As filed with the Securities and Exchange
Commission on June 23, 2011
Registration
No. 333-
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form S-1
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
CLOVIS ONCOLOGY, INC.
(Exact name of registrant as
specified in its charter)
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Delaware
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2834
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90-0475355
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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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2525 28th Street,
Suite 100
Boulder, Colorado
80301
(303) 625-5000
(Address, including zip code,
and telephone number, including area code, of registrants
principal executive offices)
Patrick J. Mahaffy
President and Chief Executive
Officer
Clovis Oncology, Inc.
2525 28th Street,
Suite 100
Boulder, Colorado
80301
(303) 625-5000
(Name, address, including zip
code, and telephone number, including area code, of agent for
service)
Copies to:
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Peter H. Jakes, Esq.
William H. Gump, Esq.
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, New York 10019
(212) 728-8000
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Cheston J. Larson, Esq.
Divakar Gupta, Esq.
Latham & Watkins LLP
12636 High Bluff Drive, Suite 400
San Diego, California 92130
(858) 523-5400
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Approximate date of commencement of proposed sale to the
public:
As soon as practicable after this
Registration Statement becomes effective.
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, 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,
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
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2
of the
Exchange Act. (Check one):
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Large
accelerated
filer
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Accelerated
filer
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Non-accelerated
filer
þ
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Smaller reporting
company
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(Do not check if a smaller
reporting company)
CALCULATION
OF REGISTRATION FEE
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Proposed Maximum
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Amount of
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Title of Each Class of
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Aggregate Offering
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Registration
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Securities to be Registered
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Price(1)(2)
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Fee
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Common Stock, par value $0.001 per share
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$149,500,000
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$17,357
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(1)
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Estimated solely for purposes of
determining the registration fee in accordance with
Rule 457(o) under the Securities Act of 1933, as amended.
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(2)
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Includes shares of common stock
which may be purchased by the underwriters to cover
over-allotments, if any.
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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, as amended, or until this
Registration Statement shall become effective on such date as
the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
The
information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and we are not soliciting offers to buy these
securities in any state or other jurisdiction where the offer or
sale is not permitted.
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Subject to completion, dated
June 23, 2011
Prospectus
Shares
COMMON STOCK
This is the initial public offering of common stock of Clovis
Oncology, Inc. We are
selling shares
of common stock. Prior to this offering, there has been no
public market for our common stock. The initial public offering
price of our common stock is expected to be between
$ and
$ per share.
We have applied for listing of our common stock on the NASDAQ
Global Market under the symbol CLVS.
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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 discounts and commissions
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$
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$
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Proceeds to Clovis, before expenses
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$
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$
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We have granted the underwriters an option to purchase up
to
additional shares of common stock to cover over-allotments.
Investing in our common stock involves risks. See
Risk Factors beginning on page 10.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The underwriters expect to deliver the shares on or
about ,
2011.
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J.P.
Morgan
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Credit Suisse
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, 2011
TABLE OF
CONTENTS
You should rely only on the information contained in this
prospectus or in any free writing prospectus that we may
specifically authorize to be delivered or made available to you.
We have not, and the underwriters have not, authorized anyone
to provide you with any information other than that contained in
this prospectus or in any free writing prospectus we may
authorize to be delivered or made available to you. We take no
responsibility for, and can provide no assurance as to the
reliability of, any other information that others may give you.
This prospectus may only be used where it is legal to offer and
sell shares of our common stock. The information in this
prospectus is accurate only as of the date of this prospectus,
regardless of the time of delivery of this prospectus or any
sale of shares of our common stock.
Our business, financial
condition, results of operations and prospects may have changed
since that date. We are not, and the underwriters are not,
making an offer of these securities in any jurisdiction where
the offer is not permitted.
Until ,
2011 (25 days after the commencement of this offering), all
dealers that buy, sell or trade shares of our common stock,
whether or not participating in this offering, may be required
to deliver a prospectus. This delivery requirement is in
addition to the dealers obligation to deliver a prospectus
when acting as underwriters and with respect to their unsold
allotments or subscriptions.
For investors outside the United States: We have not and the
underwriters have not done anything that would permit this
offering or possession or distribution of this prospectus in any
jurisdiction where action for that purpose is required, other
than in the United States. Persons outside the United States who
come into possession of this prospectus must inform themselves
about, and observe any restrictions relating to, the offering of
the shares of common stock and the distribution of this
prospectus outside the United States.
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PROSPECTUS
SUMMARY
The following summary highlights information contained
elsewhere in this prospectus and is qualified in its entirety by
the more detailed information and consolidated financial
statements included elsewhere in this prospectus. This summary
does not contain all of the information that may be important to
you. You should read and carefully consider the following
summary together with the entire prospectus, including our
consolidated financial statements and the related notes thereto
appearing elsewhere in this prospectus and the matters discussed
in the sections in this prospectus entitled Risk
Factors, Selected Consolidated Financial Data
and Managements Discussion and Analysis of Financial
Condition and Results of Operations, before deciding to
invest in our common stock. Some of the statements in this
prospectus constitute forward-looking statements that involve
risks and uncertainties. See Cautionary Note Regarding
Forward-Looking Statements and Industry Data. Our actual
results could differ materially from those anticipated in such
forward-looking statements as a result of certain factors,
including those discussed in the Risk Factors and
other sections of this prospectus.
Except as otherwise indicated herein or as the context
otherwise requires, references in this prospectus to
Clovis, the Company, we,
us, and our, refer to Clovis Oncology, Inc.
together with its consolidated subsidiary.
Overview
We are a biopharmaceutical company focused on acquiring,
developing and commercializing innovative anti-cancer agents in
the United States, Europe and additional international markets.
We target our development programs for the treatment of specific
subsets of cancer populations, and seek to simultaneously
develop, with partners, companion diagnostics that direct our
product candidates to the patients that are most likely to
benefit from their use. We are currently developing three
product candidates for which we hold global marketing rights:
CO-101,
a
lipid-conjugated form of the anti-cancer drug gemcitabine, which
is in a pivotal study in a specific patient population for the
treatment of metastatic pancreatic cancer; CO-1686, an orally
available, small molecule epidermal growth factor receptor, or
EGFR, covalent inhibitor that is currently in preclinical
development for the treatment of non-small cell lung cancer, or
NSCLC, in patients with activating EGFR mutations, including the
initial activating mutations, as well as the primary resistance
mutation, T790M; and CO-338, an orally available, small molecule
poly (ADP-ribose) polymerase, or PARP, inhibitor being developed
for various solid tumors that is currently in a Phase I clinical
trial.
We believe that discovery productivity exceeds development
capacity in oncology, and we have built our organization to meet
the need for innovative patient-specific oncology drug
development. To implement our strategy, we have assembled an
experienced team with core competencies in global clinical
development and regulatory operations in oncology, as well as
conducting collaborative relationships with companies
specializing in companion diagnostic development. As our product
candidates mature, we intend to build our own commercial
organizations in major global markets and contract with local
distributors in smaller markets.
The most common anti-cancer drug therapies typically address
cancers within a specific organ as a single disease as opposed
to a collection of different disease subtypes, often resulting
in poor response rates and minimal effect on overall survival.
We believe the oncology community is increasingly recognizing
that tumors in a particular organ have unique pathologic and
molecular characteristics that may warrant different treatment
strategies. By better understanding differences in tumor biology
and underlying disease pathways, researchers are identifying
biomarkers to guide development of targeted oncology therapies,
with streamlined clinical trials, stratified patient populations
and improved patient outcomes. We believe that targeted
therapies and companion diagnostics offer a patient-tailored
approach to the treatment of cancers with improved diagnosis and
outcomes.
We were founded in April 2009 by former executives of Pharmion
Corporation, which successfully developed and commercialized
novel oncology products in the United States and Europe and was
ultimately acquired by Celgene Corporation in 2008. Our
investors include the following entities or their affiliates:
Domain Associates, New Enterprise Associates, Versant Ventures,
Aberdare Ventures, Abingworth Bioventures, Frazier Healthcare
Ventures, Pfizer, Inc., ProQuest Investments and our management
team.
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Our
Strategy
Our strategy is to acquire, develop, and commercialize
innovative anti-cancer agents in the United States, Europe and
additional international markets in oncology indications with
significant unmet medical need. The critical components of our
business strategy include the following:
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Focus on oncology.
The oncology market
is characterized by a number of disorders with high rates of
recurrence and a limited response from current therapies or
treatments. Many of these therapies include severe side effects.
New oncology product candidates addressing unmet medical needs
or providing superior safety profiles are frequently the subject
of expedited regulatory reviews and, if approved, can experience
rapid adoption rates. We believe that the increasing role of
targeted therapies and companion diagnostics to identify
selected patient subsets in oncology presents the potential for
improved patient outcomes.
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Focus on compounds where improved outcomes are associated
with specific biomarkers.
Our licensing
strategy to date has been to prioritize opportunities in which a
strong biological hypothesis has been established linking a
specific biomarker with improved outcomes for the product
candidate. Significant progress has been made over the last
several years in the identification of molecular targets and
pathways that more narrowly specify the causes of cancer and the
variation in responses to different therapies experienced by
patient subsets with a particular cancer or tumor type. In
certain cases, the underlying science has progressed to the
point that subset patient populations deriving little or no
benefit from existing therapies can be identified and targeted
by newly developed therapies, such as our product candidates. We
believe that the identification of such subsets, and the
correlation of their specific characteristics to the drug under
development, should increase the clinical benefit to targeted
patients and the probability of success in our clinical trials.
Such patient identification should also enable us to design
clinical trials that may be completed more rapidly than has
traditionally been the case, and, if successful, to achieve
clinical outcomes for the targeted group that are sufficiently
attractive to support the risk/benefit metrics of healthcare
payors.
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Combine companion diagnostics with drug development
efforts to realize superior clinical
outcomes.
Our development strategy is based
on the premise that we can utilize effective companion
diagnostics to identify different patient subsets who we believe
will uniquely benefit from our product candidates. We are
partnering to develop these companion diagnostics for use in the
clinical development and ultimate commercial utilization of our
product candidates. Because we do not develop diagnostics
internally, we are able to select from among all available
technologies when choosing a partner for our programs under
development. This flexibility allows us to choose the most
appropriate partner and diagnostic platform for each program
under development and affords us the best chance of clinical
success. We have partnered with experienced diagnostic companies
that we believe have the ability and commitment to gain the
required regulatory approvals and support global
commercialization for these companion diagnostics.
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Manage and control global development activities and
regulatory operations.
We believe our
development and regulatory experience enables us to devise time-
and cost-efficient strategies to develop and obtain regulatory
approvals for new drugs, and to identify the regulatory pathway
that allows us to get a product candidate to market as quickly
as possible. Unlike many early stage biotechnology and
pharmaceutical companies that have development or regulatory
capabilities only in the country in which they are located, we
have assembled an experienced team with a successful track
record at managing global clinical development activities, and
with multinational expertise in obtaining regulatory approvals
for new drugs and in maintaining compliance with the regulations
governing the sales, marketing and distribution of
pharmaceutical products. Because authorities in major markets
are increasingly accepting one core dossier as the basis for
regulatory approvals in multiple jurisdictions, we believe we
can manage a global development program without local partners,
thereby leveraging a single core dossier to gain approvals in
multiple geographies. We manage critical functions in house,
including clinical development, biostatistics, pharmaceutical
development, molecular diagnostics and clinical and regulatory
operations, and we outsource certain activities where
economically and strategically appropriate.
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Seek and maintain global commercial
rights.
We believe that it is very important
to maintain global rights to our product candidates, and that we
can build our own commercial organizations in major
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pharmaceutical markets as well as a network of third-party
distributors in smaller markets. There are a relatively small
number of oncologists practicing in each of the major
pharmaceutical markets and an even smaller number of oncology
opinion leaders who significantly influence the types of drugs
prescribed in cancer therapy. We therefore believe that we can
effectively reach the oncology markets with a relatively small
sales and marketing organization focused on these physicians and
oncology opinion leaders. As a result, we plan to maintain
commercial autonomy and will not require a pharmaceutical
partner for commercialization activities. By managing the global
sales and marketing of our products on our own, we believe we
can provide uniform marketing programs and consistent product
positioning, pricing and labeling. Finally, by controlling
commercial activities ourselves in major markets, we will retain
the vast majority of the revenues from our product candidates.
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Our
Product Pipeline
Consistent with our strategy, each of our initial three
in-licensed product candidates, for which we hold global
marketing rights, is being developed for selected patient
subsets. The following table summarizes the status of our
product pipeline:
CO-101
a Lipid-Conjugated Form of the Anti-Cancer Drug
Gemcitabine
CO-101 is currently in a pivotal clinical study for first-line
treatment of metastatic pancreatic cancer. CO-101 is a novel,
patented, lipid-conjugated form of the anti-cancer drug
gemcitabine that is designed to treat patients with pancreatic
cancer whose tumors express low amounts of a membrane
transporter protein on the surface of the cancer cell known as
hENT1 and are thus expected to be resistant to standard
gemcitabine-based therapy. Based on the published results of
multiple studies assessing the correlation of hENT1 expression
to survival outcomes in pancreatic cancer patients treated with
gemcitabine, we estimate that approximately 40% to 50% of
pancreatic patients express low levels of hENT1, and thus derive
little or no benefit from gemcitabine therapy.
CO-101 is currently in an international, randomized and
controlled 360-patient pivotal study for the first-line
treatment of metastatic pancreatic cancer. This open-label study
compares CO-101 to gemcitabine as a first-line therapy in
patients with metastatic pancreatic cancer. The primary
objective of this study is to compare the overall survival of
patients with metastatic pancreatic cancer and low hENT1
expression that are treated with CO-101 versus gemcitabine.
Secondary endpoints include overall survival in all patients and
in patients with high hENT1 expression, disease response rate,
and drug tolerability and toxicity. We expect to complete
enrollment for this trial in the first quarter of 2012 and
report top line results as to overall survival in the
prespecified hENT1-low patient subset in the fourth quarter of
2012. If data from this study are positive, we expect to file a
New Drug Application, or
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NDA, with the U.S. Food and Drug Administration, or FDA, and a
Marketing Authorization Application, or MAA, with the European
Medicines Agency, or EMA, in mid-2013. We have partnered with
Ventana Medical Systems for the development and
commercialization of a companion diagnostic for the assessment
of hENT1 levels.
CO-1686an
Oral EGFR Mutant-Selective Inhibitor
CO-1686 is a novel, orally available, small molecule covalent
inhibitor of the cancer-causing mutant forms of EGFR for the
treatment of NSCLC. Because CO-1686 targets both the initial
activating EGFR mutations as well as the primary resistance
mutation, T790M, it has the potential to treat both first- and
second-line NSCLC patients with EGFR mutations. Such initiating
activating mutations occur in approximately 10% to 15% of NSCLC
cases in Caucasian patients and approximately 30% to 35% of
NSCLC cases in East Asian patients. Following treatment with
approved NSCLC therapies, Tarceva (erlotinib) or
Iressa (gefitinib), both known as tyrosine kinase
inhibitors, or TKIs, approximately half of these patients
develop the T790M mutation.
CO-1686 is currently in preclinical development and we plan to
file an Investigational New Drug application, or IND, in the
first quarter of 2012. We have designed an accelerated clinical
development program for CO-1686, and if successful, have a goal
of filing an NDA for an initial indication within approximately
four years of filing our IND. We intend to pursue the
development of CO-1686 as both a second-line therapy for
EGFR-mutated
NSCLC patients who become resistant to TKIs due to the emergence
of the T790M secondary mutation and potentially as a first-line
treatment for
EGFR-mutated
NSCLC. We expect to initiate a Phase I/II trial of CO-1686 in
the first half of 2012. We have partnered with Roche Molecular
Systems for the development and commercialization of a companion
diagnostic for identification of EGFR mutations.
CO-338a
PARP Inhibitor
CO-338 is a novel, orally available, small molecule PARP
inhibitor that we intend to develop as both monotherapy and in
combination with chemotherapeutic agents for the treatment of
selected cancer patients.
CO-338
is
currently in a Phase I clinical trial to determine the maximum
tolerated dose of oral CO-338 that can be combined with
intravenous, or IV, platinum chemotherapy in the treatment of
solid tumors. This program is supplemented by two ongoing
investigator-initiated trials, currently using the IV
formulation of CO-338: a Phase I/II study in germ-line BRCA
mutant breast and ovarian cancer and a Phase II study in
the adjuvant treatment of germ-line BRCA mutant and
triple-negative breast cancer. As soon as practical, we intend
to replace the IV formulation with the oral formulation in
these studies. We also intend to initiate a Phase I monotherapy
study of the oral formulation in the fourth quarter of 2011 to
determine an appropriate dose and schedule for long term
administration.
Risks
Associated with Our Business
Our business and our future results of operations and financial
condition are subject to a number of risks and uncertainties.
These risks and uncertainties that could adversely affect our
actual results and performance, as well as the successful
implementation of our business strategy, are discussed more
fully in the Risk Factors and Cautionary Note
Regarding Forward-Looking Statements and Industry Data
sections of this prospectus. You should carefully consider all
of the information set forth in this prospectus and, in
particular, should evaluate the specific factors set forth under
Risk Factors and Cautionary Note Regarding
Forward-Looking Statements and Industry Data in deciding
whether to invest in our common stock. Among these important
risks and uncertainties that could adversely affect our results
of operations and business condition are the following:
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We have incurred significant losses since our inception and
anticipate that we will continue to incur losses for the
foreseeable future. We are a clinical-stage company with no
approved products, and no historical revenues, which makes it
difficult to assess our future viability.
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If we fail to obtain additional financing, we may be unable to
complete the development and commercialization of our product
candidates, or continue our development programs. In addition,
the report of our independent registered public accounting firm
on our financial statements appearing at the end of this
prospectus contains an explanatory paragraph stating that our
recurring losses raise substantial doubt about our ability to
continue as a going concern.
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We are heavily dependent on the success of our three product
candidates, two of which are in clinical development, and one of
which is in preclinical development, and we cannot give any
assurance that any of our product candidates will receive
regulatory approval, which is necessary before they can be
commercialized.
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Clinical drug development involves a lengthy and expensive
process with an uncertain outcome, and results of earlier
studies and trials may not be predictive of future trial results.
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The regulatory approval processes of the FDA and similar foreign
authorities is lengthy, time consuming and inherently
unpredictable, and if we are ultimately unable to obtain
regulatory approval for our product candidates, our business
will be substantially harmed.
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Failure to successfully validate, develop and obtain regulatory
approval for companion diagnostics could harm our drug
development strategy.
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Our commercial success depends upon attaining significant market
acceptance of our product candidates, if approved, among
physicians, patients, healthcare payors and major operators of
cancer clinics.
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We face significant competition from other biotechnology and
pharmaceutical companies and our operating results will suffer
if we fail to compete effectively.
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If our efforts to protect the proprietary nature of the
intellectual property related to our technologies are not
adequate, we may not be able to compete effectively in our
market.
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Other factors identified elsewhere in this prospectus, including
those set forth under Risk Factors.
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Our
Corporate Information
We were incorporated under the laws of the State of Delaware in
April 2009. Our principal executive offices are located at 2525
28th Street, Suite 100, Boulder, Colorado 80301, and our
telephone number is
(303) 625-5000.
Our website address is
www.clovisoncology.com.
Our website and the
information contained on, or that can be accessed through, the
website will not be deemed to be incorporated by reference in,
and are not considered part of, this prospectus. You should not
rely on any such information in making your decision whether to
purchase our common stock.
This prospectus includes references to trademarks and service
marks of other entities, and those trademarks and service marks
are the property of their respective owners.
5
THE
OFFERING
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Common stock offered
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shares
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Common stock to be outstanding immediately following this
offering
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shares
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Over-allotment option
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Up
to shares
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Use of proceeds
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We estimate that the net proceeds from this offering will be
approximately $ million, or
approximately $ million if
the underwriters exercise their over-allotment option in full,
assuming an initial public offering price of
$ per share, the midpoint of the
price range set forth on the cover page of this prospectus,
after deducting estimated underwriting discounts and commissions
and estimated offering expenses payable by us. We expect to use
the proceeds of this offering to fund our clinical trials
related to CO-101 and CO-338, to advance the development of
CO-1686, our preclinical product candidate, and for working
capital and general corporate purposes. See Use of
Proceeds for a more complete description of the intended
use of proceeds from this offering.
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Risk factors
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You should read Risk Factors for a discussion of
factors you should carefully consider before deciding to invest
in our common stock.
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Proposed NASDAQ Global Market symbol
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CLVS
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The number of shares of our common stock to be outstanding after
this offering set forth above is based
on shares
of our common stock outstanding as of March 31, 2011, after
giving effect to (1) the conversion of all outstanding
shares of our convertible preferred stock into
21,009,196 shares of common stock immediately prior to the
closing of this offering and (2) the issuance
of shares
of our common stock immediately prior to the closing of this
offering as a result of the conversion of $35.0 million in
aggregate principal amount of our 5% convertible promissory
notes due 2012 (including accrued and unpaid interest thereon),
assuming an initial public offering price
of
per share, the midpoint of the price range set forth on the
cover page of this prospectus, and assuming the conversion
occurs
on ,
2011 (the expected closing date of this offering).
The number of shares of our common stock to be outstanding after
this offering set forth above excludes:
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2,746,779 shares of our common stock issuable upon the
exercise of stock options outstanding as of March 31, 2011
at a weighted-average exercise price of $0.91 per share;
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shares
of our common stock reserved for future issuance under our 2011
Equity Incentive Plan, or the 2011 Plan, which will become
effective immediately prior to the completion of this offering,
plus 1,248,621 shares of our common stock available for
grant under our 2009 Equity Incentive Plan, or the 2009 Plan, as
of March 31, 2011, which shares will be added to the shares
to be reserved under our 2011 Plan upon the effectiveness of the
2011 Plan, plus any annual increases in the number of shares of
common stock reserved for future issuance under the 2011 Plan
pursuant to an evergreen provision and any other
shares that may become issuable under the 2011 Plan pursuant to
its terms, as more fully described in Executive and
Director CompensationEmployee Benefit Plans2011
Equity Incentive Plan; and
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shares
of our common stock reserved for future issuance under our 2011
Employee Stock Purchase Plan, or the ESPP, which will become
effective immediately prior to the completion of this offering,
plus any annual increases in the number of shares of our common
stock reserved for future issuance under the ESPP pursuant to an
evergreen provision and any other shares that may
become
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issuable under the ESPP pursuant to its terms, as more fully
described in Executive and Director
CompensationEmployee Benefit Plans2011 Employee
Stock Purchase Plan.
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Unless we specifically state otherwise, the information in this
prospectus assumes or gives effect to:
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no exercise by the underwriters of their over-allotment option
to purchase up
to
additional shares of common stock from us;
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the consent of the requisite holders of our preferred stock for
the conversion of their shares of preferred stock into common
stock;
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the implementation of
a
for
reverse stock split that we anticipate will occur prior to
completion of this offering; and
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|
|
the filing of our amended and restated certificate of
incorporation and the adoption of our amended and restated
bylaws immediately prior to the completion of this offering.
|
7
SUMMARY
CONSOLIDATED FINANCIAL DATA
The following table sets forth a summary of our historical
consolidated financial data at the dates and for the periods
indicated. The summary historical financial data presented below
for the year ended December 31, 2010 and the period from
April 20, 2009 (inception) to December 31, 2009 has
been derived from our audited financial statements, which are
included elsewhere in this prospectus.
The summary historical consolidated financial data presented
below for the three months ended March 31, 2011 and 2010
has been derived from our unaudited consolidated financial
statements and has been prepared on the same basis as the
audited financial statements included elsewhere in this
prospectus. In the opinion of management, the unaudited data
reflects all adjustments, consisting only of normal and
recurring adjustments, necessary for a fair presentation of
results as of and for these periods. The historical results are
not necessarily indicative of results to be expected in any
future period and the results for the three months ended
March 31, 2011 are not necessarily indicative of the
results that may be expected for the full fiscal year.
The summary historical financial data presented below should be
read in conjunction with Managements Discussion and
Analysis of Financial Condition and Results of Operations
and our consolidated financial statements and the related notes
thereto, which are included elsewhere in this prospectus. The
summary historical financial data in this section is not
intended to replace our financial statements and the related
notes thereto.
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|
|
|
|
|
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|
|
|
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|
|
|
|
|
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|
Period from
|
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|
|
|
|
|
|
|
Cumulative from
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|
|
|
|
|
April 20, 2009
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|
|
|
|
|
|
|
|
April 20, 2009
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|
|
Year Ended
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|
(inception) to
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|
Three Months Ended
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|
(inception) to
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|
December 31,
|
|
|
December 31,
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
(In thousands, except per share amounts)
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|
|
Revenue
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
22,323
|
|
|
|
1,762
|
|
|
|
7,041
|
|
|
|
3,259
|
|
|
|
31,126
|
|
General and administrative
|
|
|
4,302
|
|
|
|
2,209
|
|
|
|
1,405
|
|
|
|
830
|
|
|
|
7,916
|
|
Acquired in-process research and development
|
|
|
12,000
|
|
|
|
13,085
|
|
|
|
|
|
|
|
|
|
|
|
25,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(38,625
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)
|
|
|
(17,056
|
)
|
|
|
(8,446
|
)
|
|
|
(4,089
|
)
|
|
|
(64,127
|
)
|
Other income (expense), net
|
|
|
795
|
|
|
|
(43
|
)
|
|
|
118
|
|
|
|
(2
|
)
|
|
|
870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(37,830
|
)
|
|
$
|
(17,099
|
)
|
|
$
|
(8,328
|
)
|
|
$
|
(4,091
|
)
|
|
$
|
(63,257
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Basic and diluted net loss per common
share
(1)
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|
$
|
(9.85
|
)
|
|
$
|
(5.30
|
)
|
|
$
|
(2.15
|
)
|
|
$
|
(1.07
|
)
|
|
$
|
(17.45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average common shares outstanding
|
|
|
3,842
|
|
|
|
3,225
|
|
|
|
3,877
|
|
|
|
3,832
|
|
|
|
3,625
|
|
Pro forma basic and diluted net loss per common share
(unaudited)
(2)
|
|
$
|
(1.52
|
)
|
|
|
|
|
|
$
|
(0.33
|
)
|
|
|
|
|
|
$
|
(3.20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma basic and diluted weighted average common shares
outstanding (unaudited)
|
|
|
24,851
|
|
|
|
|
|
|
|
24,886
|
|
|
|
|
|
|
|
19,784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2011
|
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|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
Actual
|
|
|
Pro
Forma
(2)
|
|
|
As
Adjusted
(3)(4)
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
(In thousands)
|
|
|
Balance sheet data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and available for sale securities
|
|
|
$13,926
|
|
|
$
|
|
|
|
$
|
|
|
Working capital
|
|
|
11,540
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
17,531
|
|
|
|
|
|
|
|
|
|
Convertible preferred stock
|
|
|
75,499
|
|
|
|
|
|
|
|
|
|
Total stockholders equity (deficit)
|
|
|
(63,023
|
)
|
|
|
|
|
|
|
|
|
8
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|
|
(1)
|
|
See Note 11 within the notes to our financial statements
for a description of the method used to compute basic and
diluted loss per common share.
|
|
(2)
|
|
Pro forma to reflect (i) the issuance of $35.0 million
in aggregate principal amount of our 5% convertible promissory
notes due 2012; (ii) the conversion of all outstanding
shares of our convertible preferred stock into
21,009,196 shares of common stock immediately prior to the
closing of this offering; and (iii) the conversion of
$35.0 million in aggregate principal amount of our 5%
convertible promissory notes due 2012 (including accrued and
unpaid interest thereon)
into shares
of our common stock immediately prior to the closing of this
offering, assuming an initial public offering price of
$
per share, the midpoint of the price range set forth on the
cover page of this prospectus, and assuming the conversion
occurs
on ,
2011 (the expected closing date of this offering).
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|
(3)
|
|
Pro forma as adjusted to further reflect the sale
of shares
of our common stock offered in this offering, assuming an
initial public offering price of
$
per share, the midpoint of the price range set forth on the
cover page of this prospectus, after deducting estimated
underwriting discounts and commissions and estimated offering
expenses payable by us.
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|
(4)
|
|
A $1.00 increase or decrease in the assumed initial public
offering price of
$
per share, the midpoint of the price range set forth on the
cover page of this prospectus, would increase or decrease the
pro forma as adjusted amount of each of cash, cash equivalents
and available for sale securities and each of working capital,
total assets and total stockholders equity (deficit) by
approximately
$ million,
assuming that the number of shares offered by us, as set forth
on the cover page of this prospectus, remains the same, and
after deducting estimated underwriting discounts and commissions
and estimated offering expenses payable by us.
|
9
RISK
FACTORS
Investing in our common stock involves a high degree of risk.
You should carefully consider the risks described below,
together with the other information contained in this
prospectus, including our financial statements and the related
notes appearing at the end of this prospectus, before making
your decision to invest in shares of our common stock.
Additional risks not presently known to us or that we currently
deem immaterial may also impair our business operations. We
cannot assure you that any of the events discussed in the risk
factors below will not occur. These risks could have a material
and adverse impact on our business, results of operations,
financial condition and cash flows. If that were to happen, the
trading price of our common stock could decline, and you could
lose all or part of your investment.
This prospectus also contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ
materially from those anticipated in these forward-looking
statements as a result of certain factors, including the risks
faced by us described below and elsewhere in this prospectus.
See Cautionary Note Regarding Forward-Looking Statements
and Industry Data for information relating to these
forward-looking statements.
Risks
Related to Our Financial Position and Capital
Requirements
We
have incurred significant losses since our inception and
anticipate that we will continue to incur losses for the
foreseeable future. We are a clinical-stage company with no
approved products, and no historical revenues, which makes it
difficult to assess our future viability.
We are a clinical-stage biopharmaceutical company with a limited
operating history. Biopharmaceutical product development is a
highly speculative undertaking and involves a substantial degree
of risk. We have focused primarily on in-licensing and
developing our product candidates, CO-101,
CO-1686
and
CO-338. We are not profitable and have incurred losses in each
year since our inception in April 2009. Because we were only
recently formed, we have only a limited operating history upon
which you can evaluate our business and prospects. In addition,
as an early stage company, we have limited experience and have
not yet demonstrated an ability to successfully overcome many of
the risks and uncertainties frequently encountered by companies
in new and rapidly evolving fields, particularly in the
biopharmaceutical area. We have not generated any revenue from
product sales to date. We continue to incur significant research
and development and other expenses related to our ongoing
operations. Our net loss for the year ended December 31,
2010 and for the three months ended March 31, 2011 was
approximately $37.8 million and approximately
$8.3 million, respectively. As of March 31, 2011, we
had an accumulated deficit of $63.3 million. We expect to
continue to incur losses for the foreseeable future, and we
expect these losses to increase as we continue our development
of, and seek regulatory approvals for, our product candidates,
and begin to commercialize any approved products. As such, we
are subject to all of the risks incident in the development of
new biopharmaceutical products and related companion
diagnostics, and we may encounter unforeseen expenses,
difficulties, complications, delays and other unknown factors
that may adversely affect our business. If any of our product
candidates fail in clinical trials or do not gain regulatory
approval, or if any of our product candidates, if approved, fail
to achieve market acceptance, we may never become profitable.
Even if we achieve profitability in the future, we may not be
able to sustain profitability in subsequent periods. Our prior
losses, combined with expected future losses, have had and will
continue to have an adverse effect on our stockholders
equity and working capital.
If we
fail to obtain additional financing, we may be unable to
complete the development and commercialization of our product
candidates, or continue our development programs. In addition,
the report of our independent registered public accounting firm
on our financial statements appearing at the end of this
prospectus contains an explanatory paragraph stating that our
recurring losses raise substantial doubt about our ability to
continue as a going concern.
Our operations have consumed substantial amounts of cash since
inception. We expect to continue to spend substantial amounts to
advance the clinical development of our product candidates and
launch and commercialize any product candidates for which we
receive regulatory approval, including building our own
commercial organizations to address certain markets.
10
The report of our independent registered public accounting firm
on our financial statements appearing at the end of this
prospectus contains an explanatory paragraph stating that our
recurring losses from operations raise substantial doubt about
our ability to continue as a going concern. We estimate that our
net proceeds from this offering will be approximately
$ million, based upon an
assumed initial public offering price of
$ per share, the midpoint of the
price range set forth on the cover page of this prospectus,
after deducting estimated underwriting discounts and commissions
and estimated offering expenses payable by us. We expect that
the net proceeds from this offering, together with our existing
cash and cash equivalents will be sufficient to fund our capital
requirements for at least the next 12 months. We will
require additional capital for the further development and
commercialization of our product candidates and may also need to
raise additional funds sooner if we choose to expand more
rapidly than we presently anticipate.
We cannot be certain that additional funding will be available
on acceptable terms, or at all. If we are unable to raise
additional capital in sufficient amounts or on terms acceptable
to us we may have to significantly delay, scale back or
discontinue the development or commercialization of one or more
of our product candidates. We may also seek collaborators for
one or more of our current or future product candidates at an
earlier stage than otherwise would be desirable or on terms that
are less favorable than might otherwise be available. Any of
these events could significantly harm our business, financial
condition and prospects.
Risks
Related to Our Business and Industry
We are
heavily dependent on the success of our three product
candidates, two of which are in clinical development, and one of
which is in preclinical development, and we cannot give any
assurance that any of our product candidates will receive
regulatory approval, which is necessary before they can be
commercialized.
To date, we have invested a significant portion of our efforts
and financial resources in the acquisition and development of
our product candidates. Our future success is substantially
dependent on our ability to successfully develop, obtain
regulatory approval for, and then successfully commercialize
such product candidates. Two of our product candidates, CO-101
and CO-338, are in clinical trials, while our third product
candidate,
CO-1686,
is
in preclinical development. Our business depends entirely on the
successful development and commercialization of our product
candidates, which may never occur. We currently generate no
revenues from sales of any drugs, and we may never be able to
develop or commercialize a marketable drug.
Each of our product candidates will require additional clinical
development, management of clinical, preclinical and
manufacturing activities, regulatory approval in multiple
jurisdictions, obtaining manufacturing supply, building of a
commercial organization, substantial investment and significant
marketing efforts before we generate any revenues from product
sales. We are not permitted to market or promote any of our
product candidates before we receive regulatory approval from
the FDA or comparable foreign regulatory authorities, and we may
never receive such regulatory approval for any of our product
candidates. We believe that, depending on the result of our
current CO-101 clinical trial, this trial may serve as a pivotal
trial to support our application for approval of CO-101. To the
extent that the results of the trial are not satisfactory to the
FDA or the EMA for support of an NDA or MAA, respectively, with
respect to CO-101, we will be required to expend significant
additional resources to conduct additional clinical trials in
support of approval of
CO-101.
In
addition, many of our product development programs contemplate
the development of companion diagnostics by our
third-party
collaborators. Companion diagnostics are subject to regulation
as medical devices and must themselves be approved for marketing
by the FDA or certain other foreign regulatory agencies before
we may commercialize our product candidates.
We have not previously submitted an NDA to the FDA, or similar
drug approval filings to comparable foreign authorities, for any
product candidate, and we cannot be certain that any of our
product candidates will be successful in clinical trials or
receive regulatory approval. Further, our product candidates may
not receive regulatory approval even if they are successful in
clinical trials. If we do not receive regulatory approvals for
our product candidates, we may not be able to continue our
operations. Even if we successfully obtain regulatory approvals
to market one or more of our product candidates, our revenues
will be dependent, in part, upon our collaborators ability
to obtain regulatory approval of the companion diagnostics to be
used with our product candidates, as well as the size of the
markets in the territories for which we gain regulatory approval
and have commercial rights. If the markets for
11
patient subsets that we are targeting are not as significant as
we estimate, we may not generate significant revenues from sales
of such products, if approved.
We plan to seek regulatory approval to commercialize our product
candidates both in the United States, the European Union and in
additional foreign countries. While the scope of regulatory
approval is similar in other countries, to obtain separate
regulatory approval in many other countries we must comply with
numerous and varying regulatory requirements of such countries
regarding safety and efficacy and governing, among other things,
clinical trials and commercial sales, pricing and distribution
of our product candidates, and we cannot predict success in
these jurisdictions.
Clinical
drug development involves a lengthy and expensive process with
an uncertain outcome, and results of earlier studies and trials
may not be predictive of future trial results.
Clinical testing is expensive and can take many years to
complete, and its outcome is inherently uncertain. Failure can
occur at any time during the clinical trial process. The results
of preclinical studies and early clinical trials of our product
candidates may not be predictive of the results of later-stage
clinical trials. For example, the positive results generated to
date in clinical trials for CO-101 and CO-338 do not ensure that
later clinical trials will demonstrate similar results. Product
candidates in later stages of clinical trials may fail to show
the desired safety and efficacy traits despite having progressed
through preclinical studies and initial clinical trials. A
number of companies in the biopharmaceutical industry have
suffered significant setbacks in advanced clinical trials due to
lack of efficacy or adverse safety profiles, notwithstanding
promising results in earlier trials. Our future clinical trial
results may not be successful.
Although we have clinical trials ongoing for CO-101 and CO-338,
and although we are planning to initiate clinical trials for
CO-1686 in the first half of 2012, we may experience delays in
our ongoing clinical trials and we do not know whether planned
clinical trials will begin on time, need to be redesigned,
enroll patients on time or be completed on schedule, if at all.
Clinical trials can be delayed for a variety of reasons,
including delays related to:
|
|
|
|
|
obtaining regulatory approval to commence a trial;
|
|
|
|
reaching agreement on acceptable terms with prospective contract
research organizations, or CROs, and clinical trial sites, the
terms of which can be subject to extensive negotiation and may
vary significantly among different CROs and trial sites;
|
|
|
|
obtaining institutional review board, or IRB, approval at each
site;
|
|
|
|
recruiting suitable patients to participate in a trial;
|
|
|
|
developing and validating companion diagnostics on a timely
basis;
|
|
|
|
having patients complete a trial or return for post-treatment
follow-up;
|
|
|
|
clinical sites deviating from trial protocol or dropping out of
a trial;
|
|
|
|
adding new clinical trial sites; or
|
|
|
|
manufacturing sufficient quantities of product candidate for use
in clinical trials.
|
Patient enrollment, a significant factor in the timing of
clinical trials, is affected by many factors including the size
and nature of the patient population, the proximity of patients
to clinical sites, the eligibility criteria for the trial, the
design of the clinical trial, competing clinical trials and
clinicians and patients perceptions as to the
potential advantages of the drug being studied in relation to
other available therapies, including any new drugs that may be
approved for the indications we are investigating. Furthermore,
we rely on CROs and clinical trial sites to ensure the proper
and timely conduct of our clinical trials and while we have
agreements governing their committed activities, we have limited
influence over their actual performance.
We could encounter delays if a clinical trial is suspended or
terminated by us, by the IRBs of the institutions in which such
trials are being conducted, by the Data Safety Monitoring Board,
or DSMB, for such trial or by the FDA or other regulatory
authorities. Such authorities may impose such a suspension or
termination due to a number of factors, including failure to
conduct the clinical trial in accordance with regulatory
requirements or our clinical
12
protocols, inspection of the clinical trial operations or trial
site by the FDA or other regulatory authorities resulting in the
imposition of a clinical hold, unforeseen safety issues or
adverse side effects, failure to demonstrate a benefit from
using a drug, changes in governmental regulations or
administrative actions or lack of adequate funding to continue
the clinical trial. If we experience delays in the completion
of, or termination of, any clinical trial of our product
candidates, the commercial prospects of our product candidates
will be harmed, and our ability to generate product revenues
from any of these product candidates will be delayed. In
addition, any delays in completing our clinical trials will
increase our costs, slow down our product candidate development
and approval process and jeopardize our ability to commence
product sales and generate revenues. Any of these occurrences
may harm our business, financial condition and prospects
significantly. In addition, many of the factors that cause, or
lead to, a delay in the commencement or completion of clinical
trials may also ultimately lead to the denial of regulatory
approval of our product candidates.
In addition, we only recently entered into a license agreement
with Pfizer with respect to
CO-338
and
have not previously been involved in the development of that
product candidate. We may experience difficulties in the
transition of this product candidate from Pfizer to us, which
may result in delays in clinical trials as well as problems in
our development efforts and regulatory filings, particularly if
we do not receive all of the necessary information and data from
Pfizer in a timely manner. These problems could result in
increased costs and delays in the development of CO-338 which
could adversely affect any future revenues from this product
candidate.
The
regulatory approval processes of the FDA and comparable foreign
authorities are lengthy, time consuming and inherently
unpredictable, and if we are ultimately unable to obtain
regulatory approval for our product candidates, our business
will be substantially harmed.
The time required to obtain approval by the FDA and comparable
foreign authorities is unpredictable but typically takes many
years following the commencement of clinical trials, depending
upon numerous factors. In addition, approval policies,
regulations, or the type and amount of clinical data necessary
to gain approval may change during the course of a product
candidates clinical development. We have not obtained
regulatory approval for any product candidate.
Our product candidates could fail to receive regulatory approval
for many reasons, including the following:
|
|
|
|
|
the FDA or comparable foreign regulatory authorities may
disagree with the design or implementation of our clinical
trials;
|
|
|
|
we may be unable to demonstrate to the satisfaction of the FDA
or comparable foreign regulatory authorities that a product
candidate is safe and effective for its proposed indication;
|
|
|
|
the results of clinical trials may not meet the level of
statistical significance required by the FDA or comparable
foreign regulatory authorities for approval;
|
|
|
|
we may be unable to demonstrate that a product candidates
clinical and other benefits outweigh its safety risks;
|
|
|
|
the FDA or comparable foreign regulatory authorities may
disagree with our interpretation of data from preclinical
studies or clinical trials;
|
|
|
|
the data collected from clinical trials of our product
candidates may not be sufficient to support the submission of an
NDA or other submission or to obtain regulatory approval in the
United States or elsewhere;
|
|
|
|
the FDA or comparable foreign regulatory authorities may fail to
approve the manufacturing processes or facilities of third-party
manufacturers with which we contract for clinical and commercial
supplies;
|
|
|
|
the FDA or comparable foreign regulatory authorities may fail to
approve the companion diagnostics we contemplate developing with
partners; and
|
|
|
|
the approval policies or regulations of the FDA or comparable
foreign regulatory authorities may significantly change in a
manner rendering our clinical data insufficient for approval.
|
13
This lengthy approval process as well as the unpredictability of
future clinical trial results may result in our failing to
obtain regulatory approval to market CO-101, CO-338 and CO-1686,
which would significantly harm our business, results of
operations and prospects.
In addition, even if we were to obtain approval, regulatory
authorities may approve any of our product candidates for fewer
or more limited indications than we request, may grant approval
contingent on the performance of costly post-marketing clinical
trials, or may approve a product candidate with a label that
does not include the labeling claims necessary or desirable for
the successful commercialization of that product candidate. Any
of the foregoing scenarios could materially harm the commercial
prospects for our product candidates.
Our
product candidates may cause undesirable side effects or have
other properties that could delay or prevent their regulatory
approval, limit the commercial profile of an approved label, or
result in significant negative consequences following marketing
approval, if any.
Undesirable side effects caused by our product candidates could
cause us or regulatory authorities to interrupt, delay or halt
clinical trials and could result in a more restrictive label or
the delay or denial of regulatory approval by the FDA or other
comparable foreign authorities. To date, patients treated with
CO-101 have experienced drug-related side effects including
nausea, vomiting, anorexia, fatigue and myelosuppression and
those treated with CO-338 have experienced drug-related side
effects such as nausea and vomiting. While we have not yet
initiated clinical trials for CO-1686, as is the case with all
oncology drugs, it is likely that there may be side effects
associated with its use. Results of our trials could reveal a
high and unacceptable severity and prevalence of these or other
side effects. In such an event, our trials could be suspended or
terminated and the FDA or comparable foreign regulatory
authorities could order us to cease further development of or
deny approval of our product candidates for any or all targeted
indications. The drug-related side effects could affect patient
recruitment or the ability of enrolled patients to complete the
trial or result in potential product liability claims. Any of
these occurrences may harm our business, financial condition and
prospects significantly.
Additionally if one or more of our product candidates receives
marketing approval, and we or others later identify undesirable
side effects caused by such products, a number of potentially
significant negative consequences could result, including:
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regulatory authorities may withdraw approvals of such product;
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regulatory authorities may require additional warnings on the
label;
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we may be required to create a medication guide outlining the
risks of such side effects for distribution to patients;
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we could be sued and held liable for harm caused to
patients; 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 particular product
candidate, if approved, and could significantly harm our
business, results of operations and prospects.
Failure
to successfully validate, develop and obtain regulatory approval
for companion diagnostics could harm our drug development
strategy.
As one of the key elements of our clinical development strategy,
we seek to identify patient subsets within a disease category
who may derive selective and meaningful benefit from the product
candidates we are developing. In collaboration with partners, we
plan to develop companion diagnostics to help us to more
accurately identify patients within a particular subset, both
during our clinical trials and in connection with the
commercialization of our product candidates. Companion
diagnostics are subject to regulation by the FDA and comparable
foreign regulatory authorities as medical devices and require
separate regulatory approval prior to commercialization. We are
dependent on the sustained cooperation and effort of our
third-party collaborators in developing and obtaining approval
for these companion diagnostics. We and our collaborators may
encounter difficulties in developing and obtaining approval for
the companion diagnostics, including issues relating to
selectivity/specificity, analytical validation, reproducibility,
or clinical validation. Any delay or failure by our
collaborators to develop or obtain
14
regulatory approval of the companion diagnostics could delay or
prevent approval of our product candidates. In addition, our
collaborators may encounter production difficulties that could
constrain the supply of the companion diagnostics, and both they
and we may have difficulties gaining acceptance of the use of
the companion diagnostics in the clinical community. If such
companion diagnostics fail to gain market acceptance, it would
have an adverse effect on our ability to derive revenues from
sales of our products. In addition, the diagnostic company with
whom we contract may decide to discontinue selling or
manufacturing the companion diagnostic that we anticipate using
in connection with development and commercialization of our
product candidates or our relationship with such diagnostic
company may otherwise terminate. We may not be able to enter
into arrangements with another diagnostic company to obtain
supplies of an alternative diagnostic test for use in connection
with the development and commercialization of our product
candidates or do so on commercially reasonable terms, which
could adversely affect
and/or
delay
the development or commercialization of our product candidates.
If we
establish the hENT1 cut-off improperly, or if our LEAP trial
results do not support the hENT1 hypothesis, we could jeopardize
our potential for success with
CO-101.
Retrospective analysis of tissue samples has shown a correlation
between hENT1 expression levels and response to gemcitabine
therapy such that patients with low levels of hENT1 expression
are believed to derive little or no benefit from the drug. Our
ongoing pivotal trial will, to our knowledge, be the first
clinical trial to prospectively identify patients as hENT1-low
and to then correlate their response to CO-101 versus
gemcitabine. We will utilize both previously published research
data, as well as the data we derive from our own retrospective
analysis of tissue samples, to reach a judgment as to those
pancreatic cancer patients whose level of hENT1 expression we
will characterize as hENT1-low. If we set the
cut-off too high (to cover a broader range of patients), we may
reduce our chances of being able to show a statistically
significant improvement in the rate of survival in the patients
classified as hENT1-low, and thereby fail to meet the
pre-defined endpoint of the trial. Conversely, if we are overly
conservative in our judgment of classifying patients as
hENT1-low, we may improve our chance of success in achieving the
pre-defined endpoint, but at the cost of limiting the
prescribing label on CO-101 to such a small subset of potential
patients as to significantly constrain the commercial potential
for this product candidate, if approved. Finally, we will
establish our hENT1 cut-off based on tissue samples that came
from primary pancreatic tumors, but are using tissue samples
from metastatic cancer sites to define the hENT1 status of the
patients in the trial. While there are limited data that suggest
that the hENT1 status is generally consistent between metastatic
and primary tumors, this may not be the case in the clinical
setting, which could adversely affect the outcome of the trial.
There have been multiple publications addressing the
relationship between hENT1 levels and gemcitabine treatment
outcomes. To date, all of these publications have suggested the
same relationship, namely that hENT1-high patients tend to
respond better to gemcitabine therapy than hENT1-low patients.
It is possible that other retrospective analyses of tissue
samples may be published that do not reflect this correlation.
Moreover, none of such studies have attempted to do what our
LEAP trial is designed to do, which is to seek to prospectively
prove this hENT1 hypothesis. Accordingly, we bear the risk that
in a prospective, well controlled clinical trial, we may not be
able to prove the hENT1 hypothesis. Our failure to achieve the
predefined endpoints of the LEAP trial that support this hENT1
hypothesis would have an adverse impact on our ability to obtain
approval for CO-101 and on our business, financial condition and
prospects.
If we
are unable to obtain regulatory approval of our product
candidates, we will not be able to commercialize them and our
business will be adversely impacted.
The FDA, the EMA and other comparable foreign regulatory
authorities each have substantial discretion in the approval
process and may either refuse to consider our application for
substantive review or may form the opinion after review of our
data that our application is insufficient to allow approval of
our product candidates. Approval procedures vary among
jurisdictions and can involve requirements and administrative
review periods different from, and greater than, those in the
United States. One of our primary strategies is to leverage the
same data from a small number of global clinical studies to
obtain regulatory approval in multiple jurisdictions. To the
extent that approval procedures vary significantly, we may be
unable to implement this strategy and achieve the time and cost
savings we anticipate from managing our global regulatory
operations. Moreover, any approvals that we obtain may not cover
all of the clinical indications for which we are seeking
approval, or could contain significant limitations in
15
the form of narrow indications, warnings, precautions or
contra-indications with respect to conditions of use. In such an
event, our ability to generate revenues from such products would
be greatly reduced and our business would be harmed.
If a regulatory authority does not consider or approve our
application, it may require that we conduct additional clinical,
preclinical or manufacturing validation studies and submit that
data before it will reconsider our application. Depending on the
extent of these or any other studies, approval of any
applications that we submit may be delayed by several years, or
may require us to expend more resources than we have available.
It is also possible that additional studies, if performed and
completed, may not be successful or considered sufficient by the
applicable regulatory authority for approval or even to make our
applications approvable. If any of these outcomes occur, we may
be forced to abandon one or more of our applications for
approval, which might significantly harm our business and
prospects.
Even if we do receive regulatory approval to market a product
candidate, any such approval may be subject to limitations on
the indicated uses for which we may market the product. It is
possible that none of our existing product candidates or any
product candidates we may seek to develop in the future will
ever obtain the appropriate regulatory approvals necessary for
us to commence product sales. In many countries outside the
United States, a product candidate must be approved for
reimbursement before it can be approved for sale in that
country. In some cases, the price that we intend to charge for
our product is also subject to approval. Any delay in obtaining,
or an inability to obtain, applicable regulatory approvals would
prevent us from commercializing our product candidates,
generating revenues and achieving and sustaining profitability.
We
rely on third parties to conduct our preclinical and clinical
trials. If these third parties do not successfully carry out
their contractual duties or meet expected deadlines, we may not
be able to obtain regulatory approval for or commercialize our
product candidates and our business could be substantially
harmed.
We have relied upon and plan to continue to rely upon
third-party CROs to monitor and manage data for our ongoing
preclinical and clinical programs. We rely heavily on these
parties for execution of our preclinical and clinical trials,
and control only certain aspects of their activities.
Nevertheless, we are responsible for ensuring that each of our
studies is conducted in accordance with the applicable protocol,
legal, regulatory and scientific standards and our reliance on
the CROs does not relieve us of our regulatory responsibilities.
We and our CROs are required to comply with current good
clinical practices, or cGCP, which are regulations and
guidelines enforced by the FDA, the Competent Authorities of the
Member States of the European Economic Area, or EEA, and
comparable foreign regulatory authorities for all of our
products in clinical development. Regulatory authorities enforce
these cGCPs through periodic inspections of trial sponsors,
principal investigators and trial sites. If we or any of our
CROs fail to comply with applicable cGCPs, the clinical data
generated in our clinical trials may be deemed unreliable and
the FDA, EMA or comparable foreign regulatory authorities may
require us to perform additional clinical trials before
approving our marketing applications. We cannot assure you that
upon inspection by a given regulatory authority, such regulatory
authority will determine that any of our clinical trials comply
with cGCP regulations. In addition, our clinical trials must be
conducted with product produced under cGMP regulations. Our
failure to comply with these regulations may require us to
repeat clinical trials, which would delay the regulatory
approval process.
Our CROs have the right to terminate their agreements with us in
the event of an uncured material breach. In addition, some of
our CROs have an ability to terminate their respective
agreements with us if it can be reasonably demonstrated that the
safety of the subjects participating in our clinical trials
warrants such termination, if we make a general assignment for
the benefit of our creditors or if we are liquidated.
If any of our relationships with these third-party CROs
terminate, we may not be able to enter into arrangements with
alternative CROs or to do so on commercially reasonable terms.
In addition, our CROs are not our employees, and except for
remedies available to us under our agreements with such CROs, we
cannot control whether or not they devote sufficient time and
resources to our on-going clinical, nonclinical and preclinical
programs. If CROs do not successfully carry out their
contractual duties or obligations or meet expected deadlines, if
they need to be replaced or if the quality or accuracy of the
clinical data they obtain is compromised due to the failure to
adhere to our clinical protocols, regulatory requirements or for
other reasons, our clinical trials may be
16
extended, delayed or terminated and we may not be able to obtain
regulatory approval for or successfully commercialize our
product candidates. As a result, our results of operations and
the commercial prospects for our product candidates would be
harmed, our costs could increase and our ability to generate
revenues could be delayed.
Switching or adding additional CROs involves substantial cost
and requires extensive management time and focus. In addition,
there is a natural transition period when a new CRO commences
work. As a result, delays occur, which can materially impact our
ability to meet our desired clinical development timelines.
Though we carefully manage our relationships with our CROs,
there can be no assurance that we will not encounter similar
challenges or delays in the future or that these delays or
challenges will not have a material adverse impact on our
business, financial condition and prospects.
We
rely completely on third parties to manufacture our preclinical
and clinical drug supplies and we intend to rely on third
parties to produce commercial supplies of any approved product
candidate, and our commercialization of any of our product
candidates could be stopped, delayed or made less profitable if
those third parties fail to obtain approval of the FDA,
Competent Authorities of the Member States of the EEA or
comparable regulatory authorities, fail to provide us with
sufficient quantities of drug product or fail to do so at
acceptable quality levels or prices.
We do not currently have nor do we plan to acquire the
infrastructure or capability internally to manufacture our
preclinical and clinical drug supplies for use in the conduct of
our clinical trials and we lack the resources and the capability
to manufacture any of our product candidates on a clinical or
commercial scale. The facilities used by our contract
manufacturers to manufacture our product candidates must be
approved by the FDA pursuant to inspections that will be
conducted after we submit our NDA to the FDA. We do not control
the manufacturing process of, and are completely dependent on,
our contract manufacturing partners for compliance with the
regulatory requirements, known as current good manufacturing
practices, or cGMPs, for manufacture of both active drug
substances and finished drug products. If our contract
manufacturers cannot successfully manufacture material that
conforms to our specifications and the strict regulatory
requirements of the FDA or others, they will not be able to
secure
and/or
maintain regulatory approval for their manufacturing facilities.
In addition, we have no control over the ability of our contract
manufacturers to maintain adequate quality control, quality
assurance and qualified personnel. If the FDA or a comparable
foreign regulatory authority does not approve these facilities
for the manufacture of our product candidates or if it withdraws
any such approval in the future, we may need to find alternative
manufacturing facilities, which would significantly impact our
ability to develop, obtain regulatory approval for or market our
product candidates, if approved.
We rely on our manufacturers to purchase from third-party
suppliers the materials necessary to produce our product
candidates for our clinical trials. There are a limited number
of suppliers for raw materials that we use to manufacture our
drugs and there may be a need to assess alternate suppliers to
prevent a possible disruption of the manufacture of the
materials necessary to produce our product candidates for our
clinical trials, and if approved, ultimately for commercial
sale. We do not have any control over the process or timing of
the acquisition of these raw materials by our manufacturers.
Moreover, we currently do not have any agreements for the
commercial production of these raw materials. Although we
generally do not begin a clinical trial unless we believe we
have a sufficient supply of a product candidate to complete the
clinical trial, any significant delay in the supply of a product
candidate, or the raw material components thereof, for an
ongoing clinical trial due to the need to replace a third-party
manufacturer could considerably delay completion of our clinical
trials, product testing and potential regulatory approval of our
product candidates. If our manufacturers or we are unable to
purchase these raw materials after regulatory approval has been
obtained for our product candidates, the commercial launch of
our product candidates would be delayed or there would be a
shortage in supply, which would impair our ability to generate
revenues from the sale of our product candidates.
We expect to continue to depend on third-party contract
manufacturers for the foreseeable future. We have not entered
into long-term agreements with our current contract
manufacturers or with any alternate fill/finish suppliers, and
though we intend to do so prior to commercial launch in order to
ensure that we maintain adequate supplies of finished drug
product, we may be unable to enter into such an agreement or do
so on commercially reasonable terms, which could have a material
adverse impact upon our business.
17
Even
if we receive regulatory approval for any of our product
candidates, we will be subject to ongoing obligations and
continued regulatory review, which may result in significant
additional expense. Additionally, our product candidates, if
approved, could be subject to labeling and other restrictions
and market withdrawal and we may be subject to penalties if we
fail to comply with regulatory requirements or experience
unanticipated problems with our products.
Any regulatory approvals that we receive for our product
candidates may also be subject to limitations on the approved
indicated uses for which the product may be marketed or to the
conditions of approval, or contain requirements for potentially
costly post-marketing testing, including Phase IV clinical
trials, and surveillance to monitor the safety and efficacy of
the product candidate. In addition, if the FDA or a comparable
foreign regulatory authority approves any of our product
candidates, the manufacturing processes, labeling, packaging,
distribution, adverse event reporting, storage, advertising,
promotion and recordkeeping for the product will be subject to
extensive and ongoing regulatory requirements. These
requirements include submissions of safety and other
post-marketing information and reports, registration, as well as
continued compliance with cGMPs and cGCPs for any clinical
trials that we conduct post-approval. Later discovery of
previously unknown problems with a product, including adverse
events of unanticipated severity or frequency, or with our
third-party manufacturers or manufacturing processes, or failure
to comply with regulatory requirements, may result in, among
other things:
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restrictions on the marketing or manufacturing of the product,
withdrawal of the product from the market, or voluntary or
mandatory product recalls;
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fines, warning letters or holds on clinical trials;
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refusal by the FDA to approve pending applications or
supplements to approved applications filed by us, or suspension
or revocation of product license approvals;
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product seizure or detention, or refusal to permit the import or
export of products; and
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injunctions or the imposition of civil or criminal penalties.
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The FDAs policies may change and additional government
regulations may be enacted that could prevent, limit or delay
regulatory approval of our product candidates. If we are slow or
unable to adapt to changes in existing requirements or the
adoption of new requirements or policies, or if we are not able
to maintain regulatory compliance, we may lose any marketing
approval that we may have obtained, which would adversely affect
our business, prospects and ability to achieve or sustain
profitability.
We
currently have no marketing and sales organization. If we are
unable to establish marketing and sales capabilities or enter
into agreements with third parties to market and sell our
product candidates, we may not be able to effectively market and
sell our product candidates, if approved, or generate product
revenues.
We currently do not have a marketing or sales organization for
the marketing, sales and distribution of pharmaceutical
products. In order to commercialize any product candidates, we
must build our marketing, sales, distribution, managerial and
other non-technical capabilities or make arrangements with third
parties to perform these services, and we may not be successful
in doing so. If our product candidates receive regulatory
approval, we intend to establish our sales and marketing
organization with technical expertise and supporting
distribution capabilities to commercialize our product
candidates, which will be expensive and time consuming. Any
failure or delay in the development of our internal sales,
marketing and distribution capabilities would adversely impact
the commercialization of these products. With respect to our
product candidates, we may choose to collaborate with third
parties that have direct sales forces and established
distribution systems, either to augment our own sales force and
distribution systems or in lieu of our own sales force and
distribution systems. If we are unable to enter into such
arrangements on acceptable terms or at all, we may not be able
to successfully commercialize any of our product candidates that
receive regulatory approval. If we are not successful in
commercializing our product candidates, either on our own or
through collaborations with one or more third parties, our
future product revenue will suffer and we may incur significant
additional losses.
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Our
commercial success depends upon attaining significant market
acceptance of our product candidates, if approved, among
physicians, patients, healthcare payors and major operators of
cancer clinics.
Even if we obtain regulatory approval for our product
candidates, the product may not gain market acceptance among
physicians, health care payors, patients and the medical
community, which are critical to commercial success. Market
acceptance of any product candidate for which we receive
approval depends on a number of factors, including:
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the efficacy and safety as demonstrated in clinical trials;
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the timing of market introduction of such product candidate as
well as competitive products;
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the clinical indications for which the drug is approved;
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the approval, availability, market acceptance and reimbursement
for the companion diagnostic;
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acceptance by physicians, major operators of cancer clinics and
patients of the drug as a safe and effective treatment;
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the potential and perceived advantages of such product candidate
over alternative treatments, especially with respect to patient
subsets that we are targeting with such product candidate;
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the safety of such product candidate seen in a broader patient
group, including its use outside the approved indications;
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the cost of treatment in relation to alternative treatments;
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the availability of adequate reimbursement and pricing by
third-party payors and government authorities;
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relative convenience and ease of administration;
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the prevalence and severity of adverse side effects; and
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the effectiveness of our sales and marketing efforts.
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If our product candidates are approved but fail to achieve an
adequate level of acceptance by physicians, health care payors
and patients, we will not be able to generate significant
revenues, and we may not become or remain profitable.
We
face significant competition from other biotechnology and
pharmaceutical companies, and our operating results will suffer
if we fail to compete effectively.
The biotechnology and pharmaceutical industries are intensely
competitive and subject to rapid and significant technological
change. In addition, the competition in the oncology market is
intense. We have competitors both in the United States and
internationally, including major multinational pharmaceutical
companies, biotechnology companies and universities and other
research institutions. Many of our competitors have
substantially greater financial, technical and other resources,
such as larger research and development staff and experienced
marketing and manufacturing organizations. Additional mergers
and acquisitions in the biotechnology and pharmaceutical
industries may result in even more resources being concentrated
in our competitors. As a result, these companies may obtain
regulatory approval more rapidly than we are able and may be
more effective in selling and marketing their products as well.
Smaller or early-stage companies may also prove to be
significant competitors, particularly through collaborative
arrangements with large, established companies. Competition may
increase further as a result of advances in the commercial
applicability of technologies and greater availability of
capital for investment in these industries. Our competitors may
succeed in developing, acquiring or licensing on an exclusive
basis drug products that are more effective or less costly than
any drug candidate that we are currently developing or that we
may develop. If approved, our product candidates will face
competition from commercially available drugs as well as drugs
that are in the development pipelines of our competitors.
Established pharmaceutical companies may invest heavily to
accelerate discovery and development of novel compounds or to
in-license novel compounds that could make our product
candidates less competitive. In addition, any new product that
competes with an approved product must demonstrate compelling
advantages in efficacy,
19
convenience, tolerability and safety in order to overcome price
competition and to be commercially successful. Accordingly, our
competitors may succeed in obtaining patent protection,
receiving FDA, EMA or other regulatory approval or discovering,
developing and commercializing medicines before we do, which
would have a material adverse impact on our business.
Reimbursement
may be limited or unavailable in certain market segments for our
product candidates, which could make it difficult for us to sell
our products profitably.
There is significant uncertainty related to the third-party
coverage and reimbursement of newly approved drugs. We intend to
seek approval to market our product candidates in the United
States, Europe and other selected foreign jurisdictions. Market
acceptance and sales of our product candidates in both domestic
and international markets will depend significantly on the
availability of adequate coverage and reimbursement from
third-party payors for any of our product candidates and may be
affected by existing and future health care reform measures.
Government authorities and third-party payors, such as private
health insurers and health maintenance organizations, decide
which drugs they will pay for and establish reimbursement
levels. Reimbursement by a third-party payor may depend upon a
number of factors, including the third-party payors
determination that use of a product is:
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a covered benefit under its health plan;
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safe, effective and medically necessary;
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appropriate for the specific patient;
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cost-effective; and
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neither experimental nor investigational.
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Obtaining coverage and reimbursement approval for a product from
a government or other third-party payor is a time consuming and
costly process that could require us to provide supporting
scientific, clinical and cost-effectiveness data for the use of
our products to the payor. We may not be able to provide data
sufficient to gain acceptance with respect to coverage and
reimbursement. If reimbursement of our future products is
unavailable or limited in scope or amount, or if pricing is set
at unsatisfactory levels, we may be unable to achieve or sustain
profitability.
In both the United States and certain foreign jurisdictions,
there have been and we expect there will continue to be a number
of legislative and regulatory changes to the health care system
that could impact our ability to sell our products profitably.
In particular, the Medicare Modernization Act of 2003 revised
the payment methodology for many products under the Medicare
program in the United States. This has resulted in lower rates
of reimbursement. In 2010, the Patient Protection and Affordable
Care Act, as amended by the Health Care and Education
Reconciliation Act, collectively, the Healthcare Reform Law, was
enacted. The Healthcare Reform Law substantially changes the way
healthcare is financed by both governmental and private insurers
and significantly affects the pharmaceutical industry. Among the
provisions of the Healthcare Reform Law of greatest importance
to the pharmaceutical industry are the following:
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an annual, nondeductible fee on any entity that manufactures or
imports certain branded prescription drugs and biologic agents,
beginning in 2011;
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an increase in the minimum rebates a manufacturer must pay under
the Medicaid Drug Rebate Program;
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a new Medicare Part D coverage gap discount program, under
which manufacturers must agree to offer 50 percent
point-of-sale
discounts off negotiated prices of applicable brand drugs to
eligible beneficiaries during their coverage gap period, as a
condition for the manufacturers outpatient drugs to be
covered under Medicare Part D, beginning in 2011;
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extension of manufacturers Medicaid rebate liability to
covered drugs dispensed to individuals who are enrolled in
Medicaid managed care organizations, effective March 23,
2010;
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expansion of the entities eligible for discounts under the
Public Health Service pharmaceutical pricing program, effective
January 2010;
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a licensure framework for follow-on biologic products; and
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a new Patient-Centered Outcomes Research Institute to oversee,
identify priorities in, and conduct comparative clinical
effectiveness research.
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There have been, and likely will continue to be, legislative and
regulatory proposals at the federal and state levels directed at
broadening the availability of healthcare and containing or
lowering the cost of healthcare. We cannot predict the
initiatives that may be adopted in the future. The continuing
efforts of the government, insurance companies, managed care
organizations and other payors of healthcare services to contain
or reduce costs of healthcare may adversely affect:
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the demand for any drug products for which we may obtain
regulatory approval;
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our ability to set a price that we believe is fair for our
products;
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our ability to generate revenues and achieve or maintain
profitability;
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the level of taxes that we are required to pay; and
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the availability of capital.
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In addition, governments may impose price controls, which may
adversely affect our future profitability.
In some foreign countries, particularly in the European Union,
the pricing of prescription pharmaceuticals is subject to
governmental control. In these countries, pricing negotiations
with governmental authorities can take considerable time after
the receipt of marketing approval for a product candidate. To
obtain reimbursement or pricing approval in some countries, we
may be required to conduct additional clinical trials that
compare the cost-effectiveness of our product candidates to
other available therapies. If reimbursement of our product
candidates is unavailable or limited in scope or amount in a
particular country, or if pricing is set at unsatisfactory
levels, we may be unable to achieve or sustain profitability of
our products in such country.
If we
are not successful in attracting and retaining highly qualified
personnel, we may not be able to successfully implement our
business strategy.
Our industry has experienced a high rate of turnover of
management personnel in recent years. Our ability to compete in
the highly competitive biotechnology and pharmaceuticals
industries depends upon our ability to attract and retain highly
qualified managerial, scientific and medical personnel. We are
highly dependent on our management, scientific and medical
personnel, especially Patrick J. Mahaffy, our President and
Chief Executive Officer, Erle T. Mast, our Executive Vice
President and Chief Financial Officer, Andrew R. Allen, our
Executive Vice President of Clinical and Pre-Clinical
Development and Chief Medical Officer, and Gillian C.
Ivers-Read, our Executive Vice President, Technical Operations
and Chief Regulatory Officer, whose services are critical to the
successful implementation of our product candidate acquisition,
development and regulatory strategies. We are not aware of any
present intention of any of these individuals to leave our
company. In order to induce valuable employees to continue their
employment with us, we have provided stock options that vest
over time. The value to employees of stock options that vest
over time is significantly affected by movements in our stock
price that are beyond our control, and may at any time be
insufficient to counteract more lucrative offers from other
companies.
Despite our efforts to retain valuable employees, members of our
management, scientific and development teams may terminate their
employment with us on short notice. Our employment arrangements
provide for at-will employment, which means that any of our
employees could leave our employment at any time, with or
without notice. The loss of the services of any of our executive
officers or other key employees and our inability to find
suitable replacements could potentially harm our business,
financial condition and prospects. Our success also depends on
our ability to continue to attract, retain and motivate highly
skilled junior, mid-level, and senior managers as well as
junior, mid-level, and senior scientific and medical personnel.
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We may not be able to attract or retain qualified management and
scientific personnel in the future due to the intense
competition for a limited number of qualified personnel among
biopharmaceutical, biotechnology, pharmaceutical and other
businesses. Many of the other pharmaceutical companies that we
compete against for qualified personnel have greater financial
and other resources, different risk profiles and a longer
history in the industry than we do. They also may provide more
diverse opportunities and better chances for career advancement.
Some of these characteristics may be more appealing to high
quality candidates than what we have to offer. If we are unable
to continue to attract and retain high quality personnel, the
rate and success at which we can develop and commercialize
product candidates will be limited.
We
will need to grow the size of our organization, and we may
experience difficulties in managing this growth.
As of June 1, 2011, we had 38 full-time employees. As
our development and commercialization plans and strategies
develop, we expect to need additional managerial, operational,
sales, marketing, financial and other resources. Future growth
would impose significant added responsibilities on members of
management, including:
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managing our clinical trials effectively;
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identifying, recruiting, maintaining, motivating and integrating
additional employees;
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managing our internal development efforts effectively while
complying with our contractual obligations to licensors,
licensees, contractors and other third parties;
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improving our managerial, development, operational and finance
systems; and
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expanding our facilities.
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As our operations expand, we expect that we will need to manage
additional relationships with various strategic partners,
suppliers and other third parties. Our future financial
performance and our ability to commercialize our product
candidates and to compete effectively will depend, in part, on
our ability to manage any future growth effectively. To that
end, we must be able to manage our development efforts and
clinical trials effectively and hire, train and integrate
additional management, administrative and sales and marketing
personnel. We may not be able to accomplish these tasks, and our
failure to accomplish any of them could prevent us from
successfully growing our company.
Our
employees may engage in misconduct or other improper activities,
including noncompliance with regulatory standards and
requirements, which could have a material adverse effect on our
business.
We are exposed to the risk of employee fraud or other
misconduct. Misconduct by employees could include intentional
failures to comply with FDA regulations, provide accurate
information to the FDA, comply with manufacturing standards we
have established, comply with federal and state health-care
fraud and abuse laws and regulations, report financial
information or data accurately or disclose unauthorized
activities to us. In particular, sales, marketing and business
arrangements in the healthcare industry are subject to extensive
laws and regulations intended to prevent fraud, kickbacks,
self-dealing and other abusive practices. These laws and
regulations may restrict or prohibit a wide range of pricing,
discounting, marketing and promotion, sales commission, customer
incentive programs and other business arrangements. Employee
misconduct could also involve the improper use of information
obtained in the course of clinical trials, which could result in
regulatory sanctions and serious harm to our reputation. In
connection with this offering, we will adopt a Code of Business
Ethics, but it is not always possible to identify and deter
employee misconduct, and the precautions we take to detect and
prevent this activity may not be effective in controlling
unknown or unmanaged risks or losses or in protecting us from
governmental investigations or other actions or lawsuits
stemming from a failure to be in compliance with such laws or
regulations. If any such actions are instituted against us, and
we are not successful in defending ourselves or asserting our
rights, those actions could have a significant impact on our
business and results of operations, including the imposition of
significant fines or other sanctions.
22
We may
be subject, directly or indirectly, to federal and state
healthcare fraud and abuse laws, false claims laws and health
information privacy and security laws. If we are unable to
comply, or have not fully complied, with such laws, we could
face substantial penalties.
If we obtain FDA approval for any of our product candidates and
begin commercializing those products in the United States, our
operations may be directly, or indirectly through our customers,
subject to various federal and state fraud and abuse laws,
including, without limitation, the federal Anti-Kickback Statute
and the federal False Claims Act. These laws may impact, among
other things, our proposed sales, marketing and education
programs. In addition, we may be subject to patient privacy
regulation by both the federal government and the states in
which we conduct our business. The laws that may affect our
ability to operate include:
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the federal Anti-Kickback Statute, which prohibits, among other
things, persons from knowingly and willfully soliciting,
receiving, offering or paying remuneration, directly or
indirectly, to induce, or in return for, the purchase or
recommendation of an item or service reimbursable under a
federal healthcare program, such as the Medicare and Medicaid
programs;
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federal civil and criminal false claims laws and civil monetary
penalty laws, which prohibit, among other things, individuals or
entities from knowingly presenting, or causing to be presented,
claims for payment from Medicare, Medicaid, or other third-party
payers that are false or fraudulent;
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the federal Health Insurance Portability and Accountability Act
of 1996, or HIPAA, which created new federal criminal statutes
that prohibit executing a scheme to defraud any healthcare
benefit program and making false statements relating to
healthcare matters;
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HIPAA, as amended by the Health Information Technology and
Clinical Health Act, or HITECH, and its implementing
regulations, which imposes certain requirements relating to the
privacy, security and transmission of individually identifiable
health information; and
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state law equivalents of each of the above federal laws, such as
anti-kickback and false claims laws which may apply to items or
services reimbursed by any third-party payer, including
commercial insurers, and state laws governing the privacy and
security of health information in certain circumstances, many of
which differ from each other in significant ways and may not
have the same effect, thus complicating compliance efforts.
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If our operations are found to be in violation of any of the
laws described above or any other governmental regulations that
apply to us, we may be subject to penalties, including civil and
criminal penalties, damages, fines and the curtailment or
restructuring of our operations, any of which could adversely
affect our ability to operate our business and our results of
operations.
If
product liability lawsuits are brought against us, we may incur
substantial liabilities and may be required to limit
commercialization of our product candidates.
We face an inherent risk of product liability as a result of the
clinical testing of our product candidates and will face an even
greater risk if we commercialize any products. For example, we
may be sued if any product we develop allegedly causes injury or
is found to be otherwise unsuitable during product testing,
manufacturing, marketing or sale. Any such product liability
claims may include allegations of defects in manufacturing,
defects in design, a failure to warn of dangers inherent in the
product, negligence, strict liability, and a breach of
warranties. Claims could also be asserted under state consumer
protection acts. If we cannot successfully defend ourselves
against product liability claims, we may incur substantial
liabilities or be required to limit commercialization of our
product candidates, if approved. Even successful defense would
require significant financial and management resources.
Regardless of the merits or eventual outcome, liability claims
may result in:
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decreased demand for our product candidates or products that we
may develop;
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injury to our reputation;
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withdrawal of clinical trial participants;
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initiation of investigations by regulators;
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costs to defend the related litigation;
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a diversion of managements time and our resources;
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substantial monetary awards to trial participants or patients;
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product recalls, withdrawals or labeling, marketing or
promotional restrictions;
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loss of revenues from product sales; and
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the inability to commercialize our product candidates.
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Our inability to obtain and retain sufficient product liability
insurance at an acceptable cost to protect against potential
product liability claims could prevent or inhibit the
commercialization of products we develop. We currently carry
$5.0 million of product liability insurance, which we
believe is adequate for our clinical trials. Although we
maintain such insurance, any claim that may be brought against
us could result in a court judgment or settlement in an amount
that is not covered, in whole or in part, by our insurance or
that is in excess of the limits of our insurance coverage. Our
insurance policies also have various exclusions, and we may be
subject to a product liability claim for which we have no
coverage. We will have to pay any amounts awarded by a court or
negotiated in a settlement that exceed our coverage limitations
or that are not covered by our insurance, and we may not have,
or be able to obtain, sufficient capital to pay such amounts.
Our
ability to utilize our net operating loss carryforwards and
certain other tax attributes may be limited.
We have incurred substantial losses during our history and do
not expect to become profitable in 2011 and may never achieve
profitability. To the extent that we continue to generate
taxable losses, unused losses will carry forward to offset
future taxable income, if any, until such unused losses expire.
Under Section 382 of the Internal Revenue Code of 1986, as
amended, or the Code, if a corporation undergoes an
ownership change (generally defined as a greater
than 50% change (by value) in its equity ownership over a three
year period), the corporations ability to use its
pre-change net operating loss carryforwards and other pre-change
tax attributes to offset its post-change income may be limited.
We do not believe that we will experience an ownership change as
a result of this initial public offering. However, we may
experience ownership changes in the future as a result of
subsequent shifts in our stock ownership. As of
December 31, 2010, we had federal net operating loss
carryforwards of approximately $24.4 million that could be
limited if we experience an ownership change, which could have
an adverse effect on our results of operations.
Our
business and operations would suffer in the event of system
failures.
Despite the implementation of security measures, our internal
computer systems and those of our CROs and other contractors and
consultants are vulnerable to damage from computer viruses,
unauthorized access, natural disasters, terrorism, war and
telecommunication and electrical failures. While we have not
experienced any such system failure, accident or security breach
to date, if such an event were to occur and cause interruptions
in our operations, it could result in a material disruption of
our drug development programs. For example, the loss of clinical
trial data from completed or ongoing or planned clinical trials
could result in delays in our regulatory approval efforts and
significantly increase our costs to recover or reproduce the
data. To the extent that any disruption or security breach were
to result in a loss of or damage to our data or applications, or
inappropriate disclosure of confidential or proprietary
information, we could incur liability and the further
development of our product candidates could be delayed.
Risks
Related to Our Intellectual Property
If our
efforts to protect the proprietary nature of the intellectual
property related to our technologies are not adequate, we may
not be able to compete effectively in our market.
We rely upon a combination of patents, trade secret protection
and confidentiality agreements to protect the intellectual
property related to our technologies. Any disclosure to or
misappropriation by third parties of our confidential
proprietary information could enable competitors to quickly
duplicate or surpass our technological achievements, thus
eroding our competitive position in our market.
24
The strength of patents in the biotechnology and pharmaceutical
field involves complex legal and scientific questions and can be
uncertain. The patent applications that we own or license may
fail to result in issued patents in the United States or in
other foreign countries. Even if the patents do successfully
issue, third parties may challenge the validity, enforceability
or scope thereof, which may result in such patents being
narrowed, invalidated or held unenforceable. Furthermore, even
if they are unchallenged, our patents and patent applications
may not adequately protect our intellectual property or prevent
others from designing around our claims. If the breadth or
strength of protection provided by the patent applications we
hold or pursue with respect to our product candidates is
threatened, it could threaten our ability to commercialize our
product candidates. Further, if we encounter delays in our
clinical trials, the period of time during which we could market
our product candidates under patent protection would be reduced.
Since patent applications in the United States and most other
countries are confidential for a period of time after filing, we
cannot be certain that we were the first to file any patent
application related to our product candidates. Furthermore, an
interference proceeding can be provoked by a third-party or
instituted by the United States Patent and Trademark Office, or
the U.S. PTO, to determine who was the first to invent any
of the subject matter covered by the patent claims of our
applications.
In addition to the protection afforded by patents, we seek to
rely on trade secret protection and confidentiality agreements
to protect proprietary know-how that is not patentable,
processes for which patents are difficult to enforce and any
other elements of our drug development processes that involve
proprietary know-how, information or technology that is not
covered by patents. Although we require all of our employees to
assign their inventions to us, and all of our employees,
consultants, advisors and any third parties who have access to
our proprietary know-how, information or technology to enter
into confidentiality agreements, we cannot be certain that our
trade secrets and other confidential proprietary information
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 or in the same manner 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
prevent material disclosure of the intellectual property related
to our technologies to third parties, we will not be able to
establish or maintain a competitive advantage in our market,
which could materially adversely affect our business, results of
operations and financial condition.
Third-party
claims of intellectual property infringement may prevent or
delay our drug discovery and development efforts.
Our commercial success depends in part on our avoiding
infringement of the patents and proprietary rights of third
parties. There is a substantial amount of litigation involving
patent and other intellectual property rights in the
biotechnology and pharmaceutical industries, including
interference and reexamination proceedings before the
U.S. PTO or oppositions and other comparable proceedings in
foreign jurisdictions. Numerous United States and foreign issued
patents and pending patent applications, which are owned by
third parties, exist in the fields in which we are developing
product candidates. As the biotechnology and pharmaceutical
industries expand and more patents are issued, the risk
increases that our product candidates may give rise to claims of
infringement of the patent rights of others.
