As filed with the Securities and Exchange Commission on
April 16, 2010
Registration No. 333-162782
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Amendment No. 5
to
Form S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
Alimera Sciences,
Inc.
(Exact Name of Registrant as
Specified in its Charter)
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Delaware
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2834
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20-0028718
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(State or Other Jurisdiction
of
Incorporation or Organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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6120 Windward Parkway, Suite 290
Alpharetta, GA 30005
(678) 990-5740
(Address, including zip code,
and telephone number, including area code, of registrants
principal executive offices)
C. Daniel Myers
Chief Executive Officer
6120 Windward Parkway, Suite 290
Alpharetta, GA 30005
(678) 990-5740
(Name, address, including zip
code, and telephone number, including area code, of agent for
service)
Copies to:
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Jay K. Hachigian, Esq.
Marc F. Dupré, Esq.
Gunderson Dettmer Stough
Villeneuve Franklin & Hachigian, LLP
850 Winter Street
Waltham, MA 02451
(781) 890-8800
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Richard D. Truesdell, Jr., Esq.
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, NY 10017
(212) 450-4000
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Approximate date of commencement of proposed sale to the
public:
As soon as practicable after the
effective date of this Registration Statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, as amended,
check the following
box.
o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering.
o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If this form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following
box.
o
Indicate by a check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer
or a smaller reporting company.
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Large
accelerated filer
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Accelerated filer
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Non-accelerated filer
þ
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Smaller reporting company
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum
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Proposed Maximum
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Title of Each Class of
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Amount to be
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Offering Price
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Aggregate
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Amount of
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Securities to be Registered
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Registered(1)
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Per Share
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Offering Price(2)
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Registration Fee(3)
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Common Stock, $0.01 par value per share
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6,900,000
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$17.00
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$117,300,000
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$7,124
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(1)
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Includes 900,000 shares of
common stock issuable upon exercise of an option to purchase
additional shares granted to the underwriters.
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(2)
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Estimated solely for the purpose of
calculating the registration fee pursuant to Rule 457(a)
under the Securities Act, based on an estimate of the proposed
maximum aggregate offering price.
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(3)
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A registration fee in the amount of
$4,464 was paid at the time of the initial filing of the
registration statement on an estimate of the aggregate offering
price. A portion of this registration fee was paid through an
off-set of a registration fee in the amount of $2,948 that was
previously paid by the registrant in connection with a prior
registration statement filing that was subsequently withdrawn.
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The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
The
information in this preliminary prospectus is not complete and
may be changed. These securities may not be sold until the
registration statement filed with the Securities and Exchange
Commission is effective. This preliminary prospectus is not an
offer to sell nor does it seek an offer to buy these securities
in any jurisdiction where the offer or sale is not
permitted.
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SUBJECT
TO COMPLETION, DATED APRIL 16, 2010
PRELIMINARY PROSPECTUS
6,000,000 Shares
ALIMERA SCIENCES,
INC.
Common Stock
This is an initial
public offering of shares of common stock of Alimera Sciences,
Inc. All of the shares of common stock are being sold by the
company.
Prior to this
offering, there has been no public market for the common stock.
It is currently estimated that the initial public offering price
per share will be between $15.00 and $17.00. Our common stock
has been approved for listing on the Nasdaq Global Market under
the symbol ALIM.
Investing in the
common stock involves risks. See Risk Factors
beginning on page 7 to read about factors you should
consider before buying shares of the common stock.
Neither the
Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon
the accuracy or adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
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Per
Share
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Total
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Initial public offering price
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$
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$
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Underwriting discount
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$
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$
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Proceeds, before expenses, to the Issuer
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$
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$
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To the extent that
the underwriters sell more than 6,000,000 shares of common
stock, the underwriters have the option to purchase up to an
additional 900,000 shares from the company at the initial
public offering price less the underwriting discount.
The underwriters
expect to deliver the shares against payment
in
on ,
2010.
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Credit Suisse
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Citi
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Cowen and Company
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Oppenheimer & Co.
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The date of this
prospectus
is ,
2010.
Iluvien
®
(fluocinolone acetonide
intravitreal insert)
Iluvien is currently in clinical development. Iluvien has not
been approved by the U.S. Food and
Drug Administration and therefore Alimera Sciences, Inc. has
not generated any revenues
from the commercial sale of Iluvien as of the date of this
prospectus.
TABLE OF
CONTENTS
Through and
including ,
2010 (the 25th day after the date of this prospectus), all
dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a
prospectus. This obligation is in addition to a dealers
obligation to deliver a prospectus when acting as an underwriter
and with respect to an unsold allotment or subscription.
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this
prospectus. You must not rely on any unauthorized information or
representations. This prospectus is an offer to sell only the
shares offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information
contained in this prospectus is current only as of its date.
i
PROSPECTUS
SUMMARY
This summary highlights the most important features of this
offering and the information contained elsewhere in this
prospectus. This summary is not complete and does not contain
all of the information that you should consider before investing
in our common stock. You should read the entire prospectus
carefully, especially the risks of investing in our common stock
discussed under the heading Risk Factors and our
financial statements and related notes included in this
prospectus.
Our
Company
We are a biopharmaceutical company that specializes in the
research, development and commercialization of prescription
ophthalmic pharmaceuticals. We are presently focused on diseases
affecting the back of the eye, or retina, because we believe
these diseases are not well treated with current therapies and
represent a significant market opportunity. Our most advanced
product candidate is Iluvien, an intravitreal insert containing
fluocinolone acetonide (FA), a non-proprietary corticosteroid
with demonstrated efficacy in the treatment of ocular disease.
Intravitreal refers to the space inside the eye behind the lens
that contains the jelly-like substance called vitreous. We are
developing Iluvien to provide a sustained therapeutic effect for
up to 36 months in the treatment of diabetic macular edema
(DME). DME is a disease of the retina that affects individuals
with diabetes and can lead to severe vision loss and blindness.
There are no ophthalmic drug therapies approved by the U.S. Food
and Drug Administration (FDA) for the treatment of DME. We
believe that Iluvien will be the first ophthalmic drug therapy
approved by the FDA for the treatment of DME.
We are currently conducting two Phase 3 pivotal clinical trials
for Iluvien (collectively, our FAME Study) involving
956 patients in sites across the United States, Canada,
Europe and India to assess the efficacy and safety of Iluvien in
the treatment of DME. The primary efficacy endpoint for our FAME
Study is the difference in the percentage of patients with
improved visual acuity of 15 or more letters on the Early
Treatment Diabetic Retinopathy Study (ETDRS) eye chart at month
24 between the treatment and control groups. In December 2009 we
received the month 24 clinical readout from our FAME Study.
Based on our analysis of this readout, Iluvien demonstrated
efficacy in the treatment of DME. In addition, based on this
readout, we believe that the adverse events associated with the
use of Iluvien, which are typical of the side effects associated
with the use of intravitreal corticosteroids, are within the
acceptable limits of a drug for the treatment of DME.
Based upon our analysis of the month 24 clinical readout from
our FAME Study, we plan to file a New Drug Application (NDA) in
the United States for the low dose of Iluvien in the second
quarter of 2010, followed by registration filings in certain
European countries and Canada. We intend to request Priority
Review of our NDA from the FDA. If Priority Review is granted,
we can expect a response to our NDA from the FDA in the fourth
quarter of 2010. If our NDA is approved, we plan to
commercialize Iluvien in the United States by marketing and
selling Iluvien to retinal specialists as early as the first
quarter of 2011. In addition to treating DME, Iluvien is being
studied in three Phase 2 clinical trials for the treatment of
the dry form of age-related macular degeneration (AMD), the wet
form of AMD and retinal vein occlusion (RVO).
In 2007, according to the U.S. Department of Health and
Human Services Centers for Disease Control and Prevention,
there were approximately 17.9 million diagnosed diabetics
in the United States. Additionally, per the International
Diabetes Federations Diabetes Atlas, the estimated
prevalence of people diagnosed with diabetes for 2010 has
increased to 285 million people worldwide. All patients
with diabetes are at risk of developing some form of diabetic
retinopathy, an ophthalmic condition that includes the swelling
and leakage of blood vessels within the retina or the abnormal
growth of new blood vessels on the surface of the retina. When
the blood vessel leakage of diabetic retinopathy causes swelling
in the macula, the part of the eye responsible for central
vision, the condition is called DME. We estimate the incidence
of DME in the United States to be approximately 340,000 cases
annually.
The current standard of care for the treatment of DME is laser
photocoagulation. Laser photocoagulation is a retinal procedure
in which a laser is used to cauterize leaky blood vessels or to
apply a pattern of burns to reduce edema. This procedure has
undesirable side effects including partial loss of peripheral
and night vision. As a result of these side effects and a desire
for improved visual outcomes, retinal specialists have
1
supplemented laser photocoagulation with alternate off-label
therapies for the treatment of DME, including injections of
corticosteroids and anti-vascular endothelial growth factor
(anti-VEGF) agents. Corticosteroids have shown improved visual
acuity in DME patients in non-pivotal clinical trials, but they
are associated with the side effects of increased intraocular
pressure (IOP), which may increase the risk of glaucoma, and
cataract formation. Both of these alternate therapies are
limited by a need for multiple injections to maintain a
therapeutic effect.
Iluvien is inserted in the back of the patients eye to a
placement site that takes advantage of the eyes natural
fluid dynamics. Iluvien is inserted with a device that employs a
25-gauge
needle which allows for a self-sealing wound. Iluvien is
designed to provide a therapeutic effect for up to 36 months by
delivering sustained
sub-microgram
levels of FA. The sustained sub-microgram dosage level of
Iluvien provides lower exposure to corticosteroids than other
intraocular dosage forms currently available. Iluvien has
demonstrated efficacy in the treatment of DME in our FAME Study.
Additionally, by providing lower exposure to corticosteroids and
focusing the delivery to the back of the eye, we believe that
the adverse events associated with the use of Iluvien, which are
typical of the side effects associated with the use of
corticosteroids, are within the acceptable limits of a drug for
the treatment of DME.
Our commercialization strategy is to establish Iluvien as a
leading therapy for the treatment of DME and subsequently for
any other indications for which Iluvien proves safe and
effective. We intend to capitalize on our managements
experience and expertise with eye-care products, by marketing
and selling Iluvien to the approximately 1,600 retinal
specialists practicing in the approximately 900 retina
centers across the United States and Canada. We intend to seek a
commercialization partner for sales and marketing activities
outside North America. Our commercialization strategy is subject
to and dependent upon regulatory approval of Iluvien for the
treatment of DME.
In addition to our activities related to Iluvien, we are
pursuing the development, license and acquisition of rights to
compounds and technologies with the potential to treat diseases
of the eye that we believe are not well treated by current
therapies. We have executed agreements with Emory University,
whereby we acquired exclusive, worldwide licenses of rights
under patent applications covering two classes of nicotinamide
adenine dinucleotide phosphate (NADPH) oxidase inhibitors. Our
initial focus is on the use of NADPH oxidase inhibitors in the
treatment of dry AMD. We plan to evaluate the use of NADPH
oxidase inhibitors in the treatment of other diseases of the
eye, including wet AMD and diabetic retinopathy.
Our
Business Strategy
We are presently focused on diseases affecting the back of the
eye, or retina, because we believe these diseases are not well
treated with current therapies and represent a significant
market opportunity. Our business strategy is to:
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Pursue FDA Approval for Iluvien.
In December
2009 we received the month 24 clinical readout from our FAME
Study. Based upon our analysis of this data, we plan to file an
NDA in the United States for the low dose of Iluvien in the
second quarter of 2010, followed by registration filings in
certain European countries and Canada.
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Maximize the Commercial Success of Iluvien.
If
approved by the FDA, we intend to market and sell Iluvien to the
approximately 1,600 retinal specialists practicing in the
approximately 900 retina centers in the United States and Canada
and to seek a commercialization partner for sales and marketing
activities outside North America.
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Assess the Effectiveness of Iluvien for Additional Retinal
Diseases.
Iluvien is being studied in three
Phase 2 clinical trials with retinal specialists to assess
its safety and efficacy in the treatment of dry AMD, wet AMD and
RVO.
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Develop Our Existing Ophthalmic Product
Pipeline.
We have acquired exclusive, worldwide
licenses of rights under patent applications for two classes of
NADPH oxidase inhibitors from Emory University and are
evaluating the use of these compounds in the treatment of dry
AMD. We plan to evaluate the
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use of NADPH oxidase inhibitors in the treatment of other
diseases of the eye, including wet AMD and diabetic retinopathy.
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Expand Our Ophthalmic Product Pipeline.
We
believe there are further unmet needs in the treatment of
ophthalmic diseases. Toward that end, we intend to leverage
managements expertise and its broad network of
relationships in continuing to evaluate in-licensing and
acquisition opportunities for compounds and technologies with
applications in diseases affecting the eye.
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Risks
That We Face
Our business is subject to numerous risks that could prevent us
from successfully implementing our business strategy. You should
carefully consider these risks and other risks described under
Risk Factors and elsewhere in this prospectus, which
include the following:
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We are dependent on the success of our product candidates and
specifically on the success of Iluvien, our only product
candidate currently in clinical development, and if we are not
successful in commercializing Iluvien, or are significantly
delayed in doing so, our business will be materially harmed and
we may need to curtail or cease operations;
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We face heavy government regulation, and approval of Iluvien and
our other product candidates from the FDA and from similar
entities in other countries is uncertain, in particular the FDA
may have a different interpretation of our clinical data than
that presented in our NDA, which could result in the FDA not
granting marketing approval for Iluvien;
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Even if approved, the demonstration of Iluviens safety and
efficacy, its cost-effectiveness, its potential advantages over
other therapies, the reimbursement policies of government and
third-party payors with respect to Iluvien, and the
effectiveness of our marketing and distribution capabilities may
impact the degree of Iluviens acceptance in the market;
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We are dependent upon our ability, and the ability of our
licensors, to obtain and maintain protection for the
intellectual property incorporated into our products and the
value of our technology and products will be adversely affected
if we or our licensors are unable to obtain or maintain such
protection; and
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We do not expect to generate revenues from our product
candidates until the first quarter of 2011 and although we
anticipate that the proceeds from this offering will fund our
operations through the projected commercialization of Iluvien as
early as the first quarter of 2011, we cannot be sure that this
offering will be completed, that Iluvien will be approved by the
FDA in the fourth quarter of 2010 or that, if approved, future
sales of Iluvien will generate revenues sufficient to fund our
operations beyond the first quarter of 2011, or ever.
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These risks and other risks described under Risk
Factors and elsewhere in this prospectus could materially
and adversely impact our business, financial condition,
operating results and future prospects which could cause the
trading price of our common stock to decline and could result in
a partial or total loss of your investment.
Corporate
Information
We are a Delaware corporation incorporated on June 4, 2003.
Our principal executive office is located at 6120 Windward
Parkway, Suite 290, Alpharetta, Georgia 30005 and our
telephone number is
(678) 990-5740.
Our web site address is
http://www.alimerasciences.com.
The information contained in, or that can be accessed through,
our Web site is not part of this prospectus and should not be
considered part of this prospectus.
Iluvien
®
and
FAME
tm
are our trademarks. This prospectus also contains trademarks of
other companies including
visiongain
tm
,
Retisert
®
,
Lucentis
®
,
Ozurdex
tm
,
Visudyne
®
,
Macugen
®
,
Avastin
®
,
Trivaris
®
and
TRIESENCE
®
.
3
THE
OFFERING
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Common stock offered by us
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6,000,000 shares
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Common stock to be outstanding after this offering
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30,501,055 shares
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Use of Proceeds
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We expect to receive net proceeds from the offering of
approximately $87.2 million, assuming an initial public
offering price of $16.00 per share, which is the midpoint of the
range listed on the cover page of the prospectus and after
deducting estimated underwriting discounts and commissions and
estimated offering expenses that we must pay. We intend to use
the proceeds from this offering primarily to complete the
clinical development and registration of Iluvien for DME, to
repay indebtedness and make certain milestone payments to
pSivida US, Inc., to commence the commercial launch of Iluvien,
to continue to develop our product pipeline and for working
capital and other general corporate purposes. See Use of
Proceeds for additional information.
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Risk Factors
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You should read the Risk Factors section of this
prospectus for a discussion of factors that you should consider
carefully before deciding to invest in shares of our common
stock.
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Nasdaq Global Market symbol
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ALIM
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The number of shares of our common stock outstanding after this
offering is based on 1,637,359 shares of our common stock
outstanding as of March 31, 2010 and the automatic
conversion of all outstanding shares of our preferred stock into
22,863,696 shares of common stock upon the closing of the
offering, including the conversion of certain Series A preferred
stock dividends accumulated prior to November 22, 2005 into
380,301 shares of common stock, and excludes:
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2,225,778 shares of our common stock issuable upon exercise
of options outstanding as of March 31, 2010 at a weighted
average price per share of $2.14;
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208,493 shares of our common stock issuable upon the
exercise of outstanding warrants at a weighted average price of
$3.37 per share, all of which are currently exercisable;
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494,422 shares of common stock reserved for issuance under
our 2010 Employee Stock Purchase Plan that becomes effective on
the effective date of this registration statement; and
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1,977,686 shares of common stock reserved for issuance
under our 2010 Equity Incentive Plan that becomes effective on
the effective date of this registration statement.
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Unless otherwise indicated, the information we present in this
prospectus assumes and reflects the following:
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the automatic conversion of all outstanding shares of our
preferred stock into 22,863,696 shares of common stock upon
the closing of the offering, including the conversion of certain
Series A preferred stock dividends accumulated prior to
November 22, 2005 into 380,301 shares of common stock;
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the filing of our restated certificate of incorporation and the
adoption of our amended and restated bylaws to be effective upon
the closing of this offering;
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no exercise of the underwriters over-allotment option to
purchase additional shares; and
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a
3.4-for-one
reverse split of our common and preferred stock effected prior
to the effective date of this registration statement.
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4
SUMMARY
HISTORICAL AND PRO FORMA FINANCIAL AND OTHER DATA
The tables below summarize our financial data. The following
statements of operations data for fiscal years 2007, 2008 and
2009, and the balance sheet data as of December 31, 2008
and 2009 have been derived from our audited financial statements
and related notes and are included elsewhere in this prospectus.
The statement of operations data for fiscal years 2005 and 2006,
and the balance sheet data as of December 31, 2005, 2006
and 2007 are derived from our audited financial statements, but
are not included in this prospectus. The following summary
financial data should be read together with our financial
statements and related notes and Managements
Discussion and Analysis of Financial Condition and Results of
Operations included elsewhere in this prospectus.
Statement
of Operations Data
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Years Ended December 31,
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2005
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2006
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2007
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2008
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2009
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(In thousands, except per share data)
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Operating expenses
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Research and development(1)
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$
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2,926
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$
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6,736
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$
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8,363
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$
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43,764
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$
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15,057
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General and administrative
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2,595
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3,028
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3,184
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5,058
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3,407
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Marketing
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557
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616
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969
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1,259
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752
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Total operating expenses
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6,078
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10,380
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12,516
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50,081
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19,216
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Interest income
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223
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596
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1,079
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585
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37
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Interest expense
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(2
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(2
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(2
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(1,514
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(1,897
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Decrease (increase) in fair value of preferred stock conversion
feature
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8
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6
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1
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(10,454
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(23,142
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Loss from continuing operations
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|
(5,849
|
)
|
|
|
(9,780
|
)
|
|
|
(11,438
|
)
|
|
|
(61,464
|
)
|
|
|
(44,218
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations(2)
|
|
|
(7,790
|
)
|
|
|
(3,191
|
)
|
|
|
5,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(13,639
|
)
|
|
|
(12,971
|
)
|
|
|
(5,705
|
)
|
|
|
(61,464
|
)
|
|
|
(44,218
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial conversion feature of preferred stock (see Note 9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(355
|
)
|
Preferred stock accretion
|
|
|
(164
|
)
|
|
|
(243
|
)
|
|
|
(248
|
)
|
|
|
(718
|
)
|
|
|
(623
|
)
|
Preferred stock dividends
|
|
|
(1,546
|
)
|
|
|
(3,548
|
)
|
|
|
(4,685
|
)
|
|
|
(6,573
|
)
|
|
|
(7,225
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders
|
|
$
|
(15,349
|
)
|
|
$
|
(16,762
|
)
|
|
$
|
(10,638
|
)
|
|
$
|
(68,755
|
)
|
|
$
|
(52,421
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share attributable to common
stockholders basic and diluted
|
|
$
|
(10.68
|
)
|
|
$
|
(11.66
|
)
|
|
$
|
(7.09
|
)
|
|
$
|
(45.50
|
)
|
|
$
|
(34.56
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding basic and
diluted
|
|
|
1,437
|
|
|
|
1,437
|
|
|
|
1,500
|
|
|
|
1,511
|
|
|
|
1,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net loss per share attributable to common
stockholders basic and diluted(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.94
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma weighted average common shares outstanding
basic and diluted(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Includes $29.8 million of research and development expenses
incurred in connection with an amendment to the pSivida license
agreement in the year ended December 31, 2008. See
Note 7 to the financial statements for a more detailed
description of the pSivida agreement and the amendment.
|
|
(2)
|
|
Includes gains on disposal of $9.7 million and
$6.0 million for the years ended December 31, 2006 and
2007, respectively. See Note 3 to the financial statements
for a more detailed description of the discontinued operations.
|
|
(3)
|
|
The pro forma basic and diluted net loss per common share data
for the year ended December 31, 2009 reflect the
conversion, upon the closing of this offering, of our
Series A, Series B, Series C and Series C-1
preferred stock (including shares of
Series C-1
preferred stock issued upon the exercise of warrants in January
2010) at their respective conversion rates into our common
stock, as if the conversion had occurred at the later of the
beginning of the period presented or the date of issuance of
such shares of preferred stock and excludes the effect of the
change in fair value of the preferred stock conversion feature,
preferred stock accretion and preferred stock dividends. The pro
forma data does not give effect to the consummation of this
offering.
|
5
Balance
Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2005
|
|
2006
|
|
2007
|
|
2008
|
|
2009
|
|
Pro Forma(1)
|
|
|
(In thousands)
|
|
|
|
Cash and cash equivalents
|
|
$
|
22,815
|
|
|
$
|
27,157
|
|
|
$
|
20,847
|
|
|
$
|
17,875
|
|
|
$
|
4,858
|
|
|
$
|
14,858
|
(2)
|
Working capital
|
|
|
21,846
|
|
|
|
25,294
|
|
|
|
19,862
|
|
|
|
14,551
|
|
|
|
(4,428
|
)
|
|
|
5,572
|
|
Total assets
|
|
|
25,081
|
|
|
|
31,251
|
|
|
|
24,519
|
|
|
|
20,264
|
|
|
|
6,561
|
|
|
|
16,561
|
|
Long-term liabilities
|
|
|
57
|
|
|
|
60
|
|
|
|
31
|
|
|
|
28,217
|
|
|
|
47,909
|
|
|
|
11,208
|
|
Preferred stock
|
|
|
43,373
|
|
|
|
63,057
|
|
|
|
67,990
|
|
|
|
103,017
|
|
|
|
113,389
|
|
|
|
|
|
Additional paid-in capital
|
|
|
2,193
|
|
|
|
2,571
|
|
|
|
2,867
|
|
|
|
3,474
|
|
|
|
4,836
|
|
|
|
183,273
|
|
Accumulated deficit
|
|
|
(23,315
|
)
|
|
|
(40,077
|
)
|
|
|
(50,715
|
)
|
|
|
(119,470
|
)
|
|
|
(171,891
|
)
|
|
|
(188,995
|
)
|
Total stockholders deficit
|
|
|
(21,015
|
)
|
|
|
(37,399
|
)
|
|
|
(47,738
|
)
|
|
|
(115,887
|
)
|
|
|
(165,472
|
)
|
|
|
(5,382
|
)
|
|
|
|
(1)
|
|
Assumes and gives effect to the conversion of all outstanding
shares of preferred stock into common stock upon the completion
of this offering, including the conversion of certain
Series A preferred stock dividends accumulated prior to
November 22, 2005 into 380,301 shares of common stock
and the conversion of 1,935,700 shares of our
Series C-1
preferred stock issued upon the exercise of warrants in January
2010, the receipt of $10.0 million in proceeds in January
2010 as a result of the exercise of
Series C-1
warrants, and an incremental loss of $17.1 million on the
revaluation of the embedded conversion feature based on the
midpoint of the offering range immediately prior to the
conversion of our Series A, Series B, Series C
and
Series C-1
preferred stock.
|
|
|
|
(2)
|
|
This amount does not include a $4.0 million option payment
that we received in January 2010 from Bausch & Lomb
Incorporated (Bausch & Lomb) upon the exercise by
Bausch & Lomb of its option to extend the period
during which it may continue to develop an allergy product
acquired from us in 2006 by two years.
|
6
RISK
FACTORS
Investing in our common stock involves a high degree of risk.
You should consider carefully the risk factors described below,
together with the other information in this prospectus
(including our financial statements and the related notes
appearing at the end of this prospectus) before deciding to
invest in shares of our common stock. If any of the events
contemplated by the following discussion of risks should occur,
our business, financial condition, results of operations and
future prospects would likely be materially and adversely
affected. As a result, the market price of our common stock
could decline, and you could lose all or part of your
investment.
Risks
Related to Our Business and Industry
We are
heavily dependent on the success of our lead product candidate,
Iluvien, which is still under development. If we are unable to
commercialize Iluvien, or experience significant delays in doing
so, our business will be materially harmed.
We have invested a significant portion of our time and financial
resources in the development of Iluvien, our only product
candidate in clinical development. We anticipate that in the
near term our ability to generate revenues will depend solely on
the successful development and commercialization of Iluvien.
Based on our analysis of the month 24 clinical readout from our
Phase 3 pivotal clinical trials for the use of Iluvien in the
treatment of diabetic macular edema, or DME (collectively, our
FAME Study), we plan to file a New Drug Application (NDA) for
the low dose of Iluvien in the United States in the second
quarter of 2010, followed by registration filings in certain
European countries and Canada. However, we may not complete our
registration filings in our anticipated time frame. Even after
we complete our NDA filing, the U.S. Food and Drug
Administration (FDA) may not accept our submission, may request
additional information from us, including data from additional
clinical trials, and, ultimately, may not grant marketing
approval for Iluvien. In addition, although we believe the month
24 clinical readout from our FAME Study demonstrates that
Iluvien is effective in the treatment of DME, clinical data
often is susceptible to varying interpretations and many
companies that have believed that their products performed
satisfactorily in clinical trials have nonetheless failed to
obtain FDA approval for their products.
If we are not successful in commercializing Iluvien, or are
significantly delayed in doing so, our business will be
materially harmed and we may need to curtail or cease
operations. Our ability to successfully commercialize Iluvien
will depend, among other things, on our ability to:
|
|
|
|
|
successfully complete our clinical trials;
|
|
|
|
produce, through a validated process, batches of Iluvien in
quantities sufficiently large to permit successful
commercialization;
|
|
|
|
receive marketing approvals from the FDA and similar foreign
regulatory authorities;
|
|
|
|
establish commercial manufacturing arrangements with third-party
manufacturers;
|
|
|
|
launch commercial sales of Iluvien; and
|
|
|
|
secure acceptance of Iluvien in the medical community and with
third-party payors.
|
We face
heavy government regulation, and approval of Iluvien and our
other product candidates from the FDA and from similar entities
in other countries is uncertain.
The research, testing, manufacturing and marketing of drug
products are subject to extensive regulation by U.S. federal,
state and local government authorities, including the FDA, and
similar entities in other countries. To obtain regulatory
approval of a product, we must demonstrate to the satisfaction
of the regulatory agencies that, among other things, the product
is safe and effective for its intended use. In addition, we must
show that the manufacturing facilities used to produce the
products are in compliance with current Good Manufacturing
Practice (cGMP) regulations.
7
The process of obtaining regulatory approvals and clearances
will require us to expend substantial time and capital. Despite
the time and expense incurred, regulatory approval is never
guaranteed. The number of preclinical and clinical tests that
will be required for regulatory approval varies depending on the
drug candidate, the disease or condition for which the drug
candidate is in development and the regulations applicable to
that particular drug candidate. Regulatory agencies, including
those in the United States, Canada, the European Union and other
countries where drugs are regulated, can delay, limit or deny
approval of a drug candidate for many reasons, including that:
|
|
|
|
|
a drug candidate may not be safe or effective;
|
|
|
|
regulatory agencies may interpret data from preclinical and
clinical testing in different ways from those which we do;
|
|
|
|
they may not approve of our manufacturing process;
|
|
|
|
they may conclude that the drug candidate does not meet quality
standards for stability, quality, purity and potency; and
|
|
|
|
they may change their approval policies or adopt new regulations.
|
The FDA may make requests or suggestions regarding conduct of
our clinical trials, resulting in an increased risk of
difficulties or delays in obtaining regulatory approval in the
United States. For example, the FDA may object to the use of a
sham injection in our control arm or may not approve of certain
of our methods for analyzing our trial data, including how we
evaluate the risk/benefit relationship. Further, we intend to
market Iluvien, and may market other product candidates, outside
the United States and specifically in the European Union and
Canada. Regulatory agencies within these countries will require
that we obtain separate regulatory approvals and comply with
numerous and varying regulatory requirements. The approval
procedures within these countries can involve additional
testing, and the time required to obtain approval may differ
from that required to obtain FDA approval. Additionally, the
foreign regulatory approval process may include all of the risks
associated with obtaining FDA approval. For all of these
reasons, we may not obtain foreign regulatory approvals on a
timely basis, if at all. Approval by the FDA does not ensure
approval by regulatory authorities in other countries or
jurisdictions, and approval by one foreign regulatory authority
does not ensure approval by regulatory authorities in other
foreign countries or jurisdictions or by the FDA.
We plan to submit an NDA in the United States for the low dose
of Iluvien in the second quarter of 2010 with 24 months of
clinical data from our FAME Study, followed by registration
filings in certain European countries and Canada. Consistent
with recommendations regarding the appropriate population for
primary analysis as described in the FDA-adopted
International Conference on Harmonization of Technical
Requirements for Registration of Pharmaceuticals for Human Use
(ICH) Guidance E9, Statistical Principals for
Clinical Trials, we believe that the FDA will consider the
most relevant population for determining safety and efficacy to
be the full data set of all 956 patients randomized into
our FAME Study, with data imputation employed using last
observation carried forward, for data missing because of
patients who discontinued the trial or are unavailable for
follow-up
(the Full Analysis Set). The primary efficacy endpoint was met
with statistical significance for both the low dose and the high
dose of Iluvien in both trials using the Full Analysis Set and
we intend to submit an analysis based on this data set for the
low dose to the FDA. However, our FAME Study protocol did not
include the Full Analysis Set and provides that the primary
assessment of efficacy will be based on another data set that
excludes from the Full Analysis Set three patients who were
enrolled but never treated as well as data collected for
patients subsequent to their use of treatments prohibited by our
FAME Study protocol (the Modified ART Data Set). Statistical
significance was not achieved for either the low dose or the
high dose in one trial using the Modified ART Data Set. There is
no assurance that the FDA will utilize the Full Analysis Set and
not the Modified ART Data Set or another data set in determining
whether Iluvien is safe and effective, which could result in the
FDA not granting marketing approval for Iluvien.
Regulatory agencies require carcinogenicity studies in animals
to identify tumorigenic potential in animals to assess the
relevant risk in humans. Based on month 18 readouts from our
open-label Phase 2 human pharmacokinetic clinical trial (PK
Study), which indicate that there is negligible systemic
absorption of
8
fluocinolone acetonide (FA) in patients being treated with
Iluvien, we expect to obtain a waiver from these regulatory
agencies from the requirement to perform carcinogenicity
studies. However, we may not be able to demonstrate negligible
systemic absorption of FA in our PK Study beyond 18 months
or may not obtain a waiver from regulatory agencies for the
requirement to perform carcinogenicity studies in animals. If we
are required to perform carcinogenicity studies in animals, the
approval of Iluvien could be delayed by up to 36 months.
Any delay or failure by us to obtain regulatory approvals for
our product candidates could diminish competitive advantages
that we may attain and would adversely affect the marketing of
our products. We have not yet received regulatory approval to
market any of our product candidates in any jurisdiction.
Iluvien
utilizes FA, a corticosteroid that has demonstrated undesirable
side effects in the eye; therefore, the success of Iluvien will
be dependent upon the achievement of an appropriate relationship
between the benefits of its efficacy and the risks of its
side-effect profile.
The use of corticosteroids in the eye has been associated with
undesirable side effects, including increased incidence of
intraocular pressure (IOP), which may increase the risk of
glaucoma, and cataract formation. We have received only the
month 24 clinical readout from our FAME Study and the extent of
Iluviens long-term side effect profile is not yet known.
Upon review of our NDA for the low dose of Iluvien in the
treatment of DME, the FDA may conclude that our FAME Study did
not demonstrate that Iluvien has sufficient levels of efficacy
to outweigh the risks associated with its side-effect profile.
Conversely, the FDA may conclude that Iluviens side-effect
profile does not demonstrate an acceptable risk/benefit
relationship in line with Iluviens demonstrated efficacy.
In the event of such conclusions, we may not receive regulatory
approval from the FDA or from similar regulatory agencies in
other countries.
Even if
we do receive regulatory approval for Iluvien, the FDA or other
regulatory agencies may impose limitations on the indicated uses
for which Iluvien may be marketed, subsequently withdraw
approval or take other actions against us or Iluvien that would
be adverse to our business.
Regulatory agencies generally approve products for particular
indications. If any such regulatory agency approves Iluvien for
a limited indication, the size of our potential market for
Iluvien will be reduced. For example, our potential market for
Iluvien would be reduced if the FDA limited the indications of
use to patients diagnosed with only clinically significant DME
as opposed to DME or restricted the use to patients exhibiting
IOP below a certain level at the time of treatment. Product
approvals, once granted, may be withdrawn if problems occur
after initial marketing. If and when Iluvien does receive
regulatory approval or clearance, the marketing, distribution
and manufacture of Iluvien will be subject to regulation in the
United States by the FDA and by similar entities in other
countries. We will need to comply with facility registration and
product listing requirements of the FDA and similar entities in
other countries and adhere to the FDAs Quality System
Regulations. Noncompliance with applicable FDA and similar
entities requirements can result in warning letters,
fines, injunctions, civil penalties, recall or seizure of
Iluvien, total or partial suspension of production, refusal of
regulatory agencies to grant approvals, withdrawal of approvals
by regulatory agencies or criminal prosecution. We would also
need to maintain compliance with federal, state and foreign laws
regarding sales incentives, referrals and other programs.
Iluvien
may not be granted Priority Review by the FDA and, even if
Iluvien receives Priority Review, Iluvien may not receive
approval within the six-month review/approval cycle.
We believe that Iluvien may be eligible for Priority Review
under FDA procedures. We will request Priority Review for
Iluvien at the time we submit our NDA. Although the FDA has
granted Priority Review to other products that treat retinal
disease (including Visudyne, Retisert, Macugen, Lucentis and
Ozurdex), Iluvien may not receive similar consideration.
However, even in the event that Iluvien is designated for
Priority Review, such a designation does not necessarily mean a
faster regulatory review process or necessarily confer any
advantage with respect to approval compared to conventional FDA
procedures. Receiving Priority Review from the FDA does not
guarantee approval within the six-month review/approval cycle.
9
Our
product candidates may never achieve market acceptance even if
we obtain regulatory approvals.
Even if we receive regulatory approvals for the sale of our
product candidates, the commercial success of these products
will depend, among other things, on their acceptance by retinal
specialists, patients, third-party payors and other members of
the medical community as a therapeutic and cost-effective
alternative to competing products and treatments. The degree of
market acceptance of any of our product candidates will depend
on a number of factors, including the demonstration of its
safety and efficacy, its cost-effectiveness, its potential
advantages over other therapies, the reimbursement policies of
government and third-party payors with respect to the product
candidate, and the effectiveness of our marketing and
distribution capabilities. If our product candidates fail to
gain market acceptance, we may be unable to earn sufficient
revenue to continue our business. If our product candidates are
not accepted by retinal specialists, patients, third-party
payors and other members of the medical community, it is
unlikely that we will ever become profitable.
Our
ability to pursue the development and commercialization of
Iluvien depends upon the continuation of our license from
pSivida US, Inc.
Our license rights to pSivida US, Inc.s (pSividas)
proprietary delivery device could revert to pSivida if we
(i) fail twice to cure our breach of an obligation to make
certain payments to pSivida following receipt of written notice
thereof; (ii) fail to cure other breaches of material terms
of our agreement with pSivida within 30 days after notice
of such breaches or such longer period (up to 90 days) as
may be reasonably necessary if the breach cannot be cured within
such
30-day
period; (iii) file for protection under the bankruptcy
laws, make an assignment for the benefit of creditors, appoint
or suffer appointment of a receiver or trustee over our
property, file a petition under any bankruptcy or insolvency act
or have any such petition filed against us and such proceeding
remains undismissed or unstayed for a period of more than
60 days; or (iv) notify pSivida in writing of our
decision to abandon our license with respect to a certain
product using pSividas proprietary delivery device. If our
agreement with pSivida were terminated, we would lose our rights
to develop and commercialize Iluvien, which would materially and
adversely affect our business, results of operations and future
prospects.
We will
rely on a single manufacturer for Iluvien, a single manufacturer
for the Iluvien inserter and a single active pharmaceutical
ingredient formulator for Iluviens active pharmaceutical
ingredient. Our business would be seriously harmed if these
third-parties are not able to satisfy our demand and alternative
sources are not available.
We do not have in-house manufacturing capability and will depend
completely on a single third-party manufacturer for the
manufacture of the Iluvien insert (Alliance Medical Products,
Inc. (Alliance)), a single third-party manufacturer for the
manufacture of the Iluvien inserter (Flextronics International,
Ltd. or an affiliate of Flextronics International, Ltd.
(Flextronics)) and a single third-party manufacturer for the
manufacture of Iluviens active pharmaceutical ingredient
(FARMABIOS S.R.L./Byron Chemical Company Inc. (FARMABIOS)).
Although we have finalized a long-term agreement for the
manufacture of the Iluvien insert (with Alliance), we have not
yet finalized long-term agreements for the manufacture of the
Iluvien inserter (with Flextronics) or for the manufacture of
Iluviens active pharmaceutical ingredient (with
FARMABIOS), and if any of the third-party manufacturers are
unable or unwilling to perform for any reason, we may not be
able to locate alternative acceptable manufacturers or
formulators, enter into favorable agreements with them or get
them approved by the FDA in a timely manner. Further, all of our
manufacturers rely on additional third-parties for the
manufacture of component parts. Any inability to acquire
sufficient quantities of Iluvien, the Iluvien inserter or the
active pharmaceutical ingredient in a timely manner from these
third-parties could delay commercial production of, and impact
our ability to fulfill demand for, Iluvien. Any inability to
acquire information necessary to file for regulatory approval
from such third-parties could also prevent us from obtaining
regulatory approval for Iluvien in a timely manner. In addition,
all our third-party manufacturers are subject to cGMP and
comparable requirements of foreign regulatory bodies, and
certain of our manufacturers utilize production facilities
outside the U.S. that are subject to local regulations with
respect to those operations, and we do not have control over
compliance with these regulations by our manufacturer. If our
manufacturer fails to maintain compliance, the production of
Iluvien could be interrupted, resulting in delays
10
and additional costs. In addition, if the facilities of our
manufacturer do not pass a pre-approval plant inspection, the
FDA will not grant market approval for Iluvien.
Materials
necessary to manufacture Iluvien and our other product
candidates may not be available on commercially reasonable
terms, or at all, which may delay the development, regulatory
approval and commercialization of our product
candidates.
We will rely on our manufacturers to purchase materials from
third-party suppliers necessary to produce Iluvien and our other
product candidates for our clinical trials. Suppliers may not
sell these materials to our manufacturers at the times we need
them or on commercially reasonable terms. We do not have any
control over the process or timing of the acquisition of these
materials by our manufacturers. Moreover, we currently have not
finalized any agreements for the commercial production of these
materials. If our manufacturers are unable to obtain these
materials for our clinical trials, product testing and potential
regulatory approval of Iluvien and our other product candidates
could be delayed, significantly affecting our ability to develop
Iluvien and our other product candidates. If we or our
manufacturers are unable to purchase these materials after
regulatory approval has been obtained for Iluvien and our other
product candidates, the commercial launch of Iluvien and our
other product candidates would be delayed or there would be a
shortage in supply, which would materially affect our ability to
generate revenues from the sale of Iluvien and our other product
candidates. Moreover, although we have finalized an agreement
for the commercial production of the Iluvien insert, we
currently have not yet finalized any agreements for the
commercial production of the active pharmaceutical ingredient in
Iluvien or the Iluvien inserter.
The
manufacture and packaging of pharmaceutical products such as
Iluvien are subject to the requirements of the FDA and similar
foreign regulatory entities. If we or our third-party
manufacturers fail to satisfy these requirements, our product
development and commercialization efforts may be materially
harmed.
The manufacture and packaging of pharmaceutical products such as
Iluvien and our future product candidates are regulated by the
FDA and similar foreign regulatory entities and must be
conducted in accordance with the FDAs cGMP and comparable
requirements of foreign regulatory entities. There are a limited
number of manufacturers that operate under these cGMP
regulations which are both capable of manufacturing Iluvien and
willing to do so. Failure by us or our third-party manufacturers
to comply with applicable regulations, requirements, or
guidelines could result in sanctions being imposed on us,
including fines, injunctions, civil penalties, failure of
regulatory authorities to grant marketing approval of our
products, delays, suspension or withdrawal of approvals, license
revocation, seizures or recalls of product, operating
restrictions and criminal prosecutions, any of which could
significantly and adversely affect our business.
Changes in the manufacturing process or procedure, including a
change in the location where the product is manufactured or a
change of a third-party manufacturer, will require prior FDA
review
and/or
approval of the manufacturing process and procedures in
accordance with the FDAs cGMP regulations. There are
comparable foreign requirements. This review may be costly and
time consuming and could delay or prevent the launch of a
product. If we elect to manufacture products in our own facility
or at the facility of another third-party, we would need to
ensure that the new facility and the manufacturing process are
in substantial compliance with cGMP regulations. The new
facility will also be subject to pre-approval inspection. In
addition, we have to demonstrate that the product made at the
new facility is equivalent to the product made at the former
facility by physical and chemical methods, which are costly and
time consuming. It is also possible that the FDA may require
clinical testing as a way to prove equivalency, which would
result in additional costs and delay.
Furthermore, in order to obtain approval of our products,
including Iluvien, by the FDA and foreign regulatory agencies,
we need to complete testing on both the active pharmaceutical
ingredient and on the finished product in the packaging that we
propose for commercial sales. This includes testing of
stability, identification of impurities and testing of other
product specifications by validated test methods. In addition,
we will be required to consistently produce Iluvien in
commercial quantities and of specified quality in a reproducible
manner and document our ability to do so. This requirement is
referred to as process validation.
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With respect to Iluvien, although we have validated the
manufacturing process at pilot scale batches, some of the steps
in the manufacturing processes will need to be revalidated when
we begin to manufacture commercial scale batches. If the
required testing or process validation is delayed or produces
unfavorable results, we may have to launch the product using
smaller pilot scale batches, which may impact our ability to
fulfill demand for the product.
The FDA and similar foreign regulatory bodies may also implement
new standards, or change their interpretation and enforcement of
existing standards and requirements, for the manufacture,
packaging, or testing of products at any time. If we are unable
to comply, we may be subject to regulatory or civil actions or
penalties that could significantly and adversely affect our
business.
Any
failure or delay in completing clinical trials for our product
candidates could severely harm our business.
Preclinical studies and clinical trials required to demonstrate
the safety and efficacy of our product candidates are time
consuming and expensive and together take several years to
complete. The completion of clinical trials for our product
candidates may be delayed by many factors, including:
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our inability to manufacture or obtain from third-parties
materials sufficient for use in preclinical studies and clinical
trials;
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delays in patient enrollment and variability in the number and
types of patients available for clinical trials;
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difficulty in maintaining contact with patients after treatment,
resulting in incomplete data;
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poor effectiveness of product candidates during clinical trials;
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unforeseen safety issues or side effects; and
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governmental or regulatory delays and changes in regulatory
requirements and guidelines.
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If we fail to successfully complete our clinical trials for any
of our product candidates, we may not receive the regulatory
approvals needed to market that product candidate. Therefore,
any failure or delay in commencing or completing these clinical
trials would harm our business materially.
If we are required to conduct additional clinical trials or
other studies with respect to any of our product candidates
beyond those that we initially contemplated, if we are unable to
successfully complete our clinical trials or other studies or if
the results of these trials or studies are not positive or are
only modestly positive, we may be delayed in obtaining marketing
approval for that product candidate, we may not be able to
obtain marketing approval or we may obtain approval for
indications that is not as broad as intended. Our product
development costs will also increase if we experience delays in
testing or approvals. Significant clinical trial delays could
allow our competitors to bring products to market before we do
and impair our ability to commercialize our products or
potential products. If any of this occurs, our business will be
materially harmed.
We
currently have no sales or marketing organization. If we are
unable to establish satisfactory sales and marketing
capabilities, we may not succeed in commercializing
Iluvien.
At present, we have no sales personnel and a limited number of
marketing personnel. In anticipation of receiving FDA approval
for the commercial launch of Iluvien, we plan to begin hiring
additional sales and marketing personnel to establish our own
sales and marketing capabilities in the United States in time
for our anticipated commercial launch of Iluvien. We plan to add
our first sales representatives in the fourth quarter of 2010.
Therefore, at the time of our commercial launch of Iluvien,
assuming regulatory approval by the FDA, our sales and marketing
team will have worked together for only a limited period of time.
We may not be able to establish a direct sales force in a
cost-effective manner or realize a positive return on this
investment. In addition, we will have to compete with other
pharmaceutical and biotechnology
12
companies to recruit, hire, train and retain sales and marketing
personnel. Factors that may inhibit our efforts to commercialize
our products without strategic partners or licensees include:
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our inability to recruit and retain adequate numbers of
effective sales and marketing personnel;
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the inability of sales personnel to obtain access to or persuade
adequate numbers of retinal specialists to prescribe our
products;
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the lack of complementary products to be offered by sales
personnel, which may put us at a competitive disadvantage
relative to companies with more extensive product lines; and
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unforeseen costs and expenses associated with creating an
independent sales and marketing organization.
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If appropriate regulatory approvals are obtained, we intend to
commercialize Iluvien and our other product candidates in
international markets through collaboration arrangements with
third-parties. We have not yet entered into any agreements
related to the marketing of Iluvien or any of our other product
candidates in international markets and we may not be able to
enter into any arrangements with respect to international
collaborations on favorable terms or at all. In addition, these
arrangements could result in lower levels of income to us than
if we marketed our product candidates entirely on our own. If we
are unable to enter into appropriate marketing arrangements for
our product candidates in international markets, we may not be
able to develop an effective international sales force to
successfully commercialize Iluvien and our other product
candidates in international markets. If we fail to enter into
marketing arrangements for our products and are unable to
develop an effective international sales force, our ability to
generate revenue outside of North America would be limited.
If we are not successful in recruiting sales and marketing
personnel or in building a sales and marketing infrastructure or
if we do not successfully enter into appropriate collaboration
arrangements with third-parties, we will have difficulty
commercializing Iluvien and our other product candidates, which
would adversely affect our business, operating results and
financial condition.
In order
to establish our sales and marketing infrastructure, we will
need to grow the size of our organization, and we may experience
difficulties in managing this growth.
As of March 31, 2010, we had 21 employees. As our
development and commercialization plans and strategies develop,
we will need to expand the size of our employee base for
managerial, operational, sales, marketing, financial and other
resources. Future growth would impose significant added
responsibilities on members of management, including the need to
identify, recruit, maintain, motivate and integrate additional
employees. Also, our management may have to divert a
disproportionate amount of its attention away from our
day-to-day activities and devote a substantial amount of time to
managing these growth activities. Our future financial
performance and our ability to commercialize Iluvien and our
other product candidates and compete effectively will depend, in
part, on our ability to effectively manage any future growth.
Iluvien
and our other potential products may not be commercially viable
if we fail to obtain an adequate level of reimbursement for
these products from private insurers, the Medicare program and
other third-party payors which could be affected by the recently
enacted U.S. healthcare reform. The market for our products may
also be limited by the indications for which their use may be
reimbursed or the frequency at which they may be
administered.
The availability and levels of reimbursement by governmental and
other third-party payors affect the market for products such as
Iluvien and others that we may develop. These third-party payors
continually attempt to contain or reduce the costs of health
care by challenging the prices charged for medical products and
services. In the United States, we will need to obtain approvals
for payment for Iluvien from private insurers, including managed
care organizations, and from the Medicare program. In recent
years, through legislative and regulatory actions, the federal
government has made substantial changes to various payment
systems under the Medicare program. Comprehensive reforms to the
U.S. healthcare system were recently enacted, including changes
to the methods for, and amounts of, Medicare reimbursement.
These reforms could significantly reduce payments from Medicare
and Medicaid over the next ten years. Reforms or other changes
13
to these payment systems, including modifications to the
conditions on qualification for payment, bundling payments or
the imposition of enrollment limitations on new providers, may
change the availability, methods and rates of reimbursements
from Medicare, private insurers and other third-party payors for
Iluvien and our other potential products. Some of these changes
and proposed changes could result in reduced reimbursement rates
for Iluvien and our other potential products, which would
adversely affect our business strategy, operations and financial
results.
We expect that private insurers will consider the efficacy, cost
effectiveness and safety of Iluvien in determining whether to
approve reimbursement for Iluvien and at what level. Obtaining
these approvals can be a time consuming and expensive process.
Our business would be materially adversely affected if we do not
receive approval for reimbursement of Iluvien from private
insurers on a timely or satisfactory basis. Although drugs that
are not self-administered are covered by Medicare, the Medicare
program has taken the position that it can decide not to cover
particular drugs if it determines that they are not
reasonable and necessary for Medicare beneficiaries.
Limitations on coverage could also be imposed at the local
Medicare carrier level or by fiscal intermediaries. Our business
could be materially adversely affected if the Medicare program,
local Medicare carriers or fiscal intermediaries were to make
such a determination and deny or limit the reimbursement of
Iluvien. Our business also could be adversely affected if
retinal specialists are not reimbursed by Medicare for the cost
of the procedure in which they administer Iluvien on a basis
satisfactory to the administering retinal specialists. If the
local contractors that administer the Medicare program are slow
to reimburse retinal specialists for Iluvien, the retinal
specialists may pay us more slowly, which would adversely affect
our working capital requirements.
Our business could also be adversely affected if private
insurers, including managed care organizations, the Medicare
program or other reimbursing bodies or payors limit the
indications for which Iluvien will be reimbursed to a smaller
set than we believe it is effective in treating or establish a
limitation on the frequency with which Iluvien may be
administered that is less often than we believe would be
effective.
In some foreign countries, particularly Canada and the countries
of the European Union, the pricing of prescription
pharmaceuticals is subject to governmental control. In Canada,
each province has a publicly funded drug plan with each having
its own formulary citing specific criteria for reimbursement and
prior authorization. Each provincial government except
Québec considers the clinical and cost-effectiveness
recommendations of the Common Drug Review performed by the
Canadian Agency for Drugs and Technologies in Health.
Québec has a separate drug review process that is performed
by its Medication Council. In the European Union, each country
has a different reviewing body that evaluates reimbursement
dossiers submitted by manufacturers of new drugs and then makes
recommendations as to whether or not the drug should be
reimbursed. In these countries, pricing negotiations with
governmental authorities can take 12 months or longer after
the receipt of regulatory approval and product launch. To obtain
reimbursement or pricing approval in some countries, we may be
required to conduct a clinical trial that compares the
cost-effectiveness of our products, including Iluvien, to other
available therapies. If reimbursement for our products is
unavailable, limited in scope or amount, or if pricing is set at
unsatisfactory levels, our business could be materially harmed.
We expect to experience pricing pressures in connection with the
sale of Iluvien and our future products due to the potential
healthcare reforms discussed above, as well as the trend toward
programs aimed at reducing health care costs, the increasing
influence of health maintenance organizations and additional
legislative proposals.
We face
substantial competition, which may result in others discovering,
developing or commercializing products before or more
successfully than we do.
The development and commercialization of new drugs is highly
competitive and the commercial success of Iluvien will depend on
several factors, including, but not limited to, its efficacy and
side effect profile, reimbursement acceptance by private
insurers and Medicare, acceptance of pricing, the development of
our sales and marketing organization, an adequate payment to
physicians for the insertion procedure (based on a
14
cost assigned by the American Medical Association to the
procedure, also known as a CPT code) and our ability to
differentiate Iluvien from our competitors products. We
will face competition from major pharmaceutical companies,
specialty pharmaceutical companies and biotechnology companies
worldwide with respect to Iluvien and any products that we may
develop or commercialize in the future. Our competitors may
develop products or other novel technologies that are more
effective, safer or less costly than any that we are developing.
Our competitors may also obtain FDA or other regulatory approval
for their products more rapidly than we may obtain approval for
ours. The active pharmaceutical ingredient in Iluvien is FA,
which is not protected by currently valid patents. As a result,
our competitors could develop an alternative formulation or
delivery mechanisms to treat diseases of the eye with FA. We do
not have the right to develop and sell pSividas
proprietary delivery device for indications for diseases outside
of the eye or for the treatment of uveitis. Further, our
agreement with pSivida permits pSivida to grant to any other
party the right to use its intellectual property (i) to
treat DME through an incision smaller than that required for a
25-gauge needle, unless using a corticosteroid delivered to the
back of the eye, (ii) to deliver any compound outside the
back of the eye unless it is to treat DME through an incision
required for a 25-gauge or larger needle, or (iii) to
deliver non-corticosteroids to the back of the eye, unless it is
to treat DME through an incision required for a 25-gauge or
larger needle.
There are no ophthalmic drug therapies approved by the FDA for
the treatment of DME. Retinal specialists are currently using
laser photocoagulation and off-label therapies for the treatment
of DME, and may continue to use these therapies in competition
with Iluvien. Additional treatments for DME are in various
stages of preclinical or clinical testing. Later stage products
include Lucentis, a drug sponsored by Genentech, Inc., a
wholly-owned member of the Roche Group and Ozurdex, a drug
sponsored by Allergan, Inc. If approved, these treatments would
also compete with Iluvien. Other laser, surgical or
pharmaceutical treatments for DME may also compete against
Iluvien. These competitive therapies may result in pricing
pressure if we receive marketing approval for Iluvien, even if
Iluvien is otherwise viewed as a preferable therapy.
Many of our competitors have substantially greater financial,
technical and human resources than we have. Additional mergers
and acquisitions in the pharmaceutical and biotechnology
industries may result in even more resources being concentrated
by our competitors. Competition may increase further as a result
of advances made in the commercial applicability of technologies
and greater availability of capital for investment in these
fields.
We
currently do not have any collaborations with third-parties. We
expect to depend on collaborations to develop and commercialize
our products. If we are unable to identify or enter into an
agreement with any material third-party collaborator, if our
collaborations with any such third-party are not scientifically
or commercially successful or if our agreement with any such
third-party is terminated or allowed to expire, we could be
adversely affected financially or our business reputation could
be harmed.
Our business strategy includes entering into collaborations with
corporate and academic collaborators for the research,
development and commercialization of additional product
candidates. We currently do not have any collaborations with
third-parties. Areas in which we anticipate entering into
third-party collaboration arrangements include joint sales and
marketing arrangements for sales and marketing of Iluvien
outside of North America, and future product development
arrangements. If we are unable to identify or enter into an
agreement with any material third-party collaborator we could be
adversely affected financially or our business reputation could
be harmed. Any arrangements we do enter into may not be
scientifically or commercially successful. The termination of
any of these future arrangements might adversely affect our
ability to develop, commercialize and market our products.
The success of our future collaboration arrangements will depend
heavily on the efforts and activities of our collaborators. Our
collaborators will have significant discretion in determining
the efforts and resources that they will apply to these
collaborations. We expect that the risks which we face in
connection with these future collaborations will include the
following:
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our collaboration agreements are expected to be for fixed terms
and subject to termination under various circumstances,
including, in many cases, on short notice without cause;
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we expect to be required in our collaboration agreements not to
conduct specified types of research and development in the field
that is the subject of the collaboration. These agreements may
have the effect of limiting the areas of research and
development that we may pursue, either alone or in cooperation
with third-parties;
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our collaborators may develop and commercialize, either alone or
with others, products and services that are similar to or
competitive with our products which are the subject of their
collaboration with us; and
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our collaborators may change the focus of their development and
commercialization efforts. In recent years there have been a
significant number of mergers and consolidations in the
pharmaceutical and biotechnology industries, some of which have
resulted in the participant companies reevaluating and shifting
the focus of their business following the completion of these
transactions. The ability of our products to reach their
potential could be limited if any of our future collaborators
decreases or fails to increase spending relating to such
products.
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Collaborations with pharmaceutical companies and other
third-parties often are terminated or allowed to expire by the
other party. With respect to our future collaborations, any such
termination or expiration could adversely affect us financially
as well as harm our business reputation.
We may
not be successful in our efforts to expand our portfolio of
products.
A key element of our strategy is to commercialize a portfolio of
new ophthalmic drugs in addition to Iluvien. We are seeking to
do so through our internal research programs and through
licensing or otherwise acquiring the rights to potential new
drugs and drug targets for the treatment of ophthalmic disease.
A significant portion of the research that we are conducting
involves new and unproven technologies. Research programs to
identify new disease targets and product candidates require
substantial technical, financial and human resources whether or
not we ultimately identify any candidates. Our research programs
may initially show promise in identifying potential product
candidates, yet fail to yield product candidates for clinical
development for a number of reasons, including:
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the research methodology used may not be successful in
identifying potential product candidates; or
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potential product candidates may on further study be shown to
have harmful side effects or other characteristics that indicate
they are unlikely to be effective drugs.
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We may be unable to license or acquire suitable product
candidates or products from third-parties for a number of
reasons. In particular, the licensing and acquisition of
pharmaceutical products is a competitive area. A number of more
established companies are also pursuing strategies to license or
acquire products in the ophthalmic field. These established
companies may have a competitive advantage over us due to their
size, cash resources and greater clinical development and
commercialization capabilities. Other factors that may prevent
us from licensing or otherwise acquiring suitable product
candidates include the following:
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we may be unable to license or acquire the relevant technology
on terms that would allow us to make an appropriate return from
the product;
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companies that perceive us to be their competitors may be
unwilling to assign or license their product rights to
us; or
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we may be unable to identify suitable products or product
candidates within our areas of expertise.
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Additionally, it may take greater human and financial resources
to develop suitable potential product candidates through
internal research programs or by obtaining rights than we will
possess, thereby limiting our ability to develop a diverse
product portfolio.
If we are unable to develop suitable potential product
candidates through internal research programs or by obtaining
rights to novel therapeutics from third-parties, our business
will suffer.
16
We may
acquire additional businesses or form strategic alliances in the
future, and we may not realize the benefits of such
acquisitions.
We may acquire additional businesses or products, form strategic
alliances or create joint ventures with third-parties that we
believe will complement or augment our existing business. If we
acquire businesses with promising markets or technologies, we
may not be able to realize the benefit of acquiring such
businesses if we are unable to successfully integrate them with
our existing operations and company culture. We may have
difficulty in developing, manufacturing and marketing the
products of a newly acquired company that enhances the
performance of our combined businesses or product lines to
realize value from expected synergies. We cannot assure that,
following an acquisition, we will achieve the revenues or
specific net income that justifies the acquisition.
We face
the risk of product liability claims and may not be able to
obtain insurance.
Our business exposes us to the risk of product liability claims,
which is inherent in the manufacturing, testing and marketing of
drugs and related products. If the use of one or more of our
products harms people, we may be subject to costly and damaging
product liability claims. We have primary product liability
insurance that covers our clinical trials for a
$5.0 million general aggregate limit and excess product
liability insurance that covers our clinical trials for an
additional $5.0 million general aggregate limit. We intend
to expand our insurance coverage to include the sale of
commercial products if we obtain marketing approval for any of
the products that we may develop. We may not be able to obtain
or maintain adequate protection against potential liabilities.
If we are unable to obtain insurance at acceptable cost or
otherwise protect against potential product liability claims, we
will be exposed to significant liabilities, which may materially
and adversely affect our business and financial position. These
liabilities could prevent or interfere with our product
development and commercialization efforts.
In addition, our business is exposed to the risk of product
liability claims related to our sale and distribution of our
over-the-counter dry eye product prior to its acquisition by
Bausch & Lomb Incorporated in July 2007. Our
primary product liability insurance and excess product liability
insurance policies cover product liability claims related to the
product. To the extent this insurance is insufficient to cover
any product related claims we may be exposed to significant
liabilities, which may materially and adversely affect our
business and financial condition.
If we
lose key management personnel, or if we fail to recruit
additional highly skilled personnel, it will impair our ability
to identify, develop and commercialize product
candidates.
We are highly dependent on principal members of our management
team, including C. Daniel Myers, our President and Chief
Executive Officer, Susan Caballa, our Senior Vice President of
Regulatory Affairs, and Kenneth Green, Ph.D., our Senior
Vice President and Chief Scientific Officer. These executives
each have significant ophthalmic and regulatory industry
experience. The loss of any such executives or any other
principal member of our management team, would impair our
ability to identify, develop and market new products.
In addition, our growth will require us to hire a significant
number of qualified technical, commercial and administrative
personnel. There is intense competition from other companies and
research and academic institutions for qualified personnel in
the areas of our activities. If we cannot continue to attract
and retain, on acceptable terms, the qualified personnel
necessary for the continued development of our business, we may
not be able to sustain our operations or grow.
If our
contract research organizations (CROs), third-party vendors and
investigators do not successfully carry out their duties or if
we lose our relationships with them, our development efforts
with respect to Iluvien or any of our other product candidates
could be delayed.
We are dependent on CROs, third-party vendors and investigators
for preclinical testing and clinical trials related to our
discovery and development efforts with respect to Iluvien or any
of our other product candidates and we will likely continue to
depend on them to assist in our future discovery and development
efforts. These parties are not our employees and we cannot
control the amount or timing of resources that they devote to
our
17
programs. If they fail to devote sufficient time and resources
to our development programs with respect to Iluvien or any of
our other product candidates or if their performance is
substandard, it will delay the development and commercialization
of our product candidates. The parties with which we contract
for execution of clinical trials play a significant role in the
conduct of the trials and the subsequent collection and analysis
of data. Their failure to meet their obligations could adversely
affect clinical development of our product candidates. Moreover,
these parties may also have relationships with other commercial
entities, some of which may compete with us. If they assist our
competitors, it could harm our competitive position.
If we lose our relationship with any one or more of these
parties, we could experience a significant delay in identifying
another comparable provider and contracting for its services. We
may be unable to retain an alternative provider on reasonable
terms, if at all. Even if we locate an alternative provider,
this provider may need additional time to respond to our needs
and may not provide the same type or level of service as the
original provider. In addition, any provider that we retain will
be subject to current Good Laboratory Practices (cGLP) and
similar foreign standards, and we do not have control over
compliance with these regulations by these providers.
Consequently, if these practices and standards are not adhered
to by these providers, the development and commercialization of
our product candidates could be delayed.
Our
products could be subject to restrictions or withdrawal from the
market and we may be subject to penalties if we fail to comply
with regulatory requirements, or if we experience unanticipated
problems with our products, when and if any of them is
approved.
Any product for which we obtain marketing approval, along with
the manufacturing processes, post-approval pharmacovigilance,
advertising and promotional activities for such product, will be
subject to continual requirements, review and periodic
inspections by the FDA and other regulatory bodies. Even if
regulatory approval of a product is granted, the approval may be
subject to limitations on the indicated uses for which the
product may be marketed or to the conditions of approval, or
contain requirements for costly post-marketing testing and
surveillance to monitor the safety or efficacy of the product.
Later discovery of previously unknown problems with our
products, manufacturer or manufacturing processes, or failure to
comply with regulatory requirements, may result in:
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restrictions on such products or manufacturing processes;
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withdrawal of the products from the market;
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voluntary or mandatory recall;
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fines;
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suspension of regulatory approvals;
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product seizure; and
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injunctions or the imposition of civil or criminal penalties.
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We may be slow to adapt, or we may never adapt, to changes in
existing regulatory requirements or adoption of new regulatory
requirements or policies.
Failure
to obtain regulatory approval in foreign jurisdictions would
prevent us from marketing our products abroad.
We intend to market our products outside North America with one
or more commercial partners. In order to market our products in
foreign jurisdictions, we will be required to obtain separate
regulatory approvals and comply with numerous and varying
regulatory requirements. The approval procedure varies among
countries and jurisdictions and can involve additional testing,
and the time required to obtain approval may differ from that
required to obtain FDA approval. Additionally, the foreign
regulatory approval process may include all of the risks
associated with obtaining FDA approval. For all of these
reasons, we may not obtain foreign regulatory approvals on a
timely basis, if at all. Approval by the FDA does not ensure
approval by regulatory authorities in other countries or
jurisdictions, and approval by one foreign regulatory authority
does not ensure approval by regulatory authorities in other
foreign countries or jurisdictions or by the FDA. We may not be
18
able to file for regulatory approvals and may not receive
necessary approvals to commercialize our products in any market.
The failure to obtain these approvals could harm our business
materially.
Our
product candidates may cause undesirable side effects or have
other properties that could delay or prevent their regulatory
approval or limit their marketability.
Undesirable side effects caused by our product candidates could
interrupt, delay or halt clinical trials and could result in the
denial of regulatory approval by the FDA or other regulatory
authorities for any or all targeted indications, and in turn
prevent us from commercializing our product candidates and
generating revenues from their sale. Possible side effects of
Iluvien include, but are not limited to, extensive blurred
vision, cataracts, eye irritation, eye pain, increased IOP,
which may increase the risk of glaucoma, ocular discomfort,
reduced visual acuity, visual disturbance, endophthalmitis, or
long-standing vitreous floaters.
In addition, if any of our product candidates receives marketing
approval and we or others later identify undesirable side
effects caused by the product, we could face one or more of the
following consequences:
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regulatory authorities may require the addition of labeling
statements, such as a black box warning or a
contraindication;
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regulatory authorities may withdraw their approval of the
product;
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we may be required to change the way that the product is
administered, conduct additional clinical trials or change the
labeling of the product; and
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our reputation may suffer.
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Any of these events could prevent us from achieving or
maintaining market acceptance of the affected product or could
substantially increase the costs and expenses of commercializing
the product candidate, which in turn could delay or prevent us
from generating significant revenues from its sale.
Risks
Related to Intellectual Property and Other Legal
Matters
If we or
our licensors are unable to obtain and maintain protection for
the intellectual property incorporated into our products, the
value of our technology and products will be adversely
affected.
Our success will depend in large part on our ability or the
ability of our licensors to obtain and maintain protection in
the United States and other countries for the intellectual
property incorporated into our products. The patent situation in
the field of biotechnology and pharmaceuticals generally is
highly uncertain and involves complex legal and scientific
questions. We or our licensors may not be able to obtain
additional issued patents relating to our technology. Our
success will depend in part on the ability of our licensors to
obtain, maintain (including making periodic filings and
payments) and enforce patent protection for their intellectual
property, in particular, those patents to which we have secured
exclusive rights. Under our license with pSivida, pSivida
controls the filing, prosecution and maintenance of all patents.
Our licensors may not successfully prosecute or continue to
prosecute the patent applications to which we are licensed. Even
if patents are issued in respect of these patent applications,
we or our licensors may fail to maintain these patents, may
determine not to pursue litigation against entities that are
infringing these patents, or may pursue such litigation less
aggressively than we ordinarily would. Without protection for
the intellectual property that we own or license, other
companies might be able to offer substantially identical
products for sale, which could adversely affect our competitive
business position and harm our business prospects. Moreover, FA
is an off-patent active ingredient that is commercially
available in several forms including the extended release ocular
implant Retisert.
Even if issued, patents may be challenged, narrowed,
invalidated, or circumvented, which could limit our ability to
stop competitors from marketing similar products or limit the
length of term of patent protection that we may have for our
products. In addition, our patents and our licensors
patents may not afford us protection against competitors with
similar technology.
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Litigation
or third-party claims of intellectual property infringement
would require us to divert resources and may prevent or delay
our development, regulatory approval or commercialization of our
product candidates.
We may not have rights under some patents or patent applications
that may be infringed by our products or potential products.
Third-parties may now or in the future own or control these
patents and patent applications in the United States and abroad.
These third-parties could bring claims against us or our
collaborators that would cause us to incur substantial expenses
or divert substantial employee resources from our business and,
if successful, could cause us to pay substantial damages or
prevent us from developing one or more product candidates.
Further, if a patent infringement suit were brought against us
or our collaborators, we or they could be forced to stop or
delay research, development, manufacturing or sales of the
product or product candidate that is the subject of the suit.
Several issued and pending U.S. patents claiming methods and
devices for the treatment of eye diseases, including through the
use of steroids, implants and injections into the eye, purport
to cover aspects of Iluvien. For example, one of our potential
competitors holds issued and pending U.S. patents with claims
covering devices for injecting an ocular implant into a
patients eye similar to the Iluvien inserter. There is
also an issued U.S. patent with claims covering implanting a
steroidal anti-inflammatory agent to treat an
inflammation-mediated condition of the eye. If these or any
other patents were held by a court of competent jurisdiction to
be valid and to cover aspects of Iluvien, then the owners of
such patents would be able to block our ability to commercialize
Iluvien unless and until we obtain a license under such patents
(which license might require us to pay royalties or grant a
cross-license to one or more patents that we own), until such
patents expire or unless we are able to redesign our product to
avoid any such valid patents.
As a result of patent infringement claims, or in order to avoid
potential claims, we or our collaborators may choose to seek, or
be required to seek, a license from the third-party and would
most likely be required to pay license fees or royalties or
both. These licenses may not be available on acceptable terms,
or at all. Even if we or our collaborators were able to obtain a
license, the rights may be nonexclusive, which would give our
competitors access to the same intellectual property.
Ultimately, we could be prevented from commercializing a
product, or be forced to cease some aspect of our business
operations if, as a result of actual or threatened patent
infringement claims, we or our collaborators are unable to enter
into licenses on acceptable terms. This could harm our business
significantly.
There has been substantial litigation and other proceedings
regarding patent and other intellectual property rights in the
pharmaceutical and biotechnology industries. In addition to
infringement claims against us, we may become a party to other
patent litigation and other proceedings, including interference
proceedings declared by the U.S. Patent and Trademark Office and
opposition proceedings in the European Patent Office, regarding
intellectual property rights with respect to our products and
technology. The cost to us of any litigation or other
proceeding, regardless of its merit, even if resolved in our
favor, could be substantial. Some of our competitors may be able
to sustain the costs of such litigation or proceedings more
effectively than we can because of their substantially greater
financial resources. Uncertainties resulting from the initiation
and continuation of patent litigation or other proceedings could
have a material adverse effect on our ability to compete in the
marketplace. Intellectual property litigation and other
proceedings may, regardless of their merit, also absorb
significant management time and employee resources.
If we
fail to comply with our obligations in the agreements under
which we license development or commercialization rights to
products or technology from third-parties, we could lose license
rights that are important to our business.
Our licenses are important to our business, and we expect to
enter into additional licenses in the future. We hold a license
from pSivida under intellectual property relating to Iluvien.
This license imposes various commercialization, milestone
payment, profit sharing, insurance and other obligations on us.
We also hold a license from Dainippon Sumitomo Pharma Co., Ltd.
under patents relating to Iluvien. This license imposes a
milestone payment and other obligations on us. If we fail to
comply with these obligations, the licensor may
20
have the right to terminate the applicable license, in which
event we would not be able to market products, such as Iluvien,
that may be covered by such license.
If we are
unable to protect the confidentiality of our proprietary
information and know-how, the value of our technology and
products could be adversely affected.
In addition to patented technology, we rely upon unpatented
proprietary technology, processes, trade secrets and know-how.
Any involuntary disclosure or misappropriation by third-parties
of our confidential or proprietary information could enable
competitors to quickly duplicate or surpass our technological
achievements, thus eroding our competitive position in our
market. We seek to protect confidential or proprietary
information in part by confidentiality agreements with our
employees, consultants and third-parties. While we require all
of our employees, consultants, advisors and any third-parties
who have access to our proprietary know-how, information and
technology to enter into confidentiality agreements, we cannot
be certain that this know-how, information and technology will
not be disclosed or that competitors will not otherwise gain
access to our trade secrets or independently develop
substantially equivalent information and techniques. These
agreements may be terminated or breached, and we may not have
adequate remedies for any such termination or breach.
Furthermore, these agreements may not provide meaningful
protection for our trade secrets and know-how in the event of
unauthorized use or disclosure. To the extent that any of our
staff were previously employed by other pharmaceutical or
biotechnology companies, those employers may allege violations
of trade secrets and other similar claims in relation to their
drug development activities for us.
If our
efforts to protect the proprietary nature of the intellectual
property related to our products are not adequate, we may not be
able to compete effectively in our markets.
The strength of our patents in the biotechnology and
pharmaceutical field involves complex legal and scientific
questions and can be uncertain. In addition to the rights we
have licensed from pSivida relating to our product candidates,
we rely upon intellectual property we own relating to our
products, including patents, patent applications and trade
secrets. As of April 16, 2010, we owned one pending
non-provisional U.S. utility patent application, one issued U.S.
design patent and one patent Cooperation Treaty Application,
relating to our inserter system for Iluvien. Our patent
applications may be challenged or fail to result in issued
patents and our existing or future patents may be too narrow to
prevent third-parties from developing or designing around these
patents.
As of April 16, 2010, the patent rights relating to Iluvien
licensed to us from pSivida include three U.S. patents that
expire between March 2019 and April 2020 and counterpart filings
to these patents in a number of other jurisdictions. No patent
term extension will be available for any of these U.S. patents
or any of our licensed U.S. pending patent applications. After
these patents expire in April 2020, we will not be able to block
others from marketing FA in an insert similar to Iluvien in the
U.S. Moreover, it is possible that a third-party could
successfully challenge the scope (i.e., whether a patent is
infringed), validity and enforceability of our licensed patents
prior to patent expiration and obtain approval to market a
competitive product.
Further, the patent applications that we license or have filed
may fail to result in issued patents. Some claims in pending
patent applications filed or licensed by us have been rejected
by patent examiners. These claims may need to be amended and,
even after amendment, a patent may not be permitted to issue.
Further, the existing or future patents to which we have rights
based on our agreement with pSivida may be too narrow to prevent
third-parties from developing or designing around these patents.
Additionally, we may lose our rights to the patents and patent
applications we license in the event of a breach or termination
of the license agreement. Manufacturers may also seek to obtain
approval to sell a generic version of Iluvien prior to the
expiration of the relevant licensed patents. If the sufficiency
of the breadth or strength of protection provided by the patents
we license with respect to Iluvien or the patents we pursue
related to another product candidate is threatened, it could
dissuade companies from collaborating with us to develop, and
threaten our ability to commercialize Iluvien and our other
product candidates. Further, if we encounter delays in our
clinical trials, the period of time during which we could market
Iluvien and our other product candidates under patent protection
would be reduced.
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We rely on trade secret protection and confidentiality
agreements to protect certain proprietary know-how that is not
patentable, for processes for which patents are difficult to
enforce and for any other elements of our development processes
with respect to Iluvien and our other product candidates that
involve proprietary know-how, information and technology that is
not covered by patent applications. While we require all of our
employees, consultants, advisors and any third-parties who have
access to our proprietary know-how, information and technology
to enter into confidentiality agreements, we cannot be certain
that this know-how, information and technology will not be
disclosed or that competitors will not otherwise gain access to
our trade secrets or independently develop substantially
equivalent information and techniques. Further, the laws of some
foreign countries do not protect proprietary rights to the same
extent as the laws of the United States. As a result, we may
encounter significant problems in protecting and defending our
intellectual property both in the United States and abroad. If
we are unable to protect or defend the intellectual property
related to our technologies, we will not be able to establish or
maintain a competitive advantage in our market.
Third-party
claims of intellectual property infringement may prevent or
delay our discovery, development and commercialization efforts
with respect to Iluvien and our other product
candidates.
Our commercial success depends in part on avoiding infringement
of the patents and proprietary rights of third-parties.
Third-parties may assert that we are employing their proprietary
technology without authorization. In addition, at least several
issued and pending U.S. patents claiming methods and
devices for the treatment of eye diseases, including through the
use of steroids, implants and injections into the eye, purport
to cover aspects of Iluvien.
Although we are not currently aware of any litigation or other
proceedings or third-party claims of intellectual property
infringement related to Iluvien, the pharmaceutical industry is
characterized by extensive litigation regarding patents and
other intellectual property rights. Other parties may in the
future allege that our activities infringe their patents or that
we are employing their proprietary technology without
authorization. We may not have identified all the patents,
patent applications or published literature that affect our
business either by blocking our ability to commercialize our
product, by preventing the patentability of one or more aspects
of our products or those of our licensors or by covering the
same or similar technologies that may affect our ability to
market our product. We cannot predict whether we would be able
to obtain a license on commercially reasonable terms, if at all.
Any inability to obtain such a license under the applicable
patents on commercially reasonable terms, or at all, may have a
material adverse effect on our ability to commercialize Iluvien
or other products until such patents expire.
In addition, third-parties may obtain patents in the future and
claim that use of our product candidates or technologies
infringes upon these patents. Furthermore, parties making claims
against us may obtain injunctive or other equitable relief,
which could effectively block our ability to further develop and
commercialize one or more of our product candidates. Defense of
these claims, regardless of their merit, would involve
substantial litigation expense and would be a substantial
diversion of employee resources from our business. In the event
of a successful claim of infringement against us, we may have to
pay substantial damages, obtain one or more licenses from
third-parties or pay royalties, or we may be enjoined from
further developing or commercializing our product candidates and
technologies. In addition, even in the absence of litigation, we
may need to obtain licenses from third-parties to advance our
research or allow commercialization of our product candidates,
and we have done so from time to time. We may fail to obtain
future licenses at a reasonable cost or on reasonable terms, if
at all. In that event, we may be unable to further develop and
commercialize one or more of our product candidates, which could
harm our business significantly.
We may
become involved in lawsuits to protect or enforce our patents or
the patents of our licensors, which could be expensive, time
consuming and unsuccessful.
Competitors may infringe our patents or the patents of our
licensors. To counter infringement or unauthorized use, we may
be required to file infringement claims, which can be expensive
and time consuming. In addition, in an infringement proceeding,
a court may decide that a patent of ours or our licensors is not
valid or is unenforceable, or may refuse to stop the other party
from using the technology at issue on the grounds that our
patents do not cover the technology in question. An adverse
result in any
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litigation or defense proceedings could put one or more of our
patents at risk of being invalidated or interpreted narrowly and
could put our patent applications at risk of not issuing.
Interference proceedings brought by the U.S. Patent and
Trademark Office may be necessary to determine the priority of
inventions with respect to our patents and patent applications
or those of our collaborators or licensors. An unfavorable
outcome could require us to cease using the technology or to
attempt to license rights to it from the prevailing party. Our
business could be harmed if a prevailing party does not offer us
a license on terms that are acceptable to us. Litigation or
interference proceedings may fail and, even if successful, may
result in substantial costs and distraction of our management
and other employees. We may not be able to prevent, alone or
with our licensors, misappropriation of our proprietary rights,
particularly in countries where the laws may not protect those
rights as fully as in the United States.
Furthermore, because of the substantial amount of discovery
required in connection with intellectual property litigation,
there is a risk that some of our confidential information could
be compromised by disclosure during this type of litigation. In
addition, there could be public announcements of the results of
hearings, motions or other interim proceedings or developments.
If securities analysts or investors perceive these results to be
negative, it could have a substantial adverse effect on the
price of our common stock.
Product
liability lawsuits could divert our resources, result in
substantial liabilities and reduce the commercial potential of
our products.
The risk that we may be sued on product liability claims is
inherent in the development of pharmaceutical products. We face
a risk of product liability exposure related to the testing of
our product candidates in clinical trials and will face even
greater risks upon any commercialization by us of our product
candidates. We believe that we may be at a greater risk of
product liability claims relative to other pharmaceutical
companies because our products are inserted into the eye, and it
is possible that we may be held liable for eye injuries of
patients who receive our product. These lawsuits may divert our
management from pursuing our business strategy and may be costly
to defend. In addition, if we are held liable in any of these
lawsuits, we may incur substantial liabilities and may be forced
to limit or forego further commercialization of one or more of
our products. Although we maintain primary product liability
insurance and excess product liability insurance that cover our
clinical trials, our aggregate coverage limit under these
insurance policies is $10.0 million, and while we believe
this amount of insurance is sufficient to cover our product
liability exposure, these limits may not be high enough to fully
cover potential liabilities. In addition, we may not be able to
obtain or maintain sufficient insurance coverage at an
acceptable cost or otherwise to protect against potential
product liability claims, which could prevent or inhibit the
commercial production and sale of our products.
Legislative
or regulatory reform of the health care system in the United
States and foreign jurisdictions may affect our ability to sell
our products profitably.
The U.S. government and other governments have shown significant
interest in pursuing healthcare reform. Any government-adopted
reform measures could adversely impact the pricing of healthcare
products and services in the U.S. or internationally and
the amount of reimbursement available from governmental agencies
or other third party payors. The continuing efforts of the
United States and foreign governments, insurance companies,
managed care organizations and other payors of health care
services to contain or reduce health care costs may adversely
affect our ability to set prices for our products which we
believe are fair, and our ability to generate revenues and
achieve and maintain profitability.
New laws, regulations and judicial decisions, or new
interpretations of existing laws, regulations and decisions,
that relate to healthcare availability, methods of delivery or
payment for products and services, or sales, marketing or
pricing, may limit our potential revenue. The pricing and
reimbursement environment may change in the future and become
more challenging due to several reasons, including policies
advanced by the current executive administration in the U.S.,
new healthcare legislation or fiscal challenges faced by
government health administration authorities. Specifically, in
both the U.S. and some foreign jurisdictions, there have
been a number of legislative and regulatory proposals to change
the health care system in ways that could affect our ability to
sell our products profitably. In the U.S., changes in federal
health care policy are
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being considered by Congress this year. Some of these proposed
reforms could result in reduced reimbursement rates for Iluvien
and our other potential products, which would adversely affect
our business strategy, operations and financial results.
In addition, the Medicare Prescription Drug Improvement and
Modernization Act of 2003 reforms the way Medicare will cover
and reimburse for pharmaceutical products. This legislation
could decrease the coverage and price that we may receive for
our products. Other third-party payors are increasingly
challenging the prices charged for medical products and
services. It will be time consuming and expensive for us to go
through the process of seeking reimbursement from Medicare and
private payors. 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
profitable basis. Further federal and state proposals and health
care reforms are likely which could limit the prices that can be
charged for the product candidates that we develop and may
further limit our commercial opportunity. Our results of
operations could be materially adversely affected by the
proposed healthcare reforms, by the Medicare prescription drug
coverage legislation, by the possible effect of such current or
future legislation on amounts that private insurers will pay and
by other health care reforms that may be enacted or adopted in
the future.
In September 2007, the Food and Drug Administration Amendments
Act of 2007 was enacted, giving the FDA enhanced post-marketing
authority, including the authority to require post-marketing
studies and clinical trials, labeling changes based on new
safety information, and compliance with risk evaluations and
mitigation strategies approved by the FDA. The FDAs
exercise of this authority could result in delays or increased
costs during product development, clinical trials and regulatory
review, increased costs to ensure compliance with post-approval
regulatory requirements, and potential restrictions on the sale
and/or
distribution of approved products.
In some foreign countries, including the European Union and
Canada, the pricing of prescription pharmaceuticals is subject
to governmental control. In these countries, pricing
negotiations with governmental authorities can take six to
12 months or longer after the receipt of regulatory
approval and product launch. To obtain reimbursement or pricing
approval in some countries, we may be required to conduct a
clinical trial that compares the cost-effectiveness of our
product candidate to other available therapies. Our business
could be materially harmed if reimbursement of our products is
unavailable or limited in scope or amount or if pricing is set
at unsatisfactory levels.
If we use
hazardous and biological materials in a manner that causes
injury or violates applicable law, we may be liable for
damages.
Our research and development activities involve the controlled
use of potentially hazardous substances, including chemical and
biological materials. In addition, our operations produce
hazardous waste products. Federal, state and local laws and
regulations in both the United States and Canada govern the use,
manufacture, storage, handling and disposal of hazardous
materials. Although we believe that our procedures for use,
handling, storing and disposing of these materials comply with
legally prescribed standards, we may incur significant
additional costs to comply with applicable laws in the future.
Also, even if we are in compliance with applicable laws, we
cannot completely eliminate the risk of contamination or injury
resulting from hazardous materials and we may incur liability as
a result of any such contamination or injury. In the event of an
accident, we could be held liable for damages or penalized with
fines, and the liability could exceed our resources. We do not
have any insurance for liabilities arising from hazardous
materials. Compliance with applicable environmental laws and
regulations is expensive, and current or future environmental
regulations may impair our research, development and production
efforts, which could harm our business, operating results and
financial condition.
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Risks
Relating to Our Financial Results and Need for
Financing
We have
incurred operating losses in each year since our inception and
expect to continue to incur substantial and increasing losses
for the foreseeable future.
We have a limited operating history. We are not currently
generating revenues and we cannot estimate with precision the
extent of our future losses. We do not currently have any
products that have been approved for commercial sale and we may
never generate revenue from selling products or achieve
profitability. We expect to continue to incur substantial and
increasing losses through the anticipated commercial launch of
Iluvien as early as the first quarter of 2011, particularly as
we increase our research, clinical development, administrative
and sales and marketing activities. As a result, we are
uncertain when or if we will achieve profitability and, if so,
whether we will be able to sustain it. As of December 31,
2009, we have accumulated a net deficit of $171.9 million.
Our ability to achieve revenue and profitability is dependent on
our ability to complete the development of our product
candidates, obtain necessary regulatory approvals, and have our
products manufactured and marketed. We cannot assure you that we
will be profitable even if we successfully commercialize our
products. Failure to become and remain profitable may adversely
affect the market price of our common stock and our ability to
raise capital and continue operations.
Fluctuations
in our quarterly operating results and cash flows could
adversely affect the price of our common stock.
We expect our operating results and cash flows to be subject to
quarterly fluctuations. The revenues we generate, if any, and
our operating results will be affected by numerous factors,
including, but not limited to:
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the commercial success of our product candidates;
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the emergence of products that compete with our product
candidates;
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the status of our preclinical and clinical development programs;
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variations in the level of expenses related to our existing
product candidates or preclinical and clinical development
programs;
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execution of collaborative, licensing or other arrangements, and
the timing of payments received or made under those arrangements;
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any intellectual property infringement lawsuits to which we may
become a party; and
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regulatory developments affecting our product candidates or
those of our competitors,
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If our quarterly operating results fall below the expectations
of investors or securities analysts, the price of our common
stock could decline substantially. Furthermore, any quarterly
fluctuations in our operating results and cash flows may, in
turn, cause the price of our stock to fluctuate substantially.
We believe that quarterly comparisons of our financial results
are not necessarily meaningful and should not be relied upon as
an indication of our future performance.
We may
need additional financing in the event that we do not receive
regulatory approval for Iluvien or the approval is delayed or,
if approved, the future sales of Iluvien do not generate
sufficient revenues to fund our operations. This financing may
be difficult to obtain.
Since the inception of our company, we have funded our
operations through the private placement of common stock,
preferred stock and convertible debt, as well as by the sale of
certain assets of the non-prescription business in which we were
previously engaged. As of December 31, 2009, we had
$4.9 million in cash and cash equivalents. Including the
January 2010 receipt of $10.0 million in proceeds from the
exercise of outstanding
Series C-1
warrants and a $4.0 million option payment from Bausch
& Lomb Incorporated upon the exercise by Bausch & Lomb
Incorporated of its option to extend the period during which it
may continue to develop an allergy product acquired from us in
2006 by two years; we had $18.9 million in cash and cash
equivalents which we believe is sufficient to fund our
operations into September 2010, but not beyond. Our need for
additional financing, and current lack of a commercial product
raise substantial doubt about our ability to continue as a going
concern. On a pro forma as adjusted basis, (assuming an initial
public offering price of $16.00 per share, which is the midpoint
of the range listed on the cover page of the
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prospectus) as of December 31, 2009 we expect to have
approximately $87.0 million in cash and cash equivalents
which we believe is sufficient to fund our operations through
the projected commercialization of Iluvien as early as the first
quarter of 2011. However, we cannot be sure that this offering
will be completed, that Iluvien will be approved by the FDA in
the fourth quarter of 2010 or that, if approved, future sales of
Iluvien will generate revenues sufficient to fund our operations
beyond the first quarter of 2011, or ever. In the event
additional financing is needed, we may seek to fund our
operations through the sale of equity securities, strategic
collaboration agreements and debt financing. We cannot be sure
that additional financing from any of these sources will be
available when needed or that, if available, the additional
financing will be obtained on terms favorable to us or our
stockholders. If we raise additional funds by issuing equity
securities, substantial dilution to existing stockholders would
likely result and the terms of any new equity securities may
have a preference over our common stock. If we attempt to raise
additional funds through strategic collaboration agreements and
debt financing, we may not be successful in obtaining
collaboration agreements, or in receiving milestone or royalty
payments under those agreements, or the terms of the debt may
involve significant cash payment obligations as well as
covenants and specific financial ratios that may restrict our
ability to commercialize our product candidates or operate as a
business.
Risks
Related to this Offering
Our
existing stockholders will have the ability to control the
outcome of matters submitted for stockholder approval and may
have interests that differ from those of our other
stockholders.
After this offering, our existing stockholders, which will
include certain executive officers, key employees and directors
and their affiliates, will beneficially own approximately 80.33%
of our outstanding common stock (approximately 78.03% if the
underwriters option to purchase additional shares is
exercised in full) and will have the ability to control all
matters requiring stockholder approval, including the election
of directors. As a result, our existing stockholders would have
the power to prevent a change of control in our company. The
interests of our existing stockholders may differ from the
interests of our stockholders who purchased their shares of our
common stock in this offering, and this concentration of voting
power may have the affect of delaying or impeding actions that
could be beneficial to you, including actions that may be
supported by our board of directors. See Principal
Stockholders for additional information regarding the
ownership of our outstanding stock by our executive officers,
directors and their affiliates.
An active
trading market for our common stock may not develop.
Prior to this offering, there has been no public market for our
common stock. Although we anticipate that our common stock will
be approved for listing on the Nasdaq Global Market (Nasdaq), an
active trading market for our shares may never develop or be
sustained following this offering. If the market does not
develop or is not sustained, it may be difficult for you to sell
your shares of common stock at a price that is attractive to you
or at all. In addition, an inactive market may impair our
ability to raise capital by selling shares and may impair our
ability to acquire other companies or technologies by using our
shares as consideration, which, in turn, could materially
adversely affect our business.
The price
of our common stock may be volatile and fluctuate substantially,
which could result in substantial losses for investors
purchasing shares in this offering.
The initial public offering price for the shares of our common
stock sold in this offering will be determined by negotiation
between the representatives of the underwriters and us. This
price may not reflect the market price of our common stock
following this offering. Investors may not be able to sell their
common stock at or above the initial public offering price. In
addition, the market price of our common stock is likely to be
highly volatile and may fluctuate substantially due to factors
including the following (in addition to the other risk factors
described in this section):
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actual or anticipated fluctuations in our results of operations;
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changes in, or our failure to meet, securities analysts
expectations;
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conditions and trends in the markets we serve;
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26
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announcements of significant new services or solutions by us or
our competitors, including technological innovations;
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additions to or changes in key personnel;
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the commencement or outcome of litigation;
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changes in market valuation or earnings of our competitors;
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the trading volume of our common stock;
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future sales of our equity securities;
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changes in the estimation of the future size and growth rate of
our markets;
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legislation or regulatory policies, practices or
actions; and
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general economic conditions.
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In addition, the stock markets, and in particular Nasdaq, have
experienced extreme price and volume fluctuations that have
affected and continue to affect the market prices of equity
securities of many pharmaceutical companies. These broad market
and industry factors may materially harm the market price
irrespective of our operating performance. As a result of these
factors, after this offering you might be unable to resell your
shares at or above the initial public offering price. In the
past, following periods of volatility in the overall market and
the market price of a companys securities, securities
class action litigation has often been instituted against these
companies. This litigation, if instituted against us, could
result in substantial costs and a diversion of our
managements attention and resources.
We
currently do not intend to pay dividends on our common stock
and, consequently, your only opportunity to achieve a return on
your investment is if the price of our common stock
appreciates.
Following the completion of this offering, we do not anticipate
that we will pay any cash dividends on shares of our common
stock for the foreseeable future. Any determination to pay
dividends in the future will be at the discretion of our board
of directors and will depend on results of operations, financial
condition, contractual restrictions, restrictions imposed by
applicable law and other factors our board of directors deems
relevant. Accordingly, if you purchase shares in this offering,
realization of a gain on your investment will depend on the
appreciation of the price of our common stock, which may never
occur. Investors seeking cash dividends in the foreseeable
future should not purchase our common stock. See Dividend
Policy for additional information.
The
actual or possible sale of our shares by our existing
stockholders, who will beneficially own approximately 80.33% of
our outstanding common stock following this offering, or by
others could depress or reduce the market price of our common
stock, or cause our shares of common stock to trade below the
prices at which they would otherwise trade, or impede our
ability to raise future capital.
The market price of our common stock could drop as a result of
sales in the market by our existing stockholders of substantial
amounts of our common stock after this offering or the
perception that these sales could occur. These factors also
could make it more difficult for us to raise funds through
future offerings of our common stock.
In conjunction with this offering, our officers, directors and
holders of substantially all of our common stock have entered
into
lock-up
agreements with the underwriters under which they will agree not
to sell or otherwise dispose of any shares of our common stock
for 180 days after the completion of this offering, subject
to certain exceptions, without the written consent of Credit
Suisse Securities (USA) LLC and Citigroup Global Markets Inc.
After these
lock-up
agreements expire, the shares subject to these lock-up
agreements and not sold in this offering will be eligible for
sale in the public market, subject in some cases to volume
27
limitations and manner of sale requirements. These factors
could also make it difficult for us to raise additional capital
by selling stock. See Shares Eligible for Future
Sale for additional information.
If you
purchase shares of common stock sold in this offering, you will
experience immediate and substantial dilution.
If you purchase shares of our common stock in this offering, you
will experience immediate and substantial dilution of
$13.31 per share (assuming the common stock is offered at
$16.00 per share, the mid-point of the range set forth on the
cover page of the prospectus) because the price that you pay
will be substantially greater than the net tangible book value
per share of the shares you acquire based on the net tangible
book deficit per share as of December 31, 2009. This
dilution is due in large part to the fact that our earlier
investors paid substantially less than the initial public
offering price when they purchased their shares. You will
experience additional dilution upon the exercise of stock
options by employees or directors to purchase common stock under
our equity incentive plans. As of December 31, 2009, we had
options outstanding to purchase 2,225,778 shares of our
common stock with a weighted average exercise price of $2.14 per
share. In addition, as of December 31, 2009 there were
warrants outstanding to purchase 248,181 shares of our
common stock with a weighted average exercise price of $3.48 per
share. See Dilution for additional information.
Future
sales and issuances of our equity securities or rights to
purchase our equity securities, including pursuant to our equity
incentive plans, would result in additional dilution of the
percentage ownership of our stockholders and could cause our
stock price to fall.
To the extent we raise additional capital by issuing equity
securities, our stockholders may experience substantial
dilution. We may sell common stock, convertible securities or
other equity securities in one or more transactions at prices
and in a manner we determine from time to time. If we sell
common stock, convertible securities or other equity securities
in more than one transaction, investors may be further diluted
by subsequent sales. Such sales may also result in material
dilution to our existing stockholders, and new investors could
gain rights superior to existing stockholders.
Pursuant to our 2010 Equity Incentive Plan, our board of
directors is authorized to grant stock options to our employees,
directors and consultants. The number of shares available for
future grant under our 2010 Equity Incentive Plan increases each
year by an amount equal to the lesser of 4% of all shares of our
capital stock outstanding as of January 1st of each
year, 2,000,000 shares, or as determined by our board of
directors.
All of the shares of common stock sold in our initial public
offering will be freely tradable without restrictions or further
registration under the Securities Act, as amended, except for
any shares purchased by our affiliates as defined in
Rule 144 under the Securities Act. Rule 144 defines an
affiliate as a person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is
under common control with, us and would include persons such as
our directors and executive officers.
Our
management will have broad discretion over the use of the net
proceeds we receive in this offering and might not apply the
proceeds in ways that increase the value of your
investment.
Our management will have broad discretion to use the net
proceeds from this offering, and you will be relying on the
judgment of our management regarding the application of these
proceeds. They might not apply the net proceeds of this offering
in ways that increase the value of your investment. We expect to
use the net proceeds from this offering primarily to complete
the development and registration of Iluvien for DME, to repay
indebtedness and make certain milestone payments to pSivida, to
commence the commercial launch of Iluvien, to continue to
develop our product pipeline and for working capital and other
general corporate purposes. Our management might not be able to
yield any return on the investment and use of these net
proceeds. You will not have the opportunity to influence our
decisions on how to use the proceeds.
28
Anti-takeover
provisions in our charter and bylaws and in Delaware law could
prevent or delay acquisition bids for us that you might consider
favorable and could entrench current management.
We are a Delaware corporation and the anti-takeover provisions
of the Delaware General Corporation Law may deter, delay or
prevent a change in control by prohibiting us from engaging in a
business combination with an interested stockholder for a period
of three years after the person becomes an interested
stockholder, even if a change in control would be beneficial to
our existing stockholders. See Description of Capital
Stock Anti-Takeover Effects of Provisions of Our
Amended and Restated Certificate of Incorporation, Bylaws and
Delaware Law for additional information. In addition, our
restated certificate of incorporation and bylaws may discourage,
delay or prevent a change in our management or control over us
that stockholders may consider favorable. Our restated
certificate of incorporation and bylaws, which will be in effect
as of the closing of this offering:
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Authorize the issuance of blank check preferred
stock that could be issued by our board of directors to thwart a
takeover attempt;
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Do not provide for cumulative voting in the election of
directors, which would allow holders of less than a majority of
our outstanding common stock to elect some directors;
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Establish a classified board of directors, as a result of which
the successors to the directors whose terms have expired will be
elected to serve from the time of election and qualification
until the third annual meeting following their election;
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Require that directors only be removed from office for cause;
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Provide that vacancies on the board of directors, including
newly created directorships, may be filled only by a majority
vote of directors then in office;
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Limit who may call special meetings of stockholders;
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Prohibit stockholder action by written consent, requiring all
actions to be taken at a meeting of the stockholders; and
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Establish advance notice requirements for nominating candidates
for election to the board of directors or for proposing matters
that can be acted upon by stockholders at stockholder meetings.
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See Description of Capital Stock for additional
information regarding these and other provisions.
If
securities or industry analysts do not publish research or
reports or publish unfavorable research or reports about our
business, our stock price and trading volume could
decline.
The trading market for our common stock will depend in part on
the research and reports that securities or industry analysts
publish about us, our business, our market or our competitors.
We do not currently have and may never obtain research coverage
by securities and industry analysts. If no securities or
industry analysts commence coverage of our company, the trading
price for our stock would be negatively impacted. In the event
we obtain securities or industry analyst coverage, if one or
more of the analysts who covers us downgrades our stock, our
stock price would likely decline. If one or more of these
analysts ceases to cover us or fails to regularly publish
reports on us, interest in our stock could decrease, which could
cause our stock price or trading volume to decline.
Our
ability to use our net operating loss carry-forwards may be
limited.
At December 31, 2009, we had U.S. federal and state net
operating loss carry-forwards (NOLs) of approximately
$79.5 million and $62.7 million, respectively, which
expire at various dates beginning in 2018 through 2029.
Section 382 of the Internal Revenue Code limits the annual
utilization of NOLs and tax credit carry-forwards following an
ownership change in our company. If it is determined that
significant ownership changes have occurred since we generated
these NOLs, we may be subject to annual limitations on the use
of these NOLs under Internal Revenue Code Section 382 (or
comparable provisions of state law).
29
We will
incur significant increased costs as a result of operating as a
public company, and our management will be required to devote
substantial time to new compliance initiatives.
As a public company, we will incur significant legal, accounting
and other expenses that we did not incur as a private company.
The Sarbanes-Oxley Act, as well as rules subsequently
implemented by the Securities and Exchange Commission and
Nasdaq, have imposed various new requirements on public
companies, including requiring establishment and maintenance of
effective disclosure and financial controls and changes in
corporate governance practices. Our management and other
personnel will need to devote a substantial amount of time to
these new compliance initiatives. Moreover, these rules and
regulations will increase our legal and financial compliance
costs and will make some activities more time consuming and
costly. We expect these rules and regulations to make it more
difficult and more expensive for us to obtain director and
officer liability insurance and we may be required to incur
substantial costs to maintain the same or similar coverage.
The Sarbanes-Oxley Act requires, among other things, that we
maintain effective internal controls for financial reporting and
disclosure controls and procedures. In particular, we will be
required to perform system and process evaluation and testing of
our internal controls over financial reporting to allow
management and our independent registered public accounting firm
to report, commencing in our annual report on
Form 10-K
for the year ending December 31, 2011, on the effectiveness
of our internal controls over financial reporting. Our testing,
or the subsequent testing by our independent registered public
accounting firm, may reveal deficiencies in our internal
controls over financial reporting that are deemed to be material
weaknesses. Our compliance with Section 404 will require
that we incur substantial accounting expense and expend
significant management efforts. We currently do not have an
internal audit group, and we will need to hire additional
accounting and financial staff. Moreover, if we are not able to
comply with the requirements of Section 404 in a timely
manner or if we or our independent registered public accounting
firm identifies deficiencies in our internal controls over
financial reporting that are deemed to be material weaknesses,
the market price of our stock could decline and we could be
subject to sanctions or investigations by Nasdaq, the Securities
and Exchange Commission or other regulatory authorities, which
would require additional financial and management resources.
30
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS AND
PROJECTIONS
This prospectus contains forward-looking statements. All
statements other than statements of historical fact contained in
this prospectus, including statements regarding our future
results of operations and financial position, business strategy
and plans and objectives of management for future operations,
are forward-looking statements. These statements involve known
and unknown risks, uncertainties and other important factors
that may cause our actual results, performance or achievements
to be materially different from any future results, performance
or achievements expressed or implied by the forward-looking
statements.
In some cases, we identify forward-looking statements by terms
such as may, will, should,
expects, plans, anticipates,
could, intends, target,
projects, contemplates,
believes, estimates,
predicts, potential or
continue or the negative of these terms or other
similar expressions. The forward-looking statements in this
prospectus are only predictions. We have based these
forward-looking statements largely on our current expectations
and projections about future events and financial trends that we
believe may affect our business, financial condition and results
of operations. These forward-looking statements speak only as of
the date of this prospectus and are subject to a number of
risks, uncertainties and assumptions described in the Risk
Factors section and elsewhere in this prospectus. All
forward-looking statements involve risks, assumptions and
uncertainties. You should not rely upon forward-looking
statements as predictions of future events. The events and
circumstances reflected in our forward-looking statements may
not occur and actual results could differ materially from those
projected in our forward-looking statements. We undertake no
obligation, and specifically decline any obligation, to publicly
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
31
USE OF
PROCEEDS
We estimate that the net proceeds to us of the sale of the
common stock that we are offering will be approximately
$87.2 million, assuming an initial public offering price of
$16.00 per share, which is the midpoint of the range listed on
the cover page of this prospectus, and after deducting estimated
underwriting discounts and commissions and estimated offering
expenses that we must pay. A $1.00 increase or decrease in the
assumed initial public offering price of $16.00 per share would
increase or decrease the net proceeds to us from this offering
by approximately $5.6 million, assuming the number of
shares offered by us, as set forth on the cover page of the
prospectus, remains the same and after deducting the
underwriting discounts and commissions and estimated offering
expenses payable by us.
We anticipate using the net proceeds from this offering as
follows:
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approximately $13.4 million to complete the clinical development
and registration of Iluvien for DME;
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$15.0 million to repay indebtedness to pSivida US, Inc.
(pSivida) pursuant to a promissory note issued in connection
with the amendment and restatement of our agreement with pSivida
(this promissory note is currently accruing interest at the rate
of 8% per annum, adjusting to 20% per annum effective
April 1, 2010, and is payable in full upon the earlier of
certain liquidity events (including an initial public offering
of our common stock greater than $75.0 million), the
occurrence of an event of default under our agreement with
pSivida or on September 30, 2012);
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$133,333 to repay interest accrued on the indebtedness to
pSivida as of April 16, 2010;
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$25.0 million to pay a milestone payment to pSivida upon
the FDA approval of Iluvien pursuant to our agreement with
pSivida; and
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the balance of $33.7 million to commence the commercial
launch of Iluvien, to continue to develop our product pipeline
and for working capital and other general corporate purposes.
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Pending use of proceeds from this offering, we intend to invest
the proceeds in a variety of capital preservation investments,
including short-term, investment-grade and interest-bearing
instruments.
DIVIDEND
POLICY
We have never declared or paid any cash dividends on capital
stock. We currently intend to retain all available funds and any
future earnings for use in financing the growth of our business
and do not anticipate paying any cash dividends after the
offering and for the foreseeable future. Any future
determination relating to dividend policy will be made at the
discretion of our board of directors and will depend on our
future earnings, financial condition, results of operations,
capital requirements, general business conditions, future
prospects, applicable Delaware law, which provides that
dividends are only payable out of surplus or current net
profits, and other factors that our board of directors may deem
relevant.
32
CAPITALIZATION
The following table sets forth our cash and cash equivalents and
capitalization as of December 31, 2009 (in thousands,
except share data):
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our actual capitalization as of December 31, 2009, assuming
and giving effect to a
3.4-for-one
reverse split of our common and preferred stock to be effected
prior to the effective date of this registration statement;
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our pro forma capitalization assuming and giving effect to the
conversion of all outstanding shares of preferred stock into
common stock upon the completion of this offering, including the
conversion of certain Series A preferred stock dividends
accumulated prior to November 22, 2005 into
380,301 shares of common stock and the conversion of
1,935,700 shares of our
Series C-1
preferred stock issued upon the exercise of warrants in
January 2010, the receipt of $10.0 million in proceeds
in January 2010 as a result of the exercise of
Series C-1
warrants, and an incremental loss of $17.1 million on the
revaluation of the embedded conversion feature based on the
midpoint of the offering range immediately prior to the
conversion of our Series A, Series B, Series C
and
Series C-1
preferred stock; and
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our pro forma capitalization as adjusted to reflect the receipt
of the estimated net proceeds from our sale of
6,000,000 shares of common stock in this offering at the
assumed offering price of $16.00 per share (which is the
midpoint of the range listed on the cover page of the
prospectus), after deducting the underwriting discounts and
commissions and estimated offering expenses and after deducting
the amount necessary to repay the note due to pSivida, and the
filing of a restated certificate of incorporation after the
closing of this offering.
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The following table does not include a $4.0 million option
payment that we received in January 2010 from Bausch &
Lomb Incorporated (Bausch & Lomb) upon the exercise by
Bausch & Lomb of its option to extend the period
during which it may continue to develop an allergy product
acquired from us in 2006 by two years.
33
|
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As of December 31, 2009
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|
|
|
|
|
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Pro Forma As
|
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|
|
Actual
|
|
|
Pro Forma
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|
|
Adjusted
|
|
|
|
(In thousands, except per share data)
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|
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Cash and cash equivalents
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|
$
|
4,858
|
|
|
$
|
14,858
|
|
|
|
87,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note payable to pSivida
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|
$
|
15,000
|
|
|
$
|
15,000
|
|
|
|
|
|
Fair value of preferred stock conversion features
|
|
|
36,701
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
|
|
|
|
|
|
|
|
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Series A preferred stock, $.01 par value;
6,624,866 shares authorized and 6,624,844 shares issued and
outstanding on actual basis; 0 shares authorized, issued
and outstanding on a pro forma and pro forma as adjusted basis;
liquidation preference of $37,019 on an actual basis
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|
36,467
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|
|
|
|
|
|
|
|
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Series B preferred stock, $.01 par value;
7,147,912 shares authorized and 7,147,894 shares issued and
outstanding on actual basis; 0 shares authorized, issued
and outstanding on a pro forma and pro forma as adjusted basis;
liquidation preference of $41,057 on an actual basis
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|
40,617
|
|
|
|
|
|
|
|
|
|
Series C preferred stock, $.01 par value;
5,807,131 shares authorized and 5,807,112 shares issued and
outstanding on actual basis; 0 shares authorized, issued
and outstanding on a pro forma and pro forma as adjusted basis;
liquidation preference of $34,281 on an actual basis
|
|
|
33,452
|
|
|
|
|
|
|
|
|
|
Series C-1
preferred stock, $.01 par value; 2,903,565 shares
authorized; 967,845 shares issued and outstanding on actual
basis; 0 shares authorized, issued and outstanding on a pro
forma and pro forma as adjusted basis; liquidation preference of
$5,140 on an actual basis
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|
2,853
|
|
|
|
|
|
|
|
|
|
Stockholders deficit
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|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $.01 par value; 29,411,764 shares
authorized, 1,598,571 shares issued and outstanding on an
actual basis; 29,411,764 shares authorized,
24,462,267 shares issued and outstanding on a pro forma
basis; 100,000,000 shares authorized,
30,462,267 shares issued and outstanding on a pro forma as
adjusted basis
|
|
|
54
|
|
|
|
283
|
|
|
|
343
|
|
Additional paid-in capital
|
|
|
4,836
|
|
|
|
183,273
|
|
|
|
270,397
|
|
Series C-1
preferred stock warrants
|
|
|
1,472
|
|
|
|
|
|
|
|
|
|
Common stock warrants
|
|
|
57
|
|
|
|
57
|
|
|
|
57
|
|
Accumulated deficit
|
|
|
(171,891
|
)
|
|
|
(188,995
|
)
|
|
|
(188,995
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders deficit
|
|
|
(165,472
|
)
|
|
|
(5,382
|
)
|
|
|
81,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
(382
|
)
|
|
$
|
9,618
|
|
|
|
81,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The number of shares of our common stock outstanding following
this offering is based on 1,598,571 shares of our common
stock outstanding as of December 31, 2009 and includes:
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|
|
|
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the automatic conversion of all outstanding shares of our
preferred stock into 22,863,696 shares of common stock upon
the closing of the offering, including the conversion of certain
Series A preferred stock dividends accumulated prior to
November 22, 2005 into 380,301 shares of common stock,
the conversion of 1,935,700 shares of
Series C-1
preferred stock issued upon the exercise of warrants in
January 2010;
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and excludes:
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|
|
|
|
2,225,778 shares of common stock issuable upon exercise of
stock options outstanding at a weighted average exercise price
of $2.14 per share;
|
|
|
|
248,181 shares of common stock issuable upon the exercise
of outstanding warrants as of December 31, 2009, with a
weighted average exercise price of $3.48 per share;
|
|
|
|
494,422 shares of common stock reserved for issuance under
our 2010 Employee Stock Purchase Plan that becomes
effective on the effective date of this registration statement;
and
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|
|
|
1,977,686 shares of common stock reserved for issuance
under our 2010 Equity Incentive Plan that becomes effective
on the effective date of this registration statement.
|
See Management Employee Benefit Plans,
and Note 10 of the Notes to the Financial Statements for a
description of our equity benefit plans.
34
DILUTION
Our pro forma net tangible book value as of December 31,
2009 was approximately $(5.4) million, or approximately
$(0.22) per share. Pro forma net tangible book value per share
represents the amount of stockholders equity, divided by
24,462,267 shares of common stock outstanding after giving
effect to the conversion of all outstanding shares of preferred
stock (including shares of
Series C-1
preferred stock issued upon the exercise of outstanding warrants
in January 2010) into shares of common stock upon
completion of this offering.
Net tangible book value dilution per share to new investors
represents the difference between the amount per share paid by
purchasers of shares of common stock in this offering and the
net tangible book value per share of common stock immediately
after completion of this offering. After giving effect to our
sale of 6,000,000 shares of common stock in this offering
at an assumed initial public offering price of $16.00 per
share (which is the midpoint of the range listed on the cover
page of the prospectus), and after deducting the underwriting
discounts and commissions and estimated offering expenses, the
pro forma net tangible book value as of December 31, 2009
would have been approximately $81.8 million or
approximately $2.69 per share. This represents an immediate
increase in net tangible book value of $2.91 per share to
existing stockholders and an immediate dilution in net tangible
book value of $13.31 per share to purchasers of common stock in
the offering, as illustrated in the following table:
|
|
|
|
|
|
|
|
|
Assumed initial public offering price per share
|
|
|
|
|
|
$
|
16.00
|
|
|
|
|
|
|
|
|
|
|
Historical net tangible book value per share
|
|
$
|
(103.51
|
)
|
|
|
|
|
Increase attributable to the conversion of the preferred stock
|
|
$
|
(103.29
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net tangible book value per share before this offering
|
|
$
|
(0.22
|
)
|
|
|
|
|
Increase per share attributable to new investors
|
|
$
|
2.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net tangible book value per share after this offering
|
|
|
|
|
|
$
|
2.69
|
|
|
|
|
|
|
|
|
|
|
Dilution per share to new investors
|
|
|
|
|
|
$
|
13.31
|
|
|
|
|
|
|
|
|
|
|
If the underwriters exercise their option to purchase additional
shares of our common stock in full in this offering, the pro
forma net tangible book value per share after the offering would
be approximately $3.04 per share, the increase in pro forma net
tangible book value per share to existing stockholders would be
approximately $3.26 per share and the dilution to new investors
purchasing shares in this offering would be approximately $12.96
per share.
The table below presents on a pro forma basis as of
December 31, 2009, after giving effect to a
3.4-for-one
reverse split of our common and preferred stock to be effected
prior to the effective date of this registration statement and
the conversion of all outstanding shares of preferred stock
(including 1,935,700 shares of
Series C-1
preferred stock issued and the receipt of $10.0 million in
proceeds in January 2010 as a result of the exercise of Series
C-1 warrants) into common stock upon completion of this offering
and assuming there are no exercises of stock options or warrants
outstanding on December 31, 2009 (as further described
below), the differences between the existing stockholders and
the purchasers of shares in the offering with respect to the
number of shares purchased from us, the total consideration paid
and the average price paid per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Purchased
|
|
|
Total Consideration
|
|
|
Average Price
|
|
|
|
Number
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Per Share
|
|
|
|
|
|
|
|
|
|
(In thousands, except per share data)
|
|
|
Existing stockholders
|
|
|
24,462,267
|
|
|
|
80.3
|
%
|
|
$
|
105,900
|
|
|
|
52.5
|
%
|
|
$
|
4.32
|
|
New stockholders
|
|
|
6,000,000
|
|
|
|
19.7
|
|
|
|
96,000
|
|
|
|
47.5
|
|
|
$
|
16.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
30,462,267
|
|
|
|
100.0
|
%
|
|
|
201,900
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009, there were options outstanding to
purchase a total of 2,225,778 shares of common stock at a
weighted average exercise price of $2.14 per share. In addition,
as of December 31, 2009, there were warrants outstanding to
purchase 248,181 shares of common stock with a weighted
average exercise price of $3.48 per share. To the extent
outstanding options or warrants are exercised, there will be
further dilution to new investors. See
Management Employee Benefit Plans and
Note 10 of the Notes to the Financial Statements for a
description of our equity benefit plans.
35
SELECTED
FINANCIAL DATA
The following statements of operations data for fiscal years
2007, 2008 and 2009, and the balance sheet data as of
December 31, 2008 and 2009, have been derived from our
audited financial statements and related notes and are included
elsewhere in this prospectus. The statement of operations data
for fiscal years 2005 and 2006, and the balance sheet data as of
December 31, 2005, 2006 and 2007 are derived from our
audited financial statements, but are not included in this
prospectus. The following selected financial data should be read
together with our financial statements and related notes and
Managements Discussion and Analysis of Financial
Condition and Results of Operations included elsewhere in
this prospectus.
36
Statement
of Operations Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands, except per share data)
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development(1)
|
|
$
|
2,926
|
|
|
$
|
6,736
|
|
|
$
|
8,363
|
|
|
$
|
43,764
|
|
|
$
|
15,057
|
|
General and administrative
|
|
|
2,595
|
|
|
|
3,028
|
|
|
|
3,184
|
|
|
|
5,058
|
|
|
|
3,407
|
|
Marketing
|
|
|
557
|
|
|
|
616
|
|
|
|
969
|
|
|
|
1,259
|
|
|
|
752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
6,078
|
|
|
|
10,380
|
|
|
|
12,516
|
|
|
|
50,081
|
|
|
|
19,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
223
|
|
|
|
596
|
|
|
|
1,079
|
|
|
|
585
|
|
|
|
37
|
|
Interest expense
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
(1,514
|
)
|
|
|
(1,897
|
)
|
Decrease (increase) in fair value of preferred stock conversion
feature
|
|
|
8
|
|
|
|
6
|
|
|
|
1
|
|
|
|
(10,454
|
)
|
|
|
(23,142
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(5,849
|
)
|
|
|
(9,780
|
)
|
|
|
(11,438
|
)
|
|
|
(61,464
|
)
|
|
|
(44,218
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations(2)
|
|
|
(7,790
|
)
|
|
|
(3,191
|
)
|
|
|
5,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(13,639
|
)
|
|
|
(12,971
|
)
|
|
|
(5,705
|
)
|
|
|
(61,464
|
)
|
|
|
(44,218
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial conversion feature of preferred stock (see
Note 9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(355
|
)
|
Preferred stock accretion
|
|
|
(164
|
)
|
|
|
(243
|
)
|
|
|
(248
|
)
|
|
|
(718
|
)
|
|
|
(623
|
)
|
Preferred stock dividends
|
|
|
(1,546
|
)
|
|
|
(3,548
|
)
|
|
|
(4,685
|
)
|
|
|
(6,573
|
)
|
|
|
(7,225
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders
|
|
$
|
(15,349
|
)
|
|
$
|
(16,762
|
)
|
|
$
|
(10,638
|
)
|
|
$
|
(68,755
|
)
|
|
$
|
(52,421
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share attributable to common
stockholders basic and diluted
|
|
$
|
(10.68
|
)
|
|
$
|
(11.66
|
)
|
|
$
|
(7.09
|
)
|
|
$
|
(45.50
|
)
|
|
$
|
(34.56
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding basic and
diluted
|
|
|
1,437
|
|
|
|
1,437
|
|
|
|
1,500
|
|
|
|
1,511
|
|
|
|
1,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net loss per share attributable to common
stockholders basic and diluted(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.94
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma weighted average common shares outstanding
basic and diluted(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes $29.8 million of research and development expenses
incurred in connection with an amendment to the pSivida license
agreement in the year ended December 31, 2008. See
Note 8 to the financial statements for a more detailed
description of the pSivida agreement and the amendment.
|
|
(2)
|
Includes gains on disposal of $9.7 million and
$6.0 million for the years ended December 31, 2006 and
2007, respectively. See Note 3 to the financial statements
for a more detailed description of the discontinued operations.
|
|
(3)
|
The pro forma basic and diluted net loss per common share data
for the year ended December 31, 2009 reflect the
conversion, upon the closing of this offering, of our
Series A, Series B, Series C and Series C-1
preferred stock (including shares of
Series C-1
preferred stock issued upon the exercise of warrants in January
2010) at their respective conversion rates into our common
stock, as if the conversion had occurred at the later of the
beginning of the period presented or the date of issuance of
such shares of preferred stock and excludes the effect of the
change in fair value of the preferred stock conversion feature,
preferred stock accretion, and preferred stock dividends. The
pro forma data does not give effect to the consummation of this
offering.
|
37
Balance
Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2005
|
|
2006
|
|
2007
|
|
2008
|
|
2009
|
|
Pro Forma(1)
|
|
|
(In thousands)
|
|
Cash and cash equivalents
|
|
$
|
22,815
|
|
|
$
|
27,157
|
|
|
$
|
20,847
|
|
|
$
|
17,875
|
|
|
$
|
4,858
|
|
|
$
|
14,858
|
(2)
|
Working capital
|
|
|
21,846
|
|
|
|
25,294
|
|
|
|
19,862
|
|
|
|
14,551
|
|
|
|
(4,428
|
)
|
|
|
5,572
|
|
Total assets
|
|
|
25,081
|
|
|
|
31,251
|
|
|
|
24,519
|
|
|
|
20,264
|
|
|
|
6,561
|
|
|
|
16,561
|
|
Long-term liabilities
|
|
|
57
|
|
|
|
60
|
|
|
|
31
|
|
|
|
28,217
|
|
|
|
47,909
|
|
|
|
11,208
|
|
Preferred stock
|
|
|
43,373
|
|
|
|
63,057
|
|
|
|
67,990
|
|
|
|
103,017
|
|
|
|
113,389
|
|
|
|
|
|
Additional paid-in capital
|
|
|
2,193
|
|
|
|
2,571
|
|
|
|
2,867
|
|
|
|
3,474
|
|
|
|
4,836
|
|
|
|
183,273
|
|
Accumulated deficit
|
|
|
(23,315
|
)
|
|
|
(40,077
|
)
|
|
|
(50,715
|
)
|
|
|
(119,470
|
)
|
|
|
(171,891
|
)
|
|
|
(188,995
|
)
|
Total stockholders deficit
|
|
|
(21,015
|
)
|
|
|
(37,399
|
)
|
|
|
(47,738
|
)
|
|
|
(115,887
|
)
|
|
|
(165,472
|
)
|
|
|
(5,382
|
)
|
|
|
|
(1)
|
|
Assumes and gives effect to the conversion of all outstanding
shares of preferred stock into common stock upon the completion
of this offering, including the conversion of certain
Series A preferred stock dividends accumulated prior to
November 22, 2005 into 380,301 shares of common stock
and the conversion of 1,935,700 shares of our
Series C-1
preferred stock issued upon the exercise of warrants in January
2010, the receipt of $10.0 million in proceeds in January
2010 as a result of the exercise of
Series C-1
warrants, and an incremental loss of $17.1 million on the
revaluation of the embedded conversion feature based on the
midpoint of the offering range immediately prior to the
conversion of our Series A, Series B, Series C
and
Series C-1
preferred stock.
|
|
|
|
(2)
|
|
This amount does not include a $4.0 million option payment
that we received in January 2010 from Bausch & Lomb
Incorporated (Bausch & Lomb) upon the exercise by
Bausch & Lomb of its option to extend the period
during which it may continue to develop an allergy product
acquired from us in 2006 by two years.
|
38
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
We are a biopharmaceutical company that specializes in the
research, development and commercialization of prescription
ophthalmic pharmaceuticals. We are presently focused on diseases
affecting the back of the eye, or retina, because we believe
these diseases are not well treated with current therapies and
represent a significant market opportunity. Our most advanced
product candidate is Iluvien, which we are developing for the
treatment of diabetic macular edema (DME). DME is a disease of
the retina that affects individuals with diabetes and can lead
to severe vision loss and blindness. We are currently conducting
two Phase 3 pivotal clinical trials (collectively, our FAME
Study) for Iluvien involving 956 patients in sites across the
United States, Canada, Europe and India to assess the efficacy
and safety of Iluvien in the treatment of DME. In December 2009
we received the month 24 clinical readout from our FAME Study.
