Registration No.
333-_____
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
______________________________________________________
FORM
S-1
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
______________________________________________________
DOR
BioPharma,
Inc.
(Name of
registrant as specified in its charter)
______________________________________________________
|
Delaware
|
2834
|
41-1505029
|
|
(State or
jurisdiction of incorporation or organization)
|
(Primary Standard
Industrial Classification Code Number)
|
(I.R.S.
Employer Identification
No.)
|
DOR
BioPharma, Inc.
850
Bear Tavern Road, Suite 201
Ewing,
New
Jersey
08628
(609)
538-8200
(Address,
including zip code, and telephone number, including area code,
of
registrant’s principal executive offices)
President
and Chief Executive Officer
DOR
BioPharma, Inc.
850
Bear Tavern Road, Suite 201
Ewing,
New Jersey 08628
(609)
538-8200
(Name,
address, including zip code, and telephone number,
including area code, of agent for
service)
______________________________________________________
with
copies to:
Leslie
J. Croland, Esq.
Edwards
Angell Palmer & Dodge LLP
One
North Clematis Street, Suite 400
West
Palm Beach, Florida 33401-5552
(561)
833-7700
______________________________________________________
Approximate date of
commencement of proposed sale to the public:
From time to time, at the discretion of
the selling stockholders, after the effective date of this registration
statement.
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the
following box:
ý
If this
Form is filed to register additional securities for an offering pursuant to
Rule 462(b) under the Securities Act, please check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.
¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering.
¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering.
¨
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definitions of “large accelerated filer,” “accelerated
filer,” and “smaller
reporting company” in
Rule 12b-2 of the Exchange Act. (Check one):
|
Large accelerated filer
¨
|
Accelerated filer
¨
|
|
Non-accelerated filer
¨
|
Smaller reporting company
ý
|
|
(Do not check if a smaller reporting
company)
|
|
______________________________________________________
CALCULATION
OF REGISTRATION FEE
|
Title
of each class
of
securities to be registered
|
Amount
to be registered (1)
|
Proposed
maximum offering price per unit (2)
|
Proposed
maximum aggregate offering price (2)
|
Amount
of registration fee(2)
|
|
Common
Stock,
$.001
par value per share
|
41,158,276
|
$0.13
|
$5,350,576
|
$211
|
|
(1)
|
Includes
20,914,035 shares of the Registrant’s common stock
,
issued to
certain
Selling Stockholders, as
defined in the accompanying prospectus, on
January 20, 2009, 16,666,667 shares of the
Registrant’s common stock issued to one of the Selling Stockholders in
connection with
the execution of a
letter of intent
,
213,539
shares of the Registrant’s common stock issued to certain Selling
Stockholders
on December 1, 2008
as
compensation for services rendered to the
Registrant, up to
1,000,000 shares of the Registrant’s common stock
issuable upon exercise of warrants for a finder fee, up to 914,035 shares
of the Registrant's common stock issuable upon exercise of warrants issued
to certain selling stockholders on January 20, 2009, and up to 1,450,000
shares of the Registrant’s common stock issuable upon exercise of warrants
for services rendered to the Registrant
. Pursuant to
Rule 416 under the Securities Act of 1933, as amended (the “Securities
Act”), to the extent additional shares of Registrant’s common stock may be
issued or issuable as a result of a stock split, stock dividend or other
distribution declared at any time by the Registrant while this
registration statement is in effect, this registration statement is hereby
deemed to cover all such additional shares of common
stock.
|
|
(2)
|
Estimated
solely for purposes of calculating the registration fee according to Rule
457(c) under the Securities Act on the basis of the average of the high
and low prices of the Registrant’s common stock
quoted
on the Over-
the
-Counter Bulletin Board on February
9
,
2009.
|
The Registrant hereby amends this
Registration Statement on such date or dates as may be necessary to delay its
effective date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act or until
the Registration Statement shall become effective on such date as the
Commission, acting pursuant to Section 8(a), may determine.
The
information in this prospectus is not complete and may be changed. The Selling
Stockholders may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and it is not soliciting an offer to
buy these securities in any state where the offer or sale is not
permitted.
SUBJECT
TO COMPLETION, DATED FEBRUARY 13, 2009
PROSPECTUS
DOR
BioPharma, Inc.
41,158,276
Shares of Common Stock
This
prospectus relates to the sale from time to time of up to 41
,158,276
shares of our common stock by the
selling stockholders named in this prospectus in the section “Selling
Stockholders,” including their pledgees, assignees and successors-in-interest,
whom we collectively refer to in this document as the “Selling
Stockholders.” We completed a
private
placement in
which we issued to certain of the Selling Stockholders an
aggregate of 20,914,035 shares of our common stock
, together with warrants to purchase up to 914,035
shares of our common stock.
We
also
issued 16,666,667 shares of
our common stock to one of the Selling
Stockholders in connection with
the
execution of a letter of intent
. In
addition, we
issued
213,539 shares
of our common stock to certain
of the
Selling Stockholders as compensation for services rendered to us,
warrants to purchase up to 1,000,000 shares of our common stock for a finder’s
fee and warrants to purchase up to 1,450,000 shares of our common stock for
services rendered. The common stock offered by this prospectus shall
be adjusted to cover any additional securities as may become issuable to prevent
dilution resulting from stock splits, stock dividends or similar transactions.
The prices at which the Selling Stockholders may sell the shares will be
determined by the prevailing market price for the shares or in negotiated
transactions. We will not receive any of the proceeds from the sale
of any of the shares covered by this prospectus. References in this prospectus
to the “Company,” “we,” “our,” and “us” refer to DOR BioPharma,
Inc.
Our
common stock is quoted on the Over-the-Counter Bulletin Board (“OTCBB”) under
the symbol
“
DORB.OB.
”
On February 9
,
2009, the last reported sale price for our
common stock as
quoted
on the OTCBB was
$
0.
12
per share.
Investing
in our common stock involves certain risks. See “Risk Factors” beginning on page
4 for a discussion of these risks.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal
offense.
DOR
BioPharma, Inc.
850
Bear Tavern Road, Suite 201
Ewing,
New Jersey 08628
(609)
538-8200
The
date of this prospectus is ___________________, 2009.
You
should rely only on the information contained or incorporated by reference in
this prospectus and in any accompanying prospectus supplement. We have not
authorized anyone to provide you with different information.
We have
not authorized the Selling Stockholders to make an offer of these shares of
common stock in any jurisdiction where the offer is not permitted.
You
should not assume that the information in this prospectus or prospectus
supplement is accurate as of any date other than the date on the front of this
prospectus.
The
information contained in this prospectus, including the information incorporated
by reference into this prospectus, includes forward-looking statements. These
forward-looking statements are often identified by words such as “may,” “will,”
“expect,” “intend,” “anticipate,” “believe,” “estimate,” “continue,” “plan” and
similar expressions. These statements involve estimates, assumptions and
uncertainties that could cause actual results to differ materially from those
expressed for the reasons described in this prospectus. You should not place
undue reliance on these forward-looking statements.
You
should be aware that our actual results could differ materially from those
contained in the forward-looking statements due to a number of factors,
including:
|
·
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significant
uncertainty inherent in developing vaccines against bioterror threats, and
manufacturing and conducting preclinical and clinical trials of
vaccines;
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·
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our
ability to obtain regulatory
approvals;
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·
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uncertainty
as to whether our technologies will be safe and
effective;
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·
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our
ability to make certain that our cash expenditures do not exceed projected
levels;
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·
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our
ability to obtain future financing or funds when
needed;
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·
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that
product development and commercialization efforts will be reduced or
discontinued due to difficulties or delays in clinical trials or a lack of
progress or positive results from research and development
efforts;
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·
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our
ability to successfully obtain further grants and awards from the U.S.
Government and other countries, and maintenance of our existing
grants;
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·
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our
ability to enter into any biodefense procurement contracts with the U.S.
Government or other countries;
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·
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our
ability to patent, register and protect our technology from challenge and
our products from competition;
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·
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maintenance
or expansion of our license agreements with our current
licensors;
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·
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maintenance
of a successful business strategy;
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·
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our
ability to execute and successfully complete the upcoming confirmatory
Phase 3 clinical trial of orBec
®
for the treatment of gastrointestinal Graft-versus-Host disease (“GI
GVHD”);
|
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·
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the
possibility that orBec
®
may not show therapeutic effect or an acceptable safety profile in future
clinical trials, or could take a significantly longer time to gain
regulatory approval than we expect or may never gain
approval;
|
|
·
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our
dependence on the expertise, effort, priorities and contractual
obligations of third parties in the clinical trials, manufacturing,
marketing, sales and distribution of our
products;
|
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·
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the
possibility that orBec® may not gain market acceptance;
and
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·
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that
others may develop technologies or products superior to our
products.
|
You
should also consider carefully the statements under “Risk Factors” and other
sections of this prospectus, which address additional factors that could cause
our actual results to differ from those set forth in the forward-looking
statements and could materially and adversely affect our business, operating
results and financial condition. All subsequent written and oral forward-looking
statements attributable to us or persons acting on our behalf are expressly
qualified in their entirety by the applicable cautionary
statements.
The
forward-looking statements speak only as of the date on which they are made,
and, except to the extent required by federal securities laws, we undertake no
obligation to update any forward-looking statement to reflect events or
circumstances after the date on which the statement is made or to reflect the
occurrence of unanticipated events. In addition, we cannot assess the impact of
each factor on our business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statements.
About Our
Company
We are a late-stage research and
development biopharmaceutical company focused on the development of oral
therapeutic products intended for areas of unmet medical need and biodefense
vaccines.
We were
incorporated in Delaware in 1987.
We
maintain two active business segments: BioTherapeutics and BioDefense. Our
business strategy is to:
|
|
(a)
initiate and execute the pivotal Phase 3 confirmatory clinical trial
for orBec
®
in acute
GI GVHD;
|
|
|
(b)
make orBec
®
available worldwide through named patient access programs for the
treatment of GI GVHD;
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|
|
(c)
identify a development and
marketing
partner for orBec
®
for territories
outside of North
America, as we have granted an
exclusive license to
Sigma-Tau
Pharmaceuticals, Inc. (“Sigma-Tau”) to c
ommercialize
orBec
®
in the United States, Canada and Mexico,
Sigma-Tau will pay us a 35% roylaty on net sales
;
|
|
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(d)
conduct a Phase 2 clinical trial of orBec
®
for the prevention of GI GVHD;
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|
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(e)
evaluate and initiate additional clinical trials to explore the
effectiveness of oral BDP in other therapeutic indications involving
inflammatory conditions of the gastrointestinal (“GI”) tract such as
radiation enteritis, radiation injury and Crohn’s
disease;
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|
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(f)
reinitiate development and manufacturing of our other biotherapeutics
products, namely LPM
TM
Leuprolide;
|
|
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(g)
continue to secure additional government funding for each of our
biodefense programs, RiVax
TM
and BT-VACC
TM
,
through grants, contracts and
procurements;
|
|
|
(h)
convert our biodefense vaccine programs from early stage development to
advanced development and manufacturing with the potential to collaborate
and/or partner with other companies in the biodefense
area;
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(i)
explore business development and acquisition strategies under which we may
be considered to be an attractive acquisition candidate by another
company; and
(j) acquire or in-license new
clinical-stage compounds for
development.
|
The
following tables summarize the products that we are currently
developing:
BioTherapeutic
Products
|
Product
|
Therapeutic
Indication
|
Stage
of Development
|
|
|
|
|
|
orBec
®
|
Treatment
of Acute GI GVHD
|
Pivotal
Phase 3 confirmatory trial to be initiated in 2009
|
|
orBec
®
|
Prevention
of Acute GI GVHD
|
Phase
2 trial enrolling
|
|
orBec
®
|
Treatment
of Chronic GI GVHD
|
Phase
2 trial to be initiated in 2009
|
|
Oral
BDP
|
Radiation
Enteritis and Radiation Exposure
|
Phase
½ trial to be initiated in 2009
|
|
LPM
TM
–
Leuprolide
|
Endometriosis
and Prostate Cancer
|
Phase
1 trial to be initiated in
2009
|
Biodefense
Products
|
Select
Agent
|
Currently
Available Countermeasure
|
DOR
Biodefense Product
|
|
|
|
|
|
Ricin
Toxin
|
No
vaccine or antidote currently FDA approved
|
Injectable
Ricin Vaccine Phase 1 clinical trial Successfully
Completed
|
|
Botulinum
Toxin
|
No
vaccine or antidote currently FDA approved
|
Oral/Nasal
Botulinum Vaccine
|
We have
stated in our footnotes to the consolidated financial statements as of the
period ended September 30, 2008, and reported in our quarterly report for the
same period, that we will continue as a going concern and that our ability to
continue our operations is dependent on our ability to raise sufficient capital.
Since our quarterly report for the period ended September 30, 2008, we have
raised an additional $8,384,200 through equity financings. We believe that this
funding will allow us to continue operations through mid year 2010.
Our
principal executive offices are located at 850 Bear Tavern Road, Suite 201,
Ewing, New Jersey 08628 and our telephone number is 609-538-8200.
The Offering
This prospectus relates to the offer and sale, from time
to time, of up
41
,
158
,276 shares of our common stock by the Selling
Stockholders. We are also registering for sale any additional shares of common
stock which may become issuable by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the receipt of
consideration, which results in an increase in the number of outstanding shares
of our common stock.
The Selling Stockholders may sell these shares in the
over-the-counter market or otherwise, at market prices prevailing at the time of
sale or at negotiated prices. We will not receive any proceeds from the sale of
shares by the Selling Stockholders. See “Plan of
Distribution.”
As of February 11
,
2009, there were 164,524,739 shares outstanding, including 37,794,241 of the
41,158,276
shares of our common stock
offered by the Selling Stockholders pursuant to this
prospectus. The number of shares offered by this prospectus
represents approximately 25.02% of the total common stock outstanding as of
February 11, 2009.
You should carefully consider the
risks, uncertainties and other factors described below before you decide whether
to buy shares of our common stock. Any of the factors could materially and
adversely affect our business, financial condition, operating results and
prospects and could negatively impact the market price of our common stock.
Below are the significant risks and uncertainties of which we are aware.
Additional risks and uncertainties that we do not yet know of, or that we
currently think are immaterial, may also impair our business operations. You
should also refer to the other
info
rmation contained in and
incorporated by reference into this
prospectus
, including our financial statements
and the related notes.
Risks Related to our
Industry
We
have had significant losses and anticipate future losses; if additional funding
cannot be obtained, we may reduce or discontinue our product development and
commercialization efforts.
We have
experienced significant losses since inception and have a significant
accumulated deficit. We expect to incur additional operating losses in the
future and expect our cumulative losses to increase. As of September 30, 2008,
we had $686,216 in cash available. Since September 30, we
have issued a total of 62,580,702
shares of
common stock
and warrants
to
purchase up to
20,914,035 shares of
common stock for a sum of
$8,384,200.
Based on our projected budgetary needs over the
next 18 months, we expect to be able to maintain the current level of our
operations through mid year 2010 and begin the pivotal Phase 3 confirmatory
clinical trial of orBec
®
for the
treatment of acute gastrointestinal GI GVHD.
We have
sufficient funds through our existing, biodefense grant facilities from the
National Institute of Allergy and Infectious Diseases (“NIAID”), a division of
the National Institute of Health (“NIH”) to finance our biodefense projects. On
September 29, 2006, we announced that we had received approximately $5,300,000
in grants for the development of our biodefense programs. We estimate that the
overhead revenue contribution from our existing NIH biodefense grants will
generate an additional $650,000 over the next four quarters.
All of
our products are currently in preclinical studies or clinical trials, and we
have not yet generated any significant revenues from sales or licensing of them.
Through September 30, 2008, we had expended approximately $23,600,000 developing
our current product candidates for preclinical research and development and
clinical trials, and we currently expect to spend at least $7 million over the
next two years in connection with the development and commercialization of our
vaccines and therapeutic products, licenses, employment agreements, and
consulting agreements. Unless and until we are able to generate sales or
licensing revenue from orBec®, our lead product candidate, or another one of our
product candidates, we will require additional funding through our existing
equity facility with Fusion Capital Fund II, LLC (“Fusion Capital”) or another
financing source to meet these commitments, sustain our research and development
efforts, provide for future clinical trials, and continue our operations. If
additional funds are raised through the issuance of equity securities,
stockholders may experience dilution of their ownership interests, and the newly
issued securities may have rights superior to those of the common stock. If
additional funds are raised by the issuance of debt, we may be subject to
limitations on our operations.
If we are unsuccessful in developing
our products, our ability to generate revenues will be significantly
impaired.
To be
profitable, our organization must, along with corporate partners and
collaborators, successfully research, develop and commercialize our technologies
or product candidates. Our current product candidates are in various stages of
clinical and preclinical development and will require significant further
funding, research, development, preclinical and/or clinical testing, regulatory
approval and commercialization, and are subject to the risks of failure inherent
in the development of products based on innovative or novel technologies.
Specifically, each of the following is possible with respect to any of our
product candidates:
|
·
|
we
may not be able to maintain our current research and development
schedules;
|
|
·
|
we
may be unsuccessful in our efforts to secure profitable procurement
contracts from the U.S. government or others for our biodefense
products;
|
|
·
|
we
may encounter problems in clinical trials;
or
|
|
·
|
the
technology or product may be found to be ineffective or
unsafe.
|
If any of
the risks set forth above occurs, or if we are unable to obtain the necessary
regulatory approvals as discussed below, we may not be able to successfully
develop our technologies and product candidates and our business will be
seriously harmed. Furthermore, for reasons including those set forth below, we
may be unable to commercialize or receive royalties from the sale of any other
technology we develop, even if it is shown to be effective, if:
|
·
|
it
is uneconomical or the market for the product does not develop or
diminishes;
|
|
·
|
we
are not able to enter into arrangements or collaborations to manufacture
and/or market the product;
|
|
·
|
the
product is not eligible for third-party reimbursement from government or
private insurers;
|
|
·
|
others
hold proprietary rights that preclude us from commercializing the
product;
|
|
·
|
others
have brought to market similar or superior products;
or
|
|
·
|
the
product has undesirable or unintended side effects that prevent or limit
its commercial use.
|
We received a not
approvable letter from the FDA for our lead product candidate orBec
®
.
Our
business is subject to very stringent United States, federal, foreign, state and
local government laws and regulations, including the Federal Food, Drug and
Cosmetic Act, the Environmental Protection Act, the Occupational Safety and
Health Act, and state and local counterparts to these acts. These laws and
regulations may be amended, additional laws and regulations may be enacted, and
the policies of the FDA and other regulatory agencies may change.
On
October 18, 2007, we received a not approvable letter from the FDA for our lead
product candidate, orBec
®
, for the
treatment of GI GVHD. The letter stated that the FDA requested data
from additional clinical trials to demonstrate the safety and efficacy of
orBec
®
. The FDA
also requested nonclinical and chemistry, manufacturing and controls information
as part of the not approvable letter. On October 19, 2007, we requested an “End
of Review Conference” with the FDA to further understand the letter and gain
clarity as to the next steps. On December 7, 2007, we announced the following
guidance from that meeting: (1) a single, confirmatory, Phase 3 clinical trial
could provide sufficient evidence of efficacy provided that it is well designed,
well executed and provides clinically and statistically meaningful findings; (2)
we anticipated working quickly with the FDA to finalize the design of the
confirmatory trial under the Agency’s “Special Protocol Assessment” process; and
(3) the FDA would be agreeable to reviewing a plan for a Treatment
investigational new drug (“IND”) as long as it does not interfere with patient
accrual in a confirmatory trial, such as potentially enrolling patients that
would not be eligible for the Phase 3 study.
On
January 5, 2009, we reached an agreement with the FDA on the design of a
confirmatory, pivotal Phase 3 clinical trial evaluating our lead product
orBec
®
for the treatment of acute GI GVHD. The agreement was made under the
FDA’s Special Protocol Assessment procedure. We expect to begin enrollment in
the new confirmatory Phase 3 clinical trial for the treatment of GI GVHD in the
first half of 2009.
Although
we intend to obtain FDA approval for orBec
®
, there
can be no assurances that the FDA will ever approve orBec
®
for
market.
Our business is subject to extensive
governmental regulation, which can be costly, time consuming and subjects us to
unanticipated delays.
The
regulatory process applicable to our products requires pre-clinical and clinical
testing of any product to establish its safety and efficacy. This testing can
take many years and require the expenditure of substantial capital and other
resources. We may not be able to obtain, or we may experience difficulties and
delays in obtaining, necessary domestic and foreign governmental clearances and
approvals to market a product. Also, even if regulatory approval of a product is
granted, that approval may entail limitations on the indicated uses for which
the product may be marketed.
Following
any regulatory approval, a marketed product and its manufacturer are subject to
continual regulatory review. Later discovery of problems with a product or
manufacturer may result in restrictions on such product or manufacturer. These
restrictions may include withdrawal of the marketing approval for the product.
Furthermore, the advertising, promotion and export, among other things, of a
product are subject to extensive regulation by governmental authorities in the
United States and other countries. If we fail to comply with applicable
regulatory requirements, we may be subject to fines, suspension or withdrawal of
regulatory approvals, product recalls, seizure of products, operating
restrictions and/or criminal prosecution.
There
may be unforeseen challenges in developing our biodefense products.
For
development of biodefense vaccines and therapeutics, the FDA has instituted
policies that are expected to result in accelerated approval. This includes
approval for commercial use using the results of animal efficacy trials, rather
than efficacy trials in humans. However, we will still have to
establish that the vaccines we are developing are safe in humans at doses that
are correlated with the beneficial effect in animals. Such clinical trials will
also have to be completed in distinct populations that are subject to the
countermeasures; for instance, the very young and the very old, and in pregnant
women, if the countermeasure is to be licensed for civilian
use. Other agencies will have an influence over the risk benefit
scenarios for deploying the countermeasures and in establishing the number of
doses utilized in the Strategic National Stockpile. We may not be able to
sufficiently demonstrate the animal correlation to the satisfaction of the FDA,
as these correlates are difficult to establish and are often
unclear. Invocation of the two animal rule may raise issues of
confidence in the model systems even if the models have been validated. For many
of the biological threats, the animal models are not available and we may have
to develop the animal models, a time-consuming research effort. There are few
historical precedents, or recent precedents, for the development of new
countermeasure for bioterrorism agents. Despite the two animal rule, the FDA may
require large clinical trials to establish safety and immunogenicity before
licensure and it may require safety and immunogenicity trials in additional
populations. Approval of biodefense products may be subject to
post-marketing studies, and could be restricted in use in only certain
populations.
We will be dependent on government
funding, which is inherently uncertain, for the success of our biodefense
operations.
We are
subject to risks specifically associated with operating in the biodefense
industry, which is a new and unproven business area. We do not anticipate that a
significant commercial market will develop for our biodefense products. Because
we anticipate that the principal potential purchasers of these products, as well
as potential sources of research and development funds, will be the U.S.
government and governmental agencies, the success of our biodefense division
will be dependent in large part upon government spending decisions. The funding
of government programs is dependent on budgetary limitations, congressional
appropriations and administrative allotment of funds, all of which are
inherently uncertain and may be affected by changes in U.S. government policies
resulting from various political and military developments.
The
manufacture of our products is a highly exacting process, and if we or one of
our materials suppliers encounter problems manufacturing our products, our
business could suffer.
The FDA
and foreign regulators require manufacturers to register manufacturing
facilities. The FDA and foreign regulators also inspect these facilities to
confirm compliance with cGMP or similar requirements that the FDA or foreign
regulators establish. We or our materials suppliers may face manufacturing or
quality control problems causing product production and shipment delays or a
situation where we or the supplier may not be able to maintain compliance with
the FDA’s cGMP requirements, or those of foreign regulators, necessary to
continue manufacturing our drug substance. Any failure to comply with cGMP
requirements or other FDA or foreign regulatory requirements could adversely
affect our clinical research activities and our ability to market and develop
our products.
If
the parties we depend on for supplying our drug substance raw materials and
certain manufacturing-related services do not timely supply these products and
services, it may delay or impair our ability to develop, manufacture and market
our products.
We rely
on suppliers for our drug substance raw materials and third parties for certain
manufacturing-related services to produce material that meets appropriate
content, quality and stability standards and use in clinical trials of our
products and, after approval, for commercial distribution. To succeed, clinical
trials require adequate supplies of drug substance and drug product, which may
be difficult or uneconomical to procure or manufacture. We and our suppliers and
vendors may not be able to (i) produce our drug substance or drug product to
appropriate standards for use in clinical studies, (ii) perform under any
definitive manufacturing, supply or service agreements with us or (iii) remain
in business for a sufficient time to successfully produce and market our product
candidates. If we do not maintain important manufacturing and service
relationships, we may fail to find a replacement supplier or required vendor or
develop our own manufacturing capabilities which could delay or impair our
ability to obtain regulatory approval for our products and substantially
increase our costs or deplete profit margins, if any. If we do find replacement
manufacturers and vendors, we may not be able to enter into agreements with them
on terms and conditions favorable to us and, there could be a substantial delay
before a new facility could be qualified and registered with the FDA and foreign
regulatory authorities.
We
do not have sales and marketing experience and our lack of experience may
restrict our success in commercializing our product candidates.
We do not
have experience in marketing or selling pharmaceutical products. We may be
unable to establish satisfactory arrangements for marketing, sales and
distribution capabilities necessary to commercialize and gain market acceptance
for orBec
®
or our
other product candidates. To obtain the expertise necessary to successfully
market and sell orBec
®
, or any
other product, will require the development of our own commercial infrastructure
and/or collaborative commercial arrangements and partnerships. Our ability to
make that investment and also execute our current operating plan is dependent on
numerous factors, including, the performance of third party collaborators with
whom we may contract. Accordingly, we may not have sufficient funds to
successfully commercialize orBec
®
or any
other potential product in the United States or elsewhere.
Our
products, if approved, may not be commercially viable due to change in health
care practice and third party reimbursement limitations.
Recent
initiatives to reduce the federal deficit and to change health care delivery are
increasing cost-containment efforts. We anticipate that Congress, state
legislatures and the private sector will continue to review and assess
alternative benefits, controls on health care spending through limitations on
the growth of private health insurance premiums and Medicare and Medicaid
spending, price controls on pharmaceuticals, and other fundamental changes to
the health care delivery system. Any changes of this type could negatively
impact the commercial viability of our products, if approved. Our ability to
successfully commercialize our product candidates, if they are approved, will
depend in part on the extent to which appropriate reimbursement codes and
authorized cost reimbursement levels of these products and related treatment are
obtained from governmental authorities, private health insurers and other
organizations, such as health maintenance organizations. In the absence of
national Medicare coverage determination, local contractors that administer the
Medicare program may make their own coverage decisions. Any of our product
candidates, if approved and when commercially available, may not be included
within the then current Medicare coverage determination or the coverage
determination of state Medicaid programs, private insurance companies or other
health care providers. In addition, third-party payers are increasingly
challenging the necessity and prices charged for medical products, treatments
and services.
We may not be able to retain rights
licensed to us by third parties to commercialize key products or to develop the
third party relationships we need to develop, manufacture and market our
products.
We
currently rely on license agreements from the University of Texas Southwestern
Medical Center, the University of Texas Medical Branch at Galveston, Thomas
Jefferson University, and George B. McDonald MD for the rights to commercialize
key product candidates. We may not be able to retain the rights granted under
these agreements or negotiate additional agreements on reasonable terms, or at
all.
Furthermore,
we currently have very limited product development capabilities and no
manufacturing, marketing or sales capabilities. For us to research, develop and
test our product candidates, we need to contract or partner with outside
researchers, in most cases with or through those parties that did the original
research and from whom we have licensed the technologies. If products are
successfully developed and approved for commercialization, then we will need to
enter into collaboration and other agreements with third parties to manufacture
and market our products. We may not be able to induce the third parties to enter
into these agreements, and, even if we are able to do so, the terms of these
agreements may not be favorable to us. Our inability to enter into these
agreements could delay or preclude the development, manufacture and/or marketing
of some of our product candidates or could significantly increase the costs of
doing so. In the future, we may grant to our development partners rights to
license and commercialize pharmaceutical and related products developed under
the agreements with them, and these rights may limit our flexibility in
considering alternatives for the commercialization of these products.
Furthermore, third-party manufacturers or suppliers may not be able to meet our
needs with respect to timing, quantity and quality for the
products.
Additionally,
if we do not enter into relationships with third parties for the marketing of
our products, if and when they are approved and ready for commercialization, we
would have to build our own sales force. Development of an effective sales force
would require significant financial resources, time and expertise. We may not be
able to obtain the financing necessary to establish a sales force in a timely or
cost effective manner, if at all, and any sales force we are able to establish
may not be capable of generating demand for our product candidates, if they are
approved.
We may suffer product and other
liability claims; we maintain only limited product liability insurance, which
may not be sufficient.
The
clinical testing, manufacture and sale of our products involves an inherent risk
that human subjects in clinical testing or consumers of our products may suffer
serious bodily injury or death due to side effects, allergic reactions or other
unintended negative reactions to our products. As a result, product and other
liability claims may be brought against us. We currently have clinical trial and
product liability insurance with limits of liability of $5 million, which may
not be sufficient to cover our potential liabilities. Because liability
insurance is expensive and difficult to obtain, we may not be able to maintain
existing insurance or obtain additional liability insurance on acceptable terms
or with adequate coverage against potential liabilities. Furthermore, if any
claims are brought against us, even if we are fully covered by insurance, we may
suffer harm such as adverse publicity.
We may not be able to compete
successfully with our competitors in the biotechnology
industry.
The
biotechnology industry is intensely competitive, subject to rapid change and
sensitive to new product introductions or enhancements. Most of our existing
competitors have greater financial resources, larger technical staffs, and
larger research budgets than we have, as well as greater experience in
developing products and conducting clinical trials. Our competition is
particularly intense in the gastroenterology and transplant areas and is also
intense in the therapeutic area of inflammatory bowel diseases. We face intense
competition in the area of biodefense from various public and private companies
and universities as well as governmental agencies, such as the U.S. Army, which
may have their own proprietary technologies that may directly compete with our
technologies. In addition, there may be other companies that are currently
developing competitive technologies and products or that may in the future
develop technologies and products that are comparable or superior to our
technologies and products. We may not be able to compete successfully with our
existing and future competitors.
We may be unable to commercialize
our products if we are unable to protect our proprietary rights, and we may be
liable for significant costs and damages if we face a claim of intellectual
property infringement by a third party.
Our
success depends in part on our ability to obtain and maintain patents, protect
trade secrets and operate without infringing upon the proprietary rights of
others. In the absence of patent and trade secret protection, competitors may
adversely affect our business by independently developing and marketing
substantially equivalent or superior products and technology, possibly at lower
prices. We could also incur substantial costs in litigation and suffer diversion
of attention of technical and management personnel if we are required to defend
ourselves in intellectual property infringement suits brought by third parties,
with or without merit, or if we are required to initiate litigation against
others to protect or assert our intellectual property rights. Moreover, any such
litigation may not be resolved in our favor.
Although
we and our licensors have filed various patent applications covering the uses of
our product candidates, patents may not be issued from the patent applications
already filed or from applications that we might file in the future. Moreover,
the patent position of companies in the pharmaceutical industry generally
involves complex legal and factual questions, and recently has been the subject
of much litigation. Any patents we have obtained, or may obtain in the future,
may be challenged, invalidated or circumvented. To date, no consistent policy
has been developed in the United States Patent and Trademark Office regarding
the breadth of claims allowed in biotechnology patents.
In
addition, because patent applications in the United States are maintained in
secrecy until patents issue, and because publication of discoveries in the
scientific or patent literature often lags behind actual discoveries, we cannot
be certain that we and our licensors are the first creators of inventions
covered by any licensed patent applications or patents or that we or they are
the first to file. The Patent and Trademark Office may commence interference
proceedings involving patents or patent applications, in which the question of
first inventorship is contested. Accordingly, the patents owned or licensed to
us may not be valid or may not afford us protection against competitors with
similar technology, and the patent applications licensed to us may not result in
the issuance of patents.
It is
also possible that our patented technologies may infringe on patents or other
rights owned by others, licenses to which may not be available to us. We may not
be successful in our efforts to obtain a license under such patent on terms
favorable to us, if at all. We may have to alter our products or processes, pay
licensing fees or cease activities altogether because of patent rights of third
parties.
In
addition to the products for which we have patents or have filed patent
applications, we rely upon unpatented proprietary technology and may not be able
to meaningfully protect our rights with regard to that unpatented proprietary
technology. Furthermore, to the extent that consultants, key employees or other
third parties apply technological information developed by them or by others to
any of our proposed projects, disputes may arise as to the proprietary rights to
this information, which may not be resolved in our favor.
Our business could be harmed if we
fail to retain our current personnel or if they are unable to effectively run
our business.
We have
only seven employees and we depend upon these employees to manage the day-to-day
activities of our business. Because we have such limited personnel, the loss of
any of them or our inability to attract and retain other qualified employees in
a timely manner would likely have a negative impact on our operations. Dr.
Christopher J. Schaber, our Chief Executive Officer, was hired in August 2006;
Evan Myrianthopoulos, our Chief Financial Officer, was hired in November 2004,
although he was a member of our Board of Directors for two years prior to that;
James Clavijo, our Controller, Treasurer and Corporate Secretary was hired in
October 2004; and Dr. Robert Brey, our Chief Scientific Officer was hired in
1996. In August 2006, Dr. James S. Kuo was appointed Chairman of the
Board. In June 2007, Cyrille F. Buhrman was appointed to the Board of
Directors. We will not be successful if this management team cannot
effectively manage and operate our business. Several members of our board of
directors are associated with other companies in the biopharmaceutical industry.
Stockholders should not expect an obligation on the part of these board members
to present product opportunities to us of which they become aware outside of
their capacity as members of our board of directors.
Risks
Related to our Common Stock
Our stock price is highly
volatile.
The
market price of our common stock, like that of many other research and
development public pharmaceutical and biotechnology companies, has been highly
volatile and may continue to be so in the future due to a wide variety of
factors, including:
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announcements
of technological innovations, more important bio-threats or new commercial
therapeutic products by us, our collaborative partners or our present or
potential competitors;
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our
quarterly operating results and
performance;
|
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·
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announcements
by us or others of results of pre-clinical testing and clinical
trials;
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·
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developments
or disputes concerning patents or other proprietary
rights;
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·
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litigation
and government proceedings;
|
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·
|
changes
in government regulations;
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·
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economic
and other external factors; and
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·
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general
market conditions.
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In
addition, potential dilutive effects of future sales of shares of common stock
by the Company, and subsequent sale of common stock by the holders of warrants
and options, could have an adverse effect on the market price of our
shares.
Our stock
price has fluctuated between January 1, 2005 through December 31, 2008 with the
per share price of our common stock ranging between a high of $0.95 per share to
a low of $0.04 per share. As of February 9, 2009, our common stock traded
at $0.12. The fluctuation in the price of our common stock has sometimes been
unrelated or disproportionate to our operating performance.
Our stock trades on the
O
ver
-
the
-C
ounter
B
ulletin
B
oard.
On April
18, 2006, our stock was delisted from the American Stock Exchange (“AMEX”) and
began trading on the OTCBB securities market on April 18, 2006 under the ticker
symbol DORB. Our stock was delisted from the AMEX because we did not
maintain stockholder equity above $6,000,000, as required under the maintenance
requirement for continued listing. The OTCBB is a decentralized market
regulated by the Financial Industry Regulatory Authority in which securities are
traded via an electronic quotation system that serves more than 3,000 companies.
On the OTCBB, securities are traded by a network of brokers or dealers who carry
inventories of securities to facilitate the buy and sell orders of investors,
rather than providing the order matchmaking service seen in specialist
exchanges. OTCBB securities include national, regional, and foreign equity
issues. Companies traded on the OTCBB must be current in their reports filed
with the Securities and Exchange Commission (the “SEC”) and other regulatory
authorities.
If our
common stock is not listed on a national exchange or market, the trading market
for our common stock may become illiquid. Our common stock is subject to the
penny stock rules of the SEC, which generally are applicable to equity
securities with a price of less than $5.00 per share, other than securities
registered on certain national securities exchanges or quoted on the NASDAQ
system, provided that current price and volume information with respect to
transactions in such securities is provided by the exchange or system. The penny
stock rules require a broker-dealer, before a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document prepared by the SEC that provides information about penny stocks and
the nature and level of risks in the penny stock market. The broker-dealer also
must provide the customer with bid and ask quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer’s account. In addition, the penny stock rules require that, before
a transaction in a penny stock that is not otherwise exempt from such rules, the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser’s written
agreement to the transaction. As a result of these requirements, our common
stock could be priced at a lower price and our stockholders could find it more
difficult to sell their shares.
Shareholders may suffer substantial
dilution
.
We have a
number of agreements or obligations that may result in dilution to investors.
These include:
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·
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warrants
to purchase a total of approximately 43,500,000 shares of our common stock
at a current weighted average exercise price of approximately $0.20;
and
|
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options
to purchase approximately 16,730,039 shares of our common stock of a
current weighted average exercise price of approximately
$0.24.
|
During
2009, outstanding warrants to purchase approximately 10,580,000 shares of our
common stock will expire.
To the
extent that warrants or options are exercised, our stockholders will experience
dilution and our stock price may decrease.
Shareholders
are also subject to the risk of substantial dilution to their interests as a
result of our issuance of shares under the common stock purchase agreement with
Fusion Capital. Under the agreement, we have the right, but not the
obligation, under certain conditions, to sell shares of common stock to Fusion
Capital in an aggregate amount of $8.5 million from time to time over a 25 month
period. The purchase price of the shares will be determined based
upon the market price of our shares without any fixed discount at the time of
each sale.
We
already have sold 3,864,987 shares of common stock to Fusion Capital (together
with a warrant to purchase 1,388,889 shares of our common stock) under the
agreement for total proceeds of $627,500. Additionally, we issued
Fusion Capital 1,275,000 shares of common stock as a commitment fee. In addition
to the shares already sold to Fusion Capital, we have filed a registration
statement with respect to approximately 18.8 million shares that may be sold to
Fusion Capital. We may ultimately sell all, some or none of the 18.8
million shares of common stock. If such 18.8 million shares were
issued and outstanding as of February 9, 2009, the 18.8 million shares would
have represented approximately 13.5% of the total outstanding common
stock.
The
sale of our common stock to Fusion Capital may cause dilution and the sale of
the shares of common stock acquired by Fusion Capital could cause the price of
our common stock to decline.
On February 14, 2008,
we entered into an $8,500,000 common stock purchase
agreement with Fusion Capital
. The Fusion Capital facility allows us to
require Fusion Capital to purchase between $80,000 and $1.0 million, depending
on certain conditions,
of our common stock
up to an aggregate of $8.5 million over approximately a 25-month period. As part
of that agreement, we issued Fusion Capital 1,275,000 shares of common stock as
a commitment fee. In connection with the execution of the common stock purchase
agreement, Fusion Capital purchased 2,777,778 common shares and a four year
warrant to purchase 1,388,889 shares of common stock at $0.22 per share, for an
aggregate price of $500,000.
To
date, we have
issued an additional
1,012,209 shares of common stock and
received
an additional
$127,500 from the Fusion Capital
facility.
In
connection with entering into the agreement, we authorized the sale to Fusion
Capital of up to 25,327,778 shares of our common stock. The number of
shares ultimately offered for sale by Fusion Capital is dependent upon the
number of shares purchased by Fusion Capital under the agreement. The purchase
price for the common stock to be sold to Fusion Capital pursuant to the common
stock purchase agreement will fluctuate based on the price of our common stock.
All 25,327,778 shares registered for sale by Fusion Capital are freely
tradable. It is anticipated that those shares will be sold over a
period of up to 25 months from the date of the prospectus pertaining to those
shares. Depending upon market liquidity at the time, a sale of shares
under the registration statement at any given time could cause the trading price
of our common stock to decline. Fusion Capital may ultimately purchase all, some
or none of the approximately 18.8 million shares of common stock not yet
issued. After it has acquired such shares, it may sell all, some or
none of such shares. Therefore, sales to Fusion Capital by us under the
agreement may result in substantial dilution to the interests of other holders
of our common stock. The sale of a substantial number of shares of our common
stock, or anticipation of such sales, could make it more difficult for us to
sell equity or equity-related securities in the future at a time and at a price
that we might otherwise wish to effect sales. However, we have the right to
control the timing and amount of any sales of our shares to Fusion Capital and
the agreement may be terminated by us at any time at our discretion without any
cost to us.
The common stock purchase agreement with Fusion Capital
may be terminated in the event of a default under the agreement. In
addition, we may not require Fusion Capital to purchase any shares of our common
stock if the purchase price is less than $0.10 per share. Thus, we
may be unable to sell shares of our common stock to Fusion Capital when we need
the funds, and that could severely harm our business and financial condition and
our ability to continue to develop and commercialize our
products. The closing price of our common stock on
February
9
, 2009, was $0.
12
.
Our
shares of common stock are thinly traded, so stockholders may be unable to sell
at or near ask prices or at all if they need to sell shares to raise money or
otherwise desire to liquidate their shares.
Our
common stock has from time to time been “thinly-traded,” meaning that the number
of persons interested in purchasing our common stock at or near ask prices at
any given time may be relatively small or non-existent. This situation is
attributable to a number of factors, including the fact that we are a small
company that is relatively unknown to stock analysts, stock brokers,
institutional investors and others in the investment community that generate or
influence sales volume, and that even if we came to the attention of such
persons, they tend to be risk-averse and would be reluctant to follow an
unproven company such as ours or purchase or recommend the purchase of our
shares until such time as we become more seasoned and viable. As a consequence,
there may be periods of several days or more when trading activity in our shares
is minimal or non-existent, as compared to a seasoned issuer which has a large
and steady volume of trading activity that will generally support continuous
sales without an adverse effect on share price. We cannot give stockholders any
assurance that a broader or more active public trading market for our common
shares will develop or be sustained, or that current trading levels will be
sustained.
Fusion
Capital's purchase and sale into the market of our common stock could cause our
common stock price to decline due to the additional shares available in the
market, particularly in light of the relatively thin trading volume of our
common stock. The market price of our common stock could decline given our
minimal average trading volume compared to the number of shares potentially
issuable to Fusion Capital, and the voting power and value of your investment
would be subject to continual dilution if Fusion Capital purchases the shares
and resells those shares into the market, although there is no obligation for
Fusion Capital to sell such shares. Any adverse affect on the market price of
our common stock would increase the number of shares issuable to Fusion Capital
which would increase the potential dilution of your investment.
RECENT
DEVELOPMENTS
On December 1, 2008, we received $1.5 million under a
non-binding letter of intent with Sigma-Tau
, which granted Sigma-Tau an exclusive right to
negotiate terms and conditions for a possible business transaction or strategic
alliance regarding orBec
®
and potentially other pipeline compounds until March 1,
2009. Sigma-Tau is a pharmaceutical company that creates novel therapies for the
unmet needs of patients with rare diseases. They have both prescription and
consumer products in
metabolic
, oncology, renal and supplements. Under the
terms of the letter of intent, Sigma-Tau
purchased $1.5 million of our common stock at the market
price of $0.09 per share, representing 16,666,667 shares.
On February 12, 2009, we entered into a collaboration
and supply agreement with Sigma-Tau for the commercialization of Beclomethasone
Dipropionate (orBec®). Pursuant to this agreement, Sigma-Tau has an exclusive
license to commercialize orBec® in the United States, Canada and Mexico.
Sigma-Tau is obligated to make payments upon the attainment of significant
milestones, as set forth in the agreement.
The first milestone payment, a
$1 million payment, will be made upon the enrollment of the first patient
in our confirmatory Phase 3 clinical trial of orBec® for the treatment of
GI GVHD, which is expected to occur in the first half of 2009.
Total milestone payments due from Sigma-Tau for orBec®
under the agreement could reach up to $10 million.
Sigma-Tau will
pay us a 35% royalty on net sales.
In connection with the execution of the collaboration
and supply agreement, we entered into a common stock purchase agreement with
Sigma-Tau pursuant to which we sold 25 million
shares of our common stock to Sigma-Tau for
$0.18
per share, for an aggregate price of
$4,500,000. The purchase price is equal to one hundred fifty percent
(150%) of the average trading price of our common stock over the five trading
days prior to February 11, 2009
. As part of
the transaction, the Company granted Sigma-Tau certain demand and piggy-back
registration rights.
On
January 20, 2009, we received $2,384,200 from the completed private placement of
common stock and warrants to accredited investors. Under the terms of the
agreement, we sold 20,914,035 common shares together with five year warrants to
purchase up to 20,914,035 shares of our common stock at $0.14 per share, for an
aggregate price of $2,384,200 representing a price of $0.114 per share. The
expiration date of the warrants can be accelerated if the Company's common stock
meets certain price thresholds and we would receive additional gross proceeds of
approximately $2.9 million if they are all exercised.
BUSINESS
OVERVIEW
We are a
late-stage research and development biopharmaceutical company focused on the
development of oral therapeutic products intended for areas of unmet medical
need and biodefense vaccines.
We were incorporated in
Delaware in 1987. We maintain two active business segments: BioTherapeutics and
BioDefense. Our business strategy is to:
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(a)
initiate and execute the pivotal Phase 3 confirmatory clinical trial
for orBec
®
in acute
GI GVHD;
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(b)
make orBec
®
available worldwide through named patient access programs for the
treatment of GI GVHD;
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(c)
identify a development and
marketing
partner for orBec
®
for territories
outside of North
America, as we have granted an
exclusive license to
Sigma-Tau to c
ommercialize
orBec
®
in the United States, Canada and Mexico,
Sigma-Tau will pay us a 35% roylaty on net sales
;
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(d)
conduct a Phase 2 clinical trial of orBec
®
for the prevention of GI GVHD;
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(e)
evaluate and initiate additional clinical trials to explore the
effectiveness of oral BDP in other therapeutic indications involving
inflammatory conditions of the gastrointestinal (“GI”) tract such as
radiation enteritis, radiation injury and Crohn’s
disease;
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(f)
reinitiate development and manufacturing of our other biotherapeutics
products, namely LPM
TM
Leuprolide;
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(g)
continue to secure additional government funding for each of our
biodefense programs, RiVax
TM
and BT-VACC
TM
,
through grants, contracts and
procurements;
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(h)
convert our biodefense vaccine programs from early stage development to
advanced development and manufacturing with the potential to collaborate
and/or partner with other companies in the biodefense
area;
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(i)
explore business development and acquisition strategies under which we may
be considered to be an attractive acquisition candidate by another
company; and
(j) acquire or in-license new
clinical-stage compounds for
development.
|
Our
principal executive offices are located at 850 Bear Tavern Road, Suite 201,
Ewing, New Jersey 08628 and our telephone number is 609-538-8200.
orBec®
On
January 5, 2009, we announced that we reached an agreement with the FDA on the
design of a confirmatory, pivotal Phase 3 clinical trial evaluating our lead
product orBec
®
for the
treatment of acute GI GVHD. The agreement was made under the FDA’s Special
Protocol Assessment (“SPA”) procedure. An agreement via the SPA procedure is an
agreement with the FDA that a Phase 3 clinical trial's design (e.g., endpoints,
sample size, control group and statistical analyses) is acceptable to support a
regulatory submission seeking new drug approval. After the study begins, the FDA
can only change an SPA for very limited reasons. Based on data from the prior
Phase 3 study of orBec®, the upcoming confirmatory Phase 3 protocol will be a
highly powered, double-blind, randomized, placebo-controlled, multi-center trial
and will seek to enroll an estimated 166 patients. The primary endpoint is the
treatment failure rate at Study Day 80. This endpoint was successfully measured
as a secondary endpoint (p-value = 0.005) in the previous Phase 3 study as a key
measure of durability following a 50-day course of treatment with orBec® (i.e.,
30 days following cessation of treatment).
Our lead
product, orBec
®
, has
been evaluated in a randomized, multi-center, double-blind, placebo-controlled
pivotal Phase 3 clinical trial for the treatment of GI GVHD, a serious and
life-threatening gastrointestinal inflammation associated with allogeneic
hematopoietic cell transplantation (“HCT”). While orBec
®
did not
achieve statistical significance in time to treatment failure through Day 50
(p-value 0.1177), the primary endpoint of its pivotal Phase 3 trial, there was a
positive trend observed and it did achieve statistical significance in other key
outcomes such as median time to treatment failure through Day 80 (p-value
0.0226) and treatment failure rate at Day 80 (p-value 0.005). Most importantly,
orBec
®
demonstrated a statistically significant survival advantage in comparison to
placebo at 200 days post-transplantation (p-value 0.0139) and at one year
post-randomization (p-value 0.04).
Based on
the data from Phase 2 and the Phase 3 studies, on September 21, 2006, we filed a
new drug application (“NDA”) for our lead product orBec
®
(oral
beclomethasone dipropionate) with the U.S. Food and Drug Administration (“FDA”)
for the treatment of GI GVHD. On November 3, 2006, we also filed a
Marketing Authorization Application (“MAA”) for orBec
®
with the
European Central Authority, European Medicines Evaluation Agency (“EMEA”). On
October 18, 2007, we received a not approvable letter from the FDA in response
to our NDA for orBec
®
(oral
beclomethasone dipropionate) for the treatment of GI GVHD. In the letter,
the FDA requested additional clinical trial data to demonstrate the safety and
efficacy of orBec
®
. The
FDA also requested nonclinical and chemistry, manufacturing and controls
information as part of the not approvable letter. On October 19, 2007, we
requested an “End of Review Conference” with the FDA to further understand the
letter and gain clarity as to the next steps. On December 7, 2007, we announced
FDA guidance from that meeting in which a single, confirmatory, Phase 3 clinical
trial could provide sufficient evidence of efficacy provided that it is well
designed, well executed and provides clinically and statistically meaningful
findings, and that the FDA would be agreeable to reviewing a plan for a
Treatment IND as long as it does not interfere with patient accrual in a
confirmatory trial, such as potentially enrolling patients that would not be
eligible for the Phase 3 study.
In May
2008, we voluntarily withdrew the MAA that was being reviewed by EMEA. We
reached this decision after consultation with the EMEA and determining that
confirmatory evidence of clinical efficacy will be required for
approval. This is consistent with the request made by the FDA. The
withdrawal of an MAA application does not prejudice the possibility of making a
new application at a later stage.
On June
30, 2008, we announced that we entered into a collaboration
agreement
with Numoda Corporation (
“
Numoda
”
),
for the execution of our upcoming confirmatory, Phase 3 clinical trial of
orBec
®
. Collaborating
with Numoda will allow us to take advantage of a scope of services including
using their industry benchmarking capabilities to develop an operational and
financial plan including the use of
a
proprietary management and oversight capabilities process. Barring any
unforeseen modifications to the Phase 3 clinical program, Numoda will guarantee
the agreed clinical trial budget against cost overruns. As part of the
collaboration, Numoda
has agreed to accept payment
in our
common stock in exchange for a portion of its services in
connection with the conduct of the upcoming confirmatory Phase 3 clinical trial.
To date, we have issued 347,222 shares of common
stock to Numoda in partial payment for its services.
Working with Numoda,
we will be also able to take full advantage of early reporting of results to
potential licensing partners and others. In order to execute the
collaboration
,
we will require further
funding from financings or partnerships.
On
December 1, 2008, we received $1.5 million under a letter of intent with
Sigma-Tau, which grants Sigma-Tau an exclusive right to negotiate terms and
conditions for a possible business transaction or strategic alliance regarding
orBec® and potentially other pipeline compounds until March 1, 2009. Under the
terms of the letter of intent, Sigma-Tau purchased $1.5 million of our common
stock at the market price of $0.09 per share, which will be considered an
advance payment to be deducted from upfront monies due to us by Sigma-Tau
pursuant to the collaboration and supply agreement between the two
parties.
On
November 25, 2008, we announced that the Therapeutics Goods Administration of
Australia has designated orBec® as an Orphan Drug for the treatment of patients
with GI GVHD following allogeneic hematopoietic cell
transplantation.
On
September 10, 2008, we announced that we entered into a collaboration agreement
with BurnsAdler Pharmaceuticals, Inc. (“BurnsAdler”), a specialty pharmaceutical
company based in North Carolina under which BurnsAdler will act as our
distributor of a Named Patient Access Program (“NPAP”) for orBec® to patients
suffering from acute GI GVHD in all countries within Central America, South
America and the Caribbean (Latin America). On October 30, 2008 we announced that
we expanded our collaboration with BurnsAdler, as our distributor of orBec® to
patients suffering from acute GI GVHD in Canada via the Special Access
Programme.
On August
27, 2008, we announced that we entered into a collaboration agreement with
Pacific Healthcare Thailand Co., Ltd. (“Pacific”), a specialty pharmaceutical
company based in Bangkok, under which Pacific will act as our sponsor to
administer an NPAP for orBec® to patients suffering from acute GI GVHD in
Thailand as well as other Association of Southeast Asian Nations (ASEAN) member
countries including Brunei, Cambodia, Indonesia, Laos, Myanmar, Philippines and
Vietnam.
On July
18, 2008, we announced that we entered into collaboration agreement with Steward
Cross Pte Ltd (“Steward Cross”), a specialty pharmaceutical company based in
Singapore, under which Steward Cross will act as our Sponsor to administer an
NPAP for patients suffering from acute GI GVHD in Singapore and Malaysia. We
will manufacture and supply orBec
®
to Steward Cross, while Steward Cross will be responsible for all
distribution costs in Singapore and Malaysia.
On July
15, 2008, we announced that we entered into a definitive collaborative agreement
with IDIS Limited (“IDIS”), under which IDIS will act as our sponsor to
administer an NPAP for patients suffering from acute GI GVHD in the European
Union. IDIS is the leading specialist in the management of NPAPs in
Europe.
On
February 15, 2008, we announced that we entered into a Letter of Intent with
BL&H Co. Ltd. (“BL&H”), a specialty pharmaceutical company based in
Seoul, Korea, pursuant to which BL&H will act as our sponsor with regard to
the administration of an NPAP for orBec
®
to
patients suffering from acute GI GVHD in South Korea.
On
November 28, 2007, we announced that we entered into a Letter of Intent with
Orphan Australia Pty Ltd. (“Orphan Australia”), a specialty pharmaceutical
company based in Melbourne, Australia, pursuant to which Orphan Australia will
act as our sponsor with regard to the administration of an NPAP for orBec
®
to GI
GVHD patients in Australia, New Zealand and South Africa.
On
September 12, 2007, we announced that our academic partner, the Fred Hutchinson
Cancer Research Center (“FHCRC”), received a $1 million grant from NIH to
conduct preclinical studies of oral beclomethasone dipropionate (oral BDP, also
the active ingredient in orBec
®
) for the
treatment of GI radiation injury. While we will not receive any monetary benefit
from this grant, we will benefit if this work is successful and it will enhance
the value of our orBec
®
/oral BDP
program. The purpose of the studies funded by the grant, entitled “Improving
Gastrointestinal Recovery after Radiation,” is to evaluate the ability of three
promising clinical-grade drugs, including oral BDP, given alone or in
combination, that are likely to significantly mitigate the damage to the
gastrointestinal epithelium caused by exposure to high doses of radiation using
a well-established dog model. The GI tract is highly sensitive to ionizing
radiation and the destruction of epithelial tissue is one of first effects of
radiation exposure. The rapid loss of epithelial cells leads to inflammation and
infection that are often the primary cause of death in acute radiation injury.
This type of therapy, if successful, would benefit cancer patients undergoing
radiation, chemotherapy, or victims of nuclear-terrorism. In most radiation
scenarios, injury to the hematopoietic (blood) system and gastrointestinal tract
are the main determinants of survival. The studies will compare overall survival
and markers of intestinal cell regeneration when the drug regimens are added to
supportive care intended to boost proliferation of blood cells. The principal
investigator of the study is George E. Georges, M.D., Associate Member of the
FHCRC.
On July
12, 2007, we announced that patient enrollment commenced in a randomized, double
blind, placebo-controlled, Phase 2 clinical trial of orBec
®
for the
prevention of acute GI GVHD after allogeneic HCT with myeloablative conditioning
regimens. The trial is being conducted by Paul Martin, M.D., at the FHCRC in
Seattle, Washington and is being supported, in large part, by an NIH grant. We
will not receive any direct monetary benefit from this grant, but if successful,
this funded trial could serve to increase the value of our orBec
®
/oral BDP
program. The Phase 2 trial will seek to enroll up to 138 (92
orBec
®
and 46
placebo) patients. The primary endpoint of the trial is the proportion of
subjects who develop acute GVHD with severity sufficient to require systemic
immunosuppressive treatment on or before day 90 after
transplantation. Patients in this study will begin dosing at the
start of the conditioning regimen and continue through day 75 following HCT.
Enrollment in this trial is expected to be completed in the second half of
2009.
orBec
®
Comprehensive Long-Term Mortality Results
Among the
data reported in the January 2007 issue of
Blood
, the peer-reviewed
Journal of the American Society of Hematology, orBec
®
showed
continued survival benefit when compared to placebo one year after randomization
in the pivotal Phase 3 clinical trial. Overall, 18 patients (29%) in the
orBec
®
group
and 28 patients (42%) in the placebo group died within one year of randomization
(46% reduction in mortality, hazard ratio 0.54, 95% CI: 0.30, 0.99, p=0.04,
stratified log-rank test). Results from the Phase 2 trial also
demonstrated enhanced long-term survival benefit with orBec
®
versus
placebo. In that study, at one year after randomization, 6 of 31 patients (19%)
in the orBec
®
group
had died while 9 of 29 patients (31%) in the placebo group had died (45%
reduction in mortality, p=0.26). Pooling the survival data from both trials
demonstrated that the survival benefit of orBec
®
treatment was sustained long after orBec
®
was
discontinued and extended well beyond 3 years after the transplantation. As of
September 25, 2005, median follow-up of patients in the two trials was 3.5 years
(placebo patients) and 3.6 years (orBec
®
patients), with a range of 10.6 months to 11.1 years. The risk of mortality was
37% lower for patients randomized to orBec
®
compared
with placebo (hazard ratio 0.63, p=0.03, stratified log-rank test).
200
Days Post Transplantation Mortality Results
|
|
Phase
3 trial
|
Phase
2 trial
|
|
|
orBec
®
|
Placebo
|
orBec
®
|
Placebo
|
|
Number
of patients randomized
|
62
|
67
|
31
|
29
|
|
Number
(%) who died
|
5
(8%)
|
16
(24%)
|
3
(10%)
|
6
(21%)
|
|
Hazard
ratio (95% confidence interval)
|
0.33
(0.12, 0.89)
|
0.47
(0.12, 1.87)
|
|
Death
with infection*
|
3
(5%)
|
9
(13%)
|
2
(6%)
|
5
(17%)
|
|
Death
with relapse*
|
3
(5%)
|
9
(13%)
|
1
(3%)
|
4
(14%)
|
*Some
patients died with both infection and relapse of their underlying
malignancy.
In this
Phase 3 clinical trial, survival at the pre-specified endpoint of 200 days
post-transplantation showed a clinically meaningful and statistically
significant result. According to the manuscript, “the risk of mortality during
the 200-day post-transplantation period was 67% lower with orBec
®
treatment compared to placebo treatment (hazard ratio 0.33; 95% CI: 0.12, 0.89;
p=0.03, Wald chi-square test).” Although orBec
®
did not
achieve statistical significance in the primary endpoint of its Phase 3 trial,
namely time to treatment failure through Day 50 (p=0.1177), orBec
®
did
achieve statistical significance in other key outcomes such as reduction in the
risk of treatment failure through Day 80 (p=0.0226) and, most importantly,
demonstrated a statistically significant long-term survival advantage compared
with placebo. The most common proximate causes of death by transplantation
day-200 were relapse of the underlying malignancy and infection. Relapse of the
underlying hematologic malignancy had contributed to the deaths of 9/67 patients
(13.4%) in the placebo arm and 3/62 patients (4.8%) in the BDP arm. Infection
contributed to the deaths of 9/67 patients (13.4%) in the placebo arm and 3/62
(4.8%) in the BDP arm. Acute or chronic GVHD was the proximate cause of death in
3/67 patients (4.5%) in the placebo arm and in 1/62 (1.6%) in the BDP
arm.
A
retrospective analysis of survival at 200 days post-transplantation in the
supportive Phase 2 clinical trial showed consistent response rates with the
Phase 3 trial; three patients (10%) who had been randomized to orBec
®
had
died, compared with six deaths (21%) among patients who had been randomized to
placebo, leading to a reduced hazard of day-200 mortality, although not
statistically significantly different. Detailed analysis of the
likely proximate cause of death showed that mortality with infection or with
relapse of underlying malignancy were both reduced in the same proportion after
treatment with orBec
®
compared
to placebo. By transplantation day-200, relapse of hematologic
malignancy had contributed to the deaths of 1 of 31 patients (3%) in the
orBec
®
arm and
4 of 29 patients (14%) in the placebo arm. Infection contributed to
the deaths of 2 of 31 patients (6%) in the orBec
®
arm and
5 of 29 patients (17%) in the placebo arm.
In this
Phase 3 trial, orBec
®
achieved
these mortality results despite the fact that there were more “high risk of
underlying cancer relapse” patients in the orBec
®
group
than in the placebo group: 40, or 65%, versus 29, or 43%, respectively. There
was also an imbalance of non-myeloablative patients in the orBec
®
treatment group, 26, or 42%, in the orBec
®
group
versus 15, or 22%, in the placebo group, putting the orBec
®
group at
a further disadvantage. In addition, a subgroup analysis also
revealed that patients dosed with orBec
®
who had
received stem cells from unrelated donors had a 94% reduction in the risk of
mortality 200 days post-transplantation.
Safety
and Adverse Events
The
frequencies of severe adverse events, adverse events related to study drug, and
adverse events resulting in study drug discontinuation were all comparable to
that of the placebo group in both trials. Patients who remained on orBec
®
until
Day 50 in the Phase 3 study had a higher likelihood of having biochemical
evidence of abnormal hypothalamic-pituitary-adrenal axis function compared to
patients on placebo.
Commercialization
and Market
We
anticipate the market potential for orBec
®
for the
treatment of GI GVHD to be approximately 50 percent of the more than 10,000
allogeneic bone marrow and stem cell transplantations that occur each year in
the U.S.
On
December 1, 2008, we received $1.5 million under a non-binding letter of
intent with Sigma-Tau, which granted Sigma-Tau an exclusive right to negotiate
terms and conditions for a possible business transaction or strategic alliance
regarding orBec
®
and
potentially other pipeline compounds until March 1, 2009. Sigma-Tau is a
pharmaceutical company that creates novel therapies for the unmet needs of
patients with rare diseases. Sigma-Tau has both prescription and consumer
products in the metabolic, oncology, and renal markets.
On February 11, 2009, we entered into a collaboration
and supply agreement with Sigma-Tau for the commercialization of Beclomethasone
Dipropionate (orBec®). Pursuant to this agreement, Sigma-Tau has an exclusive
license to commercialize orBec® in the United States, Canada and Mexico.
Sigma-Tau is obligated to make payments upon the attainment of significant
milestones, as set forth in the agreement. The first milestone payment of $1
million will be made upon the enrollment of the first patient in our
confirmatory Phase 3 clinical trial of orBec® for the treatment of GI GVHD,
which is expected to occur in the first half of 2009.
Total milestone payments due from Sigma-Tau for orBec®
under the agreement could reach up to $10 million.
Sigma-Tau will
pay us a 35% royalty on net sales.
Research and Development Analysis for orBec
®
Since 2000, we have incurred expenses of approximately
$15,900,000 in the development of orBec
®
. Research and development costs for orBec
®
totaled $884,341 for the nine months ended September
30, 2008 and $2,288,615 and $3,060,778 for the years ended December 31, 2007 and
2006, respectively.
About
Graft-versus-Host Disease
Graft-versus-Host
Disease occurs in patients following allogeneic bone marrow transplantation in
which tissues of the host, most frequently the gut, liver, and skin, are
attacked by lymphocytes from the donor (graft) marrow. Patients with mild to
moderate GI GVHD present to the clinic with early satiety, anorexia, nausea,
vomiting and diarrhea. If left untreated, symptoms of GI GVHD persist and can
progress to necrosis and exfoliation of most of the epithelial cells of the
intestinal mucosa, frequently a fatal condition. Approximately 50% of the more
than 10,000 annual allogeneic transplantation patients in the United States will
develop some form of acute GI GVHD.
GI GVHD
is one of the most common causes for the failure of bone marrow transplantation.
These procedures are being increasingly utilized to treat leukemia and other
cancer patients with the prospect of eliminating residual disease and reducing
the likelihood of relapse. orBec
®
represents a first-of-its-kind oral, locally acting therapy tailored to
treat the gastrointestinal manifestation of GVHD, the organ system where GVHD is
most frequently encountered and highly problematic. orBec
®
is
intended to reduce the need for systemic immunosuppressives to treat GI GVHD.
Currently used systemic immunosuppressives utilized to control GI GVHD
substantially inhibit the highly desirable graft-versus-leukemia (“GVL”) effect
of bone marrow transplants, leading to high rates of aggressive forms of
relapse, as well as substantial rates of mortality due to opportunistic
infection.
About
Allogeneic Bone Marrow/Stem Hematopoietic Cell Transplantation
(HCT)
Allogeneic
HCT is considered a potentially curative option for many leukemias as well as
other forms of blood cancer. In an allogeneic HCT procedure,
hematopoietic stem cells are harvested from a closely matched relative or
unrelated person, and are transplanted into the patient following either
high-dose chemotherapy or intense immunosuppressive conditioning
therapy. The curative potential of allogeneic HCT is now partly
attributed to the so-called GVL (graft-versus-leukemia) or graft-versus-tumor
effects of the newly transplanted donor cells to recognize and destroy malignant
cells in the recipient patient.
