S-1/A 1 ds1a.htm AMENDMENT NO. 3 TO FORM S-1 Amendment No. 3 to form S-1
Table of Contents

As filed with the Securities and Exchange Commission on May 25, 2007

Registration No. 333-141459

 


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


AMENDMENT NO. 3

to

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 


AEGERION PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in Its Charter)

 


 

Delaware    2834    20-2960116

(State or other jurisdiction of

incorporation or organization)

  

(Primary Standard Industrial

Classification Code Number)

  

(I.R.S. Employer

Identification Number)

CenterPointe IV

1140 Route 22 East, Suite 304

Bridgewater, New Jersey 08807

(908) 704-1300

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 


Gerald Wisler

President and Chief Executive Officer

Aegerion Pharmaceuticals, Inc.

CenterPointe IV

1140 Route 22 East, Suite 304

Bridgewater, New Jersey 08807

(908) 704-1300

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)

 


Copies to:

Jocelyn M. Arel, Esq.

Michael H. Bison, Esq.

Goodwin Procter LLP

53 State Street

Boston, Massachusetts 02109

(617) 570-1000

 

Jonathan L. Kravetz, Esq.

Brian P. Keane, Esq.

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

One Financial Center

Boston, Massachusetts 02111

(617) 542-6000

 


Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

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, check the following box.  ¨

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) 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 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 post-effective amendment filed pursuant to Rule 462(d) 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.  ¨

 


CALCULATION OF REGISTRATION FEE

 


Title of Each Class of

Securities to be Registered

  Amount to be
Registered(1)
  Proposed
Maximum
Aggregate
Offering Price(2)
  Proposed
Maximum
Aggregate
Offering Price(2)
  Amount of
Registration
Fee(3)(4)

Common stock, par value $0.001 per share

  5,750,000   $ 14.00   $ 80,500,000   $ 2,471.35

(1) Includes 750,000 shares of common stock that may be purchased by the underwriters to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(a) under the Securities Act of 1933, as amended.
(3) Calculated in accordance with Rule 457(a) based on an estimate of the proposed maximum aggregate offering price.
(4) A registration fee of $2,647.88 has been paid previously in connection with this Registration Statement based on an estimate of the aggregate offering price.

 


 

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 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), shall determine.

 



Table of Contents

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to Completion, dated May 25, 2007

PROSPECTUS

5,000,000 Shares

LOGO

Common Stock

 


This is the initial public offering of shares of our common stock. We are offering 5,000,000 shares of common stock. No public market currently exists for our common stock.

We have applied to have our common stock listed on The NASDAQ Global Market under the symbol “AEGR.” We anticipate that the initial public offering price will be between $12.00 and $14.00 per share.

Investing in our common stock involves risks. See “ Risk Factors” beginning on page 8.

 

     Per Share    Total

Public Offering Price

   $                 $             

Underwriting Discount

   $                 $             

Proceeds to Aegerion (before expenses)

   $                 $             

We have granted the underwriters a 30-day option to purchase up to an additional 750,000 shares of common stock on the same terms and conditions as set forth above if the underwriters sell more than 5,000,000 shares in this offering.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Lehman Brothers, on behalf of the underwriters, expects to deliver the shares on or about                     , 2007.

 


 

LEHMAN BROTHERS  
  CIBC WORLD MARKETS
    THOMAS WEISEL PARTNERS LLC
      C.E. UNTERBERG, TOWBIN

                    , 2007


Table of Contents

TABLE OF CONTENTS

 

     Page

Prospectus Summary

   1

Risk Factors

   8

Special Note Regarding Forward-Looking Statements

   26

Use of Proceeds

   27

Dividend Policy

   28

Capitalization

   29

Dilution

   30

Selected Financial Data

   32

Management’s Discussion and Analysis of Financial Condition and Results of Operations

   34

Business

   47
     Page

Management

   81

Compensation

   87

Certain Relationships and Related Person Transactions

   101

Principal Stockholders

   104

Description of Capital Stock

   107

Shares Eligible For Future Sale

   112

Underwriting

   114

Legal Matters

   119

Experts

   119

Where You Can Find Additional Information

   119

Index to Financial Statements

   F-1

 


You should rely only on the information contained in this prospectus or in any free writing prospectus we may authorize to be delivered to you. We have not authorized anyone to provide you with additional or different information. We are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common stock.

Except where the context requires otherwise, in this prospectus “Company,” “Aegerion,” “we,” “us” and “our” refer to Aegerion Pharmaceuticals, Inc.

Until                     , 2007 (25 days after the commencement of this offering), all dealers that effect transactions in shares of our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

For investors outside the United States:    Neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of shares of common stock and the distribution of this prospectus outside of the United States.

 

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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus and does not contain all of the information you should consider in making your investment decision. You should read this summary together with the more detailed information, including our financial statements and the related notes, elsewhere in this prospectus. You should carefully consider, among other things, the matters discussed in “Risk Factors” beginning on page 8.

AEGERION PHARMACEUTICALS, INC.

Aegerion Pharmaceuticals is an emerging biopharmaceutical company focused on the development and commercialization of therapeutics to treat cardiovascular and metabolic disease. Our two product candidates are microsomal triglyceride transfer protein inhibitors that limit secretion of cholesterol and triglycerides, collectively referred to as lipids, from the intestine and liver and have demonstrated in humans an ability to significantly reduce low-density lipoprotein cholesterol, or LDL-C. We believe these compounds have the potential to address significant unmet medical needs for patients who seek to lower their cholesterol levels, either on a stand-alone basis or in combination with existing therapies, such as statins and cholesterol absorption inhibitors.

Lipid-lowering therapeutics represent one of the largest markets in the pharmaceutical industry, with as many as 52 million patients in the United States alone eligible for therapy. According to IMS Health, worldwide revenues for lipid-lowering therapeutics were approximately $30 billion for the twelve months ended December 31, 2006. 

We are developing AEGR-733 as an oral, once-a-day treatment for individuals with high lipid levels, or hyperlipidemia, in particular high cholesterol, or hypercholesterolemia, and high triglyceride levels, or hypertriglyceridemia, who are unable to meet specified target goals on other therapies. We are developing our other product candidate, AEGR-427 (implitapide), as an oral, once-a-day treatment of hyperlipidemia. We believe AEGR-733 and AEGR-427 (implitapide) have the potential to address unmet medical needs in a variety of patient populations, including the approximately 8 million people in the United States eligible for LDL-C lowering therapy we estimate would not be able to achieve a target LDL-C level of <70 mg/dL even if the most efficacious forms of currently available drug therapies were prescribed. In addition, we believe our product candidates have the potential to address the estimated 1.5 million U.S. patients who are statin-intolerant and unable to achieve goals on non-statin therapy, such as Zetia (ezetimibe), one of the most effective non-statin treatments currently approved by the FDA for the treatment of high cholesterol.

Cardiovascular Disease and Hyperlipidemia

Cardiovascular disease continues to be the number one cause of death and disabilities among men and women in western societies. The American Heart Association estimates that approximately 871,500 deaths were caused by cardiovascular disease in 2004, more than the 550,300 deaths caused by cancer. Recent clinical trials have shown that there is a direct relationship between lower LDL-C and a reduced risk for cardiovascular events.

The most commonly used class of drugs to lower LDL-C levels are statins, such as Lipitor (atorvastatin), Crestor (rosuvastatin) and Zocor (simvastatin), which reduce cholesterol by blocking an enzyme in the liver that produces cholesterol. Statins have been shown to reduce LDL-C levels by approximately 25-55% when used as monotherapy. Another class of cholesterol-lowering drugs is cholesterol absorption inhibitors, such as Zetia (ezetimibe), which lower blood cholesterol by blocking the absorption of cholesterol, including dietary cholesterol, from the intestine. Zetia (ezetimibe) can generally reduce LDL-C levels by approximately 15-20%

 

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when used as monotherapy. Several recent clinical studies have shown that combination therapy with multiple, differently-acting compounds is the most effective way to achieve lower LDL-C levels. For example, Vytorin, a fixed dose combination of the statin Zocor (simvastatin) and the cholesterol absorption inhibitor Zetia (ezetimibe) has been shown to reduce LDL-C levels by up to 60%.

Despite the success of current therapies in achieving lower LDL-C levels, we believe there remains an unmet medical need for agents that can allow a higher percentage of patients to achieve optimal LDC-C levels. Recent clinical trials conducted by others add to the substantial evidence that there is a direct relationship between lower LDL-C levels and decreased risk for major cardiovascular events. These findings prompted the National Cholesterol Education Program in 2004 to introduce optional LDL-C guidelines, endorsed by the American Heart Association, the American College of Cardiology and others, advising physicians to consider more intensive treatment options for people with high and moderately high-risk of a cardiovascular event. These options include setting lower treatment goals for LDL-C levels (including a LDL-C level of <70 mg/dL as a therapeutic option for very high-risk patients and a treatment goal of <100 mg/dL for all high-risk patients) and initiating cholesterol-lowering drug therapy at lower LDL-C thresholds. We believe these recommendations reflect a trend toward more aggressive treatment of LDL-C levels in both high and moderately high-risk patient populations, a significant percentage of whom will not be able to achieve the lower LDL-C goals using current treatments. We believe that this unmet medical need will become even more pronounced as lower LDL-C goals become more widely adopted by the medical community.

Our Product Candidates

AEGR-733

In February 2007, a twelve-week Phase II clinical trial that evaluated AEGR-733 as monotherapy compared to Zetia (ezetimibe) as monotherapy, as well as AEGR-733 in combination with Zetia (ezetimibe) was completed. In this trial, patients treated with AEGR-733 as monotherapy had a statistically significant decrease in average LDL-C levels compared to patients treated with Zetia (ezetimibe) as monotherapy. In addition, patients treated with AEGR-733 in combination with Zetia (ezetimibe) had a statistically significant decrease in average LDL-C levels compared to patients treated with AEGR-733 as monotherapy and patients treated with Zetia (ezetimibe) as monotherapy. We believe the results of this Phase II trial demonstrate the LDL-C lowering efficacy of AEGR-733 when used as a monotherapy, as well as the additivity of AEGR-733 when used in combination with Zetia (ezetimibe), thereby potentially offering statin-like efficacy for statin-intolerant patients seeking significant cholesterol reduction.

In the second quarter of 2007, we initiated patient screening for a randomized, double-blind, placebo-controlled, parallel group Phase II clinical trial to evaluate the safety and efficacy of the combination of AEGR-733 + Lipitor (atorvastatin) versus Lipitor (atorvastatin) alone and AEGR-733 alone in subjects with moderate hypercholesterolemia. The average percentage reduction in LDL-C levels will be the primary efficacy endpoint. Secondary efficacy endpoints are expected to include other lipid parameters, change in body weight and safety and tolerability.

We also believe AEGR-733 has the potential to address unmet medical needs in certain niche patient populations, such as the approximately 30,000 patients in the United States with high cholesterol levels that are resistant to treatment, a condition known as severe refractory hypercholesterolemia. Patients with this condition have elevated and refractory hypercholesterolemia and are eligible to receive periodic plasma apheresis, or the mechanical filtration of LDL-C particles from the blood, and often die at an early age. Of these 30,000 patients, approximately 300 patients in the United States have a rare genetic disorder called homozygous familial hypercholesterolemia resulting in severely elevated levels of LDL-C (400-800 mg/dL). Because of their genetic defect, these patients have dysfunctional LDL receptors and are therefore refractory to statin therapy. High dose statin therapies that will typically produce 50-60% reductions in LDL-C in the broad hypercholesterolemic patient population will only produce 20-25% reductions in the homozygous familial hypercholesterolemia patient population. In January 2007, we reported the results of a Phase II clinical trial of AEGR-733 in six patients with homozygous familial hypercholesterolemia conducted by the University of Pennsylvania School of Medicine.

 

 

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We expect a Phase III clinical trial, to be funded by us and the U.S. Food and Drug Administration, or FDA, under its orphan grant program and conducted by the University of Pennsylvania School of Medicine, will be initiated in the second half of 2007, to further study the effects of AEGR-733 in this patient population. We expect AEGR-733 to be eligible for orphan drug designation for this patient population and we intend to pursue such designation with the FDA. Orphan drug status is awarded by the FDA to drugs intended to treat rare diseases or conditions, as defined by the FDA, and a drug that receives this designation and subsequently receives the first FDA approval for the disease for which it has such designation is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same drug for the same indication, except in very limited circumstances, for seven years.

AEGR-427 (implitapide)

We are developing AEGR-427 (implitapide) for the treatment of hyperlipidemia. Based on prior clinical trials, we believe that AEGR-427 (implitapide) may also have an impact on weight loss. Data from a Phase II clinical trial of AEGR-427 (implitapide) conducted by Bayer Healthcare AG, or Bayer, demonstrated a dose-related decrease in LDL-C as the dose of AEGR-427 (implitapide) increased, but the higher doses were accompanied by a high number of discontinuations due to adverse side effects. As with AEGR-733, we believe that by implementing a lower dose development strategy, we can potentially develop doses that provide clinically relevant reductions in LDL-C and other lipids, such as triglycerides, while having acceptable rates of adverse events.

We plan to initiate a randomized, placebo-controlled, double-blind Phase II clinical trial to evaluate the efficacy and safety/tolerability profile of AEGR-427 (implitapide) in doses ranging from 30 mg to 50 mg, and a Phase II pharmacokinetic trial, which involves measuring the drug-to-drug interaction in the blood of healthy volunteers, to evaluate the impact of steady state levels of AEGR-427 (implitapide) on the single-dose pharmacokinetics of three commonly used statins: Lipitor (atorvastatin), Zocor (simvastatin) and Crestor (rosuvastatin). We expect to initiate patient screening for both of these clinical trials in the second half of 2007.

Our Strategy

Our long term objective is to develop and commercialize promising therapeutics to treat cardiovascular and metabolic disease for the broadest spectrum of unmet medical need. In the near term, we seek to advance the development of our product candidates, which represent a new class of therapeutic with a unique mechanism of action, to address the unmet medical need resulting from the emerging trend towards more aggressive LDL-C reduction as well as certain niche populations for whom current therapies are inadequate. To achieve these objectives, we intend to:

 

   

Advance the development of our product candidates for use as monotherapy or, more likely, in combination with existing lipid-lowering therapies:

 

   

Develop our product candidates for use at low doses in combination with statins thereby offering the potential for LDL-C lowering efficacy, with potential for additional benefits;

 

   

Develop our product candidates for use at low doses as monotherapy or as combination therapy to address the needs of statin-intolerant patients; and

 

   

Develop our product candidates for use at increased doses to address the unmet medical needs of niche patient populations.

 

   

Leverage our management team’s significant experience and third-party relationships in developing and commercializing successful lipid-lowering therapeutics.

 

   

Maintain our focus on cardiovascular and metabolic drug development by building, through in-license or acquisition, an extended portfolio of candidates aimed at these diseases.

 

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Risks Associated with Our Business

Our business is subject to numerous risks, as more fully described in the section entitled “Risk Factors” immediately following this prospectus summary, including the following:

 

   

We have a limited operating history, have incurred substantial net losses, and had a deficit accumulated during development stage of $12.3 million as of March 31, 2007.

 

   

We expect to continue to incur substantial losses for the foreseeable future, and we expect these losses to increase as we conduct larger scale trials for our product candidates.

 

   

Our product candidates are undergoing clinical trials, and failure is common and can occur at any stage of development.

 

   

Our product candidates may cause undesirable side effects, such as gastrointestinal adverse events or the accumulation of fat in the liver, or have other properties that could delay or prevent their regulatory approval or limit the commercial profile of any approved label.

 

   

Even if we succeed in obtaining regulatory approval for one or both of our product candidates, we may never generate sufficient revenue to achieve and then sustain profitability.

 

   

Our ability to generate product revenue in the future will depend heavily on the successful development and commercialization of our product candidates, AEGR-733 and AEGR-427 (implitapide).

 

   

We can provide no assurance to you that our future clinical trials for AEGR-733 and AEGR-427 (implitapide) will achieve positive results.

 

   

We cannot be certain that the National Cholesterol Education Program will establish guidelines advising a target LDL-C goal of <70 mg/dL for all high-risk patients, and if these guidelines are not established, our competitive position, revenues and business prospects may be harmed.

Corporate Information

We were founded in 2005 as a Delaware corporation. Our principal executive offices are located at CenterPointe IV, 1140 Route 22 East, Suite 304, Bridgewater, New Jersey 08807, and our telephone number is (908) 704-1300. Our web site address is www.aegerion.com. The information on our web site is not part of this prospectus.

Aegerion is a trademark of Aegerion Pharmaceuticals, Inc. in the United States and other countries. This prospectus also includes other trademarks of Aegerion Pharmaceuticals, Inc. and other persons.

 

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The Offering

 

Common stock offered by us

5,000,000 shares

 

Common stock to be outstanding after this offering

18,649,678 shares

 

Use of proceeds

We plan to use the net proceeds of this offering for repayment of debt and to fund the continued clinical development of AEGR-733 and AEGR-427 (implitapide) and for general corporate purposes, such as general and administrative expenses, capital expenditures, working capital, prosecution and maintenance of our intellectual property and the potential acquisition of, or investment in, technologies, products or companies that complement our business. For a more complete description of our intended use of the proceeds from this offering, see “Use of Proceeds.”

 

Proposed NASDAQ Global Market symbol

AEGR

General Information About This Prospectus

Unless otherwise noted, throughout this prospectus the number of shares of our common stock to be outstanding following this offering is based on 13,649,678 shares of our common stock outstanding as of May 15, 2007. This number excludes 697,936 shares subject to options outstanding as of May 15, 2007 and having a weighted average exercise price of $3.47 per share, 4,000,000 additional shares reserved as of May 15, 2007 for future issuance under our stock-based compensation plans and 600,000 additional shares reserved as of May 15, 2007 for issuance under our employee stock purchase plan.

In addition, unless otherwise noted, throughout this prospectus the number of shares of common stock to be outstanding after this offering reflects the conversion of the 12,211,604 outstanding shares of our Series A redeemable convertible preferred stock and accumulated dividends thereon upon completion of this offering into 9,225,570 shares of common stock. Each share of our Series A redeemable convertible preferred stock is convertible into a number of shares of our common stock determined by dividing (1) the Series A per share purchase price of $1.8599 plus an accumulated dividend of 7% per year (which is calculated on a daily basis and compounded annually) by (2) a conversion price equal to $2.7368 per share. For purposes of calculating the number of shares of common stock into which the Series A redeemable convertible preferred stock will be convertible upon completion of the offering, we have assumed the closing of this offering occurs on June 19, 2007, which would result in accumulated dividends of $0.21 per share of Series A redeemable convertible preferred stock and aggregate accumulated dividends of $2,536,024 on all outstanding shares of Series A redeemable convertible preferred stock.

Unless otherwise indicated, all information in this prospectus assumes that the underwriters do not exercise their over-allotment option to purchase 750,000 shares of our common stock in this offering and also reflects:

 

   

the filing of our amended and restated certificate of incorporation and the adoption of our amended and restated by-laws immediately prior to the closing of this offering; and

 

   

a 1 -for- 1.47 reverse split of our common stock effected on May 25, 2007.

 

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SUMMARY FINANCIAL DATA

The following tables summarize financial data regarding our business and should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes included elsewhere in this prospectus. The statements of operations data for the period from February 4, 2005 (Inception) to December 31, 2005 and for the year ended December 31, 2006 are derived from our audited financial statements included elsewhere in this prospectus. We have derived the statements of operations data for the three months ended March 31, 2006 and 2007, and for the period from February 4, 2005 (Inception) to March 31, 2007, and the balance sheet data as of March 31, 2007, from our unaudited financial statements included in this prospectus. Our historical results are not necessarily indicative of the results to be expected in any future period.

 

    February 4, 2005
(Inception) to
December 31, 2005
    Year Ended
December 31, 2006
   

Three Months
Ended
March 31,

   

Period From
February 4,
2005
(Inception)
March 31,
2007

 
       

2006

   

2007

   
        (Unaudited)       (Unaudited)  

Statements of Operation Data:

       

Operating expenses:

         

Research and development

  $ 141,250     $ 3,801,924     $ 405,530     $ 2,829,695     $ 6,772,869  

General and administrative

    1,047,193       3,237,577       389,450       874,358       5,159,128  
                                       

Total operating expenses

    1,188,443       7,039,501       794,980       3,704,053       11,931,997  
                                       

Loss from operations

    (1,188,443 )     (7,039,501 )     (794,980 )     (3,704,053 )     (11,931,997 )

Interest expense

    (235,978 )     —         —         (41,017 )     (276,995 )

Interest income

    17,801       871,405       176,345       212,740       1,101,946  
                                       

Net loss

    (1,406,620 )     (6,168,096 )     (618,636 )     (3,532,330 )     (11,107,046 )

Less: accretion of preferred stock dividends

    (74,162 )     (1,652,025 )     (396,667 )     (425,274 )     (2,151,461 )
                                       

Net loss attributable to common stockholders

  $ (1,480,782 )   $ (7,820,121 )   $ (1,015,313 )   $ (3,957,604 )   $ (13,258,507 )
                                       

Basic and diluted net loss attributable to common stockholders per share

  $ (0.89 )   $ (3.40 )   $ (0.51 )   $ (1.40 )  
                                 

Weighted average shares outstanding—basic and diluted(1)

    1,660,340       2,298,331       1,978,885       2,823,307    
                                 

Pro forma basic and diluted net loss attributable to common stockholders per share(2)

    $ (0.54 )     $ (0.30 )  
                     

Pro forma weighted average shares outstanding—basic and diluted(1)(2)

      11,523,901         12,041,562    
                     

(1) For accounting purposes only, the number of issued and outstanding shares does not include 2,146,140 shares of restricted stock in 2005, 1,608,078 shares of restricted stock in 2006, 2,146,140 shares of restricted stock at March 31, 2006 and 1,473,945 shares of restricted stock at March 31, 2007. These shares are subject to a risk of repurchase by us until such shares are vested. See Note 1 to our financial statements for more information.
(2) The pro forma basic and diluted net loss per share gives effect to the conversion of all outstanding shares of our Series A redeemable convertible preferred stock and accumulated dividends thereon into 9,225,570 shares of common stock upon the completion of this offering, assuming the closing of this offering occurs on June 19, 2007. See “Prospectus Summary—General Information About This Prospectus.”

 

 

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The summary balance sheet data as of March 31, 2007 is presented:

 

   

on an actual basis;

 

   

on a pro forma basis to give effect to:

 

   

the conversion of all outstanding shares of our Series A redeemable convertible preferred stock and accumulated dividends thereon into 9,225,570 shares of common stock upon completion of this offering, assuming the closing of this offering occurs on June 19, 2007; and

 

   

our marking-to-market the warrant liability arising from our warrant agreement with Hercules Technology Growth Capital, Inc., or Hercules, using an assumed initial public offering price of $13.00 per share, the midpoint of the range listed on the cover page of this prospectus, which results in interest expense of $47,493, and our reclassification of this warrant agreement from liabilities to equity upon the conversion of our Series A redeemable convertible preferred stock into common stock upon completion of this offering; and

 

   

on a pro forma as adjusted basis to give further effect to:

 

   

the receipt by us of net proceeds of $57.5 million from the sale of 5,000,000 shares of common stock offered by us in this offering at an assumed initial public offering price of $13.00 per share, after deducting underwriting discounts and commissions and estimated offering expenses; and

 

   

the use of $10 million of the net proceeds of this offering to repay our outstanding indebtedness to Hercules, as described under “Use of Proceeds.”

     As of March 31, 2007  
     Actual     Pro Forma    

Pro Forma,

As Adjusted(1)

 
     (Unaudited)     (Unaudited)     (Unaudited)  

Cash and cash equivalents

   $ 22,951,417     $ 22,951,417     $ 70,401,417  

Total assets

     24,756,458       24,756,458       72,055,508  

Short term debt

     9,285,769       9,285,769       —    

Total liabilities

     12,287,109       11,566,509       2,280,740  

Series A convertible redeemable preferred stock

     24,760,966       —         —    

Deficit accumulated during development stage

     (12,296,041 )     (12,343,534 )     (13,208,715 )

Total stockholders’ equity (deficiency)

     (12,291,617 )     13,189,950       69,774,768  

(1) A $1.00 increase (decrease) in the assumed initial public offering price of $13.00 per share would increase (decrease) each of cash and cash equivalents, total assets and total stockholders’ equity by approximately $4.7 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same.

 

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RISK FACTORS

Before you decide to invest in our common stock, you should consider carefully the risks described below, together with the other information contained in this prospectus. We believe the risks described below are the risks that are material to us as of the date of this prospectus. If any of the following risks occur, our business, financial condition, results of operations and future growth prospects could be materially and adversely affected. In these circumstances, the market price of our common stock could decline, and you may lose all or part of your investment.

Risks Related to Our Financial Position and Capital Requirements

We have incurred significant operating losses since our inception, and anticipate that we will incur continued losses for the foreseeable future.

We are a development stage company with a limited operating history. To date we have focused on developing our two product candidates, AEGR-733 and AEGR-427 (implitapide). We have financed our operations exclusively through private placements of preferred stock, venture debt and convertible debt and have incurred losses in each year since our inception in February 2005. Net losses were $1.4 million in 2005, $6.2 million in 2006, and $1.0 million and $3.5 million for the three months ended March 31, 2006 and 2007, respectively. As of March 31, 2007, we had a deficit accumulated during development stage of $12.3 million. Substantially all of the operating losses resulted from costs incurred in connection with our development programs and from general and administrative costs associated with our operations. We expect to incur additional and increasing operating losses over the next several years. These losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital. We expect our development expenses to significantly increase in connection with ongoing and planned Phase II and planned Phase III clinical trials and other studies for our product candidates. In addition, if we obtain regulatory approval for any of our product candidates, we may incur significant sales, marketing, in-licensing and outsourced manufacturing expenses, as well as continued development expenses. As a result, we expect to continue to incur significant and increasing operating losses for the foreseeable future. Because of the numerous risks and uncertainties associated with developing pharmaceutical products, we are unable to predict the extent of any future losses or when we will become profitable, if at all.

We have not generated any revenue from our product candidates and may never be profitable.

Our ability to become profitable depends upon our ability to generate revenue. To date, we have not generated any revenue from our development-stage product candidates, and we do not know when, or if, we will generate any revenue. We do not expect to generate significant revenue unless or until we obtain regulatory approval of, and commercialize, our product candidates. Our ability to generate revenue depends on a number of factors, including, but not limited to, our ability to:

 

   

obtain favorable results for and progress the continued clinical development of AEGR-733, including the initiation of additional Phase II clinical trials for the management of high cholesterol, which are expected to be initiated in 2007, and a Phase III clinical trial for the management of high cholesterol in patients with homozygous familial hypercholesterolemia, which is expected to be initiated in the second half of 2007;

 

   

obtain favorable results for and progress the continued clinical development of AEGR-427 (implitapide), including the initiation in the second half of 2007 of two additional Phase II clinical trials for the management of high cholesterol;

 

   

fund additional clinical trials for AEGR-733 and AEGR-427 (implitapide) for the management of high cholesterol, including pivotal Phase III clinical trials;

 

   

obtain regulatory approval for AEGR-733 and AEGR-427 (implitapide);

 

   

contract for the manufacture of commercial quantities of our product candidates at acceptable cost levels if regulatory approvals are received; and

 

   

establish sales and marketing capabilities or identify and enter into one or more strategic collaborations to effectively market and sell our product candidates.

 

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Even if one or more of our product candidates is approved for commercial sale, which we do not expect to occur for several years, any approved product candidate may not gain market acceptance or achieve commercial success. In addition, we would anticipate incurring significant costs associated with commercializing any approved product. We may not achieve profitability soon after generating product sales, if ever. If we are unable to generate product revenues, we will not become profitable and may be unable to continue operations without continued funding.

We will need substantial additional capital in the future. If additional capital is not available, we will have to delay, reduce or cease operations.

We will need to raise additional capital to fund our operations and to develop our product candidates. Our future capital requirements will be substantial and will depend on many factors including:

 

   

the scope, size, rate of progress, results and costs of our preclinical studies, clinical trials and other development activities for our product candidates;

 

   

our ability to establish and maintain collaborative arrangements;

 

   

the cost, timing and outcomes of regulatory proceedings;

 

   

revenues received from approved products, if any, in the future;

 

   

payments received under any strategic partnerships;

 

   

the cost of filing, prosecuting and enforcing patent claims; and

 

   

the costs associated with commercializing our product candidates if they receive regulatory approval, including the cost and timing of developing sales and marketing capabilities or entering into strategic collaborations to market and sell any approved products.

We anticipate that the net proceeds of this offering and interest earned thereon, together with existing cash, cash equivalents and marketable securities, will enable us to maintain our currently planned operations at least through the end of 2008. Changing circumstances may cause us to consume capital significantly faster than we currently anticipate. Additional financing may not be available when we need it or may not be available on terms that are favorable to us. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans. If adequate funds are not available to us on a timely basis, or at all, we may be required to:

 

   

terminate or delay preclinical studies, clinical trials or other development activities for one or more of our product candidates; or

 

   

delay our establishment of sales and marketing capabilities or other activities that may be necessary to commercialize our product candidates, if approved for sale.

Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights.

We may seek additional capital through a combination of private and public equity offerings, debt financings and collaboration, strategic and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration, strategic alliance and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or product candidates, or grant licenses on terms that are not favorable to us.

 

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Our limited operating history makes it difficult to evaluate our business and prospects.

We were incorporated in February 2005. Our operations to date have been limited to organizing and staffing our company and conducting product development activities for our two product candidates, AEGR-733 and AEGR-427 (implitapide). We have not yet demonstrated an ability to obtain regulatory approval for or commercialize a product candidate. Consequently, any predictions about our future performance may not be as accurate as they could be if we had a history of successfully developing and commercializing pharmaceutical products.

We will incur significant increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives.

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and The NASDAQ Stock Market, have imposed various new requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these new compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified people to serve on our board of directors, our board committees or as executive officers.

The Sarbanes-Oxley Act of 2002 requires, among other things, that we maintain effective internal controls for financial reporting and disclosure. In particular, commencing in fiscal 2008, we must perform system and process evaluation and testing of our internal controls over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002. Our testing, or the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses. We expect to incur significant expense and devote substantial management effort toward ensuring compliance with Section 404. We currently do not have an internal audit function, and we will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal controls that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by The NASDAQ Stock Market, the SEC or other regulatory authorities, which would entail expenditure of additional financial and management resources.

Risks Associated with Development and Commercialization of Our Product Candidates

We depend entirely on the success of our two product candidates, AEGR-733 and AEGR-427 (implitapide), which are still under clinical development. We cannot be certain that either product candidate will receive regulatory approval or be successfully commercialized.

We currently have only two product candidates in clinical development, and our business currently depends entirely on their successful development and commercialization. We have no drug products for sale currently and we may never be able to develop marketable drug products. The research, testing, manufacturing, labeling, approval, sale, marketing and distribution of drug products are subject to extensive regulation by the U.S. Food and Drug Administration, or FDA, and other regulatory authorities in the United States and other countries, which regulations differ from country to country. We are not permitted to market our product candidates in the

 

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United States until we receive approval of a new drug application, or NDA, from the FDA, or in any foreign countries until we receive the requisite approval from such countries. We have not submitted an NDA or received marketing approval for either of our product candidates. Obtaining approval of an NDA is an extensive, lengthy, expensive and uncertain process, and the FDA may delay, limit or deny approval of a product candidate for many reasons, including:

 

   

the FDA may not deem a product candidate safe and effective;

 

   

the FDA may not find the data from preclinical studies and clinical trials sufficient to support approval;

 

   

the FDA may not approve of our third-party manufacturers’ processes and facilities; or

 

   

the FDA may change its approval policies or adopt new regulations.

Both of our product candidates are still in the early stages of development and remain subject to clinical testing and regulatory approval. If we are unable to successfully develop and test our product candidates, we will not be successful.

To date, we have not marketed, distributed or sold any product candidates. The success of our business depends primarily upon our ability to develop and commercialize our product candidates successfully. Our only two product candidates are AEGR-733 and AEGR-427 (implitapide), neither of which has been approved for sale by the FDA. Our product candidates are prone to the risks of failure inherent in drug development. Before obtaining regulatory approvals for the commercial sale of AEGR-733, AEGR-427 (implitapide) or any other product candidate for a target indication, we must demonstrate with substantial evidence gathered in well-controlled clinical trials, and, with respect to approval in the United States, to the satisfaction of the FDA and, with respect to approval in other countries, similar regulatory authorities in those countries, that the product candidate is safe and effective for use for that target indication. Despite our efforts, our product candidates may not:

 

   

offer therapeutic or other improvement over existing, comparable drugs;

 

   

be proven safe and effective in clinical trials;

 

   

meet applicable regulatory standards;

 

   

be capable of being produced in commercial quantities at acceptable costs; or

 

   

be successfully commercialized.

Positive results in preclinical studies of a product candidate may not be predictive of similar results in humans during clinical trials, and promising results from early clinical trials of a product candidate may not be replicated in later clinical trials. Interim results of a clinical trial do not necessarily predict final results. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials even after achieving promising results in early-stage development. Accordingly, the results from the completed preclinical studies and clinical trials and ongoing clinical trials for AEGR-733 and AEGR-427 (implitapide) may not be predictive of the results we may obtain in later stage trials. Our preclinical studies or clinical trials may produce negative or inclusive results, and we may decide, or regulators may require us, to conduct additional preclinical studies or clinical trials. We do not expect any of our product candidates to be commercially available for at least several years.

In earlier studies our product candidates were found to cause undesirable side effects at high doses, and even at the lower doses that we intend to pursue our product candidates may continue to cause such side effects or have other properties that could delay or prevent their regulatory approval or limit the commercial profile of any approved label.

Undesirable side effects caused by our product candidates could cause us, regulatory authorities or institutional review boards to interrupt, delay or halt clinical trials and could result in the denial of regulatory

 

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approval by the FDA or other regulatory authorities. For example, both of our product candidates are microsomal triglyceride transfer protein inhibitors we are developing for the treatment of hyperlipidemia. In preclinical tests, rodents who received AEGR-733 experienced phospholipidosis, a lipid storage disorder in which excess phospholipids accumulate within cells. Although we have not observed significant phospholipidosis in humans, we plan to study this effect in our currently planned Phase II and Phase III clinical trials. In addition, early Phase I and Phase II clinical trials of AEGR-733 at doses between 25 mg and 100 mg were associated with a very high rate of gastrointestinal adverse events as well as the accumulation of fat in the liver (hepatic fat) in a significant percentage of the trial subjects. Similar findings were observed in early Phase I and Phase II clinical trials of AEGR-427 (implitapide) at doses between 80 mg and 160 mg. We intend to develop both AEGR-733 and AEGR-427 (implitapide) at significantly lower doses (2.5 mg to 10 mg for AEGR-733 and 30 mg to 50 mg for AEGR-427 (implitapide)) than those previously studied, and we believe there may be a significant reduction in adverse events at such lower doses. However, while in the previous trials of AEGR-733 the most significant increases in hepatic fat accumulation were associated with the highest doses, increases in hepatic fat to levels of between 6% and 24% were observed at doses of less than 10 mg in some patients with pre-existing homozygous familial hypercholesterolemia. In addition, in the recently completed Phase II trial of AEGR-733 in combination with Zetia (ezetimibe), the primary reason for discontinuation of therapy in patients treated with AEGR-733 were increases in liver enzymes. Although the clinical significance of increases in hepatic fat is unknown, and other drugs approved by the FDA are known to increase accumulation of hepatic fat, we cannot assure you that if significant hepatic fat accumulation is demonstrated in future clinical trials of our product candidates or if other liver-related side effects occur, regulatory approval will not be delayed or prevented. We expect to initiate a Phase II clinical trial in the first half of 2007 in order to evaluate hepatic fat accumulation as measured by magnetic resonance spectroscopy imaging in hypercholesterolemic patients receiving AEGR-733 as monotherapy or in combination with three other commonly used classes of lipid-lowering therapy. There can be no assurance that the results of this study will demonstrate that lower doses of AEGR-733, or its use in combination with other classes of lipid-lowering drug therapy, will mitigate the accumulation of hepatic fat. Nor can there be any assurance that our other product candidate, AEGR-427 (implitapide), will be distinctive enough from AEGR-733 to avoid any such class specific risks. Even if a product candidate is approved, if future clinical trials of our product candidates demonstrate hepatic fat accumulation or other liver-related side effects, we can not assure you that it would gain market acceptance over approved drugs with similar efficacy that do not have such side effects.

Moreover, even if any of our product candidates receives marketing approval, we or others may later identify undesirable side effects caused by the product, and in that event a number of potentially significant negative consequences could result, including:

 

   

regulatory authorities may withdraw their approval of the product;

 

   

regulatory authorities may require the addition of labeling statements, such as warnings or contraindications;

 

   

we may be required to change the way the product is administered, conduct additional clinical trials or change the labeling of the product;

 

   

we could be sued and held liable for harm caused to patients; and

 

   

our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of the affected product candidate and could substantially increase the costs of commercializing our product candidates.

Delays in the commencement or completion of clinical testing could result in increased costs to us and delay or limit our ability to generate revenues.

Delays in the commencement or completion of clinical testing could significantly affect our product development costs. We do not know whether planned clinical trials will begin on time or be completed on

 

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schedule, if at all. The commencement and completion of clinical trials can be delayed for a number of reasons, including delays related to:

 

   

obtaining regulatory approval to commence a clinical trial or complying with conditions imposed by a regulatory authority regarding the scope or term of a clinical trial;

 

   

reaching agreement on acceptable terms with prospective clinical research organizations, or CROs, and trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

 

   

manufacturing sufficient quantities of a product candidate for use in clinical trials;

 

   

obtaining institutional review board, or IRB, approval to conduct a clinical trial at a prospective site;

 

   

recruiting and enrolling patients to participate in clinical trials for a variety of reasons, including size of patient population, nature of trial protocol, the availability of approved effective treatments for the relevant disease and competition from other clinical trial programs for similar indications;

 

   

severe or unexpected drug-related side effects experienced by patients in a clinical trial; and

 

   

retaining patients who have enrolled in a clinical trial but may be prone to withdraw due to rigors of the trials, lack of efficacy or personal issues, or who are lost to further follow-up.

Clinical trials may also be delayed or terminated as a result of ambiguous or negative interim results. In addition, a clinical trial may be suspended or terminated by us, the FDA, the IRBs at the sites where the IRBs are overseeing a trial, or a data safety monitoring board, or DSMB, overseeing the clinical trial at issue, or other regulatory authorities due to a number of factors, including:

 

   

failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols;

 

   

inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities resulting in the imposition of a clinical hold;

 

   

unforeseen safety issues; and

 

   

lack of adequate funding to continue the clinical trial.

Additionally, changes in regulatory requirements and guidance may occur and we may need to amend clinical trial protocols to reflect these changes. Amendments may require us to resubmit our clinical trial protocols to IRBs for reexamination, which may impact the cost, timing or successful completion of a clinical trial. If we experience delays in completion of, or if we terminate, any of our clinical trials, the commercial prospects for our product candidates may be harmed and our ability to generate product revenues will be delayed. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of a product candidate.

Even if our product candidates receive regulatory approval, they may still face future development and regulatory difficulties.

Even if U.S. regulatory approval is obtained, the FDA may still impose significant restrictions on a product’s indicated uses or marketing or impose ongoing requirements for potentially costly post-approval studies. For example, the label ultimately approved by the FDA for AEGR-733 or AEGR-427 (implitapide), if approved, may include restrictions on use, including restrictions based upon evidence of hepatic fat accumulation, liver function test elevations or gastrointestinal distress. Our product candidates will also be subject to ongoing FDA requirements governing the labeling, packaging, storage, advertising, promotion, recordkeeping and submission of safety and other post-market information. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with current Good Manufacturing Practice regulations, or cGMP, and other regulations. If we or a regulatory agency discovers previously unknown problems with a product, such as adverse

 

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events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions on that product, the manufacturer or us, including requiring withdrawal of the product from the market or suspension of manufacturing. If we, our product candidates or the manufacturing facilities for our product candidates fail to comply with applicable regulatory requirements, a regulatory agency may:

 

   

issue warning letters or untitled letters;

 

   

impose civil or criminal penalties or monetary fines;

 

   

suspend or withdraw regulatory approval;

 

   

suspend any ongoing clinical trials;

 

   

refuse to approve pending applications or supplements to applications filed by us;

 

   

impose restrictions on operations, including costly new manufacturing requirements; or

 

   

seize or detain products or require us to initiate a product recall.

Even if our product candidates receive regulatory approval in the United States, we may never receive approval or commercialize our products outside of the United States.

In order to market any products outside of the United States, we must establish and comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy. Approval procedures vary among countries and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries might differ from that required to obtain FDA approval. The regulatory approval process in other countries may include all of the risks detailed above regarding FDA approval in the United States as well as other risks. Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in others. Failure to obtain regulatory approval in other countries or any delay or setback in obtaining such approval would impair our ability to develop foreign markets for our product candidates.

