these research and
development costs through 2021. The Company recognized approximately $55,000 for
each of the three months ended December 31, 2006 and 2005 and approximately
$110,000 for each of the six months ended December 31, 2006 and 2005.
In September 2006, the Company obtained the exclusive license to develop,
manufacture, market, distribute and sell Evoltra(R) in Japan and Southeast Asia.
We made an initial payment of $2,500,000 cash to SRI upon execution of this
agreement and are obligated to pay SRI additional milestone payments and
royalties during the term of this agreement.
Modrenal(R)
The Company holds an exclusive license, until the expiration of existing and new
patents related to Modrenal(R), to market Modrenal(R) in major international
territories, and an agreement with a United Kingdom company to co-develop
Modrenal(R) for other therapeutic indications. Management believes that
Modrenal(R) currently is manufactured by third-party contractors in accordance
with good manufacturing practices. The Company has no plans to establish its own
manufacturing facility for Modrenal(R), but will continue to use third-party
contractors.
The Company received a nonrefundable upfront payment of $1,250,000 when it
entered into the License and Sublicense Agreement with Dechra Pharmaceuticals
("Dechra") in May 2003. The Company deferred the upfront payment and recognizes
revenues ratably, on a straight-line basis over the related service period,
currently through September 2022. The Company recognized revenues of
approximately $15,000, in connection with the upfront payment from Dechra for
each of the three months ended December 31, 2006 and 2005 and approximately
$30,000, for each of the six months ended December 31, 2006 and 2005.
Deferred costs include royalty payments that became due and payable to Stegram
Pharmaceuticals Ltd. ("Stegram") upon the Company's execution of the License and
Sub-License Agreement with Dechra in May 2003. The Company defers all royalty
payments made to Stegram and recognizes these costs ratably, on a straight-line
basis concurrent with revenue that is recognized in connection with the Dechra
agreement. Research and development costs related to this agreement include
approximately $3,000 for each of the three months ended December 31, 2006 and
2005 and approximately $6,000 for each of the six months ended December 31, 2006
and 2005.
NOTE 12 - Marketing and Distribution Agreement
In March 2006, the Company entered into a Marketing and Distribution Agreement
with Mayne Pharma Limited, a public company in Australia, to develop, market and
distribute Evoltra(R) in Australia and New Zealand in certain cancer
indications. The Company anticipates entering into similar arrangements with
other marketing and distribution partner(s) around the world (outside North
America) to capitalize on the commercial potential of Evoltra(R), with a fully
integrated sales and marketing team being a primary focus for the sales and
marketing partner(s) the Company may select at any time or from time to time.
-11-
BIOENVISION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 13 - Stockholders' Transactions
Convertible Preferred Stock
The Company is required to accrue for and pay a dividend of 5%, subject to
certain adjustments, on its cumulative Series A Convertible Participating
Preferred Stock. The Company has paid the dividend in cash to holders of its
cumulative Series A Convertible Participating Preferred Stock through January
30, 2007.
Common Stock
On November 27, 2006, the Company issued 31,100 shares of common stock to an
officer of the Company pursuant to the terms of his amended employment agreement
dated January 6, 2006. The officer was entitled to receive 50,000 shares upon
the appointment of a new chief financial officer, of which 18,900 shares were
withheld to satisfy the officer's tax liability. In connection with such
issuance we recognized approximately $247,000 as compensation expense for the
three and six months ended December 31, 2006.
Stock Options
The Board of Directors adopted, and the stockholders approved, the 2003 Stock
Incentive Plan at the Annual Meeting held in January 2004. The plan was adopted
to recognize the contributions made by the Company's employees, officers,
consultants, and directors, to provide those individuals with additional
incentive to devote themselves to our future success and to improve the
Company's ability to attract, retain and motivate individuals upon whom the
Company's growth and financial success depends. Under the plan, stock options
may be granted as approved by the Board of Directors or the Compensation
Committee. There are 6,750,000 shares reserved for grants of options under the
plan and, at December 31, 2006, options to purchase 4,494,500 shares of common
stock had been issued. The Company's policy is to issue new shares for option
exercises. Stock options vest pursuant to individual stock option agreements. No
options granted under the plan are exercisable after the expiration of ten years
(or less in the discretion of the Board of Directors or the Compensation
Committee) from the date of the grant. The plan will continue in effect until
terminated or amended by the Board of Directors or until expiration of the plan
on November 17, 2013. Refer to Note 2 for discussion of the Company's
determination of fair value for each stock option granted
During the six months ended December 31, 2006, options to purchase 25,000 of the
Company's common stock at a price of $5.62 per share were granted to members
serving on the Board of Directors. The Company recognized $18,000 and $14,000 as
consulting expense during the three months ended December 31, 2006 and 2005,
respectively, and $27,000 and $28,000 as consulting expense during the six
months ended December 31, 2006 and 2005, respectively, related to options
granted to board members.
Options granted to employees during the six months ended December 31, 2006
totaled 435,000. Included in this total are 350,000 stock options at an exercise
price of $4.96 per share granted to an officer of the Company in conjunction
with his employment agreement dated November 27, 2006 to serve as chief
financial officer. The Company recognized approximately $273,000 as compensation
expense during the three and six months ended December 31, 2006 in connection
with said grant. Total compensation expense for options granted to employees was
$873,000 and $482,000 for the three months ended December 31, 2006 and 2005,
respectively, and $1,487,000 and $941,000 for the six months ended December 31,
2006 and 2005, respectively.
There were no options exercised during the six months ended December 31, 2006.
During the six months ended December 31, 2005, certain non-employee holders of
options exercised pursuant to the cashless exercise feature available to such
option holders and the Company issued approximately 191,196 shares of its common
stock in connection therewith.
Warrants
On August 4, 2004, the Company issued a warrant to a consultant pursuant to
which said consultant has the right to purchase 40,000 shares of the Company's
common stock at a price of $7.22 per share, of which 20,000 warrants vested
immediately and 20,000 vest upon satisfaction of certain milestones included in
the warrant. No milestones were met during the three and six months ended
December 31, 2006 and 2005.
On August 9, 2004, the Company issued two warrants to a consultant pursuant to
which said consultant has the right to purchase an aggregate of 45,000 shares of
the Company's common stock at a price of $6.10 per share. All milestones were
met as of September 30, 2005 related to said warrants. The Company recognized
consulting expense of approximately $0 and $9,000 for the six months ended
December 31, 2006 and 2005, respectively.