Third parties may assert that we are employing their proprietary
technology without authorization. There may be third-party
patents of which we are currently unaware with claims to
materials, formulations, methods of manufacture or methods for
treatment related to the use or manufacture of our product
candidates. Because patent applications can take many years to
issue, there may be currently pending patent applications which
may later result in issued patents that our product candidates
may infringe. In addition, third parties may obtain patents in
the future and claim that use of our technologies infringes upon
these patents. If any third-party patents were held by a court
of competent jurisdiction to cover the manufacturing process of
any of our product candidates, any molecules formed during the
manufacturing process or any final product itself, the holders
of any such patents may be able to block our ability to
commercialize such product candidate unless we obtained a
license under the applicable patents, or until such patents
expire or they are finally determined to be held invalid or
unenforceable. Similarly, if any third-party patent were held by
a court of competent jurisdiction to cover aspects of our
formulations, processes for manufacture or methods of use,
including combination therapy or patient selection methods, the
holders of any
25
such patent may be able to block our ability to develop and
commercialize the applicable product candidate unless we
obtained a license, limit our uses, or until such patent expires
or is finally determined to be held invalid or unenforceable. In
either case, such a license may not be available on commercially
reasonable terms or at all.
We are aware of a family of patents and patent applications
controlled by a third party that claim certain uses of PARP
inhibitors that could potentially be asserted against our use of
CO-338
in
certain indications. 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, including treble damages and attorneys fees for
willful infringement, obtain one or more licenses from third
parties, limit our uses, pay royalties or redesign our
infringing product candidates, which may be impossible or
require substantial time and monetary expenditure. We cannot
predict whether any such license would be available at all or
whether it would be available on commercially reasonable terms.
Furthermore, 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 any of these
licenses at a reasonable cost or on reasonable terms, if at all.
In that event, we would be unable to further develop and
commercialize one or more of our product candidates, which could
harm our business significantly.
The
patent protection and patent prosecution for some of our product
candidates is dependent on third parties.
While we normally seek and gain the right to fully prosecute the
patents relating to our product candidates, there may be times
when platform technology patents that relate to our product
candidates are controlled by our licensors. This is the case
with our license of CO-1686 from Avila Therapeutics, Inc., in
which Avila retained the right to prosecute and maintain the
patents and patent applications covering its core discovery
technology, including molecular backbones, building blocks and
classes of compounds generated by that technology, aspects of
which relate to CO-1686. While we have the right to prosecute
and maintain the patent rights for the composition of matter for
CO-1686, if Avila or any of our future licensing partners fail
to appropriately prosecute and maintain patent protection for
patents covering any of our product candidates, our ability to
develop and commercialize those product candidates may be
adversely affected and we may not be able to prevent competitors
from making, using and selling competing products.
We may
be 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 litigation or defense proceedings could put one or
more of our patents at risk of being invalidated, held
unenforceable, or interpreted narrowly and could put our patent
applications at risk of not issuing.
Interference proceedings provoked by third parties or brought by
the U.S. PTO may be necessary to determine the priority of
inventions with respect to our patents or patent applications or
those of our licensors. An unfavorable outcome could require us
to cease using the related technology or to attempt to license
rights to it from the prevailing party. Our business could be
harmed if the prevailing party does not offer us a license on
commercially reasonable terms. Litigation or interference
proceedings may fail and, even if successful, may result in
substantial costs and distract our management and other
employees. We may not be able to prevent, alone or with our
licensors, misappropriation of our trade secrets or confidential
information, 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
26
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.
We may
not be able to protect our intellectual property rights
throughout the world.
Filing, prosecuting and defending patents on all of our product
candidates throughout the world would be prohibitively
expensive. Competitors may use our technologies in jurisdictions
where we have not obtained patent protection to develop their
own products and further, may export otherwise infringing
products to territories where we have patent protection, but
enforcement is not as strong as that in the United States. These
products may compete with our products in jurisdictions where we
do not have any issued patents and our patent claims or other
intellectual property rights may not be effective or sufficient
to prevent them from so competing.
Many companies have encountered significant problems in
protecting and defending intellectual property rights in foreign
jurisdictions. The legal systems of certain countries,
particularly certain developing countries, do not favor the
enforcement of patents and other intellectual property
protection, particularly those relating to biopharmaceuticals,
which could make it difficult for us to stop the infringement of
our patents or marketing of competing products in violation of
our proprietary rights generally. Proceedings to enforce our
patent rights in foreign jurisdictions could result in
substantial cost and divert our efforts and attention from other
aspects of our business.
If we
breach any of the agreements under which we license
commercialization rights to our product candidates from third
parties, we could lose license rights that are important to our
business.
We license the use, development and commercialization rights for
all of our product candidates, and may enter into similar
licenses in the future. Under each of our existing license
agreements, we are subject to commercialization and development,
diligence obligations, milestone payment obligations, royalty
payments and other obligations. If we fail to comply with any of
these obligations or otherwise breach our license agreements,
our licensing partners may have the right to terminate the
license in whole or in part. Generally, the loss of any one of
our three current licenses or other licenses in the future could
materially harm our business, prospects, financial condition and
results of operations.
Intellectual
property rights do not necessarily address all potential threats
to our competitive advantage.
The degree of future protection afforded by our intellectual
property rights is uncertain because intellectual property
rights have limitations, and may not adequately protect our
business, or permit us to maintain our competitive advantage.
The following examples are illustrative:
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Others may be able to make compounds that are similar to our
product candidates but that are not covered by the claims of the
patents that we own or have exclusively licensed.
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We or our licensors or strategic partners might not have been
the first to make the inventions covered by the issued patent or
pending patent application that we own or have exclusively
licensed.
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We or our licensors or strategic partners might not have been
the first to file patent applications covering certain of our
inventions.
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Others may independently develop similar or alternative
technologies or duplicate any of our technologies without
infringing our intellectual property rights.
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It is possible that our pending patent applications will not
lead to issued patents.
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Issued patents that we own or have exclusively licensed may not
provide us with any competitive advantages, or may be held
invalid or unenforceable, as a result of legal challenges by our
competitors.
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Our competitors might conduct research and development
activities in countries where we do not have patent rights and
then use the information learned from such activities to develop
competitive products for sale in our major commercial markets.
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We may not develop additional proprietary technologies that are
patentable.
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The patents of others may have an adverse effect on our business.
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Should any of these events occur, they could significantly harm
our business, results of operations and prospects.
Risks
Related to This Offering and Ownership of our Common
Stock
We do
not know whether an active, liquid and orderly trading market
will develop for our common stock or what the market price of
our common stock will be and as a result it may be difficult for
you to sell your shares of our common stock.
Prior to this offering there has been no market for shares of
our common stock. Although we expect that our common stock will
be approved for listing on The NASDAQ Global Market, an active
trading market for our shares may never develop or be sustained
following this offering. The initial public offering price for
our common stock was determined through negotiations with the
underwriters, and the negotiated price may not be indicative of
the market price of our common stock after this offering. This
initial public offering price may vary from the market price of
our common stock after the offering. As a result of these and
other factors, you may be unable to resell your shares of our
common stock at or above the initial public offering price.
Further, an inactive market may also impair our ability to raise
capital by selling shares of our common stock and may impair our
ability to enter into strategic partnerships or acquire
companies or products by using our shares of common stock as
consideration.
The
price of our stock may be volatile, and you could lose all or
part of your investment.
The trading price of our common stock following this offering is
likely to be highly volatile and could be subject to wide
fluctuations in response to various factors, some of which are
beyond our control. In addition to the factors discussed in this
Risk Factors section and elsewhere in this
prospectus, these factors include:
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our failure to commercialize our product candidates, if approved;
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actual or anticipated adverse results or delays in our clinical
trials;
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unanticipated serious safety concerns related to the use of any
of our product candidates;
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adverse regulatory decisions;
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changes in laws or regulations applicable to our product
candidates, including but not limited to clinical trial
requirements for approvals;
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disputes or other developments relating to proprietary rights,
including patents, litigation matters and our ability to obtain
patent protection for our product candidates;
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our decision to initiate a clinical trial, not to initiate a
clinical trial or to terminate an existing clinical trial;
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our dependence on third parties, including CROs as well as our
partners that provide us with companion diagnostic products;
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additions or departures of key scientific or management
personnel;
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failure to meet or exceed any financial guidance or expectations
regarding development milestones that we may provide to the
public;
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actual or anticipated variations in quarterly operating results;
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failure to meet or exceed the estimates and projections of the
investment community;
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overall performance of the equity markets and other factors that
may be unrelated to our operating performance or the operating
performance of our competitors, including changes in market
valuations of similar companies;
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conditions or trends in the biotechnology and biopharmaceutical
industries;
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introduction of new products offered by us or our competitors;
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announcements of significant acquisitions, strategic
partnerships, joint ventures or capital commitments by us or our
competitors;
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our ability to maintain an adequate rate of growth and manage
such growth;
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issuances of debt or equity securities;
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significant lawsuits, including patent or stockholder litigation;
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sales of our common stock by us or our stockholders in the
future;
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trading volume of our common stock;
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publication of research reports about us or our industry or
positive or negative recommendations or withdrawal of research
coverage by securities analysts;
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ineffectiveness of our internal controls;
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general political and economic conditions;
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effects of natural or man-made catastrophic events; and
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other events or factors, many of which are beyond our control.
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In addition, the stock market in general, and the NASDAQ Global
Market and biotechnology companies in particular, have
experienced extreme price and volume fluctuations that have
often been unrelated or disproportionate to the operating
performance of these companies. Broad market and industry
factors may negatively affect the market price of our common
stock, regardless of our actual operating performance. The
realization of any of the above risks or any of a broad range of
other risks, including those described in these Risk
Factors, could have a dramatic and material adverse impact
on the market price of our common stock.
Our
principal stockholders and management own a significant
percentage of our stock and will be able to exert significant
control over matters subject to stockholder
approval.
Prior to this offering, our executive officers, directors, 5%
stockholders and their affiliates beneficially owned
approximately 82.0% of our voting stock and, upon the closing of
this offering, that same group will hold
approximately % of our outstanding
voting stock (assuming no exercise of the underwriters
over-allotment option and no exercise of outstanding options) in
each case assuming an initial public offering price of
$ per share (the midpoint of the
range set forth on the cover page of this prospectus) and a
conversion date
of ,
2011 (for purposes of calculating the accrued interest on the
notes to be converted into shares of common stock). Therefore,
even after this offering these stockholders will have the
ability to influence us through this ownership position. These
stockholders may be able to determine all matters requiring
stockholder approval. For example, these stockholders may be
able to control elections of directors, amendments of our
organizational documents, or approval of any merger, sale of
assets, or other major corporate transaction. This may prevent
or discourage unsolicited acquisition proposals or offers for
our common stock that you may feel are in your best interest as
one of our stockholders.
If you
purchase our common stock in this offering, you will incur
immediate and substantial dilution in the book value of your
shares.
The initial public offering price is substantially higher than
the net tangible book value per share of our common stock.
Investors purchasing common stock in this offering will pay a
price per share that substantially exceeds the book value of our
tangible assets after subtracting our liabilities. As a result,
investors purchasing common stock in this offering will incur
immediate dilution of $ per share,
based on an initial public offering price of
$ per share (the midpoint of the
range set forth on the cover page of this prospectus). Further,
investors purchasing common stock in this offering will
contribute approximately % of the
total amount invested by stockholders since our inception, but
will own only approximately % of
the shares of common stock outstanding after giving effect to
this offering.
29
This dilution is due to our investors who purchased shares prior
to this offering having paid substantially less than the price
offered to the public in this offering when they purchased their
shares. In addition, as of March 31, 2011, options to
purchase 2,746,779 shares of our common stock at a
weighted-average exercise price of $0.91 per share were
outstanding. The exercise of any of these options would result
in additional dilution. As a result of the dilution to investors
purchasing shares in this offering, investors may receive
significantly less than the purchase price paid in this
offering, if anything, in the event of our liquidation. Further,
because we will need to raise additional capital to fund our
clinical development programs, we may in the future sell
substantial amounts of common stock or securities convertible
into or exchangeable for common stock. These future issuances of
common stock or common stock-related securities, together with
the exercise of outstanding options and any additional shares
issued in connection with acquisitions, if any, may result in
further dilution to investors. For a further description of the
dilution that you will experience immediately after this
offering, see Dilution.
We
will incur 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.
We will be subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended, or the Exchange
Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes Oxley Act,
as well as rules subsequently adopted by the SEC and the NASDAQ
Stock Market, or NASDAQ. The Exchange Act will require, among
other things, that we file annual, quarterly and current reports
with respect to our business and financial condition. In
addition, on July 21, 2010, the Dodd-Frank Wall Street
Reform and Protection Act, or the Dodd-Frank Act, was enacted.
There are significant corporate governance and executive
compensation-related provisions in the Dodd-Frank Act that
require the SEC to adopt additional rules and regulations in
these areas such as say on pay and proxy access, and
the SEC has since issued final rules implementing say on
pay measures. We expect these rules and regulations to
substantially increase our legal and financial compliance costs
and to make some activities more time-consuming and costly. The
increased costs will decrease our net income or increase our
consolidated net loss, and may require us to reduce costs in
other areas of our business or increase the prices of our
products or services. For example, 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. We cannot predict or estimate the amount or
timing of additional costs we may incur to respond to these
requirements. The impact of these requirements could also make
it more difficult for us to attract and retain qualified persons
to serve on our board of directors, our board committees or as
executive officers.
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 to report, commencing in our annual report on
Form 10-K
for the year ending December 31, 2012, on the effectiveness
of our internal controls over financial reporting, if then
required by Section 404 of the Sarbanes-Oxley Act. 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 with appropriate public company
experience and technical accounting knowledge. Moreover, if we
are not able to comply with the requirements of Section 404
in a timely manner or if we identify 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 the
NASDAQ, the SEC or other regulatory authorities, which would
require additional financial and management resources.
New laws and regulations as well as changes to existing laws and
regulations affecting public companies, including the provisions
of the Sarbanes-Oxley Act and rules adopted by the SEC and by
NASDAQ, would likely result in increased costs to us as we
respond to their requirements.
30
Sales
of a substantial number of shares of our common stock in the
public market could cause our stock price to fall.
If our existing stockholders sell, or indicate an intention to
sell, substantial amounts of our common stock in the public
market after the
lock-up
and
other legal restrictions on resale discussed in this prospectus
lapse, the trading price of our common stock could decline. Upon
the closing of this offering, we will have outstanding a total
of shares
of common stock, assuming no exercise of the underwriters
overallotment option. Of these shares, only
the shares
of common stock sold in this offering by us, plus any shares
sold upon exercise of the underwriters overallotment
option, will be freely tradable, without restriction, in the
public market immediately following this offering.
J.P. Morgan Securities LLC and Credit Suisse Securities
(USA) LLC, however, may, in their sole discretion, permit our
officers, directors and other stockholders who are subject to
these
lock-up
agreements to sell shares prior to the expiration of the
lock-up
agreements.
We expect that the
lock-up
agreements pertaining to this offering will expire 180 days
from the date of this prospectus (subject to extension upon the
occurrence of specified events). After the
lock-up
agreements expire, up to an
additional shares
of common stock will be eligible for sale in the public
market, of
which shares are held by directors, executive officers and other
affiliates and will be subject to volume limitations under
Rule 144 under the Securities Act of 1933, as amended, or
the Securities Act, assuming an initial public offering price of
$ per share (the midpoint of the
range set forth on the cover page of this prospectus) and a
conversion date
of ,
2011 (for purposes of calculating the accrued interest on the
notes to be converted into shares of common stock). In addition,
shares of common stock that are either subject to outstanding
options or reserved for future issuance under our equity
incentive plans will become eligible for sale in the public
market to the extent permitted by the provisions of various
vesting schedules, the
lock-up
agreements and Rule 144 and Rule 701 under the
Securities Act. If these additional shares of common stock are
sold, or if it is perceived that they will be sold, in the
public market, the trading price of our common stock could
decline.
After this offering, the holders
of shares
of our common stock, or % of our
total outstanding common stock as
of ,
2011, will be entitled to rights with respect to the
registration of their shares under the Securities Act, subject
to the
lock-up
agreements described above and assuming an initial public
offering price of $ per share (the
midpoint of the range set forth on the cover page of this
prospectus) and a conversion date
of ,
2011 (for purposes of calculating the accrued interest on the
notes to be converted to shares of common stock). Registration
of these shares under the Securities Act would result in the
shares becoming freely tradable without restriction under the
Securities Act, except for shares purchased by affiliates. Any
sales of securities by these stockholders could have a material
adverse effect on the trading price of our common stock.
Future
sales and issuances of our common stock or rights to purchase
common stock, including pursuant to our equity incentive plans,
could result in additional dilution of the percentage ownership
of our stockholders and could cause our stock price to
fall.
We expect that significant additional capital will be needed in
the future to continue our planned operations. To raise capital,
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 materially diluted by
subsequent sales. Such sales may also result in material
dilution to our existing stockholders, and new investors could
gain rights, preferences and privileges senior to those of
holders of our common stock, including shares of common stock
sold in this offering.
Pursuant to our equity incentive plan(s), our compensation
committee (or a subset thereof) is authorized to grant
equity-based incentive awards to our employees, directors and
consultants. The number of shares of our common stock available
for future grant under our 2011 Equity Incentive Plan
is
and the number of shares available for future grant will
automatically increase each year by an amount equal
to % of all shares of our common
stock outstanding as of January 1 of each calendar year, subject
to the ability of our board of directors to take action to
reduce the size of such increase in any given calendar year.
Future option grants and issuances of common stock under our
2011 Equity Incentive Plan may have an adverse effect on the
market price of our common stock.
31
We
have broad discretion in the use of the net proceeds from this
offering and may not use them effectively.
Our management will have broad discretion in the application of
the net proceeds from this offering, and you will be relying on
the judgment of our management regarding the application of
these proceeds. You will not have the opportunity, as part of
your investment decision, to assess whether the proceeds are
being used appropriately. Our management might not apply our net
proceeds in ways that ultimately increase the value of your
investment. We expect to use the net proceeds from this offering
to fund our clinical trials related to CO-101 and CO-338, to
advance the development of CO-1686, our preclinical product
candidate, and for working capital and general corporate
purposes. Pending their use, we may invest the net proceeds from
this offering in short-term, investment-grade, interest-bearing
securities. These investments may not yield a favorable return
to our stockholders. If we do not invest or apply the net
proceeds from this offering in ways that enhance stockholder
value, we may fail to achieve expected financial results, which
could cause our stock price to decline.
Some
provisions of our charter documents and Delaware law may have
anti-takeover effects that could discourage an acquisition of us
by others, even if an acquisition would be beneficial to our
stockholders and may prevent attempts by our stockholders to
replace or remove our current management.
Provisions in our amended and restated certificate of
incorporation and bylaws that will be in effect immediately
prior to the closing of this offering, as well as provisions of
Delaware law, could make it more difficult for a third-party to
acquire us or increase the cost of acquiring us, even if doing
so would benefit our stockholders or remove our current
management. These provisions include:
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authorizing the issuance of blank check preferred
stock, the terms of which may be established and shares of which
may be issued without stockholder approval;
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limiting the removal of directors by the stockholders;
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creating a staggered board of directors;
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prohibiting stockholder action by written consent, thereby
requiring all stockholder actions to be taken at a meeting of
our stockholders;
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eliminating the ability of stockholders to call a special
meeting of stockholders;
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permitting our board of directors to accelerate the vesting of
outstanding option grants upon certain transactions that result
in a change of control; and
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establishing advance notice requirements for nominations for
election to the board of directors or for proposing matters that
can be acted upon at stockholder meetings.
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These provisions may frustrate or prevent any attempts by our
stockholders to replace or remove our current management by
making it more difficult for stockholders to replace members of
our board of directors, which is responsible for appointing the
members of our management. Because we are incorporated in
Delaware, we are governed by the provisions of Section 203
of the Delaware General Corporation Law, which may discourage,
delay or prevent someone from acquiring us or merging with us
whether or not it is desired by or beneficial to our
stockholders. Under Delaware law, a corporation may not, in
general, engage in a business combination with any holder of 15%
or more of its capital stock unless the holder has held the
stock for three years or, among other things, the board of
directors has approved the transaction. Any provision of our
certificate of incorporation or bylaws or Delaware law that has
the effect of delaying or deterring a change in control could
limit the opportunity for our stockholders to receive a premium
for their shares of our common stock, and could also affect the
price that some investors are willing to pay for our common
stock.
If
securities or industry analysts do not publish research or
publish inaccurate or unfavorable research 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 or our business. Securities and industry
analysts do not currently, and may never, publish research on
our company. If no securities or industry analysts commence
coverage of our company, the
32
trading price for our stock would likely be negatively impacted.
In the event securities or industry analysts initiate coverage,
if one or more of the analysts who cover us downgrade our stock
or publish inaccurate or unfavorable research about our
business, our stock price would likely decline. If one or more
of these analysts cease coverage of our company or fail to
publish reports on us regularly, demand for our stock could
decrease, which might cause our stock price and trading volume
to decline.
Claims
for indemnification by our directors and officers may reduce our
available funds to satisfy successful third-party claims against
us and may reduce the amount of money available to the
Company.
Our certificate of incorporation provides that we will indemnify
our directors and officers, in each case to the fullest extent
permitted by Delaware law.
In addition, as permitted by Section 145 of the Delaware
General Corporation Law, our bylaws to be effective immediately
prior to the completion of this offering and our indemnification
agreements that we have entered into with our directors and
officers provide that:
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We will indemnify our directors and officers for serving us in
those capacities or for serving other business enterprises at
our request, to the fullest extent permitted by Delaware law.
Delaware law provides that a corporation may indemnify such
person if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best
interests of the registrant and, with respect to any criminal
proceeding, had no reasonable cause to believe such
persons conduct was unlawful.
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We may, in our discretion, indemnify employees and agents in
those circumstances where indemnification is permitted by
applicable law.
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We are required to advance expenses, as incurred, to our
directors and officers in connection with defending a
proceeding, except that such directors or officers shall
undertake to repay such advances if it is ultimately determined
that such person is not entitled to indemnification.
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We will not be obligated pursuant to our bylaws to indemnify a
person with respect to proceedings initiated by that person
against us or our other indemnitees, except with respect to
proceedings authorized by our board of directors or brought to
enforce a right to indemnification.
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The rights conferred in our bylaws are not exclusive, and we are
authorized to enter into indemnification agreements with our
directors, officers, employees and agents and to obtain
insurance to indemnify such persons.
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We may not retroactively amend our bylaw provisions to reduce
our indemnification obligations to directors, officers,
employees and agents.
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33
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY
DATA
This prospectus includes statements that are, or may be deemed,
forward-looking statements. In some cases, these
forward-looking statements can be identified by the use of
forward-looking terminology, including the terms
believes, estimates,
anticipates, expects, plans,
intends, may, could,
might, will, should,
approximately or, in each case, their negative or
other variations thereon or comparable terminology, although not
all forward-looking statements contain these words. They appear
in a number of places throughout this prospectus and include
statements regarding our intentions, beliefs, projections,
outlook, analyses or current expectations concerning, among
other things, our ongoing and planned preclinical studies and
clinical trials, the timing of and our ability to make
regulatory filings and obtain and maintain regulatory approvals
for our product candidates, the degree of clinical utility of
our products, particularly in specific patient populations,
expectations regarding clinical trial data, our results of
operations, financial condition, liquidity, prospects, growth
and strategies, the industry in which we operate and the trends
that may affect the industry or us.
By their nature, forward-looking statements involve risks and
uncertainties because they relate to events, competitive
dynamics, and industry change and depend on the economic
circumstances that may or may not occur in the future or may
occur on longer or shorter timelines than anticipated. Although
we believe that we have a reasonable basis for each
forward-looking statement contained in this prospectus, we
caution you that forward-looking statements are not guarantees
of future performance and that our actual results of operations,
financial condition and liquidity, and the development of the
industry in which we operate may differ materially from the
forward-looking statements contained in this prospectus. In
addition, even if our results of operations, financial condition
and liquidity, and the development of the industry in which we
operate are consistent with the forward-looking statements
contained in this prospectus, they may not be predictive of
results or developments in future periods.
Some of the factors that we believe could cause actual results
to differ from those anticipated or predicted include:
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the success and timing of our preclinical studies and clinical
trials;
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our ability to obtain and maintain regulatory approval of our
product candidates, and the labeling under any approval we may
obtain;
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our plans to develop and commercialize our product candidates;
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our ability, with partners, to validate, develop and obtain
regulatory approval of companion diagnostics for our product
candidates;
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the loss of key scientific or management personnel;
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the size and growth of the potential markets for our product
candidates and our ability to serve those markets;
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regulatory developments in the United States and foreign
countries;
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the rate and degree of market acceptance of any of our product
candidates;
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our use of the proceeds from this offering;
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the accuracy of our estimates regarding expenses, future
revenues, capital requirements and needs for additional
financing;
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our ability to obtain and maintain intellectual property
protection for our product candidates;
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the successful development of our sales and marketing
capabilities;
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the success of competing drugs that are or become
available; and
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the performance of third-party manufacturers.
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Any forward-looking statements that we make in this prospectus
speak only as of the date of such statement, and we undertake no
obligation to update such statements to reflect events or
circumstances after the date of this
34
prospectus or to reflect the occurrence of unanticipated events.
Comparisons of results for current and any prior periods are not
intended to express any future trends or indications of future
performance, unless expressed as such, and should only be viewed
as historical data.
You should also read carefully the factors described in the
Risk Factors section of this prospectus to better
understand the risks and uncertainties inherent in our business
and underlying any forward-looking statements. As a result of
these factors, we cannot assure you that the forward-looking
statements in this prospectus will prove to be accurate.
Furthermore, if our forward-looking statements prove to be
inaccurate, the inaccuracy may be material. In light of the
significant uncertainties in these forward-looking statements,
you should not regard these statements as a representation or
warranty by us or any other person that we will achieve our
objectives and plans in any specified timeframe, or at all. The
Private Securities Litigation Reform Act of 1995 and
Section 27A of the Securities Act do not protect any
forward-looking statements that we make in connection with this
offering.
This prospectus also includes estimates of market size and
industry data that we obtained from industry publications and
surveys and internal company sources. The industry publications
and surveys used by management to determine market size and
industry data contained in this prospectus have been obtained
from sources believed to be reliable, but there can be no
assurance as to their accuracy or completeness. Although we
believe these sources are reliable, we have not independently
verified any of the data from third-party sources, nor have we
ascertained the underlying assumptions relied upon therein. You
are cautioned not to give undue weight to such data. Industry
and market data could be wrong because of the method by which
sources obtained their data and because information cannot
always be verified with complete certainty. In addition, we do
not know all of the assumptions that were used in preparing such
industry and market data. While we are not aware of any
misstatements regarding our industry data presented herein, our
estimates involve risks and uncertainties and are subject to
change based on various factors, including those discussed under
the heading Risk Factors in this prospectus.
35
USE OF
PROCEEDS
We estimate that our net proceeds from the sale of the shares of
common stock in this offering will be approximately
$ million, based on an
assumed initial public offering price of
$ per share, the midpoint of
the price range set forth on the cover page of this prospectus,
and after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by us.
If the underwriters exercise their over-allotment option in
full, we estimate that our net proceeds will be approximately
$ , based on an assumed initial
public offering price of
$ per share, the midpoint of
the price range set forth on the cover page of this prospectus,
and after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by us.
The principal purposes of this offering are to obtain additional
capital to support our operations, establish a public market for
our common stock and to facilitate our future access to the
public capital markets. We anticipate that we will use the net
proceeds of this offering to fund our clinical trials related to
CO-101 and CO-338, to advance the development of CO-1686, our
preclinical product candidate, and for working capital and
general corporate purposes.
Although it is difficult to predict future liquidity
requirements, we believe that the net proceeds from this
offering and our existing cash and cash equivalents, together
with interest thereon, will be sufficient to fund our operations
for at least the next 12 months.
The expected use of the net proceeds from this offering
represents our intentions based upon our current plans and
business conditions. The amounts and timing of our actual
expenditures depend on numerous factors, including the ongoing
status of and results from clinical trials and other studies, as
well as any strategic partnerships that we may enter into with
third parties for our product candidates and any unforeseen cash
needs. As a result, management will have broad discretion in
applying the net proceeds of this offering. Pending these uses,
we intend to invest the net proceeds of this offering in
short-term, interest-bearing investment grade securities,
certificates of deposit or direct or guaranteed obligations of
the U.S. government.
Each $1.00 increase (decrease) in the assumed initial public
offering price of $ per share, the
midpoint of the price range set forth on the cover page of this
prospectus, would increase (decrease) the net proceeds to us
from this offering by approximately
$ , assuming the number of shares
offered by us, as set forth on the cover page of this
prospectus, remains the same and after deducting estimated
underwriting discounts and commissions and estimated offering
expenses payable by us.
DIVIDEND
POLICY
We have never declared or paid any cash dividends on our capital
stock. We currently intend to retain all available funds and any
future earnings to support our operations and finance the growth
and development of our business. We do not intend to pay cash
dividends on our common stock for the foreseeable future. Any
future determination related to our dividend policy will be made
at the discretion of our board of directors and will depend
upon, among other factors, our results of operations, financial
condition, capital requirements, contractual restrictions,
business prospects and other factors our board of directors may
deem relevant.
36
CAPITALIZATION
The following table sets forth our consolidated cash and cash
equivalents and our consolidated capitalization as of
March 31, 2011 on:
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an actual basis;
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a pro forma basis giving effect to:
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(1)
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the issuance of $35.0 million in aggregate principal amount
of our 5% convertible promissory notes due 2012;
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(2)
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the conversion of all outstanding shares of our convertible
preferred stock into 21,009,196 shares of common stock
immediately prior to the closing of this offering; and
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(3)
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the conversion of $35.0 million in aggregate principal
amount of our 5% convertible promissory notes due 2012
(including accrued and unpaid interest thereon)
into shares
of our common stock immediately prior to the closing of this
offering, assuming an initial public offering price of
$ per share, the midpoint of the
price range set forth on the cover page of this prospectus, and
assuming the conversion occurs
on ,
2011 (the expected closing date of this offering); and
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a pro forma as adjusted basis giving additional effect to the
sale
of shares
of our common stock offered in this offering, assuming an
initial public offering price of $
per share, the midpoint of the price range set forth on the
cover page of this prospectus, after deducting estimated
underwriting discounts and commissions and estimated offering
expenses payable by us.
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The information in this table is illustrative only and our
capitalization following the completion of this offering will be
adjusted based on the actual initial public offering price and
other terms of this offering determined at pricing. You should
read this table in conjunction with the information contained in
Use of Proceeds, Selected Consolidated
Financial Data and Managements Discussion and
Analysis of Financial Condition and Results of Operations,
as well as the consolidated financial statements and the notes
thereto included elsewhere in this prospectus.
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As of March 31, 2011
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Pro Forma
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Actual
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Pro Forma
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as
Adjusted
(1)
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(dollars in thousands)
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Cash and cash equivalents
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$4,602
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$
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$
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5% convertible promissory notes due 2012
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Convertible preferred stock, par value $0.001 per share;
36,296,552 shares authorized; 21,009,196 shares issued
and outstanding, actual; no shares authorized, issued or
outstanding, pro forma and pro forma as adjusted
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75,499
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Stockholders equity:
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Preferred stock, par value $0.001 per share; no shares
authorized, issued or outstanding,
actual; shares
authorized and no shares issued and outstanding, pro forma and
pro forma as adjusted
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Common stock, par value $0.001 per share; 55,000,000 shares
authorized and 3,879,600 shares issued and outstanding,
actual; shares
authorized
and shares
issued and outstanding, pro forma
and shares
issued and outstanding, pro forma as adjusted
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4
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Additional paid-in capital
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195
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Accumulated deficit
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(63,257
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)
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Accumulated other comprehensive income (loss)
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35
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Total stockholders equity (deficit)
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(63,023
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)
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|
|
|
|
|
|
Total capitalization
|
|
|
$12,476
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37
|
|
|
(1)
|
|
A $1.00 increase (decrease) in the assumed initial public
offering price of $ per share, the
midpoint of the price range set forth on the cover page of this
prospectus, would increase (decrease) the pro forma as adjusted
amount of each of cash and cash equivalents, additional paid-in
capital, total stockholders equity (deficit) and total
capitalization by approximately
$ million, assuming that the
number of shares offered by us, as set forth on the cover page
of this prospectus, remains the same and after deducting
estimated underwriting discounts and commissions and estimated
offering expenses payable by us.
|
The number of shares of our common stock to be outstanding after
this offering set forth above is based
on shares
of our common stock outstanding as of March 31, 2011, after
giving effect to (1) the conversion of all outstanding
shares of our convertible preferred stock into
21,009,196 shares of common stock immediately prior to the
closing of this offering and (2) the issuance
of shares
of our common stock immediately prior to the closing of this
offering as a result of the conversion of $35.0 million in
aggregate principal amount of our 5% convertible promissory
notes due 2012 (including accrued and unpaid interest thereon),
assuming an initial public offering price
of
per share, the midpoint of the price range set forth on the
cover page of this prospectus, and assuming the conversion
occurs
on ,
2011 (the expected closing date of this offering).
The number of shares of our common stock to be outstanding after
this offering set forth above excludes:
|
|
|
|
|
2,746,779 shares of our common stock issuable upon the
exercise of stock options outstanding as of March 31, 2011
at a weighted-average exercise price of $0.91 per share;
|
|
|
|
shares
of our common stock reserved for future issuance under our 2011
Equity Incentive Plan, or the 2011 Plan, which will become
effective immediately prior to the completion of this offering,
plus 1,248,621 shares of our common stock available for
grant under our 2009 Equity Incentive Plan, or the 2009 Plan, as
of March 31, 2011, which shares will be added to the shares
to be reserved under our 2011 Plan upon the effectiveness of the
2011 Plan, plus any annual increases in the number of shares of
common stock reserved for future issuance under the 2011 Plan
pursuant to an evergreen provision and any other
shares that may become issuable under the 2011 Plan pursuant to
its terms, as more fully described in Executive and
Director CompensationEmployee Benefit Plans2011
Equity Incentive Plan; and
|
|
|
|
shares
of our common stock reserved for future issuance under our 2011
Employee Stock Purchase Plan, or the ESPP, which will become
effective immediately prior to the completion of this offering,
plus any annual increases in the number of shares of our common
stock reserved for future issuance under the ESPP pursuant to an
evergreen provision and any other shares that may
become issuable under the ESPP pursuant to its terms, as more
fully described in Executive and Director
CompensationEmployee Benefit Plans2011 Employee
Stock Purchase Plan.
|
38
DILUTION
If you invest in our common stock in this offering, your
ownership interest will be diluted to the extent of the
difference between the initial public offering price per share
of our common stock and the pro forma as adjusted net tangible
book value per share of our common stock upon completion of this
offering. Net tangible book value (deficit) per share of our
common stock is determined at any date by subtracting our total
liabilities from the amount of our total tangible assets (total
assets less intangible assets) and dividing the difference by
the number of shares of our common stock deemed to be
outstanding at that date.
Our historical net tangible book value (deficit) as of
March 31, 2011 was approximately $(63.0) million, or
$(16.24) per share, based on 3,879,600 shares of common
stock outstanding as of March 31, 2011.
On a pro forma basis, after giving effect to
(1) a
for reverse
stock split that we anticipate will occur prior to the closing
of this offering; (2) the issuance of $35.0 million in
aggregate principal amount of our 5% convertible promissory
notes due 2012; (3) the conversion of all outstanding
shares of our convertible preferred stock into
21,009,196 shares of common stock immediately prior to the
closing of this offering; and (4) the conversion of
$35.0 million in aggregate principal amount of our 5%
convertible promissory notes due 2012 (including accrued and
unpaid interest thereon)
into shares
of our common stock immediately prior to the closing of this
offering, assuming an initial public offering price of
$ per share, the midpoint of the
price range set forth on the cover page of this prospectus, and
assuming the conversion occurs
on ,
2011 (the expected closing date of this offering), our net
tangible book value as of March 31, 2011 would have been
approximately $ million, or
approximately $ per share of our
pro forma outstanding common stock.
Investors participating in this offering will incur immediate,
substantial dilution. After giving effect to our receipt of
approximately $ of estimated net
proceeds (after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by us) from
our sale of common stock in this offering at an assumed initial
public offering price of $ per
share, the midpoint of the price range set forth on the cover
page of this prospectus, our pro forma as adjusted net tangible
book value as of March 31, 2011 would have been
$ , or
$ per share. This amount
represents an immediate increase in net tangible book value of
$ per share of our common stock to
existing stockholders and an immediate dilution in net tangible
book value of $ per share of our
common stock to new investors purchasing shares of common stock
in this offering.
The following tables illustrate this dilution on a per share
basis:
|
|
|
|
|
|
|
|
|
|
Assumed initial public offering price per share
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Historical net tangible book deficit per share as of
March 31, 2011 (unaudited)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma increase in net tangible book value per share
attributable to pro forma transactions described in preceding
paragraphs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net tangible book value per share as of March 31,
2011 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma increase in net tangible book value per share
attributable to investors participating in this offering
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma as adjusted net tangible book value per share after
this offering
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilution of pro forma as adjusted net tangible book value per
share to new investors
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Each $1.00 increase (decrease) in the assumed initial public
offering price of $ per share, the
midpoint of the price range set forth on the cover page of this
prospectus, would increase (decrease) our pro forma as adjusted
net tangible book value by $ , the
pro forma as adjusted net tangible book value per share per
share after this offering by $ per
share and the dilution in pro forma as adjusted net tangible
book value to new investors in this offering by
$ per share, assuming the number of
shares offered by us, as set forth on the cover page of this
prospectus, remains the same and after deducting the estimated
underwriting discounts and commissions and estimated offering
expenses payable by us.
The following table summarizes, as of March 31, 2011, the
differences between the number of shares purchased from us, the
total consideration paid to us, and the average price per share
paid to us by existing stockholders and by new investors
purchasing shares in this offering, before deducting estimated
underwriting
39
discounts and commissions and estimated offering expenses
payable by us, at an assumed initial public offering price of
$ per share, the midpoint of the
price range set forth on the cover page of this prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Purchased
|
|
|
Total Consideration
|
|
|
Average Price
|
|
|
|
Number
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
per Share
|
|
|
|
(dollars in thousands, except per share amounts)
|
|
|
Existing stockholders before this offering
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
Investors purchasing common stock in this offering
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The number of shares of our common stock to be outstanding
immediately following this offering set forth above excludes:
|
|
|
|
|
2,746,779 shares of our common stock issuable upon the
exercise of stock options outstanding as of March 31, 2011
at a weighted-average exercise price of $0.91 per share;
|
|
|
|
shares
of our common stock reserved for future issuance under our 2011
Equity Incentive Plan, or the 2011 Plan, which will become
effective immediately prior to the completion of this offering,
plus 1,248,621 shares of our common stock available for
grant under our 2009 Equity Incentive Plan, or the 2009 Plan, as
of March 31, 2011, which shares will be added to the shares
to be reserved under our 2011 Plan upon the effectiveness of the
2011 Plan, plus any annual increases in the number of shares of
common stock reserved for future issuance under the 2011 Plan
pursuant to an evergreen provision and any other
shares that may become issuable under the 2011 Plan pursuant to
its terms, as more fully described in Executive and
Director CompensationEmployee Benefit Plans2011
Equity Incentive Plan; and
|
|
|
|
shares
of our common stock reserved for future issuance under our 2011
Employee Stock Purchase Plan, or the ESPP, which will become
effective immediately prior to the completion of this offering,
plus any annual increases in the number of shares of our common
stock reserved for future issuance under the ESPP pursuant to an
evergreen provision and any other shares that may
become issuable under the ESPP pursuant to its terms, as more
fully described in Executive and Director
CompensationEmployee Benefit Plans2011 Employee
Stock Purchase Plan.
|
If the underwriters over-allotment option is exercised in
full, the pro forma as adjusted net tangible book value per
share after giving effect to this offering would be
$ per share, which amount
represents an immediate increase in net tangible book value of
$ per share of our common stock to
existing stockholders and an immediate dilution in net tangible
book value of $ per share of our
common stock to new investors purchasing shares of common stock
in this offering.
If all our outstanding stock options had been exercised as of
March 31, 2011, assuming the treasury stock method, our pro
forma net tangible book value as of March 31, 2011
(calculated on the basis of the assumptions set forth above)
would have been approximately
$ million or
$ per share of our common stock,
and the pro forma as adjusted net tangible book value would have
been $ per share, representing
dilution in our pro forma as adjusted net tangible book value
per share to new investors of $ .
In addition, we may choose to raise additional capital due to
market conditions or strategic considerations even if we believe
we have sufficient funds for our current or future operating
plans. To the extent that we raise additional capital by issuing
equity securities or convertible debt, your ownership will be
further diluted.
40
SELECTED
CONSOLIDATED FINANCIAL DATA
The following table sets forth certain of our selected
historical financial data at the dates and for the periods
indicated. The selected historical statement of operations data
presented below for the year ended December 31, 2010 and
the period from April 20, 2009 (inception) to
December 31, 2009 and as of December 31, 2010 and 2009
have been derived from our audited financial statements, which
are included elsewhere in this prospectus.
The selected historical consolidated financial data presented
below for the three months ended March 31, 2011 and 2010
and as of March 31, 2011 have been derived from our
unaudited consolidated financial statements and have been
prepared on the same basis as the audited financial statements
included elsewhere in this prospectus. The financial information
presented from April 20, 2009 (inception) to
December 31, 2010 was based solely on the results of Clovis
Oncology, Inc. Subsequent to January 1, 2011, the financial
information is consolidated and includes the results of our
wholly owned subsidiary in the United Kingdom. In the opinion of
management, the unaudited data reflects all adjustments,
consisting only of normal and recurring adjustments, necessary
for a fair presentation of results as of and for these periods.
The historical results are not necessarily indicative of results
expected in any future period and the results for the three
months ended March 31, 2011 are not necessarily indicative
of the results that may be expected for the full fiscal year.
The selected historical financial data presented below should be
read in conjunction with Managements Discussion and
Analysis of Financial Condition and Results of Operations
and our financial statements and the related notes thereto,
which are included elsewhere in this prospectus. The selected
historical financial information in this section is not intended
to replace our financial statements and the related notes
thereto.
Statement
of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
Cumulative from
|
|
|
|
|
|
|
April 20, 2009
|
|
|
|
|
|
|
|
|
April 20, 2009
|
|
|
|
Year Ended
|
|
|
(Inception) to
|
|
|
Three Months Ended
|
|
|
(Inception) to
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
(in thousands, except per share amounts)
|
|
|
Revenue
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
22,323
|
|
|
|
1,762
|
|
|
|
7,041
|
|
|
|
3,259
|
|
|
|
31,126
|
|
General and administrative
|
|
|
4,302
|
|
|
|
2,209
|
|
|
|
1,405
|
|
|
|
830
|
|
|
|
7,916
|
|
Acquired in-process research and development
|
|
|
12,000
|
|
|
|
13,085
|
|
|
|
|
|
|
|
|
|
|
|
25,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(38,625
|
)
|
|
|
(17,056
|
)
|
|
|
(8,446
|
)
|
|
|
(4,089
|
)
|
|
|
(64,127
|
)
|
Other income (expense), net
|
|
|
795
|
|
|
|
(43
|
)
|
|
|
118
|
|
|
|
(2
|
)
|
|
|
870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(37,830
|
)
|
|
$
|
(17,099
|
)
|
|
$
|
(8,328
|
)
|
|
$
|
(4,091
|
)
|
|
$
|
(63,257
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share
|
|
$
|
(9.85
|
)
|
|
$
|
(5.30
|
)
|
|
$
|
(2.15
|
)
|
|
$
|
(1.07
|
)
|
|
$
|
(17.45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares used in the computation of basic and diluted net
loss per common share
|
|
|
3,842
|
|
|
|
3,225
|
|
|
|
3,877
|
|
|
|
3,832
|
|
|
|
3,625
|
|
Pro forma basic and diluted net loss per common share (unaudited)
|
|
$
|
(1.52
|
)
|
|
|
|
|
|
$
|
(0.33
|
)
|
|
|
|
|
|
$
|
(3.20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma basic and diluted weighted average common shares
outstanding (unaudited)
|
|
|
24,851
|
|
|
|
|
|
|
|
24,886
|
|
|
|
|
|
|
|
19,784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41
Balance
Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
As of March 31,
|
|
|
2010
|
|
2009
|
|
2011
|
|
|
|
|
|
|
(unaudited)
|
|
|
(in thousands)
|
|
Cash, cash equivalents and available for sale securities
|
|
|
$22,299
|
|
|
|
$57,311
|
|
|
|
$13,926
|
|
Working capital
|
|
|
19,886
|
|
|
|
57,349
|
|
|
|
11,540
|
|
Total assets
|
|
|
26,200
|
|
|
|
59,574
|
|
|
|
17,531
|
|
Convertible preferred stock
|
|
|
75,499
|
|
|
|
75,499
|
|
|
|
75,499
|
|
Total stockholders deficit
|
|
|
(54,749
|
)
|
|
|
(17,058
|
)
|
|
|
(63,023
|
)
|
42
MANAGEMENTS
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our
financial condition and results of operations together with our
financial statements and related notes appearing at the end of
this prospectus. Some of the information contained in this
discussion and analysis or set forth elsewhere in this
prospectus, including information with respect to our plans and
strategy for our business and related financing, includes
forward-looking statements that involve risks and uncertainties.
You should read the Risk Factors section of this
prospectus for a discussion of important factors that could
cause actual results to differ materially from the results
described in or implied by the forward-looking statements
contained in the following discussion and analysis.
Overview
We are a biopharmaceutical company focused on acquiring,
developing and commercializing innovative anti-cancer agents in
the United States, Europe and additional international markets.
We target our development programs for the treatment of specific
subsets of cancer populations, and seek to simultaneously
develop, with partners, companion diagnostics that direct our
product candidates to the patients that are most likely to
benefit from their use. We are currently developing three
product candidates for which we hold global marketing rights:
CO-101,
a
lipid-conjugated form of the anti-cancer drug gemcitabine, which
is in a pivotal study in a specific patient population for the
treatment of metastatic pancreatic cancer; CO-1686, an orally
available, small molecule EGFR covalent inhibitor that is
currently in preclinical development for NSCLC patients with
activating EGFR mutations, including the initial activating
mutations, as well as the primary resistance mutation, T790M;
and CO-338, an orally available, small molecule PARP inhibitor
being developed for various solid tumors that is currently in a
Phase I clinical trial. As our product candidates mature, we
intend to build commercial organizations of our own in major
global markets and contract with local distributors in smaller
markets.
We were incorporated in Delaware in April 2009 and commenced
operations in May 2009. To date, we have devoted substantially
all of our resources to identifying and in-licensing product
candidates, performing development activities with respect to
those product candidates, and the general and administrative
support of these operations. We have generated no revenues and,
through March 31, 2011, have principally funded our
operations using net proceeds from the sale of
$75.5 million of convertible preferred stock to our
investors. In addition, in May and June 2011, we issued
$35.0 million aggregate principal amount of convertible
promissory notes due 2012 to investors. As further discussed
under the heading Convertible Promissory Notes,
these notes will convert into shares of our common stock upon
the completion of an initial public offering of our common stock
at a per share price equal to the initial public offering price
shown on the cover page of this prospectus.
We have never been profitable and, as of March 31, 2011, we
had an accumulated deficit of $63.3 million. We incurred
losses of $17.1 million, $37.8 million, and
$8.3 million for the period from April 20, 2009
(inception) through December 31, 2009, the year ended
December 31, 2010, and the three months ended
March 31, 2011, respectively. We expect to incur
significant and increasing losses for the foreseeable future as
we advance our product candidates through preclinical activities
and clinical trials to seek regulatory approval and, if
approved, commercialize such product candidates. We will need
additional financing to support our operating activities. In
addition, the report of our independent registered public
accounting firm on our financial statements appearing at the end
of this prospectus contains an explanatory paragraph stating
that our recurring losses from operations raise substantial
doubt about our ability to continue as a going concern. We will
seek to fund our operations through public or private equity or
debt financings or other sources. Adequate additional financing
may not be available to us on acceptable terms, or at all. Our
failure to raise capital as and when needed would have a
negative impact on our financial condition and our ability to
pursue our business strategy. We expect that research and
development expenses will increase as we continue the
development of our product candidates and general and
administrative costs will increase as we grow and operate as a
public company. We will need to generate significant revenues to
achieve profitability and we may never do so.
The financial information presented from April 20, 2009
(inception) to December 31, 2010 was based solely on the results
of Clovis Oncology, Inc. Subsequent to January 1, 2011, the
financial information is consolidated and
43
includes the results of our wholly owned subsidiary in the
United Kingdom. All intercompany transactions and balances are
eliminated in this consolidation.
Convertible
Promissory Notes
In May and June 2011, we issued an aggregate $35.0 million
aggregate principal amount of 5% convertible promissory notes
due 2012 in two separate transactions described as follows.
|
|
|
|
|
In May 2011, we issued $20.0 million aggregate principal
amount of 5% convertible promissory notes due 2012 to raise
additional working capital to advance the development programs
of our product candidates and for general corporate purposes.
The notes accrue interest at an annual rate of 5% and mature on
May 25, 2012. Upon the completion of this offering, the
principal balance and all accrued and unpaid interest due on the
notes will be converted into shares of our common stock at a per
share price equal to the initial public offering price shown on
the cover page of this prospectus.
|
|
|
|
In June 2011, we entered into a license agreement with Pfizer as
further described under the heading Product License
Agreements. Pursuant to the terms of the license
agreement, we made an up-front payment by issuing Pfizer
$7.0 million principal amount of a 5% convertible
promissory note due 2012. Pfizer concurrently purchased for cash
an additional $8.0 million principal amount of another 5%
convertible promissory note due 2012, bringing the total
principal amount of the notes issued to Pfizer to
$15.0 million. These convertible notes have substantially
the same terms as the $20.0 million aggregate principal
amount of convertible promissory notes described in the
preceding paragraph, including identical interest provisions,
maturity date, and conversion features.
|
Product
License Agreements
CO-101
In November 2009, we entered into a license agreement with
Clavis to develop and commercialize CO-101 in North America,
Central America, South America and Europe. Under the terms of
the license agreement, we made an up-front payment to Clavis in
the amount $15.0 million, which was comprised of
$13.1 million for development costs incurred prior to the
execution of the agreement, which we recognized as acquired
in-process research and development and $1.9 million for
the prepayment of preclinical activities to be performed by
Clavis. In November 2010, the license agreement was amended to
expand the license territory to include Asia and other
international markets. We paid Clavis $10.0 million for the
territory expansion and recognized that payment as acquired
in-process research and development expense. As part of the
amendment to the license agreement, Clavis has also agreed to
reimburse up to $3.0 million of our research and
development costs for certain CO-101 development activities
subject to our incurring such costs. We are responsible for all
remaining development and commercialization costs of the
compound and, if approved, Clavis will be entitled to receive
royalties based on the volume of annual net sales achieved. We
may be required to pay Clavis an aggregate of up to
$115.0 million in development and regulatory milestone
payments if certain clinical study objectives and regulatory
filings, acceptances and approvals are achieved. In addition, we
may be required to pay Clavis an aggregate of up to
$445.0 million in sales milestone payments if certain
annual sales targets are met for CO-101.
Subject to certain conditions set forth in the license
agreement, Clavis may elect to co-develop and co-promote CO-101
in Europe. If Clavis were to make this election, it would be
required to reimburse us for a portion of both past and future
development costs. In addition, our milestone payment
obligations described above would be reduced. Clavis would not
be entitled to royalties on the net sales in Europe, but would
instead share equally in the pretax profits or losses resulting
from commercialization activities in Europe.
CO-1686
In May 2010, we entered into a worldwide license agreement with
Avila to discover, develop and commercialize preclinical
covalent inhibitors of mutant forms of EGFR. CO-1686 was
identified as the lead inhibitor candidate developed by Avila
under the license agreement. We are responsible for all
preclinical, clinical, regulatory and other activities necessary
to develop and commercialize
CO-1686.
We
made an up-front payment of
44
$2.0 million to Avila upon execution of the license
agreement which we recognized as acquired in-process research
and development expense. We are obligated to pay Avila royalties
on net sales of CO-1686, based on the volume of annual net sales
achieved. Avila has the option to increase royalty rates by
electing to reimburse a portion of our development expenses.
This option must be exercised within a limited period of time of
Avilas being notified by us of our intent to pursue
regulatory approval of CO-1686 in the United States or the
European Union as a first-line therapy. We may be required to
pay Avila up to an aggregate of $119.0 million in
development and regulatory milestone payments if certain
clinical study objectives and regulatory filings, acceptances
and approvals are achieved. In addition, we may be required to
pay Avila up to an aggregate of $120.0 million in sales
milestone payments if certain annual sales targets are achieved.
CO-338
In June 2011, we entered into a license agreement with Pfizer to
acquire exclusive global development and commercialization
rights to Pfizers drug candidate PF-01367338, which we
have renamed CO-338. This drug candidate is a small molecule
PARP inhibitor which we are developing for the treatment of
selected solid tumors. Pursuant to the terms of the license
agreement, we made an up-front payment by issuing Pfizer
$7.0 million principal amount of a 5% convertible
promissory note due 2012. We are responsible for all development
and commercialization costs of CO-338 and, if approved, we will
be required to pay Pfizer royalties on sales of the product. In
addition, we may be required to pay Pfizer up to an aggregate of
$259.0 million in milestone payments if certain
development, regulatory and sales milestones are achieved.
Financial
Operations Overview
Revenue
To date, we have not generated any revenues. In the future, we
may generate revenue from the sales of product candidates that
are currently under development. Based on our current
development plans, we do not expect to generate revenue until
2014 at the earliest. If we fail to complete the development of
our product candidates and, together with our partners,
companion diagnostics or obtain regulatory approval for them,
our ability to generate future revenue, and our results of
operations and financial position, will be adversely affected.
Research
and Development Expenses
Research and development expenses consist of costs incurred for
the development of our product candidates and companion
diagnostics, which include:
|
|
|
|
|
license fees related to the acquisition of in-licensed products,
which are reported on our statements of operations as acquired
in-process research and development;
|
|
|
|
employee-related expenses, including salaries, benefits, travel
and stock-based compensation expense;
|
|
|
|
expenses incurred under agreements with CROs and investigative
sites that conduct our clinical trials and preclinical studies;
|
|
|
|
the cost of acquiring, developing and manufacturing clinical
trial materials;
|
|
|
|
costs associated with preclinical activities and regulatory
operations; and
|
|
|
|
activities associated with the development of companion
diagnostics for our product candidates.
|
Research and development costs are expensed as incurred. License
fees and milestone payments related to in-licensed products and
technology are expensed if it is determined that they have no
alternative future use. Costs for certain development
activities, such as clinical trials, are recognized based on an
evaluation of the progress to completion of specific tasks using
data such as patient enrollment, clinical site activations or
information provided to us by our vendors.
Research and development activities are central to our business
model. Product candidates in later stages of clinical
development generally have higher development costs than those
in earlier stages of clinical development, primarily due to the
increased size and duration of later stage clinical trials. We
plan to increase our research and
45
development expenses for the foreseeable future as we seek to
complete development of our most advanced product candidate,
CO-101, and its companion diagnostic, transition our CO-1686
product candidate into human clinical trials, and assume
responsibility for the development costs of CO-338, which was
in-licensed in June 2011, including the cost of ongoing clinical
trials.
The following table identifies research and development costs
and acquired in-process research and development costs on a
program-specific basis for our product candidates in-licensed
through March 31, 2011 and their companion diagnostics.
Personnel-related costs, depreciation and stock-based
compensation are not allocated to a program as they are deployed
across multiple projects under development and, as such, are
separately classified as personnel and other expenses in the
table below.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from
|
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|
|
|
|
|
|
|
|
|
|
|
April 20, 2009
|
|
|
|
|
|
Cumulative from
|
|
|
|
Year Ended
|
|
|
(Inception) to
|
|
|
Three Months Ended
|
|
|
April 20, 2009
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
March 31,
|
|
|
(Inception) to
|
|
|
|
2010
|
|
|
2009
|
|
|
2011
|
|
|
2010
|
|
|
March 31, 2011
|
|
|
|
|
|
|
|
|
|
(unaudited, in thousands)
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
CO-101 Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired in-process R&D
|
|
$
|
10,000
|
|
|
$
|
13,085
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
23,085
|
|
Research and development
|
|
|
14,461
|
|
|
|
371
|
|
|
|
3,762
|
|
|
|
2,387
|
|
|
|
18,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CO-101 Total
|
|
|
24,461
|
|
|
|
13,456
|
|
|
|
3,762
|
|
|
|
2,387
|
|
|
|
41,679
|
|
CO-1686 Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired in-process R&D
|
|
|
2,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000
|
|
Research and development
|
|
|
2,432
|
|
|
|
|
|
|
|
1,289
|
|
|
|
|
|
|
|
3,721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CO-1686 Total
|
|
|
4,432
|
|
|
|
|
|
|
|
1,289
|
|
|
|
|
|
|
|
5,721
|
|
Personnel and other expenses
|
|
|
5,430
|
|
|
|
1,391
|
|
|
|
1,990
|
|
|
|
872
|
|
|
|
8,811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
34,323
|
|
|
$
|
14,847
|
|
|
$
|
7,041
|
|
|
$
|
3,259
|
|
|
$
|
56,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and Administrative Expenses
General and administrative expenses consist principally of
salaries and related costs for personnel in executive, finance,
business development, and information technology functions.
Other general and administrative expenses include facility
costs, communication expenses, and professional fees for legal,
patent review, consulting and accounting services.
We anticipate that our general and administrative expenses will
increase due to many factors and the most significant of these
factors include:
|
|
|
|
|
increased personnel expenses to support the growth in research
and development activities; and
|
|
|
|
increased expenses related to becoming a publicly traded
company, including increased legal and accounting services,
addition of new headcount to support compliance and
communication needs, and increased insurance premiums.
|
Other
Income and Expense
Other income is comprised of interest income earned on cash,
cash equivalents and available for sale securities, gain on the
sale of available for sale securities, and a federal grant
awarded to us under the Qualifying Therapeutic Discovery Project
Program in 2010. In addition, we hold cash balances at financial
institutions denominated in currencies other than the
U.S. dollar to fund research and development activities
performed by various third-party vendors. The translation of
these currencies into U.S. dollars results in foreign
currency gains or losses, depending on the change in value of
these currencies against the U.S. dollar. These gains and
losses are included in Other Income and Expense.
46
Critical
Accounting Policies and Significant Judgments 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 U.S. generally
accepted accounting principles. The preparation of these
financial statements requires us to make estimates and judgments
that affect the reported amounts of assets, liabilities and
expenses and the disclosure of contingent assets and liabilities
in our financial statements. On an ongoing basis, we evaluate
our estimates and judgments, including those related to accrued
expenses and stock-based compensation. We base our estimates on
historical experience, known trends and events and various other
factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or
conditions.
Our significant accounting policies are described in more detail
in the notes to our financial statements appearing elsewhere in
this prospectus. We believe the following accounting policies to
be most critical to the judgments and estimates used in the
preparation of our financial statements.
Accrued
Research and Development Expenses
As part of the process of preparing our financial statements, we
are required to estimate our accrued expenses. This process
involves reviewing open contracts and purchase orders,
communicating with our personnel to identify services that have
been performed on our behalf and estimating the level of service
performed and the associated cost incurred for the service when
we have not yet been invoiced or otherwise notified of the
actual cost. The majority of our service providers invoice us
monthly in arrears for services performed or when contractual
milestones are met. We make estimates of our accrued expenses as
of each balance sheet date in our financial statements based on
facts and circumstances known to us at that time. We
periodically confirm the accuracy of our estimates with the
service providers and make adjustments if necessary. Examples of
estimated accrued research and development expenses include:
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|
|
|
|
fees paid to CROs in connection with clinical studies;
|
|
|
|
fees paid to investigative sites in connection with clinical
studies;
|
|
|
|
fees paid to vendors in connection with preclinical development
activities;
|
|
|
|
fees paid to vendors associated with the development of
companion diagnostics; and
|
|
|
|
fees paid to vendors related to product manufacturing,
development and distribution of clinical supplies.
|
We base our expenses related to clinical studies on our
estimates of the services received and efforts expended pursuant
to contracts with multiple CROs that conduct and manage clinical
studies on our behalf. The financial terms of these agreements
are subject to negotiation, vary from contract to contract and
may result in uneven payment flows. There may be instances in
which payments made to our vendors will exceed the level of
services provided and result in a prepayment of the clinical
expense. Payments under some of these contracts depend on
factors such as the successful enrollment of patients and the
completion of clinical trial milestones. In accruing service
fees, we estimate the time period over which services will be
performed, enrollment of patients, number of sites activated and
the level of effort to be expended in each period. If the actual
timing of the performance of services or the level of effort
varies from our estimate, we adjust the accrual or prepaid
accordingly. Although we do not expect our estimates to be
materially different from amounts actually incurred, our
understanding of the status and timing of services performed
relative to the actual status and timing of services performed
may vary and may result in us reporting amounts that are too
high or too low in any particular period. Based on the amount of
accrued research and development expenses as of March 31,
2011, if our estimates are too high or too low by 5%, this could
increase or decrease our research and development expenses by
approximately $162,000.
Stock-Based
Compensation
To date, stock-based compensation expense has not been material
to our financial results. Nevertheless, as we continue to expand
our work force, we expect to make additional stock option
grants, which will result in additional stock-based compensation
expense. Accordingly, we describe below the methodology we have
employed to date in
47
measuring such expenses. Following the consummation of this
offering, stock option values will be determined based on the
quoted market price of our common stock.
Since our inception in 2009, we have applied the fair value
recognition provisions of Financial Accounting Standards Board
Accounting Standards Codification, or ASC, 718 Accounting
for Stock Based Compensation, which we refer to as
ASC 718. Determining the amount of stock-based compensation
to be recorded requires us to develop estimates of the fair
value of stock options as of their grant date. Compensation
expense is recognized over the vesting period of the award.
Calculating the fair value of stock-based awards requires that
we make highly subjective assumptions. We use the Black-Scholes
option pricing model to value our stock option awards. Use of
this valuation methodology requires that we make assumptions as
to the price volatility of our common stock, the expected term
of our stock options, the risk free interest rate for a period
that approximates the expected term of our stock options and our
expected dividend yield. Because we are a privately-held company
with a limited operating history, we utilize data from several
peer companies to estimate expected stock price volatility and
the expected term of our options. We selected peer companies
from the biopharmaceutical industry with similar characteristics
as us, including stage of product development, market
capitalization, number of employees and therapeutic focus. We
utilize a dividend yield of zero based on the fact that we have
never paid cash dividends and have no current intention to pay
cash dividends. The risk-free interest rate used for each grant
is based on the U.S. Treasury yield curve in effect at the
time of grant for instruments with a similar expected life.
The fair value of stock options was estimated at the grant date
using the following weighted average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from April 20
|
|
|
|
Three Months
|
|
|
|
|
Year Ended
|
|
|
|
(Inception) Through
|
|
|
|
Ended
|
|
|
|
|
December 31,
|
|
|
|
December 31,
|
|
|
|
March 31,
|
|
|
|
|
2010
|
|
|
|
2009
|
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
Dividend yield
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volatility
|
|
|
80
|
|
%
|
|
|
80
|
|
%
|
|
|
74
|
|
%
|
Risk-free interest rate
|
|
|
2.10
|
|
%
|
|
|
2.33
|
|
%
|
|
|
2.48
|
|
%
|
Expected term (years)
|
|
|
5.61
|
|
|
|
|
5.30
|
|
|
|
|
6.00
|
|
|
There were no options granted during the three months ended
March 31, 2010.
In accordance with ASC 718, we recognized stock-based
compensation expense of approximately $4,000 and $68,000 for the
period April 20, 2009 (inception) through December 31,
2009 and for the year ended December 31, 2010,
respectively, and $4,000 and $59,000 for the three months ended
March 31, 2010 and 2011, respectively. As of March 31,
2011, we had $1.2 million in total unrecognized
compensation expense, net of related forfeiture estimates, which
is expected to be recognized over a weighted-average remaining
vesting period of approximately 3.6 years. While our
stock-based compensation has not been significant historically,
we expect the impact to grow in future periods due to the
potential increases in the value of our common stock and
headcount.
Under ASC 718, we are required to estimate the level of
forfeitures expected to occur and record compensation expense
only for those awards that we ultimately expect will vest. Due
to the lack of historical forfeiture activity of our plan, we
estimated our forfeiture rate based on peer company data with
characteristics similar to our company.
48
The following table presents the grant dates and related
exercise prices of stock options granted to employees and our
board of directors since April 20, 2009 (inception):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Shares
|
|
|
|
Common Stock
|
|
|
Underlying
|
|
Exercise
|
|
Fair Value per
|
|
|
Options
|
|
Price per
|
|
Share on Grant
|
Period of Grant
|
|
Granted
|
|
Share
|
|
Date
|
|
April 20, 2009 (inception) to June 30, 2009
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
July 1, 2009 to September 30, 2009
|
|
|
755,000
|
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
October 1, 2009 to December 31, 2009
|
|
|
147,500
|
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
January 1, 2010 to March 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
April 1, 2010 to June 30, 2010
|
|
|
451,500
|
|
|
$
|
1.06
|
|
|
$
|
1.06
|
|
July 1, 2010 to September 30, 2010
|
|
|
3,000
|
|
|
$
|
1.06
|
|
|
$
|
1.06
|
|
October 1, 2010 to December 31, 2010
|
|
|
245,000
|
|
|
$
|
1.06
|
|
|
$
|
1.06
|
|
January 1, 2011 to March 31, 2011
|
|
|
1,549,900
|
|
|
$
|
1.13
|
|
|
$
|
1.13
|
|
We have granted stock options at exercise prices not less than
the estimated fair market value of our common stock. As there
was no public market for our common stock, the estimated fair
value of our common stock was determined by our board of
directors based on valuation estimates provided by management.
For the period from April 20, 2009 (inception) to
December 31, 2009, our board of directors determined the
fair value of our common stock to be $0.10 per share. Due to the
minimal value of non-cash assets owned during this period, the
superior preferences associated with our convertible preferred
stock in relation to our common stock and our focus on start up
activities, there was a nominal value attributed to the fair
value of our common stock during this time.
In the fourth quarter of 2009, we completed the in-licensing of
our first product candidate and the issuance of our
Series A-2
and Series B convertible preferred stock for total net
proceeds of $65.6 million. Based on the significance of
these transactions, we deemed it appropriate to update the
estimated valuation of our common stock as of December 31,
2009. This valuation was updated again as of December 31,
2010.
Utilizing the assistance of a third-party valuation specialist,
we performed contemporaneous valuations of our common stock as
of December 31, 2009 and 2010 in accordance with the
framework of the 2004 AICPA Technical Practice Aid,
Valuation
of Privately-Held-Company Equity Securities Issued as
Compensation,
or the Practice Aid. Based on the valuation
methodology selection criteria set forth in the Practice Aid and
the stage of our development as a company as of
December 31, 2009 and 2010, we determined that the Option
Pricing Method based on a Black-Scholes option pricing model was
the most appropriate valuation methodology to estimate the fair
value of our common stock. We concluded that there were no
significant transactions affecting our capital structure which
would have indicated that an update to our valuation was
required at dates other than December 31, 2009 and 2010,
which was validated by the relatively insignificant change in
value during each period.
Key variables in the Option Pricing Method are as follows:
|
|
|
|
|
Underlying equity value To estimate the value of our
total equity (including both common and preferred equity), we
utilized the marketable equity value based on the most recent
rounds our preferred stock issuances, which we believed to be
the most indicative of our value.
|
|
|
|
Volatility We estimated volatility based on
comparison to volatility of publicly-traded comparable companies.
|
|
|
|
Time to liquidity We estimated time to a liquidity
event based on the forecasted time to significant clinical
development events for our product candidates which we believed
could lead to an initial public offering, or IPO, or other type
of liquidation event for our stockholders.
|
|
|
|
Risk-free interest rate We determined the risk-free
interest rate based on the yield of a U.S. Treasury bill
with a maturity date closest to the estimated time to a
liquidation event for our stockholders.
|
49
|
|
|
|
|
Discounts for lack of marketability Because we are a
privately-held company, shares of our common stock are highly
illiquid and, as such, warrant a discount in value from their
estimated marketable price. We estimate the discount
factor for illiquidity using legal guidelines from U.S. Tax
Court cases regarding privately-held business valuations,
fundamental business factors, and empirical studies on the
discount for lack of marketability. We corroborated the discount
factor based on the value of a put option compared to the value
of common stock using a Black-Scholes option pricing model.
|
For our valuation as of December 31, 2009, we assumed a
three-year time to liquidity based on our assumption that
clinical data from the LEAP study for CO-101 would be available
in the fourth quarter of 2012. At that time, we believed that an
IPO or other liquidity event would most likely occur following
the availability of those data. For our valuation as of
December 31, 2010, we performed two valuation models, one
that assumed a one-year time to liquidity and another that
assumed a two-year time to liquidity. As of December 31,
2010, we believed that a liquidity event was possible within one
year due to the fact that we had in-licensed a second product
candidate (CO-1686), which was expected to commence human
clinical trials in the first half of 2012, and the development
of CO-101 was progressing as planned. We also believed that a
liquidity event was equally likely after the availability of the
clinical data from the LEAP study of CO-101, which was still
expected within two years of the valuation. Since neither of
these scenarios seemed more likely than the other, we calculated
valuations using both liquidity event assumptions and equally
weighted the results to estimate the fair value of our common
stock.
In April 2011, our board of directors authorized management to
pursue an initial public offering in the second half of 2011.
Considering this change in assumptions and other events,
including the issuance of our convertible promissory notes, we
are in the process of updating our estimate of the fair value of
our common stock for periods subsequent to that authorization.
There are significant judgments and estimates inherent in the
determination of these valuations. These judgments and estimates
include assumptions regarding our future performance, including
the successful completion of our clinical trials as well as the
determination of the appropriate valuation methods. If we had
made different assumptions, our share-based compensation expense
could have been different. The foregoing valuation methodology
is not the only methodology available and it will not be used to
value our common stock once this offering is complete. We cannot
make assurances as to any particular valuation for our common
stock. Accordingly, investors are cautioned not to place undue
reliance on the foregoing valuation methodology as an indicator
of future stock prices.
Results
of Operations
Comparison
of the Three Months Ended March 31, 2011 and
2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
March 31,
|
|
|
Increase
|
|
|
|
2011
|
|
|
2010
|
|
|
(Decrease)
|
|
|
|
(unaudited, in thousands)
|
|
|
|
|
|
Revenues
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
7,041
|
|
|
|
3,259
|
|
|
|
3,782
|
|
General and administrative
|
|
|
1,405
|
|
|
|
830
|
|
|
|
575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(8,446
|
)
|
|
|
(4,089
|
)
|
|
|
4,357
|
|
Other income (expense), net
|
|
|
118
|
|
|
|
(2
|
)
|
|
|
120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(8,328
|
)
|
|
$
|
(4,091
|
)
|
|
$
|
4,237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and Development
Expenses.
Research and development expenses
for the three months ended March 31, 2011 were
$7.0 million compared to $3.3 million for the three
months ended March 31, 2010, an increase of
$3.8 million. Clinical trial expenses increased by
$1.4 million due to growth in the number of patients,
active sites and investigators that are participating in our
pivotal CO-101 clinical trial. In addition, $1.3 million of
the increase was the result of discovery, formulation
development and the commencement of preclinical activities
associated
50
with CO-1686, a compound that was in-licensed in May 2010. The
remaining increase of $1.1 million was due to an increase
in salaries, benefits and personnel related costs resulting from
additional headcount hired to support the expanding development
activities of CO-101 and CO-1686.
General and Administrative
Expenses.
General and administrative expenses
for the three months ended March 31, 2011 were
$1.4 million compared to $0.8 million for the three
months ended March 31, 2010, an increase of
$0.6 million. The increase was primarily attributable to
the lease of new office space in San Francisco, California
commencing in May 2010 as well as legal fees associated with
patent review and analysis activities for two of our product
candidates.
Other Income (Expense), Net.
Other
income (expense), net for the three months ended March 31,
2011 was $118,000 compared to $(2,000) for the three months
ended March 31, 2010, a change of $120,000. This change was
largely due to the increase to the value of the Euro in relation
to the U.S. Dollar which created a foreign currency
transaction gain to our Euro denominated cash account in the
first quarter of 2011 of $113,000. The Euro cash account was
established in May 2010 and had no impact to the first quarter
of 2010.
Comparison
of the Year Ended December 31, 2010 to the Period from
April 20, 2009 (Inception) to December 31,
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
April 20, 2009
|
|
|
|
|
|
|
Year ended
|
|
|
(Inception) to
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
Increase
|
|
|
|
2010
|
|
|
2009
|
|
|
(Decrease)
|
|
|
Revenues
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
22,323
|
|
|
|
1,762
|
|
|
|
20,561
|
|
General and administrative
|
|
|
4,302
|
|
|
|
2,209
|
|
|
|
2,093
|
|
Acquired in-process research and development
|
|
|
12,000
|
|
|
|
13,085
|
|
|
|
(1,085
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(38,625
|
)
|
|
|
(17,056
|
)
|
|
|
21,569
|
|
Other income (expense), net
|
|
|
795
|
|
|
|
(43
|
)
|
|
|
838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(37,830
|
)
|
|
$
|
(17,099
|
)
|
|
$
|
20,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and Development
Expenses.
Research and development expenses
were $22.3 million for the year ended December 31,
2010, compared to $1.8 million for the period from
April 20, 2009 (inception) to December 31, 2009, an
increase of $20.6 million. The increase was due to the
commencement of research and development activities in 2010 for
our in-licensed compounds CO-101 and CO-1686. Significant 2010
development activities included:
|
|
|
|
|
increase of $5.5 million related to the commencement of our
pivotal clinical trial for CO-101 in January 2010;
|
|
|
|
increase of $4.7 million for CO-101 drug product
development, clinical supply manufacturing and distribution;
|
|
|
|
increase of $2.3 million associated with CO-1686 product
development and IND enabling activities;
|
|
|
|
increase of $2.0 million for the initiation of additional
supporting CO-101 clinical studies;
|
|
|
|
increase of $1.1 million for companion diagnostic
development related to both CO-101 and
CO-1686; and
|
|
|
|
increase of $4.0 million to salaries, benefits and other
personnel costs to support the growth in our 2010 development
activities.
|
General and Administrative
Expenses.
General and administrative expenses
for the year ended December 31, 2010 were $4.3 million
compared to $2.2 million for the period from April 20,
2009 (inception) to December 31, 2009, an increase of
$2.1 million. The increase was due primarily to an increase
of $0.9 million in personnel related expenses to support
corporate operational activities and the commencement of
research and
51
development activities for CO-101 and CO-1686 in 2010. In
addition, office lease expense increased by $0.9 million
due to new lease agreements for the Boulder, Colorado and
San Francisco, California locations, effective in December
2009 and May 2010, respectively. In addition, we commenced
operations in May 2009 and, as such, expenses for the period
ended December 31, 2009 reflect only a partial years
activity.
Acquired In-Process Research and Development
Expenses.
The rights to develop and
commercialize CO-101 in North America, Central America, South
America and Europe were licensed from Clavis in November 2009.
As part of the in-license transaction, we recognized
$13.1 million in 2009 as acquired in-process research and
development expense. In November 2010, we made a payment of
$10.0 million to Clavis to expand the territory rights
under the license agreement to include Asia and other
international markets and we recorded this payment as acquired
in-process research and development expense. The acquired
in-process research and development expense associated with
CO-101 decreased $3.1 million for the year ended
December 31, 2010 in comparison to the period from
April 20, 2009 (inception) to December 31, 2009 as a
result of the transactions described above. This reduction was
partially offset by the acquisition of the worldwide rights to
CO-1686 in May 2010. We recognized the up-front payment of
$2.0 million for CO-1686 rights as acquired in-process
research and development expense during 2010.
Other Income (Expense), Net.
Other
income (expense), net for the year ended December 31, 2010
was $795,000 compared to $(43,000) for the period from
April 20, 2009 (inception) to December 31, 2009, a
change of $838,000. The net change to other income (expense) was
largely due to a $489,000 award received in 2010 under the
Qualifying Therapeutic Discovery Project Program for the
development of CO-101 and CO-1686. In addition, $232,000 was due
to the strengthening of the Euro value in relation to the
U.S. Dollar over the 2010 year, which created an
exchange gain to our Euro denominated cash account. The Euro
cash account was established in May 2010 and had no impact in
the period ended December 31, 2009.
Liquidity
and Capital Resources
We have funded our operations primarily through the private
placement of equity and convertible debt securities. As of
March 31, 2011, we have received $75.5 million in net
proceeds from the issuance of convertible preferred stock. In
May and June 2011, we received proceeds of $28.0 million
through the issuance of convertible promissory notes. As more
fully described under the heading Convertible Promissory
Notes, the convertible promissory notes will automatically
convert into shares of our common stock upon completion of this
offering. As of March 31, 2011, we had cash, cash
equivalents and available for sale securities totaling
$13.9 million. This amount does not reflect the additional
$28.0 million in cash proceeds we received from the
issuance of the convertible promissory notes after
March 31, 2011.
The following table sets forth the primary sources and uses of
cash for each of the periods set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
April 20, 2009
|
|
|
|
|
|
|
Year Ended
|
|
|
(Inception) to
|
|
|
Three Months Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
Net cash used in operating activities
|
|
$
|
(34,011
|
)
|
|
$
|
(17,955
|
)
|
|
$
|
(8,188
|
)
|
|
$
|
(4,911
|
)
|
Net cash provided by (used in) investing activities
|
|
|
(12,821
|
)
|
|
|
(270
|
)
|
|
|
2,280
|
|
|
|
(20,306
|
)
|
Net cash provided by financing activities
|
|
|
29
|
|
|
|
75,536
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
$
|
(46,803
|
)
|
|
$
|
57,311
|
|
|
$
|
(5,906
|
)
|
|
$
|
(25,217
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Activities
The use of cash in all periods resulted primarily from our net
losses adjusted for non-cash charges and changes in components
of working capital. The significant increase in cash used in
operating activities for the year ended December 31, 2010
compared to the period from April 20, 2009 (inception) to
December 31, 2009 is due to an increase in research and
development expenses as we commenced development work on CO-101
and CO-1686 following the in-licensing of those programs in
November 2009 and May 2010, respectively. In addition, we
commenced operations in May 2009 and, as such, the period ended
December 31, 2009 reflects only a partial year of
52
activity. The increase of $3.3 million to cash used in
operating activities for the three months ended March 31,
2011 in comparison to the same period in the prior year was due
to an increase in clinical trial costs for CO-101 resulting from
an increase in the number of patients enrolled and sites
activated for our ongoing LEAP trial and commencement of CO-1686
research and development activities, a product candidate we
in-licensed in May 2010.
Investing
Activities
The cash used in investing activities for all periods primarily
reflects the purchase of available for sale securities partially
offset by maturities and sales of available for sale securities.
The net use of cash for these activities increased from zero in
2009 to $12.0 million in 2010 as we invested a portion of
the proceeds received from the sale of convertible preferred
stock in November 2009 in available for sale securities. In
addition, we purchased $0.8 million in property and
equipment in 2010 compared to $0.3 million in 2009. The
increase of $22.6 million in cash provided by investing
activities for the three months ended March 31, 2011
compared to the three months ended March 31, 2010 was due
primarily to a reduction of cash outflows for the purchase of
available for sale securities in the first quarter of 2011.
Financing
Activities
The cash provided by financing activities in 2009 is the result
of the sale and issuance of 5,044,828 shares of our
Series A-1
convertible preferred stock for net proceeds of
$9.9 million, 5,044,828 shares of our
Series A-2
convertible preferred stock for net proceeds of
$15.1 million, and 10,919,540 shares of our
Series B convertible preferred stock for net proceeds of
$50.4 million. Cash provided by financing activities for
other periods presented are due to the exercise of stock options.
Operating
Capital Requirements
Assuming we successfully complete clinical trials and obtain
requisite regulatory approvals, we do not anticipate
commercializing any of our product candidates until 2014 at the
earliest. As such, we anticipate that we will continue to
generate significant losses for the next several years as we
incur expenses to complete our development activities for each
of our programs, including clinical trial activities, companion
diagnostic development, drug development, establishing our
commercial capabilities, and expanding our general and
administrative functions to support the growth in our research
and development and commercial organizations. In addition, the
report of our independent registered public accounting firm on
our financial statements appearing at the end of this prospectus
contains an explanatory paragraph stating that our recurring
losses from operations raise substantial doubt about our ability
to continue as a going concern. We believe that the successful
completion of this offering will eliminate this doubt and enable
us to continue as a going concern; however, if we are unable to
raise sufficient capital in this offering, we will need to
obtain alternative financing or significantly modify our
operational plan for us to continue as a going concern.