Based upon our analysis of this data, we plan to file a New Drug
Application (NDA) in the United States for the low dose of
Iluvien in the second quarter of 2010, followed by registration
filings in certain European countries and Canada. We intend to
request Priority Review of our NDA from the U.S. Food and
Drug Administration (FDA). If Priority Review is granted, we can
expect a response to our NDA from the FDA in the
fourth quarter of 2010. If our NDA is approved, we plan to
commercialize Iluvien in the United States by
marketing and selling Iluvien to retinal specialists as early as
the first quarter of 2011. In addition to treating DME, Iluvien
is being studied in three Phase 2 clinical trials for the
treatment of the dry form of age-related macular degeneration
(AMD), the wet form of AMD and retinal vein occlusion (RVO). We
are also conducting testing on two classes of nicotinamide
adenine dinucleotide phosphate (NADPH) oxidase inhibitors, for
which we have acquired exclusive, worldwide licenses from Emory
University, in the treatment of dry AMD. We plan to evaluate the
use of NADPH oxidase inhibitors in the treatment of other eye
diseases of the eye, including wet AMD and diabetic retinopathy.
We intend to seek a collaboration partner for sales and
marketing activities outside North America. We currently
contract with development partners or outside firms for various
operational aspects of our development activities, including the
preparation of clinical supplies and have no plans to establish
in-house manufacturing capabilities.
We commenced operations in June 2003. Since our inception we
have incurred significant losses. As of December 31, 2009
we have accumulated a deficit of $171.9 million. We expect
to incur substantial losses through the projected
commercialization of Iluvien through at least the first quarter
of 2011 as we:
|
|
|
|
|
complete the clinical development and registration of Iluvien;
|
|
|
|
build our sales and marketing capabilities for the anticipated
commercial launch of Iluvien as early as the first quarter of
2011;
|
|
|
|
add the necessary infrastructure to support our growth;
|
|
|
|
evaluate the use of Iluvien for the treatment of other diseases;
and
|
|
|
|
advance the clinical development of other new product candidates
either currently in our pipeline, or that we may license or
acquire in the future.
|
To date we have funded our operations through the private
placement of common stock, preferred stock and convertible debt,
as well as by the sale of certain assets of the non-prescription
business in which we were previously engaged. As of
December 31, 2009, we had $4.9 million in cash and
cash equivalents. Including the January 2010 receipt of
$10.0 million in proceeds from the exercise of outstanding
Series C-1
warrants, and a $4.0 million option payment from
Bausch & Lomb Incorporated (Bausch & Lomb)
upon the exercise by Bausch & Lomb of its option to
extend the period during which it may continue to develop an
allergy product acquired from us in 2006 by two years, we had
$18.9 million in cash and cash equivalents which we believe
is sufficient to fund our operations into September 2010, but
not beyond. We anticipate that the proceeds of this offering
will be sufficient to fund our operations through the projected
commercialization of Iluvien as early as the first quarter of
2011. However, we may need additional financing in the event
that we do not receive regulatory approval for Iluvien in the
fourth quarter of 2010 or the approval is delayed or, if
approved, the
39
future sales of Iluvien do not generate sufficient revenues to
fund our operations. This financing may be difficult to obtain.
Our
Agreement with pSivida US, Inc.
In February 2005, we entered into an agreement with pSivida US,
Inc. (pSivida) for the use of fluocinolone acetonide (FA) in
pSividas proprietary delivery device. pSivida is a global
drug delivery company committed to the biomedical sector and the
development of drug delivery products. Our agreement with
pSivida provides us with a worldwide exclusive license to
develop and sell Iluvien, which consists of a tiny polyimide
tube with membrane caps that is filled with FA in a polyvinyl
alcohol matrix, for delivery to the back of the eye for the
treatment and prevention of eye diseases in humans (other than
uveitis). This agreement also provided us with a worldwide
non-exclusive license to develop and sell pSividas
proprietary delivery device to deliver other corticosteroids to
the back of the eye for the treatment and prevention of eye
diseases in humans (other than uveitis) or to treat DME by
delivering a compound to the back of the eye through a direct
delivery method through an incision required for a
25-gauge
or
larger needle. We do not have the right to develop and sell
pSividas proprietary delivery device for indications for
diseases outside of the eye or for the treatment of uveitis.
Further, our agreement with pSivida permits pSivida to grant to
any other party the right to use its intellectual property
(i) to treat DME through an incision smaller than that
required for a 25-gauge needle, unless using a corticosteroid
delivered to the back of the eye, (ii) to deliver any
compound outside the back of the eye unless it is to treat DME
through an incision required for a 25-gauge or larger needle, or
(iii) to deliver non-corticosteroids to the back of the
eye, unless it is to treat DME through an incision required for
a 25-gauge or larger needle.
We made initial license fee payments totaling $750,000 to
pSivida in 2004 and additional license fee payments of $750,000
in 2005 upon the initiation of our FAME Study. Under the
February 2005 agreement, we and pSivida agreed to collaborate on
the development of Iluvien for DME, and share financial
responsibility for the development expenses equally. Per the
terms of the agreement, we each reported our monthly
expenditures on a cash basis, and the party expending the lesser
amount of cash during the period was required to make a cash
payment to the party expending the greater amount to balance the
cash expenditures. We retained primary responsibility for the
development of the product, and therefore, were generally the
party owed a balancing payment. Between February 2006 and
December 2006, pSivida failed to make payments to us for its
share of development costs totaling $2.0 million. For each
payment not made, pSivida incurred a penalty of 50% of the
missed payment and interest began accruing at the rate of 20%
per annum on the missed payment and the penalty amount. In
accordance with the terms of the agreement, pSivida was able to
remain in compliance with the terms of the February 2005
agreement as long as the total amount of development payments
past due did not exceed $2.0 million, and pSivida began
making payments again in December 2006 in order to maintain
compliance with the agreement. For financial reporting purposes
we fully reserved the $2.0 million in past due development
payments and all penalties and interest due with respect to such
past due payment, due to the uncertainty of future collection.
The February 2005 agreement provided that after
commercialization of Iluvien, profits, as defined in our
agreement, would be shared equally. In March 2008, we and
pSivida amended and restated the agreement to provide us with
80% of the net profits and pSivida with 20% of the net profits.
Total consideration to pSivida in connection with the execution
of the March 2008 agreement was $33.8 million, which
consisted of a payment of $12.0 million, the issuance of a
$15.0 million note payable, and the forgiveness of
$6.8 million in outstanding receivables. The
$15.0 million promissory note accrues interest at 8% per
annum, payable quarterly and is payable in full to pSivida upon
the earlier of a liquidity event as defined in the agreement
(including an initial public offering of our common stock
greater than $75.0 million), the occurrence of an event of
default under our agreement with pSivida, or September 30,
2012. If the note is not paid in full by March 31, 2010,
the interest rate will increase to the lesser of 20% and the
highest rate permitted by applicable law per annum effective
April 1, 2010, and we will be required to begin making
principal payments of $500,000 per month. The outstanding
receivables forgiven represented all outstanding development
payments, penalties and interest totaling $6.8 million, of
which $4.0 million was reserved for financial reporting
purposes prior to the date of the amendment. The remaining
$2.8 million
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represented a receivable for current and unbilled development
payments as of the effective date of the March 2008 agreement.
In connection with this transaction we recognized incremental
research and development expenses of $29.8 million in March
2008 and we prospectively assumed all financial responsibility
for the remaining development of Iluvien. We will owe pSivida an
additional milestone payment of $25.0 million upon FDA
approval of Iluvien. As a result of the amended profit sharing
percentages we will only be able to recover 20% of the
commercialization costs of Iluvien incurred prior to
profitability, reduced from the 50% established in the February
2005 agreement.
Our
Discontinued Non-Prescription Business
At the inception of our company, we were focused primarily on
the development and commercialization of non-prescription
over-the-counter ophthalmic products. In October 2006, due to
the progress and resource requirements related to the
development of Iluvien, we decided to discontinue our
non-prescription business. As a result, we received proceeds of
$10.0 million from the sale of our allergy products in
December 2006 and $6.7 million from the sale of our dry eye
product in July 2007, both to Bausch & Lomb. If one of
the allergy products receives FDA approval, we are entitled to
an additional $8.0 million payment from Bausch &
Lomb under the sales agreement. In January 2010 we received a
$4.0 million option payment from Bausch & Lomb
upon the exercise by Bausch & Lomb of its option to extend
the period during which it may continue to develop an allergy
product acquired from us in 2006 by two years. However, there
can be no assurance that Bausch & Lomb will continue
the development of this allergy product, that it will receive
FDA approval or that we will receive the $8.0 million
payment.
As a result of the discontinuance of our non-prescription
business, all revenues and expenses associated with our
over-the-counter portfolio are included in the income (loss)
from discontinued operations in the accompanying statements of
operations.
Financial
Overview
Revenue
To date we have only generated revenue from our dry eye
non-prescription product. From the launch of that product in
September 2004 to its sale in July 2007, we generated
$4.4 million in net revenues which are included in the
income (loss) from discontinued operations in the accompanying
financial statements. We do not expect to generate any
significant additional revenue unless or until we obtain
regulatory approval of, and commercialize, our product
candidates or in-license additional products that generate
revenue. In addition to generating revenue from product sales,
we intend to seek to generate revenue from other sources such as
up-front fees, milestone payments in connection with
collaborative or strategic relationships, and royalties
resulting from the licensing of our product candidates and other
intellectual property. We expect any revenue we generate will
fluctuate from quarter to quarter as a result of the nature,
timing and amount of any milestone payments we may receive from
potential collaborative and strategic relationships, as well as
revenue we may receive upon the sale of our products to the
extent any are successfully commercialized.
Research
and Development Expenses
Substantially all of our research and development expenses
incurred to date related to our continuing operations have been
related to the development of Iluvien. We anticipate that we
will incur expenses of approximately $11.6 million and
$1.8 million in 2010 and 2011, respectively, to complete
the clinical development and registration of Iluvien for DME.
Upon the approval of Iluvien by the FDA, we will owe an
additional milestone payment of $25.0 million to pSivida.
We anticipate that we will incur additional research and
development expenses in the future as we evaluate and possibly
pursue the development of Iluvien for additional indications, or
develop additional product candidates.
We recognize research and development expenses as they are
incurred. Our research and development expenses consist
primarily of:
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salaries and related expenses for personnel;
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fees paid to consultants and contract research organizations in
conjunction with independently monitoring clinical trials and
acquiring and evaluating data in conjunction with clinical
trials, including all related fees such as investigator grants,
patient screening, lab work and data compilation and statistical
analysis;
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costs incurred with third parties related to the establishment
of a commercially viable manufacturing process for our product
candidates;
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costs related to production of clinical materials, including
fees paid to contract manufacturers;
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costs related to upfront and milestone payments under
in-licensing agreements;
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costs related to compliance with FDA regulatory requirements;
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consulting fees paid to third-parties involved in research and
development activities; and
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costs related to stock options or other stock-based compensation
granted to personnel in development functions.
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We expense both internal and external development costs as they
are incurred.
We expect that a large percentage of our research and
development expenses in the future will be incurred in support
of our current and future technical, preclinical and clinical
development programs. These expenditures are subject to numerous
uncertainties in terms of both their timing and total cost to
completion. We expect to continue to develop stable formulations
of our product candidates, test such formulations in preclinical
studies for toxicology, safety and efficacy and to conduct
clinical trials for each product candidate. We anticipate
funding clinical trials for Iluvien ourselves, but we may engage
collaboration partners at certain stages of clinical
development. As we obtain results from clinical trials, we may
elect to discontinue or delay clinical trials for certain
product candidates or programs in order to focus our resources
on more promising product candidates or programs. Completion of
clinical trials by us or our future collaborators may take
several years or more, the length of time generally varying with
the type, complexity, novelty and intended use of a product
candidate. The costs of clinical trials may vary significantly
over the life of a project owing to but not limited to the
following:
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the number of sites included in the trials;
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the length of time required to enroll eligible patients;
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the number of patients that participate in the trials;
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the number of doses that patients receive;
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the drop-out or discontinuation rates of patients;
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the duration of patient
follow-up;
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the phase of development the product candidate is in; and
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the efficacy and safety profile of the product candidate.
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Our expenses related to clinical trials are based on estimates
of the services received and efforts expended pursuant to
contracts with multiple research institutions and contract
research organizations that conduct and manage clinical trials
on our behalf. The financial terms of these agreements are
subject to negotiation and vary from contract to contract and
may result in uneven payment flows. Generally, these agreements
set forth the scope of work to be performed at a fixed fee or
unit price. Payments under the contracts depend on factors such
as the successful enrollment of patients or the completion of
clinical trial milestones. Expenses related to clinical trials
generally are accrued based on contracted amounts applied to the
level of patient enrollment and activity according to the
protocol. If timelines or contracts are modified based upon
changes in the clinical trial protocol or scope of work to be
performed, we modify our estimates of accrued expenses
accordingly on a prospective basis.
None of our product candidates have received FDA or foreign
regulatory marketing approval. In order to grant marketing
approval, a health authority such as the FDA or foreign
regulatory agencies must conclude that clinical and preclinical
data establish the safety and efficacy of our product candidates
with an appropriate
42
benefit to risk profile relevant to a particular indication, and
that the product can be manufactured under current Good
Manufacturing Practice (cGMP) in a reproducible manner to
deliver the products intended performance in terms of its
stability, quality, purity and potency. Until our submission is
reviewed by a health authority, there is no way to predict the
outcome of their review. Even if the clinical studies meet their
predetermined primary endpoints, and a registration dossier is
accepted for filing, a health authority could still determine
that an appropriate benefit to risk relationship does not exist
for the indication that we are seeking.
We cannot forecast with any degree of certainty which of our
product candidates will be subject to future collaborations or
how such arrangements would affect our development plan or
capital requirements.
As a result of the uncertainties discussed above, we are unable
to determine the duration and completion costs of our
development projects or when and to what extent we will receive
cash inflows from the commercialization and sale of an approved
product candidate.
General
and Administrative Expenses
General and administrative expenses consist primarily of
compensation for employees in executive and administrative
functions, including finance, accounting and human resources.
Other significant costs include facilities costs and
professional fees for accounting and legal services, including
legal services associated with obtaining and maintaining
patents. After completion of this offering, we anticipate
incurring a significant increase in general and administrative
expenses, as we operate as a public company. These increases
will likely include increased costs for insurance, costs related
to the hiring of additional personnel and payments to outside
consultants, lawyers and accountants. We also expect to incur
significant costs to comply with the corporate governance,
internal control and similar requirements applicable to public
companies.
Marketing
Expenses
Marketing expenses consist primarily of compensation for
employees responsible for assessing the commercial opportunity
of and developing market awareness and launch plans for our
product candidates. Other costs include professional fees
associated with developing brands for our product candidates and
maintaining public relations. We expect significant increases in
our marketing and selling expenses as we hire additional
personnel and establish our sales and marketing capabilities in
anticipation of the commercialization of our product candidates.
We intend to capitalize on our managements past experience
and expertise with eye-care products by marketing and selling
Iluvien to the approximately 1,600 retinal specialists
practicing in the approximately 900 retina centers across
the United States and Canada. We intend to seek a
commercialization partner for sales and marketing activities
outside North America.
Our plan is to develop our own specialized domestic sales and
marketing infrastructure, comprised of approximately
40 people, to market Iluvien and other ophthalmic products
that we acquire or develop in the future. We will begin
recruiting sales representatives and regional managers with
extensive ophthalmic-based-sales experience in 2010 in advance
of an expected commercial launch of Iluvien as early as the
first quarter of 2011. We expect that our domestic sales force
will be able to access and form relationships with retinal
specialists in the approximately 900 retina centers prior to the
commercial launch of Iluvien.
Interest
Income
Interest income consists primarily of interest earned on our
cash and cash equivalents.
Interest
Expense
Beginning in March 2008, we began recognizing interest on our
$15.0 million note payable to pSivida at an effective
interest rate of 12.64% per annum (this note is currently
accruing interest at the rate of 8% per annum and will increase
to 20% per annum effective April 1, 2010). Accrued interest
in excess of amounts payable currently at the stated rate are
included in accrued expenses and in other long-term liabilities
in the accompanying balance sheets. Interest expense also
includes interest on our capital leases.
43
Change
in Fair Value of Preferred Stock Conversion
Feature
Our Series A, Series B, Series C and
Series C-1 preferred stock contain certain conversion
features which are considered embedded derivatives. We account
for such embedded derivative financial instruments in accordance
with the Financial Accounting Standards Boards (FASB)
Statement of Financial Accounting Standards (SFAS) No. 133,
Accounting for Derivative Instruments and Hedging Activities
(ASC 815). We record derivative financial instruments
as assets or liabilities in our balance sheet measured at their
fair value. We record the changes in fair value of such
instruments as non-cash gains or losses in the consolidated
statement of operations. Based upon our proposed offering range
of $15.00 to $17.00, we anticipate recognizing a loss on the
revaluation of the embedded conversion feature of
$13.3 million to $20.9 million immediately prior to
the conversion of our Series A, Series B,
Series C and Series C-1 preferred stock at their
respective conversion rates (including shares of
Series C-1
preferred stock issued upon the exercise of warrants in January
2010) into 22,863,696 shares of our common stock.
Preferred
Stock Accretion
Our Series A, Series B, Series C and
Series C-1 preferred stock were recorded at issuance at the
proceeds received net of any issuance discounts, issuance costs
and the fair value of the conversion features at issuance. The
difference between the amount recorded at issuance and the
original issue price is accreted on a straight-line basis over a
period extending from the date of issuance to the date at which
the preferred stock becomes redeemable at the option of the
holder.
Preferred
Stock Dividends
Our Series A, Series B, Series C and
Series C-1 preferred stock accrue dividends at 8% per annum
which are recorded as an increase in the carrying amount of the
respective preferred stock. Upon conversion of our preferred
stock immediately prior to this initial public offering,
$1.5 million of dividends accrued on our Series A
preferred stock prior to November 17, 2005 will convert
into 380,301 shares of our common stock. All other
preferred dividends will be eliminated upon conversion of the
underlying preferred stock. We also recognized a dividend of
$355,000 to holders of our
Series C-1
preferred stock during the year ended December 31, 2009 for
a beneficial conversion feature associated with the
Series C-1
preferred stock at issuance.
Basic and
Diluted Net Loss Attributable to Common Stockholders per Common
Share
We calculated net loss per share in accordance with SFAS
No. 128,
Earnings Per Share
(ASC 260). We have
determined that the Series A, Series B, Series C
and Series C-1 preferred stock represent participating
securities in accordance with ASC 260. However, since we
operate at a loss, and losses are not allocated to the preferred
stock, the two class method does not affect our calculation of
earnings per share. We had a net loss for all periods presented;
accordingly, the inclusion of common stock options and warrants
would be anti-dilutive.
Dilutive common stock equivalents would include the dilutive
effect of convertible securities, common stock options, warrants
for convertible securities and warrants for common stock
equivalents. Potentially dilutive weighted average common stock
equivalents totaled approximately 14,378,628, 19,741,154 and
22,149,592 for the years ended December 31, 2007, 2008 and
2009, respectively. Potentially dilutive common stock
equivalents were excluded from the diluted earnings per share
denominator for all periods because of their anti-dilutive
effect. Therefore, the weighted average shares used to calculate
both basic and diluted earnings per share are the same.
Critical
Accounting Policies and Estimates
Our discussion and analysis of our financial condition and
results of operations are based on our financial statements
which have been prepared in accordance with accounting
principles generally accepted in the United States (GAAP).
The preparation of these financial statements requires us to
make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses. On an ongoing basis,
44
we evaluate these estimates and judgments, including those
described below. We base our estimates on historical experience
and on various other assumptions that we believe to be
reasonable under the circumstances. These estimates and
assumptions form the basis for making judgments about the
carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results and experiences may
differ materially from these estimates.
While our significant accounting policies are more fully
described in Note 1 to our financial statements included
within this prospectus, we believe that the following accounting
policies are the most critical to aid you in fully understanding
and evaluating our reported financial results and affect the
more significant judgments and estimates that we use in the
preparation of our financial statements.
Clinical
Trial Prepaid and Accrued Expenses
We record prepaid assets and accrued liabilities related to
clinical trials associated with contract research organizations,
clinical trial investigators and other vendors based upon
amounts paid and the estimated amount of work completed on each
clinical trial. The financial terms of agreements vary from
vendor to vendor and may result in uneven payment flows. As
such, if we have advanced funds exceeding our estimate of the
work completed, we record a prepaid asset. If our estimate of
the work completed exceeds the amount paid, an accrued liability
is recorded. All such costs are charged to research and
development expenses based on these estimates. Our estimates may
or may not match the actual services performed by the
organizations as determined by patient enrollment levels and
related activities. We monitor patient enrollment levels and
related activities to the extent possible through internal
reviews, correspondence and discussions with our contract
research organization and review of contractual terms. However,
if we have incomplete or inaccurate information, we may
underestimate or overestimate activity levels associated with
various clinical trials at a given point in time. In this event,
we could record significant research and development expenses in
future periods when the actual level of activities becomes
known. To date, we have not experienced material changes in
these estimates. Additionally, we do not expect material
adjustments to research and development expenses to result from
changes in the nature and level of clinical trial activity and
related expenses that are currently subject to estimation. In
the future, as we expand our clinical trial activities, we
expect to have increased levels of research and development
costs that will be subject to estimation.
Research
and Development Costs
Research and development expenditures are expensed as incurred,
pursuant to SFAS No. 2,
Research and Development
(ASC 730). Costs to license technology to be used in our
research and development that have not reached technological
feasibility, defined as FDA approval for our current product
candidates, and have no alternative future use are expensed when
incurred. Payments to licensors that relate to the achievement
of pre-approval development milestones are recorded as research
and development expense when incurred.
Income
Taxes
We recognize deferred tax assets and liabilities for temporary
differences between the financial reporting basis and the tax
basis of its assets and liabilities in accordance with SFAS
No. 109,
Accounting for Income Taxes
(ASC 740).
We evaluate the positive and negative evidence bearing upon the
realizability of our deferred tax assets on an annual basis.
Significant management judgment is involved in determining the
provision for income taxes, deferred tax assets and liabilities,
and any valuation allowance recorded against net deferred tax
assets. Due to uncertainties with respect to the realization of
our deferred tax assets due to our history of operating losses,
a valuation allowance has been established against our deferred
tax asset balances to reduce the net carrying value to an amount
that is more likely than not to be realized. As a result we have
fully reserved against the deferred tax asset balances. The
valuation allowances are based on our estimates of taxable
income in the jurisdictions in which we operate and the period
over which deferred tax assets will be recoverable. In the event
that actual results differ from these estimates or we adjust
these estimates in future periods, a change in the valuation
allowance may be needed, which could materially impact our
financial position and results of operations. Our deferred tax
assets primarily consist of net operating loss (NOL)
carry-forwards. At December 31, 2007, 2008 and 2009 we had
federal NOL carry-forwards of approximately $33.9 million,
$57.5 million and $79.5 million, respectively, and
state NOL carry-forwards of approximately
45
$24.7 million, $40.7 million and $62.7 million,
respectively, that are available to reduce future income
otherwise taxable. If not utilized, the federal NOL
carry-forwards will expire at various dates between 2023 and
2029 and the state NOL carry-forwards will expire at various
dates between 2018 and 2029. If it is determined that
significant ownership changes have occurred since these NOLs
were generated, we may be subject to annual limitations on the
use of these NOLs under Internal Revenue Code Section 382
(or comparable provisions of state law).
In the event that we were to determine that we are able to
realize any of our net deferred tax assets in the future, an
adjustment to the valuation allowance would increase net income
in the period such determination was made. We believe that the
most significant uncertainty that will impact the determination
of our valuation allowance will be our estimation of the extent
and timing of future net income, if any.
We considered our income tax positions for uncertainty in
accordance with ASC 740. We believe our income tax filing
positions and deductions are more likely than not of being
sustained on audit and do not anticipate any adjustments that
will result in a material change to our financial position;
therefore, we have not recorded ASC 740 liabilities. Our
adoption of ASC 740 did not result in a cumulative effect
adjustment to retained earnings. We will recognize accrued
interest and penalties related to unrecognized tax benefits as
interest expense and income tax expense, respectively, in our
statements of operations. Our tax years since 2003 remain
subject to examination in Georgia, Tennessee, and on the federal
level. We do not anticipate any material changes to our
uncertain tax positions within the next 12 months.
The
Valuation of Our Common Stock
In the absence of a public trading market for our common stock,
we determined a reasonable estimate of the then current fair
value of our common stock based upon multiple valuation criteria
and contemporaneous analyses (in each case, as adjusted to
reflect a
3.4-for-one
reverse split of our common and preferred stock effected prior
to the effective date of this registration statement). Our board
of directors exercised judgment in evaluating and assessing the
foregoing based on several factors, including:
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the nature and history of our business;
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our historical operating and financial results;
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the net present value of our expected cash flows;
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the market value of companies that are engaged in a
substantially similar business;
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the lack of marketability for our common stock;
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the price at which shares of our common and preferred stock have
been sold;
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the liquidation preference and other rights, privileges and
preferences associated with our preferred stock;
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our progress in developing and commercializing the
non-prescription products owned by our company at the time;
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our progress towards clinical and product development milestones;
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the risks and uncertainties of obtaining FDA approval for
Iluvien;
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the inherent risks associated with our business at the time
stock option grants were approved; and
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overall equity market conditions and general economic trends.
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We made an initial estimate of the value of our common stock as
of December 31, 2005 for the purpose of establishing the
exercise price of stock-based awards granted during the year
ended December 31, 2006. Our valuation methodology relied
upon an application of the income approach and the market
approach. The income approach involves applying appropriate risk
adjusted discount rates to estimated debt free cash flows, based
on forecasted revenues and costs. The projections used to
estimate our value were based upon our expected operating
performance over the forecast period. There is inherent
uncertainty in our forecasts and projections. If different
estimates or other assumptions had been used, the valuations
would have been different. The market approach assessed the
value of our common stock in comparison to a similar
transaction,
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specifically a recent sale of our preferred stock. Our analysis
also included the application of discounts related to
(i) the lack of marketability for our common stock, and
(ii) the lack of control by our common stockholders due to
the rights, privileges and preferences associated with our
preferred stock. We selected a lack of marketability discount of
40% and a lack of control discount of 30%. The marketability
discount was based upon restricted stock studies, studies of
private placements of stock in public companies and studies of
initial public offerings that primarily observed discounts
ranging from 30% to 40%. We used the higher end of that range in
valuing our common stock due to the historical lack of dividends
being paid, restrictions on transferability, the high volatility
of our peer group, concentration of ownership, and the
difficulty in valuing our common stock due to the uncertainty
surrounding the future results of our FAME Study. Our lack of
control discount was 30%, based on a review of premiums paid in
transactions to acquire control of public companies that ranged
from 10% to 40%. We used the higher end of that range due to the
significant rights, privileges and preferences held by our
preferred stockholders.
As of December 31, 2005 the income approach yielded a
valuation range of $0.99 to $1.43 per share for our common
stock, and the market approach yielded a value of $1.33 per
share based upon the sale of our Series B preferred stock
in November and December of 2005. We therefore estimated a
valuation of $1.33 per share, which was recommended to our board
of directors for the strike price of all stock options granted
during the year ended December 31, 2006. We also relied on
this valuation in determining the fair value of the preferred
stock conversion features of our Series A and Series B
preferred stock at December 31, 2005, and at the end of
each of the first three calendar quarters in the year ended
December 31, 2006.
For purposes of valuing the conversion features of our
Series A preferred stock at the time of issuance between
July 2004 and October 2005, and determining the fair value of
stock options granted in each of the years ended
December 31, 2004 and 2005, we retrospectively applied the
same lack of liquidity and lack of discounts used in our
valuation as of December 31, 2005 to the issue price of our
Series A preferred stock sold between July 2004 and October
2005. We determined that the fair value of our common stock for
purposes of these valuations was $1.22 per share during this
period.
We also estimated the value of our common stock on
December 31, 2006, utilizing the income and market
approaches consistent with its valuation at December 31,
2005. As of December 31, 2006 the income approach yielded a
valuation of $1.63 per share for our common stock, and the
market approach yielded a value of $1.33 per share based upon
the sale of our Series B preferred stock in November 2006.
We weighted 25% of its assessment to the income approach and 75%
to the market approach, and therefore recommended a valuation of
$1.39 per share as of December 31, 2006. We relied on this
valuation for our recommendation to the board of directors for
the strike price of all stock options granted during the year
ended December 31, 2007. We also relied on this valuation
in determining the fair value of the conversion features of our
Series A and Series B preferred stock at
December 31, 2006, and at the end of each of the first
three calendar quarters in the year ended December 31, 2007.
Because we began evaluating an initial public offering of our
common stock or a sale of our company in 2008, we amended our
process to estimate the value of our common stock to utilize a
probability-weighted expected return method, as detailed in a
practice aid issued by the American Institute of Certified
Public Accountants entitled Valuation of Privately Held
Company Equity Securities Issued as Compensation as of
December 31, 2007 and periodically thereafter. Using this
valuation methodology, we estimated the value of our common
stock based upon an analysis of future values of the company
assuming various liquidity events or the lack of a liquidity
event as described below.
At each valuation date, we estimated the value of our common
stock under various potential outcomes for the company, including
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the potential of an initial public offering at various market
capitalizations;
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a sale of us or our assets in a merger or acquisition;
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a decision by our board of directors and stockholders to remain
an independent private company; or
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the liquidation of our company resulting in no value to the
holders of common stock.
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The value of our common stock was based upon the impact of the
rights, privileges and preferences of the preferred stock on the
value of each class of stock in each scenario. We then weighted
the values for our common stock determined under each scenario
based upon our estimates of the probability of each of the four
possible outcomes to determine an estimate of the value of our
common stock.
For valuations between December 31, 2007 and May 22,
2008 the significant drivers and weightings for our valuations
were: initial public offering 35%; sale of our company/assets
20%, remain private 20%; and liquidation of intellectual
property 25%. For valuations between June 25, 2008 and
August 27, 2008 the significant drivers and weightings for
our valuations were: initial public offering 40%; sale of our
company/assets 25%; remain private 20%; and liquidation of
intellectual property 15%. For valuations on September 30,
2008 and October 7, 2008 the significant drivers and
weightings for our valuations were: initial public offering 35%;
sale of our company/assets 35%; remain private 20%; and
liquidation of intellectual property 10%. For valuations between
December 31, 2008 and December 1, 2009 the significant
drivers and weightings for our valuations were: initial public
offering 20%; sale of our company/assets 40%; remain private
20%; and liquidation of intellectual property 20%. For the
valuations on December 16, 2009 and December 31, 2009
the significant drivers and weightings for our valuations were:
initial public offer 25%; sale of our company/assets 45%; remain
private 20%; and liquidation of intellectual property 10%. Our
estimated valuations on the following dates were as follows:
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|
|
|
|
|
|
Common
|
|
|
Stock
|
Valuation Date
|
|
Valuation
|
|
December 31, 2007
|
|
$
|
2.24
|
|
March 17, 2008
|
|
|
2.41
|
|
March 31, 2008
|
|
|
2.48
|
|
April 23, 2008
|
|
|
2.52
|
|
May 22, 2008
|
|
|
3.26
|
|
June 25, 2008
|
|
|
3.88
|
|
June 30, 2008
|
|
|
3.91
|
|
August 27, 2008
|
|
|
5.03
|
|
September 30, 2008
|
|
|
5.41
|
|
October 7, 2008
|
|
|
5.44
|
|
December 31, 2008
|
|
|
3.71
|
|
March 31, 2009
|
|
|
3.71
|
|
June 30, 2009
|
|
|
3.94
|
|
July 17, 2009
|
|
|
4.01
|
|
August 25, 2009
|
|
|
4.01
|
|
September 30, 2009
|
|
|
4.22
|
|
October 27, 2009
|
|
|
4.32
|
|
December 1, 2009
|
|
|
6.26
|
|
December 16, 2009
|
|
|
8.47
|
|
December 31, 2009
|
|
|
8.53
|
|
In assessing these valuations, the following factors are
significant:
|
|
|
|
|
On March 14, 2008, we completed the modification of our
agreement with pSivida that resulted in our acquisition of
rights to an incremental 30% of the future profits of Iluvien,
increasing our total ownership to 80% of the future profits;
|
|
|
|
|
|
On March 17, 2008, we entered into a Series C
preferred stock purchase agreement with certain investors. Under
the agreement, the investors agreed to purchase up to
5,807,112 shares of our Series C preferred stock at a
purchase price of $5.17 per share. The agreement contemplated
the purchase of such shares in two tranches. The first sale of
shares was completed on March 17, 2008 when we issued
|
48
|
|
|
|
|
5,504,542 shares. We completed the second sale of the
remaining 302,570 shares on April 23, 2008. The
proceeds of this offering have been and will be used primarily
to fund the initial payments associated with our amended and
restated agreement with pSivida and our incremental development
costs associated with our assumption of all financial
responsibility for the remaining development of Iluvien.
|
|
|
|
|
|
On April 25, 2008, we had an organizational meeting with a
selected group of investment bankers to initiate a process for
the initial public offering of our common stock. We filed a
registration statement with respect to this offering on
July 1, 2008, and subsequently amended that registration
statement on August 19, 2008.
|
|
|
|
In the fall of 2008 the volatility of the public capital markets
increased significantly and limited our ability to complete the
initial public offering of our common stock contemplated in our
July 1, 2008 registration filing, raise additional private
capital or complete a sale of our company. We ceased efforts
towards an initial public offering in the fourth quarter of 2008.
|
|
|
|
|
|
On August 25, 2009, we entered into a
Series C-1
preferred stock and warrant purchase agreement with certain
investors. Under the agreement, the investors agreed to purchase
up to 967,845 shares of our
Series C-1
preferred stock at a purchase price of $5.17 per share and
warrants to purchase up to an additional 1,935,700 shares
of our
Series C-1
preferred stock at an exercise price per share of $5.17. The
sale of the shares of
Series C-1
preferred stock was completed on August 25, 2009. The
proceeds of this offering will be used primarily to fund the
continuation of our FAME Study and prepare for filing an NDA for
Iluvien.
|
|
|
|
|
|
In June 2008, September 2008 and September 2009, we received
interim readouts from our open-label Phase 2 human
pharmacokinetic clinical trial (PK Study) that we believe
support that the sub-microgram levels of FA delivered by Iluvien
will provide visual acuity improvements while reducing the risk
of ocular side effects commonly associated with the use of
corticosteroids. See Business
Iluvien Iluvien is Positioned to Reduce Side
Effects for additional information on ocular side effects
commonly associated with the use of corticosteroids.
|
|
|
|
On September 30, 2009, we had an organizational meeting
with a selected group of investment bankers to reinitiate a
process for the initial public offering of our common stock. We
filed a registration statement with respect to this offering on
October 30, 2009.
|
|
|
|
On December 16, 2009, we received the month 24 clinical
readout from our FAME Study. Based on our analysis of this
readout, Iluvien demonstrated efficacy in the treatment of DME.
In addition, based on this readout, we believe that the adverse
events associated with the use of Iluvien are within the
acceptable limits of a drug for the treatment of DME.
|
The differences in valuation of our preferred stock and common
stock is due to the impact of the rights, privileges and
preferences of our preferred stock, including a cumulative
preference distribution of approximately $117.5 million at
December 31, 2009. We anticipate the per share price of
this offering will be in excess of both the most recent issuance
price of our preferred stock in August 2009, and the most recent
valuations of our common stock. We believe that the increase in
value above the issuance price of $5.17 per share for our
Series C-1 preferred stock will be due to:
|
|
|
|
|
The month 24 clinical readout from our FAME Study in
advance of this offering has further reduced the perceived
development and regulatory risk associated with Iluvien for a
potential investor. In discussions with our underwriters related
to the initial public offering of our common stock they have
indicated that a higher valuation of our common stock will
result from the month 24 readout from our FAME Study.
|
|
|
|
Our underwriters view of current market conditions and
other factors, including the last available financial and market
data from which our projections and valuations were derived.
|
|
|
|
The immediate liquidity available to investors in this offering.
|
49
Our estimated common stock valuation was $8.53 on
December 31, 2009. We believe that the impact of the
following items will result in additional increases in the value
of our common stock up to the issuance price of this offering:
|
|
|
|
|
The increased likelihood of consummating this offering.
|
|
|
|
The assumed conversion of all of our outstanding shares of
preferred stock (including shares of
Series C-1
preferred stock issued upon the exercise of outstanding warrants
in January 2010) into common stock immediately prior to
this offering, resulting in the elimination of a cumulative
preference distribution of approximately $117.5 million at
December 31, 2009 to the holders of our preferred stock.
|
|
|
|
The immediate liquidity available to investors in this offering.
|
Stock-Based
Compensation
Prior to January 1, 2005 we accounted for employee stock
options using the intrinsic-value method in accordance with
Accounting Principles Board (APB), Opinion No. 25,
Accounting for Stock Issued to Employees,
FASB
Interpretation No. 44,
Accounting for Certain
Transactions Involving Stock Compensation, an interpretation of
APB No. 25
, and related interpretations. For periods
prior to January 1, 2005, we have adopted the
disclosure-only provisions of SFAS No. 123,
Accounting for Stock-Based Compensation
(ASC 718),
as amended.
Effective January 1, 2005, we adopted the fair value
recognition provisions of ASC 718 using the modified
prospective application method. The modified prospective
application method requires us to (i) record compensation
costs for the unvested portion of previously issued awards that
remained outstanding at January 1, 2005 using the fair
value amounts measured under ASC 718 and (ii) record
compensation costs for any awards issued, modified, repurchased,
or cancelled after January 1, 2005.
We recognize the grant date fair value as compensation cost of
employee stock-based awards using the straight-line method over
the remaining vesting period for awards granted prior to
January 1, 2005 and the actual vesting period for all
awards issued after January 1, 2005, adjusted for our
estimates of forfeiture. Typically, we grant stock options with
a requisite service period of four years from the grant date. We
have elected to use the Black-Scholes option pricing model to
determine the fair value of stock options granted.
We concluded that this was the most appropriate method by which
to value our share-based payment arrangements, but if any
share-based payment instruments should be granted for which the
Black-Scholes method does not meet the measurement objective as
stated within ASC 718, we will utilize a more appropriate
method for valuing that instrument. However, we do not believe
that any instruments granted to date and accounted for under
ASC 718 would require a method other than the Black-Scholes
method.
Our determination of the fair market value of share-based
payment awards on the grant date using option valuation models
requires the input of highly subjective assumptions, including
the expected price volatility and option life. As we have been
operating as a private company, we are unable to use actual
price volatility or option life data as input assumptions within
our Black-Scholes valuation model.
For the calculation of expected volatility, because we lack
company-specific historical and implied volatility information,
we based our estimate of expected volatility on the volatility
by utilizing an average of volatilities of publicly traded
companies deemed similar to us in terms of product composition,
stage of lifecycle, capitalization and scope of operations. We
intend to continue to consistently apply this process using this
same index until a sufficient amount of historical information
regarding the volatility of our own share price becomes
available.
To estimate the expected term, we chose to utilize the
simplified method for plain vanilla
options as discussed within the Securities and Exchange
Commissions (SEC) Statement of Accounting Bulletin (SAB)
107. We believe that all factors listed within SAB 107 as
pre-requisites for utilizing the simplified method are true for
us and for our share-based payment arrangements. We intend to
utilize the simplified method for the foreseeable future until
more detailed information about exercise behavior will be more
widely available.
50
Our risk-free interest rates are based on a zero-coupon
U.S. treasury instrument, the term of which is consistent
with the expected term of the stock options. We have not paid
and do not anticipate paying cash dividends on our shares of
common stock; therefore, the expected dividend yield is assumed
to be zero. We are required to estimate forfeitures at the time
of the grant and revise those estimates in subsequent periods if
actual forfeitures differ from those estimates. We use
historical data to estimate pre-vesting option forfeitures and
record stock-based compensation expense only for those awards
that are expected to vest. Stock-based payments are generally
amortized on a straight-line basis over the requisite service
periods of the awards, which are generally the vesting periods.
We believe there is a high degree of subjectivity involved when
using option pricing models to estimate stock-based compensation
under ASC 718. There is currently not a market-based
mechanism or other practical application to verify the
reliability and accuracy of the estimates stemming from these
valuation models, nor is there a means to compare and adjust the
estimates to actual values. Although the fair value of employee
share-based awards is determined in accordance with ASC 718
using an option pricing model, that value may not be indicative
of the fair value observed in a market transaction between a
willing buyer and a willing seller. If factors change and we
employ different assumptions in the application of ASC 718
in future periods than those currently applied under
ASC 718, the compensation expense we record in future
periods under ASC 718 may differ significantly from what we
have historically reported.
The exercise prices of options granted were set by our board of
directors, the members of which have extensive experience in the
life sciences industry and all but one of whom are non-employee
directors. Our board of directors sets the exercise prices of
options on its determination of the fair market value of our
common stock at the time of the grants, which determination is
made in accordance with federal tax rules which require
reasonable application of a reasonable valuation method.
We performed valuations of our common stock contemporaneously
with the granting of stock options. We believe that all of our
stock options have been granted with exercise prices that are
equal to or greater than the fair value of our common stock on
the date of grant. The following table provides information
regarding our stock option grants to our employees and our
independent members of our board of directors from our inception:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Weighted
|
|
Weighted
|
|
|
Options
|
|
Average
|
|
Average Fair
|
Periods of Option Grants
|
|
Granted
|
|
Exercise Price
|
|
Value at Grant
|
|
July 7, 2004 to September 30, 2004
|
|
|
274,219
|
|
|
$
|
2.04
|
|
|
$
|
1.22
|
|
October 1, 2004 to December 31, 2004
|
|
|
86,764
|
|
|
|
2.04
|
|
|
|
1.22
|
|
January 1, 2005 to March 31, 2005
|
|
|
60,186
|
|
|
|
2.04
|
|
|
|
1.22
|
|
April 1, 2005 to June 30, 2005
|
|
|
17,647
|
|
|
|
2.04
|
|
|
|
1.22
|
|
July 1, 2005 to September 30, 2005
|
|
|
29,852
|
|
|
|
2.04
|
|
|
|
1.22
|
|
October 1, 2005 to December 31, 2005
|
|
|
18,036
|
|
|
|
2.04
|
|
|
|
1.22
|
|
January 1, 2006 to March 31, 2006
|
|
|
495,198
|
|
|
|
1.33
|
|
|
|
1.33
|
|
April 1, 2006 to June 30, 2006
|
|
|
36,764
|
|
|
|
1.33
|
|
|
|
1.33
|
|
July 1, 2006 to September 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
October 1, 2006 to December 31, 2006
|
|
|
421,852
|
|
|
|
1.33
|
|
|
|
1.33
|
|
January 1, 2007 to March 31, 2007
|
|
|
73,530
|
|
|
|
1.39
|
|
|
|
1.39
|
|
April 1, 2007 to June 30, 2007
|
|
|
2,942
|
|
|
|
1.39
|
|
|
|
1.39
|
|
July 1, 2007 to September 30, 2007
|
|
|
3,530
|
|
|
|
1.39
|
|
|
|
1.39
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Weighted
|
|
Weighted
|
|
|
Options
|
|
Average
|
|
Average Fair
|
Periods of Option Grants
|
|
Granted
|
|
Exercise Price
|
|
Value at Grant
|
|
October 1, 2007 to December 31, 2007
|
|
|
334,513
|
|
|
|
1.39
|
|
|
|
1.39
|
|
January 1, 2008 to March 31, 2008
|
|
|
492,272
|
|
|
|
2.41
|
|
|
|
2.41
|
|
April 1, 2008 to June 30, 2008
|
|
|
39,706
|
|
|
|
3.77
|
|
|
|
3.77
|
|
July 1, 2008 to September 30, 2008
|
|
|
5,882
|
|
|
|
5.03
|
|
|
|
5.03
|
|
October 1, 2008 to December 31, 2008
|
|
|
2,058
|
|
|
|
5.44
|
|
|
|
5.44
|
|
January 1, 2009 to March 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
April 1, 2009 to June 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
July 1, 2009 to September 30, 2009
|
|
|
271,844
|
|
|
|
4.01
|
|
|
|
4.01
|
|
October 1, 2009 to December 31, 2009
|
|
|
23,619
|
|
|
|
8.47
|
|
|
|
8.47
|
|
The intrinsic value of all outstanding vested and unvested
options based on $16.00 per share, the midpoint of the initial
public offering range, is $30.8 million based on 2,225,778
common stock options at a weighted average exercise price of
$2.14 per share outstanding at December 31, 2009.
Results
of Operations
Year
ended December 31, 2009 compared to the year ended
December 31, 2008
Research and development
expenses.
Research and development expenses
decreased by approximately $28.7 million, or 66%, to
approximately $15.1 million for the year ended
December 31, 2009 compared to approximately
$43.8 million for the year ended December 31, 2008.
The decrease was principally attributable to the restructuring
of our agreement with pSivida Inc., which resulted in
incremental expenses of $29.8 million in the year ended
December 31, 2008 that were not incurred in the year ended
December 31, 2009. The $29.8 million cost in 2008 was
comprised of a $12.0 million cash payment, a
$15.0 million promissory note issued to pSivida, and the
forgiveness of $2.8 million of net outstanding receivables
due from pSivida related to the agreement. We continued to incur
costs in 2009 with respect to our FAME Study, which completed
enrollment in October 2007, and preparations for its anticipated
registration with the FDA. We incurred increased costs in 2009
related to our FAME Study of $620,000 for our clinical research
organization (CRO) costs as we prepared for and completed the
lock of our FAME Study database and month 24 readout in the
fourth quarter of 2009 and $490,000 in technology transfer costs
associated with establishing manufacturing capabilities with a
third-party manufacturer for Iluvien. These amounts were offset
by decreases of $1.2 million in FAME Study trial site
costs, $310,000 for our reading center to evaluate pictures of
each enrollees retina, and $240,000 for our PK Study due
to the completion of enrollment and fewer patient visits per
month as the trial progressed. Additionally, total development
costs related to Iluvien increased by $1.3 million due to
the absence of cost sharing reimbursements from pSivida as a
result of the restructuring of our agreement in March 2008. We
also decreased spending on the evaluation of the NADPH oxidase
inhibitors obtained from Emory University and other development
pipeline candidates by $270,000 due to the restricted capital
markets in 2009 and in order to focus our resources on
completing the development of Iluvien, but incurred $300,000 in
initial license fees in 2009 to enter into these agreements with
Emory University.
General and administrative
expenses.
General and administrative expenses
decreased by approximately $1.7 million, or 33%, to
approximately $3.4 million for the year ended
December 31, 2009 compared to approximately
$5.1 million for the year ended December 31, 2008. The
decrease was primarily attributable to $1.3 million
incurred in preparation for the anticipated 2008 initial public
offering of our common stock that was expensed in the year ended
December 31, 2008 when we determined that an initial public
offering was unlikely in the then near term and $380,000 in
legal fees associated with the restructuring of our agreement
with pSivida, the evaluation of intellectual property regarding
our Iluvien inserter system and the evaluation of certain
strategic options.
Marketing expenses.
Marketing expenses
decreased by approximately $510,000, or 40%, to approximately
$750,000 for the year ended December 31, 2009 compared to
approximately $1.3 million for the year
52
ended December 31, 2008. The decrease was primarily
attributable to $230,000 in decreased spending on travel and
general corporate awareness due to the restricted capital
markets in 2009 and in order to focus our resources on
completing the development of Iluvien, and $210,000 incurred for
the initiation of pricing studies of the U.S. and European
markets for Iluvien during the year ended December 31, 2008
that were not incurred in the year ended December 31, 2009.
Interest income.
Interest income decreased by
approximately $550,000, or 94%, to approximately $40,000 for the
year ended December 31, 2009 compared to approximately
$590,000 for the year ended December 31, 2008. The decrease
in interest income is primarily attributable to a decrease in
our average cash balance from $25.5 million during the year
ended December 31, 2008 to $11.1 million for the year
ended December 31, 2009, combined with a substantial drop
in the rates of return available on our money market accounts
from approximately 2.3% during the year ended December 31,
2008 to 0.3% for the year ended December 31, 2009.
Interest expense.
Interest expense increased
by approximately $380,000, or 25%, to approximately
$1.9 million for the year ended December 31, 2009
compared to approximately $1.5 million for the year ended
December 31, 2008. Our interest expense is associated with
our $15.0 million note payable to pSivida issued in March
2008, and the increase is due to the note payable being
outstanding for the full year ended December 31, 2009 as
opposed to being outstanding for nine months in 2008.
Increase in fair value of preferred stock conversion
feature.
For the year ended December 31,
2009 we recognized an expense of approximately
$23.1 million related to the increase in the fair value of
the conversion feature of our preferred stock. The increase was
attributable to an increase in the estimated fair value of our
common stock from $3.71 at December 31, 2008 to $8.53 at
December 31, 2009 and increased volatility in the market
values of our peer group.
Income (loss) from discontinued operations.
We
did not have any income (loss) from discontinued operations for
either of the year ended December 31, 2008 or
December 31, 2009 due to the sale of our dry eye product to
Bausch & Lomb in July 2007.
Year
ended December 31, 2008 compared to the year ended
December 31, 2007
Research and development
expenses.
Research and development expenses
increased by approximately $35.4 million, or 423%, to
approximately $43.8 million for the year ended
December 31, 2008 compared to approximately
$8.4 million for the year ended December 31, 2007. The
increase was primarily attributable to the restructuring of our
agreement with pSivida, which resulted in incremental
non-recurring expenses of $29.8 million in 2008. The
$29.8 million was comprised of a $12.0 million cash
payment, a $15.0 million promissory note issued to pSivida,
and the forgiveness of $2.8 million of net outstanding
receivables due from pSivida related to the agreement. The
remaining increase is primarily due to costs to continue our
FAME Study which completed enrollment in October 2007, and
preparations for its anticipated registration with the FDA. We
incurred increases in our FAME Study of, $1.3 million in
technology transfer costs associated with establishing
manufacturing capabilities with a third-party manufacturer,
$550,000 for clinical supplies, stability testing, and tech
transfer assistance paid to pSivida and $490,000 for our PK
Study initiated in September 2007. These amounts were offset by
decreases in FAME Study trial site costs of $1.9 million
and CRO costs of $490,000 due to the completion of enrollment
and fewer patient visits per month as the trial progresses, and
a decrease of $220,000 associated with the acquisition of
patent rights in 2007 to a device similar to our delivery
technology in order to avoid the risk of patent infringement.
Additionally, total development costs related to Iluvien
increased by $4.8 million due to the absence of cost
sharing reimbursements due from pSivida as a result of the
restructuring of our agreement in March 2008. We also had an
increase in payroll and staffing related costs of $720,000
primarily due to additional research and development personnel
necessary to monitor the increased activity of our FAME Study
and facilitate the technology transfer of Iluvien to our third
party manufacturers, $240,000 in increased stock
compensation expense associated with December 2007 option grants
and expenses of $170,000 for pilot studies of Iluvien for other
indications initiated in 2008.
General and administrative
expenses.
General and administrative expenses
increased by approximately $1.9 million, or 59%, to
approximately $5.1 million for the year ended
December 31, 2008 compared to
53
approximately $3.2 million for the year ended
December 31, 2007. The increase was primarily attributable
to $1.3 million in expenses incurred in preparation for the
anticipated 2008 initial public offering of our common stock
that was expensed when we determined that an initial public
offering was unlikely in the then near term, $410,000 in
increased legal fees associated with the restructuring of our
agreement with pSivida, the evaluation of intellectual property
regarding our Iluvien inserter system and the evaluation of
certain strategic options, $350,000 in increased payroll costs
associated with pay increases and additional staffing, $250,000
in stock compensation expense associated with December 2007
option grants, and $90,000 in software amortization expense
related to the acquisition of software in late 2007 and 2008 to
support our FAME Study and the planned filing of an NDA for
Iluvien. These changes were offset primarily by a decrease of
$320,000 in severance and other costs associated with the
departure of our Vice President of Business Development in April
2007 and a decrease of $130,000 insurance expense due to the
decreased scope of our business associated with the
discontinuance of our non-prescription business.
Marketing expenses.
Marketing expenses
increased by approximately $290,000, or 30%, to approximately
$1.3 million for the year ended December 31, 2008
compared to approximately $1.0 million for the year ended
December 31, 2007. The increase was primarily attributable
to $220,000 for the initiation of pricing studies of the U.S.
and European markets for Iluvien in 2008, $100,000 in
conventions and key opinion leader development and $80,000 in
stock compensation expense associated with December 2007 option
grants. These increases were offset by $170,000 decrease
associated with reimbursement studies and an Iluvien branding
project undertaken in 2007.
Interest income.
Interest income decreased by
approximately $490,000, or 46%, to approximately $590,000 for
the year ended December 31, 2008 compared to approximately
$1.1 million for the year ended December 31, 2007. The
decrease in interest income was primarily attributable to a
substantial drop in the rates of return available on our money
market accounts from approximately 4.6% in 2007 to approximately
2.3% in 2008.
Interest expense.
For the year ended
December 31, 2008 we recognized approximately
$1.5 million in interest expense associated with our
$15.0 million note payable to pSivida issued in March 2008.
Increase in fair value of preferred stock conversion
feature.
For the year ended December 31,
2008 we recognized expense of approximately $10.5 million
related to the increase in the fair value of the conversion
feature of our preferred stock. The increase was attributable to
an increase in the estimated fair value of our common stock from
$2.24 at December 31, 2007 to $3.71 at December 31,
2008, increased volatility in the market values of our peer
group and an increase in the term of the redemption features as
a result of the issuance our Series C preferred stock in
March 2008.
Income (loss) from discontinued operations.
We
did not have any income (loss) from discontinued operations for
the year ended December 31, 2008 due to the sale of our dry
eye product to Bausch & Lomb in July 2007. We
recognized income from discontinued operations of
$5.7 million for the year ended December 31, 2007 due
to a gain of $6.0 million on the sale of our dry eye
product to Bausch & Lomb, offset by a loss from
operations of the non-prescription business.
Liquidity
and Capital Resources
To date we have incurred recurring losses, negative cash flow
from operations, and have accumulated a deficit of
$171.9 million from our inception through December 31,
2009. Since our inception, we have funded our operations through
the private placement of common stock, preferred stock and
convertible debt, as well as by the sale of certain assets of
the non-prescription business in which we were previously
engaged.
As of December 31, 2009, we had $4.9 million in cash
and cash equivalents. Including the January 2010 receipt of
$10.0 million in proceeds from the exercise of
Series C-1
warrants and a $4.0 million option payment from
Bausch & Lomb upon the exercise by Bausch & Lomb
of its option to extend the period during which it may continue
to develop an allergy product acquired from us in 2006 by two
years, we had $18.9 million in cash and cash equivalents
which we believe is sufficient to fund our operations into
September 2010, but not beyond. Our need for additional
financing, and current lack of a commercial product raise
substantial doubt about our ability to continue as a going
concern. On a pro forma as adjusted basis, as of
December 31, 2009 we had approximately $87.0 million
in cash and cash equivalents which we believe is sufficient to
fund our
54
operations through the projected commercialization of Iluvien as
early as the first quarter of 2011. However, we cannot be sure
that this offering will be completed, that Iluvien will be
approved by the FDA in the fourth quarter of 2010 or that, if
approved, future sales of Iluvien will generate revenues
sufficient to fund our operations beyond the first quarter of
2011, or ever. In the event additional financing is needed, we
may seek to fund our operations through the sale of additional
equity securities, strategic collaboration agreements and debt
financing. We cannot be sure that additional financing from any
of these sources will be available when needed or that, if
available, the additional financing will be obtained on terms
favorable to us or our stockholders. If we raise additional
funds by issuing equity securities, substantial dilution to
existing stockholders would likely result and the terms of any
new equity securities may have a preference over our common
stock. If we attempt to raise additional funds through strategic
collaboration agreements and debt financing, we may not be
successful in obtaining collaboration agreements, or in
receiving milestone or royalty payments under those agreements,
or the terms of the debt may involve significant cash payment
obligations as well as covenants and specific financial ratios
that may restrict our ability to commercialize our product
candidates or operate as a business.
Historically through December 2009, we have received
$95.1 million from the sale of shares of our common and
preferred stock (including securities convertible into our
common stock and preferred stock):
|
|
|
|
|
from July 2003 to October 2003, we issued and sold a total of
1,389,684 shares of common stock for aggregate net proceeds
of $1.7 million;
|
|
|
|
|
|
in May 2004 we issued $810,000 of convertible promissory notes
which were converted into 190,072 shares of Series A
preferred stock and 47,517 shares of common stock in July
2004;
|
|
|
|
|
|
from July 2004 to October 2005, we issued and sold a total of
6,434,772 shares of Series A preferred stock for
aggregate net proceeds of $25.9 million;
|
|
|
|
|
|
from November 2005 to November 2006, we issued and sold a total
of 7,147,894 shares of Series B preferred stock for
aggregate net proceeds of $31.9 million;
|
|
|
|
|
|
from March 2008 to April 2008, we issued and sold a total of
5,807,112 shares of Series C preferred stock for
aggregate net proceeds of $29.9 million; and
|
|
|
|
|
|
in August 2009 we issued and sold 967,845 shares of
Series C-1
preferred stock, and warrants exercisable for an additional
1,935,700 shares of
Series C-1
preferred stock for aggregate net proceeds of $4.9 million.
|
In December 2006, we received $10.0 million in proceeds
from the sale of our allergy products to Bausch &
Lomb. We will receive an additional milestone payment of
$8.0 million from Bausch & Lomb if one of the
allergy products receives FDA approval. We also sold our dry eye
product to Bausch & Lomb in July 2007, resulting in
proceeds of $6.7 million to us.
As of December 31, 2009, we had $4.9 million in cash
and cash equivalents. We have invested a substantial portion of
our available cash in money market funds placed with reputable
financial institutions for which credit loss is not anticipated.
We have established guidelines relating to diversification and
maturities of our investments to preserve principle and maintain
liquidity.
Net cash was used in both our continuing and discontinued
operations in the years and ended December 31, 2007, 2008
and 2009 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(In millions)
|
|
|
Continuing Operations
|
|
$
|
10.4
|
|
|
$
|
32.2
|
|
|
$
|
17.8
|
|
Discontinued Operations
|
|
|
2.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
12.9
|
|
|
$
|
32.2
|
|
|
$
|
17.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55
For the twelve months ended December 31, 2009, cash used in
our continuing operations of $17.5 million was primarily
due to our net loss from continuing operation of
$44.2 million offset by non-cash charges including
$23.1 million related to the change in fair value of our
preferred stock conversion feature, $1.1 million in
depreciation and amortization expense associated primarily with
equipment used for the manufacture of our Iluvien registration
batches, $550,000 in stock compensation and other expense and
$300,000 in non-cash research and development expense paid to
Emory University with our common stock as an initial license fee
for two classes of NADPH oxidase inhibitors. Further offsetting
our net losses from continuing operations were increases in
accounts payable, accrued liabilities and other current
liabilities of $890,000 and other long-term liabilities of
$150,000, and a decrease in prepaid expenses and other current
assets of $590,000. Accounts payable, accrued liabilities and
other current liabilities increased due to increases of
$1.1 million in amounts payable to our clinical trial sites
and $550,000 in interest accrued on our $15.0 million
promissory note to pSivida, partially offset by decreases of
$420,000 in professional fees payable in connection with the
preparation for an initial public offering of our common stock
in 2008 and $390,000 in amounts payable to one of our third
party manufacturers. The increase in other long term liabilities
is due to interest being accrued on our promissory note to
pSivida. Prepaid expenses and other current assets decreased
primarily due to the progression of the technology transfer of
Iluvien and the utilization of prepayments to our third party
manufacturer.
For the year ended December 31, 2008, our cash used in
continuing operations of $32.2 million was primarily due to
our net loss from continuing operations of $61.5 million
offset by non-cash charges including a promissory note payable
of $15.0 million issued to pSivida and the forgiveness of
$2.8 million of net receivables due from pSivida in
connection with the amendment of our agreement,
$10.5 million related to the change in fair value of our
preferred stock conversion feature, $750,000 in stock
compensation and other expense, and $240,000 in depreciation and
amortization. An increase of $1.2 million in prepaid and
other current assets was offset by increases of $700,000
accounts payable, accrued expenses and other current liabilities
and $540,000 in other long-term liabilities. The increase in
prepaid expenses and other current assets was due primarily to
$1.1 million in advances to our third party manufacturers
for the technology transfer of Iluvien and an $880,000 increase
in our receivable due from pSivida prior to the renegotiation of
our agreement, offset by decreases in prepayments of $460,000 to
certain clinical trial sites and $360,000 to our contract
research organizations as our FAME Study progressed. Accounts
payable, accrued expenses and other current liabilities
increased primarily due to $440,000 to our CROs as our FAME
Study continued, $400,000 related to the technology transfer of
Iluvien and $380,000 associated with preparation for an initial
public offering of our common stock, offset by decreases of
$440,000 in amounts payable to our clinical trial sites and
$150,000 for our animal toxicology and degradation studies. The
increase in other long term liabilities is due to interest being
accrued on our promissory note to pSivida.
For the year ended December 31, 2007, our cash used in
continuing operations of $10.4 million was primarily
attributable to our loss from continuing operations of
$11.4 million increased by an increase in other current
assets of $1.6 million, and offset by an increase in our
accounts payable, accrued expenses and other current liabilities
of $2.2 million, non-cash stock-based compensation of
$190,000, and non-cash depreciation and amortization of
$150,000. The increase in prepaid expenses and other current
assets was primarily attributable to an increase of
$1.2 million in our receivable due from pSivida under our
agreement as our FAME Study progressed and $220,000 prepayments
to certain clinical trial sites for their participation in our
FAME Study. The increase in accounts payable, accrued expenses
and other current liabilities was comprised primarily of
increases of $1.6 million in amounts payable to our
clinical trial sites as we completed enrollment of our FAME
Study in 2007, $310,000 in CRO and reading center costs to
monitor patients and clinical trial sites, and $100,000 owed to
software vendors for installation of trial management software
for our FAME Study.
56
Net cash was provided by (used in) the investing activities of
our continuing and discontinued operations in the years ended
December 31, 2007, 2008 and 2009 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
December 31,
|
|
|
2007
|
|
2008
|
|
2009
|
|
|
(In millions)
|
|
Continuing Operations
|
|
$
|
(0.2
|
)
|
|
$
|
(0.6
|
)
|
|
$
|
(0.1
|
)
|
Discontinued Operations
|
|
|
6.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6.5
|
|
|
$
|
(0.6
|
)
|
|
$
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in the investing activities of our continuing
operations is attributable to purchases of property and
equipment in each of the years ended December 31, 2007,
2008 and 2009.
Net cash provided by our financing activities was
$4.9 million for the year ended December 31, 2009;
$29.8 million for the year ended December 31, 2008 and
$80,000 for the year ended December 31, 2007. Net cash
provided by financing activities in the year ended
December 31, 2009 were due to net proceeds of
$4.9 million received from the issuance of our
Series C-1
preferred stock and warrants for our Series C-1 preferred stock.
In 2008, cash was provided primarily by net proceeds of
$29.9 million received from the issuance of our
Series C preferred stock. In 2007, cash provided by
financing activities were primarily due to the exercise of
employee stock options.
Our future capital requirements will depend on numerous
forward-looking factors, including, but not limited to:
|
|
|
|
|
the progress and cost of preclinical studies, clinical trials
and other research and development activities;
|
|
|
|
the scope, prioritization and number of clinical trials and
other research and development programs;
|
|
|
|
the costs of the development and expansion of our operational,
sales and marketing infrastructure;
|
|
|
|
the costs and timing of obtaining regulatory approval;
|
|
|
|
the ability of our collaborators to achieve development
milestones;
|
|
|
|
the costs of filing, prosecuting, enforcing and defending patent
claims and other intellectual property rights;
|
|
|
|
the costs and timing of securing manufacturing arrangements for
clinical or commercial production;
|
|
|
|
the costs of acquiring or undertaking development and
commercialization efforts for any future product candidates;
|
|
|
|
the magnitude of our general and administrative expenses; and
|
|
|
|
the cost that we may incur under current and future licensing
arrangements relating to other product candidates.
|
Obligations
and Commitments
The following table summarizes our contractual obligations and
commitments as of December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Future Period
|
|
|
|
Total
|
|
|
Less than 1 Year
|
|
|
1 - 3 Years
|
|
|
3 - 5 Years
|
|
|
5+ Years
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Note payable to pSivida plus accrued interest
|
|
$
|
19,175
|
|
|
$
|
6,750
|
|
|
$
|
12,425
|
|
|
$
|
|
|
|
$
|
|
|
Operating lease
|
|
|
105
|
|
|
|
105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital leases
|
|
|
6
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
19,286
|
|
|
$
|
6,861
|
|
|
$
|
12,425
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57
The following amounts have not been included in the table above
as the timing of the payments is uncertain:
|
|
|
|
|
The possible acceleration of the note payable to pSivida of
$15 million upon the earlier of certain liquidity events
(including an initial public offering of our common stock
greater than $75 million), or the occurrence of an event of
default under our agreement with pSivida.
|
|
|
|
In connection with our March 2008 agreement with pSivida we
are obligated to make a milestone payment of $25.0 million
upon FDA approval of Iluvien.
|
|
|
|
In connection with our July 2009 license and option agreement
with Emory University for the fulvene class of NADPH oxidase
inhibitors, we are required to make annual minimum royalty
payments in the first through the fourth calendar years
following regulatory approval of the product in a major market
country (i.e., the United States, Japan, China, India or any
European country) in the amount of $250,000, $500,000,
$1.0 million and $2.5 million, respectively, and $2.5
million for each subsequent year during the term of our
agreement. We will also be required to make payments of up to
$5.8 million depending upon which regulatory milestones we
achieve. If we do not make any milestone payments to Emory
University under our agreement prior to the third anniversary of
the effective date of the agreement, then we will be required to
pay Emory University annual license maintenance fees ranging
from $500,000 to $2.0 million (depending upon when such
payment is made) until a milestone payment is made under the
agreement. As an upfront license fee for the license granted by
Emory University to us, we issued to Emory University (and its
inventors) that number of shares of our common stock with a fair
market value equal to $150,000 on the date of issuance. To date,
no other payments have been made to Emory University in
connection with this license agreement.
|
|
|
|
In connection with our August 2009 license and option agreement
with Emory University for the triphenylmethane class of NADPH
oxidase inhibitors, we are required to make annual minimum
royalty payments in the first through the fourth calendar years
following regulatory approval of the product in a major market
country (i.e., the United States, Japan, China, India or any
European country) in the amount of $250,000, $500,000,
$1.0 million and $2.5 million, respectively, and an
annual minimum royalty payment of $2.5 million for each
subsequent year during the term of our agreement. We will also
be required to make payments of up to $5.9 million
depending upon which regulatory milestones we achieve. If we do
not make any milestone payments to Emory University under our
agreement prior to the third anniversary of the effective date
of the agreement, then we will be required to pay Emory
University annual license maintenance fees ranging from $500,000
to $2.0 million (depending upon when such payment is made)
until a milestone payment is made under the agreement. As an
upfront license fee for the license granted by Emory University
to us, in the fourth quarter of 2009 we issued to Emory
University (and its inventors) that number of shares of our
common stock with a fair market value equal to $150,000 on the
date of issuance. To date, no other payments have been made to
Emory University in connection with this license agreement.
|
|
|
|
In connection with our November 2007 agreement with Dainippon
Sumitomo Pharma Co., Ltd. (Dainippon) we will be required to
make a payment in the amount of $200,000 to Dainippon within
30 days following the first regulatory approval of a
licensed product in the United States by the FDA.
|
|
|
|
|
|
In January 2006, we entered into an agreement with a contract
research organization for clinical and data management services
to be performed in connection with our FAME Study clinical sites
in the United States, Canada, and Europe. In accordance with the
terms of the agreement, we will incur approximately
$17.4 million of expenses with the contract research
organization through 2010. Through December 31, 2009 we
incurred $13.6 million of expense associated with this
agreement.
|
|
|
|
|
|
In July 2006, we entered into an agreement with a contract
research organization for clinical services to be performed in
connection with our FAME Study clinical sites in India. In
accordance with the terms of the agreement, we will incur
approximately $1.8 million of expenses with the contract
research organization through 2010. Through December 31,
2009 we incurred $1.0 million of expense associated with
this agreement.
|
58
Off-Balance
Sheet Transactions
To date, we have not had any relationships with unconsolidated
entities or financial partnerships, such as entities referred to
as structured finance or special purpose entities, which are
established for the purpose of facilitating off-balance sheet
arrangements or other contractually narrow or limited purposes.
Qualitative
and Quantitative Disclosures About Market Risk
We are exposed to market risk related to changes in interest
rates. As of December 31, 2009, we had cash and cash
equivalents of $4.9 million. Our primary exposure to market
risk is interest income sensitivity, which is affected by
changes in the general level of U.S. interest rates,
particularly because our investments are in short-term
marketable securities. Due to the short-term duration of our
investment portfolio and the low risk profile of our
investments, an immediate 10% change in interest rates would not
have a material effect on the fair market value of our
portfolio. Accordingly, we would not expect our operating
results or cash flows to be affected to any significant degree
by the effect of a sudden change in market interest rates on our
securities portfolio.
We contract for the conduct of some of our clinical trials and
other research and development activities with contract research
organizations and investigational sites in the United States,
Europe and India. We may be subject to exposure to fluctuations
in foreign exchange rates in connection with these agreements.
We do not hedge our foreign currency exposures. We have not used
derivative financial instruments for speculation or trading
purposes.
Tax Loss
Carry-Forwards
At December 31, 2009, we had U.S. federal and state net
operating loss carry-forwards (NOLs) of approximately
$79.5 million and $62.7 million, respectively, which
expire at various dates beginning in 2018 through 2029.
Section 382 of the Internal Revenue Code limits the annual
utilization of NOLs and tax credit carry-forwards following an
ownership change in our company. If it is determined that
significant ownership changes have occurred since we generated
these NOLs, we may be subject to annual limitations on the use
of these NOLs under Internal Revenue Code Section 382 (or
comparable provisions of state law).
Recent
Accounting Pronouncements
In March 2008, the FASB Issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging
Activities an amendment of FASB Statement
No. 133
, (ASC 815), which requires companies with
derivative instruments to disclose information that should
enable financial statement users to understand how and why a
company uses derivative instruments, how derivative instruments
and related hedged items are accounted for under ASC 815, and
how these items affect a companys financial position,
results of operations and cash flows. ASC 815 affects only these
disclosures and does not change the accounting for derivatives.
We are applying ASC 815 prospectively beginning with the first
quarter of the 2009 fiscal year. The adoption of ASC 815 did not
have a material effect on the disclosures in our financial
statements.
In June 2009, the FASB issued SFAS No. 168,
The
FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles
(SFAS 168).
SFAS 168 authorized the Codification as the sole source for
authoritative U.S. GAAP and any accounting literature that
is not in the Codification will be considered nonauthoritative.
We have commenced utilizing the Codification as its sole source
of authoritative U.S. GAAP for its 2009 financial
statements.
59
BUSINESS
Overview
We are a biopharmaceutical company that specializes in the
research, development and commercialization of prescription
ophthalmic pharmaceuticals. We are presently focused on diseases
affecting the back of the eye, or retina, because we believe
these diseases are not well treated with current therapies and
represent a significant market opportunity. Our most advanced
product candidate is Iluvien, which we are developing for the
treatment of diabetic macular edema (DME). DME is a disease of
the retina that affects individuals with diabetes and can lead
to severe vision loss and blindness. We are currently conducting
two Phase 3 pivotal clinical trials (collectively, our FAME
Study) for Iluvien involving 956 patients in sites across the
United States, Canada, Europe and India to assess the efficacy
and safety of Iluvien in the treatment of DME. In December 2009
we received the month 24 clinical readout from our FAME Study.
Based upon our analysis of this data, we plan to file a New Drug
Application (NDA) in the United States for the low dose of
Iluvien in the second quarter of 2010, followed by registration
filings in certain European countries and Canada. We intend to
request Priority Review of our NDA from the U.S. Food and Drug
Administration (FDA). If Priority Review is granted, we can
expect a response to our NDA from the FDA in the fourth quarter
of 2010. If our NDA is approved, we plan to commercialize
Iluvien in the United States by marketing and selling Iluvien to
retinal specialists as early as the first quarter of 2011. In
addition to treating DME, Iluvien is being studied in three
Phase 2 clinical trials for the treatment of the dry form of
age-related macular degeneration (AMD), the wet form of AMD and
retinal vein occlusion (RVO).
According to the Centers for Disease Control and Prevention
(CDC), the number of Americans diagnosed with diabetes had
increased from approximately 8.1 million people in 1994 to
approximately 17.9 million people in 2007. Per the
International Diabetes Federation Atlas, the estimated
prevalence of people diagnosed with diabetes for 2010 has
increased to 285 million people worldwide and that this
number is expected to reach 438 million people by 2030. All
patients with diabetes are at risk of developing some form of
diabetic retinopathy, an ophthalmic condition of diabetes that
presents with symptoms that include the swelling and leakage of
blood vessels within the retina or the abnormal growth of new
blood vessels on the surface of the retina. As reported by the
American Diabetes Association, in the U.S. diabetic retinopathy
causes approximately 12,000 to 24,000 new cases of blindness
each year, making diabetes the leading cause of new cases of
blindness in adults aged 20 to 74. When the blood vessel leakage
of diabetic retinopathy causes swelling in the macula, the part
of the eye responsible for central vision, the condition is
called DME. The Wisconsin Epidemiologic Study of Diabetic
Retinopathy found that over a ten-year period approximately 19%
of diabetics studied were diagnosed with DME. Based on this
study and the current U.S. diabetic population, we estimate the
incidence of DME in the United States to be approximately
340,000 cases annually. As the population of diabetics
increases, we expect the annual incidence of diagnosed DME to
increase.
There are no ophthalmic drug therapies currently approved by the
FDA for the treatment of DME. The current standard of care for
the treatment of DME is laser photocoagulation. Laser
photocoagulation is a retinal procedure in which a laser is used
to cauterize leaky blood vessels or to apply a pattern of burns
to reduce edema. This procedure has undesirable side effects
including partial loss of peripheral and night vision. As a
result of these side effects and a desire for improved visual
outcomes, retinal specialists have supplemented laser
photocoagulation with alternate off-label therapies for the
treatment of DME, including injections of corticosteroids and
anti-vascular endothelial growth factor (anti-VEGF) agents.
Corticosteroids have shown improved visual acuity in DME
patients in non-pivotal clinical trials, but they are associated
with increased intraocular pressure (IOP), which may increase
the risk of glaucoma, and cataract formation. Both of these
alternate therapies are limited by a need for multiple
injections to maintain a therapeutic effect.
Iluvien is inserted in the back of the patients eye to a
placement site that takes advantage of the eyes natural
fluid dynamics to deliver fluocinolone acetonide (FA). Iluvien
is inserted with a device that employs a 25-gauge needle which
allows for a self-sealing wound. In the United States, this
procedure is non-surgical and is performed in the retinal
specialists office. Iluvien is an intravitreal insert
designed to provide a therapeutic effect for up to
36 months by delivering sustained sub-microgram levels of
FA, a non-proprietary corticosteroid with demonstrated efficacy
in the treatment of ocular diseases. Iluvien has demonstrated
efficacy
60
in the treatment of DME in our FAME Study. Additionally, by
providing lower exposure to corticosteroids and focusing the
delivery to the back of the eye, we believe that the adverse
events associated with the use of Iluvien are within the
acceptable limits of a drug for the treatment of DME.
Iluvien is also being studied in three Phase 2 clinical
trials with retinal specialists to assess its safety and
efficacy for the treatment of dry AMD, wet AMD and RVO. In
addition to our activities related to the development and
commercialization of Iluvien, we are also conducting testing on
two classes of nicotinamide adenine dinucleotide phosphate
(NADPH) oxidase inhibitors for which we have acquired exclusive,
worldwide licenses from Emory University. Our initial focus is
on the use of NADPH oxidase inhibitors in the treatment of dry
AMD. We plan to evaluate the use of NADPH oxidase inhibitors in
the treatment of other diseases of the eye, including wet AMD
and diabetic retinopathy. We will pursue the development,
license and acquisition of rights to compounds and technologies
with the potential to treat diseases of the eye that we believe
are not well treated by current therapies.
We are led by an executive team with extensive development and
commercialization expertise with ophthalmic products including
the launch and management of Visudyne, a drug product sponsored
by Novartis Ophthalmics and the first pharmacological treatment
indicated for the treatment of wet AMD. We intend to capitalize
on our managements experience and expertise in marketing
eye-care products, by marketing and selling Iluvien to the
approximately 1,600 retinal specialists practicing in the
approximately 900 retina centers across the United States
and Canada. We intend to seek a commercialization partner for
sales and marketing activities outside North America.
Business
Strategy
We are presently focused on diseases affecting the back of the
eye, or retina, because we believe these diseases are not well
treated with current therapies and represent a significant
market opportunity. Our business strategy is to:
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Pursue FDA Approval for Iluvien.
We are
currently conducting our FAME Study involving 956 patients in
sites across the United States, Canada, Europe and India to
assess the efficacy and safety of Iluvien in the treatment of
DME. In December 2009 we received the month 24 clinical readout
from our FAME Study. Based upon our analysis of this data, we
plan to file an NDA in the United States for the low dose of
Iluvien in the second quarter of 2010, followed by registration
filings in certain European countries and Canada.
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Maximize the Commercial Success of Iluvien.
If
approved by the FDA, we intend to capitalize on our
managements past experience and expertise in marketing
eye-care products including the launch and management of
Visudyne (Novartis Ophthalmics) by marketing and selling Iluvien
to the approximately 1,600 retinal specialists practicing
in the approximately 900 retina centers in the United
States and Canada. We intend to seek a commercialization partner
for sales and marketing activities outside North America.
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Assess the Effectiveness of Iluvien for Additional Retinal
Diseases.
We believe that Iluvien has the
potential to address additional retinal diseases including,
among others, dry AMD, wet AMD and RVO. Iluvien is being studied
in three Phase 2 clinical trials with retinal specialists
to assess the safety and efficacy of Iluvien for the treatment
of these diseases of the eye.
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Develop Our Existing Ophthalmic Product
Pipeline.
We have acquired exclusive, worldwide
licenses of rights under patent applications for two classes of
NADPH oxidase inhibitors from Emory University. We believe that
the management of oxidative stress is an important strategy in
managing the development and progression of diseases of the eye,
and we believe that NADPH oxidase inhibitors have the potential
to manage oxidative stress. Our initial focus is on the use of
NADPH oxidase inhibitors in the treatment of dry AMD. We plan to
evaluate the use of NADPH oxidase inhibitors in the treatment of
other diseases of the eye, including wet AMD and diabetic
retinopathy.
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Expand Our Ophthalmic Product Pipeline.
We
believe there are further unmet needs in the treatment of
ophthalmic diseases. Toward that end, we intend to leverage
managements expertise and its broad
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61
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network of relationships in continuing to evaluate in-licensing
and acquisition opportunities for compounds and technologies
with applications in diseases affecting the eye.
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Disease
Overview and Market Opportunity
Diabetes
and Diabetic Retinopathy
Diabetes mellitus, and its systemic and ophthalmic
complications, represents an enormous public health threat in
the United States. According to the CDC, the number of Americans
diagnosed with diabetes has increased from approximately
8.1 million people in 1994 to approximately
17.9 million people in 2007. In addition to diagnosed
cases, the CDC estimates that an additional 5.7 million
Americans with diabetes are currently undiagnosed and are
therefore not being monitored and treated to control their
disease and prevent systemic and ophthalmic complications. With
better diagnosis methodologies and improved public awareness,
the number of persons diagnosed with and being treated for
diabetes is expected to increase. Per the International Diabetes
Federation Atlas, the estimated prevalence of diabetes for 2010
has increased to 285 million people worldwide and this
number is expected to reach 438 million people by 2030.
All patients with diabetes are at risk of developing some form
of diabetic retinopathy, an ophthalmic complication of diabetes
that presents with symptoms including the swelling and leakage
of blood vessels within the retina or the abnormal growth of new
blood vessels on the surface of the retina. According to the
American Diabetes Association, in the United States diabetic
retinopathy causes approximately 12,000 to 24,000 new cases of
blindness each year making diabetes the leading cause of new
cases of blindness in adults aged 20 to 74. Diabetic retinopathy
can be divided into either non-proliferative or proliferative
retinopathy. Non-proliferative retinopathy (also called
background retinopathy) develops first and causes increased
capillary permeability, microaneurysms, hemorrhages, exudates,
macular ischemia and macular edema (thickening of the retina
caused by fluid leakage from capillaries). Proliferative
retinopathy is an advanced stage of diabetic retinopathy which,
in addition to characteristics of non-proliferative retinopathy,
results in the growth of new blood vessels. These new blood
vessels are abnormal and fragile, growing along the retina and
along the surface of the clear, vitreous gel that fills the
inside of the eye. By themselves, these blood vessels do not
cause symptoms or vision loss. However, these blood vessels have
thin, fragile walls that are prone to leakage and hemorrhage.
Figures 1 and 2 provide a detailed cross section of a healthy
retina and a retina affected by diabetic retinopathy.
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Figure 1
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Figure 2
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©
A.D.A.M.,
Inc.
62
Diabetic
Macular Edema
DME, the primary cause of vision loss associated with diabetic
retinopathy, is a disease affecting the macula, the part of the
retina responsible for central vision. When the blood vessel
leakage of diabetic retinopathy causes swelling in the macula,
the condition is called DME. The onset of DME is painless and
may go undetected by the patient until it manifests with the
blurring of central vision or acute vision loss. The severity of
this blurring may range from mild to profound loss of vision.
The Wisconsin Epidemiologic Study of Diabetic Retinopathy found
that over a ten-year period approximately 19% of diabetics
studied were diagnosed with DME. Based on this study and the
current U.S. diabetic population, we estimate the incidence of
DME in the United States to be approximately 340,000 cases
annually. As the population of diabetics increases, we expect
the annual incidence of diagnosed DME to increase.
Limitations
of Current Treatments for DME
There are no ophthalmic drug therapies approved by the FDA for
the treatment of DME. The current standard of care for the
treatment of DME is laser photocoagulation. Laser
photocoagulation is a retinal procedure in which a laser is used
to cauterize leaky blood vessels or to apply a pattern of burns
to reduce edema. This procedure has undesirable side effects
including partial loss of peripheral and night vision. As a
result of these side effects and a desire for improved visual
outcomes, retinal specialists have supplemented laser
photocoagulation with alternate off-label therapies for the
treatment of DME, including injections of corticosteroids and
anti- VEGF agents. Corticosteroids have been shown to improve
visual acuity in DME patients in non-pivotal clinical trials,
but are associated with increased IOP, which may increase the
risk of glaucoma, and cataract formation. Both of these
alternate therapies are limited by a need for multiple
injections to maintain a therapeutic effect.
FDA
Approved Treatments for DME
Laser Photocoagulation.
In laser
photocoagulation, light rays are directed into the eye focusing
on abnormal blood vessels that are growing within the retina and
patches of edema which are near the macula. This laser, which
administers heat from a fine-point beam, cauterizes the vessels
to seal them from further leakage or destroys retinal tissue
associated with the patch of edematous tissue, via thermal
destruction, in the hope of preventing further vision loss.
Results of clinical trials on laser photocoagulation have shown
the procedure reduces vision loss in DME patients. Visual acuity
gains have been seen as well, although results have been highly
variable and may take more than eight months for median visual
acuity to improve. Further, the 2008 Preferences and Trends
Survey among retinal specialists showed that 84% of patients
treated with laser photocoagulation required an off-label drug
therapy or a combination of both additional laser
photocoagulation and an off-label drug therapy to treat the
disease.
There are no other therapies approved by the FDA for the
treatment of DME.
Off-Label
Treatments for DME
Intravitreal Triamcinolone Acetonide Injections
(IVTA).
Triamcinolone acetonide is a
corticosteroid administered via an intravitreal injection either
as an adjunct to laser photocoagulation or as a stand alone
treatment. Typically administered in a 4,000 microgram (µg)
suspension, IVTA is relatively inexpensive and has demonstrated
temporary visual improvement and reduction of edema in patients
with DME. Due to the potential side effects, including increased
IOP, which may increase the risk of glaucoma, and cataract
formation, as well as the need for multiple injections, the use
of IVTA for the treatment of DME is not optimal.
Anti-VEGF Intravitreal Injection.
Anti-VEGF
therapies are administered via an intravitreal injection. VEGF
has been identified as an important mediator in diabetic
retinopathy, including DME, and appears to play a role in
increasing vascular permeability in this condition. Similar to
IVTA, anti-VEGFs require multiple injections, potentially as
frequently as once per month, to sustain a therapeutic effect.
Two Phase 3 clinical trials studying the use of Lucentis
(ranibizumab injection), a drug sponsored by Genentech, Inc., a
wholly-owned member of the Roche Group (Genentech), as a
treatment for DME are currently underway, where the
63
clinical trial design is based on one injection per month.
Results from a single-center study involving 26 patients
comparing one injection of IVTA versus Genentechs Avastin
(bevacizumab) in patients with refractory DME was published in
the October 2007 issue of the British Journal of Ophthalmology.
Over the four to eight week period post-injection, IVTA was
statistically significantly better at improving vision and
reducing macular thickness than Avastin. This head-to-head study
supports the anecdotal observations reported by retinal
specialists that, in DME, corticosteroids appear to be
therapeutically superior to anti-VEGF therapy.
Iluvien
Overview
Our most advanced product candidate is Iluvien, an intravitreal
insert designed to provide a therapeutic effect for up to
36 months in the treatment of DME by delivering sustained
sub-microgram levels of FA, a non-proprietary corticosteroid
with demonstrated efficacy in the treatment of ocular disease.
Intravitreal refers to the space inside the eye behind the lens
that contains the jelly-like substance called vitreous. DME is a
disease of the retina which affects individuals with diabetes
and can lead to severe vision loss and blindness. Iluvien is
inserted in the back of the patients eye using an
insertion device (the Iluvien inserter) employing a 25-gauge
needle which allows for a self-sealing wound. This insertion is
very similar to the administration of an intravitreal injection,
a procedure commonly employed by retinal specialists. In the
United States, this procedure is non-surgical and is performed
in the retinal specialists office. Based on our analysis
of the month 24 clinical readout from our FAME Study, we believe
Iluvien improves vision while reducing side effects commonly
associated with the use of corticosteroids for the following
reasons:
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Iluvien delivers FA.
The active pharmaceutical
ingredient in Iluvien is FA, which has demonstrated efficacy in
the treatment of DME in our FAME Study.
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Iluvien delivers sustained sub-microgram levels of a steroid
to the eye.
In our clinical trials we are
studying two doses of Iluvien (a high-dose with an initial
release of approximately 0.45µg per day and a low-dose with
an initial release of approximately 0.23µg per day) to
determine the lowest dose possible that will provide efficacy
for the treatment of DME. The dosage levels of Iluvien provide
lower exposure to corticosteroids than other intraocular dosage
forms currently available.
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Iluvien is expected to deliver a therapeutic effect for up to
36 months.
In vitro release kinetics have
shown that Iluvien provides sustained delivery of sub-microgram
levels of FA over time. Based on these release kinetics, we
expect that the low dose of Iluvien will provide sustained
therapy for up to 36 months, with actual therapeutic effect
to be determined in our ongoing FAME Study.
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Iluviens placement utilizes the eyes natural
fluid dynamics.
There are two natural currents of
fluid within the eye; one to the front of the eye and the other
to the back of the eye, or retina. We believe that
Iluviens delivery of sustained sub-microgram levels of FA
and insertion into the back of the eye, a position that we
believe optimizes delivery of FA to the retina by utilizing
these natural currents, will maximize efficacy and minimize
possible side effects.
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Iluvien is inserted using a 25-gauge
needle.
Needle gauge determines the size of the
wound that is created. Iluvien is inserted into the eye using a
25-gauge needle, which results in a wound that is small enough
to seal itself after the needle is removed thus eliminating the
need for additional intervention. Using a larger needle would
require a more complicated insertion procedure to create a
self-sealing wound.
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Fluocinolone
Acetonide
Fluocinolone acetonide (FA) is the active compound in Iluvien
and a member of the class of steroids known as corticosteroids.
FA is a non-proprietary corticosteroid that has a history of use
in treating ocular disease as the active compound in
Bausch & Lomb Incorporateds product Retisert (a
surgically implanted intravitreal drug delivery device approved
for the treatment of chronic non-infectious posterior uveitis).
Corticosteroids have demonstrated a range of pharmacological
actions, including inhibition of inflammation, inhibition of
leukostasis, upregulation of occludin, inhibition of release of
certain inflammatory cytokines and suppression of VEGF
secretion. These pharmacological actions have the potential to
treat various ocular
64
conditions, including DME, dry AMD, wet AMD and RVO. However, FA
shares many of the same side effects as other corticosteroids
currently available for intraocular use, including increased
IOP, which may increase the risk of glaucoma, and cataract
formation.
Iluvien
is Positioned to Reduce Side Effects
Based on our analysis of the month 24 clinical readout from our
FAME Study, it appears that Iluvien mitigates the incidence of
steroid-induced IOP elevations and cataract formation commonly
associated with the intraocular use of corticosteroids, which we
believe is due to its location in the posterior portion of the
eye, as illustrated below. Fluid, or aqueous humor, generated at
the ciliary body, located just behind the iris, flows within the
eye primarily via two currents as illustrated below. The
predominant current flows through the iris into the anterior
chamber and exits the eye mainly through the trabecular outflow
pathway. Another current of outflow is directed toward the back
of the eye. Various publications support the existence of these
currents within the eye, including an article by J. Park et. al.
published in 2005 in the Journal of Controlled Release, an
article by J. Xu et. al. published in 2000 in Pharmaceutical
Research and a paper by M. Araie and D.M. Maurice published in
the 1991 in the Journal of Experimental Eye Research.
©
Nucleus
Medical Art
The side effect of increased IOP associated with corticosteroids
in certain people is directly related to the interaction of
corticosteroids with the cells of the trabecular meshwork, a
specialized tissue that acts as a filter located in the front of
the eye. In some individuals, corticosteroids result in a
build-up
of
debris in this meshwork, increasing resistance to outflow, and
increasing pressure inside the eye. The positioning of Iluvien
allows it to take advantage of the posterior flow of fluid away
from the trabecular meshwork of the eye. We believe this
positioning minimizes the anterior chamber exposure to FA and
mitigates the incidence of IOP elevations and cataract formation
commonly associated with the intraocular use of corticosteroids.
Iluvien
Provides Sustained Sub-Microgram Delivery
Iluvien consists of a tiny polyimide tube with membrane caps,
licensed by us from pSivida US, Inc. (pSivida), that is filled
with 190µg of FA in a polyvinyl alcohol matrix. Iluvien is
non-bioerodable; however, both polyimide and the polyvinyl
alcohol matrix are biocompatible with ocular tissues and have
histories of safe use within the eye. In February 2005, we
entered into an agreement with pSivida for the development of
65
FA in pSividas proprietary delivery system. Our agreement
with pSivida provides us with a worldwide exclusive license to
develop and sell Iluvien for delivery to the back of the eye for
the treatment and prevention of eye diseases in humans (other
than uveitis). See Licenses and
Agreements below for additional information related to our
agreement with pSivida.
The low dose of Iluvien is designed to provide sustained
sub-microgram levels of FA and a therapeutic effect for up to
36 months. We believe that Iluviens ability to
deliver sub-microgram levels of FA mitigates the incidence of
IOP elevations and cataract formation commonly associated with
the intraocular use of corticosteroids. As illustrated in the
chart below, in vitro data from multiple clinical supply batches
of the low dose of Iluvien show that the daily amount of FA
released starts at an average daily release rate 0.23µg per
day and continues to release at the month 24 time point.
Our analysis of the FA release rate of Iluvien is ongoing.
The
Iluvien Inserter
We developed the Iluvien inserter, a custom insertion system for
Iluvien, which includes improvements over the modified syringe
used during our two Phase 3 pivotal clinical trials
(individually referred to as Trial A and Trial B, and
collectively as our FAME Study). These improvements include
ergonomic design features, a transparent window to visually
confirm Iluviens presence within the inserter and markings
to guide retinal specialists to the proper insertion point. As
was the case with the modified syringe used during our FAME
Study, the Iluvien inserter uses a 25-gauge needle which results
in a wound that is small enough to seal itself after Iluvien has
been inserted into the back of the eye and the needle has been
removed. We believe that a 25-gauge needle is the smallest
needle capable of delivering Iluvien into the back of eye. In
the United States, this procedure is non-surgical and is
performed in the retinal specialists office. The Iluvien
inserter is also being used in our Phase 2 trial for the use of
Iluvien in the treatment of RVO. See
Development Program for the Treatment of
DME and Iluvien for Other Diseases of
the Eye below for additional information with respect to
our FAME Study and RVO clinical trial.
66
Iluvien
Clinical Development Program
The following table summarizes current and planned clinical
trials for Iluvien.
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Number of
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Enrollment
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Population
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Trial Name
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Phase
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Objectives
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Geography
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Patients
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Status
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DME
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FAME Study
(Trial A)
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Phase 3
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Safety
Dosage
Efficacy
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Northern Regions
of the U.S., Europe
and India and all
of Canada
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481
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Completed
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DME
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FAME Study
(Trial B)
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Phase 3
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Safety
Dosage
Efficacy
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Southern Regions
of the U.S.,
Europe and India
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475
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|
Completed
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DME
|
|
PK Study
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Phase 2
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Pharmaco-
kinetics
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U.S.
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37
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Completed
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Dry AMD
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MAP GA
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Phase 2
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Safety
Dosage
Proof of
Concept
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U.S.
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40
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On-going
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Wet AMD
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MAP
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Phase 2
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Safety
Dosage
Proof of
Concept
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U.S.
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30
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On-going
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RVO
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FAVOR
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Phase 2
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Safety
Dosage
Proof of
Concept
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U.S.
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20
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On-going
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Development
Program for the Treatment of DME
We are currently conducting the FAME Study for Iluvien involving
956 patients in sites across the United States, Canada,
Europe and India to assess the efficacy and safety of Iluvien in
the treatment of DME. Combined enrollment was completed in
October 2007, and the month 24 clinical readout from our FAME
Study was received in December 2009. We believe that the month
24 data supports approval of the low dose of Iluvien for the
treatment of DME. Therefore, we plan to proceed with the
preparation of a registration dossier and to submit an NDA in
the United States for the low dose of Iluvien to the FDA in
the second quarter of 2010 with the month 24 clinical data,
followed by registration filings in certain European countries
and Canada.
Consistent with the FDA requirement for registration and
approval of drugs being developed for diabetic retinopathy,
including DME, the primary efficacy endpoint for our FAME Study
is the difference in the percentage of patients whose best
corrected visual acuity (BCVA) improved from baseline by 15 or
more letters on the Early Treatment Diabetic Retinopathy Study
(ETDRS) eye chart between the treatment and control groups at
month 24. The ETDRS eye chart is the standard used in clinical
trials for measuring sharpness of sight as established by the
National Eye Institutes Early Treatment Diabetic
Retinopathy Study. In addition, the FDA requires a numerical
comparison of the percentage of patients with BCVA improvement
of 15 or more letters between the month 24 and month 18 data to
determine if the month 24 results are equal to or greater than
the month 18 results. Patients enrolled in our FAME Study will
be followed for 36 months. Although we will submit the
additional 12 months of clinical data to applicable regulatory
authorities, the approval of Iluvien by regulatory authorities,
including the FDA, will be based on the month 24 clinical data
from our FAME Study.
We believe that Iluvien meets the requirements for Priority
Review in the United States and we intend to make a formal
request for this review classification when we file our NDA with
the FDA. Upon receipt, the FDA will notify us within
45 days of Iluviens final review classification. In
the European Union, we will be utilizing the decentralized
registration procedure. The Iluvien insertion system will not
require a separate
67
device application, but it must meet the safety and regulatory
requirements of the applicable regulatory authorities when
evaluated as part of the drug product marketing application.
FAME
Study
We initiated our FAME Study in September 2005. Trial A and Trial
B have identical protocols and completed enrollment in October
2007 with a total of 956 patients across 101 academic and
private practice centers. Trial A drew patients from sites
located in the northern regions of the United States, Europe and
India and all sites in Canada, while sites in the southern
regions of the United States, India and Europe comprise Trial B.
Our FAME Study was designed to assess the safety and efficacy of
Iluvien in patients with DME involving the center of the macula,
and who had at least one prior macular laser treatment
12 weeks or more before study entry. The inclusion criteria
for our FAME Study were designed to select DME patients with
BCVA between 20/50 (68 letters on the ETDRS eye chart) and
20/400 (19 letters on the ETDRS eye chart) in the study eye
and no worse than 20/400 in the non-study eye. Patients who had
received steroid drug treatments for DME within three months of
screening or anti-VEGF injections within two months of
screening, and patients with glaucoma, ocular hypertension, IOP
greater than 21mmHg or concurrent therapy with IOP-lowering
agents in the study eye at screening were not eligible to
participate in this trial.
The following table describes the baseline characteristics of
the patients randomized into our FAME Study.
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Trial A
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Trial B
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Low
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High
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Low
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High
|
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|
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Control
|
|
|
Dose
|
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Dose
|
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Control
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|
Dose
|
|
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Dose
|
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Number of Patients
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95
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|
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|
190
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|
196
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90
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|
|
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186
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|
|
|
199
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Mean Age (years)
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62.7
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64.0
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62.3
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61.1
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61.8
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62.2
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Mean Baseline Vision (letters)
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54.8
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53.4
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52.5
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54.7
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53.3
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53.3
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Male/Female (percent)
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50.5/49.5
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57.9/42.1
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60.2/39.8
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66.7/33.3
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56.5/43.5
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63.8/36.2
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Mean Time Since Diagnosis (years)
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|
|
|
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Diabetes
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|
|
16.5
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|
17.4
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|
|
16.5
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|
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|
16.3
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|
|
|
16.8
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|
|
|
15.9
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|
DME
|
|
|
4.4
|
|
|
|
3.9
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|
|
|
3.9
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|
|
|
3.5
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|
|
|
3.3
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|
|
|
3.3
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|
Patient characteristics, such as age, gender and baseline BCVA,
were balanced across the treatment and control groups. As part
of randomization, the patients were divided into two separate
groups, those with a baseline BCVA score greater than or equal
to 49 letters on the ETDRS eye chart and those with a baseline
BCVA score of less than 49 letters on the ETDRS eye chart.
We randomly assigned patients participating in our FAME Study to
one of three groups at a ratio of 2:2:1. The first two of these
groups were assigned to an active drug formulation and the third
group serves as the control group, undergoing a sham insertion
procedure designed to mimic an intravitreal insertion. The
treatment groups consist of one group receiving a low dose of
Iluvien and another group receiving a high dose of Iluvien. To
reduce potential bias, these trials use a randomized,
double-masked study design so that neither the patient nor the
investigational staff involved with assessing the patient knows
to which group the patient belongs. In order to simulate an
insertion and help to maintain proper patient masking, the sham
insertion procedure includes all steps involved in the insertion
procedure, except that a blunt inserter without a needle is used
to apply pressure to the anesthetized eye.
As part of our FAME Study, investigators were able to re-treat
each patient with Iluvien following their month 12 follow up
visit. Through month 24, 24.5% of patients had been treated
with more than one Iluvien insert and 2.5% of patients had been
treated with three or more Iluvien inserts.
Primary Efficacy Endpoint.
The primary
efficacy endpoint for our FAME Study is the difference in the
percentage of patients with improved BCVA from baseline of 15 or
more letters on the ETDRS eye chart at month 24 between the
treatment and control groups. In December 2009, we received the
month 24 clinical readout for our FAME Study and have analyzed
the full data set consistent with the recommendations
68
regarding the appropriate population for primary analysis as
described in the
FDA-adopted
International Conference on Harmonization of Technical
Requirements for Registration of Pharmaceuticals for Human Use
(ICH) Guidance E9, Statistical Principles for Clinical
Trials. ICH is a joint initiative involving regulatory
authorities and pharmaceutical industry representatives from
Europe, Japan and the United States who discuss scientific and
technical aspects of product registration.
The full data set includes all 956 patients randomized into
our FAME Study, with data imputation employed, using last
observation carried forward (LOCF), for data missing
because of patients who discontinued the trial or are
unavailable for
follow-up
(the Full Analysis Set). As part of our analyses, we determined
statistical significance based on the Hochberg-Bonferroni
procedure (H-B procedure), which is a procedure employed to
control for multiple comparisons. We also made a target
p-value
adjustment of 0.0001 to account for each of the nine instances
our independent data safety monitoring board reviewed unmasked
interim clinical data. These adjustments resulted in a required
p-value
of
0.0491 or lower for each of Trial A and Trial B to
demonstrate statistical significance for both the low dose and
high dose of Iluvien. Based upon the H-B procedure, if either
dose of Iluvien in a trial did not meet statistical
significance, the alternate dose was required to achieve a
p-value of 0.02455 or lower in that trial to demonstrate
statistical significance.
In the Full Analysis Set, the primary efficacy endpoint was met
with statistical significance for both the low dose and the high
dose of Iluvien in Trial A and Trial B, as well as on
a combined basis. The table below summarizes the primary
efficacy variable results.
Patients
Gaining At Least 15 Letters At Month 24
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Trial A
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Trial B
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Study Group
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Individuals
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%
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p-value
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Individuals
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%
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p-value
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Control
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14/95
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14.7
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%
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16/90
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17.8
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%
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Low Dose
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51/190
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26.8
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%
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0.029
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57/186
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30.6
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%
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0.030
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High Dose
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51/196
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26.0
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%
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0.034
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62/199
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31.2
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%
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0.027
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Combined
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Study Group
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Individuals
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%
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p-value
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Control
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30/185
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16.2
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%
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Low Dose
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108/376
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28.7
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%
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0.002
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High Dose
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113/395
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28.6
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%
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0.002
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Additionally, as required by the FDA, a numerical comparison of
the responder rates at month 18 and month 24 in the Full
Analysis Set demonstrated that the responder rates for both the
low dose and high dose of Iluvien at month 24 were numerically
greater than the month 18 responder rates in both Trial A
and Trial B.
Based on these results, we plan to submit an NDA in the United
States for the low dose of Iluvien in the second quarter of
2010, followed by registration filings in various European
countries and Canada. We intend to request Priority Review of
our NDA from the FDA. If Priority Review is granted, we can
expect a response to our NDA from the FDA in the fourth quarter
of 2010.
Our FAME Study protocol provides for analyses of additional data
sets. The all-randomized and treated data set includes
953 patients randomized into our FAME Study and treated,
with data imputation employed, using the LOCF method, for data
missing because of patients who discontinued the trial or are
unavailable for
follow-up
(the ART Data Set). Three patients who were randomized, but not
treated, are included in the Full Data Set and excluded from the
ART Data Set. In the ART Data Set, the primary efficacy endpoint
was met with statistical significance for both doses of Iluvien
in both Trial A and Trial B. The percentage of
patients in the ART Data Set achieving improved BCVA of 15 or
more letters at month 24 for Trial A is 14.7% for the
control group, 26.8%
69
for the low dose
(p-value
0.029) and 26.2% for the high dose
(p-value
0.032). The percentage of patients in the ART Data Set achieving
improved BCVA of 15 or more letters at month 24 for
Trial B is 17.8% for the control group, 30.8% for the low
dose
(p-value
0.028) and 31.3% for the high dose
(p-value
0.026).
The modified ART Data Set includes all 953 patients
included in our ART Data Set and excludes data collected
subsequent to the use of treatments prohibited by the protocol,
such as Avastin, Lucentis, triamcinolone acetonide or vitrectomy
(the Modified ART Data Set). In instances when a treatment
prohibited by our FAME Study protocol was used, the last
observation prior to the protocol violation was imputed forward
to month 24 using the LOCF method. The percentage of patients in
the Modified ART Data Set achieving improved BCVA of 15 or more
letters for Trial A is 12.6% for the control group, 22.6%
for the low dose
(p-value
0.057) and 24.1% for the high dose
(p-value
0.026). Neither dose of Iluvien for Trial A was
statistically significant based on the
H-B procedure.
The percentage of patients in the Modified ART Data Set
achieving improved BCVA of 15 or more letters at month 24
for Trial B is 13.3% for the control group, 29.7% for the
low dose
(p-value
0.004) and 29.3% for the high dose
(p-value
0.005). Both doses of Iluvien for Trial B were
statistically significant.
Our FAME Study protocol provides that the primary assessment of
efficacy is based on the Modified ART Data Set and that other
data sets are considered secondary. The protocol did not specify
the Full Analysis Set as a data set for analyzing the study;
however, consistent with the recommendations regarding the
appropriate population for primary analysis as described in the
FDA-adopted ICH Guidance E9, we believe that the FDA will
consider the Full Analysis Set to be the most relevant data set
for determining the safety and efficacy of Iluvien in
Trials A and B.
Additional Clinical Observations.
In addition
to the primary efficacy variable, we also observed a number of
other clinically relevant results in the month 24 clinical data
from our FAME Study. These observations included, among others,
the following:
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patients with improved BCVA of 15 or more letters at each follow
up visit;
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patients with improved BCVA of 15 or more letters at any time
point;
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other levels of BCVA improvement at month 24;
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BCVA improvement of 15 or more letters relative to baseline BCVA;
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Mean change in BCVA letter score;
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BCVA improvements beyond month 24; and
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decrease in excess foveal thickness.
|
The analyses of these Full Analysis Set observations set forth
below are presented for Trial A and Trial B on a
combined basis for patients who received the low dose of Iluvien
in comparison to the control group. Statements regarding
statistical significance do not reflect any adjustments to the
p-values calculated for multiple comparisons and analyses.
Patients With Improved BCVA of 15 Letters or More at Each
Follow Up Visit.
Our analysis of the results of
the FAME Study through month 24 indicates that the low dose of
Iluvien provides an improvement in BCVA as early as three weeks
after insertion. The low dose of Iluvien was statistically
significantly better than the control group in our FAME Study by
week 3 of patient follow up, and maintained a statistically
significant advantage over the control through month 24. The
chart below demonstrates the treatment effect of the low dose of
Iluvien versus the control group, as measured by an improvement
in BCVA of 15 letters or more, at each scheduled follow up visit
during the FAME Study.
70
Patients With Improved BCVA of 15 or More Letters at Any Time
Point.
Our analysis of the results of the FAME
Study through month 24 indicates that a significantly greater
percentage of patients receiving the low dose of Iluvien versus
the control group had an improvement in BCVA of 15 letters or
more when assessed at any follow up visit. During the first
24 months of the FAME Study, 165 out of 376 patients
randomized to receive the low dose of Iluvien, or 43.9%,
demonstrated improved BCVA of 15 letters or more at any time
point compared to 47 out of 185 patients, or 25.4%,
randomized to the control group.
Other Levels of BCVA Improvement at Month
24.
While the FDAs requirement for the
registration and approval of drugs being developed for DME is
that the primary efficacy variable be based on an improvement in
BCVA of 15 letters or more, lesser degrees of improvement in
BCVA are considered clinically significant by retinal
physicians. The table below demonstrates the low dose of
Iluviens statistically significant improvements in BCVA
versus the control group at month 24 of our FAME Study.
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Trial A & Trial B Combined
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BCVA Improvement
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Control
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Low Dose
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p-value
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Greater than 1 letter
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54.1
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%
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66.8
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%
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0.005
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Greater than 5 letters
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40.0
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%
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52.1
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%
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|
0.010
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Greater than 10 letters
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26.5
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%
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38.3
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%
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|
0.009
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|
BCVA Improvement of 15 or More Letters Relative to Baseline
BCVA.
Our analysis of the results of the FAME
Study at month 24 indicates that Iluvien has a statistically
significant advantage over the control group irrespective of the
severity of a patients baseline BCVA. The table below
demonstrates the statistically significant treatment effect of
Iluvien versus the control group in patients with baseline BCVA
of more than 49 letters on the EDTRS eye chart, and patients
with BCVA of 49 letters or less on the EDTRS eye chart at
baseline.
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Trial A & Trial B Combined
|
Baseline BCVA
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|
Control
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|
Low Dose
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|
p-value
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|
Greater than 49 Letters
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|
|
11.8
|
%
|
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|
21.1
|
%
|
|
|
0.027
|
|
49 Letters or Less
|
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28.6
|
%
|
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|
46.1
|
%
|
|
|
0.039
|
|
Mean Change in BCVA Letter Score.
Our analysis
of the results of the FAME Study through month 24 indicates that
the low dose of Iluvien provided a more beneficial improvement
in visual acuity than the control group as analyzed by the mean
change in the BCVA letter score from baseline. As demonstrated
in the graph below, the mean change in BCVA for the patients
receiving the low dose of Iluvien was an increase of
71
4.4 letters at month 24, peaking at an increase of 6.0
letters at month 6, compared to an increase of 1.7 letters in
the control group, peaking at an increase of 2.6 letters at week
6. The low dose of Iluvien was statistically significantly
better than the control group at month 24 (p-value 0.020).
During the first 24 months of follow up in our FAME Study,
patients that were phakic (had a natural lens and no prior
cataract surgery) at baseline, 50 of 121, or 41.3% of the
control group and 182 of 235, or 77.4% of the low dose had
cataract formation reported as an adverse event through month
24. For these same phakic patients, 19.8% of the control group
and 66.0% of the low dose group underwent cataract surgery
through month 24. For the patients in the low dose group the
median time to reporting cataract formation as an adverse event
was approximately 12 months from randomization into the
FAME Study. The median time to cataract surgery was
approximately 18 months. This interval between the report
of cataract formation as an adverse event and cataract surgery
accounts for the decrease in the mean change in BCVA in patients
receiving the low dose of Iluvien from the month 6 follow up
visit to the month 18 follow up visit.
The temporary effect of cataracts is further illustrated by
comparing the mean change in BCVA of the 140 low dose patients
that were pseudophakic (had an artificial lens) to the 235 that
were phakic (natural lens and no prior cataract surgery) at
baseline. The chart below shows the pseudophakic subset (those
who would not have vision affected by a cataract) achieved a
mean change in BCVA of more than 7 letters by month 6 and
maintained this mean change through month 24 while the phakic
subset experienced a decrease in the mean change in BCVA from
the month 6 follow up visit to the month 18 follow up visit. The
temporary decrease in mean change in BCVA in the phakic
population is consistent with the total low dose population.
72
BCVA Improvements Beyond Month 24.
Analyses of
available data from patients that have completed month 27 and
month 30 follow up visits in the FAME Study indicate that the
low dose of Iluvien maintains a statistically significant
advantage in comparison to the control group as demonstrated in
the chart below.
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|
Trial A & Trial B Combined
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|
Month 27
|
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|
Month 30
|
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|
Control
|
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|
Low Dose
|
|
|
|
|
|
Control
|
|
|
Low Dose
|
|
|
|
|
BCVA Improvement
|
|
(n=64)
|
|
|
(n=125)
|
|
|
p-value
|
|
|
(n=63)
|
|
|
(n=123)
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|
|
p-value
|
|
|
³
1 letter
|
|
|
57.8
|
%
|
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|
76.8
|
%
|
|
|
0.008
|
|
|
|
54.0
|
%
|
|
|
81.3
|
%
|
|
|
<0.001
|
|
³
5 letters
|
|
|
48.4
|
%
|
|
|
68.8
|
%
|
|
|
0.007
|
|
|
|
50.8
|
%
|
|
|
70.7
|
%
|
|
|
0.009
|
|
³
10 letters
|
|
|
26.6
|
%
|
|
|
49.6
|
%
|
|
|
0.002
|
|
|
|
31.7
|
%
|
|
|
54.5
|
%
|
|
|
0.004
|
|
³
15 letters
|
|
|
15.6
|
%
|
|
|
34.4
|
%
|
|
|
0.005
|
|
|
|
17.5
|
%
|
|
|
39.8
|
%
|
|
|
0.002
|
|
Mean Change in Letter Score
|
|
|
2.9
|
|
|
|
8.7
|
|
|
|
0.014
|
|
|
|
0.9
|
|
|
|
10.2
|
|
|
|
0.001
|
|
Decrease In Excess Foveal Thickness.
In
addition to the functional measures of BCVA, we assessed the
ability of Iluvien to effect a decrease in excess foveal
thickness, an anatomic outcome, as measured by optical coherence
tomography. Excess foveal thickness is a measurement of the
swelling of the macula at its center point (known as the fovea).
We consider any measurement above 180 microns to represent
excess foveal thickness. Based on a review of the month 24
clinical readout as summarized in the chart below, patients
receiving the low dose of Iluvien demonstrated a statistically
significant difference versus the control group in decreasing
excess foveal thickness by week 1 of patient follow up of
our FAME Study, and maintain a statistically significant
advantage through month 24. At month 24, patients receiving the
low dose of Iluvien
73
demonstrated a mean decrease in excess foveal thickness of 156.1
microns versus 100.5 microns for the control group.
Safety.
Our safety assessment in connection
with the month 24 clinical readout of the FAME Study included
all reported adverse events at that time, regardless of a
patients progression in the FAME Study. Some reported
adverse events occurred beyond patients month 24 follow up
visits. Iluvien was well tolerated through this readout in both
the low and high dose patient populations. Our preliminary
assessment of adverse event data indicates that there is no
apparent risk of systemic adverse events to patients as a result
of the use of Iluvien. The use of corticosteroids in the eye is
primarily associated with two undesirable side effects:
increased IOP, which may increase the risk of glaucoma and
require additional procedures to manage, and cataract formation.
Excluding IOP related side effects and cataracts, we observed no
significant eye related adverse events when comparing both the
low dose and high dose patient populations to control. Thus, we
believe that the adverse events associated with the use of
Iluvien are within the acceptable limits of a drug for the
treatment of DME.
The table below summarizes the IOP related adverse events
occurring in all patients randomized and treated in our
FAME Study.
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|
Trial A & Trial B Combined
|
|
|
|
Control
|
|
|
Low Dose
|
|
|
High Dose
|
|
|
|
N=185
|
|
|
N=375
|
|
|
N=393
|
|
|
IOP > 30
mmHg
(1)
|
|
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2.7%
|
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|
16.3%
|
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|
|
21.6%
|
|
Trabeculoplasty
|
|
|
0.0%
|
|
|
|
1.3%
|
|
|
|
2.5%
|
|
IOP-Lowering Surgeries
|
|
|
|
|
|
|
|
|
|
|
|
|
Trabeculectomy (filtration)
|
|
|
0.0%
|
|
|
|
2.1%
|
|
|
|
5.1%
|
|
Vitrectomy
|
|
|
0.0%
|
|
|
|
0.3%
|
|
|
|
0.5%
|
|
Other Surgery Performed
|
|
|
0.5%
|
|
|
|
1.6%
|
|
|
|
2.5%
|
|
Percentage of Patients Requiring One or More
IOP-Lowering
Surgeries
|
|
|
0.5%
|
|
|
|
3.7%
|
|
|
|
7.4%
|
|
|
|
(1)
|
An IOP of 30 mmHg is a clinically significant level that we use
in assessing adverse events.
|
According to the CDC, diabetic individuals aged 50 or older are
1.5 times more likely to develop cataracts than non-diabetic
individuals. A review of the baseline characteristics of our
patient population reflects this increased risk of cataracts for
diabetic patients, with 34.8% of the patients treated in our
FAME Study having previously undergone a cataract surgery in the
study eye. The month 24 clinical readout from
74
our FAME Study (which includes reported adverse events that
occurred beyond patients month 24 follow up visits)
indicated that, of patients who had a natural lens (no prior
cataract surgery) at baseline, 46.3% of the control group, 80.0%
of the low dose and 87.5% of the high dose had cataract
formation reported as an adverse event through month 24.
Additionally, of the patients who had a natural lens at
baseline, 23.1% of the control group, 74.9% of the low dose and
84.5% of the high dose underwent cataract surgery.
PK
Study
We initiated an open-label Phase 2 human pharmacokinetic
clinical study (PK Study) in August 2007 to assess the systemic
exposure of FA by measuring plasma levels of FA. Analysis of
plasma levels through month 18 in September 2009 demonstrated no
systemic exposure of FA (plasma levels were below the limit of
detection of 100 picograms per milliliter). Based on these
results, we intend to file a carcinogenicity waiver with the
applicable regulatory authorities, including with the FDA in
connection with our NDA submission.
A total of 37 patients were enrolled in the PK Study,
17 patients on the high dose of Iluvien and
20 patients on the low dose of Iluvien. The last patient
was enrolled in the study at the end of February 2008. Data from
the PK Study are being evaluated on an ongoing basis with
interim evaluations at months 3, 6, 12, 18, 24, 30 and 36.
