s-3posam2.htm
As
filed with the Securities and Exchange Commission on July 10, 2009
Reg.
No. 333-147605
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Post-Effective
Amendment No. 2
to
FORM
S-3
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
___________________
CYTRX
CORPORATION
(Exact
name of registrant as specified in its charter)
___________________
|
Delaware
|
|
58-1642750
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
|
(I.R.S.
Employer
Identification
No.)
|
CytRx
Corporation
11726
San Vicente Boulevard, Suite 650
Los
Angeles, California 90049
(Address,
including zip code, and telephone number, including area code, of Registrant’s
principal executive offices)
___________________
Steven
A. Kriegsman
CytRx
Corporation
11726
San Vicente Boulevard., Suite 650
Los
Angeles, California 90049
(310)
826-5648
(Name,
address, including zip code, and telephone number, including area code, of agent
for service)
With
a copy to:
|
Benjamin
S. Levin, Esq.
CytRx
Corporation
11726
San Vicente Boulevard, Suite 650
Los
Angeles, California 90049
Fax:
(310) 826-6139
|
Sanford
J. Hillsberg, Esq.
Dale
E. Short, Esq.
Troy
& Gould Professional Corporation
1801
Century Park East, Suite 1600, Los Angeles, California 90067
Fax:
(310) 201-4746
|
___________________
Approximate date of commencement of
proposed sale to public: From time to time after the effective
date of this registration statement.
If the
only securities being registered on this form are being offered pursuant to
dividend or interest reinvestment plans, please check the following
box. ¨
If any of
the securities being registered on this form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. ý
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
If this
Form is a registration statement pursuant to General Instruction I.D. or a
post-effective amendment thereto that shall become effective upon filing with
the Commission pursuant to Rule 462(e) under the Securities Act, check the
following box. ¨
If this
Form is a post-effective amendment to a registration statement filed pursuant to
General Instruction I.D. filed to register additional securities or additional
classes of securities pursuant to Rule 413(b) under the Securities Act, check
the following box. ¨
CALCULATION
OF REGISTRATION FEE
|
Title
of each class of securities to be registered
|
|
Proposed
maximum aggregate offering price(1)
|
|
Amount
of registration fee
|
|
Common
Stock, par value $.001 per share(2)
|
|
|
|
|
|
Preferred
Stock, $.01 par value per share
|
|
|
|
|
|
Warrants
|
|
|
|
|
|
Units
|
|
|
|
|
|
Total(3)
|
|
$100,000,000(4)
|
|
$3,070(5)
|
|
(1)
|
The
securities registered by this registration statement may be sold
separately, together with other securities registered hereunder or as
units consisting of a combination of such securities. Pursuant
to Rule 457(o) under the Securities Act of 1933 and General Instruction
II.D to Form S-3 under the Securities Act of 1933, the number of shares,
warrants or units of each class of securities registered hereunder is not
specified. There is being registered hereunder an indeterminate
amount of common stock, preferred stock, warrants and units of the
registrant as may from time to time be issued at indeterminate
prices. The maximum offering price per class of securities will
be determined from time to time by the registrant in connection with the
issuance of the securities registered by this registration
statement. However, in no event will the maximum aggregate
offering price of all securities issued under this registration statement
exceed $100,000,000 or such lesser aggregate amount permitted under
General Instruction I.B.6 to Form S-3 under the Securities Act of
1933.
|
|
(2)
|
Each
share of common stock will be accompanied by one Series A Junior
Participating Preferred Stock Purchase Right that trades with the common
stock. The value, if any, attributable to this right is reflected in the
market price of common stock. Prior to the occurrence of certain events,
none of which has occurred as of the date of this registration statement,
the rights will not be exercisable or evidenced separately from the common
stock.
|
|
(3)
|
Pursuant
to Rule 416 under the Securities Act of 1933, this registration statement
also registers such indeterminate amounts of securities as may be issued
upon conversion of, or in exchange for, the securities registered
hereunder and such indeterminate number of shares of common stock and
preferred stock as may be issued from time to time upon conversion or
exchange as a result of stock splits, stock dividends or similar
transactions.
|
|
(4)
|
Estimated
solely for the purpose of calculating the registration fee pursuant to
Rule 457(o) under the Securities Act of
1933.
|
THE
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
The
information in this prospectus is not complete and may be
changed. These shares may not be sold until the registration
statement filed with the Securities and Exchange Commission becomes effective.
This prospectus is not an offer to sell these shares, and it is not a
solicitation of an offer to buy these shares, in any state where the offer or
sale is not permitted.
SUBJECT
TO COMPLETION, JULY 10, 2009
PROSPECTUS
CYTRX
CORPORATION
$100,000,000
We may
offer and sell from time to time up to $100,000,000 in the aggregate of shares
of our common stock, shares of our preferred stock, and warrants in amounts, at
prices and on terms that we will decide at the time of the
offering. These securities may be offered and sold separately,
together or as units with other securities. Each share of our common
stock to be offered and sold is accompanied by one Series A Junior
Participating Preferred Stock Purchase Right that trades with our common
stock.
We will
provide the specific terms of these offers and sales in supplements to this
prospectus. This prospectus may not be used to sell securities unless
accompanied by a prospectus supplement. You should read this
prospectus and the supplement carefully before you invest. We may
offer securities directly to investors or through agents, underwriters or
dealers. If any agents, underwriters or dealers are involved in the
sale of any of our securities, their names and any applicable purchase prices,
fees, commissions or discount arrangements will be set forth in the prospectus
supplement.
Our
common stock is traded on the Nasdaq Capital Market under the symbol
“CYTR.” On July 9, 2009, the last sale price of our common stock
as reported on the Nasdaq Capital Market was $1.00
An
investment in our securities involves a high degree of risk. Before
purchasing any securities, you should consider carefully the risks referred to
under “Risk Factors” on page 16 in this prospectus and in the prospectus
supplement.
_____________________________
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED THAT THIS PROSPECTUS IS
COMPLETE OR ACCURATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
_____________________________
THE
DATE OF THIS PROSPECTUS IS JULY
10, 2009
|
|
Page
|
|
ABOUT
THIS
PROSPECTUS
|
1
|
|
NOTE
ON FORWARD-LOOKING
STATEMENTS
|
1
|
|
DESCRIPTION
OF OUR
BUSINESS
|
2
|
|
RISK
FACTORS
|
15
|
|
USE
OF
PROCEEDS
|
28
|
|
THE
SECURITIES THAT WE MAY
OFFER
|
28
|
|
DESCRIPTION
OF CAPITAL
STOCK
|
28
|
|
DESCRIPTION
OF
WARRANTS
|
31
|
|
DESCRIPTION
OF
UNITS
|
33
|
|
PLAN
OF
DISTRIBUTION
|
34
|
|
WHERE
YOU CAN FIND MORE
INFORMATION
|
37
|
|
INCORPORATION
OF INFORMATION FILED WITH THE
SEC
|
37
|
|
LEGAL
MATTERS
|
38
|
|
EXPERTS
|
38
|
This
prospectus is part of a registration statement utilizing the “shelf
registration” process that we filed with the Securities and Exchange Commission,
or the SEC, to permit us to offer and sell the securities described in this
prospectus in one or more transactions. The plan of distribution of
the securities is described in this prospectus under the heading “Plan of
Distribution.”
As
permitted by the rules and regulations of the SEC, the registration statement
filed by us includes additional information not contained in this
prospectus. You may read the registration statement and the other
reports we file with the SEC at the SEC’s web site or at the SEC’s offices
described below under the heading “Where You Can Find Additional
Information.”
This
prospectus provides you with a general description of the securities we may
offer. Each time securities are sold, we will provide a prospectus
supplement that will contain specific information about the terms of that
offering. The prospectus supplement may also add, update or change
information contained in this prospectus. You should read both this
prospectus and the prospectus supplement, together with additional information
described in this prospectus under the heading “Where You Can Find More
Information.”
You
should rely only on the information provided in this prospectus and in the
prospectus supplement, including any information incorporated by
reference. For more details on information incorporated herein by
reference, you should review the discussion contained under the heading
“Incorporation of Information Filed With the SEC.” We have not
authorized anyone to provide you with information different from that contained
or incorporated by reference in this prospectus and in the prospectus
supplement. We are offering the securities only in jurisdictions
where offers are permitted. You should not assume that the
information in this prospectus or the prospectus supplement is accurate at any
date other than the date indicated on the cover page of these
documents.
In this
prospectus, we sometimes refer to CytRx Corporation as “CytRx,” to our former
subsidiary, RXi Pharmaceuticals Corporation, as “RXi,” and to Innovive
Pharmaceuticals, Inc., which we acquired in September 2008, as
“Innovive.” References in this prospectus and the prospectus
supplement to “we,” “us,” “our” or the “company” refer to CytRx,
alone.
NOTE
ON FORWARD-LOOKING STATEMENTS
Some of
the statements contained or incorporated by reference in this prospectus or in
the prospectus supplement may include forward-looking statements that reflect
our current views with respect to our research and development activities,
business strategy, business plan, financial performance and other future
events. These statements include forward-looking statements both with
respect to us, specifically, and the biotechnology sector, in
general. We make these statements pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of
1995. Statements that include the words “expect,” “intend,” “plan,”
“believe,” “project,” “estimate,” “may,” “should,” “anticipate,” “will” and
similar statements of a future or forward-looking nature identify
forward-looking statements for purposes of the federal securities laws or
otherwise.
All
forward-looking statements involve inherent risks and uncertainties, and there
are or will be important factors that could cause actual results to differ
materially from those indicated in these statements. We believe that
these factors include, but are not limited to, those factors set forth under the
caption “Risk Factors” in this prospectus and in any prospectus supplement and
under the captions “Business,” “Legal Proceedings,” “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” “Quantitative and
Qualitative Disclosures About Market Risk” and “Controls and Procedures” in our most recent
Annual Report on Form 10-K, all of which you should review
carefully. Please consider our forward-looking statements in light of
those risks as you read this prospectus and the prospectus
supplement. We undertake no obligation to publicly update or review
any forward-looking statement, whether as a result of new information, future
developments or otherwise.
If one or
more of these or other risks or uncertainties materializes, or if our underlying
assumptions prove to be incorrect, actual results may vary materially from what
we anticipate. All subsequent written and oral forward-looking
statements attributable to us or individuals acting on our behalf are expressly
qualified in their entirety by this Note. Before purchasing any
securities, you should consider carefully all of the factors set forth or
referred to in this prospectus and in the prospectus supplement that could cause
actual results to differ.
DESCRIPTION
OF OUR BUSINESS
General
We are a
biopharmaceutical research and development company engaged in the development of
high-value human therapeutics. Our drug development pipeline includes two
product candidates in clinical development for cancer indications, including
registration studies of tamibarotene for the treatment of acute promyelocytic
leukemia, or APL. In addition to our core oncology programs, we are developing
treatments for neurodegenerative and other disorders based upon our
small-molecule molecular chaperone amplification technology. We also
have been engaged in new-drug discovery research at our laboratory facility in
San Diego, California, utilizing our master chaperone regulator assay, or MaCRA,
technology. In May
2009, we substantially completed the initial phase of these activities, and
announced that we will conduct our research and development activities through
third parties for the foreseeable future. Apart from our
drug development programs, we maintain at present a 45% equity interest in our
former subsidiary, RXi Pharmaceuticals Corporation, or RXi (NASDAQ:
RXII).
On
September 19, 2008, we completed the merger acquisition of Innovive
Pharmaceuticals, Inc., or Innovive, and its clinical-stage oncology product
candidates, including tamibarotene. As a result of the merger,
Innovive became our wholly owned subsidiary. On December 30,
2008, we merged the former Innovive subsidiary into CytRx. Prior to
our acquisition of Innovive, we were focused on developing human therapeutics
based primarily upon our small-molecule molecular chaperone amplification
technology, including arimoclomol for amyotrophic lateral sclerosis, which is
commonly known as ALS or Lou Gehrig’s disease, and iroxanadine for diabetic foot
ulcers and other potential indications. After acquiring Innovive, we
redirected our efforts to developing Innovive’s lead oncology product
candidates, tamibarotene for APL, INNO-206 for small cell lung cancer, or SCLC,
and other solid tumor cancers, and bafetinib, which we believe hold greater
near-term revenue potential than our molecular chaperone product
candidates. Our current business strategy is to seek one or more
strategic partnerships for the further development of arimoclomol and
iroxanadine.
We are a
Delaware corporation, incorporated in 1985. Our corporate offices are
located at 11726 San Vicente Boulevard, Suite 650, Los Angeles, California
90049, and our telephone number is (310) 826-5648.
Our
Product Candidate Pipeline
The
following tables summarize the current pipeline of our product
candidates:
|
|
|
|
|
|
|
|
|
|
|
|
|
APL
(acute promyelocytic leukemia)
|
|
|
|
|
SCLC
(small cell lung cancer) and other solid tumor
cancers
|
|
Tyrosine
kinase inhibitor
|
Bafetinib
(formerly INNO-406)
|
CML
(chronic myeloid leukemia)
|
|
Molecular
chaperone amplification
|
|
ALS
(amyotrophic lateral sclerosis, or Lou Gehrig’s disease) and stroke
recovery
|
|
Molecular
chaperone amplification
|
|
Diabetic
foot ulcers, other indications
|
|
Our
Clinical Development Programs
Our
current clinical development programs consist of our efforts to develop
tamibarotene for APL and INNO-206 for SCLC or other solid tumor types and our
planned animal toxicology studies designed to facilitate a Phase IIb clinical study of
arimoclomol in ALS, which has been placed on hold by the United States Food and
Drug Administration, or FDA.
Tamibarotene. Tamibarotene
is a synthetic retinoid designed to overcome resistance and avoid toxic side
effects of differentiation therapy with all-trans retinoic acid, or ATRA, a
component of the current first-line treatment for APL.
Tamibarotene for the treatment of
APL. Acute promyelocytic leukemia, or APL, is a specific type
of acute myeloid leukemia characterized by the t(15;17) translocation, which
fuses the promyelocytic leukemia, or PML, gene on chromosome 15 to the retinoic
acid receptor, or RAR, a gene on chromosome
17. This fusion causes abnormal cell growth.
Differentiation
therapy with ATRA, is the basis for the treatment of APL. Differentiation
therapy causes leukemic promyelocytes to mature and undergo cell death. Patients
typically receive ATRA in combination with chemotherapy as the initial therapy, followed by
anthracyline-based consolidation therapy designed to produce complete remission.
The majority of patients treated this way generally experience a complete
remission of disease. Current National Comprehensive Cancer Network guidelines
recommend that patients then undergo one to two years of maintenance therapy
with ATRA to prevent a recurrence. ATRA therapy is associated with several
toxicities, the most serious of which, retinoic acid syndrome, or
RAS. RAS occurs in up to 25% of patients treated with ATRA, a serious
and potentially fatal complication characterized by fever, dyspnea (breathing
difficulties), weight gain, pulmonary infiltrates (abnormal accumulation in the
lungs), and pleural or pericardial effusions (excess fluid around the lungs or
heart).
Patients
that initially respond to front-line therapy with ATRA plus
chemotherapy sometimes relapse, and some of these patients fail to respond to a
second course of treatment with ATRA. Currently, patients who fail ATRA-based
therapy are treated with arsenic trioxide, a compound administered intravenously
and associated with significant toxicity, including irregular heartbeat. There
currently is no standard of care for patients who do not respond to ATRA and
arsenic trioxide, or who respond but subsequently relapse. In 2007, the FDA
granted Orphan Drug Designation and Fast Track Designation for the use of
tamibarotene in patients with relapsed or refractory APL following treatment
with ATRA and arsenic trioxide.
Tamibarotene
was developed to overcome resistance to ATRA. In vitro, tamibarotene is
approximately ten times more potent than ATRA at causing APL cells to
differentiate and die. In addition, tamibarotene has a lower affinity for
cellular retinoic acid binding protein, or CRABP, which we believe should allow
for sustained plasma levels during administration. This may enhance
tamibarotene’s potential efficacy, because patients may be able to experience
benefits from the drug over a longer period of
time. Tamibarotene does not bind the RAR-g receptor, the major
retinoic acid receptor in the dermal epithelium, which should lessen the
occurrence of RAS. In clinical studies, the rate of RAS appeared to be
low.
Pre-clinical
data. In a variety of preclinical models, tamibarotene was
superior to ATRA in its ability to cause APL cells to differentiate and die. In
the clinical setting, in vitro response to tamibarotene appeared predictive of
clinical response, including activity in patients who had a poor response to
ATRA.
Clinical
data. Tamibarotene is approved in Japan under the brand name
Amnolake for
use in relapsed or refractory APL. The approval was based on data from two
studies in Japanese patients. In the pivotal study, the effectiveness of orally
administered tamibarotene was evaluated in 39 patients with APL, including
patients who had never received treatment for APL and patients who had been
previously treated with ATRA. Tamibarotene was administered orally at a dose of
6 mg/m2/day for
eight weeks. The overall complete response rate in these patients was 61.5%. In
patients who had a recurrence of APL following ATRA therapy, the response rate
was 81%. RAS was reported in three patients, or 7.3% of the patient
group.
Development
Plan. We re-initiated a pivotal study in ATRA and arsenic
trioxide refractory APL in the second quarter of 2008. The study is designed to
collect pharmacokinetic, safety and efficacy data in approximately 50 patients.
