☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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94-3171943
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification Number)
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Title of each class
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Name of each exchange on which registered
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Common Stock, $0.001 par value
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The Nasdaq Capital Market
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Preferred Stock Purchase Rights
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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• | the risk that our AEROSURF phase 2b clinical program, which is our only development program at this time, may be interrupted, delayed, or generate inconclusive or non-compelling data, or present an unacceptable benefit / risk profile due to suboptimal efficacy and / or safety profile, which would have a material adverse impact on our business and our ability to continue as a going concern; |
• | the risk that we will require significant additional capital to support our research and development activities and operations and have sufficient cash resources to service and repay debt, but our ability to raise such capital may be adversely impacted by: any delay or inability to complete our AEROSURF phase 2b clinical trial as planned, or if we obtain results from our clinical trial that are not sufficient to support a strategic transaction or equity financing; limitations on our ability to conduct primary offerings under our 2014 Universal Shelf, for our ATM Program or otherwise; the limited number of authorized shares available for issuance under our Amended and Restated Certificate of Incorporation, as amended, or failure to secure stockholder, if required, for a transaction involving greater than 20% of our outstanding common stock; any failure to comply with Nasdaq listing requirements, including with respect to the minimum bid price requirement, minimum market capitalization or minimum stockholders’ equity; and that unfavorable credit and financial markets may adversely affect our ability to fund our activities and that additional equity financings could result in substantial equity dilution; |
• | risks relating to our ability to manage our limited resources effectively and timely modify our business strategy as needed to respond to developments in our research and development activities, as well as in our business, our industry and other factors; |
• | risks related to our efforts to gain regulatory approval in the U.S. and elsewhere for our drug products, medical device and combination drug/device product candidates, including AEROSURF and our lyophilized KL4 surfactant, which is the drug component of AEROSURF and potentially could be developed as a separate surfactant drug product, including that changes in the national or international political and regulatory environment may make it more difficult to gain FDA or other regulatory approval of our drug products, medical device and combination drug/device product candidates; |
• | risks relating to the rigorous regulatory approval processes, including pre-filing activities, required for approval of any drug, combination drug-device product or medical device that we may develop, whether independently, with strategic development partners or pursuant to collaboration arrangements, including that the FDA or other regulatory authorities may not file, or may withhold or delay consideration of, any applications that we may submit, the FDA or other regulatory authorities will not be able to agree on matters raised during the regulatory review process and other interactions, or that we may be required to conduct significant additional activities to potentially gain approval of our product candidates, if ever; or that the FDA or other regulatory authorities may not approve our applications or may limit approval of our products to particular indications or impose unanticipated label limitations; |
• | the risk that we may be unable to identify and enter into strategic alliances, collaboration agreements or other strategic transactions that would provide capital to support our AEROSURF development activities and resources and expertise to support the registration and commercialization of AEROSURF in markets outside the U.S. and potentially support the development and, if approved, commercialization, of our other potential KL4 surfactant pipeline products; |
• | risks relating to the transfer of our manufacturing technology to contract manufacturing organizations (CMOs) and assemblers, and our CMOs’ ability to manufacture our lyophilized KL4 surfactant, which must be processed in an aseptic environment and tested using sophisticated and extensive analytical methodologies and quality control release and stability tests, for our research and development activities and, if approved, commercial applications; |
• | risks relating to our and our CMOs’ compliance status or ability to develop and manufacture our ADS and related components for preclinical and clinical studies of our combination drug/device product candidates and, if approved, commercial activities; |
• | the risk that we, our CMOs or any of our third-party suppliers, many of which are single-source providers, may encounter problems in manufacturing our KL4 surfactant drug product, the APIs used in the manufacture of our KL4 drug product, ADS and related components, and other materials on a timely basis or in an amount sufficient to support our needs; |
• | risks relating to our pledge of substantially all of our assets to secure our obligations under our loan facility (Deerfield Loan) with affiliates of Deerfield Management Company, L.P., which could make it more difficult for us to secure additional capital to satisfy our obligations and require us to dedicate cash flow to payments for debt service, which would reduce the availability of our cash flow to fund working capital, capital expenditures and other investment; moreover, we may be required to seek the consent of Deerfield to enter into certain strategic transactions; |
• | risks that reimbursement and health care reform may adversely affect our ability to secure appropriate funding an reimbursement; or that our products will not be accepted by physicians and others in the medical community; or that market conditions, the competitive landscape or other factors may make it difficult to launch and profitably sell our products; |
• | the risk that we, our strategic partners or collaborators will be unable to attract and retain key employees, including qualified scientific, professional and other personnel, in a competitive market for skilled personnel, which could have a material adverse effect on our commercial and development activities and our operations; |
• | the risks that we may be unable to maintain and protect the patents and licenses related to our products and that other companies may develop competing therapies and/or technologies; |
• | the risks that we may become involved in securities, product liability and other litigation and that our insurance may be insufficient to cover costs of damages and defense; and |
• | other risks and uncertainties detailed in “Risk Factors” and elsewhere in this Annual Report on Form 10-K, and in the documents incorporated by reference in this report. |
PART I
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ITEM 1.
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1
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ITEM 1A.
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27
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ITEM 1B.
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56
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ITEM 2.
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56
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ITEM 3.
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56
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PART II
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ITEM 5.
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56 | ||
ITEM 6.
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57
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ITEM 7.
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57
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ITEM 7A.
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73
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ITEM 8.
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73
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ITEM 9.
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73
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ITEM 9A.
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73
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ITEM 9B.
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74
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PART III
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ITEM 10.
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75
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ITEM 11.
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EXECUTIVE COMPENSATION
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ITEM 12.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
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ITEM 13.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
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ITEM 14.
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PRINCIPAL ACCOUNTING FEES AND SERVICES
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PART IV
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ITEM 15.
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75 | ||
76 |
· | We are focusing our efforts on advancing the AEROSURF clinical development program and our aerosolized KL4 surfactant pipeline candidates. We opened an investigational new drug application (IND) with the FDA and initiated a phase 2 clinical program for AEROSURF for the treatment of RDS in premature infants in November 2013. |
o | In May 2015, we announced the results of our initial AEROSURF phase 2a open label clinical trial conducted in 48 premature infants 29 to 34 week gestational age who were receiving nCPAP for RDS. The primary goal of this trial was to evaluate the safety and tolerability of a single exposure of aerosolized KL4 surfactant administered in three escalating inhaled doses (15, 30 and 45 minutes) to premature infants with RDS, compared to infants receiving nCPAP alone. In addition, a key objective of this trial was to establish proof of concept for our proprietary technology platform with (1) physiological data indicating that aerosolized KL4 surfactant is being delivered into the lung of premature infants, and (2) acceptable performance of the novel ADS in the NICU. Physiological data from this clinical trial suggest that, with AEROSURF, KL4 surfactant is being delivered to the lungs of premature infants with RDS and potentially improves gas exchange. In addition, parameters related to timing and frequency of the need for invasive surfactant therapy suggest that a single dose of AEROSURF may delay the time to invasive surfactant therapy due to nCPAP failure. Based on these encouraging results, we initiated a study to explore whether multiple or increased doses of AEROSURF may potentially reduce the need for invasive surfactant therapy. |
o | In October 2015, we completed enrollment in an AEROSURF phase 2a clinical expansion study in 32 premature infants 29 to 34 week gestational age who were receiving nCPAP for RDS. This trial was designed to evaluate safety and tolerability of aerosolized KL4 surfactant administered in higher (60 and 90 minutes) doses compared to infants receiving nCPAP alone. In November 2015, we announced top line data from our overall phase 2a clinical program in premature infants 29 to 34 week gestational age, including the previously announced data from the initial phase 2a clinical trial. The data suggest that aerosolized KL4 surfactant delivered to premature infants with RDS is generally safe and well tolerated and may be reducing the incidence of nCPAP failure. The reported adverse events and serious adverse events were those that are common and expected among premature infants with RDS and comparable to the control group. Through 72 hours after the start of treatment, AEROSURF treated patients, predominantly receiving a single dose, had lower rates of nCPAP failure compared to control in each of the last three dose groups studied. nCPAP failure rates were 53% in the control group (n=40) compared to 38% (n=8), 14% (n=7, excluding one patient who was inappropriately enrolled) and 38% (n=8) in the 45, 60 and 90 minute AEROSURF dose groups, respectively. |
o | We also are enrolling a phase 2a multicenter, randomized, open-label, controlled clinical study in 32 premature infants 26 to 28 week gestational age receiving nCPAP for RDS that is designed to evaluate safety and tolerability of aerosolized KL4 surfactant administered in two escalating (30 and 45 minutes) doses, with potential repeat doses, compared to infants receiving nCPAP alone. We anticipate completing enrollment in the second quarter of 2016 and releasing top-line results in the third quarter of 2016. As with the previous phase 2a clinical trials, the primary objective of this 2a clinical trial is to evaluate safety and tolerability and we are also assessing performance of the ADS in the NICU and available physiological data for information that indicates that aerosolized KL4 surfactant is being delivered to the lungs and potentially reducing or delaying the time to invasive surfactant therapy due to nCPAP failure. |
o | Based on the safety and tolerability profile observed in the phase 2a clinical program, we initiated the AEROSURF phase 2b clinical trial in premature infants 26 to 32 weeks gestational age receiving nCPAP for RDS. The trial is a multicenter, randomized, controlled study with masked treatment assignment in approximately 240 premature infants and is designed to evaluate the safety and tolerability of aerosolized KL4 surfactant (including with potential repeat doses) administered in two dose groups (25 and 50 minutes), compared to infants receiving nCPAP alone. We plan to evaluate the following endpoints: time to nCPAP failure (defined as the need for intubation and delayed surfactant therapy), incidence of nCPAP failure and physiological parameters indicating the effectiveness of lung function. The trial is expected to be conducted in up to 60 clinical sites in the U.S., Canada, Europe and Latin America. Enrollment is beginning with premature infants 29 to 32 week gestational age, and will include premature infants 26 to 28 weeks gestational age after completion of the ongoing phase 2a clinical trial in this age group. We anticipate completing enrollment for this clinical trial by the end of 2016 and releasing top-line results in the first quarter of 2017. |
· | We are also planning for the manufacture of a sufficient number of ADSs to support the AEROSURF phase 2b clinical trial. We are working with Battelle Memorial Institute (Battelle), which assisted us in the development and manufacture of our phase 2a clinic-ready ADS to manufacture a sufficient number of ADSs to support our continuing development activities and our phase 2b clinical trial. The ADS has been demonstrated to produce consistent and controlled output rates, particle size, and other aerosol characteristics throughout extended KL4 surfactant dosing periods. We believe the ADS represents a robust platform to support reliable and reproducible clinical development, potential commercialization of our AEROSURF combination drug / device product, if approved, and, in the future, further life-cycle product development. |
· | We are developing a lyophilized (freeze-dried) dosage form of our KL4 surfactant that can be stored as a dry substance and reconstituted to liquid form just prior to use and is being developed potentially to improve ease of use for healthcare providers, prolong shelf life and reduce the need for cold-chain storage. We are developing lyophilized KL4 surfactant initially for our AEROSURF development program. In the first quarter of 2015, we completed a technology transfer of our lyophilized surfactant manufacturing process to our contract manufacturing organization (CMO), Patheon Manufacturing Services LLC (Patheon), which manufactured a sufficient supply of clinical drug product to support our AEROSURF phase 2 clinical program. We are currently engaged in a second technology transfer to a new facility at Patheon. We also have entered into a manufacturing development agreement with Patheon for the further development of this lyophilized KL4 surfactant, potentially for our AEROSURF phase 3 program and, if approved, commercial supply. |
· | To achieve our business objectives over time, we will require significant additional capital and resources to support our operations, advance our development programs, manufacture our drug product and medical devices, and support the commercialization of our approved products in markets around the world. We continue to assess potential opportunities that could provide capital resources and strengthen our capabilities. |
o | In October 2014, we entered into a Collaboration Agreement with Battelle providing for further development of our ADS for use in our planned AEROSURF phase 3 clinical program and, if AEROSURF is approved, initial commercial supply. The collaboration involves a sharing of development expense and provides us the continued benefit of Battelle’s expertise in developing and integrating aerosol devices using innovative and advanced technologies. See, “– Business Operations – Strategic Alliances and Collaboration Arrangements – Battelle Collaboration Agreement.” |
o | We plan in the future to seek opportunities to enter into a significant strategic alliance, collaboration or other strategic transaction that would support our AEROSURF development activities, potentially by providing development, regulatory and commercial market expertise as well as financial resources, and, if approved, support the commercial introduction of AEROSURF in selected markets outside the U.S. Financial resources provided by such an alliance could take the form of upfront payments, milestone payments, commercialization royalties and a sharing of research and development expenses. |
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We plan to closely manage our cash resources and will seek additional capital, including potentially from strategic transactions and through future debt and equity financings, as we deem necessary to maintain and strengthen our financial position. However, with our current market capitalization, we may be constrained in our efforts by several factors, including: (i) our ability to conduct primary offerings, including under the ATM Program, is constrained by a restriction under our universal shelf registration statement on Form S-3 (File No. 333-196420), which was declared effective on June 13, 2014 (2014 Universal Shelf), that limits the value of primary securities offerings we may conduct in any 12-month period to no more than one-third of our public float; (ii) the number of authorized shares currently available for issuance under our Amended and Restated Certificate of Incorporation, as amended, likely would be insufficient to fund our activities through equity offerings; (iii) if in a financing, we seek to issue more than 20% of our outstanding shares of common stock, we may be required to first seek approval of our stockholders, a time-consuming and expensive process; (iv) if we fail to maintain compliance with Nasdaq listing requirements, including without limitation the minimum bid price, minimum market capitalization or minimum stockholders’ equity requirements, our common stock may be subject to delisting, which could affect the liquidity and value of our common stock.
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o | We continue to pursue non-dilutive funding opportunities, including in the form of U.S. Government-funded research and preclinical development initiatives that explore the use of our KL4 surfactant in the treatment of a range of respiratory diseases. Since 2012, we have received $4.1 million in funding, including approximately $1.9 million to fund our AEROSURF phase 2a clinical program. |
o |
In July 2015, we completed a registered public offering of 1,791,667 Series A units and 3,000,000 Series B units each at a price per unit of $8.40, resulting in gross proceeds of $40.25 million ($37.6 million net after underwriting discount and expenses). The proceeds included $5.0 million in non-cash consideration from affiliates of Deerfield Management, L.P. (Deerfield) in the form of a reduction in future interest payments due under the Deerfield Loan (discussed below). Each Series A unit consists of one share of common stock and a Series A warrant to purchase one share of common stock at an exercise price of $9.80 per share. Each Series B unit consists of a fully paid pre-funded Series B warrant to purchase one share of common stock at an exercise price of $8.40 per share, and a Series B warrant to purchase one share of common stock at an exercise price of $9.80 per share. See, Item 7 – Management Discussion and Analysis – Liquidity and Capital Resources – Financings Pursuant to Common Stock Offerings – Registered Public Offerings.”
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o | In February 2013, we entered into an At-the-Market Equity Offering Sales Agreement (Sales Agreement) with Stifel, Nicolaus & Company, Incorporated (Stifel), pursuant to which Stifel, as our exclusive agent, may sell through an “at-the-market” program (ATM Program), at such times that we may elect during a three-year term, up to a maximum of $25,000,000 of shares of our common stock. In February 2016, we entered into an amendment to the Sales Agreement to extend the term three years to February 11, 2019. As of December 31, 2015, approximately $23.0 million remains available under the ATM Program. |
o |
In February 2013, we entered into a secured loan agreement with Deerfield, under which we secured long-term debt of $30 million (Deerfield Loan). In July 2015, we entered into two amendments to the loan agreement, pursuant to which we prepaid $5 million of the outstanding principal amount, eliminated the initial principal payment due in February 2017; increased each of the remaining principal payments due in February 2018 (which may be deferred one year if we achieve a market capitalization milestone) and February 2019 to $12.5 million; agreed to pay $5 million in satisfaction of future interest obligations through issuance to Deerfield of $5 million securities in the July 2015 public offering; and reduced the rate of any remaining interest accruing under the Deerfield Loan from 8.75% to 8.25%. The loan agreement also includes certain negative covenants that may require us to seek Deerfield’s consent before entering into certain strategic transactions, which could impair our ability to enter into certain strategic transactions. See, “Item 7 – Management Discussion and Analysis – Liquidity and Capital Resources – Deerfield Loan.”
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· | We plan to continue prosecuting and protecting our rights in our KL4 surfactant drug products and drug delivery technologies through patents, patent term restoration, trademarks and trade secrets. We expect that, as we advance our development programs, we may identify opportunities to extend the duration of our market exclusivities, through new patents and other intellectual property. We also plan to utilize and seek regulatory designations that may provide post-approval market exclusivity for our approved products. See, “– Licensing, Patents and Other Proprietary Rights and Regulatory Designations.” |
· | We believe that our KL4 surfactant technology may potentially support a product pipeline to address a variety of debilitating respiratory conditions and diseases that could represent potentially significant market opportunities. While we remain focused on RDS, we have participated in investigator-initiated research programs and government-funded research and preclinical development initiatives that explore the use of our KL4 surfactant in the treatment of a range of respiratory diseases. For example, since 2012, we have participated in a U.S. Government-funded study to assess whether aerosolized KL4 surfactant may mitigate radiation-induced lung injury in an animal model. Although there can be no assurance, we may in the future support development activities to establish a proof-of-concept and, if successful, thereafter determine whether to seek strategic alliances or collaboration arrangements or pursue other financial alternatives to fund further development and, if approved, commercialization of additional KL4 surfactant indications. |
· | improved ease of use for healthcare practitioners, including potential elimination of the drug warming process allowing for shortened preparation time; and potential reduction of continuous cold chain storage and refrigeration requirements; |
· | potential for extended shelf life; and |
· | relatively lower viscosity than that of a liquid instillate, which may aid and/or improve the distribution of KL4 surfactant throughout the lung and potentially may reduce the frequency of transient peri-dosing events typically observed during administration of surfactants. |
· | full retention of the surface-tension lowering properties of a functioning surfactant necessary to restore lung function and maintain patency of the conducting airways; |
· | full retention of the surfactant composition upon aerosolization; and |
· | drug particle size believed to be suitable for deposition into the lung. |
AFECTAIR® Aerosol-Conducting Airway Connector
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· | physicians and scientists on staff and available under consulting arrangements who have expertise in pediatric and pulmonary medicine and extensive contacts in the neonatal medical community; |
· | expertise in the design and execution of preclinical experiments and studies to support drug development. We conduct certain development-related experiments and bench studies in-house and also engage professional research laboratories and collaborate with academic scientific centers to conduct animal studies and experiments requiring specialized equipment and expertise; |
· | expertise in the design, development and management of clinical trials. We have our own scientific, medical, biostatistics, and trial and data management capabilities. For the initial phase of the AEROSURF program, we have managed our clinical trial data, supported by third-party technology systems and independent consultants, and monitored all clinical activities using our clinical operations capabilities. We rely on scientific advisory committees and other medical and consulting experts to assist in the design and monitoring of clinical trials. We also have retained contract research organizations (CROs) to support our ongoing multi-center AEROSURF trials, including in the U.S., EU, Latin America and Canada; |
· | regulatory personnel with expertise in FDA regulatory matters. We also consult extensively with independent FDA and international regulatory experts, including former senior scientific staff of the FDA; |
· | engineering expertise to support development of our ADS and aerosol delivery technologies. In addition to our collaboration with Battelle, which has significant expertise in developing and integrating aerosol device technologies, we have our own engineering team that is focused on further optimizing our ADS; |
· | quality operations capabilities to assure compliance of our drug and device development activities with applicable regulations; |
· | we rely on CMOs to produce our lyophilized KL4 surfactant, APIs and other materials for our drug product. We plan to rely on third-party manufacturers to manufacture and assemble our ADS and related components; and |
· | our own analytical testing laboratory and research and medical device development laboratory. We also rely on a number of third-party analytical and testing laboratories to support our research activities and provide certain laboratory services in support of our manufacturing activities. |
• | seek collaborators for one or more of our development programs for territories that we had planned to retain or on terms that are less favorable than might otherwise be available; and/or |
• | relinquish or license on unfavorable terms our rights to technologies or product candidates that we otherwise would seek to develop or commercialize ourselves. |
• | the number of clinical sites; |
• | the size of the patient population; |
• | the severity of the disease under investigation; |
• | the eligibility and enrollment criteria for the study; |
• | the willingness of patients’ parents or guardians to participate in the clinical trial; |
• | the perceived risks and benefits of the product candidate under study; |
• | the existence of competing clinical trials; |
• | the existence of alternative available products; and |
• | geographical and geopolitical considerations. |
· | the FDA or a foreign regulator may disagree with the design or implementation of one or more clinical trials; |
· | the FDA or a foreign regulator may not deem a product candidate safe and effective for its proposed indication, or may deem a product candidate’s safety or other perceived risks to outweigh its clinical or other benefits; |
· | the FDA or a foreign regulator may not find the data from preclinical studies and clinical trials sufficient to support approval, or the results of clinical trials may not meet the level of statistical or clinical significance required by the FDA or the applicable foreign regulatory body for approval; |
· | the FDA or a foreign regulator may disagree with our interpretation of data from preclinical studies or clinical trials performed by us or third parties; |
· | the data collected from clinical trials may not be sufficient to support the submission of an NDA or other applicable regulatory filing; |
· | the FDA or a foreign regulator may require additional preclinical studies or clinical trials; |
· | the FDA or a foreign regulator may identify deficiencies in the formulation, quality control, labeling or specifications of our current or future product candidates; |
· | the FDA or a foreign regulator may grant approval contingent on the performance of costly additional post-approval clinical trials; |
· | the FDA or a foreign regulator also may approve our current or any future product candidates for a more limited indication or a narrower patient population than we originally requested; |
· | the FDA or a foreign regulator may not approve the labeling that we believe is necessary or desirable for the successful commercialization of our product candidates; |
· | the FDA or a foreign regulator may not approve of the manufacturing processes, controls or facilities of third-party manufacturers or testing labs with which we contract; or |
· | the FDA or a foreign regulator may change its approval policies or adopt new regulations in a manner rendering our clinical data or regulatory filings insufficient for approval. |