The net proceeds from this offering alone will not be sufficient
to fund our operations through successful development and
commercialization of our product candidates. As a result, we
will need to raise additional capital following this offering to
fund our operations and continue to conduct clinical trials to
support additional development and potential regulatory
approval, make milestone payments to our licensors and
commercialize our product candidates.
We believe that the net proceeds from this offering, together
with our existing cash and cash equivalents and available for
sale securities, will allow us to fund our operating plan
through at least the next 12 months. If our available cash
and cash equivalents and available for sale securities are
insufficient to satisfy our liquidity requirements, we may seek
to sell additional equity or debt securities or obtain a credit
facility. The sale of additional equity and debt securities may
result in additional dilution to our shareholders.
In addition, if we raise additional funds through the issuance
of debt securities or convertible preferred stock, these
securities may have rights senior to those of our common stock
and could contain covenants that would restrict our operations.
Furthermore, any such required additional capital may not be
available on reasonable terms, if at all. If we were unable to
obtain additional financing, we may be required to reduce the
scope of, delay, or eliminate some or all of our planned
development and commercialization activities, which could harm
our business.
53
Because of the numerous risks and uncertainties associated with
research, development and commercialization of pharmaceutical
products, we are unable to estimate the exact amounts of our
working capital requirements. Our future funding requirements
will depend on many factors, including but not limited to:
|
|
|
|
|
the number and characteristics of the product candidates,
companion diagnostics, and indications we pursue;
|
|
|
|
the achievement of various development, regulatory and
commercial milestones resulting in required payments to partners
pursuant to the terms of our license agreements;
|
|
|
|
the scope, progress, results and costs of researching and
developing our product candidates and related companion
diagnostics and conducting clinical and preclinical trials;
|
|
|
|
the timing of, and the costs involved in, obtaining regulatory
approvals for our product candidates and companion diagnostics;
|
|
|
|
the cost of commercialization activities, if any, of our product
candidates are approved for sale, including marketing and
distribution costs;
|
|
|
|
the cost of manufacturing any of our product candidates we
successfully commercialize;
|
|
|
|
the costs involved in preparing, filing, prosecuting,
maintaining, defending and enforcing patent claims, including
litigation costs and outcome of such litigation; and
|
|
|
|
the timing, receipt and amount of sales, if any, of our product
candidates.
|
Contractual
Obligations and Commitments
The following table summarizes our contractual obligations at
December 31, 2010 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than
|
|
|
|
|
|
More than
|
|
|
Total
|
|
1 Year
|
|
1 to 3 Years
|
|
3 to 5 Years
|
|
5 Years
|
|
Operating lease obligations
|
|
$
|
2,198
|
|
|
$
|
665
|
|
|
$
|
1,140
|
|
|
$
|
393
|
|
|
|
|
|
In addition, we have certain obligations under licensing
agreements with third parties contingent upon achieving various
development, regulatory and commercial milestones. Pursuant to
our license agreement with Clavis for the development and
commercialization of
CO-101,
we
may be required to pay Clavis an aggregate of up to
$115.0 million if certain clinical study objectives and
regulatory filings and approvals are achieved. Further, we may
be required to pay Clavis up to an aggregate of
$445.0 million in sales milestone payments if certain
annual sales targets are met for CO-101. Subject to certain
conditions set forth in the license agreement, Clavis may elect
to co-develop and co-promote CO-101 in Europe. If Clavis were to
make this election, it would be required to reimburse us for a
portion of both past and future development costs. In addition,
the milestone payments described above would be reduced.
Pursuant to our license agreement with Avila for the development
and commercialization of CO-1686, we may be required to pay
Avila an aggregate of up to $119.0 million if certain
clinical study objectives and regulatory approvals are achieved,
including $4.0 million payable upon our planned filing of
an IND for CO-1686 in the first quarter of 2012. Further, we may
be required to pay Avila an aggregate of up to
$120.0 million in sales milestone payments if certain
annual sales targets are met for CO-1686. Pursuant to our
license agreement with Pfizer for the development of CO-338,
which was signed in June 2011, we may be required to pay Pfizer
up to an aggregate $259.0 million in milestone payments
upon the successful attainment of development, regulatory and
sales milestones. Finally, pursuant to terms of each of these
license agreements, we will pay royalties to our licensors on
sales, if any, of the respective products.
In May and June 2011, we issued an aggregate $35.0 million
aggregate principal amount of 5% convertible promissory notes in
two separate transactions as described under the heading
Convertible Promissory Notes. Upon the completion of
this offering, the principal balance and all accrued and unpaid
interest due on the notes will be converted into shares of our
common stock at a per share price equal to the initial public
offering price shown on the cover page of this prospectus.
54
Off-Balance
Sheet Arrangements
We did not have during the periods presented, and we do not
currently have, any off-balance sheet arrangements, as defined
under the rules promulgated by the SEC.
Tax Loss
Carryforwards
As of December 31, 2010, we have federal net operating loss
carryforwards of $24.4 million to offset future federal
income taxes. We also have federal research and development tax
credit carryforwards of $7.2 million to offset future
federal income taxes. The federal net operating loss
carryforwards and research and development tax credit
carryforwards expire at various times through 2030. The federal
tax credits expire at various times through 2030. To date, there
have not been any ownership changes under Section 382 of
the Code that would limit the amount of net operating loss
carryforwards and tax credit carryfowards available in future
years. However, the occurrence of certain events, including
significant changes in ownership interests, may limit the amount
of the tax carryforwards available in future years. At
December 31, 2010, we recorded a 100% valuation allowance
against our net operating loss and research and development tax
credit carryforwards of approximately $16.6 million, as we
believe it is more likely than not that the tax benefits will
not be fully realized. In the future, if we determine that a
portion or all of the tax benefits associated with our tax
carryforwards will be realized, net income would increase in the
period of determination.
Quantitative
and Qualitative Disclosures about Market Risks
We are exposed to market risk related to changes in interest
rates. As of December 31, 2010 and March 31, 2011, we
had cash, cash equivalents and available for sale securities of
$22.3 million and $13.9 million, respectively,
consisting of money market funds, U.S. government and
agency obligations, and corporate debt securities. Our primary
exposure to market risk is interest rate sensitivity, which is
affected by changes in the general level of U.S. interest
rates, particularly because our investments are in short-term
securities. Our available for sale securities are subject to
interest rate risk and will fall in value if market interest
rates increase. Due to the short-term duration of our investment
portfolio and the low risk profile of our investments, an
immediate 100 basis point change in interest rates would not
have a material effect on the fair market value of our portfolio.
We contract with CROs, investigational sites, and contract
manufacturers globally. We may be subject to fluctuations in
foreign currency rates in connection with these agreements.
While we periodically hold foreign currencies, primarily Euros,
we do not use other financial instruments to hedge our foreign
exchange risk. Transactions denominated in currencies other than
the functional currency are recorded based on exchange rates at
the time such transactions arise. As of March 31, 2011 and
December 31, 2010, approximately 29% and 23% of our total
liabilities, respectively, were denominated in currencies other
than the functional currency.
The convertible promissory notes we issued in May and June 2011
bear interest at a fixed rate. As a result we have limited
exposure to changes in interest rates. In addition, these
convertible promissory notes will convert into shares of our
common stock upon the completion of this offering.
Recently
Adopted Accounting Standards
We have not recently adopted any new accounting standards. There
are no recently issued accounting standards that have a material
impact on us.
Financial
Statements and Supplementary Data
Reference is made to the consolidated financial statements, the
report thereon, and the notes thereto, commencing at
page F-1
of the consolidated financial statements included in this
prospectus.
55
BUSINESS
Overview
We are a biopharmaceutical company focused on acquiring,
developing and commercializing innovative anti-cancer agents in
the United States, Europe and additional international markets.
We target our development programs for the treatment of specific
subsets of cancer populations, and seek to simultaneously
develop, with partners, companion diagnostics that direct our
product candidates to the patients that are most likely to
benefit from their use. We are currently developing three
product candidates for which we hold global marketing rights:
CO-101,
a
lipid-conjugated form of the anti-cancer drug gemcitabine, which
is in a pivotal study in a specific patient population for the
treatment of metastatic pancreatic cancer; CO-1686, an orally
available, small molecule epidermal growth factor receptor, or
EGFR, covalent inhibitor that is currently in preclinical
development for the treatment of non-small cell lung cancer, or
NSCLC, in patients with activating EGFR mutations, including the
initial activating mutations, as well as the primary resistance
mutation, T790M; and CO-338, an orally available, small molecule
poly (ADP-ribose) polymerase, or PARP, inhibitor being developed
for various solid tumors that is currently in a Phase I clinical
trial.
We believe that discovery productivity exceeds development
capacity in oncology, and we have built our organization to meet
the need for innovative patient-specific oncology drug
development. To implement our strategy, we have assembled an
experienced team with core competencies in global clinical
development and regulatory operations in oncology, as well as
conducting collaborative relationships with companies
specializing in companion diagnostic development. As our product
candidates mature, we intend to build our own commercial
organizations in major global markets and contract with local
distributors in smaller markets.
The most common anti-cancer drug therapies typically address
cancers within a specific organ as a single disease as opposed
to a collection of different disease subtypes, often resulting
in poor response rates and minimal effect on overall survival.
We believe the oncology community is increasingly recognizing
that tumors in a particular organ have unique pathologic and
molecular characteristics that may warrant different treatment
strategies. By better understanding differences in tumor biology
and underlying disease pathways, researchers are identifying
biomarkers to guide development of targeted oncology therapies,
with streamlined clinical trials, stratified patient populations
and improved patient outcomes. We believe that targeted
therapies and companion diagnostics offer a patient-tailored
approach to the treatment of cancers with improved diagnosis and
outcomes.
Our pipeline consists of the following three product candidates,
each of which is being developed for selected patient subsets:
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CO-101
-Our most advanced product candidate, CO-101, is
currently in a pivotal clinical study comparing CO-101 to
gemcitabine for first-line treatment of metastatic pancreatic
cancer. We expect to complete enrollment for this trial in the
first quarter of 2012 and report top line results as to overall
survival in the prespecified hENT1-low patient subset in the
fourth quarter of 2012. CO-101 is a novel, patented,
lipid-conjugated form of the anti-cancer drug gemcitabine that
is designed to treat patients with pancreatic cancer whose
tumors express low amounts of a membrane transporter protein on
the surface of the cancer cell known as hENT1 and are thus
expected to be resistant to standard gemcitabine-based therapy.
Based on the published results of multiple studies assessing the
correlation of hENT1 expression to survival outcomes in
pancreatic cancer patients treated with gemcitabine, we estimate
that approximately 40% to 50% of pancreatic patients express low
levels of hENT1, and thus derive little or no benefit from
gemcitabine therapy. We have partnered with Ventana Medical
Systems for the development and commercialization of a companion
diagnostic for the assessment of hENT1 levels.
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CO-1686
-Our second product candidate, CO-1686, is an
orally available, small molecule covalent inhibitor of the
cancer-causing mutant forms of EGFR for the treatment of NSCLC.
Because CO-1686 targets both the initial activating mutations as
well as the primary resistance mutation, T790M, it has the
potential to treat both first- and second-line NSCLC patients
with EGFR mutations. CO-1686 is currently in preclinical
development and we plan to file an Investigational New Drug
application, or IND, in the first quarter of 2012. We have
designed an accelerated clinical development program for
CO-1686, and if successful, have a goal of filing a New Drug
Application, or NDA, for an initial indication within
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approximately four years of filing our IND. We have partnered
with Roche Molecular Systems for the development and
commercialization of a companion diagnostic for EGFR mutations.
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CO-338
-Our third product candidate, CO-338, is an orally
available, small molecule PARP inhibitor being developed for use
as monotherapy or in combination with chemotherapeutic agents
for the treatment of various cancers. CO-338 is currently in a
dose ranging Phase I clinical trial in combination with
carboplatin chemotherapy for the treatment of solid tumors. This
program is supplemented by two investigator-sponsored trials of
CO-338 for the treatment of breast and ovarian cancers. We
intend to initiate a Phase I monotherapy study of the oral
formulation in the fourth quarter of 2011 to determine an
appropriate dose and schedule for long term administration.
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We were founded in April 2009 by former executives of Pharmion
Corporation, which successfully developed and commercialized
novel oncology products in the United States and Europe and was
ultimately acquired by Celgene Corporation in 2008. Our
investors include the following entities or their affiliates:
Domain Associates, New Enterprise Associates, Versant Ventures,
Aberdare Ventures, Abingworth Bioventures, Frazier Healthcare
Ventures, Pfizer, Inc., ProQuest Investments and our management
team.
Our
Strategy
Our strategy is to acquire, develop, and commercialize
innovative anti-cancer agents in the United States, Europe and
additional international markets in oncology indications with
significant unmet medical need. The critical components of our
business strategy include the following:
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Focus on oncology.
The oncology market
is characterized by a number of disorders with high rates of
recurrence and a limited response from current therapies or
treatments. Many of these therapies include severe side effects.
New oncology product candidates addressing unmet medical needs
or providing superior safety profiles are frequently the subject
of expedited regulatory reviews and, if approved, can experience
rapid adoption rates. We believe that the increasing role of
targeted therapies and companion diagnostics to identify
selected patient subsets in oncology presents the potential for
improved patient outcomes.
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Focus on compounds where improved outcomes are associated
with specific biomarkers.
Our licensing
strategy to date has been to prioritize opportunities in which a
strong biological hypothesis has been established linking a
specific biomarker with improved outcomes for the product
candidate. Significant progress has been made over the last
several years in the identification of molecular targets and
pathways that more narrowly specify the causes of cancer and the
variation in responses to different therapies experienced by
patient subsets with a particular cancer or tumor type. In
certain cases, the underlying science has progressed to the
point that subset patient populations deriving little or no
benefit from existing therapies can be identified and targeted
by newly developed therapies, such as our product candidates. We
believe that the identification of such subsets, and the
correlation of their specific characteristics to the drug under
development, should increase the clinical benefit to targeted
patients and the probability of success in our clinical trials.
Such patient identification should also enable us to design
clinical trials that may be completed more rapidly than has
traditionally been the case, and, if successful, to achieve
clinical outcomes for the targeted group that are sufficiently
attractive to support the risk/benefit metrics of healthcare
payors.
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Combine companion diagnostics with drug development
efforts to realize superior clinical
outcomes.
Our development strategy is based
on the premise that we can utilize effective companion
diagnostics to identify different patient subsets who we believe
will uniquely benefit from our product candidates. We are
partnering to develop these companion diagnostics for use in the
clinical development and ultimate commercial utilization of our
product candidates. Because we do not develop diagnostics
internally, we are able to select from among all available
technologies when choosing a partner for our programs under
development. This flexibility allows us to choose the most
appropriate partner and diagnostic platform for each program
under development and affords us the best chance of clinical
success. We have partnered with experienced diagnostic companies
that we believe have the ability and commitment to gain the
required regulatory approvals and support global
commercialization for these companion diagnostics.
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Manage and control global development activities and
regulatory operations.
We believe our
development and regulatory experience enables us to devise time-
and cost-efficient strategies to develop and obtain regulatory
approvals for new drugs, and to identify the regulatory pathway
that allows us to get a product candidate to market as quickly
as possible. Unlike many early stage biotechnology and
pharmaceutical companies that have development or regulatory
capabilities only in the country in which they are located, we
have assembled an experienced team with a successful track
record at managing global clinical development activities, and
with multinational expertise in obtaining regulatory approvals
for new drugs and in maintaining compliance with the regulations
governing the sales, marketing and distribution of
pharmaceutical products. Because authorities in major markets
are increasingly accepting one core dossier as the basis for
regulatory approvals in multiple jurisdictions, we believe we
can manage a global development program without local partners,
thereby leveraging a single core dossier to gain approvals in
multiple geographies. We manage critical functions in house,
including clinical development, biostatistics, pharmaceutical
development, molecular diagnostics and clinical and regulatory
operations, and we outsource certain activities where
economically and strategically appropriate.
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Seek and maintain global commercial
rights.
We believe that it is very important
to maintain global rights to our product candidates, and that we
can build our own commercial organizations in major
pharmaceutical markets as well as a network of third-party
distributors in smaller markets. There are a relatively small
number of oncologists practicing in each of the major
pharmaceutical markets and an even smaller number of oncology
opinion leaders who significantly influence the types of drugs
prescribed in cancer therapy. We therefore believe that we can
effectively reach the oncology markets with a relatively small
sales and marketing organization focused on these physicians and
oncology opinion leaders. As a result, we plan to maintain
commercial autonomy and will not require a pharmaceutical
partner for commercialization activities. By managing the global
sales and marketing of our products on our own, we believe we
can provide uniform marketing programs and consistent product
positioning, pricing and labeling. Finally, by controlling
commercial activities ourselves in major markets, we will retain
the vast majority of the revenues from our product candidates.
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Product
Candidates
Consistent with our strategy, each of our initial three
in-licensed product candidates, for which we hold global
marketing rights, is being developed for selected patient
subsets. The following table summarizes the status of our
product pipeline:
58
CO-101 - a
Lipid-Conjugated form of the Anti-Cancer Drug
Gemcitabine
Overview
CO-101 is a new chemical entity that we in-licensed in November
2009 from Clavis Pharma ASA, a publicly traded biotechnology
company based in Oslo, Norway. CO-101 is a novel, patented,
lipid-conjugated form of the anti-cancer drug gemcitabine.
CO-101 is designed to treat patients with pancreatic cancer
whose tumors express low amounts of a membrane transporter
protein known as hENT1 and thus are expected to be resistant to
standard gemcitabine-based therapy. CO-101 is currently in an
international, randomized, controlled 360-patient pivotal study
comparing CO-101 to gemcitabine for the first-line treatment of
metastatic pancreatic cancer. We expect to complete enrollment
for this trial in the first quarter of 2012 and report top line
results as to overall survival in the prespecified hENT1-low
patient subset in the fourth quarter of 2012, and, if positive,
we expect to file an NDA, with the U.S. Food and Drug
Administration, or FDA, and a Marketing Authorization
Application, or MAA, with the European Medicines Agency, or EMA,
in mid-2013. We are also conducting clinical trials of CO-101
for the second-line treatment of pancreatic cancer and to
evaluate a modified formulation of the drug for improved
manufacturing efficiencies.
Pancreatic
Cancer Market Overview
According to published reports, over 43,000 new cases of
pancreatic cancer occurred in the United States in 2010. In
addition, over 60,000 new cases are reported each year in the
European Union and over 20,000 new cases are reported annually
in Japan. According to a number of published reports, 85% of
patients with pancreatic cancer present with unresectable,
locally advanced, also referred to as Stage III, or metastatic,
also referred to as Stage IV, disease. Even after surgical
resection and adjuvant chemotherapy or radiotherapy for
apparently localized disease, these patients often experience
early recurrence and rapid disease progression. As a result,
pancreatic cancer has one of the highest mortality rates among
all cancers, with estimates for one- and five-year overall
survival of 24% and 5%, respectively, in the United States.
The standard first-line therapy for patients with unresectable
or metastatic disease is gemcitabine, given as monotherapy.
Gemcitabine was originally introduced in the United States in
1996 under the brand name
Gemzar
®
,
and is now widely available as a generic drug. Gemcitabine is
part of a class of drugs known as nucleoside analogues and can
be used alone or in combination with other chemotherapy agents
in the treatment of various malignancies, including pancreatic,
NSCLC, breast, and ovarian cancers. Current guidelines of the
National Comprehensive Cancer Network list gemcitabine
monotherapy as an appropriate therapy for all pancreatic cancer
patients eligible for cytotoxic therapy. Although the drug
Tarceva
tm
(erlotinib) is approved in combination with gemcitabine in
patients with metastatic pancreatic cancer, this combination
involves increased toxicity and has been shown to confer a
median survival benefit of only approximately two weeks when
compared to gemcitabine monotherapy. Alternative therapies for
the treatment of pancreatic cancer include: FOLFIRINOX
(combination 5-fluorouracil
(5-FU),
leucovorin, irinotecan and oxaliplatin), gemcitabine combination
therapy or capecitabine. Some patients initially respond to
cytotoxic chemotherapy, but all eventually progress, and many
fail to derive even an initial benefit from such treatment.
There are no approved second-line therapies for pancreatic
cancer, and in practice, for those patients that do receive
second-line therapy, it is typically a therapy that was not
utilized in the first-line setting. Based upon a survey which we
commissioned in 2009 of approximately 25 physicians in the
United States and Europe, we believe that the consequence of
this treatment paradigm is that approximately 80% of all
pancreatic cancer patients will receive gemcitabine during their
disease course.
Targeting
Gemcitabine Non-Responders: the hENT1 Hypothesis
For gemcitabine to kill cancer cells, it must enter them through
specific membrane transporters, or channels, on the surface of
the cancer cells. The human equilibrative nucleoside transporter
1, or hENT1, is believed to be the dominant transporter for
gemcitabine. As a consequence, it is believed that tumor cells
with low hENT1 expression will be resistant to gemcitabine
therapy. This was first supported by clinical data in 2004.
Specifically,
Clinical Cancer Research
reported the study
results of 21 metastatic pancreatic cancer patients treated with
gemcitabine. This study demonstrated that survival after
gemcitabine therapy was positively correlated with hENT1
expression. As shown in the figure below, also referred to as a
Kaplan-Meier estimate of survival, patients with a high level of
59
hENT1 expression had a median overall survival of 13 months
compared to four months for those patients with a low level
of hENT1 expression when treated with gemcitabine.
Kaplan-Meier estimate of survival in gemcitabine-treated
hENT1-high and hENT1-low pancreatic cancer patients.
*hENT1-high
= all tumor cells had detectable hENT1 protein by IHC
Source: Spratlin et al Clin Can Res(2004)
This correlation of overall survival and hENT1 expression in
pancreatic cancer patients treated with gemcitabine has been
further demonstrated in multiple studies. For example, in 2009,
Gastroenterology
reported the results of a retrospective
analysis of a large, randomized study of 198 pancreatic cancer
patients comparing treatment with gemcitabine versus 5-FU.
Patients in this study treated with gemcitabine who had a high
level of hENT1 expression had a median overall survival of
21 months, compared to a median overall survival of
16 months for gemcitabine-treated patients with low hENT1
expression and 12 months for gemcitabine-treated patients
with no hENT1 expression. Importantly, the results of this study
also demonstrated that there was no correlation between overall
survival and hENT1 expression for patients treated with 5-FU.
This suggests that the correlation between survival and hENT1
expression is specific to pancreatic cancer patients treated
with gemcitabine and not a prognostic marker. The Kaplan-Meier
curves for this study are shown in the figure below.
60
Source: Farrell et. al Gastroenterology 2009:136:187-195
A positive, and statistically significant association is seen
between tumor hENT1 expression and overall survival for
recipients of gemcitabine (left, p=0.002 for high vs. no hENT1,
p=0.03 for low vs. no hENT1), but not for recipients of
5-FU
(right,
p=not significant). hENT1 expression was characterized as no,
low or high. High hENT1 was defined by strong
reactivity in greater than 50% of neoplastic cells on IHC,
whereas no hENT1 was defined as no staining in
greater than 50% of neoplastic cells. A score of low hENT1
staining was given to all cases in between.
The table below summarizes studies performed by various groups
that repeatedly confirmed the correlation between survival
outcomes for pancreatic cancer patients treated with gemcitabine
and their hENT1 expression.
CO-101:
Addressing Patients with Low Levels of hENT1
CO-101, also known as gemcitabine-5-elaidate, is a new
chemical entity that is derived by adding a fatty acid to the
gemcitabine chemical structure, creating a lipid-conjugate. In
contrast to the conventional form of gemcitabine, the
lipid-conjugate enables CO-101 to enter cancer cells without the
need for a specific membrane transporter protein on the surface
of the cancer cell known as hENT1. CO-101 is thus designed to
address the unmet need of patients with pancreatic cancer whose
tumors express low amounts of hENT1 and are thus expected to be
resistant to standard gemcitabine-based therapy. Based on the
published results of multiple studies assessing the correlation
of hENT1 expression to survival outcomes in pancreatic cancer
patients treated with gemcitabine, we estimate that
approximately 40% to 50% of pancreatic patients express low
levels of hENT1. CO-101 has a broad spectrum of
anti-proliferative activity
in vitro
and antitumor
activity in a wide range of mouse and human tumor models
in
vivo
. These tumor models are similar to those used for
evaluating the
in vivo
activity of gemcitabine.
CO-101
Clinical Development
LEAP Study: Pivotal Trial of CO-101 in First-Line Pancreatic
Cancer.
In mid-2010, we commenced a pivotal study of
CO-101, which we refer to as LEAP (
L
ow h
E
NT1 and
A
denocarcinoma of the
P
ancreas). We plan to enroll
a total of 360 patients across approximately 90 sites in
North and South America, Europe and Australia. This open-label,
randomized, controlled, multicenter study compares CO-101 to
gemcitabine as a first-line therapy in patients with metastatic
pancreatic cancer. The primary objective of this study is to
compare the overall survival of patients with metastatic
pancreatic cancer and low hENT1 expression that are treated with
CO-101 versus gemcitabine. Secondary endpoints include overall
survival in all patients and in patients with high hENT1
expression, disease response rate, and drug tolerability and
toxicity. Patients enrolled in the trial are being randomized on
a
one-to-one
basis to receive either
CO-101
or
gemcitabine. Patients receiving CO-101 are dosed at
1250mg/m
2
delivered through intravenous infusion once per week for three
out of every four weeks. Gemcitabine patients are dosed at its
standard prescribing regimen of
1000mg/m
2
delivered through intravenous infusion once per week for seven
weeks,
61
followed by one week of rest and then once per week for three
out of every four weeks. We expect enrollment to be completed in
the first quarter of 2012. We expect to report top line overall
survival data from this trial in the fourth quarter of 2012. If
the LEAP data are positive, we expect to file an NDA with the
FDA and an MAA with the EMA in mid-2013.
To test the primary hypothesis that CO-101 is more effective
than gemcitabine in pancreatic cancer patients with low levels
of hENT1, we need to develop an
in vitro
diagnostic,
or IVD, product to reliably measure tissue hENT1 expression and
enable prospective classification of patients as either hENT1
high or hENT1 low. We are collaborating with Ventana Medical
Systems, Inc., part of the Roche Group, or Ventana, to develop
the IVD using an IHC based approach. Key characteristics of this
companion diagnostic are:
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Ability to analyze accessible tissue:
Patients with
metastatic pancreatic cancer typically have liver metastases
which can be biopsied quite easily and analyzed by IHC;
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Simple assay/local analysis:
IHC is a standard
laboratory technique that is widely utilized and does not
require samples to be sent off-site for analysis;
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Based on existing technology:
Ventana utilized
established IHC diagnostic techniques to develop a validated
hENT1 IHC assay using knowledge already gained from IHC hENT1
assays developed by academics;
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Regulatory precedent:
IHC IVDs have previously been
approved by the FDA as companion diagnostics for cancer
therapeutics, including Ventanas PATHWAY HER-2/neu assay
intended to assist in the assessment of breast cancer patients
for whom Herceptin treatment is considered; and
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Reimbursement:
IHC diagnostic kits are widely
reimbursed by health care payors.
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In the United States, the marketing approval of this type of IVD
requires the submission to and approval by the FDA of a
Pre-Market Approval Application, or PMA, submission. We and
Ventana will generate data on the IVD, including the necessary
analytical and clinical validation studies, with the goal of
being in a position to submit a PMA and, assuming a successful
outcome for the LEAP trial, seek approval of the PMA for the IHC
hENT1 assay substantially simultaneously with the approval of an
NDA for CO-101. In the European Union, the EMA is not currently
involved in approving companion diagnostics and, instead,
Ventana will apply for a CE mark designation in the European
Union that will allow it to sell the diagnostic in the European
Union.
Study CO-101-002: Establishing a hENT1
Cut-Off.
Having developed the IHC assay with
Ventana, we need to establish a cut-off for
determining whether an individual patient is hENT1-high or
hENT1-low. This cut-off must be robust such that the assay will
provide consistent results when run and interpreted in different
geographies by different labs and pathologists. Our goal is for
a patient who presents with metastatic pancreatic cancer to
undergo a metastasis biopsy and subsequent IHC assay that will
be interpreted by a local pathologist, to determine whether a
patient is hENT1-low and thus a good candidate for CO-101
therapy. In order to prospectively establish the hENT1-high/low
cut-off, we commenced study CO-101-002. Pursuant to the protocol
for this study, we are collecting tumor tissue samples from
previously completed clinical studies of gemcitabine for the
treatment of pancreatic cancer. Using the Ventana IHC assay, we
will assess the hENT1 levels in each of the tissue samples and
correlate the hENT1 expression with clinical outcomes. We will
then define a cut-off level of hENT1 expression that is
optimally associated with overall survival outcomes following
gemcitabine therapy. According to the hypothesis, patients with
tumor hENT1 expression levels below the cut-off will derive
minimal benefit from gemcitabine and will constitute the
prospectively defined hENT1-low population in the LEAP trial.
Collection and analysis of the tissue samples is ongoing.
Establishment of the hENT1 cut-off is expected by the fourth
quarter of 2011. Importantly, patients from LEAP will thus be
prospectively classified as hENT1-high or -low before data from
the ongoing LEAP trial are known. The primary efficacy analysis
for LEAP is in hENT1-low patients, and their prospective
classification prior to analyzing survival outcomes is important
to ensure study integrity. Based on the published results of
multiple studies assessing the correlation of hENT1 expression
to survival outcomes in pancreatic cancer patients treated with
gemcitabine, we estimate that approximately 40% to 50% of
pancreatic patients are
hENT1-low.
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The following chart shows the LEAP study and companion
diagnostic validation study design:
Study CO-101-003: a Phase II Study in Second-Line
Pancreatic Cancer.
We are also conducting a
Phase II study to evaluate the efficacy of CO-101 as a
second-line therapy for pancreatic cancer patients whose disease
has progressed after first-line therapy and whose tumor tissue
samples demonstrate a complete absence of hENT1 using an IHC
diagnostic test. Study CO-101-003 is being conducted at up to 20
investigational centers in the United States. The first patient
was enrolled in February 2011 and enrollment is expected to be
completed in the fourth quarter of 2012.
Study CO-101-003 uses an open-label, single-arm, two-stage,
Phase II design to evaluate CO-101 as second-line therapy
in patients with measurable metastatic pancreatic cancer whose
best response to gemcitabine as a first-line therapy, measured
radiographically after treatment, was progressive disease; that
is, patients who received no demonstrable benefit from
gemcitabine therapy. Patients receive the same dosing regimen of
CO-101 as in the LEAP trial. The primary endpoint for this study
is disease control, which is defined as a complete response,
partial response, or stable disease using response evaluation
criteria in solid tumors, or RECIST, a set of published rules
that define when a cancer patient responds, stabilizes, or
progresses during treatments. After the first 18 patients
have been assessed, the remaining 17 patients will be
treated only if three or more patients in the initial 18-patient
cohort have exhibited disease control. The study will close when
a six-month
follow-up
has been completed for all patients. If meaningful numbers of
patients experience extended stable disease or even partial
responses on CO-101, we will view the study as successful in
demonstrating CO-101s activity in second-line pancreatic
cancer.
Study CO-101-004: a Study Conducted for Formulation
Development.
Following our acquisition of rights
to CO-101, we engaged in additional formulation development with
a goal of improving the formulation by increasing the
concentration of the active ingredient in the final drug
product. Such increase would allow us to reduce the volume of
drug delivered to patients and thereby reduce the number of
production batches needed for commercial supply and the overall
costs of the finished product. Study
CO-101-004
is a multicenter study that compares our current clinical
formulation of CO-101 to the potential new commercial
formulation for CO-101. Enrollment for this study began in April
2011. In this study, each patient over the course of the
protocol will receive both formulations of CO-101 and therefore
act as his or her own control. The primary objective of this
study is to compare the pharmacokinetic profiles of the current
clinical formulation of CO-101 to the newer formulation of
CO-101 to determine whether the two formulations are equivalent.
We expect to complete this study in 2012, and if successful we
believe we will be able to utilize the new formulation upon
commercialization of CO-101, if approved.
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Other Potential Indications for CO-101: the hENT1 Hypothesis
Applied to other Cancers.
In addition to its use
in pancreatic cancer, gemcitabine is approved, generally in
combination with cisplatin, for use in NSCLC, ovarian and breast
cancer, and we believe the hENT1 hypothesis could be applicable
in each of these types of cancers. A small amount of preliminary
data suggests the efficacy of gemcitabine in combination with
cisplatin in NSCLC may relate to hENT1 expression. Consequently,
we are considering clinical studies of CO-101 in other tumor
types, initially NSCLC, and will seek to confirm a hENT1 cut-off
using the Ventana IHC assay in these tumors. Testing of the IHC
assay will be undertaken using lung tissue samples obtained from
previously completed studies of gemcitabine in NSCLC, using a
retrospective tissue collection protocol. The primary objective
of the study will be to correlate the hENT1 expression with
clinical outcomes in order to confirm the cut-off level of hENT1
that is optimally associated with treatment outcomes and
survival in NSCLC patients treated with gemcitabine in
combination with cisplatin.
Early
Clinical Development of CO-101
During its initial development by Clavis Pharma, CO-101,
identified by Clavis Pharma as CP4126, was the subject of two
clinical trials:
Study
CP-4126-201:
an Abbreviated Phase II Study Conducted by Clavis
Pharma.
In June 2009, Clavis Pharma initiated a
Phase II, open-label, multicenter European study evaluating
CO-101
in
patients with advanced pancreatic cancer. This study started as
a single-arm study and included patients with locally advanced
as well as metastatic disease, who had no prior chemotherapy for
advanced disease. The patients were treated with
CO-101 1250 mg/m
2
once per week for three out of every four weeks. The primary
endpoint was change in a specific tumor marker, CA
19-9,
and
secondary endpoints were overall survival and overall response
rate according to RECIST. Tumor hENT1 status was analyzed using
an academically available assay only after patients were
enrolled and treatment had begun. The protocol was amended in
July 2009 to replace the single-arm treatment with a randomized
treatment allocation to either
CO-101
or
gemcitabine after the first 10 patients had been enrolled
in the study.
Upon obtaining the rights to CO-101, we and Clavis made the
decision to stop this trial and begin the LEAP study, which, for
the reasons set forth in detail below, we believe offers the
potential for an accelerated pathway to approval. Due to the
small number of patients in each treatment group of the Clavis
Pharma trial, meaningful treatment comparisons between CO-101
and gemcitabine with respect to the primary endpoint of CA
19-9
response and overall survival could not be made.
Twenty-one patients completed this study. While the study
database has not been locked and the final results are therefore
subject to change, a preliminary analysis of the data shows the
following: two patients in the CO-101 treatment group had a
partial response, driving an overall response rate of 13.3%,
whereas no patients in the gemcitabine group had a response.
Five additional CO-101 patients achieved stable disease,
some for a prolonged period, including one patient for
8 months. When analyzed in the subset of patients with
metastatic disease and performance status of 0-1, a set of
patient criteria similar to the ongoing LEAP study, the median
overall survival time for
CO-101
recipients was 7.6 months (N=14) versus 5.9 months for
patients receiving gemcitabine (N=4). In this same subset, when
analyzed by hENT1 status, the median survival time for
hENT1-low
patients was 9.2 months for CO-101 (N=3) and
3.3 months for gemcitabine (N=1). The activity of CO-101
appeared to be independent of hENT1 status, whereas the activity
of gemcitabine appeared to be correlated with hENT1 expression.
Most patients in the study experienced one or more
treatment-emergent adverse events, or TEAEs. More than half of
the CO-101 patients experienced nausea
and/or
vomiting, which were the most frequent TEAEs reported and
occurred at higher frequencies than gemcitabine. There were 29
Grade 3 and four Grade 4 events in the CO-101 arm, the
most significant level of TEAEs. The most frequent Grade 3 or 4
TEAE in
CO-101 patients
was neutropenia, a reduction in white blood cells. Neutropenia
was also one of the events that led most often to dose reduction
of CO-101, with the other being thrombocytopenia, or reduction
in blood platelet cells, which was rarely assessed as Grade 3 or
4.
Phase I Trial: First in Man Study on
CP-4126.
The
first-in-human
study conducted by Clavis Pharma aimed to determine the maximum
tolerated dose and the recommended dose for Phase II
studies of CO-101. All 43 patients in the study finished
treatment by December 2009. The most frequently reported
toxicities were mild (Grade 1-2)
64
nausea, vomiting, anorexia and fatigue. Myelosuppression, the
impairment of bone marrow function, was also reported.
Pharmacokinetic data suggested that CO-101 was present in plasma
in a dose-proportional manner after IV administration.
Gemcitabine can also be measured in plasma after CO-101
administration, and at the
1250mg/m
2
dose of CO-101, gemcitabine exposure exceeds that seen with
conventional gemcitabine given at the standard dose of
1000mg/m
2
.
Based on the dose limiting toxicities, the recommended
Phase II dose of CO-101 was determined to be
1250 mg/m
2
,
given as an IV infusion once per week for three out of every
four weeks.
Regulatory
strategy
CO-101 LEAP Trial Design and Requirements for Regulatory
Approval.
In most cases, the FDA requires at
least two adequate and well-controlled clinical trials to
support marketing approval. In certain cases, evidence from a
single clinical trial may be sufficient, and it is often the
case in oncology where there is an unmet medical need. A single
trial may be sufficient in cases where a multicenter study
provides highly reliable and statistically strong evidence of an
important clinical benefit, such as an effect on survival, and
in which confirmation of the result in a second trial would be
practically or ethically impossible.
We believe that if CO-101 meets the protocol specified endpoints
of the LEAP study, this single clinical study should be
sufficient for submission for marketing approval in the United
States and the European Union. Formal regulatory advice was
obtained from the FDA and EMA in response to a briefing document
and questions submitted in 2010. In September 2010, we had a
joint meeting with the oncology therapeutic and diagnostic
device divisions of the FDA to review the clinical development
plan for
CO-101
and
the development plan for its companion diagnostic. Based on this
meeting and our adherence to established guidelines, we believe
that this single clinical study could be used for registration
if the results are positive. The adequacy of the safety and
efficacy database will be a review issue, as with any
submission. Similarly, following Protocol Assistance in the
European Union, the Committee for Medicinal Products for Human
Use, part of the EMA, indicated that a submission based on this
single clinical study could be acceptable provided a meaningful
survival benefit is demonstrated.
Applications for FDA approval to market a new drug should be
based on adequate and well-controlled studies in order to
distinguish the effect of the drug from other influences, such
as a spontaneous change in the disease, or a biased observation.
The reports on adequate and well-controlled studies provide the
primary basis for determining whether there is substantial
evidence to support the claims for effectiveness of a new drug.
The key characteristics considered in determining whether a
study is adequate and well-controlled are as follows:
(1) The protocol clearly defines objectives and methods of
analysis.
(2) The study design provides a valid comparison with a
control and quantitative assessment of drug effect.
(3) The method for selection of subjects assures that they
have the disease being studied.
(4) The method of assigning patients to the treatment and
control groups minimizes bias and is intended to assure the
comparability of the groups.
(5) Adequate measures are taken to minimize bias on the
part of the subjects, observers and analysts of the data.
(6) The methods of assessment of response are well-defined
and reliable.
(7) The analysis of the results of the study is adequate to
assess the effects of the drug.
We believe that the LEAP study protocol meets these requirements
and that the study fulfills the criteria of an adequate and
well-controlled study. The protocol clearly defines the
objectives and patient population. The methods of analysis are
subject to a detailed statistical analysis plan. The protocol
includes an active treatment control, which is the standard of
care, gemcitabine. Various types of control arms can be used,
but in oncology an active control is most often used. The sample
size for the study is predetermined and the study is powered to
provide a quantitative assessment of drug effect and detect a
difference between treatments. The selection of subjects follows
best practice principles and incorporates the guidance provided
in a recent consensus report for clinical trials in pancreatic
cancer.
65
Patients are randomized to therapy with CO-101 or gemcitabine,
stratified to ensure the comparability of the groups and
precautions are taken to minimize potential bias. The primary
efficacy variable is overall survival, which is an objective
endpoint and the gold standard for measurement of
efficacy for oncology clinical trials. Survival is considered
the most reliable cancer endpoint and bias is not considered to
be a factor in endpoint measurement.
CO-101 has an orphan drug designation in the United States and
the European Union for the treatment of pancreatic cancer. This
designation provides procedures to facilitate the development of
drugs for rare diseases and offers incentives for such
development, including market exclusivity. However, the
submission and approval requirements for an orphan drug are not
different from the standard requirements for drugs.
The regulations for accelerated approval for new drugs for
serious or life threatening illnesses often referred to as
subpart H, do not apply to the LEAP study. Although CO-101 is
being developed for a serious and life threatening disease, this
guidance applies to approvals based on a surrogate endpoint or
clinical endpoint other than survival. Since the endpoint in the
LEAP study is survival, the NDA would be subject to a regular
approval procedure. CO-101 requires the concomitant availability
of an
in vitro
diagnostic device to identify the
relevant patient population. This diagnostic needs to be
available in parallel with the drug product and therefore the
development plan for CO-101 allows for the diagnostic to be
developed and validated in a time frame that will allow for
regulatory approval at the same time that CO-101 would be
approved. We are working with Ventana to develop the data
necessary for a PMA submission with the FDA. Assuming a
successful outcome of our LEAP study, we expect that Ventana
will submit a PMA for the hENT1 IHC assay in parallel with our
submission of an NDA for CO-101 such that approval would be
expected at the same time for both products.
CO-1686 - an
Oral EGFR Mutant-Selective Inhibitor
Overview
CO-1686 is a new chemical entity we in-licensed pursuant to an
agreement effective May 2010 from Avila Therapeutics, Inc., a
privately held biotechnology company in Waltham, Massachusetts.
It is a novel, orally available, small molecule covalent
inhibitor of the cancer-causing mutant forms of EGFR for the
treatment of NSCLC. Because CO-1686 targets both the initial
activating EGFR mutations as well as the primary resistance
mutation, T790M, it has the potential to treat both first- and
second-line NSCLC patients with EGFR mutations. Such initiating
activating mutations occur in approximately 10% to 15% of NSCLC
cases in Caucasian patients and approximately 30% to 35% of
NSCLC cases in East Asian patients. Following treatment with
Tarceva
tm
(erlotinib) or
Iressa
tm
(gefitinib), approximately half of these patients develop the
T790M mutation. CO-1686 is currently in IND enabling studies,
and we anticipate filing an IND in the first quarter of 2012.
Market
Overview: Resistance to EGFR Tyrosine Kinase Inhibitors, or
TKIs, Represents an Unmet Medical Need
Lung Cancer and EGFR TKIs.
According to the
American Cancer Society, there were an estimated 223,000 new
cases of lung cancer in the United States in 2010, making it the
most common type of cancer. In addition, according to published
reports there are an estimated 288,000 new cases of lung cancer
in the European Union each year and 85,000 new cases in Japan.
Lung cancer typically presents relatively late in its clinical
course, when locally directed therapy (surgery and radiation) is
not curative. The treatment of locally advanced and metastatic
lung cancer is a significant unmet medical need.
Lung cancer is typically divided into two groups based upon the
histologic appearance of the tumor cellssmall-cell and non
small-cell lung cancer, each of which is treated with distinct
chemotherapeutic approaches. NSCLC accounts for approximately
85% of lung cancer cases, and can be subdivided into further
histologic subsetsadenocarcinoma, bronchioalveolar,
squamous cell, anaplastic and large cell being the most
commonalthough until recently treatment was similar for
all of these subsets. The standard of care for treatment of
advanced or metastatic NSCLC has historically been a cytotoxic
chemotherapy doublet of platinum plus paclitaxel. In the last
few years, specifically for non-squamous cell, a subset of NSCLC
patients,
Avastin
®
(bevacizumab) has been shown to prolong survival when added to
the doublet, and
Alimta
®
(pemetrexed) has replaced paclitaxel on the basis of improved
tolerability and ease of administration. Despite these
additions, patients with locally advanced or metastatic NSCLC
have five-year survival rates of just 24% and 4%, respectively.
66
Approximately 10 years ago, orally active small molecule
inhibitors of the tyrosine kinase activity of EGFR were
introduced into the treatment of lung cancer. The
growth-promoting EGFR was known to be frequently expressed on
lung cancer cells, often at high levels, and preclinical work
had suggested that EGFR TKIs, such as gefitinib and erlotinib,
could provide effective cancer therapy in certain patient
subsets. Clinical trials were conducted in humans with NSCLC and
the drugs were approved by the FDA in 2003
(Iressa
tm
(gefitinib)) and 2004
(Tarceva
tm
(erlotinib)) for patients who had failed to respond to
conventional chemotherapy. At the time, it was noted that a
small subset of patients experienced profound tumor responses to
TKI therapy.
In 2004, it was discovered that the subset of NSCLC patients who
experienced dramatic clinical responses to the EGFR TKIs had
activating mutations in the EGFR gene in their lung cancer
tissue, known as an L858R mutation, rendering the EGFR protein
hyperactive. It became clear that the EGFR TKIs potently
inhibited the mutant EGFR proteins, switching off their activity
and causing dramatic tumor shrinkage in patients. This is an
example of oncogene addiction, whereby a single gene
mutation (EGFR in this case) is absolutely necessary for the
proliferation
and/or
survival of a tumor cell. A corollary of this situation is that
inhibition of that single gene product (in this case with TKIs)
is therapeutic and drives tumor shrinkage. It was subsequently
shown that EGFR mutations generate tumors with adenocarcinoma
histology, and are found in approximately 10% to 15% of
Caucasian NSCLC patients and 30 to 35% of East Asian NSCLC
patients.
The original approvals of the TKIs made no reference to patient
selection, but these new data have suggested that the majority
of their therapeutic benefit can be attributed to the subset of
patients with activating EGFR mutations. Recent clinical trials
have shown that for patients with activating EGFR mutations,
treatment with TKIs is superior to standard cytotoxic
chemotherapy as it has resulted in superior progression free
survival and improved quality of life. Consequently, many cancer
therapy guidelines (National Comprehensive Cancer Network and
American Society for Clinical Oncology) suggest that patients
with adenocarcinoma histology NSCLC should undergo genetic
testing for EGFR mutations and TKIs should be used in those
patients with identified activating mutations. Molecular testing
of NSCLC tissues for EGFR mutations has become standard across
many countries, although no specific diagnostic test is included
in the regulatory labels for any of the approved TKIs to date.
Resistance to EGFR TKIs.
Despite the success
of TKIs in patients with mutant EGFR-related NSCLC, most
patients disease will progress, typically after
approximately one year of therapy. Molecular studies have shown
that approximately 50% of the resistant tumors carry a second,
acquired resistance mutation in the EGFR gene. This resistance
mutation is a specific change in the type of amino acid located
at position 790 in the EGFR protein, called a T790M
mutation. As a consequence of this switch the three-dimensional
structure of the TKI binding site changes and thus the EGFR
becomes resistant to TKI therapy. This T790M mutation is also
called the gatekeeper mutation because of its
strategically important position in the EGFR protein.
An early approach to therapy for this important resistance
mutation was to develop covalent inhibitors, drugs that bind
irreversibly through a covalent bond to their receptor target,
and permanently inactivate it. There is a specific location on
the EGFR protein, a cysteine residue, that is close to the
proteins active site, and is where most covalent drugs
bind to in order to achieve their inhibitory effect. We are
aware of two product candidates currently in clinical
development that bind to this cysteine residue in EGFR, which
are referred to as second generation TKIs. Both
drugs have been tested in patients with the T790M mutation in
their EGFR, but no responses have been reported to date. We
believe the likely explanation for this effect is that these
drugs are extremely potent inhibitors of the normal form of the
EGFR, and cause very substantial toxicity in the skin (rash) and
intestine (diarrhea) which limits dosing significantly. Patients
appear to be unable to tolerate the dose of drug needed to
inhibit the T790M mutant EGFR in a lung tumor. Consequently, at
present, patients who develop TKI resistance receive standard
cytotoxic chemotherapy that carries toxicity and only modest
palliative efficacy, and all patients will ultimately succumb to
their disease. Thus, patients with mutant EGFR-related NSCLC who
also carry the T790 mutation represent a defined subset of
patients with a clear unmet medical need.
67
Opportunity
for Clovis
We partnered with Avila to discover and develop an orally
active, small molecule covalent inhibitor of the mutant forms of
EGFR that does not bind to unmutated or normal EGFR. We
identified CO-1686 as a potential product candidate because it
has three important potential advantages:
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potential to effectively treat patients with T790M mutant EGFR
NSCLCa large and growing group of patients, which have
been identified with greater frequency due to recently approved
guidelines, who today have no effective therapy;
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potential to effectively treat patients with initial activating
mutations in the EGFR who receive first-generation
TKIs, but develop resistance due to the acquired T790M mutation;
CO-1686 would be expected to prevent resistance through this
mechanism and may thus cause responses of greater duration than
seen with first generation TKIs and extend progression-free
survival; and
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it would not be expected to inhibit normal EGFR in skin or
intestine, and thus would be less likely to cause skin rash and
diarrhea, which are dose limiting with all other EGFR inhibitors.
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Design of
CO-1686 a Targeted Covalent Drug
Most human diseases are rooted in the improper activity of
certain proteins. Traditional small molecule drugs, while able
to inhibit disease-causing proteins, are generally only able to
form transient binding interactions with the disease targets,
and thus considered reversible. A covalent drug, however, forms
a strong and durable bond with its protein target, known as a
covalent bond. A targeted covalent drug is designed to form its
covalent bond in a highly directed and controlled manner with a
specific site on the disease target. This directed bond
formation is key to achieving a distinct selectivity profile
that is difficult to achieve with traditional reversible small
molecules.
Covalent drugs have been developed by the pharmaceutical
industry for decades, with several successfully commercialized,
including
Nexium
®
,
Plavix
®
and penicillins. However, these drugs were not intentionally
designed to be covalent drugs. Avila has developed a proprietary
platform called
Avilomics
tm
to purposefully and systematically design and develop targeted
covalent inhibitors. CO-1686 was designed using this platform.
There are a number of drugs both on the market and being
developed that inhibit various kinases, including EGFR. Because
kinases are structurally similar to each other, it is difficult
to design small molecules that selectively inhibit a single
kinase that do not also inhibit other kinases to some degree.
Most kinase inhibitors are only modestly selective and inhibit a
variety of kinases; these are typically referred to as
multi-kinase inhibitors.
However, because of the design of its bond-forming capability, a
targeted covalent drug is potent against the disease target of
interest, including EGFR, and due to its selectiveness, it is
not potent against other targets, even related targets. This is
important to avoid undesired off-target side effects
which can occur with reversible small molecules, such as
multi-kinase inhibitors which are not highly selective.
A targeted covalent approach was employed by Avila in order to
design a drug that could potently inhibit the mutant forms of
EGFR, while sparing normal EGFR.
Avila designed CO-1686 by identifying a site on the EGFR protein
where a covalent bond could be formed and used its proprietary
drug design techniques to model chemical structures that could
selectively form a bond with this site. These molecules were
then synthesized and tested in assays to verify their ability to
form targeted covalent bonds and to potently inhibit the mutant
forms of EGFR and also to demonstrate that covalent bonds were
not formed indiscriminately with other targets.
Preclinical
Development
CO-1686 has demonstrated up to 200-fold greater binding
selectivity for EGFR activating mutations and the T790M
resistance mutation relative to the normal receptor when
evaluated
in vitro
. Binding to normal EGFR can cause
significant side effects, such as rash and diarrhea, which have
been observed upon treatment with first and second-generation
EGFR inhibitors. Furthermore, experiments have been conducted in
which human tumor tissue or cells have been implanted in mice or
rats. These experiments, known as xenograft models, have
demonstrated
68
that CO-1686 can lead to tumor regression in two relevant models
of EGFR-driven lung cancer tumors. The H1975 model employs
tumors that contain both the L858R activating EGFR mutation and
the T790M resistance mutation. This model represents EGFR-driven
NSCLC that is resistant to
Tarceva
tm
(erlotinib). Use of CO-1686 in this model demonstrates a dose
response with drug activity at doses of 30mg/kg and greater
activity at doses of 100mg/kg. In addition, because
CO-1686
is
designed to spare the normal EGFR receptor, the drug was well
tolerated at all dose levels with no apparent body weight loss
in the mice, which is a surrogate measure for intestinal
toxicity.
CO-1686 is currently in exploratory toxicology studies and
undergoing formulation work, to prepare for an IND submission
which we expect to file in the first quarter of 2012.
Clinical
Development
We have designed an accelerated clinical development program for
CO-1686, and if successful, have a goal of filing an NDA for an
initial indication within approximately four years of filing our
IND. We intend to pursue the development of CO-1686 as both a
second-line therapy for EGFR-mutated NSCLC patients who become
resistant to TKIs due to the emergence of the T790M mutation
and, potentially, as a first-line treatment for EGFR-mutated
NSCLC. We expect to initiate a Phase
I/II
trial
of CO-1686 in the first half of 2012. Data from this trial will
be used to determine the tolerability and pharmacokinetics of
CO-1686, as well as provide evidence of efficacy in selected
NSCLC patients with the T790M mutation. Once we complete the
dose ranging portion of the study, we plan to enroll an expanded
cohort of NSCLC patients with the T790M mutation to test the
efficacy of CO-1686 in the selected patient subset. If this
study is successful, it will be followed by a pivotal trial in
T790M mutant positive NSCLC patients as a second-line therapy
following TKI failure. At the same time, pending data from the
Phase I/II study, we may initiate a study comparing CO-1686 to
Tarceva (erlotinib) in confirmed EGFR-mutant NSCLC
patients.
In addition to the drug development program, we have commenced a
collaboration for the development of a companion diagnostic to
enable identification of patients with the T790M mutation. We
believe such a patient selection tool would enable a focused
clinical development plan, thereby enhancing response rate and
optimizing the
benefit-to-risk
ratio for
CO-1686.
To
achieve this goal, we have partnered with Roche Molecular
Systems to develop a molecular diagnostic test for EGFR
mutations including T790M. The eventual goal of the
collaboration is to commence a pivotal trial of CO-1686 in
patients selected for the T790M mutation using a PCR-based tool.
The diagnostic test will be developed in parallel with the
clinical development of CO-1686, with the goal of filing a PMA
with the FDA in a time frame that would allow for regulatory
approval of the companion diagnostic at substantially the same
time that CO-1686 would be approved.
CO-338 - a
PARP Inhibitor
Overview
CO-338 is a new chemical entity we in-licensed from Pfizer, Inc.
in June 2011. CO-338, formerly known as PF- 01367338 and
AG-014699, is a novel, orally available, small molecule poly
ADP-ribose polymerase, known as PARP, inhibitor that we intend
to develop as both monotherapy and as a therapy in combination
with chemotherapeutic agents for the treatment of selected
cancer patients. Pursuant to our license agreement with Pfizer,
we possess global development and commercialization rights to
CO-338.
CO-338 is currently in a Phase I clinical trial to determine the
maximum tolerated dose of oral
CO-338
that
can be combined with IV platinum chemotherapy in the
treatment of solid tumors. This program is supplemented by two
ongoing investigator-initiated trials, currently using
the IV formulation of CO-338: a Phase I/II study in
germ-line BRCA mutant breast and ovarian cancer and a
Phase II study in the adjuvant treatment of hereditary, or
germ-line, BRCA mutant and triple-negative breast cancer, a
particularly difficult to treat form of breast cancer. As soon
as practical, we intend to replace the IV formulation with
the oral formulation in these studies. We also intend to
initiate a Phase I monotherapy study of the oral formulation in
the fourth quarter of 2011 to determine an appropriate dose and
schedule for long term administration.
69
DNA
Repair and PARP
Cells in the human body are under constant attack from agents
that can cause damage to DNA, including sunlight and other forms
of radiation, as well as DNA-binding chemicals that can cause
changes in the composition of DNA. Since DNA is the vehicle by
which fundamental information is passed on when a cell divides,
it is critical to the integrity of cells and human health that
DNA damage can be repaired. Cells have evolved multiple
mechanisms to enable such DNA repair, and these mechanisms are
complementary to each other, each driving repair of specific
types of DNA damage. If a cells DNA damage repair system
is overwhelmed, then the cell will undergo a form of suicide
called apoptosis that appears to operate as a fail-safe system
to limit the ability of a mutated cell to proliferate and
potentially form a cancer. A fundamental principle of cancer
therapy is to damage cells profoundly with radiation or
DNA-binding drugs, for example alkylating agents or platinums,
and induce apoptosis in those cells, thus killing the cancer
cells. DNA repair mechanisms may reduce the activity of these
anti-cancer therapies but, conversely, inhibition of DNA repair
processes may enhance the effects of DNA-damaging anti-cancer
therapy.
Poly-ADP ribose (PAR) is a part of the early warning system for
DNA damage, and is synthesized by PARP enzymes on regions of
damaged DNA, where it signals to the cell that DNA repair needs
to take place. In the absence of PARP, as is seen in
gene-knockout mice, cells are unusually sensitive to DNA damage
when exposed to radiation or DNA-alkylating agents. There are
two major forms of PARP that signal DNA damage in this way,
PARP-1 and PARP-2. Knockout of either PARP gene leads to
enhanced DNA damage in both instances although the mice may
survive. However, the double knockout in which both the PARP-1
and PARP-2 genes are deleted is fatal to the mice at an
embryonic stage. We believe that a drug that inhibits both
PARP-1 and PARP-2 may have enhanced activity in preventing DNA
repair.
As small molecule inhibitors of PARP became available, they were
tested for their ability to inhibit DNA damage repair and
potentiate the effects of radiation or cytotoxic chemotherapy,
and were shown to be potent enhancers of these anti-cancer
therapies in preclinical studies. Subsequently, PARP inhibitors
have been explored in clinical trials as
chemopotentiators, often in combination with drugs
that add alkyl groups to DNA, such as temozolamide. Results to
date have demonstrated anti-cancer activity, but have clearly
demonstrated the need for patient selection in order to show
compelling data.
Synthetic
Lethality
A large advance in the field came when it was recognized that
germ-line mutations in the BRCA genes (BRCA1 and BRCA2, two
tumor suppressor genes) were associated both with high rates of
breast and ovarian cancer in female mutant gene carriers, and
also impaired the ability of cells to repair DNA damage. BRCA
gene products were shown to be key mediators of DNA repair. The
notion was advanced that treatment of BRCA-defective cells with
PARP inhibitors could lead to a disabling blow against a tumor
cells ability to repair DNA and could induce apoptosis.
This phenomenon was termed synthetic lethality and
was demonstrated to be true
in vitro
, and then in
2009 was shown to be valid in humans, as evidenced by women with
advanced breast and ovarian cancer and germ-line BRCA mutations
experiencing objective tumor responses when treated with
monotherapy PARP inhibitors.
Germ-line BRCA mutations are a minority subset of all breast and
ovarian cancers, and the hypothesis was explored that some
tumors might have defective BRCA function for reasons other than
germ-line gene mutation. This notion has been called
BRCA-ness. Subsequent work has shown that BRCA-ness
exists, and that cancer patients with normal germ-line BRCA
genes can respond to monotherapy with PARP inhibitors. Work is
underway to identify a molecular signature for
BRCA-ness that could enable patient selection for
therapy. As a complement to the work to identify a BRCA-ness
signature, clinical criteria have been developed to identify
patients likely to respond to PARP inhibitors. If the notion of
synthetic lethality is accepted, then PARP inhibitors should
work well in patients with pre-existing defective DNA repair in
their tumors. Defective DNA repair in a tumor would likely mean
that the tumor is responsive to DNA-damaging chemotherapy, since
the therapeutic DNA damage that triggers apoptosis cannot be
effectively repaired by the tumor cell. Platinum chemotherapy
drugs are a good example of one such DNA-damaging agent. To
examine the hypothesis that platinum-sensitive tumors will
respond to PARP inhibition, ovarian cancer patients have
recently been studied, since ovarian cancer typically responds
well to initial
70
platinum-based chemotherapy, although relapses are expected
after several months. Recent data demonstrated that in women
with advanced ovarian cancer who have responded twice to
platinum chemotherapy, maintenance therapy with an oral PARP
inhibitor approximately doubled the time until disease
progression or death versus a placebo-treated arm. This study
was not conducted in all ovarian cancer subtypes, but
specifically in high grade serous ovarian cancer, which accounts
for 80% of the 22,000 newly diagnosed cases in the United
States, and in which BRCA mutation or BRCA-ness is believed to
be present in at least 50% of tumors.
PARP
Inhibitor Development Strategy
Based upon the basic science observations and clinical data
described above, we will consider at least three ways to develop
CO-338 for the treatment of solid tumors:
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monotherapy in germ-line BRCA patients (mostly breast and
ovarian cancer although a few patients develop tumors in
pancreas and prostate);
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monotherapy (induction
and/or
maintenance therapy) in patients with high BRCA-ness tumors; and
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combination therapy with cytotoxic chemotherapy or radiation or
targeted therapy in other tumors.
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These approaches will require, in many cases, a patient
selection strategy utilizing either a molecular diagnostic or a
clinical filter. Consistent with our strategy with other
projects, we will consider partnering with a molecular
diagnostic company to develop a companion diagnostic where it is
needed. Some indications, as noted above, may be adequately
explored using clinical selection criteria and obviate the need
for a companion diagnostic.
Opportunity
for Clovis
Within the universe of PARP inhibitors, we were particularly
attracted to the profile of CO-338 from a variety of
perspectives:
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it is a very potent inhibitor of PARP-1 and PARP-2 proteins;
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it is available in both oral and IV. In combination with
intravenous cytotoxic chemotherapy, it is possible that brief,
high-intensity PARP inhibition is optimal for efficacy, and an
intravenous formulation may be a preferred option under such
conditions;
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the oral formulation offers good bioavailability and low
inter-individual pharmacokinetic variability;
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CO-338 can be used as monotherapy in germ-line BRCA patients and
has shown activity in this setting (with the IV
formulation);
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CO-338 can be used in combination with cytotoxic chemotherapy
and can be safely given at doses shown to be highly PARP
inhibitory, as suggested by the trial results described below;
and
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CO-338 can likely be used as oral maintenance therapy after
cytotoxic chemotherapy.
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Clinical
Development of CO-338
IV Formulation.
The IV formulation of
CO-338 has been studied in two Phase I clinical trials and one
Phase II clinical trial. The first Phase I clinical trial
was designed to identify a dose of CO-338 that was both
pharmaceutically active and well tolerated by patients and to
identify the dose of temozolomide, or TMZ, a chemotherapy, that
could be combined with CO-338 in a safe and well-tolerated
manner. After appropriate dose-escalation, the study concluded
that the recommended treatment dose of CO-338 was
12 mg/m
2
each day with TMZ
200 mg/m
2
each day.
The second Phase I clinical trial is a dose escalation study
that began in 2009 to evaluate tolerability and pharmacokinetics
in combination with four different chemotherapy regimens in
patients with solid tumors. In this study, the initial
chemotherapies were carboplatin, carboplatin/paclitaxel,
pemetrexed/cisplatin and epirubicin/cyclophosphamide. To date, a
total of 52 patients have been enrolled and no maximum
tolerated dose was reached in any of the enrolled cohorts. In 27
evaluable patients with no pre-specified tumor type required for
enrollment, three had a partial response, including one partial
response in a breast cancer patient with a BRCA defect, one
partial
71
response in a breast cancer patient with no observable BRCA
defect and one partial response in an ovarian cancer patient
with a BRCA defect.
A Phase II study evaluated the combination of CO-338 and
TMZ in patients with metastatic melanoma. Forty-six patients
were treated at the dose level of
12 mg/m
2
each day for three cycles and TMZ
200 mg/m
2
every 21 days. Seventeen percent of patients achieved a
partial response, an additional 17% had stable disease of
greater than or equal to 24 weeks, the median progression
free survival was 3.5 months and median overall survival
was 9.9 months. The most common adverse events for the
CO-338 and temozolomide combination were gastrointestinal,
including nausea and vomiting.
Oral Formulation.
The ongoing Phase I
trial of the IV formulation of CO-338 in combination with four
different chemotherapy regimes has been recently amended to
investigate the use of an oral formulation of CO-338 in
combination only with carboplatin.
An oral, continuous daily dosing schedule has not been
established for CO-338 monotherapy. Therefore, we plan to
conduct a Phase I trial in approximately 30 patients with
BRCA-deficiencies to determine the optimal dose and schedule.
During such a Phase I trial, careful assessment of the
pharmaceutical properties of CO-338 will be performed to
establish whether a blood-based assay could be used to guide
optimal dosing.
Our CO-338 clinical development plan is supplemented by two
investigator-sponsored trials of the IV formulation of
CO-338. One is a Phase I/II trial in the treatment of germline
BRCA mutation breast and ovarian cancer; the second is a
Phase II trial in the adjuvant treatment of patients with
high risk germline BRCA-defective breast cancer and
triple-negative breast cancer. In both of these studies, our
intent is to transition to oral CO-338 once the optimal dose and
duration of treatment are established.
Upon analysis of the Phase I/II trial results, we may pursue
future development of CO-338 as monotherapy
and/or
in
combination with chemotherapy. Potential indications may include
serous ovarian cancer, breast cancer, NSCLC, endometrial cancer,
and chronic lymphocytic leukemia. We may also study the
inhibition of PARP in the maintenance setting after cytotoxic
chemotherapy, which seems to be effective in the setting of
certain cancers that are sensitive to platinum chemotherapy.
Competition
The commercialization of new drugs is competitive and we will
face competition from major pharmaceutical companies, specialty
pharmaceutical companies and biotechnology companies worldwide.
Our competitors may develop or market products or other novel
technologies that are more effective, safer or less costly than
any that have been or will be commercialized by us, or may
obtain regulatory approval for their products more rapidly than
we may obtain approval for ours.
The acquisition or licensing of pharmaceutical products is also
very competitive, and a number of more established companies,
which have acknowledged strategies to license or acquire
products, may have competitive advantages as may other emerging
companies taking similar or different approaches to product
acquisitions. In addition, a number of established
research-based pharmaceutical and biotechnology companies may
acquire products in late stages of development to augment their
internal product lines. These established companies may have a
competitive advantage over us due to their size, cash flows and
institutional experience.
Many of our competitors will have substantially greater
financial, technical and human resources than we have.
Additional mergers and acquisitions in the pharmaceutical
industry may result in even more resources being concentrated in
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. Our success will be based in part on our ability to
build and actively manage a portfolio of drugs that addresses
unmet medical needs and creates value in patient therapy.
CO-101
Competition
There are currently two agents approved for the treatment of
metastatic pancreatic cancer:
Gemzar
®
/gemcitabine
marketed by Eli Lilly, Teva Pharmaceutical Industries and APP
Pharmaceuticals, and
Tarceva
tm
72
(erlotinib) marketed by Astellas. Gemcitabine represents the
current standard of care across all lines of pancreatic cancer
therapy, either as monotherapy or as part of combination
regimens.
There are a number of companies with active clinical trials
ongoing in pancreatic cancer. Companies in late stage pancreatic
cancer clinical trials include AB Science SA, Amgen Inc.,
Astellas Pharma, BioSante Pharmaceuticals, Inc., Celgene
Corporation, Immunomedics, Inc., Lorus Therapeutics, and
Threshold Pharmaceuticals, Inc. The majority of these companies
have programs under development in combination with gemcitabine.
We are not aware of any competitors with programs targeting low
hENT1 expression in pancreatic cancer.
CO-1686
Competition
We are aware of two products in development targeting
cancer-causing mutant forms of the epidermal growth factor
receptor, or EGFR, for the treatment of non-small cell lung
cancer, or NSCLC, patients. These products include Boehringer
Ingelheims BIBW-2992 (afatinib), currently in
Phase III trials, and Pfizers PF-299804, currently in
Phase II. We believe CO-1686 potentially offers several
important advantages over the second generation EGFR inhibitors,
including superior efficacy due to activity against the T790M
resistance mutation and higher selectivity for the T790M
mutation with relative sparing of normal EGFR, therefore
avoiding the significant skin rash and gastro-intestinal
toxicities associated with other first and second generation
inhibitors. We also believe that other pharmaceutical companies
may be seeking to develop EGFR mutant selective inhibitors that
may enter clinical development on a similar time frame to
CO-1686.
CO-338
Competition
We believe the products in development targeting the PARP
pathway consist of Sanofi-Aventis BSI-201 (iniparib)
currently in Phase III clinical trials, Astra Zenecas
AZD-2281 (olaparib) currently in Phase II clinical trials,
Abbotts ABT-888 (velaparib) currently in Phase II
clinical trials, Mercks MK-4827 currently in Phase I
trial, Eisais
E-7016
currently in Phase I trials, Cephalons CEP-9722 currently
in Phase I trials, and Biomarins
BMN-673
currently in Phase I trials.
Collaborators
and License Agreements
Clavis
Pharma ASA
In November 2009, we entered into a license agreement with
Clavis to obtain the exclusive rights to develop and
commercialize CO-101 in North America, Central America, South
America and Europe. The exclusive rights are exclusive even as
to Clavis and include the right to grant sublicenses. Under the
terms of the license agreement, we made an up-front payment to
Clavis of $15.0 million, which was comprised of
$13.1 million for development costs incurred prior to the
execution of the agreement, and recognized by us as acquired
in-process research and development, and $1.9 million for
the prepayment of preclinical activities to be performed by
Clavis. In November 2010, the license agreement was amended to
expand the license territory to include exclusive rights in Asia
and other international markets, in consideration for our making
a payment of $10.0 million, which again we recognized as
acquired in-process research and development. As part of the
amended license, Clavis agreed to reimburse us for up to
$3.0 million of costs incurred by us for CO-101 development
activities. Under the amended license agreement, we are
obligated to use commercially reasonable efforts to develop and
commercialize CO-101, and with the exception of the specific
amounts to be reimbursed by Clavis, we are responsible for all
remaining development and commercialization costs for CO-101.
When and if commercial sales of CO-101 begin, we will pay Clavis
royalties based on the volume of annual net sales achieved, with
standard provisions for royalty offsets to the extent we need to
obtain any rights from third parties to commercialize CO-101 and
royalty reductions in the event of generic competition, each on
a country by country basis. We are required to make regulatory
milestone payments to Clavis of up to $115.0 million if
specified clinical study objectives and regulatory filings,
acceptances and approvals are achieved. In addition, we are
obligated to make sales milestone payments to Clavis if
specified annual sales targets for CO-101 are met, the majority
of which relate to annual sales targets of $500.0 million
and above, which, in the aggregate, could amount to total
milestone payments of $445.0 million.
Under the license agreement, for a limited period of time
related to the timing of the filing of the first MAA for CO-101
in Europe, Clavis may elect to co-develop and co-promote CO-101
in Europe. If Clavis were to make this
73
election, it would be required to reimburse us for either 35% or
40% of all development costs incurred by us up to the date of
such election, depending on the timing of such election relative
to the disclosure to Clavis of top line data from its first
completed Phase II or Phase III clinical trial, and
thereafter, Clavis would be required to pay us 25% of all
ongoing development costs for CO-101. In addition, milestone
payments described above would be reduced and, instead of
receiving royalties on net sales in Europe, Clavis would share
equally in the pretax profits or losses resulting from
commercialization activities in Europe.
The license agreement will remain in effect until we or our
sublicensees are no longer selling CO-101 in any country in our
global licensed territory, unless we elect to terminate the
license earlier. If we fail to meet our obligations under the
agreement and are unable to cure such failure within specified
time periods, Clavis can terminate the agreement, resulting in a
loss of our rights to CO-101 and an obligation to assign or
license to Clavis any intellectual property rights or other
rights we may have in CO-101, including our regulatory filings,
regulatory approvals, patents and trademarks for CO-101.
Avila
Therapeutics, Inc.
In May 2010, we entered into an exclusive worldwide license
agreement with Avila to discover, develop and commercialize a
pre-clinical covalent inhibitor of mutant forms of the EGFR gene
discovered by Avila and selected by us. As a result of the
collaboration contemplated by the agreement, CO-1686 was
identified as the lead inhibitor candidate which we are
proceeding to develop under the terms of the license agreement.
Under the agreement, we are required to use commercially
reasonable efforts to develop and commercialize CO-1686, and we
are responsible for all preclinical, clinical, regulatory and
other activities necessary to develop and commercialize CO-1686.
We made an up-front payment of $2.0 million to Avila upon
execution of the license agreement, which we recognized as an
acquired in-process research and development expense. When and
if commercial sales of CO-1686 commence, we will pay Avila
royalties based on annual net sales achieved. Avila has the
option to increase royalty rates on annual net sales in the
United States and the European Union by electing to
reimburse us for a share of our development expenses for
CO-1686. This option must be exercised within a limited period
of time of Avilas being notified by us of our intent to
pursue regulatory approval of CO-1686 in the United States or
the European Union as a first-line therapy. Under the agreement,
we are required to make regulatory milestone payments to Avila
of up to $119.0 million if specified clinical study
objectives and regulatory filings, acceptances and approvals are
achieved. In addition, we are obligated to make sales milestone
payments to Avila if specified annual sales targets for CO-1686
are met, the majority of which relate to annual sales targets of
$500.0 million and above, which, in the aggregate, could
amount to total milestone payments of $120.0 million.
We have full sublicensing rights under the license agreement
with Avila, subject to our sharing equally with Avila any
up-front payments from any
sub-licensing
arrangements relating to Japan, or Japan and any one or more of
China, South Korea and Taiwan, which we refer to herein as an
Asian Partnership, and subject to our paying Avila royalties on
sales in Asia equal to the greater of the royalty rates
contained in our license agreement with Avila or 50% of the
royalties we receive from our Asian Partnership.
The license agreement with Avila will remain in effect until the
expiration of all of our royalty and sublicense revenue
obligations to Avila, determined on a
product-by-product
and
country-by-country
basis, unless we elect to terminate the license agreement
earlier. If we fail to meet our obligations under the agreement
and are unable to cure such failure within specified time
periods, Avila can terminate the agreement, resulting in a loss
of our rights to CO-1686 and an obligation to assign or license
to Avila any intellectual property rights or other rights we may
have in CO-1686, including our regulatory filings, regulatory
approvals, patents and trademarks for CO-1686.
Pfizer,
Inc.
In June 2011, we entered into a license agreement with Pfizer,
to obtain the exclusive global rights to develop and
commercialize CO-338. The exclusive rights are exclusive even as
to Pfizer and include the right to grant sublicenses. Under the
terms of the license agreement, we made an up-front payment by
issuing to Pfizer $7.0 million principal amount of a
5% convertible promissory note due 2012. Under the license
agreement, we will assume responsibility for an ongoing Phase I
dose ranging clinical trial previously conducted by Pfizer
examining the maximum tolerated dose of the oral form of CO-338
in combination with intravenous platinum chemotherapy in
74
the treatment of solid tumors. We are obligated under the
license agreement to use commercially reasonable efforts to
develop and commercialize
CO-338,
and
with the exception of transfer to us, without cost, of
Pfizers existing inventory of CO-338, we are responsible
for all remaining development and commercialization costs for
CO-338. When and if commercial sales of CO-338 begin, we will
pay Pfizer royalties on our net sales, with standard provisions
for royalty offsets to the extent we need to obtain any rights
from third parties to commercialize CO-338. We are required to
make regulatory milestone payments to Pfizer of up to
$89.0 million if specified clinical study objectives and
regulatory filings, acceptances and approvals are achieved. In
addition, we are obligated to make sales milestone payments to
Pfizer if specified annual sales targets for CO-338 are met, the
majority of which relate to annual sales targets of
$500.0 million and above, which, in the aggregate, could
amount to total milestone payments of $170.0 million.
The license agreement with Pfizer will remain in effect until
the expiration of all of our royalty and sublicense revenue
obligations to Pfizer, determined on a
product-by-product
and
country-by-country
basis, unless we elect to terminate the license agreement
earlier. If we fail to meet our obligations under the agreement
and are unable to cure such failure within specified time
periods, Pfizer can terminate the agreement, resulting in a loss
of our rights to
CO-338
and
an obligation to assign or license to Pfizer any intellectual
property rights or other rights we may have in CO-338, including
our regulatory filings, regulatory approvals, patents and
trademarks for CO-338.
Government
Regulation
Government authorities in the United States (including federal,
state and local authorities) and in other countries, extensively
regulate, among other things, the manufacturing, research and
clinical development, marketing, labeling and packaging,
storage, distribution, post-approval monitoring and reporting,
advertising and promotion, pricing and export and import of
pharmaceutical products, such as those we are developing. The
process of obtaining regulatory approvals and the subsequent
compliance with appropriate federal, state, local and foreign
statutes and regulations require the expenditure of substantial
time and financial resources. Moreover, failure to comply with
applicable regulatory requirements may result in, among other
things, warning letters, clinical holds, civil or criminal
penalties, recall or seizure of products, injunction,
disbarment, partial or total suspension of production or
withdrawal of the product from the market. Any agency or
judicial enforcement action could have a material adverse effect
on us.
U.S.
Government Regulation
In the United States, the FDA regulates drugs under the Federal
Food, Drug, and Cosmetic Act, or FDCA, and its implementing
regulations. Drugs are also subject to other federal, state and
local statutes and regulations. The process required by the FDA
before product candidates may be marketed in the United States
generally involves the following:
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submission to the FDA of an IND which must become effective
before human clinical trials may begin and must be updated
annually;
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completion of extensive preclinical laboratory tests and
preclinical animal studies, all performed in accordance with the
FDAs Good Laboratory Practice, or GLP, regulations;
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performance of adequate and well-controlled human clinical
trials to establish the safety and efficacy of the product
candidate for each proposed indication;
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submission to the FDA of an NDA after completion of all pivotal
clinical trials;
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a determination by the FDA within 60 days of its receipt of
an NDA to file the NDA for review;
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satisfactory completion of an FDA pre-approval inspection of the
manufacturing facilities at which the active pharmaceutical
ingredient, or API, and finished drug product are produced and
tested to assess compliance with cGMP regulations; and
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FDA review and approval of an NDA prior to any commercial
marketing or sale of the drug in the United States.
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An IND is a request for authorization from the FDA to administer
an investigational drug product to humans.
The central focus of an IND submission is on the general
investigational plan and the protocol(s) for human studies. The
IND also includes results of animal studies or other human
studies, as appropriate, as well as manufacturing information,
analytical data and any available clinical data or literature to
support the use of the investigational new drug. An IND must
become effective before human clinical trials may begin. An IND
will automatically become effective 30 days after receipt
by the FDA, unless before that time the FDA raises concerns or
questions related to the proposed clinical trials. In such a
case, the IND may be placed on clinical hold and the IND sponsor
and the FDA must resolve any outstanding concerns or questions
before clinical trials can begin. Accordingly, submission of an
IND may or may not result in the FDA allowing clinical trials to
commence.
Clinical trials involve the administration of the
investigational drug to human subjects under the supervision of
qualified investigators in accordance with Good Clinical
Practices, or GCPs, which include the requirement that all
research subjects provide their informed consent for their
participation in any clinical trial. Clinical trials are
conducted under protocols detailing, among other things, the
objectives of the study, the parameters to be used in monitoring
safety, and the efficacy criteria to be evaluated. A protocol
for each clinical trial and any subsequent protocol amendments
must be submitted to the FDA as part of the IND. Additionally,
approval must also be obtained from each clinical trial
sites IRB before the trials may be initiated, and the IRB
must monitor the study until completed. There are also
requirements governing the reporting of ongoing clinical trials
and clinical trial results to public registries.
The clinical investigation of a drug is generally divided into
three phases. Although the phases are usually conducted
sequentially, they may overlap or be combined. The three phases
of an investigation are as follows:
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Phase I.
Phase I includes the initial
introduction of an investigational new drug into humans. Phase I
clinical trials are typically closely monitored and may be
conducted in patients with the target disease or condition or in
healthy volunteers. These studies are designed to evaluate the
safety, dosage tolerance, metabolism and pharmacologic actions
of the investigational drug in humans, the side effects
associated with increasing doses, and if possible, to gain early
evidence on effectiveness. During Phase I clinical trials,
sufficient information about the investigational drugs
pharmacokinetics and pharmacological effects may be obtained to
permit the design of well-controlled and scientifically valid
Phase II clinical trials. The total number of participants
included in Phase I clinical trials varies, but is generally in
the range of 20 to 80.
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Phase II.
Phase II includes controlled
clinical trials conducted to preliminarily or further evaluate
the effectiveness of the investigational drug for a particular
indication(s) in patients with the disease or condition under
study, to determine dosage tolerance and optimal dosage, and to
identify possible adverse side effects and safety risks
associated with the drug. Phase II clinical trials are
typically well-controlled, closely monitored, and conducted in a
limited patient population, usually involving no more than
several hundred participants.
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Phase III.