The use
of allogeneic HCT has grown substantially over the last decade due to advances
in human immunogenetics, the establishment of unrelated donor programs, the use
of cord blood as a source of hematopoietic stem cells and the advent of
non-myeloablative conditioning regimens, or mini-transplants, that avoid the
side effects of high-dose chemotherapy. Based on the latest
statistics available, it is estimated that there are more than 10,000 allogeneic
HCT procedures annually in the U.S. and a comparable number in
Europe. Estimates as to the current annual rate of increase in these
procedures are as high as 20%. High rates of morbidity and mortality occur in
this patient population. Clinical trials are also underway testing allogeneic
HCT for treatment of some metastatic solid tumors such as breast cancer, renal
cell carcinoma, melanoma and ovarian cancer. Allogeneic transplantation has also
been used as curative therapy for several genetic disorders, including
immunodeficiency syndromes, inborn errors of metabolism, thalassemia and sickle
cell disease. The primary toxicity of allogeneic HCT, however, is GVHD in which
the newly transplanted donor cells damage cells in the recipient’s
gastrointestinal tract, liver and skin.
Future
Potential Indications of orBec
®
and Oral
BDP
Based on
its pharmacological characteristics, orBec
®
may have
utility in treating other conditions of the gastrointestinal tract having an
inflammatory component. We have an issued U.S. patent 6,096,731 claiming the use
of oral BDP as a method for preventing the tissue damage that is associated with
both GI GVHD following HCT, as well as GVHD which also occurs following organ
allograft transplantation. We initiated a Phase 2 trial of orBec
®
in the
prevention of acute GVHD in the third quarter of 2007. In addition, we are
exploring the possibility of testing oral BDP (the active ingredient in
orBec
®
) for
local inflammation associated with Ulcerative Colitis, Crohn’s Disease,
Lymphocytic Colitis, Irritable Bowel Syndrome, among other
indications.
DOR
201
On
December 8, 2008, we announced that the FDA has completed its review and cleared
the Investigational New Drug Application (“INDA”) for DOR201, a time-release
formulation of oral BDP, for the prevention of acute radiation enteritis.
Consequently, we are able to initiate a Phase 1/2 clinical trial in acute
radiation enteritis. On January 6, 2009, we also announced that
DOR201 also received “Fast Track” designation from the FDA. Fast Track is a
designation that the FDA reserves for a drug intended to treat a serious or
life-threatening condition and one that demonstrates the potential to address an
unmet medical need for the condition. Fast track designation is designed to
facilitate the development and expedite the review of new drugs. For instance,
should events warrant, we will be eligible to submit an NDA for DOR201 on a
rolling basis, permitting the FDA to review sections of the NDA prior to
receiving the complete submission. Additionally, NDAs for Fast Track development
programs ordinarily will be eligible for priority review, which implies an
abbreviated review time of six months.
DOR201
contains BDP, a highly potent, topically active corticosteroid that has a local
effect on inflamed tissue. BDP has been marketed in the United States and
worldwide since the early 1970s as the active pharmaceutical ingredient in
inhalation products for the treatment of patients with allergic rhinitis and
asthma. BDP is also the active ingredient in orBec
®
,
currently in Phase 3 and Phase 2 development by DOR for the treatment and
prevention of GI GVHD, respectively. DOR201 is time-release
formulation of BDP specifically designed for oral use.
About
Acute Radiation Enteritis
External
radiation therapy is used to treat most types of cancer, including cancer of the
bladder, uterine, cervix, rectum, prostate, and vagina. During
delivery of treatment, some level of radiation will also be delivered to healthy
tissue, including the bowel, leading to acute and chronic
toxicities. The large and small bowels are very sensitive to
radiation. The larger the dose of radiation the greater the damage to
normal bowel tissue. Radiation enteritis is a condition in which the
lining of the bowel becomes swollen and inflamed during or after radiation
therapy to the abdomen, pelvis, or rectum. Most tumors in the abdomen
and pelvis need large doses, and almost all patients receiving radiation to the
abdomen, pelvis, or rectum will show signs of acute enteritis.
Patients
with acute enteritis may have nausea, vomiting, abdominal pain and bleeding,
among other symptoms. Some patients may develop dehydration and
require hospitalization. With diarrhea, the gastrointestinal tract does not
function normally, and nutrients such as fat, lactose, bile salts, and vitamin
B
12
are not well absorbed.
Symptoms
will usually resolve within 2-6 weeks after therapy has
ceased. Radiation enteritis is often not a self-limited illness, as
over 80% of patients who receive abdominal radiation therapy complain of a
persistent change in bowel habits. Moreover, acute radiation injury
increases the risk of development of chronic radiation enteropathy, and overall
5% to 15% of the patients who receive abdominal or pelvic irradiation will
develop chronic radiation enteritis.
There are
over 100,000 patients in the United States annually who receive abdominal or
pelvic external beam radiation treatment for cancer who are at risk of
developing acute and chronic radiation enteritis.
BioDefense
RiVax™
RiVax™ is
our proprietary vaccine developed to protect against exposure to ricin toxin,
and is the first and only ricin toxin vaccine to be clinically tested in humans.
Ricin is a potent glycoprotein toxin derived from the beans of castor plants. It
can be cheaply and easily produced, is stable over long periods of time, is
toxic by several routes of exposure and thus has the potential to be used as a
biological weapon against military and/or civilian targets. As a bioterrorism
agent, ricin could be disseminated as an aerosol, by injection, or as a food
supply contaminant. The CDC has classified ricin as a Category B biological
agent. Ricin works by first binding to glycoproteins found on the exterior of a
cell, and then entering the cell and inhibiting protein synthesis leading to
cell death. Once exposed to ricin toxin, there is no effective therapy available
to reverse the course of the toxin. Currently, there is no FDA approved vaccine
to protect against the possibility of ricin toxin being used in a terrorist
attack, or its use as a weapon on the battlefield, nor is there a known antidote
for ricin toxin exposure.
We have
announced positive Phase 1 clinical trial results for RiVax™ which demonstrated
that the vaccine is well tolerated and induces antibodies in humans that
neutralize the ricin toxin. The functional activity of the antibodies was
confirmed by animal challenge studies in mice which survived exposure to ricin
toxin after being injected with serum samples from the volunteers. The outcome
of the study was published in the Proceedings of the National Academy of
Sciences. A second Phase 1 trial is currently underway, utilizing the adjuvanted
formulation.
The
initial Phase 1 clinical trial was conducted by Dr. Ellen Vitetta at the
University of Texas Southwestern Medical Center at Dallas, DOR's academic
partner on the RiVax™ program. NIH has awarded us two grants one for $6.4
million and one for $5.2 million for a total of $11.6 million for the
development of RiVax™ covering process development, scale-up and cGMP
manufacturing, and preclinical toxicology testing pursuant to the government’s
two animal rule.
The
development of RiVax
TM
has
progressed significantly. In September 2006, we received a grant of
approximately $5.2 million from NIAID, a division of the NIH, for the
continued development of RiVax™, a recombinant vaccine against ricin toxin. The
RiVax™ grant will provide approximately $5.2 million over a three year period to
fund the development of animal models which will be used to correlate human
immune response to the vaccine with protective efficacy in animals. This is
necessary for ultimate licensure by the FDA, when human efficacy vaccine trials
are not possible. This new grant also supports the further biophysical
characterization of the vaccine containing a well-characterized adjuvant that is
needed to enhance the immune response to recombinant proteins. These studies
will be required to assure that the vaccine is stable and potent over a period
of years. A prototype version of RiVax™ has been evaluated in a Phase 1 clinical
trial and was shown to be safe and effective, while also inducing ricin
neutralizing antibodies as confirmed in subsequent animal studies.
On April
29, 2008, we announced the initiation of a comprehensive program to evaluate the
efficacy of RiVax™, in non-human primates. This study is taking place at the
Tulane University Health Sciences Center and will provide data that will further
aid in the interpretation of immunogenicity data obtained in the human
vaccination trials. The study was initiated in the second quarter of
2008.
On
January 29, 2008, we announced that we successfully achieved a two-year
milestone in the long-term stability program of the key ingredient of RiVax™, a
recombinant subunit vaccine against ricin toxin. The results of the two-year
analysis, undertaken as part of the formal stability program, demonstrate that
the immunogen component of RiVax™, a recombinant derivative of the ricin A
chain, is stable under storage conditions for at least two years without loss of
its natural configuration or the appearance of any detectable degradation
products. A vaccine is considered by many to be the best way to prospectively
protect populations at risk of exposure against ricin toxin. As this vaccine
would potentially be added to the Strategic National Stockpile and dispensed in
the event of a terrorist attack, the activity of the vaccine must be maintained
over a period of years under stockpile storage conditions.
In July
2007, we announced that the Office of Orphan Products Development ("OOPD") of
the FDA has awarded a development grant for the further clinical evaluation of
RiVax
TM
. The
grant was awarded to the University of Texas Southwestern Medical Center
(“UTSW”) to further the development of RiVax
TM
. We
will not receive any monetary benefits from this grant; however, the successful
completion of this work will enhance the value of our RiVax
TM
program
and continue to move it forward. The principal investigator for the project is
Dr. Vitetta, Director of the Cancer Immunobiology Center at the University of
Texas Southwestern. The award totals approximately $940,000 for three years and
is to be used for the evaluation of an adjuvant for use with the vaccine.
Typically, awards made by the OOPD are to support clinical trials for
development of products that address rare diseases or medicines that would be
used in numerically small populations. UTSW began a human clinical trial with
RiVax
TM
in
August of 2008.
On
November 15, 2007, we announced that we entered into a Cooperative Research and
Development Agreement with the Walter Reed Army Institute of Research (“WRAIR”)
to provide additional means to characterize the immunogenic protein subunit
component of RiVax™, our preventive vaccine against ricin toxin. The agreement
will be carried out at the Division of Biochemistry at WRAIR and will encompass
basic studies to reveal the underlying protein structure that is important in
inducing human immune responses to ricin toxin. Ricin toxin is an easy to
manufacture toxin that poses a serious threat as a bioweapon, primarily by
inhalation. Some of the features that are critical to induce protective immune
responses by vaccination with RiVax™ include structural determinants in the core
and the surface of the protein. The purpose of the agreement is to obtain data
to correlate protein structure with induction of protective immunity and
long-term stability of the protein. These studies will involve comparison to
structures of similar natural and recombinant proteins. RiVax™ induces
antibodies that appear primarily in the blood of animals and humans. Some of
these antibodies recognize determinants on the protein that are dependent on the
conformation of the protein and may be involved in biological activity. Overall,
antibodies in the blood are correlated to protection against exposure when the
toxin enters the circulatory system or when it comes into contact with lung
surfaces, where the major effects lead to severe inflammation, tissue necrosis
and death. RiVax™ induces such antibodies in humans as well as other animal
species. Lieutenant Colonel Charles B. Millard, Ph.D., Director of the Division
of Biochemistry at WRAIR, will lead the studies to be conducted at WRAIR, which
will include X-ray crystal analysis to determine the structural parameters of
the RiVax™ vaccine. We will not receive any monetary benefits from this
agreement. We will take part in evaluating the data that is found by WRAIR’s
studies, which they are funding. If successful, this will enhance the value of
our RiVax™ product and assist with continuing the progression of the
program.
Research and Development Analysis for
RiVax™
The costs that we have incurred to develop RiVax™ since
2002 total approximately $6,850,000. Research and development costs for RiVax™
totaled $249,318 for the nine months ended September 30, 2008 and $1,350,364 and
$2,
235
,
709
for the years ended December 31, 2007 and 2006,
respectively. Of the amount spent during the years ended December 31,
2007 and 2006, $897,470 and $1,
961
,
074
were for costs
reimbursed under the NIH grant, repsectively.
BT-VACC™
Our
botulinum toxin vaccine, called BT-VACC™, stems from the research of Dr. Lance
Simpson at Thomas Jefferson University in Philadelphia, Pennsylvania.
The vaccine is being developed as an oral or intranasal formulation to be given
as a primary immunization series or as oral or nasal booster to individuals who
have been primed with an injected vaccine. Botulinum toxin is the
product of the bacteria
Clostridium botulinum
.
Botulinum toxin is the most poisonous natural substance known to man. Botulinum
toxin causes acute, symmetric, descending flaccid paralysis due to its action on
peripheral cholinergic nerves. Paralysis typically presents 12 to 72 hours after
exposure. Death results from paralysis of the respiratory muscles. Current
treatments include respiratory support and passive immunization with antibodies
which must be administered before symptoms occur, which leaves little time
post-exposure for effective treatment.
In the
context of oral and nasal formulations, we are developing a multivalent vaccine
against botulinum neurotoxins serotypes A, B and E, which account for almost all
human cases of disease. We have identified lead antigens against Serotypes A, B
and E consisting of the Hc50 fragment of the botulinum toxin. Typically,
vaccines given by mucosal routes are not immunogenic because they do not attach
to immune inductive sites. In the case of the combination BT-VACC
TM
, both
the A and the B antigens were capable of attaching to cells in the mucosal
epithelium and inducing an immune response with similar magnitude to the
injected vaccine. Our preclinical data suggests that a bivalent formulation of
serotypes A and B is completely effective at low, mid and high doses as an
intranasal vaccine and completely effective at the higher dose level orally in
animal models. The animals were given a small quantity of the bivalent
combination vaccine containing each of the type A and type B antigens (10
micrograms) three times a day at two week intervals. All of the animals
developed equivalent immune responses to A and B types in the serum.
Importantly, they were then protected against exposure to each of the native
toxin molecules given at 1000 fold the dose that causes lethality. The immune
responses were also comparable to the same vaccines when given by intramuscular
injection.
In July
2007, we announced that the first results from testing of a multivalent form of
BT-VACC
TM
have
been published in the journal
Infection and Immunity
(Ravichandran et al., 2007,
Infection and Immunity
, v.
75, p. 3043). These results are the first that describe the protective immunity
elicited by a multivalent vaccine that is active by the mucosal route. The
vaccine consists of a combination of three non-toxic subunits of botulinum toxin
that induced protection against the corresponding versions of the natural
toxins. The results published in
Infection and Immunity
show
that non-toxic subunits (protein components of the natural toxin) of three of
the serotypes of botulinum toxin that cause almost all instances of human
disease, namely serotypes A, B, and E, can be combined and delivered via nasal
administration. The combination vaccine induced antibodies in the serum of mice
and protected against subsequent exposure to high doses of a combination of the
natural A, B, and E serotype neurotoxins. The combination vaccine also can
induce protection when given mucosally as a booster to animals that have been
given a primary vaccine injection.
In
September 2006, we were awarded a NIAID Phase 1 SBIR grant totaling
approximately $500,000 to conduct further work to combine antigens from
different serotypes of botulinum toxin for a prototype multivalent vaccine. This
program is currently ongoing and the grant funding has supported further work in
characterizing antigen formulations that induce protective immunity to the three
most common botulinum toxin types that may be encountered naturally or in the
form of a bioweapon. This work will continue the research conducted by Dr. Lance
Simpson and colleagues who originally showed that recombinant non-toxic segments
of the botulinum toxin can be given by the oral as well as the intranasal route
to induce a strong protective immune response in animals. This observation forms
the basis for development of an oral or intranasal vaccine for botulinum toxin
that can be used in humans. Currently, the recombinant vaccines under
development are given by intramuscular injections. The alternate route provides
a self administration option, which will bypass the requirement for needles and
personnel to administer the vaccine.
Research and Development Analysis for
BT-VACC™
The costs that we have incurred to develop BT-VACC™ from
2002 total approximately $2,250,000. Research and development costs
for BT-VACC™ totaled $154,795 for the nine months ended September 30, 2008 and
$360,997 and $
294
,
405
for the years ended December 31, 2007 and 2006,
respectively. Of the amount spent during the years ended December 31,
2007 and 2006, $
45
,
915
and $
4
,
000
were for costs reimbursed under the
und
er the SBIR
grant
, respectively
.
Anthrax
Vaccine
On May 8,
2008, we entered into a one-year exclusive option with the President and Fellows
of Harvard College to license analogues of anthrax toxin for prospective use in
vaccines against anthrax, a potentially fatal disease caused by the
spore-forming, gram-positive bacterium Bacillus anthracis. The option, which was
obtained through negotiation with Harvard University’s Office of Technology
Development, encompasses an issued U.S. patent that covers engineered variants
of protective antigen (“PA”) developed in the Harvard Medical School laboratory
of Dr. John Collier. PA is the principal determinant of protective immunity to
anthrax and is being developed for second- and third-generation anthrax
vaccines. There has been a major effort on the part of the federal government to
develop vaccines for use both pre- and post-exposure to improve upon the vaccine
currently in use. This vaccine, known as AVA (for anthrax vaccine adsorbed),
consists of a defined, but impure mixture of bacterial components. AVA is FDA
approved, but requires multiple injections followed by annual boosters. Vaccines
such as AVA or those based on the purified, recombinant anthrax toxin component
PA (“rPA”) induce antibodies that neutralize anthrax holotoxin and can strongly
protect animals from inhaled anthrax spores. Several of the protein variants
developed by Dr. Collier have been shown to be more immunogenic than native rPA,
perhaps because they are processed more efficiently by cellular antigen
processing pathways. We believe that with the proper government funding we will
be able to develop the Collier anthrax vaccine into one with an improved
stability profile, an issue that has proven challenging in the development of
other anthrax vaccines. We do not intend to conduct any new research and
development or commit any funds to this program until we receive grant
funding.
ADDITIONAL
PROGRAMS
LPM
TM
-
Leuprolide
Our Lipid
Polymer Micelle (“LPM™”) oral drug delivery system is a proprietary platform
technology designed to allow for the oral administration of peptide drugs that
are water-soluble but poorly permeable through the gastrointestinal tract. We
have previously demonstrated in preclinical animal models that the LPM™
technology is adaptable to oral delivery of peptide drugs and that high systemic
levels after intestinal absorption can be achieved with the peptide hormone drug
leuprolide. The LPM™ system utilizes a lipid based delivery system that can
incorporate the peptide of interest in a thermodynamically stable configuration
called a “reverse micelle” that, through oral administration, can promote
intestinal absorption. Reverse micelles are structures that form when certain
classes of lipids come in contact with small amounts of water. This
results in a drug delivery system in which a stable clear dispersion of the
water soluble drug can be evenly dispersed within the lipid phase. LPM™ is
thought to promote intestinal absorption due to the ability of the micelles to
open up small channels through the epithelial layer of the intestines that allow
only molecules of a certain dimension to pass through while excluding extremely
large molecules such as bacteria and viruses. The reverse micelles
also structurally prevent the rapid inactivation of peptides by enzymes in the
upper gastrointestinal tract via a non-specific enzyme inhibition by
surfactant(s) in the formulation.
In
preclinical studies, the LPM™ delivery technology significantly enhanced the
ability of leuprolide, to pass through the intestinal epithelium in comparison
to leuprolide alone. Leuprolide is a synthetic peptide agonist of gonadotropin
releasing hormone, which is used in the treatment of prostate cancer in men and
endometriosis in women. Leuprolide exhibits poor intestinal absorption from an
aqueous solution with the oral bioavailability being less than 5%. Utilizing
LPM™ in rats and dogs, the bioavailability of leuprolide averaged 30% compared
to 2.2% for the control oral solution. Based on these promising preclinical
data, we anticipate preparing for a Phase 1 study in humans in 2009 to confirm
these findings. This Phase 1 study will require further funding from financings
or partnerships.
An oral
version of leuprolide may provide a significant advantage over the currently
marketed “depot” formulations. Leuprolide is one of the most widely used
anti-cancer agents for advanced prostate cancer in men. Injectable
forms of leuprolide marketed under trade names such as Lupron
®
and
Eligard
®
had
worldwide sales of approximately $1.8 billion in 2006. Injectable leuprolide is
also widely used in non-cancer indications, such as endometriosis in women (a
common condition in which cells normally found in the uterus become implanted in
other areas of the body), uterine fibroids in women (noncancerous growths in the
uterus) and central precocious puberty in children (a condition causing children
to enter puberty too soon). Leuprolide is currently available only in
injectable, injectable depot and subcutaneous implant routes of delivery which
limits its use and utility.
Research and Development Analysis for LPM™
Leuprolide
The costs that we have incurred to develop
LPM™
-Leuprolide since 2000 total
approximately $1,400,000. Research and development costs for
LPM™
-Leuprolide totaled $111,387 for the nine months ended
September 30, 2008 and $38,254 and $5,679 for the years ended December 31, 2007
and 2006, respectively. These costs are mainly legal costs in
connection with maintenance of our patent positions and for preclinical
formulation work.
Oraprine
TM
We
anticipate that an orally administered version of the immunosuppressant drug
azathioprine may have a significant role in treating inflammatory diseases of
the oral cavity. Further, an orally administered drug may provide a
niche in the current transplant medicine market for an alternative to solid
dosage forms of azathioprine that would have utility in elderly patients.
Oraprine
TM
is an oral suspension of azathioprine, which we believe may be
bioequivalent to the oral azathioprine tablet currently marketed in the United
States as Imuran
®
.
We conducted a Phase 1 bioequivalence trial following a trial conducted by Dr.
Joel Epstein at the University of Washington that established the feasibility of
the oral drug to treat oral ulcerative lesions resulting from GVHD. Oral GVHD
can occur in up to 70% of patients who have undergone bone marrow/stem cell
transplantation despite treatment with other immunosuppressive drugs such as
prednisone, methotrexate, tacrolimus, and cyclosporine. Azathioprine is one of
the most widely used immunosuppressive medications in clinical
medicine. Azathioprine is commonly prescribed to organ transplant patients
to decrease their natural defense mechanisms to foreign bodies (such as the
transplanted organ). The decrease in the patient’s immune system increases
the chances of preventing rejection of the transplanted organ in the
patient.
On
September 25, 2007, we announced a Notice of Allowance of patent claims based on
U.S. Patent Application #09/433,418 entitled “Topical Azathioprine for the
Treatment of Oral Autoimmune Diseases.” Concurrently, the patent has
also been issued by the European Patent Office with the serial number EP 1 212
063 B1. This patent family specifically includes claims for treatment and
prevention of oral GVHD with locally or topically applied azathioprine. We
anticipate filing an ANDA; however this program is suspended pending further
funding from financing or partnerships.
Research and Development Analysis for
Oraprine
TM
The costs that we have incurred to develop Oraprine™
since 2000 total approximately $400,000. Research and development costs for
Oraprine™ totaled $4,000 for the nine months ended September 30, 2008 and $5,100
and $6,996 for the years ended December 31, 2007 and 2006,
respectively. These costs are mainly legal costs in connection with
maintenance of our patent positions.
LPE
TM
and
PLP
TM
Systems
for Delivery of Water-Insoluble Drugs
We may
develop two lipid-based systems, LPE
TM
and
PLP
TM
, to
support the oral delivery of small molecules of water insoluble drugs. Such
drugs include most kinds of cancer chemotherapeutics currently delivered
intravenously. The LPE
TM
system
is in the form of an emulsion or an emulsion pre-concentrate incorporating
lipids, polymers and co-solvents. We have filed for patent applications on the
use of perillyl alcohol as a solvent, surfactant and absorption enhancer for
lipophilic compounds. The polymers used in these formulations can either be
commercially available or proprietary polymerized lipids and lipid analogs. This
program is suspended pending further funding from financing or
partnerships.
Summary of Our Products in
Development
The
following tables summarize the products that we are currently
developing:
BioTherapeutic Products
|
Product
|
Therapeutic
Indication
|
Stage
of Development
|
|
|
|
|
|
orBec
®
|
Treatment
of Acute GI GVHD
|
Pivotal
Phase 3 confirmatory trial to be initiated in 2009
|
|
orBec
®
|
Prevention
of Acute GI GVHD
|
Phase
2 trial enrolling
|
|
orBec
®
|
Treatment
of Chronic GI GVHD
|
Phase
2 trial to be initiated in 2009
|
|
Oral
BDP
|
Radiation
Enteritis and Radiation Exposure
|
Phase
1/2 trial to be initiated in 2009
|
|
LPM
TM
–
Leuprolide
|
Endometriosis
and Prostate Cancer
|
Phase
1 trial to be initiated in 2009
|
|
Oraprine
TM
|
Oral
lesions resulting from GVHD
|
Phase
1/2 trial suspended
|
|
LPE
TM
and PLP
TM
Systems
|
Delivery
of Water-Insoluble Drugs
|
Pre-Clinical
|
Biodefense
Products
|
Select
Agent
|
Currently
Available Countermeasure
|
DOR
Biodefense Product
|
|
|
|
|
|
Ricin
Toxin
|
No
vaccine or antidote currently FDA approved
|
Injectable
Ricin Vaccine
Phase
1 Clinical Trial Successfully Completed
Second
Phase 1 trial enrolling
|
|
Botulinum
Toxin
|
No
vaccine or antidote currently FDA approved
|
Oral/Nasal
Botulinum
Vaccine
|
The Drug Approval
Process
General
Before
marketing, each of our products must undergo an extensive regulatory approval
process conducted by the FDA and applicable agencies in other countries.
Testing, manufacturing, commercialization, advertising, promotion, export and
marketing, among other things, of the proposed products are subject to extensive
regulation by government authorities in the United States and other countries.
All products must go through a series of tests, including advanced human
clinical trials, which the FDA is allowed to suspend as it deems necessary to
protect the safety of subjects.
Our
products will require regulatory clearance by the FDA and by comparable agencies
in other countries, prior to commercialization. The nature and extent of
regulation differs with respect to different products. In order to test, produce
and market certain therapeutic products in the United States, mandatory
procedures and safety standards, approval processes, manufacturing and marketing
practices established by the FDA must be satisfied.
An INDA
is required before human clinical testing in the United States of a new drug
compound or biological product can commence. The INDA includes results of
pre-clinical animal studies evaluating the safety and efficacy of the drug and a
detailed description of the clinical investigations to be
undertaken.
Clinical
trials are normally done in three Phases, although the phases may overlap. Phase
1 trials are smaller trials concerned primarily with metabolism and
pharmacologic actions of the drug and with the safety of the product. Phase 2
trials are designed primarily to demonstrate effectiveness and safety in
treating the disease or condition for which the product is indicated. These
trials typically explore various doses and regimens. Phase 3 trials are expanded
clinical trials intended to gather additional information on safety and
effectiveness needed to clarify the product’s benefit-risk relationship and
generate information for proper labeling of the drug, among other things. The
FDA receives reports on the progress of each phase of clinical testing and may
require the modification, suspension or termination of clinical trials if an
unwarranted risk is presented to patients. When data is required from long-term
use of a drug following its approval and initial marketing, the FDA can require
Phase 4, or post-marketing, studies to be conducted.
With
certain exceptions, once successful clinical testing is completed, the sponsor
can submit an NDA for approval of a drug. The process of completing clinical
trials for a new drug is likely to take a number of years and require the
expenditure of substantial resources. Furthermore, the FDA or any foreign health
authority may not grant an approval on a timely basis, if at all. The FDA may
deny the approval of an NDA, in its sole discretion, if it determines that its
regulatory criteria have not been satisfied or may require additional testing or
information. Among the conditions for marketing approval is the requirement that
the prospective manufacturer’s quality control and manufacturing procedures
conform to good manufacturing practice regulations. In complying with standards
contained in these regulations, manufacturers must continue to expend time,
money and effort in the area of production, quality control and quality
assurance to ensure full technical compliance. Manufacturing facilities, both
foreign and domestic, also are subject to inspections by, or under the authority
of, the FDA and by other federal, state, local or foreign agencies.
Even
after initial FDA or foreign health authority approval has been obtained,
further studies, including Phase 4 post-marketing studies, may be required to
provide additional data on safety and will be required to gain approval for the
marketing of a product as a treatment for clinical indications other than those
for which the product was initially tested. Also, the FDA or foreign regulatory
authority will require post-marketing reporting to monitor the side effects of
the drug. Results of post-marketing programs may limit or expand the further
marketing of the products. Further, if there are any modifications to the drug,
including any change in indication, manufacturing process, labeling or
manufacturing facility, an application seeking approval of such changes will
likely be required to be submitted to the FDA or foreign regulatory
authority.
In the
United States, the Federal Food, Drug, and Cosmetic Act, the Public Health
Service Act, the Federal Trade Commission Act, and other federal and state
statutes and regulations govern or influence the research, testing, manufacture,
safety, labeling, storage, record keeping, approval, advertising and promotion
of drug, biological, medical device and food products. Noncompliance with
applicable requirements can result in, among other things, fines, recall or
seizure of products, refusal to permit products to be imported into the U.S.,
refusal of the government to approve product approval applications or to allow
the Company to enter into government supply contracts, withdrawal of previously
approved applications and criminal prosecution. The FDA may also assess civil
penalties for violations of the Federal Food, Drug, and Cosmetic Act involving
medical devices.
For
development of biodefense vaccines and therapeutics, such as RiVax
TM
and
BT-VACC
TM
, the
FDA has instituted policies that are expected to result in shorter pathways to
market. This potentially includes approval for commercial use using the results
of animal efficacy trials, rather than efficacy trials in humans. However, the
Company will still have to establish that the vaccine and countermeasures it is
developing are safe in humans at doses that are correlated with the beneficial
effect in animals. Such clinical trials will also have to be completed in
distinct populations that are subject to the countermeasures; for instance, the
very young and the very old, and in pregnant women, if the countermeasure is to
be licensed for civilian use. Other agencies will have an influence over the
risk benefit scenarios for deploying the countermeasures and in establishing the
number of doses utilized in the Strategic National Stockpile. We may not be able
to sufficiently demonstrate the animal correlation to the satisfaction of the
FDA, as these correlates are difficult to establish and are often
unclear. Invocation of the two animal rule may raise issues of
confidence in the model systems even if the models have been validated. For many
of the biological threats, the animal models are not available and the Company
may have to develop the animal models, a time-consuming research effort. There
are few historical precedents, or recent precedents, for the development of new
countermeasure for bioterrorism agents. Despite the two animal rule, the FDA may
require large clinical trials to establish safety and immunogenicity before
licensure and it may require safety and immunogenicity trials in additional
populations. Approval of biodefense products may be subject to post-marketing
studies, and could be restricted in use in only certain
populations.
Marketing
Strategies
Pursuant to the collaboration and supply agreement with
Sigma-Tau, we granted an exclusive license to Sigma-Tau to commercialize orBec®
in the United States, Canada and Mexico
.
We are
actively seeking a partner for the development of other potential indications of
orBec
®
as well
as for our Oraprine
TM
,
LPM
TM
–
Leuprolide, LPE
TM
and
PLP
TM
systems for delivery of water-insoluble drugs.
We have
had and are having strategic discussions with a number of pharmaceutical
companies regarding the partnering or sale of our biodefense vaccine products.
We may market our biodefense vaccine products directly to government agencies.
We believe that both military and civilian health authorities of the United
States and other countries will increase their stockpiling of therapeutics and
vaccines to treat and prevent diseases and conditions that could ensue following
a bioterrorism attack.
Competition
Our
competitors are pharmaceutical and biotechnology companies, most of whom have
considerably greater financial, technical, and marketing resources than we
currently have. Another source of competing technologies is universities and
other research institutions, including the U.S. Army Medical Research Institute
of Infectious Diseases, and we face competition from other companies to acquire
rights to those technologies.
Biodefense
Vaccine Competition
We face
intense competition in the area of biodefense from various public and private
companies, universities and governmental agencies, such as the U.S. Army, some
of whom may have their own proprietary technologies which may directly compete
with the our technologies. Acambis, Inc., Dynavax, Emergent Biosolutions
(formerly Bioport Corporation), VaxGen, Inc., Chimerix, Inc., Human Genome
Sciences, Inc., Coley Pharmaceuticals, Inc., Avanir Pharmaceuticals, Inc.,
Dynport Vaccine Company, LLC., Pharmathene, SIGA Pharmaceuticals and
others have announced vaccine or countermeasure development programs for
biodefense. Some of these companies have substantially greater human and
financial resources than we do, and many of them have already received grants or
government contracts to develop anti-toxins and vaccines against bioterrorism.
For example, Avecia Biotechnology, Inc. has received NIH contracts to develop a
next generation injectable anthrax vaccine. VaxGen received an approximately
$900 million procurement order from the U.S. government to produce and deliver
75 million doses of Anthrax vaccine. This contract was rescinded in January 2007
by the HHS because of the inability of Vaxgen to enter into Phase 2 clinical
trials according to contract timelines. Several companies have received
development grants from NIH for biodefense products. For example, Coley
Pharmaceuticals, Inc. has received a $6 million Department of Defense grant to
develop vaccine enhancement technology. Dynport Vaccine Company, LLC, a prime
contractor with the DOD, currently has a $200 million contract to develop
vaccines for the U.S. Military, including a multivalent botulinum toxin vaccine.
Although we have received significant grant funding to date for product
development, we have not yet been obtained contract awards for government
procurement of products.
orBec
®
Competition
Competition
is intense in the gastroenterology and transplant areas. Companies are
attempting to develop technologies to treat GVHD by suppressing the immune
system through various mechanisms. Some companies, including Sangstat, Abgenix,
and Protein Design Labs, Inc., are developing monoclonal antibodies to treat
graft-vs.-host disease. Novartis, Medimmune, and Ariad are developing both gene
therapy products and small molecules to treat graft-vs.-host disease. All of
these products are in various stages of development. For example, Novartis
currently markets Cyclosporin, and Sangstat currently markets Thymoglobulin for
transplant related therapeutics. We face potential competition from Osiris
Therapeutics if their product Prochymal for the treatment of GI GVHD is
successful in ongoing Phase 3 clinical trials and reaches market. Kiadis Pharma
is also developing products for the treatment of GVHD. In addition,
there are investigator-sponsored clinical trials exploring the use of approved
drugs such as Enbrel
®
, which
has been approved by the FDA for the treatment of rheumatoid arthritis, in the
treatment of GVHD. We believe that orBec
®
’s unique
release characteristics, intended to deliver topically active therapy to both
the upper and lower gastrointestinal systems, should make orBec
®
an
attractive alternative to existing therapies for inflammatory diseases of the
gastrointestinal tract.
Competition
is also intense in the therapeutic area of inflammatory bowel disease. Several
companies, including Centocor, Immunex, and Celgene, have products that are
currently FDA approved. For example, Centocor, a subsidiary of Johnson &
Johnson, markets the drug product Remicade
TM
for
Crohn’s disease. Other drugs used to treat inflammatory bowel disease include
another oral locally active corticosteroid called budesonide, which is being
marketed by AstraZeneca in Europe and Canada and by Prometheus Pharmaceuticals
in the U.S. under the tradename of Entocort
®
.
Entocort is structurally
similar to beclomethasone dipropionate, and the FDA approved Entocort for
Crohn’s disease late in 2001. In Italy, Chiesi Pharmaceuticals markets an oral
formulation of beclomethasone dipropionate, the active ingredient of orBec® for
ulcerative colitis and may seek marketing approval for their product in
countries other than Italy including the United States. In addition, Salix
Pharmaceuticals, Inc. markets an FDA-approved therapy for ulcerative colitis
called Colazal
®
.
Several
companies have also established various colonic drug delivery systems to deliver
therapeutic drugs to the colon for treatment of Crohn’s disease. These companies
include Ivax Corporation, Inkine Pharmaceutical Corporation, and Elan
Pharmaceuticals, Inc. Other approaches to treat gastrointestinal disorders
include antisense and gene therapy. Isis Pharmaceuticals, Inc. is in the process
of developing antisense therapy to treat Crohn’s disease.
Patents and Other Proprietary
Rights
Our goal
is to obtain, maintain and enforce patent protection for our products,
formulations, processes, methods and other proprietary technologies, preserve
our trade secrets, and operate without infringing on the proprietary rights of
other parties, both in the United States and in other countries. Our policy is
to actively seek to obtain, where appropriate, the broadest intellectual
property protection possible for our product candidates, proprietary information
and proprietary technology through a combination of contractual arrangements and
patents, both in the U.S. and elsewhere in the world.
We also
depend upon the skills, knowledge and experience of our scientific and technical
personnel, as well as that of our advisors, consultants and other contractors,
none of which is patentable. To help protect our proprietary knowledge and
experience that is not patentable, and for inventions for which patents may be
difficult to enforce, we rely on trade secret protection and confidentiality
agreements to protect our interests. To this end, we require all employees,
consultants, advisors and other contractors to enter into confidentiality
agreements, which prohibit the disclosure of confidential information and, where
applicable, require disclosure and assignment to us of the ideas, developments,
discoveries and inventions important to our business.
We have
“Orphan Drug” designations for orBec
®
in the
United States and in Europe. Our Orphan Drug designations provide for seven
years of post approval marketing exclusivity in the U.S. and ten years
exclusivity in Europe for the use of orBec
®
in the
treatment of GI GVHD. We have pending patent applications for this indication
that, if granted, may extend our anticipated marketing exclusivity beyond the
seven year post-approval exclusivity provided by the Orphan Drug Act of 1983. We
are the exclusive licensee of an issued U.S. patent that covers the use of
orBec
®
for the
prevention of GI GVHD.
Under the
Waxman-Hatch Act, a patent which claims a product, use or method of manufacture
covering drugs and certain other products may be extended for up to five years
to compensate the patent holder for a portion of the time required for
development and FDA review of the product. The Waxman-Hatch Act also establishes
periods of market exclusivity, which are periods of time ranging from three to
five years following approval of a drug during which the FDA may not approve, or
in certain cases even accept, applications for certain similar or identical
drugs from other sponsors unless those sponsors provide their own safety and
efficacy data.
orBec
®
License
Agreement
In
November 1998, our wholly-owned subsidiary, Enteron Pharmaceuticals, Inc.
(“Enteron”), entered into an exclusive, worldwide, royalty bearing license
agreement with George B. McDonald, M.D., including the right to grant
sublicenses, for the rights to the intellectual property and know-how relating
to orBec
®
. In
addition, Dr. McDonald receives $40,000 per annum as a consultant.
Enteron
also executed an exclusive license to patent applications for “Use of
Anti-Inflammatories to Treat Irritable Bowel Syndrome” from the University of
Texas Medical Branch-Galveston. Under the license agreements, we will be
obligated to make performance-based milestone payments, as well as royalty
payments on any net sales of orBec
®
.
Ricin Vaccine Intellectual
Property
In
January 2003, we executed a worldwide exclusive option to license patent
applications with UTSW for the nasal, pulmonary and oral uses of a non-toxic
ricin vaccine. In June 2004, we entered into a license agreement with UTSW for
the injectable rights to the ricin vaccine for initial license fees of $200,000
of our common stock and $100,000 in cash. Subsequently, in October 2004, we
negotiated the remaining oral rights to the ricin vaccine for additional license
fees of $150,000 in cash. Our license obligates us to pay $50,000 in
annual license fees.
We have
sponsored research agreements with UTSW funded by two NIH grants. On December 7,
2006, we announced that the United States Patent and Trademark Office issued a
Notice of Allowance of patent claims based on U.S. Patent Application
#09/698,551 entitled “Ricin A chain mutants lacking enzymatic activity as
vaccines to protect against aerosolized ricin.” This patent includes methods of
use and composition claims for RiVax™.
Botulinum Toxin Vaccine Intellectual
Property
In 2003,
we executed an exclusive license agreement with Thomas Jefferson University for
issued U.S. Patent No. 6,051,239 and corresponding international patent
applications broadly claiming the oral administration of nontoxic modified
botulinum toxins as vaccines. The intellectual property also includes patent
applications covering the inhaled and nasal routes of delivery of the vaccine.
This license agreement required that we pay a license fee of $160,000, payable
in $130,000 of restricted common stock and $30,000 in cash. In 2003, we entered
into a one-year sponsored research agreement with the execution of the license
agreement with Thomas Jefferson University, renewable on an annual basis, under
which we have provided $300,000 in annual research support. In addition, we also
executed a consulting agreement with Dr. Lance Simpson, the inventor of the
botulinum toxin vaccine for a period of three years. Under this agreement, Dr.
Simpson received options to purchase 100,000 shares of our common stock, vesting
over two years. We are also required to pay a $10,000 non-refundable license
royalty fee no later than January 1 of each calendar year.
Description
of Property
We
currently lease approximately 2,500 square feet of office space at 850 Bear
Tavern Road, Suite 201, Ewing, New Jersey 08628. The office space currently
serves as our corporate headquarters. We pay rent of approximately $5,800 per
month, or $28 per square foot, on a month-to-month lease, which was entered into
on October 1, 2008. We anticipate that we will seek a new facility in the second
quarter of 2009.
Employees
As of
December 31, 2008, we had seven full-time employees, three of whom are
Ph.D.s.
Research and Development
Spending
We spent
approximately $900,000 in the nine months ended September 30, 2008 and
$3,100,000 and $4,800,000 in the years ended December 31, 2007 and 2006,
respectively, on research and development.
Legal
Proceedings
From
time-to-time, we are a party to claims and legal proceedings arising in the
ordinary course of business. Our management evaluates our exposure to these
claims and proceedings individually and in the aggregate and allocates
additional monies for potential losses on such litigation if it is possible to
estimate the amount of loss and if the amount of the loss is
probable.
The following discussion and
analysis provides information that we believe is relevant to an assessment and
understanding of our results of operation and financial condition. You should
read this analysis in conjunction with our audited consolidated financial
statements and related notes and our unaudited consolidated interim financial
statements and their notes. This discussion and analysis contains statements of
a forward-looking nature relating to future events or our future financial
performance. These statements are only predictions, and actual events or results
may differ materially. In evaluating such statements, you should carefully
consider the various factors identified in this prospectus, which could cause
actual results to differ materially from those expressed in, or implied by, any
forward-looking statements, including those set forth in “Risk Factors" in this
prospectus. See "Forward-Looking Statements."
Business
Overview and Strategy
We are a
late-stage research and development biopharmaceutical company focused on the
development of oral therapeutic products intended for areas of unmet medical
need and biodefense vaccines. We were incorporated in Delaware in
1987.
Our
business strategy is to:
|
(a)
|
initiate
and execute the pivotal Phase 3 confirmatory clinical trial for orBec
®
in
acute GI GVHD;
|
|
(b)
|
make
orBec
®
available worldwide through named patient access programs for the
treatment of GI GVHD;
|
|
(c)
|
identify
a development and
marketing
partner for orBec
®
for territories
outside of North
America, as we have granted an
exclusive license to
Sigma-Tau
Pharmaceuticals, Inc. (“Sigma-Tau”) to c
ommercialize
orBec
®
in the United States, Canada and Mexico,
Sigma-Tau will pay us a 35% roylaty on net sales
;
|
|
(d)
|
conduct
a Phase 2 clinical trial of orBec
®
for the prevention of
GI
GVHD;
|
|
(e)
|
evaluate
and initiate additional clinical trials to explore the effectiveness of
oral BDP in other therapeutic indications involving inflammatory
conditions of the
gastrointestinal
tract such as radiation enteritis, radiation injury and Crohn’s
disease;
|
|
(f)
|
reinitiate
development and manufacturing of our other biotherapeutics products,
namely LPM
TM
Leuprolide;
|
|
(g)
|
continue
to secure additional government funding for each of
our
biodefense programs, RiVax
TM
and BT-VACC
TM
,
through grants, contracts and
procurements;
|
|
(h)
|
convert
our biodefense vaccine programs from early stage development to advanced
development and manufacturing with the potential to collaborate and/or
partner with other companies in the biodefense
area;
|
|
(i)
|
explore
business development and acquisition strategies under which we may be
considered to be an attractive acquisition
candidate
by another company;
and
|
|
(j)
|
acquire
or in-license new clinical-stage compounds for
development.
|
Critical
Accounting Policies
Our
discussion and analysis of our financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities and expenses,
and related disclosure of contingent assets and liabilities. We evaluate these
estimates and judgments on an on-going basis.
Intangible
Assets
One of
the most significant estimates or judgments that we make is whether to
capitalize or expense patent and license costs. We make this judgment based on
whether the technology has alternative future uses, as defined in SFAS 2,
“Accounting for Research and Development Costs”. Based on this consideration, we
capitalized all outside legal and filing costs incurred in the procurement and
defense of patents.
These
intangible assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If the
sum of the expected undiscounted cash flows is less than the carrying value of
the related asset or group of assets, a loss is recognized for the difference
between the fair value and the carrying value of the related asset or group of
assets.
We
capitalize and amortize intangibles over a period of 11 to 16 years. We
capitalize payments made to legal firms that are engaged in filing and
protecting our rights to our intellectual property and rights for our current
products in both the domestic and international markets.
We
capitalize intangible assets that have alternative future uses. This is common
practice in the pharmaceutical development industry. Of our intangible asset
balance, our purchase of the RiVax
TM
vaccine
license from the University of Texas Southwestern Medical Center for $462,234
was for up-front license costs. We capitalize license costs because they have
alternative future use as referred to in paragraph 11 c. of SFAS No.2. We
believe that both of these intangible assets purchased have alternative future
uses.
We
capitalize legal costs associated with the protection and maintenance of our
patents. As a development stage company with drug and vaccine products in an
often lengthy basic and clinical research process, we believe that patent rights
are one of our most valuable assets. Patents and patent applications are a key
currency of intellectual property, especially in the early stage of product
development, as their purchase and maintenance gives us access to key product
development rights from our academic and industrial partners. These rights can
also be sold or sub-licensed as part of our strategy to partner our products at
each stage of development. The legal costs incurred for these patents consist of
work designed to protect, preserve, maintain and perhaps extend the lives of the
patents. Therefore, our policy is to capitalize these costs and amortize them
over the remaining useful life of the patents. We capitalize intangible assets’
alternative future use as referred to in SFAS No.142 and in paragraph 11 c. of
SFAS No. 2.
We
capitalized $190,801
and $356,192
in patent
related costs during the nine months ended September 30,
2008 and the year ended December 31, 2007,
respectvely. These amounts are
represented in the cash flow
statements, in the section for investing activities presented in the financial
statements. On the balance sheet as of September 30, 2008 and December 31, 2007,
these amounts are presented on the line intangible assets, net in the amount of
$1,412,278 and $1,320,787, respectively.
Research
and Development Costs
Research
and Development costs are charged to expense when incurred. Research and
development includes costs such as clinical trial expenses, contracted research
and license agreement fees with no alternative future use, supplies and
materials, salaries and employee benefits, equipment depreciation and allocation
of various corporate costs. Purchased in-process research and development
expense represents the value assigned or paid for acquired research and
development for which there is no alternative future use as of the date of
acquisition.
Revenue
Recognition
Our
revenues are generated from U.S. government grants and from Orphan
Australia for NPAP sales of orBec
®
. The
government grants are based upon subcontractor costs and internal costs covered
by the grant, plus a facilities and administrative rate that provides funding
for overhead expenses. These revenues are recognized when expenses have been
incurred by subcontractors or when we incur internal expenses that are related
to the grant. The NPAP revenues are recorded when orBec
®
is
shipped.
Material Changes in Results of
Operations
Three and Nine Months Ended September 30, 2008 Compared
to Three and Nine Months Ended September 30, 2007.
The 2008
revenues and associated expenses were from NIH Grants awarded in September 2004
and September 2006 and from Orphan Australia for NPAP sales of orBec
®
. The NIH
grants support the research and development of our ricin and botulinum
vaccines.
For the
three months ended September 30, 2008, we had a net loss of $475,701 as compared
to a net loss of $1,246,982 for the three months ended September 30, 2007, for a
decrease of $771,281, or 62%. For the nine months ended September 30, 2008, we
had a $3,103,579 net loss as compared to $4,966,848 in the nine months ended
September 30, 2007, for a decrease of $1,863,269, or 38%. This decrease is
primarily attributed to lower research and development costs and lower costs
associated with preparation of FDA and European regulatory matters as well as a
reduction in general and administrative expenses, such as, public and investor
relation expenses, a reduction in employee, travel and consultant expenses,
lower expenses taken for stock based compensation in the amount of $300,185, and
the dilution expense taken for stock issued to investors from the April 2006
private placement in the amount of $308,743 in 2007.
For the
three months ended September 30, 2008, we had revenues of $605,736 as compared
to $429,445 in the three months ended September 30, 2007, for an increase of
$176,291, or 41%. For the nine months ended September 30, 2008, we had grant
revenues of $1,771,620 as compared to $943,737 in the nine months ended
September 30, 2007, for an increase of $827,883, or 88%. During 2008 we achieved
certain R&D milestones with our subcontractors and made drawdowns from our
NIH grants. In addition, we had revenue of $40,618 from Orphan Australia for
NPAP sales of orBec
®
. We also
incurred expenses related to that revenue in the three months ended September
30, 2008 and 2007 of $538,182 and $301,672, respectively, for an increase of
$236,510, or 78%. For the nine months ended September 30, 2008 and
2007, we incurred expenses to that revenue of $1,459,206 and $669,882
respectively. Of the difference, $182,600 is due to a reclassification of
expenses from research and development costs to cost of sales. Costs of revenues
for the grants relate to payments made to subcontractors and universities in
connection with the grants. Costs of goods associated with NPAP sales of
orBec
®
were $10,551. We also recorded a $100,000 allowance as a reserve for our
orBec
®
inventory.
Our gross
profit for the three months ended September 30, 2008 was $67,554 as compared to
$127,773 in the three months ended September 30, 2007, for a decrease of
$60,219, or 47%. For the nine months ended September 30, 2008, we had a gross
profit of $312,414 as compared to $273,855 in the nine months ended September
30, 2007, for an increase of $38,559, or 14%. A portion of this difference
relates to the aforementioned reclassification error. In the third quarter of
2008, we also capitalized inventory in the net amount of $147,545 and $60,311
for certain orBec
®
costs
that were expensed as research and development expenses in 2008 and 2007,
respectively, and recorded a $100,000 allowance as a reserve for our orBec
®
inventory.
Research
and development spending decreased by $531,430, or 90%, to $60,238, for the
three months ended September 30, 2008 as compared to $591,668 for the
corresponding period ended September 30, 2007. A portion of this decrease is due
to the reclassification of research and development expenses to inventory. For
the nine months ended September 30, 2008, we had $1,403,841 of research and
development spending as compared to $2,611,220 in the nine months ended
September 30, 2007, for a decrease of $1,207,379, or 46%. During 2008, we
incurred expenses for FDA and European regulatory matters, for clinical
preparation of orBec
®
and LPM
formulation work. The majority of research and development expenses in 2007 were
related to FDA and European regulatory matters.
General
and administrative expenses decreased $98,797, or 19%, to $410,336 for the three
months ended September 30, 2008, as compared to $509,133 for the corresponding
period ended September 30, 2007. For the nine months ended September 30, 2008,
we had general and administrative expenses of $1,812,972 as compared to
$2,243,212 in the nine months ended September 30, 2007, for a decrease of
$430,240, or 19%. The decrease was primarily due to the dilution expense taken
in the first quarter of 2007 for stock issued to investors in the April 2006
private placement in the amount of $308,743. Additionally, the decrease was due
to a reduction in employee and consultant expenses, travel expenses and expenses
for public and investor relations of approximately $230,000. During the first
quarter of 2008, commitment shares were issued and an expense of $270,000 was
recorded as a result of the Fusion Capital equity transaction.
Stock
based compensation expenses for research and development decreased $37,778, or
49%, to $39,584 for the three months ended September 30, 2008, as compared to
$77,362 for the corresponding period ended September 30, 2007. For the nine
months ended September 30, 2008, we had $118,750 in stock based compensation
expenses for research and development as compared to $164,890 in the nine months
ended September 30, 2007, for a decrease of $46,140 or 28%.
Stock
based compensation expenses for general and administrative decreased $169,921,
or 82%, to $36,792 for the three months ended September 30, 2008, as compared to
$206,713 for the corresponding period ended September 30, 2007. For the nine
months ended September 30, 2008, we had $110,378 in stock based compensation
expenses for general and administrative as compared to $364,423 in the nine
months ended September 30, 2007, for a decrease of $254,045, or
70%.
Interest
income for the three months ended September 30, 2008 was $5,391 as compared to
$10,121 for the three months ended September 30, 2007, representing a decrease
of $4,730, or 47%. For the nine months ended September 30, 2008, we had $32,248
of interest income as compared to $144,062 in the nine months ended September
30, 2007, for a decrease of $111,814, or 78%. This decrease is due to lower cash
balances in 2008 as compared to 2007.
Interest
expense for the three months ended September 30, 2008 was $1,696 as compared to
$0 for the three months ended September 30, 2007. For the nine months
ended September 30, 2008, we had $2,300 of interest expense as compared to
$1,020 in the nine months ended September 30, 2007, for an increase of $1,280,
or 125%. This increase was the result of higher balances that were short-term
financed for insurance premiums due.
Financial
Condition
Cash
and Working Capital
The
accompanying consolidated financial statements have been prepared assuming we
will continue as a going concern. As of September 30, 2008, we had cash of
$686,216 as compared to $2,220,128 as of December 31, 2007. As of November 3,
2008, we had cash of approximately $520,000. As of September 30, 2008, we had
working capital deficit of $537,997 as compared to working capital of $1,243,638
as of December 31, 2007, representing a decrease of $1,781,635. For
the nine months ended September 30, 2008, our cash used in operating activities
was approximately $2,100,000, compared to $5,200,000 for the corresponding
period ended September 30, 2007.
Management’s
plan is as follows:
|
·
|
We
have and will utilize Named Patient Sales wherever possible in countries
outside the United States to generate revenues from orBec
®
.
|
|
·
|
We
are exploring outlicensing opportunities for LPM-Leuprolide and BioDefense
programs in the United States and in
Europe.
|
If we
obtain additional funds through the issuance of equity or equity-linked
securities, shareholders may experience significant dilution and these equity
securities may have rights, preferences or privileges senior to those of our
common stock. The terms of any debt financing may contain restrictive covenants
which may limit our ability to pursue certain courses of action. We may not be
able to obtain such financing on acceptable terms if at all. If we are unable to
obtain such financing when needed, or to do so on acceptable terms, we may be
unable to develop our products, take advantage of business opportunities,
respond to competitive pressures or continue our operations.
Should
the financing we require to sustain our working capital needs be unavailable or
prohibitively expensive when we require it, the consequences could
cause
a material adverse effect on our business,
operating results, financial condition and prospects.
Since September 30, 2008, we have i
ssued a total of 62,580,702 shares of common stock and
warrants to purchase 20,914,035 shares of common stock for a sum of
$8,384,200.
Expenditures
Under our
austerity budget and based upon our existing product development agreements and
license agreements pursuant to letters of intent and option agreements, we
expect our expenditures for the next 12 months to be approximately $1,200,000,
not inclusive of BioDefense programs, or programs covered under existing
NIH or orphan grants, and not including a new confirmatory Phase 3 clinical
trial for orBec
®
for the
treatment of GI GVHD. In order to fund a portion of these expenditures we
will need funding from financings and partnerships. We anticipate grant
revenues in the next 12 months to offset research and development expenses for
the development of our ricin toxin vaccine and botulinum toxin vaccine in the
amount of approximately $2,100,000, with $600,000 contributing towards our
overhead expenses.
The table
below details our costs by program for the nine months ended September
30:
|
|
2008
|
2007
|
|
Program
- Research & Development Expenses
|
|
|
|
orBec
®
|
$ 884,341
|
$ 1,999,562
|
|
RiVax™
|
249,318
|
317,390
|
|
BT-VACC™
|
154,795
|
256,914
|
|
Oraprine™
|
4,000
|
5,100
|
|
LPM
TM
-Leuprolide
|
111,387
|
32,254
|
|
Research
& Development Expense
|
$ 1,403,841
|
$ 2,611,220
|
|
|
|
|
|
Program
– Cost of Goods Sold and
Reimbursed
under Grants
|
|
|
|
orBec
®
|
$
10,551
|
$ -
|
|
RiVax™
|
1,266,049
|
636,979
|
|
BT-VACC™
|
82,606
|
32,903
|
|
Cost
of Goods Sold and Reimbursed under Grant
|
$ 1,359,206
|
$ 669,882
|
|
|
|
|
|
TOTAL
|
$ 2,863,047
|
$ 3,281,102
|
Year Ended December 31, 2007
Compared to Year Ended December 31, 2006
The 2007 revenues and associated expenses were from NIH
Grants awarded in Septemb
er 2004 and
September 2006. The NIH grants are associated with our ricin and botulinum
vaccines. In addition, we were awarded a one year FDA Orphan Products grant on
September 23, 2005 for “
Oral BDP for the
Treatment of GI GVHD.”
For the year ended Decemb
er 31, 2007, we had grant revenues of $1,258,017 as
compared to $2,313,020 in the twelve months ended December 31, 2006, a decrease
of $1,055,003, or 46%. In 2006 compared to 2007, our progress on the grant had
exceeded the original schedule, which accele
r
ated the milestone
revenues that were recorded in the first quarter of 2006. We also incurred
expenses correlated to the revenue in 2007 and 2006 of $943,385 and $1,965,074,
respectively, a decrease of $1,021,689, or 52%. These costs relate to payments
ma
d
e
to subcontractors and universities in connection with the
grants.
The gross profit for the twelve months ended December
31, 2007 was $314,632 as compared to $347,946 in the twelve months ended
December 31, 2006, a decrease of $33,314, or 10%. This was d
ue to the decreased grant revenues in the first quarter
ended 2007 that were eligible for the F&A rate as well as the expected
decrease in the final F&A rate.
Research and development spending decreased $538,549, or
15%, to $3,099,944, for the twelve mont
hs
ended December 31, 2007 as compared to $3,638,493 for the corresponding period
ended December 31, 2006. In the third quarter of 2007, a majority of
expenses were related to preparation of FDA and European regulatory matters.
During the fourth quarter
o
f 2007 our research and development expenses were
greatly reduced as a result of the end of FDA
’
s review of our
NDA for orBec
®
.
In-process research and development expenditures were $0
for the twelve months ended December 31, 2007, a decrease of 100% as
c
ompared to $981,819 for the same period
ended December 31, 2006. This decrease was due to the purchase acquisition in
2006 of all of the outstanding common stock of Enteron that the Company did not
already own.
Impairment expense for intangibles was $0 fo
r the twelve months ended December 31, 2007, a decrease
of 100% as compared to $816,300 for the same period ended December 31, 2006.
This was due to the impairment of the Southern Research Institute/Brookwood
Pharmaceuticals license of microsphere technol
o
gy.
Stock based compensation expenses for research and
development increased $10,733, or 5%, to $230,668 for the twelve months ended
December 31, 2007, as compared to $219,895 for the corresponding period ended
December 31, 2006.
Stock based compensation
expenses for general and administrative increased
$109,486, or 32%, to $446,773 for the twelve months ended December 31, 2007, as
compared to $337,287 for the corresponding period ended December 31,
2006.
General and administrative expenses increased
$31
0,670, or 12%, to $2,864,370 for the
twelve months ended December 31, 2007, as compared to $2,553,700 for the
corresponding period ended December 31, 2006. The increase was primarily due to
the dilution expense taken for stock issued to investors from the
April 2006
PIPE in the amount of $308,743. In addition, we had expenses for public and
investor relations which increased by approximately
$125,000.
Interest income for the twelve months ended December 31,
2007 was $164,847 as compared to $41,510 for the
twelve months ended December 31, 2006, representing an
increase of $123,337 or 297%. This increase is due to a higher cash balance in
2007 as compared to 2006.
Interest expense for the twelve months ended December
31, 2007 was $1,020 as compared to $5,308
for the twelve months ended December 31, 2006, a decrease of $4,288 or 81%. This
decrease was the result of lower balances that were short-term financed for
insurance premiums due and therefore less interest was accrued and
paid.
For the twelve months e
nded December 31, 2007, we had a net loss of $6,164,643
as compared to a $8,163,346 net loss for the twelve months ended December 31,
2006, a decrease of $1,998,703, or 24%. This decrease in the net loss is
primarily attributed to higher costs in 2006 for
:
regulatory and
filing consultant costs associated with the preparation of the NDA filing for
orBec
®
; the in-process research and development expense of
$981,819 for acquiring all of the outstanding common stock of Enteron that the
Company did not already
own, the impairment
expense for intangibles of $816,300, and the dilution expense taken for stock
issued to investors from the April 2006 PIPE in the amount of
$308,743.
Financial Condition
Cash and Working Capital
As of December 31, 2007, we had cash o
f $2,220,128 as compared to $119,636 as of December 31,
2006. As of March 24, 2008 we had cash of approximately $2,000,000. As of
December 31, 2007, we had working capital of $1,243,638 as compared to negative
working capital of $2,211,387 as of December
3
1, 2006,
representing an increase of $3,455,025. For the twelve months ended
December 31, 2007, our cash used in operating activities was approximately
$6,000,000, compared to $4,100,000 for the corresponding period ended December
31, 2006.
Based on the
our
current rate of cash outflows, cash in the bank,
we believe that our cash will be sufficient to meet
its anticipated cash needs for working
capital and capital expenditures
through
mid year 2010.
It is possible that we will seek additional capital in
the private and/or public equity markets to expand our operations, to respond to
competitive pressures, to develop new products and services and to
sup
port new strategic
partnerships.
We may obtain
capital pursuant to one or more corporate partnerships relating to
orBec
®
.
If we obtain
additional funds through the issuance of equity or equity-linked securities,
shareholders may experience significant dil
ution and these equity securities may have rights,
preferences or privileges senior to those of our common stock. The terms of any
debt financing may contain restrictive covenants which may limit our ability to
pursue certain courses of action. We may not
be able to
obtain such financing on acceptable terms or at all. If we are unable to obtain
such financing when needed, or to do so on acceptable terms, we may be unable to
develop our products, take advantage of business opportunities, respond to
competit
i
ve pressures or continue our
operations.
The extent
we rely
on Fusion Capital as a source of funding will depend on a number of factors
including, the prevailing market price of our common stock
and the extent to which we are able to secure working
capita
l from other sources. If
obtaining sufficient financing from Fusion Capital were to prove unavailable or
prohibitively dilutive and if we are unable to commercialize and sell enough of
our products, we will need to secure another source of funding in
ord
e
r
to satisfy our working capital needs.
Even if we are able to access the full $8.5
million under the common stock purchase agreement with Fusion Capital, we may
still need additional capital to fully implement our business, operating and
development plan
s. Should
the financing we require to sustain our working capital
needs be unavailable or prohibitively expensive when we require it, the
consequences
could be
a material adverse effect on our business, operating
results, financial condition and prospects.
Expenditures
Under existing product development agreements and
license agreements pursuant to letters of intent and option agreements, we
expect our expenditures for the next 12 months to be approximately $3,500,000,
not inclusive of BioDefense program
s, nor
programs covered under existing NIH or orphan grants, and not including a new
Phase 3 clinical trial for orBec
®
for the treatment of GI GVHD. We anticipate
grant revenues in the next 12 months to offset research and development expenses
for the dev
elopment of our ricin toxin
vaccine and botulinum toxin vaccine in the amount of approximately $2,900,000
with $950,000 contributing towards our overhead expenses.
The table below details our costs for the twelve months
ended December 31, 2007 and Decembe
r 31,
2006 by program.
|
|
2007
|
2006
|
|
Program
- Research & Development Expenses
|
|
|
|
orBec
®
|
$ 2,288,615
|
$ 3,060,778
|
|
RiVax™
|
452,894
|
274,635
|
|
BT-VACC™
|
315,082
|
290,405
|
|
Oraprine™
|
5,100
|
6,996
|
|
LPM
TM
-Leuprolide
|
38,254
|
5,679
|
|
Research
& Development Expense
|
$ 3,099,945
|
$ 3,638,493
|
|
|
|
|
|
Program
- Reimbursed under Grants
|
|
|
|
orBec
®
|
$ -
|
$ -
|
|
RiVax™
|
897,470
|
1,961,074
|
|
BT-VACC™
|
45,915
|
4,000
|
|
Oraprine™
|
-
|
-
|
|
LPM
TM
-Leuprolide
|
-
|
-
|
|
Reimbursed
under Grant
|
$ 943,385
|
$ 1,965,074
|
|
|
|
|
|
TOTAL
|
$ 4,043,330
|
$ 5,603,567
|
Leases
The
following summarizes our contractual obligations at September 30, 2008, and the
effect those obligations are expected to have on our liquidity and cash flow in
future periods.
|
Contractual
Obligation
|
Year
2008
|
Year
2009
|
Year
2010
|
|
Non-cancelable
obligation (1)(2)
|
$ 7,000
|
$ 4,500
|
4,500
|
|
TOTALS
|
$ 7,000
|
$
4,500
|
$ 4,500
|
|
(1)
|
On
October 1, 2008, we signed a month to month lease to occupy office space
in Ewing, New Jersey.
|
|
(2)
|
On
April 24, 2008, we signed a three year lease for a
copier.
|
Equity
Transactions
On
February
11
,
2009, we entered into a common stock purchase agreement with Sigma-Tau pursuant
to which we so
ld
25 million
shares
of our common stock to Sigma-Tau for $0.18
per
share, for an aggregate price of $4,500,000. The purchase price is
equal to one hundred fifty percent (150%) of the average trading price of our
common stock over the five trading days prior to
F
ebruary
11
,
2009.
On
January 20, 2009, we received $2,384,200 from the completed private placement of
common stock and warrants to accredited investors. Under the terms of the
agreement, we sold 20,914,035 common shares together with five year warrants to
purchase up to 20,914,035 shares of our common stock at $0.14 per share. The
expiration date of the warrants will be accelerated if the Company's common
stock meets certain price thresholds and we would receive additional gross
proceeds of approximately $2.9 million if exercised.
On
December 1, 2008, we received $1.5 million under a non-binding letter of intent
with Sigma-Tau, which granted Sigma-Tau an exclusive right to negotiate terms
and conditions for a possible business transaction or strategic alliance
regarding orBec
®
and
potentially other pipeline compounds until March 1, 2009. Under the terms of the
letter of intent, Sigma-Tau purchased $1.5 million of our common stock at the
market price of $0.09 per share, representing 16,666,667 shares.