-12-
BIOENVISION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 13 - Stockholders' Transactions - continued
During the six months ended December 31, 2006, certain warrant holders exercised
their warrants to acquire 1,495,024 shares of the Company's common stock. The
Company received proceeds of $510,000 from the exercise of such warrants. During
the six months ended December 31, 2005, certain warrant holders exercised their
warrants to acquire 17,599 shares of the Company's common stock. The Company
received proceeds of approximately $76,000 from the exercise of such warrants.
Shareholder Receivable
Subsequent to the exercise of an option by a former member of management on
September 27, 2005, the Company became aware of the statutorily required
withholding taxes due to the UK tax regulatory authority. In order to maintain
compliance with the UK tax regulatory authority, the Company remitted the taxes
due on behalf of the former employee in January 2006 and, in return, received a
promissory note from the former member of management dated November 28, 2005 for
$340,606, of which $40,606 has been collected. The payment of these taxes was
not part of the option agreement. The Company has classified such note as a
shareholder receivable in the equity section of the condensed consolidated
balance sheets. During the three months ended December 31, 2006, the Company
reserved for the remaining balance outstanding.
-13-
BIOENVISION, INC. AND SUBSIDIARIES
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Except for historical information contained herein, this quarterly report on
Form 10-Q contains forward-looking statements within the meaning of the Section
21E of the Securities and Exchange Act of 1934, as amended, which involve
certain risks and uncertainties. Forward-looking statements are included with
respect to, among other things, the Company's current business plan and
"Management's Discussion and Analysis of Results of Operations." These
forward-looking statements are identified by their use of such terms and phrases
as "intends," "intend," "intended," "goal," "estimate," "estimates," "expects,"
"expect," "expected," "project," "projected," "projections," "plans,"
"anticipates," "anticipated," "should," "designed to," "foreseeable future,"
"believe," "believes" and "scheduled" and similar expressions. The Company's
actual results or outcomes may differ materially from those anticipated. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date the statement was made. The Company undertakes
no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
The following discussion and analysis of significant factors affecting the
Company's operating results, liquidity and capital resources should be read in
conjunction with the accompanying financial statements and related notes.
We are a product-oriented biopharmaceutical company primarily focused upon
the acquisition, development and marketing of compounds and technologies for the
treatment of cancer, autoimmune disease and infection. Our product pipeline
includes Evoltra(R) (Clofarabine), Modrenal(R) (for which Bioenvision has
obtained regulatory approval for marketing in the United Kingdom for the
treatment of post-menopausal breast cancer following relapse to initial hormone
therapy), and certain anti-infective technologies including the OLIGON(R)
technology; an advanced biomaterial that has been incorporated into various FDA
approved medical devices and Suvus(R), an antimicrobial agent currently in
clinical development for refractory chronic hepatitis C infection.
Evoltra(R) is our lead product. In May 2006 the European Medicines Agency
approved Evoltra(R) for the treatment of acute lymphoblastic leukemia (ALL) in
pediatric patients who have relapsed or are refractory to at least two prior
regimens. The licensed indication includes patients who were less than 21 years
of age at the time of initial diagnosis of their leukemia. Evoltra(R) has been
granted orphan drug designation, providing marketing exclusivity for 10 years in
Europe, which 10-year period commenced in May 2006 upon our receipt of EMEA
marketing approval. We have a direct sales force in the U.K. and a dedicated
sales force through Innovex in several other countries within the E.U. We will
continue to expand either our direct sales force or our dedicated sales force
through Innovex as we continue to work through pricing and reimbursement in
individual countries within the E.U.
In March 2006, we entered into a Marketing and Distribution Agreement with
Mayne Pharma Limited ("Mayne"), a public company in Australia, pursuant to which
we have granted and Mayne has received certain marketing rights to to sell,
market and distribute Evoltra(R) (Clofarabine) in Australia and New Zealand in
certain cancer indications. We anticipate entering into similar arrangements
with other marketing and distribution partner(s) around the world from time to
time who have a fully integrated sales and marketing force in each such
territory to further capitalize on the commercial potential of Evoltra(R).
In September 2006, the Company executed a License Agreement with SRI,
pursuant to which the Company successfully licensed the manufacturing, marketing
and distribution rights to clofarabine in Japan and Southeast Asia (the "Japan
License"). The marketing rights in Japan and Southeast Asia had not been granted
by SRI in its history and the Company considers the addition of these rights to
be a significant development and a significant core asset. Since taking on these
rights, the Company has organized Bioenvision JapanCo., Ltd., a wholly-owned
subsidiary of the Company ("JapanCo"), and appointed Mr. Yashimaru Yamamoto as
its director in charge of corporate and product development for JapanCo. Mr.
David P. Luci, the Company's Executive Vice President and General Counsel,
serves as Chairman of JapanCo and is responsible for JapanCo's early stage
corporate and product development activities within the Company.
We also are developing Evoltra(R) for the treatment of adult acute myeloid
leukemia (AML) as first-line therapy. The Company has completed enrollment of
its pivotal Phase II clinical trial for the treatment of adult AML in elderly
patients unsuitable for intensive chemotherapy and filed a Marketing
Authorization Application in early calendar Q1 2007 for this indication - the
Company's first label-extension for Evoltra(R).
Also, in conjunction with our North American co-development partners, Genzyme
Corporation, clofarabine (Evoltra(R)) is in clinical development for the
treatment of myelodysplastic syndrome (MDS), chronic lymphocytic leukemia (CLL),
chronic myeloid leukemia (CML), non-Hodgkin's lymphoma (NHL), multiple myeloma
(MM), solid tumors and as a preconditioning regimen for transplantation.
Although we are not directly involved with these studies, Genzyme is required to
share the data generated thereunder in accordance with the terms of our
co-development agreement.
-14-
Bioenvision has completed preclinical development of a gel formulation of
Evoltra(R) and has initiated Phase I clinical development of the gel in the
treatment of psoriasis. Bioenvision is planning further worldwide development of
Evoltra(R) in psoriasis and other autoimmune diseases.
Bioenvision holds an exclusive worldwide license for clofarabine. Bioenvision
granted an exclusive sublicense to Genzyme to co-develop clofarabine for certain
cancer indications in the US and Canada. Genzyme is commercializing clofarabine
for certain cancer indications in the US and Canada under the brand name
Clolar(R). Bioenvision holds an exclusive license in the US and Canada for all
non-cancer indications and certain cancer indications. Bioenvision originally
obtained clofarabine development and commercialization rights under patents held
by Southern Research Institute.
