UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
December 31,
2009
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Or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission File Number:
000-28782
Spectrum Pharmaceuticals,
Inc.
®
(Exact Name of Registrant as
Specified in its Charter)
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Delaware
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93-0979187
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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157 Technology Drive
Irvine, California
(Address of principal
executive offices)
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92618
(Zip
Code)
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Registrants telephone number, including area code:
(949) 788-6700
Securities registered pursuant to Section 12(b) of the
Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, $0.001 par value
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The NASDAQ Stock Market, LLC
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Common Stock Purchase Warrants
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Rights to Purchase Series B Junior Participating Preferred
Stock
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Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes
o
No
þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes
o
No
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Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes
þ
No
o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 229.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes
o
No
þ
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K
o
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 the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the Exchange Act. (Check one):
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Large accelerated filer
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Accelerated filer
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Non-accelerated
filer
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(Do not check if a smaller reporting company)
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Smaller Reporting company
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Indicate by check mark whether the Registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes
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No
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The aggregate market value of the voting and non-voting common
equity held by non-affiliates of the registrant as of
June 30, 2009 was $310,033,876 based on the closing sale
price of such common equity on such date.
As of March 29, 2010 there were 49,170,969 shares of
the registrants common stock outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Registrants 2010
Annual Meeting of Stockholders, to be filed on or before
April 30, 2010, are incorporated by reference into
Part III of this
Form 10-K.
FORWARD-LOOKING
STATEMENTS
Spectrum Pharmaceuticals, Inc.s Annual Report on
Form 10-K
contains certain forward-looking statements. These
forward-looking statements involve a number of risks and
uncertainties. These forward-looking statements can generally be
identified as such because the context of the statement will
include certain words, including but not limited to,
believes, may, will,
expects, intends, estimates,
anticipates, plans, seeks,
continues, predicts,
potential, likely, or
opportunity, and also contains predictions,
estimates and other forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of
1934, as amended, and in reliance upon the safe harbor
provisions of the Private Securities Litigation Reform Act of
1995. Such forward-looking statements are based on the current
beliefs of the Companys management, as well as assumptions
made by and information currently available to the
Companys management. Readers of this Annual Report on
Form 10-K
should not put undue reliance on these forward-looking
statements, which speak only as of the time this Annual Report
on
Form 10-K
was filed with the Securities and Exchange Commission, or SEC.
Reference is made in particular to forward-looking statements
regarding the success, safety and efficacy of our drug products,
product approvals, product sales, revenues, development
timelines, product acquisitions, liquidity and capital resources
and trends. Forward-looking statements are inherently subject to
risks and uncertainties, some of which cannot be predicted or
quantified. Spectrum Pharmaceuticals, Inc.s actual results
may differ materially from the results projected in the
forward-looking statements. Factors that might cause such a
difference include, but are not limited to, those discussed in
this Report, including the Risk Factors in
Item 1A Risk Factors, and in
Item 7 Managements Discussion and
Analysis of Financial Condition and Results of Operations
included in Part II. In addition, past financial or
operating performance is not necessarily a reliable indicator of
future performance, and you should not use our historical
performance to anticipate results or future period trends. We
can give no assurances that any of the events anticipated by the
forward-looking statements will occur or, if any of them do,
what impact they will have on our results of operations and
financial condition. Except as required by law, we do not
undertake to update any such forward-looking statements and
expressly disclaim any duty to update the information contained
in this Annual Report on
Form 10-K.
Unless the context otherwise requires, all references in this
Annual Report on
Form 10-K
to the Company, we, us,
our, Spectrum and Spectrum
Pharmaceuticals refer to Spectrum Pharmaceuticals, Inc.
and its subsidiaries and other consolidated entities, as a
consolidated entity. We primarily conduct all our activities as
Spectrum Pharmaceuticals.
Spectrum Pharmaceuticals,
Inc.
®
,
Fusilev
®
,
Zevalin
®
and
RenaZorb
®
are registered trademarks of Spectrum Pharmaceuticals, Inc. and
its subsidiaries. Belinostat, Turning Insights Into
Hope
tm
,
RIT Oncology,
LLC
tm
,
RIT
tm
,
and our logos are trademarks owned by Spectrum Pharmaceuticals,
Inc. and its subsidiaries.
EOquin
®
is a registered trademark of Allergan, Inc. All other trademarks
and trade names are the property of their respective owners.
3
PART I
Overview
We are a commercial stage biopharmaceutical company committed to
developing and commercializing innovative therapies with a
primary focus in the areas of hematology-oncology and urology.
We have a fully developed commercial infrastructure that markets
and sells two drugs in the United States,
Zevalin
®
and
Fusilev
®
.
We have several drug candidates in development, the most
advanced of which are apaziquone
(EOquin
®
),
which is presently being studied in two large Phase 3 clinical
trials for non-muscle invasive bladder cancer (NMIBC) under a
strategic collaboration with Allergan; and belinostat, a drug we
recently partnered with TopoTarget A/S to jointly develop.
Belinostat is being studied in multiple indications, including a
Phase 2 registrational trial for relapsed or refractory
Peripheral T-Cell Lymphoma (PTCL).
Our business strategy is comprised of the following initiatives:
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Maximizing the growth potential of our marketed drugs,
Zevalin
and
Fusilev
.
Our
near-term outlook largely depends on sales and marketing
successes for our two marketed drugs. For Zevalin, our initial
goal was to stabilize sales, which we believe we accomplished in
2009. With the approval by the U.S. Food and Drug
Administration (FDA) for a significantly larger indication in
non-Hodgkins lymphoma (NHL) in late 2009 and our success
in addressing historical hurdles associated with the uptake of
this drug, we believe we can grow sales in 2010 and beyond. For
Fusilev, which we launched in August 2008, we were able to
benefit from broad utilization in community clinics and
hospitals through mid-2009. Our focus now is to obtain approval
for Fusilev in advanced metastatic colorectal cancer, which
could potentially increase the patient pool substantially. As
part of its review of our supplemental new drug application
(sNDA) the FDA has requested additional data which we expect to
submit in the third quarter of 2010.
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For both Zevalin and Fusilev, we initiated and continue to stage
appropriate infrastructure expansions and additional initiatives
to facilitate broad customer reach and to address other market
requirements, as appropriate. We have formed a dedicated
commercial organization comprised of highly experienced and
motivated sales representatives, account managers, medical
science liaisons and a complement of other support marketing
personnel to manage the sales and marketing of these drugs.
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Optimizing our development portfolio and maximizing the
asset values of its components
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While over
the recent few years, we have evolved from a development-stage
to a commercial-stage pharmaceutical company, we have maintained
a highly focused development portfolio. Our strategy with regard
to our development portfolio is to focus on late-stage drugs and
to develop them rapidly to the point of regulatory approval. We
plan to develop some of these drugs ourselves or with our
subsidiaries and affiliates, or secure collaborations such that
we are able to suitably monetize these assets.
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We have assembled a drug development infrastructure that is
comprised of highly experienced and motivated MDs, PhDs, medical
science liaisons and a complement of other support personnel to
rapidly develop these drugs. During 2009, this team achieved our
goal of completing enrollment in the two Phase 3 apaziquone
trials (with more than 1,600 patients enrolled). We expect
to continue to maximize the value of apaziquone through further
developmental efforts and initiation of additional trials, which
we aim to begin in 2010. In addition, this team will focus its
efforts in rapidly advancing the development of belinostat by
expediting the patient enrollment in the registrational trial
for PTCL and initiating additional studies in other indications
in 2010.
We have several other exciting compounds in earlier stages of
development in our portfolio. Based upon a criteria-based
portfolio review, we are in the process of streamlining our
pipeline drugs, allowing for greater focus and integration of
our development and commercial goals.
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Expanding commercial bandwidth through licensing and
business development
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It is our goal to
identify new strategic opportunities that will create strong
synergies with our currently marketed drugs and identify and
pursue partnerships for out-licensing certain of our drugs in
development. To this end, we will continue
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to explore strategic collaborations as these relate to drugs
that are either in advanced clinical trials or are currently on
the market. We believe that such opportunistic collaborations
will provide synergies with respect to how we deploy our
internal resources. In this regard, we intend to identify and
secure drugs that have significant growth potential either
through enhanced marketing and sales efforts or through pursuit
of additional clinical development. We believe our recent
in-licensing of belinostat, a novel histone deacetylase (HDAC)
inhibitor, is demonstrative of such licensing and business
development efforts outlined above.
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Managing our financial resources
effectively
.
We remain committed to
fiscal discipline, a policy which has allowed us to become well
capitalized among our peers, despite a very challenging capital
markets environment in 2009. This policy includes the pursuit of
non-dilutive funding options, prudent expense management, and
the achievement of critical synergies within our operations in
order to maintain a reasonable burn rate. Even with the
continued
build-up
in
operational infrastructure to facilitate the marketing of our
two commercial drugs, we intend to be fiscally prudent in any
expansion we undertake. In terms of revenue generation, we plan
to become more reliant on sales from currently marketed drugs
and intend to pursue out-licensing of select pipeline drugs in
select territories, as discussed above. When appropriate, we may
pursue other sources of financing, including non-dilutive
financing alternatives. While we are currently focused on
advancing our key drug development programs, we anticipate that
we will make regular determinations as to which other programs,
if any, to pursue and how much funding to direct to each program
on an ongoing basis, based on clinical success and commercial
potential, including termination of our existing development
programs, especially if we do not expect value being driven from
continued development. Our raising of over $100 million in
equity financing in 2009 in a difficult financing environment,
and our recent termination of the development of ozarelix in
benign prostate hypertrophy (BPH), which resulted in planned
development expense reduction, are recent examples of this
strategy.
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Further enhancing the organizational structure to meet our
corporate objectives
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We have highly
experienced staff in pharmaceutical operations, clinical
development, regulatory and commercial functions who previously
held positions at both small to mid-size biotech companies, as
well as large pharmaceutical companies. We recently strengthened
the ranks of our management team, and will continue to pursue
talent on an opportunistic basis. Finally, we remain committed
to running a lean and efficient organization, while effectively
leveraging our critical resources.
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Restatement
of Previously Issued Consolidated Financial Statements
In this Annual Report on
Form 10-K,
we have restated our previously issued consolidated financial
statements and related disclosures for fiscal years ended
December 31, 2007 and 2008, and each of the quarterly
condensed consolidated financial statements on
Form 10-Q
for the periods ended March 31, 2008 through
September 30, 2009 to reclassify warrant contracts based on
a reassessment of the applicable accounting and classification.
The Company has historically accounted for warrants as equity
instruments, pursuant to its, and Kelly & Companys
(Kelly & Co.), the predecessor independent registered
public accounting firm, interpretation and evaluation of
applicable accounting guidance contained in Accounting Standards
Codification (ASC) Topic 815 Derivatives and
Hedging Contracts in Entitys Own Equity
(ASC 815) (formerly known as Emerging Issues Task Force
Issue
00-19,
Accounting for Derivative Financial Instruments Indexed
to, and Potentially Settled in, a Companys Own
Stock). Accordingly, in connection with warrants issued in
registered offerings during 2005 and 2009, the Company
classified the warrants as equity. In connection with the audit
for the fiscal year 2009, the Company, in consultation with
Ernst & Young LLP (Ernst &
Young), the Companys current independent registered
public accounting firm, reassessed the accounting classification
of the warrants payment to ASC 815 based on certain terms of the
warrants. The warrants provide that in the event the Company is
unable to issue registered shares upon exercise, the warrant
holders are entitled, under securities laws, to receive freely
tradable shares pursuant to a cashless exercise
provision. However, based on interpretation of ASC 815, there is
a required presumption of net cash settlement, as it is not
within the control of the Company to provide registered shares,
no matter how remote the probability. After several extensive
discussions among the Companys management, Ernst &
Young and the Companys outside legal advisors, as well as
informal discussions with Staff of the Securities and Exchange
Commission by the Companys management, it appears that the
interpretation and applicability of this particular accounting
pronouncement is complex and must be applied based on a strict
reading of the authoritative
5
literature without respect to probability. The Companys
Audit Committee, together with management, in consultation with
the Companys outside legal advisors, determined on
March 30, 2010 that, notwithstanding the highly remote
theoretical nature of the possibility of net cash settlement,
the warrants should have originally been recorded as
liabilities, measured at fair value, with changes in the fair
values being recognized in the statement of operations. In this
regard, the Company reassessed the accounting classification of
the warrants issued in September 2005 pursuant to ASC 815, and
in consultation with its predecessor auditor, Kelly &
Co., determined that there should be consistent treatment of the
warrants issued in September 2005 with the warrants issued in
2009, and concluded that such 2005 warrants should also be
reclassified as a liability.
During meetings held on March 30, 2010, the Audit
Committee, together with management, in consultation with
Kelly & Co., the Companys independent registered
public accounting firm during the years ended December 31,
2008 and 2007, concluded that the Companys previously
filed consolidated financial statements for the fiscal years
ended December 31, 2005, 2006, 2007 and 2008 on
Form 10-K,
each of the quarterly condensed consolidated financial
statements on
Form 10-Q
for the periods ended March 31, 2008 through
September 30, 2009, and the independent registered public
accounting firms reports on the financial statements and
the effectiveness of internal control over financial reporting
for the fiscal years ended December 31, 2007 and 2008, and
all related earnings releases and similar communications issued
by the Company, should no longer be relied upon.
The restatements reflect the reclassification of the warrants
from equity to a liability in the following amounts, which
represents the fair value of the warrants, as of the issuance
dates, calculated using the Black-Scholes option pricing model.
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Fair Value
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Number of
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of Warrants
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Warrants
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Exercise
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Expiration
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at Issuance
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Issuance Date
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Issued
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Price
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of Warrants
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Date
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(In thousands)
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September 14, 2005
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4,000,000
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$
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6.62
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September 14, 2011
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$
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15,472
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May 27, 2009
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1,956,947
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$
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5.11
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February 25, 2010
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$
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2,881
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June 15, 2009
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857,633
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$
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5.83
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March 15, 2010
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$
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1,847
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June 30, 2009
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1,468,020
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$
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7.10
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March 30, 2010
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$
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4,117
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September 18, 2009
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2,649,007
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$
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7.55
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June 20, 2010
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$
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5,170
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The revaluation of the warrants at each subsequent balance sheet
date to fair value, results in a change in the carrying value of
the liability, which change is recorded as Change in fair
value of common stock warrant liability in the
consolidated statement of operations. The net effect of these
changes for fiscal years ended December 31, 2008 and 2007,
and for each of the quarterly condensed consolidated financial
statements on
Form 10-Q
for the periods ended March 31, 2008 through
September 30, 2009 are as follows:
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Income (Loss) Resulting
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from Change in Fair
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Value of Common
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Reporting Period
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Stock Warrant Liability
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(In thousands)
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Annual
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Year ended December 31, 2007
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$
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12,055
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Year ended December 31, 2008
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$
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1,271
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Interim (unaudited)
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Quarter ended March 31, 2008
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$
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520
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Quarter ended June 30, 2008
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$
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916
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Quarter ended September 30, 2008
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$
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45
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Quarter ended December 31, 2008
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$
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(210
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Quarter ended March 31, 2009
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$
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(509
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6
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Income (Loss) Resulting
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from Change in Fair
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Value of Common
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Reporting Period
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Stock Warrant Liability
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(In thousands)
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Quarter ended June 30, 2009
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$
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(20,113
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Quarter ended September 30, 2009
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$
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8,863
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We have not amended our previously filed Annual Reports on Form
10-K
for the
fiscal years ended December 31, 2005, 2006, 2007 and 2008,
or the Quarterly Reports on Form
10-Q
for the
periods ended September 30, 2005 through September 30,
2009 to reflect the restatements described in this Annual Report
on
Form 10-K,
and thus the financial statements and related financial
statement information contained in those reports should no
longer be relied upon. Throughout this Annual Report on
Form 10-K,
all amounts presented from prior periods and prior period
comparisons that have been revised are labeled as
restated and reflect the balances and amounts on a
restated basis.
Recent
Developments
In 2009 and early 2010, we have executed on our business
strategy that we described above. We discuss below the key
developments during that period.
We recorded approximately $28.2 million in sales of our
products for the year 2009. We successfully increased Zevalin
sales to approximately $15.7 million in 2009 as compared to
approximately $11 million by the predecessor owner of the
product in 2008. We recorded approximately $0.3 million in
Zevalin sales since we acquired the rights to fifty percent of
the product in December 2008. We also recorded Fusilev sales of
$12.5 million in 2009, compared to approximately
$7.7 million in 2008. We believe that in 2010 and beyond,
revenues from these products have the potential to significantly
grow.
In September 2009, Zevalin received FDA approval for an expanded
label for the treatment of patients with previously untreated
follicular NHL who achieve a partial or complete response to
first-line chemotherapy. This new and expanded indication
supplements the 2002 FDA approval of Zevalin as treatment for
patients with relapsed or refractory, low-grade or follicular
B-cell NHL. Additionally, in November 2009, the Centers for
Medicare and Medicaid Services (CMS) decided that Zevalin should
be reimbursed under an Average Sales Price (ASP) methodology in
the Hospital Outpatient Prospective Payment System (HOPPS) and
issued a corresponding proposed rule, which became effective on
January 1, 2010. The ASP methodology is widely used for
injectable chemotherapy drugs and creates a consistent
reimbursement standard in the hospital setting.
In October 2009, the FDA issued a Complete Response letter
regarding the sNDA for Fusilev. In the Complete Response letter,
the FDA recommended that we meet with them to discuss options
for continuing to seek approval of Fusilev in advanced
metastatic colorectal cancer. We promptly requested such a
meeting, which occurred in January 2010. In that meeting, the
FDA requested additional data which we expect to submit in the
third quarter of 2010.
As for apaziquone, in November 2009, we entered into a
collaboration agreement with Nippon Kayaku Co. Ltd. for the
development and commercialization of apaziquone in Asia, with
the exception of North and South Korea. In exchange, Nippon
Kayaku paid Spectrum an up-front payment of $15 million and
agreed to make additional payments of up to $136.0 million
based on the achievement of certain regulatory and
commercialization milestones contained in the collaboration
agreement, as well as royalties on net sales. Nippon Kayaku
received exclusive rights to apaziquone for the treatment of
NMIBC in Asia, including Japan and China. Under the terms of the
Nippon Kayaku collaboration agreement, Nippon Kayaku will
conduct the apaziquone clinical trials pursuant to a development
plan, and will be responsible for all expenses relating to the
development and commercialization of apaziquone in the Nippon
Kayaku territory. As for South Korea, or the Republic of Korea,
and North Korea, or the Democratic Peoples Republic of
Korea, (collectively, Korea), we entered into a
collaboration agreement with Handok Pharmaceuticals Co. Ltd. for
the development and commercialization of apaziquone for the
treatment of NMIBC. Under the terms of the Handok collaboration
agreement, Handok paid us an up-front payment of
7
$1.0 million and there are potential milestone payments of
approximately $19 million, as well as royalties on net
sales. The potential milestones will be based on the achievement
of certain regulatory and commercialization milestones.
Additionally, Handok will conduct the apaziquone clinical trials
pursuant to a development plan and will be responsible for all
expenses relating to the development and commercialization of
apaziquone in North and South Korea.
In addition, in the fourth quarter of 2009, we completed
enrollment of two Phase 3 pivotal clinical trials for
apaziquone. The two trials enrolled more than
1,600 patients with non-muscle invasive bladder cancer. We
received a $1.5 million milestone payment in January 2010
from Allergan for the completion of these clinical trials, per
the terms of the collaboration agreement, which we entered into
with Allergan on October 28, 2008.
In February 2010, we entered into a licensing and collaboration
agreement with TopoTarget, for the development and
commercialization of belinostat, a drug being studied in
multiple indications, including a Phase 2 registrational
trial for patients with PTCL. The licensing and collaboration
agreement provides that we have the exclusive right to make,
develop and commercialize belinostat in North America and India,
with an option for China. In consideration for the rights
granted under the licensing and collaboration agreement, we paid
TopoTarget an up-front fee of $30 million. In addition, we
will pay up to $313 million and one million shares of
Spectrum common stock based on the achievement of certain
development, regulatory and sales milestones, as well as
double-digit royalties on net sales of belinostat.
In 2009, we raised net proceeds of approximately
$95.8 million from the sale of 15,187,715 shares of
our common stock, despite adverse global financial market
conditions. We believe these funds, as well as the funds
generated through the sales of our products and other
non-dilutive funding in 2008, have resulted in our being well
capitalized. At the end of 2009, we had approximately
$125.0 million in cash, cash equivalents and marketable
securities, which we believe will be sufficient to finance our
anticipated capital and operating requirements for the next
twelve months and beyond.
In August 2009, we acquired 100% of the rights to RenaZorb (a
family of compounds represented by SP-014, also known as
RZB-014), a lanthanum-based nanotechnology compound with potent
and selective phosphate binding capabilities from Altair
Nanotechnologies. Our acquisition of RenaZorb expands upon our
2005 license agreement with Altair, pursuant to which Altair
granted us worldwide rights to Renazorb, but only for human
uses. The August 2009 acquisition provides us with access to all
uses of and intellectual property for the asset. In
consideration for the acquisition, we paid Altair a total of
$750,000 in restricted shares of common stock.
In January 2010, based upon the mixed results of our earlier
Phase 2 study of ozarelix for the treatment of BPH and the
recently announced failure of Aeterna Zentariss large,
Phase 3, registrational trial of cetrorelix (another LHRH
antagonist), we discontinued development of ozarelix in BPH. We
estimate that this discontinuation will result in a substantial
reduction in future clinical development expenses. We will
continue to look for alternative indications for the development
of ozarelix.
We continued our efforts to build a global pharmaceutical
organization in 2009. For two of our non-US business entities,
Spectrum Pharma Canada, Inc., a Canadian affiliate headquartered
in the Province of Quebec, Canada, and OncoRx Pharma Private
Ltd., a wholly-owned Indian subsidiary headquartered in Mumbai,
India, we continued to grow and establish these entities in an
effort to facilitate the opening of clinical trials sites in
these countries to continue the clinical development of our
products at a reduced cost.
Product
Portfolio
We have a product portfolio consisting of both commercial stage
and development stage products. While we are committed to
growing the sales of our marketed products, we strive to
maintain a robust pipeline of products under development to
bring to the market.
8
Our drug products, their approved
and/or
target indications, and status of development are summarized in
the following table, and discussed below in further detail:
Some of our drugs may prove to be beneficial in additional
disease indications as we continue their study and development.
In addition, we have intellectual property rights to neurology
compounds that we may out-license to third parties for further
development.
Overview
of Cancer
According to the American Cancer Societys publication
Cancer Facts & Figures 2009
, cancer is the
second leading cause of death in the United States, accounting
for approximately 25% of all deaths. In the United States,
approximately 1.5 million new cancer cases were expected to
be diagnosed in 2009 and over 562,000 persons were expected
to die from the disease in 2009. Accordingly, there is
significant demand for improved and novel cancer treatments.
Cancer develops when cells in a part of the body begin to grow
out of control. Although there are many kinds of cancer, they
all start because of
out-of-control
growth of abnormal cells. Normal body cells grow, divide, and
die in an orderly fashion. During the early years of a
persons life, normal cells divide more rapidly until the
person becomes an adult. After that, cells in most parts of the
body divide only to replace worn-out or dying cells and to
9
repair injuries. Because cancer cells continue to grow and
divide, they are different from normal cells. Instead of dying,
they outlive normal cells and continue to form new abnormal
cells.
Cancer cells develop because of damage to DNA. Most of the time,
when DNA becomes damaged, the body is able to repair it. In
cancer cells, the damaged DNA is not repaired. People can
inherit damaged DNA, which accounts for inherited cancers. More
often, however, a persons DNA becomes damaged by exposure
to something in the environment, such as smoking.
Cancer usually forms as a tumor. Some cancers, like leukemia, do
not form tumors. Instead, these cancer cells involve the blood
and blood-forming organs and circulate through other tissues
where they grow. Often, cancer cells travel to other parts of
the body where they begin to grow and replace normal tissue.
This process is called metastasis. Regardless of where a cancer
may spread, however, it is always named for the place it began.
For instance, breast cancer that spreads to the liver is still
called breast cancer, not liver cancer.
Different types of cancer can behave very differently. For
example, lung cancer and breast cancer are very different
diseases. They grow at different rates and respond to different
treatments. That is why people with cancer need treatment that
is aimed at their particular kind of cancer. Cancer is currently
treated by surgery, chemotherapy, radiation therapy, hormonal
therapy, biological therapy and immunotherapy. Cancer is
referred to as refractory when it has not responded, or is no
longer responding, to a treatment.
We are seeking novel drugs that address cancer or cancer related
indications with significant unmet medical need, that:
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are already approved for sale or have demonstrated initial
safety and efficacy in clinical trials
and/or
we
believe have a higher probability of regulatory approval than
that of a typical compound at a similar stage of development;
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target cancer indications with significant unmet medical need,
where current treatments either do not exist or are not deemed
to be effective; and
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we believe we can acquire at a fair value based on our judgment
of clinical success and commercial potential.
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Our drug
products
Zevalin ([90Y]-ibritumomab
tiuxetan)
:
In December 2008, we acquired
rights to commercialize and develop Zevalin in the United
States, as the result of a transaction with Cell Therapeutics,
Inc., (CTI) further described below.
Zevalin is a prescribed form of cancer therapy called
radioimmunotherapy. Radioimmunotherapy combines a source of
radiation, called a radioisotope, with an antibody. As part of
the Zevalin therapeutic regimen, the Y-90 radioisotope is
combined with a monoclonal antibody (CD20 MAB) that specifically
recognizes a particular part of a B-cell (the cells of the
immune system that make antibodies to invading pathogens) called
the CD20 antigen. The CD20 antigen is found on malignant and
normal B-cells. As the patient is infused with Y-90 Zevalin and
it enters the bloodstream, the antibody portion recognizes and
attaches to the CD20 antigen on tumor cells, allowing the
radiation energy emitted from the Y-90 radioisotope
(
i.e
., beta emission) to penetrate and damage the
malignant B-cells as well as nearby neighboring cells, many of
which are also lymphoma cells.
The current Zevalin therapeutic regimen also requires a bioscan
(also known as an imaging study) of the prospective
patient prior to treatment with Y-90 Zevalin. For the bioscan,
the patient is infused with In-111 Zevalin, the In-111
radioisotope combined with the CD20 MAB. In-111 Zevalin produces
a kind of radiation called gamma emission, which is very similar
to the kind of radiation used to produce x-rays. Once infused
with In-111, the prospective patient goes through a bioscan. The
bioscan allows a physician to follow In-111 Zevalin as it
travels within the prospective patients body. Based upon
the distribution of In-111 Zevalin (whether the In-111 Zevalin
goes to certain unintended areas of the body), the physician may
elect to not infuse the patient with Y-90 Zevalin. Many
healthcare providers throughout the world who provide Zevalin
therapy do not believe that the In-111 bioscan is a necessary
part of the Zevalin therapeutic regimen. In the EU, most
countries do not perform the In-111 bioscan prior to the Y-90
Zevalin infusion. Currently, we are working with the FDA to
remove this bioscan requirement.
10
Zevalin was approved by the FDA in February of 2002 as the first
radioimmunotherapeutic agent for the treatment of NHL. Zevalin
was approved as part of a Zevalin therapeutic regimen for
treatment of relapsed or refractory, low-grade or follicular
B-cell NHL, including patients with rituximab-refractory
follicular NHL. For reference, the term refractory refers to
lymphoma that does not respond to a particular therapy. The term
relapsed refers to lymphoma that returns after initially
responding to therapy. The terms low-grade and follicular refer
to types of lymphoma cells as determined by laboratory tests,
which have an indolent (slow growing) clinical course. Rituximab
is a monoclonal antibody that specifically recognizes a
particular part of a B-cell also called the CD 20 antigen, and
is used as monotherapy or in combination with other agents for
the treatment of B-cell NHL.
NHL is caused by the abnormal proliferation of white blood cells
and normally spreads through the lymphatic system, a system of
vessels that drains fluid from the body. There are many
different types of NHL which can be divided into aggressive NHL,
a rapidly spreading acute form of the disease, and indolent NHL,
which progresses more slowly, and can be classified as either
B-cell or T-cell NHL. According to the National Cancer
Institutes SEER database there were nearly
400,000 people in the U.S. with NHL in 2004. The
American Cancer Society estimated that in the United States
65,980 people were expected to be newly diagnosed with NHL
in 2009. Additionally, approximately 19,500 were expected to die
from this disease in 2009.
In December 2008, the FDA accepted for filing and review, and
granted priority review status for RITs supplemental
biologics license application (sBLA) for the use of Zevalin as
first-line therapy for patients with a previously untreated
follicular NHL who achieve a partial or complete response of
first-line chemotherapy.
The sBLA was based upon data from the multinational, randomized
Phase 3 First-line Indolent Trial (FIT) which evaluated the
efficacy and safety of a single infusion of Zevalin in
414 patients with CD20-positive follicular NHL who had
achieved a partial response or a complete response after
receiving one of the standard first-line chemotherapy regimens.
The FIT trial demonstrated that when used as a first-line
consolidation therapy for patients with follicular NHL, Zevalin
significantly improved the median progression-free survival time
from 18 months (control arm) to 38 months (Zevalin
arm) (p<0.0001).
The primary investigators of the study concluded that Zevalin
consolidation of first remission in advanced stage follicular
NHL is highly effective, resulting in a total complete response
(CR + CRu) rate of 87 percent and prolongation of median
progression-free survival by almost two years, with a toxicity
profile comparable to that seen with Zevalins use in
relapsed or refractory indications. Zevalin-treated patients had
reversible and manageable Grade 3 or 4 hematologic side effects
including neutropenia in 41 percent, thrombocytopenia in
51 percent, and anemia in 5 percent of patients.
Non-hematologic toxicities were 24 percent Grade 3,
5 percent Grade 4, and Grade 3 4 infections
were 8 percent.
In September 2009, we received FDA approval for the sBLA.
Additionally, in November 2009, the CMS decided that Zevalin
should be reimbursed under an ASP methodology in the HOPPS and
issued a corresponding proposed rule, which went into effect on
January 1, 2010. The ASP methodology is widely used for
injectable chemotherapy drugs and creates a consistent
reimbursement standard in the hospital setting.
The following describes the principal commercial terms relating
to Zevalin licensing and development:
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On December 15, 2008, we closed a transaction to enter into
a 50/50 owned joint venture called RIT, with CTI. CTI previously
acquired the U.S. rights to develop, market and sell
Zevalin from Biogen Idec, Inc. (Biogen) on December 21,
2007.
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Upon entering into the joint venture arrangement, CTI
contributed the Zevalin product assets to RIT in exchange for a
50% membership interest in RIT and the cash payments to CTI
noted below. CTI received an initial cash payment of
$7.5 million at the closing of the joint venture
transaction on December 15, 2008, and received an
additional $7.5 million cash payment in early January 2009.
CTI also had the option to sell its remaining 50% membership
interest in RIT to us, subject to adjustment for any amounts
owed between RIT and CTI at the time of sale. CTI exercised this
Put option in February 2009. On March 15, 2009,
we entered into an agreement with CTI to complete such sale for
an aggregate amount of $16.5 million subject to certain
adjustments for, among other things, payables determined to be
owed between CTI and RIT. CTI
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disputed the adjustments, but in a May 2009 arbitration
proceeding, we were awarded approximately $4.3 million. As
a result of the sale, we own 100% of RIT and are its sole member
and therefore, we have, through licenses, all of the
U.S. rights to Zevalin.
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In connection with obtaining the required consent of Biogen to
the foregoing joint venture arrangement, we entered into certain
agreements with Biogen. Such agreements included:
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an amendment to the original asset purchase agreement between
CTI and Biogen (CTI/Biogen Agreement), modifying future
milestone payments, to provide that (i) concurrently with
the execution of the amendment CTI was required to pay Biogen
$0.2 million (which was reimbursed to CTI by RIT from the
initial capital contributions made by CTI and us),
(ii) upon the December 2008 closing of the joint venture
transaction, CTI was required to pay Biogen an additional
$2.0 million (which was paid by RIT as successor to CTI
under the amendment), (iii) upon the achievement of the
specified FDA approval milestone, RIT (as successor to CTI) was
required to pay Biogen an additional amount of $5.5 million
if the milestone event occurred in 2009 (provided that RIT may
elect to defer any such payment until January 1, 2010, but
upon such election the required payment will increase to
$6.0 million), $7.0 million if the milestone event
occurs in 2010, $9.0 million if the milestone event occurs
in 2011, or $10.0 million if the milestone event occurs in
2012 or later. As disclosed above, we received FDA approval for
the treatment of patients with previously untreated follicular
NHL who achieve a partial or complete response to first-line
chemotherapy and in accordance with the amendment, we paid
Biogen $5.5 million. No other material terms of the
CTI/Biogen Agreement were modified. CTIs rights and
obligations, including its payment obligations to Biogen,
including royalties on net sales of Zevalin and an additional
regulatory milestone payment, under both the CTI/Biogen
Agreement and the amendment were assigned to and assumed by RIT
in connection with the closing of the joint venture transaction.
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an amendment to the original supply agreement between Biogen and
CTI (CTI/Biogen Supply Agreement), modifying certain of the
pricing and manufacturing technology transfer terms contained in
the CTI/Biogen Supply Agreement and also providing that the term
of the agreement may be shortened in some instances in the event
of a mid-term manufacturing technology transfer. CTIs
rights and obligations, including its payment obligations to
Biogen, under both the CTI/Biogen Supply Agreement and the
amendment were assigned to and assumed by RIT in connection with
the closing of the joint venture transaction.
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a security agreement, by and between RIT and Biogen whereby RIT
granted to Biogen a first priority security interest in all of
RITs assets, including the assets contributed to RIT by
CTI in connection with the closing of the joint venture
transaction, to secure certain payment, indemnification and
other obligations of RIT to Biogen.
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a guarantee, by us for the benefit of Biogen whereby we have,
among other things, guaranteed the payment and performance all
of RITs obligations to Biogen (including its obligations
as assignee of CTI under all contractual arrangements between
CTI and Biogen that were assigned to and assumed by RIT in
connection with the closing of the joint venture transaction).
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pursuant to the transfer of Zevalin assets from CTI to RIT in
December 2008, RIT assumed certain license and sublicense
agreements with various third parties related to Zevalin
intellectual property under which RIT is required to make
certain payment obligations including milestone payments and
royalties.
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Fusilev
®
(levoleucovorin) for injection
:
On
March 7, 2008, our new drug application (NDA) for our
proprietary drug Fusilev was approved by the FDA. We
commercially launched Fusilev in August 2008, with an in-house
sales force and commercialization team. Subsequent to the
launch, in November 2008, we received a unique J-code for
Fusilev from CMS, which went into effect on January 1,
2009. The J-code is a unique, product-specific billing code that
assists providers (
e.g.
, physicians that prescribe
Fusilev) in obtaining reimbursement for Fusilev.
Fusilev is a novel folate analog formulation and the
pharmacologically active isomer (the
levo
-isomer) of the
racemic compound, calcium leucovorin. Isomers are compounds with
the same molecular formula, but mirror image atomic
structures. Leucovorin is a mixture of equal parts of both
isomers: the pharmacologically active
levo-
isomer and the
inactive
dextro-
isomer. Preclinical studies have
demonstrated that the inactive
dextro-
isomer may
12
compete with the active
levo
-isomer for uptake at the
cellular level. By removing the inactive
dextro
form, the
dosage of Fusilev is one-half that of leucovorin and patients
are spared the administration of an inactive substance.
Fusilev rescue is indicated after high-dose methotrexate therapy
in patients with osteosarcoma, and to diminish the toxicity and
counteract the effects of impaired methotrexate elimination or
inadvertent overdose of folic acid antagonists. Fusilev has been
designated as an orphan drug for its approved indications.
Methotrexate is a widely used anti-cancer drug. It is a
therapeutic option in the treatment of solid tumors and
hematological malignancies, such as NHL. In addition,
methotrexate is also used to treat autoimmune diseases such as
rheumatoid arthritis, psoriasis and some rare opportunistic
infections.
In mid-year 2008, we filed an NDA amendment for Fusilev tablets.
Following the tablet submission, in October 2008, we filed a
sNDA for Fusilev (levoleucovorin) for injection in combination
with 5-FU-containing regimens in the treatment of colorectal
cancer. In October 2009, the FDA issued a Complete Response
letter regarding the sNDA for Fusilev. In the Complete Response
letter, the FDA recommended that we meet with them to discuss
options for continuing to seek approval of Fusilev in advanced
metastatic colorectal cancer. We promptly requested such a
meeting, which occurred in January 2010. In that meeting, the
FDA requested additional data which we expect to submit in the
third quarter of 2010.
Leucovorin is currently a standard combination agent with 5-FU
in various colorectal cancer treatment regimens. Leucovorin
potentiates the effects of 5-FU and its derivatives by
stabilizing the binding of the drugs metabolite to its
target enzyme, thus prolonging drug activity. There are
peer-reviewed publications wherein Fusilev is used in place of
the leucovorin in combination with 5-FU containing regimens for
adjuvant and advanced colorectal cancer and in combination with
oxaliplatin
and/or
irinotecan for advanced disease. The National Comprehensive
Cancer Network Clinical Practice Guidelines in
Oncology
tm
in colon cancer and rectal cancer have been updated to reflect
that Fusilev is available in the United States. Additionally, in
the fourth quarter of 2008, Fusilev was listed and continues to
be listed in the NCCN Drugs and Biologic Compendium for use in
combination with high-dose methotrexate for the treatment of
bone cancer (osteosarcoma and de-differentiated
chrondrosarcoma). The NCCN Drugs and Biologics Compendium is an
important reference that has been recognized by United
HealthCare as a formal guidance for coverage policy. In
addition, CMS announced in June 2008 that it would recognize the
NCCN Drugs & Biologics Compendium as a source of
information to determine which drugs may be covered under
Medicare Part B.
The following describes the principal commercial terms relating
to Fusilev licensing and development.
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In April 2006, we acquired all of the oncology drug product
assets of Targent, Inc. Targent is eligible to receive payments,
in the form of our common stock
and/or
cash,
upon achievement of certain regulatory and sales milestones. At
our option, any amounts due in cash under the purchase agreement
may be paid by issuing shares of our common stock having a
value, determined as provided in the purchase agreement, equal
to the cash payment amount.
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In May 2006, we amended and restated a license agreement with
Merck Eprova AG, a Swiss corporation, that we assumed in
connection with the acquisition of the assets of Targent.
Pursuant to the license agreement with Merck Eprova, we obtained
the exclusive license to use regulatory filings related to
Fusilev and a non-exclusive license under certain patents and
know-how related to Fusilev to develop, make, have made, use,
sell and have sold Fusilev in the field of oncology in North
America. In addition, we have the right of first opportunity to
negotiate an exclusive license to manufacture, have
manufactured, use and sell Fusilev products outside the field of
oncology in North America. Also, under the terms of the license
agreement, we paid Merck Eprova $100,000 for the achievement of
FDA approval of Fusilev. Eprova is also eligible to receive a
payment upon achievement of another regulatory milestone, in
addition to royalties on net sales. The term of the license
agreement is determined on a
product-by-product
and
country-by-country
basis until royalties are no longer owed under the license
agreement. The license agreement expires in its entirety after
the date that we no longer owe any royalties to Merck Eprova. We
have the unilateral right to terminate the license agreement, in
its entirety or on a
product-by-product
or
country-by-country
basis, at any time for any reason and either party may terminate
the license agreement due to material breach of the terms of the
license agreement by or insolvency of the other party.
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Apaziquone (EOquin
):
Apaziquone is an
anti-cancer agent that becomes activated by certain enzymes
often present in higher amounts in cancer cells than in normal
cells. It is currently being investigated for the treatment of
NMIBC, which is a cancer that is only in the innermost layer of
the bladder and has not spread to deeper layers of the bladder.
The American Cancer Society estimated that the 2009 incidence
and prevalence of bladder cancer in the United States would be
approximately 70,980 and over 500,000, respectively. According
to Botteman et al., (PharmacoEconomics 2003), bladder cancer is
the most expensive cancer to treat on a lifetime basis.
The initial treatment of this cancer is complete surgical
removal of the tumor. However, bladder cancer is a highly
recurrent disease with approximately 75% of patients recurring
within 5 years, and a majority of patients recurring within
2 years. This high recurrence rate is attributed to:
1) the highly implantable nature of cancer cells that are
dispersed during surgery, 2) incomplete tumor resection,
and 3) tumors present in multiple locations in the bladder
which may be missed or too small to visualize at the time of
resection. Despite evidence in the published literature and
guidance from the American and European Urology Associations,
instillation of a chemotherapeutic agent immediately following
surgery is not a standard clinical practice. Currently, there
are no approved drugs for this indication which may, in part,
explain the difference between the literature and urology
guidelines and actual clinical management of this disease. For
more than 30 years, no new drugs have been introduced in
the market for treatment of NMIBC. An immediate instillation of
apaziquone may help by 1) reducing tumor recurrence by
destroying dispersed cancer cells that would otherwise
re-implant onto the inner lining of the bladder, 2) by
destroying remaining cancer cells at the site of tumor resection
(also known as chemo-resection), and 3) by destroying
tumors not observed during resection (also known as
chemo-ablation).
Apaziquone is a bio-reductive alkylating indoloquinone that is
enzymatically activated by enzymes that are over expressed by
bladder tumors. Pharmacokinetic studies have verified that
apaziquone is not detectable in the bloodstream of patients when
it is administered either after surgical resection or as a part
of a delayed multi-instillation protocol. The proposed dose
therefore carries a minimal risk of systemic toxicity which
could arise from absorption of a drug through the bladder wall
into the bloodstream. Additionally, the current proposed dose is
a fraction of the systemic toxic dose. These features of
apaziquone are distinct from other intravesical agents currently
in use for the treatment of recurrent bladder cancer.
A Phase 1 dose-escalation marker lesion (tumor) study
demonstrated that apaziquone had no systemic toxicity, and was
well tolerated at the dose level being used in the Phase 3
trials. Apaziquone also demonstrated anti-tumor activity against
NMIBC, as evidenced by eight of twelve patients showing a
complete response, defined as the complete disappearance of the
marker lesion as confirmed by biopsy, after receiving six
treatments with apaziquone over a period of six weeks.
Phase 2 data has confirmed anti-tumor activity in patients with
multiple, recurrent NMIBC, as evidenced by 31 of
46 patients (67%) showing a complete response after
receiving six weekly treatments with 4 mg of apaziquone
instilled into the urinary bladder in this marker lesion study.
Apaziquone was well-tolerated, with no significant systemic
toxicity, and local toxicity limited to temporary chemical
cystitis (inflammation of the urinary bladder) resulting in
increased urinary frequency, dysuria (painful urination) and
hematuria (blood in the urine) in a few patients. At the
two-year follow up, eighteen patients (38%) were disease free.
In September 2005, we initiated an open label, multi-center
clinical study in Europe in high-risk NMIBC in 53 patients.
Patients with high-risk NMIBC usually have more aggressive
bladder cancer with higher incidence of recurrence
and/or
progression to a more invasive stage, where the cancer invades
the muscle wall of the bladder, which may require total surgical
removal of the bladder. Enrollment has been completed and all
patients will be followed for twenty-four months or until
recurrence or disease progression is observed.
In 2006, we performed a 20 patient pilot safety study in
low-grade NMIBC. In this study, apaziquone was found to be well
tolerated when a single 4 mg dose is given to patients
immediately following surgery. In addition, there was no adverse
effect on wound healing and apaziquone was not detected in the
bloodstream.
In March 2007, we received concurrence from the FDA for the
design of a Phase 3 study protocol for the treatment of
non-invasive bladder cancer under a special protocol assessment
procedure. The development plan for apaziquone is two
randomized, double-blind, placebo-controlled Phase 3 clinical
trials, each with 562 patients with
14
T
a
G1-G2
(low-grade) NMIBC. Patients are being randomized in a
one-to-one
ratio to apaziquone or placebo. Under the protocol, the patients
are given a single 4 mg dose following surgical removal of
the tumors. The primary endpoint is a statistically significant
difference (p < 0.05) in the rate of tumor recurrence at
year two between the apaziquone patient group and the placebo
group. The first study began during the second quarter of 2007,
and the second study began during the third quarter of 2007. In
2008, we received scientific advice from the European Medicines
Agency (EMEA) whereby the EMEA agreed that the two Phase 3
studies as designed should be sufficient for a regulatory
decision regarding European registration. We continue to recruit
sites and enroll patients in these two studies. In December
2009, we achieved our goal of completing enrollment for both
Phase 3 clinical trials by year-end 2009.
We plan to begin a multiple instillation phase 3 study in low to
intermediate NMIBC by the end of 2010.
The following describes the principal commercial terms relating
to apaziquone licensing and development.
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In October 2008, we terminated our 2001 license agreement for
apaziquone with INC
Research
®
,
formerly NDDO Research
Foundation
®
(INC) in the Netherlands, as the patents underlying the
agreement were all about to expire. Pursuant to the termination,
INC assigned to us all rights it had in the know-how or
intellectual property licensed under the agreement and all
rights in may have had in any know-how or intellectual property
created during the term of the agreement. In exchange, we paid
INC a nominal amount of cash and issued them a nominal number of
shares of our common stock. In addition, INC is entitled to up
to 25,000 additional shares of our common stock and an
additional payment of $300,000 upon achievement of certain
regulatory milestones.
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In October, 2008, we entered into a license, development, supply
and distribution agreement with Allergan pursuant to which we
and Allergan agreed to a collaboration for the development and
commercialization of a formulation of apaziquone suitable for
use in treating cancer or precancerous conditions via
instillation. The agreement with Allergan also provides that
Allergan has the exclusive right to make, develop and
commercialize apaziquone for the treatment of bladder cancer, or
pre-bladder cancer conditions worldwide except for Asia (as is
defined in the agreement). We also entered into a co-promotion
agreement with Allergan providing for the joint
commercialization of apaziquone in the United States, whereby we
and Allergan will share equally all profits and
commercialization expenses. We also have the right, in our sole
discretion, to opt-out of the co-promotion agreement before
January 1, 2012. If we elect to opt-out of the co-promotion
agreement, our share of any future development costs shall be
significantly reduced. Part of the aggregate development costs
and marketing expenses incurred by us since January 1, 2009
shall be reimbursed by Allergan in the form of a one-time
payment. In addition, if we opt-out of the co-promotion
agreement, the co-promotion agreement will terminate and instead
of a sharing of profit and expenses, Allergan will pay us
royalties on a percentage of net sales of the apaziquone in the
United States that are slightly greater than the royalties paid
on net sales outside the United States. In addition, Allergan
will pay us up to $245 million in additional milestones
based upon the achievement of certain sales milestones in the
United States.
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In consideration for the rights granted under our license,
development, supply and distribution agreements with Allergan,
Allergan paid us an up-front fee of $41.5 million. In
addition, Allergan will pay us up to $304.0 million based
on the achievement of certain development, regulatory and sales
milestones. For example, for completing enrollment of both
aforementioned Phase III trials by year-end 2009, Allergan
paid us a $1.5 million milestone payment. Also, Allergan
has agreed to pay us tiered royalties starting in the mid-teens
based on a percentage of net sales of the apaziquone outside of
the United States.
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We will continue to conduct the current Phase 3 clinical trials
as well as certain future planned clinical trials pursuant to a
joint development plan, of which Allergan will fund 65% of the
development costs.
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In November 2009, we entered into a collaboration agreement with
Nippon Kayaku Co., LTD. for the development and
commercialization of apaziquone in Asia, except North and South
Korea (Nippon Kayaku Territory). In exchange, Nippon Kayaku paid
Spectrum an up-front payment of $15 million and agreed to
make additional payments of up to $136.0 million based on
the achievement of certain regulatory and commercialization
milestones contained in the agreement. In addition, Nippon
Kayaku received exclusive
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rights to apaziquone for the treatment of NMIBC in Asia,
including Japan and China. Nippon Kayaku will conduct apaziquone
clinical trials in the Nippon Kayaku Territory pursuant to a
development plan. In addition, Nippon Kayaku will be responsible
for all expenses relating to the development and
commercialization of apaziquone in the Nippon Kayaku Territory.
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Also in November 2009, we entered into a collaboration agreement
with Handok Pharmaceuticals for the development and
commercialization of apaziquone in North and South Korea. Under
the terms of the Handok collaboration agreement, Handok paid us
an up-front payment of $1.0 million and potential milestone
payments totaling approximately $19 million. The potential
milestone payments will be based on the achievement of certain
regulatory and commercialization milestones. Handok received
rights to apaziquone for the treatment of NMIBC in North and
South Korea. Additionally, Handok will conduct the apaziquone
clinical trials in North and South Korea pursuant to a
development plan and will be responsible for all expenses
relating to the development and commercialization of apaziquone
in North and South Korea.
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Belinostat
:
Belinostat is a histone
deacytelase (HDAC) inhibitor that is being studied in multiple
clinical trials, both as a single drug and in combination with
chemotherapeutic drugs for the treatment of various
hematological and solid tumors. HDACs catalyze the removal of
chemical groups known as acetyl groups from certain portions of
human DNA, and thus regulate gene expression. By inhibiting this
enzyme, belinostat induces cell cycle arrest, and leads to
inhibition of cancer cell proliferation and induction of
apoptosis, or cell death. Additional mechanisms of action
thought to be responsible for belinostats anti-cancer
effect include inhibition of angiogenesis, or blood vessel
growth, and the resensitization of cells that have overcome drug
resistance to anticancer drugs, such as platinums and taxanes.
Belinostat is currently the only HDAC inhibitor in clinical
development with multiple potential routes of administration,
including intravenous administration, continuous intravenous
infusion and oral administration, which we believe may afford
belinostat with a significant competitive advantage.
Belinostat is currently in a registrational trial, under a
special protocol assessment, as a monotherapy for Peripheral
T-Cell Lymphoma (PTCL) an indication which has been granted
Orphan Drug and Fast Track designation by the FDA. The
registrational trial is an open-label, multicenter, single arm
efficacy and safety study, in which we plan to enroll
approximately 120 patients with relapsed or refractory
peripheral T-cell lymphoma, who have failed at least one prior
systemic therapy. We expect to file an NDA for belinostat in
PTCL in 2011.
Belinostat is also currently in a randomized Phase 2 trial for
carcinoma of unknown primary (CUP) in combination with
carboplatin and paclitaxel. There are currently no approved
therapies or drugs for treatment of CUP, which is an indication
with a large patient population. The NCI estimated that for
2008, approximately 2 to 4% of all cancers are CUP.
Based on the data from past and ongoing studies, we believe
there are many potential attributes associated with belinostat
that separate it from other currently marketed HDACs, including
efficacy when used alone and in combination, less toxicities
(when compared to other currently-marketed HDACs), including
lack of or less bone marrow toxicity, and a lack of other severe
side effects, such as mucositis, that may enable full dose
combinations of this drug with several other cytotoxic agents.
Hence, belinostat is currently being investigated in multiple
indications, both as monotherapy and in combination with other
treatment regimens. Numerous studies have been conducted, and
are ongoing, through the NCI and other well-known oncologic
academic institutions. Additionally, we plan on a comprehensive
development program for belinostat, which includes both
hematologic indications, such as PTCL, and solid tumor
indications, such as lung cancer, ovarian cancer, and CUP. Based
upon the foregoing, we believe belinostat potentially has broad
applicability and hence, commercial potential beyond that of
currently marketed HDACs.
The following describes the principal commercial terms relating
to belinostat licensing and development.
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In February 2010, we entered into a licensing and collaboration
agreement with TopoTarget, for the development and
commercialization of belinostat, pursuant to which TopoTarget
and we agreed to a collaboration for the development and
commercialization of belinostat. The agreement provides that we
have the exclusive right to make, develop and commercialize
belinostat in North America and India, with an
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option for China. The agreement also grants TopoTarget a
co-promote option if and only if we do not maintain a minimum
number (subject to adjustment for certain events outside of our
control) of field personnel (as defined in the agreement) for a
certain number of years post-approval of the PTCL indication.
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In consideration for the rights granted to us under the license
and collaboration agreement with TopoTarget, we paid TopoTarget
an up-front fee of $30.0 million. In addition, we will pay
up to $313 million and one million shares of Spectrum
common stock based on the achievement of certain development,
regulatory and sales milestones. as well as certain royalties on
net sales of belinostat.
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Under the terms of the agreement, all development, including
studies, will be conducted under a joint development plan (JDP)
and in accordance with a mutually agreed upon target product
profile (TPP) provided that we have final decision-making
authority for all developmental activities in North America and
India (and China upon exercise of the option for China) and
TopoTarget has final decision-making authority for all
developmental activities in all other jurisdictions, We will
assume all responsibility for and future costs of the ongoing
registrational PTCL trial while TopoTarget will assume all
responsibility for and future costs of the ongoing Phase 2 CUP
trial. We and TopoTarget will conduct future planned clinical
trials pursuant to the JDP, of which we will fund 70% of
the development costs and TopoTarget will fund 30% of the
development costs.
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We and TopoTarget will each pay 50% of the costs for chemical,
pharmaceutical and other process development related to the
manufacturing of the Product that are incurred with a mutually
agreed upon budget in the JDP. TopoTarget is responsible for
supplying us with both clinical and commercial product.
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Ozarelix
:
Ozarelix is a Luteinizing
Hormone Releasing Hormone (LHRH) antagonist (a substance that
blocks the effects of a natural hormone found in the body).
Mechanistically, LHRH antagonists exert rapid inhibition of
luteinizing hormone and follicle stimulating hormone with an
accompanying rapid decrease in sex hormones and would therefore
be expected to be effective in a variety of hormonally dependent
disease states including ovarian cancer, prostate cancer, BPH,
infertility, uterine myoma and endometriosis.
In January 2010, based upon the mixed results of our earlier
Phase 2 study of ozarelix for the treatment of BPH and the
recently announced failure of Aeterna Zentariss large,
Phase 3, registrational trial of cetrorelix (another LHRH
antagonist), we discontinued development of ozarelix in BPH. We
estimate that this discontinuation will result in substantial
reduction in future clinical development expenses. Currently, we
are considering the future development of Ozarelix in other
indications.
The following describes the principal commercial terms relating
to ozarelix licensing and development.
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In 2004, we entered into a license agreement with a subsidiary
of Aeterna Zentaris, Inc., Aeterna Zentaris GmbH, whereby we
acquired an exclusive license to develop and commercialize
ozarelix in North America (including Canada and Mexico) and
India. In addition, we have a 50% financial interest in any
income Aeterna Zentaris derives from ozarelix in Japan. We are
contingently obligated to pay amounts based upon achievement of
milestones and a royalty based on any future net sales.
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With certain exceptions, we are required to purchase all
finished drug product from Aeterna Zentaris for the clinical
development of ozarelix at a set price. The parties agreed to
discuss entering into a joint supply agreement for commercial
supplies of finished drug product.
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The term of the license agreement expires ten years after the
first commercial sale of a product in any country within the
territory or as long as any product is covered by a patent in
any country in the territory, whichever term is longer, although
some obligations survive termination. In addition, the agreement
may be terminated earlier by either party (in some cases either
in whole or on a
product-by-product
and/or
country-by-country
and/or
indication-by-indication
basis), based upon material breach or the commencement of
bankruptcy or insolvency proceedings involving the other, or by
us upon sixty days notice to Aeterna Zentaris.
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Ortataxel
:
In July 2007, we entered
into an exclusive worldwide license agreement for ortataxel with
Indena S.p.A., a third-generation taxane. In clinical studies,
ortataxel has been shown to be bioavailable when administered
orally to patients with solid tumors. In addition, it belongs to
a new generation of taxanes with the potential to be active
against tumors resistant to paclitaxel (Bristol-Myers
Squibbs
Taxol
®
)
and docetaxel (Sanofi-Aventis
Taxotere
®
).
Phase 1 and 2 studies in more than 350 patients with solid
tumors have shown activity in patients that
17
were refractory to treatment with the available taxane drugs.
The safety profile of ortataxel is comparable to that of
paclitaxel and docetaxel.
While optimizing the oral formulation for better
bioavailability, we will consider future studies with the oral
formulation.
The following describes the principal commercial terms relating
to ortataxel licensing and development.
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Under the terms of the license agreement with Indena, we are
obligated to make payments based on the achievement of certain
development, regulatory filing and sales milestones. We will
also pay Indena certain royalties on worldwide sales of
ortataxel, if and when the product is approved.
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Also, we are obligated to purchase all of our requirements of
ortataxel active pharmaceutical ingredient from Indena.
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Satraplatin
:
Satraplatin, an orally
administered platinum-derived chemotherapy agent, is being
developed by our sublicensee, GPC Biotech AG. On
October 30, 2007, GPC announced that the Phase 3 trial
evaluating satraplatin for the treatment of hormone-refractory
prostate cancer failed to meet its primary efficacy endpoint
and, as a result, GPC stopped seeking approval for satraplatin
in this indication. In November 2009, GPC merged with
Houston-based Agennix Inc. Agennnix is evaluating the
development plan for satraplatin.
The following describes the principal commercial terms relating
to satraplatin licensing and development.
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In 2001, we in-licensed exclusive worldwide rights to
satraplatin from its developer, Johnson Matthey, PLC in exchange
for an up-front fee, additional payments to be made based upon
achievement of certain milestones and royalties based on any net
sales, if and when a commercial drug is approved and sales are
initiated.
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In 2002, in exchange for an up-front license fee and future
milestones and royalties, we entered into a co-development and
license agreement with GPC for worldwide rights for further
development and commercialization of satraplatin. Under the
terms of the agreement, GPC agreed to fully fund the development
expenses for satraplatin. We are entitled to additional revenues
upon: achievement of specified milestones by GPC, which are
generally based on regulatory and sales milestones; and
royalties on worldwide sales, if any, of the product.
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Elsamitrucin
:
Elsamitrucin is an
anti-tumor antibiotic that acts as a dual inhibitor of two key
enzymes involved in DNA replication, topoisomerase I and II. By
inhibiting the activity of these two key enzymes involved in DNA
replication, elsamitrucin is thought to lead to DNA breaks that
prevent the correct replication of DNA and ultimately result in
cancer cell death.
On the basis of previous studies conducted by our licensor,
Bristol-Myers Squibb Inc. (BMS) elsamitrucin has been shown to
have minimal toxicity to bone marrow while demonstrating
promising anti-tumor activity.
We conducted a Phase 2, single agent study in heavily
pre-treated patients with NHL. The level of activity seen did
not justify further development for this indication as a single
agent. However, elsamitrucin appears to have synergy with taxane
and platinum derivatives in experimental models. Also, minimal
toxicity to bone marrow may allow combinations with other drugs
without a need to significantly reduce doses, which may result
in improved therapeutic effects. We are currently reviewing all
pre-clinical and clinical data of this product to determine the
best path forward for its development.
The following describes the principal commercial terms relating
to elsamitrucin licensing and development.
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We in-licensed exclusive worldwide rights to elsamitrucin from
its developer BMS, in 2001, in exchange for a small up-front fee
and additional future payments based upon achievement of
development and regulatory milestones and a royalty based on net
sales, if and when a commercial drug is approved and sales are
initiated.
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Lucanthone
:
Lucanthone is an orally
administered small-molecule which inhibits Topoisomerase II
and AP endonuclease. In preclinical tests, lucanthone was shown
to enhance the sensitivity of animals to an anticancer agent in
a time dependent and reversible manner.
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Lucanthone was originally used as an antiparasitic agent for the
treatment of schistosomiasis in the 1950s and 1960s, and has a
demonstrated safety profile. It was later discontinued because
better anti-parasitic medications became available. We are
currently working on the development plan for lucanthone.
The following describes the principal commercial terms relating
to lucanthone licensing and development.
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We entered into a license agreement with Dr. Robert E.
Bases, the inventor of a method of treating cancer of the
central nervous system through the administration of lucanthone
and radiation, whereby we acquired worldwide exclusive rights to
develop and commercialize a product based upon his invention in
May 2005. Under the terms of the license agreement, we made a
small up-front payment and are obligated to make additional
periodic payments, a payment upon achievement of a certain
regulatory milestone and royalties on potential net sales, if
any.
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SPI-1620
:
SPI-1620 is a highly
selective peptide agonist of endothelin B receptors, which can
stimulate receptors on endothelial cells, the innermost layer of
cells lining the blood vessels. This technology takes advantage
of the fact that the blood supply to tumors is different than
the blood supply to healthy organs. Blood vessels in the growing
part of tumors are relatively devoid of smooth muscle covering
and are rich in endothelial cells. Therefore, by stimulating the
endothelial B receptors present on the endothelial cells,
SPI-1620 should selectively increase tumor blood flow while
sparing healthy tissue.
Chemotherapy is one of the mainstays of therapy for solid
carcinomas, including breast, lung, and prostate. Chemotherapy
uses drugs called cytotoxic agents that are poisonous to cells
and kill cancer cells. Chemotherapy often fails because adequate
and uniform distribution of the cytotoxic agents is not achieved
in the tumor, and serious side effects can result from toxicity
to normal cells. Consequently, any means to increase the
delivery of a cytotoxic agent selectively to tumors, while
minimizing its concentration in normal tissues may be beneficial.
SPI-1620 is being developed as an adjunct to chemotherapy. In
pre-clinical studies, when anti-cancer drugs, such as
paclitaxel, are administered shortly after SPI-1620, the
anti-cancer drug concentration in the tumor is increased several
fold. This results in increased anti-tumor efficacy at a given
dose of a cytotoxic agent, and might allow physicians to
maximize efficacy with reduced cytotoxic agent doses with
resultant decreased toxicity to the normal organs.
In the first quarter of 2008, we initiated an open label,
dose-escalation Phase 1 study assessing the safety,
tolerability, pharmacokinetics and pharmacodynamics of SPI-1620
in patients with recurrent or progressive carcinoma. We enrolled
the first patient in this study in February 2008, and are
continuing to enroll patients in this study.
The following describes the principal commercial terms relating
to SPI-1620 licensing and development.
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We acquired an exclusive worldwide license to develop and
commercialize SPI-1620 for the prevention and treatment of
cancer from Chicago Labs, Inc. in February 2005. We paid Chicago
Labs a small up-front fee and are obligated to make future
payments contingent upon the successful achievement of certain
development and regulatory milestones. In addition, we will pay
royalties and sales milestones on net sales, after marketing
approval is obtained.
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SPI-205
:
SPI-205, a lipid suspension of
leteprinim, has demonstrated, in experimental models, benefits
in treating chemotherapy induced peripheral neuropathy.
Chemotherapy drugs can damage the nervous system, especially the
peripheral nervous system, which are those nerves that carry
motor (movement) information for muscle contraction and those
that carry sensory information such as touch, vibration, pain
and temperature. Damage to the peripheral nerves is known as
neuropathy. Currently, there is no effective treatment for
chemotherapy induced neuropathy.
During 2010, we plan to continue preclinical evaluation of
SPI-205.
RenaZorb
:
RenaZorb, a second-generation
lanthanum-based nanoparticle phosphate binding agent, has the
potential to treat hyperphosphatemia, (high phosphate levels in
blood), in patients with stage 5 chronic kidney disease
(end-stage renal disease). Hyperphosphatemia affects patients
with chronic kidney disease, especially end-
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stage kidney disease patients on dialysis. It can lead to
significant bone disease (including pain and fractures) and
cardiovascular disease, and is independently associated with
increased mortality.
According to The United States Renal Data System (USRDS) in
2010, there will be an estimated 600,000 patients with end-stage
renal disease in the United States. Treatment of
hyperphosphatemia is aimed at lowering blood phosphate levels
by: (1) restricting dietary phosphorus intake; and
(2) using, on a daily basis, and with each meal, oral
phosphate binding drugs that facilitate fecal elimination of
dietary phosphate before its absorption from the
gastrointestinal tract into the bloodstream. Restricting dietary
phosphorus intake has historically not been a successful means
of serum phosphate control, therefore phosphate binders are the
mainstay of hyperphosphatemia management.
Currently marketed therapies for treating hyperphosphatemia
include polymer-based and lanthanum-based phosphate binders,
aluminum-based phosphate binders, and calcium-based phosphate
binders. Under the National Kidney Foundation K/DOQI guidelines,
both calcium-based phosphate binders and non-calcium,
non-aluminum, non-magnesium phosphate binders are recommended as
first line or long-term therapy for the management of
hyperphosphatemia. However, the current therapies require use of
a large number of pills or large pills to be chewed or swallowed
along with each meal, leading to problems with patient
compliance with the treatment regimen.
We believe that RenaZorb has the opportunity, because of its
potentially higher capacity for binding phosphate on an equal
weight basis, to significantly improve patient compliance by
offering the
lowest-in-class
dosage to achieve the same therapeutic benefit as other
phosphate binders. We continue to perform preclinical
development work on RenaZorb.
The following describes the principal commercial terms relating
to RenaZorb licensing and development.
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We entered into a license agreement with Altair Nanomaterials,
Inc. and its parent Altair Nanotechnologies, Inc., whereby we
acquired an exclusive worldwide right to develop and
commercialize RenaZorb for all human therapeutic and diagnostic
uses in January 2005. Under the terms of the license agreement,
we made up-front and milestone payments and are obligated to
make additional payments upon achievement of certain clinical
development and regulatory and sales milestones, in addition to
royalties on potential net sales.
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In August 2009, we entered into an acquisition agreement with
Altair, in which we acquired 100% of the rights to Renazorb and
all of Altairs life science technology. Our acquisition of
RenaZorb expands upon our prior license agreement with Altair,
pursuant to which Altair granted us human uses. Our acquisition
of RenaZorb provides us with access to all uses of and
intellectual property for RenaZorb. In consideration for the
acquisition, we paid Altair a total of $750,000 in the form of
restricted shares of our common stock.
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Manufacturing
We currently do not have internal manufacturing capabilities;
therefore, all of our products are manufactured on a contract
basis. We expect to continue to contract with third party
providers for manufacturing services, including active
pharmaceutical ingredient (API), finished-dosage product, as
well as packaging operations. We believe that our current
agreements with third party manufacturers provide for sufficient
operating capacity to support the anticipated commercial demand
for our products. However, we have only one approved contract
manufacturer for each aspect of the manufacturing process for
Zevalin and Fusilev. If we are unable to obtain a sufficient
supply of our required products, or if we should encounter
delays or difficulties in our relationships with our
manufacturers, we may lose potential sales.
We attempt to prevent disruption of supplies through supply
agreements, appropriate forecasting, maintaining stock levels
and other strategies. We believe that the market for such
manufacturers and suppliers is such that we could quickly enter
into another supply or manufacturing agreement, on substantially
similar terms, if we were required to do so. However, in the
event we are unable to manufacture our products, either directly
or indirectly through others or on commercially acceptable
terms, if at all, we may not be able to commercialize our
products as planned. Although we are taking these actions to
avoid a disruption in supply, we cannot provide assurance that
we may not experience a disruption in the future.
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Sales,
Marketing and Distribution
We have built, and continue to build, a sales and marketing
infrastructure as part of our commercialization efforts for
Fusilev and Zevalin. While we maintain a relatively small sales
force, we believe that the size of our sales force is
appropriate to effectively reach our target audience for our two
commercial products.
For Fusilev, we utilize a third-party logistics company to store
and distribute this drug product. The same third party logistics
company also stores and ships Zevalin kits containing the CD20
MAB.
For Zevalin, we changed the supply and distribution model in
2009. Previously, we sold Zevalin kits containing the CD20 MAB
to radiopharmacies, who then in turn ordered the radioactive
isotope (Y-90 or In-111) separately and radiolabeled (or
attached) the radioactive isotope to the CD20 MAB. The
radiopharmacy then sold the end user product to the consumer.
Under the current model we do not sell the Zevalin kits
containing the CD20 MAB to the radiopharmacies, but instead
contract with them, as a
fee-for-service,
to radiolabel the individual components of the CD20 MAB to the
radioactive isotope, and then, also under a
fee-for-service
arrangement, have them distribute the end use product to the end
user, which are clinics, hospitals or other medical settings. In
this regard, we now sell the CD20 MAB together with the
radioactive isotope as the end user product directly to the
healthcare service provider.
Customers
Our product sales are concentrated in a limited number of
customers. For the year ended December 31, 2009,
approximately 44% of our Fusilev product sales were derived from
specialty distributors of oncology products as compared to 100%
for the year ended 2008; for Zevalin, we reaccorded 21% of
revenues from radiopharmacies as compared to 0% for the years
ended December 31, 2009 and 2008, respectively; and the
balance from end use customers. For Zevalin, not a single end
user customer constituted revenues over 10% individually. Due to
changes in market dynamics, these ratios are not indicative of
future concentrations. As of December 31, 2009, for
Fusilev, not a single specialty distributor owed us more than
10% of the total net accounts receivables. Three specialty
distributors owned us 100% of receivables at the end of 2008.
For Zevalin, no single end user customer owed us more than 10%
of net receivables as of December 31, 2009 or 2008. All
sales were to customers in the United States.
Due to changes in market dynamics, these ratios are not
indicative of future concentrations. We do not require
collateral or other security to support credit sales, but
provide an allowance for bad debts when warranted, based on
review of our receivables.
Competition
The pharmaceutical industry is characterized by rapidly evolving
biotechnology and intense competition. We expect
biotechnological developments and improvements in the fields of
our business to continue to occur at a rapid rate and, as a
result, expect competition to remain intense. Many companies are
engaged in research and development of compounds that are
similar to our research. Biotechnologies under development by
these and other pharmaceutical companies could result in
treatments for the diseases and disorders for which we are
developing our own treatments. In the event that one or more of
those programs are successful, the market for some of our drug
products could be reduced or eliminated. Any product for which
we obtain FDA approval must also compete for market acceptance
and market share.
Competing in the branded product business requires us to
identify and quickly bring to market new products embodying
therapeutic innovations. Successful marketing of branded
products depends primarily on the ability to communicate the
effectiveness, safety and value of the products to healthcare
professionals in private practice, group practices, hospitals
and academic institutions, and managed care organizations.
Competition for branded drugs is less driven by price and is
more focused on innovation in treatment of disease, advanced
drug delivery and specific clinical benefits over competitive
drug therapies. Unless our products are shown to have a better
safety profile, efficacy and cost-effectiveness as compared to
other alternatives, they may not gain acceptance by medical
professionals and may therefore never be successful commercially.
Companies that have products on the market or in research and
development that target the same indications as our products
target include, among others, Abraxis Bioscience, Inc., Astra
Zeneca LP, Bayer AG, Endo Pharmaceuticals, Eli Lilly and Co.,
Novartis Pharmaceuticals, Corporation, Genentech, Inc.,
Bristol-Myers Squibb Company, GlaxoSmithKline, Biogen-IDEC
Pharmaceuticals, Inc., OSI Pharmaceuticals, Inc., Cephalon,
Inc., Sanofi-Aventis,
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Inc., Pfizer, Inc., Genta Incorporated, Merck, Celegen
Corporation, Allos Therapeutics, Inc., BiPar Sciences, Inc.,
Genzyme Corporation, Shire Pharmaceuticals, Abbott Laboratories,
Poniard Pharmaceuticals, Inc., Roche Pharmaceuticals and
Johnson & Johnson who may be more advanced in
development of competing drug products or are more established
and are currently marketing products for the treatment of
various indications that our drug products target. Many of our
competitors are large and well-capitalized companies focusing on
a wide range of diseases and drug indications, and have
substantially greater financial, research and development,
marketing, human and other resources than we do. Furthermore,
large pharmaceutical companies have significantly more
experience than we do in pre-clinical testing, human clinical
trials and regulatory approval procedures, among other things.
As noted above, we launched our proprietary product, Fusilev, in
August 2008. Fusilev is the levo-isomeric form of the racemic
compound calcium leucovorin, a product already approved for the
same indications our product is approved for. Leucovorin has
been sold as a generic product on the market for a number of
years. There are two generic companies currently selling the
leucovorin product and therefore we are competing against a low
cost alternative. Also, Fusilev will be offered as part of a
treatment regimen, and that regimen may change to exclude
Fusilev. For these reasons, we may not recognize the full
potential value of our investment in the product.
Regarding Zevalin, there are three products which are potential
competitors for the indications it is currently approved for.
Treanda
®
(bendamustine hydrochloride) for Injection, for Intravenous
Infusion, marketed by Cephalon, is indicated for the treatment
of patients with indolent B-cell NHL that has progressed during
or within six months of treatment with rituximab or a
rituximab-containing regimen.
Also, the
Bexxar
®
therapeutic regimen (Tositumomab and Iodine I 131 Tositumomab),
a radiopharmaceutical marketed by GlaxoSmithKline, is indicated
for the treatment of patients with CD20 antigen-expressing
relapsed or refractory, low-grade, follicular, or transformed
NHL, including patients with Rituximab-refractory NHL.
Finally,
Rituxan
®
(rituximab), marketed by Genentech and Biogen, is indicated for
the treatment of patients with relapsed or refractory, low-grade
or follicular, CD20-positive, B-cell NHL as a single agent;
previously untreated follicular, CD20-positive, B-cell NHL in
combination with CVP (cyclophosphamide, vincristine and
prednisolone combination) chemotherapy; and non-progressing
(including stable disease), low-grade, CD20-positive B-cell NHL,
as a single agent, after first-line CVP chemotherapy. Rituxan is
administered as a part of various chemotherapy regimens and
schedules, the vast majority of which, could be used in concert
with other therapeutic agents, such as Zevalin, as part of a
treatment plan.
For more information regarding competition to our products,
please also read our discussion of competition matters in
Item 1A Risk Factors of this report.
Research
and Development
New drug development, which is the process whereby drug product
candidates are tested for the purpose of filing a NDA or BLA (or
similar filing in other countries) and eventually obtaining
marketing approval from the FDA or a similar marketing
authorization from other regulatory authorities outside of the
United States, is an inherently uncertain, lengthy and expensive
process that requires several phases of clinical trials to
demonstrate to the satisfaction of the appropriate regulatory
authorities that the products are both safe and effective for
their respective indications. Our development focus is primarily
based on acquiring and developing late-stage development drugs
as compared to new drug discovery, which is very uncertain and
lengthy.
22
Research and development expenses for such drug development are
comprised of the following types of costs incurred in performing
research and development activities: personnel expenses,
facility costs, contract services, license fees and milestone
payments, costs of clinical trials, laboratory supplies and drug
products, and allocations of corporate costs. Research and
development expenditures, including related stock-based charges
but not including amortization of intangibles or expensing of
in-process research and development costs, are expensed as we
incur them and were approximately $21.1 million in 2009,
$26.7 million in 2008 and $33.3 million in 2007 broken
out by product as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
($ in 000s)
|
|
|
Eoquin
|
|
$
|
10,915
|
|
|
$
|
5,477
|
|
|
$
|
6,348
|
|
Ozarelix
|
|
|
1,168
|
|
|
|
2,435
|
|
|
|
6,217
|
|
Ortataxel
|
|
|
311
|
|
|
|
150
|
|
|
|
3,719
|
|
Fusilev
|
|
|
940
|
|
|
|
1,791
|
|
|
|
1,368
|
|
Zevalin
|
|
|
563
|
|
|
|
151
|
|
|
|
|
|
Lucanthone
|
|
|
289
|
|
|
|
348
|
|
|
|
1,405
|
|
Other development drugs
|
|
|
496
|
|
|
|
956
|
|
|
|
2,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Direct Costs
|
|
|
14,682
|
|
|
|
11,308
|
|
|
|
21,103
|
|
Indirect Costs (including non-cash share-based compensation of
$4.1 million, $3.9 million and $3.6 million,
respectively)
|
|
|
6,376
|
|
|
|
15,375
|
|
|
|
12,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Research & Development
|
|
$
|
21,058
|
|
|
$
|
26,683
|
|
|
$
|
33,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents
and Proprietary Rights
Our
Patents and Proprietary Rights
We in-license from third parties certain patent and related
intellectual property rights related to our proprietary
products. In particular, we have licensed patent rights with
respect to Fusilev, Zevalin, ozarelix, ortataxel, satraplatin,
elsamitrucin, lucanthone, belinostat and SPI-1620, in each case
for the remaining life of the applicable patents. Except for
Zevalin, Fusilev, belinostat and ozarelix, our agreements
generally provide us with exclusive worldwide rights to, among
other things, develop, sublicense, and commercialize the drug
products. Under most of these license arrangements, we are
generally responsible for all development, patent filing and
maintenance costs, sales, marketing and liability insurance
costs related to the drug products. In addition, these licenses
and agreements may require us to make royalty and other payments
and to reasonably exploit the underlying technology of
applicable patents. If we fail to comply with these and other
terms in these licenses and agreements, we could lose the
underlying rights to one or more of our potential products,
which would adversely affect our product development and harm
our business. In addition, with regard to Zevalin, apaziquone,
RenaZorb and SPI-205, we own patent and related intellectual
property rights related to these products.
The protection, preservation and infringement-free commercial
exploitation of these patents and related intellectual property
rights is very important to the successful execution of our
strategy. However, the issuance of a patent is not conclusive as
to its validity nor as to the enforceable scope of the claims of
the patent. Accordingly, our patents and the patents we have may
not prevent other companies from developing similar or
functionally equivalent products or from successfully
challenging the validity of our patents. If our patent
applications are not allowed or, even if allowed and issued as
patents, if such patents or the patents we have in-licensed, are
circumvented or not upheld by the courts, our ability to
competitively exploit our patented products and technologies may
be significantly reduced. Also, such patents may or may not
provide competitive advantages for their respective products or
they may be challenged or circumvented by competitors, in which
case our ability to commercially exploit these products may be
diminished.
23
From time to time, we may need to obtain licenses to patents and
other proprietary rights held by third parties to develop,
manufacture and market our products. If we are unable to timely
obtain these licenses on commercially reasonable terms, our
ability to commercially exploit such products may be inhibited
or prevented.
As mentioned above, we own and in-license from third parties
certain patent rights related to our products. We believe that
our patents and licenses are important to our business, but that
with the exception of the United States and European patents
discussed in this paragraph, no one patent or license is
currently of material importance to our business. For Fusilev,
we have one United States formulation patent that covers Fusilev
that expires in 2019. For Zevalin, we have sublicensed United
States patents that cover the processes and tools for making
monoclonal anti-bodies (MABs), in general, licensed United
States patents that cover the CD-20 MAB in Zevalin as well as
the use of Zevalin to treat NHL, and acquired patent
applications covering the Zevalin compounding process
(
i.e.
, process of linking the CD20 MAB to a radioactive
isotope to make the patient-ready dosage form of Zevalin). These
patents expire over a wide range of dates beginning in 2009, but
the licensed patents covering the CD-20 MAB itself do not begin
to expire until 2015. Additionally, we have pending United
States patent applications covering the compounding process, and
will consider filing more patent applications, if the
opportunity arises. For belinostat, there are composition of
matter patents that cover belinostat and related compounds that
do not begin to expire until 2021. Currently, there are multiple
United States and foreign patent applications pending that cover
belinostat formulations, uses and manufacturing and synthesis
processes. We plan to file additional United States and foreign
patent applications covering new formulations, uses and
manufacturing and synthesis processes, where appropriate. For
apaziquone, there is a United States formulation patent that
does not expire until 2022. We have filed and plan to file
additional United States and foreign patent applications
covering new formulations
and/or
uses
for this product. For ozarelix, there is a United States
composition patent that will expire in 2020, and method of use
and formulation patent applications on file in the United
States. For ortataxel, there are two United States composition
patents that will expire in 2013 and multiple manufacturing and
synthesis patents that do not begin to expire till 2021, and the
corresponding European patents will expire in 2014. We
anticipate filing new method of use and formulation patent
applications for the ortataxel product in the future. There is
one United States patent covering satraplatin, a method of use
patent that expires in 2010. For elsamitrucin, we have filed
United States and foreign formulation and method of use patent
applications, and we anticipate filing future United States and
foreign patent applications covering new formulations
and/or
uses
for this product. For lucanthone, there is a United States
method of use patent that expires in 2019. For RenaZorb, there
is one method of use patent that expires in 2024 and pending
United States and foreign patent applications covering
compositions of matter directed to treating hyperphosphatemia.
For SPI-1620, we have filed method of use patent applications in
the United States and Europe. For SPI-205, there is a United
States composition and method of use patent that expires in
2010. This patent expires in certain European countries in 2011.
We also have multiple United States method of use patents that
expire in 2021 and 2022, and there is ongoing prosecution for
their European counterparts. We have also filed another method
of use patent application in the United States and Europe and
anticipate filing future patent applications pending the
continued development of new methods of use and new
formulations. We are constantly evaluating our patent portfolio
and are currently prosecuting patent applications for our drug
products and are considering new patent applications in order to
maximize the life cycle of each of our products.
While the United States and the European Union are currently the
largest potential markets for most of our products, we also have
patents issued and patent applications pending outside of the
United States and Europe. Limitations on patent protection in
these countries, and the differences in what constitutes
patentable subject matter in countries outside the United
States, may limit the protection we have on patents issued or
licensed to us outside of the United States. In addition, laws
of foreign countries may not protect our intellectual property
to the same extent as would laws in the United States. To
minimize our costs and expenses and to maintain effective
protection, we usually focus our patent and licensing activities
within the United States, the European Union, Canada and Japan.
In determining whether or not to seek a patent or to license any
patent in a certain foreign country, we weigh the relevant costs
and benefits, and consider, among other things, the market
potential and profitability, the scope of patent protection
afforded by the law of the jurisdiction and its enforceability,
and the nature of terms with any potential licensees. Failure to
obtain adequate patent protection for our proprietary drugs and
technology would impair our ability to be commercially
competitive in these markets.
24
In addition to the specific intellectual property subjects
discussed above, we have trademark protection in the United
States for Spectrum Pharmaceuticals,
Inc.
®
,
Fusilev
®
,
Turning Insights Into
Hope
tm
,
Zevalin
®
and
RenaZorb
®
.
Additionally, for some other of these and other works related to
our business, we have pending United States and
ex-United
States trademark applications.
EOquin
®
is a registered trademark of Allergan.
In conducting our business generally, we rely upon trade
secrets, know-how, and licensing arrangements and use customary
practices for the protection of our confidential and proprietary
information such as confidentiality agreements and trade secret
protection measures, such as periodic internal and external
trade secret audits. It is possible that these agreements will
be breached or will not be enforceable in every instance, and
that we will not have adequate remedies for any such breach. It
is also possible that our trade secrets or know-how will
otherwise become known or independently developed by
competitors. The protection of know-how is particularly
important because the know-how is often the necessary or useful
information that allows us to practice the claims in the patents
related to our proprietary drug products.
We may find it necessary to initiate litigation to enforce our
patent rights, to protect our trade secrets or know-how or to
determine the scope and validity of the proprietary rights of
others. Litigation concerning patents, trademarks, copyrights
and proprietary technologies can often be protracted and
expensive and, as with litigation generally, the outcome is
inherently uncertain. See Item 1A Risk Factors
for more information.
The
Patent Process
The United States Constitution provides Congress with the
authority to provide inventors the exclusive right to their
discoveries. Congress codified this right in United States Code
Title 35, which gave the U.S. Patent and Trademark
Office (USPTO) the right to grant patents to inventors and
defined the process for securing a United States patent. This
process involves the filing of a patent application that teaches
a person having ordinary skill in the respective art how to make
and use the invention in clear and concise terms. The invention
must be novel (not previously known) and non-obvious (not an
obvious extension of what is already known). The patent
application concludes with a series of claims that specifically
describe the subject matter that the patent applicant considers
his invention.
The USPTO undertakes an examination process that can take from
one to seven years, or more, depending on the complexity of the
patent and the problems encountered during examination.
In exchange for disclosing the invention to the public, for all
United States patent applications filed after 1995, the
successful patent applicant is currently provided a right to
exclude others from making, using or selling the claimed
invention for a period of 20 years from the effective
filing date of the patent application.
Under certain circumstances, a patent term may be extended.
Patent extensions are most frequently granted in the
pharmaceutical and medical device industries under the Drug
Price Competition and Pricing Term Restoration Act of 1984
(Hatch-Waxman Act) to recover some of the time lost during the
FDA regulatory process, subject to a number of limitations and
exceptions. The patent term may be extended up to a maximum of
five years; however, as a general rule, the average extension
period granted for a new drug is approximately three years. Only
one patent can be extended per FDA approved product, and a
patent can only be extended once.
Product
Exclusivity
Under the Hatch-Waxman Act, drug products are provided
exclusivity whereby the FDA will not accept applications to
market a generic form of an innovator reference listed drug
product until the end of the prescribed period. A product is
granted a five-year period of exclusivity if it contains a
chemical entity never previously approved by the FDA either
alone or in combination, although generic applications may be
submitted after four years if they contain a certification of
patent invalidity or non-infringement as further discussed
below. A three-year period of exclusivity is granted to a
previously approved product based on certain changes,
e.g.,
in strength, dosage form, route of administration or
conditions of use, where the application is supported by new
clinical investigations that are essential to approval. In
addition, in 1997 Congress amended the law to provide an
additional six months of exclusivity as a reward for studying
drugs in children. This pediatric exclusivity, which can be
obtained during the approval process or after approval,
effectively delays the approval of a generic application until
six months after the
25
expiration of any patent or other exclusivity that would
otherwise delay approval, thus providing an additional six
months free of generic competition. In order to qualify for
pediatric exclusivity, the FDA must make a written request for
pediatric studies, the application holder must agree to the
request and complete the studies with required timeframe, and
the studies must be accepted by the FDA based on a determination
that the studies fairly respond to the request. The provisions
were enacted with a five-year sunset date, and have been
reauthorized in 2002 and 2007. The current provisions are set to
expire in October 2012, and Congress is likely to consider
reauthorizing the statute again.
Generic
Approval and Patent Certification
The Hatch-Waxman Act also created the abbreviated new drug
application (ANDA) approval process, which permits the approval
of a generic version of a previously approved branded drug
without the submission of a full new drug application (NDA) and
based in part on the FDAs finding of safety and
effectiveness for the reference listed drug. Applicants
submitting an NDA are required to list patents associated with
the drug product, which are published in the FDA Orange Book,
and the timing of an ANDA approval depends in part on patent
protection for the branded drug. When an ANDA is filed, the
applicant must file a certification for each of the listed
patents for the branded drug, stating one of the following:
(1) that there is no patent information listed;
(2) that such patent has expired; (3) that the patent
will expire on a particular date (indicating that the ANDA may
be approved on that date); or (4) that the drug for which
approval is sought either does not infringe the patent or the
patent is invalid, otherwise known as paragraph IV
certification. If an ANDA applicant files a paragraph IV
certification, it is required to provide the patent holder with
notice of that certification. If the patent holder brings suit
against the ANDA applicant for patent infringement within
45 days of receiving notice, the FDA may not approve the
ANDA until the earlier of (1) 30 months from the
patent holders receipt of the notice (the
30-month
stay) or (2) the issuance of a final, non-appealed, or
non-appealable court decision finding the patent invalid,
unenforceable or not infringed.
The Hatch-Waxman Act also provided an incentive for generic
manufacturers to file paragraph iv certifications challenging
patents that may be invalid unenforceable, or not infringed,
whereby the first company to successfully challenge a listed
patent and receive ANDA approval is protected from competition
from subsequent generic versions of the same drug product for
180 days after the earlier of (1) the date of the
first commercial marketing of the first-filed ANDA
applicants generic drug or (2) the date of a decision
of a court in an action holding the relevant patent invalid,
unenforceable, or not infringed. These
180-day
exclusivity provisions have been the subject of litigation and
administrative review, and the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 (MMA) amended the
provisions in several ways, including by providing that an ANDA
applicant entitled to
180-day
exclusivity may lose such exclusivity if any of the following
events occur: (1) failure to market; (2) withdrawal of
the ANDA; (3) change in patent certification;
(4) failure to obtain tentative approval; (5) illegal
settlement agreement; and (6) patent expiration.
With respect to the illegal settlement prong, the MMA amendments
require that certain types of settlement agreements entered into
between branded and generic pharmaceutical companies related to
the manufacture, marketing and sale of generic versions of
branded drugs are required to be filed with the Federal Trade
Commission and the Department of Justice for review of potential
anti-competitive practices. This requirement could affect the
manner in which generic drug manufacturers resolve intellectual
property litigation and other disputes with branded
pharmaceutical companies, and could result generally in an
increase in private-party litigation against pharmaceutical
companies. The impact of this requirement, and the potential
governmental investigations and private-party lawsuits
associated with arrangements between brand name and generic drug
manufacturers, remains uncertain and could adversely affect our
business. In addition, Congress has considered enacting
legislation that would prohibit such settlements between brand
name and generic drug manufacturers. Such a provision was
considered as part of the recently enacted healthcare reform,
the Patient Protection and Affordable Care Act (PPACA) signed
into law on March 23, 2010. However, Congress removed the
provision prior to passage. It is possible that Congress will
again consider a ban on such settlements between brand name and
generic drug manufacturers in the future.
With the passage of the PPACA, there are now exclusivity
protections for certain innovator biological products and a
framework for FDA review and approval of biosimilar and
interchangeable versions of innovator biologic products. The
PPACA provides that no application for a biosimilar product may
be approved until 12 years after the date on which the
innovator product was first licensed, and no application may be
submitted until four years after
26
the date of first licensure. Products deemed interchangeable (as
opposed to biosimilar) are also eligible for certain exclusivity.
Please also read our discussion of patent and intellectual
property matters in Item 1A Risk Factors
section of this report.
Orphan
Drug Designation
Some jurisdictions, including Europe and the United States, may
designate drugs for relatively small patient populations as
orphan drugs. The FDA may grant orphan drug
designation to a drug intended to treat a rare disease or
condition that affects fewer than 200,000 individuals in the
United States, and a drug may also be considered an orphan even
if the drug treats a disease or condition affecting more than
200,000 individuals in the United States where the drug has no
expected profitability. Orphan drug designation does not
necessarily convey any advantage in, or shorten the duration of,
the regulatory review and process for marketing approval. If a
product with an orphan drug designation subsequently receives
the first FDA approval for the indication for which it has such
designation, the product is entitled to seven years of orphan
drug exclusivity, during which time FDA will not approve any
other application to market the same drug for the same
indication except in limited circumstances, such as a showing of
clinical superiority to the product with orphan exclusivity.
Also, competitors are not prohibited from receiving approval to
market the same drug or biologic for a different indication than
that which received orphan approval.
Under European Union medicines laws, the criteria for
designating an orphan medicinal product are similar
in principle to those in the United States. Criteria for orphan
designation are set out in Article 3 of Regulation (EC)
141/2000 on the basis of two alternative conditions. A medicinal
product may be designated as orphan if it is intended for the
diagnosis, prevention or treatment of a life-threatening or
chronically debilitating condition affecting not more than five
in 10 thousand persons in the European Union (EU) when the
application is made. This is commonly known as the disease
prevalence criterion Alternatively, a product may be so
designated if it is intended for the diagnosis, prevention or
treatment of a life-threatening, seriously debilitating or
serious and chronic condition in the EU and if without
incentives it is unlikely that the marketing of the product in
the EU would generate sufficient return to justify the necessary
investment. This is commonly known as the insufficient
return criterion.
These two alternative criteria must cumulatively meet the second
condition that there exists no satisfactory method of diagnosis,
prevention or treatment of the condition in question that has
been authorized in the EU, or if such a method exists, the
product will be of significant benefit to those affected by the
condition. Significant benefit is defined in
Regulation (EC) 847/2000 as a clinically relevant advantage or a
major contribution to patient care.
Upon grant of a marketing authorization, orphan medicinal
products are entitled to ten years of market exclusivity in
respect of the approved therapeutic indication. Within the
period of market exclusivity, no competent authority in the EU
is permitted to accept an application for marketing
authorization, a variation or a line-extension for the same
approved therapeutic indication in respect of a similar
medicinal product pursuant to Article 8.1 of
Regulation 141/2000 unless one of derogations set out in
Article 8.3 of the same Regulation applies. In order to
determine whether two products are considered similar,
Regulation 847/2000 requires an assessment of the principal
molecular structure and the underlying mode of action. Any minor
variation or modification of the principal molecular structure
would not ordinarily render the second product dissimilar to the
first authorized product.
In order for the second applicant to break the market
exclusivity granted to the first authorized similar medicinal
product in respect of the same therapeutic indication, the
second applicant would principally rely upon data to demonstrate
that his product is safer, more efficacious or clinically
superior to the first product pursuant to Article 8.3(c) of
Regulation 141/2000. Ordinarily, such an assessment will
require a
head-to-head
comparative clinical trial for the purpose of demonstrating
clinical superiority.
The
10-year
market exclusivity may be reduced to 6 years if at the end
of the fifth year it is established that the product no longer
meets the criteria for orphan designation on the basis of
available evidence.
27
Fusilev has been granted orphan drug designations for its use in
conjunction with high dose methotrexate in the treatment of
osteosarcoma and for its use in combination chemotherapy with
the approved agent 5-fluorouracil in the palliative treatment of
metastatic adenocarcinoma of the colon and rectum (colorectal
cancer). In addition, belinostat has been granted an orphan drug
designation for PTCL. As discussed above, a drug with orphan
designation status may obtain orphan exclusivity upon marketing
approval under specified conditions set out in the applicable
laws and regulations.
Governmental
Regulation
The development, production and marketing of our proprietary and
generic drug products are subject to regulation for safety,
efficacy and quality by numerous governmental authorities in the
United States and other countries. In the United States, drugs
are subject to rigorous regulation. The Federal Food, Drug, and
Cosmetic Act, as amended from time to time, and the regulations
promulgated there under, as well as other federal and state
statutes and regulations, govern, among other things, the
development, approval, manufacture, safety, labeling, storage,
record keeping, distribution, promotion, and advertising of our
products. Product development and approval within this
regulatory framework, including for drugs already at a clinical
stage of development, can take many years and require the
expenditure of substantial resources, and to obtain FDA
approval, a product must satisfy mandatory procedures and safety
and efficacy requirements. In addition, each drug-manufacturing
establishment must be registered with the FDA. Domestic
manufacturing establishments must comply with the FDAs
current good manufacturing practice (cGMP) regulations and are
subject to inspections by the FDA. To supply drug ingredients or
products for use in the United States, foreign manufacturing
establishments must also comply with cGMP and are subject to
inspections by the FDA or by other regulatory authorities in
certain countries under reciprocal agreements with the FDA.
General
Information about the Drug Approval Process and Post-Marketing
Requirements
The United States system of new drug approval is one of the most
rigorous in the world. Only a small percentage of compounds that
enter the pre-clinical testing stage are ever approved for
commercialization. Our strategy focuses on in-licensing clinical
stage drug products that are already in or about to enter human
clinical trials. A late-stage focus helps us to effectively
manage the high cost of drug development by focusing on
compounds that have already passed the many hurdles in the
pre-clinical and early clinical process.
The following general comments about the drug approval process
are relevant to the development activities we are undertaking
with our proprietary drugs.
Pre-clinical Testing:
During the pre-clinical
testing stage, laboratory and animal studies are conducted to
show biological activity of a drug compound against the targeted
disease and the compound is evaluated for safety.
Investigational New Drug Application:
After
pre-clinical testing, an Investigational New Drug, or IND,
Application is submitted to the FDA to request the ability to
begin human testing of the drug. An IND becomes effective thirty
days after the FDA receives the application (unless the FDA
notifies the sponsor of a clinical hold), or upon prior
notification by the FDA.
Phase 1 Clinical Trials:
These trials,
typically involving small numbers of healthy volunteers or
patients, usually define a drug candidates safety profile,
including the safe dosage range.
Phase 2 Clinical Trials:
In phase 2 clinical
trials, controlled studies of human patients with the targeted
disease are conducted to assess the drugs effectiveness.
These studies are designed primarily to determine the
appropriate dose levels, dose schedules and route(s) of
administration, and to evaluate the effectiveness of the drug on
humans, as well as to determine if there are any side effects on
humans to expand the safety profile following phase 1. These
clinical trials, and phase 3 trials discussed below, are
designed to evaluate the drugs overall benefit-risk
profile, and to provide information to inform physician labeling.
Phase 3 Clinical Trials:
This phase usually
involves larger number of patients with the targeted disease.
Investigators (typically physicians) monitor the patients to
determine the drug candidates efficacy and to observe and
report any adverse reactions that may result from long-term use
of the drug on a large, more widespread, patient population.
During the phase 3 clinical trials, typically the drug candidate
is compared to either a placebo or a standard treatment for the
target disease.
28
New Drug Application:
After completion of all
three clinical trial phases, if the data indicates that the drug
is safe and effective, a NDA is filed with the FDA requesting
FDA approval to market the new drug as a treatment for the
target disease.
Fast Track and Priority Review:
The FDA has
established procedures for accelerating the approval of drugs to
be marketed for serious or life threatening diseases for which
the manufacturer can demonstrate the potential to address unmet
medical needs.
Abbreviated New Drug Application:
An ANDA is
the abbreviated review and approval process created by the Drug
Price Competition and Patent Term Restoration Act of 1984 signed
into law in part for the accelerated approval of generic drugs.
When a company files an ANDA, it must make a patent
certification regarding the patents covering the branded product
listed in the FDAs Orange Book. An ANDA applicant must
make one of four certifications: (1) that there is no
patent information listed in the Orange Book; (2) that the
listed patent has expired; (3) that the listed patent will
expire on a stated date and the applicant will not market the
product until the patent expires; or (4) that the listed
patent is invalid or will not be infringed by the generic
product. The ANDA drug development and approval process
generally takes less time than the NDA drug development and
approval process since the ANDA process usually does not require
new clinical trials establishing the safety and efficacy of the
drug product.
NDA and ANDA Approval:
The FDA approves drugs
that are subject to NDA review based on data in the application
demonstrating the drug is safe and effective in its proposed
use(s) and that the drugs benefits outweigh its risks. FDA
will also review the NDA applicants manufacturing process
and controls to ensure they are adequate to preserve the
drugs identity, strength, quality, and purity, and FDA
will review and approve the drugs proposed labeling. As
for the ANDA approval process, these abbreviated
applications are generally not required to include preclinical
or clinical data to establish safety and effectiveness. Rather,
an ANDA must demonstrate both chemical equivalence and
bio-equivalence (the rate and extent of absorption in the body)
to the innovator drug unless a bio-equivalence
waiver is granted by the FDA.
Phase 4 Clinical Trials:
After a drug has been
approved by the FDA, phase 4 studies may be conducted to explore
additional patient populations, compare the drug to a
competitor, or to further study the risks, benefits and optimal
use of a drug. These studies may be a requirement as a condition
of the initial approval of the NDA.
Post-Approval Studies Requirements under
FDAAA:
The Food and Drug Administration
Amendments Act of 2007 (FDAAA), which President Bush signed into
law in September 2007, significantly added to the FDAs
authority to require post-approval studies. Under the FDAAA, if
the FDA becomes aware of new safety information after approval
of a product, they may require us to conduct further clinical
trials to assess a known serious risk, signals of serious risk
or to identify an unexpected serious risk. If required to
conduct a post-approval study, periodic status reports must be
submitted to the FDA. Failure to conduct such post-approval
studies in a timely manner may result in administrative action
being taken by FDA, including substantial civil fines.
Risk Evaluation and Mitigation Strategy Authority under
FDAAA:
The FDAAA also gave the FDA new authority
to require the implementation of a Risk Evaluation and
Mitigation Strategy (REMS) for a product when necessary to
minimize known and preventable safety risks associated with the
product. The FDA may require the submission of a REMS before a
product is approved, or after approval based on new safety
information, including new analyses of existing safety
information. A REMS may include a medication guide, patient
package insert, a plan for communication with healthcare
providers, or other elements as the FDA deems are necessary to
assure safe use of the product, which could include imposing
certain restrictions on distribution or use of a product. A REMS
must include a timetable for submission of assessments of the
strategy at specified time intervals. Failure to comply with a
REMS including the submission of a required
assessment may result in substantial civil or
criminal penalties.
Other Issues Related to Product
Safety:
Adverse events that are reported after
marketing approval also can result in additional limitations
being placed on a products use and, potentially,
withdrawal of the product from the market. In addition, under
the FDAAA, the FDA has authority to mandate labeling changes to
products at any point in a products lifecycle based on new
safety information derived from clinical trials, post-approval
studies, peer-reviewed medical literature, or post-market risk
identification and analysis systems data.
29
FDA
Enforcement
The development of drug products, as well as the marketing of
approved drugs, is subject to substantial continuing regulation
by the FDA, including regulation of adverse event reporting,
manufacturing practices and the advertising and promotion of the
drug. Failure to comply with the FDA and other governmental
regulations can result in fines, unanticipated compliance
expenditures, recall or seizure of products, total or partial
suspension of production
and/or
distribution, suspension of the FDAs review of NDAs, ANDAs
or other product applications, enforcement actions, injunctions
and criminal prosecution. Under certain circumstances, the FDA
also has the authority to revoke previously granted drug
approvals. Although we have internal compliance programs, if
these programs do not meet regulatory agency standards or if our
compliance is deemed deficient in any significant way, it could
have a material adverse effect on our business. See Item 1A
Risks Factors Our failure to comply with
governmental regulation may delay or prevent approval of our
products
and/or
subject us to penalties.
With respect specifically to information submitted to FDA in
support of marketing applications, the FDA, under its Fraud,
Untrue Statements of Material Facts, Bribery and Illegal
Gratuities Policy, can significantly delay the approval of a
marketing application or seek to withdraw an
approved application where it identifies fraud or
discrepancies in regulatory submissions. Such actions by the FDA
may significantly delay or suspend substantive scientific review
of a pending application during validity assessment or remove
approved products from the market until the assessment is
complete and questions regarding reliability of the data are
resolved. In addition, the Generic Drug Enforcement Act of 1992
established penalties for wrongdoing in connection with the
development or submission of an ANDA. Under this Act, the FDA
has the authority to permanently or temporarily bar companies or
individuals from submitting or assisting in the submission of an
ANDA, and to temporarily deny approval and suspend applications
to market generic drugs. The FDA may also suspend the
distribution of all drugs approved or developed in connection
with certain wrongful conduct
and/or
withdraw approval of an ANDA and seek civil penalties.
Healthcare
Reform
Continuing studies of the proper utilization, safety and
efficacy of pharmaceuticals and other health care products are
being conducted by industry, government agencies and others.
Such studies, which increasingly employ sophisticated methods
and techniques, can call into question the utilization, safety
and efficacy of previously marketed products and in some cases
have resulted, and may in the future result, in the
discontinuance of their marketing.
The Patient Protection and Affordable Care Act (PPACA) signed
into law on March 23, 2010 creates the Patient Centered
Outcomes Research Institute, a private, non-profit corporation
that is tasked with assisting patients, clinician, purchasers,
and policy-makers in making informed health decisions. One of
the Institutes initiatives will be to conduct comparative
clinical effectiveness research, which is defined as
research evaluating and comparing health outcomes and the
clinical effectiveness, risks, and benefits of 2 or more medical
treatments, services, and items. It is important to note
that the Institute would not be permitted to mandate coverage,
reimbursement, or other policies for any public or private payer.
Foreign
Regulation
Whether or not we obtain FDA approval for a product, we must
obtain approval of a product by the comparable regulatory
authorities of foreign countries before we can commence clinical
trials or marketing of the product in those countries. The
approval process varies from country/region to country/region,
and the time may be longer or shorter than that required for FDA
approval. The requirements governing the conduct of clinical
trials, product licensing, pricing and reimbursement also may
vary, sometimes significantly, from country/region to
country/region.
Under the European Union regulatory systems, we may submit
marketing authorization applications either under a centralized
procedure or decentralized procedure or the mutual recognition
procedure. The centralized procedure is mandatory for medicines
produced by a biotechnological process. The procedure is also
mandatory for new active substances which are indicated for
treatment of several diseases or conditions, including cancer
and orphan conditions. Companies may apply for centralized
assessment if the product contains a new active substance
30
or the product constitutes significant therapeutic, scientific
or technical innovation or the granting of authorization under
the centralized procedure is in the interests of the EU
patients. A centralized marketing authorization is valid in all
European Union member states. This marketing authorization is
issued in the form of a Commission decision which is legally
binding in its entirety to which it is addressed.
Directive 2004/27/EC introduced two Community parallel
procedures to the centralized procedure to allow a product to be
progressively authorized in each of the member states of the EU.
They are the decentralized procedure and the mutual recognition
procedure. The mutual recognition procedure applies where the
product has already been authorized in a member state of the EU
that will act as reference member state. The national marketing
authorization granted by the reference member state forms the
basis for mutual recognition in the member states chosen by the
applicant. In the decentralized procedure, the product in
question is not authorized in any one the EU member states. In
such a situation, the applicant company will request a member
state to act as the reference member state to lead the
scientific assessment for the benefit/risk balance for agreement
by the concerned member states. In both cases, the concerned
member states have up to 90 days to accept or raise
reasoned objections to the assessment made by the reference
member state.
In addition, pricing and reimbursement is subject to negotiation
and regulation in most countries outside the United States.
Increasingly, adoption of a new product for use in national
health services is subject to health technology assessment under
the national rules and regulations to establish the clinical
effectiveness and cost-effectiveness of a new treatment. In some
countries, in order to contain health care expenditures,
reference price is introduced in order for the national
healthcare providers to achieve a price comparable to the
reference price in the same therapeutic category. We may
therefore face the risk that the resulting prices would be
insufficient to generate an acceptable return to us.
Third
Party Reimbursement and Pricing Controls
In the United States and elsewhere, sales of pharmaceutical
products depend in significant part on the availability of
reimbursement to the consumer from third-party payers, such as
government and private insurance plans. Third-party payers are
increasingly challenging the prices charged for medical products
and services. It is time-consuming and expensive for us to go
through the process of seeking reimbursement from Medicare and
private payers. Our products may not be considered cost
effective, and coverage and reimbursement may not be available
or sufficient to allow us to sell our products on a competitive
and profitable basis.