On
February 14, 2008, we entered into a common stock purchase agreement with Fusion
Capital. The Fusion Capital facility allows us to require Fusion Capital to
purchase between $80,000 and $1.0 million depending on certain conditions of our
common stock up to an aggregate of $8.5 million over approximately a 25-month
period. As part of that agreement, we issued Fusion Capital 1,275,000 shares of
common stock as a commitment fee. In connection with the execution of the common
stock purchase agreement, Fusion Capital purchased 2,777,778 common shares and a
four year warrant to purchase 1,388,889 shares of common stock for $0.22 per
share, for an aggregate price of $500,000. We issued 75,000 shares as a pro rata
commitment fee in connection with the purchase of the $500,000 of our common
stock. If our stock price exceeds $0.15, then the amount required to be
purchased may be increased under certain conditions as the price of our common
stock increases. We cannot require Fusion Capital to purchase any shares of our
common stock on any trading days that the market price of our common stock is
less than $0.10 per share.
On
February 14, 2008, we sold 881,112 shares of our common stock to accredited
investors for an aggregate purchase price of approximately $158,600. The
investors also received four year warrants to purchase an aggregate of 440,556
shares of our common stock at an exercise price of $0.22 per share.
On
February 9, 2007, we sold 11,680,850 shares of our common stock to institutional
investors and certain of our officers and directors for a purchase price of
$5,490,000. These shares have been registered.
On
January 3, 2007, in consideration for entering into an exclusive letter of
intent, Sigma-Tau agreed to purchase $1,000,000 of the Company’s common stock at
the market price of $0.246 per share, representing 4,065,041 shares of common
stock, and contributed an additional $2 million in cash. The $2 million
contribution was to be considered an advance payment to be deducted from future
payments due to the Company by Sigma-Tau pursuant to any future orBec®
commercialization arrangement reached between the two parties. Because of this
transaction’s dilutive nature, all investors in the April 2006 private placement
had their warrants repriced to $0.246. Additionally, certain shareholders who
still held shares of the Company’s common stock from that placement were issued
additional shares as a cost basis adjustment from $0.277 to $0.246 per share of
the Company’s common stock. Neither these investors, nor any other investors,
hold any further anti-dilution rights. Because no agreement was reached by March
1, 2007, we were obligated to return the $2 million to Sigma-Tau by April 30,
2007. On June 1, 2007, we returned the $2 million to
Sigma-Tau.
On April 10, 20
06,
we sold 13,099,964 shares of our common stock to institutional and other
accredited investors, including members of our management team, for a purchase
price of $3,630,000. The investors also received warrants to purchase an
aggregate of 13,099,964 sh
a
res of our common stock at an exercise price of $0.45
per share. The warrants are exercisable for a period of three years commencing
on April 10, 2006. We filed a registration statement with the Securities and
Exchange Commission covering the shares of co
m
mon stock issued
and issuable pursuant to the exercise of the warrants, and it was declared
effective on May 25, 2006.
On January 17, 2006, we entered into a common stock
purchase agreement with Fusion Capital. The Fusion Capital facility allowed it
to pur
chase on each trading day $20,000 of
our common stock up to an aggregate of $6 million over approximately a 15-month
period. As part of that agreement we issued Fusion Capital 512,500 shares of
common stock as a commitment fee. During 2006, Fusion
purcha
s
ed 329,540 common shares for
$124,968.
Off-Balance
Sheet Arrangements
We
currently have no off-balance sheet arrangements.
Effects
of Inflation and Foreign Currency Fluctuations
We do not
believe that inflation or foreign currency fluctuations significantly affected
our financial position and results of operations as of and for the fiscal year
ended December 31, 2007 or the quarter ended September 30, 2008.
DIRECT
ORS AND EXECUTIVE OFFICERS
The
following table contains information regarding the current members of the Board
of Directors and executive officers:
|
|
|
|
|
James
S. Kuo, M.D., M.B.A.
|
45
|
Chairman
of the Board
|
|
Cyrille
F. Buhrman
|
36
|
Director
|
|
Christopher J. Schaber,
Ph.D.
|
42
|
Chief
Executive Officer, President, and Director
|
|
Evan
Myrianthopoulos
|
44
|
Chief
Financial Officer, and Director
|
|
James
Clavijo, C.P.A., M.A.
|
43
|
Controller,
Treasurer, and Corporate Secretary
|
James S. Kuo, M.D., M.B.A.
,
has been a director since 2004 and currently serves as the non-executive
Chairman of the Board. He has served as Chairman of the Board of Directors of
Duska Therapeutics, Inc., a public biopharmaceutical company, since June 2007
and has been Chief Executive Officer since September 2007. From 2006 to
September 2007, he served as Chairman and Chief Executive Officer of Cysteine
Pharma, Inc. From 2003 to 2006, he served as founder, Chairman and
Chief Executive Officer of BioMicro Systems, Inc., a private venture-backed,
microfluidics company. Prior to that time, Dr. Kuo was co-founder, President and
Chief Executive Officer of Discovery Laboratories, Inc., a public specialty
pharmaceutical company developing respiratory therapies, where he raised over
$22 million in initial private funding and took the company public. He further
has been a founder and a Board Director of Monarch Labs, LLC, a private medical
device company. Dr. Kuo is the former Managing Director of Venture Analysis for
HealthCare Ventures, LLC, which managed $378 million in venture funds. He has
also been a senior licensing and business development executive at Pfizer, Inc.,
where he was directly responsible for cardiovascular licensing and development.
After studying molecular biology and receiving his B.A. at Haverford College,
Dr. Kuo simultaneously received his M.D. from The University of Pennsylvania
School of Medicine and his MBA from The Wharton School of Business at the
University of Pennsylvania. Dr. Kuo is also a director of Pipex
Pharmaceuticals, Inc., a public company.
Cyrille F. Buhrman
has been a
director since June 2007. Mr. Buhrman is Chairman and President of the Pacific
Healthcare Group of Companies, a full-service marketing, sales, distribution and
regulatory affairs company based in Thailand where he has served for
approximately ten years. Mr. Buhrman is also a Director of International
Pharmaceuticals Ltd., a company focused on marketing niche pharmaceuticals and
other medical products in Thailand, Vision Care (Thailand) Co., Ltd., and Canyon
Pharmaceuticals, Inc., a private biotechnology company focused on the
commercialization of therapeutics to prevent and treat thrombosis and related
conditions. Mr. Buhrman is owner of Markle Holdings Ltd., an investment fund
specializing in biotech and pharmaceutical investments. Mr. Buhrman is also one
of our largest shareholders.
Christopher J. Schaber, Ph.D.
,
has been our President and Chief Executive Officer and a director since August
2006. Dr. Schaber also currently serves on the boards of both the Alliance for
BioSecurity and BioNJ, Inc. Prior to joining DOR, Dr. Schaber served from
1998 to 2006 as Executive Vice President and Chief Operating Officer of
Discovery Laboratories, Inc., where he was responsible for overall pipeline
development and key areas of commercial operations, including regulatory
affairs, quality control and assurance, manufacturing and distribution,
preclinical and clinical research, and medical affairs, as well as coordination
of commercial launch preparation activities. During his tenure at Discovery
Laboratories, Inc., Dr. Schaber played a significant role in raising in excess
of $150 million through both public offerings and private placements. From 1996
to 1998, Dr. Schaber was a co-founder of Acute Therapeutics, Inc., and served as
its Vice President of Regulatory Compliance and Drug Development. From 1994 to
1996, Dr. Schaber was employed by Ohmeda PPD, Inc., as Worldwide Director of
Regulatory Affairs and Operations. From 1989 to 1994, Dr. Schaber held a variety
of regulatory, development and operations positions with The Liposome Company,
Inc., and Elkins-Sinn Inc., a division of Wyeth-Ayerst Laboratories. Dr. Schaber
received his B.A. from Western Maryland College, his M.S. in Pharmaceutics from
Temple University School of Pharmacy and his Ph.D. in Pharmaceutical Sciences
from The Union Graduate School.
Evan Myrianthopoulos
has been
a director since 2002 and is currently our Chief Financial Officer, after
joining us in November of 2004 as President and Acting Chief Executive Officer.
From November 2001 to November 2004, he was President and founder of CVL
Advisors Group Inc., a financial consulting firm specializing in the
biotechnology sector. Prior to founding CVL Advisors Group, Inc., Mr.
Myrianthopoulos was a co-founder of Discovery Laboratories, Inc. During his
tenure at Discovery Laboratories, Inc. from June 1996 to November 2001, Mr.
Myrianthopoulos held the positions of Chief Financial Officer and Vice President
of Finance, where he was responsible for raising approximately $55 million in
four private placements. He also helped negotiate and manage Discovery
Laboratories, Inc.’s mergers with Ansan Pharmaceuticals and Acute Therapeutics,
Inc. Prior to co-founding Discovery Laboratories, Inc., Mr. Myrianthopoulos was
a Technology Associate at Paramount Capital Investments, L.L.C., a New York City
based biotechnology venture capital and investment banking firm. Prior to
joining Paramount Capital Investments, LLC, Mr. Myrianthopoulos was a managing
partner at a hedge fund and also held senior positions in the treasury
department at the National Australia Bank where he was employed as a spot and
derivatives currency trader. Mr. Myrianthopoulos holds a B.S. in Economics and
Psychology from Emory University.
James Clavijo, C.P.A., M.A.,
has been with the Company since October 2004 and is currently our Controller,
Treasurer, and Corporate Secretary. He brings 15 years of senior financial
management experience, involving both domestic and international entities, and
participating in over $100 million in equity and debt
financing. Prior to joining us, Mr. Clavijo held the position of
Chief Financial Officer for Cigarette Racing Team (Miami, FL), from July 2003 to
October 2004. During his time with Cigarette he was instrumental in developing a
cost accounting manufacturing tracking system and managed the administration and
development of an IRB Bond related to a 10 acre, 100,000 square foot facility
purchase. Prior to joining Cigarette Racing Team, Mr. Clavijo held positions as
Chief Financial Officer for Gallery Industries, from November 2001 to July 2003,
a retail and manufacturing garment company. Prior to Gallery Industries, as
corporate controller for A Novo Broadband, he managed several mergers and
acquisitions and corporate restructuring. He also, held the position of Finance
Manager for Wackenhut Corporation in the U.S. Governmental Services
Division. In addition, he served in the U.S. Army from 1983 to 1996
in both a reserve and active duty capacity for personnel and medical units. Mr.
Clavijo holds an M.A. in Accounting from Florida International University, a
B.A. in Accounting from the University of Nebraska, and a B.S. in Chemistry from
the University of Florida. Mr. Clavijo is a licensed Certified Public
Accountant in the state of Florida.
Summary
Compensation
The
following table contains information concerning the compensation paid during our
fiscal years ended December 31, 2007 and 2008 to the persons who served as our
Chief Executive Officer, and each of the two other most highly compensated
executive officers during 2008 (collectively, the “Named Executive
Officers”).
Summary
Compensation
|
Name
|
Position
|
Year
|
Salary
|
Bonus
|
Option
Awards
|
All
Other Compensation
|
Total
|
|
Christopher
J. Schaber (1)
|
CEO
& President
|
2007
|
$300,000
|
$100,000
|
$155,409
|
$47,798
|
$603,207
|
|
|
|
2008
|
$300,000
|
$100,000
|
$185,721
|
$24,844
|
$610,565
|
|
Evan
Myrianthopoulos (2)
|
CFO
|
2007
|
$200,000
|
$ 50,000
|
$146,938
|
$44,786
|
$441,724
|
|
|
|
2008
|
$200,000
|
$ 50,000
|
$ 66,033
|
$23,474
|
$339,507
|
|
James
Clavijo (3)
|
Controller,
Treasurer &
|
2007
|
$155,000
|
$ 35,000
|
$ 53,115
|
$13,191
|
$243,115
|
|
|
Secretary
|
2008
|
$155,000
|
$ 35,000
|
$ 34,226
|
$14,991
|
$239,217
|
(1) Dr.
Schaber deferred payment of his 2008 annual bonus of $100,000. Option Awards
include the value of stock option awards of vested shares of common stock as
required by FASB No. 123R. Other Compensation for 2008 includes $24,844 for
insurance costs. Other Compensation for 2007 includes $19,000 for insurance
costs, $2,301 for transportation costs, $7,263 for travel expenses and $19,234
for lodging costs.
(2) Mr.
Myrianthopoulos deferred payment of his 2008 annual bonus of $50,000. Option
Awards include the value of stock option awards of vested shares of common stock
as required by FASB No. 123R. Other Compensation for 2008 includes $23,474 for
insurance costs. Other Compensation for 2007 includes $17,000 for insurance
costs, $2,895 for transportation costs, $6,787 for travel expenses and $18,104
for lodging costs.
(3) Mr.
Clavijo deferred payment of his 2008 annual bonus of $35,000. Option Awards
include the value of stock option awards of vested shares of common stock as
required by FASB No. 123R. Other Compensation for 2008 includes $14,991 for
insurance costs. Other Compensation for 2007 includes $13,191 for insurance
costs
Potential
Issuance of Shares
On
February 28, 2007, our Board of Directors approved the issuance of 2,700,000
shares of our common stock to certain employees and a consultant. Such shares
will be issued immediately prior to the completion of a transaction, or series
or combination of related transactions, negotiated by our Board of Directors
whereby, directly or indirectly, a majority of our capital stock or a majority
of our assets are transferred from us and/or our stockholders to a third party
(an “Acquisition Event”). Of the shares of common stock to be issued upon an
Acquisition Event, 1,000,000 shares will be issued to Christopher J. Schaber, a
director and our Chief Executive Officer and President; 750,000 shares will be
issued to Evan Myrianthopoulos, a director and our Chief Financial Officer; and
300,000 shares will be issued to James Clavijo, our Controller, Treasurer, and
Corporate Secretary.
Employment
and Severance Agreements
During
August 2006, we entered into a three-year employment agreement with Christopher
J. Schaber, Ph. D. Pursuant to this employment agreement we agreed to pay Dr.
Schaber a base salary of $300,000 per year and a minimum annual bonus of
$100,000. We agreed to issue him options to purchase 2,500,000 shares of our
common stock, with one third immediately vesting and the remainder vesting over
three years. Upon termination without “Just Cause” as defined by this agreement,
we would pay Dr. Schaber nine months severance, as well as any accrued bonuses,
accrued vacation, and we would provide health insurance and life insurance
benefits for Dr. Schaber and his dependants. No unvested options shall vest
beyond the termination date.
In
December 2004, we entered into a three-year employment agreement with Mr.
Myrianthopoulos. Pursuant to this employment agreement we agreed to pay Mr.
Myrianthopoulos a base salary of $185,000 per year. After one year of service
Mr. Myrianthopoulos would be entitled to a minimum annual bonus of $50,000. We
agreed to issue him options to purchase 500,000 shares of our common stock, with
the options vesting over three years. This option grant is subject to
shareholder approval. Upon termination without “Just Cause” as defined by this
agreement, we would pay Mr. Myrianthopoulos six months severance subject to set
off, as well as any unpaid bonuses and accrued vacation would become payable. No
unvested options shall vest beyond the termination date. Mr. Myrianthopoulos
also received 150,000 options, vested immediately when he was hired in November
2004, as President and Acting Chief Executive Officer.
During
May 2006, we entered into an amendment to the February 2005 employment agreement
with James Clavijo. Pursuant to the amendment we agreed to pay Mr. Clavijo a
base salary of $150,000 per year and a minimum annual bonus of $35,000.
Additionally we agreed to issue him options to purchase 200,000 options of our
common stock, with 50,000 options immediately vesting and the remainder vesting
over three years. In the February 2005 employment agreement, we agreed to issue
150,000 shares of our common stock, with one third immediately vesting and the
remainder vesting over three years. Upon termination without “Just Cause” as
defined by this agreement, we would pay Mr. Clavijo three months severance, as
well as any unpaid bonuses and accrued vacation would become
payable. No unvested options shall vest beyond the termination date.
Mr. Clavijo also received 100,000 options, vesting over three years when he was
hired in October 2004, as Controller, Treasurer and Corporate
Secretary.
On
December 27, 2007, we entered into a new three-year employment agreement with
Dr. Schaber, Mr. Myrianthopoulos and Mr. Clavijo, which replaced their existing
employment agreements. The primary changes to the terms of the original
agreements are as follows:
In
February 2007, our Board of Directors authorized the issuance of the following
number of shares to each of Dr. Schaber and Messrs. Myrianthopoulos and Clavijo
immediately prior to the completion of a transaction, or series or a combination
of related transactions negotiated by our Board of Directors whereby, directly
or indirectly, a majority of our capital stock or a majority of our assets are
transferred from the Company and/or our stockholders to a third
party: 1,000,000 common shares to Dr. Schaber; 750,000 common shares to Mr.
Myrianthopoulos; and 300,000 common shares to Mr. Clavijo. The
amended agreements include our obligation to issue such shares to the executives
if such event occurs.
Dr.
Schaber’s monetary compensation (base salary of $300,000 and bonus of $100,000)
remained unchanged from 2006. He will be paid nine months severance
upon termination of employment. Upon a change in control of the
Company due to merger or acquisition, all of Dr. Schaber’s options shall become
fully vested, and be exercisable for a period of five years after such change in
control (unless they would have expired sooner pursuant to their
terms). In the event of his death during term of the agreement, all
of his unvested options shall immediately vest and remain exercisable for the
rest of their term and become the property of Dr. Schaber’s immediate
family.
Mr.
Myrianthopoulos’ monetary compensation (base salary of $200,000 and bonus of
$50,000) remained unchanged from 2006. He will be paid six months
severance upon termination of employment. Upon a change in control of the
Company due to merger or acquisition, all of Mr. Myrianthopoulos’ options shall
become fully vested, and be exercisable for a period of three years after such
change in control (unless they would have expired sooner pursuant to their
terms). In the event of his death during term of contract, all of his
unvested options shall immediately vest and remain exercisable for the rest of
their term and become property of Mr. Myrianthopoulos’ immediate
family.
Mr.
Clavijo’s monetary compensation (base salary of $155,000 and bonus of $35,000)
remained unchanged from 2006. He will be paid six months severance
(subject to set off) upon termination of employment. Upon a change in control of
the Company due to merger or acquisition, all of Mr. Clavijo’s options shall
become fully vested, and be exercisable for a period of three years after such
change in control (unless they would have expired sooner pursuant to
their terms). In the event of his death during term of contract, all
of his unvested options shall immediately vest and remain exercisable for the
rest of their term and become property of Mr. Clavijo’s immediate
family.
Outstanding
Equity Awards at Fiscal Year-End
The
following table contains information concerning unexercised options, stock that
has not vested, and equity incentive plan awards for the Named Executive
Officers during the fiscal year ended December 31, 2008. We have never
issued Stock Appreciation Rights.
Outstanding Equity Awards at
Fiscal Year-End
|
Name
|
Number
of Securities
Underlying
Unexercised
Options
(#)
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options (#)
|
Option
Exercise Price ($)
|
Option
Expiration Date
|
|
Exercisable
|
Unexercisable
|
|
Christopher
J. Schaber(1)
|
2,083,343
|
416,657
|
416,657
|
$0.27
|
8/28/2016
|
|
|
506,250
|
393,750
|
393,750
|
$0.47
|
8/29/2017
|
|
|
700,000
|
2,100,000
|
2,100,000
|
$0.06
|
12/17/2018
|
|
Evan
Myrianthopoulos
|
150,000
|
-
|
-
|
$0.35
|
11/14/2012
|
|
|
50,000
|
-
|
-
|
$0.90
|
9/15/2013
|
|
|
50,000
|
-
|
-
|
$0.58
|
6/11/2014
|
|
|
150,000
|
-
|
-
|
$0.47
|
11/10/2014
|
|
|
500,000
|
-
|
-
|
$0.49
|
12/13/2014
|
|
|
375,000
|
25,000
|
25,000
|
$0.35
|
5/10/2016
|
|
|
309,375
|
240,625
|
240,625
|
$0.47
|
8/29/2017
|
|
|
300,000
|
900,000
|
900,000
|
$0.06
|
12/17/2018
|
|
James
Clavijo
|
100,000
|
-
|
-
|
$0.45
|
10/22/2014
|
|
|
150,000
|
-
|
-
|
$0.45
|
2/22/2015
|
|
|
175,000
|
25,000
|
25,000
|
$0.33
|
5/10/2016
|
|
|
187,500
|
112,500
|
112,500
|
$0.47
|
8/29/2017
|
|
|
150,000
|
450,000
|
450,000
|
$0.06
|
12/17/2018
|
Compensation
of Directors
The
following table contains information concerning the compensation of the
non-employee directors during the fiscal year ended December 31,
2008.
Director
Compensation
|
Name
|
Fees
Earned Paid in Cash ($) (1)
|
Option
Awards ($) (2)
|
Total
($)
|
|
James
S. Kuo
|
$16,000
|
$-
|
$16,000
|
|
Cyrille
F. Buhrman
|
$9,000
|
$-
|
$9,000
|
_______________
|
(1)
|
Directors
who are compensated as full-time employees receive no additional
compensation for service on our Board of Directors or its committees. Each
director who is not a full-time employee is paid $2,000 for each board or
committee meeting attended ($1,000 if such meeting was attended
telephonically).
|
|
(2)
|
We
maintain a stock option grant program pursuant to the nonqualified stock
option plan, whereby members of our Board of Directors who are not
full-time employees receive an initial grant of fully vested options to
purchase 150,000 shares of common stock, and subsequent annual grants of
fully vested options to purchase 75,000 shares of common stock after
re-election to our Board of Directors. Option Awards include
the value of stock option awards of vested shares of Common Stock as
required by FASB No. 123R.
|
SECURITY
OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND
MANAGEMENT
The table
below provides information regarding the beneficial ownership of the common
stock as of February 11, 2009 of (1) each person or entity who owns
beneficially 5% or more of the shares of our outstanding common stock, (2) each
of our directors, (3) each of the Named Executive Officers, and (4) our
directors and officers as a group. Except as otherwise indicated, and subject to
applicable community property laws, we believe the persons named in the table
have sole voting and investment power with respect to all shares of common stock
held by them.
|
Name
of Beneficial Owner
|
Shares
of Common Stock Beneficially Owned
|
Percent
of Class
|
|
Biotex
Pharma Investments, LLC (1)
|
40,000,000
|
24.3%
|
|
Sigma-Tau
Pharmaceuticals, Inc. (2)
|
43,213,537
|
26.3%
|
|
Cyrille
F. Buhrman (3)
|
5,125,020
|
3.1%
|
|
Christopher
J. Schaber (4)
|
3,877,499
|
2.3%
|
|
Evan
Myrianthopoulos (5)
|
2,258,750
|
1.4%
|
|
James
Clavijo (6)
|
881,941
|
*
|
|
James
S. Kuo (7)
|
630,000
|
*
|
|
All
directors and executive officers as a group (5 persons)
|
12,773,210
|
7.5%
|
*
Indicates less than 1%.
**
Beneficial ownership is determined in accordance with the rules of the SEC.
Shares of common stock subject to options or warrants currently exercisable or
exercisable within 60 days of February 11, 2009 are deemed outstanding for
computing the percentage ownership of the stockholder holding the options or
warrants, but are not deemed outstanding for computing the percentage ownership
of any other stockholder. Percentage of ownership is based on
164,524,739 shares of common stock outstanding as of February 11,
2009.
(1)
Includes 20,000,000 shares of
common stock and warrants to purchase 20,000,000 shares of common stock within
60 days of February 11, 2009. The address of Biotex Pharma Investments,
LLC is c/o Biotex Pharma Investments, LLC 220 West 42
nd
Street
6
th
Floor New York, NY 10036.
(
2
)
Includes 43,213,537 shares of common
stock. The address of Sigma-Tau Pharmaceuticals, Inc. is c/o Sigma-Tau
Pharmaceuticals, Inc., 800 South Frederick Avenue, Suite 300, Gaithersburg,
Maryland 20877.
(
3
)
Includes 4,900,020 shares of common
stock and options to purchase 225,000 shares of common stock within 60 days of
February 11, 2009. The address of Mr. Buhrman is c/o DOR BioPharma, 850 Bear
Tavern Road, Suite 201, Ewing, New Jersey 08628.
(4) Includes
392,766 shares of common stock owned by Dr. Schaber and options to purchase
3,484,733 shares of common stock within 60 days of February 11, 2009. The
address of Dr. Schaber is c/o DOR BioPharma, 850 Bear Tavern Road, Suite 201,
Ewing, New Jersey 08628
.
(5) Includes
224,780 shares of common stock owned by Mr. Myrianthopoulos and his wife,
options to purchase 1,943,750 shares of common stock and warrants to purchase
90,220 shares of common stock within 60 days of February 11, 2009. The address
of Mr. Myrianthopoulos is c/o DOR BioPharma, 850 Bear Tavern Road, Suite 201,
Ewing, New Jersey 08628.
(6) Includes
88,191 shares of common stock owned by Mr. Clavijo and options to purchase
793,750 shares of common stock within 60 days of February 11, 2009. The address
of Mr. Clavijo is c/o DOR BioPharma, 850 Bear Tavern Road, Suite 201, Ewing, New
Jersey 08628.
(7) Includes
options to purchase 625,000 shares of common stock and warrants to purchase
5,000 shares of common stock within 60 days of February 11, 2009. The address of
Dr. Kuo is c/o DOR BioPharma, 850 Bear Tavern Road, Suite 201, Ewing, New Jersey
08628.
Equity Compensation Plan
Information
In
December 2005, our Board of Directors approved the 2005 Equity Incentive Plan,
which was approved by stockholders on December 29, 2005. In September 2007, our
stockholders approved an amendment to the 2005 Equity Incentive Plan to increase
the maximum number of shares of our common stock available for issuance under
the plan by 10,000,000 shares, bringing the total shares reserved for issuance
under the plan to 20,000,000 shares. The following table provides information,
as of December 31, 2008, with respect to options outstanding under our 1995
Amended and Restated Omnibus Incentive Plan and our 2005 Equity Incentive
Plan.
|
Plan
Category
|
Number
of Securities to be issued upon exercise of outstanding options, warrants
and rights
|
Weighted-Average
Exercise Price Outstanding options, warrants and rights
|
Number
of Securities Remaining Available for Future Issuance Under Equity
Compensation Plans (excluding securities reflected in the first
column)
|
|
Equity
compensation plans approved by security holders (1)
|
16,370,039
|
$
0.27
|
3,547,331
|
|
Equity
compensation plans not approved by security holders
|
-
|
-
|
-
|
|
|
|
|
|
|
TOTAL
|
16,370,039
|
$0.27
|
3,547,331
|
(1)
Includes our 1995 Amended and Restated Omnibus Incentive Plan and our 2005
Equity Incentive Plan. Our 1995 Plan expired in 2005 and thus no
securities remain available for future issuance under that plan. Under the
amended 2005 equity incentive plan, we have issued 1,482,669 shares to
individuals as payment for services in the amount of $380,342 as allowed in the
plan.
The
following table presents information as of February 11, 2009 and sets forth the
number of shares of common stock beneficially owned by each of the Selling
Stockholders. We are not able to estimate the amount of shares that will be held
by each Selling Stockholder after the completion of this offering because: (1)
the Selling Stockholders may sell less than all of the shares registered under
this prospectus; (2) the Selling Stockholders may exercise less than all of
their warrants; and (3) to our knowledge, the Selling Stockholders currently
have no agreements, arrangements or understandings with respect to the sale of
any of their shares. The following table assumes that all of the shares being
registered pursuant to this prospectus will be sold. The Selling Stockholders
are not making any representation that any shares covered by this prospectus
will be offered for sale. Except as otherwise indicated, based on information
provided to us by each Selling Stockholder, the Selling Stockholders have sole
voting and investment power with respect to their shares of common
stock. Except as otherwise noted, none of the Selling Stockholders
nor any of their affiliates have held a position or office, or had any other
material relationship, with us.
|
Name
of
Selling
Stockholder
|
Number
of Shares of Common Stock Owned Before the Offering (1)
|
Percent
of
Common
Stock Owned Before
the
Offering
|
Shares
Available for Sale Under This Prospectus (2)
|
Number
of Shares of Common Stock To Be Owned After Completion
of
the Offering
|
Percent
of Common Stock to be Owned After Completion
of
the Offering
|
|
Biotex
Pharma Investments, LLC (3)
|
40,000,000
|
24.3%
|
|
20,000,000
|
-
|
*
|
|
Revach
Fund LP (4)
|
701,754
|
*
|
|
701,754
|
-
|
*
|
|
Omacatl
Capital, LTD (5)
|
1,150,696
|
*
|
|
438,596
|
712,100
|
*
|
|
Richard
Molinsky
|
400,000
|
*
|
|
400,000
|
-
|
*
|
|
Bernard
and Miriam Pismeny JT TEN
|
1,055,000
|
*
|
|
200,000
|
855,000
|
*
|
|
Robin
B. Lipinski
|
1,271,720
|
*
|
|
87,720
|
1,184,000
|
*
|
|
Sigma-Tau
Pharmaceuticals, Inc. (6)
|
43,213,537
|
26.3%
|
|
16,666,667
|
26,546,870
|
16.1%
|
|
Mark
Tolpin
|
269,789
|
*
|
|
269,789
|
-
|
*
|
|
Martin
S. Kratchman
|
21,875
|
*
|
|
21,875
|
-
|
*
|
|
John
Andreadis
|
21,875
|
*
|
|
21,875
|
-
|
*
|
|
Little
Gem Life Sciences Fund LLC (7)
|
1,023,999
|
*
|
|
300,000
|
723,999
|
*
|
|
Prospera
Technology, LLC (8)
|
1,000,000
|
*
|
|
1,000,000
|
-
|
*
|
|
George
B. McDonald, M.D.
|
1,600,000
|
*
|
|
1,000,000
|
600,000
|
*
|
|
Strategic
Outsourcing Solutions, LLC (9)
|
50,000
|
*
|
|
50,000
|
-
|
*
|
* Less
than 1%.
** Beneficial
ownership is determined in accordance with the rules of the SEC. Shares of
common stock subject to options or warrants currently exercisable or exercisable
within 60 days of February 11, 2009, are deemed outstanding for computing the
percentage ownership of the stockholder holding the options or warrants, but are
not deemed outstanding for computing the percentage ownership of any other
stockholder. Percentage of ownership is based on 164,524,739 shares of common
stock outstanding as of February 11, 2009.
(1)
The
shares of common stock issuable upon the exercise of warrants are as follows:
Biotex Pharma Investments, LLC - 20,000,000 shares; Revach Fund LP - 350,877
shares; Omacatl Capital, LTD - 219,298 shares; Richard Molinsky - 200,000
shares; Bernard and Miriam Pismeny, JT TEN - 100,000 shares; Robin B.
Lipinski - 43,860 shares; Mark Tolpin - 100,000; Little Gem Life Sciences Fund,
LLC - 300,000; Prospera Technology, LLC - 1,000,000; George B. McDonald -
1,000,000; and Strategic Outsourcing Solutions, LLC - 50,000.
(2)
The
shares of common stock issuable upon the exercise of warrants are as
follows: Revach Fund LP - 350,877 shares; Omacatl Capital, LTD - 219,298
shares; Richard Molinsky - 200,000 shares; Bernard and Miriam Pismeny, JT
TEN - 100,000 shares; Robin B. Lipinski - 43,860 shares; Mark Tolpin -
100,000; Little Gem Life Sciences Fund, LLC - 300,000; Prospera Technology, LLC
- 1,000,000; George B. McDonald - 1,000,000; and Strategic Outsourcing
Solutions, LLC - 50,000.
(3) Robert
Kessler exercises voting or dispositive power with respect to the shares
held of record by Biotex Pharma Investments, LLC.
(4) Chaim
Davis exercises sole voting or dispositive power with respect to the shares
held of record by Revach Fund LP.
(5) Baruch
Ruttner exercises sole voting or dispositive power with respect to the
shares held of record by Omacatl Capital, LTD.
(6) Gregg
Lapointe, Paolo Cavazza and Claudio Cavazza exercise voting or dispositive
power with respect to the shares held of record by Sigma-Tau Pharmaceuticals,
Inc. The amount does not include 1,546,870 shares of common stock
held by Paolo Cavazza.
(7) Jeffrey
Benison exercises sole voting or dispositive power with respect to the shares
held of record by Little Gem Life Sciences Fund, LLC.
(8) David
Gentile exercises sole voting or dispositive power with respect to the shares
held of record by Prospera Technology, LLC.
(9) Susan
M. Little exercises sole voting or dispositive power with respect to the
shares held of record by Strategic Outsourcing Solutions, LLC.
This
prospectus relates to shares of our common stock that may be offered and sold
from time to time by the Selling Stockholders. We will receive no proceeds from
the sale of shares of common stock in this offering. However, we may receive up
to approximately $2,400,000 in proceeds from the exercise of the warrants to
purchase our common stock. We intend to use the net proceeds from the
exercise of the warrants as working capital to cover costs associated with the
completion of the pivotal phase 3 clinical trial for orBec®, other research and
development expenses, and general overhead costs including salaries until such
time, if ever, as we are able to generate a positive cash flow from
operations.
PLAN
OF DISTRIBUTION
The
Selling Stockholders and any of their pledgees, donees, transferees, assignees
and successors-in-interest may, from time to time, sell any or all of their
shares of common stock on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. The Selling Stockholders may use any one or more of
the following methods when selling shares:
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits investors;
|
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;
|
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
·
|
privately
negotiated transactions;
|
|
·
|
to
cover short sales and other hedging transactions made after the date that
the registration statement of which this prospectus is a part is declared
effective by the SEC;
|
|
·
|
broker-dealers
may agree with the Selling Stockholders to sell a specified number of such
shares at a stipulated price per
share;
|
|
·
|
a
combination of any such methods of sale;
and
|
|
·
|
any
other method permitted pursuant to applicable
law.
|
The
Selling Stockholders may also sell shares under Rule 144 under the Securities
Act, if available, rather than under this prospectus.
Broker-dealers
engaged by the Selling Stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the Selling Stockholders (or, if any broker-dealer acts as agent for the
investor of shares, from the purchaser) in amounts to be negotiated. The Selling
Stockholders do not expect these commissions and discounts to exceed what is
customary in the types of transactions involved.
The
Selling Stockholders may from time to time pledge or grant a security interest
in some or all of the Shares owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell shares of common stock from time to time under this prospectus,
or under an amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act of 1933 amending the list of Selling
Stockholders to include the pledgee, transferee or other successors in interest
as Selling Stockholders under this prospectus.
Upon our
being notified in writing by a Selling Stockholder that any material arrangement
has been entered into with a broker-dealer for the sale of common stock through
a block trade, special offering, exchange distribution or secondary distribution
or a purchase by a broker or dealer, a supplement to this prospectus will be
filed, if required, pursuant to Rule 424(b) under the Securities Act, disclosing
(i) the name of each such Selling Stockholder and of the participating
broker-dealer(s), (ii) the number of shares involved, (iii) the price at which
such shares of common stock were sold, (iv) the commissions paid or discounts or
concessions allowed to such broker-dealer(s), where applicable, (v) that such
broker-dealer(s) did not conduct any investigation to verify the information set
out or incorporated by reference in this prospectus, and (vi) other facts
material to the transaction. In addition, upon our being notified in writing by
a Selling Stockholder that a donee or pledge intends to sell more than 500
shares of common stock, a supplement to this prospectus will be filed if then
required in accordance with applicable securities law.
The
Selling Stockholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors in
interest will be the selling beneficial owners for purposes of this
prospectus.
The
Selling Stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Discounts, concessions, commissions and
similar selling expenses, if any, that can be attributed to the sale of
securities will be paid by the Selling Stockholders and/or the purchasers of the
securities.
Each
Selling Stockholder that is affiliated with a registered broker-dealer has
confirmed to us that, at the time it acquired the securities subject to the
registration statement of which this prospectus is a part, it did not have any
agreement or understanding, directly or indirectly, with any person to
distribute any of such securities. The Company has advised each Selling
Stockholder that it may not use shares registered on the registration statement
of which this prospectus is a part to cover short sales of our common stock made
prior to the date on which such registration statement was declared effective by
the SEC.
We are
required to pay certain fees and expenses incident to the registration of the
shares. We have agreed to indemnify the Selling Stockholders against certain
losses, claims, damages and liabilities, including liabilities under the
Securities Act. We agreed to keep this prospectus effective until the earlier of
(i) the date on which the shares may be resold by the Selling Stockholders
without registration and without regard to any volume limitations by reason of
Rule 144(e) under the Securities Act or any other rule of similar effect and
(ii) such time as all of the shares have been publicly sold.
Our
authorized capital stock consists of 255,000,000 shares of capital stock, of
which 250,000,000 shares are common stock, par value $0.001 per share, 4,600,000
shares are preferred stock, par value $0.001 per share, 200,000 are Series B
Convertible Preferred Stock, par value $0.05 per share, and 200,000 shares are
Series C Convertible Preferred Stock, par value $0.05 per share. As of February
9, 2009, there were issued and outstanding 139,524,739
shares of common stock,
options to purchase approximately 16,370,000 shares of common stock and warrants
to purchase approximately 43,464,184 shares of common stock. The amount
outstanding includes the 20,914,035 shares of common stock issued to the Selling
Stockholders.
Common
Stock
Holders
of our common stock are entitled to one vote for each share held in the election
of directors and in all other matters to be voted on by the stockholders.
There is no cumulative voting in the election of directors. Holders of
common stock are entitled to receive dividends as may be declared from time to
time by our board of directors out of funds legally available therefor. In
the event of liquidation, dissolution or winding up of the corporation, holders
of common stock are to share in all assets remaining after the payment of
liabilities. Holders of common stock have no pre-emptive or conversion
rights and are not subject to further calls or assessments. There are no
redemption or sinking fund provisions applicable to the common stock. The
rights of the holders of the common stock are subject to any rights that may be
fixed for holders of preferred stock. All of the outstanding shares of
common stock are fully paid and non-assessable.
Preferred
Stock
Our
Certificate of Incorporation authorizes the issuance of 4,600,000 shares of
preferred stock with designations, rights, and preferences as may be determined
from time to time by the board of directors. The board of directors is
empowered, without stockholder approval, to designate and issue additional
series of preferred stock with dividend, liquidation, conversion, voting or
other rights, including the right to issue convertible securities with no
limitations on conversion, which could adversely affect the voting power or
other rights of the holders of our common stock, substantially dilute a common
stockholder’s interest and depress the price of our common stock.
No shares
of the Series B Convertible Preferred Stock or the Series C Convertible
Preferred Stock are outstanding.
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Our common stock is presently quoted on
the Over-the-Counter Bulletin Board (“OTCBB”) under the symbol
"DORB.”
The amounts
represent inter-dealer quotations without adjustment for retail markup,
markdowns or commissions and do not represent the prices of actual
transactions.
|
Period
|
Price Range
|
|
High
|
Low
|
|
Fiscal
Year Ended December 31, 2007:
|
|
|
|
First
Quarter
|
$0.71
|
$0.23
|
|
Second
Quarter
|
$0.95
|
$0.20
|
|
Third
Quarter
|
$0.40
|
$0.26
|
|
Fourth
Quarter
|
$0.61
|
$0.15
|
|
Fiscal
Year Ended December 31, 2008:
|
|
|
|
First
Quarter
|
$0.25
|
$0.16
|
|
Second
Quarter
|
$0.19
|
$0.11
|
|
Third
Quarter
|
$0.15
|
$0.09
|
|
Fourth
Quarter
|
$0.12
|
$0.04
|
On April
18, 2006, our common stock was delisted from the American Stock Exchange and
began to be quoted on the OTCBB. As of February 9, 2009, the last reported
price of our common stock quoted on the OTCBB was $0.12 per share. The
OTCBB price quoted reflects inter-dealer prices, without retail mark-up,
mark-down or commission, and may not represent actual transactions. We
have approximately 1,072
registered holders of
record.
Dividend
Policy
We have
never declared nor paid any cash dividends, and currently intend to retain all
our cash and any earnings for use in our business and, therefore, do not
anticipate paying any cash dividends in the foreseeable future. Any future
determination to pay cash dividends will be at the discretion of the Board of
Directors and will be dependant upon our consolidated financial condition,
results of operations, capital requirements and such other factors as the Board
of Directors deems relevant.
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES
ACT
LIABILITIES
Section 102(b)(7) of the Delaware
General Corporation Law allows companies to limit the personal liability of its
directors to the company or its stockholders for monetary damages for breach of
a fiduciary duty.
Article IX of the Company’s Certificate of Incorporation, as amended, provides
for the limitation of personal liability of the directors of the Company as
follows:
“A
Director of the Corporation shall have no personal liability to the Corporation
or its stockholders for monetary damages for breach of his fiduciary duty as a
Director; provided, however, this Article shall not eliminate or limit the
liability of a Director (i) for any breach of the Director’s duty of loyalty to
the Corporation or its stockholders; (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law;
(iii) for the unlawful payment of dividends or unlawful stock repurchases under
Section 174 of the General Corporation Law of the State of Delaware; or (iv) for
any transaction from which the Director derived an improper personal benefit. If
the General Corporation Law is amended after approval by the stockholders of
this Article to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the General Corporation Law of the State of Delaware, as so
amended.”
Article
VIII of the Company’s Bylaws, as amended and restated, provide for
indemnification of directors and officers to the fullest extent permitted by the
Delaware General Corporation Law.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers or persons controlling the registrant
pursuant to the foregoing provisions, the registrant has been informed that in
the opinion of the SEC such indemnification is against public policy as
expressed in the Act and is therefore unenforceable.
EXPERTS
The audited consolidated financial
statements of DOR BioPharma, Inc. and subsidiaries included in the Registration
Statement have been audited by Sweeney, Matz & Co., LLC (formerly Sweeney,
Gates & Co.), an independent registered public accounting firm, for the
years ended December 31, 2007 and 2006 as set forth in their report appearing
herein.
Such
financial statements have been so included in reliance upon the reports of such
firm given upon their authority as experts in accounting and
auditing.
LEGAL
MATTERS
The
validity of the shares of our common stock offered by the Selling Stockholders
will be passed upon by the law firm of Edwards Angell Palmer & Dodge LLP,
West Palm Beach, Florida.
INDEX
TO FINANCIAL STATEMENTS
DOR
BIOPHARMA, Inc. AND SUBSIDIARIES
CONSOLIDATED
FINANCIAL STATEMENTS
Table
of Contents
Page
|
Unaudited Consolidated
Financial Statements-September 30, 2008:
|
|
|
|
Consolidated
Balance Sheet as of September 30, 2008
|
|
F-2
|
|
Consolidated
Statements of Operations for the three months ended September 30, 2008 and
2007
|
|
F-3
|
|
Consolidated
Statements of Operations for the nine months ended September 30, 2008 and
2007
|
|
F-4
|
|
Consolidated
Statements of Cash Flows for the nine months ended September 30,
2008
|
|
F-5
|
|
Notes
to Consolidated Financial Statements
|
|
F-6
|
|
|
|
|
|
Consolidated Financial
Statements-December 31, 2007 and 2006:
|
|
|
|
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
|
F-9
|
|
Consolidated
Balance Sheets as of December 31, 2007 and 2006
|
|
F-10
|
|
Consolidated
Statements of Operations for the years ended December 31, 2007 and
2006
|
|
F-11
|
|
Consolidated
Statements of Changes in Shareholders’ Equity (Deficiency) for the years
ended
December
31, 2007 and 2006
|
|
F-12
|
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2007 and
2006
|
|
F-13
|
|
Notes
to Financial Statements
|
|
F-14
|
Consolidated
Balance Sheet
|
|
|
|
September
30, 2008
|
|
|
|
|
|
December
31, 2007
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Assets
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
686,216
|
|
|
|
|
$
|
2,220,128
|
|
|
Accounts
receivable
|
|
|
204,655
|
|
|
|
|
|
97,845
|
|
|
Inventory, net
|
|
|
83,182
|
|
|
|
|
|
-
|
|
|
Prepaid
expenses
|
|
|
128,630
|
|
|
|
|
|
119,178
|
|
|
Total
current assets
|
|
|
1,102,683
|
|
|
|
|
|
2,437,151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office
and laboratory equipment, net
|
|
|
21,896
|
|
|
|
|
|
25,941
|
|
|
Intangible
assets, net
|
|
|
1,412,278
|
|
|
|
|
|
1,320,787
|
|
|
Total
assets
|
|
$
|
2,536,857
|
|
|
|
|
$
|
3,783,879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and shareholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
1,361,360
|
|
|
|
|
$
|
847,610
|
|
|
Accrued
compensation
|
|
|
279,320
|
|
|
|
|
|
345,903
|
|
|
Total
current liabilities
|
|
|
1,640,680
|
|
|
|
|
|
1,193,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’
equity:
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock, $.001 par value. Authorized 250,000,000
|
|
|
|
|
|
|
|
|
|
|
|
shares; 101,805,497
and 94,996,547, respectively issued and outstanding
|
|
|
101,805
|
|
|
|
|
|
94,996
|
|
|
Additional
paid-in capital
|
|
|
102,793,670
|
|
|
|
|
|
101,391,090
|
|
|
Accumulated
deficit
|
|
|
(101,999,298
|
)
|
|
|
|
|
(98,895,720
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
shareholders’ equity
|
|
|
896,177
|
|
|
|
|
|
2,590,366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and shareholders’ equity
|
|
$
|
2,536,857
|
|
|
|
|
|
3,783,879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
DOR
BioPharma, Inc.
Consolidated
Statements of Operations
For
the three months ended September 30,
(Unaudited)
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
605,736
|
|
$
|
429,445
|
|
|
Cost
of revenues
|
|
|
(538,182
|
)
|
|
(301,672
|
)
|
|
Gross profit
|
|
|
67,554
|
|
|
127,773
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
60,238
|
|
|
591,668
|
|
|
General and administrative
|
|
|
410,336
|
|
|
509,133
|
|
|
Stock based compensation research and development
|
|
|
39,584
|
|
|
77,362
|
|
|
Stock based compensation general and administrative
|
|
|
36,792
|
|
|
206,713
|
|
|
Total operating expenses
|
|
|
546,950
|
|
|
1,384,876
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(479,396
|
)
|
|
(1,257,103
|
)
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
5,391
|
|
|
10,121
|
|
|
Interest (expense)
|
|
|
(
1,696
|
)
|
|
-
|
|
|
Total other income (expense)
|
|
|
3,695
|
|
|
10,121
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(475,701
|
)
|
$
|
(1,246,982
|
)
|
|
|
|
|
|
|
|
|
|
|
BasicBBasic
and diluted net loss per share
|
|
$
|
(0.00
|
)
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
Basic Basic
and diluted weighted average common shares outstanding
|
|
|
102,767,174
|
|
|
92,938,838
|
|
The
accompanying notes are an integral part of these financial
statements.
Consolidated
Statements of Operations
For
the nine months ended September 30,
(Unaudited)
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,771,620
|
|
$
|
943,737
|
|
|
Cost
of revenues
|
|
|
(1,459,206
|
)
|
|
(669,882
|
)
|
|
Gross profit
|
|
|
312,414
|
|
|
273,855
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
1,403,841
|
|
|
2,611,220
|
|
|
General and administrative
|
|
|
1,812,972
|
|
|
2,243,212
|
|
|
Stock based compensation research and development
|
|
|
118,750
|
|
|
164,890
|
|
|
Stock based compensation general and administrative
|
|
|
110,378
|
|
|
364,423
|
|
|
Total operating expenses
|
|
|
3,445,941
|
|
|
5,383,745
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(3,133,527
|
)
|
|
(5,109,890
|
)
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
32,248
|
|
|
144,062
|
|
|
Interest (expense)
|
|
|
(2,300
|
)
|
|
(1,020
|
)
|
|
Total other income (expense)
|
|
|
29,948
|
|
|
143,042
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(3,103,579
|
)
|
$
|
(4,966,848
|
)
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share
|
|
$
|
(0.03
|
)
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted weighted average common shares outstanding
|
|
|
100,478,733
|
|
|
89,389,416
|
|
The
accompanying notes are an integral part of these financial
statements.
DOR
BioPharma, Inc.
Consolidated
Statements of Cash Flows
For
the nine months ended September 30,
(Unaudited)
|
|
|
2008
|
|
2007
|
|
|
Operating
activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(3,103,579
|
)
|
$
|
(4,966,848
|
)
|
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net loss to net cash used by operating
activities:
|
|
|
|
|
|
|
|
|
Amortization and depreciation
|
|
|
107,804
|
|
|
84,475
|
|
|
Non-cash stock compensation
|
|
|
623,289
|
|
|
1,201,306
|
|
|
|
|
|
|
|
|
|
|
|
Change
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(106,810
|
)
|
|
(83,701
|
)
|
|
Prepaid expenses
|
|
|
(9,452
|
)
|
|
(53,467
|
)
|
|
Accounts payable
|
|
|
514,452
|
|
|
(1,064,096
|
)
|
|
Inventory
|
|
|
(83,182
|
)
|
|
-
|
|
|
Accrued compensation
|
|
|
(67,784
|
)
|
|
(271,102
|
)
|
|
Total
adjustments
|
|
|
978,317
|
|
|
(186,585
|
)
|
|
|
|
|
|
|
|
|
|
|
Net cash used by operating activities
|
|
|
(2,125,262
|
)
|
|
(5,153,433
|
)
|
|
|
|
|
|
|
|
|
|
|
Investing
activities:
|
|
|
|
|
|
|
|
|
Acquisition
of intangible assets
|
|
|
(191,350
|
)
|
|
(294,404
|
)
|
|
Purchase
of office equipment
|
|
|
(3,400
|
)
|
|
(10,182
|
)
|
|
Net cash used by investing activities
|
|
|
(194,750
|
)
|
|
(304,586
|
)
|
|
|
|
|
|
|
|
|
|
|
Financing
activities:
|
|
|
|
|
|
|
|
|
Proceeds
from sale of common stock
|
|
|
658,600
|
|
|
6,235,404
|
|
|
Proceeds
from equity line
|
|
|
127,500
|
|
|
-
|
|
|
Proceeds
from exercise of warrants
|
|
|
-
|
|
|
1,530,763
|
|
|
Proceeds
from exercise of stock options
|
|
|
-
|
|
|
117,000
|
|
|
Net cash provided by financing activities
|
|
|
786,100
|
|
|
7,883,167
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
(1,533,912
|
)
|
|
2,425,148
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
2,220,128
|
|
|
119,636
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
686,216
|
|
$
|
2,544,784
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
1,696
|
|
$
|
413
|
|
|
Non-cash
transactions:
|
|
|
|
|
|
|
|
|
Non-cash stock payment to an institutional investor
|
|
$
|
270,000
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these financial
statements.
DOR
BioPharma, Inc.
Notes
to Consolidated Financial Statements
1.
Nature of
Business
Basis of
Presentation
These
unaudited interim consolidated financial statements of the Company were prepared
under the rules and regulations for reporting on Form 10-Q. Accordingly, the
Company omitted some information and note disclosures normally accompanying the
annual financial statements. You should read these interim financial statements
and notes in conjunction with the audited consolidated financial statements and
their notes included in the Company’s annual report on Form 10-KSB for the year
ended December 31, 2007. In the Company’s opinion, the consolidated financial
statements include all adjustments necessary for a fair statement of the results
of operations, financial position and cash flows for the interim periods. All
adjustments were of a normal recurring nature. The results of operations for
interim periods are not necessarily indicative of the results for the full
fiscal year.
The
Company is a late stage biopharmaceutical company incorporated in 1987, focused
on the development of biotherapeutic products and biodefense vaccines intended
for areas of unmet medical need. DOR’s biotherapeutic business segment intends
to develop orBec
®
, oral
BDP, and other biotherapeutic products namely LPM
TM
-Leuprolide,
for Delivery of Water-Insoluble Drugs. DOR’s biodefense business segment intends
to convert its ricin toxin, botulinum toxin, and anthrax vaccine programs from
early stage development to advanced development and manufacturing.
During
the nine months ended September 30, 2008, the Company had two customers, the
U.S. Federal Government and Orphan Australia Pty Ltd. (“Orphan Australia”), a
specialty pharmaceutical company based in Melbourne, Australia, through a Named
Patient Access Program (“NPAP”) for orBec
®
. Revenues
from the U.S. Federal Government were generated from three active grants. As of
September 30, 2008 outstanding receivables were from the U.S. Federal
Government, National Institute of Health and The U.S. Food and Drug
Administration and Orphan Australia.
2.
Summary of Significant Accounting
Policies
Principles of
Consolidation
The
consolidated financial statements include DOR BioPharma, Inc., and its wholly
owned subsidiaries (“DOR” or the “Company”). All significant intercompany
accounts and transactions have been eliminated as a result of
consolidation.
Segment
Information
Operating
segments are defined as components of an enterprise about which separate
financial information is available that is evaluated on a regular basis by the
chief operating decision maker, or decision making group, in deciding how to
allocate resources to an individual segment and in assessing the performance of
the segment.
Accounts
Receivable
Receivables
consist of unbilled amounts due from grants from the National Institute of
Health of the U.S. Federal Government and from Orphan Australia. The amounts
were billed in the month subsequent to period end. The Company considers the
grants receivable to be fully collectible; accordingly, no allowance for
doubtful accounts has been established. If accounts become uncollectible, they
are charged to operations.
Intangible
Assets
One of
the most significant estimates or judgments that the Company makes is whether to
capitalize or expense patent and license costs. The Company makes this judgment
based on whether the technology has alternative future uses, as defined in SFAS
2, “Accounting for Research and Development Costs”. Based on this consideration,
all outside legal and filing costs incurred in the procurement and defense of
patents are capitalized.
These
intangible assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If the
sum of the expected undiscounted cash flows is less than the carrying value of
the related asset or group of assets, a loss is recognized for the difference
between the fair value and the carrying value of the related asset or group of
assets.
The
Company capitalizes and amortizes intangibles over a period of 11 to 16 years.
The Company capitalizes payments made to legal firms that are engaged in filing
and protecting rights to intellectual property and rights for our current
products in both the domestic and international markets. The Company believes
that patent rights are one of its most valuable assets. Patents and patent
applications are a key component of intellectual property, especially in the
early stage of product development, as their purchase and maintenance gives the
Company access to key product development rights from DOR’s academic and
industrial partners. These rights can also be sold or sub-licensed as part of
its strategy to partner its products at each stage of development. The legal
costs incurred for these patents consist of work designed to protect, preserve,
maintain and perhaps extend the lives of the patents. Therefore, DOR capitalizes
these costs and amortizes them over the remaining useful life of the patents.
DOR capitalizes intangible assets based on alternative future use.
Impairment of Long-Lived
Assets
Office
and laboratory equipment and intangible assets are evaluated and reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. The Company recognizes impairment of
long-lived assets in the event the net book value of such assets exceeds the
estimated future undiscounted cash flows attributable to such assets. If the sum
of the expected undiscounted cash flows is less than the carrying value of the
related asset or group of assets, a loss is recognized for the difference
between the fair value and the carrying value of the related asset or group of
assets. Such analyses necessarily involve significant judgment.
The
Company did not record an impairment of intangible assets for either the three
or nine months ended September 30, 2008 or 2007.
Inventory
Inventories
are stated at the lower of cost or market. Cost is determined using the
first-in, first-out (“FIFO”) method and includes the cost of materials. The
Company records an allowance as needed for excess inventory. For the three
months ended September 30, 2008 an allowance of $100,000 was provided. This
allowance will be evaluated on a quarterly basis and adjustments will be made as
required. All inventory for this period is finished goods and consists of
orBec
®
treatments.
Fair Value of Financial
Instruments
Accounting
principles generally accepted in the United States of America require that fair
values be disclosed for the Company’s financial instruments. The carrying
amounts of the Company’s financial instruments, which include grants receivable
and current liabilities, are considered to be representative of their respective
fair values.
Revenue
Recognition
The
Company’s revenues are from government grants and NPAP sales of orBec
®
from
Orphan Australia. The revenue from government grants are based upon
subcontractor costs and internal costs covered by the grants, plus a facilities
and administrative rate that provides funding for overhead expenses. Revenues
are recognized when expenses have been incurred by subcontractors or when DOR
incurs internal expenses that are related to the grant. The revenues from the
NPAP sales of orBec
®
are
recognized when the product is shipped.
Research and Development
Costs
Research
and Development costs are charged to expense when incurred. Research and
development includes costs such as clinical trial expenses, contracted research
and license agreement fees with no alternative future use, supplies and
materials, salaries and employee benefits, equipment depreciation and allocation
of various corporate costs. Purchased in-process research and development
expense (IPR&D) represents the value assigned or paid for acquired research
and development for which there is no alternative future use as of the date of
acquisition.
Stock Based
Compensation
The
Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 123R,
“Share-Based Payment,” effective January 1, 2006, which requires companies to
record compensation expense for stock options issued to employees or
non-employee directors at an amount determined by the fair value of options.
SFAS No. 123R is effective for annual periods beginning after December 15,
2005.
The
Company adopted SFAS No. 123R using the “modified prospective application” and
therefore, financial statements from periods ending prior to January 1, 2006
have not been restated. The Company’s net loss for the three months ended
September 30, 2008 and 2007 pertaining to share-based compensation was $76,376
and $284,075 respectively; higher than if it had continued to account for
share-based compensation under APB No. 25. For the nine months ended September
30, 2008 and 2007, the net loss was higher by $229,128 and $529,313
respectively. For the three months ended September 30, 2008, $39,584 of the
$76,376 was for Research and Development personnel and $36,792 was for General
and Administrative personnel. For the same period in 2007, $77,362 of
the $284,075 was for Research and Development personnel and $206,713 was for
General and Administrative personnel. For the nine months ended
September 30, 2008, $118,750 of the $229,128 was for Research and Development
personnel and the other $110,378 was for General and Administrative personnel.
For the same period in 2007, $164,890 of the $529,313 was for Research and
Development personnel and the other $364,423 was for General and Administrative
personnel. Stock based compensation expense recognized during the period is
based on the value of the portion of share-based payment awards that is
ultimately expected to vest during the period. At September 30, 2008, the total
compensation cost for stock options not yet recognized was approximately
$380,000.
The fair
value of each option grant at the three and nine months ended September 30, 2008
and September 30, 2007 was estimated on the date of each grant using the
Black-Scholes option pricing model and amortized ratably over the option’s
vesting periods. The Company did not award any stock options for the three
and nine months ended September 30, 2008 while 2,925,000 and 3,375,000 stock
options were granted during the three and nine months ended September 30,
2007 respectively. The weighted average fair value of options granted with an
exercise price equal to the fair market value of the stock was $0.18 and $0.19
for the three and nine months ended September 30, 2007,
respectively.
The fair
value of options in accordance with SFAS 123 was estimated using the
Black-Scholes option-pricing model and the following weighted-average
assumptions: dividend yield 0%, expected life of four years, volatility of 99%
and 100% in 2008 and 2007, respectively, and average risk-free interest rates of
3.9% and 4.5% in 2008 and 2007, respectively.
Stock
compensation expense for options granted to non-employees has been determined in
accordance with SFAS 123 and Emerging Issues Task Force (“EITF”) 96-18, and
represents the fair value of the consideration received, or the fair value of
the equity instruments issued, whichever may be more reliably measured. For
options that vest over future periods, the fair value of options granted to
non-employees is amortized as the options vest.
As stock
options are exercised, common stock share certificates are issued via electronic
transfer or physical share certificates by the Company’s transfer agent. Upon
exercise, shares are issued from the 2005 stock option plan and increase the
number of shares the Company has outstanding.
Shares
repurchased
The
Company from time to time evaluates whether to repurchase existing common stock
shares in the marketplace. This repurchased stock would be reflected as Treasury
Stock. The Company has not repurchased any shares during 2008. At
this time we have no plans to repurchase the Company stock.
Income
Taxes
The
Company files a consolidated federal income tax return and utilizing asset and
liability method of accounting for income taxes. Under this method, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. A valuation
allowance is established when it is more likely than not that all or a portion
of a deferred tax asset will not be realized. A review of all available positive
and negative evidence is considered, including the Company’s current and past
performance, the market environment in which the Company operates, the
utilization of past tax credits, length of carryback and carryforward
periods. Deferred tax assets and liabilities are measured utilizing
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. No current or
deferred income taxes have been provided through September 30, 2008 due to the
net operating losses incurred by the Company since its inception.
Net Loss Per
Share
In
accordance with accounting principles generally accepted in the United States of
America, basic and diluted net loss per share has been computed using the
weighted-average number of shares of common stock outstanding during the
respective periods (excluding shares that are not yet issued). The effect of
stock options and warrants are antidilutive for all periods
presented.
Use of Estimates and
Assumptions
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
3.
Going Concern and Management’s Plan
The
accompanying consolidated financial statements have been prepared assuming the
Company will continue as a going concern. At September 30, 2008, the
Company had a working capital deficit of $537,997 and a net loss of $3,103,579
for the nine months ended September 30, 2008. The Company also expects to
sustain substantial losses over the next twelve months. Since its inception in
1987, the Company has incurred significant and recurring operating losses and
negative cash flow from operations which raises substantial doubt about its
ability to continue as a going concern. The Company’s ability to
continue its operations is dependent upon its ability to raise sufficient
capital.
Management’s
plan is as follows:
|
·
|
The
Company is and will continue to seek capital in the private and/or public
equity markets to continue its
operations.
|
|
·
|
The
Company has implemented an austerity budget plan including suspension of
its programs not supported by grant funding, reduction of office
personnel, and reduction in overhead
expenses.
|
|
·
|
The
Company will also seek capital through licensing of orBec
®
.
|
|
·
|
The
Company is continuing to seek grant funds and to respond to requests for
proposals from governmental
sources.
|
|
·
|
The
Company has and will utilize Names Patient Sales wherever possible in
countries outside the United States to generate revenues from orBec
®
.
|
|
·
|
The
Company is exploring outlicensing opportunities for LPM-Leuprolide and
BioDefense programs in the United States and in
Europe.
|
|
·
|
The
Company has engaged investment bankers to assist in exploring merger and
acquisition opportunities.
|
There is
no assurance that the Company will be able to successfully implement its plan or
will be able to generate positive cash flows from either operations,
partnerships, or from equity financings.
4.
Accounts Receivable
In the
third quarter of 2008, the Company recorded grant revenues from its three U.S.
Government Grants in the amount of $565,118 and $40,618 from Orphan Australia
for NPAP sales of orBec
®
. For the
nine months ended September 30, 2008, recorded revenues were $1,771,620.
Outstanding receivables at quarter end were $204,655. The receivables from the
U.S. Government Grants and Orphan Australia have since been
collected.
5.
Intangible Assets
The
following is a summary of intangible assets which consists of licenses and
patents:
|
|
Weighted
Average Amortization period (years)
|
|
Cost
|
|
Accumulated
Amortization
|
|
Net
Book Value
|
|
September
30, 2008
|
|
|
|
|
|
|
|
|
Licenses
|
12.0
|
|
$
462,234
|
|
$ 136,128
|
|
$
326,106
|
|
Patents
|
9.2
|
|
1,824,839
|
|
738,667
|
|
1,086,172
|
|
Total
|
9.8
|
|
$ 2,287,073
|
|
$ 874,795
|
|
$ 1,412,278
|
|
December
31, 2007
|
|
|
|
|
|
|
|
|
Licenses
|
12.7
|
|
$
462,234
|
|
$ 115,681
|
|
$
346,553
|
|
Patents
|
9.7
|
|
1,633,490
|
|
659,256
|
|
974,234
|
|
Total
|
10.4
|
|
$ 2,095,724
|
|
$ 774,937
|
|
$
1,320,787
|
Amortization
expense was $35,437 and $27,000 for the three months ended September 30, 2008
and 2007, respectively. Amortization expense was $99,859 and $75,300 for nine
months ended September 30, 2008 and 2007, respectively.
Based on
the balance of licenses and patents at September 30, 2008, the annual
amortization expense for each of the succeeding five years is estimated to be as
follows:
|
Year
|
Amortization
Amount
|
|
2008
|
$ 140,000
|
|
2009
|
140,000
|
|
2010
|
140,000
|
|
2011
|
142,000
|
|
2012
|
145,000
|
License
fees and royalty payments are expensed annually.
6.
Inventory
In the
third quarter of 2008, the Company recorded inventory. Inventories are stated at
the lower of cost or market. Cost is determined using the FIFO method and
includes the cost of materials and overhead. Inventory consists of finished
goods. For the nine month period ended September 30, 2008, the Company had
$83,182 in inventory, as compared to $0 for the same period ended September 30,
2007. For the three month period ended September 30, 2008 the Company also
recorded an allowance for excess inventory of $100,000.
7.
Income Taxes
Deferred
tax assets:
|
|
September 30, 2008
|
|
|
|
December
31, 2007
|
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
|
Net
operating loss carry forwards
|
$
27,400,000
|
|
$25,000,000
|
|
|
Orphan
drug and research and development credit carry forwards
|
1,800,000
|
|
2,000,000
|
|
|
Other
|
3,000,000
|
|
3,000,000
|
|
|
Total
|
32,200,000
|
|
30,000,000
|
|
|
Valuation
allowance
|
( 32,200,000
|
)
|
( 30,000,000
|
)
|
|
Net
deferred tax assets
|
$
-
|
|
$ -
|
|
At
December 31, 2007, the Company had net operating loss carry forwards of
approximately $73,000,000 for Federal and state tax purposes, portions of which
are currently expiring each year until 2026.