• | competently execute and complete our preclinical and clinical trials of our KL4 surfactant product candidates with scientific results that are sufficient to support further development and regulatory approval; |
• | receive the necessary regulatory approvals; |
• | obtain adequate supplies of the active pharmaceutical ingredients, manufactured to our specifications and on commercially reasonable terms; |
• | perform under agreements to supply drug substances, medical devices and related components and related services necessary to manufacture our KL4 surfactant product candidates; |
• | provide for sufficient manufacturing capabilities with CMOs, to produce sufficient drug product and ADSs and related materials to meet our preclinical and clinical development requirements; and |
• | obtain the capital necessary to fund our research and development efforts, including our business administration, preclinical and clinical organizations, and our quality and manufacturing operations. |
• | our substantial reliance on third-party collaborators, CROs, CMOs and suppliers; |
• | slow patient enrollment; |
• | long treatment time required to demonstrate effectiveness; |
• | lack of sufficient clinical supplies and material; |
• | adverse medical events or side effects in treated patients; |
• | lack of compatibility with complementary technologies; |
• | failure of a drug product candidate to demonstrate effectiveness; and |
• | lack of sufficient funds. |
• | We may not successfully develop an ADS that is acceptable for use in a phase 3 program and commercial environment, if at all, on a timely basis and such inability may delay or prevent initiation of our phase 3 clinical program. |
• | We will require access to sophisticated engineering capabilities. We have our own medical device engineering staff and we are currently working with Battelle, which has expertise in medical device development and medical device design and a successful track record in developing aerosolization systems for the medical and pharmaceutical industries. If for any reason we are unable to retain our own engineering capabilities, the agreement with Battelle is terminated, and we are unable to identify design engineers and medical device experts to support our development efforts, including for a clinic-ready ADS for use in our planned phase 3 clinical program and, potentially, for commercial use and later versions of the ADS, it would have a material adverse effect on our business strategy and impair our ability to commercialize or develop AEROSURF or other aerosolized KL4 surfactant products. |
• | We will also require additional capital to advance our development activities and plan to seek a potential strategic partner or third-party collaborator to provide financial support and potentially medical device development and commercialization expertise. There can be no assurance, however, that we will successfully identify or be able to enter into agreements with such potential partners or collaborators on terms and conditions that are favorable to us. If we are unable to secure the necessary medical device development expertise to support our development program, this could impair our ability to commercialize or develop AEROSURF or other aerosolized KL4 surfactant products. |
• | our alliance partners, distributors or collaborators may require that we transfer to them important rights to our products and/or product candidates; |
• | we may not be able to control the amount and timing of resources that our distributors or collaborators devote to the commercialization of our products; |
• | if our alliance partners, distributors or collaborators fail to perform their obligations under our distribution or commercialization arrangements to our satisfaction, we may not achieve our goals within the desired time, if at all, and projected sales and our revenues would suffer. We also may incur additional expense to terminate such arrangements and to identify and enter into arrangements with replacement distributors or collaborators; |
• | our alliance partners, distributors or collaborators may experience financial difficulties; and |
• | business combinations or significant changes in a collaborator’s business strategy may adversely affect a collaborator’s willingness or ability to perform its obligations under any arrangement, which would adversely affect our business. |
• | we may be unable to identify manufacturers with whom we might establish appropriate arrangements on acceptable terms, if at all, because the number of potential CMOs is limited and, after a product candidate is approved, the FDA must approve any transfer to a CMO. This approval could require one or more pre-approval inspections as well as a potentially lengthy qualification process. In addition, a new manufacturer would have to be educated in, or develop substantially equivalent processes for, production of our approved products after receipt of FDA approval. To qualify and receive regulatory approval for a new manufacturer could take as long as 2 years; |
• | we may implement a plan to execute a technology transfer of our manufacturing process to a CMO and, after investing significant time and resources, learn that the CMO we chose is unable to successfully complete the technology transfer and thereafter manufacture our products in accordance with our plan; |
• | CMOs might be unable to manufacture our products in the volume and to our specifications to meet our commercial and clinical needs, or we may have difficulty scheduling the production of drug product and devices in a timely manner to meet our timing requirements; |
• | CMOs may not perform as agreed, or may not remain in the CMO business for a lengthy time, or may refuse to renew an expiring agreement as expected, or may fail timely to produce a sufficient supply to meet our commercial and/or clinical needs; |
• | CMOs are subject to ongoing periodic unannounced inspection by the FDA, international health authorities, registered Notified Body(ies), the Drug Enforcement Administration, and/or corresponding state agencies to ensure strict compliance with cGMP and/or QSR and other government regulations and corresponding foreign standards. Although we do not have control over the day-to-day operations of any CMO we may use, we are responsible for ensuring compliance with these regulations and standards; |
• | if we desire to make our drug products and/or devices available outside the U.S. for clinical or commercial purposes, our CMOs would become subject to, and may not be able to comply with, corresponding manufacturing and quality system regulations of the various foreign regulators having jurisdiction over our activities abroad. Such failures could restrict our ability to execute our business strategies; |
• | if any third-party manufacturer makes improvements in the manufacturing process for our products, we may not have rights to, or may have to share, the intellectual property rights to any such innovation. Such an event could limit our ability to conduct technology transfers to alternate and successor manufacturers. We may be required to pay fees or other costs for access to such improvements; and |
• | we may have difficulty implementing changes or modifications to our manufacturing processes that may be required by the FDA or foreign regulator, if, for example, such changes would burden our CMO or otherwise disrupt operations, or our CMO could impose significant financial terms to implement any such change that could adversely affect our business. Failure to achieve such required changes or modifications could delay or prevent our gaining regulatory approval for our product candidates, or prevent us from continuing to market our approved products, which would have a material adverse effect on our business, financial condition and operations. |
• | the need to make necessary modifications to maintain a qualified facility; |
• | difficulties with production and yields, including manufacturing and completing all required release testing on a timely basis to meet demand; |
• | quality control and assurance problems related to, among other things, in-process monitoring and controls, and release and stability testing of our drug product, or materials and drug substances; |
• | casualty damage to a facility; and |
• | shortages of qualified personnel. |
• | equipment malfunctions or failures; |
• | technology malfunctions; |
• | interruption of material availability; |
• | work stoppages or slowdowns; |
• | damage to or destruction of the facility; |
• | regional power shortages; and |
• | product tampering. |
• | could impair our liquidity; |
• | could make it more difficult for us to satisfy our other obligations; |
• | require us to dedicate cash flow to payments on our debt obligations, which would reduce the availability of our cash flow to fund working capital, capital expenditures and other corporate requirements; |
• | impose restrictions on our ability to incur other indebtedness, grant liens on our assets, other than permitted indebtedness and permitted liens, and could impede us from obtaining additional financing in the future for working capital, capital expenditures, acquisitions and general corporate purposes; |
• | impose restrictions on us with respect to the use of our available cash, including in connection with future acquisitions; |
• | impose restrictions on us with respect to our ability to license our products in the U.S. as well as other markets around the world; |
• | could adversely affect our ability to enter into strategic transactions and similar agreements, or require us to obtain the consent of our lenders; |
• | make us more vulnerable in the event of a downturn in our business prospects and could limit our flexibility to plan for, or react to, changes in our licensing markets; and |
• | could place us at a competitive disadvantage when compared to our competitors who are not similarly restricted. |
• | the willingness of physicians and hospitals to utilize our products and the willingness of hospitals’ Pharmacy and Therapeutics (P&T) Committees to place our products on formulary or on the list of medical devices the hospital will purchase; |
• | the safety and efficacy of our products, both in fact and as perceived by the medical community, regulatory agencies and insurers and other payers, on both a short and long-term basis; |
• | the potential advantages of our products over alternative treatments; |
• | the relative convenience and ease of use; |
• | the prevalence and severity of any adverse events, including any unexpected adverse events of which we become aware; and |
• | the degree to which the market believes that we are able to manufacture our products and produce supply sufficient to meet market demand. |
• | the perception of the value-added provided by our products compared to the price of our products and the willingness of physicians and hospitals to pay |
• | the willingness of hospitals in the various markets, including those ex-U.S., to adopt continuous positive airway pressure (nCPAP) as a means of providing non-invasive respiratory support and for the administration of our aerosolized KL4 surfactant |
• | safe, effective and medically necessary; |
• | appropriate for the specific patient; |
• | cost-effective; and |
• | neither experimental nor investigational. |
• | agreements may be breached; |
• | agreements may not provide adequate remedies for the applicable type of breach; |
• | our trade secrets or proprietary know-how may otherwise become known; |
• | our competitors may independently develop similar technology; or |
• | our competitors may independently discover our proprietary information and trade secrets. |
• | developing products; |
• | undertaking preclinical testing and human clinical trials; |
• | obtaining FDA and other regulatory approvals or products; and |
• | manufacturing and marketing products. |
• | announcements of the results of clinical trials by us or our competitors; |
• | patient adverse reactions to our products; |
• | governmental approvals, delays in expected governmental approvals or withdrawals of any prior governmental approvals or public or regulatory agency concerns regarding the safety or effectiveness of our products; |
• | changes in the U.S. or foreign regulatory policy during the period of product development; |
• | changes in the U.S. or foreign political environment and the passage of laws, including tax, environmental or other laws, affecting the product development business; |
• | developments in patent or other proprietary rights, including any third-party challenges of our intellectual property rights; |
• | announcements of technological innovations by us or our competitors; |
• | announcements of new products or new contracts by us or our competitors; |
• | actual or anticipated variations in our operating results due to the level of development expenses and other factors; |
• | changes in financial estimates by securities analysts and whether our earnings meet or exceed the estimates; |
• | conditions and trends in the pharmaceutical and other industries; |
• | new accounting standards; and |
• | the occurrence of any of the risks described in these “Risk Factors” or elsewhere in this Annual Report on Form 10-K or our other public filings. |
• | uninsured expenses related to defense or payment of substantial monetary awards to claimants; |
• | a decrease in demand for our drug product candidates; |
• | damage to our reputation; and |
• | an inability to complete clinical trial programs or to commercialize our drug product candidates, if approved. |
ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. |
2015
|
2014
|
|||||||||||||||
High
|
Low
|
High
|
Low
|
|||||||||||||
Period:
|
||||||||||||||||
First Quarter
|
$
|
25.48
|
$
|
15.89
|
$
|
38.78
|
$
|
29.40
|
||||||||
Second Quarter
|
$
|
20.72
|
$
|
8.96
|
$
|
32.76
|
$
|
21.14
|
||||||||
Third Quarter
|
$
|
10.50
|
$
|
3.50
|
$
|
28.42
|
$
|
21.14
|
||||||||
Fourth Quarter
|
$
|
7.53
|
$
|
2.69
|
$
|
28.14
|
$
|
13.86
|
· | Company Overview and Business Strategy: this section provides a general description of our company and business plans. |
· | Critical Accounting Policies: this section contains a discussion of the accounting policies that we believe are important to our financial condition and results of operations and that require the exercise of judgment and use of estimates on the part of management in their application. In addition, all of our significant accounting policies, including the critical accounting policies and estimates, are discussed in Note 3 to the accompanying consolidated financial statements. |
· | Results of Operations: this section provides an analysis of our results of operations presented in the accompanying consolidated statements of operations, including comparisons of the results for the years ended December 31, 2015 and 2014. |
· | Liquidity and Capital Resources: this section provides a discussion of our capital resources, future capital requirements, cash flows, committed equity financing facilities, historical financing transactions, outstanding debt arrangements and commitments. |
(in thousands)
|
Years Ended
December 31,
|
|||||||
2015
|
2014
|
|||||||
Cost of product sales
|
$
|
929
|
$
|
2,671
|
(in thousands)
|
Years Ended
December 31,
|
|||||||
2015
|
2014
|
|||||||
Product development and manufacturing
|
$
|
14,446
|
$
|
14,920
|
||||
Medical and regulatory operations
|
7,125
|
8,126
|
||||||
Direct preclinical and clinical programs
|
7,317
|
3,644
|
||||||
Total Research and Development Expenses
|
$
|
28,888
|
$
|
26,690
|
(in thousands)
|
Years Ended
December 31,
|
|||||||
2015
|
2014
|
|||||||
Salaries & benefits
|
$
|
10,320
|
$
|
12,755
|
||||
Contracted services
|
11,943
|
7,064
|
||||||
Raw materials, aerosol devices and supplies
|
2,010
|
3,969
|
||||||
Rents and utilities
|
1,225
|
1,431
|
||||||
Depreciation
|
476
|
755
|
||||||
Contract manufacturing
|
1,568
|
87
|
||||||
Travel
|
616
|
749
|
||||||
Stock-based compensation
|
642
|
1,014
|
||||||
Other
|
863
|
1,315
|
||||||
Allocation to batch production
|
(775
|
)
|
(2,449
|
)
|
||||
Total
|
$
|
28,888
|
$
|
26,690
|
(in thousands)
|
Years Ended
December 31,
|
|||||||
2015
|
2014
|
|||||||
Selling, General and Administrative Expenses
|
$
|
11,004
|
$
|
16,732
|
(in thousands)
|
Years Ended
December 31,
|
|||||||
2015
|
2014
|
|||||||
Change in fair value of common stock warrant liability
|
$
|
851
|
$
|
3,791
|
(in thousands)
|
Years Ended
December 31,
|
|||||||
Other Income / (Expense):
|
2015
|
2014
|
||||||
Loss on debt extinguishment
|
$
|
(11,758
|
)
|
$
|
–
|
|||
Interest income
|
4
|
6
|
||||||
Interest expense
|
(4,583
|
)
|
(4,597
|
)
|
||||
Other income / (expense)
|
150
|
–
|
||||||
Other income / (expense), net
|
$
|
(16,187
|
)
|
$
|
(4,591
|
)
|
(in thousands)
|
December 31,
|
|||||||
2015
|
2014
|
|||||||
Cash interest expense
|
$
|
1,451
|
$
|
2,625
|
||||
Non-cash amortization of debt discounts
|
1,287
|
1,948
|
||||||
Debt discount write-off
|
707
|
–
|
||||||
Amortization of prepaid interest expense
|
971
|
–
|
||||||
Amortization of debt costs
|
12
|
19
|
||||||
Write-off of debt costs
|
66
|
–
|
||||||
Total Deerfield Loan interest expenses
|
4,494
|
$
|
4,592
|
(in thousands)
|
Years Ended
December 31,
|
|||||||
2015
|
2014
|
|||||||
Issuance of securities, net of expenses
|
$
|
32,629
|
$
|
–
|
||||
Exercise of common stock warrants and options
|
136
|
457
|
||||||
Principal payments on long-term debt
|
(5,000
|
)
|
–
|
|||||
Repayment of equipment loans
|
(62
|
)
|
(80
|
)
|
||||
Cash flows from financing activities, net
|
$
|
27,703
|
$
|
377
|
(in thousands)
|
December 31,
|
|||||||
2015
|
2014
|
|||||||
Note payable
|
$
|
25,000
|
$
|
30,000
|
||||
Unamortized discount
|
–
|
(9,698
|
)
|
|||||
Long-term debt, net of discount
|
$
|
25,000
|
$
|
20,302
|
(c) | Changes in internal controls |
DISCOVERY LABORATORIES, INC.
|
|||
Date: March 28, 2016
|
By:
|
/s/ Craig Fraser
|
|
Craig Fraser, Director, President, and Chief Executive Officer
|
Signature
|
Name & Title
|
Date
|
||
/s/ Craig Fraser
|
Craig Fraser
|
March 28, 2016
|
||
Director, President, and Chief Executive Officer
|
||||
(Principal Executive)
|
||||
/s/ John Tattory
|
John Tattory
|
March 28, 2016
|
||
Senior Vice President and Chief Financial Officer
|
||||
(Principal Financial and Accounting Officer)
|
||||
/s/ John R. Leone
|
John R. Leone
|
March 28, 2016
|
||
Director (Chairman of the Board)
|
||||
/s/ Joseph M. Mahady
|
Joseph M. Mahady
|
March 28, 2016
|
||
Director
|
||||
/s/ Bruce A. Peacock
|
Bruce A. Peacock
|
March 28, 2016
|
||
Director
|
||||
/s/ Marvin E. Rosenthale
|
Marvin E. Rosenthale, Ph.D.
|
March 28, 2016
|
||
Director
|
Exhibit No.
|
Description
|
Method of Filing
|
||
3.1
|
Amended and Restated Certificate of Incorporation filed on August 1, 2013
|
Incorporated by reference to Exhibit 3.1 to Discovery’s Quarterly Report on Form 10-Q, as filed with the SEC on August 8, 2013.
|
||
3.2
|
Certificate of Amendment to Amended and Restated Certificate of Incorporation filed on June 10, 2014
|
Incorporated by reference to Exhibit 3.1 to Discovery’s Current Report on Form 8-K, as filed with the SEC on June 10, 2014.
|
||
3.3
|
Certificate of Amendment to Amended and Restated Certificate of Incorporation, as amended, filed on January 21, 2016
|
Incorporated by reference to Exhibit 3.1 to Discovery’s Current Report on Form 8-K, as filed with the SEC on January 21, 2016.
|
||
3.4
|
Certificate of Designations, Preferences and Rights of Series A Junior Participating Cumulative Preferred Stock of Discovery, dated February 6, 2004
|
Incorporated by reference to Exhibit 2.2 to Discovery’s Form 8-A, as filed with the SEC on February 6, 2004.
|
||
3.5
|
Amended and Restated By-Laws of Discovery, as amended effective September 3, 2009
|
Incorporated by reference to Exhibit 3.1 to Discovery’s Current Report on Form 8-K, as filed with the SEC on September 4, 2009.
|
||
4.1
|
Form of Warrant dated February 13, 2013, issued to affiliates of Deerfield Management Co., LLP (Deerfield) under a Facility Agreement dated as of February 13, 2012 between Discovery and Deerfield
|
Incorporated by reference to Exhibit 4.1 to Discovery’s Current Report on Form 8-K, as filed with the SEC on June 14, 2013.
|
||
4.2
|
Form of Warrant dated December 3, 2013, issued to affiliates of Deerfield Management Co., LLP (Deerfield) on December 3, 2013 under a Facility Agreement dated as of February 13, 2012 between Discovery and Deerfield
|
Incorporated by reference to Exhibit 4.1 to Discovery’s Current Report on Form 8-K, as filed with the SEC on December 6, 2013.
|
||
4.3
|
Form of Warrant to Purchase Common Stock dated October 10, 2014, by and between Discovery and Battelle Memorial Institute
|
Incorporated by reference to Exhibit 4.11 to Discovery’s Quarterly Report on Form 10-Q, as filed with the SEC on November 7, 2014.
|
||
4.4
|
Form of Warrant to Purchase Common Stock dated October 10, 2014, by and between Discovery and Battelle Memorial Institute
|
Incorporated by reference to Exhibit 4.12 to Discovery’s Quarterly Report on Form 10-Q, as filed with the SEC on November 7, 2014.
|
||
4.5
|
Form of Series A Warrant dated July 22, 2015
|
Incorporated by reference to Exhibit 4.1 to Discovery’s Current Report on Form 8-K, as filed with the SEC on July 17, 2015.
|
||
4.6
|
Form of Pre-Funded Series B Warrant dated July 22, 2015
|
Incorporated by reference to Exhibit 4.2 to Discovery’s Current Report on Form 8-K, as filed with the SEC on July 17, 2015.
|
Exhibit No.
|
Description
|
Method of Filing
|
||
4.7
|
Form of Series B Warrant dated July 22, 2015
|
Incorporated by reference to Exhibit 4.3 to Discovery’s Current Report on Form 8-K, as filed with the SEC on July 17, 2015.
|
||
10.1+
|
Sublicense Agreement, dated as of October 28, 1996, between Johnson & Johnson, Ortho Pharmaceutical Corporation and Acute Therapeutics, Inc.
|
Incorporated by reference to Exhibit 10.6 to Discovery’s Registration Statement on Form SB-2/A, as filed with the SEC on April 18, 1997 (Commission File Number 333-19375).
|
||
10.2 +
|
Amended and Restated License Agreement by and between Discovery and Philip Morris USA Inc., d/b/a/ Chrysalis Technologies, dated March 28, 2008
|
Incorporated by reference to Exhibit 10.4 to Discovery’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, as filed with the SEC on May 9, 2008.
|
||
10.3 +
|
License Agreement by and between Discovery and Philip Morris Products S.A., dated March 28, 2008
|
Incorporated by reference to Exhibit 10.5 to Discovery’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, as filed with the SEC on May 9, 2008.
|
||
10.4+
|
Amended and Restated Sublicense and Collaboration Agreement made as of December 3, 2004, between Discovery and Laboratorios del Dr. Esteve, S.A.
|
Incorporated by reference to Exhibit 10.28 to Discovery’s Annual Report on Form 10-K for the year ended December 31, 2004, as filed with the SEC on March 16, 2005.
|
||
10.5+
|
Amended and Restated Supply Agreement, dated as of December 3, 2004, by and between Discovery and Laboratorios del Dr. Esteve, S.A.
|
Incorporated by reference to Exhibit 10.29 to Discovery’s Annual Report on Form 10-K for the year ended December 31, 2004, as filed with the SEC on March 16, 2005.
|
||
10.6*
|
Discovery’s 2007 Long Term Incentive Plan
|
Incorporated by reference to Exhibit 1.1 to Discovery’s Current Report on Form 8-K, as filed with the SEC on June 28, 2007.
|
||
10.7*
|
Form of 2007 Long-Term Incentive Plan Stock Option Agreement
|
Incorporated by reference to Exhibit 10.3 to Discovery’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, as filed with the SEC on August 9, 2007.
|
||
10.8*
|
Discovery’s 2011 Long-Term Incentive Plan
|
Incorporated by reference to Appendix II to Discovery’s Definitive Proxy Statement on Form DEF 14A, as filed with the SEC on August 15, 2011 (Commission File Number 000-26422).
|
||
10.9*
|
Form of Employee Option Agreement under Discovery’s 2011 Long-Term Incentive Plan
|
Incorporated by reference to Exhibit 10.2 to Discovery’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, as filed with the SEC on May 15, 2012.
|
||
10.10*
|
Form of Non-Employee Director Option Agreement under Discovery’s 2011 Long-Term Incentive Plan
|
Incorporated by reference to Exhibit 10.3 to Discovery’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, as filed with the SEC on May 15, 2012.
|
Exhibit No.
|
Description
|
Method of Filing
|
||
10.11*
|
Form of Restricted Stock Unit Award Agreement for Non-Employee Directors under Discovery’s 2011 Long-Term Incentive Plan
|
Incorporated by reference to Exhibit 10.11 to Discovery’s Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the SEC on March 16, 2015.
|
||
Discovery’s Amended and Restated 2011 Long-Term Incentive Plan effective as of January 22, 2016
|
Filed herewith.
|
|||
10.13*
|
Employment Agreement by and between the Company and Craig Fraser dated as of February 1, 2016.
|
Incorporated by reference to Exhibit 10.1 to Discovery’s Current Report on Form 8-K, as filed with the SEC on February 3, 2016
|
||
10.14*
|
Inducement Stock Option Award Agreement dated February 1, 2016 between Craig Fraser and Discovery under Discovery’s 2011 Long-Term Incentive Plan
|
Incorporated by reference to Exhibit 10.3 to Discovery’s Current Report on Form 8-K, as filed with the SEC on February 3, 2016.
|
||
10.15*
|
Employment Agreement dated as of December 19, 2014, by and between Discovery and Steven G. Simonson, M.D.
|
Incorporated by reference to Exhibit 10.4 to Discovery’s Quarterly Report on Form 10-Q, as filed with the SEC on May 11, 2015.
|
||
10.16*
|
Amendment dated December 29, 2014 to Employment Agreement dated as of December 19, 2014, effective as of April 1, 2015, by and between Discovery and Steven G. Simonson, M.D.
|
Incorporated by reference to Exhibit 10.5 to Discovery’s Quarterly Report on Form 10-Q, as filed with the SEC on May 11, 2015.
|
||
10.17*
|
Employment Agreement dated as of March 21, 2014, by and between Discovery and John A. Tattory
|
Incorporated by reference to Exhibit 10.1 to Discovery’s Quarterly Report on Form 10-Q, as filed with the SEC on May 12, 2014.
|
||
10.18*
|
Amendment dated December 29, 2014 to Employment Agreement dated as of March 21, 2014, by and between Discovery and John A. Tattory
|
Incorporated by reference to Exhibit 10.19 to Discovery’s Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the SEC on March 16, 2015.
|
||
10.19
|
Form of Indemnification Agreement between the Company and its named executive officers, including Craig Fraser, and directors.
|
Incorporated by reference to Exhibit 10.4 to Discovery’s Current Report on Form 8-K, as filed with the SEC on February 3, 2016
|
||
10.20
|
Lease Agreement dated May 26, 2004, and First Amendment to Lease Agreement, dated April 2, 2007, by and between TR Stone Manor Corp. and Discovery
|
Incorporated by reference to Exhibits 10.1 and 10.2 to Discovery’s Current Report on Form 8-K, as filed with the SEC on April 6, 2007.
|
||
10.21
|
Second Amendment to Lease Agreement, dated January 3, 2013 by and between TR Stone Manor Corp. and Discovery
|
Incorporated by reference to Exhibits 10.1 to Discovery’s Current Report on Form 8-K, as filed with the SEC on January 8, 2013.
|
Exhibit No.
|
Description
|
Method of Filing
|
||
10.22+
|
Master Services Agreement dated October 24, 2013 between Discovery and DSM Pharmaceuticals, Inc. (now known as Patheon Manufacturing Services LLC)
|
Incorporated by reference to Exhibit 10.2 to Discovery’s Quarterly Report on Form 10-Q, as filed with the SEC on November 12, 2013.
|
||
10.23+
|
Supply Agreement dated as of December 22, 2010 between by and between Corden Pharma (formerly Genzyme Pharmaceuticals LLC, now known as Corden Pharma) and Discovery
|
Incorporated by reference to Exhibit 10.1 to Discovery’s Current Report on Form 8-K, as filed with the SEC on December 29, 2010.
|
||
10.24+
|
Collaboration Agreement made as of October 10, 2014, by and between Discovery and Battelle Memorial Institute
|
Incorporated by reference to Exhibit 10.1 to Discovery’s Quarterly Report on Form 10-Q, as filed with the SEC on November 7, 2014.
|
||
10.25
|
Amendment dated as of August 4, 2015 to Collaboration Agreement dated as of October 14, 2014 between Discovery and Battelle Memorial Institute.
|
Incorporated by reference to Exhibit 10.3 to Discovery’s Quarterly Report on Form 10-Q, as filed with the SEC on August 10, 2015.
|
||
10.30+
|
Facility Agreement dated as of February 13, 2013, between Discovery and Deerfield
|
Incorporated by reference to Exhibit 10.1 to Discovery’s Current Report on Form 8-K/A, as filed with the SEC on March 15, 2013.
|
||
10.31
|
Amendment dated July 9, 2015 to Facility Agreement dated February 13, 2013 by and between the Company and Deerfield
|
Incorporated by reference to Exhibit 10.1 to Discovery’s Current Report on Form 8-K, as filed with the SEC on July 9, 2015.
|
||
10.32
|
Second Amendment dated July 22, 2015 to Facility Agreement dated February 13, 2013 by and between the Company and Deerfield
|
Incorporated by reference to Exhibit 10.1 to Discovery’s Current Report on Form 8-K, as filed with the SEC on July 24, 2015.
|
||
10.33
|
Registration Rights Agreement dated as of February 13, 2013, between Discovery and Deerfield
|
Incorporated by reference to Exhibit 10.2 to Discovery’s Current Report on Form 8-K/A, as filed with the SEC on March 15, 2013.
|
||
10.34
|
Security Agreement dated as of February 13, 2013, between Discovery and Deerfield
|
Incorporated by reference to Exhibit 10.3 to Discovery’s Current Report on Form 8-K/A, as filed with the SEC on March 15, 2013.
|
||
10.35
|
At-the-Market Equity Offering Sales Agreement dated February 11, 2013 between Discovery and Stifel Nicolaus & Company, Incorporated
|
Incorporated by reference to Exhibit 10.1 to Discovery’s Current Report on Form 8-K, as filed with the SEC on February 13, 2013.
|
||
10.36
|
Amendment No. 1 dated February 11, 2016, to the At-the-Market Equity Offering Sales Agreement dated February 11, 2013 between Discovery and Stifel Nicolaus & Company, Incorporated
|
Incorporated by reference to Exhibit 10.1 to Discovery’s Current Report on Form 8-K, as filed with the SEC on February 16, 2016.
|
||
Subsidiaries of Discovery
|
Filed herewith.
|
Exhibit No.
|
Description
|
Method of Filing
|
||
Consent of Ernst & Young LLP, independent registered public accounting firm
|
Filed herewith.
|
|||
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act
|
Filed herewith.
|
|||
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
Filed herewith.
|
|||
101.1
|
The following consolidated financial statements from the Discovery Laboratories, Inc. Annual Report on Form 10-K for the year ended December 31, 2015, formatted in Extensive Business Reporting Language (“XBRL”): (i) Balance Sheets as of December 31, 2015 and December 31, 2014, (ii) Statements of Operations for the years ended December 31, 2015 and December 31, 2014, (iii) Statements of Changes in Equity for the years ended December 31, 2015 and December 31, 2014, (iv) Statements of Cash Flows for the years ended December 31, 2015 and December 31, 2014, and (v) Notes to consolidated financial statements.
|
|||
101.INS
|
Instance Document
|
Filed herewith.
|
||
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
Filed herewith.
|
||
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
Filed herewith.
|
||
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
Filed herewith.
|
||
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
Filed herewith.
|
||
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
Filed herewith.