In the U.S., in December 2004, the Food and Drug Administration, or FDA,
approved clofarabine, for the treatment of pediatric acute lymphoblastic
leukemia, or ALL, in patients who are relapsed or refractory to at least two
prior regimens of treatment. We believe clofarabine was the first new medicine
initially approved in the U.S., for children with leukemia in more than a
decade. Our U.S. partner, Genzyme Corporation, received Orphan Drug designation
status for clofarabine in the U.S., providing marketing exclusivity for 7 1/2
years. Genzyme is marketing clofarabine under the brand name Clolar(R) in the
U.S.
We are marketing our second product, Modrenal(R)(trilostane), in the United
Kingdom, or U.K., through our force of six sales specialists. Modrenal(R) is
approved in the U.K. for the treatment of post-menopausal advanced breast cancer
following relapse to initial hormone therapy. Modrenal is also approved in the
U.K. and Germany for the treatment of hypercortisolism but is not currently
marketed for this indication. Bioenvision has initiated a clinical study, at the
Massachussets General Hospital, of the effects of hypercortisolism in women with
anorexia nervosa and stress-induced amenorrhoea. Bioenvision is planning the
commercial development of Modrenal in conditions known to be associated with
increased cortisol production.
With the approval of Evoltra(R) under the EMEA's centralized process, we
intend to continue to expand our dedicated sales force working for Innovex by
adding six to 10 sales specialists in each of five other key regions within the
E.U. which include the countries of France, Germany, Italy, Spain, Portugal,
Netherlands, Austria, Belgium, Denmark and Sweden. Further, our sales force is
intended to penetrate all of the other markets within the E.U. upon establishing
traction in the E.U.'s major markets. Initially, outside the U.K., we maintain a
fully dedicated sales force through Innovex, an affiliate of Quintiles
Corporation, which we intend to convert to a direct sales force of our own by
fourth quarter of calendar 2007 provided our corporate development and certain
market conditions allow for such a conversion.
In addition to Evoltra(R) and Modrenal(R), we are currently in clinical
development of Suvus(R) for chronic hepatitis C. This product is also in
pre-clinical development for the treatment of West Nile Virus and influenza.
Over the next 12 months, we intend to continue our internal growth strategy
to provide the necessary capabilities which will be required to pursue the
expanded development programs described above.
We have made significant progress in developing our product portfolio over
the past twelve months, and have multiple products in clinical trials. We have
incurred losses during this early stage of our operations.
We anticipate that revenues derived from Evoltra(R) will permit us to further
develop the other products currently in our product pipeline. In addition to
clofarabine and Modrenal(R), we are performing development work Suvus(R) for the
treatment of chronic hepatitis C. The work to date on these compounds has been
limited because of the need to concentrate on Evoltra(R), but management
believes these compounds have potential value. With Suvus(R) an
investigator-sponsored phase II clinical study has been completed in patients
with hepatitis C viral infection. We have had discussions with potential product
partners from time to time and plan to continue to explore the possibilities for
co-development and sub-licensing in order to implement our development plans. In
addition, we believe that some of our products may have applications in treating
non-cancer conditions in humans and in animals. Those conditions are outside our
core business focus and we do not presently intend to devote a substantial
portion of our resources to addressing those conditions.
In May 2003, we entered into a License and Sub-License Agreement with Dechra
Pharmaceuticals, plc, or Dechra, pursuant to which we sub-licensed to Dechra the
marketing and development rights to Vetoryl(R) (trilostane), solely with respect
to animal health applications, in the U.S. and Canada. We received $1,250,000 in
cash, together with future milestone and royalty payments which are contingent
upon the occurrence of certain events. We intend to continue to try and
capitalize on these types of opportunities as they arise. The Company also owns
rights to OLIGON(R) technology and we have had discussions with potential
product licensing partners from time to time, and plan to continue to explore
the possibilities for co-development and sub-licensing in order to implement our
development plans.
You should consider the likelihood of our future success to be highly
speculative in light of our limited operating history, as well as the limited
resources, problems, expenses, risks and complications frequently encountered by
similarly situated companies. To address these risks, we must, among other
things:
o satisfy our future capital requirements for the implementation of our
business plan;
-15-
o commercialize our existing products;
o complete development of products presently in our pipeline and obtain
necessary regulatory approvals for use;
o implement and successfully execute our business strategy to commercialize
products;
o establish and maintain our client base;
o continue to develop new products and upgrade our existing products;
o continue to establish and maintain relationships with manufacturers for our
products;
o respond to industry and competitive developments; and
o attract, retain, and motivate qualified personnel.
We may not be successful in addressing these or any other risks associated
with our business and/or products. If we were unable to do so, our business
prospects, financial condition and results of operations would be materially
adversely affected. The likelihood of our success must be considered in light of
the development cycles of new pharmaceutical products and technologies and the
competitive and regulatory environment in which we operate.
Results of Operations
The Company recorded revenue for the three months ended December 31, 2006
and 2005 of approximately $4,497,000 and $1,091,000, respectively, representing
an increase of approximately $3,406,000. This increase is due to increased
product sales of $3,513,000 primarily as a result of Evoltra's approval in
Europe. Prior to the approval, all product sales through the named patient
program were reflected as research and development contract revenue. The Company
recorded revenue for the six months ended December 31, 2006 and 2005 of
approximately $7,361,000 and $1,762,000, respectively, representing an increase
of approximately $5,559,000. This increase is due to increased product sales of
$5,192,000 as a result of Evoltra's approval in Europe and an increase of
approximately $855,000 in license and royalty revenue primarily due to increased
royalties on US sales received from our co-development partner.
The cost of products sold for the three months ended December 31, 2006 and
2005 were approximately $898,000 and $438,000, respectively, representing an
increase of approximately $460,000. The cost of products sold reflects the
direct costs associated with our product sales and includes royalty expense of
$759,000 and $331,000 for the three months ended December 31, 2006 and 2005
respectively. The cost of products sold for the six months ended December 31,
2006 and 2005 were approximately $1,320,000 and $766,000, respectively,
representing an increase of approximately $554,000. The cost of products sold
reflects the direct costs associated with our product sales and includes royalty
expense of $1,120,000 and $532,000 for the six months ended December 31, 2006
and 2005, respectively. All direct costs associated with clofarabine sales were
expensed in periods prior to the E.U. approval.
