e424b3
Filed
Pursuant to Rule 424(b)(3)
Registration No. 333-178692
PROSPECTUS
OXiGENE, INC.
4,849,101 Shares
COMMON STOCK
This prospectus relates to the sale of up to 4,849,101 shares of our common stock, par
value $0.01 per share, which may be offered by the selling stockholder, Lincoln Park Capital
Fund, LLC, or LPC. The shares of common stock being offered by the selling stockholder are
issuable pursuant to the purchase agreement dated as of November 28, 2011 between the Company and
LPC, or the Purchase Agreement. See the section of this prospectus entitled The LPC
Transaction for a description of the Purchase Agreement and the section entitled Selling
Stockholder for additional information regarding LPC. The prices at which LPC may sell the
shares will be determined by the prevailing market price for the shares or in negotiated
transactions.
We are not selling any securities under this prospectus and will not receive any of the
proceeds from the sale of shares by the selling stockholder.
The selling stockholder may sell the shares of common stock described in this prospectus in a
number of different ways and at varying prices. We provide more information about how the selling
stockholder may sell its shares of common stock in the section titled Plan of Distribution on
page 21. We will not be paying any underwriting discounts or commissions in this offering. We
will pay the expenses incurred in registering the shares, including legal and accounting fees.
In February 2011, our board of directors voted unanimously to implement a 1:20 reverse stock
split of our common stock, following authorization of the reverse split by a stockholder vote on
December 21, 2010. The reverse split became effective on February 22, 2011. All of the share and
per share values discussed in this prospectus have been adjusted to reflect the effect of the
reverse stock split.
Our common stock is quoted on
The NASDAQ Capital Market under the symbol OXGN. On
January 10, 2012, the last reported sale price of our common stock as reported on The NASDAQ Capital Market
was $1.05 per share. We have applied to have the shares of common stock offered pursuant to this
prospectus approved for listing on The NASDAQ Capital Market.
Investing
in our securities involves risks. See Risk Factors beginning on page 7 of this
prospectus for a discussion of these risks.
The selling stockholder is an underwriter within the meaning of the Securities Act of 1933,
as amended.
Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
The
date of this prospectus is January 11, 2012.
TABLE OF CONTENTS
|
|
|
|
|
|
|
|
2 |
|
|
|
|
7 |
|
|
|
|
15 |
|
|
|
|
16 |
|
|
|
|
17 |
|
|
|
|
20 |
|
|
|
|
21 |
|
|
|
|
22 |
|
|
|
|
23 |
|
|
|
|
24 |
|
|
|
|
26 |
|
|
|
|
39 |
|
|
|
|
53 |
|
|
|
|
59 |
|
|
|
|
65 |
|
|
|
|
66 |
|
|
|
|
67 |
|
|
|
|
68 |
|
|
|
|
69 |
|
|
|
|
69 |
|
|
|
|
69 |
|
You should rely only on the information contained or incorporated by reference into this
prospectus. We have not, and the selling stockholder has not, authorized anyone to provide you with
additional or different information. These securities are not being offered in any jurisdiction
where the offer is not permitted. You should assume that the information in this prospectus is
accurate only as of the date on the front of the document and that any information we have
incorporated by reference is accurate only as of the date of the document incorporated by
reference, regardless of the time of delivery of this prospectus or of any sale of our common
stock. Unless the context otherwise requires, references to we, our, us, or the Company in
this prospectus mean OXiGENE, Inc.
1
PROSPECTUS SUMMARY
The following is only a summary. We urge you to read the entire prospectus, including the more
detailed consolidated financial statements, notes to the consolidated financial statements and
other information included herein. Investing in our securities involves risks. Therefore, please
carefully consider the information provided under the heading
Risk Factors starting on page 7;.
Our Business
We are a clinical-stage, biopharmaceutical company developing novel therapeutics to treat
cancer and eye diseases. Our primary focus is the development of product candidates referred to as
vascular disrupting agents, or VDAs, that selectively disable and destroy abnormal blood vessels
that provide solid tumors a means of growth and survival and also are associated with visual
impairment in a number of ophthalmological diseases and conditions.
We intend to primarily target the development of our product candidates for the treatment of
rare cancers that will be eligible for orphan drug status from the Food and Drug Administration, or
FDA. By doing so, we believe we will be able to take advantage of significant benefits associated
with orphan drug status, such as:
|
|
|
Study design assistance from the appropriate FDA center, |
|
|
|
|
Exemption from application-filing fees, |
|
|
|
|
Possible grant funding for Phase 1 and 2 clinical trials, |
|
|
|
|
Tax credits for some clinical research expenses, and |
|
|
|
|
Seven years of marketing exclusivity after the approval of the drug. |
The Orphan Drug Act was passed in January 1983 to stimulate the research, development, and
approval of products that treat rare diseases. An orphan drug is defined as a product that treats a
rare disease affecting fewer than 200,000 patients in the United States. Drugs are granted orphan
status for a specific indication. Our lead candidate, ZYBRESTAT, has been awarded orphan drug
status by the FDA and the European Commission in the European Union for the treatment of advanced
anaplastic thyroid cancer, or ATC, and for the treatment of medullary, Stage IV papillary and Stage
IV follicular thyroid cancers. The FDA has also granted Fast Track status to ZYBRESTAT for the
treatment of regionally advanced and/or metastatic ATC.
To date, more than 400 subjects have been treated with ZYBRESTAT in human clinical trials, and
the drug candidate has generally been observed to be well-tolerated.
ZYBRESTAT for Oncology
We are currently pursuing the clinical development of ZYBRESTAT. ZYBRESTAT is a reversible
tubulin binding agent that works by disrupting the network of blood vessels, or vasculature, within
solid tumors, also referred to as vascular disruption. Vascular disruption leads to tumor hypoxia,
which refers to the process of starving the tumor of vitally necessary oxygen supply and subsequent
tumor cell death. More specifically, ZYBRESTAT selectively targets the existing abnormal and
largely immature vasculature found specifically in most solid tumors and causes endothelial cells
that make up the walls of the blood vessels in that vasculature to lose their normally flat shape
and to round up, thus blocking the flow of blood to the tumor. The downstream tumor environment is
then deprived of oxygen and nutrients, and the resulting restriction in blood supply kills the
cells in the central portion of the tumor. Based on ZYBRESTATs positive activity observed in
animal models, we have conducted multiple clinical trials of ZYBRESTAT in a variety of tumor types.
We have completed a Phase 2/3 clinical trial of ZYBRESTAT in patients with ATC. ATC is a very
aggressive, rare but lethal cancer of the thyroid gland. Because of the rapid progression of the
disease and the absence of effective therapies, median survival from the time of diagnosis is
approximately 3-4 months. Furthermore, we have an ongoing clinical trial of ZYBRESTAT in patients
with ovarian cancer, for which we were granted orphan drug status. We are currently planning a
pivotal Phase 3 clinical trial of ZYBRESTAT in ATC, which we refer to as the FACT 2 trial, which we
believe will be sufficient to obtain FDA approval and approval in Europe for the treatment of
patients with advanced ATC.
In connection with the restructuring of our business that we announced on September 1, 2011,
we determined that a Company-sponsored Phase 3 registrational study of ZYBRESTAT in patients with
ATC, as suggested by the FDA, would require significant additional capital exceeding our existing
resources. The purchase agreement with Lincoln Park Capital Fund, LLC (LPC) that we entered into in
November 2011 provides for the sale, from time to time, of up to $20 million of our common stock.
The
proceeds from sales under this purchase agreement will be used to advance our efforts to
conduct the FACT 2 registration trial in ATC, as well as to continue to support ongoing clinical
programs in other tumor types and advance our earlier stage programs.
2
Possible areas for future development
We believe that, if successful, the ongoing ZYBRESTAT for oncology clinical trial program will
establish a compelling rationale for further development of ZYBRESTAT as a treatment for:
|
|
|
aggressive and difficult-to-treat solid tumors; |
|
|
|
|
use in combination with chemotherapy in a variety of solid tumors, particularly those in
which carboplatin and/or paclitaxel chemotherapy are commonly used; and |
|
|
|
|
use in combination with commonly used drugs, such as bevacizumab, that interfere with
blood vessel growth, or angiogenesis, in various solid tumor indications. |
We believe these areas for potential further development collectively represent a significant
unmet medical need and thus a significant potential commercial market opportunity that includes
cancers of the thyroid, ovary, kidney, liver, head and neck, breast, lung, skin, brain, colon and
rectum.
OXi4503, a unique, second generation VDA for oncology indications
We are currently pursuing development of OXi4503, a second-generation, dual-mechanism VDA, as
a treatment for certain solid tumor types and, as a more recent development, for the treatment of
myeloid leukemias. We believe that OXi4503 is differentiated from other VDAs by its dual-action
activity: in addition to having potent vascular disrupting effects, OXi4503 is unique in that
certain enzymes in the human body can help convert it to a form of chemical that has direct tumor
cell killing effects. We believe this unique property may result in enhanced anti-tumor activity in
certain tumor types as compared with other VDA drug candidates. Based on data from preclinical
studies, we believe that OXi4503 may have enhanced activity in tumor types with relatively high
levels of the enzymes that facilitate the conversion of OXi4503 to the form of chemical that kills
tumor cells. These tumor types include hepatocellular carcinoma, melanoma, and leukemias of the
myeloid lineage. In preclinical studies, OXi4503 has shown potent anti-tumor activity against solid
tumors and acute myeloid leukemia models, both as a single agent and in combination with other
cancer treatment modalities.
Based on the results of preclinical studies published in the journal Blood in September 2010
that show OXi4503 has potent activity against acute myelogenous leukemia (AML) in animal models, we
entered into a clinical trial agreement pursuant to which investigators at the University of
Florida initiated an investigator sponsored Phase 1 study of OXi4503 in patients with AML or
myelodysplastic syndrome (MDS) in May 2011. This open-label, dose-escalating study for the
treatment of up to 36 patients is being conducted in patients with relapsed or refractory AML and
MDS and will evaluate the safety profile, maximum tolerated dose and biologic activity of OXi4503
in these patients. We expect that initial indications of biologic activity from this study may be
available in 2012.
The general direction of future development of OXi4503 for hematologic indications will depend
on the outcome of the analysis of the study in AML, as well as available financial resources and
potential partnering activities.
ZYBRESTAT for Ophthalmology
In addition to developing ZYBRESTAT as an intravenously administered therapy for oncology
indications, we have undertaken an ophthalmology research and development program with ZYBRESTAT
with the ultimate goal of developing a topical formulation of ZYBRESTAT for ophthalmological
diseases and conditions that are characterized by abnormal blood vessel growth within the eye that
result in loss of vision.
In December 2010, we completed a randomized, double-masked, placebo-controlled Phase 2
proof-of-mechanism trial, which we refer to as the FAVOR trial, with a single dose of
intravenously-administered ZYBRESTAT in patients with polypoidal choroidal vasculopathy (PCV), a
form of choroidal neovascularization, which is a condition where new blood vessels form in the
choroid, a part of the eye, and which can lead to vision loss and,
ultimately, blindness. Current
therapies, including approved drugs that interfere with
3
blood vessel growth, known as
anti-angiogenics, appear to provide limited benefit. We believe that the architecture of the
abnormal vasculature in certain eye tissues, namely the retina and choroid, which contribute to PCV
patients loss of vision, may be particularly susceptible to treatment with a VDA such as
ZYBRESTAT.
Data from the FAVOR trial, in which ZYBRESTAT at different doses was compared to placebo
in patients with PCV, followed by imaging of the retina on days 2, 8, 15, and 28, were presented at
the 6th Asia-Pacific VitreoRetina Society (APVRS) Congress in Hyderabad, India on December 2, 2011.
The primary objective of the study was to observe the change in the number of polyps from baseline
following administration of ZYBRESTAT. Although this number was essentially unchanged, there were
some suggestions of activity with a decrease in polyp activity and a reduction in subretinal fluid
and retinal edema in patients receiving ZYBRESTAT.
We believe that PCV represents an attractive target indication and development pathway for
ZYBRESTAT. Unlike wet age-related macular degeneration, an indication for which several
anti-angiogenic drugs are approved or prescribed off-label, conducting clinical studies of
ZYBRESTAT in patients with ophthalmologic indications not yet approved for treatment with such
anti-angiogenic drugs could potentially prove to reduce development time and expense. The
objectives of the FAVOR trial and the ongoing preclinical program of ZYBRESTAT in ophthalmology are
to:
|
|
|
determine the therapeutic utility of ZYBRESTAT in PCV, and visualize the effect of
ZYBRESTAT on the vasculature of the polyps associated with PCV; |
|
|
|
determine blood concentrations of drug required for activity in humans and thereby
estimate, with the benefit of preclinical data, an appropriate dose of
topically-administered ZYBRESTAT to be evaluated in subsequent human clinical studies; and |
|
|
|
further evaluate the feasibility of developing a topical formulation of ZYBRESTAT for
ophthalmological indications. |
We believe that a safe, effective and convenient topically-administered anti-vascular
therapeutic would have advantages over currently approved anti-vascular, ophthalmological
therapeutics, many of which must be injected directly into patients eyes, in some cases on a
chronic monthly basis.
We are also evaluating the requirements for additional preclinical toxicology and efficacy
studies with ZYBRESTAT for topical ophthalmological formulations to better position the program for
partnering. Further development of this program will depend on the outcome of our evaluation of
these requirements and available financial resources.
Corporate Information
We are a Delaware corporation, incorporated in 1988 in the state of New York and
reincorporated in 1992 in the state of Delaware, with our principal corporate office in the United
States at 701 Gateway Boulevard, Suite 210, South San Francisco, California 94080 (telephone: (650)
635-7000, fax: (650) 635-7001). We also have an office at 300 Bear Hill Road, Waltham,
Massachusetts 02451. The address of our website is www.oxigene.com. Our annual reports on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those
reports, are available to you free of charge through the Investors section of our web site as
soon as reasonably practicable after such materials have been electronically filed with, or
furnished to, the Securities and Exchange Commission. Information contained on our web site does
not form a part of this prospectus.
The Offering
On November 28, 2011, we executed a Purchase Agreement and a Registration Rights Agreement
with Lincoln Park Capital Fund, LLC, or LPC. Under the Purchase Agreement, we have the right to
sell up to $20,000,000 of our common stock, subject to certain limitations, to LPC at our
discretion, as described below.
Pursuant to the Registration Rights Agreement, we are filing this registration statement and
prospectus with the Securities and Exchange Commission, or the SEC, covering shares that have been
issued or may be issued to LPC under the Purchase Agreement. We do not have the right to commence
any sales of our shares to LPC until the SEC has declared effective the registration statement of
which this prospectus is a part. The registration statement was
declared effective on January 11, 2012. Accordingly, over
approximately 36 months, we have the right, subject to the terms and conditions of the Purchase
Agreement, to direct LPC to purchase up to $20,000,000 of our common stock in amounts up to
$200,000 as often as every two business days under certain conditions. We can also accelerate the
amount of our stock to be purchased under certain circumstances. There are no trading volume
requirements or restrictions under the Purchase Agreement, and we will control the timing and
amount of any sales of our common stock to LPC. The purchase price of the shares will be based on
the market prices of our shares immediately preceding the time of sale as computed
4
under the
Purchase Agreement without any fixed discount. We may at any time in our sole discretion terminate
the Purchase Agreement without fee, penalty or cost upon one business days notice. We issued
299,700 shares of our stock to LPC as an initial commitment fee for entering into the Purchase
Agreement and we may issue up to 599,401 shares, of which only 299,401 are included in this
prospectus, as an additional commitment fee on a pro rata basis as LPC purchases up to $20,000,000
of our stock in our discretion. For example, if we elect, at our sole discretion, to require LPC
to purchase $200,000 of our stock, then we would issue 5,994 shares as a pro rata additional
commitment fee, which is the product of $200,000, the amount we have elected to sell, divided by
$20,000,000, the total amount we can sell to LPC under the Purchase Agreement, multiplied by
599,401, the maximum number of additional commitment shares. The additional commitment shares will
only be issued pursuant to this formula if, as and when we elect to sell our stock to LPC. LPC may
not assign or transfer its rights or obligations under the Purchase Agreement.
As of November 28, 2011, there were 14,879,857 shares outstanding, of which 14,834,560 shares
were held by non-affiliates, excluding the 299,700 shares which we have already issued and are
being offered by LPC pursuant to this prospectus. In the aggregate, 4,849,101 shares are being
offered under this prospectus, which includes 299,700 shares that we issued as an initial
commitment fee and an additional 4,549,401 shares which are yet to be issued. Of that additional
number, we may issue 299,401 shares as an additional commitment fee on a pro rata basis as LPC
purchases up to $20,000,000 of our stock in our discretion and the remainder represent shares we
may sell to LPC under the Purchase Agreement. If all of the 4,849,101 shares offered by LPC under
this prospectus were issued and outstanding as of the date hereof, such shares would represent
24.58% of the total common stock outstanding or 24.64% of the outstanding shares held by
non-affiliates, as adjusted, as of the date hereof. If we elect to issue and sell more than the
4,849,101 shares offered under this prospectus to LPC, which we have the right, but not the
obligation to do, we must first register any such additional shares under the Securities Act, which
could cause substantial dilution to our stockholders. In addition, depending on the average price
at which we sell shares to LPC, if we seek to issue and sell more than 2,974,483 shares,
representing 19.9% of our outstanding common stock on November 28, 2011, to LPC, we may be required
to seek shareholder approval in order to remain in compliance with The NASDAQ Capital Market rules,
which require shareholder approval for the issuance of more than 19.9% of a companys outstanding
shares in a private placement at a discount to the greater of market or book value of the shares.
The number of shares ultimately offered for resale by LPC is dependent upon the number of shares we
sell to LPC under the Purchase Agreement.
|
|
|
Common stock to be offered by the selling stockholder
|
|
4,849,101 shares consisting of: |
|
|
|
|
|
299,700 initial commitment shares issued to
LPC; |
|
|
|
|
|
Up to 299,401 shares that we are required to
issue proportionally to the dollars we receive from
LPC in the future, as an additional commitment fee, if
and when we sell additional shares to LPC under the
Purchase Agreement; and |
|
|
|
|
|
Up to 4,250,000 shares that we may sell to LPC
under the Purchase Agreement. |
|
|
|
Common stock outstanding prior to this offering
|
|
14,879,857 shares |
|
|
|
Common stock to be outstanding after giving effect
to the issuance of 4,849,101 shares under the
Purchase Agreement
|
|
19,728,958 shares |
|
|
|
Use of Proceeds
|
|
We will receive no proceeds from the sale of shares of
common stock by LPC in this offering. However, we may
receive up to $20,000,000 under the Purchase Agreement
with LPC. Any proceeds that we receive from sales to
LPC under the Purchase Agreement will be used to fund
a portion of the costs of our FACT 2 study in
anaplastic thyroid cancer and general corporate
purposes, including working capital and operational
purposes. See Use of Proceeds. |
|
|
|
Risk Factors
|
|
This investment involves a high degree of risk. See
Risk Factors for a discussion of factors you should
consider carefully before making an investment
decision. |
|
|
|
Symbol on The NASDAQ Capital Market
|
|
OXGN |
5
Effect of Issuances in this Offering; Dilution
Issuances of our common stock in this offering will have no effect on your rights or
privileges as an existing holder of our common stock, except that the economic and voting interests
of each stockholder will be diluted as a result of any such issuances. What this means is that,
although the number of shares of common stock that current stockholders presently own will not
decrease, the shares that are held by our current stockholders will represent a smaller percentage
of our total shares that will be outstanding after any issuances of shares of common stock to LPC.
6
RISK FACTORS
An investment in our common stock involves a high degree of risk. You should carefully read
and consider the risks and uncertainties described below together with all of the other information
contained in this prospectus, including our financial statements and the related notes appearing at
the end of this prospectus, before deciding to invest in our common stock. If any of these risks
actually occur, our business, prospects, financial condition, results of operations or cash flows
could be materially harmed. In that event, the market price of our common stock could decline and
you could lose all or part of your investment.
Risks Related to Our Business
We have recently implemented a reduction in force, and now have only a limited number of employees
to manage and operate our business.
As announced on September 1, 2011, we have implemented a restructuring plan designed to focus
our capital resources on our most promising early-stage clinical programs and further reduce our
cash utilization. This restructuring plan involved a reduction in force of 11 full-time equivalent
employees, or approximately 61%. As of the date of this prospectus, we have six full-time
employees. This reduction in force and focus on reducing cash utilization requires us to manage and
operate our business in a highly efficient manner. We cannot assure you that we will be able to
retain adequate staffing levels to run our operations and/or to accomplish all of the objectives
that we otherwise would seek to accomplish.
We will be required to raise additional funds to finance our operations and remain a going concern;
we may not be able to do so when necessary, and/or the terms of any financings may not be
advantageous to us.
Our operations to date have consumed substantial amounts of cash. Negative cash flows from our
operations are expected to continue over at least the next several years. Our cash utilization
amount is highly dependent on the progress of our product development programs, particularly, the
results of our preclinical and clinical studies, the cost, timing and outcomes of regulatory
approval for our product candidates, the terms and conditions of our contracts with service
providers for these programs, and the rate of recruitment of patients in our human clinical trials.
In addition, the further development of our ongoing clinical trials will depend on upcoming
analysis and results of those studies and our cash resources at that time.
We expect cash on hand as of December 1, 2011 to fund our operations, supporting the projects
we currently have ongoing and those costs we have committed to for future projects, through the
first half of 2013. In order to remain a going concern beyond the first half of 2013, we will
require significant additional funding. Should we be able to sell the shares included in this
prospectus at a price equivalent to approximately $1.00 per share, we would be able to fund our
operations through the entire 2013 fiscal year. Additional funds to finance our operations may not
be available on terms that we deem acceptable, or at all. If we fail to secure financing before the
end of the first half of 2013, we may be forced to cease all of our clinical and other activities.
Our ongoing capital requirements will depend on numerous factors, including: the progress and
results of preclinical testing and clinical trials of our product candidates under development, and
in particular whether we initiate the proposed FACT 2 study in ATC; the progress of our research
and development programs; the time and costs expended and required to obtain any necessary or
desired regulatory approvals; the resources, if any, that we devote to develop manufacturing
methods and advanced technologies; our ability to enter into licensing arrangements, including any
unanticipated licensing arrangements that may be necessary to enable us to continue our development
and clinical trial programs; the costs and expenses of filing, prosecuting and, if necessary,
enforcing our patent claims, or defending against possible claims of infringement by third-party
patent or other technology rights; the cost of commercialization activities and arrangements, if
any, undertaken by us; and, if and when approved, the demand for our products, which demand depends
in turn on circumstances and uncertainties that cannot be fully known, understood or quantified
unless and until the time of approval, including the range of indications for which any product is
granted approval.
If we are unable to raise additional funds when needed, we will not be able to continue
development of our product candidates or we will be required to delay, scale back or eliminate some
or all of our development programs or cease operations. We may seek to raise additional funds
through public or private financing, strategic partnerships or other arrangements. Any additional
equity financing may be dilutive to our current stockholders and debt financing, if available, may
involve restrictive covenants. If we raise funds through collaborative or licensing arrangements,
we may be required to relinquish, on terms that are not favorable to us, rights to some of our
technologies or product candidates that we would otherwise seek to develop or commercialize. Our
failure to raise capital when needed will materially harm our business, financial condition and
results of operations. As a result of this uncertainty and the substantial doubt about our ability
to continue as a going concern as of December 31, 2010, the Report of Independent Registered Public
Accounting Firm at the beginning of the Consolidated Financial Statements section in this
prospectus includes a going concern explanatory paragraph.
7
We have a history of losses, and we anticipate that we will continue to incur losses in the future.
We have experienced net losses every year since our inception and, as of September 30, 2011,
had an accumulated deficit of approximately $215,008,000. We anticipate continuing to incur
substantial additional losses over at least the next several years due to, among other factors, the
need to expend substantial amounts on our continuing clinical trials with respect to our VDA drug
candidates, technologies, and anticipated research and development activities and the general and
administrative expenses associated with those activities. We have not commercially introduced any
product and our potential products are in varying early stages of development and testing. Our
ability to attain profitability will depend upon our ability to develop products that are effective
and commercially viable, to obtain regulatory approval for the manufacture and sale of our products
and to license or otherwise market our products successfully. We may never achieve profitability,
and even if we do, we may not be able to sustain being profitable.
Due in part to our constrained financial resources, we may fail to select or capitalize on the
most scientifically, clinically or commercially promising or profitable indications or therapeutic
areas for our product candidates or those that are in-licensed.
We have limited technical, managerial and financial resources to determine the indications on
which we should focus the development efforts related to our product candidates. Due to our limited
available financial resources, we have had to curtail clinical development programs and activities
that might otherwise have led to more rapid progress of our product candidates through the
regulatory and development processes. For example, in February 2010 we announced a restructuring of
our clinical development programs. As a part of that restructuring, we stopped enrollment in our
FACT trial and have redirected available resources away from other clinical trial programs in favor
of those we believe to have the highest value. In addition, in September 2011, we implemented a
reduction in force, and now have only a limited number of employees to manage and operate our
business and clinical programs. We may make incorrect determinations with regard to the
indications and clinical trials on which to focus the available resources that we do have.
Furthermore, we cannot assure you that we will be able to retain adequate staffing levels to run
our operations and/or to accomplish all of the objectives that we otherwise would seek to
accomplish. The decisions to allocate our research, management and financial resources toward
particular indications or therapeutic areas for our product candidates may not lead to the
development of viable commercial products and may divert resources from better opportunities.
Similarly, our decisions to delay or terminate drug development programs may also cause us to miss
valuable opportunities. In addition, from time to time, we may in-license or otherwise acquire
product candidates to supplement our internal development activities. Those activities may use
resources that otherwise would have been devoted to our internal programs. We cannot assure you
that any resources that we devote to acquired or in-licensed programs will result in any products
that are superior to our internally developed products.
Our product candidates have not completed clinical trials, and may never demonstrate sufficient
safety and efficacy in order to do so.
Our product candidates are in an early stage of development. In order to achieve profitable
operations, we alone or in collaboration with others, must successfully develop, manufacture,
introduce and market our products. The time frame necessary to achieve market success for any
individual product is long and uncertain. The products currently under development by us will
require significant additional research and development and extensive preclinical and clinical
testing prior to application for commercial use. A number of companies in the biotechnology and
pharmaceutical industries have suffered significant setbacks in clinical trials, even after showing
promising results in early or later-stage studies or clinical trials. Although we have obtained
some favorable results to-date in preclinical studies and clinical trials of certain of our
potential products, such results may not be indicative of results that will ultimately be obtained
in or throughout such clinical trials, and clinical trials may not show any of our products to be
safe or capable of producing a desired result. Additionally, we may encounter problems in our
clinical trials that will cause us to delay, suspend or terminate those clinical trials. Further,
our research or product development efforts may not be successfully completed, any compounds
currently under development by us may not be successfully developed into drugs, any potential
products may not receive regulatory approval on a timely basis, if at all, and competitors may
develop and bring to market products or technologies that render our potential products obsolete.
If any of these problems occur, our business would be materially and adversely affected.
We depend heavily on our executive officers, directors, and principal consultants and the loss of
their services would materially harm our business.
We believe that our success depends, and will likely continue to depend, upon our ability to
retain the services of our current executive officers, directors, principal consultants and others.
The loss of the services of any of these individuals could have a material adverse effect on our
business. In addition, we have established relationships with universities, hospitals and research
institutions, which have historically provided, and continue to provide, us with access to research
laboratories, clinical trials, facilities and patients. Additionally, we believe that we may, at
any time and from time to time, materially depend on the services of consultants and other
unaffiliated third parties. We cannot assure you that consultants and other unaffiliated third
parties will provide the level of service to us that we require in order to achieve our business
objectives.
Our industry is highly competitive, and our products may become technologically obsolete.
We are engaged in a rapidly evolving field. Competition from other pharmaceutical companies,
biotechnology companies and research and academic institutions is intense and expected to increase.
Many of those companies and institutions have substantially
8
greater financial, technical and human
resources than we do. Those companies and institutions also have substantially greater experience
in developing products, in conducting clinical trials, in obtaining regulatory approval and in
manufacturing and marketing pharmaceutical products. Our competitors may succeed in obtaining
regulatory approval for their products more rapidly than we do. Competitors have developed or are
in the process of developing technologies that are, or in the future may be, the basis for
competitive products. We are aware of at least one other company that currently has a
clinical-stage VDA for use in an oncology indication. Some of these competitive products may have
an entirely different approach or means of accomplishing the desired therapeutic effect than
products being developed by us. Our competitors may succeed in developing technologies and products
that are more effective and/or cost competitive than those we are developing, or that would render
our technology and products less competitive or even obsolete. In addition, one or more of our
competitors may achieve product commercialization or patent protection earlier than we do, which
could materially adversely affect us.
We have licensed in rights to ZYBRESTAT, OXi4503 and other programs from third parties. If our
license agreements terminate, we may lose the licensed rights to our product candidates, including
ZYBRESTAT and OXi4503, and we may not be able to continue to develop them or, if they are approved,
market or commercialize them.
We depend on license agreements with third parties for certain intellectual property rights
relating to our product candidates, including patent rights. Currently, we have licensed in patent
rights from Arizona State University, or ASU, and the Bristol-Myers Squibb Company for ZYBRESTAT
and OXi4503 and from Baylor University for other programs. In general, our license agreements
require us to make payments and satisfy performance obligations in order to keep these agreements
in effect and retain our rights under them. These payment obligations can include upfront fees,
maintenance fees, milestones, royalties, patent prosecution expenses, and other fees. These
performance obligations typically include diligence obligations. If we fail to pay, be diligent or
otherwise perform as required under our license agreements, we could lose the rights under the
patents and other intellectual property rights covered by the agreements. While we are not
currently aware of any dispute with any licensors under our material agreements with them, if
disputes arise under any of our in-licenses, including our in-licenses from ASU and the
Bristol-Myers Squibb Company, and Baylor University, we could lose our rights under these
agreements. Any such disputes may or may not be resolvable on favorable terms, or at all. Whether
or not any disputes of this kind are favorably resolved, our managements time and attention and
our other resources could be consumed by the need to attend to and seek to resolve these disputes
and our business could be harmed by the emergence of such a dispute.
If we lose our rights under these agreements, we may not be able to conduct any further
activities with the product candidate or program that the license covered. If this were to happen,
we might not be able to develop our product candidates further, or following regulatory approval,
if any, we might be prohibited from marketing or commercializing them. In particular, patents
previously licensed to us might after termination be used to stop us from conducting these
activities.
We depend extensively on our patents and proprietary technology, and we must protect those assets
in order to preserve our business.
Although we expect to seek patent protection for any compounds we discover and/or for any
specific use we discovers for new or previously known compounds, any or all of them may not be
subject to effective patent protection. Further, the development of regimens for the administration
of pharmaceuticals, which generally involve specifications for the frequency, timing and amount of
dosages, has been, and we believe, may continue to be, important to our effort, although those
processes, as such, may not be patentable. In addition, the issued patents may be declared invalid
or our competitors may find ways to avoid the claims in the patents.
Our success will depend, in part, on our ability to obtain patents, protect our trade secrets
and operate without infringing on the proprietary rights of others. As of December 1, 2011, we were
the exclusive licensee, sole assignee or co-assignee of twenty-eight (28) granted United States
patents, fifteen (15) pending United States patent applications, three (3) pending Patent
Cooperation Treaty international patent applications, and granted patents and/or pending
applications in several other major markets, including the European Union, Canada and Japan. The
patent position of pharmaceutical and biotechnology firms like us are generally highly uncertain
and involves complex legal and factual questions, resulting in both an apparent inconsistency
regarding the breadth of claims allowed in United States patents and general uncertainty as to
their legal interpretation and enforceability. Accordingly, patent applications assigned or
exclusively licensed to us may not result in patents being issued, any issued patents assigned or
exclusively licensed to us may not provide us with competitive protection or may be challenged by
others, and the current or future granted patents of others may have an adverse effect on our
ability to do business and achieve profitability. Moreover, since some of the basic research
relating to one or more of our patent applications and/or patents were performed at various
universities and/or funded by grants, one or more universities, employees of such universities
and/or grantors could assert that they have certain rights in such research and any resulting
products. Further, others may independently develop similar products, may duplicate our products,
or may design around our patent rights. In addition, as a result of the assertion of rights by a
third party or otherwise, we may be required to obtain licenses to patents or other proprietary
rights of others in or outside of the United States. Any licenses required under any such patents
or proprietary rights may not be made available on terms acceptable to us, if at all. If we do not
obtain such licenses, we could
encounter delays in product market introductions while our attempts to design around such
patents or could find that the development, manufacture or sale of products requiring such licenses
is foreclosed. In addition, we could incur substantial costs in defending
9
ourselves in suits
brought against us or in connection with patents to which we hold licenses or in bringing suit to
protect our own patents against infringement.
We require employees and the institutions that perform our preclinical and clinical trials to
enter into confidentiality agreements with us. Those agreements provide that all confidential
information developed or made known to the individual during the course of the relationship with us
to be kept confidential and not to be disclosed to third parties, except in specific circumstances.
Any such agreement may not provide meaningful protection for our trade secrets or other
confidential information in the event of unauthorized use or disclosure of such information.
If third parties on which we rely for clinical trials do not perform as contractually required or
as we expect, we may not be able to obtain regulatory approval for or commercialize our product
candidates.
We do not have the ability to independently conduct the clinical trials required to obtain
regulatory approval for our product candidates. We depend on independent clinical investigators
and, in some cases, contract research organizations and other third-party service providers to
conduct the clinical trials of our product candidates and expect to continue to do so. We rely
heavily on these parties for successful execution of our clinical trials, and we do not control
many aspects of their activities. Nonetheless, we are responsible for confirming that each of our
clinical trials is conducted in accordance with our general investigational plan and protocol.
Moreover, the FDA and corresponding foreign regulatory authorities require us and our clinical
investigators to comply with regulations and standards, commonly referred to as good clinical
practices, for conducting and recording and reporting the results of clinical trials to assure that
data and reported results are credible and accurate and that the trial participants are adequately
protected. Our reliance on third parties that we do not control does not relieve us of these
responsibilities and requirements. Third parties may not complete activities on schedule or may not
conduct our clinical trials in accordance with regulatory requirements or the respective trial
plans and protocols. The failure of these third parties to carry out their obligations could delay
or prevent the development, approval and commercialization of our product candidates or result in
enforcement action against us.
Our products may result in product liability exposure, and it is uncertain whether our insurance
coverage will be sufficient to cover all claims.
The use of our product candidates in clinical trials and for commercial applications, if any,
may expose us to liability claims, in the event such product candidates cause injury or disease, or
result in adverse effects. These claims could be made directly by health care institutions,
contract laboratories, patients or others using such products. Although we have obtained liability
insurance coverage for our ongoing clinical trials, this coverage may not be in amounts sufficient
to protect us from any product liability claims or product recalls which could have a material
adverse effect on our financial condition and prospects. Further, adverse product and similar
liability claims could negatively impact our ability to obtain or maintain regulatory approvals for
our technology and product candidates under development.
If we do not obtain required regulatory approvals, we will be unable to market and sell our product
candidates.
Our product candidates are subject to extensive governmental regulations relating to
development, clinical trials, manufacturing, and commercialization. Rigorous preclinical testing
and clinical trials and an extensive regulatory review and approval process are required to be
successfully completed in the United States and in many foreign jurisdictions before a new drug can
be sold. Satisfaction of these and other regulatory requirements is costly, time consuming,
uncertain, and subject to unanticipated delays. The time required to obtain approval by the FDA is
unpredictable but typically exceeds five years following the commencement of clinical trials,
depending upon the complexity of the product candidate.
We have limited experience in conducting and managing the clinical trials necessary to obtain
regulatory approvals, including approval by the FDA. In connection with the clinical trials of our
product candidates, we face risks that:
|
|
|
the product candidate may not prove to be safe and efficacious; |
|
|
|
|
patients may die or suffer serious adverse effects for reasons that may or may not be
related to the product candidate being tested; |
|
|
|
|
the results of later-phase clinical trials may not confirm the results of earlier
clinical trials; and |
|
|
|
|
the results may not meet the level of statistical significance or clinical
benefit-to-risk ratio required by the FDA or other regulatory agencies for marketing
approval. |
Only a small percentage of product candidates for which clinical trials are initiated are the
subject of NDAs and even fewer receive approval for commercialization. Furthermore, even if we do
receive regulatory approval to market a product candidate, any such approval may be subject to
limitations such as those on the indicated uses for which we may market the product.
10
If clinical trials for our product candidates are prolonged, delayed or suspended, we may be unable
to commercialize our product candidates on a timely basis, which would require us to incur
additional costs and delay our receipt of any revenue from potential product sales.
We cannot predict whether we will encounter problems with any of our completed, ongoing or
planned clinical trials that will cause us or any regulatory authority to delay or suspend those
clinical trials or delay the analysis of data derived from them. A number of events, including any
of the following, could delay the completion of our other ongoing and planned clinical trials and
negatively impact our ability to obtain regulatory approval for, and to market and sell, a
particular product candidate:
|
|
|
conditions imposed on us by the FDA or any foreign regulatory authority regarding the
scope or design of our clinical trials; |
|
|
|
|
delays in obtaining, or our inability to obtain, required approvals from institutional
review boards or other reviewing entities at clinical sites selected for participation in
our clinical trials; |
|
|
|
|
insufficient supply of our product candidates or other materials necessary to conduct
and complete our clinical trials; |
|
|
|
|
slow enrollment and retention rate of subjects in clinical trials; |
|
|
|
|
negative or inconclusive results from clinical trials, or results that are inconsistent
with earlier results; |
|
|
|
|
serious and unexpected drug-related side effects; and |
|
|
|
|
failure of our third-party contractors to comply with regulatory requirements or
otherwise meet their contractual obligations to us. |
Commercialization of our product candidates may be delayed by the imposition of additional
conditions on our clinical trials by the FDA or any foreign regulatory authority or the requirement
of additional supportive studies by the FDA or any foreign regulatory authority. In addition,
clinical trials require sufficient patient enrollment, which is a function of many factors,
including the size of the patient population, the nature of the trial protocol, the proximity of
patients to clinical sites, the availability of effective treatments for the relevant disease, the
conduct of other clinical trials that compete for the same patients as our clinical trials, and the
eligibility criteria for our clinical trials. Our failure to enroll patients in our clinical trials
could delay the completion of the clinical trial beyond our expectations. In addition, the FDA
could require us to conduct clinical trials with a larger number of subjects than we have projected
for any of our product candidates. We may not be able to enroll a sufficient number of patients in
a timely or cost-effective manner. Furthermore, enrolled patients may drop out of our clinical
trials, which could impair the validity or statistical significance of the clinical trials.
We do not know whether our clinical trials will begin as planned, will need to be
restructured, or will be completed on schedule, if at all. Delays in our clinical trials will
result in increased development costs for our product candidates. In addition, if our clinical
trials are delayed, our competitors may be able to bring products to market before we do and the
commercial viability of our product candidates could be limited.
Our product candidates will remain subject to ongoing regulatory review even if they receive
marketing approval, and if we fail to comply with continuing regulations, we could lose these
approvals and the sale of any approved commercial products could be suspended.
Even if we receive regulatory approval to market a particular product candidate, the
manufacturing, labeling, packaging, adverse event reporting, storage, advertising, promotion, and
record keeping related to the product will remain subject to extensive regulatory requirements. If
we fail to comply with the regulatory requirements of the FDA and other applicable domestic and
foreign regulatory authorities or previously unknown problems with any approved product,
manufacturer, or manufacturing process is discovered, we could be subject to administrative or
judicially imposed sanctions, including:
|
|
|
restrictions on the products, manufacturers, or manufacturing processes; |
|
|
|
|
warning letters; |
|
|
|
|
civil or criminal penalties; |
|
|
|
|
fines; |
|
|
|
|
injunctions; |
|
|
|
|
product seizures or detentions; |
11
|
|
|
pressure to initiate voluntary product recalls; |
|
|
|
|
suspension or withdrawal of regulatory approvals; and |
|
|
|
|
refusal to approve pending applications for marketing approval of new products or
supplements to approved applications. |
If physicians and patients do not accept our future products or if the markets for indications for
which any product candidate is approved is smaller than expected, we may be unable to generate
significant revenue, if any.
Even if any of our product candidates obtain regulatory approval, they may not gain market
acceptance among physicians, patients, and third-party payors. Physicians may decide not to
recommend our drugs for a variety of reasons including:
|
|
|
timing of market introduction of competitive products; |
|
|
|
|
demonstration of clinical safety and efficacy compared to other products; |
|
|
|
|
cost-effectiveness; |
|
|
|
|
limited or no coverage by third-party payors; |
|
|
|
|
convenience and ease of administration; |
|
|
|
|
prevalence and severity of adverse side effects; |
|
|
|
|
restrictions in the label of the drug; |
|
|
|
|
other potential advantages of alternative treatment methods; and |
|
|
|
|
ineffective marketing and distribution support of our products. |
If any of our product candidates are approved, but fail to achieve market acceptance, we may
not be able to generate significant revenue and our business would suffer.
We have no manufacturing capacity, and have relied and expect to continue to rely on third-party
manufacturers to produce our product candidates.
We do not own or operate manufacturing facilities for the production of clinical or commercial
quantities of our product candidates or any of the compounds that we are testing in our preclinical
programs, and we lack the resources and the capabilities to do so. As a result, we currently rely,
and we expect to rely in the future, on third-party manufacturers to supply our product candidates.
Reliance on third-party manufacturers entails risks to which we would not be subject if we
manufactured our product candidates or products ourselves, including:
|
|
|
reliance on the third party for manufacturing process development, regulatory
compliance and quality assurance; |
|
|
|
|
limitations on supply availability resulting from capacity and scheduling constraints
of the third party; |
|
|
|
|
the possible breach of the manufacturing agreement by the third party because of
factors beyond our control; and |
|
|
|
|
the possible termination or non-renewal of the agreement by the third party, based on
our own business priorities, at a time that is costly or inconvenient for us. |
If we do not maintain our developed important manufacturing relationships, we may fail to find
replacement manufacturers or develop our own manufacturing capabilities which could delay or impair
our ability to obtain regulatory approval for our products and substantially increase our costs or
deplete profit margins, if any. If we do find replacement manufacturers, we may not be able to
enter into agreements with them on terms and conditions favorable to us, and there could be a
substantial delay before new facilities could be qualified and registered with the FDA and foreign
regulatory authorities.
The FDA and foreign regulatory authorities require manufacturers to register manufacturing
facilities. The FDA and corresponding foreign regulators also inspect these facilities to confirm
compliance with current good manufacturing practices, or cGMPs. Contract manufacturers may face manufacturing or quality control problems causing drug
substance production and shipment delays or a situation where the contractor may not be able to
maintain compliance with the applicable cGMP requirements. Any failure to comply with cGMP
requirements or other FDA and comparable foreign regulatory requirements could adversely affect our
clinical research activities and our ability to develop our product candidates and market our
products after approval.
12
Our current and anticipated future dependence upon others for the manufacture of our product
candidates may adversely affect our future profit margins and our ability to develop our product
candidates and commercialize any products that receive regulatory approval on a timely basis.
The uncertainty associated with pharmaceutical reimbursement and related matters may adversely
affect our business.
Market acceptance and sales of any one or more of our product candidates that we develop will
depend on reimbursement policies and may be affected by future healthcare reform measures.
Government authorities and third-party payors, such as private health insurers and health
maintenance organizations, decide which drugs they will cover and establish payment levels. We
cannot be certain that reimbursement will be available for any product candidates that we develop.
Also, we cannot be certain that reimbursement policies will not reduce the demand for, or the price
paid for, our products. If reimbursement is not available or is available on a limited basis, we
may not be able to successfully commercialize any product candidates that we develop.
In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of
2003, also called the Medicare Modernization Act, or MMA, changed the way Medicare covers and pays
for pharmaceutical products. The legislation established Medicare Part D, which expanded Medicare
coverage for outpatient prescription drug purchases by the elderly but provided authority for
limiting the number of drugs that will be covered in any therapeutic class. The MMA also introduced
a new reimbursement methodology based on average sales prices for physician-administered drugs.
The United States and several foreign jurisdictions are considering, or have already enacted,
a number of legislative and regulatory proposals to change the healthcare system in ways that could
affect our ability to sell our products profitably. Among policy makers and payors in the United
States and elsewhere, there is significant interest in promoting changes in healthcare systems with
the stated goals of containing healthcare costs, improving quality and/or expanding access to
healthcare. In the United States, the pharmaceutical industry has been a particular focus of these
efforts and has been significantly affected by major legislative initiatives. We expect to
experience pricing pressures in connection with the sale of any products that we develop due to the
trend toward managed healthcare, the increasing influence of health maintenance organizations and
additional legislative proposals.
In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care
and Education Affordability Reconciliation Act, or collectively, ACA, became law in the U.S. The
goal of ACA is to expand coverage for the uninsured while at the same time containing overall
healthcare costs. ACA is expected to expand and increase industry rebates for drugs covered under
Medicaid programs and make changes to the coverage requirements under the Medicare Part D program.
While we cannot predict what impact on federal reimbursement policies this legislation will have in
general or on our business specifically, the ACA may result in downward pressure on pharmaceutical
reimbursement, which could negatively affect market acceptance of our product candidates. Members
of the U.S. Congress and some state legislatures are seeking to overturn at least portions of the
legislation, and we expect they will continue to review and assess this legislation and possibly
alternative health care reform proposals. We cannot predict whether new proposals will be made or
adopted, when they may be adopted or what impact they may have on us if they are adopted.
Our restated certificate of incorporation, our amended and restated by-laws, our stockholder rights
agreement and Delaware law could deter a change of our management which could discourage or delay
offers to acquire us.
Certain provisions of Delaware law and of our restated certificate of incorporation, as
amended, and amended and restated by-laws could discourage or make it more difficult to accomplish
a proxy contest or other change in our management or the acquisition of control by a holder of a
substantial amount of our voting stock. It is possible that these provisions could make it more
difficult to accomplish, or could deter, transactions that stockholders may otherwise consider to
be in their best interests or the best interests of us. Further, the rights issued under the
stockholder rights agreement would cause substantial dilution to a person or group that attempts to
acquire us on terms not approved in advance by our Board of Directors.
The price of our common stock is volatile, and is likely to continue to fluctuate due to reasons
beyond our control.
The market price of our common stock has been, and likely will continue to be, highly
volatile. Factors, including our financial results or our competitors financial results, clinical
trial and research development announcements and government regulatory action affecting our
potential products in both the United States and foreign countries, have had, and may continue to
have, a significant effect on our results of operations and on the market price of our common
stock. We cannot assure you that your investment in our common stock will not fluctuate
significantly. One or more of these factors could significantly harm our business
and cause a decline in the price of our common stock in the public market. Substantially all
of the shares of our common stock issuable upon exercise of outstanding options and warrants have
been registered for resale or are available for sale pursuant to Rule 144 under the Securities Act
of 1933, as amended, and may be sold from time to time. Such sales, as well as future sales of our
common stock by existing stockholders, or the perception that sales may occur at any time, could
adversely affect the market price of
13
our common stock. In addition, potential dilutive effects of
future sales of our common stock by existing stockholders, the Company and LPC pursuant to this
prospectus could have an adverse effect on the market price of our common stock.