Depending on its outcome, this study, in combination with the data from the two
Japanese studies, would form the basis of a new drug application, or NDA. If the
results of the study are positive, and if we are able to manufacture
tamibarotene in commercial quantities in compliance with stringent regulatory
requirements, we believe that we would be able to file the NDA with the FDA in
2011.
In
addition, a Phase III study is currently being conducted in Japan by the Japan
Adult Leukemia Group comparing ATRA to tamibarotene for the maintenance
treatment of APL. If positive, these data could potentially form the basis of a
supplemental NDA application.
INNO-206. INNO-206
(formerly DOXO-EMCH) is a prodrug for doxorubicin. Specifically, it is the
(6-Maleimidocaproyl) hydrazone of doxorubicin. Essentially, this chemical is
doxorubicin (DOXO) attached to an acid sensitive linker (EMCH).
INNO-206 for the Treatment of
Cancer. Anthracyclines are a class of drugs that are among the
most commonly used agents in the treatment of cancer. Doxorubicin, the first
anthracycline to gain FDA approval, has demonstrated efficacy in a wide variety
of cancers including breast cancer, lung cancer, sarcomas, and lymphomas.
However, due to the uptake of doxorubicin by various parts of the body, it is
associated with side effects such as cumulative cardiotoxicity, myelosuppression
(decreased production of blood cells by bone marrow), gastrointestinal
disorders, mucositis (inflammation of the mucous membranes lining the digestive
tract, including the mouth), stomatitis (inflammation of the mouth’s soft
tissue), and extravasation (the leakage of intravenous drugs from the vein into
the surrounding tissue).
We
believe INNO-206 has attributes that improve on native doxorubicin, including
reduction of adverse events, improvement in efficacy and the ability to reach
the tumor more quickly.
Our
anticipated mechanism of action for INNO-206 is as follows:
|
·
|
after
administration, INNO-206 rapidly binds endogenous circulating albumin
through the EMCH linker;
|
|
·
|
circulating
albumin preferentially accumulates in tumors, bypassing uptake by other
non-specific sites, including the heart, bone marrow and the
gastrointestinal tract;
|
|
·
|
once
albumin-bound INNO-206 reaches the tumor, the acidic environment of the
tumor causes cleavage of the acid sensitive linker;
and
|
|
·
|
free
doxorubicin is released at the site of the
tumor.
|
Pre-clinical
data. In a variety of preclinical models, INNO-206 was
superior to doxorubicin in its ability to increase dosing, antitumor efficacy,
and safety, including a reduction in cardiotoxicity.
Clinical data. A
Phase I study of INNO-206 that demonstrated safety and objective clinical
responses in a variety of tumor types was completed in 2005 and presented at the
March 2006 Krebskongress meeting in Berlin. In this study, single doses were
administered at up to six times the standard dosing of doxorubicin without an
increase in observed side effects over historically observed levels with
doxorubicin. Twenty-four of 35 evaluable patients had either a clinical response
or stable disease. Objective
clinical responses were observed in patients with sarcoma, breast, and lung
cancers.
Development
Plan. Based on the objective clinical responses seen in the
Phase I study, we intend to initially develop INNO-206 as a therapeutic for
patients with solid tumors, such as SCLC patients who have relapsed after
initial chemotherapy. This indication has a very poor prognosis with the current
standard of care, topotecan, which is used in approximately 30% of SCLC patients. Based on the
existing preclinical and clinical data for INNO-206, we believe there is the
potential to demonstrate superiority to topotecan in the second-line SCLC
setting.
Beyond
this initial indication, we will explore the utility of INNO-206 in chemotherapy
regimens that currently include doxorubicin, both for solid tumors and other
indications. If the Phase I data were to hold up in larger randomized studies,
we believe the potential exists for INNO-206 to replace doxorubicin based on
higher efficacy and improved side effect profile, although this has not been
proven.
Bafetinib. Bafetinib
(formerly INNO-406) is a novel drug developed by the Japanese pharmaceutical
company Nippon Shinyaku, to overcome the limitations of Gleevec and second-line
tyrosine kinase inhibitors in resistant chronic myelogenous leukemia, or CML. At
present, there are no approved third-line treatments for refractory
CML.
Bafetinib for the Treatment of
CML. CML is a type of blood cancer that occurs in
approximately 4,570 patients per year in the
U.S. Approximately 95% of CMLs contain a genetic translocation known
as Bcr-Abl, which signals the cells to proliferate. Bcr-Abl does not exist in
normal cells.
In 2001,
Novartis AG won approval in the U.S. for its drug, Gleevec. Gleevec
is a chemical molecule specifically designed to stop Bcr-Abl from emitting its
signals for cell growth. Gleevec proved effective in treating
patients with CML by inhibiting Bcr-Abl. Patients remain on Gleevec
as chronic therapy. The reported five-year survival rate for patients
with CML has gone from approximately 35% before the approval of Gleevec in 2001
to approximately 90% in 2006. Worldwide sales of Gleevec in 2006 were
$2.5 billion.
Unfortunately,
resistance to Gleevec has begun to occur. Resistance to Gleevec
appears to occur due to amplification of the Bcr-Abl gene and, in many cases,
mutations in the Bcr-Abl gene. In other cases, some of the genes that
Bcr-Abl signals to turn on are becoming turned on independently of Bcr-Abl,
making inhibition of the gene by Gleevec ineffective. Lyn is a member
of the Src family of kinases. These kinases are known to be involved
in sending out signals that drive cell growth. Lyn has been shown to be one
of the genes that is turned on by Bcr-Abl, and Lyn is known to be active in some
Gleevec-resistant CMLs. Activation of Lyn is therefore suspected of
being another mechanism by which cells become resistant to Gleevec.
The
development of resistance to Gleevec means that a second generation of drugs is
required to treat CML. Ideally, these new drugs would be able to
inhibit Bcr-Abl, even in its mutated form, and also independently turn off other genes
that Bcr-Abl normally activates.
Dasatinib,
from Bristol-Myers Squibb, is the leading second-generation Bcr-Abl
inhibitor. Dasatinib gained conditional U.S. marketing approval in
June 2006. Dasatinib has high potency in inhibiting Bcr-Abl and also
inhibits Src, a family of kinases known to be involved in cell
growth. In clinical studies, Dasatinib has shown good activity in
Gleevec-resistant patients. However, there have also been concomitant
side effects, including serious and life-threatening pleural effusion. In fact,
it is estimated that two-thirds of patients experience dose reductions or
interruptions, and in data provided by Bristol-Myers Squibb 20% to 30% of
patients that initiate dasatinib therapy discontinue its use due to
intolerance. This side effect profile is believed to be due to
non-specific kinase inhibition, but that has not yet been proven. It
is not clear whether a Bcr-Abl and Lyn inhibitor would have similar side
effects.
Nilotinib,
another second generation Bcr-Abl inhibitor being developed by Novartis AG,
received accelerated approval in the U.S. Nilotinib has potent activity against
Bcr-Abl. In its Phase I clinical trial, Nilotinib showed good
activity in Gleevec-resistant patients. In Phase II clinical data
presented at the American Society for Hematology conference in 2006, Nilotinib
showed efficacy similar to dasatinib in Gleevec-resistant patients.
Bafetinib
is roughly 25 to 55 times more potent at inhibiting Bcr-Abl than Gleevec in cell
culture. Bafetinib is also capable of inhibiting 19 of the 20 tested
mutated forms of
Bcr-Abl in CML that are resistant to Gleevec. In addition, bafetinib is capable
of shutting down the activity of the Lyn protein. This ability to
inhibit the activity of Lyn is independent of bafetinib’s ability to inhibit
Bcr-Abl.
We
believe that these properties of bafetinib, including its higher potency than
Gleevec, the ability to inhibit the mutated forms of Bcr-Abl and the addition of
Lyn inhibition, might make it an effective treatment for CML, although we are in
the early stages of the clinical testing only and none of bafetinib’s potential
advantages have been clinically proven.
Pre-clinical
Data. In mice-leukemia models, bafetinib has been shown to
markedly extend the survival of animals implanted with Gleevec-resistant
leukemic cells. In toxicology studies done in mice, rats, and dogs, bafetinib
appeared to be safe and well-tolerated. A dose was described in dogs
in which no side effects were seen was used to calculate the starting dose in
humans for our recently completed clinical trial.
Phase I Study. In
November 2008, we announced that bafetinib demonstrated clinical responses in
patients with CML in a Phase I clinical trial conducted in patients with CML and
other leukemias that have a certain mutation called the Philadelphia Chromosome
(Ph+) and are intolerant of or resistant to Gleevec and, in some cases,
second-line tyrosine kinase inhibitors such as dasatinib (Sprycelâ)
and nilotinib (Tasignaâ)).
The clinical trial was designed to identify the optimal dose for possible future
studies by escalating doses from 30 mg once per day to up to 480 mg twice per
day in a total of 56 patients with Ph+ leukemias. Of the patients, 31 had CML in
chronic phase (CML-CP), nine were in accelerated phase (CML-AP), seven were in
blast phase (CML-BP), and nine had Ph+ acute lymphocytic leukemia. The clinical
trial was conducted at seven clinical sites in the US, Germany, and Israel, with
Hagop Kantarjian, M.D., Professor & Chairman, Department of Leukemia, The
University of Texas, M.D. Anderson Cancer Center, serving as the Principal
Investigator. A positive, dramatic decrease in the number of leukemia
cells in the bone marrow was seen in 35% of the patients that were randomly
chosen to begin their treatment with the optimal INNO-406 dose of 240 mg
twice per day.
The
maximum tolerated
dose was determined to be 240 mg given twice per day, based on evidence of
increasing potential liver toxicity at higher doses. Common adverse events
(observed in greater than 20% of patients in the 240 mg twice per day dose
group) were gastrointestinal related, swelling, and fatigue. There was no
evidence of fluid accumulating around the lungs, or significant changes in a
certain heart rhythm called QTc prolongation, which are serious side effects
known to occur in patients treated with approved drugs for this indication.
Approximately 13% of patients across all dose groups discontinued dosing due to
unacceptable toxicity.
In 2007,
the FDA granted Orphan Drug Designation to bafetinib for the
treatment of Gleevec-resistant or intolerant CML. Based on the
results of our Phase I study, we intend to seek a strategic partner for the
further development of bafetinib.
Arimoclomol. Arimoclomol is
an orally-administered small-molecule product candidate that we believe
functions by stimulating a normal cellular protein repair pathway by amplifying
activated molecular chaperone proteins implicated in neurological
disorders.
Arimoclomol for the treatment of
ALS. ALS, or Lou Gehrig’s disease, is a debilitating and ultimately
deadly disease involving the progressive degeneration of motor neurons believed
to be caused by toxic mis-folding of proteins. According to the ALS Association,
approximately 30,000 people in the U.S. are living with ALS and 5,600 new cases
are diagnosed each year. Worldwide, an estimated 120,000 people are living with
ALS. According to the ALS Survival Guide, 50% of ALS patients die within 18
months of diagnosis and 80% die within five years of diagnosis.
The
following is a summary of our clinical development of arimoclomol for treating
ALS:
|
·
|
in
July 2006, we completed an 84-patient, multi-center, double-blind,
placebo-controlled, multi-dose Phase IIa clinical trial of safety and
tolerability of arimoclomol in volunteers with ALS, which we refer to as
the Phase IIa trial;
|
|
·
|
in
May 2007, we completed an open-label extension of the Phase IIa trial in
approximately 70 ALS patients from the trial who were administered the
highest investigational dose (100 mg three times daily) of arimoclomol for
an additional six months;
|
|
·
|
in
June 2007, we completed a multiple ascending-dose clinical trial of safety
and tolerability involving 40 healthy
volunteers;
|
|
·
|
in
November 2007, we completed a 28-day safety clinical trial with 400 mg of
arimoclomol three times daily involving 16 healthy volunteers;
and
|
|
·
|
in
December 2007, we initiated patient screening in a double blind,
placebo-controlled Phase IIb clinical study. In this trial, we expect to
enroll 390 ALS patients at 30 to 40 clinical sites in the U.S. and Canada.
The primary purpose of this trial is to evaluate the safety and efficacy
of a 400 mg dose of arimoclomol administered orally three times daily. The
Phase IIb clinical trial was placed on clinical hold by the FDA in January
2008. Based on written correspondence we received from the FDA, their
decision pertained to a previously completed animal toxicology study in
rats and was not related to data generated from any human studies with
arimoclomol. We have completed additional animal toxicology
studies to obtain additional safety data that we submitted to the FDA in
the second quarter of 2009.
|
Phase IIa clinical trial.
Participants in the Phase IIa clinical trial of arimoclomol were administered
either a placebo capsule, or one of three dosage levels of arimoclomol capsules,
three times daily for a period of 12 weeks, immediately followed by a one-month
period without the drug. The primary endpoints of the Phase IIa trial were
safety and tolerability. Secondary endpoints included a preliminary evaluation
of efficacy using two widely accepted disease-progression markers. The first
marker, the revised ALS Functional Rating Scale, or ALSFRS-R, is used to
determine patients’ overall functional capacity and independence in 13
activities. The second marker measures vital capacity, an assessment of lung
capacity, which is an important disease indicator since ALS sufferers eventually
lose the ability to breathe on their own. The trial was designed to be able to
detect only extreme responses in these two markers.
The
results from our Phase IIa trial and open-label extension clinical trial
indicated that arimoclomol was safe and well tolerated in ALS volunteers, even
at the highest administered dose. Arimoclomol was detected in participants’
cerebral spinal fluid, demonstrating that it passed the so-called blood:brain
barrier, and participants treated with arimoclomol experienced a statistically
significant decrease in adverse events of weakness compared with the placebo
group. As would be expected based upon the small size and short duration of the
Phase IIa trial, we observed no statistically significant effects in disease
progression markers. We did, however, observe a trend toward slower disease
progression in the highest dosage group. Since there was no concurrent placebo
control group in our open-label extension clinical trial, we compared the
results with results in an untreated placebo group with similar characteristics
in a prior ALS clinical trial published in July 2006 in Annals of Neurology. The results
indicated a trend toward a slower average progression in every disease marker in
the patients treated with arimoclomol compared to the historical placebo
control. In particular, we observed a decrease of 21% in the rate of decline for
ALSFRS-R, 8% for vital capacity, 23% for total body weight and 20% for body mass
index when compared with that historical control. No definitive conclusions can
be drawn from these data without a concurrent placebo control group, and
investors are cautioned against relying on these data as an indication of
arimoclomol’s potential efficacy.
The
favorable safety and tolerability profile observed in our Phase IIa trial,
open-label extension clinical trial and animal toxicology studies of arimoclomol
suggested that we may be able to safely increase the dose of arimoclomol without
causing significant side effects. The results from the subsequent multiple
ascending-dose study indicated that arimoclomol was safe and well tolerated,
even at doses of 600 mg three times daily (six times higher than the highest
dose used in the Phase IIa and open-label studies), when administered to healthy
volunteers over a seven-day period. Results from the 28-day safety clinical
trial in healthy volunteers indicated that the dosage of 400 mg administered
three times daily also was safe and well tolerated.
Phase IIb efficacy trial. In
January 2008, the FDA placed on clinical hold our planned efficacy trial to
evaluate the safety and efficacy in ALS patients of a 400 mg dose of arimoclomol
administered orally three times daily. Based on written correspondence we
received from the FDA, their decision pertained to a previously completed animal
toxicology study in rats and was not related to data generated from any human
studies with arimoclomol. We have completed additional animal toxicology studies
to obtain additional safety data that we submitted to the FDA in the second
quarter of 2009. We plan to seek a strategic partner for the further
development of arimoclomol for all indications.
Other Clinical
Development. In February 2009, a Phase II/III adaptive
clinical trial commenced to study arimoclomol in a subset of patients with the
inherited or familial form ALS. Patients with familial ALS (fALS) who harbor
certain mutations in the superoxide dismutase-1 (SOD1) gene suffer from a
rapidly progressing form of the disease. The clinical trial is being financially
supported by grants from the ALS Association and the U.S. Food and Drug
Administration’s (FDA’s) Office of Orphan Products Development (OOPD), and we
are supplying the drug and allowing the sponsor to reference our Investigational
New Drug Application for regulatory purposes.
Arimoclomol for recovery from
stroke. Stroke results from an acute loss of normal blood flow to the
brain caused most often by a blockage in a blood vessel (ischemic) or due to
leaking of blood from a vessel (hemorrhagic). According to the American Heart
Association: stroke is the
third leading cause of death and the number one cause of long-term
disability in the U.S.; between 50% and 70% of stroke survivors regain
functional independence, but between 15% and 30% are permanently disabled and
20% require institutional care within three months after stroke; and the direct
and indirect stroke cost in the U.S. totaled approximately $58 billion in
2006.
After the
normal flow of blood is restored to the brain after the initial event,
post-stroke neurological function continues to decline. We believe that this
continuing decline in neurological function is the consequence of mis-folded
protein aggregates generated as a result of oxygen deprivation during the
original event.
Preclinical
efficacy studies completed by us in April 2007 indicated that arimoclomol
accelerated the time to recovery, and improved recovery, in experimental animal
models of stroke. These results were obtained even when arimoclomol was
administered as long as 48 hours after onset.
By
comparison, tissue plasminogen activator, or t-PA, the only treatment currently
approved in the U.S. for acute ischemic stroke, must be administered within
three hours of stroke, which substantially limits the number of patients who
qualify for this treatment.
In light
of these preclinical data, we plan to seek a partner for the development of
arimoclomol for stroke recovery and other indications.