Phase III clinical trials are
generally controlled clinical trials conducted in an expanded
patient population generally at geographically dispersed
clinical trial sites. They are performed after preliminary
evidence suggesting effectiveness of the drug has been obtained,
and are intended to further evaluate dosage, clinical
effectiveness and safety, to establish the overall benefit-risk
relationship of the investigational drug product, and to provide
an adequate basis for product approval. Phase III clinical
trials usually involve several hundred to several thousand
participants.
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The FDA , the IRB or the clinical trial sponsor may suspend or
terminate a clinical trial at any time on various grounds,
including a finding that the research subjects are being exposed
to an unacceptable health risk. Additionally, some clinical
trials are overseen by an independent group of qualified experts
organized by the clinical trial sponsor, known as a data safety
monitoring board or committee. This group provides authorization
for whether or not a trial may move forward at designated check
points based on access to certain data from the study. We may
also suspend or terminate a clinical trial based on evolving
business objectives
and/or
competitive climate.
76
Assuming successful completion of all required testing in
accordance with all applicable regulatory requirements, detailed
investigational drug product information is submitted to the FDA
in the form of an NDA requesting approval to market the product
for one or more indications.
The application includes all relevant data available from
pertinent preclinical and clinical trials, including negative or
ambiguous results as well as positive findings, together with
detailed information relating to the products chemistry,
manufacturing, controls and proposed labeling, among other
things. Data can come from company-sponsored clinical trials
intended to test the safety and effectiveness of a use of a
product, or from a number of alternative sources, including
studies initiated by investigators. To support marketing
approval, the data submitted must be sufficient in quality and
quantity to establish the safety and effectiveness of the
investigational drug product to the satisfaction of the FDA.
Once the NDA submission has been accepted for filing, the
FDAs goal is to review applications within ten months of
submission or, if the application relates to an unmet medical
need in a serious or life-threatening indication, six months
from submission. The review process is often significantly
extended by FDA requests for additional information or
clarification. The FDA may refer the application to an advisory
committee for review, evaluation and recommendation as to
whether the application should be approved. The FDA is not bound
by the recommendation of an advisory committee, but it typically
follows such recommendations.
After the FDA evaluates the NDA and conducts inspections of
manufacturing facilities where the drug product
and/or
its
API will be produced, it may issue an approval letter or a
Complete Response Letter. An approval letter authorizes
commercial marketing of the drug with specific prescribing
information for specific indications. A Complete Response Letter
indicates that the review cycle of the application is complete
and the application is not ready for approval. A Complete
Response Letter may require additional clinical data
and/or
an
additional pivotal Phase III clinical trial(s),
and/or
other
significant, expensive and time-consuming requirements related
to clinical trials, preclinical studies or manufacturing. Even
if such additional information is submitted, the FDA may
ultimately decide that the NDA does not satisfy the criteria for
approval. The FDA could also approve the NDA with a Risk
Evaluation and Mitigation Strategies, or REMS, plan to mitigate
risks, which could include medication guides, physician
communication plans, or elements to assure safe use, such as
restricted distribution methods, patient registries and other
risk minimization tools. The FDA also may condition approval on,
among other things, changes to proposed labeling, development of
adequate controls and specifications, or a commitment to conduct
one or more post-market studies or clinical trials. Such
post-market testing may include Phase IV clinical trials
and surveillance to further assess and monitor the
products safety and effectiveness after commercialization.
Regulatory approval of oncology products often requires that
patients in clinical trials be followed for long periods to
determine the overall survival benefit of the drug.
After regulatory approval of a drug product is obtained, we are
required to comply with a number of post-approval requirements.
As a holder of an approved NDA, we would be required to report,
among other things, certain adverse reactions and production
problems to the FDA, to provide updated safety and efficacy
information, and to comply with requirements concerning
advertising and promotional labeling for any of our products.
Also, quality control and manufacturing procedures must continue
to conform to cGMP after approval to ensure and preserve the
long term stability of the drug product. The FDA periodically
inspects manufacturing facilities to assess compliance with
cGMP, which imposes extensive procedural, substantive and record
keeping requirements. In addition, changes to the manufacturing
process are strictly regulated, and, depending on the
significance of the change, may require prior FDA approval
before being implemented. FDA regulations also require
investigation and correction of any deviations from cGMP and
impose reporting and documentation requirements upon us and any
third-party manufacturers that we may decide to use.
Accordingly, manufacturers must continue to expend time, money
and effort in the area of production and quality control to
maintain compliance with cGMP and other aspects of regulatory
compliance.
We rely, and expect to continue to rely, on third parties for
the production of clinical and commercial quantities of our
product candidates. Future FDA and state inspections may
identify compliance issues at our facilities or at the
facilities of our contract manufacturers that may disrupt
production or distribution, or require substantial resources to
correct. In addition, discovery of previously unknown problems
with a product or the failure to comply with applicable
requirements may result in restrictions on a product,
manufacturer or holder of an approved NDA,
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including withdrawal or recall of the product from the market or
other voluntary, FDA-initiated or judicial action that could
delay or prohibit further marketing. Newly discovered or
developed safety or effectiveness data may require changes to a
products approved labeling, including the addition of new
warnings and contraindications, and also may require the
implementation of other risk management measures. Also, new
government requirements, including those resulting from new
legislation, may be established, or the FDAs policies may
change, which could delay or prevent regulatory approval of our
products under development.
Europe/Rest
of World Government Regulation
In addition to regulations in the United States, we will be
subject to a variety of regulations in other jurisdictions
governing, among other things, clinical trials and any
commercial sales and distribution of our products.
Whether or not we obtain FDA approval for a product, we must
obtain the requisite approvals from regulatory authorities in
foreign countries prior to the commencement of clinical trials
or marketing of the product in those countries. Certain
countries outside of the United States have a similar process
that requires the submission of a clinical trial application
much like the IND prior to the commencement of human clinical
trials. In Europe, for example, a clinical trial application, or
CTA, must be submitted to each countrys national health
authority and an independent ethics committee, much like the FDA
and IRB, respectively. Once the CTA is approved in accordance
with a countrys requirements, clinical trial development
may proceed.
The requirements and process governing the conduct of clinical
trials, product licensing, pricing and reimbursement vary from
country to country. In all cases, the clinical trials are
conducted in accordance with GCP and the applicable regulatory
requirements and the ethical principles that have their origin
in the Declaration of Helsinki.
To obtain regulatory approval of an investigational drug under
European Union regulatory systems, we must submit a marketing
authorization application. The application used to file the NDA
in the United States is similar to that required in Europe, with
the exception of, among other things, country-specific document
requirements.
For other countries outside of the European Union, such as
countries in Eastern Europe, Latin America or Asia, the
requirements governing the conduct of clinical trials, product
licensing, pricing and reimbursement vary from country to
country. In all cases, again, the clinical trials are conducted
in accordance with GCP and the applicable regulatory
requirements and the ethical principles that have their origin
in the Declaration of Helsinki.
If we fail to comply with applicable foreign regulatory
requirements, we may be subject to, among other things, fines,
suspension or withdrawal of regulatory approvals, product
recalls, seizure of products, operating restrictions and
criminal prosecution.
Available
Special Regulatory Procedures
Formal
Meetings
We are encouraged to engage and seek guidance from health
authorities relating to the development and review of
investigational drugs, as well as marketing applications. In the
United States, there are different types of official meetings
that may occur between us and the FDA. Each meeting type is
subject to different procedures. Conclusions and agreements from
each of these meetings are captured in the official final
meeting minutes issued by the FDA.
The European Medicines Agency, or EMA, also provides the
opportunity for dialogue with us. This is usually done in the
form of Scientific Advice, which is given by the Scientific
Advice Working Party of the Committee for Medicinal Products for
Human Use, or CHMP. A fee is incurred with each Scientific
Advice meeting.
Advice from either the FDA or EMA is typically provided based on
questions concerning, for example, quality (chemistry,
manufacturing and controls testing), nonclinical testing and
clinical studies, and pharmacovigilance plans and
risk-management programs. Such advice is not legally binding on
the sponsor. To obtain binding commitments from health
authorities in the United States and the European Union, Special
Protocol Assessment or Protocol Assistance procedures are
available. A Special Protocol Assessment, or SPA, is binding
upon the FDA except in limited circumstances, such as if the FDA
identifies a substantial scientific issue essential to
determining
78
the safety or effectiveness of the product after clinical
studies begin, or if the study sponsor fails to follow the
protocol that was agreed upon with the FDA. There is no
guarantee that a study will ultimately be adequate to support an
approval even if the study is subject to a SPA.
Orphan
Drug Designation
The FDA may grant orphan drug designation to drugs intended to
treat a rare disease or condition that affects fewer than
200,000 individuals in the United States, or if it affects more
than 200,000 individuals in the United States, there is no
reasonable expectation that the cost of developing and making
the drug for this type of disease or condition will be recovered
from sales in the United States. In the European Union, the
EMAs Committee for Orphan Medicinal Products, or COMP,
grants orphan drug designation to promote the development of
products that are intended for the diagnosis, prevention or
treatment of a life-threatening or chronically debilitating
conditions affecting not more than 5 in 10,000 persons in
the European Union Community. Additionally, designation is
granted for products intended for the diagnosis, prevention or
treatment of a life-threatening, seriously debilitating or
serious and chronic condition and when, without incentives, it
is unlikely that sales of the drug in the European Union would
be sufficient to justify the necessary investment in developing
the drug or biological product.
In the United States, orphan drug designation entitles a party
to financial incentives such as opportunities for grant funding
towards clinical trial costs, tax advantages and user-fee
waivers. In addition, if a product receives the first FDA
approval for the indication for which it has orphan designation,
the product is entitled to orphan drug exclusivity, which means
the FDA may not approve any other application to market the same
drug for the same indication for a period of 7 years,
except in limited circumstances, such as a showing of clinical
superiority over the product with orphan exclusivity.
In the European Union, orphan drug designation also entitles a
party to financial incentives such as reduction of fees or fee
waivers and 10 years of market exclusivity is granted
following drug or biological product approval. This period may
be reduced to 6 years if the orphan drug designation
criteria are no longer met, including where it is shown that the
product is sufficiently profitable not to justify maintenance of
market exclusivity.
Orphan drug designation must be requested before submitting an
application for marketing approval. Orphan dug designation does
not convey any advantage in, or shorten the duration of, the
regulatory review and approval process.
Pediatric
Development
In the United States, the FDCA provides for an additional
6 months of marketing exclusivity for a drug if reports are
filed of investigations studying the use of the drug product in
a pediatric population in response to a written request from the
FDA. Separate from this potential exclusivity benefit, NDAs must
contain data (or a proposal for post-marketing activity) to
assess the safety and effectiveness of an investigational drug
product for the claimed indications in all relevant pediatric
populations in order to support dosing and administration for
each pediatric subpopulation for which the drug is safe and
effective. The FDA may, on its own initiative or at the request
of the applicant, grant deferrals for submission of some or all
pediatric data until after approval of the product for use in
adults or full or partial waivers if certain criteria are met.
Discussions about pediatric development plans can be discussed
with the FDA at any time, but usually occur any time between the
end-of-Phase II
meeting and submission of the NDA.
For the EMA, a Pediatric Investigation Plan,
and/or
a
request for waiver or deferral, is required for submission prior
to submitting a marketing authorization application.
Authorization
Procedures in the European Union
Medicines can be authorized in the European Union by using
either the centralized authorization procedure or national
authorization procedures.
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Centralized procedure.
The EMA implemented the
centralized procedure for the approval of human medicines to
facilitate marketing authorizations that are valid throughout
the European Union. This
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procedure results in a single marketing authorization issued by
the EMA that is valid across the European Union, as well as
Iceland, Liechtenstein and Norway. The centralized procedure is
compulsory for human medicines that are: derived from
biotechnology processes, such as genetic engineering, contain a
new active substance indicated for the treatment of certain
diseases, such as HIV/AIDS, cancer, diabetes, neurodegenerative
disorders or autoimmune diseases and other immune dysfunctions,
and officially designated orphan medicines.
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For medicines that do not fall within these categories, an
applicant has the option of submitting an application for a
centralized marketing authorization to the EMA, as long as the
medicine concerned is a significant therapeutic, scientific or
technical innovation, or if its authorization would be in the
interest of public health.
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National authorization procedures.
There are
also two other possible routes to authorize medicinal products
in several countries, which are available for investigational
drug products that fall outside the scope of the centralized
procedure:
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Decentralized procedure.
Using the
decentralized procedure, an applicant may apply for simultaneous
authorization in more than one European Union country of
medicinal products that have not yet been authorized in any
European Union country and that do not fall within the mandatory
scope of the centralized procedure.
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Mutual recognition procedure.
In the mutual
recognition procedure, a medicine is first authorized in one
European Union Member State, in accordance with the national
procedures of that country. Following this, further marketing
authorizations can be sought from other European Union countries
in a procedure whereby the countries concerned agree to
recognize the validity of the original, national marketing
authorization.
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Priority
Review/Standard Review (United States) and Accelerated Review
(European Union)
Based on results of the Phase III clinical trial(s)
submitted in an NDA, upon the request of an applicant, the FDA
may grant the NDA a priority review designation, which sets the
target date for FDA action on the application at
six months. Priority review is granted where preliminary
estimates indicate that a product, if approved, has the
potential to provide a safe and effective therapy where no
satisfactory alternative therapy exists, or a significant
improvement compared to marketed products is possible. If
criteria are not met for priority review, the NDA is subject to
the standard FDA review period of 10 months. Priority
review designation does not change the scientific/medical
standard for approval or the quality of evidence necessary to
support approval.
Under the Centralized Procedure in the European Union, the
maximum timeframe for the evaluation of a marketing
authorization application is 210 days (excluding clock
stops, when additional written or oral information is to be
provided by the applicant in response to questions asked by the
CHMP. Accelerated evaluation might be granted by the CHMP in
exceptional cases, when a medicinal product is expected to be of
a major public health interest, defined by three cumulative
criteria: the seriousness of the disease (e.g. heavy disabling
or life-threatening diseases) to be treated; the absence or
insufficiency of an appropriate alternative therapeutic
approach; and anticipation of high therapeutic benefit. In this
circumstance, EMA ensures that the opinion of the CHMP is given
within 150 days, excluding clock stops.
Pharmaceutical
Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and
reimbursement status of any drug products for which we obtain
regulatory approval. In the United States and markets in other
countries, sales of any products for which we receive regulatory
approval for commercial sale will depend in part on the
availability of reimbursement from third-party payors.
Third-party payors include government health administrative
authorities, managed care providers, private health insurers and
other organizations. The process for determining whether a payor
will provide coverage for a drug product may be separate from
the process for setting the price or reimbursement rate that the
payor will pay for the drug product. Third-party payors may
limit coverage to specific drug products on an approved list, or
formulary, which might not include all of the
FDA-approved
drugs for a particular indication. Third-party payors are
increasingly
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challenging the price and examining the medical necessity and
cost-effectiveness of medical products and services, in addition
to their safety and efficacy. We may need to conduct expensive
pharmacoeconomic studies in order to demonstrate the medical
necessity and cost-effectiveness of our products, in addition to
the costs required to obtain FDA approvals. Our product
candidates may not be considered medically necessary or
cost-effective. A payors decision to provide coverage for
a drug product does not imply that an adequate reimbursement
rate will be approved. Adequate third-party reimbursement may
not be available to enable us to maintain price levels
sufficient to realize an appropriate return on our investment in
product development.
In 2003, the United States government enacted legislation
providing a partial prescription drug benefit for Medicare
beneficiaries, which became effective at the beginning of 2006.
Government payment for some of the costs of prescription drugs
may increase demand for any products for which we receive
marketing approval. However, to obtain payments under this
program, we would be required to sell products to Medicare
recipients through prescription drug plans operating pursuant to
this legislation. These plans will likely negotiate discounted
prices for our products. Further, the Healthcare Reform Law
substantially changes the way healthcare is financed in the
United States by both government and private insurers. Among
other cost containment measures, the Healthcare Reform Law
establishes:
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An annual, nondeductible fee on any entity that manufactures or
imports certain branded prescription drugs and biologic agents;
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A new Medicare Part D coverage gap discount program, in
which pharmaceutical manufacturers who wish to have their drugs
covered under Part D must offer discounts to eligible
beneficiaries during their coverage gap period (the donut
hole); and
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A new formula that increases the rebates a manufacturer must pay
under the Medicaid Drug Rebate Program.
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We expect that federal, state and local governments in the
United States will continue to consider legislation to limit the
growth of healthcare costs, including the cost of prescription
drugs. Future legislation could limit payments for
pharmaceuticals such as the drug candidates that we are
developing.
Different pricing and reimbursement schemes exist in other
countries. In the European Community, governments influence the
price of pharmaceutical products through their pricing and
reimbursement rules and control of national health care systems
that fund a large part of the cost of those products to
consumers. Some jurisdictions operate positive and negative list
systems under which products may only be marketed once a
reimbursement price has been agreed. To obtain reimbursement or
pricing approval, some of these countries may require the
completion of clinical trials that compare the
cost-effectiveness of a particular product candidate to
currently available therapies. Other member states allow
companies to fix their own prices for medicines, but monitor and
control company profits. The downward pressure on health care
costs in general, particularly prescription drugs, has become
very intense. As a result, increasingly high barriers are being
erected to the entry of new products. In addition, in some
countries, cross-border imports from low-priced markets exert a
commercial pressure on pricing within a country.
The marketability of any products for which we receive
regulatory approval for commercial sale may suffer if the
government and third-party payors fail to provide adequate
coverage and reimbursement. In addition, an increasing emphasis
on managed care in the United States has increased and we expect
will continue to increase the pressure on pharmaceutical
pricing. Coverage policies and third-party reimbursement rates
may change at any time. Even if favorable coverage and
reimbursement status is attained for one or more products for
which we receive regulatory approval, less favorable coverage
policies and reimbursement rates may be implemented in the
future.
Other
Healthcare Laws and Compliance Requirements
If we obtain regulatory approval for any of our product
candidates, we may be subject to various federal and state laws
targeting fraud and abuse in the healthcare industry. For
example, in the United States, there are federal and state
anti-kickback laws that prohibit the payment or receipt of
kickbacks, bribes or other remuneration intended to induce the
purchase or recommendation of healthcare products and services
or reward past purchases or
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recommendations. Violations of these laws can lead to civil and
criminal penalties, including fines, imprisonment and exclusion
from participation in federal healthcare programs.
The federal Anti-Kickback Statute prohibits persons from
knowingly and willfully soliciting, receiving, offering or
paying remuneration, directly or indirectly, to induce either
the referral of an individual, or the furnishing, recommending,
or arranging for a good or service, for which payment may be
made under a federal healthcare program, such as the Medicare
and Medicaid programs. The reach of the Anti-Kickback Statute
was broadened by the Healthcare Reform Law, which, among other
things, amends the intent requirement of the federal
Anti-Kickback Statute and the applicable criminal healthcare
fraud statutes contained within 42 U.S.C.
§ 1320a-7b,
effective March 23, 2010. Pursuant to the statutory
amendment, a person or entity no longer needs to have actual
knowledge of this statute or specific intent to violate it in
order to have committed a violation. In addition, the Healthcare
Reform Law provides that the government may assert that a claim
including items or services resulting from a violation of the
federal Anti-Kickback Statute constitutes a false or fraudulent
claim for purposes of the civil False Claims Act (discussed
below) or the civil monetary penalties statute. Many states have
adopted laws similar to the federal Anti-Kickback Statute, some
of which apply to the referral of patients for healthcare items
or services reimbursed by any source, not only the Medicare and
Medicaid programs.
The federal False Claims Act imposes liability on any person
who, among other things, knowingly presents, or causes to be
presented, a false or fraudulent claim for payment by a federal
healthcare program. The qui tam provisions of the
False Claims Act allow a private individual to bring civil
actions on behalf of the federal government alleging that the
defendant has submitted a false claim to the federal government,
and to share in any monetary recovery. In addition, various
states have enacted false claims laws analogous to the False
Claims Act. Many of these state laws apply where a claim is
submitted to any third-party payer and not merely a federal
healthcare program. When an entity is determined to have
violated the False Claims Act, it may be required to pay up to
three times the actual damages sustained by the government, plus
civil penalties of $5,500 to $11,000 for each separate false
claim.
Also, the Health Insurance Portability and Accountability Act of
1996, or HIPAA, created several new federal crimes, including
health care fraud, and false statements relating to health care
matters. The health care fraud statute prohibits knowingly and
willfully executing a scheme to defraud any health care benefit
program, including private third-party payers. The false
statements statute prohibits knowingly and willfully falsifying,
concealing or covering up a material fact or making any
materially false, fictitious or fraudulent statement in
connection with the delivery of or payment for health care
benefits, items or services.
In addition, we may be subject to, or our marketing activities
may be limited by, HIPAA, as amended by the Health Information
Technology for Economic and Clinical Health Act, or HITECH, and
its implementing regulations, which established uniform
standards for certain covered entities (healthcare
providers, health plans and healthcare clearinghouses) and their
business associates governing the conduct of certain electronic
healthcare transactions and protecting the security and privacy
of protected health information.
Regulation
of Diagnostic Tests
In the United States, the FDCA and its implementing regulations,
and other federal and state statutes and regulations govern,
among other things, medical device design and development,
preclinical and clinical testing, premarket clearance or
approval, registration and listing, manufacturing, labeling,
storage, advertising and promotion, sales and distribution,
export and import, and post-market surveillance. Diagnostic
tests are classified as medical devices under the FDCA. Unless
an exemption applies, diagnostic tests require marketing
clearance or approval from the FDA prior to commercial
distribution. The two primary types of FDA marketing
authorization applicable to a medical device are premarket
notification, also called 510(k) clearance, and premarket
approval, or PMA approval. Because the diagnostic tests being
developed by our third-party collaborators are of substantial
importance in preventing impairment of human health, they are
subject to the PMA approval process.
PMA applications must be supported by valid scientific evidence,
which typically requires extensive data, including technical,
preclinical, clinical and manufacturing data, to demonstrate to
the FDAs satisfaction the safety and effectiveness of the
device. For diagnostic tests, a PMA application typically
includes data regarding analytical and clinical validation
studies. As part of its review of the PMA, the FDA will conduct
a pre-approval inspection of
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the manufacturing facility or facilities to ensure compliance
with the Quality System Regulation, or QSR, which requires
manufacturers to follow design, testing, control, documentation
and other quality assurance procedures. FDA review of an initial
PMA application is required by statute to take between six to
ten months, although the process typically takes longer, and may
require several years to complete. If the FDA evaluations of
both the PMA application and the manufacturing facilities are
favorable, the FDA will either issue an approval letter or an
approvable letter, which usually contains a number of conditions
that must be met in order to secure the final approval of the
PMA. If the FDAs evaluation of the PMA or manufacturing
facilities is not favorable, the FDA will deny approval of the
PMA or issue a not approvable letter. A not approvable letter
will outline the deficiencies in the application and, where
practical, will identify what is necessary to make the PMA
approvable. The FDA may also determine that additional clinical
trials are necessary, in which case the PMA approval may be
delayed for several months or years while the trials are
conducted and then the data submitted in an amendment to the
PMA. Once granted, PMA approval may be withdrawn by the FDA if
compliance with post approval requirements, conditions of
approval or other regulatory standards is not maintained or
problems are identified following initial marketing.
We and our third-party collaborators who are developing the
companion diagnostics will work cooperatively to generate the
data required for submission with the PMA application, and will
remain in close contact with the Center for Devices and
Radiological Health, or CDRH, at FDA to ensure that any changes
in requirements are incorporated into the development plans. We
anticipate that meetings with the FDA with regard to our drug
product candidates as well as companion diagnostic product
candidates will include representatives from the Center for Drug
Evaluation and Research, or CDER, and CDRH to ensure that the
NDA and PMA submissions are coordinated to enable FDA to conduct
a parallel review of both submissions.
In the EEA,
in vitro
medical devices are required to
conform with the essential requirements of the E.U. Directive on
in vitro
diagnostic medical devices (Directive No
98/79/EC, as amended). To demonstrate compliance with the
essential requirements, the manufacturer must undergo a
conformity assessment procedure. The conformity assessment
varies according to the type of medical device and its
classification. For low-risk devices, the conformity assessment
can be carried out internally, but for higher risk devices it
requires the intervention of an accredited EEA Notified Body. If
successful, the conformity assessment concludes with the drawing
up by the manufacturer of an EC Declaration of Conformity
entitling the manufacturer to affix the CE mark to its products
and to sell them throughout the EEA. The data generated for the
U.S. registration will be sufficient to satisfy the
regulatory requirements for the European Union and other
countries.
Patents
and Proprietary Rights
The proprietary nature of, and protection for, our product
candidates, processes and know-how are important to our
business. Our success depends in part on our ability to protect
the proprietary nature of 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. We seek patent protection in the
United States and internationally for our product
candidates and other technology. Our policy is to patent or
in-license the technology, inventions and improvements that we
consider important to the development of our business. We also
rely on trade secrets, know-how and continuing innovation to
develop and maintain our competitive position. We cannot be sure
that patents will be granted with respect to any of our pending
patent applications or with respect to any patent applications
filed by us in the future, nor can we be sure that any of our
existing patents or any patents granted to us in the future will
be commercially useful in protecting our technology.
We have an exclusive, worldwide license from Clavis to a
portfolio of patents related to CO-101. United States
Patent 6,384,019 and its equivalent counterparts in 32 other
countries, directed to the CO-101 composition of matter, expire
in 2018 and are potentially eligible for up to five years patent
term extension in various jurisdictions. We believe that patent
term extension under the Hatch-Waxman Act could be available to
extend our patent exclusivity for CO-101 to at least
2020-2021
in
the United States depending on timing of our first approval. In
Europe, we believe that patent term extension under a
supplementary protection certificate could be available for an
additional five years to 2023. A patent application directed to
the CO-101 formulation is pending in the United States, PCT, and
Taiwan and, if issued, would expire in 2030. We and Clavis have
also filed patent applications for various aspects related to
CO-101 administration and diagnostics to assess hENT1 levels.
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We acquired an exclusive, worldwide license to CO-1686 from
Avila in May 2010. Multiple patent applications are pending that
claim CO-1686 generically and specifically that, if issued,
would have expiration dates between 2029 and 2031.
We obtained an exclusive, worldwide license from Pfizer to
develop and commercialize CO-338 in June 2011. U.S. Patent
6,495,541, and its equivalent counterparts issued or pending in
dozens of countries, directed to the
CO-338
composition of matter, expire in 2020 and are potentially
eligible for up to five years patent term extension in various
jurisdictions. We believe that patent term extension under the
Hatch-Waxman Act could be available to extend our patent
exclusivity for CO-338 to at least
2022-2024
in
the United States depending on timing of our first approval. In
Europe, we believe that patent term extension under a
supplementary protection certificate could be available for an
additional five years to 2025. Additionally, other patents and
patent applications are directed to methods of making, methods
of using, dosing regimens, and various salt forms have
expiration dates ranging from 2020 through 2031.
We are aware of a family of patents and patent applications
controlled by a third party that claim certain uses of PARP
inhibitors that could potentially be asserted against our use of
CO-338
in
certain indications. We are evaluating whether to seek a license
under such patents or patent applications, when and if they
issue, or alternatively to initiate proceedings to challenge
such patents, and we believe we have identified one or more
bases for such challenge. If we are unable to either license or
successfully challenge such patents, the size of the aggregate
potential market for
CO-338
could
be significantly reduced.
In addition, we intend to seek patent protection whenever
available for any products or product candidates and related
technology we acquire in the future.
The patent positions of pharmaceutical firms like us are
generally uncertain and involve complex legal, scientific and
factual questions. In addition, the coverage claimed in a patent
application can be significantly reduced before the patent is
issued. Consequently, we do not know whether any of the product
candidates we acquire or license will gain patent protection or,
if any patents are issued, whether they will provide significant
proprietary protection or will be challenged, circumvented or
invalidated. Because patent applications in the United States
and certain other jurisdictions are maintained in secrecy for 18
months, and since publication of discoveries in the scientific
or patent literature often lags behind actual discoveries, we
cannot be certain of the priority of inventions covered by
pending patent applications. Moreover, we may have to
participate in interference proceedings declared by the
U.S. PTO or a foreign patent office to determine priority
of invention, or in opposition proceedings in a foreign patent
office, either of which could result in substantial cost to us,
even if the eventual outcome is favorable to us. There can be no
assurance that the patents, if issued, would be held valid by a
court of competent jurisdiction. An adverse outcome could
subject us to significant liabilities to third parties, require
disputed rights to be licensed from third parties or require us
to cease using specific compounds or technology. To the extent
prudent, we intend to bring litigation against third parties
that we believe are infringing one or more of our patents.
The term of individual patents depends upon the legal term of
the patents in the countries in which they are obtained. In most
countries in which we file, the patent term is 20 years
from the earliest date of filing a non-provisional patent
application. In the United States, a patents term may be
lengthened by patent term adjustment, which compensates a
patentee for administrative delays by the U.S. PTO in
granting a patent, or may be shortened if a patent is terminally
disclaimed over another patent.
The patent term of a patent that covers an FDA-approved drug may
also be eligible for patent term extension, which permits patent
term restoration as compensation for the patent term lost during
the FDA regulatory review process. The Drug Price Competition
and Patent Term Restoration Act of 1984, or the Hatch-Waxman
Act, permits a patent term extension of up to five years beyond
the expiration of the patent. The length of the patent term
extension is related to the length of time the drug is under
regulatory review. Patent extension cannot extend the remaining
term of a patent beyond a total of 14 years from the date
of product approval and only one patent applicable to an
approved drug may be extended. Similar provisions are available
in Europe and other
non-U.S. jurisdictions
to extend the term of a patent that covers an approved drug. In
the future, if and when our pharmaceutical products receive FDA
approval, we expect to apply for patent term extensions on
patents covering those products.
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To protect our rights to any of our issued patents and
proprietary information, we may need to litigate against
infringing third parties, or avail ourselves of the courts or
participate in hearings to determine the scope and validity of
those patents or other proprietary rights. These types of
proceedings are often costly and could be very time-consuming to
us, and we cannot assure you that the deciding authorities will
rule in our favor. An unfavorable decision could allow third
parties to use our technology without being required to pay us
licensing fees or may compel us to license needed technologies
to avoid infringing third-party patent and proprietary rights.
Such a decision could even result in the invalidation or a
limitation in the scope of our patents or forfeiture of the
rights associated with our patents or pending patent
applications.
In addition we have sought and intend to continue seeking orphan
drug status whenever it is available. If a product which has an
orphan drug designation subsequently receives the first
regulatory approval for the indication for which it has such
designation, the product is entitled to orphan exclusivity,
meaning that the applicable regulatory authority may not approve
any other applications to market the same drug for the same
indication, except in certain very limited circumstances, for a
period of seven years in the United States and ten years in the
European Union. Orphan drug designation does not prevent
competitors from developing or marketing different drugs for an
indication.
We also rely on trade secret protection for our confidential and
proprietary information. No assurance can be given that others
will not independently develop substantially equivalent
proprietary information and techniques or otherwise gain access
to our trade secrets or disclose such technology, or that we can
meaningfully protect our trade secrets. However, we believe that
the substantial costs and resources required to develop
technological innovations will help us to protect the
competitive advantage of our products.
It is our policy to require our employees, consultants, outside
scientific collaborators, sponsored researchers and other
advisors to execute confidentiality agreements upon the
commencement of employment or consulting relationships with us.
These agreements provide that all confidential information
developed or made known to the individual during the course of
the individuals relationship with us is to be kept
confidential and not disclosed to third parties except in
specific circumstances. In the case of employees, the agreements
provide that all inventions conceived by the individual shall be
our exclusive property. There can be no assurance, however, that
these agreements will provide meaningful protection or adequate
remedies for our trade secrets in the event of unauthorized use
or disclosure of such information.
Plan of
Operation
Our plan of operation for the remainder of 2011 and the first
six months of 2012 is to:
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continue with the clinical development of our product
candidates, including the clinical trials for CO-101 and
CO-338; and
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continue with the preclinical development of CO-1686, looking
toward the filing of an IND in the first quarter of 2012, and
the commencement of a Phase I clinical trial in the first half
of 2012.
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We believe that the proceeds from this offering will satisfy our
cash requirements during this period.
Manufacturing
We currently contract with third parties for the manufacture of
our product candidates for preclinical studies and clinical
trials and intend to do so in the future. We do not own or
operate manufacturing facilities for the production of clinical
quantities of our product candidates. We currently have no plans
to build our own clinical or commercial scale manufacturing
capabilities. To meet our projected needs for commercial
manufacturing, third parties with whom we currently work will
need to increase their scale of production or we will need to
secure alternate suppliers. Although we rely on contract
manufacturers, we have personnel with extensive manufacturing
experience to oversee the relationships with our contract
manufacturers.
One of our contract manufacturers has manufactured what we
believe to be sufficient quantities of CO-101s active
pharmaceutical ingredient (or drug substance) to complete the
ongoing clinical trials. We have engaged a second drug substance
manufacturing to ensure continuity of supply and to increase
overall production capacity.
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Improvements to the current drug substance manufacturing process
are being implemented to further ensure production capacity
adequate to meet future development and commercial demands.
Another of our existing contract manufacturers continues to
produce CO-101 drug product for use in ongoing clinical trials.
We are implementing
scale-up
operations at this manufacturing site to provide additional
quantities of CO-101 drug product. We have also identified a
second drug product contract manufacturer to provide further
capacity for clinical and commercial production. In addition a
separate contract manufacturer labels, packages and distributes
clinical supplies of CO-101. We believe the manufacturing
processes for the active pharmaceutical ingredient and finished
drug product for CO-101 have been developed to adequately
support future development and commercial demands. While we
believe that our existing suppliers of active pharmaceutical
ingredient and drug product would be capable of continuing to
produce materials in commercial quantities, we may need to
identify additional third-party manufacturers capable of
providing commercial quantities of drug product. If we are
unable to arrange for such a third-party manufacturing source,
or fail to do so on commercially reasonable terms, we may not be
able to successfully produce and market CO-101.
The process for producing CO-1686 active pharmaceutical
ingredient is currently being developed at a single third-party
contract manufacturer. The current process has already been
sufficiently developed to satisfy immediate clinical demands.
Additional process development work
and/or
additional production capacity may be necessary to support
larger clinical development or commercialization requirements.
If we are unable to adequately develop a suitable process, or
arrange for such a third-party manufacturing source, or fail to
do so on commercially reasonable terms, we may not be able to
successfully produce and market CO-1686. Drug product
formulation development work for CO-1686 is in progress. We have
engaged a third-party manufacturer capable of both formulation
development and drug product manufacturing. Definition of an
acceptable formulation and suitable manufacturing process to
prepare that formulation are critical to the successful
development of CO-1686. If we fail to define such a formulation
and process, or fail to do so on commercially reasonable terms,
we may be unable to successfully produce and market CO-1686.
We have developed the process for manufacturing CO-338s
active pharmaceutical ingredient to a degree sufficient to meet
clinical demands and projected commercial requirements. Pfizer
is currently performing manufacturing for CO-338. Although we
believe the licensor has available quantities of the active
pharmaceutical ingredient to permit current production
sufficient to allow us to conclude the currently pending trials
for CO-338, we will need to identify an alternate third-party
contract manufacturer for preparation of the CO-338 active
pharmaceutical ingredient. While we believe that sufficient
capacity and capabilities for manufacture of this compound
exists, failure to arrange such a third-party source, or failure
to do so on commercially reasonable terms may prevent successful
production and marketing of CO-338. The CO-338 drug product
formulation and manufacturing process to produce that
formulation, both as an IV and as an oral dosage form have
been developed to a degree sufficient to meet clinical demands
and projected commercial requirements. While Pfizer will turn
over to us its existing inventory of finished dosage
form CO-338,
and produce additional quantities for us, we will need to
identify an alternate third-party contract manufacturer for
preparation of CO-338 in finished dosage form. While we believe
that sufficient capacity and capabilities for manufacture of
this formulation exists, failure to arrange such a third-party
source, or failure to do so on commercially reasonable terms may
prevent successful production and marketing of CO-338.
To date, our third-party manufacturers have met our
manufacturing requirements. We expect third-party manufacturers
to be capable of providing sufficient quantities of our product
candidates to meet anticipated full scale commercial demands. We
believe that there are alternate sources of supply that can
satisfy our clinical and commercial requirements, although we
cannot be certain that identifying and establishing
relationships with such sources, if necessary, would not result
in significant delay or material additional costs.
Sales and
Marketing
We intend to build the commercial infrastructure in the United
States and Europe necessary to effectively support the
commercialization of CO-101, CO-338 and CO-1686, if and when we
believe a regulatory approval of the first of such product
candidates in a particular geographic market appears imminent.
The commercial infrastructure for oncology products typically
consists of a targeted, specialty sales force that calls on a
limited and focused group of physicians supported by sales
management, internal sales support, an internal marketing
86
group and distribution support. Additional capabilities
important to the oncology marketplace include the management of
key accounts such as managed care organizations,
group-purchasing organizations, specialty pharmacies, oncology
group networks, and government accounts. To develop the
appropriate commercial infrastructure, we will have to invest
significant amounts of financial and management resources, some
of which will be committed prior to any confirmation that
CO-101, CO-338, or CO-1686 will be approved.
Outside of the United States and Europe, where appropriate, we
may elect in the future to utilize strategic partners,
distributors, or contract sales forces to assist in the
commercialization of our products. We are actively considering
an Asian commercial presence, including establishing our own
sales and marketing organization in Japan.
Employees
As of June 1, 2011, we had 38 full-time employees.
None of our employees is represented by labor unions or covered
by collective bargaining agreements. We consider our
relationship with our employees to be good.
Facilities
Our offices are located at three leased facilities, a
10,369 square foot facility in Boulder, Colorado used
primarily for corporate functions, a 17,195 square foot
facility in San Francisco, California used for clinical
development operations and research laboratory space, and a
1,050 square foot facility in Cambridge, United Kingdom
used for our European regulatory and clinical operations. These
leases expire in December 2015, May 2013, and May 2012,
respectively. We believe that our existing facilities are
sufficient for our needs for the foreseeable future.
Legal
Proceedings
We are not currently a party to any material legal proceedings.
87
MANAGEMENT
Executive
Officers and Directors
The following table sets forth the name, age and position of
each of our executive officers and directors as of
March 31, 2011:
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|
|
|
|
|
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Name
|
|
Age
|
|
Position
|
|
Patrick J. Mahaffy
|
|
|
48
|
|
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President and Chief Executive Officer; Director
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Erle T. Mast
|
|
|
48
|
|
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Executive Vice President and Chief Financial Officer
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Andrew R. Allen, Ph.D.
|
|
|
44
|
|
|
Executive Vice President of Clinical and Pre-Clinical
Development and Chief Medical Officer
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Gillian C. Ivers-Read
|
|
|
57
|
|
|
Executive Vice President, Technical Operations and Chief
Regulatory Officer
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Brian G. Atwood
|
|
|
58
|
|
|
Director
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M. James Barrett, Ph.D.
|
|
|
69
|
|
|
Director
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James C. Blair, Ph.D.
|
|
|
72
|
|
|
Director
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Paul Klingenstein
|
|
|
53
|
|
|
Director
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Edward J. McKinley
|
|
|
59
|
|
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Director
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John C. Reed, M.D., Ph.D.
|
|
|
52
|
|
|
Director
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Thorlef Spickschen
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|
|
70
|
|
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Director
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Executive
Officers
Patrick J. Mahaffy
is one of our co-founders and
has served as our President and Chief Executive Officer and a
member of our board of directors since our inception.
Previously, Mr. Mahaffy served as President and Chief
Executive Officer and as a member of the board of directors at
Pharmion Corporation, which he founded in 2000 and sold to
Celgene Corporation in 2008. From 1992 through 1998,
Mr. Mahaffy was President and Chief Executive Officer of
NeXagen, Inc. and its successor, NeXstar Pharmaceuticals, Inc.,
a biopharmaceutical company. Prior to that, Mr. Mahaffy was
a Vice President at the private equity firm E.M. Warburg Pincus
and Co. Mr. Mahaffy also serves on the boards of directors
of Orexigen Therapeutics, Inc. (NASDAQ: OREX) and Flexion
Therapeutics, Inc. He is also a trustee of Lewis and Clark
College. Mr. Mahaffy has a B.A. in international affairs
from Lewis and Clark College and a M.A. in international affairs
from Columbia University. We believe that Mr. Mahaffy
possesses specific attributes that qualify him to serve as a
member of our board of directors, including his experience in
the venture capital industry, his historical knowledge, his
operational and management expertise and his years of leadership
experience.
Erle T. Mast
is one of our co-founders and has
served as our Executive Vice President and Chief Financial
Officer since our inception. Previously, Mr. Mast served in
the same role at Pharmion Corporation, beginning in 2002. From
1997 through 2002, Mr. Mast worked for Dura
Pharmaceuticals, Inc. and its successor, Elan Corporation. From
2000 to 2002, he served as Chief Financial Officer for the
Global Biopharmaceuticals business unit for Elan. From 1997 to
2000, Mr. Mast served as Vice President of Finance for Dura
Pharmaceuticals. Prior to that, Mr. Mast was a partner with
Deloitte & Touche, LLP. Mr. Mast also serves on
the boards of directors of Somaxon Pharmaceuticals, Inc.
(NASDAQ: SOMX) and Zogenix, Inc. (NASDAQ: ZGNX). Mr. Mast
received a B.Sc. in business administration from California
State University Bakersfield.
Dr. Andrew R. Allen
is one of our co-founders
and has served as our Executive Vice President of Clinical and
Pre-Clinical Development and Chief Medical Officer since our
inception. Previously, Dr. Allen served in the same role at
Pharmion Corporation, beginning in 2006. From 2004 through 2006,
Dr. Allen served as Vice President of BioPharma Development
and Head of the Oncology Therapeutic Unit for Chiron
Corporation. Previously, Dr. Allen served as global project
head in Abbott Laboratories oncology franchise, and prior
to that he progressed through positions of increasing
responsibility at the management consulting firm
McKinsey & Company, with a focus on oncology strategy.
Dr. Allen serves on the board of directors of Nodality,
Inc., a privately-held biotechnology company. Dr. Allen
qualified in medicine at Oxford University and earned his Ph.D.
from the Imperial College of Science, Technology and Medicine in
London. Dr. Allen also obtained post-graduate internal
medicine qualification as a Member of Royal College of
Physicians (MRCP).
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Gillian C. Ivers-Read
is one of our co-founders
and has served as our Executive Vice President, Technical
Operations and Chief Regulatory Officer since our inception.
Previously, Ms. Ivers-Read served as Executive Vice
President, Development Operations at Pharmion Corporation,
beginning in 2002. From 1996 to 2001,
Ms. Ivers-Read
held various regulatory positions with Hoechst Marion Roussel
and its successor, Aventis Pharmaceuticals, Inc., where she most
recently held the position of Vice President, Global Regulatory
Affairs. From 1994 to 1996, Ms. Ivers-Read was Vice
President, Development and Regulatory Affairs for Argus
Pharmaceuticals, and from 1984 to 1994, she served as a
regulatory affairs director for Marion Merrell Dow.
Ms. Ivers-Read serves on the board of Bio-Path Holdings,
Inc. (OTC BB: BPTH). Ms. Ivers-Read received a B.Sc. in
pharmacology from University College London.
Directors
Brian G. Atwood
has served as a member of our
board of directors since our inception. In 1999, he co-founded
and currently serves as a Managing Director for Versant
Ventures, a healthcare-focused venture capital firm. Prior to
founding Versant Ventures, Mr. Atwood served as a general
partner of Brentwood Associates, a venture capital firm.
Mr. Atwood also serves on the boards of several
pharmaceutical and biotechnology companies, including Cadence
Pharmaceuticals, Inc. (NASDAQ: CADX), Five Prime Therapeutics,
Groove Biopharma Corporation, Helicos BioSciences Corporation
(NASDAQ: HLCS), Immune Design Corp., OpGen Inc., PhaseRx
Pharmaceuticals, Spark Diagnostics, Trius Therapeutics, Inc.
(NASDAQ: TSRX) and Veracyte, Inc. Mr. Atwood also served on
the board of Pharmion Corporation from January 2000 until the
companys acquisition in 2008. Mr. Atwood holds a B.S.
in biological sciences from the University of California,
Irvine, a M.S. in ecology from the University of California,
Davis, and an M.B.A. from Harvard University. We believe that
Mr. Atwood possesses specific attributes that qualify him
to serve as a member of our board of directors, including his
experience in the venture capital industry, his years of
business and leadership experience and his financial
sophistication and expertise.
Dr. M. James Barrett
has served as a member
of our board of directors since our inception. Since September
2001, he has served as a general partner of New Enterprise
Associates Inc., a venture capital firm focusing on the
healthcare, information technology and energy technology
industries. From 1997 to 2001, Dr. Barrett served as
Chairman and Chief Executive Officer of Sensors for Medicine and
Science, which he founded in 1997. Dr. Barrett serves on
the boards of several pharmaceutical and biotechnology
companies, including Amicus Therapeutics, Inc. (NASDAQ: FOLD),
Cardioxyl Pharmaceuticals, Inc., GlycoMimetics, Inc., Inhibitex,
Inc. (NASDAQ: INHX), Peptimmune, Inc., PhaseBio Pharmaceuticals,
Inc., Predictive Biosciences, Ltd., Psyadon Pharmaceuticals,
Inc. (formerly known as Ruxton Pharmaceuticals, Inc.), Roka
Bioscience, Inc., Supernus Pharmaceuticals, Inc., Targacept,
Inc. (NASDAQ: TRGT), and Zosano Pharma, Inc., as well as
continuing to serve as Chairman of Sensors for Medicine and
Science. Dr. Barrett previously served on the board of YM
Biosciences, Inc. (NYSE AMEX: YMI), and also served on the board
of Pharmion Corporation from December 2001 until the
companys acquisition in 2008. Dr. Barrett received a
Ph.D. in biochemistry from the University of Tennessee, his
M.B.A. from the University of Santa Clara, and a B.S. in
chemistry from Boston College. We believe that Dr. Barrett
possesses specific attributes that qualify him to serve as a
member of our board of directors, including his experience in
the venture capital industry and his years of business and
leadership experience.
Dr. James C. Blair
has served as a member of
our board of directors since our inception. Since 1985, he has
served as a general partner of Domain Associates, L.L.C., a
venture capital management company focused on life sciences.
Dr. Blair currently serves on the boards of Astute Medical,
Inc., aTyr Pharma, Inc., Cadence Pharmaceuticals, Inc. (NASDAQ:
CADX), CoDa Therapeutics, Inc., IntegenX, Inc., Meritage Pharma
Inc., NeuroPace, Inc., and Zogenix, Inc. (NASDAQ: ZGNX). He has
previously served on the boards of over 40 life science
ventures including Amgen Inc. (NASDAQ: AMGN), Aurora Biosciences
Corp., Amylin Pharmaceuticals, Inc. (NASDAQ: AMLN), Applied
Biosystems Inc., Dura Pharmaceuticals, Inc., Nuvasive, Inc.
(NASDAQ: NUVA), and Volcano Corporation (NASDAQ: VOLC).
Dr. Blair served on the board of Pharmion Corporation from
January 2000 until the companys acquisition in 2008.
Dr. Blair currently serves on the board of directors of the
Prostate Cancer Foundation, and he is on the advisory boards of
the Department of Molecular Biology at Princeton University and
the Department of Biomedical Engineering at the University of
Pennsylvania, the USC Stevens Institute for Innovation, and the
Division of Chemistry and Chemical Engineering at the California
Institute of Technology. He received a B.S.E. from Princeton
University and M.S.E. and Ph.D. degrees from the University of
89
Pennsylvania, all in electrical engineering. We believe that
Dr. Blair possesses specific attributes that qualify him to
serve as a member of our board of directors, including his
experience in the life science industry and his years of
business and leadership experience.
Paul Klingenstein
has served as a member of our
board of directors since our inception. He is the Managing
Partner of Aberdare Ventures, a healthcare-focused venture
capital firm he formed in 1999. Prior to founding Aberdare,
Mr. Klingenstein worked in venture capital and private
equity with Warburg Pincus and Accel Partners, and was an
advisor to the Rockefeller Foundation. Mr. Klingenstein
currently serves on the boards of Anacor Pharmaceuticals, Inc.
(NASDAQ: ANAC) and EnteroMedics, Inc. (NASDAQ: ETRM).
Mr. Klingenstein has previously served on the boards of
Ablation Frontiers, Inc., Alibris, Ample Medical Corporation,
Aviron, Conatus Pharmaceuticals Inc., EP Technologies, Glycomed
Inc., Idun Pharmaceuticals Inc., Isis Pharmaceuticals, Inc.
(NASDAQ: ISIS), Nevro Corp., Pharmion Corp., Posit Science
Corporation, U.S. Behavioral Health, VertiFlex Inc.,
Viagene Inc., and Xomed Surgical Products Inc. He is currently
the Chairman of the Board of the International AIDS Vaccine
Initiative, and is an advisory board member of the University of
California Berkeley School of Public Health. He has also served
on the boards of various educational and non-profit
institutions. Mr. Klingenstein received an A.B. in
anthropology from Harvard University and an M.B.A. from Stanford
University. We believe that Mr. Klingenstein possesses
specific attributes that qualify him to serve as a member of our
board of directors, including his experience in the venture
capital industry and his years of business and leadership
experience.
Edward J. McKinley
has served as a member of our
board of directors since our inception. Mr. McKinley spent
20 years serving in various roles at the private equity
firm Warburg Pincus, including managing the firms private
equity activity in Europe and serving on the firms
Management Committee. Before joining Warburg Pincus, he was with
the management consulting firm McKinsey & Company.
Mr. McKinley also served on the board of Pharmion
Corporation from October 2004 until the companys
acquisition in 2008 and currently serves and on the boards of
several private companies, and as an advisor or investment
committee head for several investment management firms. He also
serves on the investment committee of several endowments, and on
the boards or advisory boards of several non-profit
organizations. He graduated Phi Beta Kappa with honors from
Stanford University and holds a graduate management degree from
Yale University. We believe that Mr. McKinley possesses
specific attributes that qualify him to serve as a member of our
board of directors, including his experience in the venture
capital industry, his years of business and leadership
experience and his financial sophistication and expertise.
Dr. John C. Reed
has served as a member of
our board of directors since our inception. Dr. Reed served
as the President and Chief Executive Officer since January 2002,
and in 2010 he became Chief Executive Officer, Professor, and
Donald Bren Chief Executive Chair, of Sanford-Burnham Medical
Research Institute, an independent, nonprofit, public benefit
organization dedicated to biomedical research. Dr. Reed has
been with Sanford-Burnham Medical Research Institute for the
past 19 years, serving as the Deputy Director of the Cancer
Center beginning in 1994, as Scientific Director of the
Institute beginning in 1995, and as Cancer Center Director in
2002. He also currently serves as an adjunct professor in the
medical schools at University of California San Diego
School of Medicine and University of Central Florida, and in the
graduate Schools of Arts and Sciences at the University of
Florida and San Diego State Universitys Biology
department. Dr. Reed was recognized as the worlds
most highly cited scientist in the field of cell biology for the
decade
1995-2005.
He is the author of approximately 800 scientific and medical
journal publications and more than 50 book chapters.
Dr. Reed currently serves on the board of Isis
Pharmaceuticals, Inc. (NASDAQ: ISIS). He has previously served
on the boards of Stratagene Inc., Repros Therapeutics Inc.
(NASDAQ: RPRX) and Pharmion Corporation, and was appointed to
the Independent Citizens Oversight Committee of the
California Institute for Regenerative Medicine. Dr. Reed
graduated Phi Beta Kappa from the University of Virginia and
earned an M.D. and Ph.D. from the University of Pennsylvania
School of Medicine. He completed his residency in pathology and
laboratory medicine at the Hospital of the University of
Pennsylvania and was a postdoctoral fellow in molecular biology
at the Wistar Institute of Anatomy and Biology. We believe that
Dr. Reed possesses specific attributes that qualify him to
serve as a member of our board of directors, including his
scientific background and experience as the Chief Executive
Officer of the prestigious Sanford-Burnham Medical Research
Institute, as well as his expertise reflected in his significant
scientific and medical journal publications.
Dr. Thorlef Spickschen
has served as a member
of our board of directors since our inception. From 1994 to
2001, Dr. Spickschen was chairman and Chief Executive
Officer of BASF Pharma/Knoll AG. From 1984 to 1994,
90
Dr. Spickschen worked with Boehringer Mannheim GmbH, where
he was responsible for sales and marketing and has been Chairman
of its Executive Board since 1990. From 1976 to 1984,
Dr. Spickschen was Managing Director, Germany and Central
Europe for Eli Lilly & Co. Dr. Spickschen is
currently Chairman of BIOTEST AG, a publicly traded company in
Germany and on the board of Cytos Biotechnology AG, which is
publicly-traded in Switzerland. Dr. Spickschen also served
on the board of Pharmion Corporation from December 2001 through
the companys acquisition in 2008. Dr. Spickschen
received a Doctorate in business management from the University
of Cologne. We believe that Dr. Spickschen possesses
specific attributes that qualify him to serve as a member of our
board of directors, including his business and leadership
experience in the biomedical industry.
Composition
of the Board of Directors
Our board of directors consists of eight directors, seven of
whom, including Drs. Barrett, Blair, Reed and Spickschen
and Messrs. Atwood, Klingenstein and McKinley, will qualify
as independent directors under the corporate governance
standards of the NASDAQ Global Market and the independence
requirements of
Rule 10A-3
of the Exchange Act.
Board
Committees and Independence
Rule 5605 of the NASDAQ Marketplace Rules requires a
majority of a listed companys board of directors to be
comprised of independent directors within one year of listing.
In addition, the NASDAQ Marketplace Rules require that, subject
to specified exceptions, each member of a listed companys
audit, compensation and nominating and governance committees be
independent and that audit committee members also satisfy
independence criteria set forth in
Rule 10A-3
under the Exchange Act. Under Rule 5605(a)(2), a director
will only qualify as an independent director if, in
the opinion of our board of directors, that person does not have
a relationship that would interfere with the exercise of
independent judgment in carrying out the responsibilities of a
director. In order to be considered independent for purposes of
Rule 10A-3,
a member of an audit committee of a listed company may not,
other than in his or her capacity as a member of the audit
committee, the board of directors, or any other board committee:
(1) accept, directly or indirectly, any consulting,
advisory, or other compensatory fee from the listed company or
any of its subsidiaries; or (2) be an affiliated person of
the listed company or any of its subsidiaries.
In June 2011, our board of directors undertook a review of the
composition of our board of directors and its committees and the
independence of each director. Based upon information requested
from and provided by each director concerning his background,
employment and affiliations, including family relationships, our
board of directors has determined that none of Drs. Barrett,
Blair, Reed and Spickschen or Messrs. Atwood, Klingenstein and
McKinley, representing seven of our eight directors, has a
relationship that would interfere with the exercise of
independent judgment in carrying out the responsibilities of a
director and that each of these directors is
independent as that term is defined under
Rule 5605(a)(2) of the NASDAQ Marketplace Rules. Our board
of directors also determined that Messrs. Atwood, Klingenstein
and McKinley, who comprise our audit committee, Drs. Barrett,
Blair and Spickschen, who comprise our compensation committee,
and Drs. Barrett and Blair and Mr. Atwood, who comprise our
nominating and corporate governance committee, satisfy the
independence standards for such committees established by the
SEC and the NASDAQ Marketplace Rules, as applicable. In making
such determination, our board of directors considered the
relationships that each such non-employee director has with our
company and all other facts and circumstances our board of
directors deemed relevant in determining independence, including
the beneficial ownership of our capital stock by each
non-employee director. Currently, our board of directors has
determined that all current members satisfy the independence
requirements for service on the audit committee.
Role of
the Board in Risk Oversight
Our audit committee is primarily responsible for overseeing our
risk management processes on behalf of the full board of
directors. Going forward, we expect that the audit committee
will receive reports from management at least quarterly
regarding our assessment of risks. In addition, the audit
committee reports regularly to the full board of directors,
which also considers our risk profile. The audit committee and
the full board of directors focus on the most significant risks
we face and our general risk management strategies. While our
board of directors oversees our
91
risk management, company management is responsible for
day-to-day
risk management processes. Our board of directors expects
company management to consider risk and risk management in each
business decision, to proactively develop and monitor risk
management strategies and processes for
day-to-day
activities and to effectively implement risk management
strategies adopted by the audit committee and the board of
directors. We believe this division of responsibilities is the
most effective approach for addressing the risks we face and
that our board leadership structure, which also emphasizes the
independence of the board in its oversight of our business and
affairs, supports this approach.
Term and
Class of Directors
Upon the closing of this offering, our board of directors will
be divided into three staggered classes of directors of the same
or nearly the same number, designated Class I,
Class II and
Class III. , and
will serve as Class I directors whose terms expire at the
2012 annual meeting of
stockholders. , and
will serve as Class II directors whose terms expire at the
2013 annual meeting of
stockholders. and will
serve as Class III directors whose terms expire at the 2014
annual meeting of stockholders. At each annual meeting of
stockholders beginning in 2012, successors to the class of
directors whose term expires at that annual meeting will be
elected for a three-year term.
Any additional directorships resulting from an increase in the
number of directors will be distributed among the three classes
so that, as nearly as possible, each class shall consist of
one-third of the directors. The division of the board of
directors into three classes with staggered three-year terms may
delay or prevent a change of our management or a change in
control. Our directors may be removed for cause only by the
affirmative vote of the holders of at least a majority of our
voting stock.
Term of
Executive Officers
Each of our executive officers is appointed and serves at the
discretion of our board of directors and is appointed by the
board of directors to serve until a successor is appointed and
qualified or until his or her death, resignation, retirement or
removal, if earlier.
Director
Compensation
For a discussion of our director compensation arrangements, see
Executive and Director CompensationDirector
Compensation.
Board
Committees
Upon the closing of this offering, our board of directors will
have an audit committee, a compensation committee and a
nominating and corporate governance committee, each of which
will have the composition and responsibilities described below.
Our board of directors may from time to time establish other
committees.
Audit
Committee
The members of the audit committee are Messrs. Atwood,
Klingenstein and McKinley, each of whom qualifies as an
independent director under the corporate governance standards of
the NASDAQ Stock Market and the independence requirements of
Rule 10A-3
of the Exchange Act. Mr. McKinley serves as chairman of
this committee. Our board of directors has determined that
Mr. McKinley qualifies as an audit committee
financial expert as such term is defined in
Item 407(d)(5) of
Regulation S-K.
Our audit committee oversees a broad range of issues surrounding
our accounting and financial reporting processes and audits of
our financial statements, and assists our board of directors by:
(1) overseeing and monitoring the quality and integrity of
our financial statements, our compliance with legal and
regulatory requirements and our internal accounting procedures
and systems of internal controls (2) assuming direct
responsibility for the appointment, compensation, retention and
oversight of work of any independent registered public
accounting firm engaged for the purpose of performing any audit,
review or attestation services, for overseeing and monitoring
our independent registered public accounting firms
qualifications and independence, and for dealing directly with
92
any such accounting firm, including resolving disagreements
between management and our independent auditor;
(3) providing a medium for consideration of matters
relating to any audit issues; and (4) preparing the audit
committee report that the rules require be included in our
filings with the SEC.
The written charter for the audit committee will be available on
our website upon the closing of this offering.
Compensation
Committee
The members of the compensation committee are Drs. Barrett,
Blair and Spickschen, each of whom qualifies as an independent
director under the corporate governance standards of the NASDAQ
Stock Market. Each member of our compensation committee is a
non-employee director, as defined in
Rule 16b-3
promulgated under the Exchange Act and is an outside director,
as defined pursuant to Section 162(m) of the Code.
Dr. Blair serves as chairman of this committee. The purpose
of the compensation committee is to assist our board of
directors in discharging its responsibilities relating to
(1) setting our compensation program and compensation and
benefits of all of our executive officers and directors;
(2) providing oversight for our incentive and equity-based
compensation plans; (3) establishing and reviewing general
policies relating to compensation and benefits of our employees;
and (4) preparing the compensation committee report
required to be included in our proxy statement under the rules
and regulations of the SEC. The compensation committee will
review and evaluate, at least annually, the performance of the
compensation committee and its members, including compliance of
the compensation committee with its charter.
The written charter for the compensation committee will be
available on our website upon the closing of this offering.
Nominating
and Corporate Governance Committee
The members of the nominating and corporate governance committee
are Drs. Barrett and Blair and Mr. Atwood, each of whom
qualifies as an independent director under the corporate
governance standards of the NASDAQ Stock Market. Dr. Barrett
serves as chairman of this committee. The purpose of our
nominating and corporate governance committee will be to assist
our board of directors in discharging its responsibilities
relating to (1) developing and recommending criteria for
selecting new directors, and identifying, screening and
recommending nominees for election as directors;
(2) screening and recommending to the board of directors
individuals qualified to become executive officers;
(3) evaluating our board of directors and our management;
(4) developing, reviewing and recommending corporate
governance guidelines and a corporate code of business conduct
and ethics; and (5) generally advising our board of
directors on other corporate governance and related matters.
The written charter for the nominating and corporate governance
committee will be available on our website upon the closing of
this offering.
Compensation
Committee Interlocks and Insider Participation
No member of our compensation committee has ever been an
executive officer or employee of ours. None of our officers
currently serves, or has served during the last completed fiscal
year, on the compensation committee or board of directors of any
other entity that has one or more officers serving as a member
of our board of directors or compensation committee.
Limitation
on Liability and Indemnification of Directors and
Officers
Our amended and restated certificate of incorporation and bylaws
limits our directors and officers liability to the
fullest extent permitted under Delaware corporate law.
Specifically, our directors and officers will not be liable to
us or our stockholders for monetary damages for any breach of
fiduciary duty by a director or officer, except for liability:
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for any breach of the directors or officers duty of
loyalty to us or our stockholders;
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for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
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under Section 174 of the Delaware General Corporation Law
(unlawful dividends or stock repurchases); or
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for any transaction from which a director or officer derives an
improper personal benefit.
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If the Delaware General Corporation Law is amended to authorize
corporate action further eliminating or limiting the personal
liability of directors or officers, then the liability of our
directors or officers shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation
Law, as so amended.
The provision regarding indemnification of our directors and
officers in our amended and restated certificate of
incorporation will generally not limit liability under state or
federal securities laws.
Delaware law and our amended and restated certificate of
incorporation and bylaws provide that we will, in certain
situations, indemnify any person made or threatened to be made a
party to a proceeding by reason of that persons former or
present official capacity with us against judgments, penalties,
fines, settlements and reasonable expenses. Any person is also
entitled, subject to certain limitations, to payment or
reimbursement of reasonable expenses (including attorneys
fees and disbursements and court costs) in advance of the final
disposition of the proceeding.
We maintain a directors and officers insurance
policy pursuant to which our directors and officers are insured
against liability for actions taken in their capacities as
directors and officers. We believe that these indemnification
provisions and insurance are useful to attract and retain
qualified directors and officers.
The limitation of liability and indemnification provisions in
our amended and restated certificate of incorporation and bylaws
may discourage stockholders from bringing a lawsuit against
directors for breach of their fiduciary duty. These provisions
may also have the effect of reducing the likelihood of
derivative litigation against directors and officers, even
though such an action, if successful, might otherwise benefit us
and our stockholders. In addition, your investment may be
adversely affected to the extent that, in a class action or
direct suit, we pay the costs of settlement and damage awards
against directors and officers pursuant to these indemnification
provisions.
In addition, we have entered into indemnification agreements
with each of our directors and executive officers, which also
provide, subject to certain exceptions, for indemnification for
related expenses, including, among others, reasonable
attorneys fees, judgments, fines and settlements incurred
in any action or proceeding.
There is currently no pending material litigation or proceeding
involving any of our directors, officers or employees for which
indemnification is sought.
Code of
Business Ethics
In connection with this offering, we will adopt a written Code
of Business Ethics that is reviewed and published annually and
contains the ethical principles by which our chief executive
officer and chief financial officer, among others, are expected
to conduct themselves when carrying out their duties and
responsibilities. We intend to satisfy the disclosure
requirements under Item 5.05 of
Form 8-K
regarding amendments to, or waivers from, a provision of our
Code of Ethics by posting such information on our website at
www.clovisoncology.com
.
Our Code of Business Ethics will be available on our website
upon the closing of this offering.
94
EXECUTIVE
AND DIRECTOR COMPENSATION
Compensation
Discussion and Analysis
Our named executive officers for our fiscal year
ending December 31, 2010 consisted of the following
individuals:
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Patrick J. Mahaffy, our President and Chief Executive Officer;
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Erle T. Mast, our Executive Vice President and Chief Financial
Officer;
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Gillian C. Ivers-Read, our Executive Vice President, Technical
Operations and Chief Regulatory Officer; and
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Andrew R. Allen, our Executive Vice President of Clinical and
Pre-Clinical Development and Chief Medical Officer.
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Compensation
Overview and Objectives
Compensation decisions with respect to our named executive
officers have generally been made based on the need to attract,
motivate and retain talented executives, to align executive
interests with those of our stockholders, and to motivate the
achievement of individual objectives and key strategic financial
and operational goals. To that end, our compensation programs
are designed to provide fixed compensation within market
competitive ranges, to incentivize our executives to achieve
performance goals that maximize rational growth, and to motivate
our executives to achieve the greatest possible returns for our
stockholders. The fixed aspects of our compensation
programincluding base salary and benefitsenable us
to compensate our executives at market compensation levels,
which is necessary to attract and retain top talent. Our annual
incentive programs allow us to pay for performance, based on
achievement of company-wide performance targets, as well as
individual goals. Finally, our stock incentive plan enables us
to promote executive retention and to directly link the value of
the compensation paid to our executive officers to the value of
our common stock.
Determination
of Compensation
The compensation committee of our board of directors is
primarily responsible for reviewing compensatory arrangements
with our named executive officers in light of our compensation
philosophies and objectives, and making recommendations, based
upon this consideration and review, to the board of directors.
Final determinations on compensation levels and arrangements for
our named executive officers are made by the board of directors,
which meets regularly to discuss compensation matters as they
arise, and make any adjustments to compensation as the board of
directors deems necessary and advisable for our continued growth
and success. Our named executive officers frequently provide
input and recommendations to the board of directors on
compensation matters, and our President and Chief Executive
Officer periodically reviews each named executive officers
overall performance and makes recommendations to the board of
directors on the elements of the named executive officers
compensation. However, our President and Chief Executive Officer
does not participate in discussions regarding his compensation,
and recuses himself from meetings when his compensation is
discussed.
In determining the levels and mix of compensation, our board of
directors has not generally relied on formulaic guidelines, but
rather has maintained a flexible approach to compensation
determinations which allows it to adapt the various elements of
compensation to motivate individual executives and achieve our
specific strategic and financial goals. The board of directors
considered both individual performance and contributions to our
growth and success, as well as overall achievement of
performance goals, in making its compensation determinations.
The board of directors has not made use of compensation
consultants or advisors in determining the compensation of our
named executive officers in the past, but has engaged Radford,
an Aon Hewitt company, to review and advise on our compensation
practices during 2011. The board of directors intends to use
Radfords report as one factor for determining the
compensation of our named executive officers during 2011. For
2010, the board of directors generally relied on its
members collective experience and expertise in determining
the appropriate levels of compensation.
95
Components
of Compensation for Fiscal 2010
Compensation packages of our named executive officers generally
consist of base salary, annual discretionary performance
bonuses, retirement and health benefits, and equity
compensation. We believe that the relationship of fixed to
performance-based compensation was properly balanced and
provided us with an effective means to attract, motivate and
retain our named executive officers, as well as reward them for
increase in the value of our common stock.
Base
Salary
The base salary payable to each named executive officer is
intended to provide a fixed component of compensation reflecting
the executives skill set, experience, roles, and
responsibilities. Base salary amounts for each named executive
officer were determined at the time of the named executive
officers appointment to their position with us. The board
of directors periodically reviews the base salary of each named
executive officer and may make adjustments as and when
appropriate, consistent with our compensation objectives and
based on the board of directors consideration of an
executives individual performance and our overall
performance. The board of directors reviewed the base salaries
of the named executive officers in 2010 and determined that no
increases were necessary to achieve performance goals, and
consequently none of the named executive officers received
salary increases during 2010.
Annual
Discretionary Performance Bonuses
In the initial establishment of compensation packages for the
named executive officers in 2009, the board of directors
reviewed the advisability of, and approved the use of, a
proposed structure of bonuses to be paid to the named executive
officers based on the achievement of certain corporate goals. As
part of that process, the board of directors determined that
Mr. Mahaffys target annual bonus for each calendar
year should equal 50% of his annual base salary and that the
target annual bonuses for Messrs. Mast and Allen and
Ms. Ivers-Read should equal 40% of their respective annual
base salaries.
For 2010, the compensation committee did not set any specific
performance targets for the payment of bonuses to our named
executive officers. Instead, in the first quarter of 2011, the
compensation committee subjectively reviewed our overall
performance and determined that in a normal year, bonus awards
would have been made in an amount equal to 80% of target levels
based on our overall performance during 2010. However, given the
early stage of our development, the compensation committee
recommended (and the board of directors determined) that bonuses
for 2010 would be set at 50% of amounts that the compensation
committee otherwise determined would be regular target levels.
Therefore, 2010 bonuses for the named executive officers were
set at 40% of the target levels.
Equity
Compensation
We maintain the Clovis Oncology, Inc. 2009 Equity Incentive
Plan, or the 2009 Plan, the terms of which are described below.
In 2010, the board of directors determined that no new equity
grants would be made to our named executive officers in 2010.
The board of directors determined that the original grants of
restricted stock made to the named executive officers in 2009
still provided sufficient incentive to maximize our value for
our stockholders, given that the restricted stock was granted
subject to a four-year vesting schedule: 25% on the date of
grant, and in 48 equal monthly installments thereafter. The
board of directors reasoned that vesting of previously granted
awards during 2010 would serve as a sufficient retention
incentive for the named executive officers in that year.
Retirement
Benefits
In 2010, we provided retirement benefits to our named executive
officers through the Clovis Oncology, Inc. 401(k) plan, a
defined contribution pension plan, on the same basis as our
other employees. We make matching contributions to the account
of each eligible employee under the 401(k) plan of 100% of the
first 4% of an employees contributions to his or her
account.
96
Other
Benefits
In 2010, our named executive officers were eligible to receive
the same basic benefits, including health benefits, that were
available to our other employees.
At-Will
Employment Agreements
We have entered into at-will employment, confidential
information, invention assignment, and arbitration agreements
with Messrs. Mahaffy, Mast and Allen, and
Ms. Ivers-Read, which contain customary confidentiality and
invention assignment provisions. The agreements contain a
one-year nonsolicitation provision of our employees after
termination of employment with us. None of Messrs. Mahaffy,
Mast or Allen, or
Ms. Ivers-Read,
are entitled to receive any severance payments upon a
termination of employment under the at-will employment
agreements. Our decision to enter into these employment
agreements was based on the determination that confidential
information and a well-trained employee base represent valuable
resources of ours, and it would be in our best interests to
protect these resources through the use of customary
confidentiality, intellectual property assignment, and
nonsolicitation covenants. Additionally, by electing not to
provide a set compensation package in the employment agreements,
we also felt that we could maximize our flexibility in offering
competitive compensation to our employees and more closely link
individual performance, as well as market compensation trends,
to an executive officers individual compensation package.
Compensation
Decisions Relating to Fiscal Year 2011
2011
Option Grants
On March 8, 2011, Mr. Mahaffy was granted options to
purchase 600,000 shares of common stock pursuant to the
2009 Plan, and Messrs. Mast and Allen and
Ms. Ivers-Read were each granted options to purchase
200,000 shares of common stock pursuant to the 2009 Plan,
in each case at an exercise price per share of $1.13.
Twenty-five percent (25%) of the shares of common stock subject
to the options will vest on the one-year anniversary of the date
of grant, and the remainder will vest in substantially equal
installments over the forty eight (48) months immediately
following such anniversary, subject to continued employment
through such date. The options may be exercised by the named
executive officers prior to vesting in exchange for shares of
restricted stock with the same vesting schedule as the options.
The shares of our common stock acquired upon exercise of an
option (or upon vesting of any restricted shares acquired upon
an exercise prior to the vesting) are subject to a
180-day
lock-up
period following an initial public offering of the Company.
Compensation
Risk Management
Our board of directors has reviewed our overall compensation
policies and practices to determine whether those policies and
practices are reasonably likely to have a material adverse
effect on us and has concluded that they are not reasonably
likely to have a material effect on us. In conducting its
analysis, the board of directors considered the following
factors:
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Base salary: Base salary is a fixed portion of overall
compensation that is set based on factors such as the scope of
an employees responsibilities, and which provides income
regardless of our short-term performance. Our board of directors
does not believe that base salary creates an incentive for our
employees to take undue risks.
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Bonus programs: Bonuses are designed to reward employees for
achieving annual company-wide performance goals that are
important to our success, and intended to compensate our
employees for achieving such goals. Although the board of
directors has historically based bonuses on the achievement of
company-wide goals, the actual amount of any bonus is subject to
board of directors discretion. For these reasons, our board of
directors does not believe that our bonus programs encourage
employees to take risks which could have an adverse effect on us.
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Equity compensation: Equity awards are designed to encourage our
employees to align their interests with the long-term interests
of our stockholders. Our board of directors believes that equity
compensation discourages our employees from taking unnecessary
risks because the ultimate value of the equity awards is
determined based on the long-term appreciation in the value of
our stock.
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97
After considering the risk implications of each element of the
above elements of our overall compensation program, our board of
directors concluded that our overall compensation policies and
practices are not likely to have a material adverse effect on us.
Executive
Compensation
The following table shows the compensation of our principal
executive officer, our principal financial officer and our other
named executive officers for 2010.
Summary
Compensation Table
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All Other
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Salary
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Bonus
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compensation
(1)
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Total
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Name and principal position
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Year
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($)
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($)
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($)
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($)
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Patrick J. Mahaffy
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2010
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375,000
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75,000
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9,800
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459,800
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President and Chief Executive Officer
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Erle T. Mast
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2010
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325,000
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52,000
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9,208
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386,208
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EVP, Chief Financial Officer
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Gillian C. Ivers-Read
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2010
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325,000
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52,000
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9,208
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386,208
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EVP, Technical Operations and Chief Regulatory Officer
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Andrew R. Allen
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2010
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325,000
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52,000
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9,208
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386,208
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EVP of Clinical and Pre-Clinical Development and Chief Medical
Officer
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(1)
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Represents the matching contributions made during 2010 to our
401(k) plan on behalf of each named executive officer.
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Narrative
Disclosure Relating to Summary Compensation Table
For an explanation of the amount of salary and bonus paid to our
named executive officers, please see the discussion of
Annual Discretionary Performance Bonuses and
Base Salary in the Compensation Discussion and
Analysis, and the disclosure provided in the Summary
Compensation Table, above.
Outstanding
Equity Awards at Fiscal Year End
The following table sets forth summary information regarding the
outstanding equity awards held by our named executive officers
at December 31, 2010.
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Market value of
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Number of shares or
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shares or units of
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units of stock that
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stock that have
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have not vested
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not vested
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Name
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(#)
(1)
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($)
(2)
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Patrick J. Mahaffy
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792,969
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896,055
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Erle T. Mast
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264,323
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298,685
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Gillian C. Ivers-Read
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264,323
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298,685
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Andrew R. Allen
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264,323
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298,685
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(1)
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The restricted stock held by the named executive officers was
granted in May 2009 and was 25% vested as of the date of grant,
and thereafter 1/48th of the restricted stock vests on each
monthly anniversary of the date of grant thereafter. In the
event that a named executive officers employment is
terminated by us without cause within six months
following a change in control of the Company, 100% of the
unvested shares of restricted stock will immediately vest upon
such termination.
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(2)
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Represents the estimated market value of the shares on
December 31, 2010 of $1.13 per share.
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98
Option
Exercises and Stock Vested
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Restricted stock awards
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Number of shares
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Value realized on
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Name
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acquired on vesting (#)
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vesting
($)
(1)
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Patrick J. Mahaffy
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328,125
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347,813
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Erle T. Mast
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109,375
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115,938
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Gillian C. Ivers-Read
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109,375
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115,937
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Andrew R. Allen
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109,375
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115,937
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(1)
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Represents the aggregate value realized upon vesting based on
the estimated market value on each applicable vesting date of
$1.06 per share.
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Potential
Payments Upon a Termination or Change in Control
As discussed above under Compensation Discussion and
AnalysisAt-Will Employment Agreements, our named
executive officers are not entitled to receive cash severance
benefits upon their termination of employment. Pursuant to their
restricted stock agreements, as discussed above under
Compensation Discussion and AnalysisEquity
Compensation, the named executive officers are entitled to
full vesting of their restricted stock upon a termination
without cause (a qualifying termination)
within 6 months following a change in control
(as defined in the restricted stock agreements). Assuming a
qualifying termination occurred on December 31, 2010, the
total value that would have been received by each of our named
executive officers on account of the accelerated vesting
described in the previous sentence are as follows (based on the
estimated market value of our common stock on December 31,
2010 of $1.13 per share): $896,055 for Mr. Mahaffy, and
$298,685 for each of Mr. Mast, Dr. Allen and
Ms. Ivers-Read.
Director
Compensation
Director
Compensation Table
The following table summarizes the compensation received by our
directors for the year ended December 31, 2010.
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Option awards
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Name
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($)
(1)(2)
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Total ($)
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Brian G. Atwood
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13,800
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13,800
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M. James Barrett
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13,800
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13,800
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James C. Blair
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13,800
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13,800
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Paul Klingenstein
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13,800
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13,800
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Edward J. McKinley
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13,800
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13,800
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John C. Reed
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13,800
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13,800
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Thorlef Spickschen
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13,800
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13,800
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(1)
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The directors each received a grant of options to purchase
20,000 shares of our common stock on December 2, 2010.
As of December 31, 2010, each of the directors other than
Dr. Blair had a total of 95,000 options outstanding.
Dr. Blair exercised his 95,000 options for shares of our
restricted common stock.
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(2)
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Amount represents the fair value of the awards on the date of
grant computed in accordance with FASB ASC Topic 718. The
assumptions used in the valuation of these awards are consistent
with the valuation methodologies specified in the notes to our
financial statements included elsewhere in this prospectus.
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Narrative
Disclosure relating to Director Compensation Table
Stock
Option Grants
On December 2, 2010, we made grants of options to purchase
20,000 shares of our stock to each of our directors
pursuant to the 2009 Plan. 25% of the options were fully vested
as of the date of grant and 25% will vest on each of the first
three anniversaries of the date of grant. The option agreements
provide that the directors may exercise their options prior to
vesting, in which case the directors will receive grants of
restricted stock upon
99
exercise of the options and the purchase price of such
restricted stock will be the exercise price paid by the
directors for the options.
Employee
Benefit Plans
2009
Equity Incentive Plan
We maintain the 2009 Equity Incentive Plan (the 2009 Plan),
pursuant to which 4,375,000 shares of our common stock are
reserved for grant to our employees, consultants and directors.
Pursuant to the 2009 Plan, we may make grants of incentive stock
options, nonstatutory stock options, stock appreciation rights,
restricted stock, and restricted stock units to our employees,
consultants, and directors.
Upon the occurrence of a corporate event (such as a merger,
recapitalization, stock split, reorganization, consolidation, or
other similar event), the board of directors may adjust the
number, class, and price of shares covered by each award granted
under the 2009 Plan. In the event of a merger or a change
in control (as defined in the 2009 Plan), the board of
directors may determine that awards will (i) be assumed or
substituted by the acquiring company, (ii) be terminated,
(iii) become fully vested and exercisable, (iv) be
terminated and cashed out, or (v) be treated in any
combination thereof.
The board of directors may amend, suspend, alter, or terminate
the 2009 Plan or awards granted under the 2009 Plan at any time,
provided that a participants rights with respect to
outstanding awards may not be impaired without their express
written consent. Absent earlier termination by the board of
directors, the 2009 Plan will expire in February 2021. It is
currently anticipated that the 2009 Plan will be terminated as
of the effective date of this registration statement and that no
additional grants will be made thereunder following the
effective date.
2011
Equity Incentive Plan
We intend to adopt a new equity incentive plan, the 2011 Plan,
prior to the closing of this offering that will afford our
compensation committee with more flexibility by allowing grants
of a wide variety of equity awards to our key employees,
directors and consultants. The 2011 Plan will be designed to
assist us in attracting, retaining, motivating and rewarding key
employees, directors, and consultants, and promoting the
creation of long-term value for our stockholders by closely
aligning the interests of the participants with those of our
stockholders.
The 2011 Plan will initially reserve for issuance a number of
shares of common stock equal to the sum of
(x) , and (y) the number of
shares of our common stock that were available for grant under
the 2009 Plan as of the date of this prospectus (not including
issued or outstanding shares granted pursuant to awards under
the 2009 Plan as of such date). No future grants will be made
pursuant to the 2009 Plan following the date of this prospectus.