Iluvien
for Other Diseases of the Eye
We believe that Iluvien has the potential to address other
ophthalmic diseases such as dry AMD, wet AMD and RVO. Details
regarding the rationale for these other indications are as
follows:
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|
|
Dry AMD.
Dry AMD patients account for 90% of
AMD patients, with the greatest unmet need among these patients
being a treatment for geographic atrophy (GA) for which there
are currently no treatments available. Pre-clinical studies in
two established rat models of retinal degeneration reported at
the Association for Research in Vision and Ophthalmology
meetings in 2006, 2007 and 2008, described the efficacious
effects of a miniaturized version of Iluvien in two animal
models of retinal degeneration. Based on these results, we began
enrollment of a pilot study in December 2008 to assess the
safety and efficacy of Iluvien in patients with bilateral GA
secondary to AMD. Our Phase 2 study (the MAP GA Trial) is
comparing the two doses of Iluvien to a sham injection in
patients with bilateral GA secondary to AMD. The change from
baseline in size of GA will be assessed over time.
|
|
|
|
Wet AMD.
The size of the wet AMD market was
$2 billion in 2008 according to visiongain, an independent
competitive intelligence organization. We believe Iluvien will
be synergistic with the market leading anti-VEGF therapies in
the treatment of wet AMD. Anti-VEGFs require persistent dosing
to maintain a therapeutic effect which is a burden on both the
patient and the physician. Given that corticosteroids have been
shown to suppress the production of VEGF, a Phase 2 investigator
sponsored study (the MAP Trial) is assessing the safety and
efficacy of Iluvien in conjunction with Lucentis in patients
with wet AMD. Patients will be enrolled who have been treated
with Lucentis for at least six months and whose visual
acuity has plateaued. At baseline, subjects will receive either
the high-dose or the low-dose of Iluvien and an injection of
Lucentis. Subjects will receive additional Lucentis injections
during the study only if subretinal or intraretinal fluid
persists. Outcome measures will include the change from baseline
visual acuity at six months, and mean number of injections of
Lucentis over the six-month study period versus the six months
prior to study entry.
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Macular edema associated with non-ischemic
RVO.
Estimates of the prevalence of retinal vein
occlusion in the United States range from approximately 800,000
based on data from The Epidemiology of Retinal Vein Occlusion:
The Beaver Dam Eye Study in 2000, to approximately 1.6 million
based on data from Ten-Year Incidence of Retinal Vein Occlusion
in an Older Population: The Blue Mountains Eye Study in 2006.
Additionally, JP Morgan stated in 2007 in an equity research
report on Genentech, Inc. that the prevalence in the United
States was approximately 1,070,000 patients. In September
2009, Allergan introduced Ozurdex (a three to five month
dexamethasone intravitreal implant) as the first approved
product for macular edema following branch or retinal vein
occlusion. Retinal specialists have been using intravitreal
injections of the corticosteroid triamcinolone acetonide on an
off-label basis to treat non-ischemic RVO. The FDA approval of
Ozurdex provides additional evidence that lower levels
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of a steroid work effectively for RVO. In September 2009, we
began enrollment for a Phase 2 study (the FAVOR Study) to assess
the safety and efficacy of Iluvien in patients with macular
edema secondary to RVO. The FAVOR Study is comparing the two
doses of Iluvien in patients with macular edema secondary to RVO.
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Iluvien
Registration Plan
U.S.
Regulatory Requirements
In the United States, clinical evidence of the effectiveness of
Iluvien for the treatment of DME from our FAME Study is based on
two time-point comparisons. The primary efficacy variable is the
proportion of patients who have visual acuity improvement in
their study eye, referred to as the responder rate, based on the
change from baseline in BCVA as measured on the ETDRS eye chart.
BCVA improvement is defined as an increase from baseline of 15
or more letters in BCVA as measured on the ETDRS eye chart. Our
primary efficacy endpoint is defined at month 24 of our FAME
Study using this variable. Based on the month 24 clinical
readout, Iluvien has demonstrated efficacy in the treatment of
DME in our FAME Study. Then as required by the FDA, another
numerical comparison of the responder rates at months 18 and 24
of our FAME Study was conducted to demonstrate that the
responder rates at month 24 are numerically greater than or
equal to the month 18 responder rates. Patients enrolled in our
FAME Study will be followed for 36 months. Although we will
submit the additional 12 month clinical data to applicable
regulatory authorities, the approval of Iluvien by regulatory
authorities, including the FDA, will be based on the month 24
clinical data from our FAME Study.
Regulatory
Requirements in Other Jurisdictions
There are no specific guidance documents for the clinical
development of ophthalmic drug products outside of the United
States for the treatment of diabetic retinopathy or DME. We have
met with regulatory authorities in Canada, Germany, Spain,
France, Portugal and the United Kingdom and presented our
overall preclinical, technical, clinical and statistical
development plans which included the use of visual function as
the primary efficacy endpoint and an anatomical measure as a
co-primary efficacy endpoint or key secondary efficacy endpoint.
Commercialization
We believe that Iluvien will be the first ophthalmic drug
approved by the FDA for the treatment of DME and the only single
treatment drug therapy providing a sustained therapeutic effect
of longer than six months. Our commercialization strategy will
be to establish Iluvien as a leading therapy for the treatment
of DME and subsequently for other indications. In the United
States and Canada we intend to distribute Iluvien directly to
physicians and through wholesalers and specialty pharmacies
utilizing our own specialized sales and marketing
infrastructure. Although we anticipate Iluvien being
administered as a stand alone therapy, we do not foresee the use
of Iluvien as precluding the administration of other therapies
in conjunction with Iluvien. Iluvien is not approved by the FDA.
Our commercialization strategy is subject to and dependent upon
the regulatory approval of Iluvien for the treatment of DME.
Sales
and Marketing
We are led by an executive team with extensive development and
commercialization expertise with ophthalmic products including
the launch and management of Visudyne, a drug product sponsored
by Novartis Ophthalmics and the first pharmacological treatment
indicated for the treatment of wet AMD. We intend to capitalize
on our managements experience and expertise in marketing
eye-care products by marketing and selling Iluvien to the
approximately 1,600 retinal specialists practicing in the
approximately 900 retina centers in the United States and
Canada. The concentration of retinal specialists in a small
number of retina centers and Iluviens expected status as
the only ophthalmic drug therapy approved by the FDA for the
treatment of DME are factors that we believe will accelerate the
adoption of Iluvien by retinal specialists. We intend to seek a
commercialization partner for sales and marketing activities
outside North America.
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Our plan is to ensure that influential retinal specialists are
presenting our FAME Study data at key retina meetings in 2010,
to develop our medical marketing, promotion and communication
materials and to build our own specialized domestic sales and
marketing infrastructure, comprised of approximately
40 people, to market Iluvien and other ophthalmic products
that we acquire or develop in the future. We will begin
recruiting our sales and marketing infrastructure personnel with
extensive ophthalmic based sales experience in the fourth
quarter of 2010 in preparation for an expected launch of Iluvien
as early as the first quarter of 2011. We expect that our sales
force will be able to access and form relationships with retinal
specialists in the approximately 900 retina centers for the
commercial launch of Iluvien. We will hire additional personnel
to support the activities of customer service, post-marketing
pharmacovigilance, medical affairs and regulatory compliance.
Manufacturing
We do not have, and do not intend to establish an in-house
manufacturing capability for our products and as a result we
will depend heavily on third-party contract manufacturers to
produce and package our products. We are in the process of
finalizing long-term agreements with the manufacturer of the
active pharmaceutical ingredient in Iluvien (FARMABIOS
S.R.L./Byron Chemical Company Inc.) and the manufacturer of the
Iluvien inserter (Flextronics International, Ltd or an
affiliate of Flextronics International, Ltd. (Flextronics)). We
have finalized a long-term agreement with the manufacturer of
Iluvien (Alliance).
pSivida is manufacturing our clinical trial materials for our
FAME Study, PK Study and the Phase 2 clinical trials being
conducted for the use of Iluvien for the treatment of dry AMD
and wet AMD. pSividas manufacturing process is manual and
labor intensive and not practical for commercial manufacturing.
We worked with Flextronics and Alliance to develop a
manufacturing process where automation is employed whenever
feasible so that we have a process capable of being
scaled-up
to
produce commercial quantities. The manufacturing process for
Iluvien consists of filling the polyimide tube with a matrix
consisting of FA and polyvinyl alcohol (PVA), cutting the tubes,
capping the tubes with membrane caps, curing at high
temperature, loading Iluvien inside the Iluvien inserter,
packaging and sterilizing the product. This process has been
transferred to Alliance, the third-party contract manufacturer
of Iluvien. Alliance is also the provider of the clinical trial
materials for the Phase 2 clinical trial being conducted for the
use of Iluvien in the treatment of RVO. We have discussed our
approach to show equivalency of the pSivida manufacturing
process to the commercial manufacturing process with the FDA,
the United Kingdom Medicines and Healthcare Products Regulatory
Agency (MHRA) and the German Bundeninstitut fur Arneimittel und
Medizinprodukte (BfArM).
For our NDA, we will need to provide the FDA with a description
of the manufacturing and packaging procedures and in-process
controls. In addition, we will need to submit
12-month
stability data from a minimum of three registration batches to
demonstrate that the product manufactured using the process as
described meets the product specifications. Although a
Validation Protocol will be submitted with the NDA, process
validation does not need to be completed at the time of our NDA
submission. Process validation must be completed prior to
commercialization.
In Europe, the manufacturing requirements are different in that
data to demonstrate that the process has been validated must be
included in the submission. To meet these requirements,
validation of the manufacturing process was conducted in
conjunction with the manufacture of the registration batches for
Iluvien (three batches each for the high and low dose). All six
batches have been placed on stability. These were small scale
batches and we will be limited to this batch size for product
sold in Europe.
We are currently working with the third-party contract
manufacturer of Iluvien to identify activities and equipment
needed to
scale-up
for
commercial size batches. New equipment for the commercial batch
size will require full qualification and some steps, for example
the capping step, will require revalidation.
Competition
The development and commercialization of new drugs and drug
delivery technologies is highly competitive. We will likely face
competition with respect to Iluvien and any products we may
develop or commercialize in the future from major pharmaceutical
companies, specialty pharmaceutical companies and
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biotechnology companies worldwide, many of whom have
substantially greater financial and other resources than we do.
If Iluvien is approved for use in the treatment of DME, it will
compete against laser photocoagulation and off-label use of
anti-VEGF and corticosteroid injections, or other therapies that
may be approved in the future. While we believe that Iluvien
will be the first ophthalmic drug therapy approved by the FDA
for the treatment of DME, there are other companies working to
develop other drug therapies and sustained delivery platforms
for DME and other indications. We believe that the following
companies provide potential competition to our product
candidates:
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Allergan, Inc.s (Allergan) product Ozurdex (dexamethasone
intravitreal implant), is a bioerodable extended release implant
that delivers the corticosteroid dexamethasone. Ozurdex was
approved in 2009 for macular edema following branch or central
RVO and showed a duration of therapy of three to five months. In
addition, Allergans product Trivaris (triamcinolone
acetonide injectable suspension) is approved for sympathetic
ophthalmia, temporal arteritis, uveitis and other inflammatory
conditions unresponsive to topical corticosteroids. Trivaris is
not indicated for the treatment of DME, dry AMD, wet AMD or RVO.
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Alcon, Inc.s (Alcon) product TRIESENCE (triamcinolone
acetonide injectable suspension), a preservative free synthetic
corticosteroid for visualization during vitrectomy, is approved
for the treatment of sympathetic ophthalmia, temporal arteritis,
uveitis and other inflammatory conditions unresponsive to
topical corticosteroids. TRIESENCE is not indicated for the
treatment of DME, dry AMD, wet AMD or RVO.
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Genentech Inc.s (Genentech) products Lucentis (ranibizumab
injection) and Avastin (bevacizumab), both antibodies that block
all isoforms of VEGF, are being studied for the treatment of
DME. However, only Lucentis is currently enrolled in
Phase 3 clinical trials for the treatment of DME. Lucentis
is currently approved in the United States for the treatment of
patients with neovascular wet AMD. Avastin is currently marketed
as an oncology product. Neither product is indicated for the
treatment of DME, dry AMD or RVO. Genentech is a wholly-owned
member of the Roche Group.
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Eyetech, Inc.s product Macugen (pegaptanib sodium
injection) is an anti-VEGF aptamer against VEGF 165. It has been
FDA-approved for treatment of all subtypes of choroidal
neovascularization in patients with AMD. Macugen is not
indicated for the treatment of DME, dry AMD or RVO.
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In addition, there are a number of other companies, including
Regeneron, Inc., MacuSight, Inc., Lux Biosciences, Inc. and
Novagali Pharma S.A., that are developing drug therapies or
sustained delivery platforms for the treatment of ocular
disease. These companies are seeking to apply their technologies
to ophthalmic indications in early stage clinical trials.
We believe we will be less likely to face generic competition
for Iluvien because of the bioequivalency requirements of a
generic form of Iluvien. For a generic pharmaceutical competitor
to Iluvien, bioequivalency must be established through the
demonstration of an equivalent pharmacodynamic endpoint in a
clinical trial. We believe conducting such a clinical trial
would be cost prohibitive and time consuming.
The licensing and acquisition of pharmaceutical products, which
is part of our strategy, is a highly competitive area. A number
of more established companies are also pursuing strategies to
license or acquire products. These established companies may
have a competitive advantage over us due to their size, cash
flow and institutional experience.
Other
Pipeline Products
NADPH
Oxidase Inhibition
We believe that the management of oxidative stress is an
important strategy in managing the development and progression
of diseases of the eye, and we believe that NADPH oxidase
inhibitors have the potential to manage oxidative stress.
Oxidative stress is a condition where excess reactive oxygen
intermediates generally referred to as reactive oxygen species
(ROS), are produced. The production of ROS is not always
pathogenic,
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however, many researchers believe that when the level of ROS
becomes excessive, pathogenic processes are initiated, resulting
in diseased tissue.
NADPH oxidase has been identified as an enzyme system that
generates ROS as its primary function. NADPH oxidase has been
identified in almost every tissue type and there is a
significant amount of scientific literature associating NADPH
oxidase activation with many systemic and ocular conditions. In
the eye, the inhibition of NADPH oxidase has been shown to
prevent or slow pathology in various models of ocular disease,
including retinal degeneration, retinal neovascularization,
choroidal neovascularization and uveitis. In addition, the
presence of NADPH oxidase in corneal epithelial cells implicates
it as having a possible role in dry eye, and the activation of
NADPH oxidase in certain pollen grains upon hydration implicates
its role in allergic conjunctivitis.
In July and August 2009, we executed agreements with Emory
University, whereby we acquired exclusive, worldwide licenses of
rights under patent applications covering two classes of NADPH
oxidase inhibitors. Our strategy around NADPH oxidase inhibition
will target, as the first indication, the treatment of dry AMD
and specifically the end stage of this condition known as
geographic atrophy. We have initiated a testing process to
identify the optimal candidate for formulation in a sustained
release dosage form for the treatment of geographic atrophy. In
addition to studying NADPH oxidase inhibitors, and specifically
an intraocular dosage form, to treat dry AMD, we believe that
these compounds and this dosage form has the potential to treat
other diseases of the eye including wet AMD, diabetic
retinopathy and posterior uveitis.
Licenses
and Agreements
pSivida
US, Inc.
In February 2005, we entered into an agreement with pSivida to
obtain rights and licenses to intellectual property rights
related to pSividas proprietary delivery technology. Our
agreement with pSivida provides us with a worldwide exclusive
license to develop and sell Iluvien, which consists of a tiny
polyimide tube with membrane caps that is filled with FA in a
polyvinyl alcohol matrix, for delivery to the back of the eye
for the treatment and prevention of eye diseases in humans
(other than uveitis). This agreement also provided us with a
worldwide non-exclusive license to develop and sell
pSividas proprietary delivery device to deliver other
corticosteroids to the back of the eye for the treatment and
prevention of eye diseases in humans (other than uveitis) or to
treat DME by delivering a compound to the back of the eye
through a direct delivery method through an incision required
for a 25-gauge or larger needle. We do not have the right to
develop and sell pSividas proprietary delivery device in
connection with indications for diseases outside of the eye or
for the treatment of uveitis.
We made initial license fee payments totaling $750,000 to
pSivida in 2004, and made additional license fee payments of
$750,000 to pSivida in 2005 upon the initiation of the Phase 3
trials for Iluvien for the treatment of DME.
Under the February 2005 agreement, we and pSivida agreed to
collaborate on the development of Iluvien with FA for DME, and
share equally in the development expenses. We and pSivida also
agreed that after commercialization of such product, profits, as
defined in our agreement would be shared equally.
In March 2008, we and pSivida amended and restated the agreement
to provide us with 80% of the net profits and pSivida with 20%
of the net profits. In connection with the March 2008 agreement
we agreed to:
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pay $12.0 million to pSivida upon the execution of the
March 2008 agreement;
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issue a $15.0 million promissory note to pSivida;
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forgive all outstanding development payments, penalties and
interest as of the effective date of the March 2008 agreement,
which totaled $6.8 million;
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continue responsibility for regulatory, clinical, preclinical,
manufacturing, marketing and sales for the remaining development
and commercialization of the products;
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assume all financial responsibility for the development of the
products and assume 80% of the commercialization costs of the
products (instead of 50% as provided under the February 2005
agreement where commercialization costs were shared
equally); and
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make an additional milestone payment of $25.0 million after
FDA approval of the first product under the March 2008 agreement
to be approved by the FDA.
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In addition, pSivida is continuing to provide clinical supply
materials for our FAME Study, PK Study and the Phase 2 clinical
trials being conducted for the use of Iluvien for the treatment
of dry AMD and wet AMD and perform and maintain stability
testing on those supplies.
The $15.0 million promissory note accrues interest at 8%
payable quarterly and is payable in full to pSivida upon the
earlier of a liquidity event as defined in the note (including
an initial public offering of our common stock greater than
$75.0 million), the occurrence of an event of default under
our agreement with pSivida or September 30, 2012. If the
note is not paid in full by March 31, 2010, the interest
rate will increase to the lesser of 20% and the highest rate
permitted by applicable law per annum effective April 1,
2010, and we will be required to begin making principal payments
of $500,000 per month.
Our license rights to pSividas proprietary delivery device
could revert to pSivida if we (i) fail twice to cure our
breach of an obligation to make certain payments to pSivida
following receipt of written notice thereof; (ii) fail to
cure other breaches of material terms of our agreement with
pSivida within 30 days after notice of such breaches or
such longer period (up to 90 days) as may be reasonably
necessary if the breach cannot be cured within such
30-day
period; (iii) file for protection under the bankruptcy
laws, make an assignment for the benefit of creditors, appoint
or suffer appointment of a receiver or trustee over our
property, file a petition under any bankruptcy or insolvency act
or have any such petition filed against us and such proceeding
remains undismissed or unstayed for a period of more than
60 days; or (iv) we notify pSivida in writing of our
decision to abandon our license with respect to a certain
product using pSividas proprietary delivery device.
Emory
University
In July 2009, we entered into an agreement with Emory University
related to the fulvene class of NADPH oxidase inhibitors. Under
such agreement, Emory granted to us an exclusive, worldwide
license to rights under intellectual property rights related to
the fulvene class of NADPH oxidase inhibitors for the
development, manufacturing, marketing and selling of
pharmaceutical products containing such compounds for
therapeutic and prophylactic uses for the treatment of diseases
and disorders of the eye in humans. In August 2009, we entered
into a second agreement with Emory University related to the
triphenylmethane class of NADPH oxidase inhibitors. Under such
agreement, Emory granted to us an exclusive, worldwide license
to rights under intellectual property rights related to the
triphenylmethane class of NADPH oxidase inhibitors for the
development, manufacturing, marketing and selling of
pharmaceutical products containing such compounds for
therapeutic and prophylactic uses for the treatment of diseases
and disorders of the eye in humans.
Under such agreements, we pay Emory University royalties in the
mid-single digits of net sales of products containing such
fulvene or triphenylmethane compounds, in countries in which a
claim in a pending patent application or an unexpired patent
that covers the applicable product exists. We also pay Emory
University royalties in the low-single digits of net sales of
products containing such fulvene or triphenylmethane compounds,
in countries in which a claim in a pending patent application or
an unexpired patent that covers the applicable product does not
exist, if at least one patent that covers the applicable product
has issued in the United States. Furthermore, under each
agreement, we will be required to make annual minimum royalty
payments in the amount of $250,000 the first calendar year after
regulatory approval of the product in a major market country
(i.e., the United States, Japan, China, India or any European
country), $500,000 the second calendar year after regulatory
approval of the product in such major market country,
$1.0 million the third calendar year after regulatory
approval of the product in such major market country and
$2.5 million the fourth year after regulatory approval of
the product in such major market country and each subsequent
year thereafter for the remainder of the term of such agreement.
If we terminate the agreements in India, China or Japan after we
obtain regulatory approval for a licensed product, the minimum
royalty in the calendar year of the termination, and in each
subsequent calendar year thereafter, will increase by $250,000
for each such country in which termination occurred. We will
also be required to make payments of up to $5.8 million
under the fulvene license agreement and up to $5.9 million
under the triphenylmethane license agreement depending
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upon which regulatory milestones we achieve. If we do not make
any milestone payments to Emory University under the license
agreements prior to the third anniversary of the effective date
of the applicable license agreement, and we do not elect to
terminate that license agreement in accordance with its terms,
then we will be required to pay Emory University annual license
maintenance fees ranging from $500,000 to $2 million
(depending on when such payment is made) until a milestone
payment is made under the applicable license agreement or such
license agreement is terminated in accordance with its terms. As
an upfront license fee for the licenses granted by Emory
University to us, we issued to Emory University (and its
inventors), that number of shares of our common stock with a
fair market value equal to $150,000 on the date of issuance with
respect to the fulvene license agreement and in December 2009 we
issued that number of shares of our common stock with a fair
market value equal to $150,000 on the date of issuance with
respect to the triphenylmethane license agreement. We must also
reimburse Emory University for reasonable costs and
expenses incurred by Emory University in filing, prosecuting and
maintaining the licensed patents.
In connection with the license agreements, we obtained an
exclusive option to acquire an exclusive, worldwide license to
rights under intellectual property rights related to the covered
compounds for the development, manufacturing, marketing and
selling of pharmaceutical products containing such compounds for
therapeutic and prophylactic uses for the treatment of diseases
and disorders in humans outside the eye. The option will include
the right to sublicense to a third-party and will last for a
period of up to six years. In order to retain the option over
the six-year period, we will be required to make maintenance
payments of $550,000 in the aggregate over a four-year period
commencing two years after the effective date of the license
agreement. If we exercise the option during the six-year period
with respect to a license agreement and subsequently enter into
an amendment to such license agreement in connection therewith,
then the license granted under such license agreement will be
expanded to cover the development, manufacturing, marketing and
selling of products that contain the covered compounds for
therapeutic and prophylactic uses for the treatment of diseases
and disorders in humans outside the eye. We may grant
sublicenses of the intellectual property rights granted to us
under such license agreements to sublicensees. We will, however,
be required to remit 25% of any royalty amounts and 20% to 45%
(depending upon when the applicable sublicense is granted by us)
of other payments we receive from a sublicensee to Emory
University.
As a licensee, we are expected to diligently develop and
commercialize the covered compounds, and failure to meet certain
milestones may result in the termination of our licenses. Under
the agreements, the performance of our sublicensees is deemed to
be performance by us toward fulfillment of our diligence
obligations. The agreements will expire on a country by country
basis upon the later of (i) the expiration of the last to
expire of the licensed patents in a particular country and
(ii) ten years after the date of the first sale of a
licensed product in such country. In addition, Emory University
may terminate a license agreement if (i) we fail to cure a
breach of a material term of such license agreement within
30 days after notice of such breach; (ii) a material
proceeding is instituted against or by us under any bankruptcy,
insolvency, moratorium or dissolution law that is not dismissed
within 90 days; (iii) we assign substantially all of
our assets for the benefit of creditors; (iv) we place our
assets in the hands of a trustee, assignee or receiver and the
receivership or trust is not dissolved or such placement is not
reversed within 60 days; (v) we notify Emory
University in writing that we are quitting the business of
developing or selling products containing the covered compounds
or (vi) we challenge the validity, enforceability
and/or
scope
of any claim within a patent or patent application licensed to
us by Emory University under such license agreement in a court
or other government agency.
Dainippon
Sumitomo
In November 2007, we entered into a license agreement with
Dainippon Sumitomo Pharma Co., Ltd. (Dainippon) whereby it
granted to us a non-exclusive, worldwide, royalty free license
to patent rights under specific patents and patent applications
for the development, manufacturing and marketing in the field of
ophthalmology an injectable polymer tube implantable into an eye
containing a mixture of a polymer and FA (or derivative or
pharmaceutically acceptable salt of FA) with a polyvinyl alcohol
or other polymer coating or layer at each end of the tube. In
addition, Dainippon granted to us an option to acquire a
non-exclusive, worldwide license to patent rights and know-how
related to specific patents and patent applications for the
development, manufacturing and marketing in the field of
ophthalmology other pharmaceutical products. In exchange for the
license and option granted to us by Dainippon, we paid $200,000
to Dainippon shortly after
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the execution of the license agreement, and we are expected to
pay another $200,000 to Dainippon within thirty days following
the first regulatory approval of the licensed product in the
United States by the FDA. Dainippon may terminate the license
agreement if we materially fail to fulfill or breach certain
terms and conditions of the license agreement and fail to remedy
such failure or breach within thirty days after receipt of
notice from Dainippon. In addition, Dainippon may terminate the
license agreement in the event that we contest the validity of
the patent rights related to Dainippons specific patents
and patent applications. In the event of termination of the
license agreement by Dainippon, we are still expected to make
the payment described above.
Alliance
Medical Products, Inc.
In February 2010, we entered into a commercial manufacturing
agreement with Alliance Medical Products, Inc. (Alliance)
whereby Alliance agreed to manufacture and package Iluvien for
us at its Irvine, California facility. We purchased certain
equipment and loaned such equipment to Alliance solely for the
purpose of allowing Alliance to manufacture and package Iluvien
for us. Under the agreement, we are also responsible for
supplying Alliance with the Iluvien inserter and the active
pharmaceutical ingredient. In exchange for Alliances
manufacturing and packaging services, we are required to pay
them the agreed upon per unit price for each unit of Iluvien. In
addition, we will also pay Alliance an annual charge associated
with the maintenance of validation services to support
manufacturing. Alliance may increase their fee for the
manufacturing and packaging services and the annual charge one
time during each subsequent calendar year of the term of the
agreement, but such increases shall be limited to proportionate
increases in the Producer Price Index for Pharmaceutical
Preparations by Rx and OTC Product. Pursuant to our agreement
with Alliance we have agreed to order from Alliance at least 80%
of our total requirements for new units of Iluvien in the United
States, Canada and Europe in a calendar year; provided, that
Alliance is able to fulfill our supply requirements and is not
in breach of its agreements or obligations to us.
Our agreement with Alliance shall continue for a period of six
years and will automatically renew for successive one year
periods unless either party delivers written notice of
non-renewal to the other at least 12 months prior to the
end of the current term. Either party may terminate the
agreement if the other party is in breach of any of its
agreements or obligations under the agreement and has not cured
such breach within 60 calendar days after receipt of notice of
such breach from the other party (10 business days if the breach
is related to a payment default). Either party may also
terminate the agreement upon the filing or institution of any
bankruptcy, reorganization, liquidation or receivership
proceedings by the other party or upon the failure by the other
party to discharge any such actions against it for more than
90 days. In addition, we may terminate the agreement if any
required license, permit or certificate of Alliance is not
approved or issued, or is withdrawn, by any applicable
regulatory authority, or if Iluvien is withdrawn by us or by any
regulatory authority or any regulatory authority takes any
action, or raises any objection, that prevents us from
marketing, distributing, importing, exporting or selling
Iluvien. Alliance may terminate the agreement if we do not
commercially launch Iluvien within the earlier of (1) six
months after receipt by us of FDA approval necessary for the
marketing, distribution and sale of Iluvien by us in the United
States or (2) two years from completion of Alliances
validation of its processes for Iluvien. Alliance may not
terminate the agreement for such reason, however, if we choose,
within ten days after receipt of such termination notification,
to (A) compensate Alliance for the physical space reserved
at their facility for the manufacturing of Iluvien and
(B) waive a restriction agreed upon between the parties
with respect to manufacturing restrictions. Alliance may also
terminate the agreement if we cease commercial sale of Iluvien
after commercial launch and if we do not purchase at least one
full batch of Iluvien during any six month period after initial
commercial launch of Iluvien.
Government
Regulation
General
Overview
Government authorities in the United States and other countries
extensively regulate among other things the research,
development, testing, quality, efficacy, safety (pre- and
post-marketing), manufacturing, labeling, storage,
record-keeping, advertising, promotion, export, import,
marketing and distribution of pharmaceutical products.
82
United
States
In the United States, the FDA, under the Federal Food, Drug, and
Cosmetic Act (FD&C Act) and other federal and local
statutes and regulations, subjects pharmaceutical products to
review. If we do not comply with applicable regulations, the
government may refuse to approve or place our clinical studies
on clinical hold, refuse to approve our marketing applications,
refuse to allow us to manufacture or market our products, our
products may be seized, injunctions and monetary fines may be
imposed, and we may be criminally prosecuted.
To obtain approval of a new product from the FDA, we must, among
other requirements, submit data supporting the safety and
efficacy as well as detailed information on the manufacture and
composition of the product and proposed labeling. The testing
and collection of data and the preparation of the necessary
applications are expensive and time consuming. The FDA may not
act quickly or favorably in reviewing these applications, and we
may encounter significant difficulties or costs in our efforts
to obtain FDA approval that could delay or preclude us from
marketing our products. The drug approval process in the United
States generally involves the following:
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completion of preclinical laboratory and animal testing and
formulation studies conducted under Good Laboratory Practices
(GLP) regulations;
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submission of an Investigational New Drug Application (IND)
which must become effective before human clinical trials may
begin;
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completion of adequate and well-controlled human clinical trials
to establish the safety and efficacy of the investigational drug
for its intended use; the studies must be conducted under Good
Clinical Practices (GCP) regulations;
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submission of an NDA or Biologics License Application (BLA);
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satisfactory completion of an FDA inspection of the
manufacturing facility or facilities where the product is
produced to assess compliance with current Good Manufacturing
Practice (cGMP) regulations; and
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FDA review and approval of the NDA or BLA.
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Preclinical tests include laboratory evaluations of the active
drugs chemical and physical properties, product
formulation and stability and animal studies to establish
pharmacological effects and safety. The sponsor must submit the
results of preclinical tests, chemistry, manufacturing and
control (CMC) information and clinical development plan
including clinical protocol(s) in an IND. The sponsor cannot
start clinical studies until the IND becomes effective which is
30 days after receipt by the FDA unless the FDA raises
concerns or questions before the
30-day
period. In that case, the sponsor and the FDA must resolve the
questions or concerns before clinical trials can proceed.
Clinical trials involve the administration of the
investigational drug to human subjects under the supervision of
qualified investigators. They are typically conducted in three
sequential phases but the phases may overlap or be combined.
Each trial must be reviewed and approved by an independent
Institutional Review Board before it can begin.
Phase 1 trials usually involve the initial introduction of the
investigational drug in a small number of human subjects to
evaluate the products safety, dosage tolerance and
pharmacodynamics and if possible, to gain an early indication of
its effectiveness.
Phase 2 trials are usually conducted in a limited patient
population to evaluate dosage tolerance and appropriate dosage;
identify possible adverse effects and safety risks; and
preliminarily evaluate the efficacy of the drug for specific
indications.
Phase 3 trials further evaluate clinical efficacy and test
further for safety in an expanded patient population at
geographically dispersed test sites. Completion of two adequate
and well-controlled Phase 3 studies with results that replicate
each other is the norm before an application can be submitted to
the FDA.
83
The FDA closely monitors the progress of each phase of clinical
testing and may, at its discretion, reevaluate, alter, suspend
or terminate testing based on data accumulated to that point and
its assessment of the risk/benefit relationship to the patient.
Total time required for running the clinical studies varies
between 2 and 10 years. Additional clinical testing may be
required for special classes of patients, e.g., geriatric
patients, pediatric patients, patients with renal impairment.
Once all the clinical studies are completed, the sponsor submits
the NDA that contains the results of non-clinical and clinical
trials, together with detailed information on the chemistry,
manufacturing and controls of the product and proposed labeling.
It is also important that the sponsor provide a detailed
description and justify the risk/benefit relationship of the
drug to the patient. Under the Prescription Drug User Fee Act
(PDUFA), the applicant has to pay a user fee which is
substantial and increases every year. In fiscal year 2010, the
fee will be $1.4 million.
The FDA conducts a preliminary review of the NDA and within
60 days will make a fileability decision. Once
the submission is accepted for filing, the FDA conducts an
in-depth review of the NDA. Under the PDUFA, the FDA has ten
months and six months respectively in which to complete its
review and issue an action letter for a Standard and Priority
Review NDA. The review process may be extended by three months
if the FDA requests additional information or the sponsor
provides significant new information or clarification regarding
information already provided in the submission within the last
3 months of the PDUFA goal date. If the FDAs
evaluation of the NDA and audit/inspection of clinical and
manufacturing procedures and facilities are favorable, the FDA
may issue either an approval letter or an approvable letter. An
approvable letter contains conditions that must be met in order
to secure final approval. If and when those conditions have been
met to the FDAs satisfaction, the FDA will issue an
approval letter authorizing commercial marketing of the drug for
the proposed indication(s). If the FDAs evaluation of the
NDA submission and audit/inspection of clinical and
manufacturing procedures and facilities are not favorable, the
FDA may refuse to approve the NDA and issue a not approvable
letter.
Priority
Review
We plan to file our NDA for the low dose of Iluvien in the
United States in the second quarter of 2010 followed by
registration filings in certain European countries and Canada.
Once our NDA has been accepted for filing, by law the FDA has
180 days to review the application and respond to the
applicant. In 1992, under the PDUFA the FDA agreed to specific
goals for improving the drug review time and created a
two-tiered system of review times Standard Review
and Priority Review. A Priority Review designation is given to a
drug product that has the potential to provide safe and
effective therapy where no satisfactory alternate therapy exists
or the drug product provides a significant improvement compared
to marketed products, including non-drug products. Drug products
that do not meet these criteria are automatically given a
Standard Review designation. The 2002 amendment to the PDUFA set
a goal that a Standard Review of an NDA be accomplished within a
ten-month timeframe. A Priority Review means that the time it
takes the FDA to review an NDA is reduced such that the goal for
completing a Priority Review initial review cycle is six months.
We believe that Iluvien may be eligible for Priority Review
under FDA procedures. We will request Priority Review for
Iluvien at the time of we submit our NDA. Although the FDA has
granted Priority Review to other products that treat retinal
disease (including Visudyne, Retisert, Macugen, Lucentis and
Ozurdex), Iluvien may not receive similar consideration. If
granted, Priority Review may help to shorten the review time of
our NDA with respect to Iluvien. However, even in the event that
Iluvien is designated for Priority Review, such a designation
does not necessarily mean a faster regulatory review process or
necessarily confer any advantage with respect to approval
compared to conventional FDA procedures. Receiving Priority
Review from the FDA does not guarantee approval within the
six-month review/approval cycle.
Following our NDA submission in the United States, we plan to
submit registration filings in certain European countries and
Canada. Currently, Priority Review (or fast track
classification) is not available for applications filed in the
European Union using the decentralized procedure. However, we
plan to revisit the potential to file for Priority Review (or
fast track classification) with MHRA in early 2010.
We intend to apply for Priority Review in Canada.
84
Other
Regulatory Requirements
Risk Evaluation and Mitigation Strategy
(REMS).
The recently enacted Food and Drug
Administration Amendments Act of 2007 (FDAAA), gives the FDA
authority to require a drug-specific REMS to ensure the safe use
of the drug. In determining whether a REMS is necessary, the FDA
must consider the size of the population most likely to use the
drug, the seriousness of the disease or condition to be treated,
the expected benefit of the drug, the duration of treatment, the
seriousness of known or potential adverse events and whether or
not the drug is a new chemical entity. If the FDA determines a
REMS is necessary, the sponsor must propose the REMS plan at the
time of approval. A REMS may be required to include various
elements, such as a medication guide or patient package insert,
a communication plan to educate health providers of the
drugs risks, limitation on who may prescribe or dispense
the drug or other measures that the FDA deems necessary to
assure the safe use of the drug.
The FDAAA also expands the FDAs authority to require
post-approval studies and clinical trials if the FDA, after drug
approval, deems it appropriate. The purpose of such studies
would be to assess a known serious risk or signals of a serious
risk related to the drug or to identify an unexpected serious
risk when available data indicate the potential for a serious
risk. The FDA may also require a labeling change if it becomes
aware of new safety information that it believes should be
included in the labeling of a drug.
Post-Marketing Requirements.
There are
post-marketing safety surveillance requirements that we will
need to meet to continue to market an approved product. Adverse
experiences with the product must be reported to the FDA and
could result in imposition of market restrictions through
labeling changes or in product removal. Product approvals may be
withdrawn if compliance with regulatory requirements is not
maintained or if problems concerning safety
and/or
efficacy of the product occur following approval. The FDA may
also, in its discretion, require post-marketing testing and
surveillance to monitor the effects of approved products or
place conditions on any approvals that could restrict the
commercial applications of these products.
With respect to product advertising and promotion of marketed
products, the FDA imposes a number of complex regulations which
include, among others, standards for direct-to-consumer
advertising, off-label promotions, industry-sponsored scientific
and educational activities and promotional activities involving
the Internet. The FDA has very broad enforcement authority under
the FD&C Act, and failure to abide by these regulations can
result in penalties, including the issuance of warning letters
directing the sponsor to correct deviations from FDA standards,
a requirement that future advertising and promotional materials
are pre-cleared by the FDA, and state and federal civil and
criminal investigations and prosecutions.
The manufacturing facility that produces our product must
maintain compliance with cGMP and is subject to periodic
inspections by the FDA. Failure to comply with statutory and
regulatory requirements subjects a manufacturer to possible
legal and regulatory action, including Warning Letters, seizure
or recall of products, injunctions, consent decrees placing
significant restrictions on or suspending manufacturing
operations and civil and criminal penalties.
Foreign
Regulations
Foreign regulatory systems, although varying from country to
country, include risks similar to those associated with FDA
regulations in the United States.
Under the European Union regulatory system, applications for
drug approval may be submitted either in a centralized or
decentralized procedure. Under the centralized procedure, a
single application to the European Medicines Agency (EMA) leads
to an approval granted by the European Commission which permits
marketing of the product throughout the European Union
(currently 27 member states). The centralized procedure is
mandatory for new chemical entities, biotech and orphan drug
products and products to treat AIDS, cancer, diabetes and
neuro-degenerative disorder, auto-immune diseases, other immune
dysfunctions and viral diseases. Products that constitute a
significant therapeutic, scientific or technical innovation or
which are in the interests of patients at the European Union
community level may also be submitted under this procedure. Our
product
85
would potentially qualify for this procedure as a product that
constitutes a significant therapeutic, scientific or technical
innovation.
The decentralized procedure provides for mutual recognition of
nationally approved decisions and is used for products that do
not comply with the requirements for the centralized procedure.
Under the decentralized procedure, the holders of national
marketing authorization in one of the countries within the
European Union may submit further applications to other
countries within the European Union, who will be requested to
recognize the original authorization based on an assessment
report provided by the country in which marketing authorization
is held.
Our current strategy is to use the decentralized procedure. The
MHRA has agreed to be our Reference Member State. A Reference
Member State is responsible for coordinating the review and
approval process between the United Kingdom and the six other
European Union countries where we intend to seek marketing
authorization.
Patents
and Proprietary Rights
Our success depends in part on our ability to obtain and
maintain proprietary protection for our product candidates,
technology and know-how, to operate without infringing on the
proprietary rights of others and to prevent others from
infringing our proprietary rights. Because all of our product
candidates are licensed to us by third-party collaborators, we
are dependent on our collaborators ability to obtain and
maintain such protection. Where we have conducted our own
research, our policy is to seek to protect our proprietary
position by, among other methods, filing U.S. and foreign patent
applications related to our proprietary technology, inventions
and improvements that are important to the development of our
business. We also rely on trade secrets, know-how, continuing
technological innovation and in-licensing opportunities to
develop and maintain our proprietary position.
We own or have licensed three U.S. utility patents, one U.S.
design patent and six U.S. patent applications as well as
numerous foreign counterparts to many of these patents and
patent applications relating to Iluvien or the Iluvien inserter.
We licensed our patent rights relating to Iluvien from pSivida.
Pursuant to our licensed rights, we only have the right to our
Iluvien-related patent rights for diseases of the human eye
(other than uveitis). Our licensed patent portfolio includes
U.S. patents with claims directed to methods for administering a
corticosteroid with an implantable sustained delivery device to
deliver the corticosteroid to the vitreous of the eye wherein
aqueous corticosteroid concentration is less than vitreous
corticosteroid concentration during release. Our licensed patent
portfolio also includes a U.S. patent and a corresponding issued
European patent directed to our low-dose Iluvien device and a
pending U.S. patent application directed to our high-dose
Iluvien device. In addition, we have patent applications
directed to an inserter system for Iluvien.
U.S. utility patents generally have a term of 20 years from
the date of filing. The utility patent rights relating to
Iluvien licensed to us from pSivida include three U.S. patents
that expire between March 2019 and April 2020 and counterpart
filings to these patents in a number of other jurisdictions. No
patent term extension will be available for any of these U.S.
patents or any of our licensed U.S. pending patent applications.
The patent positions of companies like ours are generally
uncertain and involve complex legal and factual questions. Our
ability to maintain and solidify our proprietary position for
our technology will depend on our success in obtaining effective
claims and enforcing those claims once granted. We do not know
whether any of our patent applications or those patent
applications that we license will result in the issuance of any
patents. Our issued patents and those that may issue in the
future, or those licensed to us, may be challenged, invalidated
or circumvented, which could limit our ability to stop
competitors from marketing related products or the length of
term of patent protection that we may have for our products. In
addition, the rights granted under any issued patents may not
provide us with proprietary protection or competitive advantages
against competitors with similar technology. Furthermore, our
competitors may independently develop similar technologies or
duplicate any technology developed by us. Because of the
extensive time required for development, testing and regulatory
review of a potential product, it is possible that, before any
of our products can be
86
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 may rely, in some circumstances, on trade secrets to protect
our technology. However, trade secrets are difficult to protect.
We seek to protect our proprietary technology and processes, in
part, by confidentiality agreements with our employees,
consultants, scientific advisors and other contractors. These
agreements may be breached, and we may not have adequate
remedies for any breach. In addition, our trade secrets may
otherwise become known or be independently discovered by
competitors. To the extent that our employees, consultants or
contractors use intellectual property owned by others in their
work for us, disputes may arise as to the rights in related or
resulting know-how and inventions.
Employees
As of March 31, 2010, we had 21 employees, two of
which hold Ph.D.s, and one of which holds an O.D. Ten of these
employees were engaged in research, development and regulatory
activities, and 11 were engaged in administrative support, human
resources, finance, information technology and marketing
activities.
Facilities
Our facilities consist of 14,000 square feet of leased
office space located in Alpharetta, Georgia that houses our
corporate headquarters. The corporate headquarters is staffed by
those individuals responsible for the administrative support
responsibilities of human resources, finance, marketing,
information technology, as well as for research, development and
regulatory matters. The lease on our headquarters facility
expires in May 2010.
We believe that this facility is adequate to meet our current
needs. We believe that if additional space is needed in the
future, such space will be available on commercially reasonable
terms as necessary.
Legal
Proceedings
We are not currently a party to any material legal proceedings.
87
MANAGEMENT
Executive
Officers and Directors
The following table sets forth certain information about our
executive officers and directors, including their ages and
positions as of December 31, 2009.
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Name
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Age
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Position(s)
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C. Daniel Myers
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55
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President, Chief Executive Officer and Director
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Richard S. Eiswirth, Jr.
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41
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Chief Financial Officer
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Kenneth Green, Ph.D.
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51
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Senior Vice President and Chief Scientific Officer
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Susan Caballa
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65
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Senior Vice President, Regulatory and Medical Affairs
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David Holland
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46
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Vice President of Marketing
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Philip R. Tracy(1)
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67
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Chairman of the Board of Directors
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Mark J. Brooks(2)(3)
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43
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Director
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Brian K. Halak, Ph.D.(1)(2)
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38
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Director
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Anders D. Hove, M.D.(2)(3)
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43
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Director
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Calvin W. Roberts, M.D.(3)
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57
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Director
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Bryce Youngren(1)
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39
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Director
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Peter J. Pizzo, III(4)
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43
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Director
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(1)
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Member of the Nominating/Corporate Governance Committee
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(2)
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Member of the Compensation Committee
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(3)
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Member of the Audit Committee
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(4)
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Mr. Pizzo will be elected as a director of our company and will
replace Mr. Brooks as a member of our Audit Committee as of
the effective time of this offering.
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Executive
Officers
C. Daniel Myers
is one of our co-founders and has served
as our President and Chief Executive Officer and as a member of
our board of directors since the founding of our company in
2003. Before founding our company, Mr. Myers was a founding
member of Novartis Ophthalmics (formerly CIBA Vision
Ophthalmics) and served as its Vice President of Sales and
Marketing from 1991 to 1997 and as its President from 1997 to
2003. Mr. Myers holds a B.S. in Industrial Management from
Georgia Tech. We believe Mr. Myerss qualifications to
serve as a director of our company include 27 years of
ophthalmic pharmaceutical experience, including 13 years in
the role of president and chief executive officer. In addition
to serving on our board of directors, Mr. Myers currently
holds a directorship with Ocular Therapeutix, Inc.
Richard S. Eiswirth, Jr.
has served as Chief
Financial Officer of our company since October 2005. From 2003
to 2005, Mr. Eiswirth served as founding partner of Brand
Ignition Group, which was engaged in consumer products
acquisition activities. From 2002 to 2005, Mr. Eiswirth
served as president of Black River Holdings, Inc., a financial
consultancy he founded in 2002. Mr. Eiswirth served as
chief financial officer and senior executive vice president of
Netzee, Inc., a provider of Internet banking solutions to
community banks from 1999 to 2002. Mr. Eiswirth held
various positions with Arthur Andersen, where he began his
career, from 1991 to 1999. Mr. Eiswirth currently serves as
chairman of the board of directors, audit committee chairman and
member of the compensation committee of Jones Soda Co., a
Seattle, Washington based beverage company, as a director of
North Metro Miracle League, and previously served as a director
and audit committee chairman of Color Imaging, Inc., a Norcross,
Georgia based manufacturer of printer and copier supplies.
Mr. Eiswirth was previously a Certified Public Accountant
in Georgia. Mr. Eiswirth holds a bachelors in accounting
from Wake Forest University.
Kenneth Green, Ph.D.
joined us in 2004 as Vice
President of Scientific Affairs, and has served as the Senior
Vice President and Chief Scientific Officer of our company since
January 2007. Prior to joining us, Dr. Green served as the
global head of clinical sciences at Novartis Ophthalmics. He has
managed ophthalmic clinical development organizations at Storz
Ophthalmics, Bausch & Lomb and CIBA Vision. He started
his
88
career in the pharmaceutical industry in 1984, as a basic
research scientist in drug discovery at Lederle Laboratories,
and has since held positions in many areas of drug development.
Dr. Green holds a B.A. in Chemistry from Southern Illinois
University and a Ph.D. in Organic Chemistry from Ohio State
University.
Susan Caballa
has served as the Senior Vice President of
Regulatory and Medical Affairs of our company since 2004. Prior
to joining us, Ms. Caballa served as the vice president of
regulatory and medical affairs at Novartis Ophthalmics from 1999
to 2004. Ms. Caballa also held various regulatory
management positions with the following companies engaged in the
development and marketing of ophthalmic products: Allergan, Inc.
(1983-1987),
Iolab Corporation, a Johnson & Johnson Company
(1987-1994)
and Alcon Laboratories, Inc.
(1994-1999).
Ms. Caballa holds a B.S. in Chemistry and a Masters in
Chemistry from the University of Santo Tomas and University of
the Philippines.
David Holland
is one of our co-founders and has served as
the Vice President of Marketing since the founding of our
company in 2003. Prior to founding our company, Mr. Holland
served as the vice president of marketing of Novartis
Ophthalmics from 1998 to 2003. In 1997, Mr. Holland served
as global head of the lens business at CIBA Vision and in 1996,
Global Head of the Lens Care Business of CIBA Vision. From 1992
to 1995, Mr. Holland served as the Director of Marketing
for CIBA Vision Ophthalmics. From 1989 to 1991, Mr. Holland
served as New Products Manager for CIBA Vision. From 1985 to
1989, Mr. Holland served as a Brand Assistant and Assistant
Brand Manager for Procter and Gamble. Mr. Holland holds a
B.A. in Politics from Princeton University.
Directors
Philip R. Tracy
is the chairman of our board of directors
and has been a member of our board of directors since 2004.
Since 1998, Mr. Tracy has served as a Venture Partner of
Intersouth Partners. He is also counsel to the Raleigh, North
Carolina law firm Smith, Anderson, Blount, Dorsett,
Mitchell & Jernigan, L.L.P. Previously, Mr. Tracy
was employed by Burroughs Wellcome Co. from 1974 to 1995 and
served as president and chief executive officer from 1989 to
1995. Mr. Tracy holds an L.L.B. from George Washington
University and a B.A. from the University of Nebraska. We
believe Mr. Tracys qualifications to serve as a
director of our company include his service on the board of
directors of three publicly traded companies in the
biotechnology and pharmaceutical industries, his experience as
president and chief executive officer of Burroughs Wellcome Co.
with full responsibility for its North American pharmaceutical
business, his legal training and experience as a lawyer
including his service as general counsel to Burroughs Wellcome
Co., and Mr. Tracys 10 years of experience in
the venture capital industry as a venture partner with
Intersouth Partners. In addition to serving on our board of
directors, Mr. Tracy currently holds, or within the past
five years has held, directorships with the following companies:
Argos Therapeutics, Inc. and Burroughs Wellcome Fund.
Mark J. Brooks
has been a member of our board of
directors since 2004. Since its formation in January 2007,
Mr. Brooks has served as a managing director of Scale
Venture Partners. Prior to joining Scale Venture Partners, from
1995 Mr. Brooks worked for Bank of America Ventures,
ultimately serving as a Managing Director. Mr. Brooks also
serves on the board of directors of IPC The Hospitalist Company,
Inc., a publicly traded provider of hospitalist services, and
also serves on the board of four privately held companies:
National Healing Corporation, LivHome, Inc., Spinal Kinetics,
Inc., and Oraya Therapeutics, Inc. Mr. Brooks holds an
M.B.A. from the Wharton School at the University of Pennsylvania
and a B.A. in Economics from Dartmouth College. We believe
Mr. Brooks qualifications to serve as a director of
our company include his experience as one of six managing
directors of Scale Venture Partners, where Mr. Brooks leads
investments in healthcare services, medical devices and drug
development and his service on the board of directors of a
number of Scale Venture Partners portfolio companies. In
addition to serving on our board of directors, Mr. Brooks
currently holds, or within the past five years has held,
directorships on the following companies: Esurg Holdings
Corporation, IPC The Hospitalist Company, Inc.,
LivHome, Inc., SpinalKinetics, Inc., National Healing
Corporation, Oraya Therapeutics and U.S. Healthworks, Inc.
Brian K. Halak, Ph.D.
has been a member of our board
of directors since 2004. Since 2006, Dr. Halak has served
as a partner of Domain Associates, L.L.C. Prior to joining
Domain Associates, L.L.C., Dr. Halak served as an analyst
of Advanced Technology Ventures from 2000 to 2001. From 1993 to
1995, Dr. Halak
89
served as an analyst of Wilkerson Group. Dr. Halak holds a
Doctorate in Immunology from Thomas Jefferson University and a
B.S. in Engineering from the University of Pennsylvania. We
believe Dr. Halaks qualifications to serve as a
director of our company include his service on the board of
directors of 10 emerging companies in the life sciences industry
in the past 10 years, including Vanda Pharmaceuticals,
which completed a public offering on NASDAQ, and Esprit Pharma,
a company that was acquired by Allergan. In addition to serving
on our board of directors, Dr. Halak currently holds, or
within the past five years has held, directorships on the
following companies: Carticept Medical, Cortria Corporation,
Esprit Pharma, Inc., Fenway Pharmaceuticals, GI Dynamics, Inc.,
Immune Control, Inc., Oceana Therapeutic, Inc., Optherion, Inc.,
Tobira Therapeutics, Inc., Vanda Pharmaceuticals, and Zyga
Technology.
Anders D. Hove, M.D.
has been a member of our board
of directors since 2005. Since January 2004, Dr. Hove has
been a partner of Venrock Associates, a venture capital firm.
From 1996 to 2003, Dr. Hove was a fund manager at BB
Biotech Fund, an investment firm, and from 2002 to 2003 he
served as chief executive officer of Bellevue Asset Management,
an investment company. Dr. Hove serves on the boards of
directors of a number of public and privately-held companies.
Dr. Hove has an M.D. from the University of Copenhagen, a
M.Sc. from the Technical University of Denmark and an MBA from
INSEAD. We believe Dr. Hoves qualifications to serve
as a director of our company include his experience in the
venture capital industry since 1997 and his service on the board
of directors of over twelve companies. In addition to serving on
our board of directors, Dr. Hove currently holds, or within
the past five years has held, directorships with the following
companies: AdvanDx, Anacor, Peak Surgical, Quatrx, Still River,
Trubion, Virdante and WorldHeart.
Calvin W. Roberts, M.D.
has been a member of our
board of directors since 2003. Since 1982, Dr. Roberts has
served as a clinical professor of ophthalmology at Weill Medical
College of Cornell University. Since 1989, Dr. Roberts has
also served as a consultant to Allergan, Inc.,
Johnson & Johnson and Novartis. Dr. Roberts holds
an A.B. from Princeton University and an M.D. from the College
of Physicians and Surgeons of Columbia University.
Dr. Roberts completed his internship and ophthalmology
residency at Columbia Presbyterian Hospital in New York and
completed cornea fellowships at Massachusetts Eye and Ear
Infirmary and the Schepens Eye Research Institute in Boston. We
believe Dr. Robertss qualifications to serve as a
director of our company include his understanding of the market
for products in ophthalmology and the nature of the relationship
between pharmaceutical companies and physicians derived from his
25 years in the practice of medicine as well as his
experience in the medical market place and in the processes of
drug development and regulatory approval as a consultant to
other pharmaceutical companies.
Bryce Youngren
has been a member of our board of
directors since 2005. Since 2002, Mr. Youngren has worked
at Polaris Venture Partners, most recently as a general partner.
Prior to joining Polaris, Mr. Youngren served as a senior
associate at Great Hill Partners from 1999 to 2002. From 1996 to
1997, Mr. Youngren served as an analyst for Willis
Stein & Partners. From 1994 to 1996, Mr. Youngren
served as an analyst for Bear Stearns & Co.
Mr. Youngren holds an M.B.A. from The Wharton School at the
University of Pennsylvania and a B.A. in Economics from the
University of Illinois at Urbana-Champaign. We believe
Mr. Youngrens qualifications to serve as a director
of our company include his experience in the venture capital
industry since 1996 and his service on the board of directors of
nine companies (including our company). In addition to serving
on our board of directors, Mr. Youngren currently holds, or
within the past five years has held, directorships with the
following companies: Cardlytics, Xpressdocs, National Electronic
Attachment,
e-Rewards,
Liaison International.
Peter J. Pizzo, III
has been a member of our board
of directors since April 2010. Since its formation in 2005,
Mr. Pizzo has served as the Vice President, Finance and
Chief Financial Officer of Carticept Medical, Inc., a private
orthopedic medical device company, which he co-founded. From
2002 until its sale in 2005, Mr. Pizzo served as the Vice
President, Finance and Chief Financial Officer of Proxima
Therapeutics, Inc., a private medical device company that
developed and marketed local radiation delivery systems for the
treatment of solid cancerous tumors. From 1996 to 2001,
Mr. Pizzo worked for Serologicals Corporation, a publicly
traded global provider of biological products to life science
companies, ultimately serving as Vice President of Finance and
Chief Financial Officer. From 1995 to 1996, Mr. Pizzo
served as Vice President of Administration and Controller of
ValueMark Healthcare Systems, Inc., a privately held
owner-operator of psychiatric hospitals. From 1992 until its
sale in 1995, Mr. Pizzo served in various senior financial
positions at Hallmark Healthcare
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Corporation, a publicly traded hospital management company,
most recently as Treasurer. Mr. Pizzo holds a Bachelor of
Science with Special Attainments in Commerce from Washington and
Lee University. We believe Mr. Pizzos qualifications
to serve as a director of our company include 18 years of
experience in medical devices, biologics and healthcare
services, including the past ten years in the role of vice
president, finance and chief financial officer.
Governance
and Board Composition
Classified Board.
Our restated certificate of
incorporation that will become effective as of the closing of
this offering provides for a classified board of directors
consisting of three classes of directors, each serving a
staggered three-year term. As a result, a portion of our board
of directors will be elected each year from and after the
closing of the offering. To implement the classified structure
upon the consummation of the offering, Class I director
nominees will be elected to one-year terms, Class II
director nominees will be elected to two-year terms and
Class III director nominees will be elected to three-year
terms. Thereafter, directors will be elected for three-year
terms.
C. Daniel Myers and Calvin W. Roberts have been designated
as Class I directors whose term will expire at the 2011
annual meeting of stockholders, assuming the completion of the
proposed offering. Bryce Youngren, Anders D. Hove and
Phillip R. Tracy have been designated as Class II
directors whose term will expire at the 2012 annual meeting of
stockholders, assuming completion of the proposed offering.
Brian K. Halak, Mark J. Brooks and Peter J. Pizzo, III
have been designated as Class III directors whose term will
expire at the 2013 annual meeting of stockholders, assuming
completion of the proposed offering. Our amended and restated
bylaws that will become effective as of the closing of the
offering provide that the number of authorized directors may be
changed only by resolution of a number of directors that is more
than half of the number of directors then authorized (including
any vacancies). Any additional directorships resulting from an
increase in the number of authorized directors will be
distributed among the three classes so that, as nearly as
reasonably possible, each class will consist of one-third of the
directors. The classification of the board of directors may have
the effect of delaying or preventing changes in control of our
company.
Independent Directors.
Each of our directors
other than C. Daniel Myers qualifies as an independent director
in accordance with the published listing requirements of the
Nasdaq Global Market (Nasdaq). The Nasdaq independence
definition includes a series of objective tests, such as that
the director is not also one of our employees and has not
engaged in various types of business dealings with us. In
addition, as further required by the Nasdaq rules, our board of
directors has made a subjective determination as to each
independent director that no relationships exist which, in the
opinion of our board of directors, would interfere with the
exercise of independent judgment in carrying out the
responsibilities of a director. In making these determinations,
our directors reviewed and discussed information provided by the
directors and us with regard to each directors business
and personal activities as they may relate to us and our
management.
Board Structure and Committees.
Our board of
directors has established an audit committee, a compensation
committee and a nominating/corporate governance committee.
Our board of directors and its committees set schedules to meet
throughout the year, and also can hold special meetings and act
by written consent from time to time as appropriate. The
independent directors of our board of directors also will hold
separate regularly scheduled executive session meetings at least
twice a year at which only independent directors are present.
Our board of directors has delegated various responsibilities
and authority to its committees as generally described below.
The committees will regularly report on their activities and
actions to the full board of directors. Each member of each
committee of our board of directors qualifies as an independent
director in accordance with the Nasdaq standards described above
and SEC rules and regulations. Each committee of our board of
directors has a written charter approved by our board of
directors. Upon the effectiveness of the registration statement
of which this prospectus forms a part, copies of each charter
will be posted on our Web site at
http://www.alimerasciences.com
under the Investor Relations section. The inclusion of our Web
site address in this prospectus does not include or incorporate
by reference the information on our Web site into this
prospectus.
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Audit Committee.
Our audit committee currently
consists of Mark J. Brooks, Anders D. Hove and Calvin W.
Roberts. As of the effective time of this prospectus, our audit
committee will consist of Calvin W. Roberts, Anders D. Hove and
Peter J. Pizzo, III. The SEC rules and Nasdaq rules require
us to have one independent Audit Committee member upon the
listing of our common stock on NASDAQ, a majority of independent
directors within 90 days of the date of the completion of
this offering and all independent Audit Committee members within
one year of the date of the completion of this offering. Our
board of directors has affirmatively determined that
Mr. Roberts and Mr. Pizzo meet the definition of
independent directors for purposes of serving on an
Audit Committee under applicable SEC and Nasdaq rules, and we
intend to comply with these independence requirements within the
time periods specified. Dr. Hove currently serves as
chairman of the audit committee and as of the completion of this
offering Mr. Pizzo will serve as the chairman of the audit
committee.
Mr. Pizzo qualifies as an audit committee financial
expert as that term is defined in the rules and
regulations of the SEC. The designation of Mr. Pizzo as an
audit committee financial expert does not impose on
him any duties, obligations or liability that are greater than
those that are generally imposed on him as a member of our audit
committee and our board of directors, and his designation as an
audit committee financial expert pursuant to this
SEC requirement does not affect the duties, obligations or
liability of any other member of our audit committee or board of
directors.
The audit committee monitors our corporate financial statements
and reporting and our external audits, including, among other
things, our internal controls and audit functions, the results
and scope of the annual audit and other services provided by our
independent registered public accounting firm and our compliance
with legal matters that have a significant impact on our
financial statements. Our audit committee also consults with our
management and our independent registered public accounting firm
prior to the presentation of financial statements to
stockholders and, as appropriate, initiates inquiries into
aspects of our financial affairs. Our audit committee is
responsible for establishing procedures for the receipt,
retention and treatment of complaints regarding accounting,
internal accounting controls or auditing matters, and for the
confidential, anonymous submission by our employees of concerns
regarding questionable accounting or auditing matters, and has
established such procedures to become effective upon the
effectiveness of the registration statement of which this
prospectus forms a part. In addition, our audit committee is
directly responsible for the appointment, retention,
compensation and oversight of the work of our independent
auditors, including approving services and fee arrangements. All
related party transactions will be approved by our audit
committee before we enter into them.
Both our independent auditors and internal financial personnel
regularly meet with, and have unrestricted access to, the audit
committee.
Compensation Committee.
Our compensation
committee consists of Mark J. Brooks, Brian K. Halak and
Anders D. Hove. Our board of directors has determined that
Mr. Brooks, Dr. Halak and Dr. Hove satisfy the
independence requirements of the Nasdaq and the SEC rules and
regulations. Each member of this committee is a non-employee
director, as defined pursuant to
Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as
amended, and an outside director, as defined pursuant to
Section 162(m) of the Internal Revenue Code of 1986, as
amended. Dr. Halak serves as chairman of the compensation
committee.
The compensation committee reviews and approves our compensation
policies and all forms of compensation to be provided to our
executive officers and directors, including, among other things,
annual salaries, bonuses, and other incentive compensation
arrangements. In addition, our compensation committee will
administer our stock option and employee stock purchase plans,
including granting stock options to our executive officers and
directors. Our compensation committee also reviews and approves
employment agreements with executive officers and other
compensation policies and matters.
Nominating/Corporate Governance Committee.
Our
nominating/corporate governance committee currently consists of
Brian K. Halak, Philip R. Tracy and Bryce Youngren. Our
board of directors has determined that Dr. Halak,
Mr. Tracy and Mr. Youngren satisfy the independence
requirements of the Nasdaq and the SEC rules and regulations.
Mr. Tracy serves as chairman of the nominating/corporate
governance committee.
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Our nominating/corporate governance committee identifies,
evaluates and recommends nominees to our board of directors and
committees of our board of directors, conducts searches for
appropriate directors and evaluates the performance of our board
of directors and of individual directors. The
nominating/corporate governance committee is also responsible
for reviewing developments in corporate governance practices,
evaluating the adequacy of our corporate governance practices
and reporting and making recommendations to the board concerning
corporate governance matters. Our nominating/corporate
governance committee has not adopted a policy regarding the
consideration of diversity in identifying director nominees.
Code of Ethics and Business Conduct.
Our board
of directors has adopted a code of ethics and business conduct
that will become effective upon the effectiveness of the
registration statement of which this prospectus forms a part.
This code of ethics and business conduct will apply to all of
our employees, officers (including our principal executive
officer, principal financial officer and principal accounting
officer or controller, or persons performing similar functions)
and directors. Upon the effectiveness of the registration
statement of which this prospectus forms a part, the full text
of our code of ethics and business conduct will be posted on our
Web site at www.alimerasciences.com under the Investor Relations
section. We intend to disclose future amendments to certain
provisions of our code of ethics and business conduct, or
waivers of such provisions, applicable to our directors and
executive officers (including our principal executive officer,
principal financial officer, principal accounting officer or
controller, or persons performing similar functions) at the same
location on our Web site identified above and also in a Current
Report on
Form 8-K
within four business days following the date of such amendment
or waiver. The inclusion of our Web site address in this
prospectus does not include or incorporate by reference the
information on our Web site into this prospectus.
Board
Leadership
Our board of directors is led by our chairman of the board. The
chairman of the board chairs all board meetings (including
executive sessions), approves board agendas and schedules, and
oversees board materials. The chairman of the board also acts as
liaison between the independent directors and management,
approves board meeting schedules and oversees the information
distributed in advance of board meetings, is available to our
outside corporate counsel to discuss and, as necessary, respond
to stockholder communications to our board of directors, and
calls meetings of the independent directors. We believe that
having different people serving in the roles of chairman of the
board and chief executive officer is an appropriate and
effective organizational structure for our company.
Compensation
Committee Interlocks and Insider Participation
None of our executive officers serves as a member of the board
of directors or compensation committee, or other committee
serving an equivalent function, of any other entity that has one
or more of its executive officers serving as a member of our
board of directors or compensation committee. None of the
current members of our compensation committee has ever been
employed by us.
Executive
Officers
Each of our executive officers has been elected by our board of
directors and serves until his or her successor is duly elected
and qualified.
Director
Compensation
On October 27, 2009, our board of directors adopted a
compensation program for outside directors. This program will
begin on the effective date of this Registration Statement.
Pursuant to this program, each member of our board of directors
who is not our employee will receive a $20,000 annual retainer,
except that the chairman of our board of directors will receive
a $25,000 annual retainer. The chairman of the audit committee
will receive an additional annual retainer of $7,500, and the
chairman of each other committee will receive an additional
annual retainer of $3,500. Each other non-employee director
serving as a member of a committee will receive an additional
annual retainer of $2,000 for service on that committee. All
retainer fees will be paid in four quarterly payments.
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Each non-employee director who first becomes a member of the
board of directors after the consummation of this offering will
receive an initial, one-time option award to purchase
20,000 shares of our common stock upon his or her election
to our board of directors. Each non-employee director who served
as a board member prior to the consummation of this offering and
who continues as a member of the board of directors after such
date will receive an initial, one-time option award to purchase
7,500 shares of our common stock upon the consummation of
this offering. Each year beginning in 2011, each non-employee
director who will continue to be a director after the annual
meeting of our stockholders will be granted an option for
7,500 shares of our common stock at that annual meeting.
However, a non-employee director who is receiving the
20,000-share option will not receive the 7,500-share option in
the same calendar year.
Each initial stock option will vest and become exercisable with
respect to 25% of the option shares after one year of service on
the board of directors and an additional 6.25% of the option
shares for each subsequent three-month period thereafter. Each
annual stock option will be vested and exercisable at the date
of grant. Each option granted under the directors option
grant program that is not fully vested on the date of grant will
become fully vested upon a change in control of the company and
will also become fully vested if the non-employee
directors service terminates due to death. All options
granted to the non-employee directors will have an exercise
price equal to the fair market value of our common stock on the
date of the grant.
We currently have a policy to reimburse directors for travel,
lodging and other reasonable expenses incurred in connection
with their attendance at board and committee meetings.
Limitation
of Liability and Indemnification
Prior to the effective date of this offering, we entered into
indemnification agreements with each of our officers and
directors. The agreements provide that we will indemnify each of
our officers and directors against any and all expenses incurred
by that officer or director because of his or her status as one
of our officers or directors, to the fullest extent permitted by
Delaware law, our restated certificate of incorporation and
bylaws. In addition, the agreements provide that, to the fullest
extent permitted by Delaware law, but subject to various
exceptions, we will advance all expenses incurred by our
directors in connection with a legal proceeding.
Our restated certificate of incorporation and bylaws contain
provisions relating to the limitation of liability and
indemnification of directors. The restated certificate of
incorporation provides that our directors will not be personally
liable to us or our stockholders for monetary damages for any
breach of fiduciary duty as a director, except for liability:
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for any breach of the directors duty of loyalty to us or
our stockholders;
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for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law;
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in respect of unlawful payments of dividends or unlawful stock
repurchases or redemptions as provided in Section 174 of
the Delaware General Corporation Law; or
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for any transaction from which the director derives any improper
personal benefit.
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Our restated certificate of incorporation also provides that if
Delaware law is amended, after the approval by our stockholders
of our restated certificate of incorporation, to authorize
corporate action further eliminating or limiting the personal
liability of directors, then the liability of our directors will
be eliminated or limited to the fullest extent permitted by
Delaware law. The foregoing provisions of the restated
certificate of incorporation are not intended to limit the
liability of directors or officers for any violation of
applicable federal securities laws. As permitted by
Section 145 of the Delaware General Corporation Law, our
restated certificate of incorporation provides that we may
indemnify our directors to the fullest extent permitted by
Delaware law and the restated certificate of incorporation
provisions relating to indemnity may not be retroactively
repealed or modified so as to adversely affect the protection of
our directors.
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In addition, as permitted by Section 145 of the Delaware
General Corporation Law, our amended and restated bylaws provide
that we are authorized to enter into indemnification agreements
with our directors and officers and we are authorized to
purchase directors and officers liability insurance,
which we currently maintain to cover our directors and executive
officers.
Compensation
Discussion and Analysis
This section discusses our executive compensation polices and
decisions and the most important factors relevant to an analysis
of these policies and decisions. It provides qualitative
information regarding the manner and context in which
compensation is awarded to and earned by our executive officers
and offers perspective on the data presented in the tables and
narrative that follow.
Compensation
Philosophy and Objectives
As a biopharmaceutical company, we operate in an extremely
competitive, rapidly changing and heavily regulated industry. We
believe that the skill, talent, judgment and dedication of the
executive officers and our other key employees are critical
factors affecting our long-term stockholder value. Therefore,
our goal is to maintain a compensation program that will fairly
compensate employees, attract and retain highly qualified
employees, motivate the performance of employees towards, and
reward the achievement of, clearly defined corporate goals, and
align employees long-term interests with those of our
stockholders. To that end, our executive officers
compensation has three primary components: base compensation or
salary, annual incentive compensation or bonus and stock option
awards. In addition, we provide our executive officers a variety
of benefits that are available generally to all salaried
employees.
We view the components of compensation as related but distinct.
Although we review the total compensation of our executive
officers, we do not believe that significant compensation
derived from one component of compensation should negate or
reduce compensation from other components. Our executive officer
compensation philosophy is to (1) provide overall
compensation, when targeted levels of performance are achieved,
which is at the median of pay practices of a peer group
selected, among other criteria, for similarities in size,
business model and stage of development, and (2) emphasize
at-risk equity compensation over annual cash compensation to
attract and retain officers and align most of their compensation
with long-term stockholders interests. Our annual cash
incentives and our stock option awards are aligned with our
achievement of corporate strategic and operating goals. We
believe that successful execution against goals is the best way
to enhance long-term stockholder value.
We determine the appropriate level for each compensation
component based in part, but not exclusively, on competitive
benchmarking consistent with our recruiting and retention goals,
our view of internal equity and consistency, our overall
performance and other considerations we deem relevant. For
annual compensation reviews we evaluate each executives
performance, look to industry trends in compensation levels and
generally seek to ensure that compensation is appropriate for an
executives level of responsibility and for promotion of
future performance. Except as described below, we have not
adopted any formal or informal policies or guidelines for
allocating compensation between long-term and currently paid out
compensation, between cash and non-cash compensation or among
different forms of non-cash compensation. However, our
philosophy is to make a greater percentage of an employees
compensation performance-based and to keep cash compensation to
a nominally competitive level while providing the opportunity to
be well rewarded through equity if we perform well over time. We
also believe that for life science companies, stock-based
compensation is a significant motivator in attracting employees,
and while base salary and the potential for cash bonuses must be
at competitive levels, performance is most significantly
impacted by appropriately relating the potential for creating
stockholder value to an individuals compensation potential
through the use of stock options.
We do not have stock ownership guidelines for our officers,
because the compensation committee is satisfied that stock and
option holdings among our directors and executive officers are
sufficient at this time to provide motivation and to align this
groups interests with those of our stockholders. In
addition, we believe
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that stock ownership guidelines are rare in development-stage
biopharmaceutical companies, which means that ownership
requirements would put us at a competitive disadvantage.
Compensation
Committee
The compensation committee of our board of directors is
comprised of three non-employee members of the board of
directors. The compensation committees basic
responsibility is to review the performance of our management in
achieving corporate objectives and to ensure that the executive
officers are compensated effectively in a manner consistent with
our compensation philosophy and competitive practice. In
fulfilling this responsibility, the compensation committee
reviews the performance of each executive officer each year. The
chief executive officer, as the manager of the executive team,
assesses the executives contributions to the corporate
goals and makes a recommendation to the compensation committee
with respect to any merit increase in salary, cash bonus and
stock option award for each member of the executive team. The
compensation committee meets with the chief executive officer to
evaluate, discuss and modify or approve these recommendations.
The compensation committee also conducts a similar evaluation of
the chief executive officers contributions when the chief
executive officer is not present, and determines any increase in
salary, cash bonus and annual replenishment equity award.
Compensation
Consultant
The compensation committee has not engaged a compensation
consultant for advice on matters related to compensation for
executive officers, other key employees and non-employee
directors.
Peer
Group
In late 2007, the compensation committee established a peer
group to better align target compensation with competitive data.
Our peer group, which is listed below, was selected by the
compensation committee, based on a review of biopharmaceutical
companies that were similar to us in market capitalization,
development stage and business model. The compensation committee
intends to continue reviewing and revising the peer group
periodically to ensure that it continues to reflect companies
similar to us in size and development stage.
Achillion
Aegerion
Amicus
Biolex
Cadence
Cardiovascular Systems (f/k/a Replidyne)
Elixir
Inhibitex
MAP
Neurogesx
Orexigen
Pharmasset
Sirtris
Synta
Targacept
Targanta
Vanda
Principal
Elements of Compensation
Base Salaries.
Base salaries are set to
reflect compensation commensurate with the individuals
current position and work experience. Our goal in this regard is
to attract and retain high-caliber talent for the position and
to provide a base wage that is not subject to performance risk.
Salary for the chief executive officer and the other executive
officers is established based on the underlying scope of their
respective responsibilities, taking into account competitive
market compensation. The base salary for each executive officer
is targeted at the median compared to similar positions in the
peer companies. In certain circumstances in which an executive
officer is uniquely critical to our success or due to the
intensely competitive environment for highly qualified employees
in this industry, base salary levels may exceed the median
target for certain executive officers. We review base salaries
for the executive officers annually near the end of each year,
and the chief executive officer proposes salary adjustments to
the compensation committee based on any changes in our
competitive market salaries, individual performance
and/or
changes in job duties and responsibilities. The compensation
committee then determines any salary adjustment percentage
applicable to the executive officers.
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Prior to 2008, our competitive analysis was primarily based upon
salary surveys publicly available to us, or made available to us
based upon our participation in the survey. Beginning in late
2007, for purposes of determining the executive salaries for
2008, the competitive market analysis was made in comparison to
our peer group. On January 1, 2010, Mr. Myerss
salary was increased to $367,744, Mr. Eiswirths
salary was increased to $259,584, Dr. Greens salary
was increased to $270,400, Ms. Caballas salary was
increased to $237,952 and Mr. Hollands salary was
increased to $227,136.
Annual Incentive Compensation.
Annual cash
incentives for the executive officers are designed to reward the
achievement of overall performance by our executives each year,
which we believe in turn should increase stockholder value.
Annual incentive awards are determined and paid out based upon
the following criteria:
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50% based upon the achievement of individual performance goals;
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25% based upon our achievement of corporate performance
goals; and
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25% based upon the subjective assessment by the compensation
committee of the progress of the executive team towards our
strategic objectives.
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The annual performance goals, both corporate and individual, are
established at the beginning of the fiscal year and are clearly
communicated and measurable. A target bonus is set for each
executive officer based on targets for comparable positions and
is stated in terms of a percentage of the officers
annualized base salary for the year. The target bonus for each
named executive officer is targeted at the median of the peer
group. The target bonus for our chief executive officer is 40%
of his annualized base salary, and 25% of annualized base salary
for each of the other named executives.
Early each year, the executive team proposes a set of corporate
performance objectives and proposes percentage weights to be
allocated to each goal, with higher weights given to those goals
that we believe will have a greater impact on our value
and/or
are
more challenging to achieve within the time frame specified. The
compensation committee evaluates and approves the final goals
and weightings. The individual goals of our chief executive
officer and other named executives are established in a manner
to align their performance objectives with, and support the
achievement of, our corporate performance goals. Our chief
executive officer proposes his annual individual performance
goals and percentage weights to the compensation committee for
its consideration and approval. The performance goals and
percentage weights of the remaining named executives are
determined individually by the chief executive officer and the
specific named executive.
At the end of each year, our chief executive officer assesses
his and the named executives achievement of their
individual performance goals for the year, and recommends a
percentage payout for each individual for the 50% of the target
bonus that is allocated to individual performance goals. The
compensation committee accepts and approves that percentage as
is, or adjusts it to the extent the compensation committee deems
appropriate. Our chief executive officer and his management team
also assess our achievement of corporate performance goals, and
recommend a percentage payout for the 25% of the target bonus
that is allocated to corporate performance goals. The
compensation committee accepts and approves that percentage as
is, or adjusts it to the extent the compensation committee deems
appropriate. The remaining 25% of the annual incentive
compensation is determined at the discretion of the compensation
committee. The compensation committee evaluates subjective
criteria, including, but not limited to, its assessment of the
management teams stewardship of the company, contributions
to improving stockholder value, and strategic planning for
long-term goals.
2009 Annual Incentive Compensation.
With input
from our chief executive officer, our compensation committee
establishes corporate and individual performance goals for each
of our named executive officers. In December 2009, our
compensation committee reviewed the status of each corporate and
individual goal and determined that bonuses at or above the
target level should be paid to all of our named executive
officers based on the exceptional progress of our clinical
programs and the efforts made by our named executive officers in
preparing and positioning our company for various strategic
options, including this offering, the submission of a New Drug
Application for the use of Iluvien in the treatment of diabetic
macular edema in
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the second quarter of 2010, and the commercial launch of
Iluvien, its lead product candidate, as early as the first
quarter of 2011.
2009 Corporate Goals.
For 2009, the corporate
goals component of the annual performance goals under our
Incentive Compensation Bonus Plan, which accounted for 25% of
the amount of bonus potential for each of our named executive
officers, the weighting of each goal, and our compensation
committees quantitative assessment of the degree to which
each goal was actually achieved, were as follows:
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Corporate Goal
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Achievement Assessment
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One goal of presenting our open-label Phase 2 human
pharmacokinetic clinical trial (the PK Study) month 12 study
data at a prestigious industry convention (10)%
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100
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%(1)
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One goal of completing six registration batches of Iluvien and
initiating stability studies on the batches with the
Companys third party manufacturers (20)%
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90
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%(2)
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One goal of the month 24 readout from our FAME Study
demonstrating efficacy and a side effect profile sufficient to
support the New Drug Application (NDA) filing for Iluvien (50)%
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120
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Two goals of managing the Companys cash and raising
additional capital in order to finance the Company beyond
December 2009 (20)%
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100
|
%(4)
|
|
|
|
(1)
|
|
We presented the month 12 readout from our FAME Study at the
Angiogenesis Exudation and Degeneration Conference on
February 21, 2009.
|
|
(2)
|
|
The manufacture of six registration batches of Iluvien was
completed in April 2009 and stability studies on the batches was
initiated in May 2009. However, one of the registration batches
did not meet manufacturing specifications and therefore needed
to be re-manufactured which resulted in additional cost and
expense to the Company.
|
|
(3)
|
|
Our month 24 readout from our FAME Study demonstrated efficacy
and a side effect profile that exceeded expectations and was
sufficient to support the NDA filing for Iluvien. See
Business Iluvien Clinical Development
Program for a more in-depth discussion regarding the month
24 readout from our FAME Study.
|
|
(4)
|
|
Our cash balance as of December 31, 2009 was
$4.9 million in cash and cash equivalents.
|
With input from our chief executive officer, our compensation
committee determined that the corporate goals were achieved at
the level of 108% in view of the achievement of each of the
corporate goals and, specifically, in light of the month 24
readout from our FAME Study which demonstrated efficacy and a
safety profile that exceeded expectations.
2009 Individual Goals.
The individual goals
component of the annual performance goals under our Incentive
Compensation Bonus Plan are primarily related to the corporate
goals for which they are most responsible and, to a lesser
extent, individual development or department specific goals,
subject to discretionary adjustments that our compensation
committee deems appropriate. Our chief executive officer makes
recommendations to our compensation committee as to the degree
to which those named executive officers have satisfied their
individual goals. For 2009, the individual goals component of
the annual performance goals under our Incentive Compensation
Bonus Plan, which accounted for 50% of the amount of bonus
potential for each of our named executive officers, the
weighting of each goal, and our compensation committees
quantitative assessment of the degree to which each goal was
actually achieved, were as follows:
|
|
|
Name
|
|
Goals
|
|
Mr. Myers(1)
|
|
One goal of the month 24 readout from our FAME Study
demonstrating efficacy and a side effect profile sufficient to
support the NDA filing for Iluvien (35)%
|
|
|
One goal of managing the companys cash and related to the
goal of financing our company beyond December 2009 (10)%
|
|
|
One goal of raising additional capital in order to finance our
company beyond December 2009 (15)%
|
98
|
|
|
Name
|
|
Goals
|
|
|
|
One goal of completing six registration batches of Iluvien with
the companys third party manufacturers (15)%
|
|
|
One goal of preparing a draft NDA filing for Iluvien, which
included monitoring the completion of 50% of the chemistry,
manufacturing and controls section, 80% of the preclinical
section and an initial draft of the clinical section (15)%
|
|
|
One goal of developing a marketing pre-launch plan and analysis
of the competitive landscape for Iluvien in preparation for its
commercial launch (10)%
|
Mr. Eiswirth(2)
|
|
One goal of completing the 2008 financial audit (20)%
|
|
|
One goal of managing the companys cash and related to the
goal of financing our company beyond December 2009 (20)%
|
|
|
One goal of raising additional capital in order to finance our
company beyond December 2009 (20)%
|
|
|
One goal to build relationships with financial analyst and
investment bankers in preparation for this offering (20)%
|
|
|
One goal of managing the evaluation of strategic options (20)%
|
Dr. Green(3)
|
|
One goal of the month 24 readout from our FAME Study
demonstrating efficacy and a side effect profile sufficient to
support the NDA filing for Iluvien (30)%
|
|
|
Two goals of presenting the month 12 readout of our open-label
Phase 2 human pharmacokinetic clinical trial (PK Study) at the
annual meeting of the Association for Research in Vision and
Ophthalmology (ARVO) and completing of the interim clinical
study report (CSR) (40)%
|
|
|
One goal of preparing a draft NDA filing, which included
preparing initial drafts of various clinical and preclinical
sections of the NDA filing package (30)%
|
Ms. Caballa(4)
|
|
One goal of managing the technology transfer to our commercial
manufacturer, which included the review of protocols and final
reports and the provision of technical assistance to our
commercial manufacturer (10)%
|
|
|
Two goals of completing six registration batches of Iluvien with
the companys commercial manufacturer, which included the
review and approval of batch records, process validation,
protocols and reports and the provision of technical assistance
to our commercial manufacturer (25)%
|
|
|
One goal of initiating and monitoring stability studies on the
registration batches of Iluvien with the companys
commercial manufacturer and the provision of technical and
regulatory assistance to our commercial manufacturer (15)%
|
|
|
One goal of meeting with European health authorities, clarifying
and resolving any outstanding inquiries and discussing and
gaining concurrence on our development and regulatory strategies
in Europe (10)%
|
|
|
Three goals of preparing a draft NDA filing, which included
preparing initial drafts of the chemistry, manufacturing and
controls section and the clinical and preclinical sections of
the NDA filing package (35)%
|
|
|
One goal of departmental cash management and related to the goal
of financing our company beyond December 2009 (5)%
|
99
|
|
|
Name
|
|
Goals
|
|
Mr. Holland(5)
|
|
Three goals of meeting with private payers, engaging a third
party group to develop a coding position and timeline for our
coding submission to the Centers for Medicare & Medicaid
Services (CMS) and initiating a global dossier project with
respect to Pharmaco-Economics (20)%
|
|
|
One goal of public dissemination of information from our FAME
Study and PK Studies, including press releases associated with
our month 12 and month 18 readouts from our FAME Study, our
presentation at industry conferences and the release of top-line
data from our FAME Study (20)%
|
|
|
Six goals that included developing a key opinion
leaders database, communications plan, advisor/speaker
list, plan for attendance at 2010 industry conferences and the
schedule of speaker engagements for the market development for
Iluvien (30)%
|
|
|
Three goals of developing the marketing pre-launch plan,
analyzing the competitive landscape for Iluvien and preparing
for the commercial launch of Iluvien (30%)
|
|
|
|
(1)
|
|
Our compensation committee determined that Mr. Myerss
individual goals were achieved in full based on the month 24
readout from our FAME Study which demonstrated efficacy and a
safety profile that exceeded expectations, our cash and cash
equivalent balance of $4.9 million as of December 31,
2009, the completion of six registration batches of Iluvien in
April 2009, and the stage of preparedness of our NDA filing and
commercial launch plan for Iluvien as of December 31, 2009.
|
|
(2)
|
|
Our compensation committee determined that
Mr. Eiswirths individual goals were achieved in full
based on the timely completion of the audit of our 2008
financial statements, our cash and cash equivalent balance of
$4.9 million as of December 31, 2009, and
Mr. Eiswirths extensive efforts with respect to this
offering, managing the evaluation of strategic alternatives and
interactions with financial analysts and investments bankers.
|
|
(3)
|
|
Our compensation committee determined that Dr. Greens
individual goals were achieved in full based on the month 24
readout from our FAME Study which demonstrated efficacy and a
safety profile that exceeded expectations, presentation of the
month 12 readout for our PK Study at the ARVO annual meeting in
May 2009, completion of the interim CSR and the stage of
preparedness of our NDA filing as of December 31, 2009.
|
|
(4)
|
|
Except with respect to the goal related to the technology
transfer to our commercial manufacturer, our compensation
committee determined that Ms. Caballas individual
goals were achieved in full based on the completion of six
registration batches of Iluvien in April 2009, the initiation of
stability studies on the batches of Iluvien in May 2009, the
outcome of communications with European regulatory authorities
during 2009, the stage of preparedness of our NDA filing as of
December 31, 2009 and Ms. Caballas success in
managing our regulatory budget which was instrumental in our
ability to achieve a cash and cash equivalent balance of
$4.9 million as of December 31, 2009. Our compensation
committee determined that Ms. Caballas individual
goal with respect to the technology transfer to our commercial
manufacturer was achieved at the level of 70% in view of the
failure of one of the registration batches to meet manufacturing
specifications which required a re-manufacturing of the batch
and caused the Company to incur additional cost and expense in
connection with the technology transfer.
|
|
(5)
|
|
Our compensation committee determined that
Mr. Hollands individual goals were achieved in full
based on the outcome of meetings with third party payers and
others with respect to the coding and pricing of Iluvien,
including our submission to CMS, the stage of completion of a
global dossier project as of December 31, 2009, the timely
dissemination of information to the public with respect to our
FAME Study, PK Study and other clinical programs, and the stage
of preparedness of our commercial launch plan for Iluvien,
including marketing initiatives and analyses, communications
plan, speaking engagements and conference attendance and
presentation as of December 31, 2009.
|
100
With input from our chief executive officer, our compensation
committee determined that each of these named executive officers
achieved 100% of their individual goals other than
Ms. Caballa for whom our compensation committee determined,
in its discretion, performed at the level of 70% solely with
respect to Ms. Caballas goal related to the
management and monitoring of the technology transfer to our
commercial manufacturer in view of the failure of one of the
registration batches to meet manufacturing specifications which
required a re-manufacturing of the batch and caused the Company
to incur additional cost and expense in connection with the
technology transfer.
The remaining 25% of the amount of bonus potential for each of
our named executive officers is awarded in the discretion of our
compensation committee. In 2009, based on the level that our
named executive officers achieved both the corporate and
individual goals, including with respect to our clinical
programs, strategic options, NDA filing and commercial launch
efforts, our compensation committee exercised its discretion to
award 100% of the remaining 25% of the bonus potential to each
of our named executive officers. The 2009 bonus for our chief
executive officer was 41% of salary, and ranged from 25% to 26%
of salary for the remaining named executive officers. The
bonuses earned by the named executive officers for performance
goals in 2009 were $144,269 for Mr. Myers, $63,648 for
Mr. Eiswirth, $66,300 for Dr. Green, $57,486 for
Ms. Caballa, and $55,692 for Mr. Holland, including
the additional bonus amount paid to each named executive
officers in 2009 at the discretion of our compensation
committee. See the columns titled Bonus and
Non-Equity Incentive Compensation in the Summary
Compensation Table on page 100 for additional information
related to the performance bonuses earned by our named executive
officers.
Long-Term Incentive Compensation.
We utilize
stock options for our long-term equity compensation to ensure
that our executive officers have a continuing stake in our
long-term success. Because our executive officers are awarded
stock options with an exercise price equal to the fair market
value of our common stock on the date of grant, the
determination of which is discussed below, these options will
have value to our executive officers only if the market price of
our common stock increases after the date of grant. Typically,
our stock option grants to new employees vest at the rate of 25%
after the first year of service, with the remainder vesting
ratably over the subsequent 36 months. We do not use a
targeted cash/equity split to set officer compensation.
Our board of directors has historically determined the value of
our common stock based upon the consideration of several factors
impacting our valuation. We do not have any program, plan or
obligation that requires us to grant equity compensation on
specified dates and, because we have not been a public company,
we have not made equity grants in connection with the release or
withholding of material non-public information. As a public
company, we intend to grant equity awards at fair market value
(the closing price) on the date that the grant occurs. We
anticipate granting equity awards on a periodic basis.
Generally, in order to align his or her interests with those of
our stockholders, a significant stock option grant is made to an
executive officer at the first regularly scheduled meeting of
the compensation committee after the officer commences
employment. Generally, the compensation committee determined the
amount of the grant with the goal of setting each
executives total beneficial ownership at a level
equivalent to the median of the comparable positions within the
peer group. In certain circumstances in which an executive
officer is uniquely critical to our success, the compensation
committee targeted a level of total beneficial ownership in
excess of the median.
In August of 2009, subsequent to our acquisition of further
equity in the future profits of Iluvien and the closing of the
Series C-1 preferred stock sale, the compensation committee
made an additional replenishment grant to our executive officers
to reduce the dilutive impact of the Series C-1 preferred
stock sale to each officer. The amount of the additional grant
was in proportion to each officers total beneficial
ownership prior
101
to the grant. The exercise price of each grant was $4.01 per
share, and the grants covered the number of shares set forth
below:
|
|
|
C. Daniel Myers
|
|
106,157
|
Richard S. Eiswirth, Jr.
|
|
28,383
|
Kenneth Green, Ph.D.
|
|
36,797
|
Susan Caballa
|
|
24,527
|
David Holland
|
|
27,598
|
The compensation committee plans to consider future
replenishments of equity awards for executive officers annually
based upon recommendations from the chief executive officer and
in comparison to the peer group. We believe that the resulting
overlapping vesting schedule from awards made in prior years,
together with the number of shares subject to each award, helps
ensure a meaningful incentive to remain in our employ and to
enhance stockholder value over time. Stock option grants made to
executives generally vest quarterly over a four-year period with
an initial one-year cliff.
Severance
and Change in Control
Each of our executives has a provision in his or her employment
agreement providing for certain severance benefits in the event
of termination without cause, or the executives decision
to terminate his or her employment for good reason after a
change in control. These severance provisions are described in
the Employment Agreements section below.
In June 2008 our board of directors established acceleration
provisions for unvested options in the event of a change in
control. Under these provisions, unvested options vest in full
in the event that the stock options are not continued or
replaced with an alternate security, the executive is terminated
without cause, or the executive terminates his employment for
good reason. See Potential Payments upon
Termination or Change in Control below for estimates of
severance and change in control benefits.
We believe these severance and change in control arrangements
mitigate some of the risk that exists for executives working in
a smaller company. These arrangements are intended to attract
and retain qualified executives who could have other job
alternatives that may appear to them to be less risky absent
these arrangements. Because of the significant acquisition
activity in the life science industry, there is a possibility
that we could be acquired in the future. Accordingly, we believe
that the larger severance packages resulting from terminations
related to change in control transactions, and bonus and vesting
packages relating to the change in control itself, will provide
an incentive for these executives to help execute such a
transaction from its early stages until closing.
Other
Benefits
Executive officers are eligible to participate in all of our
employee benefit plans, such as medical, dental, vision, group
life, disability and accidental death and dismemberment
insurance and our 401(k) plan, in each case on the same basis as
other employees, subject to applicable law. We also provide
vacation and other paid holidays to all employees, including our
executive officers, which are comparable to those provided at
peer companies. At this time, we do not provide special benefits
or other perquisites to our executive officers.
Policies
Regarding Recovery of Awards
Our compensation committee has not adopted a policy on whether
or not we will make retroactive adjustments to any cash or
equity-based incentive compensation paid to executive officers
(or others) where the payment was predicated upon the
achievement of financial results that were subsequently the
subject of a restatement. Our compensation committee believes
that this issue is best addressed when the need actually arises,
when all of the facts regarding the restatement are known.
Tax
and Accounting Treatment of Compensation
Section 162(m) of the Internal Revenue Code places a limit
of $1.0 million per person on the amount of compensation
that we may deduct in any one year with respect to each of our
named executive officers other than the chief financial officer.
There is an exemption from the $1.0 million limitation for
performance-based
102
compensation that meets certain requirements. All grants of
options or stock appreciation rights under our 2010 Equity
Incentive Plan are intended to qualify for the exemption. See
Management Equity Benefit Plans
2010 Equity Incentive Plan for additional information.
Grants of restricted shares or stock units under our 2010 Equity
Incentive Plan may qualify for the exemption if vesting is
contingent on the attainment of objectives based on the
performance criteria set forth in the plan and if certain other
requirements are satisfied. Grants of restricted shares or stock
units that vest solely on the basis of service cannot qualify
for the exemption. Our current cash incentive plan is not
designed to qualify for the exemption. To maintain flexibility
in compensating officers in a manner designed to promote varying
corporate goals, our compensation committee has not adopted a
policy requiring all compensation to be deductible. Although tax
deductions for some amounts that we pay to our named executive
officers as compensation may be limited by section 162(m),
that limitation does not result in the current payment of
increased federal income taxes by us due to our significant net
operating loss carry-forwards. Our compensation committee may
approve compensation or changes to plans, programs or awards
that may cause the compensation or awards to exceed the
limitation under section 162(m) if it determines that such
action is appropriate and in our best interests.
We account for equity compensation paid to our employees under
the rules of SFAS 123R, which requires us to estimate and
record an expense for each award of equity compensation over the
service period of the award. Accounting rules also require us to
record cash compensation as an expense at the time the
obligation is accrued. We have not tailored our executive
compensation program to achieve particular accounting results.
Executive
Compensation
2009
Summary Compensation Table
The following table provides information regarding the
compensation of each of the individuals who served as our
principal executive officer and principal financial officer in
2009 and each of the next three most highly compensated
executive officers during 2009. We refer to these executive
officers as our named executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
Incentive Plan
|
|
All Other
|
|
|
|
|
|
|
Salary
|
|
Bonus(1)
|
|
Awards(2)
|
|
Compensation(3)
|
|
Compensation(4)
|
|
Total
|
Name
|
|
Year
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
C. Daniel Myers
|
|
|
2009
|
|
|
|
353,600
|
|
|
|
35,360
|
|
|
|
365,380
|
|
|
|
108,909
|
|
|
|
1,721
|
|
|
|
864,970
|
|
President and Chief
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard S. Eiswirth, Jr
|
|
|
2009
|
|
|
|
249,600
|
|
|
|
15,600
|
(5)
|
|
|
97,690
|
|
|
|
48,048
|
(5)
|
|
|
6,221
|
|
|
|
417,159
|
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth Green, Ph.D.
|
|
|
2009
|
|
|
|
260,000
|
|
|
|
16,250
|
(5)
|
|
|
126,652
|
|
|
|
50,050
|
(5)
|
|
|
6,221
|
|
|
|
459,173
|
|
Senior Vice President,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scientific Affairs and Chief Scientific Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Susan Caballa
|
|
|
2009
|
|
|
|
228,800
|
|
|
|
14,300
|
|
|
|
83,995
|
|
|
|
43,186
|
|
|
|
6,174
|
|
|
|
376,455
|
|
Senior Vice President,
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
|
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|
|
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|
|
Regulatory and Medical Affairs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Holland
|
|
|
2009
|
|
|
|
218,400
|
|
|
|
13,650
|
(5)
|
|
|
94,513
|
|
|
|
42,042
|
(5)
|
|
|
6,128
|
|
|
|
374,733
|
|
Vice President,
|
|
|
|
|
|
|
|
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|
|
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|
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|
Marketing
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
(1)
|
|
The amounts set forth in this column represent the discretionary
bonuses paid to executives based on the board of directors
approval. Discretionary bonus amounts were earned in and paid in
2009 for all executives with the exception of Mr. Eiswirth,
Dr. Green and Mr. Holland, who were paid the 2009
earned amount in 2010. See Management
Principal Elements of Compensation Annual Incentive
Compensation for additional information related to the
2009 bonuses of our named executive officers.
|
103
|
|
|
(2)
|
|
The amounts set forth in this column reflect with respect to
options newly granted in 2009 the aggregate grant date fair
value of the option, computed in accordance with FASB ASC Topic
No. 718. See Note 10 of the Notes to our Financial
Statements included elsewhere in this prospectus for a
discussion of our assumptions in determining the ASC 718
values of our option awards.
|
|
(3)
|
|
The Non-Equity Incentive Plan Compensation represents the bonus
paid to executives based on personal and corporate targets as
defined in our Incentive Compensation Bonus Plan and approved by
the board of directors. See Management
Principal Elements of Compensation Annual Incentive
Compensation for additional information related to the
2009 bonuses of our named executive officers.
|
|
(4)
|
|
All Other Compensation represents 401(k) matching contributions
and short-term and long-term disability
gross-ups
paid on an executives behalf.
|
|
(5)
|
|
Represents amount paid in January 2010 for bonus earned for
fiscal year 2009.
|
In 2009, salary, bonus and
non-equity incentive plan compensation accounted for
the following percentages of the total compensation
of our named executive officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
Plan
|
Name
|
|
Salary
|
|
Bonus
|
|
Compensation
|
|
C. Daniel Myers
|
|
|
38
|
%
|
|
|
4
|
%
|
|
|
12
|
%
|
Richard S. Eiswirth, Jr
|
|
|
58
|
%
|
|
|
4
|
%
|
|
|
11
|
%
|
Kenneth Green, Ph.D.
|
|
|
54
|
%
|
|
|
3
|
%
|
|
|
10
|
%
|
Susan Caballa
|
|
|
59
|
%
|
|
|
4
|
%
|
|
|
11
|
%
|
David Holland
|
|
|
56
|
%
|
|
|
3
|
%
|
|
|
11
|
%
|
2009
Grants of Plan-Based Awards
The following table shows information regarding cash incentive
bonus and equity awards during the fiscal year ended
December 31, 2009 to the executive officers named in the
Summary Compensation Table (in each case, as adjusted to reflect
a
3.4-for-one
reverse split of our common and preferred stock effected prior
to the effective date of this registration statement).
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|
|
|
|
Estimated Future
|
|
|
|
|
Payouts Under Non-Equity
|
|
Equity Incentive Plan
|
|
|
Incentive Plan Awards
|
|
Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
|
|
Grant Date
|
|
|
|
|
|
|
|
|
|
|
|
|
or Base
|
|
Fair
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Price of
|
|
Value of
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
Option
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
Awards
|
|
Awards
|
Name
|
|
Minimum
|
|
Target
|
|
Maximum
|
|
Grant Date
|
|
Options (#)(1)
|
|
($/Sh)
|
|
($)(3)
|
|
C. Daniel Myers
|
|
$
|
0
|
|
|
$
|
141,440
|
|
|
$
|
141,440
|
|
|
|
8/25/2009
|
|
|
|
106,157
|
|
|
$
|
4.01
|
|
|
$
|
365,380
|
|
Richard S. Eiswirth, Jr.
|
|
|
0
|
|
|
|
62,400
|
|
|
|
62,400
|
|
|
|
8/25/2009
|
|
|
|
28,383
|
|
|
|
4.01
|
|
|
|
97,690
|
|
Kenneth Green, Ph.D.
|
|
|
0
|
|
|
|
65,000
|
|
|
|
65,000
|
|
|
|
8/25/2009
|
|
|
|
36,797
|
|
|
|
4.01
|
|
|
|
126,652
|
|
Susan Caballa
|
|
|
0
|
|
|
|
57,200
|
|
|
|
57,200
|
|
|
|
8/25/2009
|
|
|
|
24,527
|
|
|
|
4.01
|
|
|
|
83,995
|
|
David Holland
|
|
|
0
|
|
|
|
54,600
|
|
|
|
54,600
|
|
|
|
8/25/2009
|
|
|
|
27,598
|
|
|
|
4.01
|
|
|
|
94,513
|
|
|
|
|
(1)
|
|
25% of the shares subject to this option vest as to 25% of the
shares subject to this option on August 25, 2009 and as to
an additional 6.25% of the shares subject to this option on each
three month anniversary date thereafter. The remaining 75% of
the shares subject to this option vest as to 25% of the shares
subject to this option on December 22, 2010 and as to an
additional 6.25% of the shares subject to this option on each
three month anniversary date thereafter.
|
|
(2)
|
|
The amounts set forth in this column reflect with respect to
options newly granted in 2009 the aggregate grant date fair
value of the option, computed in accordance with FASB ASC Topic
No. 718. See Note 10 of the Notes to our Financial
Statements included elsewhere in this prospectus for a
discussion of our assumptions in determining the ASC 718
grant date fair value of our option awards.
|
104
Outstanding
Equity Awards at 2009 Year-End
The following table shows stock options outstanding on
December 31, 2009, the last day of our fiscal year, to each
of the executive officers named in the Summary Compensation
table. No executive officer held unvested shares of stock on
that date.
The vesting schedule applicable to each outstanding option is
described in the footnote to the table below. See
Management Potential Payments upon Termination
or Change in Control for additional information regarding
the vesting acceleration provisions applicable to the options
held by our named executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
|
|
|
Underlying
|
|
Underlying
|
|
Option
|
|
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Exercise
|
|
Option
|
|
|
|
|
Options (#)
|
|
Options (#)
|
|
Price
|
|
Expiration
|
Name
|
|
Initial Vesting Date
|
|
Exercisable(1)
|
|
Unexercisable
|
|
($/share)
|
|
Date
|
|
C. Daniel Myers
|
|
|
7/7/2005
|
|
|
|
22,775
|
|
|
|
0
|
|
|
$
|
2.04
|
|
|
|
7/7/2014
|
|
|
|
|
11/22/2006
|
|
|
|
55,147
|
|
|
|
0
|
|
|
|
1.33
|
|
|
|
1/1/2016
|
|
|
|
|
11/22/2006
|
|
|
|
55,147
|
|
|
|
0
|
|
|
|
1.33
|
|
|
|
10/12/2016
|
|
|
|
|
12/13/2008
|
|
|
|
88,941
|
|
|
|
88,942
|
|
|
|
1.39
|
|
|
|
12/13/2017
|
|
|
|
|
3/20/2009
|
|
|
|
70,047
|
|
|
|
90,060
|
|
|
|
2.41
|
|
|
|
3/20/2018
|
|
|
|
|
8/25/2010
|
|
|
|
0
|
|
|
|
26,305
|
|
|
|
4.01
|
|
|
|
8/25/2019
|
|
|
|
|
12/22/2010
|
|
|
|
0
|
|
|
|
79,851
|
|
|
|
4.01
|
|
|
|
8/25/2019
|
|
Richard S. Eiswirth, Jr.
|
|
|
10/31/2006
|
|
|
|
13,625
|
|
|
|
0
|
|
|
|
2.04
|
|
|
|
10/31/2015
|
|
|
|
|
10/31/2006
|
|
|
|
96,669
|
|
|
|
0
|
|
|
|
1.33
|
|
|
|
1/1/2016
|
|
|
|
|
11/22/2007
|
|
|
|
38,603
|
|
|
|
12,868
|
|
|
|
1.33
|
|
|
|
10/12/2016
|
|
|
|
|
12/13/2008
|
|
|
|
16,547
|
|
|
|
16,547
|
|
|
|
1.39
|
|
|
|
12/13/2017
|
|
|
|
|
3/20/2009
|
|
|
|
20,276
|
|
|
|
26,070
|
|
|
|
2.41
|
|
|
|
3/20/2018
|
|
|
|
|
6/25/2009
|
|
|
|
11,029
|
|
|
|
18,382
|
|
|
|
3.88
|
|
|
|
6/25/2018
|
|
|
|
|
8/25/2010
|
|
|
|
0
|
|
|
|
7,033
|
|
|
|
4.01
|
|
|
|
8/25/2019
|
|
|
|
|
12/22/2010
|
|
|
|
0
|
|
|
|
21,349
|
|
|
|
4.01
|
|
|
|
8/25/2019
|
|
Kenneth Green, Ph.D.
|
|
|
8/2/2005
|
|
|
|
73,529
|
|
|
|
0
|
|
|
|
2.04
|
|
|
|
8/2/2014
|
|
|
|
|
1/3/2006
|
|
|
|
14,706
|
|
|
|
0
|
|
|
|
2.04
|
|
|
|
1/1/2015
|
|
|
|
|
11/22/2006
|
|
|
|
44,118
|
|
|
|
0
|
|
|
|
1.33
|
|
|
|
1/1/2016
|
|
|
|
|
11/22/2006
|
|
|
|
44,118
|
|
|
|
0
|
|
|
|
1.33
|
|
|
|
10/12/2016
|
|
|
|
|
11/22/2007
|
|
|
|
16,544
|
|
|
|
5,515
|
|
|
|
1.33
|
|
|
|
10/12/2016
|
|
|
|
|
3/1/2008
|
|
|
|
40,441
|
|
|
|
18,382
|
|
|
|
1.39
|
|
|
|
3/1/2017
|
|
|
|
|
12/13/2008
|
|
|
|
13,039
|
|
|
|
13,039
|
|
|
|
1.39
|
|
|
|
12/13/2017
|
|
|
|
|
3/20/2009
|
|
|
|
29,493
|
|
|
|
37,920
|
|
|
|
2.41
|
|
|
|
3/20/2018
|
|
|
|
|
8/25/2010
|
|
|
|
0
|
|
|
|
9,118
|
|
|
|
4.01
|
|
|
|
8/25/2019
|
|
|
|
|
12/22/2010
|
|
|
|
0
|
|
|
|
27,679
|
|
|
|
4.01
|
|
|
|
8/25/2019
|
|
Susan Caballa
|
|
|
7/7/2005
|
|
|
|
8,931
|
|
|
|
0
|
|
|
|
2.04
|
|
|
|
7/4/2014
|
|
|
|
|
2/18/2006
|
|
|
|
20,480
|
|
|
|
0
|
|
|
|
2.04
|
|
|
|
2/18/2015
|
|
|
|
|
11/22/2006
|
|
|
|
44,118
|
|
|
|
0
|
|
|
|
1.33
|
|
|
|
1/1/2016
|
|
|
|
|
11/22/2006
|
|
|
|
44,118
|
|
|
|
0
|
|
|
|
1.33
|
|
|
|
10/12/2016
|
|
|
|
|
3/1/2008
|
|
|
|
10,110
|
|
|
|
4,596
|
|
|
|
1.39
|
|
|
|
3/1/2017
|
|
|
|
|
12/13/2008
|
|
|
|
1,841
|
|
|
|
1,841
|
|
|
|
1.39
|
|
|
|
12/13/2017
|
|
|
|
|
3/20/2009
|
|
|
|
20,276
|
|
|
|
26,070
|
|
|
|
2.41
|
|
|
|
3/20/2018
|
|
|
|
|
8/25/2010
|
|
|
|
0
|
|
|
|
6,078
|
|
|
|
4.01
|
|
|
|
8/25/2019
|
|
|
|
|
12/22/2010
|
|
|
|
0
|
|
|
|
18,449
|
|
|
|
4.01
|
|
|
|
8/25/2019
|
|
105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
|
|
|
Underlying
|
|
Underlying
|
|
Option
|
|
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Exercise
|
|
Option
|
|
|
|
|
Options (#)
|
|
Options (#)
|
|
Price
|
|
Expiration
|
Name
|
|
Initial Vesting Date
|
|
Exercisable(1)
|
|
Unexercisable
|
|
($/share)
|
|
Date
|
|
David Holland
|
|
|
7/7/2005
|
|
|
|
26,795
|
|
|
|
0
|
|
|
$
|
2.04
|
|
|
|
7/7/2014
|
|
|
|
|
11/22/2006
|
|
|
|
33,088
|
|
|
|
0
|
|
|
|
1.33
|
|
|
|
1/1/2016
|
|
|
|
|
11/22/2006
|
|
|
|
33,088
|
|
|
|
0
|
|
|
|
1.33
|
|
|
|
10/12/2016
|
|
|
|
|
12/13/2008
|
|
|
|
977
|
|
|
|
977
|
|
|
|
1.39
|
|
|
|
12/13/2017
|
|
|
|
|
3/20/2009
|
|
|
|
22,120
|
|
|
|
28,440
|
|
|
|
2.41
|
|
|
|
3/20/2018
|
|
|
|
|
8/25/2010
|
|
|
|
0
|
|
|
|
6,839
|
|
|
|
4.01
|
|
|
|
8/25/2019
|
|
|
|
|
12/22/2010
|
|
|
|
0
|
|
|
|
20,759
|
|
|
|
4.01
|
|
|
|
8/25/2019
|
|
|
|
|
(1)
|
|
One-quarter of each option vests upon continuous service through
the Initial Vesting Date shown in the table. Thereafter, the
option vests in 12 equal quarterly installments over the next
three years of service.
|
Option
Exercises and Stock Vested During 2009
There were no option exercises by our named executive officers
in 2009. There were no shares of our stock that vested in 2009
for our named executive officers.
Employment
Agreements
We have entered into employment agreements with each of our
named executive officers. The material terms are as follows:
C. Daniel Myers.
We entered into an
employment agreement with C. Daniel Myers in July 2004 which was
amended and restated in August 2008. The letter agreement
provides for a starting salary of $250,000 and a potential bonus
of up to $62,500. The agreement also provided that the board
grant him an option to purchase 45,551 shares of common
stock. The board of directors adjusts Mr. Myerss
salary and bonus potential from time to time. The most recent
adjustment in December 2009 increased Mr. Myerss
annual salary to $367,744 with a bonus potential of 40% of his
base salary, or $147,098, effective January 1, 2010. If we
terminate Mr. Myerss employment without cause or if
Mr. Myers resigns for good reason, he is entitled to one
year of his base salary at the rate in effect at the time of his
termination paid in 12 equal monthly installments.
Mr. Myers will also be entitled to the portion of his bonus
earned up until termination. In addition, he is entitled to
reimbursement of his premiums for medical insurance coverage
under COBRA for 12 months after the date of termination or
until he is eligible to be covered under a medical insurance
plan by a subsequent employer.
Richard S. Eiswirth, Jr.
We entered into an
employment agreement with Richard S. Eiswirth Jr. in October
2005 which was amended and restated in August 2008. The letter
agreement provided for a starting salary of $190,000 and a bonus
of $38,000. The agreement also provided that the board grant him
an option to purchase 13,625 shares of common stock. Our
board of directors adjusts Mr. Eiswirths salary and
bonus potential from time to time. The most recent adjustment in
December 2009 increased Mr. Eiswirths annual salary
to $259,584 with a bonus potential of 25% of his base salary, or
$64,896, effective January 1, 2010. If we terminate
Mr. Eiswirths employment without cause or if
Mr. Eiswirth resigns for good reason, he is entitled to one
year of his base salary at the rate in effect at the time of his
termination paid in 12 equal monthly installments. He is also
entitled to the portion of his bonus earned up until his
termination. In addition, he is entitled to reimbursement of his
premiums for medical insurance coverage under COBRA for
12 months after the date of termination or until he is
eligible to be covered under a medical insurance plan by a
subsequent employer.
Kenneth Green, Ph.D.
We entered into an
employment agreement with Kenneth Green in June 2004 which was
amended and restated in August 2008. Under the letter agreement
Dr. Greens starting salary was
106
$185,000 with a potential bonus of up to 20% of his base salary.
The agreement also provided that the board grant him an option
to purchase 73,529 shares of common stock and an additional
option to purchase 14,706 shares of common stock if certain
performance goals were met. Our board of directors adjusts
Dr. Greens salary and bonus potential from time to
time. The most recent adjustment in December 2009 increased
Dr. Greens annual salary to $270,400 with a bonus
potential of 25% of his base salary, or $67,600, effective
January 1, 2010. If we terminate Dr. Greens
employment without cause or if Dr. Green resigns for good
reason, he is entitled to one year of his base salary at the
rate in effect at the time of his termination paid in 12 equal
monthly installments. He is also entitled to the portion of his
bonus earned up until his termination. In addition, he is
entitled to reimbursement of his premiums for medical insurance
coverage under COBRA for 12 months after the date of
termination or until he is eligible to be covered under a
medical insurance plan by a subsequent employer.
Susan Caballa.
We entered into an employment
agreement with Susan Caballa in June 2004 which was amended and
restated in August 2008. The letter agreement provided for a
starting salary of $160,000 and a potential bonus of up to 20%
of her base salary. In addition, the letter agreement provided
that the board grant Ms. Caballa an option to purchase
8,931 shares of common stock. The board of directors
adjusts Ms. Caballas salary and bonus potential from
time to time. Pursuant to the most recent adjustment in December
2009, Ms. Caballas annual salary increased to
$237,952 and her bonus potential increased to 25% of her base
salary, or $59,488, effective January 1, 2010. If we
terminate Ms. Caballas employment without cause or
Ms. Caballa resigns for good reason, she is entitled to one
year of her base salary at the rate in effect at the time of her
termination paid in 12 equal monthly installments.
Ms. Caballa is also entitled to the portion of her bonus
earned up until her termination. In addition, she is entitled to
reimbursement of her premiums for medical insurance coverage
under COBRA for 12 months after the date of termination or
until she is eligible to be covered under a medical insurance
plan by a subsequent employer.
David Holland.
We entered into an employment
agreement with David Holland in June 2004 which was amended and
restated in August 2008. The letter agreement provided for a
starting salary of $175,000 and a bonus potential of 20% of his
base salary. In addition, the letter agreement provided that the
board grant Mr. Holland an option to purchase
26,795 shares of common stock. The board of directors
occasionally adjusts Mr. Hollands salary and bonus
potential. In the most recent adjustment in December 2009, the
board of directors increased Mr. Hollands annual
salary to $227,136 with a bonus potential of 25% of his base
salary, or $56,784, effective January 1, 2010. If we
terminate Mr. Hollands employment without cause or if
Mr. Holland resigns for good reason, he is entitled to one
year of his base salary at the rate in effect at the time of his
termination paid in 12 equal monthly installments.
Mr. Holland will also be entitled to the portion of his
bonus earned up until termination. In addition, he is entitled
to reimbursement of his premiums for medical insurance coverage
under COBRA for 12 months after the date of termination or
until he is eligible to be covered under a medical insurance
plan by a subsequent employer.
For purposes of severance payments, good reason is
defined in all amended and restated employment agreements as an
executive resigning within 12 months after one of the
following conditions has come into existence without the
executives consent:
|
|
|
|
|
a reduction of the executives base salary;
|
|
|
|
a material adverse change in the executives primary
responsibilities or duties;
|
|
|
|
a geographical relocation of our corporate headquarters, or the
executives primary business location, to a location that
is more than 35 miles from the present location; or
|
|
|
|
any material breach by us of the employment agreement.
|
The executive must provide us with written notice within
90 days after a good reason condition comes into the
existence, and we have 30 days to remedy the condition
after receipt of the notice.
107
Potential
Payments upon Termination or Change in Control
The following table describes the potential payments and
benefits upon termination of our named executive officers
employment before or after a change in control of the company,
as if each officers employment terminated as of
December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
without
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
Cause or
|
|
|
Termination
|
|
|
|
|
|
Resignation
|
|
|
for Good
|
|
|
without
|
|
|
|
|
|
or
|
|
|
Reason Prior
|
|
|
Cause or for
|
|
|
|
|
|
Termination
|
|
|
to Change in
|
|
|
Good Reason after
|
|
Name
|
|
Benefit
|
|
for Cause
|
|
|
Control
|
|
|
Change in Control
|
|
|
C. Daniel Myers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
|
|
$
|
0
|
|
|
$
|
353,600
|
|
|
$
|
353,600
|
|
|
|
Bonus
|
|
|
0
|
|
|
|
144,269
|
|
|
|
144,269
|
|
|
|
Benefit Continuation
|
|
|
0
|
|
|
|
5,174
|
|
|
|
5,174
|
|
|
|
Accelerated Vesting
|
|
|
|
|
|
|
|
|
|
|
3,232,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total value
|
|
$
|
0
|
|
|
$
|
503,043
|
|
|
$
|
3,735,613
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard S. Eiswirth, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
|
|
$
|
0
|
|
|
$
|
249,600
|
|
|
$
|
249,600
|
|
|
|
Bonus
|
|
|
0
|
|
|
|
63,648
|
|
|
|
63,648
|
|
|
|
Benefit Continuation
|
|
|
0
|
|
|
|
15,593
|
|
|
|
15,593
|
|
|
|
Accelerated Vesting
|
|
|
|
|
|
|
|
|
|
|
1,347,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total value
|
|
$
|
0
|
|
|
$
|
328,841
|
|
|
$
|
1,676,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth Green, Ph.D.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
|
|
$
|
0
|
|
|
$
|
260,000
|
|
|
$
|
260,000
|
|
|
|
Bonus
|
|
|
0
|
|
|
|
66,300
|
|
|
|
66,300
|
|
|
|
Benefit Continuation
|
|
|
0
|
|
|
|
10,220
|
|
|
|
10,220
|
|
|
|
Accelerated Vesting
|
|
|
|
|
|
|
|
|
|
|
1,496,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total value
|
|
$
|
0
|
|
|
$
|
336,520
|
|
|
$
|
1,832,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Susan Caballa
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
|
|
$
|
0
|
|
|
$
|
228,800
|
|
|
$
|
228,800
|
|
|
|
Bonus
|
|
|
0
|
|
|
|
57,486
|
|
|
|
57,486
|
|
|
|
Benefit Continuation
|
|
|
0
|
|
|
|
10,470
|
|
|
|
10,470
|
|
|
|
Accelerated Vesting
|
|
|
|
|
|
|
|
|
|
|
742,236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total value
|
|
$
|
0
|
|
|
$
|
296,456
|
|
|
$
|
1,038,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Holland
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
|
|
$
|
0
|
|
|
$
|
218,400
|
|
|
$
|
218,400
|
|
|
|
Bonus
|
|
|
0
|
|
|
|
55,692
|
|
|
|
55,692
|
|
|
|
Benefit Continuation
|
|
|
0
|
|
|
|
15,593
|
|
|
|
15,593
|
|
|
|
Accelerated Vesting
|
|
|
|
|
|
|
|
|
|
|
731,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total value
|
|
$
|
0
|
|
|
$
|
289,685
|
|
|
$
|
1,021,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonus payments in the year of termination would be based on the
actual earned bonus and may be less than the target bonus. For
purposes of accelerated vesting, good reason is
defined in all employment agreements as:
|
|
|
|
|
a material adverse change in the executives
responsibilities or duties;
|
|
|
|
a geographical relocation of our corporate headquarters, or the
executives primary business location, to a location that
is more than 35 miles from the present location; or
|
|
|
|
any breach by us of the employment agreement that is material
and not cured, or capable of being cured, within 30 days
after the executive gives us and our board of directors written
notice.
|
108
For purposes of valuing the severance payments in the table
above, we used each executives base salary at the rate in
effect at the end of 2009 and the number of accrued but unused
vacation days at the end of 2009.