|
Contents
|
|
Page
|
|
Consolidated Financial Statements
|
|
Report of Independent Registered Public Accounting Firm
|
F-2
|
Balance Sheets as of December 31, 2015 and December 31, 2014
|
F-3
|
Statements of Operations for the years ended December 31, 2015 and 2014
|
F-4
|
Statements of Changes in Stockholders’ Equity for the years ended December 31, 2015 and 2014
|
F-5
|
Statements of Cash Flows for the years ended December 31, 2015 and 2014
|
F-6
|
Notes to consolidated financial statements
|
F-7
|
/s/ Ernst and Young LLP
|
|
Philadelphia, Pennsylvania
|
|
March 28, 2016
|
December 31,
2015
|
December 31,
2014
|
|||||||
ASSETS
|
||||||||
Current Assets:
|
||||||||
Cash and cash equivalents
|
$
|
38,722
|
$
|
44,711
|
||||
Inventory, net
|
–
|
27
|
||||||
Prepaid interest, current portion
|
1,710
|
–
|
||||||
Prepaid expenses and other current assets
|
362
|
821
|
||||||
Total current assets
|
40,794
|
45,559
|
||||||
Property and equipment, net
|
1,039
|
1,637
|
||||||
Restricted cash
|
225
|
225
|
||||||
Prepaid interest, non-current portion
|
2,319
|
–
|
||||||
Other assets
|
–
|
78
|
||||||
Total assets
|
$
|
44,377
|
$
|
47,499
|
||||
LIABILITIES & STOCKHOLDERS’ EQUITY
|
||||||||
Current Liabilities:
|
||||||||
Accounts payable
|
$
|
3,263
|
$
|
350
|
||||
Accrued expenses
|
7,582
|
6,116
|
||||||
Deferred revenue
|
–
|
43
|
||||||
Common stock warrant liability
|
223
|
1,258
|
||||||
Equipment loans, current portion
|
–
|
62
|
||||||
Total current liabilities
|
11,068
|
7,829
|
||||||
Long-term Debt:
|
||||||||
Long-term debt, gross
|
25,000
|
30,000
|
||||||
Discount on long-term debt
|
–
|
(9,698
|
)
|
|||||
Long-term debt, net
|
25,000
|
20,302
|
||||||
Other liabilities
|
43
|
169
|
||||||
Total liabilities
|
36,111
|
28,300
|
||||||
Stockholders’ Equity:
|
||||||||
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued or outstanding
|
–
|
–
|
||||||
Common stock, $0.001 par value; 36,000,000 shares authorized; 8,196,011 and 6,114,843 shares issued at December 31, 2015 and 2014, respectively; 8,194,519 and 6,113,351 shares outstanding at December 31, 2015 and 2014, respectively
|
8
|
6
|
||||||
Additional paid-in capital
|
590,490
|
546,255
|
||||||
Accumulated deficit
|
(579,178
|
)
|
(524,008
|
)
|
||||
Treasury stock (at cost); 1,492 shares
|
(3,054
|
)
|
(3,054
|
)
|
||||
Total stockholders’ equity
|
8,266
|
19,199
|
||||||
Total liabilities & stockholders’ equity
|
$
|
44,377
|
$
|
47,499
|
Year Ended December 31,
|
||||||||
2015
|
2014
|
|||||||
Revenues:
|
||||||||
Product sales
|
$
|
7
|
$
|
312
|
||||
Grant revenue
|
980
|
2,523
|
||||||
987
|
2,835
|
|||||||
Expenses:
|
||||||||
Cost of product sales
|
929
|
2,671
|
||||||
Research and development
|
28,888
|
26,690
|
||||||
Selling, general, and administrative
|
11,004
|
16,732
|
||||||
40,821
|
46,093
|
|||||||
Operating loss
|
(39,834
|
)
|
(43,258
|
)
|
||||
Change in fair value of common stock warrant liability
|
851
|
3,791
|
||||||
Other income / (expense):
|
||||||||
Loss on debt extinguishment
|
(11,758
|
)
|
–
|
|||||
Interest and other income
|
237
|
6
|
||||||
Interest and other expense
|
(4,666
|
)
|
(4,597
|
)
|
||||
Other income / (expense), net
|
(16,187
|
)
|
(4,591
|
)
|
||||
Net loss
|
$
|
(55,170
|
)
|
$
|
(44,058
|
)
|
||
Net loss per common share
|
||||||||
Basic
|
$
|
(7.98
|
) |
$
|
(7.28
|
) | ||
Diluted
|
$
|
(7.98
|
)
|
$
|
(7.84
|
)
|
||
Weighted average number of common shares outstanding
|
||||||||
Basic
|
6,967
|
6,078
|
||||||
Diluted
|
6,967
|
6,145
|
Consolidated Statements of Changes in Stockholders’ Equity
|
||||||||||||||||||||||||||||
(In thousands)
|
Common Stock
|
Treasury Stock
|
||||||||||||||||||||||||||
Shares
|
Amount
|
Additional
Paid-in
Capital
|
Accumulated
Deficit
|
Shares
|
Amount
|
Total
|
||||||||||||||||||||||
Balance – January 1, 2014
|
6,047
|
$
|
6
|
$
|
541,499
|
$
|
(479,950
|
)
|
(1
|
)
|
$
|
(3,054
|
)
|
$
|
58,501
|
|||||||||||||
Net Loss
|
–
|
–
|
–
|
(44,058
|
)
|
–
|
–
|
(44,058
|
)
|
|||||||||||||||||||
Issuance of common stock, 401(k) Plan employer match
|
43
|
–
|
944
|
–
|
–
|
–
|
944
|
|||||||||||||||||||||
Exercise of common stock warrants
|
20
|
–
|
803
|
–
|
–
|
–
|
803
|
|||||||||||||||||||||
Exercise of stock options for cash
|
1
|
–
|
30
|
–
|
–
|
–
|
30
|
|||||||||||||||||||||
Issuance of common stock, consultants
|
1
|
–
|
38
|
–
|
–
|
–
|
38
|
|||||||||||||||||||||
Stock-based compensation expense
|
3
|
–
|
2,941
|
–
|
–
|
–
|
2,941
|
|||||||||||||||||||||
Balance – December 31, 2014
|
6,115
|
$
|
6
|
$
|
546,255
|
$
|
(524,008
|
)
|
(1
|
)
|
$
|
(3,054
|
)
|
$
|
19,199
|
|||||||||||||
Net Loss
|
–
|
–
|
–
|
(55,170
|
)
|
–
|
–
|
(55,170
|
)
|
|||||||||||||||||||
Issuance of common stock, July 2015 financing
|
1,792
|
2
|
37,626
|
–
|
37,628
|
|||||||||||||||||||||||
Issuance of common stock, 401(k) Plan employer match
|
94
|
–
|
539
|
–
|
–
|
–
|
539
|
|||||||||||||||||||||
Issuance of common stock warrants
|
–
|
–
|
4,053
|
–
|
–
|
–
|
4,053
|
|||||||||||||||||||||
Exercise of common stock warrants
|
194
|
–
|
320
|
–
|
–
|
–
|
320
|
|||||||||||||||||||||
Stock-based compensation expense
|
1
|
–
|
1,697
|
–
|
–
|
–
|
1,697
|
|||||||||||||||||||||
Balance – December 31, 2015
|
8,196
|
$
|
8
|
$
|
590,490
|
$
|
(579,178
|
)
|
(1
|
)
|
$
|
(3,054
|
)
|
$
|
8,266
|
Year Ended December 31,
|
||||||||
2015
|
2014
|
|||||||
Cash flows from operating activities:
|
||||||||
Net loss
|
$
|
(55,170
|
)
|
$
|
(44,058
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation and amortization
|
712
|
818
|
||||||
Change in provision for excess inventory
|
(174
|
)
|
1,873
|
|||||
Stock–based compensation and 401(k) plan employer match
|
2,235
|
3,923
|
||||||
Fair value adjustment of common stock warrants
|
(851
|
)
|
(3,791
|
)
|
||||
Amortization of discount of long-term debt
|
1,287
|
1,948
|
||||||
Loss on debt extinguishment
|
11,758
|
–
|
||||||
Debt discount write-off
|
707
|
–
|
||||||
Loss on sale of equipment
|
84
|
–
|
||||||
Reduction in required restricted cash under lease agreement
|
–
|
100
|
||||||
Amortization of prepaid interest
|
971 |
–
|
||||||
Changes in:
|
||||||||
Inventory
|
201
|
(1,788
|
)
|
|||||
Accounts receivables
|
–
|
67 | ||||||
Prepaid expenses and other current assets
|
459
|
(44
|
)
|
|||||
Accounts payable
|
2,913
|
(1,083
|
)
|
|||||
Accrued expenses
|
1,466
|
1,331
|
||||||
Deferred revenue
|
(43
|
)
|
(96
|
)
|
||||
Other assets
|
67
|
–
|
||||||
Other liabilities
|
(126
|
)
|
(369
|
)
|
||||
Net cash used in operating activities
|
(33,504
|
)
|
(41,169
|
)
|
||||
Cash flows from investing activities:
|
||||||||
Purchase of property and equipment
|
(458
|
)
|
(780
|
)
|
||||
Proceeds from sale of property and equipment
|
270
|
–
|
||||||
Net cash used in investing activities
|
(188
|
)
|
(780
|
)
|
||||
Cash flows from financing activities:
|
||||||||
Proceeds from issuance of securities, net of expenses
|
32,629
|
–
|
||||||
Proceeds from exercise of common stock warrants and options
|
136
|
457
|
||||||
Principal payments on long-term debt
|
(5,000
|
)
|
–
|
|||||
Repayment of equipment loans
|
(62
|
)
|
(80
|
)
|
||||
Net cash provided by financing activities
|
27,703
|
377
|
||||||
Net decrease in cash and cash equivalents
|
(5,989
|
)
|
(41,572
|
)
|
||||
Cash and cash equivalents – beginning of year
|
44,711
|
86,283
|
||||||
Cash and cash equivalents – end of year
|
$
|
38,722
|
$
|
44,711
|
||||
Supplementary disclosure of cash flows information:
|
||||||||
Interest paid
|
$
|
1,468
|
$
|
2,630
|
(in thousands)
|
December 31,
|
|||||||
2015
|
2014
|
|||||||
Numerator:
|
||||||||
Net loss as reported
|
$
|
(55,170
|
)
|
$
|
(44,058
|
)
|
||
Less: income from change in fair value of warrant liability
|
(851
|
)
|
(3,791
|
)
|
||||
Numerator for diluted net loss per common share
|
$
|
(56,021
|
)
|
$
|
(47,849
|
)
|
||
Denominator:
|
||||||||
Basic weighted average common shares outstanding
|
6,967
|
6,078
|
||||||
Dilutive common shares from assumed warrant exercises
|
–
|
67
|
||||||
Diluted weighted average common shares outstanding
|
6,967
|
6,145
|
· | Level 1 – Quoted prices in active markets for identical assets and liabilities. |
· | Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
· | Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
Fair Value
|
Fair value measurement using
|
|||||||||||||||
(in thousands)
|
December 31,
2015
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Assets:
|
||||||||||||||||
Cash and cash equivalents
|
$
|
38,722
|
$
|
38,722
|
$
|
–
|
$
|
–
|
||||||||
Certificate of deposit
|
225
|
225
|
–
|
–
|
||||||||||||
Total Assets
|
$
|
38,947
|
$
|
38,947
|
$
|
–
|
$
|
–
|
||||||||
Liabilities:
|
||||||||||||||||
Common stock warrants
|
$
|
223
|
$
|
–
|
$
|
–
|
$
|
223
|
Fair Value
|
Fair value measurement using
|
|||||||||||||||
(in thousands)
|
December 31,
2014
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Assets:
|
||||||||||||||||
Cash and cash equivalents
|
$
|
44,711
|
$
|
44,711
|
$
|
–
|
$
|
–
|
||||||||
Certificate of deposit
|
225
|
225
|
–
|
–
|
||||||||||||
Total Assets
|
$
|
44,936
|
$
|
44,936
|
$
|
–
|
$
|
–
|
||||||||
Liabilities:
|
||||||||||||||||
Common stock warrants
|
$
|
1,258
|
$
|
–
|
$
|
–
|
$
|
1,258
|
(in thousands)
|
||||
Balance at January 1, 2014
|
$
|
5,425
|
||
Exercise of warrants (1)
|
(376
|
)
|
||
Change in fair value of common stock warrant liability
|
(3,791
|
)
|
||
Balance at December 31, 2014
|
$
|
1,258
|
||
Exercise of warrants (1)
|
(184
|
)
|
||
Change in fair value of common stock warrant liability
|
(851
|
)
|
||
Balance at December 31, 2015
|
$
|
223
|
Significant Unobservable Input
|
December 31,
|
|||||||
Assumptions of Level 3 Valuations
|
2015
|
2014
|
||||||
Historical volatility
|
159
|
%
|
55% – 84
|
%
|
||||
Expected term (in years)
|
0.2
|
0.1 – 1.1
|
||||||
Risk-free interest rate
|
0.15
|
%
|
0.03% – 0.31
|
%
|
December 31,
|
||||||||
(in thousands)
|
2015
|
2014
|
||||||
Manufacturing, laboratory & office equipment
|
$
|
6,290
|
$
|
9,154
|
||||
Furniture & fixtures
|
778
|
817
|
||||||
Leasehold improvements
|
2,437
|
2,718
|
||||||
Subtotal
|
9,505
|
12,689
|
||||||
Accumulated depreciation and amortization
|
(8,466
|
)
|
(11,052
|
)
|
||||
Property and equipment, net
|
$
|
1,039
|
$
|
1,637
|
December 31,
|
||||||||
(in thousands)
|
2015
|
2014
|
||||||
Salaries, bonus & benefits
|
$
|
2,387
|
$
|
2,332
|
||||
Research and development
|
3,254
|
1,641
|
||||||
Manufacturing operations
|
1,097
|
876
|
||||||
Professional fees
|
326
|
376
|
||||||
Sales and marketing
|
–
|
318
|
||||||
Other
|
518
|
573
|
||||||
Total accrued expenses
|
$
|
7,582
|
$
|
6,116
|
(in thousands)
|
December 31,
|
|||||||
2015
|
2014
|
|||||||
Note payable
|
$
|
25,000
|
$
|
30,000
|
||||
Unamortized discount
|
–
|
(9,698
|
)
|
|||||
Long-term debt, net of discount
|
$
|
25,000
|
$
|
20,302
|
Significant Unobservable Input
Assumptions of Level 3 Valuations
|
||||
Historical volatility
|
101%
|
|||
Expected term (in years)
|
5.2 – 6.0
|
|||
Risk-free interest rate
|
1.2% – 1.5%
|
(in thousands)
|
December 31,
|
|||||||
2015
|
2014
|
|||||||
Cash interest expense
|
$
|
1,451
|
$
|
2,625
|
||||
Non-cash amortization of debt discounts
|
1,287
|
1,948
|
||||||
Debt discount write-off
|
707
|
–
|
||||||
Amortization of prepaid interest expense
|
971
|
–
|
||||||
Amortization of debt costs
|
12
|
19
|
||||||
Write-off of debt costs
|
66
|
–
|
||||||
Total Deerfield Loan interest expenses
|
4,494
|
$
|
4,592
|
(in thousands, except price per share data)
|
December 31,
|
Exercise Price
|
Expiration Date
|
||||||||||
2015
|
2014
|
||||||||||||
Battelle – 2014 collaboration agreement(1)
|
107
|
107
|
$
|
70.00
|
10/10/2024
|
||||||||
Investors – July 2015 financing
|
4,792
|
–
|
$
|
9.80
|
07/22/2022
|
||||||||
Investors – July 2015 financing (prefunded)
|
2,857
|
–
|
–
|
07/22/2022
|
|||||||||
Deerfield – 2013 loan
|
500
|
500
|
$
|
39.34
|
2/13/2019
|
||||||||
Former employee
|
2
|
2
|
$
|
44.80
|
3/18/2016
|
||||||||
Investors – February 2011 financing
|
274
|
325
|
$
|
2.66
|
2/22/2016
|
||||||||
PharmaBio – October 2010 financing
|
–
|
6
|
$
|
57.40
|
10/13/2015
|
||||||||
Investors – June 2010 financing
|
–
|
85
|
$
|
84.00
|
6/22/2015
|
||||||||
Kingsbridge – June 2010 CEFF
|
–
|
6
|
$
|
93.66
|
12/11/2015
|
||||||||
PharmaBio – April 2010 financing
|
–
|
10
|
$
|
148.26
|
4/30/2015
|
||||||||
Investors – February 2010 financing
|
–
|
66
|
$
|
178.50
|
2/23/2015
|
||||||||
Total
|
8,532
|
1,107
|
(1) | See Note 12 for further details on the Battelle collaboration agreement |
December 31,
|
||||||||
2015
|
2014
|
|||||||
Stock Options and RSUs Outstanding
|
||||||||
2011 Plan
|
493
|
437
|
||||||
2007 Plan
|
17
|
18
|
||||||
1998 Plan
|
12
|
13
|
||||||
Total Outstanding
|
522
|
468
|
||||||
Available for Future Grants under 2011 Plan
|
420
|
476
|
(in thousands, except for weighted-average data)
|
||||||||||||
Stock Options
|
Shares
|
Weighted-
Average
Exercise
Price
|
Weighted-
Average
Remaining
Contractual
Term (In Yrs)
|
|||||||||
Outstanding at January 1, 2015
|
467
|
$
|
63.04
|
|||||||||
Granted
|
185
|
15.64
|
||||||||||
Forfeited or expired
|
(135
|
)
|
42.81
|
|||||||||
Outstanding at December 31, 2015
|
517
|
$
|
51.35
|
6.6
|
||||||||
Vested and exercisable at December 31, 2015
|
294
|
$
|
74.84
|
4.9
|
(in thousands, except for weighted-average data)
|
||||||||
Restricted Stock Units
|
Shares
|
Weighted-
Average
Grant
Date Fair
Value
|
||||||
Unvested at January 1, 2015
|
1
|
$
|
23.94
|
|||||
Awarded
|
5
|
$
|
6.72
|
|||||
Vested
|
(1
|
)
|
$
|
23.94
|
||||
Unvested at December 31, 2015
|
5
|
$
|
6.72
|
December 31,
|
||||||||
(in thousands)
|
2015
|
2014
|
||||||
Research and development
|
$
|
642
|
$
|
1,014
|
||||
Selling, general and administrative
|
1,054
|
1,927
|
||||||
Total
|
$
|
1,696
|
$
|
2,941
|
December 31,
|
||||||||
2015
|
2014
|
|||||||
Weighted average expected volatility
|
83%
|
100%
|
||||||
Weighted average expected term
|
5.5 years
|
5.4 years
|
||||||
Weighted average risk-free interest rate
|
1.50%
|
1.65%
|
||||||
Expected dividends
|
–
|
–
|
(in thousands)
|
December 31,
|
|||||||
2015
|
2014
|
|||||||
Income tax benefit, statutory rates
|
$
|
18,758
|
$
|
14,980
|
||||
State taxes on income, net of Federal benefit
|
3,760
|
2,871
|
||||||
Research and development tax credit
|
1,047
|
1,472
|
||||||
Employee related
|
(340
|
)
|
(2,131
|
)
|
||||
Warrant valuation related
|
289
|
1,289
|
||||||
Income tax benefit
|
23,514
|
18,481
|
||||||
Valuation allowance
|
(23,514
|
)
|
(18,481
|
)
|
||||
Income tax benefit
|
$
|
–
|
$
|
–
|
(in thousands)
|
December 31,
|
|||||||
2015
|
2014
|
|||||||
Long-term deferred tax assets:
|
||||||||
Net operating loss carryforwards (Federal and state)
|
$
|
218,203
|
$
|
191,643
|
||||
Research and development tax credits
|
13,917
|
12,927
|
||||||
Compensation expense on stock
|
2,776
|
2,588
|
||||||
Charitable contribution carryforward
|
6
|
7
|
||||||
Inventory reserve
|
–
|
907
|
||||||
Deferred revenue
|
–
|
16
|
||||||
Other accrued
|
469
|
1,088
|
||||||
Depreciation
|
482
|
2,630
|
||||||
Capitalized research and development
|
–
|
1,123
|
||||||
Total long-term deferred tax assets
|
235,853
|
212,929
|
||||||
Less: valuation allowance
|
(235,853
|
)
|
(212,929
|
)
|
||||
Deferred tax assets, net of valuation allowance
|
$
|
–
|
$
|
–
|
2015 Quarters Ended:
|
||||||||||||||||||||
(in thousands, except per share data)
|
Mar. 31
|
June 30
|
Sept. 30
|
Dec. 31
|
Total Year
|
|||||||||||||||
Revenues:
|
||||||||||||||||||||
Product sales
|
$
|
7
|
$
|
–
|
$
|
–
|
$
|
–
|
$
|
7
|
||||||||||
Grant revenues
|
184
|
75
|
66
|
655
|
980
|
|||||||||||||||
Total revenues
|
191
|
75
|
66
|
655
|
987
|
|||||||||||||||
Expenses:
|
||||||||||||||||||||
Cost of sales
|
929
|
–
|
–
|
–
|
929
|
|||||||||||||||
Research and development
|
7,082
|
7,129
|
6,452
|
8,225
|
28,888
|
|||||||||||||||
Selling, General and administrative
|
3,353
|
3,383
|
2,057
|
2,211
|
11,004
|
|||||||||||||||
Total expenses
|
11,364
|
10,512
|
8,509
|
10,436
|
40,821
|
|||||||||||||||
Operating loss
|
(11,173
|
)
|
(10,437
|
)
|
(8,443
|
)
|
(9,781
|
)
|
(39,834
|
)
|
||||||||||
Change in fair value of common stock warrant liability
|
(31
|
)
|
469
|
139
|
274
|
851
|
||||||||||||||
Other expense, net
|
(975
|
)
|
(1,358
|
)
|
(13,252
|
)
|
(602
|
)
|
(16,187
|
)
|
||||||||||
Net loss
|
$
|
(12,179
|
)
|
$
|
(11,326
|
)
|
$
|
(21,556
|
)
|
$
|
(10,109
|
)
|
$
|
(55,170
|
)
|
|||||
Net loss per common share - basic
|
$
|
(1.96
|
)
|
$
|
(1.82
|
)
|
$
|
(2.80
|
)
|
$
|
(1.26
|
)
|
$
|
(7.98
|
)
|
|||||
Net loss per common share - diluted
|
$
|
(1.96
|
)
|
$
|
(1.82
|
)
|
$
|
(2.80
|
)
|
$
|
(1.26
|
)
|
$
|
(7.98
|
)
|
|||||
Weighted average number of common shares outstanding - basic
|
6,114
|
6,125
|
7,550
|
8,050
|
6,967
|
|||||||||||||||
Weighted average number of common shares outstanding - diluted
|
6,114
|
6,125
|
7,550
|
8,050
|
6,967
|
2014 Quarters Ended:
|
||||||||||||||||||||
(in thousands, except per share data)
|
Mar. 31
|
June 30
|
Sept. 30
|
Dec. 31
|
Total Year
|
|||||||||||||||
Revenues:
|
||||||||||||||||||||
Product sales
|
$
|
28
|
$
|
42
|
$
|
106
|
$
|
136
|
$
|
312
|
||||||||||
Grant revenues
|
3
|
1,051
|
421
|
1,048
|
2,523
|
|||||||||||||||
Total revenues
|
31
|
1,093
|
527
|
1,184
|
2,835
|
|||||||||||||||
Expenses:
|
||||||||||||||||||||
Cost of sales
|
781
|
731
|
257
|
902
|
2,671
|
|||||||||||||||
Research and development
|
5,590
|
6,858
|
6,471
|
7,771
|
26,690
|
|||||||||||||||
Selling, General and administrative
|
4,423
|
4,446
|
4,126
|
3,737
|
16,732
|
|||||||||||||||
Total expenses
|
10,794
|
12,035
|
10,854
|
12,410
|
46,093
|
|||||||||||||||
Operating loss
|
(10,763
|
)
|
(10,942
|
)
|
(10,327
|
)
|
(11,226
|
)
|
(43,258
|
)
|
||||||||||
Change in fair value of common stock warrant liability
|
378
|
1,448
|
173
|
1,792
|
3,791
|
|||||||||||||||
Other expense, net
|
(1,091
|
)
|
(1,129
|
)
|
(1,170
|
)
|
(1,201
|
)
|
(4,591
|
)
|
||||||||||
Net loss
|
$
|
(11,476
|
)
|
$
|
(10,623
|
)
|
$
|
(11,324
|
)
|
$
|
(10,635
|
)
|
$
|
(44,058
|
)
|
|||||
Net loss per common share - basic
|
$
|
(1.96
|
)
|
$
|
(1.68
|
)
|
$
|
(1.82
|
)
|
$
|
(1.68
|
)
|
$
|
(7.28
|
)
|
|||||
Net loss per common share - diluted
|
$
|
(1.96
|
)
|
$
|
(1.96
|
)
|
$
|
(1.82
|
)
|
$
|
(2.10
|
)
|
$
|
(7.84
|
)
|
|||||
Weighted average number of common shares outstanding - basic
|
6,052
|
6,076
|
6,086
|
6,097
|
6,078
|
|||||||||||||||
Weighted average number of common shares outstanding - diluted
|
6,052
|
6,134
|
6,086
|
6,111
|
6,145
|
SECTION 1. | PURPOSE |
SECTION 2. | DEFINITIONS |
(a) | “Award” shall mean any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Award, Dividend Equivalent, Other Stock-Based Award, or cash granted under the Plan. |
(b) | “Award Agreement” shall mean any written agreement, contract, or other instrument or document, including an electronic communication, as may from time to time be designated by the Company as evidencing any Award granted under the Plan. |
(c) | “Board” shall mean the Board of Directors of the Company. |
(d) | “Cause”, with respect to any Employee or Consultant of the Company or a Subsidiary, shall have the meaning set forth in such person’s employment, consulting or other applicable agreement, or, in the absence of any such agreement or if such term is not defined in any such agreement, shall mean any one or more of the following, as determined by the Committee: |
(i) | willful misconduct or gross negligence in the performance of such person’s duties; |
(ii) | willful and continued failure or refusal to perform satisfactorily any duties reasonably requested in the course of such person’s employment by, or service to, the Company (other than a failure resulting from such person’s disability); or |
(iii) | fraudulent, dishonest or other improper conduct engaged in by such person that causes, or has the potential to cause, harm to the Company or any of its Subsidiaries, or its or their business or reputation, including, without limitation, such person’s violation of any policies of the Company applicable to such person, such person’s violation of laws, rules or regulations applicable to such person, criminal activity, habitual drunkenness or use of illegal drugs. |
(e) | “Change in Control” shall have the meaning, if any, set forth in a Participant’s employment, consulting or other applicable agreement, or, if such term is not defined in any such agreement, shall mean either a “Change in Control” as defined in subsection (e)(i) or a “409A Change in Control” as defined in subsection (e)(ii), as specified in the applicable Award Agreement. If no definition is specified, the term shall mean a 409A Change in Control. |
(i) | A “Change in Control” shall mean the occurrence of any of the following events: |
(A) | the acquisition, directly or indirectly by any Person (other than the Company, any trustee or other fiduciary under an employee benefit plan of the Company, or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company), of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than thirty-five percent (35%) of the total combined voting power of the Company’s outstanding securities; |
(B) | a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a majority of the Board ceases to consist of Incumbent Members, which term means members of the Board on the first day of such period and any person becoming a member of the Board subsequent to such date whose election or nomination for election was approved by not less than two-thirds of the members of the Board who then comprised the Incumbent Directors; |
(C) | the Company combines with another company and is the surviving corporation but, immediately after the combination, the shareholders of the Company immediately prior to the combination hold, directly or indirectly, by reason of their being stockholders of the Company, fifty percent (50%) or less of the voting stock of the combined entity; or |
(D) | a liquidation of the Company, a sale of all or substantially all of the Company’s assets, or a merger, consolidation or similar transaction in which the Company is not the surviving entity or survives as a wholly-owned or majority-owned subsidiary of another entity. |
(ii) | “409A Change in Control” shall mean the occurrence of any of the following events: |
(A) | any Person (other than (1) the Company, or (2) any trustee or other fiduciary under an employee benefit plan of the Company), is or becomes the beneficial owner (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of securities of the Grantee’s Employer (as defined below) by reason of having acquired such securities during the 12-month period ending on the date of the most recent acquisition (not including any securities acquired directly from the Company or its Affiliates) representing thirty percent (30%) or more of the total voting power of the Grantee’s Employer’s then outstanding voting securities; |
(B) | the majority of members of the Board of the Grantee’s Employer is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board of the Grantee’s Employer before the date of the appointment; |
(C) | there is consummated a merger or consolidation of the Grantee’s Employer or any subsidiary thereof with any other corporation or other entity, resulting in a change described in clauses (A), (B), (D), or (E) of this definition, other than (1) a merger or consolidation that would result in the voting securities of the Grantee’s Employer outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent entity) more than sixty percent (60%) of the total voting power of the voting securities of the Grantee’s Employer or such surviving or parent entity outstanding immediately after such merger or consolidation or (2) a merger or consolidation effected to implement a recapitalization of the Company or the Grantee’s Employer (or similar transaction) in which no Person, directly or indirectly, acquired forty percent (40%) or more of the total voting power of the then outstanding securities of the Grantee’s Employer (not including any securities acquired directly from the Company or its Affiliates); |
(D) | a liquidation of the Grantee’s Employer involving the sale to any Person of at least forty percent (40%) of the total gross fair market value of all of the assets of the Grantee’s Employer immediately before the liquidation; or |
(E) | the sale or disposition by the Grantee’s Employer or any direct or indirect subsidiary of the Grantee’s Employer to any Person (other than any Subsidiary) of assets that have a total fair market value equal to forty percent (40%) or more of the total gross fair market value of all of the assets of the Grantee’s Employer and its subsidiaries (taken as a whole) immediately before such sale or disposition (or any transaction or related series of transactions having a similar effect), other than a sale or disposition by the Company or the Grantee’s Employer or any direct or indirect subsidiary of either to an entity at least sixty percent (60%) of the total voting power of the voting securities of which is beneficially owned by shareholders of the Company or the Grantee’s Employer in substantially the same proportions as their beneficial ownership of the Company or the Grantee’s Employer immediately prior to such sale. |
(f) | “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time. |
(g) | “Committee” shall mean a committee of the Board, acting in accordance with the provisions of Section 3, designated by the Board to administer the Plan and composed of not less than two Directors. Each member of the Committee shall qualify as an “outside director” as defined under Section 162(m) of the Code and the regulations promulgated thereunder and as a “non-employee director” under Rule 16b-3 promulgated under the 1934 Act, and shall satisfy any other requirements designated by the Board. To the extent the Committee has delegated authority (including as described in Section 3(b)) the term “Committee” shall refer to such delegate. |
(h) | “Consultant” shall mean any person, including a Director, who is not an Employee and who is engaged by the Company or any Subsidiary thereof, to render services to or for the benefit of the Company or any Subsidiary and is compensated for such services. |
(i) | “Director” shall mean a member of the Board. |
(j) | “Disability” for each respective Participant shall have the meaning set forth in the Participant’s employment agreement, Award Agreement or other similar agreement with the Company; provided, that if such term is not defined in any such agreement to which the Participant is a party or if Participant is not a party to any such agreement, then “Disability” shall mean (i) with respect to any ISO, a permanent and total disability, within the meaning of Section 22(e)(3) of the Code, and (ii) with respect to any deferred compensation subject to Code Section 409A such term as defined in Treasury Regulation Section 1.409A-3(i)(4)(i)(A) or (B) or 1.409A-3(i)(4)(iii), or (iii) for any other purpose, “disability” as defined in the Company’s long term disability program applicable to the Grantee (or that would be applicable to the Grantee if the Grantee elected coverage). |
(k) | “Dividend Equivalent” shall mean any right granted under Section 10 of the Plan. |
(l) | “Eligible Person” shall mean an Employee, Director or Consultant. |
(m) | “Employee” shall mean any person treated as an employee (including officers and directors) in the records of the Company or any Subsidiary and who is subject to the control and direction of the Company or any Subsidiary with regard to both the work to be performed and the manner and method of performance. For purposes of the Plan, the payment of a director’s fee by the Company to a Director shall not be sufficient to constitute “employment” of the Director by the Company. |
(n) | “Fair Market Value” of a Share on any date of reference shall be determined by the Committee, in its sole discretion, and may be different for different purposes. For this purpose, the Fair Market Value of a Share on any trading day shall be (i) if the Shares are listed or admitted for trading on any United States national securities exchange, or if actual transactions are otherwise reported on a consolidated transaction reporting system, the price of the last sale before or the first sale after the grant, the closing price on the trading day before or the trading day of the grant, the arithmetic mean of the high and low prices on the trading day before or the trading day of the grant, or shall be determined by any other reasonable method using actual transactions in the Shares as reported on such market. The determination of fair market value for purposes of setting the exercise price or strike price of an award also may be determined using an average selling price during a specified period that is written 30 days before or 30 days after the applicable valuation date, provided the Committee irrevocably commits to grant the Award with an exercise or strike price set using such an average selling price before the beginning of the specified period, or (ii) if clause (i) is not applicable, the mean of the high bid and low asked quotations for a Share as reported by the National Quotation Bureau, Incorporated if at least two securities dealers have inserted both bid and asked quotations for the Shares on at least five of the 10 preceding trading days. If the information set forth in clauses (i) and (ii) above is unavailable or inapplicable to the Company (e.g., if the Shares are not then publicly traded or quoted), then the “Fair Market Value” of a Share shall be the value as determined by the Committee by the reasonable application of a reasonable valuation method. |