The PPACA enacted significant reforms, including revising the
definition of average manufacturer price for
reporting purposes, increasing Medicaid rebates, expanding the
340B drug discount program, and making changes to affect the
Medicare Part D coverage gap, or donut hole. In
the coming years, additional significant changes could be made
to governmental healthcare programs, and the United States
healthcare system as a whole, that may result in significantly
increased rebates, decreased pricing flexibility, diminished
negotiating flexibility, coverage and reimbursement limitations
based upon comparative and cost-effectiveness reviews, and other
measures that could significantly impact the success of our
products.
In many foreign markets, including the countries in the EU,
pricing of pharmaceutical products is subject to governmental
control. In the United States, there have been, and we expect
that there will continue to be, a number of federal and state
proposals to implement similar governmental pricing control.
While we cannot predict whether such legislative or regulatory
proposals will be adopted, the adoption of such proposals could
have a material adverse effect on our business, financial
condition and profitability.
Employees
The efforts of our employees are critical to our success. We
believe that we have assembled a strong management team with the
experience and expertise needed to execute our business
strategy. We anticipate hiring additional personnel as needs
dictate to implement our growth strategy. As of
December 31, 2009, we had 158 employees, of which 8
held a M.D. degree, 16 held a Ph.D. degree and 3 held a Pharm. D
degree. We cannot be sure that we will be able to attract and
retain qualified personnel in sufficient numbers to meet our
needs. Our employees are not subject to any collective
bargaining agreements, and we regard our relations with our
employees to be good.
31
Corporate
Background and Available Information
We are a Delaware corporation that was originally incorporated
in Colorado as Americus Funding Corporation in December 1987,
became NeoTherapeutics, Inc. in August 1996, was reincorporated
in Delaware in June 1997, and was renamed Spectrum
Pharmaceuticals, Inc. in December 2002.
We also maintain websites located at
http://www.sppirx.com
and
http://www.spectrumpharm.com,
and electronic copies of our periodic and current reports, proxy
statements for our annual stockholders meetings, and any
amendments to those reports, are available, free of charge,
under the Investor Relations link on our website as
soon as practicable after such material is filed with, or
furnished to, the SEC.
For financial information regarding our business activities,
please see Item 8 Financial Statements
and Supplementary Data.
An investment in our common stock involves a high degree of
risk. Our business, financial condition, operating results and
prospects can be impacted by a number of factors, any one of
which could cause our actual results to differ materially from
recent results or from our anticipated future results. As a
result, the trading price of our common stock could decline, and
you could lose part or all of your investment. You should
carefully consider the risks described below with all of the
other information included in this Annual Report on
Form 10-K. Failure to satisfactorily achieve any of our
objectives or avoid any of the risks below would likely have a
material adverse effect on our business and results of
operations.
Risks
Related to Our Business
Like
other early-stage biotech companies, we have a history of
operating losses and our losses may continue to increase as we
expand our commercialization and development efforts, and our
efforts may never result in profitability.
Our cumulative losses since our inception in 1987 through
December 31, 2009 were approximately $262.0 million.
Our net losses in 2009, 2008 and 2007 were approximately
$19.0 million, $14.2 million and $22.0 million,
respectively, after recording approximately $8.1 million,
$1.3 million and $12.1 million, respectively, of
warrant based income due to our restatement of previously issued
financial statements. We expect to continue to incur additional
losses as we implement our growth strategy of commercializing
our approved drug products and developing our pipeline products
for at least the next few years. We may never achieve
significant revenues from sales of products or become
profitable. Even if we eventually generate significant revenues
from sales, we will likely continue to incur losses over the
next several years.
Our
business does not generate sufficient cash to finance our
ongoing operations and therefore, we will likely need to
continue to raise additional capital.
Our current commercial operations do not generate sufficient
operating cash to finance the clinical development of all our
drug products, to commercialize our approved drug products and
to capitalize on growth opportunities. While we have been
successful recently in generating funds through the licensing
and sale of our assets, we have historically relied primarily on
raising capital through the sale of our securities and
out-licensing our drug products to meet our financial needs.
Although we began selling products in 2008, we believe that in
the near-term we will likely need to continue to raise funds in
order to continue drug product commercialization, development
and acquisition.
We may not be able to raise additional capital on favorable
terms, if at all, particularly with the current volatile
financial market conditions. Accordingly, we may be forced to
significantly change our business plans and restructure our
operations to conserve cash, which would likely involve
out-licensing or selling some or all of our intellectual,
technological and tangible property not presently contemplated
and at terms that we believe would not be favorable to us,
and/or
reducing the scope and nature of our currently planned drug
development and commercialization activities. An inability to
raise additional capital would also materially impact our
ability to expand operations.
32
Clinical
trials may fail to demonstrate the safety and efficacy of our
drug products, which could prevent or significantly delay
obtaining regulatory approval.
Prior to receiving approval to commercialize any of our drug
products, we must demonstrate with substantial evidence from
well-controlled clinical trials, and to the satisfaction of the
FDA, and other regulatory authorities in the United States and
other countries, that each of the products is both safe and
effective. For each drug product, we will need to demonstrate
its efficacy and monitor its safety throughout the process. If
such development is unsuccessful, our business and reputation
would be harmed and our stock price would be adversely affected.
All of our drug products are prone to the risks of failure
inherent in drug development. Clinical trials of new drug
products sufficient to obtain regulatory marketing approval are
expensive and take years to complete. We may not be able to
successfully complete clinical testing within the time frame we
have planned, or at all. We may experience numerous unforeseen
events during, or as a result of, the clinical trial process
that could delay or prevent us from receiving regulatory
approval or commercializing our drug products. In addition, the
results of pre-clinical studies and early-stage clinical trials
of our drug products do not necessarily predict the results of
later-stage clinical trials. Later-stage clinical trials may
fail to demonstrate that a drug product is safe and effective
despite having progressed through initial clinical testing. Even
if we believe the data collected from clinical trials of our
drug products is promising, such data may not be sufficient to
support approval by the FDA or any other United States or
foreign regulatory approval. Pre-clinical and clinical data can
be interpreted in different ways.
Accordingly, FDA officials could interpret such data in
different ways than we or our partners do, which could delay,
limit or prevent regulatory approval. The FDA, other regulatory
authorities, our institutional review boards, our contract
research organizations, or we may suspend or terminate our
clinical trials for our drug products. Any failure or
significant delay in completing clinical trials for our drug
products, or in receiving regulatory approval for the sale of
any drugs resulting from our drug products, may severely harm
our business and reputation. Even if we receive FDA and other
regulatory approvals, our drug products may later exhibit
adverse effects that may limit or prevent their widespread use,
may cause the FDA to revoke, suspend or limit their approval, or
may force us to withdraw products derived from those drug
products from the market.
If we
are unable to effectively maintain and expand our sales and
marketing capabilities, we may be unable to successfully
commercialize our approved products.
Historically, we have had limited internal experience in
selling, marketing or distributing pharmaceutical products.
However, we have recently built a commercial team to market our
approved products and we continue to seek top talent to add to
the team. If we are not able to effectively hire and maintain
qualified individuals as part of our commercial team, our
product sales and resulting revenues will be negatively impacted.
If we
are unable to maintain or obtain improved reimbursement rates
for Zevalin, the products operating results may be harmed,
which could adversely affect our financial and operating
results.
Effective January 1, 2010, the Centers for
Medicare & Medicaid Services (CMS) finalized a policy
to allow reimbursement for Zevalin in the Hospital Outpatient
Prospective Payment System (HOPPS), based on the Average Sales
Price (ASP) methodology applicable to other injectable drugs and
biologicals. We will seek a consistent reimbursement methodology
in the community clinic setting. If we are not able to maintain
this reimbursement methodology in the HOPPS setting or obtain
one in the community setting, we could face significant
difficulty in getting health care providers to prescribe
Zevalin, which will have an adverse impact on the products
expected operating results, and in turn adversely impact our
financial and operating results.
We may
face difficulties in achieving broader market acceptance of
Zevalin if we do not invest significantly in our sales and
marketing infrastructure.
United States sales of Zevalin have declined over the several
years prior to our acquisition of the Zevalin assets. We believe
that an enhanced sales and marketing strategy for Zevalin, in
conjunction with efforts to obtain approval by the FDA for
expanded uses of Zevalin, has significant potential to increase
sales of and revenue from Zevalin over the next few years.
However, implementation of the sales and marketing strategy for
Zevalin, and the efforts to expand approved usage of Zevalin,
will require a continued significant investment of financial and
other resources
33
by us for the foreseeable future and may not ultimately increase
Zevalin sales or allow us to realize the anticipated benefits
from our investment in the product. Additionally, our efforts to
establish an effective commercial team for Zevalin will require
significant commitments of both financial and management
resources by us, and may not ultimately be successful due a
variety of factors, including industry competition for effective
commercial personnel or the inability of us to dedicate the
necessary resources to those efforts.
Although chemotherapy is still the backbone to B-cell follicular
NHL, monoclonal antibody development has been paramount to the
success of therapeutic options for this tumor type. Rituximab, a
chimeric anti-CD20 monoclonal antibody, whether as monotherapy
or in combination with chemotherapy (CHOP-R, CVP-R) has been a
mainstay in the therapeutic options for low grade follicular
NHL. Much ongoing research has focused on optimizing monoclonal
antibody use, integrating them into multi-agent regimens, and
developing newer antibodies. Attempts to improve the efficacy of
monoclonal antibody-based therapy have included altering the
dosing schedule, optimizing patient selection, maintenance
therapy, and improving upon radioimmunotherapy, as well as
combinations with cytotoxic molecules and other novel agents.
The eventual goal of targeted therapies is to individualize
treatment to increase response and survival, while reducing
treatment-related toxicity.
There are many monoclonal antibodies in development for NHL,
including Ofatumumab, Veltuzumab, GA 101, AME-133 (all
targeting CD20), Galizimab (targeting CD80), Dacetuzumab
(targeting CD40), Lucatumumab (targeting CD40), Alemtuzumab
(targeting CD52). Furthermore, tumor necrosis factor-related
apoptosis ligand, small modular immunopharmaceuticals,
drug-antibody conjugates are also in the competitive landscape
and under development for low grade NHL.
In addition, Treanda (Bendamustine), a chemotherapeutic,
approved in the area of indolent B-cell NHL that has progressed
during or within six months of treatment with rituximab or a
rituximab-containing regimen, has emerged as a competitive force
for Zevalin in both the relapsed, refractory setting and in the
first line setting (BR in combination with
Rituximab).
There are three key trials in first line therapy of follicular
lymphoma. The ECOG 4402/RESORT trial is comparing rituximab
maintenance and re-treatment on progression after a CR or PR to
initial rituximab treatment in patients with low tumor burden.
The GELA PRIMA trial is examining maintenance rituximab versus
observation in patients with high tumor burden achieving a CRor
PR with CHOP, CVP, or FCM plus rituximab. The SWOG 0016 trial is
comparing R-CHOP with CHOP followed by
Bexxar
®
in patients with high tumor burden.
We are
aware of several competitors attempting to develop and market
products competitive to Zevalin, which may reduce or eliminate
our commercial opportunity.
The pharmaceutical and biotechnology industries are intensely
competitive and subject to rapid and significant technological
changes, and a number of companies are pursuing the development
of pharmaceuticals and products that target the same diseases
and conditions that Zevalin targets.
We cannot predict with accuracy the timing or impact of the
introduction of potentially competitive products or their
possible effect on our sales. Certain potentially competitive
products to Zevalin are in various stages of development, some
of which have been filed for approval with the FDA or have been
approved by regulatory authorities in other countries. Also,
there are many ongoing studies with currently marketed products
including
Rituxan
®
,
Treanda
®
and other developmental products, which may yield new data that
could adversely impact the use of Zevalin in specific states for
which it has obtained FDA approval
Some of the companies developing competing technologies and
products have significantly greater financial resources and
expertise in development, manufacturing, obtaining regulatory
approvals, and marketing than we do. Other smaller companies may
also prove to be significant competitors, particularly through
collaborative arrangements with large and established companies.
The introduction of competitive products to Zevalin could
significantly reduce the sales of Zevalin, which, in turn would
adversely impact our financial and operating results.
34
The
intellectual property and assets owned by our subsidiary, RIT,
are subject to a security agreement with Biogen that secures the
entitys payment and other obligations to Biogen, and we
have guaranteed all of those obligations.
In connection with the formation of RIT, RIT entered into a
security agreement with Biogen pursuant to which RIT granted to
Biogen a first priority security interest in all of its assets,
which consist of the Zevalin-related intellectual property and
other assets RIT. The security agreement secures certain
payment, indemnification and other obligations of RIT to Biogen
related to Zevalin. If RIT were to default on certain of its
obligations to Biogen, or in certain other circumstances
generally related to a bankruptcy or insolvency of RIT, Biogen
could seek to foreclose on the collateral under the security
agreement to obtain satisfaction of RITs obligations to
it. If RIT were to default on its obligations to Biogen, and
Biogen were to foreclose on the collateral under the security
agreement, RITs business could be materially and adversely
impacted, which could in turn materially and adversely impact
our investment in RIT and our financial condition and results of
operations.
Furthermore, in connection with the formation of RIT we
guaranteed all of RITs obligations to Biogen. If RIT were
to default on its obligations to Biogen, Biogen could require us
alone to satisfy all of those obligations under our guarantee.
The financial and other obligations that we would incur could
have a material and adverse effect on our financial condition
and results of operations.
If we
are unable to expand the approved usage of Fusilev, the
products operating results may be harmed, which could
adversely affect our financial and operating
results.
We have filed a supplemental new drug application for Fusilev
for use in combination with 5-FU-containing regimens in the
treatment of colorectal cancer. The greatest potential use of
this product is in this indication. If we are not able to obtain
approval for this indication, we may not recognize the full
anticipated value of our investment in the product and our
financial and operating results could be adversely affected.
Our
drug product Fusilev may not be more cost-effective than
competing drugs and otherwise may not have any competitive
advantage, which could hinder our ability to successfully
commercialize it.
Fusilev is a novel folate analog formulation and the
pharmacologically active isomer (the levo-isomer) of the racemic
compound calcium leucovorin, a product already approved for the
same indications our product is approved for. Leucovorin has
been sold as a generic product on the market for a number of
years. There are generic companies currently selling the product
and therefore, Fusilev competes against a low-cost alternative.
Also, Fusilev will be offered as part of a treatment regimen,
and that regimen may change to exclude Fusilev. Accordingly, it
may not gain acceptance by the medical field or become
commercially successful.
The
marketing and sale of Fusilev and Zevalin may be adversely
affected by the marketing and sales efforts of third parties who
sell these products outside the United States.
We have only licensed the rights to develop, market and sell
Fusilev in North America, and have licensed the rights to
develop, market and sell Zevalin in the United States. Other
companies market and sell the same products in other parts of
the world. If, as a result of their actions, negative publicity
is associated with the product, our own efforts to successfully
market and sell these products, may be adversely impacted.
The
development of our drug product, apaziquone, may be adversely
affected if the development efforts of Allergan, who retained
certain rights to the product, are not successful.
In 2008, we entered into a co-development and license agreement
with Allergan, Inc., or Allergan, for the worldwide development
and commercialization of our drug product, apaziquone. Allergan
has agreed to partially fund development and commercialization
expenses for apaziquone. We do not fully control the drug
development process under the license agreement. In addition, if
we do not achieve certain milestones under the license agreement
and it has been determined that failure to achieve these
milestones was a result of our actions or inactions, Allergan is
entitled to assume additional control over the development
process. As a result, success of this
35
product could depend, in part, upon the efforts of Allergan.
Allergan may not be successful in the clinical development of
the drug, obtaining approval of the product by regulatory
authorities, or the eventual commercialization of apaziquone.
The
development of our drug product, belinostat, may be adversely
affected if the development efforts of TopoTarget, who retained
certain rights to the product, are not successful.
TopoTarget licensed to us the rights to develop and market
belinostat in the United States, Canada, Mexico and India.
TopoTarget is currently fully funding and overseeing one
clinical study underway with Belinostat. In addition, TopoTarget
has agreed to partially fund other development expenses for
belinostat. We do not fully control the drug development process
under our agreement with TopoTarget. TopoTarget, or its
partners, may conduct their own clinical trials on belinostat
for regulatory approval in all other parts of the world. We will
not have control over such development activities and our
ability to attain regulatory approvals for belinostat may be
adversely impacted if its efforts are not successful.
The
development of our drug product, ozarelix, may be adversely
affected if the development efforts of Aeterna Zentaris, who
retained certain rights to the product, are not
successful.
Aeterna Zentaris licensed to us the rights to develop and market
ozarelix in the United States, Canada, Mexico and India. Aeterna
Zentaris, or its partners, may conduct their own clinical trials
on ozarelix for regulatory approval in all other parts of the
world. We will not have control over such development activities
and our ability to attain regulatory approvals for ozarelix may
be adversely impacted if its efforts are not successful.
The
development of our drug product, satraplatin, depends on the
efforts of a third party and, therefore, its eventual success or
commercial viability is largely beyond our
control.
In 2002, we entered into a co-development and license agreement
with GPC, for the worldwide development and commercialization of
our drug product, satraplatin. GPC has agreed to fully fund
development and commercialization expenses for satraplatin. We
do not have control over the drug development process and
therefore the success of this product depends upon the efforts
of GPC and any of its sublicensees. GPC may not be successful in
the clinical development of the drug, obtaining approval of the
product by regulatory authorities, or the eventual
commercialization of satraplatin.
Our
dependence on key executives, scientists and sales and marketing
personnel could impact the development and management of our
business.
We are highly dependent upon our ability to attract and retain
qualified scientific, technical sales & marketing and
managerial personnel. There is intense competition for qualified
personnel in the pharmaceutical and biotechnology industries,
and we cannot be sure that we will be able to continue to
attract and retain the qualified personnel necessary for the
development and management of our business. Although we do not
believe the loss of one individual would materially harm our
business, our business might be harmed by the loss of the
services of multiple existing personnel, as well as the failure
to recruit additional key scientific, technical and managerial
personnel in a timely manner. Much of the know-how we have
developed resides in our scientific and technical personnel and
is not readily transferable to other personnel. While we have an
employment agreement with our Chief Executive Officer, we do not
ordinarily enter into employment agreements with our other key
scientific, technical and managerial employees.
As we
evolve from a company primarily involved in development to a
company also involved in commercialization, we may encounter
difficulties in managing our growth and expanding our operations
successfully.
We only recently began commercial sales of our products and have
had to increase our personnel accordingly, including
establishing a direct sales force and complete commercial team.
In addition, as we advance our drug products through clinical
trials, we will need to expand our development, regulatory,
manufacturing, marketing and sales capabilities or contract with
third parties to provide these capabilities for us. As our
operations expand, we
36
expect that we will need to manage additional relationships with
such third parties, as well as additional collaborators and
suppliers. Maintaining these relationships and managing our
future growth will impose significant added responsibilities on
members of our management. We must be able to: manage our
development efforts effectively; manage our clinical trials
effectively; hire, train and integrate additional management,
development, administrative and sales and marketing personnel;
improve our managerial, development, operational and finance
systems and expand our facilities, all of which may impose a
strain on our administrative and operational infrastructure.
If we
acquire additional businesses, we may not successfully integrate
their operations.
We may acquire additional businesses that complement or augment
our existing business. Integrating any newly acquired business
could be expensive and time-consuming. We may not be able to
integrate any acquired business successfully or operate any
acquired business profitably. Our future financial performance
will depend, in part, on our ability to manage any future growth
effectively and our ability to integrate any acquired
businesses. We may not be able to accomplish these tasks, and
our failure to accomplish any of them could prevent us from
successfully growing our company.
Our
collaborations with outside scientists may be subject to change,
which could limit our access to their expertise.
We work with scientific advisors and collaborators at research
institutions. These scientists are not our employees and may
have other commitments that would limit their availability to
us. If a conflict of interest between their work for us and
their work for another entity arises, we may lose their
services, which could negatively impact our research and
development activities.
We may
rely on contract research organizations and other third parties
to conduct clinical trials and, in such cases, we are unable to
directly control the timing, conduct and expense of our clinical
trials.
We may rely, in full or in part, on third parties to conduct our
clinical trials. In such situations, we have less control over
the conduct of our clinical trials, the timing and completion of
the trials, the required reporting of adverse events and the
management of data developed through the trial than would be the
case if we were relying entirely upon our own staff.
Communicating with outside parties can also be challenging,
potentially leading to mistakes as well as difficulties in
coordinating activities. Outside parties may have staffing
difficulties, may undergo changes in priorities or may become
financially distressed, adversely affecting their willingness or
ability to conduct our trials. We may experience unexpected cost
increases that are beyond our control. Problems with the
timeliness or quality of the work of a contract research
organization may lead us to seek to terminate the relationship
and use an alternative service provider. However, making this
change may be costly and may delay our trials, and contractual
restrictions may make such a change difficult or impossible.
Additionally, it may be impossible to find a replacement
organization that can conduct our trials in an acceptable manner
and at an acceptable cost.
We are
subject to risks associated with doing business
internationally.
Since we conduct clinical trials and manufacture our drug
products internationally, our business is subject to certain
risks inherent in international business, many of which are
beyond our control. These risks include, among other things:
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maintaining compliance with foreign legal requirements,
including employment law;
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unexpected changes in foreign regulatory requirements, including
quality standards and other certification requirements;
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tariffs, customs, duties and other trade barriers;
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changing economic conditions in countries where our products are
manufactured;
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exchange rate risks;
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product liability, intellectual property and other claims;
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political instability;
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new export license requirements; and
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difficulties in coordinating and managing foreign operations.
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Any of these factors could have an adverse effect on our
business, financial condition and results of operations. We may
not be able to successfully manage these risks or avoid their
effects.
We may
have conflicts with our partners that could delay or prevent the
development or commercialization of our drug
products.
We may have conflicts with our partners, such as conflicts
concerning the interpretation of preclinical or clinical data,
the achievement of milestones, the interpretation of contractual
obligations, payments for services, development obligations or
the ownership of intellectual property developed during our
collaboration. If any conflicts arise with any of our partners,
such partner may act in a manner that is adverse to our best
interests. Any such disagreement could result in one or more of
the following, each of which could delay or prevent the
development or commercialization of our drug product, and in
turn prevent us from generating revenues:
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unwillingness on the part of a partner to pay us milestone
payments or royalties that we believe are due to us under a
collaboration;
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uncertainty regarding ownership of intellectual property rights
arising from our collaborative activities, which could prevent
us from entering into additional collaborations;
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unwillingness by the partner to cooperate in the development or
manufacture of the product, including providing us with product
data or materials;
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unwillingness on the part of a partner to keep us informed
regarding the progress of its development and commercialization
activities or to permit public disclosure of the results of
those activities;
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initiation of litigation or alternative dispute resolution
options by either party to resolve the dispute;
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attempts by either party to terminate the collaboration;
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our ability to maintain or defend our intellectual property
rights may be compromised by our partners acts or
omissions;
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a partner may utilize our intellectual property rights in such a
way as to invite litigation that could jeopardize or invalidate
our intellectual property rights or expose us to potential
liability;
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a partner may change the focus of their development and
commercialization efforts. As previously noted, pharmaceutical
and biotechnology companies historically have re-evaluated their
priorities following mergers and consolidations, which have been
common in recent years in these industries. The ability of our
products to reach their potential could be limited if future
partners decrease or fail to increase spending relating to such
products;
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unwillingness of a partner to fully fund or commit sufficient
resources to the testing, marketing, distribution or development
of our products;
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unwillingness or ability of a partner to fulfill their
obligations to us. A partner may develop alternative products
either on their own or in collaboration with others, or
encounter conflicts of interest or changes in business strategy
or other business issues; and/or
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we may not be able to guarantee supplies of development or
marketed products.
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Given these risks, it is possible that any collaborative
arrangements which we have or may enter into may not be
successful.
38
Our
efforts to acquire or in-license and develop additional drug
products may fail, which might limit our ability to grow our
business.
Our long-term strategy includes the acquisition or in-license of
additional drug products. We are actively seeking to acquire, or
in-license, additional commercial drug products as well as drug
products that have demonstrated positive pre-clinical
and/or
clinical data. We have certain criteria that we are looking for
in any drug product acquisition and we may not be successful in
locating and acquiring, or in-licensing, additional desirable
drug products on acceptable terms. In addition, many other large
and small companies within the pharmaceutical and biotechnology
industry seek to establish collaborative arrangements for
product research and development, or otherwise acquire products
in late-stage clinical development, in competition with us. We
face additional competition from public and private research
organizations, academic institutions and governmental agencies
in establishing collaborative arrangements for drug products in
late-stage clinical development. Many of the companies and
institutions that compete against us have substantially greater
capital resources, research and development staffs and
facilities than we have, and greater experience in conducting
business development activities. These entities represent
significant competition to us as we seek to expand our portfolio
through the in-license or acquisition of compounds. Moreover,
while it is not feasible to predict the actual cost of acquiring
additional drug products, that cost could be substantial and we
may need to raise additional financing, which may further dilute
existing stockholders, in order to acquire new drug products.
From
time to time we may need to license patents, intellectual
property and proprietary technologies from third parties, which
may be difficult or expensive to obtain.
We may need to obtain licenses to patents and other proprietary
rights held by third parties to successfully develop,
manufacture and market our drug products. As an example, it may
be necessary to use a third partys proprietary technology
to reformulate one of our drug products in order to improve upon
the capabilities of the drug product. If we are unable to timely
obtain these licenses on reasonable terms, our ability to
commercially exploit our drug products may be inhibited or
prevented.
We are
a small company relative to our principal competitors, and our
limited financial resources may limit our ability to develop and
market our drug products.
Many companies, both public and private, including well-known
pharmaceutical companies and smaller niche-focused companies,
are developing products to treat many, if not all, of the
diseases we are pursuing or are currently distributing drug
products that directly compete with the drugs that we sell or
that we intend to develop, market and distribute. Many of these
companies have substantially greater financial, research and
development, manufacturing, marketing and sales experience and
resources than us. As a result, our competitors may be more
successful than us in developing their products, obtaining
regulatory approvals and marketing their products to consumers.
Competition for branded or proprietary drugs is less driven by
price and is more focused on innovation in the treatment of
disease, advanced drug delivery and specific clinical benefits
over competitive drug therapies. We may not be successful in any
or all of our current clinical studies; or if successful, and if
one or more of our drug products is approved by the FDA, we may
encounter direct competition from other companies who may be
developing products for similar or the same indications as our
drug products. Companies that have products on the market or in
research and development that target the same indications as our
products target include, among others, Abraxis Bioscience, Inc.,
Astra Zeneca LP, Bayer AG, Endo Pharmaceuticals, Eli Lilly and
Co., Novartis Pharmaceuticals Corporation, Genentech, Inc.,
Bristol-Myers Squibb Company, GlaxoSmithKline, Biogen-IDEC
Pharmaceuticals, Inc., OSI Pharmaceuticals, Inc., Cephalon,
Inc., Sanofi-aventis, Inc., Pfizer, Inc., Genta Incorporated,
Merck, Celegen Corporate, Allos Therapeutics, Inc., BiPar
Sciences, Inc., Genzyme Corporation, Shire Pharmaceuticals,
Abbott Laboratories, Poniard Pharmaceuticals, Inc., Roche
Pharmaceuticals and Johnson & Johnson who may be more
advanced in the development of competing drug products or are
more established. Many of our competitors are large and
well-capitalized companies focusing on a wide range of diseases
and drug indications, and have substantially greater financial,
research and development, marketing, human and other resources
than we do. Furthermore, large pharmaceutical companies have
significantly more experience than we do in pre-clinical
testing, human clinical trials and regulatory approval
procedures, among other things.
39
Our
supply of drug products will be dependent upon the production
capabilities of contract manufacturing organizations (CMOs) and
component and packaging supply sources, and, if such CMOs are
not able to meet our demands, we may be limited in our ability
to meet demand for our products, ensure regulatory compliance or
maximize profit on the sale of our products.
We have no internal manufacturing capacity for our drug
products, and, therefore, we have entered into agreements with
CMOs to supply us with active pharmaceutical ingredients and our
finished dose drug products. Consequently, we will be dependent
on our CMO partners for our supply of drug products. Some of
these manufacturing facilities are located outside the United
States. The manufacture of finished drug products, including the
acquisition of compounds used in the manufacture of the finished
drug product, may require considerable lead times. We will have
little or no control over the production process. Accordingly,
while we do not currently anticipate shortages of supply, there
could arise circumstances in which we will not have adequate
supplies to timely meet our requirements or market demand for a
particular drug product could outstrip the ability of our supply
source to timely manufacture and deliver the product, thereby
causing us to lose sales. In addition, our ability to make a
profit on the sale of our drug products depends on our ability
to obtain price arrangements that ensure a supply of product at
favorable prices.
Reliance on CMOs entails risks to which we would not be subject
if we manufactured products ourselves, including reliance on the
third party for regulatory compliance and adherence to the
FDAs current Good Manufacturing Practice (cGMP)
requirements, the possible breach of the manufacturing agreement
by the CMO and the possibility of termination or non-renewal of
the agreement by the CMO, based on its own business priorities,
at a time that is costly or inconvenient for us. Before we can
obtain marketing approval for our drug products, our CMO
facilities must pass an FDA pre-approval inspection. In order to
obtain approval, all of the facilitys manufacturing
methods, equipment and processes must comply with cGMP
requirements. The cGMP requirements govern all areas of record
keeping, production processes and controls, personnel and
quality control. In addition, our CMOs will be subject to
on-going periodic inspection by the FDA and corresponding state
and foreign agencies for compliance with cGMP regulations,
similar foreign regulations and other regulatory standards. We
do not have control over our CMOs compliance with these
regulations and standards. Any failure of our third party
manufacturers or us to comply with applicable regulations,
including an FDA pre-approval inspection and cGMP requirements,
could result in sanctions being imposed on them or us, including
warning letters, fines, injunctions, civil penalties, failure of
regulatory authorities to grant marketing approval of our
products, delay, suspension or withdrawal of approvals, license
revocation, seizures or recalls of product, operation
restrictions and criminal prosecutions, any of which could
significantly and adversely affect our business.
We may
not be successful in establishing additional active
pharmaceutical ingredient or finished dose drug supply
relationships, which would limit our ability to develop and
market our drug products.
Success in the development and marketing of our drugs depends in
part upon our ability to maintain, expand and enhance our
existing relationships and establish new sources of supply for
active pharmaceutical ingredients (API) or for the manufacture
of our finished dose drug products. We do not presently intend
to focus our research and development efforts on developing APIs
or manufacturing of finished dosage form for our drugs. In
addition, we currently have no capacity to manufacture APIs or
finished dose drug products and do not intend to spend our
capital resources to develop the capacity to do so. Therefore,
we must rely on relationships with API suppliers and other CMOs,
to supply our APIs and finished dose drug products. We may not
be successful in maintaining, expanding or enhancing our
existing relationships or in securing new relationships with API
suppliers or CMOs. If we fail to maintain or expand our existing
relationships or secure new relationships, our ability to
develop and market our drug products could be harmed.
We rely on contract suppliers to supply our existing products,
and will likely do the same for other products that we may
develop, commercialize or acquire in the future. Contract
suppliers may not be able to meet our needs with respect to
timing, cost, quantity or quality. All of our suppliers are
sole-source suppliers, including for Zevalin and Fusilev, and no
currently qualified alternative suppliers exist. If problems
arise during the production of a batch of our products, that
batch of product may have to be discarded. This could, among
other things, lead to increased costs, lost revenue, damage to
customer relations, time and expense spent investigating the
cause and, depending on the cause, similar losses with respect
to other batches or products. If problems are not discovered
before the product
40
is released to the market, recall and product liability costs
may also be incurred. To the extent that one of our suppliers
experiences significant manufacturing problems, this could have
a material adverse effect on our revenues and profitability.
If we are unable to obtain a sufficient supply of our required
products and services on acceptable terms, or if we should
encounter delays or difficulties in our relationships with our
manufacturers, or if any required approvals by the FDA and other
regulatory authorities do not occur on a timely basis, we will
lose sales. Moreover, contract suppliers that we may use must
continually adhere to current good manufacturing practices
enforced by the FDA. If the facilities of these suppliers cannot
pass an inspection, we may lose FDA approval of our products.
Failure to obtain products for sale for any reason may result in
an inability to meet product demand and a loss of potential
revenues.
Our
drug products may not be more effective, safer or more
cost-efficient than a competing drug and otherwise may not have
any competitive advantage, which could hinder our ability to
successfully commercialize our drug products.
Any drug product for which we obtain FDA approval must compete
for market acceptance and market share. Drugs produced by other
companies are currently on the market for each disease type we
are pursuing. Even if one or more of our drug development
products ultimately receives FDA approval, our drug products may
not have better efficacy in treating the target indication than
a competing drug, may not have a more favorable side-effect
profile than a competing drug, may not be more cost-efficient to
manufacture or apply, or otherwise may not demonstrate a
competitive advantage over competing therapies. Accordingly,
even if FDA approval is obtained for one or more of our drug
development products, they may not gain acceptance by the
medical field or become commercially successful.
The
size of the market for our potential products is
uncertain.
We often provide estimates of the number of people who suffer
from the diseases that our drugs are targeting. However, there
is limited information available regarding the actual size of
these patient populations. In addition, it is uncertain whether
the results from previous or future clinical trials of drug
products will be observed in broader patient populations, and
the number of patients who may benefit from our drug products
may be significantly smaller than the estimated patient
populations.
If
actual future payments for allowances, discounts, returns,
rebates and chargebacks exceed the estimates we made at the time
of the sale of our products, our financial position, results of
operations and cash flows may be materially and negatively
impacted.
We recognize product revenue net of estimated allowances for
discounts, returns, rebates and chargebacks. Such estimates
require our most subjective and complex judgment due to the need
to make estimates about matters that are inherently uncertain.
Based on industry practice, pharmaceutical companies, including
us, have liberal return policies. Generally, we are obligated to
accept from customers the return of pharmaceuticals that have
reached their expiration date up to twelve months after
their expiration. We authorize returns for damaged products and
exchanges for expired products in accordance with our return
goods policy and procedures. In addition, like our competitors,
we also give credits for chargebacks to wholesale customers that
have contracts with us for their sales to hospitals, group
purchasing organizations, pharmacies or other retail customers.
A chargeback is the difference between the price the wholesale
customer (in our case, the GPOs) pays (wholesale acquisition
cost) and the price that the GPOs end-customer pays for a
product (contracted customer). Since we have only recently begun
commercial distribution of our products, we do not have
historical data on returns and allowances. Although we have
estimated the allowances very conservatively, actual results may
differ significantly from our estimated allowances for
discounts, returns, rebates and chargebacks. Changes in
estimates and assumptions based upon actual results may have a
material impact on our results of operations
and/or
financial condition. Such changes to estimates will be made to
the financial statements in the year in which the estimate is
charged. In addition, our financial position, results of
operations and cash flows may be materially and negatively
impacted if actual future payments for allowances, discounts,
returns, rebates and chargebacks exceed the estimates we made at
the time of the sale of our products.
41
Risks
Related to Our Industry
If
third-party payors do not adequately reimburse providers for any
of our products, if approved for marketing, we may not be
successful in selling them.
Our ability to commercialize any products successfully will
depend in part on the extent to which reimbursement will be
available from governmental and other third-party payors, both
in the United States and in foreign markets. Even if we succeed
in bringing one or more products to the market, the amount
reimbursed for our products may be insufficient to allow us to
compete effectively and could adversely affect our profitability.
Reimbursement by a governmental and other third-party payors may
depend upon a number of factors, including a governmental or
other third-party payors determination that use of a
product is:
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a covered benefit under its health plan;
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safe, effective and medically necessary;
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appropriate for the specific patient;
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cost-effective; and
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neither experimental nor investigational.
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Obtaining reimbursement approval for a product from each
third-party and governmental payor is a time-consuming and
costly process that could require us to provide supporting
scientific, clinical and cost-effectiveness data for the use of
our products to each payor. We may not be able to provide data
sufficient to obtain reimbursement.
In the United States, there have been, and we expect there will
continue to be, a number of state and federal proposals that
limit the amount that private insurance plans may pay to
reimburse the cost of drugs, including our products. We believe
the increasing emphasis on managed care in the United States has
and will continue to put pressure on the price and usage of our
products, which may also impact sales of our products. In
addition, current third-party reimbursement policies for our
products may change at any time. Negative changes in
reimbursement or our failure to obtain reimbursement for our
products may reduce the demand for, or the price of, products,
which could result in lower sales of our products, thereby
weakening our competitive position and negatively impacting our
results of operations.
Eligibility for coverage does not imply that any drug product
will be reimbursed in all cases or at a rate that allows us to
make a profit. Interim payments for new products, if applicable,
may also not be sufficient to cover our costs and may not become
permanent. Reimbursement rates may vary according to the use of
the drug and the clinical setting in which it is used, may be
based on payments allowed for lower-cost drugs that are already
reimbursed, may be incorporated into existing payments for other
products or services, and may reflect budgetary constraints
and/or
Medicare or Medicaid data used to calculate these rates. Net
prices for products also may be reduced by mandatory discounts
or rebates required by government health care programs or by any
future relaxation of laws that restrict imports of certain
medical products from countries where they may be sold at lower
prices than in the United States.
Wholesaler
actions could increase competitive and pricing pressures on
pharmaceutical manufacturers, including us.
We sell Fusilev primarily through wholesalers. These wholesale
customers comprise a significant part of the distribution
network for pharmaceutical products in the United States. A
small number of large wholesale distributors control a
significant share of the market, which can increase competitive
and pricing pressures on pharmaceutical manufacturers, including
us. In addition, wholesalers may apply pricing pressure through
fee-for-service
arrangements, and their purchases may exceed customer demand,
resulting in reduced wholesaler purchases in later quarters. We
cannot assure you that we can manage these pressures or that
wholesaler purchases will not decrease as a result of this
potential excess buying.
42
Rapid
bio-technological advancement may render our drug products
obsolete before we are able to recover expenses incurred in
connection with their development. As a result, our drug
products may never become profitable.
The pharmaceutical industry is characterized by rapidly evolving
biotechnology. Biotechnologies under development by other
pharmaceutical companies could result in treatments for diseases
and disorders for which we are developing our own treatments.
Several other companies are engaged in research and development
of compounds that are similar to our research. A competitor
could develop a new biotechnology, product or therapy that has
better efficacy, a more favorable side-effect profile or is more
cost-effective than one or more of our drug products and thereby
cause our drug products to become commercially obsolete. Some of
our drug products may become obsolete before we recover the
expenses incurred in their development. As a result, such
products may never become profitable.
Competition
for patients in conducting clinical trials may prevent or delay
product development and strain our limited financial
resources.
Many pharmaceutical companies are conducting clinical trials in
patients with the disease indications that our drug products
target. As a result, we must compete with them for clinical
sites, physicians and the limited number of patients who fulfill
the stringent requirements for participation in clinical trials.
Also, due to the confidential nature of clinical trials, we do
not know how many of the eligible patients may be enrolled in
competing studies and who are consequently not available to us
for our clinical trials. Our clinical trials may be delayed or
terminated due to the inability to enroll enough patients to
complete our clinical trials. Patient enrollment depends on many
factors, including the size of the patient population, the
nature of the trial protocol, the proximity of patients to
clinical sites and the eligibility criteria for the study. The
delay or inability to meet planned patient enrollment may result
in increased costs and delays or termination of the trial, which
could have a harmful effect on our ability to develop products.
Failure
to obtain regulatory approval outside the United States will
prevent us from marketing our product candidates
abroad.
We intend to market certain of our existing and future product
candidates in
non-U.S. markets.
In order to market our existing and future product candidates in
the European Union and many other
non-U.S. jurisdictions,
we must obtain separate regulatory approvals according to the
applicable domestic laws and regulations. We have had limited
interactions with
non-U.S. regulatory
authorities, and the approval procedures vary among countries
and can involve additional testing, and the time required to
obtain approval may differ from that required to obtain FDA
approval. Approval by the FDA does not guarantee approval by
regulatory authorities in other countries, and approval by one
or more
non-U.S. regulatory
authorities does not necessarily ensure approval by regulatory
authorities in other countries or by the FDA. The
non-U.S. regulatory
approval process may include all of the risks associated with
obtaining FDA approval as well as other risks specific to the
jurisdictions in which we may seek approval. We may not obtain
non-U.S. regulatory
approvals on a timely basis, if at all. We may not be able to
file for
non-U.S. regulatory
approvals and may not receive necessary approvals to
commercialize our existing and future product candidates in any
market.
Even
after we receive regulatory approval to market our drug
products, the market may not be receptive to our drug products
upon their commercial introduction, which would negatively
impact our ability to achieve profitability.
Our drug products may not gain market acceptance among
physicians, patients, healthcare payors and the medical
community. The degree of market acceptance of any approved drug
products will depend on a number of factors, including:
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the effectiveness of the drug product;
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the prevalence and severity of any side effects;
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Potential advantages or disadvantages over alternative
treatments;
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relative convenience and ease of administration;
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the strength of marketing and distribution support;
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the price of the drug product, both in absolute terms and
relative to alternative treatments; and
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sufficient third-party coverage or reimbursement.
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If our drug products receive regulatory approval but do not
achieve an adequate level of acceptance by physicians,
healthcare payors and patients, we may not generate drug product
revenues sufficient to attain profitability.
Guidelines
and recommendations published by various organizations can
reduce the use of our products.
Government agencies such as the Centers for Medicare &
Medicaid Services promulgate regulations, and issue guidelines,
directly applicable to us and to our products. In addition,
third parties such as professional societies, practice
management groups, insurance carriers, physicians, private
health/science foundations and organizations involved in various
diseases from time to time may publish guidelines or
recommendations to healthcare providers, administrators and
payers, and patient communities. Recommendations may relate to
such matters as usage, dosage, route of administration and use
of related therapies and reimbursement of our products by
government and private payers. Third-party organizations like
the above have in the past made recommendations about our
products. Recommendations or guidelines that are followed by
patients and healthcare providers could result in decreased use
and/or
dosage of our products.
Any recommendations or guidelines that result in decreased use,
dosage or reimbursement of our products could adversely affect
our product sales and operating results materially. In addition,
the perception by the investment community or stockholders that
such recommendations or guidelines will result in decreased use
and dosage of our products could adversely affect the market
price for our common stock.
Our
failure to comply with governmental regulations may delay or
prevent approval of our drug products and/or subject us to
penalties.
The FDA and comparable agencies in foreign countries impose many
requirements related to the drug development process through
lengthy and rigorous clinical testing and data collection
procedures, and other costly and time consuming compliance
procedures. While we believe that we are currently in compliance
with applicable FDA regulations, if our partners, the contract
research organizations or contract manufacturers with which we
have relationships, or we fail to comply with the regulations
applicable to our clinical testing, the FDA may delay, suspend
or cancel our clinical trials, or the FDA might not accept the
test results. The FDA, an institutional review board, third
party investigators, any comparable regulatory agency in another
country, or we, may suspend clinical trials at any time if the
trials expose subjects participating in such trials to
unacceptable health risks. Further, human clinical testing may
not show any current or future drug product to be safe and
effective to the satisfaction of the FDA or comparable
regulatory agencies, or the data derived from the clinical tests
may be unsuitable for submission to the FDA or other regulatory
agencies. Once we submit an application seeking approval to
market a drug product, the FDA or other regulatory agencies may
not issue their approvals on a timely basis, if at all. If we
are delayed or fail to obtain these approvals, our business and
prospects may be significantly damaged.
If we obtain regulatory approval for our drug products, we, our
partners, our manufacturers, and other contract entities will
continue to be subject to extensive requirements by a number of
national, foreign, state and local agencies. These regulations
will impact many aspects of our operations, including testing,
research and development, manufacturing, safety, effectiveness,
labeling, storage, quality control, adverse event reporting,
record keeping, approval, advertising and promotion of our
future products. Failure to comply with applicable regulatory
requirements could, among other things, result in:
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warning letters;
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fines;
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changes in advertising;
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revocation or suspension of regulatory approvals of products;
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product recalls or seizures;
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delays, interruption, or suspension of product distribution,
marketing and sale;
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civil or criminal sanctions;
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suspend or terminate any of our ongoing clinical trials;
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impose restrictions on our operations;
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close the facilities of our contract manufacturers; and
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refusals to approve new products.
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The
discovery of previously unknown safety risks with drug products
approved to go to market may raise costs or prevent us from
marketing such products or change the labeling of our products
or take other potentially limiting or costly actions if we or
others identify safety risks after our products are on the
market.
The later discovery of previously unknown safety risks with our
products may result in restrictions of the drug product,
including withdrawal from the market. The FDA may revisit and
change its prior determinations with regard to the safety and
efficacy of our products. If the FDAs position changes, we
may be required to change our labeling or to cease manufacture
and marketing of the products at issue. Even prior to any formal
regulatory action, we could voluntarily decide to cease the
distribution and sale or recall any of our products if concerns
about their safety or effectiveness develop.
On September 27, 2007, President Bush signed into law the
Food and Drug Administration Amendments Act of 2007,
significantly adding to the FDAs authority including
allowing the FDA to (i) require sponsors of marketed
products to conduct post-approval clinical studies to assess a
known serious risk, signals of serious risk or to identify an
unexpected serious risk; (ii) mandate labeling changes to
products, at any point in a products lifecycle, based on
new safety information and (iii) require sponsors to
implement a Risk Evaluation and Mitigation Strategy (REMS), for
a product which could include a medication guide, patient
package insert, a communication plan to healthcare providers, or
other elements as the FDA deems are necessary to assure safe use
of the drug (either prior to approval or post-approval as
necessary), which could include imposing certain restrictions on
distribution or use of a product. Failure to comply with a REMS
could result in significant civil monetary penalties or other
administrative actions by FDA. Further, regulatory agencies
could change existing, or promulgate new, regulations at any
time which may affect our ability to obtain or maintain approval
of our existing or future products or require significant
additional costs to obtain or maintain such approvals.
Our
failure to comply with FDA (and related) regulations applicable
to our business may subject us to sanctions, which could damage
our reputation and adversely affect our business
condition.
In the U.S., the FDA, and comparable state regulatory agencies
and enforcement authorities, impose requirements on us as a
manufacturer and marketer of prescription drug products. Drug
manufacturers are required to register with FDA, and are
required to comply with various regulatory requirements
regarding drug research, manufacturing, distribution, reporting
and recordkeeping. Most drug products must be approved by the
FDA prior to marketing, and companies are required to comply
with numerous post-marketing requirements. Drug manufacturing
establishments are subject to inspection by the FDA for
compliance with cGMP regulations and other applicable
regulations.
Further, drug manufacturers are required to comply with FDA
requirements for labeling and advertising, as well as other
Federal and state requirements for advertising. This includes a
prohibition on promotion for unapproved or off-label
uses,
e.g.
, promotion of products for uses that are not
described in the products FDA-approved labeling. While a
physician may prescribe a medication for off-label uses where
appropriate, companies may not generally promote drug products
for off-label uses.
If FDA or other Federal and state agencies believe that a
company is not in compliance with applicable regulations, they
have various enforcement authorities to address violations. FDA
can issue a warning letter and seek voluntary compliance from a
company in the form of remedial or corrective action. FDA may
also impose civil
45
money penalties by administrative action, and through judicial
enforcement seek actions including injunctions, seizures, and
criminal penalties. FDA or other Federal and state authorities
may also seek operating restrictions on a company in order to
achieve compliance, including termination or suspension of
company activities. Such agencies and enforcement authorities
may also disseminate information to the public about their
enforcement actions.
If we were to become subject to any FDA or similar enforcement
action related to any of our drug products, our business
condition could be adversely affected, and the public release of
such information could be damaging to our reputation.
Legislative
or regulatory reform of the healthcare system and pharmaceutical
industry related to pricing or reimbursement may hurt our
ability to sell our products profitably or at all.
In both the United States and certain foreign jurisdictions,
there have been and may continue to be a number of legislative
and regulatory proposals related to pricing and reimbursement
that could impact our ability to sell our products profitably.
The Patient Protection and Affordable Care Act (PPACA) signed
into law on March 23, 2010 enacted provision including a
revision to the definition of average manufacturer
price for reporting purposes, increasing Medicaid rebates,
expanding the 340B drug discount program, and making changes to
affect the Medicare Part D coverage gap, or donut
hole. These reforms will significantly impact the
pharmaceutical industry; however, the full effects will take as
these laws are implemented and the Centers for
Medicare & Medicaid Services and other agencies issue
applicable regulations or guidance. Moreover, in the coming
years, additional changes could be made to governmental
healthcare programs that could significantly impact the success
of our products.
Moreover, in the coming years, additional changes could be made
to governmental healthcare programs, and the delivery of
healthcare generally, that could significantly impact the
success of our products. The sales of our products depend in
part on the availability of reimbursement from third-party
payors such as government health administration authorities,
private health insurers, health maintenance organizations
including pharmacy benefit managers and other health
care-related organizations. Both the Federal and state
governments in the U.S. and foreign governments continue to
propose and pass new legislation and regulations designed to
contain or reduce the cost of health care. Such legislation and
regulations may result in decreased reimbursement for
prescription drugs, which may further exacerbate industry-wide
pressure to reduce the prices charged for prescription drugs.
This could harm our ability to market our products and generate
revenues.
It is possible that proposals will be adopted, or existing
regulations that affect the coverage or pricing of
pharmaceutical and other medical products may change, before any
of our products are approved for marketing. Cost control
initiatives could decrease the price that we receive for any of
our products that we are developing. In addition, third-party
payors are increasingly challenging the price and
cost-effectiveness of medical products and services. Significant
uncertainty exists as to the reimbursement status of
newly-approved pharmaceutical products.
The high cost of pharmaceutical prices continues to generate
substantial government interest. Various governmental entities
may focus on pharmaceutical prices by holding hearings or
launching investigations regarding the pricing for drugs by
pharmaceutical companies such as ours and the ability of
patients to obtain drugs. In December 2009, the Government
Accounting Office released its report on the growing cost of
brand-name prescription drugs. In addition, in July 2008, the
Joint Economic Committee of Congress held hearings on the
pricing of drugs for rare conditions. Based on further
developments, we may be required to decrease the price that we
charge for our products, thereby negatively affecting our
financial results.
In some foreign countries, particularly in the European Union,
prescription drug pricing is subject to governmental control.
Drug pricing may be made against a reference price set by the
healthcare providers as a measure for healthcare cost
containment. Pricing negotiations with governmental authorities
can take considerable time after the receipt of marketing
approval for a product. To obtain reimbursement or pricing
approval in some countries, we may be required to conduct a
clinical trial that seeks to address the clinical effectiveness
and cost-effectiveness of our product candidate as compared with
other available therapies as part of the health technology
assessment. If reimbursement of our products is unavailable or
limited in scope or amount, or if pricing is set at
unsatisfactory levels for the purpose of adoption of these
products in the national health services in these jurisdictions,
our profitability will likely be negatively affected.
46
If we
market products in a manner that violates health care
anti-kickback or other anti-fraud and
anti-abuse
laws, we may be subject to civil or criminal penalties,
including exclusions from participation in Federal health care
programs.
The Federal health care program anti-kickback statute prohibits,
among other things, knowingly and willfully offering, paying,
soliciting, or receiving remuneration to induce or in return for
purchasing, leasing, ordering, or arranging for the purchase,
lease or order of any health care item or service reimbursable
under Medicare, Medicaid or other federally financed health care
programs. This statute applies to arrangements between
pharmaceutical manufacturers and prescribers, purchasers and
formulary managers. Although there are a number of statutory
exemptions and regulatory safe harbors protecting certain common
activities, the exemptions and safe harbors are drawn narrowly,
and practices that involve remuneration intended to induce
prescribing, purchases or recommendations may be subject to
scrutiny if they do not qualify for an exemption or safe harbor.
Federal false claims laws prohibit any person from knowingly
presenting, or causing to be presented, a false claim for
payment to the Federal government, or knowingly making, or
causing to be made, a false statement to get a false claim paid.
Pharmaceutical companies have been prosecuted under these laws
for a variety of alleged promotional and marketing activities,
such as providing free product to customers with the expectation
that the customers would bill Federal programs for the product;
reporting to pricing services inflated average wholesale prices
that were then used by Federal programs to set reimbursement
rates; engaging in off-label promotion that caused claims to be
submitted to Medicaid for non-covered off-label uses; and
submitting inflated best price information to the Medicaid
Rebate Program.
The Health Insurance Portability and Accountability Act of 1996
also created prohibitions against health care fraud and false
statements relating to health care matters. The health care
fraud statute prohibits knowingly and willfully executing a
scheme to defraud any health care benefit program, including
private payors. The false statements statute prohibits knowingly
and willfully falsifying, concealing or covering up a material
fact or making any materially false, fictitious or fraudulent
statement in connection with the delivery of or payment for
health care benefits, items or services.
The majority of states also have statutes or regulations similar
to these Federal laws, which apply to items and services
reimbursed under Medicaid and other state programs, or, in
several states, apply regardless of the payor. In addition, some
states have laws that require pharmaceutical companies to adopt
comprehensive compliance programs. For example, under California
law, pharmaceutical companies must comply with both the April
2003 Office of Inspector General Compliance Program Guidance for
Pharmaceutical Manufacturers and the PhRMA Code on Interactions
with Healthcare Professionals, as amended. We have adopted and
implemented a compliance program which we believe satisfies the
applicable requirements of California law.
Sanctions under these Federal and state laws may include civil
monetary penalties, exclusion of a manufacturers products
from reimbursement under government programs, criminal fines and
imprisonment. Because of the breadth of these laws and the
narrowness of the safe harbors, it is possible that some of our
business activities could be subject to challenge under one or
more of such laws. The PPACA makes several important changes to
the federal anti-kickback statute, false claims laws, and health
care fraud statute for example by weakening the
intent requirement for under the anti-kickback and health care
fraud statutes that may make it easier for the
government, or whistleblowers to charge such fraud and abuse
violations. In addition, the PPACA increase penalties for fraud
and abuse violations. If our past, present or future operations
are found to be in violation of any of the laws described above
or other similar governmental regulations to which we are
subject, we may be subject to the applicable penalty associated
with the violation which could adversely affect our ability to
operate our business and our financial results.
If we
are unable to adequately protect our technology or enforce our
patent rights, our business could suffer.
Our success with the drug products that we develop will depend,
in part, on our ability and the ability of our licensors to
obtain and maintain patent protection for these products. We
currently have a number of United States and foreign patents
issued and pending, however, we primarily rely on patent rights
licensed from others. Our license agreements generally give us
the right
and/or
obligation to maintain and enforce the subject patents. We may
not receive patents for any of our pending patent applications
or any patent applications we may file in the future. If our
pending and future patent applications are not allowed or, if
allowed and issued into patents, if such patents and
47
the patents we have licensed are not upheld in a court of law,
our ability to competitively exploit our drug products would be
substantially harmed. Also, such patents may or may not provide
competitive advantages for their respective products or they may
be challenged or circumvented by our competitors, in which case
our ability to commercially exploit these products may be
diminished.
The patent positions of pharmaceutical and biotechnology
companies can be highly uncertain and involve complex legal and
factual questions. No consistent policy regarding the breadth of
claims allowed in pharmaceutical and biotechnology patents has
emerged to date in the United States. The laws of many countries
may not protect intellectual property rights to the same extent
as United States laws, and those countries may lack adequate
rules and procedures for defending our intellectual property
rights. Filing, prosecuting and defending patents on all our
products or product candidates throughout the world would be
prohibitively expensive. Competitors may use our technologies in
jurisdictions and may not be covered by any of our patent claims
or other intellectual property rights.
Changes in either patent laws or in interpretations of patent
laws in the United States and other countries may diminish the
value of our intellectual property. We do not know whether any
of our patent applications will result in the issuance of any
patents, and we cannot predict the breadth of claims that may be
allowed in our patent applications or in the patent applications
we license from others.
The degree of future protection for our proprietary rights is
uncertain because legal means afford only limited protection and
may not adequately protect our rights or permit us to gain or
keep our competitive advantage. For example:
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in certain jurisdictions, we or our licensors might not have
been the first to make the inventions covered by each of our or
our licensors pending patent applications and issued
patents, and we may have to participate in expensive and
protracted interference proceedings to determine priority of
invention;
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we or our licensors might not have been the first to file patent
applications for these inventions;
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others may independently develop similar or alternative product
candidates or duplicate any of our or our licensors
product candidates;
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our or our licensors pending patent applications may not
result in issued patents;
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our or our licensors issued patents may not provide a
basis for commercially viable products or may not provide us
with any competitive advantages or may be challenged by third
parties;
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others may design around our or our licensors patent
claims to produce competitive products that fall outside the
scope of our or our licensors patents;
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we may not develop or in-license additional patentable
proprietary technologies related to our product
candidates; or
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the patents of others may prevent us from marketing one or more
of our product candidates for one or more indications that may
be valuable to our business strategy.
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Moreover, an issued patent does not guarantee us the right to
practice the patented technology or commercialize the patented
product. Third parties may have blocking patents that could be
used to prevent us from commercializing our patented products
and practicing our patented technology. Our issued patents and
those that may be issued in the future may be challenged,
invalidated or circumvented, which could limit our ability to
prevent competitors from marketing related product candidates or
could limit the length of the term of patent protection of our
product candidates. In addition, our competitors may
independently develop similar technologies. Moreover, because of
the extensive time required for development, testing and
regulatory review of a potential product, it is possible that,
before any of our product candidates can be commercialized, any
related patent may expire or remain in force for only a short
period following commercialization, thereby reducing any
advantage of the patent.
We also rely on trade secret protection and contractual
protections for our unpatented, confidential and proprietary
technology. Trade secrets are difficult to protect. While we
enter into confidentiality agreements with our employees,
consultants and others, these agreements may not successfully
protect our trade secrets or other
48
confidential and proprietary information. It is possible that
these agreements will be breached, or that they will not be
enforceable in every instance, and that we will not have
adequate remedies for any such breach. Likewise, although we
conduct periodic trade secret audits of certain partners,
vendors and contract manufacturers, these trade secret audits
may not protect our trade secrets or other confidential and
proprietary information. It is possible that despite having
certain trade secret audited security measures in place, trade
secrets or other confidential and proprietary information may
still be leaked or disclosed to a third party. It is also
possible that our trade secrets will become known or
independently developed by our competitors.
If we are unable to adequately protect our technology, trade
secrets or proprietary know-how, or enforce our patents, our
business, financial condition and prospects could suffer.
Intellectual
property rights are complex and uncertain and therefore may
subject us to infringement claims.
The patent positions related to our drug products are inherently
uncertain and involve complex legal and factual issues. Although
we are not aware of any infringement by any of our drug products
on the rights of any third party, there may be third party
patents or other intellectual property rights, including
trademarks and copyrights, relevant to our drug products of
which we are not aware. Third parties may assert patent or other
intellectual property infringement claims against us with
products. This could draw us into costly litigation as well as
result in the loss of our use of the intellectual property that
is critical to our business strategy.
Intellectual
property litigation is increasingly common and increasingly
expensive and may result in restrictions on our business and
substantial costs, even if we prevail.
Patent and other intellectual property litigation is becoming
more common in the pharmaceutical industry. Litigation is
sometimes necessary to defend against or assert claims of
infringement, to enforce our patent rights, including those we
have licensed from others, to protect trade secrets or to
determine the scope and validity of proprietary rights of third
parties. Currently, no third party is asserting that we are
infringing upon their patent rights or other intellectual
property, nor are we aware or believe that we are infringing
upon any third partys patent rights or other intellectual
property. We may, however, be infringing upon a third
partys patent rights or other intellectual property, and
litigation asserting such claims might be initiated in which we
would not prevail, or we would not be able to obtain the
necessary licenses on reasonable terms, if at all. All such
litigation, whether meritorious or not, as well as litigation
initiated by us against third parties, is time-consuming and
very expensive to defend or prosecute and to resolve. In
addition, if we infringe the intellectual property rights of
others, we could lose our right to develop, manufacture or sell
our products or could be required to pay monetary damages or
royalties to license proprietary rights from third parties. An
adverse determination in a judicial or administrative proceeding
or a failure to obtain necessary licenses could prevent us from
manufacturing or selling our products, which could harm our
business, financial condition and prospects.
If our competitors prepare and file patent applications in the
United States or Europe that claim technology we also claim, we
may have to participate in interference proceedings required by
the USPTO to determine priority of invention or opposition
proceedings in Europe, both of which could result in substantial
costs, even if we ultimately prevail. Results of interference
and opposition proceedings are highly unpredictable and may
result in us having to try to obtain licenses in order to
continue to develop or market certain of our drug products.
We may
be subject to damages resulting from claims that we, or our
employees, have wrongfully used or disclosed alleged trade
secrets of our employees former employers.
Many of our employees were previously employed at universities
or biotechnology or pharmaceutical companies, including our
competitors or potential competitors. Although we have not
received any claim to date, we may be subject to claims that
these employees through their employment inadvertently or
otherwise used or disclosed trade secrets or other proprietary
information of their former employers. Litigation may be
necessary to defend against these claims. If we fail in
defending such claims, in addition to paying monetary damages,
we may lose valuable intellectual property rights or personnel.
49
We may
be subject to product liability claims, and may not have
sufficient product liability insurance to cover any such claims,
which may expose us to substantial liabilities.
We may be held liable if any product we or our partners develop
causes injury or is found otherwise unsuitable during product
testing, manufacturing, clinical trials, marketing or sale.
Regardless of merit or eventual outcome, product liability
claims could result in decreased demand for our product
candidates, injury to our reputation, withdrawal of patients
from our clinical trials, substantial monetary awards to trial
participants and the inability to commercialize any products
that we may develop. These claims might be made directly by
consumers, health care providers, pharmaceutical companies or
others selling or testing our products. Although we currently
carry product liability insurance in the amount of at least
$15.0 million in the aggregate, it is possible that this
coverage will be insufficient to protect us from future claims.
However, our insurance may not reimburse us or may not be
sufficient to reimburse us for expenses or losses we may suffer.
Moreover, if insurance coverage becomes more expensive, we may
not be able to maintain insurance coverage at a reasonable cost
or in sufficient amounts to protect us against losses due to
liability. Failure to maintain sufficient insurance coverage
could have a material adverse effect on our business, prospects
and results of operations if claims are made that exceed our
coverage.
On occasion, juries have awarded large judgments in class action
lawsuits for claims based on drugs that had unanticipated side
effects. In addition, the pharmaceutical and biotechnology
industries, in general, have been subject to significant medical
malpractice litigation. A successful product liability claim or
series of claims brought against us could harm our reputation
and business and would decrease our cash reserves.
The use of hazardous materials, including radioactive and
biological materials, in our research and development and
commercial efforts imposes certain compliance costs on us and
may subject us to liability for claims arising from the use or
misuse of these materials.
Our research and development, manufacturing (including a
radiolabeling step for Zevalin) and administration of our drugs
involves the controlled use of hazardous materials, including
chemicals, radioactive and biological materials, such as
radioactive isotopes, which is done by qualified third parties;
in essence. We do not physically handle these radioactive
isotopes or such hazardous materials. We are subject to federal,
state and local laws and regulations governing the storage, use
and disposal of these materials and some waste products. We
believe that our safety procedures for the storage, use and
disposal of these materials comply with the standards prescribed
by federal, state and local regulations. However, we cannot
completely eliminate the risk of accidental contamination or
injury from these materials. If there were to be an accident, we
could be held liable for any damages that result, which could
exceed our financial resources. We currently maintain insurance
coverage for injuries resulting from the hazardous materials we
use; however, future claims may exceed the amount of our
coverage. Also, we do not have insurance coverage for pollution
cleanup and removal. Currently the costs of complying with
federal, state and local regulations are not significant, and
consist primarily of waste disposal expenses, however, they
could become expensive, and current or future environmental
regulations may impair our research, development, production and
commercialization efforts.
Risks
Related to Our Common Stock
There
are a substantial number of shares of our common stock eligible
for future sale in the public market. The sale of these shares
could cause the market price of our common stock to fall. Any
future equity issuances by us may have dilutive and other
effects on our existing stockholders.
As of March 29, 2010, there were approximately
49.2 million shares of our common stock outstanding, and in
addition, security holders held options, warrants and preferred
stock which, if vested, exercised or converted, would obligate
us to issue up to approximately 19.1 million additional
shares of common stock. However, we would receive over
$104.0 million from the issuance of shares of common stock
upon the exercise of all of the options and warrants. A
substantial number of those shares, when we issue them upon
vesting, conversion or exercise, will be available for immediate
resale in the public market. In addition, we may sell additional
shares of common stock or securities convertible or exercisable
into common stock in public or private offerings, which would be
available for resale in the market. The market price of our
common stock could fall as a result of sales of any of these
shares of common stock due to the increased number of shares
available for sale in the market.
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We have primarily financed our operations, and we anticipate
that we will have to finance a large portion of our operating
cash requirements, by issuing and selling our common stock or
securities convertible into or exercisable for shares of our
common stock. Any issuances by us of equity securities may be at
or below the prevailing market price of our common stock and may
have a dilutive impact on our existing stockholders. These
issuances or other dilutive issuances would also cause our net
income, if any, per share to decrease in future periods. As a
result, the market price of our common stock could drop.
The
market price and trading volume of our common stock fluctuate
significantly and could result in substantial losses for
individual investors.
The stock market from time to time experiences significant price
and trading volume fluctuations that are unrelated to the
operating performance of particular companies. These broad
market fluctuations may cause the market price and trading
volume of our common stock to decrease. In addition, the market
price and trading volume of our common stock is often highly
volatile.
Factors that may cause the market price and volume of our common
stock to decrease include:
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recognition on up-front licensing or other fees or revenues;
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payments of non-refundable up-front or license fees, or payment
for cost-sharing expenses, to third parties;
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adverse results or delays in our clinical trials;
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fluctuations in our results of operations;
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timing and announcements of our bio-technological innovations or
new products or those of our competitors;
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developments concerning any strategic alliances or acquisitions
we may enter into;
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announcements of FDA non-approval of our drug products, or
delays in the FDA or other foreign regulatory review process or
actions;
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adverse actions taken by regulatory agencies with respect to our
drug products, clinical trials, manufacturing processes or sales
and marketing activities;
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concerns about our products being reimbursed;
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any lawsuit involving us or our drug products;
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developments with respect to our patents and proprietary rights;
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announcements of technological innovations or new products by
our competitors;
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public concern as to the safety of products developed by us or
others;
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regulatory developments in the United States and in foreign
countries;
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changes in stock market analyst recommendations regarding our
common stock or lack of analyst coverage;
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the pharmaceutical industry generally and general market
conditions;
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failure of our results of operations to meet the expectations of
stock market analysts and investors;
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sales of our common stock by our executive officers, directors
and five percent stockholders or sales of substantial amounts of
our common stock;
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changes in accounting principles; and
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loss of any of our key scientific or management personnel.
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Also, certain dilutive securities such as warrants can be used
as hedging tools which may increase volatility in our stock and
cause a price decline. While a decrease in market price could
result in direct economic loss for an individual investor, low
trading volume could limit an individual investors ability
to sell our common stock, which could result in substantial
economic loss as well. Since January 1, 2009 through
March 29, 2010, the price of our
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common stock ranged between $1.39 and $10.00, and the daily
trading volume was as high as 15,476,100 shares and as low
as 27,100 shares. In addition, due in large part to the
current global economic crisis many institutional investors that
historically had invested in specialty pharmaceutical companies
have ceased operations or further investment in these companies,
which has had negatively impacted trading volume for our stock.
Following periods of volatility in the market price of a
companys securities, securities class action litigation
may be instituted against that company. Regardless of their
merit, these types of lawsuits generally result in substantial
legal fees and managements attention and resources being
diverted from the operations of a business.
Provisions
of our charter, bylaws and stockholder rights plan may make it
more difficult for someone to acquire control of us or replace
current management even if doing so would benefit our
stockholders, which may lower the price an acquirer or investor
would pay for our stock.
Provisions of our certificate of incorporation and bylaws, both
as amended, may make it more difficult for someone to acquire
control of us or replace our current management. These
provisions include:
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the ability of our board of directors to amend our bylaws
without stockholder approval;
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the inability of stockholders to call special meetings;
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the ability of members of the board of directors to fill
vacancies on the board of directors;
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the inability of stockholders to act by written consent, unless
such consent is unanimous; and
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the establishment of advance notice requirements for nomination
for election to our board of directors or for proposing matters
that can be acted on by stockholders at stockholder meetings.
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These provisions may make it more difficult for stockholders to
take certain corporate actions and could delay, discourage or
prevent someone from acquiring our business or replacing our
current management, even if doing so would benefit our
stockholders. These provisions could limit the price that
certain investors might be willing to pay for shares of our
common stock.
We have a stockholder rights plan pursuant to which we
distributed rights to purchase units of our series B junior
participating preferred stock. The rights become exercisable
upon the earlier of ten days after a person or group of
affiliated or associated persons has acquired 15% or more of the
outstanding shares of our common stock or ten business days
after a tender offer has commenced that would result in a person
or group beneficially owning 15% or more of our outstanding
common stock. These rights could delay or discourage someone
from acquiring our business, even if doing so would benefit our
stockholders. We currently have no stockholders who own 15% or
more of the outstanding shares of our common stock.
The
restatement of our historical financial statements has already
consumed, and may continue to consume, a significant amount of
our time and resources and may have a material adverse effect on
our business and stock price.
As described earlier, we have restated our consolidated
financial statements. The restatement process was highly time
and resource-intensive and involved substantial attention from
management and significant legal and accounting costs. Although
we have now completed the restatement, we cannot guarantee that
we will have no inquiries from the SEC or NASDAQ regarding our
restated financial statements or matters relating thereto.
Any future inquiries from the SEC as a result of the restatement
of our historical financial statements will, regardless of the
outcome, likely consume a significant amount of our resources in
addition to those resources already consumed in connection with
the restatement itself.
Further, many companies that have been required to restate their
historical financial statements have experienced a decline in
stock price and stockholder lawsuits related thereto.
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If we
fail to maintain an effective system of internal control over
financial reporting, we may not be able to accurately report our
financial results, and current and potential stockholders may
lose confidence in our financial reporting.
We are required by the SEC to establish and maintain adequate
internal control over financial reporting that provides
reasonable assurance regarding the reliability of our financial
reporting and the preparation of financial statements in
accordance with generally accepted accounting principles. We are
likewise required, on a quarterly basis, to evaluate the
effectiveness of our internal controls and to disclose any
changes and material weaknesses in those internal controls.
As described in greater detail elsewhere in this Annual Report
on Form
10-K,
in
connection with the restatement process, we identified a
material weakness with regard to accounting for warrant
instruments in our internal control over financial reporting,
specifically with regard to our prior interpretation of ASC 815
Derivatives and Hedging Contracts in
Entitys Own Equity (formerly known as Emerging
Issues Task Force (EITF)
00-19,
Accounting for Derivative Financial Instruments Indexed
to, and Potentially Settled in, a Companys Own
Stock), as it related to the accounting for and
classification of certain warrant instruments dating back to
September 2005 that we had previously classified as equity. Upon
a reassessment of those financial instruments, in light of GAAP
as currently interpreted, we determined that we should have
accounted for certain warrant instruments as debt instead of
equity. Given this material weakness with regard to warrants,
management was unable to conclude that we maintained effective
internal control over financial reporting as of
December 31, 2009.
Since the determination regarding this material weakness, we
plan to devote significant effort and resources to the
remediation and improvement of our internal control over
financial reporting. While we have processes to identify and
intelligently apply developments in accounting, we plan to
enhance these processes to better evaluate and document our
research and understanding of the nuances of increasingly
complex accounting standards. Our plans include the following:
enhanced access to accounting literature, research materials and
documents; identification of third party professionals with whom
to consult regarding complex accounting applications; and the
consideration of involving additional staff with the requisite
experience and training to supplement our current accounting
professionals. The elements of our remediation plan can only be
accomplished over time and we can offer no assurance that these
initiatives will ultimately have the intended effects. Any
failure to maintain such internal controls could adversely
impact our ability to report our financial results on a timely
and accurate basis. If our financial statements are not
accurate, investors may not have a complete understanding of our
operations. Likewise, if our financial statements are not filed
on a timely basis as required by the SEC and NASDAQ, we could
face severe consequences from those authorities. In either case,
there could result a material adverse affect on our business.
Inferior internal controls could also cause investors to lose
confidence in our reported financial information, which could
have a negative effect on the trading price of our stock.
Our
publicly-filed SEC reports are reviewed by the SEC from time to
time and any significant changes required as a result of any
such review may result in material liability to us and have a
material adverse impact on the trading price of our common
stock.
The reports of publicly-traded companies are subject to review
by the SEC from time to time for the purpose of assisting
companies in complying with applicable disclosure requirements
and to enhance the overall effectiveness of companies
public filings, and reviews of such reports are now required at
least every three years under the Sarbanes-Oxley Act of 2002.
SEC reviews may be initiated at any time, and we could be
required to modify or reformulate information contained in prior
filings as a result of an SEC review. Any modification or
reformulation of information contained in such reports could be
significant and could result in material liability to us and
have a material adverse impact on the trading price of our
common stock.
We
were unable to timely file this Annual Report on Form 10-K as
required by the Securities Exchange Act of 1934. Our continued
inability to file these reports on time could result in
investors not having access to important information about us
and the delisting of our common stock from NASDAQ.
We were late in filing this Annual Report on Form 10-K. As a
result, we may not be in compliance with the continued listing
requirements of the NASDAQ Global Market and with applicable SEC
rules under the Securities
53
Exchange Act of 1934 (Exchange Act). We are required to comply
with these rules as a condition of the continued listing of our
common stock on NASDAQ.
Although we have been timely with respect to other annual and
quarterly reports, there can be no assurance that we will be
able to timely file all such reports in the future. If we are
unable to timely file these reports in the future, you may not
receive important information about us in a timely manner. In
addition, our common stock could be delisted from NASDAQ, which
could materially adversely impact the liquidity and price of our
common stock.
Changes
in our effective income tax rate could adversely affect our
results of operations.
We are subject to federal and state income taxes in the United
States and our tax liabilities are dependent upon the
distribution of income among these different jurisdictions.
Various factors may have favorable or unfavorable effects on our
effective income tax rate. These factors include, but are not
limited to, interpretations of existing tax laws, the accounting
for stock options and other share-based compensation, changes in
tax laws and rates, future levels of research and development
spending, changes in accounting standards, changes in the mix of
earnings in the various tax jurisdictions in which we operate,
the outcome of examinations by the Internal Revenue Service and
other jurisdictions, the accuracy of our estimates for
unrecognized tax benefits and realization of deferred tax
assets, and changes in overall levels of pre-tax earnings. The
impact on our income tax provision resulting from the
above-mentioned factors may be significant and could have an
impact on our results of operations.
We do
not anticipate declaring any cash dividends on our common
stock.
We have never declared or paid cash dividends on our common
stock and do not plan to pay any cash dividends on our common
stock in the foreseeable future. Our current policy is to retain
all funds and any earnings for use in the operation and
expansion of our business.
|
|
Item 1B.
|
Unresolved
Staff Comments
|
None.
Our principle executive office is located at 157 Technology
Drive, Irvine, California 92618. The lease on this facility
expires on June 30, 2016. In addition, we also have an
office in Henderson, Nevada. We lease this space pursuant to an
agreement that expires on September 30, 2011. We also lease
small administrative offices in Zurich, Switzerland, Montreal,
Canada, and Mumbai, India on an expense-sharing basis. The
financial and other terms of these lease arrangements are not
material to our business. We believe that our leased facilities
are adequate to meet our needs at this time.
|
|
Item 3.
|
Legal
Proceedings
|
We are involved with various legal matters arising from the
ordinary course of business. Although the ultimate resolution of
these various matters cannot be determined at this time, we do
not believe that such matters, individually or in the aggregate,
will have a material adverse effect on our future consolidated
results of operations, cash flows or financial condition.
54
PART II
|
|
Item 5.
|
Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
|
Common
Stock
As of March 29, 2010 there were 49,170,969 shares of
common stock outstanding and 359 shareholders of record. On
March 29, 2010, the closing sale price of our common stock
was $4.64 per share.
Market
for Securities
Our common stock is traded on the NASDAQ Global Market under the
symbol SPPI. The high and low sale prices of our
common stock reported by NASDAQ during each quarter ended in
2009 and 2008 were as follows:
|
|
|
|
|
|
|
|
|
|
|
High
|
|
Low
|
|
Year 2009
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
|
|
|
|
|
March 31
|
|
$
|
2.10
|
|
|
$
|
1.39
|
|
June 30
|
|
$
|
8.15
|
|
|
$
|
1.75
|
|
September 30
|
|
$
|
10.00
|
|
|
$
|
4.76
|
|
December 31
|
|
$
|
6.74
|
|
|
$
|
3.97
|
|
Year 2008
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
|
|
|
|
|
March 31
|
|
$
|
3.35
|
|
|
$
|
2.25
|
|
June 30
|
|
$
|
2.98
|
|
|
$
|
0.46
|
|
September 30
|
|
$
|
1.90
|
|
|
$
|
1.30
|
|
December 31
|
|
$
|
2.25
|
|
|
$
|
0.55
|
|
The high and low sales prices of our common stock, reported by
NASDAQ, reflect inter-dealer prices, without retail
mark-ups,
markdowns or commissions, and may not represent actual
transactions.
Dividends
We have never paid cash dividends on our common stock and we do
not intend to pay cash dividends of our common stock in the
foreseeable future. We currently intend to retain our earnings,
if any, to finance future growth.
|
|
Item 6.
|
Selected
Financial Data
|
The following table summarizes certain historical financial
information at the dates and for the periods indicated prepared
in accordance with U.S. Generally Accepted Accounting
Principles and gives effect to the restatements described in
Managements Discussion and Analysis of Financial
Condition and Results of Operations and in Note 2 to
our consolidated financial statements. The consolidated
statement of operations data for the years ended
December 31, 2009, 2008 (as restated) and 2007 (as
restated), the consolidated balance sheet data as of
December 31, 2009 and 2008 (as restated), have been derived
from our audited consolidated financial statements included
elsewhere in this Annual Report on
Form 10-K.
Financial data for the years ended December 31, 2007, 2006
and 2005 (all as restated) and as of December 31, 2007,
2006 and 2005 (all as restated) has been derived from our
restated financial statements not included herein. Certain
reclassifications have been made to prior-years
comparative financial statements to conform to the current year
presentation. These reclassifications had no effect on
previously reported results of operations or financial position.
The selected consolidated financial data should be read in
conjunction with Managements Discussion and Analysis
of Financial Condition and Results of
55
Operations and the consolidated financial statements and
notes thereto, which are included elsewhere in this Annual
Report on
Form 10-K.
CONSOLIDATED
FINANCIAL INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations Data for the Years Ended December
31:
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
(As Restated)
|
|
|
(As Restated)
|
|
|
(As Restated)
|
|
|
(As Restated)
|
|
|
|
(In thousands, except Share data)
|
|
|
Total revenues
|
|
$
|
38,025
|
|
|
$
|
28,725
|
|
|
$
|
7,672
|
|
|
$
|
5,673
|
|
|
$
|
577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product sales (excludes amortization of purchased
intangibles shown below)
|
|
|
8,148
|
|
|
|
1,193
|
|
|
|
|
|
|
|
97
|
|
|
|
397
|
|
Selling, general and administrative
|
|
|
33,607
|
|
|
|
15,156
|
|
|
|
11,577
|
|
|
|
7,736
|
|
|
|
6,615
|
|
Research and development
|
|
|
21,058
|
|
|
|
26,683
|
|
|
|
33,285
|
|
|
|
23,728
|
|
|
|
13,483
|
|
Amortization of purchased intangibles
|
|
|
3,720
|
|
|
|
158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired in-process research and development
|
|
|
|
|
|
|
4,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(28,508
|
)
|
|
|
(19,165
|
)
|
|
|
(37,190
|
)
|
|
|
(25,888
|
)
|
|
|
(19,918
|
)
|
Change in fair value of common stock warrant liability
|
|
|
8,075
|
|
|
|
1,271
|
|
|
|
12,055
|
|
|
|
(2,485
|
)
|
|
|
3,867
|
|
Other income, net
|
|
|
662
|
|
|
|
1,165
|
|
|
|
3,139
|
|
|
|
2,606
|
|
|
|
1,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax net loss
|
|
$
|
(19,771
|
)
|
|
$
|
(16,729
|
)
|
|
$
|
(21,996
|
)
|
|
$
|
(25,767
|
)
|
|
$
|
(14,772
|
)
|
Income tax expense
|
|
|
(421
|
)
|
|
|
(5
|
)
|
|
|
(5
|
)
|
|
|
(5
|
)
|
|
|
(4
|
)
|
Net loss attributable to non-controlling interest
|
|
|
1,146
|
|
|
|
2,538
|
|
|
|
20
|
|
|
|
3
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Spectrum
Pharmaceuticals, Inc. stockholders
|
|
$
|
(19,046
|
)
|
|
$
|
(14,196
|
)
|
|
$
|
(21,981
|
)
|
|
$
|
(25,769
|
)
|
|
$
|
(14,775
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share attributable to
Spectrum Pharmaceuticals, Inc. stockholders
|
|
$
|
(0.48
|
)
|
|
$
|
(0.45
|
)
|
|
$
|
(0.76
|
)
|
|
$
|
(1.06
|
)
|
|
$
|
(0.84
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends on common stock
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data at December 31:
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
(As Restated)
|
|
|
(As Restated)
|
|
|
(As Restated)
|
|
|
(As Restated)
|
|
|
|
(In thousands, except Share data)
|
|
|
Cash, cash equivalents and marketable securities
|
|
$
|
113,341
|
|
|
$
|
75,938
|
|
|
$
|
55,659
|
|
|
$
|
50,697
|
|
|
$
|
63,667
|
|
Other current assets
|
|
|
12,916
|
|
|
|
12,310
|
|
|
|
953
|
|
|
|
1,590
|
|
|
|
718
|
|
Property and equipment, net
|
|
|
1,928
|
|
|
|
1,782
|
|
|
|
716
|
|
|
|
625
|
|
|
|
562
|
|
Intangible assets and goodwill, net
|
|
|
33,325
|
|
|
|
37,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
11,623
|
|
|
|
2,437
|
|
|
|
212
|
|
|
|
205
|
|
|
|
128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
173,133
|
|
|
$
|
129,509
|
|
|
$
|
57,540
|
|
|
$
|
53,117
|
|
|
$
|
65,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
32,864
|
|
|
$
|
32,806
|
|
|
$
|
7,799
|
|
|
$
|
6,233
|
|
|
$
|
3,828
|
|
Common stock warrant liability
|
|
|
6,635
|
|
|
|
765
|
|
|
|
2,035
|
|
|
|
14,090
|
|
|
|
11,605
|
|
Other non-current-liabilities
|
|
|
25,310
|
|
|
|
42,822
|
|
|
|
992
|
|
|
|
1,035
|
|
|
|
241
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity (including non-controlling interest)
|
|
|
108,324
|
|
|
|
53,116
|
|
|
|
46,714
|
|
|
|
31,759
|
|
|
|
49,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
173,133
|
|
|
$
|
129,509
|
|
|
$
|
57,540
|
|
|
$
|
53,117
|
|
|
$
|
65,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
The following discussion and analysis should be read in
conjunction with our consolidated financial statements and
related notes included elsewhere in this Annual Report on
Form 10-K.
The information below has been adjusted solely to reflect the
impact of the restatement of our financial results which is more
fully described in Note 2 to the consolidated financial
statements contained in this Annual Report on Form 10-K and
under the paragraph Restatement of Previously Issued
Consolidated Financial Statements below and does not
reflect any subsequent information or events occurring after the
date of the filing of our reports originally presenting the
financial information being restated or update any disclosure
herein to reflect the passage of time since the date of such
filings. The following discussion contains forward-looking
statements that involve risks and uncertainties, such as
statements of our plans, objectives, expectations and
intentions. Reference is made in particular to forward-looking
statements regarding the success of our drug candidates, the
safety and efficacy of our drug candidates product
approvals, product sales, revenue development timelines, product
acquisitions, liquidity and capital resources and trends. Our
actual results could differ materially from those discussed
here. Factors that might cause such a difference include, but
are not limited to, those discussed below and elsewhere,
including under Item 1A Risk Factors of this
Annual Report on
Form 10-K.
The cautionary statements made in this Annual Report on Form
10-K should be read as applying to all related forward-looking
statements wherever they appear in this Annual Report on Form
10-K.
Restatement
of Previously Issued Consolidated Financial Statements
As discussed above under Item 1, Restatement of
Privately Issued Consolidated Financial Statements in this
Annual Report on Form 10-K, we have restated our previously
issued consolidated financial statements for fiscal years ended
December 31, 2007 and 2008, and each of the quarterly
condensed consolidated financial statements on Form 10-Q
for the periods ended March 31, 2008 through
September 30, 2009 to reclassify warrant contracts based on
a reassessment of the applicable accounting and classification.
In connection with the warrants issued in registered offerings
during 2005 and 2009, the Company had previously classified the
warrants as equity under its evaluation of applicable guidance
contained in ASC 815 Derivatives and Hedging
Contracts in Entitys Own Equity (formerly known as
Emerging Issues Task Force Issue
00-19,
Accounting for Derivative Financial Instruments Indexed
to, and Potentially Settled in, a Companys Own
Stock), a highly complex area of accounting. In connection
with the audit for the fiscal year 2009, the Company, in
consultation with Ernst & Young, reassessed the accounting
classification of the warrants pursuant to ASC 815 based on
certain terms of the warrants. The restatement has no impact on
cash flows from operating activities.
Overview
We are a commercial-stage biopharmaceutical company committed to
developing and commercializing innovative therapies with a
primary focus in the areas of hematology-oncology and urology.
We have a fully developed commercial infrastructure that markets
and sells two drugs,
Zevalin
®
and
Fusilev
®
,
in the United States. We have several drug candidates in
development, the most advanced of which are apaziquone
(EOquin
®
),
which is presently being studied in two large Phase 3 clinical
trials for non-muscle invasive bladder cancer (NMIBC) under a
strategic collaboration with Allergan; and belinostat, a drug we
recently partnered with TopoTarget to jointly develop.
Belinostat is being studied in a Phase 2 trial for relapsed or
refractory Peripheral
T-Cell
Lymphoma (PTCL).
Our business strategy is comprised of the following initiatives:
|
|
|
|
|
Maximizing the growth potential of our marketed drugs,
Zevalin
and
Fusilev
.
Our
near-term outlook largely depends on sales and marketing
successes for our two marketed drugs. For Zevalin, our initial
goal was to stabilize sales, which we believe we accomplished in
2009. With the approval by the FDA for a significantly larger
indication in non-Hodgkins lymphoma (NHL) in late 2009 and
our success in addressing historical hurdles associated with the
uptake of this drug, we believe we can grow sales in 2010 and
beyond. For Fusilev, which we launched in August 2008, we were
able to benefit from broad utilization in community clinics and
hospitals through mid-2009. Our focus now is to obtain approval
for Fusilev in advanced metastatic colorectal cancer, which
could potentially increase the patient pool
|
57
|
|
|
|
|
substantially. As part of its review of our supplemental new
drug application (sNDA), the FDA has requested additional data
which we expect to submit in the third quarter of 2010.
|
For both Zevalin and Fusilev, we initiated and continue to stage
appropriate infrastructure expansions and additional initiatives
to facilitate broad customer reach and to address other market
requirements, as appropriate. We have formed a dedicated
commercial organization comprised of highly experienced and
motivated sales representatives, account managers, medical
science liaisons and a complement of other support marketing
personnel to manage the sales and marketing of these drugs.
|
|
|
|
|
Optimizing our development portfolio and maximizing the
asset values of its components
.
While over
the recent few years, we have evolved from a development-stage
company to a commercial-stage pharmaceutical company, we have
maintained a highly focused development portfolio. Our strategy
with regard to our development portfolio is to focus on
late-stage drugs and to develop them rapidly to the point of
regulatory approval. We plan to develop some of these drugs
ourselves or with our subsidiaries and affiliates, or secure
collaborations such that we are able to suitably monetize these
assets.
|
We have assembled drug development infrastructure that is
comprised of highly experienced and motivated MDs, PhDs, medical
science liaisons and a complement of other support personnel to
rapidly develop these drugs. During 2009, this team achieved our
goal of completing enrollment in the two Phase 3 apaziquone
trials (with more than 1,600 patients enrolled). We expect
to continue to maximize the value of apaziquone through further
developmental efforts and initiation of additional trials, which
we aim to begin in 2010. In addition, this team will focus its
efforts in rapidly advancing the development of belinostat by
expediting the patient enrollment in the registrational trial
for PTCL and initiating additional studies in other indications
in 2010.
We have several other exciting compounds in earlier stages of
development in our portfolio. Based upon a criteria-based
portfolio review, we are in the process of streamlining our
pipeline drugs, allowing for greater focus and integration of
our development and commercial goals.
|
|
|
|
|
Expanding commercial bandwidth through licensing and
business development
.
It is our goal to
identify new strategic opportunities that will create strong
synergies with our currently marketed drugs and identify and
pursue partnerships for out-licensing certain of our drugs in
development. To this end, we will continue to explore strategic
collaborations as these relate to drugs that are either in
advanced clinical trials or are currently on the market. We
believe that such opportunistic collaborations will provide
synergies with respect to how we deploy our internal resources.
In this regard, we intend to identify and secure drugs that have
significant growth potential either through enhanced marketing
and sales efforts or through pursuit of additional clinical
development. We believe our recent in-licensing of belinostat, a
novel histone deacetylase (HDAC) inhibitor, is demonstrative of
such licensing and business development efforts outlined above.
|
|
|
|
Managing our financial resources
effectively
.
We remain committed to fiscal
discipline, a policy which has allowed us to become well
capitalized among our peers, despite a very challenging capital
markets environment in 2009. This policy includes the pursuit of
non-dilutive funding options, prudent expense management, and
the achievement of critical synergies within our operations in
order to maintain a reasonable burn rate. Even with the
continued
build-up
in
operational infrastructure to facilitate the marketing of our
two commercial drugs, we intend to be fiscally prudent in any
expansion we undertake. In terms of revenue generation, we plan
to become more reliant on sales from currently marketed drugs
and intend to pursue out-licensing of select pipeline drugs in
select territories, as discussed above. When appropriate, we may
pursue other sources of financing, including non-dilutive
financing alternatives. While we are currently focused on
advancing our key drug development programs, we anticipate that
we will make regular determinations as to which other programs,
if any, to pursue and how much funding to direct to each program
on an ongoing basis, based on clinical success and commercial
potential, including termination of our existing development
programs, especially if we do not expect value being driven from
continued development. Our raising of over $100 million in
equity financing in 2009 in a difficult financing environment,
and our recent termination of the development of ozarelix in
2009 in benign prostate hypertrophy which resulted in planned
development expense reduction, are recent examples of this
strategy.
|
58
|
|
|
|
|
Further enhancing the organizational structure to meet our
corporate objectives
.
We have highly
experienced staff in pharmaceutical operations, clinical
development, regulatory and commercial functions who previously
held positions at both small to mid-size biotech companies, as
well as large pharmaceutical companies. We recently strengthened
the ranks of our management team, and will continue to pursue
talent on an opportunistic basis. Finally, we remain committed
to running a lean and efficient organization, while effectively
leveraging our critical resources.
|
Financial
Condition
Liquidity
and Capital Resources
Our cumulative losses, since inception in 1987 through
December 31, 2009, are approximately $262 million. We
expect to continue to incur additional losses for at least the
next few years, as we implement our growth strategy of
commercializing marketed drugs, while continuing to develop our
portfolio of late-stage drug products. Our long-term strategy is
to generate profits from the sale and licensing of our drug
products. Accordingly, in the next several years, we expect to
supplement our cash position with sales of Zevalin and Fusilev
and generate licensing revenue from out-licensing our other drug
products.
While we believe that the approximately $125 million in
cash, cash equivalents and marketable securities, including some
long term marketable securities, which we had available on
December 31, 2009 will allow us to fund our current planned
operations for at least the next twelve to eighteen months, we
may, however, seek to obtain additional capital through the sale
of debt or equity securities, if necessary, especially in
conjunction with opportunistic acquisitions or license of drugs.
We may be unable to obtain such additional capital when needed,
or on terms favorable to us or our stockholders, if at all. If
we raise additional funds by issuing equity securities, the
percentage ownership of our stockholders will be reduced,
stockholders may experience additional dilution or such equity
securities may provide for rights, preferences or privileges
senior to those of the holders of our common stock. If
additional funds are raised through the issuance of debt
securities, the terms of such securities may place restrictions
on our ability to operate our business. If and when appropriate,
just as we have done in the past, we may pursue non-dilutive
financing alternatives as well.
Zevalin sales growth is largely dependent on the successful
launch of Zevalin for use as part of first-line therapy for
follicular NHL, continued use in its initial indication, and
establishing a consistent and accurate reimbursement standard.
As noted above, we recently obtained a CMS decision for a
reimbursement standard based on ASP methodology in the HOPPS
setting. Fusilev sales largely depend upon obtaining FDA
approval for use of Fusilev in combination with 5-FU containing
regimens for the treatment of colorectal cancer and favorable
reimbursement. As previously discussed, the FDA stated in their
October 2009 Complete Response letter that the submission did
not demonstrate that Fusilev is non-inferior to leucovorin; and
at our January 2010 meeting the FDA requested additional data,
which we expect to submit in the third quarter of 2010. We are
unable to reasonably estimate when, if ever, we will realize
sustainable net profit from sales of these two products or any
of our other products, if they are approved by the FDA.
Our expenditures for research and development consist of direct
product specific costs (such as up-front license fees, milestone
payments, active pharmaceutical ingredients, clinical trials,
patent related legal costs, and product liability insurance,
among others) and non-product specific, or indirect, costs. The
following summarizes our research and development expenses for
the periods indicated and include related stock-based charges
but not amortization of intangibles or expensing of in-process
research and development costs. To the extent that costs,
including personnel costs, are not tracked to a specific product
development program, they are included in the
59
Indirect Costs category in the table below. We
charge all research and development expenses to operations as
incurred.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
($ in 000s)
|
|
|
Eoquin
|
|
$
|
10,915
|
|
|
$
|
5,477
|
|
|
$
|
6,348
|
|
Ozarelix
|
|
|
1,168
|
|
|
|
2,435
|
|
|
|
6,217
|
|
Ortataxel
|
|
|
311
|
|
|
|
150
|
|
|
|
3,719
|
|
Fusilev
|
|
|
940
|
|
|
|
1,791
|
|
|
|
1,368
|
|
Zevalin
|
|
|
563
|
|
|
|
151
|
|
|
|
|
|
Lucanthone
|
|
|
289
|
|
|
|
348
|
|
|
|
1,405
|
|
Other development drugs
|
|
|
496
|
|
|
|
956
|
|
|
|
2,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Direct Costs
|
|
|
14,682
|
|
|
|
11,308
|
|
|
|
21,103
|
|
Indirect Costs (including non-cash share-based compensation of
$4.1 million, $3.9 million and $3.6 million,
respectively)
|
|
|
6,376
|
|
|
|
15,375
|
|
|
|
12,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Research & Development
|
|
$
|
21,058
|
|
|
$
|
26,683
|
|
|
$
|
33,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
While we are currently focused on advancing our key product
development programs, we anticipate that we will make regular
determinations as to which other programs, if any, to pursue and
how much funding to direct to each program on an on-going basis
in response to the scientific and clinical success of each
product candidate, as well as an ongoing assessment as to the
product candidates commercial potential.
Under our various existing licensing agreements, we are
contingently obligated to make various regulatory and business
milestone payments. In connection with the development of
certain in-licensed drug products, we anticipate the occurrence
of certain of these milestones during 2010. Upon successful
achievement of these milestones, we will likely become obligated
to pay up to approximately $0.2 million during 2010. The
FDAs acceptance of our sNDA for Fusilev for CRC in March
2009, triggered the issuance of an aggregate of
125,000 shares of our common stock to Targent, or its
stockholders, with a fair market value of approximately
$185,000. In August 2009, we acquired 100% of the rights to
RenaZorb and
Renalan
®
,
a lanthanum-based nanotechnology compounds with potent and
selective phosphate binding properties, for all uses pursuant to
an amended and restated agreement that we entered into with
Altair Nanomaterials, Inc and Altair Nanotechnologies, Inc. In
2005, we had acquired the worldwide license from Altair to
develop and commercialize Altairs lanthanum-based
nanotechnology compounds and related technology or all human
therapeutic uses. In consideration, we issued
113,809 shares of our common stock, with a then fair value
of approximately $750,000. Moving forward, we are responsible
for all development, commercialization and intellectual property
costs that accrue after the August 2009 execution date for the
amended and restated agreement.
Our anticipated net use of cash for operations in the fiscal
year ending December 31, 2010, excluding the cost of
in-licensing or acquisitions of additional drugs, if any, is
expected to range between approximately $30 and
$35 million. The programs that will represent a significant
part of our expenditures are the on-going clinical studies of
apaziquone and belinostat, the commercialization of Fusilev, and
the re-launch of Zevalin. The level of funding of our other
development projects is subject to the commercial success of our
marketed products, clinical progress with apaziquone and
belinostat and continued positive results from the preclinical
and clinical studies with these other products.
Further, while we do not receive any funding from third parties
for research and development that we conduct, co-development and
out-licensing agreements with other companies for any of our
drug products may reduce our expenses. In this regard, we
entered into a collaboration agreement with Allergan whereby,
commencing January 1, 2009, Allergan has borne 65% of the
development costs of apaziquone. Additionally, we entered into a
collaboration agreement with TopoTarget, whereby, commencing
February 2, 2010, TopoTarget bears, for belinostat, 100% of
the CUP trial costs and 30% of other development costs unrelated
to the PTCL study.
60
In addition to our present portfolio of drug product candidates,
we continually evaluate proprietary products for acquisition. If
we are successful in acquiring rights to additional products, we
may pay up-front licensing fees in cash
and/or
common stock and our research and development expenditures would
likely increase.
Net
Cash used in Operating Activities
During the year ended December 31, 2009 net cash used
in operations was approximately $17.6 million compared to
net cash used in operations of approximately $8.0 million
during 2008. The 2008 cash flows were favorably impacted by
revenues of approximately $20.7 million from the sale of
interests in certain non-core assets. The higher operating cash
outflows in 2009, are primarily attributable to higher selling,
general and administrative costs incurred due, in a large part,
to the marketing efforts associated with Zevalin and were
substantially mitigated by the revenues derived from Fusilev and
Zevalin, and the participation by Allergan in the development
activities for apaziquone.
Net
Cash used for Investing Activities
We used net cash in investing activities of approximately
$5.8 million for the year ended December 31, 2009 as
compared to net cash used in investing activities of
approximately $24.8 million for the year ended
December 31, 2008. The amounts were primarily as follows:
approximately $25.8 million of net disposition of
marketable securities as compared to approximately
$13.1 million invested in marketable securities and
approximately $0.7 million and $1.5 million, for
purchases of property and equipment in 2009 and 2008,
respectively. In addition, during 2009 and 2008, we invested
approximately $30.9 million and $10.2 million,
respectively, for the acquisition (including acquisition costs)
of the joint venture interest in Zevalin and certain milestone
payments upon approval of first line therapy of Zevalin
partially offset by amounts received in arbitration. At
December 31, 2008, we had acquired a 50% interest in the
joint venture in Zevalin and with a balance of $7.5 million
payable in January 2009. In March 2009, we completed the
acquisition of the full rights to Zevalin.
Net
Cash provided by Financing Activities
Net cash provided by financing activities totaled approximately
$95.9 million and $41.5 million for the years ended
December 31, 2009 and 2008, respectively. The 2009 amounts
were primarily from the sale of 15,187,715 shares of common
stock for net proceeds of approximately $95.8 million. In
2008, the $41.5 million up-front payment received from
Allergan was recorded as deferred revenue to be amortized over
future periods in accordance with our revenue recognition
policy. During 2009, pursuant to our revenue recognition policy,
we recognized $8.3 million of the $41.5 million
deferred in 2008 and expect that we will recognize the balance
over the period of the development work as defined in the
collaboration agreement with Allergan.
Results
of Operations
Our results of operations give effect to the restatement of our
previously issued consolidated financial statements as more
fully described above.
Results
of Operations for Fiscal 2009 Compared to Fiscal
2008
In 2009, we incurred a net loss of approximately
$19.0 million as compared to a net loss of
$14.2 million in 2008. The principal components of the
year-to-year
changes in line items are discussed below.
We recognized revenue of approximately $38.0 million in
2009 as compared to $28.7 million in 2008. During 2009, we
recorded approximately $28.2 million of revenue from the
sales of Zevalin and Fusilev as compared to approximately
$8.0 million in 2008. Zevalin and Fusilev revenues in 2009
were approximately $15.7 and $12.5 million respectively,
compared to approximately $0.3 million and
$7.7 million, respectively in 2008. While shipments of
Fusilev for the period ended December 31, 2008 were
approximately $10.8 million (net of estimates for
promotional, price and other adjustments), based on our revenue
recognition policy, we had deferred the recognition of
approximately $3.1 million of such revenue until we had
more experience with product returns. We also recognized
approximately $0.3 million net sales of Zevalin from the
consolidation of RIT Oncology, LLC (RIT) effective
December 15, 2008. We expect to continue to generate
revenue from the sales of these two products
61
in 2010, however, we are not able to provide any revenue
guidance at this time. During 2009, we also recognized
$8.3 million of licensing revenues from the amortization of
the $41.5 million up-front payment we received from
Allergan in 2008. We also recognized a milestone payment from
Allergan of $1.5 million on the completion of enrollment of
our two pivotal clinical trials for apaziquone. No similar
revenues were recognized in 2008. During 2008, we recognized
revenue from: (i) an agreement with Par Pharmaceutical, our
former marketing partner for sumatriptan injection, pursuant to
which we received a non-refundable $20 million cash payment
from Par for the transfer of our share of the profits from the
commercialization of sumatriptan injection; and (ii) the
transfer of rights to certain of our ANDAs to Sagent
Pharmaceuticals for $660,000. No similar revenues were generated
during 2009.
Selling, general and administrative expenses increased by
approximately $18.4 million, from approximately
$15.2 million in 2008 to approximately $33.6 million
in 2009, primarily due to approximately:
|
|
|
|
|
$10.6 million increase attributable to sales and marketing
expenses, including payroll costs, incurred with the launch of
Zevalin and Fusilev.
|
|
|
|
$3.3 million increase in general and administrative costs
due to increased activities, including payroll costs and higher
professional costs due to business development activities
|
|
|
|
$1.6 million increase in non-cash compensation expenses.
|
We expect an increase in selling, general and administrative
expenses for 2010 primarily related to sales and marketing of
Zevalin and Fusilev.
Research and development expenses decreased by approximately
$5.7 million, from approximately $26.7 million in 2008
to approximately $21 million in 2009, which included
non-cash amortization and write off of Zevalin related
intangibles and
in-process
research, and development changes of approximately
$3.7 million and $4.9 million in 2009 and 2008,
respectively. Research and development expenses also reduced
primarily due to sharing of apaziquone related development costs
by our development partner, Allergan, of approximately
$11.2 million. In addition, we incurred reduced development
expense in other development products, including ozarelix.
During 2009, in line with the strategy outlined at the start of
the year, and in response to the global financial crisis we
focused on executing a successful launch of Zevalin and Fusilev
and prioritized our research and development efforts to complete
the rapid enrollment in the apaziquone clinical studies.
We anticipate research and development expense in 2010 to be
higher than 2009 primarily due to our recent partnership with
TopoTarget for the development of belinostat. Research and
development costs will be partially offset by our joint
development agreement with Allergan, under which Allergan funds
65% of the development costs of development costs related to
apaziquone and Topotarget will fund 100% of the development
costs of the CUP study and cover in 30% of the development costs
related to studies other than PTCL.
As reported above, we recorded approximately $3.7 million
of expense from amortization of Zevalin related intangibles for
the year ended December 31, 2009 as compared to
$0.2 million during the same period in 2008. This was a
full years amortization expense as compared to
15 days prorated amortization during 2008, since
Zevalin was acquired in December 2008. During the year 2008, we
recorded expense of $4.7 million for in-process research
and development, or IPRD, on the Zevalin related intangibles; no
similar expense was recorded in 2009.
We recorded approximately $8.1 million of income from
warrant obligations in 2009 as compared to $1.3 million in
2008, in connection with the restatement of our previously
reported financial statements.
Other income consisted of net interest income of approximately
$0.7 million and $1.2 million for the years ended
December 31, 2009 and 2008, respectively and in 2008
included approximately $200,000 realized investment gains. The
decrease in interest income was primarily due to lower
investment yields in 2009 due to the shift in our investment
strategy to more conservative US Treasury investments. We expect
similar yields going forward until such time the credit markets
improve.
62
Results
of Operations
Results
of Operations for Fiscal 2008 Compared to Fiscal
2007
In 2008, we incurred a net loss of approximately
$14.2 million compared to a net loss of approximately
$22.00 million in 2007. The principal components of the
year-to-year
changes in line items are discussed below.
We recognized revenue of approximately $28.7 million in
2008 as compared to approximately $7.7 million in 2007.
During 2008, we recorded approximately $7.7 million of
revenue from the August 2008 commercial launch of Fusilev, which
was approved by the FDA in March 2008. While shipments of
Fusilev for the period ended December 31, 2008 were
approximately $10.8 million (net of estimates for
promotional, price and other adjustments), based on our revenue
recognition policy, we have deferred the recognition of
approximately $3.1 million of such revenue until we have
more experience with the amount of product returns. We also
recognized approximately $0.3 million net sales of Zevalin
from the consolidation of RIT effective December 15, 2008.