Thereafter, the number of shares of our common stock reserved
for issuance under the 2011 Plan will be increased (i) from
time to time by the number of shares of our common stock
forfeited upon the expiration, cancellation, forfeiture, cash
settlement or other termination of awards under the 2009 Plan
following the date of this prospectus, and (ii) unless
otherwise determined by the board of directors, on the first day
of each fiscal year, by a number of additional shares of our
common stock representing % of our
then-outstanding shares of common stock on such date, less
shares of common stock then available for issuance under the
2011 Plan. The number of shares reserved for issuance will also
be subject to adjustment in the event of any stock split,
reverse stock split, reorganization, recapitalization, merger,
consolidation, combination, share exchange or any other similar
change in our capitalization, or in connection with any
extraordinary dividend declared and paid in respect of shares of
our common stock.
2011
Employee Stock Purchase Plan
Prior to the closing of this offering, we intend to adopt a new
employee stock purchase plan that will provide our employees,
including our named executive officers, and employees of certain
designated subsidiaries with an opportunity to purchase our
ordinary shares at a discount on a tax-qualified basis through
payroll deductions following the effective date of this
registration statement. The employee stock purchase plan will be
designed to qualify as an employee stock purchase
plan under Section 423 of the U.S. Internal
Revenue Code.
100
A total of shares of our
common stock will be reserved for issuance under the employee
stock purchase plan, subject to adjustment in the event of
certain changes in our corporate structure or ordinary shares.
The employee stock purchase plan will provide for consecutive
offering periods, during which participating employees may elect
to have between 1% and 10% of their compensation withheld and
applied to the purchase of ordinary shares at the end of the
period. Unless otherwise determined by our compensation
committee before an offering period, the purchase price will be
85% of the fair market value of the ordinary shares at the start
of the offering period.
The stock purchase plan will be administered by our compensation
committee. Our board of directors will have the ability to
suspend, terminate, or amend the employee stock purchase plan at
any time, although the board of directors generally may not
amend the employee stock purchase plan in such a way that would
adversely affect the rights of any participating employee
without that employees consent or shareholder approval.
Unless sooner terminated, the employee stock purchase plan will
terminate on the day before the tenth (10th) anniversary of the
date the employee stock purchase plan is approved by the board.
101
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The following is a description of transactions, since our
formation in April 2009, to which we have been a party, in which
the amount involved exceeded or will exceed $120,000, and in
which any of our executive officers, directors or holders of
more than 5% of our voting securities, or an affiliate or
immediate family member thereof, had or will have a direct or
indirect material interest, other than compensation, termination
and change in control arrangements, which are described under
Executive and Director Compensation. We believe the
terms obtained or consideration that we paid or received, as
applicable, in connection with the transactions described below
were comparable to terms available or the amounts that would be
paid or received, as applicable, in arms-length
transactions with unrelated third parties.
Preferred
Stock and Convertible Promissory Note Issuances
Since our inception, we have sold an aggregate of
5,044,828 shares of
Series A-1
convertible preferred stock, 5,044,828 shares of
Series A-2
convertible preferred stock, 10,919,540 shares of
Series B convertible preferred stock and $20.0 million
aggregate principal amount of convertible promissory notes to
our executive officers, directors or holders of more than 5% of
our voting securities in the amounts and as of the dates shown
below:
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Principal
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|
Series A-1
|
|
|
Series A-2
|
|
|
Series B
|
|
|
Amount of
|
|
|
|
|
|
|
Convertible
|
|
|
Convertible
|
|
|
Convertible
|
|
|
Convertible
|
|
|
|
Common
|
|
|
Preferred
|
|
|
Preferred
|
|
|
Preferred
|
|
|
Promissory
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Stock
|
|
|
Stock
|
|
|
Notes
|
|
|
Stockholders beneficially owning 5% or more of our voting
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entities affiliated with Domain Associates
|
|
|
|
|
|
|
1,206,897
|
|
|
|
1,206,897
|
|
|
|
2,612,330
|
|
|
|
$4,784,000
|
|
Entities affiliated with New Enterprise Associates
|
|
|
|
|
|
|
1,206,897
|
|
|
|
1,206,897
|
|
|
|
2,612,330
|
|
|
|
$4,784,000
|
|
Entities affiliated with Versant Ventures
|
|
|
|
|
|
|
862,069
|
|
|
|
862,069
|
|
|
|
1,865,950
|
|
|
|
$3,418,000
|
|
Entities affiliated with Aberdare Ventures
|
|
|
|
|
|
|
517,241
|
|
|
|
517,241
|
|
|
|
1,119,570
|
|
|
|
$2,050,000
|
|
Abingworth Bioventures V, L.P.
|
|
|
|
|
|
|
517,241
|
|
|
|
517,241
|
|
|
|
1,119,570
|
|
|
|
$2,050,000
|
|
Directors and Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick J. Mahaffy
|
|
|
1,750,000
|
|
|
|
51,724
|
|
|
|
51,724
|
|
|
|
111,957
|
|
|
|
$206,000
|
|
Erle T. Mast
|
|
|
583,334
|
|
|
|
6,897
|
|
|
|
6,897
|
|
|
|
14,928
|
|
|
|
$28,000
|
|
Andrew R. Allen
|
|
|
583,333
|
|
|
|
10,345
|
|
|
|
10,345
|
|
|
|
22,391
|
|
|
|
$40,000
|
|
Gillian C. Ivers-Read
|
|
|
583,333
|
|
|
|
6,897
|
|
|
|
6,897
|
|
|
|
14,928
|
|
|
|
$28,000
|
|
Brian G. Atwood
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M. James Barrett
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James C. Blair
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul Klingenstein
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward J. McKinley
|
|
|
|
|
|
|
103,448
|
|
|
|
103,448
|
|
|
|
223,914
|
|
|
|
$410,000
|
|
John C. Reed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thorlef Spickschen
|
|
|
|
|
|
|
17,241
|
|
|
|
17,241
|
|
|
|
37,319
|
|
|
|
$68,000
|
|
Price Per Share
|
|
|
$0.001
|
|
|
|
$2.00
|
|
|
|
$3.00
|
|
|
|
$4.62
|
|
|
|
N/A
|
|
Date of Purchase
|
|
|
May 12, 2009
|
|
|
|
May 15, 2009
|
|
|
|
November 9, 2009
|
|
|
|
November 18, 2009
|
|
|
|
May 25, 2011
|
|
Restricted
Stock Purchase Agreements
Each of our named executive officers purchased restricted shares
of our common stock in May 2009 pursuant to restricted stock
purchase agreements between the named executive officers and us.
Pursuant to these agreements, Mr. Mahaffy purchased
1,750,000 shares of restricted stock, Mr. Mast
purchased 583,334 shares of restricted stock, and
Dr. Allen and Ms. Ivers-Read each purchased
583,333 shares of restricted stock. Until such time as the
shares vest (as described below), the shares are subject to
repurchase by us following a termination of the named executive
officers employment for any reason at a purchase price
equal to the lesser of the then-current fair market value and
102
the purchase price paid for such shares. The restricted stock
was 25% vested as of the date of grant, and 1/48th of the
remaining shares of stock vest on each monthly anniversary
thereafter, subject to continued employment through such date.
In the event that a named executive officers employment is
terminated by us without cause within six months
following a change in control of the Company, 100% of the
unvested shares of restricted stock will immediately vest upon
such termination. The agreements impose restrictions on transfer
of the restricted stock and a
lock-up
period for 180 days following our initial public offering.
Convertible
Promissory Notes
On May 25, 2011, we issued to existing holders of our
convertible preferred stock on a pro rata basis with their
respective ownership of our convertible preferred stock, at face
value, $20.0 million aggregate principal amount of our 5%
convertible promissory notes due 2012. On June 2, 2011, we
issued to Pfizer $15.0 million aggregate principal amount
of our 5% convertible promissory notes due 2012,
$7.0 million of which were issued as consideration for the
up-front payment under our license agreement with Pfizer for
CO-338 and $8.0 million of which were issued for an
investment of $8.0 million of cash by Pfizer. The notes
accrue interest at an annual rate of 5% which is not due until
maturity. The outstanding principal amount and all accrued and
unpaid interest thereon will convert into shares of our common
stock immediately prior to the closing of this offering at a
price per share equal to our initial public offering price set
forth on the cover page of this prospectus.
Voting
Agreement
We have entered into a voting agreement with holders of our
convertible preferred stock and certain other stockholders that
contains agreements with respect to the election of our board of
directors and its composition. All of our current directors were
elected pursuant to the terms of this voting agreement. The
voting agreement will terminate upon the closing of this
offering.
Right of
First Refusal and Co-Sale Agreement
We have entered into a right of first refusal and co-sale
agreement with holders of our convertible preferred stock and
certain other stockholders. This agreement provides the holders
of convertible preferred stock a right of purchase and of
co-sale in respect of sales of securities by certain holders of
our common stock. These rights of purchase and co-sale will
terminate upon the closing of this offering.
Investors
Rights Agreement
We and our founders and holders of our convertible preferred
stock have entered into an agreement under which such security
holders have registration rights with respect to their shares of
common stock following this offering. Upon the closing of this
offering, all of our currently outstanding shares of convertible
preferred stock will convert into shares of our common stock on
a one-for-one basis, and the outstanding principal amount of our
convertible promissory notes and all accrued and unpaid interest
thereon will convert into shares of our common stock at a price
per share equal to our initial public offering price set forth
on the cover page of this prospectus. For more information
regarding these agreements, see Description of Capital
StockRegistration Rights.
Director
Compensation
For a discussion of our director compensation arrangements, see
Executive and Director CompensationDirector
Compensation.
Employment
Agreements
We have entered into employment agreements with each of
Messrs. Mahaffy and Mast, Dr. Allen and
Ms. Ivers-Read. For more information regarding these
agreements, see Executive and Director
CompensationEmployment Agreements.
Indemnification
Agreements
We have entered into indemnification agreements with each of our
directors and executive officers. For more information regarding
these agreements, see ManagementLimitation on
Liability and Indemnification of Directors and Officers.
103
Stock
Option Awards
We have granted stock options to our executive officers and
directors. For more information regarding these stock option
awards, see Executive and Director CompensationStock
Option Grants. In March 2011, Mr. Mahaffy was granted
options to purchase 600,000 shares of common stock pursuant
to the 2009 Plan, and Messrs. Mast and Allen and
Ms. Ivers-Read were each granted options to purchase
200,000 shares of common stock pursuant to the 2009 Plan.
Twenty-five percent of the shares of common stock subject to the
options will vest on the one-year anniversary of the date of
grant, and the remainder will vest in substantially equal
installments over the 48 months immediately following such
anniversary, subject to continued employment through such date.
The options may be exercised by the named executive officers
prior to vesting in exchange for shares of restricted stock with
the same vesting schedule as the options. The shares of our
common stock acquired upon exercise of an option (or upon
vesting of any restricted shares acquired upon an exercise prior
to the vesting) are subject to a
180-day
lock-up
period following our initial public offering.
Policies
and Procedures Regarding Transactions with Related
Persons
Prior to the closing of this offering, we will adopt a written
Related-Person Transactions Policy that sets forth our policies
and procedures regarding the identification, review,
consideration, approval and oversight of related-person
transactions. For purposes of our policy only, a
related-person transaction is a past, present or
future transaction, arrangement or relationship (or any series
of similar transactions, arrangements or relationships) in which
we and any related person are participants, the
amount involved exceeds $120,000 and a related person has a
direct or indirect material interest. Transactions involving
compensation for services provided to us as an employee,
director, consultant or similar capacity by a related person are
not covered by this policy. A related person, as
determined since the beginning of our last fiscal year, is any
executive officer, director or nominee to become director, a
holder of more than 5% of our common stock, including any
immediate family members of such persons or any entity in which
such a person has a 10% or greater equity interest. Any
related-person transaction may only be consummated if our audit
committee has approved or ratified the transaction in accordance
with the policy guidelines set forth below.
The policy imposes an affirmative duty upon each director and
executive officer to identify, and we will request that
significant stockholders identify, any transaction involving
them, their affiliates or immediate family members that may be
considered a related party transaction before such person
engages in the transaction. Under the policy, where a
transaction has been identified as a related-person transaction,
management must present information regarding the proposed
related-person transaction to our audit committee (or, where
review by our audit committee would be inappropriate, to another
independent body of our board of directors) for review. The
presentation must include a description of, among other things,
the material facts, the direct and indirect interests of the
related persons, the benefits of the transaction to us and
whether any alternative transactions are available. In
considering related-person transactions, our audit committee
takes into account the relevant available facts and
circumstances including, but not limited to:
|
|
|
|
|
the risks, costs and benefits to us;
|
|
|
|
the impact on a directors independence in the event the
related person is a director, immediate family member of a
director or an entity with which a director is affiliated;
|
|
|
|
the terms of the transaction;
|
|
|
|
the availability of other sources for comparable services or
products; and
|
|
|
|
the terms available to or from, as the case may be, unrelated
third parties or to or from our employees generally.
|
In the event a director has an interest in the proposed
transaction, the director must recuse himself or herself from
the deliberations and approval process. Our policy requires
that, in reviewing a related-person transaction, our audit
committee must consider, in light of known circumstances, and
determine in the good faith exercise of its discretion whether
the transaction is in, or is not inconsistent with, the best
interests of us and our stockholders. Prior to the closing of
this offering, we did not have a formal policy concerning
transactions with related persons.
104
PRINCIPAL
STOCKHOLDERS
The following table and accompanying footnotes set forth certain
information regarding the beneficial ownership of our common
stock as of June 1, 2011 and as adjusted to reflect the
sale of shares of common stock in this offering, by:
|
|
|
|
|
each person or group of affiliated persons who are known by us
to own beneficially more than 5% of our common stock;
|
|
|
|
each member of our board of directors and each of our named
executive officers; and
|
|
|
|
all members of our board of directors and our named executive
officers as a group.
|
The amounts and percentages of shares beneficially owned are
reported on the basis of SEC regulations governing the
determination of beneficial ownership of securities. Under SEC
rules, a person is deemed to be a beneficial owner
of a security if that person has or shares voting power or
investment power over the security, which includes the power to
dispose of or to direct the disposition of such security. A
person is also deemed to be a beneficial owner of any securities
of which that person has a right to acquire beneficial ownership
within 60 days. Securities that can be so acquired are
deemed to be outstanding for purposes of computing such
persons ownership percentage, but not for purposes of
computing any other persons percentage. Under these rules,
more than one person may be deemed to be a beneficial owner of
the same securities and a person may be deemed to be a
beneficial owner of securities as to which such person has no
economic interest.
The number of shares of our common stock to be outstanding after
this offering set forth below is based on 24,888,796 shares
of our common stock outstanding as of June 1, 2011, after
giving effect to (1) the conversion of all outstanding
shares of our convertible preferred stock into
21,009,196 shares of common stock immediately prior to the
closing of this offering and (2) the issuance
of shares
of our common stock immediately prior to the closing of this
offering as a result of the conversion of $35.0 million in
aggregate principal amount of our 5% convertible promissory
notes due 2012 (including accrued and unpaid interest thereon),
assuming an initial public offering price
of
per share, the midpoint of the price range set forth on the
cover page of this prospectus, and assuming the conversion
occurs
on ,
2011 (the expected closing date of this offering). The number of
shares of our common stock to be outstanding after this offering
set forth below is based
on shares
of our common stock to be issued and outstanding immediately
after the closing of this offering.
Except as indicated in the footnotes below and subject to
applicable community property laws, each of the beneficial
owners named in the table below has, and upon the closing of
this offering will have, to our knowledge, sole voting and
investment power with respect to all shares of common stock
listed as beneficially owned by them. Unless otherwise
indicated, the address for each of the stockholders in the table
below is
c/o Clovis
Oncology, Inc., 2525 28th Street, Suite 100, Boulder,
Colorado 80301.
105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior to This Offering
|
|
After This Offering
|
|
|
Number of
|
|
Percent of
|
|
Number of
|
|
Percent of
|
|
|
Shares
|
|
Shares
|
|
Shares
|
|
Shares
|
|
|
Beneficially
|
|
Beneficially
|
|
Beneficially
|
|
Beneficially
|
Name Of Beneficial Owner
|
|
Owned
|
|
Owned
|
|
Owned
|
|
Owned
|
|
Stockholders beneficially owning 5% or more of our common
stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entities affiliated with Domain Associates
|
|
|
5,121,124
|
(1)
|
|
|
20.6
|
%
|
|
|
|
|
|
|
|
|
Entities affiliated with New Enterprise Associates, Inc.
|
|
|
5,026,124
|
(2)
|
|
|
20.2
|
%
|
|
|
|
|
|
|
|
|
Entities affiliated with Versant Ventures
|
|
|
3,590,088
|
(3)
|
|
|
14.4
|
%
|
|
|
|
|
|
|
|
|
Entities affiliated with Aberdare Ventures
|
|
|
2,154,052
|
(4)
|
|
|
8.7
|
%
|
|
|
|
|
|
|
|
|
Abingworth Bioventures V, L.P.
|
|
|
2,154,052
|
(5)
|
|
|
8.7
|
%
|
|
|
|
|
|
|
|
|
Pfizer, Inc.
|
|
|
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
Officers and Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick J. Mahaffy
|
|
|
2,565,405
|
|
|
|
10.3
|
%
|
|
|
|
|
|
|
|
|
Erle T. Mast
|
|
|
612,056
|
(7)
|
|
|
2.4
|
%
|
|
|
|
|
|
|
|
|
Andrew R. Allen
|
|
|
626,414
|
(8)
|
|
|
2.5
|
%
|
|
|
|
|
|
|
|
|
Gillian C. Ivers-Read
|
|
|
612,055
|
(9)
|
|
|
2.4
|
%
|
|
|
|
|
|
|
|
|
Brian G. Atwood
|
|
|
3,685,088
|
(10)
|
|
|
14.8
|
%
|
|
|
|
|
|
|
|
|
M. James Barrett
|
|
|
5,121,104
|
(11)
|
|
|
20.5
|
%
|
|
|
|
|
|
|
|
|
James C. Blair
|
|
|
5,121,124
|
(12)
|
|
|
20.6
|
%
|
|
|
|
|
|
|
|
|
Paul Klingenstein
|
|
|
2,249,052
|
(13)
|
|
|
9.0
|
%
|
|
|
|
|
|
|
|
|
Edward J. McKinley
|
|
|
525,810
|
(14)
|
|
|
2.1
|
%
|
|
|
|
|
|
|
|
|
John C. Reed
|
|
|
95,000
|
(15)
|
|
|
*
|
|
|
|
|
|
|
|
|
|
Thorlef Spickschen
|
|
|
166,801
|
(16)
|
|
|
*
|
|
|
|
|
|
|
|
|
|
All directors and named executive officers as a group
(11 persons)
|
|
|
21,379,909
|
|
|
|
82.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Represents beneficial ownership of less than 1% of our common
stock.
|
|
(1)
|
|
Includes 4,941,835 shares of common stock owned by Domain
Partners VII, L.P., 84,289 shares of common stock owned by
DP VII Associates, L.P. and 95,000 shares of common stock
owned by Domain Associates, L.L.C. With respect to the shares
owned by Domain Partners VII, L.P. and DP VII Associates, L.P.,
the managing members of One Palmer Square Associates VII,
L.L.C., the general partner of Domain Partners VII, L.P. and DP
VII Associates, L.P., share voting and investment power with
respect to these shares. With respect to the shares owned by
Domain Associates, L.L.C., voting and investment power is shared
among the managing members. Several managing members of Domain
Associates, L.L.C. are also managing members of One Palmer
Square Associates VII, L.L.C. Domain Associates is located at
One Palmer Square, Suite 515, Princeton, NJ 08542.
|
|
(2)
|
|
Includes (i) 5,006,124 shares of common stock held of
record by New Enterprise Associates 13, L.P. (NEA 13); and
(ii) 20,000 shares of common stock held of record by
NEA Ventures 2009, L.P. (Ven 2009). The shares directly held by
NEA 13 are indirectly held by NEA Partners 13, L.P. (NEA
Partners 13), the sole general partner of NEA 13, NEA 13 GP, LTD
(NEA 13 LTD), the sole general partner of NEA Partners 13 and
each of the individual Directors of NEA 13 LTD. The individual
Directors (collectively, the Directors) of NEA 13
LTD are M. James Barrett (a member of our board of directors),
Peter J. Barris, Forest Baskett, Ryan D. Drant, Patrick J.
Kerins, Krishna Kittu Kolluri, C. Richard Kramlich,
David M. Mott, Scott D. Sandell, Ravi Viswanathan and Harry R.
Weller. The shares directly held by Ven 2009 are indirectly held
by Karen P. Welsh, the general partner of Ven 2009. NEA 13, NEA
Partners 13, NEA 13 LTD and the Directors share voting and
dispositive power with regard to the shares directly held by NEA
13. Karen P. Welsh, the general partner of Ven 2009, holds
voting and dispositive power over the shares held by Ven 2009.
All indirect holders of the above-referenced shares disclaim
beneficial ownership of all applicable shares except to the
extent of their actual pecuniary interest therein. The principal
business address of New Enterprise Associates, Inc. is 1954
Greenspring Drive, Suite 600, Timonium, MD 21093.
|
|
(3)
|
|
Includes 3,567,613 shares of common stock held of record by
Versant Venture Capital IV, L.P. and 22,475 shares of
common stock owned by Versant Side Fund IV, L.P. Voting and
investment power over the shares held of record by Versant
Venture Capital IV, L.P., and Versant Side Fund IV, L.P. is held
by Versant
|
106
|
|
|
|
|
Ventures IV, LLC, their sole general partner. Brian G.
Atwood, a member of our board of directors, is a managing
member of Versant Ventures IV, LLC but he disclaims beneficial
ownership of these securities, except to the extent of his
pecuniary interest therein, and the options held by him. The
individual managing members of Versant Ventures IV, LLC are
Brian G. Atwood, Bradley J. Bolzon, Samuel D. Colella, Ross A.
Jaffe, William J. Link, Kirk G. Nielsen, Robin L. Praeger,
Rebecca B. Robertson, Camille D. Samuels, Charles M. Warden and
Kevin J. Wasserstein, all of whom share voting and investment
power with respect to these shares. Each individual managing
member disclaims beneficial ownership of these shares, except to
the extent of their pecuniary interest in such shares. The
address of each entity affiliated with Versant Ventures is 3000
Sand Hill Road, Building Four, Suite 210, Menlo Park, CA 94025.
|
|
(4)
|
|
Includes 2,111,899 shares of common stock owned by Aberdare
Ventures IV, L.P. and 42,153 shares of common stock owned
by Aberdare Partners IV, L.P. Mr. Klingenstein is a
managing director of Aberdare GP IV, LLC, the general partner of
Aberdare Ventures IV, L.P. and Aberdare Partners IV, L.P. With
respect to the shares owned by Aberdare Ventures IV, L.P. and
Aberdare Partners IV, L.P., voting and investment power is
shared among the managing members of Aberdare GP IV, LLC.
Mr. Klingenstein disclaims beneficiary ownership of such
shares except to the extent of his pecuniary interest therein.
Aberdare Ventures is located at One Embarcadero Center,
Suite 4000, San Francisco, CA 94111.
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(5)
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Abingworth LLP is the Manager of Abingworth
Bioventures V L.P. The investment committee of
Abingworth LLP comprising Dr. Joseph Anderson, Michael
Bigham, Dr. Stephen Bunting and Dr. Jonathan MacQuitty
share voting and investment power with respect to these shares,
and disclaim beneficial ownership except to the extent of their
pecuniary interest therein. Abingworth LLP is located at
38 Jermyn Street, London, SW1Y 6DN, United Kingdom.
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(6)
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Pfizer, Inc. is located at 235 East 42nd Street, New York, NY
10017.
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(7)
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Includes 200,000 shares of common stock subject to
outstanding options which are exercisable within the next
60 days.
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(8)
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Includes 200,000 shares of common stock subject to
outstanding options which are exercisable within the next
60 days.
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(9)
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Includes 200,000 shares of common stock subject to
outstanding options which are exercisable within the next
60 days.
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(10)
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Includes 95,000 shares of common stock subject to
outstanding options which are exercisable within the next
60 days, 3,567,613 shares of common stock owned by
Versant Venture Capital IV, L.P. and 22,475 shares of
common stock owned by Versant Side Fund IV, L.P. Versant
Ventures IV, L.L.C. is the general partner of Versant Venture
Capital IV, L.P. and Versant Side Fund IV, L.P. Versant Ventures
IV, L.L.C. shares voting and dispositive power over the shares
of common stock held by Versant Venture Capital IV, L.P. and
Versant Side Fund IV, L.P. Mr. Atwood is a managing member
of Versant Ventures IV, L.L.C. Mr. Atwood disclaims
beneficial ownership of these securities, except to the extent
of his pecuniary interest therein.
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(11)
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Includes 95,000 shares of common stock subject to
outstanding options which are exercisable within the next
60 days. See footnote (2) above regarding
Dr. Barretts relationship with New Enterprise
Associates, Inc. and its affiliated entities. Dr. Barrett
disclaims beneficial ownership of the shares held by NEA 13 and
Ven 2009, referenced in footnote (2) above, except to the
extent of his actual pecuniary interest therein.
Dr. Barrett does not have voting or dispositive power over
the shares held of record by Ven 2009.
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(12)
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Includes 4,941,835 shares of common stock owned by Domain
Partners VII, L.P., 84,289 shares of common stock owned by
DP VII Associates, L.P. and 95,000 shares of common stock owned
by Domain Associates, L.L.C. Dr. Blair is a managing member
of One Palmer Square Associates VII, L.L.C., which is the
general partner of Domain Partners VII, L.P. and DP VII
Associates, L.P. Dr. Blair is also a managing member of
Domain Associates, L.L.C. With respect to the shares owned by
Domain Associates, L.L.C., voting and investment power is shared
among the managing members. Several managing members of Domain
Associates, L.L.C. are also managing members of One Palmer
Square Associates VII, L.L.C. Dr. Blair disclaims
beneficial ownership of these shares except to the extent of his
pecuniary interest in such shares.
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(13)
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Includes 95,000 shares of common stock subject to
outstanding options which are exercisable within the next
60 days, 2,111,899 shares of common stock owned by
Aberdare Ventures IV, L.P. and 42,153 shares of
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common stock owned by Aberdare Partners IV, L.P.
Mr. Klingenstein is a managing director of Aberdare GP IV,
LLC, the general partner of Aberdare Ventures IV, L.P. and
Aberdare Partners IV, L.P. With respect to the shares owned by
Aberdare Ventures IV, L.P. and Aberdare Partners IV, L.P.,
voting and investment power is shared among the managing members
of Aberdare GP IV, LLC. Mr. Klingenstein disclaims
beneficiary ownership of such shares except to the extent of his
pecuniary interest therein.
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(14)
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Includes 95,000 shares of common stock subject to
outstanding options which are exercisable within the next
60 days.
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(15)
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Includes 95,000 shares of common stock subject to
outstanding options which are exercisable within the next
60 days.
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(16)
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Includes 95,000 shares of common stock subject to
outstanding options which are exercisable within the next
60 days.
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108
DESCRIPTION
OF CAPITAL STOCK
The following summary describes our capital stock and the
material provisions of our amended and restated certificate of
incorporation and our amended and restated bylaws, which will
become effective upon the closing of this offering, the
registration rights agreement to which we and certain of our
stockholders are parties and of the Delaware General Corporation
Law. Because the following is only a summary, it does not
contain all of the information that may be important to you. For
a complete description, you should refer to our amended and
restated certificate of incorporation, amended and restated
bylaws and registration rights agreement, copies of which have
been filed as exhibits to the registration statement of which
this prospectus is part.
General
Our amended and restated certificate of incorporation that will
be in effect upon the closing of this offering authorizes us to
issue up to 100 million shares of common stock, par value
$0.001 per share, and 10 million shares of preferred stock,
par value $0.001 per share. No shares of preferred stock will be
issued or outstanding immediately after this offering.
Common
Stock
The holders of our common stock are entitled to one vote for
each share held of record on all matters submitted to a vote of
stockholders and are not entitled to cumulative votes with
respect to the election of directors. The holders of common
stock are entitled to receive dividends ratably, if, as and when
dividends are declared from time to time by our board of
directors out of legally available funds, after payment of
dividends required to be paid on outstanding preferred stock, if
any. Any decision to declare and pay dividends in the future
will be made at the discretion of our board of directors and
will depend on, among other things, our results of operations,
cash requirements, financial condition, contractual restrictions
and other factors that our board of directors may deem relevant.
For more information, see Dividend Policy. Upon our
liquidation, dissolution or winding up, the holders of common
stock are entitled to share ratably in all assets that are
legally available for distribution after payment of all debts
and other liabilities, subject to the prior rights of any
holders of preferred stock then outstanding. The holders of
common stock have no other preemptive, subscription, redemption,
sinking fund or conversion rights. All outstanding shares of our
common stock are fully paid and nonassessable. The shares of
common stock to be issued upon closing of the offering will also
be fully paid and nonassessable. The rights, preferences and
privileges of holders of common stock are subject to, and may be
negatively impacted by, the rights of the holders of shares of
any series of preferred stock which we may designate and issue
in the future.
As of March 31, 2011, there were 3,879,600 shares of
our common stock outstanding and held of record by
17 stockholders.
As of March 31, 2011, options to purchase
2,746,779 shares of our common stock at a weighted average
exercise price of $0.91 per share were outstanding.
Undesignated
Preferred Stock
Immediately prior to the closing of this offering, all
outstanding shares of our preferred stock will be converted into
shares of common stock. Under our amended and restated
certificate of incorporation that will be in effect upon the
closing of this offering our board of directors has the
authority, without action by our stockholders, to designate and
issue up to 10 million shares of preferred stock in one or
more series and to designate the rights, preferences and
privileges of each series, any or all of which may be greater
than the rights of our common stock. It is not possible to state
the actual effect of the issuance of any shares of preferred
stock upon the rights of holders of our common stock until our
board of directors determines the specific rights of the holders
of preferred stock. However, the effects might include, among
other things, restricting dividends on the common stock,
diluting the voting power of the common stock, impairing the
liquidation rights of the common stock and delaying or
preventing a change in control of our common stock without
further action by our stockholders and may adversely affect the
market price of our common stock. We have no present plans to
issue any shares of preferred stock.
109
Registration
Rights
After the closing of this offering, the holders
of shares
or % of our common stock or their
transferees will be entitled to certain rights with respect to
the registration of such shares under the Securities Act. In the
event that 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, these holders will be
entitled to notice of such registration and will be entitled to
include their common stock in such registration, subject to
certain marketing and other limitations. The holders of at least
55% of these securities have the right to require us, on not
more than two occasions, to file a registration statement on
Form S-1
under the Securities Act in order to register the resale of
shares of their common stock. We may, in certain circumstances,
defer such registrations and the underwriters have the right,
subject to certain limitations, to limit the number of shares
included in such registrations. Further, these holders may
require us to register the resale of all or a portion of their
shares on a registration statement on
Form S-3,
subject to certain conditions and limitations. In an
underwritten offering, the managing underwriter, if any, has the
right, subject to specified conditions, to limit the number of
registrable securities such holders may include. Generally, we
are required to bear all registration and related expenses
incurred in connection with the demand and piggyback
registrations described above. If we are required to file a
registration statement, we must use our best efforts to cause
the registration statement to become effective. These rights
will terminate on the earlier of: (i) five years after the
closing of this offering and (ii) with respect to an
individual holder, when such holder is able to sell all of its
shares pursuant to Rule 144 under the Securities Act in any
three month period.
Anti-Takeover
Provisions of Delaware Law
We are subject to Section 203 of the Delaware General
Corporation 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 the person became an interested
stockholder, unless the business 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 other transaction
resulting in a financial benefit to the interested stockholder.
Generally, an interested stockholder is a person who, together
with affiliates and associates, owns or, in the case of
affiliates or associates of the corporation, within three years
prior to the determination of interested stockholder status,
owned 15% or more of a corporations voting stock. The
existence of this provision could have anti-takeover effects
with respect to transactions not approved in advance by our
board of directors, such as discouraging takeover attempts that
might result in a premium over the market price of our common
stock. The foregoing provisions of the Delaware General
Corporation Law may have the effect of deterring or discouraging
hostile takeovers or delaying changes in control of our company.
Charter
and Bylaws Anti-Takeover Provisions
Classified
Board of Directors
Our amended and restated certificate of incorporation that will
be in effect upon the closing of this offering provides that our
board of directors will be divided into three classes of
directors, with the number of directors in each class to be as
nearly equal as possible. Our classified board of directors
staggers terms of the three classes and will be implemented
through one, two and three-year terms for the initial three
classes, followed in each case by full three-year terms. With a
classified board of directors, only one-third of the members of
our board of directors will be elected each year. This
classification of directors will have the effect of making it
more difficult for stockholders to change the composition of our
board of directors.
Size
of Board of Directors and Removal of Directors
Our amended and restated certificate of incorporation and bylaws
that will be in effect upon the closing of this offering provide
that:
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the number of directors will be fixed from time to time
exclusively pursuant to a resolution adopted by our board of
directors, but must consist of not less than three directors,
which will prevent stockholders from circumventing the
provisions of our classified board of directors;
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directors may be removed only for cause; and
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vacancies on our board of directors may be filled only by a
majority of directors then in office, even though less than a
quorum.
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Authorized
Preferred Stock
Our amended and restated certificate of incorporation that will
be in effect upon the closing of this offering provides for the
issuance by our board of directors, without stockholder
approval, of up to 10 million shares of preferred stock,
with voting power, designations, preferences and other special
rights as may be determined in the discretion of our board of
directors. The issuance of preferred stock could decrease the
amount of earnings and assets available for distribution to the
holders of common stock or could adversely affect the rights and
powers, including voting rights, of holders of common stock. In
certain circumstances, such issuance could have the effect of
decreasing the market price of the common stock. Preferred
stockholders could also make it more difficult for a third party
to acquire our company. At the closing of this offering, no
shares of preferred stock will be outstanding and we currently
have no plans to issue any shares of preferred stock.
No
Stockholder Action by Written Consent
Our amended and restated certificate of incorporation and bylaws
require that any action required or permitted to be taken by our
stockholders must be effected at a duly called annual or special
meeting of stockholders and may not be effected by a consent in
writing.
Calling
of Special Meetings of Stockholders
Our amended and restated bylaws provide that special stockholder
meetings for any purpose may only be called by our board of
directors, our chairman or our chief executive officer.
Advance
Notice Requirements for Stockholder Proposals and Director
Nominations
Our amended and restated bylaws establish an advance notice
procedure for stockholder proposals to be brought before an
annual meeting of stockholders, including proposed nominations
of candidates for election to the board of directors.
Stockholders at an annual meeting may only consider proposals or
nominations specified in the notice of meeting or brought before
the meeting by or at the direction of the board of directors, or
by a stockholder of record on the record date for the meeting,
who is entitled to vote at the meeting and who has delivered
timely written notice in proper form to our secretary of the
stockholders intention to bring such business before the
meeting. These provisions could have the effect of delaying
until the next stockholder meeting stockholder actions that are
favored by the holders of a majority of our outstanding voting
stock. These provisions also could discourage a third party from
making a tender offer for our common stock, because even if it
acquired a majority of our outstanding voting stock, it would be
able to take action as a stockholder, such as electing new
directors or approving a merger, only at a duly called
stockholders meeting and not by written consent.
Limitation
on Liability and Indemnification of Directors and
Officers
See ManagementLimitation on Liability and
Indemnification of Directors and Officers.
Transfer
Agent and Registrar
Our transfer agent and registrar for our common stock
is .
Listing
At present, there is no established trading market for our
common stock. We have applied to have our common stock listed on
the NASDAQ Global Market under the symbol CLVS.
111
SHARES ELIGIBLE
FOR FUTURE SALE
Prior to this offering, there was no public market for our
common stock. Sales of substantial amounts of common stock in
the public market, or the perception that such sales could
occur, could materially and adversely affect the market price of
our common stock and could impair our future ability to raise
capital through the sale of our equity or equity-related
securities at a time and price that we deem appropriate. As
described below, only a limited number of shares of our common
stock will be available for sale in the public market for a
period of several months after completion of this offering due
to contractual and legal restrictions on resale described below.
Nevertheless, sales of a substantial number of shares of our
common stock in the public market after such restrictions lapse,
or the perception that those sales may occur, could adversely
affect the prevailing market price of our common stock. Although
we have applied to list our common stock on the NASDAQ Global
Market, we cannot assure you that there will be an active market
for our common stock.
Based upon the number of shares outstanding as of March 31,
2011, upon the closing of this offering, we will have
outstanding an aggregate
of shares
of our common stock, assuming no exercise of the
underwriters over-allotment option and no exercise of
outstanding options, after giving effect to (1) the
conversion of all outstanding shares of our convertible
preferred stock into 21,009,196 shares of common stock
immediately prior to the closing of this offering and
(2) the issuance
of shares
of our common stock immediately prior to the closing of this
offering as a result of the conversion of $35.0 million in
aggregate principal amount of our 5% convertible promissory
notes due 2012 (including accrued and unpaid interest thereon),
assuming an initial public offering price
of
per share, the midpoint of the price range set forth on the
cover page of this prospectus, and assuming the conversion
occurs
on ,
2011 (the expected closing date of this offering). Of these
shares,
the shares
sold in this offering, including any shares sold in this
offering in connection with the exercise by the underwriters of
their over-allotment option, will be freely tradable without
restriction or further registration under the Securities Act,
except that any shares purchased in this offering by our
affiliates, as that term is defined under
Rule 144 of the Securities Act, may be sold only in
compliance with the limitations of Rule 144 described below.
The
remaining shares
of common stock that will be outstanding after this offering,
including the shares owned by our existing equity investors,
will be deemed restricted securities as that term is
defined under Rule 144. Restricted securities may be sold
in the public market only if registered, or if they qualify for
an exemption from registration, under the Securities Act, such
as under Rule 144 or Rule 701 under the Securities
Act, which we summarize below.
We may issue shares of common stock from time to time as
consideration for future acquisitions, investments or other
corporate purposes. In the event that any such acquisition,
investment or other transaction is significant, the number of
shares of common stock that we may issue may in turn be
significant. In addition, we may also grant registration rights
covering those shares of common stock issued in connection with
any such acquisition and investment.
Rule 144
In general, under Rule 144 under the Securities Act, as in
effect on the date of this prospectus, beginning 90 days
after the effective date of the registration statement of which
this prospectus is a part, a person who is not one of our
affiliates at any time during the three months preceding a sale,
and who has beneficially owned shares of our common stock for at
least six months, would be entitled to sell an unlimited number
of shares of our common stock provided current public
information about us is available and, after owning such shares
for at least one year, would be entitled to sell an unlimited
number of shares of our common stock without regard to the
current public information requirements of Rule 144.
Beginning 90 days after the effective date of the
registration statement of which this prospectus is a part, our
affiliates who have beneficially owned shares of our common
stock for at least six months are entitled to sell 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 our common stock then outstanding,
which will equal
approximately shares,
or shares
if the underwriters exercise their over-allotment option in
full, immediately after this offering, based on the number of
shares of our common stock outstanding upon the closing of this
offering; or
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the average weekly trading volume of our common stock on the
NASDAQ Global Market during the four calendar weeks preceding
the filing of a notice on Form 144 with respect to the sale.
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112
Sales under Rule 144 by our affiliates are also subject to
manner of sale provisions and notice requirements and to the
availability of current public information about us.
Rule 144 also provides that affiliates relying on
Rule 144 to sell shares of our common stock that are not
restricted shares must nonetheless comply with the same
restrictions applicable to restricted shares, other than the
holding period requirement.
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 ours 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 ours 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 and until
expiration of the lockup agreements to which they are subject.
As of March 31, 2011, 2,768,350 shares of our
outstanding common stock had been issued in reliance on
Rule 701 as a result of exercises of stock options and
stock awards.
Lock-up
Agreements
In connection with this offering, we, our directors, our
executive officers and all of our other stockholders have
agreed, subject to certain exceptions, with the underwriters not
to dispose of or hedge any shares of our common stock or
securities convertible into or exchangeable for shares of common
stock during the period from the date of the lock-up agreement
continuing through the date 180 days after the date of this
prospectus, except with the prior written consent of
J.P. Morgan Securities LLC and Credit Suisse Securities
(USA) LLC. J.P. Morgan Securities LLC and Credit Suisse
Securities (USA) LLC have advised us that they have no current
intent or arrangement to release any of the shares subject to
the
lock-up
agreements prior to the expiration of the
lock-up
period. The
lock-up
agreements permit stockholders to transfer common stock and
other securities subject to the
lock-up
agreements in certain circumstances.
The
180-day
restricted period described in the preceding paragraph will be
automatically extended if:
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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
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prior to the expiration of the
180-day
restricted period, we announce that we will release earnings
results during the
16-day
period beginning on the last day of the
180-day
period,
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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 date of the issuance of the earnings
release or the announcement of the material news or material
event.
Following the
lock-up
periods set forth in the agreements described above, and
assuming that the representatives of the underwriters do not
release any parties from these agreements and that there is no
extension of the
lock-up
period, all of the shares of our common stock that are
restricted securities or are held by our affiliates as of the
date of this prospectus will be eligible for sale in the public
market in compliance with Rule 144 under the Securities Act.
Equity
Incentive Plans
Upon the closing of this offering, we intend to file one or more
registration statements on
Form S-8
under the Securities Act to register the shares of common stock
issued or reserved for issuance under our equity incentive
plans, including the equity incentive plan we intend to adopt in
connection with this offering. Accordingly, shares registered
under such registration statement will be available for sale in
the open market, unless such shares are subject to vesting
restrictions with us or the
lock-up
restrictions described above.
Registration
Rights
Some of our security holders have the right to require us to
register shares of our common stock for resale in some
circumstances. See Description of Capital
StockRegistration Rights.
113
Initial
Public Offering Price
Prior to this offering, there has been no public market for our
common stock. The initial public offering price will be
negotiated between us and the representatives of the
underwriters. Among the factors to be considered in these
negotiations are:
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the history of, and prospects for, our company and the industry
in which we compete;
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our past and present financial performance;
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an assessment of our management;
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the present state of our development;
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the prospects for our future earnings;
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the prevailing conditions of the applicable U.S. securities
market at the time of this offering;
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market valuations of publicly traded companies that we and the
representatives of the underwriters believe to be comparable to
us; and
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other factors deemed relevant.
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The estimated initial public offering price range set forth on
the cover page of this preliminary prospectus is subject to
change as a result of market conditions and other factors.
114
MATERIAL
U.S. FEDERAL INCOME AND ESTATE TAX CONSIDERATIONS
The following is a general discussion of the material
U.S. federal income and estate tax consequences of the
acquisition, ownership and disposition of our common stock, but
is not a complete analysis of all the potential
U.S. federal income and estate tax consequences relating
thereto. Except where noted, this summary deals only with common
stock that is purchased by a
non-U.S. holder
pursuant to this offering and is held as a capital asset by the
non-U.S. holder.
A
non-U.S. holder
means a person (other than a partnership) that is for
U.S. federal income tax purposes any of the following:
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a nonresident alien individual;
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a corporation (or any other entity treated as a corporation for
U.S. federal income tax purposes) created or organized in
or under the laws of a jurisdiction other than the United
States, any state thereof or the District of Columbia;
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an estate other than one 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 a trust if it (A) is subject to the
primary supervision of a court within the United States and the
control of one or more U.S. persons having the authority to
control all substantial decisions of the trust, or (B) has
a valid election in effect to be treated as a U.S. person.
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If an entity treated as a partnership for U.S. federal
income tax purposes holds common stock, the tax treatment of a
partner will generally depend on the status of the partner and
upon the activities of the partnership. Accordingly,
partnerships that hold common stock and partners in such
partnerships should consult their respective tax advisors with
respect to the U.S. federal income and estate tax
consequences of the ownership and disposition of common stock.
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 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 advisor regarding the
U.S. federal income and estate tax consequences of the
ownership and disposition of common stock.
This discussion does not address all aspects of
U.S. federal income and estate taxation that may be
relevant in light of a
non-U.S. holders
special tax status or special circumstances.
U.S. expatriates, controlled foreign
corporations, passive foreign investment
companies, corporations that accumulate earnings to avoid
U.S. federal income tax and investors that hold common
stock as part of a hedge, straddle or conversion transaction are
among those categories of potential investors that may be
subject to special rules not covered in this discussion. This
discussion does not address any U.S. federal tax
consequences other than income and estate tax consequences or
any tax consequences arising under the laws of any state, local
or
non-U.S. taxing
jurisdiction. Furthermore, the following discussion is based on
current provisions of the Code, Treasury Regulations and
administrative and judicial interpretations thereof, all as in
effect on the date hereof, and all of which are subject to
change, possibly with retroactive effect. Accordingly, each
non-U.S. holder
should consult its tax advisors regarding the U.S. federal,
state, local and
non-U.S. income,
estate and other tax consequences of acquiring, holding and
disposing of shares of our common stock.
THIS SUMMARY IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX
ADVICE. INVESTORS CONSIDERING THE PURCHASE OF SECURITIES
PURSUANT TO THIS OFFERING ARE ENCOURAGED TO CONSULT THEIR OWN
TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL
INCOME AND ESTATE TAX LAWS TO THEIR PARTICULAR SITUATIONS AND
THE APPLICATION OF OTHER FEDERAL TAX LAWS, FOREIGN, STATE AND
LOCAL LAWS, AND TAX TREATIES.
Dividends
Distributions in cash or other property on our common stock will
constitute dividends for U.S. federal income tax purposes
to the extent paid from our current or accumulated earnings and
profits, as determined under U.S. federal income tax
principles. Amounts not treated as dividends for
U.S. federal income tax purposes will constitute a return
of capital and will first be applied against and reduce a
holders adjusted basis in the common
115
stock, but not below zero, and then the excess, if any, will be
treated as gain from the sale of common stock, as described
below.
As discussed above in the section titled Dividend
Policy, we do not intend to pay cash dividends on our
common stock for the foreseeable future. In the event that we do
make distributions on our common stock, amounts paid to a
non-U.S.
holder of common stock that are treated as dividends for
U.S. federal income tax purposes generally will be subject
to U.S. withholding tax at a rate of 30% of the gross
amount of the dividends or such lower rate as may be specified
by an applicable tax treaty. In order to receive a reduced
treaty rate, a
non-U.S. holder
generally must provide a valid Internal Revenue Service, or IRS,
Form W-8BEN
or other successor form certifying qualification for the reduced
rate.
Dividends received by a
non-U.S. holder
that are effectively connected with a U.S. trade or
business conducted by the
non-U.S. holder
(and, if required by an applicable income tax treaty, are
attributable to a U.S. permanent establishment) are exempt
from such withholding tax. In order to obtain this exemption, a
non-U.S. holder
must provide a valid IRS
Form W-8ECI
or other applicable form properly certifying such exemption.
Such effectively connected dividends, although not subject to
withholding tax, will generally be subject to regular
U.S. federal income tax as if the
non-U.S. holder
were a U.S. resident, unless an applicable income tax
treaty provides otherwise. A
non-U.S. corporation
receiving effectively connected dividends may also be subject to
an additional branch profits tax imposed at a rate
of 30% (or a lower treaty rate) on the earnings and profits
attributable to its effectively connected income.
Gain on
Disposition of Common Stock
A
non-U.S. holder
generally will not be subject to U.S. federal income tax on
any gain realized upon the sale or other disposition of common
stock unless:
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the gain is effectively connected with the
non-U.S. holders
conduct of a trade or business in the United States (and, if
required by an applicable income tax treaty, is attributable to
a U.S. permanent establishment); 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 the
non-U.S. holders
holding period, whichever period is shorter (the relevant
period).
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Unless an applicable treaty provides otherwise, gain described
in the first bullet point above generally will be subject to
regular U.S. federal income tax as if the
non-U.S. holder
were a U.S. resident and, in the case of
non-U.S. holders
taxed as corporations, the branch profits tax described above.
Generally, a corporation is a U.S. real property holding
corporation, or USRPHC, if the fair market value of its
U.S. real property interests, as defined in the Code and
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.
We believe that we are not, and currently do not anticipate
becoming, a USRPHC. However, there can be no assurance that our
current analysis is correct or that we will not become a USRPHC
in the future. Even if we are or become a USRPHC, as long as our
common stock is regularly traded on an established
securities market, within the meaning of applicable
Treasury regulations, such common stock will be treated as
U.S. real property interests only if the
non-U.S. holder
actually or constructively held more than 5% of such regularly
traded common stock at some time during the relevant period.
Backup
Withholding and Information Reporting
Information returns will be filed with the IRS in connection
with payments of dividends and the proceeds from a sale or other
disposition of common stock. A
non-U.S. holder
may have to comply with certification procedures to establish
that it is not a U.S. person in order to avoid information
reporting and backup withholding tax requirements. The
certification procedures required to claim a reduced rate of
withholding under a treaty generally will satisfy the
certification requirements necessary to avoid the backup
withholding tax as well. The
116
amount of any backup withholding from a payment to a
non-U.S. holder
will be allowed as a credit against its U.S. federal income
tax liability and may entitle it to a refund, provided that the
required information is timely furnished to the IRS.
U.S.
Federal Estate Tax
Shares of common stock held (or deemed held) by an individual
who is a
non-U.S. holder
at the time of his or her death will be included in such
non-U.S. holders
gross estate for U.S. federal estate tax purposes, unless
an applicable estate tax treaty provides otherwise.
Legislation
Relating to Foreign Accounts
Legislation enacted in 2010 will generally impose a
U.S. federal withholding tax of 30% on dividends and the
gross proceeds of a disposition of our common stock paid after
December 31, 2012 to a foreign financial institution unless
such institution enters into an agreement with the
U.S. government to withhold on certain payments and to
collect and provide to the U.S. tax authorities substantial
information regarding U.S. account holders of such
institution (which includes certain equity and debt holders of
such institution, as well as certain account holders that are
foreign entities with U.S. owners). The recently enacted
legislation will also generally impose a U.S. federal
withholding tax of 30% on dividends and the gross proceeds of a
disposition of our common stock paid after December 31,
2012 to a foreign entity (other than a financial institution)
unless such entity provides the withholding agent with a
certification identifying the direct and indirect
U.S. owners of the entity. Under certain circumstances, a
holder might be eligible for refunds or credits of such taxes.
Investors are encouraged to consult with their own tax advisors
regarding the possible impact of this legislation on their
investment in our common stock.
117
UNDERWRITING
We are offering the shares of common stock described in this
prospectus through a number of underwriters. J.P. Morgan
Securities LLC and Credit Suisse Securities (USA) LLC are acting
as joint book-running managers of the offering and as
representatives of the underwriters. We have entered into an
underwriting agreement with the underwriters. Subject to the
terms and conditions of the underwriting agreement, we have
agreed to sell to the underwriters, and each underwriter has
severally agreed to purchase, at the public offering price less
the underwriting discounts and commissions set forth on the
cover page of this prospectus, the number of shares of common
stock listed next to its name in the following table:
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Number of
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Name
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Shares
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J.P. Morgan Securities LLC
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Credit Suisse Securities (USA) LLC
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Leerink Swann LLC
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Total
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The underwriters are committed to purchase all the common shares
offered by us if they purchase any shares. The underwriting
agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may also be
increased or the offering may be terminated.
The underwriters propose to offer the common shares directly to
the public at the initial public offering price set forth on the
cover page of this prospectus and to certain dealers at that
price less a concession not in excess of
$ per share. Any such dealers may
resell shares to certain other brokers or dealers at a discount
of up to $ per share from the
initial public offering price. After the initial public offering
of the shares, the offering price and other selling terms may be
changed by the underwriters. Sales of shares made outside of the
United States may be made by affiliates of the underwriters. The
representatives have advised us that the underwriters do not
intend to confirm discretionary sales in excess of 5% of the
common shares offered in this offering.
The underwriters have an option to buy up
to
additional shares of common stock from us to cover sales of
shares by the underwriters which exceed the number of shares
specified in the table above. The underwriters have 30 days
from the date of this prospectus to exercise this over-allotment
option. If any shares are purchased with this over-allotment
option, the underwriters will purchase shares in approximately
the same proportion as shown in the table above. If any
additional shares of common stock are purchased, the
underwriters will offer the additional shares on the same terms
as those on which the shares are being offered.
The underwriting fee is equal to the public offering price per
share of common stock less the amount paid by the underwriters
to us per share of common stock. The underwriting fee is
$ per share. The following table
shows the per share and total underwriting discounts and
commissions to be paid to the underwriters assuming both no
exercise and full exercise of the underwriters option to
purchase additional shares.
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Without
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With full
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over-allotment
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over-allotment
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exercise
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exercise
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Per Share
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$
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$
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Total
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$
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$
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We estimate that the total expenses of this offering, including
registration, filing and listing fees, printing fees and legal
and accounting expenses, but excluding the underwriting
discounts and commissions, will be approximately
$ .
A prospectus in electronic format may be made available on the
web sites maintained by one or more underwriters, or selling
group members, if any, participating in the offering. The
underwriters 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 representatives to underwriters and selling
group members that may make Internet distributions on the same
basis as other allocations.
118
We have agreed that we will not: (i) offer, pledge,
announce the intention to sell, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, or
file with the Securities and Exchange Commission a registration
statement under the Securities Act relating to, any shares of
our common stock or securities convertible into or exchangeable
or exercisable for any shares of our common stock, or
(ii) enter into any swap or other agreement that transfers,
in whole or in part, any of the economic consequences of
ownership of any shares of our common stock or such other
securities (regardless of whether any of these transactions are
to be settled by the delivery of shares of common stock, or such
other securities, in cash or otherwise), in each case without
the prior written consent of J.P. Morgan Securities LLC and
Credit Suisse Securities (USA) LLC for a period of 180 days
after the date of this prospectus. Notwithstanding the
foregoing, if (1) during the last 17 days of the
180-day
restricted period, we issue an earnings release or material news
or a material event relating to our company occurs; or
(2) prior to the expiration of the
180-day
restricted period, we announce that we will release earnings
results during the
16-day
period beginning on the last day of the
180-day
period, the restrictions described above shall continue to apply
until the expiration of the
18-day
period beginning on the issuance of the earnings release or the
occurrence of the material news or material event.
Our directors and executive officers, and substantially all of
our other stockholders have entered into
lock-up
agreements with the underwriters prior to the commencement of
this offering pursuant to which we and each of these persons or
entities, with limited exceptions, for a period of 180 days
after the date of this prospectus, may not, without the prior
written consent of J.P. Morgan Securities LLC and Credit
Suisse Securities (USA) LLC, (1) offer, pledge, announce
the intention to sell, sell, contract to sell, sell any option
or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, or
otherwise transfer or 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
(including, without limitation, common stock which may be deemed
to be beneficially owned by such directors, executive officers,
managers and members in accordance with the rules and
regulations of the SEC and securities which may be issued upon
exercise of a stock option or warrant), (2) enter into any
swap or other agreement that transfers, in whole or in part, any
of the economic consequences of ownership of any shares of our
common stock or such other securities, whether any such
transaction described in clause (1) above or this
clause (2) is to be settled by delivery of common stock or
such other securities, in cash or otherwise or (3) make any
demand for or exercise any right with respect to the
registration of any shares of our common stock or any security
convertible into or exercisable or exchangeable for our common
stock. Notwithstanding the foregoing, if (1) during the
last 17 days of the
180-day
restricted period, we issue an earnings release or material news
or a material event relating to our company occurs; or
(2) prior to the expiration of the
180-day
restricted period, we announce that we will release earnings
results during the
16-day
period beginning on the last day of the
180-day
period, the restrictions described above shall continue to apply
until the expiration of the
18-day
period beginning on the issuance of the earnings release or the
occurrence of the material news or material event. Each of the
lock-up
agreements contain certain exceptions, including transfers of
shares as a gift or by will or intestacy; transfers of shares to
any trust, the sole beneficiaries of which are the transferor
and/or
its
immediate family members; or transfers to certain entities or
persons affiliated with the stockholder; provided that in the
case of each of the above (except transfers by will or
intestacy), each donee, distributee, transferee and recipient
agrees to be subject to the restrictions described in this
paragraph, and no transaction includes a disposition for value.
We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act.
We expect to have our common stock approved for listing on the
NASDAQ Global Market under the symbol CLVS.
In connection with this offering, the underwriters may engage in
stabilizing transactions, which involves making bids for,
purchasing and selling shares of common stock in the open market
for the purpose of preventing or retarding a decline in the
market price of the common stock while this offering is in
progress. These stabilizing transactions may include making
short sales of the common stock, which involves the sale by the
underwriters of a greater number of shares of common stock than
they are required to purchase in this offering, and purchasing
shares of common stock on the open market to cover positions
created by short sales. Short sales may be covered
shorts, which are short positions in an amount not greater than
the underwriters over-allotment option referred to above,
or
119
may be naked shorts, which are short positions in
excess of that amount. The underwriters may close out any
covered short position either by exercising their over-allotment
option, in whole or in part, or by purchasing shares in the open
market. In making this determination, the underwriters will
consider, among other things, the price of shares available for
purchase in the open market compared to the price at which the
underwriters may purchase shares through the over-allotment
option. A naked short position is more likely to be created if
the underwriters are concerned that there may be downward
pressure on the price of the common stock in the open market
that could adversely affect investors who purchase in this
offering. To the extent that the underwriters create a naked
short position, they will purchase shares in the open market to
cover the position.
The underwriters have advised us that, pursuant to
Regulation M of the Securities Act, they may also engage in
other activities that stabilize, maintain or otherwise affect
the price of the common stock, including the imposition of
penalty bids. This means that if the representatives of the
underwriters purchase common stock in the open market in
stabilizing transactions or to cover short sales, the
representatives can require the underwriters that sold those
shares as part of this offering to repay the underwriting
discount received by them.
These activities may have the effect of raising or maintaining
the market price of the common stock or preventing or retarding
a decline in the market price of the common stock, and, as a
result, the price of the common stock may be higher than the
price that otherwise might exist in the open market. If the
underwriters commence these activities, they may discontinue
them at any time. The underwriters may carry out these
transactions on the NASDAQ Global Market, in the
over-the-counter
market or otherwise.
Prior to this offering, there has been no public market for our
common stock. The initial public offering price will be
determined by negotiations between us and the representatives of
the underwriters. In determining the initial public offering
price, we and the representatives of the underwriters expect to
consider a number of factors including:
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the information set forth in this prospectus and otherwise
available to the representatives;
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our prospects and the history and prospects for the industry in
which we compete;
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an assessment of our management;
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our prospects for future earnings;
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the general condition of the securities markets at the time of
this offering;
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the recent market prices of, and demand for, publicly traded
common stock of generally comparable companies; and
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other factors deemed relevant by the underwriters and us.
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Neither we nor the underwriters can assure investors that an
active trading market will develop for shares of our common
stock, or that the shares will trade in the public market at or
above the initial public offering price.
Other than in the United States, no action has been taken by us
or the underwriters that would permit a public offering of the
securities offered by this prospectus in any jurisdiction where
action for that purpose is required. The securities offered by
this prospectus may not be offered or sold, directly or
indirectly, nor may this prospectus or any other offering
material or advertisements in connection with the offer and sale
of any such securities be distributed or published in any
jurisdiction, except under circumstances that will result in
compliance with the applicable rules and regulations of that
jurisdiction. Persons into whose possession this prospectus
comes are advised to inform themselves about and to observe any
restrictions relating to the offering and the distribution of
this prospectus. This prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any securities offered
by this prospectus in any jurisdiction in which such an offer or
a solicitation is unlawful.
This document is only being distributed to and is only directed
at: (i) persons who are outside the United Kingdom or
(ii) to investment professionals falling within
Article 19(5) of the Financial Services and Markets Act
2000 (Financial Promotion) Order 2005 (the Order) or
(iii) high net worth entities, and other persons to whom it
may lawfully be communicated, falling with Article 49(2)(a)
to (d) of the Order (all such persons together being
referred to as relevant persons). The securities are
only available to, and any invitation, offer or agreement to
120
subscribe, purchase or otherwise acquire such securities will be
engaged in only with, relevant persons. Any person who is not a
relevant person should not act or rely on this document or any
of its contents.
In relation to each Member State of the European Economic Area
which has implemented the Prospectus Directive, each, a Relevant
Member State, from and including the date on which the European
Union Prospectus Directive, the E.U. Prospectus Directive, is
implemented in that Relevant Member State, the Relevant
Implementation Date, an offer of securities 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 which 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 E.U. Prospectus Directive, except that it may, with effect
from and including the Relevant Implementation Date, make an
offer of shares to the public in that Relevant Member State at
any time:
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to legal entities which are 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 which 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 in the E.U. Prospectus Directive) subject
to obtaining the prior consent of the book-running managers for
any such offer; or
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in any other circumstances which do not require the publication
by the Issuer of a prospectus pursuant to Article 3 of the
Prospectus Directive.
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For the purposes of this provision, the expression an
offer of securities to the public in relation to any
securities 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 for the
securities, as the same may be varied in that Member State by
any measure implementing the E.U. Prospectus Directive in that
Member State and the expression E.U. Prospectus Directive means
Directive 2003/71/EC and includes any relevant implementing
measure in each Relevant Member State.
Certain of the underwriters and their affiliates have provided
in the past to us and our affiliates and may provide from time
to time in the future certain commercial banking, financial
advisory, investment banking and other services for us and such
affiliates in the ordinary course of their business, for which
they have received and may continue to receive customary fees
and commissions. In addition, from time to time, certain of the
underwriters and their affiliates may effect transactions for
their own account or the account of customers, and may hold on
behalf of themselves or their customers, long or short positions
in our debt or equity securities or loans, now and in the future.
121
LEGAL
MATTERS
The validity of our common stock offered by this prospectus will
be passed upon for us by our counsel, Willkie Farr &
Gallagher LLP, New York, New York. Certain legal matters in
connection with this offering will be passed upon for the
underwriters by Latham & Watkins LLP, San Diego,
California.
EXPERTS
Ernst & Young LLP, independent registered public
accounting firm, has audited our financial statements at
December 31, 2010 and 2009, and for the year ended
December 31, 2010 and the period from April 20, 2009
(Inception) to December 31, 2009, as set forth in their
report (which contains an explanatory paragraph describing
conditions that raise substantial doubt about our ability to
continue as a going concern as described in Note 1 to the
financial statements). We have included our financial statements
in the prospectus and elsewhere in the registration statement in
reliance on Ernst & Young LLPs report, given on
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
under the Securities Act relating to the shares of our common
stock being offered by this prospectus. This prospectus, which
constitutes part of that registration statement, does not
contain all of the information set forth in the registration
statement or the exhibits and schedules which are part of the
registration statement. For further information about us and the
common stock offered, see the registration statement and the
exhibits and schedules thereto. Statements contained in this
prospectus regarding the contents of any contract or any other
document to which reference is made are not necessarily
complete, and, in each instance where a copy of a contract or
other document has been filed as an exhibit to the registration
statement, reference is made to the copy so filed, each of those
statements being qualified in all respects by the reference.
A copy of the registration statement, the exhibits and schedules
thereto and any other document we file may be inspected without
charge at the public reference facilities maintained by the SEC
in 100 F Street, N.E., Washington, D.C. 20549 and
copies of all or any part of the registration statement may be
obtained from this office upon the payment of the fees
prescribed by the SEC. The public may obtain information on the
operation of the public reference facilities in
Washington, D.C. by calling the SEC at
1-800-SEC-0330.
Our filings with the SEC are available to the public from the
SECs website at
www.sec.gov
.
Upon the closing of this offering, we will be subject to the
information and periodic reporting requirements of the Exchange
Act applicable to a company with securities registered pursuant
to Section 12 of the Exchange Act. In accordance therewith,
we will file proxy statements and other information with the
SEC. All documents filed with the SEC are available for
inspection and copying at the public reference room and website
of the SEC referred to above. We maintain a website at
www.clovisoncology.com
. You may access our reports, proxy
statements and other information free of charge at this website
as soon as reasonably practicable after such material is
electronically filed with, or furnished to, the SEC. The
information on such website is not incorporated by reference and
is not a part of this prospectus.
122
Report of
Independent Registered Public Accounting Firm
The Board of Directors
Clovis Oncology, Inc.
We have audited the accompanying balance sheets of Clovis
Oncology, Inc. (the Company), a corporation in the development
stage, as of December 31, 2010 and 2009, and the related
statements of operations, convertible preferred stock and
stockholders deficit, and cash flows for the year ended
December 31, 2010 and the period from April 20, 2009
(Inception) to 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. We were not engaged to perform an
audit of the Companys internal control over financial
reporting. Our audits included consideration of internal control
over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of
the Companys internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of the Company as of December 31, 2010 and 2009, and the
consolidated results of its operations and its cash flows for
the year ended December 31, 2010 and the period from
April 20, 2009 (Inception) to December 31, 2009 in
conformity with U.S. generally accepted accounting
principles.
As discussed in Note 1 to the financial statements, the
Companys recurring losses from operations raise
substantial doubt about its ability to continue as a going
concern (managements plans as to these matters are also
described in Note 1). The financial statements as of and
for the year ended December 31, 2010 do not include any
adjustments that might result from the outcome of this
uncertainty.
Denver, Colorado
April 29, 2011, except for Notes 1, 2, 11 and 13, as
to which the date is
June 23, 2011
F-2
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Cummulative
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Period from
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from
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For the Year
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April 20, 2009
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Ended
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(Inception) to
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(Inception) to
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December 31,
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December 31,
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Three Months Ended March 31,
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March 31,
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2010
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2009
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2011
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2010
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2011
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(unaudited)
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(unaudited)
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(unaudited)
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(in thousands, except per share amounts)
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Revenues
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$
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$
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$
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$
|
|
|
|
$
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
22,323
|
|
|
|
1,762
|
|
|
|
7,041
|
|
|
|
3,259
|
|
|
|
31,126
|
|
General and administrative
|
|
|
4,302
|
|
|
|
2,209
|
|
|
|
1,405
|
|
|
|
830
|
|
|
|
7,916
|
|
Acquired in-process research and development
|
|
|
12,000
|
|
|
|
13,085
|
|
|
|
|
|
|
|
|
|
|
|
25,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(38,625
|
)
|
|
|
(17,056
|
)
|
|
|
(8,446
|
)
|
|
|
(4,089
|
)
|
|
|
(64,127
|
)
|
Other income (expense), net
|
|
|
795
|
|
|
|
(43
|
)
|
|
|
118
|
|
|
|
(2
|
)
|
|
|
870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(37,830
|
)
|
|
$
|
(17,099
|
)
|
|
$
|
(8,328
|
)
|
|
$
|
(4,091
|
)
|
|
$
|
(63,257
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share
|
|
$
|
(9.85
|
)
|
|
$
|
(5.30
|
)
|
|
$
|
(2.15
|
)
|
|
$
|
(1.07
|
)
|
|
$
|
(17.45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average common shares outstanding
|
|
|
3,842
|
|
|
|
3,225
|
|
|
|
3,877
|
|
|
|
3,832
|
|
|
|
3,625
|
|
Pro forma basic and diluted net loss per common share (unaudited)
|
|
$
|
(1.52
|
)
|
|
|
|
|
|
$
|
(0.33
|
)
|
|
|
|
|
|
$
|
(3.20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma basic and diluted weighted average common shares
outstanding (unaudited)
|
|
|
24,851
|
|
|
|
|
|
|
|
24,886
|
|
|
|
|
|
|
|
19,784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
December 31,
|
|
|
|
|
|
Equity
|
|
|
|
2010
|
|
|
2009
|
|
|
March 31, 2011
|
|
|
(Deficit)
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
(in thousands, except for share amounts)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
10,508
|
|
|
$
|
57,311
|
|
|
$
|
4,602
|
|
|
|
|
|
Available for sale securities
|
|
|
11,791
|
|
|
|
|
|
|
|
9,324
|
|
|
|
|
|
Prepaid research and development expenses
|
|
|
1,826
|
|
|
|
1,105
|
|
|
|
1,081
|
|
|
|
|
|
Other current assets
|
|
|
1,096
|
|
|
|
66
|
|
|
|
1,459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
25,221
|
|
|
|
58,482
|
|
|
|
16,466
|
|
|
|
|
|
Property and equipment, net
|
|
|
951
|
|
|
|
264
|
|
|
|
1,030
|
|
|
|
|
|
Prepaid research and development expenses
|
|
|
|
|
|
|
810
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
28
|
|
|
|
18
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
26,200
|
|
|
$
|
59,574
|
|
|
$
|
17,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders equity (deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,400
|
|
|
$
|
534
|
|
|
$
|
1,107
|
|
|
|
|
|
Accrued research and development expenses
|
|
|
3,195
|
|
|
|
388
|
|
|
|
3,248
|
|
|
|
|
|
Other accrued expenses
|
|
|
740
|
|
|
|
211
|
|
|
|
571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
5,335
|
|
|
|
1,133
|
|
|
|
4,926
|
|
|
|
|
|
Non-current liabilities
|
|
|
115
|
|
|
|
|
|
|
|
129
|
|
|
|
|
|
Commitments and contingencies (Note 8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible preferred stock, $0.001 par value per share,
36,296,552 shares authorized;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A-1
convertible preferred stock, 5,044,828 shares authorized,
issued and outstanding at December 31, 2010 and 2009 and
March 31, 2011, and no shares at March 31, 2011
(proforma); liquidation preference of $10,090
|
|
|
9,916
|
|
|
|
9,916
|
|
|
|
9,916
|
|
|
$
|
|
|
Series A-2
convertible preferred stock, 5,044,828 shares authorized,
issued and outstanding at December 31, 2010 and 2009 and
March 31, 2011, and no shares at March 31, 2011
(proforma); liquidation preference of $15,135
|
|
|
15,135
|
|
|
|
15,135
|
|
|
|
15,135
|
|
|
|
|
|
Series B convertible preferred stock,
10,919,540 shares authorized, issued and outstanding at
December 31, 2010 and 2009 and March 31, 2011, and no
shares at March 31, 2011 (proforma); liquidation preference
of $50,448
|
|
|
50,448
|
|
|
|
50,448
|
|
|
|
50,448
|
|
|
|
|
|
Stockholders equity (deficit):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value per share,
55,000,000 shares authorized; 3,877,500, 3,832,500, and
3,879,600 issued and outstanding at December 31, 2010 and
2009 and March 31, 2011, respectively, and 24,888,796 at
March 31, 2011 (pro forma)
|
|
|
4
|
|
|
|
4
|
|
|
|
4
|
|
|
|
25
|
|
Additional paid-in capital
|
|
|
134
|
|
|
|
37
|
|
|
|
195
|
|
|
|
75,673
|
|
Accumulated other comprehensive income
|
|
|
42
|
|
|
|
|
|
|
|
35
|
|
|
|
35
|
|
Deficit accumulated during development stage
|
|
|
(54,929
|
)
|
|
|
(17,099
|
)
|
|
|
(63,257
|
)
|
|
|
(63,257
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity (deficit)
|
|
|
(54,749
|
)
|
|
|
(17,058
|
)
|
|
|
(63,023
|
)
|
|
$
|
12,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities, convertible preferred stock and
stockholders equity (deficit)
|
|
$
|
26,200
|
|
|
$
|
59,574
|
|
|
$
|
17,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Accumulated
|
|
|
Total
|
|
|
|
|
|
|
Convertible
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Other
|
|
|
During
|
|
|
Stockholders
|
|
|
|
|
|
|
Preferred Stock
|
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Comprehensive
|
|
|
Development
|
|
|
Equity
|
|
|
Comprehensive
|
|
|
|
Shares
|
|
|
Amount
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Income
|
|
|
Stage
|
|
|
(Deficit)
|
|
|
Loss
|
|
|
|
(in thousands, except for share amounts)
|
|
Balance at April 20, 2009 (inception)
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
Issuance of common stock to founders at $.001 per share
|
|
|
|
|
|
|
|
|
|
|
|
3,500,000
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
Issuance of convertible preferred stock; $2.00, $3.00 and $4.62
per share for
series A-1,
A-2
and B,
respectively, net net of issuance costs of $174
|
|
|
21,009,196
|
|
|
|
75,499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
|
332,500
|
|
|
|
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
33
|
|
|
|
|
|
Share-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,099
|
)
|
|
|
(17,099
|
)
|
|
$
|
(17,099
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
21,009,196
|
|
|
|
75,499
|
|
|
|
|
3,832,500
|
|
|
|
4
|
|
|
|
37
|
|
|
|
|
|
|
|
(17,099
|
)
|
|
|
(17,058
|
)
|
|
$
|
(17,099
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
|
45,000
|
|
|
|
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
29
|
|
|
|
|
|
Share-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68
|
|
|
|
|
|
|
|
|
|
|
|
68
|
|
|
|
|
|
Net unrealized gain on available for sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42
|
|
|
|
|
|
|
|
42
|
|
|
$
|
42
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(37,830
|
)
|
|
|
(37,830
|
)
|
|
|
(37,830
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
|
21,009,196
|
|
|
|
75,499
|
|
|
|
|
3,877,500
|
|
|
|
4
|
|
|
|
134
|
|
|
|
42
|
|
|
|
(54,929
|
)
|
|
|
(54,749
|
)
|
|
$
|
(37,788
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
2,100
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
Share-based compensation expense (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
59
|
|
|
|
|
|
Net unrealized loss on available for sale securities (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
(7
|
)
|
|
$
|
(7
|
)
|
Net loss (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,328
|
)
|
|
|
(8,328
|
)
|
|
|
(8,328
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2011 (unaudited)
|
|
|
21,009,196
|
|
|
$
|
75,499
|
|
|
|
|
3,879,600
|
|
|
$
|
4
|
|
|
$
|
195
|
|
|
$
|
35
|
|
|
$
|
(63,257
|
)
|
|
$
|
(63,023
|
)
|
|
$
|
(8,335
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
|
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
from
|
|
|
|
For the
|
|
|
April 20, 2009
|
|
|
|
|
|
|
|
|
|
April 20, 2009
|
|
|
|
Year Ended
|
|
|
(Inception) to
|
|
|
|
Three Months
|
|
|
(Inception) to
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
Ended March 31,
|
|
|
March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
(in thousands)
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(37,830
|
)
|
|
$
|
(17,099
|
)
|
|
|
$
|
(8,328
|
)
|
|
$
|
(4,091
|
)
|
|
$
|
(63,257
|
)
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
83
|
|
|
|
6
|
|
|
|
|
42
|
|
|
|
12
|
|
|
|
131
|
|
Share-based compensation expense
|
|
|
68
|
|
|
|
4
|
|
|
|
|
59
|
|
|
|
4
|
|
|
|
131
|
|
Amortization of premiums and discounts on available for sale
securities
|
|
|
320
|
|
|
|
|
|
|
|
|
61
|
|
|
|
11
|
|
|
|
381
|
|
Gain on sale of available for sale securities
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid and accrued research and development expenses
|
|
|
2,896
|
|
|
|
(1,527
|
)
|
|
|
|
797
|
|
|
|
(386
|
)
|
|
|
2,166
|
|
Other operating assets
|
|
|
(1,040
|
)
|
|
|
(84
|
)
|
|
|
|
(371
|
)
|
|
|
(324
|
)
|
|
|
(1,495
|
)
|
Accounts payable
|
|
|
866
|
|
|
|
534
|
|
|
|
|
(294
|
)
|
|
|
(238
|
)
|
|
|
1,106
|
|
Other accrued expenses
|
|
|
644
|
|
|
|
211
|
|
|
|
|
(154
|
)
|
|
|
101
|
|
|
|
701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(34,011
|
)
|
|
|
(17,955
|
)
|
|
|
|
(8,188
|
)
|
|
|
(4,911
|
)
|
|
|
(60,154
|
)
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(770
|
)
|
|
|
(270
|
)
|
|
|
|
(120
|
)
|
|
|
(74
|
)
|
|
|
(1,160
|
)
|
Purchases of available for sale securities
|
|
|
(27,008
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(20,232
|
)
|
|
|
(27,008
|
)
|
Maturities and sales of available for sale securities
|
|
|
14,957
|
|
|
|
|
|
|
|
|
2,400
|
|
|
|
|
|
|
|
17,357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities
|
|
|
(12,821
|
)
|
|
|
(270
|
)
|
|
|
|
2,280
|
|
|
|
(20,306
|
)
|
|
|
(10,811
|
)
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of convertible preferred and common stock,
net of issuance costs
|
|
|
|
|
|
|
75,503
|
|
|
|
|
|
|
|
|
|
|
|
|
75,503
|
|
Proceeds from stock option exercises
|
|
|
29
|
|
|
|
33
|
|
|
|
|
2
|
|
|
|
|
|
|
|
64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities
|
|
|
29
|
|
|
|
75,536
|
|
|
|
|
2
|
|
|
|
|
|
|
|
75,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease) increase in cash and cash equivalents
|
|
|
(46,803
|
)
|
|
|
57,311
|
|
|
|
|
(5,906
|
)
|
|
|
(25,217
|
)
|
|
|
4,602
|
|
Cash and cash equivalents at beginning of period
|
|
|
57,311
|
|
|
|
|
|
|
|
|
10,508
|
|
|
|
57,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
10,508
|
|
|
$
|
57,311
|
|
|
|
$
|
4,602
|
|
|
$
|
32,094
|
|
|
$
|
4,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-6
(INFORMATION
AS OF MARCH 31, 2011, FOR THE THREE MONTHS ENDED MARCH 31, 2011
AND 2010 AND THE PERIOD FROM APRIL 20, 2009 TO MARCH 31, 2011 IS
UNAUDITED)
Clovis Oncology, Inc. (the Company), a corporation
in the development stage, was incorporated in Delaware on
April 20, 2009, and commenced operations in May 2009. The
Company is a biopharmaceutical company focused on acquiring,
developing and commercializing innovative anti-cancer agents in
the United States, Europe and other international markets. The
Company has and intends to continue to license or acquire rights
to oncology compounds in all stages of clinical development. In
exchange for the right to develop and commercialize these
compounds, the Company generally expects to provide the licensor
with a combination of up-front payments, milestone payments and
royalties on future sales. In addition, the Company generally
expects to assume the responsibility for future drug development
and commercialization costs. The Company currently operates in
one segment. Since inception, the Companys operations have
consisted primarily of developing two in-licensed compounds and
their companion diagnostics, evaluating new product acquisition
candidates, raising capital and corporate organization
activities. The Company has never earned revenue from these
activities, and accordingly, the Company is considered to be in
the development stage as of March 31, 2011.
Liquidity
The Company has incurred significant net losses since inception
and has relied on its ability to fund its operations through
private equity financings, and management expects operating
losses and negative cash flows to continue for at least the next
several years. As the Company continues to incur losses,
transition to profitability is dependent upon the successful
development, approval, and commercialization of its product
candidates and achieving a level of revenues adequate to support
the Companys cost structure. The Company may never achieve
profitability, and unless and until it does, the Company will
continue to need to raise additional cash. Management intends to
fund future operations through additional private or public debt
or equity offerings, and may seek additional capital through
arrangements with strategic partners or from other sources.
Based on the Companys operating plan, existing working
capital at December 31, 2010 was not sufficient to meet the
cash requirements to fund planned operations through
December 31, 2011 without additional sources of cash. These
conditions raise substantial doubt about the Companys
ability to continue as a going concern. The accompanying
financial statements have been prepared assuming that the
Company will continue as a going concern and do not include
adjustments that might result from the outcome of this
uncertainty. This basis of accounting contemplates the recovery
of the Companys assets and the satisfaction of liabilities
in the normal course of business.
|
|
2.
|
Summary
of Significant Accounting Policies
|
Unaudited
Interim Financial Data
The accompanying unaudited March 31, 2011 balance sheet,
the statements of operations and cash flows for the three months
ended March 31, 2011 and 2010, and the statements of
convertible preferred stock and stockholders deficit for
the three months ended March 31, 2011 and the related
interim information contained within the notes to the financial
statements have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission
(SEC) for interim financial information.
Accordingly, they do not include all of the information and the
notes required by U.S. generally accepted accounting
principles for complete financial statements. In the opinion of
management, the unaudited interim financial statements reflect
all adjustments, consisting of normal and recurring adjustments,
necessary for the fair presentation of the Companys
financial position at March 31, 2011 and results of its
operations and its cash flows for the three months ended
March 31, 2011 and 2010 and the period from April 20,
2009 (inception) to March 31, 2011. The results for the
three months ended March 31, 2011 are not necessarily
indicative of future results.
F-7
CLOVIS
ONCOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION
AS OF MARCH 31, 2011, FOR THE THREE MONTHS ENDED MARCH 31, 2011
AND 2010 AND THE PERIOD FROM APRIL 20, 2009 TO MARCH 31, 2011 IS
UNAUDITED)
|
|
2.
|
Summary
of Significant Accounting Policies (Continued)
|
Unaudited
Pro Forma Equity and Pro Forma Loss per Common Share
In June 2011, the Companys Board of Directors (the
Board) authorized management of the Company to file
a registration statement with the SEC permitting the Company to
sell shares of its common stock to the public. The unaudited pro
forma equity (deficit) as of March 31, 2011 reflects the
conversion of all
Series A-1,
Series A-2
and Series B convertible preferred stock outstanding as of
that date into 21,009,196 shares of common stock, which
will occur upon the consent of the holders of 55% of the
Companys convertible preferred stock immediately prior to
the closing of the Companys proposed initial public
offering.