Risks Related to the LPC Transaction
Our facility with LPC will not be sufficient to satisfy our capital requirements for all of our
contemplated clinical trials.
We may direct LPC to purchase up to $20,000,000 worth of shares of our common stock under our
agreement over a 36-month period, in amounts of up to $200,000, which amounts may be increased
under certain circumstances. Assuming a purchase price of $1.00 per share (the closing sale price
of our common stock on December 1, 2011) and the purchase by LPC of the full number of purchase
shares registered under this prospectus, the proceeds to us would be $4,250,000. The extent to
which we rely on LPC as a source of funding will depend on a number of factors, including the
prevailing market price of our common stock and the extent to which we are able to secure working
capital from other sources. If obtaining sufficient funding from LPC were to prove impracticable
or prohibitively dilutive, we will need to secure another source of funding in order to satisfy our
working capital needs. Even if we sell the maximum amount we are eligible to sell to LPC under the
Purchase Agreement, we may still need additional capital to fully implement our business, operating
and development plans. Should the financing we require to sustain our working capital needs be
unavailable or prohibitively expensive when we require it, the consequences would have a material
adverse effect on our business, operating results, financial condition and prospects.
The sale of our common stock to LPC may cause dilution and the resales of such shares by LPC may
cause the price of our common stock to decline.
In connection with entering into the Purchase Agreement, we authorized the issuance to LPC of
up to $20,000,000 worth of shares of our common stock, subject to certain limitations, plus 899,101
shares of common stock as commitment shares payable to LPC. The number of shares ultimately
offered for resale by LPC under this prospectus is dependent upon the number of shares we sell to
LPC under the Purchase Agreement. The purchase price for the common stock we may sell to LPC
pursuant to the Purchase Agreement will fluctuate based on the trading price of our common stock in
the public market. All 4,849,101 shares registered in this offering are expected to be freely
tradable. We may sell the shares registered in this offering to LPC during the 36-month period
following the date of this prospectus, at any time, in our sole discretion. Depending upon market
liquidity during that period, a sale of shares in this offering at any given time could cause the
trading price of our common stock to decline. We have issued certain commitment shares to LPC and
we may sell additional shares to LPC under the Purchase Agreement. LPC may sell all, some or none
of the shares we have issued or may issue in the future, to LPC and any such resales of these
shares by LPC may result in substantial dilution to the interests of our existing stockholders. In
addition, if we sell a substantial number of shares to LPC in this offering, or if investors expect
that we will do so, the actual sales of shares or the mere existence of the facility with LPC may
make it more difficult for us to sell equity or equity-related securities in the future at a time
and at a price that may be more favorable to us than sales to LPC under the LPC facility.
14
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The SEC encourages companies to disclose forward-looking information so that investors can
better understand a companys future prospects and make informed investment decisions. This
prospectus contains such forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements may be made directly in this prospectus, and they
may also be made a part of this prospectus by reference to other documents filed with the SEC,
which is known as incorporation by reference.
Words such as may, anticipate, estimate, expects, projects, intends, plans,
believes and words and terms of similar substance used in connection with any discussion of
future operating or financial performance identify forward-looking statements. All forward-looking
statements are managements present expectations of future events and are subject to a number of
risks and uncertainties that could cause actual results to differ materially from those described
in the forward-looking statements. Forward-looking statements may include the following:
|
|
|
the initiation, timing, progress and results of our preclinical and clinical
trials and our research and development programs; |
|
|
|
|
the further preclinical or clinical development and commercialization of our
product candidates; |
|
|
|
|
the potential benefits of our product candidates over other therapies; |
|
|
|
|
the timing, costs and other limitations involved in obtaining regulatory approval
for any product; |
|
|
|
|
our ability to continue as a going concern and to operate our business with our
constrained financial resources; |
|
|
|
|
our ability to carry out the objectives of our restructuring plan by focusing our
capital resources on our most promising early-stage clinical programs and further reduce
our cash utilization; |
|
|
|
|
our ability to enter into any collaboration with respect to our product
candidates; |
|
|
|
|
our ability to protect our intellectual property and operate our business without
infringing upon the intellectual property rights of others; |
|
|
|
|
our ability to retain the services of our current executive officers, directors
and principal consultants; |
|
|
|
|
our estimates of future performance; and |
|
|
|
|
our estimates regarding anticipated operating losses, future revenue, expenses,
capital requirements and our needs for additional financing. |
These statements are only predictions and involve known and unknown risks, uncertainties and
other factors, including the risks outlined under Risk
Factors beginning on page 7 that may
cause our or our industrys actual results, levels of activity, performance or achievements to
differ from those expressed or implied by such forward-looking statements. Before deciding to
purchase our securities, you should carefully consider the risks described in the Risk Factors
section of this prospectus supplement, in addition to the other information set forth in this
prospectus supplement, the accompanying prospectus and in the documents incorporated by reference
herein and therein.
Although we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
Except as may be required by law, we do not intend to update any of the forward-looking statements
for any reason after the date of this prospectus supplement to conform such statement to actual
results or if new information becomes available.
All forward-looking statements attributable to us, or to persons acting on our behalf, are
expressly qualified in their entirety by these cautionary statements.
15
USE OF PROCEEDS
This prospectus relates to shares of our common stock that may be offered and sold from time
to time by the selling stockholder, LPC. We will not receive any of the proceeds from the sale of
shares of our common stock by the selling stockholder pursuant to this prospectus. We may receive
proceeds of up to $20,000,000 under the Purchase Agreement from the sale of our common stock to
LPC. Assuming a purchase price of $1.00 per share (the closing sale price of our common stock on
December 1, 2011) and the purchase by LPC of the full number of purchase shares registered under
this prospectus, the proceeds to us would be $4,250,000. Any issuance of shares by us to LPC under
the Purchase Agreement will be made pursuant to an exemption from the registration requirements of
the Securities Act. The proceeds that we receive under the Purchase Agreement are expected to be
used toward funding a portion of the costs of our FACT 2 study in anaplastic thyroid cancer and for
general corporate purposes, including capital expenditures, the advancement of our product
candidates in clinical and preclinical trials, and to meet working capital needs. The amounts and
timing of the expenditures will depend on numerous factors, such as the timing and progress of our
clinical trials and research and development efforts, technological advances and the competitive
environment for our product candidates. As of the date of this prospectus, we cannot specify with
certainty all of the particular uses for the net proceeds to us from the sale of shares to LPC.
Accordingly, we will retain broad discretion over the use of these proceeds, if any.
16
THE LPC TRANSACTION
General
On November 28, 2011, we executed a Purchase Agreement and a Registration Rights Agreement
with Lincoln Park Capital Fund, LLC, or LPC. Under the Purchase Agreement, we have the right to
sell up to $20,000,000 of our common stock, subject to certain limitations, to LPC at our
discretion, as described below.
Pursuant to the Registration Rights Agreement, we are filing this registration statement and
prospectus with the Securities and Exchange Commission, or the SEC, covering shares that have been
issued or may be issued to LPC under the Purchase Agreement. We do not have the right to commence
any sales of our shares to LPC until the SEC has declared effective the registration statement of
which this prospectus is a part. The registration statement was
declared effective on January 11, 2012. Accordingly, over
approximately 36 months, we have the right, subject to the terms of the Purchase Agreement, to
direct LPC to purchase up to $20,000,000 of our common stock in amounts up to $200,000 as often as
every two business days under certain conditions. We can also accelerate the amount of our stock to
be purchased under certain circumstances. There are no trading volume requirements or restrictions
under the Purchase Agreement, and we will control the timing and amount of any sales of our common
stock to LPC. The purchase price of the shares will be based on the market prices of our shares
immediately preceding the time of sale as computed under the Purchase Agreement without any fixed
discount. We may at any time in our sole discretion terminate the Purchase Agreement without fee,
penalty or cost upon one business days notice. We issued 299,700 shares of our stock to LPC as an
initial commitment fee for entering into the agreement and we may issue up to 599,401 shares, of
which only 299,401 are included in this prospectus, as an additional commitment fee on a pro rata
basis as LPC purchases up to $20,000,000 of our stock in our discretion. For example, if we elect,
at our sole discretion, to require LPC to purchase $200,000 of our stock then we would issue 5,994
shares of the pro rata additional commitment fee, which is the product of $200,000, the amount we
have elected to sell, divided by $20,000,000, the total amount we can sell to LPC under the
Purchase Agreement, multiplied by 599,401, the maximum number of additional commitment shares. The
additional commitment shares will only be issued pursuant to this formula if, as and when we elect
to sell our stock to LPC. LPC may not assign or transfer its rights or obligations under the
Purchase Agreement.
As of November 28, 2011, there were 14,879,857 shares outstanding, including 14,834,560 shares
held by non-affiliates, excluding the 299,700 shares which we have already issued and are being
offered by LPC pursuant to this prospectus. In the aggregate, 4,849,101 shares are being offered
under this prospectus, which includes 299,700 shares that we issued as an initial commitment fee
and an additional 4,549,401 shares which are yet to be issued. Of that additional number, we may
issue 299,401 shares as an additional commitment fee on a pro rata basis as LPC purchases up to
$20,000,000 of our stock in our discretion and the remainder represent shares we may sell to LPC
under the Purchase Agreement. If all of the 4,849,101 shares offered by LPC under this prospectus
were issued and outstanding as of the date hereof, such shares would represent 24.58% of the total
common stock outstanding or 24.64% of the outstanding shares held by non-affiliates, as adjusted,
as of the date hereof. If we elect to issue and sell more than the 4,849,101 shares offered under
this prospectus to LPC, which we have the right, but not the obligation, to do, we must first
register any such additional shares under the Securities Act, which could cause substantial
dilution to our stockholders. In addition, depending on the average price at which we sell shares
to LPC, if we seek to issue and sell more than 2,974,483 shares, representing 19.9% of our
outstanding common stock on November 28, 2011, to LPC, we may be required to seek shareholder
approval in order to remain in compliance with The NASDAQ Capital Market rules, which require
shareholder approval for the issuance of more than 19.9% of a companys outstanding shares in a
private placement at a discount to the greater of market or book value of the shares. The number
of shares ultimately offered for resale by LPC is dependent upon the number of shares we sell to
LPC under the Purchase Agreement.
Purchase of Shares Under The Purchase Agreement
Under the Purchase Agreement, on any business day selected by us and as often as every two
business days, we may direct LPC to purchase up to $200,000 of our common stock. The purchase
price per share is equal to the lesser of:
|
|
|
the lowest sale price of our common stock on the purchase date; or |
|
|
|
|
the average of the three (3) lowest closing sale prices of our common
stock during the twelve (12) consecutive business days prior to the purchase
date. |
The purchase price will be equitably adjusted for any reorganization, recapitalization,
non-cash dividend, stock split, or other similar transaction occurring during the business days
used to compute the purchase price.
We may increase the purchase amount from $200,000 to the following amounts:
|
|
|
up to $400,000, if the closing sale price of our common stock is not below $1.20
per share on the purchase date; |
|
|
|
|
up to $600,000, if the closing sale price of our common stock is not below $2.20
per share on the purchase date; |
17
|
|
|
up to $800,000, if the closing sale price of our common stock is not below $3.00
per share on the purchase date; and |
|
|
|
|
up to $1,200,000, if the closing sale price of our common stock is not below
$4.50 per share on the purchase date. |
Minimum Purchase Price
Under the Purchase Agreement, we have set a minimum purchase price, or the floor price, of
$0.50, which means that LPC shall not have the right or the obligation to purchase any of our
common stock if the purchase price would be less than the floor price.
Events of Default
The following events constitute events of default under the Purchase Agreement:
|
|
|
the effectiveness of the registration statement of which this prospectus is a part of
lapses for any reason (including, without limitation, the issuance of a stop order) or is
unavailable to LPC for sale of our common stock offered hereby and such lapse or
unavailability continues for a period of ten (10) consecutive business days or for more
than an aggregate of thirty (30) business days in any 365-day period; |
|
|
|
|
suspension by our principal market of our common stock from trading for a period of
three (3) consecutive business days; |
|
|
|
|
the delisting of our common stock from our principal market, provided our common stock
is not immediately thereafter trading on the New York Stock Exchange, The NASDAQ Global
Market, The NASDAQ Global Select Market, the OTC Bulletin Board (or nationally recognized
successor thereto or comparable markets), or the NYSE Amex; |
|
|
|
|
the transfer agents failure for five (5) business days to issue to LPC shares of our
common stock to which LPC is entitled under the Purchase Agreement; |
|
|
|
|
any material breach of the representations or warranties or covenants contained in the
Purchase Agreement or any related agreements which has or which would reasonably be
expected to have a material adverse effect on us, subject to a cure period of five (5)
business days; |
|
|
|
|
any voluntary or involuntary participation or threatened participation in insolvency or
bankruptcy proceedings by or against us; or |
|
|
|
|
if we reach the share limit under applicable NASDAQ Capital Market rules (generally,
2,974,483 shares, or 19.99% of our outstanding shares prior to entering into the Purchase
Agreement with LPC), to the extent applicable under NASDAQ Capital Market rules, and we
have not obtained any necessary shareholder approvals. |
LPC does not have the right to terminate the Purchase Agreement upon any of the events of
default set forth above. In the event of bankruptcy proceedings by or against us, the Purchase
Agreement will automatically terminate without action of any party. During an event of default,
all of which are outside the control of LPC, shares of our common stock cannot be sold by us to LPC
or purchased by LPC under the terms of the Purchase Agreement.
Our Termination Rights
We have the unconditional right at any time for any reason to give notice to LPC terminating
the Purchase Agreement without any cost to us.
No Short-Selling or Hedging by LPC
LPC has agreed that neither it nor any of its affiliates shall engage in any direct or
indirect short-selling or hedging of our common stock during any time following the date of the
Purchase Agreement until the termination of the Purchase Agreement.
Effect of Performance of the Purchase Agreement on Our Stockholders
All 4,849,101 shares registered in this offering are expected to be freely tradable. It is
anticipated that shares registered in this offering will be sold over a period of up to 36 months
from the date of this prospectus. The sale by LPC of a significant amount of shares registered in
this offering at any given time could cause the market price of our common stock to decline and to
be highly volatile. LPC may ultimately purchase all, some or none of the 4,549,401 shares of
common stock not yet issued but registered in this offering. If we sell these shares to LPC, LPC
may sell all, some or none of these shares immediately or in the future and any such resales of
these shares by LPC may result in substantial dilution to the interests of our existing
stockholders. In addition, if we sell a substantial number of shares to LPC in this offering, or if investors expect that we will do so,
the actual sales of shares or the mere existence of the facility with LPC may make it more
difficult for us to sell equity or equity-related securities in the future at a time and
18
at a price
that may be more favorable to us than sales to LPC under the LPC facility. However, we have the
right to control the timing and amount of any sales of our shares to LPC and we may terminate the
Purchase Agreement at any time at our discretion without any cost to us.
In connection with entering into the Purchase Agreement, we authorized the sale to LPC of up
to $20,000,000 worth of shares of our common stock, exclusive of the 299,700 initial commitment
shares issued to LPC on November 28, 2011 and the 599,401 additional commitment shares that may be
issued to LPC. We have the right to terminate the agreement without any payment or liability to
LPC at any time, including in the event that all $20,000,000 is sold to LPC under the Purchase
Agreement. The number of shares ultimately offered for resale by LPC is dependent upon the number
of shares we sell to LPC under the Purchase Agreement. The following table sets forth the amount
of proceeds we would receive from LPC from the sale of shares that are registered in this offering
at varying purchase prices:
|
|
|
|
|
|
|
|
|
Number of |
|
Percentage of |
|
|
|
|
Registered Shares |
|
Outstanding Shares |
|
Proceeds from the |
Assumed |
|
to be Issued if |
|
After Giving Effect |
|
Sale of Shares |
Average |
|
Full |
|
to the Issuance to |
|
to LPC Under the |
Purchase Price |
|
Purchase (1) (2) |
|
LPC (3) |
|
Purchase Agreement |
$0.50(4)
|
|
4,482,235
|
|
23.06%
|
|
$2,241,117 |
$1.00(5)
|
|
4,417,023
|
|
23.06%
|
|
$4,417,023 |
$2.50
|
|
4,250,000
|
|
23.06%
|
|
$10,625,000 |
$5.00
|
|
4,000,000
|
|
22.07%
|
|
$20,000,000 |
$10.00
|
|
2,000,000
|
|
13.16%
|
|
$20,000,000 |
|
|
|
(1) |
|
Although the Purchase Agreement provides that we may sell up to $20,000,000 of
our common stock to LPC, we are only registering 4,549,401 shares under this prospectus
(less the additional commitment shares issuable to LPC on a pro rata basis if, as and
when we sell the purchase shares to LPC under the Purchase Agreement), which may or may
not cover all shares we ultimately sell to LPC under the Purchase Agreement, depending
on the purchase price per share. As a result, we have included in this column only
those shares that we are registering in this offering. |
|
(2) |
|
The number of registered shares to be issued includes a number of shares to be
purchased at the applicable price plus the applicable additional commitment shares
issuable to LPC (but not the initial commitment shares), and no proceeds will be
attributable to such commitment shares. |
|
(3) |
|
The denominator is based on 15,179,557 shares outstanding as of November 29,
2011, which includes the 299,700 initial commitment shares issued to LPC on November 28,
2011, which are part of this offering, and the number of shares set forth in the
adjacent column, which includes the additional commitment shares issuable to LPC on a
pro rata basis if, as and when we sell the purchase shares to LPC under the Purchase
Agreement. The numerator is based on the number of shares issuable under the Purchase
Agreement at the corresponding assumed purchase price set forth in the adjacent column.
The number of shares in such column does not include shares that may be issued to LPC
which are not registered in this offering. |
|
(4) |
|
Under the Purchase Agreement, we may not sell and LPC may not purchase any shares
at a purchase price less than $0.50 per share. |
|
(5) |
|
The closing sale price of our shares on December 1, 2011. |
19
SELLING STOCKHOLDER
This prospectus relates to the possible resale by the selling stockholder, LPC, of shares of
common stock that we may issue pursuant to the Purchase Agreement we entered into with LPC on
November 28, 2011. We are filing the registration statement of which this prospectus is a part
pursuant to the provisions of the Registration Rights Agreement we entered into with LPC on
November 28, 2011, in which we agreed to provide certain registration rights with respect to the
sale to LPC under the Purchase Agreement of up to $20,000,000 of common stock, subject to certain
limitations, over a thirty-six (36) month period.
LPC, as the selling stockholder, may, from time to time, offer and sell pursuant to this
prospectus any or all of the shares that we sell to LPC under the Purchase Agreement.
The following table presents information regarding the selling stockholder and the shares that
it may offer and sell from time to time under this prospectus. This table is prepared based on
information supplied to us by the selling stockholder, and reflects holdings as of December 1,
2011. Neither the selling stockholder nor any of its affiliates has held a position or office, or
had any other material relationship, with us. As used in this prospectus, the term selling
stockholder includes LPC and any donees, pledgees, transferees or other successors in interest
selling shares received after the date of this prospectus from a selling stockholder as a gift,
pledge or other non-sale related transfer. The number of shares in the column Number of Shares
Being Offered represents all of the shares that the selling stockholder may offer under this
prospectus. The selling stockholder may sell some, all or none of its shares. We do not know how
long the selling stockholder will hold the shares before selling them, and we currently have no
agreements, arrangements or understandings with the selling stockholder regarding the sale of any
of the shares.
Beneficial ownership is determined in accordance with Rule 13d-3(d) promulgated by the SEC
under the Exchange Act. The percentage of shares beneficially owned prior to the offering is based
both on 15,181,094 shares of our common stock actually outstanding as of December 1, 2011 and on
the assumption that all shares of common stock issuable under the Purchase Agreement are
outstanding as of that date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares to be Sold |
|
|
|
|
|
|
|
|
|
|
|
|
in the Offering |
|
|
|
|
|
|
|
|
|
|
|
|
Assuming The |
|
|
|
|
|
|
|
|
Percentage of |
|
Company Issues The |
|
Percentage of |
|
|
Shares Beneficially |
|
Outstanding Shares |
|
Maximum Number of |
|
Outstanding Shares |
|
|
Owned Before |
|
Beneficially Owned |
|
Shares Under the |
|
Beneficially Owned |
Selling Stockholder |
|
Offering |
|
Before Offering |
|
Purchase Agreement |
|
After Offering |
Lincoln Park
Capital Fund, LLC
(1)
|
|
|
299,700 |
(2) |
|
|
2.0 |
%(2) |
|
|
4,849,101 |
|
|
* |
|
|
|
* |
|
less than 1% |
|
(1) |
|
Josh Scheinfeld and Jonathan Cope, the principals of LPC, are deemed to be beneficial owners
of all of the shares of common stock owned by LPC. Messrs. Scheinfeld and Cope have shared
voting and disposition power over the shares being offered under this prospectus. |
|
(2) |
|
299,700 shares of our common stock were issued to LPC as initial commitment shares under the
Purchase Agreement. We may at our discretion elect to issue to LPC up to an additional
$20,000,000 worth of our shares of our common stock and 599,401 shares of our common stock, of
which only 299,401 are included in this prospectus, as additional commitment shares under the
Purchase Agreement and in this offering, though such shares are not included in determining
the percentage of shares beneficially owned before the offering. |
20
PLAN OF DISTRIBUTION
The common stock offered by this prospectus is being offered by Lincoln Park Capital Fund,
LLC, the selling stockholder. The common stock may be sold or distributed from time to time by the
selling stockholder directly to one or more purchasers or through brokers, dealers, or underwriters
who may act solely as agents at market prices prevailing at the time of sale, at prices related to
the prevailing market prices, at negotiated prices, or at fixed prices, which may be changed. The
sale of the common stock offered by this prospectus may be effected in one or more of the following
methods:
|
|
|
ordinary brokers transactions; |
|
|
|
|
transactions involving cross or block trades; |
|
|
|
|
through brokers, dealers, or underwriters who may act solely as agents; |
|
|
|
|
at the market into an existing market for the common stock; |
|
|
|
|
in other ways not involving market makers or established business markets,
including direct sales to purchasers or sales effected through agents; |
|
|
|
|
in privately negotiated transactions; or |
|
|
|
|
any combination of the foregoing. |
In order to comply with the securities laws of certain states, if applicable, the shares may
be sold only through registered or licensed brokers or dealers. In addition, in certain states,
the shares may not be sold unless they have been registered or qualified for sale in the state or
an exemption from the registration or qualification requirement is available and complied with.
Brokers, dealers, underwriters, or agents participating in the distribution of the shares as
agents may receive compensation in the form of commissions, discounts, or concessions from the
selling stockholder and/or purchasers of the common stock for whom the broker-dealers may act as
agent. The compensation paid to a particular broker-dealer may be less than or in excess of
customary commissions.
LPC is an underwriter within the meaning of the Securities Act.
Neither we nor LPC can presently estimate the amount of compensation that any agent will
receive. We know of no existing arrangements between LPC, any other shareholder, broker, dealer,
underwriter, or agent relating to the sale or distribution of the shares offered by this
prospectus. At the time a particular offer of shares is made, a prospectus supplement, if
required, will be distributed that will set forth the names of any agents, underwriters, or dealers
and any compensation from the selling stockholder, and any other required information.
We will pay all of the expenses incident to the registration, offering, and sale of the shares
to the public other than commissions or discounts of underwriters, broker-dealers, or agents. We
have also agreed to indemnify LPC and related persons against specified liabilities, including
liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted
to our directors, officers, and controlling persons, we have been advised that in the opinion of
the SEC this indemnification is against public policy as expressed in the Securities Act and is
therefore, unenforceable.
LPC and its affiliates have agreed not to engage in any direct or indirect short selling or
hedging of our common stock during the term of the Purchase Agreement.
We have advised LPC that while it is engaged in a distribution of the shares included in this
prospectus it is required to comply with Regulation M promulgated under the Securities Exchange Act
of 1934, as amended. With certain exceptions, Regulation M precludes the selling stockholder, any
affiliated purchasers, and any broker-dealer or other person who participates in the distribution
from bidding for or purchasing, or attempting to induce any person to bid for or purchase any
security which is the subject of the distribution until the entire distribution is complete.
Regulation M also prohibits any bids or purchases made in order to stabilize the price of a
security in connection with the distribution of that security. All of the foregoing may affect the
marketability of the shares offered hereby this prospectus.
This offering will terminate on the date that all shares offered by this prospectus have been
sold by LPC.
21
MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Our common stock is traded on The NASDAQ Capital Market under the symbol OXGN. Prior to
March 3, 2011, our common stock was traded on The NASDAQ Global Market under the symbol OXGN. The
following table sets forth the high and low sales price per share for our common stock on The
NASDAQ Global Market and The NASDAQ Capital Market, as applicable, for each quarterly period during
the two most recent fiscal years and subsequent interim periods.
In February 2011, our board of directors voted unanimously to implement a 1:20 reverse stock
split of our common stock, following authorization of the reverse split by a stockholder vote on
December 21, 2010. The reverse split became effective on February 22, 2011. All of the per share
sales prices shown in the table below have been adjusted to reflect the effect of this reverse
split.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2011 |
|
|
Fiscal Year 2010 |
|
|
Fiscal Year 2009 |
|
|
|
High |
|
|
Low |
|
|
High |
|
|
Low |
|
|
High |
|
|
Low |
|
First Quarter |
|
$ |
5.20 |
|
|
$ |
1.69 |
|
|
$ |
27.60 |
|
|
$ |
20.00 |
|
|
$ |
17.80 |
|
|
$ |
10.40 |
|
Second Quarter |
|
$ |
6.38 |
|
|
$ |
1.52 |
|
|
$ |
26.40 |
|
|
$ |
7.40 |
|
|
$ |
55.60 |
|
|
$ |
14.20 |
|
Third Quarter |
|
$ |
2.62 |
|
|
$ |
1.00 |
|
|
$ |
11.00 |
|
|
$ |
5.20 |
|
|
$ |
47.40 |
|
|
$ |
26.20 |
|
Fourth Quarter |
|
$ |
1.97 |
(1) |
|
$ |
0.82 |
(1) |
|
$ |
6.00 |
|
|
$ |
3.80 |
|
|
$ |
34.00 |
|
|
$ |
20.20 |
|
|
|
|
(1) |
|
Through December 1, 2011 |
On December 1, 2011, the closing price of our common stock on The NASDAQ Capital Market was
$1.00 per share. As of December 1, 2011, there were approximately 80 stockholders of record of the
approximately 15,181,094 outstanding shares of our common stock. We believe, based on the number of
proxy statements and related materials distributed in connection with our 2011 Annual Meeting of
Stockholders, that there are approximately 10,735 beneficial owners of our common stock.
Dividend Policy
We have not declared or paid any cash dividends on our common stock since our inception in
1988, and do not intend to pay cash dividends in the foreseeable future. We presently intend to
retain future earnings, if any, to finance the growth and development of our business.
22
SELECTED FINANCIAL DATA
The following tables set forth financial data with respect to the Company for each of the five
years in the period ended December 31, 2010, and selected quarterly data for the quarters and nine
month periods ended September 30, 2011 and September 30, 2010. The selected financial data for each
of the five years ended December 31, 2010 has been derived from the audited consolidated financial
statements of the Company. The financial data for the quarterly financial data for the quarters and
nine month periods ended September 30, 2011 and September 30, 2010 are derived from unaudited
financial statements. The unaudited financial statements include all adjustments, consisting of
normal recurring accruals, which the Company considers necessary for a fair presentation of the
financial position and the results of operations for these periods.
Operating results for the three and nine months ended September 30, 2011 are not necessarily
indicative of the results that may be expected for the entire year ending December 31, 2011. The
information below should be read in conjunction with the financial statements (and notes thereto)
and Managements Discussion and Analysis of Financial Condition and Results of Operations,
included in this prospectus.
In February 2011, our board of directors voted unanimously to implement a 1:20 reverse stock
split of our common stock, following authorization of the reverse split by a stockholder vote on
December 21, 2010. The reverse split became effective on February 22, 2011. All of the share and
per share amounts discussed and shown in the statements and tables below have been adjusted to
reflect the effect of this reverse split.
23
STATEMENT OF OPERATIONS DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
(Amounts in thousands except per share amounts) |
|
STATEMENT OF OPERATIONS DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License Revenue: |
|
$ |
|
|
|
$ |
|
|
|
$ |
12 |
|
|
$ |
12 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
12,114 |
|
|
|
22,256 |
|
|
|
18,995 |
|
|
|
14,511 |
|
|
|
11,213 |
|
General and administrative |
|
|
5,885 |
|
|
|
8,900 |
|
|
|
6,957 |
|
|
|
7,774 |
|
|
|
6,703 |
|
Restructuring |
|
|
510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses |
|
|
18,509 |
|
|
|
31,156 |
|
|
|
25,952 |
|
|
|
22,285 |
|
|
|
17,916 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(18,509 |
) |
|
|
(31,156 |
) |
|
|
(25,940 |
) |
|
|
(22,273 |
) |
|
|
(17,916 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of warrants and other financial instruments |
|
|
(6,018 |
) |
|
|
2,166 |
|
|
|
3,335 |
|
|
|
|
|
|
|
|
|
Investment income |
|
|
17 |
|
|
|
110 |
|
|
|
618 |
|
|
|
1,955 |
|
|
|
2,502 |
|
Other income (expense), net |
|
|
740 |
|
|
|
(63 |
) |
|
|
66 |
|
|
|
(71 |
) |
|
|
(43 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net loss |
|
$ |
(23,770 |
) |
|
$ |
(28,943 |
) |
|
$ |
(21,921 |
) |
|
$ |
(20,389 |
) |
|
$ |
(15,457 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributed to non controlling interest |
|
$ |
|
|
|
$ |
(4,215 |
) |
|
$ |
(520 |
) |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributed to OXiGENE, Inc. |
|
$ |
(23,770 |
) |
|
$ |
(24,728 |
) |
|
$ |
(21,401 |
) |
|
$ |
(20,389 |
) |
|
$ |
(15,457 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess purchase price over carrying value of noncontrolling
interest acquired in Symphony ViDA, Inc |
|
$ |
|
|
|
$ |
(10,383 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss applicable to common stock |
|
$ |
(23,770 |
) |
|
$ |
(35,111 |
) |
|
$ |
(21,401 |
) |
|
$ |
(20,389 |
) |
|
$ |
(15,457 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share attributed to OXiGENE,
Inc. common shares |
|
$ |
(5.96 |
) |
|
$ |
(13.15 |
) |
|
$ |
(13.96 |
) |
|
$ |
(14.60 |
) |
|
$ |
(11.19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of common shares outstanding |
|
|
3,988 |
|
|
|
2,671 |
|
|
|
1,533 |
|
|
|
1,397 |
|
|
|
1,381 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, |
|
|
As of December 31, |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
|
|
|
|
(Amounts in thousands except per share amounts) |
|
BALANCE SHEET DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, restricted cash and
equivalents and available-for-sale
securities |
|
$ |
12,664 |
|
|
$ |
4,677 |
|
|
$ |
14,072 |
|
|
$ |
18,918 |
|
|
$ |
28,438 |
|
|
$ |
45,839 |
|
Marketable securities held by
Symphony ViDA, Inc., restricted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,663 |
|
|
|
|
|
|
|
|
|
Working capital |
|
|
9,964 |
|
|
|
1,797 |
|
|
|
6,356 |
|
|
|
28,320 |
|
|
|
23,880 |
|
|
|
42,083 |
|
Total assets |
|
|
13,375 |
|
|
|
5,567 |
|
|
|
15,617 |
|
|
|
35,031 |
|
|
|
30,064 |
|
|
|
47,642 |
|
Total liabilities |
|
|
2,978 |
|
|
|
10,822 |
|
|
|
9,818 |
|
|
|
6,292 |
|
|
|
5,207 |
|
|
|
4,222 |
|
Accumulated deficit |
|
|
(215,008 |
) |
|
|
(207,700 |
) |
|
|
(183,930 |
) |
|
|
(159,202 |
) |
|
|
(137,801 |
) |
|
|
(117,412 |
) |
Noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,432 |
|
|
|
|
|
|
|
|
|
Total stockholders (deficit)equity |
|
$ |
10,397 |
|
|
$ |
(5,255 |
) |
|
$ |
5,799 |
|
|
$ |
28,739 |
|
|
$ |
24,857 |
|
|
$ |
43,420 |
|
The amount related to loss attributed to non controlling interest in Symphony ViDA, Inc.
(ViDA) represents the loss for the ViDA entity from its inception in October 2008 through the
acquisition of ViDA in July 2009. The investments reported as held by ViDA represented the fair
value of amounts held by ViDA and were included in the acquisition.
24
Quarterly Financial Data for 2011 and 2010
The following is a summary of the quarterly results of operations for the three and nine months
ended September 30, 2011 and September 30, 2010: (Amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2011 |
|
|
2010 |
|
|
|
|
License revenue |
|
$ |
|
|
|
$ |
|
|
Net loss |
|
|
(3,513 |
) |
|
|
(13,536 |
) |
Basic and diluted net loss per share |
|
$ |
(0.25 |
) |
|
$ |
(3.47 |
) |
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2011 |
|
|
2010 |
|
| |
|
| |
License revenue |
|
$ |
|
|
|
$ |
|
|
Net loss |
|
|
(7,308 |
) |
|
|
(22,027 |
) |
Basic and diluted net loss per share |
|
$ |
(0.74 |
) |
|
$ |
(6.24 |
) |
25
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of operations should
be read together with our financial statements and accompanying notes appearing elsewhere in this
prospectus. This discussion contains forward-looking statements, based on current expectations and
related to future events and our future financial performance, that involve risks and
uncertainties. Our actual results may differ materially from those anticipated in these
forward-looking statements as a result of many important factors, including those set forth under
Risk Factors and elsewhere in this prospectus.
We are a clinical-stage, biopharmaceutical company developing novel therapeutics to treat
cancer and eye diseases. Our primary focus is the development of product candidates referred to as
vascular disrupting agents, or VDAs, that selectively disable and destroy abnormal blood vessels
that provide solid tumors a means of growth and survival and also are associated with visual
impairment in a number of ophthalmological diseases and conditions. To date, more than 400 subjects
have been treated with ZYBRESTAT, our lead candidate, in human clinical trials, and the drug
candidate has generally been observed to be well-tolerated.
In February 2011, our board of directors voted unanimously to implement a 1:20 reverse stock
split of our common stock, following authorization of the reverse split by a shareholder vote on
December 21, 2010. The reverse split became effective on February 22, 2011. All of the share and
per share amounts discussed in this prospectus have been adjusted to reflect the effect of this
reverse split.
Our managements discussion and analysis of our financial condition and results of operations
is based on our financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States. The preparation of these financial statements
requires us to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date of the financial
statements, as well as the reported revenues and expenses during the reporting periods. On an
ongoing basis, we evaluate our estimates and judgments, including those related to intangible
assets. We base our estimates on historical experience and on various other factors that are
believed to be appropriate under the circumstances, the results of which form the basis for making
the judgments about the carrying value of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates.
Our significant accounting policies are described in detail in Note 1 to our condensed
consolidated financial statements for the fiscal year ended December 31, 2010 and in Note 1 to our
condensed financial statements for the fiscal quarter ended September 30, 2011 included in this
prospectus.
RESULTS OF OPERATIONS
Three Months Ended September 30, 2011 and September 30, 2010
Revenue
We reported no licensing revenue for the three months ended September 30, 2011 and September
30, 2010. As of September 30, 2011, our only source of potential revenue was from the license to a
third party of our formerly owned Nicoplex and Thiol nutritional and diagnostic technology. Future
revenues from this license agreement, if any, are expected to be minimal. We do not expect to
generate material revenue or fee income in the near future unless we enter into a major licensing
arrangement.
Costs and expenses
Summary
The following table summarizes our operating expenses for the periods indicated, in thousands
and as a percentage of total expenses. This table also provides the changes in our operating
components and their percentages:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months ended September 30, |
|
|
|
|
|
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
% of Total |
|
|
|
|
|
|
% of Total |
|
|
|
|
|
|
|
|
|
|
Operating |
|
|
|
|
|
|
Operating |
|
|
Increase (Decrease) |
|
|
|
Amount |
|
|
Expenses |
|
|
Amount |
|
|
Expenses |
|
|
Amount |
|
|
% |
|
Research and development |
|
$ |
1,098 |
|
|
|
31 |
% |
|
$ |
2,379 |
|
|
|
65 |
% |
|
$ |
(1,281 |
) |
|
|
-54 |
% |
General and administrative |
|
|
1,309 |
|
|
|
37 |
% |
|
|
1,256 |
|
|
|
35 |
% |
|
|
53 |
|
|
|
4 |
% |
Restructuring |
|
|
1,146 |
|
|
|
32 |
% |
|
|
|
|
|
|
|
|
|
|
1,146 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
$ |
3,553 |
|
|
|
100 |
% |
|
$ |
3,635 |
|
|
|
100 |
% |
|
$ |
(82 |
) |
|
|
-2 |
% |
26
Research and development expenses
The table below summarizes the most significant components of our research and development
expenses for the periods indicated, in thousands and as a percentage of total research and
development expenses. The table also provides the changes in these components and their
percentages:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months ended September 30, |
|
|
|
|
|
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
% of Total |
|
|
|
|
|
|
% of Total |
|
|
Increase (Decrease) |
|
|
|
Amount |
|
|
Expenses |
|
|
Amount |
|
|
Expenses |
|
|
Amount |
|
|
% |
|
External services |
|
$ |
500 |
|
|
|
46 |
% |
|
$ |
1,510 |
|
|
|
63 |
% |
|
$ |
(1,010 |
) |
|
|
-67 |
% |
Employee compensation and related |
|
|
472 |
|
|
|
43 |
% |
|
|
644 |
|
|
|
27 |
% |
|
|
(172 |
) |
|
|
-27 |
% |
Employee stock-based compensation |
|
|
5 |
|
|
|
0 |
% |
|
|
62 |
|
|
|
3 |
% |
|
|
(57 |
) |
|
|
-92 |
% |
Other |
|
|
121 |
|
|
|
11 |
% |
|
|
163 |
|
|
|
7 |
% |
|
|
(42 |
) |
|
|
-26 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total research and development |
|
$ |
1,098 |
|
|
|
100 |
% |
|
$ |
2,379 |
|
|
|
100 |
% |
|
$ |
(1,281 |
) |
|
|
-54 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The reduction in external services expenses for the quarter ended September 30, 2011
compared to the same three month period in 2010 is primarily attributable to a reduction in
spending on all of our clinical projects for the comparable periods with the majority of the
reduction coming from ZYBRESTAT for oncology program, most prominently our anaplastic thyriod
cancer and non-small cell lung cancer projects. These two major studies have been progressing to
conclusion over the last 12 to 18 months. In addition, we experienced reductions in expenses on our
OXi4503 and ZYBRESTAT for ophthalmology programs for the comparable 2011 period, primarily related
to our decision in February 2010 to scale back efforts on some of our projects in these areas.
The reduction in employee compensation and related expenses for the quarter ended September
30, 2011 compared to the same three month period of 2010 is due to the reductions in our clinical
project expenses noted above. In February 2010, we implemented a Company wide restructuring plan
due to our decision to scale back activities in some of our ongoing clinical projects.
We continue to evaluate next steps in the development of our clinical programs. As a result,
research and development expenses in the future could vary significantly from those incurred in the
2011 fiscal year.
General and administrative expenses
The table below summarizes the most significant components of our general and administrative
expenses for the periods indicated, in thousands and as a percentage of total general and
administrative expenses. The table also provides the changes in these components and their
percentages:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months ended September 30, |
|
|
|
|
|
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
% of Total |
|
|
|
|
|
|
% of Total |
|
|
Increase (Decrease) |
|
|
|
Amount |
|
|
Expenses |
|
|
Amount |
|
|
Expenses |
|
|
Amount |
|
|
% |
|
Employee compensation and related |
|
$ |
410 |
|
|
|
31 |
% |
|
$ |
456 |
|
|
|
36 |
% |
|
$ |
(46 |
) |
|
|
-10 |
% |
Employee stock-based compensation |
|
|
46 |
|
|
|
4 |
% |
|
|
85 |
|
|
|
7 |
% |
|
|
(39 |
) |
|
|
-46 |
% |
Consulting and professional services |
|
|
494 |
|
|
|
38 |
% |
|
|
453 |
|
|
|
36 |
% |
|
|
41 |
|
|
|
9 |
% |
Other |
|
|
359 |
|
|
|
27 |
% |
|
|
262 |
|
|
|
21 |
% |
|
|
97 |
|
|
|
37 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total general and administrative |
|
$ |
1,309 |
|
|
|
100 |
% |
|
$ |
1,256 |
|
|
|
100 |
% |
|
$ |
53 |
|
|
|
4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses remained fairly flat for the comparable three month
periods ended September 30, 2011 and September 30, 2010. Employee stock-based compensation expense
can vary significantly from period to period due to the timing and vesting of option grants. During
fiscal 2011, there have not been any stock option grants to employees. The increase in other
expense for the three month period ended September 30, 2011 compared to the same three month period
ended September 30, 2010 is attributable to higher fees and taxes related to being a public
company.
27
Restructuring Plan
On September 1, 2011, we announced a restructuring plan designed to focus our capital
resources on our most promising early-stage clinical programs and further reduce our cash
utilization.
We offered severance benefits to the terminated employees, and anticipate recording a total
charge of approximately $1,200,000, primarily associated with personnel-related termination costs.
In order to provide for an orderly transition, we are implementing the reduction in work force in a
phased manner. We took a restructuring charge in the third quarter of 2011 of approximately
$1,146,000, with the remainder expected to be taken over the following two quarters as the
transition is effected. Substantially all of the charge is expected to represent cash expenditures.
Other Income and Expenses
The table below summarizes Other Income and Expense in our Statements of Operations for the
three month periods ended September 30, 2011 and September 30, 2010, in thousands:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
Increase (Decrease) |
|
|
|
2011 |
|
|
2010 |
|
|
Amount |
|
|
% |
|
Change in fair value of warrants and other financial instruments |
|
$ |
40 |
|
|
$ |
(9,893 |
) |
|
$ |
9,933 |
|
|
|
-100 |
% |
Investment income |
|
|
1 |
|
|
|
3 |
|
|
|
(2 |
) |
|
|
-67 |
% |
Other (expense) income, net |
|
|
(1 |
) |
|
|
(11 |
) |
|
|
10 |
|
|
|
-91 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
40 |
|
|
$ |
(9,901 |
) |
|
$ |
9,941 |
|
|
|
-100 |
% |
We recorded an unrealized (non cash) loss in 2011 and gain in 2010 as a result of the
change in the estimated Fair Market Value of our common stock warrants issued in connection with
the offerings of our common stock as discussed in the Warrants section of Note 5 to the financial
statements.
The table below summarizes the components of the change in fair value of warrants and other
financial instruments for the three month periods ended September 30, 2011 and September 30, 2010,
in thousands.
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
|
2011 |
|
|
2010 |
|
Committed Equity Financing Facility Warrants |
|
$ |
|
|
|
$ |
5 |
|
|
|
|
|
|
|
|
|
|
Direct Registration Warrants |
|
|
40 |
|
|
|
99 |
|
|
|
|
|
|
|
|
|
|
Private Placement Warrants |
|
|
|
|
|
|
(9,997 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gain (loss) on change in fair market value of derivatives |
|
$ |
40 |
|
|
$ |
(9,893 |
) |
Nine Months Ended September 30, 2011 and September 30, 2010
Revenue
We reported no licensing revenue for the nine months ended September 30, 2011 and September
30, 2010. As of September 30, 2011, our only source of potential revenue is from the license to a
third party of our formerly owned Nicoplex and Thiol nutritional and diagnostic technology. Future
revenues from this license agreement, if any, are expected to be minimal. We do not expect to
generate material revenue or fee income unless we enter into a major licensing arrangement.
28
Costs and expenses
Summary
The following table summarizes our operating expenses for the periods indicated, in thousands
and as a percentage of total expenses. This table also provides the changes in our operating
components and their percentages:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months ended September 30, |
|
|
|
|
|
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
% of Total |
|
|
|
|
|
|
% of Total |
|
|
|
|
|
|
|
|
|
|
Operating |
|
|
|
|
|
|
Operating |
|
|
Increase (Decrease) |
|
|
|
Amount |
|
|
Expenses |
|
|
Amount |
|
|
Expenses |
|
|
Amount |
|
|
% |
|
Research and development |
|
$ |
4,280 |
|
|
|
45 |
% |
|
$ |
9,912 |
|
|
|
66 |
% |
|
$ |
(5,632 |
) |
|
|
-57 |
% |
General and administrative |
|
|
4,095 |
|
|
|
43 |
% |
|
|
4,637 |
|
|
|
31 |
% |
|
|
(542 |
) |
|
|
-12 |
% |
Restructuring |
|
|
1,146 |
|
|
|
12 |
% |
|
|
510 |
|
|
|
3 |
% |
|
|
636 |
|
|
|
125 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
$ |
9,521 |
|
|
|
100 |
% |
|
$ |
15,059 |
|
|
|
100 |
% |
|
$ |
(5,538 |
) |
|
|
-37 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development expenses
The table below summarizes the most significant components of our research and development
expenses for the periods indicated, in thousands and as a percentage of total research and
development expenses. The table also provides the changes in these components and their
percentages:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months ended September 30, |
|
|
|
|
|
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
% of Total |
|
|
|
|
|
|
% of Total |
|
|
Increase (Decrease) |
|
|
|
Amount |
|
|
Expenses |
|
|
Amount |
|
|
Expenses |
|
|
Amount |
|
|
% |
|
External services |
|
$ |
2,050 |
|
|
|
48 |
% |
|
$ |
6,703 |
|
|
|
68 |
% |
|
$ |
(4,653 |
) |
|
|
-69 |
% |
Employee compensation and related |
|
|
1,664 |
|
|
|
39 |
% |
|
|
2,579 |
|
|
|
26 |
% |
|
|
(915 |
) |
|
|
-35 |
% |
Employee stock-based compensation |
|
|
171 |
|
|
|
4 |
% |
|
|
109 |
|
|
|
1 |
% |
|
|
62 |
|
|
|
57 |
% |
Other |
|
|
395 |
|
|
|
9 |
% |
|
|
521 |
|
|
|
5 |
% |
|
|
(126 |
) |
|
|
-24 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total research and development |
|
$ |
4,280 |
|
|
|
100 |
% |
|
$ |
9,912 |
|
|
|
100 |
% |
|
$ |
(5,632 |
) |
|
|
-57 |
% |
The reduction in external services expenses for the nine month period ended September 30,
2011 compared to the same nine month period in 2010 is primarily attributable to a reduction in
spending on all of our clinical projects for the comparable periods with the majority of the
reduction coming from ZYBRESTAT for oncology program, most prominently our anaplastic thyroid
cancer and non-small cell lung cancer projects. These two major studies have been progressing to
conclusion over the last 12 to 18 months. In addition, we experienced reductions in expenses on our
OXi4503 and ZYBRESTAT for ophthalmology programs for the comparable 2011 period, primarily related
to our decision in February 2010 to scale back efforts on some of our projects in these areas.