In addition, during 2008, we recognized revenue from:
(i) an agreement with Par Pharmaceutical, our former
marketing partner for sumatriptan injection, pursuant to which
we received a non-refundable $20 million cash payment from
Par for the transfer of our share of the profits from the
commercialization of sumatriptan injection; and (ii) the
transfer of rights to certain of our ANDAs to Sagent
Pharmaceuticals for $660,000. No similar revenues were generated
during 2007. During 2007, we recognized approximately
$7.7 million in licensing milestone and related revenues,
pursuant to our agreement with GPC Biotech for satraplatin.
Research and development expenses decreased by approximately
$6.6 million, from approximately $33.3 million in 2007
to approximately $26.7 million in 2008. During 2008, in
line with the strategy outlined at the start of the year, and in
response to the global financial crisis we focused on executing
a successful launch of Fusilev and prioritized our R&D
efforts to the rapid enrollment of the apaziquone clinical
study. Principal components of the decrease in 2008 were as
follows. Approximately:
|
|
|
|
|
$3.8 million and $3.6 million, respectively, due to
reductions in direct development costs related to ozarelix and
ortataxel; partially offset by,
|
|
|
|
$2.0 million increase in employee compensation expense
associated substantially with the hiring of personnel to advance
the apaziquone clinical study.
|
We recorded approximately $0.2 million of expense from
amortization of Zevalin related intangibles for the year ended
December 31, 2008 as compared to $0 million during the
same period in 2007. This was a 15 days prorated
amortization during 2008, since Zevalin was acquired in December
2008. During the year 2008, we recorded expense of approximately
$4.7 million for in-process research and development (IPRD)
on the Zevalin related intangibles; no similar expense was
recorded in 2007.
Selling, general and administrative expenses increased by
approximately $3.6 million, from approximately
$11.6 million in 2007 to approximately $15.2 million
in 2008, primarily due to approximately:
|
|
|
|
|
$5.9 million increase attributable to sales and marketing
expenses, including payroll costs, incurred with the launch of
Fusilev.
|
|
|
|
$2.4 million decrease in legal expenses, largely
attributable to the non-recurrence of arbitration costs against
GPC Biotech incurred during 2007, partially offset by legal
expenses in connection with business development activities,
including the collaboration agreement with Allergan.
|
|
|
|
$1.2 million increase in employee compensation attributed
to the expanded scope of operations.
|
We recorded approximately $1.3 million of income from
warrant obligations in 2008 as compared to approximately
$12.1 million in 2007, in connection with the restatement
of our previously reported financial statements.
Other income consisted of net interest income of approximately
$1.2 million and $3.1 million for the years ended
December 31, 2008 and 2007 and in 2008 included
approximately $200,000 realized investment gains. The decrease
in interest income was primarily due to lower investment yields
in 2008 due to the shift in our investment strategy to more
conservative US Treasury investments.
63
Nature
of each accrual that reduces gross revenue to net
revenue
Provisions for product returns, sales discounts and rebates and
estimates for chargebacks are established as a reduction of
product sales revenue at the time revenues are recognized.
Management considers various factors in determination of such
provisions, which are described more in detail below. Such
estimated amounts are deducted from our gross sales to determine
our net revenues. Provisions for bad and doubtful accounts are
deducted from gross receivables to determine net receivables.
Changes in our estimates, if any, would be recorded in the
statement of operations in the period the change is determined.
If we materially over or under estimate the amount, there could
be a material impact on our consolidated financial statements.
For the periods ended December 31, 2009 and 2008, the
following is a roll forward of the provisions for return,
discounts and rebates and chargebacks allowances and estimated
doubtful account allowances.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chargebacks &
|
|
|
|
|
|
Doubtful
|
|
|
|
|
Schedule of Allowances for Receivables
|
|
Discounts
|
|
|
Returns
|
|
|
Accounts
|
|
|
Total
|
|
|
|
($ in 000s)
|
|
|
Year Ended December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at beginning of the period
|
|
$
|
1,631
|
|
|
$
|
3,144
|
|
|
$
|
150
|
|
|
$
|
4,925
|
|
Add/(less) provisions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related to the sales of current fiscal year
|
|
|
3,760
|
|
|
|
95
|
|
|
|
|
|
|
|
3,855
|
|
Related to the sales of prior fiscal years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less : Credits or actual allowances:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related to sales from current fiscal year
|
|
|
2,900
|
|
|
|
|
|
|
|
|
|
|
|
2,900
|
|
Related to sales from prior fiscal years
|
|
|
1,631
|
|
|
|
2,063
|
|
|
|
|
|
|
|
3,694
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at the close of the period
|
|
$
|
860
|
|
|
$
|
1,176
|
|
|
$
|
150
|
|
|
$
|
2,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at beginning of period
|
|
|
|
|
|
|
|
|
|
$
|
150
|
|
|
$
|
150
|
|
Provisions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related to the sales of current fiscal year
|
|
$
|
1,691
|
|
|
$
|
3,144
|
|
|
|
|
|
|
$
|
4,835
|
|
Related to the sales of prior fiscal years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credits or actual allowances:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related to sales from current fiscal year
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
60
|
|
Related to sales from prior fiscal years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at the close of the period
|
|
$
|
1,631
|
|
|
$
|
3,144
|
|
|
$
|
150
|
|
|
$
|
4,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recorded as allowances on our consolidated balance
sheets for 2009 and 2008 are reflected in the table above. The
basis and methods of estimating these allowances, used by
management, are described below.
Chargebacks,
discounts and rebates
Chargebacks represent a provision against gross accounts
receivable and related reduction to gross revenue. A chargeback
is the difference between the price the wholesale customer, in
our case the wholesaler or distributor, pays (the wholesale
acquisition cost, or WAC) and the price (contracted price) that
a contracted customer (e.g., a Group Purchasing Organization
(GPO) member) pays for a product. We accrue for chargebacks in
the relevant period on the presumption that all units of product
sold to members of the GPOs will be charged back. We estimate
chargebacks at the time of sale of our products to the members
of the GPOs based on:
(1) volume of all products sold via distributors to members
of the GPOs and the applicable chargeback rates for the relevant
period;
(2) applicable WAC and the contract prices agreed with the
GPOs; and
64
(3) the information of inventories remaining on hand at the
wholesalers and distributors at the end of the period, actual
chargeback reports received from our wholesalers and
distributors as well as the chargebacks not yet billed (product
shipped less the chargebacks already billed back) in the
calculation and validation of our chargeback estimates and
reserves.
Discounts (generally prompt payment discounts) are accrued at
the end of every reporting period based on the gross sales made
to the customers during the period and based on their terms of
trade for a product. We generally review the terms of the
contracts, specifically price and discount structures, payment
terms in the contracts between the customer and the Company to
estimate the discount accrual.
Customer rebates are estimated at every period end, based on
direct purchases, depending on whether any rebates have been
offered. The rebates are recognized when products are purchased
and a periodic credit is given. Medicaid rebates are based on
the data we receive from the public sector benefit providers,
which is based on the final dispensing of our product by a
pharmacy to a benefit plan participant.
We record Medicaid and Medicare rebates based on estimates for
such expense. However, such amount have not been material to the
financial statements.
Product
returns allowances
Customers are typically permitted to return products within
thirty days after shipment, if incorrectly shipped or not
ordered, and within a window of time six months before and
twelve months after the expiration of product dating,
subject to certain restocking fees and preauthorization
requirements, as applicable. The returned product is destroyed
if it is damaged, quality is compromised or past its expiration
date. Based on our returns policy, we refund the sales price to
the customer as a credit and record the credit against
receivables. In general, returned product is not resold. As of
each balance sheet date, we estimate potential returns, based on
several factors, including: inventory held by distributors, sell
through data of distributor sales to end users, customer and
end-user ordering and re-ordering patterns, aging of accounts
receivables, rates of returns for directly substitutable
products and pharmaceutical products for the treatment of
therapeutic areas similar to indications served by our products,
shelf life of our products and based on experience of our
management with selling similar oncology products. We record an
allowance for future returns by debiting revenue, thereby
reducing gross revenues and crediting a reserve for returns to
reduce gross receivables.
Doubtful
Accounts
An allowance for doubtful accounts is estimated based on the
customer payment history and a review by management of the aging
of the accounts receivables as of the balance sheet date. We
accrue for doubtful accounts by recording an expense and
creating an allowance for such accounts. If we are privy to
information on the solvency of a customer or observe a payment
history change, we estimate the accrual for such doubtful
receivables or write the receivable off.
Off-Balance
Sheet Arrangements
We do not have any off balance sheet arrangements.
65
Contractual
and Commercial Obligations
The following table summarizes our contractual and other
commitments, including obligations under a facility lease and
equipment leases, as of December 31, 2009, approximately:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than
|
|
|
|
|
|
|
|
|
After
|
|
|
|
Total
|
|
|
1 Year
|
|
|
2-3 Years
|
|
|
4-5 Years
|
|
|
5 Years
|
|
|
Contractual Obligations(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Lease Obligations(2)
|
|
$
|
147
|
|
|
$
|
50
|
|
|
$
|
97
|
|
|
|
|
|
|
|
|
|
Operating Lease Obligations(3)
|
|
|
3,284
|
|
|
|
428
|
|
|
|
939
|
|
|
|
1,054
|
|
|
$
|
863
|
|
Purchase Obligations(4)
|
|
|
8,955
|
|
|
|
7,278
|
|
|
|
1,677
|
|
|
|
|
|
|
|
|
|
Contingent Milestone Obligations(5)
|
|
|
75,749
|
|
|
|
200
|
|
|
|
3,519
|
|
|
|
2,109
|
|
|
|
69,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
88,135
|
|
|
$
|
7,956
|
|
|
$
|
6,232
|
|
|
$
|
3,163
|
|
|
$
|
70,784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The table of contractual and commercial obligations excludes
contingent payments that we may become obligated to pay upon the
occurrence of future events whose outcome is not readily
determinable. Such significant contingent obligations are
described below under Employment Agreements.
|
|
(2)
|
|
The capital lease obligations are related to leased office
equipment.
|
|
(3)
|
|
The operating lease obligations are primarily related to the
facility lease for our corporate office, which we renewed in
July 2009 and expires in June 2016.
|
|
(4)
|
|
Purchase obligations represent the amount of open purchase
orders and contractual commitments to vendors for products and
services that have not been delivered, or rendered, as of
December 31, 2009. Approximately 90% of the purchase
obligations consist of expenses associated with clinical trials
and related costs for apaziquone and ozarelix for each of the
periods presented. Please see Service Agreements
below for further information.
|
|
(5)
|
|
Milestone obligations are payable contingent upon successfully
reaching certain development and regulatory milestones as
further described below under Licensing Agreements.
While the amounts included in the table above represent all of
our potential cash development and regulatory milestone
obligations as of December 31, 2009, given the
unpredictability of the drug development process, and the
impossibility of predicting the success of current and future
clinical trials, the timelines estimated above do not represent
a forecast of when payment milestones will actually be reached,
if at all. Rather, they assume that all development and
regulatory milestones under all of our license agreements are
successfully met, and represent our best estimates of the
timelines. In the event that the milestones are met, we believe
it is likely that the increase in the potential value of the
related drug product will exceed the amount of the milestone
obligation.
|
Licensing
Agreements
Almost all of our drug candidates are being developed pursuant
to license agreements that provide us with rights to certain
territories to, among other things, develop, sublicense, and
sell the drugs. We are required to use commercially reasonable
efforts to develop the drugs, are generally responsible for all
development, patent filing and maintenance costs, sales,
marketing and liability insurance costs, and are generally
contingently obligated to make milestone payments to the
licensors if we successfully reach development and regulatory
milestones specified in the agreements. In addition, we are
obligated to pay royalties and, in some cases, milestone
payments based on net sales, if any, after marketing approval is
obtained from regulatory authorities.
The potential contingent development and regulatory milestone
obligations under all our licensing agreements are generally
tied to progress through the FDA approval process, which
approval significantly depends on positive clinical trial
results. The following list is typical of milestone events
relevant for us: conclusion of Phase 2 or commencement of Phase
3 clinical trials; filing of new drug applications in each of
the United States, Europe and Japan; and approvals from each of
the regulatory agencies in those jurisdictions.
66
Service
Agreements
In connection with the research and development of our drug
products, we have entered into contracts with numerous third
party service providers, such as clinical trial centers,
clinical research organizations, data monitoring centers, and
with drug formulation, development and testing laboratories. The
financial terms of these agreements are varied and generally
obligate us to pay in stages, depending on achievement of
certain events specified in the agreements, such as contract
execution, reservation of service or production capacity, actual
performance of service, or the successful accrual and dosing of
patients.
At each period end, we accrue for all costs of goods and
services received, with such accruals based on factors such as
estimates of work performed, patient enrollment, completion of
patient studies and other events. As of December 31, 2009,
we were committed under such contracts for up to approximately
$9.0 million, for future goods and services, including
approximately $7.3 million due within one year. We are in a
position to accelerate, slow-down or discontinue any or all of
the projects that we are working on at any given point in time.
Should we decide to discontinue
and/or
slow-down the work on any project, the associated costs for
those projects would get limited to the extent of the work
completed. Generally, we are able to terminate these contracts
due to the discontinuance of the related project(s) and thus
avoid paying for the services that have not yet been rendered
and our future purchase obligations would reduce accordingly.
Employment
Agreement
We have entered into an employment agreement with
Dr. Shrotriya, our President and Chief Executive Officer,
which expires January 2, 2011. The employment agreement
automatically renews for a one-year calendar term unless either
party gives written notice of such partys intent not to
renew the agreement at least ninety days prior to the
commencement of the next year. The employment agreement requires
Dr. Shrotriya to devote his full working time and effort to
the business and affairs of the Company during the term of the
agreement. The employment agreement provides for a minimum
annual base salary with annual increases, periodic bonuses and
option grants as determined by the Compensation Committee of the
Board of Directors.
Dr. Shrotriyas employment may be terminated due to
non-renewal of his employment agreement by us, mutual agreement,
death or disability, or by us for cause (as that term is defined
in the employment agreement) or without cause, or by
Dr. Shrotriya for no reason, good reason (as defined in the
agreement) or non-renewal. The employment agreement provides for
various guaranteed severance payments and benefits if:
(i) the agreement is not renewed by us,
(ii) Dr. Shrotriyas employment is terminated
without cause, (iii) Dr. Shrotriya resigns for good
reason, (iv) the agreement is terminated due to death or
disability of Dr. Shrotriya, (v) if Dr. Shrotriya
voluntarily resigns his employment for no reason or (vi) if
Dr. Shrotriyas employment is terminated (other than
by Dr. Shrotriya) without cause within twelve months after
a change in control, or Dr. Shrotriya is adversely affected
in connection with a change in control and resigns within twelve
months. If the agreement is terminated due to mutual agreement,
Dr. Shrotriyas non-renewal of the agreement, or by us
for cause, Dr. Shrotriya shall not be entitled to any
severance.
If any payment or distribution by us to or for the benefit of
Dr. Shrotriya is subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code (IRC) or any
interest or penalties are incurred by Dr. Shrotriya with
respect to such excise tax, then Dr. Shrotriya shall be
entitled to receive an additional payment in an amount such that
after payment by Dr. Shrotriya of all taxes (including any
interest and penalties imposed with respect thereto) and excise
tax imposed upon such payment, Dr. Shrotriya retains an
amount of the payment equal to the excise tax imposed upon the
payment.
If we determine that any payments to Dr. Shrotriya under
the agreement fail to satisfy the distribution requirement of
Section 409A(a)(2)(A) of the IRC, the payment schedule of
that benefit shall be revised to the extent necessary so that
the benefit is not subject to the provisions of
Section 409A(a)(1) of the IRC. We may attach conditions to
or adjust the amounts so paid to preserve, as closely as
possible, the economic consequences that would have applied in
the absence of this adjustment; provided, however, that no such
condition or adjustment shall result in the payments being
subject to Section 409A(a)(1) of the IRC.
67
Critical
Accounting Policies, Estimates and Assumptions
Our discussion and analysis of our consolidated financial
condition and results of operations are based upon our
consolidated financial statements, which have been prepared in
conformity with accounting principles generally accepted in the
United States (GAAP). The preparation of these financial
statements requires us to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and
liabilities reported in our consolidated financial statements.
The estimation process requires assumptions to be made about
future events and conditions, and is consequently inherently
subjective and uncertain. Actual results could differ materially
from our estimates. We regularly evaluate our estimates,
including cash requirements, by assessing: planned research and
development activities and general and administrative
requirements; required clinical trial activity; market need for
our drug candidates; and other major business assumptions.
The SEC defines critical accounting policies as those that are,
in managements view, most important to the portrayal of
our financial condition and results of operations and most
demanding of our judgment. We consider the following policies to
be critical to an understanding of our consolidated financial
statements and the uncertainties associated with the complex
judgments made by us that could impact our results of
operations, financial position and cash flows.
Cash,
Cash Equivalents and Marketable Securities
Cash, cash equivalents and marketable securities primarily
consist of bank checking deposits, short-term treasury
securities, and institutional money market funds, corporate debt
and equity, municipal obligations, including market auction debt
securities, government agency notes, and certificates of
deposit. We classify highly liquid short-term investments, with
insignificant interest rate risk and maturities of
ninety days or less at the time of acquisition, as cash and
cash equivalents. Other investments, which do not meet the above
definition of cash equivalents, are classified as either
held-to-maturity
or
available-for-sale
marketable securities. Investments that we intend to hold for
more than one year are classified as long-term investments. All
of our available for sale securities are classified
as current assets based on our intent and ability to use any and
all of these securities as necessary to satisfy our cash needs
as they arise, by redeeming them at par with short notice and
without a penalty. Investments with maturity dates over
one year from December 31, 2009 are classified as
held-to-maturity.
Revenue
Recognition
We sell our products to wholesalers and distributors of oncology
products and directly to the end user, directly or through GPOs
(e.g., certain hospitals or hospital systems and clinics with
whom we have entered into a direct purchase agreement). Our
wholesalers and distributors purchase our products and sell the
products directly to the end users, which include, but are not
limited to, hospitals, clinics, medical facilities, managed care
facilities and private oncology based practices etc. Revenue
from product sales is recognized upon shipment of product when
title and risk of loss have transferred to the customer, and the
following additional criteria specified by ASC
No. 605-15,
Revenue Recognition: Products are met:
(i) the price is substantially fixed and determinable;
(ii) our customer has economic substance apart from that
provided by us;
(iii) our customers obligation to pay us is not
contingent on resale of the product; and
(iv) we do not have significant obligations for future
performance to directly bring about the resale of our
product; and
(v) we have a reasonable basis to estimate future returns.
We also follow the provisions as set forth by current accounting
rules, which primarily include Staff Accounting
Bulletin ASC
No. 605-15
Revenue Recognition, Revenue
Recognition, and ASC
No. 605-25,
Revenue Recognition: Multiple-Element Arrangements.
68
Generally, revenue is recognized when all four of the following
criteria are met:
(i) persuasive evidence that an arrangement exists;
(ii) delivery of the products has occurred, or services
have been rendered;
(iii) the selling price is both fixed and
determinable; and
(iv) collectibility is reasonably assured.
Provisions for estimated product returns, sales discounts,
rebates and charge backs are established as a reduction of gross
product sales at the time such revenues are recognized. Thus,
revenue is recorded, net of such estimated provisions. Our
estimates for product returns are based our review of inventory
in the channels and review of historical rates of actual returns.
Consistent with industry practice, our product return policy
permits our customers to return products within thirty days
after shipment, if incorrectly shipped or not ordered, and
within a window of time six months before and
twelve months after the expiration of product dating,
subject to certain restocking fees and preauthorization
requirements, as applicable. Currently, our returns policy does
not allow for replacement of product. The returned product is
destroyed if it is damaged, its quality is compromised or
it is past its expiration date. Based on our returns policy, we
refund the sales price to the customer as a credit and record
the credit against receivables. In general returned product is
not resold. We generally reserve the right to decline granting a
return and to decide on product destruction. As of each balance
sheet date, we estimate potential returns, based on several
factors, including: inventory held by distributors, sell through
data of distributor sales to end users, customer and end-user
ordering and re-ordering patterns, aging of accounts
receivables, rates of returns for directly substitutable
products and other pharmaceutical products for the treatment of
therapeutic areas similar to indications served by our products,
shelf life of our products and the extensive experience of our
management with selling the same and similar oncology products.
We record an allowance for future returns by debiting revenue,
thereby reducing gross revenues and crediting a reserve for
returns to reduce gross receivables. If allowances exceed the
related accounts receivables, we reclassify such allowances to
accrued obligations.
We also state the related accounts receivable at net realizable
value, with any allowance for doubtful accounts charged to
general operating expenses. If revenue from sales is not
reasonably determinable due to provisions for estimates,
promotional adjustments, price adjustments, returns or any other
potential adjustments, we defer the revenue and recognize
revenue when the estimates are reasonably determinable, even if
the monies for the gross sales have been received.
Up-front fees representing non-refundable payments received upon
the execution of licensing or other agreements are recognized as
revenue upon execution of the agreements where we have no
significant future performance obligations and collectibility of
the fees is reasonably assured. Milestone payments, which are
generally based on developmental or regulatory events, are
recognized as revenue when the milestones are achieved,
collectibility is reasonably assured, and we have no significant
future performance obligations in connection with the milestone.
In those instances where we have collected fees or milestone
payments but have significant future performance obligations
related to the development of the drug product, we record
deferred revenue and recognize it over the period of our future
obligations.
Purchase
Price Allocation
The purchase price allocation for acquisitions of the tangible
and identifiable intangible assets acquired and liabilities
assumed based on their estimated fair values at the acquisition
date requires extensive accounting estimates and judgments,
including in process research and development. Based on the
provisions of ASC No. 805, Business
Combinations, for transactions that occurred prior to
December 31, 2008, we allocated the purchase price for the
identifiable intangibles. For each acquisition, we engaged an
independent third-party valuation firm to assist in determining
the fair value of in-process research and development and
identifiable intangible assets. Such a valuation requires
significant estimates and assumptions including but not limited
to: determining the timing and expected costs to complete the
in-process projects, projecting regulatory approvals, estimating
future cash flows from product sales resulting from in-process
projects, and developing appropriate discount rates and
probability
69
rates by project. We believe the fair values assigned to the
assets acquired and liabilities assumed are based on reasonable
assumptions. However, these assumptions may be inaccurate, and
unanticipated events and circumstances may occur. Additionally,
we must determine whether an acquired entity considered to be a
business or a set of net assets because a portion of the
purchase price can only be allocated to goodwill in a business
combination.
Research
and Development
Research and development expenses include salaries and benefits,
clinical trial and related manufacturing costs, contract and
other outside service fees, and facilities and overhead costs
related to our research and development efforts. Research and
development expenses also consist of costs incurred for
proprietary and collaboration research and development and
include activities such as product registries and
investigator-sponsored trials. Research and development costs
are expensed as incurred. In certain instances we enter into
agreements with third parties for research and development
activities, where we may prepay fees for services at the
initiation of the contract. We record such prepayment as a
prepaid asset and charge research and development expense over
the period of time the contracted research and development
services are performed. In connection with the October 2008
co-development agreement, Allergan bears 65% of the development
costs incurred for apaziquone in NMIBC, commencing
January 1, 2009. During the year ended December 31,
2009, approximately $11.2 million of development costs were
reimbursed by Allergan, and credited against total related
research and development expense.
As of each balance sheet date, we review purchase commitments
and accrue drug development expenses based on factors such as
estimates of work performed, patient enrollment, completion of
patient studies and other events. Accrued clinical study costs
are subject to revisions as trials progress to completion.
Revisions are recorded in the period in which the facts that
give rise to the revision become known.
Amortization
and impairment of intangible assets
Identifiable intangible assets with definite lives are amortized
on a straight-line basis over their estimated useful lives,
ranging from 1 to 10 years.
We evaluate the recoverability of intangible assets whenever
events or changes in circumstances indicate that an intangible
assets carrying amount may not be recoverable. Such
circumstances could include, but are not limited to the
following:
i a significant decrease in the market value of an asset;
ii a significant adverse change in the extent or manner in
which an asset is used; or
iii an accumulation of costs significantly in excess of the
amount originally expected for the acquisition of an asset.
We measure the carrying amount of the asset against the
estimated undiscounted future cash flows associated with it.
Should the sum of the expected future net cash flows be less
than the carrying value of the asset being evaluated, an
impairment loss would be recognized. The impairment loss would
be calculated as the amount by which the carrying value of the
asset exceeds its fair value. No impairment loss was recorded
during the years 2009, 2008 or 2007.
Share-Based
Compensation
We recognize compensation expenses for all share-based awards to
employees and directors. In estimating the fair value of
share-based compensation, we use the quoted closing market
price, based on the date prior to our grant date, of our common
stock for stock awards and the Black-Scholes option pricing
model for stock options and warrants. We estimate future
volatility based on historical volatility of our common stock,
and we estimate the expected life of options based on several
criteria, including the vesting period of the grant and the
expected volatility.
Share based compensation is recognized only for those awards
that are ultimately expected to vest, and we have applied or
estimated forfeiture rate to unvested awards for purposes of
calculating compensation costs. These
70
estimates will be revised in future periods if actual
forfeitures differ from the estimates. Changes in forfeiture
estimates impact compensation cost in the period in which the
change in estimate occurs.
Warrant
accounting
We account for registered common stock warrants pursuant to
applicable accounting guidance contained in ASC 815
Deviratives and Hedging Contracts in
Entitys Own Equity (formerly known as EITF
00-19)
on
the understanding that in compliance with applicable securities
laws, the registered warrants require the issuance of registered
securities upon exercise and do not sufficiently preclude an
implied right to net cash settlement. We classify registered
warrants on the consolidated balance sheet as a current
liability which is revalued at each balance sheet date
subsequent to the initial issuance. Determining the appropriate
fair-value model and calculating the fair value of registered
warrants requires considerable judgment, including estimating
stock price volatility and expected warrant life. We develop our
estimates based on historical data. A small change in the
estimates used may have a relatively large change in the
estimated valuation. We use the Black-Scholes pricing model to
value the registered warrants. Changes in the fair market value
of the warrants are reflected in the consolidated statement of
operations as Change in fair value of common stock warrant
liability.
The following summarizes the activity of Level 3 inputs measured
on a recurring basis for the years ended December 31, 2009
and 2008:
|
|
|
|
|
|
|
Fair Value Measurements of
|
|
|
|
Common Stock Warrants
|
|
|
|
Using Significant
|
|
|
|
Unobservable Inputs (Level 3)
|
|
|
|
($ in 000s)
|
|
|
Balance at January 1, 2008
|
|
$
|
2,036
|
|
|
|
|
|
|
Transfers in / (out) of Level 3
|
|
|
|
|
Issuance of common stock warrants
|
|
|
|
|
Repurchase of Forfeitures
|
|
|
|
|
Expirations
|
|
|
|
|
Settlements associated with exercises
|
|
|
|
|
Adjustments resulting from change in value of warrants
recognized in earnings
|
|
|
(1,271
|
)
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
765
|
|
|
|
|
|
|
Transfers in / (out) of Level 3
|
|
|
|
|
Issuance of common stock warrants
|
|
|
14,016
|
|
Repurchases or forfeitures
|
|
|
(394
|
)
|
Gain on repurchase recognized in earnings
|
|
|
323
|
|
Expirations
|
|
|
|
|
Settlements associated with exercises
|
|
|
|
|
Adjustments resulting from change in value of warrants
recognized in earnings
|
|
|
(8,075
|
)
|
|
|
|
|
|
Balance at December 31, 2009
|
|
$
|
6,635
|
|
|
|
|
|
|
New
Accounting Pronouncements
See Note 3:
Recent Accounting Pronouncements
of our
accompanying consolidated financial statements for a description
of recent accounting pronouncements that have a potentially
significant impact on our financial reporting and our
expectations of their impact on our results of operations and
financial condition.
71
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
The primary objective of our investment activities is to
preserve principal, while at the same time maximizing yields
without significantly increasing risk. We do not utilize hedging
contracts or similar instruments.
We are exposed to certain market risks. Our primary exposures
relate to (1) interest rate risk on our investment
portfolio, (2) credit risk of the companies bonds in
which we invest, (3) general credit market risks as have
existed since late 2007 and (4) the financial viability of
the institutions which hold our capital and through which we
have invested our funds. We manage such risks on our investment
portfolio by matching scheduled investment maturities with our
cash requirements and investing in highly rated instruments.
In response to the dislocation in the credit markets since the
latter part of 2007, in early 2008 we converted substantially
all of our investments, including all of our market auction debt
securities, into highly liquid and safe instruments. Our
investments, as of December 31, 2009, were primarily in
money market accounts, short-term corporate bonds, certificate
of deposits, U.S. Treasury bills and
U.S. Treasury-backed securities. We believe the financial
institutions through which we have invested our funds are
strong, well capitalized and our instruments are held in
accounts segregated from the assets of the institutions.
However, due to the current extremely volatile financial and
credit markets and liquidity crunch faced by most banking
institutions, the financial viability of these institutions, and
the safety and liquidity of our funds is being constantly
monitored.
Because of our ability to generally redeem these investments at
par at short notice and without penalty, changes in interest
rates would have an immaterial effect on the fair value of these
investments. If a 10% change in interest rates were to have
occurred on December 31, 2009, any decline in the fair
value of our investments would not be material in the context of
our consolidated financial statements. In addition, we are
exposed to certain market risks associated with credit ratings
of corporations whose corporate bonds we may purchase from time
to time. If these companies were to experience a significant
detrimental change in their credit ratings, the fair market
value of such corporate bonds may significantly decrease. If
these companies were to default on these corporate bonds, we may
lose part or all of our principal. We believe that we
effectively manage this market risk by diversifying our
investments, and investing in highly rated securities.
In addition, we are exposed to foreign currency exchange rate
fluctuations relating to payments we make to vendors, suppliers
and license partners using foreign currencies. In particular,
some of our obligations are incurred in Euros. We mitigate such
risk by maintaining a limited portion of our cash in Euros and
other currencies.
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
Our annual consolidated financial statements are included in
Item 15 of this report.
|
|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
|
Effective December 3, 2009, our Audit Committee approved
the engagement of Ernst & Young to serve as our
independent registered public accounting firm. Our prior
auditors, Kelly & Co., were re-engaged by our audit
committee on March 30, 2010 to reopen the audit of the
years ended December 31, 2007 and 2008.
During the two fiscal years ended December 31, 2009 and
2008, there were no disagreements between us and Kelly &
Co. on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure
which, if not resolved to Kelly & Co.s satisfaction,
would have caused Kelly & Co. to make reference to the
subject matter of the disagreement in connection with its report
for such years within the meaning of Item 304(a)(1)(iv) of
Regulation S-K.
In addition, during the period identified above, there were no
reportable events as defined in Item 304(a)(1)(v) of
Regulation S-K.
|
|
Item 9A.
|
Controls
and Procedures
|
Our principal executive officer and principal financial officer
have provided certifications filed as Exhibits 31.1 and 32.1,
and 31.2 and 32.2, respectively. Such certifications should be
read in conjunction with the information contained in this
Item 9A for a more complete understanding of the matters
covered by such certifications.
72
(i) Disclosure
Controls and Procedures
We have established disclosure controls and procedures (as such
terms are defined in
Rules 13a-15(e)
and
15d-15(e)
under the Exchange Act, that are designed to ensure that
information required to be disclosed in our Exchange Act reports
is recorded, processed, summarized and reported within the time
periods specified in the SECs rules and forms, and that
such information is accumulated and communicated to our
management, including our Chief Executive Officer (our principal
executive officer) and Vice President Finance (our principal
financial officer), as appropriate, to allow for timely
decisions regarding required disclosure. In designing and
evaluating the disclosure controls and procedures, our
management is required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.
Our disclosure controls and procedures are designed to provide a
reasonable level of assurance of reaching our desired disclosure
control objectives.
We carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive
Officer and our Vice President of Finance, of the effectiveness
of the design and operation of our disclosure controls and
procedures as of December 31, 2009, the end of the period
covered by this annual report. Based on such evaluation, as of
December 31, 2009, our Chief Executive Officer and Vice
President of Finance concluded that, in light of the restatement
required for warrants pursuant to ASC 815 Derivatives and
Hedging Contracts in Entitys Own Equity
(formerly known as EITF
00-19)
our
disclosure controls and procedures required improvement in order
to prevent such a recurrence and were thus not effective as of
December 31, 2009. While we have processes to identify and
intelligently apply developments in accounting, we plan to
enhance these processes to better understand nuances to
increasingly complex accounting standards. Our plans include the
following: enhanced access to accounting literature, research
materials and documents; identification of third party
professionals with whom to consult regarding complex accounting
applications; and consideration of additional staff with the
requisite experience and training to supplement our current
accounting professionals.
|
|
(ii)
|
Internal
Control Over Financial Reporting
|
|
|
(a)
|
Managements
annual report on internal control over financial
reporting
|
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term
is defined in Exchange Act
Rules 13a-15(f)
and
15d-15(f).
Our internal control system was designed to provide reasonable
assurance to our management and board of directors regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. Due to the small size
of our company and the limited number of employees, it is not
possible for us to fully segregate duties associated with the
financial reporting process; accordingly, we rely on mitigating
controls to reduce the risks from such lack of segregation of
duties. Further, all internal control systems, no matter how
well designed, have inherent limitations. Therefore, even those
systems determined to be effective can provide only reasonable
assurance with respect to financial statement preparation and
presentation. Because of such inherent limitations, internal
control over financial reporting may not prevent or detect
misstatements. Projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of our
management, including our principal executive officer and
principal financial officer, we conducted an evaluation of the
effectiveness of our internal control over financial reporting
based on the framework in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission, or COSO. The objective
of this assessment was to determine whether our internal control
over financial reporting was effective as of December 31,
2009.
A material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting such
that there is a reasonable possibility that a material
misstatement of our annual or interim consolidated financial
statements will not be prevented or detected on a timely basis.
In our assessment of the effectiveness of internal control over
financial reporting as of December 31, 2009, we identified
a material weakness over the accounting for and disclosure of
derivatives associated with warrant instruments primarily
because we lacked technical expertise and adequate procedures to
develop and document our common stock
73
warrant analysis on the applicability of ASC 815
Derivatives and Hedging Contracts in
Entitys Own Equity (formerly known as
EITF 00-19)
to our warrant instruments. Because we lacked technical
expertise and adequate procedures to develop and document our
analysis of the applicability of ASC 815, and was
characterized as a material weakness with regard to accounting
for warrants, management has concluded that we did not maintain
effective internal control over financial reporting as of
December 31, 2009 based on the criteria in Internal
Control Integrated Framework.
Ernst & Young, our independent registered public
accounting firm, audited the effectiveness of our internal
controls over financial reporting and, based on that audit,
issued an adverse opinion on their report as stated below.
|
|
(b)
|
Changes
in internal control over financial reporting
|
Based on the matters discussed above, we intend to develop and
implement a remediation plan to address the identified material
weakness as follows: enhanced access to accounting literature,
research materials and documents; identification of third party
professionals with whom to consult regarding complex accounting
applications; and consideration of involving additional staff
with the requisite experience and training to supplement our
current accounting professionals.
Other than with respect to the identification of the material
weakness over the accounting for warrants discussed above, there
have been no changes in our internal control over financial
reporting that occurred during our most recent fiscal quarter
that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
74
Report of
Ernst & Young LLP, Independent Registered Public
Accounting Firm
The Board of Directors and
Stockholders of Spectrum Pharmaceuticals, Inc.
We have audited Spectrum Pharmaceuticals, Inc. and
Subsidiaries internal control over financial reporting as
of December 31, 2009, based on criteria established in
Internal Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(the COSO criteria). Spectrum Pharmaceuticals, Inc. and
Subsidiaries management is responsible for maintaining
effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over
financial reporting included in the accompanying
Managements Annual Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion
on the companys internal control over financial reporting
based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
A material weakness is a deficiency, or combination of
deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material
misstatement of the companys annual or interim financial
statements will not be prevented or detected on a timely basis.
The following material weakness has been identified and included
in managements assessment. Management has identified a
material weakness in controls related to the accounting for, and
disclosure of, warrants to purchase common stock in accordance
with relevant generally accepted accounting principles. We also
have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the
consolidated balance sheet of Spectrum Pharmaceuticals, Inc. and
Subsidiaries as of December 31, 2009 and the related
consolidated statements of operations, equity and cash flows for
the year ended December 31, 2009. This material weakness
was considered in determining the nature, timing, and extent of
audit tests applied in our audit of the 2009 consolidated
financial statements, and this report does not affect our report
dated April 2, 2010 which expressed an unqualified opinion
on those financial statements.
In our opinion, because of the effect of the material weakness
described above on the achievement of the objectives of the
control criteria, Spectrum Pharmaceuticals, Inc. and
Subsidiaries has not maintained effective internal control over
financial reporting as of December 31, 2009, based on the
COSO criteria.
Orange County, California
April 2, 2010
75
|
|
Item 9B.
|
Other
Information
|
|
|
Item 4.01.
|
Changes
in Registrants Certifying Accountant.
|
(b)
On December 3, 2009, we engaged Ernst & Young as
the Companys independent registered public accounting firm
with respect to the Companys financial statements for the
fiscal year ended December 31, 2009, and discontinued using
Kelly & Co. who served as the independent registered
public accounting firm for the Company from December 23,
2002 to December 3, 2009. During such time,
Kelly & Co. rendered the audit opinions on the
Companys consolidated financial statements included in the
Companys annual reports on
Form 10-K
filed with the Securities and Exchange Commission for the fiscal
years ended December 31, 2007 and 2008.
In connection with the restatement of the Companys
consolidated financial statements discussed below in
Item 4.02 and elsewhere in this document, on March 30,
2010, the Companys Audit Committee re-engaged
Kelly & Co. to audit the restatement adjustments that
the Company made to its 2007 and 2008 consolidated financial
statements in this
Form 10-K.
With respect to Ernst & Youngs ongoing audit of the
Companys financial statements for the fiscal year ended
December 31, 2009, the Audit Committee authorized
Kelly & Co. to respond fully to: (i) inquiries
from Ernst & Young regarding the restatement items in
the financial statements for the years ended December 31,
2007 and 2008, and (ii) any other inquiries from
Ernst & Young regarding any of the financial
statements of the Company.
The Company provided Kelly & Co. with a copy of the
foregoing disclosures in this Item 4.01(b) and requested
that Kelly & Co. review such disclosures. In addition,
Kelly & Co. has been given an opportunity to furnish
the Company with a letter addressed to the SEC containing any
new information, clarification of the Companys expression
of its views, or the extent to which it does not agree with the
statements made by the Company in this Item 4.01(b).
Kelly & Co. informed the Company on April 2, 2010
that it agrees with the disclosure provided in this
Item 4.01(b) and has not furnished such a letter to the
Company or the SEC.
|
|
Item 4.02.
|
Non-Reliance
on Previously Issued Financial Statements or a Related Audit
Report or Completed Interim Review.
|
In connection with warrants issued in registered offerings
during 2005 and 2009, the Company had previously classified the
warrants as equity under its evaluation of applicable guidance
contained in ASC 815 Derivatives and Hedging
Contracts in Entitys Own Equity (formerly known as
Emerging Issues Task Force Issue
00-19,
Accounting for Derivative Financial Instruments Indexed
to, and Potentially Settled in, a Companys Own
Stock). In connection with the audit for the fiscal year
2009, the Company, in consultation with Ernst & Young,
the Companys current independent registered public
accounting firm, reassessed the accounting classification of the
warrants under ASC 815 based on certain terms of the warrants.
The warrants provide that in the event the Company is unable to
issue registered shares upon exercise, the warrant holders are
entitled, under securities laws, to receive freely tradable
shares pursuant to a cashless exercise provision.
However, based on interpretation of ASC 815, there is a
required presumption of net cash settlement as it is not within
the control of the Company to provide registered shares, no
matter how remote the probability. The Companys Audit
Committee, together with management, in consultation with the
Companys outside legal advisors, determined on
March 30, 2010 that, notwithstanding the highly remote
theoretical nature of the possibility of net cash settlement,
the warrants should have originally been recorded as
liabilities, measured at fair value each reporting period, with
changes in the fair values being recognized in the statement of
operations.
76
The restatements reflect the reclassification of the warrants
from equity to a liability in the following amounts, which
represents the fair value of the warrants, as of the issuance
dates, calculated using the Black-Scholes option pricing model.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
|
Number of
|
|
|
|
|
|
|
|
of Warrants
|
|
|
|
Warrants
|
|
|
Exercise
|
|
|
Expiration
|
|
at Issuance
|
|
Issuance Date
|
|
Issued
|
|
|
Price
|
|
|
of Warrants
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
September 14, 2005
|
|
|
4,000,000
|
|
|
$
|
6.62
|
|
|
September 14, 2011
|
|
$
|
15,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 27, 2009
|
|
|
1,956,947
|
|
|
$
|
5.11
|
|
|
February 25, 2010
|
|
$
|
2,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 15, 2009
|
|
|
857,633
|
|
|
$
|
5.83
|
|
|
March 15, 2010
|
|
$
|
1,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
1,468,020
|
|
|
$
|
7.10
|
|
|
March 30, 2010
|
|
$
|
4,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 18, 2009
|
|
|
2,649,007
|
|
|
$
|
7.55
|
|
|
June 20, 2010
|
|
$
|
5,170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The revaluation of the warrants at each subsequent balance sheet
date to fair value, results in a change in the carrying value of
the liability, which change is recorded as Change in fair
value of common stock warrant liability in the
consolidated statement of operations. The net effect of these
changes for fiscal years ended December 31, 2008 and 2007,
and for each of the quarterly condensed consolidated financial
statements on
Form 10-Q
for the periods ended March 31, 2008 through
September 30, 2009 are as follows:
|
|
|
|
|
|
|
Income (Loss) Resulting
|
|
|
|
from Change in Fair
|
|
|
|
Value of Common
|
|
Reporting Period
|
|
Stock Warrant Liability
|
|
|
|
(In thousands)
|
|
|
Annual
|
|
|
|
|
Year ended December 31, 2007
|
|
$
|
12,055
|
|
|
|
|
|
|
Year ended December 31, 2008
|
|
$
|
1,271
|
|
|
|
|
|
|
Interim (unaudited)
|
|
|
|
|
Quarter ended March 31, 2008
|
|
$
|
520
|
|
|
|
|
|
|
Quarter ended June 30, 2008
|
|
$
|
916
|
|
|
|
|
|
|
Quarter ended September 30, 2008
|
|
|
45
|
|
|
|
|
|
|
Quarter ended December 31, 2008
|
|
$
|
(210
|
)
|
|
|
|
|
|
Quarter ended March 31, 2009
|
|
$
|
(509
|
)
|
|
|
|
|
|
Quarter ended June 30, 2009
|
|
$
|
(20,113
|
)
|
|
|
|
|
|
Quarter ended September 30, 2009
|
|
$
|
8,863
|
|
|
|
|
|
|
We have not amended our previously field Annual Reports on Form
10-K for the fiscal years ended December 31, 2005, 2006,
2007 and 2008, or the Quarterly Reports on Form 10-Q for the
periods ended September 30, 2005 through September 30,
2009 to reflect the restatements described in this Annual Report
on Form 10-K, and thus the financial statements and related
financial statement information contained in those reports
should no longer be relied upon.
The Audit Committee and management have discussed these matters
with Ernst & Young, the Companys independent
registered public accounting firm.
77
PART III
|
|
Item 10.
|
Directors,
Executive Officers and Corporate Governance
|
The information required under this item is incorporated by
reference from our definitive proxy statement related to our
2010 Annual Meeting of Stockholders, or the Proxy Statement, to
be filed pursuant to Regulation 14A, on or before
April 30, 2010.
|
|
Item 11.
|
Executive
Compensation
|
The information required under this item is incorporated herein
by reference from the Proxy Statement.
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
The information required under this item is incorporated herein
by reference from the Proxy Statement.
|
|
Item 13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
The information required under this item is incorporated herein
by reference from the Proxy Statement.
|
|
Item 14.
|
Principal
Accountant Fees and Services
|
The information required under this item is incorporated herein
by reference from the Proxy Statement.
PART IV
|
|
Item 15.
|
Exhibits
and Financial Statement Schedules
|
(a)(1)
Consolidated Financial Statements:
|
|
|
|
|
Page
|
|
Reports of Independent Registered Public Accounting Firms
|
|
F-2
|
Consolidated Balance Sheets as of December 31, 2009 and
2008 (as restated)
|
|
F-4
|
Consolidated Statements of Operations for each of the years in
the periods ended December 31, 2009, 2008 (as restated) and
2007 (as restated)
|
|
F-5
|
Consolidated Statements of Equity for each of the years in the
periods ended December 31, 2009, 2008 (as restated) and
2007 (as restated)
|
|
F-6
|
Consolidated Statements of Cash Flow for each of the years in
the periods ended December 31, 2009, 2008 (as restated) and
2007 (as restated)
|
|
F-7
|
Notes to Consolidated Financial Statements
|
|
F-8
|
(a)(2)
Financial Statement Schedules:
All
financial statement schedules are omitted because they are not
applicable or the required information is included in the
Consolidated Financial Statements or notes thereto.
(a)(3)
Exhibits.
78
Index to
Exhibits
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
2
|
.1
|
|
Asset Purchase Agreement by and between the Registrant, Targent
Inc. and Certain Stockholders of Targent, Inc., dated March 17
2006. (Filed as Exhibit 2.1 to
Form 10-K/A,
Amendment No. 1, as filed with the Securities and Exchange
Commission on May 1, 2006, and incorporated herein by
reference.)
|
|
2
|
.2
|
|
Asset Purchase Agreement by and between the Registrant and Par
Pharmaceutical, Inc., dated as of May 6, 2008. (Filed as
Exhibit 2.1 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
August 11, 2008, and incorporated herein by reference.)
|
|
2
|
.3#
|
|
Purchase and Formation Agreement, dated as of November 26,
2008, by and among the Registrant, Cell Therapeutics, Inc. and
RIT Oncology, LLC. (Filed as Exhibit 2.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
December 19, 2008, and incorporated herein by reference.)
|
|
2
|
.4#
|
|
Limited Liability Company Interest Assignment Agreement, dated
as of March 15, 2009, by and between the Registrant and
Cell Therapeutics, Inc. (Filed as Exhibit 2.1 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
May 15, 2009, and incorporated herein by reference.)
|
|
3
|
.1
|
|
Amended Certificate of Incorporation, as filed. (Filed as
Exhibit 3.1 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
August 8, 2006, and incorporated herein by reference.)
|
|
3
|
.2
|
|
Form of Amended and Restated Bylaws of the Registrant. (Filed as
Exhibit 3.1 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
August 16, 2004, and incorporated herein by reference.)
|
|
4
|
.1
|
|
Rights Agreement, dated as of December 13, 2000, between
the Registrant and ComputerShare Trust Company, N.A.
(formerly U.S. Stock Transfer Corporation), as Rights Agent,
which includes as Exhibit A thereto the form of Certificate
of Designation for the Series B Junior Participating
Preferred Stock, as Exhibit B thereto the Form of Rights
Certificate and as Exhibit C thereto a Summary of Terms of
Stockholder Rights Plan. (Filed as Exhibit 4.1 to
Form 8-A12G,
as filed with the Securities and Exchange Commission on
December 26, 2000, and incorporated herein by reference.)
|
|
4
|
.2
|
|
Amendment No. 1 to the Rights Agreement, dated as of
December 13, 2000 by and between the Registrant and
ComputerShare Trust Company, N.A. (formerly U.S. Stock
Transfer Corporation). (Filed as Exhibit 4.1 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
August 14, 2003, and incorporated herein by reference.)
|
|
4
|
.3
|
|
Registration Rights Agreement, dated as of September 26,
2003, by and among the Registrant and the persons listed on
Schedule 1 attached thereto. (Filed as Exhibit 4.4 to
Form 8-K,
as filed with the Securities and Exchange Commission on
September 30, 2003, and incorporated herein by reference.)
|
|
4
|
.4
|
|
Investor Rights Agreement, dated as of April 20, 2004, by
and among the Registrant and the persons listed on
Schedule 1 attached thereto. (Filed as Exhibit 4.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
April 23, 2004, and incorporated herein by reference.)
|
|
4
|
.5
|
|
Amendment No. 2 to the Rights Agreement, dated as of
December 13, 2000, by and between the Registrant and
ComputerShare Trust Company, N.A. (formerly U.S. Stock
Transfer Corporation). (Filed as Exhibit 4.1 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
May 17, 2004, and incorporated herein by reference.)
|
|
4
|
.6
|
|
Amendment No. 3 to the Rights Agreement, dated as of
December 13, 2000 by and between the Registrant and
ComputerShare Trust Company, N.A. (formerly U.S. Stock
Transfer Corporation). (Filed as Exhibit 4.2 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
May 17, 2004, and incorporated herein by reference.)
|
|
4
|
.7
|
|
Warrant issued by the Registrant to a Consultant, dated as of
September 17, 2003. (Filed as Exhibit 4.3 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
May 17, 2004, and incorporated herein by reference.)
|
|
4
|
.8
|
|
Amendment No. 1, dated as of November 2, 2005, to
Warrant issued by the Registrant to a Consultant, dated as of
September 17, 2003. (Filed as Exhibit 4.2 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
November 4, 2005, and incorporated herein by reference.)
|
|
4
|
.9
|
|
Warrant issued by the Registrant to a Consultant, dated as of
September 20, 2005. (Filed as Exhibit 4.3 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
November 4, 2005, and incorporated herein by reference.)
|
79
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
4
|
.10
|
|
Form of Warrant, dated September 15, 2005. (Filed as
Exhibit 4.35 to
Form 10-K,
as filed with the Securities and Exchange Commission on
March 15, 2006, and incorporated herein by reference.)
|
|
4
|
.11
|
|
Registration Rights Agreement, dated as of April 20, 2006,
by and among the Registrant and Targent, Inc. (Filed as
Exhibit 4.2 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
May 8, 2006, and incorporated herein by reference.)
|
|
4
|
.12
|
|
Fourth Amendment to Rights Agreement, dated July 7, 2006.
(Filed as Exhibit 4.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
July 12, 2006, and incorporated herein by reference.)
|
|
4
|
.13
|
|
Amendment No. 5 to the Rights Agreement, dated as of
December 13, 2000, by and between the Registrant and
ComputerShare Trust Company, N.A. (formerly U.S. Stock
Transfer Corporation). (Filed as Exhibit 4.2 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
November 3, 2006, and incorporated herein by reference.)
|
|
4
|
.14
|
|
Amendment No. 2, dated as of March 26, 2007, to
Warrant issued by the Registrant to a Consultant, dated as of
September 17, 2003. (Filed as Exhibit 4.1 to
Form 10-K/A,
as filed with the Securities and Exchange Commission on
April 30, 2007, and incorporated herein by reference.)
|
|
4
|
.15
|
|
Warrant issued by the Registrant to a Consultant, dated as of
April 28, 2008. (Filed as Exhibit 4.1 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
August 11, 2008, and incorporated herein by reference.)
|
|
4
|
.16
|
|
Form of Common Stock Purchase Warrant. (Filed as
Exhibit 4.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
May 28, 2009, and incorporated herein by reference.)
|
|
4
|
.17
|
|
Form of Common Stock Purchase Warrant. (Filed as
Exhibit 4.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
June 18, 2009, and incorporated herein by reference.)
|
|
4
|
.18
|
|
Form of Common Stock Purchase Warrant. (Filed as
Exhibit 4.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
July 2, 2009, and incorporated herein by reference.)
|
|
4
|
.19
|
|
Form of Common Stock Purchase Warrant (Filed as Exhibit 4.1
to
Form 8-K,
as filed with the Securities and Exchange Commission on
September 23, 2009, and incorporated herein by reference).
|
|
10
|
.1
|
|
Industrial Lease Agreement, dated as of January 16, 1997,
between the Registrant and the Irvine Company. (Filed as
Exhibit 10.11 to
Form 10-KSB,
as filed with the Securities and Exchange Commission on
March 31, 1997, and incorporated herein by reference.)
|
|
10
|
.2
|
|
Preferred Stock and Warrant Purchase Agreement, dated as of
September 26, 2003, by and among the Registrant and the
purchasers listed on Schedule 1 attached thereto. (Filed as
Exhibit 10.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
September 30, 2003, and incorporated herein by reference.)
|
|
10
|
.3
|
|
First Amendment, dated March 25, 2004, to Industrial Lease
Agreement dated as of January 16, 1997 by and between the
Registrant and the Irvine Company. (Filed as Exhibit 10.1
to
Form 10-Q,
as filed with the Securities and Exchange Commission on
May 17, 2004, and incorporated herein by reference.)
|
|
10
|
.4
|
|
Common Stock and Warrant Purchase Agreement, dated as of
April 20, 2004, by and among the Registrant and the
purchasers listed on Schedule 1 attached thereto. (Filed as
Exhibit 10.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
April 23, 2004, and incorporated herein by reference.)
|
|
10
|
.5#
|
|
License and Collaboration Agreement by and between the
Registrant and Zentaris GmbH, dated as of August 12, 2004.
(Filed as Exhibit 10.1 to
Form S-3/A,
as filed with the Securities and Exchange Commission on
January 21, 2005, and incorporated herein by reference.)
|
|
10
|
.6*
|
|
Form of Stock Option Agreement under the 2003 Amended and
Restated Incentive Award Plan. (Filed as Exhibit 10.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
December 17, 2004, and incorporated herein by reference.)
|
|
10
|
.7#
|
|
License Agreement by and between the Registrant and Chicago
Labs, Inc. (Filed as Exhibit 10.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
February 25, 2005, and incorporated herein by reference.)
|
|
10
|
.8*
|
|
Form of Non-Employee Director Stock Option Agreement under the
2003 Amended and Restated Incentive Award Plan. (Filed as
Exhibit 10.5 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
May 10, 2005, and incorporated herein by reference.)
|
80
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
10
|
.9*
|
|
Restricted Stock Award Grant Notice and Restricted Stock Award
Agreement under the 2003 Amended and Restated Incentive Award
Plan. (Filed as Exhibit 10.44 to
Form 10-K,
as filed with the Securities and Exchange Commission on
March 15, 2006, and incorporated herein by reference.)
|
|
10
|
.10#
|
|
License Agreement between the Registrant and Merck Eprova AG,
dated May 23, 2006. (Filed as Exhibit 10.1 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
August 8, 2006, and incorporated herein by reference.)
|
|
10
|
.11*
|
|
Third Amended and Restated 1997 Stock Incentive Plan. (Filed as
Exhibit 10.2 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
November 3, 2006, and incorporated herein by reference.)
|
|
10
|
.12#
|
|
Agreement by and between the Registrant and Glaxo Group Limited
(d/b/a GlaxoSmithKline), dated November 10, 2006. (Filed as
Exhibit 10.38 to
Form 10-K,
as filed with the Securities and Exchange Commission on
March 14, 2007, and incorporated herein by reference.)
|
|
10
|
.13*
|
|
2003 Amended and Restated Incentive Award Plan. (Filed as
Exhibit 10.3 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
August 9, 2007, and incorporated herein by reference.)
|
|
10
|
.14#
|
|
License Agreement by and between the Registrant and Indena,
S.p.A., dated July 17, 2007. (Filed as Exhibit 10.4 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
November 9, 2007, and incorporated herein by reference.)
|
|
10
|
.15*
|
|
Executive Employment Agreement by and between the Registrant and
Rajesh C. Shrotriya, M.D., entered into June 20, 2008
and effective as of January 2, 2008. (Filed as
Exhibit 10.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
June 26, 2008, and incorporated herein by reference.)
|
|
10
|
.16
|
|
Consulting Agreement by and between the Registrant and Luigi
Lenaz, M.D., effective as of July 1, 2008. (Filed as
Exhibit 10.2 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
August 11, 2008, and incorporated herein by reference.)
|
|
10
|
.17*
|
|
Form of Indemnity Agreement of the Registrant. (Filed as
Exhibit 10.32 to
Form 10-K,
as filed with the Securities and Exchange Commission on
March 31, 2009, and incorporated herein by reference.)
|
|
10
|
.18#
|
|
License, Development, Supply and Distribution Agreement, dated
October 28, 2008, by and among the Registrant, Allergan
Sales, LLC, Allergan USA, Inc. and Allergan, Inc. (Filed as
Exhibit 10.33 to
Form 10-K,
as filed with the Securities and Exchange Commission on
March 31, 2009, and incorporated herein by reference.)
|
|
10
|
.19*
|
|
Form of Stock Purchase Agreement, dated May 6, 2009. (Filed
as Exhibit 1.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
May 7, 2009, and incorporated herein by reference.)
|
|
10
|
.20
|
|
Form of Securities Purchase Agreement, dated May 27, 2009.
(Filed as Exhibit 10.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
May 28, 2009, and incorporated herein by reference.)
|
|
10
|
.21
|
|
Placement Agency Agreement between the Registrant and
Rodman & Renshaw, LLC, dated May 26, 2009. (Filed
as Exhibit 1.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
May 28, 2009, and incorporated herein by reference.)
|
|
10
|
.22
|
|
Form of Securities Purchase Agreement, dated June 15, 2009.
(Filed as Exhibit 10.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
June 18, 2009, and incorporated herein by reference.)
|
|
10
|
.23
|
|
Placement Agency Agreement between the Registrant and
Rodman & Renshaw, LLC, June 15, 2009. (Filed as
Exhibit 1.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
June 18, 2009, and incorporated herein by reference.)
|
|
10
|
.24*
|
|
2009 Employee Stock Purchase Plan. (Filed as Exhibit 99.1
to
Form S-8,
as filed with the Securities and Exchange Commission on
June 29, 2009, and incorporated herein by reference.)
|
|
10
|
.25*
|
|
2009 Incentive Award Plan. (Filed as Exhibit 99.2 to
Form S-8,
as filed with the Securities and Exchange Commission on
June 29, 2009, and incorporated herein by reference.)
|
|
10
|
.26
|
|
Form of Securities Purchase Agreement, dated June 30, 2009.
(Filed as Exhibit 10.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
July 2, 2009, and incorporated herein by reference.)
|
|
10
|
.27
|
|
Placement Agency Agreement between the Registrant and
Rodman & Renshaw, LLC, dated June 30, 2009.
(Filed as Exhibit 1.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
July 2, 2009, and incorporated herein by reference.)
|
81
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
10
|
.28*
|
|
2003 Amended and Restated Incentive Award Plan. (Filed as
Exhibit 10.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
July 2, 2009, and incorporated herein by reference.)
|
|
10
|
.29+
|
|
Fourth Amendment, dated July 29, 2009, to Industrial Lease
Agreement dated as of January 16, 1997 by and between the
Registrant and the Irvine Company.
|
|
10
|
.30*
|
|
Term Sheet for 2009 Incentive Award Plan Stock Option Award.
(Filed as Exhibit 10.8 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
August 13, 2009, and incorporated herein by reference.)
|
|
10
|
.31*
|
|
Term Sheet for 2009 Incentive Award Plan, Nonqualified Stock
Option Award Awarded to Non-Employee Directors. (Filed as
Exhibit 10.9 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
August 13, 2009, and incorporated herein by reference.)
|
|
10
|
.32*
|
|
Term Sheet for 2009 Incentive Award Plan, Restricted Stock
Award. (Filed as Exhibit 10.10 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
August 13, 2009, and incorporated herein by reference.)
|
|
10
|
.33*
|
|
Summary of Director Compensation. (Filed as Exhibit 10.11
to
Form 10-Q,
as filed with the Securities and Exchange Commission on
August 13, 2009, and incorporated herein by reference.)
|
|
10
|
.34
|
|
Placement Agency Agreement by and between the Registrant, and
Rodman & Renshaw, LLC, dated September 18, 2009
(Filed as Exhibit 1.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
September 23, 2009, and incorporated herein by reference.)
|
|
10
|
.35
|
|
Form of Securities Purchase Agreement, dated September 18,
2009 (Filed as Exhibit 1.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
September 23, 2009, and incorporated herein by reference.)
|
|
10
|
.36#+
|
|
License Agreement, dated November 6, 2009, by and between
the Registrant and Nippon Kayaku Co., Ltd.
|
|
10
|
.37#+
|
|
License and Collaboration Agreement, dated February 2,
2010, by and between the Registrant and TopoTarget A/S.
|
|
16
|
.1
|
|
Letter from Kelly and Company to the Securities and Exchange
Commission, dated December 3, 2009. (Filed as
Exhibit 16.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
December 8, 2009, and incorporated herein by reference.)
|
|
21
|
+
|
|
Subsidiaries of Registrant.
|
|
23
|
.1+
|
|
Consent of Ernst & Young LLP, Independent Registered
Public Accounting Firm.
|
|
23
|
.2+
|
|
Consent of Kelly & Company, Independent Registered
Public Accounting Firm.
|
|
24
|
.1
|
|
Power of Attorney (included in the signature page.)
|
|
31
|
.1+
|
|
Certification of Chief Executive Officer, pursuant to
Rule 13a-14(a)/15d-14(a)
of the Securities Exchange Act of 1934.
|
|
31
|
.2+
|
|
Certification of Vice President Finance, pursuant to
Rule 13a-14(a)/15d-14(a)
of the Securities Exchange Act of 1934.
|
|
32
|
.1+
|
|
Certification of Chief Executive Officer, pursuant to
Rule 13a-14(b)/15d-14(b)
of the Securities Exchange Act of 1934 and 18 U.S.C.
Section 1350.
|
|
32
|
.2+
|
|
Certification of Vice President Finance, pursuant to
Rule 13a-14(b)/15d-14(b)
of the Securities Exchange Act of 1934 and 18 U.S.C.
Section 1350.
|
|
|
|
*
|
|
Indicates a management contract or compensatory plan or
arrangement.
|
|
#
|
|
Confidential portions omitted and filed separately with the U.S.
Securities and Exchange Commission pursuant to
Rule 24b-2
promulgated under the Securities Exchange Act of 1934, as
amended.
|
|
+
|
|
Filed herewith.
|
82
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this Annual Report on
Form 10-K
to be signed on its behalf by the undersigned, thereunto duly
authorized.
Spectrum Pharmaceuticals, Inc.
|
|
|
|
By:
|
/s/
Rajesh
C. Shrotriya, M.D.
|
Rajesh C. Shrotriya, M.D.
Chief Executive Officer and President
Date: April 2, 2010
POWER OF
ATTORNEY
Each person whose signature appears below constitutes and
appoints each of Rajesh C. Shrotriya and Shyam K. Kumaria as his
attorney-in-fact, with full power of substitution, for him in
any and all capacities, to sign any amendments to this
Form 10-K,
and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that
each attorney-in-fact, or his substitute, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of
1934, this Annual Report on
Form 10-K
has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/
Rajesh
C. Shrotriya, M.D.
Rajesh
C. Shrotriya, M.D.
|
|
Chairman of the Board, Chief Executive Officer, and President
(Principal Executive Officer)
|
|
April 2, 2010
|
|
|
|
|
|
/s/
Shyam
K. Kumaria
Shyam
K. Kumaria
|
|
Vice President Finance
(Principal Financial and Accounting Officer)
|
|
April 2, 2010
|
|
|
|
|
|
/s/
Mitchell
P. Cybulski
Mitchell
P. Cybulski
|
|
Director
|
|
April 2, 2010
|
|
|
|
|
|
/s/
Richard
D. Fulmer
Richard
D. Fulmer
|
|
Director
|
|
April 2, 2010
|
|
|
|
|
|
/s/
Stuart
M. Krassner, Sc.D., Psy.D.
Stuart
M. Krassner, Sc.D., Psy.D.
|
|
Director
|
|
April 2, 2010
|
|
|
|
|
|
/s/
Anthony
E. Maida, III
Anthony
E. Maida, III
|
|
Director
|
|
April 2, 2010
|
|
|
|
|
|
/s/
Julius
A. Vida, Ph.D.
Julius
A. Vida, Ph.D.
|
|
Director
|
|
April 2, 2010
|
83
Spectrum Pharmaceuticals, Inc. and Subsidiaries
Consolidated Financial Statements
As of December 31, 2009 and 2008 and
For Each of the Three Years in the Period Ended
December 31, 2009
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Consolidated
Financial Statements
INDEX TO
FINANCIAL STATEMENTS
|
|
|
|
|
|
|
Page
|
|
|
|
|
F-2
|
|
|
|
|
F-4
|
|
|
|
|
F-5
|
|
|
|
|
F-6
|
|
|
|
|
F-7
|
|
|
|
|
F-8
|
|
F-1
Report of
Ernst & Young LLP, Independent Registered Public
Accounting Firm
The Board of Directors and
Stockholders of Spectrum Pharmaceuticals, Inc.
We have audited the accompanying consolidated balance sheet of
Spectrum Pharmaceuticals, Inc. and Subsidiaries as of
December 31, 2009, and the related consolidated statements
of operations, equity and cash flows for the year then ended.
These financial statements are the responsibility of Spectrum
Pharmaceuticals, Inc. and Subsidiaries management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the 2009 consolidated financial statements
referred to above present fairly, in all material respects, the
consolidated financial position of Spectrum Pharmaceuticals,
Inc. and Subsidiaries at December 31, 2009, and the
consolidated results of its operations and its cash flows for
the year then ended, in conformity with U.S. generally
accepted accounting principles.
As discussed in Note 1 to the consolidated financial
statements, the Company changed its method of accounting and
financial reporting for noncontrolling ownership interests in
subsidiaries held by parties other than the parent with the
adoption of FASB Accounting Standards Codification (ASC) Topic
810,
Consolidation
, effective January 1, 2009, and
retroactively adjusted all periods presented in the consolidated
financial statements for this change.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
Companys internal control over financial reporting as of
December 31, 2009, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission and our
report dated April 2, 2010 expressed an adverse opinion
thereon.
Orange County, California
April 2, 2010
F-2
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders Of
Spectrum Pharmaceuticals, Inc.
We have audited the accompanying consolidated balance sheet of
Spectrum Pharmaceuticals, Inc., as of December 31, 2008 and
the related consolidated statements of operations,
stockholders equity, comprehensive loss and cash flows for
each of the two years in the period ended December 31,
2008. These consolidated financial statements are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles
used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of Spectrum Pharmaceuticals,
Inc. as at December 31, 2008 and the consolidated results
of its operations and its cash flows for each of the two years
in the period ended December 31, 2008 in conformity with
United States generally accepted accounting principles.
As discussed in Note 2, the consolidated balance sheet as
of December 31, 2008 and the related consolidated
statements of operations, stockholders equity,
comprehensive loss and cash flows for each of the two years in
the period ended December 31, 2008 have been restated to
record certain common stock warrants originally issued in 2005
as liabilities rather than as equity.
Kelly & Company
Costa Mesa, California
March 31, 2009 except for Note 2,
which is as of April 2, 2010
F-3
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(As Restated)
|
|
|
|
(In thousands, except par value and share data)
|
|
|
ASSETS
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
82,336
|
|
|
$
|
9,860
|
|
Marketable securities
|
|
|
31,005
|
|
|
|
66,078
|
|
Accounts receivable, net
|
|
|
8,658
|
|
|
|
9,776
|
|
Inventories
|
|
|
3,230
|
|
|
|
1,841
|
|
Prepaid expenses and other current assets
|
|
|
1,028
|
|
|
|
693
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
126,257
|
|
|
|
88,248
|
|
Bank certificates of deposit & treasuries
|
|
|
11,438
|
|
|
|
2,148
|
|
Property and equipment, net
|
|
|
1,928
|
|
|
|
1,782
|
|
Zevalin related intangible assets, net
|
|
|
33,325
|
|
|
|
37,042
|
|
Other assets
|
|
|
185
|
|
|
|
289
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
173,133
|
|
|
$
|
129,509
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and other accrued obligations
|
|
$
|
16,606
|
|
|
$
|
10,401
|
|
Accrued compensation
|
|
|
3,360
|
|
|
|
2,956
|
|
Note payable in connection with Zevalin acquisition
|
|
|
|
|
|
|
7,500
|
|
Current portion of deferred revenue
|
|
|
8,300
|
|
|
|
8,500
|
|
Common stock warrant liability
|
|
|
6,635
|
|
|
|
765
|
|
Accrued drug development costs
|
|
|
4,598
|
|
|
|
3,449
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
39,499
|
|
|
|
33,571
|
|
Capital lease obligations, net of current portion
|
|
|
69
|
|
|
|
95
|
|
Deferred revenue and other credits, net of current portion
|
|
|
24,943
|
|
|
|
33,929
|
|
Zevalin related contingent obligations
|
|
|
298
|
|
|
|
8,798
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
64,809
|
|
|
|
76,393
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
Spectrum Pharmaceuticals, Inc. stockholders equity:
|
|
|
|
|
|
|
|
|
Preferred Stock, par value $0.001 per share,
5,000,000 shares authorized:
|
|
|
|
|
|
|
|
|
Series B Junior participating preferred stock,
1,000,000 shares authorized, no shares issued and
outstanding
|
|
|
|
|
|
|
|
|
Series E Convertible voting preferred stock,
2,000 shares authorized, stated value $10,000 per share,
$0.8 million aggregate liquidation value, issued and
outstanding, 68 shares at December 31, 2009 and 2008
|
|
|
419
|
|
|
|
419
|
|
Common stock, par value $0.001 per share,
100,000,000 shares authorized;
|
|
|
|
|
|
|
|
|
Issued and outstanding, 48,926,314 and 32,166,316 shares at
December 31, 2009 and December 31, 2008
|
|
|
49
|
|
|
|
32
|
|
Additional paid-in capital
|
|
|
369,482
|
|
|
|
281,059
|
|
Accumulated other comprehensive loss
|
|
|
(70
|
)
|
|
|
(146
|
)
|
Accumulated deficit
|
|
|
(261,556
|
)
|
|
|
(242,510
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
108,324
|
|
|
|
38,854
|
|
Non-controlling interest
|
|
|
|
|
|
|
14,262
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
108,324
|
|
|
|
53,116
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
173,133
|
|
|
$
|
129,509
|
|
|
|
|
|
|
|
|
|
|
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
F-4
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Consolidated Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
(As Restated)
|
|
|
(As Restated)
|
|
|
|
(In thousands, except share and share data)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Product net sales
|
|
$
|
28,225
|
|
|
$
|
8,049
|
|
|
|
|
|
License and contract revenue
|
|
|
9,800
|
|
|
|
20,676
|
|
|
$
|
7,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
38,025
|
|
|
$
|
28,725
|
|
|
$
|
7,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product sales (excludes amortization of purchased
intangibles shown below)
|
|
|
8,148
|
|
|
|
1,193
|
|
|
|
|
|
Selling, general and administrative
|
|
|
33,607
|
|
|
|
15,156
|
|
|
|
11,577
|
|
Research and development
|
|
|
21,058
|
|
|
|
26,683
|
|
|
|
33,285
|
|
Amortization of purchased intangibles
|
|
|
3,720
|
|
|
|
158
|
|
|
|
|
|
Acquired in-process research and development
|
|
|
|
|
|
|
4,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
66,533
|
|
|
|
47,890
|
|
|
|
44,862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(28,508
|
)
|
|
|
(19,165
|
)
|
|
|
(37,190
|
)
|
Change in fair value of common stock warrant liability
|
|
|
8,075
|
|
|
|
1,271
|
|
|
|
12,055
|
|
Other income, net
|
|
|
662
|
|
|
|
1,165
|
|
|
|
3,139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax net loss
|
|
|
(19,771
|
)
|
|
|
(16,729
|
)
|
|
|
(21,996
|
)
|
Income tax expense
|
|
|
(421
|
)
|
|
|
(5
|
)
|
|
|
(5
|
)
|
Net loss attributable to non-controlling interest
|
|
|
1,146
|
|
|
|
2,538
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Spectrum
Pharmaceuticals, Inc. stockholders
|
|
$
|
(19,046
|
)
|
|
$
|
(14,196
|
)
|
|
$
|
(21,981
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share attributable to
Spectrum Pharmaceuticals, Inc. stockholders
|
|
$
|
(0.48
|
)
|
|
$
|
(0.45
|
)
|
|
$
|
(0.76
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average common shares outstanding
|
|
|
39,273,905
|
|
|
|
31,551,152
|
|
|
|
29,013,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
F-5
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Consolidated Statement of Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
Total
|
|
|
Non-
|
|
|
|
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Additional
|
|
|
Comprehensive
|
|
|
Accumulated
|
|
|
Stockholders
|
|
|
Controlling
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Paid-In Capital
|
|
|
Income (Loss)
|
|
|
Deficit
|
|
|
Equity
|
|
|
Interest
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(As Restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except share data)
|
|
|
Balance at December 2006 (restated)
|
|
|
219
|
|
|
$
|
1,281
|
|
|
|
25,217,793
|
|
|
$
|
25
|
|
|
$
|
236,408
|
|
|
$
|
357
|
|
|
$
|
(206,332
|
)
|
|
|
31,739
|
|
|
$
|
20
|
|
|
$
|
31,759
|
|
Net Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,981
|
)
|
|
|
(21,981
|
)
|
|
|
(20
|
)
|
|
|
(22,001
|
)
|
Unrealized gain on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
136
|
|
|
|
|
|
|
|
136
|
|
|
|
|
|
|
|
136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive gain (loss), net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
136
|
|
|
|
(21,981
|
)
|
|
|
(21,845
|
)
|
|
|
(20
|
)
|
|
|
(21,865
|
)
|
Conversion of Series D Preferred Stock into Common Stock
|
|
|
(49
|
)
|
|
|
(233
|
)
|
|
|
207,957
|
|
|
|
1
|
|
|
|
232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock and warrants for cash, net of issuance
costs
|
|
|
|
|
|
|
|
|
|
|
5,134,100
|
|
|
|
5
|
|
|
|
30,004
|
|
|
|
|
|
|
|
|
|
|
|
30,009
|
|
|
|
|
|
|
|
30,009
|
|
Fair value of common stock issued to Targent, Inc. for milestones
|
|
|
|
|
|
|
|
|
|
|
125,000
|
|
|
|
|
|
|
|
520
|
|
|
|
|
|
|
|
|
|
|
|
520
|
|
|
|
|
|
|
|
520
|
|
Share-based compensation expense and common stock issued (net of
forfeitures)
|
|
|
|
|
|
|
|
|
|
|
235,313
|
|
|
|
|
|
|
|
5,278
|
|
|
|
|
|
|
|
|
|
|
|
5,278
|
|
|
|
|
|
|
|
5,278
|
|
Issuance of common stock upon exercise of warrants
|
|
|
|
|
|
|
|
|
|
|
161,145
|
|
|
|
|
|
|
|
519
|
|
|
|
|
|
|
|
|
|
|
|
519
|
|
|
|
|
|
|
|
519
|
|
Issuance of common stock upon exercise of employee stock options
|
|
|
|
|
|
|
|
|
|
|
81,438
|
|
|
|
|
|
|
|
120
|
|
|
|
|
|
|
|
|
|
|
|
120
|
|
|
|
|
|
|
|
120
|
|
Issuance of common stock to 401(k) plan
|
|
|
|
|
|
|
|
|
|
|
44,118
|
|
|
|
|
|
|
|
211
|
|
|
|
|
|
|
|
|
|
|
|
211
|
|
|
|
|
|
|
|
211
|
|
Fair value of common stock issued to consultant for services
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
163
|
|
|
|
|
|
|
|
|
|
|
|
163
|
|
|
|
|
|
|
|
163
|
|
Fractional share adjustments
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series D Preferred Stock dividend paid with common stock
|
|
|
|
|
|
|
|
|
|
|
1,928
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 2007 (restated)
|
|
|
170
|
|
|
$
|
1,048
|
|
|
|
31,233,798
|
|
|
$
|
31
|
|
|
$
|
273,455
|
|
|
$
|
493
|
|
|
$
|
(228,313
|
)
|
|
$
|
46,713
|
|
|
$
|
|
|
|
$
|
46,713
|
|
Net Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,196
|
)
|
|
|
(14,196
|
)
|
|
|
(2,538
|
)
|
|
|
(16,734
|
)
|
Realized gains on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(493
|
)
|
|
|
|
|
|
|
(493
|
)
|
|
|
|
|
|
|
(493
|
)
|
Unrealized loss on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(146
|
)
|
|
|
|
|
|
|
(146
|
)
|
|
|
|
|
|
|
(146
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(639
|
)
|
|
|
(14,196
|
)
|
|
|
(14,835
|
)
|
|
|
(2,538
|
)
|
|
|
(17,373
|
)
|
Conversion of Series E Preferred Stock into Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,800
|
|
|
|
16,800
|
|
Fair value of common stock issued to Targent, Inc. for NDA
Approval
|
|
|
(102
|
)
|
|
|
(629
|
)
|
|
|
204,000
|
|
|
|
|
|
|
|
629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of common stock issued to NDDO, University of
Bradford et al
|
|
|
|
|
|
|
|
|
|
|
125,000
|
|
|
|
|
|
|
|
305
|
|
|
|
|
|
|
|
|
|
|
|
305
|
|
|
|
|
|
|
|
305
|
|
Share-based compensation expense and common stock issued (net of
forfeitures)
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
|
|
|
|
|
|
74
|
|
|
|
|
|
|
|
|
|
|
|
74
|
|
|
|
|
|
|
|
74
|
|
Issuance of common stock to 401(k) plan
|
|
|
|
|
|
|
|
|
|
|
362,088
|
|
|
|
1
|
|
|
|
6,322
|
|
|
|
|
|
|
|
|
|
|
|
6,324
|
|
|
|
|
|
|
|
6,324
|
|
Fractional share adjustments
|
|
|
|
|
|
|
|
|
|
|
166,430
|
|
|
|
|
|
|
|
274
|
|
|
|
|
|
|
|
|
|
|
|
274
|
|
|
|
|
|
|
|
274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008 (restated)
|
|
|
68
|
|
|
$
|
419
|
|
|
|
32,166,316
|
|
|
$
|
32
|
|
|
$
|
281,059
|
|
|
$
|
(146
|
)
|
|
$
|
(242,510
|
)
|
|
$
|
38,854
|
|
|
$
|
14,262
|
|
|
$
|
53,116
|
|
Net Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19,046
|
)
|
|
|
(19,046
|
)
|
|
|
(1,146
|
)
|
|
|
(20,192
|
)
|
Realized gains on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101
|
|
|
|
|
|
|
|
101
|
|
|
|
|
|
|
|
101
|
|
Unrealized loss on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(25
|
)
|
|
|
|
|
|
|
(25
|
)
|
|
|
|
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76
|
|
|
|
(19,046
|
)
|
|
|
(18,970
|
)
|
|
|
(1,146
|
)
|
|
|
(20,116
|
)
|
Issuance of common stock and warrants for cash, net of issuance
costs
|
|
|
|
|
|
|
|
|
|
|
15,187,715
|
|
|
|
15
|
|
|
|
81,779
|
|
|
|
|
|
|
|
|
|
|
|
81,794
|
|
|
|
|
|
|
|
81,794
|
|
Contributions by non-controlling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,067
|
|
|
|
2,067
|
|
Purchase of non controlling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,798
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,798
|
)
|
|
|
(15,183
|
)
|
|
|
(16,981
|
)
|
Issuance of common stock to employees - shelf takedown
|
|
|
|
|
|
|
|
|
|
|
432,200
|
|
|
|
1
|
|
|
|
1,166
|
|
|
|
|
|
|
|
|
|
|
|
1,167
|
|
|
|
|
|
|
|
1,167
|
|
Stock Options tender offer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,520
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,520
|
)
|
|
|
|
|
|
|
(2,520
|
)
|
Issuance of common stock to 401(k) plan
|
|
|
|
|
|
|
|
|
|
|
139,795
|
|
|
|
|
|
|
|
448
|
|
|
|
|
|
|
|
|
|
|
|
448
|
|
|
|
|
|
|
|
448
|
|
Issuance of common stock for ESPP
|
|
|
|
|
|
|
|
|
|
|
65,715
|
|
|
|
|
|
|
|
292
|
|
|
|
|
|
|
|
|
|
|
|
292
|
|
|
|
|
|
|
|
292
|
|
Issuance of common stock upon exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
488,750
|
|
|
|
1
|
|
|
|
1,261
|
|
|
|
|
|
|
|
|
|
|
|
1,262
|
|
|
|
|
|
|
|
1,262
|
|
Share-based compensation expense and common stock issued (net of
forfeitures)
|
|
|
|
|
|
|
|
|
|
|
207,014
|
|
|
|
|
|
|
|
6,860
|
|
|
|
|
|
|
|
|
|
|
|
6,860
|
|
|
|
|
|
|
|
6,860
|
|
Fair value of common stock issued to Targent, Inc. for NDA
Approval
|
|
|
|
|
|
|
|
|
|
|
125,000
|
|
|
|
|
|
|
|
185
|
|
|
|
|
|
|
|
|
|
|
|
185
|
|
|
|
|
|
|
|
185
|
|
Fair value of common stock issued to Altair Inc. for Renazorb
rights
|
|
|
|
|
|
|
|
|
|
|
113,809
|
|
|
|
|
|
|
|
750
|
|
|
|
|
|
|
|
|
|
|
|
750
|
|
|
|
|
|
|
|
750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
68
|
|
|
$
|
419
|
|
|
|
48,926,314
|
|
|
$
|
49
|
|
|
$
|
369,482
|
|
|
$
|
(70
|
)
|
|
$
|
(261,556
|
)
|
|
$
|
108,324
|
|
|
$
|
|
|
|
$
|
108,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
F-6
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
(As Restated)
|
|
|
(As Restated)
|
|
|
|
(In thousands, except share
|
|
|
|
and share data)
|
|
|
Cash Flows From Operating Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(19,046
|
)
|
|
|
(14,196
|
)
|
|
$
|
(21,981
|
)
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred revenue
|
|
|
(9,186
|
)
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
4,244
|
|
|
|
610
|
|
|
|
255
|
|
Fair value adjustments of common stock warrants
|
|
|
(8,075
|
)
|
|
|
(1,271
|
)
|
|
|
(12,055
|
)
|
Acquired in-process research and development
|
|
|
|
|
|
|
4,700
|
|
|
|
|
|
Share-based compensation expense
|
|
|
7,423
|
|
|
|
6,537
|
|
|
|
5,652
|
|
Fair value of common stock issued in connection with drug license
|
|
|
935
|
|
|
|
379
|
|
|
|
520
|
|
Non-controlling interest in consolidated entities
|
|
|
(1,146
|
)
|
|
|
(2,538
|
)
|
|
|
(20
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
1,118
|
|
|
|
(4,811
|
)
|
|
|
959
|
|
Inventories
|
|
|
(1,389
|
)
|
|
|
(1,841
|
)
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
(354
|
)
|
|
|
101
|
|
|
|
(268
|
)
|
Accounts payable and other accrued obligations
|
|
|
7,097
|
|
|
|
2,387
|
|
|
|
1,463
|
|
Other assets
|
|
|
104
|
|
|
|
|
|
|
|
|
|
Accrued compensation
|
|
|
404
|
|
|
|
1,845
|
|
|
|
103
|
|
Accrued drug development costs
|
|
|
1,149
|
|
|
|
|
|
|
|
|
|
Deferred revenue and other credits
|
|
|
(912
|
)
|
|
|
93
|
|
|
|
(43
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(17,634
|
)
|
|
|
(8,005
|
)
|
|
|
(25,415
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales (purchases) of marketable securities
|
|
|
25,783
|
|
|
|
(13,056
|
)
|
|
|
(4,265
|
)
|
Investment in Zevalin acquisition
|
|
|
(30,940
|
)
|
|
|
(10,202
|
)
|
|
|
|
|
Purchases of property and equipment
|
|
|
(673
|
)
|
|
|
(1,518
|
)
|
|
|
(346
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(5,830
|
)
|
|
|
(24,776
|
)
|
|
|
(4,611
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock and warrants, net of
related offering costs and expenses
|
|
|
95,810
|
|
|
|
|
|
|
|
30,009
|
|
Proceeds from sale of common stock to employees
shelf takedown
|
|
|
1,167
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of common stock to employees ESPP
|
|
|
292
|
|
|
|
|
|
|
|
|
|
Proceeds from (repurchase) exercise of warrants
|
|
|
(71
|
)
|
|
|
|
|
|
|
519
|
|
Proceeds from exercise of stock options
|
|
|
1,262
|
|
|
|
|
|
|
|
120
|
|
Repurchase of stock options pursuant to tender offer
|
|
|
(2,520
|
)
|
|
|
|
|
|
|
|
|
Proceeds from Allergan, Inc. collaboration
|
|
|
|
|
|
|
41,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
95,940
|
|
|
|
41,500
|
|
|
|
30,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
72,476
|
|
|
|
8,719
|
|
|
|
622
|
|
Cash and cash equivalents, beginning of period
|
|
|
9,860
|
|
|
|
1,141
|
|
|
|
519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
82,336
|
|
|
$
|
9,860
|
|
|
$
|
1,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
28
|
|
|
$
|
36
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
$
|
45
|
|
|
$
|
5
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule of Non-Cash Investing and Financing Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of common stock issued in connection with drug license
|
|
$
|
935
|
|
|
$
|
379
|
|
|
$
|
520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of restricted stock granted employees and directors
|
|
$
|
488
|
|
|
$
|
606
|
|
|
$
|
1,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of stock issued to match employee 401k contributions
|
|
$
|
448
|
|
|
$
|
274
|
|
|
$
|
179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of common stock warrants
|
|
$
|
14,016
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying Notes to Condensed Consolidated Financial
Statements are an integral part of these statements.
F-7
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Restatement
of Historical Financial Statements
The accompanying consolidated balance sheet as of
December 31, 2008, and the consolidated statements of
operations, equity, and cash flows for the years ended
December 31, 2007 and 2008, have been restated in this
report to reclassify warrant contracts based on a reassessment
of the applicable accounting and classification, as are more
fully discussed in Note 2.
We are a commercial stage biopharmaceutical company committed to
developing and commercializing innovative therapies with a focus
primarily in the areas of hematology-oncology and urology. We
have a fully developed commercial infrastructure that markets
and sells two drugs in the United States,
Zevalin
®
and
Fusilev
®
.
We also have a portfolio of drugs under various stages of
development. Our lead developmental drug is apaziquone
(EOquin
®
),
which is presently being studied in two large Phase 3 clinical
trials for non-muscle invasive bladder cancer under a strategic
collaboration with Allergan, Inc. Subsequent to
December 31, 2009, we acquired development and
commercialization rights for North America and India for
belinostat, from TopoTarget A/S to jointly develop. Belinostat
is being studied in multiple indications, including a Phase 2
trial for relapsed or refractory Peripheral T-Cell Lymphoma
(PTCL).
|
|
2.
|
Restatement
of Financial Statements
|
The Companys consolidated financial statements contained
herein include restatements of previously reported financial
statements and related disclosures for fiscal years ended
December 31, 2007 and 2008 and each of the quarterly
condensed consolidated financial statements on Form 10-Q
for the periods ended March 31, 2008 through
September 30, 2009 to record common stock warrants as a
liability based on a reassessment of the applicable accounting
and classification.
In connection with warrants issued in registered offerings
during 2005 and 2009 (the Warrants), the Company had
previously recorded the Warrants as equity under its evaluation
of applicable guidance contained in Accounting Standards
Codification (ASC) Topic 815 Derivatives and
Hedging Contracts in Entitys Own Equity
(ASC 815) (formerly known as Emerging Issues Task
Force Issue
00-19,
Accounting for Derivative Financial Instruments Indexed
to, and Potentially Settled in, a Companys Own
Stock). In connection with the audit for the fiscal year
2009, the Company, in consultation with Ernst & Young
LLP (Ernst & Young), the Companys
current independent registered public accounting firm,
reassessed the accounting classification of the Warrants payment
to ASC 815 based on certain terms of the Warrants. The Warrants
provide that in the event the Company is unable to issue
registered shares upon exercise, the Warrant holders are
entitled, under securities laws, to receive freely tradable
shares pursuant to a cashless exercise provision.
However, based on interpretation of ASC 815, there is a required
presumption of net cash settlement as it is not within the
control of the Company to provide registered shares, no matter
how remote the probability. The Companys Audit Committee,
together with management, in consultation with the
Companys outside legal advisors, determined on
March 30, 2010 that, notwithstanding the highly remote
theoretical nature of the possibility of net cash settlement,
the Warrants should have originally been recorded as
liabilities, measured at fair value with changes in the fair
values being recognized in the statement of operations.
We have not amended our previously filed Annual Reports on Form
10-K
for the
fiscal years ended December 31, 2005, 2006, 2007 and 2008,
or the Quarterly Reports on Form
10-Q
for the
periods ended September 30, 2005 through September 30,
2009 to reflect the restatements described in this Annual Report
on Form 10-K, and thus the financial statements and related
financial statement information contained in those reports
should no longer be relied upon. Throughout this Annual Report
on Form 10-K, all amounts presented from prior periods and prior
period comparisons have been revised and labeled as
restated and reflect the balances and amounts on a
restated basis.
F-8
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
The restatements reflect the reclassification of the warrants
from equity to a liability in the following amounts, which
represents the fair value of the warrants, as of the issuance
dates, calculated using the Black-Scholes option pricing model.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
|
Number of
|
|
|
|
|
|
|
|
of Warrants
|
|
|
|
Warrants
|
|
|
Exercise
|
|
|
Expiration
|
|
at Issuance
|
|
Issuance Date
|
|
Issued
|
|
|
Price
|
|
|
of Warrants
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
September 14, 2005
|
|
|
4,000,000
|
|
|
$
|
6.62
|
|
|
September 14, 2011
|
|
$
|
15,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 27, 2009
|
|
|
1,956,947
|
|
|
$
|
5.11
|
|
|
February 25, 2010
|
|
$
|
2,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 15, 2009
|
|
|
857,633
|
|
|
$
|
5.83
|
|
|
March 15, 2010
|
|
$
|
1,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
1,468,020
|
|
|
$
|
7.10
|
|
|
March 30, 2010
|
|
$
|
4,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 18, 2009
|
|
|
2,649,007
|
|
|
$
|
7.55
|
|
|
June 20, 2010
|
|
$
|
5,170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The revaluation of the warrants at each subsequent balance sheet
date to fair value, results in a change in the carrying value of
the liability, which change is recorded as Change in
fair value of common stock warrant liability in the
consolidated statement of operations. The net effect of these
changes for fiscal years ended December 31, 2008 and 2007,
and for each of the quarterly condensed consolidated financial
statements on
Form 10-Q
for the periods ended March 31, 2008 through
September 30, 2009 are as follows:
|
|
|
|
|
|
|
Income (Loss) Resulting
|
|
|
|
from Change in Fair
|
|
|
|
Value of Common
|
|
Reporting Period
|
|
Stock Warrant Liability
|
|
|
|
(In thousands)
|
|
|
Annual
|
|
|
|
|
Year ended December 31, 2007
|
|
$
|
12,055
|
|
|
|
|
|
|
Year ended December 31, 2008
|
|
$
|
1,271
|
|
|
|
|
|
|
Interim (unaudited)
|
|
|
|
|
Quarter ended March 31, 2008
|
|
$
|
520
|
|
|
|
|
|
|
Quarter ended June 30, 2008
|
|
$
|
916
|
|
|
|
|
|
|
Quarter ended September 30, 2008
|
|
$
|
45
|
|
|
|
|
|
|
Quarter ended December 31, 2008
|
|
$
|
(210
|
)
|
|
|
|
|
|
Quarter ended March 31, 2009
|
|
$
|
(509
|
)
|
|
|
|
|
|
Quarter ended June 30, 2009
|
|
$
|
(20,113
|
)
|
|
|
|
|
|
Quarter ended September 30, 2009
|
|
$
|
(8,863
|
)
|
|
|
|
|
|
F-9
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
The following tables summarize the effects of the restatements
on the specific line items presented in the Companys
historical consolidated financial statements included in the
Companys Annual Report on
Form 10-K
as of the fiscal year ended December 31, 2008 and for the
two years ended December 31, 2008:
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheet
|
|
December 31, 2008
|
|
|
December 31, 2008
|
|
|
|
(As previously reported)
|
|
|
(As Restated)
|
|
|
|
(In thousands)
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Common stock warrant liability
|
|
$
|
|
|
|
$
|
765
|
|
Total current liabilities
|
|
$
|
28,032
|
|
|
$
|
33,571
|
|
|
|
|
|
|
|
|
|
|
Spectrum Pharmaceuticals, Inc. stockholders equity:
|
|
|
|
|
|
|
|
|
Additional
paid-in-capital
|
|
$
|
296,531
|
|
|
$
|
281,059
|
|
Accumulated deficit
|
|
$
|
(257,217
|
)
|
|
$
|
(242,510
|
)
|
Total stockholders equity
|
|
$
|
39,619
|
|
|
$
|
38,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
Consolidated Statements of Operations
|
|
December 31, 2008
|
|
|
December 31, 2008
|
|
|
December 31, 2007
|
|
|
December 31, 2007
|
|
|
|
(As Previously
|
|
|
(As Restated)
|
|
|
(As Previously
|
|
|
(As Restated)
|
|
|
|
Reported)
|
|
|
|
|
|
Reported)
|
|
|
|
|
|
Change in fair value of common stock warrant liability
|
|
$
|
|
|
|
$
|
1,271
|
|
|
$
|
|
|
|
$
|
12,055
|
|
Net loss attributable to Spectrum Pharmaceuticals,
Inc. stockholders
|
|
|
(15,467
|
)
|
|
|
(14,196
|
)
|
|
|
(34,036
|
)
|
|
|
(21,981
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share data basic and diluted
attributable to Spectrum Pharmaceuticals, Inc. stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share attributable to Spectrum
Pharmaceuticals, Inc.
|
|
$
|
(0.49
|
)
|
|
$
|
(0.45
|
)
|
|
$
|
(1.17
|
)
|
|
$
|
(0.76
|
)
|
The restatements resulted in changes to the opening balances of
accumulated defict, additional paid in capital and total
shareholders equity as of January 1, 2007 as follows:
|
|
|
|
|
|
|
|
|
|
|
January 1, 2007
|
|
|
January 1, 2007
|
|
|
|
(As Previously
|
|
|
(As Restated)
|
|
|
|
Reported)
|
|
|
|
|
|
|
(In Thousands)
|
|
|
Additional paid-in capital
|
|
$
|
251,880
|
|
|
$
|
27,345
|
|
Accumulated deficit
|
|
$
|
(207,714
|
)
|
|
$
|
(228,313
|
)
|
Stockholders equity
|
|
$
|
45,829
|
|
|
$
|
46,713
|
|
The restatements had no impact on the financial statement
amounts previously reported for the Companys assets,
revenues and operating costs and expenses and cash flows from
operations other than the change in net income (loss) for the
years ended December 31, 2008 and 2007, or for the first
nine months ended September 30, 2009, or any quarterly
periods in the years ended December 31, 2009, 2008 and 2007.
|
|
3.
|
Summary
of Significant Accounting Policies
|
Principles
of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of
Spectrum Pharmaceuticals, Inc. (Spectrum or the Company), our
wholly-owned subsidiaries, and joint ventures the Company
controls, or of which it is the primary beneficiary. We evaluate
the need to consolidate joint ventures based on
ASC
No. 810-10-15,
Consolidation, Variable Interest Entities
. Investments by
outside parties in our consolidated entities are recorded as non-
F-10
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
controlling interest in consolidated entities in our
consolidated financial statements, and stated net after
allocation of income and losses in the entity.
As of December 31, 2009, we had three consolidated
subsidiaries: OncoRx Pharma Private Limited
(OncoRx), 100% owned, organized in Mumbai, India in
2008; Spectrum Pharmaceuticals GmbH, wholly-owned inactive
subsidiary, incorporated in Switzerland in April 1997; RIT
Oncology, LLC (RIT), 100% owned since March 15,
2009, organized in Delaware in October 2008; and one
consolidated joint venture, Spectrum Pharma Canada, organized in
Quebec, Canada in January 2008. We have eliminated all
significant intercompany accounts and transactions from the
consolidated financial statements.
Use of
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires us to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses
and disclosure of contingent obligations in the consolidated
financial statements and accompanying notes. The estimation
process requires assumptions to be made by management about
future events and conditions, and as such, is inherently
subjective and uncertain. Actual results could differ materially
from those estimates.
Subsequent
Events
In connection with the preparation of the consolidated financial
statements, we have evaluated subsequent events through the
filing date of this
Form 10-K.
Cash
and Cash Equivalents, Marketable Securities and Fair Value of
Financial Instruments
Cash and cash equivalents and marketable securities primarily
consist of bank checking deposits, short-term treasury
securities, institutional money market funds, corporate debt and
equity, municipal obligations, government agency notes, and
certificates of deposit. We classify highly liquid short-term
investments, with insignificant interest rate risk and
maturities of 90 days or less at the time of acquisition,
as cash and cash equivalents. Other investments, which do not
meet the above definition of cash equivalents, are classified as
either
held-to-maturity
or
available-for-sale
marketable securities. Investments that lack immediate
liquidity, or which we intend to hold for more than one year are
classified as long-term investments, and included in other
assets. All of our available for sale securities are
classified as current assets based on our intent and ability to
use any and all of these securities as necessary to satisfy our
cash needs as they arise, by redeeming them at par with short
notice and without penalty.
We have classified $11.4 million of our investments with
maturity dates over 1 year from December 31, 2009 as
long term based on held to maturity.
The Company measures fair value based on the prices that would
be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the
measurement date. Fair value measurements are based on a
three-tier hierarchy that prioritizes the inputs used to measure
fair value. These tiers include:
Level 1:
Quoted prices (unadjusted) in
active markets that are accessible at the measurement date for
assets or liabilities. The fair value hierarchy gives the
highest priority to Level 1 inputs.
Level 2:
Observable prices that are based
on inputs not quoted on active markets, but corroborated by
market data.
Level 3:
Unobservable inputs are used
when little or no market data is available. The fair value
hierarchy gives the lowest priority to Level 3 inputs.
F-11
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
In determining fair value, we utilize valuation techniques that
maximize the use of observable inputs and minimize the use of
unobservable inputs to the extent possible, as well as consider
counterparty credit risk in the assessment of fair value.
The carrying values of our cash, cash equivalents, marketable
securities, other securities and common stock warrants, carried
at fair value as of December 31, 2009 and 2008, are
classified in the table below in one of the three categories
described above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31,
|
|
|
|
2009 and 2008
|
|
|
|
(In 000s)
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash & Equivalents
|
|
$
|
82,336
|
|
|
|
|
|
|
|
|
|
|
$
|
82,336
|
|
U.S. Treasury T-Bills
|
|
|
3,501
|
|
|
|
|
|
|
|
|
|
|
|
3,501
|
|
Money Market Currency Funds
|
|
|
4,800
|
|
|
|
|
|
|
|
|
|
|
|
4,800
|
|
FDIC insured Bank CDs
|
|
|
20,948
|
|
|
|
|
|
|
|
|
|
|
|
20,948
|
|
Medium Term Corporate Notes
|
|
|
153
|
|
|
|
|
|
|
|
|
|
|
|
153
|
|
U.S. Treasury Backed Securities
|
|
|
13,041
|
|
|
|
|
|
|
|
|
|
|
|
13,041
|
|
Other Securities (included in other assets)
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
124,814
|
|
|
|
|
|
|
|
|
|
|
$
|
124,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock warrant liability
|
|
|
|
|
|
|
|
|
|
$
|
6,635
|
|
|
$
|
6,635
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash & Equivalents
|
|
$
|
9,860
|
|
|
|
|
|
|
|
|
|
|
$
|
9,860
|
|
U.S. Treasury T-Bills
|
|
|
12,217
|
|
|
|
|
|
|
|
|
|
|
|
12,217
|
|
Money Market Currency Funds
|
|
|
128
|
|
|
|
|
|
|
|
|
|
|
|
128
|
|
FDIC insured Bank CDs
|
|
|
10,509
|
|
|
|
|
|
|
|
|
|
|
|
10,509
|
|
Medium Term Corporate Notes
|
|
|
1,912
|
|
|
|
|
|
|
|
|
|
|
|
1,912
|
|
U.S. Treasury Backed Securities
|
|
|
43,650
|
|
|
|
|
|
|
|
|
|
|
|
43,650
|
|
Other Securities (included in other assets)
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
78,323
|
|
|
|
|
|
|
|
|
|
|
$
|
78,323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock warrant liability
|
|
|
|
|
|
|
|
|
|
$
|
765
|
|
|
$
|
765
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following summarizes the activity of Level 3 inputs measured
on a recurring basis for the years ended December 31, 2009
and 2008:
|
|
|
|
|
|
|
Fair Value Measurements of
|
|
|
|
Common Stock Warrants
|
|
|
|
Using Significant
|
|
|
|
Unobservable Inputs (Level 3)
|
|
|
|
($ in 000s)
|
|
|
Balance at January 1, 2008
|
|
$
|
2,036
|
|
|
|
|
|
|
Transfers in / (out) of Level 3
|
|
|
|
|
Issuance of common stock warrants
|
|
|
|
|
Repurchase of Forfeitures
|
|
|
|
|
Expirations
|
|
|
|
|
F-12
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
Fair Value Measurements of
|
|
|
|
Common Stock Warrants
|
|
|
|
Using Significant
|
|
|
|
Unobservable Inputs (Level 3)
|
|
|
|
($ in 000s)
|
|
|
Settlements associated with exercises
|
|
|
|
|
Adjustments resulting from change in value of warrants
recognized in earnings
|
|
|
(1,271
|
)
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
765
|
|
|
|
|
|
|
Transfers in / (out) of Level 3
|
|
|
|
|
Issuance of common stock warrants
|
|
|
14,016
|
|
Repurchases or forfeitures
|
|
|
(394
|
)
|
Gain on repurchase recognized in earnings
|
|
|
323
|
|
Expirations
|
|
|
|
|
Settlements associated with exercises
|
|
|
|
|
Adjustments resulting from change in value of warrants
recognized in earnings
|
|
|
(8,075
|
)
|
|
|
|
|
|
Balance at December 31, 2009
|
|
$
|
6,635
|
|
|
|
|
|
|
The fair value of common stock warrants are measured on their
respective origination dates and at the end of each reporting
period using Level 3 inputs in accordance with the accounting
guidance. The significant assumptions used in the calculations
under the Black-Scholes pricing model as of December 31,
2009 and 2008, included an expected term based on the remaining
contractual life of the warrants, a risk-free interest rate
based upon observed interest rates appropriate for the expected
term of the instruments, volatility based on the historical
volatility of the Companys common stock, and a zero
dividend rate based on the Companys past, current and
expected practices of granting dividends on common stock.
As of December 31, 2009, substantially all of our cash,
cash equivalents and marketable securities were held at major
financial institutions, which are required to invest our funds
in accordance with our investment policy with the principal
objectives of such policy being preservation of capital,
fulfillment of liquidity needs and above market returns
commensurate with preservation of capital. Our investment policy
also requires that investments in marketable securities be in
only highly rated instruments, which are primarily US treasury
bills or US treasury backed securities, with limitations on
investing in securities of any single issuer. To a limited
degree, these investments are insured by the Federal Deposit
Insurance Corporation and by third party insurance. However,
these investments are not insured against the possibility of a
complete loss of earnings or principal and are inherently
subject to the credit risk related to the continued credit
worthiness of the underlying issuer and general credit market
risks. We manage such risks on our portfolio by matching
scheduled investment maturities with our cash requirements and
investing in highly rated instruments.
The Company did not elect the fair value option, as allowed to
account for its financial assets and liabilities that were not
previously carried at fair value. Therefore, material financial
assets and liabilities that are not carried at fair value, such
as trade accounts receivable and payable, are still reported at
their historical carrying values.
Concentration
of credit risk
We are subject to concentration of credit risk primarily from
our cash investments. Under our investment guidelines, credit
risk is managed by diversification of the investment portfolio
and by the purchase of investment-grade securities.
Our product sales are concentrated in a limited number of
customers. For the year ended December 31, 2009,
approximately 44% of our product sales of Fusilev were derived
from specialty distributors of oncology products as
F-13
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
compared to 100% for the year ended 2008. For Zevalin, we
recorded 21% of revenues from radiopharmacies as compared to 0%
for the years ended December 31, 2009 and 2008,
respectively; and the balance from end user customers. For
Zevalin, no single end user customer constituted revenues over
10% individually. Due to changes in market dynamics, these
ratios are not indicative of future concentrations. As of
December 31, 2009, no single specialty distributor owed us
more than 10% of the total net accounts receivables. Three
specialty distributors owed us 100% at the end of 2008. No
single end user customer owed us more than 10% of net
receivables as of December 31, 2009 or 2008. We maintain
reserves for potential credit losses and such losses, in the
aggregate, have not exceeded our estimates. We do not require
collateral or other security to support credit sales, but
provide an allowance for bad debts when warranted.
Currently we have single source suppliers for raw materials, and
the manufacturing of finished product of Zevalin and Fusilev. A
disruption in supply could materially affect our sales.
Similarly, we have single source suppliers for raw materials,
and manufactured finished product for our development drug
candidates. If we are unable to obtain sufficient quantities of
such product, our research and development activities may be
adversely affected.
Inventories
Inventory is valued at the lower of cost
(first-in,
first-out method) or market. The lower of cost or market is
determined based on net estimated realizable value after
appropriate consideration is given to obsolescence, excessive
levels, deterioration, and other factors.