The value of option acceleration shown in the table above was
calculated based on the assumption that the officers
employment was terminated and the change in control (if
applicable) occurred on December 31, 2009, and that the
fair market value of our common stock on that date was $16.00
per share, which represents the midpoint of the range of the
initial public offering price set forth on the cover page of
this prospectus. The value of the vesting acceleration was
calculated by multiplying the number of unvested shares subject
to each option by the difference between the fair market value
of our common stock as of December 31, 2009, and the
exercise price of the option.
2009 Director
Compensation
Our directors who serve as the designees of the significant
holders of our Series A, Series B, Series C and
Series C-1 preferred stock, Dr. Halak, Dr. Hove,
Mr. Tracy, Mr. Youngren and Mr. Brooks, received
no cash compensation and no equity-based compensation during
2009 for their service on our board of directors or committees
of our board of directors. Our independent, non-employee
director, Dr. Roberts, receives $12,000 in fees each year
and a grant of 4,412 options per year. He received his options
for 2006 and 2007 in one grant of 8,824 options on
December 14, 2006. We have a policy of reimbursing all of
our non-employee directors for their reasonable out-of-pocket
expenses incurred in attending board and committee meetings.
The following table sets forth the total compensation paid to
each person who served as a director during 2009, other than a
director who also served as a named executive officer.
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or
|
|
|
Name
|
|
Paid in Cash
|
|
Total
|
|
Philip R. Tracy
|
|
$
|
|
|
|
$
|
|
|
Mark J. Brooks
|
|
|
|
|
|
|
|
|
Brian K. Halak, Ph.D.
|
|
|
|
|
|
|
|
|
Anders D. Hove, M.D.
|
|
|
|
|
|
|
|
|
Calvin W. Roberts, M.D.
|
|
|
12,000
|
|
|
|
12,000
|
|
Bryce Youngren
|
|
|
|
|
|
|
|
|
On December 31, 2009, the number of shares subject to each
option held by a non-employee director, the exercise price per
share, the grant date fair value of each option (computed in
accordance with SFAS 123R) and the aggregate number of
options outstanding were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate Number
|
|
|
|
|
Number of
|
|
Exercise
|
|
|
|
of Options
|
|
|
|
|
Options
|
|
Price per
|
|
Grant Date
|
|
Outstanding on
|
Name
|
|
Date of Grant
|
|
Granted
|
|
Share
|
|
Fair Value(1)
|
|
December 31, 2009
|
|
Calvin W. Roberts, M.D.
|
|
|
12/29/2004
|
|
|
|
4,412
|
|
|
$
|
2.04
|
|
|
$
|
4,000
|
|
|
|
26,472
|
|
|
|
|
7/1/2005
|
|
|
|
4,412
|
|
|
|
2.04
|
|
|
|
3,800
|
|
|
|
|
|
|
|
|
12/14/2006
|
|
|
|
8,824
|
|
|
|
1.33
|
|
|
|
9,300
|
|
|
|
|
|
|
|
|
6/25/2008
|
|
|
|
4,412
|
|
|
|
3.88
|
|
|
|
13,700
|
|
|
|
|
|
|
|
|
7/16/2009
|
|
|
|
4,412
|
|
|
|
4.01
|
|
|
|
14,700
|
|
|
|
|
|
|
|
|
(1)
|
|
See Note 10 of the Notes to our Financial Statements
included elsewhere in this prospectus for a discussion of our
assumptions in determining the ASC 718 grant date fair
value of our option awards. All director options have a 7-year
term and were fully vested upon grant.
|
Following this offering, our non-employee directors will be
eligible for cash compensation and for stock option grants under
our 2010 Equity Incentive Plan. See Management
Director Compensation for additional information.
109
Equity
Benefit Plans
2010
Equity Incentive Plan
Our board of directors adopted our 2010 Equity Incentive Plan on
April 5, 2010, and our stockholders approved it on
April 5, 2010. The 2010 Equity Incentive Plan will take
effect on the effective date of the registration statement of
which this prospectus is a part. Our 2010 Equity Incentive Plan
replaced the 2004 Incentive Stock Plan and the 2005 Incentive
Stock Plan. No further grants will be made under either of these
plans after this offering. However, the options outstanding
after this offering under the 2004 Incentive Stock Plan or the
2005 Incentive Stock Plan will continue to be governed by their
existing terms.
Shares Reserved.
We have reserved
1,977,686 shares of our common stock for issuance under the
2010 Equity Incentive Plan. The number of shares reserved for
issuance under the plan will be increased automatically on
January 1 of each year, starting with 2011, by a number equal to
the smallest of:
|
|
|
|
|
2,000,000 shares;
|
|
|
|
4% of the shares of common stock outstanding at that
time; or
|
|
|
|
the number of shares determined by our board of directors.
|
In general, to the extent that awards under the 2010 Equity
Incentive Plan are forfeited or lapse without the issuance of
shares, those shares will again become available for awards. All
share numbers described in this summary of the 2010 Equity
Incentive Plan are automatically adjusted in the event of a
stock split, a stock dividend, or a reverse stock split.
Administration.
The compensation committee of
our board of directors administers the 2010 Equity Incentive
Plan. The committee has the complete discretion to make all
decisions relating to the plan and outstanding awards.
Eligibility.
Employees, members of our board
of directors who are not employees, and consultants are eligible
to participate in our 2010 Equity Incentive Plan.
Types of Award.
Our 2010 Equity Incentive Plan
provides for the following types of award:
|
|
|
|
|
incentive and non-statutory stock options to purchase shares of
our common stock;
|
|
|
|
stock appreciation rights;
|
|
|
|
restricted shares of our common stock; and
|
|
|
|
stock units.
|
Options and Stock Appreciation Rights.
The
exercise price for options granted under the 2010 Equity
Incentive Plan may not be less than 100% of the fair market
value of our common stock on the option grant date. Optionees
may pay the exercise price by using:
|
|
|
|
|
cash;
|
|
|
|
shares of common stock that the optionee already owns;
|
|
|
|
an immediate sale of the option shares through a broker approved
by us; or
|
|
|
|
a promissory note, if permitted by applicable law.
|
All forms of payment other than cash require the consent of the
compensation committee. A participant who exercises a stock
appreciation right receives the increase in value of our common
stock over the base price. The base price for stock appreciation
rights may not be less than 100% of the fair market value of our
common stock on the grant date. The settlement value of a stock
appreciation right may be paid in cash or shares of common
stock, or a combination of both. Options and stock appreciation
rights vest at the time or times determined by the compensation
committee. In most cases, they will vest over a four-year period
following the date of grant. Options and stock appreciation
rights also expire at the time determined by the compensation
committee, but in no event more than 10 years after they
are granted. They generally expire
110
earlier if the participants service terminates earlier. No
participant may receive options or stock appreciation rights
under the 2010 Equity Incentive Plan covering more than 50% of
the shares of common stock available for issuance pursuant to
the 2010 Equity Incentive Plan in any year.
Restricted Shares and Stock Units.
Restricted
shares and stock units may be awarded under the 2010 Equity
Incentive Plan in return for any lawful consideration, and
participants who receive restricted shares or stock units
generally are not required to pay for their awards in cash. In
general, these awards will be subject to vesting. Vesting may be
based on length of service, the attainment of performance-based
milestones, or a combination of both, as determined by the
compensation committee. No participant may receive restricted
shares or stock units with performance-based vesting covering
more than 50% of the shares of common stock available for
issuance pursuant to the 2010 Equity Incentive Plan in any year.
Settlement of vested stock units may be made in the form of
cash, shares of common stock, or a combination of both.
Performance Goals.
The compensation committee
may establish performance milestones based on one or more of the
following criteria:
|
|
|
|
|
Operating profits (including earnings before income, taxes,
depreciation and amortization)
|
|
|
|
Net income (before or after taxes)
|
|
|
|
Earnings per share
|
|
|
|
Profit returns
and/or
margins
|
|
|
|
Revenue
|
|
|
|
Stockholder return
and/or
value
|
|
|
|
Stock price
|
|
|
|
Working capital
|
|
|
|
Customer satisfaction
|
|
|
|
Implementation, completion or attainment of measurable
objectives with respect to research, development, products,
projects or recruiting and maintaining personnel
|
|
|
|
Market share
|
|
|
|
Return on equity
|
|
|
|
Revenue growth
|
|
|
|
Total stockholder return
|
|
|
|
Increases or growth in any of the foregoing
|
Change in Control.
The compensation committee
may determine that an award under the 2010 Equity Incentive Plan
will vest on an accelerated basis if a change in control of the
company occurs or if the participant is subject to an
involuntary termination after the change in control. In
addition, an award will generally vest in full if the surviving
corporation does not assume the award, replace it with a
comparable award or settle it for cash or securities. A change
in control includes:
|
|
|
|
|
a merger after which our own stockholders own 50% or less of the
surviving corporation or its parent company;
|
|
|
|
a sale of all or substantially all of our assets;
|
|
|
|
a proxy contest that results in the replacement of more than
one-half of our directors over a
24-month
period; or
|
|
|
|
an acquisition of 50% or more of our outstanding stock by any
person or group, other than a person related to the company,
such as a holding company owned by our stockholders.
|
111
Amendments or Termination.
Our board of
directors may amend or terminate the 2010 Equity Incentive Plan
at any time. If our board of directors amends the plan, it does
not need to ask for stockholder approval of the amendment unless
required by applicable law. The 2010 Equity Incentive Plan will
continue in effect for 10 years from its adoption date,
unless our board of directors decides to terminate the plan
earlier.
2004
and 2005 Stock Incentive Plans
Our 2004 Stock Incentive Plan was adopted by our board of
directors on June 30, 2004, and our stockholders approved
it on June 30, 2004. Our 2005 Stock Incentive Plan was
adopted by our board of directors on November 22, 2005, and
our stockholders approved it on November 22, 2005. No
further awards will be made under our 2004 and 2005 Stock
Incentive Plans after this offering. The awards outstanding
after this offering under the 2004 and 2005 Stock Incentive
Plans will continue to be governed by their existing terms.
Shares Reserved.
As of March 31, 2010,
395,782 shares of our common stock are reserved for
issuance and options to purchase 395,782 shares of our
common stock are outstanding under the 2004 Stock Incentive
Plan, and 1,969,143 shares of our common stock are reserved
for issuance and options to purchase 1,829,996 shares of
our common stock are outstanding under the 2005 Stock Incentive
Plan. No other awards are outstanding under our 2004 Stock
Incentive Plan or 2005 Stock Incentive Plan.
Administration.
The compensation committee of
our board of directors administers the 2004 and 2005 Stock
Incentive Plans. Our compensation committee has complete
discretion to make all decisions relating to the plans.
Eligibility.
Employees and non-employee
members of our board of directors are eligible to participate in
our 2004 and 2005 Stock Incentive Plans.
Types of Award.
Our 2004 and 2005 Stock
Incentive Plans provide for the following types of award:
|
|
|
|
|
incentive and non-statutory stock options to purchase shares of
our common stock;
|
|
|
|
stock appreciation rights;
|
|
|
|
restricted shares of our common stock; and
|
|
|
|
stock units.
|
Vesting and Expiration.
Awards vest at the
times determined by the compensation committee, generally over a
four-year period following the date of grant. All awards vest in
full in the event that the company is subject to a change in
control. A change in control includes:
|
|
|
|
|
a merger;
|
|
|
|
a sale of at least 50% of our assets;
|
|
|
|
the dissolution or liquidation of the company;
|
|
|
|
a proxy contest that results in the replacement of at least
one-half of our directors over a two-year period; or
|
|
|
|
an acquisition of 20% or more of our outstanding stock by any
person or group.
|
Payment.
The exercise price for options and
stock appreciation rights granted under the 2004 and 2005 Stock
Incentive Plans may not be less than 100% of the fair market
value of our common stock on the grant date. Optionees may pay
the exercise price of options by using:
|
|
|
|
|
cash or cash equivalents;
|
|
|
|
shares of common stock that the optionee already owns; or
|
|
|
|
an immediate sale of the option shares through a broker
designated by us.
|
Shares and stock units may be awarded under the 2004 and 2005
Stock Incentive Plans in consideration of services rendered to
us prior to the grant date of the award.
112
Expiration.
Options and stock appreciation
rights expire not more than 10 years after they are granted
but generally expire earlier if the optionees service
terminates earlier.
2010
Employee Stock Purchase Plan
Our board of directors adopted the 2010 Employee Stock Purchase
Plan on April 5, 2010, and our stockholders also approved
the plan on April 5, 2010. Our 2010 Employee Stock Purchase
Plan will become effective on the effective date of the
registration statement of which this prospectus is a part. The
plan is intended to qualify for preferential tax treatment under
Section 423 of the Internal Revenue Code.
Shares Reserved.
We have reserved
494,422 shares of our common stock for issuance under the
2010 Employee Stock Purchase Plan. As of January 1 of each year,
starting in 2011, the reserve will automatically be restored to
the original level. All share numbers described in this summary
of the plan are automatically adjusted in the event of a stock
split, a stock dividend, or a reverse stock split.
Administration.
The compensation committee of
our board of directors will administer the 2010 Employee Stock
Purchase Plan. The committee has the complete discretion to make
all decisions relating to the plan.
Eligibility.
All of our employees are eligible
to participate in the 2010 Employee Stock Purchase Plan after
completing three months of service, if we employ them for more
than 20 hours per week and for more than five months per
year. However, all 5% stockholders are excluded. Eligible
employees may begin participating at the start of any offering
period.
Offering Periods.
The first offering period
under the 2010 Employee Stock Purchase Plan starts on the
effective date of the registration statement related to this
offering and ends on October 31, 2010. Each subsequent
offering period consists of six consecutive months.
Amount of Contributions.
The 2010 Employee
Stock Purchase Plan permits each eligible employee to purchase
common stock through payroll deductions. Each employees
payroll deductions may not exceed 15% of his or her total cash
compensation. Participants may reduce, but not increase, their
contribution rate during an offering period. Participants may
also withdraw their contributions at any time before stock is
purchased. Lump sum contributions are not permitted.
Purchases of Shares.
Purchases of our common
stock under the 2010 Employee Stock Purchase Plan will occur on
January 1 and July 1 of each year. Each participant
may purchase as many shares as his or her contributions permit,
but not more than 2,500 shares per six-month offering
period. The value of the shares purchased in any calendar year
may not exceed $25,000, with a limited carry-over of unused
amounts.
Purchase Price.
The price of each share of
common stock purchased under the 2010 Employee Stock Purchase
Plan will be equal to 85% of the lower of:
|
|
|
|
|
the fair market value per share of our common stock on the last
trading day before the start of the applicable six-month
offering period (or, in the case of the first offering period,
the price at which shares are sold to the public in this
offering), or
|
|
|
|
the fair market value per share of common stock on the last
trading day in the applicable offering period, which is the
purchase date.
|
Other Provisions.
Employees may end their
participation in the 2010 Employee Stock Purchase Plan at any
time. Participation ends automatically upon termination of
employment with us. If a change in control of our company
occurs, the plan will end and shares will be purchased with the
payroll deductions accumulated to date by participating
employees, unless the surviving corporation continues the plan.
Our board of directors may amend or terminate the plan at any
time, and the plan terminates automatically 20 years after
its adoption. If our board of directors increases the number of
shares of common stock reserved for issuance under the plan,
except for the automatic increases described above, it must seek
the approval of our stockholders. Other amendments require
stockholder approval only to the extent required by law.
113
TRANSACTIONS
WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL
PERSONS
In addition to the compensation arrangements with directors and
executive officers and the registration rights described
elsewhere in this prospectus, the following is a description of
each transaction since January 1, 2007 and each currently
proposed transaction in which:
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we have been or are to be a participant;
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the amount involved exceeds $120,000; and
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any of our directors, executive officers or holders of more than
5% of our capital stock, or any immediate family member of or
person sharing the household with any of these individuals
(other than tenants or employees), had or will have a direct or
indirect material interest.
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All of the transactions set forth below were approved by a
majority of the board of directors, including a majority of the
independent and disinterested members of the board of directors.
We believe that we have executed all of the transactions set
forth below on terms no less favorable to us than we could have
obtained from unaffiliated third-parties. It is our intention to
ensure that all future transactions between us and our officers,
directors and principal stockholders and their affiliates are
approved by a majority of the board of directors, including a
majority of the independent and disinterested members of the
board of directors, and are on terms no less favorable to us
than those that we could obtain from unaffiliated third-parties.
Private
Placement Financings
Series C Preferred Stock Financing.
On
March 17, 2008 and on April 23, 2008, we sold an
aggregate of 5,807,112 shares of our Series C
preferred stock at a price of $5.17 per share and at an initial
conversion rate of
one-to-one
to various investors, including entities affiliated with Domain
Partners VI, L.P., Intersouth Partners VI, L.P., Intersouth
Partners VII, L.P., Venrock Associates IV, L.P., Polaris Venture
Partners IV, L.P. and BAVP, L.P. and various other entities and
individuals. Each of the investors in this financing are parties
to the second amended and restated investors rights
agreement described below. Additionally, the following members
of our board of directors serve as venture, general or managing
partners/directors of the investors as follows: Philip R. Tracy,
Mark J. Brooks, Brian K. Halak, Ph.D. (Dr. Halak
serves as a member of the general partner of the Domain
investing entities), Anders D. Hove, M.D., and Bryce
Youngren. See Principal Stockholders for additional
information regarding the shares held by these entities.
Series C-1
Preferred Stock Financing.
On August 25,
2009, we sold an aggregate of 967,845 units, at a price of
$5.17 per unit, comprised of 967,845 shares of our
Series C-1
preferred stock and warrants exercisable for up to an aggregate
of 1,935,700 shares of our
Series C-1
preferred stock at an exercise price of $5.17 per share, all of
which were exercised in January 2010. The
Series C-1
preferred stock was issued with an initial conversion rate of
one to one. The units were issued to various investors,
including entities affiliated with Domain Partners VI, L.P.,
Intersouth Partners VI, L.P., Intersouth Partners VII, L.P.,
Venrock Associates IV, L.P., Polaris Venture Partners IV,
L.P. and BAVP, L.P. and various other entities and individuals.
Each of the investors in this financing are parties to the
second amended and restated investors rights agreement
described below. Additionally, the following members of our
board of directors serve as venture, general or managing
partners/directors of the investors as follows: Philip R. Tracy,
Mark J. Brooks, Brian K. Halak, Ph.D. (Dr. Halak
serves as a member of the general partner of the Domain
investing entities), Anders D. Hove, M.D., and Bryce
Youngren. See Principal Stockholders for additional
information regarding the shares held by these entities.
Other
Transactions with our Executive Officers, Directors, Key
Employees and Significant Stockholders
Indemnification Agreements.
We have entered
into indemnification agreements with each of our directors and
executive officers and certain other key employees. The
agreements provide that we will indemnify each of our directors,
executive officers and such key employees against any and all
expenses incurred by that director, executive officer or key
employee because of his or her status as one of our directors,
executive officers or key employees to the fullest extent
permitted by Delaware law, our restated certificate of
incorporation and our amended and restated bylaws (except in a
proceeding initiated by such person without board approval). In
addition, the agreements provide that, to the fullest extent
permitted by Delaware law, we
114
will advance all expenses incurred by our directors, executive
officers and key employees in connection with a legal proceeding
in which they may be entitled to indemnification.
Stock Option Awards.
See
Management Director Compensation and
Management Executive Compensation for
additional information regarding stock options and stock awards
granted to our named executive officers and directors.
Prior Employment of the Son of Our Chief Executive
Officer.
We employed James D. Myers, the son of
our chief executive officer, C. Daniel Myers, from August 2004
through February 2007. From August 2004 through October 2005,
Mr. J. Myers served as an Associate Sales Representative
and from November 2005 through February 2007, Mr. J. Myers
served as a Sales Territory Manager. During the course of
Mr. J. Myerss employment he received cash
compensation in the aggregate amount of $134,000 and equity
compensation, in the form of stock options granted under our
equity incentive plans, having an aggregate fair market value on
the date of grant of $3,900. Mr. J. Myers is no longer
employed by our company.
Directed Share Program.
Certain of our
directors, officers, business associates employees, and other
parties related to us will have the opportunity to purchase up
to 5% of the shares offered in this prospectus for sale through
a directed share program at the initial offering price. The
number of shares of our common stock available for sale to the
general public will be reduced by the number of directed shares
purchased by participants in the program. Any such shares
purchased will be subject to a
25-day
lock-up
period and accordingly, without the prior written consent of
each of Credit Suisse Securities (USA) LLC and Citigroup Global
Markets Inc. and subject to certain exceptions, may not be
resold or otherwise transferred during such
25-day
period. For our officers and directors and holders of
substantially all of our outstanding common stock who have
entered into
lock-up
agreements as described in the section titled
Underwriting and who have participated in the
directed share program, the
180-day
lock-up period contemplated in the section titled
Underwriting shall govern with respect to their
shares purchased under the directed share program. Any directed
shares not purchased by participants in the program will be
offered by the underwriters to the general public on the same
basis as other shares offered in this prospectus. We have agreed
to indemnify Credit Suisse Securities (USA) LLC against certain
liabilities and expenses, including liabilities under the
Securities Act, in connection with the sale of the directed
shares. See Underwriting for additional information
related to the directed share program and the
lock-up
period applicable to shares of our common stock acquired under
the directed share program.
115
PRINCIPAL
STOCKHOLDERS
The following table provides information concerning beneficial
ownership of our capital stock as of March 31, 2010, and as
adjusted to reflect the sale of shares of common stock in this
offering, by:
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each stockholder, or group of affiliated stockholders, that we
know owns more than 5% of our outstanding capital stock;
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each of our named executive officers;
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each of our directors;
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all of our directors and executive officers as a group.
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The following table lists the number of shares and percentage of
shares beneficially owned based on 24,501,055 shares of
common stock outstanding as of March 31, 2010. This table
reflects:
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1,637,359 shares of common stock;
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the automatic conversion of 6,624,844 shares of our Series
A preferred stock into 7,005,145 shares of common stock
upon the closing of the offering, including the conversion of
certain Series A preferred stock dividends accumulated prior to
November 22, 2005 into 380,301 shares of common stock;
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the automatic conversion of 7,147,894 shares of our Series
B preferred stock into 7,147,894 shares of common stock
upon the closing of the offering;
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the automatic conversion of 5,807,112 shares of our Series
C preferred stock into 5,807,112 shares of common stock
upon the closing of the offering;
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the automatic conversion of 2,903,545 shares of our Series
C-1 preferred stock (which includes 1,935,700 shares of our
Series C-1 preferred stock issued upon the exercise of warrants
in January 2010) into 2,903,545 shares of common stock upon
the closing of the offering; and
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a
3.4-for-one
reverse split of our common and preferred stock effected prior
to the effective date of this registration statement.
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The table also lists the applicable percentage beneficial
ownership based on 30,501,055 shares of common stock
outstanding upon completion of this offering, assuming no
exercise of the underwriters option to purchase up to an
aggregate of 900,000 shares of our common stock.
116
Beneficial ownership is determined in accordance with the rules
of the Securities and Exchange Commission, and generally
includes voting power
and/or
investment power with respect to the securities held. Shares of
common stock subject to options and warrants currently
exercisable or exercisable within 60 days of March 31,
2010 are deemed outstanding and beneficially owned by the person
holding such options for purposes of computing the number of
shares and percentage beneficially owned by such person, but are
not deemed outstanding for purposes of computing the percentage
beneficially owned by any other person. Except as indicated in
the footnotes to this table, and subject to applicable community
property laws, the persons or entities named have sole voting
and investment power with respect to all shares of our common
stock shown as beneficially owned by them.
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Shares Beneficially Owned
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Shares Beneficially Owned
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Prior to Offering
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After the Offering
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Name and Address of Beneficial Owner
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Number
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Percent
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Number
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Percent
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5% Stockholders
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BAVP, LP
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4,499,458
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(1)
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18.36
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%
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4,499,458
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(1)
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14.75
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%
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950 Tower Lane, Suite 700
Foster City, California 94404
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Domain Associates, L.L.C.
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4,499,449
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(2)
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18.36
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%
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4,499,449
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(2)
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14.75
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%
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One Palmer Square
Princeton, New Jersey 08542
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Intersouth Partners
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4,499,452
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(3)
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18.36
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%
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4,499,452
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(3)
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14.75
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%
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406 Blackwell Street, Suite 200
Durham, North Carolina 27701
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Polaris Venture Partners
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4,499,453
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(4)
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18.36
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%
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4,499,453
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(4)
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14.75
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%
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1000 Winter Street, Suite 3350
Waltham, Massachusetts 02451
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Venrock Associates
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3,642,999
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(5)
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14.87
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%
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3,642,999
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(5)
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11.94
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%
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2494 Sand Hill Road, Suite 200
Menlo Park, California 94025
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Directors and Named Executive Officers
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Mark J. Brooks
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4,499,458
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(6)
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18.36
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%
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4,499,458
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(6)
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14.75
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%
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Susan Caballa
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205,391
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(7)
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0.83
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%
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205,391
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(7)
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0.67
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%
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Richard S. Eiswirth, Jr.
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209,987
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(8)
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0.85
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%
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209,987
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(8)
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0.68
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%
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Kenneth Green, Ph.D.
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288,265
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(9)
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1.16
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%
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288,265
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(9)
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0.94
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%
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Brian K. Halak, Ph.D.
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4,499,449
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(10)
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18.36
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%
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4,499,449
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(10)
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14.75
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%
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David Holland
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236,997
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(11)
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0.96
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%
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236,997
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(11)
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0.77
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%
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Anders D. Hove, M.D.
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3,642,999
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(12)
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14.87
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%
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3,642,999
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(12)
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11.94
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%
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C. Daniel Myers
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462,447
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(13)
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1.86
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%
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462,447
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(13)
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1.50
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%
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Calvin W. Roberts, M.D.
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324,802
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(14)
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1.32
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%
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324,802
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(14)
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1.06
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%
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Philip R. Tracy
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4,499,452
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(15)
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18.36
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%
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4,499,452
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(15)
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14.75
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%
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Bryce Youngren
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4,499,453
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(16)
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18.36
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%
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4,499,453
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(16)
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14.75
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%
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All Current Directors and Named Executive Officers as a
Group
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23,368,700
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95.29
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%
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23,368,700
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76.56
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%
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(1)
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The general partner of BAVP, L.P. is Scale Venture
Management I, LLC. The managing members of Scale Venture
Management I, LLC share voting and investment power with
respect to these shares. Mark J. Brooks, a member of our board
of directors, is a managing member of Scale Venture
Management I, LLC, and shares voting and investment power
with the three other managing members of Scale Venture
Management I, LLC. Mr. Brooks disclaims beneficial
ownership of these shares except to the extent of his pecuniary
interest therein.
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(2)
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Represents 4,451,745 shares held by Domain Partners VI,
L.P. and 47,704 shares held by DP VI Associates, L.P. The
managing members of One Palmer Square Associates VI, L.L.C., the
general partner
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117
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of Domain Partners VI, L.P. and DP VI Associates, L.P., share
voting and investment power with respect to these shares. Brian
Halak, a member of our board of directors, is a member of One
Palmer Square Associates VI, LLC, but has no voting or
investment power and disclaims beneficial ownership of these
shares, except to the extent of his pecuniary interest therein.
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(3)
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Represents 69,616 shares held by Intersouth
Affiliates V, L.P.; 1,518,808 shares held by
Intersouth Partners V, L.P.; 1,962,472 shares held by
Intersouth Partners VI, L.P.; and 948,556 shares held by
Intersouth Partners VII, L.P. Philip R. Tracy, a member of and
the chairman of our board of directors, is a member of each of
Intersouth Associates V, LLC, Intersouth Associates VI, LLC
and Intersouth Associates VII, LLC. Pursuant to powers of
attorney granted by each of Intersouth Associates V, LLC,
Intersouth Associates VI, LLC and Intersouth Associates VII,
LLC, Mr. Tracy shares voting power with respect to the
securities owned by the entities for which these entities serve
as general partners. Mr. Tracy disclaims beneficial
ownership of these shares held by Intersouth Affiliates V,
L.P., Intersouth Partners V, L.P., Intersouth Partners VI,
L.P., and Intersouth Partners VII, L.P., except to the extent of
his pecuniary interest therein.
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(4)
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Represents 4,418,655 shares held by Polaris Venture
Partners IV, L.P. and 80,798 shares held by Polaris Venture
Entrepreneurs Fund IV, L.P. Polaris Venture
Management Co., IV, L.L.C., is the sole general partner of
Polaris Venture Partners IV, L.P. and Polaris Venture Partners
Entrepreneurs Fund IV, L.P. Bryce Youngren, a member
of our board of directors, has an assignee interest in Polaris
Venture Management Co, IV, L.L.C. To the extent that he is
deemed to share voting and investment powers with respect to the
shares held by Polaris Venture Partners IV, L.P. and Polaris
Venture Partners Entrepreneurs Fund IV, L.P.,
Mr. Youngren disclaims beneficial ownership of all such
shares, except to the extent of his pecuniary interest therein.
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(5)
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Represents 2,965,404 shares held by Venrock Associates IV,
L.P.; 604,737 shares held by Venrock Partners, L.P.; and
72,858 shares held by Venrock Entrepreneurs Fund IV,
L.P. Venrock Management IV, LLC, Venrock Partners Management,
LLC, and VEF Management IV, LLC are the sole general partners of
Venrock Associates IV, L.P., Venrock Partners, L.P., and Venrock
Entrepreneurs Fund IV, L.P., respectively. Venrock
Management IV, LLC, Venrock Partners Management, LLC, and VEF
Management IV, LLC disclaim beneficial ownership of all shares
held by Venrock Associates IV, L.P., Venrock Partners, L.P., and
Venrock Entrepreneurs Fund IV, L.P., except to the extent
of their pecuniary interest therein. Anders D. Hove, M.D.,
a member of our board of directors, is a member of each of
Venrock Management IV, LLC, Venrock Partners Management, LLC,
and VEF Management IV, LLC. Dr. Hove disclaims beneficial
ownership of all shares held by Venrock Associates IV, L.P.,
Venrock Partners, L.P., and Venrock Entrepreneurs Fund IV,
L.P. and beneficially owned by Venrock Management IV, LLC,
Venrock Partners Management, LLC, and VEF Management IV, LLC,
except to the extent of his pecuniary interest therein.
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(6)
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Mr. Brooks is a managing member of Scale Venture
Management I, LLC, the general partner of BAVP, LP.
Mr. Brooks is one of four managing members of Scale Venture
Management I, LLC who share voting and investment power
with respect to these shares. Mr. Brooks disclaims
beneficial ownership of the shares held by BAVP, LP referenced
in footnote (1) above, except to the extent of his
pecuniary interest therein.
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(7)
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Includes 153,921 shares issuable upon exercise of options
exercisable within 60 days of March 31, 2010.
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(8)
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|
Includes 209,987 shares issuable upon exercise of options
exercisable within 60 days of March 31, 2010.
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(9)
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Includes 288,265 shares issuable upon exercise of options
exercisable with 60 days of March 31, 2010.
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(10)
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Dr. Halak is affiliated with Domain Associates L.L.C.
Dr. Halak disclaims beneficial ownership of the shares held
by the entities affiliated with Domain Associates referenced in
footnote (2) above, except to the extent of his pecuniary
interest therein.
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(11)
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Includes 119,350 shares issuable upon exercise of options
exercisable within 60 days of March 31, 2010.
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(12)
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Dr. Hove is affiliated with Venrock Associates.
Dr. Hove disclaims beneficial ownership of the shares held
by the entities affiliated with Venrock Associates referenced in
footnote (5) above, except to the extent of his pecuniary
interest therein.
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118
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(13)
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Includes 313,183 shares issuable upon exercise of options
exercisable within 60 days of March 31, 2010.
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(14)
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Includes 26,472 shares issuable upon exercise of options
exercisable within 60 days of March 31, 2010 and
39,706 shares issuable upon exercise of warrants
exercisable within 60 days of March 31, 2010.
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(15)
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Mr. Tracy is affiliated with Intersouth Partners.
Mr. Tracy disclaims beneficial ownership of the shares held
by the entities affiliated with Intersouth Partners referenced
in footnote (3) above, except to the extent of his
pecuniary interest therein.
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(16)
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Mr. Youngren is affiliated with Polaris Venture Partners.
Mr. Youngren disclaims beneficial ownership of the shares
held by the entities affiliated with Polaris Venture Partners
referenced in footnote (4) above, except to the extent of
his pecuniary interest therein.
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119
DESCRIPTION
OF CAPITAL STOCK
General
Following the closing of this offering, our authorized capital
stock will consist of 100,000,000 shares of common stock,
par value $0.01 per share, and 10,000,000 shares of
preferred stock, par value $0.01 per share. The following
summary of our capital stock and certain provisions of our
restated certificate of incorporation and bylaws do not purport
to be complete and is qualified in its entirety by the
provisions of our restated certificate of incorporation and
bylaws, copies of which have been filed as exhibits to the
registration statement of which this prospectus is a part.
Common
Stock
As of March 31, 2010, there were 1,637,359 shares of
common stock outstanding held of record by approximately 92
stockholders.
There will be 30,501,055 shares of common stock
outstanding, assuming no exercise of the underwriters
option to purchase additional shares in the offering and
assuming no exercise after March 31, 2010 of outstanding
options, after giving effect to the sale of the shares of common
stock to the public offered in this prospectus and the
conversion of all outstanding shares of our preferred stock into
22,863,696 shares of common stock, including the conversion
of certain Series A preferred stock dividends accumulated prior
to November 22, 2005 into 380,301 shares of common
stock.
The holders of common stock are entitled to one vote per share
on all matters to be voted upon by the stockholders. The holders
of common stock are entitled to receive ratably such dividends,
if any, as may be declared from time to time by the board of
directors out of funds legally available, subject to preferences
that may be applicable to preferred stock, if any, then
outstanding. At present, we have no plans to issue dividends.
See Dividend Policy for additional information. In
the event of a liquidation, dissolution or winding up of our
company, the holders of common stock are entitled to share
ratably in all assets remaining after payment of liabilities,
subject to prior distribution rights of preferred stock, if any,
then outstanding. The common stock has no preemptive or
conversion rights or other subscription rights. There are no
redemption or sinking fund provisions applicable to the common
stock. All outstanding shares of common stock are fully paid and
non-assessable, and the shares of common stock to be issued upon
completion of this offering will be fully paid and
non-assessable.
Preferred
Stock
Upon the closing of this offering, outstanding shares of
Series A preferred stock will be converted into
7,005,145 shares of common stock (including the conversion
of certain Series A preferred stock dividends accumulated
prior to November 22, 2005 into 380,301 shares of
common stock), outstanding shares of Series B preferred
stock will be converted into 7,147,894 shares of common
stock, an outstanding shares of Series C preferred stock
will be converted into 5,807,112 shares of common stock and
outstanding shares of Series C-1 preferred stock, will be
converted into 2,903,545 shares of common stock.
Our board of directors is authorized to issue preferred stock in
one or more series, to establish the number of shares to be
included in each such series and to fix the designation, powers,
preferences and rights of such shares and any qualifications,
limitations or restrictions thereof. The issuance of preferred
stock may have the effect of delaying, deferring or preventing a
change in control of our company without further action by the
stockholders and may adversely affect the voting and other
rights of the holders of common stock. The issuance of preferred
stock with voting and conversion rights may adversely affect the
voting power of the holders of common stock, including the loss
of voting control to others. At present, we have no plans to
issue any preferred stock.
Registration
Rights
After the completion of this offering, holders of
22,863,696 shares of outstanding common stock and
69,977 shares of common stock issuable upon the exercise of
outstanding warrants will be entitled to rights
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with respect to the registration of those shares under the
Securities Act. Under the terms of the second amended and
restated investor rights agreement between us and the holders of
these registrable securities, if we propose to register any of
our securities under the Securities Act, either for our own
account or for the account of other security holders exercising
registration rights, these holders are entitled to notice of
registration and are entitled to include their shares of common
stock in the registration. The holders of these registrable
securities are also entitled to specified demand registration
rights under which they may require us to file a registration
statement under the Securities Act at our expense with respect
to our shares of common stock, and we are required to use our
commercially reasonable efforts to effect this registration.
Further, the holders of these registrable securities may require
us to file additional registration statements on
Form S-3.
All of these registration rights are subject to conditions and
limitations, among them the right of the underwriters of an
offering to limit the number of shares included in the
registration and our right not to effect a requested
registration within six months following the initial offering of
our securities, including this offering. Other than as described
in the following paragraph, all registration rights in
connection with this offering have been waived.
Anti-Takeover
Effects of Our Charter and Bylaws and Delaware Law
Some provisions of Delaware law and our restated certificate of
incorporation and amended and restated bylaws could make the
following transactions more difficult:
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acquisition of our company by means of a tender offer, a proxy
contest or otherwise; and
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removal of our incumbent officers and directors.
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These provisions of our restated certificate of incorporation
and amended and restated bylaws, summarized below, are expected
to discourage and prevent coercive takeover practices and
inadequate takeover bids. These provisions are designed to
encourage persons seeking to acquire control of our company to
negotiate first with our board of directors. They are also
intended to provide our management with the flexibility to
enhance the likelihood of continuity and stability if our board
of directors determines that a takeover is not in the best
interests of our stockholders. These provisions, however, could
have the effect of discouraging attempts to acquire us, which
could deprive our stockholders of opportunities to sell their
shares of common stock at prices higher than prevailing market
prices.
Election and Removal of Directors.
Our
restated certificate of incorporation and our amended and
restated bylaws contain provisions that establish specific
procedures for appointing and removing members of the board of
directors. Under our restated certificate of incorporation and
amended and restated bylaws, our board will be classified into
three classes of directors and directors will be elected by a
plurality of the votes cast in each election. Only one class
will stand for election at each annual meeting, and directors
will be elected to serve three-year terms. In addition, our
restated certificate of incorporation and amended and restated
bylaws will provide that vacancies and newly created
directorships on the board of directors may be filled only by a
majority vote of the directors then serving on the board (except
as otherwise required by law or by resolution of the board).
Under our restated certificate of incorporation and amended and
restated bylaws, directors may be removed only for cause.
Special Stockholder Meetings.
Under our
restated certificate of incorporation and amended and restated
bylaws, only the chairman of the board, our chief executive
officer and our board of directors may call special meetings of
stockholders.
Requirements for Advance Notification of Stockholder
Nominations and Proposals
. Our amended and restated bylaws
establish advance notice procedures with respect to stockholder
proposals and the nomination of candidates for election as
directors, other than nominations made by or at the direction of
the board of directors or a committee of the board of directors.
Delaware Anti-Takeover Law.
Following this
offering, we will be subject to Section 203 of the Delaware
General Corporation Law, which is an anti-takeover law. In
general, Section 203 prohibits a publicly held Delaware
corporation from engaging in a business combination with an
interested stockholder for a period of three years following the
date that the person became an interested stockholder, unless
the business
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combination or the transaction in which the person became an
interested stockholder is approved in a prescribed manner.
Generally, a business combination includes a merger, asset or
stock sale, or another transaction resulting in a financial
benefit to the interested stockholder. Generally, an interested
stockholder is a person who, together with affiliates and
associates, owns 15% or more of the corporations voting
stock. The existence of this provision may have an anti-takeover
effect with respect to transactions that are not approved in
advance by our board of directors, including discouraging
attempts that might result in a premium over the market price
for the shares of common stock held by stockholders.
Elimination of Stockholder Action by Written
Consent.
Our restated certificate of
incorporation and amended and restated bylaws eliminate the
right of stockholders to act by written consent without a
meeting after this offering.
No Cumulative Voting.
Under Delaware law,
cumulative voting for the election of directors is not permitted
unless a corporations certificate of incorporation
authorizes cumulative voting. Our restated certificate of
incorporation and amended and restated bylaws do not provide for
cumulative voting in the election of directors. Cumulative
voting allows a minority stockholder to vote a portion or all of
its shares for one or more candidates for seats on the board of
directors. Without cumulative voting, a minority stockholder
will not be able to gain as many seats on our board of directors
based on the number of shares of our stock the stockholder holds
as the stockholder would be able to gain if cumulative voting
were permitted. The absence of cumulative voting makes it more
difficult for a minority stockholder to gain a seat on our board
of directors to influence our boards decision regarding a
takeover.
Undesignated Preferred Stock.
The
authorization of undesignated preferred stock makes it possible
for our board of directors to issue preferred stock with voting
or other rights or preferences that could impede the success of
any attempt to change control of our company.
Amendment of Charter Provisions.
The amendment
of most of the above provisions in our restated certificate of
incorporation and our amended and restated bylaws requires
approval by holders of at least two-thirds of our outstanding
capital stock entitled to vote generally in the election of
directors.
These and other provisions could have the effect of discouraging
others from attempting hostile takeovers and, as a consequence,
they may also inhibit temporary fluctuations in the market price
of our common stock that often result from actual or rumored
hostile takeover attempts. These provisions may also have the
effect of preventing changes in our management. It is possible
that these provisions could make it more difficult to accomplish
transactions that stockholders may otherwise deem to be in their
best interests.
Transfer
Agent and Registrar
The transfer agent and registrar for our common stock will be
American Stock Transfer & Trust Company. Its
telephone number is
(212) 936-5100.
Nasdaq
Global Market Listing
Our common stock has been approved for listing on the Nasdaq
Global Market under the symbol ALIM.
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SHARES
ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our
common stock, and we cannot assure you that a significant public
market for our common stock will develop or be sustained after
this offering. Future sales of substantial amounts of shares of
our common stock, including shares issued upon the exercise of
outstanding options, in the public market after this offering,
or the possibility of these sales occurring, could adversely
affect the prevailing market prices. Furthermore, since only a
limited number of shares will be available for sale shortly
after this offering because of contractual and legal
restrictions on resale described below, sales of substantial
amounts of common stock in the public market after the
restrictions lapse could adversely affect the prevailing market
price for our common stock, as well as our ability to raise
equity capital in the future.
Based on the number of shares outstanding as of March 31,
2010, upon the completion of this offering,
30,501,055 shares of common stock will be outstanding,
assuming no exercise of the underwriters overallotment
option and no exercise of outstanding options or warrants
following March 31, 2010. The shares to be sold in this
offering will be freely tradable, except that any shares
acquired by our affiliates, as that term is defined in
Rule 144 under the Securities Act, in this offering may
only be sold in compliance with the limitations described below.
The remaining 24,501,055 shares of common stock outstanding
after this offering will be restricted as a result of securities
laws or
lock-up
agreements as described below. Following the expiration of the
lock-up
period, all shares will be eligible for resale in compliance
with Rule 144 or Rule 701. Restricted
securities as defined under Rule 144 were issued and
sold by us in reliance on exemptions from the registration
requirements of the Securities Act. These shares may be sold in
the public market only if registered or pursuant to an exemption
from registration, such as Rule 144 or Rule 701 under
the Securities Act.
Lock-Up
Agreements
Our officers, directors, and holders of substantially all of our
common stock have agreed with the underwriters, subject to
certain exceptions, not to dispose of or hedge any of their
common stock or securities convertible into or exchangeable for
shares of common stock for a period through the date
180 days after the date of this prospectus, except with the
prior written consent of Credit Suisse Securities (USA) LLC and
Citigroup Global Markets Inc. In addition, all holders of our
common stock and options to purchase our common stock have
previously entered agreements with us not to sell or otherwise
transfer any of their common stock or securities convertible
into or exchangeable for shares of common stock for a period
through the date 180 days after the date of this prospectus.
The
180-day
restricted period under the agreements with the underwriters
described in the preceding paragraph will be automatically
extended if: (1) during the last 17 days of the
180-day
restricted period we issue an earnings release or announce
material news or a material event; or (2) prior to the
expiration of the
180-day
restricted period, we announce that we will release earnings
results during the
15-day
period following the last day of the
180-day
period, in which case the restrictions described in the
preceding paragraph will continue to apply until the expiration
of the
18-day
period beginning on the issuance of the earnings release or the
announcement of the material news or material event.
Rule 144
In general, under Rule 144 as currently in effect, once we
have been subject to public company reporting requirements for
at least 90 days, a person who is not deemed to have been one of
our affiliates for purposes of the Securities Act at any time
during 90 days preceding a sale and who has beneficially owned
the shares proposed to be sold for at least six months,
including the holding period of any prior owner other than our
affiliates, is entitled to sell such shares without complying
with the manner of sale, volume limitation or notice provisions
of Rule 144, subject to compliance with the public
information requirements of Rule 144. If such a person has
beneficially owned the shares proposed to be sold for at least
one year, including the holding period of any prior owner other
than our affiliates, then such person is entitled to sell such
shares without complying with any of the requirements of
Rule 144.
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In general, under Rule 144, as currently in effect, our
affiliates or persons selling shares on behalf of our affiliates
are entitled to sell upon expiration of the lock-up agreements
described above, within any three-month period, a number of
shares that does not exceed the greater of:
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1% of the number of shares of common stock then outstanding,
which will equal approximately 305,011 shares immediately
after this offering; or
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the average weekly trading volume of the common stock during the
four calendar weeks preceding the filing of a notice on
Form 144 with respect to such sale.
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Sales under Rule 144 by our affiliates or persons selling
shares on behalf of our affiliates are also subject to certain
manner of sale provisions and notice requirements and to the
availability of current public information about us.
Rule
701
Rule 701 generally allows a stockholder who purchased
shares of our common stock pursuant to a written compensatory
plan or contract and who is not deemed to have been an affiliate
of our company during the immediately preceding 90 days to
sell these shares in reliance upon Rule 144, but without
being required to comply with the public information, holding
period, volume limitation, or notice provisions of
Rule 144. Rule 701 also permits affiliates of our
company to sell their Rule 701 shares under Rule 144
without complying with the holding period requirements of
Rule 144. All holders of Rule 701 shares, however, are
required to wait until 90 days after the date of this
prospectus before selling such shares pursuant to Rule 701.
Registration
Rights
After the completion of this offering, the holders of
22,863,696 shares of outstanding common stock and
69,977 shares of common stock issuable upon the exercise of
outstanding warrants will be entitled to the registration rights
described in the section titled Description of Capital
Stock Registration Rights. All such shares are
covered by
lock-up
agreements. Following the expiration of the
lock-up
period, registration of these shares under the Securities Act
would result in the shares becoming freely tradable without
restriction under the Securities Act immediately upon the
effectiveness of the registration, except for shares purchased
by our affiliates.
Form S-8
Registration Statements
Prior to the expiration of the
lock-up
period, we intend to file one or more registration statements on
Form S-8
under the Securities Act to register the shares of our common
stock that are issuable pursuant to our 2004 Incentive Stock
Plan, 2005 Incentive Stock Plan, 2010 Equity Incentive Plan and
2010 Employee Stock Purchase Plan. See
Management Equity Benefit Plans for
additional information. Subject to the
lock-up
agreements described above and any applicable vesting
restrictions, shares registered under these registration
statements will be available for resale in the public market
immediately upon the effectiveness of these registration
statements, except with respect to Rule 144 volume
limitations that apply to our affiliates.
124
MATERIAL
UNITED STATES FEDERAL TAX CONSEQUENCES FOR NON-U.S.
STOCKHOLDERS
The following is a general discussion of the material
U.S. federal income and estate tax consequences of the
ownership and disposition of our common stock by a beneficial
owner that is a
non-U.S. holder.
For purposes of this discussion, a
non-U.S. holder
is a person or entity that is for U.S. federal income tax
purposes:
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a non-resident alien individual, other than certain former
citizens and residents of the United States;
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a corporation, or other entity treated as a corporation for
U.S. federal income tax purposes, created or organized
under the laws of a jurisdiction other than the United States or
any state or political subdivision thereof;
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an estate, other than an estate the income of which is subject
to U.S. federal income taxation regardless of its
source; or
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a trust, other than if a court within the United States is able
to exercise primary supervision over the administration of the
trust and one or more U.S. persons have the authority to
control all substantial decisions of the trust.
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A
non-U.S. holder
does not include an individual who is present in the United
States for 183 days or more in the taxable year of
disposition of our common stock and is not otherwise a resident
of the United States for U.S. federal income tax purposes.
Such an individual is urged to consult his or her own tax
adviser regarding the U.S. federal income tax consequences
of the sale, exchange or other disposition of our common stock.
This discussion is based on the Internal Revenue Code of 1986,
as amended (the Code), and administrative pronouncements,
judicial decisions and final, temporary and proposed Treasury
Regulations, changes to any of which subsequent to the date of
this prospectus may affect the tax consequences described
herein, possibly with a retroactive effect. This discussion does
not address all aspects of U.S. federal income and estate
taxation that may be relevant to
non-U.S. holders
in light of their particular circumstances and does not address
any tax consequences arising under the laws of any state, local
or foreign jurisdiction.
The discussion below is limited to
non-U.S. holders
that hold our shares of common stock as capital assets within
the meaning of the Code. The discussion generally does not
address tax considerations that may be relevant to particular
investors because of their specific circumstances, or because
they are subject to special rules, including, without
limitation, banks, insurance companies, or other financial
institutions; controlled foreign corporations or
passive foreign investment companies; persons
subject to the alternative minimum tax; tax-exempt
organizations; dealers in securities or currencies; traders in
securities that elect to use a
mark-to-market
method of accounting for their securities holdings; certain
former citizens or long-term residents of the United States;
hybrid entities (entities treated as flow-through
entities in one jurisdictions but as opaque in another) and
their owners; persons who hold our common stock as a position in
a hedging transaction, straddle, conversion
transaction, hedge or other risk reduction transaction; or
persons deemed to sell our common stock under the constructive
sale provisions of the Code.
If a partnership, or any entity treated as a partnership for
U.S. federal income tax purposes, is a holder of our common
stock, the tax treatment of a partner in the partnership will
generally depend upon the status of the partner and the
activities of the partnership. A holder that is a partnership,
and the partners in such partnership, should consult their own
tax advisers regarding the tax consequences of the acquisition,
holding and disposition of our common stock.
Prospective holders are urged to consult their tax advisers with
respect to the particular tax consequences to them of acquiring,
holding and disposing of our common stock, including the
consequences under the laws of any state, local or foreign
jurisdiction.
125
Dividends
As discussed in the section entitled Dividend
Policy, we do not anticipate paying any distributions in
the foreseeable future. However, if we do make distributions on
our common stock, those payments will generally constitute
dividends for U.S. tax purposes to the extent paid from our
current or accumulated earnings and profits, as determined under
U.S. federal income tax principles. To the extent those
distributions exceed our current and accumulated earnings and
profits, they will constitute a return of capital and will first
reduce a
non-U.S. holders
basis in our common stock, but not below zero, and then will be
treated as gain from the sale of stock. Any dividend paid to a
non-U.S. holder
on our common stock will generally be subject to
U.S. withholding tax at a 30% rate. The withholding tax
might apply at a reduced rate under the terms of an applicable
income tax treaty between the United States and the
non-U.S. holders
country of residence. A
non-U.S. holder
must demonstrate its entitlement to treaty benefits by
certifying eligibility. A
non-U.S. holder
can meet this certification requirement by providing a
Form W-8BEN
or appropriate substitute form to us or our paying agent. If the
holder holds the stock through a financial institution or other
agent acting on the holders behalf, the holder will be
required to provide appropriate documentation to the agent. The
holders agent will then be required to provide
certification to us or our paying agent, either directly or
through other intermediaries. For payments made to a foreign
partnership or other flow-through entity, the certification
requirements generally apply to the partners or other owners as
well as to the partnership or other entity, and the partnership
or other entity must provide the partners or other
owners documentation to us or our paying agent. Special
rules, described below, apply if a dividend is effectively
connected with a U.S. trade or business conducted by the
non-U.S. holder.
Gain on
Disposition of Common Stock
Non-U.S. holders
generally will not be subject to U.S. federal income tax on
any gains realized on the sale, exchange, or other disposition
of our common stock unless:
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the gain is effectively connected with a trade or business of
the
non-U.S. holder
in the United States, subject to an applicable income tax treaty
providing otherwise; or
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we are or have been a U.S. real property holding
corporation, as defined below, at any time within the
five-year period preceding the disposition or during the
non-U.S. holders
holding period, whichever period is shorter.
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We are not, and do not anticipate becoming, a U.S. real
property holding corporation. Generally, a corporation is a
U.S. real property holding corporation if the
fair market value of its U.S. real property interests (as
defined in the Code and the applicable Treasury regulations)
equals or exceeds 50% of the aggregate fair market value of its
worldwide real property interests and its other assets used or
held for use in a trade or business. Even if we were to become a
U.S. real property holding corporation, gain on the sale or
other disposition of our common stock by a
non-U.S. holder
generally would not be subject to U.S. federal income tax,
provided that the common stock is regularly traded on an
established securities market and the
non-U.S. holder
does not actually or constructively own more than 5% of our
common stock during the shorter of (1) the five-year period
ending on the date of the disposition or (2) the period of
time during which the holder held such shares.
Dividends
or Gain Effectively Connected With a U.S. Trade or
Business
If any dividend on our common stock, or gain from the sale,
exchange or other disposition of our common stock, is
effectively connected with a U.S. trade or business
conducted by the
non-U.S. holder,
then the dividend or gain will be subject to U.S. federal
income tax at the regular graduated rates. If the
non-U.S. holder
is eligible for the benefits of a tax treaty between the United
States and the holders country of residence, any
effectively connected dividend or gain generally
would be subject to U.S. federal income tax only if it is
also attributable to a permanent establishment or fixed base
maintained by the holder in the United States. Payments of
dividends that are effectively connected with a U.S. trade
or business, and therefore included in the gross income of a
non-U.S. holder,
will not be subject to the 30% withholding tax. To claim
exemption from withholding, the holder must certify its
qualification, which can be done by providing a
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Form W-8ECI.
If the
non-U.S. holder
is a corporation, that portion of its earnings and profits that
is effectively connected with its U.S. trade or business
would generally be subject to a branch profits tax.
The branch profits tax rate generally is 30%, although an
applicable income tax treaty might provide for a lower rate.
Information
Reporting Requirements and Backup Withholding
Information returns will be filed with the Internal Revenue
Service in connection with payments of dividends to a
non-U.S. holder.
Unless a
non-U.S. holder
complies with certification procedures to establish that it is
not a U.S. person, information returns may be filed with
the Internal Revenue Service in respect of the proceeds from a
sale or other disposition of common stock and the
non-U.S. holder
may be subject to U.S. backup withholding on payments of
dividends or on the proceeds from a sale or other disposition of
common stock. The certification procedures required to claim a
reduced rate of withholding under a treaty will satisfy the
certification requirements necessary to avoid backup withholding
as well. The amount of any backup withholding from a payment to
a
non-U.S. holder
will be allowed as a credit against such holders
U.S. federal income tax liability and may entitle such
holder to a refund, provided that the required information is
furnished to the Internal Revenue Service.
Federal
Estate Tax
The estates of nonresident alien individuals are generally
subject to U.S. federal estate tax on property with a
U.S. situs. Because we are a U.S. corporation, our
common stock will be U.S. situs property and therefore will
be included in the taxable estate of a nonresident alien
decedent. The U.S. federal estate tax liability of the
estate of a nonresident alien may be affected by a tax treaty
between the United States and the decedents country of
residence.
THE PRECEDING DISCUSSION OF U.S. FEDERAL INCOME AND ESTATE
TAX CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY. IT IS NOT
TAX ADVICE. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX
ADVISOR REGARDING THE PARTICULAR U.S. FEDERAL, STATE,
LOCAL, AND FOREIGN TAX CONSEQUENCES OF PURCHASING, HOLDING, AND
DISPOSING OF OUR COMMON STOCK, INCLUDING THE CONSEQUENCES OF ANY
PROPOSED CHANGE IN APPLICABLE LAWS.
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UNDERWRITING
Under the terms and subject to the conditions contained in an
underwriting agreement that we have entered into with the
underwriters, we have agreed to sell to the underwriters named
below, for whom Credit Suisse Securities (USA) LLC and Citigroup
Global Markets Inc. are acting as representatives, the following
respective numbers of shares of common stock:
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Number
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Underwriter
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of Shares
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Credit Suisse Securities (USA) LLC
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Citigroup Global Markets Inc.
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Cowen and Company, LLC
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Oppenheimer & Co. Inc.
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Total
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6,000,000
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The underwriting agreement provides that the underwriters are
obligated to purchase all the shares of common stock in the
offering if any are purchased, other than those shares covered
by the over-allotment option described below. The underwriting
agreement also provides that if an underwriter defaults the
purchase commitments of non-defaulting underwriters may be
increased or the offering may be terminated.
We have granted to the underwriters a
30-day
option to purchase on a pro rata basis up to 900,000 additional
shares at the initial public offering price less the
underwriting discounts and commissions. The option may be
exercised only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock
initially at the public offering price on the cover page of this
prospectus and to selling group members at that price less a
selling concession of $ per share.
The underwriters and selling group members may allow a discount
of $ per share on sales to other
broker/dealers. After the initial public offering the
representatives may change the public offering price and
concession and discount to broker/dealers.
The following table summarizes the compensation and estimated
expenses we will pay:
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Per Share
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Total
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Without
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With
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Without
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With
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Over-allotment
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Over-allotment
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Over-allotment
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Over-allotment
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Underwriting Discounts and Commissions paid by us
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$
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$
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$
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$
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Expenses payable by us
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The underwriters have informed us that they do not expect sales
to accounts over which the underwriters have discretionary
authority to exceed 5% of the shares of common stock being
offered.
We, and each of our officers and directors and holders of
substantially all of our outstanding common stock, have agreed
that, subject to certain exceptions we will not offer, sell,
contract to sell, pledge or otherwise dispose of, directly or
indirectly, any shares of our common stock or securities
convertible into or exchangeable or exercisable for any shares
of our common stock, enter into a transaction that would have
the same effect, or enter into any swap, hedge or other
arrangement that transfers, in whole or in part, any of the
economic consequences of ownership of our common stock, whether
any of these transactions are to be settled by delivery of our
common stock or other securities, in cash or otherwise, or
publicly disclose the intention to make any offer, sale, pledge
or disposition, or to enter into any transaction, swap, hedge or
other arrangement, without, in each case, the prior written
consent of each of Credit Suisse Securities (USA) LLC and
Citigroup Global Markets Inc. for a period of 180 days
after the date of this prospectus. However, in the event that
either (1) during the last 17 days of the
lock-up
period, we release earnings results or material news or a
material event relating to us occurs or (2) prior to the
expiration of the
lock-up
period, we announce that we will release earnings results during
the
16-day
period beginning on the last day of the
lock-up
period, then in either case the expiration of the
lock-up
will be extended until the expiration of the
18-day
period beginning on the date of the release of the earnings
results or the occurrence of the material news or event, as
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applicable, unless each of Credit Suisse Securities (USA) LLC
and Citigroup Global Markets Inc. waive, in writing, such an
extension.
At our request, Credit Suisse Securities (USA) LLC has reserved
up to 5% of the shares for sale at the initial public offering
price to persons who are our directors, officers, business
associates, employees and other parties related to us through a
directed share program. The number of shares of our common stock
available for sale to the general public will be reduced by the
number of directed shares purchased by participants in the
program. Each person who has not entered into a
lock-up
agreement described in the immediately preceding paragraph and
is buying shares through the directed share program has agreed
that, for a period of 25 days from the date of this
prospectus, he or she will not, without the prior written
consent of each of Credit Suisse Securities (USA) LLC and
Citigroup Global Markets Inc. and subject to certain exceptions,
offer, sell, contract to sell, pledge or otherwise dispose of,
directly or indirectly, any shares of our common stock purchased
in the program or any securities convertible into or
exchangeable or exercisable for any shares of our common stock
purchased in the program, enter into a transaction that would
have the same effect, or enter into any swap, hedge or other
arrangement that transfers, in whole or in part, any of the
economic consequences of ownership of our common stock purchased
in the program, whether any of these transactions are to be
settled by delivery of our common stock or other securities, in
cash or otherwise, or publicly disclose the intention to make
any offer, sale, pledge or disposition, or to enter into any
transaction, swap, hedge or other arrangement. For our officers
and directors and holders of substantially all of our
outstanding common stock who have entered into
lock-up
agreements as described in the immediately preceding paragraph
and who have participated in the directed share program, the
180-day
lock-up
period contemplated in the immediately preceding paragraph shall
govern with respect to their shares purchased under the directed
share program. Any directed shares not purchased by participants
in the program will be offered by the underwriters to the
general public on the same basis as all other shares offered in
this prospectus. We have agreed to indemnify Credit Suisse
Securities (USA) LLC against certain liabilities and expenses,
including liabilities under the Securities Act, in connection
with the sales of the directed shares.
We have agreed to indemnify the underwriters against liabilities
under the Securities Act, or contribute to payments that the
underwriters may be required to make in that respect.
Our common stock has been approved for listing on The Nasdaq
Global Market under the symbol ALIM.
Certain of the underwriters and their respective affiliates may
have from time to time performed and may in the future perform
various financial advisory, commercial banking and investment
banking services for us in the ordinary course of business, for
which they received or will receive customary fees.
Prior to the offering, there has been no market for our common
stock. The initial public offering price will be determined by
negotiation between us and the underwriters and will not
necessarily reflect the market price of the common stock
following the offering. The principal factors that will be
considered in determining the initial public offering price will
include:
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the information presented in this prospectus and otherwise
available to the underwriters;
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the history of and the prospects for the industry in which we
compete;
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the ability of our management;
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the prospects for our future earnings;
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the present state of our development and our current financial
condition;
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the recent market prices of, and the demand for, publicly traded
common stock of generally comparable companies; and
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the general condition of the securities markets at the time of
the offering.
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129
We offer no assurances that the initial public offering price
will correspond to the price at which our common stock will
trade in the public market subsequent to the offering or that an
active trading market for the common stock will develop and
continue after the offering.
In connection with the offering the underwriters may engage in
stabilizing transactions, over-allotment transactions, syndicate
covering transactions, penalty bids and passive market making in
accordance with Regulation M under the Securities Exchange
Act of 1934 (the Exchange Act).
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Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a
specified maximum.
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Over-allotment involves sales by the underwriters of shares in
excess of the number of shares the underwriters are obligated to
purchase, which creates a syndicate short position. The short
position may be either a covered short position or a naked short
position. In a covered short position, the number of shares
over-allotted by the underwriters is not greater than the number
of shares that they may purchase in the over-allotment option.
In a naked short position, the number of shares involved is
greater than the number of shares in the over-allotment option.
The underwriters may close out any covered short position by
either exercising their over-allotment option
and/or
purchasing shares in the open market.
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Syndicate covering transactions involve purchases of the common
stock in the open market after the distribution has been
completed in order to cover syndicate short positions. In
determining the source of shares to close out the short
position, the underwriters will consider, among other things,
the price of shares available for purchase in the open market as
compared to the price at which they may purchase shares through
the over-allotment option. If the underwriters sell more shares
than could be covered by the over-allotment option, a naked
short position, the position can only be closed out by buying
shares in the open market. A naked short position is more likely
to be created if the underwriters are concerned that there could
be downward pressure on the price of the shares in the open
market after pricing that could adversely affect investors who
purchase in the offering.
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Penalty bids permit the representatives to reclaim a selling
concession from a syndicate member when the common stock
originally sold by the syndicate member is purchased in a
stabilizing or syndicate covering transaction to cover syndicate
short positions.
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In passive market making, market makers in the common stock who
are underwriters or prospective underwriters may, subject to
limitations, make bids for or purchases of our common stock
until the time, if any, at which a stabilizing bid is made.
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These stabilizing transactions, syndicate covering transactions
and penalty bids may have the effect of raising or maintaining
the market price of our common stock or preventing or retarding
a decline in the market price of the common stock. As a result
the price of our common stock may be higher than the price that
might otherwise exist in the open market. These transactions may
be effected on The Nasdaq Global Market or otherwise and, if
commenced, may be discontinued at any time.
A prospectus in electronic format may be made available on the
Web sites maintained by one or more of the underwriters, or
selling group members, if any, participating in this offering,
and one or more of the underwriters participating in this
offering may distribute prospectuses electronically. The
representatives may agree to allocate a number of shares to
underwriters and selling group members for sale to their online
brokerage account holders. Internet distributions will be
allocated by the underwriters and selling group members that
will make Internet distributions on the same basis as other
allocations.
130
SELLING
RESTRICTIONS
Notice to
Prospective Investors in the European Economic Area
In relation to each member state of the European Economic Area
that has implemented the Prospectus Directive (each, a relevant
member state), with effect from and including the date on which
the Prospectus Directive is implemented in that relevant member
state (the relevant implementation date), an offer of shares
described in this prospectus may not be made to the public in
that relevant member state prior to the publication of a
prospectus in relation to the shares that has been approved by
the competent authority in that relevant member state or, where
appropriate, approved in another relevant member state and
notified to the competent authority in that relevant member
state, all in accordance with the Prospectus Directive, except
that, with effect from and including the relevant implementation
date, an offer of securities may be offered to the public in
that relevant member state at any time:
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to any legal entity that is authorized or regulated to operate
in the financial markets or, if not so authorized or regulated,
whose corporate purpose is solely to invest in securities;
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to any legal entity that has two or more of (1) an average
of at least 250 employees during the last financial year;
(2) a total balance sheet of more than 43,000,000 and
(3) an annual net turnover of more than 50,000,000,
as shown in its last annual or consolidated accounts;
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to fewer than 100 natural or legal persons (other than qualified
investors as defined below) subject to obtaining the prior
consent of the representatives for any such offer; or
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in any other circumstances that do not require the publication
of a prospectus pursuant to Article 3 of the Prospectus
Directive.
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Each purchaser of shares described in this prospectus located
within a relevant member state will be deemed to have
represented, acknowledged and agreed that it is a
qualified investor within the meaning of
Article 2(1)(e) of the Prospectus Directive.
For purposes of this provision, the expression an offer to
the public in any relevant member state means the
communication in any form and by any means of sufficient
information on the terms of the offer and the securities to be
offered so as to enable an investor to decide to purchase or
subscribe the securities, as the expression may be varied in
that member state by any measure implementing the Prospectus
Directive in that member state, and the expression
Prospectus Directive means Directive 2003/71/EC and
includes any relevant implementing measure in each relevant
member state.
The sellers of the shares have not authorized and do not
authorize the making of any offer of shares through any
financial intermediary on their behalf, other than offers made
by the underwriters with a view to the final placement of the
shares as contemplated in this prospectus. Accordingly, no
purchaser of the shares, other than the underwriters, is
authorized to make any further offer of the shares on behalf of
the sellers or the underwriters.
Notice to
Prospective Investors in France
Neither this prospectus nor any other offering material relating
to the shares described in this prospectus has been submitted to
the clearance procedures of the
Autorité des
Marchés Financiers
or of the competent authority of
another member state of the European Economic Area and notified
to the
Autorité des Marchés Financiers
. The
shares have not been offered or sold and will not be offered or
sold, directly or indirectly, to the public in France. Neither
this prospectus nor any other offering material relating to the
shares has been or will be:
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released, issued, distributed or caused to be released, issued
or distributed to the public in France; or
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used in connection with any offer for subscription or sale of
the shares to the public in France.
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131
Such offers, sales and distributions will be made in France only:
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to qualified investors (
investisseurs qualifiés
)
and/or
to a
restricted circle of investors (
cercle restreint
dinvestisseurs
), in each case investing for their own
account, all as defined in, and in accordance with
articles L.411-2,
D.411-1, D.411-2, D.734-1, D.744-1, D.754-1 and D.764-1 of the
French Code
monétaire et financier
;
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to investment services providers authorized to engage in
portfolio management on behalf of third parties; or
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in a transaction that, in accordance with article
L.411-2-II-1°-or-2°-or 3° of the French Code
monétaire et financier
and
article 211-2
of the General Regulations (
Règlement
Général
) of the
Autorité des Marchés
Financiers
, does not constitute a public offer (
appel
public à lépargn
e).
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The shares may be resold directly or indirectly, only in
compliance with
articles L.411-1,
L.411-2,
L.412-1
and
L.621-8 through L.621-8-3 of the French Code
monétaire
et financier
.
Notice to
Prospective Investors in Germany
The common stock which are the object of this prospectus are
neither registered for public distribution with the Federal
Financial Supervisory Authority (Bundesanstalt für
Finanzdienstleistungsaufsicht or BaFin) according to
the German Investment Act nor listed on a German exchange. No
sales prospectus pursuant to the German Securities Prospectus
Act or German Sales Prospectus Act or German Investment Act has
been filed with the BaFin. Consequently, the common stock must
not be distributed within the Federal Republic of Germany by way
of a public offer, public advertisement or in any similar manner
and this prospectus and any other document relating to the
common stock, as well as information or statements contained
therein, may not be supplied to the public in the Federal
Republic of Germany or used in connection with any offer for
subscription of the common stock to the public in the Federal
Republic of Germany or any other means of public marketing.
Notice to
Prospective Investors in Hong Kong
The shares may not be offered or sold in Hong Kong by means of
any document other than (i) in circumstances which do not
constitute an offer to the public within the meaning of the
Companies Ordinance (Cap. 32, Laws of Hong Kong), or
(ii) to professional investors within the
meaning of the Securities and Futures Ordinance (Cap. 571, Laws
of Hong Kong) and any rules made thereunder, or (iii) in
other circumstances which do not result in the document being a
prospectus within the meaning of the Companies
Ordinance (Cap. 32, Laws of Hong Kong) and no advertisement,
invitation or document relating to the shares may be issued or
may be in the possession of any person for the purpose of issue
(in each case whether in Hong Kong or elsewhere), which is
directed at, or the contents of which are likely to be accessed
or read by, the public in Hong Kong (except if permitted to do
so under the laws of Hong Kong) other than with respect to
shares which are or are intended to be disposed of only to
persons outside Hong Kong or only to professional
investors within the meaning of the Securities and Futures
Ordinance (Cap. 571, Laws of Hong Kong) and any rules made
thereunder.
Notice to
Prospective Investors in Israel
In the State of Israel, the shares of common stock offered
hereby may not be offered to any person or entity other than the
following:
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(a)
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a fund for joint investments in trust (i.e., mutual fund), as
such term is defined in the Law for Joint Investments in Trust,
5754-1994,
or a management company of such a fund;
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(b)
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a provident fund as defined in Section 47(a)(2) of the
Income Tax Ordinance of the State of Israel, or a management
company of such a fund;
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(c)
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an insurer, as defined in the Law for Oversight of Insurance
Transactions,
5741-1981,
(d) a banking entity or satellite entity, as such terms are
defined in the Banking Law (Licensing),
5741-1981,
other than a joint
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132
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services company, acting for their own account or for the
account of investors of the type listed in Section 15A(b)
of the Securities Law 1968;
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(d)
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a company that is licensed as a portfolio manager, as such term
is defined in Section 8(b) of the Law for the Regulation of
Investment Advisors and Portfolio Managers,
5755-1995,
acting on its own account or for the account of investors of the
type listed in Section 15A(b) of the Securities Law 1968;
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(e)
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a company that is licensed as an investment advisor, as such
term is defined in Section 7(c) of the Law for the
Regulation of Investment Advisors and Portfolio Managers,
5755-1995,
acting on its own account;
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(f)
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a company that is a member of the Tel Aviv Stock Exchange,
acting on its own account or for the account of investors of the
type listed in Section 15A(b) of the Securities Law 1968;
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(g)
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an underwriter fulfilling the conditions of Section 56(c)
of the Securities Law,
5728-1968;
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(h)
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a venture capital fund (defined as an entity primarily involved
in investments in companies which, at the time of investment,
(i) are primarily engaged in research and development or
manufacture of new technological products or processes and
(ii) involve above-average risk);
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(i)
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an entity primarily engaged in capital markets activities in
which all of the equity owners meet one or more of the above
criteria; and
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(j)
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an entity, other than an entity formed for the purpose of
purchasing shares of common stock in this offering, in which the
shareholders equity (including pursuant to foreign accounting
rules, international accounting regulations and
U.S. generally accepted accounting rules, as defined in the
Securities Law Regulations (Preparation of Annual Financial
Statements), 1993) is in excess of NIS 250 million.
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Any offeree of the shares of common stock offered hereby in the
State of Israel shall be required to submit written confirmation
that it falls within the scope of one of the above criteria.
This prospectus will not be distributed or directed to investors
in the State of Israel who do not fall within one of the above
criteria.
Notice to
Prospective Investors in Japan
The shares offered in this prospectus have not been registered
under the Securities and Exchange Law of Japan. The shares have
not been offered or sold and will not be offered or sold,
directly or indirectly, in Japan or to or for the account of any
resident of Japan, except (i) pursuant to an exemption from
the registration requirements of the Securities and Exchange Law
and (ii) in compliance with any other applicable
requirements of Japanese law.
Notice to
Prospective Investors in Singapore
This prospectus has not been registered as a prospectus with the
Monetary Authority of Singapore. Accordingly, this prospectus
and any other document or material in connection with the offer
or sale, or invitation for subscription or purchase, of the
shares may not be circulated or distributed, nor may the shares
be offered or sold, or be made the subject of an invitation for
subscription or purchase, whether directly or indirectly, to
persons in Singapore other than (i) to an institutional
investor under Section 274 of the Securities and Futures
Act, Chapter 289 of Singapore (the SFA), (ii) to a
relevant person pursuant to Section 275(1), or any person
pursuant to Section 275(1A), and in accordance with the
conditions specified in Section 275 of the SFA or
(iii) otherwise pursuant to, and in accordance with the
conditions of, any other applicable provision of the SFA, in
each case subject to compliance with conditions set forth in the
SFA.
Where the shares are subscribed or purchased under
Section 275 of the SFA by a relevant person which is:
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a corporation (which is not an accredited investor (as defined
in Section 4A of the SFA)) the sole business of which is to
hold investments and the entire share capital of which is owned
by one or more individuals, each of whom is an accredited
investor; or
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a trust (where the trustee is not an accredited investor) whose
sole purpose is to hold investments and each beneficiary of the
trust is an individual who is an accredited investor, shares,
debentures and units of shares and debentures of that
corporation or the beneficiaries rights and interest
(howsoever
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133
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described) in that trust shall not be transferred within six
months after that corporation or that trust has acquired the
shares pursuant to an offer made under Section 275 of the
SFA except:
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to an institutional investor (for corporations, under
Section 274 of the SFA) or to a relevant person defined in
Section 275(2) of the SFA, or to any person pursuant to an
offer that is made on terms that such shares, debentures and
units of shares and debentures of that corporation or such
rights and interest in that trust are acquired at a
consideration of not less than S$200,000 (or its equivalent in a
foreign currency) for each transaction, whether such amount is
to be paid for in cash or by exchange of securities or other
assets, and further for corporations, in accordance with the
conditions specified in Section 275 of the SFA;
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where no consideration is or will be given for the
transfer; or
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where the transfer is by operation of law.
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Notice to
Prospective Investors in Spain
The proposed offer of common stock has not been registered with
the
Comision Nacional del Mercado de Valores
(the CNMV).
Accordingly, no communication nor any document or offer material
may be distributed in Spain or targeted at Spanish resident
investors, save in compliance and in accordance with the
requirements of Law 24/1988, 28 July, as amended.
Notice to
Prospective Investors in Switzerland
The shares of common stock offered pursuant to this prospectus
will not be offered, directly or indirectly, to the public in
Switzerland and this prospectus does not constitute a public
offering prospectus as that term is understood pursuant to art.
652a or art. 1156 of the Swiss Federal Code of Obligations. The
Company has not applied for a listing of the common stock being
offered pursuant to this prospectus on the SWX Swiss Exchange or
on any other regulated securities market, and consequently, the
information presented in this prospectus does not necessarily
comply with the information standards set out in the relevant
listing rules. The shares of common stock being offered pursuant
to this prospectus have not been registered with the Swiss
Federal Banking Commission as foreign investment funds, and the
investor protection afforded to acquirers of investment fund
certificates does not extend to acquirers of the shares of
common stock.
Investors are advised to contact their legal, financial or tax
advisers to obtain an independent assessment of the financial
and tax consequences of an investment in the shares of common
stock.
Notice to
Prospective Investors in the United Kingdom
This prospectus is only being distributed to, and is only
directed at, persons in the United Kingdom that are qualified
investors within the meaning of Article 2(1)(e) of the
Prospectus Directive that are also (i) investment
professionals falling within Article 19(5) of the Financial
Services and Markets Act 2000 (Financial Promotion) Order 2005
(the Order) or (ii) high net worth entities, and other
persons to whom it may lawfully be communicated, falling within
Article 49(2)(a) to (d) of the Order (each such person
being referred to as a relevant person). This
prospectus and its contents are confidential and should not be
distributed, published or reproduced (in whole or in part) or
disclosed by recipients to any other persons in the United
Kingdom. Any person in the United Kingdom that is not a relevant
person should not act or rely on this document or any of its
contents.
INDUSTRY
AND MARKET DATA
We obtained the industry, market and competitive position data
throughout this prospectus from our own internal estimates and
research as well as from industry and general publications and
research, surveys and studies conducted by third-parties.
Industry publications, studies and surveys generally state that
they have been obtained from sources believed to be reliable,
although they do not guarantee the accuracy or completeness of
such information. While we believe that each of these studies
and publications is reliable, we
134
have not independently verified market and industry data from
third-party sources. While we believe our internal company
research is reliable and the market definitions are appropriate,
neither such research nor these definitions have been verified
by any independent source.
LEGAL
MATTERS
The validity of the common stock being offered by our company
will be passed upon for us by Gunderson Dettmer Stough
Villeneuve Franklin & Hachigian, LLP, Waltham,
Massachusetts. The underwriters are represented by Davis
Polk & Wardwell LLP, New York, New York. As of the
date of this prospectus, certain partners and employees of
Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, LLP beneficially owned an aggregate of
11,764 shares of our common stock on an as converted to
common stock basis.
EXPERTS
The financial statements of Alimera Sciences, Inc. as of
December 31, 2008 and 2009, and for each of the three years
in the period ended December 31, 2009, included in this
prospectus, have been audited by Deloitte & Touche
LLP, an independent registered public accounting firm, as stated
in their report appearing herein, which report expresses an
unqualified opinion on the financial statements and includes an
explanatory paragraph regarding the companys ability to
continue as a going concern. Such financial statements have been
so included in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
WHERE YOU
CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on
Form S-1
(File Number 333-162782) under the Securities Act with respect
to the shares of common stock we are offering by this
prospectus. This prospectus, which constitutes part of the
registration statement, does not contain all of the information
included in the registration statement and its exhibits and
schedules. For further information pertaining to us and our
common stock, you should refer to the registration statement and
to its exhibits and schedules. Whenever we make reference in
this prospectus to any of our contracts, agreements or other
documents, the references are not necessarily complete, such
financial statements have been you should refer to the exhibits
attached to the registration statement for copies of the actual
contract, agreement or other document.
Upon the closing of the offering, we will be subject to the
informational requirements of the Exchange Act and we intend to
file annual, quarterly and current reports, proxy statements and
other information with the SEC. You can read our SEC filings,
including the registration statement, through the Internet at
the SECs Web site at www.sec.gov. You may also read and
copy any document we file with the SEC at its public reference
facility at 100 F Street, N.E., Washington, D.C.
20549.
You may also obtain copies of the documents at prescribed rates
by writing to the Public Reference Section of the SEC at
100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at
1-800-SEC-0330
for further information on the operation of the public reference
facility.
135
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Alimera Sciences, Inc.
Alpharetta, Georgia
We have audited the accompanying balance sheets of Alimera
Sciences, Inc. (the Company) as of December 31,
2008 and 2009, and the related statements of operations, changes
in stockholders deficit, and cash flows for each of the
three years in the period ended December 31, 2009. These
financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes consideration
of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Companys internal control over
financial reporting. Accordingly, we express no such opinion. An
audit 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, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of the Company as of
December 31, 2008 and 2009, and the results of its
operations and its cash flows for each of the three years in the
period ended December 31, 2009 in conformity with
accounting principles generally accepted in the United States of
America.
As described in Note 4, the accompanying financial
statements have been prepared assuming the Company will continue
as a going concern. The Companys recurring net losses,
stockholders deficit, need for additional financing, and
current lack of a commercial product raise substantial doubt
about its ability to continue as a going concern.
Managements plans concerning these matters are also
discussed in Note 4. The financial statements do not
include any adjustments that might result from the outcome of
this uncertainty.
/s/ DELOITTE & TOUCHE LLP
Atlanta, Georgia
March 15, 2010
(except for Note 16, as to which the date is
April 16, 2010)
F-2
ALIMERA
SCIENCES, INC.
AS OF
DECEMBER 31, 2008 AND 2009
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Pro Forma
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December 31,
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December 31,
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2008
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2009
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2009
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(In thousands except share data)
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(Unaudited)
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ASSETS
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CURRENT ASSETS:
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Cash and cash equivalents
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$
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17,875
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$
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4,858
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$
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14,858
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Prepaid expenses and other current assets
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1,593
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634
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634
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Deferred offering costs
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815
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815
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|
|
Total current assets
|
|
|
19,468
|
|
|
|
6,307
|
|
|
|
16,307
|
|
PROPERTY AND EQUIPMENT at cost less accumulated
depreciation
|
|
|
796
|
|
|
|
254
|
|
|
|
254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
20,264
|
|
|
$
|
6,561
|
|
|
$
|
16,561
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS DEFICIT
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,575
|
|
|
$
|
1,758
|
|
|
$
|
1,758
|
|
Accrued expenses
|
|
|
2,308
|
|
|
|
3,314
|
|
|
|
3,314
|
|
Outsourced services payable
|
|
|
1,024
|
|
|
|
1,157
|
|
|
|
1,157
|
|
Note payable (Note 8)
|
|
|
|
|
|
|
4,500
|
|
|
|
4,500
|
|
Capital lease obligations
|
|
|
10
|
|
|
|
6
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
4,917
|
|
|
|
10,735
|
|
|
|
10,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Note payable less current portion (Note 8)
|
|
|
15,000
|
|
|
|
10,500
|
|
|
|
10,500
|
|
Capital lease obligations less current portion
|
|
|
6
|
|
|
|
|
|
|
|
|
|
Fair value of preferred stock conversion feature
|
|
|
12,656
|
|
|
|
36,701
|
|
|
|
|
|
Other long-term liabilities
|
|
|
555
|
|
|
|
708
|
|
|
|
708
|
|
COMMITMENTS AND CONTINGENCIES (Note 8)
|
|
|
|
|
|
|
|
|
|
|
|
|
PREFERRED STOCK:
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A preferred stock, $.01 par value
6,624,866 shares authorized and 6.624,844 shares,
issued, and outstanding at December 31, 2008 and 2009;
liquidation preference of $34,883 and $37,019 at
December 31, 2008 and 2009
|
|
|
34,199
|
|
|
|
36,467
|
|
|
|
|
|
Series B preferred stock, $.01 par value
7,147,912 shares authorized and 7,147,894 shares,
issued, and outstanding at December 31, 2008 and 2009;
liquidation preference of $38,509 and $41,057 at
December 31, 2008 and 2009
|
|
|
37,963
|
|
|
|
40,617
|
|
|
|
|
|
Series C preferred stock, $.01 par value
5,807,131 shares authorized and 5,807,112 shares,
issued and outstanding at December 31, 2008 and 2009;
liquidation preference of $31,881 and $34,281 at
December 31, 2008 and 2009
|
|
|
30,855
|
|
|
|
33,452
|
|
|
|
|
|
Series C-1
preferred stock, $.01 par value
2,903,565 shares authorized; 967,845 shares issued and
outstanding at December 31, 2009; liquidation preference of
$5,140 at December 31, 2009
|
|
|
|
|
|
|
2,853
|
|
|
|
|
|
STOCKHOLDERS DEFICIT:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $.01 par value
26,470,588 shares authorized, 1,490,113 shares issued
and outstanding at December 31, 2008 and
29,411,764 shares authorized, 1,598,571 shares issued
and outstanding at December 31, 2009 and
29,411,764 shares authorized, 24,462,267 shares issued
and outstanding at December 31, 2009 on a pro forma basis
(unaudited)
|
|
|
51
|
|
|
|
54
|
|
|
|
283
|
|
Additional paid-in capital
|
|
|
3,474
|
|
|
|
4,836
|
|
|
|
183,273
|
|
Series C-1
preferred stock warrants
|
|
|
|
|
|
|
1,472
|
|
|
|
|
|
Common stock warrants
|
|
|
58
|
|
|
|
57
|
|
|
|
57
|
|
Accumulated deficit
|
|
|
(119,470
|
)
|
|
|
(171,891
|
)
|
|
|
(188,995
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL STOCKHOLDERS DEFICIT
|
|
|
(115,887
|
)
|
|
|
(165,472
|
)
|
|
|
(5,382
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT
|
|
$
|
20,264
|
|
|
$
|
6,561
|
|
|
$
|
16,561
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
F-3
ALIMERA
SCIENCES, INC.
FOR THE
YEARS ENDED DECEMBER 31, 2007, 2008, AND 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
(In thousands except share and per share data)
|
|
|
|
|
|
|
|
|
RESEARCH AND DEVELOPMENT EXPENSES
|
|
$
|
8,363
|
|
|
$
|
43,764
|
|
|
$
|
15,057
|
|
|
|
|
|
|
|
|
|
GENERAL AND ADMINISTRATIVE EXPENSES
|
|
|
3,184
|
|
|
|
5,058
|
|
|
|
3,407
|
|
|
|
|
|
|
|
|
|
MARKETING EXPENSES
|
|
|
969
|
|
|
|
1,259
|
|
|
|
752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
12,516
|
|
|
|
50,081
|
|
|
|
19,216
|
|
|
|
|
|
|
|
|
|
INTEREST INCOME
|
|
|
1,079
|
|
|
|
585
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
INTEREST EXPENSE
|
|
|
(2
|
)
|
|
|
(1,514
|
)
|
|
|
(1,897
|
)
|
|
|
|
|
|
|
|
|
DECREASE (INCREASE) IN FAIR VALUE OF PREFERRED STOCK CONVERSION
FEATURE
|
|
|
1
|
|
|
|
(10,454
|
)
|
|
|
(23,142
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM CONTINUING OPERATIONS
|
|
|
(11,438
|
)
|
|
|
(61,464
|
)
|
|
|
(44,218
|
)
|
|
|
|
|
|
|
|
|
INCOME FROM DISCONTINUED OPERATIONS
(NOTE 3)
|
|
|
5,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
|
(5,705
|
)
|
|
|
(61,464
|
)
|
|
|
(44,218
|
)
|
|
|
|
|
|
|
|
|
BENEFICIAL CONVERSION FEATURE OF PREFERRED STOCK (NOTE 9)
|
|
|
|
|
|
|
|
|
|
|
(355
|
)
|
|
|
|
|
|
|
|
|
PREFERRED STOCK ACCRETION
|
|
|
(248
|
)
|
|
|
(718
|
)
|
|
|
(623
|
)
|
|
|
|
|
|
|
|
|
PREFERRED STOCK DIVIDENDS
|
|
|
(4,685
|
)
|
|
|
(6,573
|
)
|
|
|
(7,225
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS APPLICABLE TO COMMON SHAREHOLDERS
|
|
$
|
(10,638
|
)
|
|
$
|
(68,755
|
)
|
|
$
|
(52,421
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS PER SHARE APPLICABLE TO COMMON
SHAREHOLDERS Basic and diluted
|
|
$
|
(7.09
|
)
|
|
$
|
(45.52
|
)
|
|
$
|
(34.55
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED - AVERAGE SHARES OUTSTANDING Basic and
diluted
|
|
|
1,499,922
|
|
|
|
1,510,496
|
|
|
|
1,517,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRO FORMA NET LOSS PER SHARE APPLICABLE TO
COMMON SHAREHOLDERS Basic and diluted
(Unaudited)
|
|
|
|
|
|
|
|
|
|
$
|
(0.94
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRO FORMA WEIGHTED - AVERAGE SHARES
OUTSTANDING Basic and diluted (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
22,495,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
F-4
ALIMERA
SCIENCES, INC.
FOR THE
YEARS ENDED DECEMBER 31, 2007, 2008, AND 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Series C-1
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Preferred
|
|
|
Common
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Warrants
|
|
|
Warrants
|
|
|
Deficit
|
|
|
Total
|
|
|
|
(In thousands except share data)
|
|
|
BALANCE December 31, 2006
|
|
|
1,450,911
|
|
|
|
49
|
|
|
|
2,571
|
|
|
|
|
|
|
|
58
|
|
|
|
(40,077
|
)
|
|
|
(37,399
|
)
|
Preferred stock accretion and dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,933
|
)
|
|
|
(4,933
|
)
|
Stock compensation expense
|
|
|
|
|
|
|
|
|
|
|
185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
185
|
|
Stock option exercises
|
|
|
65,478
|
|
|
|
3
|
|
|
|
111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
114
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,705
|
)
|
|
|
(5,705
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE December 31, 2007
|
|
|
1,516,389
|
|
|
|
52
|
|
|
|
2,867
|
|
|
|
|
|
|
|
58
|
|
|
|
(50,715
|
)
|
|
|
(47,738
|
)
|
Preferred stock accretion and dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,291
|
)
|
|
|
(7,291
|
)
|
Repurchase and retirement of common stock
|
|
|
(27,746
|
)
|
|
|
(1
|
)
|
|
|
(149
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(150
|
)
|
Stock compensation expense
|
|
|
|
|
|
|
|
|
|
|
750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
750
|
|
Exercise of warrants
|
|
|
1,470
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(61,464
|
)
|
|
|
(61,464
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE December 31, 2008
|
|
|
1,490,113
|
|
|
|
51
|
|
|
|
3,474
|
|
|
|
|
|
|
|
58
|
|
|
|
(119,470
|
)
|
|
|
(115,887
|
)
|
Redeemable preferred stock accretion and dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,848
|
)
|
|
|
(7,848
|
)
|
Issuance of common stock
|
|
|
92,351
|
|
|
|
3
|
|
|
|
458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
461
|
|
Exercise of stock options
|
|
|
3,860
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
Exercise of common stock warrants
|
|
|
12,247
|
|
|
|
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
|
|
Retirement of common stock warrants
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
Issuance of
Series C-1
preferred stock warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,472
|
|
|
|
|
|
|
|
|
|
|
|
1,472
|
|
Accretion of
Series C-1
preferred stock beneficial conversion feature (Note 9)
|
|
|
|
|
|
|
|
|
|
|
355
|
|
|
|
|
|
|
|
|
|
|
|
(355
|
)
|
|
|
|
|
Stock compensation expense
|
|
|
|
|
|
|
|
|
|
|
511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
511
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(44,218
|
)
|
|
|
(44,218
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE December 31, 2009
|
|
|
1,598,571
|
|
|
$
|
54
|
|
|
$
|
4,836
|
|
|
$
|
1,472
|
|
|
$
|
57
|
|
|
$
|
(171,891
|
)
|
|
$
|
(165,472
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
F-5
ALIMERA
SCIENCES, INC.
FOR THE
YEARS ENDED DECEMBER 31, 2007, 2008, AND 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(5,705
|
)
|
|
$
|
(61,464
|
)
|
|
$
|
(44,218
|
)
|
Income from discontinued operations
|
|
|
(5,733
|
)
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
147
|
|
|
|
241
|
|
|
|
1,098
|
|
Change in fair value of preferred stock conversion feature
|
|
|
(1
|
)
|
|
|
10,454
|
|
|
|
23,142
|
|
Stock compensation expense and other
|
|
|
185
|
|
|
|
750
|
|
|
|
551
|
|
Noncash research and development expense (Notes 5 and 6)
|
|
|
|
|
|
|
17,809
|
|
|
|
300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
(1,551
|
)
|
|
|
(1,213
|
)
|
|
|
591
|
|
Accounts payable
|
|
|
181
|
|
|
|
615
|
|
|
|
183
|
|
Accrued expenses and other current liabilities
|
|
|
2,060
|
|
|
|
85
|
|
|
|
705
|
|
Other long-term assets
|
|
|
|
|
|
|
24
|
|
|
|
|
|
Other long-term liabilities
|
|
|
(18
|
)
|
|
|
540
|
|
|
|
153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities of continuing operations
|
|
|
(10,435
|
)
|
|
|
(32,159
|
)
|
|
|
(17,495
|
)
|
Net cash (used in) provided by operating activities of
discontinued operations
|
|
|
(2,502
|
)
|
|
|
43
|
|
|
|
(43
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(12,937
|
)
|
|
|
(32,116
|
)
|
|
|
(17,538
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(172
|
)
|
|
|
(640
|
)
|
|
|
(65
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities of continuing operations
|
|
|
(172
|
)
|
|
|
(640
|
)
|
|
|
(65
|
)
|
Net cash provided by investing activities of discontinued
operations
|
|
|
6,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
6,547
|
|
|
|
(640
|
)
|
|
|
(65
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering costs of sale of Series B
|
|
|
|
|
|
|
|
|
|
|
|
|
preferred stock net
|
|
|
(23
|
)
|
|
|
|
|
|
|
|
|
Proceeds from sale of Series C preferred stock
net
|
|
|
|
|
|
|
29,938
|
|
|
|
|
|
Proceeds from sale of Series C-1 preferred
stock net
|
|
|
|
|
|
|
|
|
|
|
4,897
|
|
Proceeds from exercise of stock options
|
|
|
114
|
|
|
|
|
|
|
|
7
|
|
Repurchase of common stock
|
|
|
|
|
|
|
(150
|
)
|
|
|
|
|
Proceeds from exercise of warrants
|
|
|
|
|
|
|
6
|
|
|
|
31
|
|
Deferred offering costs
|
|
|
|
|
|
|
|
|
|
|
(339
|
)
|
Payments on capital lease obligations
|
|
|
(11
|
)
|
|
|
(10
|
)
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
80
|
|
|
|
29,784
|
|
|
|
4,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET DECREASE IN CASH
|
|
|
(6,310
|
)
|
|
|
(2,972
|
)
|
|
|
(13,017
|
)
|
CASH Beginning of period
|
|
|
27,157
|
|
|
|
20,847
|
|
|
|
17,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH End of period
|
|
$
|
20,847
|
|
|
$
|
17,875
|
|
|
$
|
4,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-6
ALIMERA
SCIENCES, INC.
STATEMENTS
OF CASH FLOWS
FOR THE
YEARS ENDED DECEMBER 31, 2007, 2008, AND
2009 (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
SUPPLEMENTAL DISCLOSURES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
|
|
|
$
|
957
|
|
|
$
|
1,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental schedule of noncash investing and financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Note payable issued in conjunction with amendment to pSivida
agreement (Note 7)
|
|
$
|
|
|
|
$
|
15,000
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment acquired under capital leases
|
|
$
|
18
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for research and development
expense (Note 6)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no income tax or dividend payments made for the years
ended December 31, 2007, 2008, and 2009.
See Notes to Financial Statements.
F-7
Nature of Operations
Alimera Sciences, Inc.
(the Company) is a biopharmaceutical company that
specializes in the research, development, and commercialization
of ophthalmic pharmaceuticals. The Company was formed on
June 4, 2003 under the laws of the state of Delaware.
During the year ended December 31, 2006, management and the
board of directors approved a plan to discontinue the operations
of its non-prescription business (see Note 3). As a result
of the completion of the disposal of its non-prescription
business in July 2007, the Company no longer has active products
and will not have active products until the Company receives
U.S. Food and Drug Administration (FDA) approval and
launches its initial prescription product (see Note 4).
The Company is presently focused on diseases affecting the back
of the eye, or retina, because the Companys management
believes these diseases are not well treated with current
therapies and represent a significant market opportunity. The
Companys most advanced product candidate is Iluvien, which
is being developed for the treatment of diabetic macular edema
(DME). DME is a disease of the retina which affects individuals
with diabetes and can lead to severe vision loss and blindness.
The Company has completed enrollment of its two Phase 3 pivotal
clinical trials (collectively referred to as the Companys
FAME Study) for Iluvien involving 956 patients in sites
across the United States, Canada, Europe and India to assess the
efficacy and safety of Iluvien in the treatment of DME.
The Company is owned by management and venture capital and angel
investors.
|
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Unaudited pro forma presentation
The pro
forma balance sheet as of December 31, 2009 reflects the
conversion of all outstanding shares of the Companys
Series A, Series B, Series C and Series C-1
preferred stock (including shares of Series C-1 preferred
stock issued upon exercise the of warrants in January 2010) into
an aggregate of 22,863,696 shares of common stock, the
receipt of $10,000,000 in net cash proceeds from the exercise of
the warrants for Series C-1 preferred stock, and an
incremental loss of $17.1 million on the revaluation of the
embedded conversion feature based on the midpoint of the
offering range immediately prior to the conversion of our
Series A, Series B, Series C and
Series C-1
preferred stock.
Pro forma earnings per share as of December 31, 2009
reflects the conversion of all outstanding shares of the
Series A, Series B, Series C and
Series C-1
preferred stock (including shares of
Series C-1
preferred stock issued upon exercise of warrants in January
2010) into an aggregate of 22,863,696 shares of common
stock. Pro forma earnings per share excludes the effect of
changes to the fair value of the preferred stock conversion
feature, preferred stock accretion and preferred stock dividends.
Use of Estimates in Financial Statements
The
financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of
America and, as such, include amounts based on informed
estimates and judgments of management. Actual results could
differ from those estimates.
The following accounting policies relate primarily to the
continuing operations of the Company:
Cash and Cash Equivalents
Cash and cash
equivalents include cash and highly liquid investments that are
readily convertible into cash and have a maturity of
90 days or less when purchased.
Long-Lived Assets
Property and equipment are
stated at cost. Additions and improvements are capitalized while
repairs and maintenance are expensed. Depreciation is provided
on the straight-line method over the useful life of the related
assets beginning when the asset is placed in service. The
estimated useful
F-8
ALIMERA
SCIENCES, INC.
NOTES TO
FINANCIAL STATEMENTS (Continued)
lives of the individual assets are as follows: furniture and
fixtures, five years; office equipment, three to five years; and
software, three years.
Impairment
Property and equipment and
intangible assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. When indicators of impairment are
present, the Company evaluates the carrying amount of such
assets in relation to the operating performance and future
estimated undiscounted net cash flows expected to be generated
by the assets. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the
assets. The assessment of the recoverability of assets will be
impacted if estimated future operating cash flows are not
achieved.
Income Taxes
In accordance with
SFAS No. 109,
Accounting for Income Taxes
,
(ASC 740) the Company recognizes deferred tax assets and
liabilities for temporary differences between the financial
reporting basis and the tax basis of its assets and liabilities.
The Company records a valuation allowance against its net
deferred tax asset to reduce the net carrying value to an amount
that is more likely than not to be realized.
Income tax positions are considered for uncertainty in
accordance with FASB Interpretation No. 48,
Accounting for
Uncertainty in Income Taxes
an interpretation
of FASB Statement No. 109
,
(ASC 740-10).
The provisions of
ASC 740-10
are effective beginning January 1, 2008, but the Company
early adopted effective January 1, 2007. The Company
believes that its income tax filing positions and deductions
will be sustained on audit and does not anticipate any
adjustments that will result in a material change to its
financial position; therefore, no
ASC 740-10
liabilities have been recorded. The Companys adoption of
ASC 740-10
did not result in a cumulative effect adjustment to retained
earnings. The Company will recognize accrued interest and
penalties related to unrecognized tax benefits as interest
expense and income tax expense, respectively, in the statements
of operations.
Significant management judgment is involved in determining the
provision for income taxes, deferred tax assets and liabilities,
and any valuation allowance recorded against net deferred tax
assets. Due to uncertainties with respect to the realization of
deferred tax assets due to the history of operating losses, a
valuation allowance has been established against the entire net
deferred tax asset balance. The valuation allowance is based on
managements estimates of taxable income in the
jurisdictions in which the Company operates and the period over
which deferred tax assets will be recoverable. In the event that
actual results differ from these estimates or the Company
adjusts these estimates in future periods, a change in the
valuation allowance may be needed, which could materially impact
the Companys financial position and results of operations.
Research and Development Costs
Research and
development costs are expensed as incurred.
Stock-Based Compensation
The Company has
stock option plans which provide for grants of stock options to
employees and directors to purchase shares of the Companys
common stock at exercise prices generally equal to the fair
values of such stock at the dates of grant. Compensation cost is
recognized for all share-based awards granted subsequent to
January 1, 2005 based on the grant date fair value in
accordance with the provisions of SFAS 123(R),
Share-Based Payment
, (ASC 718). The fair values for
the options are estimated at the dates of grant using a
Black-Scholes option-pricing model.
Derivative Financial Instruments
The
Companys preferred stock (see Note 9) contains
certain features which are considered embedded derivatives. The
Company accounts for such embedded derivative financial
instruments in accordance with FASB Statement No. 133,
Accounting for Derivative Instruments and Hedging
Activities
, (ASC 815). The Company records derivative
financial instruments as assets or liabilities in the
Companys balance sheet measured at fair value (see
Note 14). The Company records the changes in fair value of
such instruments as noncash gains or losses in the consolidated
statement of operations. The Company does not enter into
derivatives for trading purposes.
F-9
ALIMERA
SCIENCES, INC.
NOTES TO
FINANCIAL STATEMENTS (Continued)
Fair Value of Financial Instruments
The
carrying amounts of the Companys financial instruments,
including cash and cash equivalents, accounts receivable, and
current liabilities approximate their fair value because of
their short maturities. The weighted average interest rate of
the Companys note payable to pSivida US, Inc.
(pSivida) (see Note 7) approximates the
rate at which the Company could obtain alternative financing,
therefore, the carrying amount of the note approximates its fair
value.
Earnings (Loss) Per Share (EPS)
Basic EPS is calculated in accordance with
SFAS No. 128,
Earnings per Share
,
(ASC 260), by dividing net income or loss attributable to
common stockholders by the weighted average common stock
outstanding. Diluted EPS is calculated in accordance with
ASC 260 by adjusting weighted average common shares
outstanding for the dilutive effect of common stock options,
warrants, convertible preferred stock and accrued but unpaid
convertible preferred stock dividends. In periods where a net
loss is recorded, no effect is given to potentially dilutive
securities, since the effect would be anti-dilutive. Total
securities that could potentially dilute basic EPS in the future
were not included in the computation of diluted EPS because to
do so would have been anti-dilutive were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
|
|
Series A preferred stock and convertible accrued dividends
|
|
|
7,005,145
|
|
|
|
7,005,145
|
|
|
|
7,005,145
|
|
|
|
|
|
|
|
|
|
Series B preferred stock
|
|
|
7,147,894
|
|
|
|
7,147,894
|
|
|
|
7,147,894
|
|
|
|
|
|
|
|
|
|
Series C preferred stock
|
|
|
|
|
|
|
4,570,674
|
|
|
|
5,807,112
|
|
|
|
|
|
|
|
|
|
Series C-1
preferred stock
|
|
|
|
|
|
|
|
|
|
|
339,408
|
|
|
|
|
|
|
|
|
|
Series C-1
preferred stock warrants
|
|
|
|
|
|
|
|
|
|
|
678,820
|
|
|
|
|
|
|
|
|
|
Common stock warrants
|
|
|
3,271
|
|
|
|
30,271
|
|
|
|
45,297
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
222,318
|
|
|
|
987,170
|
|
|
|
1,125,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
14,378,628
|
|
|
|
19,741,154
|
|
|
|
22,149,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reporting Segments
The Company does not
report segment information as it operates in only one business
segment.
The following accounting policies were primarily related to the
discontinued operations of the Companys non-prescription
business disclosed in Note 3.
Accounts Receivable
The Company extended
credit on an uncollateralized basis to wholesale drug
distributors and retail pharmacies in connection with its
non-prescription business. Receivables were considered
delinquent when they were 30 days past due. Delinquent
receivables did not accrue interest. The Company was required to
estimate the level of accounts receivable which ultimately would
not be paid. This estimate was made based on an analysis of the
customers financial health and payment patterns.
Inventories
Inventory was historically valued
at the lower of cost or market (net realizable value). Inventory
cost included the cost of purchased product, product packaging,
and in-bound freight. Cost was determined using the
first-in,
first-out method. Inventory was manufactured by an unrelated
third-party.
License Agreements
License agreements
included agreements for the use of patents, know how and other
technology for the development and marketing of ophthalmic
pharmaceuticals associated with the non-prescription business.
License agreements were amortized using the straight-line method
over the estimated economic lives of the agreements (see
Note 6).
Revenue Recognition
The Company recognized
revenue when products were shipped and ownership and risk of
loss transferred to the customer. Revenue is included within
loss from discontinued operations within the accompanying
statements of operations. Customers were generally offered a
cash discount for the early payment of receivables. These
discounts were recorded as a reduction of revenue, within loss
from
F-10
ALIMERA
SCIENCES, INC.
NOTES TO
FINANCIAL STATEMENTS (Continued)
discontinued operations within the accompanying statements of
operations, and accounts receivable in the period of sale.
As is customary in the pharmaceutical industry, customers may
generally return product from six months prior to the expiration
date of the product until twelve months after the expiration
date of the product. In determining estimated returns, the
Company utilized actual returns history, knowledge of and
communications with its customers and their purchasing patterns,
industry experience, and returns history for comparable
products. Estimated returns of $22,000 for the year ended
December 31, 2007 were recorded as a reduction of net
sales, in the income from discontinued operations within the
accompanying statements of operations, and a current liability.
Adjustments to reserves for estimated returns are made in the
period in which any new information becomes available regarding
future return levels.
The Company also participates in retail promotional incentive
programs including sales rebate and incentive programs which are
recorded as a reduction of revenue in the period the programs
are run, which are included in the (loss) income from
discontinued operations within the accompanying statements of
operations.
Cost of Goods Sold
Cost of goods sold was
comprised of inventory, shipping and handling, royalties, and
third-party distribution costs, and is included within (loss)
income from discontinued operations within the accompanying
statements of operations.
Royalties
The Company paid royalties on the
sale of its product. These royalties are included in the income
from discontinued operations in the accompanying statements of
operations.
Samples
Samples consist of product samples
used in the sales and marketing efforts of the Companys
product. Samples were expensed upon distribution and recorded as
a selling expense and are included in (loss) income from
discontinued operations in the accompanying statements of
operations.
Promotional and Advertising Costs
Promotional
and advertising costs are expensed as incurred. Promotional and
advertising expense totaled $52,000 for the year ended
December 31, 2007 and is included in income from
discontinued operations in the accompanying statements of
operations.
Recent Accounting Pronouncements
In March
2008, the FASB Issued SFAS No. 161,
Disclosures
about Derivative Instruments and Hedging Activities
an amendment of FASB Statement No. 133
, (ASC 815),
requires companies with derivative instruments to disclose
information that should enable financial statement users to
understand how and why a company uses derivative instruments,
how derivative instruments and related hedged items are
accounted for under ASC 815, and how these items affect a
companys financial position, results of operations, and
cash flows. ASC 815 affects only these disclosures and does not
change the accounting for derivatives. ASC 815 is to be applied
prospectively beginning with the first quarter of the 2009
fiscal year. The adoption of ASC 815 did not have a material
effect on the disclosures in the Companys financial
statements.
In June 2009, the FASB issued SFAS No. 168,
The
FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles
(SFAS 168).
SFAS 168 authorized the Codification as the sole source for
authoritative U.S. GAAP and any accounting literature that
is not in the Codification will be considered nonauthoritative.
The Company has commenced utilizing the Codification as its sole
source of authoritative U.S. GAAP for its 2009 financial
statements.
|
|
3.
|
DISCONTINUED
OPERATIONS
|
In October 2006, management and the board of directors of the
Company approved a plan to discontinue the operations of its
non-prescription ophthalmic pharmaceutical business (the
OTC Business). The plan included the initiation of
an effort to sell the assets of the Companys OTC Business
and also the termination of its sales and marketing personnel.
F-11
ALIMERA
SCIENCES, INC.
NOTES TO
FINANCIAL STATEMENTS (Continued)
In connection with the plan, management notified
38 employees that they would be terminated upon dates
ranging from December 2006 to February 2007. As a result of
these terminations, the Company incurred severance expenditures
of $535,000, substantially all of which was paid to affected
employees prior to December 31, 2007.
In December 2006, the Company entered into an agreement to sell
its two ophthalmic allergy products within its OTC business to a
third-party for a total purchase price of $21,500,000, including
$13,500,000 in cash at closing and $8,000,000 in contingent
consideration. As a condition of closing that agreement,
$3,500,000 of the $13,500,000 in cash to be received at closing
was paid directly to the third-party manufacturer of the
products in order to induce the manufacturer to accept the
assignment of its five-year supply agreement to the acquiring
company. The Company received the remaining $10,000,000 in cash
at closing. The contingent consideration will be paid upon the
acquiring companys receipt of FDA approval for the second
generation allergy products. Subsequent to the closing of this
transaction, the acquiring company became responsible for the
development of that product. In January 2010, the Company
received a $4,000,000 option payment from the acquiring company
to provide it with an additional two years to develop the second
generation allergy product.
In connection with the agreement to sell the allergy products,
the Company and the acquiring company agreed to negotiate the
sale of the Companys dry eye product. In February 2007,
negotiations were completed and an agreement was entered into
between the two parties to sell the dry eye product to the
acquiring company for between $5,000,000 and $7,500,000
depending upon the level of net sales of the dry eye product
between January 2007 and July 2007. In May 2007, the two parties
agreed to amend the net sales measurement period to end in May
2007. The closing of the sale of the Companys dry eye
product occurred on July 31, 2007, and the Company received
$6,719,000 in cash proceeds. The Company recognized a gain of
$6,024,000 on this disposal. This gain is included in income
from discontinued operations in the accompanying statement of
operations for the year ended December 31, 2007.
The Company has determined that the discontinued OTC business
comprised operations and cash flows that could be clearly
distinguished, operationally and for financial reporting
purposes, from the rest of the Company. Accordingly, the results
of operations for the discontinued OTC business have been
presented as discontinued operations for the year ended
December 31, 2007. There were no revenues or expenses from
discontinued operations during the years ended December 31,
2008 and 2009. Net income from discontinued operations for the
year ended December 31, 2007 was as follows (in thousands,
except share and per share data):
|
|
|
|
|
|
Net sales
|
|
$
|
1,427
|
|
Cost of goods sold
|
|
|
457
|
|
|
|
|
|
|
Gross margin
|
|
|
970
|
|
Marketing and selling expenses
|
|
|
1,062
|
|
Research and development expenses
|
|
|
25
|
|
General and administrative expenses
|
|
|
174
|
|
|
|
|
|
|
Loss on discontinued operations before disposal
|
|
|
(291
|
)
|
Gain on disposal
|
|
|
6,024
|
|
|
|
|
|
|
Net income from discontinued operations
|
|
$
|
5,733
|
|
|
|
|
|
|
NET INCOME FROM DISCONTINUED OPERATIONS PER SHARE
Basic and diluted
|
|
$
|
3.82
|
|
|
|
|
|
|
NET LOSS FROM CONTINUING OPERATIONS PER SHARE Basic
and diluted
|
|
$
|
(7.63
|
)
|
|
|
|
|
|
WEIGHTED-AVERAGE SHARES OUTSTANDING Basic and
diluted
|
|
|
1,499,922
|
|
|
|
|
|
|
F-12
ALIMERA
SCIENCES, INC.
NOTES TO
FINANCIAL STATEMENTS (Continued)
|
|
4.
|
FACTORS
AFFECTING OPERATIONS
|
To date the Company has incurred recurring losses, negative cash
flow from operations, and has accumulated a deficit of
$171,891,000 from the Companys inception through December
31, 2009. As of December 31, 2009, the Company has $4,858,000 in
cash and cash equivalents. In January 2010, the Company received
$10,000,000 in cash proceeds from the exercise of warrants to
purchase 1,935,700 shares of the Companys Series C-1
preferred stock at $5.17 per share, and a $4,000,000 option
payment from the acquirer of the OTC business. The Company
believes its cash and cash equivalents at December 31, 2009 and
the aforementioned $14,000,000 received in January 2010 are
sufficient to fund its operations into September 2010, but not
beyond. The Companys ability to continue as a going
concern beyond September 2010 is dependent on its ability to
raise additional capital.
The Company does not expect to generate revenues from its
product candidates until 2011, if at all, and therefore will
have no cash flow from operations until that time. Until the
Company can generate significant cash from operations, the
Company expects to continue to fund its operations with cash
resources generated from the proceeds of public or private
offerings of its equity securities, strategic collaboration
agreements and debt financings. There can be no assurance that
additional financing from any of these sources will be available
when needed or that, if available, the additional financing will
be obtained on terms favorable to the Company.
These matters raise substantial doubt about the Companys
ability to continue as a going concern. The accompanying
financial statements do not include any adjustments that may
result from the outcome of these uncertainties.
|
|
5.
|
PROPERTY
AND EQUIPMENT
|
Property and equipment consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Furniture and fixtures
|
|
|
$287
|
|
|
|
$290
|
|
Office equipment
|
|
|
272
|
|
|
|
290
|
|
Software
|
|
|
470
|
|
|
|
470
|
|
Leasehold improvements
|
|
|
12
|
|
|
|
12
|
|
Manufacturing equipment
|
|
|
366
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment
|
|
|
1,407
|
|
|
|
1,102
|
|
Less accumulated depreciation and amortization
|
|
|
611
|
|
|
|
848
|
|
|
|
|
|
|
|
|
|
|
Property and equipment net
|
|
|
$796
|
|
|
|
$254
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense associated with property
and equipment of the continuing operations totaled $147,000,
$241,000 and $1,098,000 for the years ended December 31,
2007, 2008, and 2009, respectively.
Depreciation and amortization expense associated with property
and equipment of the discontinued operations totaled $11,000 for
the year ended December 31, 2007 and is included in income
from discontinued operations in accompanying statements of
operations.
During the year ended December 31, 2009, the Company
recognized $860,000 of depreciation and amortization expense
associated with equipment used for the manufacture of
registration batches of Iluvien.
F-13
ALIMERA
SCIENCES, INC.
NOTES TO
FINANCIAL STATEMENTS (Continued)
In November 2007, the Company entered into a license agreement
with Dainippon Sumitomo Pharma Co., Ltd. (Dainippon) whereby
Dainippon granted us a non-exclusive, worldwide, royalty free
license to patent rights under specific patents and patent
applications. The Company paid $200,000 to Dainippon shortly
after the execution of this license agreement and will be
required to make an additional payment in the amount of $200,000
to Dainippon within 30 days following the first regulatory
approval of a licensed product in the United States by the FDA.
In August 2007, the Company entered into an exclusive option
agreement with Emory University for the licensing of certain
patents for a class of compounds that the Company intends to
evaluate for the treatment of diseases of the eye, primarily the
dry form of age related macular degeneration. The Company made
an initial payment of $75,000, which was expensed as research
and development in the accompanying statement of operations for
the year ended December 31, 2007 for the option to license
the compounds at the end of an evaluation period. The Company
exercised its option and entered into an exclusive license in
the field of ophthalmology in July 2009, and issued Emory
University and its inventor $150,000 in common stock based on
the estimated fair value at the time of issuance. Under the
terms of the Companys agreement with Emory University, the
Company is required to make annual minimum royalty payments in
the first through the fourth calendar years following regulatory
approval of the product in a major market country (i.e., the
United States, Japan, China, India or any European country) in
the amount of $250,000, $500,000, $1,000,000 and $2,500,000,
respectively, and an annual minimum royalty payment of
$2,500,000 for each subsequent year during the term of the
agreement. If the Company does not make any milestone payments
to Emory University under this license agreement prior to the
third anniversary of its effective date, and the Company does
not elect to terminate this license agreement in accordance with
its terms, then the Company will be required to pay Emory
University annual license maintenance fees ranging from $500,000
to $2,000,000 (depending on when such payment is made) until a
milestone payment is made or this license agreement is
terminated in accordance with its terms. The Company would owe
the Emory University up to $5,775,000 in additional development
and regulatory milestones under the terms of this license
agreement. As part of this license, the Company received an
exclusive option for a license of the patent rights for diseases
and disorders outside of the eye.
In February 2008, the Company entered into a similar exclusive
option agreement with Emory University for the patent rights to
a second class of compounds which will be evaluated for the
treatment of diseases of the eye, primarily the dry form of age
related macular degeneration. The initial payment was $60,000.
The Company expensed this amount as research and development
expense in February 2008. The Company exercised its option and
entered into an exclusive license in the field of ophthalmology
in August 2009, and issued Emory University and its inventor
$150,000 in common stock based on the estimated fair value at
the time of issuance in December 2009. Under the terms of the
Companys agreement with Emory University, the Company is
required to make annual minimum royalty payments in the first
through the fourth calendar years following regulatory approval
of the product in a major market country (i.e., the United
States, Japan, China, India or any European country) in the
amount of $250,000, $500,000, $1,000,000 and $2,500,000,
respectively, and an annual minimum royalty payment of
$2,500,000 for each subsequent year during the term of the
agreement. If the Company does not make any milestone payments
to Emory University under this license agreement prior to the
third anniversary of its effective date, and the Company does
not elect to terminate this license agreement in accordance with
its terms, then the Company will be required to pay Emory
University annual license maintenance fees ranging from $500,000
to $2,000,000 (depending on when such payment is made) until a
milestone payment is made or this license agreement is
terminated in accordance with its terms. The Company would owe
Emory University up to $5,850,000 in additional development and
regulatory milestones under the terms of this license agreement.
As part of this license, the Company received an exclusive
option for a license of the patent rights for diseases and
disorders outside of the eye.
F-14
ALIMERA
SCIENCES, INC.
NOTES TO
FINANCIAL STATEMENTS (Continued)
In 2005, the Company finalized a collaboration agreement with
pSivida US, Inc. (pSivida) whereby the Company and pSivida
agreed to jointly develop products for treating eye diseases in
humans. Under the terms of the agreement, the Company was
granted a license to certain proprietary technology for the
delivery of medications to the eye, and the companies agreed to
begin developing a product for the treatment of diabetic macular
edema. In connection with the agreement, the Company made
initial license fee payments totaling $750,000 in 2004. The
Company also made an additional license fee payment of $750,000
upon the initiation of the Phase 3 trial for the first
product in 2005. The initial license fee payments were expensed
as research and development expenses when paid.
As part of the collaboration agreement, the Company and pSivida
agreed to share the cost to develop the product equally.
Historically, the Company recorded its costs of developing the
product net of amounts due from pSivida. On December 31,
2007, the Company had $3,927,000 in amounts due from the
third-party for development costs incurred on its behalf
included in prepaid expenses and other current assets. pSivida
failed to make payments totaling $1,990,000, representing its
share of development costs from February 2006 to December 2006.
In accordance with the terms of the agreement, pSivida could
maintain compliance with the terms of the collaboration
agreement as long as the total amount past due did not exceed
$2,000,000. pSivida began making payments again in December 2006
in order to maintain compliance with the agreement. Management
fully reserved $2,000,000 of the amount due from pSivida at
December 31, 2007. In 2006, $1,747,000 was recorded as
incremental development costs in connection with the
establishment of this reserve.
pSivida incurred penalties and interest on the payments it
failed to make. In accordance with the terms of the agreement,
the Company was due approximately $995,000 in penalties at
December 31, 2007. Accrued interest on the outstanding
payments and penalties was $969,000 at December 31, 2007.
Given the uncertainty surrounding the collectibility of the
original amounts, the Company fully reserved the penalties and
interest in the accompanying financial statements as of
December 31, 2007.