Iroxanadine. Iroxanadine also
is an orally-administered small-molecule product candidate. We believe it
functions by stimulating the molecular chaperone protein response in the
endothelium, the thin layer of cells that line the interior surface of human
blood vessels.
Iroxanadine for the treatment of
diabetic ulcers. Type 2 diabetes is a major health problem with
significant secondary complications. The American Diabetes Association estimates
that there are 21 million type 2 diabetes sufferers in the U.S. The World Health
Organization estimates that there are more than 162 million cases of type 2
diabetes worldwide. According to the American Diabetes Association, 15% of all
diabetics will develop a foot ulcer during their lifetime, and over 82,000
non-traumatic lower-limb amputations were performed on diabetics in the U.S. in
2002 due to such ulcers and other complications. We believe there is strong
support in the scientific literature for the assertion that diabetic foot ulcers
fail to heal efficiently, in part, due to the dysfunction of endothelial cells
lining the blood vessels caused by protein mis-folding.
Animal
studies completed by us in May 2007 indicated that iroxanadine significantly
decreased the time it took for wounds to heal in diabetic mice without affecting
healing in healthy mice. Wound healing in the diabetic mice, which normally
required twice the time to heal as healthy mice, was accelerated to the extent
that healing time of diabetic mice treated with iroxanadine was
indistinguishable from that in untreated healthy mice.
In Phase
I clinical trials in healthy volunteers and Phase II clinical trials in patients
with chronic high blood pressure conducted prior to our acquisition of
iroxanadine, iroxanadine was determined to be safe and well-tolerated and
demonstrated significant improvement in the function of endothelial cells in the
brachial artery, a major blood vessel of the upper arm.
Based on
our preclinical results and the earlier clinical study data, we plan to seek a
strategic partner for the further development of iroxanadine.
Our
New-Drug Discovery Research Programs and Other Technologies
We are
conducting research aimed at discovering and validating novel drug targets
utilizing our master chaperone regulator assay, or MaCRA, drug discovery
process. We have filed a patent application on our MaCRA technology
and on new chemical entities discovered in the
laboratory. We continue to assess periodically the costs and potential
commercial value of our new-drug discovery activities, and recently announced
that we would conduct any further activities through third party
research.
Our other
current technologies, which we developed prior to the acquisition of our
molecular chaperone amplification technology, are CRL-5861, an intravenous agent
for treatment of sickle cell disease and other acute vaso-occlusive disorders,
and TranzFect, a delivery technology for DNA-based and conventional vaccines and
other potential uses.
Our
Separation from RXi Pharmaceuticals Corporation
Until
early 2008, we owned approximately 85% of the outstanding shares of common stock
of RXi and our financial statements, including our financial statements as of
and for the year ended December 31, 2007, included the consolidated financial
condition and results of operations of RXi. On February 14, 2008, our board of
directors declared a dividend of one share of RXi common stock for each
approximately 20.05 outstanding shares of our common stock, which was paid on
March 11, 2008 and which reduced our ownership of RXi shares to less than
50%. As a result, our financial statements since March 11, 2008 no longer
consolidate the financial condition and results of operation of RXi, but instead
reflect our ongoing investment in RXi based on the equity method of accounting.
As of July 8, 2009, we owned approximately 45% of the outstanding
shares of RXi common stock.
We are
party to a letter agreement with RXi and some of RXi’s current stockholders
under which we are entitled to preemptive rights to acquire any “new securities”
(as defined) that RXi proposes to sell or issue, so that we may maintain our
percentage ownership in RXi. Our preemptive rights will expire on January 8,
2012 or such earlier time at which we own less than 10% of RXi’s outstanding
common stock.
Under the
letter agreement with RXi, we agreed to vote our RXi shares for the election of
RXi directors and take other actions to ensure that a majority of the board of
directors of RXi are independent of us. We further agreed to approve of actions
that may be adopted and recommended by the RXi board of directors to facilitate
any future financing by RXi.
Manufacturing
We have
no capability to manufacture supplies of any of our products, and rely on
third-party manufacturers to produce materials needed for research and clinical
trials. We have contracted with various contract manufacturing
facilities for supply of our active pharmaceutical ingredient, or API, for our
product candidates. Pursuant to our license with TMRC Co., Ltd., or TMRC,
relating to tamibarotene, TMRC will provide us with tamibarotene at a fixed
price and in a quantity and quality sufficient to meet our clinical and
commercial needs.
To be
commercialized, our products also must be capable of being manufactured in
commercial quantities in compliance with stringent regulatory requirements and
at an acceptable cost. We intend to rely on third-party manufacturers to produce
commercial quantities of any products for which we are able to obtain marketing
approval. We have not commercialized any product, and so we also have not
demonstrated that any of our product candidates can be manufactured in
commercial quantities in accordance with regulatory requirements or at an
acceptable cost.
If our
product candidates cannot be manufactured in suitable quantities and in
accordance with regulatory standards, our clinical trials, regulatory approvals,
and marketing efforts for such products may be delayed. Such delays could
adversely affect our competitive position and our chances of generating
significant recurring revenues. If our products are not able to be manufactured
at an acceptable cost, the commercial success of our products may be adversely
affected.
Marketing
Our
tentative plan is to establish our own sales force and marketing capability in
order to commercialize tamibarotene and INNO-206 in the U.S. and to seek a
marketing partner for commercialization in other territories.
Patents
and Proprietary Technology
We
actively seek patent protection for our technologies, processes, uses, and
ongoing improvements and consider our patents and other intellectual property to
be critical to our business. We acquired patents and patent applications, and
have filed several new patent applications, in connection with our molecular
chaperone program.
We
regularly evaluate the patentability of new inventions and improvements
developed by us or our collaborators, and, whenever appropriate, will endeavor
to file U.S. and international patent applications to protect these new
inventions and improvements. We cannot be certain that any of the current
pending patent applications we have filed or licensed, or any new patent
applications we may file or license, will ever be issued in the U.S. or any
other country. There also is no assurance that any issued patents will be
effective to prevent others from using our products or processes. It is also
possible that any patents issued to us, as well as those we have licensed or may
license in the future, may be held invalid or unenforceable by a court, or third
parties could obtain patents that we would need to either license or to design
around, which we may be unable to do. Current and future competitors may have
licensed or filed patent applications or received patents, and may acquire
additional patents and proprietary rights relating to molecular chaperone
amplification and other small molecule technology or other compounds, products
or processes that may be competitive with ours.
In
addition to patent protection, we attempt to protect our proprietary products,
processes and other information by relying on trade secrets and non-disclosure
agreements with our employees, consultants and certain other persons who have
access to such products, processes and information. Under the agreements, all
inventions conceived by employees are our exclusive property, but there is no
assurance that these agreements will afford significant protection against
misappropriation or unauthorized disclosure of our trade secrets and
confidential information.
License
Agreements
Tamibarotene
We have
succeeded to Innovive’s agreement with TMRC for the license of patent rights
held by TMRC for the North American development and commercialization of
tamibarotene. The license is exclusive, applies to all products that may be
subject to the licensed intellectual property and may be used in the treatment
of APL. We may sublicense the intellectual property in our sole discretion. The
agreement also grants us an option to include within the license the use of the
drug in other fields in oncology including multiple myeloma, myelodysplastic
syndrome, and solid tumors.
Under the
agreement, we must pay TMRC royalties based on net sales and make payments to
TMRC in the aggregate of $4.165 million upon meeting clinical, regulatory, and
sales milestones up to and including the first commercial sale of the product
for the treatment of APL.
Under the
agreement, we must use commercially reasonable efforts to conduct the research
and development activities we determine are necessary to obtain regulatory
approval to market the product in those countries in North America that we
determine are commercially feasible.
The
agreement will expire upon the expiration of the subject patent rights, or 15
years from the date of first commercial sale of product in North America,
whichever is later. The agreement may be terminated if either party is in breach
and the breach is not cured within a required amount of time. We may also
terminate the agreement in the event of a material change in the safety profile
of the technology that makes continued development impossible.
INNO-206
We also
have succeeded to Innovive’s agreement with KTB Tumorforschungs GmbH, or KTB,
for the license of patent rights held by KTB for the worldwide development and
commercialization of INNO-206. The license is exclusive and
worldwide, applies to all product that may be subject to the licensed
intellectual property and may be used in all fields of use. We may sublicense
the intellectual property in our sole discretion. The agreement also grants us
an option to include within the license any technology that is claimed or
disclosed in the licensed patents and patent applications for use in the field
of oncology and the right of first refusal on any license that KTB wishes to
make to a third party regarding any technology that is claimed or disclosed in
the licensed patents and patent applications for use in the field of
oncology.
Under the
agreement, we must make payments to KTB in the aggregate of $7.5 million upon
meeting clinical and regulatory milestones up to and including the product’s
second final marketing approval. We also agreed to pay:
|
·
|
commercially
reasonable royalties based on a percentage of net sales (as defined in the
agreement);
|
|
·
|
a
percentage of non-royalty sub-licensing income (as defined in the
agreement); and
|
|
·
|
milestones
of $1 million for each additional final marketing approval that we might
obtain.
|
In the
event that we must pay a third party in order to exercise our rights to the
intellectual property under the agreement, we will deduct a percentage of those
payments from the royalties due KTB, up to an agreed upon cap. This deduction
includes a percentage of any payments that might be required to be made by us to
Bristol-Myers Squibb. Bristol-Myers Squibb holds a patent on technology that
might be considered to block the patents and patent applications that are the
subject of the agreement with KTB.
Under the
agreement with KTB, we must use commercially reasonable efforts to conduct the
research and development activities we determine are necessary to obtain
regulatory approval to market the product in those countries that we determine
are commercially feasible. Under the agreement, KTB is to use its commercially
reasonable efforts to provide us with access to suppliers of the API of the
product on the same terms and conditions as may be provided to KTB by those
suppliers.
The
agreement will expire on a product-by-product basis upon the expiration of the
subject patent rights. We have the right to terminate the agreement on 30 days
notice, provided we pay a cash penalty to KTB. KTB may terminate the agreement
if we are in breach and the breach is not cured within a specified cure period
or if we fail to use diligent and commercial efforts to meet specified clinical
milestones.
Bafetinib
We
likewise have succeeded to Innovive’s exclusive, worldwide (with the exception
of Japan) royalty-bearing license agreement with Nippon Shinyaku, including the
right to grant sublicenses, for the intellectual property relating to bafetinib
in all fields. The license agreement will expire on a
country-by-country basis upon the expiration of the subject patent rights. The
bafetinib license covers two Patent Cooperation Treaty, or PTC, applications
filed in 2003 and 2004, respectively.
Under the
agreement, we are obliged to pay Nippon Shinyaku an aggregate of $13.35 million
(including $5 million upon the product’s initial final marketing approval) upon
the achievement of clinical and regulatory milestones up to and including
approvals in the U.S. and Europe. We also will be obliged to pay:
|
·
|
commercially
reasonable royalties based on a percentage of net sales (as defined in the
Nippon Shinyaku license agreement), dependent on reaching certain revenue
thresholds;
|
|
·
|
annual
minimum payments if sales of bafetinib do not meet specified levels;
and
|
|
·
|
a
percentage of non-royalty sub-licensing income (as defined in the license
agreement).
|
The
agreement includes covenants that require us to, among other things, file an NDA
by a specific date and use our commercially reasonable efforts to bring a
licensed product to market. In the event that we breach a material
term of the Nippon Shinyaku license agreement, Nippon Shinyaku has the option to
terminate the agreement following the giving of notice and an opportunity to
cure any such breach.
Under the
merger agreement by which we acquired Innovive, we agreed to pay the former
Innovive stockholders up to $1.01 per Innovive share of future earnout merger
consideration, subject to our achievement of specified net sales under the
Innovive license agreements. The earnout merger consideration, if
any, will be payable in shares of our common stock, subject to specified
conditions, or, at our election, in cash or by a combination of shares of our
common stock and cash. Our common stock will be valued for purposes
of any future earnout merger consideration based upon the trading price of our
common stock at the time the earnout merger consideration is paid.
Competition
To our
knowledge, there are no competitors in clinical development for refractory
APL. Currently, treatment of APL is based on induction and
maintenance therapy with ATRA and chemotherapy (typically
idarubicin). ATRA and idarubicin are both generic
compounds. Arsenic trioxide, currently marketed by Cephalon, is
approved for use in patients who have relapsed after ATRA-based therapy in
APL. There are no FDA-approved therapies for patients who have failed
arsenic trioxide. In practice, it appears that patients who fail
arsenic trioxide are retreated with ATRA or receive Mylotarg, which is marketed
by Wyeth Pharmaceuticals.
We are
aware of two compounds in late-stage testing for SCLC. The first
compound is picoplatin from Poniard Pharmaceuticals. Picoplatin is a
platinum agent that is currently in a Phase III study in SCLC. The
Phase III study looks to compare picoplatin in combination with best supportive
care alone in patients who were refractory to platinum therapy or failed to
respond to platinum therapy within six months. We will test INNO-206
in patients who initially had a response on platinum therapy.
The
second compound in development in SCLC is amrubicin from
Celgene. Amrubicin is a synthetic anthracycline currently approved in
Japan for use in lung cancer. Celgene commenced a Phase III study in
the second half of 2007 in relapsed and refractory SCLC patients based on Phase
II data from Japan showing a survival of between 9.2 months and 11.7 months in
this population.
Amrubicin
and doxorubicin are both anthracyclines. We believe that the
albumin-binding ability of INNO-206 will allow the compound to overcome many of
the side effect issues typically associated with anthracyclines. We
also believe that using albumin as a carrier will allow for higher dosing and
greater efficacy.
There are
currently two main competitors to INNO-406 in the Gleevec-resistant CML market,
Dasatanib and nilotinib. Although both of these drugs are ahead of us
in clinical testing and commercialization, we believe the head-start in
development will not prove critical in the commercial setting, because CML is
becoming a chronic condition much like HIV or depression and the market for
treatment is large enough to accommodate several drugs.
Dasatinib
from Bristol-Myers Squibb, was the first of the second-generation Bcr-Abl
inhibitors to gain U.S. marketing approval from the
FDA. Bristol-Myers Squibb began distributing the product in July
2006. Dasatinib has high potency in inhibiting Bcr-Abl and also
inhibits Src, a family of kinases known to be involved in cell
growth. In clinical studies, dasatinib has shown good activity in
Gleevec-resistant patients. However, there have also been concomitant
side effects, including serious and life threatening pleural
effusion. In various studies presented to date, roughly 20% to 30% of
the patients that start therapy are discontinuing. We believe a
significant number of these patients are discontinuing due to the side effect
profile of the drug. This side effect profile may be related to Src
inhibition, but that has not yet been proven.
Nilotinib
from Novartis AG, has completed its Phase II clinical study and was granted
accelerated marketing approval by the FDA in October 2007 for the treatment of
chronic phase and accelerated phase Philadelphia chromosome positive (Ph+) CML
in adult patients resistant or intolerant to prior treatment with
Gleevec. Nilotinib has potent activity against Bcr-Abl. In its
Phase I clinical trial, Nilotinib showed good activity in Gleevec-resistant
patients. In Phase II clinical data presented at the American Society for
Hematology conference in 2006, nilotinib showed efficacy similar to dasatinib in
Gleevec-resistant patients.
Other
clinical compounds in development for CML include:
|
·
|
Wyeth’s
SKI-606 is a dual Abl and Src kinase inhibitor similar to dasatinib and is
currently in a Phase III trial in newly diagnosed Ph+ CML
patients;
|
|
·
|
Ceflatonin
from Chemgenix, a plant alkaloid primarily targeting a single Bcr-Abl
mutation known as T315I, which is in a Phase II/III clinical
trial;
|
|
·
|
Exelixis’
XL228,a multi-kinase inhibitor that targets Src and Abl , has shown
preclinical activity against the T315I mutation and is in a Phase I
clinical trial in CML patients; and
|
|
·
|
AP24534
from Ariad Pharmaceuticals is a multi-kinase inhibitor that targets
Bcr-Abl including the T315I mutation and is in a Phase I clinical trial in
CML patients.
|
We are
aware of only one drug, rilutek, developed by Aventis Pharma AG, that has been
approved by the FDA for the treatment of ALS. Many companies are working to
develop pharmaceuticals to treat ALS, including Aeolus Pharmaceuticals,
Mitsubishi Tanabe Pharma Corporation, Ono Pharmaceuticals, Trophos SA, Knopp
Neurosciences Inc., Faust Pharmaceuticals SA, Oxford BioMedica plc, Phytopharm
plc and Teva Pharmaceutical Industries Ltd., as well as RXi. ALS patients often
take over-the-counter supplements, including vitamin E, creatine and coenzyme
Q10, or drugs such as lithium that are approved for other indications. ALS
belongs to a family of neurodegenerative diseases that includes Alzheimer’s,
Parkinson’s and Huntington’s diseases. Due to similarities between these
diseases, a new treatment for one such disease potentially could be useful for
treating others. There are many companies producing and developing drugs used to
treat neurodegenerative diseases other than ALS, including Amgen, Inc., Biogen
Idec, Boehringer Ingelheim, Cephalon, Inc., Ceregene, Inc., Elan
Pharmaceuticals, plc, Forest Laboratories, Inc., H. Lundbeck A/S, Phytopharm
plc, UCB Group and Wyeth.