If any of our product candidates for which we receive regulatory approval does not achieve broad market acceptance, the revenues that we generate from their sales will be limited.

The commercial success any of our product candidates for which we obtain marketing approval from the FDA or other regulatory authorities will depend upon the acceptance of these products by the medical community, including physicians, patients and healthcare payors. The degree of market acceptance of any of our approved products will depend on a number of factors, including:

 

   

demonstration of clinical safety and efficacy compared to other products;

 

   

the relative convenience and ease of administration;

 

   

the continued acceptance of a paradigm of combination therapy in the treatment of hyperlipidemia by physicians;

 

   

the prevalence and severity of any adverse side effects;

 

   

limitations or warnings contained in a product’s FDA-approved labeling;

 

   

availability of alternative treatments, including, in the case of AEGR-733 and AEGR-427 (implitapide), a number of competitive products already approved for the treatment of hyperlipidemia or expected to be commercially launched in the near future;

 

   

pricing and cost effectiveness;

 

   

the effectiveness of our or any future collaborators’ sales and marketing strategies;

 

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our ability to obtain sufficient third-party coverage or reimbursement; and

 

   

the willingness of patients to pay out of pocket in the absence of third-party coverage.

If any of our product candidates are approved but do not achieve an adequate level of acceptance by physicians, healthcare payors and patients, we may not generate sufficient revenue from these products, and we may not become or remain profitable. In addition, our efforts to educate the medical community and third-party payors on the benefits of our product candidates may require significant resources and may never be successful.

We cannot be certain that the National Cholesterol Education Program will establish guidelines recommending a target LDL-C goal of <70 mg/dL for all high-risk patients. If these guidelines are not established, our competitive position, revenues and business prospects may be harmed.

We believe that the medical community is moving towards a recognition of the benefit to high-risk patients of achieving lower LDL-C targets, as indicated by the 2004 National Cholesterol Education Program update. Currently, the National Cholesterol Education Program recommends a LDL-C level of <70 mg/dL as a therapeutic option for very high-risk patients and a treatment goal of <100 mg/dL for all high-risk patients. The 2004 National Cholesterol Education Program update was widely endorsed by industry and thought leaders in the field, including the American Heart Association and the American College of Cardiology. Because currently available lipid-lowering therapies enable most high-risk patients to achieve a target goal of <100 mg/dL, if the National Cholesterol Education Program does not determine that the <70 mg/dL LDL-C goal should also be applied to the general high-risk patient population, our target market may be limited to only very high-risk and specialty patients.

Recent federal legislation will increase the pressure to reduce prices of pharmaceutical products paid for by Medicare, which could adversely affect our revenues, if any.

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or MMA, changed the way Medicare covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based on average sales prices for drugs. In addition, this legislation authorized Medicare Part D prescription drug plans to use formularies where they can limit the number of drugs that will be covered in any therapeutic class. As a result of this legislation and the expansion of federal coverage of drug products, we expect that there will be additional pressure to contain and reduce costs. These cost reduction initiatives and other provisions of this legislation could decrease the coverage and price that we receive for any approved products and could seriously harm our business. While the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates, and any reduction in reimbursement that results from the MMA may result in a similar reduction in payments from private payors.

Recent federal legislation and actions by state and local governments may permit re-importation of drugs from foreign countries into the United States, including foreign countries where the drugs are sold at lower prices than in the United States, which could materially adversely affect our operating results and our overall financial condition.

We may face competition for any of our product candidates, once approved, from lower priced products from foreign countries that have placed price controls on pharmaceutical products. The MMA contains provisions that may change U.S. importation laws and expand pharmacists’ and wholesalers’ ability to import lower priced versions of our product candidates and competing products from Canada, where there are government price controls. These changes to U.S. importation laws will not take effect unless and until the Secretary of Health and Human Services certifies that the changes will pose no additional risk to the public’s health and safety and will result in a significant reduction in the cost of products to consumers. The Secretary of Health and Human Services has not yet announced any plans to make this required certification. As directed by Congress, a task force on drug importation conducted a comprehensive study regarding the circumstances under which drug importation could be safely conducted and the consequences of importation on the health, medical

 

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costs and development of new medicines for U.S. consumers. The task force report issued its report in December 2004, finding that there are significant safety and economic issues that must be addressed before importation of prescription drugs is permitted. However, a number of federal legislative proposals have been made to implement the changes to the U.S. importation laws without any certification, and to broaden permissible imports in other ways. Even if the changes do not take effect, and other changes are not enacted, imports from Canada and elsewhere may continue to increase due to market and political forces, and the limited enforcement resources of the FDA, the U.S. Customs Service and other government agencies. For example, Pub. L. No. 109-295, which was signed into law in October 2006 and provides appropriations for the Department of Homeland Security for the 2007 fiscal year, expressly prohibits the U.S. Customs Service from using funds to prevent individuals from importing from Canada less than a 90-day supply of a prescription drug for personal use, when the drug otherwise complies with the Federal Food, Drug, and Cosmetic Act, or FDCA. Further, several states and local governments have implemented importation schemes for their citizens, and, in the absence of federal action to curtail such activities, we expect other states and local governments to launch importation efforts. The importation of foreign products that compete with any of our approved product candidates could negatively impact our profitability.

Our market is subject to intense competition. If we are unable to compete effectively, our product candidates may be rendered noncompetitive or obsolete.

Our industry is highly competitive and subject to rapid and significant technological change. Our potential competitors include large pharmaceutical and biotechnology companies, specialty pharmaceutical and generic drug companies, academic institutions, government agencies and research institutions. All of these competitors currently engage in, have engaged in or may engage in the future in the development, manufacturing, marketing and commercialization of new pharmaceuticals, some of which may compete with our present or future product candidates. Key competitive factors affecting the commercial success of our product candidates are likely to be efficacy, safety profile, reliability, convenience of dosing, price and reimbursement.

The market for cholesterol-lowering therapeutics is especially large and competitive. The microsomal triglyceride transfer protein inhibitor compounds we are currently developing, if approved, will face intense competition, either as monotherapies or as combination therapies, from existing lipid-lowering therapies and potentially with other product candidates currently in development for the treatment of hyperlipidemia, including:

 

   

potentially with other microsomal triglyceride transfer protein inhibitors currently being developed by Pfizer Inc., Surface Logix, Inc. and Japan Tobacco, Inc.;

 

   

currently approved fixed dosage combination therapies, such as Vytorin (ezetimibe/simvastatin), which is marketed by a joint-venture between Schering-Plough Corporation and Merck & Co., Inc., and Advicor (niacin extended-release/lovastatin tablets), which is marketed by Abbott Laboratories;

 

   

currently approved statins, such as Lipitor (atorvastatin), which is marketed by Pfizer Inc., Crestor (rosuvastatin), which is marketed by AstraZeneca PLC, and Zocor (simvastatin), which is marketed by Merck & Co., Inc;

 

   

Zetia (ezetimibe), which is marketed as a monotherapy by Schering-Plough Corporation and is currently the only FDA-approved cholesterol absorption inhibitor on the market, as well as potentially with cholesterol absorption inhibitors currently being developed by Microbia, Inc. and other pharmaceutical companies; and

 

   

other currently approved lipid-lowering therapies, such as Tricor (fenofibrate tablets) and Niaspan (niacin), both of which are marketed by Abbott Laboratories.

Many of our potential competitors have substantially greater financial, technical and human resources than we do and significantly greater experience in the discovery and development of drug candidates, obtaining FDA and other regulatory approvals of products and the commercialization of those products. Accordingly, our competitors may be more successful than we may be in obtaining FDA approval for drugs and achieving

 

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widespread market acceptance. Our competitors’ drugs may be more effective, or more effectively marketed and sold, than any drug we may commercialize and may render our product candidates obsolete or non-competitive before we can recover the expenses of developing and commercializing any of our product candidates. We anticipate that we will face intense and increasing competition as new drugs enter the market and advanced technologies become available. Finally, the development of new treatment methods for the diseases we are targeting could render our product candidates non-competitive or obsolete.

We face potential product liability exposure, and, if successful claims are brought against us, we may incur substantial liability.

The use of our product candidates in clinical trials and the sale of any products for which we obtain marketing approval expose us to the risk of product liability claims. Product liability claims might be brought against us by consumers, health care providers or others selling or otherwise coming into contact with our products. If we cannot successfully defend ourselves against product liability claims, we could incur substantial liabilities. In addition, regardless of merit or eventual outcome, product liability claims may result in:

 

   

decreased demand for any approved product candidates;

 

   

impairment of our business reputation;

 

   

withdrawal of clinical trial participants;

 

   

costs of related litigation;

 

   

distraction of management’s attention from our primary business;

 

   

substantial monetary awards to patients or other claimants;

 

   

loss of revenues; and

 

   

the inability to successfully commercialize any approved product candidates.

We have obtained product liability insurance coverage for our clinical trials with a $5 million annual aggregate coverage limit. However, our insurance coverage may not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive, and, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. If and when we obtain marketing approval for any of our product candidates, we intend to expand our insurance coverage to include the sale of commercial products; however, we may be unable to obtain this product liability insurance on commercially reasonable terms. On occasion, large judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could decrease our cash and adversely affect our business.

If we do not obtain protection under the Hatch-Waxman Amendments and similar foreign legislation to extend our patents and to obtain market exclusivity for our product candidates, our business may be materially harmed.

We believe that AEGR-733 and AEGR-427 (implitapide) are new chemical entities in the United States and may be eligible for market exclusivity under the FDCA, as amended by the Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Amendments. A drug can be classified as a new chemical entity if the FDA has not previously approved any other new drug containing the same active agent. Under sections 505(c)(3)(E)(ii) and 505(j)(5)(F)(ii) of the FDCA, as amended by the Hatch-Waxman Amendments, a new chemical entity that is granted regulatory approval may, in the absence of patent protections, be eligible for five years of marketing exclusivity in the United States following regulatory approval. This marketing exclusivity, if granted, would preclude approval during the exclusivity period of certain 505(b)(2) applications or certain abbreviated new drug applications submitted by another company for another version of the drug unless the company owned or had the legal right of reference to all data required for approval. However, there is no assurance that our compounds will be considered to be new chemical entities for these purposes or be entitled to

 

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the period of marketing exclusivity. If we are not able to gain or exploit the period of marketing exclusivity, we may face significant competitive threats to our commercialization of these compounds from other manufacturers, including the manufacturers of generic alternatives. Further, even if our compounds are considered to be new chemical entities and we are able to gain five years of marketing exclusivity, another company could also gain such marketing exclusivity under the provisions of the FDCA, as amended by the Hatch-Waxman Amendments, if such company can complete a full NDA with a complete human clinical trial process and obtain regulatory approval of its product.

Risks Related to Our Intellectual Property

If our patent position does not adequately protect our product candidates or any future products, others could compete against us more directly, which would harm our business.

As of the date of this prospectus, our AEGR-733 patent portfolio consists of five issued U.S. patents, one pending U.S. non-provisional patent application and related patents and pending applications in Europe, Australia, Japan, Canada, and Israel, which have been licensed to us in a specific field. The issued patents are scheduled to expire between 2013 and 2019. Our AEGR-427 (implitapide) patent portfolio contains four issued U.S. patents, two pending U.S. non-provisional applications, and related patents and pending applications in Europe, Australia, Asia, Africa, and South America. The issued patents are scheduled to expire between 2015 and 2017. We also have filed four U.S. patent applications (three non-provisional applications and one provisional application) and four international applications directed to pharmaceutical combinations of a microsomal triglyceride transfer protein inhibitor (for example, AEGR-733 or AEGR-427 (implitapide)) and other cholesterol lowering drugs, and to methods of using such combinations in certain dosing regimens to reduce serum cholesterol and/or triglyceride concentrations, or to treat and/or control obesity.

 

Our commercial success will depend in part on our ability to obtain additional patents and protect our existing patent position as well as our ability to maintain adequate protection of other intellectual property for our technologies, product candidates, and any future products in the United States and other countries. If we do not adequately protect our intellectual property, competitors may be able to use our technologies and erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability. Our ability to use the patents and patent applications licensed to us and described above to protect our business will depend on our ability to comply with the terms of the applicable licenses and other agreements. The laws of some foreign countries do not protect our proprietary rights to the same extent as the laws of the United States, and we may encounter significant problems in protecting our proprietary rights in these countries.

The patent positions of biotechnology and pharmaceutical companies, including our patent position, involve complex legal and factual questions, and, therefore, validity and enforceability cannot be predicted with certainty. Patents may be challenged, deemed unenforceable, invalidated, or circumvented. We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our proprietary technologies, product candidates, and any future products are covered by valid and enforceable patents or are effectively maintained as trade secrets.

The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that:

 

   

we will be able to successfully commercialize our products before some or all of our relevant patents expire;

 

   

we or our licensors were the first to make the inventions covered by each of our pending patent applications;

 

   

we or our licensors were the first to file patent applications for these inventions;

 

   

others will not independently develop similar or alternative technologies or duplicate any of our technologies;

 

   

any of our or our licensors’ pending patent applications will result in issued patents;

 

   

any of our or our licensors’ patents will be valid or enforceable;

 

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any patents issued to us or our licensors and collaborators will provide a basis for commercially viable products, will provide us with any competitive advantages or will not be challenged by third parties;

 

   

we will develop additional proprietary technologies or product candidates that are patentable; or

 

   

the patents of others will not have an adverse effect on our business.

We typically file for patent protection first on the composition-of-matter of our product candidates and also claim their activities and methods for their production and use to the extent known at that time. As we learn more about the mechanisms of action and new methods of manufacture and use of our product candidates, we generally file additional patent applications for these new inventions. Although our patents may prevent others from making, using, or selling similar products, they do not ensure that we will not infringe the patent rights of third parties. For example, because we sometimes identify the mechanism of action or molecular target of a given product candidate after we know its structure and therapeutic use, we may not be aware until the mechanism or target is further elucidated that a third party has an issued or pending patent application claiming biological activities or targets that may cover our product candidate or its use. If such a patent exists or is granted in the future, we cannot provide assurances that a license will be available on commercially reasonable terms, or at all.

We may be unable to adequately prevent disclosure of trade secrets and other proprietary information.

We rely on trade secrets to protect our proprietary technologies, especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. We rely in part on confidentiality agreements with our employees, consultants, outside scientific collaborators, sponsored researchers, and other advisors to protect our trade secrets and other proprietary information. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently discover our trade secrets and proprietary information. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.

Litigation regarding patents, patent applications and other proprietary rights may be expensive and time consuming. If we are involved in such litigation, it could cause delays in bringing product candidates to market and harm our ability to operate.

Our success will depend in part on our ability to operate without infringing the proprietary rights of third parties. Although we are not currently aware of any litigation or other proceedings or third-party claims of intellectual property infringement related to our product candidates, the pharmaceutical industry is characterized by extensive litigation regarding patents and other intellectual property rights. Other parties may obtain patents in the future and allege that the use of our technologies infringes these patent claims or that we are employing their proprietary technology without authorization. Likewise, third parties may challenge or infringe upon our existing or future patents. Under our license agreements with UPenn and Bayer, we have certain rights, but not any obligation, to bring actions against an infringing third party (with respect to the patent rights licensed from UPenn, in the field licensed exclusively to us by UPenn). If we do not bring an action, the licensor may bring an action against the infringing party.

Proceedings involving our patents or patent applications or those of others could result in adverse decisions regarding:

 

   

the patentability of our inventions relating to our product candidates; and/or

 

   

the enforceability, validity or scope of protection offered by our patents relating to our product candidates.

Even if we are successful in these proceedings, we may incur substantial costs and divert management time and attention in pursuing these proceedings, which could have a material adverse effect on us. If we are unable to

 

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avoid infringing the patent rights of others, we may be required to seek a license, defend an infringement action or challenge the validity of the patents in court. Patent litigation is costly and time consuming. We may not have sufficient resources to bring these actions to a successful conclusion. In addition, if we do not obtain a license, develop or obtain non-infringing technology, fail to defend an infringement action successfully or have infringed patents declared invalid, we may:

 

   

incur substantial monetary damages;

 

   

encounter significant delays in bringing our product candidates to market; and/or

 

   

be precluded from participating in the manufacture, use or sale of our product candidates.

Risks Related to Our Dependence on Third Parties

We rely on third parties to conduct our clinical trials, and those third parties may not perform satisfactorily, including failing to meet established deadlines for the completion of such clinical trials.

We do not have the ability to independently conduct clinical trials for our product candidates, and we rely on third parties such as contract research organizations, medical institutions, academic institutions (such as UPenn) and clinical investigators to perform this function. Our reliance on these third parties for clinical development activities reduces our control over these activities. However, if we sponsor clinical trials, we are responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires us to comply with standards, commonly referred to as Good Clinical Practices, for conducting, recording, and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. Our reliance on third parties that we do not control does not relieve us of these responsibilities and requirements. Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors. To date, our contract research organizations and other similar entities with which we are working have performed well. However, if these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be delayed in obtaining regulatory approvals for our product candidates and may be delayed in our efforts to successfully commercialize our product candidates for targeted diseases.

We do not have drug research or discovery capabilities, and will need to acquire or license existing drug compounds from third parties to expand our product candidate pipeline.

Both of our current product candidates have been licensed to us from third parties: AEGR-733 has been licensed to us by The Trustees of the University of Pennsylvania and AEGR-427 (implitapide) has been licensed to us by Bayer Healthcare AG. We currently have no drug research or discovery capabilities. Accordingly, if we are to expand our product candidate pipeline beyond our two current drug candidates, we will need to acquire or license existing compounds from third parties. We will face significant competition in seeking to acquire or license promising drug compounds. Many of our competitors for such promising compounds may have significantly greater financial resources, and/or more extensive experience in preclinical testing and clinical trials, obtaining regulatory approvals and manufacturing and marketing pharmaceutical products, and thus, may be a more attractive option to a potential licensor than us. If we are unable to acquire or license additional promising drug compounds, we will not be able to expand our product candidate pipeline.

We currently depend on third-party manufacturers to produce our preclinical and clinical drug supplies and intend to rely upon third-party manufacturers to produce commercial supplies of any approved product candidates.

We have relied upon third parties to produce material for preclinical and clinical testing purposes and intend to continue to do so in the future. We also expect to rely upon third parties to produce materials required for the commercial production of our product candidates if we succeed in obtaining necessary regulatory approvals. If

 

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we are unable to arrange for third-party manufacturing, or unable to do so on commercially reasonable terms, we may not be able to successfully complete development of our product candidates or market them. Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured product candidates ourselves, including reliance on the third party for regulatory compliance and quality assurance, the possibility of breach of the manufacturing agreement by the third party because of factors beyond our control and the possibility of termination or nonrenewal of the agreement by the third party, based on its own business priorities, at a time that is costly or damaging to us. In addition, the FDA and other regulatory authorities require that our product candidates be manufactured according to cGMP. Any failure by our third-party manufacturers to comply with cGMP and/or failure to scale up our manufacturing processes could lead to a delay in, or failure to obtain, regulatory approval of any of our product candidates. In addition, such failure could be the basis for action by the FDA to withdraw approvals for product candidates previously granted to us and for other regulatory action.

We currently rely on a single manufacturer for the preclinical and clinical supplies of each of our product candidates and do not currently have relationships for redundant supply or a second source for any of our product candidates. To date, our third-party manufacturers have met our manufacturing requirements, but we cannot assure you that they will continue to do so. Any performance failure on the part of our existing or future manufacturers could delay clinical development or regulatory approval of our product candidates or commercialization of any approved products. If for some reason our current contract manufacturers cannot perform as agreed, we may be required to replace them. Although we believe there are a number of potential replacements that could manufacture the clinical supply of our product candidates, we may incur added costs and delays in identifying and qualifying and such replacements. Furthermore, although we generally do not begin a clinical trial unless we have a sufficient supply of a product candidate for the trial, any significant delay in the supply of a product candidate for an ongoing trial due to the need to replace a third-party manufacturer could delay completion of the trial.

If we receive regulatory approval of any of our product candidates, we currently expect to continue to rely upon third-party manufacturers to produce commercial supplies of any such approved product candidate. Accordingly, we will need to identify commercial-scale manufacturers, or our manufacturers of clinical supplies will need to increase their scale of production to meet our projected needs for commercial manufacturing. We can not assure you that we will be able to identify, or reach agreement with, commercial scale manufacturers on commercially reasonably terms, or at all. If we are unable to do so, we will need to develop our own commercial-scale manufacturing capabilities, which could delay commercialization of any approved product candidates.

If we do not establish successful collaborations, we may have to alter our development plans.

Our drug development programs and potential commercialization of our product candidates will require substantial additional cash to fund expenses. We plan to seek to enter into collaborative arrangements to develop and commercialize our products, especially for target indications in which the potential collaborator has particular therapeutic expertise or that involve a large, primary care market that must be served by large sales and marketing organizations or for markets outside of North America. We intend to enter into these collaborations in order to:

 

   

fund our research and development activities;

 

   

access manufacturing capabilities of third parties;

 

   

help us conduct clinical trials; and

 

   

successfully commercialize any approved product candidates.

We face significant competition in seeking appropriate collaborators and these collaborations are complex and time-consuming to negotiate and document. We may not be able to negotiate collaborations on acceptable terms, or at all. If that were to occur, we may have to curtail the development of a particular product candidate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of our sales or marketing activities, or increase our expenditures and

 

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undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms, or at all. If we do not have sufficient funds, we will not be able to bring our product candidates to market and generate product revenue.

If a collaborative partner terminates or fails to perform its obligations under an agreement with us, the development and commercialization of our product candidates could be delayed or terminated.

We are not currently party to any collaborative arrangements, although we intend to pursue such arrangements prior to any commercialization of our two product candidates, AEGR-733 and AEGR-427 (implitapide). If we are successful in entering into collaborative arrangements and any of our collaborative partners does not devote sufficient time and resources to a collaboration arrangement with us, we may not realize the potential commercial benefits of the arrangement, and our results of operations may be adversely affected. In addition, if any future collaboration partner were to breach or terminate its arrangements with us, the development and commercialization of the affected product candidate could be delayed, curtailed or terminated because we may not have sufficient financial resources or capabilities to continue development and commercialization of the product candidate on our own.

Much of the potential revenue from future collaborations may consist of contingent payments, such as payments for achieving development milestones and royalties payable on sales of drugs developed. The milestone and royalty revenues that we may receive under these collaborations will depend upon our collaborator’s ability to successfully develop, introduce, market and sell new products. In addition, collaborators may decide to enter into arrangements with third parties to commercialize products developed under collaborations using our technologies, which could reduce the milestone and royalty revenue that we may receive, if any. Future collaboration partners may fail to develop or effectively commercialize products using our products or technologies because they:

 

   

decide not to devote the necessary resources due to internal constraints, such as limited personnel with the requisite scientific expertise, limited cash resources or specialized equipment limitations, or the belief that other drug development programs may have a higher likelihood of obtaining regulatory approval or may potentially generate a greater return on investment;

 

   

decide to pursue other technologies or develop other product candidates, either on their own or in collaboration with others (including our competitors), to treat the same diseases targeted by our own collaborative programs;

 

   

do not have sufficient resources necessary to carry the product candidate through clinical development, regulatory approval and commercialization; or

 

   

cannot obtain the necessary regulatory approvals.

Competition may negatively impact a partner’s focus on and commitment to our product candidate and, as a result, could delay or otherwise negatively affect the commercialization of our product candidate. If future collaboration partners fail to develop or effectively commercialize our product candidates for any of these reasons, we may not be able to replace the collaboration partner with another partner to develop and commercialize a product candidate under the terms of the collaboration. We may also be unable to obtain, on terms acceptable to us, a license from such collaboration partner to any of its intellectual property that may be necessary or useful for us to continue to develop and commercialize a product candidate.

If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, we may be unable to generate product revenue.

We do not currently have an organization for the sales, marketing, and distribution of pharmaceutical products. In order to market any products that may be approved by the FDA or any other regulatory body, we must build our sales, marketing, managerial, and other non-technical capabilities or make arrangements with

 

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third parties to perform these services. If we are unable to establish adequate sales, marketing, and distribution capabilities, whether independently or with third parties, we may not be able to generate product revenue and may not become profitable.

Risks Related to Employee Matters and Managing Growth

Our future success depends on our ability to retain our chief executive officer and other key executives and to attract, retain, and motivate qualified personnel.

We are highly dependent on Gerald Wisler, our President and Chief Executive Officer, Dr. William Sasiela, our Chief Medical Officer, and the other principal members of our executive and scientific teams listed under “Management.” We have entered into employment agreements with certain members of our executive and scientific teams, but any employee may terminate his or her employment with us at any time. Although we do not have any reason to believe that we may lose the services of any of these persons in the foreseeable future, the loss of the services of any of these persons might impede the achievement of our research, development, and commercialization objectives. Recruiting and retaining qualified scientific personnel and possibly sales and marketing personnel will also be critical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific personnel from universities and research institutions. Failure to succeed in clinical trials may make it more challenging to recruit and retain qualified scientific personnel. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.

We expect to expand our development and marketing capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

We currently have a very limited number of employees, and we expect to experience significant growth in the number of our employees and the scope of our operations. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational, and financial systems, expand our facilities, and continue to recruit and train additional qualified personnel. Due to our limited resources, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The physical expansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.

Risks Related to the Securities Markets and Investment in Our Common Stock

Market volatility may affect our stock price and the value of your investment.

Following this offering, the market price for our common stock is likely to be volatile, in part because our shares have not been previously traded publicly. In addition, the market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including:

 

   

plans for, progress in and results from clinical trials of AEGR-733 and AEGR-427 (implitapide);

 

   

announcements of new products, services or technologies, commercial relationships, acquisitions or other events by us or our competitors;

 

   

failure of any of our product candidates, if approved, to achieve commercial success;

 

   

fluctuations in stock market prices and trading volumes of similar companies;

 

   

general market conditions and overall fluctuations in U.S. equity markets;

 

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variations in our quarterly operating results;

 

   

changes in our financial guidance or securities analysts’ estimates of our financial performance;

 

   

changes in accounting principles;

 

   

sales of large blocks of our common stock, including sales by our executive officers, directors and significant stockholders;

 

   

additions or departures of key personnel;

 

   

success or failure of products within the cardiovascular or metabolic disease therapeutic area;

 

   

discussion of us or our stock price by the financial press and in online investor communities; and

 

   

other risks and uncertainties described in these Risk Factors.

An active public market for our common stock may not develop or be sustained after this offering. We will negotiate and determine the initial public offering price with representatives of the underwriters and this price may not be indicative of prices that will prevail in the trading market. As a result, you may not be able to sell your shares of common stock at or above the offering price.

We may allocate the net proceeds from this offering in ways that you and other stockholders may not approve.

We currently intend to use the proceeds from this offering to fund the continued clinical development of AEGR-733 and AEGR-427 (implitapide) and for general and administrative expenses, capital expenditures, working capital needs, prosecution and maintenance of our intellectual property, and other corporate purposes. Because of the number and variability of factors that will determine our use of the proceeds from this offering, their ultimate use may vary substantially from their currently intended use. As such, our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not necessarily improve our operating results or enhance the value of our common stock. For a further description of our intended use of the proceeds of the offering, see “Use of Proceeds.”

Our directors and management will exercise significant control over our company, which will limit your ability to influence corporate matters.

After this offering, our directors and executive officers and their affiliates will collectively control approximately 59.5% of our outstanding common stock, assuming the underwriters do not exercise their option to cover overallotments. As a result, these stockholders, if they act together, will be able to influence our management and affairs and all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change in control of our company and might negatively affect the market price of our common stock.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our certificate of incorporation and by-laws may delay or prevent an acquisition of us or a change in our management. These provisions include a classified board of directors, a prohibition on actions by written consent of our stockholders and the ability of our board of directors to issue preferred stock without stockholder approval. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us. Although we believe these provisions collectively provide for an opportunity to obtain greater value for stockholders by requiring potential

 

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acquirors to negotiate with our board of directors, they would apply even if an offer rejected by our board were considered beneficial by some stockholders. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management.

We do not intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

We have never declared or paid any cash dividend on our common stock and do not currently intend to do so for the foreseeable future. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Therefore, the success of an investment in shares of our common stock will depend upon any future appreciation in their value. There is no guarantee that shares of our common stock will appreciate in value or even maintain the price at which our stockholders have purchased their shares.

Future sales of our common stock may cause our stock price to decline.

Upon completion of this offering, there will be 18,649,678 shares of our common stock outstanding. Of these, 5,000,000 shares are being sold in this offering (or 5,750,000 shares, if the underwriters exercise their over-allotment option in full) and will be freely tradable immediately after this offering (except for shares purchased by affiliates) and the remaining 13,649,678 shares may be sold upon expiration of lock-up agreements 180 days after the date of this offering (subject in some cases to volume limitations). In addition, as of May 15, 2007, we had outstanding options to purchase 697,936 shares of common stock that, if exercised, will result in these additional shares becoming available for sale upon expiration of the lock-up agreements. A large portion of these shares and options are held by a small number of persons and investment funds. Sales by these stockholders or optionholders of a substantial number of shares after this offering could significantly reduce the market price of our common stock. Moreover, after this offering, the holders of shares of common stock will have rights, subject to some conditions, to require us to file registration statements covering the shares they currently hold, or to include these shares in registration statements that we may file for ourselves or other stockholders.

We also intend to register all common stock that we may issue under our 2007 Stock Option and Incentive Plan. Effective upon the completion of this offering, an aggregate of 4,000,000 shares of our common stock will be reserved for future issuance under this plan. Once we register these shares, which we plan to do shortly after the completion of this offering, they can be freely sold in the public market upon issuance, subject to the lock-up agreements referred to above. If a large number of these shares are sold in the public market, the sales could reduce the trading price of our common stock. See “Shares Eligible for Future Sale” for a more detailed description of sales that may occur in the future.

You will suffer immediate and substantial dilution in the net tangible book value of the common stock you purchase.

The initial public offering price of our common stock is substantially higher than the net tangible book value per share of our outstanding common stock immediately after this offering. Purchasers of common stock in this offering will experience immediate dilution of approximately $9.26 per share in net tangible book value of the common stock. In addition, investors purchasing common stock in this offering will contribute approximately 74% of the total amount invested by stockholders since inception, but will only own approximately 27% of the shares of common stock outstanding. In the past, we issued restricted stock and options to acquire common stock at prices significantly below the initial public offering price. To the extent these outstanding options are ultimately exercised, investors purchasing common stock in this offering will sustain further dilution. See “Dilution” for a more detailed description of the dilution to new investors in the offering.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. Forward-looking statements relate to future events or our future financial performance. We generally identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar words. These statements are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in “Risk Factors” and elsewhere in this prospectus. Accordingly, you should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results could differ materially from those projected in the forward-looking statements. Forward-looking statements contained in this prospectus include, but are not limited to, statements about:

 

   

our expectations related to the use of proceeds from this offering;

 

   

the progress and timing of our development and commercialization activities;

 

   

the timing and conduct of our clinical trials for our product candidates;

 

   

our ability to obtain U.S. and foreign regulatory clearance for our product candidates and the ability of our product candidates to meet existing or future regulatory standards;

 

   

our expectations regarding the trend towards lower LDL-C guidelines, in particular whether the National Cholesterol Education Program will lower its recommended LDL-C guidelines to <70 mg/dL for all high-risk patients;

 

   

the potential benefits and effectiveness of our product candidates;

 

   

the accuracy of our estimates of the size and characteristics of the markets that may be addressed by our product candidates;

 

   

our ability to manufacture sufficient amounts of our product candidates for clinical trials and products for commercialization activities;

 

   

our intention to seek to establish strategic partnerships for the development or sale of our product candidates;

 

   

the timing of commercializing our product candidates; and

 

   

other factors discussed elsewhere in this prospectus.

The forward-looking statements made in this prospectus relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. We have included important factors in the cautionary statements included in this prospectus, particularly in the section entitled “Risk Factors” that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

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USE OF PROCEEDS

We estimate that the net proceeds of the sale of the common stock that we are offering will be approximately $57.5 million, or $66.5 million if the underwriters exercise their over-allotment option in full, assuming an initial public offering price of $13.00 per share, which is the midpoint of the range listed on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses that we must pay.

A $1.00 increase (decrease) in the assumed initial public offering price of $13.00 per share would increase (decrease) the net proceeds to us from this offering by approximately $4.7 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The principal purposes of this offering are to obtain additional working capital to fund anticipated operating losses, establish a public market for our common stock, and facilitate future access to the public markets. We estimate that we will use approximately $10 million of the net proceeds we receive in this offering to repay debt, including accrued interest, under our loan and security agreement with Hercules. As of March 31, 2007, we had outstanding $10.0 million in aggregate principal amount under this loan and security agreement, bearing interest at a rate of 10.75% per annum, maturing in November 2010. We entered into this loan and security agreement in March 2007 and used the proceeds of this indebtedness for working capital purposes, principally to help pay costs associated with this offering.

We estimate that we will use the remaining proceeds of this offering as follows:

 

   

approximately $20.0 to $25.0 million of these net proceeds to fund the continued clinical development of AEGR-733, including the initiation in 2007 of additional Phase II trials and in the second half of 2007 of the Phase III trial in patients with homozygous familial hypercholesterolemia to be conducted by UPenn, which we believe will fund these trials through their completion;

 

   

approximately $12.0 to $17.0 million of these net proceeds to fund the continued clinical development of AEGR-427 (implitapide), including the initiation in the second half of 2007 of two additional Phase II trials, which we believe will fund these trials through their completion; and

 

   

the remaining net proceeds for general corporate purposes, such as general and administrative expenses, working capital, prosecution and maintenance of our intellectual property and the potential acquisition of, or investment in, technologies, products, or companies that complement our business.

We have no current understandings, commitments, or agreements with respect to any acquisition of or investment in any technologies, products or companies.

As of the date of this prospectus, we cannot predict with certainty all of the particular uses for the proceeds from this offering, or the amounts that we will actually spend on the uses set forth above. The amounts and timing of our actual expenditures will depend upon numerous factors, including the progress of our development and commercialization efforts, the progress of our clinical trials, whether or not we enter into strategic collaborations or partnerships, and our operating costs and expenditures. Accordingly, our management will have significant flexibility in applying the net proceeds of this offering.

The costs and timing of drug development and regulatory approval, particularly conducting clinical trials, are highly uncertain, are subject to substantial risks, and can often change. Accordingly, we may change the allocation of use of these proceeds as a result of contingencies such as the progress and results of our clinical trials and other development activities, the establishment of collaborations, our manufacturing requirements and regulatory or competitive developments.

 

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Assuming our current clinical programs proceed further to the next stage of clinical development, we do not expect our existing capital resources and the net proceeds we receive from this offering will be sufficient to enable us to fund the completion of any of our clinical development programs through FDA approval and commercial introduction. Accordingly, we expect we will need to raise additional funds. We anticipate that the proceeds of this offering, together with our existing resources, will be sufficient to fund our planned operations, including our continued product candidate development, at least through the end of 2008. However, we may require additional funds earlier than we currently expect in order to conduct additional clinical trials or seek regulatory approval of our product candidates. We may seek these funds through a combination of private and public equity offerings, debt financings and collaboration, strategic and licensing arrangements. Additional financing may not be available when we need it or may not be available on terms that are favorable to us. Because of the risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of additional funds we will require in connection with our future anticipated clinical trials or to achieve FDA approval and commercial introduction of our product candidates. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Funding Requirements.”

Pending use of the proceeds from this offering as described above or otherwise, we intend to invest the net proceeds in short-term interest-bearing, investment grade securities.

DIVIDEND POLICY

We have never declared or paid dividends on our common stock. Our board of directors will continue to have discretion in determining whether to declare or pay dividends, which will depend upon our financial condition, results of operations, capital requirements and other factors our board of directors deems relevant. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and the repayment of indebtedness. In addition, under our loan and security agreement with Hercules, we are prohibited from declaring or paying any cash dividends. Accordingly, we do not anticipate declaring or paying any cash dividends for the foreseeable future.

 

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CAPITALIZATION

The following table sets forth our capitalization as of March 31, 2007:

 

   

on an actual basis;

 

   

on a pro forma basis:

 

   

to give effect to the conversion of all outstanding shares of our Series A redeemable convertible preferred stock and accumulated dividends thereon into 9,225,570 shares of common stock upon completion of this offering, assuming the closing of this offering occurs on June 19, 2007; and

 

   

our marking-to-market the warrant liability arising from our warrant agreement with Hercules Technology Growth Capital, Inc., or Hercules, using an assumed initial public offering price of $13.00 per share, the midpoint of the range listed on the cover page of this prospectus, which results in interest expense of $47,493, and our reclassification of this warrant agreement from liabilities to equity upon the conversion of our Series A redeemable convertible preferred stock into common stock upon completion of this offering; and

 

   

on a pro forma as adjusted basis to give further effect to:

 

   

the receipt by us of net proceeds of $57.5 million from the sale of 5,000,000 shares of common stock offered by us in this offering at an assumed initial public offering price of $13.00 per share, after deducting underwriting discounts and commissions and estimated offering expenses; and

 

   

the use of $10 million of the net proceeds of this offering to repay our outstanding indebtedness to Hercules, as described under “Use of Proceeds.”

You should read the following table in conjunction with our consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this prospectus.

 

    As of March 31, 2007  
    Actual     Pro Forma    

Pro Forma

As Adjusted(1)

 

Cash and cash equivalents

  $ 22,951,417     $ 22,951,417     $ 70,401,417  
                       

Short-term debt

    9,285,769       9,285,769       —    

Series A redeemable convertible preferred stock, $0.001 par value; 13,000,000 shares authorized, 12,211,604 shares issued and outstanding, actual; no shares authorized, issued and outstanding, pro forma and pro forma as adjusted

    24,760,966       —         —    

Stockholders’ equity:

     

Preferred stock, $0.001 par value; no shares authorized, issued and outstanding, actual and pro forma; 5,000,000 shares authorized and no shares issued and outstanding, pro forma as adjusted

    —         —         —    

Common stock, $0.001 par value, 22,000,000 shares authorized and 4,424,108 shares issued and outstanding, actual; 22,000,000 authorized and 13,649,678 shares issued and outstanding, pro forma; 125,000,000 shares authorized and 18,649,678 shares issued and outstanding, pro forma as adjusted

    4,424       13,650       18,650  

Additional paid-in capital

    —         25,519,834       82,964,834  

Deficit accumulated during the development stage

    (12,296,041 )     (12,343,534 )     (13,208,715 )
                       

Total stockholders’ equity (deficiency)

    (12,291,617 )     13,189,950       69,774,769  
                       

Total capitalization

  $ 21,755,118     $ 22,475,719     $ 69,774,769  
                       

(1) A $1.00 increase (decrease) in the assumed initial public offering price of $13.00 per share would increase (decrease) each of cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by approximately $4.7 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same.

 

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DILUTION

If you invest in our common stock, your interest will be diluted immediately to the extent of the difference between the assumed initial offering price of $13.00 per share of our common stock, which is the midpoint of the range listed on the cover page of this prospectus, and the pro forma as adjusted net tangible book value per share of our common stock after this offering. Our historical net tangible book value as of March 31, 2007 was $(12,291,617), or $(2.78) per share, based on 4,424,108 shares of common stock outstanding as of March 31, 2007. Our pro forma net tangible book value as of March 31, 2007 was $13,189,950, or $0.97 per share of common stock. Pro forma net tangible book value per share represents the amount of our total tangible assets less our total liabilities after marking-to-market the warrant liability arising from our warrant agreement with Hercules using the assumed initial public offering price of $13.00 per share and our reclassification of this warrant agreement from liabilities to equity upon the conversion of our Series A redeemable convertible preferred stock, divided by the number of shares of common stock outstanding as of March 31, 2007 after giving effect to the conversion of all of our Series A redeemable convertible preferred stock and accrued dividends thereon into 9,225,570 shares of our common stock upon completion of this offering, assuming the closing of this offering occurs on June 19, 2007.

After giving effect to the sale by us of 5,000,000 shares of common stock in this offering at an assumed initial public offering price of $13.00 per share and after deducting underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of March 31, 2007 would have been approximately $69.8 million, or approximately $3.74 per share. This amount represents an immediate increase in pro forma net tangible book value of $2.77 per share to our existing stockholders and an immediate dilution in pro forma net tangible book value of approximately $9.26 per share to new investors purchasing shares of common stock in this offering at the assumed initial public offering price. The following table illustrates this dilution on a per share basis:

 

Assumed initial public offering price per share

     $ 13.00

Historical net tangible book value per share as of March 31, 2007

   $ (2.78 )  

Increase per share due to assumed conversion of preferred stock

     3.75    
          

Pro forma net tangible book value per share as of March 31, 2007

   $ 0.97    

Increase per share attributable to new investors

     2.77    
          

Pro forma as adjusted net tangible book value per share after this offering

       3.74
        

Dilution per share to new investors

     $ 9.26
        
    
    

A $1.00 increase (decrease) in the assumed initial public offering price of $13.00 per share would increase (decrease) our pro forma as adjusted net tangible book value as of March 31, 2007 by approximately $4.7 million, the pro forma as adjusted net tangible book value per share after this offering by $0.25 and the dilution to new investors in this offering by $0.75 per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters exercise their over-allotment option in full, the pro forma as adjusted net tangible book value per share after this offering would be $4.23 per share, the increase per share attributable to new investors would be $3.26 per share and the dilution to new investors would be $8.77 per share.