The
following is the approximate amount of the Company’s tax credits and net
operating loss carryforwards that expire over the next five years:
|
2008
|
$
910,000
|
|
2009
|
1,330,000
|
|
2010
|
1,410,000
|
|
2011
|
870,000
|
|
2012
|
3,870,000
|
Reconciliations
of the difference between income tax benefit computed at the federal and state
statutory tax rates and the provision for income tax benefit for the years ended
December 31, 2008 and 2007:
|
|
2008
|
2007
|
|
|
|
|
|
Income
tax loss at federal statutory rate
|
(34.00)%
|
(34.00)%
|
|
State
taxes, net of federal benefit
|
(4.00)
|
(4.29)
|
|
Valuation
allowance
|
38.00
|
38.29
|
|
Provision
for income taxes (benefit)
|
- %
|
- %
|
|
|
|
|
Due to
the move of the corporate offices to New Jersey, the Florida net operating loss
carryforward is suspended.
The
Company and one or more of its subsidiaries files income tax returns in the U.S.
Federal jurisdiction, and various state and local jurisdictions. The Company is
no longer subject to income tax assessment for years before 2004. However, since
the Company has incurred net operating losses in every tax year since inception,
all its income tax returns are subject to examination by the Internal Revenue
Service and state authorities for purposes of determining the amount of net
operating loss carryforward to reduce taxable income generated in a given tax
year.
8. Shareholders’
Equity
During
the three months ended September 30, 2008, the Company issued 26,516 shares of
common stock as payment to vendors for consulting services. An expense of $3,500
was recorded which approximated the shares’ fair market value on the date of
issuance, respectively. During the three months ended September 30, 2008 the
Company also issued 469,813 shares of common stock under its existing Fusion
Capital Equity facility. The Company received $52,500 in proceeds and recorded
$896 expense for the pro-rated commitment share expense which approximated the
shares’ fair market value on the date of issuance. During the nine months ended
September 30, 2008, the Company issued 544,543 and 168,309 shares of common
stock as payment to vendors for consulting services and as compensation and
severance for employees, respectively. An expense of $95,812 and $25,864 was
recorded which approximated the shares’ fair market value on the date of
issuance, respectively.
During
the nine month period ended September 30, 2007, the Company issued 815,357
shares of common stock as payment to vendors for consulting services. An expense
of $327,000 was recorded which approximated the shares’ fair market value on the
date of issuance. These shares of common stock were included in the Company’s
Form SB-2 Registration Statement filed with the SEC on March 9, 2007. Also
during the nine months ended September 30, 2007, 6,208,287 warrants were
exercised to purchase shares of common stock which provided proceeds of
$1,530,763, 260,000 stock options were exercised to purchase shares of common
stock which provided proceeds of $117,000, and 116,055 common stock shares were
issued to employees as payment for payroll in lieu of cash in the amount of
$36,250.
On
February 14, 2008, the Company entered into a common stock purchase agreement
with Fusion Capital Fund II, LLC (“Fusion Capital”). The Fusion Capital facility
allows the Company to require Fusion Capital to purchase between $20,000 and
$1.0 million every two business days, of the Company’s common stock up to an
aggregate of $8.0 million over approximately a 25-month period depending on
certain conditions. As part of the agreement, the Company issued Fusion Capital
1,275,000 shares of common stock as a commitment fee. In connection with the
execution of the common stock purchase agreement, Fusion Capital purchased
2,777,778 common shares and a four year warrant to purchase 1,388,889 shares of
common stock for $0.22 per share, for an aggregate price of $500,000. The
Company issued an additional 75,000 shares of common stock as a commitment fee
in connection with this $500,000 purchase. If the Company’s stock price
exceeds $0.15, then the amount required to be purchased may be increased under
certain conditions as the price of the Company’s common stock increases. The
Company cannot require Fusion Capital to purchase any shares of the Company’s
common stock on any trading days that the market price of the Company’s common
stock is less than $0.10 per share. At this time the Company is unable to draw
on Fusion because the Company’s stock price is near or below $0.10 per
share.
On
February 14, 2008, the Company sold 881,112 shares of its common stock to
institutional and other accredited investors for an aggregate purchase price of
approximately $158,600. The investors received four year warrants to purchase an
aggregate of 440,556 shares of our common stock at an exercise price of $0.22
per share.
On
February 9, 2007, the Company sold 11,680,850 shares of DOR’s common stock to
institutional investors and certain of the Company’s officers and directors for
a purchase price of $5,490,000.
On
January 3, 2007, in consideration for entering into an exclusive letter of
intent, Sigma-Tau agreed to purchase $1,000,000 of the Company’s common stock at
the market price of $0.246 per share, representing 4,065,041 shares of common
stock, and contributed an additional $2 million in cash. The $2 million
contribution was to be considered an advance payment to be deducted from future
payments due to the Company by Sigma-Tau pursuant to any future orBec®
commercialization arrangement reached between the two parties. Because of this
transaction’s dilutive nature, all investors in the April 2006 private placement
had their warrants repriced to $0.246. Additionally, certain shareholders in
that placement who still held shares of the Company’s common stock were issued
additional shares as a cost basis adjustment from $0.277 to $0.246 per share of
the Company’s common stock. Neither these investors, nor any others for that
matter, hold any further anti-dilution rights. Because no agreement
was reached by March 1, 2007, DOR was obligated to return the $2 million to
Sigma-Tau by April 30, 2007. On June 1, 2007, the Company returned
the $2 million to Sigma-Tau.
9.
Risks and Uncertainties
The
Company is subject to risks common to companies in the biotechnology industry,
including, but not limited to, litigation, product liability, development of new
technological innovations, dependence on key personnel, protections of
proprietary technology, and compliance with FDA regulations.
10.
Business Segments
The
Company had two active segments for the three and nine months ended September
30, 2008 and 2007, respectively: BioDefense and
BioTherapeutics. Summary data:
FOR THE THREE
MONTHS ENDED
|
|
|
September
30,
|
|
|
|
|
2008
|
|
2007
|
|
|
Net
Revenues
|
|
|
|
|
|
|
|
|
BioDefense
|
|
$
|
565,118
|
|
$
|
429,445
|
|
|
BioTherapeutics
|
|
|
40,618
|
|
|
-
|
|
|
Total
|
|
$
|
605,736
|
|
$
|
429,445
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from Operations
|
|
|
|
|
|
|
|
|
BioDefense
|
|
$
|
23,403
|
|
$
|
25,676
|
|
|
BioTherapeutics
|
|
|
(305,920
|
)
|
|
(581,363
|
)
|
|
Corporate
|
|
|
(196,879
|
)
|
|
(701,416
|
)
|
|
Total
|
|
$
|
(479,396
|
)
|
$
|
(1,257,103
|
)
|
|
|
|
|
|
|
|
|
|
|
Identifiable
Assets
|
|
|
|
|
|
|
|
|
BioDefense
|
|
$
|
962,575
|
|
$
|
984,286
|
|
|
BioTherapeutics
|
|
|
584,358
|
|
|
511,690
|
|
|
Corporate
|
|
|
989,924
|
|
|
2,693,135
|
|
|
Total
|
|
$
|
2,536,857
|
|
$
|
4,189,111
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
and Depreciation Expense
|
|
|
|
|
|
|
|
|
BioDefense
|
|
$
|
17,462
|
|
$
|
31,062
|
|
|
BioTherapeutics
|
|
|
14,679
|
|
|
3,462
|
|
|
Corporate
|
|
|
1,159
|
|
|
1,525
|
|
|
Total
|
|
$
|
33,300
|
|
$
|
36,049
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Income
|
|
|
|
|
|
|
|
|
Corporate
|
|
$
|
5,391
|
|
$
|
10,121
|
|
|
Total
|
|
$
|
5,391
|
|
$
|
10,121
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Option Compensation
|
|
|
|
|
|
|
|
|
BioDefense
|
|
$
|
19,517
|
|
$
|
34,027
|
|
|
BioTherapeutic
|
|
|
20,067
|
|
|
43,335
|
|
|
Corporate
|
|
|
36,792
|
|
|
206,713
|
|
|
Total
|
|
$
|
76,376
|
|
$
|
284,075
|
|
|
|
|
|
|
|
|
|
|
FOR
THE NINE MONTHS ENDED
|
|
|
September
30,
|
|
|
|
|
2008
|
|
2007
|
|
|
Net
Revenues
|
|
|
|
|
|
|
|
|
BioDefense
|
|
$
|
1,731,002
|
|
$
|
943,737
|
|
|
BioTherapeutics
|
|
|
40,618
|
|
|
-
|
|
|
Total
|
|
$
|
1,771,620
|
|
$
|
943,737
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from Operations
|
|
|
|
|
|
|
|
|
BioDefense
|
|
$
|
(151,938
|
)
|
$
|
(51,010
|
)
|
|
BioTherapeutics
|
|
|
(1,353,831
|
)
|
|
(2,276,555
|
)
|
|
Corporate
|
|
|
(1,627,758
|
)
|
|
(2,782,325
|
)
|
|
Total
|
|
$
|
(3,133,527
|
)
|
$
|
(5,109,890
|
)
|
|
|
|
|
|
|
|
|
|
|
Amortization
and Depreciation Expense
|
|
|
|
|
|
|
|
|
BioDefense
|
|
$
|
61,160
|
|
$
|
68,293
|
|
|
BioTherapeutics
|
|
|
42,671
|
|
|
11,593
|
|
|
Corporate
|
|
|
3,973
|
|
|
4,587
|
|
|
Total
|
|
$
|
107,804
|
|
$
|
84,473
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Income
|
|
|
|
|
|
|
|
|
Corporate
|
|
$
|
32,248
|
|
$
|
144,062
|
|
|
Total
|
|
$
|
32,248
|
|
$
|
144,062
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Option Compensation
|
|
|
|
|
|
|
|
|
BioDefense
|
|
$
|
58,550
|
|
$
|
63,387
|
|
|
BioTherapeutic
|
|
|
60,200
|
|
|
101,503
|
|
|
Corporate
|
|
|
110,378
|
|
|
364,423
|
|
|
Total
|
|
$
|
229,128
|
|
$
|
529,313
|
|
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors of DOR BioPharma, Inc.,
We have
audited the accompanying consolidated balance sheets of DOR BioPharma, Inc. and
subsidiaries as of December 31, 2007 and 2006 and the related consolidated
statements of operations, changes in shareholders' equity (deficiency) and cash
flows for the years ended December 31, 2007 and 2006. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We
conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the Company at
December 31, 2007 and 2006, and the results of its operations and its cash flows
for each of the years ended December 31, 2007, in conformity with United States
generally accepted accounting principals.
/s/ Sweeney, Matz & Co.,
LLC
Pompano
Beach, Florida
March 8,
2008
Consolidated
Balance Sheets
December
31,
|
|
|
|
2007
|
|
|
|
|
|
2006
|
|
|
Assets
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
2,220,128
|
|
|
|
|
$
|
119,636
|
|
|
Grants
receivable
|
|
|
97,845
|
|
|
|
|
|
89,933
|
|
|
Prepaid
expenses
|
|
|
119,178
|
|
|
|
|
|
94,470
|
|
|
Total
current assets
|
|
|
2,437,151
|
|
|
|
|
|
304,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office
and laboratory equipment, net
|
|
|
25,941
|
|
|
|
|
|
29,692
|
|
|
Intangible
assets, net
|
|
|
1,320,787
|
|
|
|
|
|
1,073,239
|
|
|
Total
assets
|
|
$
|
3,783,879
|
|
|
|
|
$
|
1,406,970
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders’ equity
(deficiency)
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
847,610
|
|
|
|
|
$
|
2,112,479
|
|
|
Accrued
compensation
|
|
|
345,903
|
|
|
|
|
|
402,947
|
|
|
Total
current liabilities
|
|
|
1,193,513
|
|
|
|
|
|
2,515,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’
equity (deficiency):
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock, $.001 par value. Authorized 250,000,000
|
|
|
|
|
|
|
|
|
|
|
|
shares;
94,996,547 and 68,855,794, respectively issued and
outstanding
|
|
|
94,996
|
|
|
|
|
|
68,855
|
|
|
Additional
paid-in capital
|
|
|
101,391,090
|
|
|
|
|
|
91,553,766
|
|
|
Accumulated
deficit
|
|
|
(
98,895,720
|
)
|
|
|
|
|
(
92,731,077
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
shareholders’ equity (deficiency)
|
|
|
2,590,366
|
|
|
|
|
|
(
1,108,456
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and shareholders’ equity (deficiency)
|
|
$
|
3,783,879
|
|
|
|
|
$
|
1,406,970
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
Consolidated
Statements of Operations
For
the years ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,258,017
|
|
$
|
2,313,020
|
|
|
Cost
of revenues
|
|
|
(
943,385
|
)
|
|
(
1,965,074
|
)
|
|
Gross profit
|
|
|
314,632
|
|
|
347,946
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
3,099,944
|
|
|
3,638,493
|
|
|
General and administrative
|
|
|
2,864,370
|
|
|
2,553,700
|
|
|
Stock based compensation research and development
|
|
|
230,668
|
|
|
219,895
|
|
|
Stock based compensation general and administrative
|
|
|
446,733
|
|
|
337,287
|
|
|
In-process research and development
|
|
|
-
|
|
|
981,819
|
|
|
Impairment of intangible assets
|
|
|
-
|
|
|
816,300
|
|
|
Total operating expenses
|
|
|
6,641,715
|
|
|
8,547,494
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(
6,327,083
|
)
|
|
(
8,199,548
|
)
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
164,847
|
|
|
41,510
|
|
|
Interest (expense)
|
|
|
(
1,020
|
)
|
|
(
5,308
|
)
|
|
Other (expense)
|
|
|
(
1,387
|
)
|
|
-
|
|
|
Total other income (expense)
|
|
|
162,440
|
|
|
36,202
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(
6,164,643
|
)
|
$
|
(
8,163,346
|
)
|
|
|
|
|
|
|
|
|
|
|
BasicnBasic
and diluted net loss per share
|
|
$
|
(
0.07
|
)
|
$
|
(
0.13
|
)
|
|
|
|
|
|
|
|
|
|
|
Basic Basic
and diluted weighted average common shares outstanding
|
|
|
90,687,677
|
|
|
63,759,092
|
|
The
accompanying notes are an integral part of these financial
statements.
Consolidated
Statements of Changes in Shareholders’ (Deficiency)
For
the years ended December 31, 2007 and 2006
|
|
|
Common
Stock
|
Additional
Paid-In capital
|
AccumulatedDeficit
|
|
|
|
|
Shares
|
|
|
Par
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
January
1, 2006
|
|
|
50,612,504
|
|
|
$50,612
|
|
|
$86,045,192
|
|
|
(
$84,567,731
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock
|
|
|
13,429,504
|
|
|
13,430
|
|
|
3,521,570
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for exercise of options
|
|
|
504,100
|
|
|
504
|
|
|
112,816
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock to vendors
|
|
|
506,942
|
|
|
507
|
|
|
134,171
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of warrants to vendors
|
|
|
-
|
|
|
-
|
|
|
121,965
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for an equity commitment fee
|
|
|
512,500
|
|
|
512
|
|
|
(
512
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock to employees
|
|
|
222,061
|
|
|
222
|
|
|
82,632
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock to minority shareholders
|
|
|
3,068,183
|
|
|
3,068
|
|
|
978,750
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
option expense
|
|
|
-
|
|
|
-
|
|
|
557,182
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(
8,163,346
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December
31, 2006
|
|
|
68,855,794
|
|
|
$68,855
|
|
|
$91,553,766
|
|
|
(
$92,731,077
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock
|
|
|
15,745,891
|
|
|
15,746
|
|
|
6,219,658
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for exercise of options and warrants
|
|
|
8,195,487
|
|
|
8,195
|
|
|
2,218,088
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock to vendors
|
|
|
829,821
|
|
|
830
|
|
|
329,670
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of stock to investors by contract as dilution protection
|
|
|
995,947
|
|
|
996
|
|
|
307,747
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock to employees
|
|
|
373,607
|
|
|
374
|
|
|
84,759
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
option expense
|
|
|
-
|
|
|
-
|
|
|
677,401
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(
6,164,643
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December
31, 2007
|
|
|
94,996,547
|
|
|
$94,996
|
|
|
$101,391,090
|
|
|
(
$98,895,720
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial statements.
Consolidated
Statements of Cash Flows
For
the years ending December 31,
|
|
|
2007
|
|
2006
|
|
|
Operating
activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(
6,164,643
|
)
|
$
|
(
8,163,346
|
)
|
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net loss to net cash used by operating
activities:
|
|
|
|
|
|
|
|
|
Amortization and depreciation
|
|
|
119,565
|
|
|
137,044
|
|
|
Non-cash stock compensation
|
|
|
1,401,777
|
|
|
896,680
|
|
|
Non-cash stock purchase of in-process research and
development
|
|
|
-
|
|
|
981,819
|
|
|
Impairment expense for intangibles
|
|
|
-
|
|
|
816,300
|
|
|
|
|
|
|
|
|
|
|
|
Change
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Grants receivable
|
|
|
(
7,912
|
)
|
|
474,397
|
|
|
Prepaid expenses
|
|
|
(
24,708
|
)
|
|
44,324
|
|
|
Accounts payable
|
|
|
(
1,264,868
|
)
|
|
476,605
|
|
|
Accrued compensation
|
|
|
(57,044
|
)
|
|
254,347
|
|
|
Accrued royalties
|
|
|
-
|
|
|
(
60,000
|
)
|
|
Total
adjustments
|
|
|
166,810
|
|
|
4,021,516
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by operating activities
|
|
|
(
5,997,833
|
)
|
|
(
4,141,830
|
)
|
|
|
|
|
|
|
|
|
|
|
Investing
activities:
|
|
|
|
|
|
|
|
|
Purchases
of office and laboratory equipment
|
|
|
(
7,170
|
)
|
|
(
2,552
|
)
|
|
Acquisition
of intangible assets
|
|
|
(
356,192
|
)
|
|
(
206,004
|
)
|
|
Net cash used by investing activities
|
|
|
(
363,362
|
)
|
|
(
208,556
|
)
|
|
|
|
|
|
|
|
|
|
|
Financing
activities:
|
|
|
|
|
|
|
|
|
Net
proceeds from issuance of common stock
|
|
|
6,235,404
|
|
|
3,535,000
|
|
|
Proceeds
from exercise of warrants
|
|
|
1,592,263
|
|
|
-
|
|
|
Proceeds
from exercise of stock options
|
|
|
634,020
|
|
|
113,320
|
|
|
Net cash provided by financing activities
|
|
|
8,461,687
|
|
|
3,648,320
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
2,100,492
|
|
|
(
702,066
|
)
|
|
Cash and cash equivalents at beginning of period
|
|
|
119,636
|
|
|
821,702
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
2,220,128
|
|
$
|
119,636
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
1,020
|
|
$
|
3,170
|
|
|
Non-cash
transactions:
|
|
|
|
|
|
|
|
|
Non-cash payment to an institutional investor
|
|
$
|
-
|
|
$
|
220,374
|
|
The
accompanying notes are an integral part of these financial
statements.
Notes
to Consolidated Financial Statements
1.
Nature of
Business
Nature of
Business
The
Company is a late stage biopharmaceutical company incorporated in 1987, focused
on the development of biodefense vaccines and biotherapeutic products intended
for areas of unmet medical need. DOR’s biodefense business segment consists of
converting biodefense vaccine programs from early stage development to advanced
development and manufacturing. DOR’s biotherapeutic business segment consists of
development of orBec
®
, oral
BDP, and other biotherapeutics products namely Oraprine
TM
,
LPM
TM
-Leuprolide,
and LPE
TM
and
PLP
TM
Systems
for Delivery of Water-Insoluble Drugs.
During
the year ending December 31, 2007, the Company had one customer, the U.S.
Federal Government. All revenues were generated from two active U.S. Federal
Government Grants. As of December 31, 2007 all outstanding receivables were from
the U.S. Federal Government, National Institute of Health and The Food and Drug
Administration.
2.
Summary of Significant Accounting
Policies
Principles of
Consolidation
The
consolidated financial statements include DOR BioPharma Inc., and its wholly
owned subsidiaries (“DOR” or the “Company”). All significant intercompany
accounts and transactions have been eliminated in consolidation.
Segment
Information
Operating
segments are defined as components of an enterprise about which separate
financial information is available that is evaluated on a regular basis by the
chief operating decision maker, or decision making group, in deciding how to
allocate resources to an individual segment and in assessing the performance of
the segment.
Grants
Receivable
Receivables
consist of unbilled amounts due from grants from the U.S. Federal Government,
National Institute of Health and The Food and Drug Administration. The amounts
were billed in the month subsequent to year end. The Company considers the
grants receivable to be fully collectible; accordingly, no allowance for
doubtful accounts has been established. If accounts become uncollectible, they
are charged to operations when that determination is made.
Intangible
Assets
One of
the most significant estimates or judgments that we make is whether to
capitalize or expense patent and license costs. The Company makes this judgment
based on whether the technology has alternative future uses, as defined in SFAS
2, “Accounting for Research and Development Costs”. Based on this consideration,
all outside legal and filing costs incurred in the procurement and defense of
patents are capitalized.
These
intangible assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If the
sum of the expected undiscounted cash flows is less than the carrying value of
the related asset or group of assets, a loss is recognized for the difference
between the fair value and the carrying value of the related asset or group of
assets.
The
Company capitalizes and amortizes intangibles over a period of 11 to 16 years.
The Company capitalizes payments made to legal firms that are engaged in filing
and protecting rights to intellectual property and rights for our current
products in both the domestic and international markets. The Company believes
that patent rights are one of its most valuable assets. Patents and patent
applications are a key currency of intellectual property, especially in the
early stage of product development, as their purchase and maintenance gives the
Company access to key product development rights from DOR’s academic and
industrial partners. These rights can also be sold or sub-licensed as part of
its strategy to partner its products at each stage of development. The legal
costs incurred for these patents consist of work designed to protect, preserve,
maintain and perhaps extend the lives of the patents. Therefore, DOR capitalizes
these costs and amortizes them over the remaining useful life of the patents.
DOR capitalizes intangible assets based on alternative future use.
Impairment of Long-Lived
Assets
Office
and laboratory equipment and intangible assets are evaluated and reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. The Company recognizes impairment of
long-lived assets in the event the net book value of such assets exceeds the
estimated future undiscounted cash flows attributable to such assets. If the sum
of the expected undiscounted cash flows is less than the carrying value of the
related asset or group of assets, a loss is recognized for the difference
between the fair value and the carrying value of the related asset or group of
assets. Such analyses necessarily involve significant judgment.
The
Company recorded impairment of intangible assets of $0 and $816,300 for the
years ended December 31, 2007 and 2006, respectively.
Fair
Value of Financial Instruments
Accounting
principles generally accepted in the United States of America require that fair
values be disclosed for the Company’s financial instruments. The carrying
amounts of the Company’s financial instruments, which include grants receivable
and current liabilities, are considered to be representative of their respective
fair values.
Revenue
Recognition
All of
the Company’s revenues are from government grants which are based upon
subcontractor costs and internal costs covered by the grant, plus a facilities
and administrative rate that provides funding for overhead expenses. Revenues
are recognized when expenses have been incurred by subcontractors or when DOR
incurs internal expenses that are related to the grant.
Research and Development
Costs
Research
and Development costs are charged to expense when incurred. Research and
development includes costs such as clinical trial expenses, contracted research
and license agreement fees with no alternative future use, supplies and
materials, salaries and employee benefits, equipment depreciation and allocation
of various corporate costs. Purchased in-process research and development
expense (IPR&D) represents the value assigned or paid for acquired research
and development for which there is no alternative future use as of the date of
acquisition.
Stock Based
Compensation
The
Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 123R,
“Share-Based Payment,” effective January 1, 2006, which requires companies to
record compensation expense for stock options issued to employees or
non-employee directors at an amount determined by the fair value of options.
SFAS No. 123R is effective for annual periods beginning after December 15,
2005.
The
Company has adopted SFAS No. 123R using the “modified prospective application”
and therefore, financial statements from periods ending prior to January 1, 2006
have not been restated. As a result of adopting SFAS No. 123R, the Company’s net
loss for the year ended December 31, 2007 was $677,401 and for December 31, 2006
was $557,182 higher than if it had continued to account for share-based
compensation under APB No. 25. Of these amounts, $230,668 was for research and
development and $446,733 was for general and administrative in 2007 and $219,895
was for research and development and $337,287 was for general and administrative
in 2006. Stock based compensation expense recognized during the period is based
on the value of the portion of share-based payment awards that is ultimately
expected to vest during the period. At December 31, 2007, the total compensation
cost for stock options not yet recognized was approximately
$600,000.
The fair
value of each option grant at the years ended December 31, 2007 and December 31,
2006 are estimated on the date of each grant using the Black-Scholes option
pricing model and amortized ratably over the option’s vesting periods. Stock
options to purchase 3,375,000 share of common stock were granted for the year
ended December 31, 2007 and stock options to purchase 4,360,000 shares of common
stock were granted for the year ended December 31, 2006.
The
weighted average fair value of options granted with an exercise price equal to
the fair market value of the stock was $0.27 and $0.30 for 2007 and 2006,
respectively.
The fair
value of options in accordance with SFAS 123 was estimated using the
Black-Scholes option-pricing model and the following weighted-average
assumptions: dividend yield 0%, expected life of four years, volatility of 100%
and 105% in 2007 and 2006, respectively, and average risk-free interest rates of
4.5% and 4.76% in 2007 and 2006, respectively.
Stock
compensation expense for options granted to non-employees has been determined in
accordance with SFAS 123 and Emerging Issues Task Force (“EITF”) 96-18, and
represents the fair value of the consideration received, or the fair value of
the equity instruments issued, whichever may be more reliably measured. For
options that vest over future periods, the fair value of options granted to
non-employees is amortized as the options vest.
As stock
options are exercised, common stock share certificates are issued via electronic
transfer or physical share certificates by the Company’s transfer agent. Shares
are issued from the 1995 or 2005 stock option plan and increase the number of
shares the Company has outstanding.
Shares
repurchased
The
Company from time to time evaluates whether to repurchase existing common stock
shares in the marketplace. This repurchased stock would be reflected as Treasury
Stock. At this time we have no plans to repurchase the Company
stock.
Income
Taxes
The
Company files a consolidated federal income tax return and utilizes the asset
and liability method of accounting for income taxes. Under this method, deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. A valuation
allowance is established when it is more likely than not that all or a portion
of a deferred tax asset will not be realized. A review of all available positive
and negative evidence is considered, including the Company’s current and past
performance, the market environment in which the Company operates, the
utilization of past tax credits, length of carryback and carryforward
periods. Deferred tax assets and liabilities are measured utilizing
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. No current or
deferred income taxes have been provided through December 31, 2007 because of
the net operating losses incurred by the Company since its
inception.
Net Loss Per
Share
In
accordance with accounting principles generally accepted in the United States of
America, basic and diluted net loss per share has been computed using the
weighted-average number of shares of common stock outstanding during the
respective periods (excluding shares that are not yet issued). The effect of
stock options and warrants are antidilutive for all periods
presented.
Use of
Estimates and Assumptions
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
New
Accounting Pronouncements
In
September 2006, the FASB issued SFAS No. 157, “Fair Value
Measurements” (“SFAS No. 157”) which defines fair value, establishes a
framework for measuring fair value and expands disclosure about fair value
measurements. SFAS No. 157 is effective for fiscal years beginning after
November 15, 2007. The Company has adopted SFAS No. 157 on
January 1, 2008, as required, and is currently evaluating the impact of
such adoption on its financial statements.
In June
2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes” (“FIN 48”), which is an interpretation of SFAS No. 109,
“Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and a
measurement attribute for the financial statement recognition and measurement of
tax positions taken or expected to be taken in a tax return. For those benefits
to be recognized, a tax position must be more-likely-than-not to be sustained
upon examination by taxing authorities. The amount recognized is measured as the
largest amount of benefit that is greater than 50 percent likely of being
realized upon ultimate settlement. The Company has adopted the provisions of FIN
48 effective January 1, 2007.
In
February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial
Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits entities to
choose to measure many financial assets and financial liabilities at fair value.
Unrealized gains and losses on items for which the fair value option has been
elected are reported in earnings. SFAS 159 is effective for fiscal years
beginning after November 15, 2007. The Company is currently assessing the impact
of SFAS 159 on its consolidated financial position and results of
operations.
In
December 2007, the FASB issued SFAS No. 141(R), “Business
Combinations” (“SFAS 141(R)”). This statement provides greater consistency
in the accounting and financial reporting of business combinations. It requires
the acquiring entity in a business combination to recognize all assets acquired
and liabilities assumed in the transaction, establishes the acquisition-date
fair value as the measurement objective for all assets acquired and liabilities
assumed, and requires the acquirer to disclose the nature and financial effect
of the business combination. The Company is currently assessing the impact to
the Company’s consolidated financial position, cash flows or results of
operations upon adoption of SFAS 141(R).
In
December 2007, the FASB issued SFAS No. 160, “Non-controlling
Interests in Consolidated Financial Statements” (“SFAS 160”). This
statement amends Accounting Research Bulletin No. 51, Consolidated
Financial Statements, to establish accounting and reporting standards for the
non-controlling interest in a subsidiary and for the deconsolidation of a
subsidiary. SFAS 141(R) and SFAS 160 are required to be adopted
simultaneously and are effective for the first annual reporting period beginning
on or after December 15, 2008, with earlier adoption prohibited. The
Company is currently assessing the impact to the Company’s consolidated
financial position, cash flows or results of operations upon adoption of
SFAS 160.
3.
Management’s Plan
The
Company has incurred continuing losses since its inception in 1987. At December
31, 2007, the Company had working capital of $1,243,638 and a net loss of
$6,164,643. In the 12 months ended December 31, 2007, the Company raised a total
of approximately $8,726,000, $6,500,000 of which was raised through equity
financings and approximately $2,226,000 of which was raised from warrant and
stock option exercises. Subsequent to December 31, 2007, the Company closed on
an equity financing of $658,000 from Fusion Capital and other investors.
Additionally, in February 2008 the Company initiated a 25 month, $8,000,000
equity line of credit with Fusion Capital. The Company expects to sustain
additional losses over the next 12 months. The Company’s ability to raise
additional funding may be more difficult due to its receipt of a not approvable
letter from the FDA on its NDA for orBec
®
.
If the
Company is unable for whatever reason to utilize its equity facility with Fusion
Capital and there were no other sources of financing, an austerity plan with
reductions or discontinuation of operations of several of the Company’s programs
will be required. In an austerity plan, the Company would have to suspend
clinical trials of orBec
®
/oral BDP
for the treatment of GI GVHD and radiation enteritis, and reduce headcount and
overhead. If this should occur, the Company believes it could continue to
operate over the next four quarters at a reduced level and continue with its
active programs, namely orBec
®
for the
prevention of GVHD, its oral BDP radiation injury program, and its biodefense
programs, all of which are supported by existing
grants.
Management’s
plan to generate positive cash flows includes the following:
|
·
|
The
Company secured a new $8,000,000 equity line from Fusion Capital and the
Company expects that the registration statement supporting this facility
will become effective by April
2008.
|
|
·
|
The
Company will manage its expenditures very closely and proceed with
Clinical programs with the use of the equity
facility.
|
|
·
|
The
Company plans to continue seeking grant funds and responding to requests
for proposals from governmental
sources.
|
|
·
|
The
Company will utilize Named Patient Sales (Compassionate Use programs)
wherever possible in countries outside the United States to generate
revenues from orBec
®
.
The Company already has letters of intent for Named Patient programs in
place in South Korea, Australia, New Zealand and South Africa and expects
to receive modest revenues from these programs in the second half of
2008.
|
|
·
|
The
Company is exploring outlicensing opportunities for orBec
®
and for its BioDefense programs both in the US and
Europe.
|
|
·
|
The
Company has engaged investment bankers to assist in exploring
mergers and acquisitions
opportunities.
|
It is
possible that the Company will seek additional capital in the private and/or
public equity markets to continue its operations, respond to competitive
pressures, and develop new products and services and to support new strategic
partnerships.
There is
no assurance that the Company will be able to successfully implement its plan or
will be able to generate cash flows from either operations, partnerships, or
from equity financings.
4. Office and Laboratory
Equipment
Office
and laboratory equipment are stated at cost. Depreciation is computed on a
straight-line basis over five years. Office and laboratory equipment consisted
of the following at December 31:
|
|
2007
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
Office
equipment
|
$ 125,328
|
|
|
$ 117,660
|
|
|
Laboratory
equipment
|
23,212
|
|
|
23,212
|
|
|
Total
|
148,540
|
|
|
140,872
|
|
|
Accumulated
depreciation
|
( 122,599
|
)
|
|
( 111,180
|
)
|
|
|
$
25,941
|
|
|
$
29,692
|
|
Depreciation
expense was $10,781 and $17,593 for the years ended December 31, 2007 and 2006,
respectively.
5. Intangible
Assets
The
following is a summary of intangible assets which consists of licenses and
patents:
|
|
Weighted
Average Amortization
period
(years)
|
|
Cost
|
|
Accumulated
Amortization
|
|
Net Book Value
|
|
December
31, 2007
|
|
|
|
|
|
|
|
|
Licenses
|
12.7
|
|
$
462,234
|
|
$ 115,681
|
|
$
346,553
|
|
Patents
|
9.7
|
|
1,633,490
|
|
659,256
|
|
974,234
|
|
Total
|
10.4
|
|
$
2,095,724
|
|
$
774,937
|
|
$
1,320,787
|
|
December
31, 2006
|
|
|
|
|
|
|
|
|
Licenses
|
13.7
|
|
$
462,234
|
|
$
88,443
|
|
$ 373,791
|
|
Patents
|
8.8
|
|
1,277,157
|
|
577,709
|
|
699,448
|
|
Total
|
10.1
|
|
$
1,739,391
|
|
$
666,152
|
|
$
1,073,239
|
Amortization
expense was $108,784 in 2007 compared to $119,451 for 2006.
Based on
the balance of licenses and patents at December 31, 2007, the annual
amortization expense for each of the succeeding five years is estimated to be as
follows:
|
Year
|
Amortization Amount
|
|
2008
|
$ 125,000
|
|
2009
|
126,000
|
|
2010
|
127,000
|
|
2011
|
128,000
|
|
2012
|
129,000
|
License
fees and royalty payments in connection with the below agreements are expensed
annually.
In July
2003, the Company entered into an exclusive license agreement with University of
Texas South Western ("UTSW") for administering the ricin vaccine via the
intramuscular route for initial license fees of 250,000 shares valued at
$200,000 of DOR common stock and $200,000 in cash. Subsequently, the
Company negotiated the remaining intranasal and oral rights to the ricin vaccine
for $50,000 in annual license fees in subsequent years. The license agreement's
term is over the life of the patent.
On March
1, 2005, the Company signed a sponsored research agreement with UTSW extending
through March 31, 2007 for $190,000 which will grant the Company certain rights
to intellectual property.
In
October 2003, the Company executed an exclusive license agreement with the
University of Texas System ("UTMB") for the use of luminally-active steroids,
including beclomethasone dipropionate (BDP) in the treatment of irritable bowel
syndrome. Pursuant to this agreement, the Company paid UTMB a license fee of
$10,000 and also agreed to pay an additional $10,000 license fee expense each
year. The Company also agreed to pay past and future patent maintenance costs.
The cost for 2007 and 2006 were $3,575 and $14,012, respectively. The Company
acquired a sublicense agreement and may receive payments on this sublicense in
the event of the sublicensee reaching certain milestones.
In July
2006, the Company signed a sponsored research agreement for $37,500 with Thomas
Jefferson University ("TJU"). In 2005, the Company signed a sponsored research
agreement for $150,000. In May 2003, the Company signed a license agreement with
TJU for the licensure of detoxified botulinum toxin for use as a vaccine. The
Company paid TJU $30,000 in cash and issued 141,305 shares of common stock
valued at $130,000. The Company also agreed to reimburse TJU for past and future
patent maintenance. The patent maintenance expense for 2006 and 2005 was $74,260
and $35,665 respectively. The patent costs are capitalized. The Company is also
responsible for a license maintenance fee of $10,000 in 2005 and $15,000 in 2006
and each year thereafter. These costs are expensed as incurred. The
Company must also pay TJU $200,000, upon the first filing of any New Drug
Application (“NDA”) with the United States Food and Drug Administration (“FDA”)
and $400,000 upon first approval of an NDA relating to the first licensed
product by FDA.
6. Shareholders’
Equity
Preferred
Stock
The
Company has 5 million authorized shares of preferred stock, none are issued or
outstanding.
Common
Stock
On
February 9, 2007, the Company sold 11,680,850 shares of the Company’s
common stock to institutional investors and certain of the Company’s officers
and directors for a purchase price of $5,490,000.
On
January 3, 2007, in consideration for entering into an exclusive letter of
intent, Sigma-Tau agreed to purchase $1,000,000 of the Company’s common stock at
the market price of $0.246 per share, representing 4,065,041 shares of common
stock, and contributed an additional $2 million in cash. The $2 million
contribution was to be considered an advance payment to be deducted from future
payments due to the Company by Sigma-Tau pursuant to any future orBec®
commercialization arrangement reached between the two parties. Because of this
transaction’s dilutive nature, all investors in the April 2006 private placement
had their warrants repriced to $0.246. Additionally, certain shareholders in
that placement who still held shares of the Company’s common stock were issued
additional shares as a cost basis adjustment from $0.277 to $0.246 per share of
the Company’s common stock. Neither these investors, nor any other investors
hold any further anti-dilution rights. Because no agreement was
reached by March 1, 2007, the Company was obligated to return the $2 million to
Sigma-Tau by April 30, 2007. On June 1, 2007, the Company returned
the $2 million to Sigma-Tau.
On May
10, 2006, the Company completed a merger pursuant to which Enteron
Pharmaceutical, Inc. (“Enteron”), the common stock of which the Company held
88.13% prior to the merger, was merged into a wholly-owned subsidiary of the
Company. Pursuant to this transaction, the Company issued 3,068,183 shares of
common stock to the Enteron minority shareholders in exchange for all of the
outstanding common stock of Enteron that the Company did not already own. This
transaction was accounted for as a purchase, and accordingly the Company
recorded an in-process research and development expense of $981,819. The common
stock was recorded at the shares’ fair market value on the date of the
merger.
On April
10, 2006, the Company sold 13,099,964 shares of common stock to institutional
and other accredited investors for a purchase price, net of expenses, of
$3,410,032. The investors also received warrants to purchase 13,099,964 shares
of common stock at an exercise price of $0.45 per share. The warrants are
exercisable for a period of three years commencing on April 10, 2006. The
Company filed a registration statement with the SEC and it was declared
effective on May 25, 2006.
On
January 17, 2006, the Company entered into a common stock purchase agreement
with Fusion Capital Fund II, LLC. The Fusion Capital facility allowed them to
purchase on each trading day $20,000 of the Company common stock up to an
aggregate of $6,000,000 million over approximately a 15-month period. As part of
that agreement, the Company issued Fusion Capital 512,500 shares of common stock
as a commitment fee, the non-cash payment for this was $220,374 valued at the
shares’ fair market value. During 2006, Fusion Capital purchased 329,540 common
shares for $ 124,968. The 2006 Fusion Capital agreement expired after the 15
month term of the contract expired.
Stock
Compensation to Employees and Non-employees
During
the years ended December 31, 2007 and 2006, the Company issued 829,821 and
506,942 shares of common stock, respectively, as payment to vendors for
consulting services. An expense of $330,500 and $134,679, respectively, was
recorded, which approximated the shares’ fair market value on the date of
issuance. Additionally, in 2007, the Company issued 373,607 shares of common
stock as part of severance payments. In 2006, the Company issued
207,896 shares of common stock as part of severance payments to terminated
employees and 165,711 shares of common stock to employees. An expense of $35,133
and $50,000, respectively, was recorded, which approximated the shares’ fair
market value on the date of issuance. In 2006, the Company issued 193,413 shares
of common stock as part of severance payments to terminated employees and 28,648
shares of common stock to employees. An expense of $75,979 and $6,875,
respectively, was recorded, which approximated the shares’ fair market value on
the date of issuance. These shares of common stock issued were covered by the
Company’s Form S-8 Registration Statement filed with the SEC on December 30,
2005 and amended in September 2007.
The
dilutive nature of the Sigma-Tau transaction on January 3, 2007 required that
all prior investors in the April 2006 private placement had their warrants
repriced to $0.246. Additionally, certain shareholders who still held shares of
the Company’s common stock were issued 995,947 shares of the Company’s common
stock and the Company recorded an expense of $308,743. Neither these investors,
nor any other investors, hold any further anti-dilution rights.
For the
12 months ended December 31, 2007, stock options were exercised to purchase
1,737,200 shares of common stock which provided $633,895 to the Company. For the
corresponding period in 2006, 504,100 stock options were exercised to purchase
shares of common stock which provided proceeds of $113,320 to the
Company.
7.
Stock Option Plans and Warrants to Purchase Common Stock
Stock
Options
The 2005
Equity Incentive Plan is divided into four separate equity programs: 1) the
Discretionary Option Grant Program, under which eligible persons may, at the
discretion of the Plan Administrator, be granted options to purchase shares of
common stock, 2) the Salary Investment Option Grant Program, under which
eligible employees may elect to have a portion of their base salary invested
each year in options to purchase shares of common stock, 3) the Automatic Option
Grant Program, under which eligible nonemployee Board members will automatically
receive options at periodic intervals to purchase shares of common stock, and 4)
the Director Fee Option Grant Program, under which non-employee Board members
may elect to have all, or any portion, of their annual retainer fee otherwise
payable in cash applied to a special option grant. In addition under the plan
the Board may elect to pay certain consultants, directors, and employees in
common stock. The Plan was amended in September 2007 to increase the number of
shares of common stock available under the plan to 20,000,000. The table below
only accounts for transactions occurring as part of the amended 2005 Equity
Incentive Plan.
December 31,
|
|
2007
|
2006
|
|
|
|
|
|
|
|
|
|
Shares
available for grant at beginning of year
|
3,236,032
|
|
|
7,000,000
|
|
|
Increase
in shares available
|
10,000,000
|
|
|
-
|
|
|
Options
granted
|
( 3,375,000
|
)
|
|
( 4,360,000
|
)
|
|
Options
forfeited or expired
|
1,140,000
|
|
|
1,325,000
|
|
|
Common
stock payment for services
|
( 388,071
|
)
|
|
( 728,968
|
)
|
|
Shares
available for grant at end of year
|
10,612,961
|
|
|
3,236,032
|
|
In 2007
and 2006, options were exercised to purchase 1,487,200 and 504,100 shares of
common stock, respectively, that were covered under the 1995 plan.
The total
option activity for the 1995 plan and the amended 2005 plan for the years ended
December 31, 2007 and 2006 was as follows:
|
|
Options
|
Weighted
Average
Options Exercise Price
|
|
Balance
at January 1, 2006
|
10,014,339
|
|
|
$ 0.59
|
|
|
Granted
|
4,360,000
|
|
|
0.30
|
|
|
Forfeited
|
( 2,230,900
|
)
|
|
0.83
|
|
|
Exercised
|
( 504,100
|
)
|
|
0.22
|
|
|
Balance
at December 31, 2006
|
11,639,339
|
|
|
0.59
|
|
|
Granted
|
3,375,000
|
|
|
0.46
|
|
|
Forfeited
|
( 2,927,300
|
)
|
|
0.73
|
|
|
Exercised
|
( 1,737,200
|
)
|
|
0.36
|
|
|
Balance
at December 31, 2007
|
10,349,839
|
|
|
$ 0.44
|
|
The
weighted-average exercise price, by price range, for outstanding options at
December 31, 2007 was:
|
Price
Range
|
|
Weighted
Average Remaining
Contractual Life in Years
|
|
Outstanding
Options
|
|
Exercisable
Options
|
|
$0.20-$0.50
|
|
8.12
|
|
9,020,000
|
|
5,884,756
|
|
$0.51-$1.00
|
|
2.69
|
|
962,839
|
|
962,839
|
|
$1.01-$6.00
|
|
3.17
|
|
367,000
|
|
367,000
|
|
Total
|
|
7.53
|
|
10,349,839
|
|
7,214,595
|
Stock
options are issued at the market price on the date of issuance. Stock options
issued to directors fully vest upon issuance. Stock options issued to employees
generally vest 25% upfront, then 25% each year for a period of three years.
These options have a ten year life for as long as the individuals are employees
or directors. In general when an employee or director terminates their
relationship with the Company, the options will expire within three
months.
From time
to time, the Company grants warrants to consultants and grants warrants to
purchase common stock in connection with private
placements.
Warrants to purchase common
stock
Warrant
activity for the years ended December 31, 2007 and 2006 was as
follows:
|
|
Warrants
|
Weighted
Average
Warrant Exercise Price
|
|
Balance
at January 1, 2006
|
22,167,118
|
|
|
$ 0.92
|
|
|
Granted
|
14,961,672
|
|
|
0.25
|
|
|
Balance
at December 31, 2006
|
37,128,790
|
|
|
0.65
|
|
|
Granted
|
560,106
|
|
|
0.59
|
|
|
Expired
|
(
2,178,909
|
)
|
|
1.90
|
|
|
Exercised
|
(
6,458,287
|
)
|
|
0.25
|
|
|
Balance
at December 31, 2007
|
29,051,700
|
|
|
$ 0.70
|
|
During
2006, warrants to purchase 500,000 shares of common stock were issued to
vendors and an expense in the amount of $121,965 was recorded.
During
2008, warrants to purchase approximately 10,000,000 shares of common stock
will expire. By April 2009, warrants to purchase a total of
approximately 20,000,000 shares of common stock will expire.
The
weighted-average exercise price, by price range, for outstanding warrants at
December 31, 2007 was:
|
Price
Range
|
|
Weighted
Average Remaining
Contractual Life in Years
|
|
Outstanding
Warrants
|
|
Exercisable
Warrants
|
|
$0.24-$0.50
|
|
1.23
|
|
8,503,386
|
|
8,503,386
|
|
$0.505-$1.00
|
|
1.67
|
|
18,328,622
|
|
18,328,622
|
|
$1.01-$2.00
|
|
0.29
|
|
2,012,622
|
|
2,012,622
|
|
$8.11
|
|
0.86
|
|
207,070
|
|
207,070
|
|
Total
|
|
1.44
|
|
29,051,700
|
|
29,051,700
|
8. Income Taxes
Deferred
tax assets as of December 31:
|
|
2007
|
|
|
|
2006
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
Net
operating loss carry forwards
|
$
25,000,000
|
|
$25,000,000
|
|
|
Orphan
drug and research and development credit carry forwards
|
2,000,000
|
|
3,000,000
|
|
|
Other
|
3,000,000
|
|
3,000,000
|
|
|
Total
|
30,000,000
|
|
31,000,000
|
|
|
Valuation
allowance
|
( 30,000,000
|
)
|
( 31,000,000
|
)
|
|
Net
deferred tax assets
|
$
-
|
|
$ -
|
|
At
December 31, 2007, the Company had net operating loss carry forwards of
approximately $73,000,000 for Federal and state tax purposes, which are
currently expiring each year until 2026.
The net
change in the valuation allowance for the year ended December 31, 2007 and
December 31, 2006 was an increase of approximately $6,000,000 and $5,000,000
respectively, resulting primarily from net operating losses generated. Based on
ownership changes that have and may occur, future utilization of the net
operating loss carry forwards may be limited.
The
following is the approximate amount of the Company’s tax credits and net
operating losses that expire over the next five years:
|
2008
|
$ 910,000
|
|
2009
|
1,330,000
|
|
2010
|
1,410,000
|
|
2011
|
870,000
|
|
2012
|
3,870,000
|
Reconciliations
of the difference between income tax benefit computed at the federal and state
statutory tax rates and the provision for income tax benefit for the years ended
December 31, 2007 and 2006 was as follows:
|
|
2007
|
|
2006
|
|
|
|
|
|
|
Income
tax loss at federal statutory rate
|
(34.00)%
|
|
(34.00)%
|
|
State
taxes, net of federal benefit
|
(4.29)
|
|
(3.63)
|
|
Permanent
differences, principally purchased
in-process
research and development
|
-
|
|
3.30
|
|
Valuation
allowance
|
38.29
|
|
34.33
|
|
Provision
for income taxes (benefit)
|
-
%
|
|
-
%
|
Due to
the move of the corporate offices to New Jersey, the Florida net operating loss
is suspended.
The
Company and one or more of its subsidiaries files income tax returns in the U.S.
Federal jurisdiction, and various state and local jurisdictions. The Company is
no longer subject to income tax assessment for years before 2004. However, since
the Company has incurred net operating losses in every tax year since inception,
all its income tax returns are subject to examination by the Internal Revenue
Service and state authorities for purposes of determining the amount of net
operating losses to reduce taxable income generated in a given tax
year.
9.
Risks and Uncertainties
The
Company is subject to risks common to companies in the biotechnology industry,
including, but not limited to, litigation, product liability, development of new
technological innovations, dependence on key personnel, protections of
proprietary technology, and compliance with FDA regulations.
10.
Concentrations
During
the year ended December 31, 2007, the Company had one vendor that constituted
approximately 12% of the outstanding payables.
At
December 31, 2007 and 2006, the Company had deposits in financial institutions
that exceeded the amount covered by the Federal Deposit Insurance Company. The
excess amounts at December 31, 2007 and December 31, 2006 were $2,020,128 and
$19,636, respectively. These funds are held at a major banking
institution.
11. Subsequent Events
On
February 14, 2008, the Company entered into a common stock purchase agreement
with Fusion Capital Fund II, LLC (“Fusion Capital”). In connection with the
execution of the common stock purchase agreement, Fusion Capital purchased
2,777,778 common shares and a four year warrant to purchase 1,388,889 shares of
common stock for $0.22 per share, for an aggregate price of $500,000. As part of
the agreement, the Company issued Fusion Capital 1,275,000 shares of common
stock as a commitment fee. The Fusion Capital facility allows the Company to
require Fusion Capital to purchase between $80,000 and $1,000,000 depending on
certain conditions, of the Company’s common stock up to an aggregate of
$8,500,000 over approximately a 25-month period. If the Company’s stock price
exceeds $0.15, then the amount required to be purchased may be increased under
certain conditions as the price of the Company’s common stock increases. The
Company cannot require Fusion Capital to purchase any shares of the Company’s
common stock on any trading days that the market price of the Company’s common
stock is less than $0.10 per share.
On February 14, 2008, the Company sold
881,11
2
shares of our common stock to institutional and other
accredited investors for an aggregate purchase price of approximately $158,600.
The investors received four year warrants to purchase an aggregate of 440,556
shares of our common stock at an exercise price of $0.22 per
share.
During November 2008, the Registrant
issued 213,539 shares of common stock
for services rendered to
the Registrant. The value of these
shares was approximately $15,000.
On December 1, 2008, the Registrant issued 16,666,667
shares of common stock in connection with the letter of intent entered into with
Sigma-Tau Pharmaceuticals, Inc. for $1,500,000.
On January 20, 2009, the Registrant completed a private
placement in which it issued 20,914,035 shares of common stock at $0.114 per
share, and warrants to purchase 20,914,035 shares of common stock, resulting in
net proceeds of $2,384,200. Also, as part of the compensation
received for its assistance in the private placement, the placement agent
received $114,000 cash and warrants to purchase an aggregate of 1,000,000 shares
of the Registrant's common stock at an exercise price of $0.14 per
share.
On
February
11, 2009, the
Registrant issued 25 million shares of common stock in connection with the
collaboration and supply agreement entered into with Sigma-Tau Pharmaceuticals,
Inc. for $4,500,000.
12.
Business Segments
The
Company had two active segments for the year ended December 31, 2007 and
December 31, 2006: BioDefense and BioTherapeutics. Summary
data:
|
|
|
December
31,
|
|
|
|
|
2007
|
|
2006
|
|
|
Net
Revenues
|
|
|
|
|
|
|
|
|
BioDefense
|
|
$
|
1,258,017
|
|
$
|
2,173,128
|
|
|
BioTherapeutics
|
|
|
-
|
|
|
139,892
|
|
|
Total
|
|
$
|
1,258,017
|
|
$
|
2,313,020
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from Operations
|
|
|
|
|
|
|
|
|
BioDefense
|
|
$
|
( 109,699
|
)
|
$
|
(
1,973,732
|
)
|
|
BioTherapeutics
|
|
|
(
2,748,764
|
)
|
|
(
5,061,664
|
)
|
|
Corporate
|
|
|
(
3,468,620
|
)
|
|
(
1,164,152
|
)
|
|
Total
|
|
$
|
(
6,327,083
|
)
|
$
|
(
8,199,548
|
)
|
|
|
|
|
|
|
|
|
|
|
Identifiable
Assets
|
|
|
|
|
|
|
|
|
BioDefense
|
|
$
|
896,383
|
|
$
|
849,295
|
|
|
BioTherapeutics
|
|
|
552,248
|
|
|
343,876
|
|
|
Corporate
|
|
|
2,335,248
|
|
|
213,799
|
|
|
Total
|
|
$
|
3,783,879
|
|
$
|
1,406,970
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
and Depreciation Expense
|
|
|
|
|
|
|
|
|
BioDefense
|
|
$
|
90,185
|
|
$
|
103,855
|
|
|
BioTherapeutics
|
|
|
24,312
|
|
|
24,395
|
|
|
Corporate
|
|
|
5,068
|
|
|
8,794
|
|
|
Total
|
|
$
|
119,565
|
|
$
|
137,044
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Income
|
|
|
|
|
|
|
|
|
Corporate
|
|
$
|
164,847
|
|
$
|
41,510
|
|
|
Total
|
|
$
|
164,847
|
|
$
|
41,510
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Option Compensation
|
|
|
|
|
|
|
|
|
BioDefense
|
|
$
|
69,591
|
|
$
|
98,937
|
|
|
BioTherapeutic
|
|
|
161,077
|
|
|
120,958
|
|
|
Corporate
|
|
|
446,733
|
|
|
337,287
|
|
|
Total
|
|
$
|
677,401
|
|
$
|
557,182
|
|
|
|
|
|
|
|
|
|
|
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
ITEM
13.
Other Expenses of
Issuance and Distribution.
The
following table sets forth the estimated costs and expenses of the Registrant in
connection with the offering described in the registration statement.
|
SEC
registration
fee
|
$ 211
|
|
Legal
fees and
expenses
|
$15,000
|
|
Accounting
fees and
expenses
|
$ 2,000
|
|
Miscellaneous
|
$ 1,000
|
|
|
|
|
TOTAL
|
$18,211
|
ITEM
14.
Indemnification of
Directors and Officers.
Section
102(b)(7) of the Delaware General Corporation Law grants the Registrant the
power to limit the personal liability of its directors to the Registrant or its
stockholders for monetary damages for breach of a fiduciary duty. Article X of
the Registrant’s Certificate of Incorporation, as amended, provides for the
limitation of personal liability of the directors of the Registrant as
follows:
“A
Director of the Corporation shall have no personal liability to the corporation
or its stockholders for monetary damages for breach of his fiduciary duty as a
Director; provided, however, this Article shall not eliminate or limit the
liability of a Director (i) for any breach of the Director’s duty of loyalty to
the Corporation or its stockholders; (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law;
(iii) for the unlawful payment of dividends or unlawful stock repurchases under
Section 174 of the General Corporation Law of the State of Delaware; or (iv) for
any transaction from which the Director derived an improper personal benefit. If
the General Corporation Law is amended after approval by the stockholders of
this Article to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the General Corporation Law of the State of Delaware, as so
amended.”
Article
VIII of the Registrant's Bylaws, as amended and restated, provide for
indemnification of directors and officers to the fullest extent permitted by
Section 145 of the Delaware General Corporation Law.
The
Registrant has a directors’ and officers’ liability insurance
policy.
The above
discussion is qualified in its entirety by reference to the Registrant’s
Certificate of Incorporation and Bylaws.
ITEM
15.
Recent Sales of
Unregistered Securities.
Under the terms of a Securities Purchase Agreement dated
as of April 6, 2006 among the Registrant and the institutional and other
accredited investors named therein, the Registrant issued 13,099,964 shares of
its common stock to the investors, for aggregate gross proceeds of $3,630,000,
and warrants, exercisable for three years, to purchase an aggregate of
13,099,964 shares of the Registrant’s common stock at an exercise price of $0.45
per share. Such securities were issued pursuant to an exemption
provided by Section 4(2) of the Securities Act of 1933, as amended, and Rule 506
of Regulation D promulgated thereunder.
On January 3, 2007, the Registrant completed a private
placement in which it issued 4,065,041 shares of common stock at $0.246 per
share, resulting in net proceeds of $1 million. The shares of common
stock were issued in transactions exempt from registration under the Securities
Act, in reliance upon Rule 506 of Regulation D under Section 4(2) of the
Securities Act, as transactions not involving a public
offering.
Under the terms of a Securities Purchase Agreement dated
as of February 9, 2007 among the Registrant and institutional investors and
certain of its officers and directors named therein, the Registrant issued
11,680,850 shares of its common stock to the investors, for aggregate gross
proceeds of $5,490,000. Also, as part of the compensation received for its
assistance in the private placement, the placement agent received $259,950 cash
and warrants to purchase an aggregate of 560,106 shares of the Registrant's
common stock at an exercise price of $0.59 per share. Such securities were
issued pursuant to an exemption provided by Section 4(2) of the Securities Act
of 1933, as amended, and Rule 506 of Regulation D promulgated
thereunder.
On February 14, 2008, the Registrant entered into a
common stock purchase agreement with Fusion Capital. Pursuant to the
agreement, the Registrant issued to Fusion Capital 1,275,000 shares of common
stock as a partial commitment fee, and 2,777,778 common shares and a four year
warrant to purchase 1,388,889 shares of common stock for $0.22 per share, for an
aggregate price of $500,000. Such securities were issued pursuant to
an exemption provided by Section 4(2) of the Securities Act of 1933, as amended,
and Rule 506 of Regulation D promulgated thereunder.
On February 14, 2008, the Registrant sold
881,11
2
shares of its common stock to institutional and other
accredited investors for an aggregate purchase price of approximately $158,600.
The investors also received four year warrants to purchase an aggregate of
440,556 shares of our common stock at an exercise price of $0.22 per share. Such
securities were issued pursuant to an exemption provided by Section 4(2) of the
Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated
thereunder.
During June
2008, the Registrant issued warrants to purchase up to 100,000 shares of common
stock at an exercise price of $0.12 per share for services rendered to the
Registrant.
The warrants
were offered in transactions exempt from registration under the Securities Act
in reliance upon Rule 506 of Regulation D under Section 4(2) of the Securities
Act, as transactions not involving a public offering.
During
November 2008, the Registrant issued 213,539 shares of common stock for services
rendered to the Registrant. The value of these shares was approximately
$15,000.
The
shares of common stock were offered in transactions exempt from
registration under the Securities Act in reliance upon Rule 506 of Regulation D
under Section 4(2) of the Securities Act, as transactions not involving a public
offering.
On December 1, 2008, the Registrant issued
16,666,667 shares of common stock
in connection with
the letter of intent entered into with Sigma-Tau Pharmaceuticals, Inc
.
for
$1,500,000.
Such
securities were issued pursuant to an exemption provided by Section 4(2) of the
Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated
thereunder.
During
December 2008, the Registrant issued warrants to purchase up to 300,000 shares
of common stock at an exercise price of $0.06 per share
to
Little Gem Life Sciences Fund, LLC
for
services rendered to the Registrant.
The warrants
were offered in transactions exempt from registration under the Securities Act
in reliance upon Rule 506 of Regulation D under Section 4(2) of the Securities
Act, as transactions not involving a public offering.
On
January 20, 2009, the Registrant completed a private placement in which it
issued 20,914,035 shares of common stock at $0.114 per share, and warrants to
purchase
20,914,035
shares of
common stock, resulting in net proceeds of
$2,384,200.
Also, as part of the
compensation received for its assistance in the private placement, the placement
agent received $114,000 cash and warrants to purchase an aggregate of 1,000,000
shares of the Registrant's common stock at an exercise price of $0.14 per
share.
The shares of common stock were issued in transactions
exempt from registration under the Securities Act, in reliance upon Rule 506 of
Regulation D under Section 4(2) of the Securities Act, as transactions not
involving a public offering.
During
January 2009, the Registrant issued warrants to purchase up to 50,000 shares of
common stock at an exercise price of $0.10 per share for services rendered to
the Registrant.
The warrants
were offered in transactions exempt from registration under the Securities Act
in reliance upon Rule 506 of Regulation D under Section 4(2) of the Securities
Act, as transactions not involving a public offering.
On
February 11, 2009, the Registrant issued warrants to purchase up to 1,000,000
shares of common stock at an exercise price of $0.11 per share to Dr. George B.
McDonald for services rendered to the Registrant.
The warrants
were offered in transactions exempt from registration under the Securities Act
in reliance upon Rule 506 of Regulation D under Section 4(2) of the Securities
Act, as transactions not involving a public offering.
On
February
11,
2009,
the
Registrant issued 25 million
shares
of
common
stock at an exercise price of $0.18 per share in connection with the
collaboration and supply agreement entered into with Sigma-Tau Pharmaceuticals,
Inc. for $4,500,000.
Such
securities were issued pursuant to an exemption provided by Section 4(2) of the
Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated
thereunder.
ITEM
16.