Research and development costs for the three months ended December 31, 2006
and 2005 were approximately $4,315,000 and $2,011,000, respectively,
representing an increase of approximately $2,304,000. Research and development
costs for the six months ended December 31, 2006 and 2005 were approximately
$13,584,000 and $4,442,000, respectively, representing an increase of
approximately $9,142,000. Our research and development costs include costs
associated with the six products shown in the table below, three of which the
Company currently devotes time and resources:
Three Months Ended Six Months Ended
December 31, December 31,
Product 2006 2005 2006 2005
---- ---- ---- ----
Evoltra(R) $ 3,267,000 $ 1,291,000 $ 11,750,000 $ 3,429,000
Modrenal(R) 1,046,000 680,000 1,818,000 916,000
Suvus(R) 2,000 40,000 16,000 97,000
Velostan - - - -
OLIGON(R) - - - -
Gene Therapy
- - - -
------------ ----------- ------------ -----------
Total $ 4,315,000 $ 2,011,000 $ 13,584,000 $ 4,442,000
============ =========== ============ ===========
-16-
Evoltra(R) research and development costs for the three months ended
December 31, 2006 and 2005 were approximately $3,267,000 and $1,291,000
respectively, representing an increase of approximately $1,976,000. The increase
is primarily due to an increase in our development activities and clinical
trials of Evoltra(R) in Europe, including the process of filing for approval in
our first label extension for Evoltra, the enrollment of patients in our Phase
II trial in Europe for the treatment of adult AML in elderly patients unfit for
intensive chemotherapy, and certain non-cash expenses incurred for stock-based
compensation relating to stock options granted to employees that devote their
time to research and development activities. Evoltra(R) research and development
costs for the six months ended December 31, 2006 and 2005 were approximately
$11,750,000 and $3,429,000, respectively, representing an increase of
approximately $8,321,000. This substantial increase is primarily due to
approximately $4,000,000 of costs recorded in connection with the acquisition of
the Japanese and Southeast Asian rights to Evoltra(R) which occurred in the
quarter ended September 30, 2006 as well as the aforementioned increase in the
development activities and clinical trials of Evoltra(R) in Europe.
Modrenal(R) research and development costs for the three months ended
December 31, 2006 and 2005 were approximately $1,046,000 and $680,000,
respectively, representing an increase of $366,000. Modrenal(R) research and
development costs for the six months ended December 31, 2006 and 2005 were
approximately $1,818,000 and $916,000, respectively, representing an increase of
$902,000. The increase is due primarily to the costs associated with our Phase
II clinical trial in pre-menopausal breast cancer and Phase IV clinical trial in
patients with post-menopausal breast cancer, which are each being conducted in
the U.K.
Suvus(R) research and development costs for the three months ended December
31, 2006 and 2005 were approximately $2,000 and $40,000, respectively,
representing a decrease of $38,000. Suvus(R) research and development costs for
the six months ended December 31, 2006 and 2005 were approximately $16,000 and
$97,000 respectively, representing a decrease of $81,000. The decrease primarily
reflects the costs associated with the investigator sponsored Phase II clinical
trial conducted in Egypt prior to the six months ended December 31, 2006.
There were no research and development costs associated with Velostan for
the three and six months ended December 31, 2006 and 2005 because the Company
has been working with its vendors on revising the manufacturing process to
develop a raceamic form of the compound for use in the Company's clinical
development program. No assurance can be given the Company will be able to
create the L-form Velostan required for the clinical development program or, if
it can, the timing of such development.
There was no research and development costs for OLIGON(R) for the three and
six months ended December 31, 2006 and 2005 due to the Company's focus on
Evoltra(R) and Modrenal(R) during this period.
There were no research and development costs associated with Gene Therapy
for the three and six months ended December 31, 2006 and 2005 due to the
Company's focus on Evoltra(R) and Modrenal(R) during this period. We anticipate
that revenue derived from our two lead drugs, clofarabine and Modrenal(R) will
permit us to further develop these products.
The clinical trials and development strategy for Evoltra(R) and
Modrenal(R), in each case, is anticipated to cost several million dollars and
will continue for several years based on the number of clinical indications
within which we plan to develop these drugs. Currently, management cannot
estimate the timing or costs associated with these projects because many of the
variables, such as interaction with regulatory authorities and response rates in
various clinical trials, are not predictable. Total costs to date for each of
our projects is as follows: (i) clofarabine research and development costs have
been approximately $35,191,000; (ii) Modrenal(R) research and development costs
have been approximately $10,470,000; (iii) Velostan research and development
costs have been approximately $380,000; (iv) Suvus(R) research and development
costs have been approximately $524,000; (v) OLIGON research and development
costs have been approximately $24,000; and (vi) Gene Therapy research and
development costs have been approximately $451,000.
Selling, general and administrative expenses for the three months ended
December 31, 2006 and 2005 were approximately $6,322,000 and $2,582,000,
respectively, representing an increase of $3,740,000. Selling, general and
administrative expenses for the six months ended December 31, 2006 and 2005 were
approximately $11,791,000 and $5,470,000, respectively, representing an increase
of $6,321,000. This increase is primarily relating to the costs associated with
the expanded sales and marketing and administrative infrastructure and costs
associated with the internal build out of the Company. Other factors include an
increase in stock-based compensation expense due to the issuance of common stock
to an officer of the Company pursuant to the terms of his amended employment
agreement and the granting of stock options to an officer as inducement to serve
as the chief financial officer to the Company.
Depreciation and amortization expense for the three months ended December
31, 2006 and 2005 was approximately $240,000 and $257,000, respectively,
representing a decrease of $17,000. Depreciation and amortization expense for
each of the six months ended December 31, 2006 and 2005 was approximately
$482,000.
-17-
Liquidity and Capital Resources
We anticipate that we will continue to incur significant operating losses
for the foreseeable future. There can be no assurance as to whether or when we
will generate material revenue or achieve profitable operations.
On December 31, 2006, we had cash and cash equivalents and short term
investments totaling, in the aggregate, approximately $29,114,000. Management
believes the Company has sufficient cash and cash equivalents, short-term
investments and working capital to continue currently planned operations over
the next 12 months.