 

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The following table summarizes, as of March 31, 2007, the differences between the number of shares purchased from us, the total consideration paid to us and the average price per share that existing stockholders and new investors paid. The table gives effect to the conversion of all of our Series A redeemable convertible preferred stock and accrued dividends thereon into 9,225,570 shares of common stock, which will occur upon completion of this offering. The calculation below is based on an assumed initial public offering price of $13.00 per share, which is the midpoint of the range listed on the cover page of this prospectus, and before deducting underwriting discounts and commissions and estimated offering expenses that we must pay.

 

     Shares Purchased     Total Consideration    

Average
Price

Per Share

     Number    Percent     Amount    Percent    

Existing stockholders

   13,649,678    73 %   $ 22,716,062    26 %   $ 1.66

New investors

   5,000,000    27       65,000,000    74       13.00
                          

Total

   18,649,678    100.0 %   $ 87,716,062    100.0 %  
                          

A $1.00 increase (decrease) in the assumed initial public offering price of $13.00 per share would increase (decrease) total consideration paid to us by investors participating in this offering by approximately $4.7 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

Assuming the underwriters’ over-allotment option is exercised in full, sales by us in this offering will reduce the percentage of shares held by existing stockholders to 70% and will increase the number of shares held by new investors to 5,750,000, or 30%.

 

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SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the notes included elsewhere in this prospectus. The statements of operations data for the period February 4, 2005 (Inception) to December 31, 2005 and for the year ended December 31, 2006 were derived from our audited financial statements that are included elsewhere in this prospectus. The statements of operations data for the three months ended March 31, 2006 and 2007, and the period from February 4, 2005 (Inception) to March 31, 2007, and the balance sheet data as of March 31, 2007 were derived from our unaudited financial statements included elsewhere in this prospectus. We have prepared our unaudited financial statements on the same basis as our audited financial statements. In the opinion of management, our unaudited financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the information. Results for the three months ended March 31, 2007 are not necessarily indicative of financial results that may be expected for the fiscal year ending December 31, 2007 or for any other future period.

 

    February 4, 2005
(Inception) to
December 31, 2005
    Year Ended
December 31, 2006
   

Three Months
Ended
March 31,

   

Period From
February 4,
2005
(Inception)
March 31,
2007

 
       

2006

   

2007

   
        (Unaudited)       (Unaudited)  

Statements of Operation Data:

         

Operating expenses:

         

Research and development

  $ 141,250     $ 3,801,924     $ 405,530     $ 2,829,695     $ 6,772,869  

General and administrative

    1,047,193       3,237,577       389,450       874,358       5,159,128  
                                       

Total operating expenses

    1,188,443       7,039,501       794,980       3,704,053       11,931,997  
                                       

Loss from operations

    (1,188,443 )     (7,039,501 )     (794,980 )     (3,704,053 )     (11,931,997 )

Interest expense

    (235,978 )     —         —         (41,017 )     (276,995 )

Interest income

    17,801       871,405       176,345       212,740       1,101,946  
                                       

Net loss

    (1,406,620 )     (6,168,096 )     (618,636 )     (3,532,330 )     (11,107,046 )

Less: accretion of preferred stock dividends

    (74,162 )     (1,652,025 )     (396,667 )     (425,274 )     (2,151,461 )
                                       

Net loss attributable to common stockholders

  $ (1,480,782 )   $ (7,820,121 )   $ (1,015,313 )   $ (3,957,604 )   $ (13,258,507 )
                                       

Basic and diluted net loss attributable to common stockholders per share

  $ (0.89 )   $ (3.40 )   $ (0.51 )   $ (1.40 )  
                                 

Weighted average shares outstanding—basic and diluted(1)

    1,660,340       2,298,331       1,978,885       2,823,307    
                                 

Pro forma basic and diluted net loss attributable to common stockholders per share(2)

    $ (0.54 )     $ (0.30 )  
                     

Pro forma weighted average shares outstanding—basic and diluted(1)(2)

      11,523,901         12,041,562    
                     

(1) For accounting purposes only, the number of issued and outstanding shares does not include 2,146,140 shares of restricted stock in 2005, 1,608,078 shares of restricted stock in 2006, 2,146,140 shares of restricted stock at March 31, 2006 and 1,473,945 shares of restricted stock at March 31, 2007. These shares are subject to a risk of repurchase by us until such shares are vested. See Note 1 to our financial statements for more information.

 

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(2) The pro forma basic and diluted net loss per share gives effect to the conversion of all outstanding shares of our Series A redeemable convertible preferred stock and accumulated dividends thereon into 9,225,570 shares of common stock upon the completion of this offering, assuming the closing of this offering occurs on June 19, 2007. See “Prospectus Summary—General Information About This Prospectus.”

 

     As of December 31,    

March 31,

2007

 
     2005     2006    

Balance Sheet Data:

         (Unaudited)  

Cash and cash equivalents

   $ 22,115,427     $ 16,563,241     $ 22,951,417  

Total assets

     22,118,037       16,771,090       24,756,458  

Short term debt

     —         —         9,285,769  

Deficit accumulated during the development stage

     (1,406,620 )     (8,632,235 )     (12,298,127 )

Total stockholders’ equity (deficiency)

     (1,302,268 )     (8,625,925 )     (12,291,617 )

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read together with our financial statements that appear elsewhere in this prospectus. This discussion contains forward-looking statements reflecting our current expectations and involves risk and uncertainties. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “intend,” “potential” or “continue” or the negative of these terms or other comparable terminology. For example, statements regarding our expectations as to future financial performance, expense levels and liquidity sources are forward-looking statements. Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under “Risk Factors” and elsewhere in this prospectus.

Overview

Background

Aegerion Pharmaceuticals is an emerging biopharmaceutical company focused on the development and commercialization of drug products consisting of single molecules, called small-molecule therapeutics, to treat cardiovascular and metabolic disease. Our current product candidates are microsomal triglyceride transfer protein inhibitors that limit secretion of cholesterol and triglycerides, collectively referred to as lipids, from the intestine and liver and have demonstrated in humans an ability to significantly reduce low-density lipoprotein cholesterol, or LDL-C. We believe these compounds have the potential to address significant unmet medical needs for patients who seek to lower their cholesterol levels, either on a stand-alone basis or in combination with existing therapies, such as statins and cholesterol absorption inhibitors.

We have two product candidates, AEGR-733 and AEGR-427 (implitapide), in clinical development. We hold exclusive worldwide rights to certain know-how and patents applicable these compounds pursuant to license agreements we completed in 2006 with The Trustees of the University of Pennsylvania and Bayer Healthcare AG, respectively. Under these agreements, we are required to make payments to our licensors throughout the development phase of these compounds, including payments upon the completion of specified development milestones. If and when we obtain regulatory approval of, and commercialize, these compounds, we will be required to pay our licensors specified royalty payments on any net sales. For more information on these license agreements, see “Business—Licenses.”

In 2007, we expect additional Phase II clinical trials of AEGR-733 will be initiated to further evaluate its potential role in reducing LDL-C in patients with hypercholesterolemia, and in the second half of 2007 we expect a Phase III clinical trial of AEGR-733 for patients with homozygous familial hypercholesterolemia will be initiated. In the second half of 2007, we expect a Phase II dose ranging trial will be initiated to evaluate the efficacy and safety/tolerability profile of AEGR-427 (implitapide) in doses ranging from 30 mg to 50 mg, and a Phase II pharmacokinetics trial will be initiated to evaluate the ability of AEGR-427 (implitapide) to be used in combination with statins.

If approved for sale, we intend to market our product candidates ourselves and with a partner in the United States and through strategic collaborations outside of the United States. We currently contract with outside firms to manufacture clinical supplies of our product candidates and have no plans to establish internal manufacturing capabilities.

We commenced operations in February 2005. Since our inception, we have generated significant losses. As of March 31, 2007, we had a deficit accumulated during development stage of $12.3 million. We expect to incur substantial and increasing losses for the next several years as we:

 

   

advance the clinical development of AEGR-733 and AEGR-427 (implitapide);

 

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advance the clinical development of potential new product candidates we may license or acquire in the future; and

 

   

add the necessary infrastructure to support our growth.

To date, we have funded our operations primarily through private placement of preferred stock, convertible debt and venture debt. As of March 31, 2007, we have had no revenue and have generated only interest income from short-term investments. We will need substantial additional financing to obtain regulatory approvals for our product candidates, fund operating losses and establish sales and marketing capabilities, which we will seek to raise through public or private equity or debt financings, collaborative or other arrangements with third parties or through other sources of financing. There can be no assurance that such funds will be available on terms favorable to us, if at all. In addition to the normal risks associated with early-stage companies, there can be no assurance that we will successfully complete development of our product candidates, obtain adequate patent protection for our technology, obtain necessary government regulatory approval for our product candidates or that any approved product candidates will be commercially viable. In addition, we may not be profitable even if we succeed in commercializing any of our product candidates.

Revenue

To date, we have not generated any revenue from the sale of any product candidates. We do not expect to generate significant revenue unless or until we obtain regulatory approval of, and commercialize, our product candidates or in-license additional products that generate revenue. We intend to seek to generate revenue from a combination of product sales, up-front fees and milestone payments in connection with collaborative or strategic relationships, and royalties resulting from the license of our intellectual property. We expect that any revenue we generate will fluctuate from quarter to quarter as a result of the nature, timing and amount of milestone payments we may receive from our collaborative or strategic relationships, as well as revenue we may receive upon the sale of our products, to the extent any are successfully commercialized.

Development Expenses

Since our inception, we have focused our activities on our product candidate development programs. We expense development expenses as they are incurred. Our development expenses consist primarily of:

 

   

salaries and related expenses for personnel;

 

   

fees paid to consultants and clinical research organizations in conjunction with independently monitoring our clinical trials and acquiring and evaluating data in conjunction with our clinical trials, including all related fees such as for investigator grants, patient screening, lab work and statistical compilation and analysis;

 

   

costs related to production of clinical materials, including fees paid to contract manufacturers;

 

   

costs related to upfront and milestone payments under in-licensing agreements;

 

   

costs related to compliance with FDA regulatory requirements;

 

   

consulting fees paid to third parties; and

 

   

costs related to stock options or other stock-based compensation granted to personnel in development functions.

We expense both internal and external development costs as incurred. We are developing our product candidates in parallel, and we typically use our employee and infrastructure resources across several projects. Thus, some of our development costs are not attributable to an individually-named project but rather are

 

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allocated across our clinical stage programs. These unallocated costs include salaries, stock based compensation charges and related fringe benefit costs for our employees, consulting fees and the fees paid to clinical suppliers.

The following table shows our total development expense for the period from February 4, 2005 (Inception) through December 31, 2005, for the year ended December 31, 2006 and for the three months ended March 31, 2006 and March 31, 2007.

 

     For the Period
February 4, 2005
(Inception) to
December 31, 2005
   For the Year Ended
December 31, 2006
   For the Three
Months Ended March 31,
           2006    2007

Allocated Costs:

           

AEGR-733

   $ 141,250    $ 2,283,079    $ 314,652      1,392,970

AEGR-427 (implitapide)

     —        750,000      —        100,000

Unallocated Costs

     —        768,845      90,878      1,336,725
                           

Total development

   $ 141,250    $ 3,801,924    $ 405,530    $ 2,829,695
                           

We expect our development expenses to increase significantly as we continue to develop our product candidates. In 2007, we expect additional Phase II clinical trials of AEGR-733 will be initiated to further evaluate its potential role in reducing LDL-C in patients with hypercholesterolemia, and in the second half of 2007, we expect a Phase III clinical trial of AEGR-733 for patients with homozygous familial hypercholesterolemia will be initiated, funded in part through a grant from the FDA under its orphan products grant program. We currently estimate that the costs to us for the Phase II trials will be approximately $18.0 million and for the Phase III trial will be approximately $4.0 million, in each case exclusive of internal personnel costs associated with conducting these trials. We expect to initiate two Phase II trials for AEGR-427 (implitapide) during the second half of 2007. We currently estimate that the costs to us for these trials will be approximately $15.0 million, exclusive of internal personnel costs associated with conducting these trials.

We expect that a large percentage of our development expenses in the future will be incurred in support of our current and future preclinical and clinical development programs. These expenditures are subject to numerous uncertainties in timing and cost to completion. We expect to continue to test our product candidates in preclinical studies for toxicology, safety and efficacy, and to conduct additional clinical trials for each product candidate. If we are not able to engage a collaboration partner prior to the commencement of later stage clinical trials, we may fund these trials ourselves. As we obtain results from clinical trials, we may elect to discontinue or delay clinical trials for certain product candidates or programs in order to focus our resources on more promising product candidates or programs. Completion of clinical trials by us or our future collaborators may take several years or more, but the length of time generally varies according to the type, complexity, novelty and intended use of a product candidate. The cost of clinical trials may vary significantly over the life of a project as a result of differences arising during clinical development, including, among others:

 

   

the number of sites included in the trials;

 

   

the length of time required to enroll suitable patient subjects;

 

   

the number of patients that participate in the trials;

 

   

the number of doses that patients receive;

 

   

the drop-out or discontinuation rates of patients;

 

   

the duration of patient follow-up;

 

   

the phase of development the product candidate is in; and

 

   

the efficacy and safety profile of the product candidate.

 

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Our expenses related to clinical trials are based on estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and clinical research organizations that conduct and manage clinical trials on our behalf. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Generally, these agreements set forth the scope of work to be performed at a fixed fee or unit price. Payments under the contracts depend on factors such as the successful enrollment of patients or the completion of clinical trial milestones. Expenses related to clinical trials generally are accrued based on contracted amounts applied to the level of patient enrollment and activity according to the protocol. If timelines or contracts are modified based upon changes in the clinical trial protocol or scope of work to be performed, we modify our estimates of accrued expenses accordingly on a prospective basis.

None of our product candidates has received FDA or foreign regulatory marketing approval. In order to grant marketing approval, the FDA or foreign regulatory agencies must conclude that clinical data establishes the safety and efficacy of our product candidates. Furthermore, our strategy includes entering into collaborations with third parties to participate in the development and commercialization of our product candidates. In the event that third parties have control over the clinical trial process for a product candidate, the estimated completion date would largely be under control of that third party rather than under our control. We cannot forecast with any degree of certainty which of our product candidates will be subject to future collaborations or how such arrangements would affect our development plan or capital requirements.

As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our development projects or when and to what extent we will receive cash inflows from the commercialization and sale of an approved product candidate.

General and Administrative Expenses

General and administrative expenses consist primarily of compensation for employees in executive and operational functions, including clinical, regulatory, finance, business development and corporate development. Other significant costs include facilities costs and professional fees for accounting and legal services, including legal services associated with obtaining and maintaining patents. After completion of this offering, we anticipate incurring a significant increase in general and administrative expenses, as we operate as a public company. These increases will likely include increased costs for insurance, costs related to the hiring of additional personnel and payment to outside consultants, lawyers and accountants. We also expect to incur significant costs to comply with the corporate governance, internal controls and similar requirements applicable to public companies.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate these estimates and judgments, including those described below. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results and experiences may differ materially from these estimates.

While our significant accounting policies are more fully described in Note 1 to our financial statements included at the end of this prospectus, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our reported financial results and affect the more significant judgments and estimates that we use in the preparation of our financial statements.

 

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Accrued Expenses

As part of the process of preparing financial statements, we are required to estimate accrued expenses. This process involves reviewing open contracts and purchase orders, communicating with our applicable personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual cost. The majority of our service providers invoice us monthly in arrears for services performed. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us. We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. To date, we have not adjusted our estimate at any particular balance sheet date in any material amount. Examples of estimated accrued expenses include:

 

   

fees paid to contract research organizations in connection with clinical trials;

 

   

fees paid to investigative sites in connection with clinical trials;

 

   

fees paid to contract manufacturers in connection with the production of clinical trial materials; and

 

   

professional service fees.

We base our expenses related to clinical trials on our estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and clinical research organizations that conduct and manage clinical trials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we will adjust the accrual accordingly. If we do not identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed or the costs of these services, our actual expenses could differ from our estimates.

Warrants

We account for our warrants in accordance with FASB Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, or SFAS No. 150. SFAS No. 150 requires that a financial instrument, other than an outstanding share, that, at inception, is indexed to an obligation to repurchase the issuer’s equity shares, regardless of the timing of the redemption feature, and may require the issuer to settle the obligation by transferring assets shall be classified as a liability. We measure the fair value of warrant liability using the Black-Scholes option pricing model with changes in fair value recognized as non-operating income or expense. The value of the warrant liability at issuance was $720,600. There was no change in its value at March 31, 2007.

Stock-Based Compensation

Effective January 1, 2006, we adopted Statement of Financial Accounting Standard, or SFAS, No. 123(R), Share-Based Payment, or SFAS 123R, which revised SFAS No. 123, Accounting for Stock-Based Compensation, or SFAS 123, and supersedes Accounting Principles Board, or APB, Opinion No. 25, Accounting for Stock Issued to Employees, or APB 25. Under SFAS 123R, we recognize as compensation expense the fair value, for accounting purposes, of stock options, restricted stock awards and other stock-based compensation issued to employees over the requisite service periods, which are typically the vesting periods. We adopted SFAS 123R using the modified-prospective-transition method, which requires us to record compensation expense for the non-vested portion of previously issued stock-based compensation awards that were outstanding at January 1, 2006, and any awards issued or modified after January 1, 2006. Equity instruments issued to non-employees are

 

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recorded at their fair value, for accounting purposes, as determined in accordance with SFAS 123R and Emerging Issues Task Force, or EITF, 96-18, Accounting for Equity Instruments That are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods and Services, and are periodically revalued as the equity instruments vest and are recognized as expense over the related service period.

We recognized stock-based compensation expense of $522,349 in 2006 and $19,372 and $298,293 in the three months ended March 31, 2006 and 2007. As of March 31, 2007, we had $3.7 million in total unrecognized compensation cost related to non-vested stock-based compensation arrangements, which we expect to recognize over a weighted average period of approximately four years. Based on the assumed initial public offering price of $13.00 per share, the intrinsic value of our stock-based compensation arrangements outstanding at March 31, 2007 was $5.6 million, of which $0.3 million related to vested arrangements and $5.3 million related to non-vested arrangements.

Under SFAS 123R, we calculate the fair value of stock-based compensation awards using the Black-Scholes option-pricing model. For the year ended December 31, 2006 and the three months ended March 31, 2007, the weighted average assumptions used in the Black-Scholes model were 5.9 years for the expected term, 69.5% for the expected volatility, 4.8% for the risk free rate and 0.0% for dividend yield. Expense amounts for future awards for any particular quarterly or annual period could be affected by changes in our assumptions. The weighted average expected option term for 2006 and for the three months ended March 31, 2007 reflects the application of the simplified method set out in SEC Staff Accounting Bulletin, or SAB, No. 107, which was issued in March 2005. The simplified method defines the life as the average of the contractual term of the stock-based compensation award and the weighted average vesting period for all tranches. Estimated volatility for fiscal 2006 and for the three months ended March 31, 2007 also reflects the application of SAB No. 107 interpretive guidance and, accordingly, incorporates historical volatility of similar public entities.

For all periods prior to January 1, 2006, we accounted for our employee stock-based compensation using the intrinsic value-based method of accounting in accordance with APB 25. Under APB 25, we recognize compensation expense for stock-based compensation arrangements with our employees only if the purchase price was below the fair value, for accounting purposes, of the underlying common stock on the date of grant. This compensation expense is recognized over the applicable vesting periods. In 2005, we recorded employee stock-based compensation expense of $6,457 related to restricted stock purchased by an employee in December 2005. There were no stock options granted to employees in 2005.

Prior to this offering there was no public market for our common stock, and in connection with our issuance of stock options the fair value for our common stock was estimated by our board of directors, with input from management. Our board of directors exercised judgment in determining the estimated fair market value of our common stock. We have not historically obtained contemporaneous valuations by an unrelated valuation specialist because, at the time of the issuances of stock options, we believed our estimates of the fair market value of our common stock to be reasonable and consistent with our understanding of how similarly situated companies in our industry are valued. Given the absence of an active market for our common stock, our board of directors determined the fair market value of our common stock on the date of grant based on several factors, including:

 

   

our stage of development and business strategy;

 

   

the price of $1.8599 per share at which our Series A redeemable convertible preferred stock was issued to investors in December 2005 and the rights, preferences and privileges of the preferred stock relative to the common stock;

 

   

important developments relating to the results of the clinical trials; and

 

   

the likelihood of achieving a liquidity event for our outstanding shares of stock.

 

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In connection with the preparation of our financial statements in connection with this offering, we retrospectively reassessed the estimated fair market value of our common stock in light of the American Institute of Certified Public Accountants, or AICPA, Practice Aid Valuation of Privately-Held-Company Equity Securities Issued as Compensation, which we refer to as the practice aid.

For all equity awards made during the period commencing August 2005 through April 2006, we have retrospectively applied a fair market value of our common stock, for accounting purposes, of $0.91. In August 2005, we completed a $749,000 convertible promissory note financing round with nine accredited and institutional investors. These promissory notes were converted into shares of our Series A redeemable convertible preferred stock in December 2005 in connection with our $22.5 million Series A redeemable convertible preferred stock financing round. In connection with this financing round, the Series A preferred stock conversion value was initially fixed at $2.7368, but subject to adjustment downward to $0.91 in the event we did not complete a license agreement with the Trustees of the University of Pennsylvania for AEGR-733 (or an alternative license agreement for a similar compound) prior to June 15, 2006. During this period: (i) in November 2005, we negotiated a non-binding letter of intent with the Trustees of the University of Pennsylvania for rights related to AEGR-733; (ii) in December 2005, we hired William J. Sasiela, Ph.D., our Chief Medical Officer; (iii) in December 2005, Bristol-Myers Squibb Company and the Trustees of the University of Pennsylvania negotiated a non-binding letter of intent with respect to the technology donation agreement between such parties, allowing for an expanded field of use as between us and the Trustees of the University of Pennsylvania under our then proposed license agreement for rights related to AEGR-733; and (iv) in January 2006, we negotiated a non-binding letter of intent with Bayer Healthcare AG for rights related to AEGR-427. On May 19, 2006, we completed our license agreement with the Trustees of the University of Pennsylvania, as a result of which we acquired rights related to our first of two product candidates, AEGR-733, and at which time the Series A preferred stock conversion adjustment mechanism was terminated. In light of these factors, we have retrospectively applied a fair market value, for accounting purposes, of $0.91 for all equity awards made during this period, which price is consistent with the valuation placed on Aegerion by our independent third party investors in the event we were unable to complete either of our then proposed licensing transactions for rights related to either AEGR-733 and AEGR-427.

For all equity awards made during the period commencing May 2006 through December 2006, we have retrospectively applied a fair market value of our common stock, for accounting purposes, of $5.27. As described above, upon the successful in-licensing of rights related to the first of our two product candidates, AEGR-733, the Series A preferred stock conversion value adjustment mechanism was terminated and the conversion value of our Series A redeemable convertible preferred stock was fixed at $2.7368. Notably, we also successfully in-licensed rights related to the second of our two product candidates in the same month, by completing on May 31, 2006 our license agreement with Bayer Healthcare AG for rights related to AEGR-427 (implitapide). Also during this period: (i) in June 2006, we opened our offices in Bridgewater, New Jersey; (ii) in August/September 2006, we received preliminary results from the pharmacokinetic trials for AEGR-733; (iii) in September 2006, we received a non-binding letter of intent for an equity financing at a valuation of $3.63 per share; (iv) in November 2006, we reported preliminary results of the Phase II clinical trial evaluating AEGR-733 as monotherapy and in combination with Zetia (ezetimibe); and (v) in November 2006, we received a non-binding letter of intent for an equity financing at a valuation of $4.30 per share. Also during this period we hired an additional four employees, including our vice president of business development and a director of clinical affairs. In light of the factors described above, we have retrospectively applied $5.27 as the fair market value of our common stock, for accounting purposes, to all equity awards made during this period.

For all equity awards made during the quarter ended March 31, 2007, we have retrospectively applied a fair market value of our common stock, for accounting purposes, of $10.39. Equity awards made during this period were made after our organizational meeting with underwriters in connection with this offering, but before we filed the registration statement of which this prospectus is a part, before we received a formal indication of the proposed offering price range for this offering from the underwriters, and contemporaneous with our receipt of

 

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the final results of the Phase II clinical trial evaluating AEGR-733 as monotherapy and in combination with Zetia (ezetimibe). Also during this period: (i) in January 2007, we received a non-binding letter of intent for an equity financing at a valuation of $5.50 per share; (ii) in March 2007, we entered into a venture loan arrangement pursuant to which we issued warrants priced at the lower of $5.27 per share or 85% of the initial public offering price of our common stock; and (iii) we hired an additional three employees, including a director and executive director of clinical affairs. In light of the factors described above, we have retrospectively applied $10.39 as the fair market value of our common stock, for accounting purposes, to all equity awards made during this period, which price represents a 20% discount for illiquidity from the assumed initial public offering price of $13.00 per share, the midpoint of the range listed on the cover page of this prospectus.

In making our retrospective reassessment of fair value for accounting purposes, in addition to the factors described above, the following factors were considered, among others:

 

   

the history and nature of our business;

 

   

our financial condition and book value;

 

   

our historical revenues and earnings;

 

   

economic and competitive elements affecting us, our industry and our target markets;

 

   

our projected operating results;

 

   

our capacity to pay dividends;

 

   

a comparative analysis of our financial condition and operating results with those of publicly-owned companies engaged in similar lines of business; and

 

   

the current and historical relationship between the reported stock prices and revenues and earnings levels of selected publicly traded companies engaged in similar lines of business.

During the year ended December 31, 2006 and the three months ended March 31, 2007, we granted stock options with exercise prices as follows:

 

Grants Made During the Three Months Ended

   Number of Shares    Weighted
Average Exercise
Price Per Share
   Weighted
Average Fair Market
Value Per Share

March 31, 2007

   296,299    $ 5.27    $ 10.39

December 31, 2006

   33,979    $ 1.10    $ 5.27

September 30, 2006

   203,878    $ 0.37    $ 5.27

June 30, 2006

   95,142    $ 0.37    $ 5.27

March 31, 2006

   0      N/A      N/A
          

Total

   629,298      
          

In accordance with SFAS 123R, we recognize as compensation expense the fair value of these equity compensation awards over the applicable vesting period.

 

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Results of Operations

Comparison of the Three Months Ended March 31, 2007 and the Three Months Ended March 31, 2006

Revenue. We did not recognize any revenue for the three months ended March 31, 2007 or the three months ended March 31, 2006.

Research and Development Expenses. Development expenses were $2.8 million for the three months ended March 31, 2007, compared with $0.4 million for the three months ended March 31, 2006. The $2.4 million increase in our development expenses reflects an increase of $1.1 million in development expenses directly related to our AEGR-733 development program, an increase of $0.1 million in development expense directly related to our AEGR-427 (implitapide) development program and an increase of $1.2 million in unallocated development expenses. The $1.1 million increase in costs for the AEGR-733 development program for the three months ended March 31, 2007 was attributable to clinical costs associated with our Phase II clinical trials as well as for clinical supplies. The $0.1 million increase in costs for the AEGR-427 (implitapide) development program for the three months ended March 31, 2007 was attributable to an annual license fee payable to the licensor of this compound. The $1.2 million increase in unallocated development expenses for the three months ended March 31, 2007 is primarily comprised of increased clinical supply, internal personnel and general infrastructure costs. We expect our development expenses to increase significantly in subsequent periods as we continue to advance the clinical development our product candidates.

General and Administrative Expenses. General and administrative expenses were $0.9 million for the three months ended March 31, 2007, compared with $0.4 million for the three months ended March 31, 2006. These expenses were principally comprised of salaries and related costs, consulting and professional fees, facilities costs and travel and expenses. The $0.5 million increase was primarily attributable to increases in salary, professional and consulting costs. After completion of this offering, we expect general and administrative expenses to increase significantly as we operate as a public company.

Interest Expense. Interest expense was $0.04 million for the three months ended March 31, 2007, compared with $0.0 million for the three months ended March 31, 2006. The $0.04 million increase for the three months ended March 31, 2007 was attributable to interest expense for $10.0 million of a venture debt facility drawn down in March, 2007 and non-cash interest related to the accretion of the venture debt deferred financing costs and the value of the warrants.

Interest Income. Interest income was $0.21 million for the three months ended March 31, 2007, compared with $0.18 million for the three months ended March 31, 2006. The increase in interest income was due to a more favorable rate of return provided through the establishment of a new commercial banking relationship beginning in late in the quarter ended March 31, 2006.

Comparison of the Year Ended December 31, 2006 and the Period From February 4, 2005 (Inception) Through December 31, 2005

Revenue. We did not recognize any revenue for the period from February 4, 2005 (Inception) to December 31, 2005 or the year ended December 31, 2006.

Research and Development Expenses. Development expenses were $3.8 million for the year ended December 31, 2006, compared with $0.1 million for the period from February 4, 2005 (Inception) to December 31, 2005. The $3.7 million increase in our development expenses reflects an increase of $2.1 million in development expenses directly related to our AEGR-733 development program, an increase of $0.8 million in development expenses directly related to our AEGR-427 (implitapide) development program and an increase of $0.8 million in unallocated development expenses. The $2.1 million increase in costs for the AEGR-733

 

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development program for 2006 was primarily attributable to clinical costs associated with our Phase II clinical trial for this compound and a one-time license initiation fee payable to the licensor of this compound. The $0.8 million increase in costs for the AEGR-427 (implitapide) development program for 2006 was attributable to a one-time license initiation fee payable to the licensor of this compound. The $0.8 million in unallocated development expenses is primarily comprised of internal personnel costs and, to a lesser degree, general infrastructure costs.

General and Administrative Expenses. General and administrative expenses were $3.2 million for the year ended December 31, 2006, compared with $1.0 million for the period from February 4, 2005 (Inception) to December 31, 2005. The $2.2 million increase was primarily attributable to the increase in salary, professional and consulting, travel and facility costs.

Interest Expense. Interest expense was $0 for the year ended December 31, 2006, compared with $235,978 for the period from February 4, 2005 (Inception) to December 31, 2005. The interest expense during the period from February 4, 2005 to December 31, 2005 was due to non-cash accrued interest expense for $749,000 of convertible notes we issued in August 2005, which were converted to preferred stock in connection with our the Series A financing consummated in December 2005.

Interest Income. Interest income was $871,405 for the year ended December 31, 2006, compared with $17,801 for the period from February 4, 2005 (Inception) to December 31, 2005. The increase in interest income of approximately $853,604 was primarily attributable to the higher level of cash available during 2006 as proceeds from the sale of our Series A redeemable convertible preferred stock were received in December 2005.

Liquidity and Capital Resources

To date, we have funded our operations primarily through private placements of preferred stock, convertible debt and venture debt. As of March 31, 2007, we had received approximately $22.6 million of cash proceeds from the sale of equity securities, including the notes that were converted into preferred stock, net of offering expenses.

In March 2007, we entered into a $15.0 million loan and security agreement with Hercules Technology Growth Capital, Inc., or Hercules, and borrowed $10.0 million under this agreement. Principal amount outstanding under this loan agreement bears interest at the prime lending rate, as published by the Wall Street Journal, plus 2.50% per annum, and matures on August 19, 2010 or, following the closing of our initial public offering, November 2010. We granted Hercules a first priority security interest on all of our assets, except for our intellectual property.

In connection with this loan agreement, we entered into a warrant agreement with Hercules, under which Hercules has the right to purchase the number of shares of our common stock determined by dividing 4.25% of the advances made under the loan agreement by the applicable exercise price. With respect to the initial $10.0 million advance under the loan agreement, the exercise price per share shall be equal to the lower of $5.27 or 85% of the initial public offering price of our common stock. With respect to subsequent advances made after our initial public offering, the exercise price will be equal to the volume weighted average price of our common stock for a period of seven trading days before such advance.

As of March 31, 2007, we had cash and cash equivalents of $23.0 million.

Cash Flows

Net cash used in operating activities amounted to $3.6 million for the three months ended March 31, 2007, $5.5 million for the year ended December 31, 2006 and $252,301 for the period from February 4, 2005 (Inception) to December 31, 2005. The primary use of cash was to fund our net operating losses for these

 

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periods, adjusted for non-cash expenses, including: depreciation and amortization of $2,928 during the three months ended March 31, 2007 and $6,672 during the year ended December 31, 2006; non-cash stock based compensation of $298,293 during the three months ended March 31, 2007 and $522,349 during the year ended December 31, 2006; and a net decrease in operating liabilities of $376,697 for the three months ended March 31, 2007, $119,837 for the year ended December 31, 2006 and $769,543 for the period from February 4, 2005 (Inception) to December 31, 2005. Our losses were primarily due to our clinical development activities. During the three months ended March 31, 2007 and the year ended December 31, 2006, these activities primarily consisted of clinical trials for AEGR-733. During the period from February 4, 2005 (Inception) to December 31, 2005, these activities primarily consisted of $1.0 million of general and administrative costs associated with the formation of Aegerion and $0.1 million paid to a prior holder of certain rights to AEGR-733 in exchange for the relinquishment of those rights.

Net cash used in investing activities amounted to approximately $10,587, $33,388 and $3,355 for the three months ended March 31, 2007, the year ended December 31, 2006 and the period from February 4, 2005 (Inception) to December 31, 2005. The net cash used in investing activities during the three months ended March 31, 2007, and the year ended December 31, 2006 consisted of capital equipment necessary to support our anticipated future growth.

Net cash provided by financing activities amounted to $10.0 million for the three months ended March 31, 2007, $440 for the year ended December 31, 2006, and $22.4 million for the period from February 4, 2005 (Inception) to December 31, 2005, consisting primarily of private sales of our Series A redeemable convertible preferred stock, convertible promissory notes which were converted into our Series A redeemable convertible preferred stock and venture debt, which were offset in part by issuance costs.

Contractual Obligations and Commitments

The following table summarizes our long-term contractual obligations and commitments as of March 31, 2007:

 

     Payments Due By Period
     Total    Less than
1 Year
   1-3 Years    4-5 Years    After 5
Years

Operating lease obligations (1)

   $ 604,000    $ 156,000    $ 448,000    $ 0    $ 0

License obligations (2)

     1,000,000      100,000      600,000      300,000      0
                                  

Total

   $ 1,604,000    $ 256,000    $ 1,048,000    $ 300,000    $ 0
                                  

(1) Operating lease obligations reflect our obligation to make payments in connection with a sublease that commenced in June 2006 and will end in October 2010 for 7,201 square feet of office space. Future minimum payments under the operating lease total monthly payments of $12,602 until the end of the lease term.
(2) License obligations reflects our obligation to make annual payments to Bayer Healthcare AG under our license agreement with Bayer regarding the patent rights and know-how owned or controlled by Bayer applicable to AEGR-427 (implitapide). Under this agreement, we are obligated to pay Bayer, in addition to the amounts described below, annual payments from 2007 through 2011 which become non-refundable when paid totaling $1,000,000 in the aggregate.

The above amounts exclude potential payments to be made under our license agreements to our licensors that are based on the progress of our product candidates in development, as these payments are not determinable. Under our license agreement with UPenn, we will be required to make development milestone payments to UPenn of up to an aggregate of $150,000 when a licensed product candidate’s indication is limited to homozygous familial hypercholesterolemia or heterozygous familial hypercholesterolemia, and an aggregate of

 

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$2,550,000 for all other indications within the licensed field (all such development milestone payments for these other indications is payable only once, no matter how many licensed product candidates for these other indications are developed), make specified royalty payments on net sales of licensed product candidates that infringe the licensed patent rights (subject to a variety of customary reductions), and share with UPenn specified percentages of sublicensing royalties and other consideration that we receive under any sublicenses that we may grant. Under our license agreement with Bayer, we will be required to make certain development milestone payments of up to an aggregate of $4,525,000 upon the achievement of certain development milestones (each development milestone payment is payable only once, no matter how many licensed product candidates are developed), a one-time commercialization milestone payment of $5,000,000 if we achieve aggregate net sales of licensed product candidates of $250,000,000 (payable only once, no matter how many licensed product candidates are commercialized), and specified royalty payments on net sales of licensed product candidates (subject to a variety of reductions). Our annual payments to Bayer described above for 2007 through 2011 will be creditable in full against any development milestones that are or become payable to Bayer.

Funding Requirements

We expect to incur substantial expenses and generate significant operating losses as we continue to advance our product candidates into preclinical studies and clinical trials and as we:

 

   

initiate additional Phase II clinical trials for AEGR-733 in 2007;

 

   

fund a Phase III clinical trial for AEGR-733 in patients with homozygous familial hypercholesterolemia in the second half of 2007;

 

   

initiate additional Phase II clinical trials for AEGR-427 (implitapide) in the second half of 2007;

 

   

hire additional clinical, scientific, and management personnel; and

 

   

implement of new operational, financial, and management information systems.

Our future capital uses and requirements depend on numerous forward-looking factors. These factors include, but are not limited to, the following:

 

   

the progress of preclinical development and laboratory testing and clinical trials;

 

   

the time and costs involved in obtaining regulatory approvals;

 

   

delays that may be caused by evolving requirements of regulatory agencies;

 

   

the costs involved in filing and prosecuting patent applications and enforcing or defending patent claims;

 

   

our ability to establish, enforce and maintain selected strategic alliances and activities required for product candidate commercialization;

 

   

the acquisition of technologies, product candidates and other business opportunities that require financial commitments; and

 

   

our revenues, if any, from successful development and commercialization of our product candidates.

To date, we have not generated any revenue from the sale of any approved product candidates. We do not expect to generate revenue unless or until we obtain regulatory approval of, and commercialize, our product candidates. We expect our continuing operating losses to result in increases in cash used in operations over the next several years. Our future capital requirements will depend on a number of factors including the progress and results of our clinical trials, the costs, timing and outcome of regulatory review of our product candidates, our revenue, if any, from successful development and commercialization of our product candidates, the costs of commercialization activities, the scope, progress, results and costs of preclinical development, laboratory testing

 

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and clinical trials for other product candidates, the emergence of competing therapies and other market developments, the costs of preparing, filing and prosecuting patent applications and maintaining, enforcing and defending intellectual property rights, the extent to which we acquire or invest in other product candidates and technologies, and our ability to establish collaborations and obtain milestone, royalty or other payments from any collaborators.

Based on our current operating plans, we expect the proceeds of this offering, together with our existing resources, to be sufficient to fund our planned operations, including our continued product candidate development, at least through the end of 2008. However, we may require significant additional funds earlier than we currently expect to conduct additional clinical trials and seek regulatory approval of our product candidates. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated clinical trials.

Additional funding may not be available to us on acceptable terms or at all. In addition, the terms of any financing may adversely affect the holdings or the rights of our stockholders. For example, if we raise additional funds by issuing equity securities or by selling debt securities, if convertible, further dilution to our existing stockholders may result. To the extent our capital resources are insufficient to meet our future capital requirements, we will need to finance our future cash needs through public or private equity offerings, collaboration agreements, debt financings or licensing arrangements.

If adequate funds are not available, we may be required to terminate, significantly modify or delay our development programs, reduce our planned commercialization efforts, or obtain funds through collaborators that may require us to relinquish rights to our technologies or product candidates that we might otherwise seek to develop or commercialize independently. We may elect to raise additional funds even before we need them if the conditions for raising capital are favorable.

Off-Balance Sheet Arrangements

We do not currently have, nor have we ever had, any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts. Therefore, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.

Quantitative and Qualitative Disclosure About Market Risk

Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because the majority of our investments are in short-term marketable securities. Due to the nature of our short-term investments, we believe that we are not subject to any material market risk exposure. We do not have any foreign currency or other derivative financial instruments.

Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, or SFAS 157, which defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 applies to other accounting pronouncements that require or permit fair value measurements. The new guidance is effective for financial statements issued for fiscal years beginning after November 15, 2007, and for interim periods within those fiscal years. We are currently evaluating the requirements of SFAS 157; however, we do not believe that its adoption will have a material effect on our financial statements.

 

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BUSINESS

Overview

Aegerion Pharmaceuticals is an emerging biopharmaceutical company focused on the development and commercialization of drug products consisting of single molecules, called small-molecule therapeutics, to treat cardiovascular and metabolic disease. Our two product candidates are microsomal triglyceride transfer protein inhibitors that limit secretion of cholesterol and triglycerides, collectively referred to as lipids, from the intestine and liver and have demonstrated in humans an ability to significantly reduce low-density lipoprotein cholesterol, or LDL-C. We believe these compounds have the potential to address significant unmet medical needs for patients who seek to lower their cholesterol levels, either on a stand-alone basis or in combination with existing therapies, such as statins and cholesterol absorption inhibitors.