Unaudited pro forma net loss per share is computed using the
weighted-average number of common shares outstanding after
giving effect to the pro forma conversion of all convertible
preferred stock outstanding during the year ended
December 31, 2010, the three months ended March 31,
2011 and the cumulative period from April 20, 2009
(inception) to March 31, 2011 into 21,009,196, 21,009,196,
and 16,158,275 shares, respectively, of the Companys
common stock as if such conversion had occurred at the beginning
of the period presented, or the date of original issuance, if
later.
Basis of
Presentation
The information reported within the Companys financial
statements from April 20, 2009 to December 31, 2010
was based solely on the accounts of Clovis Oncology, Inc.
Effective January 1, 2011, Clovis Oncology UK Limited, a
wholly owned subsidiary of the Company, commenced operations.
All financial information presented after December 31, 2010
was consolidated and includes the accounts of the Company and
its wholly owned subsidiary. All significant intercompany
balances and transactions have been eliminated in consolidation.
The financial statements are prepared in conformity with
U.S. generally accepted accounting principles
(GAAP). Subsequent events have been evaluated
through April 29, 2011, the issuance date of the financial
statements, and through the reissuance of the financial
statements on the filing date of the Companys registration
statement with the SEC. See note 13 for additional
discussion related to subsequent events.
The Companys convertible preferred stock has been
reclassified outside of stockholders equity (deficit) to
conform to SEC reporting requirements.
Use of
Estimates
The preparation of financial statements in conformity with
U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, expenses, other
comprehensive income and related disclosures. On an ongoing
basis, management evaluates its estimates, including estimates
related to clinical trial accruals and stock-based compensation
expense. The Company bases its estimates on historical
experience and other market-specific or other relevant
assumptions that it believes to be reasonable under the
circumstances. Actual results may differ from those estimates or
assumptions.
Fair
Value of Financial Instruments
Cash, cash equivalents and available for sale securities are
carried at fair value (see Note 4). Financial instruments,
including accounts payable and accrued liabilities, are carried
at cost, which approximates fair value given their short-term
nature.
F-8
CLOVIS
ONCOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION
AS OF MARCH 31, 2011, FOR THE THREE MONTHS ENDED MARCH 31, 2011
AND 2010 AND THE PERIOD FROM APRIL 20, 2009 TO MARCH 31, 2011 IS
UNAUDITED)
|
|
2.
|
Summary
of Significant Accounting Policies (Continued)
|
Cash,
Cash Equivalents and Available for Sale Securities
The Company considers all highly liquid investments with
original maturities at the date of purchase of three months or
less to be cash equivalents. Cash and cash equivalents include
bank demand deposits, marketable securities with maturities of
three months or less at purchase, and money market funds that
invest primarily in certificate of deposits, commercial paper
and U.S. government and U.S. government agency
obligations. Cash equivalents are reported at fair value.
Marketable securities with original maturities greater than
three months are considered to be available for sale securities
and consist of U.S. agency obligations,
U.S. government obligations and corporate debt obligations.
Available for sale securities are reported at fair market value
and unrealized gains and losses are included as a separate
component of stockholders equity (deficit). Realized
gains, realized losses, the amortization of premiums and
discounts, interest earned and dividends earned are included in
other income (expense). The cost of investments for purposes of
computing realized and unrealized gains and losses is based on
the specific identification method. Investments with maturities
beyond one year are classified as short-term based on
managements intent to fund current operations with these
securities or to make them available for current operations. A
decline in the market value of a security below its cost value
that is deemed to be other than temporary is charged to
earnings, and results in the establishment of a new cost basis
for the security.
Property
and Equipment
Property and equipment are stated at cost, less accumulated
depreciation. Property and equipment are depreciated using the
straight-line method over the estimated useful lives of the
assets. Leasehold improvements are amortized over the economic
life of the asset or the lease term, whichever is shorter.
Maintenance and repairs are expensed as incurred. The following
estimated useful lives were used to depreciate the
Companys assets:
|
|
|
|
|
|
|
Estimated
|
|
|
Useful Life
|
|
Computer hardware and software
|
|
|
3 years
|
|
Leasehold improvements
|
|
|
6 years
|
|
Laboratory and office equipment
|
|
|
7 years
|
|
Furniture and fixtures
|
|
|
10 years
|
|
Long-Lived
Assets
The Company reviews long-lived assets when events or changes in
circumstances indicate the carrying value of the assets may not
be recoverable. Recoverability is measured by comparison of the
assets book value to future net undiscounted cash flows
that the assets are expected to generate. If such assets are
considered to be impaired, the impairment to be recognized is
measured by the amount by which the book value of the assets
exceed their fair value, which is measured based on the
projected discounted future net cash flows arising from the
assets. No impairment losses have been recorded through
December 31, 2010.
Research
and Development Expense
Research and development costs are charged to expense as
incurred and include, but are not limited to, salary and
benefits, clinical trial activities, drug development and
manufacturing, and third-party service fees, including to
clinical research organizations and investigative sites. Costs
for certain development activities, such as clinical
F-9
CLOVIS
ONCOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION
AS OF MARCH 31, 2011, FOR THE THREE MONTHS ENDED MARCH 31, 2011
AND 2010 AND THE PERIOD FROM APRIL 20, 2009 TO MARCH 31, 2011 IS
UNAUDITED)
|
|
2.
|
Summary
of Significant Accounting Policies (Continued)
|
trials, are recognized based on an evaluation of the progress to
completion of specific tasks using data such as patient
enrollment, clinical site activations, or information provided
to us by our vendors on their actual costs incurred. Payments
for these activities are based on the terms of the individual
arrangements, which may differ from the pattern of costs
incurred, and are reflected in the financial statements as
prepaid or accrued research and development.
Acquired
In-Process Research and Development Expense
The Company has acquired and expects to continue to acquire the
rights to develop and commercialize new drug candidates. The
up-front payments to acquire a new drug compound, as well as
future milestone payments, are immediately expensed as acquired
in-process research and development provided that the drug has
not achieved regulatory approval for marketing and, absent
obtaining such approval, has no alternative future use.
Share-Based
Compensation Expense
Share-based compensation is recognized as expense for all
share-based awards made to employees and directors and is based
on estimated fair values. The Company determines equity-based
compensation at the grant date using the Black-Scholes option
pricing model. The value of the award that is ultimately
expected to vest is recognized as expense on a straight-line
basis over the requisite service period. Any changes to the
estimated forfeiture rates are accounted for prospectively.
Concentration
of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk are primarily cash, cash
equivalents and available for sale securities. The Company
maintains its cash and cash equivalent balances in the form of
money market accounts with financial institutions that
management believes are creditworthy. Available for sale
securities are invested in accordance with the Companys
investment policy. The investment policy includes guidelines on
the quality of the institutions and financial instruments and
defines allowable investments that the Company believes
minimizes the exposure to concentration of credit risk. The
Company has no financial instruments with off-balance-sheet risk
of accounting loss.
Foreign
Currency
Transactions denominated in currencies other than the functional
currency are recorded based on exchange rates at the time such
transactions arise. Transaction gains and losses are recorded in
other income (expense), net in the Consolidated Statements of
Operations. As of March 31, 2011 and December 31,
2010, approximately 29% and 23% of the Companys total
liabilities were denominated in currencies other than the
functional currency.
Income
Taxes
The Company accounts for income taxes under the asset and
liability method. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases
using enacted tax rates in effect for the year in which the
differences are expected to affect taxable income. Tax benefits
are recognized when it is more likely than not that a tax
position will be sustained during an audit. Deferred tax assets
are reduced by a valuation allowance if current evidence
indicates that it is considered more likely than not that these
benefits will not be realized.
F-10
CLOVIS
ONCOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION
AS OF MARCH 31, 2011, FOR THE THREE MONTHS ENDED MARCH 31, 2011
AND 2010 AND THE PERIOD FROM APRIL 20, 2009 TO MARCH 31, 2011 IS
UNAUDITED)
|
|
2.
|
Summary
of Significant Accounting Policies (Continued)
|
Recently
Adopted and Issued Accounting Standards
The Company has not recently adopted any new accounting
standards. There are no recently issued accounting standards
that are expected to have a material impact to the Company.
|
|
3.
|
Property
and Equipment
|
Property and equipment consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Furniture and fixtures
|
|
$
|
424
|
|
|
$
|
419
|
|
|
$
|
170
|
|
Laboratory equipment
|
|
|
392
|
|
|
|
287
|
|
|
|
|
|
Leasehold improvements
|
|
|
140
|
|
|
|
139
|
|
|
|
49
|
|
Computer equipment and software
|
|
|
122
|
|
|
|
116
|
|
|
|
45
|
|
Office equipment
|
|
|
83
|
|
|
|
79
|
|
|
|
6
|
|
Total property and equipment
|
|
|
1,161
|
|
|
|
1,040
|
|
|
|
270
|
|
Less: accumulated depreciation
|
|
|
(131
|
)
|
|
|
(89
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
1,030
|
|
|
$
|
951
|
|
|
$
|
264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense related to property and equipment was
$83,000, $6,000, $42,000, $12,000 and $131,000 for the year
ended December 31, 2010, the period from April 20,
2009 (inception) to December 31, 2009, the three months
ended March 31, 2011 and 2010 and the period from
April 20, 2009 (inception) to March 31, 2011,
respectively.
|
|
4.
|
Fair
Value Measurements
|
Fair value is defined as the exchange price that would be
received to sell an asset or paid to transfer a liability (at
exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market
participants on the measurement date. The three levels of inputs
that may be used to measure fair value include:
|
|
|
|
Level 1:
|
Quoted prices in active markets for identical assets or
liabilities. The Companys Level 1 assets and
liabilities consist of money market investments.
|
|
|
Level 2:
|
Observable inputs other than Level 1 prices, such as quoted
prices for similar assets or liabilities in active markets or
other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the
assets or liabilities. The Companys Level 2 assets
and liabilities include U.S. government obligations,
U.S. government agency obligations and corporate debt
securities.
|
|
|
Level 3:
|
Unobservable inputs that are supported by little or no market
activity.
|
F-11
CLOVIS
ONCOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION
AS OF MARCH 31, 2011, FOR THE THREE MONTHS ENDED MARCH 31, 2011
AND 2010 AND THE PERIOD FROM APRIL 20, 2009 TO MARCH 31, 2011 IS
UNAUDITED)
|
|
4.
|
Fair
Value Measurements (Continued)
|
The following table indentifies the Companys assets that
were measured at fair value on a recurring basis (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Balance
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
March 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market
|
|
$
|
639
|
|
|
$
|
639
|
|
|
$
|
|
|
|
$
|
|
|
U.S. agency obligations
|
|
|
4,083
|
|
|
|
|
|
|
|
4,083
|
|
|
|
|
|
Corporate debt securities
|
|
|
1,220
|
|
|
|
|
|
|
|
1,220
|
|
|
|
|
|
U.S. government obligations
|
|
|
4,021
|
|
|
|
|
|
|
|
4,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value
|
|
$
|
9,963
|
|
|
$
|
639
|
|
|
$
|
9,324
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market
|
|
$
|
7,010
|
|
|
$
|
7,010
|
|
|
$
|
|
|
|
$
|
|
|
U.S. agency obligations
|
|
|
4,109
|
|
|
|
|
|
|
|
4,109
|
|
|
|
|
|
Corporate debt securities
|
|
|
3,656
|
|
|
|
|
|
|
|
3,656
|
|
|
|
|
|
U.S. government obligations
|
|
|
4,026
|
|
|
|
|
|
|
|
4,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value
|
|
$
|
18,801
|
|
|
$
|
7,010
|
|
|
$
|
11,791
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market
|
|
$
|
57,000
|
|
|
$
|
57,000
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value
|
|
$
|
57,000
|
|
|
$
|
57,000
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.
|
Available
for Sale Securities
|
The Companys available for sale securities at cost or
amortized cost value and fair market value by contractual
maturity were (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Cost or
|
|
|
|
|
|
|
Amortized
|
|
|
Fair Market
|
|
|
|
Cost Value
|
|
|
Value
|
|
|
March 31, 2011
|
|
|
|
|
|
|
|
|
Due in one year or less
|
|
$
|
7,291
|
|
|
$
|
7,311
|
|
Due after one year through two years
|
|
|
1,998
|
|
|
|
2,013
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
9,289
|
|
|
$
|
9,324
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
|
|
|
|
|
Due in one year or less
|
|
$
|
7,663
|
|
|
$
|
7,675
|
|
Due after one year through two years
|
|
|
4,087
|
|
|
|
4,116
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
11,750
|
|
|
$
|
11,791
|
|
|
|
|
|
|
|
|
|
|
F-12
CLOVIS
ONCOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION
AS OF MARCH 31, 2011, FOR THE THREE MONTHS ENDED MARCH 31, 2011
AND 2010 AND THE PERIOD FROM APRIL 20, 2009 TO MARCH 31, 2011 IS
UNAUDITED)
|
|
5.
|
Available
for Sale Securities (Continued)
|
The types of securities included in the Companys available
for sale investments were (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost or
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair Market
|
|
|
|
Cost Value
|
|
|
Gains
|
|
|
(Losses)
|
|
|
Value
|
|
|
March 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agencies
|
|
$
|
4,070
|
|
|
$
|
13
|
|
|
$
|
|
|
|
$
|
4,083
|
|
U.S. government obligations
|
|
|
4,001
|
|
|
|
20
|
|
|
|
|
|
|
|
4,021
|
|
Corporate debt securities
|
|
|
1,218
|
|
|
|
2
|
|
|
|
|
|
|
|
1,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
9,289
|
|
|
$
|
35
|
|
|
$
|
|
|
|
$
|
9,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agencies
|
|
$
|
4,095
|
|
|
$
|
14
|
|
|
$
|
|
|
|
$
|
4,109
|
|
U.S. government obligations
|
|
|
4,002
|
|
|
|
24
|
|
|
|
|
|
|
|
4,026
|
|
Corporate debt securities
|
|
|
3,653
|
|
|
|
4
|
|
|
|
(1
|
)
|
|
|
3,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
11,750
|
|
|
$
|
42
|
|
|
$
|
(1
|
)
|
|
$
|
11,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No securities have been in a continuous unrealized loss position
for more than 12 months at December 31, 2010 and
March 31, 2011.
|
|
6.
|
Convertible
Preferred Stock and Stockholders Deficit
|
Common
Stock
In May 2009, the Company issued 3,500,000 shares of its
common stock to the original founders at a purchase price of
$0.001 per share. The shares were issued under restricted stock
purchase agreements, which allow the Company, at its discretion,
to repurchase unvested shares if the founders terminate their
employment with the Company. In addition, if the founders
employment is terminated by the Company without
cause within six months following a change in
control, 100% of the unvested shares of the restricted stock
will immediately vest upon termination. Upon execution of the
restricted stock purchase agreements, 25% of the shares vested
immediately and the remaining shares vest ratably on a monthly
basis over a four-year term. As of March 31, 2011,
December 31, 2010 and 2009, 1,421,874, 1,585,938 and
2,242,188 shares remained unvested, respectively.
The holders of common stock are entitled to one vote per share
on all matters to be voted upon by the stockholders of the
Company. Subject to the preferences that may be applicable to
any outstanding shares of preferred stock, the holders of common
stock are entitled to receive ratably such dividends, if any, as
may be declared by the Companys Board of Directors.
Preferred
Stock
In May 2009, the Company entered into the
Series A-1,
A-2,
B and C
Preferred Stock Purchase Agreement with various investors (the
Preferred Stock Purchase Agreement). The Preferred
Stock Purchase Agreement provides for the issuance of up to
$146.3 million of the Companys convertible preferred
stock, subject to various terms and conditions. During 2009, the
Company issued shares of
Series A-1,
Series A-2
and Series B convertible preferred stock. The total number
of shares of
Series A-1,
A-2
and B
convertible preferred stock was 5,044,828, 5,044,828 and
10,919,540, respectively, each with a par value of $0.001 and an
issuance price per share of $2.00, $3.00 and $4.62,
respectively. The total cash proceeds received from the three
convertible preferred stock issuances was $75.5 million,
net of $174,000 of costs related to stock issuance.
F-13
CLOVIS
ONCOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION
AS OF MARCH 31, 2011, FOR THE THREE MONTHS ENDED MARCH 31, 2011
AND 2010 AND THE PERIOD FROM APRIL 20, 2009 TO MARCH 31, 2011 IS
UNAUDITED)
|
|
6.
|
Convertible
Preferred Stock and Stockholders Deficit
(Continued)
|
The Preferred Stock Purchase Agreement provides for the
potential issuance of Series C convertible preferred
shares. Upon the approval of the Companys Board of
Directors and of holders of 55% of the outstanding shares of the
Companys convertible preferred stock, the Company will
sell to the existing preferred stock investors 15.3 million
shares of Series C convertible preferred stock at a price
of $4.62 per share. However, the Company has a right to solicit
a financing proposal from any arms length investors to purchase
an equal or greater amount of Series C convertible
preferred shares. If such a proposal is received by the Company,
and a majority of the disinterested members of the
Companys Board of Directors deems the proposal to be
superior to the terms of the Series C convertible preferred
stock set forth in the Preferred Stock Purchase Agreement (a
Superior Financing Proposal), then the Company may
enter into a transaction contemplated by the Superior Financing
Proposal.
The holders of the
Series A-1,
A-2
and B
convertible preferred stock have the following rights and
preferences:
Voting
Rights
The holders of the
Series A-1,
A-2
and B
convertible preferred stock are entitled to vote, together with
the holders of the common stock, on all matters submitted to
stockholders for a vote. Each holder of convertible preferred
stock is entitled to the number of votes equal to the number of
shares of common stock into which the shares of preferred stock
is convertible.
Dividends
The holders of
Series A-1,
A-2
and B
convertible preferred stock are entitled to receive
noncumulative dividends in preference to any dividend on common
stock at the annual rate per share of $0.16, $0.24 and $0.37,
respectively, when and as declared by the Companys Board
of Directors. The holders of the
Series A-1,
A-2
and B
convertible preferred stock are also entitled to participate pro
rata in any dividends paid on the common stock on an as if
converted to common stock basis. No dividends have been declared
by the Company since inception.
Liquidation
In the event of any liquidation or winding up of the Company (a
liquidation event), the holders of the
Series A-1,
A-2
and B
convertible preferred stock are entitled to receive, in
preference to the holders of the common stock, a per share
amount equal to the issuance price for each series owned plus
any accrued but unpaid declared dividends (the liquidation
preference). After the payment of the liquidation
preference to the holders of the convertible preferred stock,
the remaining assets of the Company, if any, will be distributed
ratably to the holders of the common stock and the convertible
preferred stock on an as if converted to common stock basis
until such time as the holders of the
Series A-1,
A-2
and B
convertible preferred stock have received a total liquidation
amount (including the liquidation preference) per share of
$4.00, $6.00 and $9.24, respectively (as adjusted for stock
splits, dividends and the like). Any remaining assets of the
Company above the defined liquidation ceiling for the holders of
convertible preferred stock will be distributed ratably to the
holders of the common stock.
If the liquidation value is greater for the holders of
Series A-1,
A-2
and B
convertible preferred stock, assuming that the preferred stock
is converted to common stock immediately prior to the
liquidation event, the liquidation distribution for the holders
of convertible preferred stock will be based on the as if
converted to common stock ownership and not the liquidation
preferences described in the previous paragraph.
F-14
CLOVIS
ONCOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION
AS OF MARCH 31, 2011, FOR THE THREE MONTHS ENDED MARCH 31, 2011
AND 2010 AND THE PERIOD FROM APRIL 20, 2009 TO MARCH 31, 2011 IS
UNAUDITED)
|
|
6.
|
Convertible
Preferred Stock and Stockholders Deficit
(Continued)
|
Each of the following events will be deemed a liquidation event:
(i) a merger, acquisition or sale of voting control in
which the stockholders of the Company do not own a majority of
the outstanding shares of the surviving corporation, (ii) a
sale of all or substantially all of the assets of the Company,
or (iii) a voluntary or involuntary liquidation or
dissolution of the Company.
Conversion
The holders of the
Series A-1,
A-2
and B
convertible preferred stock have the right to convert the
convertible preferred stock, at any time, into shares of common
stock. The initial conversion rate is 1:1 but, subject to
certain exceptions, is subject to adjustment in the event that
the Company issues additional equity securities at a purchase
price less than the then applicable conversion price for the
convertible preferred stock. The conversion rate will also be
subject to proportional adjustment for stock splits.
The
Series A-1,
A-2
and B
convertible preferred stock will be automatically converted into
common stock, at the then applicable conversion rate:
(i) upon the election of the holders of at least 55% of the
outstanding convertible preferred stock, or (ii) upon the
closing of a public offering of shares of common stock of the
Company at a per share price not less than two times the
original issue price of the last series of convertible preferred
stock issued and outstanding (as adjusted for stock splits,
dividends and the like) and for total offering proceeds greater
than $50 million.
|
|
7.
|
Share-Based
Compensation
|
The Companys 2009 Equity Incentive Plan (the
Plan), provides for the granting of stock options
and other stock-based awards, including restricted stock, stock
appreciation rights and restricted stock units to its employees,
directors and consultants. Common shares authorized for issuance
under the Plan were 4,375,000 and 3,000,000 at March 31,
2011 and December 31, 2010, respectively. Options to
purchase common stock under the Plan may be designated as
incentive stock options or non-statutory stock options. Stock
options granted to date vest over a three-year period for Board
of Director grants and over a four-year period for employee
grants and expire 10 years from the date of grant.
The following table summarizes the activity relating to the
Companys options to purchase common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Option Shares
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Outstanding
|
|
|
Price
|
|
|
Term (Years)
|
|
|
Value
|
|
|
Balance at April 20, 2009 (inception)
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
902,500
|
|
|
|
0.10
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(332,500
|
)
|
|
|
0.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
570,000
|
|
|
|
0.10
|
|
|
|
9.69
|
|
|
|
|
|
Granted
|
|
|
699,500
|
|
|
|
1.06
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(45,000
|
)
|
|
|
0.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
|
1,224,500
|
|
|
$
|
0.63
|
|
|
|
9.14
|
|
|
$
|
613,715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at December 31, 2010
|
|
|
1,063,590
|
|
|
$
|
0.60
|
|
|
|
9.12
|
|
|
$
|
563,671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested at December 31, 2010
|
|
|
306,667
|
|
|
$
|
0.26
|
|
|
|
8.85
|
|
|
$
|
265,467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-15
CLOVIS
ONCOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION
AS OF MARCH 31, 2011, FOR THE THREE MONTHS ENDED MARCH 31, 2011
AND 2010 AND THE PERIOD FROM APRIL 20, 2009 TO MARCH 31, 2011 IS
UNAUDITED)
|
|
7.
|
Share-Based
Compensation (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Option Shares
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Outstanding
|
|
|
Price
|
|
|
Term (Years)
|
|
|
Value
|
|
|
Balance at December 31, 2010
|
|
|
1,224,500
|
|
|
$
|
0.63
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,549,900
|
|
|
|
1.13
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(2,100
|
)
|
|
|
1.13
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(25,521
|
)
|
|
|
1.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2011
|
|
|
2,746,779
|
|
|
$
|
0.91
|
|
|
|
9.48
|
|
|
$
|
611,929
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at March 31, 2011
|
|
|
2,258,236
|
|
|
$
|
0.88
|
|
|
|
9.44
|
|
|
$
|
567,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested at March 31, 2011
|
|
|
327,626
|
|
|
$
|
0.30
|
|
|
|
8.62
|
|
|
$
|
272,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Year Ended December 31,
|
|
|
March 31, 2011
|
|
2010
|
|
2009
|
|
Weighted-average fair value of options granted per share
|
|
$
|
0.75
|
|
|
$
|
0.72
|
|
|
$
|
0.07
|
|
Intrinsic value of options exercised
|
|
$
|
|
|
|
$
|
19,200
|
|
|
$
|
|
|
Cash received from stock option exercises
|
|
$
|
2,373
|
|
|
$
|
28,500
|
|
|
$
|
33,250
|
|
The Plan allows for the option holder to exercise stock option
shares prior to the vesting of the option. The shares acquired
from an early exercise are subject to repurchase if the option
holder terminates employment or service with the Company. The
number of unvested common shares at the point of termination
will be repurchased by the Company at the stated exercise price
of the option. The number of common shares exercised prior to
vesting was 251,526 and 250,728 at March 31, 2011 and
December 31, 2010, respectively. The number of early
exercised shares expected to vest using estimated forfeiture
rates over the remaining service period of the option term was
211,453 and 208,233 at March 31, 2011 and December 31,
2010, respectively.
The fair value of each stock-based award is estimated on the
grant date using the Black-Scholes option pricing model using
the weighted-average assumptions provided in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Year Ended December 31,
|
|
|
March 31, 2011
|
|
2010
|
|
2009
|
|
Risk-free interest rate(a)
|
|
|
2.48
|
%
|
|
|
2.10
|
%
|
|
|
2.33
|
%
|
Dividend yield
|
|
|
|
|
|
|
|
|
|
|
|
|
Volatility(b)
|
|
|
74
|
%
|
|
|
80
|
%
|
|
|
80
|
%
|
Expected term (years)(c)
|
|
|
6.0
|
|
|
|
5.61
|
|
|
|
5.30
|
|
|
|
|
(a)
|
|
Risk-free interest rate:
The rate is based on the yield
on the grant date of a zero-coupon U.S. Treasury bond whose
maturity period approximates the options expected term.
|
|
(b)
|
|
Volatility:
The expected volatility was estimated using
peer data of companies in the biopharmaceutical industry with
similar equity plans.
|
|
(c)
|
|
Expected life:
The expected life of the award was
estimated using peer data of companies in the biopharmaceutical
industry with similar equity plans.
|
Unrecognized stock-based compensation expense related to
nonvested options, adjusted for expected forfeitures, was
$1.2 million and $390,000 at March 31, 2011 and
December 31, 2010, respectively. The
F-16
CLOVIS
ONCOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION
AS OF MARCH 31, 2011, FOR THE THREE MONTHS ENDED MARCH 31, 2011
AND 2010 AND THE PERIOD FROM APRIL 20, 2009 TO MARCH 31, 2011 IS
UNAUDITED)
|
|
7.
|
Share-Based
Compensation (Continued)
|
unrecognized stock-based compensation expense is expected to be
recognized over the weighted-average remaining vesting period of
3.6 years and 3.2 years at March 31, 2011 and
December 31, 2010, respectively.
As of December 31, 2010, the Company reserved shares of
common stock for future issuance as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
Available
|
|
|
Shares of
|
|
|
|
Shares or
|
|
|
for Grant or
|
|
|
Common
|
|
|
|
Options
|
|
|
Future
|
|
|
Stock
|
|
|
|
Outstanding
|
|
|
Issuance
|
|
|
Reserved
|
|
|
2009 Equity Incentive Plan
|
|
|
1,224,500
|
|
|
|
1,398,000
|
|
|
|
2,622,500
|
|
Series A-1
convertible preferred stock
|
|
|
5,044,828
|
|
|
|
|
|
|
|
5,044,828
|
|
Series A-2
convertible preferred stock
|
|
|
5,044,828
|
|
|
|
|
|
|
|
5,044,828
|
|
Series B convertible preferred stock
|
|
|
10,919,540
|
|
|
|
|
|
|
|
10,919,540
|
|
Series C convertible preferred stock
|
|
|
|
|
|
|
15,287,356
|
|
|
|
15,287,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,233,696
|
|
|
|
16,685,356
|
|
|
|
38,919,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2011, the Company reserved shares of common
stock for future issuance as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
Available
|
|
|
Shares of
|
|
|
|
Shares or
|
|
|
for Grant or
|
|
|
Common
|
|
|
|
Options
|
|
|
Future
|
|
|
Stock
|
|
|
|
Outstanding
|
|
|
Issuance
|
|
|
Reserved
|
|
|
2009 Equity Incentive Plan
|
|
|
2,746,779
|
|
|
|
1,248,621
|
|
|
|
3,995,400
|
|
Series A-1
convertible preferred stock
|
|
|
5,044,828
|
|
|
|
|
|
|
|
5,044,828
|
|
Series A-2
convertible preferred stock
|
|
|
5,044,828
|
|
|
|
|
|
|
|
5,044,828
|
|
Series B convertible preferred stock
|
|
|
10,919,540
|
|
|
|
|
|
|
|
10,919,540
|
|
Series C convertible preferred stock
|
|
|
|
|
|
|
15,287,356
|
|
|
|
15,287,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,755,975
|
|
|
|
16,535,977
|
|
|
|
40,291,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company leases office space in Boulder, Colorado,
San Francisco, California and Cambridge, U.K. under
non-cancelable operating lease agreements. The lease agreements
contain periodic rent increases that result in the Company
recording deferred rent over the term of certain leases. Rental
expense under these leases was approximately $609,000 for the
year ended December 31, 2010, $39,000 from April 20,
2009 (inception) to December 31, 2009 and $188,000 and
$75,000 for the three months ended March 31, 2011 and 2010,
respectively. Future minimum rental commitments, by fiscal year
and in the aggregate, for the Companys operating leases
are provided below (in thousands):
|
|
|
|
|
|
|
December 31, 2010
|
|
|
2011
|
|
$
|
665
|
|
2012
|
|
|
751
|
|
2013
|
|
|
389
|
|
2014
|
|
|
203
|
|
2015
|
|
|
190
|
|
Thereafter
|
|
|
|
|
|
|
|
|
|
Total minimum lease payments
|
|
$
|
2,198
|
|
|
|
|
|
|
F-17
CLOVIS
ONCOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION
AS OF MARCH 31, 2011, FOR THE THREE MONTHS ENDED MARCH 31, 2011
AND 2010 AND THE PERIOD FROM APRIL 20, 2009 TO MARCH 31, 2011 IS
UNAUDITED)
CO-101
In November 2009, the Company entered into a license agreement
with Clavis Pharma ASA (Clavis) to develop and
commercialize CO-101 in North America, Central America, South
America and Europe. Under terms of the license agreement, the
Company made an up-front payment to Clavis in the amount
$15.0 million, which was comprised of $13.1 million
for development costs incurred prior to the execution of the
agreement that was recognized as acquired in-process research
and development and $1.9 million for the prepayment of
preclinical activities to be performed by Clavis. In November
2010, the license agreement was amended to expand the license
territory to include Asia and other international markets. The
Company made a payment of $10.0 million to Clavis for the
territory expansion and recognized the payment as acquired
in-process research and development. As part of the amended
license agreement, Clavis has also agreed to reimburse up to
$3.0 million of the Companys research and development
costs for certain CO-101 development activities subject to the
Company incurring such costs. For the three months ended
March 31, 2011 and the year ended December 31, 2010,
the Company incurred expenses that were subsequently reimbursed
of approximately $1.0 million and $0.3 million,
respectively. The Company is responsible for all remaining
development and commercialization costs of the compound and, if
approved, Clavis will be eligible to receive royalties based on
the volume of annual net sales achieved. The Company may be
required to pay Clavis up to an aggregate of $115.0 million
in development and regulatory milestone payments if certain
clinical study objectives and regulatory filings, acceptances
and approvals are achieved. In addition, the Company may be
required to pay Clavis up to an aggregate of $445.0 million
in sales milestone payments if certain annual sales targets are
met for the CO-101 compound.
Subject to certain conditions set forth in the license
agreement, Clavis may elect to co-develop and co-promote CO-101
in Europe. If Clavis were to make this election, it would be
required to reimburse the Company for a portion of both past and
future development costs. In addition, the milestone payments
described above would be reduced, and Clavis would not be
entitled to royalties on the net sales in Europe, but would
instead share equally in the pretax profits or losses resulting
from commercialization activities in Europe.
CO-1686
In May 2010, the Company entered into a worldwide license
agreement with Avila Therapeutics, Inc. (Avila) to
discover, develop and commercialize preclinical covalent
inhibitors of mutant forms of the epidermal growth factor
receptor gene. CO-1686 was identified as the lead inhibitor
candidate developed by Avila under the license agreement. The
Company is responsible for all preclinical, clinical, regulatory
and other activities necessary to develop and commercialize
CO-1686. The Company made an up-front payment of
$2.0 million to Avila upon execution of the license
agreement which was recognized as acquired in-process research
and development expense. The Company is obligated to pay Avila
royalties on net sales of CO-1686, based on the volume of annual
net sales achieved. Avila has the option to increase royalty
rates by electing to reimburse a portion of the development
expenses incurred by the Company. This option must be exercised
within a limited period of time of Avilas being notified
of our intent to pursue regulatory approval of CO-1686 in the
United States or European Union as a first line therapy.
The Company may be required to pay to Avila up to an aggregate
of $119.0 million in development and regulatory milestone
payments if certain clinical study objectives and regulatory
filings, acceptances and approvals are achieved. In addition,
the Company may be required to pay Avila up to an aggregate of
$120.0 million in sales milestones if certain annual sales
targets are achieved.
F-18
CLOVIS
ONCOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION
AS OF MARCH 31, 2011, FOR THE THREE MONTHS ENDED MARCH 31, 2011
AND 2010 AND THE PERIOD FROM APRIL 20, 2009 TO MARCH 31, 2011 IS
UNAUDITED)
As a result of the net loss incurred since inception and the
Companys determination that it is more likely than not
that the current tax benefits will not be realized, there is no
provision for income taxes.
A reconciliation of the U.S. statutory income tax rate to
the Companys effective tax rate is as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Federal income tax (benefit) at statutory rate
|
|
|
(34.0
|
)%
|
|
|
(34.0
|
)%
|
State income tax benefit, net of federal benefit
|
|
|
(3.6
|
)
|
|
|
(4.4
|
)
|
Tax credits
|
|
|
(12.9
|
)
|
|
|
|
|
Other
|
|
|
0.3
|
|
|
|
|
|
Increase to valuation allowance
|
|
|
50.2
|
|
|
|
38.4
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
|
|
|
%
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
The components of the Companys deferred tax assets and
liabilities are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforward
|
|
$
|
9,386
|
|
|
$
|
1,562
|
|
Product acquisition costs
|
|
|
9,229
|
|
|
|
5,003
|
|
Tax credit carryforwards
|
|
|
7,186
|
|
|
|
|
|
Accrued liabilities and other
|
|
|
57
|
|
|
|
6
|
|
Total deferred tax assets
|
|
|
25,858
|
|
|
|
6,571
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
|
(25,510
|
)
|
|
|
(6,541
|
)
|
|
|
|
|
|
|
|
|
|
Deferred tax assets, net of valuation allowance
|
|
|
348
|
|
|
|
30
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
(321
|
)
|
|
|
(19
|
)
|
Depreciation
|
|
|
(27
|
)
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(348
|
)
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
The realization of deferred tax assets is dependent upon future
earnings, and the timing and amount of these future earnings is
uncertain. A valuation allowance was established for the net
deferred tax asset balance due to managements belief that
the realization of these assets is not likely to occur. At
December 31, 2010, the Company had $24.4 million of
U.S. federal net operating loss carryforwards, which will
expire from 2029 to 2030 if not utilized and research and
development tax credit carryforwards of $7.2 million that
will expire from 2029 through 2030 if not utilized. The
utilization of the net operating loss carryforwards may be
subject to certain IRS limitations, which may limit the
Companys ability to use its net operating loss
carryforwards in the future and such limitations could be
significant. The Companys federal and state income taxes
for the period from inception to December 31, 2010 remain
open to an audit.
The Company recorded an increase to the valuation allowance of
$19.0 million, $6.5 million and $25.5 million
during the year ended December 31, 2010, and the periods
from April 20, 2009 (inception) to December 31, 2009
and 2010, respectively.
F-19
CLOVIS
ONCOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION
AS OF MARCH 31, 2011, FOR THE THREE MONTHS ENDED MARCH 31, 2011
AND 2010 AND THE PERIOD FROM APRIL 20, 2009 TO MARCH 31, 2011 IS
UNAUDITED)
|
|
10.
|
Income
Taxes (Continued)
|
Interest and penalties related to the settlement of uncertain
tax positions, if any, will be reflected in income tax expense.
During 2010, the Company was awarded $489,000 under the
Qualifying Therapeutic Discovery Project Program
(section 48D of the internal revenue code), which the
Company elected to receive in the form of a grant. This award
has been reflected as other income in the consolidated statement
of operations for the year ended December 31, 2010.
|
|
11.
|
Net Loss
Per Common Share
|
Basic net loss per share is calculated by dividing net loss by
the weighted-average number of common shares outstanding during
the period, without consideration for common stock equivalents.
Diluted net loss per share is computed by dividing net loss by
the weighted-average number of common share equivalents
outstanding for the period determined using the treasury-stock
method. For purposes of this calculation, convertible preferred
stock and stock options are considered to be common stock
equivalents and are only included in the calculation of diluted
net loss per share when their effect is dilutive.
The shares outstanding at the end of the respective periods
presented in the table below were excluded from the calculation
of diluted net loss per share due to their anti-dilutive effect:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
|
|
|
Period
|
|
|
|
|
|
|
|
|
Cumulative
|
|
|
|
Year Ended
|
|
|
from April 20, 2009
|
|
|
Three Months
|
|
|
from April 20, 2009
|
|
|
|
December 31,
|
|
|
(Inception) to
|
|
|
Ended March 31,
|
|
|
(Inception) to
|
|
|
|
2010
|
|
|
December 31, 2009
|
|
|
2011
|
|
|
2010
|
|
|
March 31, 2011
|
|
|
Common shares under option
|
|
|
1,225
|
|
|
|
570
|
|
|
|
2,747
|
|
|
|
570
|
|
|
|
2,747
|
|
Convertible preferred stock
|
|
|
21,009
|
|
|
|
21,009
|
|
|
|
21,009
|
|
|
|
21,009
|
|
|
|
21,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total potential dilutive shares
|
|
|
22,234
|
|
|
|
21,579
|
|
|
|
23,756
|
|
|
|
21,579
|
|
|
|
23,756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.
|
Employee
Benefit Plan
|
In 2010, the Company created a retirement plan, which is
qualified under section 401(k) of the Internal Revenue Code
for its U.S. employees. The plan allows eligible employees
to defer, at the employees discretion, pretax compensation
up to the IRS annual limits. The Company matches contributions
up to 4% of the eligible employees compensation or the
maximum amount permitted by law. Total expense for contributions
made to U.S. employees was $104,000 for the year ended
December 31, 2010. The Companys international
employees participate in retirement plans governed by the local
laws in effect for the country in which they reside. The Company
made matching contributions to international employees of
$41,000 for the year ended December 31, 2010.
Convertible
Promissory Notes
In May 2011, the Company issued $20.0 million of
5% Convertible Promissory Notes due 2012 (the
Notes) for cash. The Notes accrue interest at an
annual rate of 5% and mature on May 25, 2012. The principal
balance and
F-20
CLOVIS
ONCOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION
AS OF MARCH 31, 2011, FOR THE THREE MONTHS ENDED MARCH 31, 2011
AND 2010 AND THE PERIOD FROM APRIL 20, 2009 TO MARCH 31, 2011 IS
UNAUDITED)
|
|
13.
|
Subsequent
Events (Continued)
|
all accrued and unpaid interest due on the Notes will be
converted into shares of our capital stock upon the earliest to
occur of the following:
|
|
|
|
|
Immediately prior to the closing of a Qualified IPO (as defined
below) the Notes shall automatically convert into shares of our
common stock at a per share price equal to the price to the
public for common stock issued in the Qualified IPO. A
Qualified IPO is defined as an initial public
offering with gross proceeds of at least $50 million with a
per share price of at least $9.24 or as deemed to occur by the
consent of the holders of 55% of the Companys convertible
preferred stock.
|
|
|
|
Upon the completion of an equity financing other than a
Qualified IPO and at the election of holders of at least 55% of
the outstanding principal amount of the Notes, the Notes will
convert into shares of the securities issued in the equity
financing at the per share price of the securities issued in
such equity financing.
|
|
|
|
Upon the maturity date of the Notes, they will automatically
convert into either (1) shares of our Series C
convertible preferred stock at the per share price set forth in
the Companys Restated Certificate of Incorporation, or
(2) shares of the most recent class of securities issued by
the Company, if the Company has undertaken an offering of such
securities for cash after the issuance of Series C
convertible preferred stock at the price per share to the
purchasers of the new securities.
|
|
|
|
Upon an event of default, as defined in the agreements governing
the Notes, and at the election of holders of at least 55% of the
outstanding principal amount of the Notes, the Notes will
convert into Series C convertible preferred stock or into a
more recent class of securities issued by the Company for cash
as described in the preceding bullet point.
|
Pfizer
License Agreement for CO-338
In June 2011, the Company entered into a license agreement with
Pfizer, Inc. to acquire exclusive global development and
commercialization rights to Pfizers drug candidate
PF-01367338, which the Company has renamed
CO-338.
This
drug candidate is a small molecule inhibitor of ADP-ribose
polymerase, or PARP, which the Company is developing for the
treatment of selected solid tumors. Pursuant to the terms of the
license agreement, the Company made an up-front payment by
issuing to Pfizer a $7.0 million convertible promissory
note with a 5% annual interest rate, due in 2012. Also, Pfizer
concurrently purchased for cash an additional $8.0 million
convertible note, bringing the total principal amount of the
notes issued to Pfizer to $15.0 million. These convertible
notes have substantially the same terms as the $20 million
principal amount of convertible notes described in the preceding
paragraph, including identical interest provisions, maturity
date, and conversion features. The Company is responsible for
all development and commercialization costs of CO-338 and, if it
is approved, Pfizer will receive royalties on sales of the
product. In addition, Pfizer is eligible to receive further
payments of an aggregate of up to $259 million if certain
development, regulatory and sales milestones are achieved.
F-21
Shares
Common stock
Prospectus
|
|
J.P.
Morgan
|
Credit Suisse
|
,
2011
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
|
|
Item 13.
|
Other
expenses of issuance and distribution.
|
The following table sets forth the costs and expenses, other
than underwriting discounts and commissions, payable by Clovis
in connection with the sale of common stock being registered.
All amounts shown are estimates, except the Securities and
Exchange Commission registration fee, the Financial Industry
Regulatory Authority filing fee and the NASDAQ Global Market
application listing fee.
|
|
|
|
|
|
|
Amount
|
|
Item
|
|
to be Paid
|
|
|
Securities and Exchange Commission registration fee
|
|
$
|
17,357
|
|
Financial Industry Regulatory Authority filing fee
|
|
|
15,450
|
|
NASDAQ Global Market listing fee
|
|
|
|
|
Legal fees and expenses
|
|
|
|
|
Accountants fees and expenses
|
|
|
|
|
Printing expenses
|
|
|
|
|
Transfer agent and registrar fees and expenses
|
|
|
|
|
Blue Sky fees and expenses
|
|
|
|
|
Miscellaneous
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
|
|
|
|
|
|
Item 14.
|
Indemnification
of directors and Officers.
|
Limitation
on liability and indemnification of directors and
officers
Section 102 of the Delaware General Corporation Law permits
a corporation to eliminate the personal liability of its
directors to the corporation or its stockholders for monetary
damages for a breach of fiduciary duty as a director, except
where the director breached his or her duty of loyalty, failed
to act in good faith, engaged in intentional misconduct or
knowingly violated a law, authorized the payment of a dividend
or approved a stock repurchase in violation of Delaware
corporate law or obtained an improper personal benefit. Our
certificate of incorporation provides that no director shall be
personally liable to us or our stockholders for monetary damages
for any breach of fiduciary duty as a director, notwithstanding
any provision of law imposing such liability, except to the
extent that the Delaware General Corporation Law prohibits the
elimination or limitation of liability of directors for breaches
of fiduciary duty.
Section 145 of the Delaware General Corporation Law
provides that a corporation has the power to indemnify a
director, officer, employee or agent of the corporation and
certain other persons serving at the request of the corporation
for another corporation, partnership, joint venture, trust or
other enterprise in related capacities against expenses
(including attorneys fees), judgments, fines and amounts
paid in settlements actually and reasonably incurred by the
person in connection with an action, suit or proceeding to which
he or she is or is threatened to be made a party by reason of
such position, if such person acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to
the best interests of the corporation, and, in any criminal
action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful, except that, in the case of actions
brought by or in the right of the corporation, no
indemnification shall be made with respect to any claim, issue
or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the
Court of Chancery or other adjudicating court determines that,
despite the adjudication of liability but in view of all of the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
Our certificate of incorporation that will be in effect upon the
closing of this offering provides that we will indemnify each
person who was or is a party or threatened to be made a party to
any threatened, pending or completed action, suit or proceeding
whether civil, criminal, administrative or investigative (other
than an action by or in the right of us) by reason of the fact
that he or she is or was, or has agreed to become, our director
or officer, or is or was serving, or has agreed to serve, at our
request as a director, officer or trustee of, or in a similar
capacity
II-1
with, another corporation, partnership, joint venture, trust or
other enterprise (all such persons being referred to as an
Indemnitee), or by reason of any action alleged to
have been taken or omitted in such capacity, against all
expenses (including attorneys fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by
the Indemnitee or on his or her behalf in connection with such
action, suit or proceeding and any appeal therefrom, if such
Indemnitee acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, our best
interests, and, with respect to any criminal action or
proceeding, he or she had no reasonable cause to believe his or
her conduct was unlawful.
Our certificate of incorporation that will be in effect upon the
closing of this offering also provides that we will indemnify
any Indemnitee who was or is a party to an action or suit by or
in the right of us to procure a judgment in our favor by reason
of the fact that the Indemnitee is or was, or has agreed to
become, our director or officer, or is or was serving, or has
agreed to serve, at our request as a director, officer or
trustee of, or in a similar capacity with, another corporation,
partnership, joint venture, trust or other enterprise, or by
reason of any action alleged to have been taken or omitted in
such capacity, against all expenses (including attorneys
fees) and, to the extent permitted by law, amounts paid in
settlement actually and reasonably incurred in connection with
such action, suit or proceeding, and any appeal therefrom, if
the Indemnitee acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, our best
interests, except that no indemnification shall be made with
respect to any claim, issue or matter as to which such person
shall have been adjudged to be liable to us, unless and only to
the extent that a court determines that, despite such
adjudication but in view of all of the circumstances, he or she
is entitled to indemnification for such expenses.
Notwithstanding the foregoing, to the extent that any Indemnitee
has been successful, on the merits or otherwise, he or she will
be indemnified by us against all expenses (including
attorneys fees) actually and reasonably incurred by him or
her or on his or her behalf in connection therewith. If we
dont assume the defense, expenses must be advanced to an
Indemnitee under certain circumstances.
In addition, we have entered into indemnification agreements
with each of our directors and executive officers and intend to
enter into indemnification agreements with any new director and
executive officer in the future.
We maintain a general liability insurance policy which covers
certain liabilities of our directors and officers arising out of
claims based on acts or omissions in their capacities as
directors or officers.
Certain of our non-employee directors may, through their
relationships with their employers, be insured
and/or
indemnified against certain liabilities in their capacity as
members of our board of directors.
The underwriting agreement we will enter into in connection with
the offering of common stock being registered hereby provides
that the underwriters will indemnify, under certain conditions,
our directors and officers (as well as certain other persons)
against certain liabilities arising in connection with such
offering.
See also the undertakings set out in response to Item 17
herein.
|
|
Item 15.
|
Recent
sales of unregistered securities.
|
Set forth below is information regarding shares of common stock,
convertible preferred stock and convertible promissory notes
issued and options granted by us within the past three years
that were not registered under the Securities Act. Also included
is the consideration, if any, received by us for such shares,
notes and options and information relating to the section of the
Securities Act, or rule of the SEC, under which exemption from
registration was claimed.
(a) Issuances of Capital Stock and Convertible Promissory
Notes
|
|
|
|
(1)
|
On May 12, 2009, we sold an aggregate of
3,500,000 shares of our common stock at a price per share
of $0.001 to accredited investors, for an aggregate purchase
price of $3,500.
|
|
|
(2)
|
On May 15, 2009, we sold an aggregate of
5,044,828 shares of our
series A-1
convertible preferred stock at a price per share of $2.00 to
accredited investors, for an aggregate purchase price of
$10,089,656.
|
|
|
(3)
|
On November 9, 2009, we sold an aggregate of
5,044,828 shares of our
series A-2
convertible preferred stock at a price per share of $3.00 to
accredited investors, for an aggregate purchase price of
$15,134,484.
|
II-2
|
|
|
|
(4)
|
On November 18, 2009, we sold an aggregate of
10,919,540 shares of our series B convertible
preferred stock at a price per share of $4.62 to accredited
investors, for an aggregate purchase price of $50,448,275.
|
|
|
(5)
|
On May 25, 2011, we sold $20,000,000 aggregate principal
amount of our 5% convertible promissory notes due 2012 to
accredited investors, for an aggregate purchase price of
$20,000,000.
|
|
|
(6)
|
On June 2, 2011, we sold $15,000,000 aggregate principal
amount of our 5% convertible promissory notes due 2012 to
Pfizer, Inc., an accredited investor, $7.0 million of which
were issued as consideration for the execution of our license
agreement with Pfizer, Inc. for
CO-338
and
$8.0 million of which were issued for an investment of
$8.0 million of cash by Pfizer, Inc.
|
|
|
(7)
|
From April 20, 2009 through June 1, 2011, we issued an
aggregate of 1,154,879 shares of our common stock at prices
ranging from $0.10 to $1.13 per share to certain of our
employees and directors pursuant to the exercise of stock
options under the Clovis Oncology, Inc. 2009 Equity Incentive
Plan (the 2009 Plan) for an aggregate purchase price
of $935,675.
|
(b) Grants of Stock Options
|
|
|
|
(1)
|
From April 20, 2009 through June 1, 2011, we granted
stock options to purchase an aggregate of 3,202,900 shares
of our common stock with exercise prices ranging from $0.10 to
$1.13 per share, to certain of our employees and directors under
our 2009 Plan in connection with services provided by such
parties to us.
|
No underwriters were involved in the foregoing issuances of
securities. The securities described in paragraphs (a)(1)
through (6) of this Item 15 were issued to accredited
investors in reliance upon the exemption from the registration
requirements of the Securities Act, as set forth in
Section 4(2) under the Securities Act, and, in certain
cases, in reliance on Regulation D promulgated thereunder,
relative to transactions by an issuer not involving any public
offering, to the extent an exemption from such registration was
required. The securities described in paragraph (a)(7) of this
Item 15 were issued pursuant to written compensatory plans
or arrangements with our employees, directors and consultants in
reliance on the exemption provided by Rule 701 promulgated
under Section 3(b) of the Securities Act, or pursuant to
Section 4(2) under the Securities Act, relative to
transactions by an issuer not involving any public offering, to
the extent an exemption from such registration was required. The
securities described in paragraph (b)(1) of this Item 15
were made pursuant to written compensatory plans or arrangements
with our employees, directors and consultants, in reliance on
the exemption provided by Rule 701 promulgated under
Section 3(b) of the Securities Act, or pursuant to
Section 4(2) under the Securities Act, relative to
transactions by an issuer not involving any public offering, to
the extent an exemption from such registration was required.
All of the purchasers of shares of our common stock, convertible
preferred stock and convertible promissory notes described above
represented to us in connection with their respective
acquisitions described above that they were accredited investors
and that they were acquiring the applicable securities for
investment and not distribution and to the effect that they
could bear the risks of the investment. Such parties received
written disclosures that the applicable securities had not been
registered under the Securities Act and that any resale must be
made pursuant to a registration or an available exemption from
such registration.
All of the foregoing securities are deemed restricted securities
for purposes of the Securities Act. The certificates
representing the issued shares of capital stock and notes
described in this Item 15 included appropriate legends
setting forth that the applicable securities have not been
registered and the applicable restrictions on transfer.
|
|
Item 16.
|
Exhibits
and financial statement schedules.
|
(a) Exhibits
See Exhibit Index attached to this registration statement,
which is incorporated by reference herein.
(b) Financial Statement Schedules
II-3
Schedules not listed above have been omitted because the
information required to be set forth therein is not applicable
or is shown in the financial statements or the notes thereto.
|
|
|
|
(a)
|
The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting
agreement certificates in such denominations and registered in
such names as required by the underwriters to permit prompt
delivery to each purchaser.
|
|
|
|
|
(b)
|
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant to
our amended and restated certificate of incorporation or bylaws,
or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of such issue.
|
|
|
|
|
(c)
|
The undersigned registrant hereby undertakes that:
|
|
|
|
|
(1)
|
For purposes of determining any liability under the Securities
Act of 1933, 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
the registrant pursuant to 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; and
|
|
|
(2)
|
For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
|
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement on
Form S-1
to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Boulder, in the State of Colorado, on
this June 23, 2011.
CLOVIS ONCOLOGY, INC.
|
|
|
|
By:
|
/s/
Patrick
J. Mahaffy
|
Name: Patrick J. Mahaffy
|
|
|
|
Title:
|
President and Chief Executive Officer
|
POWER OF
ATTORNEY
Each of the undersigned directors and officers of Clovis
Oncology, Inc. hereby constitutes and appoints each of Patrick
J. Mahaffy and Erle T. Mast, his true and lawful
attorneys-in-fact and agents with full power of substitution and
resubstitution, for him and his name, place and stead, in any
and all capacities, to execute any and all amendments (including
post-effective amendments) to this registration statement, to
sign any registration statement filed pursuant to
Rule 462(b) of the Securities Act of 1933, and to cause the
same to be filed with all exhibits thereto, and all documents in
connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each
and every act and thing requisite and desirable to be done in
and about the premises as fully and to all intents and purposes
as the undersigned might or could do in person, hereby ratifying
and confirming all acts and things that said attorneys-in-fact
and agents or any of them, or their or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on
Form S-1
has been signed by the following persons in the capacities and
on the dates indicated.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
/s/
Patrick
J. Mahaffy
Patrick
J. Mahaffy
|
|
President and Chief Executive Officer; Director
(Principal Executive Officer)
|
|
June 23, 2011
|
/s/
Erle
T. Mast
Erle
T. Mast
|
|
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer
and Principal Accounting Officer)
|
|
June 23, 2011
|
/s/
Brian
G. Atwood
Brian
G. Atwood
|
|
Director
|
|
June 23, 2011
|
/s/
M.
James Barrett
M.
James Barrett
|
|
Director
|
|
June 23, 2011
|
/s/
James
C. Blair
James
C. Blair
|
|
Director
|
|
June 23, 2011
|
/s/
Paul
Klingenstein
Paul
Klingenstein
|
|
Director
|
|
June 23, 2011
|
II-5
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
/s/
Edward
J. McKinley
Edward
J. McKinley
|
|
Director
|
|
June 23, 2011
|
/s/
John
C. Reed
John
C. Reed
|
|
Director
|
|
June 23, 2011
|
/s/
Thorlef
Spickschen
Thorlef
Spickschen
|
|
Director
|
|
June 23, 2011
|
II-6
INDEX TO
EXHIBITS
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit Description
|
|
|
1
|
.1
|
|
Form of Underwriting Agreement.
|
|
3
|
.1
|
|
Amended and Restated Certificate of Incorporation of Clovis
Oncology, Inc., as amended, as currently in effect.
|
|
3
|
.2
|
|
Bylaws of Clovis Oncology, Inc., as currently in effect.
|
|
3
|
.3
|
|
Form of Amended and Restated Certificate of Incorporation of
Clovis Oncology, Inc., to be effective upon the closing of this
offering.
|
|
3
|
.4
|
|
Form of Amended and Restated Bylaws of Clovis Oncology, Inc., to
be effective upon the closing of this offering.
|
|
4
|
.1
|
|
Form of Common Stock Certificate of Clovis Oncology, Inc.
|
|
4
|
.2
|
|
Clovis Oncology Inc. Investor Rights Agreement, dated as of
May 15, 2009, between Clovis Oncology, Inc., certain
investors named therein.
|
|
5
|
.1
|
|
Opinion of Willkie Farr & Gallagher LLP regarding the
validity of the securities being registered.
|
|
10
|
.1*
|
|
Amended and Restated License Agreement, dated as of
November 10, 2010, by and between Clovis Oncology, Inc. and
Clavis Pharma ASA.
|
|
10
|
.2*
|
|
Amended and Restated Strategic License Agreement, dated as of
June 16, 2011, by and between Clovis Oncology, Inc. and
Avila Therapeutics, Inc.
|
|
10
|
.3*
|
|
License Agreement, dated as of June 2, 2011, by and between
Clovis Oncology, Inc. and Pfizer, Inc.
|
|
10
|
.4+
|
|
Clovis Oncology, Inc. 2009 Equity Incentive Plan.
|
|
10
|
.5+
|
|
Clovis Oncology, Inc. 2011 Equity Incentive Plan.
|
|
10
|
.6+
|
|
Form of Clovis Oncology, Inc. 2009 Equity Incentive Plan Stock
Option Agreement.
|
|
10
|
.7+
|
|
Form of Clovis Oncology, Inc. 2011 Equity Incentive Plan Stock
Option Agreement.
|
|
10
|
.8+
|
|
At-Will Employment, Confidential Information, Invention
Assignment, and Arbitration Agreement, dated as of May 12,
2009, between Clovis Oncology, Inc. and Patrick J. Mahaffy.
|
|
10
|
.9+
|
|
At-Will Employment, Confidential Information, Invention
Assignment, and Arbitration Agreement, dated as of May 12,
2009, between Clovis Oncology, Inc. and Erle T. Mast.
|
|
10
|
.10+
|
|
At-Will Employment, Confidential Information, Invention
Assignment, and Arbitration Agreement, dated as of May 12,
2009, between Clovis Oncology, Inc. and Gillian C. Ivers-Read.
|
|
10
|
.11+
|
|
At-Will Employment, Confidential Information, Invention
Assignment, and Arbitration Agreement, dated as of May 13,
2009, between Clovis Oncology, Inc. and Andrew R. Allen.
|
|
10
|
.12+
|
|
Indemnification Agreement, dated as of May 15, 2009,
between Clovis Oncology, Inc. and John C. Reed.
|
|
10
|
.13+
|
|
Indemnification Agreement, dated as of May 15, 2009,
between Clovis Oncology, Inc. and Paul Klingenstein.
|
|
10
|
.14+
|
|
Indemnification Agreement, dated as of May 15, 2009,
between Clovis Oncology, Inc. and James C. Blair.
|
|
10
|
.15+
|
|
Indemnification Agreement, dated as of May 15, 2009,
between Clovis Oncology, Inc. and Edward J. McKinley.
|
|
10
|
.16+
|
|
Indemnification Agreement, dated as of May 15, 2009,
between Clovis Oncology, Inc. and Thorlef Spickschen.
|
|
10
|
.17+
|
|
Indemnification Agreement, dated as of May 15, 2009,
between Clovis Oncology, Inc. and M. James Barrett.
|
|
10
|
.18+
|
|
Indemnification Agreement, dated as of May 15, 2009,
between Clovis Oncology, Inc. and Brian G. Atwood.
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit Description
|
|
|
10
|
.19+
|
|
Indemnification Agreement, dated as of May 12, 2009,
between Clovis Oncology, Inc. and Patrick J. Mahaffy.
|
|
10
|
.20+
|
|
Indemnification Agreement, dated as of May 12, 2009,
between Clovis Oncology, Inc. and Erle T. Mast.
|
|
10
|
.21+
|
|
Indemnification Agreement, dated as of May 12, 2009,
between Clovis Oncology, Inc. and Gillian C. Ivers-Read.
|
|
10
|
.22+
|
|
Indemnification Agreement, dated as of May 13, 2009,
between Clovis Oncology, Inc. and Andrew R. Allen.
|
|
10
|
.23+
|
|
Restricted Stock Purchase Agreement, dated as of May 12,
2009, between Clovis Oncology, Inc. and Patrick J. Mahaffy.
|
|
10
|
.24+
|
|
Restricted Stock Purchase Agreement, dated as of May 12,
2009, between Clovis Oncology, Inc. and Erle T. Mast.
|
|
10
|
.25+
|
|
Restricted Stock Purchase Agreement, dated as of May 12,
2009, between Clovis Oncology, Inc. and Gillian C. Ivers-Read.
|
|
10
|
.26+
|
|
Restricted Stock Purchase Agreement, dated as of May 12,
2009, between Clovis Oncology, Inc. and Andrew R. Allen.
|
|
21
|
.1
|
|
List of Subsidiaries of Clovis Oncology, Inc.
|
|
23
|
.1
|
|
Consent of Ernst & Young LLP.
|
|
23
|
.2
|
|
Consent of Willkie Farr & Gallagher LLP (included in
Exhibit 5.1).
|
|
24
|
.1
|
|
Power of Attorney (included in the signature pages hereto).
|
|
|
|
+
|
|
Indicates management contract or compensatory plan.
|
|
|
|
To be filed by amendment.
|
|
*
|
|
Confidential treatment has been requested with respect to
certain portions of this exhibit. Omitted portions have been
filed separately with the Securities and Exchange Commission.
|
Exhibit 10.1 Amended and Restated License
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions
.
AMENDED AND RESTATED LICENSE AGREEMENT
This Amended and Restated License Agreement (the
Agreement
) is made and entered into
effective as of November 10, 2010 (the
Effective Date
) by and between Clavis Pharma ASA,
a Norwegian company (
Licensor
), and Clovis Oncology, Inc., a Delaware corporation
(
Licensee
). Licensor and Licensee are sometimes referred to herein individually as a
Party
and collectively as the
Parties
.
RECITALS
WHEREAS, Licensor and Licensee entered into that certain License Agreement, dated November 23,
2009, between the Parties (the
Existing Agreement
) whereby Licensor granted licenses
under certain of its rights in North America, Central and South America and Europe to Licensee with
respect to certain oral and intravenous formulations of CP-4126, a lipid vector technology
derivative of gemcitabine; and
WHEREAS, Licensee now desires to obtain a license to Develop and Commercialize (each as
defined below) the above-mentioned pharmaceutical compound in the Asia/ROW Territory (as defined
below) in addition to the above-mentioned territories, and Licensor desires to so extend the
territorial scope of Licensees licenses under the Existing Agreement, and the Parties desire to
amend and restate the Existing Agreement in connection therewith with the mutual understanding that
the rights and obligations set forth herein with respect to the Asia/ROW Territory shall be deemed
to apply only as of the Effective Date, as set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual promises and covenants
of the Parties contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereto, intending to be legally bound, do
hereby agree to amend and restate the Existing Agreement in its entirety to read as follows, and do
hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1
Defined Terms
. Unless otherwise specifically provided herein, the following terms
shall have the following meanings:
1.1.1
Adverse Event Experience
shall have the meaning set forth in Section 9.2.
1.1.2
Affiliate
shall mean, with respect to a Party, any Person that, directly or
indirectly, through one or more intermediaries, controls, is controlled by or is under common
control with such Party. For purposes of this definition, control and, with correlative
meanings, the terms controlled by and under common control with shall mean (a) the possession,
directly or indirectly, of the power to direct the management or policies of a business entity,
whether through the ownership of voting securities, by contract relating to voting rights or
corporate governance, or otherwise, or (b) the ownership, directly or indirectly, of at least fifty
percent (50%) of the voting securities or other ownership interest of a business entity (or, with
respect to a limited partnership or other similar entity, its general partner or controlling
entity).
1.1.3
Agreement
shall have the meaning set forth in the preamble to this Agreement.
1.1.4
Americas/Europe Territory
means North America, Central and South America and
Europe.
1.1.5
Americas/Europe Development Plan
shall have the meaning set forth in Section
3.2.1
.
1.1.6
Americas/Europe Commercialization Plan
shall have the meaning set forth in
Section 4.9.1.
1.1.7
ANDA
shall mean an Abbreviated New Drug Application under the U.S. Drug Price
Competition and Patent Term Restoration Act of 1984.
1.1.8
Applicable Law
shall mean applicable laws, rules and regulations, including
any rules, regulations, guidelines or other requirements (including good laboratory practices, good
clinical practices, good manufacturing practices and good distribution practices) of the Regulatory
Authorities, that may be in effect from time to time.
1.1.9
Arbitration Matter
shall have the meaning set forth in Section 15.7.2.
1.1.10
Arbitration Rules
shall have the meaning set forth in Section 15.7.2.
1.1.11
Asia/ROW Territory
shall mean the entire world other than the Americas/Europe
Territory.
1.1.12
Asia/ROW Development Plan
shall have the meaning set forth in Section 3.2.1
.
1.1.13
Average Full Royalty Rate
shall have the meaning set forth in Section 7.5(b).
1.1.14
Breaching Party
shall have the meaning set forth in Section 14.2.
1.1.15
Business Day
shall mean a day other than a Saturday or Sunday on which
banking institutions in New York, New York and Oslo, Norway are open for business.
1.1.16
Calendar Year
shall mean each successive period of twelve (12) calendar
months commencing on January 1 and ending on December 31.
- 2 -
1.1.17
Clinical Data
shall mean all information with respect to the Licensed
Products and the Licensed Compound made, collected or otherwise generated in the performance of or
in connection with Clinical Studies or Post Approval Studies for the Licensed Product, including
any investigators brochure, data, case report forms, reports and results with respect thereto.
1.1.18
Clinical Studies
shall mean any Phase I Study, Phase II Study, Phase III
Study and such other tests and studies in patients that are required by Applicable Law, or
otherwise recommended by the Regulatory Authorities, to obtain or maintain Regulatory Approvals,
but excluding Post Approval Studies.
1.1.19
Co-Promote
shall mean to promote jointly the Licensed Products in Europe
through Licensor and Licensee and their respective sales forces under the Product Trademarks.
1.1.20
Co-Promotion Exercise Date
shall mean the date upon which Licensor elects to
exercise the Licensor Co-Promotion Option.
1.1.21
Co-Promotion Expiration Date
shall have the meaning set forth in Section
5.1.1.
1.1.22
Co-Promotion Period
shall mean the period commencing on the Co-Promotion
Exercise Date and ending on the earlier of (a) the effective date of the Licensor Opt-out Right or
(b) the termination of this Agreement in accordance with its terms.
1.1.23
Commercialization
shall mean any and all activities (whether before or after
Regulatory Approval) directed to the marketing, Detailing and promotion of the Licensed Products
and shall include pre launch and post-launch marketing, promoting, Detailing, marketing research,
distributing, offering to commercially sell and commercially selling the Licensed Products,
importing, exporting or transporting the Licensed Products for commercial sale and regulatory
affairs with respect to the foregoing, but shall not include Post Approval Studies or
Manufacturing. When used as a verb, Commercializing means to engage in Commercialization and
Commercialize and Commercialized shall have corresponding meanings.
1.1.24
Commercialization Costs
shall mean the direct out of pocket costs (other than
Development Costs) that are recorded as an expense in accordance with GAAP and incurred during the
Co-Promotion Period by or on behalf of a Party or any of its Affiliates substantially in accordance
with the Americas/Europe Commercialization Plan (and the budget contained therein) to the extent
incurred in performing tasks that are specifically identified in the Americas/Europe
Commercialization Plan for Europe or reasonably allocable to the Commercialization of a Licensed
Product in Europe. Commercialization Costs shall include only the following costs, in each case
solely with respect to Europe:
(a) Manufacturing Costs of Licensed Products sold in Europe plus any inventory losses incurred
(except to the extent caused by the gross negligence or willful misconduct of a Party),
- 3 -
(b) marketing expenses specifically attributable to a Licensed Product, including costs
incurred in connection with the preparation of a commercial launch, market research, Post Approval
Studies, costs associated with marketing personnel (including compensation, benefits, travel,
supervision, and training) advertising, advertising agencies, producing Licensed Product
Promotional Materials, sponsoring seminars and symposia (including continuing medical education
programs), reimbursement and other patient support services, allocated based upon the proportion of
such expenses directly attributable to such Licensed Product or the activities of the Parties in
connection with the conduct of the Americas/Europe Commercialization Plan specifically with respect
to Europe,
(c) costs specifically identifiable to the sales force and, to the extent the Parties agree to
use Third Party contract sales organizations, the cost of such CSO sales representatives, and
medical science liaison (
MSL
) activities of Licensed Products in Europe, including the
managed care market, including costs associated with sales and MSL representatives, including
compensation, benefits, travel, supervision and training, and sales meetings, consultants, call
reporting and other monitoring/tracking costs, district, regional and national sales management,
but excluding hiring and termination costs associated with either Partys sales personnel
(including recruiting, relocation, severance and other similar costs); all such costs for personnel
who are not 100% dedicated to the Licensed Product shall be allocable by the relative position of
the products detailed,
(d) to the extent not included in the Manufacturing Costs of a Licensed Product, license fees,
milestone payments and other amounts required to be paid to Third Parties in consideration for
rights required to conduct activities under the Americas/Europe Commercialization Plan solely with
respect to Europe as agreed to pursuant to this Agreement, allocated based on the proportion of
such costs directly attributable to such Licensed Product,
(e) notwithstanding Sections 8.2 and 8.3, costs associated with prosecution, maintenance and
enforcement of Patents and Product Trademarks in Europe pursuant to Sections 8.2 and 8.3 covering
any Licensed Product and defense of Third Party intellectual property claims in Europe pursuant to
Section 8.4.3 incurred after the Regulatory Approval of such Licensed Product,
(f) product liability insurance premiums and, except to the extent required to be indemnified
by a Party under Sections 13.1(a) or (b) or 13.2(a) or (b), product liability claims, market
withdrawals, field adjustments or recalls in respect of Licensed Products sold in Europe,
(g) post-Regulatory Approval regulatory expenses directly related to the Licensed Product,
including costs to maintain such Regulatory Approval (including user fees paid after Regulatory
Approval), medical and safety activities (including, if required, the design, testing and ongoing
implementation of a risk management program for a Licensed Product) and adverse event reporting,
(h) to the extent previously included in Net Sales, bad debt expense associated with accounts
receivable deemed to be uncollectible, only after using reasonable efforts to pursue and collect
such amounts, and
- 4 -
(i) such other costs that the Parties agree shall be required for the Commercialization of the
Licensed Products in Europe.
1.1.25
Commercialization Plan
shall have the meaning set forth in Section 4.9.1.
1.1.26
Commercially Reasonable Efforts
shall mean, with respect to the Development
or Commercialization of a Licensed Product, as the case may be, efforts and resources commonly used
in the research-based pharmaceutical industry by companies similarly situated to the applicable
Party, but in the case of Licensee, in no event less than those efforts and resources commonly used
by specialty oncology companies, for an internally-developed product of similar commercial
potential at a similar stage in its lifecycle. Commercially Reasonable Efforts shall be determined
on a market-by-market basis for each Licensed Product without regard to the particular
circumstances of a Party, including any other product opportunities of such Party and, with respect
to Licensee, without regard to any payments owed to Licensor under ARTICLE 5 and ARTICLE 7. When
used as an adjective,
Commercially Reasonable
shall mean using Commercially Reasonable
Efforts.
1.1.27
Committee
shall have the meaning set forth in Section 6.2.
1.1.28
Competing Product
shall have the meaning set forth in Section 4.2.
1.1.29
Complaining Party
shall have the meaning set forth in Section 14.2.
1.1.30
Complaints
shall have the meaning set forth in Section 9.1.
1.1.31
Confidential Information
shall have the meaning set forth in Section 11.1.
1.1.32
Control
shall mean, with respect to any item of Information, Drug Master
File, Regulatory Documentation, Patent or Intellectual Property Right, possession of the right,
whether directly or indirectly, and whether by ownership, license or otherwise (other than by
operation of the assignments, license and other grants in ARTICLE 2 and Sections 8.1.2, 8.1.3 and
8.1.4 of this Agreement), to assign or grant a license, sublicense or other right to or under, such
Information, Drug Master File, Regulatory Documentation, Patent or Intellectual Property Right as
provided for herein without violating the terms of any agreement or other arrangement with any
Third Party.
1.1.33
Corporate Names
shall mean (a) in the case of Licensor, the Trademark Clavis
Pharma ASA and the Licensor corporate logo or such other names and logos as Licensor may designate
in writing from time to time and (b) in the case of Licensee, the Trademark Clovis Oncology, Inc.
and the Licensee corporate logo or such other names and logos as Licensee may designate in writing
from time to time, in each case ((a) and (b)) together with any variations and derivatives thereof.
1.1.34
CP-4126
means the chemical compound named 5-gemcitabine elaidic acid ester,
which is also named 5-O-(
trans
-9-octadecenoyl)-1-
b
-D-
- 5 -
2deoxy2,2difluorocytidine (CAS registry number 210820-30-4). CP-4126 has also been named
by Licensee as CO-101.
1.1.35
Detail
shall mean an interactive face-to-face contact of a sales
representative, who is fully equipped with, and knowledgeable of, applicable Promotional Materials
and Product Labeling for the Licensed Product, with a physician or other medical professional
licensed to prescribe drugs or other healthcare professional that has a significant impact or
influence on prescribing decisions, in which relevant characteristics of a Licensed Product are
described by the sales representative in a fair and balanced manner consistent with the
requirements of this Agreement and Applicable Law, and in a manner that is customary in the
industry for the purpose of promoting a prescription pharmaceutical product. When used as a verb,
Detail
means to engage in a Detail.
1.1.36
Development
shall mean all activities related to research, preclinical and
other non-clinical testing, test method development and stability testing, toxicology, formulation,
process development, manufacturing scale-up, qualification and validation, quality
assurance/quality control related to the foregoing manufacturing activities, Clinical Studies and
Post Approval Studies, including manufacturing in support thereof, statistical analysis and report
writing, the preparation and submission of Drug Approval Applications, regulatory affairs with
respect to the foregoing and all other activities otherwise requested or required by a Regulatory
Authority as a condition or in support of obtaining or maintaining a Regulatory Approval. When
used as a verb,
Develop
shall mean to engage in Development.
1.1.37
Development Budget
shall have the meaning set forth in Section 5.1.3(b).
1.1.38
Development Costs
shall mean the costs recorded as an expense in accordance
with GAAP, by or on behalf of a Party or any of its Affiliates on or after the Original Execution
Date pursuant to this Agreement in performing the tasks that are specifically identified in, or
reasonably allocable to, the Development Budget and the Americas/Europe Development Plan
specifically with respect to Europe or the United States. Subject to the foregoing, Development
Costs shall include such costs incurred in connection with only the following activities, but
excluding in each case any costs incurred solely with respect to obtaining Regulatory Approvals in
jurisdictions other than Europe or the United States:
(a) non-clinical activities such as toxicology and formulation development, test method
development, excluding the development and testing of a hENT1 Biomarker Assay;
(b) Clinical Studies and Post Approval Studies for a Licensed Product, including (a) the
preparation for and conduct of clinical trials, including quality assurance and quality control;
(b) data collection and analysis and report writing; (c) clinical laboratory work; and (d)
regulatory activities in connection with such studies, including adverse event recordation and
reporting;
(c) the direct costs for time recorded by a Partys personnel in performing Development
activities, which shall be charged at the FTE Rate;
- 6 -
(d) the preparation of a regulatory dossier reasonably necessary to obtain Initial Regulatory
Approval for a Licensed Product in the United States and Europe;
(e) Manufacturing Costs for (i) a Licensed Product for use in Clinical Studies, Post Approval
Studies or other Development activities for such Licensed Product, (ii) the manufacture, purchase
or packaging of comparators or placebo for use in Clinical Studies or Post Approval Studies for a
Licensed Product (with the manufacturing costs for comparators or placebo to be determined in the
same manner as Manufacturing Costs are determined for any Licensed Product) and (iii) costs and
expenses of disposal of drugs and other supplies used in such Clinical Studies, Post Approval
Studies or other Development activities;
(f) Clinical trial insurance and Losses incurred in connection with Third Party Claims
described in Section 13.3 to the extent such Losses are to be included in Development Costs
pursuant to Section 13.3; and
(g) Costs for the development of the Manufacturing Process for a Licensed Product, scale-up,
stability testing, quality assurance, quality control development, Manufacturing Process
validation, including validation batches (other than those that are commercially saleable upon
Regulatory Approval), manufacturing improvements and qualification and validation of Third Party
contract manufacturers.
For the avoidance of doubt and notwithstanding the foregoing, Development Costs shall not
include (i) any intercompany payments or charges of a Party or its Affiliates (or between such
Affiliates); (ii) filing fees in connection with the filing of applications for Regulatory
Approvals for a jurisdiction outside of Europe; and (iii) any costs in respect of any Clinical
Study or Post Approval Study required only by Regulatory Authorities outside of Europe.
1.1.39
Development Plans
shall mean the plans for the Development of the Licensed
Products in the Licensee Territory, including the Americas/Europe Development Plan and the Asia/ROW
Development Plan, as prepared and amended from time to time in accordance with Section 3.2.1.
1.1.40
Dispute
shall have the meaning set forth in Section 15.7.
1.1.41
Distributor
shall mean a Person, other than a Sublicensee or an Affiliate, in
one or more countries in the Licensee Territory that (a) purchases a Licensed Product in finished
form, packaged and labeled from the Licensee, its Affiliate or Sublicensee for such country(ies),
(b) assumes responsibility from the Licensee for all or a portion of the Commercialization of a
Licensed Product in such country(ies) and (c) sells Licensed Product in such country(ies).
1.1.42
Drug Approval Application
shall mean a New Drug Application (an
NDA
) as defined in the FFDCA and the regulations promulgated thereunder, or any
corresponding application in countries outside of the United States, including, with respect to
Europe, a Marketing Authorization Application (a
MAA
) filed with the EMEA pursuant to the
centralized approval procedure or with the applicable Regulatory Authority of a country in Europe
with respect to the mutual recognition or any other national approval procedure.
- 7 -
1.1.43
Drug Master File
shall mean any drug master files filed with the FDA with
respect to the Licensed Products and any equivalent filing in other countries or regulatory
jurisdictions, e.g. an Active Substance Master File (ASMF) filed with the EMEA.
1.1.44
Effective Date
shall mean the effective date of this Agreement as set forth
in the preamble to this Agreement.
1.1.45
EMEA
shall mean the European Medicines Agency and any successor agency
thereto.
1.1.46
Europe
shall mean (a) France, Germany, Italy, Spain and the United Kingdom of
Great Britain and Northern Ireland (the
EU5 Countries
), (b) Austria, Belgium, Denmark,
Finland, Greece, Ireland, Luxembourg, The Netherlands, Portugal, and Sweden (together with the
EU5 Countries, such countries are the
EU15 Countries
), and (c) Bulgaria, Czech Republic,
Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, Slovakia, Slovenia, and that certain
portion of Cyprus included in such organization (collectively with the EU15 Countries, the
European Union
) and Iceland, Lichtenstein, Norway, Switzerland and Turkey.
1.1.47
Executives
shall have the meaning set forth in Section 6.2.4.
1.1.48
Existing Agreement
shall have the meaning set forth in the preamble to this
Agreement.
1.1.49
Expert
shall have the meaning set forth in Section 15.7.2(b)(i).
1.1.50
Exploit
shall mean to make, have made, import, use, sell or offer for sale,
including to research, Develop, Commercialize, register, Manufacture, have Manufactured, hold or
keep (whether for disposal or otherwise), have used, export, transport, distribute, promote, market
or have sold or otherwise dispose of.
1.1.51
Exploitation
shall mean the act of Exploiting a product or process.
1.1.52
FDA
shall mean the United States Food and Drug Administration and any
successor agency thereto.
1.1.53
FFDCA
shall mean the United States Federal Food, Drug, and Cosmetic Act, as
amended from time to time.
1.1.54
Field
shall mean any and all Indications for human use
.
1.1.55
FTE
shall mean, the full time equivalent of a person year of an employee
performing work directly related to the Development of a Licensed Product.
1.1.56
FTE Rate
means the rates set forth in
Exhibit 1.1.56
per FTE for work
directly related to the Development of a Licensed Product that is performed pursuant to Article 3;
the FTE Rate includes all salary, employee benefits and social costs.
- 8 -
1.1.57
Fully Allocated Costs
shall mean the costs described in
Exhibit 1.1.96
.
1.1.58
GAAP
shall mean, in the case of Licensee, United States generally accepted
accounting principles and, in the case of Licensor, International Financial Reporting Standards, in
each case, consistently applied.
1.1.59
Generic Competition
shall have the meaning set forth in Section 7.4.
1.1.60
hENT1 Biomarker Assay
shall mean an assay that will detect the presence and
proportion of human equilibrative nucleoside transporter one (hENT1) receptors in the tumor tissue,
circulating tumor cells or other relevant site of a patient.
1.1.61
Improvement
shall mean any modification, variation or revision to a compound
(including any analog or derivative of CP-4126), product or technology or any discovery,
technology, device or process or formulation related to such compound, product or technology,
whether or not patented or patentable, including any enhancement in the efficiency, operation,
manufacture (including any manufacturing process), ingredients, preparation, presentation,
formulation, means of delivery, packaging or dosage of such compound, product or technology, any
discovery or development of any new or expanded Indications for such compound, product or
technology or any discovery or development that improves the stability, safety or efficacy of such
compound, product or technology.