Exhibits.
|
2.1
|
Agreement
and Plan of Merger, dated May 10, 2006 by and among the Company, Corporate
Technology Development, Inc., Enteron Pharmaceuticals, Inc. and CTD
Acquisition, Inc. (incorporated by reference to Exhibit 2.1 included in
our Registration Statement on Form SB-2 (File No. 333-133975) filed on May
10, 2006).
|
|
3.1
|
Amended
and Restated Certificate of Incorporation (incorporated by reference to
Exhibit 3.1 included in our Quarterly Report on Form 10-QSB, as amended,
for the fiscal quarter ended September 30, 2003).
|
|
3.2
|
Certificate
of Amendment to Amended and Restated Certificate of Incorporation
(incorporated by reference to Exhibit 4.2 included in our Registration
Statement on Form S-8 (File No. 333-130801) filed on December 30,
2005).
|
|
3.3
|
Certificate
of Amendment to Amended and Restated Certificate of Incorporation
(incorporated by reference to Annex A to our Proxy Statement filed
December 12, 2006).
|
|
3.4
|
By-laws
(incorporated by reference to Exhibit 3.1 included in our Quarterly
Report on Form 10-QSB, as amended, for the fiscal quarter ended June 30,
2003).
|
|
3.5
|
Certificate
of Designations of Series A Junior Participating Preferred Stock
(incorporated by reference to Exhibit 3.1 included in our current
report on Form 8-K filed on June 22, 2007).
|
|
4.1
|
Form
of Investor Warrant issued to each investor dated as of April 12, 2000
(incorporated by reference to Exhibit 4.4 included in our Registration
Statement on Form S-3 (File No. 333- 36950), as amended on December 29,
2000).
|
|
4.2
|
Finder
Warrant issued to Paramount Capital, Inc. dated as of April 12, 2000
(incorporated by reference to Exhibit 4.5 included in our Registration
Statement on Form S-3 (File No. 333- 36950), as amended on December 29,
2000).
|
|
4.3
|
Warrant
issued to Aries Fund dated as of May 19, 1997 (incorporated by reference
to Exhibit 4.6 included in our Registration Statement on Form S-3 (File
No. 333- 36950), as amended on December 29, 2000).
|
|
4.4
|
Warrant
issued to Aries Domestic Fund, L.P. dated as of May 19, 1997 (incorporated
by reference to Exhibit 4.7 included in our Registration Statement on Form
S-3 (File No. 333- 36950), as amended on December 29, 2000).
|
|
4.5
|
Warrant
issued to Paramount Capital, Inc. dated as of October 16, 1997
(incorporated by reference to Exhibit 4(i)(c) included in our Quarterly
Report on Form 10-QSB, as amended, for the fiscal quarter ended September
30, 1997).
|
|
4.6
|
Warrant
issued to Paramount Capital, Inc. dated as of October 16, 1997
(incorporated by reference to Exhibit 4(i)(d) included in our Quarterly
Report on Form 10-QSB, as amended, for the fiscal quarter ended September
30, 1997).
|
|
4.7
|
Warrant
issued to Élan International Services, Ltd. Dated January 21, 1998
(incorporated by reference to Exhibit 4.4 included in our Annual Report on
Form 10-KSB, as amended, for the fiscal year ended December 31,
1997).
|
|
4.8
|
Form
of Warrant to be issued to CTD warrant holders (incorporated by reference
to Exhibit 4.12 include in our Registration Statement on Form S-4 filed on
October 2, 2001).
|
|
4.9
|
Form
of Warrant issued to each investor in the December 2002 private placement
(incorporated by reference to Exhibit 4.9 included in our Annual Report on
Form 10-KSB, as amended, for the fiscal year ended December 31,
2003).
|
|
4.10
|
Form
of Warrant issued to each investor in the September 2003 private placement
(incorporated by reference to Exhibit 99.4 included in our current report
on Form 8-K filed on July 18, 2003).
|
|
4.11
|
Form
of Warrant issued to each investor in the March 2004 private placement
(incorporated by reference to Exhibit 99.4 included in our current report
on Form 8-K filed on March 4, 2004).
|
|
4.12
|
Form
of Warrant issued to each investor in the February 2005 private placement
(incorporated by reference to Exhibit 10.2 included in our current
report on Form 8-K filed on February 3, 2005).
|
|
4.13
|
Form
of Warrant issued to each investor in the April 2006 private placement
(incorporated by reference to Exhibit 10.2 included in our current
report on Form 8-K filed on April 7, 2006).
|
|
4.14
|
Form
of Warrant issued to finders in connection with the February 2007 private
placement. (incorporated by reference to Exhibit 4.14 included in our
registration statement on Form SB-2 filed on April 16, 2007).
|
|
4.15
|
Rights
Agreement dated June 22, 2007, between the Company and American
Stock Transfer & Trust Company, as Rights Agent (incorporated by
reference to Exhibit 4.1 included in our current report on Form 8-K
filed on June 22, 2007).
|
|
4.16
|
Form
of Right Certificate (incorporated by reference to Exhibit 4.2 included
in our current report on Form 8-K filed on June 22,
2007).
|
|
4.17
|
Warrant
dated February 14, 2008, issued to Fusion Capital Fund II, LLC
(incorporated by reference to Exhibit 4.17 included in our Registration
Statement on Form S-1 (File No. 333-149239) filed on February 14,
2008).
|
|
4.18
|
Form
of Warrant issued to each investor in the February 2008 private placement
(incorporated by reference to Exhibit 10.2 in our current report on Form
8-K filed on January 21, 2009).
|
|
4.19
|
Form
of Warrant issued to each investor in the January 2009 private placement
(incorporated by reference to Exhibit 4.18 included in our Registration
Statement on Form S-1 (File No. 333-149239) filed on February 14,
2008).
|
|
5.1
|
Opinion
of Edwards Angell Palmer & Dodge LLP.*
|
|
10.1
|
Amended
and Restated 1995 Omnibus Incentive Plan (incorporated by reference to
Exhibit 10.1 included in our Quarterly Report on Form 10-QSB, as amended,
for the fiscal quarter ended September 30, 2003).
|
|
10.2
|
Form
of Affiliate Agreement dated as of August 15, 2001 by and between the
Company and the affiliates of CTD (incorporated by reference to Exhibit
10.3 included in our current report on Form 8-K filed on December 14,
2001).
|
|
10.3
|
Noncompetition
and Nonsolicitation Agreement entered into by and among the Company, CTD
and Steve H. Kanzer dated as of November 29, 2001 (incorporated by
reference to Exhibit 10.30 included in our Annual Report on Form 10-KSB as
amended for the fiscal year ended December 31, 2002).
|
|
10.4
|
Termination
of the Endorex Newco joint venture between the Company, Élan Corporation,
Élan International Services, and Elan Pharmaceutical Investments dated
December 12, 2002 (incorporated by reference to Exhibit 10.37 included in
our Annual Report on Form 10-KSB as amended for the fiscal year ended
December 31, 2002).
|
|
10.5
|
Option
Agreement with General Alexander M. Haig Jr. (incorporated by reference to
Exhibit 10.39 included in our Annual Report on Form 10-KSB as amended for
the fiscal year ended December 31, 2002).
|
|
10.6
|
Separation
agreement and General Release between the Company and Ralph Ellison dated
July 9, 2004 (incorporated by reference to Exhibit 10.7 included in our
Annual Report on Form 10-KSB, as amended, for the fiscal year ended
December 31, 2004).
|
|
10.7
|
License
Agreement between the Company and the University of Texas Southwestern
Medical Center (incorporated by reference to Exhibit 10.8 included in our
Annual Report on Form 10-KSB, as amended, for the fiscal year ended
December 31, 2004).
|
|
10.8
|
License
Agreement between the Company and Thomas Jefferson University
(incorporated by reference to Exhibit 10.9 included in our Annual Report
on Form 10-KSB, as amended, for the fiscal year ended December 31,
2004).
|
|
10.9
|
License
Agreement between the Company and the University of Texas Medical Branch
(incorporated by reference to Exhibit 10.10 included in our Annual Report
on Form 10-KSB, as amended, for the fiscal year ended December 31,
2004).
|
|
10.10
|
Consulting
Agreement between the Company and Lance Simpson of Thomas Jefferson
University. (incorporated by reference to Exhibit 10.43 included in our
Annual Report on Form 10-KSB as amended for the fiscal year ended December
31, 2002).
|
|
10.11
|
Form
of Subscription Agreement between the Company and each investor dated July
18, 2003 (incorporated by reference to Exhibit 99.3 included in our
current report on Form 8-K filed on July 18, 2003).
|
|
10.12
|
Form
of Securities Purchase Agreement between the Company and each investor
dated March 4, 2004 (incorporated by reference to Exhibit 99.3 included in
our current report on Form 8-K filed on March 4, 2004).
|
|
10.13
|
Employment
agreement between the Company and Mike Sember dated December 7, 2004
(incorporated by reference to Exhibit 10.16 included in our Annual Report
on Form 10-KSB, as amended, for the fiscal year ended December 31,
2004).
|
|
10.14
|
Employment
agreement between the Company and Evan Myrianthopoulos dated December 7,
2004 (incorporated by reference to Exhibit 10.17 included in our Annual
Report on Form 10-KSB, as amended, for the fiscal year ended December 31,
2004).
|
|
10.15
|
Employment
agreement between the Company and James Clavijo dated February 18, 2005
(incorporated by reference to Exhibit 10.18 included in our Annual Report
on Form 10-KSB, as amended, for the fiscal year ended December 31,
2004).
|
|
10.16
|
Form
of Securities Purchase Agreement between the Company and each investor
dated February 1, 2005 (incorporated by reference to Exhibit 10.1 included
in our current report on Form 8-K filed on February 3,
2005).
|
|
10.17
|
Amendment
No. 1 dated February 17, 2005 to the Securities Purchase Agreement between
the Company and each investor dated February 1, 2005 (incorporated by
reference to Exhibit 10.20 included in our Annual Report on Form 10-KSB,
as amended, for the fiscal year ended December 31, 2004).
|
|
10.18
|
Form
Registration Rights agreement between the Company and each investor dated
February 1, 2005 (incorporated by reference to Exhibit 10.3 included
in our current report on Form 8-K filed on February 3,
2005).
|
|
10.19
|
2005
Equity Incentive Plan (incorporated by reference to Appendix D to our
Proxy Statement filed December 12, 2005).
|
|
10.20
|
Form
S-8 Registration of Stock Options Plan dated December 30, 2005
(incorporated by reference to our registration statement on Form S-8 filed
on December 30, 2005).
|
|
10.21
|
Form
of Securities Purchase Agreement between the Company and each investor
dated January 17, 2006 (incorporated by reference to Exhibit 10.1 included
in our current report on Form 8-K filed on January 20, 2006)
|
|
10.22
|
Form
of Registration Rights agreement between the Company and each investor
dated January 17, 2006 (incorporated by reference to Exhibit 4.1 included
in our current report on Form 8-K filed on January 20,
2006).
|
|
10.23
|
Securities
Purchase Agreement dated as of April 6, 2006 among the Company and the
investors named therein (incorporated by reference to Exhibit 10.1
included in our current report on Form 8-K filed on April 7,
2006).
|
|
10.24
|
Registration
Rights Agreement dated as of April 6, 2006 among the Company and the
investors named therein (incorporated by reference to Exhibit 10.3
included in our current report on Form 8-K filed on April 7,
2006).
|
|
10.25
|
Employment
Agreement, dated as of August 29, 2006, between Christopher J. Schaber,
Ph.D., and the Company (incorporated by reference to Exhibit 10.1 included
in our current report on Form 8-K filed on August 30,
2006).
|
|
10.26
|
Letter
of Intent dated January 3, 2007 by and between DOR BioPharma, Inc. and
Sigma-Tau Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.1
included in our current report on Form 8-K filed on January 4,
2007).
|
|
10.27
|
January
17, 2007 letter from Cell Therapeutics, Inc. to DOR BioPharma, Inc.
(incorporated by reference to Exhibit 10.1 included in our current
report on Form 8-K filed on January 19, 2007).
|
|
10.28
|
Securities
Purchase Agreement dated February 7, 2007 by and among the Company and the
investors named therein (incorporated by reference to Exhibit 10.1
included in our current report on Form 8-K filed on February 12,
2007).
|
|
10.29
|
Registration
Rights Agreement dated February 7, 2007 by among the Company and the
investors named therein (incorporated by reference to Exhibit 10.2
included in our current report on Form 8-K filed on February 12,
2007).
|
|
10.30
|
Letter
from Sigma-Tau Pharmaceuticals, Inc. dated February 21, 2007 (incorporated
by reference to Exhibit 10.1 included in our current report on Form 8-K
filed on February 23, 2007).
|
|
10.31
|
Letter
dated May 3, 2007 between the Company and Sigma-Tau Pharmaceuticals, Inc.
(incorporated by reference to Exhibit 10.1 included in our current
report on Form 8-K filed on May 4, 2007).
|
|
10.32
|
Employment
Agreement dated December 27, 2007, between Christopher
J. Schaber, PhD and the Company (incorporated by reference to
Exhibit 10.1 included in our current report on Form 8-K filed on
December 28, 2007).
|
|
10.33
|
Employment
Agreement dated December 27, 2007, between Evan Myrianthopoulos and the
Company (incorporated by reference to Exhibit 10.2 included in our
current report on Form 8-K filed on December 28, 2007).
|
|
10.34
|
Employment
Agreement dated December 27, 2007, between James Clavijo, CPA and the
Company (incorporated by reference to Exhibit 10.3 included in our
current report on Form 8-K filed on December 28, 2007).
|
|
10.35
|
Common
Stock Purchase Agreement dated February 14, 2008, between the Company and
Fusion Capital Fund II, LLC (incorporated by reference to Exhibit 10.35
included on Form S-1 filed on February 14, 2008).
|
|
10.36
|
Registration
Rights Agreement dated February 14, 2008, between the Company and Fusion
Capital Fund II, LLC (incorporated by reference to Exhibit 10.35 included
in our Registration Statement on Form S-1
(File No. 333-149239)
on Form S-1 filed on February 14,
2008).
|
|
10.37
|
Letter
dated December 1, 2008, between the Company and Sigma-Tau Pharmaceuticals,
Inc. (incorporated by reference to Exhibit 10.1 included in our current
report on Form 8-K filed on December 1, 2008).
|
|
10.38
|
Form of Securities Purchase Agreement between the
Company and each investor dated February 14, 2008
(incorporated by
reference to Exhibit
10.37
included
in our
Registration Statement
on Form
S-1 (File No. 333-149239)
filed on
F
ebruary 14, 2008
).
|
|
10.39
|
Common
Stock Purchase Agreement dated January 12, 2009, between the Company and
accredited investors (incorporated by reference to Exhibit 10.1 included
in our current report on Form 8-K filed on January 21, 2009).
|
|
10.40
|
Registration
Rights Agreement dated January 12, 2009, between the Company and
accredited investors (incorporated by reference to Exhibit 10.3 included
in our current report on Form 8-K filed on January 21, 2009).
|
|
10.41
|
Registration
Rights Agreement dated January 12, 2009, between the Company and
accredited
investors (incorporated by
reference to Exhibit 10.3 included in our current report on Form 8-K filed
on January 21, 2009).
|
|
10.42
|
Exclusive
License Agreement dated November 24, 1998, between Enteron
Pharmaceuticals, Inc. and George B. McDonald,
M.D.*
|
|
10.43
|
Collaboration
and Supply Agreement dated February 11, 2009, betweeen the Company and
Sigma-Tau Pharmaceuticals, Inc.*
†
|
|
10.44
|
Common Stock Purchase Agreement
dated February 11, 2009, between the Company and Sigma Tau
Pharmaceuticals, Inc.*
|
|
23.1
|
Consent
of Sweeney, Matz & Co., LLC, independent registered public accounting
firm.*
|
|
23.2
|
Consent
of Edwards Angell Palmer & Dodge LLC (contained in the opinion filed
as Exhibit 5.1 hereto).*
|
________________
|
*
†
|
Filed herewith.
Portions of this exhibit have been omitted
pursuant to a request for confidential
treatment.
|
|
|
|
|
|
|
ITEM
17.
Undertakings.
(a) The
undersigned registrant hereby undertakes:
(1) To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To
include any prospectus required by Section 10(a)(3) of the Securities Act of
1933;
(ii) To
reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent
post-effective amendment
thereof)
which,
individually or
in the
aggregate
, represent a fundamental change in the information set forth in
the
registration statement. Notwithstanding
the foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to
Rule 424(b)
if, in
the aggregate, the changes in volume and price represent no more than 20
%
change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the effective
registration statement
.
(iii) To
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That,
for the purpose of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
(4) That,
for the purpose of determining liability of the registrant under the Securities
Act of 1933 to any purchaser in the initial distribution of the securities, the
undersigned registrant undertakes that in a primary offering of securities of
the undersigned registrant pursuant to this registration statement, regardless
of the underwriting method used to sell the securities to the purchaser, if the
securities are offered or sold to such purchaser by means of any of the
following communications, the undersigned registrant will be a seller to the
purchaser and will be considered to offer or sell such securities to such
purchaser:
(i) Any
preliminary prospectus or prospectus of the undersigned registrant relating to
the offering required to be filed pursuant to Rule 424;
(ii) Any
free writing prospectus relating to the offering prepared by or on behalf of the
undersigned registrant or used or referred to by the undersigned
registrant;
(iii) The
portion of any other free writing prospectus relating to the offering containing
material information about the undersigned registrant or its securities provided
by or on behalf of the undersigned registrant; and
(iv) Any
other communication that is an offer in the offering made by the undersigned
registrant to the purchaser.
(b) Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant certifies that
it has reasonable grounds to believe that it meets all of the requirements for
filing on Form S-1 and has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Ewing, State of New Jersey, on
the 13th
day of February
2009.
DOR BIOPHARMA,
INC.
By:
/s/ Christopher J. Schaber,
Ph.D.
Christopher
J. Schaber, Ph.D.
President
and Chief Executive Officer
POWER
OF ATTORNEY
KNOW ALL MEN BY THESE
PRESENTS
, that each person whose signature appears below constitutes and
appoints Christopher J. Schaber and Evan Myrianthopoulos, and each of them, his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and in his name, place and stead in any and all
capacities, to sign any or all amendments to this Registration Statement on Form
S-1 (including post-effective amendments), and to file the same, with all
exhibits thereto, and other documents in connection therewith with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully and to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming that said attorneys-in-fact and agents, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.
|
Signature
|
|
Title
|
|
Date
|
|
/s/ Christopher
J. Schaber, Ph.D.
Christopher
J. Schaber, Ph.D.
|
|
Director,
President and Chief Executive Officer (Principal Executive
Officer)
|
|
February 13,
2009
|
|
/s/ Evan
Myrianthopoulos
Evan
Myrianthopoulos
|
|
Director
and Chief Financial Officer (Principal Financial Officer and Principal
Accounting Officer)
|
|
February 13,
2009
|
|
/s/
James S. Kuo
James
S. Kuo
|
|
Chairman
of the Board
|
|
February
13, 2009
|
|
|
|
|
|
|
EXHIBIT 10.42
EXCLUSIVE LICENSE
AGREEMENT
This
Agreement is made effective the 24th day of November, 1998 (the
“Effective Date”), by and between George B. McDonald, M.D. (hereinafter called
the “LICENSOR”), located at 1815 102nd Place S.E., Bellevue, WA 98004, and
Enteron Pharmaceuticals, Inc. (hereinafter called “LICENSEE”), located at 787
Seventh Avenue, 48th Floor, New York, NY 10019.
WHEREAS,
LICENSOR owns the “Licensed Patents” defined below and is willing to grant a
license to LICENSEE under the Licensed Patents; and
WHEREAS,
LICENSEE desires to obtain a license to the Licensed Patents upon the terms and
conditions hereinafter set forth.
NOW,
THEREFORE, it is agreed as follows:
Section
1.
Definitions
.
As used
in the Agreement, the following capitalized terms, whether used in the singular
or plural, shall have the following meanings:
A.
“Affiliate”
means any corporation or other business entity controlled by, controlling, or
under common control with LICENSEE, but only for so long as such control
exists. For purposes of this definition, “control” means (a) direct
or indirect beneficial ownership of at least fifty percent (50%) of the voting
stock of another corporation; or (b) the power, whether or not normally
exercised, to direct or cause the direction of the management, affairs and
policies of another corporation or other legal entity by contract, resolution,
or otherwise.
B.
“Clinical
Trial” means the enrollment of patients with graft-versus-host disease or
patients who have had (or will have had) a bone marrow transplant and,
therefore, are susceptible to graft-versus-host disease into a treatment
protocol whose primary endpoints are the safety and efficacy of the
treatment.
C.
“Calendar
Quarter” means each three-month period ending March 31, June 30, September 30
and December 31.
D.
“Confidential
Information” means all nonpublic technical and commercial information, including
all inventions, inventor or laboratory notebooks and records, formulae, methods,
plans, processes, specifications, experience and trade secrets relating to the
Technology (a) disclosed by one party to the other or (b) developed as a result
of research development or other activity conducted by either party prior to or
during the term of this Agreement,
E.
“Development
Report” means a written account of LICENSEE’s progress under a development plan
identified in Section 3A and Appendix C that contains the information specified
in Appendix B.
F.
“FDA”
means the United States Food and Drug Administration or any successor agency
having the administrative and regulatory authority to approve testing and
marketing of human pharmaceutical or biological prophylactic, therapeutic or
diagnostic products in the United States.
G.
“Know-how”
means all tangible information and data that is owned or controlled by either
party at any time before or during the term of the Agreement and that is related
to the Licensed Process(es) or is necessary or useful in the development,
registration, manufacture, use or sale of the Licensed Product(s), including,
but not limited to, items listed on Appendix D, pharmacological, toxicological,
clinical, analytical, and quality control data, and formulations, materials,
drawings and sketches, designs, testing and test results, and other regulatory
information.
H.
“Licensed
Field’’ means research and development of products for the prevention and
treatment of human diseases.
I.
“Licensed
Patents” shall mean (i) all U.S. and foreign patents and patent applications set
forth in Appendix I; (ii) any later-filed United States and/or foreign patent
applications based on the patent applications and/or patents listed in Appendix
I, or corresponding thereto, including any continuations, continuations-in-part,
divisional, reissues, reexaminations, or extensions thereof; and (iii) any
United Stales and/or foreign patents issuing from any of the
foregoing-
J.
“Licensed
Product” means (i) any product the relevant manufacture, use, sale or
importation of which would, in the applicable country and in the absence of this
License, infringe upon a Valid Claim under the Licensed Patents; or (ii) any
product that is manufactured or used according to any Licensed
Process.
K.
“Licensed
Process” means any method or process the practice of which would, in the
applicable country and in the absence of this License, infringe upon a Valid
Claim under the Licensed Patents.
L.
“NDA”
means a New Drug Application filed with the FDA.
M.
“Net
Sales” means the gross amounts actually received for the sale of Licensed
Product(s) less only the sum of the following:
(i)
Trade
discounts actually allowed to customers on Licensed Product(s);
(ii)
Sales,
tariff duties and/or use taxes directly imposed and paid with reference to sales
of Licensed Product(s) (excluding what is commonly known as income
taxes);
(iii)
Freight,
postage, and insurance charges and additional packaging charges for Licensed
Product(s);
(iv)
Amounts
actually allowed or credited on returns of Licensed Product(s);
(v)
Bad debt
deductions actually written off during the accounting period that directly
relate to Licensed Product(s); and
(vi)
Sales
commissions on sales of Licensed Product(s).
N.
“Orphan
Drug” means a product that is used to treat disease that affects relatively few
people and for which U.S. and foreign government authorities or agencies provide
tax credits or other incentives to make it possible to provide a safe and effect
medical product for the treatment of the disease.
O.
“Regulatory
Approval” means the receipt of notice by a party of approval by the FDA of a NDA
that is effective to permit the introduction of a Licensed Product into
interstate commerce pursuant to 21 U.S.C. 355. “Regulatory Approval”
also includes the equivalent approval or licensure in a country other than the
United States.
P.
“Technology”
means the Know-how and the inventions disclosed or claimed in the Licensed
Patents.
Q.
‘Third
Party” means any individual, corporation or other legal entity other than
LICENSOR, LICENSEE or an Affiliate.
R.
“Valid
Claim” means a claim of any pending patent application or unexpired patent, or
one whose expiration date has been extended by law, so long as such claim shall
withdrawn, canceled, disclaimed, nor held invalid by a court of competent
jurisdiction in an unappealed or unappealable decision.
Section
2.
Grant of
License
.
A.
Grant to
LICENSEE
Subject
to the terms and conditions of this Agreement, LICENSOR hereby grants to
LICENSEE and LICENSEE accepts the following:
(i)
an
exclusive license under the Licensed Patents, including the right to grant
sublicenses to both Affiliates and Third Parties, to practice the Licensed
Process(es) and to make, have made, use, import and sell Licensed Product(s), in
each case worldwide, for use in the Licensed Field.
(ii)
an
exclusive license to the Know-how, including the right to grant sublicenses to
both Affiliates and Third Parties, to practice the Licensed Process(es) and to
make, have made, use, import and sell Licensed Product(s), in each case
worldwide, for use in the Licensed Field.
B.
Limitations
The grant
in Section 2A shall be subject to, restricted by and non-exclusive with respect
to the following:
(i)
LICENSEE
shall use reasonable effort to introduce the Licensed Products for the
prevention of graft-versus-host disease and host-versus-graft disease into the
commercial market as soon as practicable, consistent with sound and reasonable
business practices and judgment, and thereafter endeavor to keep Licensed
Products reasonably available to the public.
(ii)
If
LICENSEE does not have to conduct any Clinical Trials prior to FDA approval of
the first LICENSEE-sponsored NDA for Licensed Product, LICENSOR shall have the
right to terminate or render this Agreement nonexclusive at any time after
eighteen (18) months from the effective date of this Agreement if, in LICENSOR’s
reasonable judgment, LICENSEE:
a)
is not
demonstrably and actively engaged in a research, development, manufacturing,
marketing or licensing program, as appropriate, and obtaining appropriate
Regulatory Approvals that are directed toward putting and keeping Licensed
Product(s) into the commercial market, or
b)
has not,
directly or through a sublicense, put Licensed Product(s) into commercial use or
kept Licensed Product(s) reasonably available to the public in a country or
countries where licensed.
In making
this determination, LICENSOR shall take into account the normal course of such
programs conducted with sound and reasonable business practices and judgment and
shall take into account the reports provided hereunder by LICENSEE.
(iii)
If
LICENSEE does have to conduct Clinical Trials to obtain FDA approval of the
first LICENSEE-sponsored NDA for Licensed Product, LICENSOR shall have the right
to terminate or render this Agreement nonexclusive at any time after five (5)
years from the effective date of this Agreement if, in LICENSOR’s reasonable
judgment, LICENSEE:
a)
is not
demonstrably and actively engaged in a research, development, manufacturing,
marketing or licensing program, as appropriate, and obtaining appropriate
Regulatory Approvals that are directed toward putting and keeping Licensed
Product(s) into the commercial market, or
b)
has not,
directly or through a sublicense, put Licensed Product(s) into commercial use or
kept Licensed Product(s) reasonably available to the public in a country or
countries where licensed.
In making
this determination, LICENSOR shall take into account the normal course of such
programs conducted with sound and reasonable business practices and judgment and
shall take into account the reports provided hereunder by LICENSEE.
(iv)
LICENSEE
shall, at least thirty (30) days prior to granting any sublicense to any
Affiliate or Third Party, identify such Affiliate or Third Party to
LICENSOR. Concurrent with identifying such Affiliate or Third Parry,
LICENSEE shall provide to LICENSOR a copy of the sublicense
agreement. Any sublicense shall be granted in a sublicense agreement
that is consistent with the terms of this Agreement and is in form and substance
acceptable to LICENSOR; provided, however, that a sublicense agreement that is
verified by Licensor to contain the relevant provisions of Sections 1, 2B, 3A,
3C, 4D, 4E, 5, 6, 7, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20 and 21 shall
not require the pre-approval of LICENSOR. In a sublicense agreement,
LICENSEE shall not grant any sublicensee the right to sublicense the Licensed
Patents or Know-how licensed in this Agreement. LICENSEE shall be
liable to LICENSOR for performance by any sublicensee of such sublicenseers
obligations under the sublicense agreement. Any sublicense agreement
shall provide for termination or assignment to LICENSOR, at the option of
LICENSOR, of LICENSEE’s interest therein upon the termination of this
Agreement.
(v)
If
LICENSEE is unable or unwilling to grant sublicenses, either as suggested by
LICENSOR or a potential sublicensee or otherwise, LICENSOR has the right to
directly license such potential sublicensee unless LICENSEE reasonably satisfies
LICENSOR that the granting of such license or sublicense would result in direct
or indirect competition with Licensed Product(s) sold, marketed, or under active
research and development by LICENSEE or would not materially increase the
availability to the general public of Licensed Products.
(vi)
A
nonexclusive, worldwide right to make and use the Technology by LICENSOR solely
for research purposes.
(vii)
It is
understood that if the United States Government (through any of its agencies or
otherwise) has funded research, during the course of or under which any of the
inventions of the Licensed Patents were conceived or made, the United States
Government is entitled, as a right, under the provisions of 35 U.S.C. §§200-212
and applicable regulations of Chapter 37 of the Code of Federal Regulations, to
a nonexclusive, nontransferable, irrevocable, paid up license to practice or
have practiced the invention of such Licensed Patents for government
purposes. Any license granted to LICENSEE in this Agreement will be
subject to such right.
Section
3.
Consideration
.
A.
Development
.
LICENSEE
agrees that it will (i) independently evaluate the Licensed Patents; (ii)
establish and actively pursue the development of the Licensed Patents to enable
Licensed Products to be sold and (iii) supply LICENSOR with a written
Development Report within one month following the end of each semi-annual period
ending on June 30 and December 31 during the term of this Agreement until
LICENSEE (a) obtains Regulatory Approvals of Licensed Product(s) for the
treatment of graft-versus-host disease and host-versus-graft disease and (b)
begins international commercial sales of such Licensed
Product(s). All development activities and all aspects of Licensed
Product design and decisions to market are entirely at the discretion of
LICENSEE, and LICENSEE will rely entirely on its own
expertise. LICENSOR’s review of LICENSEE’s development plan is solely
to verify the existence of LICENSEE’s commitment to Licensed Product development
activity.
B.
License
Fee
.
In
partial consideration for the grant of licenses in this Agreement to LICENSEE,
LICENSEE agrees to pay to LICENSOR a nonrefundable license fee of twenty
thousand dollars ($20,000) within seven (7) calendar days of the execution of
this agreement.
C.
Royalty
.
In
partial consideration for the grant of licenses in this Agreement to LICENSEE
and during the term of this Agreement, LICENSEE agrees to pay the following as
running royalties, which shall not be returnable in any event, to LICENSOR on a
country-by-country basis:
(i)
If
LICENSEE does have to conduct Clinical Trials to obtain FDA approval of the
first LICENSEE-sponsored NDA for Licensed Product, then LICENSEE shall pay to
LICENSOR within forty-five (45) days of the end of each Calendar Quarter in an
amount equal to twenty-five percent (25%) of: (a) any non-recurring
sublicense fees (including, but not limited to, signing, up-front, and lump-sum
fees) and annual license maintenance fees, if any, received from any Affiliate
or Third Party for the right to practice the Licensed Process(es) or make, use,
sell, or import Licensed Product(s); and (b) all royalties received by LICENSEE
from the sale of Licensed Product(s) by any sublicensed Third
Party.
(ii)
If
LICENSEE does not have to conduct any Clinical Trials prior to FDA approval of
the first LICENSEE-sponsored NDA for Licensed Product, then LICENSEE shall pay
to LICENSOR within forty-five (45) days of the end of each Calendar Quarter in
an amount equal to thirty-three percent (33%) of: (a) any
non-recurring sublicense fees (including, but not limited to, signing, up-front,
and lump-sum fees) and annual license maintenance fees, if any, received from
any Affiliate or Third Party for the right to practice the Licensed Process(es)
or make, use, sell, or import Licensed Product(s); and (b) all royalties
received by LICENSEE from the sale of Licensed Product(s) by any sublicensed
Third Party,
(iii)
If
LICENSEE does have to conduct Clinical Trials to obtain FDA approval of the
first LICENSEE-sponsored NDA for Licensed Product, then LICENSEE shall pay
LICENSOR within forty-five (45) days from the end of each Calendar Quarter six
percent (6%) of all Net Sales of Licensed Products by LICENSEE or a sublicensed
Affiliate.
(iv)
If
LICENSEE does not have to conduct any Clinical Trials prior to FDA approval of
the first LICENSEE-sponsored NDA for Licensed Product, then LICENSEE shall pay
LICENSOR within forty-five (45) days from the end of each Calendar Quarter eight
percent (8%) of all Net Sales of Licensed Products by LICENSEE or a sublicensed
Affiliate.
(v)
The
royalty rates in (i), (ii), (iii) and (iv) above shall be reduced by fifty
percent (50%) in any country where a competitor is selling any oral formulation
of the Licensed Product(s) for any indication.
(vi)
No
royalty shall accrue on sales among LICENSEE, its sublicensed Affiliates or
sublicensed Third Parties. Royalties shall only accrue on sales by
LICENSEE, its sublicensed Affiliates or sublicensed Third Parties to parties
other than LICENSEE, its sublicensed Affiliates or sublicensed Third Parties and
shall be payable only once for any given unit of Licensed Product
sold.
(vii)
To the
extent that LICENSEE or any Affiliate of LICENSEE is required, by order or
judgment of any court, to obtain in any country any license from a Third Party
in order to practice the rights purported to be granted hereunder to LICENSEE by
LICENSOR under the Third Party’s issued patents in such country, then fifty
percent (50%) of the royalties payable under such license in such jurisdiction
may be deducted from royalties otherwise payable to LICENSOR hereunder, provided
that in no event shall the aggregate royalties payable to LICENSOR in any
Calendar Quarter in such country be reduced by more than fifty per cent (50%) as
a result of any such deduction.
D.
Milestone
Payments
.
LICENSEE
agrees to pay to LICENSOR three hundred thousand dollars ($300,000) within seven
(7) calendar days of the FDA’s approval of the first LICENSEE-sponsored NDA
incorporating the Technology.
E.
Equity
Participation
.
(i)
In
partial consideration for the grant of licenses in this Agreement to LICENSEE,
LICENSEE shall issue to LICENSOR a number of shares (the “Initial Shares”) of
common stock (the “Common Stock”) of LICENSEE, par value $.001 per share,
representing eight percent (8%) of the outstanding Common Stock as of the date
of execution of the License Agreement, LICENSEE shall issue the Initial Shares
to LICENSOR pursuant to the exemption from registration provided by Section 4(2)
under the Securities Act of 1933, as amended (the “Securities
Act”). The Initial Shares shall be protected from dilution in
connection with any financing transaction by LICENSEE until such time as
LICENSEE has received at least two million dollars ($2,000,000) in gross
proceeds from the issuance of equity securities of LICENSEE. LICENSOR
shall be entitled to receive, in partial consideration for the grant of licenses
this Agreement to LICENSEE, additional shares of Common Stock so as to maintain
his respective percentage ownership of LICENSEE immediately prior to the
applicable financing.
(ii)
If
LICENSEE does not have to conduct any Clinical Trials prior to FDA approval of
the first LICENSEE sponsored NDA for Licensed Product, then LICENSEE also shall
issue to LICENSOR, in partial consideration for the grant of licenses in this
Agreement to LICENSEE, a number of new shares of Common Stock of LICENSEE equal
to the Initial Shares, which shall have the same dilution protection as the
Initial Shares set forth in E(i) above.
F.
Penalty
Payments
.
In the
event LICENSEE has not (i) initiated recruitment of patients for a Phase III
Clinical Trial for the Licensed Products, or (ii) initiated the filing of a NDA
within six (6) months of signing this Agreement, LICENSEE shall pay LICENSOR one
hundred thousand dollars ($100,0,00) within seven (7) calendar days of the six
(6) month anniversary of the Effective Date of this Agreement.
G.
Payments by
Equity
.
(i)
Upon the
request of LICENSOR, LICENSEE shall have the obligation to fulfill any of
LICENSEE’s payment obligations due under this Section 3 through the issuance of
an amount of shares of Common Stock equal to the cash value of any such payment
obligation. Any such issuances of Common Stock shall be made only to
the extent that an exemption from the registration requirements of the
Securities Act exists or the shares are duly registered under the Securities
Act.
(ii)
For
purposes of calculating the cash value of the Common Stock under Section 3G(i),
the then-current market price of the Common Stock will be deemed to be the
average closing price of the Common Stock for the ten (10) consecutive trading
days prior to the date on which any payment pursuant to this Section 3 accrues,
on the principal national securities exchange on which the Common Stock is
admitted to trading or listed, or if not listed or admitted to trading on any
such national exchange, then the representative average closing bid price of the
Common Stock as reported by the National Association of Securities Dealers, Inc.
Automated Quotations System (“Nasdaq”) or other similar organization, or, if the
Common Stock is not reported on Nasdaq or by a similar organization, then the
average per share bid price for the Common Stock in the over-the-counter market
as reported by the National Quotation Bureau or similar organization, or if not
so available, then the fair market price of the Common Stock as determined in
good faith by the Board of Directors of LICENSEE. In connection with
this calculation, LICENSOR, or his representative, shall have access to the
books and records of LICENSEE at any time upon twenty-four (24) hour notice to
LICENSEE. Such access shall occur during normal business hours of
LICENSEE.
(iii)
LICENSEE
agrees that, at any time, and from time to time during the period commencing two
(2) years after the Effective Date hereof, or one (1) year after LICENSEE’S
initial public offering of Common Stock registered under the Securities Act,
whichever is later, and ending on the date that is five (5) years after the
Effective Date hereof, if the Board of Directors of LICENSEE authorizes the
filing of a registration statement under the Securities Act (other than the
initial public offering of LICENSEE’s Common Stock, or a registration statement
on Form S-8, Form S-4 or any other form that does not include substantially the
same information as would be required in a form for the general registration of
securities) in connection with the proposed offer of any of its securities by it
or any of its stockholders, then LICENSEE shall (a) promptly notify LICENSOR
that such registration statement will be filed and that the Common Stock then
held by LICENSOR will be included in such registration statement at LICENSOR’s
request, (b) cause such registration statement to cover all of such Common Stock
issued to LICENSOR and requested for inclusion, (c) use its reasonable best
efforts to cause such registration statement to become effective as soon as
practicable and (d) take all other action necessary under any federal or state
law or regulation of any governmental authority to permit all such Common Stock
that has been issued to LICENSOR and requested by LICENSOR for inclusion in such
proposed registration statement to be sold or otherwise disposed of and shall
maintain such compliance with each such federal and state law and regulation of
any governmental authority for the period necessary to effect the proposed sale
or other disposition of any Common Stock that has been issued to LICENSOR and
requested by LICENSOR for inclusion in the proposed registration
statement.
To the
extent that officers or directors of LICENSEE are permitted to have registered
shares of Common Stock held by any of them included in an initial public
offering of LICENSEE’S Common Stock, LICENSOR shall also have the right to
include the Common Stock then held by LICENSOR in the registration statement
prepared in connection with such an offering.
(iv)
In the
event that LICENSEE grants to any investor(s) the right to require LICENSEE to
effect a registration of Common Stock held by such investors, LICENSOR shall
have the right to require LICENSEE to include the Common Stock held by LICENSOR
in any such registration on the same terms applicable to such
investor(s).
a)
If the
Common Stock owned by LICENSOR is or becomes freely tradable, then LICENSOR
shall have no right to the above described registration rights.
b)
LICENSEE
may at any time, abandon or delay any registration commenced by
LICENSEE.
c)
LICENSOR
represents to LICENSEE that the Common Stock will be acquired by LICENSOR for
investment purposes only, for an indefinite period of time, for its own account,
not as a nominee or agent for any other entity, and not with a view to the sale
or distribution of all or any part thereof, and LICENSOR has no present
intention of selling, granting any participation in, or otherwise distributing,
any or all of the Common Stock. LICENSOR does not have any contract,
undertaking, agreement or arrangement with any entity to sell, transfer or grant
participation to such person, firm or corporation, with respect to any or all of
the Common Stock.
d)
LICENSEE
represents to LICENSOR that LICENSEE shall rely on Section 4(2) under the
Securities Act in connection with the issuance of the Initial Shares to
LICENSOR. In addition, LICENSEE represents to LICENSOR that LICENSEE
shall conduct any further issuances of Common Stock to LICENSOR (under this
Section 3) only in compliance with registration under the Securities Act or an
available exemption from such registration requirements.
e)
The
parties agree to execute such further instruments and to take such further
action as may reasonably be necessary to carry out the intent of this Section
3G.
f)
LICENSOR
agrees that, in connection with each underwritten public offering of shares of
Common Stock or other equity securities of LICENSEE registered under the
Securities Act by or on behalf of LICENSEE, LICENSOR will not sell or transfer,
or offer to sell or transfer, any equity securities of LICENSEE, to the extent
all officers, directors and greater than five percent (5%) shareholders of
LICENSEE are also subject to this restriction for such period as the managing
underwriter of such offering determines is necessary to effect the underwritten
public offering, not to exceed one hundred and eighty (180) days, and LICENSOR
further agrees that it will sign an agreement as requested by the managing
underwriter of such offering to effect the requirements of this Section
3G(iv)(f).
Section
4.
Certain Warranties of
LICENSOR and LICENSEE
.
A.
To
LICENSOR’s knowledge and belief, LICENSOR has all right, title, and interest in
and to the Licensed Patents and Know-How, including exclusive, absolute,
irrevocable right, title and interest thereto, free and clear of all liens,
charges, encumbrances or other restrictions or limitations of any kind
whatsoever and to LICENSOR’s knowledge and belief there are no licenses,
options, restrictions, liens, rights of third parties, disputes, royalty
obligations, proceedings or claims relating to, affecting, or limiting
LICENSOR’s rights licensed to LICENSEE under this Agreement.
B.
As of the
Effective Date, to LICENSOR’s knowledge and belief, there is no claim pending or
threatened, of infringement, interference or invalidity regarding any part or
all of the Licensed Patents or the use of the inventions as contemplated in the
underlying patent applications as presently drafted.
C.
LICENSOR,
by this License Agreement, makes no representations or warranties as to the
validity and/or scope of the claims contained in the Licensed Patents or that
such Licensed Patents may be exploited by LICENSEE or its sublicensees without
infringing other patents and LICENSEE so acknowledges.
D.
EXCEPT AS
MAY BE EXPRESSLY PROVIDED IN THIS SECTION 4, LICENSOR DOES NOT MAKE, AND
EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES, EITHER EXPRESS OR IMPLIED, ORAL OR
WRITTEN, AS TO ANY OF THE LICENSED PATENTS, KNOW-HOW, OR TECHNOLOGY, INCLUDING
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
E.
LICENSEE
represents and warrants to LICENSOR the following:
(i)
LICENSEE
is a corporation duly organized„ validly existing and in good standing under the
laws of the State of New York and has all necessary corporate power to enter
into and perform its obligations under this Agreement.
(ii)
The
execution, delivery and performance of this Agreement by LICENSEE have been duly
authorized and approved by all necessary corporate action, and that the
Agreement is binding upon and enforceable against LICENSEE in accordance with
its terms (subject to bankruptcy and similar laws affecting the rights of
creditors generally).
(iii)
At all
times during the term of this Agreement, LICENSEE and all its sublicensees will
obtain, maintain and comply with all licenses, permits and authorizations
necessary to LICENSEE’S complete and timely performance of its obligations under
this Agreement, which are required under any applicable statutes, laws,
ordinances, rules and regulations of the United States as well as those of all
applicable foreign governmental bodies, agencies and subdivisions, having,
asserting or claiming jurisdiction over LICENSEE or any sublicensee or
LICENSEE’s sublicensee’s performance of the terms of this
Agreement. In particular, LICENSEE.
(iv)
LICENSEE
will be responsible for obtaining all necessary United States FDA approvals and
all approvals required by similar governmental bodies or agencies of all
applicable foreign countries.
(v)
LICENSEE
understands and acknowledges that the transfer of certain commodities and
technical data is subject to United States laws and regulations controlling the
export of such commodities and technical data, including all Export
Administration Regulations of the United States Department of
Commerce. These laws and regulations, among other things, prohibit or
require a license for the export of certain types of technical data to certain
specified countries. LICENSEE hereby agrees and gives written
assurance that it will comply with all United States laws and regulations
controlling the export of commodities and technical data, that it will be solely
responsible for any violation of such by LICENSEE or its AFFILIATES or
sublicensees, and that LICENSEE will defend and hold LICENSOR harmless of any
legal action of any nature occasioned by such violation.
Section
5.
Record Keeping, Reporting,
Accounting and Payments
.
A.
LICENSEE
shall report to LICENSOR the date of first sale of each Licensed Product in each
country within thirty (30) days of occurrence.
B.
LICENSEE
will keep, maintain and require each of its sublicenses to keep and maintain, in
accordance with generally accepted accounting principles, proper and complete
books and records sufficient to verify the accuracy and completeness of
LICENSEE’s and each sublicensee’s accounting of all sales of Licensed
Product. The books and records will be preserved for a period not
less than three years after they are created.
C.
Amounts
owing to LICENSOR under Section 3C will be paid on a quarterly basis for the
periods ending March 31, June 30, September 30 and December 31, within
forty-five days of the end of the Calendar Quarter. The balance of
any such amounts that remain unpaid more than thirty days after they are due to
LICENSOR will accrue interest until paid at the rate of one percent (1%) per
month. In no event, however, will this interest provision be
construed as a grant of permission for any payment delays.
D.
All
amounts owing to LICENSOR under this Agreement will be paid in U.S. dollars to
LICENSOR at the address provided in Section 13. All royalties owing
with respect to Net Sales stated in currencies other than U.S. dollars will be
converted at the rate shown in the Federal Reserve Noon Valuation - Value of
Foreign Currencies on the last day of the Calendar Quarter for which payment is
due or, if the last day is not a business day, the closest preceding business
day. All amounts payable by LICENSEE to LICENSOR shall be made
without any deduction for conversion or remittance fees or other charges imposed
outside of the United States or any taxes levied on such amounts by non-U.S. tax
authorities, all of which shall be borne by LICENSEE. LICENSOR shall
pay any conversion or remittance fees or other charges imposed in the United
States or any taxes levied by U.S. tax authorities.
E.
With each
payment due under Section 3C, the accounting will be summarized on the form
shown in Appendix A of this Agreement on a country-by-country basis for each
Licensed Product sold by LICENSEE or a sublicensed Affiliate or sublicensed
Third Party. Such accounting summaries shall be certified as correct
by an officer of LICENSEE and shall include a detailed listing of all deductions
from gross sales and be accompanied by a listing of all payments made by each
sublicensee to LICENSOR. In the event no payment is owed to LICENSOR,
a statement setting forth that fact will be supplied to LICENSOR and certified
as correct by an officer of LICENSEE.
F.
LICENSEE
will take all steps necessary so that LICENSOR may, within thirty (30) days of
LICENSOR’s request, review the books and records at a single U.S. location to
verify the accuracy of LICENSEE’s and each sublicensee’s
accounting. The review may be performed by any attorney or registered
CPA mutually agreed upon by LICENSOR and LICENSEE with the cost being borne
solely by LICENSOR, upon reasonable notice and during regular business hours and
not more than twice per calendar year. If a royalty payment
deficiency is determined, LICENSEE will pay the royalty deficiency outstanding
within thirty (30) days of receiving written notice thereof, plus interest on
outstanding amounts as described in Section 5C. If a royalty payment
deficiency for a calendar year exceeds five percent (5%) of the royalties paid
for any consecutive twelve (12) months, then LICENSEE will be responsible for
paying LICENSOR’s out-of-pocket expenses incurred with respect to such
review.
Section
6.
Term and
Termination
.
A.
If not
terminated sooner pursuant to Sections 2B, 8C, 10B, or the provisions in this
Section 6, this Agreement shall terminate: (i) on the date of the
last to expire claim contained in the Licensed Patents; or (ii) in the event
that no patent shall issue, upon the expiration of the Orphan Drug status, if
achieved.
B.
Subject
to the provisions of the federal bankruptcy laws that limit rights of
termination, if LICENSEE shall become bankrupt, or shall file a petition in
bankruptcy, or if the business of LICENSEE shall he placed in the hands of a
receiver, assignee or trustee for the benefit of creditors, whether by the
voluntary act of LICENSEE or otherwise, this License Agreement shall
automatically terminate.
C.
Should
LICENSEE fail to make payment to LICENSOR of royalties due in accordance with
the terms of this Agreement that are not the subject of a bona fide dispute
between LICENSOR and LICENSEE, LICENSOR shall have the right to terminate this
License Agreement within thirty (30) days after giving said notice of
termination unless LICENSEE shall pay to LICENSOR, within the 30-day period, all
such royalties and interest due. Upon the expiration of the 30-day
period, if LICENSEE shall not have paid all such royalties and interest due, the
rights, privileges and license granted hereunder shall, at the option of
LICENSOR, immediately terminate.
D.
Upon any
material breach or default of this Agreement by LICENSEE, other than as set
forth in Section 6C herein above, LICENSOR shall have the right to terminate
this Agreement and the rights, privileges and licenses granted hereunder upon
giving thirty (30) days written notice to LICENSEE.
E.
LICENSEE
shall have the right at any time to terminate this Agreement in whole by giving
ninety (90) days notice thereof in writing to LICENSOR.
F.
Upon
termination of this Agreement for any reason, nothing herein shall be construed
to release either party from any obligation that matured prior to the effective
date of such termination or obligations under Sections 3, 5, 10, 11, 15, and 16
hereof. LICENSEE and/or any sublicensee thereof may, however, after
the effective date or such termination and continuing for a period not to exceed
three (3) months thereafter, sell all Licensed Products completed as of the date
of notice of such termination and sell any Licensed Products in the process of
manufacture as of the date of notice of such termination, provided that LICENSEE
shall pay or cause to be paid to LICENSOR the royalties thereon as required by
Article 3 of this License Agreement and shall submit the reports and
certifications required on the sales of Licensed Products outlined in Section 5E
hereof.
G.
LICENSOR
shall have the right to terminate this Agreement upon termination of the
Consulting Agreement entered into by and between LICENSOR and LICENSEE that
relates to LICENSOR’s providing consulting services to LICENSEE in connection
with LICENSEE’s business.
Section
7.
Binding Effect and
Assignability
.
The
rights, benefits, duties and obligations under this Agreement shall inure to,
and be binding upon LICENSOR and LICENSEE and their respective successors,
assigns, and legal representatives, This Agreement and the rights and duties
hereunder may not be assigned by either party without first obtaining the
written consent of the other, which consent will not be unreasonably
withheld. Any such purported assignment, without the written consent
of the other party, will be null, void and of no effect, Notwithstanding the
foregoing, LICENSEE may assign this Agreement, without the written consent of
LICENSOR, to either (i) a purchaser, merging or consolidating corporation, or
acquirer of substantially all of LICENSEE’s assets or business and/or pursuant
to any reorganization qualifying under section 368 of the internal Revenue Code
of 1986 as amended and may be in effect at such time, or (ii) an Affiliate of
LICENSER
Section
8.
Patent
Prosecution
.
A.
Subject
to the provisions of section 8(C) hereof, LICENSEE, within ninety (90) days from
receipt of appropriate documentation, shall reimburse LICENSOR in the
approximate amount of Six Thousand Eight Hundred Thirty-Three Dollars and Three
Cents ($6,833.03) representing all reasonable out-of-pocket expenses LICENSOR
has incurred for the preparation, filing, prosecution and maintenance of
Licensed Patents for to execution of this Agreement and shall reimburse LICENSOR
for all such future reasonable out-of-pocket expenses within sixty (60) days
from receipt by LICENSEE of appropriate documentation of such expenses by
LICENSOR.
B.
LICENSOR
shall diligently prosecute and maintain the Licensed Patents as set forth
Section 1 hereof and Appendix I (as the same may be amended or supplemented from
time to time after the Effective Date), utilizing such patent counsel as
LICENSOR is using as of the Effective Date of this Agreement or patent counsel
as may be mutually agreed upon by the parties hereto. LICENSOR agrees
to keep LICENSEE reasonably well informed with respect to the status and
progress of any such applications, prosecutions and maintenance activities,
including consulting in good faith with LICENSEE and taking into account
LICENSEE’s comments and requests with respect thereto. Both parties
agree to provide reasonable cooperation to each other to Facilitate the
application and prosecution 01-patents pursuant to this Agreement.
C.
LICENSEE
may, in its discretion, elect to not reimburse LICENSOR for reasonable
out-of-pocket expenses of patent prosecution set forth in Section 8B, in which
case LICENSEE shall provide LICENSOR with at least ninety (90) days notice
thereof and LICENSOR shall have the right to treat such notice as a notice of
termination of this Agreement under Section 6E hereof.
Section
9.
Infringement and Other
Actions
.
A.
LICENSEE
and LICENSOR shall promptly provide written notice, to the other party, of any
alleged infringement by a Third Party of the Licensed Patents and provide such
other party with any available evidence of such
infringement. LICENSOR and the officers of LICENSEE shall confer to
determine in good faith an appropriate course of action to enforce such Licensed
Patents or other wise abate the infringement thereof. LICENSEE and
LICENSOR shall promptly provide written notice, to the other party, of any
potential or actual declaratory judgment challenge to the Licensed Patents and
shall confer to determine in good faith an appropriate course of action in
response to such challenge.
B.
During
the term of this Agreement, LICENSEE will have the right, but not the obligation
at its own expense and utilizing counsel of its choice, to prosecute any
infringement of and/or defend any declaratory judgment challenge to, the
Licensed Patents. In furtherance of such right, LICENSOR hereby
agrees that LICENSEE may join LICENSOR as a party in any such suit, without
expense to LICENSOR, No settlement, consent judgment or other voluntary final
disposition of any such suit that would adversely affect the rights of LICENSOR
may be entered into without the written consent of LICENSOR, which consent shall
not be unreasonably withheld. LICENSEE will indemnify and hold
LICENSOR harmless against any and all damages, settlements, costs, expenses,
penalties, tines or liability (including, without limitation, reasonable
attorneys’ fees) that may be found or assessed against LICENSOR in any such suit
other than those resulting from LICENSOR’s gross negligence or willful
misconduct,
C.
Any
recovery, award or damages for infringement or other moneys derived by LICENSEE
in any suit under Section 9B, whether by judgment or settlement, shall be
applied first in satisfaction of any unreimbursed expenses and legal fees of
LICENSEE relating to the suit and then to LICENSOR for any royalties credited in
accordance with Section 9D. The balance remaining from any such
recovery will be treated as royalties received by LICENSEE from a sublicensee
and shared by LICENSOR and LICENSEE in accordance with Section 3C(i)
hereof.
D.
LICENSEE
may credit up to fifty percent (50%) of any out-of-pocket litigation costs
incurred by LICENSEE in any country pursuant to Section 9B against royalties
thereafter payable to LICENSOR hereunder for such country and apply the same
toward one-half of its actual, reasonable out-of-pocket litigation
costs. If fifty percent (50%) of such out-of-pocket litigation costs
in such country exceeds fifty percent (50%) of royalties payable to LICENSOR for
such country in any year in which such costs are incurred, then the portion of
the fifty percent (50%) of the out-of-pocket litigation costs in excess of’ such
fifty percent (50%) of the royalties payable will be carried over and credited
against royalty payments in future years for such country.
E.
If within
two (2) months after receiving notice of any alleged infringement of the
Licensed Patents, LICENSEE has not notified in writing LICENSOR of LICENSEE’S
intended action, or if LICENSEE notifies LICENSOR at any time prior thereto, of
its intention not to bring suit against the alleged infringer or to defend the
Licensed Patents in a declaratory judgment action, then, and in those events
only, LICENSOR will have the right, but not the obligation, at its own expense
and utilizing counsel of its choice, prosecute any infringement of, and/or
defend any declaratory judgment challenge to, the Licensed
Patents. LICENSOR may, for such purposes, join LICENSEE as a party
plaintiff. LICENSOR will keep any recovery, award or damages for
infringement or other moneys derived therefrom, whether by judgment or
settlement, and such will not be applicable to any royalty obligation of
LICENSEE.
F.
In any
suit to enforce and/or defend the Licensed Patents pursuant to this Section 9,
the party not in control of such suit shall, at the request and expense of the
controlling party, cooperate in all respects and, to the extent possible, have
its employees testify when requested and make available relevant records,
papers, information, samples, specimens, and the like.
Section
10.
Product Liability; Conduct
of Business
.
A.
LICENSEE
will, at all times during the term of this Agreement and thereafter, indemnify,
defend and hold LICENSOR, his successors and assigns, harmless from and against
all liabilities, damages, losses, settlements, claims, actions, suits,
penalties, fines, costs or expenses, including without limitation, legal
expenses and reasonable attorneys fees (any of the foregoing, a “Claim”)
incurred by or asserted against LICENSOR, his successors and assigns of whatever
kind or nature, including, without limitation, any Claim based upon negligence,
warranty, strict liability, violation of government regulation, arising from or
occurring as a result of (i) the use of the Technology by LICENSEE or any of its
Affiliates, agents or sublicensees or (ii) the production, manufacture, sale,
use, consumption or advertisement of Licensed Product(s) or the practice of
Licensed Process(es), except to the ex-tent such Claims are the result of
LICENSOR’s gross negligence or willful misconduct No settlement, consent
judgment or other voluntary final disposition of any such Claim may be entered
into without the written consent of the LICENSOR, which consent shall not be
unreasonably withheld. LICENSOR at all times reserves the right to
select and retain, at LICENSOR’s sole expense, counsel of its own to defend
LICENSOR’s interests,
B.
No later
than the earlier of (i) testing or use of Licensed Product in human subjects or
(ii) sale of a Licensed Product, LICENSEE shall obtain and maintain product
liability insurance policies in amounts acceptable to LICENSOR and have LICENSOR
named as an additional insured on such policies. LICENSEE shall
provide LICENSOR with evidence of such coverage at least ten (10) days before
the commencement of the earlier of (i) or (ii) of this Section 10B and from time
thereafter upon LICENSOR’s request. If LICENSOR’s insurance costs can
be shown to have increased solely because of this Agreement, and such increases
are verified by an independent certified public accountant, LICENSEE shall
reimburse LICENSOR for such increase within thirty (30) days of receiving
written notice from LICENSOR requesting such reimbursement. If
LICENSEE does not reimburse LICENSOR, LICENSOR shall have the right to terminate
this Agreement thirty (30) days after written notice of termination unless
LICENSEE shall reimburse LICENSOR within the 30-day period. This
Section 10B shall survive any termination of this Agreement.
Section
11.
Use of
Names
.
Nothing
contained in this Agreement shall be construed as granting any right to LICENSEE
or its Affiliates to use in advertising, publicity, or other commercial or
promotional activities any name, trade name, trademark, or other designation of
LICENSOR (including contraction, abbreviation or simulation of any of the
foregoing) without the prior written consent of LICENSOR; provided, however,
that LICENSOR acknowledges and agrees that LICENSEE may use the names of
LICENSOR in various documents used by LICENSER for capital raising and financing
without such prior written consent or where the use of such names may be
required by law.
Section
12.
Independent Contractor
Status
.
The
parties to this Agreement recognize and agree that each is operating as an
independent contractor and nothing herein shall be deemed to establish a
relationship of principal and agent between LICENSOR and LICENSEE, nor any of
their agents or employees for any purpose whatsoever. This Agreement
shall not be construed as creating a partnership or joint venture between
LICENSOR and LICENSEE, or as creating any other form of legal association or
arrangement that would impose liability upon one party for the act or failure to
act of the other party.
Section
13.
Notices
.
Any
notice required to be given pursuant to the provisions of this Agreement will be
in writing and will be deemed to have been given at the earlier
of: when delivered personally against receipt therefor; one (1) day
after being sent by Federal Express or similar overnight delivery; or three (3)
days after being mailed registered or certified mail, postage prepaid, to a
party hereto at the address set forth below, or to such other address as such
party shall give by notice hereunder to the other party to this
Agreement
If to
LICENSOR:
George B.
McDonald, M.D.
1815
102
nd
Place,
S.E.
Bellevue,
WA 98004
Phone: 425-453-9936
If to
LICENSEE:
Enteron
Pharmaceuticals, Inc.
787
Seventh Avenue, 48
th
Floor
New York,
NY 10019
Attn: Baruch
Runner, M.D.
Phone: 212-554-4543
Fax: 212-554-4338
Section
14.
Governing Law and
Severability
.
This
Agreement will be construed in accordance with the laws of the State of New
York. If any provisions of this Agreement conflicts with the laws or
regulations of any jurisdiction or any governmental entity having jurisdiction
over the parties or this Agreement, those provisions will he deemed
automatically waived in that jurisdiction but shall not affect the validity,
legality or enforceability of such provision in any other
jurisdiction. If the waiver is allowed by relevant law, the remaining
terms and conditions of this Agreement will remain in full force and
effect. If a waiver is not so allowed or if a waiver leaves terms and
conditions clearly illogical or inappropriate in effect, the parties agree to
substitute new terms as similar in effect to the present terms of this Agreement
as may be allowed under the applicable laws and regulations.
Section
15.
Confidentiality
.
A.
LICENSEE
and LICENSOR agree that they will not use the Confidential Information for any
purpose unrelated to this Agreement, and will hold it in confidence during the
term of this Agreement and for a period of five (5) years after the termination
or expiration date of this Agreement. Each party will exercise with
respect to such Confidential Information the same degree of care as that party
exercises with respect to its own confidential or proprietary information of a
similar nature, and will not disclose it or permit its disclosure to any Third
Party (except to those of its employees, consultants, agents, Third Party
sublicensees and potential sublicensees, and Affiliates who are bound by the
same obligation of confidentiality as the party is bound by pursuant to this
Agreement and who need the Confidential Information to carry out the purposes of
this Agreement). However, such undertaking of confidentiality will
not apply to any information or data that:
(i)
was known
to receiving parry prior to the receipt of the Confidential Information; or is
developed independently without breach of this Agreement by the receiving
party;
(ii)
becomes
known to the public not as a result of any action or inaction by the receiving
party;
(iii)
receiving
party receives at any time from a Third Party who is lawfully in possession of
same and has the right to disclose same; or
(iv)
is
required to be disclosed by law, regulation or order in a judicial or
administrative proceedings, provided that the receiving party, to the fullest
extent permitted or reasonably feasible under the circumstances, shall have
secured confidential treatment of the Confidential Information
disclosed.
B.
Notwithstanding
the provisions of Section 15A hereof, a party may, to the extent necessary,
disclose and use Confidential Information disclosed to it by the other
party:
(i)
for
purposes of securing institutional or government approval to clinically test or
market any Licensed Product(s) or practice any Licensed Process(es), provided
that the party that originally disclosed the Confidential Information shall have
been notified of such disclosure; or
(ii)
where the
disclosure and use of the Confidential Information will be useful or necessary
to the application or prosecution of patents for any Licensed Process(es),
Licensed Product(s), or Technology, provided that the party that originally
disclosed the Confidential Information shall have been notified of such
disclosure.
(iii)
where the
disclosure and use of the Confidential Information is in the opinion of outside
counsel for the Company, required for financial reporting and disclosure under
applicable securities laws.
Section
16.
Mediation and
Arbitration
.
If any
dispute arises from or relating to this Agreement, the parties must submit the
dispute to mediation in Seattle, Washington, by a sole mediator who is selected
by the parties or, at any time, to mediation by the American Arbitration
Association (“AAA”). If not thus resolved, the dispute will be
determined before a sole arbitrator selected by the parties or in accordance
with the rules of the AAA. The arbitration shall be in Seattle,
Washington, and governed by the Federal Arbitration Act. The
requirement for mediation and arbitration shall not be deemed a waiver of any
right of termination under this Agreement and the arbitrator is not empowered to
act or make any award other than based solely on the rights and obligations of
the parties prior to any such termination. The arbitrator shall not
limit, expand or modify the terms of the Agreement nor award damages in excess
of compensatory damages, and each party waives any claim to such excess
damages. Any arbitration award made (i) shall be a bare award limited
to, a holding for or against a party and affording such remedy as is deemed
equitable, just and within the scope of this Agreement; (ii) shall be without
findings as to issues (including, but not limited to patent validity and/or
infringement); (iii) may in appropriate circumstances (other than patent
disputes) include injunctive relief; (iv) shall be made within four (4) months
of the appointment of the arbitrator and (v) may be entered by any court of
competent jurisdiction. A request by a party to a court for interim
protection shall not affect either party’s obligation hereunder to mediate or
arbitrate. Each party shall bear its own expenses and an equal share
of all cost and fees of the mediation and/or arbitration. Any
arbitrator selected shall be competent in the legal and technical aspects of the
subject matter of this Agreement. The existence, content and result
of mediation and/or arbitration shall be held in confidence by all participants,
each of whom shall be bound by an appropriate confidentiality
agreement.
Section
17.
Integration and
Modification
.
This
Agreement constitutes the full understanding between the parties with reference
to the subject matter hereof, and no statements or agreements by or between the
parties, whether orally or in writing, made prior to or at the signing hereof,
will vary or modify the written terms of this Agreement. Neither
party can claim any amendment, modification, or release from any provisions of
this Agreement by mutual agreement, acknowledgment, or otherwise, unless such
mutual agreement is in writing, signed by the other party, and specifically
states that it is an amendment to this Agreement.
Section
18.
Non-Waiver
.
The
failure of either party to insist upon the strict performance of any of the
terms, conditions and provisions of this Agreement shall not he construed as a
waiver or relinquishment of future compliance therewith, and said terms,
conditions and provisions shall remain in full force and effect. No
waiver of any term or condition of this Agreement on the part of either party
shall be effective for any purpose whatsoever unless such waiver is in writing
and signed by such party.
Section
19.
Remedies For Breach of
Confidentiality
.
A.
The
parties agree that any breach of Section 15 of this Agreement by either
LICENSOR, or LICENSEE could cause irreparable damage to the non-breaching party,
and that monetary damages alone would not be adequate and, if such breach or
threat of breach occurs, the non-breaching party shall have, in addition to any
and all remedies at law and without the posting of a bond or other security, the
right to an injunction, specific performance or other equitable relief necessary
to prevent or redress the violation of the confidentiality obligations of
Section 15.. If a proceeding is brought in equity to enforce Section
15, the breaching party shall not urge as a defense that there is an adequate
remedy at law nor shall the non-breaching parry be prevented from seeking any
other remedies that may be available to it,
B.
If either
party is required to bring suit or otherwise seek enforcement of its rights
under Sections 15 and 19 hereof, the prevailing parry in any such action or
proceeding shall be entitled to recover reasonable attorneys’ fees and expenses
incurred in such action or proceeding.
Section
20.
Headings
.
The
headings of the sections are inserted for convenience of reference only and
shall not affect any interpretation of this Agreement.
Section
21.
Contract Formation and
Authority
.
A.
No
agreement between the parties exists unless a duly authorized representative of
LICENSEE and of LICENSOR have signed this document.
B.
The
persons signing on behalf of LICENSOR and LICENSEE warrant and represent that
they have authority to execute this Agreement on behalf of the party for whom
they have signed.
IN
WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the
dates indicated below.
George
B. McDonald, M.D.
/s/ George B.
McDonald
Date:
November
23,
1998
LICENSEE
ENTERON
PHARMACEUTICALS, INC.
|
By:
/s/ Steve H.
Kanzer
|
Date:
November
24, 1998
|
|
|
|
|
Steve
H. Kanzer, Chairman
|
APPENDIX
A
ROYALTY
REPORT
LICENSEE:
Agreement No.:
Inventor:
Technology:
Period
Covered: From
/ /
1999
Through:
/ /
199
Prepared
By:
Date:
Approved
By:
Date:
If
license covers several major product lines, please prepare a separate report for
each line.
Then
combine all product lines into a summary report.
Report
Type:
Single Product Line
Report:
Multiproduct Summary
Report. Page 1
of
Pages
Product Line
Detail. Line: Tradename: Page:
Report
Currency:
U.S.
Dollars
Other
|
|
Gross
|
*
Less:
|
Net
|
Royalty
|
Period
Royalty Amount
|
|
Country
|
Sales
|
Allowances
|
Sales
|
Rate
|
This
Year
|
Last
Year
|
|
U.S.A.
|
|
|
|
|
|
|
|
Canada
|
|
|
|
|
|
|
|
Europe
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Japan
|
|
|
|
|
|
|
|
Other
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
TOTAL:
|
|
|
|
|
|
|
Total
Royalty:
Conversion
Rate:
Royalty in U.S Dollars:
$
* Provide
a detailed listing of all deductions from Gross Sales.
APPENDIX
B
DEVELOPMENT
REPORT
Development
Report (4-8 paragraphs) including time period covered by this
report.
|
1.
|
Pertinent
information since last report including progress of the research and
development and completed results.
|
|
2.
|
Activities
currently under investigation and projected date of
completion.
|
|
3.
|
Status
of regulatory compliance, approvals and permits or licenses for using
Licensed Product(s) for the prevention and treatment of graft-versus-host
disease and host-versus-graft
disease.
|
Future
Development Activities (4-8 paragraphs).
|
1.
|
Activities
to be undertaken before next report and their projected starting and
completion dates.
|
|
2.
|
Estimated
total development time remaining before Licensed Product(s) will be
commercialized for the prevention and treatment of graft-versus-host
disease and host-versus-graft
disease.
|
Changes
to initial development plan (2-4 paragraphs).
|
4.
|
Variables
that may cause additional changes.
|
Items to
be provided if applicable:
|
5.
|
Information
relating to Licensed Product(s) that has become publicly available, e.g.,
published articles, competing products, patents,
etc.
|
|
6.
|
Descriptions
and result of any research or development work being performed by Third
Parties or Affiliates (including name of such Third Party or Affiliate and
reasons for use of Third Parties or Affiliates) and planned future uses of
Third Parties or Affiliates (including name of such Third Parties or
Affiliates, reasons for use of Third Parties or Affiliates, and
description of type of work).
|
|
7.
|
Update
of each of the following: competitive information trends in
industry, sublicensing activity, changes in government compliance
requirements (if applicable) and market
plan.
|
APPENDIX
C
DEVELOPMENT
PLAN
The plan
should provide LICENSOR with an overview of the activities that LICENSEE
believes arc necessary to bring Licensed Products to the marketplace
worldwide. Include estimated start date and completion date for each
item.
|
I.
|
Development
program for international Regulatory Approvals and sales of Licensed
Product(s) for the prevention and treatment of graft-versus-host disease
and host-versus-graft disease.
|
|
A.
|
Development
activities to be undertaken, including major
milestones.
|
1.