Current
drug classes used to treat stroke include antiplatelet agents, anticoagulants,
salycylates, neuroprotectants and thrombolytic agents. Prescription antiplatelet
agents include Aggrenox by Boehringer Ingelheim, Plavix by Sanofi-Aventis and
Bristol-Myers Squibb, and Ticlid by Roche Pharmaceuticals. Coumadin by
Bristol-Myers Squibb and Jantoven by Upsher-Smith Laboratories are branded forms
of warfarin, an anticoagulant. Moreover, Salicylates, like aspirin, are commonly
used to treat patients after stroke. In Europe, Ferrer Grupo markets the
neroprotectant, Somazina. Activase, also known as tissue plasminogen activator,
or t-PA, is a thrombolytic agent marketed by Genentech. Many new drug candidates
are in development by pharmaceutical and biotech companies, including
GlaxoSmithKline, Ipsen, Merck & Co., Ono Pharmaceuticals, PAION AG and
Wyeth. In addition to drug therapy, companies such as Medtronic and Northstar
Neurosciences are developing neurostimulation medical devices to aid in recovery
after stroke.
Many
companies, including large pharmaceutical and biotechnology firms with financial
resources, research and development staffs, and facilities that may be
substantially greater than those of ours or our strategic partners or licensees,
are engaged in the research and development of pharmaceutical products that
could compete with our potential products. To the extent that we seek to
acquire, through license or otherwise, existing or potential new products, we
will be competing with numerous other companies, many of which will have
substantially greater financial resources, large acquisition and research and
development staffs that may give those companies a competitive advantage over us
in identifying and evaluating these drug acquisition opportunities. Any products
that we acquire will be competing with products marketed by companies that in
many cases will have substantially greater marketing resources than we have. The
industry is characterized by rapid technological advances and competitors may
develop their products more rapidly and such products may be more effective than
those currently under development or that may be developed in the future by our
strategic partners or licensees. Competitive products for a number of the
disease indications that we have targeted are currently being marketed by other
parties, and additional competitive products are under development and may also
include products currently under development that we are not aware of or
products that may be developed in the future.
Government
Regulation
The U.S.
and other developed countries extensively regulate the preclinical and clinical
testing, manufacturing, labeling, storage, record-keeping, advertising,
promotion, export, marketing and distribution of drugs and biologic products.
The FDA, under the Federal Food, Drug, and Cosmetic Act, the Public Health
Service Act and other federal statutes and regulations, regulates pharmaceutical
and biologic products.
To obtain
approval of our product candidates from the FDA, we must, among other
requirements, submit data supporting safety and efficacy for the intended
indication as well as detailed information on the manufacture and composition of
the product candidate. In most cases, this will require extensive laboratory
tests and preclinical and clinical trials. The collection of these data, as well
as the preparation of applications for review by the FDA involve significant
time and expense. The FDA also may require post-marketing testing to monitor the
safety and efficacy of approved products or place conditions on any approvals
that could restrict the therapeutic claims and commercial applications of these
products. Regulatory authorities may withdraw product approvals if we fail to
comply with regulatory standards or if we encounter problems at any time
following initial marketing of our products.
The first
stage of the FDA approval process for a new biologic or drug involves completion
of preclinical studies and the submission of the results of these studies to the
FDA. These data, together with proposed clinical protocols, manufacturing
information, analytical data and other information submitted to the FDA, in an
investigational new drug application, or IND, must become effective before human
clinical trials may commence. Preclinical studies generally involve FDA
regulated laboratory evaluation of product characteristics and animal studies to
assess the efficacy and safety of the product candidate.
After the
IND becomes effective, a company may commence human clinical trials. These are
typically conducted in three sequential phases, but the phases may overlap.
Phase I trials consist of testing of the product candidate in a small number of
patients or healthy volunteers, primarily for safety at one or more doses. Phase
II trials, in addition to safety, evaluate the efficacy of the product candidate
in a patient population somewhat larger than Phase I trials. Phase III trials
typically involve additional testing for safety and clinical efficacy in an
expanded population at multiple test sites. A company must submit to the FDA a
clinical protocol, accompanied by the approval of the Institutional Review
Boards at the institutions participating in the trials, prior to commencement of
each clinical trial.
To obtain
FDA marketing authorization, a company must submit to the FDA the results of the
preclinical and clinical testing, together with, among other things, detailed
information on the manufacture and composition of the product candidate, in the
form of a new drug application, or NDA.
The
amount of time taken by the FDA for approval of an NDA will depend upon a number
of factors, including whether the product candidate has received priority
review, the quality of the submission and studies presented, the potential
contribution that the compound will make in improving the treatment of the
disease in question, and the workload at the FDA.
The FDA
may, in some cases, confer upon an investigational product the status of a fast
track product. A fast track product is defined as a new drug or biologic
intended for the treatment of a serious or life-threatening condition that
demonstrates the potential to address unmet medical needs for this condition.
The FDA can base approval of an NDA for a fast track product on an effect on a
surrogate endpoint, or on another endpoint that is reasonably likely to predict
clinical benefit. If a preliminary review of clinical data suggests that a fast
track product may be effective, the FDA may initiate review of entire sections
of a marketing application for a fast track product before the sponsor completes
the application. The FDA has granted fast track designation and orphan drug
status to arimoclomol for the treatment of ALS.
We
anticipate that our products will be manufactured by our strategic partners,
licensees or other third parties. Before approving an NDA, the FDA will inspect
the facilities at which the product is manufactured and will not approve the
product unless the manufacturing facilities are in compliance with the FDA’s
cGMP, which are regulations that govern the manufacture, holding and
distribution of a product. Our manufacturers also will be subject to regulation
under the Occupational Safety and Health Act, the Environmental Protection Act,
the Nuclear Energy and Radiation Control Act, the Toxic Substance Control Act
and the Resource Conservation and Recovery Act. Following approval, the FDA
periodically inspects drug and biologic manufacturing facilities to ensure
continued compliance with the good manufacturing practices regulations. Our
manufacturers will have to continue to comply with those requirements. Failure
to comply with these requirements subjects the manufacturer to possible legal or
regulatory action, such as suspension of manufacturing or recall or seizure of
product. Adverse patient experiences with the product must be reported to the
FDA and could result in the imposition of marketing restrictions through
labeling changes or market removal. Product approvals may be withdrawn if
compliance with regulatory requirements is not maintained or if problems
concerning safety or efficacy of the product occur following
approval.
The
labeling, advertising, promotion, marketing and distribution of a drug or
biologic product also must be in compliance with FDA and Federal Trade
Commission requirements which include, among others, standards and regulations
for off-label promotion, industry sponsored scientific and educational
activities, promotional activities involving the internet, and
direct-to-consumer advertising. We also will be subject to a variety of federal,
state and local regulations relating to the use, handling, storage and disposal
of hazardous materials, including chemicals and radioactive and biological
materials. In addition, we will be subject to various laws and regulations
governing laboratory practices and the experimental use of animals. In each of
these areas, as above, the FDA has broad regulatory and enforcement powers,
including the ability to levy fines and civil penalties, suspend or delay
issuance of product approvals, seize or recall products, and deny or withdraw
approvals.
We will
also be subject to a variety of regulations governing clinical trials and sales
of our products outside the U.S. Whether or not FDA approval has been obtained,
approval of a product candidate by the comparable regulatory authorities of
foreign countries and regions must be obtained prior to the commencement of
marketing the product in those countries. The approval process varies from one
regulatory authority to another and the time may be longer or shorter than that
required for FDA approval. In the European Union, Canada and Australia,
regulatory requirements and approval processes are similar, in principle, to
those in the U.S.
Employees
As of
July 1, 2009, we had 12 employees, two of whom were engaged in research and
development activities and ten of whom were involved in management and
administrative operations. Because we substantially completed the
initial phase of the research and development activities performed at our San
Diego facility and have determined to conduct our research and development
activities through third parties for the foreseeable future, we have
significantly reduced headcount and related expenses in the past three
months.
Properties
Our
headquarters are located in leased facilities in Los Angeles, California. The
lease covers approximately 4,700 square feet of office space and expires in June
2012. This lease currently requires us to make monthly payments of approximately
$18,081.
We also
lease approximately 10,000 square feet of office and laboratory space in San
Diego, California. The lease expires in October 2010, although we have the
option to extend the lease for up to two additional three-year terms. In May
2009, we substantially completed the initial phase of the research and
development activities performed at the San Diego facility, and announced that
we will conduct our research and development activities through third parties
for the foreseeable future. As a result, we are exploring
alternatives for the San Diego facility that might include subletting some or
all of the premises. Our headquarters and
laboratory facilities are sufficient for our current purposes.
We also
acquired a sublease to approximately 5,526 square feet of office space at 555
Madison Avenue, New York, New York, in connection with our acquisition of
Innovive in September 2008. This lease currently requires us to make
annual payments of approximately $210,000, plus certain taxes and operating
expenses, and it expires on August 30, 2012. On December 4, 2008, we
sub-subleased the space to Red Pine Advisors LLC through August 29, 2012.
Under the sub-sublease, we are entitled to base annual rent of approximately
$350,000, plus certain taxes and operating expenses.
RISK
FACTORS
An investment in our shares involves
a high degree of risk. Prior to making a decision about purchasing
our shares, you should carefully consider the risks and uncertainties and all
other information contained or incorporated by reference in this prospectus and
in the prospectus supplement, including the risks and uncertainties discussed
below, as well as any modification, replacement or update to these risks and
uncertainties that are reflected in any subsequent filings we make with the SEC
as described in the “Where You Can Find More Information” section of this
prospectus. These risks and uncertainties are not the only ones
facing us. Additional risks and uncertainties not presently known to
us, or that we currently perceive as immaterial, may also harm our
business. If any of these risks or uncertainties actually occurs, our
business, results of operations and financial condition could be materially and
adversely affected. In that case, the trading price of our common
stock could decline, and you could lose all or part of your
investment.
Risks
Associated With Our Business
We
have operated at a loss and will likely continue to operate at a loss for the
foreseeable future.
We have
operated at a loss due to our ongoing expenditures for research and development
of our product candidates and for general and administrative purposes and lack
of significant recurring revenue. We incurred net losses of $27.0
million, $21.9 million and $16.8 million for the years ended December 31, 2008,
2007 and 2006, respectively, and incurred net losses of $4.0 million and $6.1
million for the three months ended March 31, 2009 and 2008,
respectively. We had an accumulated deficit as of March 31, 2009 of
approximately $196.1 million. We are likely to continue to incur
losses unless and until we are able to commercialize one or more of our product
candidates. These losses, among other things, have had and will
continue to have an adverse effect on our stockholders’ equity and working
capital. Because of the numerous risks and uncertainties associated with our
product development efforts, we are unable to predict when we may become
profitable, if at all. If we do not become profitable or are unable
to maintain future profitability, the market value of our common stock will be
adversely affected.
Because
we have no source of significant recurring revenue, we must depend on financing
to sustain our operations.
Developing
products and conducting clinical trials require substantial amounts of capital.
To date, we have relied primarily upon proceeds from sales of our equity
securities and the exercise of options and warrants to generate funds needed to
finance our business and operations. We will need to raise additional
capital to, among other things:
|
·
|
fund
our clinical trials and pursue regulatory approval of our existing and
possible future product candidates;
|
|
·
|
expand
our research and development
activities;
|
|
·
|
finance
our general and administrative
expenses;
|
|
·
|
acquire
or license new technologies;
|
|
·
|
prepare,
file, prosecute, maintain, enforce and defend our patent and other
proprietary rights; and
|
|
·
|
develop
and implement sales, marketing and distribution capabilities to
successfully commercialize any product for which we obtain marketing
approval and choose to market
ourselves.
|
Our
revenues were $6.3 million, $7.5 million and $2.1 million, respectively, for
years ended December 31, 2008, 2007 and 2006, which included $6.2 million, $7.2
million and $1.8 million, respectively, of deferred revenue recognized from our
sale in August 2006 of a one-percent royalty interest in worldwide sales of
arimoclomol for the treatment of ALS. Our revenues for the three
months ended March 31, 2009 and 2008 were $1.5 million and $2.2 million,
respectively, attributable to deferred revenue. We will have no
significant recurring revenue unless we are able to commercialize one or more of
our product candidates in development, which may require us to first enter into
license or other strategic arrangements with third parties.
At March
31, 2009, we had cash, cash equivalents and short-term investments of $21.9
million. We believe that our current resources will be sufficient to support our
currently planned level of operations through into the third quarter of 2011.
This estimate is based, in part, upon our currently projected expenditures for
the remainder of 2009 and the first three months of 2010 of approximately $10.7
million, which includes approximately
$0.7 million for our clinical program for tamibarotene, approximately $0.3
million for our clinical program for INNO-206, approximately $0.3 million for
our clinical program for bafetinib, approximately $0.7 million for our animal
toxicology studies and related activities for arimoclomol, approximately $1.0
million for operating our clinical programs, approximately $1.1 million in
connection with the outsourcing of research activities that previously had been
conducted at our laboratory in San Diego, California, and approximately $6.6
million for other general and administrative expenses. As described in the risk
factor that follows below in this section, these projected expenditures are
based upon numerous assumptions and subject to many uncertainties, and our
actual expenditures may be significantly different from these
projections.
If we
obtain marketing approval as currently planned and successfully commercialize
our product candidates, we anticipate it will take a minimum of three years, and possibly
longer, for us to generate significant recurring revenue, and we will be
dependent on future financing until such time, if ever, as we can generate
significant recurring revenue. Our ability to raise capital has been materially
and adversely affected by the downturn in the financial markets and poor
economy, which have severely depressed the market for private investment in
public equities, or PIPEs, transactions on which we have relied for raising
needed capital. These conditions also have materially and adversely affected the
market for our RXi shares. We have no commitments from third parties to provide
us with any additional financing, and we may not be able to obtain future
financing on favorable terms, or at all. Failure to obtain adequate financing
would adversely affect our ability to operate as a going concern. If we raise
additional funds by issuing equity securities, dilution to stockholders may
result and new investors could have rights superior to holders of the shares
issued in this offering. In addition, debt financing, if available, may include
restrictive covenants. If adequate funds are not available to us, we may have to
liquidate some or all of our assets or to delay or reduce the scope of or
eliminate some portion or all of our development programs or clinical trials. We
also may have to license to other companies our product candidates or
technologies that we would prefer to develop and commercialize
ourselves.
If
we do not achieve our projected development goals in the time frames we announce
and expect, or if our financial projections prove to be materially inaccurate,
the commercialization of our products may be delayed and our business prospects
may suffer.
From time
to time, we estimate the timing of the accomplishment of various scientific,
clinical, regulatory and other product development goals, which we sometimes
refer to as milestones. These milestones may include the commencement or
completion of scientific studies and clinical trials and the submission of
regulatory filings. For example, we have stated in our most recent Annual Report
incorporated by reference in this prospectus supplement the expected timing of
certain milestones relating to our tamibarotene, INNO-206 and arimoclomol
clinical development programs.
We also
may disclose projected expenditures or other forecasts for future periods such
as the statements above in this prospectus supplement regarding our current
projected expenditures for fiscal year 2009 and the first three months of 2010.
These and other financial projections are based on management’s current
expectations and do not contain any margin of error or cushion for any specific
uncertainties, or for the uncertainties inherent in all financial forecasting.
The assumptions management has used to produce these projections may
significantly change or prove to be inaccurate. Accordingly, you should not
unduly rely on any of these projections.
The
actual timing of milestones and actual expenditures or other financial results
can vary dramatically compared to our estimates, in some cases for reasons
beyond our control. If we do not meet milestones or financial projections as
announced from time to time, the development and commercialization of our
products may be delayed and our business prospects may suffer.
If
our products are not successfully developed and approved by the FDA, we may be
forced to reduce or curtail our operations.
All of
our product candidates in development must be approved by the U.S. Food and Drug
Administration, or FDA, or corresponding foreign governmental agencies before
they can be marketed. The process for obtaining FDA and foreign
government approvals is both time-consuming and costly, with no certainty of a
successful outcome. This process typically includes the conduct of extensive
pre-clinical and clinical testing, including post-approval testing, which may
take longer or cost more than we or our licensees, if any, anticipate, and may
prove unsuccessful due to numerous factors. Product candidates that may appear
to be promising at early stages of development may not successfully reach the
market for a number of reasons. The results of preclinical and
initial clinical testing of these product candidates may not necessarily be
predictive of the results that will be obtained from later or more extensive
testing. Companies in the pharmaceutical and biotechnology industries have
suffered significant setbacks in advanced clinical trials, even after obtaining
promising results in earlier trials.
Numerous
factors could affect the timing, cost or outcome of our product development
efforts, including the following:
|
·
|
difficulty
in securing centers to conduct
trials;
|
|
·
|
difficulty
in enrolling patients in conformity with required protocols or projected
timelines;
|
|
·
|
unexpected
adverse reactions by patients in
trials;
|
|
·
|
difficulty
in obtaining clinical supplies of the
product;
|
|
·
|
changes
in or our inability to comply with FDA or foreign governmental product
testing, manufacturing or marketing
requirements;
|
|
·
|
regulatory
inspections of clinical trials or manufacturing facilities, which may,
among other things, require us or our manufacturers or licensees to
undertake corrective action or suspend or terminate the affected clinical
trials if investigators find them not to be in compliance with applicable
regulatory requirements;
|
|
·
|
inability
to generate statistically significant data confirming the safety and
efficacy of the product being
tested;
|
|
·
|
modification
of the product during testing; and
|
|
·
|
reallocation
of our limited financial and other resources to other clinical
programs.
|
In
addition, the FDA and other regulatory agencies may lack experience in
evaluating our product candidates. For example, we are aware of only
one drug that the FDA has approved to treat amyotrophic lateral sclerosis,
commonly known as ALS, or Lou Gehrig’s disease. This inexperience may
lengthen the regulatory review process, increase our development costs and delay
or prevent commercialization of arimoclomol or our other product
candidates. It is possible that none of the product candidates we
develop will obtain the regulatory approvals necessary for us to begin selling
them. The time required to obtain FDA and foreign governmental
approvals is unpredictable, but often can take years following the commencement
of clinical trials, depending upon the complexity of the product candidate. Any
analysis we perform on data from clinical activities is subject to confirmation
and interpretation by regulatory authorities, which could delay, limit or
prevent regulatory approval.