However, we may need additional financing to continue to fund the research
and development and marketing programs for our products and to generally expand
and grow our business. Because we will be required to fund additional operating
losses in the foreseeable future, our financial position will continue to
deteriorate. We cannot be sure that we will be able to find financing in the
future or, if found, such funding may not be on terms favorable to us. If
adequate financing is not available, we may be required to delay, scale back, or
eliminate some of our research and development programs, to relinquish rights to
certain technologies or products, or to license third parties to commercialize
technologies or products that we would otherwise seek to develop. Any inability
to obtain additional financing, if required, would have a material adverse
effect on our ability to continue our operations and implement our business
plan.
Although we do not currently plan to acquire or obtain licenses for new
technologies, if any such opportunity arises and our Board deems it to be in our
interests to pursue such an opportunity, it is possible that additional
financing would be required for such a purpose.
For the six months ended December 31, 2006 and 2005, net cash used in
operating activities was approximately $16,891,000 and $10,517,000,
respectively, representing an increase of approximately $6,374,000. This
increase is primarily due to increased costs associated with (i) our expanded
research and development activity, (ii) selling, general and administrative
expenses, including an increase in costs associated with the expanded sales and
marketing and administrative infrastructure and costs associated with the
internal build out of the Company and (iii) cash paid for insurance premiums.
For the six months ended December 31, 2006 and 2005, net cash provided by (used
in) investing activities was approximately $20,863,000 and $(17,782,000),
respectively, representing an increase of approximately $38,645,000. This
increase is primarily due to the redemption of our certificates of deposit
during the period. For the six months ended December 31, 2006 and 2005, net cash
provided by (used in) financing activities was approximately $381,000 and
$(169,000) representing an increase of $550,000. This increase is primarily due
to proceeds from the exercise of warrants and cash received on a promissory note
due from a shareholder.
The Company has the following commitments due over the next five fiscal
years:
2007 2008 2009 2010 2011
Operating Leases $ 570,535 $ 907,303 $ 378,399 $ 181,391 $ -
Contractual obligations 115,705 1,000,000 250,000 500,000 4,000,000
-----------------------------------------------------------------------------
Totals $ 686,240 $ 1,907,303 $ 628,399 $ 681,391 $ 4,000,000
=============================================================================
The contractual obligations relate to minimum payments due for research
conducted on Modrenal and minimum royalties due on our licenses.
Off-balance sheet arrangements
We have no off-balance sheet arrangements.
Other Events
As described in the Company's current report on Form 8-K, filed on October 11,
2006, effective October 6, 2006, the board of directors (the "Board") of the
Company voted to increase the number of directors from 5 to 6. On the same date,
the Board, in accordance with the Company's director nomination policy,
unanimously approved the election of Joseph P. Cooper as a director of
-18-
the Company to fill the newly created vacancy on the Board. The Board has
determined that Mr. Cooper is "independent" under the Nasdaq Global Select
Market and Nasdaq Global Market Listing Standards. There is no arrangement or
understanding between Mr. Cooper and any other persons pursuant to which he was
selected as a director. There are no relationships between Mr. Cooper and the
Company or its subsidiaries that would require disclosure pursuant to Item
404(a) of Regulation S-K. In consideration for Mr. Cooper agreeing to serve on
the Board, on October 6, 2006, the Company granted him an option to purchase
25,000 shares of the Company's common stock, which will vest in equal portions
on the first and second anniversary of the grant date.
As further described in the Company's current report on Form 8-K, filed on
November 30, 2006, on November 28, 2006, the Company announced the appointment
James S. Scibetta to the post of Chief Financial Officer of the Company. Mr.
Scibetta began his employment with Bioenvision on December 4, 2006.
Subsequent Events
In January 2007, the Company entered into a licensing arrangement with
Foster Corporation ("Foster") to license out exclusive rights to manufacture,
market and distribute the Company's proprietary anti-microbial OLIGON(R)
technology. Under the terms of the license agreement, Bioenvision will have a
revenue sharing arrangement on future sublicenses and a royalty on all sales by
Foster, a Connecticut-based compounder of biomedical materials. Foster is
required to comply with annual minimum marketing and research and development
expenditures within the first five years of the term of the license.
As further described in the Company's current report on Form 8-K, filed on
February 6, 2007, on February 5, 2007, the Company announced the appointment of
Mr. Yoshimaru Yamamoto to the post of Director and General Manager of
Bioenvision JapanCo., Ltd.
On February 7, 2007, the Company announced it has filed with the European
Medicines Agency (EMeA) to expand the Evoltra(R)(clofarabine) label to include
the treatment of acute myeloid leukemia (AML) in patients who are greater than
or equal to 65-years-old and have one or more of the following: adverse
cytogenetics, secondary AML, aged greater than or equal to 70 years, or have
greater than or equal to 1 significant comorbidity.
Recent Accounting Pronouncements
In December 2006, the Financial Accounting Standards Board ("FASB") issued
a FASB Staff Position Emerging Issues Task Force ("EITF") Issue No.
00-19-2"Accounting for Registration Payment Arrangements" ("FSP 00-19-2") which
addresses an issuer's accounting for registration payment arrangements. FSP
00-19-2 specifies that the contingent obligation to make future payments or
otherwise transfer consideration under a registration payment arrangement,
whether issued as a separate agreement or included as a provision of a financial
instrument or other agreement, should be separately recognized and measured in
accordance with FASB Statement No. 5 "Accounting for Contingencies". The
guidance in FSP 00-19-2 amends FASB Statements No. 133, "Accounting for
Derivative Instruments and Hedging Activities", and No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity", and FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others" to include scope exceptions for registration payment arrangements. FSP
00-19-2 is effective immediately for registration payment arrangements and the
financial instruments subject to those arrangements that are entered into or
modified subsequent to the date of issue of FSP 00-19-2. For registration
payment arrangements and financial instruments subject to those arrangements
that were entered into prior to the issuance of FSP 00-19-2, this is effective
for financial statements issued for fiscal years beginning after December 15,
2006, and interim periods within those fiscal years. The Company has analyzed
the provisions of FSP 00-19-2 and determined that it will not have a material
effect on the Company's consolidated financial statements.
In September 2006, the FASB issued Statement of Financial Accounting
Standards No. 157, "Fair Value Measurements" ("SFAS 157"). SFAS 157 defines fair
value, establishes a framework for measuring fair value in accordance with
generally accepted accounting principles and expands disclosures about fair
value measurements. The provisions of SFAS 157 are effective for fiscal years
beginning after November 15, 2007. The Company is currently evaluating the
impact, if any, of the provisions of SFAS 157.