Property
and Equipment
Property and equipment is stated at cost. Equipment is
depreciated on a straight-line basis over its estimated useful
life (generally 5 to 7 years). Leasehold improvements are
amortized over the shorter of the estimated useful life or lease
term. Maintenance and repairs are expensed as incurred. Major
renewals and improvements that extend the life of the property
are capitalized.
All long-lived assets, including property and equipment, are
reviewed for impairment whenever events or changes in business
circumstances indicate that the carrying amount of the assets
may not be fully recoverable. If impairment is indicated, we
reduce the carrying value of the asset to fair value. Fair value
would be determined by the use of appraisals, discounted cash
flow analyses or comparable fair values of similar assets.
Patents
and Licenses
We expense all licensing and patent application costs as they
are incurred.
Intangible
Assets
As described in note 4 below, we acquired 50% of the rights
in RIT in December 2008 and the remaining 50% in March 2009.
The purchase price for the acquisition of Zevalin rights was
allocated to identifiable intangible assets acquired and
liabilities assumed based on their estimated fair values at the
acquisition date. Such a valuation requires significant
estimates and assumptions including but not limited to:
determining the timing and expected costs to complete the
in-process projects, projecting regulatory approvals, estimating
future cash flows from product sales resulting from in-process
projects, and developing appropriate discount rates and
probability rates by project. We believe the fair values
assigned to the assets acquired and liabilities assumed are
based on reasonable assumptions.
Identifiable intangible assets with definite lives are amortized
on a straight-line basis over their estimated useful lives,
ranging from 1 to 10 years.
F-14
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
We evaluate the recoverability of intangible assets whenever
events or changes in circumstances indicate that an intangible
assets carrying amount may not be recoverable. Such
circumstances could include, but are not limited to the
following:
i a significant decrease in the market value of an asset;
ii a significant adverse change in the extent or manner in
which an asset is used; or
iii an accumulation of costs significantly in excess of the
amount originally expected for the acquisition of an asset.
We measure the carrying amount of the asset against the
estimated undiscounted future cash flows associated with it.
Should the sum of the expected future net cash flows be less
than the carrying value of the asset being evaluated, an
impairment loss would be recognized. The impairment loss would
be calculated as the amount by which the carrying value of the
asset exceeds its fair value. No impairment loss was recorded
during the years 2009, 2008 or 2007.
Segment
and Geographic Information
We operate in one business segment, that is to acquire, develop
and commercialize prescription drug products. Accordingly, the
accompanying consolidated financial statements are reported in
the aggregate, including all our activities in one segment. Our
foreign operations were not significant for any of the years
presented herein.
Revenue
Recognition
Revenue from product sales is recognized upon shipment of
product when title and risk of loss have transferred to the
customer. We sell our products to wholesalers and distributors
of oncology products and directly to the end user, directly or
through GPOs (e.g., certain hospitals or hospital systems and
clinics with whom we have entered into a direct purchase
agreement). Our wholesalers and distributors purchase our
products and sell the products directly to end users, which
include, but are not limited to, hospitals, clinics, medical
facilities, managed care facilities and private oncology based
practices etc. Revenue from product sales is recognized upon
shipment of product when title and risk of loss have transferred
to the customer, and the following additional criteria specified
by ASC
No. 605-15,
Revenue Recognition: Products, are met:
(i) the price is substantially fixed and determinable;
(ii) our customer has economic substance apart from that
provided by us;
(iii) our customers obligation to pay us is not
contingent on resale of the product;
(iv) we do not have significant obligations for future
performance to directly bring about the resale of our product;
and
(v) we have a reasonable basis to estimate future returns.
We also follow the provisions as set forth by current accounting
rules, which primarily include ASC
No. 605-15,
Revenue Recognition: Products, and ASC
No. 605-25,
Revenue Recognition: Multiple-Element Arrangements.
Generally, revenue is recognized when all four of the following
criteria are met:
(i) persuasive evidence that an arrangement exists;
(ii) delivery of the products has occurred, or services
have been rendered;
(iii) the selling price is both fixed and determinable; and
(iv) collectibility is reasonably assured.
F-15
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
Provision for estimated product returns, sales discounts,
rebates and chargebacks are established as a reduction of gross
product sales at the time such revenues are recognized. Thus,
revenue is recorded, net of such estimated provisions.
Consistent with industry practice, our product return policy
permits our customers to return products within 30 days
after shipment, if incorrectly shipped or not ordered, and
within a window of time 6 months before and 12 months
after the expiration of product dating, subject to certain
restocking fees and preauthorization requirements, as
applicable. The returned product is destroyed if it is damaged,
its quality is compromised or it is past its expiration
date. Based on our returns policy, we refund the sales price to
the customer as a credit and record the credit against
receivables. In general, returned product is not resold. We
generally reserve the right to decline granting a return and to
decide on product destruction. As of each balance sheet date, we
estimate potential returns, based on several factors, including:
inventory held by distributors, sell through data of distributor
sales to end users, customer and end-user ordering and
re-ordering patterns, aging of accounts receivables, rates of
returns for directly substitutable products and other
pharmaceutical products for the treatment of therapeutic areas
similar to indications served by our products, shelf life of our
products and the extensive experience of our management with
selling the same and similar oncology products. We record an
allowance for future returns by reducing gross revenues and
increasing the allowance for returns. If allowances exceed the
related accounts receivables, we reclassify such allowances to
accrued obligations. Historical allowances for product returns
have been within estimated amounts reserved or accrued.
We record Medicaid and Medicare rebates based on estimates for
such expense. However, such amounts have not been material to
the financial statements.
We also state the related accounts receivable at net realizable
value, with any allowance for doubtful accounts charged to
general operating expenses. If revenue from sales is not
reasonably determinable due to provisions for estimates,
promotional adjustments, price adjustments, returns or any other
potential adjustments, we defer the revenue and recognize
revenue when the estimates are reasonably determinable, even if
the monies for the gross sales have been received.
Up-front fees representing non-refundable payments received upon
the execution of licensing or other agreements are recognized as
revenue upon execution of the agreements where we have no
significant future performance obligations and collectibility of
the fees is reasonably assured. Milestone payments, which are
generally based on developmental or regulatory events, are
recognized as revenue when the milestones are achieved,
collectibility is reasonably assured, and we have no significant
future performance obligations in connection with the milestone.
In those instances where we have collected fees or milestone
payments but have significant future performance obligations
related to the development of the drug product, we record
deferred revenue and recognize it over the period of our future
obligations.
Research
and Development
Research and development expenses include salaries and benefits,
clinical trial and related manufacturing costs, contract and
other outside service fees, and facilities and overhead costs
related to our research and development efforts. Research and
development expenses also consist of costs incurred for
proprietary and collaborative research and development and
include activities such as product registries and
investigator-sponsored trials. Research and development costs
are expensed as incurred. In certain instances, we enter into
agreements with third parties for research and development
activities, where we may prepay fees for services at the
initiation of the contract. In accordance with ASC
No. 730-20,
Research and Development: Research & Development
Arrangements, we record such prepayment as a prepaid asset
and charge research and development expense over the period of
time the contracted research and development services are
performed. Other types of arrangements with third parties may be
fixed fee or fee for service, and may include monthly payments
or payments upon the completion of milestones or receipt of
deliverables.
F-16
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
As of each balance sheet date, we review purchase commitments
and accrue drug development expenses based on factors such as
estimates of work performed, patient enrollment, completion of
patient studies and other events. Accrued clinical study costs
are subject to revisions as trials progress to completion.
Revisions are recorded in the period in which the facts that
give rise to the revision become known.
Basic
and Diluted Net Loss Per Share
We calculate basic and diluted net loss per share using the
weighted average number of common shares outstanding during the
periods presented, and adjust the amount of net loss, used in
this calculation, for preferred stock dividends declared during
the period.
We incurred net losses in each of the periods presented, and as
such, did not include the effect of potentially dilutive common
stock equivalents in the diluted net loss per share calculation,
as their effect would be anti-dilutive for all periods.
Potentially dilutive common stock equivalents would include the
common stock issuable upon conversion of preferred stock and the
exercise of warrants and stock options that have conversion or
exercise prices below the market value of our common stock at
the measurement date.
The following shows the amounts used in computing basic loss per
share for each of the three years in the period ended
December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
(As Restated)
|
|
|
(As Restated)
|
|
|
|
(Amounts in thousands except share
|
|
|
|
and per share data)
|
|
|
Net loss attributable to Spectrum Pharmaceuticals,
Inc. stockholders
|
|
$
|
(19,046
|
)
|
|
$
|
(14,196
|
)
|
|
$
|
(21,981
|
)
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred dividends paid in cash or stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss attributable to Spectrum stockholders
|
|
$
|
(19,046
|
)
|
|
$
|
(14,196
|
)
|
|
$
|
(21,981
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares issued and outstanding
|
|
|
48,425,486
|
|
|
|
31,551,152
|
|
|
|
29,013,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share
|
|
$
|
(0.39
|
)
|
|
$
|
(0.45
|
)
|
|
$
|
(0.76
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth the number of shares excluded
from the computation of diluted earnings per share, as to do so
would have been anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Series E Preferred Shares
|
|
|
136,000
|
|
|
|
136,000
|
|
|
|
340,000
|
|
Stock Options
|
|
|
4,451,733
|
|
|
|
5,097,835
|
|
|
|
4,185,273
|
|
Warrants
|
|
|
8,379,912
|
|
|
|
5,444,555
|
|
|
|
9,572,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,967,645
|
|
|
|
10,678,390
|
|
|
|
14,097,324
|
|
Accounting
for Employee Share-Based Compensation
We measure compensation cost for all share-based awards at fair
value on the date of grant and recognize compensation expense in
our consolidated statements of operations over the service
period that the awards are expected to vest. We have elected to
recognize compensation expense for all options with graded
vesting on a straight-line basis over the vesting period of the
entire option.
The fair value of share-based compensation is estimated based on
the closing market price of our common stock on the day prior to
the award grants for stock awards, and the Black-Scholes Option
Pricing Model for stock
F-17
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
options and warrants. We estimate volatility based on historical
volatility of our common stock, and estimate the expected length
of options based on several criteria, including the vesting
period of the grant and the term of the award.
We recorded share-based employee compensation during each of the
three years in the period ended December 31, 2009 as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
($ in 000s)
|
|
|
Research and development
|
|
$
|
3,192
|
|
|
$
|
3,925
|
|
|
$
|
3,555
|
|
Selling, general and administrative
|
|
|
4,231
|
|
|
|
2,612
|
|
|
|
2,097
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total employee pre-tax share-based compensation
|
|
$
|
7,423
|
|
|
$
|
6,537
|
|
|
$
|
5,652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant
accounting
We account for common stock warrants pursuant to the applicable
guidance on accounting for derivative financial instruments
indexed to, and potentially settled in, a companys own
stock, on the understanding that in compliance with applicable
securities laws, registered warrants require the issuance of
registered securities upon exercise and do not sufficiently
preclude an implied right to net cash settlement. We classify
registered warrants on the consolidated balance sheet as a
current liability, which is revalued at each balance sheet date
subsequent to the initial issuance. Determining the appropriate
fair-value model and calculating the fair value of registered
warrants requires considerable judgment, including estimating
stock price volatility and expected warrant life. We develop our
estimates based on historical data. A small change in the
estimates used may have a relatively large change in the
estimated valuation. We use the Black-Scholes pricing model to
value the registered warrants. Changes in the fair market value
of the warrants are reflected in the consolidated statement of
operations as Change in the fair value of common stock
warrant liability.
Income
Taxes
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. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect
on the deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the
enactment date. The Company has determined that the net deferred
tax asset does not meet the more likely than not to
be realized criteria and, accordingly, a valuation allowance has
been recorded to reduce the net deferred tax asset to zero.
Comprehensive
Income (loss)
Comprehensive loss is calculated in accordance with ASC
No. 220, Comprehensive Income, which requires
the disclosure of all components of comprehensive income,
including net income and changes in equity during a period from
transactions and other events and circumstances generated from
non-owner sources. Our accumulated other comprehensive loss at
December 31, 2009, 2008 and 2007, respectively consisted
primarily of net unrealized gains/losses on investments in
marketable securities as of that date.
Reclassification
of Accounts
Certain reclassifications of prior-year comparative financial
statements have been made to conform to the current year
presentation. These reclassifications had no effect on
previously reported consolidated results of operations or
financial position.
F-18
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
New
Accounting Pronouncements
In June 2009, the FASB issued authoritative guidance that
establishes the FASB Accounting Standards CodificationTM as the
single source of authoritative U.S. GAAP to be applied by
nongovernmental entities and modifies the U.S. GAAP
hierarchy to only two levels: authoritative and
nonauthoritative. This guidance became effective for interim
periods and fiscal years ending after September 15, 2009.
The Company adopted the provisions of the guidance in the third
quarter of 2009. The adoption did not have a material impact on
the Companys consolidated financial statements.
In May 2009, the FASB issued authoritative guidance that
establishes general standards of accounting for and disclosure
of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued.
This guidance became effective for interim periods and fiscal
years ending after June 15, 2009. The Company adopted the
provisions of the guidance in the second quarter of 2009. The
adoption did not have a material impact on the Companys
consolidated financial statements.
In April 2009, the FASB issued authoritative guidance that
requires publicly traded companies to include in their interim
financial reports certain disclosures about the carrying value
and fair value of financial instruments previously required only
in annual financial statements and to disclose changes in
significant assumptions used to calculate the fair value of
financial instruments. This guidance became effective for
interim reporting periods ending after June 15, 2009, with
early adoption permitted for interim reporting periods ending
after March 15, 2009. The Company adopted the provisions of
the guidance in the first quarter of 2009. The adoption did not
have a material impact on the Companys consolidated
financial statements.
In November 2008, the FASB issued authoritative guidance that
clarifies how to account for acquired intangible assets
subsequent to initial measurement in situations in which an
entity does not intend to actively use the assets but intends to
hold the asset to prevent others from obtaining access to the
asset (a defensive intangible asset), except for intangible
assets that are used in research and development activities.
This guidance requires that a defensive intangible asset be
accounted for as a separate unit of accounting and assigned a
useful life that reflects the entitys consumption of the
expected benefits related to that asset. This guidance became
effective for intangible assets acquired on or after
December 15, 2008. The Company adopted the provisions of
the guidance in the first quarter of 2009. The adoption did not
have a material impact on the Companys consolidated
financial statements.
In June 2008, the FASB issued authoritative guidance that
requires companies to determine if an instrument (or embedded
feature) is indexed to an entitys own stock and provides
guidance in evaluating whether certain financial instruments or
embedded features can be excluded from the scope of the guidance
for accounting for derivatives and hedging activities. The
guidance sets forth a two-step approach that evaluates an
instruments contingent exercise and settlement provisions
for the purpose of determining whether such instruments are
indexed to an issuers own stock (a requirement necessary
to comply with the scope exception under the guidance for
accounting for derivatives). The Company adopted the guidance in
the first quarter of 2009. The adoption did not have a material
impact on the Companys consolidated financial statements.
In April 2008, the FASB issued authoritative guidance that
amends the guidance for estimating the useful lives of
recognized intangible assets and requires additional disclosure
related to renewing or extending the useful lives of recognized
intangible assets. This guidance became effective for fiscal
years and interim periods beginning after December 15,
2008. The Company adopted the provisions of the guidance in the
first quarter of 2009. The adoption did not have a material
impact on the Companys consolidated financial statements.
In December 2007, the FASB issued authoritative guidance that
significantly changes the accounting and reporting requirements
for business combination transactions, including capitalization
of in-process research and development assets and expensing
acquisition costs as incurred. This guidance became effective
for business combination transactions occurring in fiscal years
beginning after December 15, 2008. The Company adopted the
provisions of the guidance in the first quarter of 2009. The
adoption did not have a material impact on the Companys
consolidated financial statements.
F-19
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
In December 2007, the FASB issued authoritative guidance that
changes the accounting and financial reporting of noncontrolling
ownership interests in subsidiaries held by parties other than
the parent, and the allocation of net income attributable to the
parent and the noncontrolling interest. This guidance also
establishes disclosure requirements to separately identify the
interests of the parent and the interests of the noncontrolling
owners. This guidance became effective for fiscal years
beginning after December 15, 2008. The Company adopted the
provisions of the guidance in the first quarter of 2009. The
adoption changed the presentation format of the Companys
consolidated statements of operations and equity and
consolidated balance sheets, but did not have an impact on net
earnings or equity attributable to the Companys
stockholders.
In December 2007, the FASB issued authoritative guidance that
defines collaborative arrangements and requires that
transactions with third parties that do not participate in the
arrangement be reported in the appropriate income statement line
items pursuant to existing authoritative accounting literature.
Income statement classification of payments made between
participants of a collaborative arrangement are to be based on
other applicable authoritative accounting literature. If the
payments are not within the scope or analogy of other
authoritative accounting literature, a reasonable, rational and
consistent accounting policy is to be elected. This guidance
became effective for fiscal years beginning after
December 15, 2008 and was applied as a change in accounting
principle to all prior periods retrospectively for all
collaborative arrangements existing as of the effective date.
The Company adopted the provisions of the guidance in the first
quarter of 2009. The adoption did not have a material impact on
the Companys consolidated financial statements.
New
Accounting Standards Not Yet Adopted
In January 2010, the FASB issued new accounting guidance related
to the disclosure requirements for fair value measurements and
provides clarification for existing disclosures requirements.
More specifically, this update will require (a) an entity
to disclose separately the amounts of significant transfers in
and out of Levels 1 and 2 fair value measurements and to
describe the reasons for the transfers; and (b) information
about purchases, sales, issuances and settlements to be
presented separately (i.e. present the activity on a gross basis
rather than net) in the reconciliation for fair value
measurements using significant unobservable inputs (Level 3
inputs). This guidance clarifies existing disclosure
requirements for the level of disaggregation used for classes of
assets and liabilities measured at fair value and requires
disclosures about the valuation techniques and inputs used to
measure fair value for both recurring and nonrecurring fair
value measurements using Level 2 and Level 3 inputs.
The new disclosures and clarifications of existing disclosure
are effective for fiscal years beginning after December 15,
2009, except for the disclosure requirements for related to the
purchases, sales, issuances and settlements in the rollforward
activity of Level 3 fair value measurements. Those
disclosure requirements are effective for fiscal years ending
after December 31, 2010. The Company has not yet evaluated
the potential impact of adopting this guidance on the
Companys consolidated financial statements.
In October 2009, the FASB issued an accounting standards update
that requires an entity to allocate arrangement consideration at
the inception of an arrangement to all of its deliverables based
on their relative selling prices, eliminates the use of the
residual method of allocation, and requires the
relative-selling-price method in all circumstances in which an
entity recognizes revenue of an arrangement with multiple
deliverables. This guidance will be effective for revenue
arrangements entered into or materially modified in fiscal years
beginning on or after June 15, 2010, which will be the
Companys fiscal year 2011, with earlier application
permitted. The Company has not yet evaluated the potential
impact of adopting this guidance on the Companys
consolidated financial statements.
In June 2009, the FASB issued authoritative guidance that
requires an enterprise to perform an analysis to determine
whether the enterprises variable interest or interests
give it a controlling financial interest in a variable interest
entity. This analysis identifies the primary beneficiary of a
variable interest entity as the enterprise that has both the
power to direct the activities of a variable interest entity
that most significantly impact the entitys economic
performance, and the obligation to absorb losses or the right to
receive benefits of the entity that could
F-20
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
potentially be significant to the variable interest entity. This
guidance also requires ongoing reassessments of whether an
enterprise is the primary beneficiary of a variable interest
entity and eliminates the quantitative approach previously
required for determining the primary beneficiary. This guidance
will be effective for fiscal years beginning after
November 15, 2009, which will be the Companys fiscal
year 2010. The Company does not expect that the adoption of the
guidance will have a material impact on the Companys
consolidated financial statements.
|
|
4.
|
Commercial
and Development Drug Products
|
We currently market two products in the United States, Zevalin
and Fusilev. In addition, we have several products in clinical
development, primarily including apaziquone (EOquin) which has
completed patient enrollment for two Phase 3 clinical trials for
bladder cancer and has one multiple instillation study under
development and belinostat, a drug we recently partnered with
TopoTarget A/S to jointly develop. Belinostat is being studied
under a Special Protocol Assessment (SPA), in a Phase 2 trial
for relapsed or refractory Peripheral
T-Cell
Lymphoma (PTCL). The following is a brief description of our key
products as of December 31, 2009.
Zevalin
:
Zevalin is a prescribed form
of cancer therapy called radioimmunotherapy. Radioimmunotherapy
combines a source of radiation, called a radioisotope, with an
antibody.
During the year ended December 31, 2009 and 2008, we
recorded net revenues of $15.7 million and
$0.3 million, respectively from sales of Zevalin.
In December 2008, we partnered with Cell Therapeutics, Inc.
(CTI) to form a
50-50
owned
joint venture, RIT Oncology, LLC (RIT) to commercialize and
develop Zevalin, a CD20-directed radiotherapeutic antibody, in
the United States. We paid $15 million for our 50% interest
in RIT. Pursuant to provisions of the 2008 joint-venture
agreement, in March 2009, we acquired the remaining 50%
ownership of RIT for $16.5 million, resulting in RIT
becoming our wholly-owned subsidiary. In April 2009, we disputed
payment of an installment of $3.5 million of the
$16.5 million, on the grounds that CTIs unpaid
liabilities pertaining to Zevalin, and CTIs share of joint
venture expenses equaled or exceeded the installment amount. In
May 2009, we received an arbitration award of approximately
$4.3 million. The entire $3.5 million was released to
us and CTI additionally paid us approximately $0.8 million.
The award was final, binding and non-appealable by either party.
The assets contributed by CTI to RIT were all of its interests
in the Zevalin business, which included the following:
(i) assets acquired in the December 2007 agreement with
Biogen, which included the U.S. development, sales and
marketing rights to Zevalin. The assets acquired included the
Zevalin FDA registration, FDA dossier, U.S. trademark,
trade name and trade dress, customer list, certain patents and
the assignment of numerous contracts. There was no continuity of
physical facilities or personnel from the December 2007
transaction; (ii) assets acquired in the June 2008 Access
Agreement with Bayer Schering Pharma AG, which holds the rights
to Zevalin outside of the United States. Under the agreement,
Bayer gave CTI access to data from Bayers phase 3
first-line indolent trial (FIT Trial), of Zevalin; and
(iii) CTIs September 30, 2008 submission of the
Zevalin sBLA for use in first-line consolidation therapy for
patients with B-cell follicular NHL. The joint venture also
assumed obligations of $2.2 million in current liabilities
and certain contingent obligations.
F-21
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
The allocation of the initial capitalization of the joint
venture, detailed below, was based on the relative fair values
of the intangible assets acquired, as determined by an
independent valuation consultant, and the obligations assumed by
the joint venture.
|
|
|
|
|
|
|
|
|
Developed technology
|
|
|
|
|
|
$
|
23,100
|
|
Core technology
|
|
|
|
|
|
|
14,100
|
|
Acquired in-process research and development
|
|
|
|
|
|
|
4,700
|
|
Assumed obligation to pay Biogen
|
|
|
|
|
|
|
(2,200
|
)
|
Acquisition transaction costs
|
|
|
|
|
|
|
(902
|
)
|
Fair value of assumed contingent obligations
|
|
$
|
12,500
|
|
|
|
|
|
Less: Limitation based on excess of values of intangibles
acquired over initial capitalization
|
|
|
(1,898
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum amount available
|
|
$
|
10,602
|
|
|
|
|
|
Contingent obligations, restricted out of $10,602 as recorded
|
|
|
|
|
|
|
(8,798
|
)
|
|
|
|
|
|
|
|
|
|
Total initial capitalization of joint venture
|
|
|
|
|
|
$
|
30,000
|
|
|
|
|
|
|
|
|
|
|
The total fair value of developed and core assets equals
$37.2 million. The developed technology asset relates to
intellectual property and rights thereon related to Zevalin as
approved by the FDA for relapsed or refractory, low-grade or
follicular B-cell NHL. The core technology asset represents the
value of the intellectual property and rights therein expected
to be leveraged in the development of label expansions for
Zevalin. Developed and core technologies are amortized over the
term of the patents related to such technologies. Identifiable
intangible assets with definite lives are amortized on a
straight-line basis over their estimated useful lives. The
developed and core technology assets will be amortized over
10 years, or approximately $3.7 million annually
through 2018. In addition, during 2008 an amount of
$4.7 million of IPR&D for a medical indication still
awaiting approval by the FDA was recorded to operating expenses.
Such amount was completely written off during the year ended
December 31, 2008. Amortization expense expected to be
recorded over the next five years is approximately
$18.5 million. In process research and development
(IPR&D) for RIT was evaluated utilizing the present value
of the estimated after- tax cash flows expected to be generated
by purchased undeveloped technology related to the Zevalin
business or label expansions for indications that have not been
approved by the FDA. Since, at the effective time of the
transaction establishing RIT, the IPR&D had not reached
technological feasibility, such amount was charged to operations
for the year ended December 31, 2008 as of the formation
date of RIT. The March 2009 50% acquisition of the
non-controlling interest in RIT included a premium of
$1.8 million, including certain acquisition related costs,
was charged to additional paid in capital in accordance with ASC
810, Consolidation.
The RIT transaction involved contingent consideration, therefore
we recognized $8.8 million as a Zevalin related contingent
obligation on the balance sheet, which is equal to the excess of
the fair value of the intangible assets over the initial
capitalization, and is less than the approximately
$12.5 million fair value of the contingent consideration,
as determined by the independent valuation consultant. Certain
contingencies were resolved during 2009 and $8.5 million of
the contingent consideration payable was charged to the recorded
amount, which reduced contingent liabilities to approximately
$0.3 million at December 31, 2009.
In December 2008, the United States Food and Drug Administration
(FDA) had accepted for filing and review, and granted priority
review status for a supplemental Biologics License Application
(sBLA) for the use of Zevalin as part of a first-line therapy
for patients with previously untreated follicular
non-Hodgkins lymphoma (NHL). The sBLA application was
approved by the FDA on September 3, 2009, which now allows
the use of Zevalin for a substantially larger patient
population. Zevalin is now FDA approved and marketed by Spectrum
for treatment of patients with previously untreated follicular
NHL who achieve a partial or complete response to chemotherapy
and with relapsed or refractory, low-grade or follicular B-cell
NHL, including patients who have rituximab-refractory follicular
NHL. In connection with the FDA approval, we became obligated to
pay $8.5 million in milestone
F-22
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
payments. Such amount was included in accrued liabilities as of
September 30, 2009 and paid in October 2009. In November
2009, the Centers for Medicare & Medicaid Services
(CMS) finalized a policy to allow reimbursement for
Zevalin
®
,
in the Hospital Outpatient Prospective Payment System, based on
the Average Sales Price (ASP) methodology applicable to other
injectable drugs and biologicals. This reimbursement methodology
will go into effect on January 1, 2010.
Fusilev for Injection
:
Fusilev is the
only commercially available drug containing only the pure active
L-isomer of racemic (L and R forms) leucovorin. Fusilev is
currently indicated after high-dose methotrexate therapy in
patients with osteosarcoma, and to diminish the toxicity and
counteract the effects of impaired methotrexate elimination or
inadvertent overdose of folic acid antagonists.
We commercially launched Fusilev in August 2008 and recorded net
revenues of approximately $12.5 million and
$7.7 million from Fusilev sales for the year ended
December 31, 2009 and 2008 respectively.
In April 2006, we acquired all of the oncology drug assets of
Targent, Inc. The principal asset in the transaction was a
license agreement to market Fusilev in the field of oncology in
North America. We paid an up-front fee in common stock, with a
fair market value of approximately $2.7 million, and are
contingently obligated to pay additional amounts based upon
achievement of milestones. At our option, cash payments for
milestones specified in the agreement may be paid in shares of
the Companys common stock having a value determined as
provided in the asset purchase agreement, equal to the cash
payment amount. In 2009, 2008 and 2007, we recorded stock-based
research and development charges of $185,000, $305,000 and
$520,000, respectively, which represents the fair market value
of 125,000 shares of our common stock issued at each of
October 2007 and March 2008 as milestone payments to Targent,
LLC.
Apaziquone
(EOquin
®
)
:
Apaziquone,
a synthetic drug which is activated by certain enzymes present
in higher amounts in cancer cells than in normal tissues, is
currently being developed for non-muscle invasive bladder cancer.
In October 2008, we signed an exclusive development and
commercialization collaboration agreement with Allergan for
apaziquone. Under the terms of the agreement, Allergan paid us
an up-front non-refundable $41.5 million at closing and
will make additional payments of up to $304 million based
on the achievement of certain development, regulatory and
commercialization milestones. We retained exclusive rights to
apaziquone in Asia, including Japan and China. Allergan received
exclusive rights to apaziquone for the treatment of bladder
cancer in the rest of the world, including the United States,
Canada and Europe.
In the United States, Allergan and we will co-promote apaziquone
and share equally in its profits and expenses. Allergan will
also pay us royalties on all of its apaziquone sales outside of
the United States. Under the terms of the agreement, we will
continue to conduct the development program, including the
manufacture of clinical supplies and the conduct of the current
and future phase 3 clinical trials, and will be jointly
responsible for obtaining regulatory approval for the product.
Both parties share development expenses with Allergan bearing
65% of the cost. Pursuant to our revenue recognition policy, we
expect that we will recognize the up front payment of
$41.5 million over the period of the development work,
estimated at 4 to 5 years. As of December 31, 2009 and
2008, we have classified $8.3 million of such amount
recorded on the consolidated balance sheet as current portion of
deferred revenue.
In December 2009, we completed enrollment of our two Phase 3
pivotal clinical trials enrolling more than 1,600 patients
with non-muscle invasive bladder cancer. As per the
collaboration agreement with Allergan, Spectrum recorded a
$1.5 million milestone payment from Allergan. Such amount
was received in January 2010.
We also have the right, in our sole discretion, to opt-out of
the co-promotion agreement before January 1, 2012. If we do
so, our share of any future development costs shall be
significantly reduced. Part of the aggregate development costs
and marketing expenses incurred by us since January 1, 2009
shall be reimbursed by Allergan in the form of a one-time
payment. The co-promotion agreement will terminate and instead
of a sharing of profit and
F-23
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
expenses, Allergan will pay us royalties on a percentage of net
sales of the apaziquone in the United States that are slightly
greater than the royalties paid on net sales outside the United
States. In addition, Allergan will pay us up to
$245 million in additional milestones based upon the
achievement of certain sales milestones in the United States.
In October 2008, we terminated our 2001 license agreement for
apaziquone with INC
Research
®
,
formerly NDDO Research Foundation (INC) in the Netherlands, as
the patents underlying the agreement were all about to expire.
Pursuant to the termination, INC assigned to us all rights it
had in the know-how or intellectual property licensed under the
agreement and all rights in may have had in any know-how or
intellectual property created during the term of the agreement.
In exchange we paid INC a nominal amount of cash and issued them
a nominal number of shares of our common stock. In addition, INC
is entitled to up to 25,000 additional shares of our common
stock and an additional payment of $300,000 upon achievement of
certain regulatory milestones.
In November 2009, we entered into a collaboration agreement with
Nippon Kayaku Co., LTD. for the development and
commercialization of apaziquone in Asia, except North and South
Korea (Nippon Kayaku Territory). In exchange, Nippon Kayaku is
required to pay Spectrum an up-front payment of
$15.0 million, which was received in January 2010, and
agreed to make additional payments of up to $136.0 million
based on the achievement of certain regulatory and
commercialization milestones. Nippon Kayaku received exclusive
rights to apaziquone for the treatment of non-muscle invasive
bladder cancer in Asia, including Japan and China. Under the
terms of the Nippon Kayaku collaboration agreement, Nippon
Kayaku will conduct the apaziquone clinical trials pursuant to a
development plan. In addition, Nippon Kayaku will be responsible
for all expenses relating to the development and
commercialization of apaziquone in the Nippon Kayaku Territory.
Also in November 2009, we entered into collaboration agreement
with Handok Pharmaceuticals of Korea for the development and
commercialization of apaziquone for the treatment of non-muscle
invasive bladder cancer in North and South Korea. Under the
terms of the Handok collaboration agreement, Handok is required
to pay us an up-front payment of $1.0 million, which was
received in January 2010, and potential milestone payments
totaling approximately $19 million. The potential
milestones will be based on the achievement of certain
regulatory and commercialization milestones. Additionally,
Handok will conduct the apaziquone clinical trials pursuant to a
development plan and will be responsible for all expenses
relating to the development and commercialization of apaziquone
in North and South Korea.
RenaZorb
®
:
RenaZorb,
a second-generation lanthanum-based nanoparticle phosphate
binding agent, has the potential to treat hyperphosphatemia,
(high phosphate levels in blood), in patients with stage 5
chronic kidney disease (end-stage renal disease).
Hyperphosphatemia affects patients with chronic kidney disease,
especially end-stage kidney disease patients on dialysis. It can
lead to significant bone disease (including pain and fractures)
and cardiovascular disease, and is independently associated with
increased mortality.
In August 2009, we acquired 100% of the rights to RenaZorb and
Renalan
®
,
lanthanum-based nanotechnology compounds with potent and
selective phosphate binding properties, for all uses pursuant to
an amended and restated agreement that we entered into with
Altair Nanomaterials, Inc. and Altair Nanotechnologies. In 2005,
the Company had acquired the worldwide license from Altair to
develop and commercialize Altairs lanthanum-based
nanotechnology compounds and related technology or all human
therapeutic uses. The August 2009 acquisition expanded the
worldwide, exclusive license to include all uses. In conjunction
with the expanded license, Altair assigned all intellectual
property associated with RenaZorb (associated with human uses),
Renalan
®
(associated with animal or veterinarian use), its
lanthanum-based nanotechnology and all of its other life
sciences research and development to us. In consideration, we
issued 113,809 shares of our common stock, with a then fair
value of approximately $750,000, which was recorded to research
ad development in the consolidated statement of operations in
2009. We are responsible for all development, commercialization
and intellectual property costs that accrue after the August
2009 execution date for the amended and restated agreement.
Ozarelix
:
Ozarelix, a LHRH (Luteinizing
Hormone Releasing Hormone, also known as GnRH or Gonadotropin
Releasing Hormone) antagonist (a substance that blocks the
effects of a natural hormone found in the
F-24
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
body) is currently being investigated for its targeted
indications in hormone dependent prostate cancer, and
endometriosis.
In January 2010, subsequent to the close of the year, we
terminated a multi-center, randomized, double-blind,
placebo-controlled study to evaluate the efficacy of ozarelix
compared to placebo in the treatment of lower urinary tract
symptoms (LUTS) secondary to BPH in men. Currently, we are
considering the future development of ozarelix.
|
|
5.
|
Cash and
Cash Equivalents and Marketable Securities
|
Cash and cash equivalents, and investments in marketable
securities, including long term bank certificates of deposits,
totaled $124.8 million and $78.3 million as of
December 31, 2009 and 2008, respectively. The following is
a summary of such investments (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
|
|
Marketable Securities
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
Cash
|
|
|
Current
|
|
|
Long Term
|
|
|
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
82,336
|
|
|
|
|
|
|
|
|
|
|
$
|
82,336
|
|
|
$
|
82,336
|
|
|
|
|
|
|
|
|
|
Bank certificates of deposit
|
|
|
20,948
|
|
|
|
|
|
|
|
|
|
|
|
20,948
|
|
|
|
|
|
|
$
|
12,260
|
|
|
$
|
8,688
|
|
Money Market Currency Funds
|
|
|
4,800
|
|
|
|
|
|
|
|
|
|
|
|
4,800
|
|
|
|
|
|
|
|
4,800
|
|
|
|
|
|
U.S. Government securities
|
|
|
16,542
|
|
|
|
|
|
|
|
|
|
|
|
16,542
|
|
|
|
|
|
|
|
13,792
|
|
|
|
2,750
|
|
Corporate debt securities
|
|
|
153
|
|
|
|
|
|
|
|
|
|
|
|
153
|
|
|
|
|
|
|
|
153
|
|
|
|
|
|
Other securities (included in other assets)
|
|
|
47
|
|
|
|
|
|
|
|
12
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
$
|
124,826
|
|
|
$
|
|
|
|
$
|
12
|
|
|
$
|
124,814
|
|
|
$
|
82,336
|
|
|
$
|
31,005
|
|
|
$
|
11,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
9,860
|
|
|
|
|
|
|
|
|
|
|
$
|
9,860
|
|
|
$
|
9,860
|
|
|
|
|
|
|
|
|
|
Bank certificates of deposit
|
|
|
10,509
|
|
|
|
|
|
|
|
|
|
|
|
10,509
|
|
|
|
|
|
|
$
|
10,319
|
|
|
|
190
|
|
Money Market Currency Funds
|
|
|
128
|
|
|
|
|
|
|
|
|
|
|
|
128
|
|
|
|
|
|
|
|
128
|
|
|
|
|
|
U.S. Government securities
|
|
|
55,867
|
|
|
|
|
|
|
|
|
|
|
|
55,867
|
|
|
|
|
|
|
|
55,867
|
|
|
|
|
|
Corporate debt securities
|
|
|
2,000
|
|
|
|
|
|
|
|
88
|
|
|
|
1,912
|
|
|
|
|
|
|
|
1,912
|
|
|
|
|
|
Other securities (included in other assets)
|
|
|
104
|
|
|
|
|
|
|
|
57
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
$
|
78,468
|
|
|
$
|
|
|
|
$
|
145
|
|
|
$
|
78,323
|
|
|
$
|
9,860
|
|
|
$
|
68,226
|
|
|
$
|
237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
marketable securities are carried at fair value, with any
unrealized gains and losses included as a component of
accumulated other comprehensive income (loss) in
stockholders equity. Realized gains and losses and
declines in value judged to be
other-than-temporary,
as well as interest income and dividends on investments, are
included in other income and expense. We have classified
$11.4 million of our investments with maturity dates over
1 year from December 31, 2009 as long term based on
held to maturity.
|
|
6.
|
Accounts
Receivables, Related Allowances and Revenues
|
Our product sales are concentrated in a limited number of
customers. For the year ended December 31, 2009,
approximately 44% of our Fusilev product sales were derived from
specialty distributors of oncology products as compared to 100%
for the year ended 2008; for Zevalin, we accorded 21% of
revenues from radio pharmacies as
F-25
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
compared to 0% for the years ended December 31, 2009 and
2008, respectively; and the balance from end use customers. For
Zevalin, not a single end user customer constituted revenues
over 10% individually. Due to changes in market dynamics, these
ratios are not indicative of future concentrations. As of
December 31, 2009, for Fusilev, not a single specialty
distributor owed us more than 10% of the total net accounts
receivables. Three specialty distributors owned us 100% of
receivables at the end of 2008. For Zevalin, no single end user
customer owed us more than 10% of net receivables as of
December 31, 2009 or 2008. All sales were to customers in
the United States.
For Fusilev, we utilize a third-party logistics company to store
and distribute this drug product. The same third party logistics
company also stores and ships Zevalin kits containing the CD20
MAB.
During 2009, we changed the supply and distribution model for
Zevalin. Previously, we sold Zevalin kits containing the CD20
MAB to radiopharmacies, who in turn ordered the radioactive
isotope (Y-90 or In-111) separately and radiolabeled (or
attached) the radioactive isotope to the CD20 MAB. The
radiopharmacy then sold the end user product to the consumer.
Under the current model we do not sell the Zevalin kits
containing the CD20 MAB to the radiopharmacies, but instead
contract with them, as a
fee-for-service,
to radiolabel the individual components of the CD20 MAB to the
radioactive isotope, and then, also under a
fee-for-service
arrangement, have them distribute the end use product to the end
user; the clinics, hospitals or other medical settings. In this
regard, we now sell the CD20 MAB together with the radioactive
isotope as the end user product.
Accounts receivable, net of allowances for doubtful accounts,
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
($ in 000s)
|
|
|
Accounts receivables gross
|
|
$
|
8,808
|
|
|
$
|
9,926
|
|
Allowances for doubtful accounts
|
|
|
(150
|
)
|
|
|
(150
|
)
|
|
|
|
|
|
|
|
|
|
Accounts receivables net of allowances
|
|
$
|
8,658
|
|
|
$
|
9,776
|
|
|
|
|
|
|
|
|
|
|
Allowances for chargebacks, discounts and rebates and returns as
of December 31, 2009 and 2008 are recorded as a part of
other accrued liabilities on the balance sheet. Allowances thus
recorded consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
($ in 000s)
|
|
|
Allowances for discounts, chargebacks and rebates
|
|
$
|
860
|
|
|
$
|
1,631
|
|
Allowances for returns
|
|
|
1,176
|
|
|
|
3,143
|
|
|
|
|
|
|
|
|
|
|
Total allowances
|
|
$
|
2,036
|
|
|
$
|
4,774
|
|
|
|
|
|
|
|
|
|
|
Shipments of Fusilev for the year ended December 31, 2008
were approximately $10.8 million (net of estimates for
promotional, price and other adjustments). We deferred the
recognition of approximately $3.1 million of such revenue
to allow for potential sales returns. In 2009, based on our
evaluation of return history to date combined with inventory
held by distributors, sell through data of distributor sales to
end users, customer and end-user ordering and re-ordering
patterns, aging of accounts receivables, rates of returns for
directly substitutable products and other pharmaceutical
products for the treatment of therapeutic areas similar to
indications served by our products, shelf life of our products
and the extensive experience of our management with selling the
same and similar oncology products, we reduced the reserve to
approximately $1.2 million. No returns reserve is recorded
for Zevalin since we invoice our end user customers and
recognize revenues only when a patient is treated with Zevalin.
F-26
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
As of December 31, 2009 and 2008, inventories, net, consisted of
the following:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
($ in 000s)
|
|
|
Finished Goods
|
|
$
|
3,039
|
|
|
$
|
1,492
|
|
Work In Process
|
|
|
|
|
|
|
312
|
|
Raw Materials
|
|
|
280
|
|
|
|
68
|
|
Less: reserve for obsolescence
|
|
|
(89
|
)
|
|
|
(31
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,230
|
|
|
$
|
1,841
|
|
|
|
|
|
|
|
|
|
|
We continually review product inventories on hand, evaluating
inventory levels relative to product demand, remaining shelf
life, future marketing plans and other factors, and reserves for
obsolete and slow-moving inventories are recorded for amounts
which may not be realizable.
|
|
8.
|
Property
and Equipment
|
As of December 31, 2009 and 2008, property and equipment
consisted of:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
($ in 000s)
|
|
|
Equipment
|
|
$
|
2,762
|
|
|
$
|
2,286
|
|
Leasehold improvements
|
|
|
1,255
|
|
|
|
1,255
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment
|
|
|
4,017
|
|
|
|
3,541
|
|
Less: accumulated depreciation and amortization
|
|
|
(2,089
|
)
|
|
|
(1,759
|
)
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
1,928
|
|
|
$
|
1,782
|
|
|
|
|
|
|
|
|
|
|
For the years ended December 31, 2009, 2008 and 2007, the
Company recorded depreciation expense of approximately $527,000,
$452,000 and $255,000, respectively.
Significant components of the income tax expense for each of the
three years ended December 31, 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(Amounts in thousands)
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
78
|
|
|
|
|
|
|
|
|
|
State
|
|
$
|
343
|
|
|
$
|
5
|
|
|
$
|
5
|
|
Foreign
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
421
|
|
|
$
|
5
|
|
|
$
|
5
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
|
|
|
|
|
|
|
|
|
|
State
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Provision
|
|
$
|
421
|
|
|
$
|
5
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-27
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
The income tax provision differs from that computed using the
federal statutory rate applied to income before taxes as follows
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
(As Restated)
|
|
|
(As Restated)
|
|
|
|
(Amounts in thousands)
|
|
|
Tax benefit computed at the federal statutory rate
|
|
$
|
(6,697
|
)
|
|
$
|
(6,086
|
)
|
|
$
|
(8,548
|
)
|
State tax, net of federal benefit
|
|
|
(981
|
)
|
|
|
(1,039
|
)
|
|
|
(1,462
|
)
|
Expired Tax Attributes
|
|
|
8,097
|
|
|
|
|
|
|
|
|
|
Credits
|
|
|
(1,644
|
)
|
|
|
|
|
|
|
|
|
Common stock warrant liability
|
|
|
(2,745
|
)
|
|
|
(432
|
)
|
|
|
(4,099
|
)
|
Permanent items and other
|
|
|
796
|
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
|
3,595
|
|
|
|
7,562
|
|
|
|
14,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
$
|
421
|
|
|
$
|
5
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant components of the Companys deferred tax assets
as of December 31, 2009 and 2008 are shown below. A
valuation allowance has been recognized to offset the net
deferred tax assets as realization of such deferred tax assets
has not met the more likely than not threshold.
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(As Restated)
|
|
|
|
(Amounts in thousands)
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
58,597
|
|
|
$
|
70,468
|
|
Research Credits
|
|
|
10,230
|
|
|
|
9,468
|
|
Stock Compensation
|
|
|
2,641
|
|
|
|
2,755
|
|
Deferred Revenue
|
|
|
12,839
|
|
|
|
|
|
Depreciation and amortization differences
|
|
|
1,466
|
|
|
|
698
|
|
Other, Net
|
|
|
1,211
|
|
|
|
|
|
Valuation Allowance
|
|
|
(86,984
|
)
|
|
|
(83,389
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2009, the Company has federal and state net
operating loss carryforwards of approximately
$153.2 million and $94.1 million, respectively. The
Company has approximately $2.5 million of foreign loss
carryforwards that begin to expire in 2010. The federal and
state loss carryforwards begin to expire in 2018 and 2012,
respectively, unless previously utilized. At December 31,
2009, the Company has federal and state research and development
tax credits of approximately $10 million and
$0.2 million, respectively. The federal research tax credit
begins to expire in 2010 unless previously utilized.
The utilization of the net operating loss and research and
development tax credit carryforwards is subject to an annual
limitation under Sections 382 and 383 of the Internal
Revenue Code of 1986, and similar state tax provisions due to
the amount of the net operating loss and research and
development tax credits carryforwards and other deferred tax
assets that can be utilized to offset future taxable income and
tax, respectively. In general, an ownership change, as defined
by Sections 382 and 383, results form transactions
increasing ownership of certain stockholders or public groups in
the stock of the corporation by more than 50 percentage
points over a three-year period. An analysis was performed which
indicated that multiple ownership changes have occurred in
previous years which created an annual limitation on the
Companys ability to utilize its net operating loss and
research and development tax carryovers.
F-28
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
The Company has not completed a study to assess whether an
ownership change has occurred. If the Company has experienced an
ownership change, utilization of the NOL or R&D credit
carryforwards would be subject to an annual limitation under
Section 382 of the Code, which is determined by first
multiplying the value of the Companys stock at the time of
the ownership change by the applicable long-term, tax-exempt
rate, and then could be subject to additional adjustments, as
required. Any limitation may result in expiration of a portion
of the NOL or R&D credit carryforwards before utilization.
Further, until a study is completed and any limitation is known,
no amounts are being considered as an uncertain tax position or
disclosed as an unrecognized tax benefit under FIN 48. Due
to the existence of the valuation allowance, future changes in
the Companys unrecognized tax benefits will not impact its
effective tax rate. Any carryforwards that will expire prior to
utilization as a result of such limitations will be removed from
deferred tax assets with a corresponding reduction of the
valuation allowance.
The Company is subject to the accounting guidance for uncertain
income tax positions as of January 1, 2007. The Company
believes that is income tax filing positions and deductions will
be sustained on audit and does not anticipate any adjustments
that will result in a material adverse effect on the
Companys financial condition, results of operations, or
cash flow. Therefore, no reserves for uncertain income tax
positions have been recorded pursuant to the accounting guidance.
Management does not believe that the amounts of unrecognized tax
benefits will increase within the next twelve months. With a few
exceptions, the Company is no longer subject to U.S. federal,
state and local income tax examinations for years before 2005.
The Company policy is to recognize interest and/or penalties
related to unrecognized tax benefits in income tax expense.
|
|
10.
|
Commitments
and Contingencies
|
Facility
and Equipment Leases
The Company leases certain facilities and office equipment. As
of December 31, 2009, we primarily had obligations under a
facility lease in Irvine, California, which expires in
June 30, 2016, an office lease in Henderson, Nevada, which
expires in September 2011, and various operating and capital
equipment leases.
Minimum lease requirements for each of the next five years and
thereafter, under the property and equipment operating leases,
are as follows:
|
|
|
|
|
|
|
|
|
|
|
Lease
|
|
|
Capital Lease
|
|
|
|
Commitments
|
|
|
Commitments
|
|
|
|
($ in 000s)
|
|
|
Year ending December 31:
|
|
|
|
|
|
|
|
|
2010
|
|
$
|
428
|
|
|
$
|
50
|
|
2011
|
|
|
455
|
|
|
|
50
|
|
2012
|
|
|
484
|
|
|
|
47
|
|
2013
|
|
|
513
|
|
|
|
|
|
2014
|
|
|
542
|
|
|
|
|
|
Thereafter
|
|
|
863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,285
|
|
|
$
|
147
|
|
|
|
|
|
|
|
|
|
|
Rent expense for the years ended December 31, 2009, 2008
and 2007 was approximately $593,000, $583,000 and $579,000,
respectively.
Licensing
Agreements
Almost all of our drug candidates are being developed pursuant
to license agreements that provide us with rights to certain
territories to, among other things, develop, sublicense, and
sell the drugs. We are required to use
F-29
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
commercially reasonable efforts to develop the drugs, are
generally responsible for all development, patent filing and
maintenance costs, sales, marketing and liability insurance
costs, and are generally contingently obligated to make
milestone payments to the licensors if we successfully reach
development and regulatory milestones specified in the
agreements. In addition, we are obligated to pay royalties and,
in some cases, milestone payments based on net sales, if any,
after marketing approval is obtained from regulatory authorities.
The potential contingent development and regulatory milestone
obligations under all our licensing agreements are generally
tied to progress through the FDA approval process, which
approval significantly depends on positive clinical trial
results. The following represents typical milestone events for
the Company: conclusion of Phase 2 or commencement of Phase 3
clinical trials; filing of new drug applications in each of the
United States, Europe and Asia; and approvals from each of the
regulatory agencies in those jurisdictions.
Given the uncertainty of the drug development and regulatory
approval process, we are unable to predict with any certainty
when any of the milestones will occur, if at all. Accordingly,
the milestone payments represent contingent obligations that
will be recorded as expense when the milestone is achieved.
While it is difficult to predict when milestones will be
achieved, we estimate that if all of our contingent milestones
are successfully achieved within our anticipated timelines, our
potential contingent cash development and regulatory milestone
obligations, aggregating to approximately $75.7 million as
of December 31, 2009, would be due approximately as
follows: $0.2 million within 12 months;
$3.5 million in 2 to 3 years; $2.1 million in 4
to 5 years; and $69.9 million after 5 years.
Service
Agreements
In connection with the research and development of our drug
products, we have entered into contracts with numerous third
party service providers, such as clinical trial centers,
clinical research organizations, data monitoring centers, and
with drug formulation, development and testing laboratories. The
financial terms of these agreements are varied and generally
obligate us to pay in stages, depending on achievement of
certain events specified in the agreements, such as contract
execution, reservation of service or production capacity, actual
performance of service, or the successful accrual and dosing of
patients.
At each period end, we accrue for all costs of goods and
services received, with such accruals based on factors such as
estimates of work performed, patient enrollment, completion of
patient studies and other events. As of December 31, 2009,
we were committed under such contracts for up to approximately
$9.0 million, for future goods and services, including
approximately $7.3 million due within one year. We are in a
position to accelerate, slow-down or discontinue any or all of
the projects that we are working on at any given point in time.
Should we decide to discontinue
and/or
slow-down the work on any project, the associated costs for
those projects would be limited to the extent of the work
completed. Generally, we are able to terminate these contracts
due to the discontinuance of the related project(s) and thus
avoid paying for the services that have not yet been rendered
and our future purchase obligations would reduce accordingly.
Supply
Agreements
In connection with our acquisition of Zevalin, RIT Oncology
assumed a supply agreement with Biogen Idec Inc.
(Biogen) to manufacture Zevalin for sale in the
United States pursuant to which we would purchase from Biogen,
and Biogen would provide to us, kits to make Zevalin doses for
sale to end-users in the United States at a cost
plus manufacturing price. RIT Oncology also assumed a
manufacturing and supply agreement with MDS (Canada) Inc., MDS
Nordion Division, or MDS (Canada), for yttrium-90, a
radioisotope used in connection with the administration of
Zevalin.
In connection with Fusilev, we have a single source API supplier
as well as a single source finished product manufacturer.
F-30
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
Employment
Agreement
We have entered into an employment agreement with
Dr. Shrotriya, our President and Chief Executive Officer,
which expires January 2, 2011. The employment agreement
automatically renews for a one-year calendar term unless either
party gives written notice of such partys intent not to
renew the agreement at least 90 days prior to the
commencement of the next year. The employment agreement requires
Dr. Shrotriya to devote his full working time and effort to
the business and affairs of the Company during the term of the
agreement. The employment agreement provides for a minimum
annual base salary with annual increases, periodic bonuses and
option grants as determined by the Compensation Committee of the
Board of Directors.
Litigation
At December 31, 2009, we are involved with various legal
matters arising from the ordinary course of business. Although
the ultimate resolution of these various matters cannot be
determined at this time, we do not believe that such matters,
individually or in the aggregate, will have a material adverse
effect on our consolidated results of operations, cash flows or
financial condition.
Authorized
Stock
On July 6, 2006, our stockholders approved an amendment to
our Certificate of Incorporation to increase the authorized
number of shares of our common stock from 50 million shares
to 100 million shares. The amendment was filed with the
Delaware Secretary of State on July 7, 2006. Further, on
July 7, 2006, we amended the Certificate of Designation of
Rights, Preferences and Privileges of Series B Junior
Participating Preferred Stock filed with the Delaware Secretary
of State on December 18, 2000 to increase the authorized
number of Series B Junior Participating Preferred Stock
from 200,000 shares to 1,000,000 shares.
Preferred
Stock
In December 2000, we adopted a stockholder rights plan pursuant
to which we distributed rights to purchase units of our
Series B Junior Participating Preferred Stock
(Series B Preferred Stock). Under this plan, as
amended through December 31, 2008, the rights become
exercisable upon the earlier of ten days after a person or group
of affiliated or associated persons has acquired 15% or more of
the outstanding shares of our common stock or ten business days
after a tender offer has commenced that would result in a person
or group beneficially owning 15% or more of our outstanding
common stock. These rights could delay or discourage someone
from acquiring our business, even if doing so would benefit our
stockholders. We currently have no stockholders who own 15% or
more of the outstanding shares of our common stock. Five days
after the rights become exercisable, each right, other than
rights held by the person or group of affiliated persons whose
acquisition of more than 15% of our outstanding common stock
caused the rights to become exercisable, will entitle its holder
to buy, in lieu of shares of Series B Preferred Stock, a
number of shares of our common stock having a market value of
twice the exercise price of the rights. After the rights become
exercisable, if we are a party to certain merger or business
combination transactions or transfers 50% or more of our assets
or earnings power (as defined), each right will entitle its
holder to buy a number of shares of common stock of the
acquiring or surviving entity having a market value of twice the
exercise price of the right. The rights expire on
December 13, 2010 and may be redeemed by us at one-tenth of
one cent per right at any time up to ten days after a person has
announced that they have acquired 15% or more of our outstanding
common stock.
In May 2003, we received gross cash proceeds of $6,000,000 in
exchange for the issuance of 600 shares of our
Series D 8% Cumulative Convertible Voting Preferred Stock
(Series D Preferred Stock), convertible into
2,553,191 shares of common stock, and Series D
Warrants, exercisable for five years, to purchase up to a total
of 1,276,595 shares of our common stock at an exercise
price of $3.00 per share and up to a total of
1,276,595 shares of
F-31
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
our common stock at an exercise price of $3.50 per share. As of
December 31, 2007, all Series D Preferred Stock had
been converted to common stock. Dividends on the Series D
Preferred Stock were payable quarterly at an annual rate of 8%
either in cash or shares of our common stock at our discretion.
In September 2003, we received gross cash proceeds of
$20,000,000 in exchange for the issuance of 2,000 shares of
our Series E Convertible Voting Preferred Stock
(Series E Preferred Stock), convertible into
4,000,000 shares of common stock, and Series E
Warrants, exercisable for five years, to purchase up to a total
of 2,800,000 shares of our common stock at an exercise
price of $6.50 per share. As of December 31, 2009 and 2008,
68 shares of Series E Preferred Stock, convertible
into 136,000 shares of common stock are outstanding. No
dividends are payable on the Series E Preferred Stock.
Pursuant to certain provisions of the Certificate of
Designation, Rights and Preferences of the Series E
Preferred Stock, we have the option to redeem all of the
unconverted Series E Preferred Stock outstanding at the end
of a
20-day
trading period if, among other things, in that period the common
stock of the Company trades above $12.00 per share.
In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, before any
distribution of assets of the Corporation shall be made to the
common stockholders, the holders of the Series E Preferred
Stock shall be entitled to receive a liquidation preference in
an amount equal to 120% of the stated value per share plus any
declared and unpaid dividends thereon.
Common
Stock Issuances for Cash
In September 2005, we sold 8,000,000 shares of our common
stock at a purchase price of $5.25 per share, and six year
warrants purchasing up to a total of 4,000,000 shares of
our common stock at an exercise price of $6.62 per share,
for net cash proceeds of approximately $39.3 million after
offering costs of approximately $2.7 million.
In May 2007, we sold 5,134,100 shares of our common stock
at a purchase price of $6.25 per share for net cash proceeds of
approximately $30 million, after placement agent fees and
other offering costs of approximately $2 million. No
warrants were issued in connection with this offering.
On May 6, 2009, we sold an aggregate of 432,200 shares
of common stock to certain of our employees at a purchase price
of $2.70 per share, which was the closing price of our common
stock on May 6, 2009. This offering resulted in gross
proceeds to us of approximately $1.2 million. The investors
in this offering included Dr. Rajesh Shrotriya, M.D.,
our Chairman, President and Chief Executive Officer, and Shyam
Kumaria, our Vice President of Finance. Dr. Shrotriya
purchased 290,000 shares of common stock and
Mr. Kumaria purchased 85,000 shares of common stock.
We decided to conduct this offering with certain of our
employees to allow such employees to invest their personal cash
directly into the Company at the current fair market value of
our stock. The purchase agreements include provisions
prohibiting the investors from disposing of the shares of common
stock purchased in the offering for ninety days. The offering
was approved by the Placement Committee of the Board of
Directors. In addition, the Audit Committee of the Board of
Directors approved the offering pursuant to our Related Party
Transaction Policies and Procedures.
On May 26, 2009, we sold 3,913,895 shares of our
common stock at a purchase price of $5.11 per share for net cash
proceeds of approximately $19 million, after placement
agent fees and other offering costs of approximately
$1 million. In connection with this offering, 1,956,947
common stock warrants exercisable at $5.11 between
November 27, 2009 and February 25, 2010, were issued
to the investors.
On June 15, 2009, we sold 1,715,266 shares of our
common stock at a purchase price of $5.83 per share for net cash
proceeds of approximately $9.5 million, after placement
agent fees and other offering costs of approximately
$0.5 million. In connection with this offering, 857,633
common stock warrants exercisable at $5.83 between
December 15, 2009 and March 15, 2010, were issued to
the investors.
On June 30, 2009, we sold 2,936,037 shares of our
common stock at a purchase price of $7.15 per share for net cash
proceeds of approximately $20 million, after placement
agent fees and other offering costs of approximately
F-32
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
$1 million. In connection with this offering, 1,468,020
common stock warrants exercisable at $7.10 between
December 30, 2009 and March 30, 2010, were issued to
the investors.
On September 18, 2009, we sold 6,622,517 shares of our
common stock at a purchase price of $7.55 per share for net cash
proceeds of approximately $47.5 million, after placement
agent fees and other offering costs of approximately
$2.5 million. In connection with this offering, 2,649,007
common stock warrants exercisable at $7.55 between
March 22, 2010 and June 21, 2010, were issued to the
investors.
All the warrants issued in conjunction with the 2009 financings
were outstanding as of December 31, 2009. Of the 6,931,607
warrants outstanding, 4,282,600 were exercisable as of
December 31, 2009. Subsequent to the close of the year and
before the date of this filing, 4,282,600 of the 6,931,607
warrants issued in conjunction with the 2009 financing expired
and 2,649,007 of the warrants will expire on June 20, 2010
if not exercised.
Other
Equity Transactions
Pursuant to the terms of the April 2006 asset purchase agreement
with Targent, LLC, upon achievement of certain regulatory and
sales milestones Targent is eligible to receive payments in the
form of shares of the Companys common stock
and/or
cash.
At our option, cash payments specified in the agreement may be
paid in shares of the Companys common stock having a value
determined as provided in the asset purchase agreement, equal to
the cash payment amount. During the three years ended
December 31, 2009, we issued shares of common stock, for
achievement of certain regulatory milestones, as follows. The
fair value of the issued stock was recorded as stock-based
research and development expense for the period in which the
milestone was achieved:
|
|
|
|
|
October 2007: 125,000 shares with a fair value of $520,000.
|
|
|
|
March 2008: 125,000 shares with a fair value of $305,000.
|
|
|
|
March 2009: 125,000 shares with a fair value of $185,000.
|
In October 2008, we issued 75,000 shares of the
Companys common stock in connection with the assignment to
us of certain intellectual property rights related to apaziqone.
The fair value of the stock, $74,000, was recorded as a
stock-based research and development expense for the year ended
December 31, 2008.
In August 2009, we acquired 100% of the rights to
RenaZorb
®
and
Renalin
®
,
lanthanum-based nanotechnology compounds with potent and
selective phosphate binding properties, for all uses pursuant to
an amended and restated agreement that we entered into with
Altair Nanomaterials, Inc. and Altair Nanotechnologies. In 2005,
the Company had acquired the worldwide license from Altair to
develop and commercialize Altairs lanthanum-based
nanotechnology compounds and related technology for all human
therapeutic uses. The August 2009 acquisition expanded the
worldwide, exclusive license to include all uses. In conjunction
with the expanded license, Altair assigned all intellectual
property associated with
RenaZorb
®
(associated with human uses),
Renalin
®
(associated with animal or veterinarian use), its
lanthanum-based nanotechnology and all of its other life
sciences research and development to us. In consideration, we
issued 113,809 shares of our common stock, with a then fair
value of approximately $750,000.
Common
Stock Reserved for Future Issuance
As of December 31, 2009, approximately 19.1 million
shares of common stock were issuable upon conversion or exercise
of rights granted under prior financing arrangements, stock
options and warrants, as follows:
|
|
|
|
|
Conversion of Series E preferred shares
|
|
|
136,000
|
|
Exercise of stock options
|
|
|
7,945,245
|
|
Exercise of warrants
|
|
|
11,028,919
|
|
|
|
|
|
|
Total shares of common stock reserved for future issuances
|
|
|
19,110,164
|
|
|
|
|
|
|
F-33
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
Subsequent to the close of the year and before the date of this
filing, 4,282,600 of the 6,931,607 warrants issued in
conjunction with the 2009 financing expired and 2,649,007 of the
warrants will expire on June 20, 2010 if not exercised.
Warrant
Activity
We typically issue warrants to purchase shares of our common
stock to investors as part of a financing transaction or in
connection with services rendered by placement agents and
consultants. Our outstanding warrants expire on varying dates
through September 2013. Below is a summary of warrant activity
during each of the three years in the period ended
December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
Common
|
|
|
Weighted
|
|
|
Common
|
|
|
Weighted
|
|
|
Common
|
|
|
Weighted
|
|
|
|
Stock
|
|
|
Average
|
|
|
Stock
|
|
|
Average
|
|
|
Stock
|
|
|
Average
|
|
|
|
Warrants
|
|
|
Exercise Price
|
|
|
Warrants
|
|
|
Exercise Price
|
|
|
Warrants
|
|
|
Exercise Price
|
|
|
Outstanding at beginning of year
|
|
|
5,444,555
|
|
|
$
|
7.28
|
|
|
|
9,652,051
|
|
|
$
|
6.51
|
|
|
|
9,917,077
|
|
|
$
|
6.71
|
|
Granted
|
|
|
6,931,607
|
|
|
|
3.67
|
|
|
|
50,000
|
|
|
|
1.79
|
|
|
|
|
|
|
|
|
|
Repurchased
|
|
|
(95,238
|
)
|
|
|
6.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(161,145
|
)
|
|
|
3.22
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
(157,450
|
)
|
|
|
6.62
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(1,252,005
|
)
|
|
|
10.03
|
|
|
|
(4,100,046
|
)
|
|
|
5.43
|
|
|
|
(103,881
|
)
|
|
|
30.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, at the end of year
|
|
|
11,028,919
|
|
|
$
|
6.52
|
|
|
|
5,444,555
|
|
|
$
|
7.28
|
|
|
|
9,652,051
|
|
|
$
|
6.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, at the end of year
|
|
|
8,379,912
|
|
|
$
|
6.19
|
|
|
|
5,432,055
|
|
|
$
|
7.29
|
|
|
|
9,572,051
|
|
|
$
|
6.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes information about warrants
outstanding at December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
|
|
Weighted
|
|
Weighted
|
|
Warrants
|
|
Weighted
|
|
|
Outstanding
|
|
Average
|
|
Average
|
|
Exercisable
|
|
Average
|
Range of Exercise Price
|
|
12/31/2009
|
|
Remaining Life
|
|
Exercise Price
|
|
12/31/2009
|
|
Exercise Price
|
|
$1.00 - $2.50
|
|
|
50,000
|
|
|
|
3.25
|
|
|
$
|
1.79
|
|
|
|
50,000
|
|
|
$
|
1.79
|
|
$5.01 - $6.00
|
|
|
3,114,580
|
|
|
|
0.39
|
|
|
|
5.31
|
|
|
|
3,114,580
|
|
|
|
5.31
|
|
$6.01 - $7.00
|
|
|
3,747,312
|
|
|
|
1.71
|
|
|
|
6.62
|
|
|
|
3,747,312
|
|
|
|
6.62
|
|
$7.01 - $7.55
|
|
|
4,117,027
|
|
|
|
0.39
|
|
|
|
7.39
|
|
|
|
1,468,020
|
|
|
|
7.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,028,919
|
|
|
|
|
|
|
$
|
6.52
|
|
|
|
8,379,912
|
|
|
$
|
6.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As described above, subsequent to the close of the year and
before the date of this filing, 4,282,600 of the 6,931,607
warrants issued in conjunction with the 2009 financing expired
and 2,649,007 of the warrants will expire on June 20, 2010
if not exercised.
|
|
12.
|
Share-Based
Compensation
|
Stock
Options
We have three stock incentive plans: the 1997 Stock Incentive
Plan (the 1997 Plan) , the 2003 Amended and Restated
Incentive Award Plan (the 2003 Plan) and the 2009
Incentive Award Plan (the 2009 Plan) which was
approved by our shareholders in June 2009 (collectively, the
Plans). The 2003 Plan authorizes the grant of
incentive awards, including stock options, for the purchase of
up to a total of 10,000,000 shares. Subsequent to the
adoption of the 2009 Plan, no new options have been granted
pursuant the 2003 Plan or 1997 Plan. The Board and
F-34
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
the shareholders approved 10,000,000 shares of common stock
available for issuance under the 2009 Plan. Beginning on
January 1, 2010, and each January 1st thereafter,
the number of shares of common stock available for issuance
under the 2009 Plan shall increase by the greater of
(i) 2,500,000 and (ii) a number of shares such that
the total number of shares of common stock available for
issuance under the Plan shall equal 30% of the then number of
shares of common stock issued and outstanding. As of
December 31, 2009, approximately 9.3 million incentive
awards were available for grant under the 2009 Plan.
During each of the three years in the period ended
December 31, 2009, we granted stock options at exercise
prices equal to or greater than the quoted price of our common
stock on the grant date. The fair value of each option grant was
estimated on the date of grant using the Black-Scholes option
pricing model with the following weighted average assumptions
used for grants in 2009, 2008 and 2007, respectively: risk-free
interest rates of 2.27% (2009), 2.66% (2008) and 4.57%
(2007); zero expected dividend yields; expected lives of
5 years; expected volatility of 72.4% (2009), 65.9%
(2008) and, 68.3% (2007). The risk-free interest rate
assumption is based upon observed interest rates appropriate for
the expected term of the Companys employee stock options.
The expected volatility is based on the historical volatility of
the Companys stock. The Company has not paid any dividends
on common stock since its inception and does not anticipate
paying dividends on its common stock in the foreseeable future.
The weighted average fair value of stock options, using the
Black-Scholes option pricing model, that were granted in 2009,
2008 and 2007, was $2,87, $1.19 and $3.54, respectively.
A summary of stock option activity for each of the three years
in the period ended December 31, 2009, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
Common
|
|
|
Average
|
|
|
Common
|
|
|
Average
|
|
|
Common
|
|
|
Average
|
|
|
|
Stock
|
|
|
Exercise
|
|
|
Stock
|
|
|
Exercise
|
|
|
Stock
|
|
|
Exercise
|
|
|
|
Options
|
|
|
Price
|
|
|
Options
|
|
|
Price
|
|
|
Options
|
|
|
Price
|
|
|
Outstanding at beginning of year
|
|
|
7,115,772
|
|
|
$
|
4.80
|
|
|
|
6,482,260
|
|
|
$
|
5.91
|
|
|
|
4,640,252
|
|
|
$
|
5.86
|
|
Granted
|
|
|
4,141,000
|
|
|
|
4.70
|
|
|
|
2,148,000
|
|
|
|
2.10
|
|
|
|
1,974,700
|
|
|
|
5.85
|
|
Exercised
|
|
|
(488,750
|
)
|
|
|
2.58
|
|
|
|
|
|
|
|
|
|
|
|
(81,438
|
)
|
|
|
1.48
|
|
Forfeited
|
|
|
(551,130
|
)
|
|
|
5.35
|
|
|
|
(294,521
|
)
|
|
|
4.38
|
|
|
|
(39,425
|
)
|
|
|
5.04
|
|
Cancelled
|
|
|
(2,165,372
|
)
|
|
|
7.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(106,275
|
)
|
|
|
4.62
|
|
|
|
(1,219,967
|
)
|
|
|
6.08
|
|
|
|
(11,829
|
)
|
|
|
8.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, at end of year
|
|
|
7,945,245
|
|
|
$
|
4.04
|
|
|
|
7,115,772
|
|
|
$
|
4.80
|
|
|
|
6,482,260
|
|
|
$
|
5.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at end of year
|
|
|
4,451,733
|
|
|
$
|
4.06
|
|
|
|
5,097,835
|
|
|
$
|
5.22
|
|
|
|
4,185,273
|
|
|
$
|
5.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes information about stock options
outstanding under all plans at December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
Options
|
|
Weighted
|
|
Average
|
|
Options
|
|
Average
|
|
|
Outstanding
|
|
Average
|
|
Exercise
|
|
Exercisable
|
|
Exercise
|
Range of Exercise Price
|
|
12/31/09
|
|
Remaining Term
|
|
Price
|
|
12/31/09
|
|
Price
|
|
|
|
|
(In years)
|
|
|
|
|
|
|
|
$1.00 - $2.50
|
|
|
2,250,650
|
|
|
|
8.03
|
|
|
$
|
1.59
|
|
|
|
915,525
|
|
|
$
|
1.54
|
|
$2.51 - $5.00
|
|
|
2,500,270
|
|
|
|
7.67
|
|
|
|
3.66
|
|
|
|
1,829,770
|
|
|
|
3.51
|
|
$5.01 - $10.00
|
|
|
3,194,325
|
|
|
|
8.10
|
|
|
|
6.06
|
|
|
|
1,706,438
|
|
|
|
6.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,945,245
|
|
|
|
|
|
|
|
|
|
|
|
4,451,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due to our rapid growth over the past few years and a low
personnel turnover rate, in early 2009, we had a limited number
of shares available for future grant under the 2003 Plan.
Primarily in order to increase the pool of
F-35
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
shares available for future grant under such plan, we conducted
a tender offer to eligible employees to acquire options granted
to certain employees of the Company pursuant to the Third
Amended and Restated 1997 Stock Incentive Plan and 2003 Plan,
and which were outstanding at March 23, 2009. Eligible
employees were employees of Spectrum or its subsidiaries who
held options with exercise prices in excess of $5.00. The cash
amount offered to those employees was $0.01 for options with an
exercise price over $10.00 and $1.15 for the options with an
exercise price between $5.00 and $9.99.
On April 23, 2009, a total of 2,165,372 shares
underlying eligible options were tendered by eligible employees
and were accepted by us, representing 73% of the shares
underlying eligible options that were eligible to be tendered in
the offer. We made a cash payment in the aggregate of
approximately $2.5 million to the eligible employees
participating in the offer.
Presented below is the aggregate intrinsic value of the stock
options outstanding, vested and expected to vest, and
exercisable as of December 31, 2009. The intrinsic value
represents the total difference between $4.44, the
Companys closing common stock price on December 31,
2009, and the exercise price, multiplied by the number of all
in-the-money
options, that would have been received by the option holders had
all option holders exercised their options on December 31,
2009. This amount changes based on the fair market value of the
Companys common stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
Average
|
|
|
Weighted
|
|
|
Aggregate
|
|
|
|
Stock
|
|
|
Exercise
|
|
|
Average
|
|
|
Intrinsic
|
|
|
|
Options
|
|
|
Price
|
|
|
Remaining Term
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
(In years)
|
|
|
(In thousands)
|
|
|
Stock Options as of December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
|
7,945,245
|
|
|
$
|
4.04
|
|
|
|
7.97
|
|
|
$
|
8,632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest
|
|
|
7,735,634
|
|
|
$
|
4.04
|
|
|
|
7.93
|
|
|
$
|
8,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
|
|
|
4,451,733
|
|
|
$
|
4.06
|
|
|
|
6.94
|
|
|
$
|
4,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the years ended December 31, 2009, 2008 and 2007,
the share-based charge in connection with the expensing of stock
options was approximately $6.6 million, $5.5 million
and $4.6 million, respectively. As of December 31,
2009, there was $7.0 million of unrecognized share-based
compensation cost related to stock options, which is expected to
be recognized over a weighted average period of 2.5 years.
Restricted
Stock
A summary of the status of the Companys restricted stock
awards as of December 31, 2009 and of changes in unvested
shares outstanding is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
Restricted
|
|
|
Average
|
|
|
Restricted
|
|
|
Average
|
|
|
Restricted
|
|
|
Average
|
|
|
|
Stock
|
|
|
Grant date
|
|
|
Stock
|
|
|
Grant date
|
|
|
Stock
|
|
|
Grant date
|
|
|
|
Awards
|
|
|
Fair Value
|
|
|
Awards
|
|
|
Fair Value
|
|
|
Awards
|
|
|
Fair Value
|
|
|
Nonvested at beginning of period
|
|
|
377,500
|
|
|
$
|
3.04
|
|
|
|
277,500
|
|
|
$
|
5.03
|
|
|
|
146,250
|
|
|
$
|
4.25
|
|
Granted
|
|
|
262,500
|
|
|
|
1.86
|
|
|
|
372,500
|
|
|
|
1.65
|
|
|
|
265,000
|
|
|
|
5.56
|
|
Vested
|
|
|
(284,375
|
)
|
|
|
2.82
|
|
|
|
(272,500
|
)
|
|
|
3.17
|
|
|
|
(133,750
|
)
|
|
|
5.22
|
|
Forfeited
|
|
|
(2,500
|
)
|
|
|
5.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested at the end of period
|
|
|
353,125
|
|
|
$
|
2.32
|
|
|
|
377,500
|
|
|
$
|
3.04
|
|
|
|
277,500
|
|
|
$
|
5.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-36
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
The fair value of restricted stock awards is the quoted market
price of our stock on the grant date, and is charged to expense
over the period of vesting. These awards are subject to
forfeiture to the extent that the recipients service is
terminated prior to the shares becoming vested.
During the years ended December 31, 2009, 2008 and 2007,
the stock-based charge in connection with the expensing of
restricted stock awards was approximately $665,000, $862,000 and
$842,000, respectively. As of December 31, 2009, there was
approximately $0.6 million of unrecognized stock-based
compensation cost related to non-vested restricted stock awards,
which is expected to be recognized over a weighted average
period of 1.0 year.
401(k)
Plan Matching Contribution
During the years ended December 31, 2009, 2008 and 2007, we
issued 139,795, 166,430 and 44,118 shares of common stock
as the Companys match of approximately $448,000, $274,000
and $211,000 on the 401(k) contributions of its employees during
those periods.
2009
Employee Stock Purchase Plan (ESPP)
There are 5,000,000 shares of common stock available for
issuance under the 2009 ESPP. Beginning on January 1, 2010,
and each January 1st thereafter, the number of shares
of common stock available for issuance under the 2009 ESPP shall
increase by an amount equal to the lesser of
(i) 1,000,000 shares or (ii) an amount determined
by the ESPP Administrator. However, in no event shall the number
of shares of common stock available for future sale under the
2009 ESPP exceed 10,000,000 shares, subject to
capitalization adjustments occurring due to dividends, splits,
dissolution, liquidation, mergers, or changes in control.
The 2009 ESPP provides that there shall be consecutive periods
during which an option to purchase common stock under the 2009
ESPP may be exercised (Offering Periods), each of
which will last approximately six months. The first Offering
Period shall commence on July 1, 2009 and shall terminate
on December 31, 2009. Thereafter, the first Offering Period
of a given year shall commence on January 1st of that
year and shall terminate on June 30th of the same
year. The second Offering Period of a given year shall commence
on July 1st of each year and shall terminate on
December 31st of each year.
The purchase price per share for which shares of common stock
will be sold pursuant to the 2009 ESPP is an amount equal to the
lesser of: (a) 85% of the fair market value of common stock
on the first day of the Offering Period or (b) 85% of the
fair market value of common stock on the last day of the
Offering Period.
The 2009 ESPP replaces our 2001 Employee Stock Purchase Program,
which was terminated by the Board effective June 26, 2009.
Total related stock based compensation expense for the year
ended December 31, 2009 was $0.3 million. No similar
expense was incurred in 2008 or 2007. The fair value of these
shares as of December 31, 2009 was $0.3 million.
|
|
13.
|
Quarterly
Financial Information (Unaudited)
|
As discussed in Note 2, the Company has restated its
consolidated financial statements for the years ended December
31, 2007 and 2008 and for each of the quarterly periods ended
March 31, 2008 through September 30, 2009 (the
Affected Periods) to reflect certain warrant-related
accounting adjustments identified in connection with its
reassessment of the accounting and classification of its warrant
contracts. The tables that follow provide quarterly information
and display the unaudited condensed consolidated financial
statements for each of the Affected Periods. The financial
statements are presented As Previously Reported and
As Restated to reflect the impact of the changes
resulting from the restatements of the Affected Periods. Certain
reclassifications, including
F-37
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
reclassification of all historical activities have been made to
the historical financial statements to conform to the fiscal
2009 presentation.
The following is a summary of the unaudited quarterly results of
consolidated operations for each of the calendar quarters in the
two-year period ended December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2008
|
|
|
Adjustments
|
|
|
March 31, 2008
|
|
|
|
(Previously reported)
|
|
|
|
|
|
(As restated)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
4,037
|
|
|
|
|
|
|
$
|
4,037
|
|
Marketable securities
|
|
|
44,549
|
|
|
|
|
|
|
|
44,549
|
|
Accounts receivable, net of allowance for doubtful accounts
|
|
|
84
|
|
|
|
|
|
|
|
84
|
|
Inventory
|
|
|
562
|
|
|
|
|
|
|
|
562
|
|
Prepaid expenses and other current assets
|
|
|
692
|
|
|
|
|
|
|
|
692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
49,924
|
|
|
|
|
|
|
|
49,924
|
|
Property and equipment, net
|
|
|
767
|
|
|
|
|
|
|
|
767
|
|
Other assets
|
|
|
155
|
|
|
|
|
|
|
|
155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
50,846
|
|
|
|
|
|
|
$
|
50,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and other accrued liabilities
|
|
$
|
1,864
|
|
|
|
|
|
|
$
|
1,864
|
|
Accrued compensation
|
|
|
1,004
|
|
|
|
|
|
|
|
1,004
|
|
Accrued drug development costs
|
|
|
4,654
|
|
|
|
|
|
|
|
4,654
|
|
Common stock warrant liability
|
|
|
|
|
|
|
1,516
|
|
|
|
1,516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
7,522
|
|
|
|
1,516
|
|
|
|
9,038
|
|
F-38
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2008
|
|
|
Adjustments
|
|
|
March 31, 2008
|
|
|
|
(Previously reported)
|
|
|
|
|
|
(As restated)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Deferred revenue and other credits
|
|
|
979
|
|
|
|
|
|
|
|
979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
8,501
|
|
|
|
1,516
|
|
|
|
10,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, par value $0.001 per share,
5,000,000 shares authorized:
|
|
|
|
|
|
|
|
|
|
|
|
|
Series B Junior participating preferred stock,
1,000,000 shares authorized, no shares issued and
outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Series E convertible voting preferred stock,
2,000 shares authorized, stated value $10,000 per share,
$2.0 million aggregate liquidation value, issued and
outstanding, 170 shares at March 31, 2008
|
|
|
1,048
|
|
|
|
|
|
|
|
1,048
|
|
Common stock, par value $0.001 per share,
100,000,000 shares authorized:
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued and outstanding, 31,461,396 shares at March 31,
2008
|
|
|
31
|
|
|
|
|
|
|
|
31
|
|
Additional paid-in capital
|
|
|
290,947
|
|
|
|
(15,472
|
)
|
|
|
275,475
|
|
Deferred stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income
|
|
|
735
|
|
|
|
|
|
|
|
735
|
|
Accumulated deficit
|
|
|
(250,416
|
)
|
|
|
13,956
|
|
|
|
(236,460
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
42,345
|
|
|
|
(1,516
|
)
|
|
|
40,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
50,846
|
|
|
|
|
|
|
$
|
50,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-39
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-Months
|
|
|
|
|
|
Three-Months
|
|
|
|
Ended
|
|
|
|
|
|
Ended
|
|
|
|
March 31, 2008
|
|
|
Adjustments
|
|
|
March 31, 2008
|
|
|
|
(Previously reported)
|
|
|
|
|
|
(As restated)
|
|
|
|
(In thousands, except share and share data)
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Licensing and milestone revenues
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
Other revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
6,382
|
|
|
|
|
|
|
|
6,382
|
|
Selling, general and administrative
|
|
|
2,585
|
|
|
|
|
|
|
|
2,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
8,967
|
|
|
|
|
|
|
|
8,967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(8,967
|
)
|
|
|
|
|
|
|
(8,967
|
)
|
Change in fair value of common stock warrant liability
|
|
|
|
|
|
|
520
|
|
|
|
520
|
|
Other income, net
|
|
|
301
|
|
|
|
|
|
|
|
301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(8,666
|
)
|
|
$
|
520
|
|
|
$
|
(8,146
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.28
|
)
|
|
$
|
|
|
|
$
|
(0.26
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
31,271,281
|
|
|
|
|
|
|
|
31,271,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-40
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
|
|
|
Quarter
|
|
|
|
Ended
|
|
|
|
|
|
Ended
|
|
|
|
March 31, 2008
|
|
|
Adjustments
|
|
|
March 31, 2008
|
|
|
|
(Previously reported)
|
|
|
|
|
|
(As restated)
|
|
|
|
(In thousands, Except Share and Per Share Data)
|
|
|
Cash Flows From Operating Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(8,666
|
)
|
|
$
|
520
|
|
|
$
|
(8,146
|
)
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
87
|
|
|
|
|
|
|
|
87
|
|
Fair value adjustments of common stock warrants
|
|
|
|
|
|
|
(520
|
)
|
|
|
(520
|
)
|
Share-based compensation
|
|
|
1,731
|
|
|
|
|
|
|
|
1,731
|
|
Fair value of common stock issued in connection with drug license
|
|
|
305
|
|
|
|
|
|
|
|
305
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in Accounts Receivable
|
|
|
107
|
|
|
|
|
|
|
|
107
|
|
Increase in Inventory
|
|
|
(562
|
)
|
|
|
|
|
|
|
(562
|
)
|
Decrease in other assets
|
|
|
188
|
|
|
|
|
|
|
|
188
|
|
Decrease in accounts payable and accrued expenses
|
|
|
(170
|
)
|
|
|
|
|
|
|
(170
|
)
|
Decrease in accrued compensation and related taxes
|
|
|
(107
|
)
|
|
|
|
|
|
|
(107
|
)
|
Decrease in deferred revenue and other credits
|
|
|
(30
|
)
|
|
|
|
|
|
|
(30
|
)
|
Net cash used in operating activities
|
|
|
(7,117
|
)
|
|
|
|
|
|
|
(7,117
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of marketable securities
|
|
|
10,151
|
|
|
|
|
|
|
|
10,151
|
|
Purchases of marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(138
|
)
|
|
|
|
|
|
|
(138
|
)
|
Net cash provided by investing activities
|
|
|
10,013
|
|
|
|
|
|
|
|
10,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock and warrants, net of
related offering costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
2,896
|
|
|
|
|
|
|
|
2,896
|
|
Cash and cash equivalents, beginning of period
|
|
|
1,141
|
|
|
|
|
|
|
|
1,141
|
|
Cash and cash equivalents, end of period
|
|
|
4,037
|
|
|
|
|
|
|
|
4,037
|
|
F-41
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
|
|
|
Quarter
|
|
|
|
Ended
|
|
|
|
|
|
Ended
|
|
|
|
March 31, 2008
|
|
|
Adjustments
|
|
|
March 31, 2008
|
|
|
|
(Previously reported)
|
|
|
|
|
|
(As restated)
|
|
|
|
(In thousands, Except Share and Per Share Data)
|
|
|
Supplemental Cash Flow Information
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule of Non-Cash Investing and Financing Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of common stock issued in connection with drug license
|
|
$
|
305
|
|
|
|
|
|
|
$
|
305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of restricted stock granted employees and directors
|
|
$
|
223
|
|
|
|
|
|
|
$
|
223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of stock issued to match employee 401k contributions
|
|
$
|
61
|
|
|
|
|
|
|
$
|
61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends paid with common stock
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-42
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2008
|
|
|
Adjustments
|
|
|
June 30, 2008
|
|
|
|
(Previously reported)
|
|
|
|
|
|
(As restated)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,725
|
|
|
|
|
|
|
$
|
1,725
|
|
Marketable securities
|
|
|
57,825
|
|
|
|
|
|
|
|
57,825
|
|
Accounts receivable, net of allowance for doubtful accounts
|
|
|
379
|
|
|
|
|
|
|
|
379
|
|
Inventory
|
|
|
1,197
|
|
|
|
|
|
|
|
1,197
|
|
Prepaid expenses and other current assets
|
|
|
781
|
|
|
|
|
|
|
|
781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
61,907
|
|
|
|
|
|
|
|
61,907
|
|
Property and equipment, net
|
|
|
1,217
|
|
|
|
|
|
|
|
1,217
|
|
Other assets
|
|
|
112
|
|
|
|
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
63,236
|
|
|
|
|
|
|
|
63,236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and other accrued liabilities
|
|
|
2,910
|
|
|
|
|
|
|
|
2,910
|
|
Common stock warrant liability
|
|
|
|
|
|
|
600
|
|
|
|
600
|
|
Accrued compensation
|
|
|
1,062
|
|
|
|
|
|
|
|
1,062
|
|
Accrued drug development costs
|
|
|
3,782
|
|
|
|
|
|
|
|
3,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
7,754
|
|
|
|
600
|
|
|
|
8,354
|
|
Deferred revenue and other credits
|
|
|
966
|
|
|
|
|
|
|
|
966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
8,720
|
|
|
|
600
|
|
|
|
9,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, par value $0.001 per share,
5,000,000 shares authorized:
|
|
|
|
|
|
|
|
|
|
|
|
|
Series B Junior participating preferred stock,
1,000,000 shares authorized, no shares issued and
outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Series E Convertible Voting Preferred Stock; 2,000 shares
authorized, stated value $10,000 per share, $2.0 million
aggregate liquidation value, issued and outstanding, 170 shares
at June 30, 2008
|
|
|
1,048
|
|
|
|
|
|
|
|
1,048
|
|
Common stock, par value $0.001 per share,
100,000,000 shares authorized:
|
|
|
|
|
|
|
|
|
|
|
|
|
F-43
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2008
|
|
|
Adjustments
|
|
|
June 30, 2008
|
|
|
|
(Previously reported)
|
|
|
|
|
|
(As restated)
|
|
|
Issued and outstanding, 31,518,603 shares at June 30,
2008
|
|
|
32
|
|
|
|
|
|
|
|
32
|
|
Additional paid-in capital
|
|
|
292,332
|
|
|
|
(15,472
|
)
|
|
|
276,860
|
|
Accumulated other comprehensive income
|
|
|
843
|
|
|
|
|
|
|
|
843
|
|
Accumulated deficit
|
|
|
(239,739
|
)
|
|
|
14,872
|
|
|
|
(224,867
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
54,516
|
|
|
|
(600
|
)
|
|
|
53,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
|
63,236
|
|
|
$
|
|
|
|
|
63,236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-44
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
|
|
|
Ended
|
|
|
|
June 30, 2008
|
|
|
Adjustments
|
|
|
June 30, 2008
|
|
|
|
(Previously reported)
|
|
|
|
|
|
(As restated)
|
|
|
|
(In thousands, except share and share data)
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Licensing and milestone revenues
|
|
$
|
20,676
|
|
|
|
|
|
|
$
|
20,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
20,676
|
|
|
|
|
|
|
$
|
20,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
6,747
|
|
|
|
|
|
|
|
6,747
|
|
Selling, general and administrative
|
|
|
3,230
|
|
|
|
|
|
|
|
3,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
9,977
|
|
|
|
|
|
|
|
9,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
10,699
|
|
|
|
|
|
|
|
10,699
|
|
Change in fair value of common stock warrant liability
|
|
|
|
|
|
|
916
|
|
|
|
916
|
|
Other expense, net
|
|
|
(21
|
)
|
|
|
|
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before minority interest in consolidated subsidiary
|
|
|
10,678
|
|
|
|
916
|
|
|
|
11,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
10,678
|
|
|
$
|
916
|
|
|
$
|
11,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
Net income per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.34
|
|
|
|
|
|
|
$
|
0.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.34
|
|
|
|
|
|
|
$
|
0.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
31,462,522
|
|
|
|
|
|
|
|
31,462,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
31,872,224
|
|
|
|
|
|
|
|
31,872,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-45
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
|
|
Six Months
|
|
|
|
|
|
|
Ended
|
|
|
|
|
|
Ended
|
|
|
|
|
|
|
June 30, 2008
|
|
|
Adjustments
|
|
|
June 30, 2008
|
|
|
|
|
|
|
(Previously reported)
|
|
|
|
|
|
(As restated)
|
|
|
|
|
|
|
(In thousands, except share and per share data)
|
|
|
|
|
|
Cash Flows From Operating Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,012
|
|
|
$
|
1,435
|
|
|
$
|
3,447
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
185
|
|
|
|
|
|
|
|
185
|
|
|
|
|
|
Fair value adjustments of common stock warrants
|
|
|
|
|
|
|
(1,435
|
)
|
|
|
(1,435
|
)
|
|
|
|
|
Stock-based compensation
|
|
|
3,117
|
|
|
|
|
|
|
|
3,117
|
|
|
|
|
|
Fair value of common stock issued in connection with drug license
|
|
|
305
|
|
|
|
|
|
|
|
305
|
|
|
|
|
|
Minority interest in subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in accounts receivable
|
|
|
(188
|
)
|
|
|
|
|
|
|
(188
|
)
|
|
|
|
|
Increase in inventory
|
|
|
(1,197
|
)
|
|
|
|
|
|
|
(1,197
|
)
|
|
|
|
|
Decrease in other assets
|
|
|
190
|
|
|
|
|
|
|
|
190
|
|
|
|
|
|
Increase in accounts payable and accrued expenses
|
|
|
4
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
Decrease in accrued compensation and related taxes
|
|
|
(49
|
)
|
|
|
|
|
|
|
(49
|
)
|
|
|
|
|
Decrease in deferred revenue and other credits
|
|
|
(43
|
)
|
|
|
|
|
|
|
(43
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
4,336
|
|
|
|
|
|
|
|
4,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of marketable securities
|
|
|
(3,065
|
)
|
|
|
|
|
|
|
(3,065
|
)
|
|
|
|
|
Sales of marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(687
|
)
|
|
|
|
|
|
|
(687
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(3,752
|
)
|
|
|
|
|
|
|
(3,752
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock and warrants, net of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
related offering costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments made on capital lease obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority investment in subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-46
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
|
|
Six Months
|
|
|
|
|
|
|
Ended
|
|
|
|
|
|
Ended
|
|
|
|
|
|
|
June 30, 2008
|
|
|
Adjustments
|
|
|
June 30, 2008
|
|
|
|
|
|
|
(Previously reported)
|
|
|
|
|
|
(As restated)
|
|
|
|
|
|
|
(In thousands, except share and per share data)
|
|
|
|
|
|
Cash dividends paid on preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
584
|
|
|
|
|
|
|
|
584
|
|
|
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
1,141
|
|
|
|
|
|
|
|
1,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
1,725
|
|
|
|
|
|
|
$
|
1,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule of Non-Cash Investing and Financing Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of common stock issued in connection with drug license
|
|
$
|
305
|
|
|
|
|
|
|
$
|
305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of restricted stock granted employees and directors
|
|
$
|
223
|
|
|
|
|
|
|
$
|
223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of stock issued to match employee 401k contributions
|
|
$
|
129
|
|
|
|
|
|
|
$
|
129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends paid with common stock
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of warrants issued to consultants and placement agents
|
|
$
|
69
|
|
|
|
|
|
|
$
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-47
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2008
|
|
|
Adjustments
|
|
|
September 30, 2008
|
|
|
|
(Previously reported)
|
|
|
|
|
|
(As restated)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
4,679
|
|
|
|
|
|
|
$
|
4,679
|
|
Marketable securities
|
|
|
46,957
|
|
|
|
|
|
|
|
46,957
|
|
Accounts receivable, net of allowance for doubtful accounts
|
|
|
186
|
|
|
|
|
|
|
|
186
|
|
Inventory
|
|
|
1,446
|
|
|
|
|
|
|
|
1,446
|
|
Prepaid expenses and other current assets
|
|
|
254
|
|
|
|
|
|
|
|
254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
53,522
|
|
|
|
|
|
|
|
53,522
|
|
Property and equipment, net
|
|
|
1,633
|
|
|
|
|
|
|
|
1,633
|
|
Other assets
|
|
|
143
|
|
|
|
|
|
|
|
143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
55,298
|
|
|
|
|
|
|
$
|
55,298
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and other accrued liabilities
|
|
$
|
3,217
|
|
|
|
|
|
|
$
|
3,217
|
|
Common stock warrant liability
|
|
|
|
|
|
|
556
|
|
|
|
556
|
|
Accrued compensation
|
|
|
1,145
|
|
|
|
|
|
|
|
1,145
|
|
Accrued drug development costs
|
|
|
3,572
|
|
|
|
|
|
|
|
3,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
7,934
|
|
|
|
556
|
|
|
|
8,490
|
|
Deferred revenue and other credits
|
|
|
1,026
|
|
|
|
|
|
|
|
1,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
8,960
|
|
|
|
556
|
|
|
|
9,516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock, par value $0.001 per share,
5,000,000 shares authorized:
|
|
|
|
|
|
|
|
|
|
|
|
|
Series E Convertible Voting Preferred Stock,
2,000 shares authorized, stated value $10,000 per share,
$2.0 million aggregate liquidation value, issued and
outstanding, 68 shares at September 30, 2008
|
|
|
419
|
|
|
|
|
|
|
|
419
|
|
Common stock, par value $0.001 per share,
100,000,000 shares authorized:
|
|
|
|
|
|
|
|
|
|
|
|
|
F-48
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2008
|
|
|
Adjustments
|
|
|
September 30, 2008
|
|
|
|
(Previously reported)
|
|
|
|
|
|
(As restated)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Issued and outstanding, 31,771,876 shares at
September 30, 2008
|
|
|
32
|
|
|
|
|
|
|
|
32
|
|
Additional paid-in capital
|
|
|
294,051
|
|
|
|
(15,472
|
)
|
|
|
278,579
|
|
Accumulated other comprehensive income
|
|
|
390
|
|
|
|
|
|
|
|
390
|
|
Accumulated deficit
|
|
|
(248,554
|
)
|
|
|
14,916
|
|
|
|
(233,638
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
46,338
|
|
|
|
(556
|
)
|
|
|
45,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
55,298
|
|
|
$
|
|
|
|
$
|
55,298
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-49
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
|
|
|
Ended
|
|
|
|
September 30, 2008
|
|
|
Adjustments
|
|
|
September 30, 2008
|
|
|
|
(In thousands, except share and share data)
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Licensing and milestone revenues
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
5,960
|
|
|
|
|
|
|
$
|
5,960
|
|
Selling, general and administrative
|
|
|
3,132
|
|
|
|
|
|
|
|
3,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
9,092
|
|
|
|
|
|
|
|
9,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(9,092
|
)
|
|
|
|
|
|
|
(9,092
|
)
|
Change in fair value of common stock warrant liability
|
|
|
|
|
|
|
45
|
|
|
|
45
|
|
Other income, net
|
|
|
276
|
|
|
|
|
|
|
|
276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss before minority interest in consolidated subsidiary
|
|
|
(8,816
|
)
|
|
|
45
|
|
|
|
(8,771
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(8,816
|
)
|
|
$
|
45
|
|
|
$
|
(8,771
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.28
|
)
|
|
|
|
|
|
$
|
(0.28
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
31,538,023
|
|
|
|
|
|
|
|
31,538,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-50
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
|
|
Nine Months
|
|
|
|
Ended
|
|
|
|
|
|
Ended
|
|
|
|
September 30, 2008
|
|
|
Adjustments
|
|
|
September 30, 2008
|
|
|
|
(Previously Reported)
|
|
|
|
|
|
(As Restated)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Cash Flows From Operating Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(6,804
|
)
|
|
$
|
1,480
|
|
|
$
|
(5,324
|
)
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
146
|
|
|
|
|
|
|
|
146
|
|
Fair value adjustments of common stock warrants
|
|
|
|
|
|
|
(1,480
|
)
|
|
|
(1,480
|
)
|
Share-based compensation
|
|
|
4,207
|
|
|
|
|
|
|
|
4,207
|
|
Fair value of common stock issued in connection with drug license
|
|
|
305
|
|
|
|
|
|
|
|
305
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in accounts receivable
|
|
|
5
|
|
|
|
|
|
|
|
5
|
|
Increase in inventory
|
|
|
(1,446
|
)
|
|
|
|
|
|
|
(1,446
|
)
|
Decrease in prepaids and other assets
|
|
|
686
|
|
|
|
|
|
|
|
686
|
|
Increase in accounts payable and accrued expenses
|
|
|
101
|
|
|
|
|
|
|
|
101
|
|
Increase in accrued compensation and related taxes
|
|
|
34
|
|
|
|
|
|
|
|
34
|
|
Increase in deferred revenue and other credits
|
|
|
17
|
|
|
|
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(2,749
|
)
|
|
|
|
|
|
|
(2,749
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of marketable securities
|
|
|
7,351
|
|
|
|
|
|
|
|
7,351
|
|
Sales of marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(1,064
|
)
|
|
|
|
|
|
|
(1,064
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities
|
|
|
6,287
|
|
|
|
|
|
|
|
6,287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock and warrants, net of
|
|
|
|
|
|
|
|
|
|
|
|
|
related offering costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments made on capital lease obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid on preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-51
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
|
|
Nine Months
|
|
|
|
Ended
|
|
|
|
|
|
Ended
|
|
|
|
September 30, 2008
|
|
|
Adjustments
|
|
|
September 30, 2008
|
|
|
|
(Previously Reported)
|
|
|
|
|
|
(As Restated)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Net increase in cash and cash equivalents
|
|
|
3,538
|
|
|
|
|
|
|
|
3,538
|
|
Cash and cash equivalents, beginning of period
|
|
|
1,141
|
|
|
|
|
|
|
|
1,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
4,679
|
|
|
|
|
|
|
$
|
4,679
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule of Non-Cash Investing and Financing Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of common stock issued in connection with drug license
|
|
$
|
305
|
|
|
|
|
|
|
$
|
305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of restricted stock granted employees and directors
|
|
$
|
275
|
|
|
|
|
|
|
$
|
275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of stock issued to match employee 401k contributions
|
|
$
|
208
|
|
|
|
|
|
|
$
|
208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends paid with common stock
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of warrants issued to consultants and placement agents
|
|
$
|
69
|
|
|
|
|
|
|
$
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-52
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
Adjustments
|
|
|
December 31, 2008
|
|
|
|
(Previously Reported)
|
|
|
|
|
|
(As Restated)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
9,860
|
|
|
|
|
|
|
|
9,860
|
|
Marketable securities
|
|
|
66,078
|
|
|
|
|
|
|
|
66,078
|
|
Accounts receivable-trade, net
|
|
|
9,776
|
|
|
|
|
|
|
|
9,776
|
|
Inventory
|
|
|
1,841
|
|
|
|
|
|
|
|
1,841
|
|
Prepaid expenses and other current assets
|
|
|
693
|
|
|
|
|
|
|
|
693
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
88,248
|
|
|
|
|
|
|
|
88,248
|
|
Bank certificates of deposit
|
|
|
2,148
|
|
|
|
|
|
|
|
2,148
|
|
Property and equipment, net
|
|
|
1,782
|
|
|
|
|
|
|
|
1,782
|
|
Zevalin related intangible assets, net
|
|
|
37,042
|
|
|
|
|
|
|
|
37,042
|
|
Other assets
|
|
|
289
|
|
|
|
|
|
|
|
289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
129,509
|
|
|
|
|
|
|
|
129,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued obligations
|
|
$
|
10,401
|
|
|
|
|
|
|
|
10,401
|
|
Common stock warrant liability
|
|
|
|
|
|
|
765
|
|
|
|
765
|
|
Accrued compensation
|
|
|
2,956
|
|
|
|
|
|
|
|
2,956
|
|
Note payable in connection with Zevalin joint venture
|
|
|
7,500
|
|
|
|
|
|
|
|
7,500
|
|
Current portion of deferred revenue and other credits
|
|
|
8,500
|
|
|
|
|
|
|
|
8,500
|
|
Accrued drug development costs
|
|
|
3,449
|
|
|
|
|
|
|
|
3,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
32,806
|
|
|
|
765
|
|
|
|
33,571
|
|
Capital lease obligations, net of current portion
|
|
|
95
|
|
|
|
|
|
|
|
95
|
|
Deferred revenue and other credits, net of current portion
|
|
|
33,929
|
|
|
|
|
|
|
|
33,929
|
|
Zevalin related contingent obligations
|
|
|
8,798
|
|
|
|
|
|
|
|
8,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
75,628
|
|
|
|
765
|
|
|
|
76,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest in consolidated entity
|
|
|
14,262
|
|
|
|
|
|
|
|
14,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, par value $0.001 per share,
5,000,000 shares authorized:
|
|
|
|
|
|
|
|
|
|
|
|
|
Series B Junior participating preferred stock,
1,000,000 shares authorized, no shares issued and
outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
F-53
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
Adjustments
|
|
|
December 31, 2008
|
|
|
|
(Previously Reported)
|
|
|
|
|
|
(As Restated)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Series E convertible voting preferred stock,
2,000 shares authorized, stated value $10,000 per share,
$0.8 million aggregate liquidation value, issued and
outstanding, 68 shares at December 31, 2008
|
|
|
419
|
|
|
|
|
|
|
|
419
|
|
Common stock, par value $0.001 per share,
100,000,000 shares authorized.