On March 14, 2008 the Company amended and restated its
collaboration agreement with pSivida for the development of its
product, Iluvien, for the treatment of diabetic macular edema to
increase its equity in the future profits of the product from
50% to 80%. Total consideration to pSivida in connection with
the execution of the March 2008 agreement was $33,800,000, which
consisted of a cash payment of $12,000,000, the issuance of a
$15,000,000 note payable, and the forgiveness of $6,800,000 in
outstanding receivables. The note payable accrues interest at 8%
per annum, payable quarterly. Principal is payable upon the
earlier of a liquidity event as defined in the agreement
(including an initial public offering of our common stock
greater than $75.0 million), the occurrence of an event of
default under our agreement with pSivida or September 30,
2012. If the note is not paid in full by March 31, 2010,
the interest rate will increase to 20% per annum effective
April 1, 2010, and the Company will be required to begin
making principal payments of $500,000 per month. The Company
also agreed to forgive all outstanding development payments,
penalties and interest totaling $2,800,000, net of a $4,000,000
reserve, as of the amendment date, and assume all financial
responsibility for the remaining development of the product. In
connection with this transaction the Company recognized
incremental research and development expense of $29,810,000 in
March 2008. The Company will owe an additional milestone payment
of $25,000,000 to pSivida upon FDA approval.
Upon commercialization, the Company must share 20% of net
profits, as defined by the agreement, with pSivida. In
connection with this arrangement the Company is entitled to
recover 20% of commercialization costs decreased from 50% as a
result of the amendment, as defined in the amendment, incurred
prior to product profitability out of pSividas share of
net profits. As of December 31, 2007, 2008 and 2009 the
Company was owed $365,000, $511,000 and $958,000, respectively,
in commercialization costs. Due to the uncertainty of FDA
approval, the Company has fully reserved these amounts in the
accompanying financial statements.
F-15
ALIMERA
SCIENCES, INC.
NOTES TO
FINANCIAL STATEMENTS (Continued)
pSivida Note Payable
In March 2008, in
conjunction with the amendment and restatement of the
Companys collaboration agreement with pSivida, the Company
issued to pSivida a note payable of $15,000,000 (see
Note 7). The note payable accrues interest at 8% per annum,
payable quarterly. The principal is payable upon the earlier of
a liquidity event as defined in the agreement (including an
initial public offering of our common stock greater than
$75,000,000), the occurrence of an event of default under our
agreement with pSivida or September 30, 2012. If the note
is not paid in full by March 31, 2010, the interest rate
will increase to 20% per annum effective April 1, 2010, and
the Company will be required to begin making principal payments
of $500,000 per month.
As of December 31, 2009, a schedule of future minimum
payments under the pSivida Note Payable is as follows (in
thousands):
|
|
|
|
|
Years Ending
|
|
|
|
December 31
|
|
|
|
|
2010
|
|
$
|
4,500
|
|
2011
|
|
|
6,000
|
|
2012
|
|
|
4,500
|
|
|
|
|
|
|
|
|
$
|
15,000
|
|
|
|
|
|
|
The effective interest rate on the note payable is 12.64%. As of
December 31, 2008 and 2009, the Company has accrued and
unpaid interest payable to pSivida of $550,000 and $708,000,
respectively, which is classified as other long-term
liabilities, and $0 and $543,000, respectively, which is
included in accrued expenses in the accompanying balances.
Operating Leases
The Company leases office
space and equipment under noncancelable agreements accounted for
as operating leases. The leases generally require that the
Company pay taxes, maintenance, and insurance. Management
expects that in the normal course of business, leases that
expire will be renewed or replaced by other leases. The Company
has recorded a deferred rent obligation in the accompanying
balance sheets to reflect the excess of rent expense over cash
payments since the Companys inception of the lease.
Deferred rent obligations totaled approximately $15,000 and $0
at December 31, 2008 and 2009 respectively. In May 2009,
the Company signed an extension of its lease for office space
for a period ended May 31, 2010. The Companys future
minimum payments under this operating lease from
December 31, 2009 to May 31, 2010 are $105,000.
Rent expense under all operating leases totaled approximately
$217,000 for each of the years ended December 31, 2007 and
2008, respectively, and $229,000 for the year ended
December 31, 2009.
Capital Leases
The Company leases equipment
under capital leases. The property and equipment is capitalized
at the lesser of fair market value or the present value of the
minimum lease payments at the inception of the leases using the
Companys incremental borrowing rate.
At December 31, 2009, a schedule by year of future minimum
payments under capital leases, together with the present value
of minimum lease payments, is as follows (in thousands):
|
|
|
|
|
Year ended December 31, 2010
|
|
$
|
6
|
|
|
|
|
|
|
Total
|
|
|
6
|
|
Less amount representing interest
|
|
|
0
|
|
|
|
|
|
|
Present value of minimum lease payments
|
|
|
6
|
|
Less current portion
|
|
|
6
|
|
|
|
|
|
|
Noncurrent portion
|
|
$
|
0
|
|
|
|
|
|
|
F-16
ALIMERA
SCIENCES, INC.
NOTES TO
FINANCIAL STATEMENTS (Continued)
Property and equipment under capital leases, which are included
in property and equipment (see Note 5), consisted of the
following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Office equipment
|
|
$
|
42
|
|
|
$
|
42
|
|
Less accumulated amortization
|
|
|
(27
|
)
|
|
|
(37
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
15
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense associated with office equipment under
capital leases was $11,000, $10,000 and $10,000 during the years
ended December 31, 2007, 2008 and 2009, respectively.
Significant Agreements
In January 2006, the
Company entered into an agreement with a contract research
organization for clinical and data management services to be
performed in connection with the Phase 3 trial product for the
treatment of diabetic macular edema in the United States,
Canada, and Europe. In accordance with the terms of the
agreement, the Company will incur approximately $16,000,000 in
costs with the contract research organization through 2010. For
the years ended December 31, 2007, 2008, and 2009, the
Company incurred $3,700,000, $3,300,000, and $3,900,000
respectively, of expense associated with this agreement. At
December 31, 2008 and 2009, $976,000 and $1,100,000,
respectively, are included in outsourced services payable.
In July 2006, the Company entered into an agreement with a
contract research organization for clinical services to be
performed in connection with the Phase 3 trial of its product
for the treatment of diabetic macular edema in India. In
accordance with the terms of the agreement, the Company will
incur approximately $1,800,000 in costs with the contract
research organization through 2010. For the years ended
December 31, 2007, 2008, and 2009, the Company incurred
$318,000, $248,000, and $240,000, respectively, of expense
associated with this agreement. At December 31, 2008 and
2009, $48,000, and $53,000, respectively, are included in
outsourced services payable.
Employment Agreements
The Company is party to
employment agreements with five executives. The agreements
generally provide for annual salaries, bonuses, and benefits for
a period of three years, and automatically renew for one-year
periods after the third year unless terminated by either party.
Effective January 1, 2009, the salaries ranged from
$218,000 to $354,000. Effective January 1, 2010, the
salaries were adjusted to a range of $227,000 to $368,000. If
any of the agreements are terminated by the Company without
cause, or by the employee for good reason, as defined in the
agreements, the Company will be liable for one year of salary
and benefits. Certain other employees have general employment
contracts which include stipulations regarding confidentiality,
Company property, and miscellaneous items.
On July 7, 2004, the Company entered into a Series A
preferred stock purchase agreement with certain investors. Under
the agreement, the investors agreed to purchase up to
6,635,720 shares of the Companys Series A
preferred stock at a purchase price of $4.03 per share. The
agreement contemplated the purchase of such shares in five
tranches based upon the Companys achievement of certain
milestones. The first sale of shares was completed in July 2004
when the Company issued 2,096,046 shares of Series A
preferred stock in exchange for $8,450,000 in cash, less
transaction costs. In 2005, the remaining 4,338,726 shares
were issued in four separate tranches in exchange for a total of
$17,490,000 in cash, less transaction costs. At
December 31, 2008 and 2009, the Company had authorized and
issued 6,624,844 shares of Series A preferred stock
with a par value of $0.01 per share.
F-17
ALIMERA
SCIENCES, INC.
NOTES TO
FINANCIAL STATEMENTS (Continued)
On November 22, 2005, the Company entered into a
Series B preferred stock purchase agreement with certain
investors. Under the agreement, the investors agreed to purchase
up to 7,134,329 shares of the Companys Series B
preferred stock at a purchase price of $4.46 per share. The
agreement contemplated the purchase of such shares in two
tranches. The first sale of shares was completed in November
2005 when the Company issued 3,563,090 shares of
Series B preferred stock in exchange for $15,880,000 in
cash, less transaction costs. The Company issued an additional
13,565 shares to a director on December 1, 2005, for
$60,000 in cash. The remaining 3,571,239 shares were issued
in November 2006 in exchange for $15,917,000 in cash, less
transaction costs. At December 31, 2008 and 2009 the
Company had issued 7,147,894 shares of Series B
preferred stock with a par value of $0.01 per share.
On March 17, 2008, the Company entered into a Series C
preferred stock purchase agreement with certain investors. Under
the agreement, the investors agreed to purchase up to
5,807,112 shares of the Companys Series C
preferred stock at a purchase price of $5.17 per share. The
agreement contemplated the purchase of such shares in two
tranches. The first sale of shares was completed on
March 17, 2008 when the Company issued
5,504,542 shares of Series C preferred stock in
exchange for $28,437,000 in cash less transaction costs. The
Company completed the second sale of the remaining
302,570 shares on April 23, 2008 for $1,563,000 in
cash less transaction costs. At December 31, 2008 and 2009,
the Company had issued 5,807,112 shares of Series C
preferred stock with a par value of $0.01 per share.
On August 25, 2009, the Company entered into and completed
a
Series C-1
preferred stock and warrant purchase agreement with certain
investors. Under the agreement, the investors agreed to purchase
up to 967,845 units at a purchase price of $5.17 per unit,
comprised of 967,845 shares of our Series C-1
preferred stock and warrants exercisable for up to an aggregate
of 1,935,700 shares of our Series C-1 preferred stock
at an exercise price of $5.17 per share for
$5,000,000 in cash less transaction costs. The warrants
expire unless exercised by the later of January 14, 2010 or
30 days after the delivery of the month 24 top line data
from the Companys FAME Study. The Company allocated the
purchase price of each unit to the Series C-1 preferred
stock and the warrants based on their relative fair values on
the issuance date. As a result, $1.53 of each unit, or
$1,472,000 of the aggregate consideration, was allocated to
the warrants. The remaining $3.64 of each unit, or
$3,528,000 of the aggregate consideration, was allocated to
the Series C-1 preferred stock. Because the Series
C-1 preferred
stock was convertible at issuance on a one for one basis into
shares of the Companys common stock which had a fair value
of $4.01 per share on the issuance date, the
Series C-1 preferred stock was issued with a beneficial
conversion feature of $0.37 per share, or $355,000 in
aggregate. As a result the Company recognized a $355,000
dividend to the holders of the Series C-1 preferred stock
in the accompanying statements of operations and changes in
stockholders deficit for the year ended December 31,
2009. At December 31, 2009, the Company had issued
967,845 of
Series C-1
preferred stock with a par value of $0.01 per share. On
January 8, 2010 the
Series C-1
preferred stock warrants were exercised resulting in $10,000,000
in cash proceeds and the issuance of 1,935,700 additional shares
of
Series C-1
preferred stock.
Significant terms of Series A, Series B, Series C
and Series C-1 preferred stock are as follows:
|
|
|
|
|
Holders of the preferred stock are entitled to the number of
votes equal to the number of shares of common stock into which
such shares of preferred stock could then be converted and have
voting rights and powers equal to the voting rights and powers
of the common stock. In addition, the holders of the preferred
stock have the right, voting separately from common
stockholders, to elect five out of seven members of the
Companys Board of Directors. The remaining two members are
elected by both the common and preferred stockholders.
|
|
|
|
Dividends are cumulative and accrue on a daily basis at the rate
of 8% per annum beginning on the date of issuance and based on
the original issue price, $4.03 per share for the Series A
preferred stock, $4.46 per share for the Series B preferred
stock, and $5.17 per share for the Series C and
Series C-1 preferred stock, as adjusted for any stock
dividend, stock split, combination, or other event involving the
preferred stock. Dividends will accrue, whether or not declared,
annually and will be due and
|
F-18
ALIMERA
SCIENCES, INC.
NOTES TO
FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
payable when and if declared by the Board of Directors, upon a
liquidating event, as defined, upon redemption of the preferred
stock, as defined, or on the date that the preferred stock is
otherwise acquired by the Company. Accumulated, accrued, and
unpaid dividends were:
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Series A preferred stock
|
|
$
|
8,177
|
|
|
$
|
10,313
|
|
Series B preferred stock
|
|
|
6,652
|
|
|
|
9,200
|
|
Series C preferred stock
|
|
|
1,881
|
|
|
|
4,281
|
|
Series C-1
preferred stock
|
|
|
|
|
|
|
140
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
16,710
|
|
|
$
|
23,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Upon any liquidation, dissolution, or winding up of the Company,
the preferred stockholders are entitled to a liquidation
preference payment equal to (i) the sum of the liquidation
value ($4.03 per share for the Series A preferred stock,
$4.46 per share for the Series B preferred stock and $5.17
per share for the Series C and
Series C-1
preferred stock) plus all accumulated, accrued, and unpaid
dividends and (ii) the pro rata share of any remaining
amounts such holder would have been entitled to receive had such
holders shares been converted into common stock
immediately prior to the liquidation, dissolution, or winding
up. The liquidation value plus accumulated, accrued, and unpaid
dividends were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Series A preferred stock
|
|
$
|
34,883
|
|
|
$
|
37,019
|
|
|
|
|
|
Series B preferred stock
|
|
|
38,509
|
|
|
|
41,057
|
|
|
|
|
|
Series C preferred stock
|
|
|
31,881
|
|
|
|
34,281
|
|
|
|
|
|
Series C-1
preferred stock
|
|
|
|
|
|
|
5,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
105,273
|
|
|
$
|
117,497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Each share is convertible, at the option of the holder, into one
share of common stock (subject to adjustments for events of
dilution). In addition, all shares of preferred stock are
automatically converted upon the completion of a public offering
of common shares yielding proceeds of at least $50,000,000 and a
price of at least five times the original issue price of the
Series A preferred stock of $4.03 per share (subject to
adjustments for events of dilution).
|
|
|
|
At any time subsequent to March 17, 2013, the holders of a
majority of the preferred stock may require the Company to
redeem all or any portion of the preferred stock. If the
preferred stock is redeemed, the redemption will occur in equal
installments over a three-year period. The price paid by the
Company to redeem the shares would be the greater of
(i) the original issue price, plus all accumulated,
accrued, and unpaid dividends, and (ii) the fair market
value of the preferred stock being redeemed at the time of the
redemption.
|
|
|
|
The holders of the preferred stock have the right but not the
obligation to participate proportionately in certain types of
future financings.
|
Because the preferred stock provides the holders the right to
require the Company to redeem such shares for cash after
March 17, 2013 at the greater of (a) the original
issue price plus any accrued but unpaid dividends or
(b) the fair market value of the preferred stock being
redeemed, the embedded conversion feature requires separate
accounting under SFAS No. 133. Consequently, the
conversion feature must be bifurcated from the preferred stock
and accounted for separately at each issuance date. The carrying
value of the
F-19
ALIMERA
SCIENCES, INC.
NOTES TO
FINANCIAL STATEMENTS (Continued)
embedded derivative is adjusted to fair value at the end of each
reporting period and the change in fair value is recognized in
the statement of operations.
Upon the issuance of the first tranche of the Series A
preferred stock, the estimated fair value of the conversion
feature was $10,000 which was recorded as a liability. The
derivative, when combined with other offering costs of $634,000,
reduced the recorded value of the Series A preferred stock
to $8,572,000. The cumulative estimated fair value of the
conversion feature associated with the four tranches issued in
2005 was $3,000 which was recorded as a liability. Combined with
the other offering costs of $401,000, the derivative reduced the
recorded value of the Series A preferred stock issued in
2005 to $17,087,000.
Upon the issuance of the first tranche of the Series B
preferred stock in November 2005 and the incremental issuance on
December 1, 2005, the estimated fair value of the
conversion feature was $7,000 which was recorded as a liability.
The derivative, when combined with other offering costs of
$339,000, reduced the recorded value of the first tranche of the
Series B preferred stock to $15,595,000. Upon the issuance
of the second tranche of the Series B preferred stock in
November 2006, the estimated fair value of the conversion
feature was $326 which was recorded as a liability. Combined
with the other offering costs of $23,000, the derivative reduced
the recorded value of the preferred stock issued in 2006 to
$15,893,000.
Upon the issuance of the first tranche of the Series C
preferred stock in March 2008, the estimated fair value of the
conversion feature was $1,058,000 which was recorded as a
liability. The derivative, when combined with other offering
costs of $60,000, reduced the recorded value of the first
tranche of the Series C preferred stock to $27,318,000.
Upon issuance of the second tranche of the Series C
preferred stock in April 2008, the estimated fair value of the
conversion feature was $61,000 which was recorded as a
liability. The derivative, when combined with other offering
costs of $2,000, reduced the recorded value of the second
tranche of the Series C preferred stock to $1,501,000.
Upon the issuance of the
Series C-1
preferred stock in August 2009, the estimated fair value of the
conversion feature was $903,000 which was recorded as a
liability. The derivative, when combined with other offering
costs of $102,000, further reduced the initial recorded value of
the
Series C-1
preferred stock to $2,522,000.
At each reporting date, the Company adjusts the carrying value
of the embedded derivatives to estimated fair value and
recognizes the change in such estimated value in its statement
of operations. The estimated fair value of the derivatives at
December 31, 2008 and 2009, were $12,656,000 and
$36,701,000, respectively, and the Company recognized losses of
$10,454,000 and $23,142,000 associated with the change in fair
value for the years ended December 31, 2008 and 2009,
respectively, and a gain of $1,000 associated with the change in
fair value for the year ended December 31, 2007.
The Company accretes the carrying value of the Series A,
Series B, Series C and
Series C-1
preferred stock to their redemption values over the redemption
period from the date of the issuance based upon the three-year
redemption feature. The accreted values of the Series A,
Series B, Series C and Series C-1 preferred
stock, including accumulated, accrued, and unpaid dividends were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Series A preferred stock
|
|
$
|
34,199
|
|
|
$
|
36,467
|
|
|
|
|
|
Series B preferred stock
|
|
|
37,963
|
|
|
|
40,617
|
|
|
|
|
|
Series C preferred stock
|
|
|
30,855
|
|
|
|
33,452
|
|
|
|
|
|
Series C-1
preferred stock
|
|
|
|
|
|
|
2,853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
103,017
|
|
|
$
|
113,389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-20
ALIMERA
SCIENCES, INC.
NOTES TO
FINANCIAL STATEMENTS (Continued)
The Company has stock option and stock incentive plans which
provide for grants of shares to employees and grants of options
to employees and directors to purchase shares of the
Companys common stock at exercise prices generally equal
to the fair values of such stock at the dates of grant. Options
granted to employees typically become exercisable over a
four-year vesting period and have a
120-month
term. Options granted to directors typically vest immediately
and have a
60-month
term.
As of December 31, 2009, the Company was authorized to
grant under the Companys plans up to 446,577 shares
under the 2004 Stock Option Plan and up to 2,001,428 shares
under the 2005 Stock Option Plan. Upon the exercise of stock
options, the Company may issue the required shares out of
authorized but unissued common stock or out of treasury stock,
at managements discretion.
A summary of stock option transactions under the plans are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Exercise
|
|
|
|
Options
|
|
|
Price
|
|
|
Options
|
|
|
Price
|
|
|
Options
|
|
|
Price
|
|
|
Options at beginning of period
|
|
|
1,268,674
|
|
|
$
|
1.56
|
|
|
|
1,419,808
|
|
|
$
|
1.50
|
|
|
|
1,959,726
|
|
|
$
|
1.80
|
|
Grants
|
|
|
414,515
|
|
|
|
1.39
|
|
|
|
539,918
|
|
|
|
2.55
|
|
|
|
295,463
|
|
|
|
4.35
|
|
Forfeitures
|
|
|
(197,903
|
)
|
|
|
1.56
|
|
|
|
|
|
|
|
|
|
|
|
(25,551
|
)
|
|
|
1.84
|
|
Exercises
|
|
|
(65,478
|
)
|
|
|
1.73
|
|
|
|
|
|
|
|
|
|
|
|
(3,860
|
)
|
|
|
1.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options at end of period
|
|
|
1,419,808
|
|
|
|
1.50
|
|
|
|
1,959,726
|
|
|
|
1.80
|
|
|
|
2,225,778
|
|
|
|
2.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at period end
|
|
|
563,855
|
|
|
|
1.63
|
|
|
|
921,055
|
|
|
|
1.56
|
|
|
|
1,427,649
|
|
|
|
1.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average per share fair value of options granted during
the period
|
|
$
|
0.88
|
|
|
|
|
|
|
$
|
1.73
|
|
|
|
|
|
|
$
|
3.74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides additional information related to
outstanding stock options, fully vested stock options, and stock
options expected to vest as of December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
Average
|
|
Aggregate
|
|
|
|
|
Exercise
|
|
Contractual
|
|
Intrinsic
|
|
|
Shares
|
|
Price
|
|
Term
|
|
Value
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Outstanding
|
|
|
2,225,778
|
|
|
$
|
2.14
|
|
|
|
7.28 years
|
|
|
$
|
14,251
|
|
Exercisable
|
|
|
1,427,649
|
|
|
|
1.70
|
|
|
|
6.52 years
|
|
|
|
9,765
|
|
Expected to vest
|
|
|
718,320
|
|
|
|
2.92
|
|
|
|
8.63 years
|
|
|
|
4,037
|
|
The Company estimated the fair value of options granted using
the Black-Scholes option-pricing model with the following
weighted-average assumptions used for option grants:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2007
|
|
2008
|
|
2009
|
|
Risk-free interest rate
|
|
|
3.98
|
%
|
|
|
2.87
|
%
|
|
|
3.44
|
%
|
Volatility factor
|
|
|
64.16
|
%
|
|
|
73.78
|
%
|
|
|
112.57
|
%
|
Grant date fair value of common stock
|
|
|
$ 1.39
|
|
|
|
$ 2.55
|
|
|
|
$ 4.35
|
|
Weighted-average expected life
|
|
|
6.13 years
|
|
|
|
6.15 years
|
|
|
|
6.18 years
|
|
Assumed forfeiture rate
|
|
|
10.00
|
%
|
|
|
10.00
|
%
|
|
|
10.00
|
%
|
F-21
ALIMERA
SCIENCES, INC.
NOTES TO
FINANCIAL STATEMENTS (Continued)
Employee stock-based compensation expense recognized under
ASC 718 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Marketing
|
|
$
|
9
|
|
|
$
|
109
|
|
|
$
|
43
|
|
Research and development
|
|
|
36
|
|
|
|
269
|
|
|
|
161
|
|
General and administrative
|
|
|
45
|
|
|
|
372
|
|
|
|
307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total employee stock-based compensation expense
|
|
$
|
90
|
|
|
$
|
750
|
|
|
$
|
511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The total estimated fair value of options granted during the
years ended December 31, 2007, 2008 and 2009 was $360,000,
$930,000 and $1,100,000, respectively, and the total estimated
value of options granted prior to 2007 was $1,156,000.
The following table summarizes outstanding and exercisable
options at December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
Average
|
|
|
|
Average
|
|
|
|
|
Remaining
|
|
|
|
Remaining
|
|
|
Number
|
|
Contractual
|
|
Number
|
|
Contractual
|
Exercise Prices
|
|
Outstanding
|
|
Life
|
|
Exercisable
|
|
Life
|
|
$1.33
|
|
|
700,024
|
|
|
|
6.33
|
|
|
|
674,979
|
|
|
|
6.31
|
|
1.39
|
|
|
396,868
|
|
|
|
7.78
|
|
|
|
212,633
|
|
|
|
7.74
|
|
2.04
|
|
|
305,269
|
|
|
|
4.79
|
|
|
|
305,270
|
|
|
|
4.79
|
|
2.24
|
|
|
10,294
|
|
|
|
8.16
|
|
|
|
4,504
|
|
|
|
8.16
|
|
2.41
|
|
|
470,214
|
|
|
|
8.22
|
|
|
|
205,722
|
|
|
|
8.22
|
|
3.26
|
|
|
5,882
|
|
|
|
8.39
|
|
|
|
2,206
|
|
|
|
8.39
|
|
3.88
|
|
|
33,824
|
|
|
|
8.49
|
|
|
|
15,441
|
|
|
|
8.49
|
|
4.01
|
|
|
271,844
|
|
|
|
9.65
|
|
|
|
4,412
|
|
|
|
9.55
|
|
5.03
|
|
|
5,882
|
|
|
|
8.66
|
|
|
|
1,838
|
|
|
|
8.66
|
|
5.44
|
|
|
2,059
|
|
|
|
8.67
|
|
|
|
644
|
|
|
|
8.67
|
|
8.47
|
|
|
23,618
|
|
|
|
9.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,225,778
|
|
|
|
|
|
|
|
1,427,649
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11.
|
COMMON
STOCK WARRANTS
|
The Company has issued warrants to purchase common stock to
various members of the board of directors and third-parties for
services. The Company also issued warrants to purchase common
stock to a third party in connection with a license agreement
(see Note 6). Total warrants to purchase common stock
issued and outstanding were 349,464 and 248,181 at
December 31, 2008 and 2009, respectively, at exercise
prices ranging from $1.70 to $4.05 per share. The warrants are
exercisable for a period of seven to ten years from the issuance
date.
No warrants to purchase common stock were issued in the years
ended December 31, 2007, 2008 and 2009.
|
|
12.
|
STOCK
RESTRICTION AGREEMENTS
|
In 2004 the Company entered into stock restriction agreements
with six employee stockholders of the Company for a total of
591,178 shares of common stock. Under the agreements, the
Company had a right to repurchase the common stock owned by the
employees at a purchase price of $2.04 per share upon the
F-22
ALIMERA
SCIENCES, INC.
NOTES TO
FINANCIAL STATEMENTS (Continued)
termination of the employees employment by the Company
with cause or by the employee without good reason, as defined in
the agreement. The repurchase rights expired ratably through
June 2007, and no shares were repurchased.
The Company accounted for these as restricted stock grants under
the provisions of FASB Interpretation (FIN) No. 28,
Accounting for Stock Appreciation Rights and Other Variable
Stock Options Award Plans
. Over the lifetime of the
restriction agreements, the Company recognized a total of
$715,000 in compensation expense based on a value of $1.22 per
share on the date the Company entered into the restriction
agreements. The Company recognized $95,000 in expense for the
year ended December 31, 2007 due to the lapse of the
restrictions in the normal course.
The components of the income tax benefit were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Deferred benefit (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
1,877
|
|
|
$
|
17,119
|
|
|
$
|
6,649
|
|
State
|
|
|
18
|
|
|
|
2,202
|
|
|
|
774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,895
|
|
|
|
19,321
|
|
|
|
7,423
|
|
Valuation allowance
|
|
|
(1,895
|
)
|
|
|
(19,321
|
)
|
|
|
(7,423
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As required by ASC 740, management of the Company has
evaluated the positive and negative evidence bearing upon the
realizability of its deferred tax assets. Management has
concluded, in accordance with the applicable accounting
standards, that it is more likely than not that the Company will
not realize the benefit of its deferred tax assets. Accordingly,
the net deferred tax assets have been fully reserved. Management
reevaluates the positive and negative evidence on an annual
basis.
At December 31, 2008 and 2009, the Company had federal net
operating loss (NOL) carry-forwards of approximately $57,509,000
and $79,494,000 and state net operating losses of approximately
$40,681,000, and $62,666,000 respectively, that are available to
reduce future income unless otherwise taxable. If not utilized,
the federal NOL carryforward will expire at various dates
between 2023 and 2029 and the state NOL carry-forwards will
expire at various dates between 2018 and 2029.
Net deferred tax assets (liabilities) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Depreciation and amortization
|
|
$
|
(65
|
)
|
|
$
|
(17
|
)
|
|
$
|
268
|
|
Other deferred tax assets
|
|
|
179
|
|
|
|
227
|
|
|
|
338
|
|
NOL carry-forwards
|
|
|
12,157
|
|
|
|
21,167
|
|
|
|
29,512
|
|
Research and development costs
|
|
|
|
|
|
|
11,013
|
|
|
|
10,039
|
|
Collaboration agreement receivable reserves
|
|
|
1,506
|
|
|
|
194
|
|
|
|
364
|
|
Other
|
|
|
|
|
|
|
514
|
|
|
|
|
|
Valuation allowance
|
|
|
(13,777
|
)
|
|
|
(33,098
|
)
|
|
|
(40,521
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-23
ALIMERA
SCIENCES, INC.
NOTES TO
FINANCIAL STATEMENTS (Continued)
If changes in ownership of the Company were to occur, NOL
carry-forwards may be subject to annual limitations under
Internal Revenue Code Section 382 (or comparable provisions
of state law).
The income tax provision (benefit) differs from the amount
determined by applying the U.S. federal statutory income
tax rate to the pre-tax accounting loss as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
(In thousands, except percentages)
|
|
|
Federal tax benefit at statutory rate
|
|
$
|
(1,940
|
)
|
|
|
34.0
|
%
|
|
$
|
(20,898
|
)
|
|
|
34.0
|
%
|
|
$
|
(15,035
|
)
|
|
|
34.0
|
%
|
|
|
|
|
|
|
|
|
State tax net of federal benefit
|
|
|
(31
|
)
|
|
|
0.5
|
|
|
|
(2,434
|
)
|
|
|
4.0
|
|
|
|
(1,751
|
)
|
|
|
4.0
|
|
|
|
|
|
|
|
|
|
Permanent items
|
|
|
63
|
|
|
|
(1.1
|
)
|
|
|
4,226
|
|
|
|
(6.9
|
)
|
|
|
8,938
|
|
|
|
(20.2
|
)
|
|
|
|
|
|
|
|
|
Change in state deferred tax rate
|
|
|
13
|
|
|
|
(0.2
|
)
|
|
|
(160
|
)
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
(55
|
)
|
|
|
|
|
|
|
425
|
|
|
|
(1.0
|
)
|
|
|
|
|
|
|
|
|
Increase in valuation allowance
|
|
|
1,895
|
|
|
|
(33.2
|
)
|
|
|
19,321
|
|
|
|
(31.4
|
)
|
|
|
7,423
|
|
|
|
(16.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tax expense
|
|
$
|
|
|
|
|
|
%
|
|
$
|
|
|
|
|
|
%
|
|
$
|
|
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company has evaluated the impact of
ASC 740-10
on its financial statements, which was early adopted effective
January 1, 2007. The Company believes that its income tax
filing positions are more likely than not of being sustained on
audit and does not anticipate any adjustments that will result
in a material change to its financial position; therefore, no
ASC 740-10
liabilities and no related penalties and interest have been
recorded. The Company did not record a cumulative effect
adjustment related to the adoption of
ASC 740-10.
Tax years since 2003 remain subject to examination in Georgia,
Tennessee, and on the federal level. The Company does not
anticipate any material changes to its uncertain tax positions
within the next 12 months.
|
|
14.
|
FAIR
VALUE MEASUREMENTS
|
The Company adopted Statement of Financial Accounting Standards
No. 157,
Fair Value Measurements
(ASC 820),
effective January 1, 2008. Under this standard, fair value
is defined as the price that would be received to sell an asset
or paid to transfer a liability (i.e., the exit
price) in an orderly transaction between market
participants at the measurement date.
In determining fair value, the Company uses various valuation
approaches. The hierarchy of those valuation approaches is
broken down into three levels based on the reliability of inputs
as follows:
Level 1 inputs are quoted prices in active markets for
identical assets or liabilities that the reporting entity has
the ability to access at the measurement date. An active market
for the asset or liability is a market in which transactions for
the asset or liability occur with sufficient frequency and
volume to provide pricing information on an ongoing basis. The
valuation under this approach does not entail a significant
degree of judgment.
Level 2 inputs are inputs other than quoted prices included
within Level 1 that are observable for the asset or
liability, either directly or indirectly. Level 2 inputs
include: quoted prices for similar assets or liabilities in
active markets, inputs other than quoted prices that are
observable for the asset or liability, (e.g., interest rates and
yield curves observable at commonly quoted intervals or current
market) and contractual prices for the underlying financial
instrument, as well as other relevant economic measures.
Level 3 inputs are unobservable inputs for the asset or
liability. Unobservable inputs shall be used to measure fair
value to the extent that observable inputs are not available,
thereby allowing for situations in which there is little, if
any, market activity for the asset or liability at the
measurement date.
F-24
ALIMERA
SCIENCES, INC.
NOTES TO
FINANCIAL STATEMENTS (Continued)
The following fair value table presents information about the
Companys assets and liabilities measured at fair value on
a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
government-backed money market funds(1)
|
|
$
|
17,421
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
17,421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets measured at fair value
|
|
$
|
17,421
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
17,421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial conversion feature of preferred stock(2)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
12,656
|
|
|
$
|
12,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities measured at fair value
|
|
$
|
|
|
|
$
|
|
|
|
$
|
12,656
|
|
|
$
|
12,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
government-backed money market funds(1)
|
|
$
|
4,668
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
4,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets measured at fair value
|
|
$
|
4,668
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
4,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial conversion feature of preferred stock(2)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
36,701
|
|
|
$
|
36,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities measured at fair value
|
|
$
|
|
|
|
$
|
|
|
|
$
|
36,701
|
|
|
$
|
36,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The carrying amounts approximate fair value due to the
short-term maturities of the cash and cash equivalents.
|
|
(2)
|
|
The fair value of the beneficial conversion feature of preferred
stock (see note 9) is established using a probability
weighted expected return method (PWERM) and Black Scholes
valuation model. Significant inputs to the valuation include:
|
|
|
|
|
|
probability of various scenarios occurring, including the
potential for an initial public offering, sale of the Company or
its assets, decision to remain a private company or liquidation
of the Company;
|
|
|
|
fair value of common stock as determined under each of the
scenarios under the PWERM, adjusted for a lack of control and
lack of marketability discount;
|
|
|
|
volatility estimated as an average of volatilities of publicly
traded companies deemed similar to the Company in terms of
product composition, stage of lifecycle, capitalization, and
scope of operations;
|
|
|
|
exercise price and weighted-average expected life estimated
based on the underlying and the expected remaining life of the
underlying instrument;
|
|
|
|
risk-free interest rate estimated as the daily treasury yield
for the period that most closely approximates the
weighted-average expected life as the valuation date as
published by the United States Department of Treasury.
|
F-25
ALIMERA
SCIENCES, INC.
NOTES TO
FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
The method described above may produce a fair value calculation
that may not be indicative of net realizable value or reflective
of future fair values. Furthermore, while the Company believes
its valuation methods are appropriate, the use of different
methodologies or assumptions to determine the fair value of
certain financial instruments could result in a different fair
value measurement at the reporting date.
|
The following table presents the changes to the fair value of
the beneficial conversion feature of preferred stock during the
year ended December 31, 2009 (in thousands):
|
|
|
|
|
Balance of beneficial conversion feature of preferred stock at
December 31, 2008
|
|
$
|
12,656
|
|
Issuance of
Series C-1
preferred stock (See Note 9)
|
|
|
903
|
|
Change in fair value of beneficial conversion feature of
preferred stock during the year ended December 31, 2009
|
|
|
23,142
|
|
|
|
|
|
|
Balance of beneficial conversion feature of preferred stock at
December 31, 2009
|
|
$
|
36,701
|
|
|
|
|
|
|
|
|
15.
|
EMPLOYEE
BENEFIT PLAN
|
The Company has a salary deferral 401(k) plan which covers
substantially all employees of the Company. In May 2008, the
Company established a plan to match participant contributions
subject to certain plan limitations. The Companys matching
plan took effect on July 1, 2008. Compensation expense
associated with the Companys matching plan totaled $61,000
and $70,000 for the years ended December 31, 2008 and 2009,
respectively. The Company may also make an annual discretionary
profit-sharing contribution. No such discretionary contributions
were made during the years ended December 31, 2007, 2008
and 2009.
On April 5, 2010, the Companys board of directors
approved a
3.4-for-one
reverse split of the Companys common and preferred stock
to be effected prior to the effective date of the Companys
registration statement. In connection with the reverse split,
the Company filed a Certificate of Amendment of the Restated
Certificate of Incorporation with the Secretary of State of
Delaware on April 16, 2010 making the reverse split legally
effective. All share and per share amounts have been
retroactively restated in the accompanying financial statements
and notes for all periods presented.
******
F-26
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
|
|
ITEM 13.
|
OTHER
EXPENSES OF ISSUANCE AND DISTRIBUTION
|
The following table presents the costs and expenses, other than
underwriting discounts and commissions, payable by us in
connection with the sale of the common stock being registered.
All amounts are estimates except the SEC registration fee, the
FINRA fee, and the Nasdaq Global Market listing fee.
|
|
|
|
|
SEC Registration fee
|
|
$
|
7,124
|
|
FINRA fee
|
|
|
8,500
|
|
Nasdaq Global Market listing fee
|
|
|
125,000
|
|
Printing and engraving expenses
|
|
|
350,000
|
|
Legal fees and expenses
|
|
|
1,200,000
|
|
Accounting fees and expenses
|
|
|
325,000
|
|
Blue sky fees and expenses
|
|
|
2,000
|
|
Custodian and transfer agent fees
|
|
|
8,000
|
|
Miscellaneous fees and expenses
|
|
|
71,240
|
|
|
|
|
|
|
Total
|
|
$
|
2,096,864
|
|
|
|
|
|
|
|
|
|
*
|
|
To be completed in subsequent amendment
|
|
|
ITEM 14.
|
INDEMNIFICATION
OF DIRECTORS AND OFFICERS
|
Section 145 of the Delaware General Corporation Law
authorizes a court to award or a corporations board of
directors to grant, indemnification to directors and officers in
terms sufficiently broad to permit indemnification under limited
circumstances for liabilities, including reimbursement for
expenses incurred, arising under the Securities Act of 1933, as
amended (the Securities Act). Article 5 of our
bylaws provides for mandatory indemnification of our directors
and officers to the maximum extent permitted by the Delaware
General Corporation Law. Our restated certificate of
incorporation provides that, under Delaware law, our directors
and officers shall not be liable for monetary damages for breach
of the officers or directors fiduciary duty as
officers or directors to our stockholders and us. This provision
in the restated certificate of incorporation does not eliminate
the directors or officers fiduciary duty, and in
appropriate circumstances, equitable remedies like injunctive or
other forms of non-monetary relief will remain available under
Delaware law. In addition, each director or officer will
continue to be subject to liability for breach of the
directors or officers duty of loyalty to us, for
acts or omissions not in good faith or involving intentional
misconduct or a knowing violation of law, for actions leading to
improper personal benefit to the director or officer, and for
payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. This provision
also does not affect a directors or officers
responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws. We have
entered into indemnification agreements with our directors and
officers, a form of which is attached as Exhibit 10.1 and
incorporated by reference. The indemnification agreements
provide our directors and officers with further indemnification
to the maximum extent permitted by the Delaware General
Corporation Law. Reference is made to Section 8 of the
underwriting agreement contained in Exhibit 1.1 to this
prospectus, indemnifying our directors and officers against
limited liabilities. In addition, Section 2.6 of the second
amended and restated investor rights agreement contained in
Exhibit 4.3 to this registration statement provides for
indemnification of certain of our stockholders against
liabilities described in the second amended and restated
investor rights agreement.
|
|
ITEM 15.
|
RECENT
SALES OF UNREGISTERED SECURITIES
|
In the three years preceding the filing of this registration
statement, we have issued the following securities that were not
registered under the Securities Act:
1. We granted direct issuances or stock options to purchase
1,249,896 shares of our common stock at exercise prices
ranging from $1.39 to $8.47 per share to employees and directors
under our 2004
II-1
Incentive Stock Plan and our 2005 Incentive Stock Plan. We did
not grant any direct issuances or stock options outside of our
2004 Incentive Stock Plan and our 2005 Incentive Stock Plan.
2. We issued and sold an aggregate of 69,338 shares of
our common stock to employees, consultants, and other service
providers for aggregate consideration of approximately $120,101
in connection with direct issuances or exercises of options
granted under our 2004 Incentive Stock Plan and our 2005
Incentive Stock Plan. We did not issue or sell any shares of our
common stock to employees, consultants, and other service
providers outside of our 2004 Incentive Stock Plan and our 2005
Incentive Stock Plan.
3. We sold an aggregate of 5,807,112 shares of our
Series C preferred stock to various investors, including
entities affiliated with Domain Partners VI, L.P.,
Intersouth Partners VI, L.P., Intersouth Partners VII,
L.P., Venrock Associates IV, L.P., Polaris Venture
Partners IV, L.P. and BAVP, L.P. and various other entities
and individuals for aggregate consideration of approximately
$30.0 million.
4. We sold an aggregate of 967,845 units, comprised of
967,845 shares of our
Series C-1
preferred stock and warrants exercisable for up to an aggregate
of 1,935,700 shares of our Series
C-1
preferred stock to various investors, including entities
affiliated with Domain Partners VI, L.P., Intersouth Partners
VI, L.P., Intersouth Partners VII, L.P., Venrock Associates
IV, L.P., Polaris Venture Partners IV, L.P. and BAVP, L.P. and
various other entities and individuals for aggregate
consideration of approximately $5.0 million.
5. We issued and sold an aggregate of 1,935,700 shares
of our
Series C-1
preferred stock to various investors, including those listed
above, for aggregate consideration of approximately
$10.0 million in connection with the exercise of the
Series C-1
warrants.
6. We issued an aggregate of 37,247 shares of our
common stock having an aggregate fair market value on the date
of issuance of approximately $161,000 to Croft &
Bender LLC in consideration of its provision of certain
consulting services to us.
7. We issued an aggregate of 37,387 shares of our
common stock having an aggregate fair market value on the date
of issuance of $150,000 to Emory University and Jack L. Arbiser
in connection with our execution of an option and license
agreement with Emory University.
8. We issued an aggregate of 17,717 shares of our
common stock having an aggregate fair market value on the date
of issuance of $150,000 to Emory University and Jack L. Arbiser
in connection with our execution of an option and license
agreement with Emory University.
9. We issued and sold an aggregate of 51,035 shares of
our common stock to various consultants and other service
providers, including to Oppenheimer & Co. Inc. one of our
underwriters on this offering, for aggregate consideration of
approximately $205,745 in connection with exercises of
outstanding common stock warrants.
10. The sale of the above securities was deemed to be
exempt from registration under the Securities Act in reliance
upon Section 4(2) of the Securities Act or
Regulation D promulgated thereunder, or Rule 701
promulgated under Section 3(b) of the Securities Act as
transactions by an issuer not involving any public offering or
transactions under compensation benefit plans and contracts
relating to compensation as provided under Rule 701. The
recipients of securities in each transaction represented their
intentions to acquire the securities for investment only and not
with a view to or for sale in connection with any distribution
and appropriate legends were affixed to the share certificates
issued in these transactions. All recipients had adequate
access, through their relationships with us, to information
about us.
|
|
ITEM 16.
|
EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES
|
Exhibits
|
|
|
|
|
|
1
|
.1
|
|
Form of Underwriting Agreement**
|
|
3
|
.1
|
|
Restated Certificate of Incorporation of Registrant, as amended
on various dates
|
|
3
|
.2
|
|
Restated Certificate of Incorporation of Registrant to be
effective upon closing**
|
|
3
|
.3
|
|
Amended and Restated Bylaws of the Registrant**
|
II-2
|
|
|
|
|
|
3
|
.4
|
|
Amended and Restated Bylaws of the Registrant to be effective
upon closing**
|
|
4
|
.1
|
|
Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4
|
|
4
|
.2
|
|
Form of Registrants Common Stock Certificate**
|
|
4
|
.3
|
|
Second Amended and Restated Investor Rights Agreement, dated
March 17, 2008, by and among the Registrant, certain
stockholders and the investors listed on the signature pages
thereto**
|
|
4
|
.4
|
|
Second Amended and Restated Stock Sale Agreement, dated
March 17, 2008, by and among the Registrant, certain
stockholders and the investors listed on the signature pages
thereto**
|
|
4
|
.5
|
|
Omnibus Amendment, dated August 25, 2009 by and among the
Registrant, certain stockholders and the investors listed on the
signature pages thereto**
|
|
5
|
.1
|
|
Opinion of Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP*
|
|
10
|
.1
|
|
Form of Indemnification Agreement between the Registrant and
each of its directors and executive officers**
|
|
10
|
.2
|
|
Amended and Restated Employment Agreement, dated August 18,
2008, by and between the Registrant and C. Daniel Myers**
|
|
10
|
.3
|
|
Amended and Restated Employment Agreement, dated August 18,
2008, by and between the Registrant and Richard Eiswirth**
|
|
10
|
.4
|
|
Amended and Restated Employment Agreement, dated August 18,
2008, by and between the Registrant and David Holland**
|
|
10
|
.5
|
|
Amended and Restated Employment Agreement, dated August 18,
2008, by and between the Registrant and Susan Caballa**
|
|
10
|
.6
|
|
Amended and Restated Employment Agreement, dated August 18,
2008, by and between the Registrant and Kenneth Green**
|
|
10
|
.7
|
|
Alimera Sciences, Inc. 2004 Incentive Stock Plan, as amended**
|
|
10
|
.7.A
|
|
Form of Option Certificate under the Alimera Sciences, Inc. 2004
Incentive Stock Plan**
|
|
10
|
.8
|
|
Alimera Sciences, Inc. 2005 Incentive Stock Plan**
|
|
10
|
.8.A
|
|
Form of Option Certificate under the Alimera Sciences, Inc. 2005
Incentive Stock Plan**
|
|
10
|
.9
|
|
2010 Equity Incentive Plan (to be effective upon closing of the
offering)**
|
|
10
|
.10
|
|
2010 Employee Stock Purchase Plan (to be effective upon closing
of the offering)**
|
|
10
|
.11
|
|
Management Cash Incentive Plan (to be effective upon closing of
the offering)**
|
|
10
|
.12
|
|
Compensation Program for Non-Employee Directors (to be effective
upon closing of the offering)**
|
|
10
|
.13
|
|
Amended and Restated Collaboration Agreement by and between
pSivida, Inc. (f/k/a/ Control Delivery Systems, Inc.) and
Alimera Sciences, Inc., dated as of March 14, 2008
|
|
10
|
.14
|
|
Asset Purchase Agreement between Bausch & Lomb
Incorporated and Alimera Sciences, Inc., dated as of
December 20, 2006
|
|
10
|
.15
|
|
Asset Purchase Agreement between Bausch & Lomb
Incorporated and Alimera Sciences, Inc., dated as of
February 16, 2007
|
|
10
|
.16
|
|
License and Option Agreement by and between Emory University and
Alimera Sciences, Inc., dated as of July 16, 2009
|
|
10
|
.17
|
|
License and Option Agreement by and between Emory University and
Alimera Sciences, Inc., dated as of August 31, 2009
|
|
10
|
.18
|
|
Office Lease by and between Rubicon, L.C. and Alimera Sciences,
Inc., dated as of May 27, 2003, as amended**
|
|
10
|
.19
|
|
Option Certificates Documenting Options Granted to C. Daniel
Myers under the 2004 Incentive Stock Plan and 2005 Incentive
Stock Plan**
|
|
10
|
.20
|
|
Option Certificates Documenting Options Granted to Richard
Eiswirth under the 2004 Incentive Stock Plan and 2005 Incentive
Stock Plan**
|
|
10
|
.21
|
|
Option Certificates Documenting Options Granted to David Holland
under the 2004 Incentive Stock Plan and 2005 Incentive Stock
Plan**
|
II-3
|
|
|
|
|
|
10
|
.22
|
|
Option Certificates Documenting Options Granted to Susan Caballa
under the 2004 Incentive Stock Plan and 2005 Incentive Stock
Plan**
|
|
10
|
.23
|
|
Option Certificates Documenting Options Granted to Kenneth Green
under the 2004 Incentive Stock Plan and 2005 Incentive Stock
Plan**
|
|
10
|
.24
|
|
Option Certificates Documenting Options Granted to Calvin W.
Roberts under the 2004 Incentive Stock Plan and 2005 Incentive
Stock Plan**
|
|
10
|
.25
|
|
License Agreement, between Alimera Sciences, Inc. and Dainippon
Sumitomo Pharma Co., Ltd., dated November 4, 2007
|
|
10
|
.26
|
|
Commercial Contract Manufacturing Agreement, between Alimera
Sciences, Inc. and Alliance Medical Products, Inc., dated
February 5, 2010**
|
|
23
|
.1
|
|
Consent of Deloitte & Touche LLP Independent
Registered Public Accounting Firm
|
|
23
|
.2
|
|
Consent of Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP (contained in
Exhibit 5.1)*
|
|
24
|
.1
|
|
Power of Attorney**
|
|
|
|
|
|
Compensation Arrangement.
|
|
*
|
|
To be filed by amendment.
|
|
|
|
Confidential treatment has been requested for portions of this
document. The omitted portions of this document have been filed
by amendment with the Securities and Exchange Commission.
|
|
**
|
|
Previously filed.
|
We undertake to provide to the underwriters at the closing
specified in the underwriting agreement, certificates in the
denominations and registered in the names as required by the
underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Registrant under the Delaware General
Corporation Law, the restated certificate of incorporation or
our bylaws, the underwriting agreement, or otherwise, we have
been advised that in the opinion of the Securities and Exchange
Commission, this indemnification is against public policy as
expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification
against these liabilities, other than the payment by us of
expenses incurred or paid by a director, officer, or controlling
person of ours in the successful defense of any action, suit or
proceeding, is asserted by a director, officer or controlling
person in connection with the securities being registered in
this offering, we will, unless in the opinion of our counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether this
indemnification by us is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of this issue.
We undertake that:
(1) For purposes of determining any liability under the
Securities Act, the information omitted from the form of
prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of
prospectus filed by us under Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration
statement relating to the securities offered, and the offering
of these securities at that time shall be deemed to be the
initial bona fide offering.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment No. 5 to this
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of
Alpharetta, State of Georgia, on this
16
th
day
of April, 2010.
ALIMERA SCIENCES, INC. (Registrant)
C. Daniel Myers
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Amendment No. 5 to this Registration
Statement has been signed by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated:
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/
C.
Daniel Myers
C.
Daniel Myers
|
|
President and Chief Executive Officer
|
|
April 16, 2010
|
|
|
|
|
|
/s/
Richard
S. Eiswirth, Jr.
Richard
S. Eiswirth, Jr.
|
|
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
|
|
April 16, 2010
|
|
|
|
|
|
*
Phillip
R. Tracy
|
|
Chairman of the Board of Directors,
Director
|
|
April 16, 2010
|
|
|
|
|
|
*
Mark
J. Brooks
|
|
Director
|
|
April 16, 2010
|
|
|
|
|
|
*
Brian
K. Halak, Ph.D.
|
|
Director
|
|
April 16, 2010
|
|
|
|
|
|
*
Anders
D. Hove, M.D.
|
|
Director
|
|
April 16, 2010
|
|
|
|
|
|
*
Calvin
W. Roberts, M.D.
|
|
Director
|
|
April 16, 2010
|
|
|
|
|
|
*
Bryce
Youngren
|
|
Director
|
|
April 16, 2010
|
|
|
|
|
|
|
|
*By:
|
|
/s/
Richard
S. Eiswirth, Jr.
Richard
S. Eiswirth, Jr.
Attorney-in-Fact
|
|
|
|
|
II-5
INDEX TO
EXHIBITS
|
|
|
|
|
|
1
|
.1
|
|
Form of Underwriting Agreement**
|
|
3
|
.1
|
|
Restated Certificate of Incorporation of Registrant, as amended
on various dates
|
|
3
|
.2
|
|
Restated Certificate of Incorporation of Registrant to be
effective upon closing**
|
|
3
|
.3
|
|
Amended and Restated Bylaws of the Registrant**
|
|
3
|
.4
|
|
Amended and Restated Bylaws of the Registrant to be effective
upon closing**
|
|
4
|
.1
|
|
Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4
|
|
4
|
.2
|
|
Form of Registrants Common Stock Certificate**
|
|
4
|
.3
|
|
Second Amended and Restated Investor Rights Agreement, dated
March 17, 2008, by and among the Registrant, certain
stockholders and the investors listed on the signature pages
thereto**
|
|
4
|
.4
|
|
Second Amended and Restated Stock Sale Agreement, dated
March 17, 2008, by and among the Registrant, certain
stockholders and the investors listed on the signature pages
thereto**
|
|
4
|
.5
|
|
Omnibus Amendment, dated August 25, 2009, by and among the
Registrant, certain stockholders and the investors listed on the
signature pages thereto**
|
|
5
|
.1
|
|
Opinion of Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP*
|
|
10
|
.1
|
|
Form of Indemnification Agreement between the Registrant and
each of its directors and executive officers**
|
|
10
|
.2
|
|
Amended and Restated Employment Agreement, dated August 18,
2008, by and between the Registrant and C. Daniel Myers**
|
|
10
|
.3
|
|
Amended and Restated Employment Agreement, dated August 18,
2008, by and between the Registrant and Richard Eiswirth**
|
|
10
|
.4
|
|
Amended and Restated Employment Agreement, dated August 18,
2008, by and between the Registrant and David Holland**
|
|
10
|
.5
|
|
Amended and Restated Employment Agreement, dated August 18,
2008, by and between the Registrant and Susan Caballa**
|
|
10
|
.6
|
|
Amended and Restated Employment Agreement, dated August 18,
2008, by and between the Registrant and Kenneth Green**
|
|
10
|
.7
|
|
Alimera Sciences, Inc. 2004 Incentive Stock Plan, as amended**
|
|
10
|
.7.A
|
|
Form of Option Certificate under the Alimera Sciences, Inc. 2004
Incentive Stock Plan**
|
|
10
|
.8
|
|
Alimera Sciences, Inc. 2005 Incentive Stock Plan**
|
|
10
|
.8.A
|
|
Form of Option Certificate under the Alimera Sciences, Inc. 2005
Incentive Stock Plan**
|
|
10
|
.9
|
|
2010 Equity Incentive Plan (to be effective upon closing of the
offering)**
|
|
10
|
.10
|
|
2010 Employee Stock Purchase Plan (to be effective upon closing
of the offering)**
|
|
10
|
.11
|
|
Management Cash Incentive Plan (to be effective upon closing of
the offering)**
|
|
10
|
.12
|
|
Compensation Program for Non-Employee Directors (to be effective
upon closing of the offering)**
|
|
10
|
.13
|
|
Amended and Restated Collaboration Agreement by and between
pSivida, Inc. (f/k/a/ Control Delivery Systems, Inc.) and
Alimera Sciences, Inc., dated as of March 14, 2008
|
|
10
|
.14
|
|
Asset Purchase Agreement between Bausch & Lomb
Incorporated and Alimera Sciences, Inc., dated as of
December 20, 2006
|
|
10
|
.15
|
|
Asset Purchase Agreement between Bausch & Lomb
Incorporated and Alimera Sciences, Inc., dated as of
February 16, 2007
|
|
10
|
.16
|
|
License and Option Agreement by and between Emory University and
Alimera Sciences, Inc., dated as of July 16, 2009
|
|
10
|
.17
|
|
License and Option Agreement by and between Emory University and
Alimera Sciences, Inc., dated as of August 31, 2009
|
|
10
|
.18
|
|
Office Lease by and between Rubicon, L.C. and Alimera Sciences,
Inc., dated as of May 27, 2003, as amended**
|
|
10
|
.19
|
|
Option Certificates Documenting Options Granted to C. Daniel
Myers under the 2004 Incentive Stock Plan and 2005 Incentive
Stock Plan**
|
|
|
|
|
|
|
10
|
.20
|
|
Option Certificates Documenting Options Granted to Richard
Eiswirth under the 2004 Incentive Stock Plan and 2005 Incentive
Stock Plan**
|
|
10
|
.21
|
|
Option Certificates Documenting Options Granted to David Holland
under the 2004 Incentive Stock Plan and 2005 Incentive Stock
Plan**
|
|
10
|
.22
|
|
Option Certificates Documenting Options Granted to Susan Caballa
under the 2004 Incentive Stock Plan and 2005 Incentive Stock
Plan**
|
|
10
|
.23
|
|
Option Certificates Documenting Options Granted to Kenneth Green
under the 2004 Incentive Stock Plan and 2005 Incentive Stock
Plan**
|
|
10
|
.24
|
|
Option Certificates Documenting Options Granted to Calvin W.
Roberts under the 2004 Incentive Stock Plan and 2005 Incentive
Stock Plan**
|
|
10
|
.25
|
|
License Agreement between Alimera Sciences, Inc. and Dainippon
Sumitomo Pharma Co., Ltd., dated November 4, 2007
|
|
10
|
.26
|
|
Commercial Contract Manufacturing Agreement, between Alimera
Sciences, Inc. and Alliance Medical Products, Inc., dated
February 5, 2010**
|
|
23
|
.1
|
|
Consent of Deloitte & Touche LLP Independent
Registered Public Accounting Firm
|
|
23
|
.2
|
|
Consent of Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP (contained in
Exhibit 5.1)*
|
|
24
|
.1
|
|
Power of Attorney**
|
|
|
|
|
|
Compensation Arrangement.
|
|
*
|
|
To be filed by amendment.
|
|
|
|
Confidential treatment has been requested for portions of this
document. The omitted portions of this document have been filed
with the Securities and Exchange Commission.
|
|
**
|
|
Previously filed.
|
Exhibit 10.13
CONFIDENTIAL TREATMENT REQUESTED
Revised Execution Version
AMENDED AND RESTATED
COLLABORATION AGREEMENT
BY AND BETWEEN
PSIVIDA, INC. (f/k/a CONTROL DELIVERY SYSTEMS, INC.)
AND
ALIMERA SCIENCES, INC.
DATED AS OF MARCH 14, 2008
CONFIDENTIAL TREATMENT REQUESTED
TABLE OF CONTENTS
|
|
|
|
|
|
|
Page
|
ARTICLE 1 DEFINITIONS
|
|
|
1
|
|
|
ARTICLE 2 Intentionally omitted
|
|
|
16
|
|
|
ARTICLE 3 DEVELOPMENT ACTIVITIES
|
|
|
16
|
|
|
3.1 General
|
|
|
16
|
|
3.2 Regulatory Approvals
|
|
|
18
|
|
3.3 Performance
|
|
|
19
|
|
3.4 Primary Contact Persons
|
|
|
19
|
|
3.5 Availability of Employees
|
|
|
19
|
|
3.6 Visit of Facilities
|
|
|
19
|
|
3.7 Subcontracts
|
|
|
20
|
|
3.8 Information Sharing
|
|
|
20
|
|
3.9 Records
|
|
|
20
|
|
3.10 Manufacturing for Clinical Supply Requirements
|
|
|
20
|
|
3.11 Technology Transfer by CDS
|
|
|
20
|
|
|
ARTICLE 4 COMMERCIALIZATION
|
|
|
21
|
|
|
4.1 Commercialization of Product(s) in the Collaboration Field
|
|
|
21
|
|
4.2 Commercialization Budget
|
|
|
21
|
|
4.3 Diligence
|
|
|
22
|
|
4.4 Costs of Commercialization
|
|
|
24
|
|
4.5 Manufacturing for Commercial Supply Requirements
|
|
|
25
|
|
4.6 Product Recalls
|
|
|
25
|
|
|
ARTICLE 5 GRANT OF RIGHTS
|
|
|
26
|
|
|
5.1 Grant of License by CDS
|
|
|
26
|
|
5.2 Grant of License by Alimera
|
|
|
26
|
|
5.3 Sublicenses and Subcontracts
|
|
|
26
|
|
5.4 Ownership of and Rights to Inventions
|
|
|
27
|
|
5.5 Limitation on Use
|
|
|
28
|
|
5.6 Reservation of Rights
|
|
|
28
|
|
5.7 No Grant of Other Technology or Patent Rights
|
|
|
29
|
|
-ii-
CONFIDENTIAL TREATMENT REQUESTED
|
|
|
|
|
|
|
Page
|
5.8 Options to Licenses in the Collaboration Field
|
|
|
29
|
|
5.9 Clinical IP
|
|
|
30
|
|
5.10 Section 365(n) of the Bankruptcy Code
|
|
|
30
|
|
|
ARTICLE 6 COSTS & REVENUES PRE AND POST PROFITABILITY DATE
|
|
|
31
|
|
|
6.1 License Fee
|
|
|
31
|
|
6.2 Milestone Payments
|
|
|
31
|
|
6.2A Payments on Execution of Amended and Restated Agreement
|
|
|
31
|
|
6.2B Certain Alimera Note Payments and Events
|
|
|
31
|
|
6.3 Development Costs
|
|
|
32
|
|
6.4 Revenues Prior to Profitability Date
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6.5 Costs and Revenues After the Profitability Date
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6.6 Revenues from Third Party Agreements
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6.7 Records; Audits
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ARTICLE 7 INTELLECTUAL PROPERTY
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7.1 CDS-Prosecuted Patent Rights
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7.2 Abandonment
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7.3 Alimera-Prosecuted Patent Rights
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7.4 Information Disclosure; Cooperation
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7.5 Employees and Sublicensees Assignment of Inventions
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7.6 Infringement
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7.7 Marking
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7.8 Trademarks
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7.9 UKRF Licenses and B&L Agreement
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ARTICLE 8 CONFIDENTIALITY
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8.1 Confidentiality
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8.2 Disclosure
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8.3 Disclosure of Agreement
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8.4 Disclosure of Product Achievements
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ARTICLE 9 REPRESENTATIONS AND WARRANTIES
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44
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9.1 Representations and Warranties of CDS
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9.2 Representations and Warranties of Alimera
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-iii-
CONFIDENTIAL TREATMENT REQUESTED
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9.3 Warranty Disclaimer
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9.4 Limited Liability
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ARTICLE 10 INDEMNITY
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46
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10.1 Cross Indemnity
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10.2 Limitation on Indemnity Obligations
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10.3 Procedure
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10.4 Insurance
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10.5 Product Liability Claims
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ARTICLE 11 TERM AND TERMINATION
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11.1 Term
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11.2 Termination for Default by Either Party
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11.3 Intentionally omitted
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11.4 Intentionally omitted
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49
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11.5 Termination for Abandonment
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11.6 Effect of Expiration or Termination of the Agreement
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11.7 Survival of Provisions Upon Expiration or Termination
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ARTICLE 12 MISCELLANEOUS
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50
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12.1 Interpretation
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12.2 Assignment
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12.3 Severability
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12.4 Notices
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12.5 Governing Law and Venue
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12.6 Compliance with Applicable Laws
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12.7 Dispute Resolution
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12.8 Intentionally omitted
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12.9 Entire Agreement
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12.10 Headings
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12.11 Independent Contractors
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12.12 Waiver
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12.13 Counterparts
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-iv-
CONFIDENTIAL TREATMENT REQUESTED
AMENDED AND RESTATED COLLABORATION AGREEMENT
THIS AMENDED AND RESTATED COLLABORATION AGREEMENT (the
Agreement
) dated as of March 14,
2008 (the
Amendment Effective Date
), is made by and between PSIVIDA, INC. (f/k/a CONTROL
DELIVERY SYSTEMS, INC.), a corporation organized and existing under the laws of the State of
Delaware having its offices at 400 Pleasant St., Watertown, Massachusetts 02472 (
CDS
),
and ALIMERA SCIENCES, INC., a corporation organized and existing under the laws of the State of
Delaware having its offices at 6120 Windward Parkway, Alpharetta, GA 30005 (
Alimera
).
CDS and Alimera are sometimes referred to herein individually as a
Party
and collectively
as the
Parties
.
R E C I T A L S
WHEREAS, CDS designs and develops innovative ophthalmic drug delivery products; and
WHEREAS, Alimera develops and commercializes ophthalmic drug products; and
WHEREAS, the Parties were interested in collaborating with one another and jointly funding the
development, and sharing Net Profits from the sale, of novel products for treating eye diseases in
humans, including a product for the treatment of diabetic macular edema using a corticosteroid; and
WHEREAS, CDS was willing to grant Alimera a license to certain of its proprietary technology
and know-how relating to developing products for treating eye diseases; and
WHEREAS, the Parties entered into such a collaboration and licensing relationship upon the
terms and conditions set forth in the Collaboration Agreement by and between Control Delivery
Systems, Inc. and Alimera Sciences, Inc. (the
Original Agreement
) dated as of February
11, 2005 (the
Effective Date
), as amended by Amendment No. 1 dated February 23, 2005 and
Amendment No. 2 dated May 11, 2005; and
WHEREAS, CDS and Alimera desire to enter into this Agreement to amend and restate the Original
Agreement (as amended prior to the Amendment Effective Date) as of the Amendment Effective Date as
set forth herein;
NOW THEREFORE, in consideration of the premises and of the mutual covenants herein contained,
and for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereto agree as follows:
ARTICLE 1 DEFINITIONS
For purposes of this Agreement, the terms defined in this Article shall have the meanings specified
below, whether used in their singular or plural form:
1.1 Affiliate shall mean any corporation or other entity that controls, is controlled by, or
is under common control with a Party to this Agreement. A corporation or other entity shall be
regarded as in control of another corporation or entity if it directly or indirectly owns or
1
CONFIDENTIAL TREATMENT REQUESTED
controls more than fifty percent (50%) of the voting stock or other ownership interest of the
other corporation or entity, or if it possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the corporation or other entity or the power
to elect or appoint more than fifty percent (50%) of the members of the governing body of the
corporation or other entity.
1.1A Alimera Development Activities shall mean (a) for activities conducted prior to the
Amendment Effective Date, Alimeras development activities conducted as set forth in the
Development Plan (as defined in the Original Agreement) and (b) for activities conducted on and
after the Amendment Effective Date, all Alimera development activities related to this Agreement.
1.2 Alimera Improvements shall mean any and all Improvements created, conceived or reduced
to practice by Alimera, or its Affiliates, agents, subcontractors or sublicensees, alone or with
others, or by Third Parties acting on their behalf, that are (a) Improvements covered by or derived
from practice of the CDS Technology, and/or (b) Improvements covered by or derived from the
practice of the Improvements set forth in clause (a); provided, however, that Alimera Improvements
shall not include any Improvement that meets each of the following: (x) is related specifically to
an active ingredient provided by Alimera and used in the Products, (y) can be practiced without
infringing any CDS Existing Patent Rights and any Patent Rights included within CDS Improvements,
or without utilizing any CDS Know-How, and (z) does not fall within the definition of the CDS Core
Technology.
1.3 Alimera Know-How shall mean Know-How Controlled by Alimera.
1.3A Alimera Note shall have the meaning set forth in Section 6.2A.
1.4 Alimera Patent Costs shall mean fees and costs associated with filing, prosecution and
maintenance of the Alimera-Prosecuted Patent Rights, as defined in Section 7.3, in the Territory.
1.4A AMD means age-related macular degeneration.
1.4B Amendment Effective Date shall have the meaning set forth in the preamble.
1.5 Approval shall mean the approvals from applicable regulatory authorities in any country
or region required to lawfully market a Product in such country or region, including, but not
limited to, approval of an NDA. The term Approved shall mean the receipt of Approval.
1.6 Bankruptcy Code shall mean Title 11 of the United States Code, as amended from time to
time.
1.7 B&L shall mean Bausch & Lomb Incorporated.
1.8 B&L Agreement shall mean the Amended and Restated License Agreement between CDS and B&L
dated as of December 9, 2003 as in existence and effect on the Effective Date, a full and complete
copy of which has been provided to Alimera.
2
CONFIDENTIAL TREATMENT REQUESTED
1.9 Business Day shall mean each day of the week excluding Saturday, Sunday and U.S. federal
holidays.
1.10 CDS Core Technology shall mean (a) any drug delivery device, or component thereof, for
ophthalmic use that includes a core containing one or more drugs, and (b) any method or process for
using a device described in clause (a).
1.10A CDS Development Activities shall mean (a) for activities conducted prior to the
Amendment Effective Date, CDS development activities conducted as set forth in the Development
Plan (as defined in the Original Agreement) and (b) for activities conducted on and after the
Amendment Effective Date, CDS development activities conducted to the extent specifically set
forth in Section 3.1.2 herein.
1.11 CDS Existing Patent Rights shall mean (a) the United States and foreign patents and
patent applications listed in
Exhibit 1.11A
, (b) any Patent Rights arising from those
patents and patent applications during the Term, and (c) any other patents or patent applications
Controlled by CDS as of the Effective Date, a Valid Claim of which, absent the licenses granted by
CDS to Alimera under Section 5.1, would be infringed by the making, having made, using, selling,
offering to sell or importing of a Product in the Collaboration Field by Alimera or its
subcontractors or sublicensees as permitted under this Agreement; provided, however, that CDS
Existing Patent Rights shall in no event include the patents and patent applications listed in
Exhibit 1.11B
or any Patent Rights arising from those patents or patent applications.
1.12 CDS Improvements shall mean any and all Improvements created, conceived or reduced to
practice by CDS, or its Affiliates, agents, or sublicensees, alone or with others or by Third
Parties acting on their behalf, during the course of CDS Development Activities, that are (a)
Improvements covered by or derived from practice of the CDS Technology, and/or (b) Improvements
covered by or derived from the practice of the Improvements set forth in clause (a); provided,
however, that CDS Improvements shall not include any Improvement that is an Alimera Improvement.
1.13 CDS Know-How shall mean Know-How Controlled by CDS that is required for development and
Commercialization of a Product.
1.14 CDS Net Income or CDS Net Losses shall mean, for the first calendar quarter after the
CDS Profitability Date and for any calendar quarter thereafter, Net Sales by CDS, and/or CDS
Sublicense Revenue actually received by CDS, for a Product in that calendar quarter minus the CDS
Product Costs for such Product in that calendar quarter; provided that in the event any portions of
the CDS Product Costs are already included in arriving at CDS Sublicense Revenue, such portions of
the CDS Product Costs shall be excluded from the above calculation to determine the CDS Net Income
or CDS Net Losses. To the extent Net Sales and/or CDS Sublicense Revenue actually received by CDS
exceed the CDS Product Costs for the relevant calendar quarter, such amount of difference shall be
deemed CDS Net Income, and to the extent CDS Product Costs exceed Net Sales and/or CDS Sublicense
Revenue actually received by CDS for the relevant calendar quarter, the amount of such difference
shall be deemed CDS Net Losses. For clarification, with respect to calculating CDS Net Income
for any unit of
3
CONFIDENTIAL TREATMENT REQUESTED
Product, the Manufacturing Cost incurred to manufacture such unit shall be deemed to be
incurred in that country and quarter in which such unit is sold.
1.15 CDS Patent Costs shall mean fees and costs associated with filing, prosecution and
maintenance of the CDS-Prosecuted Patent Rights, as defined in Section 7.1.2, in the countries
listed on
Exhibit 1.15
.
1.16 CDS Patent Rights shall mean CDS Existing Patent Rights and CDS interest in any Patent
Rights included within Alimera Improvements and CDS Improvements.
1.17 CDS Product Costs shall mean, with respect to a Product, all costs CDS incurred for
developing and Commercializing such Product, including, without limitation, the following costs:
(a) all Direct Development Costs incurred by CDS during the Term of this Agreement, (b) each of the
following to the extent paid by CDS to Alimera pursuant to this Agreement: all Development
Payments, Compounded Development Payments, Determined Disputed Costs and Compounded Disputed
Payments (as all defined in the Original Agreement), (c) each of the following, if any, owed by
Alimera to CDS to the extent not already paid by Alimera: any Compounded Development Payments and
Compounded Disputed Payments (as both defined in the Original Agreement), plus any interest on such
unpaid amount that has accrued in accordance with the terms of this Agreement after termination of
either this entire Agreement or this Agreement with respect to a Product, as applicable, (d) each
of the following to the extent not already included in Direct Development Costs or reimbursed by
Alimera: CDS Patent Costs, UKRF Costs and insurance premiums paid by CDS to maintain insurance
required by Section 10.4, as compounded, if applicable, pursuant to Section 4.4, and (e) any other
costs incurred by CDS for developing and Commercializing such Product.
1.18 CDS Profitability Date shall mean, with respect to a Product, the first day of the
first calendar quarter in which the aggregate of Net Sales by CDS, and CDS Sublicense Revenue
actually received by CDS, of such Product for all preceding calendar quarters and the current
calendar quarter exceeds the CDS Product Costs during all preceding calendar quarters and the
current calendar quarter; provided that in the event that any portions of the CDS Product Costs are
already included in arriving at the CDS Sublicense Revenue, such portions of the costs shall be
excluded from the above calculation to determine the CDS Profitability Date. For clarification,
all preceding calendar quarters include the Term of this Agreement and for any applicable periods
thereafter.
1.19 CDS Sublicense Revenue shall mean any form of consideration (excluding any amounts paid
for equity securities of CDS other than amounts that exceed the fair market value of such
securities) in connection with a sublicense agreement that CDS enters into with a Third Party to
sell or otherwise transfer some or all of CDS rights to a Product, including, but not limited to,
marketing rights and/or distribution rights, provided that (1) the fair market value of such
securities shall be determined by mutual agreement of both Parties, and (2) in the event that the
Parties fail to reach such mutual agreement, the matter shall be resolved by arbitration in
accordance with Section 12.7.2 herein.
1.20 CDS Technology shall mean CDS Patent Rights, CDS Know-How and CDS interest in Alimera
Improvements and CDS Improvements.
4
CONFIDENTIAL TREATMENT REQUESTED
1.21 Change of Control shall mean, with respect to a Party, (a) a merger or consolidation of
such Party with a Third Party which results in the voting securities of such Party outstanding
immediately prior thereto ceasing to represent at least fifty percent (50%) of the combined voting
power of the surviving entity immediately after such merger or consolidation, or (b) except in the
case of a bona fide equity financing in which a Party issues new shares of its capital stock, a
transaction or series of related transactions in which a Third Party, together with its Affiliates,
becomes the beneficial owner of fifty percent (50%) or more of the combined voting power of the
outstanding securities of such Party, or (c) the sale or other transfer to a Third Party of all or
substantially all of such Partys assets related to the Collaboration Field.
1.22 Clinical IP shall mean (a) all preclinical and clinical protocols, studies, data,
results, study-related forms, materials and reports (e.g., investigator brochures, informed consent
forms, data safety monitoring board related documents, patient recruitment related materials,
biocompatibility studies, animal studies, safety studies, and chemistry, manufacturing and control
data) resulting from any preclinical or clinical study or trial of any Product in the Collaboration
Field that is conducted by or under the direction of Alimera or CDS, or their Permitted
Subcontractors or sublicensees, pursuant to this Agreement, and any audit of any such preclinical
or clinical study or trial, and (b) all INDs, NDAs, any unfiled applications, components or
materials normally associated with an IND or NDA, regulatory filings or applications comparable to
INDs or NDAs in any foreign jurisdictions, and other regulatory applications and Approvals
regarding any Product in the Collaboration Field that are prepared or submitted by or under the
direction of Alimera or CDS, or their Permitted Subcontractors or sublicensees, pursuant to this
Agreement; provided, however, that Clinical IP shall not include any Pre-Existing Clinical IP.
1.23 Clinical Supply Requirements shall mean, with respect to each Product, the quantities
of such Product that are required for the conduct of preclinical studies and clinical trials
required to procure data necessary for the acceptance of filing of an NDA for the Product, pursuant
to the Development Activities. For the avoidance of doubt, supplies for Non-NDA Trials are
excluded from the definition of Clinical Supply Requirements.
1.24 CODRUG shall mean a compound or a pharmaceutically acceptable salt thereof comprising
one constituent moiety covalently or ionically associated with at least one other constituent
moiety, wherein each moiety, in its separate form (i.e., in the absence of the association), is a
therapeutically or pharmacologically active agent or a prodrug or pharmaceutically acceptable salt
of such an agent. The covalent association between said moieties can be either direct or indirect
through a linker. Examples of covalent association include without limitation ester, amide,
carbamate, carbonate, cyclic ketal, thioester, thioamide, thiocarbamate, thiocarbonate, xanthate,
and phosphate ester bonds. Each constituent moiety of a CODRUG compound can be the same as or
different from the other constituent moiety. Upon cleavage of the covalent or ionic association,
the individual constituent moieties are reconstituted as the therapeutically or pharmacologically
active forms of the same moieties prior to conjugation.
1.25 Collaboration Field shall mean the treatment and prevention of eye diseases in humans;
provided, however, that the treatment and prevention of uveitis excluded from the Collaboration
Field.
5
CONFIDENTIAL TREATMENT REQUESTED
1.26 Commercial Supply Requirements shall mean, with respect to each Product, quantities of
such Product that are required to fulfill requirements for commercial sales, Product sampling, and
Non-NDA Trials, in the Collaboration Field in the Territory.
1.27 Commercialize or Commercialization shall mean any and all activities directed to
marketing, promoting, Detailing, distributing, importing, offering for sale, having sold and/or
selling a product, including, but not limited to, sampling, and conducting Non-NDA Trials.
1.28 Commercialization Budget shall have the meaning set forth in Section 4.2 hereof.
1.29 Commercially Reasonable Efforts shall mean efforts and resources that parties in the
pharmaceutical industry would consider normal to use for a compound or product owned by a party in
that industry or to which that party has rights, which is of similar market potential at a similar
stage in its development or product life, taking into account the competitiveness of the
marketplace, the proprietary position of the compound or product, the regulatory structure
involved, the profitability of the applicable products, and other relevant factors. In determining
Commercially Reasonable Efforts with respect to a particular Product, a Party may not consider any
other product(s) owned or licensed by it.
1.30 Intentionally omitted.
1.31 Confidential Information shall have the meaning set forth in Section 8.1 hereof.
1.32 Control or Controlled by shall mean, in the context of a license to or ownership of
intellectual property, possession of the ability on the part of a Party to grant access to or a
license or sublicense as provided for herein without violating the terms of any agreement or other
arrangement with any Third Party existing at the time such Party would be required hereunder to
grant the other Party such access or license or sublicense.
1.33 Detail shall mean a face-to-face meeting (including a live video presentation) with one
or more healthcare professionals with prescribing authority during which scientific and/or medical
information about the Product is discussed. Detailing does not include merely a reminder or a
promotional sample drop. When used as a verb, the term Detailing shall mean to engage in the
activity of a Detail.
1.33A Development Activities shall mean the Alimera Development Activities and CDS
Development Activities.
1.34 Intentionally omitted.
1.35 Intentionally omitted.
1.36 Direct Commercialization Costs shall mean only the following costs incurred, on a cash
basis, by Alimera for Commercializing a Product in accordance with this Agreement and pursuant to
the Commercialization Budget:
6
CONFIDENTIAL TREATMENT REQUESTED
(a) Direct Costs of marketing activities for the Product, including pre-launch, launch,
advertising, packaging, activities necessary for seeking and maintaining pricing and reimbursement
approvals from Third Party payors, literature, lectures, training (including wet labs for training
healthcare professionals) and sales promotion;
(b) [*];
(c) Direct Costs associated with maintaining Approvals for the Product;
(d) Direct Costs of package development and package maintenance for the Product;
(e) Selling Expenses for the Product;
(f) Manufacturing Costs to satisfy Commercial Supply Requirements for the Product;
(g) Direct Costs of distribution of the Product other than the costs specified in Section
1.60(d);
(h) Royalties, milestones and other fees paid by Alimera under Third Party license(s) ([*])
that are at arms length to the extent they relate to the Product, to the extent such licenses are
necessary for Alimera to make, have made, use, offer to sell, sell, and import the Product without
infringing patents of such Third Parties, including without limitation as provided for in Section
7.6.4;
(i) Direct Costs of selection, filing, prosecution and maintenance of trademarks used solely
for the Product (or an appropriate allocation in the case of any trademarks used for the Product
and other products);
(j) Direct Costs of Medical Advisory Services for the Product;
(k) Recall expenses that are Direct Commercialization Costs as set forth in Section 4.6;
(l) Product Liability Losses that are Direct Commercialization Costs as set forth in Section
10.5;
(m) Insurance premiums paid by Alimera for the insurance required by Section 10.4 to the
extent such insurance relates to Commercialization of the Product (i.e., if insurance covers risks
other than risks related to Commercialization of the Product, then only an appropriate portion of
such premiums shall be included); and
(n) Taxes, duties, tariffs and other governmental charges (excluding taxes on income) associated
with manufacture and distribution of the Product, to the extent not deducted from Net Sales
pursuant to Section 1.60(c).
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*
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Certain information has been omitted and filed separately with the
commission. Confidential treatment has been requested with respect to the omitted
portions.
|
7
CONFIDENTIAL TREATMENT REQUESTED
Notwithstanding any other provisions in this Agreement, Direct Commercialization Costs shall
include only the costs of labor for those individuals who spent greater than fifty percent (50%) of
their time on activities within the Commercialization Budget during any calendar month (the
Majority Time Individuals), and such costs shall be determined according to the amount of the
Majority Time Individuals time actually spent on such Commercialization activities, provided that,
if the Commercialization activity is Detailing, then such costs for the Majority Time Individuals
shall be determined in accordance with Section 1.81. In the event there is more than one Product
on the market at any given time, Direct Commercialization Costs attributable to more than one
Product shall be allocated to each Product as appropriate; provided, however, that in no event
shall any Direct Commercialization Costs be accounted for more than once. Notwithstanding the
foregoing, in the event that a person devotes time to both activities under the Commercialization
Budget and Development Activities, the time spent shall be aggregated in determining whether such
person meets the fifty percent (50%) threshold set forth in this definition and in the definition
of Direct Development Costs, and the persons time shall be allocated accordingly between
development and Commercialization. Notwithstanding anything else herein, no Direct Development
Costs may be categorized as Direct Commercialization Costs.
1.37 Direct Costs shall mean, on a cash basis, the costs of labor (including only salaries,
wages and current period employee benefits (but specifically excluding expenses associated with
stock options or other equity-based or deferred compensation)), raw materials, supplies, services,
fees, and other resources, directly and exclusively consumed or used in the conduct of the
applicable activity; provided, however, that the following costs shall not be deemed Direct Costs:
(i) corporate overhead expenses, including, but not limited to, general administration, business
development, travel, entertainment, executive management, facilities, finance, information system
and data management services, investor relations, human resources, legal, payroll, purchasing, and
corporate supervisory services; (ii) amortization and depreciation expenses, interest expenses,
taxes, extraordinary or nonrecurring losses customarily deducted by a Party in calculating and
reporting consolidated net income, capital expenditures (including, but not limited to, purchases
of facilities, property or equipment), and inventory write-offs (to the extent not attributable to
a Product); (iii) consulting (including legal) fees unless specifically set forth in a mutually
approved budget; and (iv) payments made to any related party or Affiliates in excess of an arms
length charge for the relevant product or service.
1.38 Direct Development Costs shall mean the following costs incurred, on a cash basis, by
either Party for developing a Product:
(a) Direct Costs for Development Activities for the Product, incurred, on a cash basis, by a
Party or paid by a Party to Permitted Subcontractors, including, but not limited to, research,
formulation development and testing, clinical development activities, data management, toxicology,
and planning and execution of clinical trials required to procure data necessary for the acceptance
of filing of an NDA;
(b) Manufacturing Costs to satisfy Clinical Supply Requirements;
(c) Direct Costs for regulatory filings pursuant to the Development Activities (specifically
excluding any filing related to Non-NDA Trials) for the Product;
8
CONFIDENTIAL TREATMENT REQUESTED
(d) Insurance premiums paid by either Party for commercial insurance to the extent such
insurance relates to Development Activities in accordance with Section 10.4 hereof (i.e., if
insurance covers risks other than risks related to development of the Product, then only an
appropriate portion of such premiums shall be included);
(e) CDS Patent Costs paid from the Effective Date up to the first Product Profitability Date
that are not otherwise reimbursed by a Third Party; provided, however, that CDS Patent Costs in
excess of [*] in any calendar year shall not be included as Direct Development Costs;
(f) Direct Costs of the activities conducted under Section 3.11, including, but not limited
to, technology transfer assistance from CDS to Alimera to enable Alimera to manufacture the Product
for Commercialization;
(g) Direct Costs for capital expenditures to the extent attributable to the Product and part
of Development Activities; and
(h) Other Direct Costs as mutually agreed upon by the Parties.
Notwithstanding any other provisions in this Agreement, Direct Development Costs shall (1) with the
exception of (e) and (f) above, include only Direct Costs incurred, on a cash basis, in connection
with activities conducted to procure data necessary for the acceptance of filing of an NDA for the
Product; and (2) include only the costs of labor for those individuals who spent greater than fifty
percent (50%) of their time on Development Activities during any calendar month, and such costs
shall be determined according to the percentage of the individuals time actually spent on such
development activities; and (3) not include any Commercialization costs. Notwithstanding the
foregoing, in the event that a person devotes time to both activities under the Commercialization
Budget and Development Activities, the time spent shall be aggregated in determining whether such
person meets the fifty percent (50%) threshold set forth in this definition and in the definition
of Direct Commercialization Costs, and the persons time shall be allocated accordingly between
development and Commercialization.
1.39 DME shall mean diabetic macular edema.
1.40 Effective Date shall have the meaning set forth in the recitals.
1.41 Earnest Money Loan shall mean the aggregate of the loan under the Secured Promissory
Notes from CDS to Alimera dated October 19, 2004, November 18, 2004 and December 22, 2004.
1.42 Excluded Product shall mean a [*] that generally conforms to the drawings and
specifications (and any prior iterations thereof in whole or in part) shown in
Exhibit 1.42
.
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Certain information has been omitted and filed separately with the
commission. Confidential treatment has been requested with respect to the omitted
portions.
|
9
CONFIDENTIAL TREATMENT REQUESTED
1.43 FDA shall mean the United States Food and Drug Administration or any successor agency
with responsibilities comparable to those of the United States Food and Drug Administration.
1.43A Fifty/Fifty Amendments shall mean both of the following amendments:
(1) In the first sentence of Section 6.5.1, the words Alimera and CDS shall be entitled to
eighty percent (80%) and twenty percent (20%), respectively, shall be deleted and the words each
Party shall be entitled to fifty percent (50%) shall be substituted in their place.
(2) In Section 6.6, the words twenty percent (20%) shall be deleted and the words fifty
percent (50%) shall be substituted in their place, and the words thirty-three percent (33%)
shall be deleted and the words fifty percent (50%) shall be substituted in their place.
1.44 First Commercial Sale shall mean, with respect to each Product, the first sale for use
or consumption by the general public of such Product in a country after required Approval has been
granted by the applicable regulatory authority of such country.
1.45 First Product shall have the meaning set forth in Section 1.77 hereof.
1.46 GAAP shall mean the current United States generally accepted accounting principles,
consistently applied.
1.47 Gross Sales shall mean, for any period, on a cash basis (a) for any arms length
transaction in which Products are sold separately by Alimera or its Affiliates to a Third Party,
the gross invoice price for Products in such transactions, and (b) for all other transactions
(i.e., other than those described in subsection (a)) in which Products are sold, used or otherwise
disposed of by Alimera or its Affiliates (including in barter or similar transactions, or
transactions that are not at arms length to a Third Party, or transactions in which Products are
not sold separately, but not including the provision of Products intended for use solely as
samples), the total imputed sales price for Products in such transactions, using as the imputed
sales price the weighted average gross invoice price for Products under subsection (a) during the
preceding calendar quarter or, if there have been no Gross Sales under subsection (a) in the
preceding quarter, using a reasonable imputed price to be determined at the time by the parties.
For purposes of this Section 1.47, sold separately shall mean sold, solely for monetary
consideration, on a stand-alone basis (i.e., with a selling price independent of any other product)
for not less than arms length value.
1.48 Improvements shall mean any and all Inventions, enhancements, derivatives, new uses,
developments, techniques, materials, compounds, products, designs, processes or other technology or
intellectual property, whether or not patentable and all Patent Rights and other intellectual
property rights in any of the foregoing.
1.49 IND shall mean the Investigational New Drug Application filed with FDA or a similar
application filed with an applicable regulatory authority outside of the United States.
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1.50 Invention shall mean ideas, information, Know-How, data, research results, writings,
inventions, discoveries, modifications, improvements and other technology (including, but not
limited to, any proprietary biological or other materials, compounds or reagents and computer
software), whether or not patentable or copyrightable.
1.51 Intentionally omitted.
1.52 Know-How shall mean unpatented information, whether or not patentable, including, but
not limited to, technical information, processes, formulae, trade secrets, materials, designs,
drawings and data.
1.53 Majority Time Individuals shall have the meaning set forth in Section 1.36.
1.54
Manufacturing Costs
shall mean:
(A) with respect to Product manufactured by a Third Party, a Partys cost of procuring such
Product on an arms length basis; or
(B) with respect to Product manufactured by a Party or one of its Affiliates, (1) Direct Costs
incurred, on a cash basis, by such Party or one of its Affiliates to manufacture such Product,
including Direct Costs of purchasing, inspection, quality assurance, quality control, storage,
scrap and training, and (2) a portion of depreciation, amortization, interest expense, utilities,
rent, maintenance and repairs, insurance and other manufacturing overhead (the Manufacturing
Overhead) allocable to Product as determined by the following formula: the Manufacturing Overhead
multiplied by a fraction, the numerator of which is the number of direct labor hours of individuals
who spent time on the production of Product at a plant at which Product is manufactured, and the
denominator of which is the number of direct labor hours devoted to the production of all products
at such plant when the plant is operating at full capacity, provided that Manufacturing Costs shall
exclude costs associated with excess capacity, selling costs (including, without limitation,
marketing, advertising, salaries and commissions), corporate overhead, costs that are otherwise
attributed as Direct Development Costs or Direct Commercialization Costs under this Agreement,
royalties (earned or paid up) and other amounts payable to Third Parties under any license taken by
a Party in connection with the manufacture of the Product, and all amounts spent on research and
development;
provided, however, that any amount determined pursuant to clause (B) shall not exceed the amount
that a qualified Third Party manufacturer would charge for supplying comparable quantities of the
relevant Product in a timely manner on reasonable and customary terms and conditions.
1.55 Medical Advisory Services shall mean those health care professionals employed or
engaged by a Party with sufficient medical or other pertinent health care experience to engage in
in-depth dialogues with physicians regarding medical issues associated with a Product.
1.55A Medidur FA shall mean the product being developed as of the Amendment Effective Date
under IND #72056.
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1.56 Milestone Payments shall have the meaning set forth in Section 6.2 hereof.
1.57 NDA shall mean a new drug application or product license application or its equivalent
filed with and accepted by the FDA after completion of human clinical trials to obtain marketing
approval for a Product, or any comparable application filed with and accepted by the regulatory
authorities of a country other than the United States, including, where applicable, any
applications for governmental pricing and marketing approval.
1.58 Net Profits or Net Losses shall mean, for a particular calendar quarter, the Net
Sales for a Product in a country minus the Direct Commercialization Costs for such Product in that
country. For the avoidance of doubt, Net Profits shall be calculated on a Product-by-Product and
calendar quarter-by-quarter basis. To the extent Net Sales exceed Direct Commercialization Costs
for the relevant calendar quarter, such amount of difference shall be deemed Net Profits, and to
the extent Direct Commercialization Costs exceed Net Sales for the relevant calendar quarter, such
amount of difference shall be deemed Net Losses. For clarification, with respect to calculating
Net Profits or Net Losses for any unit of Product, the Manufacturing Cost incurred to manufacture
such unit shall be deemed to be incurred in the country and quarter in which such unit is sold.
1.59 Net Profits Payment shall have the meaning set forth in Section 6.5.1(b) hereof.
1.60 Net Sales shall mean, with regard to a Product, on a cash basis, for any period, Gross
Sales less the following reasonable and customary deductions:
(a) normal and customary trade, cash and other discounts, allowances and credits allowed and
actually taken directly with respect to sales of the Product;
(b) credits or allowances actually granted for damaged goods or returns or rejections of the
Product;
(c) taxes or other governmental charges imposed directly on the sales of Products, including
value added taxes or other similar governmental charges, but not including any tax levied with
respect to income;
(d) freight, postage, shipping, and insurance charges; and
(e) charge back payments and government rebates allowed and taken.
1.61 Non-NDA Trial shall mean any clinical trial, or part of a clinical trial, of a Product
that is not designed or required to procure data necessary for the acceptance of filing of an NDA.
Non-NDA Trials may be conducted before or after the filing of an NDA, before Approval or at any
time after Approval. Non-NDA Trials shall specifically not include (that is, costs associated with
such trials may be deemed Direct Development Costs) any (i) clinical trials designed to obtain
favorable labeling at the time of initial Approval, (ii) post-Approval or post-marketing trials
required by the FDA or other regulatory authority in granting a conditional Approval, or (iii)
trials required to obtain Approval for pediatric use of a Product, whether such trials are prior or
subsequent to the filing of an NDA or Approval.
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1.62 Intentionally omitted.
1.63 Option Compound shall mean a compound, other than a compound that is a corticosteroid,
that (i) Alimera has a right to use and (ii) is selected by Alimera under an Alimera Compound
Option set forth in Section 5.8; provided, however, that Option Compound shall not include any
compound that is included in a license or option by CDS to a Third Party, or is included in a term
sheet with a Third Party, as of the date on which Alimera notifies CDS under Section 5.8 that
Alimera wishes to exercise an Alimera Compound Option with regard to such compound. For the
avoidance of doubt, a compound, as used herein, shall be a specific compound and shall not be a
category or class of compounds.
1.64 Option Product shall mean (i) a product that meets the definition of Product in
Section 1.77, except that the term Option Compound shall be substituted in place of
corticosteroid, and (ii) clause (B)(2) and the third sentence of Section 1.77 shall be omitted.
1.65 Option Term shall mean the period commencing on the Effective Date and expiring on the
earliest of (i) [*] months after the Effective Date; (ii) the date on which [*]; and (iii)
Alimeras exercise of all [*] Alimera Compound Options under Section 5.8.
1.65A Original Agreement shall have the meaning set forth in the recitals.
1.66 Intentionally omitted.
1.67 Party shall mean CDS or Alimera.
1.68 Patent Rights shall mean any United States or foreign patent or patent applications,
any patents issuing from such patent applications, and any continuations, continuations-in-part to
the extent specifically directed to subject matter specifically described in such patent
applications, divisionals, renewals, reexaminations, reissues, extensions or provisional
applications of any of the foregoing and any corresponding patent, patent application, utility
model, inventor certificate, registration or the like in any country of the world with respect to
the foregoing.
1.69 Permitted Subcontractor shall mean a Third Party or an Affiliate that has been awarded
a subcontract with one Party in accordance with Section 3.7 hereof.
1.70 Phase I Clinical Trial shall mean a clinical trial as defined in 21 C.F.R. 312.21(a),
as may be amended from time to time, or any foreign equivalent thereto.
1.71 Intentionally omitted.
1.72 Phase II Clinical Trial shall mean a clinical trial as defined in 21 C.F.R. 312.21(b),
as may be amended from time to time, or any foreign equivalent thereto.
1.73 Phase III Clinical Trial shall mean a clinical trial as defined in 21 C.F.R. 312.21(c),
as may be amended from time to time, or any foreign equivalent thereto.
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1.74 Pre-Existing Clinical IP shall mean [*].
1.75 Primary Contact Person shall have the meaning set forth in Section 3.4.
1.76 Prime shall have the meaning set forth in Section 6.5.1(b).
1.77 Product shall mean a drug delivery device that meets all of the following criteria: (A)
it has a core within a polymer layer that contains a drug in a form other than a CODRUG and no
other active ingredient, where the core does not include a CODRUG, (B) it is Approved or designed
to be Approved (1) to deliver a corticosteroid and no other active ingredient by implantation,
injection, or other direct delivery method to the posterior portion of the eye, or (2) to treat DME
by delivering a compound or formulation by implantation, injection, or other direct delivery method
other than through an incision smaller than that required for a 25 gauge needle, (C) it does not
fall under the definition of Excluded Product, and (D) it is Approved or designed to be Approved
for a particular indication in a particular country. For clarification, eye drops or other topical
administration and tablets or other oral administration shall not be deemed to be direct delivery
to the posterior portion of the eye. For example, Product shall specifically include a drug
delivery device that meets all of the following criteria (such product sometimes referred to as the
First Product): (1) consists of [*]; (2) is Approved or designed to be Approved to be
administered [*]; (3) is Approved or designed to be Approved [*]; and (4) is Approved or designed
to be Approved for a particular indication in a particular country. For clarification, with regard
to the same drug delivery device described above, each indication in each country shall be a
separate Product. By way of non-limiting examples, with regard to a particular drug delivery
device X, (i) X for DME and X for age-related macular degeneration shall be two different Products,
and (ii) X for DME in the United States and X for DME in Japan shall be two different Products.
The Parties acknowledge that Medidur FA is a First Product.
1.78 Profitability Date shall mean, with respect to each Product, the first day of the first
calendar quarter in which Net Profits are realized for such Product.
1.79 Recall shall mean any recall of a product or any related actions (e.g., market
withdrawal and stock recovery). For avoidance of doubt, Recall includes recall of product
packaging.
1.80 Right of Access to Clinical IP shall mean the right to reference, cross-reference,
review, have access to, incorporate and use Clinical IP in any regulatory applications or filings,
any patent filings, or for any research or development purpose.
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1.81 Selling Expenses shall mean Direct Costs incurred, on a cash basis, by Alimera for the sales
force who are employees of Alimera or its Affiliates, all only pursuant to the Commercialization
Budget; provided, however, that if a portion of time of Alimera Majority Time Individuals involved
in Detailing Products is devoted to Detailing products other than Products, then only the following
percentages of the Alimera Majority Time Individuals time spent in Detailing shall be Direct
Commercialization Costs:
(a) [*] if the Product is carried in the sole Detail position, in which the Product is the
only product presented during a Detail and the key Product attributes are verbally presented in a
presentation delivered during the Detail by Alimeras or its Affiliates sales representative;
(b) [*] if the Product is carried in the primary Detail position, in which key Product
attributes are verbally presented in the first position during a Detail, where the Product is given
primary emphasis (i.e., an emphasis that is more important than the emphasis given to any other
product presented), and where no more than three products are presented during such Detail;
(c) [*] if the Product is carried in the secondary Detail position, in which key Product
attributes are presented in the second position during a Detail, where the Product is given
significant but not primary emphasis, and where no more than three products are presented during
such Detail;
(d) [*] if the Product is carried in the tertiary Detail position, in which key Product
attributes are presented in the third position during a Detail, where the Product is given some
emphasis, and where three products are presented during such Detail;
provided that (1) if more than one Product is the subject of a Detail, the foregoing percentages
shall be cumulative, not to exceed 100% (e.g., if one Product is carried in the primary Detail
position and another Product is carried in the secondary Detail position, then [*] of the sales
force time shall be a Direct Commercialization Cost with respect to the first Product and [*] shall
be a Direct Commercialization Cost with respect to the second Product), and (2) if there are more
than three products presented in a Detail, the percentages specified in (b)-(d) above shall be
multiplied by a fraction, the numerator of which is three and the denominator of which is the
number of products presented in that Detail (e.g., if a Product is carried in the secondary Detail
position and there are four products presented during such Detail, then [*] is multiplied by
3
/
4
and
[*] of the sales force time shall be a Direct Commercialization Cost with respect to that Product).
For clarification, the costs of Majority Time Individuals shall be determined according to the
amount of Majority Time Individuals time actually spent on Detailing multiplied by the applicable
percentage as specified in this Section 1.81 above. For example, if a Majority Time Individual
spends twenty-five (25) hours on Detailing, in which Products are carried in the primary Detail
positions, then Direct Commercialization Costs attributable to such Detailing shall be the Direct
Costs of 25 hours multiplied by [*] (as may be further adjusted as specified above). For further
clarification, Selling Expenses relating to a Product may be incurred prior to First Commercial
Sale of such Product (e.g., for sales force training); in such event, the percentages referred to
in this Section 1.81 initially shall be based on the Detail position for the relevant Product
contemplated in the Commercialization Budget. For example, if the Product is
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projected in the Commercialization Budget to be the sole product Detailed by the sales force, then
initially [*] of the Direct Costs associated with the sales force shall be allocated as Selling
Expenses. In the event that the actual Detail position for a Product differs from that projected
in the Commercialization Budget, then the amount of the Direct Costs that are included as Direct
Commercialization Costs shall be adjusted subsequently to reflect the actual Detail position.
1.82 Term shall have the meaning set forth in Section 11.1.
1.83 Territory shall mean all countries and territories worldwide.
1.84 Third Party shall mean any person or entity other than CDS, Alimera or their respective
Affiliates.
1.85 UKRF shall mean the University of Kentucky Research Foundation.
1.86 UKRF Costs shall mean all royalties, milestones and other fees due to UKRF related to a
Product pursuant to the UKRF Licenses.
1.87 UKRF Licenses shall mean the licenses set forth in
Exhibit 1.87
, as may be
amended from time to time consistent with Section 7.9, full and complete copies of which agreements
in effect as of the Effective Date have been provided to Alimera.
1.88 Valid Claim shall mean a claim of an issued and unexpired patent, or a claim of a
pending patent application, which has not been withdrawn, cancelled, abandoned, disclaimed, or held
permanently revoked, unenforceable or invalid by a decision of a court or other governmental agency
of competent jurisdiction, unappealable or unappealed within the time allowed for appeal.
ARTICLE 2 Intentionally omitted
ARTICLE 3 DEVELOPMENT ACTIVITIES
3.1
General
. Subject to Sections 3.1.1 and 3.1.2 below, (a) CDS and Alimera shall
undertake development activities for the Products in the Collaboration Field in accordance with
this Agreement and (b) during the course of performing such activities, CDS and Alimera shall
communicate regularly and shall assume certain rights and responsibilities for the development of
the Products in the Collaboration Field in accordance with this Agreement.
3.1.1.
Limitation on CDS Development
. Notwithstanding any other provision in this
Agreement to the contrary (including any provision of Article 2 or 3) and except as the Parties
mutually agree in writing, CDS will have no obligation relating to the development of (a) Medidur
FA after December 31, 2009 or (b) any Product other than Medidur FA at any time on or after the
Amendment Effective Date.
3.1.2.
CDS Development Responsibilities and Development Payments
. Subject to Section 3.1.1
and this Section 3.1.2, CDS shall be responsible for the performance of only the following
development activities: (a) providing clinical supply of Medidur FA as necessary for:
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(i) the FAME trial (i.e., the fluocinolone acetonide in macular edema trial) ongoing as of the
Amendment Effective Date to the extent set forth in protocol C-01-05-001 under IND # 72056, (ii)
the PK trial ongoing as of the Amendment Effective Date to the extent set forth in protocol
C-01-06-002 under IND # 72056, (iii) an upcoming wet AMD trial for up to thirty (30) patients, (iv)
an upcoming vein occlusion trial for up to thirty (30) patients, and (v) one additional marketing
support trial, similar to the wet AMD and vein occlusion trials, for up to thirty (30) patients;
(b) with respect to Medidur FA, performing the support expressly set forth on
Exhibit
3.1.2A
hereto for: (i) stability studies for clinical supply of Medidur FA, and (ii) ongoing
preclinical work; and (c) performing the technology transfer activities with respect to Medidur FA
set forth in Section 3.11. CDS will be reimbursed by Alimera for the costs associated with CDS
Development Activities pursuant to this Section 3.1.2, and such payments shall be deemed Direct
Development Costs, provided that all such reimbursed costs associated with the wet AMD trial, the
vein occlusion trial and the additional marketing support trial shall be deemed Direct
Commercialization Costs to the extent such trials are Non-NDA Trials.
CDS Development Budget
. Attached hereto as
Exhibit 3.1.2B
as of the Amendment Effective
Date is CDS initial budget relating to CDS Development Activities (the
CDS Development
Budget
). CDS shall from time to time provide to Alimera an updated written budget relating to
CDS Development Activities promptly after CDS becomes aware of any discrepancy between the cost of
performing the CDS Development Activities and the amount included in the current CDS Development
Budget, which updated budget will become the new CDS Development Budget hereunder following good
faith discussions and agreement by the Parties in writing on the content thereof.
CDS Reporting and Reimbursement
. During the course of the CDS Development Activities as described
in this Section 3.1.2, within fifteen (15) calendar days after the end of each calendar month, CDS
shall report in writing to Alimera a detailed itemization (including copies of any third party
invoices) of the actual costs incurred by CDS in the preceding calendar month. Alimera shall
reimburse CDS the actual costs on a monthly basis as follows: to the extent CDS incurred such costs
in a calendar month that are within (and do not exceed) the costs in the applicable CDS Development
Budget, CDS shall issue an invoice to Alimera for the full amount of such costs incurred and
Alimera shall pay to CDS the amount of such invoice (the
Development Payment
) within
thirty (30) calendar days after delivery of the invoice.
Non-Payment by Alimera
. In the event that (i) Alimera fails to make a timely payment of all or a
portion of any of its Development Payments and (ii) Alimera fails to pay all such payments under
this Agreement within thirty (30) days after receiving written notice from CDS of such outstanding
payments (provided that Alimera has a one-time right to use sixty (60) days to cure hereunder),
then, automatically and without further action by CDS or Alimera, the Fifty/Fifty Amendments shall
be deemed to have been made, which amendments shall apply to all payments due or paid thereafter.
The foregoing states the entire liability of Alimera with respect to its failure to make a timely
payment of all or a portion of any of its Development Payments (but will not limit Alimeras
liability for any failure to pay CDS Net Profits payments, which is addressed in Section
6.5.1(c)(I)).
3.1.3.
Alimera Development Responsibilities
. Alimera shall use Commercially
Reasonable Efforts to develop the First Product for at least one indication in the Collaboration
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Field. Before January 31
st
of each calendar year, Alimera shall provide CDS with a
written status update of its Alimera Development Activities. Alimera shall have sole
decision-making authority with respect to the development of Products, consistent with its other
obligations under this Agreement.
3.2
Regulatory Approvals.
3.2.1.
Regulatory Filings
. Unless otherwise agreed in writing by the Parties, Alimera
shall be responsible for all U.S. and non-U.S. regulatory matters, including filing an IND and NDA
for the First Product, provided that no regulatory filings by Alimera shall include any
Pre-Existing Clinical IP. Alimera shall be responsible for obtaining Approvals and for subsequent
maintenance of Approvals. For all regulatory filings made in the name of Alimera, Alimera shall
have the sole authority and responsibility, for submitting supplements, communications, annual
reports, adverse event reports, manufacturing changes, supplier designations and other related
filings to, and for communicating with, the FDA and other regulatory authorities. Alimera shall
provide CDS with copies of all substantive submissions to (which may be in draft form), and all
correspondences from, the FDA or other regulatory authorities which relate to Products.
3.2.2.
Manufacture-related Activities
. Alimera shall be responsible for preparing and
submitting all documentation to regulatory authorities regarding the manufacture of the Product for
commercial sale necessary to obtain Approvals for such Product. Alimera shall be responsible for
all activities related to pre-Approval inspections of Alimeras (or its subcontractors)
manufacturing facility. Alimera shall have the right to inspect and audit CDS manufacturing
facility and related records and its operations, in each case solely to the extent related to
Medidur FA, upon reasonable notice. Any information obtained by Alimera during such visits shall
be treated as Confidential Information in accordance with Article 8 of this Agreement.
3.2.3.
Documentation
. Each Party shall maintain all records, including, but not
limited to, batch records and supporting documentation required by the FDA and other applicable
regulatory authorities with respect to each Product for the periods of time required by such
authorities. Alimera shall provide a copy of all such records to CDS within ten (10) Business Days
of reasonable request by CDS. Within ninety (90) days after the Amendment Effective Date, CDS
shall provide a copy of all such records that relate to Medidur FA to Alimera (to the extent such
records have not previously been provided by CDS to Alimera). In addition, within thirty (30) days
after the end of each calendar quarter following the Amendment Effective Date, CDS shall provide to
Alimera a copy of all such records that relate to Medidur FA and were generated during such
calendar quarter. Without limiting any other provision of this Agreement, upon at least ten (10)
days prior written notice, during regular business hours, each Party shall provide the other Party
with reasonable access to documents and other materials Controlled by the other Party that are
useful in the regulatory filings and maintenance of Approvals for Medidur FA in the Territory.
3.2.4.
Reporting
. Each Party shall use Commercially Reasonable Efforts to immediately
provide notice to the other Party (and shall in any event provide such notice within five (5) days)
of: (a) discovery by such Party of any event that triggers a filing requirement with
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FDA or other regulatory authorities with respect to any Product; and (b) any requirements that FDA
may impose with respect to the Approval (including, but not limited to, additional clinical trials)
and all FDA inquiries requiring a response with respect to any Product.
3.2.5.
Meetings
. In connection with Sections 3.2.1 through 3.2.4 above, Alimera shall
provide CDS with notice of all meetings, conferences, and discussions (including, but not limited
to, advisory committee meetings and any other meeting of experts convened by FDA or other
regulatory authorities concerning any topic relevant to Medidur FA) scheduled with FDA or such
other regulatory authorities concerning any regulatory matters relating to the Product within five
(5) days after Alimera receives notice of the scheduling of such meetings, conferences, or
discussions.
3.3
Performance
.
3.3.1.
Commercially Reasonable Efforts
. Subject to Section 3.1.1 and 3.1.2, each
Party shall use Commercially Reasonable Efforts to conduct all development activities and
responsibilities assigned to it under this Agreement.
3.3.2. Intentionally omitted.
3.4
Primary Contact Persons
. As of the Amendment Effective Date, CDS has designated
[*] CDS primary contact person and Alimera has designated [*] as Alimeras primary contact person
(each, a
Primary Contact Person
). The Primary Contact Persons shall be responsible for
the day-to-day interactions between the Parties related to Development Activities and oversight of
the day-to-day operations of these activities. The Primary Contact Persons shall attempt to
resolve any disputes that arise during the course of performing such activities. If the Primary
Contact Persons cannot resolve any such dispute within thirty (30) days (or such longer reasonable
period of time as they may agree) after their initial discussion of such issue, the dispute shall
be resolved in accordance with Section 12.7. Each Party may change its Primary Contact Person upon
written notice to the other Party.
3.5
Availability of Employees
. Each Party agrees to make its employees involved in
the conduct of the Development Activities related to Medidur FA reasonably available upon
reasonable advance notice and during business hours at their respective places of employment to
consult with the other Party on issues related to Medidur FA, including, but not limited to,
regulatory, scientific, technical and clinical testing issues, arising under Development Activities
and in connection with any request from any regulatory agency.
3.6
Visit of Facilities
. Subject to the provisions of Article 8, each Party shall
permit the other Party or the representatives of the other Party to visit, upon reasonable notice
and at reasonably acceptable times, their respective facilities where the Development Activities
are being conducted, and to consult informally, during such visits and by telephone, facsimile and
email, with their respective personnel performing work on the Development Activities in connection
with Medidur FA. Any information obtained by a Party during such visits shall be treated as
Confidential Information in accordance with Article 8 of this Agreement. Each Party shall use
Commercially Reasonable Efforts to obtain comparable inspection rights with respect to
subcontractors.
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3.7
Subcontracts
. Subject to the provisions of Article 8 and Section 7.3 hereof, each
Party may subcontract portions of the development activities to be performed by it to
subcontractors, provided that CDS shall obtain the prior written consent of Alimera to subcontract
its development activities, which consent shall not be unreasonably withheld or delayed (each such
subcontractor, a
Permitted Subcontractor
). Any subcontract entered into pursuant to this
Section 3.7 shall be consistent with the terms of this Agreement, including providing for
intellectual property ownership as set forth herein and all confidentiality obligations of the
Parties.
3.8
Information Sharing
. Each Party shall provide the other Party with such
information related to the providing Partys Development Activities as the other Party may
reasonably request.
3.9
Records
. The Parties will make available to one another all results of the work
conducted pursuant to the Development Activities, will promptly disclose to one another such
results to the extent they are material, and shall keep such records as described in this Section
3.9 or elsewhere in this Agreement; provided, however, that each Party shall maintain in
confidence, and shall limit its use of, such results and records in confidence in accordance with
Article 8 hereof and shall not use such results or records without written consent of the other
Party except to the extent provided in Section 5.9 or other provisions of this Agreement. The
Parties shall maintain records of the results in sufficient detail and in good scientific manner
appropriate for patent purposes and FDA filings and as will properly reflect all work done and
results achieved in the performance of the Development Activities (including, but not limited to,
all data in the form required to be maintained under any applicable governmental regulations).
Such records shall include books, records, reports, research notes, charts, graphs, comments,
computations, analyses, recordings, photographs, computer programs and documentation thereof,
computer information storage means, samples of materials and other graphic or written data
generated in connection with the Development Activities. Each Party hereby grants the other Party
the right to inspect and copy such records upon reasonable advance notice by the other Party for
purposes of this Agreement.
3.10
Manufacturing for Clinical Supply Requirements
. CDS and/or its Permitted
Subcontractors shall use Commercially Reasonable Efforts to provide an adequate and timely clinical
supply, but limited to such quantities and such type and specification as set forth in Section
3.1.2 and all in accordance with GMP and/or ISO standards, to the extent applicable for clinical
trials in the relevant country, and other applicable laws and regulations. The Manufacturing Costs
for such supply shall be reimbursed by Alimera in accordance with Section 3.1.2 and shall be Direct
Development Costs (except that the Manufacturing Costs associated with the wet AMD trial, the vein
occlusion trial and the additional marketing support trial shall be deemed Direct Commercialization
Costs to the extent such trials are Non-NDA Trials). All Clinical Supply Requirements (beyond
those listed in Section 3.1.2) will be Alimeras sole responsibility.
3.11
Technology Transfer by CDS
. Upon the earlier of: (i) written request by Alimera to
CDS and (ii) [*] prior to [*], CDS and/or its Permitted Subcontractors shall be responsible for
providing to Alimera all information, support and materials that are in each case in CDS Control
and reasonably
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necessary to enable Alimera and/or its subcontractors to manufacture and perform quality testing on
Medidur FA to satisfy Commercial Supply Requirements, all to the extent set forth in the CDS
Development Budget and reimbursed pursuant to Section 3.1.2. CDS and/or its Permitted
Subcontractors shall be responsible for the following activities in association therewith (to the
extent set forth in the CDS Development Budget and any costs of which will be reimbursed by Alimera
in accordance with Section 3.1.2): (a) assist with technology transfer to commercial manufacture
site, (b) assist with manufacturing scale-up and validation activities, and (c) transfer analytical
methods to commercial manufacture site for stability monitoring. In addition, within ninety (90)
days after the Amendment Effective Date, CDS shall provide to Alimera a Pharmaceutical Development
Report, the form and content of which should follow the ICH Guidance documents Q8 Pharmaceutical
Development (dated May 19, 2006) and draft Q8(R1) Pharmaceutical Development Revision 1 (dated
January 10, 2008). Within thirty (30) days after receipt of such report, Alimera shall notify CDS
in writing whether such report is accepted or rejected (provided that any rejection must be
reasonable). If Alimera notifies CDS of its acceptance or fails to notify CDS of its reasonable
rejection within the thirty (30) day time period, then such report is deemed to be accepted. If
Alimera reasonably rejects the report, then it shall notify CDS in writing of its reasons, with
reasonable specificity, for the rejection, and CDS shall use commercially reasonable efforts to
revise the report to address such reasons within ten (10) Business Days following receipt of such
rejection notice and reasons. CDS shall submit the revised report to Alimera for another review in
accordance with the acceptance procedures and timeline specified above. Alimera shall have primary
responsibility, with reasonable input and assistance from CDS, for the preparation of the
Chemistry, Manufacturing and Controls (the
CMC
) section of Alimeras IND and NDA filings.
Technology transfer shall be effected in accordance with GMP and ISO guidelines, to the extent
applicable for Commercialization in the relevant country.
ARTICLE 4 COMMERCIALIZATION
4.1
Commercialization of Product(s) in the Collaboration Field
. Alimera is granted a
license under this Agreement to market, distribute and/or sell any Product in the Collaboration
Field in the Territory, including, but not limited to, the right to conduct marketing,
reimbursement (e.g., seeking and maintaining pricing and reimbursement approvals from Third Party
payors), sales and distribution activities. Alimera may subcontract with any Affiliate or Third
Party to perform any of the foregoing activities in accordance with Section 5.3. Alimera shall
have sole decision-making authority with respect to the Commercialization of Products, consistent
with its other obligations under this Agreement.
4.2
Commercialization Budget
. Alimera shall have sole responsibility for implementing
Commercialization based on Alimeras commercially reasonable expectations of the resources and
expenses required to Commercialize each Product in the Territory, taking into account industry
standards and the competitive environment in effect from time to time with regard to each Product.
Alimera shall prepare a budget (
Commercialization Budget
) that shall set forth, on a
rolling two (2) year basis, the projected sales and the projected Direct Commercialization Costs
broken down on a calendar quarter-by-quarter and Product-by-Product basis. Alimera shall prepare
semi-annual updates to the Commercialization Budget prior to June 30 and December 31 of each year
in which Alimera has a Commercialization Budget or engages in Commercialization of any Products,
and shall provide CDS with copies of such semi-annual
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updates. Prior to finalizing the initial Commercialization Budget and prior to finalizing each
subsequent updated Commercialization Budget due by December 31, Alimera shall arrange for the
Parties to have an in-person meeting (or, at CDS option, a meeting by telephone, videoconference
or other means), during which an executive from Alimera shall present in reasonable detail its
planned Commercialization activities and Commercialization Budget for the time period covered in
the subject Commercialization Budget and CDS shall have opportunities to ask questions and to
present its comments on the applicable Commercialization Budget. It is understood and agreed that
Alimera shall have sole decision-making authority with respect to the Commercialization Budget,
consistent with its other obligations under this Agreement. Alimera shall provide an initial draft
Commercialization Budget to CDS on the Amendment Effective Date.
4.3
Diligence
. Alimera shall use Commercially Reasonable Efforts to Commercialize the
First Product for at least one indication in the Collaboration Field in [*] (collectively, the
Major Markets
) and in all countries outside the Major Markets, except for any country
outside the Major Markets as to which Alimera has made an election pursuant to Section 4.3.9. For
purposes of this Section 4.3 (including Subsections 4.3.1- 4.3.9), the term Alimera shall include
Alimera and any of its Affiliates, sublicensees and subcontractors. Without limiting the
foregoing, Alimera agrees to the following specific obligations:
4.3.1. Alimera shall effect a First Commercial Sale in the United States of the first First
Product to receive Approval in the United States (the
Alimera First Product
) no later
than [*] after obtaining such Approval. Alimeras nonperformance of an obligation in this Section
4.3.1 shall be excused to the extent directly attributable to a disruption in Commercial Supply
Requirements, but only to the extent that such disruption and the impact thereof is outside the
control of Alimera.
4.3.2. With respect to Commercialization of the Alimera First Product, Alimera shall expend
not less than [*] in Direct Commercialization Costs (excluding Manufacturing Costs) on or before
[*], provided that if Alimera is making Commercialization expenditures substantially in accordance
with a Commercialization Budget designed to provide for such level of expenditures and the FDA
provides Approval sooner than reasonably contemplated by the Commercialization Budget, then the
failure to spend at least [*] in Direct Commercialization Costs (excluding Manufacturing Costs) on
or before [*] shall be excused.
4.3.3. With respect to Commercialization of the Alimera First Product, Alimera shall expend
not less than [*] in Direct Commercialization Costs (excluding Manufacturing Costs, but including
expenditures referred to in Section 4.3.2) on or before [*].
4.3.4. With respect to Commercialization of the Alimera First Product, Alimera shall expend
not less than [*] in Direct Commercialization Costs (excluding Manufacturing Costs) between [*] and
[*].
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4.3.5. Alimera shall cause Gross Sales of the Alimera First Products in the United States during the
[*] period referred to in Section 4.3.4 to be at least [*] more than Gross Sales of the Alimera
First Products in the United States during the immediately preceding [*] period. Alimeras
nonperformance of an obligation in this Section 4.3.5 shall be excused to the extent directly
attributable to (1) one or more of the following events, but only to the extent that such event is
outside the control of Alimera: a breach of this Agreement by CDS, a disruption in Commercial
Supply Requirements, or a Product Recall, or (2) one or more of the following events, but only to
the extent that such event materially and adversely affects the market for the First Product: FDA
action or regulatory guidance affecting Product, a change in reimbursement rates or policies
relating to Product, or the introduction of one or more competitive products or services that
provide for superior dosing, safety or efficacy.