Furthermore,
even if we obtain regulatory approvals, our products and the manufacturing
facilities used to produce them will be subject to continual review, including
periodic inspections and mandatory post- approval clinical trials by the FDA and
other U.S. and foreign regulatory authorities. Any delay or failure
in obtaining required approvals or to comply with post-approval regulatory
requirements could have a material adverse effect on our ability to generate
revenue from the particular product candidate. The failure to comply
with any post-approval regulatory requirements also could also result in the
rescission of the related regulatory approvals or the suspension of sales of the
offending product.
Our
current and planned clinical trials of our product candidates may fail to show
that these product candidates are clinically safe and effective.
Our Phase
IIa clinical trial and open-label extension clinical trial of arimoclomol for
the treatment of ALS indicated that arimoclomol was safe and well-tolerated in
patients, but the results of the open-label extension clinical trial indicated
only a non-statistically significant trend of improvement in the revised ALS
Functional Rating Scale, or ALSFRS-R, in the arimoclomol high-dose group as
compared with reports of previous studies of untreated patients. This trial did
not have a concurrent placebo control group, so we could draw no definitive
conclusions with respect to efficacy. Further development of arimoclomal for ALS
and stroke recovery, as well as clinical development of iroxanadine for diabetic
foot ulcers, would require significant additional testing, and it is possible
that the favorable safety data we observed in earlier trials may not be
reproduced in any later trials.
Tamibarotene
has been shown to be safe, well tolerated, and efficacious in the Japanese
population. However, it is possible that the response to the drug may
be different in American or European populations. Furthermore, the
efficacy studies that led to approval in Japan occurred prior to the advent of
the use of arsenic trioxide, or ATO, for second line therapy. It is
possible that the current use of ATO could alter the safety or efficacy of
tamibarotene. Finally, the FDA may not accept the Japanese studies as
a database for safety in the US.
INNO-206
was no more toxic than free doxorubicin in a Phase I clinical trial and showed
limited biological responses against tumors. However, these
conclusions may not be reproducible in larger clinical
trials. Furthermore, future clinical trials will likely include
multiple dosing with INNO-206 instead of the single doses used in the Phase I
clinical trial.
Later
trials also may not yield statistically significant data indicating that these
product candidates are clinically effective. Accordingly, we, or any development
partners, may ultimately be unable to provide the FDA with satisfactory data on
clinical safety and efficacy sufficient to obtain FDA approval of tamibarotene,
INNO-206, arimoclomol or iroxanadine for these indications.
The
FDA placed a clinical hold on our Phase IIb efficacy trial of arimoclomol for
ALS, which will delay further development of arimoclomol.
In
January 2008, the FDA placed a clinical hold on our Phase IIb clinical efficacy
trial of arimoclomol for the treatment of ALS due to concerns relating to
previous toxicology studies of arimoclomol in rats. We have completed additional
animal toxicology studies to obtain additional safety data that we submitted to
the FDA in the second quarter of 2009. Although we expect to the FDA
to respond to that submission in the third quarter of 2009, we cannot be certain
how long the FDA may take to complete its review. Depending on the outcome of
the FDA’s review, the FDA could require:
|
·
|
additional
toxicology or human studies prior to or in parallel with the resumption of
clinical trials, which would result in substantial additional expenses and
possible significant delays in completing the clinical trials;
or
|
|
·
|
changes
in the design of our previously planned Phase IIb clinical efficacy trial,
including a reduction in the planned dosage of arimoclomol, which could
delay further or increase the cost of the trial, adversely affect our
ability to demonstrate the efficacy of arimoclomol in the trial or cause
the cancellation of the trial altogether due to one or more of these
consideration.
|
If we are
unable to resolve the FDA’s safety concerns, the FDA may prohibit the resumption
of trials of arimoclomol for the treatment of ALS and all other
indications.
Even
if we obtain regulatory approval for our product candidates, these product
candidates may not achieve market acceptance or be profitable.
We do not
expect to receive regulatory approvals for the commercial sale of any of our
product candidates for several years, if at all. Even if we do receive
regulatory approvals, the future commercial success of these drug candidates
will depend, among other things, on their acceptance by physicians, patients,
healthcare payors and other members of the medical community as therapeutic and
cost-effective alternatives to commercially available products. If our product
candidates fail to gain market acceptance, we may not be able to earn sufficient
revenues to continue our business.
Any
drugs we develop may become subject to unfavorable pricing regulations,
third-party reimbursement practices or healthcare reform initiatives, which
could have a material adverse effect on our business.
We intend
to sell our products primarily to hospitals which receive reimbursement for the
health care services they provide to their patients from third-party payors,
such as Medicare, Medicaid and other domestic and international government
programs, private insurance plans and managed care programs. Most third-party
payors may deny reimbursement if they determine that a medical product was not
used in accordance with cost-effective treatment methods, as determined by the
third-party payor, or was used for an unapproved indication. Third-party payors
also may refuse to reimburse for experimental procedures and devices.
Furthermore, because our programs are in the early stages of development, we are
unable at this time to determine their cost-effectiveness and the level or
method of reimbursement. Increasingly, the third-party payors who reimburse
patients are requiring that drug companies provide them with predetermined
discounts from list prices, and are challenging the prices charged for medical
products. If the price we are able to charge for any products we develop is
inadequate in light of our development and other costs, our profitability could
be adversely affected.
We
currently expect that any drugs we develop may need to be administered under the
supervision of a physician. Under currently applicable law, drugs that are not
usually self-administered may be eligible for coverage by the Medicare program
if:
|
·
|
they
are “incidental” to a physician’s
services,
|
|
·
|
they
are “reasonable and necessary” for the diagnosis or treatment of the
illness or injury for which they are administered according to accepted
standard of medical practice,
|
|
·
|
they
are not excluded as immunizations,
and
|
|
·
|
they
have been approved by the FDA.
|
We
may rely upon third parties in connection with the commercialization of our
products.
We
currently plan to continue the development of tamibarotene for the treatment of
APL through a third-party clinical trials management service, and may retain the
services of site management and clinical research organizations to help conduct
our other clinical trials. We may seek to complete the development of
tamibarotene and market it ourselves if it is approved by the FDA. However, the
completion of the development of tamibarotene and our other product candidates,
as well as the marketing of these products, may require us to enter into
strategic alliances, license agreements or other collaborative arrangements with
other pharmaceutical companies under which those companies will be responsible
for one or more aspects of the commercial development and eventual marketing of
our products.
Our
products may not have sufficient potential commercial value to enable us to
secure strategic arrangements with suitable companies on attractive terms, or at
all. If we are unable to enter into such arrangements, we may not have the
financial or other resources to complete the development of any of our products
and may have to sell our rights in them to a third party or abandon their
development altogether.
To the
extent we enter into collaborative arrangements, we will be dependent upon the
timeliness and effectiveness of the development and marketing efforts of our
contractual partners. If these companies do not allocate sufficient personnel
and resources to these efforts or encounter difficulties in complying with
applicable FDA and other regulatory requirements, we may not obtain regulatory
approvals as planned, if at all, and the timing of receipt or the amount of
revenue from these arrangements may be materially and adversely affected. By
entering into these arrangements rather than completing the development and then
marketing these products on our own, the profitability to us of these products
may decline.
We
may be unable to protect our intellectual property rights, which could adversely
affect our ability to compete effectively.
We
believe that obtaining and maintaining patent and other intellectual property
rights for our technologies and potential products is critical to establishing
and maintaining the value of our assets and our business. We will be able to
protect our technologies from unauthorized use by third parties only to the
extent that we have rights to valid and enforceable patents or other proprietary
rights that cover them. Although we own or have rights to patents and patent
applications directed to INNO-206, bafetinib and our molecular chaperone
amplification technologies, these patents and applications may not prevent third
parties from developing or commercializing similar or identical technologies. In
addition, our patents may be held to be invalid if challenged by third parties,
and our patent applications may not result in the issuance of
patents.
The
patent positions of pharmaceutical and biotechnology companies can be highly
uncertain and involve complex legal and factual questions for which important
legal principles remain unresolved. No consistent policy regarding the breadth
of claims allowed in biotechnology patents has emerged to date in the U.S. and
in many foreign countries. The application and enforcement of patent laws and
regulations in foreign countries is even more uncertain. Accordingly, we may not
be able to effectively file, protect or defend our proprietary rights on a
consistent basis. Many of the patents and patent applications on which we rely
were issued or filed by third parties prior to the time we acquired rights to
them. The validity, enforceability and ownership of those patents and patent
applications may be challenged, and if a court decides that our patents are not
valid, we will not have the right to stop others from using our inventions.
There is also the risk that, even if the validity of our patents is upheld, a
court may refuse to stop others on the ground that their activities do not
infringe our patents.
Any
litigation brought by us to protect our intellectual property rights could be
costly and have a material adverse effect on our operating results or financial
condition, make it more difficult for us to enter into strategic alliances with
third parties to develop our products, or discourage our existing licensees from
continuing their development work on our potential products. If our patent
coverage is insufficient to prevent third parties from developing or
commercializing similar or identical technologies, the value of our assets is
likely to be materially and adversely affected.
We also
rely on certain proprietary trade secrets and know-how, especially where we
believe patent protection is not appropriate or obtainable. However, trade
secrets and know-how are difficult to protect. Although we have taken measures
to protect our unpatented trade secrets and know-how, including the use of
confidentiality and invention assignment agreements with our employees,
consultants and some of our contractors, it is possible that these persons may
disclose our trade secrets or know-how or that our competitors may independently
develop or otherwise discover our trade secrets and know-how.
If
our product candidates infringe the rights of others, we could be subject to
expensive litigation or be required to obtain licenses from others to develop or
market them.
Our
competitors or others may have patent rights that they choose to assert against
us or our licensees, suppliers, customers or potential collaborators. Moreover,
we may not know about patents or patent applications that our products would
infringe. For example, because patent applications can take many years to issue,
there may be currently pending applications, unknown to us, that may later
result in issued patents that our arimoclomol, iroxanadine or other product
candidates would infringe. In addition, if third parties file patent
applications or obtain patents claiming technology also claimed by us in issued
patents or pending applications, we may have to participate in interference
proceedings in the US Patent and Trademark Office to determine priority of
invention. If third parties file oppositions in foreign countries, we may also
have to participate in opposition proceedings in foreign tribunals to defend the
patentability of our foreign patent applications.
If a
third party claims that we infringe its proprietary rights, any of the following
may occur:
|
·
|
we
may become involved in time-consuming and expensive litigation, even if
the claim is without merit;
|
|
·
|
we
may become liable for substantial damages for past infringement if a court
decides that our technology infringes a competitor’s
patent;
|
|
·
|
a
court may prohibit us from selling or licensing our product without a
license from the patent holder, which may not be available on commercially
acceptable terms, if at all, or which may require us to pay substantial
royalties or grant cross licenses to our patents;
and
|
|
·
|
we
may have to redesign our product candidates or technology so that it does
not infringe patent rights of others, which may not be possible or
commercially feasible.
|
If any of
these events occurs, our business and prospects will suffer and the market price
of our common stock will likely decline substantially.
We
have reported, in the past, material weaknesses in the effectiveness of our
internal controls over financial reporting, and if we cannot maintain effective
internal controls or provide reliable financial and other information, investors
may lose confidence in our SEC reports.
Within
the past several years:
|
·
|
we
identified a material weakness related to our accounting for an equity
transaction by RXi and our tax withholding in connection with exercises of
employee stock options. As a result, we restated our financial statements
for the quarter ended June 30, 2007 and extended the filing of our
quarterly report for the quarter ended September 30,
2007;
|
|
·
|
we
identified a material weakness related to our accounting for transactions
at our former laboratory facility in Worcester, Massachusetts. As a
result, we restated our financial statements for the quarters ended March
31, 2006, June 30, 2006 and September 30,
2006;
|
|
·
|
we
improperly applied generally accepted accounting principles related to our
accounting for deemed dividends incurred in connection with anti-dilution
adjustments made to our outstanding warrants. This misapplication of
accounting principles constituted a material weakness and caused us to
twice restate our financial statements for the quarters ended March 31,
2005, June 30, 2005 and September 30, 2005 and for the year ended December
31, 2005, as well as restate our financial statements for the quarters
ended March 31, 2006, June 30, 2006 and September 30, 2006;
and
|
|
·
|
we
miscalculated pro forma employee stock option compensation figures
disclosed in the footnotes to our financial statements. As a result, we
restated our financial statements for the quarters ended March 31, 2005,
June 30, 2005 and September 30, 2005 and for the year ended December 31,
2005.
|
In
addition, we concluded in our annual report for the year ended December 31, 2007
and in our quarterly reports for the quarters ended March 31, 2008 and June 30,
2008, that our disclosure controls and procedures were ineffective as of those
dates. Disclosure controls generally include controls and procedures designed to
ensure that information required to be disclosed by us in the reports we file
with the SEC is recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms. In January 2008, we also filed
an amendment to an SEC report to correct certain form errors.
Effective
internal controls over financial reporting and disclosure controls and
procedures are necessary for us to provide reliable financial and other reports
and effectively prevent fraud. If we cannot maintain effective internal controls
or provide reliable financial or SEC reports or prevent fraud, investors may
lose confidence in our SEC reports, our operating results and the trading price
of our common stock could suffer and we may become subject to
litigation.
We
are subject to intense competition, and we may not compete
successfully.
We and
our strategic partners or licensees may be unable to compete successfully
against our current or future competitors. The pharmaceutical, biopharmaceutical
and biotechnology industries are characterized by intense competition and rapid
and significant technological advancements. Many companies, research
institutions and universities are working in a number of areas similar to our
primary fields of interest to develop new products. There also is intense
competition among companies seeking to acquire products that already are being
marketed. Many of the companies with which we compete have or are likely to have
substantially greater research and product development capabilities and
financial, technical, scientific, manufacturing, marketing, distribution and
other resources than us and at least some of our present or future strategic
partners or licensees.
As a
result, these competitors may:
|
·
|
succeed
in developing competitive products sooner than us or our strategic
partners or licensees;
|
|
·
|
obtain
FDA or foreign governmental approvals for their products before we can
obtain approval of any of our
products;
|
|
·
|
obtain
patents that block or otherwise inhibit the development and
commercialization of our product candidate
candidates;
|
|
·
|
develop
products that are safer or more effective than our
products;
|
|
·
|
devote
greater resources than us to marketing or selling
products;
|
|
·
|
introduce
or adapt more quickly than us to new technologies and other scientific
advances;
|
|
·
|
introduce
products that render our products
obsolete;
|
|
·
|
withstand
price competition more successfully than us or our strategic partners or
licensees;
|
|
·
|
negotiate
third-party strategic alliances or licensing arrangements more effectively
than us; and
|
|
·
|
take
better advantage than us of other
opportunities.
|
Companies
that currently sell generic and proprietary compounds for the treatment of
cancer and related diseases include, but are not limited to, Abraxis BioScience,
Amgen, Sanofi-Aventis, Bayer, Bristol-Myers Squibb, Celgene, Cephalon,
Genentech, Eli Lilly, Johnson & Johnson and Novartis. Alternative
technologies are being developed to treat cancer and related diseases by
numerous companies including Bristol-Myers Squibb, Eisai, Merck and Genentech,
several of which are in advanced clinical trials. There also are FDA approved
cancer therapies that are in the late stage of development by larger established
companies for new cancer indications: Alimta (Eli Lilly), Avastin (Genentech),
Eloxatin (Sanofi-Aventis), Erbitux (Bristol-Myers Squibb and Imclone Systems)
and Tarceva (Genentech). Poniard Pharmaceuticals and Celgene are developing
compounds for SCLC. Novartis and Bristol-Myers Squibb have each developed a
treatment for chronic myelogenous leukemia that would compete with bafetinib.
ATRA and Cephalon’s Trisenox (arsenic trioxide) could compete with
tamibarotene. In addition, companies pursuing different but related
fields represent substantial competition. Any of these competing
therapies could prove to be more effective than tamibarotene, INNO-206,
bafetinib or any future therapy of ours.