(o) | “Incentive Stock Option” and “ISO” shall mean an option granted under Section 6 of the Plan that is intended to meet the requirements of Section 422 of the Code, or any successor provision thereto. |
(p) | “1934 Act” shall mean the Securities Exchange Act of 1934, as amended. |
(q) | “Non-Qualified Stock Option” shall mean an option granted under Section 6 of the Plan that is not intended to be an Incentive Stock Option. |
(r) | “Option” shall mean an Incentive Stock Option or a Non-Qualified Stock Option. |
(s) | “Other Stock-Based Award” shall mean any right granted under Section 11 of the Plan. |
(t) | “Participant” shall mean an Eligible Person granted an Award under the Plan. |
(u) | “Performance Award” shall mean any right granted under Section 9 of the Plan. |
(v) | “Performance Criteria” shall mean any quantitative and/or qualitative measures, as determined by the Committee, which may be used to measure the level of performance of the Company or any individual Participant during a Performance Period, including any Qualifying Performance Criteria. |
(w) | “Performance Period” shall mean any period as determined by the Committee in its sole discretion. |
(x) | “Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the 1934 Act and used in Sections 13(d) and 14(d) thereof, including “group” as defined in Section 13(d) thereof. |
(y) | “Qualifying Performance Criteria” shall mean one or more of the following performance criteria, either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit or related Subsidiary, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to a previous year’s results or to a designated comparison group, in each case as specified by the Committee in the Award: achieving specified milestones in the discovery and development, commercialization or manufacturing of one or more of the Company product candidates, obtaining debt or equity financing, achieving personal management objectives, achieving sales, revenue, net income (before or after taxes), net earnings, earnings per share, return on total capital, return on equity, cash flow, cash flow from operations, operating profit and/or margin rate targets, subject to adjustment by the Committee to remove the effect of charges for restructurings, discontinued operations, extraordinary items and all items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence, related to the disposal of a segment or a business, or related to a change in accounting principle or otherwise. |
(z) | “Restricted Securities” shall mean Awards of Restricted Stock or other Awards under which issued and outstanding Shares are held subject to certain restrictions. |
(aa) | “Restricted Stock” shall mean any award of Shares granted under Section 8 of the Plan. |
(bb) | “Restricted Stock Unit” shall mean any right granted under Section 8 of the Plan that is denominated in Shares. |
(cc) | “Shares” shall mean the common shares of the Company par value $0.001 per share, and such other securities as may become the subject of Awards, or become subject to Awards, pursuant to an adjustment made under Section 4(b) of the Plan. |
(dd) | “Stock Appreciation Right” shall mean any right granted under Section 7 of the Plan. |
(ee) | “Subsidiary” shall mean a subsidiary company as defined in Section 424(f) of the Code (with the Company being treated as the employer corporation for purposes of this definition). |
(ff) | “2007 Plan” shall mean the Company’s 2007 Long-Term Incentive Plan as amended from time to time. |
SECTION 3. | ADMINISTRATION |
(a) | Subject to the terms of the Plan and applicable law, the Committee shall have full power and authority to: |
(i) | designate Participants and grant Awards under the Plan; |
(ii) | determine the size and type or types of Awards to be granted to each Participant under the Plan; |
(iii) | determine the number of Shares to be covered by (or with respect to which payments, rights, or other matters are to be calculated in connection with) Awards; |
(iv) | determine the terms and conditions of any Award, and to prescribe Award Agreements evidencing or setting terms thereof, which need not be the same for each Participant; |
(v) | determine whether, to what extent, and under what circumstances Awards may be settled or exercised in cash, Shares, other securities, or other Awards, or canceled, forfeited, or suspended, and the method or methods by which Awards may be settled, exercised, canceled, forfeited, or suspended; |
(vi) | determine whether, to what extent, and under what circumstances cash, Shares, other securities, other Awards, and other amounts payable with respect to an Award under the Plan shall be deferred either automatically or at the election of the holder thereof or of the Committee; |
(vii) | interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan; |
(viii) | establish, amend, suspend, or waive such rules and guidelines; |
(ix) | appoint such agents as it shall deem appropriate for the proper administration of the Plan; |
(x) | make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan; and |
(xi) | correct any defect, supply any omission, or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem desirable to carry the Plan into effect. |
(b) | Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time, and shall be final, conclusive, and binding upon all Persons, including the Company, any Subsidiary, any Participant, any holder or beneficiary of any Award, any shareholder, and any employee of the Company or of any Subsidiary. Subject to the requirements of applicable law and regulations, actions of the Committee may be taken by: |
(i) | a subcommittee, designated in writing by the Committee; |
(ii) | the Committee but with one or more members abstaining or recusing himself or herself from acting on the matter, so long as two or more members remain to act on the matter. Such action, authorized by such a subcommittee or by the Committee upon the abstention or recusal of such members, shall be the action of the Committee for purposes of the Plan; or |
(iii) | one or more officers or managers of the Company or any Subsidiary, or a committee of such officers or managers, to whom authority to perform such functions as the Committee may determine, to the fullest extent permitted under Section 157 and other applicable provisions of the Delaware General Corporation Law and the Company’s bylaws, have been delegated and whose authority is subject to such terms and limitations set forth by the Committee in writing, and whose authority shall not extend to any matter relating to Participants who are officers or directors of the Company for purposes of Section 16 of the 1934 Act. |
SECTION 4.
|
SHARES AVAILABLE FOR AWARDS
|
(a) | Shares Available. |
(i) | Subject to adjustment as provided in Section 4(b) and to the terms of this Section 4, the total number of Shares reserved and available for delivery pursuant to Awards granted under the Plan shall be (A ) one million nine hundred ninety thousand nine hundred fifty five (1,990,955), plus (B) the number of shares that, immediately prior to the Effective Date, remain available for issuance or delivery under the 2007 Plan; plus (C) the number of shares subject to awards under the 2007 Plan which become available for grant under the Plan in accordance with Section 4(c) after the Effective Date. |
(ii) | The Committee may adopt reasonable counting procedures to ensure appropriate counting, avoid double counting (as, for example, in the case of tandem or substitute awards) and make adjustments if the number of Shares actually delivered differs from the number of Shares previously counted in connection with an Award. Shares subject to an Award or an award under the 2007 Plan that is canceled, expired, forfeited, settled in cash or otherwise terminated or settled without delivery of the full number of Shares subject to such Award to the Participant will again be available for Awards. In addition, in the case of any Award granted in substitution for an award of a company or business acquired by the Company or an Affiliate, shares delivered or to be delivered in connection with such substitute Award shall not be counted against the number of shares reserved under the Plan, but shall be available under the Plan by virtue of the Company’s assumption of the plan or arrangement of the acquired company or business. This Section 4(a)(ii) shall apply to the number of Shares reserved and available for ISOs only to the extent consistent with applicable regulations relating to ISOs under the Code. Because Shares will count against the number reserved upon delivery (or later vesting) and subject to these share counting rules, the Committee may determine that Awards may be outstanding that relate to more Shares than the aggregate remaining available under the Plan, so long as Awards will not result in delivery and vesting of Shares in excess of the number then available under the Plan. The Company shall at all times during the term of the Plan retain as authorized and unissued Shares or treasury Shares at least the number of Shares from time to time required under the provisions of the Plan, or otherwise assure itself of its ability to perform its obligations hereunder. |
(iii) | Any Shares delivered pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares or of treasury Shares. |
(iv) | Upon the Effective Date, no further Awards shall be granted under the 2007 Plan. |
(b) | Adjustments. |
(i) | In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, Shares, or other securities), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, or other similar corporate transaction or event constitutes an equity restructuring transaction, as that term is defined in Statement of Financial Accounting Standards No. 123 (revised) or otherwise affects the Shares, then the Committee shall adjust the following in a manner that is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan: |
(A) | the number and type of Shares or other securities which thereafter may be made the subject of Awards; |
(B) | the number and type of Shares or other securities subject to outstanding Awards; |
(C) | the number and type of Shares or other securities specified as the annual per-participant limitation under Sections 14(e), (f), and (g); |
(D) | the grant, purchase, or exercise price with respect to any Award, or, if deemed appropriate, make provision for a cash payment to the holder of an outstanding Award; and |
(E) | other value determinations applicable to outstanding awards; |
(ii) | In the event the Company or any Subsidiary shall assume outstanding employee awards or the right or obligation to make future such awards in connection with the acquisition of another business or another corporation or business entity, the Committee may make such adjustments, not inconsistent with the terms of the Plan, in the terms of Awards as it shall deem appropriate in order to achieve reasonable comparability or other equitable relationship between the assumed awards and the Awards granted under the Plan as so adjusted. |
(iii) | The Committee shall be authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events affecting the Company, any Subsidiary, or the financial statements of the Company or any Subsidiary, or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits to be made available under the Plan. |
(c) | Prior Plans. Except as otherwise provided herein, (i) any award made under the Company’s Amended and Restated 1998 Stock Incentive Plan, as amended before the expiration of such plan, shall continue to be subject to the terms and conditions of such plan and the applicable award agreement, and (ii) any award made under the 2007 Plan before the Effective Date shall continue to be subject to the terms and conditions of the 2007 Plan and the applicable award agreement. |
SECTION 5. | ELIGIBILITY |
SECTION 6. | OPTIONS |
(a) | Exercise Price. The purchase price per Share purchasable under an Option shall be determined by the Committee no later than the date of grant of such Option; provided, however, and except as provided in Section 4(b), that such purchase price shall not be less than 100% of the Fair Market Value of a Share on the date of grant of such Option. |
(b) | Option Term. The term of each Option shall be specified in the applicable Award Agreement and shall not exceed ten (10) years from its date of grant. |
(c) | Time and Method of Exercise. The Committee shall establish in the applicable Award Agreement the time or times at which and the circumstances under which (including based on achievement of performance goals and/or future service requirements) an Option may be exercised in whole or in part, and the method or methods by which, and the form or forms, including, without limitation, cash, Shares (including Shares deliverable on exercise), other Awards, or other property that does not have a deferral feature, (including through “net exercise” or “cashless exercise” arrangements to the extent permitted by applicable law), or any combination thereof, having a Fair Market Value on the exercise date equal to the relevant exercise price, in which, payment of the exercise price with respect thereto may be made or deemed to have been made, and the method or forms in which Shares will be delivered or deemed delivered in satisfaction of Options. In addition, the Committee may allow a Participant to exercise any Option by delivering to the Company or its designated agent an executed irrevocable option exercise form together with irrevocable instructions to a broker-dealer to sell Shares and deliver the sale proceeds directly to the Company to the extent required to pay the Option exercise price. |
(d) | Incentive Stock Options. Only employees (as determined in accordance with Section 3401(c) of the Code) of the Company or a Subsidiary may be granted Incentive Stock Options. The terms of any Incentive Stock Option granted under the Plan shall be designed to comply in all respects with the provisions of Section 422 of the Code, or any successor provision thereto, and any regulations promulgated thereunder. In addition, Options designated as Incentive Stock Options shall not be eligible for treatment under the Code as Incentive Stock Options (and will be deemed to be Non-Qualified Stock Options) to the extent that either (1) the aggregate Fair Market Value of Shares (determined as of the time of grant) with respect to which such Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Subsidiary) exceeds $100,000, taking Options into account in the order in which they were granted, or (2) such Options otherwise remain exercisable but are not exercised within three (3) months of termination of employment (or such other period of time provided in Section 422 of the Code). |
SECTION 7. | STOCK APPRECIATION RIGHTS |
(a) | Grant Price. The grant price of any Stock Appreciation Right shall be determined by the Committee no later than the date of grant, provided, however, that such price shall not be less than 100% of the Fair Market Value of one Share on the date of grant of the Stock Appreciation Right, and if a Stock Appreciation Right is granted in tandem to an Option, the grant price of the Stock Appreciation Right shall not be less than the exercise price of such Option. |
(b) | Term. The term of each Stock Appreciation Right shall be specified in the applicable Award Agreement and shall not exceed ten (10) years from the date of grant. |
(c) | Time and Method of Exercise. The Committee shall establish in the applicable Award Agreement the time or times at which and the circumstances under which a Stock Appreciation Right may be exercised in whole or in part (including achievement of performance goals and/or future service requirements, and the method of exercise, method of settlement, form of consideration payable in settlement (whether cash, Shares or other property) and the methods or forms in which Shares will be delivered or deemed to be delivered, and whether or not a Stock Appreciation Right shall be freestanding or in tandem or combination with any other Award). |
SECTION 8. | RESTRICTED STOCK AND RESTRICTED STOCK UNITS |
(a) | Grant. The Committee is authorized to grant Awards of Restricted Stock and Restricted Stock Units to Eligible Persons. |
(b) | Restrictions. Shares of Restricted Stock and Restricted Stock Units shall be subject to such restrictions as the Committee may establish in the applicable Award Agreement (including, without limitation, any limitation on the right to vote a Share of Restricted Stock or the right to receive any dividend or other right), which restrictions may lapse separately or in combination at such time or times, under such circumstances (including based on achievement of performance goals and/or future service requirements), in such installments or otherwise, as the Committee may deem appropriate. Unrestricted Shares, evidenced in such manner as the Committee shall deem appropriate, shall be delivered to the holder of Restricted Stock or Restricted Stock Unit promptly after such restrictions have lapsed. |
(c) | Registration. Any Restricted Stock or Restricted Stock Units granted under the Plan may be evidenced in such manner as the Committee may deem appropriate, including, without limitation, book-entry registration or issuance of a stock certificate or certificates. In the event any stock certificate is issued in respect of Shares of Restricted Stock granted under the Plan, such certificate shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock. |
(d) | Consideration. A Participant shall pay such consideration for Restricted Stock as the Committee may require; provided that the minimum consideration for shares of Restricted Stock (other than treasury shares) shall be the par value of such Shares. |
(e) | Forfeiture. Upon termination of service during the applicable restriction period, except as set forth herein or in the applicable Award Agreement or as otherwise determined by the Committee, all Shares of Restricted Stock and all Restricted Stock Units still, in either case, subject to restriction shall automatically be forfeited and reacquired for no additional consideration by the Company. |
(f) | Dividend Equivalents. Unless otherwise determined by the Committee, and subject to Section 10, Dividend Equivalents on Restricted Stock Units shall be either (A) paid with respect to such Restricted Stock Units at the dividend payment date in cash or unrestricted Shares having a Fair Market Value equal to the amount of such dividends, or (B) deferred with respect to such Restricted Stock Units, either as a cash deferral or with the amount or value thereof automatically deemed reinvested in Restricted Stock Units, other Awards or other investment vehicles having a Fair Market Value equal to the amount of such dividends, as the Committee shall determine or permit a Participant to elect, and shall be paid when the Restricted Stock Units to which they relate are settled. Notwithstanding the foregoing, Dividend Equivalents (whether in the form of Restricted Stock Units or otherwise) on Restricted Stock Units that are contingent on satisfying performance criteria shall be forfeited if the Restricted Stock Units to which they relate are forfeited or otherwise not earned. Unless otherwise determined by the Committee, cash, Shares or other property distributed in connection with a stock split or stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock and Restricted Stock Units with respect to which such Shares or other property has been distributed. |
SECTION 9. | PERFORMANCE AWARDS |
(a) | may be denominated or payable in cash, Shares (including, without limitation, Restricted Stock), other securities, or other Awards; and |
(b) | shall confer on the holder thereof rights valued as determined by the Committee and payable to, or exercisable by, the holder of the Performance Award, in whole or in part, upon the achievement of such performance goals during such Performance Periods as the Committee shall establish. |
SECTION 10. | DIVIDEND EQUIVALENTS |
SECTION 11. | OTHER STOCK-BASED AWARDS |
SECTION 12. | TERMINATION OF EMPLOYMENT OR SERVICE |
(a) | For Cause. Except as otherwise provided by the Committee in an Award Agreement, if a Participant’s employment or service is terminated for Cause (i) the Participant’s Restricted Stock or Restricted Stock Units that are then forfeitable shall thereupon be forfeited, and (ii) any unexercised Option, Stock Appreciation Right, Performance Award, Other Stock-Based Award or cash Award shall terminate effective immediately upon such termination of employment or service. |
(b) | On Account of Death. Except as otherwise provided by the Committee in an Award Agreement, if a Participant’s employment or service terminates on account of death (or if a Participant dies within ninety (90) days following termination of employment due to Disability), then: |
(i) | the Participant’s Restricted Stock and Restricted Stock Units that were forfeitable shall thereupon become nonforfeitable; |
(ii) | any unexercised Option or Stock Appreciation Right, to the extent exercisable on the date of such termination of employment or service, may be exercised, in whole or in part, within the first twelve (12) months after such termination of employment or service (but only during the term of such Award) after the death of the Participant by (A) his or her personal representative or by the person to whom an Option or Stock Appreciation Right, as applicable, is transferred by will or the applicable laws of descent and distribution or (B) the Participant’s designated beneficiary; and, to the extent that any such Option or Stock Appreciation Right was not exercisable on the date of such termination of employment or service, it will immediately terminate; and |
(iii) | the Participant’s rights with respect to any unexercised Performance Shares, Other Stock-Based Awards or cash Awards shall be as set forth in the applicable Award Agreement. |
(c) | On Account of Disability. Except as otherwise provided by the Committee in an Award Agreement, if a Participant’s employment or service terminates on account of Disability, then: |
(i) | the Participant’s Restricted Stock and Restricted Stock Units that were forfeitable shall thereupon become nonforfeitable; |
(ii) | any unexercised Option or Stock Appreciation Right, to the extent exercisable on the date of such termination of employment or service, may be exercised in whole or in part, within the first ninety (90) days after such termination of employment or service (but only during the term of such Award) by the Participant, or by (A) his or her personal representative or by the person to whom an Option or Stock Appreciation Right, as applicable, is transferred by will or the applicable laws of descent and distribution or (B) the Participant’s designated beneficiary; and, to the extent that any such Option or Stock Appreciation Right was not exercisable on the date of such termination of employment, it will immediately terminate; and |
(iii) | the Participant’s rights with respect to any unexercised Performance Shares, Other Stock-Based Awards or cash Awards shall be as set forth in the applicable Award Agreement. |
(d) | Any Other Reason. Except as otherwise provided by the Committee in an Award Agreement, if a Participant’s employment or service terminates for any reason other than for Cause, death, or Disability, then: |
(i) | the Participant’s Restricted Stock and Restricted Stock Units, to the extent forfeitable on the date of the Participant’s termination of employment or service, shall be forfeited on such date; |
(ii) | any unexercised Option or Stock Appreciation Right, to the extent exercisable immediately before the Participant’s termination of employment or service, may be exercised in whole or in part, not later than three (3) months after such termination of employment or service (but only during the term of such Award); and, to the extent that any such Option or Stock Appreciation Right was not exercisable on the date of such termination of employment or service, it will immediately terminate; and |
(iii) | the Participant’s rights with respect to any unexercised Performance Shares, Other Stock-Based Awards or cash Awards shall be as set forth in the applicable Award Agreement. |
(e) | Repurchase Rights. Except as otherwise provided by the Committee in an Award Agreement, if at any time a Participant’s employment or service with the Company is terminated for Cause or a Participant breaches any post-termination covenants set forth in any written agreement between the Participant and the Company, the Company may, in its discretion, for a period of one year after the termination for Cause or the actual discovery by the Company of the breach, as applicable, and upon 10 (ten) days’ notice to the Participant, (i) repurchase all or any portion of any Shares acquired by the Participant upon the Participant’s exercise of an Award, and/or (ii) require any such Participant to repay to the Company the amount of any profits derived by such Participant upon the sale or other disposition of any Shares underlying an Award during the preceding three years. The purchase price for any Shares repurchased by the Company pursuant to clause (i) of this Section 12(e) shall be the lesser of the price paid to acquire such Share and the Fair Market Value thereof on the date of such purchase by the Company. |
SECTION 13. | CHANGE IN CONTROL |
(a) | In the event of any Change in Control, the vesting of each outstanding Option and Stock Appreciation Right shall automatically accelerate so that each such Option and Stock Appreciation Right shall, immediately prior to the effective date of the Change in Control, become fully exercisable with respect to the total number of Shares at the time subject to such Option or Stock Appreciation Right and may be exercised for any or all of those Shares as fully-vested Shares. However, an outstanding Option or Stock Appreciation Right shall not so accelerate if and to the extent: (i) such Option or Stock Appreciation Right is, in connection with the Change in Control, either to be assumed by the successor corporation (or parent thereof) or to be replaced with a comparable Option to purchase shares of the capital stock of the successor corporation (or parent thereof) or stock appreciation right, (ii) such Option or Stock Appreciation Right is to be replaced with a cash incentive program of the successor corporation which preserves the spread existing on the unvested Option Shares or Stock Appreciation Right at the time of the Change in Control and provides for subsequent payout in accordance with the same vesting schedule applicable to the Option or Stock Appreciation Right or (iii) the acceleration of such Option or Stock Appreciation Right is subject to other limitations under the applicable Award Agreement. The determination of comparability under clause (i) above shall be made by the Committee, and its determination shall be final, binding and conclusive. |
(b) | All outstanding restrictions with respect to any Restricted Stock or Restricted Stock Units shall also terminate automatically, and the Shares subject to those restrictions shall immediately vest in full, in the event of any Change in Control, except to the extent: (i) those repurchase rights are to be assigned to the successor corporation (or parent thereof) in connection with such Change in Control or (ii) such accelerated vesting is precluded by other limitations imposed under the applicable Award Agreement or would trigger additional taxes under Section 409A of the Code. |
(c) | The Committee shall have the discretion, exercisable either at the time an Award is granted or at any time while the Award remains outstanding, to provide for the automatic acceleration of one or more outstanding Awards upon the occurrence of a Change in Control, whether or not those Awards are to be assumed or replaced in the Change in Control. |
(d) | The outstanding Options or other Awards shall in no way affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. |
SECTION 14. | GENERAL |
(a) | No Cash Consideration for Awards. Awards shall be granted for no cash consideration or for such minimal cash consideration as may be required by applicable law. |
(b) | Awards May be Granted Separately or Together. Awards may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution for any other Award or any award granted under any other plan of the Company or any Subsidiary. Awards granted in addition to or in tandem with other Awards, or in addition to or in tandem with awards granted under any other plan of the Company or any Subsidiary, may be granted either at the same time as or at a different time from the grant of such other Awards or awards. |