The reduction in employee compensation and related expenses for the nine month period ended
September 30, 2011 compared to the same nine month period of 2010 is due to the reductions in our
clinical project expenses noted above. In February 2010, we implemented a Company wide
restructuring plan due to our decision to scale back activities in some of our ongoing clinical
projects.
The increase in stock-based compensation expense for the nine month period ended September 30,
2011 compared to the same nine month period of 2010 is primarily due to the timing of issuance and
vesting of stock options for the comparable periods.
The reduction in other expenses for the nine month period ended September 30, 2011 compared to
the same nine month period of 2010 is primarily due to a reduction in both our research and
development facility related costs as well as program wide support costs for the comparable
periods.
General and administrative expenses
The table below summarizes the most significant components of our general and administrative
expenses for the periods indicated, in thousands and as a percentage of total general and
administrative expenses. The table also provides the changes in these components and their
percentages:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months ended September 30, |
|
|
|
|
|
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
% of Total |
|
|
|
|
|
|
% of Total |
|
|
Increase (Decrease) |
|
|
|
Amount |
|
|
Expenses |
|
|
Amount |
|
|
Expenses |
|
|
Amount |
|
|
% |
|
Employee compensation and related |
|
$ |
1,395 |
|
|
|
34 |
% |
|
$ |
1,591 |
|
|
|
34 |
% |
|
$ |
(196 |
) |
|
|
-12 |
% |
Employee stock-based compensation |
|
|
331 |
|
|
|
8 |
% |
|
|
312 |
|
|
|
7 |
% |
|
$ |
19 |
|
|
|
6 |
% |
Consulting and professional services |
|
|
1,460 |
|
|
|
36 |
% |
|
|
1,909 |
|
|
|
41 |
% |
|
$ |
(449 |
) |
|
|
-24 |
% |
Other |
|
|
909 |
|
|
|
22 |
% |
|
|
825 |
|
|
|
18 |
% |
|
$ |
84 |
|
|
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total general and administrative |
|
$ |
4,095 |
|
|
|
100 |
% |
|
$ |
4,637 |
|
|
|
100 |
% |
|
$ |
(542 |
) |
|
|
-12 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
The reduction in employee compensation and related expenses for the nine month period ended
September 30, 2011 compared to the same nine month period of 2010 is due to a reduction in our
average full time equivalents for the comparable periods. In February 2010, we implemented a
Company wide restructuring plan due to our decision to scale back activities in some of our ongoing
clinical projects.
The reduction in consulting and professional services expenses for the nine month period ended
September 30, 2011 compared to the same nine month period of 2010 is primarily due to one time
costs incurred in our attempt to acquire Vaxgen Inc and due to the PIPE financing deal that did not
recur in the 2011 period and lower board member compensation attributable to lower stock cost basis
during the 2011 nine month period as board members are paid in the form of non-cash stock grants.
In addition, we experienced lower legal, accounting and service provider expenses due to fewer
significant transactions during the 2011 period.
Restructuring Plan
On September 1, 2011, we announced a restructuring plan designed to focus our capital
resources on our most promising early-stage clinical programs and further reduce our cash
utilization.
We offered severance benefits to the terminated employees, and anticipate recording a total
charge of approximately $1,200,000, primarily associated with personnel-related termination costs.
In order to provide for an orderly transition, we are implementing the reduction in work force in a
phased manner. We took a restructuring charge in the third quarter of 2011 of approximately
$1,146,000, with the remainder expected to be taken over the following two quarters as the
transition is effected. Substantially all of the charge is expected to represent cash expenditures.
We also executed a restructuring in February 2010, designed to focus our existing resources on
our highest-value clinical assets and reduce our cash utilization. We incurred a charge of
$510,000, primarily associated with personnel-related termination costs in connection with this
restructuring.
Other Income and Expenses
The table below summarizes Other Income and Expense in our Statements of Operations for the
nine month periods ended September 30, 2011 and September 30, 2010, in thousands:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, |
|
|
Increase (Decrease) |
|
|
|
2011 |
|
|
2010 |
|
|
Amount |
|
|
% |
|
Change in fair value of warrants and other financial instruments |
|
$ |
2,219 |
|
|
$ |
(6,987 |
) |
|
$ |
9,206 |
|
|
|
-132 |
% |
Investment income |
|
|
3 |
|
|
|
14 |
|
|
|
(11 |
) |
|
|
-79 |
% |
Other (expense) income, net |
|
|
(9 |
) |
|
|
5 |
|
|
|
(14 |
) |
|
|
-280 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,213 |
|
|
$ |
(6,968 |
) |
|
$ |
9,181 |
|
|
|
-132 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We recorded an unrealized (non cash) gain in both the 2011 and 2010 periods as a result
of the change in the estimated Fair Market Value of our common stock warrants issued in connection
with the offerings as discussed in the Warrants section of Note 4 to the financial statements.
The table below summarizes the components of the change in fair value of warrants for the nine
month periods ended September 30, 2011 and September 30, 2010, in thousands.
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, |
|
|
|
2011 |
|
|
2010 |
|
Committed Equity Financing Facility Warrants |
|
$ |
3 |
|
|
$ |
95 |
|
|
|
|
|
|
|
|
|
|
Direct Registration Warrants |
|
|
99 |
|
|
|
2,077 |
|
|
|
|
|
|
|
|
|
|
Excess of value of the Private Placement Warrants at issuance over the net proceeds of the offering |
|
|
|
|
|
|
(4,433 |
) |
|
|
|
|
|
|
|
|
|
Gain recognized in connection with warrant exchange agreements |
|
|
690 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private Placement Warrants |
|
|
1,427 |
|
|
|
(4,726 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gain (loss) on change in fair market value of derivatives |
|
$ |
2,219 |
|
|
$ |
(6,987 |
) |
|
|
|
|
|
|
|
30
Years ended December 31, 2010 and 2009
Revenues
We did not recognize any license revenue in the years ended December 31, 2010 and 2009, in
connection with the license of our nutritional and diagnostic technology or otherwise. Future
revenues, if any, from this license agreement are expected to be minimal.
Our future revenues will depend upon our ability to establish collaborations with respect to,
and generate revenues from products currently under development by us. We expect that we will not
generate meaningful revenue unless and until we enter into new collaborations providing for funding
through the payment of licensing fees and up-front payments.
Costs and Expenses
The following table summarizes our operating expenses for the periods indicated, in thousands
and as a percentage of total expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
% of Total |
|
|
|
|
|
|
% of Total |
|
|
Increase |
|
|
|
|
|
|
|
Operating |
|
|
|
|
|
|
Operating |
|
|
(Decrease) |
|
|
|
Amount |
|
|
Expenses |
|
|
Amount |
|
|
Expenses |
|
|
Amount |
|
|
% |
|
Research and development |
|
$ |
12,114 |
|
|
|
65 |
% |
|
$ |
22,256 |
|
|
|
71 |
% |
|
$ |
(10,142 |
) |
|
|
-46 |
% |
General and administrative |
|
|
5,885 |
|
|
|
32 |
% |
|
|
8,900 |
|
|
|
29 |
% |
|
|
(3,015 |
) |
|
|
-34 |
% |
Restructuring |
|
|
510 |
|
|
|
3 |
% |
|
|
|
|
|
|
|
|
|
|
510 |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
$ |
18,509 |
|
|
|
100 |
% |
|
$ |
31,156 |
|
|
|
100 |
% |
|
$ |
(12,647 |
) |
|
|
-41 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development expenses
The table below summarizes the most significant components of our research and development
expenses for the periods indicated, in thousands and as a percentage of total research and
development expenses and provides the changes in these components and their percentages:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
Increase |
|
|
|
|
|
|
|
% of Total |
|
|
|
|
|
|
% of Total |
|
|
(Decrease) |
|
|
|
Amount |
|
|
Expenses |
|
|
Amount |
|
|
Expenses |
|
|
Amount |
|
|
% |
|
External services |
|
$ |
7,944 |
|
|
|
66 |
% |
|
$ |
13,233 |
|
|
|
59 |
% |
|
$ |
(5,289 |
) |
|
|
-40 |
% |
Employee compensation and related |
|
|
3,247 |
|
|
|
27 |
% |
|
|
7,692 |
|
|
|
35 |
% |
|
|
(4,445 |
) |
|
|
-58 |
% |
Stock-based compensation |
|
|
241 |
|
|
|
1 |
% |
|
|
184 |
|
|
|
1 |
% |
|
|
57 |
|
|
|
31 |
% |
Other |
|
|
682 |
|
|
|
6 |
% |
|
|
1,147 |
|
|
|
5 |
% |
|
|
(465 |
) |
|
|
-41 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total research and development |
|
$ |
12,114 |
|
|
|
100 |
% |
|
$ |
22,256 |
|
|
|
100 |
% |
|
$ |
(10,142 |
) |
|
|
-46 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The reduction in external services expenses for the year ended December 31, 2010 compared
to the same twelve month period in 2009 is primarily attributable to a reduction in spending on our
ZYBRESTAT for Oncology program of approximately $3.3 million. This reduction is primarily
attributable to lower costs on our ATC study for the comparable 2010 period in connection with our
decision to discontinue further recruitment of patients on this study in February 2010. In
addition, we experienced reductions in expenses on both our OXi4503 and ZYBRESTAT for Ophthalmology
programs for the comparable 2010 period, primarily related to our decision in February 2010 to
scale back efforts in some of our projects in these areas as well.
The reduction in employee compensation and related expenses for the year ended December 31,
2010 compared to the same twelve month period of 2009 is due to a 50% reduction in our average full
time equivalents for the comparable 2010 period. In
February 2010 we implemented a Company-wide restructuring plan due to our decision to scale
back activities in some of our ongoing clinical projects.
31
The reduction in other expenses for the year ended December 31, 2010 compared to the same
twelve month period of 2009 is primarily due to a reduction in both our research and development
facility related costs as well as program wide support costs for the comparable 2010 period.
General and administrative expenses
The table below summarizes the most significant components of our general and administrative
expenses for the periods indicated, in thousands and as a percentage of total general and
administrative expenses and provides the changes in these components and their percentages:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
Increase |
|
|
|
|
|
|
|
% of Total |
|
|
|
|
|
|
% of Total |
|
|
(Decrease) |
|
|
|
Amount |
|
|
Expenses |
|
|
Amount |
|
|
Expenses |
|
|
Amount |
|
|
% |
|
Employee compensation and related |
|
$ |
2,049 |
|
|
|
35 |
% |
|
$ |
3,165 |
|
|
|
36 |
% |
|
$ |
(1,116 |
) |
|
|
-35 |
% |
Stock-based compensation |
|
|
453 |
|
|
|
8 |
% |
|
|
272 |
|
|
|
3 |
% |
|
$ |
181 |
|
|
|
67 |
% |
Consulting and professional services |
|
|
2,295 |
|
|
|
39 |
% |
|
|
4,409 |
|
|
|
50 |
% |
|
$ |
(2,114 |
) |
|
|
-48 |
% |
Other |
|
|
1,088 |
|
|
|
18 |
% |
|
|
1,054 |
|
|
|
11 |
% |
|
$ |
34 |
|
|
|
3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total general and administrative |
|
$ |
5,885 |
|
|
|
100 |
% |
|
$ |
8,900 |
|
|
|
100 |
% |
|
$ |
(3,015 |
) |
|
|
-34 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The reduction in employee compensation and related expenses for the year ended December
31, 2010 compared to the same twelve month period of 2009 is due to a reduction in both our average
full time equivalents of 16% and expenses in the 2009 period for administrative costs associated
with the Symphony ViDA entity that did not recur in the 2010 period. In February 2010, we
implemented a Company-wide restructuring plan due to our decision to scale back activities in some
of our ongoing clinical projects. The number and scope of our clinical development projects affects
how we staff and support those projects.
The increase in stock based compensation expense for the year ended December 31, 2010 compared
to the same twelve month period of 2009 is due to timing and vesting periods of option awards to
employees.
The reduction in consulting and professional services expenses for the year ended December 31,
2010 compared to the same twelve month period of 2009 is primarily due to a reduction in both
recurring professional services fees including director and audit fees for the comparable periods
as well as one time costs incurred in the 2009 period for corporate wide quality systems reviews
and costs incurred in our attempt to acquire VaxGen Inc. that did not recur in the 2010 period.
On February 11, 2010, we announced a restructuring plan designed to focus resources on our
highest-value clinical assets and reduce our cash utilization. Key aspects of the restructuring and
its effects on our current clinical trials are as follows:
|
|
|
We continue to advance our high-priority Phase 2 ZYBRESTAT trial in non-small
cell lung cancer (FALCON study), with updated safety and efficacy results anticipated
for presentation at the upcoming American Society of Clinical Oncology (ASCO) meeting in
June 2011. |
|
|
|
|
We stopped further enrollment in the Phase 2/3 FACT clinical trial in anaplastic
thyroid cancer (ATC), but have continued to treat and follow all patients who enrolled
in the study. We expect this approach to optimize our ability to gain useful additional
insight into ZYBRESTATs antitumor activity earlier than the previously anticipated
timeline, while also reducing cash utilization in 2010 and beyond. |
|
|
|
|
We discontinued enrolling patients in our OXi4503 Phase 1b trial in patients with
hepatic tumors. We are evaluating the results received to date. |
|
|
|
|
We discontinued enrollment in our Phase 2 FAVOR study of ZYBRESTAT in polypoidal
choroidal vasculopathy (PCV), a form of macular degeneration. After completing
enrollment in the fall of 2010, we are considering next steps for this program. |
|
|
|
|
Future development decisions concerning the OXi4503 program and the ZYBRESTAT for
ophthalmology program will be made following these analyses and additional review by our
management and board of directors. |
|
|
|
|
In addition, we reduced our workforce by 20 employees or approximately 49%. |
32
Other Income and Expenses
The table below summarizes Other Income and Expense in our Income Statement for the years 2010
and 2009, in thousands.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase |
|
|
|
|
|
|
|
|
|
|
|
(Decrease) |
|
|
|
2010 |
|
|
2009 |
|
|
Amount |
|
|
% |
|
Change in fair value of warrants and other financial instruments |
|
$ |
(6,018 |
) |
|
$ |
2,166 |
|
|
$ |
(8,184 |
) |
|
|
-378 |
% |
Investment income |
|
|
17 |
|
|
|
110 |
|
|
|
(93 |
) |
|
|
-85 |
% |
Other income (expense), net |
|
|
740 |
|
|
|
(63 |
) |
|
|
803 |
|
|
|
1275 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(5,261 |
) |
|
$ |
2,213 |
|
|
$ |
(7,474 |
) |
|
|
-338 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
We record unrealized (non cash) gain/(loss) as a result of a change in the estimated Fair
Market Value (FMV) of our Derivative Liabilities and the common stock warrants issued in
connection with our equity offerings as discussed in Accounting for Derivative Financial
Instruments Indexed to and Potentially Settled in the Companys Common Stock, Note 1 to our
financial statements, Summary of Significant Accounting Policies. In 2010, the loss primarily
relates to the triggering of the full-ratchet provisions of the PIPE warrants, where the exercise
price of each warrant was decreased, causing a greater warrant liability. In 2009, the gain
primarily relates to the decline in the underlying fair value of the common stock.
The decrease in Investment income of $93,000 for fiscal 2010 compared to fiscal 2009 is
primarily a result of a reduction in our average month end cash balance available for investment
during the respective periods.
The Other income (expense) amounts are derived from our gain and loss on foreign currency
exchange and reflect both a change in number of foreign clinical trials and the fluctuation in
exchange rates. Also included in the fiscal 2010 amount is our receipt of $733,000 in connection
with qualified investments in a qualifying therapeutic discovery project under section 48D of the
Internal Revenue Code in November 2010.
Tax Matters
At December 31, 2010, the Company had a net operating loss carry-forward of approximately
$74,444,000 for U.S. income tax purposes, which begin to expire for U.S. purposes through 2021. Due
to the degree of uncertainty related to the ultimate use of these loss carry-forwards, we have
fully reserved this future benefit. Additionally, the future utilization of the U.S. net operating
loss carry-forwards is subject to limitations under the change in stock ownership rules of the
Internal Revenue Service. The valuation allowance increased by approximately $5,640,000 and
approximately $8,466,000 for the years ended December 31, 2010 and 2009, respectively, due
primarily to the increase in net operating loss carry-forwards.
Years ended December 31, 2009 and 2008
Revenues
We recognized approximately $12,000 in licensing revenue in the year ended December 31, 2008,
in connection with the license of our nutritional and diagnostic technology. We did not recognize
any license revenue in the year ended December 31, 2009.
Costs and Expenses
The following table summarizes our operating expenses for the periods indicated, in thousands
and as a percentage of total expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
% of Total |
|
|
|
|
|
|
% of Total |
|
|
Increase |
|
|
|
|
|
|
|
Operating |
|
|
|
|
|
|
Operating |
|
|
(Decrease) |
|
|
|
Amount |
|
|
Expenses |
|
|
Amount |
|
|
Expenses |
|
|
Amount |
|
|
% |
|
Research and development |
|
$ |
22,256 |
|
|
|
71 |
% |
|
$ |
18,995 |
|
|
|
73 |
% |
|
$ |
3,261 |
|
|
|
17 |
% |
General and administrative |
|
|
8,900 |
|
|
|
29 |
% |
|
|
6,957 |
|
|
|
27 |
% |
|
|
1,943 |
|
|
|
28 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
$ |
31,156 |
|
|
|
100 |
% |
|
$ |
25,952 |
|
|
|
100 |
% |
|
$ |
5,204 |
|
|
|
20 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
Research and development expenses
The table below summarizes the most significant components of our research and development
expenses for the periods indicated, in thousands and as a percentage of total research and
development expenses and provides the changes in these components and their percentages:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
% of Total |
|
|
|
|
|
|
% of Total |
|
|
Increase (Decrease) |
|
|
|
Amount |
|
|
Expenses |
|
|
Amount |
|
|
Expenses |
|
|
Amount |
|
|
% |
|
External services |
|
$ |
13,233 |
|
|
|
59 |
% |
|
$ |
13,273 |
|
|
|
70 |
% |
|
$ |
(40 |
) |
|
|
0 |
% |
Employee compensation and related |
|
|
7,692 |
|
|
|
35 |
% |
|
|
4,490 |
|
|
|
24 |
% |
|
|
3,202 |
|
|
|
71 |
% |
Stock-based compensation |
|
|
184 |
|
|
|
1 |
% |
|
|
337 |
|
|
|
2 |
% |
|
|
(153 |
) |
|
|
-45 |
% |
Other |
|
|
1,147 |
|
|
|
5 |
% |
|
|
895 |
|
|
|
4 |
% |
|
|
252 |
|
|
|
28 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total research and development |
|
$ |
22,256 |
|
|
|
100 |
% |
|
$ |
18,995 |
|
|
|
100 |
% |
|
$ |
3,261 |
|
|
|
17 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The most significant component of the increase in research and development expenses in
fiscal 2009 over fiscal 2008 of $3,261,000 was for employee compensation and related expenses. In
fiscal 2009, in order to support our multiple worldwide clinical studies, one of which was a
registrational study, we experienced an increase in our average headcount of approximately 13 R&D
employees or approximately 66%. This resulted in increases in salaries, benefits, recruitment costs
and travel costs in fiscal 2009 over fiscal 2008. In addition, we incurred one-time severance
expenses of approximately $690,000 primarily associated with two executives who departed the
Company in fiscal 2009. The increase in R&D headcount described above also contributed to the
increase in Facilities and related costs of $165,000 in fiscal 2009 over fiscal 2008. The decrease
in stock based compensation of $153,000 in fiscal 2009 from fiscal 2008 was as a result of
forfeitures of grants by executives and non-recurring vesting expense in 2009 of restricted stock
grants.
With regards to the external services component of our research and development expenses, we
experienced a decrease of approximately $1,000,000 on our ZYBRESTAT for oncology program in fiscal
2009 from fiscal 2008 as we concluded our Phase 2 trial for the treatment of platinum resistant
ovarian cancer and a number of other smaller studies in fiscal 2009. We increased expenditures in
fiscal 2009 versus fiscal 2008 by approximately $965,000 in our OXi4503 program which includes our
Phase 1 trial of OXi4503 in solid tumors and our Phase 1 trial of ZYBRESTAT in combination with
bevacizumab in solid tumors. We also increased expenditures in fiscal 2009 versus fiscal 2008 in
our ZYBRESTAT for Ophthalmology program by approximately $1,369,000, primarily attributable to the
initiation of our PCV study. The increases in expenditures on our OXi4503 and ZYBRESTAT for
Ophthalmology programs were offset by a decrease in Non-clinical expenditures for those programs of
approximately $800,000 in fiscal 2009 versus fiscal 2008.
General and administrative expenses
The table below summarizes the most significant components of our general and administrative
expenses for the periods indicated, in thousands and as a percentage of total general and
administrative expenses and provides the changes in these components and their percentages:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
Increase |
|
|
|
|
|
|
|
% of Total |
|
|
|
|
|
|
% of Total |
|
|
(Decrease) |
|
|
|
Amount |
|
|
Expenses |
|
|
Amount |
|
|
Expenses |
|
|
Amount |
|
|
% |
|
Employee compensation and related |
|
$ |
3,165 |
|
|
|
36 |
% |
|
$ |
2,604 |
|
|
|
37 |
% |
|
$ |
561 |
|
|
|
22 |
% |
Stock-based compensation |
|
|
272 |
|
|
|
3 |
% |
|
|
663 |
|
|
|
10 |
% |
|
$ |
(391 |
) |
|
|
-59 |
% |
Consulting and professional services |
|
|
4,409 |
|
|
|
50 |
% |
|
|
2,498 |
|
|
|
36 |
% |
|
$ |
1,911 |
|
|
|
77 |
% |
Other |
|
|
1,054 |
|
|
|
11 |
% |
|
|
1,192 |
|
|
|
17 |
% |
|
$ |
(138 |
) |
|
|
-12 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total general and administrative |
|
$ |
8,900 |
|
|
|
100 |
% |
|
$ |
6,957 |
|
|
|
100 |
% |
|
$ |
1,943 |
|
|
|
28 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In fiscal 2009 versus fiscal 2008 general and administrative costs increased $1,943,000.
The most significant component of this increase was due primarily to an increase of $1,911,000 in
consulting and professional services. In fiscal 2009, we incurred one-time costs of approximately
$1,341,000 in connection with our proposed merger with VaxGen. These costs included accounting,
legal and printing costs incurred in preparation for the acquisition. In addition, we experienced
an increase in fiscal 2009 over fiscal 2008 in legal and other advisory consulting and professional
services expenses of approximately $540,000 primarily attributable to an initiative we undertook to
review and improve our quality, vendor oversight and regulatory compliance, as well as advisory
services in connection with the management of the Symphony ViDA.
Employee compensation and related expenses in fiscal 2009 versus fiscal 2008 increased by
$561,000. This increase is primarily due to severance costs in connection with the departure of our
former CEO of approximately $350,000. In addition, our average G&A headcount increased in fiscal
2009 over fiscal 2008 by approximately 1, or approximately 6%, which accounted for
34
increases in salaries, benefits and travel costs in fiscal 2009 over fiscal 2008. The decrease
in stock based compensation of $391,000 in fiscal 2009 versus fiscal 2008 is primarily a result of
forfeitures of options by directors and executives who departed the company in fiscal 2009.
Other Income and Expenses
The table below summarizes Other Income and Expense in our Statement of Operations for the
years 2009 and 2008, in thousands.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase |
|
|
|
|
|
|
|
|
|
|
|
(Decrease) |
|
|
|
2009 |
|
|
2008 |
|
|
Amount |
|
|
% |
|
Change in fair value of warrants and other financial instruments |
|
$ |
2,166 |
|
|
$ |
3,335 |
|
|
$ |
(1,169 |
) |
|
|
-35 |
% |
Investment income |
|
|
110 |
|
|
|
618 |
|
|
|
(508 |
) |
|
|
-82 |
% |
Other income (expense), net |
|
|
(63 |
) |
|
|
66 |
|
|
|
(129 |
) |
|
|
-195 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,213 |
|
|
$ |
4,019 |
|
|
$ |
(1,806 |
) |
|
|
-45 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
The decrease in Investment income of $508,000 for fiscal 2009 from fiscal 2008 is
primarily a result of a reduction in our average month end cash balance available for investment
and lower average rate of return.
We record unrealized (non cash) gain/(loss) as a result of the change in the estimated Fair
Market Value (FMV) of our Derivative Liabilities and the common stock warrants issued in
connection with our equity offerings as discussed in Accounting for Derivative Financial
Instruments Indexed to and Potentially Settled in the Companys Common Stock, Note 1 to the
financial statements, Summary of Significant Accounting Policies.
In fiscal 2009, we recorded a gain relating to the change in fair value of outstanding
warrants which were accounted for as liabilities of $2,166,000. The change in the fair value of the
short-term and long-term direct registration warrants from the date of issue of July 20, 2009 to
December 31, 2009 was $1,855,000. The change in fair value of the CEFF Warrant and the additional
investment warrants held by Symphony Capital from December 31, 2008 to July 20, 2009, the date on
which both instruments were no longer treated as liabilities, was $311,000.
In fiscal 2008, we recorded a gain of $3,335,000 relating to the change in fair value of
outstanding warrants, which warrants were accounted for as liabilities. The majority of this gain,
or $3,312,000, is due to the Direct Investment Warrant issued to Symphony Capital in October 2008
and exercised by them in December 2008 following the approval by our stockholders of the issuance
of our common stock underlying the warrant at a special meeting of stockholders on December 9,
2008. The gain represents the change in value between the Direct Investment Warrant issue date and
December 30, 2008, the date that the Direct Investment Warrant was exercised. The remainder of the
gain reflects the change during the fourth quarter of 2008 in value of the CEFF Warrant issued to
Kingsbridge Capital.
The Other income (expense) amounts are derived from our gain and loss on foreign currency
exchange and reflect both a change in number of foreign clinical trials and the fluctuation in
exchange rates.
Liquidity and Capital Resources
To date, we have financed our operations principally through net proceeds received from
private and public equity financing and through our strategic development arrangement with
Symphony. We have experienced negative cash flow from operations each year since our inception,
except in fiscal 2000. As of September 30, 2011, we had an accumulated deficit of approximately
$215,008,000. We expect to continue to incur ongoing losses, over at least the next several years
due to, among other factors, our continuing and planned clinical trials and anticipated research
and development activities. We had cash, cash equivalents and restricted cash of approximately
$12,664,000 at September 30, 2011.
35
The following table summarizes our cash flow activities for the periods indicated, in
thousands:
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, |
|
|
|
2011 |
|
|
2010 |
|
Operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(7,308 |
) |
|
$ |
(22,027 |
) |
Non-cash adjustments to net loss |
|
|
(1,552 |
) |
|
|
7,787 |
|
Changes in operating assets and liabilities |
|
|
(117 |
) |
|
|
(3,703 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(8,977 |
) |
|
|
(17,943 |
) |
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
Change in other assets |
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities |
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock |
|
|
17,019 |
|
|
|
10,425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
17,019 |
|
|
|
10,425 |
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
|
8,042 |
|
|
|
(7,478 |
) |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
4,602 |
|
|
|
13,932 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
12,644 |
|
|
$ |
6,454 |
|
Non-cash adjustments to net loss in the nine month period ended September 30, 2011
consist primarily of a gain from a change in the fair value of warrants and other financial
instruments of $2,219,000, offset in part by stock compensation expense of $550,000 related to the
issuance of options to purchase our common stock. The net change in operating assets and
liabilities is primarily attributable to a decrease in accounts payable, accrued expenses and other
payables of $234,000, an increase in prepaid expenses and other current assets of $62,000 and a
reduction in restricted cash of $55,000. Net cash provided by financing activities for the nine
month period ended September 30, 2011 is primarily attributable to the sale of common stock under
our at the market equity financing facility discussed below.
On September 1, 2011, we announced a restructuring plan designed to focus our capital
resources on the most promising early-stage clinical programs and further reduce our cash
utilization.
We offered severance benefits to the terminated employees, and anticipate recording a total
charge of approximately $1,200,000, primarily associated with personnel-related termination costs.
In order to provide for an orderly transition, we are implementing the reduction in work force in a
phased manner. We took a restructuring charge in the third quarter of 2011 of approximately
$1,146,000, with the remainder expected to be taken over the following two quarters as the
transition is effected. Substantially all of the charge is expected to represent cash expenditures.
Upon completion of the restructuring activities associated with the restructuring, we expect to
reduce expenses from current levels by an annual amount of approximately $2,000,000.
During the nine months ended September 30, 2011, we sold approximately 7,707,000 shares of
common stock pursuant to an at the market (ATM) equity offering sales agreement with McNicoll,
Lewis & Vlak LLC, or MLV, resulting in net proceeds to us of approximately $17,019,000. In October
2011, we sold approximately 86,000 shares of common stock pursuant to the ATM sales agreement
resulting in net proceeds of approximately $128,000. We are currently unable to sell further shares
using the ATM sales agreement due to the expiration of our Registration Statement on Form S-3. We
intend to refile that Registration Statement in 2012. No assurance can be given that we will sell
any additional shares under the ATM sales agreement, or, if we do, as to the price or amount of
shares that we will sell, or the dates on which any such sales will take place.
We expect cash on hand as of December 1, 2011 to fund our operations, supporting the projects
we currently have ongoing and those costs we have committed to for future projects, through the
first half of 2013. In order to remain a going concern beyond the first half of 2013, we will
require significant additional funding. Should we be able to sell the shares included in this
prospectus at a price equivalent to approximately $1.00 per share, we would be able to fund our
operations through the entire 2013 fiscal year. Additional funds to finance our operations may not
be available on terms that we deem acceptable, or at all. If we fail to secure financing before the
end of the first half of 2013, we may be forced to cease all of our clinical and other activities.
We are aggressively pursuing other forms of capital infusion including public or private
financing, strategic partnerships or other arrangements with organizations that have capabilities
and/or products that are complementary to our own capabilities and/or products, in order to
continue the development of our product candidates. If we are unable to access additional funds
when needed, we would not be able to continue the development of our product candidates or we could
be required to delay, scale back or eliminate some or all of our development programs and other
operations. Any additional equity financing, which may not be available to us or may not be
available on favorable terms, will likely be dilutive to our current stockholders and debt
financing, if available, may involve restrictive covenants. If we access funds through
collaborative or licensing arrangements, we may be required to relinquish
36
rights to some of our technologies or product candidates that we would otherwise seek to develop or
commercialize on our own, on terms that are not favorable to us. Our ability to access capital when
needed is not assured and, if not achieved on a timely basis, will materially harm our business,
financial condition and results of operations. As a result of this uncertainty and the substantial
doubt about our ability to continue as a going concern as of December 31, 2010, the Report of
Independent Registered Public Accounting Firm at the beginning of the Consolidated Financial
Statements section in this prospectus includes a going concern explanatory paragraph.
Our cash utilization amount is highly dependent on the progress of our potential-product
development programs, particularly, the results of our pre-clinical projects and clinical trials,
the cost, timing and outcomes of regulatory approvals for our product candidates, the terms and
conditions of our contracts with service providers for these programs, and the rate of recruitment
of patients in our human clinical trials much of which is not within our control as well as the
timing of hiring development staff to support our product development plans. We anticipate a
continued reduction in our cash utilization over the next several quarters resulting from the
conclusion of a number of our clinical projects in 2011 and based on those future projects to which
we are currently committed. We continue to evaluate our future potential product development
options and our cash utilization may vary depending on conclusions made regarding those options.
Our cash requirements may vary materially from those now planned for or anticipated by
management due to numerous risks and uncertainties. These risks and uncertainties include, but are
not limited to: the progress of and results of our pre-clinical testing and clinical trials of our
VDA drug candidates under development, including ZYBRESTAT, our lead drug candidate, and OXi4503;
the progress of our research and development programs; the time and costs expended and required to
obtain any necessary or desired regulatory approvals; the resources, if any, that we devote to
developing manufacturing methods and advanced technologies; our ability to enter into licensing
arrangements, including any unanticipated licensing arrangements that may be necessary to enable us
to continue our development and clinical trial programs; the costs and expenses of filing,
prosecuting and, if necessary, enforcing our patent claims, or defending ourselves against possible
claims of infringement by us of third party patent or other technology rights; the costs of
commercialization activities and arrangements, if any, undertaken by us; and, if and when approved,
the demand for our products, which demand is dependent in turn on circumstances and uncertainties
that cannot be fully known, understood or quantified unless and until the time of approval, for
example the range of indications for which any product is granted approval.
Contractual Obligations
The following table presents information regarding our contractual obligations and commercial
commitments as of December 31, 2010 in thousands:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than |
|
|
1-3 |
|
|
4-5 |
|
|
After 5 |
|
|
|
Total |
|
|
1 Year |
|
|
Years |
|
|
Years |
|
|
Years |
|
Clinical development and related commitments |
|
$ |
4,921 |
|
|
$ |
4,873 |
|
|
$ |
45 |
|
|
$ |
3 |
|
|
$ |
|
|
Operating Leases |
|
|
1,153 |
|
|
|
494 |
|
|
|
659 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual cash obligations |
|
$ |
6,074 |
|
|
$ |
5,367 |
|
|
$ |
704 |
|
|
$ |
3 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments under clinical development and related commitments are based on the completion
of activities as specified in the contract. The amounts in the table above assume the successful
completion, by the third-party contractor, of all of the activities contemplated in the agreements.
Our primary drug development programs are based on a series of natural products called
Combretastatins. In August 1999, we entered into an exclusive license for the commercial
development, use and sale of products or services covered by certain patent rights owned by Arizona
State University. This agreement was subsequently amended in June 2002. From the inception of the
agreement through December 31, 2010, we have paid a total of $2,500,000 in connection with this
license. The agreement provides for additional payments in connection with the license arrangement
upon the initiation of certain clinical trials or the completion of certain regulatory approvals,
which payments could be accelerated upon the achievement of certain financial milestones, as
defined in the agreement. The license agreement also provides for additional payments upon our
election to develop certain additional compounds, as defined in the agreement. Future milestone
payments under this agreement could total $200,000. We are also required to pay royalties on future
net sales of products associated with these patent rights.
Quantitative and Qualitative Disclosures about Market Risk
At September 30, 2011, we did not hold any derivative financial instruments. As of September
30, 2011 we did not hold any commodity-based instruments or other long-term debt obligations. We
account for all of our other warrants issued in connection with our equity financings as
liabilities.
37
We have adopted an Investment Policy, the primary objectives of which are to preserve
principal, maintain proper liquidity to meet operating needs and maximize yields while preserving
principal. Although our investments are subject to credit risk, we follow procedures to limit the
amount of credit exposure in any single issue, issuer or type of investment. Our investments are
also subject to interest rate risk and will decrease in value if market interest rates increase.
However, due to the conservative nature of our investments and relatively short duration, we
believe that interest rate risk is mitigated. Our cash and cash equivalents are maintained in U.S.
dollar accounts. Although we conduct a number of our trials and studies outside of the United
States, we believe our exposure to foreign currency risk to be limited as the arrangements are in
jurisdictions with relatively stable currencies.
38
BUSINESS
OVERVIEW
We are a clinical-stage, biopharmaceutical company developing novel therapeutics to treat
cancer and eye diseases. Our primary focus is the development of product candidates referred to as
vascular disrupting agents, or VDAs, that selectively disable and destroy abnormal blood vessels
that provide solid tumors a means of growth and survival and also are associated with visual
impairment in a number of ophthalmological diseases and conditions.
We intend to primarily target the development of our product candidates for the treatment of
rare cancers that will be eligible for orphan drug status from the Food and Drug Administration, or
FDA. By doing so, we believe we will be able to take advantage of significant benefits associated
with orphan drug status, such as:
|
|
|
Study design assistance from the appropriate FDA center, |
|
|
|
Exemption from application-filing fees, |
|
|
|
Possible grant funding for Phase 1 and 2 clinical trials, |
|
|
|
Tax credits for some clinical research expenses, and |
|
|
|
Seven years of marketing exclusivity after the approval of the drug. |
The Orphan Drug Act was passed in January 1983 to stimulate the research, development, and
approval of products that treat rare diseases. An orphan drug is defined as a product that treats a
rare disease affecting fewer than 200,000 patients in the United States. Drugs are granted orphan
status for a specific indication. Our lead candidate, ZYBRESTAT, has been awarded orphan drug
status by the FDA and the European Commission in the European Union for the treatment of advanced
anaplastic thyroid cancer, or ATC, and for the treatment of medullary, Stage IV papillary and Stage
IV follicular thyroid cancers. The FDA has also granted Fast Track status to ZYBRESTAT for the
treatment of regionally advanced and/or metastatic ATC.
To date, more than 400 subjects have been treated with ZYBRESTAT in human clinical trials, and
the drug candidate has generally been observed to be well-tolerated.
ZYBRESTAT for Oncology
We are currently pursuing the clinical development of ZYBRESTAT. ZYBRESTAT is a reversible
tubulin binding agent that works by disrupting the network of blood vessels, or vasculature, within
solid tumors, also referred to as vascular disruption. Vascular disruption leads to tumor hypoxia,
which refers to the process of starving the tumor of vitally necessary oxygen supply and subsequent
tumor cell death. More specifically, ZYBRESTAT selectively targets the existing abnormal and
largely immature vasculature found specifically in most solid tumors and causes endothelial cells
that make up the walls of the blood vessels in that vasculature to lose their normally flat shape
and to round up, thus blocking the flow of blood to the tumor. The downstream tumor environment is
then deprived of oxygen and nutrients, and the resulting restriction in blood supply kills the
cells in the central portion of the tumor. Based on ZYBRESTATs positive activity observed in
animal models, we have conducted multiple clinical trials of ZYBRESTAT in a variety of tumor types.
We have completed a Phase 2/3 clinical trial of ZYBRESTAT in patients with ATC. ATC is a very
aggressive, rare but lethal cancer of the thyroid gland. Because of the rapid progression of the
disease and the absence of effective therapies, median survival from the time of diagnosis is
approximately 3-4 months. Furthermore, we have an ongoing clinical trial of ZYBRESTAT in patients
with ovarian cancer, for which we were granted orphan drug status. We are currently planning a
pivotal Phase 3 clinical trial of ZYBRESTAT in ATC, which we refer to as the FACT 2 trial, which we
believe will be sufficient to obtain FDA approval and approval in Europe for the treatment of
patients with advanced ATC.
Clinical Development of ZYBRESTAT in anaplastic thyroid cancer (ATC)
In earlier Phase 1 studies of ZYBRESTAT in ATC, clinical investigators observed several
objective responses in treatment with ZYBRESTAT, including a complete response lasting more than 13
years, in patients with ATC. A subsequent Phase 2 study in
26 ATC patients showed a 23% rate of one year survival in a disease where median expected
survival of patients is approximately 3-4 months from the time of diagnosis and fewer than 10% of
patients are typically alive at one year.
We subsequently conducted the FACT (fosbretabulin in anaplastic cancer of the thyroid) trial,
a randomized Phase 2/3 study in ATC, which enrolled 80 patients between July 2007 and February
2010. A total of 40 clinical sites in 11 countries participated in this clinical study, which was
conducted in accordance with good clinical practice guidelines and a Special Protocol Assessment,
or SPA, with the FDA. The trial was originally designed to evaluate ZYBRESTAT in 180 patients as a
potential treatment for ATC.
39
The primary endpoint for the FACT trial was overall survival. Eligible patients were
randomized to receive either ZYBRESTAT in combination with the chemotherapeutic agents carboplatin
and paclitaxel, or to the control arm of the study, in which they received only carboplatin and
paclitaxel. Central pathology review by external pathologists not associated with the study was
utilized to confirm the histological diagnosis prior to enrollment of patients.
Due to the rarity of the disease and the fact that many of the patients screened for the study
did not meet the trials inclusion criteria or either died or no longer met the trials inclusion
criteria, the enrollment period spanned more than twice the planned 18 month period. As a result of
both the length of the enrollment period and financial constraints affecting us, in February 2010,
we chose to continue to treat and follow all 80 patients who were enrolled in the Phase 2/3 FACT
clinical trial in ATC in accordance with the SPA, but to stop further enrollment.
During a meeting on March 16, 2011, the FDA indicated that the data from the FACT trial are
suggestive of possible clinical activity that may warrant continued development, and that to seek
regulatory approval, we should plan to conduct an additional clinical trial with a survival
endpoint. The FDA also confirmed that, as we expected, the SPA that had been agreed upon at the
start of the study is no longer in effect.
In June 2011, Julie Sosa, M.D., Associate Professor of Surgery and of Medicine at Yale
University and principal investigator in the Phase 2/3 study, presented final data from the trial
at the American Society of Clinical Oncology (ASCO) conference in Chicago, Illinois. Dr. Sosa
presented data reflecting a median overall survival (OS) time of 5.2 months for patients who
received ZYBRESTAT and chemotherapy compared with 4.0 months for patients receiving chemotherapy
alone, representing a 28% reduction in the risk of death for patients receiving ZYBRESTAT and
chemotherapy. For patients treated with ZYBRESTAT and chemotherapy, the data suggested that the
likelihood of being alive at six months was 48% compared with 35% for patients treated with the
control arm regimen. At one year, the data suggested that the likelihood of being alive was 26% for
patients treated with ZYBRESTAT and chemotherapy compared with 9% for patients treated with
chemotherapy alone. As in other studies, ZYBRESTAT appeared to be well tolerated.
We are currently planning a second pivotal Phase 3 clinical trial of ZYBRESTAT in ATC, which
we refer to as the FACT 2 trial, subject to obtaining sufficient financial resources in order to do
so. In connection with the restructuring of our business that we announced on September 1, 2011,
we determined that a Company-sponsored Phase 3 registrational study of ZYBRESTAT in patients with
ATC, as suggested by the FDA, would require significant additional capital exceeding our existing
resources. The purchase agreement with Lincoln Park Capital Fund, LLC (LPC) that we entered into in
November 2011 provides for the sale, from time to time, of up to $20 million of our common stock.
The proceeds from sales under this purchase agreement will be used to advance our efforts to
conduct the FACT 2 registration trial in ATC, as well as to continue to support ongoing clinical
programs in other tumor types and advance our earlier stage programs.
In December 2011, we established a partnership agreement to provide access to ZYBRESTAT for
the treatment of patients in Europe with ATC on a compassionate use basis. Our newly formed named
patient program, to be managed by Azanta A/S, provides a regulatory mechanism to allow healthcare
professionals in Europe to prescribe ZYBRESTAT to individual ATC patients while it is still in
development. Under the terms of the agreement, we will provide ZYBRESTAT to Azanta, and Azanta will
serve as our exclusive distributor for ZYBRESTAT in the specified territory for this purpose.
Azanta will provide ZYBRESTAT to physicians solely to treat ATC on a compassionate use basis in the
territory covered by the agreement until such time as ZYBRESTAT may obtain marketing approval in
that territory. The territory includes the European Union, including the Nordic countries and
Switzerland, and Canada, and the agreement may also be expanded to include other countries on a
country-by-country basis. We and Azanta will cooperate on regulatory activities relating to
ZYBRESTAT for the treatment of ATC within the territory.
FALCON (fosbretabulin in advanced lung oncology) trial randomized, controlled Phase 2 study with
ZYBRESTAT in non-small cell lung cancer
We evaluated ZYBRESTAT in a randomized, controlled Phase 2 clinical trial, which we refer to
as the FALCON trial, as a potential first-line treatment for stage IIIB/IV non-small cell lung
cancer, or NSCLC. In the FALCON trial, patients were randomized either to the treatment arm of the
study, in which they received ZYBRESTAT (CA4P) in combination with the chemotherapeutic agents,
carboplatin and paclitaxel, and bevacizumab, a drug that interferes with blood vessel growth, or
angiogenesis, or to the control arm of the study, in which they received a standard combination regimen of carboplatin,
paclitaxel and bevacizumab. The objective of the study was to determine the safety, tolerability,
and efficacy of ZYBRESTAT at a dose of 60 mg/m2 in combination with carboplatin, paclitaxel and
bevacizumab in Stage IIIB or IV non-squamous NSCLC. Primary endpoints of this study were safety of
the combination therapy and progression-free survival; secondary endpoints were overall survival
and objective response rate.
Edward Garon, M.D., Assistant Professor of Medicine at the University of California, Los
Angeles and primary investigator in the study, presented the progression-free survival data from
this study at the ASCO conference in Chicago, Illinois in June 2011. Dr. Garons updated analysis,
conducted approximately 11 months after the enrollment of the last patient in June 2010, showed
that
40
the combination regimen of ZYBRESTAT plus bevacizumab, carboplatin and paclitaxel (ZYBRESTAT
arm) appeared to be well-tolerated with no significant cumulative toxicities when compared with the
control arm of the study. Dr. Garons presentation also included data on the achieved rate of
objective response. In terms of Partial Response as Best Overall Tumor Response (Intent to Treat)
patients on the active treatment arm including ZYBRESTAT achieved a 56% rate of objective response
according to RECIST criteria, as compared to 36% on the control arm. Further analysis also
suggested that the addition of ZYBRESTAT may benefit patients with a poorer performance status.
Poor performance status in this context refers to patients who present with higher tumor burden or
larger tumors, who have additional medical complications, who suffer from additional illnesses such
as emphysema or diabetes, or who may be taking other medications.
Since the initial presentation of the progression-free survival data at ASCO 2011, the overall
survival follow-up has continued with each patient having been followed for survival for at least
one year following the initiation of study therapy. The final results from this analysis were
available in November 2011, and the analysis of the data showed that the combination regimen of
ZYBRESTAT plus bevacizumab, carboplatin and paclitaxel (ZYBRESTAT arm) was observed to be
well-tolerated with no significant cumulative toxicities or overlapping toxicities with bevacizumab
when compared with the control arm of the study (standard chemotherapy plus bevacizumab). However,
for the overall patient population, no survival benefit was observed for patients receiving
ZYBRESTAT. Similar to the initial findings regarding progression-free survival, an analysis of
patients with more advanced disease as indicated by a tumor burden greater than 10 cm or poor
performance status suggested meaningful improvements in overall survival for patients receiving
ZYBRESTAT in addition to bevacizumab and chemotherapy.