We are
aware of only one drug, Rilutek, which was developed by Aventis Pharma AG, that
has been approved by the FDA for the treatment of ALS. Many companies are
working to develop pharmaceuticals to treat ALS, including Aeolus
Pharmaceuticals, Celgene Corporation, Mitsubishi Tanabe Pharma Corporation, Ono
Pharmaceuticals, Trophos SA, Knopp Neurosciences Inc., Faust Pharmaceuticals SA,
Oxford BioMedica plc, Phytopharm plc and Teva Pharmaceutical Industries Ltd., as
well as RXi. ALS patients often take over-the-counter supplements, including
vitamin E, creatine and coenzyme Q10, or drugs such as lithium that are approved
for other indications. ALS belongs to a family of neurodegenerative diseases
that includes Alzheimer’s, Parkinson and Huntington’s diseases. Due to
similarities between these diseases, a new treatment for one such disease
potentially could be useful for treating others. There are many companies
producing and developing drugs used to treat neurodegenerative diseases other
than ALS, including Amgen, Inc., Biogen Idec, Boehringer Ingelheim, Cephalon,
Inc., Ceregene, Inc., Elan Pharmaceuticals, plc, Forest Laboratories, Inc., H.
Lundbeck A/S, Phytopharm plc, UCB Group and Wyeth.
Current
drug classes used to treat stroke include antiplatelet agents, anticoagulants,
salycylates, neuroprotectants and thrombolytic agents. Prescription antiplatelet
agents include Aggrenox by Boehringer Ingelheim, Plavix by Sanofi-Aventis and
Bristol-Myers Squibb, and Ticlid by Roche Pharmaceuticals. Coumadin by
Bristol-Myers Squibb and Jantoven by Upsher-Smith Laboratories are branded forms
of warfarin, an anticoagulant. Moreover, Salicylates, like aspirin, are commonly
used to treat patients after stroke. In Europe, Ferrer Grupo markets the
neroprotectant, Somazina. Activase, also known as tissue plasminogen activator,
or t-PA, is a thrombolytic agent marketed by Genentech. Many new drug candidates
are in development by pharmaceutical and biotech companies, including
GlaxoSmithKline, Ipsen, Merck & Co., Ono Pharmaceuticals, PAION AG and
Wyeth. In addition to drug therapy, companies such as Medtronic and Northstar
Neurosciences are developing neurostimulation medical devices to aid in recovery
after stroke.
Most of
our competitors have substantially greater research and product development
capabilities and financial, technical, scientific, manufacturing, marketing,
distribution and other resources than us.
We
will be required to pay substantial milestone and other payments relating to the
commercialization of our products.
The
agreement under which we have North American rights to tamibarotene provides for
our payment of royalties based on net sales of any products, as well as
aggregate payments of $4.165 million upon meeting specified clinical, regulatory
and sales milestones up to and including the first commercial sale of
tamibarotene for the treatment of APL.
The
agreement relating to our worldwide rights to INNO-206 provides for our payment
of an aggregate of $7.5 million upon meeting specified clinical and regulatory
milestones up to and including the product’s second final marketing
approval. We also will be obliged to pay:
|
·
|
commercially
reasonable royalties based on a percentage of net sales (as defined in the
agreement);
|
|
·
|
a
percentage of non-royalty sub-licensing income (as defined in the
agreement); and
|
|
·
|
milestones
of $1,000,000 for each additional final marketing approval that we might
obtain.
|
If we are
required to pay any third party in order to exercise our rights under the
agreement, we will deduct a percentage of those payments from the royalties due
under the agreement, up to an agreed-upon cap.
Our
agreement relating to our worldwide (except Japan) rights to bafetinib provides
for our payment of an aggregate of $13.35 million (including $5 million upon the
product’s initial final marketing approval) upon the achievement of specified
clinical and regulatory milestones up to and including approvals in the U.S. and
Europe. We also will be obliged to pay:
|
·
|
commercially
reasonable royalties based on a percentage of net sales (as defined in the
agreement), dependent on reaching certain revenue
thresholds;
|
|
·
|
annual
minimum payments if sales of bafetinib do not meet specified levels;
and
|
|
·
|
a
percentage of non-royalty sub-licensing income (as defined in the
agreement).
|
Under the
merger agreement by which we acquired Innovive, we agreed to pay the former
Innovive stockholders a total of up to approximately $18.3 million of future
earnout merger consideration, subject to our achievement of specified net sales
under the Innovive license agreements. The earnout merger
consideration, if any, will be payable in shares of our common stock, subject to
specified conditions, or, at our election, in cash or by a combination of shares
of our common stock and cash. Our common stock will be valued for
purposes of any future earnout merger consideration based upon the trading price
of our common stock at the time the earnout merger consideration is
paid.
Our
agreement by which we acquired rights to arimoclomol and our other molecular
chaperone amplification product candidates provides for milestone payments by us
upon the occurrence of specified regulatory filings and approvals related to the
acquired products. In the event that we successfully develop arimoclomol or any
of these other product candidates, these milestone payments could aggregate as
much as $3.7 million, with the most significant payments due upon the first
commercialization of any of these products. In addition, our agreement with the
ALS CRT requires us to pay a one-percent royalty interest on worldwide sales of
arimoclomol for the treatment of ALS. Also, any future license, collaborative or
other agreements we may enter into in connection with our development and
commercialization activities may require us to pay significant milestone,
license and other payments in the future.
We
will rely upon third parties for the manufacture of our clinical product
supplies.
We do not
have the facilities or expertise to manufacture supplies of any of our product
candidates, including tamibarotene, INNO-206, arimoclomol or iroxanadine.
Accordingly, we are dependent upon third-party manufacturers, or potential
future strategic alliance partners, to manufacture these supplies. We have
manufacturing supply arrangements in place with respect to a portion of the
clinical supplies needed for the clinical development programs for tamibarotene
and arimoclomol. However, we have no supply arrangements for the commercial
manufacture of these product candidates or any manufacturing supply arrangements
for any other potential product candidates, and we may not be able to secure
needed supply arrangements on attractive terms, or at all. Our failure to secure
these arrangements as needed could have a materially adverse effect on our
ability to complete the development of our products or to commercialize
them.
If our
product candidates cannot be manufactured in suitable quantities and in
accordance with regulatory standards, our clinical trials, regulatory approvals
and marketing efforts for such products may be delayed. Such delays could
adversely affect our competitive position and our chances of generating
significant recurring revenues. If our products cannot be manufactured at an
acceptable cost, the commercial success of our products may be adversely
affected.
We
are subject to potential liabilities from clinical testing and future product
liability claims.
If any of
our products are alleged to be defective, they may expose us to claims for
personal injury by patients in clinical trials of our products or, if we obtain
marketing approval and commercialize our products, by patients using our
commercially marketed products. Even if the if one or more of our products is
approved by the FDA, users may claim that such products caused unintended
adverse effects. We maintain clinical trial insurance for our Phase II clinical
trial of tamibarotene for APL, and we plan to seek to obtain similar insurance
for any other clinical trials that we conduct. We also would seek to obtain
product liability insurance covering the commercial marketing of our product
candidates. We may not be able to obtain additional insurance, however, and any
insurance obtained by us may prove inadequate in the event of a claim against
us. Any claims asserted against us also may divert management’s attention from
our operations, and we may have to incur substantial costs to defend such claims
even if they are unsuccessful.
We
may be unable to successfully acquire additional technologies or products. If we
require additional technologies or products, our product development plans may
change and the ownership interests of our shareholders, or our ownership
interest in RXi, could be diluted.
We may
seek to acquire additional technologies by licensing or purchasing such
technologies, or through a merger or acquisition of one or more companies that
own such technologies. We have no current understanding or agreement to acquire
any technologies, however, and we may not be able to identify or successfully
acquire any additional technologies. We also may seek to acquire products from
third parties that already are being marketed or have been approved for
marketing, although we have not currently identified any of these products. We
do not have any prior experience in acquiring or marketing products approved for
marketing and may need to find third parties to market any products that we
might acquire.
Following
our acquisition of Innovive in September 2008, we refocused our product
development efforts on tamiboratene, which we acquired from Innovive and which
we believe has the greatest near-term revenue potential of all of our other
product candidates. If we acquire additional technologies or product
candidates, we may determine to make further changes to our product development
plans and business strategy to capitalize on opportunities presented by the new
technologies and product candidates.
We may
determine to issue shares of our common stock, or to use shares of RXi common
stock owned by us, or both, to acquire additional technologies or products or in
connection with a merger or acquisition of another company. To the extent we do
so, the ownership interest of our stockholders, or our ownership interest in
RXi, or both, will be diluted accordingly.
We
use hazardous materials and must comply with environmental, health and safety
laws and regulations, which can be expensive and restrict how we do
business.
Our
research and development and manufacturing processes involve the controlled
storage, use and disposal of hazardous materials, including biological hazardous
materials. We are subject to federal, state and local regulations governing the
use, manufacture, storage, handling and disposal of these materials and waste
products. Although we believe that our safety procedures for handling and
disposing of these hazardous materials comply with the standards prescribed by
law and regulation, we cannot completely eliminate the risk of accidental
contamination or injury from hazardous materials. In the event of an accident,
we could be held liable for any damages that result. We could incur significant
costs to comply with current or future environmental laws and
regulations.
Risks
Associated With Our Investment in RXi
We
may sell or dispose of some of our RXi shares, and may not be able to do so on
attractive terms.
As of
July 1, 2009, we owned approximately 6,268,881 shares of common stock of
RXi, or approximately 45% of the outstanding RXi common stock. RXi shares are
listed on the Nasdaq Capital Market under the symbol “RXi.” During the 12-month
period ended June 30, 2009, the market prices for RXi shares as reported on the
Nasdaq Capital Market has fluctuated from a high of $12.25 per share to a low of
$2.71 per share, and the market price of RXi shares and the value of our RXi
shares may continue to experience significant volatility. We believe that the
downturn in the financial markets, in particular, and poor economy, generally,
have contributed to the volatility of the market price of RXi
shares.
We may
determine to sell or otherwise dispose of our RXi shares in one or more
transactions in order to obtain funds to carry on our operations or in
connection with our acquisition of new technologies or
products. There is no assurance, however, whether, or on what terms,
we might be able to sell or dispose of our RXi shares. We believe that the
downturn in the financial markets has adversely affected the market for shares
of development-stage companies such as RXi.
If we
undertake to sell our RXi shares, we may be unable to do so at attractive
prices, if at all. In addition, any sales or other disposition of RXi
shares by us, or the possibility of such sales or disposition, could adversely
affect the market price of our remaining RXi shares.
If
RXi undertakes future financings, our ownership interest in RXi may be
diluted.
Under our
agreement with RXi, with some exceptions, we will have preemptive rights to
acquire a portion of any new securities sold or issued by RXi so as to maintain
our percentage ownership of RXi. Depending upon the terms and provisions of any
proposed sale of new securities by RXi, our financial condition and other
factors, we may be unwilling or unable to exercise our preemptive rights. We
agreed to waive our preemptive rights in connection with a private placement by
RXi in June 2008, which resulted in a reduction in our percentage ownership of
RXi from approximately 49% to approximately 45%. If RXi undertakes
future issuances of equity securities, our percentage ownership interest in RXi
may be diluted further.
We
do not control RXi, and the officers, directors and other RXi stockholders may
have interests that are different from ours.
Although
we currently own a significant portion of RXi’s outstanding common stock, we do
not control its management or operations. RXi has its own board of directors and
management, who are responsible for the affairs and policies of RXi and its
development plans. We have entered into letter agreements with RXi and certain
of its stockholders under which we agree to vote our shares of RXi common stock
for the election of directors of RXi and to take other actions to ensure that a
majority of RXi’s board of directors are independent of us. The board of
directors and other stockholders of RXi may have interests that are different
from ours, and RXi may engage in actions in connection with its business and
operations that we believe are not in our best interests.
Risks
Associated With Our Common Stock
Our
common stock may be delisted from the Nasdaq Capital Market if our stock price
does not increase.
We
received notice from the Nasdaq Stock Market on May 28, 2008 that we were not in
compliance with the minimum $1.00 closing bid price required by Nasdaq
Marketplace Rule 4310(c)(4) and, in accordance with Marketplace Rule
4310(c)(8)(D), could regain compliance if, by November 24, 2008, our common
stock closes at or above $1.00 for 10 consecutive business days and we otherwise
meet the Nasdaq’s continuing listing requirements. Nasdaq
subsequently announced that it had temporarily suspended until July 19, 2009 the
enforcement of its rules requiring a minimum $1.00 closing bid price. As a
result, we will have until August 2009 to regain compliance with this rule,
assuming no further actions by Nasdaq in this regard. However, in its
original notice to us on May 28, 2008, Nasdaq also informed us that, if we did
not regain compliance by the stated deadline, we would be granted up to an
additional 180 calendar days (i.e. until February 2010) to regain full
compliance while continuing to trade during such time if we meet the Nasdaq’s
initial listing requirements other than the minimum bid price
rule. If we eventually fail to comply with this condition for
continued listing and our common stock is delisted from the Nasdaq Small Capital
Market, there is no assurance that our common stock will be listed for trading
or quoted elsewhere and an active trading market for our common stock may cease
to exist, which would materially and adversely impact the market value of our
common stock.
Our
anti-takeover provisions may make it more difficult to change our management, or
may discourage others from acquiring us, and thereby adversely affect
stockholder value.
We have a
stockholder rights plan and provisions in our bylaws that are intended to
protect our stockholders’ interests by encouraging anyone seeking control of our
company to negotiate with our board of directors. These provisions may
discourage or prevent a person or group from acquiring us without the approval
of our board of directors, even if the acquisition would be beneficial to our
stockholders.
We have a
classified board of directors, which means that at least two stockholder
meetings, instead of one, will be required to effect a change in the majority
control of our board of directors. This applies to every election of directors,
not just an election occurring after a change in control. The classification of
our board increases the amount of time it takes to change majority control of
our board of directors and may cause potential acquirers to lose interest in a
potential purchase of us, regardless of whether our purchase would be beneficial
to us or our stockholders. The additional time and cost to change a majority of
the members of our board of directors makes it more difficult and may discourage
our existing stockholders from seeking to change our existing management in
order to change the strategic direction or operational performance of our
company.
Our
bylaws provide that directors may only be removed for cause by the affirmative
vote of the holders of at least a majority of the outstanding shares of our
capital stock then entitled to vote at an election of directors. This provision
prevents stockholders from removing any incumbent director without cause. Our
bylaws also provide that a stockholder must give us at least 120 days notice of
a proposal or director nomination that such stockholder desires to present at
any annual meeting or special meeting of stockholders. Such provision prevents a
stockholder from making a proposal or director nomination at a stockholder
meeting without us having advance notice of that proposal or director
nomination. This could make a change in control more difficult by providing our
directors with more time to prepare an opposition to a proposed change in
control. By making it more difficult to remove or install new directors, these
bylaw provisions may also make our existing management less responsive to the
views of our stockholders with respect to our operations and other issues such
as management selection and management compensation.
We are
also subject to the anti-takeover provisions of Section 203 of the Delaware
General Corporation Law, which may also prevent or delay a takeover of us that
may be beneficial to you.
Our
outstanding options and warrants and the availability for resale of our shares
issued in our private financings may adversely affect the trading price of our
common stock.
As of
July 1, 2009, there were outstanding stock options and warrants to purchase
approximately 18.5 million shares of our common stock at a weighted-average
exercise price of $1.24 per share. Our outstanding options and warrants could
adversely affect our ability to obtain future financing or engage in certain
mergers or other transactions, since the holders of options and warrants can be
expected to exercise them at a time when we may be able to obtain additional
capital through a new offering of securities on terms more favorable to us than
the terms of outstanding options and warrants. For the life of the options and
warrants, the holders have the opportunity to profit from a rise in the market
price of our common stock without assuming the risk of ownership. The issuance
of shares upon the exercise of outstanding options and warrants will also dilute
the ownership interests of our existing stockholders. Many of our outstanding
warrants contain anti-dilution provisions pertaining to dividends with respect
to our common stock. Outstanding warrants to purchase approximately 9.3 million
shares contain anti-dilution provisions that are triggered upon any issuance of
securities by us below the prevailing market price of our common
stock. Our distribution to our stockholders of RXi shares on March
11, 2008 required us to reduce the exercise price of those warrants. In the
event that these anti-dilution provisions are triggered by us in the future, we
would likewise be required to reduce the exercise price, and increase the number
of shares underlying, those warrants, which would have a dilutive effect on our
stockholders.
We have
registered with the SEC the resale by the holders of all or substantially all
shares of our common stock issuable upon exercise of our outstanding options and
warrants. The availability of these shares for public resale, as well as actual
resales of these shares, could adversely affect the trading price of our common
stock.
We
may issue preferred stock in the future, and the terms of the preferred stock
may reduce the value of our common stock.
We are
authorized to issue shares of preferred stock in one or more series. Our board
of directors may determine the terms of future preferred stock offerings without
further action by our stockholders. If we issue preferred stock, it could affect
your rights or reduce the value of our outstanding common stock. In particular,
specific rights granted to future holders of preferred stock may include voting
rights, preferences as to dividends and liquidation, conversion and redemption
rights, sinking fund provisions, and restrictions on our ability to merge with
or sell our assets to a third party.
We
may experience volatility in our stock price, which may adversely affect the
trading price of our common stock.
The
market price of our common stock has ranged from $0.23 to $5.49 per share since
January 1, 2007, and it may continue to experience significant volatility from
time to time. Our ability to raise capital has been materially and adversely
affected by the downturn in the financial markets and poor economy, which have
severely depressed the market for PIPEs transactions on which we have relied for
raising needed capital.