In September 2006, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulleting No. 108 ("SAB 108"). SAB 108 provides interpretive
guidance on how the effects of the carryover or reversal of prior year
misstatements should be considered in quantifying a potential current year
misstatement. Prior to SAB 108, companies might evaluate the materiality of
financial statement misstatements using either the income statement or balance
sheet approach, with the income statement approach focusing on new misstatements
added in the current year, and the balance sheet approach focusing on the
cumulative amount of misstatement present in a company's balance sheet.
Misstatements that would be material under one approach could be viewed as
immaterial under another approach, and not be corrected. SAB 108 now requires
that companies view financial statement misstatements as material if they are
material according to either the income statement or balance sheet approach. The
Company has analyzed SAB 108 and determined that it will have no impact on the
reported results of operations or financial condition of the Company.
-19-
In June 2006, the FASB ratified the consensus of EITF Issue No. 06-3, "How
Taxes Collected from Customers and Remitted to Governmental Authorities Should
Be Presented in the Income Statement" ("EITF 06-3"). EITF 06-3 indicates that
the income statement presentation on either a gross basis or a net basis of the
taxes within the scope of the issue is an accounting policy decision. The
Company's accounting policy is to present the taxes within the scope of EITF
06-3 on a net basis. The adoption of EITF 06-3 in the second fiscal quarter of
2007 did not result in a change to the Company's accounting policy and,
accordingly, did not have any effect on the Company's consolidated financial
statements.
In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109 ("FIN
48"). This Interpretation clarifies the accounting for uncertainty in income
taxes recognized in an enterprise's financial statements in accordance with FASB
Statement No. 109, Accounting for Income Taxes. This Interpretation prescribes
that a company should use a more likely than not recognition threshold based on
the technical merits of the tax position taken. Tax positions that meet the more
likely than not recognition threshold should be measured in order to determine
the tax benefit to be recognized in the financial statements. FIN 48 is
effective in fiscal years beginning after December 15, 2006. We do not expect
the adoption of FIN 48 to have a material impact on the results of operations or
financial condition of the Company.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
Our excess cash is invested in Certificates of Deposit with various
short-term maturities. We hold no derivative financial instruments and we do not
currently engage in hedging activities. As of December 31, 2006, we do not have
any outstanding debt. Accordingly, due to the maturity and credit quality of our
investments, we are not subjected to any substantial risk arising from changes
in interest rates, currency exchange rates and commodity and equity prices.
However, the Company does have some exposure to foreign currency rate
fluctuations arising from maintaining an office for the Company's U.K. based,
wholly-owned subsidiary which transacts business in the local functional
currency. Management periodically reviews such foreign currency risk and to date
has not undertaken any foreign currency hedges through the use of forward
exchange contracts or options and does not foresee doing so in the near future.
ITEM 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our principal executive officer and principal financial officer have
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended) as of the end of the period covered
by this quarterly report on Form 10-Q. Based on this evaluation our principal
executive officer and principal financial officer concluded that these
disclosure controls and procedures are effective and designed to ensure that the
information required to be disclosed in our reports filed or submitted under the
Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
and reported within the requisite time periods.
Changes in Internal Controls
During the quarterly period ended December 31, 2006, the following change
occurred in our internal controls over financial reporting that materially
affected or are reasonably likely to materially affect our internal control over
financial reporting: On November 28, 2006, the Company announced the appointment
of a new Chief Financial Officer of the Company. The new CFO began his
employment with Bioenvision on December 4, 2006. On that date, the Company's
current Chief Financial Officer, General Counsel and Corporate Secretary was
promoted to the position of Executive Vice President, General Counsel and
Corporate Secretary, focusing on business and product development activities and
continuing to manage the Company's legal and regulatory matters.
-20-
BIOENVISION, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
We are not currently engaged in any legal proceedings.
Item 1A. Risk Factors
None.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
ITEM 3. Defaults Upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
a) The Company held its annual meeting of stockholders on December 15, 2006.
(b)and (c) At the annual meeting of stockholders on December 15, 2006, our
stockholders considered and approved:
1. A proposal to elect six directors (identified in the table below)
to serve until the next annual meeting of stockholders or until
such directors' successors are elected and shall have been duly
qualified ("Proposal 1");
2. A proposal to approve and adopt an amendment to our 2003 stock
incentive plan to increase the number of shares to be granted
under the plan from 4,500,000 to 6,750,000 ("proposal 2"); and
3. A proposal to ratify the appointment of J.H. Cohn LLP as our
independent auditors for the fiscal year ending June 30, 2007
("Proposal 3").
The following table sets forth the number of votes in favor, the number of votes
opposed, and the number of abstentions (or votes withheld in the case of the
election of directors) with respect to each of the foregoing proposals.
Proposal Votes in Favor Votes Opposed Abstentions(withheld)
-------- ------------------ ----------------- ----------
Proposal 1
Christopher B. Wood 36,765,929 5,699,168
Thomas Scott Nelson 35,647,020 6,818,077
Michael Kauffman 37,894,003 4,571,094
Steven A. Elms 37,872,028 4,593,069
Andrew N. Schiff 37,877,303 4,587,794
Joseph P. Cooper 38,448,593 4,016,504
Proposal 2 18,473,134 7,486,287 63,991
Proposal 3 42,301,021 1,161,592 98,230
ITEM 5. Other Information
None.