While we believe that these data could be used to design a specific clinical program with
ZYBRESTAT and more generally, provide clinical validation supporting further evaluation of
ZYBRESTAT in patients with poor-prognosis NSCLC in combination with standard chemotherapy and
anti-VEGF therapy, there is no precedent and no established regulatory pathway for such an
approach. Therefore, we are not currently actively pursuing poor-prognosis NSCLC as a target
indication.
ZYBRESTAT in ovarian cancer
At the 2009 ASCO Annual Meeting, we reported positive final data from an
investigator-sponsored Phase 2 study of ZYBRESTAT and carboplatin plus paclitaxel chemotherapy in
patients with platinum-resistant ovarian cancer.
Based on the results of this Phase 2, single-arm, two-stage study, in February 2011, we
entered into a Cooperative Research and Development Agreement (CRADA) with the National Cancer
Institutes (NCI) Cancer Therapy Evaluation Program (CTEP) to collaborate on the conduct of a
randomized Phase 2 trial of ZYBRESTAT in combination with bevacizumab in up to 110 patients with
relapsed, platinum-sensitive ovarian cancer. Under the terms of the agreement, we are providing
ZYBRESTAT to NCI for an NCI-sponsored study being conducted by the Gynecologic Oncology Group
(GOG), an organization dedicated to clinical research in the field of gynecologic cancer. The aim
of the trial will be to determine if the combination of ZYBRESTAT and bevacizumab will enhance
anti-tumor effects and further delay tumor progression when compared to bevacizumab alone.
Investigators initiated enrollment in this Phase 2 study in the first half of 2011, and this study
is actively recruiting patients. The primary endpoint of the study will be progression-free
survival, with results expected to become available in early 2013.
The June 2011 ASCO meeting in Chicago, Illinois included an announcement that the addition of
Avastin (bevacizumab) to a chemotherapy regimen reduces the risk of progression in patients with
platinum-sensitive ovarian cancer. This is of particular interest to OXiGENE in view of the NCI /
CTEP Phase 2 study of ZYBRESTAT in combination with bevacizumab for platinum-sensitive ovarian
cancer patients, and we are encouraged to see additional data from other studies supporting use of
bevacizumab in platinum-sensitive ovarian cancer patients.
Further development of our ongoing clinical trials will depend on continuing analysis and
results of these ongoing clinical studies and our cash resources at that time.
Possible areas for future development
We believe that, if successful, the ongoing ZYBRESTAT for oncology clinical trial program will
establish a compelling rationale for further development of ZYBRESTAT as a treatment for:
|
|
|
aggressive and difficult-to-treat solid tumors; |
|
|
|
use in combination with chemotherapy in a variety of solid tumors, particularly those in
which carboplatin and/or paclitaxel chemotherapy are commonly used; and |
|
|
|
use in combination with commonly used drugs, such as bevacizumab, that interfere with
blood vessel growth, or angiogenesis, in various solid tumor indications.
|
41
We believe these areas for potential further development collectively represent a significant
unmet medical need and thus a significant potential commercial market opportunity that includes
cancers of the thyroid, ovary, kidney, liver, head and neck, breast, lung, skin, brain, colon and
rectum.
OXi4503, a unique, second generation VDA for oncology indications
We are currently pursuing development of OXi4503, a second-generation, dual-mechanism VDA, as
a treatment for certain solid tumor types and, as a more recent development, for the treatment of
myeloid leukemias. We believe that OXi4503 is differentiated from other VDAs by its dual-action
activity: in addition to having potent vascular disrupting effects, OXi4503 is unique in that
certain enzymes in the human body can help convert it to a form of chemical that has direct tumor
cell killing effects. We believe this unique property may result in enhanced anti-tumor activity in
certain tumor types as compared with other VDA drug candidates. Based on data from preclinical
studies, we believe that OXi4503 may have enhanced activity in tumor types with relatively high
levels of the enzymes that facilitate the conversion of OXi4503 to the form of chemical that kills
tumor cells. These tumor types include hepatocellular carcinoma, melanoma, and leukemias of the
myeloid lineage. In preclinical studies, OXi4503 has shown potent anti-tumor activity against solid
tumors and acute myeloid leukemia models, both as a single agent and in combination with other
cancer treatment modalities.
We have completed a Phase 1 clinical trial of OXi4503 in patients with advanced solid tumors
sponsored by Cancer Research United Kingdom. In collaboration with us, Professor Gordon Rustin and
colleagues from the Mount Vernon Cancer Research Centre, UK and other institutions in the United
Kingdom, reported positive final data from this study at the 2010 ASCO Annual Meeting. In this
study, 45 patients with advanced solid tumors who had declined or were unresponsive to standard
treatment were treated with escalating doses of OXi4503. Partial responses were observed in two
patients with epithelial ovarian cancer and stable disease was observed in 9 patients. OXi4503 was
also observed to be well-tolerated in this study. To date, OXi4503 has been observed to have a
manageable side-effect profile similar to that of other agents in the VDA class, potential
single-agent clinical activity, and effects on tumor blood flow and tumor metabolic activity, as
determined with several imaging modalities. We also evaluated escalating doses of OXi4503 in an
OXiGENE-sponsored Phase 1b trial, initiated in the first quarter of 2009 in patients with solid
tumors with hepatic involvement. This study confirmed the recommended dose established in the first
Phase 1 study. We have completed the final analysis of this study and look forward to either
publishing the data or presenting it at an upcoming medical meeting.
Currently, we are exploring possible clinical studies but we have no firm plans to continue
the evaluation of OXi4503 in patients with solid tumors. A proposal to study the use of OXi4503 in
combination with a tyrosine kinase inhibitor in patients with advanced ovarian cancer is in the
evaluation stage.
Based on the results of preclinical studies published in the journal Blood in September 2010
that show OXi4503 has potent activity against acute myelogenous leukemia (AML) in animal models, we
entered into a clinical trial agreement pursuant to which investigators at the University of
Florida initiated an investigator sponsored Phase 1 study of OXi4503 in patients with AML or
myelodysplastic syndrome (MDS) in May 2011. This open-label, dose-escalating study for the
treatment of up to 36 patients is being conducted in patients with relapsed or refractory AML and
MDS and will evaluate the safety profile, maximum tolerated dose and biologic activity of OXi4503
in these patients. We expect that initial indications of biologic activity from this study may be
available in 2012.
The general direction of future development of OXi4503 for hematologic indications will depend
on the outcome of the analysis of the study in AML, as well as available financial resources and
potential partnering activities.
ZYBRESTAT for Ophthalmology
In addition to developing ZYBRESTAT as an intravenously administered therapy for oncology
indications, we have undertaken an ophthalmology research and development program with ZYBRESTAT
with the ultimate goal of developing a topical formulation of ZYBRESTAT for ophthalmological
diseases and conditions that are characterized by abnormal blood vessel growth within the eye that
result in loss of vision. Previously, we reported results at the 2007 annual meeting of the
Association for Research in Vision and Ophthalmology, or ARVO, from a Phase 2 study in patients with myopic macular
degeneration in which all patients in the study met the primary clinical endpoint of vision
stabilization at three months after study entry.
In December 2010, we completed a randomized, double-masked, placebo-controlled Phase 2
proof-of-mechanism trial, which we refer to as the FAVOR trial, with a single dose of
intravenously-administered ZYBRESTAT in patients with polypoidal choroidal vasculopathy (PCV), a
form of choroidal neovascularization, which is a condition where new blood vessels form in the
choroid, a part of the eye, and which can lead to vision loss and,
ultimately, blindness. Current
therapies, including approved drugs that interfere with blood vessel growth, known as
anti-angiogenics, appear to provide limited benefit. We believe that the architecture of the
abnormal vasculature in certain eye tissues, namely the retina and choroid, which contribute to PCV
patients loss of vision, may be particularly susceptible to treatment with a VDA such as
ZYBRESTAT.
42
Data from the FAVOR trial, in which ZYBRESTAT at different doses was compared to placebo
in patients with PCV, followed by imaging of the retina on days 2, 8, 15, and 28, were presented at
the 6th Asia-Pacific VitreoRetina Society (APVRS) Congress in Hyderabad, India on December 2, 2011.
The primary objective of the study was to observe the change in the number of polyps from baseline
following administration of ZYBRESTAT. Although this number was essentially unchanged, there were
some suggestions of activity with a decrease in polyp activity and a reduction in subretinal fluid
and retinal edema in patients receiving ZYBRESTAT.
We believe that PCV represents an attractive target indication and development pathway for
ZYBRESTAT. Unlike wet age-related macular degeneration, an indication for which several
anti-angiogenic drugs are approved or prescribed off-label, conducting clinical studies of
ZYBRESTAT in patients with ophthalmologic indications not yet approved for treatment with such
anti-angiogenic drugs could potentially prove to reduce development time and expense. The
objectives of the FAVOR trial and the ongoing preclinical program of ZYBRESTAT in ophthalmology are
to:
|
|
|
determine the therapeutic utility of ZYBRESTAT in PCV, and visualize the effect of
ZYBRESTAT on the vasculature of the polyps associated with PCV; |
|
|
|
determine blood concentrations of drug required for activity in humans and thereby
estimate, with the benefit of preclinical data, an appropriate dose of
topically-administered ZYBRESTAT to be evaluated in subsequent human clinical studies; and |
|
|
|
further evaluate the feasibility of developing a topical formulation of ZYBRESTAT for
ophthalmological indications. |
We believe that a safe, effective and convenient topically-administered anti-vascular
therapeutic would have advantages over currently approved anti-vascular, ophthalmological
therapeutics, many of which must be injected directly into patients eyes, in some cases on a
chronic monthly basis.
For this purpose we have been developing a potential minitab topical formulation of
ZYBRESTAT which has demonstrated attractive pharmacokinetic and safety properties and efficacy in
destroying abnormal vasculature in a rat choroidal melanoma model following administration in the
eye. We believe that a topical formulation would enhance our partnering opportunities to further
develop ZYBRESTAT in diseases of the eye.
To date, we have completed preclinical testing that indicated that ZYBRESTAT has activity in
six different preclinical ophthalmology models, including a model in which ZYBRESTAT was combined
with an approved drug that interferes with blood vessel growth, or anti-angiogenic agents. We have
also completed multiple preclinical studies suggesting that ZYBRESTAT, when applied topically to
the surface of the eye at doses that appear to be well-tolerated, penetrates to the retina and
choroid in quantities that we believe should be sufficient for therapeutic activity.
We are also evaluating the requirements for additional preclinical toxicology and efficacy
studies with ZYBRESTAT for topical ophthalmological formulations to better position the program for
partnering. Further development of this program will depend on the outcome of our evaluation of
these requirements and available financial resources.
Our Development Programs and Product Candidates
The following table outlines the ongoing, recently completed and planned clinical development
programs for our current product candidates:
ZYBRESTAT for Oncology
|
|
|
|
|
|
|
|
|
|
|
Study Design and |
|
|
|
|
|
|
Indication |
|
Number of Subjects (n) |
|
Regimen |
|
Sponsor |
|
Status |
Anaplastic Thyroid
Cancer (ATC)
|
|
FACT Trial Phase
2/3 Randomized,
Controlled Pivotal
Registration Study
(n=180) Enrollment
terminated at 80
patients in February
2010)
|
|
Carboplatin +
paclitaxel ±
ZYBRESTAT
|
|
OXiGENE
|
|
Complete |
|
|
|
|
|
|
|
|
|
1st-line
Non-small Cell
Lung Cancer
(NSCLC)
|
|
FALCON Trial
Phase 2 Randomized,
|
|
Bevacizumab ±
ZYBRESTAT
|
|
OXiGENE
|
|
Complete |
|
|
Controlled Study
(n=60)
|
|
Bevacizumab ±
ZYBRESTAT |
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
Study Design and |
|
|
|
|
|
|
Indication |
|
Number of Subjects (n) |
|
Regimen |
|
Sponsor |
|
Status |
Platinum-resistant
Ovarian Cancer
|
|
Phase 2 Simon Two-
Stage Design Study
(n=44)
|
|
ZYBRESTAT +
carboplatin +
paclitaxel
|
|
Cancer Research
UK
|
|
Complete
results published |
|
|
|
|
|
|
|
|
|
Platinum-relapsed but
platinum sensitive
Ovarian Cancer
|
|
Phase 2 Randomized
Controlled
Study (n=110)
|
|
ZYBRESTAT =
bevacizumab
|
|
GOG and
NCI/CTEP
|
|
Ongoing |
OXi4503 for Oncology
|
|
|
|
|
|
|
|
|
|
|
Study Design and |
|
|
|
|
|
|
Indication |
|
Number of Subjects (n) |
|
Regimen |
|
Sponsor |
|
Status |
Acute Myelogenous
Leukemia and
Myelodysplastic
Syndromes
|
|
Phase 1 dose-
Escalation Study
(n=36)
|
|
OXi4503
|
|
University of Florida
|
|
Ongoing |
|
|
|
|
|
|
|
|
|
Solid Tumors with
Hepatic
|
|
Phase 1b Dose-
Ranging Study (n=18
in Phase 1b portion)
|
|
OXi4503
|
|
OXiGENE
|
|
Enrollment complete |
|
|
|
|
|
|
|
|
|
Refractory Solid
Tumors
|
|
Phase 1 Dose-
Escalation Study
|
|
OXi4503
|
|
Cancer Research UK
|
|
Enrollment complete;
results published |
ZYBRESTAT for Ophthalmology
|
|
|
|
|
|
|
|
|
|
|
Study Design and |
|
|
|
|
|
|
Indication |
|
Number of Subjects (n) |
|
Regimen |
|
Sponsor |
|
Status |
Proof-of-mechanism
Study in Polypoidal
Choroidal
Vasculopathy (PCV)
|
|
Phase 2 Randomized,
Double-Masked,
|
|
ZYBRESTAT
(intravenous-route)
|
|
OXiGENE
|
|
Enrollment complete |
|
|
|
|
|
|
|
|
|
|
|
Placebo-controlled,
Single-dose Study
(n=20) |
|
|
|
|
|
|
Corporate Information
We are a Delaware corporation, incorporated in 1988 in the state of New York and
reincorporated in 1992 in the state of Delaware, with our principal corporate office in the United
States at 701 Gateway Boulevard, Suite 210, South San Francisco, California 94080 (telephone: (650)
635-7000, fax: (650) 635-7001). We also have an office at 300 Bear Hill Road, Waltham,
Massachusetts 02451. Our Internet address is www.oxigene.com. Our annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports,
are available to you free of charge through the Investors section of our web site as soon as
reasonably practicable after such materials have been electronically filed with, or furnished to,
the Securities and Exchange Commission. Information contained on our web site does not form a part
of this prospectus.
VASCULAR DISRUPTING AGENTS: ANTI-VASCULAR THERAPEUTICS THAT ADDRESS A LARGE POTENTIAL MARKET
OPPORTUNITY
According to Cancer Research UK, a cancer organization in the United Kingdom, nearly 90% of
all cancers, more than 200 types, are solid tumors, which are dependent upon a continually
developing vascular supply for their growth and survival. Similarly, in the ophthalmology field,
abnormal neovascularization characterizes a variety of ophthalmological diseases and conditions,
including corneal neovascularization, central retinal vein occlusion, proliferative diabetic
retinopathy, retinopathy of prematurity, sickle cell retinopathy, myopic macular degeneration
(MMD), age-related macular degeneration (AMD), and neovascular glaucoma.
Since 2004, multiple drugs that interfere with blood vessel growth, or anti-angiogenics (see
table below), have been approved for a variety of cancer and ophthalmology indications, and
development of approved anti-angiogenic drugs for new indications continues. Physician adoption of
these first-generation anti-vascular drugs has been rapid and continues to accelerate.
We believe that our VDA drug candidates are second-generation anti-vascular drugs that differ
from and are complementary and non-competitive with anti-angiogenic agents. Similar to
anti-angiogenic agents, our VDA drug candidates are anti-vascular drugs that exert therapeutic
effects by depriving tumors and in the case of eye disease, ocular lesions of blood supply. We also
believe that
44
our VDA therapeutics may be better tolerated than anti-angiogenic drugs and may
potentially have utility in later-stage tumors that have become unresponsive to anti-angiogenic
therapies.
In September 2006, we announced the publication of a research article in the journal Science
that provided strong scientific evidence for combining VDAs with anti-angiogenic agents such as
bevacizumab, a widely-used anti-angiogenic drug that acts by inhibiting VEGF, a pro-angiogenic
growth factor. In this article, Professor Kerbel and Dr. Shaked from Sunnybrook Cancer Centre in
Canada demonstrated that the combination of ZYBRESTAT and an anti-angiogenic agent (an
anti-VEGF-receptor antibody) had synergistic effects on tumors.
In December 2007, we completed a Phase 1b clinical trial to evaluate ZYBRESTAT in combination
with bevacizumab (an approved and widely-used anti-VEGF monoclonal antibody) in patients with
advanced solid tumors. This was the first human clinical trial to pair a vascular disrupting agent
and an anti-angiogenic drug in the treatment of cancer, specifically in patients who had failed
previous treatments and were in advanced stages of disease. The trial was an open-label,
multi-center trial designed to determine the safety and tolerability of ascending doses of
ZYBRESTAT administered intravenously in combination with bevacizumab. Three dose levels of
ZYBRESTAT were evaluated in combination with an approved dose of bevacizumab. In May of 2008, we
reported final data from the trial showing that the two-drug combination appeared to be
well-tolerated with early signs of clinical efficacy (9 of 16 patients with stable disease
responses with prolonged stable disease observed in several patients) and additive effects on tumor
blood-flow inhibition.
We believe that these pre-clinical and clinical research results suggest combining VDA and
anti-angiogenic therapies may be a compelling strategy to maximize the therapeutic potential of
VDAs and anti-angiogenic drugs in the treatment of solid tumors. We believe the potential ability
to synergistically combine VDA drugs with anti-angiogenic therapeutics affords it a wide range of
future development and commercialization options with our VDA drug candidates, including tumor
types and treatment settings where anti-angiogenic drugs are commonly utilized, as well as those
where anti-angiogenic agents are either poorly tolerated, ineffective, no longer effective, or not
commonly utilized.
As illustrated in the table below, VDA and anti-angiogenic drugs act via different mechanisms
to produce complementary biological and anti-vascular effects with mostly non-overlapping side
effects. In pre-clinical studies, VDA plus anti-angiogenic drug combinations demonstrate robust and
additive anti-tumor effects. Results from initial human clinical studies conducted by us with
combinations of ZYBRESTAT and the widely-used anti-angiogenic drug, bevacizumab, provide support
and initial clinical validation for combining these agents to significantly increase clinical
activity without significantly increasing side-effects.
|
|
|
|
|
|
|
1ST-Generation Anti-Vascular Drugs |
|
2ND-Generation Anti-Vascular Drugs |
|
|
Anti-Angiogenic Drugs (bevacizumab, ranibizumab,
sorafenib, sunitinib, pegaptanib, etc.)
|
|
OXiGENE VDA Drug Candidates (ZYBRESTAT,
OXi4503) |
|
|
|
|
|
Biological Effect
|
|
Prevent formation and growth of new blood
vessels throughout the body
|
|
Selectively occlude and collapse
pre-existing tumor vessels |
|
|
|
|
|
Mechanism
|
|
Continuously inhibit pro-angiogenic growth
factor signaling (e.g., VEGF) Promiscuous for
all angiogenesis
|
|
Intermittently and reversibly collapses
abnormal blood vessels that feed tumors |
|
|
|
|
|
|
|
|
|
Selectively blocks the formation of tumor
vessel and other abnormal vessel tissue
junctions by disrupting the cell junctional
protein VE-cadherin |
|
|
|
|
|
|
|
|
|
ZYBRESTAT half-life is approximately 4 hours |
|
|
|
|
|
|
|
|
|
Selective for abnormal vasculature
characteristic of tumors and certain eye
lesions |
|
|
|
|
|
Rapidity of Effect
|
|
Weeks
|
|
Hours |
45
|
|
|
|
|
|
|
1ST-Generation Anti-Vascular Drugs |
|
2ND-Generation Anti-Vascular Drugs |
Side Effects
|
|
Vascular and non-vascular side-effects, some of
which are chronic in nature, e.g., chronic
hypertension, wound-healing impairment,
hemorrhage/ hemoptysis, gastrointestinal
perforation, proteinuria/nephrotic syndrome,
thromboembolic events, etc.
|
|
Transient and manageable, typical of a
vascularly active chronic disease (e.g.,
transient and manageable hypertension) |
|
|
|
|
Mostly non-overlapping with anti-angiogenics |
|
|
|
|
|
Compare favorably with anti-angiogenics |
We believe our VDA drug candidates act on tumor blood vessels via two complementary
mechanisms, tubulin depolymerization and disengagement of the junctional protein VE-cadherin, which
cause shape change of tumor vascular endothelial cells, vessel occlusion and collapse, and the
subsequent blockage of blood-flow to the tumor, which deprives it of oxygen and nutrients essential
for survival.
In vitro studies have demonstrated that our VDA drug candidates act in a reversible fashion on
a protein called tubulin inside newly-formed and growing endothelial cells, such as the vascular
endothelial cells comprising tumor vasculature. By binding to the tubulin, ZYBRESTAT is able to
collapse the structural framework that maintains the cells flat shape. When this occurs, the shape
of the cells changes from flat to round, initiating a cascade of events resulting in physical
blockage of the blood vessels. The resulting shutdown in blood-flow then deprives tumor cells of
the oxygen and nutrients necessary for maintenance and growth and also prevents tumor cells from
being able to excrete toxic metabolic waste products. The consequence of the blockage is extensive
tumor cell death, as demonstrated in animal studies and suggested in imaging studies of human
patients treated with ZYBRESTAT and OXi4503.
Pre-clinical research, published in the November 2005 issue of the Journal of Clinical
Investigation, showed that ZYBRESTAT also disrupts the molecular engagement of VE-cadherin, a
junctional protein important for endothelial cell survival and function. The authors of the
research article conclude that this effect only occurs in endothelial cells which lack contact with
smooth muscle cells, a known feature of abnormal vasculature associated with tumors and other
disease processes. The disengagement of VE-cadherin leads to endothelial cell detachment, which in
turn, can cause permanent physical blockage of vessels.
Pre-clinical and clinical study results indicate that ZYBRESTAT exerts anti-vascular effects
rapidly, within hours of administration, and the half-life of the active form of ZYBRESTAT in
humans is approximately four hours. Because the half-life of the active form of ZYBRESTAT is
relatively short, the effects of ZYBRESTAT on tubulin are reversible, and ZYBRESTAT is typically
administered no more frequently than once per week, the side-effects of ZYBRESTAT are typically
transient in nature, limited to the period of time following administration when the active form of
ZYBRESTAT is in the body in significant concentrations. This contrasts with drugs that interfere
with blood vessel growth, known as anti-angiogenic agents, which are typically administered on a
chronic basis so as to constantly maintain levels of drug in the body, exert their tumor
blood-vessel growth inhibiting effects over days to weeks, and as a result can cause a variety of
chronic side-effects that are not limited to the immediate period following administration.
In contrast with anti-angiogenic agents, which can cause a variety of chronic side-effects,
side-effects associated with ZYBRESTAT are typically transient and manageable. The most frequent
ZYBRESTAT side-effects include infusion-related side effects such as nausea, vomiting, headache and
fatigue, and tumor pain, which is consistent with the drugs mechanism-of-action. Like approved
anti-angiogenic drugs, ZYBRESTAT also exhibits cardiovascular effects, which in the majority of
patients are mild and
transient in nature. Approximately 10-20% of patients treated with ZYBRESTAT experience
clinically-significant and transient hypertension that can be readily managed and prevented after
initial occurrence with straightforward oral anti-hypertensive therapy. In an analysis undertaken
by us, the incidence of serious cardiovascular side-effects such as angina and myocardial ischemia
observed across all studies to date (including early studies in which hypertension management and
prevention was not employed) was less than 3%, a frequency comparable to that reported with
approved anti-angiogenic agents such as bevacizumab, sunitinib and sorafenib.
In September 2010, a research article published in the journal Blood demonstrated that, in a
systemic model of human leukemia growing in mice, OXi4503 had significant anti-leukemic activity
when used as single agent. In this article, Dr. Cogle and colleagues from the University of Florida
in Gainesville provided evidence that the single agent activity of OXi4503 was greater than that
obtained with the anti-angiogenic agent bevacizumab. In addition they attributed this anti-leukemic
activity to several mechanisms including both its effect on blood vessels and a direct effect on
leukemia cells mediated via its oxidation to a reactive quinine moiety and the associated
production of oxygen radicals.
46
Preclinical Discovery Research
Under a sponsored research agreement with Baylor University, we are pursuing discovery and
development of additional novel, small-molecule therapeutics for the treatment of cancer, including
small-molecule cathepsin-L inhibitors and hypoxia-activated VDAs. Cathepsin-L is an enzyme involved
in protein degradation and has been shown to be closely involved in the processes of angiogenesis
and metastasis. Small molecule inhibitors may have the potential to slow tumor growth and
metastasis in a manner we believe could be complementary with our VDA therapeutics. We also believe
that our hypoxia-activated VDAs could serve as line-extension products to ZYBRESTAT and/or OXi4503.
RESEARCH AND DEVELOPMENT AND COLLABORATIVE ARRANGEMENTS
Our strategy is to develop innovative therapeutics for oncology and to leverage our drug
candidates and technology in the field of ophthalmology. Our principal focus, in the foreseeable
future, is to advance the clinical development of our drug candidates ZYBRESTAT and OXi4503 and to
identify new pre-clinical candidates that are complementary to our VDAs. To advance its strategy,
we have established relationships with universities, research organizations and other institutions
in these fields.
We intend to broaden these relationships, rather than expand our in-house research and
development staff. In general, these programs are created, developed and controlled by our internal
management. Currently, we have collaborative agreements and arrangements with a number of
institutions in the United States and abroad, which we utilize to perform the day-to-day activities
associated with drug development. In 2010, collaborations were ongoing with a variety of university
and research institutions, including the following:
|
|
|
Baylor University, Waco, Texas; |
|
|
|
Beth Israel Deaconess Medical Center, Boston, Massachusetts; |
|
|
|
University of Oxford, Oxford, United Kingdom; and |
|
|
|
University College London, London, United Kingdom. |
We have secured a technology license from Arizona State University (ASU). The ASU license is
an exclusive, world-wide, royalty-bearing license for commercial development, use and sale of
products or services covered by certain patent rights to particular combretastatins, including
among others, OXi4503. Under the ASU license, we have the right to grant sublicenses. ASU is
entitled to single-digit royalty and milestone payments under the license agreement. We bear the
costs of preparing, filing, prosecuting and maintaining all patent applications under the ASU
license. Under the license agreement, we have agreed to diligently proceed with the development,
manufacture and sale of products using the licensed technology. ASU has the first responsibility of
enforcing patents under the license agreement. Either party may terminate the license agreement
upon material default or bankruptcy of the other party. Payments made to ASU to date have amounted
to $2,500,000. The agreement is to terminate on December 31, 2014 or within two months of receipt
of written notice of termination from us.
We also have a license from Baylor University. The Baylor license is an exclusive license to
all novel compositions developed for the treatment of vascular disorders, inflammation, parasitic
diseases and infections, fungal diseases and infections and/or cancer. We have the right to grant
sublicenses under the Baylor license. The agreement with Baylor stipulates that low-single-digit
royalties will be paid by us should sales be generated through use of Baylors compounds, or a
minimum annual royalty payment of $20,000. We are not required to pay Baylor for use of Baylors
compounds other than pursuant to this royalty arrangement. We are entitled to file, prosecute and
maintain patent applications on products for which it has a license under this agreement. We have
made a one-time payment of $50,000 for the licensing fee that was used as a credit against research
expenses generated by Baylor. Either
party may terminate the license agreement upon material default of the other party. The term
of the license shall end upon the expiration of the licensed patents.
We also have an exclusive, world-wide, royalty-bearing license from Bristol-Myers Squibb (BMS)
for commercial development, use and sale of products or services covered by certain patent rights
to particular combretastatins, including among others, ZYBRESTAT. Under the BMS license, we have
the right to grant sublicenses. BMS is entitled to low-single-digit royalty payments under the
license agreement. All licensing fees and milestone payments under the license agreement, in the
aggregate amount of $1,080,000, have been paid. We bear the costs of preparing, filing, prosecuting
and maintaining all patent applications under the BMS license and have a right, but not a duty, of
enforcing patents covered by the license. Either party may terminate the license upon material
default of the other party. The term of the license shall end upon the expiration of the licensed
patents. The latest United States patent licensed under this agreement is scheduled to expire in
December 2021.
47
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.
U.S. 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 FDAs refusal to approve pending applications, withdrawal of an
approval, a clinical hold, warning letters, product recalls, product seizures, total or partial
suspension of production or distribution injunctions, fines, refusal 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 pre-clinical 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 drugs identity, strength, quality and purity; |
|
|
|
satisfactory completion of FDA inspections of clinical sites and GLP toxicology
studies; 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 pre-clinical
testing stage. Pre-clinical tests include laboratory evaluations of product chemistry, toxicity and
formulation, as well as animal studies. An IND sponsor must submit the results of the pre-clinical
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
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. Pre-clinical testing continues 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.
48
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 1: 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. |
|
|
|
|
Phase 2: 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 3: 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. |
During the development of a new drug, sponsors may, under certain circumstances request a
special protocol assessment, or SPA, from the FDA. For example, a sponsor may request an SPA of a
protocol for a clinical trial that will form the primary basis of an efficacy claim in an NDA. The
request, which must be made prior to commencing the trial, must include the proposed protocol and
protocol-specific questions that the sponsor would like the FDA to answer regarding the protocol
design, study goals and data analysis for the proposed investigation. After receiving the request,
the FDA will consider whether the submission is appropriate for an SPA. If an SPA is appropriate,
the FDA will base its assessment on the questions posed by the sponsor. Comments from the FDA
review team are supposed to be sent to the sponsor within 45 calendar days of receipt of the
request. The sponsor may request a meeting to discuss the comments and any remaining issues and
uncertainties regarding the protocol. If the sponsor and the FDA reach agreement regarding the
protocol, the agreement will be documented and made part of the administrative record. This
agreement may not be changed by the sponsor or the FDA after the trial begins, except (1) with the
written agreement of the sponsor and the FDA or (2) if the FDA determines that a substantial
scientific issue essential to determining the safety or effectiveness of the drug was identified
after the testing began.
Progress reports detailing the results of the clinical trials must be submitted at least
annually to the FDA. IND Safety Reports must be submitted to the FDA, IRBs and the investigators
for (a) any suspected adverse reaction that is both serious and unexpected; (b) any findings from
epidemiological studies, pooled analysis of multiple studies, or clinical studies (other than those
already reported in (a); (c) any findings from animal or in vitro testing, whether or not conducted
by the sponsor, that suggest a significant risk in humans exposed to the drug, such as reports of
mutagenicity, teratogenicity, or carcinogenicity or reports of significant organ toxicity at or
near the expected human exposure; and (d) any clinically important increase in the rate of a
serious suspected adverse reaction over that listed in the protocol or investigator brochure. Phase
1, Phase 2, and Phase 3 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 IRBs 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, pre-clinical 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, 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
49
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 an 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 are 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 a complete response letter, which may require additional clinical or other
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
products identity, strength, quality and purity. Before approving an NDA, the FDA will inspect the
facility or facilities where the product is manufactured. The FDA will also inspect selected
clinical sites that participated in the clinical studies and may inspect the testing facilities
that performed the GLP toxicology studies cited in the NDA.
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
4 testing, which involves clinical trials designed to further assess a drugs safety and
effectiveness after NDA approval, and may require testing and surveillance programs to monitor the
safety of approved products which have been commercialized.
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 competitors product for the same indication or disease.
In the European Union and Japan, orphan drug exclusivity regulations provide for 10 years of
marketing exclusivity for orphan drugs that are approved for the treatment of rare diseases or
conditions.
ZYBRESTAT was awarded orphan drug status by the FDA for the treatment of anaplastic,
medullary, Stage IV papillary and Stage IV follicular thyroid cancers and by the European
Commission in the European Union for the treatment of anaplastic thyroid cancer.
50
Expedited Review and Approval
The FDA has various programs, including Fast Track, priority review, and accelerated approval,
which are intended to expedite or simplify the process for reviewing drugs, and/or provide for
approval on the basis of surrogate endpoints. Even if a drug qualifies for one or more of these
programs, we cannot be sure that the FDA will not later decide that the drug no longer meets the
conditions for qualification or that the time period for FDA review or approval will be shortened.
Generally, drugs that may be eligible for these programs are those for serious or life-threatening
conditions, those with the potential to address unmet medical needs, and those that offer
meaningful benefits over existing treatments. Fast Track designation applies to the combination of
the product and the specific indication for which it is being studied. Although Fast Track and
priority review do not affect the standards for approval, the FDA will attempt to facilitate early
and frequent meetings with a sponsor of a Fast Track designated drug and expedite review of the
application for a drug designated for priority review. Drugs that receive an accelerated approval
may be approved on the basis of adequate and well-controlled clinical trials establishing that the
drug product has an effect of 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 post-marketing clinical trials.
The FDA has granted Fast Track designation to ZYBRESTAT for the treatment of regionally
advanced and/or metastatic ATC.
Foreign Regulation
Before our products can be marketed outside of the United States, they are subject to
regulatory approval similar to that required in the United States, although the requirements
governing the conduct of clinical trials, including additional clinical trials that may be
required, product licensing, pricing and reimbursement vary widely from country to country. No
action can be taken to market any product in a country until an appropriate application has been
approved by the regulatory authorities in that country. The current approval process varies from
country to country, and the time spent in gaining approval varies from that required for FDA
approval. In certain countries, the sales price of a product must also be approved. The pricing
review period often begins after market approval is granted. Even if a product is approved by a
regulatory authority, satisfactory prices may not be approved for such product.
In Europe, marketing authorizations may be submitted at a centralized, a decentralized or
national level. The centralized procedure is mandatory for the approval of biotechnology products
and provides for the grant of a single marketing authorization that is valid in all European Union
members states. As of January 1995, a mutual recognition procedure is available at the request of
the applicant for all medicinal products that are not subject to the centralized procedure. There
can be no assurance that the chosen regulatory strategy will secure regulatory approvals on a
timely basis or at all.
PATENTS AND PROPRIETARY RIGHTS
We actively seeks to protect the proprietary technology that we consider important to our
business, including chemical species, compositions and forms, their methods of use and processes
for their manufacture, as well as modified forms of naturally-expressed receptors, in the United
States and other jurisdictions internationally that it considers key pharmaceutical markets. We
also rely upon trade secrets and contracts to protect our proprietary information.
As of December 1, 2011, we were the exclusive licensee, sole assignee or co-assignee of
twenty-eight (28) granted United States patents, fifteen (15) pending United States patent
applications, three (3) pending Patent Cooperation Treaty international patent applications and
granted patents and/or pending applications in several other major markets, including the European
Union, Canada and Japan. Our policy is to file United States and foreign patent applications to
protect technology, inventions and improvements to inventions that are commercially important to
the development of our business. There can be no assurance that any of these patent applications
will result in the grant of a patent either in the United States or elsewhere, or that any patents
granted will be valid and enforceable, or will provide a competitive advantage or will afford
protection against competitors with similar technologies. We also intend to rely upon trade secret
rights to protect other technologies that may be used to discover and validate targets and that may
be used to identify and develop novel drugs. We seek protection, in part, through confidentiality
and proprietary information agreements.
We consider the following United States patents owned by or exclusively licensed to us to be
particularly important to the protection of our most advanced product candidates.
|
|
|
|
|
Product Candidate |
|
Patent Scope |
|
Patent Expiration |
ZYBRESTAT*
|
|
Methods of modulating tumor growth or
metastasis by administration of
combretastatin A-4 phosphate and
paclitaxel
|
|
December 2021 |
|
|
|
|
|
|
|
Lyophilized or crystalline
combretastatin A-4 phosphate
tromethamine
|
|
September 2021 |
|
|
|
|
|
OXi4503**
|
|
Composition of matter for
|
|
April 2012 |
51
|
|
|
|
|
Product Candidate |
|
Patent Scope |
|
Patent Expiration |
|
|
combretastatin A-1 (active) |
|
|
|
|
|
|
|
|
|
Composition of matter for OXi4503
(combretastatin-A1-disodium-phosphate
(OXi4503) pro-drug)
|
|
October 2021 |
|
|
|
* |
|
In-licensed from Bristol-Myers Squibb |
|
** |
|
In-licensed from Arizona State University |
In addition to these patents, for some of our product candidates, we have patents and/or
applications that cover a particular form or composition, used as part of combination therapy or
method of preparation or use, as well as other pending patent applications. These issued patents,
including any patents that issue from pending applications, could provide additional or a longer
period of protection. We also have patent applications pending that seek equivalent or
substantially comparable protection for our product candidates in jurisdictions internationally
that we consider key pharmaceutical markets.
The patent expiration dates referenced above do not reflect any potential patent term
extension that we may receive under the federal Drug Price Competition and Patent Term Restoration
Act of 1984, known as the Hatch-Waxman Act. The Hatch-Waxman Act generally permits a patent
extension term of up to five years as compensation for patent term lost during the FDA regulatory
review process. Patent extension cannot extend the remaining term of a patent beyond a total of 14
years. The patent term restoration period is generally one-half of the time between the effective
date of an investigational new drug application, or IND, and the submission date of a new drug
application, or NDA, plus the time between the submission date and approval date of an NDA. 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 applications for patent term extension.
COMPETITION
The industry in which we are engaged is characterized by rapidly evolving technology and
intense competition. Our competitors include, among others, major pharmaceutical, biopharmaceutical
and biotechnology companies, many of which have financial, technical and marketing resources
significantly greater than ours. In addition, many of the small companies that compete with us have
also formed collaborative relationships with large, established companies to support research,
development, clinical trials and commercialization of products that may be competitive with ours.
Academic institutions, governmental agencies and other public and private research organizations
are also conducting research activities and seeking patent protection and may commercialize
products on their own or through joint ventures or other collaborations.
We are aware of a limited number of companies involved in the development of VDAs. Such
companies include Sanofi-Aventis, Myrexis, Nereus and MediciNova, all of which have VDAs that
management believes are at an earlier or similar stage of clinical development than our lead drug
candidate, ZYBRESTAT.
We expect that, if any of our products gain regulatory approval for sale, they will compete
primarily on the basis of product efficacy, safety, patient convenience, reliability, price and
patent protection. Our competitive position will also depend on our ability to attract and retain
qualified scientific and other personnel, develop effective proprietary products and implement
joint ventures or other alliances with large pharmaceutical companies in order to jointly market
and manufacture its products.
EMPLOYEES
We expect to continue to maintain a relatively small number of executives and other employees.
We rely on outsourcing much of our research, development, pre-clinical testing and clinical trial
activity, although we maintain managerial and quality control over its clinical trials. As of
December 1, 2011, we had a total of six full-time employees.
PROPERTIES
Our corporate headquarters is located in South San Francisco, California. In November 2008, we
executed a lease for 7,038 square feet (Suite 210) of office space located in South San Francisco,
California. We agreed to lease an additional 5,275 square feet (Suite 270) of office space in the
same building beginning in the first quarter of 2009. The lease agreement is for an estimated 52
months. In April 2009, we executed a lease for 3,891 square feet of office space located in
Waltham, Massachusetts. In October 2011, we reduced the number of square feet leased in the
Waltham location to approximately 2,500 square feet. The lease term expires on May 31, 2012.
52
LEGAL PROCEEDINGS
We are not a party to any material litigation in any court, and management is not aware of any
contemplated proceeding by any governmental authority against us.
MANAGEMENT
Directors and Executive Officers
The following information with respect to our current directors and executive officers has
been furnished to us by the directors and executive officers. The ages of the directors and
executive officers are as of December 1, 2011. We currently employ Dr. Langecker as our Chief
Executive Officer.
Directors
TAMAR D. HOWSON
|
|
|
Age:
|
|
62 |
|
|
|
Director Since:
|
|
2010 |
|
|
|
Principal Occupation:
|
|
Ms. Howson is currently a Partner with JSB-Partners, a transaction
advisory firm serving the life sciences industry. |
|
|
|
Business Experience:
|
|
Ms. Howson formerly served as Executive Vice President of Corporate
Development for Lexicon Pharmaceuticals. Prior to Lexicon, she
served as Senior Vice President of Corporate and Business
Development and was a member of the executive committee at
Bristol-Myers Squibb. During her tenure there, Ms. Howson was
responsible for leading the companys efforts in external
alliances, licensing and acquisitions. Earlier, Ms. Howson served
as Senior Vice President and Director of Business Development at
SmithKline Beecham. She also managed SR One Ltd., the $100 million
venture capital fund of SmithKline Beecham. Ms. Howson has served
as an independent business consultant and adviser to companies both
in the United States and in Europe. She held the position of Vice
President, Venture Investments at Johnston Associates, a venture
capital firm, and earlier as Director of Worldwide Business
Development and Licensing for Squibb Corporation. Ms. Howson
received her M.B.A. in finance and international business from
Columbia University. Educated as a chemical engineer, she holds a
M.S. from the City College of New York and a B.S. from the Technion
in Israel. |
|
|
|
Other Directorships:
|
|
Ms. Howson currently serves on the boards of Idenix
Pharmaceuticals, Inc. (Nasdaq:IDIX), a biopharmaceutical company
engaged in the discovery and development of drugs for the treatment
of human viral diseases, Soligenix, Inc., a biopharmaceutical
company developing products to treat life-threatening side effects
of cancer treatments and serious gastrointestinal diseases, Aradigm
Corporation, a specialty pharmaceutical company developing and
commercializing drugs delivered by inhalation for the treatment of
severe respiratory disease, and S*Bio Pte Ltd, a company engaged in
the discovery and development of drugs for the treatment of cancer.
She also serves as a consultant to Pitango Venture Fund and is a
member of the advisory board to Triana Venture Partners. She
previously served on the boards of Ariad Pharmaceuticals,
SkyePharma, NPS Pharma, Targacept, and HBA. |
|
|
|
Director
Qualifications:
|
|
The Board highly values Ms. Howsons significant business
development and life sciences industry expertise, developed through
her career as a senior professional at several leading
pharmaceutical companies. The Board believes that these
characteristics uniquely qualify Ms. Howson to serve as a director
of the Company and led to the Boards conclusion that she should be
a member of the Board of Directors. |
53
|
|
|
PETER J. LANGECKER, M.D., PH.D. |
|
|
|
Age:
|
|
60 |
|
|
|
Director Since:
|
|
2010 |
|
|
|
Principal Occupation:
|
|
Dr. Langecker joined OXiGENE as Executive Vice
President and Chief Development Officer in June
2009 and was appointed Chief Executive Officer in
October 2009. He became Chairman of our Board of
Directors in October 2011. |
|
|
|
Business Experience:
|
|
Dr. Langecker served as Chief Medical Officer of
DURECT Corporation from May 2006 until June 2009.
Prior to joining DURECT, Dr. Langecker served as
Chief Medical Officer and Vice President of
Clinical Affairs at Intarcia Therapeutics, Inc.
from October 1999 to April 2006. Prior to that,
Dr. Langecker was Vice President of Clinical
Affairs at Sugen, Inc. from 1997 to 1999, Vice
President, Clinical Research at Coulter
Pharmaceuticals from 1995 to 1997 and Director of
Clinical Research, Oncology, at Schering-Plough
from 1992 to 1995. Previously, Dr. Langecker
worked as a Project Physician-Central Medical
Advisor, Oncology at Ciba-Geigy (now Novartis) in
Basel, Switzerland. He received his M.D. degree
and his doctorate in medical sciences from the
Ludwig-Maximilians University in Munich. |
|
|
|
Director Qualifications:
|
|
The Board believes that Dr. Langeckers medical
and scientific training, developed through his
extensive career as a life sciences industry
executive, uniquely qualify Dr. Langecker to
serve as a director of the Company and led to the
Boards conclusion that Dr. Langecker should be a
member of the Board of Directors. |
|
|
|
GERALD MCMAHON, PH.D. |
|
|
|
Age:
|
|
57 |
|
|
|
Director Since:
|
|
2011 |
|
|
|
Principal Occupation:
|
|
Dr. McMahon is Senior Vice
President and Oncology Innovative
Medicines Unit Leader of Medimmune
LLC, a wholly owned subsidiary of
Astra Zeneca PLC, a position which
he has held since 2010. |
|
|
|
Business Experience:
|
|
Dr. McMahon served as the Chief
Executive Officer of Poniard
Pharmaceuticals, Inc. from May 2004
to February 2010 and as the
Chairman of the Board of Directors
of Poniard from May 2004 to May
2011. He was a Venture Partner at
Bay City Capital, LLC from February
2010 to October 2010. Dr. McMahon
has spent more than 20 years as a
business executive in the
healthcare and biotech industries
where he held various roles at
Pfizer, Pharmacia, and Sandoz. In
addition, Dr. McMahon was employed
for 10 years at SUGEN where he was
instrumental to build the business
leading to the successful
discovery, development, and
regulatory approvals of novel
oncology drugs. Since his role as
President of SUGEN in 2003, he
served as a Venture Partner with
Bay City Capital and also has
served as CEO and in various board
of director roles for public and
private healthcare companies. Dr.
McMahon holds a B.S. in biology and
earned a Ph.D. in 1980 in
biochemistry from Rensselaer
Polytechnic Institute and held
post-graduate appointments at Tufts
Medical School in Boston and the
Massachusetts Institute of
Technology in Cambridge,
Massachusetts. |
|
|
|
Director Qualifications:
|
|
The Board believes that Dr.
McMahons scientific training,
developed through his extensive
career as a life sciences industry
executive at several leading
pharmaceutical companies, coupled
with his specific experience,
qualifications, and skills in the
life sciences industry, uniquely
qualify Dr. McMahon to serve as a
director of the Company and led to
the Boards conclusion that Dr.
McMahon should be a member of the Board of Directors. |
|
|
|
WILLIAM D. SCHWIETERMAN, M.D. |
|
|
|
Age:
|
|
53 |
|
|
|
Director Since:
|
|
2007 |
|
|
|
Principal Occupation:
|
|
Dr. Schwieterman has been the Chief
Medical Officer of Chelsea
Therapeutics, a biopharmaceutical
development company, since November
2009. He has been an independent
consultant to biotech and
pharmaceutical companies
specializing in clinical
development since July 2002. |
|
|
|
Business Experience:
|
|
Dr. Schwieterman is a
board-certified internist and a
rheumatologist who was formerly
Chief of the Medicine Branch and
Chief of the Immunology and
Infectious Disease Branch in the
Division of Clinical Trials at the
FDA. In these capacities and
others, Dr. Schwieterman spent 10
years at the FDA |
54
|
|
|
|
|
in the Center for
Biologics overseeing a wide range
of clinical development plans for a
large number of different types of
molecules. Dr. Schwieterman holds a
B.S. and M.D. from the University
of Cincinnati. |
|
|
|
Director Qualifications:
|
|
The Board believes that Dr.