(c) | Forms of Payment Under Awards. Subject to the terms of the Plan and of any applicable Award Agreement, payments or transfers to be made by the Company or a Subsidiary upon the grant, exercise, or payment of an Award may be made in such form or forms as the Committee shall determine, including, without limitation, cash, Shares, rights in or to Shares issuable under the Award or other Awards, other securities, or other Awards, or any combination thereof, and may be made in a single payment or transfer, in installments, or on a deferred basis, in each case in accordance with rules and procedures established by the Committee. Such rules and procedures may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting of Dividend Equivalents in respect of installment or deferred payments. |
(d) | Limits on Transfer of Awards. Except as provided by the Committee, no Award and no right under any such Award, shall be assignable, alienable, saleable, or transferable by a Participant otherwise than by will or by the laws of descent and distribution provided, however, that, if so determined by the Committee, a Participant may, in the manner established by the Committee, designate a beneficiary or beneficiaries to exercise the rights of the Participant with respect to any Award upon the death of the Participant. Each Award, and each right under any Award, shall be exercisable, during the Participant’s lifetime, only by the Participant or, if permissible under applicable law, by the Participant’s guardian or legal representative. No Award and no right under any such Award, may be pledged, alienated, attached, or otherwise encumbered, and any purported pledge, alienation, attachment, or encumbrance thereof shall be void and unenforceable against the Company or any Affiliate. |
(e) | Per-Person Limitation on Options and SARs. The number of Shares with respect to which Options and Stock Appreciation Rights may be granted under the Plan during any year to an individual Participant shall not exceed 1,500,000 Shares, subject to adjustment as provided in Section 4(b). |
(f) | Per-Person Limitation on Certain Awards. Other than Options and Stock Appreciation Rights, the aggregate number of Shares with respect to which Restricted Stock, Restricted Stock Units, Performance Awards and Other Stock-Based Awards may be granted under the Plan during any year to an individual Participant shall not exceed 750,000 Shares, subject to adjustment as provided in Section 4(b). |
(g) | Per-Person Limit on Performance-Based Awards. Subject to Section 4, the aggregate number of Shares subject to Awards that are intended to qualify as “performance-based compensation” under Code Section 162(m) granted during any calendar year to any one Eligible Person (taking into account the maximum number payable based on performance exceeding target objectives) shall not exceed three (3) million Shares. The maximum amount payable as a cash Award for any performance period to an Eligible Person that is intended to satisfy the requirements for “performance-based compensation” under Code Section 162(m) shall be five (5) million dollars per calendar year. In the case of an award with a multi-year performance period, these limits shall apply to each calendar year (or portion thereof) in the performance period. The limitation on cash Awards is separate from and not affected by the limitation on Awards denominated in Shares. |
(h) | Conditions and Restrictions Upon Securities Subject to Awards. The Committee may provide that the Shares issued upon exercise of an Option or Stock Appreciation Right or otherwise subject to or issued under an Award shall be subject to such further agreements, restrictions, conditions or limitations as the Committee in its discretion may specify prior to the exercise of such Option or Stock Appreciation Right or the grant, vesting or settlement of such Award, including without limitation, conditions on vesting or transferability and forfeiture or repurchase provisions or provisions on payment of taxes arising in connection with an Award. Without limiting the foregoing, such restrictions may address the timing and manner of any resales by the Participant or other subsequent transfers by the Participant of any Shares issued under an Award, including without limitation: (A) restrictions under an insider trading policy or pursuant to applicable law, (B) restrictions designed to delay and/or coordinate the timing and manner of sales by Participant and holders of other Company equity compensation arrangements, (C) restrictions as to the use of a specified brokerage firm for such resales or other transfers and (D) provisions requiring Shares to be sold on the open market or to the Company in order to satisfy tax withholding or other obligations. |
(i) | Share Certificates. All Shares or other securities delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares or other securities are then listed, and any applicable Federal, state, or local securities laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. |
(j) | No Rights to Awards. No Participant or other Person shall have any claim to be granted any Award under the Plan, or, having been selected to receive an Award under this Plan, to be selected to receive a future Award, and further there is no obligation for uniformity of treatment of Employees, Directors, Consultants, Participants, or holders or beneficiaries of Awards under the Plan. The terms and conditions of Awards need not be the same with respect to each recipient. |
(k) | Tax Provisions. |
(i) | Withholding. The Company and any Subsidiary is authorized to withhold, at the time of grant or settlement or other time as appropriate, from any Award, any payment relating to an Award, including from a distribution of Shares, or any payroll or other payment to a Participant, amounts of withholding and other taxes required to be withheld. This authority shall include authority to withhold or receive Shares or other property and to make cash payments in respect thereof in satisfaction of the Company’s (or a Subsidiary’s) withholding obligations, either on a mandatory or elective basis in the discretion of the Committee. The Committee is specifically authorized to allow Participants to satisfy withholding tax amounts by electing to have the Company (or a Subsidiary) withhold from the Shares to be delivered upon exercise of an Option or vesting or settlement of a Stock Award that number of Shares having a Fair Market Value equal to the amount required to be withheld. |
(ii) | Required Consent to and Notification of Code Section 83(b) Election. No election under Code Section 83(b) (to include in gross income in the year of transfer the amounts specified in Code Section 83(b)) or under a similar provision of the laws of a jurisdiction outside the United States may be made unless expressly permitted by the terms of the Award Agreement or by action of the Committee in writing prior to the making of such election. In any case in which a Participant is permitted to make such an election in connection with an Award, the Participant shall notify the Committee of such election within ten days of filing notice of the election with the Internal Revenue Service or other governmental authority, in addition to any filing and notification required pursuant to regulations issued under Code Section 83(b) or other applicable provision. |
(iii) | Requirement of Notification Upon Disqualifying Disposition Under Code Section 421(b). If any Participant shall make any disposition of shares of Stock delivered pursuant to the exercise of an ISO under the circumstances described in Code Section 421(b) (relating to certain disqualifying dispositions), such Participant shall notify the Committee of such disposition within ten days thereof. |
(iv) | Payment of Tax Amount. Notwithstanding anything herein to the contrary, in the event the Internal Revenue Service should finally determine that part or all of an Award that has not been settled is nevertheless required to be included in the Participant’s gross income for federal income tax purposes, then an amount necessary to pay applicable federal, state or local income taxes on such includible value shall be distributed with respect to the Award in a lump sum cash payment within sixty (60) days after such determination, without the requirement of separate approval by the Committee. A “final determination” of the Internal Revenue Service is a determination in writing ordering the payment of additional tax, reporting of additional gross income or otherwise requiring an Award or portion thereof to be included in gross income, which is not appealable or which the Participant does not appeal within the time prescribed for appeals. |
(v) | Construction in Compliance with Code Section 409A. The Company intends that none of the grant, exercise, settlement or amendment or termination of any Award under the Plan will cause the Participant to be liable for payment of interest or a tax penalty under Code Section 409A. The provisions of the Plan and any Award Agreement shall be construed consistent with that intent. |
(vi) | “Termination of service,” “resignation” or words of similar import, as used in this Plan shall mean, with respect to any payments of deferred compensation subject to Section 409A of the Code, the Participant’s “separation from service” as defined in Section 409A of the Code. For this purpose, a “separation from service” is deemed to occur on the date that the Company and the Participant reasonably anticipate that the level of bona fide services the Participant would perform after the date (whether as an employee or independent contractor) would permanently decrease to a level that, based on the facts and circumstances would constitute a separation from service; provided that a decrease to a level that is 50% or more of the average level of bona fide services provided over the prior 36 months shall not be a separation from service, and a decrease to a level that is 20% or less of the average level of such bona fide services shall be a separation from service. The bona fide services taken into account for purposes of determining whether there has been a separation from service shall be services performed for the Company and any person or entity that would be considered a single employer with the Company under Section 414(b) or 414(c) of the code; provided that, in applying Section 1563(a)(1), (2), and (3) of the Code, the language “at least 50 percent” shall be used instead of “at least 80 percent;” and further provided that “at least 20 percent” shall be used instead of “at least 50 percent” where based on legitimate business criteria. |
(vii) | Six-Month Delay. Any distribution or settlement of an Award triggered by the separation from service of a Specified Employee that would otherwise be made prior to the Deferred Distribution Date (as defined below) shall not occur earlier than the Deferred Distribution Date. The “Deferred Distribution Date” is the day that is six (6) month and one (1) day after a Participant’s separation from service. |
(l) | No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company or any Subsidiary from adopting or continuing in effect other or additional compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases. |
(m) | No Right to Employment. The grant of an Award shall not constitute an employment contract nor be construed as giving a Participant the right to be retained in the employ or service of the Company or any Subsidiary. Further, the Company or a Subsidiary may at any time dismiss a Participant from employment, free from any liability, or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement. |
(n) | Governing Law. The validity, construction, and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Delaware and applicable Federal law without regard to conflict of laws. |
(o) | Severability. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction, or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person, or Award, and the remainder of the Plan and any such Award shall remain in full force and effect. |
(p) | No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Subsidiary and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company or any Subsidiary pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or any Subsidiary. |
(q) | No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, or other securities shall be paid or transferred in lieu of any fractional Shares, or whether such fractional Shares or any rights thereto shall be canceled, terminated, or otherwise eliminated. |
(r) | Headings. Headings are given to the sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. |
(s) | No Representations or Covenants With Respect to Tax Qualification. Although the Company may endeavor to (i) qualify an Award for favorable U.S. or foreign tax treatment (e.g., incentive stock options under Section 422 of the Code) or (ii) avoid adverse tax treatment (e.g., under Section 409A of the Code), the Company makes no representation to that effect and expressly disavows any covenant to maintain favorable or avoid unfavorable tax treatment. The Company shall be unconstrained in its corporate activities without regard to the potential negative tax impact on holders of Awards under the Plan. |
(t) | Compliance With Laws. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or stock exchanges on which the Company is listed as may be required. The Company shall have no obligation to issue or deliver evidence of title for Shares issued under the Plan prior to: |
(i) | obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and |
(ii) | completion of any registration or other qualification of the Shares under any applicable national or foreign law or ruling of any governmental body that the Company determines to be necessary or advisable or at a time when any such registration or qualification is not current, has been suspended or otherwise has ceased to be effective. |
SECTION 15. | AMENDMENT AND TERMINATION |
(a) | Amendments to the Plan. The Board of Directors of the Company may amend, alter, suspend, discontinue, or terminate the Plan, in whole or in part; provided, however, that without the prior approval of the Company’s shareowners, no material amendment shall be made if shareholder approval is required by law, regulation, or stock exchange, and; provided, further, that, notwithstanding any other provision of the Plan or any Award Agreement, no such amendment, alteration, suspension, discontinuation, or termination shall be made without the approval of the shareholders of the Company that would: |
(i) | increase the total number of Shares available for Awards under the Plan, except as provided in Section 4 hereof; or |
(ii) | except as provided in Section 4(b), permit Options, Stock Appreciation Rights, or Other Stock-Based Awards encompassing rights to purchase Shares to be repriced, replaced, or regranted through cancellation, or by lowering the exercise price of a previously granted Option or the grant price of a previously granted Stock Appreciation Right, or the purchase price of a previously granted Other Stock-Based Award. |
(b) | Amendments to Awards. The Committee may waive any conditions or rights under, amend any terms of, or amend, alter, suspend, discontinue, or terminate, any Awards theretofore granted, prospectively or retroactively. Except for amendments authorized under Section 13, no such amendment or alteration shall be made which would impair the rights of any Participant, without such Participant’s consent, under any Award theretofore granted, provided that no such consent shall be required with respect to any amendment or alteration if the Committee determines in its sole discretion that such amendment or alteration either (i) is required or advisable in order for the Company, the Plan or the Award to satisfy or conform to any law or regulation or to meet the requirements of any accounting standard, or (ii) is not reasonably likely to significantly diminish the benefits provided under such Award. |
SECTION 16. | EFFECTIVE DATE OF THE PLAN |
SECTION 17. | TERM OF THE PLAN |
/s/ Ernst & Young LLP
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Philadelphia, Pennsylvania
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March 28, 2016
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Date: March 28, 2016
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/s/ Craig Fraser
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Craig Fraser
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President and Chief Executive Officer
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Date: March 28, 2016
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/s/ John Tattory
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John Tattory
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Senior Vice President and
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Chief Financial Officer
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Date: March 28, 2016
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/s/ Craig Fraser
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Craig Fraser
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President and Chief Executive Officer
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/s/ John A. Tattory
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John A. Tattory
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Senior Vice President and Chief Financial Officer
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Document and Entity Information - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Mar. 15, 2016 |
Jun. 30, 2015 |
|
Document and Entity Information [Abstract] | |||
Entity Registrant Name | DISCOVERY LABORATORIES INC /DE/ | ||
Entity Central Index Key | 0000946486 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 49.5 | ||
Entity Common Stock, Shares Outstanding | 8,191,289 | ||
Document Fiscal Year Focus | 2015 | ||
Document Fiscal Period Focus | FY | ||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Dec. 31, 2015 |
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Dec. 31, 2015 |
Dec. 31, 2014 |
---|---|---|
Stockholders' Equity: | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized (in shares) | 5,000,000 | 5,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 36,000,000 | |
Common stock, shares issued (in shares) | 8,196,011 | 6,114,843 |
Common stock, shares outstanding (in shares) | 8,194,519 | 6,113,351 |
Treasury stock (at cost) (in shares) | 1,492 | 1,492 |
Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Revenues: | ||
Product sales | $ 7 | $ 312 |
Grant revenue | 980 | 2,523 |
Total revenues | 987 | 2,835 |
Expenses: | ||
Cost of product sales | 929 | 2,671 |
Research and development | 28,888 | 26,690 |
Selling, general, and administrative | 11,004 | 16,732 |
Total expenses | 40,821 | 46,093 |
Operating loss | (39,834) | (43,258) |
Change in fair value of common stock warrant liability | 851 | 3,791 |
Other income / (expense): | ||
Loss on debt extinguishment | (11,758) | 0 |
Interest and other income | 237 | 6 |
Interest and other expense | (4,666) | (4,597) |
Other income / (expense), net | (16,187) | (4,591) |
Net loss | $ (55,170) | $ (44,058) |
Net loss per common share | ||
Basic (in dollars per share) | $ (7.98) | $ (7.28) |
Diluted (in dollars per share) | $ (7.98) | $ (7.84) |
Weighted average number of common shares outstanding | ||
Basic (in shares) | 6,967 | 6,078 |
Diluted (in shares) | 6,967 | 6,145 |
The Company and Description of Business |
12 Months Ended |
---|---|
Dec. 31, 2015 | |
The Company and Description of Business [Abstract] | |
The Company and Description of Business | Note 1 – The Company and Description of Business Discovery Laboratories, Inc. (referred to as “we,” “us,” or the “Company”) is a biotechnology company focused on developing novel KL4 surfactant therapies for respiratory diseases and other potential applications. Surfactants are produced naturally in the lung and are essential for normal respiratory function and survival. Our proprietary technology platform includes a synthetic, peptide-containing surfactant (KL4 surfactant) that is structurally similar to endogenous pulmonary surfactant, and novel drug delivery technologies being developed to enable noninvasive administration of aerosolized KL4 surfactant. We believe that our proprietary technology platform may make it possible to develop a pipeline of surfactant products to address a variety of respiratory diseases for which there are few or no approved therapies. Our core development program, AEROSURF® (lucinactant for inhalation), is focused on improving the management of respiratory distress syndrome (RDS) in premature infants, a serious respiratory condition that can result in long-term respiratory problems, developmental delay and death. Premature infants born prior to 37 weeks gestational age may not have fully developed natural lung surfactant and therefore may need surfactant therapy to sustain life. Higher incidence and severity of RDS are correlated with younger gestational ages; however, RDS can occur at any premature gestational age. RDS is the most prevalent respiratory disease in the neonatal intensive care unit (NICU). Surfactant therapy is a life-saving treatment for RDS and the primary therapy to address an underlying surfactant deficiency. Surfactants currently available in the U.S. are animal-derived and must be administered using invasive endotracheal intubation and mechanical ventilation, each of which may result in serious respiratory conditions and other complications. Intubation is associated with airway trauma and clinical instability that can extend beyond the respiratory system such as increased intracranial pressure and risk for brain injury. Mechanical ventilation is associated with ventilator-associated lung injury, chronic lung disease and increased risk of infection. To avoid these risks, many premature infants are initially treated with noninvasive respiratory support, such as nasal continuous positive airway pressure (nCPAP). Unfortunately, since nCPAP does not address the underlying surfactant deficiency, many premature infants respond poorly to nCPAP (typically within the first 72 hours of life) and may require intubation and delayed surfactant therapy (an outcome referred to as nCPAP failure). In addition, many premature infants with RDS who receive surfactant therapy as initial therapy are capable of breathing without mechanical ventilation, but require surfactant therapy for RDS. Because surfactant therapy requires intubation, these infants generally are supported with mechanical ventilation for either a limited or extended period of time. If surfactant therapy could be administered noninvasively, neonatologists would be able to provide surfactant therapy to these premature infants without exposing them to the risks associated with intubation and mechanical ventilation. AEROSURF is an investigational combination drug/device product that combines our proprietary KL4 surfactant with our novel aerosol delivery system (ADS), which is based primarily on our capillary aerosol generator technology. We are developing AEROSURF to enable administration of aerosolized KL4 surfactant to premature infants receiving nCPAP, without invasive intubation and mechanical ventilation. We believe that, if approved, AEROSURF will have the potential to transform the treatment of RDS, allow for earlier treatment of those premature infants who currently receive surfactants later in their course of treatment, decrease the morbidities and complications currently associated with surfactant administration, and reduce the number of premature infants who are subjected to invasive intubation and delayed surfactant therapy as a result of nCPAP failure. By enabling delivery of our aerosolized KL4 surfactant using noninvasive methods, we believe that AEROSURF, if approved, will address a serious unmet medical need and potentially provide transformative clinical and pharmacoeconomic benefits. The drug product component of our AEROSURF product candidate is a lyophilized (freeze-dried) dosage form of our KL4 surfactant liquid instillate drug product that was approved by the U.S. Food and Drug Administration (FDA) in 2012 under the name SURFAXIN® (lucinactant) Intratracheal Suspension for the prevention of RDS in premature infants at high risk for RDS. In the second quarter of 2015, we determined to cease commercial and manufacturing activities for SURFAXIN to focus our limited resources on advancing the AEROSURF clinical development program and our aerosolized KL4 surfactant pipeline. We believe that gaining the approval of SURFAXIN provided us valuable experience to support the further development of our KL4 surfactant product candidates, beginning with AEROSURF. |
Basis of Presentation |
12 Months Ended |
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Dec. 31, 2015 | |
Basis of Presentation [Abstract] | |
Basis of Presentation | Note 2 – Basis of Presentation The accompanying consolidated financial statements reflect a 1-for-14 reverse split of our common stock and a change in the number of shares of common stock authorized for issuance under our Amended and Restated Certificate of Incorporation, as amended (Certificate of Incorporation), that was approved by our Board of Directors and stockholders and made effective on January 22, 2016. All share and per share information herein that relates to our common stock has been retroactively restated to reflect the reverse stock split and reduction in authorized shares. |
Liquidity Risks and Management's Plans |
12 Months Ended |
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Dec. 31, 2015 | |
Liquidity Risks and Management's Plans [Abstract] | |