-21-
ITEM 6. EXHIBITS
Exhibit
Number Description
------- --------
2.1 Acquisition Agreement between Registrant and Bioenvision,
Inc. dated December 21, 1998 for the acquisition of
7,013,897 shares of Registrant's Common Stock by the
stockholders of Bioenvision, Inc. (1)
2.2 Amended and Restated Agreement and Plan of Merger, dated
as of February 1, 2002, by and among Bioenvision, Inc.,
Bioenvision Acquisition Corp. and Pathagon, Inc. (5)
3.1 Certificate of Incorporation of Registrant. (2)
3.1(a) Amendment to Certificate of Incorporation filed January
29, 1999. (3)
3.1(b) Certificate of Correction to the Certificate of
Incorporation, filed March 15, 2002 (6)
3.1(c) Certificate of Amendment to the Certificate of
Incorporation, filed April 30, 2002 (6)
3.1(d) Certificate of Designations, Preferences and Rights of
series A Preferred Stock (6)
3.1(e) Certificate of Amendment to the Certificate of
Incorporation, filed January 14, 2004 (15)
3.2 Amended and Restated By-Laws of the Registrant. (13)
4.1 Registration Rights Agreement, dated as of February 1,
2002, by and among Bioenvision, Inc., the former
shareholders of Pathagon, Inc. party thereto, Christopher
Wood, Bioaccelerate Limited, Jano Holdings Limited and
Lifescience Ventures Limited. (8)
4.2 Stockholders Lock-Up Agreement, dated as of February 1,
2002, by and among Bioenvision, Inc., the former
shareholders of Pathagon, Inc. party thereto, Christopher
Wood, Bioaccelerate Limited, Jano Holdings Limited and
Lifescience Ventures Limited. (8)
4.3 Form of Securities Purchase Agreement by and among
Bioenvision, Inc. and certain purchasers, dated as of May
7, 2002. (6)
4.4 Form of Registration Rights Agreement by and among
Bioenvision, Inc. and certain purchasers, dated as of May
7, 2002. (6)
4.5 Form of Warrant (6)
4.6 Registration Rights Agreement, dated April 2, 2003, by
and between Bioenvision, Inc. and RRD International, LLC
(14)
4.7 Warrant, dated April 2, 2003, made by Bioenvision, Inc.
in favor of RRD International, LLC (14)
4.8 Common Stock and Warrant Purchase Agreement, dated as of
March 22, 2004, by and among Bioenvision, Inc. and the
Investors set forth on Schedule I thereto (16)
-22-
4.9 Registration Rights Agreement, dated March 22, 2004, by
and between Bioenvision, Inc. and the Investors set forth
on Schedule I thereto (16)
4.10 Form of Warrant (16)
4.11 Bioenvision, Inc. 2003 Stock Incentive Plan (17)
10.1 Pharmaceutical Development Agreement, dated as of June
10, 2003, by and between Bioenvision, Inc. and Ferro
Pfanstiehl Laboratories, Inc.
10.2 Co-Development Agreement between Bioheal, Ltd. and
Christopher Wood dated May 19, 1998. (3)
10.3 Master Services Agreement, dated May 14, 2003, by and
between PennDevelopment Pharmaceutical Services Limited
and Bioenvision, Inc.
10.4 Co-Development Agreement between Stegram Pharmaceuticals,
Ltd. and Bioenvision, Inc. dated July 15, 1998. (3)
10.5 Co-Development Agreement between Southern Research
Institute and Eurobiotech Group, Inc. dated August 31,
1998. (3)
10.5(a) Agreement to Grant License from Southern Research
Institute to Eurobiotech Group, Inc. dated September 1,
1998. (3)
10.6 License and Sub-License Agreement, dated as of May 13,
2003, by and between Bioenvision, Inc. and Dechra
Pharmaceuticals, plc
10.7 Employment Agreement between Bioenvision, Inc. and
Christopher B. Wood, M.D., dated December 31, 2002 (3)
10.8 Employment Agreement between Bioenvision, Inc. and David
P. Luci, dated March 31, 2003 (14)
10.9 Securities Purchase Agreement with Bioaccelerate Inc
dated March 24, 2000. (4)
10.10 Engagement Letter Agreement, dated as of November 16,
2001, by and between Bioenvision, Inc. and SCO Securities
LLC. (7)
10.11 Security Agreement, dated as of November 16, 2001, by
Bioenvision, Inc. in favor of SCO Capital Partners LLC.
(7)
10.12 Commitment Letter, dated November 16, 2001, by and
between SCO Capital Partners LLC and Bioenvision, Inc.
(7)
10.13 Senior Secured Grid Note, dated November 16, 2001, by
Bioenvision, Inc. in favor of SCO Capital Partners LLC.
(7)
10.14 Exclusive License Agreement by and between Baxter
Healthcare Corporation, acting through its Edwards
Critical-Care division, and Implemed, dated as of May 6,
1997. (12)
10.15 License Agreement by and between Oklahoma Medical
Research Foundation and bridge Therapeutic Products,
Inc., dated as of January 1, 1998. (12)
10.16 Amendment No. 1 to License Agreement by and among
Oklahoma Medical Research Foundation, Bioenvision, Inc.
and Pathagon, Inc., dated May 7, 2002. (12)
-23-
10.17 Inter-Institutional Agreement between Sloan-Kettering
Institute for Cancer Research and Southern Research
Institute, dated as of August 31, 1998. (12)
10.18 License Agreement between University College London and
Bioenvision, Inc., dated March 1, 1999. (12)
10.19 Research Agreement between Stegram Pharmaceuticals Ltd.,
Queen Mary and Westfield College and Bioenvision, Inc.,
dated June 8, 1999 (12)
10.20 Research and License Agreement between Bioenvision, Inc.,
Velindre NHS Trust and University College Cardiff
Consultants, dated as of January 9, 2001. (12)
10.21 Co-Development Agreement, between Bioenvision, Inc. and
ILEX Oncology, Inc., dated March 9, 2001. (12)
10.22 Amended and Restated Agreement and Plan of Merger, dated
as of February 1, 2002, among Bioenvision, Inc.,
Bioenvision Acquisition Corp. and Pathagon Inc. (5)
10.23 Master Services Agreement, dated as of April 2, 2003, by
and between Bioenvision, Inc. and RRD International,
LLC(14)
10.24 Employment Agreement between Bioenvision Limited and Hugh
Griffith, effective as of October 23, 2002 (18)
10.25 Employment Agreement between Bioenvision Limited and Ian
Abercrombie, effective as of January 6, 2003 (18)
10.26 Amendment # 2 to the Co-Development Agreement between
Bioenvision and ILEX Oncology, Inc. dated December 30,
2003.(21)
10.27 Amendment to the Co-Development Agreement between
Bioenvision, Inc. and SRI, dated as of March 12,
2001.(21)
10.28 Letter Agreement For Co-Development Of An Oral
Clofarabine Formulation and First Amendment to
Co-Development Agreement dated March 12, 2001 between
Bioenvision, Inc. and ILEX .(21)
10.29 Joinder made by Bioenvision, Inc., dated February 26,
2004 (22)
10.30 Supply Agreement-Trilostane, by and among, Stegram
Pharmaceuticals, Bioenvision, Inc., Dechra Ltd. and
Sterling SNIFF, dated as of August 12, 2005 (22)
10.31 Supply Agreement-Trilostane, by and among, Stegram
Pharmaceuticals, Bioenvision, Inc., Dechra Ltd. and
Steroid SpA, dated as of August 12, 2005 (22)
10.32 Amendment to Employment Agreement, by and between
Bioenvision and David P. Luci, dated February 6, 2006
(23)
10.33 Clofarabine Marketing and Development Agreement, by and
between Bioenvision Inc. and Mayne Pharma Limited, dated
March 24, 2006 (24)
10.34 License Agreement by and between Southern Research
Institute and Bioenvision, Inc., dated September 12, 2006
(26)
10.35 Employment Agreement by and between the Company and James
S. Scibetta, dated November 27, 2006. (27)
-24-
10.36* Amendment to Clofarabine Marketing and Development
Agreement, by and between Bioenvision Inc. and Mayne
Pharma Limited, dated November 2, 2006.