2.
|
B.
|
Estimated
Total Development Time
|
|
II.
|
Governmental
approvals, if required, including types of submissions required by each
government agency (e.g. FDA, EPA,
etc.).
|
|
III.
|
Proposed
marketing approach for international sales of Licensed Product(s) for the
prevention and treatment of graft-versus-host disease and
host-versus-graft disease.
|
|
IV.
|
Competitive
information including potential competitors, potential competitive devices
or compositions, developments, technical achievements, anticipated dates
of LICENSEE’s and competitor’s respective products launches for the
prevention and treatment of graft-versus-host disease, host-versus-graft
disease or other diseases.
|
APPENDIX
D
KNOW-HOW
|
|
Oral
Formulations of Beclomethasone Dipropionate for the treatment of
inflammatory, diseases of the intestinal
tract.
|
|
2.
|
Orphan
Drug Designation Application
#98-1111
|
|
|
FDA’s
acknowledgment of an orphan drug designation for oral administration of
beclomethasone dipropionate for the treatment of intestinal
graft-versus-host disease is attached hereto as “Appendix
D—Attachment.”
|
APPENDIX
I
LICENSED
PATENTS
|
1.
|
U.S.
Patent Application Serial Number 09/103,762, entitled “Method for
preventing tissue damage following hematopoietic cell transplantation” and
filed June 24, 1998.
|
|
2.
|
U.S.
Patent Application Serial Number 09/151,388, entitled “Method for
preventing tissue damage associated with graft-versus-host or
host-versus-graft disease following transplantation” and filed September
10, 1998.
|
EXHIBIT
10.43
EXECUTED VERSION
Portions of
this Exhibit have been omitted pursuant to a request for confidential treatment.
The omitted
portions are marked ***** and have been filed separately with the
Commission
COLLABORATION
AND SUPPLY AGREEMENT
This
COLLABORATION AND SUPPLY AGREEMENT (this “AGREEMENT”) is made and entered into
as of February 11, 2009 (the “EFFECTIVE DATE”).
by and
between
DOR BioPharma Inc.
, a Delaware
corporation having its principal office at 850 Bear Tavern Road, Suite 201,
Ewing, New Jersey 08628 (the “COMPANY”), and
Enteron Pharmaceuticals, Inc.
,
a wholly owned subsidiary of the COMPANY, (“ENTERON”, and together with the
COMPANY, “DOR”), each
and
SIGMA-TAU Pharmaceuticals,
Inc.
, a Nevada corporation having its principal office at 9841
Washingtonian Blvd., Suite 500, Gaithersburg, MD 20878 (hereinafter referred to
as “STPI”).
------------------------------------
|
WHEREAS
,
|
DOR
has developed and is developing, through its research activities,
Beclomethasone Dipropionate (orBec
®
)
and owns and/or controls the related KNOW-HOW and PATENT RIGHTS (as
hereinafter respectively defined in Article 1);
and
|
|
WHEREAS
,
|
DOR
and STPI signed on January 3, 2007 a Letter of Intent and on November 26,
2008 a Letter of Intent, each of which is related,
inter
alia
, to
Beclomethasone Dipropionate (orBec
®
),
both of which are superseded by this AGREEMENT;
and
|
|
WHEREAS
,
|
STPI
desires to obtain from DOR the right to market, distribute and sell the
PRODUCT and AG PRODUCT in the FIELD in the TERRITORY (as hereinafter
respectively defined in Article 1);
and
|
|
WHEREAS
,
|
DOR
is willing to grant to STPI such rights in the TERRITORY, under the terms
and conditions hereinafter set forth;
and
|
|
WHEREAS
,
|
both
DOR and STPI are interested in the further development of Beclomethasone
Dipropionate in all therapeutic areas, diseases or conditions and in the
commercial exploitation of the results of such further
development.
|
NOW, THEREFORE
, in
consideration of the foregoing premises and of the mutual covenants of the
parties hereinafter contained, the parties hereto agree as follows:
The
following terms as used in this AGREEMENT have the meanings set forth
below:
|
1.1
|
“
AFFILIATED COMPANIES
” or
“
AFFILIATES
”
means: (i) an organization more than fifty percent (50%) of the voting
stock of which is owned and/or controlled directly or indirectly by either
party; (ii) an organization which directly or indirectly owns and/or
controls more than fifty percent (50%) of the voting stock of either
party; (iii) an organization which is directly or indirectly under common
control of either party through common
shareholdings.
|
|
1.2
|
“
AGENCY
” means any
regulatory authority, including the FDA, responsible for granting any
marketing registration or pricing approval, if applicable, necessary so
the PRODUCT and AG PRODUCT may be marketed and sold in the
TERRITORY.
|
|
1.3
|
“
AG PRODUCT
” means a
generically-labeled version of the PRODUCT (
i.e.
, such
product does not bear the TRADEMARK) supplied by DOR and sold by STPI
and/or its sub-distributors or permitted
sublicensees.
|
|
1.4
|
“
AGREEMENT
” has the
meaning set forth in the introductory
paragraph.
|
|
1.5
|
“
APPROVAL
”
or
“
APPROVED
” means all
necessary approvals granted by the appropriate AGENCY for any country in
the TERRITORY for the manufacture, sale and distribution of the PRODUCT
and AG PRODUCT for an indication(s), which may include the FDA for the
U.S.
|
|
1.6
|
“
APPROVED NEW INDICATION
”
means a NEW INDICATION that, pursuant to Article 5.2, each of the parties,
in its sole discretion, has agreed to
develop.
|
|
1.7
|
“
ARBITRATOR
” has the
meaning set forth in Appendix C.
|
|
1.8
|
“
cGMP
” means the current
standards for the manufacture of drugs, as set forth in the U.S. Food,
Drug and Cosmetics Act and applicable FDA regulations (including 21 C.F.R.
Parts 210 and 211) and guidances promulgated thereunder, as amended from
time to time.
|
|
1.9
|
“
CODE
” has the meaning
set forth in Article 15.2.
|
|
1.10
|
“
COMMERCIALIZATION
”
or
“
COMMERCIALIZE
” means any
and all activities directed to the distribution, promotion, offer for sale
and sale of an APPROVED PRODUCT and AG PRODUCT, including marketing,
promoting, detailing, distributing, offering to sell and selling,
importing for sale, conducting post-marketing human clinical studies and
interacting with any AGENCY regarding the foregoing. For the
avoidance of doubt, the term “Commercialization” or “Commercialize” does
not include the right to manufacture or use. When used as a
verb, “to Commercialize” and “Commercializing” means to engage in
Commercialization and “Commercialized” has a corresponding
meaning.
|
|
1.11
|
“
COMPANY
” has the meaning
set forth in the introductory
paragraph.
|
|
1.12
|
“
CONFIDENTIAL
INFORMATION
” has the meaning set forth in Article
3.3.
|
|
1.13
|
“
CONTROL
” means
possession of the ability, whether by ownership or license, to grant a
license or sublicense as provided for herein without violating the terms
of any agreement, securing consent or other arrangements with any third
party.
|
|
1.14
|
“
DEVELOPMENT PLAN
” means
the schedule, attached hereto as Appendix A describing all future
activities, relevant budget and timelines related to the development of
the PRODUCT for the treatment of GI GVHD, including the preclinical,
safety, clinical, technical, manufacturing (CMC) and regulatory
development of the PRODUCT.
|
|
1.15
|
“
DILIGENT EFFORTS
” means,
with respect to a party, the carrying out of obligations in a diligent and
sustained manner using efforts not less than the efforts that a
US based pharmaceutical company of similar size to such party devotes to a
product of similar market potential, profit potential or strategic value
resulting from its own research efforts, based on conditions then
prevailing, but excluding consideration of any obligation to the other
party under this AGREEMENT but in no event less than the efforts of a US
based pharmaceutical company of similar size to such
party. DILIGENT EFFORTS requires,
inter
alia
, that each
party: (i) promptly assign responsibility for such obligations
to specific employee(s) who are held accountable for progress and monitor
such progress on an on-going basis, (ii) set and consistently seek to
achieve specific and meaningful objectives for carrying out such
obligations, and (iii) consistently make and implement decisions and
allocate resources designed to advance progress with respect to such
objectives.
|
|
1.16
|
“
DISCLOSING PARTY
” has
the meaning set forth in Article
3.3.
|
|
1.17
|
“
DOR
” has the meaning set
forth in the introductory
paragraph.
|
|
1.18
|
“
EFFECTIVE DATE
” has the
meaning set forth in the introductory
paragraph.
|
|
1.19
|
“
ENTERON
” has the meaning
set forth in the introductory
paragraph.
|
|
1.20
|
“
ESTIMATED QUANTITIES
”
has the meaning set forth in Article
8.2.
|
|
1.21
|
“
EUROPEAN TERRITORY
”
means Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, Finland,
France, Germany, Greece, Hungary, Ireland, Italy (including the Republic
of San Marino and the Vatican City), Latvia, Lithuania, Luxembourg, Malta,
Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, The Netherlands and
the United Kingdom, as well as any other country entering the European
Union, Iceland, Norway and Switzerland (including
Liechtenstein).
|
|
1.22
|
“
EXECUTIVE COMMITTEE
” has
the meaning set forth in Article
4.3.
|
|
1.23
|
“
FDA
” means the United
States Food and Drug Administration and any successor agency
thereto.
|
|
1.24
|
“
FIELD
” means the
diagnosis, treatment and/or prevention of any and all diseases and
conditions.
|
|
1.25
|
“
FIRM ORDER
” has the
meaning set forth in Article 8.3.
|
|
1.26
|
“
FIRST COMMERCIAL SALE
”
shall mean the first commercial sale by STPI or any of its AFFILIATES or
its distributors of a PRODUCT to an independent third party in the
TERRITORY. A sale or transfer which is not for value, including
for clinical trial purposes, shall not constitute a FIRST COMMERCIAL
SALE.
|
|
1.27
|
“
FIRST PRODUCT
” means the
PRODUCT for the treatment of GI GVHD in
humans.
|
|
1.28
|
“
FIXED COMPONENT
” has the
meaning set forth in Appendix C.
|
|
1.29
|
“
FULLY BURDENED MANUFACTURING
COST
” means with respect to the PRODUCT and AG PRODUCT the
fully-burdened cost of manufacturing, assembling, filling, and secondary
packaging of the PRODUCT and AG PRODUCT packaged for shipment to the
receiving party expressed on a per unit manufactured basis, including the
cost of:
|
|
1.29.1
|
material,
excipients, primary and secondary packaging and labeling material,
and
|
|
1.29.2
|
direct
labor of supplying party employees (including basic wages, labor and
related payroll taxes and benefits) incurred or spent in the actual
production, filling, packaging and labeling of the PRODUCT and AG PRODUCT,
including for reasonable and normal quality assurance, purchasing and
manufacturing facility operations,
and
|
|
1.29.3
|
overhead
of supplying party (including operating expenses, indirect labor and
related payroll taxes and benefits, depreciation, taxes, insurance, rent,
repairs and maintenance, and supplies) incurred or spent in support of the
actual production, filling, packaging and labeling of the PRODUCT and AG
PRODUCT, but not for any cost of any unused manufacturing capacities that
supplying party or its third party sub-contract manufacturer may have in
excess of the requirements contained in the forecasts provided by
receiving party in connection with this AGREEMENT,
and
|
|
1.29.4
|
interim
transportation, or any related transportation cost including tertiary
packaging and storage of the PRODUCT and AG PRODUCT (for greater clarity,
such storage cost does not include the cost of inventory) or any part
thereof as incurred or spent by supplying party in connection with the
supply of the PRODUCT and AG PRODUCT pursuant to the terms of this
AGREEMENT, and
|
|
1.29.5
|
any
third party sub-contract manufacturer as invoiced to supplying
party. Supplying party shall provide to receiving party (within
one month of the EFFECTIVE DATE) the prices in effect for each
sub-contract manufacturer.
|
For the
avoidance of doubt, the term “Fully Burdened Manufacturing Cost” does not
include any so called “profit margin” for DOR, such profit margin on the sale of
PRODUCT to STPI being represented by the PERCENTAGE COMPONENT as set forth in
Appendix C attached hereto.
|
1.30
|
“
GENERIC COMPETITION
”
shall exist for a given PRODUCT when a GENERIC PRODUCT with the same
labeled indication as the PRODUCT COMMERCIALIZED by STPI in a given
country of the TERRITORY enters the market and the NET SALES of the
PRODUCT during any three (3) month rolling period are at least ten percent
(10%) lower than the amount of NET SALES of that PRODUCT in that same
country during the three (3) month period preceding the APPROVAL of such
GENERIC PRODUCT (in terms of US Dollar, or equivalent legal currency of
the given country).
|
|
1.31
|
“
GENERIC PRODUCT
” means
a product that is APPROVED by an AGENCY (or successor agency) that
contains the SUBSTANCE or salts or esters of the SUBSTANCE and utilizes
the same route of administration as the
PRODUCT.
|
|
1.32
|
“
GI GVHD
” means
gastrointestinal graft vs. host
disease.
|
|
1.33
|
“
IMPROVEMENT
” means any
change, improvement, development or modification of the PATENT RIGHTS or
KNOW-HOW in the FIELD that is made or created after the EFFECTIVE DATE and
relates to the PRODUCT, AG PRODUCT or the SUBSTANCE or any method of use
or manufacture related thereto.
|
|
1.34
|
“
INITIAL TERM
” has the
meaning set forth in Article 14.1
|
|
1.35
|
“
INSOLVENT PARTY
” has the
meaning set forth in Article 15.2.
|
|
1.36
|
“
JOINT DEVELOPMENT
COMMITTEE
” means a committee with the authority to review,
recommend and coordinate any research, development and regulatory
activities related to the PRODUCT in the FIELD in the
TERRITORY.
|
|
1.37
|
“
JOINT COMMERCIALIZATION
COMMITTEE
” means a committee with the authority to review,
recommend and coordinate any COMMERCIALIZATION activities related to the
PRODUCT and AG PRODUCT in the
TERRITORY.
|
|
1.38
|
“
KNOW-HOW
” means all
information and data, technical information, trade secrets,
specifications, instructions, processes, formulae, expertise and
information relating to the SUBSTANCE and the PRODUCT and its sale in the
FIELD owned by or under the CONTROL of DOR or any AFFILIATE thereof as of
the EFFECTIVE DATE or during the term of this AGREEMENT. Such KNOW-HOW
shall include all biological, chemical, pharmacological, biochemical,
toxicological, pharmaceutical, physical and analytical, safety, quality
control, manufacturing, preclinical and clinical data, instructions,
processes, formulae, expertise and information, relevant to the sale of
the SUBSTANCE which may be useful in the sale of the SUBSTANCE or the
PRODUCT.
|
|
1.39
|
“
MARKETING
AUTHORIZATIONS
” mean the authorizations issued by the AGENCY which
are necessary for the marketing, use, distribution and sale of the PRODUCT
and AG PRODUCT in the TERRITORY.
|
|
1.40
|
“
MCDONALD
” has the
meaning set forth in Article 2.7.
|
|
1.41
|
“
MCDONALD LICENSE
” has
the meaning set forth in Article
2.7.
|
|
1.42
|
“
NDA
” means the New Drug
Application and all amendments and supplements thereto for the PRODUCT
submitted by DOR to the FDA, including all documents, data and other
information included in an accepted NDA submission for APPROVAL to market
and sell the PRODUCT in the
TERRITORY.
|
|
1.43
|
“
NET SALES
” mean, with
respect to each PRODUCT and AG PRODUCT, the gross invoiced sales price of
such PRODUCT and AG PRODUCT billed by or on behalf of STPI, its
AFFILIATES, sub-licensees (if permitted), distributors or agents to third
parties on sales of a PRODUCT and AG PRODUCT in
bona
fide
arm’s
length transactions in the TERRITORY, less the following deductions,
determined in accordance with U.S. generally accepted accounting
principles as then in effect and consistently applied, to the extent
included in the gross invoiced sales price for such PRODUCT or AG PRODUCT
or otherwise directly paid or incurred by STPI, its AFFILIATES or
sub-licensees (if permitted), distributors or agents with respect to the
sale of such PRODUCT and AG
PRODUCT:
|
|
1.43.1
|
normal
and customary trade and quantity discounts actually allowed and properly
taken directly with respect to sales of such PRODUCT and AG
PRODUCT;
|
|
1.43.2
|
normal
and customary amounts repaid or credited by reason of rejections, returns
and allowances;
|
|
1.43.3
|
normal
and customary third party cash rebates and chargebacks related to sales of
the PRODUCT and AG PRODUCT, if and to the extent allowed under applicable
laws of the TERRITORY (including shelf stock adjustments in the case of an
AG PRODUCT);
|
|
1.43.4
|
tariffs,
duties, excise, sales, value-added or other taxes (other than taxes based
on income);
|
|
1.43.5
|
normal
and customary cash discounts for timely
payment;
|
|
1.43.6
|
normal
and customary discounts pursuant to indigent patient programs and patient
discount programs, including without limitation coupon discounts and
co-pay assistance programs; and
|
|
1.43.7
|
any
other normal and customary specifically identifiable costs or charges
included in the gross invoiced sales price of such PRODUCT falling within
categories substantially equivalent to those listed
above.
|
Sales
from STPI to its AFFILIATES or sub-licensees (if permitted), distributors or
agents shall be disregarded for purposes of calculating NET
SALES. Any of the items set forth above that would otherwise be
deducted from the invoice price in the calculation of NET SALES but which are
separately charged to third parties shall not be deducted from the invoice price
in the calculation of NET SALES. No sale of PRODUCT or AG PRODUCT
will be for any consideration other than cash.
|
1.44
|
“
NEW INDICATION
” means
any indication other than for the treatment of GI GVHD which the JOINT
DEVELOPMENT COMMITTEE agrees to develop and for which STPI or its
AFFILIATES are granted exclusive COMMERCIALIZATION rights
hereunder.
|
|
1.45
|
“
PATENT RIGHTS
” means all
the patents and the patent applications claiming the SUBSTANCE and/or the
PRODUCT (as the case may be) or its use and manufacture in the FIELD owned
and/or under the CONTROL of DOR as listed in Appendix B to this AGREEMENT,
as well as: (i) all patents arising from said applications; (ii) any
additions, divisions, continuations, continuations-in-part, amendments,
amalgamations and reissues of such applications or patents; (iii) any
confirmation, importation or registration patents thereof or therefor; and
(iv) any extensions and renewals of all such patents and/or patent
applications in whatever legal form and/or by whatever legal title they
are granted, including Supplementary Protection Certificate(s) or
equivalent.
|
|
1.46
|
“
PERCENTAGE COMPONENT
”
has the meaning set forth in Appendix
C.
|
|
1.47
|
“
PHARMACOVIGILANCE
AGREEMENT
” means the agreement that defines how the parties are to
cooperate to enable each of them to comply with its respective obligations
under applicable laws, regulations and guidelines with regard to the
adverse event collection, evaluation, reporting and communicating any
safety issues for the PRODUCT, both pre- and post-marketing and to enable
each party to satisfy its duty of care, which the parties hereto shall
negotiate in good faith and enter into within sixty (60) days of the
EFFECTIVE DATE.
|
|
1.48
|
“
PHASE 3 TRIAL
” means the
clinical study BDP-GVHD-03 entitled, “A Phase 3, Randomized, Double-Blind,
Placebo-Controlled, Multi-Center Study of the Safety and Efficacy of
orBec
®
(Oral Beclomethasone 17,21-Dipropionate) in Conjunction with Ten Days of
High-Dose Prednisone Therapy in the Treatment of Patients with
Gastrointestinal Graft vs. Host
Disease”.
|
|
1.49
|
“
PRODUCT
” means any
product in finished pharmaceutical form APPROVED for use, manufacture and
sale in the FIELD containing the
SUBSTANCE.
|
|
1.50
|
“
QUALITY ASSURANCE
AGREEMENT
” shall have the meaning set forth in Article 6.3 of
this AGREEMENT, which the parties hereto shall negotiate in good faith and
enter within sixty (60) days of the EFFECTIVE
DATE.
|
|
1.51
|
“
RECEIVING PARTY
” has the
meaning set forth in Article 3.3.
|
|
1.52
|
“
ROFN NOTICE
” has the
meaning set forth in Article 2.2.
|
|
1.53
|
“
SOLVENT PARTY
” has the
meaning set forth in Article 15.2.
|
|
1.54
|
“
SPECIFIED INDICATION
”
has the meaning set forth in Article
2.8.
|
|
1.55
|
“
SUBSTANCE
” means
Beclomethasone Dipropionate.
|
|
1.56
|
“
SUPPLY PRICE
” means the
supply price for the PRODUCT and AG PRODUCT as set forth in
Appendix C attached hereto.
|
|
1.57
|
“
TERRITORY
” means the
United States of America (including its territories and possessions, as
well as Puerto Rico), Canada and
Mexico.
|
|
1.58
|
“
TRADEMARK
” means
orBec
®
as
well as any and all trademark/s, their back-ups and clones, which shall be
owned or under the CONTROL of DOR or of any of its AFFILIATED COMPANIES
and shall be used to identify the PRODUCT in the TERRITORY, including
domain names.
|
|
1.59
|
“
VALID CLAIM
” means, on a
country-by-country basis, a granted claim within the PATENT RIGHTS which
has not been held invalid and/or unenforceable in a decision of a patent
office, court or other government agency of competent jurisdiction,
unappealable or unappealed within the time frame allowed for
appeal.
|
It is
understood that the definitions above shall have the same meaning regardless of
whether a term is used in the singular or plural form. Additionally,
as used in this AGREEMENT, unless the context otherwise requires: Section,
Schedule, Article and Exhibit references are intended to refer to this
AGREEMENT; the words “hereof”, “herein” and “hereunder”, and words of similar
import, shall refer to this AGREEMENT as a whole, and not to any particular
provision of this AGREEMENT; and the term “include” and derivations thereof are
not intended to apply any limitation to the item(s) specified.
(The information below marked by ***** has been
omitted by a request for confidential treatment. The omitted portion has been
separately filed with the Commission.)
|
2.1
|
Subject
to the terms and conditions hereof, DOR hereby appoints STPI as its
exclusive distributor of PRODUCTS and AG PRODUCTS in the FIELD in the
TERRITORY (even as to DOR), and, in connection therewith and to support
the distribution rights granted hereunder, grants to STPI and STPI hereby
accepts an exclusive (even as to DOR) license, with no right to grant
sub-licenses, to COMMERCIALIZE the PRODUCT and AG PRODUCT in the FIELD in
the TERRITORY, under the TRADEMARK, the PATENT RIGHTS and under the
KNOW-HOW, including marketing, detailing, conducting post-marketing human
clinical studies and interacting with any AGENCY regarding the
foregoing. For purposes of clarification, STPI shall not have
the right to develop, modify, manufacture or have manufactured the
SUBSTANCE or the PRODUCT or AG PRODUCT, except as authorized by the JOINT
DEVELOPMENT COMMITTEE and agreed between the parties and subject to
Article 8.9 below. Subject to the terms and conditions hereof
and solely in support of the rights granted hereunder in the remainder of
the AGREEMENT, DOR hereby agrees that, with respect to any third party, it
will exclusively manufacture and supply STPI with all STPI’s requirements
of the PRODUCT and AG PRODUCT in the FIELD in the
TERRITORY. STPI shall have the right to appoint distributors of
the PRODUCT and AG PRODUCT,
provided
,
however
, in
each case such distributor agrees in writing to abide by the terms of this
AGREEMENT and, in the case of a distributor that is not an AFFILIATE of
STPI, such distributor is approved in advance by DOR, which approval shall
not be unreasonably withheld or delayed. STPI shall notify DOR
of any AFFILIATED distributor promptly upon their
appointment.
|
|
2.3
|
Regulatory
. DOR
shall be the holder of the MARKETING
AUTHORIZATIONS. DOR shall provide to STPI copies of
any Investigational New Drug or other health registration documents and
amendments or supplements thereto filed with the FDA (or other similar
AGENCY) by DOR and all correspondence to and from such AGENCY (or other
similar AGENCY) relevant to the SUBSTANCE or the PRODUCT in the FIELD in
the TERRITORY.
|
|
2.4
|
Assignment of
Improvements
. Subject to the terms and conditions
hereof, STPI hereby assigns to DOR the IMPROVEMENTS made, invented or
conceived by STPI (and its AFFILIATES but only if such AFFILIATES are
appointed as distributors hereunder or receive any CONFIDENTIAL
INFORMATION of DOR) after the EFFECTIVE DATE and agreed to take any and
all actions, make and execute any and all assignments and make any filings
in order to facilitate the
foregoing.
|
|
2.5
|
No Sale Outside
Territory
.
|
|
2.5.1
|
During
the term hereof, STPI shall not and shall cause its AFFILIATES not to,
directly or indirectly, including through the use of one or more agents or
persons with whom STPI and/or its Affiliates are in privity of contract:
(i) sell, distribute or otherwise dispose of; or (ii) grant any license or
other right or otherwise distribute or dispose of, PRODUCT in the FIELD
outside the TERRITORY.
|
|
2.5.2
|
During
the term hereof, DOR shall not and shall cause its AFFILIATES not to,
directly or indirectly, including through the use of one or more agents or
persons with whom DOR and/or its Affiliates are in privity of contract:
(i) sell, distribute or otherwise dispose of; or (ii) grant any license or
other right or otherwise distribute or dispose of, PRODUCT in the FIELD
within the TERRITORY.
|
|
2.6
|
Exclusive Relationship
in GI GVHD
.
|
|
2.6.1
|
Except
pursuant to terms of this Agreement, during the term hereof, STPI shall
not, itself or through any AFFILIATE, COMMERCIALIZE (i) a product for the
treatment or prevention of GI GVHD or any APPROVED NEW INDICATION in the
TERRITORY or (ii) a PRODUCT in the TERRITORY in the
FIELD.
|
|
2.6.2
|
Except
pursuant to terms of this Agreement, during the term hereof, DOR shall
not, itself or through any AFFILIATE, COMMERCIALIZE (i) a product for the
treatment or prevention of GI GVHD or any NEW INDICATION in the TERRITORY
or (ii) a PRODUCT in the TERRITORY in the
FIELD.
|
|
2.7
|
McDonald
License
. STPI acknowledges that the certain of the
rights granted hereunder are rights which DOR has received through the
Exclusive License Agreement dated as of November 24, 1998 (the “MCDONALD
LICENSE”) by and between George McDonald (“MCDONALD”) and ENTERON, a copy
of which is attached hereto as Appendix E, and which contains certain
terms and conditions set forth therein. Without limiting the
foregoing, STPI expressly acknowledges the reservation of rights of
MCDONALD set forth in Sections 2B(vi) and (vii). STPI further
acknowledges and agrees that any information provided herein to DOR by
STPI hereunder may be included in one or more development reports made to
MCDONALD pursuant to Section 3A of the MCDONALD LICENSE. STPI
further acknowledges that all representations and warranties made in this
AGREEMENT are made by DOR and not MCDONALD, who has specifically
disclaimed representations as set forth in Section 4D of the MCDONALD
LICENSE. STPI agrees to reasonably cooperate with DOR to enable
DOR to fulfill its obligations under Section 5 of the MCDONALD
LICENSE. Neither STPI nor any distributor of STPI shall use the
trade names or marks of MCDONALD (including any contraction, abbreviation
or simulation of the foregoing) in connection with the COMMERCIALIZATION
of any PRODUCT except where required by law. STPI agrees that
it shall not enter into any discussions or communications with MCDONALD,
directly or indirectly, during the term of this AGREEMENT regarding any
license or transaction under this AGREEMENT, except in respect of
COMMERCIALIZATION of the PRODUCT. STPI shall not
intentionally
take any action or
omit to take any action which would cause DOR to be in default under the
MCDONALD LICENSE. Notwithstanding anything to the contrary
contained in this AGREEMENT, during the term of this AGREEMENT, (i) DOR
shall provide STPI with copies of any notices provided by DOR to MCDONALD
which relate to any claim or action by DOR to terminate the MCDONALD
LICENSE and (ii) DOR shall not terminate the MCDONALD LICENSE pursuant to
Section 6E of the MCDONALD LICENSE, as such Section may be
amended. The parties agree that irreparable damage would occur
in the event the obligations set forth in the preceding sentence were not
performed in accordance with the terms thereof and that STPI shall be
entitled to specific performance of the terms thereof in addition to any
other remedy at law or in equity, including monetary damages, that may be
available to it. The COMPANY agrees that ENTERON shall remain a
wholly owned subsidiary of the COMPANY during the term of this AGREEMENT,
provided
,
however
,
the COMPANY may merge ENTERON with and into the COMPANY at its
discretion.
|
|
2.8
|
Notwithstanding
the rights provided in Article 2.1, STPI (i) shall have the right to
market, sell, offer for sale, and have sold AG PRODUCT for a labeled
indication (the “SPECIFIED INDICATION”) only beginning (A) on the date on
or, with DOR’s prior written consent, not to be unreasonably withheld,
prior to the anticipated date that a third party sells or offers for sale
a generically-labeled version of the PRODUCT APPROVED for the SPECIFIED
INDICATION for which such PRODUCT is APPROVED or (B) if applicable, upon
(or as part of) settlement of a litigation under Article 10.3 that allows
a third party to sell or offer for sale a generically-labeled version of
the PRODUCT APPROVED for the SPECIFIED INDICATION and (ii) shall not
have a general right to sublicense, but shall have the limited right to
grant sublicenses only under its rights to market, sell, offer for sale,
and have sold AG PRODUCT for the SPECIFIED INDICATION and only in
connection with settlement of a litigation under Article 10.3 that allows
a third party to sell or offer for sale a generically-labeled version of
the PRODUCT APPROVED for the SPECIFIED INDICATION, provided that STPI has
obtained the consent of DOR and MCDONALD to such settlement to the extent
required under Article 10.3. STPI will at all times remain
responsible to DOR for all of its obligations under this AGREEMENT and
shall be responsible for the acts or omissions of its sublicensees in
exercising rights granted hereunder. Each sublicense granted by
STPI shall be consistent with the terms of this AGREEMENT, and STPI shall
furnish DOR a copy of any such sublicense it
grants.
|
|
3
-
|
EXCHANGE
OF INFORMATION, CONFIDENTIALITY,
PHARMACOVIGILANCE.
|
|
3.1
|
DOR
shall promptly disclose, at its own cost, to STPI on an ongoing basis
during the term of this AGREEMENT, in writing, or via mutually acceptable
electronic media, copies or reproductions of all PRODUCT-related
information under the CONTROL of DOR, but only to the extent not
previously disclosed to STPI, that are reasonably necessary or useful for
STPI and its sub-distributors to COMMERCIALIZE the PRODUCT in the
TERRITORY, including any KNOW-HOW and PATENT RIGHTS under the CONTROL of
DOR.
|
|
3.2
|
Furthermore,
each party shall promptly disclose to the other through the JOINT
DEVELOPMENT COMMITTEE on an ongoing basis during the term of this
AGREEMENT any and all progress made on development and regulatory
activities relating to the SUBSTANCE and/or the PRODUCT. STPI shall be
informed in advance of any FDA meeting/request related to such development
and shall have the right to send up to two (2) representatives to attend
to such FDA meetings.
|
|
3.3
|
Both
DOR and STPI agree to keep and have kept in strict confidence all
confidential information and data (hereinafter “CONFIDENTIAL INFORMATION”)
received from the other party under the terms of this AGREEMENT. DOR and
STPI agree to use CONFIDENTIAL INFORMATION only for the purposes of this
AGREEMENT and pursuant to the rights granted by the recipient under this
AGREEMENT. In particular DOR and STPI agree not to disclose such
information and data to any third party other
than:
|
|
3.3.1
|
their
respective AFFILIATED COMPANIES; or
|
|
3.3.2
|
a
third party solely to the extent necessary for furthering the purposes of
this AGREEMENT, provided that the third party agrees in writing to
maintain the confidentiality of the CONFIDENTIAL INFORMATION in a manner
consistent with the confidentiality provisions of this AGREEMENT;
or
|
|
3.3.3
|
in
connection with seeking MARKETING AUTHORIZATIONS outside the
TERRITORY.
|
Notwithstanding
the foregoing, each party may disclose CONFIDENTIAL INFORMATION to any AGENCY to
the extent that such disclosure (i) is necessary for the purposes of this
AGREEMENT and/or (ii) is legally required.
The party
receiving CONFIDENTIAL INFORMATION (the “RECEIVING PARTY”) may do so only if it
limits disclosure to that purpose, after giving the party disclosing
CONFIDENTIAL INFORMATION (the “DISCLOSING PARTY”) prompt written notice of any
instance of such a requirement in reasonable time for the DISCLOSING PARTY to
take steps to object to or to limit such disclosure. In the event of
disclosures required by law, the RECEIVING PARTY shall cooperate with the
DISCLOSING PARTY as reasonably requested thereby.
|
3.4
|
The
secrecy obligations herein shall last during and for a period of five (5)
years, and ten (10) years with respect to KNOW-HOW, after any termination
of this AGREEMENT, subject to the exceptions set forth
herein. The obligations of confidentiality and use of
information and data above shall not apply with regard to that information
and those data which:
|
|
3.4.1
|
the
RECEIVING PARTY can show in writing were known to it or to its AFFILIATES
at the time of disclosure, and/or
|
|
3.4.2
|
are
public knowledge at the time of disclosure to the RECEIVING PARTY,
and/or
|
|
3.4.3
|
become
public knowledge at a later date without any fault of the RECEIVING PARTY,
and/or
|
|
3.4.4
|
are
independently developed by the RECEIVING PARTY or its AFFILIATES, as
competently proven.
|
|
3.5
|
DOR
and STPI agree that they shall refer any serious adverse event or
significant clinical safety information which they have knowledge thereof
to the other party according to the procedure to be agreed upon separately
and documented in the PHARMACOVIGILANCE
AGREEMENT.
|
|
3.6
|
Any
proposed written publications of a party relating to PRODUCT and AG
PRODUCT shall be cleared for release by the other party. The
disclosing party shall provide a copy of the proposed written publication
to the reviewing party at least thirty (30) days prior to the intended
date of release. The reviewing party shall have thirty (30) days from
receipt of the proposed written publication to provide comments and/or
proposed changes to the disclosing party. These timelines will be reduced
to respectively ten (10) and five (5) working days in the case of
abstracts. In the event the disclosing party does not accept the comments
and/or proposed changes, DOR and STPI shall further discuss, and mutually
agree upon, the final wording of the written publication. Thereby, due
regard shall be given to the receiving party’s legitimate interests,
e.g.
, obtaining
optimal patent protection, coordinating and maintaining the proprietary
nature of submissions to AGENCIES, and protection of confidential data and
information. The review period may be extended for an additional two (2)
months to permit the reviewing party to file one or more patent
applications as it deems appropriate. While publications and presentations
by outside investigators may be difficult to control, both STPI and DOR
shall use reasonable efforts to gain the right to review publications and
presentations relating to the PRODUCT and AG PRODUCT by such outside
investigators. This Article 3.6 shall not apply to disclosures to the
financial community, including investor conferences and analysts’
meetings/reports, provided that such disclosure does not undermine the
validity of any claims in a prospective patent
application.
|
|
4
-
|
JOINT
DEVELOPMENT COMMITTEE
|
|
4.1
|
As
soon as possible after the EFFECTIVE DATE, DOR and STPI shall appoint a
JOINT DEVELOPMENT COMMITTEE in which both parties are equally represented
by three (3) members designated by each party. A party may change one or
more of its representatives to the JOINT DEVELOPMENT COMMITTEE at any
time. The Chairman of the JOINT DEVELOPMENT COMMITTEE shall be
a representative appointed by DOR.
|
|
4.2
|
Meetings
of the JOINT DEVELOPMENT COMMITTEE shall be held at locations designated
by the parties approximately every three (3) months or as the JOINT
DEVELOPMENT COMMITTEE may deem necessary. At these meetings, progress of
the work over the preceding period shall be discussed and the parties will
discuss, formulate and agree to plans, including plans and strategy for
the regulatory dossiers, to achieve the goals of the
collaboration. Also, at these meetings DOR will supply STPI
with progress reports summarizing any and all clinical, technical and
manufacturing activities conducted over the prior three-month period. At
these meetings either party shall be entitled to ask and to receive from
the other party any detail on any and all aspects of the activities
performed by the other party. The Chairman shall prepare or have prepared
the minutes reporting in reasonable detail the actions taken by the JOINT
DEVELOPMENT COMMITTEE, the issues requiring resolution and resolutions of
previously reported issues, which minutes are to be signed by a
representative of each party, promptly after each meeting. In the first
meeting of the JOINT DEVELOPMENT COMMITTEE the parties shall discuss and
agree upon a common policy to be used in answering any inquiries from
and/or in making any communications to any AGENCY in the
TERRITORY.
|
|
4.3
|
Any
decision by the JOINT DEVELOPMENT COMMITTEE shall be taken on a consensus
basis, by the majority of the elected members. In the event the JOINT
DEVELOPMENT COMMITTEE is unable to reach a decision by consensus, the
matter(s) in dispute shall be referred to an executive committee
(hereinafter “EXECUTIVE COMMITTEE”) for decision. The EXECUTIVE COMMITTEE
shall consist of the President of STPI (or its designee) and the President
of DOR (or its designee), provided however any final determination shall
be made by DOR.
|
|
4.4
|
DOR
shall use DILIGENT EFFORTS to carry out development of the PRODUCT in
accordance with the DEVELOPMENT PLAN. If DOR determines that it
will be unable to accomplish any of the key clinical events identified in
the DEVELOPMENT PLAN, it shall promptly notify the JOINT DEVELOPMENT
COMMITTEE at the next regularly scheduled meeting, and if necessary, DOR
shall develop a revised DEVELOPMENT PLAN for the PRODUCT, to be agreed
upon in good faith between the
parties.
|
|
4.5
|
Each
party shall bear all expenses of its representatives related to their
participation in the JOINT DEVELOPMENT
COMMITTEE.
|
|
5.1
|
DOR
shall use DILIGENT EFFORTS in connection with, and shall be responsible
for conducting or having conducted through a Contract Research
Organization, the development of the PRODUCT according to the DEVELOPMENT
PLAN, at DOR’s sole costs and expenses, which development includes the
completion of the PHASE 3 TRIAL and the assemblage of the registration
dossier so that the MARKETING AUTHORIZATIONS can be filed by DOR with the
competent AGENCY in the TERRITORY.
|
|
5.2
|
It
is expected that the PRODUCT development will be related first to the use
of the PRODUCT in the treatment of GI GVHD. If either DOR or STPI
determines that additional development may yield new indications for
PRODUCT, the parties agree to negotiate in good faith, without obligation,
the potential for a sharing of costs, milestones, or any other mutually
acceptable arrangement that would encourage such development. In the event
the parties reach an agreement, this AGREEMENT would be amended in writing
accordingly.
|
|
5.3
|
DOR
agrees to supply, free of charge, the PRODUCT necessary to conduct the
PHASE 3 TRIAL as well as any clinical trial as approved by the JOINT
DEVELOPMENT COMMITTEE in order to pursue the fullest
development. Any PRODUCT required for any Phase 4
studies that are required by or negotiated with the FDA as a condition to
obtaining or maintaining APPROVAL of the PRODUCT shall be supplied by DOR
free of charge. Any PRODUCT required for any Phase 4 studies
requested by STPI that are not required by or negotiated with the FDA as a
condition to obtaining or maintaining APPROVAL of the PRODUCT shall be
supplied by DOR at DOR’s FULLY BURDENED
COST.
|
|
5.4
|
DOR
shall promptly supply STPI with the results of the PHASE 3 TRIAL as well
as with any and all results and documentation arising from any studies
conducted by DOR. DOR grants STPI the right to use these results and
documentation for COMMERCIALIZATION and pharmacovigilance purposes for the
PRODUCT in the FIELD in the
TERRITORY.
|
|
5.5
|
As
supplier of the PRODUCT and AG PRODUCT, DOR shall be responsible for
filing or having applicable vendors/suppliers file drug master files with
respect to the SUBSTANCE and PRODUCT with all relevant AGENCIES in the
TERRITORY in accordance with the DEVELOPMENT
PLAN.
|
|
5.6
|
The
parties shall cooperate in good faith with respect to the conduct of any
inspections by an AGENCY of a party’s site and facilities related to the
PRODUCT and AG PRODUCT. To the extent either party receives any
material written or oral communication from an AGENCY relating to the
APPROVAL process with respect to the PRODUCT in the TERRITORY, the party
receiving such communication shall promptly notify the other party and
provide a copy of such written communication and/or a written summary of
such oral communication as soon as reasonably practicable. The
parties shall cooperate in good faith with respect to all regulatory
filings required under this
AGREEMENT.
|
|
5.7
|
DOR
acknowledges that certain PRODUCT-related activities undertaken by DOR
outside of the TERRITORY may trigger material reporting obligations to an
AGENCY and may materially affect the COMMERCIALIZATION of the PRODUCT by
STPI in the TERRITORY, and with respect to such activities that DOR
determines in good faith are likely to trigger such material reporting
obligations and/or are likely to materially affect such COMMERCIALIZATION
by STPI, DOR shall disclose such PRODUCT-related activities outside of the
TERRITORY to STPI and permit STPI to promptly review them and provide
comments and suggestions that would enable both parties to achieve their
objectives under this AGREEMENT. Similarly, STPI shall disclose
any PRODUCT-related activities within the TERRITORY to DOR and permit DOR
to promptly review them and provide comments and suggestions that would
enable both parties to achieve their objectives under this
AGREEMENT. If the parties are unable to reach mutual agreement
regarding a fair and reasonable approach that would avoid or minimize any
material reporting obligations and material effects on COMMERCIALIZATION
of the PRODUCT by STPI, such dispute or disagreement shall be resolved
pursuant to Article 17.
|
|
5.8
|
DOR
shall conduct any post-APPROVAL development programs for the PRODUCT in
the TERRITORY, including Phase 4 studies, that are required by or
negotiated with the FDA as a condition to obtaining or maintaining
APPROVAL of the PRODUCT. The cost and expense of any such
programs related to treatment of GI GVHD shall be borne by
DOR. The cost and expense of any Phase 4 studies requested by
STPI that are not required by or negotiated with the FDA as a condition to
obtaining or maintaining APPROVAL of the PRODUCT shall be borne by
STPI.
|
|
6
-
|
REGISTRATION,
COMMERCIALIZATION.
|
|
6.1
|
DOR
will own the NDA or submission filed by DOR with any AGENCY to obtain the
MARKETING AUTHORIZATIONS in any country of the TERRITORY. DOR
will also own all MARKETING
AUTHORIZATIONS.
|
|
6.2
|
DOR
shall file applications for and maintain MARKETING AUTHORIZATIONS for the
PRODUCT in the FIELD in the TERRITORY with the competent AGENCY in the
TERRITORY in DOR’s own name and costs. DOR shall at its own cost and
expense obtain and comply with all authorizations, licenses, permits and
regulations which may from time to time be required from any AGENCY in the
TERRITORY to enable DOR to obtain and maintain MARKETING
AUTHORIZATIONS.
|
|
6.3
|
DOR,
directly and/or through the manufacturer/s of the PRODUCT and AG PRODUCT,
and STPI will enter into the QUALITY ASSURANCE AGREEMENT, which will set
forth in detail the responsibilities of the parties concerning
manufacturing, control, and release of the PRODUCT and AG
PRODUCT. The QUALITY ASSURANCE AGREEMENT will also address, but
not be limited to, preliminary specifications, raw material purchasing and
controls, analytical documentation, costs of quality assurance and other
matters relating to compliance with cGMP in the
TERRITORY.
|
|
6.4
|
STPI
shall be responsible for the promotion, marketing and distribution of the
PRODUCT and AG PRODUCT in the FIELD in the TERRITORY, and the creation, if
any, of associated marketing collaterals, inserts, advisory information or
material or the like.
|
|
6.5
|
Joint
Commercialization Committee
.
|
|
6.5.1
|
Promptly
after the EFFECTIVE DATE, the parties shall appoint a JOINT
COMMERCIALIZATION COMMITTEE in which both parties are equally represented
by three (3) members designated by each party. A party may change one or
more of its representatives to the JOINT COMMERCIALIZATION COMMITTEE at
any time. The Chairman of the JOINT COMMERCIALIZATION COMMITTEE
shall be a representative appointed by
STPI.
|
|
6.5.2
|
Any
decision by the JOINT COMMERCIALIZATION COMMITTEE shall be taken on a
consensus basis, by the majority of the elected members. In the event the
JOINT COMMERCIALIZATION COMMITTEE is unable to reach a decision by
consensus, the matter(s) in dispute shall be referred to the EXECUTIVE
COMMITTEE for decision, provided however any final determination shall be
made by STPI.
|
|
6.5.3
|
Meetings
of the JOINT COMMERCIALIZATION COMMITTEE shall be held at locations
designated by the parties approximately every three (3) months; via
teleconferencing or as the JOINT COMMERCIALIZATION COMMITTEE may deem
necessary. In furtherance of its responsibility for overseeing
the COMMERCIALIZATION of the PRODUCT, the JOINT COMMERCIALIZATION
COMMITTEE shall perform the following
activities:
|
|
(i)
|
review
strategy for COMMERCIALIZATION of PRODUCT, including product
positioning;
|
|
(ii)
|
coordinate
with the JOINT DEVELOPMENT COMMITTEE as
appropriate;
|
|
(iii)
|
review
and comment on marketing plans;
|
|
(iv)
|
facilitate
the flow of information with respect to the COMMERCIALIZATION of the
PRODUCT and AG PRODUCT;
|
|
(v)
|
coordinate
plans for labeling and selecting TRADEMARKS for PRODUCT and AG PRODUCT in
the TERRITORY;
|
|
(vi)
|
review
and comment on advertising and promotional materials, including medical
education, symposia, opinion leader development, peer-to-peer development,
publications and journal ads;
|
|
(vii)
|
design,
in collaboration with the JOINT DEVELOPMENT COMMITTEE, Phase 4 studies,
and review use and dissemination of such resulting
data;
|
|
(viii)
|
review
and comment on final packaging, and plan and oversee educational and
professional symposia and speaker and peer-to-peer activity
programs;
|
|
(ix)
|
recommend
to the JOINT DEVELOPMENT COMMITTEE whether to seek NEW INDICATIONS,
formulations or uses for the PRODUCT and AG PRODUCT, such as for PRODUCT
and AG PRODUCT life cycle
management;
|
|
(x)
|
work
with the JOINT DEVELOPMENT COMMITTEE for approval of early access and
compassionate use programs.
|
On or
before the filing of the NDA for a PRODUCT in the FIELD in the TERRITORY, the
JOINT COMMERCIALIZATION COMMITTEE shall prepare and approve a detail marketing
plan which shall set forth market development activities and expenditures by
STPI and the steps that will be taken in order to COMMERCIALIZE the
PRODUCT. Following the APPROVAL, the parties shall communicate regularly
in order to review the activities taken in connection with the COMMERCIALIZATION
of the PRODUCT in the TERRITORY.
|
6.6
|
STPI
shall at all times use DILIGENT EFFORTS in the COMMERCIALIZATION in the
TERRITORY of the PRODUCT and AG
PRODUCT.
|
|
6.7
|
Each
party shall bear all expenses of its representatives related to their
participation in the JOINT COMMERCIALIZATION
COMMITTEE.
|
|
7.1
|
STPI
agrees that the TRADEMARK shall be owned, controlled and maintained
(including filing, watching, renewals) by DOR, at DOR’s sole costs and
expenses, for the duration of this
AGREEMENT.
|
|
7.2
|
DOR
agrees to take promptly all reasonable legal action necessary to protect
the TRADEMARK against any infringement by third parties. If within sixty
(60) days following notice of a possible infringement of the TRADEMARK,
DOR decides not to take action to restrain such infringement, STPI shall,
in its sole discretion, have the right to take such action as it deemed
necessary or desirable. Each party agrees to render such reasonable
assistance the other party may reasonably request (e.g. necessary Powers
of Attorney). Costs of any action brought by either party here under and
recovery achieved as a result thereof, shall belong to
DOR.
|
|
7.3
|
Should
any settlement or judicial finding which is reviewable by a higher
authority arise as a result of such action, then STPI and DOR shall
reasonably consult before accepting any settlement or judicial finding
which is reviewable by a higher
authority.
|
|
7.4
|
STPI
agrees to comply with the trademark usage standards attached to this
AGREEMENT as Appendix D. From time to time, or upon the request
of DOR, STPI agrees to supply DOR with a sample of advertisements,
marketing material and the promotional material bearing the TRADEMARKS
prior to their use for the purpose of enabling DOR to have thirty (30)
days to examine and approve the
foregoing.
|
|
8
-
|
MANUFACTURING
AND SUPPLY OF THE PRODUCT
|
|
8.1
|
In
order to ensure that the manufacture of the PRODUCT and AG PRODUCT
conforms to the highest quality standards: (i) STPI undertakes to purchase
all its requirements of the PRODUCT and AG PRODUCT from DOR at the SUPPLY
PRICE set forth in Appendix C to this AGREEMENT; and (ii) DOR undertakes
to manufacture and supply STPI with all STPI’s requirements of the PRODUCT
and AG PRODUCT.
|
|
8.2
|
Forecasts
. In
order to assist DOR in its production planning, STPI shall submit to DOR
as soon as possible before the launching of the PRODUCT and AG PRODUCT by
STPI, its best estimates of its purchase requirements of PRODUCT and AG
PRODUCT for the first twelve (12) months, together with projected delivery
dates. Thereafter, not later than the
10
th
working day of each calendar month, STPI shall submit to DOR its best
estimates of its purchase requirements (“ESTIMATED QUANTITIES”) and
delivery dates of PRODUCT and AG PRODUCT for the following twelve (12)
calendar months, broken down into requirements for each calendar
month.
|
|
8.3
|
Firm
Orders
. Not less than ninety (90) calendar days prior to
the beginning of each calendar month, STPI shall submit to DOR a binding
purchase order for its requirements of PRODUCT and AG PRODUCT in such
month (“FIRM ORDER”). The quantity in each FIRM ORDER for
PRODUCT and AG PRODUCT shall not be less than seventy-five percent (75%)
nor more than one hundred twenty-five percent (125%) of the ESTIMATED
QUANTITY for such PRODUCT and AG PRODUCT for any calendar month as most
recently updated. Notwithstanding the foregoing, DOR shall use
DILIGENT EFFORTS to fill requested revisions of FIRM ORDERS that are in
excess of one hundred twenty-five percent (125%) of the ESTIMATED
QUANTITY. DOR shall deliver the PRODUCT and AG PRODUCT at the
requested delivery dates set forth in the FIRM ORDER, which dates shall
have been agreed upon by the parties in advance as commercially
reasonable.
|
|
8.4
|
Delivery
. DOR
shall deliver or arrange for the delivery of PRODUCT and AG PRODUCT
ordered by STPI CIP (ICC Incoterms 2000) to STPI’s warehouses in the
U.S. DOR shall provide STPI with certificates of analysis
related to the PRODUCT and AG PRODUCT for each batch released for delivery
hereunder. These certificates will document that each batch
received by STPI conforms to the agreed upon specifications and is
otherwise in conformity with Article 8.6. A copy of each
certificate shall be included with each batch delivered to
STPI.
|
|
8.5
|
At
STPI’s expense, DOR shall allow STPI’s employees, consultants or other
representatives upon prior written notification, at all reasonable
business times, to visit and inspect the premise(s) used directly or
indirectly by DOR or its subcontractors or AFFILIATES for the
manufacturing (e.g. processing, packing, etc.) of the SUBSTANCE, PRODUCT
and/or AG PRODUCT, but in any event not more than once annually unless DOR
has received a warning letter from the FDA and then such visits may be
conducted more frequently as reasonably necessary to provide assurances to
STPI until the defects listed in such warning letter are
remedied. STPI warrants that all such inspections and audits
shall be carried out in a manner so as not to unreasonably interfere with
DOR’s, its subcontractors’ or its AFFILIATES’ conduct of business and to
insure the continued confidentiality of DOR’s business and technical
information. Further, STPI agrees to comply with all of DOR’s
safety and security requirements during any visits to the DOR, its
subcontractors’, or AFFILIATES’ facilities. STPI agrees to make
promptly available to DOR any external reports from such facility
visit(s).
|
|
8.6
|
DOR
represents and warrants that the PRODUCT and AG PRODUCT manufactured by or
on behalf of DOR shall (i) meet the specifications set forth in the
registration dossier and MARKETING AUTHORIZATIONS and (ii) be manufactured
and packaged in compliance with applicable law, including
cGMP. DOR will be responsible for labeling and packaging of
PRODUCT and AG PRODUCT for final distribution, utilizing TRADEMARKS and
artwork provided by STPI to DOR in accordance with the terms
hereof. Any claim under this representation and warranty shall
be governed by Article 8.8. The provisions of this Article 8.6
shall not in any way limit DOR’s indemnification obligations under Article
13.2.
|
|
8.7
|
The
SUPPLY PRICE for the PRODUCT and AG PRODUCT supplied and delivered to STPI
in accordance with this AGREEMENT shall be paid to DOR in accordance with
the provisions of Appendix C
hereof.
|
|
8.8
|
Claims
. All
claims made concerning quality, loss or other defects in any PRODUCT must
be made to DOR in writing within thirty (30) days following delivery of
the PRODUCT and AG PRODUCT to STPI;
provided
,
however
, that
other than with respect to defects or other non-compliance plainly
observable from a visual inspection, any acceptance or deemed acceptance
shall not adversely affect or otherwise diminish STPI’s rights to receive
shipments of the PRODUCT and AG PRODUCT in compliance with the
requirements of Article 8.6 or its rights in respect of Article
13. At DOR’s request, STPI shall forward for inspection a
representative sampling of the PRODUCT and AG PRODUCT or any part thereof
that is the subject of STPI’s claim. DOR shall inspect such
samples and, if it concurs with STPI’s claim, shall promptly replace the
defective PRODUCT and AG PRODUCT without any cost to STPI. If
the parties are unable to resolve their differences within sixty (60) days
of STPI’s claim, then either party may refer the matter to an independent
specialized firm of international reputation agreeable to both the parties
for final analysis, which shall be a final resolution of such issue,
binding on both parties hereto. If the PRODUCT and AG PRODUCT is
determined to be in compliance or if there is a nonconformity with respect
to such PRODUCT and AG PRODUCT but the nonconformity occurred after
delivery by DOR, then STPI shall bear the cost of the independent
laboratory testing and pay for the PRODUCT and AG PRODUCT in accordance
with this AGREEMENT and DOR shall have no liability. If the
PRODUCT and AG PRODUCT is determined not to be in compliance, then DOR
shall bear the cost of independent laboratory testing, and shall, at its
election, either replace the rejected PRODUCT and AG PRODUCT at no cost to
STPI, or credit STPI for the SUPPLY PRICE paid by STPI with respect to the
defective PRODUCT and AG PRODUCT. STPI shall provide prompt assistance to
DOR in connection with any recall including without limitation
notification of the customers and recalling the PRODUCT and AG PRODUCT
supplied to such customers, at DOR’s cost. Each party shall act
in good faith and shall cooperate with the other party, with any qualified
independent third-party laboratory in connection with an investigation,
and with the arbitrator, as to the existence of or source of nonconformity
with respect to a batch of PRODUCT and AG PRODUCT supplied under this
AGREEMENT. In testing the batch of PRODUCT and AG PRODUCT, any
independent third-party laboratory shall use analytical testing methods as
agreed upon by the parties. This shall be the sole remedy for the
resolution of any claims STPI or its AFFILIATES related to any defective
or non conforming PRODUCT. The provisions of this Article 8.8
shall not in any way limit DOR’s indemnification obligations under Article
13.2.
|
|
8.9
|
DOR
undertakes to appoint at least one back up manufacturer. Should DOR expect
to be unable, directly or indirectly, to timely and accurately supply STPI
with STPI’s total requirement of the PRODUCT and AG PRODUCT, it will
promptly inform STPI in advance and the parties will promptly convene to
agree in good faith how best to proceed, including using alternate
manufacturer/s to fulfill DOR’s obligation to supply PRODUCT and AG
PRODUCT. This Article 8.9 is without prejudice for STPI to claim any and
all damages resulting from DOR’s inability to timely and accurately
fulfill its obligation to supply STPI with all STPI’s requirements of the
PRODUCT and AG PRODUCT in the
TERRITORY.
|
|
8.10
|
OTHER
THAN AS SET FORTH IN THIS AGREEMENT, ALL OTHER WARRANTIES OF EITHER PARTY,
BOTH EXPRESS AND IMPLIED, ARE HEREBY EXPRESSLY DISCLAIMED, INCLUDING ANY
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE
DRUG SUBSTANCE OR THE SERVICES PROVIDED HEREUNDER. IN NO EVENT
SHALL DOR OR STPI BE LIABLE FOR CONSEQUENTIAL DAMAGES, INCIDENTAL DAMAGES,
LOST PROFITS, LOST PRODUCTS, PUNITIVE DAMAGES OR LOSS OF
OPPORTUNITY.
|
|
8.11
|
DOR
shall maintain true and accurate books, records, test and laboratory data,
reports and all other information relating to manufacturing and packaging
under this AGREEMENT, including all information required to be maintained
by the specifications and all applicable laws. Such information
shall be maintained in forms, notebooks and records for a period as
required under applicable laws and/or as outlined in the QUALITY ASSURANCE
AGREEMENT.
|
(The information below marked by ***** has been
omitted by a request for confidential treatment. The omitted portion has been
separately filed with the Commission.)
|
9.1
|
STPI
shall pay to DOR the following amounts plus VAT, if
applicable:
|
|
9.1.1
|
one
million U.S. Dollars (U.S. $1,000,000) to be paid within thirty (30) days
of receipt of a report, certified by DOR, stating that the first patient
in the PHASE 3 TRIAL has been administered the PRODUCT;
and
|
|
9.1.2
|
*****
to be paid within thirty (30) days of receipt of a report from DOR showing
that the PHASE 3 TRIAL has successfully achieved its primary endpoint
consistent with the FDA’s Special Protocol Assessment (SPA) feedback in
support of an NDA; and
|
|
9.1.3
|
*****
to be paid within thirty (30) days upon the cumulative NET SALES in
the TERRITORY having achieved twenty-five million U.S. Dollars (U.S.
$25,000,000); and
|
|
9.1.4
|
***** to
be paid within thirty (30) days upon the NET SALES in the TERRITORY for
any twelve (12) month period (i.e., any twelve (12) consecutive months)
exceeding fifty million U.S. Dollars (U.S.
$50,000,000).
|
For the
avoidance of doubt, (i) each of the above milestones will be payable only once
for each event described and (ii) the aggregate of all milestone payments under
this Article 9.1 during the term of this AGREEMENT shall not exceed an
amount equal to ten million U.S. Dollars (U.S. $10,000,000).
The above
milestones payments are to be considered STPI’s contribution to and
reimbursement of the costs and expenses related to the PHASE 3 TRIAL and other
activities necessary to obtain and maintain the MARKETING AUTHORIZATIONS.