1.1.62
including
or any variation thereof means including without limitation and
shall not be construed to limit any general statement that it follows to the specific items or
matters immediately following it.
1.1.63
Indemnification Claim Notice
shall have the meaning set forth in Section
13.5.
1.1.64
IND
shall mean an investigational new drug application filed with the FDA for
authorization to commence Clinical Studies or Post Approval Studies and its equivalent in other
countries or regulatory jurisdictions.
1.1.65
Indemnified Party
shall have the meaning set forth in Section 13.5.
1.1.66
Indication
for a Licensed Product shall mean the use of such Licensed Product
for treating a particular disease or medical condition.
1.1.67
Information
shall mean all technical, scientific and other know-how and
information, trade secrets, knowledge, technology, means, methods, processes, practices, formulae,
instructions, skills, techniques, procedures, experiences, ideas, technical assistance, designs,
drawings, assembly procedures, computer programs, apparatuses, specifications, data, results and
other material, including: biological, chemical, pharmacological, toxicological, pharmaceutical,
physical and analytical, pre-clinical, clinical, safety, manufacturing and quality control data and
information, including study designs and protocols; assays and biological methodology; (whether or
not confidential, proprietary, patented or patentable) in written, electronic or any other form now
known or hereafter developed, but excluding the Regulatory Documentation and the Drug Master File.
- 9 -
1.1.68
Initial Regulatory Approval
of a Licensed Product for an Indication means (a)
with respect to the United States, the approval by FDA (whether through means of an NDA, subpart E,
or subpart H filing or otherwise); or (b) with respect to a country in a regulatory jurisdiction in
the Licensee Territory outside the United States, the approval by the applicable Regulatory
Authorities, of the Drug Approval Application with respect to a Licensed Product for an Indication
in the applicable regulatory jurisdiction (including, in Europe, the approval by the European
Commission of an MAA filed pursuant to the centralized approval procedure.
1.1.69
Intellectual Property Rights
shall mean Trademarks, service marks, trade
names, registered designs, design rights, copyrights (including rights in computer software),
database rights, trade secrets and any rights or property similar to any of the foregoing (other
than Patents) in any part of the world whether registered or not registered together with the right
to apply for the registration of any such rights.
1.1.70
Invoiced Sales
shall have the meaning set forth in Section 1.1.100.
1.1.71
Joint Improvement
shall mean any Improvement jointly conceived by or on
behalf of Licensor or its Affiliates, on the one hand, and Licensee or its Affiliates or
Sublicensees, on the other hand.
1.1.72
Joint Intellectual Property Rights
shall have the meaning set forth in
Section 8.1.5.
1.1.73
Joint Know-How
shall have the meaning set forth in Section 8.1.5.
1.1.74
Joint Patents
shall have the meaning set forth in Section 8.1.5.
1.1.75
Joint Steering Committee
or
JSC
shall have the meaning set forth in
Section 6.1.1.
1.1.76
Know-How
shall mean the Licensor Know-How, the Licensee Know-How and the
Joint Know-How.
1.1.77
Knowledge
shall mean the actual knowledge or good faith understanding of the
vice presidents, senior vice presidents, president or chief executive officer of a Party of the
facts and information then in their possession without any duty to conduct any investigation with
respect to such facts and information and
Knowingly
shall mean, with respect to any
action, to take such action with Knowledge.
1.1.78
Licensed Compound
shall mean CP-4126 and any analog or derivative of CP-4126
developed by Licensor.
1.1.79
Licensed Product
shall mean any oral and intravenous formulations of the
Licensed Compound existing as of the Original Execution Date, and any formulations developed
thereafter by or for Licensor or Licensee, and any other any form, mode of administration or dosage
of a pharmaceutical composition or preparation that contains the Licensed Compound as an active
ingredient, including any Improvements thereto.
- 10 -
1.1.80
Licensee
shall have the meaning set forth in the preamble to this Agreement.
1.1.81
Licensee Activities
shall have the meaning set forth in Section 3.2.2.
1.1.82
Licensee Improvement
shall mean any Improvement conceived or used by or on
behalf of Licensee or its Affiliates in connection with the Development of a Licensed Product under
this Agreement (including development of a hENT1 Biomarker Assay), but excluding any Joint
Improvement.
1.1.83
Licensee Know-How
shall mean all Information, including any Licensee
Improvements and Clinical Data, that is Controlled as of the Original Execution Date or during the
term of this Agreement by Licensee or any of its Affiliates or Sublicensees that is not generally
known and (a) is developed or acquired by or licensed to Licensee or any of its Affiliates or
Sublicensees under or in connection with this Agreement or otherwise used by or on behalf of
Licensee or any of its Affiliates or Sublicensees in the Exploitation of a Licensed Product or (b)
is necessary for the Exploitation of a Licensed Product, but excluding any Information to the
extent covered or claimed by published Licensee Patents, published Joint Patents and any Joint
Know-How.
1.1.84
Licensee Patents
shall mean all Patents Controlled by Licensee and any of its
Affiliates or Sublicensees that are necessary (or with respect to Patent applications, would be
necessary if such Patent applications were to issue as Patents) for the Exploitation of a Licensed
Product, the Licensed Compound or any Licensee Improvement thereto, including those that claim or
cover any Licensed Product, Licensee Know-How, any Licensee Improvement thereto or the Exploitation
of any of the foregoing, but excluding any Joint Patents.
1.1.85
Licensee Territory
means the Americas/Europe Territory and the Asia/ROW
Territory.
1.1.86
Licensor
shall have the meaning set forth in the preamble to this Agreement.
1.1.87
Licensor Co-Promotion Option
shall have the meaning set forth in Section
5.1.1.
1.1.88
Licensor Improvement
shall mean any Improvement conceived or used by or on
behalf of Licensor or its Affiliates in connection with the Development of a Licensed Product under
this Agreement (including development of a hENT1 Biomarker Assay) but excluding any Joint
Improvement.
1.1.89
Licensor Know-How
shall mean all Information, including any Licensor
Improvements and Clinical Data, that is Controlled by Licensor or its Affiliates as of the Original
Execution Date or during the term of this Agreement that is not generally known and (a) is
developed or acquired by or licensed to Licensor or any of its Affiliates under or in connection
with this Agreement or otherwise used by or on behalf of Licensor or any of its Affiliates in the
Development or Commercialization of a Licensed Product or (b) is necessary for the Development or
Commercialization of a Licensed Product, but excluding any Information to the
- 11 -
extent covered or claimed by published Licensor Patents, published Joint Patents and any Joint
Know-How.
1.1.90
Licensor Opt-out Right
has the meaning set forth in Section 5.8.
1.1.91
Licensor Patents
shall mean all of the Patents that Licensor and its
Affiliates Control as of the Original Execution Date or during the term of this Agreement that are
necessary (or, with respect to Patent applications, would be necessary if such Patent applications
were to issue as Patents) for the Development or Commercialization of a Licensed Product or any
Improvement thereto, including those that claim or cover the Licensed Compound, a Licensed Product
or the Development or Commercialization thereof, but excluding any Joint Patents. For the
avoidance of doubt, the Licensor Patents include, as of the Original Execution Date and as of the
Effective Date, the Patents set forth on
Exhibit 1.1.91
.
1.1.92 [Intentionally left blank].
1.1.93
Losses
shall have the meaning set forth in Section 13.1.
1.1.94
MAA
shall have the meaning set forth in Section 1.1.42.
1.1.95
Manufacture
and
Manufacturing
shall mean all activities related to
the production, manufacture, processing, filling, finishing, packaging, labeling, shipping and
holding of a Licensed Product or any intermediate thereof, including process development, process
qualification and validation, scale up, pre-clinical, clinical and commercial manufacture and
analytic development, product characterization, stability testing, quality assurance and quality
control.
1.1.96
Manufacturing Cost
shall mean the cost to Manufacture a Licensed Product as
defined in
Exhibit 1.1.96
.
1.1.97
Manufacturing Process
shall mean any process or step thereof that is
necessary or useful for Manufacturing a Licensed Product or any intermediate thereof.
1.1.98
Markings
shall have the meaning set forth in Section 4.3.2.
1.1.99
NDA
shall have the meaning set forth in Section 1.1.42.
1.1.100
Net Sales
shall mean, for any period: (a) the gross amount invoiced by
Licensee and its Affiliates or Sublicensees for the sale of a Licensed Product in an arms length
transaction exclusively for money (the
Invoiced Sales
), after deduction of allowances for
normal trade, cash and other quantity discounts, government or commercial rebates, wholesaler fees,
chargebacks and any credits actually given by Licensee for returned or defective products, all as
determined in accordance with GAAP, and excluding or making proper deductions for any costs of
packing, insurance, freight and VAT or other sales-related tax and, in the case of export orders,
any import duties or similar applicable governmental levies or export insurance costs expressly
subject in all cases to the same being separately charged on customer invoices or (b) in any sale
or other disposal of a Licensed Product otherwise than in an arms length transaction exclusively
for money, the fair market value (if higher) in the relevant country of disposal.
- 12 -
Licensees or any of its Affiliates or Sublicensees transfer of Licensed Product to
Licensee, an Affiliate or Sublicensee shall not result in any Net Sales, unless a Licensed Product
is consumed by such Affiliate or Sublicensee in the course of its commercial activities. Sales to
Distributors shall be treated identically to any other sales to Third Parties.
1.1.101
Notice Period
shall have the meaning set forth in Section 14.2.
1.1.102
Option Exercise Intent Notice
shall have the meaning set forth in Section
5.1.3.
1.1.103
Original Execution Date
means November 23, 2009.
1.1.104
Party
and
Parties
shall have the meaning set forth in the preamble
to this Agreement.
1.1.105
Patent Challenge
shall have the meaning set forth in Section 14.6.
1.1.106
Patents
shall mean (a) all national, regional and international patents and
patent applications, including provisional patent applications, (b) all patent applications filed
either from such patents, patent applications or provisional applications or from an application
claiming priority from either of these, including divisionals, continuations,
continuations-in-part, provisionals, converted provisionals and continued prosecution applications,
(c) any and all patents that have issued or in the future issue from the foregoing patent
applications ((a) and (b)), including utility models, petty patents and design patents and
certificates of invention, (d) any and all extensions or restorations by existing or future
extension or restoration mechanisms, including revalidations, reissues, re-examinations and
extensions (including any supplementary protection certificates and the like) of the foregoing
patents or patent applications ((a), (b) and (c)) and (e) any similar rights, including so-called
pipeline protection or any importation, revalidation, confirmation or introduction patent or
registration patent or patent of additions to any of such foregoing patent applications and
patents.
1.1.107
Payments
shall have the meaning set forth in Section 7.9.1.
1.1.108
Person
shall mean an individual, sole proprietorship, partnership, limited
partnership, limited liability partnership, corporation, limited liability company, business trust,
joint stock company, trust, unincorporated association, joint venture or other similar entity or
organization, including a government or political subdivision, department or agency of a
government.
1.1.109
Pharmacovigilance Agreement
shall have the meaning set forth in Section 9.3.
1.1.110
Phase I Study
shall mean a human clinical trial of a Licensed Product, the
principal purpose of which is a preliminary determination of safety in healthy individuals or
patients or similar clinical study prescribed by the Regulatory Authorities, including the trials
referred to in 21 C.F.R. §312.21(a), as amended.
- 13 -
1.1.111
Phase II Study
shall mean a human clinical trial of a Licensed Product, the
principal purpose of which is a determination of safety and efficacy in the target patient
population or a similar clinical study prescribed by the Regulatory Authorities, from time to time,
pursuant to Applicable Law or otherwise, including the trials referred to in 21 C.F.R. §312.21(b),
as amended.
1.1.112
Phase III Study
shall mean a human clinical trial of a Licensed Product on a
sufficient number of subjects that is designated to establish that a pharmaceutical product is safe
and efficacious for its intended use and to determine warnings, precautions and adverse reactions
that are associated with such pharmaceutical product in the dosage range to be prescribed, which
trial is intended to support marketing approval of a Licensed Product, including all tests and
studies that are required by the FDA from time to time, pursuant to Applicable Law or otherwise.
1.1.113
Pre-tax Net Profit
shall mean, with respect to sales of Licensed Products in
Europe, the (a) Net Sales and the fair market value of any other consideration (whether in cash,
payment in kind, exchange or other form) actually received by a Party or its Affiliates from Third
Parties with respect to transactions involving the Development or Commercialization of a Licensed
Product or Exploitation of Licensor or Licensee Patents or Know-How or Joint Intellectual Property
Rights in Europe, including upfront and milestone payments by Sublicensees and Distributors and any
payments recovered from the enforcement of Patents pursuant to Section 8.3, less (b) the
Commercialization Costs related to such sales. The Parties acknowledge that the defined term
Pre-tax Net Profit may, in any given accounting period, actually consist of a financial loss.
1.1.114
Post Approval Study
shall mean any human clinical study or other test or
study with respect to a product for an Indication that (a) is conducted solely in support of
pricing or reimbursement for such product in a country or (b) is not required to obtain or maintain
Regulatory Approval for such product for such Indication (for clarity, any human clinical study
that is intended to expand the Product Labeling for such product shall be a Clinical Study).
Subject to the foregoing, Post Approval Studies may include epidemiological studies, modeling and
pharmacoeconomic studies, post-marketing surveillance studies, investigator sponsored studies and
health economics studies.
1.1.115
Product Labeling
shall mean (a) the Regulatory Authority approved full
prescribing information for a Licensed Product for that country, including any required patient
information; and (b) all labels and other written, printed or graphic matter upon a container,
wrapper or any package insert utilized with or for such Licensed Product.
1.1.116
Product Trademarks
shall mean the Trademark(s) for the Licensed Products
Controlled by Licensor during the term of this Agreement and used or intended for use in connection
with the Commercialization of the Licensed Products.
1.1.117
Promotional Materials
shall mean all sales representative training materials
with respect to the Licensed Products and all written, printed, graphic, electronic, audio or video
matter, including journal advertisements, sales visual aids, direct mail, medical
information/education monographs, direct-to-consumer advertising, Internet postings, broadcast
- 14 -
advertisements and sales reminder aids (e.g., scratch pads, pens and other such items)
intended for use or used by a Party, its Affiliates or, with respect to Licensee, its Sublicensees
or Distributors, in connection with any promotion of the Licensed Products, except Product Labeling
for the Licensed Products.
1.1.118
Regulatory Approval
shall mean, with respect to a country, any and all
approvals (including Drug Approval Applications), licenses, registrations or authorizations of any
Regulatory Authority necessary to commercially distribute, sell or market a Licensed Product in
such country, including, where applicable, (a) pricing or reimbursement approval in such country,
(b) pre- and post-approval marketing authorizations (including any prerequisite Manufacturing
approval or authorization related thereto), (c) labeling approval, (d) technical, medical and
scientific licenses, and (e) orphan drug designations.
1.1.119
Regulatory Authority
shall mean any applicable supra-national, federal,
national, regional, state, provincial, local or other regulatory agencies, departments, bureaus,
commissions, councils or other government entities, including self-regulatory organizations,
regulating or otherwise exercising authority with respect to the Exploitation of a Licensed
Product.
1.1.120
Regulatory Documentation
shall mean all applications, registrations,
licenses, authorizations and approvals (including all Regulatory Approvals), all correspondence
submitted to or received from Regulatory Authorities (including minutes and official contact
reports relating to any communications with any Regulatory Authority) and all supporting documents
and all clinical studies and tests, relating to the Licensed Products and all data contained in any
of the foregoing, including all INDs, Drug Approval Applications, regulatory drug lists,
advertising and promotion documents, Clinical Data, adverse event files and complaint files (but
excluding any Drug Master File).
1.1.121
Regulatory Exclusivity Period
shall mean any period of data, market or other
regulatory exclusivity, including any such periods listed in the FDAs Orange Book or periods under
national implementations of Article 10.1(a)(iii) of Directive 2001/EC/83, as amended, and all
international equivalents.
1.1.122
Royalty Rate Floor
shall have the meaning set forth in Section 7.2.4.
1.1.123
Royalty Term
shall have the meaning set forth in Section 7.3.
1.1.124
Sublicensee
shall mean a Person, other than an Affiliate, that is (a)
granted a sublicense by Licensee under the grant in Section 2.1 as provided in Section 2.3 or (b)
in the case of the United States, any EU15 Country or Japan, otherwise granted rights to market,
promote and sell a Licensed Product and has the primary responsibility for the marketing and
promotion of such Licensed Product in its distribution territory and has the right to record sales
of such Licensed Product for its account.
1.1.125
Third Party
shall mean any Person other than Licensor, Licensee and their
respective Affiliates.
1.1.126
Third Party Claims
shall have the meaning set forth in Section 13.1.
- 15 -
1.1.127
Third Party Payments
shall have the meaning set forth in Section 8.4.1(a).
1.1.128
Trademark
shall include any word, name, symbol, color, designation or device
or any combination thereof, including any trademark, trade dress, brand mark, service mark, trade
name, brand name, logo or business symbol, whether or not registered.
1.1.129
United States
or
U.S.
shall mean the United States of America,
including its territories and possessions, the District of Columbia and Puerto Rico.
1.1.130
VAT
shall have the meaning set forth in Section 7.9.2.
ARTICLE 2
GRANT OF RIGHTS
2.1
Grants to Licensee
. Subject to the terms and conditions of this Agreement,
Licensor hereby grants to Licensee:
2.1.1 an exclusive (including with regard to Licensor and its Affiliates), royalty-bearing
license, with the right to grant sublicenses in accordance with Section 2.3, under the Licensor
Patents and the Licensor Know-How to Develop, to obtain, maintain and hold Regulatory Approvals
for, and to Commercialize the Licensed Products in the Field in the Licensee Territory;
2.1.2 a non-exclusive royalty-free license, with the right to grant sublicenses in accordance
with Section 2.3, under the Joint Patents (to the extent Controlled by Licensor) and the Joint
Know-How (to the extent Controlled by Licensor) or any other Intellectual Property Rights
Controlled by Licensor that relate to the Licensed Compound or the Licensed Products to Develop, to
obtain, maintain and hold Regulatory Approvals for, and to Commercialize the Licensed Products in
the Field in the Licensee Territory;
2.1.3 a royalty-bearing license, exclusive in the Licensee Territory, with the right to grant
sublicenses in accordance with Section 2.3, to use the Product Trademarks as necessary to exercise
its rights under the grants in Sections 2.1.1 and 2.1.2;
2.1.4 an exclusive royalty-bearing license and right of reference in the Licensee Territory,
with the right to grant further sublicenses and rights of reference to Sublicensees in accordance
with Section 2.3, under Licensors right, title and interest in and to any Clinical Data,
Regulatory Approvals, Drug Master File and all Regulatory Documentation that Licensor may Control
with respect to the Licensed Compound or the Licensed Products as necessary to exercise Licensees
rights under the grants in Sections 2.1;
2.1.5 to the extent necessary to exercise Licensees rights under the grants in Section 2.1,
Licensor hereby grants, and shall ensure that its Affiliates and Sublicensees grant, to Licensee
and its Sublicensees a right of reference or use (as that term is defined in 21 C.F.R. §314.3(b),
as amended from time to time), and any non-United States equivalents (including Article 10c of
Directive 2001/83/EC, as amended), to any and all data contained or referenced in
- 16 -
any Regulatory Approvals and other Regulatory Documentation relating to all Licensed Products,
including all reports, correspondence and conversation logs, and Licensor shall provide appropriate
notification of Licensees access and reference rights to the Regulatory Authorities, including an
informed consent letter under Article 10c of Directive 2001/83/EC as amended;
2.1.6 subject to Section 4.10, a non-exclusive license, with the right to grant sublicenses in
accordance with Section 2.3, under the Licensor Patents, the Licensor Know-How, the Joint Patents
(to the extent Controlled by Licensor) and the Joint Know-How (to the extent Controlled by
Licensor) to Manufacture or, subject to Section 2.3 hereof, to have Manufactured the Licensed
Compound and the Licensed Products anywhere in the world for sale in the Licensee Territory; and
2.1.7 a non-exclusive license, with the right to grant sublicenses in accordance with Section
2.3, under the Licensor Patents, the Licensor Know-How, the Joint Patents (to the extent Controlled
by Licensor) and the Joint Know-How (to the extent Controlled by Licensor) to Develop the Licensed
Compound and the Licensed Products anywhere in the world for sale in the Licensee Territory.
Licensee acknowledges that (a) the Licensor Know-How is secret and substantial and that
without Licensor Know-How Licensee would not be able to obtain and maintain Regulatory Approvals,
(b) such Regulatory Approvals will allow Licensee to obtain and maintain Regulatory Exclusivity
Periods with respect to the Licensed Product, (c) access to Licensor Know-How and the license to
the Product Trademarks will provide Licensee with a competitive advantage in the marketplace beyond
the exclusivity afforded by the Licensor Patents and the Regulatory Exclusivity Period and (d) the
milestone payments and royalties set forth in Sections 7.1, 7.2 and 5.4 are, in part, intended to
compensate Licensor for such exclusivity and such competitive advantage.
2.2
Retention of Rights
. Notwithstanding anything to the contrary in this Agreement,
Licensor retains all right, title and interest in and to the Licensor Patents, the Licensor
Know-How, the Joint Patents (to the extent Controlled by Licensor) and the Joint Know-How (to the
extent Controlled by Licensor), and the Product Trademarks as may be necessary or useful (a) to
exercise its rights and perform its obligations in connection with the co-promotion of the sale of
the Licensed Products in Europe pursuant to Article 5; and (b) to use and Exploit the Product
Trademarks for any and all purposes, subject only Licensors obligations expressly set forth
hereunder with respect thereto. Except as expressly provided herein, Licensor grants no other
right or license, including any rights or licenses to the Licensor Patents, the Licensor Know-How,
the Product Trademarks, the Licensor Corporate Name, the Licensed Compound, any other Patent or
Intellectual Property Rights or any Improvements to any of the foregoing not otherwise expressly
granted herein.
2.3
Sublicenses
. The rights and licenses granted to Licensee under Section 2.1 shall
include the right to grant sublicenses (or further rights of reference to Sublicensees) in the
Field in the Licensee Territory;
provided
,
however
, that: (a) Licensee may grant sublicenses or
otherwise appoint a Sublicensee in the United States, or the EU5 Countries only with the prior
written consent of Licensor, which will not be unreasonably withheld and as to which there will be
no additional consideration shall be payable to Licensor; (b) Licensee undertakes to be
- 17 -
primarily liable for all obligations hereunder in respect of such sublicensed rights and shall
use all Commercially Reasonable Efforts to procure the performance by any Sublicensee of the terms
of each such sublicense and (c) any Sublicensee shall comply with the applicable terms and
conditions of this Agreement. The grant of any such sublicense shall not relieve the Licensee of
its obligations under this Agreement, except to the extent they are satisfactorily performed by a
Sublicensee. Any such permitted sublicenses shall be consistent with and subject to the terms and
conditions of this Agreement. A copy of any sublicense agreement executed by Licensee (with
financial terms redacted) shall be provided to the Licensor within fourteen (14) days of its
execution.
2.4
Use of Trademarks
.
2.4.1 Subject to Sections 2.1.3 and 8.2.2 with respect to the Licensee Territory, Licensor
shall have the sole right to own and use the Product Trademarks with respect to the Exploitation of
the Licensed Products on a worldwide basis. Licensee shall not, and shall not permit its
Sublicensees, Distributors or Affiliates to use in their respective businesses, any Trademark that
is confusingly similar to, misleading or deceptive with respect to or that dilutes any (or any
part) of the Product Trademarks. Licensee shall, and shall cause its Sublicensees, Distributors
and Affiliates to, conform to the customary industry standards for the protection of Trademarks for
pharmaceutical products and guidelines of Licensor (as provided in writing by Licensor) with
respect to manner of use of the Product Trademarks. Licensee shall, and shall cause its
Affiliates, Sublicensees and Distributors to, use Commercially Reasonable Efforts not to do any act
which endangers, destroys or similarly affects, in any material respect, the value of the goodwill
pertaining to the Product Trademarks. Licensee shall not, and shall not permit its Sublicensees,
Distributors or Affiliates to, attack, dispute or contest the validity of or ownership of such
Product Trademark anywhere in the world or any registrations issued or issuing with respect
thereto. Licensee acknowledges and agrees that no ownership rights are vested or created in such
Product Trademark anywhere in the Licensee Territory by the licenses and other rights granted in
Section 2.1 and Section 8.2.2 and that all use of such Product Trademark by Licensee, its
Sublicensees, Distributors and Affiliates, including any goodwill generated in connection
therewith, inures to the benefit of Licensor, and Licensor may call for a confirmatory assignment
thereof.
2.5 [Intentionally left blank].
2.6
Subcontracting
. Any delegation or subcontracting by either Party shall be subject
to agreements containing provisions as materially protective of the other Partys rights, including
with respect to access to data, ownership and licenses of intellectual property rights and
protection of confidential information, as set forth in this Agreement.
ARTICLE 3
DEVELOPMENT AND REGULATORY
3.1
Development of the Licensed Products
.
- 18 -
3.1.1
Diligence
. Licensee shall have the right and shall use Commercially Reasonable
Efforts to, at its sole expense (except as otherwise herein expressly provided), Develop the
Licensed Products, obtain Regulatory Approval for the Licensed Products, and Commercialize the
Licensed Products in the U.S., Europe, China, Japan and in each other country within the Licensee
Territory where performing such Development and seeking such Regulatory Approval would be
Commercially Reasonable.
3.1.2
Compliance
. Licensee shall perform or cause to be performed, any and all of its
Development obligations under this Agreement in good scientific manner, and in compliance with all
Applicable Law, and shall endeavor to achieve the objectives of the Development Plans diligently
and efficiently by allocating sufficient time, effort, equipment and skilled personnel to complete
such Development activities successfully and promptly.
3.2
Development Plans and Implementation
.
3.2.1
Development Plans
. As of the Original Execution Date, Licensee has provided
Licensor with the initial development plan outline for the Americas/Europe Territory set forth in
Exhibit 3.2.1
(the
Initial Americas/Europe Development Plan
). As of the Effective Date,
Licensee has provided Licensor with the initial development plan outline for the Asia/ROW Territory
set forth in
Exhibit 3.2.1A
(the
Initial Asia/ROW Development Plan
). As Licensee further
refines such development plans, including identifying timelines, work plan activities, CROs, trial
sites, investigators, protocols, quality controls, manufacturing procedures and other details as
are customarily included in development plans for oncology products at a similar stage of
development, for each of the Americas/Europe Territory (the
Americas/Europe Development
Plan
) and the Asia/ROW Territory (the
Asia/ROW Development Plan
) (such plans
collectively, its
Development Plans
), it shall furnish copies of such Development Plans
to Licensor through the JSC. Subject to such changes as may be required to meet the requirements
of any Regulatory Authority or which arise from clinical or scientific developments, each
Development Plan shall be consistent with the Initial Americas/Europe Development Plan or the
Initial Asia/ROW Development Plan, as applicable, in all material respects. Licensee shall revise
the Development Plans, from time to time to reflect material changes to such Development Plans, for
review and approval by the JSC. Licensee shall prepare and propose amendments to the Development
Plans that may be necessary or desirable to efficiently and expeditiously complete the Development
activities, including Clinical Studies and Post Approval Studies, and to efficiently and
expeditiously obtain and maintain Regulatory Approvals and successfully Commercialize the Licensed
Products in the Licensee Territory. The JSC shall review each Development Plan and each proposed
amendment, and Licensee shall consider in good faith any comments provided by Licensor.
3.2.2
Licensee Responsibility
. Licensee shall have responsibility for the day-to-day
implementation of the Development activity included in the Development Plans with respect to any
Clinical Studies, Post Approval Studies and other Development activities for the Licensed Products
that are conducted in support of Regulatory Approvals for the Licensed Products or
Commercialization of the Licensed Products in the Licensee Territory (collectively, the
Licensee Activities
).
- 19 -
3.2.3
Licensor Responsibility
. Licensor shall cooperate with the Licensee to enable
Licensee to take over such Clinical Studies and Post Approval Studies and shall perform such
activities with respect thereto, at Licensees cost (except as otherwise provided in Section 3.3),
as are reasonably requested of it by Licensee and in the Development Plans under the direction of
the Licensee and subject to the Development Plans and, with respect to the Americas/Europe
Territory, the Development Budget. As reasonably requested from time to time by Licensee, Licensor
shall provide personnel to support the Development of the Licensed Products in Europe.
3.3
Development Costs
.
3.3.1
Pre-Clinical Studies
. Licensor agrees to complete, and bear the full cost of,
the pre-clinical studies specified on
Exhibit 3.3.1
in support of Developing the Licensed Products
in the Americas/Europe Territory. Licensor shall use its Commercially Reasonable Efforts to
complete such studies prior to the first filing of the NDA or MAA as set forth in the Initial
Americas/Europe Development Plan. The costs of any other pre-clinical studies performed by
Licensor in connection with obtaining Regulatory Approvals in the Americas/Europe Territory shall
be borne equally by Licensor and Licensee.
3.3.2
Funding by Licensor for Certain Development Activities to be Conducted in 2011
.
Licensor shall reimburse Licensee up to Three Million U.S. Dollars ($3,000,000) for costs incurred
by Licensee to Third Parties between the Effective Date and December 31, 2011 in the course of
performing the Development activities set forth in
Exhibit 3.3.2
. Such costs shall be determined
and the payments made in the manner set forth in
Exhibit 3.3.2
.
3.3.3
Costs of Development in the Asia/ROW Territory
. Except as set forth in Section
3.3.2, Licensee shall be solely responsible for, and pay, all costs for all Development activities
conducted in connection with obtaining Regulatory Approvals in the Asia/ROW Territory. For the
avoidance of doubt, such costs shall not be included in Development Costs.
3.3.4
Development Cost Reports
. Within 45 days after each of June 30 and December 31,
Licensee shall provide a statement disclosing in reasonable detail the Development Costs incurred
in the six months prior to such dates.
3.4
Regulatory Matters
.
3.4.1
Regulatory Responsibilities With Respect to Licensee Territory; Preparation of
Regulatory Submissions
.
(a) Licensee shall be responsible for all regulatory submissions with respect to Regulatory
Approvals, including Drug Approval Applications, for the Licensed Products in the Licensee
Territory and Licensee Activities in those countries where such activities are conducted, and
ownership of Regulatory Approvals and related submissions within the Licensee Territory relating to
the Licensed Products shall be governed by Section 8.1.3.
(b) As of the Original Execution Date, Licensor is conducting three Clinical Studies for the
Licensed Products that are described in
Exhibit 3.4.1
. Licensor shall continue to perform the two
Phase I Studies formulation of the Licensed Product. Each Party
- 20 -
shall use reasonable efforts to transfer sponsorship and ongoing responsibility (including
Licensee obtaining an IND in its name) for the ongoing Phase II Study for the IV formulation of the
Licensed Products to Licensee as soon as reasonably practical so that Licensee may be the sponsor
of such Phase II Study for the dosing of the first patient under the amended protocol contemplated
under the Initial Americas/Europe Development Plan. Substantially simultaneously with the transfer
of the sponsorship of the Phase II Study for the IV formulation of the Licensed Product, Licensor
shall transfer to Licensee the orphan drug designation previously obtained by the Licensor for the
Licensed Product from the EMEA. Licensor shall also assign to Licensee those clinical investigator
agreements related to the Phase II Study for the IV formulation of the Licensed Product. All
Development Costs incurred by Licensor after the Original Execution Date in the conduct of such
Clinical Studies shall be reimbursed by Licensee within 30 days after invoices submitted by
Licensor monthly.
3.4.2
Clinical and Non-Clinical Data
.
(a) Each Party shall periodically provide updates to the other Party regarding clinical and
non-clinical data, and other results and analyses with respect to any Development activities with
respect to the Licensed Products, reasonably promptly after such data, results and analyses become
available. All such data transfers and exchanges shall be subject to the confidentiality
obligations of the Parties contained in ARTICLE 11.
(b) Each Party shall support the other, as may be reasonably necessary, in obtaining
Regulatory Approvals for the Licensed Products, including providing necessary documents or other
materials required by Applicable Law to obtain Regulatory Approvals, in each case in accordance
with the terms and conditions of this Agreement and the Development Plans.
3.4.3
Communications with Regulatory Authorities
.
(a)
Licensee Territory
.
(i)
In General
. Licensee shall be solely responsible for any communications
with the Regulatory Authorities occurring or required in connection with performing its
responsibilities set forth in Section 3.4.1 and shall designate a representative to serve as
the designated regulatory representative with respect to such communications.
(ii)
Major Communications
. Licensee will keep Licensor informed of any other
significant interface or communication with the FDA or other Regulatory Authority which
might affect efforts to obtain Regulatory Approval for the Licensed Products.
(iii)
Regulatory Contacts
. During the Co-Promotion Period, Licensee shall
provide Licensor with prior notice of all meetings and teleconferences with representatives
of Regulatory Authorities regarding any Licensed Product intended for sale in Europe.
Licensor shall have the right to have representatives present as observers at all such
meetings and teleconferences, to the extent not prohibited by such Regulatory Authority.
During the Co-Promotion Period, Licensee shall use reasonable
- 21 -
efforts to provide Licensor with a reasonable opportunity to review and comment upon
submissions to, and correspondence with, any Regulatory Authority in Europe, and Licensee
shall consider in good faith all comments provided by Licensor in a timely manner. Without
limiting the foregoing, during the Co-Promotion Period, Licensee shall use reasonable
efforts to confirm in writing to Licensor all communications with a Regulatory Authority
with respect to a Regulatory Approval (including filings therefor) and to provide to
Licensor copies of all documents sent to or received from such Regulatory Authority
regarding such Regulatory Approvals.
(b)
Adverse Event Experiences
. Without limitation to anything contained in this
Section 3.4.3, each Party shall provide to the other Party documentation concerning Adverse Event
Experiences required to be reported to a Regulatory Authority pursuant to Applicable Law in
accordance with ARTICLE 9.
3.4.4
Pricing and Reimbursement Approvals
. Licensee shall have sole authority over
and be responsible for all pricing and reimbursement approval proceedings relating to the Licensed
Products in the Licensee Territory. Licensee shall provide Licensor with reasonable advance notice
of all such meetings and advance copies of all related documents (including documents to be
submitted in connection with pricing and reimbursement approvals) and other relevant information
relating to such meetings and shall consider in good faith all comments provided by Licensor.
During the Co-Promotion Period, Licensor shall consult with Licensee concerning all such pricing
and reimbursement approvals and consider in good faith all comments provided by Licensor.
3.4.5
Regulatory Records
. Licensee and Licensor each shall maintain, or cause to be
maintained, records of its respective Development activities with respect to the Licensed Products
in sufficient detail and in good scientific manner appropriate for patent and regulatory purposes,
which shall be complete and accurate and shall fully and properly reflect all work done and results
achieved in the performance of its respective Development activities, and which shall be retained
by such Party for at least three (3) years after the termination of this Agreement, or for such
longer period as may be required by Applicable Law. All records should be retained in a secure
area reasonably protected from fire, theft and destruction. Each Party shall have the right,
during normal business hours and upon reasonable notice, to inspect and copy any such records,
except to the extent that a Party reasonably determines that such records contain Confidential
Information that is not licensed to the other Party, or to which the other Party does not otherwise
have a right hereunder. Licensee shall provide Licensor with such additional information regarding
the Licensee Activities as Licensor may reasonably request from time to time.
3.4.6 [Intentionally left blank].
3.5
hENT1 Biomarker
. Licensee and Licensor shall Develop a hENT1 Biomarker Assay in
accordance with a joint development plan that the Parties shall establish within 60 days after the
Original Execution Date. If the Parties succeed in Developing a hENT1 Biomarker Assay and
notwithstanding any termination of this Agreement, Licensee agrees to grant to Licensor an
exclusive royalty-free license to use such hENT1 Biomarker Assay anywhere in the world in
connection with any other product developed by Licensor with respect to which the hENT1
- 22 -
Biomarker Assay would be necessary or useful. The Parties shall keep one another informed of
their respective efforts to Develop a hENT1 Biomarker Assay and, to the extent reasonably
practical, will seek to coordinate such efforts through dialogue in the JSC. With respect to
Development of a hENT1 Biomarker Assay, each Party shall pay its internal costs and Licensee shall
pay all costs payable to Third Parties. Licensor is now contemplating entering into an agreement
with a Third Party under terms previously disclosed to Licensee for the license of certain rights
to a hybridoma expressing an antibody for use in an hENT1 Biomarker Assay. If Licensor enters into
such agreement, it shall contain provisions permitting the sublicense of rights to Licensee to the
extent required to Develop and Commercialize an hENT1 Biomarker Assay as provided in this Section
3.5. Each Party shall have the same regulatory obligations concerning the hENT1 Biomarker Assay as
it does under this ARTICLE 3 for Licensed Products. If Licensor succeeds in independently
Developing a hENT1 Biomarker Assay, Licensor shall grant to Licensee an exclusive license to use
such hENT1 Biomarker Assay in the Licensee Territory in connection with the Licensed Products,
subject to Licensee bearing 100% of whatever Third Party royalties and payments are applicable to
the use or sale of such Assay in the Licensee Territory.
3.6 [Intentionally left blank].
ARTICLE 4
COMMERCIALIZATION
4.1
Commercialization of the Licensed Product
.
4.1.1
In General
. Except as otherwise provided in Article 5 following the
Co-Promotion Exercise Date, Licensee shall have the sole right to Commercialize the Licensed
Products in the Licensee Territory at its sole expense in accordance with the Commercialization
Plans and shall do so in compliance with this Agreement and all Applicable Law.
4.1.2
Commercialization Obligations
. Licensee shall use Commercially Reasonable
Efforts to Commercialize the Licensed Products in the U.S., Europe, China, Japan, and in each other
country within the Licensee Territory where Commercializing the Licensed Products would be
Commercially Reasonable.
4.1.3
Product Trademarks
. Except with respect to the Corporate Names as provided in
Section 4.3.2, Licensee and its Affiliates, Sublicensees and Distributors shall Commercialize the
Licensed Products solely under the Product Trademarks.
4.2
Non-Compete
. During the term of this Agreement, neither Party nor its Affiliates
shall Develop, market, detail, promote or otherwise Commercialize anywhere in the world any
pharmaceutical product (other than the Licensed Products) containing gemcitabine or any other
prodrugs of dFdCTP and/or dFdCDP (a
Competing Product
). Notwithstanding the foregoing, if
either Party is acquired by a Third Party, or merged with or into a Third Party in a transaction in
which the shareholders of the Party immediately prior to such transaction own less than 50% of the
voting rights of such Party or of the resulting entity immediately after such transaction, then
such Party and its Affiliates may continue to Develop, market, detail, promote or otherwise
- 23 -
Commercialize in the Licensee Territory any Competing Product that was being Developed or
Commercialized by such a Third Party (or any of its Affiliates) prior to the date of such
transaction.
4.3
Promotional Materials and Activities
.
4.3.1
In General
. Licensee shall be responsible for preparing all Promotional
Materials used to support the Commercialization of the Licensed Products in the Licensee Territory.
4.3.2
Markings
. All Promotional Materials, packaging and Product Labeling for the
Licensed Products used by Licensee, its Affiliates, Sublicensees or Distributors in connection with
the Licensed Products in any country in the Licensee Territory shall contain (i) the Product
Trademarks, (ii) the Corporate Name of Licensee and (iii) if required by Applicable Law, the logo
and corporate name of the manufacturer (collectively, the
Markings
). During the
Co-Promotion Period and to the extent permitted by Applicable Law, all Promotional Materials,
packaging and Product Labeling for the Licensed Products used by Licensee, its Affiliates,
Sublicensees or Distributors in connection with the Licensed Products in any country in Europe
shall also contain the logo and Corporate Name of each Party with equal prominence.
4.4
Statements and Compliance with Applicable Law
.
4.4.1
Public Statements Regarding Licensed Products
. Licensee shall be responsible
for disseminating accurate information regarding the Licensed Products based on Product Labeling
and Promotional Materials for the Licensed Products (and for causing its Affiliates, Sublicensees
and Distributors to so disseminate such accurate information). In exercising its rights pursuant
to this ARTICLE 4, Licensee shall seek to prevent claims or representations in respect of the
Licensed Products or the characteristics of the Licensed Products (e.g., safety or efficacy) being
made by or on behalf of it or its Affiliates, Sublicensees or Distributors (by members of its or
their sales force or otherwise) that do not represent an accurate or fairly balanced summary or
explanation of the Product Labeling for the Licensed Products in the country in question.
4.4.2
Sales Force Compliance
. Licensee shall use Commercially Reasonable Efforts to
train and monitor its sales representatives so that such sales representatives: (i) use only
Promotional Materials (without any addition, deletion or other modification) for the promotion of
the Licensed Products in the Licensee Territory, (ii) limit claims of efficacy and safety for the
Licensed Products to those that are consistent with Applicable Law and with approved (by the
appropriate Regulatory Authority) promotional claims in Product Labeling and Promotional Materials
for the Licensed Products, and not add, delete or otherwise modify claims of efficacy and safety in
the promotion of the Licensed Products in any respect from those claims of efficacy and safety that
are contained in such approved Product Labeling and Promotional Materials and (iii) Commercialize
the Licensed Products in accordance in all material respects with Applicable Law and applicable
codes for the promotion of pharmaceutical products, including marketing, promotion and distribution
of medicinal products.
- 24 -
4.4.3
Medical and Other Inquiries
. The Licensee shall be responsible for responding
to all medical questions or inquiries from customers or others in the Licensee Territory relating
to the Licensed Products sold in Licensee Territory. The Licensee shall keep such records and make
such reports as are reasonably necessary to document such communications in compliance with all
Applicable Law.
4.4.4
Compliance with Laws
. Licensee shall comply with all Applicable Law with
respect to the Commercialization of the Licensed Products. Neither Party shall be required to
undertake any activity relating to the Commercialization of the Licensed Products that it believes,
in good faith, may violate Applicable Law. Licensee shall in all material respects conform its
practices and procedures relating to educating the medical community in the Licensee Territory with
respect to the Licensed Products to any applicable industry association regulations, policies and
guidelines, as the same may be amended from time to time and shall comply with Applicable Law with
respect thereto.
4.5
Use of Distributors
. Licensee shall have the right to use Distributors to
Commercialize the Licensed Products in any country in the Licensee Territory in which Licensee
deems it Commercially Reasonable to do so; provided, that (a) no Distributors shall be appointed
for Europe prior to the filing of the MAA and (b) during the Co-Promotion Period, Licensee shall
have obtained Licensors prior written consent prior to the appointment of any Distributor in
Europe.
4.6
Sales and Distribution in Licensee Territory
. Licensee shall be solely
responsible for invoicing and booking sales, establishing all terms of sale (including pricing and
discounts) and warehousing and distributing the Licensed Products in the Licensee Territory and
shall perform all related services, in each case in a manner consistent with the terms and
conditions of this Agreement and the Commercialization Plans. Licensee shall also be solely
responsible for handling all returns, recalls or withdrawals in accordance with ARTICLE 10, order
processing, invoicing and collection, distribution and inventory and receivables in the Licensee
Territory.
4.7 [Intentionally left blank].
4.8 [Intentionally left blank].
4.9
Commercialization Plans and Implementation
.
4.9.1
Commercialization Plan
. The Commercialization of the Licensed Products shall be
conducted pursuant to an annual plan and budget to be prepared by Licensee with respect to the
Americas/Europe Territory (the
Americas/Europe Commercialization Plan
) and the Asia/ROW
Territory (the
Asia/ROW Commercialization Plan
) (the Americas/Europe Commercialization
Plan and the Asia/ROW Commercialization Plan, collectively the
Commercialization Plans
),
which plans and budgets shall be consistent with Licensees obligations set forth in Section 4.1.
The Commercialization Plans shall include, when and as formulated by Licensee: with respect to the
Americas/Europe Territory or the Asia/ROW Territory, as applicable, (i) general strategies for the
promoting, Detailing, marketing, sales and distribution of the Licensed Products in each applicable
countries, including the identification of any Third Parties engaged or to be engaged in connection
with such activities and the
- 25 -
arrangements with them that have been or are proposed to be agreed upon (including policies
and procedures for adjustments, rebates, bundling and the like), (ii) estimated launch date, market
and sales forecasts, in numbers of patients and local currency, and competitive analysis for the
Licensed Products for the Licensee Territory and for each country within the Licensee Territory,
(iii) product positioning and promotional plans (including examples of planned Promotional
Materials), (iv) Phase IV clinical trial support, if applicable, (v) managed care contracting
strategy, (vi) conduct of Licensed Product-specific training programs for sales representatives,
(viii) a detailed manufacturing plan, (ix) pre-launch commercialization activities and the expected
date of launch, (x) sales force size and allocation throughout the Licensee Territory and, during
the Co-Promotion Period, (xi) a detailed budget for the Commercialization Costs to be incurred in
connection with performing such Americas/Europe Commercialization Plan and (xii) an allocation of
specific responsibilities of each of the Parties with respect to Commercialization objectives,
including a specification of target market segments and Detailing requirements and strategy to be
achieved during the calendar year to which the Commercialization Plans relate. The Parties agree
that any forecasts provided by Licensee as part of the Commercialization Plans shall be regarded as
Licensees good faith estimates based upon conditions then existing and shall not be binding upon
Licensee. The first such Commercialization Plans shall be prepared by Licensee and furnished to
Licensor through the JSC by no later than twelve months before the anticipated launch of the first
Licensed Product in each of the Americas/Europe Territory and Asia/ROW Territory, respectively, and
shall thereafter be updated annually, with delivery of draft Commercialization Plans to Licensor by
no later than November 1 of each successive Calendar Year and delivery of the final
Commercialization Plans following the approval of such Commercialization Plans by the board of
directors of Licensee.
4.9.2
Ongoing Disclosure Regarding Commercialization
. Licensee will keep Licensor
informed about Licensees efforts to Commercialize the Licensed Products, including summaries of
Licensees (and its Affiliates and Sublicensees) major marketing activities, progress towards
meeting the goals and milestones in the Commercialization Plans, significant developments in the
commercialization of the Licensed Products, any reasons for any deviations or variances (either in
time or in sales or other numerical figures) in meeting sales projections, milestones or timelines
in the Commercialization Plans, any proposed changes in the Commercialization Plans, and
representative samples of Promotional Materials. Such disclosures will be made through the members
of the JSC in a written report provided to Licensor at least once every six months while Licensed
Products are being sold anywhere in the Licensee Territory.
4.10
Manufacture of Licensed Product
.
4.10.1
Existing Material
. Promptly following the Original Execution Date, Licensor
shall make available to Licensee all existing clinical inventory of the Licensed Products meeting
criteria determined by Licensee and furnished to Licensor. Licensee shall pay 50% of the
Manufacturing Costs for all such material that was released prior to the Original Execution Date
and 100% of the Manufacturing Costs of any such material that is released thereafter. Thereafter,
Licensee shall, with the assistance of Licensor, arrange the Manufacture of additional clinical
material to support Phase II Studies if the existing, transferred inventories are determined by
Licensee to be inadequate to complete the Phase II Studies. Licensor shall maintain and
- 26 -
complete ongoing stability studies of the Licensed Products and keep Licensee reasonably
informed with regard to the results from those studies; provided, that Licensee shall pay all
Development Costs incurred in performing such studies after the Original Execution Date.
4.10.2
Scaled Up Manufacturing
. Licensor and Licensee shall discuss and agree on the
optimal strategy for Manufacturing development and scale-up, and for the further Manufacture of the
GMP materials for Phase III Studies and commercial supply of the Licensed Product. In particular,
Licensee shall be responsible for leading process development activities and the Manufacture of GMP
materials for Phase III Studies and commercial supply, and shall reimburse Licensor for its
documented internal costs on an FTE Rate basis and its Third Party costs to assist with the
foregoing activities.
ARTICLE 5
LICENSOR CO-PROMOTION OPTION
5.1
General
.
5.1.1
Licensor Co-Promotion Option
. Licensor shall have the right (but not the
obligation) to, by giving notice to Licensee at any time prior to the later of (x) three months
after the date on which Licensee notified Licensor under Section 5.1.2 of the expected date of the
filing in Europe of the first MAA for a Licensed Product or (y) the first MAA for a Licensed
Product is filed in Europe (such date, the
Co-Promotion Expiration Date
), to elect to
share in the Commercialization activities of the Licensed Products in Europe with Licensee under
the terms of this Agreement in lieu of receiving royalties from Licensee in respect of Europe under
ARTICLE 7 (the
Licensor Co-Promotion Option
). Licensor shall notify Licensee in writing
of its decision, in its sole discretion, to elect to exercise the Licensor Co-Promotion Option in
Europe.
5.1.2
Notices of Anticipated Option Dates
. Promptly following the availability of (a)
top-line results from the first Phase II Study of a Licensed Product and (b) top-line results from
the first Phase III Study of a Licensed Product, Licensee shall notify Licensor and shall provide
all then available data, results and reports of such studies, and Licensor shall also provide
Licensor three months prior written notice of the date it expects to file the first MAA for a
Licensed Product.
5.1.3
Statement of Initial Development Costs and Other Information
. If Licensor, in
good faith, believes that, subject to the procedures described below, it is more than likely to
exercise Licensor Co-Promotion Option, it shall send a notice to Licensee indicating its intent to
so exercise its rights (the
Option Exercise Intent Notice
). Such Option Exercise Intent
Notice shall include an anticipated Co-Promotion Exercise Date. Within ten (10) Business Days
following the date of the Option Exercise Intent Notice, Licensee shall deliver to Licensor:
(a) a statement, prepared in accordance with GAAP and consistent with the information
regarding Development efforts previously furnished to Licensor through the JSC, setting
forth in reasonable detail the aggregate Development Costs that have been incurred by it
from the Original Execution Date through the anticipated Co-
- 27 -
Promotion Exercise Date. Unless such aggregate amount is disputed by Licensor within
ten (10) days of its delivery, the aggregate figure reflected in Licensees statement shall
be definitive for purposes of ARTICLE 5. If the Licensor disputes such statement, then such
Dispute shall be resolved in accordance with Section 15.7.2(b).
(b) Projection of Development Costs for the next 3 Calendar Years (the
Development
Budget
);
(c) Americas/Europe Commercialization Plan and Projection of Commercialization Costs in
Europe for the next 3 Calendar Years;
(d) Such other material results, development protocols, market potential projections
and other information possessed by Licensee (and that was not previously provided to
Licensor) that in Licensees reasonable judgment would be material for making Licensors
decision to exercise the Licensor Co-Promotion Option.
5.1.4 Within twenty (20) Business Days following the later of the date of delivery of
Licensees statement of the Initial Development Costs, or the resolution of any Dispute with
respect to such statement, and the other information described in Section 5.1.3, Licensor shall
deliver either a notice of its exercise of the Licensor Co-Promotion Option, or a notice that it
has decided not to so exercise such Licensor Co-Promotion Option at such time (without prejudice to
its right to so exercise the Licensor Co-Promotion Option at another time prior to the Co-Promotion
Expiration Date.)
5.1.5 It shall be Licensors responsibility to allow for sufficient time following the
delivery of an Option Exercise Intent Notice for Licensor to exercise the Licensor Co-Promotion
Option prior to the specified dates set forth in Section 5.2 below and prior to the Co-Promotion
Expiration Date.
5.2
Development Costs Upon Exercise of Licensor Co-Promotion Option
.
5.2.1
Initial Development Costs
. Upon the exercise by Licensor of the Licensor
Co-Promotion Option provided for in Section 5.1.1 and within sixty (60) Business Days following the
Co-Promotion Exercise Date, Licensor shall make one of the two following payments to Licensee,
dependent upon the timing of the Co-Promotion Exercise Date:
(a) if the Co-Promotion Exercise Date occurs following the date of the provision to Licensor
by Licensee of top-line results from the first Phase II Study of a Licensed Product but prior to
the provision to Licensor by Licensee of top-line results from the first Phase III Study of a
Licensed Product, Licensor shall make a payment to Licensee in the amount of Thirty-Five Percent
(35%) of Development Costs incurred from the Original Execution Date through the Co-Promotion
Exercise Date; or
(b) if the Co-Promotion Exercise Date occurs following the date of the provision to Licensor
by Licensee of top-line results from the first Phase III Study of a Licensed Product, Licensor
shall make a payment to Licensee in the amount of Forty Percent (40%) of Development Costs incurred
from the Original Execution Date through the Co-Promotion Exercise Date.
- 28 -
If Licensor does not make such payment within such time period, the Licensor Co-Promotion
Option shall not be effective and Licensor shall no longer have the right to exercise the Licensor
Co-Promotion Option.
5.2.2
Responsibility for Development Costs following Co-Promotion Exercise Date
.
During the Co-Promotion Period, the Parties shall share all Development Costs in the following
proportions: Licensor shall bear Twenty-Five Percent (25%) of all Development Costs and Licensee
shall bear Seventy Five Percent (75%) of all Development Costs;
provided,
that (a) each Party shall
pay 50% of all filing fees in connection with the filing of applications for Regulatory Approvals
for a jurisdiction in Europe and 50% of any Development Costs incurred to conduct a Clinical Study
required only by the EMEA; and (b) Licensee shall bear 100% of all Development Costs (x) incurred
in the first 12 months following the Co-Promotion Exercise Date exceeding 110% of the amount for
such time period set forth in the Development Budget provided under Section 5.1.3 and (y) incurred
in the following 24 months exceeding 115% of the amount for such time period set forth in the
Development Budget provided under Section 5.1.3 (excluding, in each such case (x) or (y),
Development Costs incurred to perform any new Clinical Study that is required by a Regulatory
Authority and was not identified in the Americas/Europe Development Plan at the time of the
Co-Promotion Exercise Date).
5.3
Milestone Payments Upon Exercise of Licensor Co-Promotion Option
. If the Licensor
elects to exercise the Licensor Co-Promotion Option, then (a) the milestone payments set forth in
Sections 7.1.2(c), 7.1.2(e), 7.1.2(g) and 7.1.2(i) shall be reduced by 33.3% and (b) the milestone
payments set forth in Section 7.1.3 shall each be reduced by 40%.
5.4
Profit Sharing in Lieu of Royalties
. If Licensor elects to exercise the Licensor
Co-Promotion Option, then during the Co-Promotion Period Licensor shall not be entitled to any
royalty payments pursuant to Section 7.2 with respect to Net Sales of the Licensed Product in
Europe recorded from and after the Co-Promotion Exercise Date. In lieu of such royalties, during
the Co-Promotion Period Licensor and Licensee shall divide the Pre-tax Net Profit from Net Sales of
Licensed Products in Europe on a fifty/fifty basis.
5.5
Americas/Europe Commercialization Plan after Exercise of Co-Promotion Option
.
During the Co-Promotion Period, while Licensee shall maintain overall authority for the
Commercialization of the Licensed Products in Europe, the Americas/Europe Commercialization Plan
shall include mutually agreed upon obligations on the part of Licensor to provide specified levels
of personnel and resources in specific countries within Europe to assist Licensee in the
Commercialization of the Licensed Products, as well as coordination of promotional materials used
by each Party. In any event, during the Co-Promotion Period Licensor shall have the right, on a
Licensed Product-by-Licensed Product basis, to provide up to 50% of the Details in each of the EU5
Countries, Denmark, Norway and Sweden, and a lesser percentage of Details in other European
countries;
provided,
that, on the Co-Promotion Exercise Date, Licensor has established, or is then
planning in connection with another product at a similar stage of development to establish, prior
to launch of the first Licensed Product in any such country, an organization having a sufficient
number of sales representatives to conduct such Detailing activities.
- 29 -
5.6
Amendment to Agreement
. Promptly following the Co-Promotion Exercise Date, the
Parties will negotiate in good faith an amendment to this Agreement to provide additional detail
regarding the supervision and implementation of the co-promotion activities contemplated by Section
5.5, periodic reporting of Pre-tax Net Profits and the calculations therefor (including monthly
reporting of estimated Pre-tax Net Profits and quarterly payment reconciling amounts), payment and
credit mechanisms to implement Section 5.4, procedures for the defense of Third Party claims that
are subject to shared costs under Section 13.4, procedures to assure that the Detailing assigned to
each Party within the parameters established by Section 5.5 shall be allocated in an equitable and
proportional manner among targeted prescribers (taking into account specialty, expected prescribing
level, geography and other relevant factors), management provisions relating to Licensor sales or
medical marketing representatives and the coordination of their efforts by Licensees marketing
management, and other provisions typically found in co-promotion agreements between parties in the
pharmaceutical industry. If the Parties fail to reach such an agreement within forty-five (45)
days after the Co-Promotion Exercise Date, any Dispute in connection therewith shall be resolved in
accordance with Section 15.7.2(b).
5.7
Accounting Procedures
. For purposes of determining Development Costs and
Commercialization Costs, any expense allocated by either Party to a particular category under
Development Costs and Commercialization Costs for the Licensed Products shall not also be allocated
to another category under Development Costs and Commercialization Costs for the
Licensed Products. Each Party shall determine Development Costs and Commercialization Costs
with respect to the Licensed Products using its standard accounting procedures in accordance with
GAAP, consistently applied, to the maximum extent practical as if the Licensed Products were
solely-owned products of the Party (
provided
that the application of such procedures results, on
balance, in outcomes that are fair and equitable to both Parties taking into consideration the
interests of both Parties as reflected in this Agreement). Each Party shall have the right to
audit the other Partys records to confirm the accuracy of the other Partys costs and reports as
provided in Section 7.12. If the Parties fail to agree on the accuracy of such costs and reports,
such Dispute shall be resolved in accordance with Section 15.7.2(b).
5.8
Licensor Right to Opt-Out
. Licensor shall have the right to opt-out of its rights
under this ARTICLE 5 to Co-Promote the Licensed Products in Europe upon six (6) months prior
written notice to Licensee (the
Licensor Opt-out Right
).
5.8.1
Conversion to Royalty
. Following the effective date of the Licensor Opt-out
Right, Licensor shall no longer share in the Pre-tax Net Profit as provided in Section 5.4 and
Licensee shall instead (a) pay 100% of the amount of all milestone payments set forth in Sections
7.1.2 and 7.1.3 accruing thereafter and (b) in addition to royalties payable under Section 7.2.1,
pay an additional royalty on Net Sales in Europe as provided in Section 7.2.3.
ARTICLE 6
JOINT STEERING COMMITTEE
6.1
Joint Steering Committee (JSC)
.
- 30 -
6.1.1
Formation and Purpose
. For the purpose of establishing a thorough and effective
co-operation and communication between them during the term of this Agreement, within thirty (30)
days after the Original Execution Date the Parties shall establish a
Joint Steering
Committee
or
JSC
in accordance with this Section 6.1 to exchange information
relating to the Development and the Commercialization of the Licensed Products, as further
described in this Section 6.1 or otherwise set forth in this Agreement, and, among other things, to
facilitate the flow of information with respect to Development activities being conducted for the
Licensed Products and Clinical Studies and Post Approval Studies for the Licensed Products
conducted under the Development Plans. Each Party shall designate its initial members of the JSC
within thirty (30) days after the Original Execution Date by written notice to the other Party.
6.1.2
Specific Responsibilities of the JSC
. At its meetings, the JSC shall,
consistent with the terms and conditions of this Agreement,
(a) review the Development Plans and, during the Co-Promotion Period, approve the
Americas/Europe Development Plan for the United States and Europe and the Development Budget
(including all amendments),
(b) monitor the Licensees progress toward the objectives and timelines set forth in the
Development Plans and the Commercialization Plans and, during the Co-Promotion Period, the progress
of both Parties towards those objectives with respect to the Americas/Europe Development Plan and
the Americas/Europe Commercialization Plan,
(c) review the Commercialization Plans and, during the Co-Promotion Period, approve the
Americas/Europe Commercialization Plan for Europe,
(d) undertake and/or approve such other matters as are specifically provided for the JSC under
this Agreement, and
(e) serve as a forum for communication between the Parties and to resolve issues as mutually
agreed.
The JSC shall create, when advisable, subcommittees such as, for example, a joint development
committee and/or a joint manufacturing committee, comprised of representatives of each Party having
qualifications and experience relevant to a productive dialogue on the subject matter of each such
subcommittee. All such subcommittees shall report to the JSC.
6.2
General Provisions
. The following general provisions shall govern the conduct of
the JSC and such other subcommittees as the JSC may establish from time to time under this
Agreement (each, a
Committee
) except as otherwise expressly provided elsewhere in this
Agreement or as agreed to by the Parties in writing:
6.2.1
Membership
. Each Committee shall be comprised of an equal number of
representatives from each of Licensor and Licensee, selected by such Party. The minimum number of
such representatives on each Committee shall be two (2) for each of Licensor and Licensee, which
may be increased to such other number as the Parties may agree. Each of Licensee and Licensor may
replace its respective Committee representatives at any time, with prior written notice to the
other Party. In addition, each Party may, at its discretion, invite
- 31 -
employees, and, with the
consent of the other Party, consultants or scientific advisors, to attend meetings of each
Committee as non-voting observers. Licensee shall designate one of its representatives to serve as
chairperson each Committee which designation Licensee may change from time to time by written
notice to Licensor.
6.2.2
Meetings and Minutes
. Each Committee shall meet quarterly, or as otherwise
agreed to by the Parties, with the location of such meetings designated by Licensee,
provided
that
each Committee may meet by teleconference if in-person meetings are not feasible. The chairperson
of each Committee shall be responsible for calling meetings. Each Party shall bear its own
personnel, travel and lodging expenses relating to Committee meetings. No costs incurred by either
Party in attending such meetings shall be included within Commercialization Costs or Development
Costs.
6.2.3
Procedural Rules
. The Committee shall have the right to adopt such standing
rules as shall be necessary for its work to the extent that such rules are not inconsistent with
this Agreement. A quorum of the Committee shall exist whenever there is present at a meeting at
least one representative appointed by each Party. Members of the Committee may attend a meeting
either in person or by telephone, video conference or similar means in which each participant can
hear what is said by, and be heard by, the other participants. Representation by proxy shall be
allowed. With respect to those actions which require the approval of the JSC pursuant to the
express terms of this Agreement, the Committee shall take action by consensus of the members
present at a meeting at which a quorum exists, with each Party having a single vote
irrespective of the number of representatives of such Party in attendance or by a written
resolution signed by a representative of each of the members of the Committee. Employees or
consultants of either Party that are not members of the Committee may attend any meeting of the
Committee;
provided
,
however
, that such attendees (a) shall not vote or otherwise participate in
the decision-making process of the Committee and (b) are bound by obligations of confidentiality
and non-disclosure equivalent to those set forth in ARTICLE 11.
6.2.4
Decisions of the JSC
. The JSC may make decisions with respect to any subject
matter that is subject to the JSCs decision-making authority and functions as set forth in Section
6.1.2. All decisions of the JSC shall be made by unanimous vote or written consent, with each Party
each having, collectively, among its respective members, one vote in all decisions. Each Party
shall have obtained all necessary board of directors and other internal approvals before attending
meetings of the JSC regarding all subjects identified in an agenda for a meeting and before casting
its vote on any issue. As to subjects not so identified in advance agendas, the JSC shall, if
necessary, defer decision making for a period of no more than ten (10) Business Days to permit such
authorizations to be obtained. The JSC shall use reasonable efforts to resolve the matters within
its roles and functions or otherwise referred to it. If the JSC cannot reach consensus on a matter
within ten Business Days after such matter has been brought to the JSCs attention, then such
matter shall be handled in the manner set forth below:
(a) any dispute that cannot be resolved by the JSC shall be referred to the Chief Executive
Officer of each Party for resolution (the
Executives
). If the Executives are unable to
resolve a dispute pursuant to this Section 6.2.4(a) within ten Business Days, the Licensee
Executive shall have final decision-making authority on all matters appropriately
- 32 -
referred to the
Parties Executives and shall make such decisions in good faith after considering the interests of
both Parties.
(b) Notwithstanding subsection (a) above, all decisions on the following matters shall require
the consent of both Parties:
(i) during the Co-Promotion Period, matters requiring a material change in any
Development or Commercialization activities of Licensor with respect to the United States or
Europe;
(ii) any decisions that would result in a breach, violation or modification of the
terms of this Agreement;
(iii) during the Co-Promotion Period after the third anniversary of the Co-Promotion
Exercise Date, (A) any change to the Americas/Europe Development Plan that is likely to
increase Development Costs by more than 10% of the then current budget for the then current
Calendar Year or by more than 15% of the then current budgets for either of the two years
following the then current Calendar Year, or (B) approval of a Development Budget that would
result in Development Costs exceeding in any Calendar Year the most recently approved
Development Budget by more than 10%;
(iv) during the Co-Promotion Period, (A) any change to the Americas/Europe
Commercialization Plan for Europe that is likely to increase the
Commercialization Costs by more than 10% of the then current budget for the then
current Calendar Year or (B) approval of budget of the Americas/Europe Commercialization
Plan for Europe that would result in Commercialization Costs exceeding in any Calendar Year
the most recently approved budget for such Commercialization Costs by more than 10%; and
provided
,
as to each of cases (iii) and (iv) above, Licensee may proceed without mutual
approval if it agrees to fund all resulting Development Costs and Commercialization Costs
that exceed such budgeted amounts and their respective percentage collars, in which case
Licensee shall have the right to (x) include all such excess Commercialization Costs in the
calculation of Pre-tax Net Profits for the year in which such amounts are expended and (y)
deduct 25% of all such excess Development Costs from Licensors share of Pre-tax Net Profits
for the year in which such amounts are expended.
6.2.5
Limitations on Authority
. Each Party shall retain the rights, powers and
discretion granted to it under this Agreement and no such rights, powers, or discretion shall be
delegated to or vested in the Committee unless such delegation or vesting of rights is expressly
provided for in this Agreement or the Parties expressly so agree in writing. The Committees shall
not have the power to amend, modify or waive compliance with this Agreement, which may only be
amended or modified as provided in Section 15.9 or compliance with which may only be waived as
provided in Section 15.12.
6.2.6
Interactions Between the JSC and Internal Teams
. The Parties recognize that
each Party possesses an internal structure (including various committees, teams and review boards)
that will be involved in administering such Partys activities under this Agreement. The
- 33 -
JSC shall
establish procedures to facilitate communications between such JSC and the relevant internal
committee, team or board of each of the Parties in order to maximize the efficiency of the JSC and
the performance of the Parties of their obligations under this Agreement, including by requiring
appropriate members of such JSC to be available at reasonable times and places and upon reasonable
prior notice for making appropriate oral reports to, and responding to reasonable inquiries from,
the relevant internal committee, team or board.
ARTICLE 7
CONSIDERATION
7.1
Payments to Licensor
. In partial consideration of the licenses and other rights
granted herein, Licensee has made and shall make the following payments to Licensor:
7.1.1
Signature Fee
. On the Original Execution Date, Licensee made a non-refundable,
non-creditable payment of Fifteen Million U.S. Dollars ($15,000,000) of which (a) $5,000,000 was
allocable to reimbursement of costs to be incurred by Licensor in performing the pre-clinical
studies referred to in Section 3.3.1 and (b) the balance compensated Licensor partially for all
costs incurred to research and develop the Licensed Product prior to the Original Execution Date.
7.1.2
Development and Regulatory Milestone Payments for the Americas/Europe Territory
.
Subject to Section 5.3, Licensee shall make each of the milestone payments provided below within
ten (10) days following the achievement of the corresponding milestone event:
Development and Regulatory Milestones & Payments
|
|
|
|
|
Milestone
|
|
Associated Payment
|
(a)
|
|
Upon the earlier of (i) dosing
of the first subject enrolled in a
Phase III Study; and (ii) first
acceptance for filing by the FDA or
EMEA of an NDA or MAA for a Licensed
Product for an Indication in the
Field;
provided,
that if, on the
date of such filing, Licensee is
taking action to commence the first
Phase III Study of a Licensed
Product, the event described in this
clause (ii) shall be the earlier of
(A) the dosing of the first subject
enrolled in a Phase III Study or (B)
9 months from the date of such
filing
|
|
[***]
|
|
|
|
|
|
(b)
|
|
Upon the first acceptance for
filing by the FDA of an NDA for a
Licensed Product for an Indication
in the Field
|
|
[ ***] in addition to any amount
then payable under milestone (a)(ii)
|
|
|
|
|
|
(c)
|
|
Upon the first acceptance for
filing by the EMEA of an MAA for a
Licensed Product for an Indication
in the Field
|
|
[ ***], in addition to any amount
then payable under milestone (a)(ii)
|
- 34 -
Development and Regulatory Milestones & Payments
|
|
|
|
|
Milestone
|
|
Associated Payment
|
(d)
|
|
Upon the first NDA approval of a
Licensed Product in the United
States for an Indication in the
Field
|
|
[ ***]
|
|
|
|
|
|
(e)
|
|
Upon the first MAA approval of a
Licensed Product in the European
Union for an Indication in the Field
|
|
[ ***]
|
|
|
|
|
|
(f)
|
|
Upon a subsequent NDA approval
of a Licensed Product in a second
tumor type or any Indication outside
of oncology in the United States or
of a different formulation of a
Licensed Compound for a previously
approved Indication
|
|
[***]
|
|
|
|
|
|
(g)
|
|
Upon a subsequent MAA approval
of a Licensed Product in a second
tumor type or any Indication outside
of oncology in the European Union or
of a different formulation of a
Licensed Compound for a previously
approved Indication
|
|
[***]
|
|
|
|
|
|
(h)
|
|
Upon a subsequent NDA approval
of a Licensed Product in a third
tumor type or any Indication outside
of Oncology that was not the
previously approved in the United
States for such Licensed Product in
the United States or of a different
formulation of a Licensed Compound
for a previously approved Indication
|
|
[ ***]
|
|
|
|
|
|
(i)
|
|
Upon a subsequent MAA approval
of a Licensed Product in a third
tumor type or any Indication outside
of oncology that was not the
previously approved in the European
Union for such Licensed Product in
Europe or of a different formulation
of a Licensed Compound for a
previously approved Indication
|
|
[ ***]
|
7.1.3
Sales Milestone Payments for the Americas/Europe Territory
. Subject to Section
5.3, Licensee shall make each of the milestone payments provided below upon the first achievement
of the corresponding milestone event, with such payment to be made within sixty (60) days following
the completion of the applicable quarter in which such level of sales is first achieved:
Sales Milestones & Payments
|
|
|
|
|
Milestone
|
|
Associated Payment
|
(a)
|
|
*** U.S. Dollars ($***) in aggregate Net Sales of
Licensed Products in the Americas/Europe Territory
during any four consecutive calendar quarters
|
|
[ ***]
|
- 35 -
|
|
|
|
|
Milestone
|
|
Associated Payment
|
(b)
|
|
*** U.S. Dollars ($***) in aggregate Net Sales of
Licensed Products in the Americas/Europe Territory
during any four consecutive calendar quarters
|
|
[ ***]
|
|
|
|
|
|
(c)
|
|
*** U.S. Dollars ($***) in aggregate Net Sales of
Licensed Products in the Americas/Europe Territory
during any four consecutive calendar quarters
|
|
[ ***]
|
|
|
|
|
|
(d)
|
|
*** U.S. Dollars ($***) in aggregate Net Sales of
Licensed Products in the Americas/Europe Territory
during any four consecutive calendar quarters
|
|
[ ***]
|
|
|
|
|
|
(e)
|
|
*** U.S. Dollars ($***) in aggregate Net Sales of
Licensed Products in the Americas/Europe Territory
during any four consecutive calendar quarters
|
|
[ ***]
|
7.1.4
Distributor Revenues
. Licensee shall also pay Licensor ***% of all upfront and
milestone payments paid to Licensee or its Affiliates by any Distributor.
7.1.5
Fee for Expansion of Licensee Territory to include the Asia/ROW Territory
.
Licensee shall make a non-refundable, non-creditable payment of Ten Million U.S. Dollars
($10,000,000) on the Effective Date.
7.1.6
Development and Regulatory Milestones Payments for Asia/ROW Territory
. Subject
to Sections 7.1.8 (a) and (d), Licensee shall make each of the milestone payments provided below
within ten (10) days following the achievement of the corresponding milestone event:
Development and Regulatory Milestones & Payments for Asia/ROW Territory
|
|
|
|
|
Milestone
|
|
Associated Payment
|
(a)
|
|
Upon the first acceptance by
applicable Regulatory Authorities in
Japan or China for filing of a Drug
Approval Application for a Licensed
Product for an Indication in the
Field
|
|
[ ***]
|
|
|
|
|
|
(b)
|
|
Upon first approval by
applicable Regulatory Authorities in
Japan or China of a Drug Approval
Application for a Licensed Product
for an Indication in the Field
|
|
[ ***]
|
|
|
|
|
|
(c)
|
|
Upon a subsequent approval by
applicable Regulatory Authorities in
Japan or China of a Drug Approval
Application for a Licensed Product in
a second tumor type or any Indication
outside of oncology or of a different
formulation of a Licensed Compound
for a previously approved Indication
in such country
|
|
[ ***]
|
- 36 -
7.1.7
Sales Milestone Payments for the Asia/ROW Territory
. Subject to Sections 7.1.8
(a), (b) and (d), Licensee shall make each of the milestone payments provided below upon the first
achievement of the corresponding milestone event, with such payment to be made within sixty (60)
days following the completion of the applicable quarter in which such level of sales is first
achieved:
Sales Milestones & Payments
|
|
|
|
|
Milestone
|
|
Associated Payment
|
(a)
|
|
*** U.S. Dollars ($***) in aggregate Net Sales of
Licensed Products in the Asia/ROW Territory during any
four consecutive calendar quarters
|
|
[ ***]
|
|
|
|
|
|
(b)
|
|
*** U.S. Dollars ($***) in aggregate Net Sales of
Licensed Products in the Asia/ROW Territory during any
four consecutive calendar quarters
|
|
[ ***]
|
|
|
|
|
|
(b)
|
|
*** U.S. Dollars ($***) in aggregate Net Sales of
Licensed Products in the Asia/ROW Territory during any
four consecutive calendar quarters
|
|
[ ***]
|
|
|
|
|
|
(c)
|
|
*** U.S. Dollars ($***) in aggregate Net Sales of
Licensed Products in the Asia/ROW Territory during any
four consecutive calendar quarters
|
|
[ ***]
|
7.1.8
Milestone Payment Terms
. For clarification:
(a) each milestone payment described in Section 7.1.2, 7.1.3, 7.1.6 or 7.1.7 shall be payable
only once irrespective of the number of times the milestone events set forth such sections shall
have been achieved;
(b) sales milestones shall be measured over a period of four consecutive quarters and not on a
cumulative basis from the inception of sales; if more than one sales milestone is achieved in any
four consecutive calendar quarters, both milestone payments are payable; if one or more sales
milestones are achieved during any four consecutive calendar quarters, none of the sales in any
such quarter may be counted again in determining whether the next sales milestone is achieved;
(c) sales of Licensed Product on a named patient basis or under a compassionate use program
prior to approval of an MAA in Europe shall be excluded from the determination of sales milestones,
unless such sales by themselves achieve any sales milestone prior to approval of an MAA in Europe;
and
- 37 -
(d) Licensee shall notify Licensor promptly of any determination, filing or approval that
would trigger a payment by Licensee to Licensor under Section 7.1.2, 7.1.3, 7.1.6 or 7.1.7 and the
amount of the payment required and shall pay such amount as provided herein.
7.2
Royalties
.
7.2.1 Subject to Sections 7.3, 7.4 and 8.4, for sales of Licensed Products in the Licensee
Territory, Licensee shall pay Licensor royalties based on the following table, with each royalty
percentage being applicable to the portion of the annual Net Sales of the Licensed Products falling
within the relevant band of the Net Sales for a Calendar Year:
|
|
|
Total annual Net Sales of
|
|
|
Licensed Products in Licensee
|
|
|
Territory
|
|
Applicable royalty rate
|
Less than US$***
|
|
***%
|
|
|
|
US$*** and greater
|
|
***
|
For purposes of the foregoing, it is understood that annual Net Sales shall be calculated on a
Calendar Year basis. For example, if in a Calendar Year, Net Sales of US$*** of Licensed Products
were realized by Licensee, the royalty payable would be US$ *** ( ***% of the first US$*** and
***% of the next US$***).
7.2.2 The ***% royalty rate described above shall apply only as long as the Manufacturing
Costs (for the units comprising the applicable Net Sales and expressed as a percentage of Net
Sales) are less than or equal to ***% of the Net Sales of the Licensed Product. If the
Manufacturing Costs exceed such level in any quarter, the royalty rate for such quarter shall be
reduced sufficiently to reflect an equal sharing by both Parties of the amount by which such
Manufacturing Costs exceed ***% of Net Sales;
provided
, that the royalty rate shall not be less
than ***% on annual Net Sales up to and including US$***
7.2.3 Following the effective date of a Licensor Opt-out Right pursuant to Section 5.8,
Licensee shall pay an additional royalty equal to 5% of the Net Sales in Europe;
provided
, that,
such additional royalty obligation shall terminate when the aggregate amount of such additional
royalties paid equals 125% of the amount of Development Costs paid by Licensor under Section 5.2.
Notwithstanding anything to the contrary in this Agreement, such additional royalty shall not be
subject to any deductions or credits under Section 8.4.
7.2.4 Notwithstanding the foregoing or any other provision of this Agreement (including any
deductions or credits under Article 8), in no event shall the royalty rate on Net Sales be at a
rate less than [ ***] ([ ***]%) (
Royalty Rate Floor
).
- 38 -
7.3
Royalty Term
. Licensees obligations to pay royalties under this ARTICLE 7 shall
terminate, on a country-by-country basis, at such time as Licensee or any Sublicensee is no longer
selling Licensed Products in such country (the
Royalty Term
).
7.4
Royalty Adjustment for Generic Competition
. In the event that there is Generic
Competition (as defined below) with respect to a Licensed Product in any country in the Licensee
Territory, the royalty payable by Licensee on Net Sales of Licensed Products in such
country only shall be reduced to the Royalty Rate Floor following the first occurrence of
Generic Competition in such country and for as long as Generic Competition prevails in such
country. In this Section,
Generic Competition
means the commercial sale in any country
in the Licensee Territory of a product that contains the Licensed Compound in a formulation
equivalent to that of a Licensed Product pursuant to an approved ANDA or its equivalent filing in a
jurisdiction outside of the United States.
7.5
Methodology for Royalty Offsets
. For purposes of any royalty offsets under Section
8.4:
(a) Royalties in each quarter shall be calculated using the weighted average royalty rate on
the cumulative year-to-date aggregate Net Sales in the Licensee Territory;
(b) Such weighted average royalty rate (the
Average Full Royalty Rate
"
)
will be
applied to the cumulative year-to-date Net Sales in any country in which none of the reductions,
deductions or credits referred to Section 8.4 apply; and
(c) In respect of all other countries, the Average Full Royalty Rate will then be adjusted for
each country after taking into account the applicable reductions, deductions or credits referred to
in Section 8.4. Such adjusted Average Full Royalty Rate will then be applied to the cumulative
year-to-date Net Sales in such countries.
7.6
Royalty Payments
. Royalties shall be payable on a quarterly basis, within sixty
(60) days after the end of each calendar quarter of each Calendar Year, based upon the Net Sales
during such quarter. Royalties shall be calculated in accordance with GAAP and with the terms of
this ARTICLE 7. Only one royalty payment shall be due on Net Sales even though the sale or use of
a Licensed Product may be covered by more than one Patent or Know-How in a country.
7.7
Royalty Statements
. Each royalty payment hereunder shall be accompanied by a
statement showing, on a country-by-country and Licensed Product-by-Licensed Product basis, at a
minimum (a) Invoiced Sales and Net Sales for the Licensee Territory, (b) a detailed breakdown of
any deductions from the Invoiced Sales that were taken to calculate Net Sales, (c) the currency
exchange rates used in determining such Invoiced Sales and Net Sales, and (d) the amount of
royalties due on such Net Sales. Licensee shall also provide a statement of its estimated Net
Sales within ten days after the end of each month.
7.8
Mode of Payment
. All payments to Licensor or Licensee under this Agreement shall
be made by deposit of United States dollars in the requisite amount to such bank account as the
receiving Party may from time to time designate by notice to the paying Party. With respect to
sales outside the United States, payments shall be calculated based on currency exchange rates
- 39 -
for
the calendar quarter for which remittance is made for royalties. For each month and each currency,
such exchange rate shall equal the arithmetic average of the daily exchange rates (obtained as
described below) during such calendar quarter; each daily exchange rate shall be obtained from
www.OANDA.com or, if not so available, as otherwise agreed by the Parties. Notwithstanding the
foregoing, for purposes of calculating the Net Sales thresholds set forth in Sections 7.1.3,
7.1.7 and 7.2, the aggregate Net Sales with respect to each calendar quarter within
a Calendar Year shall be calculated based on the currency exchange rates for the calendar
quarter in which such Net Sales occurred, in a manner consistent with the exchange rate procedures
set forth in the immediately preceding sentence.