10.37 Entrustment Agreement, by and between Bioenvision JapanCo
Ltd. and Yoshimaru Yamamoto, dated January 31, 2007. (28)
14.1 Bioenvision Inc.'s Code of Business Conduct and Ethics
(19)
16.1 Letter from Graf Repetti & Co., LLP to the Securities and
Exchange Commission, dated September 30, 1999. (9)
16.2 Letter from Ernst & Young LLP to the Securities and
Exchange Commission, dated July 6, 2001. (10)
16.3 Letter from Ernst & Young LLP to the Securities and
Exchange Commission, dated August 16, 2001. (11)
16.4 Letter from Grant Thornton LLP to the Securities and
Exchange Commission , dated April 7, 2005 (20)
16.5 Letter from Deloitte & Touche LLP to the Securities and
Exchange Commission , dated January 19, 2006 (25)
21.1 Subsidiaries of the registrant (4)
31.1 Certification of Christopher B. Wood, Chief Executive
Officer, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification of James S. Scibetta, Chief Accounting
Officer, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
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.
32.2 Certification of Chief Accounting Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
* Portions of this exhibit have been omitted and filed
separately with the Securities and Exchange Commission
pursuant to a confidential treatment request under Rule
24b-2 of the Securities and Exchange Act of 1934, as
amended.
-----------------------
(1) Incorporated by reference and filed as an Exhibit to Registrant's
Current Report on Form 8-K filed with the SEC on January 12, 1999.
(2) Incorporated by reference and filed as an Exhibit to Registrant's
Registration Statement on Form 10-12g filed with the SEC on September 3,
1998.
(3) Incorporated by reference and filed as an Exhibit to Registrant's Form
10-KSB/A filed with the SEC on October 18, 1999.
(4) Incorporated by reference and filed as an Exhibit to Registrant's Form
10-KSB filed with the SEC on November 13, 2000.
(5) Incorporated by reference and filed as an Exhibit to Registrant's
Current Report on Form 8-K filed with the SEC on April 16, 2002.
(6) Incorporated by reference and filed as an Exhibit to Registrant's
Current Report on Form 8-K, filed with the SEC on May 28, 2002.
-25-
(7) Incorporated by reference and filed as an Exhibit to Registrant's
Current Report on Form 8-K, filed with the SEC on January 8, 2002.
(8) Incorporated by reference and filed as an Exhibit to Registrant's
Current Report on Form 8-K, filed with the SEC on February 21, 2002.
(9) Incorporated by reference and filed as an Exhibit to Registrant's
Current Report on Form 8-K, filed with the SEC on October 1, 1999.
(10) Incorporated by reference and filed as an Exhibit to Registrant's
Current Report on Form 8-K/A, filed with the SEC on July 26, 2001.
(11) Incorporated by reference and filed as an Exhibit to Registrant's
Current Report on Form 8-K, filed with the SEC on December 6, 2001.
(12) Incorporated by reference and filed as an Exhibit to Registrant's
Current Report on Form 8-K, filed with the SEC on June 24, 2002.
(13) Incorporated by reference and filed as an Exhibit to Registrant's
Quarterly Report on Form 10-QSB for the three-month period ended
December 31, 2002.
(14) Incorporated by reference and filed as an Exhibit to Registrant's
Quarterly Report on Form 10-QSB for the three-month period ended March
31, 2003.
(15) Incorporated by reference and filed as an Exhibit to Registrant's
Quarterly Report on Form 10-QSB for the three- month period ended
December 31, 2004.
(16) Incorporated by reference and filed as an Exhibit to Registrant's
Current Report on Form 8-K, filed with the SEC on March 24, 2004.
(17) Registrant's definitive proxy statement on Schedule 14-A, filed in
connection with the annual meeting held on January 14, 2004.
(18) Incorporated by reference and filed as an Exhibit to Registrant's
Quarterly Report on Form 10-QSB for the three- month period ended
September 30, 2003.
(19) Incorporated by reference and filed as an Exhibit to Registrant's Annual
Report on Form 10-KSB for the year ended June 30, 2004.
(20) Incorporated by reference and filed as an Exhibit to Registrant's
Current Report on Form 8-K, filed with the SEC on April 7, 2005.
(21) Incorporated by reference and filed as an Exhibit to Registrant's Annual
Report on Form 10-KSB, filed with the SEC on October 13, 2005.
(22) Incorporated by reference and filed as an Exhibit to Registrant's
Quarterly Report on Form 10-QSB for the three- month period ended
September 30, 2005.
(23) Incorporated by reference and filed as an Exhibit to Registrant's
Current Report on Form 8-K, filed with the SEC on February 10, 2006.
(24) Incorporated by reference and filed as an Exhibit to Registrant's
Quarterly Report on Form 10-Q, for the three month period ended March
31, 2006.
(25) Incorporated by reference and filed as an Exhibit to Registrant's
Current Report on Form 8-K, filed with the SEC on January 20, 2006.
(26) Incorporated by reference and filed as an Exhibit to Registrant's
Quarterly Report on Form 10-Q, for the three month period ended
September 30, 2006.
-26-
(27) Incorporated by reference and filed as an Exhibit to the Registrant's
Current Report on Form 8-K, filed with the SEC on November 30, 2006.
(28) Incorporated by reference and filed as an Exhibit to the Registrant's
Current Report on Form 8-K, filed with the SEC on February 6, 2007.
-27-
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: February __, 2007 By: /s/ Christopher B. Wood M.D.
----------------------------
Christopher B. Wood M.D.
Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: February __, 2007 By: /s/James S. Scibetta
-------------------
James S. Scibetta
Chief Financial Officer
(Principal Financial and Accounting Officer)