4.3.6. If Alimera fails to meet any spending obligation set forth in Sections 4.3.2, 4.3.3 or
4.3.4 and such nonperformance is not excused, Alimera may cure such failure by paying to CDS an
amount equal to [*]. Alimeras right to cure under this Section 4.3.6 shall terminate upon a
Change of Control of Alimera.
4.3.7. If Alimera fails to achieve the Gross Sales obligation set forth in Section 4.3.5,
Alimera may cure such failure by paying to CDS an amount equal to the amount of Net Profits that
would have been payable to CDS pursuant to Section 6.5.1 for the relevant period had Gross Sales
been equal to [*] (the
Extrapolated Net Profits
). For purposes of this Section 4.3.7,
the Extrapolated Net Profits for the [*] period referred to in Section 4.3.4 shall be determined by
the following formula: [*].
4.3.8.
Non-Performance
.
(a) In the event the Fifty/Fifty Amendments have not previously been made in accordance with
Sections 3.1.2, 4.3.8(a), 4.4, 6.2B or 6.5.1(c)(II),if Alimera fails to meet any of its obligations
under subsections 4.3.1 4.3.5 and does not cure such failure in accordance with this Agreement
within thirty (30) days of receiving a written notice from CDS requesting Alimera to cure such
failure (provided that Alimera has a one-time right to use sixty (60) days to cure hereunder),
then, automatically and without further action by CDS or Alimera, the Fifty/Fifty Amendments shall
be deemed to have been made, which amendments shall apply to all payments due or paid thereafter.
(b) In the event the Fifty/Fifty Amendments have previously been made in accordance with
Sections 3.1.2, 4.3.8(a), 4.4, 6.2B or 6.5.1(c)(II), if Alimera fails to meet any of its
obligations under subsections 4.3.1 4.3.5 and does not cure such failure in accordance with this
Agreement within thirty (30) days of receiving a written notice from CDS requesting Alimera to cure
such failure (provided that Alimera has a one-time right to use sixty (60) days to cure hereunder),
then CDS may choose one of the following two options: (a) terminate this Agreement, or (b)
terminate this Agreement only with respect to the Alimera First Product. In
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the event of termination pursuant to this Section 4.3.8, Alimera shall not, for a period of [*]
from the date of such termination, Develop or Commercialize, or license or otherwise assist an
Affiliate or a Third Party to Develop or Commercialize, any product that is Approved or designed to
be Approved (1) to [*] or (2) to deliver a [*]. For purposes of this Section 4.3.8, the term
Develop shall mean performance of human clinical trials for a product. In the event of
termination of this Agreement with respect to the Alimera First Product, CDS shall no longer be
bound by Section 5.1.2(1), (2), (3) or (4) with respect to such Product. After termination
pursuant to this Section 4.3.8 and in the event that CDS (i) makes a First Commercial Sale of the
Alimera First Product in the United States and (ii) reaches the CDS Profitability Date for the
Alimera First Product, CDS shall thereafter pay Alimera [*] of CDS Net Income realized by CDS in
the United States with respect to such Product until such time as the sum of all such payments plus
the revenues otherwise realized by Alimera with respect to such Product in the United States equal
the amount of Direct Development Costs and Direct Commercialization Costs previously incurred, on a
cash basis, or reimbursed by Alimera with respect to such Product in the United States; provided,
however, that in the event that there are CDS Net Losses in any calendar quarter after the CDS
Profitability Date, any payment to Alimera shall be offset by such CDS Net Losses.
4.3.9. For clarification, Alimera may elect not to engage in Commercialization in any country
outside the Major Markets. If Alimera determines not to engage in Commercialization of any Product
in any country outside the Major Markets, Alimera shall so notify CDS. At any time after receipt
of such notice, CDS may by written notice to Alimera, effective upon the giving of such notice,
terminate Alimeras license(s), and rights to Commercialize, in such country. Thereafter CDS may,
in its sole discretion, directly or through an Affiliate or Third Party, Commercialize the relevant
Product(s) in such country. In the event of such termination with respect to a country, CDS shall
no longer be bound by Section 5.1.2(1), (2), (3) or (4) with respect to such country.
4.3.10 The Parties acknowledge and agree that Alimeras obligations in Sections 4.3.1 through
4.3.5 reflect the Parties assumption that the first First Product Approval in the United States
will be for DME or AMD. If at any time a Phase III Clinical Trial is initiated with respect to the
First Product for an indication other than DME or AMD prior to the Approval of the First Product
for DME or AMD, then the Parties will discuss in good faith Alimera obligations paralleling those
in Sections 4.3.1 through 4.3.5 with respect to such non-DME and non-AMD First Product (should it
then be Approved). If such non-DME and non-AMD First Product is then Approved before the First
Product for DME or AMD is Approved, the portions of such obligations paralleling Sections 4.3.2
through 4.3.4 that are agreed-upon by the parties with respect to such non-DME and non-AMD First
Product will be deemed subtracted from the numbers set forth in Sections 4.3.2 through 4.3.4,
respectively, with respect to the First Product for DME or AMD to be Approved (the intent of the
Parties being that Alimera will not be obligated to spend more than the amounts set forth as of the
Amendment Effective Date in such Sections cumulatively for the two Products discussed above).
4.4
Costs of Commercialization
. Regardless of the Profitability Date for a Product,
Alimera shall have sole responsibility for paying all costs and expenses incurred in connection
with Commercializing such Product in the Collaboration Field in the Territory, including, but not
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limited to, Direct Commercialization Costs; with the exception that CDS shall be responsible
for paying: (a) the CDS Patent Costs paid after the first Product Profitability Date, subject to
Section 7.1.2, (b) all UKRF Costs and (c) insurance premiums paid by CDS to maintain insurance
required by Section 10.4 to the extent such insurance relates to Product (i.e., if insurance
covers risks other than risks related to Commercialization of Products, then only an appropriate
portion of such premiums shall be reimbursed). Alimera shall reimburse CDS for [*] of the amount
described in clauses (a), (b) and (c) of the preceding sentence within thirty (30) days after the
date of invoice from CDS; provided, however, that the amount of the [*] that Alimera reimburses
CDS in any calendar year shall not exceed [*] and that the reimbursement percentage for the amount
described in clause (a) may be less than [*] to the extent provided in Section 7.1.2. The costs
set forth in (a), (b) and (c) of this Section 4.4 for which Alimera has a reimbursement
responsibility shall be collectively referred to herein as the
CDS Commercialization
Costs
. In the event that (i) Alimera fails to reimburse CDS within the time period specified
above, and (ii) Alimera fails to pay all such payments under this Agreement within thirty (30)
days after receiving written notice from CDS of such outstanding payments (provided that Alimera
has a one-time right to use sixty (60) days to cure hereunder), then, automatically and without
further action by CDS or Alimera, the Fifty/Fifty Amendments shall be deemed to have been made,
which amendments shall apply to all payments due or paid thereafter. The foregoing states the
entire liability of Alimera with respect to its failure to make a timely payment of all or a
portion of any of its CDS Commercialization Costs (but will not limit Alimeras liability for any
failure to pay CDS Net Profits payments, which is addressed in Section 6.5.1(c)(I)).
4.5
Manufacturing for Commercial Supply Requirements
. Alimera shall use Commercially
Reasonable Efforts to provide an adequate and timely supply to satisfy Commercial Supply
Requirements. Subject to the terms of this Agreement, Alimera shall have the right to manufacture,
itself or through any Third Party, any Product, under the licenses granted to Alimera pursuant to
Article 5 and in accordance with Section 5.3. Alimera shall be responsible for ensuring that all
such manufacturing is carried out in accordance with GMP and/or ISO standards to the extent
applicable for Commercialization in the relevant country.
4.6
Product Recalls
. Alimera shall have the sole right and responsibility and
authority to carry out any Product Recall, whether or not such Recall is required or requested by a
governmental authority. If any governmental authority having jurisdiction requires or reasonably
requests Alimera to Recall a Product due to a defect in the manufacture, processing, packaging or
labeling of the Product or for any other reason whatsoever, Alimera shall immediately notify CDS.
Alimera shall be responsible for carrying out any Recall as expeditiously as possible and in such a
way designed to cause the least disruption to the sales of the Product and to preserve the goodwill
and reputation attached to the Product and to the names of Alimera and CDS. Alimera agrees to
maintain the appropriate records and procedures to permit a Product Recall. All Direct Costs
associated with any Product Recall, to the extent such costs are not covered by insurance, shall be
Direct Commercialization Costs; provided, however, that in the event that the Product Recall is
required due to Alimeras negligence or misconduct (including a manufacturing quality defect in the
Product) or any other reason within Alimeras control, all such expenses shall be borne solely by
Alimera and, in such event, shall not be Direct Commercialization Costs.
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ARTICLE 5 GRANT OF RIGHTS
5.1
Grant of License by CDS
.
5.1.1.
License to First Product
. Subject to the terms and conditions of this
Agreement, CDS hereby grants to Alimera an exclusive (even as to CDS) right and license under CDS
interest (i.e. subject to the UKRF Licenses) in the CDS Technology, solely to make, have made, use,
offer to sell, sell, and import First Product in the Collaboration Field in the Territory.
5.1.2.
License to Products Other Than First Product
. Subject to the terms and
conditions of this Agreement and the B&L Agreement (wherein CDS granted certain rights to the CDS
Technology), CDS hereby grants to Alimera a non-exclusive right and license under CDS interest
(i.e. subject to the UKRF Licenses) in the CDS Technology, solely to make, have made, use, offer to
sell, sell, and import Products other than First Product in the Collaboration Field in the
Territory, provided that during the Term of this Agreement, and subject to the terms and conditions
of this Agreement and the B&L Agreement, (1) CDS shall not grant a license to any Affiliate or
Third Party under CDS interest in the CDS Technology to make, have made, use, offer to sell, sell,
or import Products in the Collaboration Field in the Territory, (2) CDS shall not itself use the
CDS Technology to make, have made, use, offer to sell, sell, or import Products in the
Collaboration Field in the Territory, (3) CDS shall not grant a license to any Affiliate or Third
Party under CDS interest in the CDS Technology to make, have made, use, offer to sell, sell, or
import in the Collaboration Field in the Territory any product that otherwise meets the definition
of Product under Section 1.77 except that such product is Approved or designed to be Approved to
deliver [*], and (4) CDS shall not itself use the CDS Technology to make, have made, use, offer to
sell, sell, or import in the Collaboration Field in the Territory any product that otherwise meets
the definition of Product under Section 1.77 except that such product is Approved or designed to be
Approved to deliver [*].
5.1.3
License to Exhibit 1.11B Patents
. Subject to the terms and conditions of this
Agreement and only to the extent permitted by the B&L Agreement, CDS hereby grants to Alimera a
non-exclusive right and license under any interest CDS may have from time to time in the United
States and foreign patents and patent applications listed in
Exhibit 1.11B
, solely to make,
have made, use, offer to sell, sell, and import Products in the Collaboration Field in the
Territory, except for products that would fall under the definition of Licensed Products in the B&L
Agreement.
5.2
Grant of License by Alimera
. Subject to the terms of this Agreement, Alimera
hereby grants to CDS a right and license under Alimeras interest in the Alimera Know-How as
necessary for CDS to perform its obligations under this Agreement, including, but not limited to,
its performance of the CDS Development Activities.
5.3
Sublicenses and Subcontracts
. Subject to the terms and conditions of this
Agreement, Alimera may grant sublicenses and subcontracts to its Affiliates or to Third Parties to
perform Commercialization activities for Products under the licenses granted pursuant to
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Sections 5.1.1 and 5.1.2 of this Agreement, provided that for sublicenses or subcontracts to which
any Alimera Affiliate is a party or which include Bundling (as defined below), Alimera shall obtain
CDS prior written consent, which consent shall not be unreasonably withheld or delayed. For the
purposes of this Section 5.3,
Bundling
is a situation in which all three of the following
exist: (i) the offering (whether simultaneously or not) by Alimera or its Affiliates to a Third
Party, or by a Third Party to Alimera or its Affiliates, of any rights, goods or services with
respect to a Product (including sale of Product itself); (ii) the offering (whether simultaneously
or not) by Alimera or its Affiliates to a Third Party, or by a Third Party to Alimera or its
Affiliates, of any other rights, goods or services (including any rights, goods or services
relating to other products Alimera or any of its Affiliates Controls, sells or otherwise disposes
of); and (iii) the consideration for the rights, goods or services with respect to any Product in
such offering is less than would have been customarily accepted by Alimera, or more than would have
been customarily provided by Alimera, if such rights, goods or services with respect to such
Product were offered individually (i.e., separate from the bundle). In the event of a proposed
sublicense or subcontract that requires CDS prior written consent as described in the foregoing,
Alimera shall present CDS with a summary of the principal terms of the proposed transaction,
including the identity of the proposed subcontractor or sublicensee. CDS shall promptly consent or
provide justification for its objection and negotiate in good faith with Alimera regarding terms
that would be satisfactory. Each sublicense or subcontract shall be consistent with the terms and
conditions of this Agreement, shall be at arms length and shall include such terms as are
necessary to permit Alimera to fulfill its obligations hereunder. Alimera shall be responsible for
the operations of any sublicensee or subcontractor relative to this Agreement as if such operations
were carried out by Alimera itself, including, but not limited to, any payment provided for
hereunder, regardless of whether the terms of any sublicense or subcontract provide for such
payment to be paid by the sublicensee or subcontractor directly to CDS. Alimera shall provide CDS
with a copy of each of the following sublicenses or subcontracts promptly after its execution: (i)
those for which CDS consent is required by this paragraph, (ii) those under which any rights are
sublicensed, and (iii) those under which consideration owed by Alimera exceeds $250,000; provided,
however, that Alimera may redact such copies in order to protect the confidential information of
the Third Party. The terms of any sublicense or subcontract, or proposed sublicense or subcontract,
shall be deemed to be Confidential Information of Alimera. CDS acknowledges that Alimera intends
to grant a sublicense of rights to one or more Third Parties for the development and
Commercialization of Product in [*]. For avoidance of doubt, CDS acknowledgement in the preceding
sentence shall not constitute CDS consent, if required before Alimera enters into such a
sublicense pursuant to this Section 5.3. Each sublicensee or subcontractor and its employees,
contractors, consultants, clinical investigators and agents shall be required to assign all
Improvements to Alimera pursuant to Section 7.3.
5.4
Ownership of and Rights to Inventions
. Except as otherwise provided under this
Agreement, ownership of all Inventions made by either Party shall be governed by applicable United
States patent law. Alimera hereby assigns and agrees to assign to CDS a co-ownership interest in
Alimeras interest in any Alimera Improvements, excluding any rights to any trademarks. Subject to
Section 5.5, each Party shall have worldwide rights to use, practice and sublicense any such
Alimera Improvements, without any accounting to, reporting to, or other obligation to, or consent
from, the other Party. If a Party licenses or otherwise transfers to a Third Party any Alimera
Improvements, the other Party shall cooperate and give such consent to such Party to enter into
such license or transfer as may be required to permit such Party to license
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or transfer the Alimera Improvements to the Third Party without a duty to account to such other
Party.
5.5
Limitation on Use
. Notwithstanding any other provisions of this Agreement,
neither Alimera nor any of its Affiliates, subcontractors or sublicensees shall use Alimera
Improvements for any product that falls within the definition of CDS Core Technology, except for
(1) Products (other than any Product(s) for which Alimeras license(s) have been terminated
pursuant to Sections 4.3.8, 4.3.9 or 11.5 of this Agreement) during the Term of this Agreement, (2)
any Product(s) for which CDS has granted a license to Alimera pursuant to Section 11.5.1, during
the term of such license, and (3) Option Products for which CDS has granted a license to Alimera
pursuant to Section 5.8.2, during the term of such license. Alimera shall ensure that any
agreement it enters into with a licensee, sublicensee, acquirer, acquiree, transferee or merger or
consolidation partner of or with Alimera, or acquirer or transferee of substantially all of the
assets or stock of Alimera, or of the assets or business relating to this Agreement or the Alimera
Improvements, includes the same limitation of use as set forth in this Section 5.5, and any such
party shall be bound by such limitation.
5.6
Reservation of Rights
.
5.6.1.
Reservation of Rights by CDS
. All rights and interests not expressly granted
to Alimera are reserved by CDS (the
Reserved Interests
) for itself, its Affiliates and
partners (other than Alimera) and other licensees and sublicensees, including, but not limited to,
the rights to use and grant licenses under the CDS Technology or any other technology owned or
controlled by CDS to make, have made, use, offer to sell, sell, have sold and import products
(other than Products for so long as Alimera has a license to such Products under this Agreement).
It shall not be a breach of this Agreement for CDS, acting directly or indirectly, to exploit its
Reserved Interests in any manner anywhere in the Territory, whether or not such activity is
competitive with the activities of Alimera, including, but not limited to, the research,
development and Commercialization or licensing of others to research, develop and Commercialize
products (other than Products for so long as Alimera has a license to such Products under this
Agreement). Except as otherwise expressly provided in this Agreement, for the avoidance of doubt,
CDS shall be free to enter into an agreement with any Third Party or Third Parties under the CDS
Technology or any other technology owned or controlled by CDS or its Affiliate or a Third Party, to
research, develop and Commercialize any and all products (other than Products for so long as
Alimera has a license to such Products under this Agreement), including, but not limited to,
products that potentially compete in the same indication or product market as a Product, and
products that use or include any or all compounds that are not, at the time of such agreement, the
subject of a license granted pursuant to Section 5.8.3.
5.6.2.
Reservation of Rights by Alimera
. Except as otherwise expressly provided in
this Agreement, for the avoidance of doubt, Alimera shall be free to enter into an agreement with
any Third Party or Third Parties under the Alimera Know-How, the Alimera-Prosecuted Patent Rights
or any other technology owned or controlled by Alimera or its Affiliate or a Third Party, to
research, develop and Commercialize any and all products, including, but not limited to, products
that potentially compete in the same indication or product market as a Product.
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CONFIDENTIAL TREATMENT REQUESTED
5.7
No Grant of Other Technology or Patent Rights
. Except as otherwise expressly
provided in this Agreement, under no circumstances shall a Party hereto, as a result of this
Agreement, obtain any ownership interest or license in or other right to any technology, Know-How,
patents, patent applications, products, or biological materials of the other Party, including, but
not limited to, items owned, Controlled or developed by the other Party, at any time pursuant to
this Agreement. This Agreement does not create, and shall under no circumstances be construed or
interpreted as creating, an obligation on the part of either Party to grant any license to the
other Party other than as expressly set forth herein. Any further contract or license agreement
between the Parties shall be in writing.
5.8
Options to Licenses in the Collaboration Field
.
5.8.1.
Options
. Subject to the terms and conditions of this Agreement and the B&L
Agreement, CDS hereby grants to Alimera three (3) options to obtain a non-exclusive right and
license under CDS interest (i.e. subject to the UKRF Licenses) in the CDS Technology, solely to
make, have made, use, offer to sell, sell and import an Option Product in the Collaboration Field
(each option relating to a particular compound is referred to herein as an
Alimera Compound
Option
, and the three (3) options are collectively referred to herein as the
Alimera
Compound Options
). Each license granted in connection with an Alimera Compound Option will
provide that during the term of such license, and subject to the B&L Agreement, CDS shall not (a)
grant a license to any Affiliate or Third Party under CDS interest in the CDS Technology to make,
have made, use, offer to sell, sell, or import such Option Product in the Collaboration Field in
the Territory, and (b) itself use the CDS Technology to make, have made, use, offer to sell, sell,
or import such Option Product in the Collaboration Field in the Territory during the term of such
license.
5.8.2.
Exercise of Options
. Alimera may exercise, in accordance with this Section
5.8, an Alimera Compound Option at any time during the Option Term, by submitting a written request
to CDS indicating its intent to exercise such option and specifying the specific compound as to
which it wishes to exercise the option. CDS shall have [*] Business Days, after it receives such
notice, in which to notify Alimera in the event that CDS, acting in good faith, has already entered
into an agreement or term sheet with a Third Party that includes the specific compound specified by
Alimera. In that event, Alimera may not exercise the Alimera Compound Option with respect to that
specific compound; provided, however, that if CDS and such Third Party fail to consummate a license
or other agreement relating to such compound or such agreement is terminated during the Option
Term, CDS shall promptly notify Alimera that such compound is no longer subject to any Third Party
rights and Alimera may exercise the Alimera Compound Option with respect to such compound in
accordance with this Section 5.8.2. If CDS has not notified Alimera within the time period set
forth above, then Alimera shall be permitted to exercise the Alimera Compound Option with regard to
that specific compound.
5.8.3.
Grant of License
. Upon the exercise of any Alimera Compound Option under
Section 5.8.2, CDS may choose one of the following two options: (a) the Parties will enter into a
collaboration agreement (the
Option Collaboration Agreement
) to develop and Commercialize
the Option Product on the same terms as the Original Agreement (including, but not limited to, the
same economic terms, including license fee, milestone payment and profit split) and Alimera shall
reimburse CDS for [*] of all costs and expenses CDS incurred
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(excluding any CDS Patent Costs related to Existing CDS Patent Rights or costs that are
Development Costs or otherwise reimbursed by Alimera under this Agreement) with respect to the
Option Compound and the Option Product from the Effective Date of this Agreement until the
effective date of the Option Collaboration Agreement; or (b) CDS shall grant Alimera a license
under the CDS Technology, as then in effect, to make, have made, use, offer to sell, sell and
import the Option Product in the Collaboration Field in the Territory, under the following terms:
(A) CDS shall receive a royalty of [*] of Net Sales of the Option Product in the Territory, and (B)
Alimera shall reimburse CDS [*] with respect to the Option Compound and the Option Product from the
Effective Date of this Agreement until the effective date of such license, and (C) such other
non-financial terms and conditions as set forth on
Exhibit 5.8.3
and other customary terms
and conditions. If the Parties have not entered into an agreement under (a) or (b), as CDS
chooses, within [*] Business Days after Alimera exercises an Alimera Compound Option, then the
matter shall be referred to dispute resolution in accordance with Section 12.7 hereof, and the
terms of such agreement shall be consistent with those specified above in (a) or (b), as
applicable.
5.8.4.
Reservation of Rights by CDS
. The existence of the Alimera Compound Options
under Section 5.8.1 shall not limit the reservation of rights by CDS pursuant to Section 5.6, and
CDS shall have no obligation to refrain from including any or all compounds in a license with a
Third Party or Third Parties, except to the extent of any license that is actually granted to
Alimera pursuant to Section 5.8.3 or to the extent restricted by Sections 5.1.1 and 5.1.2, from and
after the date of such license. In the event that CDS grants Alimera a license to one or more
Option Products pursuant to Section 5.8.3, the reservation of rights by CDS will remain the same as
set forth in Section 5.6.1, except that the phrase Products and Option Products for which CDS has
granted a license to Alimera shall be substituted in place of Products wherever it is used in
Section 5.6.1 during the term of any such license.
5.9
Clinical IP
.
5.9.1.
Right of Access to Clinical IP
. Alimera and CDS shall jointly own all Clinical
IP and shall provide each other with a Right of Access to Clinical IP. Each Party may exercise
this right of access for itself, its Affiliates and any licensees, sublicensees or any other Third
Party without the consent of the other Party.
5.9.2.
Cooperation
. Each Party shall use Commercially Reasonable Efforts, and shall
reasonably cooperate with the other Party, to provide the other Party with such waivers,
irrevocable cross reference letters, assignments, and/or other reasonable documentation as may be
necessary or useful for the other Partys full exercise of any Right of Access to Clinical IP
granted pursuant to this Section 5.9.
5.10
Section 365(n) of the Bankruptcy Code
. All rights and licenses granted under or
pursuant to any section of this Agreement are rights to intellectual property as defined in
Section 101(35A) of the Bankruptcy Code. CDS acknowledges and agrees that in connection with such
rights and licenses, Alimera is hereby granted a right of access and a right to obtain possession
of and to benefit from (i) copies of research data, (ii) laboratory samples, (iii) product samples
and inventory, (iv) formulas, (v) laboratory notes and notebooks, (vi) data and results
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CONFIDENTIAL TREATMENT REQUESTED
related to clinical trials, (vii) copies of regulatory filings and Approvals, (viii) rights of
reference in respect of regulatory filings and Approvals, (ix) preclinical research data and
results, and (x) marketing, advertising and promotional materials, all of which constitute
embodiments of intellectual property pursuant to Section 365(n) of the Bankruptcy Code and (xi)
all other embodiments of such intellectual property, whether any of the foregoing are in CDS
possession or control or in the possession and control of Alimera or Third Parties. CDS agrees not
to interfere with Alimeras exercise of rights and licenses to intellectual property licensed
hereunder and embodiments thereof in accordance with this Agreement.
ARTICLE 6 COSTS & REVENUES PRE AND POST PROFITABILITY DATE
6.1
License Fee.
The $750,000 in principal plus all accrued interest due under the
Earnest Money Loan shall be treated as paid in full as the payment of a license fee, and the
security interest under the Security Agreement (the
Security Agreement
) made by CDS in
favor of Alimera and effective as of October 19, 2004, as amended on November 18, 2004, shall
terminate, and Alimera shall execute and deliver to CDS such documents as CDS may reasonably
request to evidence such termination pursuant to Section 4 of the Security Agreement.
6.2
Milestone Payments
. Alimera shall make the following additional payments to CDS
(
Milestone Payments
):
(a) An additional payment of $750,000 upon the dosing of the first patient in the first Phase
III Clinical Trial for the first Product to enter a Phase III Clinical Trial. For purposes of this
Section 6.2, the Parties agree that Phase III Clinical Trial includes, without limitation, the
clinical trial that the Parties plan to initiate in and about the spring of 2005 and that is
designed to support safety and efficacy of the first Product to treat DME. CDS acknowledges and
agrees that it has received such $750,000 payment from Alimera, and that Alimera has no further
obligations under this Section 6.2(a); and
(b) An additional payment of $25,000,000 within 30 days after Approval by the FDA of the first
First Product Approved by the FDA.
6.2A
Payments on Execution of Amended and Restated Agreement
. On the Amendment
Effective Date, Alimera will:
(a) Make a payment to CDS of $12,000,000 in cash; and
(b) Issue a note in the principal amount of $15,000,000 to CDS in the form of
Exhibit
6.2A
hereto (the
Alimera Note
).
6.2B
Certain Alimera Note Payments and Events
. Upon any Interest Payment Default or
Scheduled Payment Default pursuant to and as defined in the Alimera Note, then, automatically and
without further action by CDS or Alimera, the Fifty/Fifty Amendments shall be deemed to have been
made, which amendments shall apply to all payments due or paid thereafter.
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CONFIDENTIAL TREATMENT REQUESTED
6.3
Development Costs
. With respect to activities prior to the Amendment Effective
Date, each Party was to pay [*] of the total Direct Development Costs of a Product incurred in
accordance with the Development Budget (as defined in the Original Agreement). Notwithstanding
anything in this Article 6 of this Agreement or in any other provision of this Agreement to the
contrary, with respect to activities on and after the Amendment Effective Date, subject to Sections
3.1.2, Alimera will be solely responsible for, and shall pay one hundred percent (100%) of, all
development costs of a Product, including Direct Development Costs. Notwithstanding anything in
this Article 6 of this Agreement or in any other provision of this Agreement to the contrary, (i)
all payments owing by CDS hereunder with respect to development activities prior to the Amendment
Effective Date are hereby deemed fully paid by CDS (or waived, to the extent such waiver may be
required), including any Development Payments, Compounded Development Payments, Determined Disputed
Costs and Compounded Disputed Costs (as all defined in the Original Agreement), further including
any penalties and interest which might have accrued with respect thereto, and further including all
CDS payments deferred pursuant to that February 11, 2008 letter agreement sent by CDS and executed
by CDS and Alimera regarding deferral of payments under the Original Agreement as of such date;
(ii) all payments owing by Alimera hereunder with respect to development activities prior to the
Amendment Effective Date are hereby deemed fully paid by Alimera (or waived, to the extent such
waiver may be required), including any Development Payments, Compounded Development Payments,
Determined Disputed Costs and Compounded Disputed Costs (as all defined in the Original Agreement),
and further including any penalties and interest which might have accrued with respect thereto; and
(iii) subject to Sections 3.1.1 and 3.1.2, from and after the Amendment Effective Date, CDS will
have no liability whatsoever hereunder for any past, present or future development costs, including
Direct Development Costs (which includes those incurred before, on and after the Amendment
Effective Date), and instead Alimera shall have sole liability therefor.
6.3.1. Intentionally omitted.
6.3.2. Intentionally omitted.
6.3.3. Intentionally omitted.
6.4
Revenues Prior to Profitability Date
. Prior to the Profitability Date for each
Product, Alimera shall retain all Gross Sales generated from such Product in the Collaboration
Field in the Territory.
6.5
Costs and Revenues After the Profitability Date
.
6.5.1.
Net Profits.
From and after the Profitability Date for each Product and
subject to (b) below, Alimera and CDS shall be entitled to eighty percent (80%) and twenty percent
(20%), respectively, of Net Profits for that Product, calculated on a calendar quarter-by-quarter
and country-by-country basis. Such Net Profits Payment to CDS shall be deemed royalty for licenses
granted by CDS to Alimera under Article 5.
(a)
Reporting; Reconciliation of Net Profits.
After the incurrence of
Commercialization costs by Alimera, Alimera shall be responsible for issuing a written report to
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CDS within [*] calendar days (or as the Parties may otherwise agree) after the end of each
calendar quarter, which such report shall include the following calculations:
(i) Direct Commercialization Costs incurred, on a cash basis, by
Alimera for each Product in the preceding calendar quarter and, in the event
that there are Net Profits in such preceding calendar quarter, Direct
Commercialization Costs incurred in prior quarters to the extent such costs
are taken into account in calculating Net Losses that are offset from such
Net Profits pursuant to Section 6.5.1 (b);
(ii) the quantity of each Product sold in the preceding calendar
quarter;
(iii) for each calendar quarter with Net Losses, the calculation of
Gross Sales, Net Sales and Net Losses;
(iv) for each calendar quarter with Net Profits, the calculation of
Gross Sales, Net Sales, Net Profits; and in the event that Net Profits are
offset by Net Losses previously realized pursuant to Section 6.5.1(b), such
Net Losses; and
(v) the amount of Net Profits, if any, to which each Party is entitled
for such calendar quarter.
All of the reports and payments in this Section 6.5 shall be made in U.S. dollars. If any currency
conversion is required in connection with the calculation of Gross Sales, Net Sales and Net Profits
hereunder, such conversion shall be made in accordance with GAAP.
(b)
Net Profits Payment
. Alimera shall pay to CDS the amount of Net Profits to which
CDS is entitled for such calendar quarter within [*] calendar days after the end of such calendar
quarter (the
Net Profits Payment
); provided that Alimera may offset twenty percent (20%)
of the Net Losses previously realized by Alimera (plus interest as described below, if applicable)
on a Product-by-Product and country-by-country basis up to a maximum offset of twenty percent (20%)
of the amount of Net Profits Payment to which CDS is otherwise entitled for such calendar quarter
until twenty percent (20%) of such Net Losses previously realized by Alimera (plus interest as
described below if applicable) are offset. In the event that Alimera incurs Net Losses, Alimera
shall be entitled to recover under the preceding offset an amount equal to twenty percent (20%) of
the amount of the Net Losses previously realized by Alimera plus interest, compounded annually at
the compounding rate of [*] per annum from the time that such Net Losses are incurred until the
time such Net Losses (plus interest), or portion thereof, have been offset pursuant to this
paragraph. [*]. Notwithstanding the foregoing, CDS may, at any time, elect to permit Alimera to
retain [*] of Net Profits until twenty percent (20%) of the Net Losses previously realized by
Alimera have been offset. If CDS makes such an election, then no interest charge shall accrue with
respect to the Net Losses between the time CDS makes such election and the time they are recovered
by Alimera by
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operation of the offset. In the event that, during any calendar quarter, Alimera makes Commercial
sales of two Products that are otherwise identical except that they are Approved for two different
indications (the first Product for which Alimera has made Commercial sales shall be called Product
1 and the second Product for which Alimera has made Commercial sales shall be called Product 2),
so that it is not reasonably possible to allocate Net Sales attributable to each such Product, then
Net Profits and Net Losses for such Products shall be determined as follows for periods in which
there are Commercial sales of both Product 1 and Product 2:
The Product 2 Profitability Date shall be deemed to be the first day of the first calendar
quarter (i) that begins at least [*] after [*] and (ii) in which the aggregate of Net Sales of
Product 1 and Product 2 exceed the aggregate of Direct Commercialization Costs for Product 1 and
Product 2. Before the Product 2 Profitability Date, Net Profits for Product 1 shall be the
aggregate of Net Sales of Product 1 and Net Sales of Product 2 minus the Direct Commercialization
Costs of Product 1, and such Net Profits shall be distributed as provided in the foregoing in this
Section 6.5.1(b). After the Product 2 Profitability Date, Net Sales and Direct Commercialization
Costs of Product 1 and Product 2 shall be aggregated for the purpose of determining Net Profits and
Net Losses for Product 1 and Product 2, such that (i) to the extent the aggregate Net Sales for
Product 1 and Product 2 exceeds the Direct Commercialization Costs of Product 1 and Product 2, such
amount of difference shall be the aggregate Net Profits for Product 1 and Product 2, and (ii) to
the extent the Direct Commercialization Costs of Product 1 and Product 2 exceeds the aggregate Net
Sales for Product 1 and Product 2, such amount of difference shall be the aggregate Net Losses for
Product 1 and Product 2, provided that all Direct Commercialization Costs incurred by Alimera for
Product 2 prior to the Product 2 Profitability Date (plus interest as described above, if
applicable), shall be treated as aggregate Net Losses for Product 1 and Product 2; further provided
that to the extent it is not possible to separately track Direct Commercialization Costs for
Product 1 and Product 2, such Direct Commercialization Costs shall be reasonably allocated between
Product 1 and Product 2. The distribution of such aggregate Net Profits and offset of such
aggregate Net Losses shall be as provided in the foregoing in this Section 6.5.1(b). In the event
that, during any calendar quarter, Alimera makes Commercial sales of three or more Products that
are otherwise identical except that they are Approved for three or more different indications so
that it is not reasonably possible to allocate Net Sales attributable to each such Product, the
Parties agree to work together in good faith to extend the principles reflected in the foregoing
method of calculation to include such third or additional Products.
(c)
Non-Payment
.
(I) In the event the Fifty/Fifty Amendments have previously been made in accordance with
Sections 3.1.2, 4.3.8(a), 4.4, 6.2B or 6.5.1(c)(II), then in the event that Alimera fails to make
timely payment to CDS for all or a portion of a Net Profits Payment pursuant to this Section 6.5.1
and does not cure such failure within thirty (30) days of receiving a written notice from CDS
requesting Alimera to cure such failure, then CDS may exercise its rights pursuant to Section 11.2
of this Agreement; and
(II) In all cases other than as described in provision (I) above, in the event that Alimera
fails to make timely payment to CDS for all or a portion of a Net Profits Payment pursuant to this
Section 6.5.1, CDS shall provide written notice to Alimera and Alimera shall
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have thirty (30) days in which to cure the nonpayment (provided that Alimera has a one-time right
to use sixty (60) days to cure hereunder). If after such notice, Alimera fails to cure the
nonpayment within the cure period, then, automatically and without further action by CDS or
Alimera, the Fifty/Fifty Amendments shall be deemed to have been made, which amendments shall apply
to all payments due or paid thereafter.
(d)
Consideration for Net Profits Payments
. In consideration of all rights granted,
and information provided by CDS to Alimera, and the amount of Direct Development Costs paid by CDS
under this Agreement with respect to Product(s), the Parties agree that the amount of Net Profits
Payments set forth in Section 6.5 reflects the value of all such rights granted, information
provided and costs paid, and such Net Profits Payments shall be paid whether or not such Product is
covered by a Valid Claim in the CDS Patent Rights, and whether or not such Net Profits Payments
under this Section 6.5 extend beyond the term of any CDS Patent Rights containing Valid Claims
covering such Product. For the sake of clarity, the Parties have agreed not to decrease the
percentage of Net Profits to be paid by Alimera to CDS, even if the Product is no longer covered by
a Valid Claim in the CDS Patent Rights, in view of substantial CDS Know-How provided in the
development of Product. Moreover, the Net Profits value itself will at all times reflect the
then-current value of the intellectual property licensed hereunder and will naturally reflect any
loss of the CDS Patent Rights.
6.5.2.
Net Losses.
In the event that there are Net Losses in a calendar quarter,
Alimera shall be solely responsible for bearing such Net Losses, subject to Alimeras right to
recover twenty percent (20%) of such Net Losses as provided for in Section 6.5.1.
6.6
Revenues from Third Party Agreements
. In the event that Alimera enters into a
sublicense or other agreement, or otherwise agrees, with a Third Party, before or after the
Profitability Date for a Product, to sell or otherwise transfer some or all of Alimeras rights to
a Product, including, but not limited to, marketing rights and/or distribution rights, and Alimera
obtains any form of consideration in connection therewith, (A) with respect to all royalties
received by Alimera thereunder, CDS shall be entitled to receive twenty percent (20%) of the amount
of such royalties remaining after deduction of Direct Commercialization Costs incurred by Alimera
in supporting the sublicense under which such royalties were received, and (B) with respect to all
consideration received by Alimera thereunder other than royalties, CDS shall be entitled to receive
thirty-three percent (33%) of the excess of (i) such non-royalty consideration (excluding any
amounts paid for equity securities of Alimera other than amounts that exceed the fair market value
of such securities) over (ii) Alimeras reasonable out-of-pocket costs that are directly and solely
incurred to secure such Third Party agreement, promptly after any such consideration is received by
Alimera, provided that (1) the fair market value of such securities shall be determined by mutual
agreement of both Parties acting in good faith, and (2) in the event that the Parties fail to reach
such mutual agreement, the matter shall be resolved by arbitration in accordance with Section
12.7.2 herein. The amount of payment that CDS is entitled to receive from Alimera pursuant to the
foregoing shall be deemed royalty for licenses granted by CDS to Alimera under Article 5.
6.7
Records; Audits
.
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CONFIDENTIAL TREATMENT REQUESTED
6.7.1. Each Party shall keep, and shall cause its Affiliates, agents and sublicensees to keep,
full and accurate records and books of account containing all particulars that may be necessary for
the purpose of calculating Direct Development Costs (including Development Payments), Direct
Commercialization Costs, Gross Sales, Net Sales, and Net Profits or Net Losses for Products to be
received or borne by the Parties pursuant to this Agreement, including, but not limited to,
inventory, purchase and invoice records, manufacturing records, sales analysis, general ledgers,
financial statements, and tax returns relating to Products. Such books of account, with all
necessary supporting data, shall be kept by each Party at its place of business for the three (3)
years next following the end of the calendar year to which each shall pertain. Each Party (the
Audited Party
) shall permit an independent accounting firm selected by the other Party
(the
Auditing Party
) and reasonably acceptable to the Audited Party, which acceptance
shall not be unreasonably withheld or delayed, to have access during normal business hours to such
records as may be reasonably necessary to verify the accuracy of the Audited Partys reports of
Direct Development Costs, Direct Commercialization Costs, Gross Sales, Net Sales, and Net Profits
or Net Losses as provided herein. All such verifications shall be conducted at the expense of the
Auditing Party and not more than once in each calendar year. In the event such audit concludes
that adjustments should be made in the Auditing Partys favor, then any appropriate payments (plus
accrued interest at a rate announced by the Bank of America as its prime rate in effect on the date
that such payment was first due plus three percent (3%) for the period starting from the date the
payment was first due ending on the date the payment was made) shall be paid by the Audited Party
within thirty (30) days of the date the Audited Party receives the Auditing Partys accounting
firms written report so concluding, unless the Audited Party shall have a good faith dispute as to
the conclusions set forth in such written report, in which case the audited Party shall provide
written notice to the Auditing Party within such thirty (30) day period of the nature of its
disagreement with such written report. The Parties shall thereafter, for a period of sixty (60)
days, attempt in good faith to resolve such dispute and if they are unable to do so then the matter
will be submitted to dispute resolution in accordance with Section 12.7 hereof. The fees charged
by such accounting firm shall be paid by the Auditing Party unless the audit discloses that
adjustments in favor of the Auditing Party for the period are five percent (5%) or more of the
aggregate amount paid or payable by the Audited Party to the Auditing Party during the period, in
which case the Audited Party shall pay the reasonable fees and expenses charged by such accounting
firm. The Parties agree that all information subject to review under this Section 6.7 is
confidential and that it shall cause its accounting firm to retain all such information subject to
the confidentiality restrictions of Article 8 hereof.
6.7.2. In addition to the foregoing, Alimera shall permit an independent certified public
accountant retained by UKRF to inspect the records and books of account described in Section 6.7.1
during normal business hours and upon reasonable notice to the extent required by the UKRF
Licenses. Such right of inspection shall last for two (2) years following the end of the calendar
quarter to which such records and books of account pertain, shall be limited solely to those
matters directly related to CDS royalty obligations under the UKRF Licenses, and shall be allowed
no more than once a year.
ARTICLE 7 INTELLECTUAL PROPERTY
7.1
CDS-Prosecuted Patent Rights
.
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CONFIDENTIAL TREATMENT REQUESTED
7.1.1.
Filing, Prosecution and Maintenance
. CDS shall have primary responsibility for
and control over the preparation, filing, prosecution and maintenance of (a) any of the CDS
Existing Patent Rights, (b) any Patent Rights included within the CDS Improvements, and (c) any
Patent Rights included within the Alimera Improvements that fall within the definition of or relate
to the CDS Core Technology (collectively, the
CDS-Prosecuted Patent Rights
). For
CDS-Prosecuted Patent Rights, CDS shall have the authority to select patent counsel, and to
determine the form and content of such prosecution documents and to make all decisions regarding
whether to file, prosecute and maintain patents and patent applications, and in which countries to
do so.
7.1.2.
CDS Patent Costs
. Alimera shall be responsible for reimbursement of CDS Patent
Costs only in the jurisdictions identified in
Exhibit 1.15
as follows: the CDS Patent Costs
in such jurisdictions paid up to the first Product Profitability Date shall be Direct Development
Costs, as provided in Section 1.34, and shall be paid by CDS, and Alimera shall reimburse CDS fifty
percent (50%) (subject to the last sentence of this paragraph) for all such costs paid by CDS
within thirty (30) days after the date of invoice by CDS. The CDS Patent Costs paid after the
first Product Profitability Date shall be paid by CDS, and Alimera shall reimburse CDS fifty
percent (50%) (subject to the last sentence of this paragraph) for all such costs paid by CDS
within thirty (30) days after the date of invoice by CDS in accordance with Section 4.4. The list
of countries identified in
Exhibit 1.15
may be amended (i.e., to add or to drop one or more
countries) only upon mutual agreement by the Parties. If, after the Effective Date of the Original
Agreement, CDS grants to any Third Party a license to any of the CDS-Prosecuted Patent Rights for
which Alimera has continuing reimbursement obligations, thereafter Alimeras share of costs for
those particular CDS-Prosecuted Patent Rights shall be reduced on a per capita basis during the
term of such license (by way of example, if CDS grants a license to one Third Party to any of the
CDS-Prosecuted Patent Rights, Alimeras share of costs for those particular CDS-Prosecuted Patent
Rights shall be [*]).
7.1.3.
Communication
. CDS shall provide Alimera with copies of all official
correspondence (including, but not limited to, applications, office actions, responses, etc.)
relating to prosecution and maintenance of CDS-Prosecuted Patent Rights in countries identified in
Exhibit 1.15
. Alimera may provide comments and CDS will give good faith consideration
thereto. In order to facilitate Alimeras rights to comment, CDS shall provide copies of all such
official correspondence and any proposed responses by CDS at least ten (10) business days prior to
any filing or response deadlines. In the event that the Parties have a material disagreement
relating to the prosecution or maintenance of any of the CDS-Prosecuted Patent Rights (other than a
determination by CDS to abandon any CDS-Prosecuted Patent Rights as described below), CDS shall
have the right to decide on the course of action. Thereafter, Alimera may choose not to pay any
portion of the CDS Patent Costs associated with the applicable CDS-Prosecuted Patent Rights. In
the event that Alimera chooses not to pay for one or more countries, then, with respect to such
countries, (a) the license for the applicable CDS-Prosecuted Patent Rights shall automatically
terminate, and (b) CDS shall no longer be bound by Section 5.1.2(1), (2), (3) or (4).
7.2
Abandonment
. CDS shall not abandon prosecution or maintenance of any
CDS-Prosecuted Patent Rights already pending in any country identified in
Exhibit 1.15
without notifying Alimera in a timely manner of CDS intention and reason therefore and providing
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Alimera with reasonable opportunity to comment upon such abandonment and to assume
responsibility for prosecution or maintenance of such Patent Rights as set forth below. For
avoidance of doubt, for CDS-Prosecuted Patent Rights, CDS has the sole discretion to decide
whether or not to file in a country, and a decision not to file in a country shall not be deemed
as abandonment of CDS-Prosecuted Patent Rights in that country for purpose of this Article 7. In
the event that CDS abandons prosecution or maintenance of CDS-Prosecuted Patent Rights in any
country identified in
Exhibit 1.15
at any time during the Term of this Agreement, Alimera
may assume prosecution responsibility therefor in the name of CDS, and such patent costs shall be
paid by Alimera and CDS shall reimburse Alimera for [*] of such patent costs within thirty (30)
days after the date of invoice from Alimera (the
CDS Reimbursement Amount
). In the
event that CDS fails to reimburse Alimera within the time period as specified above, any future
payment to CDS shall be decreased by an amount that is calculated as follows: the amount of the
non-reimbursed CDS Reimbursement Amount is multiplied by [*], and that amount is compounded
annually at the compounding rate of [*] per annum, for any period in which any portion of such
costs remains non-reimbursed. CDS may pay all or any portion of the unpaid CDS Reimbursement
Amount plus any interest accrued and due at any time.
7.3
Alimera-Prosecuted Patent Rights
.
7.3.1.
Filing, Prosecution and Maintenance
. Alimera shall have primary responsibility
for and control over the preparation, filing, prosecution and maintenance of any Patent Rights
included within Alimera Improvements that are not CDS-Prosecuted Patent Rights
(
Alimera-Prosecuted Patent Rights
). For Alimera-Prosecuted Patent Rights, Alimera shall
have the authority to select patent counsel, and to determine the form and content of such
prosecution documents and to make all decisions regarding whether to file, prosecute and maintain
patents and patent applications, and in which countries to do so. Alimera shall be solely
responsible for Alimera Patent Costs and such costs shall be neither Direct Development Costs nor
Direct Commercialization Costs. Alimera shall provide CDS with copies of all official
correspondence (including, but not limited to, applications, office actions, responses, etc.)
relating to prosecution and maintenance of Alimera-Prosecuted Patent Rights.
7.3.2.
Abandonment
. Alimera shall not abandon prosecution or maintenance of any
Alimera-Prosecuted Patent Rights in the Territory without notifying CDS in a timely manner of
Alimeras intention and reason therefore and providing CDS with reasonable opportunity to comment
upon such abandonment and to assume responsibility for prosecution or maintenance of such
Alimera-Prosecuted Patent Rights. For avoidance of doubt, for Alimera-Prosecuted Patent Rights,
Alimera has the sole discretion to decide whether or not to file in a country, and a decision not
to file in a country shall not be deemed as abandonment of Alimera-Prosecuted Patent Rights in that
country for purpose of this Article 7. In the event that Alimera abandons prosecution or
maintenance of Alimera-Prosecuted Patent Rights in any country in the Territory, CDS may assume
prosecution responsibility for such Patent Rights in that country, and thereafter such Patent
Rights will cease being Alimera-Prosecuted Patent Rights and will become CDS-Prosecuted Patent
Rights. Notwithstanding the foregoing, if Alimera, acting in good faith, grants a Third Party
prosecution rights with respect to any Alimera-Prosecuted Patent Rights, then CDS rights under
this Section 7.2.2 shall be subject to the rights granted to such Third Party.
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7.4
Information Disclosure; Cooperation
. Each Party shall disclose and make available
to the other Party all material information controlled by such Party that is reasonably necessary
for the other Party to perform its obligations and exercise its rights under this Article 7,
including the preparation, filing, prosecution and maintenance of patents and patent applications
pursuant to this Article 7. All such information shall be disclosed to the other Party reasonably
promptly after it is first developed or learned or its significance is first appreciated. Without
limiting the foregoing, each Party agrees to disclose and make available to the other Party all
Alimera Improvements and CDS Improvements, as applicable. Neither Alimera nor CDS shall publicly
disclose any Alimera Improvements before the Party responsible for filing and prosecuting such
Improvements has an opportunity to make appropriate patent filings. Each Party agrees to cooperate
with the other Party with respect to the preparation, filing, prosecution and maintenance of
patents and patent applications pursuant to this Article 7.
7.5
Employees and Sublicensees Assignment of Inventions
. Each Party shall cause all
of its employees, Affiliates, contractors, sublicensees, consultants, clinical investigators and
agents, acting under authority from such Party or its sublicensees, (i) to enter into written
agreements pursuant to which each such person or entity assigns to such Party all Improvements and
other Inventions that such individual or entity discovers, develops, creates, conceives or reduces
to practice in the course of their relationship with such Party or its sublicensees; and (ii) to
execute such other documents and take such other actions as may be necessary to effectuate the
foregoing assignments. Each Party agrees to undertake to enforce the agreements referenced in this
Section 7.5 (including, where appropriate, by legal action).
7.6
Infringement
7.6.1.
Notification
. Each party shall promptly report in writing to the other Party
during the Term of this Agreement any known infringement or suspected infringement of any of its
Patent Rights that covers a Product and shall provide the other Party with all available evidence
supporting said infringement or suspected infringement.
7.6.2.
Prosecution
. CDS shall have the initial right, but not the obligation, to
initiate or prosecute an infringement or other appropriate suit or action against any Third Party
who at any time has infringed or is suspected of infringing (an
Infringer
), any of the
CDS Patent Rights covering a Product. CDS shall give Alimera sufficient advance notice of its
intent to file said suit and the reasons therefore, and shall provide Alimera with an opportunity
to make suggestions and comments regarding such filing; provided, however, that Alimera shall
provide any such comments sufficiently in advance of any filing dates to allow for consideration by
CDS, and further provided that it shall be within CDS sole discretion whether to incorporate such
suggestions or comments. CDS shall keep Alimera reasonably informed of the status and progress of
the litigation. CDS shall have the sole and exclusive right to select counsel for any such suit
and action and shall pay [*], including, but not limited to, attorneys fees and court costs. If
CDS has not taken legal action or been successful in obtaining cessation of the infringement within
(a) ninety (90) days from the date of notice by Alimera under Section 7.6.1; (b) thirty (30) days
after Alimera notifies CDS that Alimera would like to move for injunctive relief; or (c) ten (10)
days before the expiration of a period of time set by applicable law in which action must be taken
with respect to the alleged infringement (e.g., as may be required under the Hatch-Waxman Act and
35 USC §271), then subject to any rights
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granted to B&L under the B&L Agreement to enforce or prosecute any Patent Rights owned or
Controlled by CDS, Alimera shall have the right to bring suit against an Infringer at Alimeras own
expense. This right of Alimera to bring suit, as well as to continue an existing suit, is also
conditioned on all of the following requirements:
(i) The allegedly infringing product, device or method (collectively,
the
Accused Device
) falls within the definition of Product;
(ii) If Alimera owns (or has licensed from a Third Party and has the
right to enforce) any patent(s) that reads on the Accused Device practiced
by the Infringer, Alimera will include in the complaint one or more claims
alleging infringement of all such other patent(s);
(iii) Alimera has provided evidence to CDS that there is a good faith
basis to believe that the Accused Device is being prepared for
Commercialization or is already Commercialized;
(iv) Alimera shall keep CDS reasonably and timely informed of the
pre-litigation and litigation issues and strategy (including, without
limitation, furnishing copies of communications, pleading, and other
documents and keeping CDS informed of settlement efforts and developments),
and shall obtain suggestions and strategy from CDS, including during
pre-trial motions and discovery;
(v) In the instance of litigation issues and strategies pertaining to
defenses or setting strategy for the scope of claims, Alimera shall
incorporate all reasonable suggestions and strategy from CDS as may be
deemed appropriate in the reasonable business judgment of CDS; and
(vi) Except for joining the legal actions described in this Section
7.6.2 as a party at Alimeras request and matters discussed in the following
paragraph, CDS shall have no obligation regarding such actions unless
required to participate by law or contract. However, CDS shall have the
right to participate in any such actions through its own counsel and at its
expense.
Upon request of the other Party, either Party shall join as a party to the suit, at the other
Partys reasonable expense, and shall offer reasonable assistance to the other Party in connection
therewith at the other Partys reasonable expense. Any damages, royalties, settlement fees or other
consideration for infringement resulting from such suit shall be distributed as follows: (i) first,
each Party shall be reimbursed for its reasonable out-of-pocket costs paid in connection with the
proceeding; and (ii) thereafter, shall be [*] in accordance with the percentages set forth in the
first sentence of Section 6.5.1. Neither Party shall settle any such action or otherwise consent
to an adverse judgment in any such action that adversely affects the rights or interests of the
other Party under this Agreement, including, without limitation, issues of validity of the CDS
Patent Rights, without the prior written consent of the other Party.
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7.6.3.
Notification of Third Party Claim
. Each Party shall promptly report in writing
to the other Party during the Term of this Agreement any claim or allegation by any Third Party
that the development or Commercialization of any Product infringes the intellectual property rights
of any Third Party and shall provide the other Party with all available evidence supporting said
infringement or suspected infringement.
7.6.4.
Responsibility
. Subject to any rights granted to B&L under the B&L Agreement,
Alimera shall have the initial right, but not the obligation, to defend any suit or action
initiated by any Third Party alleging solely that a Product developed or Commercialized hereunder
has infringed, or is suspected of infringing any Third Party intellectual property rights. Upon
Alimeras request, CDS shall offer reasonable assistance to Alimera in connection therewith at
Alimeras expense. Alimera shall give CDS advance notice of its intent to defend any said suit and
shall provide CDS with an opportunity to make suggestions and comments regarding such defense;
provided, however, that CDS shall provide any such comments sufficiently in advance of any filing
dates to allow for consideration by Alimera, and further provided that it shall be within Alimeras
sole discretion whether to incorporate such suggestions or comments. Alimera shall keep CDS
reasonably informed of the status and progress of the litigation. Alimera shall have the sole and
exclusive right to select counsel for any such suit and action and shall pay all expenses of the
suit, including, but not limited to, attorneys fees and court costs. Alimera shall have the right
to settle any such litigation and shall specifically have the right, whether or not litigation
commences, to negotiate a license or other rights from any Third Party authorizing the use of Third
Party intellectual property rights in connection with Products; provided, however, that Alimera
shall not settle any such action, or otherwise consent to an adverse judgment in any such action,
or make any admission in any such license and negotiation that adversely affects the rights or
interests of CDS under this Agreement, including, without limitation, issues of validity of the CDS
Patent Rights, without the prior written consent of CDS. Any such license shall be at arms length
and otherwise on terms and conditions as may be deemed appropriate in the reasonable business
judgment of Alimera. Alimera shall provide CDS with a copy of any such license promptly after its
execution. All reasonable costs incurred in connection with such litigation and any amounts
payable to the Third Party relating to Products under such license shall constitute Direct
Commercialization Costs as follows: (i) any litigation, negotiation or settlement-related costs and
expenses or up-front payments shall be deemed to be a Direct Commercialization Cost of Product or
Products as reasonably allocated by Alimera in good faith, subject to the dispute resolution
procedures provided for in Section 12.7; (ii) any royalties on net sales or similar payments
calculated by reference to sales shall be allocated to Products on a Product-by-Product and
country-by-country basis; (iii) any other amounts (e.g., milestone payments or patent reimbursement
fees) shall be reasonably allocated by Alimera to one or more Products in good faith, subject to
the dispute resolution procedures provided for in Section 12.7. If Alimera recovers any damages or
any other payments, by way of settlement or otherwise, in connection with any counterclaim made by
it in any such actions, such damages shall be considered Net Sales for purposes of this
Agreement.
If Alimera does not defend a claim, suit or proceeding as set forth above within ninety (90)
days of the date Alimera was reasonably aware or notified of the Third Party claim alleging
infringement (or within such shorter period as may be necessary for submitting or filing a
response), then CDS may, in its sole discretion, elect to defend such claim, suit or proceeding,
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CONFIDENTIAL TREATMENT REQUESTED
using counsel of its own choice and the provisions of Section 7.6.4 shall apply as if the term
CDS were changed to Alimera and the term Alimera were changed to CDS.
7.7
Marking
. Alimera and any Affiliates or sublicensees shall mark all Products with
the numbers of all patents included in CDS Technology that cover the Products. Without limiting
the foregoing, all Products shall be marked in such a manner as to conform with the patent laws of
the country to which such Products are shipped or in which such products are sold, including, but
not limited to, the requirements of 35 U.S.C. §287.
7.8
Trademarks
. Alimera shall be free to adopt, use and register in any trademark
offices any trademarks for use with a Product in its sole discretion. Subject to Section 11.5.2,
Alimera shall own all right, title and interest in and to any such trademark in its own name during
and after the Term of this Agreement.
7.8.1.
The MEDIDUR Mark
. CDS hereby grants to Alimera a royalty-free non-exclusive
right and license, with right to sublicense, to use the MEDIDUR mark Controlled by CDS on or in
connection with any Products marketed, distributed or sold pursuant to this Agreement. Alimera
shall not use the MEDIDUR mark in direct association with another mark such that the two marks
appear to be a single mark or in any other composite manner with any marks of Alimera or any Third
Party. Alimera shall cause to appear on all items bearing the MEDIDUR mark such legends,
markings and notices as may be required by applicable law or reasonably requested by CDS to
establish, perfect, defend or exploit the proprietary character of the MEDIDUR mark. Alimera
shall not grant, attempt to grant, or record anywhere, a security interest in the MEDIDUR mark.
Alimera hereby assigns and will assign any goodwill associated with its use of the MEDIDUR mark
to CDS. CDS has the right to control the quality of the Products Commercialized in connection with
the commercial exploitation of the MEDIDUR Mark as follows: (1) CDS may, in its sole discretion and
upon at least ten (10) days prior written notice, during regular business hours, carry out periodic
reasonable inspections of the related operation of Alimera, its Affiliates, subcontractors and
sublicensees, provided that such inspections are limited to information necessary to ensure the
quality of the Products Commercialized, and (2) Alimera agrees to reasonably cooperate, and to
cause its Affiliates, subcontractors and sublicensees to cooperate, with such periodic inspections
of its related operations upon at least ten (10) days prior written notice by CDS. Alimera
acknowledges and agrees that the MEDIDUR mark shall remain the property of CDS. ALIMERA
ACKNOWLEDGES AND AGREES THAT THE MEDIDUR MARK IS PROVIDED ON AN AS IS BASIS AND THAT CDS MAKES
NO REPRESENTATIONS AND EXTENDS NO WARRANTIES WHATSOEVER, EXPRESS, IMPLIED OR STATUTORY, WITH
RESPECT THERETO INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF TITLE, VALIDITY,
ENFORCEABILITY OR NON-INFRINGEMENT. CDS is not obligated to (i) file any application for
registration of the MEDIDUR mark, or to secure any rights in the MEDIDUR mark, (ii) to maintain
the MEDIDUR mark, or (iii) to police or pursue (including for infringement) any Third Parties
using the MEDIDUR mark.
7.9
UKRF Licenses and B&L Agreement
. CDS shall not amend or modify any of the UKRF
Licenses or the B&L Agreement, or waive any right thereunder, in any manner that
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CONFIDENTIAL TREATMENT REQUESTED
would adversely affect Alimeras rights hereunder without the prior written authorization of
Alimera.
ARTICLE 8 CONFIDENTIALITY
8.1
Confidentiality
. Except as otherwise provided in this Article 8, each Party
shall maintain Confidential Information of the other Party in confidence and shall not disclose
Confidential Information of the other Party to any Third Party and shall not use Confidential
Information of the other Party except as expressly authorized under this Agreement. Confidential
Information shall mean any and all information (whether in written, electronic, visual, verbal or
other form) received from the other Party or its representatives, including, but not limited to,
all information relating to any technology, product, method, process or intellectual property of
such disclosing Party (including, but not limited to, Patent Rights, and other owned or licensed
intellectual property rights, data, Know-How, samples, technical and non-technical materials and
specifications), as well as any business plan, financial information, research data or results, or
other confidential commercial information of or about such disclosing Party; provided, however,
that Confidential Information shall not include any information that: (a) is or becomes part of the
public domain other than by unauthorized acts or omissions of the Party obligated not to disclose
such Confidential Information or its employees, directors, officers, or agents (collectively, the
Receiving Party); (b) can be shown by written documents to have been disclosed to the Receiving
Party by a Third Party; provided, however, that such Third Party had no obligation of
confidentiality or non-use to the disclosing party with respect to such Confidential Information;
or (c) can be shown by written documents to have been in the possession of the Receiving Party
prior to disclosure by the disclosing Party; provided, however, that such Confidential Information
was not obtained directly or indirectly from the other Party to this Agreement pursuant to a
confidentiality agreement. Notwithstanding any other provisions of this Article, Alimera Know-How
shall be Confidential Information of Alimera and CDS Technology shall be Confidential Information
of CDS.
8.2
Disclosure
. A Party may disclose Confidential Information (a) to its employees
on a need-to-know basis, provided that such employees agree in writing to non-use and
non-disclosure obligations essentially the same as those set forth herein and to keep the
Confidential Information confidential to the same extent as such Party is required to keep the
Confidential Information confidential; (b) to its directors, Affiliates, accountants, attorneys,
lenders and other financing sources, provided that the Party making such disclosure will advise the
recipients that such information is confidential and of the terms of this Section 8 and that by
receiving such information, the recipients are agreeing to be bound by such provisions; (c) to
Third Parties on a need-to-know basis in connection with (i) a proposed merger, acquisition or
other comparable transaction solely for the purpose of evaluating, negotiating and, if applicable,
consummating such transaction, (ii) a proposed offering of securities solely for purpose of
evaluating, negotiating and, if applicable, consummating such offering, (iii) strategic consulting
advice solely for the purpose of rendering such advice, and (iv) a proposed license or sublicense
of the technology or intellectual property, or portion thereof, licensed hereunder as permitted
under this Agreement solely for the purpose of evaluating, negotiating and, if applicable,
consummating such license or sublicense; provided that the Party making such disclosure in the case
of (i), (ii), (iii) and (iv) will advise the recipients that such information is confidential and
of the terms of this Section 8 and that such recipients shall agree in writing to non-use and
non-disclosure
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CONFIDENTIAL TREATMENT REQUESTED
obligations essentially the same as those set forth herein; (d) to government or other
regulatory authorities to the extent that such disclosure is required by law, regulation or order
(i) in connection with the filing, prosecution or maintenance of patents for which the Party
disclosing the Confidential Information has responsibility or is permitted under this Agreement to
file, prosecute and maintain, or (ii) to obtain authorizations to conduct clinical trials of, and
to Commercialize, Product pursuant to this Agreement; and (e) as required by any applicable law,
order, regulation, rule or ruling of any governmental entity, court or stock exchange, provided
that the Party required to make such disclosure will provide prompt prior written notice of such
request or requirement to the other Party (if legally permissible and feasible) so that the other
Party may seek, at its expense, an appropriate protective order or other remedy, and in the absence
of a protective order, will consult with the other Party about the extent and nature of such
disclosure, will disclose only that portion of the Confidential Information that is required or
compelled to be disclosed and will exercise commercially reasonable efforts to obtain confidential
treatment (if legally permissible and practicable) with respect to such disclosure.
8.3
Disclosure of Agreement
. Disclosure of the execution and terms of this Agreement
shall be made in the form of a mutually acceptable press release on the Amendment Effective Date
(and in the case of CDS, a report on Form 8-K); and neither Party shall make any public disclosure
with respect to or describing the Agreement (including the relationship of the Parties hereunder
and the terms thereof) that is contrary to or inconsistent with the substance in such press release
or the Agreement.
8.4
Disclosure of Product Achievements
. Prior to making disclosure of the achievement
of any event relating to a Product, including any results of clinical trials, Alimera shall provide
CDS with prompt prior written notice (if feasible) of such disclosure, will provide CDS with a copy
of such disclosure reasonably in advance (together with all data underlying such disclosure unless
previously provided to CDS), and will reasonably consult in advance with CDS with respect thereto.
ARTICLE 9 REPRESENTATIONS AND WARRANTIES
9.1
Representations and Warranties of CDS
. CDS represents and warrants as of the
Amendment Effective Date that:
(a) CDS is a corporation duly organized, validly existing and in corporate good standing under
the laws of Delaware;
(b) CDS has the legal right, authority and power to enter into this Agreement, and to extend
the rights and licenses granted to Alimera in this Agreement;
(c) CDS has taken all necessary action to authorize the execution, delivery and performance of
this Agreement;
(d) upon the execution and delivery of this Agreement, this Agreement shall constitute a valid and
binding obligation of CDS enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors and contracting parties rights generally and
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CONFIDENTIAL TREATMENT REQUESTED
except as enforceability may be subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law);
(e) the performance of its obligations under this Agreement will not conflict with its charter
documents or result in a breach of any agreements, contracts or other arrangements to which it is a
party;
(f) CDS is the sole and exclusive owner or the licensee of CDS Existing Patent Rights;
(g) to the best of CDS knowledge, no claim has been threatened or asserted that the practice
of any patent or patent application listed in
Exhibit 1.11A
infringes patent rights of any
Third Party;
(h) CDS has not received any complaint, demand or notice from a Third Party in writing
challenging the validity or enforceability of any patent listed in
Exhibit 1.11A
;
(i) CDS has no present intention [*] any patent listed in
Exhibit 1.11A
and has not
instructed its patent counsel or taken any other actions [*] any patent listed in
Exhibit
1.11A
;
(j) CDS is in compliance in all material respects with the UKRF Licenses and the B&L
Agreement; to CDS knowledge, there is no noncompliance by UKRF or B&L under the UKRF Licenses and
the B&L Agreement, respectively, other than noncompliance that would not adversely affect Alimeras
rights hereunder; and
(k) neither CDS nor any of its Affiliates has initiated for CDS a filing for protection under
the bankruptcy laws, an assignment for the benefit of creditors, appointment of a receiver or
trustee over its property or any similar undertaking.
9.2
Representations and Warranties of Alimera
. Alimera represents and warrants as of
the Amendment Effective Date that:
(a) Alimera is a corporation duly organized, validly existing and in corporate good standing
under the laws of Delaware.
(b) Alimera has the legal right, authority and power to enter into this Agreement, and to
extend the rights and licenses granted to CDS in this Agreement;
(c) Alimera has taken all necessary action to authorize the execution, delivery and
performance of this Agreement;
(d) upon the execution and delivery of this Agreement, this Agreement shall constitute a valid
and binding obligation of Alimera enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws, affecting creditors and contracting parties rights generally and except as
enforceability maybe subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law);
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(e) the performance of its obligations under this Agreement will not conflict with Alimeras
charter documents or result in a breach of any agreements, contracts or other arrangements to which
it is a party;
(f) to the knowledge of Alimera, Alimera is the sole and exclusive owner of the Alimera
Know-How;
(g) to the best of Alimeras knowledge, no claim has been threatened or asserted that the
practice of any patent or patent application listed in
Exhibit 1.11A
infringes patent
rights of any Third Party;
(h) Alimera has not received any complaint, demand or notice from a Third Party in writing
challenging the validity or enforceability of any patent listed in
Exhibit 1.11A
; and
(i) Alimera has no present intention to seek reexamination of any patent listed in
Exhibit
1.11A
and has not instructed its patent counsel or taken any other actions to seek
reexamination of any patent listed in
Exhibit 1.11A
.
9.3
Warranty Disclaimer
. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT,
NEITHER PARTY MAKES ANY WARRANTY WITH RESPECT TO ANY CDS TECHNOLOGY, CDS KNOW-HOW, ALIMERA
IMPROVEMENTS, ALIMERA KNOW-HOW, GOODS, SERVICES OR OTHER SUBJECT MATTER OF THIS AGREEMENT AND
HEREBY DISCLAIMS WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, VALIDITY, SCOPE
AND NON-INFRINGEMENT WITH RESPECT TO ANY AND ALL OF THE FOREGOING.
9.4
Limited Liability
. EXCEPT FOR THEIR RESPECTIVE OBLIGATIONS UNDER ARTICLE 8 or
ARTICLE 10, NEITHER CDS NOR ALIMERA WILL BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF THIS
AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR
ANY PUNITIVE, EXEMPLARY, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES OR LOST PROFITS.
ARTICLE 10 INDEMNITY
10.1
Cross Indemnity
. Each Party (the
Indemnifying Party
) agrees to defend,
indemnify and hold the other party (the
Indemnified Party
), its Affiliates and their
respective directors, officers, employees and agents and their respective heirs and assigns
harmless from all Third Party claims, actions, losses, damages, liabilities or expenses (including,
but not limited to, reasonable attorneys fees) (each, a
Loss
) arising as a result of (a)
a breach by the Indemnifying Party of any of its representations, warranties or obligations under
this Agreement, (b) actual or asserted violations of any applicable law or regulation by the
Indemnifying Party or any of its employees, Affiliates, sublicensees, consultants, or other agents
in connection with the research, development, manufacture, distribution, marketing, promotion,
sale, or use of Products, or the reporting requirements for Products, including, but not limited
to, any allegation or determination that a Product has been adulterated, misbranded, mislabeled or
otherwise is not in compliance with any applicable law or regulation, or (c) except as provided in
Section 7.6.4 or
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10.5, bodily injury, death, property damage or other harm or damage attributable to the
research, development, manufacture, distribution, marketing, promotion, sale or use of any Products
by the Indemnifying Party or its employees, Affiliates, sublicensees, consultants, or other agents.
10.2
Limitation on Indemnity Obligations
. A Party, its Affiliates and their
respective directors, officers, employees and agents shall not be entitled to the indemnities set
forth in Sections 10.1 to the extent the Loss for which indemnification is sought was caused
by the negligence, or by the reckless or intentional misconduct or omission, of such Party or its
directors, officers, employees or agents.
10.3
Procedure
. If an Indemnified Party intends to claim indemnification under
Article 10, the Indemnified Party shall notify the Indemnifying Party of any Loss in respect of
which the Indemnified Party intends to claim such indemnification, and the Indemnifying Party shall
assume the defense thereof with counsel mutually satisfactory to the Parties. Notwithstanding the
prior sentence, if CDS is the Indemnifying Party based on a claim for indemnification by Alimera,
then Alimera agrees to use CDS counsel as common counsel to the extent the Parties interests are
aligned; provided that if the Parties interests diverge after they have used common counsel of
CDS choosing, the common counsel may continue to represent CDS and not be subject to
disqualification on account of the common representation. The failure to deliver notice to the
Indemnifying Party within a reasonable time after the commencement of any such action, shall
relieve such Indemnifying Party of liability to the Indemnified Party under Article 10 only to the
extent that the delay adversely affects Indemnifying Partys rights or ability to defend such claim
or action, but the failure so to deliver notice to the Indemnifying Party will not relieve the
Indemnifying Party of any liability that it may have to any Indemnified Party otherwise than under
Article 10. The Indemnified Party under Article 10 shall provide reasonable assistance to the
Indemnifying Party and its legal representatives, at the Indemnifying Partys expense, in the
investigation of any action, claim or liability covered by this indemnification. The Indemnifying
Party shall additionally be liable to pay the reasonable legal costs and attorneys fees incurred
by the Indemnified Party in establishing its claim for indemnity. Except as provided in the last
sentence of this Section 10.3, the indemnity agreement in this Article 10 shall not apply to
amounts paid in settlement of any Loss if such settlement is effected without the consent of the
Indemnifying Party, which consent shall not be withheld unreasonably or delayed. Indemnifying
Party shall not, without the written consent of Indemnified Party, settle or compromise any Loss or
consent to the entry of any judgment with respect to any Loss (a) that does not release Indemnified
Party from all liability with respect to such Loss or (b) which may materially adversely affect
Indemnified Party or under which Indemnified Party would incur any obligation or liability, other
than one as to which Indemnifying Party has an indemnity obligation hereunder. If Indemnifying
Party, within ten (10) days of receiving notice of a Loss or such shorter period as may be
necessary for submitting or filing a response, fails to assume the defense of such Loss or fails to
notify Indemnified Party that is assuming such defense, Indemnified Party shall have the right to
assume the defense, compromise or settlement of such Loss at the risk and expense of Indemnifying
Party.
10.4
Insurance
. Each Party shall maintain, and shall cause its Affiliates and each
sublicensee conducting activities under this Agreement to maintain, at such Partys, an
Affiliates, or sublicensees sole expense, appropriate product liability insurance coverage in
amounts reasonably determined by the Party from time to time but at least sufficient to
insure
47
CONFIDENTIAL TREATMENT REQUESTED
against claims which may arise from the performance of obligations or exercise of rights granted
under this Agreement or from indemnification obligations under this Article 10, but in no event
shall a Partys insurance coverage be in an amount less than $5,000,000 per occurrence and
$10,000,000 annual aggregate. The policy of insurance shall contain a provision of
non-cancellation except upon the provision of thirty (30) days notice to the other Party. The
policy of insurance with respect to any Product that would, absent the licenses herein, infringe a
Valid Claim under a patent licensed under one or more of the UKRF Licenses shall contain an
endorsement naming UKRF, and the University of Kentucky (and its Board of Trustees, agents,
officers, and employees) as additional insureds. Each Party shall maintain such insurance
commencing on the Effective Date and for so long as it continues to research, produce, develop,
manufacture, distribute, sell or use the Products, and thereafter for so long as each Party
maintains insurance for itself covering such manufacture or sales.
10.5
Product Liability Claims
. If either Party incurs any losses, costs, damages
(including amounts paid in settlement of claims), fees (including reasonable attorneys fees) or
expenses arising out of any Third Party claim relating to injuries or death resulting from the use
of any Product developed or Commercialized pursuant to this Agreement, then such losses, costs,
damages, fees or expenses that are not attributable to the gross negligence and/or willful
misconduct of a Party and are not covered by an insurance policy (
Product Liability
Losses
) shall be Direct Commercialization Costs. If CDS incurs Product Liability Losses,
Alimera shall reimburse CDS for [*] of the Product Liability Losses within forty-five (45) days of
receipt of a request for reimbursement for such Product Liability Losses. If either Party incurs
any losses, costs, damages (including amounts paid in settlement of claims), fees (including
reasonable attorneys fees) or expenses arising out of any Third Party claim relating to injuries
or death resulting from the use of any Product developed or Commercialized pursuant to this
Agreement, then to the extent such losses, costs, damages, fees or expenses are attributable to the
gross negligence and/or willful misconduct of a Party, such Party shall bear [*] of such losses,
damages, fees or expenses.
ARTICLE 11 TERM AND TERMINATION
11.1
Term
. If not earlier terminated as provided in this Article 11, the term of this
Agreement (the
Term
) shall commence on the Effective Date and expire upon the later of
(i) ten (10) years after the Effective Date, or (ii) the expiration or abandonment of the last
Valid Claim included in the CDS Patent Rights, or (iii) as long as Alimera, any Affiliate of
Alimera or any sublicensee is selling a Product in any part of the Territory.
11.2
Termination for Default by Either Party
. Either Party may terminate this Agreement
(i) upon the occurrence of a breach of a material term of this Agreement (other than a material
breach described in clause (ii) below or in Section 11.5) if the breaching Party fails to remedy
such breach within thirty (30) days after notice thereof by the non-breaching Party or, with
respect to a breach (other than a failure to make a payment) that cannot be cured within such
period, then such longer period (up to 90 days) as may be reasonably necessary, using Commercially
Reasonable Efforts, to cure the breach, or (ii) if the other Party files for protection under the
bankruptcy laws, makes an assignment for the benefit of creditors, appoints or suffers appointment
of a receiver or trustee over its property, files a petition under any bankruptcy or insolvency act
or has any such petition filed against it and such proceeding remains undismissed
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*
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Certain information has been omitted and filed separately with the
commission. Confidential treatment has been requested with respect to the omitted
portions.
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48
CONFIDENTIAL TREATMENT REQUESTED
or unstayed for a period of more than sixty (60) days. Upon termination, the non-breaching Party
shall, subject to the dispute resolution procedures set forth in Section 12.7, have the right, in
its sole discretion, to seek any other rights or remedies available to it at law or in equity.
Any Event of Default pursuant to and as defined in the Alimera Note shall constitute a breach of a
material term of this Agreement by Alimera. A Liquidity Event Failure pursuant to and as defined
in the Alimera Note shall constitute a breach of a material term of this Agreement by Alimera. The
third occurrence of an Interest Payment Default (as defined in the Alimera Note), Scheduled Payment
Default (as defined in the Alimera Note), or any combination thereof, on different days and not
simultaneously, (notwithstanding any intervening cure or waiver, other than a waiver in writing
relating specifically to this sentence of this Section 11.2, and notwithstanding the termination of
the Alimera Note) shall constitute a breach of a material term of this Agreement by Alimera. For
the sake of clarity, as provided in the Alimera Note, in the event of a Liquidity Event Failure or
if this Agreement shall have been terminated because there shall have occurred three Interest
Payment Defaults, Scheduled Payment Defaults, or any combination thereof, on different days and not
simultaneously (the simultaneous occurrence of an Interest Payment Default and a Scheduled Payment
Default on the same day constituting one such occurrence), the Alimera Note shall immediately and
without further action be cancelled, and Alimera shall have no obligation to pay any principal
amount of such Alimera Note then outstanding or any accrued and unpaid interest thereon.
11.3 Intentionally omitted.
11.4 Intentionally omitted.
11.5
Termination for Abandonment
. For purposes of this Section 11.5, Abandonment by
Alimera or to Abandon shall mean delivery of a written election by Alimera to abandon this
Agreement with respect to a Product. If Alimera Abandons a Product pursuant to this Section 11.5,
then CDS sole remedy shall be termination with respect to such Product pursuant to this Section
11.5 and Section 11.5.2. Solely for purposes of this Section 11.5 (including 11.5.2), the term
Product shall have the meaning set forth in Section 1.77 except that in (E) and (4) the words in
a particular country shall be omitted, in the next to last sentence the words in each country
shall be omitted, and in the last sentence example (ii) shall be omitted.
11.5.1. Intentionally omitted.
11.5.2.
Effect of Abandonment by Alimera
. In the event that CDS terminates this Agreement
with respect to a Product in the Territory for Abandonment of that Product by Alimera under this
Section 11.5, the rights and licenses granted to Alimera pursuant to Article 5 shall terminate with
respect to that Product in the Territory and the Parties shall negotiate in good faith a license
agreement under which Alimera shall grant to CDS a non-exclusive license to any Alimera Know-How
related to such Product. After termination with respect to such Product as set forth in this
Section 11.5 and at CDS request: (a) any and all Confidential Information and materials solely
related to such Product provided by CDS pursuant to this Agreement shall be promptly returned by
Alimera to CDS, (b) Alimera shall promptly deliver to CDS copies of all Clinical IP owned or
Controlled by Alimera and necessary or useful to the development or Commercialization of such
Product and Alimera shall not use any such Clinical IP thereafter for
49
CONFIDENTIAL TREATMENT REQUESTED
any regulatory applications or filings for such Product, provided that the foregoing shall not
prevent Alimera from using such Clinical IP for other Products or from performing preclinical and
clinical studies or other research of any nature, including research that reproduces data contained
in the Clinical IP, or from using the results of such research in regulatory applications or
filings or for any other purpose, (c) if Alimera has applied for or obtained any Approvals in any
country for the Product, then Alimera shall, to the extent legally permissible, take all additional
action reasonably necessary to assign all of its right, title and interest in and transfer
possession and control to CDS of such applications or Approvals, (d) any regulatory filings for the
Product which have been submitted in Alimeras name, subject to FDA approval, will be transferred
to CDS name, (e) Alimera will assign to CDS all of its right, title and interest in any trademark
under which Alimera shall solely have marketed the Product or registered for use solely with such
Product together with the goodwill associated therewith, and (f) CDS shall no longer be bound by
Section 5.1.2(1), (2), (3) or (4) with respect to the Product Abandoned by Alimera. Termination of
this Agreement with respect to the Product shall be CDS sole and exclusive remedy under this
Agreement for Abandonment of that product by Alimera, except that Alimera shall promptly pay to CDS
all Development Payments that Alimera owes CDS as of the date of termination (the
Alimera
Abandonment Amount
), provided that, from and after the date of termination, interest on any
unpaid Alimera Abandonment Amount shall accrue at [*] (rather than at [*]), compounded annually,
until such costs have been paid; further provided that the accrual of such interest or payment
shall not preclude CDS from seeking full payment of amounts owed under this Section 11.5.2.
11.6
Effect of Expiration or Termination of the Agreement
. Except as expressly
provided herein, the expiration or termination of this Agreement shall not relieve the Parties of
any obligation accruing prior to such expiration or termination and all rights and licenses granted
under this Agreement shall be terminated. In the event of termination of this Agreement pursuant
to Section 11.2, (a) any and all Confidential Information and materials provided by the
non-breaching Party to the breaching Party pursuant to this Agreement shall be promptly returned by
the breaching Party to the non-breaching Party, and (b) the breaching Party shall not use any
Clinical IP arising from the activities conducted under this Agreement at any time thereafter;
provided that the foregoing shall not prevent the breaching Party from performing preclinical and
clinical studies or other research of any nature, including research that reproduces data contained
in the Clinical IP, or from using the results of such research in regulatory applications or
filings or for any other purpose.
11.7
Survival of Provisions Upon Expiration or Termination
. The provisions of
Articles 8, 10 and 11, and Sections 5.2 (in the event of termination of this Agreement by CDS under
Section 11.5.2), 5.4, 5.5, 5.6, 5.9, 9.3, 9.4, 11.5.2 (in the event of termination of this
Agreement by CDS under Section 11.5), 11.6, 12.5, 12.6 and 12.7 shall survive the expiration or
termination of this Agreement for any reason.
ARTICLE 12 MISCELLANEOUS
12.1
Interpretation
.
(a) If an ambiguity or a question of intent or interpretation arises with respect to this
Agreement, this Agreement shall be construed as if drafted jointly by the Parties and no
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*
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Certain information has been omitted and filed separately with the
commission. Confidential treatment has been requested with respect to the omitted
portions.
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50
CONFIDENTIAL TREATMENT REQUESTED
presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any provisions of this Agreement.
(b) Whenever the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words include, includes and including shall be deemed to be
followed by the phrase but not limited to. The word will shall be construed to have the same
meaning and effect as the word shall. Unless the context requires otherwise, (A) any definition
of or reference to any agreement, instrument or other document herein shall 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 shall be construed
as referring to such laws as from time to time enacted, repealed or amended, (C) any reference
herein to any Person shall be construed to include the Persons permitted successors and assigns,
(D) the words herein, hereof and hereunder, and words of similar import, shall be construed to
refer to this Agreement in its entirety and not to any particular provision hereof unless
specifically stated, (E) any reference herein to the words mutually agree or mutual written
agreement shall 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 and unless otherwise stated; and (F) all references herein to Articles,
Sections or Schedules shall be construed to refer to Articles, Sections and Schedules of this
Agreement unless otherwise noted.
12.2
Assignment
. This Agreement may not be assigned or otherwise transferred by
either Party without the consent of the other Party; provided, however, that either Party may,
without such consent, assign its rights and obligations under this Agreement in connection with a
Change of Control of such Party; provided, however, that such Partys rights and obligations under
this Agreement shall be assumed by its successor in interest in any such transaction. Any
purported assignment in violation of the preceding sentence shall be void. Any permitted assignee
shall assume all obligations of its assignor under this Agreement.
12.3
Severability
. Each Party hereby agrees that it does not intend to violate any
public policy, statutory or common laws, rules, regulations, treaty or decision of any government
agency or executive body thereof of any country or community or association of countries. Should
one or more provisions of this Agreement be or become invalid, the Parties hereto shall substitute,
by mutual consent, valid provisions for such invalid provisions which valid provisions in their
economic effect are sufficiently similar to the invalid provisions that it can be reasonably
assumed that the Parties would have entered into this Agreement with such valid provisions. In
case such valid provisions cannot be agreed upon, the invalidity of one or several provisions of
this Agreement shall not affect the validity of this Agreement as a whole, unless the invalid
provisions are of such essential importance to this Agreement that it is to be reasonably assumed
that the Parties would not have entered into this Agreement without the invalid provisions.
12.4
Notices
. Any consent, notice or report required or permitted to be given or made
under this Agreement by one of the Parties hereto to the other shall be in writing, delivered
personally or by facsimile (and promptly confirmed by personal delivery or courier) or courier,
postage prepaid (where applicable), addressed to such other Party at its address indicated below,
51
CONFIDENTIAL TREATMENT REQUESTED
or to such other address as the addressee shall have last furnished in writing to the
addressor and shall be effective upon receipt by the addressee.
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If to CDS:
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pSivida, Inc.
400 Pleasant Street
Watertown, MA 02472
Attention: President
Fax: (617)-926-5050
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With a copy to:
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pSivida, Inc.
400 Pleasant Street
Watertown, MA 02472
Attention: General Counsel
Fax: (617) 926-5050
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With a copy to:
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Ropes & Gray LLP
One International Place
Boston, MA 02110
Attention: Susan Galli, Esq.
Fax: (617) 951-7050
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If to Alimera:
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Alimera Sciences, Inc.
6120 Windward Parkway, Suite 290
Alpharetta, GA 30005
Attention: President
Fax: (678) 990-5744
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With a copy to:
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Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP
610 Lincoln Street
Waltham, MA 02451
Attention: Jay Hachigian, Esq.
Fax: (781) 622-1622
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12.5
Governing Law and Venue
. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of New York, without regard to any choice of law
principle that would dictate the application of the laws of another jurisdiction. Any suit brought
by Alimera arising under or relating to this Agreement shall be brought in a court of competent
jurisdiction in the Commonwealth of Massachusetts, and Alimera hereby consents to the jurisdiction
of the state and federal courts sitting in the Commonwealth of Massachusetts. Any suit brought by
CDS arising under or relating to this Agreement shall be brought in a court of competent
jurisdiction in the state of Georgia, and CDS hereby consents to the jurisdiction of the state and
federal courts sitting in the state of Georgia. Each Party agrees not to raise any objection at
any time to the laying or maintaining of the venue of any such action, suit or proceeding in any of
the specified courts, irrevocably waives any claim that such action, suit or other proceeding has
been brought in any inconvenient forum and further irrevocably waives the
52
CONFIDENTIAL TREATMENT REQUESTED
right to object, with respect to such action, suit or other proceeding, that such court does
not have any jurisdiction over such Party.
12.6
Compliance with Applicable Laws
. The Parties shall use their best efforts to
comply with all provisions of any applicable laws, regulations, rules and orders relating to the
license granted and to the testing, production, transportation, export, packaging, labeling, sale
or use of Products. The Parties shall use their best efforts to obtain written assurances
regarding export and re-export of technical data (including Products made by use of technical data)
as may be required by the Office of Export Administration Regulations. Notwithstanding any other
provision of this Agreement, each Party (and each Affiliate and agent of the Party) may disclose
the tax treatment and tax structure of the transaction and all materials of any kind (including,
but not limited to, opinions and other tax analyses) that are provided to the Party relating to
such tax treatment and tax structure as contemplated by section 1.6011-4(b)(3)(iii) of the Code of
Federal Regulations.
12.7
Dispute Resolution
. Any disputes, other than disputes regarding the
construction, validity or enforcement of patents (which disputes shall be resolved by Section
12.5), arising between the Parties relating to, arising out of or in any way connected with this
Agreement or any term or condition hereof, or the performance by either Party of its obligations
hereunder, whether before or after termination of this Agreement, shall be resolved as follows:
12.7.1.
Senior Management
. If the dispute cannot be resolved by the Primary Contact
Persons in accordance with Section 3.4 hereof, the Primary Contact Persons shall promptly notify
the chief executive officer of each Party (or their designee), who shall meet in person at a
mutually acceptable time and location or by means of telephone or video conference within sixty
(60) days of such notice and attempt to negotiate a settlement.
12.7.2.
Arbitration
. If the chief executive officers are not able to resolve the
dispute within thirty (30) days of their first meeting or within such extended period as they agree
upon, either Party may submit the matter to binding arbitration in accordance with this Section
12.7.2. Except as specified below, the arbitration shall be conducted in accordance with the rules
of, and under the auspices of, the American Arbitration Association (the
AAA
). The
arbitration will be conducted by a single arbitrator with relevant technical expertise who is
jointly selected by the Parties or, if the Parties cannot mutually agree, is selected by the AAA
administrator and is not employed by and does not have a material financial relationship with, a
Party or any of its Affiliates. If Alimera is the claimant, the location of the arbitration shall
be in Boston, Massachusetts and if CDS is the claimant, the location of the arbitration shall be in
Atlanta, Georgia. This Agreement shall remain in effect pending completion of the proceedings
brought under this Section 12.7.2. Within ten (10) Business Days after the arbitrator is selected,
each Party shall submit to the arbitrator that Partys proposed resolution of the dispute and
justification therefor. All arbitration proceedings must be completed within 30 days after the
arbitration is convened. The Parties hereby agree that the arbitrator has authority to issue
rulings and orders regarding all procedural and evidentiary matters that the arbitrator deems
reasonable and necessary with or without petition therefor by the Parties as well as the final
ruling and judgment. Rulings shall be issued by written order summarizing the arbitration
proceedings. Any judgment or award by the arbitrator in any dispute shall have the same force and
effect as the final judgment of a court of competent jurisdiction. Nothing in this arbitration
clause shall
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CONFIDENTIAL TREATMENT REQUESTED
prevent either Party from seeking a pre-award attachment of assets or preliminary relief to
enforce its rights in intellectual property or confidentiality obligations under this Agreement, or
to enjoin any event that might cause irreparable injury, in a court of competent jurisdiction prior
to an award on the merits by the arbitrator.
12.8 Intentionally omitted.
12.9
Entire Agreement
. This Agreement, together with the Exhibits hereto, contains
the entire understanding of the Parties with respect to the subject matter hereof. All express or
implied agreements and understandings, either oral or written, heretofore made are expressly merged
in and made a part of this Agreement. In the event of any conflict or inconsistency between any
provision of any Exhibits hereto and any provision of this Agreement, the provisions of this
Agreement shall prevail. This Agreement may be amended, or any term hereof modified, only by a
written instrument duly executed by both Parties hereto. The Confidentiality Agreement between
Alimera and CDS with an effective date of August 17, 2004 remains effective until the Effective
Date of the Original Agreement, whereupon the provisions of such agreement shall survive to the
extent set forth in that agreement.
12.10
Headings
. The captions to the several Articles and Sections hereof and Exhibits
hereto are not a part of this Agreement, but are merely guides or labels to assist in locating and
reading the several Articles and Sections hereof.
12.11
Independent Contractors
. It is expressly agreed that CDS and Alimera shall be
independent contractors and that the relationship between the two Parties shall not constitute a
partnership, joint venture or agency. Neither CDS nor Alimera shall have the authority to make any
statements, representations or commitments of any kind, or to take any action, which shall be
binding on the other, without the prior consent of the other Party to do so.
12.12
Waiver
. The waiver by either Party hereto of any right hereunder or the failure
to perform or of a breach by the other Party shall not be deemed a waiver of any other right
hereunder or of any other breach or failure by said other Party whether of a similar nature or
otherwise.
12.13
Counterparts
. This Agreement may be executed by facsimile and/or in two or more
counterparts, each of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
<signature page to follow>
54
CONFIDENTIAL TREATMENT REQUESTED
IN WITNESS WHEREOF, the Parties have executed this Amended and Restated Collaboration Agreement as
of the date first set forth above.
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PSIVIDA, INC.
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ALIMERA SCIENCES, INC.
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By:
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/s/ Lori Freedman
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By:
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/s/ Richard S. Eiswirth, Jr.
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Name:
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Lori Freedman
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Name:
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Richard S. Eiswirth, Jr .
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Title:
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VP, Corporate Affairs,
General Counsel and Secretary
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Title:
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CFO
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CONFIDENTIAL TREATMENT REQUESTED
EXHIBITS
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EXHIBIT 1.11A:
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CDS EXISTING PATENT RIGHTS
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EXHIBIT 1.11B:
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EXCLUDED CDS PATENTS AND PATENT APPLICATIONS
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EXHIBIT 1.15:
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CDS PATENT COST-SHARING COUNTRIES
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EXHIBIT 1.42:
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EXCLUDED PRODUCT SPECIFICATIONS/DRAWINGS
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EXHIBIT 1.87:
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UKRF LICENSES
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EXHIBIT 3.1.2A:
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SPECIFIED CDS DEVELOPMENT ACTIVITIES
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EXHIBIT 3.1.2B:
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INITIAL CDS DEVELOPMENT BUDGET
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EXHIBIT 5.8.3:
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TERMS FOR OPTION LICENSE AGREEMENT
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EXHIBIT 6.2A:
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NOTE
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CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 1.11A
CDS EXISTING PATENT RIGHTS
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APP. / PAT.
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FILING
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REF. NO.
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TITLE
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COUNTRY
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NO.
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DATE
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STATUS
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[*]
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*
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Certain information has been omitted and filed separately with the commission.
Confidential treatment has been requested with respect to the omitted portions.
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i
CONFIDENTIAL TREATMENT REQUESTED
[*]
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*
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Certain information has been omitted and filed separately with the commission.
Confidential treatment has been requested with respect to the omitted portions.
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ii
CONFIDENTIAL TREATMENT REQUESTED
[*]
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*
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Certain information has been omitted and filed separately with the commission.
Confidential treatment has been requested with respect to the omitted portions.
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iii
CONFIDENTIAL TREATMENT REQUESTED
[*]
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*
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Certain information has been omitted and filed separately with the commission.
Confidential treatment has been requested with respect to the omitted portions.
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iv
CONFIDENTIAL TREATMENT REQUESTED
[*]
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*
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Certain information has been omitted and filed separately with the commission.
Confidential treatment has been requested with respect to the omitted portions.
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v
CONFIDENTIAL TREATMENT REQUESTED
[*]
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*
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Certain information has been omitted and filed separately with the commission.
Confidential treatment has been requested with respect to the omitted portions.
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vi
CONFIDENTIAL TREATMENT REQUESTED
[*]
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*
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Certain information has been omitted and filed separately with the commission.
Confidential treatment has been requested with respect to the omitted portions.
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vii
CONFIDENTIAL TREATMENT REQUESTED
[*]
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*
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Certain information has been omitted and filed separately with the commission.
Confidential treatment has been requested with respect to the omitted portions.
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viii
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 1.11B
EXCLUDED CDS PATENT RIGHTS
[*]
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*
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Certain information has been omitted and filed separately with the commission.
Confidential treatment has been requested with respect to the omitted portions.
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i
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 1.15
CDS PATENT COST-SHARING COUNTRIES
[*]
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*
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Certain information has been omitted and filed separately with the commission.
Confidential treatment has been requested with respect to the omitted portions.
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i
CONFIDENTIAL TREATMENT REQUESTED
[*]
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*
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|
Certain information has been omitted and filed separately with the commission.
Confidential treatment has been requested with respect to the omitted portions.
|
ii
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 1.42
Excluded Product Specifications/Drawings
[*]
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*
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Certain information has been omitted and filed separately with the commission.
Confidential treatment has been requested with respect to the omitted portions.
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i
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 1.87
UKRF LICENSES
[*]
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*
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Certain information has been omitted and filed separately with the commission.
Confidential treatment has been requested with respect to the omitted portions.
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i
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 3.1.2A
SPECIFIED CDS DEVELOPMENT ACTIVITIES
Current Stability Protocol Listing
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Document #
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Rev. #
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Document Title
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Issued Date
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DCO #
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[*]
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*
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Certain information has been omitted and filed separately with the commission.
Confidential treatment has been requested with respect to the omitted portions.
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CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 3.1.2B
INITIAL CDS DEVELOPMENT BUDGET
[*]
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*
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Certain information has been omitted and filed separately with the commission.
Confidential treatment has been requested with respect to the omitted portions.
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CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 5.8.3
TERMS FOR OPTION LICENSE AGREEMENT
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Any terms not defined herein shall have those definitions
set forth in the Collaboration Agreement
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LICENSE
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Alimera shall have a non-exclusive license under the CDS
Technology (as in existence on the Option License
Effective Date (as defined below), with the right to
sublicense, to make, have made, use, import, sell, and
offer for sale the Option Product in the Collaboration
Field in the Territory. During the term of this option
license, CDS shall not (a) grant a license to any
Affiliate or Third Party under CDS interest in the CDS
Technology to make, have made, use, offer to sell, sell,
or import such Option Product in the Collaboration Field
in the Territory, and (b) itself use the CDS Technology
to make, have made, use, offer to sell, sell, or import
such Option Product in the Collaboration Field in the
Territory.
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Alimera shall have an exclusive royalty-free license to
use the MEDIDUR mark Controlled by CDS on or in
connection with the Option Product marketed, distributed
or sold pursuant to this license.
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ROYALTIES
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During the option license term, Alimera shall pay to CDS
on a quarterly basis a royalty of [*] of Net Sales by
Alimera or its Affiliates.
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DILIGENCE
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As provided in Section 4.3 of the Collaboration Agreement.
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SUBLICENSES
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Alimera shall have full rights to sublicense without
consent, provided that such sublicense shall be
consistent with the term of the option license. Revenues
earned from sublicenses shall be treated as Net Sales.
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OWNERSHIP OF AND
RIGHTS TO
INVENTIONS
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As provided in Section 5.4 of the Collaboration Agreement.
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LIMITATION ON USE,
RESERVATION OF
RIGHTS BY CDS, AND
NO GRANT OF OTHER
TECHNOLOGY OR
PATENT RIGHTS
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As provided in Section 5.5, 5.6 and 5.7 of the
Collaboration Agreement.
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*
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Certain information has been omitted and filed separately with the commission. Confidential treatment has been requested with respect to the omitted portions.
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CONFIDENTIAL TREATMENT REQUESTED
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PATENT MAINTENANCE
AND ENFORCEMENT
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As provided for in Article 7 of the Collaboration
Agreement. Neither Party is obligated to pay for patent
costs or enforcement costs under this license as long as
either the Collaboration Agreement or the 10% license
pursuant to Section 11.5.1 of the Collaboration Agreement
is in effect. If neither the Collaboration Agreement nor
the 10% license pursuant to Section 11.5.1 of the
Collaboration Agreement is in effect, then CDS shall have
the primary control in filing, prosecution, maintenance
and enforcement of CDS Patent Rights. The Parties shall
split the patent costs. Any amounts recovered as a
result of any infringement action taken by the Parties
hereunder shall be first applied, on a pro-rata basis, to
reimburse each Party for its out-of-pocket expenses
incurred in connection with such action and the
remainder, if any, shall be divided appropriately between
the Parties with reference to [*].
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REGULATORY
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All regulatory filings and/or Approvals related to the
Option Product that are subject of this license will be
immediately transferred to Alimera and Alimera shall own
all such filings and Approvals.
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PATENT MARKING
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As provided in Section 7.7 of the Collaboration Agreement.
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INDEMNITY
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As provided for in Article 10, except that CDS shall not
be responsible for product liability claims as described
in Section 10.5 arising based on acts or omissions after
the Option License Effective Date except to the extent
the claims are attributable to CDS gross negligence or
willful misconduct.
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REPORTS
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Alimera will provide to CDS a quarterly written account
of the Net Sales of Option Products together with any
relevant sublicense revenues and royalty payments.
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TERM; TERMINATION
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Commences upon Alimeras exercise of its rights pursuant
to Section 5.8.3 under the Collaboration Agreement (the
Option License Effective Date
) and expires upon the
expiration or abandonment of the last Valid Claim
included in the relevant CDS Patent Rights.
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Alimera may terminate the license at any time by giving
CDS ninety (90) days written notice. CDS may terminate
the license if Alimera: (a) fails to make any payment due
under the license, unless Alimera makes such payments
within sixty (60) days after receipt of written notice
from CDS, or (b) commits a material breach of any other
provision of the license, and such breach is not cured
within ninety (90) days after receipt of written notice
from CDS.
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*
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Certain information has been omitted and filed separately with the commission. Confidential treatment has been requested with respect to the omitted portions.
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CONFIDENTIAL TREATMENT REQUESTED
|
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REPRESENTATIONS
AND WARRANTIES
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As provided in Article 9 of the Collaboration Agreement.
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CONFIDENTIALITY AND
MISCELLANEOUS
|
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As provided in Article 8 and Sections 12.1-12.8 and
12.10-12.13 of the Collaboration Agreement.
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CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 6.2A
NOTE
CONFIDENTIAL TREATMENT REQUESTED
ALIMERA SCIENCES, INC.
Promissory Note
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$15,000,000
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March 14, 2008
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FOR VALUE RECEIVED, the undersigned, ALIMERA SCIENCES, INC., a Delaware corporation (the
Company
), hereby promises to pay to the order of PSIVIDA INC. or registered assigns (such
original payee or any assignee from time to time, the
Noteholder
), at the address
specified in Section 6.2 hereof, or at such other place as the Noteholder shall from time to time
have designated to the Company in writing, on the Liquidity Date, if and when it occurs, Fifteen
Million and No/100ths Dollars ($15,000,000.00), and to pay interest thereon as provided in Section
2 hereof.
1. THE NOTE. This Note (the
Note
) is issued pursuant to and in accordance with Section
6.2A of the Amended and Restated Collaboration Agreement, dated as of March 14, 2008, between the
Company, on the one hand, and pSivida, Inc., on the other hand (as amended and in effect from time
to time, the
Collaboration Agreement
). The rights of the Noteholder therein shall be in
addition to the rights of the Noteholder hereunder. Certain terms are used in this Note as
specifically defined herein and these definitions are set forth or referred to in Section 5 hereof.
2. INTEREST PROVISIONS.
2.1
Interest Rate
. This Note shall bear interest (computed on the basis of a 360-day
year consisting of twelve 30-day months) from the date hereof, on the principal amount hereof from
time to time unpaid, until repayment of all sums due hereunder or until such amounts are otherwise
no longer payable as provided in Section 3.3 herein, at the following rates:
(a) From the date hereof until and including March 31, 2010, at a rate equal to 8% per
annum; and
(b) From and after April 1, 2010, at a rate equal to the lesser of 20% per annum and
the highest rate of interest permissible under applicable law (after taking into account any
notifications or filings made under applicable law).
2.2
Interest Payment Dates
. Interest shall be payable in cash quarterly in arrears on
the last Business Day of each of December, March, June and September, commencing on March 31, 2008;
provided
,
however
, that upon the third occurrence of an Interest Payment Default, a
Scheduled Payment Default, or any combination thereof on different days and not simultaneously (the
simultaneous occurrence of an Interest Payment Default and a Scheduled Payment Default on the same
day constituting one such occurrence), interest shall continue to accrue hereunder, but no further
quarterly payments of interest shall be required pursuant to this Section 2.2.
CONFIDENTIAL TREATMENT REQUESTED
2.3
Maximum Rate
. Notwithstanding any provisions of this Note, in no event shall the
amount of interest paid or agreed to be paid by the Company exceed an amount computed at the
highest rate of interest permissible under applicable law.
3. PAYMENT PROVISIONS. The Company covenants that so long as this Note is outstanding:
3.1
Scheduled Payments
. Commencing on April 30, 2010 and on the last Business Day of
each month thereafter until the Maturity Date, the Company shall make a payment of $500,000 of the
principal amount of this Note, together with all accrued and unpaid interest on the principal
amount so paid;
provided
,
however
, that upon the third occurrence of an Interest
Payment Default, a Scheduled Payment Default or any combination thereof on different days and not
simultaneously (the simultaneous occurrence of an Interest Payment Default and a Scheduled Payment
Default on the same day constituting one such occurrence), no further scheduled payments shall be
required pursuant to this Section 3.1.
3.2
Mandatory Prepayment
. On the Liquidity Date, the Company will pay the entire
principal amount of this Note then outstanding, together with all accrued and unpaid interest
thereon and any other amounts owed to the Noteholder under this Note.
3.3
Liquidity Event Failure; Termination of Collaboration Agreement
. If no Liquidity
Event shall have occurred on or before the Maturity Date (a Liquidity Event Failure) or if the
Collaboration Agreement shall have been terminated because there shall have occurred three Interest
Payment Defaults, Scheduled Payment Defaults, or any combination thereof, on different days and not
simultaneously (the simultaneous occurrence of an Interest Payment Default and a Scheduled Payment
Default on the same day constituting one such occurrence), this Note shall immediately and without
further action be cancelled, and the Company shall have no obligation to pay any principal amount
of this Note then outstanding or any accrued and unpaid interest thereon.
3.4
Voluntary Prepayments
. The Company may at any time and from time to time prepay
all or part of the principal amount of this Note then outstanding without penalty or premium.
3.5
Notice of Prepayments
. Notice of each voluntary prepayment of this Note pursuant
to Section 3.4 hereof shall be given to the Noteholder in accordance with Section 6.2 hereof no
later than one Business Day prior to the prepayment date, in each case by delivering to the
Noteholder a notice of intention to prepay specifying the date of prepayment, the aggregate amount
of this Note to be prepaid on such date, and the accrued interest applicable to such prepayment.
3.6
Payment and Interest
. Upon each voluntary prepayment of this Note, in whole or in
part, the Company will pay to the Noteholder the amount of this Note to be prepaid, as set forth in
the notice delivered pursuant to Section 3.5 hereof, together with unpaid interest in respect
thereof accrued to and including the prepayment date.
CONFIDENTIAL TREATMENT REQUESTED
3.7
Application of Payments
. All cash payments made by the Company hereunder shall be
applied: (a) first, to the payment of any costs and expenses for which the Company is responsible
under Section 3.8 hereof; (b) second, to the payment in full of accrued unpaid interest; and (c)
finally, to the reduction of the unpaid principal balance hereof. Voluntary prepayments will be
applied to the remaining scheduled payments under Section 3.1 hereof in inverse order of maturity.
3.8
Noteholder Expenses
. The Company shall pay to the Noteholder all costs and
expenses (including reasonable counsel fees) incurred by the Noteholder in connection with any
proceedings or enforcement action instituted by or on behalf of the Noteholder to collect any sums
due and owing by the Company under this Note.
3.9
Notice of Events Constituting or That May Constitute a Liquidity Event
. No later
than three Business Days after the occurrence thereof, the Company shall provide the Noteholder
with notice in accordance with Section 6.2 hereof of the occurrence of a transaction qualifying as
a Liquidity Event or the occurrence of any transaction described in the definition of Liquidity
Event.
4. DEFAULTS.
4.1
Interest Payment Default
. An
Interest Payment Default
shall exist if
the Company fails to make a payment when the same shall become due pursuant to Section 2.2 hereof
and such failure continues for seven Business Days after the Noteholder has provided the Company
with notice, in accordance with Section 6.2 hereof, of such failure. In the event of an Interest
Payment Default the remedies of the Noteholder shall be as provided in the Collaboration Agreement.
4.2
Scheduled Payment Default
. A
Scheduled Payment Default
shall exist if
the Company fails to make a payment when the same shall become due pursuant to Section 3.1 hereof
and such failure continues for seven Business Days after the Noteholder has provided the Company
with notice, in accordance with Section 6.2 hereof, of such failure. In the event of a Scheduled
Payment Default the remedies of the Noteholder shall be as provided in the Collaboration Agreement.
4.3
Event of Default
. An
Event of Default
shall exist if any of the
following conditions or events shall occur and be continuing:
4.3.1 The Company shall fail to make any payment pursuant to Section 3.2 hereof when the same
shall become due and (a) in the event that the Company has provided the Noteholder with notice of
such Liquidity Event in accordance with Section 3.9 hereof, such failure continues for seven
Business Days after the Noteholder has provided the Company with notice, in accordance with Section
6.2 hereof, of such failure and (b) in the event that the Company has not provided the Noteholder
notice of such Liquidity Event in accordance with Section 3.9 hereof, and such failure continues
for seven Business Days.
CONFIDENTIAL TREATMENT REQUESTED
4.3.2 The Company shall: (i) commence a voluntary case concerning itself under Title 11 of the
United States Code entitled Bankruptcy as now or hereafter in effect, or any successor thereto
(the
Bankruptcy Code
); (ii) have commenced against it an involuntary case under said
Bankruptcy Code and the petition is not dismissed within 60 days of the commencement of the case;
(iii) have appointed for it a custodian (as defined in the Bankruptcy Code) to take charge of all
or substantially all of its property; (iv) have filed against it any proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or hereafter in effect, which such
proceeding remains undismissed for a period of 60 days, or shall suffer the appointment of any
receiver or custodian or the like for it or a substantial part of its property which continues
undischarged or unstayed for a period of 60 days; (v) make a general assignment for the benefit of
its creditors; or (vi) take any corporate action for the purpose of effecting any case referred to
in the foregoing clauses (i) or (v); or
4.3.3 The Company shall create or incur or permit to exist any consensual lien or other
security interest of any kind upon any Collaboration Agreement Rights in favor of (a) any of the
Persons set forth on Schedule A and their Affiliates or (b) any stockholder of the Company
including any of such stockholders Affiliates, other than where such lien or other security
interest is created in conjunction with (i) a joint collaboration or development agreement to which
the Company and such stockholder or its Affiliates is a party, and that relates to the Companys
development of any Product and pursuant to which such stockholder or its Affiliates is required to
make a substantial investment in the Company or any Product, or (ii) a credit or other lending
agreement between the Company and such stockholder or its Affiliates, provided, that such
stockholders or such Affiliates principal business is lending.
For the avoidance of doubt, an Interest Payment Default, a Scheduled Payment Default and a
Liquidity Event Failure shall not constitute an Event of Default.
4.4
Acceleration
. Upon the occurrence and during the continuance of any Event of
Default, and in addition to the rights provided to the Noteholder in the Collaboration Agreement,
the Noteholder may proceed to protect and enforce its rights by suit in equity, action at law
and/or other appropriate proceeding, and/or may by notice to the Company declare all or any part of
the unpaid principal amount of this Note then outstanding to be forthwith due and payable (each, an
Acceleration
) and thereupon such unpaid principal amount or part thereof, together with
interest accrued thereon and all other sums, if any, payable under this Note, shall become so due
and payable without presentation, presentment, protest or further demand or notice of any kind, all
of which are hereby expressly waived, and such holder or holders may proceed to enforce payment of
such amount or part thereof in such manner as it or they may elect.
4.5
Annulment of Defaults
. None of an Event of Default, an Interest Payment Default
or a Scheduled Payment Default shall be deemed to be in existence for any purpose of this Agreement
if the Noteholder shall have waived such event in writing or stated in writing that the same has
been cured to the Noteholders reasonable satisfaction. No waiver or statement of satisfactory
cure pursuant to this Section 4.5 shall extend to or affect any subsequent or other
CONFIDENTIAL TREATMENT REQUESTED
Event of Default, Interest Payment Default or Scheduled Payment Default not specifically
identified in such waiver or statement of satisfactory cure or impair any of the rights of any
holder of this Note upon the occurrence thereof.
5. DEFINED TERMS.
5.1
Cross Reference Table
. The following terms defined elsewhere in this Note in the
Sections set forth below shall have the respective meanings therein defined
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Term
|
|
Definition
|
Acceleration
|
|
Section 4.4
|
Bankruptcy Code
|
|
Section 4.3.2
|
Collaboration Agreement
|
|
Section 1
|
Company
|
|
Preamble
|
Event of Default
|
|
Section 4.3
|
Interest Payment Default
|
|
Section 4.1
|
Liquidity Event Failure
|
|
Section 3.3
|
Note
|
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Section 1
|
Noteholder
|
|
Preamble
|
Scheduled Payment Default
|
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Section 4.2
|
5.2
Other Defined Terms
. As used in this Note, the following terms will have the
following meanings:
Business Day
shall mean each day of the week excluding Saturday, Sunday, U.S.
federal holidays and U.S. bank holidays.
Collaboration Agreement Rights
means any of the Companys rights under the
Collaboration Agreement, including rights to any Product (as defined in the Collaboration
Agreement) or to any CDS Technology (as defined in the Collaboration Agreement), as well as any
revenues or royalties related to any Product (as defined in the Collaboration Agreement) or to any
CDS Technology (as defined in the Collaboration Agreement), whether now owned or hereafter
acquired.
Liquidity Date
means the date three Business Days following the date on which a
Liquidity Event shall have occurred, provided such date shall be on or before the Maturity Date.
Liquidity Event
means the consummation of (i) any of the following events for which
the proceeds are not less than $75,000,000 or (ii) any of the following events, related or
unrelated, which when combined with any one or more of the following events that have been
consummated have proceeds from all such events that aggregate not less than $75,000,000:
CONFIDENTIAL TREATMENT REQUESTED
(a) a public offering of the common stock of the Company, any of its Subsidiaries or any of
their respective successors, registered under the Securities Act of 1933, as amended, by any of the
Company, any of its Subsidiaries or any of their respective successors and/or any of their
respective security holders (for which event proceeds shall mean the aggregate gross proceeds to
the Company, any of its Subsidiaries, and/or any of their respective successors and/or security
holders);
(b) (i) any event or series of events, whether related or unrelated, prior to the Companys
initial public offering, as a result of which the Persons set forth on Schedule A hereto, who are
the beneficial owners of the securities of the Company on the date hereof no longer (x) have the
direct or indirect power to elect a majority of the board of directors of the Company or any of its
successors, or (y) are beneficial owner(s) of at least fifty percent (50%) of the outstanding
securities of the Company or any surviving entity or any of its successors and (ii) after the
Companys initial public offering, any event or series of related events as a result of which the
beneficial owners of the securities of the Company immediately prior thereto (x) no longer have the
direct or indirect power to elect a majority of the board of directors of the Company or any of its
successors, or (y) no longer are beneficial owner(s) of at least fifty percent (50%) of the
outstanding securities of the Company or any surviving entity or any of its successors, or (z)
transfer securities of the Company representing 50% or more of the combined voting power of the
then outstanding securities of the Company (other than in connection with the Companys initial
public offering or a distribution by a limited partnership to the limited partners in accordance
with the terms of the partnership agreement) (for each of such event, proceeds shall mean the
aggregate net proceeds to the Company and/or any of its successors and/or its security holders);
(c) any event or transaction involving the Company, any of its Subsidiaries, and/or any of
their respective successors (other than the issuance by the Company of shares of its Series C
Preferred Stock pursuant to that certain Series C Preferred Stock Purchase Agreement, dated on or
about the date hereof), involving the sale, issuance, conversion, exchange, exercise, transfer or
other event with respect to the capital stock of the Company, any of its Subsidiaries, and/or any
of their respective successors, or securities exercisable for, convertible into or otherwise
representing the right to acquire such capital stock (including, without limitation, resulting from
a merger, consolidation, exchange, tender offer, corporate combination, reorganization,
restructuring, recapitalization, stock or other security issuance, securities conversion, exercise
or similar transaction, but excluding, however, issuances of options to employees of the Company in
the ordinary course of business) (for which event or transaction proceeds shall mean the gross
proceeds to the Company, any of its Subsidiaries, and/or any of their respective successors other
than events included pursuant to (1)(a) above, for which proceeds shall be as defined therein); or
(d) any sublicense of rights under the Collaboration Agreement (for which sublicense proceeds
shall mean the share of royalty and/or non-royalty consideration received by the Company, any of
its Subsidiaries, and/or any of their respective successors or security holders, as applicable,
after deduction of amounts paid by the Company to pSivida, Inc. and/or
CONFIDENTIAL TREATMENT REQUESTED
its successors and assigns and other amounts paid by the Company and permitted to be deducted
pursuant to Section 6.6 of the Collaboration Agreement, in each case with respect to such
sublicense); or
(e) any sale, transfer or other disposition of all or substantially all of the assets of the
Company (for each of such event, proceeds shall mean the aggregate net proceeds to the Company, its
Subsidiaries and/or any of their respective successors and/or its security holders).
For purposes of this definition, any noncash proceeds shall be valued at fair market value as
determined by mutual agreement of the Company and the Noteholder acting in good faith. In the
event that the Company and the Noteholder fail to reach such mutual agreement, the matter shall be
resolved by arbitration in accordance with Section 12.7.2 of the Collaboration Agreement.
Maturity Date
means September 30, 2012.
Person
means any individual or corporation, partnership, association, limited
liability company, joint venture, trust, governmental authority or other entity of any kind.
Product
shall have the meaning given such term in the Collaboration Agreement.
Subsidiary
means any Person of which the Company (or other specified Person) shall
at the time, directly or indirectly through one or more of its Subsidiaries, (a) own more than 50%
of the outstanding capital stock (or other shares of beneficial interest) entitled to vote
generally, (b) hold more than 50% of the partnership, joint venture or similar interests or (c) be
a general partner or joint venturer.
6. MISCELLANEOUS.
6.1
Assignment
. This Note shall be binding upon the Company and its successors and
assigns and shall inure to the benefit of the Noteholder and its successors and assigns. Neither
the Companys rights or obligations hereunder nor any interest therein may be assigned or delegated
by the Company without the prior written consent of the Noteholder. The Noteholder shall have the
right at any time to sell, assign or transfer, in whole or in part, this Note.
6.2
Notices
. Any notice or other communication to the Company or the Noteholder in
connection with this Note must be in writing and must be delivered: (a) by hand (in which case it
will be effective upon delivery), (b) by facsimile (in which case it will be effective upon receipt
of confirmation of good transmission), or (c) by overnight delivery by a nationally recognized
courier service (in which case it will be effective on the Business Day after being deposited with
such courier service), and in each case, to the address (or facsimile number) listed below:
If to the Company, to it at:
CONFIDENTIAL TREATMENT REQUESTED
Alimera Sciences, Inc.
6120 Windward Parkway, Suite 290
Alpharetta, GA 30005
Attn: Chief Executive Officer
Telephone: 678-990-5740
Fax: 678-990-5744
With a copy to:
Gunderson Dettmer Stough
Villeneuve Franklin & Hachigian, LLP
610 Lincoln Street
Waltham, MA 02451
Attn: Jay Hachigian, Esq.
Telephone: 781-795-3550
Fax: 781-622-1622
If to the Noteholder, to it at :
pSivida, Inc.
400 Pleasant Street
Watertown, MA 02472
Attn: Chief Financial Officer
Telephone: 617-926-5000
Fax: 617-926-5050
With a copy to:
Ropes & Gray LLP
One International Place
Boston, MA 02110
Attn: Mary Weber, Esq.
Telephone: 617-951-7000
Fax: 617-951-7050
6.3
Waiver of Jury Trial
. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT
BE WAIVED, THE COMPANY (BY ITS EXECUTION HEREOF) AND THE NOTEHOLDER (BY ITS ACCEPTANCE OF THIS
NOTE) WAIVES AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE)
ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE OR ACTION ARISING OUT OF OR BASED
UPON OR RELATING TO THIS NOTE OR IN ANY WAY CONNECTED WITH OR RELATED OR
CONFIDENTIAL TREATMENT REQUESTED
INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING.
6.4
Governing Law
. This Note shall be deemed to be a contract made under the laws of
the Commonwealth of Massachusetts and for all purposes shall be governed by, construed under, and
enforced in accordance with the laws (other than the conflict of laws rules) of the Commonwealth of
Massachusetts.
CONFIDENTIAL TREATMENT REQUESTED
Promissory Note
$15,000,000
The undersigned has caused this Note to be executed under seal by a duly authorized officer as
of the date first written above.
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ALIMERA SCIENCES, INC.
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By
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Name:
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Title:
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CONFIDENTIAL TREATMENT REQUESTED
Schedule A
[*]
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*
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Certain information has been omitted and filed separately with the commission. Confidential treatment has been requested with respect to the omitted portions.