Schwietermans medical training and
his expertise with regulatory
matters involving the Food and Drug
Administration and the clinical
trials process are invaluable
skills that Dr. Schwieterman brings
to his Board service and led to the
Boards conclusion that Dr.
Schwieterman should be a member of
the Board of Directors. |
|
|
|
ALASTAIR J.J. WOOD, M.D. |
|
|
|
Age:
|
|
64 |
|
|
|
Director Since:
|
|
2008 |
|
|
|
Principal Occupation:
|
|
Dr. Wood, a partner
of Symphony Capital
LLC, has worked
with Symphony since
its inception,
initially as
Chairman of
Symphonys Clinical
Advisory Council,
and joined the firm
full-time in
September 2006 as a
Managing Director. |
|
|
|
Business Experience:
|
|
Prior to joining
Symphony Capital
LLC full-time, Dr.
Wood completed more
than 30 years at
Vanderbilt
University School
of Medicine, most
recently as
Associate Dean of
External Affairs,
where he was also
Attending Physician
and Tenured
Professor of
Medicine and
Pharmacology. Dr.
Wood is currently
Professor of
Medicine (courtesy
appointment) and
Professor of
Pharmacology
(courtesy
appointment) at
Weill Cornell
Medical School,
appointments served
in an unpaid
capacity. Dr. Wood
has written or
co-authored more
than 300 scientific
papers and won
numerous honors
including election
to the National
Academy of
Sciences Institute
of Medicine. He was
until 2006 the
chairman of the
FDAs
Nonprescription
Drugs Advisory
Committee. He
previously served
as a member of the
Cardiovascular and
Renal Advisory
Committee of the
FDA, and the FDAs
Nonprescription
Drugs Advisory
Committee. Dr. Wood
has been a member
of and chaired
National Institutes
of Health study
sections, served on
the editorial
boards of four
major journals, and
between 1992 and
2004 was the Drug
Therapy Editor of
The New England
Journal of
Medicine. Most
recently, he was
named to the Board
of the Critical
Path Institute. He
earned his medical
degree at the
University of St.
Andrews. |
|
|
|
Other Directorships:
|
|
Dr. Wood is a
director of
Symphony Evolution,
Inc., a Symphony
portfolio company.
He was previously a
director of
Antigenics, Inc., a
publicly traded
drug development
company. |
|
|
|
Director Qualifications:
|
|
The Board believes
that Dr. Woods
medical training
and expertise in
drug development,
combined with his
prior service as a
member of several
advisory committees
to the Food and
Drug
Administration,
uniquely qualify
Dr. Wood to serve
as a director of
the Company and led
to the Boards
conclusion that Dr.
Wood should be a
member of the Board
of Directors. |
Executive Officers
See above for biographical information pertaining to Peter J. Langecker, our Chief Executive
Officer.
James B. Murphy, 54, was appointed as our Vice President and Chief Financial Officer in March
2004. From 2001 until May 2003, Mr. Murphy was Vice President of Finance for Whatman Inc., of
Marlborough, Massachusetts, a subsidiary of U.K.-based Whatman plc (LSE: WHM), a publicly traded
manufacturer of filtration and separation products for the pharmaceutical industry. From 1994
through 2001, Mr. Murphy worked at HemaSure (NASDAQ: HMSR), a spin-off of Sepracor, Inc., serving
as the companys Senior Vice President of Finance and Administration, and later as Senior Vice
President and Chief Financial Officer. From 1990 to 1994, he was Corporate Controller at Sepracor
(NASDAQ: SEPR), a diversified pharmaceutical, medical device and biotechnology products company
based in Marlborough, Massachusetts. Mr. Murphy holds a B.A. in economics and accounting from the
College of the Holy Cross and is registered as a Certified Public Accountant.
Board Composition
Our Board of Directors currently consists of five members. Each member of the Compensation
Committee of our Board of Directors qualifies as a Non-Employee Director within the meaning of
Rule 16b-3 under the Securities Exchange Act of 1934, as amended. Under our by-laws, the number of
members of our Board of Directors is fixed from time to time by the Board of Directors, and
directors serve in office until the next annual meeting of stockholders and until their successors
have been elected and qualified.
55
Board and Committee Meetings
During 2010, the Board of Directors held nineteen meetings. The Board of Directors has
established three committees whose functions and current members are noted below. The Audit
Committee, the Compensation Committee and the Nominating and Governance Committee (collectively,
the Board Committees) are committees of the Board of Directors and consist solely of members of
the Board of Directors. The Board Committees met a total of seven times in 2010. Each director
during 2010 attended 75% or more of the aggregate number of meetings of the Board of Directors and
Board Committees on which he or she served during 2010. The Board has also adopted a policy under
which each member of the Board is required to make every effort to attend each annual meeting of
our stockholders. Mr. Bill Shiebler, whose term as a Director expired on October 31, 2011, and Dr.
Langecker attended our annual meeting of stockholders in 2010.
Audit Committee. From January 1 through March 11, 2010, the Audit Committee consisted of
Messrs. Arthur B. Laffer (Chairman), Roy H. Fickling and William N. Shiebler. During 2010, the
Audit Committee held five meetings. Dr. Laffer resigned from the Board of Directors on March 11,
2010. Ms. Howson was appointed to the Audit Committee on April 2, 2010. Mr. Fickling resigned from
the Board of Directors on March 31, 2011. Dr. McMahon was appointed to the Audit Committee on
September 2, 2011. Currently, the Audit Committee consists of William D. Schwieterman, Tamar D.
Howson and Gerald McMahon (Chairman). Our Audit Committee has the authority to retain and terminate
the services of our independent registered public accounting firm, reviews annual financial
statements, considers matters relating to accounting policy and internal controls and reviews the
scope of annual audits. The Board of Directors has adopted a charter for the Audit Committee,
which is reviewed and reassessed annually by the Audit Committee. A copy of the Audit Committees
written charter is publicly available on our website at www.oxigene.com.
Securities and Exchange Commission rules require that we disclose our compliance with NASDAQ
listing standards regarding the independence of our Audit Committee members and inclusion in the
Audit Committee of any non-independent director. Currently, all of our Audit Committee members are
independent as defined under NASDAQ listing standards.
Compensation Committee. From January 1 through March 11, 2010, the Compensation Committee
consisted of Messrs. Arthur B. Laffer (Chairman), Roy H. Fickling, William N. Shiebler and William
D. Schwieterman. Dr. Laffer resigned from the Board of Directors on March 11, 2010. On April 27,
2010, Mr. Fickling was appointed Chairman of the Compensation Committee. Mr. Fickling resigned from
our Board of Directors on March 31, 2011. Dr. McMahon was appointed to the Compensation Committee
on September 2, 2011. Currently, the Compensation Committee consists of William D. Schwieterman,
Tamar D. Howson (Chair) and Gerald McMahon.
During 2010, the Compensation Committee held one meeting. The Compensation Committee makes
recommendations to the Board of Directors regarding the compensation philosophy and compensation
guidelines for our executives, the role and performance of our executive officers, appropriate
compensation levels for our Chief Executive Officer, which are determined without the Chief
Executive Officer present, and other executives based on a comparative review of compensation
practices of similarly situated businesses. The Compensation Committee also makes recommendations
to the Board regarding the design and implementation of our compensation plans and the
establishment of criteria and the approval of performance results relative to our incentive plans.
The Compensation Committee has adopted the following processes and procedures for the consideration
and determination of executive and director compensation. Each year, the Compensation Committee
reviews and assesses the three main components of each named executive officers compensation: base
salary, incentive compensation and equity compensation. Adjustments to base salary are generally
only made when there has been a change in the scope of the responsibilities of the named executive
officer or when, based on a review of the base salary component of executive officers in companies
of a similar size and stage of development, the Committee members believe that an adjustment is
warranted in order to remain competitive. Each year, the executive management of the Company
determines and agrees with the Compensation Committee on its corporate goals and objectives for the
ensuing year. At the end of each year, the attainment of each objective is assessed and incentive
awards are made to each executive based on his contribution to achieving the objectives and at a
percentage of base salary outlined in the executives employment agreement. In addition, equity
compensation is reviewed annually. Awards are made based on either provisions of an executives
employment agreement, or an assessment of each executives equity compensation position relative to
the Companys other executives. All members of the Compensation Committee qualify as independent
under the definition promulgated by NASDAQ. A copy of the Compensation Committees written charter
is publicly available on our website at www.oxigene.com.
Compensation Committee Interlocks and Insider Participation. Our Compensation Committee
currently consists of Tamar D. Howson (Chair), William D. Schwieterman and Dr. Gerald McMahon.
None of the members of our Compensation Committee is or has been employed by us. From January 1
through March 11, 2010, the Compensation Committee consisted of Messrs. Arthur B. Laffer, Roy H.
Fickling, William N. Shiebler and William D. Schwieterman. Dr. Laffer resigned from the Board of
Directors on March 11, 2010. On April 27, 2010, Mr. Fickling was appointed Chairman of the
Compensation Committee. Mr. Fickling resigned from our Board of Directors on March 31, 2011. During
2010, no member of our Compensation Committee served as an officer or was employed by us.
56
Nominating and Governance Committee. From January 1 through March 11, 2010, the Nominating
and Governance Committee consisted of Messrs. William N. Shiebler (Chairman), Roy H. Fickling and
Arthur B. Laffer. Dr. Laffer resigned from the Board of Directors on March 11, 2010. On April 27,
2010, Dr. Schweiterman (Chairman) and Ms. Howson were appointed to the Nominating and Governance
Committee and Mr. Shiebler was re-nominated to this committee. During 2010, the Nominating and
Governance Committee met once. Currently, the Nominating and Governance Committee consists of Dr.
Schwieterman (Chairman), Ms. Howson and Dr. McMahon. This committees role is to make
recommendations to the full Board as to the size and composition of the Board and to make
recommendations as to particular nominees. All members of the Nominating and Governance Committee
qualify as independent under the definition promulgated by NASDAQ. The Nominating and Governance
Committee may consider candidates recommended by stockholders, as well as from other sources, such
as current directors or officers, third-party search firms or other appropriate sources. For all
potential candidates, the Nominating and Governance Committee may consider all factors it deems
relevant, such as a candidates personal integrity and sound judgment, business and professional
skills and experience, independence, knowledge of the biotechnology industry, possible conflicts of
interest, diversity, the extent to which the candidate would fill a present need on the Board, and
concern for the long-term interests of the stockholders. In general, persons recommended by
stockholders will be considered on the same basis as candidates from other sources. If a
stockholder wishes to nominate a candidate to be considered for election as a director at the 2012
annual meeting of stockholders using the procedures set forth in the Companys by-laws, it must
follow the procedures described under Stockholder Proposals and Nominations for Director set
forth in our proxy statement for our 2011 Annual Meeting of Stockholders filed with the SEC on
September 22, 2011. If a stockholder wishes simply to propose a candidate for consideration as a
nominee by the Nominating and Governance Committee, it should submit any pertinent information
regarding the candidate to the Chairman of the Nominating and Governance Committee by mail at 701
Gateway Boulevard, Suite 210, South San Francisco, California 94080. The Nominating and Governance
Committee considers issues of diversity among its members in identifying and considering nominees
for director, and strives where appropriate to achieve a diverse balance of backgrounds,
perspectives, experience, age, gender, ethnicity and country of citizenship of the Board and its
committees. A copy of the Nominating and Governance Committees written charter is publicly
available on our website at www.oxigene.com.
Board of Directors Leadership Structure
The Board does not have a policy regarding the separation of the roles of Chief Executive
Officer and Chairman of the Board, as the Board believes it is in the best interests of the Company
to make that determination based on the position and direction of the Company and the membership of
the Board. The Board has determined that having the Chief Executive Officer serve as Chairman is
in the best interest of the Companys stockholders at this time. The Board believes this
leadership structure is appropriate in light of the small size of the Companys Board and the
expertise that Dr. Langecker brings to his role as both Chairman and Chief Executive Officer.
Dr. Langecker has served as Chairman of the Board of Directors since the 2011 Annual Meeting.
The Chairman of the Board of Directors provides leadership to the Board and works with the Board to
define its activities and the calendar for fulfillment of its responsibilities. The Chairman of
the Board of Directors approves the meeting agendas after input from management, facilitates
communication among members of the Board and presides at meetings of our Board and stockholders.
The Chairman of the Board of Directors, the Chairman of the Audit Committee, and the other
members of the Board work in concert to provide oversight of our management and affairs. We
believe that the leadership of the Chairman fosters a culture of open discussion and deliberation,
with a thoughtful evaluation of risk, to support our decision-making. Our Board encourages
communication among its members and between management and the Board to facilitate productive
working relationships. Working with the other members of the Board, the Chairman also works to
ensure that there is an appropriate balance and focus among key board responsibilities such as
strategic development, review of operations and risk oversight.
The Board of Directors Role in Risk Oversight
The Board plays an important role in risk oversight through direct decision-making authority
with respect to significant matters and the oversight of management by the Board and its
committees. In particular, the Board administers its risk oversight function through (1) the review
and discussion of regular periodic reports to the Board and its committees on topics relating to
the risks that we face, (2) the required approval by the Board (or a committee of the Board) of
significant transactions and other decisions, (3) the direct oversight of specific areas of our
business by the Audit and Compensation committees, and (4) regular periodic reports from our
auditors and outside advisors regarding various areas of potential risk, including, among others,
those relating to our internal control over financial reporting. The Board also relies on
management to bring significant matters impacting us to the Boards attention.
Pursuant to the Audit Committees charter, the Audit Committee is responsible for discussing
the guidelines and policies that govern the process by which our exposure to risk is assessed and
managed by management. As part of this process, the Audit Committee discusses our major financial
risk exposures and steps that management has taken to monitor and control such exposure. In
addition, we, under the supervision of the Audit Committee, have established procedures available
to all employees for the anonymous
57
and confidential submission of complaints relating to any matter to encourage employees to
report questionable activities directly to our senior management and the Audit Committee.
Because of the role of the Board in risk oversight, the Board believes that any leadership
structure that it adopts must allow it to effectively oversee the management of the risks relating
to our operations. The Board recognizes that there are different leadership structures that could
allow it to effectively oversee the management of the risks relating to our operations. The Board
believes its current leadership structure enables it to effectively provide oversight with respect
to such risks.
Director Independence
Our Board has determined that the following members of the Board qualify as independent
directors under the current independence standards promulgated by the Securities and Exchange
Commission and The NASDAQ Stock Market: Tamar D. Howson, Gerald McMahon and William D.
Schwieterman.
Stockholder Communications to the Board
Generally, stockholders who have questions or concerns should contact our Investor Relations
department at (650) 635-7000. However, any stockholders who wish to address questions regarding our
business directly with the Board of Directors, or any individual director, should submit his or her
questions to the appropriate director using the contact information and instructions for this
purpose set forth on the Companys website at www.oxigene.com. Communications will be distributed
to the Board, or to any individual director or directors as appropriate, depending on the facts and
circumstances outlined in the communications. Items that are unrelated to the duties and
responsibilities of the Board may be excluded, such as:
|
|
|
junk mail and mass mailings |
|
|
|
|
resumes and other forms of job inquiries |
|
|
|
|
surveys |
|
|
|
|
solicitations or advertisements. |
In addition, any material that is unduly hostile, threatening, or illegal in nature may be
excluded, provided that any communication that is filtered out will be made available to any
outside director upon request.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act) requires
our directors and executive officers, and persons who own more than 10% of our common stock to file
with the Securities and Exchange Commission and us initial reports of beneficial ownership and
reports of changes in beneficial ownership of common stock and other of our equity securities. For
these purposes, the term other equity securities would include options granted under our 2005
Stock Plan, as amended. To our knowledge, based solely on a review of the forms and written
representations received by us from our Section 16 reporting persons, during the fiscal year ended
December 31, 2010, all Section 16(a) filing requirements applicable to the reporting persons were
properly and timely satisfied.
58
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table shows the total compensation paid or accrued during the fiscal years ended
December 31, 2010 and December 31, 2009 to (1) our Chief Executive Officer, (2) our Chief Financial
Officer and, (3) our next most highly compensated executive officer who earned more than $100,000
during the fiscal year ended December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards |
|
|
Option Awards |
|
|
Compensation |
|
Name |
|
Year |
|
|
Salary ($) |
|
|
Bonus ($) |
|
|
($)(1) |
|
|
($)(1) |
|
|
($) |
|
|
|
|
David Chaplin(2) |
|
|
2010 |
|
|
$ |
278,124 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
74,966 |
|
|
$ |
|
|
Former Vice President and |
|
|
2009 |
|
|
$ |
282,220 |
|
|
$ |
|
|
|
$ |
74,298 |
|
|
$ |
27,530 |
|
|
$ |
|
|
Chief Scientific Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter Langecker(3) |
|
|
2010 |
|
|
$ |
350,000 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
132,825 |
|
|
$ |
929 |
|
Chief Executive Officer |
|
|
2009 |
|
|
$ |
236,923 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
41,926 |
|
|
$ |
464 |
|
James Murphy(4) |
|
|
2010 |
|
|
$ |
245,000 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
101,759 |
|
|
$ |
690 |
|
Vice President and Chief Financial Officer |
|
|
2009 |
|
|
$ |
245,000 |
|
|
$ |
|
|
|
$ |
37,151 |
|
|
$ |
63,244 |
|
|
$ |
663 |
|
|
|
|
(1) |
|
See Note 5 to our Condensed Consolidated Financial Statements included in this prospectus for
details as to the assumptions used to determine the fair value of each of the stock awards and
option awards set forth in this table, as well as a description of all forfeitures during
fiscal year 2010. |
|
(2) |
|
Dr. Chaplins employment agreement provides that his salary be paid in British Pounds. The
salary amounts presented above represent his annual salary of £180,257 converted into U.S.
dollars at the average monthly conversion rate for the year presented. Dr. Chaplins
employment with the Company ended on August 30, 2011. The Company entered into a separation
agreement with Dr. Chaplin in connection with his departure. The terms of Dr. Chaplins
separation arrangement are consistent with the severance benefits provided for in his
employment agreement. |
|
(3) |
|
Dr. Langecker commenced employment in June 2009 as Executive Vice President and Chief
Development Officer. In October 2009, he was appointed as Chief Executive Officer. |
|
(4) |
|
Mr. Murphys permanent employment with the Company ended on October 31, 2011; however, Mr.
Murphy continues to serve as the Companys Chief Financial Officer on a temporary basis until
his replacement is hired. The Company entered into a separation agreement with Mr. Murphy in
connection with his departure. The terms of Mr. Murphys separation arrangement are
consistent with the severance benefits provided for in his employment agreement. |
Narrative Disclosure to Summary Compensation Table
Dr. Peter J. Langecker, M.D., Ph.D.
Employment Agreement with Dr. Peter J. Langecker. In June 2009, we entered into an employment
agreement with Dr. Langecker with respect to his service as our Executive Vice President and Chief
Development Officer. In October 2009, Dr. Langecker was appointed our Chief Executive Officer, and
in October 2011, Dr. Langecker was named as the Chairman of our Board of Directors. Pursuant to
his agreement, Dr. Langecker currently receives an annual base salary of $350,000 per year. In
addition, Dr. Langecker may be awarded an annual bonus of up to 40% of his then-current annual base
salary, at the sole discretion of OXiGENE, based on our assessment of his and OXiGENEs
performance. Pursuant to his employment agreement, on June 29, 2009, we granted to Dr. Langecker
options to purchase 250,000 shares of the Companys common stock at an exercise price of $2.32 per
share. The options shall vest in equal annual installments over four years beginning one year from
the date of grant.
Dr. Langecker may terminate the agreement upon written notice to us. We may also terminate
the agreement without prior written notice for cause, as defined in the agreement, as long as, in
certain circumstances, we give Dr. Langecker a minimum period of 30 days to cure the act or
omission constituting cause (if reasonably subject to cure), as described in the agreement. If Dr.
Langeckers employment is terminated by us for cause, or by Dr. Langecker without good reason (as
defined in the agreement), we will pay to Dr. Langecker the amount of accrued obligations as of the
date of such termination, consisting of accrued and unpaid salary, value of accrued vacation days,
annual bonus related to the most recently completed calendar year if not already paid and amount of
unreimbursed and incurred expenses. If Dr. Langeckers employment is terminated by us other than
for cause or Dr. Langeckers disability, we will pay to Dr. Langecker the accrued obligations, as
described above, an amount equal to 12 months of his then-current base salary, the annual bonus
related to the most recently completed calendar year, if not already paid, and will also pay COBRA
premiums, should Dr. Langecker timely elect and be eligible for COBRA coverage, for Dr. Langecker
and his immediate family for 12 months (provided that OXiGENE shall have no obligation to provide
such coverage if Dr. Langecker becomes eligible for medical and dental coverage with another
employer).
59
If Dr. Langeckers employment is terminated by us (other than for cause or Dr. Langeckers
disability) within one year following a change in control of the Company (as defined in the
agreement), or by Dr. Langecker with good reason within one year following a change in control of
the Company, we will pay to Dr. Langecker the accrued obligations, as described above, an amount
equal to 12 months of his then-current base salary, the annual bonus related to the most recently
completed calendar year, if not already paid, and will also pay COBRA premiums for a period of 12
months on the same conditions as described above. In addition, all of Dr. Langecker unvested
equity compensation outstanding on the date of termination shall vest and remain exercisable in
accordance with the terms of the applicable plan and related agreements. Dr. Langecker has also
agreed not to engage in activities competitive with the Company during his employment and for a 12
month period following the termination of his employment. All payments made and benefits available
to Dr. Langecker in connection with his employment agreement will comply with Internal Revenue Code
Section 409A in accordance with the terms of his employment agreement.
Outstanding Equity Awards at Fiscal Year-End
The following table shows grants of stock options and grants of unvested stock awards
outstanding on the last day of the fiscal year ended December 31, 2010, including both awards
subject to performance conditions and non-performance-based awards, to each of the executive
officers named in the Summary Compensation Table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market |
|
|
|
Option Awards(1) |
|
|
Number of |
|
|
Value of |
|
|
|
Number of |
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
shares or |
|
|
Shares or |
|
|
|
Securities |
|
|
Securities |
|
|
|
|
|
|
|
|
|
|
Units of |
|
|
Units of |
|
|
|
Underlying |
|
|
Underlying |
|
|
|
|
|
|
|
|
|
|
Stock That |
|
|
Stock That |
|
|
|
Unexercised |
|
|
Unexercised |
|
|
Option |
|
|
Option |
|
|
Have Not |
|
|
Have Not |
|
|
|
Options |
|
|
Options |
|
|
Exercise |
|
|
Expiration |
|
|
Vested |
|
|
Vested |
|
Name |
|
Exerciseable # |
|
|
Unexerciseable # |
|
|
Price $ |
|
|
Date |
|
|
# |
|
|
(2) $ |
|
David Chaplin |
|
|
2,250 |
|
|
|
|
|
|
$ |
101.20 |
|
|
|
7/12/2010 |
|
|
|
|
|
|
$ |
|
|
Former Vice President and |
|
|
5,000 |
|
|
|
|
|
|
$ |
44.80 |
|
|
|
3/15/2012 |
|
|
|
|
|
|
|
|
|
Chief Scientific Officer |
|
|
5,000 |
|
|
|
|
|
|
$ |
158.80 |
|
|
|
7/24/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
|
|
|
$ |
100.60 |
|
|
|
7/28/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
938 |
|
|
|
313 |
|
|
$ |
83.60 |
|
|
|
1/25/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
1,500 |
|
|
|
4,500 |
|
|
$ |
13.00 |
|
|
|
1/20/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
17,500 |
|
|
$ |
21.20 |
|
|
|
4/27/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
3,438 |
|
|
|
6,563 |
|
|
$ |
5.60 |
|
|
|
9/15/2020 |
|
|
|
|
|
|
|
|
|
Peter Langecker |
|
|
3,125 |
|
|
|
9,375 |
|
|
$ |
46.40 |
|
|
|
6/29/2019 |
|
|
|
|
|
|
$ |
|
|
Chief Executive Officer |
|
|
2,500 |
|
|
|
17,500 |
|
|
$ |
21.20 |
|
|
|
4/27/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
3,438 |
|
|
|
6,563 |
|
|
$ |
5.60 |
|
|
|
9/15/2020 |
|
|
|
|
|
|
|
|
|
James Murphy |
|
|
3,750 |
|
|
|
|
|
|
$ |
181.00 |
|
|
|
2/23/2014 |
|
|
|
|
|
|
$ |
|
|
Vice President and |
|
|
1,000 |
|
|
|
|
|
|
$ |
100.60 |
|
|
|
7/28/2014 |
|
|
|
|
|
|
|
|
|
Chief Financial Officer |
|
|
1,250 |
|
|
|
|
|
|
$ |
70.20 |
|
|
|
6/14/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
1,875 |
|
|
|
625 |
|
|
$ |
83.60 |
|
|
|
1/25/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
1,563 |
|
|
|
4,688 |
|
|
$ |
13.00 |
|
|
|
1/20/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
17,500 |
|
|
$ |
21.20 |
|
|
|
4/27/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
3,438 |
|
|
|
6,563 |
|
|
$ |
5.60 |
|
|
|
9/15/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Generally, option awards vest in equal annual installments over four years beginning on the
first anniversary of the date of grant and the exercise price is the closing price of our
common stock as quoted on The NASDAQ Capital Market on the date of grant. On September 15,
2010, we granted options to each of the named executive officers included in the table above
that vest in equal annual installments over two years beginning on the first anniversary of
the date of grant. |
|
(2) |
|
The market value of the stock awards is determined by multiplying the number of shares times
$4.60, the closing price of our common stock on The NASDAQ Global Market on December 31, 2010,
the last day of our fiscal year. |
Pension Benefits
We do not have any qualified or non-qualified defined benefit plans.
60
Nonqualified Deferred Compensation
We do not have any non-qualified defined contribution plans or other deferred compensation
plans.
Potential Payments Upon Termination or Change-In-Control
We have entered into certain agreements and maintain certain plans that may require us to make
certain payments and/or provide certain benefits to our named executive officers in the event of a
termination of employment or a change of control of the Company. The following tables summarize the
potential payments to each named executive officer assuming that one of the described termination
events occurs. The tables assume that the event occurred on December 31, 2010, the last day of our
fiscal year. On December 31, 2010, the last trading day of 2010, the closing price of our common
stock as listed on The NASDAQ Global Market was $4.60 per share.
Peter J. Langecker
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
|
Voluntary |
|
|
Cause Termination or |
|
|
|
|
|
|
|
|
|
within 12 months |
|
|
Termination by |
|
|
Termination by |
|
|
|
|
|
|
|
Executive Benefits and |
|
Following Change |
|
|
Executive or |
|
|
Executive with Good |
|
|
For Cause |
|
|
|
|
Payments Upon Termination |
|
in Control |
|
|
Death |
|
|
Reason |
|
|
Termination |
|
|
Disability |
|
Base Salary |
|
$ |
350,000 |
|
|
$ |
|
|
|
$ |
350,000 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Bonus (x% of |
|
Executive entitled to |
|
|
Executive entitled to |
|
|
Executive entitled to |
|
|
|
|
|
|
|
|
|
Base Salary) |
|
Annual Bonus related |
|
|
Annual Bonus related |
|
|
Annual Bonus related |
|
|
|
|
|
|
Executive entitled to |
|
|
|
to most recently |
|
|
to most recently |
|
|
to most recently |
|
|
|
|
|
|
Annual Bonus related |
|
|
|
completed calendar |
|
|
completed calendar |
|
|
completed calendar |
|
|
|
|
|
|
to most recently |
|
|
|
year if not already |
|
|
year if not already |
|
|
year if not already |
|
|
|
|
|
|
completed calendar |
|
|
|
paid |
|
|
paid |
|
|
paid |
|
|
|
N/A |
|
|
year if not already paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration of
Vesting of Equity |
|
|
100 |
% |
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Stock Options |
|
|
42,500 |
|
|
|
9,063 |
|
|
|
9,063 |
|
|
|
9,063 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value upon Termination |
|
$ |
195,500 |
|
|
$ |
41,688 |
|
|
$ |
41,688 |
|
|
$ |
41,688 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested Stock Received: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value upon Termination |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Relocation
Reimbursement |
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Compensation
Payout |
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-Term Health Care |
|
Up to 12months for |
|
|
|
|
|
|
Up to 12months for |
|
|
|
|
|
|
|
|
|
|
|
Executive and family |
|
|
|
N/A |
|
|
Executive and family |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
37,044 |
|
|
$ |
|
|
|
$ |
37,044 |
|
|
$ |
|
|
|
$ |
|
|
Excise Tax Gross Up |
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
The information set forth above is described in more detail in the narrative following the
Summary Compensation Table.
A Change in Control as defined in Dr. Langeckers employment agreement shall mean the occurrence
during the term of his employment of the following:
(i) |
|
Ownership. Any Person (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended) becomes the Beneficial Owner (as defined in Rule 13d-3
under said Act), directly or indirectly, of securities of OXiGENE representing 50% or more of
the total voting power represented by OXiGENEs then outstanding voting securities (excluding
for this purpose any such voting securities held by OXiGENE or its affiliates or by any
employee benefit plan of OXiGENE) pursuant to a transaction or a series of related transaction
which the Board of Directors does not approve; or |
|
(ii) |
|
Merger/Sale of Assets. (A) A merger or consolidation of OXiGENE whether or not approved by
the Board of Directors, other than a merger or consolidation which would result in the voting
securities of OXiGENE outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the surviving entity or
the parent of such corporation) at least 50% of the total voting power represented by the
voting securities of OXiGENE or such surviving entity or parent of such corporation, as the
case may be, outstanding immediately after such merger or consolidation; or (B) the
stockholders of OXiGENE approve an agreement for the sale or disposition by OXiGENE of all or
substantially all of OXiGENEs assets; or |
|
(iii) |
|
Change in Board Composition. A change in the composition of the Board of Directors, as a
result of which fewer than a majority of the directors are Incumbent Directors. Incumbent
Directors shall mean directors who either (A) are directors of OXiGENE as of the date of this
Agreement, or |
61
(B) |
|
are elected, or nominated for election, to the Board of Directors with the affirmative votes
of at least a majority of the Incumbent Directors at the time of such election or nomination
(but shall not include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to OXiGENE). |
Dr. Langecker will be entitled to certain benefits as described in the table above if his
employment is terminated by the Company for reasons other than cause or by him with good reason.
Cause shall mean any of the following:
(a) the Executives substantial failure to perform any of his duties hereunder or to follow
reasonable, lawful directions of the Board or any officer to whom the Executive reports;
(b) the Executives willful misconduct or willful malfeasance in connection with his
employment;
(c) the Executives conviction of, or plea of nolo contendre to, any crime constituting a
felony under the laws of the United States or any state thereof, or any other crime involving moral
turpitude;
(d) the Executives material breach of any of the provisions of this Agreement, OXiGENEs
bylaws or any other agreement with OXiGENE; or
(e) the Executives engaging in misconduct which has caused significant injury to OXiGENE,
financial or otherwise, or to OXiGENEs reputation; or
(f) any act, omission or circumstance constituting cause under the law governing this
Agreement. Termination with Good Reason shall mean:
(i) without the Executives express written consent, any material reduction in Executives
title, or responsibilities compared to those prior to a Change in Control (as such term is defined
in the employment agreement);
(ii) relocation of more than 60 miles;
(iii) without the Executives express written consent, a material reduction by OXiGENE in the
Executives total compensation as in effect on the date hereof or as the same may be increased from
time to time, provided that it shall not be deemed a material reduction if (a) the amount of
Executives Annual Bonus is less than the amount of any previously awarded Annual Bonuses or (b) a
benefit is amended and such amendment affects all eligible executive participants; or
(iv) OXiGENE breaches a material term of this Agreement and such breach has remained uncured
for a minimum of thirty (30) days after Executive has notified OXiGENE of breach. To be effective,
such notice must be in writing and set forth the specific alleged Good Reason for termination and
the factual basis supporting the alleged Good Reason.
All payments made and benefits available to Dr. Langecker in connection with his employment
agreement will comply with Internal Revenue Code Section 409A in accordance with the terms of his
employment agreement.
David Chaplin, Ph.D.
As announced on September 1, 2011, Dr. Chaplins employment with the Company ended on August
30, 2011. The Company entered into a separation agreement with Dr. Chaplin in connection with his
departure. The terms of Dr. Chaplins separation arrangement are consistent with the severance
benefits provided for in his employment agreement.
Employment Agreement with David Chaplin. In July 2000, we entered into an employment
agreement with Dr. Chaplin to serve as our Chief Scientific Officer and Head of Research and
Development. Effective in January 2007, Dr. Chaplins employment agreement was amended such that he
received an annual base salary of £180,257 per year (or $279,398, using January 3, 2011 exchange
rates). In 2009, Dr. Chaplins employment agreement was further amended to (1) set the period for
which Dr. Chaplin would be paid in the event of his termination of employment other than for cause
of with good reason at sixteen (16) months and (2) provide for the immediate vesting of all stock
options, stock appreciation rights, restricted stock and other incentive compensation granted to
him in the event of a change in control. Dr. Chaplins employment was terminated by OXiGENE other
than for cause, and therefore, Dr. Chaplin will be entitled to receive a payment of sixteen (16)
months of his current base salary, and all stock options and other incentive compensation granted
to Dr. Chaplin by OXiGENE shall, to the extent vested, remain exercisable in accordance with
the 2005 Plan and any related agreements. All payments made and benefits available to Dr.
Chaplin in connection with his separation agreement will comply with Internal Revenue Code Section
409A in accordance with the terms of his employment agreement.
62
James B. Murphy
As announced on September 1, 2011, Mr. Murphys permanent employment with the Company ended on
October 31, 2011. Mr. Murphy continues to serve as the Companys Chief Financial Officer on a
temporary basis until his replacement is hired. The Company entered into a separation agreement
with Mr. Murphy in connection with his departure. The terms of Mr. Murphys separation arrangement
are consistent with the severance benefits provided for in his employment agreement.
Employment Agreement with James B. Murphy. In February 2004, we entered into an employment
agreement with Mr. Murphy to serve as our Vice President and Chief Financial Officer. We amended
the agreement in January 2009. Pursuant to the agreement as amended, Mr. Murphy receives a base
salary of $245,000 per year. Mr. Murphys employment will be terminated by OXiGENE other than for
cause, and therefore, Mr. Murphy will be entitled to receive a payment of twelve months current
base salary and the Company will also pay COBRA premiums, should Mr. Murphy timely elect and be
eligible for COBRA coverage, for Mr. Murphy and his immediate family for 12 months (provided that
OXiGENE shall have no obligation to provide such coverage if Mr. Murphy becomes eligible for
medical and dental coverage with another employer). In addition, all stock options and other
incentive compensation granted to Mr. Murphy by OXiGENE shall, to the extent vested, remain
exercisable in accordance with the 2005 Plan and any related agreements. All payments made and
benefits available to Mr. Murphy in connection with his separation agreement will comply with
Internal Revenue Code Section 409A in accordance with the terms of his employment agreement.
Director Compensation
The following table shows the total compensation paid or accrued during the fiscal year ended
December 31, 2010 to each of our non-employee directors.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or |
|
|
Stock |
|
|
Option |
|
|
All Other |
|
|
|
Paid in Cash |
|
|
Awards |
|
|
Awards |
|
|
Compensation |
|
Name |
|
($) |
|
|
($) (1) |
|
|
($) |
|
|
($) |
|
Roy H. Fickling (2) |
|
$ |
|
|
|
$ |
53,303 |
|
|
$ |
|
|
|
$ |
|
|
Tamar Howson |
|
$ |
|
|
|
$ |
38,753 |
|
|
$ |
|
|
|
$ |
|
|
Mark Kessel (3) |
|
$ |
|
|
|
$ |
49,403 |
|
|
$ |
|
|
|
$ |
|
|
Arthur Laffer (4) |
|
$ |
|
|
|
$ |
39,900 |
|
|
$ |
|
|
|
$ |
|
|
William D. Schwieterman |
|
$ |
|
|
|
$ |
53,303 |
|
|
$ |
|
|
|
$ |
|
|
William Shiebler (5) |
|
$ |
95,000 |
|
|
$ |
49,403 |
|
|
$ |
|
|
|
$ |
|
|
Alastair J.J. Wood |
|
$ |
|
|
|
$ |
49,403 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
(1) |
|
See Note 1 to our Consolidated Financial Statements for the year ended December 31,
2010 in this prospectus for details as to the assumptions used to determine the fair value of
each of the stock awards set forth in this table, and Note 3 describing all forfeitures during
fiscal year 2010. |
|
(2) |
|
Effective March 31, 2011, Mr. Fickling resigned as a member of the Companys Board of
Directors. |
|
(3) |
|
Mr. Kessels term expired at the 2011 Annual Meeting of Stockholders. |
|
(4) |
|
Effective March 11, 2010, Dr. Laffer resigned as a member of the Companys Board of
Directors. |
|
(5) |
|
Mr. Shieblers term expired at the 2011 Annual Meeting of Stockholders. |
The following is a description of the standard compensation arrangements under which our
non-employee directors are compensated for their service as directors, including as members of the
various Committees of our Board.
Fees. The Board of Directors adopted an amended and restated director compensation policy,
effective January 1, 2010. In accordance with the policy, prior to the commencement of each
calendar year, the Board of Directors established the number of shares of our common stock to be
granted as the annual retainer for the upcoming calendar year for all non-employee directors. The
annual retainer was paid in the form of semi-annual grants, under the 2005 Plan, of fully-vested
shares of our common stock in the amount established by the Board of Directors for such calendar
year. Shares of common stock to be issued to each non-employee director on the date of grant were
automatically granted without further action by the Board of Directors or the Compensation
Committee semi-annually on and as of January 2 and July 1, or the first business day thereafter.
Shares granted pursuant to the policy have a purchase price equal to the par value of our common
stock on the date of grant and are subject to the terms and conditions of the 2005 Plan.
The Board of Directors adopted a revised amended and restated non-employee director
compensation policy, effective September 20, 2011. In accordance with the revised policy, prior to
the commencement of each calendar year, the Board of Directors establishes the dollar value of the
retainer to be paid for the upcoming calendar year for all non-employee directors. For 2011, the
retainer has been set at $80,000. Once a year, prior to December 31, each non-employee director
makes an election for the next
63
calendar year to receive his or her retainer in the form of options
to purchase shares of our common stock, shares of our common stock, or a combination of options
and/or stock and up to 50% cash. Any cash election must be in whole $10,000 amounts. A new
non-employee director joining the Board during the course of the year would make an election for
the calendar year within 30 days of joining the Board, and his or her retainer will be pro-rated.
In the absence of an election, a non-employee director will receive 50% of the retainer as cash and
50% as shares of our common stock. Shares and options comprising the annual retainer are granted
under the 2005 Plan. The shares of common stock are fully-vested as of the grant date and have a
purchase price equal to the par value of our common stock on the grant date. The options are fully
vested as of the grant date, have a six-year term and an exercise price equal to the closing price
of our common stock on its principal trading market on the grant date. The number of options to be
granted is calculated using the Black-Scholes valuation method. Shares of common stock, options to
purchase shares of common stock and/or cash to be paid to each non-employee director on the date of
grant are automatically granted without further action by the Board of Directors or the
Compensation Committee semi-annually on and as of January 2 and July 1, or the first business day
thereafter. Shares and options granted pursuant to the policy are subject to the terms and
conditions of the 2005 Plan.
Pursuant to the amendments to the 2005 Plan, which were approved by our stockholders at the
2011 Annual Meeting of Stockholders, each of our non-employee directors whose term continued after
the Annual Meeting received an equity grant of up to $40,000 in value as compensation for Board of
Directors service for the period of July 1 to December 31, 2011, in accordance with our revised
non-employee director compensation policy described above, provided that no such grant shall be
made to Dr. Gerald McMahon in 2011 in light of the grant made to him at the time of his joining the
Board in September 2011. We were unable to make these director compensation grants on July 1, 2011
due to the insufficient number of shares of our common stock available for award issuances under
the 2005 Plan at that time. Mark Kessel and Bill Shiebler received a cash payment of $26,667 each
for their service on the Board of Directors during the period from July 1, 2011 to October 31,
2011.
During an interim period beginning in May 2009 and ending on January 31, 2010, following his
assumption of the duties of Chairman, Mr. Shiebler received: $40,000 in cash for the first month of
service; $20,000 in cash for each month thereafter during such interim period; $1,200 per month for
secretarial expenses to be incurred by him; and an option to purchase 100,000 shares of our common
stock, vesting in equal amounts over four years, starting one year from the date of grant, at an
exercise price of $2.23 per share. Mr. Shiebler received these amounts in connection with the
services he provided as Chairman, and in recognition of the level of services he provided in that
capacity. Mr. Shiebler did not receive any separate compensation under the director compensation
policy in addition to these amounts. Effective February 2010, Mr. Shieblers cash compensation was
reduced to $10,000 per month. Effective June 2010, Mr. Shieblers cash compensation was reduced
further to $5,000 per month.
Equity Incentives. Under the terms of the 2005 Plan, directors may be granted shares of
common stock, stock-based awards and/or stock options to purchase shares of common stock.
64
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth certain information with respect to the beneficial ownership of
our common stock as of December 1, 2011, for (a) (1) our Chief Executive Officer, (2) our Chief
Financial Officer and (3) our next most highly compensated executive officer who earned more than
$100,000 during the fiscal year ended December 31, 2010, (b) each of our directors, (c) all of our
current directors and executive officers as a group and (d) each stockholder known by us to own
beneficially more than 5% of our common stock. Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission and includes voting or investment power
with respect to the securities. We deem shares of common stock that may be acquired by an
individual or group within 60 days of December 1, 2011 pursuant to the exercise of options or
warrants to be outstanding for the purpose of computing the percentage ownership of such individual
or group, but such shares are not deemed to be outstanding for the purpose of computing the
percentage ownership of any other person shown in the tables. Except as indicated in footnotes to
these tables, we believe that the stockholders named in these tables have sole voting and
investment power with respect to all shares of common stock shown to be beneficially owned by them
based on information provided to us by these stockholders. Percentage of ownership is based on
15,181,094 shares of common stock outstanding on December 1, 2011.
|
|
|
|
|
|
|
|
|
|
|
Number of Shares |
|
|
|
|
|
|
Beneficially Owned |
|
|
|
|
|
|
and Nature of |
|
|
Percent of |
|
|
|
Ownership |
|
|
Class % |
|
David Chaplin(1) |
|
|
6,655 |
|
|
|
* |
|
Tamar Howson(2) |
|
|
18,411 |
|
|
|
* |
|
Peter Langecker(3) |
|
|
21,249 |
|
|
|
* |
|
Gerald McMahon(4) |
|
|
17,000 |
|
|
|
* |
|
James Murphy(5) |
|
|
27,685 |
|
|
|
* |
|
William Schwieterman(6) |
|
|
26,260 |
|
|
|
* |
|
Alastair J.J. Wood |
|
|
17,871 |
|
|
|
* |
|
All current directors and executive officers as a group (6 persons)(7) |
|
|
128,476 |
|
|
|
* |
% |
|
|
|
* |
|
Less than 1%. |
|
(1) |
|
Mr. Chaplins employment with the Company ended on August 30, 2011. |
|
(2) |
|
Includes options to purchase 8,600 shares of common stock, which are exercisable within 60
days of December 1, 2011 (January 30, 2012). |
|
(3) |
|
Represents options to purchase 21,249 shares of common stock, which are exercisable within 60
days of December 1, 2011 (January 30, 2012). |
|
(4) |
|
Represents options to purchase 17,000 shares of common stock, which are exercisable within 60
days of December 1, 2011 (January 30, 2012). |
|
(5) |
|
Includes options to purchase 25,685 shares of common stock, which are exercisable within 60
days of December 1, 2011 (January 30, 2012). |
|
(6) |
|
Includes options to purchase 17,300 shares of common stock, which are exercisable within 60
days of December 1, 2011 (January 30, 2012). |
|
(7) |
|
Includes 2,000 shares of common stock subject to transfer restrictions and options to
purchase 89,834 shares of common stock held by the directors and executive officers as a group
and which are exercisable within 60 days of December 1, 2011 (January 30, 2012). |
As of December 1, 2011, the following is the only entity known to us to be the beneficial
owner of more than 5% of our outstanding common stock.
Number of Shares
|
|
|
|
|
|
|
|
|
|
|
Beneficially Owned |
|
|
|
|
|
|
and Nature of |
|
|
Percent of |
|
Name and Address of Beneficial Owner |
|
Ownership |
|
|
Class |
|
|
|
|
Symphony ViDA Holdings LLC |
|
|
1,361,606 |
|
|
|
8.97 |
% |
875 Third Avenue
18th Floor
New York, NY 10022 |
|
|
|
|
|
|
|
|
65
The determination that there were no other persons, entities or groups known to us to
beneficially own more than 5% of our outstanding common stock was based on a review of all
statements filed with respect to us since the beginning of the past fiscal year with the Securities
and Exchange Commission pursuant to Section 13(d) or 13(g) of the Exchange Act.
LIMITATION OF DIRECTORS LIABILITY AND INDEMNIFICATION
The Delaware General Corporation Law authorizes corporations to limit or eliminate, subject to
certain conditions, the personal liability of directors to corporations and their stockholders for
monetary damages for breach of their fiduciary duties. Our restated certificate of incorporation
limits the liability of our directors to the fullest extent permitted by Delaware law.
We have obtained director and officer liability insurance to cover liabilities our directors
and officers may occur in connection with their services to us, including matters arising under the
Securities Act. Our restated certificate of incorporation and restated bylaws also provide that we
will indemnify any of our directors and officers who, by reason of the fact that he or she is one
of our officers or directors, is involved in a legal proceeding of any nature. We will repay
certain expenses incurred by a director or officer in connection with any civil or criminal action
or proceeding, specifically including actions by us or in our name (derivative suits). These
indemnifiable expenses include, to the maximum extent permitted by law, attorneys fees, judgments,
civil or criminal fines, settlement amounts and other expenses customarily incurred in connection
with legal proceedings. A director or officer will not receive indemnification if he or she is
found not to have acted in good faith and in a manner he or she reasonably believed to be in, or
not opposed to, our best interest. In addition, we have entered into agreements to indemnify our
directors and officers. These agreements, among other things, will indemnify and advance expenses
to our directors and officers for certain expenses, including attorneys fees, judgments, fines and
settlement amounts incurred by any such person in any action or proceeding, including any action by
us arising out of such persons services as our director or officer, or any other company or
enterprise to which the person provides services at our request.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers or persons controlling the registrant pursuant to the foregoing
provisions, the registrant has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act and is therefore
unenforceable.
There is no pending litigation or proceeding involving any of our directors, officers,
employees or agents in which indemnification will be required or permitted. We are not aware of any
threatened litigation or proceeding that may result in a claim for indemnification under the
agreements described in this section.
66
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Our Audit Committee reviews and approves in advance all related-person transactions.
We did not engage in any related person transactions during the year ended December 31, 2010.