Liquidity Risks and Management's Plans | Note 3 – Liquidity Risks and Management’s Plans As of December 31, 2015, we had cash and cash equivalents of approximately $38.7 million, current accounts payable and accrued expenses of $10.8 million, and $25 million of long-term debt under a secured loan (Deerfield Loan) with affiliates of Deerfield Management, L.P. (Deerfield). The principal portion of the debt is payable in two equal installments in February 2018 (subject to potential deferral in certain circumstances) and February 2019. Before any additional financings or other transactions, we anticipate that we will have sufficient cash available to support our development programs, business operations and debt service obligations through the first quarter of 2017. We have incurred substantial losses since inception, due to investments in research and development, manufacturing, the commercialization of SURFAXIN, including marketing, commercial and medical affairs activities, and we expect to continue to incur substantial losses over the next four to five years. To secure the significant additional capital that we will need, we expect to utilize all or a combination of potential strategic alliances, collaboration agreements and other strategic transactions, public or private equity offerings (including our ATM Program), or through debt arrangements. We also believe that our success in these efforts will be largely dependent upon our ability to successfully and timely complete the AEROSURF phase 2b clinical trial. Failure to complete the clinical trial within the expected time line in the fourth quarter of 2015 and obtain acceptable and promising results could have a material adverse effect on our ability to secure the additional capital that we will require, through strategic transactions or otherwise, and our ability to continue as a going concern. Our ability to secure capital under our ATM Program or pursuant to public offerings under our 2014 Universal Shelf will be constrained by the value of our equity securities held by nonaffiliated persons and entities (public float), which as of March 18, 2016 is approximately $13.4 million. Our 2014 Universal Shelf was filed on Form S-3, which limits the size of primary securities offerings conducted by companies that have a public float of less than $75 million in any 12-month period to no more than one-third of their public float. Based on the closing market price of our common stock on March 18, 2016 ($1.65) we could raise up to approximately $4.5 million under our 2014 Universal Shelf. To raise capital, we may be required to seek other forms of transactions, including, for example, under a registration statement on Form S-1, the preparation and maintenance of which would be more time consuming and costly, or private placements, potentially with registration rights or priced at a discount to the market value of our stock, or other transactions, any of which could result in substantial equity dilution of stockholders’ interests. In addition, although we have regained compliance with the Minimum Bid Price Requirement of the Nasdaq Listing Rules, there can be no assurance that we will be able to maintain continued compliance, including with certain other Nasdaq listing requirements that require us to maintain a market capitalization of at least $35 million or stockholders’ equity of at least $2.5 million. If we fail to meet both of these requirements, we would receive another delisting notice from the Nasdaq Capital Market, which could further depress the value of our stock. In addition, to be able to raise sufficient capital to support our activities in the near term through public or private equity offerings, given our current per share market price, we may have to seek approval from our stockholders to increase the number of shares of common stock authorized for issuance under our Certificate of Incorporation. Moreover, if any such offering were to involve the issuance of common stock in excess of 20% of our outstanding common stock, we may be required under Nasdaq Listing Rules to seek stockholder approval before we can proceed. There can be no assurance that we would be successful in obtaining such approvals. Failure to secure the additional capital that we will need, whether from non-dilutive sources or from equity offerings, would have a material adverse impact on our business and our ability to continue as a going concern. We have in the past collaborated with research organizations and universities to assess the potential utility of our KL4 surfactant in studies funded in part through non-dilutive grants issued by U.S. Government-sponsored drug development programs, including grants in support of initiatives related to our AEROSURF clinical program and medical and biodefense-related initiatives under programs that encourage private sector development of medical countermeasures against chemical, biological, radiological, and nuclear terrorism threat agents, and pandemic influenza, and provide a mechanism for federal acquisition of such countermeasures. Although there can be no assurance, we continue to pursue such funding opportunities and expect that we may qualify for similar programs in the future. An important priority for us is to identify potential strategic transactions, including without limitation strategic alliances and collaboration arrangements that would potentially provide additional capital to support our AEROSURF development activities and strategic resources to support the registration and commercial introduction of AEROSURF. We seek a significant strategic alliance partner that has broad experience, including local regulatory and product-development expertise and, if AEROSURF is approved, an ability to support the commercial introduction of AEROSURF in the EU and other selected markets outside the U.S. Such alliances typically also provide financial resources, in the form of upfront payments, milestone payments, commercialization royalties and a sharing of research and development expenses. We have engaged in discussions with potential counterparties and a number of these entities have expressed interest in AEROSURF and our KL4 surfactant and drug delivery technologies. Our future capital requirements will depend upon many factors, including our efforts to (i) advance the AEROSURF development program to completion of the phase 2b clinical trials as planned; (ii) assure near- and long-term continuity of supply for our lyophilized KL4 surfactant and ADS and related components with CMOs to support our clinical activities, (iv) develop our ADS for use in a planned phase 3 clinical program and, if approved, early commercial activities, (v) prepare for and conduct an AEROSURF phase 3 clinical program, which likely will be designed to enroll significantly more premature infants than our phase 2 clinical trials, and (vi) secure one or more strategic alliances or other collaboration arrangements to support our development programs and commercialization of our approved products, if any. There can be no assurance that our AEROSURF development program will be successful within our anticipated time frame, if at all; that we will be able to secure regulatory approval for AEROSURF and our other potential KL4 surfactant product candidates in the U.S. and other markets; or that we will be successful in securing the capital we will require when needed. Failure to secure the necessary additional capital when needed could have a material adverse effect on our business, financial condition and results of operations and could compel us to pace, delay or cease our new product development and clinical trial activities and ultimately cease operations. Even if we succeed in our efforts and subsequently commercialize our products, we may never achieve sufficient sales revenue to achieve or maintain profitability. As of December 31, 2015, we had outstanding warrants to purchase approximately 8.5 million shares of our common stock that are exercisable at various prices on different dates into 2024. This includes 4.8 million warrants issued in a July 2015 public offering with an exercise price of $9.80 per share, and 2.9 million pre-funded warrants, of which the entire purchase price was pre-paid upon issuance. Upon exercise of the pre-funded warrants, we would issue the shares to the holders and receive no additional proceeds. The accompanying financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. In the future, our ability to continue as a going concern is dependent on our ability to raise additional capital to fund our research and development programs and meet our obligations on a timely basis. If we are unable to secure the required additional capital, we will likely not have sufficient cash flows and liquidity to fund our business operations, which could significantly limit our ability to continue as a going concern. In that event, we may be forced to limit our development programs and consider other means of creating value for our stockholders, such as licensing the development and/or commercialization of products that we consider valuable and might otherwise plan to develop ourselves. If we are unable to raise the necessary capital, we may be forced to curtail all of our activities and, ultimately, cease operations. Even if we are able to secure additional capital, such financings may only be available on unattractive terms, or could result in significant dilution of stockholders’ interests and, in such event, the market price of our common stock may decline. Moreover, if we fail in the future to make any required payment under our Deerfield Loan or fail to comply with any commitments contained in the loan documents, Deerfield would be able to declare us in default regarding that indebtedness, which could result in the acceleration of the payment obligations under all or a portion of our indebtedness. Since we have pledged substantially all of our assets to secure our obligations under the Deerfield Loan, a debt default would enable the lenders to foreclose on our assets securing the debt and could significantly diminish the market value and marketability of our common stock. Our December 31, 2015 financial statements do not include any adjustments relating to recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue in existence. As of December 31, 2015, 36 million shares of common stock and 5 million shares of preferred stock were authorized under our Certificate of Incorporation and approximately 18.3 million shares of common stock and 5 million shares of preferred stock were available for issuance and not otherwise reserved. |
Accounting Policies and Recent Accounting Pronouncements |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Accounting Policies and Recent Accounting Pronouncements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies and Recent Accounting Pronouncements | Note 4 – Accounting Policies and Recent Accounting Pronouncements The consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the U. S. Consolidation The consolidated financial statements include all of the accounts of Discovery Laboratories, Inc. and its inactive subsidiary, Acute Therapeutics, Inc. All intercompany transactions and balances have been eliminated in consolidation. Use of estimates The preparation of financial statements, in conformity with accounting principles generally accepted in the U. S., requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and cash equivalents Cash and cash equivalents are held in U.S. banks and consist of liquid investments and money market funds with a maturity from date of purchase of 90 days or less that are readily convertible into cash. Fair value of financial instruments Our financial instruments consist principally of cash and cash equivalents and restricted cash. The fair values of our cash equivalents are based on quoted market prices. The carrying amount of cash equivalents is equal to their respective fair values at December 31, 2015 and 2014, respectively. Warrants classified as liabilities are recorded at their fair market value. Other financial instruments, including long-term debt, accounts payable and accrued expenses, are carried at cost, which we believe approximates fair value. Property and equipment Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets (generally three to ten years). Leasehold improvements are amortized over the shorter of the estimated useful lives or the remaining term of the lease. Repairs and maintenance costs are charged to expense as incurred. Restricted cash Restricted cash consists of a certificate of deposit held by our bank as collateral for a letter of credit in the same notional amount held by our landlord to secure our obligations under our Lease Agreement dated May 26, 2004 and amended January 3, 2013 for our headquarters location in Warrington, Pennsylvania (See, Note 13 – Commitments, for further discussion on our leases). Long-lived assets Our long-lived assets, primarily consisting of equipment, are reviewed for impairment when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable, or its estimated useful life has changed significantly. When the undiscounted cash flows of an asset are less than its carrying value, an impairment is recorded and the asset is written down to estimated value. No impairment was recorded during the years ended December 31, 2015 and 2014 as management believes there are no circumstances that indicate the carrying amount of the assets will not be recoverable. In the second quarter of 2015, we closed the Totowa Facility and sold manufacturing equipment for total cash proceeds of $0.3 million, resulting in a $0.1 million loss from the sale and disposal of these assets. Grant revenue We recognize grant revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed and determinable, and collectability is reasonably assured. Research and development We account for research and development expense by the following categories: (a) product development and manufacturing, (b) medical and regulatory operations, and (c) direct preclinical and clinical programs. Research and development expense includes personnel, facilities, manufacturing and quality operations, pharmaceutical and device development, research, clinical, regulatory, other preclinical and clinical activities and medical affairs. Research and development costs are charged to operations as incurred. Stock-based compensation Stock-based compensation is accounted for under the fair value recognition provisions of Accounting Standards Codification (ASC) Topic 718, Stock Compensation (ASC Topic 718). See, Note 11 – Stock Options and Stock-based Employee Compensation, for a detailed description of our recognition of stock-based compensation expense. The fair value of stock option grants is recognized evenly over the vesting period of the options or over the period between the grant date and the time the option becomes non-forfeitable by the employee, whichever is shorter. Warrant accounting We account for common stock warrants in accordance with applicable accounting guidance provided in ASC Topic 815, Derivatives and Hedging – Contracts in Entity’s Own Equity (ASC Topic 815), as either derivative liabilities or as equity instruments depending on the specific terms of the warrant agreement. We classify derivative warrant liabilities on the consolidated balance sheet as current liabilities, which are revalued at each balance sheet date subsequent to the initial issuance. Depending on the terms of a warrant agreement, we use the Black-Scholes or trinomial pricing models to value the related derivative warrant liabilities. Changes in the fair value of the warrants are reflected in the consolidated statement of operations as “Change in fair value of common stock warrant liability.” See, “Item 8 – Notes to consolidated financial statements – Note 8 – Common Stock Warrant Liability,” for a detailed description of our accounting for derivative warrant liabilities. Collaborative arrangements We account for collaborative arrangements in accordance with applicable accounting guidance provided in ASC Topic 808, Collaborative Arrangements (ASC Topic 808). See, “ – Note 12 – Corporate Partnership, Licensing and Research Funding Agreements – Battelle Memorial Institute,” for a description of our accounting for the Battelle collaboration Agreement. Income taxes We account for income taxes in accordance with ASC Topic 740, Accounting for Income Taxes (ASC Topic 740), which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities. We use a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Because we have never realized a profit, management has fully reserved the net deferred tax asset since realization is not assured. Net loss per common share Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted net loss per common share is computed by giving effect to all potentially dilutive securities outstanding for the period. For the years ended December 31, 2015 and 2014, the number of shares of common stock potentially issuable upon the exercise of certain stock options and warrants was 9.1 million and 1.6 million shares, respectively. As of December 31, 2015, all potentially dilutive securities were anti-dilutive and therefore have been excluded from the computation of diluted net loss per share. As of December 31, 2014, there were 1.2 million shares of common stock potentially issuable upon the exercise of stock options and warrants excluded from the computation of diluted net loss per common share because their impact would have been anti-dilutive. In accordance with ASC Topic 260, “Earnings per Share,” when calculating diluted net loss per common share, a gain associated with the decrease in the fair value of warrants classified as derivative liabilities results in an adjustment to the net loss; and the dilutive impact of the assumed exercise of these warrants results in an adjustment to the weighted average common shares outstanding. We utilize the treasury stock method to calculate the dilutive impact of the assumed exercise of warrants classified as derivative liabilities. For the year ended December 31, 2015, the effect of the adjustments for warrants classified as derivative liabilities was anti-dilutive. For the year ended December 31, 2014, the effect of the adjustments for warrants classified as derivative liabilities was dilutive. The table below provides information pertaining to the calculation of diluted net loss per common share for the periods presented:
We do not have any components of other comprehensive income (loss). Concentration of Suppliers We currently obtain the active pharmaceutical ingredients (APIs) of our KL4 surfactant drug products from single-source suppliers. In addition, we rely on a number of third-party institutions and laboratories that perform various studies as well as quality control release and stability testing and other activities related to our KL4 surfactant development and manufacturing activities. At the present time, several of these laboratories are single-source providers. The loss of one or more of our single-source suppliers or testing laboratories could have a material adverse effect upon our operations. Business segments We currently operate in one business segment, which is the research and development of products focused on surfactant therapies for respiratory disorders and diseases, and the manufacture and commercial sales of approved products. We are managed and operated as one business. A single management team that reports to the Chief Executive Officer comprehensively manages the entire business. We do not operate separate lines of business with respect to our product candidates. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize revenue at an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. generally accepted accounting principles (GAAP) when it becomes effective. The new standard is effective for us in the annual period ending December 31, 2017, including interim periods within that annual period. Early application is not permitted. We are evaluating the effect that ASU 2014-09 will have on our consolidated financial statements and related disclosures. The standard permits the use of either the retrospective or cumulative effect transition method. We have not yet selected a transition method nor determined the effect of the standard on our financial reporting. In August 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-15, Presentation of Financial Statements – Going Concern, which requires management to evaluate whether there is substantial doubt about the entity’s ability to continue as a going concern and, if so, disclose that fact. Management will also be required to evaluate and disclose whether its plans alleviate that doubt. The standard defines substantial doubt as when it is probable (i.e., likely) that the entity will be unable to meet its obligations as they become due within one year of the date the financial statements are issued (or available to be issued, when applicable). The ASU is effective for the annual period ending December 31, 2016 and interim periods thereafter. Early application is permitted. We are evaluating the effect that ASU 2014-15 will have on our consolidated financial statements and related disclosures. The standard permits the use of either the retrospective or cumulative effect transition method. We have not yet selected a transition method nor determined the effect of the standard on our financial reporting. In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires an entity to present debt issuance costs in the balance sheet as a direct deduction from the carrying amount of the corresponding debt liability, consistent with debt discounts. The guidance would not address situations in which debt issuance costs do not have an associated debt liability or exceed the carrying amount of the associated debt liability (e.g., an undrawn or partially drawn line of credit). The new standard is effective for us in the annual period ending December 31, 2016, including interim periods within that annual period. Early adoption is permitted and the standard is to be applied retrospectively. We are evaluating the effect that ASU 2015-03 will have on our consolidated financial statements and related disclosures. In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, which requires an entity to classify all deferred tax assets and liabilities as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts. Also, companies will no longer allocate valuation allowances between current and noncurrent deferred tax assets because those allowances also will be classified as noncurrent. The new standard is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. We have adopted ASU 2015-17 as of December 31, 2015, and the adoption of this update is not expected to have a material effect on our consolidated financial statements and related disclosures. |
Fair Value Measurements |
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Fair Value Measurements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Note 5 – Fair Value Measurements Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:
Fair Value on a Recurring Basis Assets and liabilities measured at fair value on a recurring basis are categorized in the table below as of December 31, 2015 and 2014:
The following table summarizes changes in the fair value of the common stock warrants measured on a recurring basis using Level 3 inputs for 2015 and 2014:
(1) See, Note 8 – Common Stock Warrant Liability. The significant unobservable inputs used in the fair value measurement of the common stock warrants measured on a recurring basis are the historical volatility of our common stock market price, expected term of the applicable warrants, and the risk-free interest rate based on the U.S. Treasury yield curve in effect at the measurement date. In addition to the significant unobservable inputs noted above, certain fair value measurements also take into account an assumption of the likelihood and timing of the occurrence of an event that would result in an adjustment to the exercise price in accordance with the anti-dilutive pricing provisions in certain of the warrants. Any significant increases or decreases in the unobservable inputs, with the exception of the risk-free interest rate, may result in significantly higher or lower fair value measurements.
Fair Value of Long-Term Debt At December 31, 2015, the estimated fair value of the Deerfield Loan (see, Note 9 – Deerfield Loan) approximated the carrying value of $25.0 million. At December 31, 2014, the estimated fair value of the Deerfield Loan was $22.2 million compared to a carrying value, net of discounts, of $20.3 million. At December 31, 2014, the estimated fair value of the Deerfield Loan was based on discounting the future contractual cash flows to the present value at the valuation date. This analysis utilizes certain Level 3 unobservable inputs, including current cost of capital. Considerable judgment is required to interpret market data and to develop estimates of fair value. The estimates presented are not necessarily indicative of amounts we could realize in a current market exchange. The use of alternative market assumptions and estimation methodologies could have a material effect on these estimates of fair value. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. |
Property and Equipment |
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Property and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment | Note 6 –Property and Equipment Property and equipment comprises the following:
Depreciation expense on property and equipment for the years ended December 31, 2015 and 2014 was $0.7 million and $0.8 million, respectively. |
Accrued Expenses |
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Accrued Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Expenses | Note 7 – Accrued Expenses Accrued expenses are comprised of the following:
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Common Stock Warrant Liability |
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Common Stock Warrant Liability [Abstract] | |
Common Stock Warrant Liability | Note 8 – Common Stock Warrant Liability We account for common stock warrants in accordance with applicable accounting guidance provided in ASC Topic 815, Derivatives and Hedging – Contracts in Entity’s Own Equity (ASC 815), either as derivative liabilities or as equity instruments depending on the specific terms of the warrant agreement. On February 22, 2011, we issued registered warrants (2011 Warrants) that expired on February 22, 2016 and had a fair value at issuance of $8.0 million. As of December 31, 2015, there were 0.3 million warrant shares potentially issuable upon exercise of these warrants, with a fair value of $0.2 million. These warrants contained anti-dilution provisions that in certain circumstances would adjust the exercise price if we issued any common stock, securities convertible into common stock, or other securities (subject to certain exceptions) at a value below the then-existing exercise price of the warrants. Although by their express terms, these warrants were not subject to potential cash settlement, due to the nature of the anti-dilution provisions, they were classified as derivative liabilities and reported, at each balance sheet date, at estimated fair value determined using a trinomial pricing model. The exercise price of these warrants was adjusted downward to $2.66 per share at the time of the July 2015 public offering. During the year ended December 31, 2015, holders of the 2011 Warrants exercised warrants to purchase 51,193 shares of our common stock at an exercise price of $2.66 per share, resulting in proceeds to us of $0.1 million. During the year ended December 31, 2014, holders of the 2011 Warrants exercised warrants to purchase 20,346 shares of our common stock at an exercise price of $21.00 per share, resulting in proceeds to us of $0.4 million. Changes in the estimated fair value of warrants classified as derivative liabilities are reported in the accompanying Consolidated Statement of Operations as the “Change in fair value of common stock warrants.” |
Deerfield Loan |
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Deerfield Loan | Note 9 – Deerfield Loan Long-term debt consists solely of amounts due under a loan (Deerfield Loan) with affiliates of Deerfield Management Company, L.P. (Deerfield) for the periods presented:
Under the terms of the Deerfield loan agreement, Deerfield made two advances, the first upon execution of the agreement in February 2013 in the amount of $10 million, and the second upon the first commercial sale of SURFAXIN in December 2013 in the amount of $20 million. In connection with each advance, we paid Deerfield a transaction fee equal to 1.5% of the amount disbursed. The outstanding principal accrued interest at a rate of 8.75%, payable quarterly in cash. The Deerfield Loan agreement also contains customary terms and conditions, representations and warranties and affirmative and negative covenants, including restrictions on our ability to incur additional indebtedness and grant additional liens on our assets, but it does not require us to meet minimum financial and revenue performance covenants. In addition, all amounts outstanding under the Deerfield Loan may become immediately due and payable upon (i) an “Event of Default,” as defined in the Deerfield Loan agreement, including, among other things, the consummation of a change of control transaction or the sale of more than 50% of our assets (a Major Transaction). Upon execution of the Deerfield Loan, we issued to Deerfield warrants to purchase approximately 0.2 million shares of our common stock at an exercise price of $39.34 per share. Upon receipt of the second advance in December 2013, we issued to Deerfield warrants to purchase an additional 0.3 million shares of our common stock at an exercise price of $39.34 per share (together with the warrants issued in connection with the execution of the agreement, the Deerfield Warrants). The number of shares of common stock into which the Deerfield Warrants are exercisable and the exercise price will be, and have been, adjusted to reflect any stock splits, recapitalizations or similar adjustments in the number of outstanding shares of common stock. The Deerfield Warrants will expire on the sixth anniversary of the Deerfield Loan agreement, February 13, 2019, and contain limitations on the ability of a holder to exercise the Deerfield Warrants if after such exercise, the holder would beneficially own more than 9.985% of the total number of shares of our common stock then issued and outstanding. The Deerfield Warrants may be exercised in whole or in part either for cash or on a cashless basis. In connection with a Major Transaction, as defined in the Deerfield Warrants, to the extent of consideration payable to stockholders in cash in connection with such Major Transaction, the holder may have the option to redeem the Deerfield Warrants or that portion of the Deerfield Warrants for cash in an amount equal to the Black-Scholes value (as defined in the Deerfield Warrants) of the Deerfield Warrants or that portion of the Deerfield Warrants redeemed. In addition, in connection with a Major Transaction, to the extent of any consideration payable to stockholders in securities, or in the event of an Event of Default, the holder may have the option to exercise the Deerfield Warrants and receive therefor that number of shares of common stock that equals the Black-Scholes value of the Deerfield Warrants or that portion of the Deerfield Warrants exercised. Prior to a holder exercising the Deerfield Warrants for shares in such transactions, the Company may elect to terminate the Deerfield Warrants or that portion of the Deerfield Warrants being exercised and pay the holder cash in an amount equal to the Black-Scholes value of the Deerfield Warrants. We initially recorded the loan as long-term debt at its face value of $30.0 million less debt discounts and issuance costs consisting of (i) $11.7 million fair value of the Deerfield Warrants issued upon the first advance and the second advance (0.5 million warrants in total), and (ii) a $450,000 transaction fee. The discount was being accreted to the $30 million loan over its term using the effective interest method. The Deerfield Warrants are derivatives that qualify for an exemption from liability accounting as provided for in ASC Topic 815 “Derivatives and Hedging – Contracts in Entity’s Own Equity” (ASC 815) and have been classified as equity. The fair value of the Deerfield Warrants at issuance was calculated using the Black-Scholes option-pricing model. The significant Level 3 unobservable inputs used in valuing the Deerfield Warrants are the historical volatility of our common stock market price, expected term of the warrants, and the risk-free interest rate based on the U.S. Treasury yield curve in effect at the measurement date. Any significant increases or decreases in the unobservable inputs, with the exception of the risk-free interest rate, would have resulted in a significantly higher or lower fair value measurement.