Other
factors that may affect the market price of our common stock include the
following:
|
·
|
announcements
of regulatory developments or technological innovations by us or our
competitors;
|
|
·
|
changes
in our relationship with our licensors and other strategic
partners;
|
|
·
|
changes
in our ownership of or other relationships with
RXi;
|
|
·
|
our
quarterly operating results;
|
|
·
|
litigation
involving or affecting us;
|
|
·
|
shortfalls
in our actual financial results compared to our guidance or the forecasts
of stock market analysts;
|
|
·
|
developments
in patent or other technology ownership
rights;
|
|
·
|
acquisitions
or strategic alliances by us or our
competitors;
|
|
·
|
public
concern regarding the safety of our products;
and
|
|
·
|
government
regulation of drug pricing.
|
We
do not expect to pay any cash dividends on our common stock.
We have
not declared or paid any cash dividends on our common stock or other securities,
and we currently do not anticipate paying any cash dividends in the foreseeable
future. Because we do not anticipate paying cash dividends for the foreseeable
future, our stockholders will not realize a return on their investment in our
common stock except to the extent of any appreciation in the value of our common
stock. Our common stock may not appreciate in value, or may decline in
value.
USE
OF PROCEEDS
Unless we
indicate otherwise in the prospectus supplement, we expect to use the net
proceeds we receive from the sale of our securities to augment our working
capital and for general corporate purposes, including, but not limited to,
product development activities, capital expenditures, potential acquisitions and
other business opportunities. We may set forth in the prospectus
supplement additional information on our intended use for the net proceeds
received from the sale of any securities sold pursuant to that prospectus
supplement.
THE
SECURITIES THAT WE MAY OFFER
We,
directly or through agents, dealers or underwriters designated from time to
time, may offer, issue and sell, together or separately, up to $100,000,000 in
the aggregate of:
|
·
|
shares
of our common stock, par value $.001 per
share;
|
|
·
|
shares
of our preferred stock, par value $.01 per
share;
|
|
·
|
warrants
to purchase our common stock or preferred stock;
and
|
|
·
|
any
combination of the securities listed above, separately or as units, each
on terms to be determined at the time of
sale.
|
The
common stock, preferred stock, warrants and units collectively are referred to
in this prospectus as the “securities.”
We have
summarized below the material terms of the various types of securities that we
may offer. We will describe in the applicable prospectus supplement
the detailed terms of the securities offered by that supplement. If
indicated in the prospectus supplement, the terms of the offered securities may
differ from the terms summarized below.
DESCRIPTION
OF CAPITAL STOCK
Our
authorized capital stock currently consists of 175,000,000 shares of common
stock, $.001 par value per share, and 5,000,000 shares of preferred stock, $.01
par value per share.
The
following summary of certain provisions of our common and preferred stock does
not purport to be complete. You should refer to our amended and
restated certificate of incorporation and our restated bylaws, which are filed
with or incorporated by reference in the registration statement relating to this
offering filed by us with the SEC. The summary below is also
qualified by reference to the provisions of applicable Delaware corporation
law.
Common
Stock
Holders
of our common stock are entitled to one vote per share on matters on which our
stockholders vote, including with respect to the election of
directors. Holders of common stock are entitled to receive dividends,
if declared by our board of directors, out of funds that we may legally use to
pay dividends. See the section of this prospectus supplement entitled
“Dividend policy” for further information. If we liquidate or
dissolve, holders of common stock are entitled to share ratably in our assets
once our debts and any liquidation preference owed to holders of any
then-outstanding preferred stock are paid. No shares of preferred
stock will be outstanding immediately after the closing of this
offering. All shares of common stock that are outstanding as of the
date of this prospectus supplement are, and all shares we are selling in this
offering, upon their issuance and sale, will be, fully-paid and
non-assessable.
Preferred
Stock
We are
currently authorized to issue 5,000,000 shares of preferred stock, of which
15,000 shares have been designated as Series A Junior Participating
Preferred Stock. We have reserved all of the shares of our
Series A Junior Participating Preferred Stock for issuance upon the
exercise of the rights under our Shareholder Protection Rights Agreement
described below. Our board of directors has the authority to issue
shares of preferred stock in one or more series and to fix the rights of each
series. These rights may include dividend rights, dividend rates,
conversion rights, voting rights, terms of redemption, redemption prices,
liquidation preferences, sinking fund terms, and the number of shares that
constitute any series. The board of directors may exercise this
authority without any further action by our stockholders.
Our board
of directors will fix the rights, preferences, privileges, qualifications and
restrictions of the preferred stock of each series that we sell under this
prospectus in the certificate of designation relating to each such
series. We will incorporate by reference as an exhibit to the
registration statement of which this prospectus is a part or as an exhibit to
one or more current reports on Form 8-K, the form of any certificate of
designation that describes the terms of the series of preferred stock we are
offering before the issuance of the related series of preferred
stock. This description will include:
|
·
|
the
title and stated value;
|
|
·
|
the
number of shares we are offering;
|
|
·
|
the
liquidation preference per share;
|
|
·
|
the
purchase price per share;
|
|
·
|
the
dividend rate per share, dividend period, payment date or dates and method
of calculation of dividends;
|
|
·
|
whether
dividends will be cumulative or non-cumulative and, if cumulative, the
date from which dividends will
accumulate;
|
|
·
|
our
right, if any, to defer payment of dividends and the maximum length of any
such deferral period;
|
|
·
|
the
procedures for any auction and remarketing, if
any;
|
|
·
|
the
provisions for a sinking fund, if
any;
|
|
·
|
the
provisions for redemption or repurchase, if applicable, and any
restrictions on our ability to exercise those redemption and repurchase
rights;
|
|
·
|
any
listing of the preferred stock on any securities exchange or
market;
|
|
·
|
whether
the preferred stock will be convertible into our common stock or other
securities of ours, including warrants, and, if applicable, the conversion
price, or how it will be calculated, and under what circumstances and the
mechanism by which it may be adjusted, and the conversion
period;
|
|
·
|
whether
the preferred stock will be exchangeable into debt securities or other
securities of ours, and, if applicable, the exchange price, or how it will
be calculated, and under what circumstances it may be adjusted, and the
exchange period;
|
|
·
|
preemptive
rights, if any;
|
|
·
|
restrictions
on transfer, sale or other assignment, if
any;
|
|
·
|
a
discussion of any material United States federal income tax considerations
applicable to the preferred stock;
|
|
·
|
the
relative ranking and preferences of the preferred stock as to dividend
rights and rights if we liquidate, dissolve or wind up our
affairs;
|
|
·
|
any
limitations on issuances of any class or series of preferred stock ranking
senior or on a parity with the series of preferred stock being issued as
to dividend rights and rights if we liquidate, dissolve or wind up our
affairs; and
|
|
·
|
any
other specific terms, rights, preferences, privileges, qualifications or
limitations of, or restrictions on, the preferred
stock.
|
If we
issue and sell shares of preferred stock pursuant to this prospectus, the shares
will be fully paid and non-assessable and will not have, or be subject to, any
preemptive or similar rights.
The laws
of the State of Delaware, the state of our incorporation, provide that the
holders of preferred stock will have the right to vote separately as a class on
any proposal involving fundamental changes in the rights of holders of such
preferred stock. This right is in addition to any voting rights that
may be provided for in the applicable certificate of designation.
We
believe the power to issue preferred stock will provide our board of directors
with flexibility in connection with certain possible corporate
transactions. The issuance of preferred stock, however, could
adversely affect the voting power of holders of our common stock, restrict their
rights to receive payment upon liquidation, and have the effect of delaying,
deferring, or preventing a change in control which may be beneficial to our
stockholders.
Anti-Takeover
Measures
Delaware
Law
Section
203 of the Delaware General Corporation Law is applicable to takeovers of
certain Delaware corporations, including us. Subject to exceptions
enumerated in Section 203, Section 203 provides that a corporation shall not
engage in any business combination with any “interested stockholder” for a
three-year period following the date that the stockholder becomes an interested
stockholder unless:
|
·
|
prior
to that date, the board of directors of the corporation approved either
the business combination or the transaction that resulted in the
stockholder becoming an interested
stockholder;
|
|
·
|
upon
consummation of the transaction that resulted in the stockholder becoming
an interested stockholder, the interested stockholder owned at least 85%
of the voting stock of the corporation outstanding at the time the
transaction commenced, though some shares may be excluded from the
calculation; or
|
|
·
|
on
or subsequent to that date, the business combination is approved by the
board of directors of the corporation and by the affirmative votes of
holders of at least two-thirds of the outstanding voting stock that is not
owned by the interested
stockholder.
|
Except as
specified in Section 203, an interested stockholder is generally defined to
include any person who, together with any affiliates or associates of that
person, beneficially owns, directly or indirectly, 15% or more of the
outstanding voting stock of the corporation, or is an affiliate or associate of
the corporation and was the owner of 15% or more of the outstanding voting stock
of the corporation, any time within three years immediately prior to the
relevant date. Under certain circumstances, Section 203 makes it more
difficult for an interested stockholder to effect various business combinations
with a corporation for a three-year period, although the stockholders may elect
not to be governed by this section, by adopting an amendment to the certificate
of incorporation or by-laws, effective 12 months after adoption. Our
amended and restated certificate of incorporation and by-laws do not opt out from
the restrictions imposed under Section 203. We anticipate that the
provisions of Section 203 may encourage companies interested in acquiring us to
negotiate in advance with the board because the stockholder approval requirement
would be avoided if a majority of the directors then in office excluding an
interested stockholder approve either the business combination or the
transaction that resulted in the stockholder becoming an interested
stockholder. These provisions may have the effect of deterring
hostile takeovers or delaying changes in control, which could depress the market
price of our common stock and deprive stockholders of opportunities to realize a
premium on shares of common stock held by them.
Charter
and By-Law Provisions
In
addition to the board of directors’ ability to issue shares of preferred stock,
our amended and restated certificate of incorporation and by-laws contain the
following provisions that may have the effect of discouraging unsolicited
acquisition proposals:
|
·
|
our
by-laws classify the board of directors into three classes with staggered
three-year terms;
|
|
·
|
under
our by-laws, our board of directors may enlarge the size of the board and
fill the vacancies;
|
|
·
|
our
by-laws provide that a stockholder may not nominate candidates for the
board of directors at any annual or special meeting unless that
stockholder notifies us of its intention a specified period in advance and
provides us with certain required
information;
|
|
·
|
stockholders
who wish to bring business before the stockholders at our annual meeting
must provide advance notice; and
|
|
·
|
our
by-laws provide that special meetings of stockholders may only be called
by our board of directors or by an officer so instructed by our
board.
|
Shareholder
Protection Rights Agreement
Our board
of directors adopted a Shareholder Protection Rights Agreement, or Rights
Agreement, dated April 16, 1997, as amended, between us and American Stock
Transfer & Trust Co., as Rights Agent. The Rights Agreement will
expire on April 16, 2017, unless renewed or extended by our board of
directors. A series of our preferred stock, designated as Series A
Junior Participating Preferred Stock, par value $.01 per share, was created in
accordance with the Rights Agreement. The Rights Agreement is
designed to deter coercive takeover tactics, including the accumulation of
shares in the open market or through private transactions, and to prevent an
acquirer from gaining control of us without offering a fair and adequate price
and terms to all of our stockholders. As such, the Rights Agreement
is intended to enhance our board of directors’ ability to protect stockholder
interests and help to assure that stockholders receive fair and equal treatment
in the event any proposed takeover of CytRx is made in the
future. Pursuant to the Rights Agreement, our board of directors
declared a dividend distribution of one preferred stock purchase right for each
outstanding share of our common stock. The preferred stock purchase
rights are attached to, and trade with, our common stock. The
purchase rights are exercisable only upon the occurrence of certain triggering
events described in the Rights Agreement.
Transfer
Agent
The
transfer agent for our common stock is American Stock Transfer & Trust
Company, 40 Wall Street, New York, New York 10005.
DESCRIPTION
OF WARRANTS
We may
offer and issue warrants to purchase shares of our common stock or preferred
stock. The warrants may be issued independently or as a part of units
consisting of shares of our common stock or preferred stock and warrants to
purchase additional shares of our common stock or preferred stock. If
the warrants are issued pursuant to warrant agreements, we will so specify in
the prospectus supplement relating to the warrants being offered pursuant to the
prospectus supplement.
The
following description will apply to the warrants offered by this prospectus
unless we provide otherwise in the applicable prospectus supplement. The
applicable prospectus supplement for a particular series of warrants may specify
different or additional terms. The forms of any warrant certificates
or warrant agreements evidencing the warrants that we issue will be filed with
the SEC and incorporated by reference into this prospectus, and you should
carefully review such documents.
The
applicable prospectus supplement will describe the following terms of warrants
to purchase our common stock, preferred stock or debt securities to the extent
applicable:
|
·
|
the
title of the warrants;
|
|
·
|
the
common stock or preferred stock for which the warrants are
exercisable;
|
|
·
|
the
price at which the warrants will be issued and the exercise price of the
warrants;
|
|
·
|
the
aggregate number of warrants
offered;
|
|
·
|
the
number of shares of common stock or preferred stock that may be purchased
upon the exercise of each warrant;
|
|
·
|
whether
the warrants are being offered separately or as a part of units consisting
of shares of our common stock or preferred stock and warrants to purchase
additional shares of our common stock or preferred
stock;
|
|
·
|
the
terms of any right by us to redeem the
warrants;
|
|
·
|
the
date on which the right to exercise the warrants will commence and the
date on which this right will
expire;
|
|
·
|
the
procedures for exercising the
warrants;
|
|
·
|
the
terms on which the warrants may be
amended;
|
|
·
|
the
terms of any adjustments in the warrant exercise price and the number of
shares of common stock or preferred stock purchasable upon the exercise of
each warrant to be made in certain events, including the issuance of a
stock dividend to holders of common stock or preferred stock or a stock
split, reverse stock split, combination, subdivision or reclassification
of common stock;
|
|
·
|
the
effect on the warrants of our merger or consolidation with another entity
or our sale of all or substantially all of our
assets;
|
|
·
|
the
maximum or minimum number of warrants which may be exercised at any time;
and
|
|
·
|
the
material United States federal income tax consequences applicable to the
warrants and their exercise.
|
Holders
of warrants to purchase common stock or preferred stock will not be entitled, by
virtue of being such holders, to vote, consent, receive dividends, receive
notice as stockholders with respect to any meeting of stockholders for the
election of our directors or any other matter, or to exercise any rights
whatsoever as our stockholders.
Warrants
may be exercised at any time up to the close of business on the expiration date
set forth in the prospectus supplement relating to the warrants offered
thereby. After the close of business on the expiration date,
unexercised warrants will become void. Upon our receipt of the
exercise price of the warrants upon the due exercise of the warrants, we will,
as soon as practicable, forward the securities purchasable upon
exercise. If less than all of the warrants represented by such
warrant certificate are exercised, a new warrant certificate will be issued for
the remaining warrants.
DESCRIPTION
OF UNITS
We may
offer and issue units that consist of shares of our common stock or preferred
stock and warrants to purchase additional shares of our common stock or
preferred stock. For example, we may elect to issue units for a
specified price per unit, with each unit consisting of one share of our common
stock or preferred stock and one warrant to purchase an additional share of our
common stock or preferred stock at a specified price. The holder of a
unit will also hold each of the securities that is included in the
unit.
We have
provided in the preceding sections of this prospectus a general description of
our common stock, preferred stock, and debt securities and of the warrants that
we may offer. If we elect to offer units, we will describe the
specific terms of the units in a supplement to this prospectus. Among
other things, the prospectus supplement will describe, to the extent
applicable:
|
·
|
the
price of each unit;
|
|
·
|
the
securities comprising each unit;
|
|
·
|
the
exercise price of the warrants comprising part of the
units;
|
|
·
|
the
aggregate number of units offered;
|
|
·
|
the
number of shares of common stock or preferred stock that may be purchased
upon the exercise of each warrant comprising part of a
unit;
|
|
·
|
the
terms of any right by us to redeem any of the securities comprising the
units;
|
|
·
|
the
date on which the right to exercise the warrants forming part of the units
will commence and the date on which this right will
expire;
|
|
·
|
any
transfer restrictions on the units, including whether the securities
comprising the units may be transferred
separately;
|
|
·
|
the
terms on which the units or warrants forming part of the units may be
amended;
|
|
·
|
with
respect to preferred stock forming part of the units, the other matters
listed above under “Description of Capital Stock—Preferred
Stock”;
|
|
·
|
with
respect to warrants forming part of the units, the other matters listed
above under “Description of Warrants”;
and
|
|
·
|
the
material United States federal income tax consequences applicable to the
units.
|
PLAN
OF DISTRIBUTION
We may
sell the securities being offered hereby in one or more of the following ways
from time to time:
|
·
|
through
agents to the public or to
investors;
|
|
·
|
to
one or more underwriters for resale to the public or to
investors;
|
|
·
|
in
“at the market” offerings, within the meaning of Rule 415(a)(4) of the
Securities Act of 1933, as amended, or the Securities Act, to or through a
market maker or into an existing trading market, on an exchange or
otherwise;
|
|
·
|
directly
to investors; or
|
|
·
|
through
a combination of these methods of
sale.
|
We will
set forth in a prospectus supplement the terms of an offering of shares of our
securities, including.
|
·
|
the
name or names of any agents or
underwriters;
|
|
·
|
the
purchase price of the securities being offered and the proceeds we will
receive from the sale;
|
|
·
|
any
over-allotment options under which underwriters may purchase additional
securities from us;
|
|
·
|
any
agency fees or underwriting discounts and other items constituting agents’
or underwriters’ compensation;
|
|
·
|
the
public offering price; and
|
|
·
|
any
discounts or concessions allowed or re-allowed or paid to
dealers.
|
We may
distribute the securities from time to time in one or more
transactions;
|
·
|
at
a fixed price or prices, which may be
changed;
|
|
·
|
at
market prices prevailing at the time of
sale;
|
|
·
|
at
prices related to such prevailing market prices;
or
|
We may
also, from time to time, authorize dealers, acting as our agents, to offer and
sell securities upon the terms and conditions set forth in the applicable
prospectus supplement. We, or the purchasers of securities for whom
the underwriters may act as agents, may compensate underwriters in the form of
underwriting discounts or commissions, in connection with the sale of
securities. Underwriters may sell the securities to or through
dealers, and those dealers may receive compensation in the form of discounts,
concessions or commissions from the underwriters or commissions from the
purchasers for whom they may act as agent. Unless otherwise indicated
in a prospectus supplement, an agent will be acting on a “best efforts” basis
and a dealer will purchase securities as a principal, and may then resell the
common stock at varying prices to be determined by the dealer.