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CONFIDENTIAL TREATMENT REQUESTED
[*]
DP VI Associates, LP
[*]
Venrock Entrepreneurs Fund IV, LP
Polaris Venture Partners Entrepreneurs Fund IV, L.P.
[*]
Susan Caballa
[*]
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*
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Certain information has been omitted and filed separately with the commission. Confidential treatment has been requested with respect to the omitted portions.
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CONFIDENTIAL TREATMENT REQUESTED
[*]
Calvin Roberts
[*]
C. Daniel Myers
[*]
Venrock Partners, LP
Intersouth Partners V, L.P.
Intersouth Affiliates V, LP
Intersouth Partners VI, LP
Venrock Associates IV, LP
Polaris Venture Partners IV, LP
Domain Partners VI, LP
BAVP, LP
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*
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Certain information has been omitted and filed separately with the commission. Confidential treatment has been requested with respect to the omitted portions.
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Exhibit 10.14
CONFIDENTIAL TREATMENT REQUESTED
ASSET PURCHASE AGREEMENT
BETWEEN
BAUSCH & LOMB INCORPORATED
AND
ALIMERA SCIENCES, INC.
DATED DECEMBER 20, 2006
CONFIDENTIAL TREATMENT REQUESTED
TABLE OF CONTENTS
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Page
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ARTICLE I DEFINITIONS
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1
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1.1 Definitions
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1
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1.2 Other Definitions
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5
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1.3 Rules of Construction
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6
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ARTICLE II SALE AND PURCHASE
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7
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2.1 Transfer of Assets
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7
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2.2 Excluded Assets
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8
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2.3 Assumption of Liabilities
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8
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2.4 Excluded Liabilities
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9
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2.5 Consideration
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10
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2.6 Allocation of Consideration
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10
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2.7 Post-Closing Consideration
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10
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER
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12
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3.1 Organization, Power, Standing and Qualification
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12
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3.2 Power and Authority
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12
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3.3 Validity of Contemplated Transactions
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12
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3.4 Consents
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12
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3.5 Subsidiaries
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13
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3.6 Financial Statements; Undisclosed Liabilities
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13
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3.7 Intentionally Omitted
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13
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3.8 Equipment; Inventory; Sufficiency of Assets
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13
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3.9 Assigned Intellectual Property
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13
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3.10 IP Rights
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15
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3.11 Contracts
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17
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3.12 Restrictions on Purchased Assets
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17
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3.13 Suppliers
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17
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3.14 Litigation; Product Liability
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17
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3.15 Compliance with Laws and Permits
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18
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3.16 Conflicts of Interest
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18
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3.17 Brokers or Finders Fees
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18
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3.18 Insurance
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18
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3.19 Disclosure
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18
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER
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18
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4.1 Organization
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18
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4.2 Power and Authority
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19
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4.3 Validity of Contemplated Transactions
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19
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4.4 Consents
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19
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4.5 Brokers and Finders Fees
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19
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ARTICLE V INTENTIONALLY OMITTED
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19
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- i -
CONFIDENTIAL TREATMENT REQUESTED
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Page
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ARTICLE VI OTHER COVENANTS
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19
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6.1 Reasonable Commercial Efforts
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19
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6.2 Laws Affecting Transfer of Permits
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20
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6.3 Public Announcements
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20
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6.4 Confidentiality
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20
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6.5 Transfer Taxes
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20
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6.6 HSR Filing
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21
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6.7 Cooperation Regarding Audits and Litigation
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21
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6.8 Insurance Claims
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21
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6.9 Additional Assurances
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21
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6.10 Covenant Not to Compete
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22
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6.11 Post-Closing Services
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23
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6.12 License of Know-How
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23
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6.13 Good Faith Negotiations Related to Sale of Soothe
®
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23
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ARTICLE VII CONDITIONS PRECEDENT TO CLOSING
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24
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7.1 Conditions to Obligation of Buyer to Close
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24
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7.2 Conditions to Obligations of Seller to Close
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25
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ARTICLE VIII THE CLOSING
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26
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8.1 Time and Place
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26
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8.2 Conduct of Closing
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26
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ARTICLE IX SURVIVAL AND INDEMNIFICATION
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27
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9.1 Survival of Representations, Warranties and Covenants
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27
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9.2 Indemnification by Seller
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27
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9.3 Indemnification by Buyer
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28
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9.4 Procedure
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28
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9.5 No Subrogation
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29
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9.6 Sole Remedy
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29
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ARTICLE X MISCELLANEOUS
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29
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10.1 Headings and References
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29
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10.2 Severability
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30
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10.3 Expenses
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30
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10.4 Notices
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30
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10.5 Waiver; Consents
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31
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10.6 Assignment
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31
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10.7 Governing Law
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31
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10.8 Parties in Interest
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31
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10.9 Submission to Jurisdiction
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31
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10.10 Counterparts
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32
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10.11 Entire Agreement; Amendments
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32
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- ii -
CONFIDENTIAL TREATMENT REQUESTED
EXHIBITS
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Exhibit 1.1-A
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[*] Assignment, Assumption and Amendment Agreement
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Exhibit 1.1-B
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Patent Assignment
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Exhibit 1.1-C
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Trademark Assignment
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Exhibit 2.1.4
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Assigned Contracts
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Exhibit 2.1.9
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Equipment
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Exhibit 2.6
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Purchase Price Allocation Schedule (to be provided post-Closing)
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Exhibit 6.11
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Post-Closing Services
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Exhibit 6.3-A
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Form of Seller Initial Press Release
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Exhibit 6.3-B
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Form of Buyer Initial Press Release
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Exhibit 7.1.6
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Opinion of Counsel for Seller
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*
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Certain information has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
.
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- iii -
CONFIDENTIAL TREATMENT REQUESTED
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement, dated as of December 20, 2006, is by and between Alimera
Sciences, Inc., a Delaware corporation (Seller) and Bausch & Lomb Incorporated, a New York
corporation (Buyer).
RECITALS:
WHEREAS, Seller is engaged, among other things, in the development, commercialization and sale
of over-the-counter and prescription pharmaceutical products; and
WHEREAS, Seller desires to sell the Purchased Assets set forth in Section 2.1 to Buyer, and
Buyer desires to purchase the same and to assume the Assumed Liabilities set forth in Section 2.3,
all on the terms and conditions set forth in this Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1
Definitions
. As used in this Agreement, terms defined in the preamble of this
Agreement shall have the meanings set forth therein and the following terms shall have the meanings
set forth below.
Action means any complaint, claim, prosecution, investigation (other than an investigation
that is not known to Seller), indictment, action, suit, arbitration or proceeding by or before any
Governmental Entity or arbitrator.
Affiliate means, with respect to any Person, any other Person directly or indirectly
controlling, controlled by or under common control with such Person, whether through the ownership
of voting securities, by contract or otherwise.
Agreement means this Asset Purchase Agreement, the Exhibits and Schedules hereto.
Alaway means Ketotifen Fumarate (0.025%) Ophthalmic Solution.
Alaway Plus means [*] (or other similar vasoconstrictors as permitted under the patents set
forth on Schedule 3.10.1 under the heading Alaway Plus) Ophthalmic Solution.
Alaway Plus Sale means the transfer or other disposition by Buyer (or reseller, distributor
or other distribution channel thereof) of Alaway Plus for value in an arms length transaction
with a third party (other than an Affiliate of Buyer).
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*
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Certain information has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
.
|
CONFIDENTIAL TREATMENT REQUESTED
Asset Classes means, collectively, the Assigned Intellectual Property, the Products, the
Assigned Contracts, the Permits, the Assigned Claims, the Inventory, the Access Fee and the
Equipment.
Assigned Intellectual Property means all of Sellers Intellectual Property and Sellers IP
Rights inherent in, used in or related to the following: Clinical IP, Patent Rights, Copyrights,
Trademarks, Books and Records, the Products.
Clinical IP means (i) pre-clinical or clinical protocols, data, and findings resulting from
or relating to pre-clinical or clinical trials related to the Products, and (ii) all INDs, NDAs and
other regulatory applications and approvals related thereto.
Closing means the closing of the Transactions.
Code means the Internal Revenue Code of 1986 and all regulations promulgated thereunder, as
the same have from time to time been amended.
Collateral Documents means the Patent Assignment, Trademark Assignment, and [*] Assignment,
Assumption and Amendment Agreement.
Default means the occurrence of any event which of itself or with the giving of notice or
the passage of time or both would constitute an event of default under the applicable agreement,
contract or instrument or would permit the other party thereto to cancel or terminate performance
or seek damages for breach.
Dollars and $ means dollars of the United States of America.
[*] means [*]
[*] Assignment, Assumption and Amendment Agreement means the Assignment, Assumption and
Amendment Agreement to be executed among Buyer, Seller and [*] on the Closing Date in the form of
Exhibit 1.1-A.
FDA means the United States Food and Drug Administration or any other Governmental Entity
which may regulate or control the sale of cosmetics or drugs, including any of the Products.
FDC Act means the Federal Food, Drug and Cosmetic Act, as amended from time to time, and all
regulations promulgated pursuant thereto.
Financial Statements means Sellers audited financial statements as of and for its fiscal
year ended December 31, 2005, including the independent auditors report issued thereon.
GAAP means United States generally accepted accounting principles in effect on the date
hereof, applied on a consistent basis.
Governmental Entity means the United States government, the government of any of the states
constituting the United States, any municipality and any other national or provincial or
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*
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Certain information has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
.
|
2
CONFIDENTIAL TREATMENT REQUESTED
regional government, and all of their respective branches, departments, agencies,
instrumentalities, non appropriated fund activities, subsidiary corporations or other subdivisions.
Income Taxes means any taxes measured, in whole or in part, by net or gross income or
profits together with any interest, penalties or additions to tax.
IND means any Investigational New Drug Application relating to Alaway or Alaway Plus and
all associated documents to support such applications, as submitted to the FDA, or a similar
application and supporting documents submitted to any other Governmental Entity.
Intellectual Property means any patents, patent applications, inventors certificates,
trademarks including words, phrases, symbols, product shapes, logos and the goodwill related
thereto, trademark registrations and applications therefor, trade dress rights, trade names,
service marks and the goodwill related thereto, service mark registrations and applications
therefor, Internet domain names, Internet and world wide web URLs or addresses, copyrights,
copyright registrations and applications therefor, inventions, trade secrets, know-how, customer
lists, supplier lists, proprietary processes and formulae, structures, development tools, designs,
blueprints, specifications, technical drawings (or similar information in electronic format),
software, hardware, source and object code and data applications and licenses and other rights
necessary to use or run such software, programs, code or applications, and all documentation and
media constituting, describing or relating to the foregoing, including manuals, programmers notes,
memoranda and records existing anywhere in the world.
IP Rights means all rights of a Person in, to or arising out of the Intellectual Property.
Know-How means all technology, engineering data, trade secrets, technical data,
manufacturing information, pre-clinical and clinical data and any other information or experience
(other than as disclosed in the Patent Rights) related to the Purchased Assets.
Laws means any law, statute, code, ordinance, rule, regulation, order, judgment or decree
promulgated by any Governmental Entity.
Lien means any mortgage, pledge, assessment, security interest, lease, sublease, lien,
charge, adverse or prior claim, levy, charge, easement, rights of way, covenants, restrictions,
rights of first refusal, encroachments, options or encumbrances of any kind, or any defects in
title, conditional sale contract, title retention contract, or other contract to give or to refrain
from giving any of the foregoing; provided, however, that obligations to pay royalties and other
obligations imposed pursuant to the Assigned Contracts in connection with any Intellectual Property
subject to an Inbound Technology Agreement shall not constitute a Lien.
Litigation Expense means any reasonable expenses incurred in connection with investigating,
defending or asserting any claim, action, suit or proceeding incident to any matter indemnified
against under this Agreement, including court filing fees, court costs, arbitration fees or costs,
witness fees and fees and disbursements of legal counsel (whether incurred in any action or
proceeding between the parties to this Agreement or between any party to this Agreement and any
third party), investigators, expert witnesses, accountants and other professionals.
3
CONFIDENTIAL TREATMENT REQUESTED
Loss means any loss, obligation, claim, liability, settlement payment, award, judgment,
fine, penalty, interest charge, expense, damage or deficiency or other charge, other than
Litigation Expense.
Material Adverse Effect means a material adverse effect on (a) the condition of the
Purchased Assets or the ability to use, develop, commercialize or sell the Products or (b) the
ability of Seller to perform its obligations under this Agreement; provided, however, that none of
the following shall be deemed (either alone or in combination) to constitute a Material Adverse
Effect: (i) a general deterioration in the economy or in the industry in which Seller operates;
(ii) the outbreak or escalation of hostilities involving the United States or any other country,
the declaration by the United States or any other country of a national emergency or war or the
occurrence of any other calamity or crisis, including an act of terrorism; (iii) the disclosure (as
expressly permitted by this Agreement) of Buyer as, or the fact that Buyer is, the prospective
acquirer of the Purchased Assets; (iv) the announcement whether internal or external (as expressly
permitted by this Agreement) of the pendency of the Transactions; (v) actions taken by Buyer or any
of its Affiliates, officers, directors, employees, agents or advisers; or (vi) compliance with the
terms of, or the taking of any action required or contemplated (and permitted) by this Agreement.
NDA means any New Drug Application relating to any of the Products and all associated
documents to support such applications, as submitted to the FDA, or a similar application and
supporting documents submitted to any other Governmental Entity.
Patent Assignment means the Patent Assignment to be executed by Seller and delivered to
Buyer on the Closing Date in the form of Exhibit 1.1-B.
Patent Rights means all rights of a Person, in, to or arising out of (i) any patents, patent
applications, or inventors certificates that claim inventions used in the Products as listed on
Schedule 3.10.1, and (ii) any continuations, continuations in part, divisions, re-examinations,
re-issues, extensions, and improvements of any of the patents or patent applications listed in
Schedule 3.10.1 and any foreign equivalents thereof.
Permitted Liens means any of the following: (a) Liens, if any, arising under the Assigned
Contracts; and (b) covenants, restrictions or other encumbrances of any kind imposed on the
Purchased Assets pursuant to an Inbound Technology Agreement.
Person means and includes an individual, a corporation, a partnership, a limited liability
company, a limited liability partnership, a joint venture, a trust, an unincorporated association,
a Governmental Entity or any other business entity, wherever located or organized.
Products means, collectively all products currently and in the past under development,
developed under, sold under or marketed in conjunction with the names and marks Alaway or Alaway
Plus (including all variations and derivations of such names and marks) by or on behalf of Seller.
Schedule means the appropriate schedule to this Agreement.
Soothe
®
means Soothe Emollient (Lubricant) Eye Drops.
4
CONFIDENTIAL TREATMENT REQUESTED
Subsidiary means a Person, more than fifty percent (50%) of the outstanding equity interests
of which are owned, directly or indirectly, by Seller.
Taxes means any taxes, charges, fees, levies or other assessments, including income, excise,
property, sales, gross receipts, employment and franchise taxes imposed by the United States, or
any state, county, local or foreign government or subdivision or agency thereof, and any interest,
penalties or additions attributable thereto.
Tax Returns means all returns, reports, estimates, information returns and statements of any
nature with respect to Taxes.
Trademark Assignment means the Trademark Assignment to be executed by Seller and delivered
to Buyer on the Closing Date in the form of Exhibit 1.1-C.
Transactions means the transactions contemplated by this Agreement.
1.2
Other Definitions
. Each of the following terms is defined in the Section or
Section referred to below:
Access Fee as defined in Section 2.1.8.
Account as defined in Section 2.5.
Acquisition Offer as defined in Section 5.3.
Alaway Plus Purchase Option as defined in Section 2.7.2.
Alaway Plus Proviso as defined in Section 2.7.2.
Assigned Claims as defined in Section 2.1.6.
Assigned Contracts as defined in Section 2.1.4.
Assumed Liabilities as defined in Section 2.3.
Books and Records as defined in Section 2.1.3.
Buyer as defined in the preamble to this Agreement.
Buyer Fundamental Representations as defined in Section 9.1.
Buyer Indemnified Parties as defined in Section 9.2.
Cap as defined in Section 2.7.1.
Claim as defined in Section 9.4.
Closing Consideration as defined in Section 2.5.
Closing Date as defined in Section 8.1.
Competitive Activity as defined in Section 6.10.1.
Confidential Information as defined in Section 6.4.
Consideration as defined in Section 2.7.1.
Contracts as defined in Section 3.11.
Contributors as defined in Section 3.9.4.
Copyrights as defined in Section 3.10.2.
Disclosure Schedule as defined in the preamble to Article III.
Equipment as defined in Section 2.1.9.
Excluded Assets as defined in Section 2.2.
Excluded Liabilities as defined in Section 2.4.
Expiration Date as defined in Section 9.1.
5
CONFIDENTIAL TREATMENT REQUESTED
Final Offer as defined in Section 6.14.
First Milestone Date as defined in Section 2.7.2.
First Milestone Payment as defined in Section 2.7.2.
First Option Period as defined in Section 2.7.2.
First Sale Notice as defined in Section 2.7.2.
HSR Act as defined in Section 6.6.
Inbound Technology as defined in Section 3.9.5.
Inbound Technology Agreements as defined in Section 3.9.5.
Indemnitee as defined in Section 9.4.
Indemnitor as defined in Section 9.4.
Inventory as defined in Section 2.1.7.
Minimum Claim Amount as defined in Section 9.2.
Negotiation Period as defined in Section 6.14.
Offset Amount as defined in Section 2.7.1.
Offset Dispute as defined in Section 2.7.1.
Organizational Documents as defined in Section 3.1.
Outbound Technology Agreements as defined in Section 3.9.6.
Payment Due Date as defined in Section 2.7.1.
Post-Closing Consideration as defined in Section 2.7.1.
Prepaid Expenses as defined in Section 2.1.8.
Purchased Assets as defined in Section 2.1.
Purchase Price Allocation Schedule as defined in Section 2.6.
Permits as defined in Section 2.1.5.
Restrictive Covenants as defined in Section 6.10.2.
Retained Claims as defined in Section 2.4.4.
Second Milestone Date as defined in Section 2.7.2.
Second Option Period as defined in Section 2.7.2.
Second Sale Notice as defined in Section 2.7.2.
Seller as defined in the preamble to this Agreement.
Seller Fundamental Representations as defined in Section 9.1.
Seller Indemnified Parties as defined in Section 9.3.
Seller Inventory Trademarks as defined in Section 6.13.
Soothe
®
Terms as defined in Section 6.14.
Third Party Negotiation Period as defined in Section 6.14.
Third Party Sale as defined in Section 6.14.
Trademarks as defined in Section 3.10.2.
Transfer Taxes as defined in Section 6.5.
1.3
Rules of Construction
.
1.3.1 References in this Agreement to any gender shall include references to all genders.
Unless the context otherwise requires, references in the singular include references in the plural
and vice versa. References to a party to this Agreement or to other agreements described herein
means those Persons executing such agreements. The words include, including or includes
shall be deemed to be followed by the phrase without limitation or the phrase but not limited
to in all places where such words appear in this Agreement. The word or shall be deemed to have
the inclusive meaning represented by the phrase and/or.
6
CONFIDENTIAL TREATMENT REQUESTED
This Agreement is the joint drafting product of Seller and Buyer and each provision has been
subject to negotiation and agreement and shall not be construed for or against either party as
drafter thereof.
1.3.2 The phrases have heretofore been provided or has provided or similar words mean that
one party has delivered or provided access to such information to the other party or to counsel of
such other party.
ARTICLE II
SALE AND PURCHASE
2.1
Transfer of Assets
. Upon and subject to the terms and conditions stated in this
Agreement, and except as provided in Section 2.2 of this Agreement, on the Closing Date, for the
consideration described in Section 2.5 hereof and Buyers performance of its other obligations
under this Agreement, Seller hereby sells, assigns, conveys, transfers and delivers to Buyer, and
Buyer hereby acquires from Seller, free and clear of all Liens (other than Permitted Liens), all of
Sellers right, title and interest in and to the following (the Purchased Assets):
2.1.1 All Assigned Intellectual Property, including all tangible embodiments thereof;
provided, however, that Seller or its Affiliates may retain one copy of any such tangible
embodiments, solely for legal, regulatory, Tax or accounting purposes;
2.1.2 All Products;
2.1.3 (a) All books, records or information (including all data and other information stored
on discs, tapes or other media) of Seller in existence on the date hereof and relating exclusively
to any Asset Class, including, any customer lists, customer records, internally prepared production
reports, manuals, promotional materials, or other development plans, documentation (in all media,
including digital formats, as currently exists) created or otherwise developed by or on behalf of
Seller (including by any Contributor), and all copies thereof in Sellers possession or control and
all other documents and records exclusively relating to any Asset Class, provided, however, that
Seller or its Affiliates may retain one copy of any such Books and Records to the extent required
for legal, regulatory, Tax or accounting purposes, and (b) a copy of all books, records or
information (including all data and other information stored on discs, tapes or other media) of
Seller relating to any Asset Class, including, any customer lists, customer records, internally
prepared production reports, manuals, promotional materials, development plans, documentation (in
all media, including digital formats, as currently exists) created or otherwise developed by or on
behalf of Seller (including by any Contributor), and all other documents and records relating to
any Asset Class to the extent related to or included within the Excluded Assets or Excluded
Liabilities ((a) and (b) are hereinafter collectively referred to as the Books and Records);
2.1.4 All of the rights of Seller in and to the contracts and purchase orders identified in
Exhibit 2.1.4 (collectively, the Assigned Contracts);
2.1.5 All of Sellers licenses, permits and franchises, approvals, consents, product registrations
or authorizations issued by any Governmental Entity or any third party test
7
CONFIDENTIAL TREATMENT REQUESTED
house, registrar or certification body, relating to the development or use of the Products,
including product registrations or applications and approvals or submissions to the FDA or any
regulatory body of any foreign government (collectively, the Permits);
2.1.6 All of Sellers claims, causes of action, judgments, and other rights and remedies of
whatever nature arising from infringements of Sellers IP Rights in or to the Assigned Intellectual
Property and all other claims of Seller arising from any Asset Class, including rights to
recoveries for damages for defective goods or services, insurance and refund claims and similar
assets related to any Asset Class (except to the extent related to Excluded Liabilities)
(collectively, the Assigned Claims);
2.1.7 All goods and materials held for resale or license or being produced on Sellers behalf
by [*] in connection with any Asset Class or incorporated into or consumed in connection with the
Products, including raw materials, work in process, finished goods, packaging, labels, cartons and
related promotional or advertising material owned or controlled by Seller on the Closing Date,
regardless of where located (collectively, the Inventory);
2.1.8 The benefit of the $90,000 prepaid access fee paid by Seller pursuant to that certain
Supply Agreement, dated July 29, 2004, between Seller and [*] (the Access Fee);
2.1.9 The machinery, equipment, furniture and other personal property set forth on
Exhibit 2.1.9 (collectively, the Equipment); and
2.1.10 All of the goodwill of Seller associated with any Asset Class or the Books and Records.
2.2
Excluded Assets
. The Purchased Assets shall not include the following
(collectively, the Excluded Assets):
2.2.1 All of Sellers cash and cash equivalents (including marketable securities and short
term investments calculated in accordance with GAAP); and
2.2.2 The assets and rights of Seller not included within the definition of Purchased
Assets, including all of Sellers right, title and interest in and to Soothe
®
and any other
products other than the Products; all originals of the Books and Records provided in copy form to
Buyer pursuant to Section 2.1.3(b); all Know-How (subject to the license set forth in Section
6.12); the copies of tangible embodiments of Assigned Intellectual Property or Books or Records to
be retained by Seller pursuant to Sections 2.1.1 and 2.1.3(a), respectively; and all Contracts
other than the Assigned Contracts.
2.3
Assumption of Liabilities
. On the Closing Date, Buyer hereby assumes and agrees
to pay and perform only the following liabilities and obligations (collectively, the Assumed
Liabilities):
2.3.1 The obligations of Seller arising under the Assigned Contracts after the Closing Date,
other than the obligations arising from any breach of an Assigned Contract by Seller on or prior to
the Closing Date or from Sellers failure to pay any accounts payable
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Certain information has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions
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CONFIDENTIAL TREATMENT REQUESTED
outstanding under an Assigned Contract as of the Closing Date that are not assumed by Buyer
pursuant to Section 2.3.5;
2.3.2 All liabilities and obligations of Seller under or in respect of the Permits to the
extent related to the period following the Closing Date;
2.3.3 All product liability claims involving the Products that are first made after the
Closing Date;
2.3.4 All warranty claims (other than product liability claims, which are governed by Section
2.3.3) and returns of Products following the Closing Date; and
2.3.5 All accounts payable and other expenses set forth on Exhibit B to the [*] Assignment,
Assumption and Amendment Agreement.
2.4
Excluded Liabilities
. Notwithstanding any provision of this Agreement to the
contrary, none of the liabilities or obligations of Seller other than the Assumed Liabilities shall
be assumed or are being assumed by Buyer, and Seller shall retain and remain and hereby retains and
remains solely liable for, all of the debts, expenses, contracts, agreements, commitments,
obligations and other liabilities of any nature whatsoever of Seller, the business of Seller or the
Purchased Assets, whether known or unknown, accrued or not accrued, fixed or contingent
(collectively, the Excluded Liabilities), including the following:
2.4.1 Any liability related to any Excluded Assets;
2.4.2 Except as set forth in Section 2.3.5, any liability arising under the Assigned Contracts
on or prior to the Closing Date or any liability for any breach by Seller or any other Person of
any Assigned Contract prior to the Closing Date or any liability for Sellers failure to pay any
accounts payable outstanding under the Assigned Contracts on or prior to the Closing Date;
2.4.3 Any product liability claims involving the Products that were first made on or prior to
the Closing Date;
2.4.4 Any liability, other than liabilities or obligations pursuant to Section 2.4.3, under
any Action against Seller based, in whole or in part, on events occurring or circumstances existing
on or before the Closing Date (the Retained Claims);
2.4.5 Any liability or obligation related to Sellers existing or former employees,
consultants or independent contractors;
2.4.6 Any liability for any Taxes incurred or accruing prior to the Closing Date with respect
to Sellers business or the Purchased Assets; and
2.4.7 Any liability for or in respect of any loan, other indebtedness for money borrowed, or
account payable of Seller or any Affiliate of Seller.
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Certain information has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions
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CONFIDENTIAL TREATMENT REQUESTED
2.5
Consideration
. In consideration of Sellers performance of this Agreement and
transfer and delivery of the Purchased Assets to Buyer, Buyer shall (in accordance with the
allocation provided for in Section 2.6) deliver to Seller (i) at Closing, the sum of Thirteen
Million Five Hundred Thousand Dollars ($13,500,000) (the Closing Consideration) by wire transfer
to the account which Seller shall specify prior to the Closing Date (the Account), in immediately
available funds; and (ii) after Closing, the Post-Closing Consideration as provided in Section 2.7
hereof.
2.6
Allocation of Consideration
. Within sixty (60) days after the Closing Date, Buyer
shall provide to Seller Exhibit 2.6 which shall allocate the Consideration to be paid by Buyer to
Seller at and after the Closing among each class of Purchased Assets (the Purchase Price
Allocation Schedule). Each of Seller and Buyer shall prepare its federal, state, local and
foreign Income Tax returns for all current and future tax reporting periods with respect to the
transfer of the Purchased Assets to Buyer in a manner consistent with the Purchase Price Allocation
Schedule. If any Governmental Entity challenges such allocation, the party first receiving notice
of such challenge shall give the other party prompt notice of such challenge, and Seller and Buyer
shall cooperate in good faith in responding to such challenge, in order to preserve the
effectiveness of the Purchase Price Allocation Schedule. Neither Seller nor Buyer shall report the
allocation of the Consideration in a manner inconsistent with the Purchase Price Allocation
Schedule.
2.7
Post-Closing Consideration
.
2.7.1
First Commercial Sale
. Subject to Section 2.7.2, within thirty (30) days after
the first to occur of (a) a Sale of Alaway Plus and (b) three (3) months after the FDAs approval
of the NDA for Alaway Plus (FDA Approval), Buyer shall deliver to Seller the sum of Eight
Million Dollars ($8,000,000) (the Post-Closing Consideration and, together with the Closing
Consideration, the Consideration) less amounts, if any, previously paid pursuant to
Section 2.7.2, by wire transfer to the Account (or such other account as specified by Seller prior
to the date the Post-Closing Consideration is due (the Payment Due Date)) in immediately
available funds; provided, however, that in the event of an Offset Dispute such Payment Due Date
shall be within ten (10) days of the final resolution of such Offset Dispute. In the event that
amounts are owed to Buyer in connection with any Claims for Losses or Litigation Expenses properly
noticed pursuant to Article IX of this Agreement, Buyer shall have the right (but not the
obligation) to offset the amount of such Claims (the Offset Amount) up to a maximum amount of Two
Million Three Hundred Thousand Dollars ($2,300,000) (the Cap); provided, however, that within
thirty (30) days following Buyers receipt of FDA Approval, or within a reasonable period of time
prior to a Sale of Alaway Plus, Buyer has delivered to Seller a reasonably detailed accounting of
the Offset Amount. Seller may object to the Offset Amount (an Offset Dispute) by delivering to
Buyer a reasonably detailed written statement describing its objection and its own accounting of
the Offset Amount, if any. If Seller objects to the Offset Amount, the parties shall first attempt
in good faith to resolve such Offset Dispute by mutual agreement. If the parties are unable to
resolve such Offset Dispute within thirty (30) days of any objection by Seller, then either party
may by notice to the other party refer the Offset Dispute to senior management of the parties for
resolution. Within fifteen (15) days after delivery of such notice, representatives of senior
management of each of the parties shall meet and attempt in good faith to resolve the Offset
Dispute by mutual agreement. Should mutual resolution not be obtained at
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CONFIDENTIAL TREATMENT REQUESTED
such meeting or should no such meeting take place within such fifteen (15) day period, then any
party may commence an action in a court of competent jurisdiction as set forth in Section 10.8.
2.7.2
Obligation to Develop
. Notwithstanding any provision herein, including the
provisions of this Section 2.7.2, Buyer is not obligated to continue development or
commercialization of Alaway Plus in the event that Buyer makes a commercially reasonable, good
faith determination to discontinue such development or commercialization. Notwithstanding the
foregoing, if Buyer has not filed an NDA for Alaway Plus on or prior to the third (3rd)
anniversary of the Closing Date (the First Milestone Date), then within thirty (30) days of the
First Milestone Date Buyer, at its sole option, shall either (a) pay Seller an amount equal to the
difference between Four Million Dollars ($4,000,000) and the Offset Amount (the First Milestone
Payment) or (b) notify Seller (the First Sale Notice) that it has the right, for a period of
ninety (90) days after receipt of the First Sale Notice (the First Option Period), to purchase
from Buyer the right to develop, commercialize and market Alaway Plus in exchange for (i)
assumption by Seller of liabilities and obligations that are consistent with the types of
liabilities and obligations included in the Assumed Liabilities which Seller and Buyer shall agree
upon in good faith and (ii) a cash payment of immediately available funds in an amount equal to the
out-of-pocket costs plus the allocated portion of internal costs incurred by Buyer or its
Affiliates in furtherance of the development and commercialization of Alaway Plus (the Alaway
Plus Purchase Option) from the date hereof to the date of the First Sale Notice; provided,
however, such purchase shall not include any rights in and to the trademark Alaway or the goodwill
related thereto and neither Seller nor any Seller Affiliate shall take any action that conflicts
with or impairs Buyers right, title, and ownership in and to the Alaway trademark and the goodwill
related thereto, including using, registering, seeking to register or contesting the validity of
Buyers Alaway trademark in any jurisdiction and shall not itself use any name, mark or designation
that is confusingly similar to Buyers Alaway trademark (the Alaway Plus Proviso). If Buyer
makes the First Milestone Payment and Buyer has not filed an NDA for Alaway Plus on or prior to
the fifth (5th) anniversary of the Closing Date (the Second Milestone Date), then within thirty
(30) days of the Second Milestone Date Buyer, at its sole option, shall either (x) pay Seller an
amount equal to the difference between Four Million Dollars ($4,000,000) and any remaining Offset
Amount or (y) notify Seller (the Second Sale Notice) that it has the right, for a period of
ninety (90) days after receipt of the Second Sale Notice (the Second Option Period), to exercise
the Alaway Plus Purchase Option from the date hereof to the date of the Second Sale Notice,
subject to the Alaway Plus Proviso. During any First Option Period and Second Option Period,
Buyer shall provide Seller reasonable access to all of the facilities, books and records of Seller
related to Alaway Plus, and Buyer shall use commercially reasonable efforts to make Buyers
officers, employees (including all technical employees), suppliers, customers, and contract
manufacturers available to Seller as Seller shall from time to time reasonably request.
Notwithstanding the generality of the foregoing, Seller agrees that its communications with Buyers
officers, employees (including all technical employees), suppliers, customers, and contract
manufacturers shall be coordinated with Buyer and conducted in a manner so as to interfere as
little as possible with Buyers day-to-day business operations. If Buyer provides the First Sale
Notice or the Second Sale Notice and Seller does not consummate the purchase of the right to
develop, commercialize and market Alaway Plus during the First Option Period or the Second Option
Period, as applicable, then Buyer shall have no further obligations to Seller under this
Section 2.7.2; provided, however, that Buyer shall
11
CONFIDENTIAL TREATMENT REQUESTED
still be obligated to pay the Post-Closing Consideration to the extent it is required to do so
pursuant to and in accordance with Section 2.7.1.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in the Disclosure Schedule setting forth exceptions to a specifically
identified Section contained in this Article III and delivered by Seller to Buyer concurrently with
the execution and delivery of this Agreement (the Disclosure Schedule), Seller represents and
warrants to Buyer as follows:
3.1
Organization, Power, Standing and Qualification
. Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the State of Delaware, and has
the requisite corporate power and authority to carry on its business as it is now being conducted
and to own and operate the properties and assets now owned and operated by it. Seller has
delivered to Buyer complete and correct copies of its Certificate of Incorporation and By-laws
(Organizational Documents). Seller is duly qualified to do business and in good standing in each
jurisdiction where the conduct of its business or the ownership or operation of its assets requires
such qualification except where failure to be so qualified or in such good standing will not result
in a Material Adverse Effect.
3.2
Power and Authority
. Upon execution and delivery as contemplated herein, this
Agreement will be a valid and binding obligation of Seller, enforceable against it in accordance
with its terms, except as the same may be limited by bankruptcy, insolvency, moratorium,
reorganization or other laws of general applicability relating to or affecting the enforcement of
creditors rights and general principles of equity. Seller has the requisite corporate power and
authority to enter into this Agreement and to perform all of its obligations hereunder. The board
of directors of Seller has duly authorized the execution and delivery of this Agreement and the
performance of the Transactions.
3.3
Validity of Contemplated Transactions
. The execution, delivery and performance of
this Agreement by Seller, the execution, delivery and performance by Seller of the Collateral
Documents to which it is a party and the consummation of the Transactions do not and will not
(a) contravene any provision of the Organizational Documents; (b) constitute a breach by Seller of,
or result in a Default by Seller under or cause the acceleration of any payments due from Seller
pursuant to, any agreement, contract, indenture, lease or mortgage to which Seller is a party or by
which any of the Purchased Assets are bound, or violate in any material respect any provision of
any Law or Permit to which the Purchased Assets are subject, except for requirements for consents,
waivers or notices of Persons set forth on Schedule 3.4.
3.4
Consents
. No permit, consent, approval or authorization of, or designation,
declaration or filing with, any Governmental Entity or any other Person on the part of Seller is
required in connection with the execution or delivery by Seller of this Agreement or the
consummation of the Transactions other than (a) those specified in Schedule 3.4 which have not been
obtained or (b) those specified in Schedule 3.4 which have previously been obtained.
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CONFIDENTIAL TREATMENT REQUESTED
3.5
Subsidiaries
. Seller has no Subsidiaries and has no equity ownership in any other
Person.
3.6
Financial Statements; Undisclosed Liabilities
.
3.6.1
Financial Statements
. Schedule 3.6.1 contains true and complete copies of the
Financial Statements. The Financial Statements have been prepared from the books and records of
Seller as prepared in the ordinary course of business. Except as disclosed in Schedule 3.6, the
Financial Statements have been prepared in accordance with GAAP applied on a consistent basis, and
present fairly, in all material respects, the financial position of Seller for the periods and as
of the dates specified therein and the results of its operations for the periods covered thereby.
3.6.2
Undisclosed Liabilities
. Seller does not have any obligations or liabilities of
any kind (whether accrued, absolute, contingent, unliquidated, inchoate or otherwise, and whether
due or to become due) that are related to the Purchased Assets except (a) liabilities reflected in
the Financial Statements, (b) liabilities expressly disclosed in Schedule 3.6.2 or (c) immaterial
obligations or liabilities that are not Assumed Liabilities and cannot reasonably be expected by
Seller to impact Buyers business or the Purchased Assets after the Closing Date.
3.7
Intentionally Omitted
.
3.8
Equipment; Inventory; Sufficiency of Assets
.
3.8.1
Equipment
. Seller has good and marketable title or valid leasehold interests in
and to the Equipment free and clear of all Liens (other than Permitted Liens). The Equipment is in
good operating condition and in a state of reasonable maintenance and repair, ordinary wear and
tear excepted.
3.8.2
Inventory
. Schedule 3.8.2 sets forth the Inventory included within the
Purchased Assets, all of which Inventory is located at [*].
3.8.3
Sufficiency of Assets
. The Purchased Assets, taken together with the licenses
provided for in Section 6.12, constitute all of the tangible and intangible property used by Seller
in its business related to the Products or that would be necessary, to Sellers knowledge and
subject to FDA approval where required with respect to any Purchased Asset, for Buyer to develop,
commercialize, market or sell the Products to the extent that such development, commercialization,
marketing or sale is conducted in accordance with the Assumed Contracts and Permits and all
applicable Laws, except for Sellers employees, consultants and other professional service or
product development advisers, insurance policies, cash, general and administrative assets
(including, sales, marketing and finance), interests in real property and other similar assets
(including the Excluded Assets) not being transferred to Buyer pursuant to this Agreement.
3.9
Assigned Intellectual Property
.
3.9.1
Intentionally Omitted
.
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Certain information has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions
.
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CONFIDENTIAL TREATMENT REQUESTED
3.9.2
Intentionally Omitted
.
3.9.3
Intentionally Omitted
.
3.9.4
Title
. Except as set forth on Schedule 3.9.4, Seller owns all right, title and
interest in and to the Purchased Assets or, under the Inbound Technology Agreements is, to Sellers
knowledge, licensed legally enforceable rights to use the Purchased Assets and to make, have made,
sell, offer to sell, import, license and distribute the Products. There are no Liens (other than
Permitted Liens) on any of the Purchased Assets. Except for portions licensed pursuant to the
Inbound Technology Agreements or rights granted pursuant to the Outbound Technology Agreements, to
Sellers knowledge, Seller holds valid and enforceable IP Rights in and to all of the Purchased
Assets (including all of the Assigned Intellectual Property). Seller has used good faith in the
prosecution of all patents included in the Purchased Assets and has performed the patent searches
previously provided to Buyer or Buyers counsel. Except as set forth in Schedule 3.9.4, Seller did
not use any Person other than past or current employees of, or consultants to, Seller
(Contributors) in the development of the Products or the development, invention, creation and
authoring of the Purchased Assets. All Contributors executed valid and binding written agreements
with Seller under which the Contributors agreed to maintain confidentiality and assigned all right,
title and interest in the Products and the Purchased Assets to Seller. None of the Contributors
has any valid claim to ownership, joint ownership, or any other interest in or to any portion of
the Products or the Purchased Assets (including the Assigned Intellectual Property).
3.9.5
Inbound Technology Agreements
. Seller uses certain IP Rights in connection with
the Purchased Assets (Inbound Technology) which are licensed to Seller pursuant to written
agreements providing Seller with licenses or other rights to develop, market, distribute, sell,
license, use or otherwise exploit the Inbound Technology to the extent provided in such agreements
(collectively, the Inbound Technology Agreements), each of which is identified on Schedule 3.9.5.
Seller has provided to Buyer or to Buyers counsel true and complete copies of each such Inbound
Technology Agreement. Seller has not received written notice, and, to Sellers knowledge it has
not received any other notice, of and, to Sellers knowledge, there are no circumstances which
would give rise to, any termination, Default, cancellation or breach under, any Inbound Technology
Agreement.
3.9.6
Outbound Technology Agreements
. Seller has not: (a) sold, licensed, transferred
or assigned to, or otherwise provided for the benefit of, any Person, any Assigned Intellectual
Property, (b) granted any Person the right to sublicense any Assigned Intellectual Property to any
other Person, or (c) granted any third party ownership rights in or to any Assigned Intellectual
Property, except pursuant to written agreements (Outbound Technology Agreements), each of which
is listed in Schedule 3.9.6. Seller has provided to Buyer or Buyers counsel true and complete
copies of each such Outbound Technology Agreement.
3.9.7
No Claims
. (a) Seller has received no written notice, and, to Sellers
knowledge it has not received any other notice, of any claim, demand, suit or other assertion by
any Person; and (b) except in connection with Inbound Technology Agreements, to Sellers knowledge,
there are no circumstances which would (or are reasonably likely to) give rise to any claim,
demand, suit or other assertion by any Person other than a party to this Agreement, that
14
CONFIDENTIAL TREATMENT REQUESTED
such Person has superior rights, ownership or shared ownership requiring any payments to any Person
other than as provided in this Agreement, or other interest of any kind or nature in or with
respect to, the Assigned Intellectual Property.
3.9.8
No Government Funding
. Seller has not received funding from any Governmental
Entity or any academic funding which (a) was used in the development of the Assigned Intellectual
Property or the Products; or (b) precludes Buyer from making any desired change to the Assigned
Intellectual Property or the Products or combining them with other technology or exploiting or
marketing them in any manner.
3.9.9
No Claims Against Contributors
. To Sellers knowledge, no Person has claimed or
has reason to claim that any Contributor, by virtue of its participation in the development of the
Assigned Intellectual Property, has thereby: (a) violated any of the terms or conditions of any
employment, non-competition or non-disclosure agreement; (b) disclosed or utilized any trade secret
or proprietary information or documentation in an unauthorized manner; (c) tortiously interfered
with or breached any agreement; or (d) violated or exceeded the scope of any Law or agreement.
3.9.10
Protection
. Seller has taken reasonable measures to protect the proprietary
rights owned by Seller to the Assigned Intellectual Property. In no instance has the eligibility
of the Assigned Intellectual Property (excluding the portions licensed under the Inbound Technology
Agreements) for protection under applicable Law been forfeited to the public domain for any reason.
3.9.11
Noninfringement
. To Sellers knowledge, the creation, generation, development,
or use of the Assigned Intellectual Property and the manufacture, marketing, or sale of the
Products do not infringe or misappropriate any IP Right of any Person. Seller has not received
written notice, and, to Sellers knowledge it has not received any other notice, of and has no
knowledge of any complaint, assertion, threat or allegation that would contradict the foregoing.
For purposes of this Section 3.9.11, knowledge shall not be inferred solely because the claimant
complied with patent marking requirements or statutory copyright notice provisions.
3.9.12
Judgments and Settlements
. The Assigned Intellectual Property and, to Sellers
knowledge, the right of any third party licensor to the intellectual property licensed pursuant to
the Inbound Technology Agreements, are not subject to any outstanding settlement agreement, order,
ruling, decree, judgment, or stipulation preventing their use by Buyer after the Closing Date.
3.9.13
Warranties and Warranty Claims
. Other than as set forth in the Outbound
Technology Agreements and except for indemnification obligations set forth in certain of the
Assigned Contracts, Seller has not made any written or other binding warranty or representation
with respect to any of the Assigned Intellectual Property, or any product that embodies or utilizes
any of it.
3.10
IP Rights
.
3.10.1
Patents
. Schedule 3.10.1 lists: (a) all patents and patent applications
(United States and foreign) that have been issued or assigned to Seller, and (b) all invention
15
CONFIDENTIAL TREATMENT REQUESTED
disclosure statements prepared by or for Seller, in each case, claiming or disclosing inventions
used in or necessary to use, develop, sell, offer to sell or market the Products. Except as set
forth in Schedule 3.10.1, Seller has provided to Buyer or Buyers counsel true and complete copies
of all such patent and patent applications (as amended to date) and has provided to Buyer or
Buyers counsel all of Sellers internal documentation, the prosecution files of patent counsel, a
copy of the file wrapper and any validity opinions and valuations, whether internally or externally
prepared, relating to such patents, applications and invention disclosure statements, and has
provided to Buyer or Buyers counsel true and complete copies of all other written documentation
evidencing ownership, prosecution and enforcement (if applicable) of each such item. Neither
Seller nor any Affiliate of Seller owns or has rights to any patent or patent application that will
affect Buyers rights in the Assigned Intellectual Property, other than as set forth on
Schedule 3.10.1.
3.10.2
Copyrights and Trademarks
. (a) Schedule 3.10.2 lists all worldwide registered
copyrights owned by Seller that constitute Assigned Intellectual Property used by Seller in respect
of the Purchased Assets (the Copyrights), along with information as to Sellers ownership thereof
or licenses or rights therein and registration thereof. All worldwide trademarks (including words,
phrases, symbols, product shapes or logos), service marks, trademark registrations, trade names and
trade dress, and the goodwill related thereto that constitute Assigned Intellectual Property or are
owned by Seller and used by Seller solely in respect of the Purchased Assets (collectively, the
Trademarks) are listed on Schedule 3.10.2 (whether registered, filed or common law), along with
information as to Sellers ownership thereof and registrations or applications and related
information thereof (including but not limited to any applicable docketing or filing deadline dates
occurring within six (6) months from the date of this Agreement). Seller has filed and used the
Trademarks in good faith and has performed the trademark searches previously provided to Buyer or
Buyers counsel. No Trademark filing, registration or application with a Governmental Entity
identified in Schedule 3.10.2 (except as listed therein) has expired or been canceled, and Seller
has not received written notice, and, to Sellers knowledge it has not received any other notice,
of any third party claim or petition for cancellation or opposition, or any outstanding office
action from the relevant Governmental Entity responsible for trademark filings with respect to any
such registration or application that has not been provided to Buyer or Buyers counsel. Except as
listed on Schedule 3.10.2, (i) there are no restrictions on the use of the Copyrights or Trademarks
that would affect Buyers use of the Copyrights or Trademarks after the Closing Date, and (ii) to
Sellers knowledge, no Copyrights and Trademarks are being infringed, violated, misappropriated or
otherwise conflicted with by any Person.
(b) (i) The Copyrights and Trademarks are valid, in full force and effect, enforceable and
owned exclusively by Seller (except as provided in Schedule 3.10.2), (ii) Seller has the
unencumbered and unrestricted right to use, license and convey ownership and title of all the
Copyrights and Trademarks to Buyer free and clear of all Liens (other than Permitted Liens),
(iii) Seller has not granted to any party the right to use the Copyrights and Trademarks except in
connection with the Assigned Contracts or as set forth on Schedule 3.10.2, (iv) Seller has not
received written notice, and, to Sellers knowledge it has not received any other notice, of any
claim, demand, suit or other assertion by any Person, and, to Sellers knowledge, there are no
circumstances which would (or are reasonably likely to) give rise to any claim, demand, suit or
other assertion by any Person other than a party to this Agreement, that such Person has superior
16
CONFIDENTIAL TREATMENT REQUESTED
rights, ownership or shared ownership requiring any payments or transfer of the Copyrights and
Trademarks to any Person other than as provided in this Agreement, or other interest of any kind or
nature in or with respect to, the Copyrights and Trademarks, (v) Seller has taken reasonable
measures to protect the proprietary rights of Seller to the Copyrights and Trademarks and in no
instance has the validity, ownership or eligibility of the Copyrights and the Trademarks for
protection under applicable Law been forfeited to the public domain or any Person for any reason,
and (vi) to Sellers knowledge, the Copyrights and Trademarks do not infringe or otherwise conflict
with the IP Rights of any Person and Seller has not received written notice, and, to Sellers
knowledge it has not received any other notice, of and has no knowledge of any complaint,
assertion, threat or conflict that would contradict the foregoing, except as provided in
Schedule 3.10.2.
3.10.3
Know-How
. Seller has used reasonable commercial efforts to safeguard and
protect the confidentiality of the Know-How. Seller has no knowledge of any violation of the
Know-How protection practices and procedures of Seller by any Person or the misappropriation of any
Know-How by any Person. Seller has no knowledge that (a) any of the Know-How is presently invalid
or unprotectable, or (b) any Know-How has become part of the public domain.
3.11
Contracts
. Set forth on Schedule 3.11 is a list of all Assigned Contracts and
written contracts with any Person relating to professional services or product development with
respect to the Purchased Assets (the Contracts), true and complete copies of which (and all
amendments and modifications thereof and consent and waivers thereunder) Seller has provided to
Buyer or Buyers counsel. There is no Default on the part of Seller, or written notice of or
knowledge of Seller of any Default on the part of any other party, in the performance of any
obligation to be performed or paid under any Contract.
3.12
Restrictions on Purchased Assets
. Except as set forth on Schedule 3.12 and
except for the Inbound Technology Agreements and Outbound Technology Agreements, there is no
agreement to which Seller, with respect to the Purchased Assets, is a party or, to Sellers
knowledge by which it is otherwise bound, nor any judgment, injunction, order or decree affecting
the Purchased Assets which prohibits or limits the scope of development or marketing of the
Products. Buyer is not and after the Closing Date neither it nor the Purchased Assets shall be
bound by the agreements set forth on Schedule 3.12.
3.13
Suppliers
. Schedule 3.13 lists all of the suppliers with respect to the
Purchased Assets.
3.14
Litigation; Product Liability
.
3.14.1
Litigation
. There are no Actions pending by or against or, to Sellers
knowledge, threatened, and since the March 10, 2005, there have not been pending any Actions,
against Seller related to the Purchased Assets and since March 10, 2005 there have not been any
such Actions related to the Purchased Assets; and Seller is not subject to, or in Default of, any
outstanding order, writ, injunction, judgment or decree of any Governmental Entity related to the
Purchased Assets.
17
CONFIDENTIAL TREATMENT REQUESTED
3.14.2
Product Liability
. There are no Actions presently pending or, to the knowledge of
Seller, threatened, and since March 10, 2005, there have not been pending any Actions, that are
based on any legal or equitable theory of recovery whatsoever, arising out of any injury to
individuals or property as a result of the ownership, possession or use of, or from any defect or
alleged defect in design, manufacture, materials or workmanship, including any failure to warn or
alleged breach of express or implied warranty, representation or condition relating to, any of the
Products. There has never been any recall conducted with respect to any of the Products.
3.15
Compliance with Laws and Permits
. Seller is in compliance in all material
respects with all Laws applicable to the Purchased Assets. Seller has not received any written
notice, and to Sellers knowledge it has not received any other notice, of any asserted failure to
comply with such Laws. Seller holds all Permits necessary for the ownership, manufacture, use and
development of the Purchased Assets.
3.16
Conflicts of Interest
. Except as set forth on Schedule 3.16, neither Seller nor,
to its knowledge, any of its directors or Affiliates, is an officer, director, employee or
consultant of, or owns or otherwise controls any Person which is, or is engaged in business as, a
competitor, customer or supplier of the Purchased Assets. Notwithstanding the foregoing, Seller is
making no representation with respect to any actual or potential conflicts of interest of its
directors who represent any of its venture capital investors or any fund, general partner or
management company that such directors represent or in which such funds, general partners or
management companies have an interest.
3.17
Brokers or Finders Fees
. Seller has not incurred, nor will it incur, directly
or indirectly, any liability for brokers or finders fees or agents commissions or any similar
charges in connection with this Agreement or the Transactions.
3.18
Insurance
. Seller has maintained product liability insurance since March 10,
2005 and, since that date, has neither made nor been entitled to make any claims thereunder.
3.19
Disclosure
. No representation or warranty made by Seller in this Agreement, the
Collateral Documents or the certificates delivered pursuant to Section 8.2.2 (d), (e) and
(f) contains or will contain any untrue statement of a material fact, or omits or will omit to
state a material fact necessary to make the statements or facts contained herein or therein not
misleading in light of the circumstances under which they were furnished.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1
Organization
. Buyer is a corporation duly organized, validly existing and
subsisting under the laws of the State of New York and has the requisite corporate power and
authority to carry on its business as it is now being conducted and to own and operate the
properties and assets owned and operated by it.
18
CONFIDENTIAL TREATMENT REQUESTED
4.2
Power and Authority
. Upon execution and delivery as contemplated herein, this
Agreement will be a valid and binding obligation of Buyer, enforceable against it in accordance
with its terms, except as the same may be limited by bankruptcy, insolvency, moratorium,
reorganization or other laws of general applicability relating to or affecting the enforcement of
creditors rights and general principles of equity. Buyer has the requisite corporate power and
authority to enter into this Agreement and to perform all of its obligations hereunder. The board
of directors of Buyer has duly authorized the execution and delivery of this Agreement and the
performance of the Transactions. No approval of the stockholders of Buyer is required with respect
to the consummation of the Transactions.
4.3
Validity of Contemplated Transactions
. The execution, delivery and performance of
this Agreement by Buyer, the execution, delivery and performance by Buyer of the Collateral
Documents to which it is a party and the consummation of the Transactions do not and will not
(a) contravene any provision of the organizational documents of Buyer, or (b) constitute a breach
of, or result in a Default under, or cause the acceleration of any payments pursuant to, any
agreement, contract, indenture, lease or mortgage to which Buyer is a party or by which either
Buyer or its assets is bound, or violate any provision of any applicable Law, permit or license to
which Buyer is subject, where any such breaches, Defaults or violations would materially impair the
ability of Buyer to consummate and perform the Transactions.
4.4
Consents
. No permit, consent, approval or authorization of, or designation,
declaration or filing with, any Governmental Entity or any other Person on the part of Buyer is
required in connection with the execution or delivery by Buyer of this Agreement or required of
Buyer in connection with the consummation of the Transactions other than (a) those which have
previously been obtained, or (b) such permits, consents, approvals, authorizations, designations,
declarations or filings the absence of which, individually or in the aggregate, would not
materially impair the ability of Buyer to consummate the Transactions.
4.5
Brokers and Finders Fees
. Buyer has not incurred, nor will it incur, directly
or indirectly, any liability for brokerage or finders fees or agents commissions or any similar
charges in connection with this Agreement or the Transactions.
ARTICLE V
INTENTIONALLY OMITTED
ARTICLE VI
OTHER COVENANTS
6.1
Reasonable Commercial Efforts
. Seller and Buyer will use reasonable commercial
efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things,
necessary, proper or advisable under applicable Laws to consummate and make effective the
Transactions as promptly as practicable.
19
CONFIDENTIAL TREATMENT REQUESTED
6.2
Laws Affecting Transfer of Permits
. Seller shall and, if required, Buyer shall make
any necessary filings with the appropriate Governmental Entities required to transfer the Permits
under applicable Laws.
6.3
Public Announcements
. On or after the Closing Date, Buyer and Seller shall not
(nor shall they permit any of their respective Affiliates to), without prior consultation with the
other party and such other partys review of and consent to any public announcement concerning the
Transactions, issue any press release or announcement concerning this Agreement or the Transactions
without the consent of the other, except for disclosures required by Law, in which case such press
releases or announcements shall be reviewed and approved by both Buyer and Seller in advance, and
except for announcements as may be reasonably necessary in connection with obtaining the consents
set forth on Schedule 3.4. During such period Seller and Buyer shall, to the extent practicable,
allow the other party reasonable time to review and comment on such release or announcement in
advance of its issuance and to reflect the reasonable and good faith comments of such other party.
The parties intend that the initial announcements (other than announcements as may be reasonably
necessary in connection with obtaining the consents set forth on Schedule 3.4) of the terms of the
Transactions shall be made promptly following the execution of this Agreement in the forms attached
hereto as Exhibits 6.3-A and 6.3-B.
6.4
Confidentiality
. Following the Closing Date, Seller shall, and shall use
commercially reasonable efforts to cause its personnel, agents and consultants (including the
parties to the Contracts set forth on Schedule 3.11 identified with an *) to, hold in strict
confidence, not disclose to any Person without the prior written consent of Buyer, and not use in
any manner whatsoever, any confidential business or technical information remaining in their
possession concerning the Purchased Assets (the Confidential Information). In furtherance of the
foregoing, if Seller becomes aware of a breach of any confidentiality obligations by any of its
personnel, agents or consultants (including any party to the Contracts set forth on Schedule 3.11
identified with an *), whether from Buyer or otherwise, Seller shall diligently enforce such
confidentiality obligations, notify Buyer of such breach (if Buyer did not notify Seller) and keep
Buyer informed on a regular basis of the status of its efforts, it being understood that Seller
shall have the right (but not the obligation unless requested by Buyer, in which case Seller shall
have the obligation) to bring suit to enforce the confidentiality obligations or recover damages
for breach of such confidentiality obligation and, if Buyer asks Seller to bring any such suit then
all of the expenses of any such suit shall be borne by Buyer (and Buyer shall have the right to
participate with Seller in such action). Notwithstanding the foregoing, Buyers prior written
consent shall not be required with respect to disclosures and uses of Books and Records related to
the Excluded Assets to the extent Confidential Information related to the Purchased Assets is
excluded or redacted therefrom.
6.5
Transfer Taxes
. All excise, sales, use, transfer, stamp, documentary, filing,
recording and other similar taxes or fees which may be imposed or assessed as the result of the
Transactions (Transfer Taxes), together with any interest or penalties with respect thereto shall
be paid by Seller at its sole expense. Seller will prepare and file all necessary Tax Returns and
other documentation with respect to such Transfer Taxes when due, at its sole expense, and, if
required by applicable Law, Buyer will (and will cause its Affiliates to) join in the execution of
any such Tax Returns and other documentation. Seller shall promptly provide Buyer with copies
20
CONFIDENTIAL TREATMENT REQUESTED
of such Tax Returns. All Transfer Tax Returns shall be prepared on a basis consistent with the
Purchase Price Allocation Schedule.
6.6
HSR Filing
. Buyer and Seller shall have determined, upon advice of counsel, that
no filing is required pursuant to the Hart-Scott-Rodino Act (HSR Act). Buyer and Seller shall
furnish to each other such necessary information and reasonable assistance as the other may
reasonably request in connection with formalizing such determination.
6.7
Cooperation Regarding Audits and Litigation
. Upon reasonable prior written notice
given by Buyer to Seller or Seller to Buyer, as the case may be, each party shall provide the other
with access to such information and employees as either party may reasonably request in connection
with any audits, actions, suits or proceedings relating to the Purchased Assets or the Retained
Claims.
6.8
Insurance Claims
. After the Closing Date, Seller and Buyer shall cooperate with
Sellers insurers in processing all claims arising with respect to acts, omissions, or occurrences
in connection with or related to the Purchased Assets prior to the Closing Date and shall cooperate
with Buyers insurers in processing all claims with respect to acts, omissions, or occurrences in
connection with or related to the Purchased Assets after the Closing Date.
6.9
Additional Assurances
. After the Closing Date, Seller shall and shall cause its
Affiliates to take such additional actions and execute any such additional documents and
instruments as may be reasonably necessary to fully vest Sellers ownership, rights and privileges
in the Purchased Assets in Buyer. Notwithstanding anything to the contrary contained in this
Agreement, to the extent that the sale, assignment, transfer, conveyance or delivery or attempted
sale, assignment, transfer, conveyance or delivery to Buyer of any Purchased Asset is prohibited by
any applicable Law or would require any Governmental Entity or other third party authorizations,
approvals, consents or waivers and such authorizations, approvals, consents or waivers shall not
have been obtained prior to the Closing and Buyer shall have waived the applicable condition to
Closing with respect to such item(s), this Agreement shall not constitute a sale, assignment,
transfer, conveyance or delivery, or any attempted sale, assignment, transfer, conveyance or
delivery, thereof. Following the Closing, the parties shall use reasonable efforts and shall
cooperate with each other, to obtain promptly such authorizations, approvals, consents or waivers.
Pending such authorization, approval, consent or waiver, the parties shall cooperate with each
other in any reasonable and lawful arrangements designed to provide to Buyer the benefits and
liabilities of use of such Purchased Asset. Once such authorization, approval, consent or waiver
for the sale, assignment, transfer, conveyance or delivery of a Purchased Asset not sold, assigned,
transferred, conveyed or delivered at the Closing is obtained, Seller shall and shall cause its
Affiliates to promptly assign, transfer, convey and deliver, or cause to be assigned, transferred,
conveyed and delivered, such Purchased Asset to Buyer for no additional consideration. To the
extent that any such Purchased Asset cannot be transferred or the full benefits and liabilities of
use of any such Purchased Asset cannot be provided to Buyer following the Closing pursuant to this
Section 6.9, then Buyer and Seller shall enter into such arrangements (including subleasing or
subcontracting if permitted) designed to provide to Buyer the economic and operational equivalent
of obtaining such authorization, approval, consent or waiver and the performance by Buyer of the
obligations thereunder to the extent permitted by Law.
21
CONFIDENTIAL TREATMENT REQUESTED
6.10
Covenant Not to Compete
.
6.10.1 For a period of three (3) years after the Closing Date, each of Seller and Dan Myers
agree that it will not, and Seller agrees that it will cause its Affiliates not to, alone or with
any other Person, (a) develop, sell, distribute, market or service any over-the-counter
opthamological product similar to (including copyright, trademark or trade dress) or that competes
with or could compete with any of the Products (the Competitive Activity), or (b) directly or
indirectly (i) hold or invest in any equity (or debt convertible into equity) of, or (ii) manage,
operate or control, any Person that engages in any Competitive Activity; provided, however, that
each of Seller, such Affiliates and Dan Myers, may directly or indirectly own up to five percent
(5%) of the issued and outstanding securities of any publicly held corporation; and, further
provided, that this Section 6.10.1 shall not apply to or in anyway restrict Sellers activities
related to or in connection with Soothe
®
; and, further provided, that this Section 6.10.1 shall not
apply to any third party acquirer of all or substantially all of Sellers business assets or stock
in an arms length transaction.
6.10.2 In the event Seller, any Seller Affiliate or Dan Myers breaches, or threatens to commit
a breach of, any of the provisions of Section 6.10.1 (the Restrictive Covenants), Buyer shall
have the following rights and remedies, which shall be independent of any others and severally
enforceable, and shall be in addition to, and not in lieu of, any other rights and remedies
available to Buyer at law or in equity: (a) the right and remedy to seek to enjoin the breaching
party from violating or threatening to violate the Restrictive Covenants and to have the
Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed
that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to
Buyer and that money damages would not provide an adequate remedy to Buyer; and (b) the right and
remedy to seek to require the breaching party to account for and pay over to Buyer all
compensation, profits, monies, accruals, increments or other benefits derived or received by such
party as the result of any transactions constituting a breach of the Restrictive Covenants.
6.10.3 Seller acknowledges and agrees that the Restrictive Covenants are reasonable and valid
in geographical and temporal scope and in all other respects. If any court determines that any of
the Restrictive Covenants or any part thereof, are invalid or unenforceable, the remainder of the
Restrictive Covenants shall not thereby be affected and shall be given full effect, without regard
to the invalid portions. If any court determines that any of the Restrictive Covenants, or any
part thereof, are unenforceable because of the duration or geographic scope of such provision, such
court shall have the power to reduce the duration or scope of such provision, as the case may be,
and, in its reduced form, such provision shall then be enforceable.
6.10.4 The parties hereto intend to and hereby confer jurisdiction to enforce the Restrictive
Covenants upon the courts of any jurisdiction within the geographical scope of such Restrictive
Covenants. If the courts of any one or more of such jurisdictions hold the Restrictive Covenants
unenforceable by reason of the breadth of such scope or otherwise, it is the intention of the
parties hereto that such determination not bar or in any way affect Buyers right to the relief
provided above in the courts of any other jurisdiction within the geographical scope of such
Restrictive Covenants, as to breaches of such Restrictive Covenants in such other respective
22
CONFIDENTIAL TREATMENT REQUESTED
jurisdictions, such Restrictive Covenants as they relate to each jurisdiction being, for this
purpose, severable into diverse and independent covenants.
6.11
Post-Closing Services
. Notwithstanding the provisions of Section 6.10 hereof,
from and after the Closing Date, Seller shall, for the benefit of Buyer, perform the services set
forth on Exhibit 6.11 hereto on the terms and conditions and, in the case of the services, for the
further consideration, set forth therein.
6.12
License of Know-How
. Subject to the terms and conditions of this
Agreement, Seller hereby grants to Buyer a non-exclusive, assignable, royalty-free, irrevocable,
worldwide license, with the right to sublicense, to use its proprietary rights in the Know-How
related to the Products to the extent that such Know-How is necessary for Buyers research,
development, production, marketing and sale of the Products and for no other purpose. In
connection with the license of Know-How granted pursuant to this Section 6.12, Buyer shall, and
shall use commercially reasonable efforts to cause its personnel and agents to, (a) hold the
Know-How in strict confidence, (b) not disclose the Know-How to any Person without the prior
written consent of Seller, which shall not be unreasonably withheld, and (c) not use the Know-How
in any manner whatsoever, except in each case of (a), (b) and (c) as expressly contemplated or
permitted by the license granted in the first sentence of this Section 6.12.
6.13
Good Faith Negotiations Related to Sale of Soothe
®
. Buyer and Seller agree to
negotiate in good faith a separate purchase agreement with respect to a sale of all of Sellers
right, title and interest in assets and rights related to Soothe
®
to Buyer for a period commencing
on the Closing Date and concluding on January 17, 2007 (the Negotiation Period). During the
Negotiation Period, Seller shall not, directly or indirectly, through its Affiliates, directors,
officers, shareholders, employees, agents, representatives or otherwise, offer for sale or
participate in negotiations, discussions or due diligence reviews, with respect to the sale,
license or other transfer of rights or assets related to Soothe
®
, directly or indirectly, with any
Person other than Buyer. Unless otherwise agreed to by Buyer and Seller, Buyer and Seller agree
that the definitive purchase agreement, if any, governing a sale of Soothe
®
to Buyer shall provide
(a) for a purchase price of no more than Seven Million Five Hundred Thousand Dollars ($7,500,000)
in cash to Seller (provided Sellers net sales of Soothe
®
during the first seven (7) months of 2007
are not less than Two Million Dollars ($2,000,000)), (b) that Buyers obligation to consummate such
purchase of Soothe
®
shall be contingent on, among other things, (i) there having not been a notice
of or other Action involving negative FDA observations regarding the Soothe
®
manufacturing
facility, notice of or other action involving product withdrawal or recall with respect to Soothe
®
,
notice of or other action involving personal injuries associated with Soothe
®
, and (ii) Sellers
net sales of Soothe
®
during the first seven (7) months of 2007 being equal to a mutually agreed
upon dollar amount and (c) for a formula for reducing the purchase price in the event that Sellers
net sales of Soothe
®
during the first seven (7) months of 2007 are less than a mutually agreed upon
dollar amount (the Soothe
®
Terms). During the Negotiation Period, Buyer will provide Seller with
reasonable access to the manufacturing facility of Buyer into which Soothe
®
would be transferred
solely to allow Seller to analyze the feasibility of such transfer, and Buyer shall use
commercially reasonable efforts to make Buyers officers, employees (including all technical
employees), suppliers, customers, and contract manufacturers available to Seller for such purpose
as Seller shall from time to time reasonably request. Notwithstanding the generality of the
foregoing, Seller agrees that its communications with
23
CONFIDENTIAL TREATMENT REQUESTED
Buyers officers, employees (including all technical employees), suppliers, customers, and contract
manufacturers shall be coordinated with Buyer and conducted in a manner so as to interfere as
little as possible with Buyers day-to-day business operations. If, at the conclusion of the
Negotiation Period, Buyer and Seller have not reached agreement with respect to a sale of Soothe
®
to Buyer, Seller shall submit a final Soothe
®
offer to Buyer for its consideration (the Final
Offer). If Buyer has not accepted the Final Offer within five (5) days following its receipt
thereof, Seller shall have a period of sixty (60) days (the Third Party Negotiation Period) to
negotiate the sale of Soothe
®
to any third party on terms, in the aggregate, no less favorable that
the terms set forth in the Final Offer (a Third Party Sale). In the event Seller has not
executed a definitive agreement with respect to a Third Party Sale at the conclusion of the Third
Party Negotiation Period, Buyer and Seller shall repeat the negotiation process described in this
Section 6.14; provided, that the Negotiation Period shall be the fifteen (15) day period commencing
on the date following the conclusion of the Third Party Negotiation Period.
ARTICLE VII
CONDITIONS PRECEDENT TO CLOSING
7.1
Conditions to Obligation of Buyer to Close
. The obligation of Buyer to consummate
the Transactions on the Closing Date shall be subject to the satisfaction or the waiver by Buyer of
the following conditions on or prior to the Closing Date:
7.1.1
Representations and Warranties; Compliance with Agreement
. The representations
and warranties of Seller set forth in this Agreement shall be true and correct in all material
respects (except to the extent that any representation is qualified by its terms with reference to
materiality, in which case such representation shall be true and correct as written) as of the date
of this Agreement and, except for any changes contemplated by this Agreement or representations
that expressly speak as of a certain date, as of the Closing Date as though made on and as of the
Closing Date; Seller shall have performed all covenants and agreements to be performed by it under
this Agreement in all material respects (except to the extent that any covenants are qualified by
its terms with reference to materiality, in which case such covenant shall have been performed as
written) on or prior to the Closing Date; and Seller shall have delivered to Buyer a certificate of
Sellers chief executive officer or chief financial officer to such effect, dated the Closing Date,
in form and substance reasonably satisfactory to Buyer;
7.1.2
Government Approvals
. All consents or approvals of the Transactions by
Governmental Entities shall have been granted;
7.1.3
Litigation Affecting Closing
. No action, suit or proceeding shall have been
instituted by any Governmental Entity, before a court or Governmental Entity, to restrain or
prevent the consummation of the Transactions or the performance by any of the parties hereto of
their respective obligations under or with respect to this Agreement and no statute shall have been
enacted and there shall be no injunction, restraining order or decree or any nature of any court or
governmental agency or body in effect which restrains or prohibits the consummation of the
Transactions;
24
CONFIDENTIAL TREATMENT REQUESTED
7.1.4
Required Consents
. Except as expressly indicated on Schedule 3.4 as not being a
consent required by Buyer on the Closing Date, the consents set forth on Schedule 3.4 shall have
been obtained on terms that do not, without Buyers consent, modify any Assigned Contract in a
manner that would impose an obligation on Buyer after the Closing Date other than those set forth
in any such Assigned Contract on the date of this Agreement;
7.1.5
No Material Adverse Effect
. There shall not have been any occurrence or event
which, individually or in the aggregate, (i) has resulted in or which Seller reasonably expects
will result in any Material Adverse Effect and Seller shall have delivered to Buyer a certificate
of its chief executive officer to such effect, dated the Closing Date, or (ii) Buyer reasonably
expects will result in any Material Adverse Effect;
7.1.6
Opinion of Counsel for Seller
. Outside counsel for Seller shall have delivered
to Buyer its opinion, dated the Closing Date, in the form of Exhibit 7.1.6;
7.1.7
Collateral Documents
. Seller shall have executed and delivered to Buyer the
Collateral Documents to which it is a party; and
7.1.8
Other Documents
. Seller shall have delivered to Buyer such other documents and
instruments as Buyer or its counsel may reasonably request in good faith to effect the transfer of
the Purchased Assets pursuant to this Agreement.
7.2
Conditions to Obligations of Seller to Close
. The obligation of Seller to
consummate the Transactions on the Closing Date shall be subject to the satisfaction or the waiver
by Seller of the following conditions on or prior to the Closing Date:
7.2.1
Representations and Warranties; Compliance with Agreement
. The representations
and warranties of Buyer set forth in this Agreement shall be true and correct in all material
respects (except to the extent that any representation is qualified by its terms with reference to
materiality, in which case such representation shall be true and correct as written) as of the date
of this Agreement and, except for any changes contemplated by this Agreement or representations
that expressly speak as of a certain date, as of the Closing Date as though made on and as of the
Closing Date; Buyer shall have performed all covenants and agreements to be performed by them under
this Agreement in all material respects (except to the extent that any covenants are qualified by
its terms with reference to materiality, in which case such covenant shall have been performed as
written) on or prior to the Closing Date; and Buyer shall have delivered to Seller a certificate of
an authorized officer of Buyer to such effect, dated the Closing Date, in form and substance
reasonably satisfactory to Seller;
7.2.2
Litigation Affecting Closing
. No action, suit or proceeding shall have been
instituted by any Governmental Entity, before a court or Governmental Entity, to restrain or
prevent the consummation of the Transactions or the performance by any of the parties hereto of
their respective obligations under or with respect to this Agreement and no statute shall have been
enacted and there shall be no injunction, restraining order or decree or any nature of any court or
governmental agency or body in effect which restrains or prohibits the consummation of the
Transactions;
25
CONFIDENTIAL TREATMENT REQUESTED
7.2.3
Collateral Documents; Consents
. Buyer shall have executed and delivered to Seller the
Collateral Documents to which it is a party; and
7.2.4
Other Documents
. Buyer shall have delivered to Seller such other documents and
instruments as Seller or its counsel may reasonably request in good faith connection with the
assumption of the Purchased Assets and the Assumed Liabilities.
ARTICLE VIII
THE CLOSING
8.1
Time and Place
. The Closing shall be held on the date of execution of this
Agreement (the Closing Date) at the offices of Nixon Peabody LLP, Rochester, New York.
8.2
Conduct of Closing
.
8.2.1
As to Buyer
. At the Closing, Buyer shall, in exchange for the Purchased Assets,
deliver to Seller, in each case duly executed by Buyer:
(a) The Closing Consideration;
(b) The certificate required by Section 7.2.1;
(c) A certificate dated the Closing Date and signed on behalf of Buyer by its respective
Secretary or Assistant Secretary attaching (i) a certificate issued by the Secretary of State of
New York as of a date within fifteen (15) business days of the Closing Date evidencing that Buyer
is a subsisting corporation, and (ii) specimen signatures of the incumbent officers of Buyer
executing this Agreement, the Collateral Documents and the certificates being delivered pursuant to
this Agreement;
(d) The Collateral Documents to which Buyer is a party; and
(e) Such other documents and instruments as Seller or its counsel may reasonably request
pursuant to Section 7.2.5.
8.2.2
As to Seller
. Seller shall deliver or shall cause to be delivered to Buyer, in
each case duly executed by Seller:
(a) The Collateral Documents to which Seller is a party;
(b) The Purchased Assets;
(c) The certificate required by Section 7.1.1;
(d) The certificate required by Section 7.1.5;
(e) A certificate dated the Closing Date and signed on behalf of Seller, by its Secretary or
Assistant Secretary, attaching (i) a certificate of good standing from the Secretary of State of
the State of Delaware dated as of a date within fifteen (15) business days of
26
CONFIDENTIAL TREATMENT REQUESTED
the Closing Date, (ii) a copy of the resolutions of the Board of Directors of Seller authorizing
and approving this Agreement and the Collateral Documents to which it is a party and the
consummation of the Transactions and authorizing the officers of Seller to take any actions and to
execute all documents and instruments to be executed, delivered or filed by it pursuant to or in
connection with this Agreement, and (iii) specimen signatures of the incumbent officers of Seller
executing any documents executed and delivered pursuant to or in connection with this Agreement;
(f) The opinion of counsel specified in Section 7.1.6; and
(g) Such other documents and instruments as Buyer or its counsel may reasonably request
pursuant to Section 7.1.8.
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
9.1
Survival of Representations, Warranties and Covenants
. The representations and
warranties of the parties contained in this Agreement shall, notwithstanding any investigation by
or notice by or to any party prior to the Closing Date, survive the Closing until eighteen (18)
months following the Closing Date; provided, however, that the representations and warranties
contained in Sections 3.1, 3.2, 3.3, 3.4, 3.17, 3.8.3, and 3.9.4 (the Seller Fundamental
Representations) shall survive until the expiration of all statutes of limitations applicable
thereto, the representations and warranties of Seller contained in Sections 3.9.11 and 3.10.2 shall
survive the Closing until February 28, 2009, and the representations and warranties of Buyer
contained in Sections 4.1, 4.2, 4.3, 4.4 and 4.5 (the Buyer Fundamental Representations) shall
survive until the expiration of all statutes of limitations applicable thereto. In the event
notice of any Claim for indemnification under Section 9.4 shall have been given prior to midnight
on the last day of the applicable survival period (the Expiration Date), the representations and
warranties that are the subject of such Claim shall survive until the Claim is finally resolved.
The covenants and agreements of the parties contained in this Agreement shall survive until fully
performed.
9.2
Indemnification by Seller
. From and after the Closing Date, Seller shall
indemnify and hold harmless Buyer and its Affiliates, and each of their respective employees,
directors, agents and representatives (collectively, the Buyer Indemnified Parties), on an
after-tax basis, from and against any and all Loss and Litigation Expense, which they, or any of
them, may suffer or incur as a result of or arising from any of the following: (a) any
misrepresentation or breach of warranty of Seller, (b) the failure of Seller to perform any of its
covenants or agreements contained in this Agreement, (c) the failure by Seller to satisfy any
liability or obligation which is an Excluded Liability, (d) the failure of Seller or its Affiliates
to pay any Transfer Taxes which Seller is required to pay pursuant to Section 6.5 or any other
costs or expenses which are the responsibility of Seller, or (e) the failure of any of Sellers
personnel, agents or consultants (including a party to the Contracts set forth on Schedule 3.11
identified with an *) to hold in strict confidence, not disclose to any Person without the prior
written consent of Buyer, or not use in any manner whatsoever, any Confidential Information;
provided, however, that Seller shall not be required to indemnify and hold harmless the Buyer
Indemnified
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CONFIDENTIAL TREATMENT REQUESTED
Parties pursuant to Section 9.2(a) with respect to any Loss and Litigation Expense incurred by the
Buyer Indemnified Parties until the amount of Loss and Litigation Expense suffered by the Buyer
Indemnified Parties related to each individual Claim exceeds Twenty Thousand Dollars ($20,000) (the
Minimum Claim Amount); provided, further, however, that the aggregate amount that Seller shall be
required to indemnify and hold harmless the Buyer Indemnified Parties pursuant to
Section 9.2(a) with respect to all Loss and Litigation Expense incurred by all Buyer Indemnified
Parties shall not exceed the Cap; provided further, however, that the Cap shall not apply with
respect to any Loss and Litigation Expense resulting from a breach of any Seller Fundamental
Representation (other than 3.8.3) or from fraud or intentional misrepresentation of Seller and the
Minimum Claim Amount shall not apply with respect to any Loss and Litigation Expense resulting from
fraud or intentional misrepresentation of Seller. With respect to Sellers indemnification
obligation in clause (e) above, notwithstanding anything to the contrary in this Agreement, (i)
Seller shall not be liable to Buyer if Buyer (x) requests Seller to bring an action against
Sellers personnel, agents or consultants to protect such Confidential Information or recover
damages as contemplated by Section 6.4, and Buyer does not promptly pay all Litigation Expenses
associated with such action (or provide other assurance reasonably acceptable to Seller that such
payment will be made) or (y) does not request Seller to bring such action, and (ii) Sellers
liability shall not extend to any Litigation Expense incurred by Buyer that is associated with such
action against Sellers personnel, agents or consultants.
9.3
Indemnification by Buyer
. From and after the Closing Date, Buyer shall indemnify
and hold harmless Seller, its Affiliates and each of their respective employees, directors, agents
and representatives (collectively, the Seller Indemnified Parties), on an after-tax basis, from
and against any and all Loss and Litigation Expense which they, or any of them, may suffer or incur
as a result of or arising from any of the following: (a) any misrepresentation or breach of
warranty, (b) the failure of Buyer to perform any of its covenants or agreements contained in this
Agreement, (c) the failure by Buyer to satisfy any liability or obligation which is an Assumed
Liability, or (d) the failure of Buyer or its Affiliates to pay any other costs or expenses which
are the responsibility of Buyer; provided, however, that Buyer shall not be required to indemnify
and hold harmless the Seller Indemnified Parties pursuant to Section 9.3(a) with respect to any
Loss and Litigation Expense incurred by the Seller Indemnified Parties until the amount of Loss and
Litigation Expense suffered by the Seller Indemnified Parties related to each individual Claim
exceeds the Minimum Claim Amount; provided, further, however, that the aggregate amount that Buyer
shall be required to indemnify and hold harmless the Seller Indemnified Parties pursuant to
Section 9.3(a) with respect to all Loss and Litigation Expense incurred by all Seller Indemnified
Parties shall not exceed the Cap; provided further, however, that the Cap shall not apply with
respect to any Loss and Litigation Expense resulting from a breach of any Buyer Fundamental
Representation or from fraud or intentional misrepresentation of Buyer and the Minimum Claim Amount
shall not apply with respect to any Loss and Litigation Expense resulting from fraud or intentional
misrepresentation of Buyer.
9.4
Procedure
. Promptly after acquiring knowledge of any Loss, or any action, suit,
investigation, proceeding, demand, assessment, audit, judgment, or claim (Claim) which may result
in a Loss, and prior to the Expiration Date, the Person seeking indemnity under this Article IX
(the Indemnitee) shall give written notice thereof to the party from whom indemnification is
sought (the Indemnitor). The Indemnitor shall have the right, at its expense,
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CONFIDENTIAL TREATMENT REQUESTED
to defend, contest or compromise such Claim, through counsel of its choice (unless such Indemnitor
is relieved of its liability hereunder with respect to such Claim and Loss and Litigation Expense
by the Indemnitee) and shall not then be liable for fees or expenses of the Indemnitees attorneys
(unless the Indemnitor and Indemnitee are parties to the action and there exists a conflict of
interest between the Indemnitor and the Indemnitee, in which event the Indemnitor will be
responsible for the reasonable fees and expenses of one firm), and the Indemnitee and the
Indemnitor shall provide to each other all necessary and reasonable cooperation in the defense of
all Claims. In the event that the Indemnitor shall undertake to compromise or defend any Claim, it
shall promptly notify the Indemnitee of its intention to do so. If the Indemnitor, after written
notice from Indemnitee, (a) fails within thirty (30) days after receipt of such notice to notify
the Indemnitee (i) of its intent to defend against such Loss or Claim and (ii) that it irrevocably
acknowledge its obligation to indemnify the Indemnitee pursuant to this Agreement for such Loss or
Claim, or (b) after providing such notice fails to defend, contest, or otherwise protect against
such Loss or Claim, or (c) after commencing to defend, contest or otherwise protect against such
Loss or Claim fails to diligently continue to defend, contest or otherwise protect against the
same, then in any such case the Indemnitee shall have the right to defend the same by counsel of
its own choosing, but at the cost and expense of the Indemnitor. If the Indemnitor provides the
Indemnitee with the notice contemplated by this Section 9.4(a)(i) and (ii), then the Indemnitor may
settle or compromise the entry of any judgment (x) which includes the unconditional release by the
Person asserting the Claim and any related claimants of Indemnitee from all liability with respect
to such Claim in form and substance reasonably satisfactory to Indemnitee, and (y) which would not
adversely affect the right of Indemnitee and its Affiliates to own, hold use and operate their
respective assets and businesses.
9.5
No Subrogation
. Subject to Section 2.7.2, if any payment is made by or Claim
asserted against Seller under the terms of this Article IX, none of Seller Indemnified Parties
shall have any rights against the Purchased Assets, whether by reason of contribution,
indemnification or otherwise and shall not take any action against the Purchased Assets with
respect thereto. Except as set forth in Section 2.7.2, any rights which Seller Indemnified Parties
may have, by operation of law or otherwise against the Purchased Assets are, effective on the
Closing Date, hereby expressly and knowingly waived.
9.6
Sole Remedy
. The indemnification provided for in this Article IX shall be the
sole and exclusive remedy of any Buyer Indemnified Party or Seller Indemnified Party, as the case
may be, with respect to any Loss and Litigation Expense for which indemnification is owed pursuant
to this Article IX.
ARTICLE X
MISCELLANEOUS
10.1
Headings and References
. The headings in this Agreement are for convenience of
reference only and shall not affect its interpretation. Any reference in this Agreement to an
Article, Section or Exhibit, unless it clearly refers to another instrument, means the specified
Article, Section or Exhibit of this Agreement and any reference to Schedule means a Schedule to
this Agreement.
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10.2
Severability
. The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the validity or enforceability of
the other provisions hereof. If any provision of this Agreement, or the application thereof to any
Person or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision
shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the
intent and purpose of such invalid or unenforceable provision and (b) the remainder of this
Agreement and the application of such provision to other persons, entities or circumstances shall
not be affected by such invalidity or unenforceability.
10.3
Expenses
. Regardless of whether the Closing occurs and except as otherwise
expressly provided herein, each of Seller and Buyer shall be responsible for its own expenses and
costs that it incurs with respect to the negotiation, execution, delivery and performance of this
Agreement.
10.4
Notices
. All notices and other communications hereunder shall be in writing and
shall be deemed given to the Person if delivered personally or upon sending a copy thereof by first
class or express mail, postage prepaid, or by documented overnight delivery services, charges
prepaid, to such partys address:
If to Buyer, to:
Bausch & Lomb Incorporated
One Bausch & Lomb Place
Rochester, New York 14604-2701
Attention: Vice President Business Development
With a copy to:
Bausch & Lomb Incorporated
One Bausch & Lomb Place
Rochester, New York 14604-2701
Attention: General Counsel
and to:
Nixon Peabody LLP
1100 Clinton Square
Rochester, New York 14604-1792
Attention: Lori B. Green, Esq.
If to Seller to:
Alimera Sciences, Inc.
6120 Windward Parkway, Suite 290
Alpharetta, Georgia 30005
Attention: Dan Myers
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CONFIDENTIAL TREATMENT REQUESTED
With a copy to:
Gunderson Dettmer LLP
610 Lincoln Street
Waltham, Massachusetts 02451
Attention: Jay Hachigian, Esq.
or to such other Person or address as any of the foregoing may have designated for that purpose by
notice to the others.
10.5
Waiver; Consents
. The failure by any party to exercise any right under, or to
object to the breach by any other party of any term, provision or condition of, this Agreement
shall not constitute a waiver thereof and shall not preclude such party from thereafter exercising
that or any other right, or from thereafter objecting to that or any prior or subsequent breach of
the same or any other term, provision or condition of the Agreement. Any consent granted pursuant
to this Agreement shall be in writing, executed by the person authorized by the consenting party to
receive notices, and shall be a consent only to the transaction, act or agreement specifically
referred to in the consent and not to other similar transactions, acts or agreements.
10.6
Assignment
. This Agreement shall not be assigned by any party without the prior
written consent of the other party; provided, however, that Buyer may assign this Agreement to any
Affiliate of Buyer but only if Buyer shall remain liable for its obligations hereunder, and Buyer
and Seller may assign this Agreement to any acquirer of all or substantially all of its business
assets or any successor entity upon the occurrence of a merger, consolidation or other
reorganization, in each case provided that the assignee confirms and acknowledges the obligations
of Buyer or Seller, as the case may be, under this Agreement and the Collateral Documents. Any
attempted assignment in contravention with the foregoing shall be void. This Agreement shall be
binding on and inure to the benefit of the parties hereto, their successors and any permitted
assigns.
10.7
Governing Law
. This Agreement, including any dispute or controversy arising out
of or related to this Agreement or the breach thereof, shall be subject to, governed by, and
construed in accordance with, the substantive and procedural laws of the State of New York, without
reference to its principles of conflict of laws.
10.8
Parties in Interest
. This Agreement is binding upon and shall inure to the
benefit of the parties hereto and their successors and permitted assigns. Nothing contained in
this Agreement, express or implied, shall give any other Person any legal or equitable right,
remedy or claim under or with respect to this Agreement or the Transactions except as expressly
provided in Article IX.
10.9
Submission to Jurisdiction
. The parties hereby irrevocably and unconditionally
consent to submit to the exclusive jurisdiction of the federal courts of the United States of
America located in Monroe County, New York for any actions, suits or proceedings arising out of or
relating to this Agreement, the Collateral Documents or the transactions contemplated hereby or
thereby, and the parties agree not to commence any action, suit or proceeding relating
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CONFIDENTIAL TREATMENT REQUESTED
thereto except in such courts, and further agree that service of any process, summons, notice or
documents by U.S. registered mail shall be effective service of process for any action, suit or
proceeding brought against the parties in any such court. The parties hereby irrevocably and
unconditionally waive any objection to the laying of venue of any action, suit or proceeding
arising out of this Agreement, any Collateral Documents or the transactions contemplated hereby or
thereby, in the federal courts of the United States of America located in Monroe County, New York,
and hereby further irrevocably and unconditionally waive and agree not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court has been brought in
an inconvenient forum.
10.10
Counterparts
. This Agreement may be executed in counterparts, each of which
shall be deemed an original, but such counterparts shall together constitute one and the same
Agreement.
10.11
Entire Agreement; Amendments
. This Agreement and the Collateral Documents
constitute the entire understanding among the parties hereto with respect to the subject matter
contained herein and supersede any prior understandings and agreements among them respecting such
subject matter. This Agreement may be amended, supplemented, and terminated only by a written
instrument duly executed by Seller and Buyer. Each of Buyer and Seller recognizes that the
liability and remedy provisions of this Agreement are material to the Agreement and have been
bargained for and are reflected in the mutual promises and agreements set forth in the Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly
authorized officers on the date first above written.
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SELLER
ALIMERA SCIENCES, INC.
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By:
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/s/ Dan Myers
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Name:
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Dan Myers
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Title:
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President and Chief Executive Officer
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BUYER
BAUSCH & LOMB INCORPORATED
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By:
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/s/ Stephen C. McCluski
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Name:
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Stephen C. McCluski
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Title:
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Senior Vice President and Chief
Financial Officer
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Solely for purposes of Section 6.10:
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/s/ Dan Myers
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Dan Myers
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CONFIDENTIAL TREATMENT REQUESTED
Exhibit 1.1-A
[*] Assignment, Assumption and Amendment Agreement
This Assignment, Assumption and Amendment Agreement (the
Amendment
) is made this
20
th
day of December, 2006 (the
Effective Date
), by and between Bausch & Lomb
Incorporated, a New York corporation (
B&L
), Alimera Sciences, Inc., a Delaware
corporation (
Alimera
) and [*], a Delaware corporation ([*]).
WHEREAS,
Alimera and [*] entered into a certain [*] Supply Agreement, dated June 26, 2006 (the
Supply Agreement
), a copy of which is attached hereto as
Exhibit A
;
WHEREAS
, B&L has acquired certain assets of Alimera pursuant to that certain Asset Purchase
Agreement, dated the Effective Date, by and between B&L and Alimera (the
Purchase
Agreement
), and in connection therewith Alimera desires to assign to B&L, and B&L desires to
assume, certain rights and obligations of Alimera pursuant to the Supply Agreement;
WHEREAS,
B&L and [*] desire to amend the Supply Agreement with respect to its term and the
minimum purchase obligations applicable to B&L pursuant to the Supply Agreement; and
NOW, THEREFORE,
in consideration of the mutual promises, benefits and covenants contained
herein, the parties hereby agree as follows:
1.
Assignment, Assumption and Consent
.
Alimera hereby assigns to B&L all of Alimeras
rights in, to and under the Supply Agreement and B&L hereby agrees to and does assume all of
Alimeras duties and obligations under the Supply Agreement arising after the Effective Date;
provided, that B&L shall also assume all duties and obligations with respect to the accounts
payable and other expenses set forth on
Exhibit B
. [*] hereby agrees, consents to and
accepts the foregoing assignment and assumption.
2.
Release.
In consideration of [*] and for other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged and confirmed, [*], on its own behalf and
on behalf of its directors, officers, employees, agents, successors, predecessors, subsidiaries,
parent, shareholders, employee benefit plans and assigns, hereby fully and forever releases and
discharges Alimera and B&L and each of their directors, officers, employees, agents, successors,
predecessors, subsidiaries, parent, shareholders, employee benefit plans and assigns (together, the
Releasees), from all known and unknown claims and causes of action including, without limitation,
any claims or causes of action arising out of or relating in any way to obligations of Alimera
arising under the Supply Agreement on or prior to the Closing Date (as defined in the Purchase
Agreement). Notwithstanding the foregoing, nothing herein shall be deemed to release [*].
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*
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Certain information has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.
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Execution Version
CONFIDENTIAL TREATMENT REQUESTED
3.
Amendment
. The Supply Agreement is hereby amended as follows:
(a) All references in the Supply Agreement to Alimera Sciences, Inc. shall be replaced
with Bausch & Lomb Incorporated and all references to Alimera shall be replaced by
B&L.
(b) Section 11.1 of the Supply Agreement, governing the Term of the Supply Agreement,
shall be deleted in its entirety and shall be replaced with the following:
11.1
Term
. Unless sooner terminated pursuant to the
terms hereof, the term of this Agreement shall commence on the
Effective Date and shall continue in force and effect until [*]
(the Term).
(c) All references in the Supply Agreement, as amended hereby, to the defined term
Initial Term will be replaced with the defined term Term.
(d) Subsections (x) and (y) of Section 5.4 of the Supply Agreement shall be amended
hereby to read as follows:
(x) with respect to Product purchased and delivered during any
Contract Year, [*]; and (y) with respect to all Product delivered
during the term of this Agreement, an aggregate amount of [*].
(e) Section 6.2 of the Supply Agreement, governing Monthly Forecasts, shall be deleted
in its entirety and shall be replaced with the following:
6.2
Monthly Forecasts
. B&Ls estimate of its requirements
for the period commencing on December 31, 2006 through the end of
the Term (the Contract Commitment Period), is set forth on
Annex 6
(the Monthly Forecast).
Annex 6
sets
forth the monthly requirements for the first twelve (12) months
of the Contract Commitment Period and quarterly requirements for
the next twelve (12) months of the Contract Commitment Period.
If [*] is unable to accept quantities stated for any month in the
Monthly Forecast (Additional Quantities), then [*]
shall notify B&L in writing within [*] after receipt of the Monthly Forecast;
otherwise such Additional Quantities shall be deemed to have been
approved and accepted by [*]. The Parties shall negotiate in
good faith to resolve any issues in respect of the Additional
Quantities which [*] is unable to accept for any month(s) stated
in the Monthly Forecast, according to [*] available capacity.
(f) Section 6.3 of the Supply Agreement, governing Firm Purchase Commitment, shall be
deleted in its entirety and shall be replaced with the following:
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*
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Certain information has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted
portions.
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Execution Version
CONFIDENTIAL TREATMENT REQUESTED
6.3
Firm Purchase Commitment
. The forecast of the first [*] of the
Monthly Forecast shall constitute a firm purchase commitment (the Firm
Purchase Commitment) which shall state in detail the quantities of Products
ordered and the required delivery dates, and shall [*] binding on the
Parties regarding Products to be purchased and supplied. The forecast for
months [*] and [*] of the Monthly Forecast shall be considered semi-firm
orders (the Semi-Firm Purchase Commitment); and B&L shall be obligated to
purchase [*] of such forecast. The forecast for the remaining [*] months of
the Monthly Forecast is for planning purposes only and shall not constitute
a commitment to purchase or supply Product. In the event that B&L does not
ultimately purchase [*] of the forecast quantities for each month of the
Firm Purchase Commitment period and [*] of the forecast quantities for each
month of the Semi-Firm Purchase Commitment, it shall be obligated to pay to
[*] for any deficient quantities on the basis of [*] of the Product Price
for those quantities which B&L failed to purchase during the Firm Purchase
Commitment or the Semi-Firm Purchase Commitment. However, if [*] is unable
for any reason other than the failure of B&Ls designated vendors timely to
provide API and/or Excipients as referenced in Section 4.4, to supply the
Firm Purchase Commitment to B&L, B&L shall not be obligated to pay for that
portion of the Firm Purchase Commitment which [*]could not deliver.
(g) Section 6.7 of the Supply Agreement, governing the Minimum Contract Commitment,
shall be deleted in its entirety and shall be replaced with the following:
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6.7
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Minimum Contract Commitment
. B&L agrees
that during the Contract Commitment Period, (a) it will purchase the
products set forth under the heading Commercial Products on Annex
6 and (b) it will purchase the products set forth under the heading
Samples on Annex 6, at B&Ls option, either as Samples or
Commercial Products, in each case of (a) and (b) in the years set
forth therein from [*] according to the applicable Product Price
(the Minimum Contract Commitment), unless this Agreement is
terminated early (i) as a result of [*] breach of this Agreement, or
(ii) pursuant to Section 11.5, as a result of the regulatory filings
in respect of the Product not being approved by regulatory
authorities, or (iii) pursuant to Section 11.4. All amounts payable
to [*] under this Agreement during the Contract Commitment Period
shall be credited
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*
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Certain information has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted
portions.
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Execution Version
CONFIDENTIAL TREATMENT REQUESTED
towards the Minimum Contract Commitment. For clarification and
without limitation, cancelled production fees under Section 4.4,
purchases upon termination pursuant to Sections 11.8 and 11.9,
and purchases by a Third Party of a Divested Product or by an
assignee shall be credited against the Minimum Contract
Commitment.
(h) The Supply Agreement shall be amended to add
Annex 6
in the form attached
to this Amendment.
(i) Except as explicitly provided herein, all terms, conditions and provisions of the
Supply Agreement shall continue in full force and effect.
4.
Representations and Warranties
.
[*] represents and warrants that (i) a true and
complete copy of the Supply Agreement is attached hereto as
Exhibit A
,(ii) except as set
forth in this Amendment, the Supply Agreement is in full force and effect and is otherwise
unmodified, and (iii) neither [*], nor, to [*] knowledge Alimera, has defaulted, breached or failed
to perform any material obligation under the Supply Agreement; and no fact or circumstance exists
that, with notice or passage of time, or both, would constitute a breach or default by [*] or, to
[*] knowledge, by Alimera, under the Supply Agreement.
5.
Further Assurances
.
The parties shall (i) furnish upon request to each other such
further information; (ii) execute and deliver to each other such other documents; and (iii) do such
other acts and things, all as the other party may reasonably request for the purpose of carrying
out the intent of this Amendment and the transaction contemplated by this Amendment.
6.
Entire Agreement
.
Except as set forth herein, this Amendment contains the entire
agreement of the parties with respect to its subject matter hereof and supersedes all prior written
and oral agreements.
7.
Amendment and Waiver
.
This Amendment may not be amended, or a partys rights
waived, except by a written instrument signed by the party to be charged.
8.
Counterparts
.
This Amendment may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument, and any of the parties may
execute this Amendment by signing any such counterpart. A facsimile copy of this Amendment showing
the signatures of each of the parties, or, when taken together, multiple facsimile copies of this
Amendment showing the signatures of each of the parties, respectively, where such signatures do not
appear on the same copy, will constitute an original copy of this Amendment requiring no further
execution.
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*
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Certain information has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted
portions.
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Execution Version
CONFIDENTIAL TREATMENT REQUESTED
IN WITNESS WHEREOF,
the parties hereto have duly executed this Assignment, Assumption and
Amendment Agreement to be effective as of the Effective Date.
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BAUSCH & LOMB INCORPORATED
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By:
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Print Name:
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Print Title:
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ALIMERA SCIENCES, INC.
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By:
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Print Name:
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Print Title:
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[*]
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By:
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[*]
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[*]
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(Signature Page to Assignment, Assumption and Amendment Agreement)
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*
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Certain information has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.
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Execution Version
CONFIDENTIAL TREATMENT REQUESTED
Exhibit 1.1-B
Patent Assignment
WHEREAS, Alimera Sciences, Inc., a corporation duly organized under the laws of the State of
Delaware (Assignor), owns all right, title, and interest in the patents and patent applications
set forth on Schedule 1 attached hereto and made a part hereof (collectively, the Patents); and
WHEREAS, Bausch & Lomb Incorporated, a corporation duly organized under the laws of the State
of New York (Assignee), desires to own Assignors entire right, title, and interest in and to the
Patents, in all countries throughout the world.
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Assignor hereby sells, assigns, and transfers unto Assignee the entire right,
title and interest in and to the Patents and all accrued causes of action for damages for
infringement thereof, the same to be held and enjoyed by Assignee for its own use and benefits, and
for its legal representatives and assigns, to the full end of the term for which said Patents are
granted (if applicable), as fully and as entirely as the same would have been held by Assignor had
this assignment and sale not been made. Notwithstanding anything to the contrary, nothing herein
shall expand or modify the rights or obligations of the parties as set forth in that certain Asset
Purchase Agreement dated as of December 20, 2006 by and between Assignor and Assignee.
[signature page follows]
Execution Version
CONFIDENTIAL TREATMENT REQUESTED
IN WITNESS WHEREOF, Assignor has caused this Patent Assignment to be executed by its duly
authorized officer on December 20, 2006.
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ALIMERA SCIENCES, INC.
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By:
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Name:
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Title:
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STATE OF
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COUNTY OF
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On
this ___ day of December, 2006 personally appeared
to me personally known, who,
being by me duly sworn, did depose and say that he is the
of Alimera Sciences,
Inc., the corporation described in and which executed the foregoing instrument and that he did sign
said instrument as such officer and on behalf of such corporation.
Execution Version
CONFIDENTIAL TREATMENT REQUESTED
Schedule 1
Alaway
[*]
Alaway Plus
[*]
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Certain information has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.
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Execution Version
CONFIDENTIAL TREATMENT REQUESTED
Exhibit 1.1-C
Trademark Assignment
WHEREAS, Alimera Sciences, Inc., a corporation duly organized under the laws of the State of
Delaware (Assignor), owns all right, title, and interest in the registered trademarks and
trademark applications set forth on Schedule 1 attached hereto and made a part hereof
(collectively, the Trademarks) as shown in the records in the United States Patent and Trademark
Office; and
WHEREAS, Bausch & Lomb Incorporated, a corporation duly organized under the laws of the State
of New York (Assignee), desires to own Assignors entire right, title, and interest in and to the
Trademarks.
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Assignor hereby sells, assigns, and transfers unto Assignee the entire right,
title and interest in and to the Trademarks together with the good will of the business connected
therewith and symbolized thereby and all accrued causes of action for damages for infringement
thereof, the same to be held and enjoyed by Assignee for its own use and benefits, and for its
legal representatives and assigns, as fully and as entirely as the same would have been held by
Assignor had this assignment and sale not been made. Notwithstanding anything to the contrary,
nothing herein shall expand or modify the rights or obligations of the parties as set forth in that
certain Asset Purchase Agreement dated as of December 20, 2006 by and between Assignor and
Assignee.
[signature page follows]
Execution Version
CONFIDENTIAL TREATMENT REQUESTED
IN WITNESS WHEREOF, Assignor has caused this Trademark Assignment to be executed by its duly
authorized officer on December 20, 2006.
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ALIMERA SCIENCES, INC.
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By:
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On
this ___ day of December, 2006 personally appeared
to me personally known, who,
being by me duly sworn, did depose and say that he is the
of Alimera Sciences,
Inc., the corporation described in and which executed the foregoing instrument and that he did sign
said instrument as such officer and on behalf of such corporation.
Execution Version
CONFIDENTIAL TREATMENT REQUESTED
Schedule 1
78/890,154 Alaway
Execution Version
CONFIDENTIAL TREATMENT REQUESTED
Exhibit 2.1.4
Assigned Contracts
Clinical Development Agreement between Seller and [*] dated September 6, 2005.
Supply Agreement between Seller and [*] dated July 29, 2004.
Pharmaceutical Product Supply Agreement between Seller and [*] dated June 26, 2006, including, as
Annex 3, Quality Agreement dated August 16, 2005 and any outstanding purchase orders under that
certain [*] Planning Forecast dated December 2006, a copy of which is attached hereto as Exhibit
3.11-A.
Pharmaceutical Consulting Services Agreement between Seller and [*] dated May 18, 2005.
Purchase Order from [*] to Seller dated December 15, 2006.
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Confidential treatment has been requested with respect to the omitted portions.
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Execution Version
CONFIDENTIAL TREATMENT REQUESTED
Exhibit 2.1.9
Equipment
Shorewood Security Labeling System, Serial No: 2602, located at the plant of [*].
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Confidential treatment has been requested with respect to the omitted portions.
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Execution Version
CONFIDENTIAL TREATMENT REQUESTED
Exhibit 2.6
Purchase Price Allocation Schedule
(in thousands)
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Closing Consideration
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[*]
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Allocation of Closing Consideration
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Intangibles (Assigned Intellectual Property,
Products, Books & Records, Assigned Contracts,
Permits, Assigned Claims, Access Fee and goodwill)
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[*]
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Inventory
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Equipment
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[*]
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Post Closing Consideration
If and when the Post Closing Consideration of [*] is due and payable, it shall be allocated to [*].
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Certain information has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.
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Execution Version
CONFIDENTIAL TREATMENT REQUESTED
Exhibit 6.3-A
Form of Seller Initial Press Release
Alimera Sciences and Bausch & Lomb Announce Transaction
For Alaway OTC Eye Care Product
FOR RELEASE WEDNESDAY, DECEMBER 20, 2006
ATLANTA, GA AND ROCHESTER, NY Alimera Sciences, a privately-held company headquartered in
Atlanta, GA and Bausch & Lomb (NYSE:BOL) today announced that Bausch & Lomb has purchased Alimeras
OTC allergy franchise, including
Alaway
(ketotifen fumarate ophthalmic solution 0.025%)
,
which was
recently approved by the U.S. Food and Drug Administration.
Alaway
is an antihistamine indicated for up to 12 hours of temporary relief for itchy eyes due to
ragweed, pollen, grass, animal hair and dander.
Alaway
contains the same active ingredient and
strength and is shown to be therapeutically equivalent to
Zaditor
, a prescription product being
switched to OTC by Novartis.
The acquisition of
Alaway
not only enhances our current OTC product portfolio by giving us a
stronger and longer-lasting product to address the needs of consumers who suffer itchy eyes, but it
also gives us an excellent technology platform for the development of product line extensions in
the ocular allergy category, said Gary M. Phillips, MD, corporate vice president and global
pharmaceutical category leader for Bausch & Lomb.
We are delighted by this transaction with a leading company like Bausch & Lomb and their valuation
of our allergy franchise, said Dan Myers, president and chief executive of Alimera. The
monetization of this franchise represents a strong return on our investment in the OTC business and
allows us to focus our attention and resources on
Medidur
, our investigational drug currently in
Phase 3 clinical trials for the treatment of diabetic macular edema (DME), and to pursue the
development of other drug delivery technologies.
Financial details of the transaction were not disclosed.
###
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Bausch & Lomb News Media Contact:
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Alimera Sciences Contact:
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Barbara M. Kelley
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Lisa Gibson Lake
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585.338.5386
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Fleishman-Hillard
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bkelley@bausch.com
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404-739-0152
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lisa.gibson@fleishman.com
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Bausch & Lomb Investor Relations Contact:
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Daniel L. Ritz
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585.338.5802
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dritz@bausch.com
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This news release contains, among other things, certain statements of a forward-looking nature
relating to future events or the future business performance of Bausch & Lomb. Such statements
involve a number of risks and uncertainties including those concerning economic conditions,
currency exchange rates, product development and introduction, the financial well-being of key
customers, the successful execution of marketing strategies, the continued successful
implementation of its efforts in managing and reducing costs and expenses, as well as the risk
factors listed from time to time in the Companys SEC filings, including but not limited to filings
on Form 8-K and on Form 12b-25, each dated August 8, 2006.
About Alimera Sciences Inc.
Atlanta-based Alimera Sciences Inc., a venture backed company, specializes in the development and
commercialization of over-the-counter and prescription ophthalmology pharmaceuticals. Founded by an
executive team with extensive
development and revenue growth expertise, Alimera initiated a Phase III clinical trial in October
2005 to study diabetic macular edema (DME) patients treated using Medidur with fluocinolone
acetonide, the companys pharmacologic treatment for DME. Alimera Sciences also sells Soothe
®
nationwide, the markets first multi-dose, emollient-based artificial tear product.
www.alimerasciences.com
About Bausch & Lomb
Bausch & Lomb is the eye health company, dedicated to perfecting vision and enhancing life for
consumers around the world. Its core businesses include soft and rigid gas permeable contact lenses
and lens care products, and ophthalmic surgical and pharmaceutical products. The Bausch & Lomb name
is one of the best known and most respected healthcare brands in the world. Founded in 1853, the
Company is headquartered in Rochester, New York. Bausch & Lomb employs approximately 13,700 people
Execution Version
CONFIDENTIAL TREATMENT REQUESTED
worldwide and its products are available in more than 100 countries. More information about the
Company is on the Bausch & Lomb Web site at www.bausch.com. Copyright Bausch & Lomb Incorporated.
Execution Version
CONFIDENTIAL TREATMENT REQUESTED
Exhibit 6.3-B
Form of Buyer Initial Press Release
See Exhibit 6.3-A
Execution Version
CONFIDENTIAL TREATMENT REQUESTED
Exhibit 6.11
Post-Closing Services
Seller will provide Buyer with sales and training services from the Closing Date until [*] (the
Transition Services). Upon Buyers provision of notice to Seller at least [*] prior to the
desired delivery of Transition Services, Seller will make available to Buyer the services of [*] or
another individual [*] ([*] and such other individually being collectively referred to herein as
the Trainer). Buyer will pay [*] per week (assuming a forty hour work week) of Transition
Services provided by Seller, pro rated based on the actual number of hours of Transition Services
utilized by Buyer. To the extent commercially reasonable, Seller will provide Buyer [*] notice
should Buyer decide to terminate the Trainer.
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Certain information has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.
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Execution Version
CONFIDENTIAL TREATMENT REQUESTED
Exhibit 7.1.6
Opinion of Counsel for Seller
December 20, 2006
Bausch & Lomb Incorporated
One Bausch & Lomb Place
Rochester, NY 14604
Ladies and Gentlemen:
We have acted as counsel for Alimera Sciences, Inc., a Delaware corporation (the Company),
in connection with Asset Purchase Agreement, dated as of December 20, 2006 (the Agreement) by and
between the Company and Bausch & Lomb Incorporated, a New York corporation (
Buyer
). This
opinion is being rendered to you pursuant to Section 7.1.6 of the Agreement. Capitalized terms not
ot Agreement.
In connection with the opinions expressed herein, we have made such examination of matters of
law and of fact as we considered appropriate or advisable for purposes hereof. As to matters of
fact material to the opinions expressed herein, we have relied upon the representations and
warranties as to factual matters contained in and made by the Company pursuant to the Agreement, a
certificate of an officer of the Company (the
Opinion Certificate
; a copy of which has
been provided to Buyer) and other certificates and statements of government officials. We have
also examined originals or copies of such corporate documents or records of the Company as we have
considered appropriate for the opinions expressed herein. We have assumed for the purposes of this
opinion that the signatures on documents and instruments examined by us are authentic, that each
document is what it purports to be, and that all documents submitted to us as copies or facsimiles
conform with the originals, which facts we have not independently verified. We have not conducted
a docket search in any jurisdiction with respect to litigation that may be pending against the
Company or any of its officers or directors or undertaken any further inquiry other than as stated
herein. In addition, we have reviewed the Companys Amended and Restated Certificate of
Incorporation and Bylaws, each as amended and in effect on the date hereof (the Charter
Documents) and the following documents:
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(i)
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the Agreement;
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(ii)
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the Patent Assignment;
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(iii)
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the Trademark Assignment; and
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(iv)
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the [*] Assignment, Assumption and Amendment Agreement.herwise
defined in this opinion have the meaning given them in the
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Certain information has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.
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Execution Version
CONFIDENTIAL TREATMENT REQUESTED
The documents described in (i)-(iv) above are collectively referred to as the Transaction
Documents.
In rendering this opinion we have also assumed that (A) the Agreement and the [*] Assignment,
Assumption and Amendment Agreement have been duly and validly authorized, executed and delivered by
you, that you had the power, legal competence and capacity to enter into the Agreement and the [*]
Assignment, Assumption and Amendment Agreement and that the Agreement and the [*] Assignment,
Assumption and Amendment Agreement are enforceable against and binding upon you; (B) the
representations and warranties made in the Agreement by you are true and correct; (C) there are no
facts or circumstances relating to you that may prevent you from enforcing any of the rights to
which our opinion relates; and (D) there are no extrinsic agreements or understandings among the
parties to the Transaction Documents that would modify or interpret the terms of the Transaction
Documents or the respective rights or obligations of the parties thereunder.
As used in this opinion, the expression we are not aware or the phrase to our knowledge
means as to matters of fact that, based on the actual knowledge of individual attorneys within this
firm principally responsible for handling the matter of the Agreement and directly related matters
and after an examination of documents referred to herein and after inquiries of certain officers of
the Company, we find no reason to believe that the opinions expressed are factually incorrect, but
beyond that we have made no factual investigation for the purposes of rendering this opinion.
Specifically, but without limitation, we have made no inquiries of securities holders or employees
(other than obtaining the Opinion Certificate as described above) of the Company. No inference as
to our knowledge of the existence or absence of any facts should be drawn from the fact of our
representation of the Company. You should be aware that our involvement with the Company has been
limited to the matter of the Agreement and certain directly related matters, and that our
representation of the Company began in September of 2006. Moreover, we have not, for purposes of
our opinions below, searched computerized or electronic databases or the docket of any court,
governmental agency or regulatory body or other filing office in any jurisdiction.
Where statements in this opinion are qualified by the term material or materially, those
statements involve judgments and opinions as to the materiality or lack of materiality of any
matter to the Company or its business, assets, condition (financial or otherwise) or results of
operations that are entirely those of the Company and its officers, after having been advised by us
as to the legal effect and consequences of such matters. Such opinions and judgments are not known
to us to be incorrect.
We are opining herein as to the effect on the subject transaction solely with respect to the
Delaware General Corporation Law, the laws of the State of New York and the federal laws of the
United States. We express no opinion as to matters governed by any laws other than the laws of the
State of New York, the corporate law of the State of Delaware and the federal law of the United
States of America (and specifically excluding all local and municipal laws). We express no opinion
as to whether the laws of any particular jurisdiction apply, and no opinion to the extent that the
laws of any jurisdiction other than those identified above are applicable to the subject matter of
this opinion.
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Certain information has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.
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Execution Version
CONFIDENTIAL TREATMENT REQUESTED
In rendering the opinion set forth in paragraph 1 below as to the good standing of the
Company, we have relied exclusively on a certificate from the Secretary of State of the State of
Delaware, although we have not obtained tax good standing certificates and no opinion is provided
with respect to tax good standing.
In connection with the general enforceability opinion set forth in paragraph 4, this opinion
is qualified by, and we render no opinion with respect to, the following:
(a) Our opinions are qualified by the limitations imposed by general principles of equity upon
the availability of equitable remedies for the enforcement of provisions of the Agreement, and by
the effect of judicial decisions that have held that certain provisions are unenforceable when
their enforcement would violate the implied covenant of good faith and fair dealing, or would be
commercially unreasonable, or where their breach is not material
(b) We express no opinion as to the effect of any New York law, United States federal or
Delaware law or equitable principle that provides that a court may refuse to enforce, or may limit
the application of, a contract or any clause thereof that the court finds to have been
unconscionable at the time it was made or contrary to public policy;
(c) We express no opinion as to the enforceability of provisions of the Agreement expressly or
by implication waiving broadly or vaguely stated rights or unknown future rights, or waiving rights
granted by law where such waivers are against public policy;
(d) We express no opinion as to the enforceability of any provision of the Agreement
purporting to (i) waive rights to trial by jury, service of process or objections to the laying of
venue or to forum in connection with any litigation arising out of or pertaining to the Agreement,
(ii) exclude conflict of law principles, (iii) establish particular courts as the forum for the
adjudication of any controversy relating to the Agreement, (iv) establish the laws of any
particular state or jurisdiction for the adjudication of any controversy relating to the Agreement,
(v) establish evidentiary standards or make determinations conclusive or (vi) provide for
arbitration of (or another non-judicial method of resolving) disputes;
(e) We express no opinion as to the effect of judicial decisions that may permit the
introduction of extrinsic evidence to modify the terms or the interpretation of the Agreement;
(f) We express no opinion as to the enforceability of any provisions of the Agreement
providing that (a) rights or remedies are not exclusive, (b) rights or remedies may be exercised
without notice, (c) every right or remedy is cumulative and may be exercised in addition to or with
any other right or remedy, (d) the election of a particular remedy or remedies does not preclude
recourse to one or more other remedies, (e) liquidated damages are to be paid upon the breach of
the Agreement or (f) the failure to exercise, or any delay in exercising, rights or remedies
available under the Agreement will not operate as a waiver of any such right or remedy; and
(g) We note that a requirement that provisions of the Agreement may only be waived in writing
may not be binding or enforceable if an oral agreement has been
Execution Version
CONFIDENTIAL TREATMENT REQUESTED
created modifying any such provision or an implied agreement by trade practice or course of conduct
has given rise to a waiver.
In connection with our opinion in paragraph 5 below, the term Applicable Laws shall mean (i)
those federal laws, rules and regulations of the United States, (ii) those laws, rules and
regulations of the State of New York and (iii) those provisions of the Delaware General Corporation
Law, that, in each case and in our experience, are normally applicable to transactions of the type
contemplated by the Agreement, without our having made any special investigation as to the
applicability of any specific law, rule or regulation, and that are not the subject of a specific
opinion herein referring expressly to a particular law or laws.
In connection with our opinion in paragraph 6 below, the term Governmental Entity shall mean
any court, administrative agency or commission organized under federal, New York or Delaware
corporate statutes, laws, rules or regulations.
Finally, our opinions below are each specifically subject to the following limitations,
exceptions, qualifications and assumptions:
(A) We express no opinion as to the effect of bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting the relief of debtors or the rights and
remedies of creditors generally, including, without limitation, the effect of statutory or other
law regarding fraudulent conveyances and preferential transfers.
(B) We express no opinion as to the Companys compliance or noncompliance with applicable
federal or state antifraud or antitrust statutes, laws, rules and regulations, including, without
limitation, the HSR Act.
(C) Limitations imposed by state law, federal law or general equitable principles upon the
specific performance of any of the remedies, covenants or other provisions of any applicable
agreement and upon the availability of injunctive relief or other equitable remedies, regardless of
whether enforcement of any such agreement is considered a proceeding in equity or at law.
Based upon our examination of and reliance upon the foregoing and subject to the limitations,
exceptions, qualifications and assumptions set forth above and except as set forth in the
Disclosure Schedule, we are of the opinion that as of the date hereof:
1. The Company is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware. The Company has all requisite corporate power and authority to
own, operate and lease its properties and to carry on its business as, to our knowledge, it is
presently conducted.
2. The Company has all requisite corporate power and corporate authority to enter into,
execute, deliver and perform its obligations under the Transaction Documents and to transfer and
deliver the Purchased Assets pursuant to the Agreement.
Execution Version
CONFIDENTIAL TREATMENT REQUESTED
3. All corporate action on the part of the Company, its directors and stockholders necessary
for the authorization, execution, delivery and performance of the obligations under the Transaction
Documents by the Company has been taken.
4. The Agreement and the [*] Assignment, Assumption and Amendment Agreement constitute legally
valid and binding obligations of the Company, enforceable against the Company in accordance with
their terms. Each of the Transaction Documents has been duly executed and delivered by the
Company.
5. The execution, delivery and performance of the Transaction Documents will not, as of the
Closing, result in (i) a violation of the Charter Documents (ii) a material violation of any
Applicable Laws or (iii) a violation of any judgment or order specifically identified in the
Disclosure Schedule, if any.
6. No consent, approval, order, authorization from, or registration, declaration or filing
with, any Governmental Entity is necessary or required to be made or obtained for the execution and
delivery by the Company of the Agreement or the consummation by the Company of the transactions
contemplated thereby.
In addition to the foregoing, we supplementally inform you that, to our knowledge and except
as set forth on the Disclosure Schedule, there is no action, suit, proceeding or investigation
pending or threatened against the Company that (i) questions the validity of the Transaction
Documents or the right of the Company to enter into the Transaction Documents or (ii) relates to
the Purchased Assets. Please note that we have not conducted a docket search in any jurisdiction
with respect to litigation that may be pending against the Company or any of its officers or
directors, nor have we undertaken any further inquiry whatsoever other than to request the Opinion
Certificate from the Company.