On July 9, 2015, we entered into an amendment to our Deerfield Loan agreement and related notes (Deerfield Notes) to better align our Deerfield Loan principal repayment obligations with anticipated milestones under our clinical development program for AEROSURF. Under the terms of the amendment, (i) upon execution, we prepaid in cash $2.5 million of the principal amounts outstanding, (ii) on July 22, 2015, upon the occurrence of the July 2015 public offering, we prepaid in cash an additional $2.5 million of the principal amounts outstanding, (iii) the principal installment originally due in February 2017 was eliminated and (iv) each of the principal payments due in February 2018 and February 2019 was increased to $12.5 million. We also paid Deerfield’s expenses (including reasonable counsel fees and expenses) incurred in connection with the amendment. Under the Deerfield Loan agreement, the $12.5 million principal installment due in February 2018 may be deferred one year if we achieve the market capitalization milestone set forth in the Deerfield Loan agreement. On July 22, 2015, we entered into a second amendment to our Deerfield Loan agreement and Deerfield Notes, pursuant to which (a) upon closing the July 2015 public offering on July 22, 2015, we prepaid in cash $2.5 million of the principal amounts outstanding, as contemplated by the first amendment, and (b) Deerfield purchased and accepted $5 million Series A and Series B units offered in our July 2015 public offering in satisfaction of $5 million of future interest payments due under the Deerfield Notes. In addition, (i) we paid in cash when due on September 30, 2015, all accrued and unpaid interest under the Deerfield Notes for the period from June 30, 2015 to July 22, 2015 at the original rate of 8.75%; (ii) Deerfield agreed to apply the $5 million prepaid interest accruing from and after July 23, 2015, as and when such payments are due and payable, as follows; first, to interest accruing on the $12.5 million principal installment due on February 13, 2019, and second, to interest accruing on the $12.5 million principal installment due on February 13, 2018, until fully allocated, which is scheduled to occur at the end of the second quarter of 2016; (iii) after the full allocation of the $5 million interest prepayment, any remaining interest due on the principal amount of the Deerfield Notes will accrue at a rate of 8.25% per annum; and (iv) no credit will be given with respect to prepaid interest on principal under the Deerfield Notes that is prepaid, in whole or in part, except for a prepayment at our election or a prepayment required under the Deerfield Loan agreement in connection with a Major Transaction that qualifies as a “Qualified Major Transaction.” A “Qualified Major Transaction” means a change of control transaction (as defined in the Deerfield Warrants), in which (i) we are not the surviving entity and (ii) our common stock valuation (as defined in the Deerfield Warrants) immediately prior to the change of control transaction equals or exceeds $100 million. In addition, we paid Deerfield’s expenses (including reasonable counsel fees and expenses) incurred in connection with the second amendment. The restructuring of the Deerfield Loan was accounted for as an extinguishment of debt in accordance with ASC Topic 470, Debt – Modifications and Extinguishments, and as a result, we have incurred an $11.8 million non-cash loss on debt extinguishment consisting the difference between the reacquisition price of the Deerfield Loan and the net carrying amount of the extinguished Deerfield Loan, which includes $4.1 million in fair value of the Series A and Series B warrants issued to Deerfield as part of the $5 million of Series A and Series B units Deerfield agreed to purchase and accept in our July 2015 public offering in satisfaction of $5 million of future interest payments due under the Deerfield Notes. The following amounts comprise the Deerfield Loan interest expense for the periods presented:
Cash interest expense represents interest at an annual rate of 8.75% on the outstanding principal amount for the period, paid in cash on a quarterly basis. Non-cash amortization of debt discount represents the amortization of transaction fees and the fair value of the Deerfield Warrants. Debt discount write-off represents the proportional write-off of unamortized debt discount at the time of a $2.5 million pre-payment of principal amount outstanding under the Deerfield Loan. Amortization of prepaid interest expense represents non-cash amortization of the $5 million of Series A and Series B units Deerfield agreed to purchase and accept in our July 2015 public offering in satisfaction of $5 million of future interest payments due under the Deerfield Notes. The amortization of debt costs represents professional fees incurred in connection with the Deerfield Loan, and the write-off of debt costs represents the write-off of the remaining costs at the time of the debt restructuring. |
Stockholders' Equity |
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Stockholders' Equity | Note 10 – Stockholders’ Equity Registered Public Offerings On July 22, 2015, we completed a registered public offering of 1,791,667 Series A units and 3,000,000 Series B units each at a price per unit of $8.40, resulting in gross proceeds of $40.25 million ($37.6 million net after underwriting discount and expenses), including the exercise in full by the underwriters of their option to purchase up to an additional 625,000 Series A units at a price per unit of $8.40 to cover over-allotments. The proceeds included $5.0 million in non-cash consideration from Deerfield in the form of a reduction in future interest payments due under the Deerfield Loan (see, Note 9, “Deerfield Loan”). Each Series A unit consists of one share of common stock and a Series A warrant to purchase one share of common stock at an exercise price of $9.80 per share. Each Series B unit consists of a fully paid pre-funded Series B warrant to purchase one share of common stock at an exercise price of $8.40 per share, and a Series B warrant to purchase one share of common stock at an exercise price of $9.80 per share. The shares of common stock and warrants were immediately separable such that no units were issued. The warrants are exercisable immediately at the election of the holder for cash or through a net cashless exercise, provided that a holder may not exercise a warrant to the extent that after giving effect to such exercise, such holder would beneficially own in excess of 9.99% (or 4.99% as may be elected by such holder) of the shares of our common stock outstanding immediately after such exercise. All warrants will expire on the seventh anniversary of the issue date. The net proceeds will be used primarily (i) to advance the AEROSURF development program, and (ii) for general corporate purposes. The offering was made pursuant to a preliminary prospectus supplement dated July 16, 2015 to the 2014 Universal Shelf. At-the-Market Program (ATM Program) Stifel ATM Program On February 11, 2013, we entered into an At-the-Market Equity Sales Agreement (ATM Agreement) with Stifel, Nicolaus & Company, Incorporated (Stifel), under which Stifel, as our exclusive agent, at our discretion and at such times that we may determine from time to time, may sell over a three-year period up to a maximum of $25,000,000 of shares of our common stock (ATM Program). We are not required to sell any shares at any time during the term of the ATM Program. If we issue a sale notice to Stifel, we may designate the minimum price per share at which shares may be sold and the maximum number of shares that Stifel is directed to sell during any selling period. As a result, prices are expected to vary as between purchasers and during the term of the offering. Stifel may sell the shares by any method deemed to be an “at-the-market” equity offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, which may include ordinary brokers’ transactions on The Nasdaq Capital Market®, or otherwise at market prices prevailing at the time of sale or prices related to such prevailing market prices, or as otherwise agreed by Stifel and us. Either party may suspend the offering under the ATM Agreement by notice to the other party. The ATM Agreement, as amended on February 11, 2016, will terminate upon the earliest of: (1) the sale of all shares subject to the ATM Agreement, (2) February 11, 2019 or (3) the termination of the ATM Agreement in accordance with its terms. Either party may terminate the ATM Agreement at any time upon written notification to the other party in accordance with the ATM Agreement, and upon such termination, the offering will terminate. We agreed to pay Stifel a commission equal to 3.0% of the gross sales price of any shares sold pursuant to the ATM Agreement. With the exception of expenses related to the shares, Stifel will be responsible for all of its own costs and expenses incurred in connection with the offering. 401(k) Plan Employer Match We have a voluntary 401(k) savings plan (401(k) Plan) covering eligible employees that allows for periodic discretionary company matches equal to a percentage of each participant’s contributions (up to the maximum deduction allowed, excluding “catch up” amounts). We currently provide for the company match by issuing shares of common stock that are registered pursuant to a registration statement on Form S-8 filed with the U.S. Securities and Exchange Commission (SEC). For the years ended December 31, 2015 and 2014, the match resulted in the issuance of 94,114 and 42,371 shares of common stock, respectively. Expenses associated with the 401(k) match for the years ended December 31, 2015 and 2014 were $0.5 million and $1.0 million, respectively. Common Shares Reserved for Future Issuance Common shares reserved for potential future issuance upon exercise of warrants The chart below summarizes shares of our common stock reserved for future issuance upon the exercise of warrants:
Common shares reserved for potential future issuance upon exercise of stock options or granting of additional equity incentive awards As of December 31, 2015 and 2014, we had 0.4 million and 0.5 million shares, respectively, available for potential future issuance under the 2011 Long-Term Incentive Plan (the 2011 Plan). On January 21, 2016, at a Special Meeting of Stockholders, our stockholders authorized the issuance of an additional 1.1 million shares under the 2011 Long-Term Incentive Plan, which shares were registered on Form S-8 on January 27, 2016. Common shares reserved for potential future issuance under our 401(k) Plan As of December 31, 2015 and 2014, we had 4,567 and 438, respectively, reserved for potential future issuance under the 401(k) Plan. On October 27, 2015 the Board of Directors approved the issuance of 78,571 shares of common stock that may be issued pursuant to our 401(k) Plan. These shares were registered on Form S-8 on January 6, 2016. |
Stock Options and Stock-based Employee Compensation |
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Stock Options and Stock-based Employee Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Options and Stock-based Employee Compensation | Note 11 – Stock Options and Stock-based Employee Compensation Long-Term Incentive Plans We have the 2011 Plan that provides for the grant of long-term equity and cash incentive compensation awards and replaced a 2007 Long-Term Incentive Plan (the 2007 Plan). Awards outstanding under the 2007 and an earlier 1998 Plan (expired) will continue to be governed by the terms of the plans and award agreements under which they were granted. Under the 2011 Plan, we may grant awards for up to 2.0 million shares of our common stock. Additionally, any shares returnable to the 2007 Plan as a result of cancellations, expirations and forfeitures will be returned to, and become available for issuance under, the 2011 Plan. Shares returnable to the 1998 Plan as a result of cancellations, expirations and forfeitures will not become available for issuance under the 1998 Plan or the 2011 Plan. Awards under the Plan may include stock options, stock appreciation rights (SARs), restricted stock awards (RSAs), restricted stock units, other performance and stock-based awards, and dividend equivalents. An administrative committee (the Committee – currently the Compensation Committee of the Board of Directors) or Committee delegates may determine the types, the number of shares covered by, and the terms and conditions of, such awards. Eligible participants may include any of our employees, directors, advisors or consultants. Stock options and restricted stock units (RSUs) outstanding and available for future issuance are as follows:
No SARs, RSAs, other performance and stock-based awards, or dividend equivalents have been granted under the 2011 Plan. Although individual grants may vary, option awards generally are exercisable upon vesting, vest based upon two years of continuous service, and have a 10-year term. A summary of activity under our long-term incentive plans is presented below:
Based upon application of the Black-Scholes option-pricing formula described below, the weighted-average grant-date fair value of options granted during the years ended December 31, 2015 and 2014 was $10.48 and $25.48, respectively. The weighted-average grant-date fair value of RSUs granted during the years ended December 31, 2015 and 2014 was $6.72 and $23.94, respectively. The total intrinsic value of options outstanding, vested, and exercisable as of December 31, 2015 are each $0. Stock-Based Compensation We recognized stock-based compensation expense in accordance ASC Topic 718 for the years ended December 31, 2015 and 2014 of $1.7 million and $2.9 million, respectively. Stock-based compensation expense was classified as follows:
The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing formula that uses assumptions noted in the following table. Expected volatilities are based upon the historical volatility of our common stock and other factors. We also use historical data and other factors to estimate option exercises, employee terminations and forfeiture rates within the valuation model. The risk-free interest rates are based upon the U.S. Treasury yield curve in effect at the time of the grant.
The total fair value of the underlying shares of the options vested during 2015 and 2014 equals $2.7 million and $3.1 million, respectively. As of December 31, 2015, there was $1.9 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the 2011 Plan. That cost is expected to be recognized over a weighted-average vesting period of 1.8 years. |
Corporate Partnership, Licensing and Research Funding Agreements |
12 Months Ended |
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Dec. 31, 2015 | |
Corporate Partnership, Licensing and Research Funding Agreements [Abstract] | |
Corporate Partnership, Licensing and Research Funding Agreements | Note 12 – Corporate Partnership, Licensing and Research Funding Agreements Licensing and Research Funding Agreements Battelle Memorial Institute In October 2014, we entered into a collaboration agreement with Battelle providing for the further development of our ADS for potential use in our planned phase 3 clinical program for AEROSURF for the treatment of RDS in premature infants and, if AEROSURF is approved for commercial sale by the FDA or other regulatory authority, initial commercial supply. Under our agreement, we and Battelle plan to design, develop, and complete the testing, verification, and documentation of an improved AEROSURF system, and share equally in the related development costs. These costs are recognized in research and development expense as incurred and were $3.1 million and $0.3 million for the years ended December 31, 2015 and 2014, respectively. In connection with the collaboration agreement, we issued to Battelle two warrants to purchase shares of our common stock, each having an exercise price of $70.00 per share and a term of 10 years, subject to earlier termination under certain circumstances set forth therein, including (i) a warrant to purchase up to 71,429 shares of our common stock, exercisable upon successful completion by Battelle of development activities described above (Initial Warrant), and (ii) a warrant to purchase up to 35,714 shares of our common stock (Additional Warrant; and together with the Initial Warrant, the Battelle Warrants), exercisable if and only if Battelle successfully completes the development activities no later than July 15, 2016, which date was adjusted, and may be further adjusted, as provided in the Collaboration Agreement. We and Battelle have agreed to execute a registration rights agreement providing for the registration of the resale of shares underlying the Battelle Warrants. The Battelle Warrants may be exercised for cash only, except that, in the event a registration statement is not effective at the time of exercise and if an exemption from registration is otherwise available at that time, the Battelle Warrants may be exercised on a cashless basis. The Battelle Warrants were issued pursuant to an exemption from registration contained in Regulation D, Rule 506. The Battelle Warrants are accounted for as equity instruments under the applicable accounting guidance of ASC Topic 815. If Battelle successfully completes their activities under the agreement, we have agreed to pay Battelle royalties equal to a low single-digit percentage of the worldwide net sales and license royalties on sales of AEROSURF for the treatment of RDS in premature infants, up to an aggregate limit of $25 million. Philip Morris USA Inc. and Philip Morris Products S.A. Under license agreements with Philip Morris USA Inc. (PMUSA) and Philip Morris Products S.A. (PMPSA), we hold exclusive worldwide licenses to the ADS technology for use with pulmonary surfactants (alone or in combination with any other pharmaceutical compound(s)) for all respiratory diseases and conditions (the foregoing uses in each territory, the Exclusive Field), and an exclusive license in the U.S. for use with certain non-surfactant drugs to treat a wide range of pediatric and adult respiratory indications in hospitals and other health care institutions. We generally are obligated to pay royalties at a rate equal to a low single-digit percent of sales of products sold in the Exclusive Field (as defined in the license agreements) in the territories, including sales of aerosol devices and related components that are not based on the capillary aerosolization technology (unless we exercise our right to terminate the license with respect to a specific indication). We also agreed to pay minimum royalties quarterly beginning in 2014, but are entitled to a reduction of future royalties in an amount equal to the excess of any minimum royalty paid over royalties actually earned in prior periods. We paid the minimum royalty of $400,000 and $300,000 in 2015 and 2014, respectively, related to these license agreements. Johnson & Johnson and Ortho Pharmaceutical Corporation We, Johnson & Johnson (J&J) and its wholly-owned subsidiary, Ortho Pharmaceutical Corporation, are parties to a license agreement granting to us an exclusive worldwide license to the J&J proprietary KL4 surfactant technology. Under the license agreement, we are obligated to pay fees of up to $2.5 million in the aggregate upon our achievement of certain milestones, primarily upon receipt of marketing regulatory approvals for certain designated products. We have paid $950,000 to date for milestones that have been achieved including a $500,000 milestone payment in 2012 that became due as a result of the FDA’s approval of SURFAXIN. In addition, we are required to make royalty payments at different rates, depending upon type of revenue and country, in amounts in the range of a high single-digit percent of net sales (as defined in the license agreement) of licensed products sold by us or sublicensees, or, if greater, a percentage of royalty income from sublicensees in the low double digits. Laboratorios del Dr. Esteve, S.A. We have a strategic alliance with Laboratorios del Dr. Esteve, S.A. (Esteve) for the development, marketing and sales of a broad portfolio of potential KL4 surfactant products in Andorra, Greece, Italy, Portugal, and Spain. Antonio Esteve, Ph.D., a principal of Esteve, served as a member of our Board of Directors from May 2002 until January 2013. Esteve will pay us a transfer price on sales of our KL4 surfactant products. We will be responsible for the manufacture and supply of all of the covered products and Esteve will be responsible for all sales and marketing in the territory. Esteve is obligated to make stipulated cash payments to us upon our achievement of certain milestones, primarily upon receipt of marketing regulatory approvals for the covered products. In addition, Esteve has agreed to contribute to phase 3 clinical trials for the covered products by conducting and funding development performed in the territory. As part of a 2004 restructuring in which Esteve returned certain rights to us in certain territories (Former Esteve Territories), we agreed to pay Esteve 10% of any cash up front and milestone fees (up to a maximum aggregate of $20 million) that we receive in connection with any strategic collaborations for the development and/or commercialization of certain of our KL4 surfactant products in the Former Esteve Territories. |
Commitments |
12 Months Ended |
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Dec. 31, 2015 | |
Commitments [Abstract] | |
Commitments | Note 13 – Commitments Operating Leases Our operating leases consist primarily of facility leases for our operations in Pennsylvania and New Jersey. We maintain our headquarters in Warrington, Pennsylvania. The facility is 39,594 square feet and serves as the main operating facility for drug and device development, regulatory, analytical technical services, research and development, and administration. In January 2013, the lease was amended to extend the term an additional five years through February 2018. The total aggregate base rental payments remaining under the extended portion of the lease are approximately $2.0 million. Until June 30, 2015, we leased approximately 21,000 square feet of space for our manufacturing operations in Totowa, New Jersey (Totowa Facility), at an annual rent of $525,000. The lease for this facility, which was used to manufacture SURFAXIN drug product, expired on June 30, 2015 Rent expense under these leases was $1.0 million and $1.2 million for the years ended December 31, 2015 and 2014, respectively. Battelle Collaboration In accordance with terms of the Battelle agreement (See, – Note 12 – Corporate Partnership, Licensing and Research Funding Agreements), we and Battelle plan to design, develop, and complete the testing, verification, and documentation of an improved AEROSURF system, and share equally in the development plan costs. If this project is successfully completed in accordance with the development plan, based upon current estimates, we expect to incur development costs of approximately $6.6 million through 2016. Restructuring Plan In April 2015, we implemented a restructuring plan to voluntarily cease the commercialization of SURFAXIN and focus our resources on the development of our aerosolized KL4 surfactant pipeline for respiratory diseases, beginning with AEROSURF. As part of the restructuring plan, we ceased manufacturing activities at our Totowa Facility, which we closed upon the expiration of our lease on June 30, 2015. The total severance cost for all impacted employees is $2.9 million, of which $1.0 million was accrued as of December 31, 2014 for Totowa employees. The remaining $1.9 million was charged to expense 2015 ($1.0 million to research and development expenses and $0.9 million to selling, general and administrative expenses). We paid $2.6 million of the severance and retention benefits during 2015. The remaining $0.3 million will be paid through June 30, 2016. |
Litigation |
12 Months Ended |
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Dec. 31, 2015 | |
Litigation [Abstract] | |
Litigation | Note 14 – Litigation We are not aware of any pending or threatened legal actions that would, if determined adversely to us, have a material adverse effect on our business and operations. We have from time to time been involved in disputes and proceedings arising in the ordinary course of business, including in connection with the conduct of our clinical trials. In addition, as a public company, we are also potentially susceptible to litigation, such as claims asserting violations of securities laws. Any such claims, with or without merit, if not resolved, could be time-consuming and result in costly litigation. There can be no assurance that an adverse result in any future proceeding would not have a potentially material adverse effect on our business, results of operations and financial condition. |
Income Taxes |
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Income Taxes [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Note 15 – Income Taxes Since our inception, we have never recorded a provision or benefit for Federal and state income taxes. The reconciliation of the income tax benefit computed at the Federal statutory rates to our recorded tax benefit for the years ended December 31, 2015 and 2014 is as follows:
The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities, at December 31, 2015 and 2014, are as follows:
We are in a net deferred tax asset position at December 31, 2015 and 2014 before the consideration of a valuation allowance. Because we have never realized a profit, management has fully reserved the net deferred tax asset since realization is not assured. It is our policy to classify interest and penalties recognized on uncertain tax positions as a component of income tax expense. There was neither interest nor penalties accrued as of December 31, 2015 or 2014, nor were any incurred in 2015 or 2014. At December 31, 2015 and 2014, we had available carryforward net operating losses for Federal tax purposes of $540.2 million and $473.3 million, respectively, and a research and development tax credit carryforward of $13.9 million and $12.9 million, respectively. The Federal net operating loss and research and development tax credit carryforwards will continue to expire through 2035. At December 31, 2015, we had available carryforward Federal and State net operating losses of $5.2 million and $0.4 million, respectively, related to stock-based compensation, the tax effect of which will result in a credit to equity as opposed to income tax expense, to the extent these losses are utilized in the future. At December 31, 2015 and 2014, we had available carryforward losses of approximately $527.1 million and $470.4 million, respectively, for state tax purposes. Of the $527.1 million state tax carryforward losses, $503.7 million is associated with the state of Pennsylvania, with the remainder associated with the other 10 states within which we have established tax nexus. Utilization of net operating loss (NOL) and research and development (R&D) credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 due to ownership change limitations that have occurred previously or that could occur in the future. These ownership changes may limit the amount of NOL and R&D credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. There also could be additional ownership changes in the future, which may result in additional limitations in the utilization of the carryforward NOLs and credits. A full valuation allowance has been provided against our research and development credits and, if a future assessment requires an adjustment, an adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact to the consolidated balance sheet or statement of operations if an adjustment were required. |
Selected Quarterly Financial Data (Unaudited) |
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Selected Quarterly Financial Data (Unaudited) | Note 16 –Selected Quarterly Financial Data (Unaudited) The following tables contain unaudited statement of operations information for each quarter of 2015 and 2014. The operating results for any quarter are not necessarily indicative of results for any future period.
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Subsequent Events |
12 Months Ended |
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Dec. 31, 2015 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 17 Subsequent Events We evaluated all events or transactions that occurred after December 31, 2015 through the date we issued these financial statements. During this period, we noted two subsequent events as described below: Share Consolidation On January 21, 2016, at a Special Meeting of Stockholders, our stockholders approved proposals authorizing the Board of Directors, in its discretion, to implement a reverse split based on an exchange ratio in a designated range and to reduce the number of authorized shares of common stock at one half the exchange ratio implemented for the reverse split. We filed a Certificate of Amendment to our Certificate of Incorporation to (i) effect a share consolidation, or reverse split, of the common stock, par value $0.001 per share, at a ratio of 1-for-14, effective at 12:01 a.m. on January 22, 2016, and (ii) reduce the number of authorized shares of common stock under our Certificate of Incorporation from 250 million to 36 million. Because the Amendment did not reduce the number of authorized shares of common stock in the same proportion as the reverse split, the Amendment had the effect of increasing the amount of common stock available for issuance relative to the amount of common stock available for issuance prior to the Amendment. Further, any warrants, options, restricted stock units and rights outstanding as of the effective date that were subject to adjustment were adjusted in accordance with the terms thereof. Those adjustments may have included, without limitation, changes to the number of shares of common stock that may be obtained upon exercise or conversion of these securities, and changes to the applicable exercise or purchase price. The stockholders also approved the issuance of an additional 1.1 million shares under the 2011 Long-Term Incentive Plan. Executive Severance On February 1, 2016, the Company announced the appointment of Craig Fraser to serve as our President and Chief Executive Officer, effective February 1, 2016. Upon recommendation of the Nomination and Governance Committee of our Board of Directors also appointed Mr. Fraser to serve as a member of the Board, effective immediately. In connection with the foregoing, effective February 1, 2016, we terminated the Employment Agreement of our then President and Chief Executive Officer (the Former CEO). In connection therewith, upon execution by the Former CEO of a plenary release in form satisfactory to us, he became entitled under his Employment Agreement to the following severance and other benefits, in addition to any vested benefits under our company plans or policies: (i) a pro rata bonus equal to a percentage of his Annual Bonus Amount determined by dividing the aggregate bonuses paid to other contract executives for the year 2016 by the aggregate target bonuses of such other contract executives for 2016, and further prorated for the number of days the Former CEO was employed during 2016, payable at the time that other contract executives are paid bonuses with respect to 2016; (ii) a severance amount equal to the sum of the Former CEO’s base salary then in effect and his Annual Bonus Amount, payable in equal installments through August 1, 2017 (the Severance Period); and (iii) all stock options held by the Former CEO will continue to vest during the Severance Period, and continue to be exercisable for up to 36 months after the date of termination. From and after the end of the Severance Period, the Former CEO will forfeit all of his unvested stock options in accordance with the terms of the 2011 Plan. The Former CEO also is subject to non-competition and non-solicitation restrictions for 12 months and 18 months, respectively, after the date of termination under a separate confidentiality agreement. All of our obligations under the Employment Agreement will cease if at any time during the Severance Period the Former CEO engages in a material breach of the Employment Agreement and fails to cure such breach within five business days after receipt from us of notice of such breach. |
Accounting Policies and Recent Accounting Pronouncements (Policies) |
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Consolidation | Consolidation The consolidated financial statements include all of the accounts of Discovery Laboratories, Inc. and its inactive subsidiary, Acute Therapeutics, Inc. All intercompany transactions and balances have been eliminated in consolidation. |
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Use of estimates | Use of estimates The preparation of financial statements, in conformity with accounting principles generally accepted in the U. S., requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
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Cash and cash equivalents | Cash and cash equivalents Cash and cash equivalents are held in U.S. banks and consist of liquid investments and money market funds with a maturity from date of purchase of 90 days or less that are readily convertible into cash. |
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Fair value of financial instruments | Fair value of financial instruments Our financial instruments consist principally of cash and cash equivalents and restricted cash. The fair values of our cash equivalents are based on quoted market prices. The carrying amount of cash equivalents is equal to their respective fair values at December 31, 2015 and 2014, respectively. Warrants classified as liabilities are recorded at their fair market value. Other financial instruments, including long-term debt, accounts payable and accrued expenses, are carried at cost, which we believe approximates fair value. |
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Property and equipment | Property and equipment Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets (generally three to ten years). Leasehold improvements are amortized over the shorter of the estimated useful lives or the remaining term of the lease. Repairs and maintenance costs are charged to expense as incurred. |
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Restricted cash | Restricted cash Restricted cash consists of a certificate of deposit held by our bank as collateral for a letter of credit in the same notional amount held by our landlord to secure our obligations under our Lease Agreement dated May 26, 2004 and amended January 3, 2013 for our headquarters location in Warrington, Pennsylvania (See, Note 13 – Commitments, for further discussion on our leases). |
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Long-lived assets | Long-lived assets Our long-lived assets, primarily consisting of equipment, are reviewed for impairment when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable, or its estimated useful life has changed significantly. When the undiscounted cash flows of an asset are less than its carrying value, an impairment is recorded and the asset is written down to estimated value. No impairment was recorded during the years ended December 31, 2015 and 2014 as management believes there are no circumstances that indicate the carrying amount of the assets will not be recoverable. In the second quarter of 2015, we closed the Totowa Facility and sold manufacturing equipment for total cash proceeds of $0.3 million, resulting in a $0.1 million loss from the sale and disposal of these assets. |
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Grant revenue | Grant revenue We recognize grant revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed and determinable, and collectability is reasonably assured. |
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Research and development | Research and development We account for research and development expense by the following categories: (a) product development and manufacturing, (b) medical and regulatory operations, and (c) direct preclinical and clinical programs. Research and development expense includes personnel, facilities, manufacturing and quality operations, pharmaceutical and device development, research, clinical, regulatory, other preclinical and clinical activities and medical affairs. Research and development costs are charged to operations as incurred. |
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Stock-based compensation | Stock-based compensation Stock-based compensation is accounted for under the fair value recognition provisions of Accounting Standards Codification (ASC) Topic 718, Stock Compensation (ASC Topic 718). See, Note 11 – Stock Options and Stock-based Employee Compensation, for a detailed description of our recognition of stock-based compensation expense. The fair value of stock option grants is recognized evenly over the vesting period of the options or over the period between the grant date and the time the option becomes non-forfeitable by the employee, whichever is shorter. |
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Warrant accounting | Warrant accounting We account for common stock warrants in accordance with applicable accounting guidance provided in ASC Topic 815, Derivatives and Hedging – Contracts in Entity’s Own Equity (ASC Topic 815), as either derivative liabilities or as equity instruments depending on the specific terms of the warrant agreement. We classify derivative warrant liabilities on the consolidated balance sheet as current liabilities, which are revalued at each balance sheet date subsequent to the initial issuance. Depending on the terms of a warrant agreement, we use the Black-Scholes or trinomial pricing models to value the related derivative warrant liabilities. Changes in the fair value of the warrants are reflected in the consolidated statement of operations as “Change in fair value of common stock warrant liability.” See, “Item 8 – Notes to consolidated financial statements – Note 8 – Common Stock Warrant Liability,” for a detailed description of our accounting for derivative warrant liabilities. |
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Collaborative arrangements | Collaborative arrangements We account for collaborative arrangements in accordance with applicable accounting guidance provided in ASC Topic 808, Collaborative Arrangements (ASC Topic 808). See, “ – Note 12 – Corporate Partnership, Licensing and Research Funding Agreements – Battelle Memorial Institute,” for a description of our accounting for the Battelle collaboration Agreement. |
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Income taxes | Income taxes We account for income taxes in accordance with ASC Topic 740, Accounting for Income Taxes (ASC Topic 740), which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities. We use a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Because we have never realized a profit, management has fully reserved the net deferred tax asset since realization is not assured. |
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Net loss per common share | Net loss per common share Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted net loss per common share is computed by giving effect to all potentially dilutive securities outstanding for the period. For the years ended December 31, 2015 and 2014, the number of shares of common stock potentially issuable upon the exercise of certain stock options and warrants was 9.1 million and 1.6 million shares, respectively. As of December 31, 2015, all potentially dilutive securities were anti-dilutive and therefore have been excluded from the computation of diluted net loss per share. As of December 31, 2014, there were 1.2 million shares of common stock potentially issuable upon the exercise of stock options and warrants excluded from the computation of diluted net loss per common share because their impact would have been anti-dilutive. In accordance with ASC Topic 260, “Earnings per Share,” when calculating diluted net loss per common share, a gain associated with the decrease in the fair value of warrants classified as derivative liabilities results in an adjustment to the net loss; and the dilutive impact of the assumed exercise of these warrants results in an adjustment to the weighted average common shares outstanding. We utilize the treasury stock method to calculate the dilutive impact of the assumed exercise of warrants classified as derivative liabilities. For the year ended December 31, 2015, the effect of the adjustments for warrants classified as derivative liabilities was anti-dilutive. For the year ended December 31, 2014, the effect of the adjustments for warrants classified as derivative liabilities was dilutive. The table below provides information pertaining to the calculation of diluted net loss per common share for the periods presented:
We do not have any components of other comprehensive income (loss). |
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Concentration of Suppliers | Concentration of Suppliers We currently obtain the active pharmaceutical ingredients (APIs) of our KL4 surfactant drug products from single-source suppliers. In addition, we rely on a number of third-party institutions and laboratories that perform various studies as well as quality control release and stability testing and other activities related to our KL4 surfactant development and manufacturing activities. At the present time, several of these laboratories are single-source providers. The loss of one or more of our single-source suppliers or testing laboratories could have a material adverse effect upon our operations. |
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Business segments | Business segments We currently operate in one business segment, which is the research and development of products focused on surfactant therapies for respiratory disorders and diseases, and the manufacture and commercial sales of approved products. We are managed and operated as one business. A single management team that reports to the Chief Executive Officer comprehensively manages the entire business. We do not operate separate lines of business with respect to our product candidates. |
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Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize revenue at an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. generally accepted accounting principles (GAAP) when it becomes effective. The new standard is effective for us in the annual period ending December 31, 2017, including interim periods within that annual period. Early application is not permitted. We are evaluating the effect that ASU 2014-09 will have on our consolidated financial statements and related disclosures. The standard permits the use of either the retrospective or cumulative effect transition method. We have not yet selected a transition method nor determined the effect of the standard on our financial reporting. In August 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-15, Presentation of Financial Statements – Going Concern, which requires management to evaluate whether there is substantial doubt about the entity’s ability to continue as a going concern and, if so, disclose that fact. Management will also be required to evaluate and disclose whether its plans alleviate that doubt. The standard defines substantial doubt as when it is probable (i.e., likely) that the entity will be unable to meet its obligations as they become due within one year of the date the financial statements are issued (or available to be issued, when applicable). The ASU is effective for the annual period ending December 31, 2016 and interim periods thereafter. Early application is permitted. We are evaluating the effect that ASU 2014-15 will have on our consolidated financial statements and related disclosures. The standard permits the use of either the retrospective or cumulative effect transition method. We have not yet selected a transition method nor determined the effect of the standard on our financial reporting. In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires an entity to present debt issuance costs in the balance sheet as a direct deduction from the carrying amount of the corresponding debt liability, consistent with debt discounts. The guidance would not address situations in which debt issuance costs do not have an associated debt liability or exceed the carrying amount of the associated debt liability (e.g., an undrawn or partially drawn line of credit). The new standard is effective for us in the annual period ending December 31, 2016, including interim periods within that annual period. Early adoption is permitted and the standard is to be applied retrospectively. We are evaluating the effect that ASU 2015-03 will have on our consolidated financial statements and related disclosures. In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, which requires an entity to classify all deferred tax assets and liabilities as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts. Also, companies will no longer allocate valuation allowances between current and noncurrent deferred tax assets because those allowances also will be classified as noncurrent. The new standard is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. We have adopted ASU 2015-17 as of December 31, 2015, and the adoption of this update is not expected to have a material effect on our consolidated financial statements and related disclosures. |
Accounting Policies and Recent Accounting Pronouncements (Tables) |
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Calculation of diluted net loss per common share | The table below provides information pertaining to the calculation of diluted net loss per common share for the periods presented:
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Fair Value Measurements (Tables) |
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Fair Value Measurements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets and liabilities measured at fair value | Assets and liabilities measured at fair value on a recurring basis are categorized in the table below as of December 31, 2015 and 2014:
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Common stock warrants measured at Level 3 inputs on recurring basis | The following table summarizes changes in the fair value of the common stock warrants measured on a recurring basis using Level 3 inputs for 2015 and 2014:
(1) See, Note 8 – Common Stock Warrant Liability. |
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Significant unobservable input assumption used for valuation | Any significant increases or decreases in the unobservable inputs, with the exception of the risk-free interest rate, may result in significantly higher or lower fair value measurements.