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued and outstanding, 32,166,316 shares at
December 31, 2008
|
|
|
32
|
|
|
|
|
|
|
|
32
|
|
Additional paid-in capital
|
|
|
296,531
|
|
|
|
(15,472
|
)
|
|
|
281,059
|
|
Accumulated other comprehensive loss
|
|
|
(146
|
)
|
|
|
|
|
|
|
(146
|
)
|
Accumulated deficit
|
|
|
(257,217
|
)
|
|
|
14,707
|
|
|
|
(242,510
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
39,619
|
|
|
|
(765
|
)
|
|
|
38,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
129,509
|
|
|
$
|
|
|
|
|
129,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-54
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
|
|
|
Ended
|
|
|
|
December 31, 2008
|
|
|
Adjustments
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
|
(As Restated)
|
|
|
|
(In thousands, except share and share data)
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Licensing and milestone revenues
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
Other revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Product sales
|
|
|
8,049
|
|
|
|
|
|
|
|
8,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
8,049
|
|
|
|
|
|
|
$
|
8,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product sold
|
|
$
|
1,193
|
|
|
|
|
|
|
$
|
1,193
|
|
Research and development
|
|
|
7,594
|
|
|
|
|
|
|
|
7,594
|
|
Selling, general and administrative
|
|
|
6,209
|
|
|
|
|
|
|
|
6,209
|
|
Acquired in-process research and development
|
|
|
4,700
|
|
|
|
|
|
|
|
4,700
|
|
Amortization of purchased intangibles
|
|
|
158
|
|
|
|
|
|
|
|
158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
19,854
|
|
|
|
|
|
|
|
19,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(11,805
|
)
|
|
|
|
|
|
|
(11,805
|
)
|
Change in fair value of common stock warrants
|
|
|
|
|
|
$
|
(210
|
)
|
|
|
(210
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income, net
|
|
|
609
|
|
|
|
|
|
|
|
609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax net loss
|
|
|
(11,196
|
)
|
|
|
(210
|
)
|
|
|
(11,406
|
)
|
Income tax expense
|
|
|
(5
|
)
|
|
|
|
|
|
|
(5
|
)
|
Net loss attributable to non-controlling interest
|
|
|
2,538
|
|
|
|
|
|
|
|
2,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(8,663
|
)
|
|
$
|
(210
|
)
|
|
$
|
(8,873
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.28
|
)
|
|
|
|
|
|
$
|
(0.28
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
31,928,778
|
|
|
|
|
|
|
|
31,928,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-55
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months
|
|
|
|
|
|
Twelve Months
|
|
|
|
Ended
|
|
|
|
|
|
Ended
|
|
|
|
December 31, 2008
|
|
|
Adjustment
|
|
|
December 31, 2008
|
|
|
|
(Previously Reported)
|
|
|
|
|
|
(As Restated)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Cash Flows From Operating Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(15,467
|
)
|
|
|
1,271
|
|
|
|
(14,196
|
)
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
610
|
|
|
|
|
|
|
|
610
|
|
Fair value adjustments of common stock warrants
|
|
|
|
|
|
|
(1,271
|
)
|
|
|
(1,271
|
)
|
Acquired in-process research and development
|
|
|
4,700
|
|
|
|
|
|
|
|
4,700
|
|
Share-based compensation expense
|
|
|
6,537
|
|
|
|
|
|
|
|
6,537
|
|
Fair value of common stock issued in connection with drug license
|
|
|
379
|
|
|
|
|
|
|
|
379
|
|
Minority interest in consolidated entities
|
|
|
(2,538
|
)
|
|
|
|
|
|
|
(2,538
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(4,811
|
)
|
|
|
|
|
|
|
(4,811
|
)
|
Inventory
|
|
|
(1,841
|
)
|
|
|
|
|
|
|
(1,841
|
)
|
Prepaid expenses and other assets
|
|
|
101
|
|
|
|
|
|
|
|
101
|
|
Accounts payable and accrued obligations
|
|
|
2,387
|
|
|
|
|
|
|
|
2,387
|
|
Notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued compensation and related taxes
|
|
|
1,845
|
|
|
|
|
|
|
|
1,845
|
|
Deferred revenue and other credits
|
|
|
93
|
|
|
|
|
|
|
|
93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(8,005
|
)
|
|
|
|
|
|
|
(8,005
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net purchases of marketable securities
|
|
|
(13,056
|
)
|
|
|
|
|
|
|
(13,056
|
)
|
Investment in Zevalin joint venture
|
|
|
(10,202
|
)
|
|
|
|
|
|
|
(10,202
|
)
|
Purchases of property and equipment
|
|
|
(1,518
|
)
|
|
|
|
|
|
|
(1,518
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(24,776
|
)
|
|
|
|
|
|
|
(24,776
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock and warrants, net of
|
|
|
|
|
|
|
|
|
|
|
|
|
related offering costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from Allergan Collaboration
|
|
|
41,500
|
|
|
|
|
|
|
|
41,500
|
|
Payments made on capital lease obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority investment in subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid on preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
41,500
|
|
|
|
|
|
|
|
41,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
8,719
|
|
|
|
|
|
|
|
8,719
|
|
F-56
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months
|
|
|
|
|
|
Twelve Months
|
|
|
|
Ended
|
|
|
|
|
|
Ended
|
|
|
|
December 31, 2008
|
|
|
Adjustment
|
|
|
December 31, 2008
|
|
|
|
(Previously Reported)
|
|
|
|
|
|
(As Restated)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
1,141
|
|
|
|
|
|
|
|
1,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
9,860
|
|
|
|
|
|
|
|
9,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
36
|
|
|
|
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
$
|
5
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule of Non-Cash Investing and Financing Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of common stock issued in connection with drug license
|
|
$
|
379
|
|
|
|
|
|
|
|
379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of restricted stock granted employees and directors
|
|
$
|
606
|
|
|
|
|
|
|
|
606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of stock issued to match employee 401k contributions
|
|
$
|
274
|
|
|
|
|
|
|
|
274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of equity awarded to consultants and placement agents
|
|
$
|
70
|
|
|
|
|
|
|
|
70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-57
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2009
|
|
|
Adjustments
|
|
|
March 31, 2009
|
|
|
|
(Previously Reported)
|
|
|
|
|
|
(As Restated)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
4,065
|
|
|
|
|
|
|
$
|
4,065
|
|
Restricted cash in escrow
|
|
|
10,000
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents
|
|
|
14,065
|
|
|
|
|
|
|
|
14,065
|
|
Marketable securities
|
|
|
49,833
|
|
|
|
|
|
|
|
49,833
|
|
Accounts receivable-trade, net
|
|
|
6,306
|
|
|
|
|
|
|
|
6,306
|
|
Inventory
|
|
|
1,894
|
|
|
|
|
|
|
|
1,894
|
|
Prepaid expenses and other current assets
|
|
|
736
|
|
|
|
|
|
|
|
736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
72,834
|
|
|
|
|
|
|
|
72,834
|
|
Property and equipment, net
|
|
|
1,818
|
|
|
|
|
|
|
|
1,818
|
|
Zevalin related intangible assets, net
|
|
|
36,092
|
|
|
|
|
|
|
|
36,092
|
|
Other assets
|
|
|
104
|
|
|
|
|
|
|
|
104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
110,848
|
|
|
|
|
|
|
$
|
110,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued obligations
|
|
$
|
8,221
|
|
|
|
|
|
|
$
|
8,221
|
|
Common stock warrant liability
|
|
|
|
|
|
|
1,274
|
|
|
|
1,274
|
|
Accrued compensation
|
|
|
1,921
|
|
|
|
|
|
|
|
1,921
|
|
Note payable in connection with Zevalin acquisition
|
|
|
10,000
|
|
|
|
|
|
|
|
10,000
|
|
Current portion of deferred revenue and other credits
|
|
|
8,500
|
|
|
|
|
|
|
|
8,500
|
|
Accrued drug development costs
|
|
|
4,798
|
|
|
|
|
|
|
|
4,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
33,440
|
|
|
|
1,274
|
|
|
|
34,714
|
|
Capital lease obligations, net of current portion
|
|
|
89
|
|
|
|
|
|
|
|
89
|
|
Deferred revenue and other credits, net of current portion
|
|
|
31,785
|
|
|
|
|
|
|
|
31,785
|
|
Zevalin related contingent obligations
|
|
|
4,998
|
|
|
|
|
|
|
|
4,998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
70,312
|
|
|
|
1,274
|
|
|
|
71,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest in consolidated entity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, par value $0.001 per share,
5,000,000 shares authorized:
|
|
|
|
|
|
|
|
|
|
|
|
|
Series B Junior participating preferred stock,
1,000,000 shares authorized, no shares issued and
outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
F-58
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2009
|
|
|
Adjustments
|
|
|
March 31, 2009
|
|
|
|
(Previously Reported)
|
|
|
|
|
|
(As Restated)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Series E convertible voting preferred stock,
2,000 shares authorized, stated value $10,000 per share,
$0.8 million aggregate liquidation value, issued and
outstanding, 68 shares at March 31, 2009
|
|
|
419
|
|
|
|
|
|
|
|
419
|
|
Common stock, par value $0.001 per share,
100,000,000 shares authorized.
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued and outstanding, 32,547,700 shares at March 31,
2009
|
|
|
33
|
|
|
|
|
|
|
|
33
|
|
Additional paid-in capital
|
|
|
297,208
|
|
|
|
(15,472
|
)
|
|
|
281,736
|
|
Accumulated other comprehensive loss
|
|
|
(531
|
)
|
|
|
|
|
|
|
(531
|
)
|
Accumulated deficit
|
|
|
(256,593
|
)
|
|
|
14,198
|
|
|
|
(242,395
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
40,536
|
|
|
|
(1,274
|
)
|
|
|
39,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
110,848
|
|
|
$
|
|
|
|
$
|
110,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-59
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
|
|
|
Ended
|
|
|
|
March 31, 2009
|
|
|
Adjustments
|
|
|
March 31, 2009
|
|
|
|
(Previously reported)
|
|
|
|
|
|
(As restated)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
License and contract revenue
|
|
$
|
2,125
|
|
|
|
|
|
|
$
|
2,125
|
|
Product sales
|
|
|
12,038
|
|
|
|
|
|
|
|
12,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
14,163
|
|
|
|
|
|
|
$
|
38,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product sold
|
|
$
|
1,834
|
|
|
|
|
|
|
$
|
1,834
|
|
Research and development
|
|
|
5,654
|
|
|
|
|
|
|
|
5,654
|
|
Amortization of purchased intangibles
|
|
|
950
|
|
|
|
|
|
|
|
950
|
|
Selling, general and administrative
|
|
|
6,351
|
|
|
|
|
|
|
|
6,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
14,789
|
|
|
|
|
|
|
|
66,533
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(626
|
)
|
|
|
|
|
|
|
(626
|
)
|
Change in fair value of common stock warrant liability
|
|
|
|
|
|
|
(509
|
)
|
|
|
(509
|
)
|
Other income, net
|
|
|
104
|
|
|
|
|
|
|
|
104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before minority interest in consolidated entities
|
|
|
(522
|
)
|
|
|
(509
|
)
|
|
|
(1,031
|
)
|
Minority interest in net loss of consolidated entities
|
|
|
1,146
|
|
|
|
|
|
|
|
1,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
624
|
|
|
$
|
(509
|
)
|
|
$
|
(19,046
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.02
|
|
|
|
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.02
|
|
|
|
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
31,952,523
|
|
|
|
|
|
|
|
31,952,523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
32,157,425
|
|
|
|
|
|
|
|
32,157,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-60
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
|
|
|
Quarter
|
|
|
|
Ended
|
|
|
|
|
|
Ended
|
|
|
|
March 31, 2009
|
|
|
Adjustments
|
|
|
March 31, 2009
|
|
|
|
(Previously reported)
|
|
|
|
|
|
(As restated)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Cash Flows From Operating Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
624
|
|
|
$
|
(509
|
)
|
|
$
|
115
|
|
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred revenue
|
|
|
(2,125
|
)
|
|
|
|
|
|
|
(2,125
|
)
|
Depreciation and amortization
|
|
|
136
|
|
|
|
|
|
|
|
136
|
|
Fair value adjustments of common stock warrants
|
|
|
|
|
|
|
509
|
|
|
|
509
|
|
Share-based compensation expense
|
|
|
968
|
|
|
|
|
|
|
|
968
|
|
Fair value of common stock issued in connection with drug license
|
|
|
185
|
|
|
|
|
|
|
|
185
|
|
Minority interest in consolidated entities
|
|
|
(1,146
|
)
|
|
|
|
|
|
|
(1,146
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(1,304
|
)
|
|
|
|
|
|
|
(1,304
|
)
|
Inventory
|
|
|
(53
|
)
|
|
|
|
|
|
|
(53
|
)
|
Prepaid expenses and other assets
|
|
|
148
|
|
|
|
|
|
|
|
148
|
|
Accounts payable and accrued obligations
|
|
|
3,942
|
|
|
|
|
|
|
|
3,942
|
|
Accrued compensation and related taxes
|
|
|
(1,035
|
)
|
|
|
|
|
|
|
(1,035
|
)
|
Deferred revenue and other credits
|
|
|
(25
|
)
|
|
|
|
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
315
|
|
|
|
|
|
|
|
315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales of marketable securities
|
|
|
18,112
|
|
|
|
|
|
|
|
18,112
|
|
Investment in Zevalin acquisition
|
|
|
(14,050
|
)
|
|
|
|
|
|
|
(14,050
|
)
|
Restricted cash in escrow for Zevalin acquisition
|
|
|
(10,000
|
)
|
|
|
|
|
|
|
(10,000
|
)
|
Purchases of property and equipment
|
|
|
(172
|
)
|
|
|
|
|
|
|
(172
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(6,110
|
)
|
|
|
|
|
|
|
(6,110
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock and warrants, net of
related offering costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from Allergan Collaboration
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments made on capital lease obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority investment in subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid on preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-61
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
|
|
|
Quarter
|
|
|
|
Ended
|
|
|
|
|
|
Ended
|
|
|
|
March 31, 2009
|
|
|
Adjustments
|
|
|
March 31, 2009
|
|
|
|
(Previously reported)
|
|
|
|
|
|
(As restated)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(5,795
|
)
|
|
|
|
|
|
|
(5,795
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
9,860
|
|
|
|
|
|
|
|
9,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
4,065
|
|
|
|
|
|
|
$
|
4,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information
:
|
|
|
|
|
|
|
|
|
|
$
|
|
|
Interest paid
|
|
$
|
7
|
|
|
|
|
|
|
$
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
$
|
45
|
|
|
|
|
|
|
$
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule of Non-Cash Investing and Financing Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of common stock issued in connection with drug license
|
|
$
|
185
|
|
|
|
|
|
|
$
|
185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of restricted stock granted employees and directors
|
|
$
|
182
|
|
|
|
|
|
|
$
|
182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of stock issued to match employee 401k contributions
|
|
$
|
108
|
|
|
|
|
|
|
$
|
108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends paid with common stock
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of equity awarded to consultants and placement agents
|
|
$
|
111
|
|
|
|
|
|
|
$
|
111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-62
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
Adjustments
|
|
|
June 30, 2009
|
|
|
|
(Previously reported)
|
|
|
|
|
|
(As restated)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
7,993
|
|
|
|
|
|
|
$
|
7,993
|
|
Marketable securities
|
|
|
77,062
|
|
|
|
|
|
|
|
77,062
|
|
Financing proceeds receivable
|
|
|
21,000
|
|
|
|
|
|
|
|
21,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents, marketable securities and financing
proceeds receivable
|
|
|
106,055
|
|
|
|
|
|
|
|
106,055
|
|
Accounts receivable-trade, net
|
|
|
1,531
|
|
|
|
|
|
|
|
1,531
|
|
Inventory
|
|
|
2,355
|
|
|
|
|
|
|
|
2,355
|
|
Prepaid expenses and other current assets
|
|
|
661
|
|
|
|
|
|
|
|
661
|
|
Total current assets
|
|
|
110,602
|
|
|
|
|
|
|
|
110,602
|
|
Property and equipment, net
|
|
|
1,845
|
|
|
|
|
|
|
|
1,845
|
|
Zevalin related intangible assets, net
|
|
|
35,143
|
|
|
|
|
|
|
|
35,143
|
|
Other assets
|
|
|
99
|
|
|
|
|
|
|
|
99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
147,689
|
|
|
|
|
|
|
$
|
147,689
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued obligations
|
|
$
|
13,985
|
|
|
|
|
|
|
$
|
13,985
|
|
Common stock warrant liability
|
|
|
|
|
|
|
30,232
|
|
|
|
30,232
|
|
Accrued compensation
|
|
|
2,278
|
|
|
|
|
|
|
|
2,278
|
|
Current portion of deferred revenue and other credits
|
|
|
8,500
|
|
|
|
|
|
|
|
8,500
|
|
Accrued drug development costs
|
|
|
3,929
|
|
|
|
|
|
|
|
3,929
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
28,692
|
|
|
|
30,232
|
|
|
|
58,924
|
|
Capital lease obligations, net of current portion
|
|
|
102
|
|
|
|
|
|
|
|
102
|
|
Deferred revenue and other credits, net of current portion
|
|
|
29,622
|
|
|
|
|
|
|
|
29,622
|
|
Zevalin related contingent obligations
|
|
|
6,755
|
|
|
|
|
|
|
|
6,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
65,171
|
|
|
|
30,232
|
|
|
|
95,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest in consolidated entity
|
|
|
|
|
|
|
|
|
|
|
|
|
F-63
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
Adjustments
|
|
|
June 30, 2009
|
|
|
|
(Previously reported)
|
|
|
|
|
|
(As restated)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Stockholders Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, par value $0.001 per share,
5,000,000 shares authorized:
|
|
|
|
|
|
|
|
|
|
|
|
|
Series B Junior participating preferred stock,
1,000,000 shares authorized, no shares issued and
outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Series E convertible voting preferred stock,
2,000 shares authorized, stated value $10,000 per share,
$0.8 million aggregate liquidation value, issued and
outstanding, 68 shares at June 30, 2009
|
|
|
419
|
|
|
|
|
|
|
|
419
|
|
Common stock, par value $0.001 per share,
100,000,000 shares authorized:
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued and outstanding, 41,707,484 shares at June 30,
2009
|
|
|
42
|
|
|
|
|
|
|
|
42
|
|
Additional paid-in capital
|
|
|
348,521
|
|
|
|
(24,318
|
)
|
|
|
324,203
|
|
Accumulated other comprehensive loss
|
|
|
(166
|
)
|
|
|
|
|
|
|
(166
|
)
|
Accumulated deficit
|
|
|
(266,298
|
)
|
|
|
(5,914
|
)
|
|
|
(272,212
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
82,518
|
|
|
|
(30,232
|
)
|
|
|
52,286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
147,689
|
|
|
$
|
|
|
|
$
|
147,689
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-64
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Three Months
|
|
|
|
|
|
Ended
|
|
|
|
Ended
|
|
|
|
|
|
June 30,
|
|
|
|
June 30, 2009
|
|
|
Adjustments
|
|
|
2009
|
|
|
|
(Previously reported)
|
|
|
|
|
|
(As restated)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
License and contract revenue
|
|
$
|
2,125
|
|
|
|
|
|
|
$
|
2,125
|
|
Product sales
|
|
|
6,016
|
|
|
|
|
|
|
|
6,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
8,141
|
|
|
|
|
|
|
$
|
8,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product sold
|
|
$
|
1,439
|
|
|
|
|
|
|
$
|
1,439
|
|
Research and development
|
|
|
6,391
|
|
|
|
|
|
|
|
6,391
|
|
Amortization of purchased intangibles
|
|
|
950
|
|
|
|
|
|
|
|
950
|
|
Selling, general and administrative
|
|
|
9,192
|
|
|
|
|
|
|
|
9,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
17,972
|
|
|
|
|
|
|
|
17,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(9,831
|
)
|
|
|
|
|
|
|
(9,831
|
)
|
Change in fair value of common stock warrant liability
|
|
|
|
|
|
|
(20,113
|
)
|
|
|
(20,113
|
)
|
Other income, net
|
|
|
125
|
|
|
|
|
|
|
|
125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before minority interest in consolidated entities
|
|
|
(9,706
|
)
|
|
|
(20,113
|
)
|
|
|
(29,819
|
)
|
Minority interest in net loss of consolidated entities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(9,706
|
)
|
|
$
|
(20,113
|
)
|
|
$
|
(29,819
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.28
|
)
|
|
|
|
|
|
$
|
(0.87
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
34,137,640
|
|
|
|
|
|
|
|
34,137,640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-65
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
|
|
|
Ended
|
|
|
|
June 30, 2009
|
|
|
Adjustments
|
|
|
June 30, 2009
|
|
|
|
(Previously reported)
|
|
|
|
|
|
(As restated)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Cash Flows From Operating Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(9,081
|
)
|
|
$
|
(20,621
|
)
|
|
$
|
(29,702
|
)
|
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred revenue
|
|
|
(4,250
|
)
|
|
|
|
|
|
|
(4,250
|
)
|
Depreciation and amortization
|
|
|
2,178
|
|
|
|
|
|
|
|
2,178
|
|
Fair value adjustments of common stock warrants
|
|
|
|
|
|
|
20,621
|
|
|
|
20,621
|
|
Share-based compensation expense
|
|
|
4,793
|
|
|
|
|
|
|
|
4,793
|
|
Fair value of common stock issued in connection with drug license
|
|
|
185
|
|
|
|
|
|
|
|
185
|
|
Minority interest in consolidated entities
|
|
|
(1,146
|
)
|
|
|
|
|
|
|
(1,146
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
3,471
|
|
|
|
|
|
|
|
3,471
|
|
Inventory
|
|
|
(514
|
)
|
|
|
|
|
|
|
(514
|
)
|
Prepaid expenses and other assets
|
|
|
228
|
|
|
|
|
|
|
|
228
|
|
Accounts payable and accrued obligations
|
|
|
9,154
|
|
|
|
|
|
|
|
9,154
|
|
Accrued compensation and related taxes
|
|
|
(678
|
)
|
|
|
|
|
|
|
(678
|
)
|
Deferred revenue and other credits
|
|
|
(49
|
)
|
|
|
|
|
|
|
(49
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
4,291
|
|
|
|
|
|
|
|
4,291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net purchases of marketable securities
|
|
|
(8,862
|
)
|
|
|
|
|
|
|
(8,862
|
)
|
Investment in Zevalin Acquisition
|
|
|
(22,687
|
)
|
|
|
|
|
|
|
(22,687
|
)
|
Purchases of property and equipment
|
|
|
(344
|
)
|
|
|
|
|
|
|
(344
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(31,893
|
)
|
|
|
|
|
|
|
(31,893
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock and warrants, net of
related offering costs and expenses
|
|
|
27,070
|
|
|
|
|
|
|
|
27,070
|
|
Proceeds from sale of common stock to employees
shelf takedown
|
|
|
1,167
|
|
|
|
|
|
|
|
1,167
|
|
Repurchase of warrants
|
|
|
(71
|
)
|
|
|
|
|
|
|
(71
|
)
|
Proceeds from exercise of stock options
|
|
|
89
|
|
|
|
|
|
|
|
89
|
|
Repurchase of stock options pursuant to tender offer
|
|
|
(2,520
|
)
|
|
|
|
|
|
|
(2,520
|
)
|
Net cash provided by financing activities
|
|
|
25,735
|
|
|
|
|
|
|
|
25,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(1,867
|
)
|
|
|
|
|
|
|
(1,867
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
9,860
|
|
|
|
|
|
|
|
9,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
7,993
|
|
|
|
|
|
|
$
|
7,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-66
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
|
|
|
Ended
|
|
|
|
June 30, 2009
|
|
|
Adjustments
|
|
|
June 30, 2009
|
|
|
|
(Previously reported)
|
|
|
|
|
|
(As restated)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Supplemental Cash Flow Information
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
10
|
|
|
|
|
|
|
$
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
$
|
45
|
|
|
|
|
|
|
$
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule of Non-Cash Investing and Financing Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of common stock issued in connection with drug license
|
|
$
|
185
|
|
|
|
|
|
|
$
|
185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of restricted stock granted employees and directors
|
|
$
|
226
|
|
|
|
|
|
|
$
|
226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of stock issued to match employee 401k contributions
|
|
$
|
219
|
|
|
|
|
|
|
$
|
219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of equity awarded to consultants and placement agents
|
|
$
|
111
|
|
|
|
|
|
|
$
|
111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-67
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009
|
|
|
Adjustments
|
|
|
September 30, 2009
|
|
|
|
(Previously reported)
|
|
|
|
|
|
(As restated)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
9,686
|
|
|
|
|
|
|
$
|
9,686
|
|
Marketable securities
|
|
|
133,785
|
|
|
|
|
|
|
|
133,785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and marketable securities
|
|
|
143,471
|
|
|
|
|
|
|
|
143,471
|
|
Accounts receivable-trade, net
|
|
|
4,441
|
|
|
|
|
|
|
|
4,441
|
|
Inventory
|
|
|
2,160
|
|
|
|
|
|
|
|
2,160
|
|
Prepaid expenses and other current assets
|
|
|
472
|
|
|
|
|
|
|
|
472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
150,544
|
|
|
|
|
|
|
|
150,544
|
|
Property and equipment, net
|
|
|
1,771
|
|
|
|
|
|
|
|
1,771
|
|
Zevalin related intangible assets, net
|
|
|
35,941
|
|
|
|
|
|
|
|
35,941
|
|
Other assets
|
|
|
193
|
|
|
|
|
|
|
|
193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
188,449
|
|
|
|
|
|
|
$
|
188,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued obligations
|
|
$
|
21,460
|
|
|
|
|
|
|
$
|
21,460
|
|
Common stock warrant liability
|
|
|
|
|
|
|
26,540
|
|
|
|
26,540
|
|
Accrued compensation
|
|
|
2,476
|
|
|
|
|
|
|
|
2,476
|
|
Current portion of deferred revenue and other credits
|
|
|
8,500
|
|
|
|
|
|
|
|
8,500
|
|
Accrued drug development costs
|
|
|
3,779
|
|
|
|
|
|
|
|
3,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
36,215
|
|
|
|
26,540
|
|
|
|
62,755
|
|
Capital lease obligations, net of current portion
|
|
|
102
|
|
|
|
|
|
|
|
102
|
|
Deferred revenue and other credits, net of current portion
|
|
|
27,512
|
|
|
|
|
|
|
|
27,512
|
|
Total liabilities
|
|
|
63,829
|
|
|
|
26,540
|
|
|
|
90,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 5)
|
|
|
|
|
|
|
|
|
|
|
|
|
F-68
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009
|
|
|
Adjustments
|
|
|
September 30, 2009
|
|
|
|
(Previously reported)
|
|
|
|
|
|
(As restated)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Stockholders Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, par value $0.001 per share,
5,000,000 shares authorized:
|
|
|
|
|
|
|
|
|
|
|
|
|
Series B Junior participating preferred stock,
1,000,000 shares authorized, no shares issued and
outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Series E convertible voting preferred stock,
2,000 shares authorized, stated value $10,000 per share,
$0.8 million aggregate liquidation value, issued and
outstanding, 68 shares at September 30, 2009
|
|
|
419
|
|
|
|
|
|
|
|
419
|
|
Common stock, par value $0.001 per share,
100,000,000 shares authorized:
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued and outstanding, 48,741,009 shares at
September 30, 2009
|
|
|
49
|
|
|
|
|
|
|
|
49
|
|
Additional paid-in capital
|
|
|
398,967
|
|
|
|
(29,489
|
)
|
|
|
369,478
|
|
Non-controlling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss
|
|
|
(136
|
)
|
|
|
|
|
|
|
(136
|
)
|
Accumulated deficit
|
|
|
(274,679
|
)
|
|
|
2,949
|
|
|
|
(271,730
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
124,620
|
|
|
|
(26,540
|
)
|
|
|
98,080
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
188,449
|
|
|
$
|
|
|
|
$
|
188,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-69
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
|
|
|
Ended
|
|
|
|
September 30, 2009
|
|
|
Adjustments
|
|
|
September 30, 2009
|
|
|
|
(Previously Reported)
|
|
|
|
|
|
(As Restated)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Product sales
|
|
$
|
4,976
|
|
|
|
|
|
|
$
|
4,976
|
|
License and contract revenue
|
|
|
2,125
|
|
|
|
|
|
|
|
2,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
7,101
|
|
|
|
|
|
|
$
|
7,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product sold (excludes amortization of purchased
intangibles shown below)
|
|
$
|
2,429
|
|
|
|
|
|
|
$
|
2,429
|
|
Amortization of purchased intangibles
|
|
|
950
|
|
|
|
|
|
|
|
950
|
|
Research and development
|
|
|
5,488
|
|
|
|
|
|
|
|
5,488
|
|
Acquired in-process research and development
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
6,995
|
|
|
|
|
|
|
|
6,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
15,862
|
|
|
|
|
|
|
|
15,862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(8,761
|
)
|
|
|
|
|
|
|
(8,761
|
)
|
Change in fair value of common stock warrant liability
|
|
|
|
|
|
|
8,863
|
|
|
|
8,863
|
|
Other income, net
|
|
|
372
|
|
|
|
|
|
|
|
372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated loss
|
|
|
(8,389
|
)
|
|
|
8,863
|
|
|
|
474
|
|
Net loss attributable to non-controlling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to Spectrum
|
|
$
|
(8,389
|
)
|
|
$
|
8,863
|
|
|
$
|
474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.20
|
)
|
|
|
|
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
(0.19
|
)
|
|
|
|
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
42,364,983
|
|
|
|
|
|
|
|
42,364,983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
44,191,257
|
|
|
|
|
|
|
|
44,191,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-70
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine-Months
|
|
|
|
|
|
Nine-Months
|
|
|
|
Ended
|
|
|
|
|
|
Ended
|
|
|
|
September 30, 2009
|
|
|
Adjustments
|
|
|
September 30, 2009
|
|
|
|
(Previously Reported)
|
|
|
|
|
|
(As Restated)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Cash Flows From Operating Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(17,471
|
)
|
|
$
|
(11,759
|
)
|
|
$
|
(29,230
|
)
|
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred revenue
|
|
|
(6,375
|
)
|
|
|
|
|
|
|
(6,375
|
)
|
Depreciation and amortization
|
|
|
3,248
|
|
|
|
|
|
|
|
3,248
|
|
Fair value adjustments of common stock warrants
|
|
|
|
|
|
|
11,759
|
|
|
|
11,759
|
|
Share-based compensation expense
|
|
|
6,013
|
|
|
|
|
|
|
|
6,013
|
|
Fair value of common stock issued in connection with drug license
|
|
|
935
|
|
|
|
|
|
|
|
935
|
|
Minority interest in consolidated entities
|
|
|
(1,146
|
)
|
|
|
|
|
|
|
(1,146
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
561
|
|
|
|
|
|
|
|
561
|
|
Inventory
|
|
|
(319
|
)
|
|
|
|
|
|
|
(319
|
)
|
Prepaid expenses and other assets
|
|
|
314
|
|
|
|
|
|
|
|
314
|
|
Accounts payable and accrued obligations
|
|
|
7,663
|
|
|
|
|
|
|
|
7,663
|
|
Accrued compensation and related taxes
|
|
|
(480
|
)
|
|
|
|
|
|
|
(480
|
)
|
Deferred revenue and other credits
|
|
|
(35
|
)
|
|
|
|
|
|
|
(35
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(7,092
|
)
|
|
|
|
|
|
|
(7,092
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net purchases of marketable securities
|
|
|
(65,538
|
)
|
|
|
|
|
|
|
(65,538
|
)
|
Investment in Zevalin acquisition
|
|
|
(22,687
|
)
|
|
|
|
|
|
|
(22,687
|
)
|
Purchases of property and equipment
|
|
|
(388
|
)
|
|
|
|
|
|
|
(388
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(88,613
|
)
|
|
|
|
|
|
|
(88,613
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock and warrants, net of
related offering costs and expenses
|
|
|
95,810
|
|
|
|
|
|
|
|
95,810
|
|
Proceeds from sale of common stock to employees
shelf takedown
|
|
|
1,167
|
|
|
|
|
|
|
|
1,167
|
|
Repurchase of warrants
|
|
|
(71
|
)
|
|
|
|
|
|
|
(71
|
)
|
Proceeds from exercise of stock options
|
|
|
1,145
|
|
|
|
|
|
|
|
1,145
|
|
Repurchase of stock options pursuant to tender offer
|
|
|
(2,520
|
)
|
|
|
|
|
|
|
(2,520
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
95,531
|
|
|
|
|
|
|
|
95,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
(174
|
)
|
|
|
|
|
|
|
(174
|
)
|
F-71
Spectrum
Pharmaceuticals, Inc. and Subsidiaries
Notes to
the Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine-Months
|
|
|
|
|
|
Nine-Months
|
|
|
|
Ended
|
|
|
|
|
|
Ended
|
|
|
|
September 30, 2009
|
|
|
Adjustments
|
|
|
September 30, 2009
|
|
|
|
(Previously Reported)
|
|
|
|
|
|
(As Restated)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
9,860
|
|
|
|
|
|
|
|
9,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
9,686
|
|
|
|
|
|
|
$
|
9,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
10
|
|
|
|
|
|
|
$
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
$
|
45
|
|
|
|
|
|
|
$
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule of Non-Cash Investing and Financing Activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of common stock issued in connection with drug license
|
|
$
|
935
|
|
|
|
|
|
|
$
|
935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of restricted stock granted employees and directors
|
|
$
|
226
|
|
|
|
|
|
|
$
|
226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of stock issued to match employee 401k contributions
|
|
$
|
342
|
|
|
|
|
|
|
$
|
342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of equity awarded to consultants and placement agents
|
|
$
|
111
|
|
|
|
|
|
|
$
|
111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-72
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
|
December 31, 2009
|
|
|
Revenues
|
|
|
|
|
Product sales
|
|
$
|
5,195
|
|
License and contract revenue
|
|
|
3,425
|
|
|
|
|
|
|
Total revenues
|
|
$
|
8,620
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
Cost of product sold (excludes amortization of purchased
intangibles shown below)
|
|
|
2,446
|
|
Selling, general and administrative
|
|
|
11,069
|
|
Research and development
|
|
|
3,525
|
|
Amortization of purchased intangibles
|
|
|
870
|
|
|
|
|
|
|
Total operating expenses
|
|
|
17,910
|
|
|
|
|
|
|
Loss from operations
|
|
|
(9,290
|
)
|
Change in fair value of common stock warrant liability
|
|
|
19,834
|
|
Other income, net
|
|
|
61
|
|
|
|
|
|
|
Consolidated loss
|
|
|
10,605
|
|
Income tax expense
|
|
|
(421
|
)
|
Net income
|
|
$
|
10,184
|
|
|
|
|
|
|
Net income per share
|
|
|
|
|
Basic
|
|
$
|
0.21
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.20
|
|
|
|
|
|
|
Weighted average common shares:
|
|
|
|
|
Basic
|
|
|
48,425,486
|
|
|
|
|
|
|
Diluted
|
|
|
49,704,126
|
|
|
|
|
|
|
In connection with the preparation of the Consolidated Financial
Statements, we have evaluated subsequent events through the
filing date of this form 10-K.
In February 2010, we entered into a licensing and collaboration
agreement with TopoTarget, for the development and
commercialization of belinostat, a drug being studied in
multiple indications, including a Phase 2 registrational trial
for patients with Peripheral T-Cell Lymphoma. The agreement
provides that we have the exclusive right to make, develop and
commercialize belinostat in North America and India, with an
option for China. In consideration for the rights granted under
the license agreement, we paid TopoTarget an up-front fee of
$30 million. In addition, we will pay up to
$313 million and one million shares of Spectrum common
stock based on the achievement of certain development,
regulatory and sales milestones, as well as royalties on net
sales of belinostat.
Index to
Exhibits
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
2
|
.1
|
|
Asset Purchase Agreement by and between the Registrant, Targent
Inc. and Certain Stockholders of Targent, Inc., dated March 17
2006. (Filed as Exhibit 2.1 to
Form 10-K/A,
Amendment No. 1, as filed with the Securities and Exchange
Commission on May 1, 2006, and incorporated herein by
reference.)
|
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
2
|
.2
|
|
Asset Purchase Agreement by and between the Registrant and Par
Pharmaceutical, Inc., dated as of May 6, 2008. (Filed as
Exhibit 2.1 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
August 11, 2008, and incorporated herein by reference.)
|
|
2
|
.3#
|
|
Purchase and Formation Agreement, dated as of November 26,
2008, by and among the Registrant, Cell Therapeutics, Inc. and
RIT Oncology, LLC. (Filed as Exhibit 2.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
December 19, 2008, and incorporated herein by reference.)
|
|
2
|
.4#
|
|
Limited Liability Company Interest Assignment Agreement, dated
as of March 15, 2009, by and between the Registrant and
Cell Therapeutics, Inc. (Filed as Exhibit 2.1 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
May 15, 2009, and incorporated herein by reference.)
|
|
3
|
.1
|
|
Amended Certificate of Incorporation, as filed. (Filed as
Exhibit 3.1 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
August 8, 2006, and incorporated herein by reference.)
|
|
3
|
.2
|
|
Form of Amended and Restated Bylaws of the Registrant. (Filed as
Exhibit 3.1 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
August 16, 2004, and incorporated herein by reference.)
|
|
4
|
.1
|
|
Rights Agreement, dated as of December 13, 2000, between
the Registrant and ComputerShare Trust Company, N.A.
(formerly U.S. Stock Transfer Corporation), as Rights Agent,
which includes as Exhibit A thereto the form of Certificate
of Designation for the Series B Junior Participating
Preferred Stock, as Exhibit B thereto the Form of Rights
Certificate and as Exhibit C thereto a Summary of Terms of
Stockholder Rights Plan. (Filed as Exhibit 4.1 to
Form 8-A12G,
as filed with the Securities and Exchange Commission on
December 26, 2000, and incorporated herein by reference.)
|
|
4
|
.2
|
|
Amendment No. 1 to the Rights Agreement, dated as of
December 13, 2000 by and between the Registrant and
ComputerShare Trust Company, N.A. (formerly U.S. Stock
Transfer Corporation). (Filed as Exhibit 4.1 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
August 14, 2003, and incorporated herein by reference.)
|
|
4
|
.3
|
|
Registration Rights Agreement, dated as of September 26,
2003, by and among the Registrant and the persons listed on
Schedule 1 attached thereto. (Filed as Exhibit 4.4 to
Form 8-K,
as filed with the Securities and Exchange Commission on
September 30, 2003, and incorporated herein by reference.)
|
|
4
|
.4
|
|
Investor Rights Agreement, dated as of April 20, 2004, by
and among the Registrant and the persons listed on
Schedule 1 attached thereto. (Filed as Exhibit 4.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
April 23, 2004, and incorporated herein by reference.)
|
|
4
|
.5
|
|
Amendment No. 2 to the Rights Agreement, dated as of
December 13, 2000, by and between the Registrant and
ComputerShare Trust Company, N.A. (formerly U.S. Stock
Transfer Corporation). (Filed as Exhibit 4.1 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
May 17, 2004, and incorporated herein by reference.)
|
|
4
|
.6
|
|
Amendment No. 3 to the Rights Agreement, dated as of
December 13, 2000 by and between the Registrant and
ComputerShare Trust Company, N.A. (formerly U.S. Stock
Transfer Corporation). (Filed as Exhibit 4.2 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
May 17, 2004, and incorporated herein by reference.)
|
|
4
|
.7
|
|
Warrant issued by the Registrant to a Consultant, dated as of
September 17, 2003. (Filed as Exhibit 4.3 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
May 17, 2004, and incorporated herein by reference.)
|
|
4
|
.8
|
|
Amendment No. 1, dated as of November 2, 2005, to
Warrant issued by the Registrant to a Consultant, dated as of
September 17, 2003. (Filed as Exhibit 4.2 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
November 4, 2005, and incorporated herein by reference.)
|
|
4
|
.9
|
|
Warrant issued by the Registrant to a Consultant, dated as of
September 20, 2005. (Filed as Exhibit 4.3 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
November 4, 2005, and incorporated herein by reference.)
|
|
4
|
.10
|
|
Form of Warrant, dated September 15, 2005. (Filed as
Exhibit 4.35 to
Form 10-K,
as filed with the Securities and Exchange Commission on
March 15, 2006, and incorporated herein by reference.)
|
|
4
|
.11
|
|
Registration Rights Agreement, dated as of April 20, 2006,
by and among the Registrant and Targent, Inc. (Filed as
Exhibit 4.2 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
May 8, 2006, and incorporated herein by reference.)
|
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
4
|
.12
|
|
Fourth Amendment to Rights Agreement, dated July 7, 2006.
(Filed as Exhibit 4.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
July 12, 2006, and incorporated herein by reference.)
|
|
4
|
.13
|
|
Amendment No. 5 to the Rights Agreement, dated as of
December 13, 2000, by and between the Registrant and
ComputerShare Trust Company, N.A. (formerly U.S. Stock
Transfer Corporation). (Filed as Exhibit 4.2 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
November 3, 2006, and incorporated herein by reference.)
|
|
4
|
.14
|
|
Amendment No. 2, dated as of March 26, 2007, to
Warrant issued by the Registrant to a Consultant, dated as of
September 17, 2003. (Filed as Exhibit 4.1 to
Form 10-K/A,
as filed with the Securities and Exchange Commission on
April 30, 2007, and incorporated herein by reference.)
|
|
4
|
.15
|
|
Warrant issued by the Registrant to a Consultant, dated as of
April 28, 2008. (Filed as Exhibit 4.1 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
August 11, 2008, and incorporated herein by reference.)
|
|
4
|
.16
|
|
Form of Common Stock Purchase Warrant. (Filed as
Exhibit 4.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
May 28, 2009, and incorporated herein by reference.)
|
|
4
|
.17
|
|
Form of Common Stock Purchase Warrant. (Filed as
Exhibit 4.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
June 18, 2009, and incorporated herein by reference.)
|
|
4
|
.18
|
|
Form of Common Stock Purchase Warrant. (Filed as
Exhibit 4.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
July 2, 2009, and incorporated herein by reference.)
|
|
4
|
.19
|
|
Form of Common Stock Purchase Warrant (Filed as Exhibit 4.1
to
Form 8-K,
as filed with the Securities and Exchange Commission on
September 23, 2009, and incorporated herein by reference).
|
|
10
|
.1
|
|
Industrial Lease Agreement, dated as of January 16, 1997,
between the Registrant and the Irvine Company. (Filed as
Exhibit 10.11 to
Form 10-KSB,
as filed with the Securities and Exchange Commission on
March 31, 1997, and incorporated herein by reference.)
|
|
10
|
.2
|
|
Preferred Stock and Warrant Purchase Agreement, dated as of
September 26, 2003, by and among the Registrant and the
purchasers listed on Schedule 1 attached thereto. (Filed as
Exhibit 10.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
September 30, 2003, and incorporated herein by reference.)
|
|
10
|
.3
|
|
First Amendment, dated March 25, 2004, to Industrial Lease
Agreement dated as of January 16, 1997 by and between the
Registrant and the Irvine Company. (Filed as Exhibit 10.1
to
Form 10-Q,
as filed with the Securities and Exchange Commission on
May 17, 2004, and incorporated herein by reference.)
|
|
10
|
.4
|
|
Common Stock and Warrant Purchase Agreement, dated as of
April 20, 2004, by and among the Registrant and the
purchasers listed on Schedule 1 attached thereto. (Filed as
Exhibit 10.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
April 23, 2004, and incorporated herein by reference.)
|
|
10
|
.5#
|
|
License and Collaboration Agreement by and between the
Registrant and Zentaris GmbH, dated as of August 12, 2004.
(Filed as Exhibit 10.1 to
Form S-3/A,
as filed with the Securities and Exchange Commission on
January 21, 2005, and incorporated herein by reference.)
|
|
10
|
.6*
|
|
Form of Stock Option Agreement under the 2003 Amended and
Restated Incentive Award Plan. (Filed as Exhibit 10.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
December 17, 2004, and incorporated herein by reference.)
|
|
10
|
.7#
|
|
License Agreement by and between the Registrant and Chicago
Labs, Inc. (Filed as Exhibit 10.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
February 25, 2005, and incorporated herein by reference.)
|
|
10
|
.8*
|
|
Form of Non-Employee Director Stock Option Agreement under the
2003 Amended and Restated Incentive Award Plan. (Filed as
Exhibit 10.5 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
May 10, 2005, and incorporated herein by reference.)
|
|
10
|
.9*
|
|
Restricted Stock Award Grant Notice and Restricted Stock Award
Agreement under the 2003 Amended and Restated Incentive Award
Plan. (Filed as Exhibit 10.44 to
Form 10-K,
as filed with the Securities and Exchange Commission on
March 15, 2006, and incorporated herein by reference.)
|
|
10
|
.10#
|
|
License Agreement between the Registrant and Merck Eprova AG,
dated May 23, 2006. (Filed as Exhibit 10.1 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
August 8, 2006, and incorporated herein by reference.)
|
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
10
|
.11*
|
|
Third Amended and Restated 1997 Stock Incentive Plan. (Filed as
Exhibit 10.2 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
November 3, 2006, and incorporated herein by reference.)
|
|
10
|
.12#
|
|
Agreement by and between the Registrant and Glaxo Group Limited
(d/b/a GlaxoSmithKline), dated November 10, 2006. (Filed as
Exhibit 10.38 to
Form 10-K,
as filed with the Securities and Exchange Commission on
March 14, 2007, and incorporated herein by reference.)
|
|
10
|
.13*
|
|
2003 Amended and Restated Incentive Award Plan. (Filed as
Exhibit 10.3 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
August 9, 2007, and incorporated herein by reference.)
|
|
10
|
.14#
|
|
License Agreement by and between the Registrant and Indena,
S.p.A., dated July 17, 2007. (Filed as Exhibit 10.4 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
November 9, 2007, and incorporated herein by reference.)
|
|
10
|
.15*
|
|
Executive Employment Agreement by and between the Registrant and
Rajesh C. Shrotriya, M.D., entered into June 20, 2008
and effective as of January 2, 2008. (Filed as
Exhibit 10.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
June 26, 2008, and incorporated herein by reference.)
|
|
10
|
.16
|
|
Consulting Agreement by and between the Registrant and Luigi
Lenaz, M.D., effective as of July 1, 2008. (Filed as
Exhibit 10.2 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
August 11, 2008, and incorporated herein by reference.)
|
|
10
|
.17*
|
|
Form of Indemnity Agreement of the Registrant. (Filed as
Exhibit 10.32 to
Form 10-K,
as filed with the Securities and Exchange Commission on
March 31, 2009, and incorporated herein by reference.)
|
|
10
|
.18#
|
|
License, Development, Supply and Distribution Agreement, dated
October 28, 2008, by and among the Registrant, Allergan
Sales, LLC, Allergan USA, Inc. and Allergan, Inc. (Filed as
Exhibit 10.33 to
Form 10-K,
as filed with the Securities and Exchange Commission on
March 31, 2009, and incorporated herein by reference.)
|
|
10
|
.19*
|
|
Form of Stock Purchase Agreement, dated May 6, 2009. (Filed
as Exhibit 1.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
May 7, 2009, and incorporated herein by reference.)
|
|
10
|
.20
|
|
Form of Securities Purchase Agreement, dated May 27, 2009.
(Filed as Exhibit 10.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
May 28, 2009, and incorporated herein by reference.)
|
|
10
|
.21
|
|
Placement Agency Agreement between the Registrant and
Rodman & Renshaw, LLC, dated May 26, 2009. (Filed
as Exhibit 1.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
May 28, 2009, and incorporated herein by reference.)
|
|
10
|
.22
|
|
Form of Securities Purchase Agreement, dated June 15, 2009.
(Filed as Exhibit 10.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
June 18, 2009, and incorporated herein by reference.)
|
|
10
|
.23
|
|
Placement Agency Agreement between the Registrant and
Rodman & Renshaw, LLC, June 15, 2009. (Filed as
Exhibit 1.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
June 18, 2009, and incorporated herein by reference.)
|
|
10
|
.24*
|
|
2009 Employee Stock Purchase Plan. (Filed as Exhibit 99.1
to
Form S-8,
as filed with the Securities and Exchange Commission on
June 29, 2009, and incorporated herein by reference.)
|
|
10
|
.25*
|
|
2009 Incentive Award Plan. (Filed as Exhibit 99.2 to
Form S-8,
as filed with the Securities and Exchange Commission on
June 29, 2009, and incorporated herein by reference.)
|
|
10
|
.26
|
|
Form of Securities Purchase Agreement, dated June 30, 2009.
(Filed as Exhibit 10.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
July 2, 2009, and incorporated herein by reference.)
|
|
10
|
.27
|
|
Placement Agency Agreement between the Registrant and
Rodman & Renshaw, LLC, dated June 30, 2009.
(Filed as Exhibit 1.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
July 2, 2009, and incorporated herein by reference.)
|
|
10
|
.28*
|
|
2003 Amended and Restated Incentive Award Plan. (Filed as
Exhibit 10.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
July 2, 2009, and incorporated herein by reference.)
|
|
10
|
.29+
|
|
Fourth Amendment, dated July 29, 2009, to Industrial Lease
Agreement dated as of January 16, 1997 by and between the
Registrant and the Irvine Company.
|
|
10
|
.30*
|
|
Term Sheet for 2009 Incentive Award Plan Stock Option Award.
(Filed as Exhibit 10.8 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
August 13, 2009, and incorporated herein by reference.)
|
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
10
|
.31*
|
|
Term Sheet for 2009 Incentive Award Plan, Nonqualified Stock
Option Award Awarded to Non-Employee Directors. (Filed as
Exhibit 10.9 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
August 13, 2009, and incorporated herein by reference.)
|
|
10
|
.32*
|
|
Term Sheet for 2009 Incentive Award Plan, Restricted Stock
Award. (Filed as Exhibit 10.10 to
Form 10-Q,
as filed with the Securities and Exchange Commission on
August 13, 2009, and incorporated herein by reference.)
|
|
10
|
.33*
|
|
Summary of Director Compensation. (Filed as Exhibit 10.11
to
Form 10-Q,
as filed with the Securities and Exchange Commission on
August 13, 2009, and incorporated herein by reference.)
|
|
10
|
.34
|
|
Placement Agency Agreement by and between the Registrant, and
Rodman & Renshaw, LLC, dated September 18, 2009
(Filed as Exhibit 1.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
September 23, 2009, and incorporated herein by reference.)
|
|
10
|
.35
|
|
Form of Securities Purchase Agreement, dated September 18,
2009 (Filed as Exhibit 1.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
September 23, 2009, and incorporated herein by reference.)
|
|
10
|
.36#+
|
|
License Agreement, dated November 6, 2009, by and between
the Registrant and Nippon Kayaku Co., Ltd.
|
|
10
|
.37#+
|
|
License and Collaboration Agreement, dated February 2,
2010, by and between the Registrant and TopoTarget A/S.
|
|
16
|
.1
|
|
Letter from Kelly and Company to the Securities and Exchange
Commission, dated December 3, 2009. (Filed as
Exhibit 16.1 to
Form 8-K,
as filed with the Securities and Exchange Commission on
December 8, 2009, and incorporated herein by reference.)
|
|
21
|
+
|
|
Subsidiaries of Registrant.
|
|
23
|
.1+
|
|
Consent of Ernst & Young LLP, Independent Registered
Public Accounting Firm.
|
|
23
|
.2+
|
|
Consent of Kelly & Company, Independent Registered
Public Accounting Firm.
|
|
24
|
.1
|
|
Power of Attorney (included in the signature page.)
|
|
31
|
.1+
|
|
Certification of Chief Executive Officer, pursuant to
Rule 13a-14(a)/15d-14(a)
of the Securities Exchange Act of 1934.
|
|
31
|
.2+
|
|
Certification of Vice President Finance, pursuant to
Rule 13a-14(a)/15d-14(a)
of the Securities Exchange Act of 1934.
|
|
32
|
.1+
|
|
Certification of Chief Executive Officer, pursuant to
Rule 13a-14(b)/15d-14(b)
of the Securities Exchange Act of 1934 and 18 U.S.C.
Section 1350.
|
|
32
|
.2+
|
|
Certification of Vice President Finance, pursuant to
Rule 13a-14(b)/15d-14(b)
of the Securities Exchange Act of 1934 and 18 U.S.C.
Section 1350.
|
|
|
|
*
|
|
Indicates a management contract or compensatory plan or
arrangement.
|
|
#
|
|
Confidential portions omitted and filed separately with the U.S.
Securities and Exchange Commission pursuant to
Rule 24b-2
promulgated under the Securities Exchange Act of 1934, as
amended.
|
|
+
|
|
Filed herewith.
|
Exhibit 10.36
EXECUTION COPY
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT MARKED WITH [***] HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
LICENSE AGREEMENT
This
License Agreement
(the
Agreement
) is entered into on November 6, 2009 (the
Effective Date
) between
Nippon Kayaku Co., Ltd.
, a Japanese corporation with its
principal place of business at 11-2, Fujimi 1-chome, Chiyoda-ku,
Tokyo 102-8172, Japan (
NK
), and
Spectrum Pharmaceuticals, Inc.
, a
Delaware corporation with its principal place of business at 157 Technology Drive, Irvine, CA 92618
(
Spectrum
). Spectrum and NK are sometimes referred to herein individually as a
Party
and
collectively as the
Parties.
RECITALS
Whereas
, Spectrum has developed certain intellectual property relating to the use of
Apaziquone for treatment of bladder cancer;
Whereas
, Spectrum has granted the right to develop and commercialize certain products
containing Apaziquone outside of Asia to Allergan, Inc. and its affiliates, under a License,
Development, Supply and Distribution Agreement by and among Allergan Sales, LLC, Allergan USA,
Inc., Allergan, Inc. and Spectrum, effective October 28, 2008 (the Allergan entities collectively,
together with any successors or assigns of Allergan with respect to such agreement with Spectrum,
Allergan
, such agreement, the
Allergan Agreement
and such date, the
Allergan Agreement
Effective Date
);
Whereas
, NK has substantial expertise in the research, development, manufacture,
distribution, sales and marketing of pharmaceutical products in Japan and in the distribution,
sales and marketing of pharmaceutical products through distributors in Asia; and
Whereas
, Spectrum desires to grant to NK, and NK desires to obtain, the right to
develop, manufacture and commercialize product(s) containing Apaziquone for certain indications in
all countries and territories of Asia except for Korea, all on the terms and conditions set forth
herein.
Now Therefore
, in consideration of the foregoing premises and the mutual promises,
covenants and conditions contained in this Agreement, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following initially capitalized terms, whether used in the
singular or plural form, shall have the meanings set forth in this Article 1.
1.1
Affiliate
means, with respect to a particular Party, a person, corporation, partnership,
or other entity that controls, is controlled by or is under common control with such Party. For
the purposes of this definition, the word control (including, with correlative meaning, the terms
controlled by or under the common control with) means the actual power, either directly or
indirectly through one or more intermediaries, to direct or cause the direction of the management
and policies of such entity, whether by the ownership of fifty percent (50%) or more of the voting
stock of such entity, or by contract or otherwise.
1.2
Apaziquone
means the compound having the structure set forth on
Exhibit A
attached
hereto.
1.3
Asia
means Bangladesh, Bhutan, Brunei, Burma (Myanmar), Cambodia, China, Hong Kong,
India, Indonesia, Japan, Laos, Macao, Malaysia, Maldives, Mongolia, Nepal, North Korea, Pakistan,
Philippines, Qatar, Singapore, South Korea, Sri Lanka, Taiwan, Thailand, and Vietnam, as their
boundaries are defined as of the Allergan Agreement Effective Date, and including any successors of
the foregoing countries to the extent within the boundaries of the countries set forth above as of
the Allergan Agreement Effective Date.
1.4
Closed-System Packaging
means a packaging system that allows reconstitution of drug
product with diluent in a closed system in a manner that does not expose the individual performing
the reconstitution to any direct contact with either lyophilized or reconstituted Apaziquone.
1.5
Commercialization
with a correlative meaning for Commercialize and Commercializing,
means all activities undertaken before and after obtaining Regulatory Approvals relating
specifically to the pre-launch, launch, promotion, detailing, medical education and medical liaison
activities, marketing, pricing, reimbursement, sale, and distribution of the Product, including:
(a) strategic marketing, sales force detailing, advertising, medical education and liaison, and
market and Product support; (b) any postmarketing clinical studies for use in generating data to
be submitted to Regulatory Authorities (and all associated reporting requirements); and (c) all
customer support, Product distribution, invoicing and sales activities.
1.6
Commercially Reasonable Efforts
means those efforts consistent with the exercise of
prudent scientific and business judgment in an active and ongoing program as applied by a Party to
the development and commercialization of its own pharmaceutical products at a similar stage of
development and with similar market potential. Commercially Reasonable Efforts requires that a
Party, at a minimum, assigns responsibility for such obligations to qualified employees, sets
annual goals and objectives for carrying out such obligations, and allocates resources designed to
meet such goals and objectives.
2.
1.7
Confidential Information
means, with respect to a Party, all reports and other
Information of such Party that is disclosed to the other Party under this Agreement, whether in
oral, written, graphic, or electronic form. All Information disclosed by either Party pursuant to
the Mutual Confidentiality Agreement between the Parties dated April 16, 2009, shall be deemed to
be such Partys Confidential Information disclosed hereunder.
1.8
Control
means, with respect to any material, Information, or intellectual property
right, that a Party owns or has a license to such material, Information, or intellectual property
right and, in each case, has the ability to grant to the other Party access, a license, or a
sublicense (as applicable) to the foregoing on the terms and conditions set forth in this Agreement
without violating the terms of any then-existing agreement or other arrangement with any Third
Party.
1.9 Cost of Goods Sold
means the cost incurred by Spectrum in manufacturing the Product
(including the production of the active ingredient and the fill and finish of the Product) supplied
to NK under this Agreement and transporting such Product to the airport(s) where such Product will
be exported to NK, including material costs, labor costs and overhead costs (including allocated
facility costs, testing costs and delivery costs). In the event Spectrum engages any Third Party
contract manufacturer for the manufacture and supply of the Products, Cost of Goods Sold shall mean
Spectrums costs actually incurred in such engagement, the procurement of such Products from such
Third Party and transporting such Product to such airport(s).
1.10
Develop
or
Development
means all activities relating to preparing and conducting
preclinical testing, toxicology testing, human clinical studies, and regulatory activities (e.g.,
regulatory applications) with respect to the Product, together with the manufacturing of the
Product for the purpose of conducting the foregoing activities.
1.11
Development Costs
means the internal costs and out-of-pocket costs incurred as an
expense in accordance with generally accepted accounting principles by or on behalf of a Party or
its Affiliates in carrying out the Development of the Product in accordance with the approved
Development Plan, including, without limitation, (i) the costs of clinical trials (including costs
of procuring the Product(s), placebos and comparator drugs used in such clinical trials), (ii)
filing fees and other costs associated with any Regulatory Filings; (iii) costs related to
manufacturing development; and (iv) all other costs that are directly attributable and reasonably
allocable to the Development activities for the Products. For purposes of this definition: (a)
out-of-pocket costs mean the actual expense incurred with respect to a Third Party for specific
Development activities relating to the Products; and (b) internal costs means the applicable FTE
Rate multiplied by the number of FTE hours expended in carrying out the Development activities in
accordance with the Development Plan. For clarity, the costs associated with attending or
participating in meetings of the JPT are expressly excluded from this definition.
1.12
Development Plan
has the meaning set forth in Section 4.2(a).
1.13
Dollar
means a U.S. dollar, and $ shall be interpreted accordingly.
3.
1.14
FDA
means the United States Food and Drug Administration and any successors thereof.
1.15
Field
means the intravesical treatment of non-muscle invasive bladder cancer in humans.
1.16
First Commercial Sale
means the first sale to a Third Party of a Product in a given
regulatory jurisdiction after Regulatory Approval has been obtained in such jurisdiction.
1.17
Generic Product
means, with respect to a Product in the Field in a particular country
in the NK Territory, another pharmaceutical product that is: (a) a Product; (b) approved for use in
such country by the Regulatory Authority; and (c) commercialized by a Third Party who has not
obtained the right or access to such product (through sublicense, subcontract or chain of
distribution) from NK or its Affiliates or sublicensees.
1.18
Governmental Authority
means any multi-national, federal, state, local, municipal,
provincial or other government authority of any nature (including any governmental division,
prefecture, subdivision, department, agency, bureau, branch, office, commission, council, court or
other tribunal).
1.19
Immediate Instillation Indication
means the intravesical instillation of a Product into
the bladder for the treatment of non-muscle invasive bladder cancer, administered immediately after
transurethral resection of bladder tumor (TUR-BT).
1.20
Information
means any data, results, technology, business information and information
of any type whatsoever, in any tangible or intangible form, including, without limitation,
know-how, trade secrets, practices, techniques, methods, processes, inventions, developments,
specifications, formulations, formulae, materials or compositions of matter of any type or kind
(patentable or otherwise), software, algorithms, marketing reports, expertise, technology, test
data (including pharmacological, biological, chemical, biochemical, toxicological, preclinical and
clinical test data), analytical and quality control data, stability data, other study data and
procedures.
1.21
Joint Inventions
has the meaning set forth in Section 9.1.
1.22
Joint Patent
has the meaning set forth in Section 9.1.
1.23
Joint Product Team
or
JPT
means the Product team formed by the Parties as described
in Section 3.2.
1.24
Laws
means all laws, statutes, rules, regulations, ordinances and other pronouncements
having the effect of law of any federal, national, multinational, state, provincial, county, city
or other political subdivision, domestic or foreign.
1.25
Major Markets
means each of the following countries: (a) Japan; (b) mainland China; (c)
Taiwan; (d) Hong Kong; (e) Singapore; and (f) India.
4.
1.26
Multiple Instillation Indication
means the intravesical instillation of a Product into
the bladder for the treatment of non-muscle invasive bladder cancer, administered as multiple
instillations. For clarity, multiple instillations shall mean a repeat and/or sequential dosing
regimen which may include an immediate instillation dose as part of such regimen.
1.27
Net Sales
means, with respect to a particular time period, the total amounts invoiced
by NK, its Affiliates and their respective sublicensees for sales of Products made during such time
period to unrelated Third Parties, less the following deductions to the extent actually allowed or
incurred with respect to such sales:
(a)
reasonable and customary discounts, including cash and quantity discounts, charge-back
payments, administrative fees incurred directly in such discounting, and rebates actually granted
to trade customers and distributors (including wholesalers);
(b)
reasonable and customary credits or allowances actually granted for damaged, outdated,
spoiled, returned or rejected Products, including, without limitation, in connection with recalls;
and
(c)
Taxes, tariffs, duties or other governmental charges (other than income taxes) levied on,
absorbed or otherwise imposed on sales of the Product in the NK Territory, as adjusted by any
refunds, provided that such Taxes, tariffs, duties or other government charges are included in the
applicable invoiced amount and identified in the applicable invoice.
Notwithstanding the foregoing, amounts billed by NK, its Affiliates, or their respective
sublicensees for the sale of Products among NK, its Affiliates or their respective sublicensees for
resale, or for use in clinical development (at or below cost incurred for procuring and shipping
the Product), shall not be included in the computation of Net Sales hereunder. A sale of Products
by NK, its Affiliates or their respective sublicensees to a wholesaler shall be regarded as the
sale of Product to unrelated Third Parties for the purpose of calculating Net Sales. For purposes
of determining Net Sales, the Products shall be deemed to be sold when shipped and a sale shall
not include reasonable transfers or dispositions, at no cost, as samples or for charitable
purposes, or transfers or dispositions at no cost for preclinical, clinical or regulatory purposes.
Each of the deductions set forth above shall be reasonable and customary, and in accordance with
accounting principles generally accepted in Japan. NK, its Affiliates, and their respective
sublicensees will sell Products as stand-alone products and will not sell such Products as part of
a bundle with other products or offer packaged arrangements to customers that include Products,
except with the prior written consent of Spectrum.
1.28
NK Know-How
means all Information that is Controlled by NK or its Affiliates as of the
Effective Date or during the Term and is necessary or reasonably useful for the Development,
manufacture and/or Commercialization of the Product in the Field in accordance with the terms of
this Agreement. For clarity, NK Know-How excludes rights granted under the NK Patents. For further
clarity, NK Know-How includes (i) all data, results and other Information generated from or
obtained by the Development conducted by or for NK in the NK Territory under this Agreement, (ii)
all data, results and other Information generated from or obtained by the clinical Development
conducted by or for NK in South Korea pursuant
5.
to Section 2.1(a)(ii), and (iii) NKs interest in the data, results and other Information
generated from or obtained by the clinical Development conducted by NK and Korean Partner pursuant
to Section 2.1(a)(ii).
1.29
NK Patent
means any Patent that (a) is Controlled by NK or its Affiliates as of the
Effective Date or at any time during the Term (excluding NKs interest in any Joint Patents), and
(b) claims the Products or their use, composition, formulation, preparation, method of
administration or manufacture.
1.30
NK Technology
means the NK Patents and NK Know-How.
1.31
NK Territory
means all countries and territories in Asia, excluding North Korea and
South Korea.
1.32
Patents
means (a) pending patent applications, issued patents, utility models and
designs; (b) reissues, substitutions, confirmations, registrations, validations, re-examinations,
additions, continuations, continued prosecution applications, continuations-in-part, or divisions
of or to any patents, patent applications, utility models or designs; and (c) the equivalent or
counterpart of the foregoing.
1.33
Product
means any formulation that includes Apaziquone that is suitable for use in
treating non-muscle invasive bladder cancer via intravesical instillation.
1.34
Regulatory Approval
means, with respect to a Product in any country or jurisdiction,
all approvals (including, where required, pricing and reimbursement approvals), registrations,
licenses or authorizations from the relevant Regulatory Authority in a country or jurisdiction that
is specific to Product and necessary to market and sell such Product in such country or
jurisdiction.
1.35
Regulatory Authority
means, in a particular country or regulatory jurisdiction, any
applicable Governmental Authority involved in granting Regulatory Approval and/or, to the extent
required in such country or regulatory jurisdiction, pricing or reimbursement approval of a Product
in such country or regulatory jurisdiction.
1.36
Regulatory Exclusivity
means market exclusivity granted by a Governmental Authority
designed to prevent the entry of Generic Product(s) onto the market in the Field, including new
chemical entity exclusivity, new use or indication exclusivity, new formulation exclusivity, orphan
drug exclusivity, pediatric exclusivity and 180-day generic product exclusivity, or any equivalent
of the foregoing in the NK Territory.
1.37
Regulatory Filings
means, with respect to the Products, any submission to a Regulatory
Authority of any appropriate regulatory application specific to Products, and shall include,
without limitation, any submission to a regulatory advisory board and any supplement or amendment
thereto.
1.38
Retained Territory
means all countries and territories in the world outside the NK
Territory.
6.
1.39
Sole Inventions
has the meaning set forth in Section 9.1.
1.40
Spectrum Know-How
means all Information that is Controlled by Spectrum or its
Affiliates as of the Effective Date or during the Term and is necessary or reasonably useful for
the Development, manufacture and/or Commercialization of the Product in the Field in accordance
with the terms of this Agreement. For clarity, Spectrum Know-How includes all data, results and
other Information generated from or obtained by clinical studies and other tests conducted under
the Allergan Agreement and any Information described in Regulatory Filings filed with any
Regulatory Authority in the Retained Territory with respect to the Product, in each case to the
extent Controlled by Spectrum or its Affiliates. For further clarity, Spectrum Know-How excludes
rights granted under the Spectrum Patents. Notwithstanding the foregoing, Spectrum Know-How shall
not include Information controlled by an acquiror or merger partner of Spectrum that: (a) existed
as of the date of closing of such acquisition or merger; or (b) was developed after the date of
closing of such acquisition or merger without using Spectrum Know-How or inventions claimed in
Spectrum Patents.
1.41
Spectrum Patents
means all Patents in the NK Territory that (a) are Controlled by
Spectrum or its Affiliates as of the Effective Date or at any time during the Term (excluding
Spectrums interest in any Joint Patents), and (b) but for the licenses granted herein, would be
infringed by the developing, making, using and/or selling of the Products by NK, its Affiliates or
sublicensees in the Field in the NK Territory. Notwithstanding the foregoing, Spectrum Patents
shall not include Patents controlled by an acquiror or merger partner of Spectrum that: (a) existed
as of the date of closing of such acquisition or merger; or (b) were developed after the date of
closing of such acquisition or merger without using Spectrum Know-How or inventions claimed in
Spectrum Patents. The Spectrum Patents existing as of the Effective Date in the NK Territory are
set forth on
Exhibit B
attached hereto.
1.42
Spectrum Technology
means the Spectrum Patents and Spectrum Know-How.
1.43
Taxes
means taxes (other than income taxes), duties, tariffs or other governmental
charges levied on the sale of Products, including, without limitation, consumption taxes.
1.44
Term
means the term of this Agreement, as determined in accordance with Article 13.
1.45
Third Party
means any person or entity other than Spectrum or NK or an Affiliate of
either of them.
1.46
TPP
means the target product profile of the Product existing as of the Effective Date
and attached to this Agreement as
Exhibit C
.
1.47
Valid Claim
means, with respect to any country: (a) a claim of an issued and unexpired
patent (as may be extended through supplementary protection certificate or patent term extension or
the like) included within the Spectrum Patents to the extent such claim has not been revoked, held
invalid or unenforceable by a patent office, court or other governmental agency of competent
jurisdiction in a final and non-appealable judgment (or judgment from which no appeal was taken
within the allowable time period) and which claim has not been
7.
disclaimed, denied or admitted to be invalid or unenforceable through reissue, re-examination
or disclaimer or otherwise; and (b) a claim of a pending patent application included within the
Spectrum Patents.
ARTICLE 2
LICENSES AND EXCLUSIVITY
2.1 License to NK under Spectrum Technology
.
(a) License
.
(i)
Subject to the terms of this Agreement, Spectrum hereby grants NK: (A) an exclusive,
royalty-bearing license, with the right to grant sublicenses at one or more tier(s) subject to
Section 2.1(c) below, under the Spectrum Technology, to research, Develop, use, sell, offer for
sale, have sold, import and otherwise Commercialize the Products in the Field in the NK Territory;
and (B) a non-exclusive license under the Spectrum Technology to make and have made the Products in
the NK Territory and have made the Products in the Retained Territory, solely for use or sale of
such Products pursuant to Section 2.1(a)(i)(A).
(ii)
The Parties acknowledge that Spectrum is actively seeking a licensee for the Product in
South Korea (such licensee, the
Korean Partner
). Spectrum hereby grants to NK a co-exclusive
license (with such Korean Partner) under the Spectrum Technology to conduct clinical Development
activities (but not seek Regulatory Approval) in South Korea with respect to the Products solely to
support NKs or its sublicensees Regulatory Filings in the NK Territory. Promptly after the
Effective Date or the execution of a license agreement between Spectrum and such Korean Partner
granting such Korean Partner the right to develop and commercialize the Products in Korea,
whichever is later, NK shall discuss in good faith with such Korean Partner to coordinate the
Development activities for the Products in South Korea. Further, the Parties acknowledge that in
order to facilitate the Regulatory Filings in the NK Territory, it is essential for NK to conduct
clinical Development in South Korea and, therefore, the Parties agree that, in the event such
license agreement between Spectrum and such Korean Partner is not executed by the expiration of a
period of [***] after the Effective Date: (A) North Korea and South Korea shall be included in the
NK Territory hereunder; (B) South Korea shall be included as an additional Major Market hereunder;
and (C) NK shall deliver to Spectrum a payment in the amount of $[***] as a consideration for such
inclusion.
(b) Spectrum Retained Rights
.
(i)
Notwithstanding the licenses granted to NK under Section 2.1, Spectrum retains the right
to practice the Spectrum Technology in the NK Territory to fulfill its obligations under this
Agreement.
(ii)
Subject to Section 2.5 below, Spectrum retains the right to practice and license the
Spectrum Technology outside the scope of the license granted to NK in Section 2.1(a)(i) above,
including to develop and commercialize in the NK Territory any formulation
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including Apaziquone that is not a Product.
(c) Sublicenses
.
(i)
NK shall have the right to grant sublicenses under the license in Section 2.1(a) to its
Affiliates or other Third Parties only with the prior written consent from Spectrum, such consent
not to be unreasonably withheld or delayed for the grant of sublicenses in countries and
territories in the NK Territory outside Japan. NK shall remain primarily responsible for the
performance of its Affiliates and sublicensees obligations set forth herein by each of its
Affiliates and sublicensees.
(ii)
NK shall, within thirty (30) days after granting any sublicense under Section 2.1(a)
above, notify Spectrum of the grant of such sublicense and provide Spectrum with a true and
complete copy of such sublicense agreement. Each sublicense agreement shall not conflict with the
terms and conditions under this Agreement. For clarity, NK may determine the terms and conditions
of such sublicense agreement at its sole discretion so long as they do not conflict with the terms
and conditions of this Agreement. NK shall, in each agreement under which it grants a sublicense
under the license set forth in Section 2.1(a) (each, a
Sublicense Agreement
), include the
following terms and conditions: (i) the sublicensee is required to carry out such tasks to ensure
that NK will comply with its obligations to Spectrum hereunder, to, among other things, allow
Spectrum to comply with its obligations to Allergan under the Allergan Agreement, including by
providing all Product-related Information to NK so that NK may comply with its obligations under
Section 5.5; (ii) the sublicensee is required to provide the following to NK if such Sublicense
Agreement terminates during the term of this Agreement: (A) the assignment and transfer of
ownership and possession of all Regulatory Filings and Regulatory Approvals held or possessed by
such sublicensee, and (B) the assignment of, or a freely sublicenseable exclusive license to, all
intellectual property Controlled by such sublicensee that covers or embodies a Product or its
respective use, manufacture, sale, or importation and was created by or on behalf of such
sublicensee during the exercise of its rights or fulfillment of its obligations pursuant to such
Sublicense Agreement; and (iii) if this Agreement terminates pursuant to Section 13.2 prior to the
expiration of the Term, then Spectrum may, at its sole discretion: (C) assume NKs rights and
obligations under such Sublicense Agreement; or (D) terminate such Sublicense Agreement. Each
Sublicense Agreement shall include the sublicensees obligations set forth herein.
(iii)
NK shall pay to Spectrum [***] percent ([***]%) of all Sublicense Revenues within [***]
after the receipt of each payment of the Sublicense Revenue from each sublicensee.
Sublicense
Revenue
means all upfront payments and milestone payments made by any sublicensee to NK under any
Sublicense Agreement. For the avoidance of doubt, Sublicense Revenue shall not include: (A) any
sales-based royalty payment; (B) any payment in exchange for the fair market value for actual
services performed by or on behalf of NK to such sublicensee or the fair market value for the
supply of Products by NK to such sublicensee; and (C) any payment in exchange for the fair market
value of NKs equity.
2.2 License to Spectrum.
NK hereby grants Spectrum: (a) a non-exclusive, fully-
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paid, royalty free license, with the right to grant sublicenses, under the NK Technology to
perform Spectrums obligations under this Agreement; (b) an exclusive license, with the right to
grant sublicenses, under the NK Technology to research, Develop, make, have made, use, sell, offer
for sale and import products containing Apaziquone (including Products) for all fields of use in
the Retained Territory and outside the Field in the NK Territory; provided, however, that NK may
use or have used the NK Technology when NK has made the Product in the Retained Territory pursuant
to Section 2.1(a)(i)(B) and NK conducts the clinical Development in South Korea pursuant to Section
2.1(a)(ii); further provided that such license shall be royalty-free with respect to NK Know-How
and shall be royalty-bearing with respect to NK Patents (with reasonable royalty rates to be agreed
upon by the Parties through good faith negotiations upon Spectrums request prior to Spectrums
utilization of such NK Patents); and (c) an exclusive option to obtain an exclusive,
royalty-bearing license, (with reasonable royalty rates to be agreed upon by the Parties through
good faith negotiations upon Spectrums request prior to Spectrums utilization of the Joint
Patents), with the right to grant sublicenses, under NKs interest in the Joint Patents to
research, Develop, make, have made, use, sell, offer for sale and import products containing
Apaziquone (including Products) for all fields of use in the Retained Territory and outside the
Field in the NK Territory; provided, however, that NK may use or have used such Joint Patents when
NK has made the Product in the Retained Territory pursuant to Section 2.1(a)(i)(B) and NK conducts
the clinical Development in South Korea pursuant to Section 2.1(a)(ii).
2.3 Negative Covenant; No Implied License
. NK covenants that it will not, and it will not
permit any of its Affiliates to, use or practice any Spectrum Technology outside the scope of the
license granted to it under Section 2.1 above. Spectrum covenants that it will not, and it will
not permit any of its Affiliates to, use or practice any NK Technology outside the scope of the
license granted to it under Section 2.2. Except as set forth herein, neither Party shall acquire
any license or other intellectual property interest, by implication or otherwise, under any
trademarks, patents or patent applications owned or Controlled by the other Party.
2.4 Diversion
.
(a)
NK hereby covenants and agrees that it will not, and will ensure that its Affiliates,
sublicensees and subcontractors will not, either directly or indirectly, promote, market,
distribute, import, sell or have sold Products, including via the Internet or mail order, to any
Third Party, address or Internet Protocol (
IP
) address in the Retained Territory. As to such
countries in the Retained Territory: (i) NK shall refrain from establishing or maintaining any
branch, warehouse or distribution facility for the Product in such countries; (ii) NK shall not
engage in any advertising or promotional activities relating to the Product directed primarily to
customers or other buyers or users of the Product located in such countries; and (iii) NK shall not
solicit orders from any prospective purchaser located in such countries. If NK receives any order
from a prospective purchaser located in a country in the Retained Territory, NK shall immediately
refer that order to Spectrum. NK shall not accept any such orders. NK may not deliver or tender
(or cause to be delivered or tendered) any Product outside of the NK Territory.
(b)
If any of NKs Product is diverted for use in the Retained Territory, the following shall
apply: (i) if such Product were diverted by an identifiable customer, distributor, employee,
consultant or agent of NK then, upon the request of Spectrum, NK shall not sell such
10.
category of Product to, or allow the sale of such category of Product by, any such customer,
distributor, employee, consultant or agent for the remaining Term and shall use commercially
reasonable efforts to buy back all such Product from such customer, distributor, employee,
consultant or agent within seven (7) business days of receiving such request from Spectrum; or (ii)
NK shall use commercially reasonable efforts to investigate the location of such diverted Product
and buy it back; but, if and to the extent that, NK elects not to, or is unable to, buy back the
applicable diverted Product, then Spectrum may, in its sole discretion, buy back the applicable
diverted Product and NK shall reimburse Spectrum for all reasonable costs incurred by Spectrum in
connection with the buy-back of any such diverted Product.
(c)
If any formulation containing Apaziquone sold by NK, its Affiliates or sublicensees (the
NK Product
) is used in the Retained Territory, NK shall pay to Spectrum an amount equal to the
amount Spectrum is obligated to pay to Allergan as a result of such sales.
2.5 Exclusivity.
For the period commencing on the Effective Date and ending ten (10) years
after the First Commercial Sale of a Product in the Field in the NK Territory: (a) neither Party or
its Affiliates will, either by itself or through the grant of licenses or sublicenses, without the
other Partys written consent, commercialize any formulation that includes Apaziquone in the Field
in the NK Territory except under this Agreement; and (b) NK will not, and will ensure that its
Affiliates will not, either by itself or through the grant of licenses or sublicenses: (i)
commercialize any formulation that includes Apaziquone outside the Field in the NK Territory; (ii)
develop or commercialize any formulation that includes Apaziquone for any field of use in the
Retained Territory (except having made the Product in the Retained Territory pursuant to Section
2.1(a)(i)(B)), to the extent such obligation is not in conflict with applicable antitrust Laws in
Japan; or (iii) commercialize another low-molecular intravesical therapeutic agent for the
treatment of non-muscle invasive bladder cancer in the NK Territory, except: (A) those which have
already been commercialized by NK before the Effective Date; and (B) doxorubicin. This Section 2.5
shall not be construed as expanding the scope of license granted to either Party under this Article
2 in any manner.
2.6 Registration of License
. NK shall have the right to record or register the licenses
granted hereunder, and allow its sublicensees to record or register the sublicenses granted under
the Sublicense Agreement, at any patent office or other relevant authority in the NK Territory.
Spectrum shall execute all documents and give all declarations regarding the licenses or
sublicenses and reasonably cooperate with NK or its sublicensees at the costs of NK or its
sublicensees to the extent such documents, declarations and/or cooperation are required for such
record or registration of the licenses or sublicenses for the benefit of NK or its sublicensees.
2.7 Disclosure of Spectrum Know-How.
Spectrum shall, as soon as practicable after the
Effective Date but in no event later than six (6) months after the Effective Date, and from time to
time thereafter during the Term, disclose to NK all Spectrum Know-How material or necessary for the
Development and Commercialization of the Product that are set forth on
Exhibit D
attached hereto.
11.
ARTICLE 3
OVERVIEW; MANAGEMENT
3.1 Alliance Managers.
Within thirty (30) days following the Effective Date, each Party will
appoint (and notify the other Party of the identity of) a representative having the appropriate
qualifications including a general understanding of pharmaceutical Development and
Commercialization issues to act as its alliance manager under this Agreement (
Alliance Manager
).
The Alliance Managers will serve as the primary contact points between the Parties for the purpose
of providing each Party with information on the progress of the other Partys Development and
Commercialization of the Product(s). The Alliance Managers will also be primarily responsible for
facilitating the flow of information and otherwise promoting communication, coordination and
collaboration between the Parties, providing single point communication for seeking consensus both
internally within each Partys respective organization, including facilitating review of external
corporate communications, and raising cross-Party and/or cross-functional disputes in a timely
manner. Each Party may replace its Alliance Manager on written notice to the other Party.
3.2 Joint Product Team.
(a) Formation.
Within thirty (30) days after the Effective Date, the Parties will establish a
joint product team (the
Joint Product Team
or
JPT
) to plan, administer, evaluate and carry out
all aspects of the Development, manufacture, regulatory and Commercialization activities by NK or
its Affiliates hereunder with respect to the Products.
(b) Members.
The JPT will primarily consist of the internal product team of NK for the
Products, include members from various NK functional groups (e.g., research, preclinical, safety,
clinical, regulatory, marketing, manufacturing, as appropriate) which are or which will be expected
to be involved in Developing, manufacturing and/or Commercialization of the Product and obtaining
Regulatory Approval for the Product. Spectrum shall have the right (but not the obligation) to
have its representatives on the JPT who will from time to time represent some or all of the
following functional groups of Spectrum: clinical development, regulatory, medical affairs,
pharmacovigilance, commercial and manufacturing. NK will appoint a chair of the JPT.
(c) Meetings.
NK shall schedule the half-yearly JPT meetings and shall inform Spectrum of
such schedule at least quarterly in advance. Spectrum shall inform NK as to whether it will
participate in each of such JPT meetings reasonably in advance. Either Party may call additional
ad hoc meetings of the JPT as the needs arise with reasonable advance notice to the other Party,
and such ad hoc meetings shall be conducted at times that are mutually agreed upon by the Parties,
if Spectrum chooses to participate in such meeting. No later than five (5) business days prior to
any regularly scheduled meeting of the JPT, the chairperson of the JPT shall prepare and circulate
an agenda for such meeting and, as soon as practicable, all materials, documents and information
for the meeting for distribution to both Parties (in the case of Spectrum, even in the event
Spectrum chooses not to participate in such meeting); provided, however, that either Party may
propose additional topics to be included on such agenda, either prior to or in the course of such
meeting. The JPT may meet in person, by videoconference or by
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teleconference. The chairperson of the JPT will be responsible for preparing reasonably
detailed written minutes of all JPT meetings that reflect, without limitation, material decisions
made at such meetings. The JPT chairperson shall send draft meeting minutes to the NK members and
the Spectrum members of the JPT (regardless of whether Spectrum chooses to participate in such
meeting) for review and approval within ten (10) business days after each JPT meeting. Such
minutes will be deemed approved unless one or more members of the JPT objects to the accuracy of
such minutes within ten (10) business days of receipt. Further, upon NKs request, Spectrum will
use commercially reasonable efforts to coordinate any meeting among Spectrum, Allergan and NK for
the exchange of information helpful for the Development of the Product. In addition to the
regularly scheduled meetings, NK shall call additional ad hoc meetings of the JPT prior to making
any major decisions in the Development of the Product in the NK Territory, including without
limitation the decisions set forth in Sections 3.2(d)(A) through (F) below. The Parties shall also
maintain regular, frequent and informal communications for Spectrum to obtain updates from NK and
for the Parties to discuss the progress of the Development of the Product in the NK Territory.
(d) JPT Actions
. The JPT shall strive to seek consensus in its actions and decision making
process. In the event of a disagreement between the Spectrum members and NK members of the JPT,
either Party may refer the matter to one senior executive of each Party (i.e., the Chief Executive
Officer or Managing Director of such Party or an executive of such Party who reports directly to
the Chief Executive Officer or Managing Director) for resolution. If such senior executives cannot
resolve the matter within ten (10) business days, then such senior executive of NK shall have the
final decision making authority on such matter, provided that any final determination made by such
senior executive of NK shall be consistent with the terms of this Agreement, further provided that
NK shall not make any decision with respect to the following critical issues without the consent of
Spectrum, such consent not to be unreasonably withheld or delayed: (A) discontinue the Development
of any Product; (B) initiate or discontinue any clinical trial; (C) modify the TPP of the Product
under Development; (D) unreasonably delay the process of or cease to seek Regulatory
Approval for any Product; (E) unreasonably delay or cancel the commercial launch of any Product;
and (F) remove any Product from the market, other than for safety reasons.
3.3 Costs of Governance.
The Parties agree that the costs incurred by each Party in
connection with its participation at any meetings under this Article 3 shall be borne solely by
such Party.
3.4 Discontinuation of Participation in the JPT.
Spectrum shall have the right, at any time
during the Term and in its sole discretion, to provide NK with written notice of its intention to
no longer participate in the JPT. Once Spectrum has provided such written notice to NK, NK shall
continue with the JPT structure with NK members only, and all decisions formerly made within or by
the JPT shall be determined by NK, consistent with the principles set forth in Sections 3.2(d). NK
will continue to provide Spectrum with Information provided to its members at such JPT meetings.
13.
ARTICLE 4
PRODUCT DEVELOPMENT
4.1 Overview of Product Development
. The Parties desire and intend to collaborate with
respect to the clinical development of the Product by or for NK or its Affiliates or sublicensees
in the NK Territory in the Field (including the clinical Development pursuant to Section
2.1(a)(ii)), with the oversight by the JPT, as and to the extent set forth in this Agreement. As
described in more detail in this Article 4, NK shall be solely responsible for the conduct of NK
Development Plan of the Product by or for NK or its Affiliates and for the overseeing of the
conduct of the Sublicensee Development Plan by its sublicensees, in order to obtain Regulatory
Approval for the Product in the NK Territory (including the clinical Development pursuant to
Section 2.1(a)(ii)). Spectrum will provide assistance to NK in an advisory role through the JPT.
The Parties agree that NK will seek the approval from the Regulatory Authority in Japan for the
final form of a Product to be used in clinical trials to be conducted to support Regulatory Filings
in Japan, and NK agrees to use the Product in such final form in connection with NKs Development
activities in clinical trials conducted by or on behalf of NK to support Regulatory Filing
throughout the NK Territory. The Parties anticipate that NK will initially seek Regulatory
Approval for the Product in Closed-System Packaging.
4.2 Development Plan
.
(a) General
. As of the Effective Date, the Parties have agreed upon a development plan for
the Development of the Product in Japan, and such development plan is attached to this Agreement as
Exhibit E
(the
NK Development Plan
). The NK Development Plan includes all clinical studies to be
performed for the Immediate Instillation Indication(s) and Multiple Instillation Indication(s),
including those that are required for Regulatory Approval for such indications for the Product(s)
in Japan. The development plan for the Development of the Product in the NK Territory other than
Japan will be, in accordance with Section 4.2(b): (i) prepared by NK to the extent such Development
activities are to be conducted by NK or its Affiliates, and such development plan shall be
incorporated into the NK Development Plan; and (ii) prepared with the input of sublicensees of NK
or its Affiliates to the extent such Development activities are to be conducted by such
sublicensees, and such development plan shall be deemed the
Sublicensee Development Plan
. The NK
Development Plan and the Sublicensee Development Plan are referred to collectively as the
Development Plan
hereunder. The NK Development Plan and the Sublicensee Development Plan will
also set forth timelines regarding the activities set forth thereunder, respectively. The NK
Development Plan and Sublicensee Development Plan shall also each specify the plans and timeline
for preparing the necessary Regulatory Filings and for obtaining Regulatory Approval for such
Immediate Instillation Indication and such Multiple Instillation Indication in the respective
territories. NK shall conduct the Development activities in accordance with the then-current NK
Development Plan (including the timelines set forth therein) and under the direction of the JPT,
and NK shall oversee the Development activities in accordance with the then-current Sublicensee
Development Plan (including the timelines set forth therein) and under the oversight of the JPT.
(b) Updates to Development Plan
. From time to time during the Term, the JPT shall update and
amend (with input from the applicable sublicensees with respect to any
14.
Sublicensee Development Plan), as appropriate, the then-current Development Plan and submit
such updated or amended Development Plan for the Parties approval, such approval not to be
unreasonably withheld or delayed. Once approved by the Parties, each updated or amended
Development Plan shall become effective and supersede the previous Development Plan as of the date
of such approval.
4.3 NK Development Activities
(a)
NK shall Develop the Product and seek Regulatory Approval in each of the Immediate
Instillation Indication and the Multiple Instillation Indication in Japan, by timely and diligently
conducting all Development activities under the NK Development Plan (the
NK Development
Activities
). With respect to each of the Major Markets other than Japan, NK shall (i) Develop the
Product and seek Regulatory Approval in each of the Immediate Instillation Indication and the
Multiple Instillation Indication, or (ii) grant sublicenses to do so under Section 2.1(c), in
accordance with Section 4.3(c).
(b)
The status, progress and results of the Development activities in the NK Territory shall
be discussed at meetings of the JPT, and NK shall provide the JPT with a written report on the
status and progress of such Development activities on a half-yearly basis at least five (5)
business days prior to each scheduled JPT meeting. In addition, NK shall make available to
Spectrum such information about such Development activities as may be reasonably requested by
Spectrum from time to time.
(c)
NK shall: (i) in Japan, carry out the NK Development Activities in accordance with the NK
Development Plan; (ii) in mainland China, (A) grant a sublicense in accordance with Section 2.1(c)
to a sublicensee who will undertake to initiate activities under the applicable Sublicensee
Development Plan within [***] after the Effective Date or (B) initiate activities under the NK
Development Plan within [***] after the Effective Date; and (iii) in every country that is a Major
Market other than Japan and mainland China, initiate activities under the applicable Development
Plan within [***] after the first Regulatory Approval for the Product in the U.S., provided that,
NK may fulfill such obligation under this subsection (iii) within such timeframe in each such
country through a sublicensee pursuant to Section 2.1(c) if such sublicensee agrees to carry out
development activities pursuant to the applicable Sublicensee Development Plan. In the event NK
does not fulfill the foregoing obligation as set forth above within a particular country in the NK
Territory other than Japan, Spectrum may remove such country from the NK Territory by giving NK a
written notice to that effect. Notwithstanding anything to the contrary in this Agreement, in all
countries in the NK Territory other than Japan, Spectrum shall have no other remedy in respect of
the NKs failure to fulfill the foregoing obligation, and for such NKs failure NKs sole liability
and the sole remedy of Spectrum shall be such removal of such country from the NK Territory.
4.4 Compliance.
(a)
NK agrees that in performing its obligations under this Agreement: (i) it shall comply
with all applicable Laws; and (ii) it will not employ or engage any person who has
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been debarred by any Regulatory Authority, or, to such Partys knowledge, is the subject of
debarment proceedings by a Regulatory Authority. NK shall have the right to engage subcontractors
for the performance of its obligations under the Development Plan. NK remains responsible for the
performance of such subcontractor(s) and the engagement of such subcontractors shall not relieve NK
from its obligations to comply with the terms and conditions of this Agreement.
(b)
NK shall maintain complete, current and accurate records of all work conducted by it under
the NK Development Plan, and all data and other Information resulting from such work. NK shall
cause the sublicensees to maintain complete, current and accurate records of all work conducted by
such sublicensees under the applicable Sublicensee Development Plan, and all data and other
Information resulting from such work. Such records shall fully and properly reflect all work done
and results achieved in the performance of the Development activities in good scientific manner
appropriate for regulatory purposes. Spectrum shall have the right to review all records
maintained by NK or such sublicensees at reasonable times, upon Spectrums written request.
(c)
NK shall document all preclinical studies and clinical trials conducted by or for it in
written study reports and shall provide Spectrum with a summary of each such report in English
promptly after its completion.
4.5 Development Costs
. As between the Parties, NK shall bear all Development Costs for the
Development: (a) conducted by or for NK and incurred by NK; or (b) conducted by Spectrum for NK at
the written request of or with the written consent of NK and incurred by Spectrum, in each case
after the Effective Date in connection with the research, manufacture and Development (including
development of manufacturing processes for the Products and other matters relating to the
chemistry, manufacture and controls of the Products) of the Products in accordance with the
Development Plan or the other provisions of this Agreement, as well as any other research,
manufacture and development of the Products by NK.
ARTICLE 5
REGULATORY MATTERS
5.1 NK Regulatory Responsibilities.
(a)
NK shall own all Regulatory Filings and Regulatory Approvals for the Products in Japan,
and shall be solely responsible for preparing any and all Regulatory Filings for the Product in
Japan at its sole expense in accordance with the NK Development Plan, with the direction of the JPT
and subject to the terms of this Article 5. With respect to the countries in the NK Territory other
than Japan, the relevant Regulatory Filings and Regulatory Approvals for the Products shall be
owned by NK or NKs sublicensees, and NK may delegate to its sublicensees the responsibility for
preparing any and all Regulatory Filings for the Product subject to the terms of this Article 5,
subject to Section 2.1(c), at the expense of NK or such sublicensees in accordance with the
Sublicensee Development Plan. Spectrum shall assist NK or
16.
its sublicensees as they may reasonably request in connection with the preparation and filing
of such Regulatory Filings, at NKs or its sublicensees reasonable request and expense;
(b)
NK shall keep Spectrum informed of regulatory developments specific to Products throughout
the NK Territory, and Spectrum shall have the right to contribute to the regulatory plans and
strategies for the Products in the NK Territory;
(c)
NK shall, and shall ensure that its sublicensees will, lead discussions with any
Regulatory Authority related to any Development of any Products. NK will, and will cause its
sublicensees to, inform Spectrum of any such discussions in advance to the extent practicable, and
NK will, and will ensure that its sublicensees will, reasonably consider any input from Spectrum in
preparation for such discussions;
(d)
NK shall, and shall ensure that its sublicensees will, be responsible to ensure, at its
sole expense, that the Development, manufacture and Commercialization of the Products in the NK
Territory are in compliance with all applicable Laws, including without limitation all rules and
regulations promulgated by any of the Regulatory Authorities in the NK Territory. Specifically and
without limiting the foregoing, NK shall, and shall ensure that its sublicensees will, file all
compliance filings, certificates and safety reporting (subject to Section 5.2(a)) in the NK
Territory at its sole expense;
(e)
to the extent permitted by the applicable Regulatory Authority and as requested by
Spectrum, NK shall, and shall ensure that its sublicensees will, allow representatives of Spectrum
to participate in any scheduled conference calls and meetings between NK or its sublicensees and
the Regulatory Authority in the Major Markets at Spectrums expense. If Spectrum elects not to
participate in such calls or meetings, NK shall, and shall ensure that its sublicensees will,
provide Spectrum with written summaries of such calls and meetings in English as soon as
practicable after the conclusion thereof; and
(f)
with respect to all Regulatory Filings, NK shall, and shall ensure that its Affiliates and
sublicensees will: (i) submit only data and information that are free from fraud or material
falsity; (ii) not use bribery or the payment of illegal gratuities in connection with its
Regulatory Filings for the Product; and (iii) submit only data and information that are accurate
and reliable in all material respects for purposes of supporting Regulatory Approval.
5.2 Adverse Events.
(a)
Within one (1) year prior to the planned first Regulatory Approval of the Product in the
NK Territory, the Parties shall discuss in good faith and enter into a pharmacovigilance and
adverse event reporting agreement setting forth the worldwide pharmacovigilance procedures for the
Parties with respect to the Product, such as safety data sharing, adverse events reporting and
prescription events monitoring (the
Pharmacovigilance Agreement
). Such Pharmacovigilance
Agreement shall govern the global pharmacovigilance procedures to be agreed upon by NK, Spectrum
and the commercial partners of each Party (including without limitation Allergan and the Korean
Partner).
(b)
Prior to the execution of such Pharmacovigilance Agreement, the Parties agree to
coordinate the pharmacovigilance procedures in connection with the Development of the
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Products, and NK shall submit to Spectrum all safety information and reporting in a manner
that meets the reporting requirements in the Retained Territory, as outlined in
Exhibit F
attached.
Each Party shall notify the other Party within twenty-four (24) hours of such Partys learning of
any Serious Adverse Events (as defined below) that is attributed to or potentially attributable to
the use of the Products. Each Party shall also provide the other Party, on an annual basis and
more frequently as reasonably requested by the other Party, a summary report of Adverse Events (as
defined below), as well as those Serious Adverse Events that are not attributable to the use of the
Products. As used herein, unless defined differently by the FDA,
Adverse Events
means any side
effect, injury, toxicity or sensitivity reaction, or any unexpected incident, and the severity
thereof, whether or not determined to be attributable to any Product, and
Serious Adverse Events
means an Adverse Event which results in death, is immediately life-threatening, results in
persistent and significant disability/incapacity or requires in-patient hospitalization or
prolongation of existing hospitalization.
(c)
After the execution of the Pharmacovigilance Agreement, the Parties shall comply with the
such Pharmacovigilance Agreement with respect to all aspects of pharmacovigilance activities with
respect to the Products, and Section 5.2(b) above shall be of no further effect.
5.3 No Harmful Actions
. If either Party believes that the other Party, as the case may be, is
taking or intends to take any action with respect to the Product that could reasonably be expected
to have a material adverse impact upon the regulatory status of the Product in the Retained
Territory or the NK Territory, such Party shall have the right to bring the matter to the attention
of the JPT. Without limiting the foregoing, unless the Parties otherwise agree: (a) except as
necessary for the clinical Development in South Korea pursuant to Section 2.1(a)(ii), NK shall not
communicate with any Regulatory Authority having jurisdiction in the Retained Territory, unless so
ordered by such Regulatory Authority, in which case NK shall provide immediately to Spectrum notice
of such order; and (b) NK shall not submit any Regulatory Filings (except as necessary for the
clinical Development in South Korea pursuant to Section 2.1(a)(ii)) or seek Regulatory Approvals
for the Product in the Retained Territory.
5.4 Notification of Threatened Action
. Each Party shall immediately notify the other Party of
any information it receives regarding any threatened or pending action, inspection or communication
by or from any party, including, without limitation, a Regulatory Authority, which may affect the
safety or efficacy claims of the Product or the continued marketing of the Product. Upon receipt
of such information, the Parties shall consult with each other in an effort to arrive at a mutually
acceptable procedure for taking appropriate action.
5.5 Data Exchange and Use.
This Section 5.5 shall not apply to any pharmacovigilance data
(which is addressed in Section 5.2). NK shall, and shall ensure that its sublicensees will,
provide Spectrum with copies of all final submissions and correspondence to and from all Regulatory
Authorities relating to the Product in the Field within seven (7) days of submission or receipt, as
applicable, and shall, and shall ensure that its sublicensees will, provide Spectrum a summary of
each significant submission (such as application for approval for clinical trials, Regulatory
Approval and fast track or orphan drug designation, the protocol for clinical trials and any
modifications thereof) in English as soon as practicable but in any event within ten (10) business
days after such submission. Each Party shall permit the other Party to access, and
18.
shall provide the other Party with rights to reference and use in association with the Product
in the Field, all of its, its Affiliates, and its or their licensees and sublicensees
regulatory, preclinical and clinical data documentation, Regulatory Filings, and Regulatory
Approvals with respect to the Product in the Field.
5.6 Remedial Actions
. Each Party will, and will ensure that its Affiliates and sublicensees
will, notify the other Party immediately, and promptly confirm such notice in writing, if it
obtains information indicating that the Product may be subject to any recall, corrective action or
other regulatory action with respect to a Product taken by virtue of applicable Law in the NK
Territory (a
Remedial Action
). The Parties (or NKs sublicensees and Spectrum), as the case may
be, will assist each other in gathering and evaluating such information as is necessary to
determine the necessity of conducting a Remedial Action. NK shall, and shall ensure that its
Affiliates and sublicensees will, maintain or have maintained adequate records to permit the
Parties to trace the manufacture of the Product and the distribution and, to the extent feasible,
the use of the Product. In the event NK or its any sublicensee determines that any Remedial Action
with respect to the Product in the Field in the NK Territory should be commenced or Remedial Action
is required by any Regulatory Authority having jurisdiction over the matter, NK will, and will
ensure that its sublicensees will, as the case may be, control and coordinate all efforts necessary
to conduct such Remedial Action. In the event Spectrum determines that any Remedial Action with
respect to the Product outside the Field in the NK Territory should be commenced or Remedial Action
is required by any Regulatory Authority having jurisdiction over the matter, Spectrum will control
and coordinate all efforts necessary to conduct such Remedial Action. For clarity, as between the
Parties, Spectrum shall have sole discretion with respect to any matters relating to any Remedial
Action in the Retained Territory, except the Remedial Action relating to the manufacture of the
Product for NK in the Retained Territory pursuant to Section 2.1(a)(i)(B) or the clinical
Development by NK in South Korea pursuant to Section 2.1(a)(ii). The cost and expense of a
Remedial Action arising from the development, manufacture or commercialization of the Product in
the Field in the NK Territory shall be borne solely by NK or its sublicensees, unless, to the
extent the Product subject to such Remedial Action is supplied by Spectrum to NK, such Remedial
Action is caused by (i) such Products non-conformity to specifications at the time such Product is
delivered by Spectrum to NK or any of its Affiliates or sublicensees or (ii) such Products
manufacture not in compliance with applicable Laws including applicable Good Manufacturing
Practice.
ARTICLE 6
COMMERCIALIZATION
6.1 Overview of Commercialization in the NK Territory
. NK or its sublicensees will be solely
responsible for all aspects of the Commercialization of the Product in the Field in the NK
Territory, in compliance with all applicable Laws and, in case of Commercialization of the Product
in Japan, in accordance with a commercialization plan to be prepared by NK and approved by both
Parties (such approval not to be unreasonably withheld or delayed) prior to the First Commercial
Sale of the Product in Japan (the
Japan Commercialization Plan
), and in the case of each country
in the NK Territory outside of Japan where NK or any of its Affiliates or sublicensees has received
Regulatory Approval for the Product, in accordance with a commercialization plan to be prepared by
NK and/or such Affiliate or sublicensee, as applicable,
19.
and approved by the Parties and any applicable sublicensee (such approval not to be
unreasonably withheld or delayed) prior to the First Commercial Sale of the Product in such country
(such commercialization plans collectively, the
Outside Japan Commercialization Plan
, and
together with the Japan Commercialization Plan, the
Commercialization Plan
). Such
Commercialization Plan shall include the activities and timelines in preparation for the launch of
the Product and after such Product launch in the respective countries, and shall be updated on an
annual basis by NK or its sublicensees subject to the approval of the Parties, such approval not to
be unreasonably withheld or delayed. NK or its sublicensees shall book sales for the Products in
the NK Territory.
6.2 NK Performance.
(a) Commercial Diligence
. NK shall Commercialize the Product in Japan in accordance with the
Japan Commercialization Plan. NK shall, by itself or through an Affiliate or sublicensee,
Commercialize the Product in other countries and territories in the NK Territory, in accordance
with the applicable Outside Japan Commercialization Plan. Without limiting the foregoing, NK shall
launch the first Product in at least one of the Major Markets (including Japan) within [***] after
obtaining relevant Regulatory Approval to do so, and, with respect to Commercialization in Japan,
after such launch, shall commit at least the same number of sales representatives, the same level
of resources and infrastructure in connection with the Commercialization of such Product as that
are expended by NK and comparable pharmaceutical companies having operations in Japan in connection
with the commercialization of products with similar market potential.
(b) Reports.
NK shall update Spectrum periodically regarding NKs Commercialization
activities with respect to the Product in the NK Territory. In addition, NK shall present a
written report to Spectrum summarizing NKs Commercialization activities with respect to the
Product in the NK Territory pursuant to this Agreement to the extent practicable, covering subject
matter at a level of detail reasonably requested by Spectrum and sufficient to enable Spectrum to
determine NKs compliance with its diligence obligations pursuant to this Section 6.2. NK shall
provide such written reports on a quarterly basis for the Commercialization activities in Japan and
on an annual basis for the Commercialization activities in the other countries and territories in
the NK Territory.
6.3 Trademark
. NK shall have the right to brand the Products using NK related trademarks and
any other trademarks and trade names it determines appropriate for the Products in consultation
with Spectrum, which may vary by country or within a country (
Product Marks
). NK shall own all
rights in the Product Marks and register and maintain the Product Marks in the countries and
regions it determines reasonably necessary. NK shall not, and shall ensure that its Affiliates and
sublicensees will not, make any use of the trademarks assigned by Spectrum to Allergan under the
Allergan Agreement, or any trademark that includes any such trademark or is confusingly similar
thereto, on or in connection with the Commercialization of the Product in the NK Territory.
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20.
ARTICLE 7
MANUFACTURING
7.1 Overview
. The Parties recognize that Spectrum manufactures the Products for the Retained
Territory through certain Third Party contract manufacturer(s) as of the Effective Date and may
engage other Third Party contract manufacturers after the Effective Date (collectively, the
Manufacturers
). The Parties agree that Spectrum assists NK with the manufacture and supply of the
Product for use or sale by NK or its sublicensees in the NK Territory as follows:
(a)
Spectrum shall: (i) procure from Manufacturers and supply to NK all requirements (in
accordance with standard forecast terms) of the Product, in the form used by Spectrum and its
licensees in the Retained Territory at the time of such supply, for use by NK or its sublicensees
in conducting its or their Development activities under the Development Plan in the NK Territory
(including South Korea in case NK needs the Product for clinical Development pursuant to Section
2.1(a)(ii)); and (ii) procure from Manufacturers and supply to NK all requirements (in accordance
with standard forecast terms) of either the Brite Stock or Kitted Product (each as defined below),
pursuant to the Parties agreement as set forth below, for commercial sale by NK and its
sublicensees for a period of [***] after the First Commercial Sale (the
Initial Supply Period
) in
the NK Territory, and, subject to Section 7.1(c), for an additional [***] period after the Initial
Supply Period.
Brite Stock
means all components of the Kitted Product, including the drug vials
containing Apaziquone and the diluent vials, for incorporation into the final Kitted Product.