Lipid-lowering therapeutics represent one of the largest markets in the pharmaceutical industry, with as many as 52 million patients in the United States alone eligible for therapy. Worldwide revenues for lipid-lowering therapeutics were approximately $30 billion for the twelve months ended December 31, 2006. However, significant unmet medical needs remain for patients with elevated lipid levels, in particular LDL-C. Recent clinical trials conducted by others add to the substantial evidence that there is a direct relationship between lower LDL-C levels and decreased risk for major cardiovascular events. These findings prompted the National Cholesterol Education Program in 2004 to introduce optional LDL-C guidelines, endorsed by the American Heart Association, the American College of Cardiology and others, advising physicians to consider more intensive treatment options for people with high and moderately high-risk of a cardiovascular event. These options include setting lower treatment goals for LDL-C levels (including a LDL-C level of <70 mg/dL as a therapeutic option for very high-risk patients and a treatment goal of <100 mg/dL for all high-risk patients) and initiating cholesterol-lowering drug therapy at lower LDL-C thresholds. We believe these recommendations reflect a trend toward more aggressive treatment of LDL-C levels in both high and moderately high-risk patient populations, a significant percentage of whom will not be able to achieve the lower LDL-C goals using current treatments. We believe that this unmet medical need will become even more pronounced as lower LDL-C goals become more widely adopted by the medical community.

Several recent clinical trials have shown that combination therapy with multiple, differently acting compounds is the most effective way to achieve these more aggressive LDL-C goals. For example, one recent clinical trial demonstrated that use of Vytorin, a fixed-dose combination of the statin Zocor (simvastatin) and the cholesterol absorption inhibitor Zetia (ezetimibe), results in a greater percentage of high-risk patients reaching their LDL-C goal than does the use of the leading marketed statin, Lipitor (atorvastatin), alone. Despite the increased LDL-C lowering effect of Vytorin over statin monotherapy, we believe millions of people may be unable to reach their optimal level of LDL-C, and the number will increase significantly if the National Cholesterol Education Program lowers the guidelines even further for people with high and moderately high-risk of a cardiovascular event. We believe our product candidates have the potential to take advantage of this trend towards combination therapy in the lipid-lowering market.

One of our two product candidates, AEGR-733, is a microsomal triglyceride transfer protein inhibitor that we are developing for the oral, once-a-day treatment of individuals with high lipid levels, or hyperlipidemia, in particular in those patients with high cholesterol, or hypercholesterolemia, and/or high triglyceride levels, or hypertriglyceridemia, who are unable to meet specified target goals. We believe AEGR-733 has the potential to address unmet medical needs in a variety of patient populations, including the approximately one-third of all patients in the United States at high-risk for coronary heart disease, or approximately 8 million people, we estimate would not be able to achieve a target LDL-C level of <70 mg/dL, even if the most efficacious forms of currently available drug therapies were prescribed. In addition, there are an estimated 1.5 million patients in the United States who are statin-intolerant and unable to achieve goals on non-statin therapy, such as Zetia (ezetimibe), one of the most effective non-statin treatments currently approved for the treatment of high cholesterol. In a recently completed Phase II clinical trial, AEGR-733 in doses of 5 mg to 10 mg in combination

 

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with Zetia (ezetimibe) 10 mg resulted in an average reduction in LDL-C of 34.5% to 46.2% in patients with hypercholesterolemia (versus approximately 20% for Zetia (ezetimibe) alone). There was no difference in discontinuation rates between the patients treated with the combination of AEGR-733 + Zetia (ezetimibe) 10 mg versus those treated with Zetia (ezetimibe) alone. We believe the results of this trial demonstrate the potential of AEGR-733, when used in combination with other non-statin therapies such as Zetia (ezetimibe), to offer statin-like LDL-C lowering efficacy for statin-intolerant patients.

We also believe that AEGR-733 may have advantages over Zetia (ezetimibe), both as a monotherapy and particularly when used in combination with other drug therapies. We believe the potential advantages may include: superior LDL-C lowering efficacy; the ability to administer AEGR-733 at increasing doses for greater LDL-C lowering efficacy due to a significant dose response curve, whereas Zetia (ezetimibe) is only available at a single marketed dose; superior triglyceride lowering efficacy; and the potential to induce weight loss. In a recently completed Phase II clinical trial, AEGR-733 10 mg when used as a monotherapy resulted in significantly greater LDL-C lowering efficacy than Zetia (ezetimibe) 10 mg (29.9% vs. 19.9%, respectively). In 2007, we intend to initiate additional Phase II trials of AEGR-733 to further evaluate its potential role in reducing LDL-C, both as a monotherapy and in combination with Lipitor (atorvastatin) and other lipid-lowering therapies.

We also believe AEGR-733 has the potential to address unmet medical needs in niche patient populations, such as the approximately 30,000 patients in the United States with high cholesterol levels that are resistant to treatment, a condition known as severe refractory hypercholesterolemia. Patients with this condition have elevated and refractory hypercholesterolemia to the point that they are eligible to receive periodic plasma apheresis, or the mechanical filtration of LDL-C particles from the blood, and often die at an early age. Of these 30,000 patients, approximately 300 patients in the United States have a rare genetic disorder called homozygous familial hypercholesterolemia resulting in severely elevated levels of LDL-C (400-800 mg/dL). In January 2007, The New England Journal of Medicine published the results of a Phase II clinical trial of AEGR-733 in patients with homozygous familial hypercholesterolemia. In this trial, patients receiving the highest dose of AEGR-733 (1.0 mg per kg of body weight) as monotherapy achieved on average a 51% reduction in LDL-C. We expect a Phase III clinical trial, to be conducted by the University of Pennsylvania School of Medicine on our behalf, will be initiated in the second half of 2007, to further study the effects of AEGR-733 in this patient population. In this trial, AEGR-733 will be used in conjunction with other lipid-lowering therapies. We expect AEGR-733 to be eligible for orphan drug designation for this patient population and we intend to pursue such designation with the FDA.

Our second product candidate, AEGR-427 (implitapide), is also a microsomal triglyceride transfer protein inhibitor that we are developing for the oral, once-a-day treatment of hyperlipidemia. In the Phase II trial conducted by Bayer Healthcare AG, implitapide 40 mg was shown to lower LDL-C by an average of 22% and triglycerides by an average of 11%, with a discontinuation rate the same as placebo (2%). In addition, based on prior clinical trials, we believe that AEGR-427 (implitapide) may also have an impact on weight loss. In the second half of 2007, we plan to initiate a pharmacokinetic trial, which involves measuring the drug-to-drug interaction in the blood of healthy volunteers, to study AEGR-427 (implitapide) in combination with a variety of statin therapies as well as a dose ranging trial to evaluate its efficacy and safety/tolerability profile in doses ranging from 30 mg to 50 mg.

 

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Background

Cardiovascular Disease and Hyperlipidemia

Heart attacks, strokes and other cardiovascular events continue to be the number one cause of death and disability among men and women in western societies. The American Heart Association estimates that approximately 871,500 deaths were caused by cardiovascular disease in 2004, more than the 550,300 deaths caused by cancer.

Abnormally high levels of lipids and lipoproteins are widely regarded as a significant risk factor for cardiovascular disease due to the influence of cholesterol, one of the most clinically relevant lipid substances, on atherosclerosis. Atherosclerosis is a disease that is commonly referred to as a hardening of the arteries and is characterized by the deposition of cholesterol-containing lipoproteins, a lipid substance, in arterial blood vessels. People with elevated lipids and/or lipoproteins in the blood are at risk for atherosclerosis, and therefore cardiovascular disease.

Our bodies obtain cholesterol through the foods we eat via the intestines and by manufacturing cholesterol inside some of our cells and organs, primarily the liver. Cholesterol is transported by the blood to various organs, primarily from the liver and the intestines, in different lipoproteins, the most well known of which are low-density lipoprotein, or LDL, and high-density lipoprotein, or HDL. The cholesterol carried in the blood in LDL-C particles can be deposited throughout the body, but frequently ends up in artery walls, especially those in the heart. This deposition of LDL-C particles is an early and important step in the initiation and progression of atherosclerosis. Accordingly, LDL-C is sometimes referred to as “bad” cholesterol.

A large number of studies have demonstrated the relationship between different levels of LDL-C and their impact on the rate of cardiovascular events. As a result, physicians focus on maintaining low levels of LDL-C in their patients. The market for cholesterol-lowering drugs has become one of the largest therapeutic categories in the pharmaceutical industry. According to IMS Health, worldwide sales of drugs targeting hyperlipidemia were approximately $30 billion for the twelve months ended December 31, 2006, which represents approximately 7.9% of the entire pharmaceutical market. According to IMS Health, over the same period, approximately 200 million prescriptions were dispensed for agents to treat hyperlipidemia in the United States, representing year-over-year growth in prescriptions of approximately 13%.

Evolving Trends Towards Lower LDL-C Guidelines

The direct relationship between lower LDL-C levels and reduced risk for major cardiovascular events has been consistently demonstrated for more than a decade in over 18 trials involving more than 119,000 patients. In addition, we believe that clinical evidence increasingly supports more aggressive LDL-C reduction than was previously targeted. While early trials demonstrated that lowering relatively high levels of LDL-C significantly reduced the risk of experiencing a cardiovascular event, more recent trials have demonstrated that even patients who initiate therapy with relatively low initial LDL-C levels experience significant clinical benefits from aggressive LDL-C management.

In 1994, the Scandinavian Simvastatin Survival Study (4S) demonstrated that reducing LDL-C levels could result in a significant reduction in cardiovascular events, including heart attacks. In the 4S trial, patients receiving statin therapy experienced, on average, LDL-C reduction from 188 mg/dL to 122 mg/dL, 42% fewer cardiovascular deaths and 35% fewer fatal cardiovascular events than subjects receiving placebo. The 4S trial was funded by Merck Research Laboratories, Inc. and conducted under the management of a steering committee of cholesterol experts chaired by Dr. John Kjekshus. The primary trial results were published in November 1994 in volume 344 of The Lancet. In 2002, the Heart Protection Study (HPS) demonstrated that patients can derive benefits if their LDL-C levels are treated to aggressive levels, even if their starting levels are not that high. In the HPS trial, patients receiving statin therapy experienced a 24% average reduction in cardiovascular events, and

 

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the subgroup of patients with the lowest starting LDL-C levels (~100 mg/dL) who received statin therapy and achieved an LDL-C level of 70 mg/dL were seen to derive as much reduction in heart attacks and strokes (22%) on average as did the overall patient population. The HPS trial was funded in part by Merck & Co., Inc., Roche Vitamins Ltd, the UK Medical Research Council and the British Heart Foundation, and conducted under the management of the UK Medical Research Council and the British Heart Foundation and a steering committee of cholesterol experts. Dr. Rory Collins was the principal investigator. The primary trial results were published in July 2002 in volume 360 of The Lancet. The Treating to New Targets (TNT) trial further demonstrated the benefit of more aggressive reductions in LDL-C for high risk patients. In the TNT trial, 10,000 patients with coronary heart disease were randomized to one of two treatment arms. In one treatment arm patients received Lipitor (atorvastatin) 10 mg and had their LDL-C reduced to an average of 101 mg/dL. In the second treatment arm, patients were given Lipitor (atorvastatin) 80 mg and had their LDL-C reduced to an average of 77 mg/dL. The patients who received Lipitor (atorvastatin) 80 mg experienced an average of 22% fewer fatal and nonfatal cardiovascular events than patients who received Lipitor (atorvastatin) 10 mg who did not have their LDL-C lowered as significantly. The TNT trial was funded by Pfizer Inc. and conducted under the management of a steering committee of cholesterol experts chaired by Dr. John LaRosa. The primary trial results were published in March 2005 in volume 352 of The New England Journal of Medicine. In 2006, A Study to Evaluate the Effect of Rosuvastatin on Intravascular Ultrasound-Derived Coronary Atheroma Burden (ASTEROID) demonstrated that patients with established atherosclerosis who received Crestor (rosuvastatin) for two years experienced mean LDL-C reductions of 53% (130 mg/dL to 61 mg/dL). These patients also saw a significant regression in the amount of atherosclerosis in their arteries. The ASTEROID trial was the first trial to treat patients to such aggressively low LDL-C levels and demonstrate actual regression of the arterial disease. The ASTEROID trial was funded by Astra-Zeneca PLC. The primary trial results were published in April 2006 in volume 295 of The Journal of the American Medical Association in an article written by Dr. Steven Nissen.

These trials, among others, have reinforced our belief that patients can derive significant clinical benefits from reduction of LDL-C to levels as low as 60-70 mg/dL. We believe this is corroborated by increasing support for lower LDL-C treatment targets by a variety of organizations. For example, in the United States, increasing attention has been paid to aggressive LDL-C management by organizations, such as the National Cholesterol Education Program, the American Heart Association, and American College of Cardiology. Additionally, both the Canadian Cardiovascular Society and the Joint British Society have supported LDL-C treatment targets as low as 77 mg/dL for high-risk patients.

The National Cholesterol Education Program was launched in November 1985 by the National Heart, Lung, and Blood Institute of the National Institutes of Health, an agency of the U.S. Department of Health and Human Services. The stated goal of the National Cholesterol Education Program is to contribute to reducing illness and death from coronary heart disease in the United States by reducing the percentage of Americans with high blood cholesterol. The National Cholesterol Education Program produces guidelines on the clinical management of hyperlipidemia and periodically updates these guidelines as warranted by scientific advances.

In May 2001, the National Cholesterol Education Program published an executive summary of its third report of its Expert Panel on Detection, Evaluation, and Treatment of High Blood Cholesterol in Adults (referred to as Adult Treatment Panel III) and in December 2002, published the final Adult Treatment Panel III report. Adult Treatment Panel III provided evidence-based recommendations on the management of high blood cholesterol and related disorders. Consistent with prior Adult Treatment Panels, Adult Treatment Panel III identified elevated LDL-C as the primary target of cholesterol-lowering therapy and proposed a treatment algorithm for LDL-lowering therapy with specific guidelines for patients based on their particular risk profile.

In July 2004, largely in response to the publication of data from five large clinical trials completed after Adult Treatment Panel III, including the HPS trial described above, the National Cholesterol Education Program issued an update to its clinical practice guidelines on cholesterol management, advising physicians to consider new, more intensive treatment options for people at very-high-risk, high-risk and moderately high-risk for a heart

 

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attack. These options include setting lower treatment goals for LDL-C, as well as initiating cholesterol-lowering drug therapy at lower LDL-C thresholds. The 2004 National Cholesterol Education Program update has been widely endorsed by industry and thought leaders in the field. For example, in May 2006, a panel of experts representing the American Heart Association and the American College of Cardiology published updated guidelines for secondary prevention for patients with coronary heart disease and other atherosclerotic vascular disease. In these guidelines they stated that the LDL-C goal for all patients with coronary heart disease is <100 mg/dL but that it is reasonable to treat to <70 mg/dL in these patients.

The 2004 National Cholesterol Education Program update defines high-risk patients as those who have coronary heart disease or disease of the blood vessels to the brain or extremities, or diabetes, or multiple (two or more) risk factors (such as smoking and hypertension) that give them a greater than 20% chance of having a heart attack within ten years. Very high-risk patients are defined as those who have had a recent heart attack, or those who have cardiovascular disease combined with either multiple risk factors (especially diabetes), or severe and poorly controlled risk factors (such as continued smoking), or metabolic syndrome (a constellation of risk factors associated with obesity including high triglycerides and low high-density lipoprotein cholesterol, or HDL-C). Patients hospitalized for acute cardiovascular events, such as heart attack, are also considered to be at very high-risk. Moderately high-risk patients are defined as those who have multiple (two or more) risk factors for coronary heart disease together with a 10 to 20% risk of heart attack within ten years.

The major recommendations included in the 2004 National Cholesterol Education Program update are summarized below:

 

   

High-Risk and Very High-Risk Patients. Under the 2004 National Cholesterol Education Program update, for high-risk patients, the overall LDL-C treatment goal remains at <100 mg/dL. However, for the sub-set of high-risk patients who are deemed to be in the very high risk category, the update provides that an LDL-C treatment goal of <70 mg/dL is a therapeutic option. For high-risk patients, the update also lowers the threshold for initiation of drug therapy to an LDL-C level of 100 mg/dL or higher (from 130 mg/dL or higher under Adult Treatment Panel III) and recommends treatment for those high-risk patients whose LDL-C is 100 to 129 mg/dL, whereas treatment for such patients was deemed optional under Adult Treatment Panel III. When LDL-C lowering drug therapy is employed in high-risk patients, the update advises that the intensity of therapy be sufficient to achieve at least a 30% to 40% reduction in LDL-C levels.

 

   

Moderately High-Risk Patients. Under the 2004 National Cholesterol Education Program update, for moderately high-risk patients, the LDL-C target goal remains at <130 mg/dL, but the update also provides a therapeutic option to set a lower LDL-C treatment goal of <100 mg/dL and to initiate drug therapy at LDL-C levels of 100 to 129 mg/dL. When LDL-C lowering drug therapy is employed in moderately high-risk patients, the update advises that the intensity of therapy be sufficient to achieve at least a 30% to 40% reduction in LDL-C levels.

Based on the aforementioned factors, as well as additional clinical data released since the 2004 National Cholesterol Education Program update, such as the TNT and ASTEROID trials described above, that provide further support to the proposition that “lower is better” when it comes to LDL-C levels, we believe that when the National Cholesterol Education Program next issues clinical guidelines, LDL-C goals may be lowered again, perhaps to as low as 70 mg/dL for the entire high-risk patient population.

 

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Market Opportunities in the Lipid Lowering Market

Broad Patient Population

We believe that the implications of these recent clinical trials and the 2004 National Cholesterol Education Program update indicate a continuing trend in medical beliefs towards lowering optimal LDL-C targets in high-risk and moderately high-risk patient populations. The National Cholesterol Education Program guidelines, in particular, outline more intensive therapeutic options for the treatment of hyperlipidemia and also note the benefit of initiating cholesterol-lowering drug therapy at lower LDL-C thresholds. As a result of these more intensive therapy guidelines, we believe that significant treatment gaps exist within the lipid-lowering market, and if target LDL-C goals trend lower, these treatment gaps will widen. Currently approved agents, even at maximal doses, are only able to achieve LDL-C levels <70 mg/dL in 50–60% of high-risk patients. We estimate that, even if the most efficacious forms of existing therapies were to be utilized, as many as one-third of all U.S. patients at high-risk for coronary heart disease, or approximately 8 million people, would not be able achieve a target LDL-C level of 70 mg/dL.

Niche Patient Population

In addition to the broader patient population for whom our lipid-lowering therapy may be appropriate, we believe that smaller, niche patient populations exist for which currently available therapies are inadequate, even at current LDL-C guidelines.

For example, homozygous familial hypercholesterolemia and heterozygous familial hypercholesterolemia are conditions primarily caused by inheritable genetic defects. Patients with two defective copies of the gene that causes hypercholesterolemia are termed to have homozygous familial hypercholesterolemia. These patients have extremely high LDL-C levels (400-800 mg/dL) and have an extremely high-risk of cardiovascular events early in life. These patients are generally less responsive to statins, and maximal doses typically provide only a mean 20-25% reduction in LDL-C. Since multiple pharmacological therapies are usually inadequate to treat these patients to goal, mechanical filtration of LDL-C particles from the blood, known as plasma apheresis, is often required. Patients who have a single defective gene are termed to have heterozygous familial hypercholesterolemia. These patients typically have LDL-C values of 250-400 mg/dL. Because heterozygous familial hypercholesterolemia patients have one correctly functioning gene, they are generally more responsive to standard therapies than homozygous familial hypercholesterolemia patients. However, due to their high baseline levels, these patients still may not be able to achieve their LDL-C goals with current maximal therapies, and some of these patients may also receive plasma apheresis.

Another small, niche patient population includes patients suffering from severe hypertriglyceridemia, a condition in which plasma triglyceride levels exceed 500 mg/dL. In patients with this degree of hypertriglyceridemia, increased risk of cardiovascular disease is generally overshadowed by the risk of acute pancreatitis, a life-threatening disease. Currently available treatments for hypertriglyceridemia consist of lifestyle changes as well as the intake of fibrates and omega-3 fatty acids, however these treatments are typically inadequate to meet this clinical need.

 

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Limitations of Current Monotherapies and Benefits of Combination Therapy

The most commonly used class of drugs to lower LDL-C levels are statins, such as Lipitor (atorvastatin), Crestor (rosuvastatin) and Zocor (simvastatin), which reduce cholesterol by blocking an enzyme in the liver that produces cholesterol. Statins lower LDL-C as well as triglycerides and have been shown to reduce LDL-C by approximately 25-55%, depending on the dose, when used as monotherapy. Another class of cholesterol-lowering drugs is cholesterol absorption inhibitors, such as Zetia (ezetimibe), which lower blood cholesterol by blocking the absorption of cholesterol, including dietary cholesterol, from the intestine. Zetia (ezetimibe) can generally reduce LDL-C by approximately 15–20% when used as monotherapy. Niacin, fibrates and bile acid sequestrants are other agents that have a varying ability to reduce LDL-C (generally <25%) and triglyceride levels.

Despite the demonstrated efficacy, safety/tolerability and clinical outcomes of statin therapy, an unmet medical need for additional cholesterol lowering therapies remains. Many patients are not able to achieve target LDL-C levels using currently available statins as monotherapies. This is primarily due to the inability of statins to achieve sufficient LDL- C lowering efficacy at currently available dosages to enable patients to reach target LDL-C goals, particularly when baseline LDL-C levels are relatively high, or the inability of certain patients to tolerate a statin. Even with high-dose statins, LDL-C reductions of more than 55% often cannot be achieved. Moreover, the percentage of patients able to achieve target LDL-C levels using statin monotherapy drops dramatically when the target LDL-C level is reduced from 100 mg/dL to 70 mg/dL, as illustrated below:

LOGO   LOGO

 

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New combination therapies have recently emerged in response to the inability of statin monotherapies to treat patients to optimal levels of LDL-C. For example, Merck and Schering-Plough have collaborated to develop and launch Vytorin, a fixed-dose combination of the statin Zocor (simvastatin) and the cholesterol absorption inhibitor Zetia (ezetimibe), for the treatment of high cholesterol. Vytorin (simvastatin/ezetimibe) has proven to be an effective treatment to lower LDL-C because of the complementary mechanisms of action of simvastatin and ezetimibe. The simvastatin component of Vytorin reduces cholesterol by blocking an enzyme in the liver that produces cholesterol. The ezetimibe component of Vytorin lowers blood cholesterol by blocking the absorption of cholesterol, including dietary cholesterol, from the intestine. Clinical trials have shown that adding 10 mg of Zetia (ezetimibe) to the 10 mg to 80 mg dosage range of Zocor (simvastatin) yields approximately 11-14% additional LDL-C lowering efficacy beyond that provided by Zocor (simvastatin) alone, thereby increasing the number of patients able to reach an LDL-C goal of 70 mg/dL over statin monotherapy (e.g., Lipitor (atorvastatin)), as illustrated below:

LOGO

Since it was launched in August 2004, Vytorin has captured approximately 6% market share in sales of the hyperlipidemia market, and worldwide sales in 2006 approximated $2 billion. We believe the market success of Vytorin is representative of an emerging trend toward combination therapy as a means to more effectively lower LDL-C. Although Zetia (ezetimibe) has yielded significant results when used in combination with Zocor (simvastatin), Zetia (ezetimibe) alone provides only modest LDL-C reduction (on average 15-20%) and has no significant effect on other lipid parameters, such as raising HDL or lowering triglycerides. Furthermore, Zetia (ezetimibe) has no significant dose response curve, meaning that increasing the dose beyond 10 mg has not been shown to significantly improve its ability to lower LDL-C levels. As a result, Zetia (ezetimibe) is only available at a 10 mg dose, is typically used as monotherapy only for those patients who are statin-intolerant and is more widely used in combination with statins to provide additional LDL-C reductions in those patients who have not successfully reached their National Cholesterol Education Program goal with statin monotherapy.

 

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The Aegerion Opportunity

We believe that our product candidates have the potential to be efficacious when used as monotherapy or combination therapy, depending on the particular needs of the patient. In particular, we believe our product candidates can address the unmet medical needs of patients who are taking statins as monotherapy or in combination with non-statin therapies but are unable to reach their target LDL-C goal, as well as patients who are unable to tolerate a statin. We estimate that, even if the most efficacious forms of existing therapies were to be utilized, as many as one-third of all patients in the United States at high-risk for coronary heart disease, or approximately 8 million people, would not be able achieve a target LDL-C level of 70 mg/dL. Additionally, we estimate that approximately 1.5 million patients in the United States are statin-intolerant and unable to achieve goals on non-statin therapy, such as Zetia (ezetimibe).

We also believe our product candidates may address the smaller, niche patient populations who suffer from rare but serious diseases, such as homozygous familial hypercholesterolemia, heterozygous familial hypercholesterolemia and severe hypertriglyceridemia. It is generally estimated that the incidence of homozygous familial hypercholesterolemia is 1:1,000,000 within the general population. The prevalence of heterozygous familial hypercholesterolemia is generally thought to be approximately 1:500 in the population. We estimate that approximately 1.8 per 10,000 adults in the United States suffer from severe hypertriglyceridemia of >2,000 mg/dL. Lesser elevations (>500 mg/dL) can also put patients at higher risk for pancreatitis and warrant treatment.

Our Strategy

Our long-term objective is to develop and commercialize promising therapeutics to treat cardiovascular and metabolic disease for the broadest spectrum of unmet medical need. In the near term, we seek to advance the development of our product candidates, which represent a new class of therapy with a unique mechanism of action, to address the unmet medical need resulting from the emerging trend towards more aggressive LDL-C reduction as well as certain niche populations for whom current therapies are inadequate. To achieve these objectives, we intend to utilize the following strategies:

 

   

Advance the development of our product candidates for use as monotherapy or, more likely, in combination with existing lipid-lowering therapies. We believe our product candidates have the potential to address hyperlipidemia, in particular hypercholesterolemia and hypertriglyceridemia, in a variety of patient populations. We plan to concurrently advance the development of our compounds for these different indications. Specifically, we will seek to:

 

   

Develop our product candidates for use at low doses in combination with statins thereby offering the potential for LDL-C lowering efficacy, with potential for additional benefits. Based on the results of a recently completed Phase II clinical trial, we believe that AEGR-733 may offer potential advantages over Zetia (ezetimibe), including: superior LDL-C lowering efficacy; the ability to administer AEGR-733 at increasing doses for greater LDL-C lowering efficacy due to a significant dose response curve, whereas Zetia (ezetimibe) is only available at a single marketed dose; superior triglyceride lowering efficacy; and the potential for weight loss. In particular, we believe that, when combined at low doses with other drug therapies, AEGR-733 has the potential to effectively treat those patients who can not achieve target LDL-C levels using currently available drugs.

 

   

Develop our product candidates for use at low doses as monotherapy or as combination therapy to address the needs of statin-intolerant patients. We believe that the recently completed Phase II clinical trial demonstrates that AEGR-733 is not only significantly more effective than Zetia (ezetimibe) as a monotherapy but also may potentially provide an alternative therapeutic option, when used in combination with other non-statin therapies such as Zetia (ezetimibe), to offer LDL-C lowering efficacy in a range similar to that of statins to treat statin-intolerant patients.

 

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Develop our product candidates for use at increased doses to address the unmet medical needs of niche patient populations. We believe that our product candidates have the potential to provide added benefits to certain niche patient populations such as patients with homozygous familial hypercholesterolemia, heterozygous familial hypercholesterolemia and severe hypertriglyceridemia. Current therapies do not adequately address the acute need of these patients to dramatically reduce their LDL-C or triglyceride levels. New treatment alternatives, such as combination therapies using different therapeutic classes, have the potential to provide life- altering outcomes to these patient populations. In light of the relatively small number of patients with homozygous familial hypercholesterolemia or severe hypertriglyceridemia or who require plasma apheresis, we intend to seek orphan designation from the FDA in connection with our clinical trials for these indications.

 

   

Leverage our management team’s significant experience and third-party relationships in developing and commercializing successful lipid-lowering therapeutics. Our senior management team has developed extensive expertise and cultivated valuable resources in the field of lipid lowering therapeutics and other biopharmaceutical products through their previous work on the commercialization of the drugs Zocor, Pepcid, and Diovan, as well as Lipitor. We intend to maximize the value of our product candidates by utilizing our relevant experience as well as select clinical development, manufacturing and/or commercialization partners to develop our product candidates in the most time-efficient and cost-effective manner possible.

 

   

Maintain our focus on cardiovascular and metabolic drug development by building, through in-license or acquisition, an extended portfolio of candidates aimed at these diseases. We intend to remain singularly focused on our core area of expertise, which is the development and commercialization of promising later-stage therapeutics to treat cardiovascular and metabolic disease. We will actively seek to acquire or license such compounds, which may include new microsomal triglyceride transfer protein inhibitors in order to take advantage of our expertise in this new therapeutic class.

 

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Our Product Candidates

Overview

The following table summarizes the status of the most significant clinical trials related to our two compounds currently in development.

 

       
Product
Candidate
 

Phase of

Clinical

Trial

  Protocol   Status

AEGR-733

  Phase II  

Pharmacokinetics drug interaction:

- AEGR-733 10 mg(1)

- AEGR-733 60 mg

 

 

 

Complete

Patient screening initiated

    Phase II   AEGR-733 5-10 mg +/- Zetia (ezetimibe) in patients with hypercholesterolemia(1)   Complete
    Phase II   AEGR-733 2.5-10 mg +/- Lipitor (atorvastatin) in patients with moderate hypercholesterolemia  

Patient screening initiated

    Phase II   Impact of AEGR-733 on hepatic fat in hyperlipidemic patients   Initiate 2H 2007
    Phase II   AEGR-733 in patients with homozygous familial hypercholesterolemia(2)   Complete
     Phase III   AEGR-733 in patients with homozygous familial hypercholesterolemia(3)   Initiate 2H 2007

AEGR-427

(implitapide)

  Phase II  

AEGR-427 (implitapide) in patients with primary hypercholesterolemia

(MISTRAL)(4)

  Complete
    Phase II   Pharmacokinetics drug interaction trial   Initiate 2H 2007
   

Phase II

 

Dose-ranging trial

 

Initiate 2H 2007

(1) Conducted by Daniel J. Rader, M.D., a member of our Scientific Advisory Board and Associate Director of the Institute for Translational Medicine and Therapeutics, University of Pennsylvania School of Medicine.
(2) Conducted by Daniel J. Rader, M.D., University of Pennsylvania School of Medicine.
(3) To be conducted by Daniel J. Rader, M.D., University of Pennsylvania School of Medicine, who will hold a sponsor-investigator IND for the homozygous familial hypercholesterolemia protocol.
(4) Conducted by Bayer Healthcare AG.

Our two product candidates, AEGR-733 and AEGR-427 (implitapide), are microsomal triglyceride transfer protein inhibitors that potentially represent a new therapeutic class for the treatment of hypercholesterolemia and hypertriglyceridemia. Microsomal triglyceride transfer protein exists in both the liver and intestine where it plays a role in the formation and transfer of cholesterol and triglycerides. The liver and intestine represent the two main sources of lipids in the body. The liver synthesizes cholesterol and triglycerides and provides the body’s intrinsic supply of lipids. The intestine is the pathway that dietary, or extrinsic, lipids enter the body for metabolism. Given the fact that microsomal triglyceride transfer protein is involved in the formation of cholesterol-carrying lipoproteins from both intestinal and liver-related, or hepatic, sources, we believe the inhibition of microsomal triglyceride transfer protein makes an attractive target for lipid lowering therapy. Currently there are no microsomal triglyceride transfer protein inhibitors approved by the FDA.

We obtained our rights to AEGR-733 through an exclusive license agreement with The Trustees of the University of Pennsylvania (who received rights to the compound from Bristol-Myers Squibb Company, or BMS) and we obtained our rights to AEGR-427 (implitapide) through an exclusive license agreement with Bayer Healthcare AG, or Bayer. See “—Licenses” for a more complete description of these license agreements.

 

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AEGR-733 and AEGR-427 (implitapide) were originally developed by BMS and Bayer, respectively, as monotherapies and at significantly higher doses aimed at potentially producing LDL-C lowering efficacy equal to or greater than that seen at maximum dosing with statins. Early Phase I and Phase II clinical studies of both these drug candidates at such high doses demonstrated significant efficacy but also led to a high rate of gastrointestinal adverse events and fat accumulation in the liver.

We are currently developing these two drug candidates at significantly lower doses than those previously studied by BMS and Bayer for use as monotherapies or, more likely, in combination with other classes of lipid- lowering therapies, such as statins and cholesterol absorption inhibitors. We do believe, however, that the risk- benefit profile may warrant the use of higher doses of AEGR-733 or AEGR-427 (implitapide) for the extremely severe hyperlipidemic patient population, such as patients with homozygous familial hypercholesterolemia, heterozygous familial hypercholesterolemia patients requiring plasma apheresis and severe hypertriglyceridemia.

Although our two product candidates are both microsomal triglyceride transfer protein inhibitors that share the same mechanism of action, we believe there are potential differences in their profiles that may allow for slightly different development programs. Because microsomal triglyceride transfer protein exists both in the intestine and the liver, a theoretical spectrum of activity exists where at one end a microsomal triglyceride transfer protein inhibitor might act predominantly in the intestine and at the other end a microsomal triglyceride transfer protein inhibitor might act in the liver and the intestine. We believe that AEGR-733 may have greater effect in the liver, and thus may have relatively greater LDL-C lowering efficacy than AEGR-427 (implitapide) at comparable doses. We believe that AEGR-427 (implitapide) may have greater effect in the intestine, and thus may have relatively greater potential for lowering postprandial triglycerides and causing weight loss, in addition to lowering LDL-C.

AEGR-733 for Hyperlipidemia

Overview

AEGR-733 is a microsomal triglyceride transfer protein inhibitor we are developing as an oral, once-a-day treatment for hyperlipidemia in those individuals who are unable to meet target LDL-C levels on other therapies. In the mid-to-late 1990s, AEGR-733 (then known as BMS-201,038) was developed by BMS as a monotherapy treatment aimed at producing LDL-C lowering efficacy equal to or greater than that seen at maximum dosing with statins. Early Phase I and Phase II clinical trials by BMS at doses between 25-100 mg did produce mean percentage reductions in LDL-C levels of 54-86% after seven days of therapy but also led to a high rate of gastrointestinal adverse events and fat accumulation in the liver, or hepatic steatosis. In 2003, BMS donated certain patent rights and other rights related to this product candidate to The Trustees of the University of Pennsylvania, or UPenn, and in May 2006, in connection with BMS donating additional rights to UPenn, we entered into a patent license agreement with UPenn for the right to develop and commercialize this product candidate to treat certain specified patient populations.

Following the donation by BMS to UPenn, clinical trials, described below, were conducted by Daniel J. Rader, M.D., a member of our Scientific Advisory Board and Associate Director of the Institute for Translational Medicine and Therapeutics, University of Pennsylvania School of Medicine under an investigational new drug application, or IND. This IND was transferred to Aegerion effective April 2007. In addition, Dr. Rader will open a sponsor-investigator IND for AEGR-733 in order to conduct the anticipated Phase III clinical trial of AEGR-733 in patients with homozygous familial hypercholesterolemia, described below. We expect to pay a portion of the cost of this clinical trial in exchange for the right to use data generated from the trial to support our own regulatory filings with the FDA.

We are currently developing AEGR-733 at significantly lower doses (2.5-10 mg) than those previously studied by BMS (25-100 mg). We believe that AEGR-733, at those lower doses, has the potential to treat patients

 

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with hyperlipidemia, either as a once-daily monotherapy or, more likely, in combination with existing lipid-lowering therapies, without the level of adverse side effects observed by BMS at higher doses. Our objective is to develop doses of AEGR-733 that as monotherapy will provide clinically meaningful reductions in LDL-C (15-30%) and in combination with existing therapies, such as statins or cholesterol absorption inhibitors, will provide significant additive reduction to LDL-C levels to help patients achieve more aggressive lipid-lowering goals presently unattainable with existing therapies.

Clinical Data

Phase II—Pharmacokinetics drug interaction clinical trial

In 2006, a Phase II clinical trial was initiated to evaluate the pharmacokinetic drug interaction between AEGR-733 and various, existing lipid-lowering therapies. This trial was funded by Aegerion and conducted under an IND held by Dr. Rader of the University of Pennsylvania School of Medicine. The primary objective of this trial was to evaluate the potential effect of AEGR-733 on the pharmacokinetics of five commonly prescribed lipid-lowering therapies, including agents metabolized by the cytochrome P 450 3A4 isoenzyme, or CYP 3A4. This enzyme is responsible for the metabolism of a number of drugs, including two of the most widely used statins, Zocor (simvastatin) and Lipitor (atorvastatin). Previous in vitro studies with AEGR-733 suggested a potential for modest inhibition of CYP 3A4. High levels of inhibition could result in increased plasma levels of these statins, thereby increasing the likelihood of statin-induced side effects. The trial was a fixed-sequence, open-label research clinical trial conducted on 60 healthy volunteers.

After seven days of treatment with AEGR-733 at 10 mg, patients experienced clinically insignificant increases in maximum drug concentrations and overall drug exposure of Lipitor (atorvastatin) and Zocor (simvastatin). Based on this data, we believe there should be no significant drug-drug interaction between AEGR-733 at doses planned for future study (2.5 mg to 10 mg) and these statins. Additionally, there was no significant impact of AEGR-733 upon the metabolism of the other agents studied, including Tricor (fenofibrate), Crestor (rosuvastatin) and Zetia (ezetimibe).

In this trial, AEGR-733 appeared to be safe and well tolerated. Some patients experienced mild, episodic gastro-intestinal events, two patients experienced moderate diarrhea and no significant shifts or changes in liver function enzymes were noted.

Prior to initiating the Phase III homozygous familial hypercholesterolemia clinical trial described below, we added additional arms to this pharmacokinetics trial of AEGR-733 to evaluate the potential pharmacokinetic effect of AEGR-733 60 mg in combination with two lipid-lowering drugs, Lipitor (atorvastatin) and Crestor (rosuvastatin), and dextromethrophan, which is a surrogate for drugs metabolized by the cytochrome P 450 2D6 isoenzyme. We initiated patient screening for these arms in the second quarter of 2007.

Phase II—AEGR-733 5-10 mg +/- Zetia (ezetimibe)

In 2006, a Phase II clinical trial was initiated to evaluate AEGR-733 as monotherapy as well as in combination with Zetia (ezetimibe). This trial was funded by Aegerion and conducted under an IND held by Dr. Rader of the University of Pennsylvania School of Medicine. In this twelve-week trial, a total of 84 patients with hypercholesterolemia were randomized to one of three treatment arms: AEGR-733 alone, Zetia (ezetimibe) 10 mg alone, or the combination of AEGR-733 + Zetia (ezetimibe) 10 mg. Patients receiving AEGR-733, whether alone or in combination, were started at 5 mg once daily for four weeks, and were subsequently titrated to 7.5 mg then 10 mg for two additional four week intervals. The primary efficacy endpoint of this trial was the percentage change in LDL-C from baseline after twelve weeks. Secondary endpoints included percentage change in LDL-C after four and eight weeks, percentage change in other lipid parameters, such as total cholesterol, or TC, triglycerides, and HDL-C, as well as percentage change in body weight and safety and tolerability at all time points.

 

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In November 2006, at a meeting of the American Heart Association, we reported interim results for the primary and secondary efficacy and safety objectives from this clinical trial. The final LDL-C efficacy findings for the percentage reduction in LDL-C levels are summarized below.

 

Drugs Evaluated

   Number of
Subjects
   % LDL-C
Reduction(1)
   P-Value(2)

After four weeks:

        

Zetia (ezetimibe) 10 mg

   25    19.9%    p<0.001

AEGR-733 5 mg

   24    18.6%    p<0.001

AEGR-733 5 mg + Zetia (ezetimibe) 10 mg

   27    34.5%    p<0.001

After eight weeks:

        

Zetia (ezetimibe) 10 mg

   23    21.9%    p<0.001

AEGR-733 7.5 mg

   21    26.4%    p<0.001

AEGR-733 7.5 mg + Zetia (ezetimibe) 10 mg

   26    38.0%    p<0.001

After twelve weeks:

        

Zetia (ezetimibe) 10 mg

   23    19.9%    p<0.001

AEGR-733 10 mg

   19    29.9%    p<0.001

AEGR-733 10 mg + Zetia (ezetimibe) 10 mg

   24    46.2%    p<0.001

(1) In each case, percentage of LDL-C reduction represents the percentage reduction in LDL-C levels from baseline that was experienced by the subjects in the relevant subgroup.
(2) P-value is a measure of the likelihood that LDL-C reduction vs. baseline is due to random chance. A p-value of <0.05 means the chance that the difference is due to random chance is less than 5%, and is a commonly accepted threshold for denoting a statistically meaningful difference.