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Property and Equipment (Tables) |
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Property and equipment | Property and equipment comprises the following:
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Accrued Expenses (Tables) |
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Accrued expenses | Accrued expenses are comprised of the following:
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Deerfield Loan (Tables) |
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Deerfield Loan [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long term debt included in balance sheet | Long-term debt consists solely of amounts due under a loan (Deerfield Loan) with affiliates of Deerfield Management Company, L.P. (Deerfield) for the periods presented:
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Significant unobservable input assumptions of Level 3 valuations | Any significant increases or decreases in the unobservable inputs, with the exception of the risk-free interest rate, would have resulted in a significantly higher or lower fair value measurement.
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Interest expense included in statement of operations | The following amounts comprise the Deerfield Loan interest expense for the periods presented:
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Stockholders' Equity (Tables) |
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Common shares reserved for future issuance, warrants | The chart below summarizes shares of our common stock reserved for future issuance upon the exercise of warrants:
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Stock Options and Stock-based Employee Compensation (Tables) |
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Stock Options and Stock-based Employee Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock options and restricted stock units (RSUs) outstanding and available for future issuance | Stock options and restricted stock units (RSUs) outstanding and available for future issuance are as follows:
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Summary of stock option activity | A summary of activity under our long-term incentive plans is presented below:
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Employee stock-based compensation | Stock-based compensation expense was classified as follows:
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Weighted-average assumptions in estimating fair value of options | The risk-free interest rates are based upon the U.S. Treasury yield curve in effect at the time of the grant.
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Income Taxes (Tables) |
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Dec. 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of effective income tax rate reconciliation | The reconciliation of the income tax benefit computed at the Federal statutory rates to our recorded tax benefit for the years ended December 31, 2015 and 2014 is as follows:
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Schedule of deferred tax assets and liabilities | The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities, at December 31, 2015 and 2014, are as follows:
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Selected Quarterly Financial Data (Unaudited) (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Selected Quarterly Financial Data (Unaudited) [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of quarterly financial information | The following tables contain unaudited statement of operations information for each quarter of 2015 and 2014. The operating results for any quarter are not necessarily indicative of results for any future period.
|
Basis of Presentation (Details) |
Jan. 22, 2016 |
---|---|
Subsequent Event [Member] | |
Basis of Presentation [Line Items] | |
Reverse stock split ratio | 14 |
Liquidity Risks and Management's Plans, Warrants (Details) - $ / shares |
Dec. 31, 2015 |
Dec. 31, 2014 |
---|---|---|
Class of Warrant or Right [Line Items] | ||
Exercise price of warrants (in dollars per share) | $ 39.34 | |
Number of warrant shares issuable (in shares) | 8,500,000 | |
Common stock, shares authorized (in shares) | 36,000,000 | |
Preferred stock, shares authorized (in shares) | 5,000,000 | 5,000,000 |
Common stock available for future issuance (in shares) | 18,300,000 | |
Preferred stock reserved for future issuance (in shares) | 5,000,000 | |
July 2015 Public Offering [Member] | ||
Class of Warrant or Right [Line Items] | ||
Exercise price of warrants (in dollars per share) | $ 9.80 | |
Number of warrants issued (in shares) | 4,800,000 | |
Prefunded Warrants [Member] | July 2015 Public Offering [Member] | ||
Class of Warrant or Right [Line Items] | ||
Number of warrants issued (in shares) | 2,900,000 |
Fair Value Measurements, Level 3 Rollforward (Details) - USD ($) $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|||
Fair value measurements of common stock warrants using significant unobservable inputs (level 3) | ||||
Balance at beginning of period | $ 1,258 | |||
Balance at end of period | 223 | $ 1,258 | ||
Level 3 [Member] | ||||
Fair value measurements of common stock warrants using significant unobservable inputs (level 3) | ||||
Balance at beginning of period | 1,258 | 5,425 | ||
Exercise of warrants | [1] | (184) | (376) | |
Change in fair value of common stock warrant liability | (851) | (3,791) | ||
Balance at end of period | $ 223 | $ 1,258 | ||
|
Fair Value Measurements, Significant Unobservable input assumptions of Level 3 valuations (Details) |
12 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Significant Unobservable Input Assumptions of Level 3 Valuations [Abstract] | ||
Historical Volatility | 159.00% | |
Expected Term | 2 months 12 days | |
Risk-free interest rate | 0.15% | |
Minimum [Member] | Level 3 [Member] | ||
Significant Unobservable Input Assumptions of Level 3 Valuations [Abstract] | ||
Historical Volatility | 55.00% | |
Expected Term | 1 month 6 days | |
Risk-free interest rate | 0.03% | |
Maximum [Member] | Level 3 [Member] | ||
Significant Unobservable Input Assumptions of Level 3 Valuations [Abstract] | ||
Historical Volatility | 84.00% | |
Expected Term | 1 year 1 month 6 days | |
Risk-free interest rate | 0.31% |
Property and Equipment (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Property and equipment [Line Items] | ||
Property and equipment, gross | $ 9,505 | $ 12,689 |
Accumulated depreciation and amortization | (8,466) | (11,052) |
Property and equipment, net | 1,039 | 1,637 |
Depreciation expense | 700 | 800 |
Manufacturing, laboratory & office equipment [Member] | ||
Property and equipment [Line Items] | ||
Property and equipment, gross | 6,290 | 9,154 |
Furniture & fixtures [Member] | ||
Property and equipment [Line Items] | ||
Property and equipment, gross | 778 | 817 |
Leasehold improvements [Member] | ||
Property and equipment [Line Items] | ||
Property and equipment, gross | $ 2,437 | $ 2,718 |
Accrued Expenses (Details) - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
---|---|---|
Accrued Expenses [Abstract] | ||
Salaries, bonus & benefits | $ 2,387 | $ 2,332 |
Research and development | 3,254 | 1,641 |
Manufacturing operations | 1,097 | 876 |
Professional fees | 326 | 376 |
Sales and marketing | 0 | 318 |
Other | 518 | 573 |
Total accrued expenses | $ 7,582 | $ 6,116 |
Common Stock Warrant Liability (Details) - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Feb. 22, 2011 |
|
Estimated fair value of warrants accounted for as derivative liabilities [Abstract] | |||
Fair value of warrants | $ 223 | $ 1,258 | |
Number of warrant shares potentially issuable (in shares) | 8,500,000 | ||
Exercise price of warrants (in dollars per share) | $ 39.34 | ||
2011 Warrants [Member] | |||
Estimated fair value of warrants accounted for as derivative liabilities [Abstract] | |||
Warrants issuance date | Feb. 22, 2011 | ||
Warrants expiration date | Feb. 22, 2016 | ||
Fair value of warrants | $ 200 | $ 8,000 | |
Number of warrant shares potentially issuable (in shares) | 300,000 | ||
Exercise price of warrants (in dollars per share) | $ 2.66 | $ 21.00 | |
Exercise of warrants by warrant holders to purchase common stock (in shares) | 51,193 | 20,346 | |
Proceeds from exercise of warrants | $ 100 | $ 400 |
Stockholders' Equity, ATM Program and 401(k) Matching Contributions (Details) - USD ($) |
12 Months Ended | ||
---|---|---|---|
Feb. 11, 2013 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Stockholders' Equity [Line Items] | |||
Issuance of common stock, 401(k) employer match (in shares) | 94,114 | 42,371 | |
Expense associated with 401(k) plan | $ 500,000 | $ 1,000,000 | |
Stifel ATM Program [Member] | |||
Stockholders' Equity [Line Items] | |||
Period of agency agreement | 3 years | ||
Maximum value of potential common stock available for issue | $ 25,000,000 | ||
Percentage sales commission on shares | 3.00% |
Stock Options and Stock-based Employee Compensation (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Stock options and restricted stock units (RSUs) outstanding and available for future issuance [Abstract] | ||
Total outstanding (in shares) | 522 | 468 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | ||
Stock options outstanding, beginning of period (in shares) | 467 | |
Granted (in shares) | 185 | |
Forfeited or expired (in shares) | (135) | |
Stock options outstanding, end of period (in shares) | 517 | 467 |
Vested and exercisable at end of period (in shares) | 294 | |
Weighted Average Exercise Price [Roll Forward] | ||
Outstanding, beginning of period (in dollars per share) | $ 63.04 | |
Granted (in dollars per share) | 15.64 | |
Forfeited or expired (in dollars per share) | 42.81 | |
Outstanding, end of period (in dollars per share) | 51.35 | $ 63.04 |
Vested and exercisable at end of period (in dollars per share) | $ 74.84 | |
Outstanding, weighted average remaining contractual term | 6 years 7 months 6 days | |
Vested and exercisable, weighted average remaining contractual term | 4 years 10 months 24 days | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract] | ||
Weighted average grant date fair value of options granted (in dollars per share) | $ 10.48 | $ 25.48 |
Options, outstanding, total intrinsic value | $ 0 | |
Options, vested, total intrinsic value | 0 | |
Options, exercisable, total intrinsic value | $ 0 | |
Restricted Stock Units (RSUs) [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | ||
Unvested RSAs outstanding (in shares), beginning of period | 1 | |
Awarded (in shares) | 5 | |
Vested (in shares) | (1) | |
Unvested RSAs outstanding (in shares), end of period | 5 | 1 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract] | ||
Unvested at beginning of period (in dollars per share) | $ 23.94 | |
Awarded (in dollars per share) | 6.72 | |
Vested (in dollars per share) | 23.94 | |
Unvested at end of period (in dollars per share) | $ 6.72 | $ 23.94 |
2011 Long-Term Incentive Plan [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of shares authorized (in shares) | 2,000 | |
Stock options and restricted stock units (RSUs) outstanding and available for future issuance [Abstract] | ||
Total outstanding (in shares) | 493 | 437 |
Available for future grants under 2011 plan (in shares) | 420 | 476 |
Duration of continuous service | 2 years | |
Term of award | 10 years | |
2007 Equity Incentive Plan [Member] | ||
Stock options and restricted stock units (RSUs) outstanding and available for future issuance [Abstract] | ||
Total outstanding (in shares) | 17 | 18 |
1998 Equity Incentive Plan [Member] | ||
Stock options and restricted stock units (RSUs) outstanding and available for future issuance [Abstract] | ||
Total outstanding (in shares) | 12 | 13 |
Stock Options and Stock-based Employee Compensation, Options Outstanding, Vested and Exercisable (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Employee stock-based compensation | $ 1,696 | $ 2,941 |
Weighted-average assumptions used in estimating fair value of stock options [Abstract] | ||
Weighted average expected volatility | 83.00% | 100.00% |
Weighted average expected term | 5 years 6 months | 5 years 4 months 24 days |
Weighted average risk-free interest rate | 1.50% | 1.65% |
Expected dividends | 0.00% | 0.00% |
Fair value of options vested during period | $ 2,700 | $ 3,100 |
Unrecognized compensation cost related to non-vested share-based compensation arrangements | $ 1,900 | |
Weighted-average vesting period of stock options | 1 year 9 months 18 days | |
Research and Development [Member] | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Employee stock-based compensation | $ 642 | 1,014 |
Selling, General & Administrative [Member] | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Employee stock-based compensation | $ 1,054 | $ 1,927 |
Corporate Partnership, Licensing and Research Funding Agreements (Details) - USD ($) |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2015 |
Sep. 30, 2015 |
Jun. 30, 2015 |
Mar. 31, 2015 |
Dec. 31, 2014 |
Sep. 30, 2014 |
Jun. 30, 2014 |
Mar. 31, 2014 |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2012 |
|
Licensing and Research Funding Agreements [Abstract] | |||||||||||
Research and development expense | $ 8,225,000 | $ 6,452,000 | $ 7,129,000 | $ 7,082,000 | $ 7,771,000 | $ 6,471,000 | $ 6,858,000 | $ 5,590,000 | $ 28,888,000 | $ 26,690,000 | |
Exercise price of warrants (in dollars per share) | $ 39.34 | $ 39.34 | |||||||||
Laboratories del Dr. Esteve, S.A. [Abstract] | |||||||||||
Percent of cash upfront and milestone fees payable to Esteve | 10.00% | 10.00% | |||||||||
Maximum aggregate cash upfront and milestone fees payable to Esteve | $ 20,000,000 | $ 20,000,000 | |||||||||
Battelle - 2014 Collaboration Agreement [Member] | |||||||||||
Licensing and Research Funding Agreements [Abstract] | |||||||||||
Research and development expense | $ 3,100,000 | 300,000 | |||||||||
Number of warrants to purchase shares of common stock (in shares) | 2 | 2 | |||||||||
Term of collaboration agreement | 10 years | ||||||||||
Exercise price of warrants (in dollars per share) | $ 70.00 | $ 70.00 | |||||||||
Maximum royalty paid to Battelle on successful completion of activities | $ 25,000,000 | ||||||||||
Battelle - 2014 Collaboration Agreement [Member] | Additional Warrants [Member] | |||||||||||
Licensing and Research Funding Agreements [Abstract] | |||||||||||
Number of warrant shares issuable (in shares) | 35,714 | 35,714 | |||||||||
Battelle - 2014 Collaboration Agreement [Member] | Initial Warrants [Member] | |||||||||||
Licensing and Research Funding Agreements [Abstract] | |||||||||||
Number of warrant shares issuable (in shares) | 71,429 | 71,429 | |||||||||
Phillip Morris - License Agreement [Member] | |||||||||||
Licensing and Research Funding Agreements [Abstract] | |||||||||||
Royalty paid | $ 400,000 | $ 300,000 | |||||||||
Johnson & Johnson - License Agreement [Member] | |||||||||||
Licensing and Research Funding Agreements [Abstract] | |||||||||||
Potential license fee payable | $ 2,500,000 | 2,500,000 | |||||||||
License fees paid | $ 950,000 | ||||||||||
Payment of license costs subject to FDA approval | $ 500,000 |
Commitments (Details) |
6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Jan. 31, 2013
USD ($)
|
Jun. 30, 2015
USD ($)
ft²
|
Dec. 31, 2015
USD ($)
ft²
|
Dec. 31, 2014
USD ($)
|
|
Commitments [Abstract] | ||||
Estimated development costs | $ 6,600,000 | |||
Operating Leased Assets [Line Items] | ||||
Rent expense | 1,000,000 | $ 1,200,000 | ||
Retention plan [Line Items] | ||||
Employee severance cost | 2,900,000 | |||
Employee severance cost charged to expense | 1,900,000 | |||
Accrued severance cost amount | $ 1,000,000 | |||
Severance and retention benefits paid | 2,600,000 | |||
Severance and retention benefits to be paid in future periods | $ 300,000 | |||
Headquarters [Member] | ||||
Operating Leased Assets [Line Items] | ||||
Leased Area of Real Estate Property | ft² | 39,594 | |||
Lease extension term | 5 years | |||
Aggregate rental payments | $ 2,000,000 | |||
Sterile Manufacturing Facility [Member] | ||||
Operating Leased Assets [Line Items] | ||||
Leased Area of Real Estate Property | ft² | 21,000 | |||
Annual rent of leased property | $ 525,000 | |||
Research and Development Expenses [Member] | ||||
Retention plan [Line Items] | ||||
Employee severance cost charged to expense | $ 1,000,000 | |||
Selling, General and Administrative Expenses [Member] | ||||
Retention plan [Line Items] | ||||
Employee severance cost charged to expense | $ 900,000 |
Income Taxes (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Reconciliation of income tax benefit to Federal statutory rates [Abstract] | ||
Income tax benefit, statutory rates | $ 18,758 | $ 14,980 |
State taxes on income, net of Federal benefit | 3,760 | 2,871 |
Research and development tax credit | 1,047 | 1,472 |
Employee related | (340) | (2,131) |
Warrant valuation related | 289 | 1,289 |
Income tax benefit | 23,514 | 18,481 |
Valuation allowance | (23,514) | (18,481) |
Income tax benefit | 0 | 0 |
Long-term deferred tax assets [Abstract] | ||
Net operating loss carryforwards(Federal and state) | 218,203 | 191,643 |
Research and development tax credits | 13,917 | 12,927 |
Compensation expense on stock | 2,776 | 2,588 |
Charitable contribution carryforward | 6 | 7 |
Inventory reserve | 0 | 907 |
Deferred revenue | 0 | 16 |
Other accrued | 469 | 1,088 |
Depreciation | 482 | 2,630 |
Capitalized research and development | 0 | 1,123 |
Total long-term deferred tax assets | 235,853 | 212,929 |
Less: valuation allowance | (235,853) | (212,929) |
Deferred tax assets, net of valuation allowance | 0 | 0 |
Operating Loss Carryforwards [Line Items] | ||
Unrecognized tax benefits income tax penalties and interest accrued | 0 | 0 |
Unrecognized tax benefits income tax penalties and interest expense | 0 | 0 |
Research Tax Credit Carryforward [Member] | ||
Operating Loss Carryforwards [Line Items] | ||
Tax credit carryforward amount | $ 13,900 | 12,900 |
Internal Revenue Service (IRS) [Member] | ||
Operating Loss Carryforwards [Line Items] | ||
Operating loss carryforwards expiration dates | Dec. 31, 2035 | |
Tax credit carryforward expiration date | Dec. 31, 2035 | |
Operating loss carryforwards | $ 540,200 | 473,300 |
State and Local Jurisdiction [Member] | ||
Operating Loss Carryforwards [Line Items] | ||
Operating loss carryforwards | 527,100 | $ 470,400 |
Federal [Member] | ||
Operating Loss Carryforwards [Line Items] | ||
Operating loss carryforwards | 5,200 | |
State [Member] | ||
Operating Loss Carryforwards [Line Items] | ||
Operating loss carryforwards | 400 | |
Pennsylvania [Member] | ||
Operating Loss Carryforwards [Line Items] | ||
Operating loss carryforwards | $ 503,700 |
Selected Quarterly Financial Data (Unaudited) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 12 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2015 |
Sep. 30, 2015 |
Jun. 30, 2015 |
Mar. 31, 2015 |
Dec. 31, 2014 |
Sep. 30, 2014 |
Jun. 30, 2014 |
Mar. 31, 2014 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Revenues: | ||||||||||
Product sales | $ 0 | $ 0 | $ 0 | $ 7 | $ 136 | $ 106 | $ 42 | $ 28 | $ 7 | $ 312 |
Grant Revenues | 655 | 66 | 75 | 184 | 1,048 | 421 | 1,051 | 3 | 980 | 2,523 |
Total revenues | 655 | 66 | 75 | 191 | 1,184 | 527 | 1,093 | 31 | 987 | 2,835 |
Expenses: | ||||||||||
Cost of sales | 0 | 0 | 0 | 929 | 902 | 257 | 731 | 781 | 929 | 2,671 |
Research and development | 8,225 | 6,452 | 7,129 | 7,082 | 7,771 | 6,471 | 6,858 | 5,590 | 28,888 | 26,690 |
Selling, General and administrative | 2,211 | 2,057 | 3,383 | 3,353 | 3,737 | 4,126 | 4,446 | 4,423 | 11,004 | 16,732 |
Total expenses | 10,436 | 8,509 | 10,512 | 11,364 | 12,410 | 10,854 | 12,035 | 10,794 | 40,821 | 46,093 |
Operating loss | (9,781) | (8,443) | (10,437) | (11,173) | (11,226) | (10,327) | (10,942) | (10,763) | (39,834) | (43,258) |
Change in fair value of common stock warrant liability | 274 | 139 | 469 | (31) | 1,792 | 173 | 1,448 | 378 | 851 | 3,791 |
Other expense, net | (602) | (13,252) | (1,358) | (975) | (1,201) | (1,170) | (1,129) | (1,091) | (16,187) | (4,591) |
Net loss | $ (10,109) | $ (21,556) | $ (11,326) | $ (12,179) | $ (10,635) | $ (11,324) | $ (10,623) | $ (11,476) | $ (55,170) | $ (44,058) |
Net loss per common share - basic (in dollars per share) | $ (1.26) | $ (2.80) | $ (1.82) | $ (1.96) | $ (1.68) | $ (1.82) | $ (1.68) | $ (1.96) | $ (7.98) | $ (7.28) |
Net loss per common share - diluted (in dollars per share) | $ (1.26) | $ (2.80) | $ (1.82) | $ (1.96) | $ (2.10) | $ (1.82) | $ (1.96) | $ (1.96) | $ (7.98) | $ (7.84) |
Weighted average number of common shares outstanding - basic (in shares) | 8,050 | 7,550 | 6,125 | 6,114 | 6,097 | 6,086 | 6,076 | 6,052 | 6,967 | 6,078 |
Weighted average number of common shares outstanding - diluted (in shares) | 8,050 | 7,550 | 6,125 | 6,114 | 6,111 | 6,086 | 6,134 | 6,052 | 6,967 | 6,145 |
Subsequent Events (Details) shares in Thousands |
Feb. 01, 2016 |
Jan. 22, 2016
$ / shares
shares
|
Jan. 21, 2016
shares
|
Dec. 31, 2015
Event
$ / shares
shares
|
Dec. 31, 2014
$ / shares
shares
|
---|---|---|---|---|---|
Subsequent Events [Abstract] | |||||
Number of subsequent event | Event | 2 | ||||
Subsequent Event [Line Items] | |||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 | |||
2011 Long-Term Incentive Plan [Member] | |||||
Subsequent Event [Line Items] | |||||
Number of shares authorized (in shares) | 2,000 | ||||
Common stock available for future issuance (in shares) | 420 | 476 | |||
Subsequent Event [Member] | |||||
Subsequent Event [Line Items] | |||||
Portion of exchange ratio to reduce common stock authorized | 0.5 | ||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.001 | ||||
Reverse stock split ratio | 14 | ||||
Number of shares authorized (in shares) | 36,000 | 250,000 | |||
Maximum period after termination for stock options to be exercisable | 36 months | ||||
Period of non-competition restrictions after termination | 12 months | ||||
Period of non-solicitation restrictions after termination | 18 months | ||||
Period for cure of breach | 5 days | ||||
Subsequent Event [Member] | 2011 Long-Term Incentive Plan [Member] | |||||
Subsequent Event [Line Items] | |||||
Common stock available for future issuance (in shares) | 1,100 |
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