Kitted Product
means the Brite Stock that has been labeled and packaged in final form ready for
sale. As soon as practicable after the Effective Date but in any event prior to the third
(3
rd
) anniversary of the Effective Date, the Parties shall discuss in good faith and
agree as to whether Spectrum will supply the Brite Stock or Kitted Product to NK under Section
7.1(a)(ii). If the Parties agree that Spectrum will supply NK with the Brite Stock, then NK or its
sublicensees will be responsible for the labeling and packaging of the Brite Stock into Kitted
Product for Development and commercial sale in the NK Territory, using such Brite Stock supplied by
Spectrum. Spectrum shall supply Brite Stock or Kitted Product to NK under Section 7.1(a) above at
[***] percent ([***]%) of Spectrums Cost of Goods Sold for such Products (i.e., if the Cost of
Goods Sold is $100, NK shall pay Spectrum $[***]).
(b)
Notwithstanding Section 7.1(a) above, in the event the form or packaging of the Product
used in the Development of the Product in the NK Territory or commercialized in the NK Territory is
different from the form or packaging of the product used by Spectrum or its commercial partners in
the Retained Territory, then Spectrums obligation to supply as set forth above shall apply only
with respect to Apaziquone and the Parties shall discuss in good faith to allocate the
responsibilities for the fill and finish of the Product in such alternative form or packaging.
Spectrum will consult with NK as to the selection of packaging materials for the Product or
materials used in the components of the Product and will take into consideration NKs comments in
such consultation. For clarity, for the purpose of this Section 7.1(b), so long as the
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21.
components of the Product are same, Brite Stock shall not be deemed to be different from
Kitted Product and vice versa.
(c)
Notwithstanding the provisions of 7.1(a)(ii), in the event, at Spectrums reasonable
determination, it is no longer practicable for Spectrum to continue to supply NK with commercial
supply under Section 7.1(a)(ii) after the Initial Supply Period, (for reasons including, but not
limited to, the termination of Spectrums agreement with a Manufacturer or Allergans assumption of
manufacturing obligations outside of Asia), Spectrum shall inform NK in writing of its desire to
cease such supply at the end of the Initial Supply Period (or anytime thereafter) at least eighteen
(18) months prior to the end of the Initial Supply Period (or at least eighteen (18) months prior
to such later time) and may cease the supply of the Product (Brite Stock or Kitted Product) at the
end of the Initial Supply Period (or such later time). In such event, (1) Spectrum shall ensure
that NK enters into direct supply agreement(s) with Spectrums then-current Manufacturer(s) for the
supply of the same Brite Stock or Kitted Product for at least an additional [***] period after the
Initial Supply Period on the terms and conditions similar to those which Spectrum used to be
provided with during the Initial Supply Period, (2) Spectrum shall arrange the supply of such
Product (Brite Stock or Kitted Product) from the then-current Manufacturer(s) to NK until such time
NK has entered into such direct supply agreement(s) with such Manufacturers, so that NK and its
sublicensees are able to continue to sell such Product in the NK Territory without interruption and
(3) NK shall cooperate with Spectrum in such arrangements.
7.2 Manufacturing Technology Disclosure.
As soon as practicable after the Effective Date but
no later than sixty (60) days after the Effective Date in any event, Spectrum shall make available
and transfer copies to NK of the Spectrum Technology that are necessary or reasonably useful in the
manufacture of Product and as of the Effective Date are being used by Spectrum or its Manufacturers
to manufacture Product, as set forth in
Exhibit G
, including without limitation Drug Master File of
the Product if applicable (the
Spectrum Manufacturing Know-How
). During the Term, Spectrum shall
continue to provide information relating to the chemistry, manufacture and control of the Product,
and NK shall promptly provide Spectrum with its feedback and/or comments to such information
relating to the supply of Product for the NK Territory. During the Initial Supply Period, if NK
desires to assume the responsibility to procure the Product for the NK Territory by itself, NK
shall notify Spectrum in writing, and, upon Spectrums agreement, the Parties shall discuss in good
faith with respect to an orderly transfer of such responsibility from Spectrum to NK.
7.3 Manufacture of Product by Spectrum or its Manufacturer.
Spectrum shall manufacture or
procure the manufacture of the Product to be supplied to NK hereunder in accordance with applicable
Good Manufacturing Practice, other applicable Laws and specifications of the Product agreed by the
Parties. If Spectrum or its Manufacturers intend to make a change to (a) manufacturing site of the
Product, (b) manufacturing process of the Product or (c) such specification, Spectrum shall
promptly notify NK of such change and shall provide NK with all information and data obtained by
any tests conducted by or on behalf of Spectrum in respect of any such proposed change for the
purpose of NK or its sublicensees applying for an amendment to any Regulatory Approval of the
Product in the NK Territory which is required
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22.
with respect to such change. Further, Spectrum shall provide NK with test samples manufactured
at the proposed manufacturing site or in accordance with such proposed new process or proposed new
specification for the purpose of NK or its sublicensees applying for such amendment. NK shall use
commercially reasonable best efforts to complete the amendment process with the relevant Regulatory
Authority as quickly as possible, and shall notify Spectrum immediately on receipt by NK of
notification from the relevant Regulatory Authority that such amendment has been completed.
Spectrum shall not supply any Product manufactured with such change until such time as NK or its
sublicensees are notified by the Regulatory Authority that such amendment has been completed. Until
such time as NK or its sublicensees are notified by the Regulatory Authority that such amendment
has been completed, Spectrum shall use commercially reasonable best efforts to continue to supply
NK with the Product manufactured at the current manufacturing site in accordance with the current
process and specifications. Spectrum shall be responsible for and shall bear the costs for (as
part of the Costs of Goods Sold) the delivery of the Product to airport(s) from where such Product
will be exported to NK, where the title to such Product and the risk of loss and damage shall
transfer to NK and NK shall bear the costs of the shipment of such Product thereafter (including
the cost for air transportation).
7.4 Regulatory Inspections.
Each Party shall use good faith efforts to obtain and reveal to
the other Party, all inspection reports for itself, its Affiliates, or for any of its vendors,
suppliers or other Third Parties by any Regulatory Authority arising from an inspection of the
facilities where a Product is manufactured, packaged or stored (a
Facility Inspection
), and the
progress and outcome of any Facility Inspection as it may relate to the Product. Upon receipt of
notice of any Facility Inspection, the receiving Party will promptly notify the other Party thereof
and the receiving Party will provide the other Party with the inspection report and any other
relevant information available about the progress and outcome of such inspection available to the
receiving Party.
7.5 Audits
. Each Party and its duly authorized representatives shall have the right to
inspect all facilities utilized by the other Party or any of its subcontractors (either directly or
with the contracting Party, as permitted in the agreement governing the engagement of such
subcontractor) in connection with the development, manufacture, sale, storage or distribution of
the Product in the NK Territory, upon reasonable prior written notice during normal business hours
to ensure compliance with the terms and conditions of this Agreement, and compliance with industry
standard and applicable Law. For clarity, NK shall have the right to inspect facilities of
Spectrum or its subcontractors where the Product is manufactured or stored for supply to NK and
facilities of the manufacture and storage of Apaziquone which is used for the manufacture of the
Product for NK Territory. All audits shall be without any undue disruption to the business and
operations of the audited Party, and in the case of an inspection involving facilities of a
subcontractor of Spectrum, consistent with the terms under the applicable agreement between
Spectrum and such subcontractor, and the Allergan Agreement to the extent applicable. Any Third
Parties conducting such audits shall enter into confidentiality agreements with the audited Party
in a form suitable to the audited Party, and all information or reports gained by the auditing
Party as a result of such audit shall be deemed Confidential Information of the audited Party. In
the event of a disagreement between the Parties as to the outcome of a particular audit, an
independent, mutually agreed upon arbiter shall be selected by the Parties to resolve the dispute.
The cost of such arbiter shall be borne by the Party whose position is overruled by such arbiter.
Spectrum shall have the right to appoint Allergan as its authorized
23.
representative for the purpose of this Section 7.5.
ARTICLE 8
FINANCIAL PROVISIONS
8.1 Upfront Fee
. After the sixtieth (60
th
) day after the Effective Date and before
the seventy-fifth (75
th
) day after the Effective Date, NK shall pay to Spectrum a
one-time, non-refundable and non-creditable upfront fee of fifteen million Dollars ($15,000,000).
8.2 Milestone Payments
. NK shall make the following non-refundable and non-creditable
milestone payments to Spectrum within [***] after the first achievement of each milestone event for
a Product as set forth in this Section 8.2 by NK, its Affiliates or sublicensees. Each milestone
payment by NK to Spectrum hereunder shall be payable only once, regardless of the number of times
achieved by the Products, provided that, if more than one sales milestones that are triggered by
annual aggregate Net Sales that have not been previously paid are triggered at the end of any
particular calendar year, then each and every of such sales milestones shall be deemed to have been
achieved upon the end of such calendar year and the corresponding milestone payments triggered by
each and every of such sales milestones shall become due at the end of such calendar year.
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Milestone Event
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Milestone Payment
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Regulatory Milestones
|
Regulatory Approval of a Product in the United States
for the Immediate Instillation Indication
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$[***]
|
Regulatory Approval of a Product in the United States
for a Multiple Instillation Indication
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$[***]
|
First NDA Filing for a Product in Japan
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$[***]
|
First Regulatory Approval for a Product in Japan
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$[***]
|
First Regulatory Approval for a Product in the NK
Territory excluding Japan
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$[***]
|
Sales Milestones
|
The aggregate Net Sales of all Products in Japan during
the Term equal or exceed $[***]
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$[***]
|
The aggregate Net Sales of all Products in Japan during
the Term equal or exceed $[***]
|
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$[***]
|
The aggregate Net Sales of all Products in Japan during
any calendar year equal or exceed $[***]
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$[***]
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24.
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Milestone Event
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Milestone Payment
|
The aggregate Net Sales of all Products in Japan during
any calendar year equal or exceed $[***]
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$[***]
|
The aggregate Net Sales of all Products in Japan during
any calendar year equal or exceed $[***]
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$[***]
|
The aggregate Net Sales of all Products in the NK
Territory (excluding Japan) during the Term equal or
exceed $[***]
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$[***]
|
The aggregate Net Sales of all Products in the NK
Territory (excluding Japan) during the Term equal or
exceed $[***]
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$[***]
|
The aggregate Net Sales of all Products in the NK
Territory (excluding Japan) during any calendar year
equal or exceed $[***]
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$[***]
|
The aggregate Net Sales of all Products in the NK
Territory (excluding Japan) during any calendar year
equal or exceed $[***]
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$[***]
|
The aggregate Net Sales of all Products in the NK
Territory (excluding Japan) during any calendar year
equal or exceed $[***]
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$[***]
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8.3 Royalties
.
(a) Royalty Rates
. NK shall pay to Spectrum a running royalty at the following royalty rates,
on Net Sales of the Products in all countries of the NK Territory during the Royalty Term.
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Aggregate Annual Net Sales of all Products in the
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Royalty Rate Applicable to All
|
NK Territory for a Particular Calendar Year
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Net Sales in such Calendar Year
|
For a calendar year in which the
aggregate annual Net Sales
throughout the NK Territory are less
than $[***]
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[***]%
|
For a calendar year in which the
aggregate annual Net Sales
throughout the NK Territory equal to
or greater than $[***]
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[***]%
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25.
For clarity, for each calendar year, NK shall initially calculate its royalty payments to
Spectrum and submit such royalty payments at the royalty rate of [***]% until the aggregate annual
Net Sales for all Products throughout the NK Territory reaches $[***]. Thereafter, NK shall
calculate royalty payments to Spectrum and submit such royalty payments at the royalty rate of
[***]%. In addition, NK shall submit to Spectrum a true-up payment at the end of the calendar
quarter during which such aggregate annual Net Sales reaches $[***], in the amount of $[***].
(b) Royalty Term.
The royalty payment obligation under Section 8.3 shall be due, on a
country-by-country basis, during the period of time beginning upon the First Commercial Sale of the
Product in such country, and ending upon the later of (i) the expiration of the last-to-expire
Valid Claim covering the Product sold in such country; (ii) the expiration of Regulatory
Exclusivity covering the Product sold in such country; and (iii) the tenth (10
th
)
anniversary after the First Commercial Sale of the Product in such country (the
Royalty Term
).
(c) Royalty Payments and Reports
. NK shall deliver to Spectrum a report containing the
following information for the prior calendar quarter: (i) the gross sales associated with each
Product sold by NK, its Affiliates and sublicensees; (ii) a calculation of Net Sales of each
Products that are sold by NK, its Affiliates and (if applicable) sublicensees; and (iii) a
calculation of payments due to Spectrum with respect to the foregoing. NK shall use commercially
reasonable efforts to deliver the foregoing report to Spectrum within thirty-five (35) days after
the end of such calendar quarter, but in any event NK shall provide to Spectrum such report within
forty-five (45) days after the end of such calendar quarter. If, despite commercially reasonable
efforts, NK is unable to provide Spectrum with such report within the foregoing thirty-five (35)
day period, NK shall provide Spectrum with a report containing reasonable estimates of the amounts
described in subsections (i) through (iii) above by the end of such thirty-five (35) day period for
Spectrum to comply with its quarterly reporting obligations. Within sixty (60) days after the end
of each calendar quarter, NK shall remit to Spectrum any payment due for the applicable calendar
quarter. If no royalties are due to Spectrum for such reporting period, the report shall so state.
The method of payment shall be wire transfer to an account specified in writing by Spectrum.
8.4 Foreign Exchange
. The rate of exchange to be used in computing the amount of currency
equivalent in Dollars of Net Sales invoiced in other currencies shall be made at the average of the
closing exchange rates reported in
The Wall Street Journal
(U.S., Western Edition) over the
applicable reporting period for the payment due.
8.5 Payment Method; Late Payments
. All payments due to Spectrum hereunder shall be made by
wire transfer of immediately available funds into an account designated by Spectrum. If Spectrum
does not receive payment of any sum due to it on or before the due date, simple interest shall
thereafter accrue on the sum due to Spectrum until the date of payment at the per annum rate of
[***] percent ([***]%) over the then-current prime rate reported in
The
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26.
Wall Street Journal
(U.S., Western Edition) or the maximum rate allowable by applicable Law,
whichever is lower.
8.6 Records; Audits
. NK will, and will assure that its sublicensees will, maintain complete
and accurate records in sufficient detail to permit Spectrum to confirm the accuracy of the
calculation of royalty payments under this Agreement. Upon reasonable prior notice, such records
shall be available during regular business hours for a period of three (3) years from the end of
the calendar year to which they pertain for examination at the expense of Spectrum, and not more
often than once each calendar year, by an independent certified public accountant selected by
Spectrum and reasonably acceptable to NK or its sublicensees, for the sole purpose of verifying the
accuracy of the financial reports furnished by NK pursuant to this Agreement. Any such auditor
shall not disclose to Spectrum NKs Confidential Information or sublicensees confidential
information, except to the extent such disclosure is necessary to verify the accuracy of the
financial reports furnished by NK or the amount of payments due by NK under this Agreement. Any
amounts shown to be owed but unpaid shall be paid within [***] from the receipt by NK of the
accountants report, plus interest (as set forth in Section 8.5) from the original due date. If
such audit discloses an underpayment by NK of more than [***] percent ([***]%), then NK shall also
pay to Spectrum a premium equal to [***] percent ([***]%) of such underpayment. Spectrum shall
bear the full cost of such audit unless such audit discloses an underpayment by NK of more than
[***] percent ([***]%) of the amount due, in which case NK shall bear the full cost of such audit.
8.7 Taxes
.
(a) Taxes on Income.
Each Party shall be solely responsible for the payment of all taxes
imposed on its share of income arising under this Agreement or directly or indirectly from the
efforts of the Parties under this Agreement.
(b) Tax Responsibility.
The Parties understand that, in accordance with the applicable Laws
existing as of the Effective Date, none of the payments to be submitted by NK to Spectrum under
Sections 8.1, 8.2 and/or 8.3 shall be subject to any deduction of tax or withholding tax.
Consequently, NK shall submit to Spectrum the upfront fee under Section 8.1 above without any
deduction or withholding. If, after the Effective Date, as a result of any modification to the
applicable Laws, any payment required to be made by NK to Spectrum (other than the upfront fee
under Section 8.1) is subject to a deduction of tax or withholding tax, NK may deduct such tax or
withholding tax.
(c) Tax Cooperation.
The Parties agree to cooperate with one another and use reasonable
efforts to reduce or eliminate tax withholding or similar obligations in respect of royalties,
milestone payments, and other payments made by NK to Spectrum under this Agreement. To the extent
NK is required to deduct and withhold taxes on any payment to Spectrum, NK shall pay the amounts of
such taxes to the proper Governmental Authority in a timely manner and promptly transmit to
Spectrum an official tax certificate or other evidence of such withholding sufficient to enable
Spectrum to claim such payment of taxes. Spectrum shall provide NK any tax forms that may be
reasonably necessary in order for NK to not withhold tax
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27.
or to withhold tax at a reduced rate under an applicable bilateral income tax treaty.
Spectrum shall use reasonable efforts to provide any such tax forms to NK at least thirty (30) days
prior to the due date for any payment for which Spectrum desires that NK applies a reduced
withholding rate. Each Party shall provide the other with reasonable assistance to enable the
recovery, as permitted by applicable law, of withholding taxes, value added taxes, or similar
obligations resulting from payments made under this Agreement, such recovery to be for the benefit
of the Party bearing such withholding tax or value added tax. NK shall require its sublicensees in
the NK Territory to cooperate with Spectrum in a manner consistent with this Section 8.7(c).
ARTICLE 9
INTELLECTUAL PROPERTY
9.1 Ownership of Inventions
. Each Party shall own any inventions made solely by its own
employees, agents, or independent contractors in the course of conducting its activities under this
Agreement, together with all intellectual property rights therein (
Sole Inventions
). The Parties
shall jointly own any inventions that are made jointly by employees, agents, or independent
contractors of each Party in the course of performing activities under this Agreement, together
with all intellectual property rights therein (
Joint Inventions
). Inventorship shall be
determined in accordance with U.S. patent laws. All Patents claiming patentable, jointly owned
Joint Inventions shall be referred to herein as
Joint Patents.
Except to the extent otherwise
set forth in this Agreement, each Party shall be entitled to practice and exploit (including
through the grant of licenses) the Joint Inventions without the duty of accounting or seeking
consent from the other Party.
9.2 Disclosure of Inventions
. Each Party shall promptly disclose to the other Party any
invention disclosures, or other similar documents, submitted to it by its employees, agents or
independent contractors describing inventions that are either Sole Inventions or Joint Inventions.
Further, each Party shall promptly disclose to the other Party all Information relating to Joint
Inventions to the extent necessary for the preparation, filing and maintenance of any Joint Patent
with respect to such Joint Invention.
9.3 Prosecution of Patents
.
(a) Spectrum Patents.
(i)
Subject to Sections 9.3(a)(ii). 9.3(a)(iii) and 9.3(a)(iv) below, Spectrum shall have the
sole right to prepare, file, prosecute and maintain Spectrum Patents and Joint Patents
(collectively, the
Spectrum Prosecuted Patents
). Spectrum shall provide NK reasonable
opportunity to review and comment on such prosecution efforts regarding such Spectrum Prosecuted
Patents in the NK Territory. Spectrum shall provide NK with a copy of material communications from
any patent authority in the NK Territory regarding such Spectrum Prosecuted Patents, and shall
provide drafts of any material filings or responses to be made to such patent authorities a
reasonable amount of time in advance of submitting such filings or responses for NKs review and
comment. Spectrum shall reasonably consider such comments by
28.
NK in connection with the prosecution of Spectrum Prosecuted Patents.
(ii)
The costs and expenses incurred after the Effective Date by Spectrum in connection with
the preparation, filing, prosecution and maintenance of Spectrum Patents and Joint Patents under
Section 9.3(a)(i) above shall be allocated between the Parties as follows: (A) NK shall reimburse
Spectrum for all out-of-pocket costs incurred by Spectrum in connection with the preparation,
filing, prosecution and maintenance of: (1) the [***] in the [***]; (2) the [***] in [***]; and (3)
the [***], and Spectrum shall bear its internal costs incurred in connection with the activities
set forth in [***]; (B) Spectrum shall bear its own internal and out-of-pocket costs incurred: (1)
in connection with the preparation, filing, prosecution and maintenance of [***] in [***]; and (2)
in connection with the preparation, filing, prosecution and maintenance of [***] in the [***]; and
(C) [***], NK may request that Spectrum prepare, file, prosecute and maintain [***] in such country
provided that NK reimburses Spectrum for all out-of-pocket costs incurred by Spectrum in connection
with such activities. Notwithstanding the foregoing, NK shall have the right to opt out of its
payment obligations for the [***] under [***] by providing Spectrum with written notification
thereof, and NK hereby assigns to Spectrum all of its rights and interests in such [***], effective
upon Spectrums receipt of such notification.
(iii)
If Spectrum wishes to cease the prosecution or maintenance of any Spectrum Prosecuted
Patents in the NK Territory, it shall notify NK to that effect in writing, and NK may, at its
discretion, assume the rights to the prosecution or maintenance of such Spectrum Prosecuted
Patents, at NKs sole expense, by informing Spectrum in writing within sixty (60) days after
receiving such notification from Spectrum. If NK notifies Spectrum of its intention to assume such
rights, Spectrum shall assign to NK all rights and interests in and to such Spectrum Prosecuted
Patents, and NK hereby grants to Spectrum a royalty-free, fully-paid, worldwide, perpetual,
irrevocable, non-exclusive license, with the right to grant sublicenses, under such Spectrum
Prosecuted Patents so assigned to NK for all purposes other than to develop, make, have made, use,
sell, offer for sale or import the Product in the Field in the NK Territory.
(iv)
Spectrum shall not assign or transfer Spectrums rights and interests in and to the
Spectrum Technology to any Third Party in conflict with the terms of this Agreement; provided,
however, that Spectrum shall assign and transfer Spectrums all rights and interests in and to the
Spectrum Technology to the Third Party when Spectrum assigns or transfers this Agreement to such
Third Party pursuant to Section 15.5.
(b) NK Patents.
(i)
NK shall have the sole right to prepare, file, prosecute and maintain NK Patents at NKs
costs and expense.
(ii)
If NK decides to cease the prosecution or maintenance of any NK Patents, it shall notify
Spectrum in writing sufficiently in advance. Spectrum may, at its discretion, assume the rights to
the prosecution or maintenance of such NK Patents, at Spectrums sole expense by informing NK in
writing within sixty (60) days after receiving such
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29.
notification from NK, in which event NK shall assign to Spectrum all rights and interests in
and to such NK Patents.
(c) Cooperation in Prosecution
. Each Party shall provide the other Party all reasonable
assistance and cooperation with respect to the assignment of Spectrum Prosecuted Patents by
Spectrum to NK or the assignment of NK Patents by NK to Spectrum pursuant to Sections 9.3(a) or
9.3(b), as the case may be, including providing any documents necessary to complete such
assignments.
9.4 Infringement of Patents by Third Parties
.
(a) Notification
. Each Party shall promptly notify the other Party in writing of any existing
or threatened infringement of the Spectrum Patents through the Development or Commercialization of
a Product in the Field in the NK Territory by a Third Party, of which such Party becomes aware,
including any certification or the like in the NK Territory similar to patent certification of 21
U.S.C. §355(b)(2) or 21 U.S.C. §355(j)(2) and of any declaratory judgment, opposition, or similar
action alleging the invalidity, unenforceability or non-infringement of any of the Spectrum Patents
(collectively
Product Infringement
).
(b) Product Infringement
.
(i)
For any Product Infringement in the Field in the NK Territory, each Party shall share with
the other Party all Information available to it regarding such existing or threatened infringement.
NK shall have the first right, but not the obligation, to bring an appropriate suit or other action
against any person or entity engaged in such Product Infringement, subject to Section 9.4(b)(ii)
through 9.4(b)(iv), below. If NK fails to institute and prosecute an action or proceeding to abate
such Product Infringement within a period of ninety (90) days after the first notice under Section
9.4(a) to elect to enforce such Spectrum Patent or otherwise having knowledge of such Product
Infringement, then Spectrum shall have the right, but not the obligation to, commence a suit or
take action to enforce the applicable Spectrum Patent against such Third Party perpetrating such
Product Infringement in the NK Territory at its own cost and expense. In this case, NK shall take
appropriate actions, if any, in order to enable Spectrum to commence a suit or take the actions set
forth in the preceding sentence.
(ii)
Each Party shall provide to the Party enforcing the Spectrum Patent under this Section
9.4(b) reasonable assistance in such enforcement, at such enforcing Partys request and expense,
including joining such action as a party plaintiff if required by applicable Law to pursue such
action. The enforcing Party shall keep the other Party regularly informed of the status and
progress of such enforcement efforts, shall reasonably consider the other Partys comments on any
such efforts, and shall seek consent of the other Party in any important aspects of such
enforcement including, without limitation, determination of litigation strategy, filing of
important papers to the competent court, which shall not be unreasonably withheld or delayed.
(iii)
Each Party shall bear all of its own internal costs incurred in connection with its
activities under this Section 9.4(b). In the event NK commences a Product Infringement action, it
shall bear all external costs and expenses for such action. In the event
30.
that Spectrum commences a Product Infringement action, it shall bear all external costs and
expenses for such action.
(iv)
The Party not bringing an action with respect to Product Infringement under this Section
9.4(b) shall be entitled to separate representation in such matter by counsel of its own choice and
at its own expense, but such Party shall at all times cooperate fully with the Party bringing such
action.
(c) Infringement Other Than a Product Infringement
. For any and all infringement of any
Spectrum Patent other than a Product Infringement in the Field in the NK Territory, as between the
Parties, Spectrum shall have the sole and exclusive right to bring an appropriate suit or other
action against any person or entity engaged in such other infringement, in its sole discretion, and
as between the Parties shall bear all related expenses and retain all related recoveries.
(d) Settlement
. NK shall not settle any claim, suit or action that it brought under this
Section 9.4 involving Spectrum Patents in any manner that would negatively impact such Spectrum
Patents or that would limit or restrict the ability of Spectrum to Develop, make, import, use,
offer for sale, sell or otherwise Commercialize Products anywhere in the Retained Territory or to
make or have made Product anywhere in the world for such Development, use, sale or import anywhere
in the Retained Territory, without the prior written consent of Spectrum, which consent shall not
be unreasonably withheld or delayed. Nothing in this Article 9 shall require Spectrum to consent
to any settlement that is reasonably anticipated by Spectrum to have a substantially adverse impact
upon any Spectrum Patent in the Retained Territory, or to the commercialization, manufacture, use,
importation, offer for sale or sale of the Product in the Retained Territory.
(e) Allocation of Recoveries
. [***].
9.5 Infringement of Third Party Rights in the NK Territory
. If any Product used or sold by
NK, its Affiliates or sublicensees becomes the subject of a Third Partys claim or assertion of
infringement of a Patent granted by a jurisdiction within the NK Territory, NK shall promptly
notify Spectrum thereof and [***].
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31.
ARTICLE 10
REPRESENTATIONS AND WARRANTIES
10.1 Mutual Representations and Warranties
. Each Party hereby represents, warrants, and
covenants (as applicable) to the other Party as follows:
(a) Corporate Existence and Power
. It is a company or corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction in which it is incorporated, and
has full corporate power and authority and the legal right to own and operate its property and
assets and to carry on its business as it is now being conducted and as contemplated in this
Agreement, including, without limitation, the right to grant the licenses granted by it hereunder.
(b) Authority and Binding Agreement
. As of the Effective Date, (i) it has the corporate power
and authority and the legal right to enter into this Agreement and perform its obligations
hereunder; (ii) it has taken all necessary corporate action on its part required to authorize the
execution and delivery of this Agreement and the performance of its obligations hereunder; and
(iii) this Agreement has been duly executed and delivered on behalf of such Party, and constitutes
a legal, valid, and binding obligation of such Party that is enforceable against it in accordance
with its terms.
(c) No Conflict; Covenant
. It is not a party to any agreement that would materially prevent
it from granting the rights granted to the other Party under this Agreement or performing its
obligations under this Agreement.
(d) No Debarment
. In the course of the development of Products, each Party shall not use,
during the Term, any employee or consultant who has been debarred by any Regulatory Authority, or,
to the best of such Partys knowledge, is the subject of debarment proceedings by a Regulatory
Authority.
10.2 Additional Representations and Warranties of Spectrum
. Spectrum represents and warrants
to NK that, as of the Effective Date:
(a)
it has the right under the Spectrum Technology to grant the licenses to NK as purported to
be granted pursuant to this Agreement;
(b)
as of the Effective Date, Spectrum or its licensee has not received any written notice
from any Third Party asserting or alleging that any research or development of any Product by
Spectrum or its licensee prior to the Effective Date infringed or misappropriated the intellectual
property rights of such Third Party; and
(c)
there are no actual, pending, alleged or threatened adverse actions, suits, claims,
interferences or formal governmental investigations involving the Product and/or the Spectrum
Technology relating to the Product by or against Spectrum or any of its Affiliates or licensees in
or before any court, governmental or regulatory authority.
32.
10.3 Disclaimer
. NK understands that the Products are the subject of ongoing clinical
research and development and that Spectrum cannot assure the safety or efficacy of the Products.
In addition, Spectrum makes no warranties except as set forth in this Article 10 concerning the
Spectrum Technology.
10.4 No Other Representations or Warranties
. EXCEPT AS
EXPRESSLY STATED IN THIS
AGREEMENT, NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESS OR IMPLIED, INCLUDING,
WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, IS MADE OR
GIVEN BY OR ON BEHALF OF A PARTY. ALL REPRESENTATIONS AND WARRANTIES OTHER THAN THOSE EXPRESSLY
STATED IN THIS AGREEMENT, WHETHER ARISING BY OPERATION OF LAW OR OTHERWISE, ARE HEREBY EXPRESSLY
EXCLUDED.
ARTICLE 11
INDEMNIFICATION
11.1 Indemnification by Spectrum.
Spectrum hereby agrees to defend, hold harmless and
indemnify (collectively
Indemnify
) NK and its Affiliates, sublicensees, agents, directors,
officers and employees (the
NK Indemnitees
) from and against any and all liabilities, expenses
and/or losses, including without limitation reasonable legal expenses and attorneys fees
(collectively
Losses
) in each case resulting from Third Party suits, claims, actions and demands
(each, a
Third Party Claim
) arising directly or indirectly out of (a) a breach of any of
Spectrums obligations under this Agreement, including without limitation Spectrums
representations and warranties or covenants set forth in Article 10, or (b) the negligence or
willful misconduct of any Spectrum Indemnitee. Spectrums obligation to Indemnify the NK
Indemnitees pursuant to this Section 11.1 shall not apply to the extent that any such Losses arise
from: (A) the negligence or willful misconduct of any NK Indemnitees; (B) the research, Development
or Commercialization of Products by NK or its Affiliates, or sublicensees in the NK Territory
without negligence or willful misconduct of any Spectrum Indemnitee and Spectrums breach of this
Agreement; or (C) NKs breach of this Agreement.
11.2 Indemnification by NK.
NK hereby agrees to Indemnify Spectrum and its Affiliates,
licensees, agents, directors, officers and employees (the
Spectrum Indemnitees
) from and against
any and all Losses resulting from Third Party Claims arising directly or indirectly out of (a) a
breach of any obligations of NK under this Agreement, including without limitation NKs
representations and warranties or covenants set forth in Article 10; (b) the research, Development,
manufacture or Commercialization of Products by NK or its Affiliates or sublicensees in the NK
Territory (including any activities undertaken by Spectrum under this Agreement at the direction of
or on behalf of NK); or (c) the negligence or willful misconduct of NK Indemnitees. NKs
obligation to Indemnify the Spectrum Indemnitees pursuant to the foregoing sentence shall not apply
to the extent that any such Losses arise from: (A) the negligence or willful misconduct of any
Spectrum Indemnitees; or (B) Spectrums breach of this Agreement.
33.
11.3 Procedure.
The indemnified Party shall provide the indemnifying Party with prompt
notice of the claim giving rise to the indemnification obligation pursuant to this Article 11 and
the exclusive ability to defend (with the reasonable cooperation of the indemnified Party) or
settle any such claim;
provided, however
, that the indemnifying Party shall not enter into any
settlement for damages other than monetary damages without the indemnified Partys written consent,
such consent not to be unreasonably withheld. The indemnified Party shall have the right to
participate, at its own expense and with counsel of its choice, in the defense of any claim or suit
that has been assumed by the indemnifying Party. If the Parties cannot agree as to the application
of Sections 11.1 and 11.2 to any particular Third Party Claim, the Parties may conduct separate
defenses of such Third Party Claim. Each Party reserves the right to claim indemnity from the
other in accordance with Sections 11.1 and 11.2 above upon resolution of the underlying claim,
notwithstanding the provisions of this Section 11.3 requiring the indemnified Party to tender to
the indemnifying Party the exclusive ability to defend such claim or suit.
11.4 Limitation of Liability
. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL,
INCIDENTAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES OR LOSS OF PROFITS ARISING FROM OR
RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH
DAMAGES. NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS SECTION 11.4 IS INTENDED TO OR SHALL LIMIT
OR RESTRICT THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF ANY PARTY UNDER SECTION 11.1 OR 11.2, OR
DAMAGES AVAILABLE FOR A PARTYS BREACH OF CONFIDENTIALITY OBLIGATIONS IN ARTICLE 12, PROVIDED THAT
A PARTYS LIABILITY TO THE OTHER PARTY UNDER THIS SENTENCE SHALL NOT EXCEED $10,000,000, EXCEPT
WHEN SUCH LIABILITY ARISES FROM SUCH PARTYS INTENTIONAL BREACH OF, OR WILLFUL MISCONDUCT
REGARDING, ITS OBLIGATIONS UNDER ARTICLE 12, IN WHICH CASE THERE SHALL BE NO LIMIT TO SUCH
LIABILITY.
11.5 Insurance
. Each Party shall procure and maintain insurance, including product liability
insurance, adequate to cover its obligations hereunder and which are consistent with normal
business practices of prudent companies similarly situated at all times during which any Product is
being clinically tested in human subjects or commercially distributed or sold by such Party. It is
understood that such insurance shall not be construed to create a limit of either Partys liability
with respect to its indemnification obligations under this Article 11. Each Party shall provide
the other Party with written evidence of such insurance upon request, if insurance company so
agrees. Each Party shall provide the other Party with written notice at least thirty (30) days
prior to the cancellation, non-renewal or material change in such insurance or self-insurance which
materially adversely affects the rights of the other Party hereunder.
ARTICLE 12
CONFIDENTIALITY
12.1 Confidentiality
. Except to the extent expressly authorized by this Agreement or
otherwise agreed in writing by the Parties, each Party agrees that it shall keep confidential and
shall not publish or otherwise disclose and shall not use for any purpose other than as provided
34.
for in this Agreement (which includes the exercise of any rights or the performance of any
obligations hereunder) any Confidential Information of the other Party pursuant to this Agreement.
The foregoing confidentiality and non-use obligations shall not apply to any portion of the
Confidential Information that the receiving Party can demonstrate by competent written proof:
(a)
was already known to the receiving Party or its Affiliate, other than under an obligation
of confidentiality, at the time of disclosure by the other Party;
(b)
was generally available to the public or otherwise part of the public domain at the time
of its disclosure to the receiving Party;
(c)
became generally available to the public or otherwise part of the public domain after its
disclosure and other than through any act or omission of the receiving Party in breach of this
Agreement;
(d)
is subsequently disclosed to the receiving Party or its Affiliate by a Third Party who has
a legal right to make such disclosure; or
(e)
is subsequently independently discovered or developed by the receiving Party or its
Affiliate without the aid, application, or use of the disclosing Partys Confidential Information,
as evidenced by a contemporaneous writing.
12.2 Authorized Disclosure
. Notwithstanding the obligations set forth in Section 12.1, a
Party may disclose the other Partys Confidential Information and the terms of this Agreement to
the extent:
(a)
such disclosure: (i) is reasonably necessary for the filing or prosecuting patent rights
as contemplated by this Agreement; or (ii) is reasonably necessary for the prosecuting or defending
litigation as contemplated by this Agreement; or
(b)
such disclosure is reasonably necessary: (i) to such Partys directors, attorneys,
independent accountants or financial advisors for the sole purpose of enabling such directors,
attorneys, independent accountants or financial advisors to provide advice to the receiving Party,
provided that in each such case on the condition that such directors, attorneys, independent
accountants and financial advisors are bound by confidentiality and non-use obligations consistent
with those contained in this Agreement; or (ii) to actual or potential investors and/or acquirors
solely for the purpose of evaluating an actual or potential investment or acquisition; provided
that in each such case on the condition that such actual or potential investors and/or acquirers
are bound by confidentiality and non-use obligations consistent with those contained in this
Agreement;
(c)
such disclosure is required by judicial or administrative process, provided that in such
event such Party shall promptly inform the other Party such required disclosure and provide the
other Party an opportunity to challenge or limit the disclosure obligations.
Confidential Information that is disclosed by judicial or administrative process shall remain
otherwise subject to the confidentiality and non-use provisions of this Article 12, and the Party
disclosing Confidential Information pursuant to law or court order shall take all steps reasonably
35.
necessary, including seeking of confidential treatment or a protective order to ensure the
continued confidential treatment of such Confidential Information; and
(d)
such disclosure is reasonably necessary to its collaborators in its respective territory
(including CROs, hospitals, doctors, consultants, subcontractors and Affiliates) for the purpose of
the development, manufacture and/or commercialization of the Products, solely for the purpose of
carrying out such collaboration, on the condition that such collaborators are bound by
confidentiality and non-use obligations consistent with those contained in this Agreement. For
clarity, Spectrum shall have the right to disclose to its commercial partners in the Retained
Territory (including without limitation Allergan and the Korean Partner), and such commercial
partners shall have the right to use, the Confidential Information of NK, in each case in
connection with the research, development, manufacture and commercialization of products in the
Retained Territory on condition that such partners are bound by confidentiality and non-use
obligations consistent with those contained in this Agreement. For further clarity, NK shall have
the right to disclose to its sublicensees in the NK Territory, and such sublicensees shall have the
right to use, the Confidential Information of Spectrum in accordance with the right granted under
the sublicense under Section 2.1(a) on condition that such sublicensees are bound by
confidentiality and non-use obligations consistent with those contained in this Agreement.
(e)
such disclosure is reasonably necessary to its potential sublicensees to have such
potential sublicensees to evaluate the possibility of sublicenses under Section 2.1(a) on condition
that such potential sublicensees are bound by confidentiality and non-use obligations consistent
with those contained in this Agreement.
12.3 Publication.
NK shall deliver to Spectrum a copy of any proposed publication or
presentation for Spectrums review and approval. Spectrum shall have the right to require
modifications of the proposed publication or presentation for reasons such as: (a) to protect
Spectrums Confidential Information; (b) for trade secret reasons or business reasons; and/or (c)
to delay such submission for an additional ninety (90) days as may be reasonably necessary to seek
patent protection for the Sole Inventions owned by Spectrum or the Joint Invention disclosed in
such proposed submission.
12.4 Publicity; Use of Names.
Subject to Section 12.2 and the rest of this Section 12.4, no
disclosure of the terms of this Agreement may be made by either Party or its Affiliates, and no
Party shall use the name, trademark, trade name or logo of the other Party, its Affiliates or their
respective employee(s) in any publicity, promotion, news release or other public disclosure
relating to this Agreement or its subject matter, without the prior express written permission of
the other Party, except as may be required by law.
(a)
A Party may disclose this Agreement and its terms in securities filings with the
Securities Exchange Commission or other regulatory agency (
SEC
) (or equivalent foreign agency) to
the extent required by law after complying with the procedure set forth in this Section 12.4. In
such event, the Party seeking such disclosure will prepare a draft confidential treatment request
and a proposed redacted version of this Agreement to request confidential
treatment for this Agreement, and the other Party agrees to promptly (and in any event, no
less than seven (7) days after receipt of such confidential treatment request and proposed
redactions) give its input in a reasonable manner in order to allow the Party seeking disclosure to
file its
36.
request within the time lines proscribed by applicable SEC regulations or equivalent
foreign agency regulations. The Party seeking such disclosure shall exercise Commercially
Reasonable Efforts to obtain confidential treatment of this Agreement from the SEC or equivalent
foreign agency as represented by the redacted version reviewed by the other Party.
(b)
Further, each Party acknowledges that the other Party may be legally required to make
public disclosures (including in filings with the SEC or other agency) of certain material
developments or material information generated under this Agreement and agrees that each Party may
make such disclosures as required by law,
provided
that the Party seeking such disclosure first
provides the other Party a copy of the proposed disclosure, and provided further that (except to
the extent that the Party seeking disclosure is required to disclose such information to comply
with applicable laws or regulations) if the other Party demonstrates to the reasonable satisfaction
of the Party seeking disclosure, within three (3) business days of such Partys providing the copy,
that the public disclosure of previously undisclosed information will materially adversely affect
the development and/or commercialization of a Product being developed and/or commercialized, the
Party seeking disclosure will remove from the disclosure such specific previously undisclosed
information as the other Party shall reasonably request to be removed.
(c)
Notwithstanding the foregoing, the Parties have agreed on language of a press release
announcing the collaboration, attached hereto as
Exhibit H
, to be issued promptly after the
execution of this Agreement by both Parties.
(d)
During the Term, each Party shall have the right to issue press release or make a public
announcement concerning the material terms of this Agreement or the Development or
Commercialization of the Product under this Agreement, such as announcing the commencement and
completion of clinical studies for the Products in countries of the NK Territory, the filing and
obtaining of Regulatory Approvals for the Products in countries of the NK Territory, the First
Commercial Sale of the Products in countries of the NK Territory, and the publication of data and
results in accordance with Section 12.3, by providing the other Party with reasonable advance
notice of the content thereof. Such other Party shall have the right to review and comment on such
proposed press release or announcement and the Party seeking such disclosure shall take into
consideration and incorporate when appropriate the comment from the other Party.
(e)
The Parties agree that after a disclosure pursuant to Sections 12.4(a) or (b) has been
reviewed and approved by the other Party, the disclosing Party may make subsequent public
disclosures or issue a press release disclosing the same content without having to obtain the other
Partys prior consent and approval.
(f)
The Parties agree that NK may publish or disclose any data, results and other
information generated from or obtained by the Development hereunder to the extent reasonably
necessary or helpful for the Development or Commercialization of the Product under this Agreement,
subject to Section 12.3.
12.5 Equitable Relief.
Each Party and its Affiliates acknowledge that a breach of this
Article 12 cannot reasonably or adequately be compensated in damages in an action at law and
37.
that
such a breach shall cause the other Party irreparable injury and damage. By reason thereof, each
Party and its Affiliates agree that the other Party shall be entitled, in addition to any other
remedies it may have under this Agreement or otherwise, to preliminary and permanent injunctive and
other equitable relief to prevent or curtail any breach of the obligations relating to Confidential
Information set forth herein by the other Party.
12.6 Obligation Period.
The obligations of the Parties under this Article 12 shall continue
for a period of [***] ([***]) years after the expiration or termination of this Agreement.
ARTICLE 13
TERM AND TERMINATION
13.1 Term
. This Agreement shall become effective on the Effective Date and, unless earlier
terminated pursuant to this Article 13, shall remain in effect, on a country-by-country basis,
until the expiration of the Royalty Term of the Product in such country (
Term
). Upon the
expiration of the Term in a particular country, the license granted to NK under the Spectrum
Technology in such country shall become fully-paid, royalty-free and non-exclusive.
13.2 Termination for Breach or for Other Reasons.
(a) Notice.
If either Party believes that the other Party is in material breach of this
Agreement, then the Party holding such belief (the Non-breaching Party) may deliver notice of
such breach to the other Party (the Notified Party). The Notified Party shall have [***] to cure
such breach to the extent involving non-payment of amounts due hereunder, and [***] to either cure
such breach for all other material breaches, or, if cure of such breach other than non-payment
cannot reasonably be effected within such [***] period, to deliver to the Non-breaching Party a
plan reasonably calculated to cure such breach within a timeframe that is reasonably prompt in
light of the circumstances then prevailing but in no event longer than an additional [***].
Following delivery of such a plan, the Notified Party shall carry out the plan and cure the breach
within the timeframe set forth in the plan and the failure of the Notified Party to cure the breach
within such timeframe shall be result in the immediate and automatic termination of this Agreement
upon the expiration of such timeframe.
(b) Failure to Cure.
If the Notified Party fails to cure a material breach of this Agreement
as provided for in Section 13.2(a), then the Non-Breaching Party may terminate this Agreement upon
written notice to the Notified Party.
(c) Termination by NK.
In the event NK determines at its sole discretion that further
Development or Commercialization of the Product is commercially, financially or otherwise not
advisable or reasonable due to the reasons of (i) efficacy, (ii) safety, (iii) infringement of
Third Partys patent or other intellectual property or (iv) marketability, NK may terminate this
Agreement by giving to Spectrum nine (9)-month written notice to that effect.
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(d) Disputes.
If a Party gives notice of termination under this Section 13.2 and the
other Party disputes whether such termination is proper under this Section 13.2, then the issue of
whether this Agreement may properly be terminated upon expiration of the notice period (unless such
breach is cured as provided in Section 13.2(a)) shall be resolved in accordance with Article 14.
If as a result of such dispute resolution process it is determined that the notice of termination
was proper, then such termination shall be deemed to have been effective ninety (90) days following
the date of the notice of termination (or such other time period applicable pursuant to Section
13.2(a) or Section 13.2(c)). If as a result of such dispute resolution process it is determined
that the notice of termination was improper, then no termination shall have occurred and this
Agreement shall remain in effect.
13.3 Spectrum Rights upon Termination of this Agreement
. In the event this Agreement is
terminated, upon the early termination of this Agreement, the following shall apply (in addition to
any other rights and obligations otherwise under this Agreement with respect to such termination),
subject to Section 13.4 below:
(a) Regulatory Filings; Data
. To the extent permitted by applicable Laws, NK shall transfer
and assign to Spectrum all Regulatory Filings, Regulatory Approvals, and related preclinical,
analytical, and clinical data for the Products throughout the NK Territory.
(b) NK License and Assignment
. NK hereby grants to Spectrum, effective only in event of such
termination, an exclusive, royalty-free license, with the right to grant multiple tiers of
sublicenses if applicable, under NK Technology to Develop, make, have made, use, sell, offer for
sale, have sold, import and otherwise Commercialize the Products in the NK Territory, which license
shall be effective as of the date of such termination. NK hereby assigns to Spectrum, effective
only in the event of such termination, all of its rights and interests in and to the Product Marks
(other than the corporate names of NK) and NK shall provide such further assistance to Spectrum
promptly after the effective date of such termination to effect such assignment.
(c) Revocation of Registration of License.
NK shall, and shall cause its sublicensees to,
execute all documents and give all declarations regarding the licenses or sublicenses and
reasonably cooperate with Spectrum to the extent such documents, declarations and/or cooperation
are required for the revocation of record or registration of the licenses or sublicenses for the
benefit of NK or its sublicensees in the NK Territory made pursuant to Section 2.6.
(d) Transition Assistance
. NK shall provide such assistance, at no cost to Spectrum, as may
be reasonably necessary or useful for Spectrum to commence or continue, at Spectrums cost,
Developing or Commercializing Products in the NK Territory, to the extent NK is then performing or
having performed such activities, including without limitation transferring or amending as
appropriate, upon request of Spectrum, any agreements or arrangements with Third Party vendors to
sell Products in the NK Territory. To the extent that any such contract between NK and a Third
Party is not assignable to Spectrum, then NK shall reasonably cooperate with Spectrum to arrange to
continue to provide and provide such services from such entity.
39.
13.4 Payment by Spectrum
. In the event this Agreement is terminated by NK pursuant to Section
13.2 for Spectrums material breach of its material obligations under this Agreement, in order for
Sections 13.3(a) through (d) to take effect, Spectrum shall first agree in writing to reimburse NK,
in [***] equal monthly installments, for all reasonable and documented out-of-pocket and internal
costs (including labor costs) incurred by NK (or its sublicensees, to the extent NKs assignment
and assistance obligations in Sections 13.3(a) through (d) above in the NK Territory outside of
Japan are fulfilled through such sublicensees) after the Effective Date and prior to the effective
date of such termination that are directly attributable to: (a) the conduct of preclinical,
analytical and clinical studies (including clinical studies in South Korea) using the Product for
the purpose of generating data to support Regulatory Approval for the Product in the Field in the
NK Territory; and (b) the preparation and filing for Regulatory Approval for the Product in the
Field in the NK Territory, including any filing fees associated therewith.
13.5 Survival
. The following provisions shall survive any expiration or termination of this
Agreement: Articles 1, 8 (solely with respect to payments that are due prior to or as of the
effective date of such expiration or termination), 11 (excluding Section 11.5), 12, 14, and 15, and
Sections 2.2 (other than subclause (a)), 9.1, 9.2, 9.3, 10.3, 10.4, 13.1, 13.3, 13.4 and 13.5.
ARTICLE 14
DISPUTE RESOLUTION
14.1 Disputes
. The Parties recognize that disputes as to certain matters may from time to
time arise during the Term which relate to either Partys rights and/or obligations hereunder. It
is the objective of the Parties to establish procedures to facilitate the resolution of disputes
arising under this Agreement in an expedient manner by mutual cooperation and without resort to
litigation. To accomplish this objective, the Parties agree to follow the procedures set forth in
this Article 14 to resolve any controversy or claim arising out of, relating to or in connection
with any provision of this Agreement, if and when a dispute arises under this Agreement.
14.2 Internal Resolution.
With respect to all disputes arising between the Parties under this
Agreement, including, without limitation, any alleged breach under this Agreement or any issue
relating to the interpretation or application of this Agreement, if the Parties are unable to
resolve such dispute within thirty (30) days after such dispute is first identified by either Party
in writing to the other, the Parties shall refer such dispute to the Chief Executive Officers or
the Managing Director of the Parties (or any senior executive reporting directly to either Partys
Chief Executive Officer or Managing Director) for attempted resolution by good faith negotiations
within thirty (30) days after such notice is received.
14.3 Binding Arbitration.
If the Chief Executive Officers or the Managing Director or such
senior executive of the Parties are not able to resolve such disputed matter within thirty (30)
days and either Party wishes to pursue the matter, each such dispute, controversy or claim
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[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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40.
that is not an Excluded Claim (defined in Section 14.4 below) shall be finally resolved by
binding arbitration administered by JAMS pursuant to JAMS Streamlined Arbitration Rules and
Procedures then in effect (the
JAMS Rules
), and judgment on the arbitration award may be entered
in any court having jurisdiction thereof. The Parties agree that:
(a)
The arbitration shall be conducted by a panel of three persons experienced in the
pharmaceutical business: within thirty (30) days after initiation of arbitration, each Party shall
select one person to act as arbitrator and the two Party-selected arbitrators shall select a third
arbitrator within thirty (30) days of their appointment. If the arbitrators selected by the
Parties are unable or fail to agree upon the third arbitrator, the third arbitrator shall be
appointed by JAMS. The place of arbitration shall be Los Angeles, California, and all proceedings
and communications shall be in English.
(b)
Either Party may apply to the arbitrators for interim injunctive relief until the
arbitration award is rendered or the controversy is otherwise resolved. Either Party also may,
without waiving any remedy under this Agreement, seek from any court having jurisdiction any
injunctive or provisional relief necessary to protect the rights or property of that Party pending
the arbitration award. The arbitrators shall have no authority to award punitive or any other type
of damages not measured by a Partys compensatory damage. Each Party shall bear its own costs and
expenses and attorneys fees and an equal share of the arbitrators fees and any administrative
fees of arbitration regardless of the outcome of such arbitration.
(c)
Except to the extent necessary to confirm an award or as may be required by law, neither a
Party nor an arbitrator may disclose the existence, content, or results of an arbitration without
the prior written consent of both Parties. In no event shall an arbitration be initiated after the
date when commencement of a legal or equitable proceeding based on the dispute, controversy or
claim would be barred by the applicable California statute of limitations.
14.4 Excluded Claim.
As used in Section 14.3, the term
Excluded Claim
shall mean a dispute,
controversy or claim that concerns (a) the scope, validity, enforceability, inventorship or
infringement of a patent, patent application, trademark or copyright; or (b) any antitrust,
anti-monopoly or competition law or regulation, whether or not statutory.
ARTICLE 15
MISCELLANEOUS
15.1 Entire Agreement; Amendment
. This Agreement, including the Exhibits hereto, sets forth
the complete, final and exclusive agreement and all the covenants, promises, agreements,
warranties, representations, conditions and understandings between the Parties with respect to the
subject matter hereof and supersedes, as of the Effective Date, all prior agreements and
understandings between the Parties with respect to the subject matter hereof. There are no
covenants, promises, agreements, warranties, representations, conditions or understandings, either
oral or written, between the Parties other than as are set forth herein and therein. No subsequent
alteration, amendment, change or addition to this Agreement shall be binding upon the Parties
unless reduced to writing and signed by an authorized representative of each Party.
41.
15.2 Force Majeure
. Each Party shall be excused from the performance of its obligations under
this Agreement to the extent that such performance is prevented by force majeure and the
nonperforming Party promptly provides notice of the prevention to the other Party. Such excuse
shall be continued so long as the condition constituting force majeure continues and the
nonperforming Party takes reasonable efforts to remove the condition. For purposes of this
Agreement, force majeure shall include conditions beyond the reasonable control of the
nonperforming Party, including without limitation, an act of God or terrorism, involuntary
compliance with any regulation, law or order of any government, war, civil commotion, epidemic,
failure or default of public utilities or common carriers, destruction of production facilities or
materials by fire, earthquake, storm or like catastrophe. Notwithstanding the foregoing, a Party
shall not be excused from making payments owed hereunder because of a force majeure affecting such
Party. If a force majeure persists for more than ninety (90) days, then the Parties will discuss
in good faith the modification of the Parties obligations under this Agreement in order to
mitigate the delays caused by such force majeure.
15.3 Notices
. Any notice required or permitted to be given under this Agreement shall be in
writing, shall specifically refer to this Agreement, and shall be addressed to the appropriate
Party at the address specified below or such other address as may be specified by such Party in
writing in accordance with this Section 15.3, and shall be deemed to have been given for all
purposes (a) when received, if hand-delivered or sent by confirmed facsimile or a reputable courier
service, or (b) five (5) business days after mailing, if mailed by first class certified or
registered airmail, postage prepaid, return receipt requested.
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If to Spectrum:
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Spectrum Pharmaceuticals, Inc.
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701 N. Green Valley Parkway Suite 265
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Henderson, NV 89074
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Attention: Legal Counsel
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Fax: (702) 990-3001
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With copies to:
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Spectrum Pharmaceuticals, Inc.
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157 Technology Drive
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Irvine, CA 92618
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Attention: Legal Counsel
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Fax: (949) 788-6706
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and
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Cooley Godward Kronish LLP
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5 Palo Alto Square
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3000 El Camino Real
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Palo Alto, CA 94306
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Attention: Robert L. Jones, Esq.
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Facsimile: (650) 849-7400
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42.
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If to NK:
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Nippon Kayaku Co., Ltd.
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Tokyo Fujimi Bldg., 11-2,
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Fujimi 1-chome, Chiyoda-ku
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Tokyo 102-8172, Japan
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Attention: General Manager of Licensing Division
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Fax: +81-3-(3237)5920
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15.4 No Strict Construction; Headings
. This Agreement has been prepared jointly and shall not
be strictly construed against either Party. Ambiguities, if any, in this Agreement shall not be
construed against any Party, irrespective of which Party may be deemed to have authored the
ambiguous provision. The headings of each Article and Section in this Agreement have been inserted
for convenience of reference only and are not intended to limit or expand on the meaning of the
language contained in the particular Article or Section.
15.5 Assignment
. Neither Party may assign or transfer this Agreement or any rights or
obligations hereunder without the prior written consent of the other, except that a Party may make
such an assignment without the other Partys consent to Affiliates or to a successor to
substantially all of the business of such Party to which this Agreement relates (whether by merger,
sale of stock, sale of assets or other transaction) (the
Acquisition
). Any permitted successor
or assignee of rights and/or obligations hereunder shall, in writing to the other Party, expressly
assume performance of such rights and/or obligations. Any permitted assignment shall be binding on
the successors of the assigning Party. Any assignment or attempted assignment by either Party in
violation of the terms of this Section 15.5 shall be null, void and of no legal effect.
15.6 Performance by Affiliates
. Each Party may discharge any obligations and exercise any
right hereunder through any of its Affiliates. Each Party hereby guarantees the performance by its
Affiliates of such Partys obligations under this Agreement, and shall cause its Affiliates to
comply with the provisions of this Agreement in connection with such performance. Any breach by a
Partys Affiliate of any of such Partys obligations under this Agreement shall be deemed a breach
by such Party, and the other Party may proceed directly against such Party without any obligation
to first proceed against such Partys Affiliate.
15.7 Further Actions
. Each Party agrees to execute, acknowledge and deliver such further
instruments, and to do all such other acts, as may be necessary or appropriate in order to carry
out the purposes and intent of this Agreement.
15.8 Severability
. If any one or more of the provisions of this Agreement is held to be
invalid or unenforceable by any court of competent jurisdiction from which no appeal can be or is
taken, the provision shall be considered severed from this Agreement and shall not serve to
invalidate any remaining provisions hereof. The Parties shall make a good faith effort to replace
any invalid or unenforceable provision with a valid and enforceable one such that the objectives
contemplated by the Parties when entering this Agreement may be realized.
15.9 No Waiver
. Any delay in enforcing a Partys rights under this Agreement or any waiver as
to a particular default or other matter shall not constitute a waiver of such Partys rights to the
future enforcement of its rights under this Agreement, except with respect to an express written
and signed waiver relating to a particular matter for a particular period of time.
43.
15.10 Independent Contractors
. Each Party shall act solely as an independent contractor, and
nothing in this Agreement shall be construed to give either Party the power or authority to act
for, bind, or commit the other Party in any way. Nothing herein shall be construed to create the
relationship of partners, principal and agent, or joint-venture partners between the Parties.
15.11 English Language.
This Agreement was prepared in the English language, which language
shall govern the interpretation of, and any dispute regarding, the terms of this Agreement. To the
extent this Agreement requires a Party to provide to the other Party Information, correspondence,
notice and/or other documentation, such Party shall provide such Information, correspondence,
notice and/or other documentation in the English language.
15.12 Governing Law
. This Agreement and all disputes arising out of or related to this
Agreement or any breach hereof shall be governed by and construed under the laws of the State of
California, without giving effect to any choice of law principles that would require the
application of the laws of a different state.
15.13 Counterparts
. This Agreement may be executed in one (1) or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument.
44.
Exhibit 10.36
EXECUTION COPY
In Witness Whereof,
the Parties have executed this Agreement in duplicate originals
by their duly authorized representatives as of the Effective Date.
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Spectrum Pharmaceuticals, Inc.
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Nippon Kayaku Co., Ltd.
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By:
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/s/ Rajesh C. Shrotriya, M.D.
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By:
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/s/ Akira Mandai
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Name:
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Rajesh C. Shrotriya, M.D.
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Name:
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Akira Mandai
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Title:
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Chairman & Chief Executive Officer
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Title:
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Managing Director
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45.
Exhibit A
Apaziquone
[***]
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[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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46.
Exhibit B
Spectrum Patents Existing as of the Effective Date
[***]
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[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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47.
Exhibit C
Target Product Profile (TPP)
[***]
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[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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48.
Exhibit D
Certain Spectrum Know-How
[***]
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[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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49.
Exhibit E
NK Development Plan
[***]
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[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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50.
Exhibit F
Outline of Adverse
Reporting Requirements
[***]
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[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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51.
Exhibit G
Spectrum Manufacturing Know-How
[***]
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[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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52.
Exhibit H
Joint Press Release
[On 6 am of November 10 (PST) from Spectrum]
COMPANY CONTACTS
Paul Arndt
Senior Manager, Investor Relations
949-788-6700x216
SPECTRUM PHARMACEUTICALS AND NIPPON KAYAKU ENTER COLLABORATION
AGREEMENT FOR APAZIQUONE IN ASIAN TERRITORIES
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Total Potential Value Of Collaboration Exceeds $151 Million
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Spectrum to Receive an Upfront Payment of $15 Million, up to $136 Million in Milestones,
and Royalties
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Nippon Kayaku Responsible for 100% of Development and Commercial Expenses
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Spectrum Retains Commercial Rights to South Korea
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IRVINE, California November 10, 2009
Spectrum Pharmaceuticals, Inc. (NasdaqGM: SPPI), a
commercial stage biotechnology company with a primary focus in oncology, and Nippon Kayaku today
announced an exclusive collaboration for the development and commercialization of apaziquone in
Asia. Apaziquone is an antineoplastic agent currently being investigated for the treatment of
non-muscle invasive bladder cancer by intravesical instillation. Spectrum Pharmaceuticals has
previously entered into a strategic collaboration with Allergan, Inc. (NYSE: AGN) for North
America, Europe, and other key markets. These two collaborations are representative of the
Companys stated objective of achieving solid strategic partnerships that are aimed at fully
exploiting developmental goals for apaziquone on a worldwide basis.
We are excited to partner apaziquone with a strong Japanese oncology company such as Nippon
Kayaku, said Rajesh C. Shrotriya, Chairman of the Board and Chief Executive Officer of Spectrum
Pharmaceuticals, Inc. Nippon Kayaku is one of the most established and reputable pharmaceutical
companies in Japan and has unparalleled experience in Asia in the field of non-muscle invasive
bladder cancer and prostate cancer. We believe that Nippon Kayaku is a terrific strategic partner
for apaziquone and for Spectrum.
Apaziquone is an ideal candidate to complement our portfolio of 24 anti-cancer products,
said Akira Mandai, Head of Pharmaceuticals Group of Nippon Kayaku
.
We look forward to working
with Spectrum in developing apaziquone for non-muscle invasive bladder cancer.
Under the terms of the agreement, Nippon Kayaku will pay Spectrum an upfront payment of $15 million
and will make additional payments of up to $136 million based on the achievement of certain
regulatory and commercialization milestones. Nippon Kayaku received exclusive rights to apaziquone
for the treatment of non-muscle invasive bladder cancer in Asia, including Japan and China but
excluding South Korea. Nippon Kayaku will conduct the apaziquone clinical trials
53.
pursuant to a
development plan. Nippon Kayaku will be responsible for all expenses relating to the development
and commercialization of apaziquone in the Nippon Kayaku territory.
Spectrum is currently conducting two Phase 3 clinical trials to investigate apaziquones safety and
efficacy in non-muscle invasive bladder cancer. Spectrums goal is to complete enrollment in both
Phase 3 studies by year-end 2009.
About Non-Muscle Invasive Bladder Cancer
Non-muscle invasive bladder cancer is a form of bladder cancer localized in the surface layers of
the bladder and is commonly treated with intravesical therapies. Approximately 70% of all patients
newly diagnosed with bladder cancer have non-muscle invasive bladder cancer.
1
More than
one million patients in the United States, Europe and Japan are estimated to be affected by the
disease, which is treated predominantly by urologists.
2
About Apaziquone
Apaziquone is a drug currently being investigated for the treatment of non-muscle invasive bladder
cancer. Apaziquone, an anti-cancer agent that becomes activated by reductase enzymes found in
cancer cells, is formulated for administration directly into the urinary bladder. Phase 2 data has
confirmed anti-tumor activity in patients with multiple, recurrent non-muscle invasive bladder
cancer, as evidenced by 31 of 46 patients (67%) showing a complete response after receiving six
weekly treatments with 4 mg of apaziquone instilled into the urinary bladder in a marker lesion
study. In another Phase 2 study, apaziquone instilled into the bladder following surgery was well
tolerated and was not absorbed in any detectable amount from the bladder wall into the bloodstream
and therefore, is expected to carry a low risk of systemic toxicity, if any.
The apaziquone registration plan, which the U.S. Food and Drug Administration (FDA) concurred with
under a Special Protocol Assessment, calls for two double blind, placebo-controlled, randomized
Phase 3 clinical studies, each with 562 patients with Ta G1 or G2 low risk non-invasive bladder
cancer. Patients are randomized in a one-to-one ratio to apaziquone or placebo. Under the
protocol, the patients are given a single 4 mg dose following surgical removal of the tumors.
The primary endpoint is a statistically significant difference (p<0.05) in the rate of
tumor recurrence between the two treatment groups by year two. The FDA has granted Fast Track
Designation for the investigation of apaziquone for the treatment of non-muscle invasive bladder
cancer. Spectrum also received scientific advice from the European Medicines Agency
(EMEA) whereby the EMEA agreed that the two Phase 3 studies as designed should be sufficient for a
regulatory decision regarding European registration.
About Nippon Kayaku
Nippon Kayaku is a general chemical company focused on IT, health care and safety systems. The
Companys Pharmaceuticals Group maintains extensive original expertise related to research and
development, production, sales, and aftermarket investigations of anti-cancer drugs. The Companys
lineup of cancer-fighting drugs and cancer supportive products has reached 28 products. Nippon
Kayaku is also strengthening its licensing activities, and is
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1
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Kirkali Z,
et al
. Bladder Cancer:
Epidemiology, Staging and Grading, and Diagnosis. Urology
66
(Suppl 6A): 4-34,
2005.
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2
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For U.S. see National Cancer Institute.
Bethesda, MD, http://seer.cancer.gov/statfacts/html/urinb.html accessed
10-23-2008; For Europe see Globocan 2002 database, http://www-dep.iarc.fr/
accessed 10-23-2008.
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54.
introducing generic products in order
to expand its cancer-related business. For more information, please visit the Companys website at
www.nipponkayaku.co.jp/english/.
About Spectrum Pharmaceuticals
Spectrum Pharmaceuticals is a commercial-stage biotechnology company with a primary focus in
oncology. The Companys strategy is comprised of acquiring and developing a broad and diverse
pipeline of late-stage clinical and commercial products; establishing a commercial organization for
its approved drugs; continuing to build a team with people who have demonstrated skills, passion,
commitment and have a track record of success in its areas of focus; and, leveraging the expertise
of partners around the world to assist it in the execution of its strategy. For more information,
please visit the Companys website at
www.sppirx.com
.
Forward Looking Statements This press release may also contain forward-looking statements
regarding future events and the future performance of Spectrum Pharmaceuticals that involve risks
and uncertainties that could cause actual results to differ materially. These statements include
but are not limited to statements that relate to Spectrums business and its future, Spectrums
ability to identify, acquire, develop and commercialize a broad and diverse pipeline of late-stage
clinical and commercial products, establishing a commercial organization for Spectrums approved
drugs, continuing to build Spectrums team, leveraging the expertise of partners around the world
to assist Spectrum in the execution of its strategy, that apaziquone is expected to carry a low
risk of systemic toxicity, if any, the safety and efficacy of apaziquone and that enrollment in the
Phase 3 clinical trials will be completed by year-end 2009, and any statements that relate to the
intent, belief, plans or expectations of Spectrum or its management, or that are not a statement of
historical fact. Risks that could cause actual results to differ include the possibility that
Spectrums existing and new drug candidates may not prove safe or effective, the possibility that
Spectrums existing and new drug candidates may not receive approval from the FDA, and other
regulatory agencies in a timely manner or at all, the possibility that Spectrums existing and new
drug candidates, if approved, may not be more effective, safer or more cost efficient than
competing drugs, the possibility that Spectrums efforts to acquire or in-license and develop
additional drug candidates may fail, Spectrums lack of revenues, limited marketing experience,
dependence on third parties for clinical trials, manufacturing, distribution and quality control
and other risks that are described in further detail in Spectrums reports filed with the
Securities and Exchange Commission. Spectrum does not plan to update any such forward-looking
statements and expressly disclaim any duty to update the information contained in this press
release except as required by law.
SPECTRUM PHARMACEUTICALS, INC.
®
is a registered trademark of Spectrum, TURNING INSIGHTS
INTO HOPE and the Spectrum Pharmaceutical logos are trademarks owned by Spectrum Pharmaceuticals,
Inc.
Information
regarding Nippon Kayaku has been obtained from Nippon Kayaku and not independently verified by Spectrum.
©
2009 Spectrum Pharmaceuticals, Inc. All Rights Reserved.
55.
EXHIBIT 10.37
CONFIDENTIAL
Execution Copy
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT MARKED WITH [***] HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
LICENSE AND COLLABORATION AGREEMENT
by and between
SPECTRUM PHARMACEUTICALS, INC.
and
TOPOTARGET A/S
CONFIDENTIAL
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ARTICLE 1
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DEFINITIONS
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1
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ARTICLE 2
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GRANT OF RIGHTS
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14
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2.1
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Rights to Spectrum
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14
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2.2
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Sublicense Agreements
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16
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2.3
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Mutual Exclusivity
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16
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2.4
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Other HDAC Inhibitors
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17
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2.5
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Right of Negotiation for China Territory
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18
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2.6
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Backup Compound
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19
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2.7
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No Other Licenses
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22
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ARTICLE 3
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GOVERNANCE
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22
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3.1
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Alliance Manager
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22
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3.2
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Joint Development Committee
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22
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3.3
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Meetings of the JDC
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22
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3.4
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Responsibilities of the JDC
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22
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3.5
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Areas Outside the JDCs Authority; Other
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23
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3.6
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JDC Decisions
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23
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3.7
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Joint Commercialization Committee
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24
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3.8
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Meetings of JCC
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24
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3.9
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Responsibilities of the JCC
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24
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3.10
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Areas Outside the JCCs Authority; Other
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25
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3.11
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JCC Decisions
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25
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3.12
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Subcommittees
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26
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3.13
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Appointment of Alliance Managers and Members of JDC and JCC
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26
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ARTICLE 4
|
|
DEVELOPMENT; REGULATORY
|
|
|
27
|
|
|
|
|
|
|
|
|
4.1
|
|
Development
|
|
|
27
|
|
4.2
|
|
Development Plan
|
|
|
27
|
|
4.3
|
|
Spectrum Development Obligations
|
|
|
30
|
|
4.4
|
|
Development Activities and Development Costs
|
|
|
31
|
|
4.5
|
|
Regulatory Matters
|
|
|
34
|
|
4.6
|
|
Rights of Reference to Regulatory Materials; Use of Clinical Data
|
|
|
35
|
|
4.7
|
|
Adverse Event Reporting and Safety Data Exchange
|
|
|
36
|
|
4.8
|
|
Communications with Regulatory Authorities
|
|
|
36
|
|
4.9
|
|
Regulatory Inspection or Audit
|
|
|
37
|
|
4.10
|
|
Product Withdrawals and Recalls
|
|
|
37
|
|
|
|
|
|
|
|
|
ARTICLE 5
|
|
COMMERCIALIZATION; MANUFACTURING
|
|
|
37
|
|
|
|
|
|
|
|
|
5.1
|
|
Commercialization by the Parties
|
|
|
37
|
|
5.2
|
|
Commercialization by Spectrum
|
|
|
37
|
|
5.3
|
|
Launch Efforts
|
|
|
39
|
|
5.4
|
|
Commercialization Reporting
|
|
|
39
|
|
5.5
|
|
Cross-Territory Sales
|
|
|
39
|
|
5.6
|
|
Manufacture and Supply of Product
|
|
|
40
|
|
5.7
|
|
Promotional Materials
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARTICLE 6
|
|
TOPOTARGET CO-PROMOTION RIGHT
|
|
|
44
|
|
|
|
|
|
|
|
|
6.1
|
|
Option Exercise
|
|
|
44
|
|
6.2
|
|
Grant of Co-Promotion Right
|
|
|
44
|
|
|
|
|
|
|
|
|
ARTICLE 7
|
|
FINANCIALS
|
|
|
47
|
|
|
|
|
|
|
|
|
7.1
|
|
License Fee
|
|
|
47
|
|
7.2
|
|
Development Milestone Payments
|
|
|
47
|
|
7.3
|
|
Sales Milestone Payments
|
|
|
49
|
|
7.4
|
|
Royalties
|
|
|
49
|
|
7.5
|
|
Sublicense Revenue
|
|
|
50
|
|
7.6
|
|
Spectrum Payments and Reports
|
|
|
51
|
|
7.7
|
|
Taxes
|
|
|
51
|
|
7.8
|
|
No Setoff
|
|
|
51
|
|
7.9
|
|
Late Payments
|
|
|
51
|
|
7.10
|
|
Records; Audits
|
|
|
52
|
|
|
|
|
|
|
|
|
ARTICLE 8
|
|
INTELLECTUAL PROPERTY
|
|
|
52
|
|
|
|
|
|
|
|
|
8.1
|
|
Ownership of Inventions
|
|
|
52
|
|
8.2
|
|
Disclosure of Inventions
|
|
|
52
|
|
8.3
|
|
Prosecution of Patents
|
|
|
52
|
|
8.4
|
|
Enforcement of TopoTarget Technology
|
|
|
55
|
|
8.5
|
|
Patent Marking
|
|
|
56
|
|
8.6
|
|
Trademarks
|
|
|
56
|
|
8.7
|
|
Infringement of Third Party IP
|
|
|
57
|
|
8.8
|
|
The CREATE Act
|
|
|
58
|
|
8.9
|
|
License to TopoTarget
|
|
|
58
|
|
|
|
|
|
|
|
|
ARTICLE 9
|
|
REPRESENTATIONS, WARRANTIES AND COVENANTS
|
|
|
59
|
|
|
|
|
|
|
|
|
9.1
|
|
Mutual Representations and Warranties
|
|
|
59
|
|
9.2
|
|
TopoTarget Technology
|
|
|
60
|
|
9.3
|
|
TopoTarget Trademark Representations and Warranties
|
|
|
61
|
|
9.4
|
|
Compliance with Law
|
|
|
61
|
|
9.5
|
|
Representations regarding Debarment
|
|
|
61
|
|
9.6
|
|
Regulatory Matters
|
|
|
62
|
|
9.7
|
|
Representations regarding Spectrum NDA Shares
|
|
|
63
|
|
9.8
|
|
No Broker
|
|
|
64
|
|
9.9
|
|
Material Contracts
|
|
|
64
|
|
9.10
|
|
No Other Representations or Warranties
|
|
|
64
|
|
|
|
|
|
|
|
|
ARTICLE 10
|
|
INDEMNIFICATION
|
|
|
64
|
|
|
|
|
|
|
|
|
10.1
|
|
General Indemnification by TopoTarget
|
|
|
64
|
|
10.2
|
|
General Indemnification by Spectrum
|
|
|
65
|
|
10.3
|
|
Product Liability Indemnification
|
|
|
65
|
|
10.4
|
|
Indemnification Procedures
|
|
|
66
|
|
10.5
|
|
Limitation of Liability
|
|
|
67
|
|
10.6
|
|
Insurance
|
|
|
68
|
|
-ii-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARTICLE 11
|
|
CONFIDENTIALITY
|
|
|
68
|
|
|
|
|
|
|
|
|
11.1
|
|
Confidentiality
|
|
|
68
|
|
11.2
|
|
Authorized Disclosure
|
|
|
69
|
|
11.3
|
|
Publicity; Terms of Agreement
|
|
|
70
|
|
11.4
|
|
Publications
|
|
|
70
|
|
11.5
|
|
Clinical Trial Registries
|
|
|
71
|
|
|
|
|
|
|
|
|
ARTICLE 12
|
|
TERM AND TERMINATION
|
|
|
71
|
|
|
|
|
|
|
|
|
12.1
|
|
Term
|
|
|
71
|
|
12.2
|
|
Termination by Spectrum at Will
|
|
|
71
|
|
12.3
|
|
Termination by Spectrum for Breach by TopoTarget
|
|
|
71
|
|
12.4
|
|
Alternate Remedies for Breach by TopoTarget
|
|
|
72
|
|
12.5
|
|
Termination by TopoTarget
|
|
|
73
|
|
12.6
|
|
Termination Upon Bankruptcy
|
|
|
74
|
|
12.7
|
|
Effect of Termination of the Agreement
|
|
|
75
|
|
12.8
|
|
Accrued Liabilities; Other Remedies
|
|
|
76
|
|
12.9
|
|
Rights in Bankruptcy
|
|
|
76
|
|
12.10
|
|
Survival
|
|
|
77
|
|
|
|
|
|
|
|
|
ARTICLE 13
|
|
DISPUTE RESOLUTION
|
|
|
77
|
|
|
|
|
|
|
|
|
13.1
|
|
Disputes
|
|
|
77
|
|
13.2
|
|
Injunctive Relief
|
|
|
78
|
|
|
|
|
|
|
|
|
ARTICLE 14
|
|
MISCELLANEOUS
|
|
|
78
|
|
|
|
|
|
|
|
|
14.1
|
|
Entire Agreement; Amendment
|
|
|
78
|
|
14.2
|
|
Force Majeure
|
|
|
78
|
|
14.3
|
|
Notices
|
|
|
79
|
|
14.4
|
|
No Strict Construction; Headings; Interpretation
|
|
|
79
|
|
14.5
|
|
Assignment
|
|
|
80
|
|
14.6
|
|
Records Retention
|
|
|
80
|
|
14.7
|
|
Governing Law
|
|
|
80
|
|
14.8
|
|
No Third Party Beneficiaries
|
|
|
80
|
|
14.9
|
|
Performance by Affiliates
|
|
|
81
|
|
14.10
|
|
Further Assurances and Actions
|
|
|
81
|
|
14.11
|
|
Compliance with Applicable Law
|
|
|
81
|
|
14.12
|
|
Severability
|
|
|
81
|
|
14.13
|
|
No Waiver
|
|
|
81
|
|
14.14
|
|
Independent Contractors
|
|
|
82
|
|
14.15
|
|
Counterparts
|
|
|
82
|
|
-iii-
CONFIDENTIAL
LICENSE AND COLLABORATION AGREEMENT
This License and Collaboration Agreement
(the
Agreement
) is entered into as of the
2
nd
day of February, 2010 (the
Effective Date
) by and between
TopoTarget A/S
,
a Danish corporation having its principal offices at Symbion Science Park, Fruebjergvej 3, 2100
København, Denmark (
TopoTarget
), and
Spectrum Pharmaceuticals, Inc
, a Delaware
corporation having a place of business at 701 N. Green Valley Parkway, Henderson, Nevada 89074
U.S.A. (
Spectrum
). TopoTarget and Spectrum are sometimes referred to herein individually as a
Party
and collectively as the
Parties
.
Recitals
TopoTarget owns certain intellectual property rights relating to belinostat (PXD 101), including
the TopoTarget Patents (as defined herein).
Spectrum and TopoTarget desire to establish a collaboration for the continued development and
commercialization of belinostat worldwide.
TopoTarget desires to grant, and Spectrum desires to accept, an exclusive license to develop and
commercialize Compounds and Products in the Territory (as such terms are defined herein).
Now Therefore
, in consideration of the foregoing premises and the mutual promises,
covenants and conditions contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as
follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following initially capitalized terms, whether used in the singular
or plural form, shall have the meanings set forth in this Article 1.
1.1
Acquiring Group
has the meaning set forth in Section 1.13.
1.2
Acquisition
means (a) any consolidation or merger of a Third Party corporation or other
entity or person with or into a Party, or any other corporate reorganization in which the
shareholders holding capital stock of the Third Party immediately prior to such consolidation,
merger or reorganization represents less than fifty percent (50%) of the voting power of the
surviving entity (or, if the surviving entity is a wholly owned subsidiary, its parent) immediately
after such consolidation, merger or reorganization or (b) any transaction or series of related
transactions, as a result of which a Party shall have become, directly or indirectly, the
beneficial owner of the securities of the Third Party representing fifty percent (50%) or more of
the Third Partys voting power, or (c) the consummation of a sale of all or substantially all of
the assets of the Third Party in any transaction or series of related transactions to a Party.
1.3
Additional Indication
has the meaning set forth in Section 7.2(e).
1.4
Affiliate
means, with respect to a particular Person, any person, firm, trust,
corporation, company, partnership, or other entity or combination thereof that directly or
indirectly controls, is controlled by or is under common control with such Person. For the
purposes of this definition, the word control (including, with correlative meaning, the terms
controlled by or under the common control with) means (a) ownership of fifty percent (50%) or
more, including ownership by trusts with substantially the same beneficial interest, of the voting
and equity rights of such person, firm, trust, corporation, company, partnership or other entity or
combination thereof, or (b) the power to direct the management of such person, firm, trust,
corporation, company, partnership, or other entity or combination thereof.
1.5
Alliance Manager
has the meaning set forth in Section 3.1.
1.6
ANDA
means an Abbreviated New Drug Application, as described in Section 505(j) of the
FD&C Act, or any similar procedure in any country in the Territory.
1.7
Applicable Law
means any and all statutes, ordinances, regulations or rules of any kind
whatsoever and any and all requirements under permits, orders, decrees, judgments or directives and
requirements of applicable Governmental Authorities, in each case pertaining to any of the
activities contemplated by this Agreement, including any regulations promulgated by any Regulatory
Authority in the Territory, all as amended from time to time.
1.8
Backup Compound
means any one, but only one, of either an Other HDAC Inhibitor or the
Preliminary Backup Compound that is designated by Spectrum pursuant to Section 2.6(b) for
Development and Commercialization in place of Belinostat, all in accordance with Section 2.6.
1.9
Backup Facility
has the meaning set forth in Section 5.6(c)(v)(1).
1.10
Belinostat
has the meaning set forth in Section 1.19.
1.11
Business Day
means each day of the week excluding Saturday, Sunday or a day on which
banking institutions in New York, New York USA or Copenhagen, Denmark are closed.
1.12
Cancer Field
means the detection, treatment and/or prevention of cancer.
1.13
Change of Control
means, with respect to a Party, any of the following events: (a) any
Third Party (or group of Third Parties acting in concert) acquires, directly or indirectly, shares
of such Party representing fifty percent (50%) or more of the voting shares (where voting refers to
being entitled to vote for the election of directors) then outstanding of such Party; (b) such
Party consolidates with or merges into another corporation or entity which is a Third Party, or any
corporation or entity which is a Third Party consolidates with or merges into such Party, in either
event pursuant to a transaction in which more than fifty percent (50%) of the voting shares of the
acquiring or resulting entity outstanding immediately after such consolidation or merger is not
held by the holders of the outstanding voting shares of such Party preceding such consolidation or
merger; or (c) such Party conveys, transfers or leases all or substantially all of its assets to a
Third Party. Such Third Party or group of Third Parties, and its and/or their
2
respective Affiliates (other than the Party and its Affiliates at the time of the Change of
Control of such Party), are hereinafter referred to as the
Acquiring Group
.
1.14
China Exclusivity Period
has the meaning set forth in Section 2.5.
1.15
China Territory
means the widely recognized territory of the Peoples Republic of
China, including Hong Kong, and Macau. For the purpose of this Agreement, China Territory will
include the disputed region of Taiwan, but not include territories disputed by India.
1.16
Commercialization
means the marketing, Promotion, sale, offering for sale, importation
and/or distribution of Products for use anywhere in the world, including activities directed to
obtaining pricing or reimbursement approval.
Commercialize
has a correlative meaning.
1.17
Commercially Reasonable Efforts
means, with respect to a Partys obligations under this
Agreement, the reasonable and good faith efforts normally used by a company in the pharmaceutical
industry for a product (regardless of whether the product is owned by the company or the company
has obtained rights to such product), which is of similar market potential at a similar stage in
its development or product life, which level of effort is at least commensurate with the level of
effort that a Party would devote to its own internally discovered compounds or products that are of
most closely comparable market potential at a most closely comparable stage in their development or
product life, taking into account regulatory requirements of safety and efficacy, product profile,
the competitiveness of the marketplace, the proprietary position of the product, and the cost of
scaling up a manufacturing process (including facility costs) and the market potential of the
applicable product.
1.18
Common Stock
has the meaning set forth in Section 7.2(a).
1.19
Compound
means (a) any compound that [***] that is Controlled by TopoTarget or its
Affiliates either prior to the Effective Date or during the Term and/or (b) any salt, free acid,
free base, clathrate, solvate, hydrate, hemihydrate, anhydride, ester, chelate, conformer,
congener, crystal form, crystal habit, polymorph, amorphous solid, homolog, isomer, stereoisomer,
enantiomer, racemate, prodrug, isotopic or radiolabeled equivalent, metabolite, conjugate, complex
or mixture of any of the foregoing. For clarity, Compound includes the active pharmaceutical
ingredient known as belinostat (PXD-101), together with any salt, free acid, free base, clathrate,
solvate, hydrate, hemihydrate, anhydride, ester, chelate, conformer, congener, crystal form,
crystal habit, polymorph, amorphous solid, homolog, isomer, stereoisomer, enantiomer, racemate,
prodrug, isotopic or radiolabeled equivalent, metabolite, conjugate, complex or mixture thereof
(
Belinostat
).
1.20
Confidential Information
means, with respect to a Party, all proprietary Information of
such Party that is disclosed to or accessed by the other Party under this Agreement.
1.21
Control
means, with respect to any material, Information, or intellectual
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
3
property right, that an entity owns or has a license, right or covenant to such material,
Information, or intellectual property right and has the ability to grant to another entity access,
a license, or a sublicense right or covenant (as applicable) to such material, Information, or
intellectual property right on the terms and conditions set forth herein without (a) violating the
terms of any then-existing agreement or other arrangement with any Third Party or (b) increasing at
any time the amount of any payments required under any such agreement or arrangement executed after
the Effective Date. Notwithstanding anything to contrary herein, in the event of a Change of
Control of a Party, any material, Information or intellectual property of any Person within the
Acquiring Group shall not be included in any of the licenses or other rights granted under this
Agreement by such Party, and the term Control shall not include such material, Information or
intellectual property, except to the extent any material, Information or intellectual property is
conceived, reduced to practice, authored, developed, generated or otherwise made by any Person
within the Acquiring Group as part of the activities under this Agreement.
1.22
Co-Promotion Agreement
has the meaning set forth in Section 6.2.
1.23
Co-Promotion Commencement Date
has the meaning set forth in Section 6.2(a).
1.24
Co-Promotion Option
has the meaning set forth in Section 5.2(b)(iii).
1.25
Co-Promotion Option Period
has the meaning set forth in Section 5.2(b)(iii).
1.26
Co-Promotion Right
has the meaning set forth in Section 6.2.
1.27
Co-Promotion Term
has the meaning set forth in Section 6.2(a).
1.28
Cost of Goods
means (a) with respect to any Product or a component thereof
manufactured, packaged, transferred, validated, sterilized and/or quality-tested, in part or
solely, by a Third Party or Third Parties, the sum of: [***]; and
(b) if a Product is manufactured, packaged, transferred, validated, sterilized and quality
tested solely by TopoTarget and/or its Affiliates, the sum of: [***].
1.29
Covering
means, with respect to a TopoTarget Patent and the subject matter at issue,
that, but for a license granted to Spectrum, its Affiliates or sublicensees under a Valid Claim
included in the TopoTarget Patent, the manufacture, use, sale or importation by Spectrum of the
subject matter at issue would infringe such Valid Claim.
1.30
CUP Indication
means cancer of unknown primary origin.
1.31
Detail or
"
Detailing
means each separate face-to-face contact by a professional sales
representative with a physician or other professional with authority to write prescriptions during
which time the promotional message involving a Product is presented and is a topic of discussion.
When used as a verb,
Detail
shall mean to engage in a Detail.
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
4
1.32
Development
means all activities worldwide that relate to obtaining, maintaining
or expanding Regulatory Approval of Product. This includes (a) research, preclinical testing,
toxicology, chemical process, formulation, manufacturing and clinical studies of Product; (b)
preparation, submission, review, and development of data or information for the purpose of
submission to a Governmental Authority to obtain, maintain and/or expand Regulatory Approval of
Product; and (c) post-Regulatory Approval product support for Product (including laboratory and
clinical efforts directed toward the further understanding of the safety and efficacy of Product).
Develop
and
Developed
have correlative meanings.
1.33
Development Costs
means all direct and indirect expenditures actually incurred by the
Parties after the Effective Date in connection with the Development of a Product for any indication
in the Field in accordance with the Development Plan, to the extent such direct expenditures are
directly related to the Development Program and such indirect expenditures are allocated based upon
the proportion of such expenditures directly attributable to the support of the applicable
activity, including expenditures for FTEs at the FTE Rate and the following expenditures to the
extent such items are customary under industry practices: (a) expenditures for Development
activities incurred by a Party or paid by such Party to subcontractors or other Third Parties; (b)
FTEs engaged in planning Publications related to Development activities; (c) expenditures for
safety and pharmacovigilance activities; and (d) other expenditures mutually agreed to by the
Parties during the Term in connection with the Development of any Product.
The Parties agree that the following expenditures shall not be considered Development Costs:
(i) any expenditures associated with manufacturing Product used after the Effective Date in
clinical trials and non-clinical studies in support of Development of a Product, including costs
associated with chemical, pharmaceutical and other process development pursuant to Section 5.6(b),
(ii) expenditures associated with the conduct of Phase 4 Clinical Trials of Products; (iii)
Regulatory Costs; (iv) amortization and depreciation expenses; (v) deductions, credits, interest
expenses including taxes and extraordinary or nonrecurring losses customarily deducted by a Party
in calculating and reporting consolidated net income; (vi) manufacturing facility capital costs,
capital expenditures, including purchases of facilities, property or equipment (unless such
equipment is exclusively used in the Development Program); and (vii) property taxes and any other
taxes not related to Development of Products in the Field.
1.34
Development Plan
has the meaning set forth in Section 4.2(b).
1.35 [***].
1.36
Eligible HDAC Inhibitors
has the meaning set forth in Section 2.6(a).
1.37
Exclusivity Period
has the meaning set forth in Section 2.3.
1.38
Existing Confidentiality Agreement
means the confidentiality agreement between the
Parties dated October 9, 2009.
1.39
FDA
means the United States Food and Drug Administration or its successor.
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
5
1.40
FD&C Act
means the United States Federal Food, Drug and Cosmetic Act.
1.41
Field
means all uses of any Compound or Product, alone or in combination with any other
drug or pharmaceutical product.
1.42
Field Personnel
means a Spectrum FTE not based at Spectrums principal place of
business who is a sales representative, MSL or account manager working in the field visiting
physicians and other customers or potential customers to educate them or market and Promote the
Products.
1.43
First Commercial Sale
means, with respect to a Product, the first sale for use or
consumption by any person of such Product in a country after Regulatory Approval has been granted
by the governing Regulatory Authority of such country, provided that sale of Product for clinical
or other research or compassionate use shall not constitute a First Commercial Sale.
1.44
First Indication
means, with respect to a Product, the first indication for which
Regulatory Approval is received from the FDA for such Product, whether or not the PTCL Indication.
1.45
First Non-PTCL Indication
means, with respect to a Product, the first indication for
which Regulatory Approval is received from the FDA for such Product, excluding the PTCL Indication.
1.46
FTE Rate
means an initial annual rate of [***] Dollars ($[***]) per FTE. The FTE Rate
for each FTE shall include compensation and all employee benefits, allocated travel costs (not
including travel costs budgeted for clinical trials and included as a separate line item in the
Development Plan budget and reimbursed as such), allocated equipment maintenance costs, utilities,
waste removal, and facilities expenses, including allocated building operating costs, allocated
depreciation, utilities, telephone, and repairs and maintenance, regardless of whether the same are
considered allocable overhead, and there shall be no additional charge for such items or any other
general and administrative costs; but shall not include any costs described above specifically and
forming a part of the independent line items of the Development Plan budget and reimbursed as such.
The FTE Rate shall be adjusted annually to reflect any percentage increase or decrease (as the
case may be) in the Consumer Price Index for the US City Average (all times) (
CPI
) (based on the
cumulative change in the CPI index from the Effective Date to the index most recently available at
the time of any such adjustment).
1.47
Full Time Equivalent
or
FTE
means one or more individuals at Spectrum or TopoTarget
or their respective Affiliates who spend time and effort working on a specific project or task
pursuant to the Development Plan or otherwise as contemplated by this Agreement whose time and
effort is equivalent to the time and effort of one (1) employee devoted exclusively to the project
or task based on 1,860 person-hours or greater per year.
1.48
GAAP
has the meaning set forth in Section 1.73.
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
6
1.49 [***].
1.50
Generic Product
means, on a country-by-country basis, any pharmaceutical product sold
by a Third Party which (a) contains a Compound which is the same active ingredient (or any salt,
free acid, free base, clathrate, solvate, hydrate, hemihydrate, anhydride, ester, chelate,
conformer, congener, crystal form, crystal habit, polymorph, amorphous solid, homolog, isomer,
stereoisomer, enantiomer, racemate, prodrug, isotopic or radiolabeled equivalent, metabolite,
conjugate, complex or mixture of any of the foregoing) as an approved Product of Spectrum, its
sublicensee and their respective Affiliates and (b) is approved under an ANDA or under 505(b)(2) of
the FD&C Act or any similar abbreviated route of approval in any country in the Territory.
1.51
Governmental Authority
means any multi-national, federal, state, county, local,
municipal or other government authority or self regulating organization of any nature (including
any governmental division, subdivision, department, agency, bureau, branch, office, commission,
council, court or other tribunal), including the United States Securities and Exchange Commission,
The NASDAQ Stock Market, Inc. and the Copenhagen Stock Exchange.
1.52
HDAC Inhibitor
means any compound that inhibits one or more histone deacetylase enzymes
or activity.
1.53
HDAC Inhibitor Information
has the meaning set forth in Section 2.6(a).
1.54
IND
means an Investigational New Drug Application, as defined in the FD&C Act.
1.55
Indemnification Claim Notice
has the meaning set forth in Section 10.4.
1.56
Indemnified Party
has the meaning set forth in Section 10.4.
1.57
Indemnifying Party
has the meaning set forth in Section 10.4.
1.58
Information
means any data, results, and information of any type whatsoever, in any
tangible or intangible form, including know-how, trade secrets, practices, techniques, methods,
processes, inventions, developments, specifications, formulations, formulae, software, algorithms,
marketing reports, expertise, stability, technology, data including pharmacological, biological,
chemical, biochemical, toxicological, and clinical test data, analytical and quality control data,
stability data, studies and procedures.
1.59
Initial Development Plan
has the meaning set forth in Section 4.2(a).
1.60
Initial Funding Cap
has the meaning set forth in Section 4.4(d).
1.61
Initial Funding Period
has the meaning set forth in Section 4.4(d).
1.62
Issuance Date
has the meaning set forth in Section 7.2(a).
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
7
1.63
IST
has the meaning set forth in Section 4.2(a).
1.64
Joint Inventions
has the meaning set forth in Section 8.1.
1.65
Joint Patent
has the meaning set forth in Section 8.3(b).
1.66
Joint Commercialization Committee
or
JCC
means the joint commercialization committee
formed by the Parties as described in Section 3.7.
1.67
Joint Development Committee
or
JDC
means the joint development committee formed by
the Parties as described in Section 3.2.
1.68 [***].
1.69
NCI
has the meaning set forth in Section 4.2(a).
1.70
NCI Trial
has the meaning set forth in Section 4.2(c).
1.71
NDA
means a New Drug Application or supplemental New Drug Application, as defined in
the FD&C Act.
1.72
Negotiation Period
has the meaning set forth in Section 2.4(b) or Section 2.5, as
applicable.
1.73
Net Sales
means, for any period, the aggregate of the gross amounts invoiced or
otherwise billed by Spectrum, its Affiliates and sublicensees (
Selling Party
) for arms length
sales or other commercial disposition of a Product to a Third Party purchaser, less the following
to the extent specifically related to the Product and actually allowed, incurred or paid during
such period (collectively,
Net Sales Deductions
):
(a) discounts, including cash, trade and quantity discounts, price reduction or incentive
programs, retroactive price adjustments with respect to sales of such Product, charge-back
payments, and rebates granted to managed health care organizations or to federal, state and local
governments (or their respective agencies, purchasers and reimbursers) or to trade customers,
including wholesalers and chain and pharmacy buying groups;
(b) credits or allowances taken upon rejections or returns of Products, including for recalls
or damaged goods;
(c) freight, postage, shipping and insurance charges for delivery of such Product actually
paid;
(d) customs duties, surcharges and other governmental charges incurred in connection with the
exportation or importation of such Product;
(e) bad debts relating to sales of Products that are actually written off by the
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
8
Selling Party (it being understood that Net Sales will include all amounts received for any
bad debts at a subsequent date);
(f) taxes, duties or other governmental charges levied on, absorbed or otherwise imposed on
sale of such Product, including value-added taxes, or other governmental charges otherwise measured
by the billing amount, as adjusted for rebates and refunds, but specifically excluding taxes based
on net income of the Selling Party; and
(g) the amount of any TopoTarget Margin (as defined in Section 5.6(c)(ii)) paid by Spectrum to
TopoTarget as part of the Commercial Supply Price pursuant to the Commercial Supply Agreement;
provided that all of the foregoing deductions are incurred in the ordinary course and calculated in
accordance with then-current generally accepted accounting principles in the United States,
consistently applied (
GAAP
) during the applicable calculation period throughout the Selling
Partys organization.
Notwithstanding the foregoing, in the event a Product is (i) sold in the form of a combination
product containing one or more active ingredients which are not Products or (ii) sold under a
bundled or capitated arrangement with one or more products which are not Compounds or Products or
(iii) sold under an arrangement whereby the sale of Product is only available with or conditioned
upon the purchase of other products (a
Combination Product
), then Net Sales for such Combination
Product shall be calculated, on a country-by-country basis, by multiplying actual Net Sales of such
Combination Product by the fraction A/(A+B), where A is the average invoiced sales amount of the
Product if sold separately by the Selling Party in finished form, and B is the average invoiced
sales amount of all other active ingredients or products in finished form in such country, less the
Net Sales Deductions.
If, on a country-by-country basis, either the Product or the other active ingredients or products
of the Combination Product are not sold separately in finished form in such country, Net Sales of
the Combination Product shall be determined by the Parties in good faith based on the relative fair
market value for the Product and each active ingredient or product in finished form, as applicable.
For sake of clarity and avoidance of doubt, the transfer of Product by a Selling Party or one of
its Affiliates to another Affiliate of such Selling Party or to a sublicensee of such Selling Party
for resale shall not be considered a sale; in such cases, Net Sales shall be determined based on
the amount invoiced or otherwise billed by such Affiliate or sublicensee to an independent Third
Party, less the Net Sales Deductions allowed under this Section. Notwithstanding the foregoing,
sales of Product by Spectrum to a bona fide Third Party distributor in an arms length transaction
shall be considered a sale to a Third Party customer and Net Sales shall be determined based on all
amounts invoiced or otherwise billed to, or other consideration paid by, the distributor, less the
Net Sales Deductions allowed under this Section. Any Products used (but not sold for more than
nominal consideration) for Promotional, advertising or humanitarian purposes or used (but not sold
for more than nominal consideration) for clinical or other research purposes shall not be
considered in determining Net Sales hereunder.
9
1.74
Net Sales Deductions
has the meaning set forth in Section 1.73.
1.75
NSCLC Indication
means non small cell lung cancer.
1.76
Permitted Encumbrances
means (i) assessments and other governmental charges not yet due
and payable; (ii) mechanics, workmens, repairmens, warehousemens, carriers or other like liens
arising or incurred in the ordinary course of business or other encumbrances that are a matter of
public record; and (iii) all notices, orders, demands, proposals or requirements of any
governmental authority which, in the case of each of (i) through (iii), individually are not
material and which do not individually materially adverse affect the use of such property in the
manner currently being utilized by the Products. The Permitted Encumbrances as of the Effective
Date are listed on
Exhibit H
.
1.77
Person
means an individual, partnership, joint venture, corporation, limited liability
company, trust, unincorporated organization or other similar entity or governmental authority.
1.78
Phase 4 Clinical Trial
means a human clinical trial or other study of a Product in a
particular indication conducted after Regulatory Approval of such Product for such indication has
been obtained from an appropriate Regulatory Authority, which trial or study is (a) conducted
voluntarily by a Party to enhance marketing or scientific knowledge of the Product, or (b)
conducted due to a request or requirement of a Regulatory Authority.
1.79
Preliminary Backup Compound
has the meaning set forth in Section 2.6(a).
1.80
Product
means any and all pharmaceutical preparations that contain a Compound in any
formulation and any dosage strength, including Belinostat and all line extensions thereof.
1.81
Product Liability
means any product liability claims asserted or filed by Third Parties
(without regard to their merit or lack thereof), seeking damages or equitable relief of any kind,
relating to personal injury, wrongful death, medical expenses, an alleged need for medical
monitoring, consumer fraud or other alleged economic losses, allegedly caused by any Product, and
including claims by or on behalf of users of any Product (including spouses, family members and
personal representatives of such users) relating to the use, sale, distribution or purchase of any
Product sold by a Party or its distributors or sublicensees, or any Affiliate thereof, including,
but not limited to claims by third party payers, such as insurance carriers and unions.
1.82
Promote
means those activities, including Detailing and distributing samples of a
product, normally undertaken by a pharmaceutical companys sales force to implement marketing plans
and strategies aimed at encouraging the appropriate use of a particular prescription pharmaceutical
product. When used as a verb,
Promote
shall mean to engage in such activities.
Promotion
and
Promotional
have correlative meanings.
1.83
Promotional Materials
means all training materials and all written, printed, graphic,
electronic, audio or video matter, including advertisements, sales visual aids, leave items,
formulary binders, reprints, direct mail, Internet postings and broadcast advertisements, in
10
each case created by Spectrum or on its behalf, and used or intended for use by the Sales
Forces in connection with any Promotion of any Product in the Territory under this Agreement.
1.84
PTCL Indication
means peripheral T-cell lymphoma disease.
1.85
Publication
has the meaning set forth in Section 11.4.
1.86
Registration Rights and Stockholder Agreement
means the Registration Rights and
Stockholder Agreement being executed as of the date hereof between Spectrum and TopoTarget relating
to the Spectrum NDA Shares.
1.87
Regulatory Approval
means all approvals necessary for the manufacture, marketing,
importation and sale of a Product for one or more indications in a country or regulatory
jurisdiction, which may include satisfaction of all applicable regulatory and notification
requirements, but which shall exclude any pricing and reimbursement approvals.
1.88
Regulatory Authority
means, in a particular country or regulatory jurisdiction, any
applicable Governmental Authority involved in granting Regulatory Approval and/or, to the extent
required in such country or regulatory jurisdiction, governmental pricing or reimbursement approval
of a Product in such country or regulatory jurisdiction, including the FDA and the United States
Drug Enforcement Administration or its successor.
1.89
Regulatory Costs
means all costs and expenses incurred in connection with preparing,
submitting, amending and supplementing any applications for Regulatory Approvals for a Product in
the Field, including meetings with any relevant Regulatory Authority.
1.90
Regulatory Materials
means regulatory applications, submissions, notifications,
registrations, Regulatory Approvals and/or other filings made to or with a Regulatory Authority
that are necessary or reasonably desirable in order to Develop, manufacture, market, sell or
otherwise commercialize a Product in a particular country or regulatory jurisdiction and all
internal contact reports of agency interactions. Regulatory Materials include INDs and NDAs.
1.91
Sales Force
means each Partys respective sales employees Promoting Product in the
Territory.
1.92
Sales Year
means the twelve (12) month period commencing with the first full calendar
month after First Commercial Sale, and each subsequent twelve (12) month period. The first Sales
Year is referred to herein as Sales Year 1, the second Sales Year is referred to herein as Sales
Year 2, and so on.
1.93
Second Non-PTCL Indication
means, with respect to a Product, the next indication after
the First Non-PTCL Indication for which Regulatory Approval is received from the FDA for such
Product, excluding the PTCL Indication.
1.94
Selling Party
has the meaning set forth in Section 1.73.
1.95
Sole Inventions
has the meaning set forth in Section 8.1.
11
1.96
Spectrum Indemnitees
has the meaning set forth in Section 10.1.
1.97
Spectrum NDA Shares
has the meaning set forth in Section 7.2(a).
1.98
Spectrum Overpayment
has the meaning set forth in Section 4.4(d).
1.99
Spectrum Repayment Amount
has the meaning set forth in Section 4.4(d).
1.100
Spectrum Term Sheet
has the meaning set forth in Section 2.4(b) or Section 2.5, as
applicable.
1.101
Spectrum Trademarks
has the meaning set forth in Section 8.6(a).
1.102
Statutory Exchange
has the meaning set forth in Section 7.2(a).
1.103
Sublicense Revenue
shall mean all income and payments received by Spectrum from a
sublicensee, in consideration of the grant of a sublicense under the TopoTarget Patents to make,
use, sell, or import Products including upfront license fees, annual maintenance fees and milestone
payments, but excluding (a) royalties based on Net Sales by or on behalf of sublicensees, (b)
payments made in consideration of the issuance of securities of Spectrum, but only up to the fair
market value of such securities, and (c) payments made by a sublicensee to Spectrum that are for
the provision (after the effective date of Spectrums sublicense agreement with such sublicensee)
of goods and services related to the research and/or development of Compounds or Products by
Spectrum to the sublicensee, but only up to the fair market value of such goods and services.
1.104
Supply Disruption
has the meaning set forth in Section 5.6(c)(v)(2).
1.105
Target Product Profile
or
TPP
means the target product profile that is mutually
agreed by the Parties and attached hereto as
Exhibit B
as of the Effective Date, as such
target product profile may be revised pursuant to Section 4.1(b).
1.106
Technical Failure
means, with respect to Belinostat, (i) the material failure of
Belinostat to meet any primary clinical study endpoint, (ii) material safety or efficacy issues of
Belinostat, or (iii) any other material failure of Belinostat to satisfy requirements necessary to
obtain Regulatory Approval from FDA, as reasonably determined by Spectrum for use in the Cancer
Field.
1.107
Term
has the meaning set forth in Section 12.1.
1.108
Territory
means (a) the U.S. Territory, (b) Canada and all of its territories and
possessions, (c) Mexico and all of its territories and possessions, (d) India and all of its
territories and possessions, and (e) if included pursuant to Section 2.5, the China Territory.