In addition to these LDL-C efficacy findings, at all three intervals the superiority of AEGR-733 + Zetia (ezetimibe) vs. Zetia (ezetimibe) monotherapy in LDL-C lowering efficacy was statistically significant (p<0.001). Additionally, AEGR-733 10 mg monotherapy was superior to Zetia (ezetimibe) 10 mg monotherapy in LDL-C lowering efficacy, with a statistical significance of p=0.015.

The secondary efficacy findings for average percentage increase or (decrease) in triglyceride and HDL-C levels and weight from this trial are summarized below.

 

Drugs Evaluated

   TG(1)     HDL-C(2)     Weight(2)  

After four weeks:

      

Zetia (ezetimibe) 10 mg

   2.2 %   3.0 %   (0.2 )%

AEGR-733 5 mg

   (0.7 )%   (9.1 )%   (0.4 )%

AEGR-733 5 mg + Zetia (ezetimibe) 10 mg

   (1.0 )%   (7.1 )%   (0.9 )%

After eight weeks:

      

Zetia (ezetimibe) 10 mg

   (1.5 )%   2.8 %   (0.7 )%

AEGR-733 7.5 mg

   (6.6 )%   (9.2 )%   (0.7 )%

AEGR-733 7.5 mg + Zetia (ezetimibe) 10 mg

   (20.0 )%   (8.5 )%   (1.6 )%

After twelve weeks:

      

Zetia (ezetimibe) 10 mg

   (3.1 )%   6.3 %   (0.2 )%

AEGR-733 10 mg

   (9.9 )%   (6.2 )%   (1.0 )%

AEGR-733 10 mg + Zetia (ezetimibe) 10 mg

   (14.8 )%   (9.2 )%   (1.4 )%

(1) Percentage change represents the median percentage change from baseline that was experienced by the subjects in the relevant subgroup.

 

(2) Percentage change represents the mean percentage change from baseline that was experienced by the subjects in the relevant subgroup.

 

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In this trial, AEGR-733 appeared to be safe and well tolerated. There was no difference in discontinuation rates between the patients treated with the combination of AEGR-733 + Zetia (ezetimibe) (n=4) versus those treated with Zetia (ezetimibe) (n=4) alone. Eight patients treated with AEGR-733 monotherapy were discontinued from therapy during this trial. As summarized below, the primary reason for discontinuation of therapy in patients treated with AEGR-733 were elevations in liver function tests. The adverse events experienced in this trial leading to discontinuation are summarized below.

 

    

Total Number

of Patients
Discontinuing

                       

Drugs Evaluated

   Treatment   Hepatic        GI        Muscle    Neuro    Vascular

Zetia (ezetimibe)

   4   1    2    1    1    0

AEGR-733

   8   6    1    0    0    1

AEGR-733 + Zetia (ezetimibe)

   4   3    1    1    0    0

One patient involved in the trial suffered a severe adverse event that was determined to be a fatal myocardial infarction. This event occurred 7 days after the patient had completed the trial and was deemed by the investigator and the medical monitor to be unrelated to drug therapy.

We believe the results of this trial demonstrate the LDL-C lowering efficacy of AEGR-733 when used as a monotherapy, as well as the additivity of AEGR-733 when used in combination with Zetia (ezetimibe), thereby potentially offering statin-like efficacy for statin-intolerant patients seeking significant cholesterol reduction. Statins have been shown to generally reduce LDL-C by approximately 25-55%, depending on the dose, when used as monotherapy.

Future Clinical Trials

Phase II—AEGR-733 2.5-10 mg +/- Lipitor (atorvastatin)

As evidenced by the rapid adoption of combination lipid-lowering therapies, such as Vytorin (ezetimibe/simvastatin), we believe that combination therapies represent the next generation of therapeutic option for high risk patients in need of aggressive cholesterol management. In particular, based in part on data from the Phase II clinical trial described above, we believe that, when combined at low doses with existing statin therapies, AEGR-733 has the potential to effectively treat those patients that can not achieve target LDL-C levels using currently available drugs, with the potential for added benefits such as lower triglyceride levels and weight loss.

 

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In the second quarter of 2007, we initiated patient screening for a randomized, double-blind, placebo-controlled, parallel group Phase II clinical trial to evaluate the safety and efficacy of the combination of AEGR-733 + Lipitor (atorvastatin) versus Lipitor (atorvastatin) alone and AEGR-733 alone in subjects with moderate hypercholesterolemia. In this clinical trial, as depicted below, we currently expect that approximately 286 patients will be randomized to one of eleven arms: four arms will have AEGR-733 alone at the doses of 2.5, 5, 7.5 or 10 mg; four arms will have those same four doses of AEGR-733 combined with Lipitor (atorvastatin) 20 mg; and three comparator arms will have placebo, Lipitor (atorvastatin) 20 mg and Lipitor (atorvastatin) 80 mg, respectively.

LOGO

The average percentage reduction in LDL-C levels will be the primary efficacy endpoint. Secondary efficacy endpoints are expected to include other lipid parameters, change in body weight and safety and tolerability.

We currently expect to publicly announce preliminary results from this clinical trial in the fourth quarter of 2007.

Phase II—Impact of AEGR-733 on hepatic fat

Phase I and Phase II clinical trials of AEGR-733 and AEGR-427 (implitapide) conducted by BMS and UPenn, respectively, demonstrated that four weeks of therapy at higher doses (25-100 mg in the case of AEGR-733 and 80 and 160 mg in the case of AEGR-427 (implitapide)) resulted in hepatic steatosis that was reversible upon termination of treatment. The clinical significance of an increase in hepatic fat is unknown. Although there are more severe hepatic diseases that have fat accumulation as a component, the causative role of hepatic fat, if any, in these diseases is not clearly understood. In addition, there are other drugs approved by the FDA for sale in the United States that are known to induce hepatic steatosis, including tamoxifen (used in the treatment of breast cancer) and amiodarone (used in the treatment of ventricular fibrillation), although these indications have different risk/benefit profiles than the broad hyperlipidemic patient population. Furthermore, studies have shown that a significant number of patients with diabetes and obese individuals have hepatic steatosis, with no known long-term liver consequences. Similarly, those patients who suffer from a genetic deficiency of microsomal triglyceride transfer protein have been shown to have some degree of hepatic steatosis with no known long-term liver complications.

 

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We intend to initiate a randomized, double-blind, placebo-controlled, parallel-group Phase II clinical trial to evaluate low doses of AEGR-733 on hepatic fat accumulation as measured by magnetic resonance spectroscopy, or MRS, imaging in hyperlipidemic patients. In this clinical trial, as depicted below, we currently expect that approximately 240 patients will be randomized into one of eight arms: placebo, AEGR-733 alone at doses of 2.5, 5, 7.5 and 10 mg and AEGR-733 5 mg combined with either fenofibrate 145 mg, Lipitor (atorvastatin) 20 mg or Zetia (ezetimibe) 10 mg over the course of the 12-week clinical trial.

LOGO

Hepatic fat will be measured by MRS imaging at baseline and at four-week intervals over the course of the clinical trial. Secondary efficacy endpoints are expected to include lipid efficacy measures and other markers of hepatic and overall safety and tolerability.

We have designed this clinical trial in consultation with leading hepatologists who serve on our Scientific Advisory Board. We believe this clinical trial will allow us to test several important hypotheses, including:

 

   

whether significant hepatic fat accumulation is seen at the lower doses we intend to develop;

 

   

if lower doses result in hepatic steatosis, whether there is the potential for adaptation by the liver after longer exposure (> four weeks); and

 

   

the ability of combination therapies to mitigate any potential hepatic steatosis that may result from low-dose microsomal triglyceride transfer protein inhibitor therapy.

A direct dose-dependent relationship between AEGR-733 and the accumulation of hepatic fat has been observed in a previous clinical trial. We will be studying doses well below where the majority of previous clinical work was conducted. There is also evidence that when patients are exposed to certain drugs with hepatic action, adaptation can occur. That is, the liver will return to baseline levels if the medication is continued. Therefore, if the accumulation of hepatic fat is observed at lower doses of AEGR-733, one objective of this clinical trial would be to determine whether the liver will adapt over time to the increases in hepatic fat patients experience when treated with AEGR-733. Finally, other lipid lowering therapies have been shown in animal studies to reduce diet or microsomal triglyceride transfer protein inhibitor induced hepatic steatosis. Therefore, if the accumulation of hepatic fat is observed at lower doses of AEGR-733, another objective of this clinical trial will be to determine whether combination therapy may mitigate this effect.

We currently expect to initiate patient screening for this Phase II clinical trial in the second half of 2007. We currently expect to publicly announce preliminary results from this clinical trial in the second quarter of 2008.

 

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AEGR-733 for Niche Patient Populations

Overview

We believe that AEGR-733 has the potential to treat patients with homozygous familial hypercholesterolemia and heterozygous familial hypercholesterolemia or severe hypertriglyceridemia, either as an oral, once-a-day monotherapy or, more likely, in combination with existing lipid-lowering therapies. Our objective is to develop doses of AEGR-733 that, alone and in combination with existing therapies, will provide clinically meaningful reductions in LDL-C and triglycerides for these niche patient populations.

The homozygous familial hypercholesterolemia patient population represents the most severe and at-risk patient population in the spectrum of hypercholesterolemia. Untreated, LDL-C levels typically run in the 400-800 mg/dL range and these patients typically suffer fatal and nonfatal cardiovascular events, often in their teens or twenties. Because of their genetic defect, these patients have absent or dysfunctional LDL receptors and therefore statin therapy is substantially less effective. High dose statin therapies that will typically produce 50-60% reductions in LDL-C in the broad hypercholesterolemic patient population will only produce 20-25% reductions in the homozygous familial hypercholesterolemia patient population. These patients normally resort to regular (e.g., every other week) plasma apheresis sessions in order to mechanically filter the blood of excess lipoproteins.

We believe that the novel mechanism of action associated with microsomal triglyceride transfer protein inhibitors and the high degree of LDL-C reducing efficacy seen with AEGR-733 in prior high dose trials in homozygous familial hypercholesterolemia patients may make homozygous familial hypercholesterolemia an indication where relatively higher doses (e.g., up to 60 mg) could provide the necessary reductions in LDL-C to minimize or potentially even eliminate the need for plasma apheresis. Such a therapeutic outcome would have a significant impact on risk for future cardiovascular events and be a transformative event in the lives of these patients. Given the severity of this condition and the risks associated with the inadequate LDL-C reduction achievable using existing therapies, we believe that the potential benefits of higher dose microsomal triglyceride transfer protein inhibitor treatments could outweigh the increased risk of side effects associated with these higher doses. Since it is estimated that only 1:1,000,000 individuals have homozygous familial hypercholesterolemia in the United States, we believe AEGR-733 is eligible for orphan drug designation by the FDA for this indication and we intend to pursue such designation. Orphan drug status is awarded by the FDA to drugs intended to treat rare diseases or conditions, as defined by the FDA, and a drug that receives this designation and subsequently receives the first FDA approval for the disease of which it has such designation is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same drug for the same indication, except in very limited circumstances, for seven years. See “—Regulatory Matters—Orphan Drug Designation.”

Clinical Data

Phase II—AEGR-733 in patients with homozygous familial hypercholesterolemia

In February 2004, the University of Pennsylvania completed a Phase II clinical trial in homozygous familial hypercholesterolemia patients. In this single-arm, open-label clinical trial, six subjects were given ascending doses of 0.03 mg/kg, 0.1 mg/kg, 0.3 mg/kg and 1.0 mg/kg of body weight of AEGR-733 at four-week intervals for a total of 16 weeks. A planned four-week therapy washout followed the active dosing period. Given the weight-based dosing, the average dose at 1 mg/kg was 67 mg.

 

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In January 2007, the results of this trial were published in The New England Journal of Medicine and are summarized below. Percentage change represents the average percentage change from baseline in the four lipid parameters for the six patient group.

LOGO

We believe these results demonstrate a dose-dependent effect of AEGR-733 on lipid levels. In addition, subjects treated with AEGR-733 experienced a mean reduction in body weight of 4.4% (2.8 kg) over the 16 weeks of therapy.

No patient withdrew from the trial and all patients were titrated to the maximum planned dose. Adverse events that were judged to be associated with drug therapy were primarily gastrointestinal, typically episodes of increased stool frequency of mild or moderate severity that were transient. Elevations in liver enzyme levels were seen in four of the six patients, though there was a transient nature to some of these as well. Increases in hepatic fat levels were also seen in four patients while two patients had minimal changes in hepatic fat levels. All values for liver transaminases and hepatic fat returned to baseline levels upon cessation of therapy, other than for one patient, who consumed alcohol during the trial. Because this trial employed a forced-titration scheme of treating the patients at higher doses at four week intervals, it is possible to infer that in those patients experiencing increases in hepatic fat, greater increases in hepatic fat are seen with the higher doses of AEGR-733. An increase in the international normalized ratio, which measures the blood’s ability to form clots, was observed in the two patients receiving warfarin, an anti-coagulation therapy, which may be due to a drug-drug interaction. Based upon this finding, we expect to undertake additional pharmacokinetics trials to further evaluate the interaction of AEGR-733 with warfarin. It is possible that patients who use AEGR-733 with warfarin may require monitoring of the international normalized ratio, as is commonly experienced by patients taking warfarin with other drugs.

Future Clinical Trials

Phase III—AEGR-733 in patients with homozygous familial hypercholesterolemia

We expect a Phase III clinical trial, to be funded, in part, by Aegerion and conducted under a sponsor-investigator IND to be held by Dr. Rader of the University of Pennsylvania School of Medicine, will be initiated in the second half of 2007, to evaluate both the efficacy and long-term safety of AEGR-733 in subjects with homozygous familial hypercholesterolemia at the maximum tolerated dose. This trial will also be partially funded by the FDA under its orphan products grant program. Under the current trial protocol, 25 subjects with homozygous familial hypercholesterolemia would be enrolled and would receive AEGR-733 in combination with

 

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their existing statin, such as Lipitor (atorvastatin) or Crestor (rosuvastatin), and other lipid-lowering therapies, such as Zetia (ezetimibe). Patients would be initiated at AEGR-733 5 mg and then titrated to as much as 60 mg over the first 26 weeks of the clinical trial. Patients would then be maintained on the highest tolerated dose for an additional 52 weeks. The primary efficacy endpoint of this trial would be percent change in LDL-C, a validated surrogate endpoint for FDA approval, after 26 weeks of treatment. Other secondary efficacy and safety endpoints (including hepatic fat as measured by MRS imaging) would be followed over the course of the clinical trial. A Phase I QT study, which assesses the potential of a drug to delay cardiac repolarization as measured by the QT interval on the surface electrocardiogram, will be undertaken concurrently with this Phase III trial. Since it is estimated that only 1:1,000,000 individuals, or approximately 300 in the United States, have homozygous familial hypercholesterolemia, we believe AEGR-733 is eligible for orphan drug designation for this indication and we intend to pursue such designation from the FDA.

We expect patient screening for this Phase III clinical trial will be initiated in the second half of 2007.

Other Potential Clinical Trials in Niche Patient Populations

Plasma apheresis is a process by which LDL-C particles are mechanically filtered from the bloodstream, typically in patients with homozygous familial hypercholesterolemia or heterozygous familial hypercholesterolemia and very high levels of cholesterol. Generally, plasma apheresis is indicated for patients with prior coronary heart disease and LDL-C levels > 200 mg/dL or patients without prior coronary heart disease and LDL-C levels > 300 mg/dL even with treatment with maximal existing oral therapies. We may elect to study AEGR-733 at moderate to high doses in this patient population in order to determine whether AEGR-733 provides reductions in LDL-C that could minimize or potentially eliminate the need for plasma apheresis and/or allow patients to achieve their treatment goals. In addition to the approximately 300 homozygous familial hypercholesterolemia patients estimated to be in the United States, we estimate there may be another 30,000 patients in the United States that are indicated to receive plasma apheresis, and qualify under the indications listed above, to control their LDL-C levels. Patients with heterozygous familial hypercholesterolemia are also missing one copy of the LDL receptor gene and tend to have untreated LDL-C levels of 250-400 mg/dL and are at very high-risk for a premature cardiovascular event. Unlike homozygous familial hypercholesterolemia patients most of these patients do respond well to statins and other therapies. However, because of the high baseline levels of LDL-C, many are still not able to achieve their LDL-C goals. Because of the inability to garner the needed efficacy from existing therapies, we believe a small (approximately 5%) subset of the heterozygous familial hypercholesterolemia patients may be eligible for regular plasma apheresis in order to adequately lower their LDL-C levels. We may elect to evaluate the ability of AEGR-733 in combination with existing therapies to provide additional reductions in LDL-C in these patients. We believe AEGR-733 may be eligible for orphan drug designation for patients indicated for plasma apheresis and we would expect to pursue such designation from the FDA.

In addition, we believe that AEGR-733 at moderate to high doses may have the potential to treat patients with severe hypertriglyceridemia. These patients are often at risk for acute pancreatitis, a potentially life-threatening condition. There is one patient with severe hypertriglyceridemia and prior history of complicated, life-threatening bouts of acute pancreatitis that has been treated with AEGR-733 at a dose of 25 mg for six years under a compassionate use program. This patient had severe fatty liver before treatment, and this condition has not progressed. Liver biopsies showed no fibrosis or cirrhosis during treatment. Liver function enzymes, which can act as a signal of liver toxicity, generally have been normal with no trend to increasing on therapy. We currently estimate that the number of patients with severely elevated triglycerides of >2000 mg/dL such that they are at risk for pancreatitis to be approximately 1.8 patients per 10,000 adults. Therefore, we believe AEGR-733 may be eligible for orphan drug designation by the FDA for this patient population and we would expect to pursue such a designation.

 

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AEGR-427 (implitapide) for Hyperlipidemia

Overview

Our second product candidate, AEGR-427 (implitapide), is a microsomal triglyceride transfer protein inhibitor we are developing as an oral, once-a-day treatment for hyperlipidemia. Although both our product candidates are microsomal transfer protein inhibitors that share the same mechanism of action, we believe that AEGR-427 (implitapide) may have greater effect in the intestine, and thus may have relatively greater potential for lowering postprandial triglycerides and causing weight loss, in addition to lowering LDL-C.

Prior development with this compound followed a similar pathway to the prior development of AEGR-733. Bayer was primarily focused on developing implitapide as a monotherapy at higher doses (80 mg and 160 mg) aimed at providing 40-60% reductions in LDL-C. Like AEGR-733, these higher doses were also associated with significantly higher rates of gastrointestinal adverse events and hepatic fat accumulation. As with AEGR-733, we believe lower doses than those previously studied by Bayer may provide the potential for an appropriate therapeutic window.

We plan to initiate a randomized, placebo-controlled, double-blind Phase II clinical trial to evaluate the efficacy and safety/tolerability profile of AEGR-427 (implitapide) in doses ranging from 30 mg to 50 mg, and a Phase II pharmacokinetic trial, which involves measuring the drug-to-drug interaction in the blood of healthy volunteers, to evaluate the impact of steady state levels of AEGR-427 (implitapide) on the single-dose pharmacokinetics of three commonly used statins: Lipitor (atorvastatin), Zocor (simvastatin) and Crestor (rosuvastatin). We expect to initiate patient screening for both of these clinical trials in the second half of 2007.

Clinical Data

Phase II—AEGR-427 (implitapide) in patients with primary hypercholesterolemia (MISTRAL)

In 1999, Bayer completed a Phase II clinical trial to evaluate the effects of implitapide in patients with hypercholesterolemia. This trial was a randomized, placebo-controlled, double-blind, parallel-group, dose-ranging comparative trial in which four doses of implitapide ranging from 20 to 160 mg were compared to placebo and to cerivastatin 0.3 mg in patients with primary hypercholesterolemia during a four-week treatment period. The total duration of the clinical trial was 14 to 18 weeks with an eight to 12 week diet run-in period, the last four weeks on a single blind placebo. This was followed by four weeks of randomized study treatment and by two weeks of post-treatment follow-up. The primary efficacy endpoint was the mean percentage change from baseline to endpoint, which was the end of the trial or last visit carried forward, of LDL-C, as well as the percentage of patients with a decrease of at least 15% in LDL-C between baseline and endpoint. Secondary efficacy endpoints included levels of other lipid parameters such as TC, triglycerides and HDL-C, as well as safety and tolerability.

 

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The results of this trial are summarized below.

LOGO

In this trial, treatment with AEGR-427 (implitapide) resulted in a dose-dependent average decrease in LDL-C levels of 8.2% to 55.1% as the dose was increased from 20 to 160 mg. For the doses from 40 mg to 160 mg, the p-value was <0.001 compared to placebo.

The rate of discontinuation remained low in the 20 mg and 40 mg doses of AEGR-427 (implitapide), with one subject discontinued in the placebo arm, as well as for the 20 mg and 40 mg arms of the trial. A higher rate of discontinuation was seen in the group of patients treated with 80 mg, and a very high rate of discontinuation was seen in those treated with 160 mg, with 13.7% and 41.5% of patients discontinuing the trial, respectively, in these two treatment groups. The primary reason for discontinuation was the occurrence of a gastrointestinal event. Elevation in liver function test values also was observed in the 80 and 160 mg patient groups. These gastrointestinal effects and elevation in liver function test values were consistent with observations in other trials Bayer conducted at 80 and 160 mg.

Future Clinical Trials

As with AEGR-733, we are focusing on a strategy to develop AEGR-427 (implitapide) at lower doses (30-50 mg) than most frequently studied by Bayer. Based upon results from the prior development efforts, including the results of the MISTRAL trial described above, we believe that such lower doses have the potential to provide clinically relevant reductions in LDL-C and other lipids, such as triglycerides, while having acceptable rates of adverse events.

Phase II—Pharmacokinetics Drug Interaction Trial

We intend to initiate a Phase II clinical trial of AEGR-427 (implitapide) designed to evaluate the impact of steady state levels of AEGR-427 (implitapide) in approximately 45 healthy volunteers on the single-dose pharmacokinetics of three commonly used statins: Lipitor (atorvastatin), Zocor (simvastatin) and Crestor (rosuvastatin). This trial is similar, in many respects, to the pharmacokinetic study conducted in 2006 with AEGR-733. Given what we currently know about the profile of AEGR-427 (implitapide) we do not expect that it will affect the pharmacokinetics of any of these statins. We would also expect to collect safety/tolerability data for AEGR-427 (implitapide) in this trial.

 

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We currently expect to initiate this Phase II clinical trial in the second half of 2007. We currently expect to publicly announce preliminary results from this clinical trial in the first quarter of 2008.

Phase II—AEGR-427 (implitapide) Dose-Ranging Trial

We intend to initiate a randomized, placebo-controlled, open-label Phase II trial designed to evaluate AEGR-427 (implitapide) at varying doses. In the trial, we expect that approximately 150 hypercholesterolemic patients will be randomized into one of six treatment arms: placebo, 30 mg, 35 mg, 40 mg, 45 mg and 50 mg of implitapide. We would expect the primary efficacy parameters to be percentage reduction in LDL-C levels and secondary parameters to include other lipid parameters, including changes in triglyceride levels, as well as safety and tolerability and weight loss.

We currently expect to initiate this Phase II clinical trial in the second half of 2007. We currently expect to publicly announce preliminary results from this clinical trial in the first quarter of 2008.

AEGR-427 (implitapide) for Niche Patient Populations

We believe that AEGR-427 (implitapide) has a greater level of activity in intestinal cells than in the liver. Accordingly, we believe AEGR-427 (implitapide) has the potential to be particularly helpful in treating patients with severely elevated levels of triglycerides who are often at risk for acute pancreatitis, a potentially life-threatening condition. We currently estimate that the number of patients with severely elevated triglycerides such that they are at risk for pancreatitis to be approximately 1.8 patients per 10,000 adults. Therefore, we believe AEGR-427 (implitapide) may be eligible for orphan drug designation by the FDA for this patient population and we would expect to pursue such designation.

Competition

Our industry is highly competitive and subject to rapid and significant technological change. Our potential competitors include large pharmaceutical and biotechnology companies, specialty pharmaceutical and generic drug companies, academic institutions, government agencies and research institutions. Key competitive factors affecting the commercial success of our product candidates are likely to be efficacy, safety and tolerability profile, reliability, convenience of dosing, price and reimbursement.

The market for cholesterol therapeutics is especially large and competitive. The microsomal triglyceride transfer protein inhibitor product candidates we are currently developing, if approved, will face intense competition, either as monotherapies or in combination therapies. Although there are no microsomal triglyceride transfer protein inhibitor compounds currently approved by the FDA for the treatment of hyperlipidemia, we are aware of other pharmaceutical companies, as described below, that are developing product candidates in this new therapeutic area.

Many of our potential competitors, including many of the organizations named below have substantially greater financial, technical and human resources than we do and significantly greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of products and the commercialization of those products. Accordingly, our competitors may be more successful than we may be in obtaining FDA approval for drugs and achieving widespread market acceptance. Our competitors’ drugs may be more effective, or more effectively marketed and sold, than any drug we may commercialize and may render our product candidates obsolete or non-competitive before we can recover the expenses of developing and commercializing any of our product candidates. We anticipate that we will face intense and increasing competition as new drugs enter the market and advanced technologies become available. Finally, the development of new treatment methods for the diseases we are targeting could render our drugs non-competitive or obsolete.

We expect that AEGR-733 and AEGR-427 (implitapide), if approved, will compete with the following:

 

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Other microsomal triglyceride transfer protein inhibitors. Currently, there are no microsomal triglyceride transfer protein inhibitor compounds approved by the FDA for the treatment of hyperlipidemia. In November 2006, Pfizer Inc. announced that it is developing a microsomal triglyceride transfer protein inhibitor. We believe that this compound has either recently entered into a Phase II clinical trial, or will shortly. We also understand that Surface Logix, Inc., a privately–held drug development company, is developing an intestine- specific microsomal triglyceride transfer protein inhibitor, called SLX-4090 and has recently completed a Phase I clinical trial for this product candidate. In addition, we understand that Japan Tobacco, Inc. is working on a microsomal triglyceride transfer protein inhibitor, called JTT-130 that is currently in Phase II trials in Japan and overseas. We believe that other large pharmaceutical companies may be investigating microsomal transfer protein inhibitor compounds, but all are believed to be in early stages of development.

 

   

Combination Therapies. We believe that our product candidates have the potential to address significant unmet medical needs when used in combination with existing lipid lowering therapies, in particular statins and cholesterol absorption inhibitors. As such, our product candidates, if approved, will compete to varying degrees with fixed dosage combination therapies, such as Vytorin (ezetimibe / simvastatin) which is marketed by a joint-venture between Schering-Plough Corporation and Merck & Co., Inc. and Advicor (niacin extended-release / lovastatin tablets) which is marketed by Abbott Laboratories.

 

   

Statins. We believe that our product candidates have the potential to address significant unmet medical needs when used in combination with statin therapies. However, to a limited extent our product candidates, if approved, will compete directly with statins, including: Lipitor (atorvastatin) which is marketed by Pfizer Inc.; Crestor (rosuvastatin) which is marketed by AstraZeneca PLC; and Zocor (simvastatin), which is marketed by Merck & Co., Inc.

 

   

Cholesterol Absorption Inhibitors. We believe that our product candidates have the potential to address significant unmet medical needs when used in combination with cholesterol absorption inhibitors. However, to a significant extent our product candidates, if approved, will also compete directly with this drug class, particularly as a combination therapy with statins to treat patients with hyperlipidemia, including: Zetia (ezetimibe) which is marketed as a monotherapy by Schering-Plough Corporation and is currently the only FDA-approved cholesterol absorption inhibitor on the market. In addition, we understand that Microbia, Inc., a privately–held drug development company, is developing a cholesterol absorption inhibitor, called MD-0727, that is currently in Phase I clinical trials. Sanofi-Aventis has also recently announced that it is developing a cholesterol absorption inhibitor, called AVE-5530, that is currently in Phase IIb clinical development. We believe that other pharmaceutical companies may be developing cholesterol absorption inhibitor compounds, but all are believed to be in early stages of development.

 

   

Other Lipid-Lowering Therapies. Although we believe that our product candidates have the potential to be used in combination with other lipid-lowering therapies, to a significant extent our product candidates, if approved, will compete directly with these therapies in the treatment of hyperlipidemia, including: Tricor (fenofibrate tablets) and Niaspan (niacin), both of which are marketed by Abbott Laboratories. Isis Pharmaceuticals is developing an antisense apoB-100 inhibitor for lowering high cholesterol and has initiated a Phase II clinical trial for this product candidate.

 

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Intellectual Property

Our policy is to pursue patents, developed internally and licensed from third parties, and other means to otherwise protect our technology, inventions and improvements that are commercially important to the development of our business. We also rely on trade secrets that may be important to the development of our business.

Our success will depend significantly on our ability to:

 

   

obtain and maintain patent and other proprietary protection for the technology, inventions and improvements we consider important to our business;

 

   

defend our patents;

 

   

preserve the confidentiality of our trade secrets; and

 

   

operate without infringing the patents and proprietary rights of third parties.

As of the date of this prospectus, our AEGR-733 patent portfolio consists of five issued U.S. patents, one pending U.S. non-provisional patent application and related patents and pending applications in Europe, Australia, Japan, Canada, and Israel. We hold an exclusive worldwide license from The Trustees of the University of Pennsylvania to these patents and patent applications. This license is described below. The issued patents described above contain claims directed to the compound, AEGR-733, and various methods of use, including methods of treating atherosclerosis, hyperlipidemia or hypercholesterolemia, and methods of reducing serum lipid levels, cholesterol and/or triglycerides. The patents are scheduled to expire between 2013 and 2019.

As of the date of this prospectus, our AEGR-427 (implitapide) patent portfolio consists of four issued U.S. patents, two pending U.S. non-provisional applications, and related patents and pending applications in Europe, Australia, Asia, Africa, and South America. We hold an exclusive worldwide license from Bayer Healthcare AG to these patents and patent applications. This license is described below. The issued patents described above contain claims directed to the compound, AEGR-427 (implitapide), methods for treating obesity and atherosclerosis, and processes for making AEGR-427 (implitapide). The patents are scheduled to expire between 2015 and 2017.

In addition to the patents and patent applications described above, we have filed four U.S. patent applications (three non-provisional applications and one provisional application) and four international applications directed to pharmaceutical combinations of a microsomal triglyceride transfer protein inhibitor (for example, AEGR-733 or AEGR-427 (implitapide)) and other cholesterol lowering drugs, and to methods of using such combinations in certain dosing regimens to reduce serum cholesterol and/or triglyceride concentrations, or to treat and/or control obesity.

The U.S. patent system permits the filing of provisional and non-provisional patent applications. A non-provisional patent application is examined by the U.S. Patent Office and can mature into a patent once the Patent Office considers the invention claimed in the non-provisional patent application meets the standards for patentability. A provisional patent application, however, is not examined, and automatically expires twelve months after its filing date. As a result, a provisional patent application cannot mature into a patent. The requirements for filing a provisional patent application are not as strict as those for filing a non-provisional patent application. Accordingly, provisional applications are sometimes used, among other things, to provide an early filing date for an invention. The filing date is a date the Patent Office uses to measure what information is prior art when it considers the patentability of a claimed invention. If certain requirements are satisfied, a patent issuing from a non-provisional patent application can claim the benefit of the filing date of an earlier filed provisional patent application. As a result, the filing date accorded by the provisional patent application may remove information that otherwise could preclude the patentability of an invention.

 

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Depending upon the timing, duration and specifics of FDA approval of the use of AEGR-733 or AEGR-427 (implitapide), some of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Act. See “—Regulatory Matters—Patent Term Restoration and Marketing Exclusivity.”

Licenses

University of Pennsylvania

In May 2006, we entered into a license agreement with The Trustees of the University of Pennsylvania, or UPenn, pursuant to which we obtained an exclusive, worldwide license from UPenn to certain know-how and a range of patent rights applicable to AEGR-733. In particular, we obtained a license to certain patents and patent applications owned by UPenn relating to the dosing of microsomal triglyceride transfer protein inhibitors (including AEGR-733 and AEGR-427 (implitapide)), and certain patents and patent applications and know-how covering AEGR-733 that were assigned to UPenn by Bristol-Myers Squibb Company, BMS, in the field of monotherapy or in combination with other dyslipidemic therapies, which are therapies for the treatment of abnormally high or low levels of plasma cholesterol or triglycerides, for treatment of patients with severe hypercholesterolemia unable to come within 15% of National Cholesterol Education Program LDL-C goal on maximal tolerated oral therapy, as determined by the patient’s prescribing physician, or with severe combined hyperlipidemia unable to come within 15% of National Cholesterol Education Program non-HDL-C goal on maximal tolerated oral therapy, as determined by the patient’s prescribing physician, or with severe hypertriglyceridemia unable to reduce TG<1000 on maximal tolerated therapy. We also have the right to use AEGR-733 either as a monotherapy or with other dyslipidemic therapies to treat patients with a genetic deficiency leading to extremely high levels of LDL-C, such as patients with homozygous familial hypercholesterolemia or heterozygous familial hypercholesterolemia. We refer to the patents and patent applications assigned by BMS to UPenn and licensed to us by UPenn as the BMS-UPenn assigned patents.

To the extent that rights under the BMS-UPenn assigned patents were not licensed to us under our license agreement with UPenn or were retained by UPenn for non-commercial education and research purposes, those rights were licensed by UPenn back to BMS on an exclusive basis pursuant to a technology donation agreement between UPenn and BMS. In the technology donation agreement, BMS agreed not to develop or commercialize any compound (including AEGR-733) covered by certain of the BMS-UPenn assigned patents in the field licensed to us exclusively by UPenn. Through our license with UPenn, as provided in the technology donation agreement, we have the exclusive right with respect to the BMS-UPenn assigned patents regarding their enforcement and prosecution in the field licensed exclusively to us by UPenn.

The license from UPenn covers, among other things, the development and commercialization of AEGR-733 alone or in combination with other active ingredients in the licensed field. The license is subject to customary non-commercial rights retained by UPenn for non-commercial educational and research purposes. We may grant sublicenses under the license, subject to certain limitations. Pursuant to this license agreement, UPenn granted to us first option rights to exclusively license certain improvements to the licensed patent rights developed during the three years after the execution of this license agreement under the direction of Daniel Rader, M.D. at UPenn, and any invention arising from the use of the supply of AEGR-733 provided by us to UPenn (to the extent we do not already own any such invention pursuant to any other agreement with UPenn).

We are obligated under this license agreement to use commercially reasonable efforts to develop, commercialize, market and sell at least one product covered by the licensed patent rights, such as AEGR-733. Pursuant to this license agreement, we paid UPenn a one-time license initiation fee of $56,250. We will be required to make development milestone payments to UPenn of up to an aggregate of $150,000 when a licensed product’s indication is limited to homozygous familial hypercholesterolemia or severe refractory hypercholesterolemia, and an aggregate of $2,550,000 for all other indications within the licensed field (all such development milestone payments for these other indications are payable only once, no matter how many licensed

 

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products for these other indications are developed), make specified royalty payments on net sales of products covered by the license (subject to a variety of customary reductions), and share with UPenn specified percentages of sublicensing royalties and other consideration that we receive under any sublicenses that we may grant.

This license agreement will remain in effect on a country-by-country basis until the expiration of the last-to-expire licensed patent right in the applicable country. We have the right to terminate this license agreement for convenience upon 60 days prior written notice to UPenn or for UPenn’s uncured material breach of the license agreement, subject to certain specific conditions and consequences. UPenn may terminate this license agreement for our uncured material breach of the license agreement, our uncured failure to make payments to UPenn or if we are the subject of specified bankruptcy or liquidation events.

Bayer Healthcare AG

In May 2006, we entered into a license agreement with Bayer Healthcare AG, or Bayer, pursuant to which we obtained an exclusive, worldwide license from Bayer under the patent rights and know-how owned or controlled by Bayer applicable to AEGR-427 (implitapide). This license covers the development and commercialization of AEGR-427 (implitapide) alone or in combination with other active ingredients. We may grant sublicenses under the license, subject to certain limitations. Pursuant to this license agreement, we granted Bayer a first right of negotiation in the event Aegerion desires to commercialize any licensed products through or with a third party, which expires after 90 days if the parties are unable to come to an agreement. This first right of negotiation applies only to the specific products and in the specific countries potentially subject to third party commercialization.

We are obligated under this license agreement to use commercially reasonable efforts to develop and commercialize, at our cost, at least one licensed product, such as AEGR-427 (implitapide). Pursuant to this license agreement, we paid Bayer a one-time initial license fee of $750,000. We will be required to make certain development milestone payments of up to an aggregate of $4,525,000 upon the achievement of certain development milestones (each development milestone payment is payable only once, no matter how many licensed products are developed), annual payments for 2007 through 2011 of $1,000,000 in the aggregate, with each annual payment creditable in full against any development milestones that are or become payable, a one-time commercialization milestone payment of $5,000,000 if we achieve aggregate net sales of licensed products of $250,000,000 (payable only once, no matter how many licensed products are commercialized), and specified royalty payments on net sales of licensed products (subject to a variety of reductions).

This license agreement will remain in effect, and royalties will be payable on sales of licensed products, on a country-by-country and product-by-product basis until the later of the expiration of the last-to-expire licensed patent right in the applicable country or 10 years after the first commercial sale of a licensed product in that country. This license agreement may be terminated by either party for the other party’s uncured material breach of this license agreement, except that Bayer may only terminate the license agreement for our material breach on a country-by-country or product-by-product basis if our breach is reasonably specific to one or more countries or licensed products, or if the other party becomes the subject of a specified bankruptcy or liquidation event. We have the right to terminate the license agreement for convenience upon 60 days prior written notice to Bayer.

Manufacturing and Supply

We currently rely on contract manufacturers to produce drug substances and drug products required for our clinical trials under current good manufacturing practices, with oversight by our internal managers. We plan to continue to rely upon contract manufacturers and, potentially, collaboration partners to manufacture commercial quantities of our product candidates if and when approved for marketing by the FDA. We currently rely on a single manufacturer for the preclinical or clinical supplies of each of our product candidates and do not currently have relationships for redundant supply or a second source for any of our product candidates. We believe that there are alternate sources of supply that can satisfy our clinical trial requirements without significant delay or material additional costs.

 

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Sales and Marketing

Given our stage of development, we have not developed a commercial organization or distribution capabilities. It is expected that these capabilities would begin to be developed at the time we enter into Phase III trials. In order to commercialize any of our product candidates, we must develop these capabilities internally or through collaboration with third parties. In selected therapeutic areas where we feel that any approved products can be commercialized by a specialty sales force that calls on a limited and focused group of physicians, we may seek to commercialize these product candidates alone. In therapeutic areas that require a large sales force selling to a large and diverse prescribing population, we currently plan to partner our product candidates for commercialization, while retaining rights to co-promote our product(s) to a select audience of high prescribing physicians in the United States only, thereby supplementing or enhancing the efforts of a commercial partner.

In North America and Western Europe, patients in the markets for our product candidates are largely managed by medical specialists in the areas of cardiology and internal medicine. Historically, companies have experienced substantial commercial success through the deployment of specialized sales forces which can address a majority of key prescribers, particularly within the cholesterol treatment marketplace. Therefore, we expect to utilize a specialized sales force in North America for the sales and marketing of product candidates that we may successfully develop. Based upon sales models, we estimate that we could effectively promote (supplementing a commercial partner’s sales efforts) for hyperlipidemia to 20,000 high prescribing physicians with approximately 150 sales representatives. If we obtain additional label indications for AEGR-733 or AEGR-427 (implitapide) we may choose to increase our sales force size to promote these new uses. Due to their concentrated and focused nature, specialty target audiences may be reached with more focused and cost-effective marketing campaigns. Outside of North America, and in situations or markets where a more favorable return may be realized through licensing commercial rights to a third party, we may license a portion or all of our commercial rights in a territory to a third party in exchange for one or more of the following: up-front payments, research funding, development funding, milestone payments and royalties on drug sales.

We intend to build the commercial infrastructure necessary to bring AEGR-733 and AEGR-427 (implitapide) to market alone or in collaboration with a co-development and/or co-promotion partner. In addition to a specialty sales force, sales management, internal sales support, and an internal marketing group, we will need to establish capabilities to manage key accounts, such as managed care organizations, group purchasing organizations, specialty pharmacies, and government accounts. We may also choose to employ medical sales liaisons personnel to support the product.

Regulatory Matters

Government Regulation and Product Approval

Government authorities in the United States, at the federal, state and local level, and other countries extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, marketing and export and import of products such as those we are developing. Our drugs must be approved by FDA through the new drug application, or NDA, process before they may be legally marketed in the United States.