Symphony Transaction
In October 2008, we announced a strategic collaboration with Symphony Capital Partners, L.P.
(Symphony), a private-equity firm, under which Symphony agreed to provide up to $40 million in
funding to support the advancement of ZYBRESTAT for oncology, ZYBRESTAT for ophthalmology and
OXi4503. In connection with the collaboration, we granted Symphony ViDA, Inc., a newly-created drug
development company, exclusive licenses to ZYBRESTAT for use in ophthalmologic indications and
OXi4503. As part of this transaction, we maintained the exclusive purchase option, but not the
obligation, to purchase all of the equity of Symphony ViDA (Purchase Option) at any time between
October 2, 2009 and March 31, 2012 for an amount equal to two times the amount of capital actually
invested by Holdings in Symphony ViDA, less certain amounts.
Under the collaboration, we entered into a series of related agreements with Symphony Capital
LLC, Symphony ViDA, Symphony ViDA Holdings LLC (Holdings) and related entities, including a
Purchase Option Agreement, a Research and Development Agreement, a Technology License Agreement and
an Additional Funding Agreement. In addition, we entered into a series of related agreements with
Holdings, including a Stock and Warrant Purchase Agreement and a Registration Rights Agreement.
Pursuant to these agreements, Holdings formed and capitalized Symphony ViDA in order (a) to
hold certain intellectual property related to the programs which were exclusively licensed to
Symphony ViDA under the Technology License Agreement and (b) to fund commitments of up to $25
million. The funding was intended to support preclinical and clinical development by us, on behalf
of Symphony ViDA, of the programs.
We issued to Holdings, pursuant to the Stock and Warrant Purchase Agreement, an aggregate of
675,675 shares of our common stock and warrants at a price of $22.20 per share, which was the
closing price of our common stock on The NASDAQ Global Market on September 30, 2008, the day before
we entered into the Symphony transaction. In addition, pursuant to the Purchase Option Agreement,
we issued to Holdings an aggregate of 180,180 shares of our common stock with a fair value of $4
million as consideration for the Purchase Option.
On July 2, 2009, OXiGENE, Holdings and Symphony ViDA entered into a series of related
agreements pursuant to which we exercised the Purchase Option under terms set forth in an amended
and restated purchase option agreement (the Amended Purchase Option Agreement), and OXiGENE and
Holdings also entered into an amended and restated registration rights agreement.
We closed on the amended Purchase Option on July 20, 2009 and issued 500,000 shares of our
common stock to Holdings at the closing in exchange for all of the equity of Symphony ViDA, subject
to further adjustment under the rights described in the paragraph above. In addition, upon the
closing of the Purchase Option, we re-acquired all of the rights to the programs, and the
approximately $12,400,000 in cash held by Symphony ViDA at the time of the closing became available
for use for our general corporate purposes.
67
DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock and certain provisions of our restated
certificate of incorporation, as amended, and our amended and restated by-laws is a summary and is
qualified in its entirety by the provisions of our restated certificate of incorporation, as
amended, and our amended and restated by-laws.
Our authorized capital stock consists of 300,000,000 shares of common stock, par value of
$0.01 per share, and 15,000,000 shares of preferred stock, par value of $0.01 per share.
Common Stock
We are authorized to issue 300,000,000 shares of common stock. Each stockholder of record is
entitled to one vote for each outstanding share of our common stock owned by that stockholder on
every matter properly submitted to the stockholders for their vote. Holders of common stock are
entitled to any dividend declared by our board of directors out of funds legally available for that
purpose. Holders of common stock are entitled to receive, on a pro rata basis, all our remaining
assets available for distribution to stockholders in the event of our liquidation, dissolution or
winding up. Holders of common stock do not have any preemptive right to become subscribers or
purchasers of additional shares of any class of our capital stock.
Preferred Stock
We are authorized to issue 15,000,000 shares of preferred stock, par value $0.01 per share. As
of December 1, 2011, no shares of our preferred stock were outstanding. The following summary of
certain provisions of our preferred stock does not purport to be complete. You should refer to our
restated certificate of incorporation, as amended, and our amended and restated by-laws, both of
which are included as exhibits to the registration statement we have filed with the SEC in
connection with this offering. The summary below is also qualified by provisions of applicable law.
Our board of directors may, without further action by our stockholders, from time to time,
direct the issuance of shares of preferred stock in series and may, at the time of issuance,
determine the rights, preferences and limitations of each series, including voting rights, dividend
rights and redemption and liquidation preferences. Satisfaction of any dividend preferences of
outstanding shares of preferred stock would reduce the amount of funds available for the payment of
dividends on shares of our common stock. Holders of shares of preferred stock may be entitled to
receive a preference payment in the event of any liquidation, dissolution or winding-up of our
company before any payment is made to the holders of shares of our common stock. In some
circumstances, the issuance of shares of preferred stock may render more difficult or tend to
discourage a merger, tender offer or proxy contest, the assumption of control by a holder of a
large block of our securities or the removal of incumbent management. Upon the affirmative vote of
our board of directors, without stockholder approval, we may issue shares of preferred stock with
conversion rights which could adversely affect the holders of shares of our common stock.
Listing
Our common stock is listed on The NASDAQ Capital Market under the symbol OXGN.
Transfer Agent and Registrar
American Stock Transfer & Trust Company, LLC is the transfer agent and registrar for our
common stock and preferred stock.
Delaware Law, Certain Charter and By-Law Provisions and Stockholder Rights Agreement
The provisions of Delaware law and of our restated certificate of incorporation, as amended,
and amended and restated by-laws discussed below could discourage or make it more difficult to
accomplish a proxy contest or other change in our management or the acquisition of control by a
holder of a substantial amount of our voting stock. It is possible that these provisions could make
it more difficult to accomplish, or could deter, transactions that stockholders may otherwise
consider to be in their best interests or the best interests of OXiGENE.
Delaware Statutory Business Combinations Provision. In general, Section 203 prohibits a
publicly-held Delaware corporation from engaging in a business combination with an interested
stockholder for a period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is, or the transaction in which
the person became an interested stockholder was, approved in a prescribed manner or another
prescribed exception applies. For
purposes of Section 203, a business combination is defined broadly to include a merger,
asset sale or other transaction resulting in a financial benefit to the interested stockholder,
and, subject to certain exceptions, an interested stockholder is a person who, together with his
or her affiliates and associates, owns (or within the prior three years, did own) 15% or more of
the corporations voting stock.
68
Special Meetings of Stockholders. Special meetings of the stockholders may be called by the
chairman of our board of directors, the president, or the entire board of directors pursuant to a
resolution adopted by a majority of directors present at a meeting at which a quorum is present.
The president or secretary shall also call special meetings upon the written request of not less
than 10% in interest of the stockholders entitled to vote at the meeting.
Stockholder Rights Agreement. On March 24, 2005 our board of directors declared a dividend of
one common stock purchase right for each outstanding share of our voting common stock, $0.01 par
value per share, to stockholders of record at the close of business on April 4, 2005. Each right
entitles the registered holder to purchase from us one-fifth of a share of common stock, at a
purchase price of $1,000.00 in cash, subject to adjustment. The description and terms of the rights
are set forth in a Stockholder Rights Agreement between us and American Stock Transfer & Trust
Company, LLC, as Rights Agent.
Initially, the rights will be attached to all common stock certificates representing shares
then outstanding, and no separate certificates for rights will be distributed. The rights will
separate from the common stock and a Distribution Date will occur upon the earlier of (i) 10 days
following a public announcement that a person or group of affiliated or associated persons has
acquired, or obtained the right to acquire, beneficial ownership of 15% or more of the outstanding
shares of our common stock or (ii) 10 business days following the commencement of a tender offer or
exchange offer that may result in a person or group beneficially owning 15% or more of the
outstanding shares of our common stock.
Until the distribution date (or earlier redemption or expiration of the rights), (i) the
rights will be evidenced by the common stock certificates and will be transferred with and only
with such common stock certificates, (ii) new common stock certificates issued after the record
date will contain a notation incorporating the Stockholder Rights Agreement by reference, and (iii)
the surrender for transfer of any certificates for common stock outstanding, even without such
notation, will also constitute the transfer of the rights associated with the common stock
represented by such certificate.
LEGAL MATTERS
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Boston, Massachusetts, will provide us
with an opinion as to the legal matters in connection with the securities we are offering.
EXPERTS
The consolidated financial statements of OXiGENE, Inc. at December 31, 2010 and 2009, and for
each of the three years in the period ended December 31, 2010, appearing in this prospectus and
registration statement have been audited by Ernst & Young LLP, independent registered public
accounting firm, as set forth in their report thereon appearing elsewhere herein (which contains an
explanatory paragraph describing conditions that raise substantial doubt about the Companys
ability to continue as a going concern as described in Note 1 to the consolidated financial
statements), and are included in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We are a public company and file annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any document we file at the SECs Public
Reference Room at Station Place, 100 F Street, N.E., Washington, D.C. 20549. You can request copies
of these documents by writing to the SEC and paying a fee for the copying cost. Please call the SEC
at 1-800-SEC-0330 for more information about the operation of the public reference room. Our SEC
filings are also available to the public at the SECs web site at www.sec.gov, and on our web site
at www.oxigene.com. The information contained on our web site is not included or incorporated by
reference into this prospectus. In addition, our common stock is listed for trading on The NASDAQ
Capital Market under the symbol OXGN. You can read and copy reports and other information
concerning us at the offices of the Financial Industry Reporting Authority located at 1735 K
Street, N.W., Washington, D.C. 20006.
This prospectus is only part of a registration statement on Form S-1 that we have filed with
the SEC under the Securities Act, and therefore omits certain information contained in the
registration statement. We have also filed exhibits and schedules with the registration statement
that are excluded from this prospectus, and you should refer to the applicable exhibit or schedule
for a complete description of any statement referring to any contract or other document. You may:
|
|
|
inspect a copy of the registration statement, including the exhibits and
schedules, without charge at the public reference room, |
|
|
|
|
obtain a copy from the SEC upon payment of the fees prescribed by the SEC, or |
|
|
|
|
obtain a copy from the SECs web site or our web site. |
69
OXiGENE, Inc.
Index to Financial Statements
|
|
|
|
|
|
|
|
F-2 |
|
|
|
|
F-3 |
|
|
|
|
F-4 |
|
|
|
|
F-5 |
|
|
|
|
F-6 |
|
|
|
|
F-7 |
|
|
|
|
F-24 |
|
|
|
|
F-25 |
|
|
|
|
F-26 |
|
|
|
|
F-27 |
|
F-1
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of
OXiGENE, Inc.
We have audited the accompanying consolidated balance sheets of OXiGENE, Inc. as of December
31, 2010 and 2009, and the related consolidated statements of operations, stockholders (deficit)
equity, and cash flows for each of the three years in the period ended December 31, 2010. These
financial statements are the responsibility of the Companys 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 the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. We were not engaged to perform an audit of the Companys 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 Companys 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. An audit
also includes assessing the accounting principles used and significant estimates made by
management, as well as 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 consolidated financial position of OXiGENE, Inc. at December 31, 2010 and 2009, and
the consolidated results of its operations and its cash flows for each of the three years in the
period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming that OXiGENE,
Inc. will continue as a going concern. As more fully described in Note 1, the Company has incurred
recurring operating losses and will be required to raise additional capital, alternative means of
financial support, or both, prior to January 1, 2012 in order to sustain operations. The ability of
the Company to raise additional capital or alternative sources of financing is uncertain. These
conditions raise substantial doubt about the Companys ability to continue as a going concern.
Managements plans in regard to these matters are also described in Note 1. The 2010 consolidated
financial statements do not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.
/s/ Ernst & Young LLP
Boston, Massachusetts
March 16, 2011
F-2
OXiGENE, Inc.
Consolidated Balance Sheets
(All Amounts in thousands
except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
|
December 31, 2009 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
4,602 |
|
|
$ |
13,932 |
|
Restricted cash |
|
|
75 |
|
|
|
140 |
|
Prepaid expenses |
|
|
256 |
|
|
|
644 |
|
Other current assets |
|
|
75 |
|
|
|
108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
5,008 |
|
|
|
14,824 |
|
Furniture and fixtures, equipment and leasehold improvements |
|
|
1,512 |
|
|
|
1,515 |
|
Accumulated depreciation |
|
|
(1,425 |
) |
|
|
(1,332 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87 |
|
|
|
183 |
|
|
|
|
|
|
|
|
|
|
License agreements, net of accumulated amortization of
$1,114 and $1,016 at December 31, 2010 and December 31,
2009, respectively |
|
|
386 |
|
|
|
484 |
|
Other assets |
|
|
86 |
|
|
|
126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
5,567 |
|
|
$ |
15,617 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
458 |
|
|
$ |
1,181 |
|
Accrued research and development |
|
|
2,125 |
|
|
|
4,753 |
|
Accrued other |
|
|
628 |
|
|
|
1,684 |
|
Derivative liability short term |
|
|
|
|
|
|
850 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
3,211 |
|
|
|
8,468 |
|
Derivative liability long term |
|
|
7,611 |
|
|
|
1,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
10,822 |
|
|
|
9,818 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 11) |
|
|
|
|
|
|
|
|
Stockholders (deficit) equity: |
|
|
|
|
|
|
|
|
Preferred Stock, $.01 par value, 15,000 shares
authorized; 0 shares issued and outstanding at December 31,
2010 and December 31, 2009 |
|
|
|
|
|
|
|
|
Common stock, $.01 par value, 300,000 shares authorized
and 5,501 shares issued and outstanding at December 31,
2010; 150,000 shares authorized and 3,137 shares issued and
outstanding at December 31, 2009 |
|
|
55 |
|
|
|
31 |
|
Additional paid-in capital |
|
|
202,390 |
|
|
|
189,698 |
|
Accumulated deficit |
|
|
(207,700 |
) |
|
|
(183,930 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders (deficit) equity |
|
|
(5,255 |
) |
|
|
5,799 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders (deficit) equity |
|
$ |
5,567 |
|
|
$ |
15,617 |
|
|
|
|
|
|
|
|
See accompanying notes.
F-3
OXiGENE, Inc.
Consolidated Statements of Operations
(All amounts in thousands
except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
License Revenue: |
|
$ |
|
|
|
$ |
|
|
|
$ |
12 |
|
Operating costs and expenses(1): |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
12,114 |
|
|
|
22,256 |
|
|
|
18,995 |
|
General and administrative |
|
|
5,885 |
|
|
|
8,900 |
|
|
|
6,957 |
|
Restructuring (Note 6) |
|
|
510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses |
|
|
18,509 |
|
|
|
31,156 |
|
|
|
25,952 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(18,509 |
) |
|
|
(31,156 |
) |
|
|
(25,940 |
) |
Change in fair value of warrants and other financial instruments (Note 5) |
|
|
(6,018 |
) |
|
|
2,166 |
|
|
|
3,335 |
|
Investment income |
|
|
17 |
|
|
|
110 |
|
|
|
618 |
|
Other income (expense), net |
|
|
740 |
|
|
|
(63 |
) |
|
|
66 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net loss |
|
$ |
(23,770 |
) |
|
$ |
(28,943 |
) |
|
$ |
(21,921 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: net loss attributed to non controlling interest (Note 7) |
|
$ |
|
|
|
$ |
(4,215 |
) |
|
$ |
(520 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributed to OXiGENE, Inc. |
|
$ |
(23,770 |
) |
|
$ |
(24,728 |
) |
|
$ |
(21,401 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess purchase price over carrying value of noncontrolling interest acquired in
Symphony ViDA, Inc (Note 7) |
|
$ |
|
|
|
$ |
(10,383 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss applicable to common stock |
|
$ |
(23,770 |
) |
|
$ |
(35,111 |
) |
|
$ |
(21,401 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share attributed to OXiGENE, Inc. common shares (Note 8) |
|
$ |
(5.96 |
) |
|
$ |
(13.15 |
) |
|
$ |
(13.96 |
) |
Weighted-average number of common shares outstanding |
|
|
3,988 |
|
|
|
2,671 |
|
|
|
1,533 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes share based compensation expense as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
$ |
245 |
|
|
$ |
206 |
|
|
$ |
328 |
|
General and administrative |
|
|
707 |
|
|
|
324 |
|
|
|
671 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share based compensation expense |
|
$ |
952 |
|
|
$ |
530 |
|
|
$ |
999 |
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-4
OXiGENE, Inc.
Consolidated Statements of Stockholders (Deficit) Equity
(All amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
Total |
|
|
Non |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
OXiGENE, Inc. |
|
|
Controlling |
|
|
|
|
|
|
Common |
|
|
Additional |
|
|
|
|
|
|
Comprehensive |
|
|
Stockholders |
|
|
Interest in |
|
|
Total |
|
|
|
Stock |
|
|
Paid-In |
|
|
Accumulated |
|
|
Income/ |
|
|
(Deficit)/ |
|
|
Symphony |
|
|
(Deficit) / |
|
|
|
Shares |
|
|
$ |
|
|
Capital |
|
|
Deficit |
|
|
(Loss) |
|
|
Equity |
|
|
ViDA, Inc. |
|
|
Equity |
|
Balance December 31, 2007 |
|
|
1,425 |
|
|
$ |
14 |
|
|
$ |
162,629 |
|
|
$ |
(137,801 |
) |
|
$ |
15 |
|
|
$ |
24,857 |
|
|
$ |
|
|
|
$ |
24,857 |
|
Formulation of Symphony ViDA, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,952 |
|
|
|
9,952 |
|
Unrealized loss from available-for-sale securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(125 |
) |
|
|
(125 |
) |
|
|
|
|
|
|
(125 |
) |
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,401 |
) |
|
|
|
|
|
|
(21,401 |
) |
|
|
(520 |
) |
|
|
(21,921 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,526 |
) |
|
|
9,432 |
|
|
|
(12,094 |
) |
Issuance of common stock for executive incentive
compensation |
|
|
2 |
|
|
|
|
|
|
|
87 |
|
|
|
|
|
|
|
|
|
|
|
87 |
|
|
|
|
|
|
|
87 |
|
Issuance of common stock related to CEFF, net of costs |
|
|
32 |
|
|
|
|
|
|
|
740 |
|
|
|
|
|
|
|
|
|
|
|
740 |
|
|
|
|
|
|
|
740 |
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
999 |
|
|
|
|
|
|
|
|
|
|
|
999 |
|
|
|
|
|
|
|
999 |
|
Issuance of warrants to purchase common stock to Symphony
ViDA Holdings, LLC |
|
|
|
|
|
|
|
|
|
|
(8,935 |
) |
|
|
|
|
|
|
|
|
|
|
(8,935 |
) |
|
|
|
|
|
|
(8,935 |
) |
Settlement of Symphony warrant upon exercise |
|
|
|
|
|
|
|
|
|
|
5,622 |
|
|
|
|
|
|
|
|
|
|
|
5,622 |
|
|
|
|
|
|
|
5,622 |
|
Accounting for additional CEFF investment and warrant as a
liability |
|
|
|
|
|
|
|
|
|
|
(489 |
) |
|
|
|
|
|
|
|
|
|
|
(489 |
) |
|
|
|
|
|
|
(489 |
) |
Issuance of common stock to Symphony as direct investment,
net of costs |
|
|
112 |
|
|
|
1 |
|
|
|
1,428 |
|
|
|
|
|
|
|
|
|
|
|
1,429 |
|
|
|
|
|
|
|
1,429 |
|
Exercise of Symphony warrant issuance of shares of common
stock |
|
|
564 |
|
|
|
6 |
|
|
|
12,517 |
|
|
|
|
|
|
|
|
|
|
|
12,523 |
|
|
|
|
|
|
|
12,523 |
|
Issuance of common stock as compensation for purchase
option |
|
|
180 |
|
|
|
2 |
|
|
|
3,998 |
|
|
|
|
|
|
|
|
|
|
|
4,000 |
|
|
|
|
|
|
|
4,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2008 |
|
|
2,315 |
|
|
|
23 |
|
|
|
178,596 |
|
|
|
(159,202 |
) |
|
|
(110 |
) |
|
|
19,307 |
|
|
|
9,432 |
|
|
|
28,739 |
|
Unrealized gain from available-for-sale securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
110 |
|
|
|
110 |
|
|
|
|
|
|
|
110 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24,728 |
) |
|
|
|
|
|
|
(24,728 |
) |
|
|
(4,215 |
) |
|
|
(28,943 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24,618 |
) |
|
|
(4,215 |
) |
|
|
(28,833 |
) |
Issuance of common stock for Symphony ViDA, Inc.
acquisition (including $10.4 million of excess purchase
price over carrying value of non controlling interest) |
|
|
500 |
|
|
|
5 |
|
|
|
5,125 |
|
|
|
|
|
|
|
|
|
|
|
5,130 |
|
|
|
(5,217 |
) |
|
|
(87 |
) |
Issuance of common stock in lieu of compensation for the
Board of Directors |
|
|
15 |
|
|
|
|
|
|
|
321 |
|
|
|
|
|
|
|
|
|
|
|
321 |
|
|
|
|
|
|
|
321 |
|
Elimination of the CEFF warrant derivative liability due
to the Symphony ViDA, Inc. acquisition |
|
|
|
|
|
|
|
|
|
|
155 |
|
|
|
|
|
|
|
|
|
|
|
155 |
|
|
|
|
|
|
|
155 |
|
Issuance of common stock in direct registration net of
costs and fair value of warrants issued of $4,055 |
|
|
313 |
|
|
|
3 |
|
|
|
4,971 |
|
|
|
|
|
|
|
|
|
|
|
4,974 |
|
|
|
|
|
|
|
4,974 |
|
Issuance of common stock under employee stock purchase plan |
|
|
3 |
|
|
|
|
|
|
|
125 |
|
|
|
|
|
|
|
|
|
|
|
125 |
|
|
|
|
|
|
|
125 |
|
Stock based compensation expense |
|
|
|
|
|
|
|
|
|
|
407 |
|
|
|
|
|
|
|
|
|
|
|
407 |
|
|
|
|
|
|
|
407 |
|
Forfeiture of restricted stock |
|
|
(9 |
) |
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2009 |
|
|
3,137 |
|
|
|
31 |
|
|
|
189,698 |
|
|
|
(183,930 |
) |
|
|
|
|
|
|
5,799 |
|
|
|
|
|
|
|
5,799 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23,770 |
) |
|
|
|
|
|
|
(23,770 |
) |
|
|
|
|
|
|
(23,770 |
) |
Issuance of common stock and common stock warrants in
connection with the private placement financing, net of
expenses of $877 |
|
|
329 |
|
|
|
3 |
|
|
|
(316 |
) |
|
|
|
|
|
|
|
|
|
|
(313 |
) |
|
|
|
|
|
|
(313 |
) |
Reclass of CEFF warrants to derivative liability in March
2010 due to private placement warrants |
|
|
|
|
|
|
|
|
|
|
(103 |
) |
|
|
|
|
|
|
|
|
|
|
(103 |
) |
|
|
|
|
|
|
(103 |
) |
Exercise of warrants issued in private placement financing |
|
|
1,347 |
|
|
|
14 |
|
|
|
8,241 |
|
|
|
|
|
|
|
|
|
|
|
8,255 |
|
|
|
|
|
|
|
8,255 |
|
Issuance of common stock under ATM, net of expenses of $288 |
|
|
664 |
|
|
|
7 |
|
|
|
3,799 |
|
|
|
|
|
|
|
|
|
|
|
3,806 |
|
|
|
|
|
|
|
3,806 |
|
Issuance of common stock in lieu of compensation to Board
of Directors |
|
|
19 |
|
|
|
|
|
|
|
325 |
|
|
|
|
|
|
|
|
|
|
|
325 |
|
|
|
|
|
|
|
325 |
|
Issuance of common stock under employee stock purchase plan |
|
|
4 |
|
|
|
|
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
33 |
|
|
|
|
|
|
|
33 |
|
Stock based compensation expense |
|
|
|
|
|
|
|
|
|
|
687 |
|
|
|
|
|
|
|
|
|
|
|
687 |
|
|
|
|
|
|
|
687 |
|
Exercise of stock options |
|
|
1 |
|
|
|
|
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
26 |
|
|
|
|
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2010 |
|
|
5,501 |
|
|
$ |
55 |
|
|
$ |
202,390 |
|
|
$ |
(207,700 |
) |
|
$ |
|
|
|
$ |
(5,255 |
) |
|
$ |
|
|
|
$ |
(5,255 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-5
OXiGENE, Inc
Consolidated Statements of Cash Flows
(Amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributed to OXiGENE, Inc. |
|
$ |
(23,770 |
) |
|
$ |
(24,728 |
) |
|
$ |
(21,401 |
) |
Loss attributed to noncontrolling interests |
|
|
|
|
|
|
(4,215 |
) |
|
|
(520 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of warrants and other financial instruments |
|
|
6,018 |
|
|
|
(2,166 |
) |
|
|
(3,335 |
) |
Depreciation |
|
|
96 |
|
|
|
123 |
|
|
|
133 |
|
Amortization of license agreement |
|
|
98 |
|
|
|
97 |
|
|
|
98 |
|
Rent loss accrual |
|
|
|
|
|
|
(60 |
) |
|
|
(163 |
) |
Stock-based compensation |
|
|
952 |
|
|
|
778 |
|
|
|
1,086 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash |
|
|
65 |
|
|
|
(140 |
) |
|
|
|
|
Prepaid expenses and other current assets |
|
|
457 |
|
|
|
(210 |
) |
|
|
(78 |
) |
Accounts payable, accrued expenses and other payables |
|
|
(4,343 |
) |
|
|
1,852 |
|
|
|
782 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(20,427 |
) |
|
|
(28,669 |
) |
|
|
(23,398 |
) |
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of available-for-sale securities |
|
|
|
|
|
|
753 |
|
|
|
23,456 |
|
Purchase of available-for-sale securities |
|
|
|
|
|
|
|
|
|
|
(4,314 |
) |
Proceeds from sale of marketable securities held by Symphony ViDA, Inc |
|
|
|
|
|
|
2,286 |
|
|
|
(14,663 |
) |
Purchase of furniture, fixtures and equipment |
|
|
|
|
|
|
(109 |
) |
|
|
(113 |
) |
Proceeds from sale of fixed assets |
|
|
|
|
|
|
4 |
|
|
|
|
|
Change in other assets |
|
|
3 |
|
|
|
|
|
|
|
137 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities |
|
|
3 |
|
|
|
2,934 |
|
|
|
4,503 |
|
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock, net of acquisition costs |
|
|
11,044 |
|
|
|
9,029 |
|
|
|
14,691 |
|
Proceeds from Symphony ViDA acquisition, net of acquisition costs |
|
|
|
|
|
|
12,289 |
|
|
|
|
|
Proceeds from purchase of noncontrolling interest by shareholders in Symphony ViDA, Inc., net of fees |
|
|
|
|
|
|
|
|
|
|
13,952 |
|
Proceeds from exercise of employee stock plans |
|
|
50 |
|
|
|
74 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
11,094 |
|
|
|
21,392 |
|
|
|
28,643 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease) increase in cash and cash equivalents |
|
|
(9,330 |
) |
|
|
(4,343 |
) |
|
|
9,748 |
|
Cash and cash equivalents at beginning of period |
|
|
13,932 |
|
|
|
18,275 |
|
|
|
8,527 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
4,602 |
|
|
$ |
13,932 |
|
|
$ |
18,275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- cash Disclosures: |
|
|
|
|
|
|
|
|
|
|
|
|
Fair market value of private placement warrants at issuance |
|
$ |
11,868 |
|
|
$ |
4,055 |
|
|
$ |
6,111 |
|
Fair market value of warrants at exercise |
|
$ |
7,645 |
|
|
$ |
|
|
|
$ |
|
|
Fair market value reclassification of CEFF warrants to liabilities in connection with private placement |
|
$ |
103 |
|
|
$ |
155 |
|
|
$ |
|
|
Stock issued as consideration for Symphony ViDA, Inc. purchase options |
|
$ |
|
|
|
$ |
|
|
|
$ |
4,000 |
|
See accompanying notes.
F-6
OXiGENE, INC.
Notes to Consolidated Financial Statements
December 31, 2010
1. Description of Business and Significant Accounting Policies
Description of Business
OXiGENE, Inc. (the Company), incorporated in 1988 in the state of New York and
reincorporated in 1992 in the state of Delaware, is a clinical-stage, biopharmaceutical company
developing novel therapeutics to treat cancer and eye diseases. OXiGENEs primary focus is the
development and commercialization of product candidates referred to as vascular disrupting agents,
or VDAs, that selectively disable and destroy abnormal blood vessels that provide solid tumors a
means of growth and survival and also are associated with visual impairment in a number of
ophthalmological diseases and conditions. To date, more than 400 subjects have been treated with
ZYBRESTAT in human clinical trials, and the drug candidate has generally been observed to be
well-tolerated. Currently, the Company does not have any products available for sale; however, it
has two therapeutic product candidates in various stages of clinical and pre-clinical development,
as well as additional product candidates currently in research and development.
OXiGENEs primary drug development candidates, ZYBRESTAT and OXi4503, are based on a series of
natural products called Combretastatins, and are VDAs. The Company is currently developing its VDA
drug candidates for indications in both oncology and ophthalmology. OXiGENEs most advanced drug
candidate is ZYBRESTAT, a VDA, which is being evaluated in multiple ongoing and planned clinical
trials in various oncology and ophthalmic indications. The Company conducts scientific activities
pursuant to collaborative arrangements with universities. Regulatory and clinical testing functions
are generally contracted out to third-party, specialty organizations.
In February 2011, the Companys board of directors voted unanimously to implement a 1:20
reverse stock split of the Companys common stock, following authorization of the reverse split by
a shareholder vote on December 21, 2010. The reverse split became effective on February 22, 2011.
All of the share and per share amounts, except for the per share fair value amounts, discussed and
shown in the consolidated financial statements and notes have been adjusted to reflect the effect
of this reverse split. In the first quarter of OXiGENEs fiscal 2011, the Company will revalue all
of its derivative liability and equity instruments that use the Black Scholes method of valuation
effective as of the date of the reverse split. The change in value of such instruments will be
recorded as a gain or loss in the Companys statement of operations in the first quarter. These
gains or losses could be substantial.
To date, OXiGENE has financed its operations principally through net proceeds received from
private and public equity financings. The Companys cash, restricted cash and cash equivalents
balance as of December 31, 2010 was $4,677,000.
On March 11, 2010 the Company completed a definitive agreement with certain institutional
investors to sell 328,947 shares of its common stock and four separate series of warrants to
purchase common stock in a private placement. Gross proceeds of the financing were approximately
$7,500,000, before deducting placement agent fees and offering expenses, and excluding the
subsequent exercises of the warrants.
On July 21, 2010, the Company entered into an at the market (ATM) equity offering sales
agreement with McNicoll, Lewis & Vlak LLC, or MLV, pursuant to which it may issue and sell shares
of its common stock from time to time through MLV acting as sales agent and underwriter. Sales of
the Companys common stock through MLV, if any, are made on the Companys principal trading market
by means of ordinary brokers transactions at market prices, in block transactions or as otherwise
agreed by MLV and the Company. MLV uses its commercially reasonable efforts to sell the Companys
common stock from time to time, based upon instructions from the Company (including any price, time
or size limits the Company may impose). The Company pays MLV a commission rate of up to 7.0% of the
gross sales price per share of any common stock sold through MLV as agent under the sales
agreement. The Company has also provided MLV with customary indemnification rights. During the year
ended December 31, 2010, the Company sold 664,150 shares of common stock pursuant to the ATM sales
agreement resulting in net proceeds to the Company of approximately $3,806,000. As of December 31,
2010, there were 48,350 shares remaining available for sale under the ATM, based on the number of
shares registered to be sold. In January 2011, OXiGENE sold the remaining 48,350 shares resulting
in net proceeds to the Company of approximately $180,000. On January 31, 2011, the Company filed a
prospectus supplement pursuant to which it may issue and sell additional shares of its common stock
having an aggregate offering price of up to $4,790,000 under the ATM.
In November 2010, the Company received $732,000 for qualified investments in a qualifying
therapeutic discovery project under section 48D of the Internal Revenue Code. This amount is
recorded within Other income in the 2010 Consolidated Statement of Operations.
F-7
OXiGENEs ongoing capital requirements will depend on numerous factors, including: the
progress and results of preclinical testing and clinical trials of its product candidates under
development, including ZYBRESTAT and OXi4503; the progress of its research and development
programs; the time and costs expended and required to obtain any necessary or desired regulatory
approvals; the resources, if any, that the Company devotes to develop manufacturing methods and
advanced technologies; OXiGENEs ability to enter into licensing arrangements, including any
unanticipated licensing arrangements that may be necessary to enable it to continue the Companys
development and clinical trial programs; the costs and expenses of filing, prosecuting and, if
necessary, enforcing OXiGENEs patent claims, or defending against possible claims of infringement
by third-party patent or other technology rights; the cost of commercialization activities and
arrangements, if any, undertaken by the Company; and, if and when approved, the demand for
OXiGENEs products, which demand depends in turn on circumstances and uncertainties that cannot be
fully known, understood or quantified unless and until the time of approval, including the range of
indications for which any product is granted approval.
The Company expects its existing cash and cash equivalents to support the Companys operations
through the first quarter of 2011. Assuming that net proceeds from the potential sale of shares at
current market prices under the ATM sales agreement described above are received ratably over the
March 2011 to June 2011 timeframe, the Company expects that its existing financial resources,
together with the expected net proceeds from the ATM, would be sufficient to fund its operations
through the second quarter of 2011. No assurance can be given that the Company will sell any
additional shares under the ATM sales agreement, or, if it does, as to the price or amount of
shares that it will sell, or the dates on which any such sales will take place. The Company is
aggressively pursuing other forms of capital infusion including public or private financing,
strategic partnerships or other arrangements with organizations that have capabilities and/or
products that are complementary to the Companys own capabilities and/or products, in order to
continue the development of its product candidates.
OXiGENE will need to access additional funds to remain a going concern beyond the first
quarter of 2011 or, if funds are raised through the ATM sales agreement as described above, beyond
the second quarter of 2011. Such funding may not be available to OXiGENE on acceptable terms, or at
all. If the Company is unable to access additional funds when needed, it may not be able to
continue the development of its product candidates or the Company could be required to delay, scale
back or eliminate some or all of its development programs and other operations. Any additional
equity financing, if available to the Company, may not be available on favorable terms, most likely
will be dilutive to its current stockholders and debt financing, if available, may involve
restrictive covenants. If the Company accesses funds through collaborative or licensing
arrangements, it may be required to relinquish rights to some of its technologies or product
candidates that it would otherwise seek to develop or commercialize on its own, on terms that are
not favorable to the Company. The Companys ability to access capital when needed is not assured
and, if not achieved on a timely basis, will materially harm its business, financial condition and
results of operations. The Companys ability to raise additional capital could also be impaired if
its common shares lose their status on The NASDAQ Capital Market, and trade in the over-the-counter
market. These uncertainties create substantial doubt about the Companys ability to continue as a
going concern. The Report of Independent Registered Accounting Firm at the beginning of the
Consolidated Financial Statements section of this Form 10-K includes a going concern explanatory
paragraph.
The accompanying financial statements have been prepared on a basis which assumes that the
Company will continue as a going concern, which contemplates the realization of assets and the
satisfaction of liabilities and commitments in the normal course of business.
Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.
Concentration of Credit Risk
The Company has no significant off balance sheet concentrations of credit risk. Financial
instruments that potentially subject the Company to concentrations of credit risk primarily consist
of cash and cash equivalents. The Company holds its cash and cash equivalents at one financial
institution.
Cash, Restricted Cash and Cash Equivalents
The Company considers all highly liquid financial instruments with maturities of three months
or less when purchased to be cash equivalents. The Company has $75,000 and $140,000 of restricted
cash as of December 31, 2010 and 2009, respectively that is
F-8
used to secure financing through a Company credit card. This amount is separated from cash and
cash equivalents on the Consolidated Balance Sheet.
Available-for-Sale Securities
In accordance with the Companys investment policy, surplus cash may be invested primarily in
commercial paper, obligations issued by the U.S. Treasury/ federal agencies or guaranteed by the
U.S. government, money market instruments, repurchase agreements, bankers acceptances,
certificates of deposit, time deposits and bank notes. In accordance with financial accounting
standards, the Company separately discloses cash and cash equivalents from investments in
marketable securities. The Company designates its marketable securities as available-for-sale
securities. Available-for-sale securities are carried at fair value with the unrealized gains and
losses, net of tax, if any, reported as accumulated other comprehensive income (loss) in
stockholders equity. The Company reviews the status of the unrealized gains and losses of its
available-for-sale marketable securities on a regular basis. Realized gains and losses and declines
in value judged to be other-than-temporary on available-for-sale securities are included in
investment income. Interest and dividends on securities classified as available-for-sale are
included in investment income. Securities with maturation greater than twelve months, are
classified as long-term assets.
The Companys investment objectives are to preserve principal, maintain a high degree of
liquidity to meet operating needs and obtain competitive returns subject to prevailing market
conditions. The Company assesses the market risk of its investments on an ongoing basis so as to
avert risk of loss. The Company assesses the market risk of its investments by continuously
monitoring the market prices of its investments and related rates of return, and continuously
looking for the safest, most risk-averse investments that will yield the highest rates of return in
their category.
The Company did not hold any available-for-sale securities as of December 31, 2010 or 2009.
Fair Value
The Company is required to disclose information on all assets and liabilities reported at fair
value that enables an assessment of the inputs used in determining the reported fair values. Fair
value hierarchy is now established that prioritizes valuation inputs based on the observable nature
of those inputs. The fair value hierarchy applies only to the valuation inputs used in determining
the reported fair value of our investments and is not a measure of the investment credit quality.
The hierarchy defines three levels of valuation inputs:
|
|
|
Level 1 inputs
|
|
Quoted prices in active markets; |
|
|
|
Level 2 inputs
|
|
Generally include inputs with other observable qualities,
such as quoted prices in active markets for similar assets
or quoted prices for identical assets in inactive markets;
and |
|
|
|
Level 3 inputs
|
|
Valuations based on unobservable inputs. |
As of December 31, 2010 and 2009, OXiGENE did not hold any assets or liabilities subject to
these standards, except the derivative liabilities and other financial instruments discussed below
in Accounting for Derivative Financial Instruments Indexed to and Potentially Settled in the
Companys Common stock which are level 3 inputs. Effective January 1, 2009, the Company adopted
the fair value standards as they relate to non-recurring fair value measurements, such as the
assessment of goodwill and other long-lived assets for impairment.
Furniture and Fixtures, Equipment and Leasehold Improvements
Furniture and fixtures, equipment and leasehold improvements are recorded at cost.
Depreciation is recorded using the straight-line method over the estimated useful lives of the
assets, which range from three to five years.
License Agreements
The present value of the amount paid under the license agreement with Arizona State University
(see Note 3) has been capitalized and is being amortized over the term of the agreement
(approximately 15.5 years). The Company is required to perform an impairment analysis of its
long-lived assets if triggering events occur. The Company reviews for such triggering events
periodically such as a going concern opinion and continuing losses. The license agreement provides
for additional payments in connection with the license arrangement upon the initiation of certain
clinical trials or the completion of certain regulatory approvals, which payments could be
accelerated upon the achievement of certain financial milestones as defined in the agreement. The
Company expenses these payments to research and development in the period the obligation becomes
both probable and estimable.
F-9
Accrued Research and Development
The Company charges all research and development expenses, both internal and external costs,
to operations as incurred. The Companys research and development costs represent expenses incurred
from the engagement of outside professional service organizations, product manufacturers and
consultants associated with the development of the Companys potential product candidates. The
Company recognizes expenses associated with these arrangements based on the completion of
activities as specified in the applicable contracts. Costs incurred under fixed-fee contracts are
expensed ratably over the contract period absent any knowledge that the services will be performed
other than ratably. Costs incurred under contracts with clinical trial sites and principal
investigators are generally accrued on a patient-treated basis consistent with the terms outlined
in the contract. In determining costs incurred on some of these programs, the Company takes into
consideration a number of factors, including estimates and input provided by internal program
managers. Upon termination of such contracts, the Company is normally only liable for costs
incurred and committed to date. As a result, accrued research and development expenses represent
the Companys reasonably estimated contractual liability to outside service providers at any
particular point in time.
Accounting for Derivative Financial Instruments Indexed to and Potentially Settled in the
Companys Common stock
The Company evaluates all derivative financial instruments issued in connection with its
equity offerings when determining the proper accounting treatment for such instruments in the
Companys financial statements. The Company considers a number of generally accepted accounting
principles to determine such treatment. The Company performs a number of steps to evaluate the
features of the instrument against the guidance provided in the accounting pronouncements in order
to determine the appropriate accounting treatment. The Companys policy with regard to settling
outstanding financial instruments is to settle those with the earliest maturity date first which
essentially sets the order of preference for settling the awards. In the majority of circumstances,
the Company utilizes the Black Scholes method to determine the fair value of its derivative
financial instruments. In some cases, where appropriate, the Company utilizes the Binomial method
to determine the fair value of such derivative financial instruments. Key valuation factors in
determining the fair value include the current stock price as of the date of measurement, the
exercise price, the remaining contractual life, expected volatility for the instrument and the
risk-free interest rate. Changes in fair value are recorded as a gain or loss in the Companys
Statement of Operations with the corresponding amount recorded as an adjustment to liability on its
Balance Sheet. The expected volatility factor, in particular, is subject to significant variability
from measurement period to measurement period and can result in large gains or losses from period
to period.
Revenue Recognition
Currently, the Company does not have any products available for sale. The only source of
potential revenue at this time is from the license to a third party of the Companys formerly owned
Nicoplex and Thiol Test technology. Revenue in connection with this license arrangement is earned
based on sales of products or services utilizing this technology. Revenue is recognized under this
agreement when payments are received due to the uncertainty of the timing of sales of products or
services.
Stock-based Compensation
The Company expenses the estimated fair value of all share-based payments issued to employees
over the vesting period. The Company has a 2005 Stock Plan (2005 Plan), which superseded its 1996
Stock Option Plan that provides for the award of stock options, restricted stock and stock
appreciation rights to employees, directors and consultants to the Company. The Company also has a
2009 Employee Stock Purchase Plan (2009 ESPP).
Consolidation of Variable Interest Entity (VIE)
A variable interest entity (VIE) is (1) an entity that has equity that is insufficient to
permit the entity to finance its activities without additional subordinated financial support, or
(2) an entity that has equity investors that cannot make significant decisions about the entitys
operations or that do not absorb their proportionate share of the expected losses or do not receive
the expected residual returns of the entity. A VIE should be consolidated by the party that is
deemed to be the primary beneficiary, which is the party that has exposure to a majority of the
potential variability in the VIEs outcomes. The application of accounting policy to a given
arrangement requires significant management judgment.
The Company consolidated the financial position and results of operations of ViDA (See Note 7)
in accordance with proper accounting guidance. OXiGENE believes ViDA was by design a VIE because
OXIGENE had a purchase option to acquire its outstanding voting stock at prices that are fixed
based upon the date the option is exercised. The fixed nature of the purchase option price limited
Symphonys returns, as the investor in ViDA. Further, due to the direct investment from Holdings in
OXiGENE common stock, as a related party ViDA was a VIE of which OXiGENE was the primary
beneficiary. Upon OXiGENE exercising the purchase option in 2009, ViDA became a wholly-owned
subsidiary of OXiGENE and ceased being a VIE.
F-10
Accounting and Reporting of Noncontrolling Interests
On January 1, 2009, the Company adopted (retrospectively for all periods presented) the new
presentation requirements for noncontrolling interests required by ASC 810 Consolidations. Under
ASC 810, earnings or losses attributed to the noncontrolling interests are reported as part of
consolidated earnings and not as a separate component of income or expense. Accordingly, the
Company reported the consolidated earnings of ViDA in its consolidated statement of operations from
October 2008, when it entered into a strategic collaboration with Symphony, until July 20, 2009,
when OXiGENE acquired 100% of the equity of ViDA pursuant to the Amended and Restated Purchase
Option Agreement. Once becoming the Companys wholly-owned subsidiary, the operating results of
ViDA continued to be included in the Companys consolidated statement of operations but were no
longer subject to the presentation requirements applicable to noncontrolling interests. Losses
incurred by ViDA prior to July 20, 2009 and attributable to Symphony, were charged to
noncontrolling interest.
Patents and Patent Applications
The Company has filed applications for patents in connection with technologies being
developed. The patent applications and any patents issued as a result of these applications are
important to the protection of the Companys technologies that may result from its research and
development efforts. Costs associated with patent applications and maintaining patents are expensed
as general and administrative expense as incurred.
Income Taxes
The Company accounts for income taxes based upon the provisions of ASC 740 Income Taxes. Under
ASC 740, deferred taxes are recognized using the liability method whereby tax rates are applied to
cumulative temporary differences between carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes based on when and how they are
expected to affect the tax return.
Subsequent Events
The Company reviews all activity subsequent to year end but prior to the issuance of the
financial statements for events that could require disclosure or which could impact the carrying
value of assets or liabilities as of the balance sheet date.
2. Furniture and Fixtures, Equipment and Leasehold Improvements
Furniture and fixtures, equipment and leasehold improvements consisted of the following at the
dates indicated below:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
|
December 31, 2009 |
|
|
|
(In thousands) |
|
Leasehold improvements |
|
$ |
449 |
|
|
$ |
449 |
|
Equipment |
|
|
647 |
|
|
|
650 |
|
Furniture and fixtures |
|
|
416 |
|
|
|
416 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross assets |
|
|
1,512 |
|
|
|
1,515 |
|
Less accumulated depreciation |
|
|
(1,425 |
) |
|
|
(1,332 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment |
|
$ |
87 |
|
|
$ |
183 |
|
|
|
|
|
|
|
|
3. License agreements
In August 1999, the Company entered into an exclusive license agreement for the commercial
development, use and sale of products or services covered by certain patent rights owned by Arizona
State University. From the inception of the agreement through December 31, 2010, the Company has
paid a total of $2,500,000 in connection with this license. The Company capitalized the net present
value of the total amount paid under the initial terms of the license, or $1,500,000, and is
amortizing this amount over the patent life or 15.5 years.
The Company expects to record amortization expense related to this license agreement of
approximately $8,100 per month through November 2014. The net book value at December 31, 2010 and
2009, was $386,000 and 484,000 respectively.
F-11
4. Accrued other
Accrued other consisted of the following at the dates indicated below:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
|
December 31, 2009 |
|
|
|
(In thousands) |
|
Accounting and Legal |
|
$ |
206 |
|
|
$ |
436 |
|
Payroll |
|
|
251 |
|
|
|
612 |
|
Other |
|
|
171 |
|
|
|
636 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Accrued other |
|
$ |
628 |
|
|
$ |
1,684 |
|
|
|
|
|
|
|
|
5. Stockholders (Deficit) Equity Common and Preferred Shares
The Company had 300,000,000 and 150,000,000 shares of common stock authorized as of December
31, 2010 and December 31, 2009, respectively. As of December 31, 2010, the Company had 5,500,600
shares of common stock issued and outstanding.