This opinion is rendered as of the date first written above solely for your benefit in
connection with the Agreement and may not be delivered to, quoted or relied upon by any person
other than you, or for any other purpose, without our prior written consent. Our opinion is
expressly limited to the matters set forth above and we render no opinion, whether by implication
or otherwise, as to any other matters relating to the Company. We assume no obligation to advise
you of facts, circumstances, events or developments which hereafter may be brought to our attention
and which may alter, affect or modify the opinions expressed herein.
Very truly yours,
GUNDERSON DETTMER STOUGH
VILLENEUVE FRANKLIN & HACHIGIAN, LLP
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Certain information has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.
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Execution Version
Exhibit 10.15
CONFIDENTIAL TREATMENT REQUESTED
ASSET PURCHASE AGREEMENT
BETWEEN
BAUSCH & LOMB INCORPORATED
AND
ALIMERA SCIENCES, INC.
DATED FEBRUARY 16, 2007
CONFIDENTIAL TREATMENT REQUESTED
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS
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1
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1.1 Definitions
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1
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1.2 Other Definitions
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1.3 Rules of Construction
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ARTICLE II SALE AND PURCHASE
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2.1 Transfer of Assets
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2.2 Excluded Assets
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2.3 Assumption of Liabilities
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2.4 Excluded Liabilities
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2.5 Consideration
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2.6 Allocation of Consideration
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER
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3.1 Organization, Power, Standing and Qualification
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3.2 Power and Authority
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3.3 Validity of Contemplated Transactions
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3.4 Consents
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3.5 Subsidiaries
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3.6 Financial Statements; Undisclosed Liabilities
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3.7 Absence of Material Adverse Change
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3.8 Sufficiency of Assets
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3.9 Assigned Intellectual Property
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3.10 IP Rights
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3.11 Contracts
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3.12 Restrictions on Purchased Assets
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3.13 Suppliers
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3.14 Litigation; Product Liability
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3.15 Compliance with Laws and Permits
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3.16 Conflicts of Interest
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3.17 Brokers or Finders Fees
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3.18 Insurance
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3.19 Sellers Return Policy
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3.20 Disclosure
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER
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4.1 Organization
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4.2 Power and Authority
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4.3 Validity of Contemplated Transactions
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4.4 Consents
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4.5 Brokers and Finders Fees
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ARTICLE V PRECLOSING COVENANTS OF SELLER
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CONFIDENTIAL TREATMENT REQUESTED
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Page
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5.1 Access
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5.2 Conduct of Business
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5.3 Exclusivity
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5.4 Consents
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5.5 Pre-Closing Litigation Consultation
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5.6 Technical Transfer
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5.7 Monthly Calculation of Soothe
®
Net Sales
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ARTICLE VI OTHER COVENANTS
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6.1 Reasonable Commercial Efforts
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6.2 Laws Affecting Transfer of Permits
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6.3 Public Announcements
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6.4 Confidentiality
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6.5 Transfer Taxes
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6.6 HSR Filing
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6.7 Cooperation Regarding Audits and Litigation
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6.8 Insurance Claims
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6.9 Additional Assurances
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6.10 Covenant Not to Compete
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6.11 License of Know-How Not Exclusively Related to the Products
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6.12 Supplements
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ARTICLE VII CONDITIONS PRECEDENT TO CLOSING
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7.1 Conditions to Obligation of Buyer to Close
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7.2 Conditions to Obligations of Seller to Close
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ARTICLE VIII THE CLOSING
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8.1 Time and Place
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8.2 Conduct of Closing
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ARTICLE IX SURVIVAL AND INDEMNIFICATION
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9.1 Survival of Representations, Warranties and Covenants
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9.2 Indemnification by Seller
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9.3 Indemnification by Buyer
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9.4 Procedure
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9.5 No Subrogation
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9.6 Sole Remedy
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ARTICLE X TERMINATION
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10.1 Optional Termination
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10.2 Governmental Consents
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10.3 Effect of Termination
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ARTICLE XI MISCELLANEOUS
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11.1 Headings and References
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11.2 Severability
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11.3 Expenses
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- ii -
CONFIDENTIAL TREATMENT REQUESTED
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Page
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11.4 Notices
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11.5 Waiver; Consents
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11.6 Assignment
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11.7 Governing Law
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11.8 Parties in Interest
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11.9 Submission to Jurisdiction
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11.10 Counterparts
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11.11 Entire Agreement; Amendments
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EXHIBITS
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Exhibit 1.1-A
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Assignment and Assumption Agreement
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Exhibit 1.1-B
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Bill of Sale
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Exhibit 1.1-D
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Patent Assignment
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Exhibit 1.1-E
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Trademark Assignment
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Exhibit 1.1-F
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Excluded Categories
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Exhibit 2.1.4
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Assigned Contracts
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Exhibit 2.6
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Purchase Price Allocation Schedule (to be provided post-Closing)
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Exhibit 7.1.6
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Opinion of Counsel for Seller
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Exhibit 7.1.10
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Final Soothe
®
Net Sales Calculation (to be provided at Closing)
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- iii -
CONFIDENTIAL TREATMENT REQUESTED
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement, dated as of February 16, 2007, is by and between Alimera
Sciences, Inc., a Delaware corporation (Seller) and Bausch & Lomb Incorporated, a New York
corporation (Buyer).
RECITALS:
WHEREAS, Seller is engaged, among other things, in the development, commercialization and sale
of over-the-counter and prescription pharmaceutical products;
WHEREAS, Seller sold to Buyer certain of its assets pursuant to an Asset Purchase Agreement,
dated December 20, 2006, between Buyer and Seller (the Alaway Agreement) related to Alaway (as
defined in the Alaway Agreement) and Alaway Plus (as defined in the Alaway Agreement); and
WHEREAS, Seller desires to sell the Purchased Assets set forth in Section 2.1 to Buyer, and
Buyer desires to purchase the same and to assume the Assumed Liabilities set forth in Section 2.3,
all on the terms and conditions set forth in this Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1
Definitions
. As used in this Agreement, terms defined in the preamble of this
Agreement shall have the meanings set forth therein and the following terms shall have the meanings
set forth below.
Action means any complaint, claim, prosecution, investigation (other than an investigation
that is not known to Seller), indictment, action, suit, arbitration or proceeding by or before any
Governmental Entity or arbitrator.
Affiliate means, with respect to any Person, any other Person directly or indirectly
controlling, controlled by or under common control with such Person, whether through the ownership
of voting securities, by contract or otherwise.
Agreement means this Asset Purchase Agreement, the Exhibits and Schedules hereto.
Asset Classes means, collectively, the Assigned Intellectual Property, the Products, the
Assigned Contracts, the Permits, the Assigned Claims, the Inventory and the Prepaid Expenses.
Assignment and Assumption Agreement means the Assignment and Assumption Agreement to be
executed by Buyer and Seller on the Closing Date in the form of Exhibit 1.1-A.
CONFIDENTIAL TREATMENT REQUESTED
Assigned Intellectual Property means all of Sellers Intellectual Property and Sellers IP
Rights inherent in, used in or related to the following: Clinical IP, Patent Rights, Copyrights,
Know-How exclusively related to the Products, Trademarks, Books and Records, the Products.
Bill of Sale means the Bill of Sale to be delivered to Buyer by Seller on the Closing Date
in the form of Exhibit 1.1-B.
Clinical IP means pre-clinical or clinical protocols, data, and findings resulting from or
relating to pre-clinical or clinical trials related to the Products.
Closing means the closing of the Transactions.
Code means the Internal Revenue Code of 1986 and all regulations promulgated thereunder, as
the same have from time to time been amended.
Collateral Documents means the Assignment and Assumption Agreement, Bill of Sale, Patent
Assignment and Trademark Assignment.
Default means the occurrence of any event which of itself or with the giving of notice or
the passage of time or both would constitute an event of default under the applicable agreement,
contract or instrument or would permit the other party thereto to cancel or terminate performance
or seek damages for breach.
Dollars and $ means dollars of the United States of America.
[*] means that certain Agreement [*], between Seller and [*] as modified by that certain
letter agreement [*].
FDA means the United States Food and Drug Administration or any other Governmental Entity
which may regulate or control the sale of cosmetics or drugs, including any of the Products.
FDC Act means the Federal Food, Drug and Cosmetic Act, as amended from time to time, and all
regulations promulgated pursuant thereto.
Financial Statements means Sellers audited financial statements as of and for its fiscal
year ended December 31, 2005, including the independent auditors report issued thereon, the
unaudited financial statements for the period commencing January 1, 2006 and ending on December 31,
2006, the unaudited financial statements for the period commencing January 1, 2007 and ending on
the last day of the last month immediately prior to the date of this Agreement and the unaudited
internally prepared report of the gross and net sales of the Products for the twelve (12) month
period ended as of December 31, 2006 (the Soothe
®
Historical Report).
GAAP means United States generally accepted accounting principles in effect on the date
hereof, applied on a consistent basis.
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*
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Certain information has been omitted and filed separately with the Commission. Confidential
treatment has been requested with respect to the omitted portions.
|
- 2 -
CONFIDENTIAL TREATMENT REQUESTED
Governmental Entity means the United States government, the government of any of the states
constituting the United States, any municipality and any other national or provincial or regional
government, and all of their respective branches, departments, agencies, instrumentalities, non
appropriated fund activities, subsidiary corporations or other subdivisions.
Income Taxes means any taxes measured, in whole or in part, by net or gross income or
profits together with any interest, penalties or additions to tax.
Intellectual Property means any patents, patent applications, inventors certificates,
trademarks including words, phrases, symbols, product shapes, logos and the goodwill related
thereto, trademark registrations and applications therefor, trade dress rights, trade names,
service marks and the goodwill related thereto, service mark registrations and applications
therefor, Internet domain names, Internet and world wide web URLs or addresses, copyrights,
copyright registrations and applications therefor, inventions, trade secrets, know-how, customer
lists, supplier lists, proprietary processes and formulae, structures, development tools, designs,
blueprints, specifications, technical drawings (or similar information in electronic format),
software, hardware, source and object code and data applications and licenses and other rights
necessary to use or run such software, programs, code or applications, and all documentation and
media constituting, describing or relating to the foregoing, including manuals, programmers notes,
memoranda and records existing anywhere in the world.
IP Rights means all rights of a Person in, to or arising out of the Intellectual Property.
Know-How means all technology, engineering data, trade secrets, technical data,
manufacturing information, pre-clinical and clinical data and any other information or experience
(other than as disclosed in the Patent Rights) related to the Purchased Assets.
Laws means any law, statute, code, ordinance, rule, regulation, order, judgment or decree
promulgated by any Governmental Entity.
Lien means any mortgage, pledge, assessment, security interest, lease, sublease, lien,
charge, adverse or prior claim, levy, charge, easement, rights of way, covenants, restrictions,
rights of first refusal, encroachments, options or encumbrances of any kind, or any defects in
title, conditional sale contract, title retention contract, or other contract to give or to refrain
from giving any of the foregoing; provided, however, that obligations to pay royalties and other
obligations imposed pursuant to the Assigned Contracts in connection with any Intellectual Property
subject to an Inbound Technology Agreement shall not constitute a Lien.
Litigation Expense means any reasonable expenses incurred in connection with investigating,
defending or asserting any claim, action, suit or proceeding incident to any matter indemnified
against under this Agreement, including court filing fees, court costs, arbitration fees or costs,
witness fees and fees and disbursements of legal counsel (whether incurred in any action or
proceeding between the parties to this Agreement or between any party to this Agreement and any
third party), investigators, expert witnesses, accountants and other professionals.
- 3 -
CONFIDENTIAL TREATMENT REQUESTED
Loss means any loss, obligation, claim, liability, settlement payment, award, judgment,
fine, penalty, interest charge, expense, damage or deficiency or other charge, other than
Litigation Expense.
Material Adverse Change means:
(a) a material adverse change in (i) the condition of the Purchased Assets or the ability to
use, manufacturer, market or sell the Products or (ii) the ability of Seller to perform its
obligations under this Agreement; provided, however, that none of the following shall be deemed
(either alone or in combination) to constitute a Material Adverse Change:
(i) a general deterioration in the economy or in the industry in which Seller operates;
(ii) the outbreak or escalation of hostilities involving the United States or any other
country, the declaration by the United States or any other country of a national emergency
or war or the occurrence of any other calamity or crisis, including an act of terrorism;
(iii) the disclosure (as expressly permitted by this Agreement) of Buyer as, or the
fact that Buyer is, the prospective acquirer of the Purchased Assets;
(iv) the announcement whether internal or external (as expressly permitted by this
Agreement) of the pendency of the Transactions;
(v) actions taken by Buyer or any of its Affiliates, officers, directors, employees,
agents or advisers;
(vi) compliance with the terms of, or the taking of any action required or contemplated
(and permitted) by this Agreement; or
(vii) Buyers inability to complete the Technical Transfer for any reason on or prior
to the Closing Date; or
(b) if Seller receives any notice of or any Action exists involving negative FDA observations
regarding any facility where any Product is or, at any time has been, manufactured, which
observation arises from, relates to or in any way adversely affects or could reasonably be expected
to adversely affect any Product;
(c) if Seller receives any notice of or any Action exists involving the withdrawal or recall
of any of the Products; or
(d) if Seller receives any notice of or any Action exists involving personal injuries
associated with any of the Products; or (e) if Soothe
®
Net Sales are less than the Minimum Net
Sales Target.
Notwithstanding the foregoing, with respect to this definition of Material Adverse Change only,
Action shall not include occasional minor complaints and minor customer claims
- 4 -
CONFIDENTIAL TREATMENT REQUESTED
regarding known side effects of the Products (such as momentary stinging or haze) or occasional
minor manufacturing mistakes (such as missing dropper tip or solution).
Minimum Net Sales Target means Eight Hundred Seventy-Five Thousand Dollars ($875,000);
provided, however, if the Closing Date occurs prior to the Target Closing Date, such number shall
be adjusted downward by Four Thousand Seven Hundred Seventeen Dollars ($4,717) for each day between
the Target Closing Date and such earlier Closing Date.
Net Sales Target means [*]; provided, however, if the Closing Date occurs prior to the
Target Closing Date, such number shall be adjusted downward by [*] for each day between the Target
Closing Date and such earlier Closing Date.
Patent Assignment means the Patent Assignment to be executed by Seller and delivered to
Buyer on the Closing Date in the form of Exhibit 1.1-D.
Patent Rights means all rights of a Person, in, to or arising out of (i) any patents, patent
applications, or inventors certificates that claim inventions used in the Products as listed on
Schedule 3.10.1, and (ii) any continuations, continuations in part, divisions, re-examinations,
re-issues, extensions, and improvements of any of the patents or patent applications listed in
Schedule 3.10.1 and any foreign equivalents thereof.
Permitted Liens means any of the following: (a) Liens, if any, arising under the Assigned
Contracts; and (b) covenants, restrictions or other encumbrances of any kind imposed on the
Purchased Assets pursuant to an Inbound Technology Agreement.
Person means and includes an individual, a corporation, a partnership, a limited liability
company, a limited liability partnership, a joint venture, a trust, an unincorporated association,
a Governmental Entity or any other business entity, wherever located or organized.
Products means, collectively all products currently and in the past under development,
developed under, sold under or marketed in conjunction with the name and mark Soothe
®
(including
all variations and derivations of such names and marks) by or on behalf of Seller.
Sales Period means January 1, 2007 through the July 31, 2007; provided, however, if the
Closing Date occurs prior to July 31, 2007, then the Sales Period shall be January 1, 2007 through
such earlier Closing Date.
Schedule means the appropriate schedule to this Agreement.
Soothe
®
means Soothe Emollient (Lubricant) Eye Drops.
Soothe
®
Net Sales means the aggregate dollar amount of gross sales of the Products during the
Sales Period (the Determination Period) minus the actual dollar amount of returns of Products or
damages allowances minus the actual dollar amount of cash discounts taken against sales of the
Products minus the actual dollar amount of promotional program discounts incurred (excluding the
categories of expenses highlighted on Exhibit 1.1-E), in each case to the
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*
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Certain information has been omitted and filed separately with the Commission. Confidential
treatment has been requested with respect to the omitted portions.
|
- 5 -
CONFIDENTIAL TREATMENT REQUESTED
extent attributable to such gross sales, taken or incurred in the ordinary course of business and
consistent with past practices, and with documentation therefor provided to Buyer.
Subsidiary means a Person, more than fifty percent (50%) of the outstanding equity interests
of which are owned, directly or indirectly, by Seller.
Target Closing Date means July 31, 2007.
Taxes means any taxes, charges, fees, levies or other assessments, including income, excise,
property, sales, gross receipts, employment and franchise taxes imposed by the United States, or
any state, county, local or foreign government or subdivision or agency thereof, and any interest,
penalties or additions attributable thereto.
Tax Returns means all returns, reports, estimates, information returns and statements of any
nature with respect to Taxes.
Technical Transfer means the technical transfer of the manufacturing of the Products to
Buyers manufacturing facility.
Trademark Assignment means the Trademark Assignment to be executed by Seller and delivered
to Buyer on the Closing Date in the form of Exhibit 1.1-F.
Transactions means the transactions contemplated by this Agreement.
1.2
Other Definitions
. Each of the following terms is defined in the Section or
Section referred to below:
Account as defined in Section 2.5.
Alaway Agreement as defined in the preamble to this Agreement.
Assigned Claims as defined in Section 2.1.6.
Assigned Contracts as defined in Section 2.1.4.
Assumed Liabilities as defined in Section 2.3.
Books and Records as defined in Section 2.1.3.
Buyer as defined in the preamble to this Agreement.
Buyer Fundamental Representations as defined in Section 9.1.
Buyer Indemnified Parties as defined in Section 9.2.
Cap as defined in Section 9.2.
Claim as defined in Section 9.4.
Closing Date as defined in Section 8.1.
Competitive Activity as defined in Section 6.10.1.
Confidential Information as defined in Section 6.4.
Consideration as defined in Section 2.5.
Contracts as defined in Section 3.11.
Contributors as defined in Section 3.9.4.
Copyrights as defined in Section 3.10.2.
Disclosure Schedule as defined in the preamble to Article III.
Excluded Assets as defined in Section 2.2.
Excluded Liabilities as defined in Section 2.4.
- 6 -
CONFIDENTIAL TREATMENT REQUESTED
Expiration Date as defined in Section 9.1.
Extended Closing Date as defined in Section 10.1.2
Final Soothe
®
Net Sales Calculation as defined in Section 7.1.10.
Governmental Consent as defined in Section 10.2.
HSR Act as defined in Section 6.6.
Inbound Technology as defined in Section 3.9.5.
Inbound Technology Agreements as defined in Section 3.9.5.
Indemnitee as defined in Section 9.4.
Indemnitor as defined in Section 9.4.
Inventory as defined in Section 7.1.8.
Minimum Claim Amount as defined in Section 9.2.
Monthly Soothe
®
Net Sales Calculation as defined in Section 5.7.
Organizational Documents as defined in Section 3.1.
Outbound Technology Agreements as defined in Section 3.9.6.
Permitted Announcements as defined in Section 6.3.
Prepaid Expenses as defined in Section 2.1.8.
Purchased Assets as defined in Section 2.1.
Purchase Price Allocation Schedule as defined in Section 2.6.
Permits as defined in Section 2.1.5.
Restrictive Covenants as defined in Section 6.10.2.
Retained Claims as defined in Section 2.4.4.
Seller as defined in the preamble to this Agreement.
Seller Bring Down Representations as defined in Section 7.11.
Seller Fundamental Representations as defined in Section 9.1.
Seller Indemnified Parties as defined in Section 9.3.
Sellers Return Policy as defined in Section 3.19.
Trademarks as defined in Section 3.10.2.
Transfer Taxes as defined in Section 6.5.
1.3
Rules of Construction
.
1.3.1 References in this Agreement to any gender shall include references to all genders.
Unless the context otherwise requires, references in the singular include references in the plural
and vice versa. References to a party to this Agreement or to other agreements described herein
means those Persons executing such agreements. The words include, including or includes
shall be deemed to be followed by the phrase without limitation or the phrase but not limited
to in all places where such words appear in this Agreement. The word or shall be deemed to have
the inclusive meaning represented by the phrase and/or. This Agreement is the joint drafting
product of Seller and Buyer and each provision has been subject to negotiation and agreement and
shall not be construed for or against either party as drafter thereof.
1.3.2 The phrases have heretofore been provided or has provided or similar words mean that
one party has delivered or provided access to such information to the other party or to counsel of
such other party.
- 7 -
CONFIDENTIAL TREATMENT REQUESTED
ARTICLE II
SALE AND PURCHASE
2.1
Transfer of Assets
. Upon and subject to the terms and conditions stated in this
Agreement, and except as provided in Section 2.2 of this Agreement, on the Closing Date, for the
consideration described in Section 2.5 hereof and Buyers performance of its other obligations
under this Agreement, Seller shall sell, assign, convey, transfer and deliver to Buyer, and Buyer
shall acquire from Seller, free and clear of all Liens (other than Permitted Liens), all of
Sellers right, title and interest in and to the following (the Purchased Assets):
2.1.1 All Assigned Intellectual Property, including all tangible embodiments thereof;
provided, however, that Seller or its Affiliates may retain one copy of any such tangible
embodiments, solely for legal, regulatory, Tax or accounting purposes;
2.1.2 All Products;
2.1.3 (a) All books, records or information (including all data and other information stored
on discs, tapes or other media) of Seller in existence on the date hereof and relating exclusively
to any Asset Class, including, any customer lists, customer records, internally prepared production
reports, manuals, promotional materials, account management materials or other development plans,
documentation (in all media, including digital formats, as currently exists) created or otherwise
developed by or on behalf of Seller (including by any Contributor), and all copies thereof in
Sellers possession or control and all other documents and records exclusively relating to any
Asset Class, provided, however, that Seller or its Affiliates may retain one copy of any such Books
and Records to the extent required for legal, regulatory, Tax or accounting purposes, and (b) a
copy of all books, records or information (including all data and other information stored on
discs, tapes or other media) of Seller relating to any Asset Class, including, any customer lists,
customer records, internally prepared production reports, manuals, promotional materials, account
management materials development plans, documentation (in all media, including digital formats, as
currently exists) created or otherwise developed by or on behalf of Seller (including by any
Contributor), and all other documents and records relating to any Asset Class to the extent related
to or included within the Excluded Assets or Excluded Liabilities ((a) and (b) are hereinafter
collectively referred to as the Books and Records);
2.1.4 All of the rights of Seller in and to the contracts and purchase orders identified in
Exhibit 2.1.4 (collectively, the Assigned Contracts); provided, however, that such rights shall
not include any of Sellers accounts receivable arising under the Assigned Contracts on or prior to
the Closing Date to the extent that the obligations to which such accounts receivable relate were
performed in full by Seller on or prior to the Closing Date;
2.1.5 All of Sellers licenses, permits and franchises, approvals, consents, product
registrations or authorizations issued to Seller by any Governmental Entity or any third party test
house, registrar or certification body, relating to the development or use of the Products,
including product registrations or applications and approvals or submissions to the FDA or any
regulatory body of any foreign government (collectively, the Permits);
- 8 -
CONFIDENTIAL TREATMENT REQUESTED
2.1.6 All of Sellers claims, causes of action, judgments, and other rights and remedies of
whatever nature arising from infringements of Sellers IP Rights in or to the Assigned Intellectual
Property and all other claims of Seller arising from any Asset Class, including rights to
recoveries for damages for defective goods or services, insurance and refund claims and similar
assets related to any Asset Class (except to the extent related to Excluded Liabilities)
(collectively, the Assigned Claims);
2.1.7 All unapplied prepaid expenses, royalties, deposits and other current and non current
assets of Seller, as of the Closing Date, to the extent related to the Purchased Assets
(collectively the Prepaid Expenses);
2.1.8 All of the goodwill of Seller associated with any Asset Class, the Soothe
®
Business or
the Books and Records.
2.2
Excluded Assets
. The Purchased Assets shall not include the following
(collectively, the Excluded Assets):
2.2.1 All of Sellers cash and cash equivalents (including marketable securities and short
term investments calculated in accordance with GAAP) and accounts receivable, including the
accounts receivable expressly set forth in Section 2.1.4; and
2.2.2 The assets and rights of Seller not included within the definition of Purchased
Assets, including all of Sellers right, title and interest in and to any products other than the
Products; all originals of the Books and Records provided in copy form to Buyer pursuant to Section
2.1.3(b); all Know-How not exclusively related to the Products (subject to the license set forth in
Section 6.11); the copies of tangible embodiments of Assigned Intellectual Property or Books or
Records to be retained by Seller pursuant to Sections 2.1.1 and 2.1.3(a), respectively; and all
Contracts other than the Assigned Contracts.
2.3
Assumption of Liabilities
. On the Closing Date, Buyer shall assume and agree to
pay and perform only the following liabilities and obligations (collectively, the Assumed
Liabilities):
2.3.1 The obligations of Seller arising under the Assigned Contracts after the Closing Date,
other than the obligations arising from any breach of an Assigned Contract by Seller on or prior to
the Closing Date or from Sellers failure to pay any accounts payable outstanding under an Assigned
Contract as of the Closing Date that are not assumed by Buyer pursuant to Section 2.3.5;
2.3.2 All liabilities and obligations of Seller under or in respect of the Permits to the
extent related to the period following the Closing Date;
2.3.3 All returns of Products following the Closing Date with respect to Products sold or
otherwise distributed prior to the Closing Date (i) from Wal-Mart which are returned solely as a
result of Buyer, directly or indirectly, selling the Products to Wal-Mart during the [*] and (ii)
from any other customer of Seller which are returned solely as a result of Buyer, directly
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Certain information has been omitted and filed separately with the Commission. Confidential
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CONFIDENTIAL TREATMENT REQUESTED
or indirectly, selling the Products to such other customer [*]; and
2.3.4 All warranty claims (other than product liability claims, which are governed by Section
2.3.5) arising from or related to Products sold or otherwise distributed by or on behalf of Buyer
after the Closing Date;
2.3.5 Any product liability claims arising from or related to Products manufactured, sold or
otherwise distributed by or on behalf of Buyer after the Closing Date; and
2.3.6 The obligations of Seller with respect to the sales promotions identified on Schedule
3.6.2 to the extent they are in effect on the Closing Date or cover periods following the Closing
Date.
2.4
Excluded Liabilities
. Notwithstanding any provision of this Agreement to the
contrary, none of the liabilities or obligations of Seller other than the Assumed Liabilities shall
be assumed or are being assumed by Buyer, and Seller shall retain and remain and hereby retains and
remains solely liable for, all of the debts, expenses, contracts, agreements, commitments,
obligations and other liabilities of any nature whatsoever of Seller, the business of Seller or the
Purchased Assets, whether known or unknown, accrued or not accrued, fixed or contingent
(collectively, the Excluded Liabilities), including the following:
2.4.1 Any liability related to any Excluded Assets;
2.4.2 Any liability arising under the Assigned Contracts on or prior to the Closing Date or
any liability for any breach by Seller or any other Person of any Assigned Contract prior to the
Closing Date or any liability for Sellers failure to pay any accounts payable outstanding under
the Assigned Contracts on or prior to the Closing Date;
2.4.3 Any product liability claims arising from or related to the Products manufactured, sold
or otherwise distributed by or on behalf of Seller on or prior to the Closing Date;
2.4.4 Any liability, other than liabilities or obligations pursuant to Section 2.4.3, under
any Action against Seller based, in whole or in part, on events occurring or circumstances existing
on or before the Closing Date (the Retained Claims);
2.4.5 Any liability or obligation related to Sellers existing or former employees,
consultants or independent contractors (other than product liability claims by such existing or
former employees, consultants or independent contractors which shall be governed by Sections 2.3.5
or 2.4.3, as appropriate);
2.4.6 Any liability for any Taxes incurred or accruing prior to the Closing Date with respect
to Sellers business or the Purchased Assets;
2.4.7 Any liability for or in respect of any loan, other indebtedness for money borrowed, or
account payable of Seller or any Affiliate of Seller; and
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Certain information has been omitted and filed separately with the Commission. Confidential
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CONFIDENTIAL TREATMENT REQUESTED
2.4.8 Any warranty claims that relate to Products manufactured or sold on or prior to the Closing
Date and, except as provided in Section 2.3.3, returns of Products manufactured or sold on or prior
to the Closing Date.
2.5
Consideration
. In consideration of Sellers performance of this Agreement and
transfer and delivery of the Purchased Assets to Buyer, Buyer shall (in accordance with the
allocation provided for in Section 2.6) deliver to Seller at Closing, by wire transfer to the
account which Seller shall specify prior to the Closing Date (the Account), in immediately
available funds, (i) Seven Million Five Hundred Thousand Dollars ($7,500,000); provided, that if
Soothe
®
Net Sales are less than the Net Sales Target such amount shall be reduced by [*] in Soothe
®
Net Sales below the Net Sales Target (such amount, as adjusted, the Consideration).
2.6
Allocation of Consideration
. Within sixty (60) days after the Closing Date, Buyer
shall provide to Seller Exhibit 2.6 which shall allocate the Consideration to be paid by Buyer to
Seller at and after the Closing among each class of Purchased Assets (the Purchase Price
Allocation Schedule). Each of Seller and Buyer shall prepare its federal, state, local and
foreign Income Tax returns for all current and future tax reporting periods with respect to the
transfer of the Purchased Assets to Buyer in a manner consistent with the Purchase Price Allocation
Schedule. If any Governmental Entity challenges such allocation, the party first receiving notice
of such challenge shall give the other party prompt notice of such challenge, and Seller and Buyer
shall cooperate in good faith in responding to such challenge, in order to preserve the
effectiveness of the Purchase Price Allocation Schedule. Neither Seller nor Buyer shall report the
allocation of the Consideration in a manner inconsistent with the Purchase Price Allocation
Schedule.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in the Disclosure Schedule setting forth exceptions to a specifically
identified Section contained in this Article III and delivered by Seller to Buyer concurrently with
the execution and delivery of this Agreement (the Disclosure Schedule), Seller represents and
warrants to Buyer as follows:
3.1
Organization, Power, Standing and Qualification
. Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the State of Delaware, and has
the requisite corporate power and authority to carry on its business as it is now being conducted
and to own and operate the properties and assets now owned and operated by it. Seller has
delivered to Buyer complete and correct copies of its Certificate of Incorporation and By-laws
(Organizational Documents). Seller is duly qualified to do business and in good standing in each
jurisdiction where the conduct of its business or the ownership or operation of its assets requires
such qualification except where failure to be so qualified or in such good standing will not result
in a Material Adverse Change.
3.2
Power and Authority
. Upon execution and delivery as contemplated herein, this
Agreement will be a valid and binding obligation of Seller, enforceable against it in
accordance
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treatment has been requested with respect to the omitted portions.
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CONFIDENTIAL TREATMENT REQUESTED
with its terms, except as the same may be limited by bankruptcy, insolvency, moratorium,
reorganization or other laws of general applicability relating to or affecting the enforcement of
creditors rights and general principles of equity. Seller has the requisite corporate power and
authority to enter into this Agreement and to perform all of its obligations hereunder. The board
of directors of Seller has duly authorized the execution and delivery of this Agreement and the
performance of the Transactions.
3.3
Validity of Contemplated Transactions
. The execution, delivery and performance of
this Agreement by Seller, the execution, delivery and performance by Seller of the Collateral
Documents to which it is a party and the consummation of the Transactions do not and will not (a)
contravene any provision of the Organizational Documents; (b) constitute a breach by Seller of, or
result in a Default by Seller under or cause the acceleration of any payments due from Seller
pursuant to, any agreement, contract, indenture, lease or mortgage to which Seller is a party or by
which any of the Purchased Assets are bound, or violate in any material respect any provision of
any Law or Permit to which the Purchased Assets are subject, except for requirements for consents,
waivers or notices of Persons set forth on Schedule 3.4.
3.4
Consents
. No permit, consent, approval or authorization of, or designation,
declaration or filing with, any Governmental Entity or any other Person on the part of Seller is
required in connection with the execution or delivery by Seller of this Agreement or the
consummation of the Transactions other than (a) those specified in Schedule 3.4 which have not been
obtained or (b) those specified in Schedule 3.4 which have previously been obtained.
3.5
Subsidiaries
. Seller has no Subsidiaries and has no equity ownership in any other
Person.
3.6
Financial Statements; Undisclosed Liabilities
.
3.6.1
Financial Statements
. Schedule 3.6.1 contains true and complete copies of the
Financial Statements as of the date of this Agreement. Such Financial Statements have been
prepared from the books and records of Seller as prepared in the ordinary course of business.
Except as disclosed in Schedule 3.6.1, the audited Financial Statements have been prepared in
accordance with GAAP applied on a consistent basis, and the Financial Statements (other than the
Soothe
®
Historical Report) present fairly, in all material respects, the financial position of
Seller and the results of its operations, in each case for the periods and as of the dates
specified therein. The Soothe
®
Historical Report has been prepared from the books and records of
Seller as prepared in the ordinary course of business, and accurately presents the gross and net
sales of the Products for the period and as of the date specified therein.
3.6.2
Undisclosed Liabilities
. Seller does not have any obligations or liabilities of
any kind (whether accrued, absolute, contingent, unliquidated, inchoate or otherwise, and whether
due or to become due) that are related to the Purchased Assets except (a) liabilities reflected in
the Financial Statements, (b) liabilities expressly disclosed in Schedule 3.6.2 or (c) immaterial
obligations or liabilities that are not Assumed Liabilities and cannot reasonably be expected by
Seller to impact Buyers business or the Purchased Assets after the Closing Date.
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CONFIDENTIAL TREATMENT REQUESTED
3.7
Absence of Material Adverse Change
. Except as set forth on Schedule 3.7, since
September 4, 2004, there has not been any occurrence or event which, individually or in the
aggregate, has resulted in or which Seller reasonably expects will result in any Material Adverse
Change.
3.8
Sufficiency of Assets
. The Purchased Assets, taken together with the licenses
provided for in Section 6.11, constitute all of the tangible and intangible property used by Seller
in its business related to the Products or that would be necessary for Buyer to market or sell the
Products to the extent that such marketing or sale is conducted in accordance with the Assumed
Contracts and Permits and all applicable Laws, except for Sellers employees, consultants and other
professional service or product development advisers, insurance policies, cash, general and
administrative assets (including, sales, marketing and finance), interests in real property and
other similar assets (including the Excluded Assets) not being transferred to Buyer pursuant to
this Agreement.
3.9
Assigned Intellectual Property
.
3.9.1
Intentionally Omitted
.
3.9.2
Intentionally Omitted
.
3.9.3
Intentionally Omitted
.
3.9.4
Title
. Except as set forth on Schedule 3.9.4, Seller owns all right, title and
interest in and to the Purchased Assets or, under the Inbound Technology Agreements is, to Sellers
knowledge, licensed legally enforceable rights to use the Purchased Assets and to make, have made,
sell, offer to sell, import, license and distribute the Products. There are no Liens (other than
Permitted Liens) on any of the Purchased Assets. Except for portions licensed pursuant to the
Inbound Technology Agreements or rights granted pursuant to the Outbound Technology Agreements, to
Sellers knowledge, Seller holds valid and enforceable IP Rights in and to all of the Purchased
Assets (including all of the Assigned Intellectual Property). Seller has used good faith in the
prosecution of all patents included in the Purchased Assets and has performed the patent searches
previously provided to Buyer or Buyers counsel. Except as set forth in Schedule 3.9.4, Seller did
not use any Person other than past or current employees of, or consultants to, Seller
(Contributors) in the development of the Products or the development, invention, creation and
authoring of the Purchased Assets. All Contributors executed valid and binding written agreements
with Seller under which the Contributors agreed to maintain confidentiality and assigned all right,
title and interest in the Products and the Purchased Assets to Seller. None of the Contributors
has any valid claim to ownership, joint ownership, or any other interest in or to any portion of
the Products or the Purchased Assets (including the Assigned Intellectual Property).
3.9.5
Inbound Technology Agreements
. Seller uses certain IP Rights in connection with
the Purchased Assets (Inbound Technology) which are licensed to Seller pursuant to written
agreements providing Seller with licenses or other rights to develop, market, distribute, sell,
license, use or otherwise exploit the Inbound Technology to the extent provided in such agreements
(collectively, the Inbound Technology Agreements), each of which is
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CONFIDENTIAL TREATMENT REQUESTED
identified on Schedule 3.9.5. Seller has provided to Buyer or to Buyers counsel true and complete
copies of each such Inbound Technology Agreement. Seller has not received written notice, and, to
Sellers knowledge it has not received any other notice, of and, to Sellers knowledge, there are
no circumstances which would give rise to, any termination, Default, cancellation or breach under,
any Inbound Technology Agreement.
3.9.6
Outbound Technology Agreements
. Seller has not: (a) sold, licensed,
transferred or assigned to, or otherwise provided for the benefit of, any Person, any Assigned
Intellectual Property, (b) granted any Person the right to sublicense any Assigned Intellectual
Property to any other Person, or (c) granted any third party ownership rights in or to any Assigned
Intellectual Property, except pursuant to written agreements (Outbound Technology Agreements),
each of which is listed in Schedule 3.9.6. Seller has provided to Buyer or Buyers counsel true
and complete copies of each such Outbound Technology Agreement.
3.9.7
No Claims
. Except as set forth in Schedule 3.9.7, (a) Seller has received no
written notice, and, to Sellers knowledge it has not received any other notice, of any claim,
demand, suit or other assertion by any Person with respect to the Assigned Intellectual Property;
and (b) except in connection with Inbound Technology Agreements, to Sellers knowledge, there are
no circumstances which would (or are reasonably likely to) give rise to any claim, demand, suit or
other assertion by any Person other than a party to this Agreement, that such Person has superior
rights, ownership or shared ownership requiring any payments to any Person other than as provided
in this Agreement, or other interest of any kind or nature in or with respect to, the Assigned
Intellectual Property.
3.9.8
No Government Funding
. Seller has not received funding from any Governmental
Entity or any academic funding which (a) was used in the development of the Assigned Intellectual
Property or the Products; or (b) precludes Buyer from making any desired change to the Assigned
Intellectual Property or the Products or combining them with other technology or exploiting or
marketing them in any manner.
3.9.9
No Claims Against Contributors
. To Sellers knowledge, no Person has claimed or
has reason to claim that any Contributor, by virtue of its participation in the development of the
Assigned Intellectual Property, has thereby: (a) violated any of the terms or conditions of any
employment, non-competition or non-disclosure agreement; (b) disclosed or utilized any trade secret
or proprietary information or documentation in an unauthorized manner; (c) tortiously interfered
with or breached any agreement; or (d) violated or exceeded the scope of any Law or agreement.
3.9.10
Protection
. Seller has taken reasonable measures to protect the proprietary
rights owned by Seller to the Assigned Intellectual Property. In no instance has the eligibility
of the Assigned Intellectual Property (excluding the portions licensed under the Inbound Technology
Agreements) for protection under applicable Law been forfeited to the public domain for any reason.
3.9.11
Noninfringement
. To Sellers knowledge, the creation, generation, development,
or use of the Assigned Intellectual Property and the manufacture, marketing, or sale of the
Products do not infringe or misappropriate any IP Right of any Person. Seller has not
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CONFIDENTIAL TREATMENT REQUESTED
received written notice, and, to Sellers knowledge it has not received any other notice, of and
has no knowledge of any complaint, assertion, threat or allegation that would contradict the
foregoing. For purposes of this Section 3.9.11, knowledge shall not be inferred solely because the
claimant complied with patent marking requirements or statutory copyright notice provisions.
3.9.12
Judgments and Settlements
. The Assigned Intellectual Property and, to Sellers
knowledge, the right of any third party licensor to the intellectual property licensed pursuant to
the Inbound Technology Agreements, are not subject to any outstanding settlement agreement, order,
ruling, decree, judgment, or stipulation preventing their use by Buyer after the Closing Date.
3.9.13
Warranties and Warranty Claims
. Other than as set forth in the Outbound
Technology Agreements and except for indemnification obligations set forth in certain of the
Assigned Contracts, Seller has not made any written or other binding warranty or representation
with respect to any of the Assigned Intellectual Property, or any product that embodies or utilizes
any of it.
3.10
IP Rights
.
3.10.1
Patents
. Schedule 3.10.1 lists: (a) all patents and patent applications
(United States and foreign) that have been issued or assigned to Seller, and (b) all invention
disclosure statements prepared by or for Seller, in each case, claiming or disclosing inventions
used in or necessary to use, develop, sell, offer to sell or market the Products. Except as set
forth in Schedule 3.10.1, Seller has provided to Buyer or Buyers counsel true and complete copies
of all such patent and patent applications (as amended to date) and has provided to Buyer or
Buyers counsel all of Sellers internal documentation, the prosecution files of patent counsel, a
copy of the file wrapper and any validity opinions and valuations, whether internally or externally
prepared, relating to such patents, applications and invention disclosure statements, and has
provided to Buyer or Buyers counsel true and complete copies of all other written documentation
evidencing ownership, prosecution and enforcement (if applicable) of each such item. Neither
Seller nor any Affiliate of Seller owns or has rights to any patent or patent application that will
affect Buyers rights in the Assigned Intellectual Property, other than as set forth on Schedule
3.10.1.
3.10.2
Copyrights and Trademarks
. (a) Schedule 3.10.2 lists all worldwide registered
copyrights owned by Seller that constitute Assigned Intellectual Property used by Seller in respect
of the Purchased Assets (the Copyrights), along with information as to Sellers ownership thereof
or licenses or rights therein and registration thereof. All worldwide trademarks (including words,
phrases, symbols, product shapes or logos), service marks, trademark registrations, trade names and
trade dress, and the goodwill related thereto that constitute Assigned Intellectual Property or are
owned by Seller and used by Seller solely in respect of the Purchased Assets (collectively, the
Trademarks) are listed on Schedule 3.10.2 (whether registered, filed or common law), along with
information as to Sellers ownership thereof and registrations or applications and related
information thereof (including but not limited to any applicable docketing or filing deadline dates
occurring within six (6) months from the date of this Agreement). Seller has filed and used the
Trademarks in good faith and has performed the trademark searches previously provided to Buyer or
Buyers counsel. No
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CONFIDENTIAL TREATMENT REQUESTED
Trademark filing, registration or application with a Governmental Entity identified in Schedule
3.10.2 (except as listed therein) has expired or been canceled, and Seller has not received written
notice, and, to Sellers knowledge it has not received any other notice, of any third party claim
or petition for cancellation or opposition, or any outstanding office action from the relevant
Governmental Entity responsible for trademark filings with respect to any such registration or
application that has not been provided to Buyer or Buyers counsel. Except as listed on Schedule
3.10.2, (i) there are no restrictions on the use of the Copyrights or Trademarks that would affect
Buyers use of the Copyrights or Trademarks after the Closing Date, and (ii) to Sellers knowledge,
no Copyrights and Trademarks are being infringed, violated, misappropriated or otherwise conflicted
with by any Person.
(a) (i) The Copyrights and Trademarks are valid, in full force and effect, enforceable and
owned exclusively by Seller (except as provided in Schedule 3.10.2), (ii) Seller has the
unencumbered and unrestricted right to use, license and convey ownership and title of all the
Copyrights and Trademarks to Buyer free and clear of all Liens (other than Permitted Liens), (iii)
Seller has not granted to any party the right to use the Copyrights and Trademarks except in
connection with the Assigned Contracts or as set forth on Schedule 3.10.2, (iv) Seller has not
received written notice, and, to Sellers knowledge it has not received any other notice, of any
claim, demand, suit or other assertion by any Person, and, to Sellers knowledge, there are no
circumstances which would (or are reasonably likely to) give rise to any claim, demand, suit or
other assertion by any Person other than a party to this Agreement, that such Person has superior
rights, ownership or shared ownership requiring any payments or transfer of the Copyrights and
Trademarks to any Person other than as provided in this Agreement, or other interest of any kind or
nature in or with respect to, the Copyrights and Trademarks, (v) Seller has taken reasonable
measures to protect the proprietary rights of Seller to the Copyrights and Trademarks and in no
instance has the validity, ownership or eligibility of the Copyrights and the Trademarks for
protection under applicable Law been forfeited to the public domain or any Person for any reason,
and (vi) to Sellers knowledge, the Copyrights and Trademarks do not infringe or otherwise conflict
with the IP Rights of any Person and Seller has not received written notice, and, to Sellers
knowledge it has not received any other notice, of and has no knowledge of any complaint,
assertion, threat or conflict that would contradict the foregoing, except as provided in Schedule
3.10.2.
3.10.3
Know-How
. Seller has used reasonable commercial efforts to safeguard and
protect the confidentiality of the Know-How. Seller has no knowledge of any violation of the
Know-How protection practices and procedures of Seller by any Person or the misappropriation of any
Know-How by any Person. Seller has no knowledge that (a) any of the Know-How is presently invalid
or unprotectable, or (b) any Know-How has become part of the public domain.
3.11
Contracts
. Set forth on Schedule 3.11 is a list of all Assigned Contracts and
written contracts with any Person relating to professional services or product development with
respect to the Purchased Assets (the Contracts), true and complete copies of which (and all
amendments and modifications thereof and consent and waivers thereunder) Seller has provided to
Buyer or Buyers counsel. There is no Default on the part of Seller, or written notice of or
knowledge of Seller of any Default on the part of any other party, in the performance of any
obligation to be performed or paid under any Contract.
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CONFIDENTIAL TREATMENT REQUESTED
3.12
Restrictions on Purchased Assets
. Except as set forth on Schedule 3.12 and except for
the Inbound Technology Agreements and Outbound Technology Agreements, there is no agreement to
which Seller, with respect to the Purchased Assets, is a party or, to Sellers knowledge by which
it is otherwise bound, nor any judgment, injunction, order or decree affecting the Purchased Assets
which prohibits or limits the scope of development or marketing of the Products. Buyer is not and
after the Closing Date neither it nor the Purchased Assets shall be bound by the agreements set
forth on Schedule 3.12.
3.13
Suppliers
. Schedule 3.13 lists all of the suppliers with respect to the
Purchased Assets.
3.14
Litigation; Product Liability
.
3.14.1
Litigation
. There are no Actions pending by or against or, to Sellers
knowledge, threatened, and since September 4, 2004, there have not been pending any Actions,
against Seller related to the Purchased Assets and since September 4, 2004 there have not been any
such Actions related to the Purchased Assets; and Seller is not subject to, or in Default of, any
outstanding order, writ, injunction, judgment or decree of any Governmental Entity related to the
Purchased Assets.
3.14.2
Product Liability
. There are no Actions presently pending or, to the knowledge
of Seller, threatened, and since September 4, 2004, there have not been pending any Actions, that
are based on any legal or equitable theory of recovery whatsoever, arising out of any injury to
individuals or property as a result of the ownership, possession or use of, or from any defect or
alleged defect in design, manufacture, materials or workmanship, including any failure to warn or
alleged breach of express or implied warranty, representation or condition relating to, any of the
Products. There has never been any recall conducted with respect to any of the Products.
3.15
Compliance with Laws and Permits
. Seller is in compliance in all material
respects with all Laws applicable to the Purchased Assets. Seller has not received any written
notice, and to Sellers knowledge it has not received any other notice, of any asserted failure to
comply with such Laws. Seller holds all Permits necessary for the ownership, manufacture, use,
marketing and sale of the Purchased Assets.
3.16
Conflicts of Interest
. Except as set forth on Schedule 3.16, neither Seller nor,
to its knowledge, any of its directors or Affiliates, is an officer, director, employee or
consultant of, or owns or otherwise controls any Person which is, or is engaged in business as, a
competitor, customer or supplier of the Purchased Assets. Notwithstanding the foregoing, Seller is
making no representation with respect to any actual or potential conflicts of interest of its
directors who represent any of its venture capital investors or any fund, general partner or
management company that such directors represent or in which such funds, general partners or
management companies have an interest.
3.17
Brokers or Finders Fees
. Seller has not incurred, nor will it incur, directly
or indirectly, any liability for brokers or finders fees or agents commissions or any similar
charges in connection with this Agreement or the Transactions.
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CONFIDENTIAL TREATMENT REQUESTED
3.18
Insurance
. Seller has maintained product liability insurance since September 4, 2004
and, since that date, has neither made nor been entitled to make any claims thereunder.
3.19
Sellers Return Policy
. Prior to the Closing Date, Seller has accepted returns
in the ordinary course of its business and in accordance with its return policy, as in effect from
time to time, and, following the Closing and subject to Section 2.3.3, Seller shall accept returns
of Products in accordance with Sellers return policy attached hereto as Schedule 3.19 (Sellers
Return Policy) to the extent such Products were manufactured or sold on or prior to the Closing
Date. Seller has not, and following the Closing Date shall not commence (or in any way be
required) to accept returns of Products in violation of Sellers Return Policy.
3.20
Disclosure
. No representation or warranty made by Seller in this Agreement, the
Collateral Documents or the certificates delivered pursuant to Section 8.2.2 (d), (e) and (f)
contains or will contain any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements or facts contained herein or therein not misleading
in light of the circumstances under which they were furnished.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1
Organization
. Buyer is a corporation duly organized, validly existing and
subsisting under the laws of the State of New York and has the requisite corporate power and
authority to carry on its business as it is now being conducted and to own and operate the
properties and assets owned and operated by it.
4.2
Power and Authority
. Upon execution and delivery as contemplated herein, this
Agreement will be a valid and binding obligation of Buyer, enforceable against it in accordance
with its terms, except as the same may be limited by bankruptcy, insolvency, moratorium,
reorganization or other laws of general applicability relating to or affecting the enforcement of
creditors rights and general principles of equity. Buyer has the requisite corporate power and
authority to enter into this Agreement and to perform all of its obligations hereunder. The board
of directors of Buyer has duly authorized the execution and delivery of this Agreement and the
performance of the Transactions. No approval of the stockholders of Buyer is required with respect
to the consummation of the Transactions.
4.3
Validity of Contemplated Transactions
. The execution, delivery and performance of
this Agreement by Buyer, the execution, delivery and performance by Buyer of the Collateral
Documents to which it is a party and the consummation of the Transactions do not and will not (a)
contravene any provision of the organizational documents of Buyer, or (b) constitute a breach of,
or result in a Default under, or cause the acceleration of any payments pursuant to, any agreement,
contract, indenture, lease or mortgage to which Buyer is a party or by which either Buyer or its
assets is bound, or violate any provision of any applicable Law, permit or license to which Buyer
is subject, where any such breaches, Defaults or violations would materially impair the ability of
Buyer to consummate and perform the Transactions.
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CONFIDENTIAL TREATMENT REQUESTED
4.4
Consents
. No permit, consent, approval or authorization of, or designation,
declaration or filing with, any Governmental Entity or any other Person on the part of Buyer is
required in connection with the execution or delivery by Buyer of this Agreement or required of
Buyer in connection with the consummation of the Transactions other than (a) those which have
previously been obtained, or (b) such permits, consents, approvals, authorizations, designations,
declarations or filings the absence of which, individually or in the aggregate, would not
materially impair the ability of Buyer to consummate the Transactions.
4.5
Brokers and Finders Fees
. Buyer has not incurred, nor will it incur, directly
or indirectly, any liability for brokerage or finders fees or agents commissions or any similar
charges in connection with this Agreement or the Transactions.
ARTICLE V
PRECLOSING COVENANTS OF SELLER
5.1
Access
. Prior to the Closing, Seller shall provide or make available to Buyer and
its representatives such additional information concerning the Products and the Purchased Assets as
Buyer reasonably requests. Upon notice from Buyer, Seller shall give Buyer and Buyers
representatives access to all of the facilities, books and records of Seller related to the
Products and the Purchased Assets, and Seller shall use all commercially reasonable efforts to make
Sellers officers, employees (including all technical employees), suppliers, customers, and
contract manufacturers available to Buyer as Buyer shall from time to time reasonably request.
Notwithstanding the generality of the foregoing, Buyer agrees that its communications with Sellers
officers, employees (including all technical employees), suppliers, customers, and contract
manufacturers shall be coordinated with Seller and conducted in a manner so as to interfere as
little as possible with Sellers day-to-day business operations.
5.2
Conduct of Business
. From the date of this Agreement through the Closing Date,
except as otherwise specifically set forth in this Agreement (including Sections 7.1.8, 7.1.9 and
7.1.10), Seller covenants that it shall:
(a) use commercially reasonable efforts to preserve intact and maintain the Purchased Assets;
(b) use commercially reasonable efforts (of a company that has terminated its sales force and
is in the process of winding down a division of its business) to maintain the accounts of its
customers including, without limitation, [*];
(c) use commercially reasonable efforts (of a company that has terminated its sales force and
is in the process of winding down a division of its business) to continue its engagement of Emerson
pursuant to the Emerson Agreement;
(d) make payments when due on its liabilities with respect to the Purchased Assets to suppliers,
trade creditors, to parties to the Assigned Contracts and other Persons and not delay in making any
such payment (unless contesting such payments in good faith) or enter into extended payment terms
with respect to such Assigned Contracts and shall
|
|
|
*
|
|
Certain information has been omitted and filed separately with the Commission. Confidential
treatment has been requested with respect to the omitted portions.
|
- 19 -
CONFIDENTIAL TREATMENT REQUESTED
notify Buyer of any written notice of Default or Default known to Seller with respect to such
Assigned Contracts;
(e) maintain the Books and Records consistent with past practice; and
(f) distribute Five Hundred Thousand (500,000) samples of the Products to its existing
customers during the Sales Period; provided, however, if the Closing Date occurs prior to the
Target Closing Date, such number of samples shall be adjusted downward by Two Thousand Three
Hundred and Fifty Eight (2,358) samples for each day between the Target Closing Date and such
earlier Closing Date.
5.2.2 Notwithstanding Section 5.2, except as otherwise specifically set forth in this
Agreement or any Collateral Document, or with the prior written consent of Buyer, Seller covenants
that with respect to the Purchased Assets and the Products it shall not:
(a) sell, lease or transfer any Purchased Asset, except for the sale of Inventory in the
ordinary course of business;
(b) cause or permit to arise any Lien (other than Permitted Liens) on any Purchased Asset;
(c) enter into any amendment, modification or change to any of the Assigned Contracts or enter
into any new agreement with respect to the Purchased Assets or the Products (excluding for these
purposes all agreements, amendments, modifications and changes made with respect to the agreements
listed on the Disclosure Schedule hereto as being terminated by Seller in connection with the
Closing);
(d) give any notice of Default or breach, or renewal, non-renewal or cancellation to any
Person pursuant to any Inbound Technology Agreement or Outbound Technology Agreement unless
reasonably necessary to protect the Soothe
®
Business or the Purchased Assets (excluding for these
purposes any non-renewal or cancellation notices given in connection with Sellers termination of
certain agreements in connection with the Closing as identified in the Disclosure Schedule);
(e) sell, assign, or otherwise transfer any rights in any of the Assigned Intellectual
Property to any Person;
(f) enter into any strategic alliance of any kind with respect to the Purchased Assets or the
Products;
(g) commence cease and desist demands or any Action to perfect, maintain, or enforce the IP
Rights of Seller with respect to the Assigned Intellectual Property unless reasonably necessary to
protect the Products or the Purchased Assets;
(h) take any action which would result in a breach of any of Sellers representations or
warranties in this Agreement or interfere with Sellers ability to perform all of its obligations
under this Agreement; or
- 20 -
CONFIDENTIAL TREATMENT REQUESTED
(i) authorize any of the foregoing or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
5.3
Exclusivity
. From the date hereof until the earlier of the Closing Date or the
date of termination of this Agreement pursuant to Section 10.1, Seller agrees that it shall not,
directly or indirectly, through its Affiliates, directors, officers, shareholders, employees,
agents, representatives or otherwise, offer for sale or participate in negotiations, discussions or
due diligence reviews, with respect to the sale, license or other transfer of rights or assets
related to the Purchased Assets or the Products, directly or indirectly, with any person or entity
other than Buyer.
5.4
Consents
. Seller shall, at its sole cost and expense, use its reasonable
commercial efforts to promptly obtain the consents of all requisite Persons so as to vest all of
the rights and obligations of Seller under the Assigned Contracts, Assigned Intellectual Property
and Permits and other Purchased Assets in Buyer as of the Closing Date. Buyer shall, at Sellers
request, use commercially reasonable efforts to assist Seller in obtaining such consents and shall
have the right, if additional assurances with respect to the assumption of obligations by Buyer are
requested by the Person from whom consent is sought, to participate, directly or through its
representatives, in the process of obtaining such consents, provided, however, that Buyer shall not
be required to make any payment to any Person or undertake any other obligation or liability in
connection with obtaining any such consent. The forms of such consents shall be in recordable form
and subject to the prior approval of Buyer, such approval to not be unreasonably withheld or
delayed.
5.5
Pre-Closing Litigation Consultation
. Seller shall consult with Buyer regarding
the prosecution and conduct of any pending Action which may affect a Purchased Asset or an Assumed
Liability, and shall not, without Buyers prior written consent, which shall not be unreasonably
withheld or delayed, settle any such Action or take any dispositive measures in such Action.
5.6
Technical Transfer
. Seller shall use its good faith efforts to assist Buyer in
completing the Technical Transfer.
5.7
Monthly Calculation of Soothe
®
Net Sales
. Seller shall provide Buyer, within ten
(10) business days after the last day of each month after the date hereof and prior to the Closing
Date, with an internally prepared calculation of Soothe
®
Net Sales for the period commencing on
January 1, 2007 and ending on the last day of the month for which such calculation has been
prepared (Monthly Soothe
®
Net Sales Calculation).
ARTICLE VI
OTHER COVENANTS
6.1
Reasonable Commercial Efforts
. Seller and Buyer will use reasonable commercial
efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things,
necessary, proper or advisable under applicable Laws to consummate and make effective the
Transactions as promptly as practicable.
- 21 -
CONFIDENTIAL TREATMENT REQUESTED
6.2
Laws Affecting Transfer of Permits
. Seller shall and, if required, Buyer shall make
any necessary filings with the appropriate Governmental Entities required to transfer the Permits
under applicable Laws.
6.3
Public Announcements
. On or after the date hereof, Buyer and Seller shall not
(nor shall they permit any of their respective Affiliates to), without prior consultation with the
other party and such other partys review of and consent to any public announcement concerning the
Transactions, issue any press release or announcement concerning this Agreement or the Transactions
without the consent of the other, except for (a) disclosures required by Law, in which case such
press releases or announcements shall be reviewed and approved by both Buyer and Seller in advance,
(b) announcements as may be reasonably necessary in connection with obtaining the consents set
forth on Schedule 3.4, and (c) announcements to Sellers stockholders and Affiliates as may be
reasonably necessary in connection with the Transactions contemplated by this Agreement (the press
releases and announcements set forth in clauses (a) through (c), the Permitted Announcements).
During such period Seller and Buyer shall, to the extent practicable, allow the other party
reasonable time to review and comment on any Permitted Announcement in advance of its issuance and
to reflect the reasonable and good faith comments of such other party. The parties intend that the
initial press release or announcement (other than the Permitted Announcements) of each of Seller
and Buyer of the terms of the Transactions shall be made promptly following the Closing Date in the
forms agreed to by the parties prior to the Closing Date.
6.4
Confidentiality
.
6.4.1 Prior to the Closing Date, Buyer shall, and shall use commercially reasonable efforts to
cause its personnel, agents and consultants to, hold in strict confidence, not disclose to any
Person without the prior written consent of Seller, and not use in any manner whatsoever not
contemplated by this Agreement (including to effect the Technical Transfer), any confidential
business or technical information in their possession concerning the Purchased Assets (the
Confidential Information). In furtherance of the foregoing, if Buyer becomes aware of a breach
of any confidentiality obligations by any of its personnel, agents or, whether from Seller or
otherwise, Buyer shall diligently enforce such confidentiality obligations, notify Seller of such
breach (if Seller did not notify Buyer) and keep Seller informed on a regular basis of the status
of its efforts, it being understood that Buyer shall have the right (but not the obligation unless
requested by Seller, in which case Buyer shall have the obligation) to bring suit to enforce the
confidentiality obligations or recover damages for breach of such confidentiality obligation and,
if Seller asks Buyer to bring any such suit then all of the expenses of any such suit shall be
borne by Seller (and Seller shall have the right to participate with Buyer in such action at
Sellers cost).
6.4.2 Following the Closing Date, Seller shall, and shall use commercially reasonable efforts
to cause its personnel, agents and consultants (including the parties to the Contracts set forth on
Schedule 3.11 identified with an *) to, hold in strict confidence, not disclose to any Person
without the prior written consent of Buyer, and not use in any manner whatsoever, any Confidential
Information. In furtherance of the foregoing, if Seller becomes aware of a breach of any
confidentiality obligations by any of its personnel, agents or consultants (including any party to
the Contracts set forth on Schedule 3.11 identified with an *), whether
- 22 -
CONFIDENTIAL TREATMENT REQUESTED
from Buyer or otherwise, Seller shall diligently enforce such confidentiality obligations, notify
Buyer of such breach (if Buyer did not notify Seller) and keep Buyer informed on a regular basis of
the status of its efforts, it being understood that Seller shall have the right (but not the
obligation unless requested by Buyer, in which case Seller shall have the obligation) to bring suit
to enforce the confidentiality obligations or recover damages for breach of such confidentiality
obligation and, if Buyer asks Seller to bring any such suit then all of the expenses of any such
suit shall be borne by Buyer (and Buyer shall have the right to participate with Seller in such
action at Buyers cost). Notwithstanding the foregoing, Buyers prior written consent shall not be
required with respect to disclosures and uses of Books and Records related to the Excluded Assets
to the extent Confidential Information related to the Purchased Assets is excluded or redacted
therefrom.
6.5
Transfer Taxes
. All excise, sales, use, transfer, stamp, documentary, filing,
recording and other similar taxes or fees which may be imposed or assessed as the result of the
Transactions (Transfer Taxes), together with any interest or penalties with respect thereto shall
be paid by Seller at its sole expense. Seller will prepare and file all necessary Tax Returns and
other documentation with respect to such Transfer Taxes when due, at its sole expense, and, if
required by applicable Law, Buyer will (and will cause its Affiliates to) join in the execution of
any such Tax Returns and other documentation. Seller shall promptly provide Buyer with copies of
such Tax Returns. All Transfer Tax Returns shall be prepared on a basis consistent with the
Purchase Price Allocation Schedule.
6.6
HSR Filing
. Buyer and Seller shall have determined, upon advice of counsel, that
no filing is required pursuant to the Hart-Scott-Rodino Act (HSR Act). Buyer and Seller shall
furnish to each other such necessary information and reasonable assistance as the other may
reasonably request in connection with formalizing such determination.
6.7
Cooperation Regarding Audits and Litigation
. Upon reasonable prior written notice
given by Buyer to Seller or Seller to Buyer, as the case may be, each party shall provide the other
with access to such information and employees as either party may reasonably request in connection
with any audits, actions, suits or proceedings relating to the Purchased Assets or the Retained
Claims.
6.8
Insurance Claims
. After the Closing Date, Seller and Buyer shall cooperate with
Sellers insurers in processing all claims arising with respect to acts, omissions, or occurrences
in connection with or related to the Purchased Assets prior to the Closing Date and shall cooperate
with Buyers insurers in processing all claims with respect to acts, omissions, or occurrences in
connection with or related to the Purchased Assets after the Closing Date.
6.9
Additional Assurances
. After the Closing Date, Seller shall and shall cause its
Affiliates to take such additional actions and execute any such additional documents and
instruments as may be reasonably necessary to fully vest Sellers ownership, rights and privileges
in the Purchased Assets in Buyer. Notwithstanding anything to the contrary contained in this
Agreement, to the extent that the sale, assignment, transfer, conveyance or delivery or attempted
sale, assignment, transfer, conveyance or delivery to Buyer of any Purchased Asset is prohibited by
any applicable Law or would require any Governmental Entity or other third party authorizations,
approvals, consents or waivers and such authorizations, approvals, consents or
- 23 -
CONFIDENTIAL TREATMENT REQUESTED
waivers shall not have been obtained prior to the Closing and Buyer shall have waived the
applicable condition to Closing with respect to such item(s), this Agreement shall not constitute a
sale, assignment, transfer, conveyance or delivery, or any attempted sale, assignment, transfer,
conveyance or delivery, thereof. Following the Closing, the parties shall use reasonable efforts
and shall cooperate with each other, to obtain promptly such authorizations, approvals, consents or
waivers. Pending such authorization, approval, consent or waiver, the parties shall cooperate with
each other in any reasonable and lawful arrangements designed to provide to Buyer the benefits and
liabilities of use of such Purchased Asset. Once such authorization, approval, consent or waiver
for the sale, assignment, transfer, conveyance or delivery of a Purchased Asset not sold, assigned,
transferred, conveyed or delivered at the Closing is obtained, Seller shall and shall cause its
Affiliates to promptly assign, transfer, convey and deliver, or cause to be assigned, transferred,
conveyed and delivered, such Purchased Asset to Buyer for no additional consideration. To the
extent that any such Purchased Asset cannot be transferred or the full benefits and liabilities of
use of any such Purchased Asset cannot be provided to Buyer following the Closing pursuant to this
Section 6.9, then Buyer and Seller shall enter into such arrangements (including subleasing or
subcontracting if permitted) designed to provide to Buyer the economic and operational equivalent
of obtaining such authorization, approval, consent or waiver and the performance by Buyer of the
obligations thereunder to the extent permitted by Law.
6.10
Covenant Not to Compete
.
6.10.1 For a period of three (3) years after the Closing Date, each of Seller and Dan Myers
agree that it will not, and Seller agrees that it will cause its Affiliates not to, alone or with
any other Person, (a) develop, sell, distribute, market or service any over-the-counter
ophthamological product similar to (including trademark and trade dress; substantially similar
copyright) or that competes with or could compete with any of the Products (the Competitive
Activity), or (b) directly or indirectly (i) hold or invest in any equity (or debt convertible
into equity) of, or (ii) manage, operate or control, any Person that engages in any Competitive
Activity; provided, however, that each of Seller, such Affiliates and Dan Myers, may directly or
indirectly own up to five percent (5%) of the issued and outstanding securities of any publicly
held corporation; and, further provided, that this Section 6.10.1 shall not apply to any third
party acquirer of all or substantially all of Sellers business assets or stock in an arms length
transaction.
6.10.2 In the event Seller, any Seller Affiliate or Dan Myers breaches, or threatens to commit
a breach of, any of the provisions of Section 6.10.1 (the Restrictive Covenants), Buyer shall
have the following rights and remedies, which shall be independent of any others and severally
enforceable, and shall be in addition to, and not in lieu of, any other rights and remedies
available to Buyer at law or in equity: (a) the right and remedy to seek to enjoin the breaching
party from violating or threatening to violate the Restrictive Covenants and to have the
Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed
that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to
Buyer and that money damages would not provide an adequate remedy to Buyer; and (b) the right and
remedy to seek to require the breaching party to account for and pay over to Buyer all
compensation, profits, monies, accruals, increments or other benefits derived or received by such
party as the result of any transactions constituting a breach of the Restrictive Covenants.
- 24 -
CONFIDENTIAL TREATMENT REQUESTED
6.10.3 Seller acknowledges and agrees that the Restrictive Covenants are reasonable and valid in
geographical and temporal scope and in all other respects. If any court determines that any of the
Restrictive Covenants or any part thereof, are invalid or unenforceable, the remainder of the
Restrictive Covenants shall not thereby be affected and shall be given full effect, without regard
to the invalid portions. If any court determines that any of the Restrictive Covenants, or any
part thereof, are unenforceable because of the duration or geographic scope of such provision, such
court shall have the power to reduce the duration or scope of such provision, as the case may be,
and, in its reduced form, such provision shall then be enforceable.
6.10.4 The parties hereto intend to and hereby confer jurisdiction to enforce the Restrictive
Covenants upon the courts of any jurisdiction within the geographical scope of such Restrictive
Covenants. If the courts of any one or more of such jurisdictions hold the Restrictive Covenants
unenforceable by reason of the breadth of such scope or otherwise, it is the intention of the
parties hereto that such determination not bar or in any way affect Buyers right to the relief
provided above in the courts of any other jurisdiction within the geographical scope of such
Restrictive Covenants, as to breaches of such Restrictive Covenants in such other respective
jurisdictions, such Restrictive Covenants as they relate to each jurisdiction being, for this
purpose, severable into diverse and independent covenants.
6.11
License of Know-How Not Exclusively Related to the Products
. Subject to the
terms and conditions of this Agreement, Seller hereby grants to Buyer a non-exclusive, assignable,
royalty-free, irrevocable, worldwide license, with the right to sublicense, to use its proprietary
rights in the Know-How not exclusively related to the Products to the extent that such Know-How is
necessary for Buyers manufacture, marketing or sale of the Products (including research and
development related to improvements thereon) and for no other purpose. In connection with the
license of the Know-How not exclusively related to the Products granted pursuant to this Section
6.11, Buyer shall, and shall use commercially reasonable efforts to cause its personnel and agents
to, (a) hold such Know-How in strict confidence, (b) not disclose such Know-How to any Person
without the prior written consent of Seller, which shall not be unreasonably withheld, and (c) use
such Know-How only as expressly contemplated or permitted by the license granted in the first
sentence of this Section 6.11.
6.12
Supplements
. From time to time prior to the Closing Date, Seller shall
supplement or amend the Disclosure Schedule to correct inaccuracies therein or to reflect matters
arising after the date hereof, which if existing or occurring at the date hereof, would have been
required to be set forth or described on the Disclosure Schedule; provided, that no interim
supplements or amendments shall be required with respect to changes contemplated by this Agreement
(or in the Disclosure Schedules delivered on the date hereof) or to correct inaccuracies of a
technical or ministerial nature. No such supplement or amendment shall (i) have any effect for the
purposes of determining the satisfaction of conditions to Closing set forth in Article VII or (ii)
relieve the Seller of liability or diminish any right or remedies of Buyer with respect to any
breach of representation or warranty made or deemed to be made to Buyer herein or in the Disclosure
Schedule or in any document or certificate delivered pursuant hereto prior to the date of such
supplement or amendment; provided, that if the Closing occurs, the representations and warranties
which are made or deemed to have been made as of the Closing Date shall be deemed to incorporate
the supplemental and amended Disclosure Schedule, so that
- 25 -
CONFIDENTIAL TREATMENT REQUESTED
if the conditions to Closing have been satisfied and the Closing Date occurs, Seller shall have no
liability under Article IX for breach of any representation and warranty with respect to the
matters disclosed on the supplementary and amended Disclosure Schedule.
ARTICLE VII
CONDITIONS PRECEDENT TO CLOSING
7.1
Conditions to Obligation of Buyer to Close
. The obligation of Buyer to consummate
the Transactions on the Closing Date shall be subject to the satisfaction or the waiver by Buyer of
the following conditions on or prior to the Closing Date:
7.1.1
Representations and Warranties; Compliance with Agreement
. The representations
and warranties of Seller set forth in Sections 3.2, 3.3, 3.4 (subject to Section 10.2), 3.6.1 (but
only with respect to the representations and warranties of Seller related to the Soothe
®
Historical
Report), 3.6.2, 3.7, 3.9, 3.10, 3.11, 3.12, 3.14, 3.15, 3.17, 3.18 and 3.19 of this Agreement (the
Seller Bring Down Representations) shall be true and correct in all material respects (except to
the extent that any Seller Bring Down Representation is qualified by its terms with reference to
materiality, in which case such Seller Bring Down Representation shall be true and correct as
written) as of the date of this Agreement and, except for any changes to the Disclosure Schedule to
reflect changes contemplated by this Agreement or any Seller Bring Down Representation that
expressly speaks as of a certain date, as of the Closing Date as though made on and as of the
Closing Date, Seller shall have performed all covenants and agreements to be performed by it under
this Agreement in all material respects (except to the extent that any covenants are qualified by
its terms with reference to materiality, in which case such covenant shall have been performed as
written) on or prior to the Closing Date; and Seller shall have delivered to Buyer a certificate of
Sellers chief executive officer or chief financial officer to such effect, dated the Closing Date,
in form and substance reasonably satisfactory to Buyer;
7.1.2
Government Approvals
. All consents or approvals of the Transactions by
Governmental Entities shall have been granted;
7.1.3
Litigation Affecting Closing
. No action, suit or proceeding shall have been
instituted by any Governmental Entity, before a court or Governmental Entity, to restrain or
prevent the consummation of the Transactions or the performance by any of the parties hereto of
their respective obligations under or with respect to this Agreement and no statute shall have been
enacted and there shall be no injunction, restraining order or decree or any nature of any court or
governmental agency or body in effect which restrains or prohibits the consummation of the
Transactions;
7.1.4
Required Consents
. Except as expressly indicated on Schedule 3.4 as not being a
consent required by Buyer on the Closing Date, the consents set forth on Schedule 3.4 shall have
been obtained on terms that do not, without Buyers consent, modify any Assigned Contract in a
manner that would impose an obligation on Buyer after the Closing Date other than those set forth
in any such Assigned Contract on the date of this Agreement;
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CONFIDENTIAL TREATMENT REQUESTED
7.1.5
No Material Adverse Change
. Since September 4, 2004, there shall not have been any
occurrence or event which, individually or in the aggregate, (i) has resulted in or which Seller
reasonably expects will result in any Material Adverse Change and Seller shall have delivered to
Buyer a certificate of its chief executive officer to such effect, dated the Closing Date, or (ii)
Buyer reasonably expects will result in any Material Adverse Change;
7.1.6
Opinion of Counsel for Seller
. Outside counsel for Seller shall have delivered
to Buyer its opinion, dated the Closing Date, in the form of Exhibit 7.1.6;
7.1.7
Collateral Documents
. Seller shall have executed and delivered to Buyer the
Collateral Documents to which it is a party;
7.1.8
Destruction of Inventory
. On or as soon as reasonably practicable following the
Closing Date (but in any event within sixty (60) days following the Closing Date), Seller shall
destroy all goods and materials held for resale or license in connection with any Asset Class or
incorporated into or consumed in connection with the Products, including raw materials, work in
process, finished goods, packaging, labels, cartons and related promotional or advertising material
owned or controlled by Seller on the Closing Date, regardless of where located (collectively, the
Inventory);
7.1.9 [
Intentionally Omitted
].
7.1.10
Final Soothe
®
Net Sales Calculation
. Seller shall have delivered the Soothe
®
net sales calculation for the period commencing on January 1, 2007 and ending on July 31, 2007 (the
Final Soothe
®
Net Sales Calculation), which calculation shall be attached hereto as Exhibit
7.1.10, and a certificate, executed by Sellers chief financial officer, certifying that the Final
Soothe
®
Net Sales Calculation was prepared in good faith from the books and records of Seller in
the ordinary course of business and accurately presents the Soothe
®
Net Sales for the periods and
as of the dates specified therein.
7.1.11
Other Documents
. Seller shall have delivered to Buyer such other documents and
instruments as Buyer or its counsel may reasonably request in good faith to effect the transfer of
the Purchased Assets pursuant to this Agreement.
7.2
Conditions to Obligations of Seller to Close
. The obligation of Seller to
consummate the Transactions on the Closing Date shall be subject to the satisfaction or the waiver
by Seller of the following conditions on or prior to the Closing Date:
7.2.1
Compliance with Agreement
. The representations and warranties of Buyer in this
Agreement shall be true and correct in all material respects (except to the extent that any
representation is qualified by its terms with reference to materiality, in which case such
representation shall be true and correct as written) as of the date of this Agreement and, except
for any changes contemplated by this Agreement or any representation that expressly speak as of a
certain date, as of the Closing Date as though made on and as of the Closing Date; Buyer shall have
performed all covenants and agreements to be performed by them under this Agreement in all material
respects (except to the extent that any covenants are qualified by its terms with reference to
materiality, in which case such covenant shall have been performed as written) on or prior to the
Closing Date; and Buyer shall have delivered to Seller a certificate of an authorized
- 27 -
CONFIDENTIAL TREATMENT REQUESTED
officer of Buyer to such effect, dated the Closing Date, in form and substance reasonably
satisfactory to Seller;
7.2.2
Litigation Affecting Closing
. No action, suit or proceeding shall have been
instituted by any Governmental Entity, before a court or Governmental Entity, to restrain or
prevent the consummation of the Transactions or the performance by any of the parties hereto of
their respective obligations under or with respect to this Agreement and no statute shall have been
enacted and there shall be no injunction, restraining order or decree or any nature of any court or
governmental agency or body in effect which restrains or prohibits the consummation of the
Transactions;
7.2.3
Collateral Documents; Consents
. Buyer shall have executed and delivered to
Seller the Collateral Documents to which it is a party;
7.2.4
Reimbursement
. Buyer shall have reimbursed Seller for all out-of-pocket
documented logistical costs and expenses incurred in good faith by Seller in connection with the
Technical Transfer.
7.2.5
Other Documents
. Buyer shall have delivered to Seller such other documents and
instruments as Seller or its counsel may reasonably request in good faith connection with the
assumption of the Purchased Assets and the Assumed Liabilities.
ARTICLE VIII
THE CLOSING
8.1
Time and Place
. The Closing shall be held on the Target Closing Date at the
offices of Nixon Peabody LLP, Rochester, New York, or such other date as may be mutually agreed
upon by the parties. The actual date and time of the Closing are referred to as the Closing
Date.
8.2
Conduct of Closing
.
8.2.1
As to Buyer
. At the Closing, Buyer shall, in exchange for the Purchased Assets,
deliver to Seller, in each case duly executed by Buyer:
(a) The Consideration;
(b) The certificate required by Section 7.2.1;
(c) A certificate dated the Closing Date and signed on behalf of Buyer by its respective
Secretary or Assistant Secretary attaching (i) a certificate issued by the Secretary of State of
New York as of a date within fifteen (15) business days of the Closing Date evidencing that Buyer
is a subsisting corporation, and (ii) specimen signatures of the incumbent officers of Buyer
executing this Agreement, the Collateral Documents and the certificates being delivered pursuant to
this Agreement;
(d) The Collateral Documents to which Buyer is a party;
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CONFIDENTIAL TREATMENT REQUESTED
(e) The reimbursement required by Section 7.2.4; and
(f) Such other documents and instruments as Seller or its counsel may reasonably request
pursuant to Section 7.2.5.
8.2.2
As to Seller
. Seller shall deliver or shall cause to be delivered to Buyer, in
each case duly executed by Seller:
(a) The Collateral Documents to which Seller is a party;
(b) The Purchased Assets;
(c) The certificate required by Section 7.1.1;
(d) The certificate required by Section 7.1.5;
(e) A certificate dated the Closing Date and signed on behalf of Seller, by its Secretary or
Assistant Secretary, attaching (i) a certificate of good standing from the Secretary of State of
the State of Delaware dated as of a date within fifteen (15) business days of the Closing Date,
(ii) a copy of the resolutions of the Board of Directors of Seller authorizing and approving this
Agreement and the Collateral Documents to which it is a party and the consummation of the
Transactions and authorizing the officers of Seller to take any actions and to execute all
documents and instruments to be executed, delivered or filed by it pursuant to or in connection
with this Agreement, and (iii) specimen signatures of the incumbent officers of Seller executing
any documents executed and delivered pursuant to or in connection with this Agreement;
(f) The opinion of counsel specified in Section 7.1.6;
(g) The Final Soothe
®
Net Sales Calculation and certificate as required by Section 7.1.10; and
(h) Such other documents and instruments as Buyer or its counsel may reasonably request
pursuant to Section 7.1.8.
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
9.1
Survival of Representations, Warranties and Covenants
. The representations and
warranties of the parties contained in this Agreement shall, notwithstanding any investigation by
or notice by or to any party prior to the Closing Date, survive the Closing until eighteen (18)
months following the Closing Date; provided, however, that the representations and warranties
contained in Sections 3.1, 3.2, 3.3, 3.4, 3.17, 3.8.2, and 3.9.4 (the Seller Fundamental
Representations) shall survive until the expiration of all statutes of limitations applicable
thereto, and the representations and warranties of Buyer contained in Sections 4.1, 4.2, 4.3, 4.4
and 4.5 (the Buyer Fundamental Representations) shall survive until the expiration of all
statutes of limitations applicable thereto. In the event notice of any Claim for indemnification
- 29 -
CONFIDENTIAL TREATMENT REQUESTED
under Section 9.4 shall have been given prior to midnight on the last day of the applicable
survival period (the Expiration Date), the representations and warranties that are the subject of
such Claim shall survive until the Claim is finally resolved. The covenants and agreements of the
parties contained in this Agreement shall survive until fully performed.
9.2
Indemnification by Seller
. From and after the Closing Date, Seller shall
indemnify and hold harmless Buyer and its Affiliates, and each of their respective employees,
directors, agents and representatives (collectively, the Buyer Indemnified Parties), on an
after-tax basis, from and against any and all Loss and Litigation Expense, which they, or any of
them, may suffer or incur as a result of or arising from any of the following: (a) any
misrepresentation or breach of warranty of Seller, (b) the failure of Seller to perform any of its
covenants or agreements contained in this Agreement, (c) the failure by Seller to satisfy any
liability or obligation which is an Excluded Liability, (d) the failure of Seller or its Affiliates
to pay any Transfer Taxes which Seller is required to pay pursuant to Section 6.5 or any other
costs or expenses which are the responsibility of Seller, or (e) the failure of any of Sellers
personnel, agents or consultants (including a party to the Contracts set forth on Schedule 3.11
identified with an *) to hold in strict confidence, not disclose to any Person without the prior
written consent of Buyer, or not use in any manner whatsoever, any Confidential Information;
provided, however, that Seller shall not be required to indemnify and hold harmless the Buyer
Indemnified Parties pursuant to Section 9.2(a) with respect to any Loss and Litigation Expense
incurred by the Buyer Indemnified Parties until the amount of Loss and Litigation Expense suffered
by the Buyer Indemnified Parties related to each individual Claim exceeds Twenty Thousand Dollars
($20,000) (the Minimum Claim Amount); provided, further, however, that the aggregate amount that
Seller shall be required to indemnify and hold harmless the Buyer Indemnified Parties pursuant to
Section 9.2(a) with respect to all Loss and Litigation Expense incurred by all Buyer Indemnified
Parties shall not exceed twenty percent (20%) of the Consideration (the Cap); provided further,
however, that the Cap shall not apply with respect to any Loss and Litigation Expense resulting
from a breach of any Seller Fundamental Representation (other than 3.8.3) or from fraud or
intentional misrepresentation of Seller and the Minimum Claim Amount shall not apply with respect
to any Loss and Litigation Expense resulting from fraud or intentional misrepresentation of Seller.
With respect to Sellers indemnification obligation in clause (e) above, notwithstanding anything
to the contrary in this Agreement, (i) Seller shall not be liable to Buyer if Buyer (x) requests
Seller to bring an action against Sellers personnel, agents or consultants to protect such
Confidential Information or recover damages as contemplated by Section 6.4, and Buyer does not
promptly pay all Litigation Expenses associated with such action (or provide other assurance
reasonably acceptable to Seller that such payment will be made) or (y) does not request Seller to
bring such action, and (ii) Sellers liability shall not extend to any Litigation Expense incurred
by Buyer that is associated with such action against Sellers personnel, agents or consultants. In
the event that amounts are owed to Buyer in connection with any Claims for Losses or Litigation
Expenses properly noticed pursuant to Article IX of this Agreement, Buyer shall have the right (but
not the obligation) to offset the amount of such Claims against the Post-Closing Consideration (as
defined in the Alaway Agreement).
9.3
Indemnification by Buyer
. From and after the Closing Date, Buyer shall indemnify
and hold harmless Seller, its Affiliates and each of their respective employees, directors, agents
and representatives (collectively, the Seller Indemnified Parties), on an after-tax basis, from
and against any and all Loss and Litigation Expense which they, or any of them,
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CONFIDENTIAL TREATMENT REQUESTED
may suffer or incur as a result of or arising from any of the following: (a) any misrepresentation
or breach of warranty, (b) the failure of Buyer to perform any of its covenants or agreements
contained in this Agreement, (c) the failure by Buyer to satisfy any liability or obligation which
is an Assumed Liability, or (d) the failure of Buyer or its Affiliates to pay any other costs or
expenses which are the responsibility of Buyer; provided, however, that Buyer shall not be required
to indemnify and hold harmless the Seller Indemnified Parties pursuant to Section 9.3(a) with
respect to any Loss and Litigation Expense incurred by the Seller Indemnified Parties until the
amount of Loss and Litigation Expense suffered by the Seller Indemnified Parties related to each
individual Claim exceeds the Minimum Claim Amount; provided, further, however, that the aggregate
amount that Buyer shall be required to indemnify and hold harmless the Seller Indemnified Parties
pursuant to Section 9.3(a) with respect to all Loss and Litigation Expense incurred by all Seller
Indemnified Parties shall not exceed the Cap; provided further, however, that the Cap shall not
apply with respect to any Loss and Litigation Expense resulting from a breach of any Buyer
Fundamental Representation or from fraud or intentional misrepresentation of Buyer and the Minimum
Claim Amount shall not apply with respect to any Loss and Litigation Expense resulting from fraud
or intentional misrepresentation of Buyer.
9.4
Procedure
. Promptly after acquiring knowledge of any Loss, or any action, suit,
investigation, proceeding, demand, assessment, audit, judgment, or claim (Claim) which may result
in a Loss, and prior to the Expiration Date, the Person seeking indemnity under this Article IX
(the Indemnitee) shall give written notice thereof to the party from whom indemnification is
sought (the Indemnitor). The Indemnitor shall have the right, at its expense, to defend, contest
or compromise such Claim, through counsel of its choice (unless such Indemnitor is relieved of its
liability hereunder with respect to such Claim and Loss and Litigation Expense by the Indemnitee)
and shall not then be liable for fees or expenses of the Indemnitees attorneys (unless the
Indemnitor and Indemnitee are parties to the action and there exists a conflict of interest between
the Indemnitor and the Indemnitee, in which event the Indemnitor will be responsible for the
reasonable fees and expenses of one firm), and the Indemnitee and the Indemnitor shall provide to
each other all necessary and reasonable cooperation in the defense of all Claims. In the event
that the Indemnitor shall undertake to compromise or defend any Claim, it shall promptly notify the
Indemnitee of its intention to do so. If the Indemnitor, after written notice from Indemnitee, (a)
fails within thirty (30) days after receipt of such notice to notify the Indemnitee (i) of its
intent to defend against such Loss or Claim and (ii) that it irrevocably acknowledge its obligation
to indemnify the Indemnitee pursuant to this Agreement for such Loss or Claim, or (b) after
providing such notice fails to defend, contest, or otherwise protect against such Loss or Claim, or
(c) after commencing to defend, contest or otherwise protect against such Loss or Claim fails to
diligently continue to defend, contest or otherwise protect against the same, then in any such case
the Indemnitee shall have the right to defend the same by counsel of its own choosing, but at the
cost and expense of the Indemnitor. If the Indemnitor provides the Indemnitee with the notice
contemplated by this Section 9.4(a)(i) and (ii), then the Indemnitor may settle or compromise the
entry of any judgment (x) which includes the unconditional release by the Person asserting the
Claim and any related claimants of Indemnitee from all liability with respect to such Claim in form
and substance reasonably satisfactory to Indemnitee, and (y) which would not adversely affect the
right of Indemnitee and its Affiliates to own, hold use and operate their respective assets and
businesses.
- 31 -
CONFIDENTIAL TREATMENT REQUESTED
9.5
No Subrogation
. Subject to Section 2.7.2, if any payment is made by or Claim asserted
against Seller under the terms of this Article IX, none of Seller Indemnified Parties shall have
any rights against the Purchased Assets, whether by reason of contribution, indemnification or
otherwise and shall not take any action against the Purchased Assets with respect thereto. Except
as set forth in Section 2.7.2, any rights which Seller Indemnified Parties may have, by operation
of law or otherwise against the Purchased Assets are, effective on the Closing Date, hereby
expressly and knowingly waived.
9.6
Sole Remedy
. The indemnification provided for in this Article IX shall be the
sole and exclusive remedy of any Buyer Indemnified Party or Seller Indemnified Party, as the case
may be, with respect to any Loss and Litigation Expense for which indemnification is owed pursuant
to this Article IX.
ARTICLE X
TERMINATION
10.1
Optional Termination
. This Agreement may be terminated and the Transactions may
be abandoned at any time before completion of the Closing:
10.1.1 by mutual agreement of Buyer and Seller;
10.1.2 by Seller if Buyer breaches any of its respective representations, covenants or
agreements contained in this Agreement, which breach would give rise to the failure of a condition
set forth in Section 7.2.1, and such breach shall not have been cured or eliminated (or by its
nature cannot be cured or eliminated) by Buyer on or before September 1, 2007 (the Extended
Closing Date), provided that Seller is not then in material breach of any applicable provision of
this Agreement;
10.1.3 subject to Section 10.2, by Buyer, (a) if Seller breaches any of its respective
representations, warranties, covenants or agreements contained in this Agreement, which breach
would give rise to the failure of a condition set forth in Section 7.1.1 and such breach shall not
have been cured or eliminated (or by its nature cannot be cured or eliminated) by Seller on or
before the Extended Closing Date provided that Buyer is not then in material breach of any
applicable provision of this Agreement, or (b) upon the occurrence of a Material Adverse Change; or
10.1.4 by Seller upon the happening of an occurrence or event which, individually or in the
aggregate, has resulted in or which Seller reasonably believes will result in a Material Adverse
Change that cannot or will not be cured by the Extended Closing Date, provided, that Seller shall
have no right to terminate this Agreement pursuant to this Section 10.1.4 if such occurrence or
event is the result of a breach of this Agreement by Seller or Buyer has irrevocably waived its
right to terminate this Agreement pursuant to Section 10.1.3 with respect to such Material Adverse
Change within fifteen (15) business days of receiving notice of the happening of such occurrence or
event; or
10.1.5 by Buyer or Seller, if there shall be any Law of any competent jurisdiction that makes
consummation of the Transactions illegal or otherwise prohibited.
- 32 -
CONFIDENTIAL TREATMENT REQUESTED
10.2
Governmental Consents
. In the event any permit, consent, approval or
authorization of, or designation, declaration of filing with, any Governmental Entity on the part
of Seller (each, a Governmental Consent) is required in connection with the Closing of the
Transactions as a result of the enactment of a new Law (or modification to an existing Law) after
the date hereof, and as of the Closing Date such Governmental Consent has not been obtained but is
reasonably expected to be received within a timeframe acceptable to Buyer and Seller, Buyer and
Seller agree to engage in good faith negotiations to modify the terms of this Agreement to
accommodate a later Closing Date so that such Governmental Consent may be obtained prior to or as
of such later Closing Date.
10.3
Effect of Termination
.
10.3.1 If this Agreement is terminated and the Transactions are not consummated as provided in
Section 10.1 by Buyer, on the one hand, or Seller, on the other hand, written notice thereof shall
be given to the other party specifying the provision of Section 10.1 pursuant to which such
termination is made, and this Agreement shall be terminated and become void and of no further force
or effect and there shall be no liability hereunder on the part of Buyer or Seller, except that the
provisions of Section 6.3 (Public Announcements), Section 6.4 (Confidentiality), Section 10.1
(Optional Termination), this Section 10.3 (Effect of Termination), Section 11.3 (Expenses), Section
11.7 (Governing Law) and Section 11.9 (Submission to Jurisdiction) shall survive any termination of
this Agreement.
10.3.2 Notwithstanding anything to the contrary set forth in this Section 10.3, nothing in
this Section 10.3 shall relieve any party of liability for any breach of any representation,
warranty, covenant or agreement set forth in this Agreement.
10.3.3 Notwithstanding anything to the contrary set forth in this Section 10.3, if this
Agreement is terminated by Buyer pursuant to 10.1.3(b) because Soothe
®
Net Sales are less than the
Minimum Net Sales Target, but the Technical Transfer has been completed on or prior to the date of
the termination notice from Buyer to Seller, then Buyer shall enter into a supply agreement with
Seller providing (a) for a purchase price of [*] of Soothe
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sample inventory during the first
twelve (12) month period of such supply agreement and [*] of Soothe
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sample inventory thereafter,
and [*] of Soothe
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trade inventory during the first twelve (12) month period of such supply
agreement and [*] of Soothe
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trade inventory thereafter, (b) that such agreement may be assigned by
Seller to a credit-worthy Affiliate of Seller or other third party to which Soothe
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has been
transferred (provided, however, if Buyer, in good faith, makes a reasonable determination that such
Affiliate or third party is not credit worthy, then Seller shall guaranty the payment and
performance of such Affiliate or third party, as applicable, under the supply agreement as a
condition precedent to the assignment), and (c) for such other terms and conditions as shall be
agreed upon by Buyer and Seller.
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Certain information has been omitted and filed separately with the Commission. Confidential
treatment has been requested with respect to the omitted portions.
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CONFIDENTIAL TREATMENT REQUESTED
ARTICLE XI
MISCELLANEOUS
11.1
Headings and References
. The headings in this Agreement are for convenience of
reference only and shall not affect its interpretation. Any reference in this Agreement to an
Article, Section or Exhibit, unless it clearly refers to another instrument, means the specified
Article, Section or Exhibit of this Agreement and any reference to Schedule means a Schedule to
this Agreement.
11.2
Severability
. The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the validity or enforceability of
the other provisions hereof. If any provision of this Agreement, or the application thereof to any
Person or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision
shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the
intent and purpose of such invalid or unenforceable provision and (b) the remainder of this
Agreement and the application of such provision to other persons, entities or circumstances shall
not be affected by such invalidity or unenforceability.
11.3
Expenses
. Regardless of whether the Closing occurs and except as otherwise
expressly provided herein, each of Seller and Buyer shall be responsible for its own expenses and
costs that it incurs with respect to the negotiation, execution, delivery and performance of this
Agreement.
11.4
Notices
. All notices and other communications hereunder shall be in writing and
shall be deemed given to the Person if delivered personally or upon sending a copy thereof by first
class or express mail, postage prepaid, or by documented overnight delivery services, charges
prepaid, to such partys address:
If to Buyer, to:
Bausch & Lomb Incorporated
One Bausch & Lomb Place
Rochester, New York 14604-2701
Attention: Vice President Business Development
With a copy to:
Bausch & Lomb Incorporated
One Bausch & Lomb Place
Rochester, New York 14604-2701
Attention: General Counsel
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CONFIDENTIAL TREATMENT REQUESTED
and to:
Nixon Peabody LLP
1100 Clinton Square
Rochester, New York 14604-1792
Attention: Lori B. Green, Esq.
If to Seller to:
Alimera Sciences, Inc.
6120 Windward Parkway, Suite 290
Alpharetta, Georgia 30005
Attention: Dan Myers
With a copy to:
Gunderson Dettmer LLP
610 Lincoln Street
Waltham, Massachusetts 02451
Attention: Jay Hachigian, Esq.
or to such other Person or address as any of the foregoing may have designated for that purpose by
notice to the others.
11.5
Waiver; Consents
. The failure by any party to exercise any right under, or to
object to the breach by any other party of any term, provision or condition of, this Agreement
shall not constitute a waiver thereof and shall not preclude such party from thereafter exercising
that or any other right, or from thereafter objecting to that or any prior or subsequent breach of
the same or any other term, provision or condition of the Agreement. Any consent granted pursuant
to this Agreement shall be in writing, executed by the person authorized by the consenting party to
receive notices, and shall be a consent only to the transaction, act or agreement specifically
referred to in the consent and not to other similar transactions, acts or agreements.
11.6
Assignment
. This Agreement shall not be assigned by any party without the prior
written consent of the other party; provided, however, that Buyer may assign this Agreement to any
Affiliate of Buyer but only if Buyer shall remain liable for its obligations hereunder, and Buyer
and Seller may assign this Agreement to any acquirer of all or substantially all of its business
assets or any successor entity upon the occurrence of a merger, consolidation or other
reorganization, in each case provided that the assignee confirms and acknowledges the obligations
of Buyer or Seller, as the case may be, under this Agreement and the Collateral Documents. Any
attempted assignment in contravention with the foregoing shall be void. This Agreement shall be
binding on and inure to the benefit of the parties hereto, their successors and any permitted
assigns.
11.7
Governing Law
. This Agreement, including any dispute or controversy arising out
of or related to this Agreement or the breach thereof, shall be subject to, governed by, and
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CONFIDENTIAL TREATMENT REQUESTED
construed in accordance with, the substantive and procedural laws of the State of New York, without
reference to its principles of conflict of laws.
11.8
Parties in Interest
. This Agreement is binding upon and shall inure to the
benefit of the parties hereto and their successors and permitted assigns. Nothing contained in
this Agreement, express or implied, shall give any other Person any legal or equitable right,
remedy or claim under or with respect to this Agreement or the Transactions except as expressly
provided in Article IX.
11.9
Submission to Jurisdiction
. The parties hereby irrevocably and unconditionally
consent to submit to the exclusive jurisdiction of the federal courts of the United States of
America located in Monroe County, New York for any actions, suits or proceedings arising out of or
relating to this Agreement, the Collateral Documents or the transactions contemplated hereby or
thereby, and the parties agree not to commence any action, suit or proceeding relating thereto
except in such courts, and further agree that service of any process, summons, notice or documents
by U.S. registered mail shall be effective service of process for any action, suit or proceeding
brought against the parties in any such court. The parties hereby irrevocably and unconditionally
waive any objection to the laying of venue of any action, suit or proceeding arising out of this
Agreement, any Collateral Documents or the transactions contemplated hereby or thereby, in the
federal courts of the United States of America located in Monroe County, New York, and hereby
further irrevocably and unconditionally waive and agree not to plead or claim in any such court
that any such action, suit or proceeding brought in any such court has been brought in an
inconvenient forum.
11.10
Counterparts
. This Agreement may be executed in counterparts, each of which
shall be deemed an original, but such counterparts shall together constitute one and the same
Agreement.
11.11
Entire Agreement; Amendments
. This Agreement and the Collateral Documents
constitute the entire understanding among the parties hereto with respect to the subject matter
contained herein and supersede any prior understandings and agreements among them respecting such
subject matter. This Agreement may be amended, supplemented, and terminated only by a written
instrument duly executed by Seller and Buyer. Each of Buyer and Seller recognizes that the
liability and remedy provisions of this Agreement are material to the Agreement and have been
bargained for and are reflected in the mutual promises and agreements set forth in the Agreement.
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CONFIDENTIAL TREATMENT REQUESTED
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly
authorized officers on the date first above written.
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SELLER
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ALIMERA SCIENCES, INC.
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By:
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/s/ Dan Myers
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Name: Dan Myers
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Title: President and Chief Executive Officer
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BUYER
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BAUSCH & LOMB INCORPORATED
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By:
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/s/ Stephen C. McCluski
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Name: Stephen C. McCluski
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Title: Senior Vice President and Chief Financial
Officer
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Solely for purposes of Section 6.10:
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/s/ Dan Myers
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Dan Myers
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- 37 -
CONFIDENTIAL TREATMENT REQUESTED
Exhibit 1.1-A
Assignment and Assumption Agreement
THIS ASSUMPTION AGREEMENT (this Agreement) is made on
by and between Bausch &
Lomb Incorporated, a New York corporation (Buyer), and Alimera Sciences, Inc., a Delaware
corporation (Seller).
1. This Agreement is made, executed and delivered pursuant to the Asset Purchase Agreement,
dated as of February 16, 2007, by and between Buyer and Seller, as amended (the Asset Purchase
Agreement) and is subject to all of the terms, provisions and conditions thereof. All initially
capitalized terms used and not defined herein shall have the meanings attributed to them in the
Asset Purchase Agreement.
2. Buyer, for itself and its successors and assigns, hereby assumes and agrees to pay and
perform the Assumed Liabilities. Notwithstanding any provision of this Agreement to the contrary,
Buyer does not assume and shall be deemed not to have assumed any of the Excluded Liabilities or
any liabilities or obligations of Seller other than the Assumed Liabilities.
3. Buyer shall, from time to time, from and after the date hereof, upon reasonably request of
Seller, execute such further documents of assumption as Seller deems reasonably necessary to carry
out the transactions contemplated by this Agreement.
4. This Agreement shall be binding upon and shall inure to the benefit of Buyer and Seller and
their respective successors and assigns.
5. This Agreement shall be governed by and construed in accordance with the internal laws of
the State of New York, without regard to any applicable principles of conflicts of law.
6. Nothing in this Agreement shall constitute a waiver of, expansion of or limitation upon any
of Sellers or Buyers rights and remedies under the Asset Purchase Agreement and, in the case of
any conflict between the terms of the Asset Purchase Agreement and this Agreement, the Asset
Purchase Agreement shall govern.
7. This Agreement may be executed in counterparts, each of which shall be deemed an original,
but all of which shall constitute one and the same document.
[signature page follows]
CONFIDENTIAL TREATMENT REQUESTED
IN WITNESS WHEREOF, the parties have caused this Assumption Agreement to be executed by their
respective duly authorized officers on
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ALIMERA SCIENCES, INC.
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By:
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Name:
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Title:
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BAUSCH & LOMB INCORPORATED
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By:
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CONFIDENTIAL TREATMENT REQUESTED
Exhibit 1.1-B
Bill of Sale
KNOW ALL MEN BY THESE PRESENTS, that Alimera Sciences, Inc., a Delaware corporation
(Seller), for good and valuable consideration paid to it by Bausch & Lomb Incorporated, a New
York corporation (Buyer), the receipt and sufficiency of which is hereby acknowledged, does
hereby sell, assign, transfer and convey to Buyer, its successors and assigns, all of Sellers
right, title and interest in and to the Purchased Assets, other than the Trademarks and the Patent
Rights (which shall be transferred to Buyer pursuant to separate instruments), as such terms are
defined in that certain Asset Purchase Agreement dated as of February 16, 2007, by and between
Buyer and Seller, as amended (the Asset Purchase Agreement).
All initially capitalized terms used but not defined herein shall have the meanings attributed
to them in the Asset Purchase Agreement.
This Bill of Sale is further documentation of the transfers, conveyances and assignments
contemplated by the Asset Purchase Agreement and is subject to all of the terms, provisions and
conditions thereof. Nothing in this Bill of Sale shall constitute a waiver of, expansion of or
limitation upon any of Sellers or Buyers rights and remedies under the Asset Purchase Agreement
and, in the case of any conflict between the terms of the Asset Purchase Agreement and this Bill of
Sale, the Asset Purchase Agreement shall govern.
Seller shall, from time to time, from and after the date hereof, upon reasonable request of
Buyer, execute such further documents of transfer, conveyance and assignment as Buyer deems
reasonably necessary to carry out the transactions contemplated by this Bill of Sale.
This Bill of Sale shall be binding upon and shall inure solely to the benefit of Buyer and
Seller and their respective successors and assigns.
This Bill of Sale shall be governed by and construed in accordance with the internal laws of
the State of New York, without regard to any applicable principles of conflicts of law.
[signature page follows]
CONFIDENTIAL TREATMENT REQUESTED
- 2 -
IN WITNESS WHEREOF, Seller has caused this Bill of Sale to be executed by its duly authorized
officer on
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ALIMERA SCIENCES, INC.
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By:
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Name:
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Title:
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STATE OF
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):SS.:
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COUNTY OF
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)
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On
this ___ day of
, 2007 personally appeared
to me personally known, who,
being by me duly sworn, did depose and say that he is the
of Alimera Sciences,
Inc., the corporation described in and which executed the foregoing instrument and that he did sign
said instrument as such officer and on behalf of such corporation.
CONFIDENTIAL TREATMENT REQUESTED
Exhibit 1.1-D
Patent Assignment
WHEREAS, Alimera Sciences, Inc., a corporation duly organized under the laws of the State of
Delaware (Assignor), owns all right, title, and interest in the patents and patent applications
set forth on Schedule 1 attached hereto and made a part hereof (collectively, the Patents); and
WHEREAS, Bausch & Lomb Incorporated, a corporation duly organized under the laws of the State
of New York (Assignee), desires to own Assignors entire right, title, and interest in and to the
Patents, in all countries throughout the world.
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Assignor hereby sells, assigns, and transfers unto Assignee the entire right,
title and interest in and to the Patents and all accrued causes of action for damages for
infringement thereof, the same to be held and enjoyed by Assignee for its own use and benefits, and
for its legal representatives and assigns, to the full end of the term for which said Patents are
granted (if applicable), as fully and as entirely as the same would have been held by Assignor had
this assignment and sale not been made. Notwithstanding anything to the contrary, nothing herein
shall expand or modify the rights or obligations of the parties as set forth in that certain Asset
Purchase Agreement dated as of February 16, 2007 by and between Assignor and Assignee, as amended.
This Patent Assignment shall be binding upon and shall inure solely to the benefit of Assignor
and Assignee and their respective successors and assigns.
This Patent Assignment shall be governed by and construed in accordance with the internal laws
of the State of New York, without regard to any applicable principles of conflicts of law.
[signature page follows]
CONFIDENTIAL TREATMENT REQUESTED
IN WITNESS WHEREOF, Assignor has caused this Patent Assignment to be executed by its duly
authorized officer on
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ALIMERA SCIENCES, INC.
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By:
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Name:
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Title:
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STATE OF
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): SS.:
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COUNTY OF
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On
this ___ day of
, 2007 personally appeared
to me personally known,
who, being by me duly sworn, did depose and say that he is the
of Alimera
Sciences, Inc., the corporation described in and which executed the foregoing instrument and that
he did sign said instrument as such officer and on behalf of such corporation.
CONFIDENTIAL TREATMENT REQUESTED
Schedule 1
[*]
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*
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Certain information has been omitted and filed separately with the Commission. Confidential
treatment has been requested with respect to the omitted portions.
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CONFIDENTIAL TREATMENT REQUESTED
Exhibit 1.1-E
Trademark Assignment
WHEREAS, Alimera Sciences, Inc., a corporation duly organized under the laws of the State of
Delaware (Assignor), owns all right, title, and interest in the trademarks and trademark
applications set forth on Schedule 1 attached hereto and made a part hereof (collectively, the
Trademarks) as shown in the records in the United States Patent and Trademark Office; and
WHEREAS, Bausch & Lomb Incorporated, a corporation duly organized under the laws of the State
of New York (Assignee), desires to own Assignors entire right, title, and interest in and to the
Trademarks.
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Assignor hereby sells, assigns, and transfers unto Assignee the entire right,
title and interest in and to the Trademarks together with the good will of the business connected
therewith and symbolized thereby and all accrued causes of action for damages for infringement
thereof, the same to be held and enjoyed by Assignee for its own use and benefits, and for its
legal representatives and assigns, as fully and as entirely as the same would have been held by
Assignor had this assignment and sale not been made. Notwithstanding anything to the contrary,
nothing herein shall expand or modify the rights or obligations of the parties as set forth in that
certain Asset Purchase Agreement dated as of February 16, 2007 by and between Assignor and
Assignee, as amended.
This Trademark Assignment shall be binding upon and shall inure solely to the benefit of
Assignor and Assignee and their respective successors and assigns.
This Trademark Assignment shall be governed by and construed in accordance with the internal
laws of the State of New York, without regard to any applicable principles of conflicts of law.
[signature page follows]
CONFIDENTIAL TREATMENT REQUESTED
IN WITNESS WHEREOF, Assignor has caused this Trademark Assignment to be executed by its duly
authorized officer on
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ALIMERA SCIENCES, INC.
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By:
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Name:
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Title:
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STATE OF
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): SS.:
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COUNTY OF
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)
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On
this ___ day of
, 2007 personally appeared
to me personally known,
who, being by me duly sworn, did depose and say that he is the
of Alimera
Sciences, Inc., the corporation described in and which executed the foregoing instrument and that
he did sign said instrument as such officer and on behalf of such corporation.
CONFIDENTIAL TREATMENT REQUESTED
Schedule 1
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2,921,821
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Soothe
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77/067,219
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Miscellaneous Design (Soothe
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packaging)
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78/607,156
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Soothe and design
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77,102,918
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Soothe
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3,149,181
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Restoryl
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CONFIDENTIAL TREATMENT REQUESTED
Exhibit 1.1-F
Excluded Categories
[*]
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*
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Certain information has been omitted and filed separately with the Commission. Confidential
treatment has been requested with respect to the omitted portions.
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CONFIDENTIAL TREATMENT REQUESTED
Exhibit 2.1.4
Assigned Contracts
License Agreement between Seller and [*] dated January 22, 2004, as amended June 1, 2006.
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*
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Certain information has been omitted and filed separately with the Commission. Confidential
treatment has been requested with respect to the omitted portions.
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CONFIDENTIAL TREATMENT REQUESTED
Exhibit 2.6
Purchase Price Allocation Schedule
CONFIDENTIAL TREATMENT REQUESTED
Exhibit 7.1.6
Opinion of Counsel for Seller
Bausch & Lomb Incorporated
One Bausch & Lomb Place
Rochester, NY 14604
Ladies and Gentlemen:
We have acted as counsel for Alimera Sciences, Inc., a Delaware corporation (the Company),
in connection with Asset Purchase Agreement, dated as of February 16, 2007 (the Agreement) by and
between the Company and Bausch & Lomb Incorporated, a New York corporation (
Buyer
). This
opinion is being rendered to you pursuant to Section 7.1.6 of the Agreement. Capitalized terms not
otherwise defined in this opinion have the meaning given them in the Agreement.
In connection with the opinions expressed herein, we have made such examination of matters of
law and of fact as we considered appropriate or advisable for purposes hereof. As to matters of
fact material to the opinions expressed herein, we have relied upon the representations and
warranties as to factual matters contained in and made by the Company pursuant to the Agreement, a
certificate of an officer of the Company (the
Opinion Certificate
; a copy of which has
been provided to Buyer) and other certificates and statements of government officials. We have
also examined originals or copies of such corporate documents or records of the Company as we have
considered appropriate for the opinions expressed herein. We have assumed for the purposes of this
opinion that the signatures on documents and instruments examined by us are authentic, that each
document is what it purports to be, and that all documents submitted to us as copies or facsimiles
conform with the originals, which facts we have not independently verified. We have not conducted
a docket search in any jurisdiction with respect to litigation that may be pending against the
Company or any of its officers or directors or undertaken any further inquiry other than as stated
herein. In addition, we have reviewed the Companys Amended and Restated Certificate of
Incorporation and Bylaws, each as amended and in effect on the date hereof (the Charter
Documents) and the following documents:
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(i)
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the Agreement;
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(ii)
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the Assumption Agreement;
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(iii)
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the Bill of Sale;
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(iv)
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the Patent Assignment; and
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(v)
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the Trademark Assignment.
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CONFIDENTIAL TREATMENT REQUESTED
The documents described in (i)-(v) above are collectively referred to as the Transaction
Documents.
In rendering this opinion we have also assumed that (A) the Agreement and the Assumption
Agreement have been duly and validly authorized, executed and delivered by you, that you had the
power, legal competence and capacity to enter into the Agreement and the Assumption Agreement and
that the Agreement and the Assumption Agreement are enforceable against and binding upon you;
(B) the representations and warranties made in the Agreement by you are true and correct; (C) there
are no facts or circumstances relating to you that may prevent you from enforcing any of the rights
to which our opinion relates; and (D) there are no extrinsic agreements or understandings among the
parties to the Transaction Documents that would modify or interpret the terms of the Transaction
Documents or the respective rights or obligations of the parties thereunder.
As used in this opinion, the expression we are not aware or the phrase to our knowledge
means as to matters of fact that, based on the actual knowledge of individual attorneys within this
firm principally responsible for handling the matter of the Agreement and directly related matters
and after an examination of documents referred to herein and after inquiries of certain officers of
the Company, we find no reason to believe that the opinions expressed are factually incorrect, but
beyond that we have made no factual investigation for the purposes of rendering this opinion.
Specifically, but without limitation, we have made no inquiries of securities holders or employees
(other than obtaining the Opinion Certificate as described above) of the Company. No inference as
to our knowledge of the existence or absence of any facts should be drawn from the fact of our
representation of the Company. You should be aware that our involvement with the Company has been
limited to the matter of the Agreement and certain directly related matters, and that our
representation of the Company began in September of 2006. Moreover, we have not, for purposes of
our opinions below, searched computerized or electronic databases or the docket of any court,
governmental agency or regulatory body or other filing office in any jurisdiction.
Where statements in this opinion are qualified by the term material or materially, those
statements involve judgments and opinions as to the materiality or lack of materiality of any
matter to the Company or its business, assets, condition (financial or otherwise) or results of
operations that are entirely those of the Company and its officers, after having been advised by us
as to the legal effect and consequences of such matters. Such opinions and judgments are not known
to us to be incorrect.
We are opining herein as to the effect on the subject transaction solely with respect to the
Delaware General Corporation Law, the laws of the State of New York and the federal laws of the
United States. We express no opinion as to matters governed by any laws other than the laws of the
State of New York, the corporate law of the State of Delaware and the federal law of the United
States of America (and specifically excluding all local and municipal
CONFIDENTIAL TREATMENT REQUESTED
laws). We express no opinion as to whether the laws of any particular jurisdiction apply, and no
opinion to the extent that the laws of any jurisdiction other than those identified above are
applicable to the subject matter of this opinion.
In rendering the opinion set forth in paragraph 1 below as to the good standing of the
Company, we have relied exclusively on a certificate from the Secretary of State of the State of
Delaware, although we have not obtained tax good standing certificates and no opinion is provided
with respect to tax good standing.
In connection with the general enforceability opinion set forth in paragraph 4, this opinion
is qualified by, and we render no opinion with respect to, the following:
(a) Our opinions are qualified by the limitations imposed by general principles of equity upon
the availability of equitable remedies for the enforcement of provisions of the Transaction
Documents, and by the effect of judicial decisions that have held that certain provisions are
unenforceable when their enforcement would violate the implied covenant of good faith and fair
dealing, or would be commercially unreasonable, or where their breach is not material;
(b) We express no opinion as to the effect of any New York law, United States federal or
Delaware law or equitable principle that provides that a court may refuse to enforce, or may limit
the application of, a contract or any clause thereof that the court finds to have been
unconscionable at the time it was made or contrary to public policy;
(c) We express no opinion as to the enforceability of provisions of the Transaction Documents
expressly or by implication waiving broadly or vaguely stated rights or unknown future rights, or
waiving rights granted by law where such waivers are against public policy;
(d) We express no opinion as to the enforceability of any provision of the Transaction
Documents purporting to (i) waive rights to trial by jury, service of process or objections to the
laying of venue or to forum in connection with any litigation arising out of or pertaining to the
Transaction Documents, (ii) exclude conflict of law principles, (iii) establish particular courts
as the forum for the adjudication of any controversy relating to the Transaction Documents, (iv)
establish the laws of any particular state or jurisdiction for the adjudication of any controversy
relating to the Transaction Documents, (v) establish evidentiary standards or make determinations
conclusive or (vi) provide for arbitration of (or another non-judicial method of resolving)
disputes;
(e) We express no opinion as to the effect of judicial decisions that may permit the
introduction of extrinsic evidence to modify the terms or the interpretation of the Transaction
Documents;
CONFIDENTIAL TREATMENT REQUESTED
(f) We express no opinion as to the enforceability of any provisions of the Transaction
Documents providing that (a) rights or remedies are not exclusive, (b) rights or remedies may be
exercised without notice, (c) every right or remedy is cumulative and may be exercised in addition
to or with any other right or remedy, (d) the election of a particular remedy or remedies does not
preclude recourse to one or more other remedies, (e) liquidated damages are to be paid upon the
breach of the Transaction Documents or (f) the failure to exercise, or any delay in exercising,
rights or remedies available under the Transaction Documents will not operate as a waiver of any
such right or remedy; and
(g) We note that a requirement that provisions of the Transaction Documents may only be waived
in writing may not be binding or enforceable if an oral agreement has been created modifying any
such provision or an implied agreement by trade practice or course of conduct has given rise to a
waiver.
In connection with our opinion in paragraph 5 below, the term Applicable Laws shall mean (i)
those federal laws, rules and regulations of the United States, (ii) those laws, rules and
regulations of the State of New York and (iii) those provisions of the Delaware General Corporation
Law, that, in each case and in our experience, are normally applicable to transactions of the type
contemplated by the Agreement, without our having made any special investigation as to the
applicability of any specific law, rule or regulation, and that are not the subject of a specific
opinion herein referring expressly to a particular law or laws.
In connection with our opinion in paragraph 6 below, the term Governmental Entity shall mean
any court, administrative agency or commission organized under federal, New York or Delaware
corporate statutes, laws, rules or regulations.
Finally, our opinions below are each specifically subject to the following limitations,
exceptions, qualifications and assumptions:
(A) We express no opinion as to the effect of bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting the relief of debtors or the rights and
remedies of creditors generally, including, without limitation, the effect of statutory or other
law regarding fraudulent conveyances and preferential transfers.
(B) We express no opinion as to the Companys compliance or noncompliance with applicable
federal or state antifraud or antitrust statutes, laws, rules and regulations, including, without
limitation, the HSR Act.
(C) Limitations imposed by state law, federal law or general equitable principles upon the
specific performance of any of the remedies, covenants or other provisions of any applicable
agreement and upon the availability of injunctive relief or other equitable remedies, regardless of
whether enforcement of any such agreement is considered a proceeding in equity or at law.
CONFIDENTIAL TREATMENT REQUESTED
Based upon our examination of and reliance upon the foregoing and subject to the limitations,
exceptions, qualifications and assumptions set forth above and except as set forth in the
Disclosure Schedule, we are of the opinion that as of the date hereof:
1. The Company is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware. The Company has all requisite corporate power and authority to
own, operate and lease its properties and to carry on its business as, to our knowledge, it is
presently conducted.
2. The Company has all requisite corporate power and corporate authority to enter into,
execute, deliver and perform its obligations under the Transaction Documents and to transfer and
deliver the Purchased Assets pursuant to the Transaction Documents.
3. All corporate action on the part of the Company, its directors and stockholders necessary
for the authorization, execution, delivery and performance of the obligations under the Transaction
Documents by the Company has been taken.
4. The Transaction Documents constitute legally valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms. Each of the Transaction Documents
has been duly executed and delivered by the Company.
5. The execution, delivery and performance of the Transaction Documents will not, as of the
Closing, result in (i) a violation of the Charter Documents (ii) a material violation of any
Applicable Laws or (iii) a violation of any judgment or order specifically identified in the
Disclosure Schedule, if any.
6. No consent, approval, order, authorization from, or registration, declaration or filing
with, any Governmental Entity is necessary or required to be made or obtained for the execution and
delivery by the Company of the Transaction Documents or the consummation by the Company of the
transactions contemplated thereby.
In addition to the foregoing, we supplementally inform you that, to our knowledge and except
as set forth on the Disclosure Schedule, there is no action, suit, proceeding or investigation
pending or threatened against the Company that (i) questions the validity of the Transaction
Documents or the right of the Company to enter into the Transaction Documents or (ii) relates to
the Purchased Assets. Please note that we have not conducted a docket search in any jurisdiction
with respect to litigation that may be pending against the Company or any of its officers or
directors, nor have we undertaken any further inquiry whatsoever other than to request the Opinion
Certificate from the Company.
CONFIDENTIAL TREATMENT REQUESTED
This opinion is rendered as of the date first written above solely for your benefit in
connection with the Agreement and may not be delivered to, quoted or relied upon by any person
other than you, or for any other purpose, without our prior written consent. Our opinion is
expressly limited to the matters set forth above and we render no opinion, whether by implication
or otherwise, as to any other matters relating to the Company. We assume no obligation to advise
you of facts, circumstances, events or developments which hereafter may be brought to our attention
and which may alter, affect or modify the opinions expressed herein.
Very truly yours,
GUNDERSON DETTMER STOUGH
VILLENEUVE FRANKLIN & HACHIGIAN, LLP
CONFIDENTIAL TREATMENT REQUESTED
Exhibit 7.1.10
Final Soothe
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Net Sales Calculation
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Net Sales Target
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[*]
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Total Net Sales
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[*]
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Purchase Price
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[*]
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*
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Certain information has been omitted and filed separately with the Commission. Confidential
treatment has been requested with respect to the omitted portions.
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