United States Drug Development Process

In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with the applicable United States requirements at any time during the product development process, approval process or after approval, may subject an applicant to administrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an

 

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approval, a clinical hold, warning letters, product recalls, product seizures, total or partial suspension of production or distribution injunctions, fines, refusals of government contracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The process required by the FDA before a drug may be marketed in the United States generally involves the following:

 

   

completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices or other applicable regulations;

 

   

submission to the FDA of an investigational new drug application, or IND, which must become effective before human clinical trials may begin;

 

   

performance of adequate and well-controlled human clinical trials according to Good Clinical Practices to establish the safety and efficacy of the proposed drug for its intended use;

 

   

submission to the FDA of an NDA;

 

   

satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance with current good manufacturing practice, or cGMP, to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity; and

 

   

FDA review and approval of the NDA.

The testing and approval process requires substantial time, effort and financial resources, and we cannot be certain that any approvals for our product candidates will be granted on a timely basis, if at all.

Once a pharmaceutical candidate is identified for development it enters the preclinical testing stage. Preclinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturing information and analytical data, to the FDA as part of the IND. The sponsor will also include a protocol detailing, among other things, the objectives of the first phase of the clinical trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the first phase lends itself to an efficacy evaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during studies due to safety concerns or non-compliance.

All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with good clinical practice regulations. These regulations include the requirement that all research subjects provide informed consent. Further, an institutional review board, or IRB, must review and approve the plan for any clinical trial before it commences at any institution. An IRB considers, among other things, whether the risks to individuals participating in the trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the information regarding the trial and the consent form that must be provided to each trial subject or his or her legal representative and must monitor the study until completed.

Each new clinical protocol must be submitted to the IND for FDA review, and to the IRBs for approval. Protocols detail, among other things, the objectives of the study, dosing procedures, subject selection and exclusion criteria, and the parameters to be used to monitor subject safety.

Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:

 

   

Phase I: The drug is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption, metabolism, distribution and excretion. In the case of some products for severe or life-threatening diseases, especially when the product may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing is often conducted in patients.

 

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Phase II: Involves studies in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.

 

   

Phase III: Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population at geographically dispersed clinical study sites. These studies are intended to establish the overall risk-benefit ratio of the product and provide, if appropriate, an adequate basis for product labeling.

Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events. Phase I, Phase II, and Phase III testing may not be completed successfully within any specified period, if at all. The FDA or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients.

Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final drug. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

U.S. Review and Approval Processes

The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of the drug, proposed labeling, and other relevant information are submitted to the FDA as part of an NDA requesting approval to market the product. The submission of an NDA is subject to the payment of user fees; a waiver of such fees may be obtained under certain limited circumstances.

In addition, under the Pediatric Research Equity Act of 2003, or PREA, an NDA or supplement to an NDA must contain data to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the drug is safe and effective. The FDA may grant deferrals for submission of data or full or partial waivers. Unless otherwise required by regulation, PREA does not apply to any drug for an indication for which orphan designation has been granted.

The FDA reviews all NDAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA may request additional information rather than accept a NDA for filing. In this event, the NDA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. FDA may refer the NDA to an advisory committee for review, evaluation and recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations. The approval process is lengthy and difficult and the FDA may refuse to approve an NDA if the applicable regulatory criteria are not satisfied or may require additional clinical or other data and information. Even if such data and information is submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret the same data. The FDA may issue an approvable letter, which may require additional clinical or other

 

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data or impose other conditions that must be met in order to secure final approval of the NDA. The FDA reviews an NDA to determine, among other things, whether a product is safe and effective for its intended use and whether its manufacturing is cGMP-compliant to assure and preserve the product’s identity, strength, quality and purity. Before approving an NDA, the FDA will inspect the facility or facilities where the product is manufactured.

NDAs receive either standard or priority review. A drug representing a significant improvement in treatment, prevention or diagnosis of disease may receive priority review. In addition, products studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may receive accelerated approval and may be approved on the basis of adequate and well-controlled clinical trials establishing that the drug product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit or on the basis of an effect on a clinical endpoint other than survival or irreversible morbidity. As a condition of approval, the FDA may require that a sponsor of a drug receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials. Priority review and accelerated approval do not change the standards for approval, but may expedite the approval process.

If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require us to conduct Phase IV testing which involves clinical trials designed to further assess a drug’s safety and effectiveness after NDA approval, and may require testing and surveillance programs to monitor the safety of approved products which have been commercialized.

Patent Term Restoration and Marketing Exclusivity

Depending upon the timing, duration and specifics of FDA approval of the use of AEGR-733 or AEGR-427 (implitapide), some of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent term restoration period is generally one-half the time between the effective date of an IND, and the submission date of an NDA, plus the time between the submission date of an NDA and the approval of that application. Only one patent applicable to an approved drug is eligible for the extension and the extension must be applied for prior to expiration of the patent. The United States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we intend to apply for restorations of patent term for some of our currently owned or licensed patents to add patent life beyond their current expiration date, depending on the expected length of clinical trials and other factors involved in the filing of the relevant NDA.

Market exclusivity provisions under the FDCA also can delay the submission or the approval of certain applications. The FDCA provides a five-year period of non-patent marketing exclusivity within the United States to the first applicant to gain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review an abbreviated new drug application, or ANDA, or a 505(b)(2) NDA submitted by another company for another version of such drug where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement. The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by FDA to be essential to the approval of the application, for example, for new indications, dosages, or strengths of an existing drug. This three-year exclusivity covers only the conditions associated with the new clinical investigations and does not prohibit the

 

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FDA from approving ANDAs for drugs containing the original active agent. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA; however, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.

Pediatric exclusivity is another type of exclusivity in the United States. Pediatric exclusivity, if granted, provides an additional six months to an existing exclusivity or statutory delay in approval resulting from a patent certification. This six-month exclusivity, which runs from the end of other exclusivity protection or patent delay, may be granted based on the voluntary completion of a pediatric study in accordance with an FDA-issued “Written Request” for such a study. The current pediatric exclusivity provision is scheduled to end on October 1, 2007, but it may be reauthorized.

Orphan Drug Designation

Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making available in the United States a drug for this type of disease or condition will be recovered from sales in the United States for that drug. Orphan drug designation must be requested before submitting an NDA. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in or shorten the duration of the regulatory review and approval process.

If a product that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same drug for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, also could block the approval of one of our products for seven years if a competitor obtains approval of the same drug as defined by the FDA or if our product candidate is determined to be contained within the competitor’s product for the same indication or disease.

Post-Approval Requirements

Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product may result in restrictions on the product or even complete withdrawal of the product from the market. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further FDA review and approval. Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws. We rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities of our products. Future FDA and state inspections may identify compliance issues at the facilities of our contract manufacturers that may disrupt production or distribution, or require substantial resources to correct.

Any drug products manufactured or distributed by us pursuant to FDA approvals are subject to continuing regulation by the FDA, including, among other things, record-keeping requirements, reporting of adverse experiences with the drug, providing the FDA with updated safety and efficacy information, drug sampling and distribution requirements, complying with certain electronic records and signature requirements, and complying with FDA promotion and advertising requirements. FDA strictly regulates labeling, advertising, promotion and other types of information on products that are placed on the market. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label.

 

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From time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions governing the approval, manufacturing and marketing of products regulated by the FDA. In addition, FDA regulations and guidance are often revised or reinterpreted by the agency in ways that may significantly affect our business and our products. It is impossible to predict whether legislative changes will be enacted, or FDA regulations, guidance or interpretations changed or what the impact of such changes, if any, may be.

Foreign Regulation

In addition to regulations in the United States, we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our products. Whether or not we obtain FDA approval for a product, we must obtain approval of a product by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries. The approval process varies from country to country and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.

Under European Union regulatory systems, we may submit marketing authorization applications either under a centralized or decentralized procedure. The centralized procedure, which is compulsory for medicines produced by certain biotechnological processes and optional for those which are highly innovative, provides for the grant of a single marketing authorization that is valid for all European Union member states. For drugs without approval in any Member State, the decentralized procedure provides for approval by one or more other, or concerned, Member States of an assessment of an application performed by one Member State, known as the reference Member State. Under this procedure, an applicant submits an application, or dossier, and related materials (draft summary of product characteristics, draft labeling and package leaflet) to the reference Member State and concerned Member States. The reference Member State prepares a draft assessment and drafts of the related materials within 120 days after receipt of a valid application. Within 90 days of receiving the reference Member State’s assessment report, each concerned Member State must decide whether to approve the assessment report and related materials. If a Member State cannot approve the assessment report and related materials on the grounds of potential serious risk to public health, the disputed points may eventually be referred to the European Commission, whose decision is binding on all Member States.

Reimbursement

Sales of pharmaceutical products depend in significant part on the availability of third-party reimbursement. Third-party payors include government health administrative authorities, managed care providers, private health insurers and other organizations. We anticipate third-party payors will provide reimbursement for our products. However, these third-party payors are increasingly challenging the price and examining the cost-effectiveness of medical products and services. In addition, significant uncertainty exists as to the reimbursement status of newly approved healthcare products. We may need to conduct expensive pharmacoeconomic studies in order to demonstrate the cost-effectiveness of our products. Our product candidates may not be considered cost-effective. It is time consuming and expensive for us to seek reimbursement from third-party payors. Reimbursement may not be available or sufficient to allow us to sell our products on a competitive and profitable basis.

The passage of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or the MMA, imposes new requirements for the distribution and pricing of prescription drugs for Medicare beneficiaries, and includes a major expansion of the prescription drug benefit under a new Medicare Part D. Medicare Part D went into effect on January 1, 2006. Under Part D, Medicare beneficiaries may enroll in prescription drug plans offered by private entities which will provide coverage of outpatient prescription drugs. Part D plans include both stand-alone prescription drug benefit plans and prescription drug coverage as a supplement to Medicare Advantage plans. Unlike Medicare Part A and B, Part D coverage is not standardized. Part D prescription drug plan sponsors are not required to pay for all covered Part D drugs, and each drug plan

 

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can develop its own drug formulary that identifies which drugs it will cover and at what tier or level. However, Part D prescription drug formularies must include drugs within each therapeutic category and class of covered Part D drugs, though not necessarily all the drugs in each category or class. Any formulary used by a Part D prescription drug plan must be developed and reviewed by a pharmacy and therapeutic committee.

It is not clear what effect the MMA will have on the prices paid for currently approved drugs and the pricing options for new drugs approved after January 1, 2006. Government payment for some of the costs of prescription drugs may increase demand for products for which we receive marketing approval. However, any negotiated prices for our products covered by a Part D prescription drug plan will likely be lower than the prices we might otherwise obtain. Moreover, while the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own payment rates. Any reduction in payment that results from the MMA may result in a similar reduction in payments from non-governmental payors.

We expect that there will continue to be a number of federal and state proposals to implement governmental pricing controls and limit the growth of healthcare costs, including the cost of prescription drugs. At the present time, Medicare is prohibited from negotiating directly with pharmaceutical companies for drugs. However, Congress is currently considering passing legislation that would lift the ban on federal negotiations. While we cannot predict whether such legislative or regulatory proposals will be adopted, the adoption of such proposals could have a material adverse effect on our business, financial condition and profitability.

In addition, in some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing vary widely from country to country. For example, the European Union provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products.

Employees

As of May 15, 2007, we had eleven employees. All of our employees are engaged in administration, finance, clinical and business development functions. We believe our relations with our employees are good.

Property and Facilities

We are currently subleasing approximately 7,201 square feet of office space in Bridgewater, New Jersey, which we occupy under a sublease that commenced on June 27, 2006 and will expire on October 24, 2010. We believe our existing facilities are adequate for our current needs and that additional space will be available in the future on commercially reasonable terms as needed.

Legal Proceedings

We are not currently subject to any material legal proceedings.

 

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MANAGEMENT

The following table sets forth information regarding our directors and executive officers, including their ages as of March 31, 2007.

 

Name

   Age   

Position

Gerald Wisler

   50    President, Chief Executive Officer and Director

William J. Sasiela, Ph.D.

   41    Chief Medical Officer, Senior Vice President, Clinical

William H. Lewis

   38    Chief Financial Officer and Senior Vice President, Finance and Administration

David I. Scheer

   54    Chairman of the Board

Antonio M. Gotto Jr., M.D., D.Phil.(2)(3)

   71    Director

Jason Fisherman, M.D.(1)(3)

   50    Director

Kevin Johnson, Ph.D.(3)

   46    Director

Alison de Bord(1)(2)

   34    Director

David A. Arkowitz(2)

   44    Director

(1) Member of the nominating and corporate governance committee.
(2) Member of the audit committee.
(3) Member of the compensation committee.

Executive Officers and Directors

Gerald Wisler. Mr. Wisler, a co-founder of Aegerion, has served as our Chief Executive Officer since February 2005, as our President since July 2005 and as a member of our board of directors since October 2005. From June 2003 to September 2004, Mr. Wisler served as a Vice President in Cardiovascular & Metabolic Brand Management at Novartis Pharmaceuticals Corporation, where he was responsible for its cardiovascular and metabolic franchises. From March 1983 to June 2003, Mr. Wisler held positions at Merck and Co., Inc., the last as Vice President, Managed Care, and for the five years before that as Vice President of Marketing with responsibilities for the U.S. Atherosclerosis franchise, which included Zocor, in which he was responsible for the commercialization of those products. During this tenure, he played a key role in the decision by Merck to enter into a joint venture with Schering-Plough for the development and commercialization of Zetia and Vytorin. Mr. Wisler holds a B.S. in Pharmacy from the University of Toledo College of Pharmacy and an M.B.A. in Finance from the University of Toledo College of Business.

William J. Sasiela, Ph.D. Dr. Sasiela has served as our Chief Medical Officer and Vice President of Clinical since December 2005 and as our Senior Vice President of Clinical since February 2007. From March 1996 to December 2005, Dr. Sasiela held several roles at Parke-Davis, now a subsidiary of Pfizer Inc., most recently serving as Senior Director and Team Leader, in which he was responsible for the world-wide Lipitor (atorvastatin) medical program and involved in the development of certain atherosclerosis products, as well as strategy and licensing activities within the atherosclerosis and metabolic areas. Dr. Sasiela holds a B.S. in biochemistry from Virginia Tech and a Ph.D. from the University of South Carolina School of Medicine, and also conducted post-doctoral research at the University of North Carolina, Chapel Hill.

William H. Lewis. Mr. Lewis, a co-founder of Aegerion, has served as our Chief Financial Officer since March 2005, as our Secretary, Treasurer and Vice President of Administration since July 2005 and as our Senior Vice President of Finance and Administration since February 2007. From August 2004 to March 2005, Mr. Lewis served as Managing Director at a hedge fund, in which he focused on investments in small market capitalization companies. From August 2002 to April 2004, he served as a Managing Director at Wells Fargo Securities as Head of Capital Markets Investment Banking, in which he was responsible for sourcing, overseeing and executing private and public debt and equity transactions. From 2000 to 2002, Mr. Lewis served as a

 

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Principal at Robertson Stephens & Company, in which he was responsible for overseeing private and public debt and equity transactions. From 1996 to 2000, Mr. Lewis served as a Vice President at JP Morgan, in which he focused on private and public equity offerings in the United States and Europe. Mr. Lewis holds a B.A. cum laude from Oberlin College and a M.B.A./J.D. with Honors from Case Western Reserve University. Prior to attending graduate school he worked as an Operations Officer for the U.S. Government.

David I. Scheer. Mr. Scheer, a co-founder of Aegerion, has served as our Chairman of the Board since February 2005. Since 1981, Mr. Scheer has served as President at Scheer & Company, Inc., a company that provides corporate strategic advisory services in the life sciences industry. Mr. Scheer serves as the Chairman of the Board of Tengion, Inc. and Achillion Pharmaceuticals, Inc., and a member of the Advisory Board to the Harvard Malaria Initiative and the Leadership Council for the Harvard School of Public Health. Mr. Scheer holds an A.B. cum laude from Harvard College and an M.S. from Yale University.

Antonio M. Gotto Jr., M.D., D.Phil. Dr. Gotto has served as a member of our board of directors since January 2006. Since January 1997, Dr. Gotto has served as the Stephen and Suzanne Weiss Dean of the Joan and Sanford I. Weill Medical College of Cornell University and Provost for Medical Affairs of Cornell University. From 1976 to 1996, Dr. Gotto served as J.S. Abercrombie Chair of Atherosclerosis and Lipoprotein Research and from 1977 to 1996 as Chairman and Professor of the Department of Medicine at Baylor College of Medicine and Methodist Hospital. Dr. Gotto currently serves as a member of the Institute of Medicine of the National Academy of Sciences and a Fellow of the American Academy of Arts and Sciences, and is also a Past President of the International Atherosclerosis Society and a Past President of the American Heart Association. Dr. Gotto received his Bachelor’s degree from Vanderbilt University in 1957. In 1961, Dr. Gotto was awarded a Doctor of Philosophy from Oxford University in England, where he was a Rhodes Scholar. Dr. Gotto received his Doctor of Medicine from Vanderbilt University School of Medicine in 1965, and completed his residency training at Massachusetts General Hospital in Boston.

Jason Fisherman, M.D. Dr. Fisherman has served as a member of our board of directors since December 2005. Since 1994, Dr. Fisherman has worked at Advent International Corporation, a global private equity firm where he is Managing Director, specializing in biotechnology and emerging pharmaceutical investments. Previously, Dr. Fisherman served from 1991 to 1994 as Senior Director of Medical Research at Enzon, Inc., a biopharmaceutical company. From 1989 to 1991, Dr. Fisherman served as Senior Investigator at the National Cancer Institute, where he managed the clinical development of a number of oncology drugs. Dr. Fisherman serves as a member of the board of directors of several life science companies, including, Torrey Pines Therapeutics, Inc. and Achillion Pharmaceuticals, Inc. Dr. Fisherman holds a B.A. from Yale University, an M.D. from the University of Pennsylvania and an M.B.A. from the Wharton School of the University of Pennsylvania.

Kevin Johnson, Ph.D. Dr. Johnson has served as a member of our board of directors since May 2006. Dr. Johnson has served as a Partner at Ash Biotech Consulting Ltd. since July 2003, a venture advisor of Index Ventures since October 2004 and Chief Executive Officer at PanGenetics BV since July 2005. From January 2000 to June 2003, Dr. Johnson served as Chief Technology Officer and a member of the board of directors at Cambridge Antibody Technologies, a European biotechnology company. Dr. Johnson holds a BSc (hons) in Molecular Biology from Edinburgh University and a Ph.D. in Pathology from Cambridge University.

Alison de Bord. Ms. de Bord has served as a member of our board of directors since December 2005. Ms. de Bord is a Director at Alta BioPharma Partners III, L.P., or Alta Partners, where she focuses on life sciences investing. She joined Alta Partners in 2001. Previously, Ms. de Bord served from 1995 to 1997 as an Associate and from 1999 to 2001 as a Senior Associate at Robertson Stephens & Company in the Life Sciences Investment Banking Group, in which she was responsible for various corporate finance transactions. From 1994 to 1995, Ms. de Bord served as an Associate at Geron Corporation, a biotechnology company, in its business development group. Ms. de Bord serves as a member of the board of directors of Insulet Corporation and SurgRx, Inc. Ms. de Bord holds a B.A. from Colgate University and an M.B.A. from Columbia University.

 

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David A. Arkowitz. Mr. Arkowitz has served as a member of our board of directors since May 2007. Since April 2007, Mr. Arkowitz has served as Chief Financial Officer and Chief Business Officer of Advanced Magnetics, Inc., where he is responsible for all finance, treasury, business development and investor relations functions. Previously, Mr. Arkowitz served from 2003 to 2007 as Chief Financial Officer and Treasurer of Idenix Pharmaceuticals Inc., where he helped lead the company’s initial public offering and played an integral role in the establishment of essential infrastructure and key governance and business processes to support the company’s growth and commercialization of its first product. From 1990 to 2003, Mr. Arkowitz worked at Merck & Co., Inc., where he held positions of increasing responsibility, including Vice President & Controller for Merck’s U.S. Human Health Division, Controller for the Merck Research Laboratories and Vice President, Finance and Business Development for Merck’s Canadian subsidiary. Mr. Arkowitz holds a B.A. in Mathematics from Brandeis University and an M.B.A. from Columbia University.

Scientific Advisory Board

We seek advice from a number of leading scientists and physicians on scientific and medical matters. Our scientific advisory board regularly assess:

 

   

our development programs;

 

   

our publication strategies;

 

   

new technologies relevant to our development programs; and

 

   

specific scientific and technical issues relevant to our business.

The current members of our scientific advisory board are:

David E. Cohen, M.D., Ph.D. Dr. Cohen is a director of hepatology at Brigham and Women’s Hospital and Harvard Medical School and a consultant at Merck and Co., Inc. Dr. Cohen’s research focuses on the role of phosphatidylcholine transfer protein in reverse cholesterol transport and the impact of obesity on hepatic cholesterol metabolism. Dr. Cohen is a fellow of the American College of Physicians, a chair of the Liver and Biliary Section of the American Gastroenterological Association, and a member of the American Association for the Study of Liver Diseases, the American Gastroenterological Association, the American Federation for Medical Research, the American Society for Clinical Investigation, and the Massachusetts Medical Society. He received numerous awards, including the American Liver Foundation Research Prize in 1992, the American Liver Foundation Liver Scholar Award in the years 1994 through 1997 and the International HDL Research Award in the years 2003 through 2006. Dr. Cohen holds an A.B. from Harvard College, an M.D. from Harvard University and a Ph.D. in physiology and biophysics from Harvard University.

Scott M. Grundy, M.D., Ph.D. Dr. Grundy is Professor of Internal Medicine and Director at the Center for Nutrition at the University of Texas Southwestern Medical Center. Dr. Grundy’s research focuses on cholesterol and lipoprotein metabolism. He was awarded the American Heart Association Distinguished Achievement Award in 1997 and the Baylor College of Medicine Distinguished Alumnus Award in 1998.

Jay D. Horton, M.D. Dr. Horton is Associate Professor of Internal Medicine and Molecular Genetics and the Dr. Robert C. and Veronica Atkins Chair in Obesity and Diabetes Research at the University of Texas Southwestern Medical Center. Dr. Horton’s research interests are in the molecular regulation of fat and cholesterol metabolism. Dr. Horton obtained his B.S. and M.D. degrees from the University of Iowa and completed his internal medicine residency and fellowship in gastroenterology at the University of Texas Southwestern Medical Center. He then completed a Howard Hughes post-doctoral fellowship in the Department of Molecular Genetics at the University of Texas Southwestern Medical Center. Dr. Horton is a former PEW scholar and member of the American Society for Clinical Investigation.

 

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Willis C. Maddrey, MD, MCAP, FRCP (London). Dr. Maddrey is Professor of Internal Medicine and the Executive Vice President for Clinical Affairs at The University of Texas Southwestern Medical Center. He is the Adelyn and Edmund M. Hoffman Distinguished Chair in Medical Science at The University of Texas Southwestern Medical Center. Dr. Maddrey holds a B.S. from Wake Forest University and an M.D. from The Johns Hopkins University School of Medicine. Dr. Maddrey completed his residency at the Osler Medical Service of The Johns Hopkins Hospital and his postgraduate fellowship in liver disease with Dr. Gerald Klatskin at Yale University School of Medicine.

James M. McKenney, Pharm.D. Dr. McKenney is President and Chief Executive Officer of National Clinical Research, Professor Emeritus of the School of Pharmacy of Virginia Commonwealth University and President and a member of the board of directors of the National Lipid Association. Dr. McKenney has been a member of the Coordinating and Executive Committees of the National Cholesterol Education Program and Chairman of the National Lipid Association’s Task Force on the Safety of Lipid Altering Drugs. He was also appointed to the Adult Treatment Panels II and III in 1990 to 1992 and 1999 to 2001, respectively, which developed guidelines for the evaluation and treatment of hyperlipidemia. Additionally, Dr. McKenney was awarded a Fellowship in the American Society of Hospital Pharmacists in 1998, a Fellowship in the Council on Arteriosclerosis by the American Heart Association in 1993 and the Clinical Practice Award for lifetime contributions made to pharmacy practice by the American College of Clinical Pharmacy in 1996. Dr. McKenney holds a B.S. in pharmacy from the Medical College of Virginia and a Pharm.D. from Wayne State University.

Daniel J. Rader, M.D. Dr. Rader is the Cooper-McClure Professor of Medicine and Professor of Pathology and Pharmacology at the University of Pennsylvania School of Medicine, the Associate Director of UPenn’s Institute for Translational Medicine and Therapeutics, the Director of the Translational Research Center, Director of Preventive Cardiovascular Medicine and Lipid Clinic and the Director of the Lipid-Atherosclerosis Research Unit. Dr. Rader’s research focuses on genetic and pharmacologic regulation of lipoprotein metabolism and atherosclerosis, human genetics of lipid disorders and atherosclerosis, novel approaches to treatment of dyslipidemia and regression of atherosclerosis, and HDL metabolism. Dr. Rader received his undergraduate degree from Lehigh University and his medical degree from the Medical College of Pennsylvania. He completed an internship and residency in internal medicine at Yale-New Haven Hospital, followed by a year as a Chief Resident. In 1988, he began a fellowship in lipid metabolism at the Molecular Disease Branch of the National Heart, Lung, and Blood Institute of the National Institutes of Health, and was subsequently appointed to a staff scientist position. He was recruited in 1994 to the University of Pennsylvania.

Frank Sacks, M.D. Dr. Sacks is an attending physician at Brigham and Women’s Hospital where he has a specialty clinic in hyperlipidemia. Dr. Sacks is involved in research and public policy initiatives in the areas of nutrition, cholesterol disorders, hypertension, and cardiovascular disease. His research specifically focuses on the acute and long-term effects of diet on the kinetics of lipoproteins. Dr. Sacks serves as the Chair of the Steering Committee for the National Heart, Lung and Blood Institute’s, or NHLBI’s, Dietary Approaches to Stop Hypertension-Sodium trial, the Co-Chair of the Optimal Macronutrient Intake Trial to Prevent Heart Disease and the Principal Investigator of an NHBLI trial researching the dietary approaches for weight loss and maintenance. He also served as the Principal Investigator of the Cholesterol and Recurrent Events trial. He is a member of the American Heart Association Nutrition Committee and the National Institute of Health’s Nutrition Study Section. Dr. Sacks has chaired conferences and has over 110 publications. Dr. Sacks holds an M.D. from Columbia University.

Board of Directors

We currently have seven directors. Upon completion of this offering, the board of directors will be divided into three classes with members of each class of directors serving for three-year terms. Our board of directors will consist of three Class I directors (currently Dr. Kevin Johnson, Mr. Arkowitz and Dr. Antonio Gotto), two Class II directors (currently Dr. Jason Fisherman and Alison de Bord) and two Class III directors (currently

 

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David Scheer and Gerald Wisler), whose initial terms will expire at the annual meetings of stockholders held in 2008, 2009 and 2010, respectively. Our classified board could have the effect of making it more difficult for a third party to acquire control of us.

Our by-laws provide that any vacancies in our board of directors and newly created directorships may be filled only by our board of directors and that the authorized number of directors may be changed only by our board of directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes, so that, as nearly as possible, each class will consist of one-third of the total number of directors. These provisions of our by-laws and the classification of the board of directors may have the effect of delaying or preventing changes in the control or management of Aegerion.

Each executive officer is elected by, and serves at the discretion of, the board of directors. Each of our executive officers and directors, other than non-employee directors, devotes his or her full time to our affairs. Each of our directors currently serves on the board of directors pursuant to a stockholders agreement. The stockholders agreement, including the provisions relating to the nomination and election of directors, will terminate upon the closing of this offering. There are no family relationships among any of our directors or officers.

Our board of directors has considered the relationships of all directors and, where applicable, the transactions involving them described below under “Certain Relationships and Related Person Transactions,” and determined that each of Drs. Gotto, Fisherman and Johnson, Mr. Arkowitz and Ms. de Bord does not have any relationship which would interfere with the exercise of independent judgment in carrying out his or her responsibility as a director and that each director qualifies as an independent director under the applicable rules of The NASDAQ Global Market.

Board Committees

Our board of directors has established an audit committee, a compensation committee and a nominating and corporate governance committee, each of which operates pursuant to a separate charter adopted by our board of directors. The composition and functioning of all of our committees will comply with all applicable requirements of the Sarbanes-Oxley Act of 2002, The NASDAQ Global Market and Securities and Exchange Commission rules and regulations, except that with respect to the independent audit committee requirements our audit committee will rely upon the phase in rules of The NASDAQ Global Market and the Securities and Exchange Commission, as further described below.

Audit Committee

Mr. Arkowitz, Dr. Gotto and Ms. de Bord currently serve on the audit committee. Mr. Arkowitz qualifies as an “audit committee financial expert” for purposes of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Under the applicable rules of The NASDAQ Global Market, a company listing in connection with its initial public offering is permitted to phase in its compliance with the independent audit committee requirements set forth in Marketplace Rule 4350(d)(2) on the same schedule as it is permitted to phase in its compliance with the independent audit committee requirement pursuant to Rule 10A-3(b)(1)(iv)(A) under the Securities and Exchange Act of 1934, as amended, that is, (1) one independent member at the time of listing; (2) a majority of independent members within 90 days of listing; and (3) all independent members within one year of listing. Mr. Arkowitz and Dr. Gotto are each independent under the rules of The NASDAQ Global Market and Rule 10A-3 of the Exchange Act. Within one year of our listing on The NASDAQ Global Market, we expect that Ms. de Bord will resign from our audit committee and be replaced with a new director that is also independent under these rules.

The audit committee’s responsibilities include:

 

   

appointing, approving the compensation of, and assessing the independence of our independent registered public accounting firm;

 

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pre-approving auditing and permissible non-audit services, and the terms of such services, to be provided by our independent registered public accounting firm;

 

   

reviewing and discussing with management and the independent registered public accounting firm our annual and quarterly financial statements and related disclosures;

 

   

coordinating the oversight and reviewing the adequacy of our internal control over financial reporting;

 

   

establishing policies and procedures for the receipt and retention of accounting related complaints and concerns; and

 

   

preparing the audit committee report required by Securities and Exchange Commission rules to be included in our annual proxy statement.

Compensation Committee

Drs. Gotto, Fisherman and Johnson currently serve on the compensation committee. The compensation committee’s responsibilities include:

 

   

annually reviewing and approving corporate goals and objectives relevant to compensation of our chief executive officer;

 

   

evaluating the performance of our chief executive officer in light of such corporate goals and objectives and determining the compensation of our chief executive officer;

 

   

reviewing and approving the compensation of all our other officers;

 

   

overseeing and administering our employment agreements, severance arrangements, compensation, welfare, benefit and pension plans and similar plans; and

 

   

reviewing and making recommendations to the board with respect to director compensation.

Nominating and Corporate Governance Committee

Dr. Fisherman and Ms. de Bord currently serve on the nominating and corporate governance committee. The nominating and corporate governance committee’s responsibilities include:

 

   

developing and recommending to the board criteria for selecting board and committee membership;

 

   

establishing procedures for identifying and evaluating director candidates including nominees recommended by stockholders;

 

   

identifying individuals qualified to become board members;

 

   

recommending to the board the persons to be nominated for election as directors and to each of the board’s committees;

 

   

developing and recommending to the board a code of business conduct and ethics and a set of corporate governance guidelines;

 

   

conducting appropriate review of all related party transactions; and

 

   

overseeing the evaluation of the board, its committees and management.

Compensation Committee Interlocks and Insider Participation

None of our executive officers serves as a member of the board of directors or compensation committee, or other committee serving an equivalent function, of any other entity that has one or more of its executive officers serving as a member of our board of directors or who will serve on our compensation committee. None of the members of our compensation committee will have ever been one of our employees.

 

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COMPENSATION

Compensation Discussion and Analysis

Background and Overview of Our Executive Compensation Objectives, Policies and Procedures

Our primary objectives with respect to executive compensation are attracting and retaining individuals who possess knowledge, experience and skills that we believe are important to the development of our business of developing and commercializing small-molecule therapeutics to treat cardiovascular and metabolic disease. To achieve these objectives, we seek to provide a competitive compensation package that ties a substantial portion of the executive’s overall compensation to our clinical, regulatory, commercial and operational performance.

As a recently formed company with only ten employees as of March 31, 2007, we have not yet developed comprehensive compensation policies and procedures typical of larger companies with longer operating history. Following our inception in February 2005, David I. Scheer, our sole director at the time, sought to bring together a management team he believed, based upon his more than twenty years of experience in the biopharmaceuticals industry, had the relevant skills and experience to manage an early-stage pre-commercial company with the goal of developing and commercializing small-molecule therapeutics to treat cardiovascular and metabolic disease. To date, we have not retained a compensation consultant to review our policies and procedures with respect to executive compensation. In determining an appropriate compensation package for our initial hires, Mr. Scheer drew upon his own experience with three early stage life science companies, Achillion Pharmaceuticals, Inc., Esperion Therapeutics, Inc. and Tengion Inc., and also conducted a review of the compensation packages of executive officers at five other similarly situated companies, AVI Biopharma Inc., Biocryst Pharmaceuticals, Inc., Cardiome Pharma Corp., Exelixis, Inc. and Metabasis Therapeutics, Inc., based primarily on publicly available data relating to the compensation practices and policies of other companies within and outside of the biotechnology industry, and on two surveys of executive compensation paid by peer companies in the biopharmaceutical industry: the BioWorld Executive Compensation Report conducted by The BioWorld Group and the Radford Biotechnology Survey conducted by Aon Corporation. Mr. Scheer was responsible for the initial hiring of Gerald Wisler as a consultant in December 2004 and as our Chief Executive Officer beginning in February 2005. In April 2005, we hired William Lewis to be our Chief Financial Officer. Messrs. Wisler and Lewis purchased shares of our common stock in April 2005, which shares are subject to vesting based on their continued full time employment with us. Messrs. Wisler and Lewis each entered into an employment agreement with us on July 1, 2005. William J. Sasiela, Ph.D., became our third employee when we hired him as our Chief Medical Officer in December 2005. Concurrent with his entering into an employment agreement with us, Dr. Sasiela also purchased shares of our common stock, which shares are subject to vesting based on his continued full time employment. The details of our employment agreements with each of our executive officers are discussed below in “—Employment Agreements and Severance Arrangements” and the details of the restrictions on the common stock purchased by Messrs. Wisler and Lewis and Dr. Sasiela are discussed below in “—Outstanding Shares of Restricted Stock at Fiscal Year End.”

Since our Series A financing on December 15, 2005, which resulted in the addition of four directors, our board of directors has sought to develop a more formal compensation system by adopting our 2006 Stock Option and Grant Plan, or 2006 Option Plan, in May 2006 and establishing a compensation committee to assist our board of directors in making decisions about compensation matters. Once we become a public company, our compensation committee will be primarily responsible for developing and implementing our compensation policies and establishing and approving the compensation for all of our executive officers. Although we have not adopted any formal guidelines for allocating total compensation between equity compensation and cash compensation, we intend to implement and maintain compensation plans that tie a substantial portion of our executives’ overall compensation to the achievement of corporate goals and value-creating milestones, such as the establishment and maintenance of key strategic relationships and the clinical development of our product candidates. We have also recently adopted an equity grant policy that formalizes how we grant equity by setting a regular schedule for grants, outlining grant approval requirements and specifying how awards are priced. We expect that this equity grant policy will enhance the effectiveness of our internal control over the equity grant process. In the future, our compensation committee may continue to review the compensation packages offered

 

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by peer companies and may choose to retain the services of third-party executive compensation specialists from time to time, as it sees fit, in connection with the establishment of cash and equity compensation and related policies. While peer group market data and reports from third party consultants provide useful starting points for compensation decisions, our compensation committee may also take into account factors such as level of responsibility, prior experience and individual performance in arriving at final compensation decisions.

Executive Compensation Components

Our executive compensation primarily consists of base salary, periodic discretionary cash incentive bonuses, equity incentive compensation and broad-based benefits programs. Each of the primary elements of our executive compensation is discussed in detail below, including a description of the particular element and how it fits into our overall executive compensation and a discussion of the amounts of compensation paid to our named executive officers in 2006 under each of these elements. Our named executive officers include the individuals who served as our chief executive officer and chief financial officer, as well as our other most highly compensated executive officers who served in such capacities during 2006.

Annual Cash Compensation

Base Salary

Base salaries for our named executive officers are intended to be competitive with those received by other individuals in similar positions at our peer group companies. The base salaries of our executive officers are reviewed annually and adjusted to reflect individual roles and performance. We may also increase the base salary of an executive officer at other times if a change in the scope of the officer’s responsibilities justifies such consideration. We believe that a competitive base salary is a necessary element of any compensation program that is designed to attract and retain talented and experienced executives. We also believe that attractive base salaries can motivate and reward executives for their overall performance. Although base salaries are established in part based on the individual experience, skills and expected contributions of our executives and our executives’ performance during the prior year, we do not view base salaries as primarily serving our objective of paying for performance.

In 2006, the base salaries of our named executive officers were: Mr. Wisler, $296,400 per year; Mr. Lewis, $234,000 per year; and Dr. Sasiela, $225,000 per year. The base salaries of our executives were based on our understanding of market conditions at the time, the individual experience and skills of, and expected contribution from, each executive, the roles and responsibilities of the executive, the base salaries of our existing executives and other factors. We review base salaries periodically and may adjust them to reflect market increases, the growth and stage of development of our company, our executives’ performance and increased experience and other factors.

Cash Incentive Bonuses

Our compensation committee has the authority to award annual performance-based cash bonuses to our executive officers and certain non-executive employees. The amount of the cash bonus generally depends on the level of achievement of corporate and individual objectives established at the beginning of the fiscal year, with a target bonus generally set as a percentage of base salary. At the end of the fiscal year, each employee is required to complete a self-evaluation referencing their specific accomplishments against their stated objectives, which our compensation committee will use as a factor in making bonus decisions. Our compensation committee has discretion to award cash bonuses that are less than or greater than these target amounts.

At the beginning of 2006, we established certain corporate objectives relating to, among other things:

 

   

initiating and conducting clinical trials (65% weighting);

 

   

evaluating and pursuing opportunities to in-license new technology for development (20% weighting);

 

   

developing a plan to address Aegerion’s ongoing financial needs (10% weighting); and

 

   

recruiting employees in positions important for Aegerion’s development (5% weighting).

 

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The weighting assigned by the compensation committee to each corporate objective is the same for all employees; however, because corporate objectives and individual objectives may overlap, the achievement of a specific corporate objective does not, by itself, determine what percentage of the target bonus an employee will receive.

In February 2007, our compensation committee determined that we pay a bonus to Mr. Wisler, Mr. Lewis and Dr. Sasiela of $118,560, $82,040 and $82,040, respectively, based upon the achievement of certain corporate and individual objectives, including (i) the initiation and advancement of three Phase II clinical trials of AEGR-733, (ii) the in-licensing of certain rights related to AEGR-733 from UPenn and AEGR-427 (implitapide) from Bayer; (iii) activities relating to preparing for our initial public offering and (iv) the hiring of a Vice President of Business Development, a Director of Clinical Operations and a Controller and Director of Finance. These bonus amounts include 100% of each executive’s target bonus for 2006, and an additional bonus of $29,640 to Mr. Wisler, $23,440 to Mr. Lewis and $25,790 to Dr. Sasiela, paid at the discretion of our board of directors.

Equity Incentive Compensation

Each of our named executive officers purchased restricted shares of common stock in connection with their initial employment with us in 2005 in the following amounts: Mr. Wisler, 1,563,066 shares for an aggregate purchase price of $2,300; Mr. Lewis, 475,715 shares for an aggregate purchase price of $700; and Dr. Sasiela, 339,797 shares for an aggregate purchase price of $500. The restricted stock purchased by each executive is subject to vesting and other provisions of their respective restricted stock agreements, which are described below. The shares purchased by Messrs. Wisler and Lewis were purchased in April 2005 in connection with the formation of Aegerion at fair market value, as determined by our board of directors. Dr. Sasiela’s shares were purchased in December 2005, at which time our board of directors determined that the fair market value was $0.91 per share. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Stock-Based Compensation.” See also “—Outstanding Shares of Restricted Stock at Fiscal Year End.”

Equity incentive grants to our executives and other employees are currently made at the discretion of our board of directors out of our 2006 Option Plan. Under the 2006 Option Plan, we may grant equity incentive awards in the form of stock options or restricted stock awards. Because of our limited operating history, no such grants were made to our named executive officers in the fiscal year ended December 31, 2006. However, in 2006 we granted options to non-executive employees in connection with their initial employment by us.

Stock option awards provide our executive officers with the right to purchase shares of our common stock at a fixed exercise price, subject to continued employment with our company. Stock options are earned on the basis of continued service to us and generally vest over four years, beginning with one-fourth vesting one year after the date of grant, then pro-rata vesting quarterly thereafter. See also “Potential Payments Upon Termination or Change-in-Control” for a discussion of the change-in-control provisions related to stock options.