Accordingly, DOR undertakes to utilize such milestones payments received prior
to the granting of the MARKETING AUTHORIZATIONS only for the furtherance of the
PHASE 3 TRIAL and other PRODUCT development activities necessary to obtain and
maintain the MARKETING AUTHORIZATIONS in the TERRITORY; DOR shall send to STPI
quarterly reports showing the proper allocation of the above milestones
payments.
|
9.2.1
|
STPI
shall pay DOR a certain SUPPLY PRICE, starting from the FIRST COMMERCIAL
SALE of the PRODUCT and AG PRODUCT by STPI during the term of this
AGREEMENT, as specified by the provisions of Appendix C attached
hereto.
|
|
9.2.2
|
Upon
the ninety (90) days prior to the date where DOR will be required to
supply PRODUCT to STPI, DOR shall inform STPI of the amount of the FIXED
COMPONENT of the SUPPLY PRICE. DOR shall reasonably cooperate
with any request by STPI to review DOR’s determination of the FIXED
COMPONENT, but barring any clear error in calculation, the determination
of DOR shall be conclusive. DOR shall inform STPI of any
adjustment to the FIXED COMPONENT at least thirty (30) days prior to
making such adjustment. DOR shall reasonably cooperate with any
request by STPI to review DOR’s determination of the adjustment to FIXED
COMPONENT, but barring any clear error in calculation, the determination
of DOR shall be conclusive and
STPI.
|
|
9.2.3
|
STPI
shall keep accurate books and records setting forth the sales in unit and
value, the selling prices, the NET SALES and the amount of SUPPLY PRICE
payable to DOR hereunder, for each country of the TERRITORY with regard to
the PRODUCT and AG PRODUCT sold. DOR, at its discretion, shall be
permitted either: to have performed by an independent certified public
accounting firm of nationally recognized standing selected by DOR and
reasonably acceptable to STPI, at DOR’s expense, yearly audits of STPI
records and books related to the PRODUCT and AG PRODUCT, provided such
audits are reasonably conducted at STPI convenience and during STPI
regular business hours. DOR’s representative or agent will be
required to execute a reasonable and commercially customary
confidentiality agreement with STPI prior to commencing any audit. Such
auditor shall report to DOR only on the accuracy of the information
provided by STPI (without taking any copies of STPI records and books) and
whether additional amounts are owed. Such audits may be
conducted for any calendar year ending not more than twenty-four (24)
months prior to the date of each request. The right to audit with respect
to any calendar year shall terminate three (3) years after the end of any
such calendar year. In the event that a discrepancy arises between the
SUPPLY PRICE paid to DOR and STPI records and books, STPI shall be given
thirty (30) days from the receipt of the notice to either explain
such discrepancy and/or remedy such discrepancy, as
appropriate. Further, in the event of a discrepancy of more
than five percent (5%) between the amount owed and the actual amount
received by DOR, STPI shall reimburse all the actual expenses and costs
incurred by DOR in performing such
audit.
|
|
9.2.4
|
The
obligation to pay SUPPLY PRICE hereunder shall be imposed only once with
respect to each unit of the PRODUCT and AG PRODUCT. No payments
shall accrue on the sales of STPI to its AFFILIATED COMPANIES or
sublicensees (if permitted) or distributors or agents as well as on any
transactions between such entities. Payments shall accrue only
on sales to unrelated third parties in arm’s length
transactions.
|
|
9.2.5
|
Any
taxes (other than value added or income taxes) STPI is required
by the local authorities to pay or withhold on behalf of DOR with respect
to the money payable to DOR under this AGREEMENT shall be deducted from
the amount of such payments,
provided
,
however
, that
with regard to any such deduction STPI shall give DOR such assistance as
may be necessary to enable or assist DOR to claim exception therefore
(under US or other applicable laws as well as any applicable treaties or
conventions) and shall give DOR proper evidence as to payment of the
tax. Any other taxes due in the TERRITORY and arising out of or
in connection with STPI exercise of the rights granted herein shall be
borne by STPI. STPI shall not be responsible for paying DOR’s
income tax.
|
(The information below marked by ***** has been
omitted by a request for confidential treatment. The omitted portion has been
separately filed with the Commission.)
|
9.3
|
In
the event of GENERIC COMPETITION in any country of the TERRITORY, the
SUPPLY PRICE due in said country pursuant to Appendix C hereof shall be
reduced (and may be subsequently increased, not to exceed the SUPPLY PRICE
agreed to as of the date hereof) from time to time by the same percentage
of the decrease (and may be subsequently increased, not to exceed the
SUPPLY PRICE agreed to as of the date hereof)
i
n the NET SALES during
any three (3) month rolling period,
provided
,
however
, that
in no event shall the SUPPLY PRICE be reduced to below ***** of the FULLY
BURDENED MANUFACTURING COST. Such reduction/s shall commence
with the beginning of the next month following STPI’s written notification
to DOR.
|
|
9.4
|
In
the event it is necessary due to the claim of a third party or a court
order to obtain a license from any unaffiliated third party under any
patent or other intellectual property right having claims that the
APPROVED PRODUCT that is currently subject to the PHASE 3 TRIAL or its
use, sale or manufacture infringes, DOR shall have the sole and exclusive
right to negotiate a license to such third party intellectual
property. If after six (6) months (or one (1) month if there is
an injunction in place), DOR is unable to secure a license or other
settlement, then STPI shall have the right to secure such a license or
obtain other settlement provided that such terms are commercially
reasonable within the applicable industry. In the event that
STPI is obligated to pay a royalty due to such infringement to such
unaffiliated third party or parties in any country in order to
COMMERCIALIZE
the APPROVED
PRODUCT in the TERRITORY in the FIELD, then STPI shall have the right to
deduct the amount of such royalties which STPI pays to such unaffiliated
party or parties for such product, in such country in a calendar quarter,
from the PERCENTAGE COMPONENT of the SUPPLY PRICE to be paid to DOR as set
forth in Appendix C for such PRODUCT in such country in a calendar
quarter;
provided
,
however
, that
in no event shall the PERCENTAGE COMPONENT of the SUPPLY PRICE for any
PRODUCT payable hereunder to DOR be less than fifty percent (50%) of the
amounts payable to DOR pursuant to Appendix C immediately prior to the
initiation of STPI’s obligation to pay such third party
royalty. This provision shall also apply to any other APPROVED
PRODUCT which is mutually agreed by the parties to be COMMERCIALIZED by
STPI.
|
|
9.5
|
Without
limiting the generality of the foregoing, DOR shall remain responsible for
any royalty obligations due to third parties under the PATENT RIGHTS
and/or the KNOW-HOW and/or the TRADEMARK which have been licensed to STPI
hereunder. DOR will not be entitled to add such royalties due to third
parties to the SUPPLY PRICE.
|
|
10.1
|
For
the entire term of this AGREEMENT, DOR shall prosecute and maintain the
PATENT RIGHTS at its own expense.
|
|
10.2
|
Each
party shall advise the other promptly upon its becoming aware of any third
party infringement of the PATENT RIGHTS. After discussing its intentions
with STPI, DOR may at its option take such action as is required to
restrain such infringement, STPI having the right to cooperate in its
attempt to restrain such infringement. STPI may be represented by counsel
of its own choice, at its own expense at any suit or proceeding brought to
restrain such infringement. If, however, within forty-five (45) days of
the notice of a third party infringement, DOR fails to institute an
infringement suit that STPI feels is reasonably required, STPI shall have
the right at its own discretion to institute an action for infringement of
any of the claim or claims of the PATENT RIGHTS in
question and DOR agrees to use DILIGENT EFFORTS under the MCDONALD LICENSE
to protect STPI’s rights set forth herein. After MCDONALD has been paid
any and all amounts owed under Section 9 of the MCDONALD LICENSE, to the
extent applicable, and after both parties have been reimbursed for their
expenses in bringing such suit or proceeding, any further recovery
obtained as a result of such action, whether by judgment, award, decree or
settlement, shall be split as follows: (i) if DOR brings the action, then
DOR retains 65% and STPI retains 35% and (ii) if STPI brings the action,
then DOR retains 35% and STPI retains
65%.
|
|
10.3
|
Should
any settlement or judicial finding which is reviewable by a higher
authority arise as a result of such action, then STPI and DOR shall
reasonably consult before accepting any settlement or judicial finding
which is reviewable by a higher
authority.
|
|
10.4
|
MCDONALD
has certain rights to participate in any action for infringement and other
rights as set forth in Section 9 of the MCDONALD LICENSE and to the extent
applicable, the rights of the parties in respect thereof are subject to
such rights of MCDONALD as set forth in the MCDONALD LICENSE as if fully
set forth herein.
|
|
11
-
|
REPRESENTATIONS
AND WARRANTIES
|
|
11.1
|
Each
of DOR and STPI warrant and represent to the other that, (i) it has the
full corporate right and authority to enter into the AGREEMENT, (ii)
except as specifically provided in Section 2B(iv) of the MCDONALD LICENSE,
the restrictions of which MCDONALD has waived, no contractual impediment
conflicts, and during the term of this AGREEMENT it will not permit to
exist any contractual impediment that would conflict, its ability to
perform the terms and conditions imposed on it by this AGREEMENT, (iii)
the execution, delivery and performance of this AGREEMENT by either party
have been duly authorized and approved by all necessary corporate action,
(iv) the AGREEMENT is binding upon and enforceable against either party in
accordance with its terms (subject to bankruptcy and similar laws
affecting the rights of creditors generally), and (v) to the knowledge of
such party, as of the EFFECTIVE DATE (without undertaking any special
investigation), there is no claim, action, suit, proceeding or
investigation pending or threatened against or affecting the transaction
contemplated hereby.
|
|
11.2
|
DOR
warrants and represents that, to the best of its knowledge, based on the
current best knowledge of its officers, after inquiry of the attorneys of
DOR, it is not aware of any third party patents which would be infringed
by the import, manufacture, development, use, sale, or offer for sale of
the PRODUCT or that has been asserted to cover the import, manufacture,
development, use, sale, or offer for sale of the PRODUCT. DOR further
represents and warrants that, to its knowledge, based on the current best
knowledge of its officers, after inquiry of the attorneys of DOR, it is
not aware that any third party is infringing the PATENT
RIGHTS.
|
|
11.3
|
DOR
warrants and represents that all of its PATENT RIGHTS claiming the
SUBSTANCE and/or the PRODUCT have been disclosed to STPI and are listed in
Appendix B of this AGREEMENT. DOR warrants and represents that it owns or
is in CONTROL of all right, title and interest in and to the PATENT RIGHTS
and, and to the best of its knowledge, based on the current knowledge of
its officers, after inquiry of the patent attorneys of DOR, the KNOW-HOW,
in the sense of being able to convey to STPI, in accordance with this
AGREEMENT, the exclusive rights hereunder in the FIELD in the TERRITORY,
to the extent conveyed. Without limiting the generality of the foregoing
(subject to the right of the U.S. Government to use any licensed patent
developed using government funding pursuant to the MCDONALD LICENSE), DOR
represents and warrants that none of the PATENT RIGHTS or KNOW-HOW have
been pledged, assigned or otherwise conveyed, in whole or in part, to a
third party.
|
|
11.4
|
DOR
warrants and represents that the PATENT RIGHTS constitute all of the
patents and patent applications owned or CONTROLLED by DOR as of the
EFFECTIVE DATE that are necessary or are useful to use or COMMERCIALIZE
the PRODUCT in the TERRITORY (as the PRODUCT is known to DOR as of the
EFFECTIVE DATE, and if such PRODUCT were to be COMMERCIALIZED as of the
EFFECTIVE DATE).
|
|
11.5
|
DOR
warrants and represents that, to its knowledge, all the PATENT RIGHTS
listed on Appendix B are in full force and effect and have been maintained
to date, and all fees required to be paid by DOR in order to maintain the
PATENT RIGHTS have been paid to date, and none such PATENT RIGHT has been
abandoned or cancelled for failure to prosecute or maintain
it.
|
|
11.6
|
DOR
warrants and represents that it has made available to STPI copies of all
material correspondence with the FDA related to the PRODUCT in DOR’s
CONTROL. DOR further represents and warrants that none of the
PATENT RIGHTS applicable to the PRODUCT is currently involved in any
interference, reissue, reexamination proceeding, or litigation, and
neither DOR nor any of its AFFILIATES has received any written notice from
any person of such actual or threatened
proceeding.
|
|
11.7
|
DOR
warrants and represents that DOR has used its DILIGENT EFFORTS to
make available to or provide STPI with copies of all
information in DOR’s CONTROL regarding the PRODUCT in the TERRITORY, the
PATENT RIGHTS and the KNOW-HOW which could reasonably be expected to be
material to assessing the commercial potential for the PRODUCT, the
ability to timely gain regulatory approval of the PRODUCT, and/or the
risks of infringing third party intellectual property through use or
COMMERCIALIZATION of the PRODUCT.
|
|
11.8
|
To
DOR’s knowledge, the Data Room maintained by DOR and made available to
STPI contains copies of all material information in the possession or
CONTROL of DOR relating to quality, toxicity, safety and/or efficacy which
would materially impair the utility and/or safety of the PRODUCT or the
development, manufacture and COMMERCIALIZATION of the PRODUCT in the
TERRITORY.
|
|
11.9
|
Except
for MCDONALD, whose inventions relate to the PATENT RIGHTS, DOR warrants
and represents that all current, former and future employees and
consultants of DOR and its AFFILIATES who are, have been or will be
substantively involved in the design, review, evaluation or development of
the PATENT RIGHTS, the KNOW-HOW, the SUBSTANCE or the PRODUCT have
executed (or with respect to future employees or consultants will execute)
written contracts or are otherwise obligated to protect the confidential
information of STPI, DOR, and of any third party received through their
position with DOR, and to vest in DOR or its AFFILIATES exclusive
ownership of the PATENT RIGHTS and KNOW-HOW they have invented or
developed.
|
|
11.10
|
DOR
represents and warrants that at all times during the term of this
AGREEMENT, it will, and it will require its distributors and if permitted,
sublicensees to, obtain, maintain and comply with all licenses, permits
and authorizations necessary to it to complete and timely perform its
obligations under this AGREEMENT, which are required under any applicable
statutes, laws, ordinances, rules and regulations of the United States as
well as those of all applicable foreign governmental bodies, agencies and
subdivisions, having, asserting or claiming jurisdiction over DOR or any
of such distributors or sublicensee. DOR understands and
acknowledges that the transfer of certain commodities and technical data
is subject to United States laws and regulations controlling the export of
such commodities and technical data, including all Export Administration
Regulations of the United States Department of Commerce. These
laws and regulations, among other things, prohibit or require a license
for the export of certain types of technical data to certain specified
countries. DOR hereby agrees and gives written assurance that
it will comply with all United States laws and regulations controlling the
export of commodities and technical data, that it will be solely
responsible for any violation of such by DOR or its AFFILIATES,
distributors or sublicensees (if permitted), and that DOR will defend and
hold STPI harmless if of any legal action of any nature occasioned by such
violation).
|
|
11.11
|
STPI
represents and warrants that at all times during the term of this
AGREEMENT, it will, and it will require its distributors and if permitted,
sublicensees will obtain, maintain and comply with all licenses, permits
and authorizations necessary to it to complete and timely perform its
obligations under this AGREEMENT, which are required under any applicable
statutes, laws, ordinances, rules and regulations of the United States as
well as those of all applicable foreign governmental bodies, agencies and
subdivisions, having, asserting or claiming jurisdiction over STPI or any
of such distributors or sublicensee. STPI understands and
acknowledges that the transfer of certain commodities and technical data
is subject to United States laws and regulations controlling the export of
such commodities and technical data, including all Export Administration
Regulations of the United States Department of Commerce. These
laws and regulations, among other things, prohibit or require a license
for the export of certain types of technical data to certain specified
countries. STPI hereby agrees and gives written assurance that
it will comply with all United States laws and regulations controlling the
export of commodities and technical data, that it will be solely
responsible for any violation of such by STPI or its AFFILIATES,
distributors or sublicensees (if permitted), and that STPI will defend and
hold DOR harmless if of any legal action of any nature occasioned by such
violation. STPI agrees not to repackage any PRODUCT or
add, modify or remove any labels on or product inserts in any PRODUCT,
except as authorized by the JOINT COMMERCIALIZATION
COMMITTEE.
|
|
11.12
|
DOR
represents and warrants that it has the rights to grant the sublicense and
other rights granted to STPI
herein.
|
Neither
of the parties shall be liable for failure to perform its obligations under this
AGREEMENT when occasioned by contingencies unavoidable or beyond its control,
which may include without limitation, strikes or other work stoppages, lock
outs, riots, wars, delay of carriers, governmental laws or enactments, provided
that such contingencies are unavoidable or beyond the control of any party
hereto. The party so affected shall give notice promptly to the other party in
writing of the event of force majeure, and, thereupon, the affected party shall
be excused from those of its obligations hereunder which it is unable to perform
because of that event of force. Should one party fail to perform and fulfill its
obligations stated above for more than ninety (90) consecutive days or more, the
parties agree to negotiate in good faith either (i) to resolve the
contingencies or find an alternative solution, if possible; (ii) to extend
by mutual agreement the time period to resolve, eliminate, cure or overcome such
contingencies; or (iii) to terminate this AGREEMENT upon the terms and
conditions agreed upon at that time.
|
13
-
|
LIABILITY
AND INDEMNIFICATION
|
|
13.1
|
STPI
hereby agrees to save, defend, indemnify and hold DOR and its officers,
directors, employees, independent contractors, agents, and assigns,
harmless from and against any and all third party suits, claims, actions,
demands, liabilities, expenses or loss (including reasonable attorneys’
fees) resulting from:
|
|
13.1.1
|
STPI’s
handling, storage, distributing, marketing or selling of the PRODUCT and
AG PRODUCT;
|
|
13.1.2
|
STPI’s
negligence or willful misconduct in its performance pursuant to this
AGREEMENT;
|
|
13.1.3
|
STPI’s
material breach of any of its covenants, warranties and representations
under this AGREEMENT; or
|
|
13.1.4
|
STPI’s
violation of any applicable law or
regulations.
|
STPI
shall only be obligated to so indemnify and hold DOR harmless under this Article
13.1 to the extent that DOR does not have an obligation to indemnify STPI
pursuant to Article 13.2.
|
13.2
|
DOR
hereby agrees to save, defend, indemnify and hold STPI and its AFFILIATES,
and their respective officers, directors, employees, independent
contractors, agents, and assigns, harmless from and against any and all
third party suits, claims, actions, demands, liabilities, expenses or loss
(including reasonable attorneys’ fees) resulting
from:
|
|
13.2.1
|
DOR’s
(itself or pursuant to a contract with third party) development,
manufacturing, storage or handling of SUBSTANCE manufactured by or on
behalf of DOR and registration, development manufacturing, storage or
handling of the PRODUCT and AG PRODUCT manufactured by or on behalf of
DOR;
|
|
13.2.2
|
DOR’s
negligence or willful misconduct in its performance pursuant to this
AGREEMENT or the MCDONALD LICENSE;
|
|
13.2.3
|
DOR’s
material breach of any of its covenants, warranties and representations
made under this AGREEMENT or the MCDONALD LICENSE;
or
|
|
13.2.4
|
DOR’s
violation of any applicable law or
regulations.
|
DOR shall
only be obligated to so indemnify and hold STPI harmless under this Article 13.2
to the extent that STPI does not have an obligation to indemnify DOR pursuant to
Article 13.1.
|
13.3
|
STPI
and DOR shall promptly notify each other of any claims or suits as to
which this indemnification applies. Neither STPI nor DOR shall agree to
any settlement terms with respect to such claim or suit without the prior
written consent of the other, such consent not to be unreasonably
withheld. STPI and DOR may, at their own expense, retain their
own counsel in connection with such claim or
suit.
|
|
13.4
|
If
STPI or one of its AFFILIATES brings an action or proceeding challenging
the validity or enforceability of any PATENT RIGHTS, then STPI shall
reimburse DOR for any reasonable and documented attorneys’ fees, costs and
expenses incurred by DOR (including any reimbursement under the MCDONALD
LICENSE) in connection with such action or proceeding;
provided
,
however
, that
DOR's right to receive reimbursement from STPI pursuant to this Article
13.4 shall be waived upon exercise of DOR’s termination right pursuant to
Article 15.3.
|
|
13.5
|
EXCEPT
IN RESPECT OF THIRD PARTY CLAIMS, IN NO EVENT SHALL EITHER PARTY BE LIABLE
TO THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL
LOSSES OR DAMAGES, INCLUDING LOSS OF PROFITS OR REVENUE, INCURRED BY THE
OTHER PARTY OR ANY THIRD PARTY, WHETHER IN AN ACTION IN CONTRACT OR TORT,
EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.
|
|
13.6
|
Each
party shall maintain product liability insurance as is usual customary for
this industry and type of PRODUCT and AG
PRODUCT.
|
|
14
-
|
TERM
AND RULES POST EXPIRATION
|
|
14.1
|
This
AGREEMENT shall enter into full force and effect at the EFFECTIVE DATE.
This AGREEMENT shall remain in force on a country-by-country basis until
the later of the two following dates (the “INITIAL TERM”): (i) ten (10)
years from the date of the FIRST COMMERCIAL SALE of the PRODUCT by STPI in
such country of the TERRITORY; or (ii) until the expiration of the last to
expire of the PATENT RIGHTS in such country of the TERRITORY having at
least one VALID CLAIM covering the PRODUCT, its use or manufacture, to the
extent such VALID CLAIM could be enforced against STPI’s activities if not
for the rights granted hereunder.
|
|
14.2
|
Upon
the INITIAL TERM and on a country-by-country basis this AGREEMENT shall be
automatically renewed for periods of five (5) years each provided that
during such renewal period/s:
|
|
14.2.1
|
STPI
has the right to terminate for convenience this AGREEMENT after the
INITIAL TERM upon six (6) months prior written notice to
DOR;
|
|
14.2.2
|
DOR
has the right to terminate for convenience this AGREEMENT after the
INITIAL TERM upon eighteen (18) months prior written notice to
STPI. In this case DOR shall transfer free of charge to STPI or
its designee the MARKETING AUTHORIZATIONS and all relevant data and
KNOW-HOW necessary to manufacture and COMMERCIALIZE the PRODUCT in the
TERRITORY and shall grant to STPI a royalty-free, fully paid up, perpetual
and irrevocable license, with the right to sublicense, to the TRADEMARK
and the KNOW-HOW. Termination of this AGREEMENT shall be
effective only after such transfers and license grant have been
executed.
|
|
15
-
|
TERMINATION
AND RULES POST TERMINATION
|
|
15.1
|
In
the event either party shall be in breach of any material obligation
hereunder, the non breaching party may give written notice to the other
party specifying the claimed particulars of such breach, and in the event
such material breach is not cured, or effective steps to cure such
material breach have not been initiated or are not thereafter diligently
pursued, within sixty (60) days following the date of such written
notification, the non breaching party shall have the right thereafter to
terminate the AGREEMENT by giving thirty (30) days prior written notice to
the other party to such effect.
|
|
15.2
|
Each
party (the “INSOLVENT PARTY”) shall promptly notify the other party (the
“SOLVENT PARTY”) in writing upon the initiation of any proceeding in
bankruptcy (voluntary or involuntary), reorganization, dissolution,
liquidation or arrangement for the appointment of a receiver or trustee to
take possession of the assets of the INSOLVENT PARTY or similar proceeding
under the law for release of creditors by or against the INSOLVENT PARTY
or if the INSOLVENT PARTY shall make a general assignment for the benefit
of its creditors. If any of the applicable circumstances
described above, besides a voluntary bankruptcy petition, shall have
continued for one hundred twenty (120) days undismissed, unstayed,
unbonded and undischarged, the SOLVENT PARTY may terminate this AGREEMENT
upon written notice to the INSOLVENT PARTY upon notice of the
circumstances referenced above;
provided
,
however
, if the
INSOLVENT PARTY provides for the cure of all of its defaults under this
AGREEMENT (if any) and provides adequate assurance of its future
performance of its obligations to the SOLVENT PARTY’s reasonable
satisfaction, then the SOLVENT PARTY shall not have the right to terminate
this AGREEMENT pursuant to this Article 15.2. If the INSOLVENT
PARTY shall initiate any voluntary bankruptcy proceeding, then the SOLVENT
PARTY may terminate this AGREEMENT upon written notice to the INSOLVENT
PARTY. All licenses and rights to licenses granted under or
pursuant to this AGREEMENT and the Supply Agreement are, and shall
otherwise be deemed to be, for purposes of Section 365(n) of the United
States Bankruptcy Code (the “CODE”), licenses of rights to “intellectual
property” as defined under Section 101(35A) of the CODE. STPI,
as the licensee of such rights under this AGREEMENT, shall retain and may
fully exercise all of its rights and elections under the
CODE. The foregoing provisions of this Article 15.2 are without
prejudice to any rights STPI may have arising under the CODE or other
applicable law.
|
|
15.3
|
DOR
shall have the right to terminate this Agreement in the event that STPI,
directly or indirectly, challenges or assists any third party in the
challenge of the validity of any of the PATENT
RIGHTS.
|
|
15.4
|
Upon
any termination of this AGREEMENT other than for breach by STPI, STPI
shall be allowed to process and sell the inventory of PRODUCT at its
disposal for a period not to exceed three (3) months following the date of
termination, subject to the payment of the amounts owed hereunder to DOR
and continued compliance with the terms of this AGREEMENT. Upon
termination of this AGREEMENT by STPI in accordance with Article
14.2.1 or by DOR
in accordance with this Article 15, STPI shall destroy all of DOR’s
CONFIDENTIAL INFORMATION received hereunder. After the
execution of this AGREEMENT, DOR will use commercially reasonable efforts
(which shall exclude the obligation to pay any additional monies) to amend
the MCDONALD LICENSE to extend the post termination sale period from three
(3) months to one (1) year.
|
|
15.5
|
The
right of either party to terminate this AGREEMENT as provided hereinabove
shall not be affected in any way by its waiver of or failure to take
actions with respect to any previous
default.
|
|
15.6
|
Upon
any early termination of this AGREEMENT, RECEIVING PARTY shall return to
DISCLOSING PARTY all of its CONFIDENTIAL INFORMATION and transfer to
DISCLOSING PARTY all reports, records, customer lists, regulatory
correspondence and other materials in RECEIVING PARTY’s or its AFFILIATES’
possession or control relating to the pre-clinical and clinical
development, APPROVAL, manufacture, distribution and sale of PRODUCTS,
including without limitation the safety database and such reports,
records, regulatory correspondence and other materials related to the
COMMERCIALIZATION of the PRODUCT, if any. In addition all
sublicenses (if any) or distributorships shall terminate provided however
that at DOR’s request, STPI shall use its commercially reasonable efforts
to assign to DOR any third party distributor contract relating to such
PRODUCTS to which STPI or any of its AFFILIATES is a party (or the
applicable provisions thereof, as the case may be). If STPI
terminates this AGREEMENT other than for cause or if this AGREEMENT is
terminated by DOR for cause or pursuant to Article 15.3, STPI and its
AFFILIATE and distributors will immediately (i) cease any sale of PRODUCT
and AG PRODUCT and destroy or return
all PRODUCT and AG
PRODUCT and (ii) provide an accurate and up to date list of purchasers of
the PRODUCT and AG PRODUCT along with quantities and purchase
price. STPI shall provide evidence reasonably satisfactory to
DOR regarding its compliance with the foregoing
sentence.
|
|
15.7
|
The
termination or expiration of this AGREEMENT for any reason shall be
without prejudice to any rights which shall have accrued to the benefit of
either party prior to such termination or expiration, including any
damages arising from any breach hereunder. Such termination or
expiration shall not relieve either party from obligations which are
expressly indicated to survive termination or expiration of this
AGREEMENT.
|
|
16.1
|
Modifications
. No
amendments, changes, modifications or alterations of the terms and
conditions of this AGREEMENT shall be binding upon either party hereto
unless in writing and signed by both
parties.
|
|
16.2
|
Captions
. All
titles and captions in this AGREEMENT are for convenience only and shall
not be interpreted as having any substantive
meaning.
|
|
16.3
|
Assignment
. Unless
consent in writing is first obtained from the other party, this AGREEMENT
and the rights granted herein shall not be assignable by either party
hereto, except to a successor to all or substantially all of its
business. Any attempted assignment without consent shall be
void. Any permitted assignee shall assume all obligations of its assignor
under the AGREEMENT. Notwithstanding the foregoing, either party may
assign this AGREEMENT to any of its AFFILIATES without the consent of the
other party provided that (i) the assignor party shall be responsible for
the performance by the assignee of any of its obligations provided for
herein and severally and jointly liable with such assignee for the failure
to perform its obligations provided for herein, including minimum royalty
obligations and (ii) prior written notice of such assignment is given to
the other party.
|
|
16.4
|
Survivability
. Expiration
or termination of this AGREEMENT shall not relieve the parties of any
obligation accruing prior to such expiration or termination. Without
limiting the foregoing, the obligations pursuant to Article 1
(Definitions) (to the extent applicable), Article 3.3 (Confidentiality),
Article 3.4 (Confidentiality), Article 3.5 (Notification of Serious
Adverse Events and Safety Information), Article 3.6 (Written
Publications), Article 8.10 (Disclaimer of Warranties), Article 9.1
(Milestone Payments), Article 9.2 (Supply Price), Article 13 (Liability
and Indemnification), Article 14 (Term and Rules Post Expiration), Article
15 (Termination and Rules Post Termination), Article 16 (Miscellaneous),
and Article 17 (Law, Dispute Resolution and Jurisdiction)
shall survive
termination of this AGREEMENT.
|
|
16.5
|
Entire
Understandin
g. This AGREEMENT and its Appendixes
constitute the entire agreement between the parties hereto with respect to
the subject matter hereof and supersedes all previous agreements and
representations, whether written or
oral.
|
|
16.6
|
Notices
. Any
notice required to be given hereunder shall be considered properly given
if sent by registered air-mail, telecopier, or by personal courier
delivery to the respective address of each party as
follows:
|
Sigma-Tau
Pharmaceuticals, Inc.
Attn.:
Gregg Lapointe, CEO
Fax:
(301) 354-5319
and
DOR
BioPharma Inc.
Attn.:
Christopher J. Schaber, Ph.D., President and CEO
Fax:
(609) 538-8205
or to
such other address as a party may designate in writing. Such notice will be
considered received at the date of the receipt by the addressee.
|
16.7
|
Violation
. If
any of the provisions of this AGREEMENT are held to be void or
unenforceable with regard to any particular country or all countries of
the TERRITORY, then such void or unenforceable provisions shall be
replaced by valid and enforceable provisions which will achieve as far as
possible the economic business intentions of the
parties.
|
|
16.8
|
Press
Releases
. All press releases regarding this AGREEMENT
shall be jointly planned and coordinated in detail by and between DOR and
STPI. Each party agrees not to issue any press release or other public
statement, whether oral or written, disclosing the existence of this
AGREEMENT or any information relating to this AGREEMENT without the prior
written consent of the other party;
provided
,
however
, that
neither party will be prevented from complying with any duty of disclosure
it may have pursuant to law or governmental regulation. The parties shall
consult with each other reasonably and in good faith and agree with
respect to the text and timing of such press releases prior to the
issuance thereof, provided that a party may not unreasonably withhold
consent to or delay such releases.
|
|
16.9
|
Counterparts
. This
AGREEMENT may be executed in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and
the same instrument.
|
|
16.10
|
No
Waiver
. The waiver of and relief from any breach or
non-fulfillment of any term and condition of this AGREEMENT does not
constitute a waiver of or relief from any other breach or non-fulfillment
of that or any other term and
condition.
|
|
16.11
|
Third-Party
Beneficiaries
. None of the provisions of this AGREEMENT
shall be for the benefit of or enforceable by any third party including,
without limitation, any creditor of any party hereto. No such third party
shall obtain any right under any provision of this AGREEMENT or shall by
reason of any such provision make any claim in respect of any debt,
liability or obligation (or otherwise) against any party
hereto.
|
|
16.12
|
Relationship of the
parties
. Each party shall bear its own costs incurred in
the performance of its obligations hereunder without charge or expense to
the other except as expressly provided in this AGREEMENT. Neither DOR nor
STPI shall have any responsibility for the hiring, termination or
compensation of the other party’s employees or for any employee
compensation or benefits of the other party’s employees. No employee or
representative of a party shall have any authority to bind or obligate the
other party to this AGREEMENT for any sum or in any manner whatsoever, or
to create or impose any contractual or other liability on the other party
without said party’s approval. For all purposes, and notwithstanding any
other provision of this AGREEMENT to the contrary, STPI’s legal
relationship under this AGREEMENT to DOR shall be that of independent
contractor. Nothing in this AGREEMENT shall be construed to
establish a relationship of partners or joint
ventures.
|
|
17
-
|
LAW,
DISPUTE RESOLUTION AND JURISDICTION
|
|
17.1
|
This
AGREEMENT shall be governed, construed and interpreted in accordance with
the laws of New Jersey, other than those provisions which govern conflict
of laws.
|
|
17.2
|
All
disputes between the parties arising out of or in relation to this
AGREEMENT shall be exclusively and finally resolved by the Courts of New
Jersey.
|
[Signature
Page Follows]
IN WITNESS WHEREOF
, the
parties have caused this AGREEMENT to be executed in duplicate by their duly
authorized officers effective as of the EFFECTIVE DATE.
|
|
DOR
BIOPHARMA INC.
|
|
|
By:
/s/ Christopher
J. Schaber, Ph.D.
Name: Christopher
J. Schaber, Ph.D.
Title: President
and CEO
|
|
|
|
|
|
|
|
|
ENTERON
PHARMACEUTICALS, INC.
|
|
|
By:
/s/ Christopher
J. Schaber, Ph.D.
Name: Christopher
J. Schaber, Ph.D.
Title: President
and CEO
|
|
|
|
|
|
|
|
|
SIGMA-TAU
PHARMACEUTICALS, INC.
|
|
|
By:
/s/ Gregg
Lapointe
Name: Gregg
Lapointe
Title: Chief
Executive Officer
|
|
|
|
(The information below marked by ***** has been
omitted by a request for confidential treatment. The omitted portion has been
separately filed with the Commission.)
Appendix
A
*****
(The information below marked by ***** has been
omitted by a request for confidential treatment. The omitted portion has been
separately filed with the Commission.)
Appendix
B
PATENT
RIGHTS
|
CLG
Ref. No.
|
Title
|
Serial
No.
|
Filing
Date
|
Status
|
Patent
No.
|
|
8105-006-US-CIP
|
METHOD
FOR PREVENTING TISSUE DAMAGE FOLLOWING HEMATOPOIETIC CELL
TRANSPLANTATION
|
09/151,388
|
September
10, 1998
|
Issued
|
6,096,731
|
|
8105-008-CA
|
METHOD
FOR PREVENTING TISSUE DAMAGE ASSOCIATED WITH GRAFT-VERSUS-HOST OR
HOST-VERSUS-GRAFT
|
2,413,883
|
November
22, 2002
|
Granted
|
2,413,883
|
|
8105-008-WO
|
METHOD
FOR PREVENTING TISSUE DAMAGE ASSOCIATED WITH GRAFT-VERSUS-HOST OR
HOST-VERSUS-GRAFT
|
PCT/US00/14064
|
May
22, 2000
|
Published
|
|
|
8105-009-US-CON
|
METHOD
FOR LONG TERM TREATMENT OF GRAFT-VERSUS-HOST DISEASE USING TOPICAL ACTIVE
CORTICOSTER
|
10/613,788
|
July
3, 2003
|
Pending/
published
|
|
|
8105-010-AU
|
METHOD
OF TREATING INFLAMMATORY DISORDERS OF THE GASTRO INTESTINAL TRACT USING
TOPICAL ACTIVE CORTICOSTEROIDS
|
2002254205
|
May
10, 2007
|
Granted
|
2002254205
|
|
8105-010-CA
|
METHOD
OF TREATING INFLAMMATORY DISORDERS OF THE GASTRO INTESTINAL TRACT USING
TOPICAL ACTIVE CORTICOSTEROIDS
|
2,441,007
|
March
15, 2002
|
Granted
|
2,441,007
|
|
8105-010-EP
|
METHOD
OF TREATING INFLAMMATORY DISORDERS OF THE GASTRO INTESTINAL TRACT USING
TOPICAL ACTIVE CORTICOSTEROIDS
|
02723424.1
|
March
15, 2002
|
Published
|
|
|
8105-010-IL
|
METHOD
OF TREATING INFLAMMATORY DISORDERS OF THE GASTRO INTESTINAL TRACT USING
TOPICAL ACTIVE CORTICOSTEROIDS
|
157921
|
March
15, 2002
|
Published
|
|
|
8105-010-JP
|
METHOD
OF TREATING INFLAMMATORY DISORDERS OF THE GASTRO INTESTINAL TRACT USING
TOPICAL ACTIVE CORTICOSTEROIDS
|
2002573023
|
March
15, 2002
|
Published
|
|
|
8105-010-NZ
|
METHOD
OF TREATING INFLAMMATORY DISORDERS OF THE GASTRO INTESTINAL TRACT USING
TOPICAL ACTIVE CORTICOSTEROIDS
|
528,607
|
March
15, 2002
|
Issued
|
528,607
|
|
8105-010-US
|
METHOD
OF TREATING INFLAMMATORY DISORDERS OF THE GASTRO INTESTINAL TRACT USING
TOPICAL ACTIVE CORTICOSTEROIDS
|
10/098,968
|
March
15, 2002
|
Pending/
published
|
|
|
8105-010-WO
|
METHOD
OF TREATING INFLAMMATORY DISORDERS OF THE GASTRO INTESTINAL TRACT USING
TOPICAL ACTIVE CORTICOSTEROIDS
|
PCT/US02/07676
|
March
15, 2002
|
Completed
|
|
|
8105-011-CIP
|
METHOD
OF TREATMENT OF CANCER BY CONTROLLING
GRAFT-VERSUS-LEUKEMIA
|
12/186,492
|
*****
|
Pending
|
|
|
8105-012-AU
|
TREATMENT
OF GRAFT-VERSUS-HOST DISEASE AND LEUKEMIA WITH BECLOMETHASONE DIPROPIONATE
AND PREDNISONE
|
2005321826
|
April
3, 2007
|
Pending
|
|
|
8105-012-CA
|
TREATMENT
OF GRAFT-VERSUS-HOST DISEASE AND LEUKEMIA WITH BECLOMETHASONE DIPROPIONATE
AND PREDNISONE
|
2583244
|
April
4, 2007
|
Pending
|
|
|
8105-012-CN
|
TREATMENT
OF GRAFT-VERSUS-HOST DISEASE AND LEUKEMIA WITH BECLOMETHASONE DIPROPIONATE
AND PREDNISONE
|
200580039395.5
|
May
17, 2007
|
Pending/
published
|
|
|
8105-012-EP
|
TREATMENT
OF GRAFT-
VERSUS-HOST
DISEASE AND LEUKEMIA WITH BECLOMETHASONE DIPROPIONATE AND
PREDNISONE
|
05856121.8
|
December
30, 2005
|
Pending/
published
|
|
|
8105-012-ID
|
TREATMENT
OF GRAFT-
VERSUS-HOST
DISEASE AND LEUKEMIA WITH BECLOMETHASONE DIPROPIONATE AND
PREDNISONE
|
WO
07/02004
|
June
22, 2007
|
Pending
|
|
|
8105-012-IL
|
TREATMENT
OF GRAFT-VERSUS-HOST DISEASE AND LEUKEMIA WITH BECLOMETHASONE DIPROPIONATE
AND PREDNISONE
|
182462
|
April
11, 2007
|
Pending
|
|
|
8105-012-IN
|
TREATMENT
OF GRAFT-VERSUS-HOST DISEASE AND LEUKEMIA WITH BECLOMETHASONE DIPROPIONATE
AND PREDNISONE
|
2783/KOLNP/2007
|
June
30, 2007
|
Pending
|
|
|
8105-012-JP
|
TREATMENT
OF GRAFT-VERSUS-HOST DISEASE AND LEUKEMIA WITH BECLOMETHASONE DIPROPIONATE
AND PREDNISONE
|
2007-599693
|
June
4, 2007
|
Pending/
published
|
|
|
8105-012-KR
|
TREATMENT
OF GRAFT-VERSUS-HOST DISEASE AND LEUKEMIA WITH BECLOMETHASONE DIPROPIONATE
AND PREDNISONE
|
10-2007-7013835
|
June
19, 2007
|
Pending
|
|
|
8105-012-MY
|
TREATMENT
OF GRAFT-VERSUS-HOST DISEASE AND LEUKEMIA WITH BECLOMETHASONE DIPROPIONATE
AND PREDNISONE
|
PI
20070515
|
April
2, 2007
|
Pending
|
|
|
8105-012-NZ
|
TREATMENT
OF GRAFT-VERSUS-HOST DISEASE AND LEUKEMIA WITH BECLOMETHASONE DIPROPIONATE
AND PREDNISONE
|
554326
|
June
30, 2007
|
Pending
|
|
|
8105-012-PH
|
TREATMENT
OF GRAFT-VERSUS-HOST DISEASE AND LEUKEMIA WITH BECLOMETHASONE DIPROPIONATE
AND PREDNISONE
|
1-2007-501177
|
June
6, 2007
|
Pending
|
|
|
8105-012-SG
|
TREATMENT
OF GRAFT-VERSUS-HOST DISEASE AND LEUKEMIA WITH BECLOMETHASONE DIPROPIONATE
AND PREDNISONE
|
200704692-3
|
June
21, 2007
|
Pending
|
|
|
8105-012-VN
|
TREATMENT
OF GRAFT-VERSUS-HOST DISEASE AND LEUKEMIA WITH BECLOMETHASONE DIPROPIONATE
AND PREDNISONE
|
1-2007-01557
|
June
30, 2007
|
Pending/
published
|
|
|
8105-012-US
|
TREATMENT
OF GRAFT-VERSUS-HOST DISEASE AND LEUKEMIA WITH BECLOMETHASONE DIPROPIONATE
AND PREDNISONE
|
11/320,564
|
December
30, 2005
|
Pending/
published
|
|
|
8105-012-WO
|
TREATMENT
OF GRAFT-VERSUS-HOST DISEASE AND LEUKEMIA WITH BECLOMETHASONE DIPROPIONATE
AND PREDNISONE
|
PCT/US05/047666
|
December
30, 2005
|
Pending/
published
|
|
|
8105-018-PR2
|
TOPICALLY
ACTIVE STEROIDS FOR USE IN RADIATION AND CHEMOTHERAPEUTICS
INJURY
|
61/120,785
|
*****
|
Pending
|
|
|
8105-019-WO
|
TOPICALLY
ACTIVE CORTICOSTEROIDS FOR USE IN INTERSTITIAL PULMONARY
FIBROSIS
|
PCT/US09/32015
|
*****
|
Pending
|
|
|
N/A
|
TREATMENT
OF IRRITABLE BOWEL SYNDROME AND RELATED BOWEL DISEASES
|
10/665,770
|
September
19, 2003
|
Pending
|
|
(The information below marked by ***** has been
omitted by a request for confidential treatment. The omitted portion has been
separately filed with the Commission.)
Appendix
C
SUPPLY
PRICE
DOR shall
sell and deliver to STPI the PRODUCT and AG PRODUCT at a SUPPLY PRICE equal to
thirty-five percent (35%) of the NET SALES of the PRODUCT and AG
PRODUCT.
For the
sake of good order, DOR declares that such thirty-five percent (35%) SUPPLY
PRICE is to be allocated as follows:
|
(i)
|
FULLY
BURDENED MANUFACTURING COST as a transfer price for the PRODUCT and AG
PRODUCT, to be paid within thirty (30) days of receipt of the relevant
invoice (the “FIXED COMPONENT”);
and
|
|
(ii)
|
The
remaining amount (representing the remainder of the purchase price for the
PRODUCT) to be paid within thirty (30) days of the end of each
calendar quarter (the “PERCENTAGE
COMPONENT”).
|
STPI
agrees that, while it has the discretion to set the pricing for the PRODUCT and
AG PRODUCT, the SUPPLY PRICE shall in no event be less than ***** of the FIXED
COMPONENT.
For the
avoidance of doubt, in no case shall the SUPPLY PRICE (i.e. the FIXED COMPONENT
plus the PERCENTAGE COMPONENT) exceed thirty-five percent (35%) of the NET SALES
of the PRODUCT.
Notwithstanding
the foregoing, but subject to Article 9.3, upon the expiration of the last to
expire VALID CLAIM covering the PATENT RIGHTS, the SUPPLY PRICE shall be reduced
to a percentage of NET SALES of the PRODUCT or AG PRODUCT to be mutually agreed
upon by the parties.
If the parties are
unable to agree, either party may, by written notice to the other party, have
such dispute referred to the respective officers designated below, or their
successors, for attempted resolution by good faith negotiation within thirty
(30) days after such notice is received. Such designated officers are
as follows:
For
DOR: Christopher
J. Schaber, Ph.D., President and CEO
|
|
For
STPI:
|
Gregg
Lapointe, Chief Executive Officer
|
In the
event that the designated officers are not able to resolve the dispute within
such thirty (30)-day period, or such other period of time as the parties
may mutually agree to in writing, the dispute shall be referred to and finally
and exclusively resolved as follows:
(i) Each
party shall appoint an independent expert with reasonably significant and
demonstrable experience in the pharmaceutical industry. Such
appointees shall reasonably collaborate and appoint an independent expert who
they reasonably believe is capable of determining the amount of the reduction in
SUPPLY PRICE (such person, the “ARBITRATOR”).
(ii) The
ARBITRATOR shall be instructed to deliver a decision in respect of the foregoing
reduction amount that is not above or below each of the parties’ last best offer
and that otherwise takes into consideration applicable legal, regulatory,
commercialization and customary marketing concerns related to the PRODUCT and AG
PRODUCT. The ARBITRATOR shall be instructed that its decision with
respect to the reduction shall be delivered in ten (10) business days (or such
time as the parties may mutually agree or the ARBITRATOR may reasonably
request), in writing and shall include a statement describing in reasonable
detail the decision of the ARBITRATOR. The decision of the ARBITRATOR
shall be final and binding and conclusive upon the parties for all purposes
under this AGREEMENT (absent fraud or manifest bad faith by the
ARBITRATOR). The fees and expenses of the ARBITRATOR shall be shared
equally by the parties.
//////////
Appendix
D
TRADEMARK
POLICY
DOR
BIOPHARMA, Inc. Trademark Policy
The Marks
and Trademarks of DOR BioPharma, Inc. (“DOR”) include without limitation: “DOR
BioPharma” and “orBec®”, and accompanying logos and trade dress, which is
subject to modification by DOR from time to time. These marks as of
June 24, 2008 are set forth on Exhibit A to this policy.
The
foregoing and attached are either registered trademarks or trademarks of DOR, in
the United States and worldwide. All rights are
reserved.
All use
and appearance of Marks and accompanying logos and trade dress shall be in
accordance with the DOR’s Trademark Policy. Any use of any DOR Marks,
other DOR related names and/or logos, or variations of DOR Marks from those
presented herein shall be pre-approved by DOR. Any use of images or
statements of DOR’s employees shall be pre-approved by DOR.
DOR
Policy on Use of DOR Marks, Trademarks and Official Logo:
|
·
|
Christopher
J. Schaber, Ph.D., President and CEO, is the key and only official
spokesperson for and representative of DOR. Any use or
appearance of any another spokesperson for or representative of DOR is
subject to its prior written approval. Any use or appearance of
any other person’s image, name, or statements in representation of DOR is
subject to its prior written
approval.
|
|
·
|
All
Products that include DOR technology, and related product packaging,
advertising, promotional and marketing materials, shall display DOR’s
Official Logo in a size and prominence previously approved by
DOR.
|
|
·
|
Use
of DOR’s Official Logo (the Logo) shall maintain the integrity of the
Logo’s design. Unless provided or authorized in advance in
writing by DOR, no deviations from the then current Logo design or
appearance are allowed. All use of the Logo shall maintain its
visual effectiveness. No design elements may be appended to the
Logo. The Logo shall not be presented with any alternative font
or type style, change in letter spacing, or linear dropped
shadows. Distortion of the logo’s shape and lettering is
not permitted. Reproduction of the Logo shall be consistent,
accurate, sharp, clear, and undistorted, and shall maintain the Logo’s
correct colors.
|
|
·
|
The
color used in the DOR’s Marks, including the Official Logo, is as follows:
Pantone 281 (for the blue) and Pantone 871 (for the
gold).
|
|
·
|
DOR’s
Marks, including its name, orBec® and Official Logo shall be displayed in
a size and prominence at least equal to similar marks, names and logos for
similar products or methods on any product, packaging, documentation,
advertising, promotional, marketing, and related materials in accordance
with industry standards. The elements of the DOR trade dress
cannot be separated without the prior permission of
DOR.
|
Appendix
E
McDonald
License Agreement
EXCLUSIVE LICENSE
AGREEMENT
This
Agreement is made effective the 24th day of November, 1998 (the
“Effective Date”), by and between George B. McDonald, M.D. (hereinafter called
the “LICENSOR”), located at 1815 102nd Place S.E., Bellevue, WA 98004, and
Enteron Pharmaceuticals, Inc. (hereinafter called “LICENSEE”), located at 787
Seventh Avenue, 48th Floor, New York, NY 10019.
WHEREAS,
LICENSOR owns the “Licensed Patents” defined below and is willing to grant a
license to LICENSEE under the Licensed Patents; and
WHEREAS,
LICENSEE desires to obtain a license to the Licensed Patents upon the terms and
conditions hereinafter set forth.
NOW,
THEREFORE, it is agreed as follows:
Section
1.
Definitions
.
As used
in the Agreement, the following capitalized terms, whether used in the singular
or plural, shall have the following meanings:
A.
“Affiliate”
means any corporation or other business entity controlled by, controlling, or
under common control with LICENSEE, but only for so long as such control
exists. For purposes of this definition, “control” means (a) direct
or indirect beneficial ownership of at least fifty percent (50%) of the voting
stock of another corporation; or (b) the power, whether or not normally
exercised, to direct or cause the direction of the management, affairs and
policies of another corporation or other legal entity by contract, resolution,
or otherwise.
B.
“Clinical
Trial” means the enrollment of patients with graft-versus-host disease or
patients who have had (or will have had) a bone marrow transplant and,
therefore, are susceptible to graft-versus-host disease into a treatment
protocol whose primary endpoints are the safety and efficacy of the
treatment.
C.
“Calendar
Quarter” means each three-month period ending March 31, June 30, September 30
and December 31.
D.
“Confidential
Information” means all nonpublic technical and commercial information, including
all inventions, inventor or laboratory notebooks and records, formulae, methods,
plans, processes, specifications, experience and trade secrets relating to the
Technology (a) disclosed by one party to the other or (b) developed as a result
of research development or other activity conducted by either party prior to or
during the term of this Agreement,
E.
“Development
Report” means a written account of LICENSEE’s progress under a development plan
identified in Section 3A and Appendix C that contains the information specified
in Appendix B.
F.
“FDA”
means the United States Food and Drug Administration or any successor agency
having the administrative and regulatory authority to approve testing and
marketing of human pharmaceutical or biological prophylactic, therapeutic or
diagnostic products in the United States.
G.
“Know-how”
means all tangible information and data that is owned or controlled by either
party at any time before or during the term of the Agreement and that is related
to the Licensed Process(es) or is necessary or useful in the development,
registration, manufacture, use or sale of the Licensed Product(s), including,
but not limited to, items listed on Appendix D, pharmacological, toxicological,
clinical, analytical, and quality control data, and formulations, materials,
drawings and sketches, designs, testing and test results, and other regulatory
information.
H.
“Licensed
Field’’ means research and development of products for the prevention and
treatment of human diseases.
I.
“Licensed
Patents” shall mean (i) all U.S. and foreign patents and patent applications set
forth in Appendix I; (ii) any later-filed United States and/or foreign patent
applications based on the patent applications and/or patents listed in Appendix
I, or corresponding thereto, including any continuations, continuations-in-part,
divisional, reissues, reexaminations, or extensions thereof; and (iii) any
United Stales and/or foreign patents issuing from any of the
foregoing-
J.
“Licensed
Product” means (i) any product the relevant manufacture, use, sale or
importation of which would, in the applicable country and in the absence of this
License, infringe upon a Valid Claim under the Licensed Patents; or (ii) any
product that is manufactured or used according to any Licensed
Process.
K.
“Licensed
Process” means any method or process the practice of which would, in the
applicable country and in the absence of this License, infringe upon a Valid
Claim under the Licensed Patents.
L.
“NDA”
means a New Drug Application filed with the FDA.
M.
“Net
Sales” means the gross amounts actually received for the sale of Licensed
Product(s) less only the sum of the following:
(i)
Trade
discounts actually allowed to customers on Licensed Product(s);
(ii)
Sales,
tariff duties and/or use taxes directly imposed and paid with reference to sales
of Licensed Product(s) (excluding what is commonly known as income
taxes);
(iii)
Freight,
postage, and insurance charges and additional packaging charges for Licensed
Product(s);
(iv)
Amounts
actually allowed or credited on returns of Licensed Product(s);
(v)
Bad debt
deductions actually written off during the accounting period that directly
relate to Licensed Product(s); and
(vi)
Sales
commissions on sales of Licensed Product(s).
N.
“Orphan
Drug” means a product that is used to treat disease that affects relatively few
people and for which U.S. and foreign government authorities or agencies provide
tax credits or other incentives to make it possible to provide a safe and effect
medical product for the treatment of the disease.
O.
“Regulatory
Approval” means the receipt of notice by a party of approval by the FDA of a NDA
that is effective to permit the introduction of a Licensed Product into
interstate commerce pursuant to 21 U.S.C. 355. “Regulatory Approval”
also includes the equivalent approval or licensure in a country other than the
United States.
P.
“Technology”
means the Know-how and the inventions disclosed or claimed in the Licensed
Patents.
Q.
‘Third
Party” means any individual, corporation or other legal entity other than
LICENSOR, LICENSEE or an Affiliate.
R.
“Valid
Claim” means a claim of any pending patent application or unexpired patent, or
one whose expiration date has been extended by law, so long as such claim shall
withdrawn, canceled, disclaimed, nor held invalid by a court of competent
jurisdiction in an unappealed or unappealable decision.
Section
2.
Grant of
License
.
A.
Grant to
LICENSEE
Subject
to the terms and conditions of this Agreement, LICENSOR hereby grants to
LICENSEE and LICENSEE accepts the following:
(i)
an
exclusive license under the Licensed Patents, including the right to grant
sublicenses to both Affiliates and Third Parties, to practice the Licensed
Process(es) and to make, have made, use, import and sell Licensed Product(s), in
each case worldwide, for use in the Licensed Field.
(ii)
an
exclusive license to the Know-how, including the right to grant sublicenses to
both Affiliates and Third Parties, to practice the Licensed Process(es) and to
make, have made, use, import and sell Licensed Product(s), in each case
worldwide, for use in the Licensed Field.
B.
Limitations
The grant
in Section 2A shall be subject to, restricted by and non-exclusive with respect
to the following:
(i)
LICENSEE
shall use reasonable effort to introduce the Licensed Products for the
prevention of graft-versus-host disease and host-versus-graft disease into the
commercial market as soon as practicable, consistent with sound and reasonable
business practices and judgment, and thereafter endeavor to keep Licensed
Products reasonably available to the public.
(ii)
If
LICENSEE does not have to conduct any Clinical Trials prior to FDA approval of
the first LICENSEE-sponsored NDA for Licensed Product, LICENSOR shall have the
right to terminate or render this Agreement nonexclusive at any time after
eighteen (18) months from the effective date of this Agreement if, in LICENSOR’s
reasonable judgment, LICENSEE:
a)
is not
demonstrably and actively engaged in a research, development, manufacturing,
marketing or licensing program, as appropriate, and obtaining appropriate
Regulatory Approvals that are directed toward putting and keeping Licensed
Product(s) into the commercial market, or
b)
has not,
directly or through a sublicense, put Licensed Product(s) into commercial use or
kept Licensed Product(s) reasonably available to the public in a country or
countries where licensed.
In making
this determination, LICENSOR shall take into account the normal course of such
programs conducted with sound and reasonable business practices and judgment and
shall take into account the reports provided hereunder by LICENSEE.
(iii)
If
LICENSEE does have to conduct Clinical Trials to obtain FDA approval of the
first LICENSEE-sponsored NDA for Licensed Product, LICENSOR shall have the right
to terminate or render this Agreement nonexclusive at any time after five (5)
years from the effective date of this Agreement if, in LICENSOR’s reasonable
judgment, LICENSEE:
a)
is not
demonstrably and actively engaged in a research, development, manufacturing,
marketing or licensing program, as appropriate, and obtaining appropriate
Regulatory Approvals that are directed toward putting and keeping Licensed
Product(s) into the commercial market, or
b)
has not,
directly or through a sublicense, put Licensed Product(s) into commercial use or
kept Licensed Product(s) reasonably available to the public in a country or
countries where licensed.
In making
this determination, LICENSOR shall take into account the normal course of such
programs conducted with sound and reasonable business practices and judgment and
shall take into account the reports provided hereunder by LICENSEE.
(iv)
LICENSEE
shall, at least thirty (30) days prior to granting any sublicense to any
Affiliate or Third Party, identify such Affiliate or Third Party to
LICENSOR. Concurrent with identifying such Affiliate or Third Parry,
LICENSEE shall provide to LICENSOR a copy of the sublicense
agreement. Any sublicense shall be granted in a sublicense agreement
that is consistent with the terms of this Agreement and is in form and substance
acceptable to LICENSOR; provided, however, that a sublicense agreement that is
verified by Licensor to contain the relevant provisions of Sections 1, 2B, 3A,
3C, 4D, 4E, 5, 6, 7, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20 and 21 shall
not require the pre-approval of LICENSOR. In a sublicense agreement,
LICENSEE shall not grant any sublicensee the right to sublicense the Licensed
Patents or Know-how licensed in this Agreement. LICENSEE shall be
liable to LICENSOR for performance by any sublicensee of such sublicenseers
obligations under the sublicense agreement. Any sublicense agreement
shall provide for termination or assignment to LICENSOR, at the option of
LICENSOR, of LICENSEE’s interest therein upon the termination of this
Agreement.
(v)
If
LICENSEE is unable or unwilling to grant sublicenses, either as suggested by
LICENSOR or a potential sublicensee or otherwise, LICENSOR has the right to
directly license such potential sublicensee unless LICENSEE reasonably satisfies
LICENSOR that the granting of such license or sublicense would result in direct
or indirect competition with Licensed Product(s) sold, marketed, or under active
research and development by LICENSEE or would not materially increase the
availability to the general public of Licensed Products.
(vi)
A
nonexclusive, worldwide right to make and use the Technology by LICENSOR solely
for research purposes.
(vii)
It is
understood that if the United States Government (through any of its agencies or
otherwise) has funded research, during the course of or under which any of the
inventions of the Licensed Patents were conceived or made, the United States
Government is entitled, as a right, under the provisions of 35 U.S.C. §§200-212
and applicable regulations of Chapter 37 of the Code of Federal Regulations, to
a nonexclusive, nontransferable, irrevocable, paid up license to practice or
have practiced the invention of such Licensed Patents for government
purposes. Any license granted to LICENSEE in this Agreement will be
subject to such right.
Section
3.
Consideration
.
A.
Development
.
LICENSEE
agrees that it will (i) independently evaluate the Licensed Patents; (ii)
establish and actively pursue the development of the Licensed Patents to enable
Licensed Products to be sold and (iii) supply LICENSOR with a written
Development Report within one month following the end of each semi-annual period
ending on June 30 and December 31 during the term of this Agreement until
LICENSEE (a) obtains Regulatory Approvals of Licensed Product(s) for the
treatment of graft-versus-host disease and host-versus-graft disease and (b)
begins international commercial sales of such Licensed
Product(s). All development activities and all aspects of Licensed
Product design and decisions to market are entirely at the discretion of
LICENSEE, and LICENSEE will rely entirely on its own
expertise. LICENSOR’s review of LICENSEE’s development plan is solely
to verify the existence of LICENSEE’s commitment to Licensed Product development
activity.
B.
License
Fee
.
In
partial consideration for the grant of licenses in this Agreement to LICENSEE,
LICENSEE agrees to pay to LICENSOR a nonrefundable license fee of twenty
thousand dollars ($20,000) within seven (7) calendar days of the execution of
this agreement.
C.
Royalty
.
In
partial consideration for the grant of licenses in this Agreement to LICENSEE
and during the term of this Agreement, LICENSEE agrees to pay the following as
running royalties, which shall not be returnable in any event, to LICENSOR on a
country-by-country basis:
(i)
If
LICENSEE does have to conduct Clinical Trials to obtain FDA approval of the
first LICENSEE-sponsored NDA for Licensed Product, then LICENSEE shall pay to
LICENSOR within forty-five (45) days of the end of each Calendar Quarter in an
amount equal to twenty-five percent (25%) of: (a) any non-recurring
sublicense fees (including, but not limited to, signing, up-front, and lump-sum
fees) and annual license maintenance fees, if any, received from any Affiliate
or Third Party for the right to practice the Licensed Process(es) or make, use,
sell, or import Licensed Product(s); and (b) all royalties received by LICENSEE
from the sale of Licensed Product(s) by any sublicensed Third
Party.
(ii)
If
LICENSEE does not have to conduct any Clinical Trials prior to FDA approval of
the first LICENSEE-sponsored NDA for Licensed Product, then LICENSEE shall pay
to LICENSOR within forty-five (45) days of the end of each Calendar Quarter in
an amount equal to thirty-three percent (33%) of: (a) any
non-recurring sublicense fees (including, but not limited to, signing, up-front,
and lump-sum fees) and annual license maintenance fees, if any, received from
any Affiliate or Third Party for the right to practice the Licensed Process(es)
or make, use, sell, or import Licensed Product(s); and (b) all royalties
received by LICENSEE from the sale of Licensed Product(s) by any sublicensed
Third Party,
(iii)
If
LICENSEE does have to conduct Clinical Trials to obtain FDA approval of the
first LICENSEE-sponsored NDA for Licensed Product, then LICENSEE shall pay
LICENSOR within forty-five (45) days from the end of each Calendar Quarter six
percent (6%) of all Net Sales of Licensed Products by LICENSEE or a sublicensed
Affiliate.
(iv)
If
LICENSEE does not have to conduct any Clinical Trials prior to FDA approval of
the first LICENSEE-sponsored NDA for Licensed Product, then LICENSEE shall pay
LICENSOR within forty-five (45) days from the end of each Calendar Quarter eight
percent (8%) of all Net Sales of Licensed Products by LICENSEE or a sublicensed
Affiliate.
(v)
The
royalty rates in (i), (ii), (iii) and (iv) above shall be reduced by fifty
percent (50%) in any country where a competitor is selling any oral formulation
of the Licensed Product(s) for any indication.
(vi)
No
royalty shall accrue on sales among LICENSEE, its sublicensed Affiliates or
sublicensed Third Parties. Royalties shall only accrue on sales by
LICENSEE, its sublicensed Affiliates or sublicensed Third Parties to parties
other than LICENSEE, its sublicensed Affiliates or sublicensed Third Parties and
shall be payable only once for any given unit of Licensed Product
sold.
(vii)
To the
extent that LICENSEE or any Affiliate of LICENSEE is required, by order or
judgment of any court, to obtain in any country any license from a Third Party
in order to practice the rights purported to be granted hereunder to LICENSEE by
LICENSOR under the Third Party’s issued patents in such country, then fifty
percent (50%) of the royalties payable under such license in such jurisdiction
may be deducted from royalties otherwise payable to LICENSOR hereunder, provided
that in no event shall the aggregate royalties payable to LICENSOR in any
Calendar Quarter in such country be reduced by more than fifty per cent (50%) as
a result of any such deduction.
D.
Milestone
Payments
.
LICENSEE
agrees to pay to LICENSOR three hundred thousand dollars ($300,000) within seven
(7) calendar days of the FDA’s approval of the first LICENSEE-sponsored NDA
incorporating the Technology.
E.
Equity
Participation
.
(i)
In
partial consideration for the grant of licenses in this Agreement to LICENSEE,
LICENSEE shall issue to LICENSOR a number of shares (the “Initial Shares”) of
common stock (the “Common Stock”) of LICENSEE, par value $.001 per share,
representing eight percent (8%) of the outstanding Common Stock as of the date
of execution of the License Agreement, LICENSEE shall issue the Initial Shares
to LICENSOR pursuant to the exemption from registration provided by Section 4(2)
under the Securities Act of 1933, as amended (the “Securities
Act”). The Initial Shares shall be protected from dilution in
connection with any financing transaction by LICENSEE until such time as
LICENSEE has received at least two million dollars ($2,000,000) in gross
proceeds from the issuance of equity securities of LICENSEE. LICENSOR
shall be entitled to receive, in partial consideration for the grant of licenses
this Agreement to LICENSEE, additional shares of Common Stock so as to maintain
his respective percentage ownership of LICENSEE immediately prior to the
applicable financing.
(ii)
If
LICENSEE does not have to conduct any Clinical Trials prior to FDA approval of
the first LICENSEE sponsored NDA for Licensed Product, then LICENSEE also shall
issue to LICENSOR, in partial consideration for the grant of licenses in this
Agreement to LICENSEE, a number of new shares of Common Stock of LICENSEE equal
to the Initial Shares, which shall have the same dilution protection as the
Initial Shares set forth in E(i) above.
F.
Penalty
Payments
.
In the
event LICENSEE has not (i) initiated recruitment of patients for a Phase III
Clinical Trial for the Licensed Products, or (ii) initiated the filing of a NDA
within six (6) months of signing this Agreement, LICENSEE shall pay LICENSOR one
hundred thousand dollars ($100,0,00) within seven (7) calendar days of the six
(6) month anniversary of the Effective Date of this Agreement.
G.
Payments by
Equity
.
(i)
Upon the
request of LICENSOR, LICENSEE shall have the obligation to fulfill any of
LICENSEE’s payment obligations due under this Section 3 through the issuance of
an amount of shares of Common Stock equal to the cash value of any such payment
obligation. Any such issuances of Common Stock shall be made only to
the extent that an exemption from the registration requirements of the
Securities Act exists or the shares are duly registered under the Securities
Act.
(ii)
For
purposes of calculating the cash value of the Common Stock under Section 3G(i),
the then-current market price of the Common Stock will be deemed to be the
average closing price of the Common Stock for the ten (10) consecutive trading
days prior to the date on which any payment pursuant to this Section 3 accrues,
on the principal national securities exchange on which the Common Stock is
admitted to trading or listed, or if not listed or admitted to trading on any
such national exchange, then the representative average closing bid price of the
Common Stock as reported by the National Association of Securities Dealers, Inc.
Automated Quotations System (“Nasdaq”) or other similar organization, or, if the
Common Stock is not reported on Nasdaq or by a similar organization, then the
average per share bid price for the Common Stock in the over-the-counter market
as reported by the National Quotation Bureau or similar organization, or if not
so available, then the fair market price of the Common Stock as determined in
good faith by the Board of Directors of LICENSEE. In connection with
this calculation, LICENSOR, or his representative, shall have access to the
books and records of LICENSEE at any time upon twenty-four (24) hour notice to
LICENSEE. Such access shall occur during normal business hours of
LICENSEE.
(iii)
LICENSEE
agrees that, at any time, and from time to time during the period commencing two
(2) years after the Effective Date hereof, or one (1) year after LICENSEE’S
initial public offering of Common Stock registered under the Securities Act,
whichever is later, and ending on the date that is five (5) years after the
Effective Date hereof, if the Board of Directors of LICENSEE authorizes the
filing of a registration statement under the Securities Act (other than the
initial public offering of LICENSEE’s Common Stock, or a registration statement
on Form S-8, Form S-4 or any other form that does not include substantially the
same information as would be required in a form for the general registration of
securities) in connection with the proposed offer of any of its securities by it
or any of its stockholders, then LICENSEE shall (a) promptly notify LICENSOR
that such registration statement will be filed and that the Common Stock then
held by LICENSOR will be included in such registration statement at LICENSOR’s
request, (b) cause such registration statement to cover all of such Common Stock
issued to LICENSOR and requested for inclusion, (c) use its reasonable best
efforts to cause such registration statement to become effective as soon as
practicable and (d) take all other action necessary under any federal or state
law or regulation of any governmental authority to permit all such Common Stock
that has been issued to LICENSOR and requested by LICENSOR for inclusion in such
proposed registration statement to be sold or otherwise disposed of and shall
maintain such compliance with each such federal and state law and regulation of
any governmental authority for the period necessary to effect the proposed sale
or other disposition of any Common Stock that has been issued to LICENSOR and
requested by LICENSOR for inclusion in the proposed registration
statement.
To the
extent that officers or directors of LICENSEE are permitted to have registered
shares of Common Stock held by any of them included in an initial public
offering of LICENSEE’S Common Stock, LICENSOR shall also have the right to
include the Common Stock then held by LICENSOR in the registration statement
prepared in connection with such an offering.
(iv)
In the
event that LICENSEE grants to any investor(s) the right to require LICENSEE to
effect a registration of Common Stock held by such investors, LICENSOR shall
have the right to require LICENSEE to include the Common Stock held by LICENSOR
in any such registration on the same terms applicable to such
investor(s).
a)
If the
Common Stock owned by LICENSOR is or becomes freely tradable, then LICENSOR
shall have no right to the above described registration rights.
b)
LICENSEE
may at any time, abandon or delay any registration commenced by
LICENSEE.
c)
LICENSOR
represents to LICENSEE that the Common Stock will be acquired by LICENSOR for
investment purposes only, for an indefinite period of time, for its own account,
not as a nominee or agent for any other entity, and not with a view to the sale
or distribution of all or any part thereof, and LICENSOR has no present
intention of selling, granting any participation in, or otherwise distributing,
any or all of the Common Stock. LICENSOR does not have any contract,
undertaking, agreement or arrangement with any entity to sell, transfer or grant
participation to such person, firm or corporation, with respect to any or all of
the Common Stock.
d)
LICENSEE
represents to LICENSOR that LICENSEE shall rely on Section 4(2) under the
Securities Act in connection with the issuance of the Initial Shares to
LICENSOR. In addition, LICENSEE represents to LICENSOR that LICENSEE
shall conduct any further issuances of Common Stock to LICENSOR (under this
Section 3) only in compliance with registration under the Securities Act or an
available exemption from such registration requirements.
e)
The
parties agree to execute such further instruments and to take such further
action as may reasonably be necessary to carry out the intent of this Section
3G.
f)
LICENSOR
agrees that, in connection with each underwritten public offering of shares of
Common Stock or other equity securities of LICENSEE registered under the
Securities Act by or on behalf of LICENSEE, LICENSOR will not sell or transfer,
or offer to sell or transfer, any equity securities of LICENSEE, to the extent
all officers, directors and greater than five percent (5%) shareholders of
LICENSEE are also subject to this restriction for such period as the managing
underwriter of such offering determines is necessary to effect the underwritten
public offering, not to exceed one hundred and eighty (180) days, and LICENSOR
further agrees that it will sign an agreement as requested by the managing
underwriter of such offering to effect the requirements of this Section
3G(iv)(f).
Section
4.
Certain Warranties of
LICENSOR and LICENSEE
.
A.
To
LICENSOR’s knowledge and belief, LICENSOR has all right, title, and interest in
and to the Licensed Patents and Know-How, including exclusive, absolute,
irrevocable right, title and interest thereto, free and clear of all liens,
charges, encumbrances or other restrictions or limitations of any kind
whatsoever and to LICENSOR’s knowledge and belief there are no licenses,
options, restrictions, liens, rights of third parties, disputes, royalty
obligations, proceedings or claims relating to, affecting, or limiting
LICENSOR’s rights licensed to LICENSEE under this Agreement.
B.
As of the
Effective Date, to LICENSOR’s knowledge and belief, there is no claim pending or
threatened, of infringement, interference or invalidity regarding any part or
all of the Licensed Patents or the use of the inventions as contemplated in the
underlying patent applications as presently drafted.
C.
LICENSOR,
by this License Agreement, makes no representations or warranties as to the
validity and/or scope of the claims contained in the Licensed Patents or that
such Licensed Patents may be exploited by LICENSEE or its sublicensees without
infringing other patents and LICENSEE so acknowledges.
D.