On March 11, 2010, the Company completed a private placement of common stock with certain
institutional investors to sell 328,947 shares of OXiGENE common stock and four separate series of
warrants to purchase common stock. Gross proceeds of the financing were approximately $7,500,000,
before deducting placement agent fees and estimated offering expenses, and assuming no exercise of
the warrants. On the date of issuance, these warrants were initially valued at $11,868,000. The
approximately $4,933,000 excess of the fair value of the liability recorded for these warrants over
the proceeds received was recorded as a charge to earnings in the first quarter of 2010 and is
included in Change in fair value of warrants and other financial instruments within the Statement
of Operations.
On July 21, 2010, the Company entered into an at the market (ATM) equity offering sales
agreement with McNicoll, Lewis & Vlak LLC, or MLV, pursuant to which it may issue and sell shares
of its common stock from time to time through MLV acting as sales agent and underwriter. Sales of
the Companys common stock through MLV are made on the Companys principal trading market by means
of ordinary brokers transactions at market prices, in block transactions or as otherwise agreed by
MLV and the Company. MLV uses its commercially reasonable efforts to sell the Companys common
stock from time to time, based upon instructions from the Company (including any price, time or
size limits the Company may impose). The Company pays MLV a commission rate of up to 7.0% of the
gross sales price per share of any common stock sold through MLV as agent under the sales
agreement. The Company has also provided MLV with customary indemnification rights. During the year
ended December 31, 2010, the Company sold 664,150 shares of common stock pursuant to the ATM sales
agreement resulting in net proceeds to the Company of approximately $3,806,000. As of December 31,
2010, there were 48,350 shares remaining available for sale under the ATM, based on the number of
shares registered to be sold. In January 2011, OXiGENE sold the remaining 48,350 shares resulting
in net proceeds to the Company of approximately $180,000. On January 31, 2011, the Company filed a
prospectus supplement pursuant to which it may issue and sell additional shares of its common stock
having an aggregate offering price of up to $4,790,000 under the ATM.
Warrants, Options, Non-Vested Stock, 2009 ESPP and Director Compensation Policy
Warrants
The following is a summary of the Companys Derivative liability activity for the year ended
December 31, 2010 (in 000s):
|
|
|
|
|
Derivative liability outstanding at December 31, 2009 |
|
$ |
2,200 |
|
Private placement warrants fair value at issuance |
|
|
11,868 |
|
CEFF warrants amounts reclassified to derivative liability based upon the fair value at
the issuance date of the Private placement warrants |
|
|
103 |
|
Net increase in fair value of all warrants |
|
|
1,085 |
|
Amount reclassified to equity based upon the fair value at the date of exercise of warrants |
|
|
(7,645 |
) |
|
|
|
|
|
|
|
|
|
Derivative liability outstanding at December 31, 2010 |
|
$ |
7,611 |
|
|
|
|
|
The table below summarizes the value (in thousands) of the warrant-related liabilities
recorded on the Companys balance sheet.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants Issued in |
|
As of December 31, 2010 |
|
|
As of December 31, 2009 |
|
Connection with: |
|
Current |
|
|
Long-term |
|
|
Current |
|
|
Long-term |
|
Committed Equity Financing Facility |
|
|
|
|
|
$ |
6 |
|
|
|
|
|
|
$ |
|
|
Direct Registration Series I Warrants |
|
|
|
|
|
|
107 |
|
|
|
|
|
|
|
1,350 |
|
Direct Registration Series II Warrants |
|
|
|
|
|
|
|
|
|
|
850 |
|
|
|
|
|
PIPE Series A Warrants |
|
|
|
|
|
|
4,143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PIPE Series C Warrants |
|
|
|
|
|
|
3,355 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative liability |
|
$ |
|
|
|
$ |
7,611 |
|
|
$ |
850 |
|
|
$ |
1,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-12
The (loss) gain from the change in fair value of warrants and other financial instruments
for the years ended December 31, 2010, 2009 and 2008 is summarized below (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Symphony Additional Investment Shares |
|
$ |
|
|
|
$ |
416 |
|
|
$ |
3,312 |
|
Committed Equity Financing Facility Warrants |
|
|
96 |
|
|
|
(105 |
) |
|
|
23 |
|
Direct Registration Warrants |
|
|
2,093 |
|
|
|
1,855 |
|
|
|
|
|
Excess of value of the Private Placement Warrants at issuance over the net proceeds of the offering |
|
|
(4,933 |
) |
|
|
|
|
|
|
|
|
Private Placement Warrants |
|
|
(3,274 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (loss) gain on change in fair market value of derivatives |
|
$ |
(6,018 |
) |
|
$ |
2,166 |
|
|
$ |
3,335 |
|
|
|
|
|
|
|
|
|
|
|
The following is a summary of the Companys outstanding common stock warrants as of
December 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
Warrants Issued in |
|
|
|
|
|
Average |
|
|
Number of Warrants Outstanding as of: |
|
Connection with: |
|
Date of Issue |
|
|
Exercise Price |
|
|
December 31, 2010 |
|
|
December 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
Committed Equity Financing Facility |
|
February 19, 2008 |
|
$ |
54.80 |
|
|
|
13 |
|
|
|
13 |
|
Direct Registration Series I Warrants |
|
July 20, 2009 |
|
$ |
42.00 |
|
|
|
141 |
|
|
|
141 |
|
Direct Registration Series II Warrants |
|
July 20, 2009 |
|
$ |
32.00 |
|
|
|
|
|
|
|
141 |
|
Private Placement Series A Warrants |
|
March 11, 2010 |
|
$ |
5.60 |
|
|
|
1,536 |
|
|
|
|
|
Private Placement Series C Warrants |
|
March 11, 2010 |
|
$ |
5.60 |
|
|
|
1,229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Warrants outstanding |
|
|
|
|
|
|
|
|
|
|
2,919 |
|
|
|
295 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private Issuance of Public Equity PIPE Warrants
On March 11, 2010, the Company completed a definitive agreement with certain institutional
investors to sell shares of its Common stock and four separate series of warrants to purchase
Common stock in a private placement. Gross proceeds of the financing were approximately $7,500,000,
before deducting placement agent fees and estimated offering expenses, and excluding the subsequent
exercises of the warrants.
The four separate series of warrants consisted of the following:
(A) Series A Warrants to initially purchase 328,947 shares of common stock, which were
exercisable immediately after issuance, had a 5-year term and had an initial per share
exercise price of $30.40;
(B) Series B Warrants to initially purchase 328,947 shares of common stock, which were
initially exercisable at a per share exercise price of $22.80, on the earlier of the six
month anniversary of the closing date or the date on which the Companys stockholders approve
the issuance of shares in the transaction, and expired on the later of three months from the
effective date of the resale registration statement covering such shares and seven months
from the closing date. These warrants expired on October 12, 2010;
(C) Series C Warrants to initially purchase 328,947 shares of common stock, and which
would be exercisable upon the exercise of the Series B Warrants and on the earlier of the six
month anniversary of the closing date or the date on which the Companys stockholders approve
the issuance of shares in the transaction, would expire five years after the date on which
they become exercisable, and had an initial per share exercise price of $22.80; and
(D) Series D Warrants to purchase shares of common stock. The Series D Warrants were not
immediately exercisable. The Company registered for resale 337,757 shares of common stock
issuable upon exercise of the Series D Warrants pursuant to an agreement with the warrant
holders. All of the Series D Warrants were exercised by November 4, 2010 and there are no
Series D Warrants outstanding after that date.
F-13
The Series A, B and C warrants listed above contained full ratchet anti-dilution features
based on the price and terms of any financings completed after March 11, 2010 as described in the
warrant agreements. As set forth in the table below, the number of shares issuable upon exercise of
the Series A, B and C Warrants has increased substantially and the per share exercise price has
decreased substantially, as a result of the operation of these features. The final number of shares
of common stock issuable upon exercise of the Series D Warrants was determined following two
pricing periods, each of no less than seven trading days and no more than thirty trading days, as
determined individually by each holder of Series D Warrants. The first of these pricing periods
occurred from July 1, 2010 to August 11, 2010. The second of these pricing periods occurred from
September 11, 2010 to October 22, 2010. The series D Warrants provided that if during the
applicable pricing period, the arithmetic average of the seven lowest closing bid prices of the
common stock (as reported on the NASDAQ Stock Market) was less than the purchase price in the
offering ($22.80), each holders Series D Warrants shall become exercisable for an additional
number of shares pursuant to a formula set forth in the Purchase Agreement. Since the arithmetic
average of such prices was below $22.80 per share during the applicable pricing periods, the number
of shares issuable upon exercise of the Series D Warrants has increased substantially as set forth
in the table below. All of the warrants listed above contained a cashless exercise feature as
described in the warrant agreements.
The following is a summary of the adjusted number of warrants from the original amounts issued
for each of the series of warrants during the year ended December 31, 2010 as a result of the
operation of the full ratchet anti-dilution provisions of such warrants (in thousands, except for
the Adjusted Exercise Price):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Original |
|
|
|
|
|
|
|
|
|
Number of |
|
|
Adjusted |
|
|
Adjusted |
|
|
|
Warrants |
|
|
Number of |
|
|
Exercise |
|
Warrant Series: |
|
Issued |
|
|
Warrants |
|
|
Price |
|
Series A Warrants |
|
|
329 |
|
|
|
1,786 |
|
|
$ |
5.60 |
|
Series B Warrants |
|
|
329 |
|
|
|
1,339 |
|
|
$ |
5.60 |
|
Series C Warrants |
|
|
329 |
|
|
|
1,339 |
|
|
$ |
5.60 |
|
Series D Warrants |
|
|
338 |
|
|
|
1,028 |
|
|
$ |
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,325 |
|
|
|
5,492 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company determined that in accordance with Accounting Standards Codification (ASC)
480, Distinguishing Liabilities from Equity, the Series A, B, and C warrants qualify for treatment
as liabilities due to provisions of the related warrant agreements that call for the number of
warrants and their exercise price to be adjusted in the event that the Company issues additional
shares of common stock, options or convertible instruments at a price that is less than the initial
exercise price of the warrants. The Company also determined that, in accordance with ASC 815,
Derivatives and Hedging, the Series D Warrants meet the definition of a derivative. The issuance
date fair market value of the Series A, B, C and D warrants of $11,868,000 was recorded as a
liability. The approximately $4,933,000 excess of the fair value of the liability recorded for
these warrants over the net proceeds received was recorded as a charge to earnings and is included
in Change in fair value of warrants and other financial instruments within the Statement of
Operations. During the quarter ended December 31, 2010, approximately $500,000 of the total
issuance costs of $877,000 associated with the March 2010 private placement was allocated to the
warrants and is included within this $4,933,000 charge. These allocated issuance costs were
initially recorded as a charge against additional paid-in-capital during the quarter ended March
31, 2010. Changes in the fair market value from the date of issuance to the exercise date and
reporting date, until exercised or cancelled will be recorded as a gain or loss in the statement of
operations.
The following is a summary of the warrants exercised during the year ended December 31, 2010
and the fair value of those warrants. The Company established the fair value at each exercise date
of the Series A and B warrants using the Black-Scholes option valuation model and the fair value at
each exercise date of the Series D warrants using the Binomial option valuation model (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of the Valuation of Warrants Exercised as of |
|
|
|
|
|
|
December 31, 2010 |
|
|
|
|
|
|
Series A |
|
|
Series B |
|
|
Series C |
|
|
Series D |
|
|
Total |
|
Warrants exercised |
|
|
250 |
|
|
|
1,229 |
|
|
|
|
|
|
|
1,028 |
|
|
|
2,507 |
|
Fair market value at exercise date |
|
$ |
811 |
|
|
$ |
1,257 |
|
|
$ |
|
|
|
$ |
5,577 |
|
|
$ |
7,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares Issued for Warrants Exercised |
|
|
70 |
|
|
|
253 |
|
|
|
|
|
|
|
1,024 |
|
|
|
1,347 |
|
The Company reduced the respective derivative liability for the fair market value of the
warrants exercised with the offset being recorded as an increase to Additional paid-in capital.
F-14
The table below summarizes the factors used to determine the value of warrants outstanding as
of December 31, 2010 and March 11, 2010, the date of issuance of the warrants. The Company
established the fair value of the Series A, B and C warrants using the Black-Scholes option
valuation model and the fair value of the Series D warrants using the Binomial option valuation
model applying the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant Valuation as of |
|
|
Total Fair |
|
|
|
December 31, 2010 |
|
|
Market |
|
|
|
Series A |
|
|
Series B |
|
|
Series C |
|
|
Series D |
|
|
Value |
|
Stock Price |
|
$ |
4.60 |
|
|
|
|
|
|
$ |
4.60 |
|
|
|
|
|
|
|
|
|
Exercise Price |
|
$ |
5.60 |
|
|
|
|
|
|
$ |
5.60 |
|
|
|
|
|
|
|
|
|
Contractual life (in Years) |
|
4.2 years |
|
|
|
|
|
4.5 years |
|
|
|
|
|
|
|
|
Expected volatility |
|
|
81 |
% |
|
|
|
|
|
|
80 |
% |
|
|
|
|
|
|
|
|
Risk-free interest rate |
|
|
2.01 |
% |
|
|
|
|
|
|
2.01 |
% |
|
|
|
|
|
|
|
|
Fair market value (in thousands) |
|
$ |
4,143 |
|
|
$ |
|
|
|
$ |
3,355 |
|
|
$ |
|
|
|
$ |
7,498 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant Valuation on Date of Issuance |
|
|
Total Fair |
|
|
|
March 11, 2010 |
|
|
Market |
|
|
|
Series A |
|
|
Series B |
|
|
Series C |
|
|
Series D |
|
|
Value |
|
Stock Price |
|
$ |
24.80 |
|
|
$ |
24.80 |
|
|
$ |
24.80 |
|
|
$ |
24.80 |
|
|
|
|
|
Exercise Price |
|
$ |
30.40 |
|
|
$ |
22.80 |
|
|
$ |
22.80 |
|
|
$ |
0.02 |
|
|
|
|
|
Contractual life (in Years) |
|
5.0 years |
|
0.6 years |
|
5.3 years |
|
0.3 years |
|
|
|
|
Expected volatility |
|
|
67 |
% |
|
|
60 |
% |
|
|
67 |
% |
|
|
62 |
% |
|
|
|
|
Risk-free interest rate |
|
|
2.43 |
% |
|
|
0.22 |
% |
|
|
2.43 |
% |
|
|
0.22 |
% |
|
|
|
|
Fair market value (in thousands) |
|
$ |
4,331 |
|
|
$ |
1,774 |
|
|
$ |
4,930 |
|
|
$ |
833 |
|
|
$ |
11,868 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of October 12, 2010, consistent with the terms of the Series B warrant agreements, the
Series B warrants expired. As of October 22, 2010, consistent with the terms of the Series D
warrant agreements, the Series D warrants expired. The effective arithmetic average of the seven
lowest closing bid prices of the Companys common stock resulting in the final number of adjusted
Series D warrants was $5.52.
See Note 13 for a discussion of the warrant exchange agreements that were executed in January
2011 relative to the remaining Series A and Series C warrants.
Committed Equity Financing Facility (CEFF) with Kingsbridge Capital Limited
In February 2008, OXiGENE entered into a Committed Equity Financing Facility (CEFF) with
Kingsbridge Capital Limited (Kingsbridge), which was subsequently amended in February 2010 to
increase the commitment period, increase the draw down discount price and increase the maximum draw
period.
Under the terms of the amended CEFF, Kingsbridge committed to purchase, subject to certain
conditions, up to 285,401 shares of the Companys common stock during the period which ends May 15,
2012. Under the CEFF, OXiGENE is able to draw down in tranches of the lesser of (i) $10,000,000 or
(ii) a maximum of 3.75 percent of its closing market value at the time of the draw down or the
alternative draw down amount calculated pursuant to the common stock purchase agreement, whichever
is less, subject to certain conditions. The purchase price of these shares is discounted between 5
and 14 percent from the volume weighted average price of our common stock for each of the eight
trading days following the election to sell shares. Kingsbridge is not obligated to purchase shares
at prices below $0.75 per share or at a price below 85% of the closing share price of OXiGENE stock
in the trading day immediately preceding the commencement of the draw down, whichever is higher. In
connection with the CEFF, the Company issued a warrant to Kingsbridge to purchase 12,500 shares of
its common stock at a price of $54.80 per share exercisable beginning six months after February 19,
2008 and for a period of five years thereafter. As of December 31, 2010, there remain a total of
253,671 shares available for sale under the CEFF.
Due to the initially indeterminate number of shares of common stock underlying the warrants
issued in connection with the Companys private placement on March 11, 2010, OXiGENE concluded that
the CEFF warrants should be recorded as a liability effective with the date of the private
placement. The fair value of the warrants on this date was reclassified from equity to derivative
liabilities. Changes in the fair market value from the date of the private placement to the
reporting date were recorded as a gain or loss in Change in fair value of warrants and other
financial instruments in the Statement of Operations. The Company established the fair value of
the CEFF warrants using the Black-Scholes option valuation model as reflected in the table below:
F-15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant |
|
|
|
|
|
|
|
Valuation on |
|
|
|
|
|
|
|
Date of |
|
|
|
Warrant Valuation |
|
|
Designation as a |
|
|
|
as of |
|
|
Liability |
|
|
|
December 31, 2010 |
|
|
March 11, 2010 |
|
Stock Price |
|
$ |
4.60 |
|
|
$ |
24.80 |
|
Exercise Price |
|
$ |
54.80 |
|
|
$ |
54.80 |
|
Contractual life (in Years) |
|
2.6 years |
|
3.4 years |
Expected volatility |
|
|
96 |
% |
|
|
75 |
% |
Risk-free interest rate |
|
|
1.02 |
% |
|
|
1.50 |
% |
Fair market value (in thousands) |
|
$ |
6 |
|
|
$ |
103 |
|
|
|
|
|
|
|
|
Direct Registration Warrants
On July 20, 2009, OXiGENE raised approximately $10,000,000 in gross proceeds, before deducting
placement agents fees and other offering expenses, in a registered direct offering (the
Offering) relating to the sale of 312,500 units, each unit consisting of (i) one share of common
stock, (ii) a five-year warrant (Direct Registration Series I) to purchase 0.45 shares of common
stock at an exercise price of $42.00 per share of common stock and (iii) a short-term warrant
(Direct Registration Series II) to purchase 0.45 shares of common stock at an exercise price of
$32.00 per share of common stock (the Units). The short-term warrants were exercisable during a
period beginning on the date of issuance until the later of (a) nine months from the date of
issuance and (b) ten trading days after the earlier of (i) the public announcement of the outcome
of the planned interim analysis by the Independent Data Safety Monitoring Committee of data from
the Companys Phase 2/3 pivotal clinical trial regarding ZYBRESTAT as a treatment for anaplastic
thyroid cancer or (ii) the public announcement of the suspension, termination or abandonment of
such trial for any reason. On September 12, 2010, the Company announced interim results from its
anaplastic thyroid cancer study and therefore the short-term Direct Registration Series II warrants
expired ten trading days later on September 24, 2010, without being exercised.
The units were offered and sold pursuant to (i) a prospectus dated December 1, 2008 and (ii) a
prospectus supplement dated July 15, 2009, pursuant to and forming a part of the Companys
effective shelf registration statement on Form S-3 (Registration No. 333-155371). The net proceeds
to the Company from the sale of the Units, after deducting the fees of the placement agents and
other offering expenses, were approximately $9,029,000. OXiGENE determined that the Direct
Registration Series I and II warrants should be classified as a liability as they require delivery
of registered shares of common stock and thus could require net-cash settlement in certain
circumstances. Accordingly, these warrants were recorded as a liability at their fair value as of
the date of their issuance and are revalued at each subsequent reporting date.
The fair value of the direct registration warrants was determined using the Black-Scholes
option valuation model applying the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant Valuation as of |
|
|
Total Fair |
|
|
|
December 31, 2010 |
|
|
Market |
|
|
|
Series I |
|
|
Series II |
|
|
Value |
|
Stock Price |
|
$ |
4.60 |
|
|
|
|
|
|
|
|
|
Exercise Price |
|
$ |
42.00 |
|
|
|
|
|
|
|
|
|
Contractual life (in Years) |
|
3.6 years |
|
|
|
|
|
|
|
|
Expected volatility |
|
|
86 |
% |
|
|
|
|
|
|
|
|
Risk-free interest rate |
|
|
1.02 |
% |
|
|
|
|
|
|
|
|
Fair market value (in thousands) |
|
$ |
107 |
|
|
$ |
|
|
|
$ |
107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant Valuation as of |
|
|
Total Fair |
|
|
|
December 31, 2009 |
|
|
Market |
|
|
|
Series I |
|
|
Series II |
|
|
Value |
|
Stock Price |
|
$ |
22.80 |
|
|
$ |
22.80 |
|
|
|
|
|
Exercise Price |
|
$ |
42.00 |
|
|
$ |
32.00 |
|
|
|
|
|
Contractual life (in Years) |
|
4.6 years |
|
0.9 years |
|
|
|
|
Expected volatility |
|
|
69 |
% |
|
|
100 |
% |
|
|
|
|
Risk-free interest rate |
|
|
2.60 |
% |
|
|
0.40 |
% |
|
|
|
|
Fair market value (in thousands) |
|
$ |
1,350 |
|
|
$ |
850 |
|
|
$ |
2,200 |
|
|
|
|
|
|
|
|
|
|
|
F-16
Options
The Companys 2005 Stock Plan provides for the award of options, restricted stock and stock
appreciation rights to acquire up to 375,000 shares of the Companys common stock. This number
includes shares of its common stock, if any, that were subject to awards under the Companys 1996
Plan as of the date of adoption of the 2005 Plan but which became or will become unissued upon the
cancellation, surrender or termination of such award. Currently, the 2005 Plan allows for awards of
up to 37,500 shares that may be granted to any participant in any fiscal year. Options are granted
with an exercise price equal to the fair market value of the Companys common stock on the date of
grant, generally vest over a period of two to four years and expire ten years from the date of
grant. For options subject to graded vesting, the Company elected the straight-line method of
expensing these awards over the service period.
The following is a summary of the Companys stock option activity under its 1996 Plan and 2005
Plan for the year ended December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Aggregate |
|
|
|
Shares |
|
|
Exercise Price |
|
|
Contractual Life |
|
|
Intrinsic Value |
|
|
|
(In thousands) |
|
|
|
|
|
|
(Years) |
|
|
(In thousands) |
|
Options outstanding at December 31, 2009 |
|
|
95 |
|
|
$ |
72.00 |
|
|
|
6.85 |
|
|
|
|
|
Granted |
|
|
257 |
|
|
$ |
16.20 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(1 |
) |
|
$ |
15.07 |
|
|
|
|
|
|
$ |
11 |
|
Forfeited and expired |
|
|
(25 |
) |
|
$ |
67.80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at December 31, 2010 |
|
|
326 |
|
|
$ |
28.39 |
|
|
|
8.63 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option exercisable at December 31, 2010 |
|
|
93 |
|
|
$ |
52.40 |
|
|
|
7.05 |
|
|
|
|
|
Options vested or expected to vest at December 31, 2010 |
|
|
233 |
|
|
$ |
32.48 |
|
|
|
8.37 |
|
|
|
|
|
During the year ended December 31, 2010, 9,800 options expired. As of December 31, 2010
there was approximately $10,146,000 of unrecognized compensation cost related to stock option
awards that is expected to be recognized as expense over a weighted average period of 3.15 years.
The following stock options were granted during the years ended December 31, 2010, 2009 and
2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Options Granted (In thousands) |
|
|
257 |
|
|
|
73 |
|
|
|
18 |
|
Weighted average fair value |
|
$ |
0.45 |
|
|
$ |
0.59 |
|
|
$ |
0.89 |
|
The fair values for the stock options granted were estimated at the date of grant using
the Black Scholes option pricing model with the following weighted-average assumptions for the
three years ended December 31, 2010, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Assumptions |
|
2010 |
|
|
2009 |
|
|
2008 |
|
Risk-free interest rate |
|
|
1.83 |
% |
|
|
1.99 |
% |
|
|
2.13 |
% |
Expected life |
|
4 years |
|
5 years |
|
5 years |
Expected volatility |
|
|
70 |
% |
|
|
58 |
% |
|
|
55 |
% |
Dividend yield |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
In calculating the estimated fair value of our stock options, the Company used the
Black-Scholes option pricing model which requires the consideration of the following six variables
for purposes of estimating fair value:
|
|
|
the stock option exercise price, |
F-17
|
|
|
the expected term of the option, |
|
|
|
|
the grant date price of OXiGENEs common stock, which is issuable upon exercise
of the option, |
|
|
|
|
the expected volatility of OXiGENEs common stock, |
|
|
|
|
the expected dividends on OXiGENEs common stock (the Company does not anticipate
paying dividends in the foreseeable future), and |
|
|
|
|
the risk free interest rate for the expected option term. |
Stock Option Exercise Price and Grant Date Price of OXiGENEs common stock The closing
market price of its common stock on the date of grant.
Expected Term The expected term of options represents the period of time for which
the options are expected to be outstanding and is based on an analysis of historical behavior of
participants over time.
Expected Volatility The expected volatility is a measure of the amount by which
the Companys stock price is expected to fluctuate during the term of the option granted. OXiGENE
determines the expected volatility based on the historical volatility of its common stock over a
period commensurate with the options expected term.
Expected Dividends Because OXiGENE has never declared or paid any cash dividends
on any of its common stock and does not expect to do so in the foreseeable future, the Company uses
an expected dividend yield of zero to calculate the grant date fair value of a stock option.
Risk-Free Interest Rate The risk-free interest rate is the implied yield available
on U.S. Treasury issues with a remaining life consistent with the options expected term on the
date of grant.
The Company is required to estimate the level of award forfeitures expected to occur and
record compensation expense only for those awards that are ultimately expected to vest. This
requirement applies to all awards that are not yet vested, including awards granted prior to
January 1, 2006. Accordingly, OXiGENE performed a historical analysis of option awards that were
forfeited prior to vesting, and ultimately recorded total stock option expense that reflected this
estimated forfeiture rate. In the Companys calculation, it segregated participants into two
distinct groups, (1) directors and officers and (2) employees, and OXiGENEs estimated forfeiture
rates were calculated at 25% and 50%, respectively using the straight line method. This analysis
will be re-evaluated quarterly and the forfeiture rate will be adjusted as necessary.
Non-Vested Restricted Stock
As of December 31, 2010, the Company had 1,000 shares of non-vested restricted common stock
outstanding, issued at a grant price of $81.80.
The Company recorded expense of approximately $82,000, $242,000 and $393,000 related to
outstanding restricted stock awards during the years ended December 31, 2010, 2009 and 2008,
respectively. The 1,000 shares of unvested restricted common stock at December 31, 2010 will vest
in June 2011. The restricted stock awards were valued based on the closing price of the Companys
common stock on their respective grant dates. Compensation expense is being recognized on a
straight -line basis over the 4 year vesting period of the awards.
Employee Stock Purchase Plan (2009 ESPP)
In May 2009, the Companys stockholders approved the 2009 Employee Stock Purchase Plan
(the 2009 ESPP). Under the 2009 ESPP, employees have the option to purchase shares of the
Companys common stock at 85% of the closing price on the first day of each purchase period or the
last day of each purchase period (as defined in the 2009 ESPP), whichever is lower, up to specified
limits. Eligible employees are given the option to purchase shares of the Companys common stock,
on a tax-favored basis, through regular payroll deductions in compliance with Section 423 of the
Internal Revenue Code of 1986, as amended (the Code). Currently, an aggregate of 125,000 shares
of common stock may be issued under the 2009 ESPP, subject to adjustment each year pursuant to the
terms of the 2009 ESPP. The Company recorded expense relating to the 2009 ESPP for years ended
December 31, 2010 and 2009 of $8,000 and $50,000, respectively. Pursuant to the 2009 ESPP
provisions, each year beginning in 2010 there will be an annual increase in the number of
shares available for issuance under the ESPP on the first day of the new year in an amount equal to
the lesser of: 25,000 shares or 5% of the shares of Common stock outstanding on the last day of the
preceding fiscal year.
F-18
Director Compensation Policy
In December 2009, the Board of Directors approved the amended and restated director
compensation policy, effective as of January 1, 2010 which established compensation to be paid to
non employee directors of the Company, to provide an inducement to obtain and retain the services
of qualified persons to serve as members of the Companys Board of Directors. Under this plan, the
Company issued 180,000 shares as compensation for Board and committee service in 2009 to each
member of the Board. Each of the Companys non-employee Directors was also granted 500 fully vested
shares of common stock on January 2, 2010 as additional compensation for services previously
rendered to the Company during 2009, and 1,250 fully vested shares of common stock on each of
January 2, 2010 and July 1, 2010 as compensation for services rendered in 2010. The Company
recorded expense for the years ended December 31, 2010 and 2009, of $257,000 and $321,000,
respectively for these shares.
6. Restructuring
In February 2010, the Company implemented a restructuring plan in which it terminated 20
full-time employees, or approximately 49% of its work force. The purpose of the restructuring was
to focus the Companys resources on its highest-value clinical assets and reduce its cash
utilization. The restructuring expenses include severance payments, health and medical benefits and
related taxes, which were paid through August 2010. No amounts remain outstanding as of December
31, 2010. The Company incurred severance and related costs of $458,000 for research and development
employees and $52,000 for administrative employees in connection with this restructuring in fiscal
2010.
7. Symphony Transaction
On October 1, 2008, OXiGENE announced a strategic collaboration with Symphony Capital
Partners, L.P. a private-equity firm that agreed to provide funding to support the advancement of
ZYBRESTAT for oncology, ZYBRESTAT for ophthalmology and OXi4503. Under this collaboration, the
Company entered into a series of related agreements with Symphony Capital LLC, or Symphony,
Symphony ViDA, Inc., or ViDA, Symphony ViDA Holdings LLC, or Holdings, and related entities.
Pursuant to these agreements, Holdings had formed and capitalized ViDA, a Delaware
corporation, in order (a) to hold certain intellectual property related to two of OXiGENEs product
candidates, ZYBRESTAT for use in ophthalmologic indications and OXi4503, referred to as the
Programs, which were exclusively licensed to ViDA under the Novated and Restated Technology
License Agreement and (b) to fund commitments of up to $25,000,000. The funding supported
pre-clinical and clinical development by OXiGENE, on behalf of ViDA, for the Programs.
As part of a series of related agreements with Holdings, on October 1, 2008, Holdings
purchased $15,000,000 worth of shares of common stock at a price of $22.20 per share, which was
equal to the closing price of the Companys common stock on The NASDAQ Global Market on September
30, 2008, via a direct investment.
On July 2, 2009, the Company, Holdings and ViDA entered into a series of related agreements
pursuant to which such parties agreed to amend the terms of the purchase option, as set forth in an
amended and restated purchase option agreement (the Amended Purchase Option Agreement). In
connection with such amendment, OXiGENE and Holdings also entered into an amended and restated
registration rights agreement.
Under the Amended Purchase Option Agreement, OXiGENE issued 500,000 newly-issued shares of
OXiGENE common stock in exchange for all of the equity of ViDA which included further consideration
for additional securities issued in connection with the July 2009 Registered Direct Offering. The
Company re-acquired all of the rights to the Programs that had been licensed in 2008 to ViDA. In
addition, the approximately $12,400,000 in cash and marketable securities held by ViDA was
transferred to OXiGENE.
OXiGENE recorded the acquisition of ViDA as a capital transaction and the $10,383,000 excess
of the fair market value of the common shares issued by OXiGENE ($15,600,000) over the carrying
value of the noncontrolling interest ($5,217,000) was reflected directly in equity as a reduction
to Additional paid-in capital. As a result, the noncontrolling interest balance was eliminated. The
reduction to Additional paid-in capital was also presented as an increase in the loss applicable to
common stock within the calculation of basic and diluted earnings per share.
OXiGENE consolidated the financial position and results of operations of Symphony ViDA, Inc.
from October 2008, when it entered into a strategic collaboration with Symphony ViDA Holdings, LLC,
until July 20, 2009 when OXiGENE acquired 100% of ViDA pursuant to an Amended and Restated Purchase
Option Agreement. The funding supported pre-clinical and clinical development by OXiGENE, on behalf
of ViDA, for ZYBRESTAT for ophthalmology and OXi4503.
F-19
8. Net Loss Per Share
Basic and diluted net loss per share was calculated by dividing the net loss per share
attributed to OXIGENE common shares by the weighted-average number of common shares outstanding.
Diluted net loss per share includes the effect of all dilutive, potentially issuable common
equivalent shares as defined using the treasury stock method. All of the Companys common stock
equivalents are anti-dilutive due to the Companys net loss position for all periods presented.
Accordingly, common stock equivalents of approximately 3,354,000, 391,000 and 136,000 at December
31, 2010, 2009 and 2008, respectively, were excluded from the calculation of weighted average
shares for diluted net loss per share.
During 2009, the Company recorded the excess of the purchase price over the carrying value of
the noncontrolling interest in ViDA as an increase in the loss applicable to common stock (See
Symphony Transaction above).
Comprehensive (Loss)
ASC 220, Comprehensive Income, establishes rules for the reporting and display of
comprehensive loss and its components and requires unrealized gains or losses on the Companys
available-for-sale securities and the foreign currency translation adjustments to be included in
other comprehensive loss. Comprehensive loss was the same as the reported net loss for the year
ended December 31, 2010.
A reconciliation of comprehensive loss for the years ended December 31, 2009 and 2008 is as
follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(In thousands) |
|
Consolidated net loss as reported |
|
$ |
(28,943 |
) |
|
$ |
(21,921 |
) |
Unrealized gains |
|
|
110 |
|
|
|
(125 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss) |
|
|
(28,833 |
) |
|
|
(22,046 |
) |
Less comprehensive loss attributable to noncontrolling interest |
|
|
(4,215 |
) |
|
|
(520 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss attributable to OXiGENE, Inc. |
|
$ |
(24,618 |
) |
|
$ |
(21,526 |
) |
|
|
|
|
|
|
|
9. Agreements
In October 2008, the Board of Directors accepted the resignation of Dr. Richard Chin from his
position as President and Chief Executive Officer and member of the Board of Directors. All
unvested options held by Dr. Chin were forfeited as of January 22, 2009 and no further severance
payments were required.
In April 2009, the Company entered into a separation agreement with Patricia Walicke, M.D.,
Ph.D., its former Vice President and Chief Medical Officer. Pursuant to the separation agreement,
Dr. Walicke, received severance payments in the amount of $300,000 made in equal installments over
one year. All unvested options held by Dr. Walicke were forfeited as of July 29, 2009 and no
further severance payments are required.
In October 2009, the Board of Directors accepted the resignation of John A. Kollins as Chief
Executive Officer and as a member of the Board of Directors. The Company entered into a separation
agreement with Mr. Kollins effective as of November 5, 2009. Mr. Kollins received his base salary
of $350,000 made in equal installments for one year plus health benefits for up to 2 years, and a
one time $20,000 payment. All unvested options held by Mr. Kollins were forfeited as of January 8,
2010.
10. Income Taxes
The components of the Companys deferred tax assets (liabilities) at December 31, 2010 and
2009 are as follows: (Amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
Deferred Tax Assets: |
|
|
|
|
|
|
|
|
Net operating loss carry-forwards |
|
$ |
74,444 |
|
|
$ |
67,923 |
|
Stock-based awards |
|
|
324 |
|
|
|
1,205 |
|
Research& development credits |
|
|
2,444 |
|
|
|
2,183 |
|
Capital loss carry forward |
|
|
1,575 |
|
|
|
1,592 |
|
Other |
|
|
201 |
|
|
|
445 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Deferred tax assets |
|
|
78,988 |
|
|
|
73,348 |
|
Valuation allowance |
|
|
(78,988 |
) |
|
|
(73,348 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
F-20
After consideration of the available evidence, both positive and negative, the Company
has determined that a full valuation allowance at December 31, 2010 and 2009, is necessary to
reduce the deferred tax assets to the amount that will more likely than not be realized. The
valuation allowance increased by approximately $5,640,000 and approximately $8,466,000 for the
years ended December 31, 2010 and 2009, respectively, due primarily to the increase in federal and
state net operating loss carry-forwards.
At December 31, 2010, the Company had net operating loss carry-forwards of approximately
$203,314,000 for U.S. income tax purposes, which will begin to expire in 2021 and state operating
loss carry-forwards of $66,723,000 in Massachusetts that begin expiring in 2011 and $32,163,000 in
California that begin to expire in 2028. The Company also had tax credits of $2,687,000 related to
federal and state research and development activities which begin to expire in 2021. The Company
recorded a capital loss carryover of approximately $4,000,000 in 2009 that generated a deferred tax
asset of $1,575,000.
The future utilization of the net operating loss carry-forwards and credit carry-forwards may
be subject to an annual limitation due to ownership changes that could have occurred in the past or
that may occur in the future under the provisions of IRC Section 382 or 383 of the internal revenue
code.
The Company has not, as yet, conducted a study of its research and development credit
carry-forwards. This study may result in an adjustment to the Companys research and development
credit carry-forwards, however, until a study is completed and any adjustment is known, no amounts
are presented as an uncertain tax position. A full valuation allowance has been provided against
the Companys research and development credits and if an adjustment is required, this adjustment
would be offset by any adjustment to the deferred tax asset established for the research and
development credit carry-forward and the valuation allowance.
In 2010, the Company received $733,000 in tax credit grants under the U.S. Governments
Qualifying Therapeutic Discovery Project for qualified research and development expenses. These
proceeds have been recognized as other income.
The Company provides for income taxes under the liability method in accordance with the FASBs
guidance on accounting for income taxes. As all of the Companys deferred tax assets have been
reserved for in a valuation allowance, no provision for (benefit from) income taxes have been
recorded in the accompanying consolidated financial statements.
A reconciliation of the federal statutory rate to the Companys effective tax rate is as
follows:
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
Income tax benefit at federal statutory rate |
|
|
34.0 |
% |
|
|
34.0 |
% |
Increase (decrease) in tax resulting from: |
|
|
|
|
|
|
|
|
State income taxes |
|
|
3.6 |
|
|
|
6.4 |
|
State rate change |
|
|
(1.6 |
) |
|
|
|
|
Federal research credits |
|
|
1.2 |
|
|
|
1.0 |
|
Warrants |
|
|
(8.6 |
) |
|
|
3.0 |
|
Federal Net Operating Loss adjustment |
|
|
6.7 |
|
|
|
(38.2 |
) |
State Net Operating Loss expired and adjusted |
|
|
(6.9 |
) |
|
|
21.7 |
|
Stock Compensation Adjustment |
|
|
(4.1 |
) |
|
|
|
|
Capital Loss |
|
|
|
|
|
|
6.4 |
|
Permanent items |
|
|
(0.6 |
) |
|
|
(0.1 |
) |
Change In Valuation Allowance |
|
|
(23.7 |
) |
|
|
(34.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
|
% |
|
|
|
% |
|
|
|
|
|
|
|
The provisions of FIN 48 (as codified under ASC 740), were adopted by the Company on
January 1, 2007. ASC 740 clarifies the accounting for income taxes, by prescribing a minimum
recognition threshold that a tax position is required to meet before being recognized in the
financial statements. ASC 740 also provides guidance on de-recognition, measurement,
classification, interest and penalties, accounting in interim periods, disclosure and transition.
The implementation of ASC 740 did not have a material impact on
F-21
the Companys financial position, cash flows or results of operations. At December 31, 2010
and 2009, the Company had no unrecognized tax benefits.
There are currently no federal or state audits in progress, tax years still subject to
examination for Federal and the State of Massachusetts and California authorities include all prior
years due to the existence of net operating loss carry-forwards. However, the statute of limitation
for assessment by the internal revenue service and state authorities is only open for tax years
ended December 31, 2007, 2008 and 2009.
11. Commitments and Contingencies
Leases
In November 2008, the Company executed a lease for a total of approximately 12,300 square feet
of office space located in South San Francisco, California. The lease agreement is for an estimated
52 months. In May 2010, the Company executed a lease for approximately 3,900 square feet in
Waltham, Massachusetts.
During 2008, 2009 and for the first five months of 2010, the Company occupied approximately
11,000 square feet in Waltham, Massachusetts and approximately 600 square feet in Oxford, UK.
The following table summarizes the rent expense by location for the years ended December 31,
2010, 2009 and 2008 (Amounts in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
California |
|
$ |
512 |
|
|
$ |
442 |
|
|
$ |
311 |
|
Massachusetts |
|
|
76 |
|
|
|
170 |
|
|
|
480 |
|
Oxford, UK |
|
|
18 |
|
|
|
50 |
|
|
|
46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total rent |
|
$ |
606 |
|
|
$ |
662 |
|
|
$ |
837 |
|
|
|
|
|
|
|
|
|
|
|
The minimum annual rent commitments for the above leases are as follows: (Amounts in
thousands)
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
2012 |
|
2013 |
|
2014 |
|
Thereafter |
|
Total |
$494
|
|
$525
|
|
$134
|
|
$
|
|
$
|
|
$1,153 |
12. Retirement Savings Plan
The Company sponsors a savings plan available to all domestic employees, which qualifies under
Section 401(k) of the Internal Revenue Code. Employees may contribute to the plan from 1% to 20% of
their pre-tax salary subject to statutory limitations. Annually the Board of Directors determines
the amount of the Company match. The Company provided a match of $92,000, for the year ended
December 31, 2008 only.
13. Subsequent Events
Warrant Exchange Agreements
On January 18, 2011, OXiGENE, entered into separate Warrant Exchange Agreements with each of
the holders of warrants to purchase shares of common stock, issued in March 2010, pursuant to
which, at the initial closing, the warrant holders exchanged their outstanding Series A and Series
C warrants having ratchet price-based anti-dilution protections for (A) an aggregate of 1,096,933
shares of common stock and (B) Series E Warrants to purchase an aggregate of 1,222,623 shares of
common stock. The Series E Warrants are not exercisable for six months, have an exercise price of
$4.60 per share (reflecting the market value of the shares of common stock as of the close of
trading on January 18, 2011, prior to the entry into the Warrant Exchange Agreements), and do not
contain any price-based anti-dilution protections. In addition, the Company agreed to seek
shareholder approval to issue up to 457,544 additional shares of common stock to the warrant
holders in a subsequent closing. In the event such shareholder approval is obtained, the Series E
Warrants issued at the initial closing shall be exchanged for the additional 457,544 shares of
common stock. The initial closing occurred on January 20, 2011, and the subsequent closing is
expected to take place on or about March 18, 2011, following the stockholder meeting that has been
scheduled for that date to approve the additional share issuance. This activity will result in
equity instrument modification accounting and could result in a significant charge to the Statement
of Operations.
F-22
In connection with the warrant exchange, the Company also amended its Stockholder Rights
Agreement with American Stock Transfer & Trust Company, LLC, dated as of March 24, 2005, as amended
as of October 1, 2008, October 14, 2009 and March 10, 2010, in connection with the warrant
exchange, to provide that the provisions of the Stockholder Rights Agreement shall not apply to the
transactions contemplated by the Warrant Exchange Agreements.
Reverse Stock Split
In February 2011, the Companys board of directors voted unanimously to implement a 1:20
reverse stock split of the Companys common stock, following authorization of the reverse split by
a shareholder vote on December 21, 2010. The reverse split became effective on February 22, 2011.
This activity will result in equity instrument modification accounting and could result in a
significant charge to the Statement of Operations.
Activity Under the At-the-Market Arrangement
Subsequent to December 31, 2010, the Company has sold 315,000 shares of its common stock under
the At-the-Market Offering arrangement, for gross proceeds of $888,000.
The Listing of OXiGENEs common stock
Prior to March 3, 2011, the Companys stock was listed on the NASDAQ Global Market. During
2010 the Company failed to maintain compliance with two of the NASDAQ Global Markets minimum
listing requirements. NASDAQ granted the Company a grace period to regain compliance. The Company
was not able to regain compliance with those two minimum listing requirements by the established
deadline date and at a meeting with NASDAQ in January 2011, requested that the listing of the
Companys stock be transferred from the NASDAQ Global Market to The NASDAQ Capital Market.
On March 1, 2011, a NASDAQ Stock Market Hearings Panel advised the Company of its decision to
transfer the listing of the Companys common stock from The NASDAQ Global Market to The NASDAQ
Capital Market effective March 3, 2011, and continue its listing on that market, provided that the
Company regain compliance by June 13, 2011 with all continued listing standards of The NASDAQ
Capital Market and have evidenced a closing bid price of $1.00 or more for a minimum of ten prior
consecutive trading days.
F-23
OXiGENE, Inc.
Condensed Balance Sheets
(All amounts in thousands, except per share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011 |
|
|
December 31, 2010 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
12,644 |
|
|
$ |
4,602 |
|
Restricted cash |
|
|
20 |
|
|
|
75 |
|
Prepaid expenses |
|
|
195 |
|
|
|
256 |
|
Other current assets |
|
|
74 |
|
|
|
75 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
12,933 |
|
|
|
5,008 |
|
|
|
|
|
|
|
|
|
|
Furniture and fixtures, equipment and leasehold improvements |
|
|
836 |
|
|
|
1,512 |
|
Accumulated depreciation |
|
|
(793 |
) |
|
|
(1,425 |
) |
|
|
|
|
|
|
|
|
|
|
43 |
|
|
|
87 |
|
|
|
|
|
|
|
|
|
|
License agreements, net of accumulated amortization
of $1,187 and $1,114 at September 30, 2011 and December
31, 2010, respectively |
|
|
313 |
|
|
|
386 |
|
Other assets |
|
|
86 |
|
|
|
86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
13,375 |
|
|
$ |
5,567 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
473 |
|
|
$ |
458 |
|
Accrued research and development |
|
|
1,171 |
|
|
|
2,125 |
|
Accrued restructuring |
|
|
1,113 |
|
|
|
|
|
Accrued other |
|
|
212 |
|
|
|
628 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
2,969 |
|
|
|
3,211 |
|
|
|
|
|
|
|
|
|
|
Derivative liability long term |
|
|
9 |
|
|
|
7,611 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
2,978 |
|
|
|
10,822 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
Stockholders equity (deficit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock, $.01 par value, 15,000 shares
authorized; 0 shares issued and outstanding at September
30, 2011 and December 31, 2010 |
|
|
|
|
|
|
|
|
Common stock, $.01 par value, 300,000 shares
authorized and 14,771 shares issued and outstanding at
September 30, 2011; 300,000 shares authorized and 5,501
shares issued and outstanding at December 31, 2010 |
|
|
148 |
|
|
|
55 |
|
Additional paid-in capital |
|
|
225,257 |
|
|
|
202,390 |
|
Accumulated deficit |
|
|
(215,008 |
) |
|
|
(207,700 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity (deficit) |
|
|
10,397 |
|
|
|
(5,255 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity (deficit) |
|
$ |
13,375 |
|
|
$ |
5,567 |
|
|
|
|
|
|
|
|
See accompanying notes.