Restricted stock awards provide our executive officers with the ability to purchase shares of our common stock at a fixed purchase price at the time of grant by entering into a restricted stock purchase agreement. Similar to stock options, shares of restricted stock are earned on the basis of continued service to us and generally vest over four years, beginning with one-fourth vesting one year after the date of grant and pro-rata vesting quarterly thereafter. See also “Potential Payments Upon Termination or Change-in-Control” for a discussion of the change-in-control provisions related to restricted stock.

The exercise price of each stock option granted under our 2006 Option Plan is based on the fair market value of our common stock on the date of grant. Historically, the fair market value of our common stock for purposes of determining the exercise price of stock options has been determined by our board of directors based on its analysis of a number of factors including, among others, the total company valuation implied by our initial venture capital round of financing in December 2005, the market value of similarly situated public companies, our anticipated future risks and opportunities, the rights and preferences of our Series A redeemable convertible preferred stock and the discounts customarily applicable to common stock of privately-held companies. Following this offering, we expect that all stock options will continue to be granted with an exercise price equal to the fair market value of our common stock on the date of grant, but fair market value will be defined as the

 

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closing market price of a share of our common stock on the date of grant. We do not currently have any program, plan or practice of setting the exercise price based on a date or price other than the fair market value of our common stock on the grant date.

We have granted stock options as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended, subject to the volume limitations contained in the Internal Revenue Code, and we may, in the future, grant non-qualified stock options. Generally, for stock options that do not qualify as incentive stock options, we are entitled to a tax deduction in the year in which the stock options are exercised equal to the spread between the exercise price and the fair market value of the stock for which the stock option was exercised. The holders of the non-qualified stock options are generally taxed on this same amount in the year of exercise. For stock options that qualify as incentive stock options, we do not receive a tax deduction, and the holder of the stock option may receive more favorable tax treatment than he or she would receive for a non-qualified stock option. We may choose to grant incentive stock options in order to provide these potential tax benefits to our executives and because of the limited expected benefits to our company of the potential tax deductions as a result of our historical net losses.

Our newly-adopted equity award grant policy formalizes how we will grant equity-based awards to officers and employees after this offering. Under our equity award grant policy all grants must be approved by our board of directors or compensation committee. All stock options will be awarded at fair market value and calculated based on our closing market price on the grant date. Under our equity award grant policy, equity awards will typically be made on a regularly scheduled basis, as follows:

 

   

grants made in conjunction with the hiring of a new employee or the promotion of an existing employee will be made on the first trading day of the month following the later of (i) the hire date or the promotion date or (ii) the date on which such grant is approved; and

 

   

grants made to existing employees other than in connection with a promotion will be made, if at all, on an annual basis.

Other Compensation

We currently maintain broad-based benefits and perquisites that are provided to all employees, including health insurance, life and disability insurance, dental insurance and a 401(k) plan.

Summary Compensation Table(1)

The following table sets forth certain information with respect to compensation for the year ended December 31, 2006 earned by or paid to Mr. Wisler, our President and Chief Executive Officer, Mr. Lewis, our Chief Financial Officer and Senior Vice President, Finance and Administration, and Dr. Sasiela, our Chief Medical Officer and Senior Vice President, Clinical. We refer to these individuals as our named executive officers. We had no other executive officers in 2006.

 

Name and
Principal Position

  Year   Salary($)   Bonus($)(2)(3)   Stock
Awards($)
    Non-Equity
Incentive Plan
Based
Compensation($)(2)(4)
  All Other
Compensation($)(5)
  Total($)

Gerald Wisler

President, Chief Executive Officer and Director

  2006   $ 296,400   $ 29,640     —       $ 88,920   —     $ 414,960

William H. Lewis

Chief Financial Officer and Senior Vice President, Finance and Administration

  2006   $ 234,000   $ 23,440     —       $ 58,600   —     $ 316,040

William J. Sasiela, Ph.D.

Chief Medical Officer and Senior Vice President, Clinical

  2006   $ 225,000   $ 25,790   $ 77,488 (6)   $ 56,250   —     $ 384,528

 

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(1) The column disclosing compensation under the heading “Change In Pension Value And Nonqualified Deferred Compensation Earnings” is not included because no compensation in this category was paid to our named executive officers in 2006.
(2) Bonus amounts are for performance during the fiscal year ended December 31, 2006, whether or not paid in 2006.
(3) Represents cash bonuses in excess of such named executive officer’s target bonus, paid at the discretion of our board of directors in February 2007.
(4) Represents bonuses earned based upon achievement of objectives established by our board of directors and paid in February 2007. See “—Cash Incentive Bonuses” above.
(5) Excludes medical, dental and certain other benefits received by the named executive officers that are available generally to all of our employees and certain perquisites and other personal benefits received by the named executive officers which do not exceed $10,000 in the aggregate.
(6) Represents the compensation expense under SFAS 123R, excluding our estimate of forfeiture applied by us under SFAS 123R when recognizing stock-based compensation expense for financial reporting purposes, incurred by us in 2006 in connection with the purchase by Dr. Sasiela of 339,797 shares of restricted common stock in December 2005. At December 31, 2006, there was approximately $226,005 unamortized stock-based compensation expense related to these shares, which will be amortized over the remaining vesting period for these shares. At December 31, 2006, 84,949 of these shares were fully vested with the remaining 254,848 shares to vest in equal quarterly installments through November 2009.

Grants of Plan-Based Awards

The following table sets forth certain information with respect to awards under our non-equity incentive plan made by us to our named executive officers for the year ended December 31, 2006.

 

     Payouts Under Non-Equity Incentive Plan Awards  

Name

  

            Target            

($)

               Actual            
($)
 

Gerald Wisler

President, Chief Executive Officer and Director

   $ 88,920    $ 88,920 (1)

William H. Lewis

Chief Financial Officer and Senior Vice President, Finance and Administration

   $ 58,600    $ 58,600 (1)

William J. Sasiela, Ph.D.

Chief Medical Officer and Senior Vice President, Clinical

   $ 56,250    $ 56,250 (1)

(1) Represents bonuses earned based upon achievement of objectives established by our board of directors and paid in February 2007. See “—Cash Incentive Bonuses” above.

Outstanding Shares of Restricted Stock at Fiscal Year End

Each of our named executive officers purchased restricted shares of common stock in connection with their initial employment with us in 2005. The following table sets forth certain information with respect to these shares of restricted stock at December 31, 2006. None of our named executive officers held stock options at December 31, 2006.

 

     Shares of Restricted Stock

Name

   Number of Shares
or Units of Stock
That Have Not
Vested
    Market Value
of Shares or Units
of Stock That
Have Not
Vested(1)

Gerald Wisler

   844,459 (2)   $ 10,977,967

William H. Lewis

   284,504 (3)   $ 3,698,552

William J. Sasiela, Ph.D.

   254,848 (4)   $ 3,313,024

(1) There was no public market for our common stock in 2006. We have estimated the market value of the unvested stock awards based on an assumed initial public offering price of $13.00 per share, the midpoint of the range listed on the cover page of this prospectus.

 

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(2) Under the terms of Mr. Wisler’s April 6, 2005 restricted stock agreement, the remaining unvested shares will vest in equal quarterly installments through June 30, 2009. Vesting of all restricted shares subject to the agreement accelerates if Mr. Wisler’s employment is terminated without cause in relation to the sale or other disposition of all or substantially all of our assets or a change in ownership in a single transaction or series of related transactions of fifty percent or more of our capital stock. In addition, if Mr. Wisler is terminated without cause other than in relation to a change of control, twenty-five percent of the unvested shares vest on termination. See “—Potential Payments Upon Termination or Change-In-Control” for further details.
(3) Under the terms of Mr. Lewis’s April 29, 2005 restricted stock agreement, the remaining unvested shares will vest in equal quarterly installments through June 30, 2009. Vesting of all restricted shares subject to the agreement accelerates if Mr. Lewis’s employment is terminated without cause in relation to the sale or other disposition of all or substantially all of our assets or a change in ownership in a single transaction or series of related transactions of fifty percent or more of our capital stock. In addition, if Mr. Lewis is terminated without cause other than in relation to a change of control, twenty-five percent of the unvested shares vest on termination. See “—Potential Payments Upon Termination or Change-In-Control” for further details.
(4) Under the terms of Dr. Sasiela’s December 1, 2005 restricted stock agreement, the remaining unvested shares will vest in equal quarterly installments through November 30, 2009. Vesting of all restricted shares subject to the agreement accelerates if Dr. Sasiela’s employment is terminated without cause in relation to the sale or other disposition of all or substantially all of our assets or a change in ownership in a single transaction or series of related transactions of fifty percent or more of our capital stock. In addition, if Dr. Sasiela is terminated without cause other than in relation to a change of control, twenty-five percent of the unvested shares vest on termination. See “—Potential Payments Upon Termination or Change-In-Control” for further details.

Stock and Benefit Plans

2006 Stock Option and Grant Plan

Our 2006 Option Plan was adopted by our board of directors in May 2006 and approved by our stockholders in June 2006. We reserved 1,056,809 shares of our common stock for the issuance of awards under the 2006 Option Plan.

Our 2006 Option Plan is administered by our board of directors. Our board of directors has the authority to delegate full power and authority to a committee of the board to select the individuals to whom awards will be granted, to make any combination of awards to participants, to accelerate the exercisability or vesting of any award, to provide substitute awards and to determine the specific terms and conditions of each award, subject to the provisions of the 2006 Option Plan.

The 2006 Option Plan permits us to make grants of incentive stock options, non-qualified stock options, restricted stock awards and unrestricted stock awards to officers, employees, directors, consultants and other key persons. Stock options granted under the 2006 Option Plan have a maximum term of ten years from the date of grant and incentive stock options have an exercise price of no less than the fair market value of our common stock on the date of grant.

Upon a sale event in which all awards are not assumed or substituted by the successor entity, the 2006 Option Plan and all stock options issued thereunder will terminate upon the effective time of such sale event following an exercise period. Restricted stock shall be treated as provided in the relevant award agreement. Under the 2006 Option Plan, a sale event is defined as the consummation of (i) the dissolution or liquidation of Aegerion, (ii) the sale of all or substantially all of our assets and our subsidiaries on a consolidated basis to an unrelated person or entity, (iii) a merger, reorganization or consolidation in which the outstanding shares of our common stock are converted into or exchanged for securities of the successor entity and the holders of our outstanding voting power immediately prior to such transaction do not own at least a majority of the outstanding voting power of the successor entity immediately upon completion of such transaction (taking into account only ownership interests resulting from pre-transaction interests in Aegerion), (iv) the sale, in a single transaction or

 

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series of related transactions, of all or a majority of our stock to an unrelated person or entity, or (v) any other transaction in which the holders of our outstanding voting power immediately prior to such transaction do not own at least a majority of the outstanding voting power of Aegerion or a successor entity immediately upon completion of the transaction (taking into account only ownership interests resulting from pre-transaction interests in Aegerion).

Following this offering, our board of directors will not grant any further awards under the 2006 Option Plan. We have adopted the 2007 Stock Option and Incentive Plan, under which we expect to make all future awards.

All stock option awards that are granted to the named executive officers are covered by a stock option agreement. Under the stock option agreements, 25% of the shares vest on the first anniversary of the grant date and the remaining shares vest quarterly over the following three years. Our board of directors may accelerate the vesting schedule in its discretion.

2007 Stock Option and Incentive Plan

Our 2007 Option Plan was adopted by our board of directors in April 2007 and approved by our stockholders in May 2007. The 2007 Option Plan permits us to make grants of incentive stock options, non-qualified stock options, stock appreciation rights, deferred stock awards, restricted stock awards, unrestricted stock awards and dividend equivalent rights. We reserved 4,000,000 shares of our common stock for the issuance of awards under the 2007 Option Plan. This number is subject to adjustment in the event of a stock split, stock dividend or other change in our capitalization. Generally, shares that are forfeited or canceled from awards under the 2007 Option Plan also will be available for future awards. As of the date of this prospectus, no awards had been granted under the 2007 Option Plan.

The 2007 Option Plan may be administered by either a committee of at least two non-employee directors or by our full board of directors, or the administrator. The administrator has full power and authority to select the participants to whom awards will be granted, to make any combination of awards to participants, to accelerate the exercisability or vesting of any award and to determine the specific terms and conditions of each award, subject to the provisions of the 2007 Option Plan.

All full-time and part-time officers, employees, non-employee directors and other key persons (including consultants and prospective employees) are eligible to participate in the 2007 Option Plan, subject to the discretion of the administrator. There are certain limits on the number of awards that may be granted under the 2007 Option Plan. For example, no more than 4,000,000 shares of common stock may be granted in the form of stock options or stock appreciation rights to any one individual during any one-calendar-year period.

The exercise price of stock options awarded under the 2007 Option Plan may not be less than the fair market value of our common stock on the date of the option grant and the term of each option may not exceed ten years from the date of grant. The administrator will determine at what time or times each option may be exercised and, subject to the provisions of the 2007 Option Plan, the period of time, if any, after retirement, death, disability or other termination of employment during which options may be exercised.

To qualify as incentive options, stock options must meet additional federal tax requirements, including a $100,000 limit on the value of shares subject to incentive options which first become exercisable in any one calendar year, and a shorter term and higher minimum exercise price in the case of certain large stockholders.

Stock appreciation rights may be granted under our 2007 Option Plan. Stock appreciation rights allow the recipient to receive the appreciation in the fair market value of our common stock between the exercise date and the date of grant. The administrator determines the terms of stock appreciation rights, including when such rights become exercisable and whether to pay the increased appreciation in cash or with shares of our common stock, or a combination thereof.

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administrator will determine the number of shares of restricted stock granted to any employee. The administrator may impose whatever conditions to vesting it determines to be appropriate. For example, the administrator may set restrictions based on the achievement of specific performance goals. Shares of restricted stock that do not vest are subject to our right of repurchase or forfeiture.

Deferred and unrestricted stock awards may be granted under our 2007 Option Plan. Deferred stock awards are units entitling the recipient to receive shares of stock paid out on a deferred basis, and are subject to such restrictions and conditions as the administrator shall determine. Our 2007 Option Plan also gives the administrator discretion to grant stock awards free of any restrictions.

Dividend equivalent rights may be granted under our 2007 Option Plan. Dividend equivalent rights are awards entitling the grantee to current or deferred payments equal to dividends on a specified number of shares of stock. Dividend equivalent rights may be settled in cash or shares and are subject to other conditions as the administrator shall determine.

Cash-based awards may be granted under our 2007 Option Plan. Each cash-based award shall specify a cash-denominated payment amount, formula or payment ranges as determined by the administrator. Payment, if any, with respect to a cash-based award may be made in cash or in shares of stock, as the administrator determines.

Unless the administrator provides otherwise, our 2007 Option Plan does not allow for the transfer of awards and only the recipient of an award may exercise an award during his or her lifetime.

In the event of a merger, sale or dissolution, or a similar “sale event,” unless assumed or substituted, all stock options and stock appreciation rights granted under the 2007 Option Plan will automatically become fully exercisable, all other awards granted under the 2007 Option Plan will become fully vested and non-forfeitable and awards with conditions and restrictions relating to the attainment of performance goals may become vested and non-forfeitable in connection with a sale event in the administrator’s discretion. In addition, upon the effective time of any such sale event, the 2007 Option Plan and all awards will terminate unless the parties to the transaction, in their discretion, provide for appropriate substitutions or assumptions of outstanding awards. Any award so assumed or continued or substituted shall be deemed vested and exercisable in full upon the date on which the grantee’s employment or service relationship with us terminates if such termination occurs (i) within 18 months after such sale event and (ii) such termination is by us or a successor entity without cause or by the grantee for good reason.

No awards may be granted under the 2007 Option Plan after April 2017. In addition, our board of directors may amend or discontinue the 2007 Option Plan at any time and the administrator may amend or cancel any outstanding award for the purpose of satisfying changes in law or for any other lawful purpose. No such amendment may adversely affect the rights under any outstanding award without the holder’s consent. Other than in the event of a necessary adjustment in connection with a change in our stock or a merger or similar transaction, the administrator may not “reprice” or otherwise reduce the exercise price of outstanding stock options or stock appreciation rights. Further, amendments to the 2007 Option Plan will be subject to approval by our stockholders if the amendment (i) increases the number of shares available for issuance under the 2007 Option Plan, (ii) expands the types of awards available under, the eligibility to participate in, or the duration of, the plan, (iii) materially changes the method of determining fair market value for purposes of the 2007 Option Plan, (iv) is required by the Nasdaq Global Market rules, or (v) is required by the Internal Revenue Code of 1986, as amended, or the Code, to ensure that incentive options are tax-qualified.

2007 Employee Stock Purchase Plan

Our 2007 employee stock purchase plan, which we refer to as the purchase plan, was adopted by our board of directors in April 2007 and approved by our stockholders in May 2007 and will become effective upon the completion of this offering. We have reserved a total of 600,000 shares of our common stock for issuance to participating employees under the purchase plan.

 

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All of our employees, including our directors who are employees and all employees of any of our participating subsidiaries and who are employees on the first day of the purchase plan period, will be eligible to participate in the purchase plan. Employees who would, immediately after being granted an option to purchase shares under the purchase plan, own five percent or more of the total combined voting power or value of our common stock will not be eligible to participate in the purchase plan.

We will make one or more offerings to our employees to purchase stock under the purchase plan. Offerings will begin on each January 1 and July 1, or the first business day thereafter, beginning January 1, 2008. Each offering commencement date will begin a six-month period during which payroll deductions will be made and held for the purchase of the common stock at the end of the purchase plan period.

On the first day of a designated payroll deduction period, or offering period, we will grant to each eligible employee who has elected to participate in the purchase plan an option to purchase shares of our common stock. The employee may authorize a minimum of one percent up to a maximum of ten percent of his or her compensation to be deducted by us during the offering period. On the last day of the offering period, the employee will be deemed to have exercised the option, at the option exercise price, to the extent of accumulated payroll deductions. Under the terms of the purchase plan, the option exercise price shall be equal to 85% of the closing price of the common stock on the exercise date.

An employee who is not a participant on the last day of the offering period will not be entitled to exercise any option, and the employee’s accumulated payroll deductions will be refunded. An employee’s rights under the purchase plan will terminate upon voluntary withdrawal from the purchase plan at any time, or when the employee ceases employment for any reason, except that upon termination of employment because of death, the balance in the employee’s account will be paid to the employee’s beneficiary.

401(k) Savings Plan

Our employee savings plan is intended to qualify under Section 401 of the Internal Revenue Code. Our 401(k) plan permits employees to make contributions up to the statutory limit. We have the discretion to match up to 50% of the first 6% of gross wages that an employee contributes, resulting in a maximum match by us that totals up to 3% of an employee’s gross wages. We did not match employee contributions in 2006. We may make matching contributions or additional contributions to our 401(k) plan in amounts determined annually.

Pension Benefits

None of our named executive officers participate in or have account balances in qualified or non-qualified defined benefit plans sponsored by us.

Non-Qualified Deferred Compensation

None of our named executive officers participate in or have account balances in non-qualified defined contribution plans or other deferred compensation plans maintained by us.

Employment Agreements and Severance Agreements

Gerald Wisler. On July 1, 2005, we entered into an employment agreement with Gerald Wisler for the position of President and Chief Executive Officer, which was amended in March 2007. The term of the agreement is five years. Mr. Wisler currently receives a base salary of $335,000, which is reviewed annually and may be adjusted at the discretion of the board of directors. Mr. Wisler is also eligible for a merit bonus with a target of 30% of his base salary, payable at the discretion of the board of directors if he achieves certain mutually agreed upon performance milestones set each fiscal year. The board of directors may also, at its discretion, make a grant of stock incentives to Mr. Wisler on an annual basis in recognition of his performance during the

 

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preceding year. Mr. Wisler is eligible to participate in our employee benefit plans, to the extent he is eligible for those plans, on the same terms as other similarly-situated executive officers of Aegerion.

William H. Lewis. On July 1, 2005, we entered into an employment agreement with William H. Lewis for the position of Chief Financial Officer and Vice President Finance and Administration, which was amended in March 2007. The term of the agreement is five years. Mr. Lewis currently receives a base salary of $250,000, which is reviewed annually and may be adjusted at the discretion of the board of directors. Mr. Lewis is also eligible for a merit bonus of with a target of 25% of his base salary, payable at the discretion of the board of directors if he achieves certain mutually agreed upon performance milestones set each fiscal year. The board of directors may also, at its discretion, make a grant of stock incentives to Mr. Lewis on an annual basis in recognition of his performance during the preceding year. Mr. Lewis is eligible to participate in our employee benefit plans, to the extent he is eligible for those plans, on the same terms as other similarly-situated executive officers of Aegerion.

William J. Sasiela, Ph.D. On December 1, 2005, we entered into an employment agreement with William J. Sasiela, Ph.D. for the position of Chief Medical Officer and Vice President Clinical Development, which was amended in March 2007. The term of the agreement is four years. Dr. Sasiela currently receives a base salary of $250,000, which is reviewed annually and may be adjusted at the discretion of the board of directors. Dr. Sasiela is also eligible for a merit bonus of with a target of 25% of his base salary, payable at the discretion of the board of directors if he achieves certain mutually agreed upon performance milestones set each fiscal year. The board of directors may also, at its discretion, make a grant of stock incentives to Dr. Sasiela on an annual basis in recognition of his performance during the preceding year. Dr. Sasiela is eligible to participate in our employee benefit plans, to the extent he is eligible for those plans, on the same terms as other similarly-situated executive officers of Aegerion.

In each of these agreements, if employment is terminated by reason of the employee’s death or disability, the employee is entitled to severance compensation of six months’ base salary and continuation of benefits for six months, and, at the discretion of the board of directors, prorated bonus to the target level. Additionally, if the employee terminates employment for good reason or if we terminate his employment without cause, he is entitled to receive, in the case of Mr. Wisler, twelve months as severance compensation and in the case of Mr. Lewis and Dr. Sasiela, nine months as severance compensation, and at the discretion of the board of directors, prorated bonus to the target level. The definition of good reason as set forth in the agreements includes an adverse change in the employee’s title, authority or responsibility, our material breach of the agreement and a reduction in salary that is not a result of an across-the-board reduction in senior management compensation. The definition of cause as set forth in the agreements includes the employee’s knowing failure or refusal to perform duties, the employee’s conduct resulting in damage to our reputation, material breach of the confidentiality agreement and the employee’s conviction or plea of guilty of nolo contendere of a felony.

Potential Payments Upon Termination or Change-in-Control

The employment agreements with our named executive officers provide certain benefits upon the termination of employment. If any of Messrs. Wisler or Lewis or Dr. Sasiela is terminated by reason of his or her death or disability, he is entitled to receive as severance compensation 100% salary and benefits continuation for a period of six months. If he terminates his employment for good reason or we terminate his employment without cause, he is entitled to receive as severance compensation 100% salary and benefits continuation for a period of twelve months for Mr. Wisler and nine months for Mr. Lewis and Dr. Sasiela. All payments and benefits are conditioned on the executive’s execution and non-revocation of a general release agreement at the time of termination. All payments due upon termination may be delayed up to six months from the termination date to avoid disfavored tax treatment under Section 409A of the Internal Revenue Code. See “Employment Agreements” above for the definition of “cause” and “good reason” in each employment agreement.

Pursuant to the restricted stock agreements between us and each of Messrs. Wisler and Lewis and Dr. Sasiela, vesting of the restricted stock subject to the agreements accelerates upon a termination of such

 

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named executive officer’s employment without cause. If the termination is not in relation to a change in control of Aegerion, 25% of the then unvested shares vest upon termination by us without cause. If the termination is in relation to a change in control of Aegerion, all of the then unvested shares vest upon termination by us or our successor without cause. The definition of cause used in the restricted stock agreements is set forth in the named executive officer’s employment agreement with us, and described above in “Employment Agreements”.

The tables below reflect (i) the continuation of salary and benefits and (ii) the acceleration of options and the lapsing of repurchase rights for shares of restricted common stock outstanding as of December 31, 2006, for each of our named executive officers, in each case, upon termination, in connection with a change of control or otherwise, or upon the death or disability of the named executive officer. See also “—Employment Agreements and Severance Agreements.”

Gerald Wisler

 

Executive Benefits and Payments Upon Termination(1)

   Without Cause    For Good Reason    For Death or
Disability

Base Salary

   $ 335,000    $ 335,000    $ 167,500

Continuation of Benefits(2)

   $ 19,200    $ 19,200    $ 9,600

 

Acceleration of Vesting of Options
and Restricted Stock on Termination(1)

   Without Cause in
Connection with a Change
of Control
   Without Cause Other Than
in Connection with a Change
of Control

Number of Option Shares and Value upon Termination(3)

   —      —  

Number of Shares of Vested Stock Received and Value upon Termination(3)

   844,459 shares
$10,977,967
   211,115 shares
$2,744,495

(1) Assumes triggering event effective as of December 31, 2006.
(2) Includes continuation of standard employee benefits, including health insurance and dental insurance for twelve months.
(3) There was no public market for our common stock in 2006. We have estimated the market value of the unvested stock awards based on an assumed initial public offering price of $13.00 per share, the midpoint of the range listed on the cover page of this prospectus.

William H. Lewis

 

Executive Benefits and Payments Upon Termination(1)

   Without Cause    For Good Reason    For Death or
Disability

Base Salary

   $ 187,500    $ 187,500    $ 125,000

Continuation of Benefits(2)

   $ 14,400    $ 14,000    $ 9,600

 

Acceleration of Vesting of Options
and Restricted Stock on Termination(1)

   Without Cause in
Connection with a Change
of Control
   Without Cause Other Than
in Connection with a Change
of Control

Number of Option Shares and Value upon Termination(3)

   —      —  

Number of Shares of Vested Stock Received and Value upon Termination(3)

   284,504 shares
$3,698,552
   71,126 shares
$924,638

(1) Assumes triggering event effective as of December 31, 2006.
(2) Includes continuation of standard employee benefits, including health insurance and dental insurance for nine months.
(3) There was no public market for our common stock in 2006. We have estimated the market value of the unvested stock awards based on an assumed initial public offering price of $13.00 per share, the midpoint of the range listed on the cover page of this prospectus.

 

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William J. Sasiela, Ph.D.

 

Executive Benefits and Payments Upon Termination(1)

   Without Cause    For Good Reason    For Death or
Disability

Base Salary

   $ 187,500    $ 187,500    $ 125,000

Continuation of Benefits (2)

   $ 14,400    $ 14,000    $ 9,600

 

Acceleration of Vesting of Options
and Restricted Stock on Termination(1)

   Without Cause in
Connection with a Change
of Control
   Without Cause Other Than
in Connection with a Change
of Control

Number of Option Shares and Value upon Termination(3)

   —      —  

Number of Shares of Vested Stock Received and Value upon Termination(3)

   254,848 shares
$3,313,024
   63,711 shares
$828,243

(1) Assumes triggering event effective as of December 31, 2006.
(2) Includes continuation of standard employee benefits, including health insurance and dental insurance for nine months.
(3) There was no public market for our common stock in 2006. We have estimated the market value of the unvested stock awards based on an assumed initial public offering price of $13.00 per share, the midpoint of the range listed on the cover page of this prospectus.

Proprietary Information and Inventions Agreements

Each of our named executive officers has also entered into a standard form agreement with respect to proprietary information and inventions. Among other things, this agreement obligates each named executive officer to refrain from disclosing any of our proprietary information received during the course of employment and, with some exceptions, to assign to us any inventions conceived or developed during the course of employment.

Director Compensation

Non-employee Director Compensation Policy

We reimburse each member of our board of directors who is not an employee for reasonable travel and other expenses in connection with attending meetings of the board of directors or committees thereof. In connection with this offering, our board of directors adopted a non-employee director compensation policy, to become effective as of the closing of this offering. The policy is designed to provide a total compensation package that enables us to attract and retain, on a long-term basis, high caliber non-employee directors who are not employees or officers and to align the directors’ interests with the long-term interests of the stockholders. Employee directors will not receive additional compensation for their services as directors.

Under the policy, all non-employee directors shall be paid cash compensation as set forth below.

 

    

Annual Retainer

  

In-Person
Attendance

Per Meeting

  

Telephonic
Attendance

Per Meeting

Board

        

Chairman of the Board

   $ 35,000    $ 1,000    $ 500

Other Directors

   $ 20,000    $ 1,000    $ 500

Audit Committee

        

Committee Chairman

   $ 10,000    $ 1,000    $ 500

Committee Members

   $ 7,500    $ 1,000    $ 500

Other Board Committees

        

Committee Chairman

   $ 7,500    $ 1,000    $ 500

Committee Members

   $ 5,000    $ 1,000    $ 500

 

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The annual retainer will be paid quarterly, in arrears, or upon the earlier resignation or removal of the non-employee director. Amounts owing to non-employee directors as annual retainer shall be annualized, meaning that non-employee directors who join the board during the calendar year, and with respect to all non-employee directors for 2007, such amounts shall be pro rated based on the number of calendar days served by such director.

Under the policy, each person who is appointed or elected to the board of directors, or is re-elected to the board of directors, as a non-employee director will be eligible for an option grant to purchase 15,000 shares of common stock under the Corporation’s stock option plan on the date he or she first becomes a non-employee director, which we refer to as a director option grant. For so long as the director remains on the board of directors, the director option grant shall vest one-third (1/3) on each one-year anniversary of the date of grant. director option grants become immediately exercisable upon the death, disability or retirement of a director or upon a change in control of Aegerion. In addition, the form of option agreement will give directors up to one year following cessation of service as a director to exercise the options (to the extent vested at the date of such cessation), provided that the director has not been removed for cause. The non-employee directors shall also be eligible to participate in our stock option plans on a case by case basis. All of the foregoing options will be granted at fair market value on the date of grant.

Director Compensation Table

The following table sets forth a summary of the compensation earned by our directors and/or paid to our directors under certain agreements, in each case, in 2006, other than Mr. Wisler. Mr. Wisler receives no additional compensation for his services to us as a director. Mr. Arkowitz joined our board in May 2007.

 

Name

   Fee Earned or Paid in
Cash($)
   Stock Awards($)    Total($)

David I. Scheer

   $ 90,311(1)      —      $ 90,311

Antonio M. Gotto Jr., M.D., D.Phil.

   $ 26,000(2)    $ 15,499(3)    $ 41,499

Jason Fisherman, M.D.

     —        —        —  

Kevin Johnson, Ph.D.

     —        —        —  

Alison de Bord

     —        —        —  

(1) Represents payments made to Scheer & Co., Inc. pursuant to a consulting agreement for services rendered to us by Mr. Scheer in his capacity as Chairman of the Board and for attending meetings of the board of directors, as well as in consideration of certain operational consulting services rendered to us by Mr. Scheer and another representative of Scheer & Co. Mr. Scheer is the President of Scheer & Co., Inc. This agreement will terminate upon completion of this initial public offering. See also “Certain Relationships and Related Person Transactions—Employment and Consulting Agreements.”
(2) Represents payments made to Dr. Gotto for service to us as a director under our consulting agreement with Dr. Gotto. This agreement will terminate upon completion of this initial public offering. See also “Certain Relationships and Related Person Transactions—Employment and Consulting Agreements.”
(3) Represents the compensation expense incurred by us under SFAS 123R, excluding an estimate of forfeiture applied by us under SFAS 123R when recognizing stock-based compensation expense for financial reporting purposes, in 2006 in connection with the purchase by Dr. Gotto of 33,979 shares of restricted common stock in April 2006. At December 31, 2006, there was approximately $23,245 unamortized stock-based compensation expense related to these shares, which will be amortized over the remaining vesting period for theses shares. At December 31, 2006, 8,494 of these shares were fully vested with the remaining 25,485 shares to vest in equal quarterly installments through January 2009.

Limitation of Liability and Indemnification Agreements

As permitted by the Delaware General Corporation Law, we have adopted provisions in our certificate of incorporation and by-laws to be in effect at the closing of this offering that limit or eliminate the personal liability of our directors. Consequently, a director will not be personally liable to us or our stockholders for monetary damages or breach of fiduciary duty as a director, except for liability for:

 

   

any breach of the director’s duty of loyalty to us or our stockholders;

 

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any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

 

   

any unlawful payments related to dividends or unlawful stock purchases, redemptions or other distributions; or

 

   

any transaction from which the director derived an improper personal benefit.

These limitations of liability do not alter director liability under the federal securities laws and do not affect the availability of equitable remedies such as an injunction or rescission.

In addition, our by-laws provide that:

 

   

we will indemnify our directors, officers and, in the discretion of our board of directors, certain employees to the fullest extent permitted by the Delaware General Corporation Law; and

 

   

we will advance expenses, including attorneys’ fees, to our directors and, in the discretion of our board of directors, to our officers and certain employees, in connection with legal proceedings, subject to limited exceptions.

We have entered into indemnification agreements with each of our directors and our executive officers. These agreements provide that we will indemnify each of our directors and executive officers to the fullest extent permitted by law and advance expenses, including attorneys’ fees, to each indemnified director or executive officer in connection with any proceeding in which indemnification is available.

We also maintain general liability insurance which covers certain liabilities of our directors and officers arising out of claims based on acts or omissions in their capacities as directors or officers, including liabilities under the Securities Act.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, or persons controlling the registrant under the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

These provisions may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers under these indemnification provisions. We believe that these provisions, the indemnification agreements and the insurance are necessary to attract and retain talented and experienced directors and officers.

At present, there is no pending litigation or proceeding involving any of our directors or officers where indemnification will be required or permitted. We are not aware of any threatened litigation or proceeding that might result in a claim for such indemnification.

 

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CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

Since inception, we have engaged in the following transactions with our directors, executive officers, holders of more than 5% of our voting securities, or any member of the immediate family of the foregoing persons.

Bridge Financing

In August 2005, we sold convertible promissory notes for an aggregate purchase price of $749,000. The convertible promissory notes accrued interest at a rate of 9% per annum and had a maturity date of February 24, 2006. In December 2005, in connection with the Series A redeemable convertible preferred stock financing described below, the convertible promissory notes, along with accrued but unpaid interest thereon, were automatically converted into an aggregate of 517,408 shares of our Series A redeemable convertible preferred stock at a conversion price of $1.4879, or 80% of the issue price of the Series A redeemable convertible preferred stock sold in the financing. In connection with the bridge financing, we also issued 30,537 shares of our common stock to the purchasers of the note for no additional consideration.

The following table summarizes the participation in the bridge financing by any of our directors, executive officers, holders of more than 5% of our voting securities, or any member of the immediate family of the foregoing persons.

 

Name

   Aggregate
Consideration
Paid
   Series A
Redeemable
Convertible
Preferred Shares
Issued Upon
Conversion of
Notes
   Common
Stock
Issued

Advent International Corporation and affiliated entities(1)

   $ 250,000    172,700    10,193

Index Ventures III (Jersey), L.P. and affiliated entities(2)

   $ 250,000    172,699    10,192

Serventia SA, Lugano

   $ 149,000    102,929    6,075

William H. Lewis

   $ 100,000    69,080    4,077

(1) Consists of 69,080 shares of Series A redeemable convertible preferred stock and 4,077 shares of common stock purchased by Advent Healthcare and Life Sciences III Limited Partnership, 101,548 shares of Series A redeemable convertible preferred stock and 5,994 shares of common stock purchased by Advent Healthcare and Life Sciences III-A Limited Partnership and 2,072 shares of Series A redeemable convertible preferred stock and 122 shares of common stock purchased by Advent Partners HLS III Limited Partnership. Jason Fisherman, a director of Aegerion, is a senior vice-president of Advent International Corporation. Dr. Fisherman disclaims beneficial ownership except to the extent of his proportionate pecuniary interest therein.
(2) Consists of 604 shares of Series A redeemable convertible preferred stock and 36 shares of common stock purchased by Index Venture Management S.A. on behalf of Index Employee Investment Plan, 113,964 shares of Series A redeemable convertible preferred stock and 6,726 shares of common stock purchased by Index Ventures III (Delaware) L.P., 56,101 shares of Series A redeemable convertible preferred stock and 3,311 shares of common stock purchased by Index Ventures III (Jersey) L.P. and 2,030 shares of Series A redeemable convertible preferred stock and 119 shares of common stock purchased by Index Ventures III Parallel Entrepreneur Fund (Jersey) L.P. Kevin Johnson, a director of Aegerion, is a venture advisor of Index Ventures. Dr. Johnson disclaims beneficial ownership except to the extent of his proportionate pecuniary interest therein.

Series A Financing

In December 2005, we sold in a private placement an aggregate of 12,211,604 shares of our Series A redeemable convertible preferred stock, $0.001 par value per share. Excluding the 517,408 shares of our Series A redeemable convertible preferred stock that were issued upon conversion of the convertible promissory notes described above at a conversion price of $1.4879, the remaining 11,694,196 shares were sold at a per share price of $1.8599.

 

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The following table summarizes the participation in the Series A financing by any of our directors, executive officers, holders of more than 5% of our voting securities, or any member of the immediate family of the foregoing persons, not including the shares of Series A redeemable convertible preferred stock issued upon conversion of the convertible promissory notes, as described above.

 

Name

   Shares of Series
A Redeemable
Convertible
Preferred
   Aggregate
Purchase Price
Paid

Advent International Corporation and affiliated entities(1)

   3,091,583    $ 5,750,035

Alta BioPharma HLS III Limited Partnership and affiliated entities(2)

   3,064,681    $ 5,700,000

Index Ventures III (Jersey), L.P. and affiliated entities(3)

   3,360,396    $ 6,250,001

MVM International Life Sciences Fund No. 1 L.P. and affiliated entities(4)

   1,075,327    $ 2,000,001

Serventia SA, Lugano

   940,911    $ 1,750,000

Jawz II(5)

   53,766    $ 99,999

William H. Lewis

   53,766    $ 99,999

(1) Consists of shares of Series A redeemable convertible preferred stock purchased by Advent Healthcare and Life Sciences III Limited Partnership (1,239,106 shares), Advent Healthcare and Life Sciences III-A Limited Partnership (1,818,470 shares) and Advent Partners HLS III Limited Partnership (34,007 shares). Jason Fisherman, a director of Aegerion, is a senior vice-president of Advent International Corporation. Dr. Fisherman disclaims beneficial ownership except to the extent of his proportionate pecuniary interest therein.
(2) Consists of shares of Series A redeemable convertible preferred stock purchased by Alta BioPharma Partners III, L.P. (2,806,991 shares), Alta BioPharma Partners III GmbH & Co. Beteiligungs KG (188,514 shares) and Alta Embarcadero BioPharma Partners III, LLC (69,176 shares). Alison de Bord, a director of Aegerion, is a principal of Alta BioPharma Partners.
(3) Consists of shares of Series A redeemable convertible preferred stock purchased by Index Venture Management S.A. on behalf of Index Employee Investment Plan (11,761 shares), Index Ventures III (Delaware) L.P. (2,217,512 shares), Index Ventures III (Jersey) L.P. (1,091,621 shares) and Index Ventures III Parallel Entrepreneur Fund (Jersey) L.P. (39,502 shares). Kevin Johnson, a director of Aegerion, is a venture advisor of Index Ventures. Dr. Johnson disclaims beneficial ownership except to the extent of his proportionate pecuniary interest therein.
(4) Consists of shares of Series A redeemable convertible preferred stock purchased by MVM International Life Sciences Fund No. 1 L.P. (1,064,571 shares) and MVM Executive Limited (10,756 shares).
(5) James Wisler, Gerald Wisler’s brother, is Manager of Jawz II LLC, the assets of which are held for the benefit of James Wisler’s children.

Employment and Consulting Agreements

We have entered into employment agreements with Messrs. Wisler and Lewis and Dr. Sasiela that provide for certain salary, bonus and severance compensation. For more information regarding these agreements, see “Executive and Director Compensation—Employment Agreements and Severance Agreements.”

On February 4, 2005, we issued 1,563,066 shares of common stock for an aggregate purchase price of $2,300 to Scheer Investment Holdings VII LLC in consideration of consulting services rendered to us. David I. Scheer, our Chairman, is the managing member of Scheer Investment Holdings VII LLC.

On July 1, 2005, we entered into a consulting agreement with Scheer & Company, Inc., which was amended and restated on August 1, 2006. David I. Scheer, our Chairman, is the President of Scheer & Company, Inc. As of the date of this prospectus, for services provided, we have paid or accrued to Scheer & Company, Inc. an aggregate of $187,686 for services rendered to us under this agreement. This agreement will terminate effective upon completion of this initial public offering.

 

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On April 4, 2006, we entered into a consulting agreement with Dr. Gotto, one of our directors. As of the date of this prospectus, we owed Dr. Gotto $31,000 for services rendered to us under this agreement. Under his consulting agreement, Dr. Gotto purchased 33,979 shares of restricted common stock for an aggregate purchase price of $50. This agreement will terminate effective upon completion of this initial public offering.

Restricted Stock and Stock Option Awards

For more information regarding restricted stock purchased by our named executive officers and directors, see “Executive and Director Compensation—Outstanding Equity Awards at Fiscal Year End.”