1.109
Third Party
means any Person other than TopoTarget, Spectrum or an Affiliate of either
Party.
12
1.110
Third Party Cost
is the amount actually paid by TopoTarget to a Third Party or Third
Parties for costs related to the third-party manufacturing, packaging, transfer, validation,
sterilization and/or quality testing of any Product or any component thereof.
1.111
Third Party Manufacturer Costs
has the meaning set forth in Section 5.6(c)(vi).
1.112
Third Party Term Sheet
has the meaning set forth in Section 2.4(b) or Section 2.5, as
applicable.
1.113
TLDs
has the meaning set forth in Section 2.1(c).
1.114
TopoTarget Indemnitees
has the meaning set forth in Section 10.2.
1.115
TopoTarget Know-How
means all Information (excluding any TopoTarget Patents or Joint
Inventions) that (a) is Controlled as of the Effective Date by TopoTarget or its Affiliates and
which relates to a Product or researching, developing, methods of manufacturing, using, importing
or selling a Product (including without limitation, all Product-related data) or (b) becomes
Controlled by TopoTarget or its Affiliates after the Effective Date and during the Term and which
relates to a Product or researching, developing, methods of manufacturing, using, importing or
selling a Product (including without limitation, all Product-related data).
1.116
TopoTarget Overpayment
has the meaning set forth in Section 4.4(e).
1.117
TopoTarget Patents
means (a) (i) all patents and patent applications that are
Controlled as of the Effective Date by TopoTarget or its Affiliates and that claim, disclose or
cover a Compound or Product or the manufacture, use, or sale of a Compound or Product and (ii) all
patents and patent applications (excluding Joint Inventions) that become Controlled by TopoTarget
or its Affiliates after the Effective Date and during the Term (including Sole Inventions) and that
claim, disclose or cover a Compound or Product or the manufacture, use, or sale of a Compound or
Product, (b) all divisions, continuations, continuations-in-part (to the extent directed to the
subject matter disclosed in a patent or patent application described in (a)) and requests for
continued examination of any of the foregoing, (c) all patents claiming priority to any of the
foregoing, (d) all reissues, registrations, re-examinations, and extensions (and equivalents
thereof) of any of the foregoing, in each case, in the Territory. Solely for purposes of the
manufacturing license granted in Section 2.1(a)(ii), TopoTarget Patents shall also include any and
all patents and patent applications outside the Territory that fall within the scope of subsection
(a), (b), (c), or (d) above (including any foreign equivalents of the categories described
therein). As of the Effective Date, the TopoTarget Patents include the patents and patent
applications set forth on
Exhibit C
.
1.118
TopoTarget Repayment Amount
has the meaning set forth in Section 4.4(e).
1.119
TopoTarget Technology
means the TopoTarget Patents and TopoTarget Know-How.
1.120
TopoTarget Territory
means the entire world other than the Territory.
13
1.121
TopoTarget Trademarks
means, in the Territory, the mark of or on Belinostat and any
mark associated with Product, together with any registrations or applications for registration
therefor, that are Controlled by TopoTarget as of the Effective Date, as listed on
Exhibit
D
. For avoidance of doubt, notwithstanding anything to the contrary herein, TopoTarget
Trademarks does not include the name TOPOTARGET or any confusingly similar variation thereof.
1.122
U.S. Territory
means the United States and all of its territories and possessions.
1.123
Valid Claim
means a claim of an issued and unexpired patent or pending patent
application included within the TopoTarget Patents to the extent such claim has not been revoked,
held invalid or unenforceable by a patent office, court or other governmental agency of competent
jurisdiction in a final and non-appealable judgment (or judgment from which no appeal was taken
within the allowable time period) and which claim has not been disclaimed, denied or admitted to be
invalid or unenforceable through reissue, re-examination or disclaimer or otherwise; provided that,
on a country-by-country basis, a patent application pending for more than five (5) years from the
date of filing of such application as a utility, non-provisional application shall not be
considered to have any Valid Claim for purposes of this Agreement from and after such five (5) year
date unless and until a patent with respect to such application issues.
ARTICLE 2
GRANT OF RIGHTS
2.1
Rights to Spectrum
.
(a)
License under TopoTarget Technology
. Subject to the terms and conditions of this
Agreement, TopoTarget hereby grants to Spectrum a royalty-bearing license, with the right to
sublicense (subject to Section 2.2), under the TopoTarget Technology and TopoTargets interest in
the Joint Patents and Joint Inventions, to (i) research, develop, use, distribute, import, Promote,
market, sell, and offer for sale Products in the Territory in the Field, and (ii) subject to
Section 5.6, make and have made Product anywhere in the world for sale solely in the Territory.
The foregoing license shall be exclusive (even as to TopoTarget and its Affiliates) with respect to
the rights granted under clause (i) above, and non-exclusive with respect to the rights granted
under clause (ii) above; provided that such exclusive license shall not preclude TopoTarget or its
Affiliates from engaging in activities in the Territory to Develop Products pursuant to the
Development Plan subject to the terms of this Agreement.
TopoTarget shall disclose to Spectrum any TopoTarget Technology, if in written form, that has
not already been disclosed to Spectrum within [***] ([***]) days after the Effective Date and on a
reasonably periodic (but not less than [***]) basis during the Term.
(b)
Assignment of TopoTarget Trademarks
. Subject to the terms and conditions of this
Agreement, TopoTarget agrees to assign and hereby assigns to Spectrum the TopoTarget Trademarks,
together with the goodwill appurtenant thereto, in all respects free and
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
14
clear of any and all liens, hypothecations, mortgages, charges, security interests, pledges
and other encumbrances and claims of any nature. On the Effective Date, TopoTarget shall execute
and deliver to Spectrum an Assignment of Trademark suitable for recordation in the United States
Patent and Trademark Office (
USPTO
) in the form attached as
Exhibit E
hereto, and
thereafter shall take all reasonable actions requested by Spectrum to perfect Spectrums rights in
the TopoTarget Trademarks in the Territory at the expense of Spectrum, including the execution and
delivery of any additional documents of assignment. For the avoidance of doubt, Spectrums and its
Affiliates right to use the TopoTarget Trademarks in connection with the Products is limited to
the Territory, and TopoTarget shall own all rights to the TopoTarget Trademarks outside of the
Territory, and shall be free to register or apply for registration of the TopoTarget Trademarks
outside of the Territory and to use such TopoTarget Trademarks in connection with Products outside
of the Territory.
(c)
Domain Names
. Spectrum shall have the sole right to register country-level domain names
for the Territory (e.g., .us, .ca, .mx) containing the assigned TopoTarget Trademarks, Spectrum
Trademarks or otherwise related to the Product in the Territory, and to enforce its rights in such
country-level domain names anywhere in the world. TopoTarget shall have the sole right to register
country-level domain names for the TopoTarget Territory (e.g., .eu, .uk,) containing the TopoTarget
Trademarks, Spectrum Trademarks or otherwise related to the Product in the TopoTarget Territory,
and to enforce its rights in such country-level domain names anywhere in the world. Spectrum shall
have the sole right to register the top-level domain names (e.g., .com, .net. and .org) containing
the assigned TopoTarget Trademarks, Spectrum Trademarks or otherwise related to the Product, in
consultation with TopoTarget (the
TLDs
). The Parties agree that the TLDs shall be used solely
for the purpose of hosting jump pages from which users may link to country specific websites
located at country-level domains registered in accordance with this Section 2.1(c). The TLDs and
jump pages shall be hosted and operated by Spectrum The content for all jump pages residing at
the TLDs (including any sub-pages) shall be discussed in good faith and mutually agreed to by the
Parties and shall comply with the terms of this Agreement. Either Party shall have the right to
initiate discussions at any time regarding the content of the jump pages by providing written
notice to the other Party, and promptly thereafter each of the Parties shall appoint a
representative to commence such discussions and develop such content. For avoidance of doubt,
content on the jump pages shall be amended only upon mutual written agreement of the Parties,
such agreement not to be unreasonably withheld, delayed or conditioned. Spectrum shall have the
initial right (at its cost) to take all actions reasonably necessary to protect the TLDs from
cybersquatting, infringement or other misappropriation by a Third Party anywhere in the world, and
in such case Spectrum shall consult with TopoTarget on the strategy for such actions and
considering in good faith TopoTargets comments regarding such actions. If Spectrum does not,
within ninety (90) days of learning of the cybersquatting, infringement or other misappropriation
of the TLDs by a Third Party, commence action to cause such Third Party to cease such unlawful
activity, or sooner if Spectrum declines in writing to commence such action, TopoTarget shall have
the right, but not the obligation, to commence such action, at its cost, against such Third Party,
and in such case TopoTarget shall consult with Spectrum on the strategy for such actions and
consider in good faith Spectrums comments regarding such actions. TopoTarget shall assign to
Spectrum any TLDs or country-level domain names for the Territory containing the assigned
TopoTarget Trademarks, Spectrum Trademarks or otherwise related to the Product (excluding the name
15
TOPOTARGET and any confusingly similar variation thereof) that TopoTarget has registered
prior to the Effective Date.
2.2
Sublicense Agreements
. The licenses granted by TopoTarget to Spectrum in Section 2.1 may
be sublicensed by Spectrum to any Affiliate or Third Party, provided that any sublicense to a Third
Party shall require the prior written consent of TopoTarget, which consent shall not be
unreasonably withheld, delayed or conditioned. Any sublicense under the licenses granted by
TopoTarget to Spectrum in Section 2.1 shall be consistent with the terms of this Agreement and
shall include confidentiality and non-use obligations no less stringent than those set forth in
Article 11.
2.3
Mutual Exclusivity.
Except for its activities with respect to Compounds and Products
under this Agreement and as set forth below, TopoTarget and Spectrum each hereby covenants that
neither it nor its Affiliates will, directly or indirectly through any Third Party, without the
other Partys consent, such consent not to be unreasonably withheld, conditioned or delayed,
conduct research, development or commercialization activities with respect to any HDAC Inhibitor
(in any class) in the Cancer Field during the Exclusivity Period; provided however:
(a) TopoTarget shall be free to itself (but not with any Third Party directly or indirectly)
conduct research and development activities (but not commercialization activities) with respect to
any HDAC Inhibitor that is not a Compound or Product solely in the furtherance of obtaining data to
demonstrate human proof of concept in the Cancer Field, subject to the terms of Section 2.4 below;
and
(b) the foregoing restriction shall not apply to any HDAC Inhibitor (in any class) in the
Cancer Field which is (i) not owned or Controlled by a Party prior to a Change of Control of such
Party but is owned or Controlled by such Party after a Change of Control of such Party or (ii)
owned or Controlled by a Third Party at the time of Acquisition of such Third Party by a Party (in
either case, a
Third Party HDAC Inhibitor
); and
(c) notwithstanding anything to the contrary herein, (i) Spectrum shall not utilize any
proprietary Information of TopoTarget, TopoTarget Know-How or TopoTarget Patents in the research or
development of any Third Party HDAC Inhibitor or any HDAC Inhibitor that is not a Product or
Compound, and shall establish procedures within Spectrum to ensure compliance with the foregoing;
and (ii) TopoTarget shall not utilize any proprietary Information of Spectrum, Spectrum Sole
Inventions, and all patents and intellectual property claiming or covering the Spectrum Sole
Inventions, in the research or development of any Third Party HDAC Inhibitor or any HDAC Inhibitor
that is not a Product or Compound, and shall establish procedures within TopoTarget to ensure
compliance with the foregoing.
Nothing in this Agreement shall be construed as restricting the right of each Party to
research, develop and commercialize one or more HDAC Inhibitors (other than Compounds or Products)
outside the Cancer Field.
16
As used herein, the term
Exclusivity Period
means the period commencing on the
Effective Date and continuing until such time as TopoTarget has itself developed data that
demonstrates human proof of concept for an HDAC Inhibitor in the Cancer Field.
2.4
Other HDAC Inhibitors
. In the event TopoTarget or its Affiliate demonstrates human proof
of concept with an HDAC Inhibitor that is not a Compound or Product in the Cancer Field (such HDAC
Inhibitor, an
Other HDAC Inhibitor
), TopoTarget shall provide all material data demonstrating
human proof of concept of such Other HDAC Inhibitor in writing to Spectrum and all other material
information in TopoTargets possession relevant to an evaluation of the development and
commercialization potential of such Other HDAC Inhibitor. For avoidance of doubt, Other HDAC
Inhibitor excludes all Third Party HDAC Inhibitors.
(a)
Spectrum Opt-In
. Upon receipt of such data, Spectrum shall determine within [***] ([***])
days whether it is interested in participating in the development and commercialization of the
Other HDAC Inhibitor in the Cancer Field in the Territory. If Spectrum determines that it is
interested in such Other HDAC Inhibitor, then it shall provide written notice thereof to TopoTarget
within such [***] ([***]) day period, and the Parties will engage in good faith negotiations for
[***] ([***]) days from the date of Spectrums notice to determine the commercially reasonable
terms and conditions specific to such Other HDAC Inhibitor, including that the development costs
for the development of such Other HDAC Inhibitor shall be shared equally unless otherwise agreed.
The Parties acknowledge and agree that, in the event Spectrum provides written notice as set forth
above, it is the intention of the Parties to execute in a timely manner an agreement providing
rights to such Other HDAC Inhibitor in the Cancer Field in the Territory to Spectrum. If Spectrum
fails to provide written notice of its interest within the [***] ([***]) day period or if the
Parties fail to come to an agreement within such [***] ([***]) day period, or such longer period as
the Parties may mutually agree, then TopoTarget may pursue the development and commercialization of
the Other HDAC Inhibitor for any purpose worldwide at its own expense or in collaboration with a
Third Party, subject to subsection (b) below; provided that nothing in this Section 2.4(a) shall be
construed as granting TopoTarget any license or right under any intellectual property right or
Technology of Spectrum or any right to use or reference any Regulatory Approval of Spectrum (except
to the extent such right of use or reference to any Regulatory Approval is generally available to
Third Parties without consent or approval of Spectrum), unless Spectrum and TopoTarget first agree
in writing to the terms and conditions for such license or use; provided that the foregoing shall
not be deemed to restrict TopoTargets rights with respect to its owned share of Joint Inventions
or Joint Patents as set forth in this Agreement.
(b)
Right of Negotiation
. If, at any time after the demonstration of human proof of concept
of an Other HDAC Inhibitor in the Cancer Field, TopoTarget or any of its Affiliates desires to
enter into an agreement or arrangement with a Third Party granting to such Third Party rights to
develop or commercialize an Other HDAC Inhibitor in the Cancer Field in the Territory, TopoTarget
first shall inform Spectrum in writing and provide any material information in TopoTargets
possession relevant to an evaluation of the development and commercialization potential of such
Other HDAC Inhibitor that was not previously provided to Spectrum. Spectrum shall have a period of
[***] ([***]) days from its receipt of such notice and
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
17
information in which to notify TopoTarget in writing that it wishes to enter into negotiations
with respect to such Other HDAC Inhibitor in the Cancer Field in the Territory.
During the [***] ([***]) day period from TopoTargets receipt of such notice, the Parties
shall exclusively negotiate a term sheet setting forth the material terms upon which the Parties
would be willing to enter into a definitive license or other arrangement with respect to such Other
HDAC Inhibitor in the Cancer Field in the Territory (the
Spectrum Term Sheet
). Upon the
conclusion of such [***] ([***]) day period or such longer period as the Parties may agree (such
period, the
Negotiation Period
), TopoTarget shall be free to negotiate a term sheet with a Third
Party setting forth the material terms upon which the Third Party and TopoTarget would be willing
to enter into a definitive license or other arrangement with respect to such Other HDAC Inhibitor
in the Cancer Field in the Territory (the
Third Party Term Sheet
). If during the [***] ([***])
month period after the end of the Negotiation Period, TopoTarget negotiates a Third Party Term
Sheet, TopoTarget shall present both the Spectrum Term Sheet and Third Party Term Sheet to an
independent consultant selected by TopoTarget and approved by Spectrum, such approval not to be
unreasonably withheld, delayed or conditioned, and the independent consultant shall determine
whether the Spectrum Term Sheet or the Third Party Term Sheet, taken as whole, is more favorable to
TopoTarget, which decision the Parties agree shall be final and non-appealable.
If the consultant determines that Third Party Term Sheet is more favorable to TopoTarget,
TopoTarget shall be free to enter into a transaction with the Third Party on terms consistent with
the Third Party Term Sheet. If the consultant determines that the Spectrum Term Sheet is more
favorable to TopoTarget, TopoTarget shall not be permitted to enter into a transaction with the
Third Party on the terms of the Third Party Term Sheet and, if TopoTarget does not enter into an
transaction with Spectrum on the terms of the Spectrum Term Sheet, then TopoTarget shall be
prohibited from entering into a transaction with any Third Party on any terms for a period of [***]
([***]) months after the date of the determination by the consultant. Thereafter, TopoTarget shall
be free to enter into an agreement or arrangement with any Person granting to such Person rights to
develop or commercialize an Other HDAC Inhibitor in the Cancer Field in the Territory under any
terms.
2.5
Right of Negotiation for China Territory
. Notwithstanding any provision of this
Agreement, in no event shall Spectrum or TopoTarget, directly or indirectly through any Third
Party, Develop or Commercialize any Product in the China Territory other than as expressly
permitted pursuant to this Section 2.5. Spectrum may not Develop, and neither Spectrum nor
TopoTarget may Commercialize, any Product in the China Territory, nor grant any rights to,
collaborate with or otherwise sell or transfer to any Third Party any rights in the China Territory
to any Product during the period commencing with the Effective Date and continuing until receipt of
Regulatory Approval for the Product for the First Indication in the U.S. Territory (
China
Exclusivity Period
).
If, during the [***] ([***]) month period after the end of the China Exclusivity Period,
TopoTarget desires to Commercialize Products in the ChinaTerritory or desires to enter into an
agreement or arrangement with a Third Party granting to such Third Party rights to Develop or
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
18
Commercialize Products in the China Territory, TopoTarget shall provide Spectrum with written
notice thereof, and Spectrum shall have a period of [***] ([***]) days from its receipt of such
notice in which to notify TopoTarget in writing that it wishes to enter into negotiations with
TopoTarget to Develop and Commercialize the Products in the China Territory. During the [***]
([***]) day period from TopoTargets receipt of such notice, the Parties shall exclusively
negotiate a term sheet setting forth the material terms upon which the Parties would be willing to
enter into a definitive license or other arrangement with respect to the Development and
Commercialization of the Products in the China Territory (the
Spectrum Term Sheet
). Upon the
conclusion of such [***] ([***]) day period or such longer period as the Parties may agree (such
period, the
Negotiation Period
), TopoTarget shall be free to itself Develop and Commercialize the
Products in the China Territory, or to negotiate a term sheet with a Third Party setting forth the
material terms upon which the Third Party and TopoTarget would be willing to enter into a
definitive license or other arrangement with respect to the Development and Commercialization of
the Products in the China Territory (the
Third Party Term Sheet
). If during the [***] ([***])
month period after the end of the Negotiation Period TopoTarget negotiates a Third Party Term
Sheet, TopoTarget shall present both the Spectrum Term Sheet and Third Party Term Sheet to an
independent consultant selected by TopoTarget and approved by Spectrum, such approval not to be
unreasonably withheld, delayed or conditioned, and the independent consultant shall determine
whether the Spectrum Term Sheet or the Third Party Term Sheet, taken as whole, is more favorable to
TopoTarget, which decision the Parties agree shall be final and non-appealable. If the consultant
determines that Third Party Term Sheet is more favorable to TopoTarget, TopoTarget shall be free to
enter into a transaction with the Third Party on terms consistent with the Third Party Term Sheet,
and the China Territory shall be deemed included in the TopoTarget Territory. If the consultant
determines that the Spectrum Term Sheet is more favorable to TopoTarget, TopoTarget shall not be
permitted to enter into a transaction with the Third Party on the terms of the Third Party Term
Sheet and, if TopoTarget does not enter into an transaction with Spectrum on the terms of the
Spectrum Term Sheet, then TopoTarget shall be prohibited from entering into a transaction for the
China Territory with any Third Party on any terms for a period of [***] ([***]) months after the
date of the determination by the consultant. Thereafter, TopoTarget shall be free to enter into an
agreement or arrangement with any Person granting to such Person rights to Develop or Commercialize
Products in the China Territory under any terms. For avoidance of doubt, if the Parties cannot
agree upon the terms of the Spectrum Term Sheet during the Negotiation Period, TopoTarget shall be
free to itself Develop and Commercialize the Products in the China Territory.
2.6
Backup Compound
.
(a) Promptly after the Effective Date, TopoTarget shall provide Spectrum with a list of all
HDAC Inhibitors (other than Belinostat and [***]) that are Controlled by TopoTarget as of the
Effective Date (the
Eligible HDAC Inhibitors
), together with chemical structure information and
any and all pre-clinical data in TopoTargets possession and Control that is directly related to
such HDAC Inhibitors (collectively, the
HDAC Inhibitor Information
). Spectrum shall have the
right to review the HDAC Inhibitor Information for the sole purpose of selecting from among the
Eligible HDAC Inhibitors one (1) compound (
Preliminary Backup Compound
) for use as a Backup
Compound pursuant to this Section
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
19
2.6. Within [***] ([***]) days of the receipt of such data from TopoTarget, Spectrum shall
notify TopoTarget in writing of its selection of one, but only one Preliminary Backup Compound, and
promptly after the delivery of such notice to TopoTarget, Spectrum shall return to TopoTarget all
HDAC Inhibitor Information. TopoTarget agrees that until Spectrums right to use a Designated
Backup Compound terminates pursuant to Section 2.6(d), TopoTarget shall not sell, license or
otherwise encumber the right to make, have made, use or sell the Preliminary Backup Compound for
use in the Cancer Field in the Territory in a manner that would deprive Spectrum of its rights
under this Section 2.6.
(b) In the event that, prior to the First Commercial Sale of any Product containing Belinostat
as the active pharmaceutical ingredient, Spectrum has reasonably determined that Belinostat has
experienced a Technical Failure, Spectrum may provide TopoTarget with written notice of such
Technical Failure, along with reasonable supporting data for Spectrums determination, and that
Spectrum elects to designate any one, but only one, of the following as the Backup Compound: (i)
any Other HDAC Inhibitor that TopoTarget is then-developing for use in the Cancer Field as
contemplated by Section 2.4, or (ii) the Preliminary Backup Compound.
(c) If Spectrum has elected to designate a Backup Compound pursuant to Section 2.6(b),
effective upon such election the Parties understand and agree that:
(i) the Backup Compound (and any salt, free acid, free base, clathrate, solvate, hydrate,
hemihydrate, anhydride, ester, chelate, conformer, congener, crystal form, crystal habit,
polymorph, amorphous solid, homolog, isomer, stereoisomer, enantiomer, racemate, prodrug, isotopic
or radiolabeled equivalent, metabolite, conjugate, complex or mixture of any of the foregoing)
shall be deemed a Compound for all purposes under this Agreement;
(ii) the TopoTarget Patents shall be amended to include any patents and patent applications
that claim, disclose or cover the Backup Compound or Product or the manufacture, use, or sale of
such Backup Compound or Product (and all divisions, continuations, continuations-in-part (to the
extent directed to the subject matter disclosed in any such patent or patent application) and
requests for continued examination of any of the foregoing, all patents claiming priority to any of
the foregoing, and all reissues, registrations, re-examinations, and extensions (and equivalents
thereof) of any of the foregoing;
(iii) Spectrum shall have the same license to the Backup Compound as it had to the Compound
under Section 2.1 prior to such election, except that (1) Spectrums rights under this Agreement,
including Section 2.1, with respect to the Backup Compound, the Compound and the Product shall be
limited solely to the Cancer Field and (2) Spectrum shall not be subject to the diligence
obligations set forth in Section 4.3;
(iv) TopoTarget shall provide to Spectrum all information and data, if
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20
any, for the Backup Compound as and to the same extent that it was required to provide the
same to Spectrum for Belinostat;
(v) Spectrums Development and Commercialization of the Backup Compound shall be subject to
all of the royalty, development milestone and sales milestone obligations set forth in this
Agreement to the same extent as applicable to Belinostat, except that Spectrum shall not be
obligated to pay any development milestone that was previously paid for Belinostat;
(vi) Belinostat shall not be deemed a Compound or Product, and all rights of Spectrum under
this Agreement relating to Belinostat shall immediately revert to TopoTarget, as follows:
(1) the licenses granted to Spectrum under Section 2.1 shall terminate solely with respect to
Belinostat;
(2) all Regulatory Materials and Regulatory Approvals of Spectrum relating to Belinostat shall
be assigned to TopoTarget;
(3) a copy of all data and other information relating to Belinostat, to the extent not
previously disclosed, shall be provided to TopoTarget;
(4) TopoTarget shall have the sole right to conduct any and all future clinical trials
relating to Belinostat, including all NCI studies and ISTs, and Spectrum shall use Commercially
Reasonable Efforts to assign and transition any existing clinical trials to TopoTarget;
(5) all TopoTarget Trademarks, Spectrum Trademarks and domain names specific to Belinostat
(but not TopoTarget Trademarks, Spectrum Trademarks and domain names that could be used for the
Backup Compound) shall be assigned to TopoTarget;
(6) Spectrum shall assign to TopoTarget, for no additional consideration, any and all of
Spectrums Sole Inventions and Joint Inventions that claim only Belinostat or its manufacture, use
or sale;
(7) Spectrum shall grant TopoTarget a non-exclusive, royalty-free, irrevocable, non-terminable
and perpetual license, with the right to sublicense, under any and all of Spectrums Sole
Inventions and Joint Inventions that claim Belinostat or its manufacture, use or sale (other than
the Sole Inventions and Joint Inventions in subsection (6) above) to research, develop, make, have
made, use, distribute, import, Promote, market, sell, and offer for sale Belinostat anywhere in the
world;
(8) Spectrum shall use Commercially Reasonable Efforts to assign to TopoTarget any agreement
with a Third Party solely to the extent such agreement is for the manufacture and supply of
Belinostat in the Backup Facility; and
21
(9) nothing in this Agreement shall be deemed to restrict TopoTarget or its Affiliates or
licensees from prosecuting or enforcing the TopoTarget Patents in the Territory or elsewhere with
respect to Belinostat;
(vii) TopoTarget shall be free to Develop and Commercialize Belinostat, whether alone or with
Third Parties, whether or not in the Field or in the Territory, such Development and
Commercialization to be outside the scope of the Development Plan, the JDC and the JCC;
(viii) the Parties promptly shall discuss and negotiate in good faith a new Development Plan
for the Backup Compound, provided that the allocation of costs between the Parties with respect to
activities to be undertaken the Development Plan shall be as set forth in Section 4.4(c)(i) and
(ii); and
(ix) the Parties reasonably shall cooperate with each other to effect the intent of the
Parties as contemplated by this Section 2.6, including by discussing and negotiating any reasonably
necessary amendments to this Agreement.
(d) Spectrums rights under this Section 2.6 shall terminate immediately upon the First
Commercial Sale of any Product containing Belinostat as the active pharmaceutical ingredient.
2.7
No Other Licenses.
Neither Party grants to the other Party any rights, licenses or
covenants in or to any intellectual property, whether by implication, estoppel, or otherwise, other
than the license rights that are expressly granted under this Agreement.
ARTICLE 3
GOVERNANCE
3.1
Alliance Manager.
Each Party shall appoint one (1) employee representative who possesses
a general understanding of clinical, regulatory, manufacturing, and marketing issues to act as its
respective alliance manager for this relationship (
Alliance Manager
). The Alliance Managers will
be responsible for the day-to-day interactions between the Parties related to the Development of
Products in the Field.
3.2
Joint Development Committee
. As of the Effective Date, TopoTarget and Spectrum have
formed a joint development committee (
JDC
) consisting of three (3) representatives from
TopoTarget and three (3) representatives from Spectrum, which representatives are listed on
Exhibit F
. Each Party may replace its JDC representatives with another employee of such
Party at any time upon prior written notice to the other Party. A representative designated by
Spectrum shall serve as the chairperson of the JDC and shall be responsible for calling meetings of
the JDC, establishing the agenda for each meeting and initiating the drafting of minutes of the
meetings for approval and finalization by the JDC.
3.3
Meetings of the JDC.
The JDC shall meet within [***] ([***]) days after the Effective
Date and at least once every calendar quarter thereafter, unless otherwise agreed by
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22
the Parties, in each case unless a particular meeting is waived by mutual consent. In
addition, each Party shall have the right to call a meeting of the JDC on reasonable notice to the
other Party. Subject to the foregoing, the JDC shall meet on such dates and at such times as
agreed by the JDC and shall meet via teleconference or videoconference or, if mutually agreed by
the Parties, at a location determined by the JDC. Upon prior written notice to, and approval of,
the JDC, each Party may permit visitors to attend meetings of the JDC, provided that any approved
visitor shall be subject to confidentiality and non-use obligations no less stringent than the
terms of Article 11. Each Party shall be responsible for its own expenses for participating in the
JDC. Meetings of the JDC shall be effective only if at least two (2) representatives of each Party
are present or participating.
3.4
Responsibilities of the JDC.
The JDC shall have the responsibility and authority to:
(a) discuss, plan, and inform of any further Development of Product in all indications in the
Field in the Territory and TopoTarget Territory, including manufacturing of Products in support of
such activities;
(b) use Commercially Reasonable Efforts to align each Partys strategy for the Development of
the Product on a worldwide basis;
(c) no less frequently than on an annual basis, review, amend and approve any updates to the
Development Plan, including the activities, budget and timeline for Development;
(d) review and approve proposed Publications in scientific journals resulting from Development
activities;
(e) establish subcommittees pursuant to Section 3.12 on an as-needed basis, oversee the
activities of all subcommittees so established, and address disputes or disagreements arising in
all such subcommittees; and
(f) perform such other functions as the Parties may agree in writing.
3.5
Areas Outside the JDCs Authority; Other
. The JDC shall not have any authority other than
that expressly set forth in Section 3.4 and, specifically, shall have no authority to (a) amend or
interpret this Agreement, or (b) determine whether or not a breach of this Agreement has occurred.
Notwithstanding anything to the contrary in this Agreement, the Parties acknowledge and agree that:
(i) TopoTarget shall be entitled to conduct the Development of the Product in the TopoTarget
Territory as it solely determines, subject to Section 4.4(f)(iii), and (ii) Spectrum shall be
entitled to conduct the Development of the Product in the Territory as it solely determines,
subject to Section 4.3.
3.6
JDC Decisions
.
(a)
Consensus; Good Faith; Action Without Meeting.
All decisions of the JDC shall be made by
a unanimous vote, with each Party having one collective vote. The members of the JDC shall act in
good faith to cooperate with one another and to reach agreement with respect to issues to be
decided by the JDC. Action that may be taken at a meeting of the
23
JDC also may be taken without a meeting if a written consent setting forth the action so taken
is signed by one (1) duly authorized representative of each Party.
(b)
Failure to Reach Consensus.
In the event that the members of the JDC cannot come to
consensus within ten (10) days with respect to any matter over which the JDC has authority and
responsibility, the matter shall be resolved as follows:
(i) with respect to any matter pertaining to the CUP Clinical Trial and any matter pertaining
to the Development of the Product conducted in the TopoTarget Territory (subject to Section
4.4(f)(iii)), the JDC shall submit the respective positions of the Parties with respect to such
matter to the respective chief executive officers of TopoTarget and Spectrum for resolution. If
such chief executive officers are not able to mutually agree upon the resolution to such matter
within ten (10) days after submission to them, TopoTargets chief executive officer shall have the
right to decide such matter reasonably, taking into account and seeking to reasonably accommodate
Spectrums legitimate interest under this Agreement, except that in no event can TopoTargets chief
executive officer unilaterally decide such matter in a manner (1) that is contrary to the express
terms of this Agreement or (2) that would result in the budget for the Development Plan during the
Initial Funding Period to exceed the Initial Funding Cap or (3) during the period commencing with
the Effective Date and continuing for [***] ([***]) [***] after the Effective Date, that would
result in the performance of Development activities inconsistent with the then current TPP; and
(ii) with respect to Development of the Product in the Territory, other than the matters set
forth in subsection (i) above (subject to Section 4.3), the JDC shall submit the respective
positions of the Parties with respect to such matter to the respective chief executive officers of
TopoTarget and Spectrum for resolution. If such chief executive officers are not able to mutually
agree upon the resolution to such matter within [***] after submission to them, Spectrums chief
executive officer shall have the right to decide such matter reasonably, taking into account and
seeking to reasonably accommodate TopoTargets legitimate interest under this Agreement, except
that in no event can Spectrums chief executive officer unilaterally decide such matter in a manner
(1) that is contrary to the express terms of this Agreement or (2) that would result in the budget
for the Development Plan during the Initial Funding Period to exceed the Initial Funding Cap or (3)
during the period commencing with the Effective Date and continuing for [***] ([***]) [***] after
the Effective Date, that would result in the performance of Development activities inconsistent
with the then current TPP.
3.7
Joint Commercialization Committee
. Not later than six (6) months prior to the anticipated
First Commercial Sale of Product, Spectrum and TopoTarget shall form a joint commercialization
committee (
JCC
) consisting of two (2) representatives from Spectrum and two (2) representatives
from TopoTarget. Each Party may replace its JCC representatives with another employee of such
Party at any time upon prior written notice to the other Party. A representative designated by
Spectrum shall serve as the chairperson of the JCC and shall be responsible for calling meetings of
the JCC, establishing the agenda for each
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
24
meeting and initiating the drafting of the minutes of the meetings for approval and
finalization by the JCC.
3.8
Meetings of JCC
. The JCC shall meet at least once each calendar year, in each case
unless a particular meeting is waived by mutual consent. Subject to the foregoing, the JCC shall
meet on such dates and at such times as agreed by the JCC and shall meet via teleconference or
videoconference or, if mutually agreed by the Parties, at a location determined by the JCC. Upon
prior written notice to, and approval of, the JCC, each Party may permit visitors to attend
meetings of the JCC, provided that any approved visitor shall be subject to confidentiality and
non-use obligations no less stringent than the terms of Article 11. Each Party shall be
responsible for its own expenses for participating in the JCC. Meetings of the JCC shall be
effective only if at least two (2) representatives of each Party are present or participating.
3.9
Responsibilities of the JCC
. The JCC shall have the responsibility and authority to:
(a) review the Commercialization of Products worldwide and the manufacturing of Products in
support of such activities;
(b) use Commercially Reasonable Efforts to align each Partys strategy for the Promotion of
the Product on a worldwide basis;
(c) establish subcommittees pursuant to Section 3.12 on an as-needed basis, review the
activities of all subcommittees so established, and address disputes or disagreements arising in
all such subcommittees; and
(d) perform such other functions as the Parties may agree in writing.
3.10
Areas Outside the JCCs Authority; Other
. The JCC shall not have any authority other
than that expressly set forth in Section 3.9 and, specifically, shall have no authority to (a)
amend or interpret this Agreement, or (b) determine whether or not a breach of this Agreement has
occurred. In addition, notwithstanding anything to the contrary in this Agreement, the Parties
acknowledge and agree that TopoTargets manufacturing of the Product shall be outside the decision
making authority of the JCC. Notwithstanding anything to the contrary in this Agreement, the
Parties acknowledge and agree that: (i) TopoTarget shall be entitled to conduct the
Commercialization of the Product in the TopoTarget Territory as it solely determines, and (ii)
Spectrum shall be entitled to conduct the Commercialization of the Product in the Territory as it
solely determines.
3.11
JCC Decisions
.
(a)
Consensus; Good Faith; Action Without Meeting
. All decisions of the JCC shall be made by
a unanimous vote, with each Party having one collective vote. The members of the JCC shall act in
good faith to cooperate with one another and to reach agreement with respect to issues to be
decided by the JCC. Action that may be taken at a meeting of the JCC also may be taken without a
meeting if a written consent setting forth the action so taken is signed by one (1) duly authorized
representative of each Party.
25
(b)
Failure to Reach Consensus
. In the event that the members of the JCC cannot come to
consensus within [***] [(***)] with respect to any matter over which the JCC has authority and
responsibility, the matter shall be resolved as follows:
(i) with respect to any matter pertaining to the Commercialization of the Product in the
Territory, the JCC shall submit the respective positions of the Parties with respect to such matter
to the respective chief executive officers of TopoTarget and Spectrum for resolution. If such
chief executive officers are not able to mutually agree upon the resolution to such matter within
[***] [(***)] after submission to them, then Spectrums chief executive officer shall have the right to
reasonably decide such matter taking into account and seeking to reasonably accommodate
TopoTargets legitimate interest under this Agreement, except that in no event can Spectrums chief
executive officer unilaterally decide such matter in a manner that is contrary to the express terms
of this Agreement; and
(ii) with respect to any matter pertaining to the Commercialization of the Product in the
TopoTarget Territory, the JCC shall submit the respective positions of the Parties with respect to
such matter to the respective chief executive officers of TopoTarget and Spectrum for resolution.
If such chief executive officers are not able to mutually agree upon the resolution to such matter
within [***] [(***)] after submission to them, then TopoTargets chief executive officer shall have the
right to reasonably decide any matter concerning Commercialization of the Product in the TopoTarget
Territory, taking into account and seeking to reasonably accommodate Spectrums legitimate interest
under this Agreement, except that in no event can TopoTargets chief executive officer unilaterally
decide such matter in a manner that is contrary to the express terms of this Agreement.
3.12
Subcommittees.
The JDC and JCC shall each have the right, upon unanimous agreement of
the representatives thereof (Sections 3.6(b) and 3.11(b), respectively, shall not apply) to
establish subcommittees and to delegate certain of its powers and responsibilities thereto.
Subcommittees established by the JDC and JCC shall operate under the same rules as the JDC and JCC
respectively, except that any disputes that cannot be resolved by a subcommittee in a reasonable
time period shall be submitted to the JDC or JCC for resolution in accordance with Section 3.6 or
3.11, respectively.
The Parties agree that, within thirty (30) days after the first meeting of the JDC, the JDC
shall establish a joint CMC subcommittee (
JCS
) to review and oversee CMC for the Product
worldwide. A representative designated by TopoTarget shall serve as the chairperson of the JCS and
shall be responsible for calling meetings of the JCS, establishing the agenda for each meeting and
initiating the drafting of minutes of the meetings for approval and finalization by the JCS.
The Parties agree that, within thirty (30) days after the first meeting of the JCC, the JCC
shall establish a joint manufacturing subcommittee (
JMS
) to review and discuss manufacture and
supply of the Product worldwide. A representative designated by Spectrum shall serve as the
chairperson of the JMS and shall be responsible for calling meetings of the JMS, establishing
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26
the agenda for each meeting and initiating the drafting of minutes of the meetings for
approval and finalization by the JMS.
3.13
Appointment of Alliance Managers and Members of JDC and JCC
. The appointment of members
of the JDC and JCC and the Alliance Managers is a right of each Party and not an obligation and
shall not be a deliverable as defined in EITF Issue No. 00-21. Each Party shall be free to
determine not to appoint members to the JDC and JCC and not to appoint an Alliance Manager, and at
any time during the Term and for any reason, either Party shall have the right to withdraw from
participation in the JDC and JCC and to remove its Alliance Managers upon written notice to the
other Party, which notice shall be effective immediately upon receipt. If a Party (
Appointing
Party
) does not appoint members of the JDC or JCC or an Alliance Manager, or withdraws from the
JDC or JCC or removes its Alliance Manager, it shall not be a breach of this Agreement, nor shall
there be any associated penalty due nor shall there be any impact on the consideration otherwise
provided for or due to the Appointing Party under this Agreement, and unless and until such persons
are again appointed: (a) the other Party, without regard to the provisions of this Article 3 with
respect to voting, quorum or dispute resolution, may discharge the roles of the JDC or JCC and the
Alliance Manager for which appointments were not made or with respect to which a withdrawal or
removal has occurred by the Appointing Party (including, where the Appointing Party has not made
appointments to the JDC or JCC or has withdrawn from the JDC or JCC, making all decisions within
the decision-making authority of the JDC or JCC, which decisions shall be binding thereafter) and
(b) where the Appointing Party has not made appointments to the JDC or JCC or has withdrawn from
the JDC or JCC, the Appointing Party shall not participate in any meetings of the JDC or JCC and
shall not have the right to approve the minutes of any JDC or JCC meeting. If, at any time
following the Effective Date, a Party has not appointed or has pursuant to this Section withdrawn
from the JDC or JCC or removed its Alliance Manager, and such Party wishes to resume participating
in the JDC or JCC or re-appoint its Alliance Manager, such Party shall notify the other Party in
writing and, thereafter, such notifying Partys designees shall be entitled to attend any
subsequent meeting of the JDC and JCC and to participate in the activities of, and decision-making
by, the JDC and JCC, and such Partys Alliance Manager shall resume their duties, in each case as
provided in this Article 3 as if a failure to appoint or submitting the withdrawal notice had not
occurred.
ARTICLE 4
DEVELOPMENT; REGULATORY
4.1
Development
.
(a)
By the Parties
. Subject to the terms and conditions of this Agreement including Section
3.6, Spectrum shall be solely responsible for the Development of Products in the Field for
Regulatory Approval in the Territory and TopoTarget shall be solely responsible for the Development
of Products in the Field for Regulatory Approval in the TopoTarget Territory, in each case in
accordance with the Development Plan and TPP. Each Party shall reasonably cooperate with and
provide reasonable support to the other Party in such Partys conduct of Development activities for
the Product in its respective territory. The Development of Products in the Field shall be
conducted by the Parties in accordance with the terms of this Agreement, including without
limitation the Development Plan and TPP, in good scientific manner and in
27
compliance with all applicable good laboratory practices, applicable cGMPs and/or other
Applicable Laws. Neither Party shall on its own or with or for the benefit of any Third Party
engage in any Development activity with respect to Products other than as set forth in this
Agreement or otherwise agreed by the Parties. The Parties will cooperate and use Commercially
Reasonable Efforts to implement a clinical trial program for the Product that is satisfactory to
Regulatory Authorities worldwide and to prepare protocols and coordinate the conduct of such
clinical trials in a manner intended to result in the Parties filing for and obtaining Regulatory
Approval from the FDA, the European Medicines Agency or its successor (
EMEA
) and other Regulatory
Authorities within a reasonably proximate time frame.
[***].
(b)
The TPP
. The TPP shall not be amended, revised or updated except (i) as mutually agreed
by the Parties, (ii) by TopoTarget solely with respect to the Development and Commercialization of
the Product in the TopoTarget Territory, and (iii) by Spectrum solely with respect to the
Development and Commercialization of the Product in the Territory.
4.2
Development Plan
.
(a)
Initial Development Plan
. As of the Effective Date, Spectrum and TopoTarget have
established an initial comprehensive plan for a research and development program for obtaining
Regulatory Approval for the Product in the Territory and in the TopoTarget Territory and
manufacturing of the Product worldwide for purposes of obtaining Regulatory Approval for the
Product in the Territory and the TopoTarget Territory (the
Initial Development Plan
). The
Initial Development Plan is attached hereto as
Exhibit A
and is incorporated herein by
reference. The Initial Development Plan includes a description of the activities to be conducted
by each Party, [***]. Within thirty (30) days after the first meeting of the JDC after the
Effective Date, the Initial Development Plan shall be updated to include a budget and timeline for
such activities. Any existing or future studies conducted with the National Cancer Institute
(
NCI
) or any investigator sponsored trials (
ISTs
) shall be part of the Development Plan. As
set forth in this Article 4, the Development Plan shall designate which Development activities
(including clinical trials which may be worldwide) are to be conducted by the Parties for the
primary purpose of obtaining Regulatory Approval of the Product in the Territory (
Spectrum
Development Activities
) and which Development activities (including clinical trials which may be
worldwide) are to be conducted by TopoTarget for the primary purpose of obtaining Regulatory
Approval of the Product in the TopoTarget Territory (
TopoTarget Development Activities
).
(b)
Development Plan
. Periodically throughout the Term as needed and in no event less
frequently than once per calendar year, the JDC shall review, amend and update in writing the
Initial Development Plan for the conduct of Development activities in the Territory
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
28
and TopoTarget Territory and manufacturing activities worldwide, and a budget and timeline for
such activities, with respect to Products in the Field in a manner consistent with the TPP (each
such updated plan, along with the Initial Development Plan, referred to as the
Development Plan
).
The Development Plan shall be amended or updated on at least an annual basis no later than October
1 of each calendar year during the term of the Development Program, and more often as the JDC may
reasonably determine, for so long as there is a Product in active Development or mutually agreed to
be Developed. The JDC shall determine which Party shall take the lead in preparing the first draft
of the updated or amended Development Plan. All updated or amended Development Plans shall be
filed with the minutes of the JDC upon approval by the JDC in accordance with Section 3.2. Until
an amended Development Plan is approved by the JDC pursuant to this Section, the previous
Development Plan shall remain in effect. For the avoidance of doubt, any decision regarding the
Development Program made by the JDC pursuant to Section 3.6 shall be deemed to be an update to the
Development Plan and shall be deemed incorporated in the Development Plan as reflected in the JDC
minutes; provided that the JDC shall incorporate all such updates reflected in minutes in a
comprehensive restatement of the Development Plan as part of each annual update cycle of the
Development Plan.
(c)
NCI/IST Studies
.
(i) [***].
(ii) [***].
(iii) [***].
(d)
No Activities Outside Development Plan
. Prior to undertaking any Development work for the
Product that is not included in the then current Development Plan or engaging or supporting any
Third Parties to conduct such Development activities (including studies with the NCI or ISTs), each
Party shall provide the JDC with its overall plan (including clinical trial design if applicable)
in sufficient time for review and comment by the JDC. The JDC shall then determine whether to
include such Development work in the Development Plan; provided however that, in accordance with
Section 3.6:
(i) TopoTarget shall have the right to determine whether TopoTarget shall conduct Development
activities in the TopoTarget Territory (subject to Section 4.4(f)(iii)),
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
29
and if so, such Development activities shall be added to the Development Plan and be subject
to Section 4.4(c)(ii);
(ii) TopoTarget shall have the right to determine whether or not to permit Development
activities to be conducted by Spectrum in the TopoTarget Territory, and if permitted, such
Development activities shall be added to the Development Plan and be subject to Section 4.4(c)(i)
and if not permitted, such Development activities shall not be conducted by Spectrum in the
TopoTarget Territory;
(iii) Spectrum shall have the right to determine whether Spectrum shall conduct Development
activities in the Territory (subject to Section 4.3) and if so, such Development activities shall
be added to the Development Plan and be subject to Section 4.4(c)(i); and
(iv) Spectrum shall have the right to determine whether or not Development activities may be
conducted by TopoTarget in the Territory, and if permitted, such Development activities shall be
added to the Development Plan and be subject to Section 4.4(c)(ii) and if not permitted, such
Development activities shall not be conducted by TopoTarget in the Territory.
In addition, each Party may conduct at its sole expense any Phase 4 Clinical Trial of the
Product that is a requirement of, or otherwise requested by, a Regulatory Authority in its
respective territory, and either Party may manufacture Product subject to Section 5.6. Neither
Party shall be obligated to pay for any Development activities outside the scope of the activities
specified in the Development Plan.
4.3
Spectrum Development Obligations
. Spectrum shall use Commercially Reasonable Efforts to
Develop the Products in accordance with the Development Plan and TPP, as such documents may be
amended, which will include Commercially Reasonable Efforts to meet the targeted activity timelines
set forth below, as they may be amended:
(a) Spectrum will be responsible for (i) finalizing any protocol for any clinical trial to be
conducted to obtain Regulatory Approval of the Product in the Territory, (ii) identifying all sites
and investigators to perform such clinical trials and (iii) obtaining IRB approval for any such
clinical trial;
(b) Spectrum will assign clinical research associates (
CRAs
) and medical scientific liaisons
(
MSLs
) to the Product, who shall be committed to spending a majority of their time on activities
related to the Development of the Compound or Product;
(c) Except as otherwise agreed by the JDC, [***] subject to Section 4.4(c)(i), Spectrum shall
commence at least [***] ([***]) randomised clinical trials of the Product within [***] ([***])
months after the Effective Date, subject to the following:
(i) Spectrum shall be ready to dose, without further delay, the first
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
30
(1
st
) patient in a clinical trial of the Product for any indication within [***]
([***]) days of IRB approval;
(ii) at least [***] ([***]) clinical trial is expected to be a pivotal registration study;
(iii) Spectrum shall ensure that the [***] ([***]) clinical trial site for a randomized
clinical trial for the Product for Regulatory Approval in the Territory of the NSCLC Indication
(the
NSCLC Clinical Trial
) is then ready to dose the first (1
st
) patient, without
further delay, within [***] ([***]) months after the Effective Date, subject to Section 4.4(c)(i),
[***]. [***], provided that the JDC has agreed on the following in advance: (1) protocol design,
(2) a development plan with regulatory options, including FDA guidance (possible Special Protocol
Assessment (SPA) or end of Phase II meeting), (3) comprehensive budget, (4) identification of
principal investigators, and (5) a feasibility study to determine number of sites, geographical
location of sites (Territory vs. TopoTarget Territory), specific Key Opinion Leader (KOL)
involvement, academic vs. community practice and other relevant considerations in advance of study
initiation; and
(iv) [***] ([***]) patients shall be enrolled by Spectrum in [***] ([***]) or more clinical
trials of the Product during the [***] ([***]) year period commencing with the Effective Date,
which is based on the clinical trials contemplated by the Development Plan and TPP. Patients
included in NCI trials and/or ISTs shall not be counted for purposes of the foregoing [***] ([***])
patient requirement.
(d) For clarity, the Parties agree that Spectrums obligation to perform the foregoing shall
be subject to commercially reasonable conditions being met, such as relevant supportive clinical
study endpoints, safety considerations, achievement of development timelines, successful end of
Phase 2 meetings (if required for progression into the pivotal registration study), approval of the
protocol design by the FDA and, where necessary, approval of an SPA. Notwithstanding the
foregoing, Spectrum shall not be deemed to have failed to perform the foregoing obligations, if it
is using its Commercially Reasonably Efforts, in the event one or more of the following events or
circumstances is attributable to a failure or delay in performance by Spectrum that is outside of
Spectrums reasonable control: (i) the occurrence of adverse events or health or safety issues such
that the JDC determines to hold or delay a study, (ii) any regulatory hold, constraint or
restriction imposed or raised by a Regulatory Authority; (iii) process development, manufacture or
supply delays or failures, (iv) any Force Majeure event, or (v) a Third Party alleges that the
manufacture, use or sale of the Product infringes its intellectual property. For the avoidance of
doubt, Spectrums failure to meet one of the milestones set forth in this Section 4.3 for a Product
shall not automatically establish Spectrums failure to use Commercially Reasonable Efforts to
Develop Products.
4.4
Development Activities and Development Costs
.
(a)
PTCL Indication Clinical Trial
. Promptly after the Effective Date, the control of the
ongoing clinical trial of the Product in the PTCL Indication (referred to as the
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
31
PXD101-CLN-19 trial or Belinostat in Relapsed or Refractory Peripheral T-Cell Lymphoma)
(this specific trial, the
PTCL Clinical Trial
) at all sites will be transferred to Spectrum and
Spectrum shall be responsible for, and shall have the sole right to conduct, the PTCL Clinical
Trial including clinical trial monitoring, site selection and contract research organization use,
provided that Spectrum shall consider in good faith any input provided by TopoTarget through the
JDC. TopoTarget shall use Commercially Reasonable Efforts to ensure a smooth, orderly and timely
transition of control of the PTCL Clinical Trial to Spectrum. Spectrum shall use Commercially
Reasonable Efforts to complete the PTCL Clinical Trial in a timely manner.
Spectrum will pay one hundred percent (100%) of the Development Costs associated with the PTCL
Clinical Trial that are accrued by the Parties commencing with the Effective Date; provided that
Spectrum shall not be responsible for any costs accrued under any agreement between TopoTarget and
any Third Party related to the PTCL Clinical Trial unless such agreement is listed on
Schedule
4.4(a)
. For avoidance of doubt, as part of such Development Costs, Spectrum agrees to
reimburse TopoTarget at the FTE Rate for [***] ([***]) TopoTarget FTEs who will be dedicated to the
performance of PTCL Clinical Trial, including the reporting activities for the PTCL Clinical Trial
as set forth in Section 4.7, as directed by Spectrum; provided that, upon written notice to
TopoTarget, Spectrum shall have the right based upon the contribution of such TopoTarget FTEs to
increase or decrease the number of such TopoTarget FTEs on a quarterly basis.
(b)
CUP Indication Clinical Trial
. TopoTarget shall be responsible for, and have the sole
right to conduct, the ongoing clinical trial of the Product in the CUP Indication (referred to as
PXD101-CLN-17 a randomized Phase 2 clinical trial in previously untreated carcinoma of unknown
primary site) (this specific trial, the
CUP Clinical Trial
), provided that TopoTarget shall
consider in good faith any input provided by Spectrum through the JDC. TopoTarget will pay one
hundred percent (100%) of the Development Costs associated with the CUP Clinical Trial that are
accrued by the Parties after the Effective Date.
(c)
Other Development Activities and Costs
.
(i) Except as set forth in Sections 4.4(a) and (b) and subject to Sections 3.6 and 4.2(c), and
subsections (c)(iii), (d) (e) and (f) below, all Development Costs accrued by the Parties after the
Effective Date in the performance of Spectrum Development Activities shall be shared as follows:
Spectrum shall be responsible for seventy percent (70%) and TopoTarget shall be responsible for
thirty percent (30%).
(ii) TopoTarget shall be responsible for all Development Costs accrued by TopoTarget in the
performance of TopoTarget Development Activities and by Spectrum in the performance of any
TopoTarget Development Activities specifically requested and authorized in advance by TopoTarget.
(iii) Neither Party may incur costs or expenses that exceed the budget for Development Costs
in the Development Plan by more than [***] percent ([***]%) on a calendar year basis without the
prior written approval of the JDC. In the event either Party
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
32
incurs costs or expenses that exceeds the budget by more than [***] percent ([***]%), such
Party shall be solely responsible for such excess costs and expenses.
(iv) Each Party shall provide the other Party with an accounting in writing of the Development
Costs actually incurred by such Party in the performance of the Development Plan on a monthly
basis, as follows: each Party shall provide a preliminary accounting within ten (10) days after
the end of each calendar month and a final accounting within thirty (30) days after the end of each
calendar month. The Party that has expended less than its percentage share of the Development
Costs under Section 4.4(c)(i) for the calendar month shall pay the amount required to satisfy its
percentage share for the relevant time period by cash or by offset against other amounts due to
such Party on a monthly basis at the time of each accounting for the applicable calendar month.
Notwithstanding the foregoing, the Parties agree that any Development Costs associated with the
start-up of any clinical trial (i.e., costs associated with setting up the clinical trial until
first patient-first visit) shall be paid on a monthly basis in advance and that the Parties
estimate that the maximum amount of Development Costs on a per patient basis for any clinical trial
of the Product in the Territory shall be between [***] Dollars (US$[***]) and [***] Dollars
(US$[***]), as such estimated amounts may be adjusted by the JDC. Spectrum shall use Commercially
Reasonable Efforts to keep per patient costs within such estimated range.
(d)
TopoTarget Failure to Fund Development Costs
. TopoTarget commits to fully fund its
thirty percent (30%) share of the Development Costs set forth in Section 4.4(c)(i) above for the
period commencing with the Effective Date and continuing until [***] ([***]) months after the
Effective Date (the
Initial Funding Period
), provided that the total Development Costs incurred
by both Parties under the Development Plan during the Initial Funding Period do not exceed US
$[***] (or such greater amount as the Parties may agree in writing) (the
Initial Funding Cap
).
In the event that, after the Initial Funding Period, TopoTarget does not pay its thirty
percent (30%) share of all Development Costs incurred by the Parties as described in Section
4.4(c)(i) up to the Initial Funding Cap, then Spectrum shall have the option to pay all or a
portion of such share of Development Costs during the remainder of the Initial Funding Period (such
costs, the
Spectrum Overpayment
). In the event Spectrum incurs any Spectrum Overpayment, then
Spectrum shall be reimbursed by TopoTarget in an amount equal to [***] (the
Spectrum Repayment
Amount
), as follows: Spectrum shall deduct the repayment amount from any payment due to
TopoTarget pursuant to Sections 7.2 (Development Milestone Payments), 7.3 (Sales Milestone
Payments) and 7.5 (Sublicense Revenue) and/or from any royalty payment due to TopoTarget pursuant
to Section 7.4, provided that in no event shall the royalty payment to TopoTarget after deductions
pursuant to this Section and any applicable reductions pursuant to Section 7.4 be reduced to less
than [***] percent ([***]%) of Net Sales of Product in any given calendar year. In the event of
termination of this Agreement for any reason pursuant to Section 12, any Spectrum Repayment Amount
not previously recouped by Spectrum shall be paid to Spectrum within [***] ([***]) days of the
effective date of termination.
(e)
Spectrum Failure to Fund Development Costs
. Spectrum commits to
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
33
fully fund its seventy percent (70%) share of the Development Costs set forth in Section
4.4(c)(i) above during the Term.
In the event that, during the Term, Spectrum does not pay its seventy percent (70%) share of
all Development Costs incurred by the Parties as described in Section 4.4(c)(i) up to the Initial
Funding Cap, then TopoTarget shall have the option to pay all or a portion of such share of
Development Costs during the remainder of the Term (such costs, the
TopoTarget Overpayment
). In
the event TopoTarget incurs any TopoTarget Overpayment, then TopoTarget shall be reimbursed by
Spectrum in an amount equal to [***] (the
TopoTarget Repayment Amount
), as follows: Spectrum
shall increase by [***] percent ([***]%) any royalty payment due to TopoTarget pursuant to Section
7.4 until the total TopoTarget Repayment Amount has been repaid. In the event of termination of
this Agreement for any reason pursuant to Section 12, any TopoTarget Repayment Amount not
previously paid by Spectrum shall be paid to TopoTarget within [***] ([***]) days of the effective
date of termination.
(f)
Phase 4 Clinical Trials
.
(i) Spectrum shall be responsible for, and shall have the sole right to conduct all Phase 4
Clinical Trials of the Product in the Field for any Regulatory Authority in the Territory, at
Spectrums sole cost and expense.
(ii) TopoTarget shall be responsible for, and shall have the sole right to conduct all Phase 4
Clinical Trials of the Product in the Field for any Regulatory Authority in the TopoTarget
Territory, at TopoTargets sole cost and expense.
(iii) Notwithstanding the foregoing, (1) if a randomized clinical trial is required by the FDA
for the PTCL Indication, such randomized clinical trial shall not be deemed a Phase 4 Clinical
Trial and shall be included in the Development Plan, subject to the cost allocation specified
Section 4.4(c)(i) and (2) if a randomized clinical trial is required solely by a Regulatory
Authority in the TopoTarget Territory for the PTCL Indication, such randomized clinical trial shall
be included in the Development Plan and be subject to Section 4.4(c)(ii), provided that TopoTarget
shall not conduct a randomized clinical trial for the PTCL Indication in the TopoTarget Territory
prior to Spectrums receipt of Regulatory Approval for the PTCL Indication from the FDA.
4.5
Regulatory Matters
.
(a)
Spectrum Responsibility
. Promptly after the Effective Date, and subject to Section 4.7,
the IND for the Product shall be transferred to Spectrum. TopoTarget shall take all reasonably
necessary steps and execute all documents reasonably necessary to effectuate such transfer to
Spectrum, for no additional consideration. TopoTarget shall have the right to reference such IND
pursuant to Section 4.6. For avoidance of doubt, TopoTarget shall have an unrestricted, exclusive
and sublicensable right to use for the Development of the Product in the
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
34
TopoTarget Territory, all Information, data and results obtained in connection with
Development activities undertaken for obtaining Regulatory Approval for the Product in the
Territory.
In addition, commencing with the Effective Date, Spectrum shall be responsible for preparing
and filing all Regulatory Materials and seeking all Regulatory Approvals for the Product in the
Field in the Territory, including preparing all reports necessary as part of an NDA. All such
Regulatory Materials for Products in the Territory shall be filed in the name of Spectrum, and
Spectrum alone shall be responsible for all communications and other dealings with Regulatory
Authorities relating to the Products in the Territory. As between the Parties, Spectrum shall be
the legal and beneficial owner of all Regulatory Materials and Regulatory Approvals for the Product
in the Field in the Territory. Spectrum shall use Commercially Reasonably Efforts to obtain
Regulatory Approval for the Products in each jurisdiction within the Territory. All Regulatory
Costs associated with the foregoing regulatory activities for obtaining Regulatory Approvals for
the Product in the Field in the Territory shall be shared as follows: Spectrum shall be
responsible for seventy percent (70%) and TopoTarget shall be responsible for thirty percent (30%),
provided that [***] Regulatory Costs relating to obtaining Regulatory Approval for the PTCL
Indication in the Territory shall be [***].
Spectrum shall promptly notify TopoTarget of all material Regulatory Materials (including all
material written communications with the FDA) that it proposes to submit or receives and shall
promptly provide TopoTarget with a copy (which may be wholly or partly in electronic form) of such
material Regulatory Materials in the Territory for review by TopoTarget. Spectrum shall reasonably
consider and give due consideration to any comments provided by TopoTarget with respect to such
Regulatory Materials. Spectrum shall retain the right to make any final decisions with respect to
the content of any such communications, which shall be compliant with the Development Plan, this
Agreement and Applicable Law. Spectrum shall provide TopoTarget with reasonable advance notice of
any scheduled meeting with any Regulatory Authority relating to the Product and/or any Regulatory
Approval in the Territory, and TopoTarget shall have the right to have up to two (2) individuals
attend any such meeting as non-participating observers, to the extent practicable and permitted by
Applicable Law; provided that Spectrum will retain the lead role and responsibility in any such
meetings.
(b)
TopoTarget Responsibility
. TopoTarget shall have the sole right, but not the obligation,
for preparing and filing all Regulatory Materials and seeking all Regulatory Approvals in the
TopoTarget Territory. All such Regulatory Approvals for Products in the TopoTarget Territory shall
be filed in the name of TopoTarget, and TopoTarget alone shall be responsible for all
communications and other dealings with Regulatory Authorities relating to the Products in the
TopoTarget Territory. As between the Parties, TopoTarget shall be the legal and beneficial owner
of all Regulatory Materials and Regulatory Approvals in the TopoTarget Territory. TopoTarget shall
be responsible for all Regulatory Costs incurred by TopoTarget that are associated with the
foregoing regulatory activities for the Product in the TopoTarget Territory. For avoidance of
doubt, Spectrum shall have an unrestricted, exclusive and sublicensable right to use for the
Development of the Product in the Territory, all Information,
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
35
data and results obtained in connection with Development activities undertaken for obtaining
Regulatory Approval for the Product in the Territory.
TopoTarget shall promptly notify Spectrum of all material Regulatory Materials (including all
material written communications with the EMEA) for the Product in the TopoTarget Territory that it
submits or receives, and shall promptly provide Spectrum with a copy (which may be wholly or partly
in electronic form) of such material Regulatory Materials for review by Spectrum. TopoTarget shall
retain the right to make any final decisions with respect to the content of any such
communications. TopoTarget will provide Spectrum with reasonable advance notice of any scheduled
meeting with any Regulatory Authority relating to the Product and/or any Regulatory Approval in the
TopoTarget Territory, and Spectrum shall have the right to have up to two (2) individuals attend
any such meeting as non-participating observers, to the extent practicable and permitted by
Applicable Law, provided that TopoTarget will retain the lead role and responsibility in any such
meetings.
4.6
Rights of Reference to Regulatory Materials; Use of Clinical Data.
TopoTarget shall
provide Spectrum with a copy of, or access in a reasonably acceptable form to, all Regulatory
Materials that have not already been disclosed to Spectrum, within [***] ([***]) days after the
Effective Date. TopoTarget hereby grants to Spectrum an exclusive, sublicenseable right of
reference to all Regulatory Materials and Regulatory Approvals owned or Controlled by TopoTarget
solely for the purpose of obtaining Regulatory Approval for Product in the Field in Territory
during the Term.
Spectrum hereby grants to TopoTarget an exclusive, sublicenseable right of reference to all
Regulatory Materials (including the IND) and Regulatory Approvals owned or Controlled by Spectrum
solely for the purpose of obtaining Regulatory Approval for Product in the TopoTarget Territory
during the Term, including to perform the CUP Clinical Trial.
As between the Parties, each Party shall own all data developed by such Party or its
Affiliates relating to any Compound or Product. Notwithstanding the terms of Article 2, each Party
shall have the right, without any additional payment, to access and use any data, Information or
results developed or acquired by the other Party and its Affiliates relating to any Compound or
Product solely (a) for purposes of Developing the Compounds and Products in accordance with this
Agreement, including for avoidance of doubt TopoTargets Development of the Compounds and Product
in the TopoTarget Territory, (b) to support the Regulatory Approval of Products in such Partys
territory and (c) for Promotional, marketing, and medical education purposes in support of the
Commercialization of Product in such Partys territory, which right may be sublicensed by such
Party (with the consent of the other Party, not to be unreasonably withheld, conditioned or
delayed) to any Third Party collaborator or licensee that agrees to allow any Product-related
clinical data developed by such collaborator to be used by the other Party for such purposes in a
reciprocal manner in such other Partys territory.
For clarity, the rights of reference and use granted by this Section shall be in addition to
the licenses and other rights granted under this Agreement and shall be independent of the
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
36
ownership of the Regulatory Materials and Regulatory Approvals as allocated or transferred by
this Agreement.
4.7
Adverse Event Reporting and Safety Data Exchange.
At any time after the Effective Date,
any adverse event (any unwanted or unintended experience in a person that is associated with the
use of a drug, whether or not that experience is caused by that drug, including any known side
effects) or any Product complaint received by either Party regarding a Product will be forwarded to
the other Party as soon as possible, but no later than two (2) calendar days after the Party
receives such adverse event or complaint, by telephone, facsimile or secure e-mail, and shall
promptly provide the other Party with such other information reasonably requested by the other
Party to comply with its reporting obligations in connection with the Development of Product in
support of Regulatory Approval. The Parties agree that TopoTarget shall be responsible for all
safety reporting to Regulatory Authorities under the IND pertaining to the CUP Clinical Trial, and
Spectrum shall be responsible for all safety reporting to Regulatory Authorities under the IND for
the PTCL Clinical Trial and all other clinical trials. Without limiting the allocation of
responsibility set forth in the immediately preceding sentence, TopoTarget shall, on behalf of
Spectrum, provide reporting to Regulatory Authorities for the PTCL Clinical Trial, using the
TopoTarget FTEs dedicated to the PTCL Clinical Trial as determined by Spectrum pursuant to Section
4.4(a) to perform such reporting activities.
Within [***] ([***]) days after the Effective Date, Spectrum and TopoTarget shall enter into a
pharmacovigilance agreement containing specific terms, conditions and obligations of the Parties
with respect to collection, reporting and monitoring of all adverse drug reactions, adverse events,
product complaints, medical inquiries and other relevant drug safety matters relating to the
Product, sufficient to enable each Party to comply with its reporting obligations and regulatory
submissions in its respective territory with respect to the Product.
4.8
Communications with Regulatory Authorities
.
(a)
General.
Each Party shall keep the other Party informed, in a timely manner compliant
with the reporting requirements of Regulatory Authorities in the other Partys territory, of
notification of any action by, or notification or other information which it receives (directly or
indirectly) from any Regulatory Authority in such Partys territory with respect to the Product and
which may have a material impact on Regulatory Approval or the continued Commercialization of the
Product in the other Partys territory.
(b)
Other Communications.
Except as may be required by Applicable Law, TopoTarget shall not,
subsequent to final approval by the FDA of the NDA for the Product, communicate regarding the
Product with any Regulatory Authority having jurisdiction in the Territory unless explicitly
requested or permitted in writing to do so by Spectrum or unless so ordered by such Regulatory
Authority in the Territory, in which case TopoTarget shall immediately provide notice of such order
to Spectrum. Except as may be required by Applicable Law, Spectrum shall not communicate with any
Regulatory Authority having jurisdiction in the TopoTarget Territory regarding any Product unless
explicitly requested or permitted in writing to
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
37
do so by TopoTarget, or unless so ordered by such Regulatory Authority, in which case Spectrum
shall immediately provide notice of such order to TopoTarget.
4.9
Regulatory Inspection or Audit.
If a Regulatory Authority desires to conduct an
inspection or audit of either Partys facility or a facility under contract with either Party with
regard to the Product in the Territory, such Party shall cooperate and use Commercially Reasonable
Efforts to cause the contract facility to cooperate with such Regulatory Authority during such
inspection or audit. Following receipt of the inspection or audit observations of such Regulatory
Authority (a copy of which such Party will immediately provide to the other Party), such Party will
prepare the response to any such observations. Such Party agrees to conform its activities under
this Agreement to any commitments made in such a response, except to the extent it believes in good
faith that such commitments violate Applicable Laws.
4.10
Product Withdrawals and Recalls.
Spectrum shall have the right and responsibility, at
its expense, to control any product recall, field correction, or withdrawal of any Product in the
Territory, provided however that Spectrum shall be reimbursed by TopoTarget for expenses of any
recall to the extent provided in the Commercial Supply Agreement. As between the Parties,
TopoTarget shall have the right, at its expense, to control all recalls, field corrections, and
withdrawals of any Product in the TopoTarget Territory. To the extent practicable, the Parties
shall discuss the circumstances of any potential product recall, field correction or withdrawal of
any Product and possible appropriate courses of action. Each Party shall maintain complete and
accurate records of any recall in its territory for such periods as may be required by Applicable
Laws, but in no event for less than [***] ([***]) years.
ARTICLE 5
COMMERCIALIZATION; MANUFACTURING
5.1
Commercialization by the Parties
. Subject to the terms of this Agreement, (a) Spectrum
shall have responsibility and decision-making authority for Commercialization activities with
respect to any Product in the Territory and, except as otherwise provided herein, Spectrum shall be
responsible for [***] and (b) TopoTarget shall have responsibility and decision-making authority
for Commercialization activities for Products in the TopoTarget Territory and TopoTarget shall be
responsible for [***].
5.2
Commercialization by Spectrum.
Spectrum, itself or through its Affiliates or
sublicensees, shall use Commercially Reasonable Efforts to Commercialize Products for which
Regulatory Approval has been received in the Territory. Without limiting the generality of the
foregoing, unless otherwise agreed by the Parties, Spectrum shall satisfy each of the following
requirements:
(a)
Commercially Reasonable Efforts
. Spectrum shall use Commercially Reasonable Efforts to
Promote the Product in the Territory by committing FTEs and resources for Promotion activities
consistent with industry standards at least [***] ([***]) year prior to the anticipated date of
Regulatory Approval for the Product for the First Indication;
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38
(b)
Spectrum Sales Force
.
(i)
Sales Year [***]
. Spectrum will provide at least [***] ([***]) Field Personnel for the
Promotion of the Product for the First Indication in the U.S. Territory (the
Spectrum Sales
Force
) for Sales Year [***]. The Spectrum Sales Force shall be comprised of qualified Field
Personnel who have at least [***] ([***]) years work experience in oncology. The Product will be
the primary focus of the Detailing efforts of the Spectrum Sales Force directed to appropriately
targeted physicians, provided, however, that in the event there are materially significant
differences between the TPP as of the Effective Date and the proposed labeling for the Product for
the First Indication or if the First Indication for the Product is not the PTCL Indication,
Spectrum will have the right to adjust its Commercialization efforts in a commercially reasonable
manner. Spectrum promptly will provide written notice to TopoTarget of any such differences
between the TPP and proposed labeling of which Spectrum becomes aware.
(ii)
Sales Year [***]
. For [***], Spectrum will engage the Spectrum Sales Force for the
Promotion of the Product for any approved indication in the U.S. Territory, which Spectrum Sales
Force shall consist of at least [***] ([***]) Field Personnel (unless such number was adjusted
pursuant to subsection (i) above or is adjusted pursuant to subsection (iv) below or the Parties
agree in writing or it is determined by arbitration that it is commercially reasonable for the
Spectrum Sales Force to consist of less than [***] ([***]) Field Personnel) (the
Minimum Sales
Force Number
). Upon TopoTargets request from time to time, Spectrum shall provide TopoTarget
with a written statement reasonably identifying such FTEs.
(iii)
Disagreement
. In the event that at any time during Sales Year [***], TopoTarget
determines in good faith that Spectrums number of FTEs for the Spectrum Sales Force for such Sales
Year is less than the Minimum Sales Force Number, then TopoTarget shall notify Spectrum in writing,
in which case TopoTarget shall have an option (the
Co-Promotion Option
) to Promote in the U.S.
Territory all Products that are being Commercialized by Spectrum under this Agreement as of or
subsequent to the date of exercise of the Co-Promotion Option on the terms set forth in Article 6,
unless Spectrum disputes TopoTargets assertion that it does not have the Minimum Sales Force
Number devoted to the Promotion of the Product. TopoTarget shall have the right to exercise the
Co-Promotion Option within [***] ([***]) Business Days of receipt of its notice (such [***] ([***])
Business Day period or the [***] period set forth in subsection (1) below, as applicable, the
Co-Promotion Option Period
) in order to Co-Promote the Product in the U.S. Territory in
accordance with the terms of Article 6; unless Spectrum has disputed that it does not have the
Minimum Sales Force Number devoted to the Promotion of the Product, in which case Spectrum may
invoke an arbitration proceeding pursuant to Section 13.1(b) in order to have an arbitrator
determine whether or not it has Minimum Sales Force Number devoted to the Promotion of the Product.
Upon a determination by the arbitrator that Spectrum does not have the Minimum Sales Force Number
devoted to the Promotion of the Product, and provided that Spectrum does not increase the number of
Field Personnel to the Minimum Sales Force Number within [***] ([***]) days,
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39
TopoTarget shall have a [***] ([***]) day period following such [***] ([***]) day period to
exercise the Co-Promotion Option in accordance Article 6.
(iv)
Adjustment
. Notwithstanding the foregoing, the Parties agree that Spectrum shall have
the right to make commercially reasonable adjustments to its obligation with respect to its Sales
Force for Sales Year [***] and its obligation to launch the Product under Section 5.3 in the event
any of the following events occur outside of Spectrums reasonable control and which materially
affect Spectrums ability to Commercialize the Product in the U.S. Territory: (1) a Third Party
manufacturer fails to satisfy its supply obligations for the Product, including the obligation to
supply sufficient initial launch quantities of Product not less than ninety (90) days following the
date upon which Regulatory Approval for the Product is granted in the U.S. Territory, (2) market
related events outside of Spectrums control (e.g., physician access issues) occur, (3) adverse
events or health or safety issues have occurred or any regulatory hold, constraint or restriction
has been imposed or raised by a Regulatory Authority, (4) any Force Majeure event occurs or (5) a
Third Party alleges that the manufacture, use or sale of the Product infringes its intellectual
property.
5.3
Launch Efforts
. Subject to Section 5.2(b)(iv), Spectrum shall use Commercially Reasonable
Efforts to Commercially launch each Product in the Territory within [***] ([***]) days of receiving
Regulatory Approval therefor.
5.4
Commercialization Reporting.
Through the JCC, each Party shall keep the other Party
reasonably informed regarding the material progress and results of its Commercialization activities
in its territory and those of its Affiliates, sublicensees and Third Party contractors. Each Party
shall provide the JCC with a marketing plan describing such Partys plans for Commercializing the
Product in its territory.
5.5
Cross-Territory Sales
. Each Party shall not, and shall use Commercially Reasonable
Efforts (consistent with any Applicable Law) to obligate its sublicensees, distributors or
wholesalers to not, deliver or cause to be delivered, including via the Internet or mail order,
Product outside each Partys territory and to not sell any Product to a purchaser if in either case
such Party or its sublicensees, distributors or wholesalers knows, or has reason to believe, that
such purchaser intends to remove such Product from such Partys territory for the purpose of sales
or use by patients of the Product in the other Partys territory. In the event that, despite such
efforts, Product for sale in a Partys territory is diverted or delivered or sold into the other
Partys territory, then (a) if such Product were diverted by an identifiable customer, distributor,
employee, consultant or agent of a Party then, upon the request of the other Party, such Party
shall not sell Product to, or allow the sale of Product by, any such customer, distributor,
employee, consultant or agent for the remaining Term and shall use Commercially Reasonable Efforts
to buy back all such Product from such customer, distributor, employee, consultant or agent within
[***] ([***]) business days of such request from the other Party; or (ii) such Party shall use
Commercially Reasonable Efforts to investigate the location of such diverted Product and buy it
back; but, if and to the extent that, such Party elects not to, or is unable to, buy back the
applicable diverted Product, then the other Party may, in its sole discretion, buy back the
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
40
applicable diverted Product and such Party shall reimburse the other Party for all reasonable
costs incurred by the other Party in connection with the buy-back of any such diverted Product.
5.6
Manufacture and Supply of Product.
(a) Except as set forth below, TopoTarget shall have sole responsibility (either itself or
through one or more contract manufacturers) for manufacturing all clinical and commercial supplies
of Product for Development and Commercialization worldwide, in all formulations in bulk and
finished form, TopoTarget shall supply Spectrums requirements for Products for the Territory as
set forth in the Clinical Supply Agreement and Commercial Supply Agreement and, subject to Section
5.6(c)(v)(1), Spectrum (for itself and its sublicensees) shall purchase all of its requirements for
Product from TopoTarget. As of the Effective Date, TopoTargets agreements with any Third Party
contract manufacturer for the supply of Product in any formulation are listed on
Exhibit G
(the
Manufacturing Agreements
). TopoTarget represents that the existing Manufacturing Agreements
do not contain any obligations for Spectrum to obtain all or part of its requirements from such
Third Parties and TopoTarget will take no action or inaction that would result in any such
obligation or that would adversely affect Spectrums rights under this Agreement. TopoTarget shall
not amend or terminate any Manufacturing Agreement without Spectrums consent if such amendment or
termination would materially and adversely affect TopoTargets obligations under the Clinical
Supply Agreement or Commercial Supply Agreement, which shall not be unreasonably withheld, delayed
or conditioned, and TopoTarget shall use Commercially Reasonable Efforts to comply in all material
respects with its obligations and enforce its rights under each such Manufacturing Agreement.
Commencing with the Effective Date, TopoTarget shall consult with Spectrum with respect to any
new agreement between TopoTarget and any Third Party related to the manufacture and supply of
Product worldwide. TopoTarget shall not enter into any such new agreement unless Spectrum consents
to the terms for the Territory, such consent not to be unreasonably withheld, conditioned or
delayed; provided that in the event the Parties fail to agree, each Party may obtain supply from
any Third Party for its territory, and provided further that TopoTarget shall continue to supply
Products to Spectrum until such time as Spectrum or its manufacturer is producing Product. The
Parties acknowledge that it may be beneficial to negotiate worldwide supply arrangements with one
or more Third Parties in order to obtain the best pricing and delivery terms from Third Parties.
TopoTarget shall use Commercially Reasonable Efforts to obtain reasonably long term supply
obligations from Third Parties and to include terms and conditions limiting the ability of the
Third Party to increase the price of the Product other than in a commercially reasonable manner.
(b) Spectrum and TopoTarget will each pay [***] percent ([***]%) of the costs for chemical,
pharmaceutical and other process development related to the manufacturing of the Product that are
incurred after the Effective Date in accordance with a mutually agreed upon budget in the
Development Plan; provided however, that in the event process development work is requested by
either Party as necessary or useful only in its own territory, such Party shall pay [***] percent
([***]%) of the costs. Any payments by a Party to satisfy its percentage share
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
41
of such process development costs shall be made in arrears on a monthly basis in a manner
consistent with Section 4.4(c)(iv). If a Party (the
Non-Paying Party
) wishes to use the results
of any particular chemical, pharmaceutical and other process development work paid for solely by
the other Party (the
Sole Paying Party
) in such Non-Paying Partys own territory, the Non-Paying
Party shall be required to reimburse the Sole Paying Party for [***] percent ([***]%) of the Sole
Paying Partys costs that it incurred in performing such chemical, pharmaceutical and other process
development work, and from and after such date the Non-Paying Party and Sole Paying Party shall
each pay [***] percent ([***]%) of any additional costs of such process chemical, pharmaceutical
and other process development work.
(c) Within [***] ([***]) days after the Effective Date, Spectrum and TopoTarget shall
negotiate and execute in good faith an agreement for clinical supply of Product to Spectrum (the
Clinical Supply Agreement
) and an agreement for commercial supply of Product to Spectrum (the
Commercial Supply Agreement
). The Clinical Supply Agreement and Commercial Supply Agreement
shall include commercially reasonable terms and conditions, including the following:
(i) [***];
(ii) [***];
(iii) With respect to clinical supply of Product to Spectrum, TopoTarget shall provide all of
Spectrums requirements for Product in finished form, labeled and packaged;
(iv) With respect to commercial supply of Product to Spectrum, TopoTarget shall provide bulk
nested vials and oral bulk tablets (in each case with a certificate of analysis). TopoTarget shall
perform release testing of commercial supplies. Spectrum shall label and package the Product and
shall control its presentation and distribution. TopoTarget shall use its Commercially Reasonable
Efforts to manufacture or have manufactured Product having a shelf life of at least [***] ([***])
months, it being understood and agreed that the shelf life of the Products shall be as provided by
the TopoTargets Third Party manufacturers, but that in no event shall the Product supplied to
Spectrum have a remaining shelf life that is shorter than the remaining shelf life of Product
supplied to TopoTarget or its Affiliates, other licensees or distributors. Binding and non-binding
forecasts for the Product shall be consistent with the terms and conditions of the Manufacturing
Agreements;
(v) [***]:
(1) [***].
(2) [***].
(3) Spectrum shall establish, at its cost, a safety stock of Products comprised of a quantity
of Products sufficient to satisfy Spectrums requirements for Products.
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
42
(vi) Within [***] ([***]) days after the Effective Date and thereafter periodically
throughout the Term, TopoTarget shall transfer to Spectrum, its Affiliate or the Third Party
manufacturer selected by Spectrum pursuant to Section 5.6(c)(v)(1), all Information, including the
specifications for the Product, Controlled by TopoTarget at such time that is necessary or useful
to enable Spectrum, its Affiliate or a Third Party manufacturer (as appropriate) to replicate the
process employed by or on behalf of TopoTarget to manufacture Product. The internal FTE costs and
expenses of each Party incurred in such transfer shall be borne by such Party. Any costs and
expenses payable to the Third Party manufacturer (
Third Party Manufacturer Costs
) and
TopoTargets third party manufacturers shall be borne solely by Spectrum. TopoTarget shall take
commercially reasonable steps to ensure the smooth and timely transfer of the manufacturing process
for Products to Spectrum, its Affiliate or Third Party manufacturer. Spectrum acknowledges and
agrees that TopoTarget may condition its agreement to transfer (or to permit Spectrum to transfer)
any TopoTarget manufacturing technology or Information to a Third Party manufacturer (other than
those Third Party manufacturers with which Spectrum has written agreements as of the Effective
Date) on the execution of a confidentiality agreement between such Third Party manufacturer and
Spectrum that contains obligations of confidentiality and non-use no less stringent than those of
Article 11 of this Agreement. TopoTarget represents, as of the Effective Date and as of the date
of execution of the Commercial Supply Agreement, that there are no contractual limitations or
restrictions under the Manufacturing Agreements with respect to Spectrum qualifying a back-up
supplier of Product and TopoTarget will take no action that would result in any such limitation or
restriction.
(vii) [***].
(viii) To the extent permitted by the Manufacturing Agreements, TopoTarget shall pass through
to Spectrum the benefit of any representations, warranties, and indemnities made by the Third Party
manufacturers under the Manufacturing Agreement and any other remedies TopoTarget may have against
such manufacturers. TopoTarget shall not have any liability to Spectrum or any other Person for
any liability solely to the extent attributable to a breach or other failure by any such
manufacturer, provided that Spectrum is a third party beneficiary entitled to enforce the
applicable Manufacturing Agreement against such manufacturer.
5.7
Promotional Materials
.
(a) All uses of the TopoTarget Trademarks and Spectrum Trademarks shall comply in all material
respects with all Applicable Laws in the Territory. Spectrum may include its company name and
associated logos on all Product packaging and Promotional Materials for the Territory.
(b) Spectrum shall be responsible, at its expense, for preparing and producing the Promotional
Materials for the Territory. Spectrum shall provide TopoTarget with a final copy of each version
of the Promotional Materials for the Territory promptly after completion thereof. Except as
specifically permitted by this Section 5.7, neither Party shall distribute or
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
43
have distributed any materials bearing the name or any trademarks of the other Party without
the prior written approval of such other Party. TopoTarget shall be responsible, at its expense,
for preparing and producing the Promotional Materials for the TopoTarget Territory. TopoTarget
shall provide Spectrum with a final copy of each version of the Promotional Materials for the
Territory promptly after completion thereof. Spectrum agrees that TopoTarget may use in
TopoTargets Promotional Materials in the TopoTarget Territory any content included within
Spectrums Promotional Materials. TopoTarget agrees that Spectrum may use in Spectrums
Promotional Materials in the Territory any content included within TopoTargets Promotional
Materials.
(c) Upon the Co-Promotion Commencement Date, at TopoTargets cost, Spectrum shall provide
TopoTarget with the Promotional Materials then used by the Spectrum Sales Force to Promote the
Product in the Territory in quantities sufficient for TopoTarget to satisfy its obligations under
this Agreement, and subsequently shall provide TopoTarget with any updated Promotional Materials.
TopoTarget shall be responsible for distributing the Promotional Materials to the TopoTarget Sales
Force. Spectrum shall own all right, title and interest in the Promotional Materials, including
all intellectual property rights appurtenant thereto. Spectrum hereby grants to TopoTarget a
royalty-free license to use the Promotional Materials during the Term solely in connection with its
Promotion of the Product in the Territory and in accordance with this Agreement, the Co-Promotion
Agreement and Applicable Laws, subject to TopoTargets payment of costs as provided in this
Section.
(d) Neither Party shall use or distribute in connection with Detailing the Product in the
Territory any promotional materials other than the Promotional Materials (branded or non-branded)
in the form(s) prepared and approved in accordance with this Section 5.7. Spectrum shall be solely
responsible for timely submitting, as applicable, any Promotional Materials to the FDAs Division
of Drug Marketing, Advertising and Communications and to any applicable state Governmental
Authorities in the Territory. TopoTarget shall distribute the Promotional Materials in accordance
with the terms of this Agreement and the Co-Promotion Agreement and shall not distribute any
out-dated Promotional Materials to the extent it has received notice from Spectrum that such
Promotional Materials are out-dated. TopoTarget shall certify that any such out-dated Materials
have been returned to Spectrum or its designee or destroyed, in accordance with Spectrums written
policy delivered on the Co-Promotion Commencement Date, as such policies may be updated from time
to time by Spectrum.
ARTICLE 6
TOPOTARGET CO-PROMOTION RIGHT
6.1
Option Exercise
. TopoTarget may exercise the Co-Promotion Option by written notice to
Spectrum at any time during the Co-Promotion Option Period pursuant to Section 5.2(b)(iii),
provided that TopoTarget may not exercise the Co-Promotion Option if TopoTarget is in material
breach of this Agreement and has not cured such breach within the sixty (60) day period set forth
in Section 12.3. The Co-Promotion Option shall automatically and irrevocably expire in the event
(i) TopoTarget has not provided written notice to Spectrum of its exercise of the Co-Promotion
Option during the Co-Promotion Option Period or (ii) there is a Change of Control of TopoTarget
prior to the exercise by TopoTarget of the Co-Promotion Option, unless
44
Spectrum consents to the exercise of the Co-Promotion Option by the acquirer of TopoTarget,
which consent shall not be unreasonably withheld, delayed or conditioned.
6.2
Grant of Co-Promotion Right.
In the event TopoTarget exercises the Co-Promotion Option by
written notice to Spectrum pursuant to Section 6.1, then Spectrum hereby grants to TopoTarget the
co-exclusive (with Spectrum) right to Promote Products in the U.S. Territory during the
Co-Promotion Term, on the terms and subject to the conditions set forth herein (the
Co-Promotion
Right
). For clarity, TopoTarget shall have no right to Detail or Promote the Product in the U.S.
Territory prior to the Co-Promotion Commencement Date. Promptly upon the grant of the Co-Promotion
Right, the Parties shall enter into a co-promotion agreement (
Co-Promotion Agreement
) that will
contain commercially reasonable terms for the Promotion of the Product by TopoTarget in the U.S.
Territory, including the following:
(a)
Co-Promotion Term
. The Co-Promotion Right shall commence on the date that is [***]
([***]) months after the date of exercise of the Co-Promotion Option (the
Co-Promotion
Commencement Date
) and shall continue in effect until [***] (the
Co-Promotion Term
).
(b)
Co-Promotion Sales
. [***]. The Co-Promotion Agreement shall provide each Party with
audit rights with respect to the foregoing consistent with the audit right under this Agreement.
(c)
Sales Force.
(i) During the Co-Promotion Term, TopoTarget shall Detail and Promote the Product in the U.S.
Territory in accordance with the Co-Promotion Agreement and this Agreement using a commercially
reasonable number of qualified sales representatives who have at least [***] ([***]) years work
experience in oncology (which number in no event shall be less than the Minimum Sales Force Number
minus the number of FTEs in the Spectrum Sales Force in the U.S. Territory) or the Co-Promotion
shall terminate. During the Co-Promotion Term, all Details and Promotion activities conducted by
TopoTarget shall be under the reasonable direction of Spectrum, shall be overseen by Spectrum and
shall be in accordance with Spectrums SOPs and in compliance with all Applicable Laws. TopoTarget
shall manage the TopoTarget Sales Force and shall implement Spectrums sales strategies and plans.
TopoTarget shall use Commercially Reasonable Efforts to provide the TopoTarget Sales Force with the
level of oversight, management, direction and sales support with respect to the Promotion of
Product to effectively and efficiently Promote the Product in accordance with the terms of this
Agreement. During any period in which the TopoTarget Sales Force is Co-Promoting the Product, the
Parties will use Commercially Reasonable Efforts at the local level to coordinate Details by the
Spectrum Sales Force with Details by the TopoTarget Sales Force in a manner intended to increase
effective coverage of the target audience and to decrease non-productive efforts. Except as set
forth in Section 6.2(b) and Section 6.2(d), TopoTarget shall bear all of the costs and expenses
incurred by TopoTarget or its employees, consultants, service providers, or agents in connection
with the Co-Promotion Agreement and shall indemnify and defend the
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
45
Spectrum Indemnitees from and against any and all claims, damages, liabilities, costs
and expenses resulting from TopoTargets Promotion of the Product, except to the extent such
claims, damages, liabilities, costs and expenses arise out of or relate to compliance with
Spectrums SOPs, directions, Promotional Materials or Spectrums breach of this Agreement or
Applicable Laws. Spectrum shall bear all of the costs and expenses incurred by Spectrum or its
employees, consultants, service providers, or agents in connection with the Co-Promotion Agreement
and shall indemnify and defend the TopoTarget Indemnitees from and against any and all claims,
damages, liabilities, costs and expenses resulting from TopoTargets compliance with Spectrums
SOPs, directions, Promotional Materials or from Spectrums breach of this Agreement or Applicable
Laws, except to the extent such claims, damages, liabilities, costs and expenses arise out of or
relate to TopoTargets failure to comply with Spectrums SOPs, directions, Promotional Materials or
TopoTargets breach of this Agreement or Applicable Laws. Except as set forth in Section 6.2(b)
and Section 6.2(d), each Party shall be solely responsible for all costs and expenses of
recruiting, hiring, training, maintaining and compensating its Sales Force, including salaries,
benefits and incentive compensation, provided that such incentive compensation shall not be
structured in a manner that would reasonably be expected to inappropriately motivate such
individuals to engage in the improper Promotion or sales of Product.
(ii) Each Party shall indemnify the other Party and Affiliates against any Losses for any
payment or obligation to make a payment to any of its employees or agents for the co-promotion of
Product relating in any way to any compensation or benefits or the payment or withholding of any
contributions, payroll taxes, or any other payroll-related item, even if it is subsequently
determined by any court or any other Governmental Authority that any such employee or agent may be
a common law employee of the other Party and/or its Affiliates, distributors or sublicensees or
otherwise entitled to such benefits.
(iii) In no case shall TopoTarget be responsible for, or liable to Spectrum on account of, the
inaccurate or misleading content of any of Spectrums Promotional Material.
(d)
Samples; Training
. Spectrum shall bear all costs related to the supply of Product samples
and promotional materials, the cost of creating and implementing the TopoTarget Sales Force
training programs, and all marketing costs and expenses, provided that expenses shall be limited to
expenses for the Reimbursed Sales Representatives only. Spectrum or its distributor(s) or
sublicensee(s), as applicable, shall develop and implement the training program for the respective
Sales Forces for the co-promotion of Products in the U.S. Territory, and TopoTarget agrees to
utilize such training program to assure a consistent, focused promotional strategy and message.
(e)
No Sales or Distribution; Returns.
With respect to the U.S. Territory, Spectrum shall
sell all Product to each customer, and shall book each sale. The Parties recognize that TopoTarget
may from time to time receive orders for the Product directly from Third Parties for delivery in
the U.S. Territory. In such event, TopoTarget promptly shall advise such Third Party that
TopoTarget is not authorized to accept orders for the Product and shall immediately and accurately
forward such order to Spectrum, or its designee, which order Spectrum may accept or reject in its
sole discretion. Spectrum shall be responsible for handling all returns of
46
the Product with respect to the U.S. Territory. If any Product sold in the U.S. Territory is
returned to TopoTarget, TopoTarget shall either promptly destroy or ship such Product to Spectrum
or its designee, as directed by Spectrum, at Spectrums expense, and in accordance with Applicable
Laws.
ARTICLE 7
FINANCIALS
7.1
License Fee
. Not later than two (2) Business Days after Spectrum receives wire transfer
information from TopoTarget after the Effective Date, Spectrum shall pay to TopoTarget a
non-refundable, non-creditable license fee of Thirty Million Dollars (US $30,000,000) by wire
transfer of immediately available funds into an account designated by TopoTarget.
7.2
Development Milestone Payments.
Spectrum shall make development milestone payments to
TopoTarget as follows:
(a)
Acceptance of First NDA
. Upon the acceptance by the FDA of the first NDA filed by
Spectrum or an Affiliate or sublicensee of Spectrum for a Product for the First Indication and in
accordance with the Registration Rights and Stockholder Agreement, Spectrum shall issue one million
(1,000,000) shares of Spectrum Common Stock (such 1,000,000 shares of Common Stock, as adjusted
from time to time on and after the Effective Date for any stock splits, stock dividends and other
similar adjustments, the Spectrum NDA Shares), to TopoTarget on a date to be determined upon the
mutual agreement of Spectrum and TopoTarget, but in no event later than the tenth (10th) Business
Day following such FDA acceptance (the Issuance Date). As used herein, Common Stock means
shares of Spectrum common stock, $0.001 par value per share. If any of the following events occur
prior to the issuance of the Spectrum NDA Shares, namely (i) any consolidation, merger or
combination of Spectrum with another person as a result of which holders of Common Stock shall be
entitled to receive stock, securities or other property or assets (including cash) with respect to
or in exchange for such Common Stock, (ii) any statutory exchange, as a result of which holders of
Common Stock generally shall be entitled to receive stock, securities or other property or assets
(including cash) with respect to or in exchange for such Common Stock (such transaction, a
Statutory Exchange), or (iii) any sale or conveyance of the properties and assets of Spectrum as,
or substantially as, an entirety to any other person as a result of which holders of Common Stock
shall be entitled to receive stock, securities or other property or assets (including cash) with
respect to or in exchange for such Common Stock, then Spectrum shall hold, set aside in an
unencumbered fund (free of liens) and, upon satisfaction of the condition described in the first
sentence of this Section 7.2(a), issue (and shall cause any successor or purchasing person, as the
case may be, to hold, set aside in an unencumbered fund (free of liens) and, upon satisfaction of
the condition described in the first sentence of this Section 7.2(a), issue), all of the kind and
amount of shares of stock and other securities or property or assets (including cash) receivable
upon such reclassification, change, consolidation, merger, combination, Statutory Exchange, sale or
conveyance by a holder of a number of shares of Common Stock equal to the number of Spectrum NDA
Shares immediately prior to such reclassification, change, consolidation, merger,
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
47
combination, Statutory Exchange, sale or conveyance assuming such holder of Common Stock did
not exercise his rights of election, if any, that holders of Common Stock who were entitled to vote
or consent to such transaction had as to the kind or amount of securities, cash or other property
receivable upon such consolidation, merger, combination, Statutory Exchange, sale or conveyance
(provided that, if the kind or amount of securities, cash or other property receivable upon such
consolidation, merger, combination, Statutory Exchange, sale or conveyance is not the same for each
share of Common Stock in respect of which such rights of election shall not have been exercised
(non-electing share), then for the purposes of this Section 7.2(a) the kind and amount of
securities, cash or other property receivable upon such consolidation, merger, combination,
Statutory Exchange, sale or conveyance for each non-electing share shall be deemed to be the kind
and amount so receivable per share by a plurality of the non-electing shares). The above
provisions of this Section 7.2(a) shall similarly apply to successive reclassifications, changes,
consolidations, mergers, combinations, Statutory Exchanges, sales and conveyances.
(b)
PTCL Indication
.
(i) [***] Dollars (US $[***]) upon acceptance by the FDA of the first NDA filed by Spectrum or
an Affiliate or sublicensee of Spectrum for a Product for use in the PTCL Indication; and
(ii) [***] Dollars (US $[***]) upon receipt by Spectrum or an Affiliate or sublicensee of
Spectrum of Regulatory Approval from the FDA for a Product for use in the PTCL Indication.
(c)
First Non-PTCL Indication
.
(i) [***] Dollars (US $[***]) upon initiation by Spectrum or an Affiliate or sublicensee of
Spectrum of treatment of the first patient in a Phase III Clinical Trial of a Product for use in
the First Non-PTCL Indication.
(ii) [***] Dollars (US $[***]) upon acceptance by the FDA of the first NDA or filed by
Spectrum or an Affiliate or sublicensee of Spectrum for a Product for use in the First Non-PTCL
Indication; and
(iii) [***] Dollars (US $[***]) upon receipt by Spectrum or an Affiliate or sublicensee of
Spectrum of Regulatory Approval from the FDA for a Product for use in the First Non-PTCL
Indication.
(d)
Second Non-PTCL Indication
.
(i) [***] Dollars (US $[***]) upon acceptance by the FDA of the first NDA filed by Spectrum or
an Affiliate or sublicensee of Spectrum for a Product for use in the Second Non-PTCL Indication;
and
(ii) [***] Dollars (US $[***]) upon receipt by Spectrum or an Affiliate
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
48
or sublicensee of Spectrum of Regulatory Approval from the FDA for a Product for use in the
Second Non-PTCL Indication.
(e)
Additional Milestone
. In the event (i) of receipt by Spectrum or an Affiliate or
sublicensee of Spectrum of Regulatory Approval from the FDA for a Product for use in any indication
(other than the PTCL Indication, First Non-PTCL Indication or Second Non-PTCL Indication) (the
Additional Indication
) and (ii) such Regulatory Approval for such Additional Indication was
obtained (1) through the use of efficacy and safety information and data generated solely by
TopoTarget at TopoTargets sole cost and expense for the purpose of obtaining Regulatory Approval
of the Product in the TopoTarget Territory for such Additional Indication and that was provided to
Spectrum pursuant to this Agreement but (2) without the use of any efficacy information or data
generated from any clinical trial of the Product for the Additional Indication performed by
Spectrum or an Affiliate or sublicensee of Spectrum, then Spectrum shall pay to TopoTarget a
milestone payment in an amount equal to [***] Dollars (US $[***]), [***].
Each milestone payment in this Section 7.2 shall be paid only once regardless of the number of
Products (including Belinostat or a Backup Compound) that achieve such milestones, and shall be
non-refundable and non-creditable. The maximum total amount of payment to TopoTarget pursuant to
Sections 7.2(b) through (e) shall be $[***].
7.3
Sales Milestone Payments.
Spectrum shall make each of the sales milestone payments
indicated below to TopoTarget when cumulative, aggregate Net Sales from and after the Effective
Date of all Products by Spectrum, its Affiliates and sublicensees in the Territory reach the
specified dollar values:
|
|
|
|
|
Cumulative, Aggregate Net Sales in the Territory
|
|
Payment
|
US $[***]
|
|
US $[***]
|
US $[***]
|
|
US $[***]
|
US $[***]
|
|
US $[***]
|
US $[***]
|
|
US $[***]
|
US $[***]
|
|
US $[***]
|
Each milestone payment in this Section 7.3 shall be paid only once. The maximum total amount of
payment to TopoTarget pursuant to this Section 7.3 shall be $[***]. Spectrum shall notify and pay
to TopoTarget the amounts set forth in this Section 7.3 within [***] after the delivery due date of
the quarterly report pursuant to Section 7.6 for the calendar quarter in which the applicable event
was achieved. For clarity, in the event that more than one of the aggregate Net Sales thresholds
is achieved in a calendar year, Spectrum shall owe each of the corresponding payments. Each such
payment shall be made by wire transfer of immediately available funds into an account designated by
TopoTarget. Each such payment is nonrefundable and noncreditable against any other payments due
hereunder.
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
49
7.4
Royalties.
(a)
Royalty Rate
. Subject to the terms of this Section 7.4 and 6.2(b), Spectrum shall pay to
TopoTarget a royalty of [***] percent ([***]%) on Net Sales of Products by it and its Affiliates
and sublicensees in the Territory, as adjusted pursuant to this Section.
(b)
Royalty Reduction Generic Competition
. In the event a Product is subject to Generic
Competition in a country in the Territory, then the royalty rate set forth in Section 7.4(a) (as
such rate may have been adjusted under Section 7.4(d)) shall be reduced by [***] percent ([***]%)
in such country,
provided
that if the royalty rate set forth in Section 7.4(a) has already
been reduced pursuant to Section 7.4(c), the amount of the reduction permitted to be taken under
this Section 7.4(b) shall be limited to [***] percent ([***]%) of the royalty rate prior to the
reduction being taken under Section 7.4(c). Such royalty reduction shall become effective on the
first day of the month after the month in which on such Generic Competition first occurs and shall
expire on the last day of the month in which such Generic Competition ceases to exist, subject to
the royalty duration provided for under Section 7.4(e).
(c)
Royalty Reduction Patent Expiry
. In the event the expiration of the last to expire
Valid Claim of a TopoTarget Patent in the U.S. Territory Covering a Product occurs prior to the
expiration of the [***] period set forth in Section 7.4(e), the royalty rate set forth in Section
7.4(a) (as such rate may have been adjusted under Section 7.5(d)) for such Product shall be reduced
by [***] percent ([***]%) for the remainder of the applicable royalty duration. Notwithstanding
the foregoing, (i) this Section 7.4(c) shall not apply during any time period that the royalty
rates are reduced pursuant to Section 7.4(b) and (ii) this Section 7.4(c) shall only apply during
such period that the payment of royalties set forth herein beyond the expiration of the last to
expire Valid Claim would render the TopoTarget Patent unenforceable (i.e., until such time as a
court of competent jurisdiction in the U.S. Territory holds in a final and non-appealable judgment
(or judgment from which no appeal was taken within the allowable time period) or a law or
administrative order explicitly provides that the payment of royalties beyond the expiration of the
last to expire Valid Claim does not render the TopoTarget Patent unenforceable).
(d)
Royalty Reduction Anti-Stacking
. In the event the manufacture, use or sale of any
Compound or Product in the Territory under this Agreement would infringe the intellectual property
rights of any Third Party absent a license thereunder, which manufacturing, use or sale activity,
as of the Effective Date, is also encompassed within any claim of the TopoTarget Patents, and
Spectrum reasonably obtains a license under such intellectual property rights, then Spectrum may
deduct from the royalties due to TopoTarget pursuant to this Section 7.4 [***] percent ([***]%) of
any payments actually paid to any such Third Party as consideration solely for any such license to
such intellectual property rights; provided that in no event shall the royalties due to TopoTarget
for a given calendar quarter be reduced under this Section 7.4(d) by more than [***] percent
([***]%) (but not any payments due under Section 4.4(e), which shall be paid in full)). Unused
credit amounts may be carried over into subsequent quarterly periods.
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
50
(e)
Duration
. Royalties shall be payable under this Section 7.4 on a
country-by-country and Product-by-Product basis during the period commencing with First Commercial
Sale of Product in the Territory and continuing until the later of: (i) [***] or (ii) [***].
7.5
Sublicense Revenue
. Without limitation of Spectrums obligations to pay the milestone
payments pursuant to Sections 7.2 and 7.3, whether achieved by Spectrum or its Affiliates or
sublicensees, or royalty payments pursuant to Section 7.4, Spectrum shall pay TopoTarget [***]
percent ([***]%) of any Sublicense Revenue received by Spectrum from any sublicensee under a
sublicense agreement entered into after the Effective Date.
7.6
Spectrum Payments and Reports.
Within sixty (60) days after the end of each calendar
quarter, Spectrum shall provide TopoTarget with a statement of (a) the amount of gross sales of
Product in the Territory by Spectrum, its Affiliates and sublicensees during the applicable
calendar quarter, (b) an itemized calculation of Net Sales showing Net Sales Deductions during such
calendar quarter, (c) a calculation of the amount of royalty payment due on such sales for such
calendar quarter pursuant to Section 7.4, (d) any milestone payment due pursuant to Section 7.2 or
7.3 and (e) Sublicense Revenue received by Spectrum and the percentage of Sublicense Revenue due
under Section 7.5. Concurrently with each statement, Spectrum shall pay to TopoTarget the royalty
payment for such calendar quarter pursuant to Section 7.4, any milestone payment due pursuant to
Section 7.2 or 7.3 and any percentage of Sublicense Revenue payment due pursuant to Section 7.5.