F-24
OXiGENE, Inc.
Condensed Statements of Operations
(All amounts in thousands, except per share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Operating costs and expenses(1) : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
$ |
1,098 |
|
|
$ |
2,379 |
|
|
$ |
4,280 |
|
|
$ |
9,912 |
|
General and administrative |
|
|
1,309 |
|
|
|
1,256 |
|
|
|
4,095 |
|
|
|
4,637 |
|
Restructuring |
|
|
1,146 |
|
|
|
|
|
|
|
1,146 |
|
|
|
510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses |
|
|
3,553 |
|
|
|
3,635 |
|
|
|
9,521 |
|
|
|
15,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(3,553 |
) |
|
|
(3,635 |
) |
|
|
(9,521 |
) |
|
|
(15,059 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of warrants and other
financial instruments |
|
|
40 |
|
|
|
(9,893 |
) |
|
|
2,219 |
|
|
|
(6,987 |
) |
Investment income |
|
|
1 |
|
|
|
3 |
|
|
|
3 |
|
|
|
14 |
|
Other (expense) income, net |
|
|
(1 |
) |
|
|
(11 |
) |
|
|
(9 |
) |
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(3,513 |
) |
|
$ |
(13,536 |
) |
|
$ |
(7,308 |
) |
|
$ |
(22,027 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share |
|
$ |
(0.25 |
) |
|
$ |
(3.47 |
) |
|
$ |
(0.74 |
) |
|
$ |
(6.24 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of common shares
outstanding Basic and diluted |
|
|
13,969 |
|
|
|
3,896 |
|
|
|
9,870 |
|
|
|
3,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes share based compensation expense as
follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
$ |
5 |
|
|
$ |
62 |
|
|
$ |
171 |
|
|
$ |
109 |
|
General and administrative |
|
|
59 |
|
|
|
114 |
|
|
$ |
379 |
|
|
$ |
541 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share based compensation expense |
|
$ |
64 |
|
|
$ |
176 |
|
|
$ |
550 |
|
|
$ |
650 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-25
OXiGENE, Inc.
Condensed Statements of Cash Flows
(All amounts in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, |
|
|
|
2011 |
|
|
2010 |
|
Operating activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(7,308 |
) |
|
$ |
(22,027 |
) |
Adjustments to reconcile net loss to net cash used in operating
activities: |
|
|
|
|
|
|
|
|
Change in fair value of warrants and other financial instruments |
|
|
(2,219 |
) |
|
|
6,987 |
|
Depreciation |
|
|
44 |
|
|
|
77 |
|
Amortization of license agreement |
|
|
73 |
|
|
|
73 |
|
Stock-based compensation |
|
|
550 |
|
|
|
650 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash |
|
|
55 |
|
|
|
65 |
|
Prepaid expenses and other current assets |
|
|
62 |
|
|
|
232 |
|
Accounts payable, accrued expenses and other payables |
|
|
(234 |
) |
|
|
(4,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(8,977 |
) |
|
|
(17,943 |
) |
Investing activities: |
|
|
|
|
|
|
|
|
Changes in other assets |
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities |
|
|
|
|
|
|
40 |
|
Financing activities: |
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock, net of acquisition costs |
|
|
17,019 |
|
|
|
10,380 |
|
Proceeds from exercise of employee stock plans |
|
|
|
|
|
|
45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
17,019 |
|
|
|
10,425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
|
8,042 |
|
|
|
(7,478 |
) |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
4,602 |
|
|
|
13,932 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
12,644 |
|
|
$ |
6,454 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- cash Disclosures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair market value of stock issued in exchange for warrants |
|
$ |
5,381 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Fair market value reclassification of CEFF warrants to
equity in connection with warrant exchange |
|
$ |
3 |
|
|
$ |
|
|
Fair market value of private placement warrants at issuance |
|
$ |
|
|
|
$ |
11,868 |
|
|
|
|
|
|
|
|
|
|
Fair market value reclassification of CEFF warrants to
liabilities in connection with private placement |
|
$ |
|
|
|
$ |
103 |
|
|
|
|
|
|
|
|
|
|
Fair market value of warrants at exercise |
|
$ |
|
|
|
$ |
5,043 |
|
See accompanying notes.
F-26
OXiGENE, Inc.
Notes to Condensed
Financial Statements
September 30, 2011
(Unaudited)
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in
accordance with U.S. generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. They have
been prepared on a basis which assumes that the Company will continue as a going concern,
which contemplates the realization of assets and the satisfaction of liabilities and
commitments in the normal course of business. The financial statements do not include all of
the information and footnotes required by U.S. generally accepted accounting principles for
complete financial statements. In the opinion of management, however, all adjustments
(consisting primarily of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and nine months ended
September 30, 2011 are not necessarily indicative of the results that may be expected for the
year ending December 31, 2011.
The balance sheet at December 31, 2010 has been derived from the audited financial
statements at that date but does not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements. For further
information, refer to the financial statements and footnotes thereto included in the Annual
Report on Form 10-K for OXiGENE, Inc. (the Company) for the year ended December 31, 2010,
which can be found at www.oxigene.com. The Report of Independent Registered Public
Accounting Firm at the beginning of the Consolidated Financial Statements section in our
Annual Report on Form 10-K for the year ended December 31, 2010 includes a going concern
explanatory paragraph.
During the nine months ended September 30, 2011, the Company sold approximately 7,707,000
shares of common stock pursuant to an at the market (ATM) equity offering sales agreement
with McNicoll, Lewis & Vlak LLC, or MLV, resulting in net proceeds to the Company of
approximately $17,019,000. In October 2011 the Company sold approximately 86,000 shares of
common stock pursuant to the ATM sales agreement resulting in net proceeds to the Company of
approximately $128,000. There remains a total of approximately $3,700 in net proceeds of the
maximum amount allowed under the Companys prospectus supplement to Form S-3 dated July 8,
2011. No assurance can be given that the Company will sell any additional shares under the
ATM sales agreement, or, if it does, as to the price or amount of shares that it will sell, or
the dates on which any such sales will take place.
On September 1, 2011, the Company announced a restructuring plan designed to focus the
Companys capital resources on its most promising early-stage clinical programs and further
reduce its cash utilization. The Company announced the following key aspects of the
restructuring and their effects on the Companys operations including current and planned
clinical trials:
|
|
|
At this time, a Company sponsored Phase 3 registrational study of ZYBRESTAT in
patients with anaplastic thyroid cancer (ATC) funded entirely by Company financial
resources is not feasible. OXiGENE intends to continue to explore options for conducting
such a study, including potential collaborations with national and international head
and neck cancer cooperative groups. Future development decisions concerning ZYBRESTAT in
patients with ATC will be made following a review of all options by OXiGENEs management
and its board of directors. |
|
|
|
|
OXiGENE is concluding the final analysis of its completed Phase 2 study of ZYBRESTAT
in conjunction with standard chemotherapy and bevacizumab in patients with non-small
cell lung cancer (FALCON study). Once the final overall survival data is available a
decision regarding further development of the study of ZYBRESTAT in patients with NSCLC
will be made. Any future development decisions concerning the study of ZYBRESTAT in
patients with NSCLC will be made following review of final data by the Companys
management and board of directors. |
|
|
|
|
OXiGENE plans to continue to support the ongoing randomized Phase 2 trial of
ZYBRESTAT in combination with bevacizumab in patients with relapsed ovarian cancer,
which is an NCI-sponsored study being conducted by the Gynecologic Oncology Group (GOG),
an organization dedicated to clinical research in the field of gynecologic cancer. |
|
|
|
|
OXiGENE plans to continue support of the ongoing investigator-sponsored Phase 1 trial
of OXi4503 in patients with AML or myelodysplastic syndrome (MDS), being conducted at
the University of Florida and with support by The Leukemia & Lymphoma Societys Therapy
Acceleration Program. |
|
|
|
|
OXiGENE will evaluate additional early-stage development opportunities for its two
product candidates, ZYBRESTAT and OXi4503, subject to available resources at the time. |
|
|
|
|
The Company is reducing its workforce by 11 full-time equivalent employees or
approximately 61%. |
F-27
|
|
|
The Company will seek to reduce the amount of space it currently rents, primarily by
closing its office in Waltham, Massachusetts and by conducting its operations only out
of its South San Francisco office as soon as practicable. |
The Company offered severance benefits to the terminated employees, and anticipates
recording a total charge of approximately $1,200,000, primarily associated with personnel-related
termination costs. In order to provide for an orderly transition, the Company is implementing the
reduction in work force in a phased manner. The Company took a restructuring charge in the third
quarter of 2011 of approximately $1,146,000, with the remainder expected to be taken over the
following two quarters as the transition is effected. Substantially all of the charge is
expected to represent cash expenditures. The Company anticipates that, with its current financial
resources, it will be able to support the completion of the ongoing clinical studies outlined
above. Should the Company decide to initiate additional studies, it would need to raise
additional capital. Upon completion of the restructuring activities outlined above, the Company
expects to reduce expenses from its current levels by an annual amount of approximately
$2,000,000.
Based on the Companys current ongoing programs and operations and taking into
consideration the expected reductions in cash utilization resulting from its September 2011
reduction in force, the Companys expect its current cash resources will be sufficient to fund
operations through the first half of fiscal 2013. However, OXiGENEs cash requirements may
vary materially from those now planned for or anticipated by management due to numerous risks
and uncertainties. The Company is aggressively pursuing other forms of capital infusion
including public or private financing, strategic partnerships or other arrangements with
organizations that have capabilities and/or products that are complementary to the Companys
own capabilities and/or products, in order to continue the development of its product
candidates. If the Company is unable to access additional funds when needed, it may not be
able to continue the development of its product candidates or the Company could be required to
delay, scale back or eliminate some or all of its development programs and other operations.
Any additional equity financing, which may not be available to the Company or may not be
available on favorable terms, will likely be dilutive to its current stockholders and debt
financing, if available, may involve restrictive covenants. If the Company accesses funds
through collaborative or licensing arrangements, it may be required to relinquish rights to
some of its technologies or product candidates that it would otherwise seek to develop or
commercialize on its own, on terms that are not favorable to the Company. The Companys
ability to access capital when needed is not assured and, if not achieved on a timely basis,
will materially harm its business, financial condition and results of operations. As a result
of this uncertainty and the substantial doubt about the Companys ability to continue as a
going concern as of December 31, 2010, the Report of Independent Registered Public Accounting
Firm at the beginning of the Consolidated Financial Statements section in the Companys Annual
Report on Form 10-K for the year ended December 31, 2010 includes a going concern explanatory
paragraph. If the Company is unable to access additional funds in the
future or reduce cash expenditures as anticipated, it is likely
that the Companys 2011 Report of Independent Registered Public Accounting Firm will also
include a going concern explanatory paragraph.
Fair Value
The Company is required to disclose information on all assets and liabilities reported at
fair value that enables an assessment of the inputs used in determining the reported fair
values. The fair value hierarchy prioritizes valuation inputs based on the observable nature
of those inputs. The fair value hierarchy applies only to the valuation inputs used in
determining the reported fair value of the Companys investments and is not a measure of the
investment credit quality. The hierarchy defines three levels of valuation inputs:
Level 1 inputs |
|
Quoted prices in active markets; |
|
Level 2 inputs |
|
Generally include inputs with other observable
qualities, such as quoted prices in active markets
for similar assets or quoted prices for identical
assets in inactive markets; and |
|
Level 3 inputs |
|
Valuations based on unobservable inputs. |
As of September 30, 2011 and December 31, 2010, OXiGENE did not hold any assets or
liabilities subject to these standards, except the derivative liabilities and other financial
instruments discussed below in Warrants, which are valued using level 3 inputs. As of
September 30, 2011 and December 31, 2010, OXiGENE held $12,664,000 and $4,677,000 in cash,
cash equivalents and restricted cash, respectively. The Company has adopted the fair value
standard as it relates to the non-recurring fair value measurements, such as the assessment of
other long-lived assets for impairment.
Accrued Research and Development
The Company charges all research and development expenses, both internal and external
costs, to operations as incurred. The Companys research and development costs represent
expenses incurred from the engagement of outside professional service organizations, product
manufacturers and consultants associated with the development of the Companys
potential product candidates. The Company recognizes expenses associated with these
arrangements based on the completion of activities as specified in the applicable contracts.
Costs incurred under fixed-fee contracts are expensed ratably over the contract period absent
F-28
any knowledge that the services will be performed other than ratably. Costs incurred under
contracts with clinical trial sites and principal investigators are generally accrued on a
patient-treated basis consistent with the terms outlined in the contract. In determining costs
incurred on some of these programs, the Company takes into consideration a number of factors,
including estimates and input provided by internal program managers. Upon termination of such
contracts, the Company is normally only liable for costs incurred and committed to date. As a
result, accrued research and development expenses represent the Companys reasonably estimated
contractual liability to outside service providers at any particular point in time.
Accounting for Derivative Financial Instruments Indexed to and Potentially Settled in the
Companys Common stock
The Company evaluates all derivative financial instruments issued in connection with
its equity offerings when determining the proper accounting treatment for such
instruments in the Companys financial statements. The Company considers a number of
generally accepted accounting principles to determine such treatment. The Company
performs a number of steps to evaluate the features of the instrument against the
guidance provided in the accounting pronouncements in order to determine the appropriate
accounting treatment. The Companys policy with regard to settling outstanding financial
instruments is to settle those with the earliest maturity date first which essentially
sets the order of preference for settling the awards. In the majority of circumstances,
the Company utilizes the Black Scholes method to determine the fair value of its
derivative financial instruments. In some cases, where appropriate, the Company utilizes
the Binomial method or other appropriate methods to determine the fair value of such
derivative financial instruments. Key valuation factors in determining the fair value
include, but are not limited to, the current stock price as of the date of measurement,
the exercise price, the remaining contractual life, expected volatility for the
instrument and the risk-free interest rate. Changes in fair value are recorded as a gain
or loss in the Companys Statement of Operations with the corresponding amount recorded
as an adjustment to liability on its Balance Sheet. The expected volatility factor, in
particular, is subject to significant variability from measurement period to measurement
period and can result in large gains or losses from period to period.
Patents and Patent Applications
The Company has filed applications for patents in connection with technologies that it is
developing. The patent applications and any patents issued as a result of these applications
are important to the protection of the Companys technologies that may result from its
research and development efforts. Costs associated with patent applications and maintaining
patents are expensed as general and administrative expense as incurred.
Stock-based Compensation
The Company expenses the estimated fair value of all share-based payments issued to
employees over the vesting period. The Company has a 2005 Stock Plan (2005 Plan) that
provides for the award of stock options, restricted stock and stock appreciation rights to
employees, directors and consultants to the Company. The Company also has a 2009 Employee
Stock Purchase Plan (2009 ESPP).
The Company is required to estimate the level of award forfeitures expected to occur and
record compensation expense only for those awards that are ultimately expected to vest. This
requirement applies to all awards that are not yet vested. Accordingly, OXiGENE performs a
historical analysis of option awards that were forfeited prior to vesting, and ultimately
records total stock option expense that reflects this estimated forfeiture rate. In the
Companys calculation, it segregates participants into two distinct groups, (1) directors and
officers and (2) employees, and OXiGENE applies estimated forfeiture rates using the Straight
Line method. This analysis is re-evaluated quarterly and the forfeiture rate is adjusted as
necessary.
Income Taxes
The Company accounts for income taxes based upon the provisions of ASC 740, Income Taxes.
Under ASC 740, deferred taxes are recognized using the liability method whereby tax rates are
applied to cumulative temporary differences between carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes based on when
and how they are expected to affect the tax return.
Realization of the deferred tax assets is uncertain due to the historical losses of the
Company and therefore a full valuation allowance has been established.
2. Furniture and Fixtures, Equipment and Leasehold Improvements
Furniture and fixtures, equipment and leasehold improvements are recorded at cost.
Depreciation is recorded using the straight-line method over the estimated useful lives of the
assets, which range from three to five years. During the second quarter
F-29
of 2011, $676,000 in
fully depreciated assets, primarily consisting of leasehold improvements which were no longer
in use, have been written off.
Property and equipment consisted of the following at the dates indicated below:
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011 |
|
|
December 31, 2010 |
|
|
|
(in thousands) |
|
Leasehold improvements |
|
$ |
25 |
|
|
$ |
449 |
|
|
|
|
|
|
|
|
|
|
Equipment |
|
|
598 |
|
|
|
647 |
|
|
|
|
|
|
|
|
|
|
Furniture and fixtures |
|
|
213 |
|
|
|
416 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross assets |
|
|
836 |
|
|
|
1,512 |
|
|
|
|
|
|
|
|
|
|
Less accumulated depreciation |
|
|
(793 |
) |
|
|
(1,425 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment |
|
$ |
43 |
|
|
$ |
87 |
|
|
|
|
|
|
|
|
On September 1, 2011, the Company announced a restructuring plan designed to focus the
Companys capital resources on its most promising early-stage clinical programs and further
reduce its cash utilization. In connection with this restructuring, the Company recognized
approximately $721,000 of research and development restructuring expenses and approximately
$425,000 of general and administrative restructuring expenses in the quarter ended September 30,
2011. The restructuring expenses include severance payments, health and medical benefits and
related taxes, which are expected to be paid through the end of fiscal 2012.
The following table sets forth the components of the Companys restructuring for the
three-month period ended September 30, 2011 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts Paid Through |
|
|
Amounts Accrued as of |
|
|
|
Charges |
|
|
September 30, 2011 |
|
|
September 30, 2011 |
|
General and
Administrative
Employee severance
and related costs |
|
$ |
425 |
|
|
$ |
(21 |
) |
|
$ |
404 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
Development
Employee severance
and related costs |
|
|
721 |
|
|
|
(12 |
) |
|
|
709 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total restructuring |
|
$ |
1,146 |
|
|
$ |
(33 |
) |
|
$ |
1,113 |
|
|
|
|
|
|
|
|
|
|
|
In August 1999, the Company entered into an exclusive license agreement for the
commercial development, use and sale of products or services covered by certain patent rights
owned by Arizona State University. From the inception of the agreement through September 30,
2011, the Company has paid a total of $2,500,000 in connection with this license. The Company
capitalized the net present value of the total amount paid under the initial terms of the
license, or $1,500,000, and is amortizing this amount over the patent life or 15.5 years.
The Company expects to record amortization expense related to this license agreement of
approximately $8,100 per month through November 2014. The net book value at September 30, 2011
and December 31, 2010, was approximately $313,000 and $386,000, respectively. The Company
performs an impairment analysis of its long-lived assets if triggering events occur. The
Company conducts reviews for such triggering events periodically and, even though triggering
events such as a going concern opinion and continuing losses have occurred, the Company has
determined that there is no impairment to this asset. The license agreement provides for
additional payments from the Company upon the initiation of certain clinical trials or the
completion of
F-30
certain regulatory approvals, which payments could be accelerated upon the
achievement of certain financial milestones as defined in the agreement. To date, no clinical
trials triggering payments under the agreement have been completed and no regulatory approvals
have been obtained. The Company expenses these payments to research and development in the
period the obligation becomes both probable and estimable.
5. Stockholders Equity (Deficit), Common and Preferred Shares
The Company had 300,000,000 shares of common stock authorized as of September 30, 2011
and December 31, 2010. As of September 30, 2011, the Company had approximately 14,771,000
shares of common stock issued and outstanding.
In July 2010, the Company entered into an at the market (ATM) equity offering sales
agreement with MLV, pursuant to which it may issue and sell shares of its common stock from
time to time through MLV acting as its sales agent and underwriter. Sales of the Companys
common stock through MLV are made on the Companys principal trading market by means of
ordinary brokers transactions at market prices, in block transactions or as otherwise agreed
by MLV and the Company. The Company has paid MLV a commission rate of up to 7.0% of the gross
sales price per share of any common stock sold through MLV as agent under the sales agreement.
During the nine months ended September 30, 2011, the Company sold approximately 7,707,000
shares of common stock pursuant to the ATM sales agreement resulting in net proceeds to the
Company of approximately $17,019,000. In October 2011 the Company sold approximately 86,000
shares of common stock pursuant to the ATM sales agreement resulting in net proceeds to the
Company of approximately $128,000. Under the Companys current prospectus supplement to Form
S-3 dated July 8, 2011, there remains approximately $3,700 in net proceeds available to be
sold under the ATM arrangement. No assurance can be given that the Company will sell any
additional shares under the ATM sales agreement, or, if it does, as to the price or amount of
shares that it will sell, or the dates on which any such sales will take place.
Reverse Stock Split
In February 2011, the Companys board of directors voted unanimously to implement a 1:20
reverse stock split of the Companys common stock, following authorization of the reverse
split by a shareholder vote on December 21, 2010. The reverse split became effective on
February 22, 2011. All of the share and per share values discussed and shown in the
consolidated financial statements prior to this date have been adjusted to reflect the effect
of this reverse stock split.
Warrant Exchange Agreements
On January 18, 2011, OXiGENE entered into separate Warrant Exchange Agreements (Private
Placement Warrant Exchange) with each of the holders of Series A and Series C warrants to
purchase shares of common stock, issued in March 2010, pursuant to which, at the initial
closing, the warrant holders exchanged their outstanding Series A and Series C warrants having
ratchet price-based anti-dilution protections for (A) an aggregate of 1,096,933 shares of
common stock and (B) Series E Warrants to purchase an aggregate of 1,222,623 shares of common
stock. The Series E Warrants were not exercisable for nine months, had an exercise price of
$4.60 per share (reflecting the market value of the shares of common stock as of the close of
trading on January 18, 2011, prior to the entry into the Warrant Exchange Agreements), and did
not contain any price-based anti-dilution protections. In addition, the Company agreed to
seek shareholder approval to issue, in exchange for the Series E Warrants, up to 457,544
additional shares of common stock to the warrant holders in a subsequent closing. The initial
closing occurred on January 20, 2011, and the subsequent closing took place on March 21, 2011,
following a stockholder meeting on March 18, 2011. As a result, there were no Series A,
Series C or Series E warrants outstanding as of the subsequent closing date nor for any period
thereafter. Similar to the Series A and Series C warrants, the Series E Warrants were
classified as a liability during the period that they were outstanding.
In connection with the warrant exchange, the Company also amended its Stockholder Rights
Agreement with American Stock Transfer & Trust Company, LLC, dated as of March 24, 2005, as
amended as of October 1, 2008, October 14,
2009 and March 10, 2010, to provide that the provisions of the Stockholder Rights
Agreement shall not apply to the transactions contemplated by the Warrant Exchange Agreements.
The following table summarizes the number of shares of common stock of the Company issued
and the proceeds received during the nine month period ended September 30, 2011:
F-31
|
|
|
|
|
|
|
|
|
Shares Issued in Connection with: |
|
Shares Issued |
|
|
Net Proceeds |
|
|
|
(in thousands) |
|
Director fees |
|
|
8 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
ATM |
|
|
7,707 |
|
|
|
17,019 |
|
|
|
|
|
|
|
|
|
|
Private Placement Warrant Exchange |
|
|
1,554 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
|
9,270 |
|
|
$ |
17,019 |
|
|
|
|
|
|
|
|
Share issuances to our directors under the Director Compensation policy are described
below. The shares issued in connection with the Private Placement Warrant Exchange during the
nine month period ended September 30, 2011 relate to the Warrant Exchange Agreements described
above.
Warrants, Options, Non-Vested Stock, 2009 ESPP and Director Compensation Policy
Warrants
The following is a summary of the Companys warrant-related derivative liability activity for
the nine months ended September 30, 2011 (in thousands):
|
|
|
|
|
|
|
(In thousands) |
|
Derivative liability outstanding at December 31, 2010 |
|
$ |
7,611 |
|
Impact of warrant exchange agreements |
|
|
(6,071 |
) |
CEFF warrants amounts reclassified to equity |
|
|
(3 |
) |
Net decrease in fair value of all warrants |
|
|
(1,528 |
) |
|
|
|
|
|
|
|
|
|
Derivative liability outstanding at September 30, 2011 |
|
$ |
9 |
|
|
|
|
|
The table below summarizes the value of the warrant-related derivative liabilities recorded
on the Companys balance sheet (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, |
|
|
As of December 31, |
|
|
|
2011 |
|
|
2010 |
|
Warrants Issued in Connection with: |
|
Long-term |
|
|
Long-term |
|
Committed Equity
Financing Facility |
|
$ |
|
|
|
$ |
6 |
|
|
|
|
|
|
|
|
|
|
Direct Registration
Series I Warrants |
|
|
9 |
|
|
|
107 |
|
|
|
|
|
|
|
|
|
|
Private Placement Series
A Warrants |
|
|
|
|
|
|
4,143 |
|
|
|
|
|
|
|
|
|
|
Private Placement Series
C Warrants |
|
|
|
|
|
|
3,355 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative liability |
|
$ |
9 |
|
|
$ |
7,611 |
|
|
|
|
|
|
|
|
F-32
The gain (loss) from the change in fair value of warrants and other financial instruments
for the three and nine month periods ended September 30, 2011 and September 30, 2010 is
summarized below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Committed Equity Financing Facility Warrants |
|
$ |
|
|
|
$ |
5 |
|
|
$ |
3 |
|
|
$ |
95 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct Registration Warrants |
|
|
40 |
|
|
|
99 |
|
|
|
99 |
|
|
|
2,077 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess of value of the Private Placement
Warrants at issuance over the net proceeds
of the offering |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,433 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain recognized in connection with warrant
exchange agreements |
|
|
|
|
|
|
|
|
|
|
690 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private Placement Warrants |
|
|
|
|
|
|
(9,997 |
) |
|
|
1,427 |
|
|
|
(4,726 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gain (loss) on change in fair market
value of derivatives |
|
$ |
40 |
|
|
$ |
(9,893 |
) |
|
$ |
2,219 |
|
|
$ |
(6,987 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a summary of the Companys outstanding common stock warrants as of September
30, 2011 and December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Warrants outstanding as of: |
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
|
|
Warrants Issued in Connection with: |
|
Date of Issue |
|
|
Exercise Price |
|
|
September 30, 2011 |
|
|
December 31, 2010 |
|
Committed Equity
Financing Facility |
|
February 19, 2008 |
|
$ |
54.80 |
|
|
|
13 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct Registration
Series I Warrants |
|
July 20, 2009 |
|
$ |
42.00 |
|
|
|
141 |
|
|
|
141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private Placement Series
A Warrants |
|
March 11, 2010 |
|
$ |
5.60 |
|
|
|
|
|
|
|
1,536 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private Placement Series
C Warrants |
|
March 11, 2010 |
|
$ |
5.60 |
|
|
|
|
|
|
|
1,229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Warrants outstanding |
|
|
|
|
|
|
|
|
|
|
154 |
|
|
|
2,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note that as of December 31, 2010, the Committed Equity Financing Facility warrants were
accounted for as a liability. Effective with the Warrant Exchange described above, these warrants
have been reclassified as equity.
Private Issuance of Public Equity PIPE Warrants
On March 11, 2010, the Company completed a definitive agreement with certain institutional
investors to sell shares of its common stock and four separate series of warrants to purchase
common stock in a private placement. Gross proceeds of the financing were approximately
$7,500,000, before deducting placement agent fees and estimated offering expenses, and excluding
the subsequent exercises of the warrants.
The four separate series of warrants consisted of the following:
(A) Series A Warrants to initially purchase 328,947 shares of common stock, which were
exercisable immediately after issuance, had a 5-year term and had an initial per share exercise
price of $30.40;
F-33
(B) Series B Warrants to initially purchase 328,947 shares of common stock, which were
initially exercisable at a per share exercise price of $22.80, on the earlier of the six month
anniversary of the closing date or the date on which the Companys stockholders approved the
issuance of shares in the transaction, and expired on the later of three months from the effective
date of the resale registration statement covering such shares and seven months from the closing
date. These warrants expired on October 12, 2010;
(C) Series C Warrants to initially purchase 328,947 shares of common stock, and which would be
exercisable upon the exercise of the Series B Warrants and on the earlier of the six month
anniversary of the closing date or the date on which the Companys stockholders approved the
issuance of shares in the transaction, would expire five years after the date on which they become
exercisable, and had an initial per share exercise price of $22.80; and
(D) Series D Warrants to purchase shares of common stock. The Series D Warrants were not
immediately exercisable. The Company registered for resale 337,757 shares of common stock issuable
upon exercise of the Series D Warrants pursuant to an agreement with the warrant holders. All of
the Series D Warrants were exercised by November 4, 2010 and there are no Series D Warrants
outstanding after that date.
The Series A, B and C warrants listed above contained full ratchet anti-dilution features
based on the price and terms of any financings completed after March 11, 2010 as described in the
warrant agreements. All of the warrants listed above contained a cashless exercise feature as
described in the warrant agreements.
The Company determined that in accordance with Accounting Standards Codification (ASC) 480,
Distinguishing Liabilities from Equity, the Series A, B, and C warrants qualify for treatment as
liabilities due to provisions of the related warrant agreements that call for the number of
warrants and their exercise price to be adjusted in the event that the Company issues additional
shares of common stock, options or convertible instruments at a price that is less than the initial
exercise price of the warrants. The Company also determined that, in accordance with ASC 815,
Derivatives and Hedging, the Series D Warrants meet the definition of a derivative. The issuance
date fair market value of the Series A, B, C and D warrants of $11,868,000 was recorded as a
liability. The approximately $4,933,000 excess of the fair value of the liability recorded for
these warrants over the net proceeds received was recorded as a charge to
earnings and is included in Change in fair value of warrants and other financial instruments
within the Statement of Operations. Changes in the fair market value from the date of issuance to
the exercise date and reporting date, until exercised or cancelled will be recorded as a gain or
loss in the statement of operations.
As of December 31, 2010, all Series B and D warrants had either been exercised or expired.
On January 18, 2011, OXiGENE entered into separate Warrant Exchange Agreements with each of
the holders of Series A and Series C warrants to purchase shares of common stock, issued in
March 2010, pursuant to which, at the initial closing, the warrant holders exchanged their
outstanding Series A and Series C warrants having ratchet price-based anti-dilution
protections for (A) an aggregate of 1,096,933 shares of common stock and (B) Series E Warrants
to purchase an aggregate of 1,222,623 shares of common stock. The Series E Warrants were not
exercisable for six months, had an exercise price of $4.60 per share (reflecting the market
value of the shares of common stock as of the close of trading on January 18, 2011, prior to the
entry into the Warrant Exchange Agreements), and did not contain any price-based anti-dilution
protections. In addition, the Company agreed to seek shareholder approval to issue, in exchange
for the Series E Warrants, up to 457,544 additional shares of common stock to the warrant
holders in a subsequent closing. The Series E Warrants were accounted for as a liability from
the date of issuance to the date of exchange, all of which occurred during the first quarter of
fiscal 2011. The initial closing occurred on January 20, 2011, and the subsequent closing took
place on March 21, 2011, following the stockholder meeting on March 18, 2011. The Company
determined that in accordance with Accounting Standards Codification (ASC) 480, Distinguishing
Liabilities from Equity, the Series E warrants qualify for treatment as a liability during the
period that they were outstanding due to provisions of the related warrant agreement that allow
for the warrants to be net settled in shares of the Companys common stock under certain
circumstances as described in the agreement. There were no Series A, Series C or Series E
warrants outstanding as of September 30, 2011.
On January 20, 2011, the date of the initial closing of the Warrant Exchange Agreements,
the Company marked the existing Series A and C warrants to market at a combined fair value of
$6,633,000. These warrants were exchanged for Series E warrants, valued at $1,555,000, and
shares of common stock valued at $4,388,000. The difference between these items was recorded as
a gain on the transaction of $690,000. On the date of the subsequent closing, the fair value of
the Series E warrants was equal to the value of the 457,544 shares of common stock issued in the
exchange, and therefore there was no gain or loss on the transaction.
The table below summarizes the factors used to determine the value of the Series A and C
warrants outstanding during the nine month period ended September 30, 2011. The Company
established the fair value of the Series A and C warrants using the Black-Scholes option valuation
model:
F-34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant Valuation on date |
|
|
|
|
|
|
of Warrant Exchange |
|
|
|
|
|
|
January 19, 2011 |
|
|
Total Fair Market |
|
|
|
Series A |
|
|
Series C |
|
|
Value |
|
Stock Price |
|
$ |
4.32 |
|
|
$ |
4.32 |
|
|
|
|
|
Exercise Price |
|
$ |
5.60 |
|
|
$ |
5.60 |
|
|
|
|
|
Contractual life (in Years) |
|
4.1 years |
|
4.5 years |
|
|
|
|
Expected volatility |
|
|
82 |
% |
|
|
79 |
% |
|
|
|
|
Risk-free interest rate |
|
|
1.53 |
% |
|
|
1.68 |
% |
|
|
|
|
|
Fair market value (in thousands) |
|
$ |
3,663 |
|
|
$ |
2,970 |
|
|
$ |
6,633 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant Valuation as of |
|
|
|
|
|
|
December 31, 2010 |
|
|
Total Fair Market |
|
|
|
Series A |
|
|
Series C |
|
|
Value |
|
Stock Price |
|
$ |
4.60 |
|
|
$ |
4.60 |
|
|
|
|
|
Exercise Price |
|
$ |
5.60 |
|
|
$ |
5.60 |
|
|
|
|
|
Contractual life (in Years) |
|
4.2 years |
|
4.5 years |
|
|
|
|
Expected volatility |
|
|
81 |
% |
|
|
80 |
% |
|
|
|
|
Risk-free interest rate |
|
|
2.01 |
% |
|
|
2.01 |
% |
|
|
|
|
|
Fair market value (in thousands) |
|
$ |
4,143 |
|
|
$ |
3,355 |
|
|
$ |
7,498 |
|
Management determined the fair value of the Series E Warrants on the date of the initial
closing to be $1,555,000. This fair value was estimated based upon the $4.00 per share fair value
of the 457,544 shares of common stock expected to be exchanged for the Series E Warrants upon
shareholder approval adjusted for a 15% discount for lack of marketability which existed until the
expected shareholder vote. Management determined the fair value of the Series E warrants on the
date of the subsequent closing to be $993,000. This fair value was estimated based upon the $2.17
per share fair value of the 457,544 shares of common stock exchanged for the Series E Warrants.
Committed Equity Financing Facility (CEFF) with Kingsbridge Capital Limited
In February 2008, OXiGENE entered into a Committed Equity Financing Facility (CEFF) with
Kingsbridge Capital Limited (Kingsbridge), which was subsequently amended in February 2010 to
increase the commitment period, increase the draw down discount price and increase the maximum draw
period. Effective October 14, 2011, the CEFF was terminated by the Company pursuant to the terms
of the common stock purchase agreement with Kingsbridge.
Under the terms of the amended CEFF, Kingsbridge committed to purchase, subject to certain
conditions, up to 285,401 shares of the Companys common stock during the period ending May 15,
2012. While the CEFF was effective, OXiGENE was able to draw down in tranches at discounts as
described in detail in the common stock purchase agreement. In connection with the CEFF, the
Company issued a warrant to Kingsbridge to purchase 12,500 shares of its common stock at a price of
$54.80 per share exercisable beginning six months after February 19, 2008 and for a period of five
years thereafter. As of September 30, 2011, there were a total of 253,671 shares available for sale
under the CEFF, which has since been terminated.
Due to the initially indeterminate number of shares of common stock underlying the warrants
issued in connection with the Companys private placement on March 11, 2010, OXiGENE concluded that
the CEFF warrants should be recorded as a liability effective with the date of the private
placement. The fair value of the warrants on this date was reclassified from equity to derivative
liabilities. Changes in the fair market value from the date of the private placement to the
reporting date were recorded as a gain or loss in Change in fair value of warrants and other
financial instruments in the Statement of Operations. Effective with the warrant
F-35
exchange
agreements executed in January 2011 in connection with the March 2010 private placement as
described above, the number of shares underlying the warrants issued in connection with the
Companys private placement was no longer indeterminable, and the CEFF warrants were reclassified
to equity. The Company revalued these warrants on the effective date of the exchange and recorded
the gain in the Statement of Operations. The Company established the fair value of the CEFF
warrants using the Black-Scholes option valuation model as reflected in the table below:
|
|
|
|
|
|
|
|
|
|
|
Warrant Valuation as of: |
|
|
|
Date of Warrant |
|
|
|
|
|
|
Exchange |
|
|
|
|
|
|
January 19, 2011 |
|
|
December 31, 2010 |
|
Stock Price |
|
$ |
4.32 |
|
|
$ |
4.60 |
|
Exercise Price |
|
$ |
54.80 |
|
|
$ |
54.80 |
|
Contractual life (in Years) |
|
2.6 years |
|
|
2.6 years |
|
Expected volatility |
|
|
87 |
% |
|
|
96 |
% |
Risk-free interest rate |
|
|
0.82 |
% |
|
|
1.02 |
% |
|
|
|
|
|
|
|
|
|
Fair market value (in thousands) |
|
$ |
3 |
|
|
$ |
6 |
|
Direct Registration Warrants
On July 20, 2009, OXiGENE raised approximately $10,000,000 in gross proceeds, before deducting
placement agents fees and other offering expenses, in a registered direct offering (the
Offering) relating to the sale of 312,500 units, each unit consisting of (i) one share of common
stock, (ii) a five-year warrant (Direct Registration Series I) to purchase 0.45 shares of common
stock at an exercise price of $42.00 per share of common stock and (iii) a short-term warrant
(Direct Registration Series II) to purchase 0.45 shares of common stock at an exercise price of
$32.00 per share of common stock (the Units). The short-term warrants expired on September 24,
2010 consistent with the terms of the warrant, without being exercised.
OXiGENE determined that the Direct Registration Series I warrants should be classified as a
liability as they require delivery of registered shares of common stock and thus could require
net-cash settlement in certain circumstances. Accordingly, these warrants were recorded as a
liability at their fair value as of the date of their issuance and are revalued at each subsequent
reporting date.
The fair value of the direct registration warrants was determined using the Black-Scholes
option valuation model applying the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
Series I Warrant Valuation as of: |
|
|
|
September 30, 2011 |
|
|
December 31, 2010 |
|
|
|
Series I |
|
|
Series I |
|
Stock Price |
|
$ |
1.01 |
|
|
$ |
4.60 |
|
Exercise Price |
|
$ |
42.00 |
|
|
$ |
42.00 |
|
Contractual life (in Years) |
|
2.8 years |
|
|
3.6 years |
|
Expected volatility |
|
|
108 |
% |
|
|
86 |
% |
Risk-free interest rate |
|
|
0.42 |
% |
|
|
1.02 |
% |
|
|
|
|
|
|
|
|
|
Fair market value (in thousands) |
|
$ |
9 |
|
|
$ |
107 |
|
|
|
|
|
|
|
|
Options
The Companys 2005 Stock Plan as amended at the 2011 Annual Meeting of Stockholders in
October 2011 (the 2005 Plan) provides for the award of options, restricted stock and stock
appreciation rights to acquire up to 2,500,000 shares of the Companys common stock in the
aggregate. This number includes shares of its common stock, if any, that were subject to
awards under the Companys 1996 Stock Incentive Plan (the 1996 Plan) as of the date of
adoption of the 2005 Plan but which were returned or will be returned to the 2005 Plan upon
the cancellation, surrender or termination of such award. Currently, the 2005
F-36
Plan allows for
awards of up to 200,000 shares that may be granted to any one participant in any fiscal year.
For options subject to graded vesting, the Company elected the straight-line method of
expensing these awards over the service period.
The following is a summary of the Companys stock option activity under its 1996 Plan and
2005 Plan for the nine-month period ended September 30, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Aggregate |
|
|
|
|
|
|
|
Exercise |
|
|
Contractual |
|
|
Intrinsic |
|
|
|
Shares |
|
|
Price |
|
|
Life |
|
|
Value |
|
|
|
(In thousands) |
|
|
|
|
|
|
(Years) |
|
|
(In thousands) |
|
Options outstanding at December 31, 2010 |
|
|
326 |
|
|
$ |
28.49 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
17 |
|
|
$ |
1.14 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited and expired |
|
|
(78 |
) |
|
$ |
19.98 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at September 30, 2011 |
|
|
265 |
|
|
$ |
29.22 |
|
|
|
6.77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at September 30, 2011 |
|
|
154 |
|
|
$ |
35.63 |
|
|
|
5.51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options vested or expected to vest at
September 30, 2011 |
|
|
222 |
|
|
$ |
31.09 |
|
|
|
6.42 |
|
|
|
|
|
During the nine months ended September 30, 2011, approximately 7,800 options expired. As
of September 30, 2011, there was approximately $449,000 of unrecognized compensation cost
related to stock option awards that is expected to be recognized as expense over a weighted
average period of 2.15 years.
A total of 17,000 stock options were granted during the nine month period ended September
30, 2011 and 257,000 stock options were granted during the nine month period ended September
30, 2010.
The following stock options were granted during the three and nine month periods ended
September 30, 2011 and September 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Options Granted (In
thousands) |
|
|
17 |
|
|
|
83 |
|
|
|
17 |
|
|
|
257 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average fair value |
|
$ |
0.79 |
|
|
$ |
0.11 |
|
|
$ |
0.79 |
|
|
$ |
0.81 |
|
The fair values for the stock options granted were estimated at the date of grant using
the Black-Scholes option pricing model with the following weighted-average assumptions for the
three and nine month periods ended September 30, 2011 and 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Weighted Average Assumptions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-free interest rate |
|
|
0.85 |
% |
|
|
0.50 |
% |
|
|
0.85 |
% |
|
|
1.83 |
% |
Expected life |
|
5 years |
|
5 years |
|
5 years |
|
5 years |
Expected volatility |
|
|
90 |
% |
|
|
74 |
% |
|
|
90 |
% |
|
|
70 |
% |
Dividend yield |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
F-37
Restricted Stock
The Company recorded expense of $0 and approximately $11,000 during the three month
periods ended September 30, 2011 and September 30, 2010, respectively, related to restricted
stock awards granted in June 2007. The Company recorded expense of approximately $19,000 and
$71,000 during the nine month periods ended September 30, 2011 and September 30, 2010,
respectively. The restricted stock awards were valued based on the closing price of the
Companys common stock on their respective grant dates. Compensation expense has been
recognized on a straight-line basis over the 4 year vesting period of the awards.
Employee Stock Purchase Plan (2009 ESPP)
Under the 2009 Employee Stock Purchase Plan (the 2009 ESPP), employees have the option
to purchase shares of the Companys common stock at 85% of the closing price on the first day
of each purchase period or the last day of each purchase period (as defined in the 2009 ESPP),
whichever is lower, up to specified limits. Eligible employees are given the option to
purchase shares of the Companys common stock, on a tax-favored basis, through regular payroll
deductions in compliance with Section 423 of the Internal Revenue Code of 1986, as amended
(the Code). Currently, an aggregate of 125,000 shares of common stock may be issued under
the 2009 ESPP, subject to adjustment each year pursuant to the terms of the 2009 ESPP. The
Company recorded expense relating to the 2009 ESPP for the three month periods ended September
30, 2011 and September 30, 2010 of approximately $0 and $3,000, respectively. The Company
recorded expense relating to the 2009 ESPP for the nine month periods ended September 30, 2011
and September 30, 2010 of approximately $1,000 and $6,000, respectively. Pursuant to the 2009
ESPP provisions, each year beginning in 2010 there will be an annual increase in the number of
shares available for issuance under the ESPP on the first day of the new year in an amount
equal to the lesser of: 25,000 shares or 5% of the shares of Common Stock outstanding on the
last day of the preceding fiscal year.
Director Compensation Policy
In December 2009, the board of directors approved a policy which established compensation
to be paid to non- employee directors of the Company, to provide an inducement to obtain and
retain the services of qualified persons to serve as members of the board of directors. In
September 2011, the board of directors approved an amendment and restatement of the policy
(the Amended and Restated Director Compensation Policy). The Amended and Restated Director
Compensation Policy provides for annual compensation of $80,000 in cash/equity value to each
non-employee director payable in two payments of $40,000 in cash/equity value, on January 2
and July 1. Each non-employee director may elect to receive such compensation in a
combination of fully vested options and/or stock and up to 50% in cash. Prior to the
September 2011 amendment, each of the Companys non-employee directors were granted 1,250
fully vested shares of common stock on both January 2 and July 1 of each year they were a
director. The Company recorded expense for the three month periods ended September 30, 2011
and September 30, 2010, of $13,000 and $29,000, respectively, for these shares. The Company
recorded expense of approximately $48,000 and $229,000 during the nine month periods ended
September 30, 2011 and September 30, 2010, respectively, for these shares.
6. Agreements
In July 2010, the Company entered into an at the market equity offering sales agreement
with MLV, pursuant to which it may issue and sell shares of its common stock from time to time
through MLV acting as its sales agent and underwriter. Sales of the Companys common stock
through MLV are made on the Companys principal trading market by means of ordinary brokers
transactions at market prices, in block transactions or as otherwise agreed by MLV and the
Company. MLV uses its commercially reasonable efforts to sell the Companys common stock from
time to time, based upon instructions from the Company (including any price, time or size
limits the Company may impose). The Company has paid MLV a commission rate of up to 7.0% of
the gross sales price per share of any common stock sold through MLV as agent under the sales
agreement. The Company has also provided MLV with customary indemnification rights.
7. Net Loss Per Share
Basic and diluted net loss per share was calculated by dividing the net loss per share
attributed to OXiGENE shares of common stock by the weighted-average number of common shares
outstanding. All of the Companys common stock equivalents are anti-dilutive for all periods
in which the Company has reported a net loss. For the three month period ended June 30, 2010,
for which the Company reported net income, all of the Companys common stock equivalents,
except for the Series D warrants, have been excluded from the diluted net income per share
calculation due to the exercise price of those common stock equivalents exceeding the fair
market value of the Companys common stock as of the date of the calculation. Although the
exercise price of the Series D warrants was $0.001 per share, the period for determining the
number of shares of common stock underlying the Series D warrants did not begin until July 1,
2010 and therefore no shares associated with the Series D warrants were included in the
diluted net income per share calculation. Accordingly, common stock equivalents of
approximately 418,000 and 3,944,000 at September 30, 2011 and September 30, 2010,
respectively, were excluded from the calculation of weighted average shares for diluted net
loss per share.
F-38
8. Subsequent Event
From October 1, 2011 through November 10, 2011, the Company sold approximately 86,000
shares of common stock pursuant to the ATM sales agreement resulting in net proceeds to the
Company of approximately $128,000. The Company did not have any other material
recognizable or unrecognizable subsequent events that occurred after September 30, 2011 up
through the date the Company issued these financial statements.
Effective October 14, 2011, the Company terminated the CEFF pursuant to the terms of the
common stock purchase agreement with Kingsbridge. The warrant for 12,500 shares of common
stock issued to Kingsbridge remains outstanding until August 19, 2013, subject to certain
conditions.
F-39