We will
describe in the applicable prospectus supplement any compensation we will pay to
underwriters or agents in connection with the offering of securities, and any
discounts, concessions or commissions allowed by underwriters to participating
dealers. The dealers and agents participating in the distribution of
securities may be deemed to be underwriters, and any discounts and commissions
received by them and any profit realized by them on resale of the securities may
be deemed to be underwriting discounts and commissions. We may enter
into agreements to indemnify underwriters, dealers and agents against certain
civil liabilities, including liabilities under the Securities Act and to
reimburse these persons for certain expenses. We may grant
underwriters who participate in the distribution of securities we are offering
under this prospectus an option to purchase additional shares to cover
over-allotments, if any, in connection with the distribution.
To
facilitate the offering of securities, certain persons participating in the
offering may engage in transactions that stabilize, maintain, or otherwise
affect the price of the securities. This may include over-allotments
or short sales of the securities, which involve the sale by persons
participating in the offering of more securities than we sold to
them. In these circumstances, these persons would cover such
over-allotments or short positions by making purchases in the open market or by
exercising their over-allotment option, if any. In addition, these
persons may stabilize or maintain the price of the securities by bidding for or
purchasing securities in the open market or by imposing penalty bids, whereby
selling concessions allowed to dealers participating in the offering may be
reclaimed if securities sold by them are repurchased in connection with
stabilization transactions. The effect of these transactions may be
to stabilize or maintain the market price of the securities at a level above
that which might otherwise prevail in the open market. These
transactions may be discontinued at any time.
Any
underwriters who are qualified market makers on the Nasdaq Capital Market may
engage in passive market making transactions in the securities on the Nasdaq
Capital Market in accordance with Rule 103 of Regulation M, during the
business day prior to the pricing of the offering, before the commencement of
offers or sales of the securities. Passive market makers must comply
with applicable volume and price limitations and must be identified as passive
market makers. In general, a passive market maker must display its
bid at a price not in excess of the highest independent bid for such security;
if all independent bids are lowered below the passive market maker’s bid,
however, the passive market maker’s bid must then be lowered when certain
purchase limits are exceeded.
Certain
underwriters, dealers or agents and their associates may engage in transactions
with and perform services for us in the ordinary course of our
business.
WHERE
YOU CAN FIND MORE INFORMATION
We are
subject to the informational requirements of the Securities Exchange Act of
1934, or the Exchange Act, and are required to file annual, quarterly and other
reports, proxy statements and other information with the SEC. You may
inspect and copy these reports, proxy statements and other information at the
public reference facilities maintained by the SEC in Washington, D.C.
(100 F Street NE, Room 1580, Washington, D.C.
20549). Copies of such materials can be obtained from the SEC’s
public reference section at prescribed rates. You may obtain
information on the operation of the public reference rooms by calling the SEC at
(800) SEC-0330 or on the SEC website located at
http://www.sec.gov.
Our
common stock is traded on the Nasdaq Capital Market under the symbol “CYTR.”
Reports, proxy and information statements and other information concerning us
also may be inspected at the offices of the National Association of Securities
Dealers, Inc. located at 1735 K Street, N.W., Washington, D.C.
20006.
Information
about us is also available at our website at www.cytrx.com; however, the
information on our website is not a part of this prospectus.
INCORPORATION
OF INFORMATION FILED WITH THE SEC
The SEC
allows us to incorporate in this prospectus “by reference” information contained
in documents that we file with the SEC, which means that we can disclose
important information to you by referring you to those other
documents. The information incorporated by reference is an important
part of this prospectus, and documents that we file with the SEC after the date
of this prospectus will automatically update and, where applicable, modify or
supersede any information set forth or incorporated by reference in this
prospectus.
We
incorporate by reference in this prospectus the documents listed
below:
|
·
|
our
Annual Report on Form 10-K for the year ended December 31,
2008;
|
|
·
|
our
Quarter Report on Form 10-Q for the quarter ended March 31, 2009 filed on
May 11, 2009
|
|
·
|
our
Current Reports on Form 8-K filed on May 5, 2009, May 12, 2009 and July 8,
2009, respectively (excluding any information furnished in such reports
under Item 2.02, Item 7.01 or
Item 9.01);
|
|
·
|
the
description of our securities as described in our Registration Statement
on Form 8-A filed under the Exchange Act on March 17, 1987 (File No.
0-15327), and any amendment or report filed for the purpose of updating
any such description;
|
|
·
|
our
definitive Proxy Statement on Schedule 14A filed on May 11,
2009;
|
|
·
|
the
description of our Series A Junior Participating Preferred Stock
Purchase Rights as described in our Registration Statement on
Form 8-A filed under the Exchange Act on April 17, 1997 (File
No. 000-15327), and any amendment or report filed for the purpose of
updating any such descriptions; and
|
|
·
|
any
document that we file with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this prospectus and before the
termination of this offering (other than any portion of such documents
that are not deemed “filed” under the Exchange Act in accordance with the
Exchange Act and applicable SEC rules). Information in these subsequent
SEC filings will be deemed to be incorporated by reference as of the date
we make the filing.
|
You may
obtain a copy of the foregoing documents from us at no cost by writing or
calling us at the following address and telephone number: 11726 San Vicente
Blvd., Suite 650 Los Angeles, California 90049, Attention: Corporate Secretary;
(310) 826-5648.
LEGAL
MATTERS
The
validity of the securities being offered hereby has been passed upon for us by
TroyGould PC, Los Angeles, California. As of July 1, 2009, TroyGould PC
owned 70,000 shares
of our common stock and warrants to purchase 7,146 shares of our common stock,
as well as 23,491 shares of common stock of RXi.
The
consolidated financial statements, schedule and management's report on the
effectiveness of internal control over financial reporting incorporated by
reference in the Prospectus constituting a part of this Registration Statement
have been audited by BDO Seidman, LLP, an independent registered public
accounting firm, to the extent and for the periods set forth in their reports
incorporated herein by reference, and are incorporated herein in reliance upon
such reports given upon the authority of said firm as experts in auditing and
accounting.
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
ITEM
14.OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
We
estimate that the expenses incurred in connection with the distribution
described in this registration statement will be as set forth below. We will
bear all of such expenses.
|
SEC
registration
fee
|
|
$ |
3,070 |
|
|
Transfer
agent fees and
expenses
|
|
|
* |
|
|
Nasdaq
Capital Market listing
fees
|
|
|
* |
|
|
FINRA
corporate filing
fees
|
|
$ |
10,000 |
|
|
Accounting
fees and
expenses
|
|
$ |
20,000 |
|
|
Legal
fees and
expenses
|
|
$ |
50,000 |
|
|
Printing
expenses
|
|
|
* |
|
|
Miscellaneous
|
|
$ |
1,930 |
|
|
Total
|
|
$ |
85,000 |
|
|
________________________
|
|
|
|
|
|
*
Estimated expenses, if any, not presently known.
|
|
|
|
|
ITEM
15. INDEMNIFICATION OF DIRECTORS AND
OFFICERS
Section
102(b)(7) of the Delaware General Corporation Law authorizes a corporation in
its certificate of incorporation to eliminate or limit personal liability of
directors of the corporation for violations of the directors’ fiduciary duty of
care. However, directors remain liable for breaches of duties of loyalty,
failing to act in good faith, engaging in intentional misconduct, knowingly
violating a law, paying a dividend or approving a stock repurchase which was
illegal under Delaware General Corporation Law Section 174 or obtaining an
improper personal benefit. In addition, equitable remedies for breach of
fiduciary duty of care, such as injunction or recession, are
available.
Our
certificate of incorporation eliminates the personal liability of the members of
our board of directors to the fullest extent permitted by
law. Specifically, Article Eleven of our certificate of incorporation
provides as follows:
A
director of the corporation shall not be personally liable to the corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director’s duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which the director derived any improper personal
benefit. If the Delaware General Corporation Law is amended after approval by
the stockholders of this Article to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law as so
amended.
Any
repeal or modification of the foregoing paragraph by the stockholders of the
corporation shall not adversely affect any right or protection of a director of
the corporation existing at the time of such repeal or
modification.
In
addition, our certificate of incorporation and bylaws provide for
indemnification of our officers and directors to the fullest extent permitted by
law. In particular, Article Nine our certificate of incorporation provides as
follows:
The
corporation shall, to the fullest extent permitted by Section 145 of the General
Corporation Law of the State of Delaware, as the same may be amended and
supplemented, indemnify any and all persons whom it shall have power to
indemnify under said section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any bylaw, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section
145 of the Delaware General Corporation Law empowers a corporation to indemnify
any person who was or is party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was a director, officer or agent of the corporation or another enterprise if
serving at the request of the corporation. Depending on the character of the
proceeding, a corporation may indemnify against expenses (including attorneys’
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with such action, suit or proceeding if the person
indemnified acted in good faith in respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. In the case of an
action by or in the right of the corporation, no indemnification may be made
with respect to any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine that despite the adjudication of liability such person is fairly
and reasonably entitled to indemnity for such expenses which the court shall
deem proper. Section 145 further provides that to the extent a director,
officer, employee or agent of a corporation has been successful in the defense
of any action, suit or proceeding referred to above or in the defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys’ fees) actually and reasonably incurred by him in
connection therewith. Our bylaws permit it to purchase insurance on behalf of
such person against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not we would
have the power to indemnify him against such liability under the foregoing
provision of the bylaws.
We hold
an insurance policy covering directors and officers under which the insurer
agrees to pay, with some exclusions, for any claim made against our directors
and officers for a wrongful act that they may become legally obligated to pay or
for which we are is required to indemnify our directors or
officers.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933, as
amended, or the Securities Act, may be permitted for directors, officers and
controlling persons of the Company under the above provisions, or otherwise, the
Commission has advised us that, in its opinion, such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
ITEM
16. EXHIBITS
The
exhibits listed in the accompanying Exhibit Index are filed or incorporated by
reference as part of this registration statement.
ITEM
17. UNDERTAKINGS.
The
undersigned registrant hereby undertakes:
(1) To file,
during any period in which offers or sales are being made, a post-effective
amendment to this registration statement:
(i) To
include any prospectus required by section 10(a)(3) of the Securities Act of
1933;
(ii) To
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum aggregate offering
price set forth in the “Calculation of Registration Fee” table in the effective
registration statement;
(iii) To
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement;
Provided, however, that
paragraphs (1)(i), (1)(ii) and (1)(iii) of this section do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in reports filed with or furnished to the Commission by
the registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement, or is contained in a form of prospectus filed pursuant to Rule 424(b)
that is part of the registration statement.
(2) That, for
the purpose of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove
from registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the
offering.
(4) That, for
the purpose of determining liability under the Securities Act of 1933 to any
purchaser:
(A) Each
prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to
be part of the registration statement as of the date the filed prospectus was
deemed part of and included in the registration statement; and
(B) Each
prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as
part of a registration statement in reliance on Rule 430B relating to an
offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of
providing the information required by section 10(a) of the Securities Act of
1933 shall be deemed to be part of and included in the registration statement as
of the earlier of the date such form of prospectus is first used after
effectiveness or the date of the first contract of sale of securities in the
offering described in the prospectus. As provided in Rule 430B, for liability
purposes of the issuer and any person that is at that date an underwriter, such
date shall be deemed to be a new effective date of the registration statement
relating to the securities in the registration statement to which that
prospectus relates, and the offering of such securities at that time shall be
deemed to be the initial bona
fide offering thereof. Provided, however, that no
statement made in a registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed incorporated
by reference into the registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of contract of sale
prior to such effective date, supersede or modify any statement that was made in
the registration statement or prospectus that was part of the registration
statement or made in any such document immediately prior to such effective
date.
(5) That, for
the purpose of determining liability of the registrant under the Securities Act
of 1933 to any purchaser in the initial distribution of the
securities:
The
undersigned registrant undertakes that in a primary offering of securities of
the undersigned registrant pursuant to this registration statement, regardless
of the underwriting method used to sell the securities to the purchaser, if the
securities are offered or sold to such purchaser by means of any of the
following communications, the undersigned registrant will be a seller to the
purchaser and will be considered to offer or sell such securities to such
purchaser:
(i) Any
preliminary prospectus or prospectus of the undersigned registrant relating to
the offering required to be filed pursuant to Rule 424 (§230.424 of this
chapter);
(ii) Any free
writing prospectus relating to the offering prepared by or on behalf of the
undersigned registrant or used or referred to by the undersigned
registrant;
(iii) The
portion of any other free writing prospectus relating to the offering containing
material information about the undersigned registrant or its securities provided
by or on behalf of the undersigned registrant; and
(iv) Any other
communication that is an offer in the offering made by the undersigned
registrant to the purchaser.
The
undersigned registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the registrant’s
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan’s annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant certifies that
it has reasonable grounds to believe that it meets all of the requirements for
filing on Form S-3 and has duly caused this Post-Effective Amendment No. 2
to Registration Statement on Form S-3 to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Los Angeles, State of
California, on July 9, 2009.
|
|
CYTRX
CORPORATION
By:
/s/ STEVEN A.
KRIEGSMAN
|
|
|
Steven A.
Kriegsman
President and Chief Executive
Officer
|
Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities and on the dates
indicated.
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/s/ STEVEN A. KRIEGSMAN
|
|
President
and Chief Executive Officer and Director
|
|
July
9, 2009
|
| Steven
A. Kriegsman |
|
|
|
|
| |
|
|
|
|
|
/s/ JOHN Y. CALOZ
|
|
Chief
Financial Officer and Treasurer
|
|
July
9, 2009
|
| John
Y. Caloz |
|
(principal
financial and accounting officer) |
|
|
| |
|
|
|
|
|
/s/ LOUIS J. IGNARRO
|
|
Director
|
|
July
9, 2009
|
|
Louis
J. Ignarro, Ph.D
|
|
|
|
|
|
|
|
|
|
|
|
/s/ MAX LINK
|
|
Director
|
|
July
9, 2009
|
|
Max
Link
|
|
|
|
|
|
|
|
|
|
|
|
/s/ JOSEPH RUBINFELD
|
|
Director
|
|
July
9, 2009
|
|
Joseph
Rubinfeld, Ph.D
|
|
|
|
|
|
|
|
|
|
|
|
/s/ MARVIN R. SELTER
|
|
Director
|
|
July
9, 2009
|
|
Marvin
R. Selter
|
|
|
|
|
|
|
|
|
|
|
|
/s/ RICHARD L. WENNEKAMP
|
|
Director
|
|
July
9, 2009
|
|
Richard
L. Wennekamp
|
|
|
|
|
EXHIBIT
INDEX
The
following exhibits are filed herewith or incorporated by reference:
|
Exhibit
Number
|
|
Description
|
|
1.1
|
|
Form
of Underwriting Agreement*
|
|
3.1
|
|
Restated
Certificate of Incorporation**
|
|
3.2
|
|
Restated
By-Laws (incorporated by reference to the Registrant’s Registration
Statement on Form S-8 (File No. 333-37171) filed on July 21,
1997)
|
|
4.1
|
|
Shareholder
Protection Rights Agreement dated April 16, 1997 between CytRx Corporation
and American Stock Transfer &Trust Company as Rights Agent
(incorporated by reference to the Registrant’s Current Report on Form 8-K
filed April 17, 1997)
|
|
4.2
|
|
Amendment
No. 1 to Shareholder Protection Rights Agreement (incorporated by
reference to the Registrant’s Annual Report on Form 10-K filed on March
27, 2001)
|
|
4.3
|
|
Amendment
No. 2 to Shareholder Protection Rights Agreement (incorporated by
reference to the Registrant’s Annual Report on Form 10-K filed on April 2,
2007)
|
|
4.6
|
|
Form
of Warrant Agreement for Common Stock, including form of
Warrant*
|
|
4.7
|
|
Form
of Warrant Agreement for preferred stock, including form of
Warrant*
|
|
5.1
|
|
Opinion
of TroyGould PC
|
|
23.1
|
|
Consent
of TroyGould PC (included in Exhibit 5.1)
|
|
23.2
|
|
Consent
of BDO Seidman, LLP
|
|
24.1
|
|
Power
of Attorney**
|
* To
be filed, if applicable, subsequent to the effectiveness of this registration
statement (1) by an amendment to this registration statement or (2) as an
exhibit to a Current Report on Form 8-K and incorporated herein by
reference.
**
Previously filed as an exhibit to the Registrant’s Registration Statement on
Form S-3 (File No. 333-147605) filed on November 23,
2007.