EXCEPT AS
MAY BE EXPRESSLY PROVIDED IN THIS SECTION 4, LICENSOR DOES NOT MAKE, AND
EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES, EITHER EXPRESS OR IMPLIED, ORAL OR
WRITTEN, AS TO ANY OF THE LICENSED PATENTS, KNOW-HOW, OR TECHNOLOGY, INCLUDING
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
E.
LICENSEE
represents and warrants to LICENSOR the following:
(i)
LICENSEE
is a corporation duly organized„ validly existing and in good standing under the
laws of the State of New York and has all necessary corporate power to enter
into and perform its obligations under this Agreement.
(ii)
The
execution, delivery and performance of this Agreement by LICENSEE have been duly
authorized and approved by all necessary corporate action, and that the
Agreement is binding upon and enforceable against LICENSEE in accordance with
its terms (subject to bankruptcy and similar laws affecting the rights of
creditors generally).
(iii)
At all
times during the term of this Agreement, LICENSEE and all its sublicensees will
obtain, maintain and comply with all licenses, permits and authorizations
necessary to LICENSEE’S complete and timely performance of its obligations under
this Agreement, which are required under any applicable statutes, laws,
ordinances, rules and regulations of the United States as well as those of all
applicable foreign governmental bodies, agencies and subdivisions, having,
asserting or claiming jurisdiction over LICENSEE or any sublicensee or
LICENSEE’s sublicensee’s performance of the terms of this
Agreement. In particular, LICENSEE.
(iv)
LICENSEE
will be responsible for obtaining all necessary United States FDA approvals and
all approvals required by similar governmental bodies or agencies of all
applicable foreign countries.
(v)
LICENSEE
understands and acknowledges that the transfer of certain commodities and
technical data is subject to United States laws and regulations controlling the
export of such commodities and technical data, including all Export
Administration Regulations of the United States Department of
Commerce. These laws and regulations, among other things, prohibit or
require a license for the export of certain types of technical data to certain
specified countries. LICENSEE hereby agrees and gives written
assurance that it will comply with all United States laws and regulations
controlling the export of commodities and technical data, that it will be solely
responsible for any violation of such by LICENSEE or its AFFILIATES or
sublicensees, and that LICENSEE will defend and hold LICENSOR harmless of any
legal action of any nature occasioned by such violation.
Section
5.
Record Keeping, Reporting,
Accounting and Payments
.
A.
LICENSEE
shall report to LICENSOR the date of first sale of each Licensed Product in each
country within thirty (30) days of occurrence.
B.
LICENSEE
will keep, maintain and require each of its sublicenses to keep and maintain, in
accordance with generally accepted accounting principles, proper and complete
books and records sufficient to verify the accuracy and completeness of
LICENSEE’s and each sublicensee’s accounting of all sales of Licensed
Product. The books and records will be preserved for a period not
less than three years after they are created.
C.
Amounts
owing to LICENSOR under Section 3C will be paid on a quarterly basis for the
periods ending March 31, June 30, September 30 and December 31, within
forty-five days of the end of the Calendar Quarter. The balance of
any such amounts that remain unpaid more than thirty days after they are due to
LICENSOR will accrue interest until paid at the rate of one percent (1%) per
month. In no event, however, will this interest provision be
construed as a grant of permission for any payment delays.
D.
All
amounts owing to LICENSOR under this Agreement will be paid in U.S. dollars to
LICENSOR at the address provided in Section 13. All royalties owing
with respect to Net Sales stated in currencies other than U.S. dollars will be
converted at the rate shown in the Federal Reserve Noon Valuation - Value of
Foreign Currencies on the last day of the Calendar Quarter for which payment is
due or, if the last day is not a business day, the closest preceding business
day. All amounts payable by LICENSEE to LICENSOR shall be made
without any deduction for conversion or remittance fees or other charges imposed
outside of the United States or any taxes levied on such amounts by non-U.S. tax
authorities, all of which shall be borne by LICENSEE. LICENSOR shall
pay any conversion or remittance fees or other charges imposed in the United
States or any taxes levied by U.S. tax authorities.
E.
With each
payment due under Section 3C, the accounting will be summarized on the form
shown in Appendix A of this Agreement on a country-by-country basis for each
Licensed Product sold by LICENSEE or a sublicensed Affiliate or sublicensed
Third Party. Such accounting summaries shall be certified as correct
by an officer of LICENSEE and shall include a detailed listing of all deductions
from gross sales and be accompanied by a listing of all payments made by each
sublicensee to LICENSOR. In the event no payment is owed to LICENSOR,
a statement setting forth that fact will be supplied to LICENSOR and certified
as correct by an officer of LICENSEE.
F.
LICENSEE
will take all steps necessary so that LICENSOR may, within thirty (30) days of
LICENSOR’s request, review the books and records at a single U.S. location to
verify the accuracy of LICENSEE’s and each sublicensee’s
accounting. The review may be performed by any attorney or registered
CPA mutually agreed upon by LICENSOR and LICENSEE with the cost being borne
solely by LICENSOR, upon reasonable notice and during regular business hours and
not more than twice per calendar year. If a royalty payment
deficiency is determined, LICENSEE will pay the royalty deficiency outstanding
within thirty (30) days of receiving written notice thereof, plus interest on
outstanding amounts as described in Section 5C. If a royalty payment
deficiency for a calendar year exceeds five percent (5%) of the royalties paid
for any consecutive twelve (12) months, then LICENSEE will be responsible for
paying LICENSOR’s out-of-pocket expenses incurred with respect to such
review.
Section
6.
Term and
Termination
.
A.
If not
terminated sooner pursuant to Sections 2B, 8C, 10B, or the provisions in this
Section 6, this Agreement shall terminate: (i) on the date of the
last to expire claim contained in the Licensed Patents; or (ii) in the event
that no patent shall issue, upon the expiration of the Orphan Drug status, if
achieved.
B.
Subject
to the provisions of the federal bankruptcy laws that limit rights of
termination, if LICENSEE shall become bankrupt, or shall file a petition in
bankruptcy, or if the business of LICENSEE shall he placed in the hands of a
receiver, assignee or trustee for the benefit of creditors, whether by the
voluntary act of LICENSEE or otherwise, this License Agreement shall
automatically terminate.
C.
Should
LICENSEE fail to make payment to LICENSOR of royalties due in accordance with
the terms of this Agreement that are not the subject of a bona fide dispute
between LICENSOR and LICENSEE, LICENSOR shall have the right to terminate this
License Agreement within thirty (30) days after giving said notice of
termination unless LICENSEE shall pay to LICENSOR, within the 30-day period, all
such royalties and interest due. Upon the expiration of the 30-day
period, if LICENSEE shall not have paid all such royalties and interest due, the
rights, privileges and license granted hereunder shall, at the option of
LICENSOR, immediately terminate.
D.
Upon any
material breach or default of this Agreement by LICENSEE, other than as set
forth in Section 6C herein above, LICENSOR shall have the right to terminate
this Agreement and the rights, privileges and licenses granted hereunder upon
giving thirty (30) days written notice to LICENSEE.
E.
LICENSEE
shall have the right at any time to terminate this Agreement in whole by giving
ninety (90) days notice thereof in writing to LICENSOR.
F.
Upon
termination of this Agreement for any reason, nothing herein shall be construed
to release either party from any obligation that matured prior to the effective
date of such termination or obligations under Sections 3, 5, 10, 11, 15, and 16
hereof. LICENSEE and/or any sublicensee thereof may, however, after
the effective date or such termination and continuing for a period not to exceed
three (3) months thereafter, sell all Licensed Products completed as of the date
of notice of such termination and sell any Licensed Products in the process of
manufacture as of the date of notice of such termination, provided that LICENSEE
shall pay or cause to be paid to LICENSOR the royalties thereon as required by
Article 3 of this License Agreement and shall submit the reports and
certifications required on the sales of Licensed Products outlined in Section 5E
hereof.
G.
LICENSOR
shall have the right to terminate this Agreement upon termination of the
Consulting Agreement entered into by and between LICENSOR and LICENSEE that
relates to LICENSOR’s providing consulting services to LICENSEE in connection
with LICENSEE’s business.
Section
7.
Binding Effect and
Assignability
.
The
rights, benefits, duties and obligations under this Agreement shall inure to,
and be binding upon LICENSOR and LICENSEE and their respective successors,
assigns, and legal representatives, This Agreement and the rights and duties
hereunder may not be assigned by either party without first obtaining the
written consent of the other, which consent will not be unreasonably
withheld. Any such purported assignment, without the written consent
of the other party, will be null, void and of no effect, Notwithstanding the
foregoing, LICENSEE may assign this Agreement, without the written consent of
LICENSOR, to either (i) a purchaser, merging or consolidating corporation, or
acquirer of substantially all of LICENSEE’s assets or business and/or pursuant
to any reorganization qualifying under section 368 of the internal Revenue Code
of 1986 as amended and may be in effect at such time, or (ii) an Affiliate of
LICENSER
Section
8.
Patent
Prosecution
.
A.
Subject
to the provisions of section 8(C) hereof, LICENSEE, within ninety (90) days from
receipt of appropriate documentation, shall reimburse LICENSOR in the
approximate amount of Six Thousand Eight Hundred Thirty-Three Dollars and Three
Cents ($6,833.03) representing all reasonable out-of-pocket expenses LICENSOR
has incurred for the preparation, filing, prosecution and maintenance of
Licensed Patents for to execution of this Agreement and shall reimburse LICENSOR
for all such future reasonable out-of-pocket expenses within sixty (60) days
from receipt by LICENSEE of appropriate documentation of such expenses by
LICENSOR.
B.
LICENSOR
shall diligently prosecute and maintain the Licensed Patents as set forth
Section 1 hereof and Appendix I (as the same may be amended or supplemented from
time to time after the Effective Date), utilizing such patent counsel as
LICENSOR is using as of the Effective Date of this Agreement or patent counsel
as may be mutually agreed upon by the parties hereto. LICENSOR agrees
to keep LICENSEE reasonably well informed with respect to the status and
progress of any such applications, prosecutions and maintenance activities,
including consulting in good faith with LICENSEE and taking into account
LICENSEE’s comments and requests with respect thereto. Both parties
agree to provide reasonable cooperation to each other to Facilitate the
application and prosecution 01-patents pursuant to this Agreement.
C.
LICENSEE
may, in its discretion, elect to not reimburse LICENSOR for reasonable
out-of-pocket expenses of patent prosecution set forth in Section 8B, in which
case LICENSEE shall provide LICENSOR with at least ninety (90) days notice
thereof and LICENSOR shall have the right to treat such notice as a notice of
termination of this Agreement under Section 6E hereof.
Section
9.
Infringement and Other
Actions
.
A.
LICENSEE
and LICENSOR shall promptly provide written notice, to the other party, of any
alleged infringement by a Third Party of the Licensed Patents and provide such
other party with any available evidence of such
infringement. LICENSOR and the officers of LICENSEE shall confer to
determine in good faith an appropriate course of action to enforce such Licensed
Patents or other wise abate the infringement thereof. LICENSEE and
LICENSOR shall promptly provide written notice, to the other party, of any
potential or actual declaratory judgment challenge to the Licensed Patents and
shall confer to determine in good faith an appropriate course of action in
response to such challenge.
B.
During
the term of this Agreement, LICENSEE will have the right, but not the obligation
at its own expense and utilizing counsel of its choice, to prosecute any
infringement of and/or defend any declaratory judgment challenge to, the
Licensed Patents. In furtherance of such right, LICENSOR hereby
agrees that LICENSEE may join LICENSOR as a party in any such suit, without
expense to LICENSOR, No settlement, consent judgment or other voluntary final
disposition of any such suit that would adversely affect the rights of LICENSOR
may be entered into without the written consent of LICENSOR, which consent shall
not be unreasonably withheld. LICENSEE will indemnify and hold
LICENSOR harmless against any and all damages, settlements, costs, expenses,
penalties, tines or liability (including, without limitation, reasonable
attorneys’ fees) that may be found or assessed against LICENSOR in any such suit
other than those resulting from LICENSOR’s gross negligence or willful
misconduct,
C.
Any
recovery, award or damages for infringement or other moneys derived by LICENSEE
in any suit under Section 9B, whether by judgment or settlement, shall be
applied first in satisfaction of any unreimbursed expenses and legal fees of
LICENSEE relating to the suit and then to LICENSOR for any royalties credited in
accordance with Section 9D. The balance remaining from any such
recovery will be treated as royalties received by LICENSEE from a sublicensee
and shared by LICENSOR and LICENSEE in accordance with Section 3C(i)
hereof.
D.
LICENSEE
may credit up to fifty percent (50%) of any out-of-pocket litigation costs
incurred by LICENSEE in any country pursuant to Section 9B against royalties
thereafter payable to LICENSOR hereunder for such country and apply the same
toward one-half of its actual, reasonable out-of-pocket litigation
costs. If fifty percent (50%) of such out-of-pocket litigation costs
in such country exceeds fifty percent (50%) of royalties payable to LICENSOR for
such country in any year in which such costs are incurred, then the portion of
the fifty percent (50%) of the out-of-pocket litigation costs in excess of’ such
fifty percent (50%) of the royalties payable will be carried over and credited
against royalty payments in future years for such country.
E.
If within
two (2) months after receiving notice of any alleged infringement of the
Licensed Patents, LICENSEE has not notified in writing LICENSOR of LICENSEE’S
intended action, or if LICENSEE notifies LICENSOR at any time prior thereto, of
its intention not to bring suit against the alleged infringer or to defend the
Licensed Patents in a declaratory judgment action, then, and in those events
only, LICENSOR will have the right, but not the obligation, at its own expense
and utilizing counsel of its choice, prosecute any infringement of, and/or
defend any declaratory judgment challenge to, the Licensed
Patents. LICENSOR may, for such purposes, join LICENSEE as a party
plaintiff. LICENSOR will keep any recovery, award or damages for
infringement or other moneys derived therefrom, whether by judgment or
settlement, and such will not be applicable to any royalty obligation of
LICENSEE.
F.
In any
suit to enforce and/or defend the Licensed Patents pursuant to this Section 9,
the party not in control of such suit shall, at the request and expense of the
controlling party, cooperate in all respects and, to the extent possible, have
its employees testify when requested and make available relevant records,
papers, information, samples, specimens, and the like.
Section
10.
Product Liability; Conduct
of Business
.
A.
LICENSEE
will, at all times during the term of this Agreement and thereafter, indemnify,
defend and hold LICENSOR, his successors and assigns, harmless from and against
all liabilities, damages, losses, settlements, claims, actions, suits,
penalties, fines, costs or expenses, including without limitation, legal
expenses and reasonable attorneys fees (any of the foregoing, a “Claim”)
incurred by or asserted against LICENSOR, his successors and assigns of whatever
kind or nature, including, without limitation, any Claim based upon negligence,
warranty, strict liability, violation of government regulation, arising from or
occurring as a result of (i) the use of the Technology by LICENSEE or any of its
Affiliates, agents or sublicensees or (ii) the production, manufacture, sale,
use, consumption or advertisement of Licensed Product(s) or the practice of
Licensed Process(es), except to the ex-tent such Claims are the result of
LICENSOR’s gross negligence or willful misconduct No settlement, consent
judgment or other voluntary final disposition of any such Claim may be entered
into without the written consent of the LICENSOR, which consent shall not be
unreasonably withheld. LICENSOR at all times reserves the right to
select and retain, at LICENSOR’s sole expense, counsel of its own to defend
LICENSOR’s interests,
B.
No later
than the earlier of (i) testing or use of Licensed Product in human subjects or
(ii) sale of a Licensed Product, LICENSEE shall obtain and maintain product
liability insurance policies in amounts acceptable to LICENSOR and have LICENSOR
named as an additional insured on such policies. LICENSEE shall
provide LICENSOR with evidence of such coverage at least ten (10) days before
the commencement of the earlier of (i) or (ii) of this Section 10B and from time
thereafter upon LICENSOR’s request. If LICENSOR’s insurance costs can
be shown to have increased solely because of this Agreement, and such increases
are verified by an independent certified public accountant, LICENSEE shall
reimburse LICENSOR for such increase within thirty (30) days of receiving
written notice from LICENSOR requesting such reimbursement. If
LICENSEE does not reimburse LICENSOR, LICENSOR shall have the right to terminate
this Agreement thirty (30) days after written notice of termination unless
LICENSEE shall reimburse LICENSOR within the 30-day period. This
Section 10B shall survive any termination of this Agreement.
Section
11.
Use of
Names
.
Nothing
contained in this Agreement shall be construed as granting any right to LICENSEE
or its Affiliates to use in advertising, publicity, or other commercial or
promotional activities any name, trade name, trademark, or other designation of
LICENSOR (including contraction, abbreviation or simulation of any of the
foregoing) without the prior written consent of LICENSOR; provided, however,
that LICENSOR acknowledges and agrees that LICENSEE may use the names of
LICENSOR in various documents used by LICENSER for capital raising and financing
without such prior written consent or where the use of such names may be
required by law.
Section
12.
Independent Contractor
Status
.
The
parties to this Agreement recognize and agree that each is operating as an
independent contractor and nothing herein shall be deemed to establish a
relationship of principal and agent between LICENSOR and LICENSEE, nor any of
their agents or employees for any purpose whatsoever. This Agreement
shall not be construed as creating a partnership or joint venture between
LICENSOR and LICENSEE, or as creating any other form of legal association or
arrangement that would impose liability upon one party for the act or failure to
act of the other party.
Section
13.
Notices
.
Any
notice required to be given pursuant to the provisions of this Agreement will be
in writing and will be deemed to have been given at the earlier
of: when delivered personally against receipt therefor; one (1) day
after being sent by Federal Express or similar overnight delivery; or three (3)
days after being mailed registered or certified mail, postage prepaid, to a
party hereto at the address set forth below, or to such other address as such
party shall give by notice hereunder to the other party to this
Agreement
If to
LICENSOR:
George B.
McDonald, M.D.
1815
102
nd
Place,
S.E.
Bellevue,
WA 98004
Phone: 425-453-9936
If to
LICENSEE:
Enteron
Pharmaceuticals, Inc.
787
Seventh Avenue, 48
th
Floor
New York,
NY 10019
Attn: Baruch
Runner, M.D.
Phone: 212-554-4543
Fax: 212-554-4338
Section
14.
Governing Law and
Severability
.
This
Agreement will be construed in accordance with the laws of the State of New
York. If any provisions of this Agreement conflicts with the laws or
regulations of any jurisdiction or any governmental entity having jurisdiction
over the parties or this Agreement, those provisions will he deemed
automatically waived in that jurisdiction but shall not affect the validity,
legality or enforceability of such provision in any other
jurisdiction. If the waiver is allowed by relevant law, the remaining
terms and conditions of this Agreement will remain in full force and
effect. If a waiver is not so allowed or if a waiver leaves terms and
conditions clearly illogical or inappropriate in effect, the parties agree to
substitute new terms as similar in effect to the present terms of this Agreement
as may be allowed under the applicable laws and regulations.
Section
15.
Confidentiality
.
A.
LICENSEE
and LICENSOR agree that they will not use the Confidential Information for any
purpose unrelated to this Agreement, and will hold it in confidence during the
term of this Agreement and for a period of five (5) years after the termination
or expiration date of this Agreement. Each party will exercise with
respect to such Confidential Information the same degree of care as that party
exercises with respect to its own confidential or proprietary information of a
similar nature, and will not disclose it or permit its disclosure to any Third
Party (except to those of its employees, consultants, agents, Third Party
sublicensees and potential sublicensees, and Affiliates who are bound by the
same obligation of confidentiality as the party is bound by pursuant to this
Agreement and who need the Confidential Information to carry out the purposes of
this Agreement). However, such undertaking of confidentiality will
not apply to any information or data that:
(i)
was known
to receiving parry prior to the receipt of the Confidential Information; or is
developed independently without breach of this Agreement by the receiving
party;
(ii)
becomes
known to the public not as a result of any action or inaction by the receiving
party;
(iii)
receiving
party receives at any time from a Third Party who is lawfully in possession of
same and has the right to disclose same; or
(iv)
is
required to be disclosed by law, regulation or order in a judicial or
administrative proceedings, provided that the receiving party, to the fullest
extent permitted or reasonably feasible under the circumstances, shall have
secured confidential treatment of the Confidential Information
disclosed.
B.
Notwithstanding
the provisions of Section 15A hereof, a party may, to the extent necessary,
disclose and use Confidential Information disclosed to it by the other
party:
(i)
for
purposes of securing institutional or government approval to clinically test or
market any Licensed Product(s) or practice any Licensed Process(es), provided
that the party that originally disclosed the Confidential Information shall have
been notified of such disclosure; or
(ii)
where the
disclosure and use of the Confidential Information will be useful or necessary
to the application or prosecution of patents for any Licensed Process(es),
Licensed Product(s), or Technology, provided that the party that originally
disclosed the Confidential Information shall have been notified of such
disclosure.
(iii)
where the
disclosure and use of the Confidential Information is in the opinion of outside
counsel for the Company, required for financial reporting and disclosure under
applicable securities laws.
Section
16.
Mediation and
Arbitration
.
If any
dispute arises from or relating to this Agreement, the parties must submit the
dispute to mediation in Seattle, Washington, by a sole mediator who is selected
by the parties or, at any time, to mediation by the American Arbitration
Association (“AAA”). If not thus resolved, the dispute will be
determined before a sole arbitrator selected by the parties or in accordance
with the rules of the AAA. The arbitration shall be in Seattle,
Washington, and governed by the Federal Arbitration Act. The
requirement for mediation and arbitration shall not be deemed a waiver of any
right of termination under this Agreement and the arbitrator is not empowered to
act or make any award other than based solely on the rights and obligations of
the parties prior to any such termination. The arbitrator shall not
limit, expand or modify the terms of the Agreement nor award damages in excess
of compensatory damages, and each party waives any claim to such excess
damages. Any arbitration award made (i) shall be a bare award limited
to, a holding for or against a party and affording such remedy as is deemed
equitable, just and within the scope of this Agreement; (ii) shall be without
findings as to issues (including, but not limited to patent validity and/or
infringement); (iii) may in appropriate circumstances (other than patent
disputes) include injunctive relief; (iv) shall be made within four (4) months
of the appointment of the arbitrator and (v) may be entered by any court of
competent jurisdiction. A request by a party to a court for interim
protection shall not affect either party’s obligation hereunder to mediate or
arbitrate. Each party shall bear its own expenses and an equal share
of all cost and fees of the mediation and/or arbitration. Any
arbitrator selected shall be competent in the legal and technical aspects of the
subject matter of this Agreement. The existence, content and result
of mediation and/or arbitration shall be held in confidence by all participants,
each of whom shall be bound by an appropriate confidentiality
agreement.
Section
17.
Integration and
Modification
.
This
Agreement constitutes the full understanding between the parties with reference
to the subject matter hereof, and no statements or agreements by or between the
parties, whether orally or in writing, made prior to or at the signing hereof,
will vary or modify the written terms of this Agreement. Neither
party can claim any amendment, modification, or release from any provisions of
this Agreement by mutual agreement, acknowledgment, or otherwise, unless such
mutual agreement is in writing, signed by the other party, and specifically
states that it is an amendment to this Agreement.
Section
18.
Non-Waiver
.
The
failure of either party to insist upon the strict performance of any of the
terms, conditions and provisions of this Agreement shall not he construed as a
waiver or relinquishment of future compliance therewith, and said terms,
conditions and provisions shall remain in full force and effect. No
waiver of any term or condition of this Agreement on the part of either party
shall be effective for any purpose whatsoever unless such waiver is in writing
and signed by such party.
Section
19.
Remedies For Breach of
Confidentiality
.
A.
The
parties agree that any breach of Section 15 of this Agreement by either
LICENSOR, or LICENSEE could cause irreparable damage to the non-breaching party,
and that monetary damages alone would not be adequate and, if such breach or
threat of breach occurs, the non-breaching party shall have, in addition to any
and all remedies at law and without the posting of a bond or other security, the
right to an injunction, specific performance or other equitable relief necessary
to prevent or redress the violation of the confidentiality obligations of
Section 15.. If a proceeding is brought in equity to enforce Section
15, the breaching party shall not urge as a defense that there is an adequate
remedy at law nor shall the non-breaching parry be prevented from seeking any
other remedies that may be available to it,
B.
If either
party is required to bring suit or otherwise seek enforcement of its rights
under Sections 15 and 19 hereof, the prevailing parry in any such action or
proceeding shall be entitled to recover reasonable attorneys’ fees and expenses
incurred in such action or proceeding.
Section
20.
Headings
.
The
headings of the sections are inserted for convenience of reference only and
shall not affect any interpretation of this Agreement.
Section
21.
Contract Formation and
Authority
.
A.
No
agreement between the parties exists unless a duly authorized representative of
LICENSEE and of LICENSOR have signed this document.
B.
The
persons signing on behalf of LICENSOR and LICENSEE warrant and represent that
they have authority to execute this Agreement on behalf of the party for whom
they have signed.
IN
WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the
dates indicated below.
George
B. McDonald, M.D.
/s/ George B.
McDonald
Date:
November
23,
1998
LICENSEE
ENTERON
PHARMACEUTICALS, INC.
|
By:
/s/ Steve H.
Kanzer
|
Date:
November
24, 1998
|
|
|
|
|
Steve
H. Kanzer, Chairman
|
APPENDIX
A
ROYALTY
REPORT
LICENSEE:
Agreement No.:
Inventor:
Technology:
Period
Covered: From
/ /
1999
Through:
/ /
199
Prepared
By:
Date:
Approved
By:
Date:
If
license covers several major product lines, please prepare a separate report for
each line.
Then
combine all product lines into a summary report.
Report
Type:
Single Product Line
Report:
Multiproduct Summary
Report. Page 1
of
Pages
Product Line
Detail. Line: Tradename: Page:
Report
Currency:
U.S.
Dollars
Other
|
|
Gross
|
*
Less:
|
Net
|
Royalty
|
Period
Royalty Amount
|
|
Country
|
Sales
|
Allowances
|
Sales
|
Rate
|
This
Year
|
Last
Year
|
|
U.S.A.
|
|
|
|
|
|
|
|
Canada
|
|
|
|
|
|
|
|
Europe
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Japan
|
|
|
|
|
|
|
|
Other
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL:
|
|
|
|
|
|
|
Total
Royalty:
Conversion
Rate:
Royalty in U.S Dollars:
$
* Provide
a detailed listing of all deductions from Gross Sales.
APPENDIX
B
DEVELOPMENT
REPORT
Development
Report (4-8 paragraphs) including time period covered by this
report.
|
1.
|
Pertinent
information since last report including progress of the research and
development and completed results.
|
|
2.
|
Activities
currently under investigation and projected date of
completion.
|
|
3.
|
Status
of regulatory compliance, approvals and permits or licenses for using
Licensed Product(s) for the prevention and treatment of graft-versus-host
disease and host-versus-graft
disease.
|
Future
Development Activities (4-8 paragraphs).
|
1.
|
Activities
to be undertaken before next report and their projected starting and
completion dates.
|
|
2.
|
Estimated
total development time remaining before Licensed Product(s) will be
commercialized for the prevention and treatment of graft-versus-host
disease and host-versus-graft
disease.
|
Changes
to initial development plan (2-4 paragraphs).
|
4.
|
Variables
that may cause additional changes.
|
Items to
be provided if applicable:
|
5.
|
Information
relating to Licensed Product(s) that has become publicly available, e.g.,
published articles, competing products, patents,
etc.
|
|
6.
|
Descriptions
and result of any research or development work being performed by Third
Parties or Affiliates (including name of such Third Party or Affiliate and
reasons for use of Third Parties or Affiliates) and planned future uses of
Third Parties or Affiliates (including name of such Third Parties or
Affiliates, reasons for use of Third Parties or Affiliates, and
description of type of work).
|
|
7.
|
Update
of each of the following: competitive information trends in
industry, sublicensing activity, changes in government compliance
requirements (if applicable) and market
plan.
|
APPENDIX
C
DEVELOPMENT
PLAN
The plan
should provide LICENSOR with an overview of the activities that LICENSEE
believes arc necessary to bring Licensed Products to the marketplace
worldwide. Include estimated start date and completion date for each
item.
|
I.
|
Development
program for international Regulatory Approvals and sales of Licensed
Product(s) for the prevention and treatment of graft-versus-host disease
and host-versus-graft disease.
|
|
A.
|
Development
activities to be undertaken, including major
milestones.
|
1.
2.
|
B.
|
Estimated
Total Development Time
|
|
II.
|
Governmental
approvals, if required, including types of submissions required by each
government agency (e.g. FDA, EPA,
etc.).
|
|
III.
|
Proposed
marketing approach for international sales of Licensed Product(s) for the
prevention and treatment of graft-versus-host disease and
host-versus-graft disease.
|
|
IV.
|
Competitive
information including potential competitors, potential competitive devices
or compositions, developments, technical achievements, anticipated dates
of LICENSEE’s and competitor’s respective products launches for the
prevention and treatment of graft-versus-host disease, host-versus-graft
disease or other diseases.
|
APPENDIX
D
KNOW-HOW
|
|
Oral
Formulations of Beclomethasone Dipropionate for the treatment of
inflammatory, diseases of the intestinal
tract.
|
|
2.
|
Orphan
Drug Designation Application
#98-1111
|
|
|
FDA’s
acknowledgment of an orphan drug designation for oral administration of
beclomethasone dipropionate for the treatment of intestinal
graft-versus-host disease is attached hereto as “Appendix
D—Attachment.”
|
APPENDIX
I
LICENSED
PATENTS
|
1.
|
U.S.
Patent Application Serial Number 09/103,762, entitled “Method for
preventing tissue damage following hematopoietic cell transplantation” and
filed June 24, 1998.
|
|
2.
|
U.S.
Patent Application Serial Number 09/151,388, entitled “Method for
preventing tissue damage associated with graft-versus-host or
host-versus-graft disease following transplantation” and filed September
10, 1998.
|
EXHIBIT
A
DOR BIOPHARMA,
INC.
EXHIBIT 10.44
COMMON
STOCK PURCHASE AGREEMENT
This
COMMON STOCK PURCHASE AGREEMENT (this “Agreement”) is made and entered into as
of February 11, 2009 (the “Effective Date”).
BY
AND BETWEEN
DOR BioPharma Inc.,
a Delaware
corporation having its principal office at 850 Bear Tavern Road, Suite 201,
Ewing, New Jersey 08628 (hereinafter referred to as the “Company”),
AND
SIGMA-TAU Pharmaceuticals,
Inc,
a Nevada corporation having its principal office at 9841
Washingtonian Blvd., Suite 500, Gaithersburg, MD 20878 (hereinafter referred to
as the “Purchaser”).
W
I T N E S S E T H:
WHEREAS
, the Company has
developed and is developing through its research activities Beclomethasone
Dipropionate (orBec
®
) and
owns and/or controls the related know-how and patents; and
WHEREAS
, the Company and the
Purchaser are entering into a Collaboration and Supply
Agreement (the “Supply
Agreement”) concerning Beclomethasone Dipropionate (orBec
®
) dated
as of the date hereof; and
WHEREAS
, shares of the
Company’s common stock, par value $.001 per share (“Common Stock”), are listed
on the Over -The- Counter bulletin board securities market (the “Market”),
symbol “DORB”; and
WHEREAS
, in connection with
the activities under the Supply Agreement, the Company desires to sell and issue
to the Purchaser, and the Purchaser, in order to support further
development of Beclomethasone Dipropionate (orBec
®
), wishes
to purchase from the Company, twenty-five million (25,000,000) shares of Common
Stock (“Shares”).
NOW, THEREFORE
, for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties, the parties agree as follows:
ARTICLE
I
1.
Definitions
. The
following terms as used in this Agreement (or the Schedule(s) hereto) have the
meanings set forth below:
1.1.
“Affiliates”
means, with respect to a party, (i) any entity, more than fifty percent (50%) of
the voting equity interests of which is owned and/or controlled directly or
indirectly by such party; (ii) any entity which directly or indirectly owns
and/or controls more than fifty percent (50%) of the voting equity interests of
such party; (iii) any entity which is directly or indirectly under common
control of the referenced party through common ownership or which is directly or
indirectly under common control of the respective shareholders of such
party.
1.2.
“Agreement”
has the meaning set forth in the introductory paragraph.
1.3.
“Closing”
has the meaning set forth in Article 3.1.
1.4.
“Closing
Date” has the meaning set forth in Article 3.1.
1.5.
“Common
Stock” has the meaning set forth in the recitals.
1.6.
“Company”
has the meaning set forth in the introductory paragraph.
1.7.
“Company’s
Knowledge” means the actual knowledge of the executive officers and directors of
the Company, after due and reasonable inquiry.
1.8.
“Effective
Date” has the meaning set forth in the introductory paragraph.
1.9.
“Exchange
Act” has the meaning set forth in Article 5.3.
1.10.
“Holder”
has the meaning set forth in Article 7.
1.11.
“Market”
has the meaning set forth in the recitals.
1.12.
“Marketing
Authorizations” has the meaning set forth in Article 8.2.
1.13.
“Permits”
has the meaning set forth in Article 5.11.
1.14.
“Phase 3
Trial” has the meaning set forth in the Supply Agreement.
1.15.
“Piggyback
Registration” has the meaning set forth in Article 7.2.
1.16.
“Preferred
Stock” has the meaning set forth in Article 5.6(a).
1.17.
“Proceeds”
has the meaning set forth in Article 2.1.
1.18.
“Product”
has the meaning set forth in the Supply Agreement.
1.19.
“Proprietary
Rights” has the meaning set forth in Article 5.10.
1.20.
“Purchaser”
has the meaning set forth in the introductory paragraph.
1.21.
“Registrable
Securities” shall mean (i) the Shares, (ii) the shares of Common Stock purchased
from the Company by the Purchaser on November 26, 2008 and (iii) any common
stock issued as a dividend or other distribution with respect to, or in exchange
for or in replacement of, such above-described securities;
provided
,
however
, that
“Registrable Securities” shall not include any securities sold by a person
either pursuant to a registration statement or Rule 144 as promulgated by the
SEC under the Securities Act, as such Rule may be amended from time to time, or
any similar successor rule that may be promulgated by the SEC.
1.22.
“SEC” has
the meaning set forth in Article 5.8.
1.23.
“SEC
Reports” has the meaning set forth in Article 5.14.
1.24.
“Securities
Act” has the meaning set forth in Article 5.3.
1.25.
“Shares”
has the meaning set forth in the recitals.
1.26.
“Sigma-Tau
Nominee” has the meaning set forth in Article 8.1.
1.27.
“Supply
Agreement” has the meaning set forth in the recitals.
ARTICLE
II
2.
Purchase and Sale of
Shares
.
2.1.
At the
Closing, subject to the terms and conditions contained in this Agreement, in
payment of the full purchase price for the Shares, the Purchaser shall provide a
wire transfer of immediately available funds to the Company in an amount equal
to Four and One-Half Million Dollars (US $4,500,000) (the “Proceeds”) using the
following wire transfer instructions:
Bank
Name: UBS
AG
ABA
No.: 026007993
A/C Name: UBS
Financial Services
Beneficiary: DOR
BIOPHARMA, INC.
Account
No.: Y300354
ARTICLE
III
3.
Closing; Deliveries at
Closing
.
3.1.
Closing
. The
purchase and sale of the Shares shall take place at a closing (the “Closing”) to
be held at the offices of Edwards Angell Palmer & Dodge LLP, 750 Lexington
Avenue, New York, New York 10022, at 10:00 a.m. Eastern Time on the date of this
Agreement, or at such other location, time and date as may be mutually agreed
upon by the parties (the “Closing Date”). The Closing shall take
place contemporaneously with the execution and delivery of this Agreement by the
parties thereto.
3.2.
Deliveries at
Closing
.
Within thirty (30) days
from the Closing, the Company shall deliver a stock certificate evidencing the
Shares, all issued in the name of the Purchaser and dated as of the Closing
Date.
ARTICLE
IV
4.
Conditions to
Closing
.
4.1.
Conditions to the
Purchaser’s Obligations at Closing
. The obligation of the
Purchaser to purchase and pay for the Shares at the Closing is subject to each
of the following conditions precedent:
(a)
Officer’s
Certificate
. The Purchaser shall have received at the Closing,
a certificate, executed by the appropriate officer of the Company and dated as
of the Closing Date, together with and certifying (i) the names of the officers
of the Company authorized to sign this Agreement together with the true
signatures of such officers; (ii) a copy of the Certificate of Incorporation of
the Company, as amended and in effect as of the Closing Date; (iii) a copy of
the Bylaws of the Company, as amended and in effect as of the Closing Date; (iv)
that the representations and warranties contained in Article 5 hereof are true
and correct as of the Closing Date; and (v) the Company has complied with all
the agreements and satisfied all the conditions herein on its part to be
performed or satisfied on or prior to the Closing Date;
(b)
Instruction
Letter
. The Company shall have transmitted an instruction
letter to its stock transfer agent directing it to issue to the Purchaser the
stock certificate for the Shares, and the Purchaser shall have received a copy
of such letter.
(c)
Conditions to Company’s
Obligations at Closing
. The obligation of the Company to issue
and sell the Shares at the Closing is subject to the delivery by the Purchaser
of the Proceeds in immediately available funds to Company’s specified account in
accordance with Article 2.1.
ARTICLE
V
5.
Representations and
Warranties by the Company
. The Company represents and warrants to the
Purchaser as follows:
5.1.
Organization and
Standing
. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. The
Company is qualified to do business and is in good standing as a foreign
corporation in every jurisdiction in which the failure to so qualify would have
a material adverse effect on the financial condition or business of the
Company.
5.2.
No
Actions
. There are no legal or governmental actions, suits,
proceedings or investigations pending or, to the Company’s knowledge, threatened
to which the Company is or may be a party or of which property owned or leased
by the Company is or may be the subject, or related to environmental or
discrimination matters, which actions, suits, proceedings or investigations,
individually or in the aggregate, might prevent or might reasonably be expected
to have a material adverse affect on the transactions contemplated by this
Agreement or the financial condition or business of the Company. The
Company is not a party to, or subject to the provisions of, any material
injunction, judgment, decree or order of any court, regulatory body,
administrative agency or other governmental body.
5.3.
Compliance with Other
Instruments
. The execution and delivery of, and the
performance and compliance with this Agreement and the transactions contemplated
hereby, with or without the giving of notice, will not (i) result in any breach
of, or constitute a default under, or result in the imposition of any lien or
encumbrance upon any asset or property of the Company pursuant to any agreement
or other instrument to which the Company is a party or by which it or any of its
properties, assets or rights is bound or affected, (ii) violate the Certificate
of Incorporation or Bylaws of the Company, or, subject to the accuracy of the
representations and warranties of the Purchaser contained in Article 6 of this
Agreement, any law, rule, regulation, judgment, order or decree or (iii) except
for the registration of the Shares under the Securities Act of 1933, as amended
(the “Securities Act”), and such consents, notifications, approvals,
authorizations, registrations or qualifications as may be required under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and applicable
state securities or “blue sky” laws in connection with the purchase of the
Shares by the Purchaser, the issuance of the Shares and the listing of the
Shares on the Market do not require any consent, notification, approval,
authorization or order of or filing with any court or governmental agency or
body. The Company is not in violation of its Certificate of
Incorporation, as amended, or Bylaws, as amended, nor in violation of, or in
default under, any lien, mortgage, lease, agreement or instrument, except for
such defaults which would not, individually or in the aggregate, have a material
adverse effect on the financial condition or business of the
Company. The Company is not subject to any restriction which would
prohibit the Company from entering into or performing its obligations under this
Agreement.
5.4.
Shares
. The
Shares when issued and paid for pursuant to the terms of this Agreement, will be
duly and validly authorized, issued and outstanding, fully paid, nonassessable
and free and clear of all pledges, liens, encumbrances and restrictions (other
than arising under federal or state securities or “blue sky”
laws). The issuance of the Shares is not subject to any preemptive or
other similar rights.
5.5.
Securities
Laws
. Subject to the accuracy of the representations and
warranties of the Purchaser contained in Article 6 of this Agreement, the offer,
sale and issuance of the Shares as contemplated by this Agreement are exempt
from the registration requirements of the Securities Act, and from the
registration or qualifications requirements of the laws of any applicable state
or other U.S. jurisdiction.
5.6.
Authorized Capital
Stock
.
(a)
The
capital stock of the Company, as authorized by the Company’s Certificate of
Incorporation immediately prior to the Closing, consists of 250,000,000 shares
of Common Stock, 4,600,000 shares of preferred stock, par value $.001 per
share, 200,000 shares of Series B preferred stock, par value $.05 per
share, and 200,000 shares of Series C preferred stock, par value $.05
per share (collectively, “Preferred Stock”). Immediately
prior to the Closing,
139,524,739 shares of
Common Stock and no shares of the Preferred Stock are issued and
outstanding. All of the outstanding shares of the Company’s capital
stock are duly authorized, validly issued, fully paid and nonassessable and
were issued in compliance with all applicable federal and state
securities laws and have been issued and sold in compliance with all applicable
preemptive or similar rights of all persons
.
(b)
Except as
set forth on
Schedule
5.6(b)
, there are no outstanding subscriptions, options, warrants,
rights, calls, contracts, demands, commitments, conversion rights or other
agreements or arrangements of any character or nature whatever under which the
Company is or may be obligated (i) to issue or sell shares of its Common Stock
or Preferred Stock, or (ii) to register shares of its Common Stock or Preferred
Stock. No holder of any security of the Company is entitled to any
preemptive or similar rights to purchase any securities of the
Company.
5.7.
Corporate Acts and
Proceedings
. This Agreement has been duly authorized by the
requisite corporate action and has been duly executed and delivered by an
authorized officer of the Company, and is a valid and binding obligation of the
Company, enforceable in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, moratorium, reorganization or other
similar laws affecting the enforcement of creditors’ rights generally and as to
limitations on the enforcement of the remedy of specific performance and other
equitable remedies. The requisite corporate action necessary to the
authorization, reservation, issuance and delivery of the Shares has been taken
by the Company.
5.8.
Filing of
Reports
. Since the Company’s Annual Report on Form 10-KSB for
the fiscal year ended December 31, 2007, the Company has filed with the
Securities and Exchange Commission (the “SEC”) all reports and other material
required to be filed by it therewith.
5.9.
Compliance with Laws
.
The business and operations of the Company have been conducted in accordance
with all applicable laws, rules and regulations of all governmental authorities,
except for such violations which would not, individually or in the aggregate,
have a material adverse effect on the financial condition or business of the
Company.
5.10.
Proprietary
Rights
. No
executive officer or director of the Company has any actual knowledge, after due
and reasonable inquiry, of, nor has the Company given or received any notice of,
any pending conflicts with or infringement of the rights of others with respect
to any patents, patent applications, inventions, trademarks, trade names,
applications for registration of trademarks, service marks, service mark
applications, copyrights, know-how, manufacturing processes, formulae, trade
secrets, licenses and rights in any thereof and any other intangible property
and assets (herein called the “Proprietary Rights”) which are material to the
business of the Company, as now conducted or as proposed to be
conducted. No action, suit, arbitration, or legal, administrative or
other proceeding, or investigation is pending or, to the Company’s Knowledge,
threatened which involves any Proprietary Rights. The Company is not
subject to any judgment, order, writ, injunction or decree of any court or any
federal, state, local, foreign or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, or any
arbitrator, and the Company has not entered into or is a party to any contract
which restricts or impairs the use of any such Proprietary Rights in a manner
which would have a material adverse effect on the financial condition or
business of the Company. The Company has not received written notice
of any pending conflict with or infringement upon any third-party proprietary
rights by the Company.
5.11.
Permits
and
Licenses
. The Company owns, possesses or has obtained, and is
operating in compliance with, all governmental, administrative and third party
licenses, permits, certificates, registrations, approvals, consents and other
authorizations (collectively, “Permits”) necessary to own or lease (as the case
may be) and operate its properties, whether tangible or intangible, and to
conduct its businesses or operations as currently conducted, except such
licenses, permits, certificates, registrations, approvals, consents and
authorizations the failure of which to obtain would not have a material adverse
effect on the business, properties, operations, financial condition or results
of operations of the Company, and the Company has not received any notice of
proceedings relating to the revocation, modification or suspension of any
Permits and, to the Company’s Knowledge, there exists no circumstance which
would lead it to believe that such proceedings are reasonably
likely.
5.12.
Insurance
.
The Company maintains
insurance of the type and in the amount reasonably adequate for its business,
including, but not limited to, insurance covering all real and personal property
owned or leased by the Company against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against by similarly situated
companies, all of which insurance is in full force and effect.
5.13.
Changes
. Since
the Company filed its Form 10-Q on November 14, 2008, the Company has not, to
the extent material to the Company, (i) incurred any debts obligations or
liabilities, absolute, accrued or contingent, whether due or to become due,
other than in the ordinary course of business, (ii) mortgaged, pledged or
subjected to lien, charge, security interest or other encumbrance any of its
assets, tangible or intangible, (iii) waived any debt owed to the Company or its
subsidiaries, (iv) satisfied or discharged any lien, claim, or encumbrance or
paid any obligation other than in the ordinary course of business, (v) declared
or paid any dividends, or (vi) entered into any transaction other than in the
usual and ordinary course of business.
5.14.
Reports and Financial
Statements
. Prior to the execution hereof, the Company has
delivered to the Purchaser true and complete copies of the Company’s most
recently filed Form 10-KSB, as amended, and the Proxy Statement in connection
with the Company’s most recent Annual Meeting of Stockholders and all Forms 10-Q
and 8-K filed by the Company with the SEC after January 1, 2008, in each case
without exhibits thereto (the “SEC Reports”). As of their respective
filing dates, the SEC Reports were prepared in all material respects in
accordance with the requirements of the Securities Act or the Exchange Act, as
the case may be, and the rules and regulations of the SEC thereunder applicable
to such SEC Reports. The SEC Reports, as they may be updated by any
supplement or amendment to an SEC Report, do not contain any untrue statements
of a material fact and do not omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements
and unaudited interim financial statements of the Company included in the SEC
Reports have been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis (except as may be indicated
therein or in the notes thereto) and fairly present, in all material respects,
the financial position of the Company as at the dates thereof and the results of
its operations and cash flows for the periods then ended subject, in the case of
the unaudited interim financial statements, to normal year-end adjustments and
any other adjustments described in such financial statements.
5.15.
Legal
Compliance
. There are no actions, suits, proceedings,
arbitrations or investigations pending or, to the Company’s Knowledge,
threatened against the Company that would be required to be disclosed on a
Form 10-K or Form 10-Q pursuant to Item 103 of Regulation S-K of the Exchange
Act that are not so disclosed.
5.16.
Disclosure
. The
representations and warranties contained in this Article 5 do not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements and information contained in this
Article 5 not misleading.
ARTICLE
VI
6.
Representations, Warranties
and Covenants of the Purchaser
.
The Purchaser represents and warrants
to the Company as follows:
6.1.
Authorization
. The
Purchaser is duly organized, validly existing and in good standing in the
jurisdiction of its organization and has all requisite legal and corporate or
other power and capacity and has taken all requisite corporate or other action
to execute and deliver the Agreement, to purchase the Shares to be purchased by
it and to carry out and perform all of its obligations under the
Agreement. This Agreement has been duly authorized, executed and
delivered and constitutes the legal, valid and binding obligation of the
Purchaser, enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting the enforcement of creditors’
rights generally and as to limitations on the enforcement of the remedy of
specific performance and other equitable remedies. The person signing
on behalf of the Purchaser has the authority to execute this Agreement on behalf
of the Purchaser.
6.2.
Investor
Status
. The Purchaser is an “Accredited Investor” as defined
in Rule 501 of Regulation D promulgated under the Securities Act. The
Purchaser acknowledges receiving and reviewing the documents, including the
documents filed with the SEC included as exhibits thereto. The
Purchaser is aware of the Company’s business affairs and financial condition and
has had access to and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the
Shares. The Purchaser has such business and financial experience as
is required to give it the capacity to utilize the information received, to
evaluate the risks involved in purchasing the Shares, to make an informed
decision about purchasing the Shares and to protect its own interests in
connection with the purchase of the Shares and is able to bear the risks of an
investment in the Shares. The Purchaser is not itself a “broker” or a
“dealer” as defined in the Exchange Act and is not an “affiliate” of the Company
as defined in Rule 405 promulgated under the Securities Act.
6.3.
Investment
Intent
. The Purchaser is purchasing the Shares for its own
account as principal, for investment purposes only and not with a present view
to or for resale, distribution or fractionalization thereof, in whole or in
part, within the meaning of the Securities Act. The Purchaser
understands that its acquisition of the Shares has not been registered under the
Securities Act or registered or qualified under any state securities or “blue
sky” laws in reliance on specific exemptions therefrom, which exemptions may
depend upon, among other things, the bona fide nature of the Purchaser’s
investment intent as expressed herein. The Purchaser has, in
connection with its decision to purchase the number of Shares set forth in this
Agreement, relied solely upon the representations and warranties of the Company
contained herein. The Purchaser will not, directly or indirectly,
offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to
buy, purchase or otherwise acquire or take a pledge of) any of the Shares,
except in compliance with the Securities Act and the rules and regulations
promulgated thereunder and under this Agreement.
6.4.
Registration or Exemption
Requirements
. The Purchaser further acknowledges and
understands that the Shares may not be resold or otherwise transferred except in
a transaction registered under the Securities Act or unless an exemption from
such registration is available. The Purchaser is able to bear the
economic risk of holding the Shares for an indefinite period of time and can
afford a complete loss of its investment. The Purchaser understands
that until the Shares have been registered for resale by the Company in
compliance with applicable securities laws, the certificates evidencing the
Shares will be imprinted with a legend pursuant to Article 6.5 or otherwise that
prohibits the transfer of the Shares, unless (i) such transaction is registered
or such registration is not required or (ii) if the transfer is pursuant to an
exemption from registration, an opinion of counsel reasonably satisfactory to
the Company is obtained to the effect that the transaction is not required to be
registered or is so exempt.
6.5.
Legend
. Until
and unless the Registrable Securities are registered under the Securities Act
and any applicable state securities or “blue sky” laws and regulations, and as
permitted by law, each certificate representing the Registrable Securities shall
bear substantially the following legend as applicable (in addition to any
legends required under applicable state securities or “blue sky”
laws):
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 OR THE SECURITIES OR BLUE SKY LAWS OF ANY STATE. SUCH SECURITIES MAY NOT
BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT SUCH
REGISTRATION, EXCEPT UPON DELIVERY TO THE COMPANY OF SUCH EVIDENCE AS MAY BE
SATISFACTORY TO COUNSEL FOR THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER
SHALL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933 OR APPLICABLE STATE
SECURITIES OR BLUE SKY LAWS OR ANY RULE OR REGULATION PROMULGATED
THEREUNDER.
6.6.
No Legal, Tax
o
r Investment
Advice
. The Purchaser understands that nothing in this
Agreement or any other materials presented to the Purchaser in connection with
the purchase and sale of the Shares constitutes legal, tax or investment
advice. The Purchaser has consulted, at its own expense, such legal,
tax and investment advisors as it, in its sole discretion, has deemed necessary
or appropriate in connection with its purchase of the Shares.
6.7.
Compliance with Other
Instruments
. The execution and delivery of this Agreement, the
purchase of the Shares and the performance by the Purchaser of all other
obligations of the Purchaser contemplated hereby will not (i) violate any law,
rule, regulation, judgment, order or decree applicable to the Purchaser or (ii)
require any consent, approval, authorization or order of, or filing with, any
court or governmental agency or body. The Purchaser is not subject to
any restriction which would prohibit it from entering into or performing its
obligations under this Agreement, except for such restrictions which would not,
individually or in the aggregate, have a material adverse effect on the ability
of the Purchaser to perform its obligations under this Agreement.
6.8.
Compliance with Insider
Trading Rules
. The Purchaser agrees to comply with the laws
and rules pertaining to inside information as they relate to the purchase or
sale of the Company’s securities at all times after the effective date of the
registration statement covering the Registrable Securities.
ARTICLE
VII
7.
Reporting, Registration
Rights, Indemnification
. As used herein, “Holder” shall mean
the Purchaser or any subsequent transferee of the Registrable Securities of the
Purchaser in accordance with the terms of this Agreement.
7.1.
Required
Registration
.
(a)
At any
time following the Effective Date, the Holders who hold and propose to sell
Registrable Securities with an aggregate value of at least One
Million Dollars (US $1,000,000) shall have the right to require the Company to
register under the Securities Act on Form S-1 or other comparable or successor
form such shares by delivering written notice thereof to the
Company. All such registrations shall be
non-underwritten. For so long as the Company may be obligated to
effect a registration statement pursuant to this Article 7.1, the Company shall
use its reasonable best efforts to be and remain eligible to use Form S-1 or
other appropriate comparable or successor form under the Securities
Act.
(b)
The
Company shall be obligated to register Registrable Securities pursuant to this
Article 7.1 on not more than one occasion during any twelve-month rolling
period, or on more than two occasions in the aggregate;
provided
,
however
, that such
obligation shall be deemed satisfied only when a registration statement covering
all shares of Registrable Securities requested to be included in such
registration statement by the Holders thereof, for sale in accordance with the
method of disposition specified by the requesting Holders, shall have become
effective or if the Holders participating in the registration withdraw from the
registration, unless such withdrawal is required pursuant to Article 7.2
below.
7.2.
Piggy-Back
Registration
. If the Company at any time proposes to register
any of its securities under the Securities Act for sale to the public, whether
for its own account or for the account of other security holders or both (except
with respect to registration statements on Forms S-4, S-8 and any successor
forms thereto) (a “Piggyback Registration”), each such time it shall promptly
give written notice to such effect to all Holders of outstanding Registrable
Securities at least twenty (20) days prior to filing such
registration. Upon the written request of any such Holder received by
the Company within ten (10) days after the giving of any such notice by the
Company, to register any of its Registrable Securities, the Company will cause
such Registrable Securities to be included in the securities to be covered by
the Registration Statement proposed to be filed by the Company, all to the
extent requisite to permit the resale or other disposition by the Holder of such
Registrable Securities so registered. If any Piggyback Registration
shall be, in whole or in part, an underwritten public offering of Common Stock,
the number of Registrable Securities to be included in such an underwriting may
be eliminated or reduced (pro rata among all requesting holders of Common Stock
based upon the number of shares of Common Stock requested to be registered by
all requesting holders) if and to the extent that the managing underwriter(s)
shall be of the good faith written opinion that such inclusion would adversely
affect the success of such an underwriting.
7.3.
Registration
Procedures
. If and whenever the Company is required by the
provisions of Article 7.1 to effect the registration of any Registrable
Securities under the Securities Act, the Company will, as expeditiously as
reasonably possible take the following actions:
(a)
Prepare
and file with the SEC a registration statement with respect to such securities
as soon as reasonably practicable after delivery of the applicable notice, and
in any event within thirty (30) days thereof, and use its commercial best
efforts to cause such registration statement to become effective within ninety
(90) days after delivery of such notice and remain effective for the period of
the distribution contemplated thereby (determined as hereinafter provided);
provided
,
however
, that that
Company’s obligation to file a registration statement, or cause such
registration statement to become and remain effective, shall be suspended for a
period not to exceed ninety (90) days in any twelve-month period if in the
reasonable judgment of the Company’s Board of Directors it would be detrimental
to the Company to effect a registration at such time.
(b)
Prepare
and file with the SEC such amendments and supplements to such registration
statement and the related prospectus as may be necessary to keep such
registration statement effective for the period specified in Article 7.3(a)
above and comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities covered by such registration statement
in accordance with the sellers’ intended method of disposition set forth in such
registration statement for such period; provided, however, the Holders hereby
acknowledge that the Company may notify the Holders of the suspension of the use
of the prospectus forming a part of the registration statement until such time
as an amendment to such registration statement has been filed by the Company and
declared effective by the SEC or until the Company has otherwise amended or
supplemented such prospectus, and upon receipt of such notice the Holders shall
immediately suspend the use of the prospectus and shall not offer or sell any
securities pursuant to said prospectus during the period commencing at the time
at which the Company gives the Holders notice of the suspension of the use of
said prospectus and ending at the time the Company gives the Holders notice that
Holders may thereafter effect sales pursuant to said
prospectus. Notwithstanding anything herein to the contrary, the
Company (i) shall not suspend use of the registration statement by Holders
unless such suspension is in the good faith opinion of the Company and its
counsel advisable under the federal securities laws and the rules and
regulations promulgated thereunder; and (ii) shall use its best efforts to amend
such registration statement or amend or supplement such prospectus as soon as
practicable to again permit sales pursuant to said prospectus.
7.4.
Expenses
. All
expenses incurred pursuant to Article 7 (including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel and independent public accountants for the Company, fees and expenses
incurred in connection with complying with state securities or “blue sky” laws,
fees of the NASD, transfer taxes, fees of transfer agents and registrars and
fees and disbursements of counsel) in connection with each such registration
statement shall be borne by the Company.
7.5.
Changes in Common
Stock
. If, and as often as, there is any change in the Common
Stock by way of a stock split, stock dividend, combination or reclassification,
or through a merger, consolidation, reorganization or recapitalization, or by
any other means, appropriate adjustment shall be made in the provisions hereof
so that the rights and privileges granted hereby shall continue with respect to
the Common Stock as so changed.
7.6.
Rule 144
Reporting
. With
a view to making available the benefits of certain rules and regulations of the
SEC that may at any time permit the sale of the Registrable Securities to the
public without registration, the Company agrees to:
(a)
make and
keep Current Public Information available, as understood and defined in Rule 144
under the Securities Act;
(b)
use
commercially reasonable efforts to file with the SEC in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act; and
(c)
furnish
to the Holders promptly upon request a written statement by the Company as to
its compliance with the reporting requirements of such Rule 144 and of the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so filed
by the Company as such Holder may reasonably request in availing itself of any
rule or regulation of the SEC allowing such Holder to sell any Registrable
Securities without registration.
7.7.
Certain Holder
Obligations
. As a condition to the inclusion of its
Registrable Securities in a registration effected pursuant to Article 7.1 the
Holder will promptly provide the Company with such information as the Company
shall reasonably request in order to prepare the applicable registration
statement for such registration, including, but not limited to, information
regarding the Holder, the securities of the Company owned beneficially or of
record by the Holder, the distribution proposed by the Holder, a customary
selling security holder’s questionnaire and, upon the Company’s request, the
Holder shall provide such information in writing and signed by the Holder and
stated to be specifically for inclusion in the applicable
registrations.
ARTICLE
VIII
8.
Undertakings
.
8.1.
Election of
Director
. To the extent the Purchaser continues to beneficially own
ten percent (10%) of the aggregate number of shares of Common Stock issued
by the Company, the Purchaser shall have the right to nominate one (1) member of
the Company’s Board of Directors, who shall be reasonably satisfactory to the
Company.
For the
2009 annual election of the Company’s Board of Directors, the Purchaser has
designated Gregg Lapointe (the “Sigma-Tau Nominee”) as its
nominee. The Company shall recommend such nominee to its shareholders
and use its best efforts to secure the election of the Sigma-Tau
Nominee. If, after the Effective Date, it is determined that the
Sigma-Tau Nominee cannot be nominated for the 2009 annual election of the
Company’s Board of Directors, the Company shall appoint such Nominee to fill any
current vacancy that exists on the Company’s Board of Directors.
8.2.
Use of
Proceeds
. The Company undertakes that the Proceeds, and the
proceeds from the sale of Common Stock purchased from the Company by the
Purchaser on November 26, 2008, will be used to support the costs and expenses
related to the Phase 3 Trial, as such term is defined in the Supply Agreement,
and other activities necessary to obtain and maintain the authorizations
(“Marketing Authorizations”) issued by all applicable regulatory authorities
which are necessary for the marketing, use, distribution and sale of the
Product, as such term is defined in the Supply
Agreement. Accordingly, the Company undertakes to utilize such
Proceeds only for the furtherance of the Phase 3 Trial and the Product
development activities necessary to obtain and maintain the Marketing
Authorizations in the United States of America (including its territories and
possessions, as well as Puerto Rico), Canada and Mexico. The Company
shall send to the Purchaser quarterly reports showing the proper allocation of
the Proceeds received.
ARTICLE
IX
9.
Costs and
Expenses
. Each party agrees to pay its own costs and expenses
in connection with the preparation, execution and delivery of this Agreement and
other instruments and documents to be delivered hereunder and
thereunder.
ARTICLE
X
10.
Miscellaneous
.
10.1.
Headings
. The
headings of the Articles of this Agreement have been inserted for convenience of
reference only and do not constitute a part of this Agreement.
10.2.
Law, Dispute Resolution and
Jurisdiction
. This
Agreement shall be governed, construed and interpreted in accordance with the
laws of New Jersey, without regard to the principles of conflicts of law
thereof. All disputes between the parties arising out of or in relation to this
Agreement shall be exclusively and finally resolved by the Courts of New
Jersey.
10.3.
Binding Effect;
Assignment
. This Agreement shall be binding upon and inure to
the benefit of the Company and the Purchaser and their respective successors and
assigns, provided that neither the Company nor the Purchaser may assign or
transfer any or all of its rights or obligations under this Agreement without
the prior written consent of the other party and any attempted assignment
without such consent shall be null and void.
10.4.
Amendments
. No
amendment, modification, waiver, discharge or termination of any provision of
this Agreement nor consent to any departure by the Purchaser or the Company
therefrom shall in any event be effective unless the same shall be in writing
and signed by the party to be charged with enforcement, and then shall be
effective only in the specific instance and for the purpose for which
given. No course of dealing between the parties hereto shall operate
as an amendment of, or a waiver of any right under, this Agreement.
10.5.
Severability
. The
holding of any provision of this Agreement to be invalid or unenforceable by a
court of competent jurisdiction shall not affect any other provision of this
Agreement, which shall remain in full force and effect. If any
provision of this Agreement shall be declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part, such provision shall be interpreted so as to remain enforceable to the
maximum extent permissible consistent with applicable law and the remaining
conditions and provisions or portions thereof shall nevertheless remain in full
force and effect and enforceable to the extent they are valid, legal and
enforceable, and no provisions shall be deemed dependent upon any other covenant
or provision unless so expressed herein.
10.6.
Notices
. Any notice
required to be given hereunder shall be considered properly given if sent by
registered air-mail, telecopier, or by personal courier delivery to the
respective address of each party as follows:
Sigma-Tau
Pharmaceuticals, Inc.
9841
Washingtonian Blvd., Suite 500,
Gaithersburg,
MD 20878
Attn.:
Don DeLillo
Fax:
(301) 354-5351
And
DOR
BioPharma Inc.
Attn.:
Evan Myrianthopoulos
Address:
850 Bear Tavern Road, Suite 201, Ewing, NJ 08628
Fax:
(609) 538-8205
or to
such other address as a party may designate in writing. Such notice will be
considered received at the date of the receipt by the addressee.
10.7.
Waiver
. It
is agreed that a waiver by either party of a breach of any provision of this
Agreement shall not operate, or be construed, as a waiver of any subsequent
breach by that same party.
10.8.
Other
Documents
. The parties agree to execute and deliver all such
further documents, agreements and instruments and take such other and further
action as may be necessary or appropriate to carry out the purposes and intent
of this Agreement.
10.9.
Publicity
. Except
as otherwise required by applicable law or by obligations pursuant to any
listing agreement with or rules of any securities exchange or automated
quotation system, each party shall, and shall cause its respective Affiliates
to, not issue any press release or make any other public statement relating to,
connected with or arising out of this Agreement or the matters contained herein
without the other party’s prior written approval of the contents and the manner
of presentation and publication thereof (which approval shall not be
unreasonably withheld or delayed).
10.10.
No Third Party
Beneficiaries
. Nothing in this Agreement shall create or be
deemed to create any rights in any person or entity not a party to this
Agreement, except for the Holders of Registrable Securities and certain
indemnitees.
10.11.
Survival
. The
representations, warranties, covenants and agreements made herein by the Company
and the Purchaser shall survive the Closing.
10.12.
Execution
. This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by and delivered to each
party. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of the
party executing such signature page with the same force and effect as if such
facsimile signature page were an original.
10.13.
Entire
Agreement
. This Agreement represents the entire agreement and
understanding between the parties hereto with respect to the subject matter
thereof and supersedes all prior oral or written agreements and understandings
relating to the subject matter thereof. No statement, representation,
warranty, covenant or agreement of any kind not expressly set forth in the
Agreement shall affect, or be used to interpret, change or restrict, the express
terms and provisions of the Agreement.
[Signature
Page Follows]
[Signature
Page to Common Stock Purchase Agreement]
IN WITNESS WHEREOF
, the
parties have caused this Agreement to be executed in duplicate by their duly
authorized officers effective as of the Effective Date.
DOR BIOPHARMA INC.
By:
/s/Christopher J.
Schaber
Name: Christopher J. Schaber,
Ph.D.
Title: President and CEO
SIGMA-TAU
PHARMACEUTICALS, INC.
By:
/s/Gregg Lapointe
Name: Gregg Lapointe
Title: Chief Executive
Officer
SCHEDULE
5.6(b)
(i)
As of the
Effective Date, there are issued and outstanding (a) options to
purchase 16,730,039 shares of Common Stock and (b) warrants to purchase
41,464,184 shares of Common Stock.
(ii) In
addition to the registration rights granted to the Purchaser under this
Agreement, the Company has entered into the following agreements: (a)
Registration Rights Agreement dated February 14, 2008 between the Company and
Fusion Capital Fund II, LLC (Exhibit 10.35 to the Company’s Registration
Statement on Form S-1 filed with the SEC on February 14, 2008) , (b)
Registration Rights Agreement dated January 12, 2009 between the Company and
accredited investors (Exhibit 10.3 to the Company’s Form 8-K filed with the SEC
on January 21, 2009), and (c) the shares of Common Stock purchased by Sigma-Tau
Pharmaceuticals, Inc. from the Company pursuant to a Letter of Intent executed
on November 26, 2008.