Indemnification Agreements

We have agreed to indemnify our directors and officers in certain circumstances. See “Management—Limitation of Liability and Indemnification.”

Registration Rights

Certain of our directors, executive officers, holders of more than 5% of our common stock are party to agreements providing for rights to register under the Securities Act certain shares of our capital stock. For more information regarding these agreements, see “Description of Capital Stock—Registration Rights.”

Policies for Approval of Related Person Transactions

Our board of directors reviews and approves transactions with directors, officers, and holders of five percent or more of our voting securities and their affiliates, or each, a related party. Prior to this offering, prior to our board of directors’ consideration of a transaction with a related party, the material facts as to the related party’s relationship or interest in the transaction are disclosed to our board of directors, and the transaction is not considered approved by our board of directors unless a majority of the directors who are not interested in the transaction approve the transaction. Following this offering, such transactions must be approved by our audit committee or another independent body of our board of directors. Further, when stockholders are entitled to vote on a transaction with a related party, the material facts of the related party’s relationship or interest in the transaction are disclosed to the stockholders, who must approve the transaction in good faith.

 

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PRINCIPAL STOCKHOLDERS

The following table sets forth information with respect to the beneficial ownership of our common stock, as of May 15, 2007, the most recent practicable date, and as adjusted to reflect the sale of common stock offered by us in this offering, for:

 

   

each beneficial owner of 5% or more of our outstanding common stock;

 

   

each of our named executive officers and directors; and

 

   

all of our executive officers and directors as a group.

Beneficial ownership is determined in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities and include shares of common stock issuable upon the exercise of stock options that are immediately exercisable or exercisable within 60 days after May 15, 2007, although these shares are not deemed outstanding for the purpose of computing the percentage ownership of any other person.

Except as otherwise indicated, all of the shares reflected in the table are shares of common stock and all persons listed below have sole voting and investment power with respect to the shares beneficially owned by them, subject to applicable community property laws. The information is not necessarily indicative of beneficial ownership for any other purpose.

Percentage ownership calculations for beneficial ownership prior to this offering are based on                  shares outstanding as of May 15, 2007. Percentage ownership calculations for beneficial ownership after this offering also include the shares we are offering hereby.

For purposes of calculating the number of shares of common stock into which the Series A redeemable convertible preferred stock will be convertible after the completion of this offering, we have assumed the closing of this offering occurs on June 19, 2007, which would result in accumulated dividends of $0.21 per share of Series A redeemable convertible preferred stock and aggregate accumulated dividends of $2,536,024 on all outstanding shares of Series A redeemable convertible preferred stock, payable in additional shares of common stock. However, because each outstanding share of our Series A redeemable convertible preferred stock is convertible into a number of shares of our common stock determined by dividing (1) the Series A per share purchase price of $1.8599 plus an accumulated dividend of 7% per year by (2) a conversion price equal to $2.7368 per share, the number of shares of common stock into which the outstanding shares of Series A redeemable convertible preferred stock will be converted upon completion of this offering will differ if the actual closing date is different from the assumption set forth above. See “Prospectus Summary—General Information About This Prospectus.” Accordingly, the percentage of common stock beneficially owned before and after this offering may differ from that set forth below.

 

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Except as otherwise indicated in the table below, addresses of named beneficial owners are in care of Aegerion Pharmaceuticals, Inc., CenterPoint IV, 1140 Route 22 East, Suite 304, Bridgewater, New Jersey 08807.

 

     Shares
Beneficially
Owned
   Percentage of Common
Stock Beneficially Owned
 

Name of Beneficial Owner

      Before
Offering
    After
Offering
 

5% or Greater Stockholders:

       

Advent International Corporation and affiliated entities(1)

   2,476,280    18.1 %   13.3 %

Alta BioPharma Partners III, L.P. and affiliated entities(2)

   2,315,292    17.0 %   12.4 %

Index Ventures III (Jersey), L.P. and affiliated entities(3)

   2,679,361    19.6 %   14.4 %

MVM International Life Sciences Fund No. 1 L.P. and affiliated entities(4)

   812,383    6.0 %   4.4 %

Scheer Investment Holdings VII LLC(5)

   1,563,066    11.5 %   8.4 %

Serventia SA, Lugano

   794,671    5.8 %   4.3 %

Named Executive Officers and Directors:

       

Gerald Wisler(6)

   1,121,330    8.2 %   6.0 %

William J. Sasiela, Ph.D.(7)

   339,797    2.5 %   1.8 %

William H. Lewis(8)

   572,600    4.2 %   3.1 %

David I. Scheer(5)

   1,563,066    11.5 %   8.4 %

Alison de Bord(2)

   2,315,292    17.0 %   12.4 %

Jason Fisherman, M.D.(1)

   2,476,280    18.1 %   13.3 %

Antonio M. Gotto Jr., M.D., D.Phil.

   33,979    *     *  

Kevin Johnson, Ph.D.(3)

   2,679,361    19.6 %   14.4 %

David A. Arkowitz

   —      —       —    

All executive officers and directors as a group (9 persons)

   11,101,705    81.3 %   59.5 %

* Represents beneficial ownership of less than 1% of the shares of common stock.
(1) The address for Advent Healthcare and Life Sciences III Limited Partnership and its affiliated entities is 75 State Street, Boston, MA 02109. Includes 4,077 shares of common stock and 988,303 shares of common stock issuable upon conversion of Series A redeemable convertible preferred stock owned of record by Advent Healthcare and Life Sciences III Limited Partnership, 5,994 shares of common stock and 1,450,528 shares of common stock issuable upon conversion of Series A redeemable convertible preferred stock owned of record by Advent Healthcare and Life Sciences III-A Limited Partnership and 122 shares of common stock and 27,256 shares of common stock issuable upon conversion of Series A redeemable convertible preferred stock owned of record by Advent Partners HLS III Limited Partnership. Jason Fisherman, a director of Aegerion, is a senior vice-president of Advent International Corporation. Dr. Fisherman disclaims beneficial ownership except to the extent of his proportionate pecuniary interest therein.
(2) The address for Alta BioPharma Partners III, L.P. and its affiliated entities is One Embarcadero Center, Suite 3700, San Francisco, CA 94111. Includes 2,120,615 shares common stock issuable upon conversion of Series A redeemable convertible preferred stock owned of record by Alta BioPharma Partners III, L.P., 142,417 shares common stock issuable upon conversion of Series A redeemable convertible preferred stock owned of record by Alta BioPharma Partners III GmbH & Co. Beteiligungs KG and 52,260 shares common stock issuable upon conversion of Series A redeemable convertible preferred stock owned of record by Alta Embarcadero BioPharma Partners III, LLC. Alison de Bord, a director of Aegerion, is a principal of Alta BioPharma Partners. Ms. de Bord disclaims beneficial ownership except to the extent of her proportionate pecuniary interest therein.
(3)

The address for Index Ventures III (Jersey), L.P. and its affiliated entities is P.O. Box 641, No. 1 Seaton Place, St. Helier, Jersey JE4 8YJ, Channel Islands. Includes 36 shares of common stock and 9,341 shares of common stock issuable upon conversion of Series A redeemable convertible preferred stock owned of record by Index Venture Management S.A. on behalf of Index Employee Investment Plan, 6,726 shares of common stock and 1,761,375 shares of common stock issuable upon conversion of Series A redeemable

 

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convertible preferred stock owned of record by Index Ventures III (Delaware) L.P., 3,311 shares of common stock and 867,077 shares of common stock issuable upon conversion of Series A redeemable convertible preferred stock owned of record by Index Ventures III (Jersey) L.P. and 119 shares of common stock and 31,376 shares of common stock issuable upon conversion of Series A redeemable convertible preferred stock owned of record by Index Ventures III Parallel Entrepreneur Fund (Jersey) L.P. Kevin Johnson, a director of Aegerion, is a venture advisor of Index Ventures. Dr. Johnson disclaims beneficial ownership except to the extent of his proportionate pecuniary interest therein.

(4) The address for MVM International Life Sciences Fund No. 1 L.P. and its affiliated entities is 6 Henrietta Street, London WC2E 8PU. Includes 804,258 shares of common stock issuable upon conversion of Series A redeemable convertible preferred stock owned of record by MVM International Life Sciences Fund No. 1 L.P. and 8,125 shares of common stock issuable upon conversion of Series A redeemable convertible preferred stock owned of record by MVM Executive Limited.
(5) The address for Scheer Investment Holdings VII LLC is 250 West Main Street, Branford, CT 06405. Mr. Scheer, our Chairman, is the managing member of Scheer Investment Holdings VII LLC. Mr. Scheer disclaims beneficial ownership except to the extent of his proportionate pecuniary interest therein.
(6) Excludes 169,898 shares of common stock owned of record by the Gerald L. Wisler Irrevocable Deed of Trust for the benefit of Nicole Miranda Wisler, Mr. Wisler’s daughter, and 169,898 shares of common stock owned of record by the Gerald L. Wisler Irrevocable Deed of Trust for the benefit of Michael Robert Wisler, Mr. Wisler’s son. Mr. Wisler’s wife, Damarys G. Wisler, is the trustee for both of these trusts. Mr. Wisler disclaims all beneficial ownership of such shares. Includes 760,013 shares of restricted common stock subject to vesting as of May 15, 2007 pursuant to the terms of Mr. Wisler’s April 6, 2005 restricted stock agreement.
(7) Includes 233,610 shares of restricted common stock subject to vesting as of May 15, 2007 pursuant to the terms of Dr. Sasiela’s December 1, 2005 restricted stock agreement.
(8) Includes 256,054 shares of restricted common stock subject to vesting as of May 15, 2007 pursuant to the terms of Mr. Lewis’s April 29, 2005 restricted stock agreement.

 

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DESCRIPTION OF CAPITAL STOCK

General

The following description of our capital stock is intended as a summary only and is qualified in its entirety by reference to our amended and restated certificate of incorporation and amended and restated by-laws to be in effect at the closing of this offering, which are filed as exhibits to the registration statement, of which this prospectus forms a part, and to the applicable provisions of the Delaware General Corporation Law. We refer in this section to our amended and restated certificate of incorporation as our certificate of incorporation, and we refer to our amended and restated by-laws as our by-laws.

Upon completion of this offering, our authorized capital stock will consist of 125,000,000 shares of common stock, par value $0.001 per share, and 5,000,000 shares of preferred stock, par value $0.001 per share, all of which shares of preferred stock will be undesignated.

As of May 15, 2007, we had 4,424,108 shares of our common stock outstanding held by 14 stockholders of record and 12,211,604 shares of our Series A redeemable convertible preferred stock outstanding held by 16 stockholders of record, and outstanding options to purchase 697,936 shares of our common stock under our stock option plan at a weighted average exercise price of $3.47 per share, none of which were exercisable. Upon the completion of this offering, all outstanding shares of our Series A redeemable convertible preferred stock and accumulated dividends thereon will be converted into an aggregate of 9,225,570 shares of common stock, assuming the closing of this offering occurs on June 19, 2007.

Common Stock

The holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of the stockholders. The holders of our common stock do not have any cumulative voting rights. Holders of our common stock are entitled to receive proportionally any dividends declared by our board of directors, subject to any preferential dividend rights of any outstanding preferred stock.

In the event of our liquidation or dissolution, holders of our common stock are entitled to share ratably in all assets remaining after payment of all debts and other liabilities, subject to the prior rights of any outstanding preferred stock. Holders of our common stock have no preemptive, subscription, redemption or conversion rights. The shares to be issued by us in this offering will be, when issued and paid for, validly issued, fully paid and nonassessable.

Warrants

In March 2007, we entered into a $15.0 million loan and security agreement with Hercules Technology Growth Capital, Inc., or Hercules, and borrowed $10.0 million under this agreement. In connection with this agreement, we entered into a warrant agreement with Hercules, under which Hercules has the right to purchase the number of shares of our common stock determined by dividing 4.25% of the advances made under the loan agreement by the applicable exercise price. With respect to the initial advance of $10.0 million under the loan agreement, the exercise price per share shall be equal to the lower of $5.27 or 85% of the initial public offering price of our common stock. With respect to subsequent advances made after our initial public offering, the exercise price shall be equal to the volume weighted average price of our common stock for a period of seven trading days before the date of such advance.

Our warrant agreement with Hercules shall be exercisable for a period ending on the earlier of (i) a merger or sale of Aegerion in which the consideration consists entirely of cash and/or freely tradeable securities or (ii) March 20, 2012. The warrant agreement includes a customary net issuance feature, which allows Hercules to pay the exercise price of the warrant by forfeiting a portion of the exercised warrant shares with a value equal to the aggregate exercise price, and, if outstanding at March 20, 2012, will be automatically exercised to the extent such warrant is then in-the-money.

 

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Preferred Stock

Upon completion of this offering, our board of directors will be authorized, without action by the stockholders, to designate and issue up to 5,000,000 shares of preferred stock in one or more series. Our board of directors can fix the rights, preferences and privileges of the shares of each series and any of its qualifications, limitations or restrictions. Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of common stock. The issuance of preferred stock, while providing flexibility in connection with possible future financings and acquisitions and other corporate purposes could, under certain circumstances, have the effect of delaying, deferring or preventing a change in control and could harm the market price of our common stock.

Our board of directors will make any determination to issue such shares based on its judgment as to our best interests and the best interests of our stockholders. We have no current plans to issue any shares of preferred stock.

Registration Rights

Holders of 12,039,085 shares of our common stock, after giving effect to the conversion of the outstanding Series A redeemable convertible preferred stock and accumulated dividends thereon into common stock upon completion of this offering, have rights, under the terms of an investor rights agreement between us and these holders, to require us to use our best efforts file registration statements under the Securities Act or request that their shares be covered by a registration statement that we are otherwise filing. We refer to these shares as registrable securities. The investor rights agreement does not provide for any liquidated damages, penalties or other rights in the event we do not file a registration statement.

Demand Registration Rights. At any time after the earlier of (i) six months following the completion of this offering or (ii) December 15, 2008, subject to certain exceptions, the holders of a majority of the then outstanding registrable securities described above have the right to demand that we file a registration statement covering the offering and sale of their registrable securities. We are not obligated to file a registration statement on more than one occasion upon the request of the holders of a majority of the then outstanding registrable securities.

Form S-3 Registration Rights. If we are eligible to file a registration statement on Form S-3, the holders of the registrable securities described above have the right, on one or more occasions, to request registration on Form S-3 of the sale of the registrable securities held by such holder provided such securities are anticipated to have an aggregate sale price (net of underwriting discounts and commissions, if any) in excess of $2,500,000. We have the ability to delay the filing of such registration statement under specified conditions, such as for a period of time following the effective date of a prior registration statement, if our board of directors deems it advisable to delay such filing or if we are in possession of material nonpublic information that would be in our best interests not to disclose. Such postponements cannot exceed 90 days during any twelve month period. We are not obligated to effect more than one registration of registrable securities on Form S-3 in any twelve month period.

Piggyback Registration Rights. The holders of the registrable securities described above have piggyback registration rights. Under these provisions, if we register any securities for public sale, including pursuant to any stockholder initiated demand registration, these holders will have the right to include their shares in the registration statement, subject to customary exceptions. The underwriters of any underwritten offering will have the right to limit the number of shares having registration rights to be included in the registration statement, and piggyback registration rights are also subject to the priority rights of stockholders having demand registration rights in any demand registration.

Expenses of Registration. We will pay all registration expenses, other than underwriting discounts and commissions, related to any demand, Form S-3 or piggyback registration, including reasonable attorney’s fees and disbursements of one counsel for the holders of registrable securities in an amount not to exceed an aggregate of $35,000.

 

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Indemnification. The investor rights agreement contains customary cross-indemnification provisions, under which we are obligated to indemnify the selling stockholders in the event of material misstatements or omissions in the registration statement attributable to us, and they are obligated to indemnify us for material misstatements or omissions attributable to them.

Expiration of Registration Rights. The registration rights granted under the investor rights agreement terminate on the earlier of (i) the fifth anniversary of the completion of this offering and (ii) with respect to any holder of not more than 100,000 registrable securities, when such holder can sell all of such shares under Rule 144 promulgated under the Securities Act without regard to time or volume limitations.

In addition, holders of 2,813,515 shares of our common stock, including Gerald Wisler, our President, Chief Executive Officer and Director, William J. Sasiela, Ph.D., our Chief Medical Officer and Senior Vice President of Clinical, William H. Lewis, our Chief Financial Officer and Senior Vice President of Finance and Administration, and Antonio Gotto, one of our Directors, are entitled to piggyback registration rights any time we propose to register any of our securities for public sale, subject to customary exceptions. The piggyback rights are for registration on the same terms as other holders of securities of the same class included in the offering, subject to underwriter cutbacks. Each of these stockholders has waived these rights in connection with this offering.

Certain Anti-Takeover Provisions of our Certificate of Incorporation and By-Laws

Upon completion of this offering, our certificate of incorporation and by-laws will include a number of provisions that may have the effect of delaying, deferring or preventing another party from acquiring control of us and encouraging persons considering unsolicited tender offers or other unilateral takeover proposals to negotiate with our board of directors rather than pursue non-negotiated takeover attempts. These provisions include the items described below.

Board Composition and Filling Vacancies. In accordance with our certificate of incorporation, our board is divided into three classes serving staggered three-year terms, with one class being elected each year. Our certificate of incorporation also provides that directors may be removed only for cause and then only by the affirmative vote of the holders of 75% or more of the shares then entitled to vote at an election of directors. Furthermore, any vacancy on our board of directors, however occurring, including a vacancy resulting from an increase in the size of our board, may only be filled by the affirmative vote of a majority of our directors then in office even if less than a quorum.

No Written Consent of Stockholders. Our certificate of incorporation provides that all stockholder actions are required to be taken by a vote of the stockholders at an annual or special meeting, and that stockholders may not take any action by written consent in lieu of a meeting. This limit may lengthen the amount of time required to take stockholder actions and would prevent the amendment of our by-laws or removal of directors by our stockholders without holding a meeting of stockholders.

Meetings of Stockholders. Our certificate of incorporation and by-laws provide that only a majority of the members of our board of directors then in office may call special meetings of stockholders and only those matters set forth in the notice of the special meeting may be considered or acted upon at a special meeting of stockholders. Our by-laws limit the business that may be conducted at an annual meeting of stockholders to those matters properly brought before the meeting.

Advance Notice Requirements. Our by-laws establish advance notice procedures with regard to stockholder proposals relating to the nomination of candidates for election as directors or new business to be brought before meetings of our stockholders. These procedures provide that notice of stockholder proposals must be timely given in writing to our corporate secretary prior to the meeting at which the action is to be taken. Generally, to be timely, notice must be received at our principal executive offices not less than 90 days nor more than 120 days prior to the first anniversary date of the annual meeting for the preceding year. The notice must contain certain information specified in the by-laws.

 

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Amendment to Certificate of Incorporation and By-Laws. As required by the Delaware General Corporation Law, any amendment of our certificate of incorporation must first be approved by a majority of our board of directors, and if required by law or our certificate of incorporation, must thereafter be approved by a majority of the outstanding shares entitled to vote on the amendment and a majority of the outstanding shares of each class entitled to vote thereon as a class, except that the amendment of the provisions relating to stockholder action, board composition, limitation of liability and the amendment of our certificate of incorporation must be approved by not less than 75% of the outstanding shares entitled to vote on the amendment, and not less than 75% of the outstanding shares of each class entitled to vote thereon as a class. Our by-laws may be amended by the affirmative vote of a majority of the directors then in office, subject to any limitations set forth in the by-laws; and may also be amended by the affirmative vote of at least 75% of the outstanding shares entitled to vote on the amendment, or, if our board of directors recommends that the stockholders approve the amendment, by the affirmative vote of the majority of the outstanding shares entitled to vote on the amendment, in each case voting together as a single class.

Undesignated Preferred Stock. Our certificate of incorporation provides for 5,000,000 authorized shares of preferred stock. The existence of authorized but unissued shares of preferred stock may enable our board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise. For example, if in the due exercise of its fiduciary obligations, our board of directors were to determine that a takeover proposal is not in the best interests of our stockholders, our board of directors could cause shares of preferred stock to be issued without stockholder approval in one or more private offerings or other transactions that might dilute the voting or other rights of the proposed acquirer or insurgent stockholder or stockholder group. In this regard, our certificate of incorporation grants our board of directors broad power to establish the rights and preferences of authorized and unissued shares of preferred stock. The issuance of shares of preferred stock could decrease the amount of earnings and assets available for distribution to holders of shares of common stock. The issuance may also adversely affect the rights and powers, including voting rights, of these holders and may have the effect of delaying, deterring or preventing a change in control of us.

Section 203 of the Delaware General Corporate Law

Upon completion of this offering, we will be subject to the provisions of Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a three-year period following the time that this stockholder becomes an interested stockholder, unless the business combination is approved in a prescribed manner. A “business combination” includes, among other things, a merger, asset or stock sale or other transaction resulting in a financial benefit to the interested stockholder. An “interested stockholder” is a person who, together with affiliates and associates, owns, or did own within three years prior to the determination of interested stockholder status, 15% or more of the corporation’s voting stock. Under Section 203, a business combination between a corporation and an interested stockholder is prohibited unless it satisfies one of the following conditions:

 

   

before the stockholder became interested, our board of directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;

 

   

upon consummation of the transaction which 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, excluding for purposes of determining the voting stock outstanding, shares owned by persons who are directors and also officers, and employee stock plans, in some instances, but not the outstanding voting stock owned by the interested stockholder; or

 

   

at or after the time the stockholder became interested, the business combination was approved by our board of directors of the corporation and authorized at an annual or special meeting of the stockholders, but not by written consent, by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder.

 

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Section 203 defines a business combination to include:

 

   

any merger or consolidation involving the corporation and the interested stockholder;

 

   

any sale, transfer, pledge or other disposition involving the interested stockholder of 10% or more of the assets of the corporation;

 

   

subject to exceptions, any transaction that results in the issuance of transfer by the corporation of any stock of the corporation to the interested stockholder;

 

   

subject to exceptions, any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interest stockholder; and

 

   

the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.

In general, Section 203 defines an interested stockholder as any entity or person beneficially owing 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by the entity or person.

NASDAQ Global Market Listing

We have applied to have our common stock approved for listing on The NASDAQ Global Market under the trading symbol “AEGR.”

Transfer Agent and Registrar

The transfer agent and registrar for our common stock will be American Stock Transfer & Trust Company.

 

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SHARES ELIGIBLE FOR FUTURE SALE

Immediately prior to this offering, there was no public market for our common stock. Future sales of substantial amounts of common stock in the public market, or the perception that such sales may occur, could adversely affect the market price of our common stock. Although we intend to apply to have our common stock approved for quotation on The NASDAQ Global Market, we cannot assure you that there will be an active public market for our common stock.

Upon completion of this offering, we will have outstanding an aggregate of 18,649,678 shares of common stock, assuming no exercise of the underwriters’ over-allotment option and no exercise of outstanding stock options. Of these shares, the 5,000,000 shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act, except for any shares purchased by our “affiliates,” as that term is defined in Rule 144 under the Securities Act, whose sales would be subject to certain limitations and restrictions described below. The 13,649,678 remaining shares of common stock held by existing stockholders will be restricted securities as that term is defined in Rule 144 under the Securities Act. Restricted securities may be sold in the public market only if registered or it they qualify for exemption under Rules 144, 144(k) or 701 under the Securities Act, which rules are summarized below, or another exemption.

As a result of the lock-up agreements described below and the provisions of Rule 144, Rule 144(k) and Rule 701 under the Securities Act, the shares of our common stock (excluding the shares sold in this offering) that will be available for sale in the public market are as follows:

 

Date of Availability of Sale

  

Approximate

Number of Shares

As of the date of this prospectus

   —  

90 days after the date of this prospectus

   —  

180 days after the date of this prospectus, or longer if the lock-up period is extended, although a portion of such shares will be subject to volume limitations pursuant to Rule 144

   13,649,678

Stock Plans

We intend to file one or more registration statements on Form S-8 under the Securities Act to register shares of our common stock issued or reserved for issuance under our stock option plans. The first such registration statement is expected to be filed soon after the date of this prospectus and will automatically become effective upon filing with the SEC. Accordingly, shares registered under such registration statement will be available for sale in the open market, unless such shares are subject to vesting restrictions with us or the lock-up restrictions described above.

Lock-Up Agreements

All of our directors and executive officers and all of the holders of our capital stock have signed a lock-up agreement that prevents them from selling any shares of our common stock or any securities convertible into or exercisable or exchangeable for shares of our common stock for a period of not less than 180 days from the date of this prospectus without the prior written consent of the representatives. This 180-day period may be extended if (i) during the last 17 days of the 180-day period we issue an earnings release or material news or a material event relating to us occurs; or (ii) prior to the expiration of the 180-day period, we announce that we will release earnings results during the 16-day period following the last day of the 180-day period. The period of such extension will be 18 days, beginning on the issuance of the earnings release or the occurrence of the material news or material event. The representatives may in their sole discretion and at any time without notice release some or all of the shares subject to lock-up agreements prior to the expiration of the 180-day period. When determining whether or not to release shares from the lock-up agreements, the representatives will consider, among other factors, the stockholder’s reasons for requesting the release, the number of shares for which the release is being requested and market conditions at the time. See “Underwriting—Lock-Up Agreements” for a more complete description of the terms of these agreements.

 

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Rule 144

In general, under Rule 144 of the Securities Act, beginning 90 days after the date of this prospectus a person deemed to be our “affiliate,” or a person holding restricted shares who beneficially owns shares that were not acquired from us or any of our “affiliates” within the previous year, is entitled to sell within any three-month period a number of shares that does not exceed the greater of either 1% of the then outstanding shares of our common stock, which will equal approximately 186,497 shares immediately after this offering, assuming no exercise of the underwriters’ overallotment option and no exercise of outstanding options, or the average weekly trading volume of our common stock on The NASDAQ Global Market during the four calendar weeks preceding the filing with the Securities and Exchange Commission of a notice on Form 144 with respect to such sale. Sales under Rule 144 of the Securities Act are also subject to prescribed requirements relating to the manner of sale, notice and availability of current public information about us.

Rule 144(k)

Under Rule 144(k), a person who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, is entitled to sell such shares without having to comply with the manner of sale, public information, volume limitation or notice filing provisions of Rule 144. Therefore, unless otherwise restricted, “144(k) shares” may be sold immediately upon the completion of this offering. Beginning 180 days after the date of this prospectus, shares of our common stock will qualify as “Rule 144(k)” shares.

Rule 701

In general, under Rule 701, any of our employees, directors, officers, consultants or advisors who purchases shares from us in connection with a compensatory stock or option plan or other written agreement before the effective date of this offering is entitled to sell such shares 90 days after the effective date of this offering in reliance on Rule 144, without having to comply with the holding period and notice filing requirements of Rule 144 and, in the case of non-affiliates, without having to comply with the public information, volume limitation or notice filing provisions of Rule 144. The SEC has indicated that Rule 701 will apply to typical stock options granted by an issuer before it becomes subject to the reporting requirements of the Exchange Act, as amended, along with the shares acquired upon exercise of such options, including exercises after the date of this prospectus.

Registration Rights

Upon completion of this offering, the holders of at least 12,039,085 shares of our common stock have certain rights with respect to the registration of such shares under the Securities Act. See “Description of Capital Stock—Registration Rights.” Upon the effectiveness of a registration statement covering these shares, the shares would become freely tradable.

 

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UNDERWRITING

Lehman Brothers Inc. is acting as the representative of the underwriters and the sole book-running manager of this offering. Under the terms of an underwriting agreement, which will be filed as an exhibit to the registration statement, each of the underwriters named below has severally agreed to purchase from us the respective number of common stock shown opposite its name below:

 

Underwriter

   Number of Shares

Lehman Brothers Inc

  

CIBC World Markets Corp

  

Thomas Weisel Partners LLC

  

C.E. Unterberg, Towbin LLC

  
    

Total

   5,000,000
    

The underwriting agreement provides that the underwriters’ obligation to purchase shares of common stock depends on the satisfaction of the conditions contained in the underwriting agreement including:

 

   

the obligation to purchase all of the shares of common stock offered hereby (other than those shares of common stock covered by their option to purchase additional shares as described below), if any of the shares are purchased;

 

   

the representations and warranties made by us to the underwriters are true;

 

   

there is no material change in our business or the financial markets; and

 

   

we deliver customary closing documents to the underwriters.

Commissions and Expenses

The following table summarizes the underwriting discounts and commissions we will pay to the underwriters. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares. The underwriting fee is the difference between the initial price to the public and the amount the underwriters pay to us for the shares.

 

     No Exercise    Full Exercise

Per share

     

Total

     

The representative of the underwriters has advised us that the underwriters propose to offer the shares of common stock directly to the public at the public offering price on the cover of this prospectus and to selected dealers, which may include the underwriters, at such offering price less a selling concession not in excess of $             per share. After the offering, the representative may change the offering price and other selling terms.

The expenses of the offering that are payable by us are estimated to be $3.0 million (excluding underwriting discounts and commissions).

Option to Purchase Additional Shares

We have granted the underwriters an option exercisable for 30 days after the date of this prospectus, to purchase, from time to time, in whole or in part, up to an aggregate of 750,000 shares at the public offering price less underwriting discounts and commissions. This option may be exercised if the underwriters sell more than 5,000,000 shares in connection with this offering. To the extent that this option is exercised, each underwriter will be obligated, subject to certain conditions, to purchase its pro rata portion of these additional shares based on the underwriter’s underwriting commitment in the offering as indicated in the table at the beginning of this Underwriting Section.

 

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Lock-Up Agreements

We, all of our directors and executive officers, and holders of all of our outstanding stock have agreed that, subject to certain exceptions, without the prior written consent of Lehman Brothers Inc., we and they will not directly or indirectly, (1) offer for sale, sell, pledge, or otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any shares of common stock (including, without limitation, shares of common stock that may be deemed to be beneficially owned by us or them in accordance with the rules and regulations of the Securities and Exchange Commission and shares of common stock that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for common stock, (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock, or (3) publicly disclose the intention to do any of the foregoing for a period of 180 days after the date of this prospectus. In addition, during this 180-day period, we have agreed not to file or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of common stock or securities convertible, exercisable or exchangeable into common stock or any of our other securities, and our directors and executive officers, and holders of all of our outstanding stock have agreed not to exercise any rights they may have with respect to registration of common stock or securities convertible, exercisable or exchangeable into common stock or any of our other securities.

The 180-day restricted period described in the preceding paragraph will be extended if:

 

   

during the last 17 days of the 180-day restricted period we issue an earnings release or material news or a material event relating to us occurs; or

 

   

prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period,

in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the announcement of the material news or occurrence of a material event, unless such extension is waived in writing by Lehman Brothers Inc.

The lock-up agreements described above do not prevent a security holder from transferring such securities: (1) in connection with a merger, reorganization or consolidation of Aegerion with or into another entity (including through the purchase of our outstanding capital stock) pursuant to which our stockholders immediately prior to such transaction will own less than 50% of the surviving entity’s voting power after such transaction; (2) by gift, will or intestacy; (3) to any trust for the direct or indirect benefit of the security holder or the immediate family of the security holder; or (4) by distribution to partners, members or shareholders of the security holder; provided, however, that, with respect to clauses (2), (3) and (4) above, it shall be a condition to the transfer that such transfer shall not involve a disposition for value and the transferee execute an agreement stating that the transferee is receiving and holding the securities subject to the provisions of the lock-up agreement executed by the transferring security holder. Furthermore, the lock-up provisions described above do not limit our ability to (a) issue securities pursuant to employee benefit plans, qualified stock option plans or other employee compensation plans existing on the date of this prospectus, (b) issue securities pursuant to currently outstanding options, warrants or rights, or (c) file a registration statement on Form S-8 to register securities issuable under our stock plans.

Lehman Brothers Inc., in its sole discretion, may release the common stock and other securities subject to the lock-up agreements described above in whole or in part at any time with or without notice. When determining whether or not to release common stock and other securities from lock-up agreements, Lehman Brothers Inc. will consider, among other factors, the holder’s reasons for requesting the release, the number of shares of common stock and other securities for which the release is being requested and market conditions at the time.

 

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Offering Price Determination

Prior to this offering, there has been no public market for our common stock. The initial public offering price will be negotiated between the representatives and us. In determining the initial public offering price of our common stock, the representatives will consider:

 

   

the history and prospects for the industry in which we compete;

 

   

our financial information,;

 

   

the ability of our management and our business potential and earning prospects;

 

   

the prevailing securities markets at the time of this offering; and

 

   

the recent market prices of, and the demand for, publicly traded shares of generally comparable companies.

Indemnification

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the underwriters may be required to make for these liabilities.

Stabilization, Short Positions and Penalty Bids

The representative may engage in stabilizing transactions, short sales and purchases to cover positions created by short sales, and penalty bids or purchases for the purpose of pegging, fixing or maintaining the price of the common stock, in accordance with Regulation M under the Securities Exchange Act of 1934:

 

   

Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.

 

   

A short position involves a sale by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase in the offering, which creates the syndicate short position. This short position may be either a covered short position or a naked short position. In a covered short position, the number of shares involved in the sales made by the underwriters in excess of the number of shares they are obligated to purchase is not greater than the number of shares that they may purchase by exercising their option to purchase additional shares. In a naked short position, the number of shares involved is greater than the number of shares in their option to purchase additional shares. The underwriters may close out any short position by either exercising their option to purchase additional shares and/or purchasing shares in the open market. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through their option to purchase additional shares. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.

 

   

Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions.

 

   

Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of the common stock. As a result, the price of the common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on The NASDAQ Global Market or otherwise and, if commenced, may be discontinued at any time.

 

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Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the common stock. In addition, neither we nor any of the underwriters make representation that the representative will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.

Electronic Distribution

A prospectus in electronic format may be made available on the Internet sites or through other online services maintained by one or more of the underwriters and/or selling group members participating in this offering, or by their affiliates. In those cases, prospective investors may view offering terms online and, depending upon the particular underwriter or selling group member, prospective investors may be allowed to place orders online. The underwriters may agree with us to allocate a specific number of shares for sale to online brokerage account holders. Any such allocation for online distributions will be made by the representative on the same basis as other allocations.

Other than the prospectus in electronic format, the information on any underwriter’s or selling group member’s web site and any information contained in any other web site maintained by an underwriter or selling group member is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter or selling group member in its capacity as underwriter or selling group member and should not be relied upon by investors.

NASDAQ Global Market

We have applied to list our shares of common stock on The NASDAQ Global Market under the symbol “AEGR.”

Discretionary Sales

The underwriters have informed us that they do not intend to confirm sales to discretionary accounts that exceed 5% of the total number of shares offered by them.

Stamp Taxes

If you purchase shares of common stock offered in this prospectus, you may be required to pay stamp taxes and other charges under the laws and practices of the country of purchase, in addition to the offering price listed on the cover page of this prospectus.

Notice to Prospective Investors in the European Economic Area

In relation to each member state of the European Economic Area that has implemented the Prospectus Directive (each, a relevant member state), with effect from and including the date on which the Prospectus Directive is implemented in that relevant member state (the relevant implementation date), an offer of the shares of common stock described in this prospectus may not be made to the public in that relevant member state prior to the publication of a prospectus in relation to the common stock that has been approved by the competent authority in that relevant member state or, where appropriate, approved in another relevant member state and notified to the competent authority in that relevant member state, all in accordance with the Prospectus Directive, except that, with effect from and including the relevant implementation date, an offer of securities may be offered to the public in that relevant member state at any time:

 

   

to any legal entity that is authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; or

 

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to any legal entity that has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; or

 

   

in any other circumstances that do not require the publication of a prospectus pursuant to Article 3 of the Prospectus Directive.

Each purchaser of shares of common stock described in this prospectus located within a relevant member state will be deemed to have represented, acknowledged and agreed that it is a “qualified investor” within the meaning of Article 2(1)(e) of the Prospectus Directive.

For purposes of this provision, the expression an “offer to the public” in any relevant member state means the communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe the securities, as the expression may be varied in that member state by any measure implementing the Prospectus Directive in that member state, and the expression “Prospectus Directive" means Directive 2003/71/EC and includes any relevant implementing measure in each relevant member state.

We have not authorized and do not authorize the making of any offer of shares of common stock through any financial intermediary on our behalf, other than offers made by the underwriters with a view to the final placement of the common stock as contemplated in this prospectus. Accordingly, no purchaser of shares of common stock, other than the underwriters, is authorized to make any further offer of the common stock on behalf of us or the underwriters.

Notice to Prospective Investors in the United Kingdom

This prospectus is only being distributed to, and is only directed at, persons in the United Kingdom that are qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive (“Qualified Investors”) that are also (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (ii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”). This prospectus and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other persons in the United Kingdom. Any person in the United Kingdom that is not a relevant persons should not act or rely on this document or any of its contents.

Relationships

The underwriters may in the future perform investment banking and advisory services for us from time to time for which they may in the future receive customary fees and expenses.

 

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LEGAL MATTERS

The validity of the shares of common stock we are offering will be passed upon for us by Goodwin Procter LLP, Boston, Massachusetts. Certain legal matters in connection with this offering will be passed upon for the underwriters by Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Boston, Massachusetts.

EXPERTS

Ernst & Young LLP, independent registered public accounting firm, has audited our financial statements for the period February 4, 2005 (Inception) to December 31, 2005, the year ended December 31, 2006 and for the period from February 4, 2005 (Inception) to December 31, 2006, as set forth in their report. We have included our financial statements in the prospectus and elsewhere in the registration statement in reliance on Ernst & Young LLP’s report, given on their authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 (File No. 333-141459) under the Securities Act with respect to the shares of common stock we are offering by this prospectus. This prospectus, which forms a part of the registration statement, does not contain all of the information included in the registration statement. For further information pertaining to us and our common stock, you should refer to the registration statement and to its exhibits. Whenever we make reference in this prospectus to any of our contracts, agreements or other documents, the references are not necessarily complete, and you should refer to the exhibits attached to the registration statement for copies of the actual contract, agreement or other document.

Upon the closing of the offering, we will be subject to the informational requirements of the Exchange Act and will file annual, quarterly and current reports, proxy statements and other information with the SEC. You can read our SEC filings, including the registration statement, over the Internet at the SEC’s website at www.sec.gov. You may also read and copy any document we file with the SEC at its public reference facility at 100 F Street, N.E., Washington, D.C., 20549.

You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C., 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facility.

 

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Aegerion Pharmaceuticals, Inc.

(a development stage company)

INDEX TO FINANCIAL STATEMENTS

CONTENTS

 

Report of Independent Registered Public Accounting Firm

   F-2

Balance Sheets as of December 31, 2005 and 2006, March 31, 2007 (Unaudited) and March 31, 2007 pro forma (Unaudited)

   F-3

Statements of Operations for the period from February 4, 2005 (Inception) to December 31, 2005, the year ended December 31, 2006, the three months ended March 31, 2006 and 2007 (Unaudited) and the period from February 4, 2005 (Inception) to March 31, 2007 (Unaudited)

   F-4

Consolidated Statements of Stockholders’ Equity for the period from February 4, 2005 (Inception) to December 31, 2006 and January 1, 2007 to March 31, 2007 (Unaudited)

   F-5

Statements of Cash Flows for the period from February 4, 2005 (Inception) to December 31, 2005, the year ended December 31, 2006, the three months ended March 31, 2006 and 2007 (Unaudited) and the period from February 4, 2005 (Inception) to December 31, 2007 (Unaudited)

   F-6

Notes to Financial Statements

   F-7

All schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted.

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Aegerion Pharmaceuticals, Inc.

We have audited the accompanying balance sheets of Aegerion Pharmaceuticals, Inc. (a development stage company) as of December 31, 2005 and 2006, and the related statements of operations, stockholders’ deficiency and cash flows for the period from February 4, 2005 (Inception) to December 31, 2005, the year ended December 31, 2006 and for the period from February 4, 2005 (Inception) to December 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Aegerion Pharmaceuticals, Inc. at December 31, 2005 and 2006, and the results of its operations and its cash flows for the period from February 4, 2005 (Inception) to December 31, 2005, the year ended December 31, 2006 and for the period from February 4, 2005 (Inception) to December 31, 2006, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 1 to the financial statements, in 2006 the Company adopted SFAS No. 123(R), “Share Based Payments” applying the modified prospective method at the beginning of fiscal 2006.

/s/ Ernst & Young LLP

MetroPark, New Jersey

March 20, 2007, except as to Note 1, as to which date is May 25, 2007.

 

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Aegerion Pharmaceuticals, Inc.

(a development stage company)

BALANCE SHEETS

 

   

December 31,

2005

   

December 31,

2006

   

March 31,
2007

   

March 31, 2007

Pro forma
(Note 1)

 
               

(Unaudited)

    (Unaudited)  
ASSETS        

Current assets:

       

Cash and cash equivalents

  $ 22,115,427     $ 16,563,241     $ 22,951,417     $ 22,951,417  

Prepaid expenses and other current assets

    —         153,323       616,034       616,034