All amounts payable to TopoTarget under this Agreement shall be paid in United States dollars.
7.7
Taxes.
All payments required to be paid under this Agreement shall be paid without
deduction or withholding of any taxes, except as set forth in this Section 7.7. The Parties agree
to cooperate with one another and use reasonable efforts to minimize obligations for any and all
income or other taxes required by Applicable Law to be withheld or deducted from any of the royalty
and other payments made by or on behalf of a Party hereunder (
Withholding Taxes
). The applicable
paying Party under this Agreement (the
Paying Party
) shall, if required by Applicable Law, deduct
from any amounts that it is required to pay to the recipient Party hereunder (the
Recipient
Party
) an amount equal to such Withholding Taxes,
provided
that the Paying Party shall
give the Recipient Party reasonable notice prior to paying any such Withholding Taxes. Such
Withholding Taxes shall be paid to the proper taxing authority for the Recipient Partys account
and, if available, evidence of such payment shall be secured and sent to recipient within one (1)
month of such payment. The Paying Party shall, at the Recipient Partys cost and expense, do all
such lawful acts and things and sign all such lawful deeds and documents as the Recipient Party may
reasonably request to enable the Paying Party to avail itself of any applicable legal provision or
any double taxation treaties with the goal of paying the sums due to the Recipient Party hereunder
without deducting any Withholding Taxes. For the sake of clarity, in no event shall the Paying
Party be required to pay any additional amounts, whether in the nature of a gross up payment or
otherwise, to the Recipient Party on account of such Withholding Taxes.
7.8
No Setoff
. Except as provided in Section 4.4(c) or 7.4, all payments due to TopoTarget
under this Agreement shall be made without setoff or deduction of any kind if TopoTarget does not
dispute that it owes money to Spectrum, provided that this Section 7.8 shall not apply to any money
damages awarded to Spectrum in a final, non-appealable judgment (or
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
51
judgment from which no appeal was taken within the allowable time period) awarded against
TopoTarget.
7.9
Late Payments.
If a Party does not receive payment of any sum due to it on or before the
due date, simple interest shall thereafter accrue on the sum due to such Party from the due date
until the date of payment at [***] per annum or the maximum rate allowable by Applicable Law,
whichever is less.
7.10
Records; Audits.
Spectrum shall maintain complete and accurate books and records in
accordance with GAAP (to the extent appropriate) in sufficient detail to permit TopoTarget to
confirm the accuracy of [***] under this Agreement, and Spectrums compliance with the
Manufacturing Limitations, for a period of [***] ([***]) years from the creation of individual
records or any longer period required by Applicable Law. At TopoTargets request, such records
going back no more than [***] ([***]) years shall be available for review not more than once each
calendar year (during normal business hours on a mutually agreed date with reasonable advance
notice) by an independent Third Party auditor selected by TopoTarget and approved by Spectrum (such
approval not to be unreasonably withheld, conditioned, or delayed) and subject to confidentiality
and non-use obligations no less stringent than those set forth in Article 11 for the sole purpose
of verifying for TopoTarget the accuracy of the financial reports furnished by Spectrum pursuant to
this Agreement or of any payments made by Spectrum to TopoTarget pursuant to this Agreement. Any
such auditor shall not disclose Spectrums Confidential Information to TopoTarget, except to the
extent such disclosure is necessary to verify the accuracy of the financial reports furnished by
Spectrum or the amount of payments due by Spectrum under this Agreement. Any amounts shown to be
owed but unpaid or overpaid and in need of reimbursement shall be paid or refunded (as the case may
be) within thirty (30) days after the accountants report, plus interest (as set forth in Section
7.9) from the original due date. [***].
ARTICLE 8
INTELLECTUAL PROPERTY
8.1
Ownership of Inventions.
Each Party shall own all inventions and Information made solely
by the respective employees, agents, and independent contractors of it and its Affiliates in the
course of conducting such Partys activities under this Agreement (collectively,
Sole
Inventions
). All inventions and Information that are conceived, reduced to practice, authored or
otherwise made jointly by employees, Affiliates, agents, or independent contractors of both Parties
in the course of performing activities under this Agreement (collectively,
Joint Inventions
)
shall be owned jointly by the Parties in accordance with joint ownership interests of co-inventors
under United States patent laws.
8.2
Disclosure of Inventions.
Each Party shall promptly disclose to the other all Sole
Inventions or Joint Inventions relating to Product or its manufacture or use, including all
invention disclosures or other similar documents submitted to such Party by its, or its
Affiliates, employees, agents or independent contractors describing such Sole Inventions or Joint
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
52
Inventions. Such Party shall also respond promptly to reasonable requests from the other
Party for more Information relating to such inventions.
8.3
Prosecution of Patents.
(a)
TopoTarget Patents.
(i)
In the Territory
. Except as otherwise provided in this Section 8.3(a), as between the
Parties, Spectrum shall have the sole right and authority to prepare, file, prosecute (including
any interferences, reissue proceedings and reexaminations) and maintain, in TopoTargets name, the
TopoTarget Patents in the Territory and to retain counsel in its reasonable discretion in
connection therewith, all at [***], subject to TopoTargets approval of such counsel, such approval
not to be unreasonably withheld, delayed or conditioned, provided that, unless otherwise agreed in
writing by the Parties, Spectrum shall not knowingly file or prosecute any TopoTarget Patent in the
Territory in a manner materially detrimental to the TopoTarget Patents being prepared, filed,
prosecuted and maintained by TopoTarget in the TopoTarget Territory.
Spectrum shall keep TopoTarget reasonably informed with respect to the preparation and
prosecution of the TopoTarget Patents in the Territory and shall provide TopoTarget with the right
to review and comment on such preparation and prosecution. Spectrum shall consider reasonable
comments by TopoTarget, but Spectrum shall have ultimate decision-making authority. If Spectrum
determines in its sole discretion that it is not interested in preparing, filing, prosecuting or
maintaining any TopoTarget Patent in the Territory, then Spectrum shall provide TopoTarget written
notice of such determination at least thirty (30) days before any deadline for taking action to
avoid abandonment and TopoTarget shall thereafter have the right and authority to prepare, file,
prosecute and maintain such former TopoTarget Patent in the Territory, at [***] and in consultation
with Spectrum, provided that TopoTarget shall not knowingly file or prosecute any such former
TopoTarget Patent in a manner that would be materially detrimental to the other TopoTarget Patents
being prepared, filed, prosecuted and maintained by Spectrum. Any such former TopoTarget Patent
shall be licensed to Spectrum and shall be considered in determining the royalties on Net Sales of
Products, provided that any such former TopoTarget Patent first prepared, filed, prosecuted and
maintained by TopoTarget after it has experienced a Change of Control shall not automatically be
licensed to Spectrum or considered in determining the royalties on Net Sales of Products unless
agreed to by Spectrum in writing. TopoTarget shall provide Spectrum with all documents (including
all office actions, communications from the relevant patent office and drafts of any filings or
responses thereto, and foreign filings and foreign search report) relevant to such preparation,
filing, prosecution and maintenance by TopoTarget for review and comment by Spectrum, and the
Parties shall discuss all such preparation, filing, prosecution and maintenance in the context of
the IP Committee. TopoTarget shall include reasonable comments by Spectrum.
(ii)
In the TopoTarget Territory
. Except as otherwise provided in this Section 8.3(a), as
between the Parties, TopoTarget shall have the sole right and authority to prepare, file, prosecute
(including any interferences, reissue proceedings and reexaminations)
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
53
and maintain, in TopoTargets name, the TopoTarget Patents in the TopoTarget Territory and to
retain counsel in its sole discretion in connection therewith, all at [***]; provided that
TopoTarget shall not knowingly file or prosecute any TopoTarget Patent in the TopoTarget Territory
in a manner materially detrimental to the TopoTarget Patents being prepared, filed, prosecuted and
maintained by Spectrum in the Territory. To the extent feasible, TopoTarget shall use Commercially
Reasonable Efforts to keep Spectrum informed with respect to the preparation and prosecution of the
TopoTarget Patents in the TopoTarget Territory and shall provide Spectrum with the right to review
and comment on such preparation and prosecution. TopoTarget shall consider reasonable comments by
Spectrum, but TopoTarget shall have ultimate decision-making authority.
(iii)
In the China Territory
. Until such time as the China Territory is included in the
Territory pursuant to Section 2.5 or such time that the China Territory is included in the
TopoTarget Territory pursuant to Section 2.5, whichever is earlier, TopoTarget shall have the sole
right and authority to prepare, file, prosecute (including any interferences, reissue proceedings
and reexaminations) and maintain, in TopoTargets name, the TopoTarget Patents in the China
Territory and to retain counsel in its sole discretion in connection therewith, all at [***]. To
the extent feasible, TopoTarget shall use Commercially Reasonable Efforts to keep Spectrum informed
with respect to the preparation and prosecution of the TopoTarget Patents in the China Territory
and shall provide Spectrum with the right to review and comment on such preparation and
prosecution. TopoTarget shall include reasonable comments by Spectrum.
(b)
Joint Patents.
With respect to any potentially patentable Joint Invention, the Parties
shall meet and agree upon which Party, if any, shall prepare, file, prosecute (including any
interferences, reissue proceedings and reexaminations) and maintain patent applications covering
such Joint Invention (any such patent application and any patents issuing therefrom a
Joint
Patent
) in any jurisdictions throughout the world, as well as the manner in which patent expense
for such Joint Patent will be [***].
The Party that prosecutes a patent application in the Joint Patents (the
Prosecuting Party
)
shall provide the other Party reasonable opportunity to review and comment on such prosecution
efforts regarding the applicable Joint Patents in the particular jurisdictions, and such other
Party shall provide the Prosecuting Party reasonable assistance in such efforts. The Prosecuting
Party shall provide the other Party with a copy of all material communications from any patent
authority in the applicable jurisdictions regarding the Joint Patent being prosecuted by such
Party, and shall provide drafts of any material filings or responses to be made to such patent
authorities a reasonable amount of time in advance of submitting such filings or responses. In
particular, each Party agrees to provide the other Party with all information necessary or
desirable to enable the other Party to comply with the duty of candor/duty of disclosure
requirements of any patent authority. The prosecuting Party shall consider comments by the
non-prosecuting Party, but each Party shall have ultimate decision-making authority in its own
territory.
Either Party may determine that it is no longer interested in supporting the continued
prosecution or maintenance of a particular Joint Patent in a country or jurisdiction, in which case
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
54
the disclaiming Party shall provide the other Party with written notice of such determination
at least [***] ([***]) days before any deadline for taking action to avoid abandonment and shall
provide the other Party with the opportunity to have the disclaiming Partys interest in such Joint
Patent in such country or jurisdiction assigned to the other Party, at no cost to the other Party.
Subject to the license granted to Spectrum pursuant to Section 2.1(a), each Party shall have
the right to practice, license and exploit the Joint Patents worldwide, without consent of the
other Party (where consent is required by law, such consent is hereby deemed granted) and without a
duty of accounting to the other Party.
(c)
Cooperation in Prosecution.
Each Party shall provide the other Party all reasonable
assistance and cooperation in the Patent prosecution efforts provided above in this Section 8.3,
including providing any necessary powers of attorney and executing any other required documents or
instruments for such prosecution.
(d)
IP Committee.
It is the goal of the Parties to facilitate the exchange of information
between them regarding each Partys performance of its responsibilities under this Article 8. To
this end, the Parties may from time to time during the Term convene an ad hoc advisory group of
individuals (the
IP Committee
) having the requisite expertise in order to (a) facilitate the
sharing of information between the Parties regarding the Parties activities under this Agreement
relating to the filing, prosecution, maintenance and enforcement of the TopoTarget Patents and
TopoTarget Know-How in the Territory and (b) provide a forum for discussing such matters. The IP
Committee shall not have any decision-making rights or responsibilities, and any failure or delay
in obtaining consensus with respect to any issue discussed by this group shall not preclude the
Party having control over a particular matter pursuant to this Article 8 from taking action with
respect to such matter.
8.4
Enforcement of TopoTarget Technology.
(a)
Notification
. If there is any infringement, threatened infringement, or alleged
infringement of the TopoTarget Patents or misappropriation of TopoTarget Know-How on account of a
Third Partys manufacture, use or sale of a Product in the Territory (in each case, a
Product
Infringement
), then each Party shall promptly notify the other Party in writing of any such
Product Infringement of which it becomes aware, and shall provide evidence in such Partys
possession demonstrating such Product Infringement. Each Party shall immediately, but in no case
more than five (5) Business Days, give written notice to the other Party of any certification of
which it becomes aware filed pursuant to 21 U.S.C. Sections 355(b)(2)(A)(iv) or
355(j)(2)(A)(vii)(IV) claiming any TopoTarget Patent covering Product is invalid or unenforceable,
or that infringement will not arise from the manufacture, use or sale of a product by a Third
Party.
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
55
(b)
Enforcement Rights
.
(i) Subject to Section 8.4(d) and the remainder of this Section 8.4(b), during the Term,
Spectrum shall have the first right, but not the obligation, to bring an appropriate suit or other
action against any Person engaged in such Product Infringement of the TopoTarget Technology in the
Territory, at Spectrums expense. If Spectrum has not brought suit to enforce such TopoTarget
Technology against such Person within thirty (30) days after Spectrums receipt or delivery (as
applicable) of notice and information under Section 8.4(a), then TopoTarget shall have the right,
but not the obligation, to commence a suit or take action to enforce the applicable TopoTarget
Technology with respect to such Product Infringement in the Territory, TopoTargets expense.
Notwithstanding the foregoing, TopoTarget shall not, and shall not permit any other licensee of
TopoTarget under the TopoTarget Patents in the Territory to, proceed against an alleged infringer
of the TopoTarget Patents in the Territory (1) unless significant damages are reasonably expected
to be recovered from the infringer in such proceeding, and (2) without first consulting with
Spectrum regarding the strategy for such proceeding and considering in good faith Spectrums
comments regarding such proceeding, provided that TopoTarget shall not, nor shall it permit any
other licensee of TopoTarget under the TopoTarget Patents in the Territory to, proceed against an
alleged infringer of any claims of a TopoTarget Patent in the Territory that are directed solely to
the sulphonamide class of HDAC Inhibitors without Spectrums prior written consent.
Each Party shall provide to the Party enforcing any such rights under this Section 8.4(b)
reasonable assistance in such enforcement, including using best efforts if required to establish
and maintain standing to join such action as a party plaintiff if required by Applicable Law to
pursue such action. The enforcing Party shall keep the other Party regularly informed of the
status and progress of such enforcement efforts, and shall reasonably consider the other Partys
comments on any such efforts.
(ii) Any recovery obtained by any enforcing Party as a result of any proceeding described in
this Section 8.4, by settlement or otherwise, shall be applied in the following order of priority:
[***].
(c)
Settlement
. Without the prior written consent of the other Party, such consent not to be
unreasonably withheld, conditioned or delayed, neither Party shall settle any claim, suit or action
that it brought under this Section 8.4 involving TopoTarget Technology in any manner that would
negatively impact such intellectual property or that would limit or restrict the ability of
Spectrum or its Affiliates or licensees to sell Products in the Territory or the ability of
TopoTarget or its Affiliates or licensees to sell Products in the TopoTarget Territory.
(d)
TopoTarget Technology Licensed from Third Parties.
Spectrums rights under this Section
8.4 with respect to any TopoTarget Technology licensed to TopoTarget by a Third Party shall be
subject and subordinated to the rights of such Third Party to enforce such TopoTarget Technology
and/or defend against any claims that such TopoTarget Technology is invalid or unenforceable, and
the rights of such Third Party to share in any recoveries.
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
56
8.5
Patent Marking
. Both Parties shall, and shall require its Affiliates and
sublicensees, to mark Products sold by it hereunder with appropriate patent numbers or indicia to
the extent permitted by Applicable Law, in those countries in which such markings or such notices
impact recoveries of damages or equitable remedies available with respect to infringements of
patents.
8.6
Trademarks.
(a)
Spectrum Trademarks
. Spectrum shall be responsible for the selection, adoption,
registration, maintenance and defense of all Compound and Product related trademarks for use in
connection with the sale or marketing of Products in the Territory (the
Spectrum Trademarks
), as
well as all expenses associated therewith. Spectrum shall own all Spectrum Trademarks. All rights
arising from the use by Spectrum of the Spectrum Trademarks in the Territory during the Term shall
inure to Spectrums benefit. Spectrum shall have the sole right and discretion to bring
infringement or unfair competition proceedings anywhere in the world involving infringement of or
unfair competitive activities relating to the Spectrum Trademarks in the Territory.
TopoTarget shall have the right, and is hereby granted an exclusive, royalty-free license, to
adopt, use, register and cause to be registered any of the Spectrum Trademarks solely for use in
connection with the sale, marketing and distribution of Products in the TopoTarget Territory. All
rights arising from the use by TopoTarget of the Spectrum Trademarks in the TopoTarget Territory
during the Term shall inure to TopoTargets benefit. TopoTarget shall have the sole right and
discretion to bring infringement or unfair competition proceedings anywhere in the world involving
infringement of or unfair competitive activities relating to the Spectrum Trademarks in the
TopoTarget Territory. TopoTarget shall properly designate the TopoTarget Trademarks on the
packaging of the final Product, to the extent required or permissible by the applicable Regulatory
Approvals and TopoTarget agrees that all Products with which the TopoTarget Trademarks are used
shall conform to all requirements of any Applicable Laws and any Regulatory Authorities in the
TopoTarget Territory.
(b)
TopoTarget Trademarks
. Spectrums use of the TopoTarget Trademarks in the Territory shall
be limited to the marketing, sale and distribution of the Product. TopoTarget shall have all
rights to the TopoTarget Trademarks in the TopoTarget Territory, as set forth in Section 2.2.
Spectrum shall be responsible for maintaining in its own name the registrations for any or all of
the TopoTarget Trademarks in the Territory, and for defending the TopoTarget Trademarks in the
Territory, all at Spectrums sole expense. TopoTarget shall, as soon as practicable after
receiving notice of any potential infringement of the TopoTarget Trademarks in the Territory,
inform Spectrum of any such potential infringement. Spectrum shall have the sole right and
discretion to bring infringement or unfair competition proceedings anywhere in the world involving
infringement of or unfair competitive activities relating to the TopoTarget Trademarks in the
Territory. Spectrum agrees that, during the Term, it will not assign the TopoTarget Trademarks to
any Third Party, except pursuant to Section 14.5. Spectrum shall, as soon as practicable after
receiving notice of any potential infringement of the TopoTarget Trademarks in the TopoTarget
Territory, inform TopoTarget of
57
any such potential infringement. TopoTarget shall have the sole right and discretion to bring
infringement or unfair competition proceedings anywhere in the world involving infringement of or
unfair competitive activities relating to the TopoTarget Trademarks in the TopoTarget Territory.
8.7
Infringement of Third Party IP.
Each Party shall promptly notify the other in writing of
any allegation, claim or suit that the manufacture, use or sale of a Product infringes or
misappropriates a Third Partys Patent or other intellectual property rights. Subject to Section
7.4(d), each Party shall have the sole right to control any defense of any such claim involving
alleged infringement of Third Party rights by such Partys activities, at its own expense and by
counsel of its own choice.
Spectrum shall be solely responsible for obtaining, at its sole expense and subject to Section
7.4(d), any agreements with Third Parties required in order to lawfully perform its manufacturing
and Commercialization responsibilities under this Agreement; provided however that, during the
Term, in the event TopoTarget enters into an agreement with a Third Party for the development or
commercialization of Products in the TopoTarget Territory or TopoTarget licenses any intellectual
property necessary or useful for the Development or Commercialization of the Products in the
Territory, TopoTarget shall use Commercially Reasonable Efforts to obtain the right to sublicense
such rights to Spectrum under this Agreement.
8.8
The CREATE Act
. Each Party acknowledges and agrees that: (a) the provisions herein are
intended to encompass and include a joint research agreement for the performance of experimental,
developmental and research work as contemplated by 35 U.S.C. § 103(c)(3), and that any invention
made in connection with the activities contemplated in this Agreement, whether made solely by or on
behalf of one Party or jointly by or on behalf of both Parties, is intended to and should have the
benefit of the rights and protections conferred by Public Law 108-453, the Cooperative Research and
Enhancement Act of 2004 as codified in 35 U.S.C. §103(c)(2) (the
CREATE Act
); (b) in the event
that a Party seeks to rely on the foregoing and invoke the CREATE Act with respect to any invention
that is the subject of a patent application filed by or on behalf of such Party, such Party will
give prior written notice(s) to the other Party of its intent to invoke the CREATE Act and of each
submission or disclosure such Party intends to make to the USPTO pursuant to the CREATE Act,
including: (i) any disclosure of or regarding the existence or contents of this Agreement to the
USPTO; (ii) the disclosure of any subject matter developed by the other Party (as such term is
used in the CREATE Act) in, without limitation, an information disclosure statement, or (iii) the
filing of any terminal disclaimer over the intellectual property of the other Party, it being
agreed that no such submission, disclosure or filing shall be made by such Party without the prior
written consent of the other Party, such consent not to be unreasonably withheld, conditioned or
delayed; (c) without limiting subsection (b) above (including the obligation to obtain a Partys
prior approval), it shall not be a violation of confidentiality obligations hereunder for a Party,
as necessary in connection with the invocation of the CREATE Act, to disclose to the USPTO (i) the
intellectual property of the other Party in, without limitation, an information disclosure
statement or (ii) this Agreement, provided that such Party exercises reasonable efforts to limit
the scope of such disclosure as strictly necessary to invoke the CREATE Act, including by
reasonably redacting the material terms of this Agreement before any such disclosure; and (d)
58
without limiting subsection (b) above, each Party will provide reasonable cooperation to the
other Party in connection with such other Partys efforts to invoke and rely on the CREATE Act.
8.9
License to TopoTarget
.
(a) Spectrum hereby grants TopoTarget a royalty-free license to and under the Spectrum Sole
Inventions which relate to a [***]. The foregoing license shall be exclusive (even as to Spectrum
and its Affiliates) with respect to the rights granted under clauses (i) and (ii) above, and
non-exclusive with respect to the rights granted under clause (iii) above.
(b) The licenses granted by Spectrum to TopoTarget in this Section may be sublicensed by
TopoTarget to any Affiliate or Third Party; provided that TopoTarget shall have the right to
sublicense the license granted by Spectrum under this Section only to sublicensees who agree in
advance to grant TopoTarget a license, with the right to sublicense to Spectrum on a royalty-free
basis, under any invention, data or information made by such sublicensee which relates to a [***].
Any sublicense under the licenses granted by Spectrum to TopoTarget in this Section shall be
consistent with the terms of this Agreement and shall include confidentiality and non-use
obligations no less stringent than those set forth in Article 11.
ARTICLE 9
REPRESENTATIONS, WARRANTIES AND COVENANTS
9.1
Mutual Representations and Warranties
. Each Party hereby represents, warrants, and
covenants (as applicable) to the other Party as follows, as of the Effective Date:
(a)
Corporate Existence and Power
. It is a corporation or limited partnership, as applicable,
duly organized, validly existing, and in good standing under the laws of the jurisdiction in which
it is incorporated or formed, and has all requisite power and authority and the legal right to own
and operate its property and assets and to carry on its business as it is now being conducted and
as contemplated in this Agreement, including the right to grant the licenses granted by it
hereunder.
(b)
Authority and Binding Agreement
. It has the requisite power and authority and the legal
right to enter into this Agreement and perform its obligations hereunder; it has taken all
necessary action on its part required to authorize the execution and delivery of this Agreement and
the performance of its obligations hereunder; and this Agreement has been duly executed and
delivered on its behalf, and constitutes a legal, valid, and binding obligation of such Party that
is enforceable against it in accordance with its terms, subject as to enforcement of remedies to
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting generally
the enforcement of creditors rights and subject to a courts discretionary authority with respect
to the granting of a decree ordering specific performance or other equitable remedies.
(c)
Consents
. All necessary consents, approvals and authorizations of all Governmental
Authorities and any Third Parties required to be obtained by it in connection with the execution,
delivery and performance of this Agreement have been obtained by it.
[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
59
(d)
No Conflict
. The execution and delivery of this Agreement, the performance of such
Partys obligations hereunder and the licenses and sublicenses to be granted pursuant to this
Agreement (i) to its knowledge, do not conflict with or violate any requirement of Applicable Law
existing as of the Effective Date, (ii) do not conflict with or violate the certificate of
incorporation, certificate of formation, by-laws, limited partnership agreement or other
organizational documents of such Party, and (iii) do not conflict with, violate, breach or
constitute a default under any contractual obligations of such Party or any of its Affiliates
existing as of the Effective Date, except as would not reasonably be expected to have a material
adverse effect on the transactions contemplated by this Agreement.
(e)
Notice of Infringement or Misappropriation.
Such Party has not received any written notice
from any Third Party asserting or alleging that the research, Development, making or using of
Compounds or Products by such Party prior to the Effective Date or upon Commercialization,
infringed, misappropriated or diluted, or will infringe, misappropriate or dilute the intellectual
property rights of such Third Party.
9.2
TopoTarget Technology
. TopoTarget hereby represents and warrants to Spectrum as of the
Effective Date that:
(a) TopoTarget is the sole owner of all right, title and interest in and to, or Controls, with
the right to sublicense, the TopoTarget Patents set forth in
Exhibit C
, free and clear of
any mortgage, pledge, claim, security interest, covenant, easement, encumbrance, lien, lease,
sublease, option, or charge of any kind, limitations on transfer or any subordination arrangement
in favor of a Third Party (other than Permitted Encumbrances) and, except for the licenses and
sublicenses contemplated by Article 2 and the Material Contracts, as of the Effective Date it has
granted no other rights in favor of a Third Party under the TopoTarget Technology in the Territory;
(b) [***].
(c) as of the Effective Date, to TopoTargets knowledge, there are no materials, Information,
or intellectual property rights that TopoTarget has a license, right or covenant to and that, if
TopoTarget provided Spectrum with access, a license, or a sublicense right or covenant (as
applicable) to such materials, Information or intellectual property without violating the terms of
any then-existing agreement or other arrangement with any Third Party, would increase at any time
the amount of any payments required under any such agreement or arrangement;
(d) no Third Party nor employee of TopoTarget has asserted or alleged in writing to TopoTarget
that it has an ownership interest in the TopoTarget Technology, and no Third Party has contested or
asserted in writing to TopoTarget that the TopoTarget Patents are not valid or enforceable in the
Territory;
|
|
|
[***]:
|
|
CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
|
60
(e) to the knowledge of TopoTarget as of the Effective Date, the Development, manufacture
and Commercialization of the Compound or Product (in its current form) in the Territory does not
infringe any valid or enforceable claims of any Third Party issued patent or, if issued, any claims
of any Third Party pending patent applications;
(f) TopoTarget has not received written notice of any interference or opposition proceeding
relating to the TopoTarget Patents in the Territory;
(g) TopoTarget has made available to Spectrum all data, results or other information derived
from or regarding any preclinical or clinical study that would be reasonably expected to be
relevant to an evaluation of any material safety risks associated with the Product; and
(h) The statements set forth in
Schedule 9.2(h)
accurately reflect the specifications
for Belinostat as of the Effective Date.
9.3
TopoTarget Trademark Representations and Warranties
. TopoTarget hereby represents and
warrants to Spectrum as of the Effective Date that:
(a) to the knowledge of TopoTarget, there is no Third Party using or infringing any of the
TopoTarget Trademarks in the Territory in derogation of the rights granted to Spectrum in this
Agreement;
(b) TopoTarget has not received notice of any opposition or cancellation action or litigation
pending or any communication which expressly threatens an opposition or cancellation action, or
other litigation, before any trademark office, court or any other governmental entity in the
Territory with respect to any of the TopoTarget Trademarks;
(c) the TopoTarget Trademarks listed on
Exhibit D
attached hereto are the only
trademarks owned, held, Controlled, licensed or otherwise used (or intended to be used) by
TopoTarget or its Affiliates with respect to the Product in the Territory (other than the
TOPOTARGET trademark);
(d) to the knowledge of TopoTarget, it has all rights necessary to use the TopoTarget
Trademarks with respect to the Product in the Territory and to assign to Spectrum the TopoTarget
Trademarks as set forth above and TopoTarget has not obtained any Third Party consents in
connection with the prosecution of the TopoTarget Trademarks in the Territory; and
(e) to the knowledge of TopoTarget, it has not infringed, misappropriated, diluted or
otherwise violated any trademark of any Third Parties by registering or using the TopoTarget
Trademarks in the Territory.
9.4
Compliance with Law
. Each Party shall, and shall ensure that its Affiliates and
sublicensees shall, comply in all material respects with all Applicable Laws in exercising their
rights and fulfilling their obligations under this Agreement.
9.5
Representations regarding Debarment.
Each Party represents, warrants and covenants that
as of the Effective Date and during the Term, neither it nor its Affiliates nor any
61
of their respective directors, officers, or employees, and, to its knowledge based upon
reasonable inquiry, any Third Party (and its directors, officers, employees and consultants), in
each case who were responsible for the development or whose responsibilities involve the
Development or Commercialization of the Product as authorized by this Agreement or the Promotion of
the Product as authorized by the Co-Promotion Right:
(a) are debarred under Section 306(a) or 306(b) of the FD&C Act;
(b) have been charged with, or convicted of, any felony under Applicable Laws related to any
of the following: (A) the development or approval of any drug product or the regulation of any drug
product under the FD&C Act; (B) a conspiracy to commit, aid or abet the development or approval of
any drug product or regulation of any drug product; (C) health care program-related crimes
(involving Medicare or any State health care program); (D) patient abuse, controlled substances,
bribery, payment of illegal gratuities, fraud, perjury, false statement, racketeering, blackmail,
extortion, falsification or destruction of records; (E) interference with, obstruction of an
investigation into, or prosecution of, any criminal offense; or (F) a conspiracy to commit, aid or
abet any of these listed felonies or misdemeanors; and
(c) is excluded, suspended or debarred from participation, or otherwise ineligible to
participate, in any Federal or State health care programs (including convicted of a criminal
offense that falls within the scope of 42 U.S.C. §1320a-7 but not yet excluded, debarred,
suspended, or otherwise declared ineligible), or excluded, suspended or debarred from
participation, or otherwise ineligible to participate, in any Federal procurement or nonprocurement
programs;
(d) each Party will notify the other Party immediately, but in no event later than five (5)
days, after knowledge of any exclusion, debarment, suspension or other ineligibility occurring
during the Term.
9.6
Regulatory Matters
. TopoTarget hereby represents and warrants the following to Spectrum
as of the Effective Date:
(a) TopoTarget has provided or made available, when requested by Spectrum to conduct its due
diligence review, any and all material documents and communications in its possession from and to
the FDA or any other Governmental Authority, or prepared by the FDA or any other Governmental
Authority, related to a Product, that may bear on compliance with the requirements of the FDA or
any other Governmental Authority in the Territory, including any notice of inspection, inspection
report, warning letter, deficiency letter, or similar communication;
(b) Neither TopoTarget nor any of its Affiliates has received, with respect to a Product, any
oral or written communication (including any warning letter, untitled letter, or similar notices)
from the FDA and there is no action pending or, to TopoTargets knowledge, threatened (including
any prosecution, injunction, seizure, civil fine, suspension or recall), in each case alleging that
with respect to a Product, TopoTarget or any of its Affiliates is not currently materially in
compliance with any and all Applicable Laws implemented by the FDA. Neither TopoTarget nor any of
its Affiliates has received any written notice from any
62
Governmental Authority claiming that the research, development, manufacture, use, offer for
sale, sale, or import of a Product is materially noncompliant with any Applicable Laws;
(c) To TopoTargets knowledge, none of TopoTarget, any of its Affiliates or any of their
respective officers, employees or agents has made, with respect to a Product, an untrue statement
of a material fact to the FDA or other Governmental Authority or failed to disclose a material fact
required to be disclosed to the FDA or other Governmental Authority;
(d) To TopoTargets knowledge, all testing, research and manufacture of the Products by or on
behalf of TopoTarget and its Affiliates has been conducted in compliance with all Applicable Laws
as applicable and required at the time such activity was performed; and
(e) There is no material matter known to TopoTarget as of the Effective Date which has not
been disclosed by TopoTarget to Spectrum concerning the safety or efficacy of any Product.
9.7
Representations regarding Spectrum NDA Shares
. TopoTarget hereby represents and warrants
the following to Spectrum as of each of the Effective Date and the Issuance Date:
(a)
Investment Intent
. TopoTarget is acquiring the Spectrum NDA Shares for its own account
for investment purposes only and not with a view to or for distributing or reselling such
securities or any part thereof, without prejudice, however, to its right at all times to sell or
otherwise dispose of all or any part of such securities in compliance with applicable federal and
state securities laws and with such other restrictions as may apply, including the restrictions set
forth in the Registration Rights and Stockholder Agreement. TopoTarget does not have any agreement
or understanding, directly or indirectly, with any Person to distribute any of the Spectrum NDA
Shares.
(b)
Purchaser Status
. TopoTarget meets one or more of the standards for an accredited
investor as defined in Rule 501(a) under the Securities Act of 1933, as amended (the
Securities
Act
).
(c)
Access to Information
. TopoTarget has been afforded (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from, representatives of Spectrum
concerning the terms and conditions of the issuance of the Spectrum NDA Shares and the merits and
risks of investing in such securities; (ii) access to information about Spectrum and its financial
condition, results of operations, business, properties, management and prospects sufficient to
enable it to evaluate its investment; and (iii) the opportunity to obtain such additional
information that is necessary to make an informed investment decision with respect to the Spectrum
NDA Shares.
(d)
Restrictions on Resale
. TopoTarget understands that the Spectrum NDA Shares to be issued
upon the conditions outlined under Section 7.2(a) have not been and will not be registered under
the Securities Act upon issuance and must be held indefinitely unless or until a subsequent
disposition thereof is registered under the Securities Act (including under the registration
statement contemplated by the Registration Rights and Stockholder Agreement) or is exempt from such
registration, that the Spectrum NDA Shares will also be subject to the
63
restrictions on transfer set out in the Registration Rights and Stockholder Agreement, and
that the share certificate for such Spectrum NDA Shares will contain a restrictive legend
substantially as set forth in the Registration Rights and Stockholder Agreement.
9.8
No Broker
. No broker, finder, agent or similar intermediary has acted for or on behalf of
a Party or its Affiliates in connection with this Agreement or the transactions contemplated
hereby, and no broker, finder, agent or similar intermediary is entitled to any brokers, finders
or similar fee or other commission in connection therewith based on any agreement, arrangement or
understanding with a Party or its Affiliates or any action taken by a Party or its Affiliates;
provided that a Party shall bear all liabilities associated with claims by any broker, finder,
agent or similar intermediary that it is entitled to any brokers, finders or similar fee or other
commission in connection with this Agreement or the transactions contemplated hereby asserted
against such Party or its Affiliates.
9.9
Material Contracts.
Schedule 9.9
sets forth all of the agreements to which
TopoTarget or its Affiliates are a party as of the Effective Date that involve the manufacturing of
Products in bulk and finished form or otherwise directly relevant to the manufacture or supply of
Product for sale in the Territory (the
Material Contracts
). All of the Material Contracts have
been delivered or made available (in an acceptable format) to Spectrum (or where a contract or
agreement is other than in writing,
Schedule 9.9
contains a true, accurate and complete
summary of the material terms of such contract or agreement) and, as of the Effective Date, to
TopoTargets knowledge, are valid, subsisting agreements, in full force and effect and binding upon
the parties thereto in accordance with their terms and TopoTarget or its Affiliate has paid in full
all amounts due thereunder and has satisfied in full all of its material accrued liabilities and
obligations thereunder, and is not in material default under any of them nor is any other party to
any such contract or other agreement in default thereunder, nor does any condition exist which with
notice or lapse of time or both would constitute a default thereunder.
9.10
No Other Representations or Warranties
. EXCEPT AS
EXPRESSLY STATED IN THIS
ARTICLE 9, NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESS OR IMPLIED, INCLUDING
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, OR
NON-MISAPPROPRIATION OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS, IS MADE OR GIVEN BY OR ON BEHALF
OF A PARTY. ALL REPRESENTATIONS AND WARRANTIES, WHETHER ARISING BY OPERATION OF LAW OR OTHERWISE,
ARE HEREBY EXPRESSLY EXCLUDED.
ARTICLE 10
INDEMNIFICATION
10.1
General Indemnification by TopoTarget.
TopoTarget shall defend, indemnify, and hold
harmless Spectrum, its Affiliates, and their respective officers, directors, employees, consultants
and authorized agents and their respective successors and assigns or heirs, as the case may be (the
Spectrum Indemnitees
) from and against any and all claims, damages, liabilities, losses, costs
(including reasonable attorneys fees and expenses) and expenses (collectively
Losses
) to the
extent resulting from any claim of a Third Party against such Spectrum Indemnitee based on or
arising out of:
64
(a) any misrepresentation or breach of any of TopoTargets representations, warranties,
covenants or obligations under this Agreement;
(b) the gross negligence or willful misconduct of, or violation of Applicable Law by,
TopoTarget, its Affiliates, licensees, contractors, distributors, or their respective officers,
directors, employees, consultants or authorized agents under this Agreement;
(c) Product Liability claims under Section 10.3(b).
The foregoing indemnity obligations shall not apply to the extent that the Losses of such
Spectrum Indemnitee were caused by: (i) a breach of any of Spectrums representations, warranties,
covenants, or obligations under this Agreement; or (ii) the negligence or willful misconduct of, or
violation of Applicable Law by, such Spectrum Indemnitee.
10.2
General Indemnification by Spectrum.
Spectrum shall defend, indemnify and hold harmless
TopoTarget, its Affiliates, and their respective officers, directors, employees, consultants and
authorized agents and their respective successors and assigns or heirs, as the case may be (the
TopoTarget Indemnitees
) from and against any and all Losses to the extent resulting from any
claim of a Third Party against such TopoTarget Indemnitee based on or arising out of:
(a) any misrepresentation or breach of any of Spectrums representations, warranties,
covenants or obligations under this Agreement;
(b) the gross negligence or willful misconduct of, or violation of Applicable Law by,
Spectrum, its Affiliates, licensees, distributors or their respective officers, directors,
employees, consultants or authorized agents under this Agreement; or
(c) Product Liability claims under Section 10.3(a).
The foregoing indemnity obligation shall not apply to the extent that the Losses of such
TopoTarget Indemnitee were caused by: (i) a breach of any of TopoTargets representations,
warranties, covenants, or obligations under the Agreement; or (ii) the negligence or willful
misconduct of, or violation of Applicable Law by, such TopoTarget Indemnitee.
10.3
Product Liability Indemnification
(a) Notwithstanding anything to the contrary herein, Spectrum shall be solely responsible for
all Losses from Product Liability claims brought in the Territory, other than to the extent covered
in clause (b) below, resulting directly from (i) Spectrums breach of its warranties, covenants or
agreements contained in this Agreement, (ii) the violation of any Applicable Laws by Spectrum, its
Affiliates, distributors or sublicensees (other than TopoTarget, its Affiliates, licensees or
contractors), (iii) Development Activities by Spectrum, its Affiliates or sublicensees (other than
TopoTarget, its Affiliates, licensees or contractors), (iv) the use, development, manufacture,
promotion, distribution, marketing, offering for sale, sale and commercialization of the Product by
or on behalf of Spectrum or its Affiliates, licensees or sublicensees (other than TopoTarget, its
Affiliates, licensees or contractors), (v) the conduct of clinical trials for the Product anywhere
by Spectrum, its Affiliates, licensees or sublicensees
65
(other than TopoTarget, its Affiliates, licensees or contractors) and/or (vi) inaccurate or
misleading content of any sales or promotional literature in connection with the marketing,
promotion and sale of the Product in the Territory.
(b) Notwithstanding anything to the contrary herein, TopoTarget shall be solely responsible
for all Losses from Product Liability claims, other than to the extent covered in clause (a) above,
resulting directly from (i) TopoTargets breach of its warranties, covenants or agreements
contained in this Agreement, (ii) the violation of any Applicable Laws by TopoTarget, its
Affiliates or licensees (other than Spectrum, its Affiliates, licensees or contractors), (iii)
Development activities by TopoTarget, its Affiliates or licensees (other than Spectrum, its
Affiliates, licensees or contractors), (iv) the use, development, manufacture, promotion,
distribution, marketing, offering for sale, sale and commercialization of the Product by or on
behalf of TopoTarget or its Affiliates, licensees or sublicensees (other than Spectrum, its
Affiliates, licensees or contractors) inside or outside the Territory prior to the Effective Date
or during the Term, (v) the conduct of clinical trials for the Product anywhere by TopoTarget, its
Affiliates, licensees or sublicensees (other than Spectrum, its Affiliates, licensees or
contractors), and/or (vi) inaccurate or misleading content of any sales or promotional literature
in connection with the marketing, promotion and sale of the Product in the Territory that was not
approved by Spectrum.
10.4
Indemnification Procedures.
(a)
Notice of Claim
. All indemnification claims in respect of any indemnitee seeking
indemnity under this Agreement will be made solely by the corresponding Party seeking indemnity
under this Article 10 (the
Indemnified Party
). The Indemnified Party will give the indemnifying
Party (the
Indemnifying Party
) prompt written notice (an
Indemnification Claim Notice
) of any
Losses or the discovery of any fact upon which such Indemnified Party intends to base a request for
indemnification under this Article 10, as applicable. The failure to give such prompt written
notice shall not, however, relieve the Indemnifying Party of its indemnification obligations,
except and only to the extent that the Indemnifying Party forfeits rights or defenses by reason of
such failure. Each Indemnification Claim Notice must contain a description of the claim and the
nature and amount of such Loss (to the extent that the nature and amount of such Loss are known at
such time). Together with the Indemnification Claim Notice, the Indemnified Party will furnish
promptly to the Indemnifying Party copies of all notices and documents (including court papers)
received by the Indemnified Party in connection with the Third Party claim.
(b)
Control of Defense
. At its option, the Indemnifying Party may assume the defense of any
Third Party claim subject to indemnification as provided for in this Article 10 by giving written
notice to the Indemnified Party within thirty (30) days after the Indemnifying Partys receipt of
an Indemnification Claim Notice, provided however that (i) the claim solely seeks monetary damages
and (ii) the Indemnifying Party expressly agrees in writing that as between the Indemnifying Party
and the Indemnified Party, the Indemnifying Party shall be solely obligated to satisfy and
discharge the claim in full (the matters described in (i) and (ii), the
Litigation Conditions
).
The Indemnified Party may, at any time, assume all such defense if the Litigation Conditions are
not satisfied at any time. Upon assuming the defense of a Third Party claim in accordance with
this Section 10.4, the Indemnifying Party shall be entitled to
66
appoint lead counsel in the defense of the Third Party claim. Should the Indemnifying Party
assume the defense of a Third Party claim, except as otherwise set forth in this Section 10.4(b),
the Indemnifying Party will not be liable to the Indemnified Party for any legal expenses
subsequently incurred by such Indemnified Party in connection with the analysis, defense or
settlement of the Third Party claim.
(c)
Right to Participate in Defense
. Without limiting Section 10.4(b), any Indemnified Party
will be entitled to participate in, but not control, the defense of a Third Party claim for which
it has sought indemnification hereunder and to employ counsel of its choice for such purpose;
provided, however, that such employment will be at the Indemnified Partys own expense unless (i)
the employment thereof has been specifically authorized by the Indemnifying Party in writing, (ii)
the Indemnifying Party has failed to assume and actively further the defense and employ counsel in
accordance with Section 10.4(b) (in which case the Indemnified Party will control the defense), or
(iii) the Indemnifying Party no longer satisfies the Litigation Conditions.
(d)
Settlement
. Notwithstanding any other provision of this Agreement, the Indemnifying Party
shall not enter into settlement of any Third Party claim without the prior written consent of the
Indemnified Party, except as provided in this Section 10.4(d). If a firm offer is made to settle a
Third Party claim without leading to liability or the creation of a financial or other obligation
on the part of the Indemnified Party and provides, in customary form, for the unconditional release
of each Indemnified Party from all liabilities and obligations in connection with such Third Party
claim and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying Party
shall give written notice to that effect to the Indemnified Party. If the Indemnified Party fails
to consent to such firm offer within ten (10) days after its receipt of such notice, the
Indemnified Party may continue to contest or defend such Third Party claim and in such event, the
maximum liability of the Indemnifying Party as to such Third Party claim shall not exceed the
amount of such settlement offer. If the Indemnified Party fails to consent to such firm offer and
also fails to assume defense of such Third Party claim, the Indemnifying Party may settle the Third
Party claim upon the terms set forth in such firm offer to settle such Third Party claim. If the
Indemnified Party has assumed the defense pursuant to Section 10.4(c), it shall not agree to any
settlement without the written consent of the Indemnifying Party (which consent shall not be
unreasonably withheld or delayed).
(e)
Cooperation
. If the Indemnifying Party chooses to defend or prosecute any Third Party
claim, the Indemnified Party will cooperate in the defense or prosecution thereof and will furnish
such records, information and testimony, provide such witnesses and attend such conferences,
discovery proceedings, hearings, trials and appeals as may be reasonably requested in connection
with such Third Party claim. Such cooperation will include access during normal business hours
afforded to the Indemnifying Party to, and reasonable retention by the Indemnified Party of,
records and information that are reasonably relevant to such Third Party claim, and making
employees and agents available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder.
10.5
Limitation of Liability.
NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY EXEMPLARY,
SPECIAL, CONSEQUENTIAL, INCIDENTAL, PUNITIVE, OR INDIRECT DAMAGES, COSTS OR EXPENSES (INCLUDING
LOST
67
PROFITS, LOST REVENUES AND/OR LOST SAVINGS) ARISING FROM OR RELATING TO ANY BREACH OF THIS
AGREEMENT, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH DAMAGES. NOTWITHSTANDING THE
FOREGOING, NOTHING IN THIS SECTION 10.5 IS INTENDED TO OR SHALL LIMIT OR RESTRICT THE
INDEMNIFICATION RIGHTS OR OBLIGATIONS OF ANY PARTY IN CONNECTION WITH (A) THIRD PARTY CLAIMS UNDER
SECTION 10.1 OR 10.2, (B) DAMAGES AVAILABLE FOR A PARTYS BREACH OF ARTICLE 11, OR (C) DAMAGES TO
THE EXTENT ARISING FROM OR RELATING TO WILLFUL MISCONDUCT OR FRAUDULENT ACTS OR OMISSIONS OF A
PARTY.
10.6
Insurance.
(a)
Comprehensive General Liability
. Each Party shall maintain at such Partys sole expense,
comprehensive general liability insurance coverage in amounts reasonably determined by the Parties
from time to time but at least appropriate to the risk involved in Developing, Manufacturing,
transporting, selling or marketing the Products, and listing the other Party as an additional
insured; provided, however, that unless agreed to by the Parties, in no event shall a Party
maintain less than Five Million Dollars (US $5,000,000) of such liability insurance, which can
include a combination of general liability insurance and umbrella policy. Such insurance shall be
in effect as of the Effective Date; provided that each Party reserves the right to satisfy its
obligations under this Section 10.6(a) through self-insurance (as reasonably acceptable to the
other Party).
(b)
Product Liability
. As of the Effective Date, Spectrum and TopoTarget shall each establish
and maintain product liability (including clinical trial liability) or other appropriate insurance
in the minimum amount of Five Million Dollars (US $5,000,000) per occurrence, and as of the First
Commercial Sale of any Product in any country, the selling Party shall establish and maintain
product liability (including clinical trial liability) or other appropriate insurance in the
minimum amount of Ten Million Dollars (US $10,000,000) per occurrence, and shall specify the other
Party as an additional insured.
ARTICLE 11
CONFIDENTIALITY
11.1
Confidentiality.
Except to the extent expressly authorized by this Agreement or
otherwise agreed in writing by the Parties, each Party agrees that, for the Term and for five (5)
years thereafter, it shall keep confidential and shall not publish or otherwise disclose and shall
not use for any purpose other than as provided for in this Agreement any Confidential Information
of the other Party except for that portion of such information or materials that the receiving
Party can demonstrate by competent proof:
(a) was already known to the receiving Party or its Affiliate, other than under an obligation
of confidentiality, at the time of disclosure by the other Party;
(b) was generally available to the public or otherwise part of the public domain at the time
of its disclosure to the receiving Party;
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(c) became generally available to the public or otherwise part of the public domain after its
disclosure and other than through any act or omission of the receiving Party in breach of this
Agreement;
(d) is subsequently disclosed to the receiving Party or its Affiliate by a Third Party who is
not bound by an obligation of confidentiality to the disclosing Party with respect to such
information; or
(e) is subsequently independently discovered or developed by the receiving Party or its
Affiliate without the aid, application, or use of Confidential Information.
Notwithstanding the foregoing, the receiving Party may disclose without violation of this
Agreement such portion of the Confidential Information as is required or permitted to be disclosed
if, on the advice of counsel, it is required under Applicable Law or pursuant to legal process to
disclose such Confidential Information of the other Party; provided that unless otherwise
prohibited by Applicable Law, the receiving Party first advises the disclosing Party of such
intended disclosure and provides the disclosing Party with the opportunity to seek appropriate
judicial or administrative relief to avoid, or obtain confidential treatment of, such disclosure at
the disclosing Partys sole cost and expense.
The confidentiality provisions set forth herein shall supersede and replace the Existing
Confidentiality Agreement and shall be deemed to cover all Confidential Information (as defined in
the Existing Confidentiality Agreement) disclosed or obtained under the Existing Confidentiality
Agreement.
Under otherwise specified in writing, all documents, record bearing media and materials
containing or embodying Confidential Information provided by the disclosing Party shall remain the
property of the disclosing Party. Upon the written request of the disclosing Party, the receiving
Party agrees to return all such Confidential Information or destroy all documents, record bearing
media and materials created by the receiving Party that contain or embody any Confidential
Information of the disclosing Party, as well as any copies thereof, except for one copy which may
be retained by the receiving Partys legal counsel for purposes of complying with such Partys
obligations hereunder.
11.2
Authorized Disclosure.
Each Party may disclose Confidential Information belonging to the
other Party to the extent such Party determines such disclosure is reasonably necessary in the
following situations:
(a) prosecuting or defending litigation relating to this Agreement;
(b) disclosure to its and its Affiliates respective directors, officers, employees,
consultants, professional advisors, lenders, insurers and sublicensees only on a need-to-know basis
and solely as necessary in connection with this Agreement, provided that each disclosee must be
bound by obligations of confidentiality and non-use no less stringent than those set forth in
Sections 11.1 and 11.2 prior to any such disclosure; and
(c) solely with respect to the material terms of this Agreement, disclosure to any bona fide
potential or actual investor, investment banker, acquirer, merger partner, or other
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potential or actual financial partner; provided that each disclosee must be bound by
obligations of confidentiality and non-use no less stringent than those set forth in Sections 11.1
and 11.2 prior to any such disclosure. The receiving Party shall be liable for any breach of such
confidentiality and non-use obligations by any such Third Party.
11.3
Publicity; Terms of Agreement.
(a) The Parties shall make separate public announcements of the execution of this Agreement on
or after the Effective Date in the forms attached hereto as
Exhibit I
. The Parties agree
that the material terms of this Agreement are the Confidential Information of both Parties, subject
to the authorized disclosure provisions set forth in Section 11.2 and this Section 11.3. Each
Party may publicly disclose without violation of this Agreement, such terms of this Agreement as
are, on the advice of counsel, required by the rules and regulations of the United States
Securities and Exchange Commission or any successor (
SEC
), The NASDAQ Stock Market, Inc. or the
Copenhagen Stock Exchange; provided that such Party shall advise the other Party of such intended
disclosures and provide the other Party with reasonable opportunity to request that such Party seek
(at such Partys expense) confidential treatment of such disclosures to be filed with the relevant
securities exchange. Subject to the immediately preceding sentence, each Party shall consult with
the other Party, and the other Party shall have the right to review and comment with respect to the
redaction of the terms of this Agreement or Confidential Information as part of the confidential
treatment request to the SEC or other securities exchange.
(b) After release of the press release announcing this Agreement and excluding any public
disclosures of the terms of this Agreement that are authorized by Section 11.3(a), if either Party
desires to make a public announcement concerning the material terms of this Agreement, milestones
achieved under this Agreement or other Confidential Information of the other Party, such Party
shall give reasonable prior advance notice of the proposed text of such announcement to the other
Party for its prior review and approval (except as otherwise provided herein), such approval not to
be unreasonably withheld, conditioned or delayed. A Party commenting on such a proposed press
release shall provide its comments, if any, within one (1) Business Day after receiving the press
release for review. In relation to each Partys review of such an announcement, such Party may
make specific, reasonable comments on such proposed press release or other public disclosure within
the prescribed time for commentary. Neither Party shall be required to seek the permission of the
other Party to disclose any information already disclosed or otherwise in the public domain,
provided such information remains accurate.
11.4
Publications
. Neither Party shall publicly present or publish results of studies,
clinical or otherwise, carried out under this Agreement (each such presentation or publication, a
Publication
) without the prior approval of the JDC. The submitting Party shall provide the JDC
with the opportunity to review any proposed Publication at least thirty (30) days prior to the
earlier of its presentation or intended submission for publication. Notwithstanding the foregoing,
Spectrum shall not have the right to publish or present TopoTargets Confidential Information
without TopoTargets prior written consent, and TopoTarget shall not have the right to publish or
present Spectrums Confidential Information without Spectrums prior written consent.
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11.5
Clinical Trial Registries.
In connection with any data or other information generated by
a Party hereunder, each Party shall have the right to publish such data and information without
further approval from the other on ClinicalTrials.gov or other public web based data entry system
in accordance with the International Committee of Medical Journal Editors (ICMJE). The Party that
conducts the clinical study in accordance with this Agreement shall be exclusively responsible for
registering the study in accordance with the Food and Drug Administration Amendments Act (FDAAA) of
2007, updating and/or amending such clinical trial registration as appropriate, and publishing the
results of such trial in accordance with Applicable Laws.
ARTICLE 12
TERM AND TERMINATION
12.1
Term.
This Agreement shall become effective on the Effective Date and, unless earlier
terminated pursuant to this Article 12, shall remain in effect until the expiration of the last to
expire royalty obligation with respect to Products under this Agreement (the
Term
). [***].
12.2
Termination by Spectrum at Will.
(a) Spectrum shall have the right to terminate this Agreement in its entirety upon [***]
([***]) days written notice to TopoTarget.
(b) Notwithstanding subsection (a), Spectrum shall have the right to terminate this Agreement
upon written notice effective immediately in the event that:
(i) the FDA or any other Governmental Authority prohibits the further clinical use of the
Product in the applicable jurisdiction within the Territory and/or terminates the IND under 21 CFR
312.44 on grounds of safety (or equivalent grounds with respect to any Territory outside of the
U.S. Territory). This termination excludes failure of Spectrum to comply with any applicable
requirement of regulations 21 CFR 312.50 or 21 CFR 312.56 (or equivalent grounds with respect to
any Territory outside of the U.S. Territory); or
(ii) a clinical hold imposed by the FDA or other Governmental Authority is definitively
converted to inactive status under 21 CFR 312.45 on grounds of safety (or equivalent grounds with
respect to such other Territory).
12.3
Termination by Spectrum for Breach by TopoTarget.
In the event TopoTarget, after
receiving written notice from Spectrum identifying a material breach by TopoTarget of its
obligations under this Agreement, fails to cure such material breach within [***] ([***]) days from
the date of such notice, then Spectrum may elect to terminate this Agreement, in which case the
licenses granted to Spectrum under Section 2.1 shall terminate, except as necessary for Spectrum to
exercise its continuing rights and fulfill its continuing
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obligations under Section 12.7(d), and Spectrum shall be entitled to claim from TopoTarget all
damages which would otherwise be due to Spectrum and to seek all other remedies otherwise available
to Spectrum for such breach as permitted by this Agreement.
Spectrum shall elect between the remedies provided in this Section 12.3 and Section 12.4 and
shall provide notice in writing to TopoTarget within [***] ([***]) days after the end of the [***]
([***]) cure period set forth above.
Notwithstanding the foregoing, if TopoTarget is alleged to be in material breach and disputes
such termination through the dispute resolution procedures set forth in this Agreement, then
Spectrums right to terminate this Agreement shall be tolled for so long as such dispute resolution
procedures are being pursued by TopoTarget in good faith and if it is finally and conclusively
determined that TopoTarget is in material breach, then prior to any termination becoming effective
or any remedies being enforced, TopoTarget shall have the right to cure such material breach after
such determination within the cure period provided above in this Section 12.3.
12.4
Alternate Remedies for Breach by TopoTarget
. In the event TopoTarget, after receiving
written notice from Spectrum identifying a material breach by TopoTarget of any obligation under
this Agreement, fails to cure such material breach within [***] ([***]) days from the date of such
notice, then Spectrum may elect to allow this Agreement to remain in effect, in which case:
(a) the JDC, JCC and all subcommittees shall be abolished, and thereafter Spectrum shall have
the right to make the decisions and take the actions previously reserved to the JDC and JCC, and
(b) the Co-Promotion Option and the Co-Promotion Right shall immediately terminate;
(c) the Territory shall be expanded to include the China Territory, for no additional
consideration; and
(d)
Damages
.
(i) Spectrum shall be free to seek (without restriction as to the number of times it may seek)
damages and costs that may be available under applicable law and shall be entitled to offset the
amount of any damages and costs obtained in a final, non-appealable judgment (or judgment from
which no appeal was taken within the allowable time period) of monetary damages or costs (as
permitted by this Agreement) against TopoTarget against any amounts otherwise due to TopoTarget
under Article 7; or
(ii) In the event TopoTargets material breach is such that it materially adversely impacts
Spectrums ability to develop or commercialize the Product in the Territory on an ongoing basis,
then Spectrum shall have the right on a one-time basis during the Development
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Phase and on a one-time basis during the Commercialization Phase, to provide notice to
TopoTarget that Spectrum is seeking to invoke the Payment Reduction Remedy. In the event Spectrum
does so and an arbitration proceeding pursuant to this Agreement determines that TopoTargets
material breach materially adversely impacts Spectrums ability to develop or commercialize the
Product in the Territory, [***]. The amount of liquidated damages in this subsection (ii) is so
fixed and agreed upon because of the impracticability and extreme difficulty in fixing and
ascertaining the actual damages that Spectrum would sustain in the event of a material breach by
TopoTarget as described in this Section. As used herein,
Development Phase
shall mean the period
commencing with the Effective Date and continuing until Regulatory Approval of the Product in the
U.S. Territory and
Commercialization Phase
shall mean the period commencing at the end of the
Development Phase and continuing until the end of the Term. If Spectrum invokes the Payment
Reduction Remedy during the Development Phase and reduces its royalty and milestone payments as set
forth above, Spectrum shall not have the right to invoke the Payment Reduction Remedy during the
Commercialization Phase. For avoidance of doubt, the royalty rate specified in Section 7.4 for
future Net Sales by Spectrum and the development milestone and sales milestone payments under
Section 7.2 and 7.3, may not be reduced by more than [***] percent ([***]%) pursuant to this
Section 12.4(d)(ii).
Notwithstanding the foregoing, if TopoTarget is alleged to be in material breach and disputes
such termination through the dispute resolution procedures set forth in this Agreement, then
Spectrums remedies under this Section shall be tolled for so long as such dispute resolution
procedures are being pursued by TopoTarget in good faith and if it is finally and conclusively
determined that TopoTarget is in material breach, then prior to any termination becoming effective
or any remedies being enforced, TopoTarget shall have the right to cure such material breach after
such determination within the cure period provided above in this Section 12.4.
12.5
Termination by TopoTarget
.
(a)
Breach by Spectrum
. In the event that Spectrum materially breaches this Agreement, and
fails to cure such breach within [***] ([***]) days of receipt of written notice identifying such
breach from TopoTarget (or, in the case of payment obligations, [***] ([***]) days from the date of
such notice), then TopoTarget may terminate this Agreement upon written notice to Spectrum
effective immediately, in which case the licenses granted to Spectrum under Sections 2.1 shall
terminate, and TopoTarget shall be entitled to claim from Spectrum all damages which would
otherwise be due to TopoTarget and to seek all other remedies otherwise available to TopoTarget for
such breach as permitted by this Agreement. The Parties agree that, without limitation, the
following shall constitute a material breach of this Agreement: (a) Spectrum does not engage in
Development activities under the Development Plan for a consecutive period of [***] ([***]) months,
except to the extent such inactivity is the result of any of the events set forth in Section
4.3(d), (b) Spectrum fails to launch the Product in the Territory pursuant to Section 5.3 and fails
to cure such failure for a period of [***] ([***]) days after having received written notification
by TopoTarget regarding such failure, except to the extent such failure is the result of any of the
events set forth in Section 5.2(b)(iv), and (c) Spectrum fails to pay [***].
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Notwithstanding the foregoing, if Spectrum is alleged to be in material breach and
disputes such termination through the dispute resolution procedures set forth in this Agreement,
then TopoTargets right to terminate this Agreement shall be tolled for so long as such dispute
resolution procedures are being pursued by Spectrum in good faith and if it is finally and
conclusively determined that Spectrum is in material breach, then prior to any termination becoming
effective or any remedies being enforced, Spectrum shall have the right to cure such material
breach after such determination within the cure period provided above in this Section 12.5.
(b)
Patent Challenge by Spectrum
. TopoTarget may terminate this Agreement upon written
notice effective immediately in the event Spectrum brings a challenge (or assists any Third Party
in bringing a challenge) in a court of law or in a proceeding before the USPTO or relevant non-U.S.
patent office that challenges the validity or ownership or enforceability of any of the TopoTarget
Patents or the scope of the claims covered by the TopoTarget Patents.
In the event Spectrum is aware that its Affiliate or sublicensee is bringing a challenge (or
is assisting any Third Party in bringing a challenge) in a court of law or in a proceeding before
the USPTO or relevant patent office that challenges the validity or ownership or enforceability of
any of the TopoTarget Patents or the scope of the claims covered by the TopoTarget Patents in the
Territory, Spectrum shall use Commercially Reasonable Efforts to cause such Affiliate or
sublicensee to cease such challenge. If such challenge does not stop within thirty (30) days of
Spectrum becoming aware of such challenge, TopoTarget may terminate this Agreement upon written
notice effective immediately.
For the avoidance of doubt, statements about or any action concerning any TopoTarget Patent
made or taken by or on behalf of Spectrum, its Affiliates or sublicensees in connection with the
prosecution, enforcement or defense of any patent rights shall not be considered a patent challenge
under this Section, provided that, unless otherwise agreed in writing by the Parties, Spectrum, its
Affiliates and/or sublicensees do not make any material adverse admissions or permit any material
adverse inferences to be made as to the validity or ownership or enforceability of any of the
TopoTarget Patents or the scope of the claims covered by the TopoTarget Patents.
12.6
Termination Upon Bankruptcy
. Either Party shall have the right to terminate this
Agreement immediately by providing written notice, if the other Party: (a) applies for or consents
to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a
substantial part of its assets, (b) makes a general assignment for the benefit of its creditors,
(c) is dissolved or liquidated in full or in substantial part, (d) commences a voluntary case under
Chapter 7 (or
Chapter 7 Case
) of the United States Bankruptcy Code or consents to any such relief
or to the appointment of or taking possession of its property by any official in such an
involuntary case or such other proceeding commenced against it, (e) takes any corporate action for
the purpose of effecting any of the foregoing, (f) a case under Chapter 11 of the Bankruptcy Code
in respect of such Party is converted to a Chapter 7 Case, or (g) becomes the subject of an
involuntary Chapter 7 Case or other proceeding seeking liquidation with respect to itself or its
debts under any bankruptcy, insolvency or other similar law now or hereafter in effect that is not
dismissed within sixty (60) days after commencement.
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12.7
Effect of Termination of the Agreement.
Upon termination of this Agreement, the
following shall apply (in addition to any other rights and obligations under Section 12.8 or
otherwise under this Agreement with respect to such termination):
(a)
Licenses; Covenant.
In the event of termination of this Agreement by either Party (other
than by operation of Section 12.1), the licenses granted to Spectrum under Section 2.1 and any
other licenses and rights granted to Spectrum under this Agreement shall terminate (and all rights
in the TopoTarget Technology shall return to TopoTarget) and Spectrum agrees to grant and hereby
grants TopoTarget, effective upon such termination, a non-exclusive, royalty-free license under the
Spectrum Patents and Spectrum Know-How solely to the extent necessary (i) to conduct research,
Development and manufacturing activities in the Territory solely in support of Regulatory Approval
worldwide of Products that are in Development or being Commercialized in the Territory as of the
effective date of such termination (
Termination Products
), (ii) to use, distribute, import,
Promote, market, sell, and offer for sale Termination Products in the Territory, and (iii) to make
and have made Termination Products in the Territory for sale in the Territory, under commercially
reasonable terms to be negotiated in good faith. TopoTarget shall have the right to sublicense the
license under the Spectrum Patents without Spectrums consent; provided however that in the event
of the termination of this Agreement by Spectrum pursuant to Section 12.3, the license granted by
Spectrum to TopoTarget under this Section 12.7(a) shall be royalty-bearing, at a commercially
reasonable rate to be negotiated in good faith by the Parties, such rate not to exceed, in the
aggregate for the licenses granted under this Section 12.7(a) and Section 12.7(b), [***] percent
([***]%).
As used herein, (1)
Spectrum Patents
shall mean (A) all patents and patent applications
(excluding Joint Patents) that are Controlled by Spectrum as of the effective date of termination
and that disclose or claim any invention made in the performance of the Development or
Commercialization activities under this Agreement that is necessary for the manufacture, use or
sale of, and relates to, any Termination Product, (B) all divisions, continuations,
continuations-in-part (to the extent directed to the subject matter disclosed in a patent or patent
application described in (A)) and requests for continued examination of any of the foregoing, (C)
all patents claiming priority to any of the foregoing, (D) all reissues, registrations,
re-examinations, extensions and supplementary protection certificates of any of the foregoing, in
each case, in the Territory, and (2)
Spectrum Know-How
shall mean all Information (excluding any
Spectrum Patents or Joint Inventions) that is Controlled as of the effective date of termination by
Spectrum as a result of the performance of the Development or Commercialization activities under
this Agreement and relates to a Termination Product; provided that both terms shall exclude any
intellectual property held or developed by a permitted successor of Spectrum prior to the
transaction in which it became a successor of such Party. The foregoing shall not limit or waive
TopoTargets non-disclosure obligations under Article 11.
(b)
Marks.
In the event of termination of this Agreement by either Party (other than by
operation of Section 12.1), Spectrum shall assign to TopoTarget all right, title and interest in
and to the TopoTarget Trademarks and Spectrum shall grant TopoTarget a non-
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exclusive, royalty-free, sublicensable license under the Spectrum Trademarks solely to
continue the Commercialization of Products in the Territory; provided however that in the event of
the termination of this Agreement by Spectrum pursuant to Section 12.3, the license granted by
Spectrum to TopoTarget under this Section 12.7(b) shall be royalty-bearing, at a commercially
reasonable rate to be negotiated in good faith by the Parties, such rate not to exceed, in the
aggregate for the licenses granted under this Section 12.7(b) and Section 12.7(a), [***] percent
([***]%).
(c)
Regulatory Materials
. Spectrum shall transfer and assign, and shall cause its Affiliates
to transfer and assign, to TopoTarget all Regulatory Materials and all Regulatory Approvals for
Products in the Territory that are Controlled by Spectrum or its Affiliates or sublicensees.
(d)
Remaining Inventories
. At TopoTargets request, TopoTarget may purchase at cost plus a
commercially reasonable margin all of the inventory of bulk or finished Products held by Spectrum
as of the date of termination (including raw materials, intermediates, and finished, unfinished, or
partially finished goods). TopoTarget shall notify Spectrum within ten (10) days after the date of
termination whether TopoTarget wishes to purchase such inventory. In the event TopoTarget does not
purchase such inventory, then Spectrum and its Affiliates shall be permitted to sell such
inventory; provided that such sales occur within six (6) months after termination; and provided
further that Spectrum shall remain obligated to pay, and report to TopoTarget on, Net Sales of such
inventory.
(e)
Sublicense Agreements
. The Parties agree that upon termination of this Agreement for any
reason, all sublicenses granted by Spectrum to Affiliates or Third Parties under the TopoTarget
Technology shall immediately terminate.
12.8
Accrued Liabilities; Other Remedies.
Termination or expiration of this Agreement for any
reason shall not release either Party from any liability or obligation that already has accrued
prior to such expiration or termination (including any milestone or other payment that has been
triggered by an event occurring prior to the effective date of termination or expiration), nor
affect the survival of any provision hereof to the extent it is expressly stated to survive such
termination. Termination or expiration of this Agreement for any reason shall not constitute a
waiver or release of, or otherwise be deemed to prejudice or adversely affect, any rights, remedies
or claims, whether for damages or otherwise, that a Party may have hereunder or that may arise out
of or in connection with such termination or expiration.
12.9
Rights in Bankruptcy.
All rights and licenses granted under or pursuant to this
Agreement by TopoTarget and Spectrum are, and shall otherwise be deemed to be, for purposes of
Section 365(n) of the United States Bankruptcy Code, licenses of rights to intellectual property
as defined under Section 101 of the United States Bankruptcy Code. The Parties agree that each
Party, as licensee of certain rights under this Agreement, shall retain and may fully exercise all
of its rights and elections under the United States Bankruptcy Code. The Parties further agree
that, in the event of the commencement of a bankruptcy proceeding by or
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against a Party (such Party, the
Bankrupt Party
) under the United States Bankruptcy Code,
the other Party shall be entitled to a complete duplicate of (or complete access to, as
appropriate) any intellectual property licensed to such other Party and all embodiments of such
intellectual property, which, if not already in such other Partys possession, shall be promptly
delivered to it (a) upon any such commencement of a bankruptcy proceeding upon such other Partys
written request therefor, unless the Bankrupt Party elects to continue to perform all of its
obligations under this Agreement or (b) if not delivered under clause (a), following the rejection
of this Agreement by the Bankrupt Party upon written request therefor by the other Party.
12.10
Survival.
The following provisions shall survive any expiration or termination of this
Agreement for the period of time specified: Sections 4.7, 4.9, 4.10, 7.4, 7.6, 7.7, 7.8, 7.9,
7.10, 8.1, 8.2, 8.3(b) and 8.3(c) and Articles 1, 9, 10, 11, 12, 13 and 14.
ARTICLE 13
DISPUTE RESOLUTION
13.1
Disputes
. The Parties recognize that disputes as to certain matters may from time to
time arise during the Term which relate to either Partys rights and/or obligations hereunder. It
is the objective of the Parties to establish procedures to facilitate the resolution of disputes
arising under this Agreement in an expedient manner by mutual cooperation. To accomplish this
objective, the Parties agree to follow the procedures set forth in this Article 13 if and when a
dispute arises under this Agreement.
(a)
Referred From JDC or JCC.
Any dispute, controversy or difference arising from the JDC
pursuant to Article 3 shall be resolved in accordance with Section 3.6 and any dispute, controversy
or difference arising from the JCC pursuant to Article 3 shall be resolved in accordance with
Section 3.11.
(b)
Arising Between the Parties.
Other than any dispute, controversy or difference which may
arise from the JDC or JCC, any disputes, controversies or differences which may arise between the
Parties out of or in relation to or in connection with this Agreement, including any alleged
failure to perform, or breach, of this Agreement, or any issue relating to the interpretation or
application of this Agreement, then upon the request of either Party, the Parties agree to meet and
discuss in good faith a possible resolution thereof, which good faith efforts shall include at
least one in-person meeting between the chief executive officers of each Party. If the matter is
not resolved within thirty (30) days following the request for discussions, such matter shall be
submitted to arbitration in accordance with the rules of the London Court of International
Arbitration (
LCIA
). The decision of the arbitrators shall be final and binding upon the Parties
and enforceable in any court of competent jurisdiction, and the Parties expressly exclude any right
to appeal from such decision. The location of arbitration will be London, U.K. The arbitration will
be heard and determined by one (1) arbitrator, who will be jointly selected by Spectrum and
TopoTarget. If, within thirty (30) days following the date upon which a claim is received by the
respondent, the Parties cannot agree on a single arbitrator, the arbitration will be heard and
determined by three (3) arbitrators, with one arbitrator being appointed by each Party and the
third arbitrator being selected by the two Party-appointed arbitrators. If either Party fails to
select an arbitrator, or if the Party-appointed arbitrators cannot agree on a third arbitrator
within sixty (60) days of the respondent receiving the claim, such
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arbitrator will be appointed by LCIA. The arbitration award shall be accompanied by a
reasoned opinion in writing (in English).
Each Party will bear its own costs and expenses (including its attorneys fees) associated
with any arbitration initiated under this section; provided that the arbitrator shall assess
against the Party losing the arbitration all of the arbitrator(s) and administrative fees
associated with the arbitration and the costs and expenses (including reasonable attorneys fees)
of both Parties, unless the arbitrator(s) believes that neither Party is the clear loser, in which
case the arbitrator(s) shall, in its/their sole discretion, divide arbitrator(s) and
administrative fees and the Parties costs and expenses between the Parties.
The language of the arbitration proceeding will be English. Notwithstanding the provisions of
this Section 13.1(b), each Party shall have the right to seek preliminary or permanent injunctive
or other equitable relief in any court of competent jurisdiction as such Party deems necessary to
preserve its rights and to protect its interests.
13.2
Injunctive Relief.
Nothing in this Article 13 will preclude either Party from seeking
equitable relief or interim or provisional relief from a court of competent jurisdiction, including
a temporary restraining order, preliminary injunction or other interim equitable relief, concerning
a dispute if necessary to protect the interests of such Party or to preserve the status quo.
ARTICLE 14
MISCELLANEOUS
14.1
Entire Agreement; Amendment
. This Agreement, including the Exhibits hereto, sets forth
the complete, final and exclusive agreement and all the covenants, promises, agreements,
warranties, representations, conditions and understandings between the Parties hereto with respect
to the subject matter hereof and supersedes, as of the Effective Date, all prior agreements and
understandings between the Parties with respect to the subject matter hereof, including, the
Existing Confidentiality Agreement. The foregoing shall not be interpreted as a waiver of any
remedies available to either Party as a result of any breach, prior to the Effective Date, by the
other Party of its obligations pursuant the Existing Confidentiality Agreement. There are no
covenants, promises, agreements, warranties, representations, conditions or understandings, either
oral or written, between the Parties other than as are set forth herein and therein. No subsequent
alteration, amendment, change or addition to this Agreement shall be binding upon the Parties
unless reduced to writing and signed by an authorized officer of each Party. All Exhibits shall be
subject to the terms and conditions of this Agreement. In the event of any conflict or
inconsistency between the terms of this Agreement and the terms of any Exhibit, the terms of this
Agreement shall govern.
14.2
Force Majeure
. Both Parties shall be excused from the performance of their obligations
under this Agreement to the extent that such performance is prevented by force majeure and the
nonperforming Party promptly provides notice of the prevention to the other Party. Such excuse
shall be continued so long as the condition constituting force majeure continues and the
nonperforming Party takes reasonable efforts to remove the condition. For purposes of this
Agreement, force majeure shall mean conditions beyond the control of the
78
Parties, including an act of God, war, civil commotion, terrorist act, labor strike or
lock-out, epidemic, failure or default of public utilities or common carriers, destruction of
production facilities or materials by fire, earthquake, storm or like catastrophe, and failure of
plant or machinery, provided that such failure could not have been prevented by the exercise of
skill, diligence, and prudence that would be reasonably and ordinarily expected from a skilled and
experienced person engaged in the same type of undertaking under the same or similar circumstances
and provided further that such condition is not the result of negligence or misconduct by the
nonperforming Party. Notwithstanding the foregoing, a Party shall not be excused from making
payments owed hereunder because of a force majeure affecting such Party.
14.3
Notices.
Any notice required or permitted to be given under this Agreement shall be in
writing, shall specifically refer to this Agreement, and shall be addressed to the appropriate
Party at the address specified below or such other address as may be specified by such Party in
writing in accordance with this Section 14.3, and shall be deemed to have been given for all
purposes when received, if hand-delivered or by means of facsimile or other electronic
transmission, or one Business Day after being sent by a reputable overnight delivery service.
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If to TopoTarget:
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TopoTarget A/S
Symbion Science Park
Fruebjergvej 3
2100 København, Denmark
Attention:
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With a copy to:
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Dechert LLP
1775 I Street, NW
Washington, D.C. 20006-2401
A
ttention: David E. Schulman, Esq.
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If to Spectrum:
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Spectrum Pharmaceuticals, Inc.
701 N. Green Valley Parkway
Henderson, NV 89074
Attention: Legal Department
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With a copy to:
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Edwards Angell Palmer & Dodge LLP
111 Huntington Avenue
Boston, MA 02199
Attention: Marcia H. Anderegg, Esq.
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14.4
No Strict Construction; Headings; Interpretation.
This Agreement has been prepared
jointly and shall not be strictly construed against either Party. Ambiguities, if any, in this
Agreement shall not be construed against any Party, irrespective of which Party may be deemed to
have authored the ambiguous provision. The headings of each Article and Section in this Agreement
have been inserted for convenience of reference only and are not intended to limit or expand on the
meaning of the language contained in the particular Article or Section. The definitions of the
terms herein apply equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun will include the corresponding
masculine, feminine and neuter forms. The words include, includes and including will be
79
deemed to be followed by the phrase without limitation. Unless the context requires otherwise,
(a) any definition of or reference to any agreement, instrument or other document herein will be
construed as referring to such agreement, instrument or other document as from time to time
amended, supplemented or otherwise modified (subject to any restrictions on such amendments,
supplements or modifications set forth herein or therein), (b) any reference to any laws herein
will be construed as referring to such laws and any rules or regulations promulgated thereunder as
from time to time enacted, repealed or amended, (c) any reference herein to any person will be
construed to include the persons successors and assigns, (d) the words herein, hereof and
hereunder, and words of similar import, will be construed to refer to this Agreement in its
entirety and not to any particular provision hereof, (e) any reference herein to the words
mutually agree or mutual written agreement will not impose any obligation on either Party to
agree to any terms relating thereto or to engage in discussions relating to such terms except as
such Party may determine in such Partys sole discretion, except as expressly provided in this
Agreement, (f) as applied to a Party, the word will shall be construed to have the same meaning
and effect as the word shall, and (g) all references herein without a reference to any other
agreement to Articles, Sections, or Exhibits will be construed to refer to Articles, Sections, and
Exhibits of or to this Agreement.
14.5
Assignment
. Neither Party may assign or transfer this Agreement or any rights or
obligations hereunder without the prior written consent of the other, except that a Party may make
such an assignment without the other Partys consent to such Partys Affiliate or to a successor to
(a) all or substantially all of the business of such Party, whether by way of merger, sale of
stock, sale of assets or other transaction or (b) in the case of Spectrum, that portion of
Spectrums business to which this Agreement pertains. Any permitted successor or assignee of
rights and/or obligations hereunder shall, in a writing to the other Party, expressly assume
performance of such rights and/or obligations. Notwithstanding any assignment of this Agreement,
the assigning Party shall remain liable for performance of its obligations hereunder, unless the
non-assigning Party agrees otherwise in writing. The TopoTarget Technology shall exclude any
intellectual property held or developed by a permitted successor of TopoTarget prior to the
transaction in which it became a successor of such Party. Any permitted assignment shall be
binding on the successors of the assigning Party. Any assignment or attempted assignment by either
Party in violation of the terms of this Section 14.5 shall be null, void and of no legal effect.
14.6
Records Retention
. Each of TopoTarget and Spectrum will maintain complete and accurate
records pertaining to its activities under this Agreement, including records pertaining to
Development or Commercialization of any Products and reports and information provided to any
Governmental Authority or Regulatory Authority, in accordance with Applicable Law. Each of
TopoTarget and Spectrum will retain such records for a duration prescribed by Applicable Law, but
not in any event for less than five (5) years from creation (or longer if a Party is notified,
ordered or otherwise required to maintain such records for a longer period in connection with a
legal proceeding or government investigation).
14.7
Governing Law.
Resolution of all disputes arising out of or related to this Agreement or
the validity, construction, interpretation, enforcement, breach, performance, application or
termination of this Agreement and any remedies relating thereto, shall be governed by and construed
under the substantive laws of the State of New York, USA excluding any
conflicts or choice of law rule or principle that might otherwise refer construction or
80
interpretation of this Agreement to the substantive law of another jurisdiction and without regard
to the United Nations Convention on Contracts for the International Sale of Goods.
14.8
No Third Party Beneficiaries
. This Agreement will be binding upon and inure solely to
the benefit of the Parties and their successors and permitted assigns and no provision of this
Agreement, express or implied, is intended to or will be deemed to confer upon Third Parties any
right, benefit, remedy, claim, liability, reimbursement, claim of action or other right of any
nature whatsoever under or by reason of this Agreement other than the Parties and, to the extent
provided in Sections 10.1 and 10.2, the Indemnified Parties. Without limitation, this Agreement
will not be construed so as to grant employees of either party in any country any rights against
the other Party pursuant to the laws of such country.
14.9
Performance by Affiliates
. Any obligation of TopoTarget under or pursuant to this
Agreement may be satisfied, met or fulfilled, in whole or in part, at TopoTargets sole and
exclusive option, either by TopoTarget directly or by any Affiliate of TopoTarget that TopoTarget
causes to satisfy, meet or fulfill such obligation, in whole or in part. Any obligation of
Spectrum under or pursuant to this Agreement may be satisfied, met or fulfilled, in whole or in
part, at Spectrums sole and exclusive option, either by Spectrum directly or by any Affiliate of
Spectrum that Spectrum causes to satisfy, meet or fulfill such obligation, in whole or in part.
With respect to any particular action, the use of the words TopoTarget will also means
TopoTarget will cause the particular action to be performed, and the use of the words Spectrum
will also means Spectrum will cause the particular action to be performed. Each of the Parties
guarantees the performance of all actions, agreements and obligations to be performed by any
Affiliates of such Party under the terms and conditions of this Agreement, and shall cause its
Affiliates to comply with the provisions of this Agreement in connection with such performance.
Any breach by a Partys Affiliate of any of such Partys obligations under this Agreement shall be
deemed a breach by such Party, and the other Party may proceed directly against such Party without
any obligation to first proceed against such Partys Affiliate.
14.10
Further Assurances and Actions
. Each Party, upon the request of the other Party,
without further consideration, will do, execute, acknowledge, and deliver or cause to be done,
executed, acknowledged or delivered all such further acts, deeds, documents, assignments,
transfers, conveyances, powers of attorney, instruments and assurances as may be reasonably
necessary to effect complete consummation of the transactions contemplated by this Agreement, and
to do all such other acts, as may be necessary or appropriate in order to carry out the purposes
and intent of this Agreement. The Parties agree to execute and deliver such other documents,
certificates, agreements and other writings and to take such other actions as may be reasonably
necessary in order to consummate or implement expeditiously the transactions contemplated by this
Agreement.
14.11
Compliance with Applicable Law.
Each Party shall comply with all Applicable Laws in the
course of performing its obligations or exercising its rights pursuant to this Agreement.
14.12
Severability
. If any one or more of the provisions of this Agreement is held to be
invalid or unenforceable by any court of competent jurisdiction from which no appeal
can be or is taken, the provision shall be considered severed from this Agreement and shall
not serve to
81
invalidate any remaining provisions hereof. The Parties shall make a good faith
effort to replace any invalid or unenforceable provision with a valid and enforceable one such that
the objectives contemplated by the Parties when entering this Agreement may be realized.
14.13
No Waiver
. Any delay in enforcing a Partys rights under this Agreement or any waiver
as to a particular default or other matter shall not constitute a waiver of such Partys rights to
the future enforcement of its rights under this Agreement, except with respect to an express
written and signed waiver relating to a particular matter for a particular period of time.
14.14
Independent Contractors.
Each Party shall act solely as an independent contractor, and
nothing in this Agreement shall be construed to give either Party the power or authority to act
for, bind, or commit the other Party in any way. Nothing herein shall be construed to create the
relationship of partners, principal and agent, or joint-venture partners between the Parties.
14.15
Counterparts
. This Agreement may be executed in one (1) or more counterparts, including
by facsimile or other electronic transmission, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
Signature Page to Follow
82
CONFIDENTIAL
In Witness Whereof,
the Parties have executed this Agreement in duplicate originals by
their duly authorized officers as of the Effective Date.
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TopoTarget A/S
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Spectrum Pharmaceuticals, Inc.
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By:
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Hakan Astrom
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By:
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Rajesh C. Shrotriya
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Name:
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Hakan Astrom
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Name:
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Rajesh C. Shrotriya
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Title:
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Chairman of the Board
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Title:
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Chairman, CEO & President
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EXHIBITS
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Exhibit A
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Initial Development Plan
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Exhibit B
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TPP
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Exhibit C
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TopoTarget Patents
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Exhibit D
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TopoTarget Trademarks
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Exhibit E
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Form of Trademark Assignment
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Exhibit F
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JDC Representatives
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Exhibit G
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Manufacturing Agreements
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Exhibit H
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Permitted Encumbrances
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Exhibit I
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Press Releases
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SCHEDULES
Schedule 4.4(a)
PTCL Clinical Trial Agreement
Schedule 9.2(h)
Product Description as of Effective Date
Schedule 9.9
Material Contracts of TopoTarget
CONFIDENTIAL
Exhibit A
Initial Development Plan
[***]
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[***]:
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CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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CONFIDENTIAL
Exhibit B
TPP
[***]
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[***]:
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CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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CONFIDENTIAL
Exhibit C
Topo Target Patents
[***]
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[***]:
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CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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CONFIDENTIAL
Exhibit D
TopoTarget Trademarks
[***]
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[***]:
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CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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CONFIDENTIAL
Exhibit E
Form of Trademark Assignment
TOPOTARGET A/S, a Danish corporation having its principal offices at Symbion Science Park,
Fruebjergvej 3, 2100 København, Denmark (TopoTarget), owning the entire ownership of each of the
trademarks set forth on Schedule A hereto, hereby, for good and valuable consideration received by
TopoTarget, (a) confirms that it has sold and assigned, and does hereby sell and assign, to
SPECTRUM PHARMACEUTICALS, INC, a Delaware corporation having a place of business at 157 Technology
Drive, Irvine, California 92618 U.S.A. (Spectrum), its successors and assigns the entire
ownership interest in each of the trademarks set forth on Schedule A hereto and the goodwill
attached thereto, to be held and enjoyed by Spectrum, its successors, assigns or other legal
representatives, to the full end of the term thereof, as may be extended by law as fully and
entirely as the same would have been held and enjoyed by TopoTarget if this assignment and sale
had not been made, including, but not limited to, the right to sue for past infringement, and (b)
authorizes and requests the Commissioner of Patents and Trademarks and any other granting authority
to issue any trademark, and any extensions or Supplementary Protections, resulting from or based in
whole upon said trademarks to Spectrum.
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TOPOTARGET A/S
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By:
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Name:
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Title:
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CONFIDENTIAL
Exhibit F
JDC Representatives
Spectrum
:
[***]
TopoTarget
:
[***]
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[***]:
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CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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CONFIDENTIAL
Exhibit G
Manufacturing Agreements
[***]
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[***]:
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CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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CONFIDENTIAL
Exhibit H
Permitted Encumbrances
[***]
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[***]:
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CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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CONFIDENTIAL
Exhibit I
Press Releases
(i) COMPANY CONTACTS
Paul Arndt
Senior Manager, Investor Relations
949-788-6700x216
***FINAL COPY NOT FOR DISTRIBUTION*** as of 9:17PM PST Monday, February 1, 2010
SPECTRUM PHARMACEUTICALS LICENSES BELINOSTAT, A NOVEL ANTICANCER
DRUG IN A PIVOTAL REGISTRATIONAL TRIAL
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Belinostat, a HDAC Inhibitor, is Currently in a Multicenter, Registrational Trial Under
a Special Protocol Assessment for Peripheral T-Cell Lymphoma (PTCL)
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NDA Filing Expected Next Year (in 2011)
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Granted Fast Track and Orphan Drug Designation by FDA
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Multiple Phase 2 Trials Are Being Pursued In Various Oncology Indications Including
Carcinoma Of Unknown Primary (CUP) For Which No Drug Has Yet Been Approved
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National Cancer Institute (NCI) is Conducting Multiple Trials With Belinostat
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More Than 700 Patients Have Been Treated With Belinostat
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Spectrum and TopoTarget Will Jointly Fund the Future Clinical Development Activities In
a Ratio Of 70:30
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Spectrum to host conference call on Thursday Feb 4 at 10AM
IRVINE, California February XX, 2010
Spectrum Pharmaceuticals (NasdaqGM: SPPI), a
commercial-stage biotechnology company with a primary focus in oncology, today announced that it
has entered into a co-development and commercialization agreement with TopoTarget A/S for
Belinostat, a novel histone deacetylase (HDAC) inhibitor. Belinostat is currently in a
registrational trial, under a Special Protocol Assessment (SPA), as a monotherapy for relapsed or
refractory Peripheral T-Cell Lymphoma (PTCL), an indication in which it has been granted Orphan
Drug and Fast Track designation by the U.S. Food and Drug Administration (FDA). Belinostat is also
under investigation in a randomized Phase 2 trial, as a combination therapy with carboplatin and
paclitaxel, for cancer of unknown primary (CUP). Additionally, the NCI is currently conducting
several clinical trials of Belinostat in a variety of hematological and solid tumors, both as
monotherapy as well as combination therapy.
The addition of Belinostat addresses our key strategic goal of in-licensing a late-stage
anti-cancer compound, said Rajesh C. Shrotriya, MD, Chairman, Chief Executive Officer, and
President of Spectrum Pharmaceuticals. With this collaboration, we have now completed our
strategic initiatives relating to in-licensing of compounds with near term commercialization
opportunities. Belinostats current registrational program is comprehensive and focused in that it
targets key hematological indications such as PTCL and other solid tumor indications. Belinostat
has the potential to be a best-in-class HDAC inhibitor for both hematological and solid tumors. We
look forward to advancing Belinostat in PTCL and other solid tumor indications, with the goal of
providing cancer patients with more effective treatment options as quickly and
efficiently as possible. With that goal in mind, we currently expect to file the NDA in PTCL in
2011. TopoTarget has laid a solid foundation from which we will further develop Belinostat.
So far, Belinostat has demonstrated some unique and differentiating attributes. If approved, it
would give Spectrum access to potentially large markets while allowing for enhanced coordination
with our marketed drugs, Zevalin and Fusilev, added Amar Singh, Spectrums Chief Commercial
Officer. The recent expansion of our commercial infrastructure positions us to prepare for another
successful launch in the near future.
We believe that this partnership will bring together synergies in our combined capabilities that
will result in significant efficiencies in Belinostats development, said Professor Peter Buhl
Jensen, MD, Chief Executive Officer of TopoTarget A/S. Spectrum as a partner is ideally suited to
exploit the full benefits of the drug for cancer patients.
Under terms of the agreement, Spectrum acquired the rights to Belinostat for North America and
India, and an option for China, in exchange for an upfront cash payment of $30 million, potential
milestone payments of up to $320 million, and one million shares of Spectrum common stock based
upon the successful achievement of certain development, regulatory and commercial milestones, as
well as double-digit royalties on net sales of Belinostat. Spectrum and TopoTarget will jointly
fund development activities, whereby clinical trial costs will be 70% borne by Spectrum, and 30% by
TopoTarget for new trials to be initiated.
About Peripheral T-Cell Lymphoma
The American cancer Society estimates that approximately 66,000 new cases of non-Hodgkins lymphoma
(NHL) were diagnosed in 2009 and of these, approximately 5,600 are classified as Peripheral T-cell
lymphoma (PTCL). PTCL is a group of 13 diverse types of T-cell lymphoma. Most cases of PTCL occur
during adulthood, are aggressive in nature and are difficult to manage with current chemotherapies.
Many patients with PTCL are treated with CHOP (cyclophosphamide, doxorubicin, vincristine and
prednisone) or a CHOP-like regimen, but often patients will stop responding to these therapies.
Studies show that only 25-40% of patients will be alive five years after treatment for PTCL,
creating a real need for more effective therapies.
About Belinostat
Belinostat (PXD 101) is a Class I and II HDAC inhibitor that is being studied in multiple clinical
trials as a single agent or in combination with chemotherapeutic agents for the treatment of
various hematological and solid cancers. Its anticancer effect is thought to be mediated through
multiple mechanisms of action, including the inhibition of cell proliferation, induction of
apoptosis (programmed cell death), inhibition of angiogenesis, induction of differentiation, and
the resensitization of cells that have overcome drug resistance to anticancer agents such as
platinums, taxanes and topoisomerase II inhibitors. Belinostat is the only HDAC inhibitor in
clinical development with multiple potential routes of administration, including intravenous
administration, continuous intravenous infusion and oral administration.
About the Belinostat Registrational Study
Belinostat is currently in registrational trial, under a Special Protocol Assessment (SPA), as a
monotherapy for Peripheral T-Cell Lymphoma (PTCL), an indication which has been granted Orphan Drug
and Fast Track designation by the U.S. Food and Drug Administration (FDA). The registrational
trial is in an open-label, multicenter, single arm efficacy and safety study in patients with
relapsed or refractory peripheral T-cell lymphoma, who have failed at least one prior systemic
therapy. The primary endpoint is objective response rate (ORR).
About TopoTarget
TopoTarget (OMX: TOPO) is an international biotech company headquartered in Denmark, dedicated to
finding Answers for Cancer and developing improved cancer therapies. The company was founded
and is run by clinical cancer specialists and combines years of hands-on clinical experience with
in-depth understanding of the molecular mechanisms of cancer. For more information, please refer to
www.topotarget.com.
About Spectrum Pharmaceuticals
Spectrum Pharmaceuticals is a commercial-stage biotechnology company with a focus in oncology. The
Companys strategy is comprised of acquiring, developing and commercializing a broad and diverse
pipeline of late-stage clinical and commercial products. In addition to building an efficient
in-house clinical research organization with regulatory and data management capabilities, the
Company has established a commercial infrastructure for its drug portfolio. Spectrum markets two
oncology drugs, Fusilev(R) and Zevalin(R) and now has two drugs in late stage development,
Apaziquone (EOquin(R)) and belinostat, along with a diverse pipeline. The Company also leverages
the expertise of its worldwide partners to assist in the execution of its strategy. For more
information, please visit the Companys website at www.sppirx.com.
This press release may contain forward-looking statements regarding future events and the
future performance of Spectrum Pharmaceuticals that involve risks and uncertainties that could
cause actual results to differ materially. These statements include but are not limited to
statements that relate to Spectrums business and its future, Spectrums ability to identify,
acquire, develop and commercialize a broad and diverse pipeline of late-stage clinical and
commercial products, NDA filing for PTCL in 2011, that Belinostat has the potential to be a
best-in-class HDAC inhibitor for both hematological and solid tumors, that we look forward to
advancing Belinostat in PTCL and other solid tumor indications, and any statements that relate to
the intent, belief, plans or expectations of Spectrum or its management, or that are not a
statement of historical fact. Risks that could cause actual results to differ include the
possibility that Spectrums existing and new drug candidates may not prove safe or effective, the
possibility that Spectrums existing and new drug candidates may not receive approval from the FDA,
and other regulatory agencies in a timely manner or at all, the possibility that Spectrums
existing and new drug candidates, if approved, may not be more effective, safer or more cost
efficient than competing drugs, the possibility that Spectrums efforts to acquire or in-license
and develop additional drug candidates may fail, Spectrums lack of significant revenues, limited
marketing experience, dependence on third parties for clinical trials, manufacturing, distribution
and quality control and other risks that are described in further detail in Spectrums reports
filed with the Securities and Exchange Commission. Spectrum does not plan to update any such
forward-looking statements and expressly disclaim any duty to update the information contained in
this press release except as required by law.
SPECTRUM PHARMACEUTICALS, INC.
®
is a registered trademark of Spectrum, TURNING INSIGHTS
INTO HOPE and the Spectrum Pharmaceutical logos are trademarks owned by Spectrum Pharmaceuticals,
Inc.
©
2010 Spectrum Pharmaceuticals, Inc. All Rights Reserved.
CONFIDENTIAL
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To NASDAQ OMX Copenhagen A/S
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TopoTarget A/S
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Announcement No. 02-XX10 / Copenhagen, XX XX 2010
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Symbion
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Fruebjergvej 3
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DK 2100 Copenhagen
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Denmark
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Tel: +45 39 17 83 92
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Fax: +45 39 17 94 92
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CVR-nr: 25695771
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www.topotarget.com
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TopoTarget signs $350 million agreement with Spectrum
Pharmaceuticals for the development and commercialisation of
Belinostat in North America and India
-A telephone conference will be held later today. Call in details will be announced later-
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Potential value of $350 million plus double digit royalties
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TopoTarget to receive $30 million cash upfront
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TopoTarget and Spectrum will jointly develop belinostat with Spectrum contributing 70%
of future development costs
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Spectrum territory North America and India
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TopoTarget can use data to commercialise belinostat in Europe, Japan and rest of the
world
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Copenhagen, Denmark & Irvine, California, US XX XX, 2010 TopoTarget A/S (NASDAQ-OMX: TOPO.CO)
and Spectrum Pharmaceuticals Inc. (NASDAQ: SPPI) announced today an agreement to co-develop and
commercialise belinostat, TopoTargets lead anticancer drug for cancer in North America and India.
Belinostat, an HDAC inhibitor, is in registrationalclinical trial in Peripheral T-Cell Lymphoma
(PTCL) as monotherapy and in a randomized phase 2 clinical trial for cancer of unknown primary site
(CUP) in combination with carboplatinum and paclitaxel (BelCaP). Belinostat is currently being
investigated in 20 clinical trials in haematological and solid cancers in monotherapy as well as in
combination therapies.
We are very happy to enter into collaboration with Spectrum a highly committed successful US
biotech company specialised in development of oncology and haematology products and expert
marketeers
said MD, Professor Peter Buhl Jensen, CEO of TopoTarget.
The partnership with Spectrum
significantly strengthens the global development of belinostat for the treatment of multiple
cancers as well as its successful commercialisation
.
The addition of Belinostat addresses our key strategic goal of acquiring a late-stage anti-cancer
compound
, said Rajesh C. Shrotriya, MD, Chairman, Chief Executive Officer, and President of
Spectrum Pharmaceuticals
. Belinostats current registrational program is comprehensive and focused
in that it targets key hematological indications such as PTCL and other solid tumor indications.
Belinostat has the potential to be a best-in-class HDAC inhibitor for both hematological and solid
tumors. We look forward to advancing Belinostat in PTCL and other solid tumor indications, with
the goal of providing cancer patients with more effective treatment options as quickly and
efficiently as possible.
Under the terms of the agreement, TopoTarget will receive an upfront payment of $30 million in
cash. The total potential value of up-front and milestones (for both development and sales) the
agreement, in the event of full commercial success could exceed $350. In addition, TopoTarget will
receive a double digit royalty on sales of belinostat as well as one million Spectrum shares.
Spectrum commits to fund 100% of the costs for the ongoing PTCL study; TopoTarget will fund 100% of
the ongoing CUP study. Spectrum and TopoTarget will split the development costs in a 70 to 30 ratio
for future development of belinostat.
Under the agreement it is now expected that the BELIEF trial will be finalised and NDA filed with
the FDA in 2011 the previous timeline announced by TopoTarget was December 2010. The CUP trial
will be fully
recruited in 2010 the previous timeline announced by TopoTarget was H1 2010. In addition other
randomised clinical trials in indications such as NSCLC are expected to be initiated.
Taking into account the 70:30 cost sharing arrangement under the collaboration, the sign on
fee and existing cash resources TopoTarget will, as a result of entering into the Agreement with
Spectrum, have sufficient cash resources to take it into 2012. The agreement also includes
diligence provisions on development and commercialisation as well as an option to co-promote under
certain conditions.
Belinostat an HDACi is a novel way of treating cancer. Belinostat has been developed to address the
serious issue of drug resistance in addition to having its own cancer cell killing effect as
monotherapy belinostat resentizises the sensitivity to several anticancer agents including platins,
taxanes and topoisomerase II drugs where resistance has been developed.
Todays news does not change TopoTargets 2009 full-year financial guidance. The impact on 2010
will be included in TopoTargets financial outlook for 2010 to be announced 25 March 2010.
TopoTarget A/S
For further information, please contact:
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Peter Buhl Jensen
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Telephone
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+45 39 17 94 99
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CEO
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Mobile
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+45 21 60 89 22
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2. Background information
About belinostat
Belinostat is a promising small molecule HDAC inhibitor being investigated for its role in the
treatment of a wide range of solid tumors and hematologic malignancies either as a single-agent, or
in combination with other active anti-cancer agents, including carboplatin, paclitaxel,
doxorubicin, idarubicin, cis-retinoic acid, azacytidine and Velcade
®
(bortezomib) for
injection. HDAC inhibitors represent a new mechanistic class of anti-cancer therapeutics that
target HDAC enzymes, and have been shown to: arrest growth of cancer cells (including drug
resistant subtypes); induce apoptosis, (programmed cell death); promote differentiation; inhibit
angiogenesis; and sensitize cancer cells to overcome drug resistance when used in combination with
other anti-cancer agents. Company-sponsored trials of IV-administered belinostat include a pivotal
trial in peripheral T-cell lymphoma (PTCL), a randomized controlled Phase 2 trial in cancer of
unknown primary (CUP), and studies in ovarian, colorectal and soft tissue sarcoma patients.
NCI-sponsored trials (single agent and in combination with anti-cancer therapeutics) with
IV-administered belinostat include studies in hepatocellular, thymoma, Myelodysplastic Syndrome
(MDS), and other solid and hematologic cancers. Continuous intravenous administration (CIV) is
being evaluated in clinical trials in solid tumours as well as in AML. An oral formulation of
belinostat is also being evaluated in a Phase 1 clinical trial for patients with advanced solid
tumors and lymphomas. These NCI-sponsored clinical studies are being conducted under a Clinical
Trials Agreement with TopoTarget. Furthermore TopoTarget has a Cooperative Research and Development
Agreement (CRADA) with the NCI to conduct preclinical and nonclinical studies on belinostat in
order to better understand its anti-tumor activity and to provide supporting information for
clinical trials.
About TopoTarget
TopoTarget (OMX: TOPO) is an international biotech company headquartered in Denmark, dedicated to
finding Answers for Cancer and developing improved cancer therapies. The company was founded
and is run by clinical cancer specialists and combines years of hands-on clinical experience with
in-depth understanding of the molecular mechanisms of cancer.
TopoTarget has a broad clinical pipeline but is currently focusing on the development of
belinostat, which has shown proof of concept as monotherapy in treating haematological malignancies
and positive results in solid tumours where it can be used in combination with full doses of
chemotherapy, and is in a pivotal trial in PTCL. TopoTargets expertise in translational research
is utilizing its highly predictive in vivo and in vitro cancer models. TopoTarget is directing its
efforts on key cancer targets including HDACi, NAD+, mTOR, FasLigand and topoisomerase II
inhibitors. The companys first marketed product Savene
®
/Totect
®
was approved
by EMEA in 2006 and the FDA in 2007 and is marketed by TopoTargets own sales force in Europe and
the US. For more information, please refer to www.topotarget.com.
About Spectrum Pharmaceuticals
Spectrum Pharmaceuticals is a commercial-stage biotechnology company with a focus in oncology. The
Companys strategy is comprised of acquiring and developing a broad and diverse pipeline of
late-stage clinical and commercial
products; establishing a commercial organization for its approved drugs; continuing to build a team
with people who have demonstrated skills, passion, commitment and have a track record of success in
its areas of focus; and, leveraging the expertise of partners around the world to assist it in the
execution of its strategy. For more information, please visit the Companys website at
www.sppirx.com.
TopoTarget Safe Harbour Statement
This announcement may contain forward-looking statements, including statements about our
expectations of the progression of our preclinical and clinical pipeline including the timing for
commencement and completion of clinical trials and with respect to cash burn guidance. Such
statements are based on managements current expectations and are subject to a number of risks and
uncertainties that could cause actual results to differ materially from those described in the
forward-looking statements. TopoTarget cautions investors that there can be no assurance that
actual results or business conditions will not differ materially from those projected or suggested
in such forward-looking statements as a result of various factors, including, but not limited to,
the following: The risk that any one or more of the drug development programs of TopoTarget will
not proceed as planned for technical, scientific or commercial reasons or due to patient enrolment
issues or based on new information from non-clinical or clinical studies or from other sources; the
success of competing products and technologies; technological uncertainty and product development
risks; uncertainty of additional funding; TopoTargets history of incurring losses and the
uncertainty of achieving profitability; TopoTargets stage of development as a biopharmaceutical
company; government regulation; patent infringement claims against TopoTargets products, processes
and technologies; the ability to protect TopoTargets patents and proprietary rights; uncertainties
relating to commercialization rights; and product liability expo-sure; We disclaim any intention or
obligation to update or revise any forward-looking statements, whether as a result of new
information, future events, or otherwise, unless required by law.
CONFIDENTIAL
Schedule 4.4(a) PTCL Clinical Trial Agreement
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[***]:
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CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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Schedule 9.2(h) Product Description as of Effective Date
[***]
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[***]:
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CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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Schedule 9.9 Material Contracts of TopoTarget
[***]
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[***]:
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CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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