7.9
Taxes
.
7.9.1
General
. The royalties, milestone payments and other amounts payable by
Licensee to Licensor pursuant to this Agreement (
Payments
) shall not be reduced on
account of any taxes unless required by Applicable Law. Licensor alone shall be responsible for
paying any and all taxes (other than withholding taxes required by Applicable Law to be paid by
Licensee) levied on account of, or measured in whole or in part by reference to, any Payments it
receives. Licensee shall deduct or withhold from the Payments any taxes that it is required by
Applicable Law to deduct or withhold. Notwithstanding the foregoing, if Licensor is entitled under
any applicable tax treaty to a reduction of rate of, or the elimination of, applicable withholding
tax, it may deliver to Licensee or the appropriate governmental authority (with the assistance of
Licensee to the extent that this is reasonably required and is expressly requested in writing) the
prescribed forms necessary to reduce the applicable rate of withholding or to relieve Licensee of
its obligation to withhold tax, and Licensee shall apply the reduced rate of withholding, or
dispense with withholding, as the case may be,
provided
that Licensee has received evidence, in a
form reasonably satisfactory to Licensee, of Licensors delivery of all applicable forms (and, if
necessary, its receipt of appropriate governmental authorization) at least fifteen (15) days prior
to the time that the Payments are due. If, in accordance with the foregoing, Licensee withholds
any amount, it shall pay to Licensor the balance when due, make timely payment to the proper taxing
authority of the withheld amount and send to Licensor proof of such payment within sixty (60) days
following that payment. The rights and obligations set forth in this Section 7.9.1 shall apply
mutatis mutandis
with respect to any amounts payable by Licensor to Licensee pursuant to Section
3.3.2.
7.9.2
Value Added Tax
. Notwithstanding anything contained in Section 7.9.1, this
Section 7.9.2 shall apply with respect to value added tax (
VAT
). All Payments are
exclusive of VAT. If any VAT is chargeable in respect of any Payments, Licensee shall pay VAT at
the applicable rate in respect of any such Payments following the receipt of a VAT invoice in the
appropriate form issued by Licensor in respect of those Payments, such VAT to be payable on the
later of the due date of the payment of the Payments to which such VAT relates and sixty (60) days
after the receipt by Licensee of the applicable invoice relating to that VAT payment.
7.10
Interest on Late Payment
. If any payment due to either Party under this
Agreement is overdue (and is not subject to a good faith dispute), then such paying Party shall pay
interest thereon (before and after any judgment) at an annual rate (but with interest accruing on a
daily basis) of the lesser of two percent (2%) above the prime rate as reported in
The Wall
- 40 -
Street
Journal
, Eastern Edition, and the maximum rate permitted by Applicable Law, such interest to run
from the date upon which payment of such sum became due until payment thereof in full together with
such interest.
7.11
Financial Records
. Licensee shall, and shall cause its Affiliates and
Sublicensees to, keep reasonably complete and accurate books and records pertaining to the
Commercialization,
sale, delivery and use of Licensed Products, including books and records of the Invoiced Sales
(including any deductions therefrom) and Net Sales of Licensed Products, in sufficient detail to
calculate the royalties payable under this Agreement. Both Parties shall, and shall cause their
respective Affiliates and, with respect to Licensee, its Sublicensees to, keep reasonably complete
and accurate books and records pertaining to Development Costs and Commercialization Costs and the
costs described in Section 3.3.2 in connection with the Development activities set forth in
Exhibit
3.3.2
. Such books and records shall be retained by both Parties and their Affiliates and with
respect to Licensee and its Sublicensees until the later of (a) three (3) years after the end of
the period to which such books and records pertain and (b) the expiration of the applicable tax
statute of limitations (or any extensions thereof), or for such longer period as may be required by
Applicable Law.
7.12
Audit
. At the request of either Party, the other Party shall, and shall cause
its Affiliates and, with respect to Licensee, its Sublicensees, to, permit the requesting Party and
its representatives, at reasonable times and upon reasonable notice, to examine the books and
records maintained pursuant to Section 7.11. Such examinations may not (a) be conducted for any
Calendar Year more than three (3) years after the end of such year, (b) be conducted more than once
in any twelve (12) month period or (c) be repeated for any Calendar Year. Except as provided
below, the cost of this examination shall be borne by the Party that requested the examination,
unless the audit reveals a variance of more than five percent (5%) from the reported amounts, in
which case the audited Party shall bear the cost of the audit. Unless disputed pursuant to Section
7.13 below, if such audit concludes that additional payments were owed or that excess payments were
made during such period, the paying Party shall pay the additional royalties or the receiving Party
shall reimburse such excess payments, with interest from the date originally due as provided in
Section 7.10, within sixty (60) days after the date on which a written report of such audit is
delivered to the Parties.
7.13
Audit Dispute
. In the event of a Dispute regarding such books and records,
including the amount of royalties owed to Licensor under this ARTICLE 7 or the calculation or
allocation of Development Costs and Commercialization Costs pursuant to ARTICLE 5, Licensor and
Licensee shall work in good faith to resolve the disagreement. If the Parties are unable to reach
a mutually acceptable resolution of any such Dispute within thirty (30) days, such Dispute shall be
resolved in accordance with Section 15.7.2(b).
7.14
Confidentiality
. The receiving Party shall treat all information subject to
review under this ARTICLE 7 in accordance with the confidentiality provisions of ARTICLE 11 and the
Parties shall cause any auditor or arbitrator to enter into a reasonably acceptable confidentiality
agreement with the audited Party obligating such firm to retain all such financial information in
confidence pursuant to such confidentiality agreement.
- 41 -
ARTICLE 8
INTELLECTUAL PROPERTY
8.1
Ownership of Intellectual Property
.
8.1.1
Ownership of Technology
. Subject to Sections 8.1.2, 8.1.3, 8.1.4, 8.1.5 and
8.1.6 and the licenses and rights of reference granted under Section 2.1, as between the Parties,
each Party shall own and retain all right, title and interest in and to any and all: (a)
Information that is conceived, discovered, developed or otherwise made, as necessary to establish
authorship, inventorship or ownership under applicable United States law, by or on behalf of such
Party under or in connection with this Agreement (or its Affiliates or its licensees or
Sublicensees), whether or not patented or patentable, and any and all Patents and Intellectual
Property Rights with respect thereto, except to the extent that any such Information, or any
Patents or Intellectual Property Rights with respect thereto, is Joint Know-How or Joint Patents,
and (b) other Information or other inventions and Patents and Intellectual Property Rights that are
owned or otherwise Controlled (other than pursuant to the license grants set forth in Section 2.1),
by such Party, its Affiliates or its licensees or Sublicensees. In the event that Licensor makes
any Improvement relating to the Licensed Compound or the Licensed Products including a different
formulation of a Licensed Product, Licensor shall have the right, title and interest in the
Improvement and any Patent covering the Improvement, subject to the licenses granted herein.
8.1.2
Ownership of Product Trademarks, Licensor Patents and Licensor Know-How
. Subject
to the licenses and rights of reference granted under Section 2.1, as between the Parties, Licensor
shall own and retain all right, title and interest in and to all Product Trademarks, Licensor
Patents and Licensor Know-How.
8.1.3
Ownership of Regulatory Documentation and the Drug Master File
. Except for the
IND under which Licensor shall continue to conduct the Phase I Study of the oral formulation of the
Licensed Product, as between the Parties, Licensee shall own all right, title and interest in and
to all Regulatory Approvals and, to the extent they contain Licensee Know-How, the Drug Master
Files with respect to the Licensed Products in the Licensee Territory and the Regulatory
Documentation (other than Clinical Data as to which Section 8.1.4 shall apply) with respect
thereto. Subject to the right of reference granted to Licensee under Section 2.1.4, Licensor shall
own and retain all right, title and interest in and to all other Regulatory Approvals, and all
other Regulatory Documentation with respect to the Licensed Compound or the Licensed Product.
8.1.4
Clinical Data
. Licensee shall own and retain all right, title and interest in
and to all Clinical Data generated by or on behalf of Licensee. Subject to the right of reference
granted to Licensee under Section 2.1, Licensor shall own and retain all right, title and interest
in and to all other Clinical Data.
8.1.5
Ownership of Improvements, Joint Patents and Joint Know-How
. Except as
expressly set forth in Section 8.1.3 and 8.1.4, as between the Parties, the Parties shall each own
an equal, undivided interest in any and all (a) Information and Improvements that are
- 42 -
conceived,
discovered, developed or otherwise made, as necessary to establish authorship, inventorship or
ownership under applicable United States law, jointly by or on behalf of Licensor (or its
Affiliates), on the one hand, and Licensee (or its Affiliates or its Sublicensees), on the other
hand, in connection with the work conducted under or in connection with this Agreement, whether or
not patented or patentable (to the extent such Information or Improvements are not generally known
and not covered or claimed by Joint Patents, the
Joint Know-How
) and (b)
Patents and Intellectual Property Rights with respect to such Information and Improvements
(the
Joint Patents
). Together, such Information, Improvements, Patents and Intellectual
Property Rights as described in clause (a) and clause (b) of this Section 8.1.5 shall be referred
to herein as the
Joint Intellectual Property Rights
. Notwithstanding the foregoing, the
intravenous formulation of the Licensed Product that the Parties conceive or reduce to practice and
claim in the provisional patent application filed on the 20th of November 2009 which is entitled,
Parenteral Formulations of Gemcitabine Derivatives shall be solely owned by Licensor, regardless
of any inventive contribution by Licensee and its employees and other representatives. Each Party
shall promptly disclose to the other Party in writing, and shall cause its Affiliates, licensees
and Sublicensees to so disclose, the development, making, conception or reduction to practice of
any Joint Know-How or Joint Patents. Each Party shall have the right to Exploit the Joint
Intellectual Property Rights outside the scope of this Agreement in any manner that is not
inconsistent with the rights and obligations of the Parties under this Agreement in its sole
discretion, in each case, without the consent of, or an accounting to, the other Party, and
provided
, that neither Party shall assign its rights in any Joint Intellectual Property Rights
without the other Partys prior written consent, such consent not to be unreasonably withheld or
delayed.
8.1.6
Ownership of Corporate Names
. As between the Parties, each Party shall retain
all right, title and interest in and to its Corporate Names and agrees that it shall not attack,
dispute or contest the validity of or ownership of such other Partys Corporate Names or any
registrations issued or issuing with respect thereto.
- 43 -
8.2
Maintenance and Prosecution of Patents and Trademarks
.
8.2.1
Licensor
. Subject to Section 8.2.4, Licensor, through patent attorneys or
agents of its choice, shall be responsible for obtaining, prosecuting and maintaining all Licensor
Patents and Joint Patents (in the name of both Parties) other than those referred to in Section
8.2.2 below. Reasonable and verifiable expenses incurred by Licensor in the preparation,
registration, filing, prosecution and maintenance (as applicable) of such Licensor Patents or Joint
Patents shall be borne by Licensee. Licensor shall not abandon or cease the prosecution of any
such application for such Licensor Patent or Joint Patent or permit any Patent issuing therefrom to
lapse without first notifying Licensee and permitting Licensee to continue the prosecution of such
applications or registrations or pay any required fees in the name of Licensor, at Licensees
expense and through patent attorneys of its choice. Licensee shall not become an assignee of any
Patent or application for Patent as a result of its continuing the prosecution or registration of
an application for Patent or Trademark or paying any fees according to this Section 8.2.1. The
Party responsible for prosecuting a Patent under this Section 8.2 shall also have the
responsibility, at its costs, for all oppositions and interference proceedings in respect of such
Patent.
8.2.2
Licensee
. Licensee shall be responsible for obtaining, prosecuting and
maintaining throughout the Licensee Territory, Licensor Patents (in the name of Licensor) and Joint
Patents (in the name of both Parties) that claim only the Licensed Product. In this regard,
Licensee shall have the first right to (a) file, prosecute and maintain Patent applications to seek
such Patent rights for the Licensed Compound and the Licensed Products and any patentable Know-How
in the Licensee Territory and (b) control the selection, development, registration,
prosecution and maintenance of the Product Trademarks (in the name of Licensor) in the
Licensee Territory. Any expenses incurred by Licensee in the preparation, selection, development,
registration, filing, prosecution and maintenance (as applicable) of such Patents and Product
Trademarks in the Licensee Territory shall be borne by Licensee. With respect to any such Licensor
Patent or Joint Patent or Product Trademark, Licensee shall not abandon or cease the prosecution of
any such application for a Patent or Product Trademark (or preparation thereof) or permit any
Patent or Product Trademark issuing therefrom to lapse without first notifying Licensor and
permitting Licensor to continue the preparation, filing, prosecution and maintenance of such
applications or pay any required fees in the name of Licensee, at Licensors expense and through
patent attorneys or agents of its choice. Licensee shall be solely responsible, at its costs, for
prosecuting and maintaining all Licensee Patents worldwide.
8.2.3
Cooperation
. Each Party shall assist and cooperate with the other Party as such
other Party may reasonably request from time to time in connection with its activities set forth in
Section 8.2.1 and 8.2.2. Each Party shall (a) keep the other Party currently informed of the
status of and all steps to be taken in the preparation and prosecution of all applications filed by
it according to this Section 8.2, (b) furnish the other Party with copies of such applications for
Patents, amendments thereto and other related material correspondence to and from patent offices,
and (c) to the extent reasonably practicable, permit the other Party an opportunity to offer its
comments thereon and give such comments good faith consideration before making a submission to a
patent office which could materially affect the scope or validity of the Patent coverage that may
result. Such other Party shall offer its comments, if any, promptly. In respect of the prosecution
of counterpart patent applications of the same Licensor Patent in different
- 44 -
countries, the Parties
shall coordinate such filings so that they take consistent positions with patent offices; if there
are any disputes about such filings, Licensor shall have the right to make all final decisions.
8.2.4
Patent Term Extensions
. The JSC shall be responsible for making decisions
regarding patent term extensions, including supplementary protection certificates and any other
extensions that are now or become available in the future, wherever applicable, for Licensor
Patents, Licensee Patents and Joint Patents in any country in the Licensee Territory,
provided
that
(a) any Dispute with respect thereto shall be resolved by the owner of the applicable Patent or, in
the case of Joint Patents, by Licensee and (b) any applications or filings with respect thereto
shall be made by Licensee in the name of the owner of the applicable Patent. Each Party shall
reasonably cooperate, as requested by the other Party, to promptly and timely implement or effect
such decisions. Notwithstanding the foregoing, the Parties shall coordinate their activities with
respect to any patent term extension with respect to all Patents in order to secure the optimal
protection for the Licensed Products available under Applicable Law.
8.3
Enforcement of Patents and Trademarks
.
8.3.1
Rights and Procedures
. In the event that either Party reasonably believes that
a Third Party may be infringing any of the Licensor Patents, the Licensee Patents, the Joint
Patents or the Product Trademarks, such Party shall promptly notify the other Party in writing,
identifying the alleged infringer and the alleged infringement complained of and furnishing the
information upon which such determination is based. With respect to such suspected infringement of
the Licensor Patents, the Licensee Patents, the Joint Patents or the Product
Trademarks that is likely or could reasonably be expected to have a material adverse effect on
the sale of the Licensed Products in the Licensee Territory, Licensee shall have the first right,
but not the obligation, through counsel of its choosing, to take any measures it deems appropriate
to stop such infringing activities by such Third Party in any part of the Licensee Territory. In
respect of such infringement and to the extent not in conflict with the terms of this Agreement,
Licensee shall have the right to grant the infringing Third Party adequate rights and licenses
necessary for continuing such activities in any part of the Licensee Territory to the extent
Licensee has the right to grant such rights under Section 2.3; such Third Party shall then be
deemed a Sublicensee hereunder. In the event Licensee fails within ninety (90) days following
notice of such infringement, as provided in the first sentence of this Section 8.3.1, or earlier
notifies Licensor in writing of its intent not to take, or thereafter ceases to take, Commercially
Reasonable steps to stop any such infringement of any Licensor Patent, Licensee Patent, Joint
Patent or Product Trademark in the Licensee Territory and Licensee has not granted the infringing
Third Party rights and licenses to continue its otherwise infringing activities as permitted above,
then Licensor shall have the right, but not the obligation, to do so. Upon reasonable request by
the enforcing Party, the other Party shall give the enforcing Party all reasonable information and
assistance, including allowing the enforcing Party access to the other Partys files and documents
and to the other Partys personnel who may have possession of relevant information and, if
necessary for the enforcing Party to prosecute any legal action, joining in the legal action as a
party at its own expense. Licensor retains the sole right to enforce the Licensor Patents in
respect of any infringement not covered by this Section 8.3.1.
- 45 -
8.3.2
Generic Competition
. Notwithstanding the foregoing, if either Party (a)
reasonably believes that a Third Party may be filing or preparing or seeking to file a generic or
abridged Drug Approval Application in the Licensee Territory that refers to or relies on Regulatory
Documentation submitted by either Party to any Regulatory Authority whether or not such a filing
may be in violation of any Regulatory Exclusivity Period or infringe the Licensor Patents, the
Licensee Patents or the Joint Patents or (b) receives any notice of certification regarding the
Licensor Patents, Joint Patents or Licensee Patents pursuant to the U.S. Drug Price Competition and
Patent Term Restoration Act of 1984 (21 United States Code §355(b)(2)(A)(iv) or (j)(2)(A)(vii)(IV))
claiming that any such Patents are invalid or unenforceable or claiming that any such Patents will
not be infringed by the Manufacture, use, marketing or sale of a product for which an ANDA is filed
or (c) receives any equivalent or similar certification or notice in any other jurisdiction, it
shall notify the other Party in writing, identifying the alleged applicant or potential applicant
and furnishing the information upon which such determination is based, and provide the other Party
a copy of any such notice of certification within ten (10) days of receipt and the Parties rights
and obligations with respect to any legal action as a result of such certification shall be as set
forth in Section 8.3.1;
provided
,
however
, that if the enforcing Party elects not to bring suit
against the Third Party providing notice of such certification within thirty (30) days of receipt
of such notice with respect to any Licensor Patent, Joint Patent or Licensee Patent, then the other
Party shall have the right, but shall not the obligation, to bring suit against such Third Party
and to join the enforcing Party as a Party plaintiff if necessary to bring such a suit, in which
event the other Party shall hold the enforcing Party harmless from and against any and all costs
and expenses of such litigation, including reasonable attorneys fees and expenses.
8.3.3
Cooperation.
If either Party is unable to initiate or to prosecute any action
under this Section 8.3 solely in its own name or it is otherwise advisable to obtain an effective
remedy, the other Party will join such action and will execute, and cause its Affiliates to
execute, all documents necessary for the enforcing Party to initiate litigation to prosecute and
maintain such action. In connection with any action brought by either Party for patent
infringement, the Parties will cooperate fully and will provide each other with any information or
assistance that either Party may reasonably request. Each Party shall keep the other Party
informed of developments in any action or proceeding, including the status of any settlement
negotiations and the terms of any offer related thereto. Each Party may be represented by counsel
of its choice.
8.3.4
Costs and Expenses
. Each Party shall bear its own costs and expenses relating
to any enforcement action pursuant to Section 8.3.1 or 8.3.2. Any damages or other amounts
collected shall be used to reimburse the Parties for their costs and expenses in making such
recovery (which amounts shall be allocated pro rata if insufficient to cover the totality of such
expenses), with any remainder being allocated as follows: (i) if Licensee was the enforcing Party,
any recovery from the enforcement of rights shall be treated as if such remainder amount were Net
Sales of the Licensed Products in the Licensee Territory (and Licensee shall pay a Royalty on such
amount as provided in Section 7.2.1 without any adjustment, deduction or credits under Articles 7
or 8), and (ii) if Licensor were the enforcing party, such remainder amount shall be shared equally
by the Parties.
- 46 -
8.4
Potential Third Party Rights
.
8.4.1
Third Party Licenses
. If the Exploitation of the Licensed Products in
accordance with the terms and conditions of this Agreement, by Licensee, its Affiliates or any of
its Sublicensees or Distributors infringes any Patents of a Third Party in any country, such that
Licensee or any of its Affiliates, Sublicensees or Distributors cannot, in the reasonable judgment
of Licensee, after investigation by and consultation with Licensor and competent patent counsel,
Develop or Commercialize the Licensed Products in such country without infringing the Patents of
such Third Party, then (x) if such Patents have claims that cover only the Licensed Products (as
opposed to those Patents which also cover other products of Licensor), Licensee shall have the
first right to take the lead on negotiating the terms of each such license with such Third Party
and (y) otherwise Licensor shall have the first right to take the lead on negotiating the terms of
each such license, and in each case ((x) and (y)), if such Party does not take such lead, then the
other Party may do so;
provided
that it shall use Commercially Reasonable Efforts to seek to
obtain, but shall not be required to obtain, worldwide rights with the right to sublicense the
other Party for use with its respective products; and
provided
,
further
, in either case that the
Party obtaining such license shall consult with the other Party prior to making any proposal
regarding, or otherwise agreeing to, the terms of any such license. If one or both Parties enter
into such a Third Party license agreement, then:
(a) Each Party shall be solely responsible for all license fees, milestones, royalties or
other such payments due to such any Third Party (
Third Party Payments
) (irrespective of
the Party that has entered into an agreement with, or first made a payment to, such Third Party)
consisting of payments with respect to the Commercialization of, on the one hand a Licensed Product
(in the case of Licensee) or, on the other hand, a product other than a Licensed Product (in the
case of the Licensor). For clarity, during the Co-Promotion Period, an allocated portion, as
between Europe and the other countries in the Licensee Territory based upon sales or reasonably
anticipated sales, of the amounts paid by Licensee to a Third Party as a
Third Party Payment for the Licensee Territory in accordance with this Section shall be
included in the Development Costs and Commercialization Costs; and
(b) Licensee shall have the right to deduct up to *** percent (***%) of any Third Party
Payments paid by Licensee with respect to any country(ies) in the Licensee Territory from royalty
payments set forth in Sections 7.2.1 and 7.2.2 hereunder on Net Sales in such country(ies);
provided
that such royalties payable to Licensor under Sections 7.2.1 and 7.2.2 on such Net Sales
shall not be reduced by more than ***percent (***%) in any Calendar Year. In the event that any
reduction permitted under this Section is so limited, Licensee may carry the unused portion of such
Third Party Payments forward to subsequent Calendar Years, subject to the application of the
limitations set forth in this Section.
8.4.2
Invalidity or Unenforceability Defenses or Actions
.
(a) In the event that a Third Party or Sublicensee asserts, as a defense or as a counterclaim
in any infringement action under Section 8.3.1, that any Product Trademark, Licensor Patent,
Licensee Patent or Joint Patent is invalid or unenforceable, then the Party enforcing such Product
Trademark or Patent in accordance with Section 8.3 shall defend such a defense or as a counterclaim
in accordance with Section 8.3;
provided
, that, if Licensee is such
- 47 -
enforcing Party, it shall
obtain the written consent of Licensor with respect to the Licensor Patents and the Joint Patents,
prior to ceasing to defend, settling or otherwise compromising such defense or counterclaim, such
consent not to be unreasonably withheld or delayed.
(b) Similarly, if a Third Party or Sublicensee asserts, in a declaratory judgment action or
similar action or claim filed by such Third Party, that any Product Trademark, Licensor Patent,
Licensee Patent or Joint Patent is invalid or unenforceable, then the Party first becoming aware of
such action or claim shall promptly give written notice to the other Party, then the Party
enforcing such Product Trademark or Patent in accordance with Section 8.3 shall defend such action
in accordance with Section 8.3;
provided
, that, if Licensee is such enforcing Party, it shall
obtain the written consent of Licensor with respect to the Licensor Patents and the Joint Patents,
prior to ceasing to defend, settling or otherwise compromising such defense or counterclaim, such
consent not to be unreasonably withheld or delayed.
(c) Each Party shall provide to the other Party all reasonable assistance requested by the
other Party in connection with any action, claim or suit under this Section 8.4.2, including
allowing such other Party access to the assisting Partys files and documents and to the assisting
Partys personnel who may have possession of relevant information. In particular, the assisting
Party shall promptly make available to the other Party, free of charge, all information in its
possession or control that it is aware will be reasonably necessary to assist the other Party in
responding to any such action, claim or suit.
(d) Licensee shall not enter into any settlement of any claim or action under Sections 8.3 or
8.4 without the prior written consent of Licensor (which consent will not unreasonably be withheld,
delayed or conditioned) if such settlement includes a finding, stipulation or agreement that any
Licensor Patent is invalid or unenforceable, or results in or requires a reduction in the scope or
abandonment of a claim or enforceable right in any Licensor Patent.
8.4.3
Third Party Litigation
. In the event of any actual or threatened suit against
Licensee or its Affiliates, Sublicensees, Distributors or customers alleging that the Development
or Commercialization of a Licensed Product in the Licensee Territory infringes the Patents of any
Third Party, Licensee shall assume direction and control of the defense of claims arising therefrom
(including the right to settle such claims at its sole discretion). Licensee shall be entitled to
credit against up to ***percent (***%) of royalties due to Licensor under Sections 7.2.1 and 7.2.2
of this Agreement in any Calendar Year in respect of the allegedly infringing sales up to half of
the out-of-pocket costs and expenses (including attorneys and experts fees) reasonably incurred
by Licensee in respect of such action. In the event that any reduction of royalties is limited to
***percent (***%) of royalties due to Licensor under Sections 7.2.1 and 7.2.2 of this Agreement in
any Calendar Year, Licensee may carry the unused portion of such costs and expenses forward to
subsequent Calendar Years, subject to the application of the limitations set forth in this Section.
Licensee will keep Licensor reasonably informed of all material developments in connection with
any such claim, suit, or proceeding. Licensee agrees to provide Licensor with copies of all
pleadings filed in such action and to allow Licensor reasonable opportunity to participate in the
defense of the claims, at its own expense. Each Party shall provide the other Party with copies of
any notices it receives from Third Parties relating to any patent nullity actions, declaratory
judgment actions and any alleged infringement or
- 48 -
misappropriation of the Intellectual Property
Rights of a Third Party by the Development, Manufacture or Commercialization of a Licensed Product
in any country of the world. Such notices shall be provided promptly, but in no event more than
ten (10) days following receipt thereof.
8.4.4
Retained Rights
. Nothing in this Section 8.4 shall prevent Licensee, at its own
expense, from obtaining any license or other rights from Third Parties it deems appropriate in
order to permit the full and unhindered exercise of its rights under this Agreement.
8.4.5
Cooperation
. In the event that a Third Party institutes a Patent, trade secret
or other infringement suit against Licensor, Licensee or their respective Affiliates or, in the
case of Licensee, Sublicensees or Distributors, during the term of this Agreement with respect to
the Licensed Products, each Party shall, at its own cost and expense, use all reasonable efforts to
assist and cooperate with the other Party in connection with the defense of such suit.
ARTICLE 9
COMPLAINTS AND ADVERSE EVENT REPORTING
During the Co-Promotion Period:
9.1
Complaints
. Each Party shall maintain a record of any and all Complaints it
receives with respect to a Licensed Product. Each Party shall investigate the Complaint and, to
the extent required to be reported to any Regulatory Authority or related to any Adverse Event
Experience, notify the other Party in reasonable detail of any Complaint received by it within five
(5) days after the initial report of the event, and in any event in sufficient time to allow such
Party to comply with all Applicable Law in any country. For purposes of this Section 9.1, a
Complaint
means any oral or written communication of dissatisfaction regarding the
identity, quality, durability, reliability or performance of a Licensed Product. Examples include
appearance, low
fills, foreign materials, foreign product, lack of effect reports, defective packaging or
defective labeling.
9.2
Adverse Event Reporting
. Each Party shall provide the other Party with all
information necessary or desirable for such other Party to comply with its pharmacovigilance
responsibilities, including any Adverse Event Experiences from pre-clinical or clinical laboratory,
animal toxicology and pharmacology studies, clinical trials and commercial experiences with a
Licensed Product.
Adverse Event Experience
shall mean (a) any finding from tests in
laboratory animals or in vitro that suggests a significant risk for human subjects including
reports of mutagenicity, teratogenicity or carcinogenicity and (b) any undesirable, untoward or
noxious event or experience associated with the clinical, commercial or other use or occurring
following administration, of a Licensed Product in humans, occurring at any dose, whether expected
or unexpected and whether or not considered related to or caused by a Licensed Product, including
such an event or experience as occurs in the course of the use of a Licensed Product in
professional practice, in a clinical trial, from overdose, whether accidental or intentional, from
abuse, from withdrawal or from a failure of expected pharmacological or biological therapeutic
action of a Licensed Product, and including those events or experiences
- 49 -
that are required to be
reported to the FDA under 21 C.F.R. sections 312.32 or 314.80 or to Regulatory Authorities under
corresponding Applicable Law outside the United States.
9.3
Pharmacovigilance
. Prior to the Effective Date, Licensor and Licensee have
previously executed a Pharmacovigilance Agreement (
Prior Pharmacovigilance Agreement
).
Such Prior Pharmacovigilance Agreement is hereby terminated as of the Effective Date. Subject to
the terms of this Agreement, promptly following the commencement of the Co-Promotion Period,
Licensor and Licensee shall discuss and develop mutually acceptable guidelines and procedures for
the investigation, exchange, receipt, recordation, communication (as between the Parties) and
exchange of Adverse Event Experience information and all other information regarding matters
covered in this ARTICLE 9. Until such guidelines and procedures are set forth in an agreement
between the Parties (the
Pharmacovigilance Agreement
), the terms of Sections 9.1 and 9.2
shall apply. Following the execution of the Pharmacovigilance Agreement, such Sections shall
continue to apply unless expressly amended by the Parties,
provided
that in the event of any
conflict between the terms of Sections 9.1 and 9.2 and the terms of the Pharmacovigilance
Agreement, the terms of the Pharmacovigilance Agreement shall control. It is anticipated that such
Pharmacovigilance Agreement shall include provisions for the exchange between the Parties of
Adverse Event Experience reports, the creation and maintenance by Licensee of an electronic
database comprised of all adverse events reported on a worldwide basis with respect to the Licensed
Products and the establishment of appropriate mechanisms by which Licensor can, in a timely manner,
access such database to comply with Applicable Law. Each Party shall be responsible for its own
costs incurred in connection with receiving, recording, reviewing, communicating, reporting and
responding to adverse events.
ARTICLE 10
LICENSED PRODUCT RECALL
10.1
Notification and Recall
. During the Co-Promotion Period, in the event that any
Regulatory Authority issues or requests a recall or takes similar action in connection with a
Licensed Product or in the event either Party determines that an event, incident or
circumstance has occurred that may result in the need for a recall or market withdrawal, the Party
notified of or desiring such recall or similar action shall, within twenty-four (24) hours, advise
the other Party thereof by telephone (and confirm by email or facsimile), email or facsimile.
Following notification of a recall in the Licensee Territory, the JSC shall meet to discuss such
notification or recall and Licensee shall decide whether to conduct a recall (except in the case of
a government-mandated recall) and the manner in which any such recall shall be conducted.
10.2
Recall Expenses
. Licensee shall bear the expenses of any recall of a Licensed
Product in the Licensee Territory;
provided
,
however
, that Licensor shall bear the expense of a
recall to the extent that such recall resulted from Licensors gross negligence or willful
misconduct.
- 50 -
ARTICLE 11
CONFIDENTIALITY AND NON-DISCLOSURE
11.1
Confidentiality Obligations
. At all times during the term of this Agreement and
for a period of ten (10) years following termination or expiration hereof, each Party shall, and
shall cause its officers, directors, employees and agents to, keep completely confidential and not
publish or otherwise disclose and not use, directly or indirectly, for any purpose, any
Confidential Information furnished or otherwise made known to it, directly or indirectly, by the
other Party, except to the extent such disclosure or use is expressly permitted by the terms of
this Agreement or is reasonably necessary for the performance of this Agreement.
Confidential
Information
means the terms of this Agreement, any information provided by one Party to
another before or after the Original Execution Date that relates to the terms of this Agreement,
the Licensed Compound or the Licensed Products (including the Regulatory Documentation, Regulatory
Approvals and Drug Master Files any information or data contained therein), any Development or
Commercialization of the Licensed Compound or the Licensed Products or the scientific, regulatory
or business affairs or other activities of either Party. All Clinical Data shall be the
Confidential Information of the Party that owns such data, regardless of which Party furnished such
data. Such Confidential Information may be used by the receiving Party only for the purposes of
carrying out obligations or exercising its rights set forth in this Agreement. Notwithstanding the
foregoing, Confidential Information shall not include any information that:
11.1.1 is or hereafter becomes part of the public domain by public use, publication, general
knowledge or the like through no wrongful act, fault or negligence on the part of receiving Party;
11.1.2 can be demonstrated by documentation or other competent proof to have been in the
receiving Partys possession prior to disclosure by the disclosing Party without any obligation of
confidentiality with respect to said information;
11.1.3 is subsequently received by the receiving Party from a Third Party who is not bound by
any obligation of confidentiality with respect to said information;
11.1.4 has been published by a Third Party or otherwise enters the public domain through no
fault of the receiving Party in breach of this Agreement; or
11.1.5 can be demonstrated by documentation or other competent evidence to have been
independently developed by or for the receiving Party without reference to the disclosing Partys
Confidential Information.
Specific aspects or details of Confidential Information shall not be deemed to be within the
public domain or in the possession of the receiving Party merely because the Confidential
Information is embraced by more general information in the public domain or in the possession of
the receiving Party. Further, any combination of Confidential Information shall not be considered
in the public domain or in the possession of the receiving Party merely because individual elements
of such Confidential Information are in the public domain or in the
- 51 -
possession of the receiving
Party unless the combination and its principles are in the public domain or in the possession of
the receiving Party.
11.2
Permitted Disclosures
. Each Party may disclose Confidential Information to the
extent that such disclosure is:
11.2.1 Made in response to a valid order of a court of competent jurisdiction or other
supra-national, federal, national, regional, state, provincial and local governmental or regulatory
body of competent jurisdiction or, if in the reasonable opinion of the receiving Partys legal
counsel, such disclosure is otherwise required by Applicable Law;
provided
,
however
, that the
receiving Party shall first have given notice to the disclosing Party and given the disclosing
Party a reasonable opportunity to quash such order and to obtain a protective order requiring that
the Confidential Information and documents that are the subject of such order be held in confidence
by such court or agency or, if disclosed, be used only for the purposes for which the order was
issued; and
provided further
that if a disclosure order is not quashed or a protective order is not
obtained, the Confidential Information disclosed in response to such court or governmental order
shall be limited to that information which is legally required to be disclosed in response to such
court or governmental order;
11.2.2 Made by the receiving Party to any Regulatory Authorities as required in connection
with any request for Regulatory Approval, any filing or application (including (a) with respect to
Licensee, disclosures to the U.S. Securities and Exchange Commission or other disclosures required
of public companies under Applicable Law in the United States and (b) with respect to Licensor, any
disclosures required of public companies under Applicable Law in Norway);
provided
,
however
, that
prior notice of such disclosure shall be provided to the other Party and reasonable measures, to
the extent available and after consultation with the other Party, shall be taken to assure
confidential treatment of such information, including requests for redaction of confidential terms
of this Agreement;
11.2.3 Made by either Party or its Affiliates or sublicensees to Third Parties as may be
necessary or useful in connection with the Manufacture or Exploitation of the Licensed Compound,
the Licensed Product (to the extent permitted or contemplated hereunder), Improvements thereto or
otherwise in connection with the performance of its obligations or exercise of its rights
(including, with respect to Licensor, its rights under Section 2.2 as
contemplated by this Agreement, including subcontracting and sublicensing transactions in
connection therewith;
provided
,
however
, that such persons shall be subject to obligations of
confidentiality and non-use with respect to such Confidential Information comparable to the
obligations of confidentiality and non-use of the receiving Party pursuant to this ARTICLE 11;
11.2.4 Made under confidentiality undertakings to any potential acquirer, merger partner, or
potential providers of equity or debt financing and their advisors.
11.3
Use of Name
. Except as expressly set forth in Sections 2.1, neither Party shall
mention or otherwise use the name, insignia, symbol, Trademark, trade name or logotype of the other
Party (or any abbreviation or adaptation thereof) in any publication, press release, promotional
material or other form of publicity without the prior written approval of such other
- 52 -
Party in each
instance. The restrictions imposed by this Section shall not prohibit either Party from making any
disclosure identifying the other Party that is required by Applicable Law.
11.4
Press Releases
. Press releases or other similar public communication by either
Party relating to this Agreement shall be approved in advance by the other Party, which approval
shall not be unreasonably withheld or delayed, except for those communications required by
Applicable Law, disclosures of information for which consent has previously been obtained,
information that has been previously disclosed publicly or as otherwise set forth in this
Agreement;
provided
that, if reasonably practicable, the other Party is given a reasonable
opportunity to review and comment on any such press release or public communication in advance
thereof.
11.5
Patient Information
. The Parties agree to abide (and to cause their respective
Affiliates, Sublicensees and Distributors to abide) and to take (and to cause their respective
Affiliates, Sublicensees and Distributors to take) all reasonable and appropriate actions to ensure
that all Third Parties conducting or assisting with any clinical development activities hereunder
in accordance with, and subject to the terms of, this Agreement, shall abide, to the extent
applicable, by all Applicable Law concerning the confidentiality or protection of patient
identifiable information and/or patients protected health information, including the regulations
at 45 C.F.R. Parts 160 and 164 and where relevant, the applicable national laws implementing the
European Union Directive 95/46/EC on the protection of individuals with regard to the processing of
personal data and on the free movement of such data of 24 October 1995 and any other Applicable
Law, in the course of their performance under this Agreement.
11.6
Publications
. The JSC (or its appropriate designees) shall determine the
strategy for, and coordinate, the publication and presentation of results of studies of the
Licensed Products or other data generated under this Agreement. Each Party recognizes that the
publication of papers regarding results of and other information regarding activities under this
Agreement, including oral presentations and abstracts, may be beneficial to both Parties,
provided
such publications are subject to reasonable controls to protect Confidential Information. In
particular, it is the intent of the Parties to maintain the confidentiality of any Confidential
Information included in any Patent application until such Patent application has been filed.
Accordingly, each Party shall have the right to review and approve any paper proposed for
publication by the other Party, including any oral presentation or abstract, which pertains to
results of Clinical Studies, Post Approval Studies or other studies with respect to the Licensed
Products or includes other data generated under this Agreement or which includes Confidential
Information of the other Party. Before any such paper is submitted for publication or an oral
presentation is made, the publishing or presenting Party shall deliver a complete copy of the paper
or materials for oral presentation to the other Party at least fifteen (15) days prior to
submitting the paper to a publisher or making the presentation. The other Party shall review any
such paper and give its comments to the publishing Party within ten (10) days of the delivery of
such paper to the other Party. With respect to oral presentation materials and abstracts, the
other Party shall make reasonable efforts to expedite review of such materials and abstracts, and
shall return such items as soon as practicable to the publishing or presenting Party with
appropriate comments, if any, but in no event later than ten (10) days from the date of delivery to
the other Party. Failure to respond within such ten (10) days shall be deemed approval to publish
or present. If approval is not given or deemed given, either Party may refer the matter to the JSC
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for resolution together with the reasons for withholding approval. Notwithstanding the foregoing,
the publishing or presenting Party shall comply with the other Partys request to delete references
to such other Partys Confidential Information in any such paper and shall withhold publication of
any such paper or any presentation of same for an additional sixty (60) days in order to permit the
Parties to obtain patent protection if either Party deems it necessary. Any publication shall
include recognition of the contributions of the other Party according to standard practice for
assigning scientific credit, either through authorship or acknowledgement, as may be appropriate.
Each Party shall use Commercially Reasonable Efforts to cause investigators and institutions
participating in Clinical Studies and Post Approval Studies for the Licensed Products with which it
contracts to agree to terms substantially similar to those set forth in this Section, which efforts
shall satisfy such Partys obligations under this Section with respect to such investigators and
institutions.
11.7
Return of Confidential Information
. Upon the effective date of the termination
of this Agreement for any reason, either Party may request in writing, and the other Party shall
either, with respect to Confidential Information to which such other Party does not retain rights
hereunder: (i) promptly destroy all copies of such Confidential Information in the possession of
the other Party and confirm such destruction in writing to the requesting Party; or (ii) promptly
deliver to the requesting Party, at the other Partys expense, all copies of such Confidential
Information in the possession of the other Party;
provided
,
however
, the other Party shall be
permitted to retain one (1) copy of such Confidential Information for the sole purpose of
performing any continuing obligations hereunder or for archival purposes. Notwithstanding the
foregoing, such other Party also shall be permitted to retain such additional copies of or any
computer records or files containing such Confidential Information that have been created solely by
such Partys automatic archiving and back-up procedures, to the extent created and retained in a
manner consistent with such other Partys standard archiving and back-up procedures, but not for
any other use or purpose. All Confidential Information shall continue to be subject to the terms
of this Agreement for the period set forth in Section 11.1.
11.8
Confidential Disclosure Agreement
. The terms of this ARTICLE 11 shall supersede
the terms of the existing Confidential Disclosure Agreement, dated as of May 31, 2009, by and
between Licensor and Licensee.
ARTICLE 12
REPRESENTATIONS AND WARRANTIES
12.1
Representations, Warranties and Covenants
. Each Party hereby represents,
warrants and covenants to the other Party that, as of the Original Execution Date and as of the
Effective Date:
12.1.1
Corporate Authority
. Such Party (a) has the power and authority and the legal
right to enter into this Agreement and perform its obligations hereunder and (b) has taken all
necessary action on its part required to authorize the execution and delivery of this Agreement and
the performance of its obligations hereunder. This Agreement has been duly executed and delivered
on behalf of such Party and constitutes a legal, valid and binding obligation of such Party and is
enforceable against it in accordance with its terms subject to the effects of
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bankruptcy,
insolvency or other laws of general application affecting the enforcement of creditor rights and
judicial principles affecting the availability of specific performance and general principles of
equity, whether enforceability is considered a proceeding at law or equity.
12.1.2
Litigation
. Such Party is not aware of any pending or threatened litigation
(and has not received any communication) that alleges that such Partys activities related to this
Agreement have violated or that by conducting the activities as contemplated herein such Party
would violate, any of the Patent or Intellectual Property Rights of any other Person.
12.1.3
Consents and Approvals
. All necessary consents, approvals and authorizations
of all regulatory and governmental authorities and other Persons required to be obtained by such
Party in connection with the execution and delivery of this Agreement and the performance of its
obligations hereunder have been obtained.
12.1.4
Conflicts
. The execution and delivery of this Agreement and the performance of
such Partys obligations hereunder (a) do not conflict with or violate any requirement of
Applicable Law or regulation or any provision of the articles of association or limited partnership
agreement or any similar instrument of such Party, as applicable, in any material way, and (b) do
not conflict with, violate or breach or constitute a default or require any consent under, any
contractual obligation or court or administrative order by which such Party is bound.
12.2
Additional Representations, Warranties and Covenants of Licensee
. Licensee
represents, warrants and covenants to Licensor that, as of the Original Execution Date and as of
the Effective Date:
12.2.1 Licensee (a) is a corporation duly organized and in good standing under the laws of
Delaware and (b) has full power and authority and the legal right to own and operate its property
and assets and to carry on its business as it is now being conducted and as it is contemplated to
be conducted by this Agreement.
12.2.2 Neither Licensee nor any of its Affiliates has been debarred or is subject to debarment
and neither Licensee nor any of its Affiliates will use in any capacity, in connection with the
services to be performed under this Agreement, any Person who has been debarred
pursuant to Section 306 of the FFDCA or who is the subject of a conviction described in such
section. Licensee shall inform Licensor in writing immediately if it or any Person who is
performing services hereunder is debarred or is the subject of a conviction described in Section
306 or if any action, suit, claim, investigation or legal or administrative proceeding is pending
or, to the best of Licensees Knowledge, is threatened, relating to the debarment or conviction of
Licensee or any Person performing services hereunder.
12.3
Additional Representations, Warranties and Covenants of Licensor
. Licensor
represents, warrants and covenants to Licensee that, as of the Original Execution Date and as of
the Effective Date:
12.3.1 Licensor is a corporation duly organized under the laws of Norway and has full power
and authority and the legal right to own and operate its property and assets and to
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carry on its
business as it is now being conducted and as is contemplated to be conducted by this Agreement.
12.3.2 Neither Licensor nor any of its Affiliates has been debarred or is subject to debarment
and neither Licensor nor any of its Affiliates will use in any capacity, in connection with the
services to be performed under this Agreement, any Person who has been debarred pursuant to Section
306 of the FFDCA or who is the subject of a conviction described in such section. Licensor shall
inform Licensee in writing immediately if it or any Person who is performing services hereunder is
debarred or is the subject of a conviction described in Section 306 or if any action, suit, claim,
investigation or legal or administrative proceeding is pending or, to the best of Licensors
Knowledge, is threatened, relating to the debarment or conviction of Licensee or any Person
performing services hereunder.
12.3.3 Licensor Controls the Patents listed on Exhibit 1.1.91 and the Licensor Know-How, and
is entitled to grant the licenses specified herein. Licensor has not caused any Licensor Patent to
be subject to any liens or encumbrances and Licensor has not granted to any Third Party any rights
or licenses under any of the Licensor Know-How or Licensor Patents that would conflict with the
licenses granted to Licensee hereunder. To Licensors Knowledge, neither the Development nor
Commercialization of the Licensed Products as currently conducted by Licensor or as contemplated by
this Agreement does or would literally infringe or result in the misappropriation of any existing
issued Patent of any Third Party.
12.3.4 To Licensors Knowledge, the Licensor Patents have been procured or are being procured
from the respective Patent offices in accordance with Applicable Law.
12.3.5 Licensor has no Knowledge of any actual infringement or threatened infringement of the
Licensor Patents or Licensor Know-How by any Person.
12.3.6 Licensor has no Knowledge of any claim or litigation that has been brought or
threatened in writing by any Person alleging that (a) the Licensor Patents or the Licensor Know-How
are invalid or unenforceable or (b) the Development and Commercialization of the Licensed Products
as contemplated by this Agreement infringes any Patent or other Intellectual Property Right
Controlled by any Third Party.
12.3.7 Licensor has not, up through and including the Original Execution Date, Knowingly
withheld (except as previously stated by Licensor to Licensee) any material information, including
reports of Adverse Event Experiences and warning letters from Regulatory Authorities, in Licensors
possession from Licensee in response to Licensees reasonable written inquiries in connection with
its due diligence relating to the Licensed Compound, Licensed Products, this Agreement and the
underlying transaction. To Licensors Knowledge, the clinical data related to Licensed Products
that Licensor has provided to Licensee prior to the Original Execution Date was, when access was
provided to Licensee, up-to-date and accurate in all material respects and Licensor has provided
Licensee with any material updates to such clinical data that have occurred since the time such
access was provided to Licensee.
12.4
DISCLAIMER OF WARRANTY
. EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN THIS
ARTICLE 12, NEITHER PARTY MAKES ANY
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REPRESENTATIONS OR GRANTS ANY WARRANTIES, EXPRESS OR IMPLIED,
EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, AND EACH PARTY SPECIFICALLY
DISCLAIMS ANY OTHER WARRANTIES, WHETHER WRITTEN OR ORAL, OR EXPRESS OR IMPLIED, INCLUDING ANY
WARRANTY OF QUALITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE OR ANY WARRANTY AS
TO THE VALIDITY OF ANY PATENTS OR THE NON-INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OF THIRD
PARTIES.
ARTICLE 13
INDEMNITY
13.1
Indemnification of Licensor
. Licensee shall indemnify Licensor, its Affiliates
and their respective directors, officers, employees, licensors and agents, and defend and save each
of them harmless, from and against any and all losses, damages, liabilities, costs and expenses
(including reasonable attorneys fees and expenses) (collectively,
Losses
) in connection
with any and all suits, investigations, claims or demands of Third Parties (collectively,
Third Party Claims
) arising from or occurring as a result of: (a) the breach by Licensee
or its Affiliates, Sublicensees or Distributors of any term of this Agreement or the
misappropriation by Licensee or its Affiliates, Sublicensees or Distributors of trade secrets or
other know how of any Third Party; (b) the negligence or willful misconduct on the part of Licensee
or its Affiliates or any Sublicensees or Distributors in performing their obligations under this
Agreement; or (c) subject to Section 13.3 and Section 13.4, the Development, Commercialization and
sale by Licensee or its Affiliates or any Sublicensees or Distributors of the Licensed Products in
the Licensee Territory, except for those Losses which Licensor has an obligation to indemnify
Licensee pursuant to Section 13.2 hereof, as to which Losses each Party shall indemnify the other
to the extent of their respective liability;
provided
,
however
, that Licensee shall not be
obligated to indemnify Licensor for any Losses to the extent that such Losses arise as a result of
gross negligence or willful misconduct on the part of Licensor or any of its Affiliates.
13.2
Indemnification of Licensee
. Licensor shall indemnify Licensee, its Affiliates
and their respective directors, officers, employees and agents, and defend and save each of them
harmless, from and against any and all Losses in connection with any and all Third Party Claims
arising from or occurring as a result of: (a) the breach by Licensor of this Agreement; or (b) the
negligence or willful misconduct on the part of Licensor in performing its obligations under
this Agreement or the misappropriation by Licensor of trade secrets or other know how of any Third
Party; except for those Losses for which Licensee has an obligation to indemnify Licensor and its
Affiliates pursuant to Section 13.1 hereof, as to which Losses each Party shall indemnify the other
to the extent of their respective liability for the Losses;
provided
,
however
, that Licensor shall
not be obligated to indemnify Licensee for any Losses to the extent that such Losses arise as a
result of gross negligence or willful misconduct on the part of Licensee or any of its Affiliates,
Sublicensees or Distributors.
13.3
Certain Losses
. Any Losses for personal injury or death or damage or destruction
of property, other than those Losses for which indemnification is provided in Section 13.1(a) or
(b) or Section 13.2(a) or (b), in connection with any claim brought against either Party by a Third
Party resulting directly or indirectly from the conduct of Clinical Studies of a Licensed Product
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by either Party (or its Affiliates, employees or agents) in accordance with the Development Plans
or the Commercialization Plans shall be included as a Development Cost only to the extent such
Losses are not covered by insurance policies of such Party. The Parties shall confer through the
JSC with respect to how to respond to the claim and how to handle the claim in an efficient manner.
In the absence of such an agreement, each Party shall have the right to take such action as it
deems appropriate.
13.4
Losses in Europe
. Notwithstanding the forgoing and other than those Losses (i)
for which indemnification is provided in Section 13.1(a) or (b) or Section 13.2(a) or (b) and (ii)
arising out of any liabilities to, or claims, of any employee or contractor of a Party (for which
such Party shall be solely responsible), any Losses incurred during the Co-Promotion Period and (a)
arising out of the Development of the Licensed Products shall be deemed Development Costs and (b)
arising out of the Commercialization of the Licensed Products in Europe shall be deemed
Commercialization Costs.
13.5
Notice of Claim
. All indemnification claims in respect of a Party, its
Affiliates or their respective directors, officers, employees and agents shall be made solely by
such Party to this Agreement (the
Indemnified Party
). The Indemnified Party shall give
the indemnifying Party prompt written notice (an
Indemnification Claim Notice
) of any
Losses or discovery of fact upon which such Indemnified Party intends to base a request for
indemnification under Section 13.1 or 13.2, but in no event shall the indemnifying Party be liable
for any Losses that result from any delay in providing such notice. Each Indemnification Claim
Notice must contain a description of the claim and the nature and amount of such Loss (to the
extent that the nature and amount of such Loss is known at such time). The Indemnified Party shall
furnish promptly to the indemnifying Party copies of all papers and official documents received in
respect of any Losses and Third Party Claims.
13.6
Control of Defense
. At its option, the indemnifying Party may assume the defense
of any Third Party Claim by giving written notice to the Indemnified Party within thirty (30) days
after the indemnifying Partys receipt of an Indemnification Claim Notice. The assumption of the
defense of a Third Party Claim by the indemnifying Party shall not be construed as an
acknowledgment that the indemnifying Party is liable to indemnify the Indemnified Party in respect
of the Third Party Claim, nor shall it constitute a waiver by the indemnifying Party of any
defenses it may assert against the Indemnified Partys claim for
indemnification. Upon assuming the defense of a Third Party Claim, the indemnifying Party may
appoint as lead counsel in the defense of the Third Party Claim any legal counsel selected by the
indemnifying Party. In the event the indemnifying Party assumes the defense of a Third Party
Claim, the Indemnified Party shall immediately deliver to the indemnifying Party all original
notices and documents (including court papers) received by the Indemnified Party in connection with
the Third Party Claim. Should the indemnifying Party assume the defense of a Third Party Claim,
except as provided in Section 13.6.1, the indemnifying Party shall not be liable to the Indemnified
Party for any legal expenses subsequently incurred by such Indemnified Party in connection with the
analysis, defense or settlement of the Third Party Claim. In the event that it is ultimately
determined that the indemnifying Party is not obligated to indemnify, defend or hold harmless the
Indemnified Party from and against the Third Party Claim, the Indemnified Party shall reimburse the
indemnifying Party for any and all costs and expenses
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(including attorneys fees and costs of suit)
and any Third Party Claims incurred by the indemnifying Party in its defense of the Third Party
Claim.
13.6.1
Right to Participate in Defense
. Without limiting Section 13.6 above, any
Indemnified Party shall be entitled to participate in, but not control, the defense of such Third
Party Claim and to employ counsel of its choice for such purpose;
provided
,
however
, that such
employment shall be at the Indemnified Partys own expense unless, subject to the consent of an
insurer, if applicable, (a) the employment thereof has been specifically authorized by the
indemnifying Party in writing, (b) the indemnifying Party has failed to assume the defense and
employ counsel in accordance with Section 13.6 (in which case the Indemnified Party shall control
the defense) or (c) the interests of the indemnitee and the indemnifying Party with respect to such
Third Party Claim are sufficiently adverse to prohibit the representation by the same counsel of
both parties under Applicable Law, ethical rules or equitable principles.
13.6.2
Settlement
. With respect to any Third Party Claims relating solely to the
payment of money damages in connection with a Third Party Claim and that shall not result in the
Indemnified Partys becoming subject to injunctive or other relief or otherwise adversely affecting
the business of the Indemnified Party in any manner, and as to which the indemnifying Party shall
have acknowledged in writing the obligation to indemnify the Indemnified Party hereunder, the
indemnifying Party shall have the sole right to consent to the entry of any judgment, enter into
any settlement or otherwise dispose of such Loss, on such terms as the indemnifying Party, in its
sole discretion, shall deem appropriate. With respect to all other Losses in connection with Third
Party Claims, where the indemnifying Party has assumed the defense of the Third Party Claim in
accordance with Section 13.6.1, the indemnifying Party shall have authority to consent to the entry
of any judgment, enter into any settlement or otherwise dispose of such Loss
provided
it obtains
the prior written consent of the Indemnified Party (which consent shall not be unreasonably
withheld or delayed). The indemnifying Party shall not be liable for any settlement or other
disposition of a Loss by an Indemnified Party that is reached without the written consent of the
indemnifying Party. Regardless of whether the indemnifying Party chooses to defend or prosecute
any Third Party Claim, no Indemnified Party shall admit any liability with respect to or settle,
compromise or discharge, any Third Party Claim without the prior written consent of the
indemnifying Party, such consent not to be unreasonably withheld or delayed.
13.6.3
Cooperation
. Regardless of whether the indemnifying Party chooses to defend or
prosecute any Third Party Claim, the Indemnified Party shall, and shall cause each Indemnified
Party to, cooperate in the defense or prosecution thereof and shall furnish such records,
information and testimony, provide such witnesses and attend such conferences, discovery
proceedings, hearings, trials and appeals as may be reasonably requested in connection therewith.
Such cooperation shall include access during normal business hours afforded to indemnifying Party
to, and reasonable retention by the Indemnified Party of, records and information that are
reasonably relevant to such Third Party Claim, and making Indemnified Parties and other employees
and agents available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder, and the indemnifying Party shall reimburse the
Indemnified Party for all its reasonable out-of-pocket expenses in connection therewith.
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13.6.4
Expenses
. Except as provided above, the costs and expenses, including
fees and disbursements of counsel, incurred by the Indemnified Party in connection with any claim
shall be reimbursed on a Calendar Year basis by the indemnifying Party, without prejudice to the
indemnifying Partys right to contest the Indemnified Partys right to indemnification and subject
to refund in the event the indemnifying Party is ultimately held not to be obligated to indemnify
the Indemnified Party.
13.7
Limitation on Damages and Liability
. EXCEPT IN CIRCUMSTANCES OF GROSS NEGLIGENCE
OR INTENTIONAL MISCONDUCT BY A PARTY OR ITS AFFILIATES (OR WITH RESPECT TO LICENSEE, ITS
SUBLICENSEES OR DISTRIBUTORS), OR WITH RESPECT TO LOSSES ARISING FROM THIRD PARTY CLAIMS UNDER
SECTION 13.1 OR 13.2, NO PARTY OR ANY OF THEIR RESPECTIVE AFFILIATES SHALL BE LIABLE FOR SPECIAL,
INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, OR FOR LOST PROFITS, MILESTONES OR ROYALTIES,
WHETHER IN CONTRACT, WARRANTY, NEGLIGENCE, TORT, STRICT LIABILITY OR OTHERWISE, ARISING OUT OF (a)
THE DEVELOPMENT, MANUFACTURE, USE OR SALE OF THE LICENSED PRODUCT OR LICENSED COMPOUND UNDER THIS
AGREEMENT, (b) THE USE OF OR REFERENCE TO ANY PATENTS, KNOW-HOW, REGULATORY DOCUMENTATION OR DRUG
MASTER FILE, OR (c) ANY BREACH OF, OR FAILURE TO PERFORM, ANY OF THE PROVISIONS OF THIS AGREEMENT.
13.8
Insurance
. Each Party shall have and maintain such type and amounts of liability
insurance covering (a) in the case of Licensee, the Manufacture, Development, use and sale of the
Licensed Products or (b) in the case of Licensor, Licensors Co-Promotion activities during the
Co-Promotion Period, in each case as is normal and customary in the pharmaceutical industry
generally for parties similarly situated, and shall upon request provide the other Party with a
copy of its policies of insurance in that regard, along with any amendments and revisions thereto.
Each Party shall provide the other Party thirty (30) days advance written notice of the
termination of coverage in its insurance program. Licensee shall cause Licensor to be named as an
additional insured under all products liability insurance policies applicable to Licensed Products
sold, or otherwise distributed to patients, in Europe during the Co-Promotion Period. To the
extent that Licensor is able to obtain products liability insurance policies applicable to Licensed
Products sold, or otherwise distributed to patients, in Europe during the Co-Promotion Period,
Licensor shall cause Licensee to be named as an additional insured under such policies. The
Parties acknowledge that further investigation and analysis is required concerning the preferred
insurance and risk management arrangements. Accordingly, the Parties will carry out such
investigation and analysis, discuss the preferred arrangements and make mutually acceptable changes
to the foregoing to reflect the preferred arrangement. The Parties shall further agree upon
financial arrangements concerning the sharing of costs and risks associated with self-insurance
arrangements, deductibles and other risk management arrangements so that the Parties shall equally
share total costs of risk management in respect of products liability risks and products liability
Losses in Europe only to the extent that Licensor exercises its Co-Promotion Option pursuant to
Article 5.
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ARTICLE 14
TERM AND TERMINATION
14.1
Term
. This Agreement shall continue in each country in the Licensee Territory
until such time as Licensee or its Sublicensee no longer is selling Licensed Products in any
country in the Licensee Territory, unless earlier terminated in accordance with this ARTICLE 14.
14.2
Termination of this Agreement for Material Breach
. In the event that either
Party (the
Breaching Party
) shall be in material default in the performance of any of its
material obligations under this Agreement, in addition to any other right and remedy the other
Party (the
Complaining Party
) may have, the Complaining Party may terminate this
Agreement by sixty (60) days prior written notice (the
Notice Period
) to the Breaching
Party, specifying the breach and its claim of right to terminate,
provided
always that the
termination shall not become effective at the end of the Notice Period if the Breaching Party cures
the breach complained about during the Notice Period (or, if such default cannot be cured within
such sixty (60)-day period, if the Breaching Party commences actions to cure such default within
the Notice Period and thereafter diligently continues such actions,
provided
that such default is
cured within one hundred eighty (180) days after the receipt of such notice), except in the case of
a payment default of amounts not subject to a good faith Dispute, as to which the Breaching Party
shall have only a ten (10)-day cure period. In the event of a Dispute between the Parties for
which either Party has commenced a dispute resolution proceeding under Section 15.7 before
expiration of the applicable cure period, the applicable cure period shall be tolled during the
pendency of such resolution.
14.3
Termination by Licensee
. If Licensee reasonably determines that it is not
feasible for Licensee to pursue the Development or Commercialization of the Licensed Products in a
country within the Licensee Territory due to scientific, technical, regulatory or commercial
reasons, including (a) safety or efficacy concerns, including adverse events of a Licensed Product,
(b) concerns relating to the present or future marketability or profitability of a Licensed
Product, (c) reasons related to Patent coverage or (d) existing and anticipated competition, which
renders the Commercialization of a Licensed Product no longer commercially practicable for
Licensee, then Licensee shall promptly notify Licensor in writing of such determination and provide
Licensor with the pertinent information with respect thereto. Promptly following the receipt of
such notice from Licensee, the Parties shall meet and discuss any amendments to this Agreement to
address Licensees concerns. If the Parties are not able to agree on such amendments within forty
five (45) days and if Licensee still reasonably believes that it is not feasible for Licensee to
pursue the Development, launch, Commercialization or sale of a Licensed Product in a country,
Licensee shall, if Licensor requests, appoint Licensor as its exclusive Distributor in such country
under which Licensor shall have all economic benefits from the sale of Licensed Products in such
country. If Licensor does not request such appointment, Licensee may terminate this Agreement with
respect to such country or countries in the Licensee Territory upon six (6) months prior written
notice to Licensor;
provided,
that Licensor may accelerate the effective date of such termination
upon notice to Licensee.
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14.4
Termination Upon Insolvency
. Either Party may terminate this Agreement if, at
any time, the other Party or its ultimate parent corporation shall file in any court or agency
pursuant to any statute or regulation of any state, country or jurisdiction, a petition in
bankruptcy or insolvency or for reorganization or for an arrangement or for the appointment of a
receiver or trustee of that Party or of its assets, or if the other Party or its ultimate parent
corporation shall be served with an involuntary petition against it, filed in any insolvency
proceeding, and such petition shall not be dismissed within sixty (60) days after the filing
thereof, or if the other Party or its ultimate parent corporation shall propose or be a party to
any dissolution or liquidation, or if the other Party or its ultimate parent corporation shall make
an assignment for the benefit of its creditors.
14.5
Rights in Bankruptcy
. All rights and licenses granted under or pursuant to this
Agreement by Licensee or Licensor are, and shall otherwise be deemed to be, for purposes of Section
365(n) of the U.S. Bankruptcy Code, licenses of right to intellectual property as defined under
Section 101 of the U.S. Bankruptcy Code. The Parties agree that the Parties, as licensees of such
rights under this Agreement, shall retain and may fully exercise all of their rights and elections
under the U.S. Bankruptcy Code. The Parties further agree that, in the event of the commencement
of a bankruptcy proceeding by or against either Party under the U.S. Bankruptcy Code, the Party
hereto that is not a Party to such proceeding shall be entitled to a complete duplicate of (or
complete access to, as appropriate) any such intellectual property and all embodiments of such
intellectual property, which, if not already in the non-subject Partys possession, shall be
promptly delivered to it (a) upon any such commencement of a bankruptcy proceeding upon the
non-subject Partys written request therefor, unless the Party subject to such proceeding elects to
continue to perform all of its obligations under this Agreement or (b) if not delivered under (a)
above, following the rejection of this Agreement by or on behalf of the Party subject to such
proceeding upon written request therefor by the non-subject Party.
14.6
Termination by Licensor for Patent Challenge
. Except to the extent the following
is unenforceable under the Applicable Law of a particular country where a patent application within
the Licensor Patents is pending or a patent within the Licensor Patents is issued, Licensor shall
have the right to terminate this Agreement by written notice effective upon receipt if Licensee or
its Affiliates or their Sublicensee or Distributors directly, or indirectly through a Third Party,
commence or maintain any Patent Challenge. If a Sublicensee or Distributor (or an Affiliate of
such Sublicensee or Distributor) undertakes a Patent Challenge of any such Licensor Patent, then
Licensee upon receipt of notice from Licensor of such Patent Challenge may terminate the applicable
sublicense agreement in its entirety. If Licensee fails to so terminate such sublicense agreement,
Licensor shall terminate all licensed rights granted to Licensee covered by such sublicense
agreement. A
Patent Challenge
means any proceeding opposing, challenging the validity or
enforceability of, opposing any extension of or the grant of a supplementary protection certificate
with respect to, or actively participating in any interference proceeding with respect to, any
Licensor Patent.
14.7
Consequences of Termination
.
14.7.1
Upon Termination
. Upon any termination of this Agreement under Section 14.2,
14.3, 14.4, or 14.6:
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(a) Subject to Sections 14.7.4, 14.7.7 and 14.7.8, all licenses and sublicenses granted to
Licensee by Licensor under this Agreement shall terminate, and Licensee, its Affiliates,
Sublicensees and Distributors shall have no further right in or to the Licensor Patents or to use
the Licensor Know-How or Product Trademarks.
(b) Licensee shall and does hereby automatically and without any further consideration
relinquish its rights hereunder and assign and cause its Affiliates, Sublicensees and Distributors
to assign to Licensor without further compensation therefor, all right, title and interest, if any,
in and to the Regulatory Approvals, Regulatory Documentation and any Drug Master Files, and shall
grant to Licensor with effect from the effective date of termination a perpetual, irrevocable and
exclusive (including with regard to Licensee and its Affiliates, Sublicensees and Distributors),
worldwide, royalty-free license, with the right to grant sublicenses (through multiple tiers of
sublicensees), under the Joint Patents (to the extent Controlled by Licensee), Joint Know-How (to
the extent Controlled by Licensee), Licensee Know-How and Licensee Patents, solely to Exploit the
Licensed Compound and the Licensed Products. To the extent any such assignment is not legally
permissible or such Regulatory Approvals, Regulatory Documentation or Drug Master Files do not
relate solely to the Licensed Products, Licensee shall grant Licensor the exclusive license and
right (with right to sublicense) to access, use, and cross-reference such Regulatory Approvals,
Regulatory Documentation or Drug Master Files to Develop, Manufacture and Commercialize the
Licensed Product worldwide.
(c) Any payments under Section 7.1 shall be retained by Licensor.
(d) Licensee shall cooperate with Licensor to assure a continuing supply of Licensed Product
for Development and Commercialization in the Licensee Territory, including, to the extent requested
by Licensor, assignment of agreements with Third Party manufacturers, transfer of existing
inventories and transfer of Licensee Know-How relating to the manufacturing of Licensed Product to
Licensor or its designee.
(e) Licensee will responsibly wind-down, in accordance with accepted pharmaceutical industry
norms and ethical practices, any on-going Clinical Studies or Post Approval Studies for which it
has responsibility hereunder in which patient dosing has commenced or, if reasonably practicable
and requested by Licensor, allow Licensor or its CRO to complete such trials (and then assign all
related Regulatory Documentation and investigator and other agreements relating to such studies).
Licensee shall be responsible for any Development Costs associated with such wind-down. Licensor
shall pay all Development Costs incurred by either Party to complete such studies should Licensor
request that such studies be completed.
14.7.2
Ceasing Exploitation of Licensed Product
. Subject to Section 14.7.4 and
14.7.7, upon termination of this Agreement, however caused or arising, Licensee shall, and shall
cause its Affiliates, Sublicensees and Distributors to, promptly, cease all Exploitation of the
Licensed Products in the Licensee Territory or such terminated countries, as applicable, and,
within thirty (30) days of the effective date of such termination, at Licensors election, either
destroy or return to Licensor, at Licensees expense, any and all unsold quantities of Licensed
Product.
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14.7.3
Transfer of Materials
. Without limitation to Section 11.7, except as provided
in Section 14.7.4, Licensee shall cooperate with Licensor in transferring to Licensor or a Third
Party, as Licensor may direct, within sixty (60) days of the termination hereof, all data, files
and other materials in the possession or under the control of Licensee or its Affiliates,
Sublicensees (subject to Section 14.7.7) or Distributors that are Controlled by Licensor or
licensed to Licensor upon such termination, except that Licensee may retain one (1) copy of such
data, files or materials Controlled by Licensor for the sole purpose of performing any continuing
obligations hereunder or for archival purposes. Notwithstanding the foregoing, Licensee also shall
be permitted to retain such additional copies of or any computer records or files containing such
data or files that have been created solely by Licensees automatic archiving and back-up
procedures, to the extent created and retained in a manner consistent with Licensees standard
archiving and back-up procedures, but not for any other use or purpose.
14.7.4
Sale of Inventory
. Upon termination of this Agreement under Sections 14.2,
14.3, 14.4 or 14.6,
provided
that Licensee is not in material breach of any obligation under this
Agreement at the time of such termination, Licensee shall have the right for six (6) months after
the effective date of such termination to dispose of all Licensed Product then in its inventory, as
though this Agreement had not terminated. For the avoidance of doubt, Licensee shall continue to
make payments thereon as provided in ARTICLE 7.
14.7.5
Assignments
. In connection with any and all assignments contemplated by this
Section 14.7, Licensee shall execute and deliver, and shall cause its Affiliates and Sublicensees
to execute and deliver such instruments and take such actions as may be necessary or desirable to
effect such transfer.
14.7.6
Remedies
. Except as otherwise expressly provided herein, termination of this
Agreement in accordance with the provisions hereof shall not limit remedies which may otherwise be
available in law or equity.
14.7.7
Effect of Termination on Sublicenses
. A termination of this Agreement, other
than a termination by Licensee under Section 14.3 hereof, shall not terminate any sublicense
granted by Licensee pursuant to Section 2.3 with respect to a Sublicensee,
provided
that (a) such
Sublicensee is not in breach of any provision of this Agreement or the applicable sublicense
agreement, (b) such Sublicensee shall perform all obligations of Licensee under this Agreement and
(c) Licensor shall have all rights with respect to any and all Sublicensees as it had hereunder
with respect to Licensee prior to termination of this Agreement with respect to Licensee. Licensee
shall include in any sublicense a provision in which said Sublicensee acknowledges its obligations
to Licensor hereunder and the rights of Licensor to terminate this Agreement with respect to any
Sublicensee for material breaches of this Agreement by such Sublicensee that are within the scope
of Section 14.2 hereof. The failure of Licensee to include in a sublicense the provision
referenced in the immediately preceding sentence shall render the affected sublicense void
ab
initio
. Notwithstanding the foregoing, sublicenses granted by Licensee pursuant to Section 2.3
shall not so continue with respect to a Sublicensee in countries for which Licensor has established
an organization to sell, or granted rights a Third Party to sell, another product or has then filed
an application seeking regulatory approval to sell another product.
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14.7.8
Assistance
. In the event of any termination pursuant to this ARTICLE 14,
Licensee shall, and shall cause its Affiliates, Sublicensees and Distributors to, at the request of
Licensor, provide Licensor with such assistance as is reasonably necessary to effectuate a smooth
and orderly transition of any Development and Commercialization of the Licensed Product, including
any ongoing Clinical Studies or Post Approval Studies, to Licensor or its designee so as to
minimize any disruption of such activities, including the assignment of any such contracts (to the
extent such contracts permit assignment) and the transfer of any such materials related to the
Licensed Product, in each case that is the subject of such obligation, to the extent not prohibited
under the terms of such contracts and requested by Licensee. In performing its obligations under
this Section 14.7.8, Licensee shall, and shall cause its Affiliates, Sublicensees and Distributors
to, cooperate with Licensor (at Licensees reasonable expense) to effect such transfers and
assignments in an orderly fashion and shall provide to Licensor or its designee any copies of
relevant documents and rights of reference or access necessary to allow Licensor to Exploit the
Licensed Compound and Licensed Product and any Improvements thereto in any particular country or,
in the event the Agreement is terminated in its entirety, in the world. Licensor shall promptly
compensate Licensee for all of its direct and indirect costs associated with the performance of any
of it obligations under this Section 14.7.8 with respect to any termination of this Agreement by
Licensee under Section 14.2.
14.8
Accrued Rights; Surviving Obligations
.
14.8.1
Accrued Rights
. Termination or expiration of this Agreement for any reason
shall be without prejudice to any rights that shall have accrued to the benefit of a Party prior to
such termination or expiration. Such termination or expiration shall not relieve a Party from
obligations that are expressly indicated to survive the termination or expiration of this
Agreement.
14.8.2
Survival
. Without limiting the foregoing, Sections 2.2, 3.4.3, 3.4.5, 3.5
(with respect to the license grants), 7.11, 7.12, 7.13, 7.14, 12.4, 14.5, 14.7, this Section 14.8,
Sections 15.3, 15.5, 15.6, 15.7, 15.8, 15.9, 15.11, 15.12, 15.13, 15.14, 15.15, 15.17 and 15.18 and
Articles 8 (with respect to provisions which by their nature must survive termination), 9, 10, 11,
and 13 of this Agreement shall survive the termination or expiration of this Agreement for any
reason.
ARTICLE 15
MISCELLANEOUS
15.1
Force Majeure
. Neither Party shall be held liable or responsible to the other
Party or be deemed to have defaulted under or breached this Agreement for failure or delay in
fulfilling or performing any term of this Agreement when such failure or delay is caused by or
results from events beyond the reasonable control of the non-performing Party, including fires,
floods, earthquakes, embargoes, shortages, epidemics, quarantines, war, acts of war (whether war be
declared or not), terrorist acts, insurrections, riots, civil commotion, strikes, lockouts or other
labor disturbances (whether involving the workforce of the non-performing Party or of any other
Person), acts of God or acts, omissions or delays in acting by any governmental authority. The
non-performing Party shall notify the other Party of such force majeure promptly after such
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occurrence by giving written notice to the other Party stating the nature of the event, its
anticipated duration, and any action being taken to avoid or minimize its effect. The suspension
of performance shall be of no greater scope and no longer duration than is necessary and the
non-performing Party shall use Commercially Reasonable Efforts to remedy its inability to perform.
In the event that such force majeure event lasts for more than ninety (90) days, such other Party
shall have the right to terminate this Agreement upon sixty (60) days written notice to the
non-performing Party.
15.2
Export Control
. This Agreement is made subject to any restrictions concerning
the export of products or technical information from the United States or other countries that may
be imposed on related to the Parties from time to time. Each Party agrees that it shall not
export, directly or indirectly, any technical information acquired from the other Party under this
Agreement or any products using such technical information to a location or in a manner that at the
time of export requires an export license or other governmental approval, without first obtaining
the written consent to do so from the appropriate agency or other governmental entity in accordance
with Applicable Law.
15.3
Non-Solicitation
. During the term of this Agreement and for a period of one (1)
year thereafter, neither Party shall actively recruit or solicit any employee of the other Party or
its Affiliates. For the avoidance of doubt, nothing shall limit a Party from engaging in general
recruitment efforts through advertisements or recruiting through head-hunters so long as the
employees of the other Party and its Affiliates are not specifically targeted in such recruitment
effort.
15.4
Assignment
. Without the prior written consent of the other Party hereto, neither
Party shall sell, transfer, assign, delegate, pledge or otherwise dispose of, whether voluntarily,
involuntarily, by operation of law or otherwise, this Agreement or any of its rights or duties
hereunder;
provided
,
however
, that (a) Licensor may, without such consent, assign this Agreement
and its rights and obligations hereunder to an Affiliate so long as such assignee entity remains an
Affiliate, to the purchaser of the Licensor Patents or Licensor Know-How or to its successor entity
or acquirer in the event of a merger, consolidation or sale of substantially all of the assets of
Licensor and (b) Licensee may, without such consent, assign this Agreement and its rights and
obligations hereunder to an Affiliate so long as such assignee entity remains an Affiliate or to
its successor entity or acquirer in the event of a merger, consolidation or sale of substantially
all of the assets of Licensee;
provided further
that in either case ((a) or (b)), with respect to
an assignment to an Affiliate, such assigning Party shall remain responsible for the performance by
such Affiliate of the rights and obligations hereunder. Any attempted assignment or delegation in
violation of the preceding sentence shall be void and of no effect. All validly assigned and
delegated rights and obligations of the Parties hereunder shall be binding upon and inure to the
benefit of and be enforceable by and against the successors and permitted assigns of Licensor or
Licensee, as the case may be. In the event either Party seeks and obtains the other Partys
consent to assign or delegate its rights or obligations to another Party, the assignee or
transferee shall assume all obligations of its assignor or transferor under this Agreement.
15.5
Severability
. If any provision of this Agreement is held to be illegal, invalid
or unenforceable under any present or future law, and if the rights or obligations of either Party
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under this Agreement will not be materially and adversely affected thereby, (a) such provision
shall be fully severable, (b) this Agreement shall be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions
of this Agreement shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom and (d) in lieu of such illegal,
invalid or unenforceable provision, there shall be added automatically as a part of this Agreement
a legal, valid and enforceable provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and reasonably acceptable to the Parties. To the
fullest extent permitted by Applicable Law, each Party hereby waives any provision of law that
would render any provision hereof illegal, invalid or unenforceable in any respect.
15.6
Governing Law, Jurisdiction, Venue and Service
.
15.6.1
Governing Law
. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, excluding any conflicts or choice of law rule or principle
that might otherwise refer construction or interpretation of this Agreement to the substantive law
of another jurisdiction. The Parties agree to exclude the application to this Agreement of the
United Nations Convention on Contracts for the International Sale of Goods.
15.6.2
Service
. Each Party further agrees that service of any process, summons,
notice or document by registered mail to its address set forth in Section 15.8.2 shall be effective
service of process for any action, suit or proceeding brought against it under this Agreement in
any such court.
15.7
Dispute Resolution
. If a dispute arises between the Parties in connection with,
relating to or otherwise arising out of this Agreement or any document or instrument delivered in
connection herewith (a
Dispute
), it shall be resolved pursuant to this Section 15.7.
15.7.1
General
. Either Party shall have the right to refer any Dispute to the chief
executive officers of the Parties who shall confer on the resolution of the issue. Any final
decision mutually agreed to by such representatives shall be conclusive and binding on the Parties.
If such officers are not able to agree on the resolution of any such issue within fifteen (15)
Business Days after such issue was first referred to them, either Party may, by written notice to
the other Party, elect to initiate arbitration pursuant to Section 15.7.2(a) for purposes of having
the matter settled. Any Disputes concerning the proper characterization of a Dispute subject to
resolution under this Section 15.7.2(a) as opposed to Section 15.7.2(b) shall be submitted
immediately to arbitration to be resolved pursuant to Section 15.7.2(b).
15.7.2
Arbitration
. Any arbitration under this Agreement (each an
Arbitration
Matter
) shall be administered by the London Court of International Arbitration under its
Arbitration Rules then in effect (the
Arbitration Rules
) and as otherwise described in
this Section 15.7.2. Participants in the arbitral panel shall be independent experts (including
lawyers) with at least ten (10) years experience with intellectual property licensing agreements in
the pharmaceutical industry. The arbitration shall take place in the English language at a
location to be agreed by the Parties;
provided
,
however
, that in the event that the Parties are
unable to agree on a location for an arbitration under this Agreement within five (5) days of the
demand therefor, such arbitration shall be held in London, England.
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(a)
Full Arbitration
. Unless Section 15.7.2(b) is applicable, the following
procedures shall apply:
(i) The Parties shall appoint an arbitral panel by mutual agreement. If the Parties
cannot agree on the appointment of an arbitral panel within thirty (30) days of the demand
for arbitration, an arbitrator shall be appointed in accordance with the Arbitration Rules.
(ii) Either Party may apply to the arbitrator for interim injunctive relief until the
arbitration decision is rendered or the Arbitration Matter is otherwise resolved. Either
Party also may, without waiving any right or remedy under this Agreement, seek from any
court having jurisdiction any injunctive or provisional relief necessary to protect the
rights or property of that Party pending resolution of the Arbitration Matter pursuant to
this Section 15.7.2. The arbitrator shall have the authority to grant any equitable and
legal remedies that would be available in any judicial proceeding instituted to resolve the
Dispute submitted to such arbitration in accordance with this Agreement;
provided
,
however
,
that the arbitrator shall not have the power to alter or amend the terms or the provisions
of this Agreement. Confirmation of, or judgment upon any award rendered pursuant to this
Section may be entered by any court of competent jurisdiction. The arbitrator shall have no
authority to award punitive or any other type of damages excluded under Section 13.7.
(iii) Each Party shall bear its own costs and expenses and attorneys fees, and the
Party that does not prevail in the arbitration proceeding shall pay the arbitrators fees
and any administrative fees of arbitration.
(iv) Except to the extent necessary to confirm or obtain judgment on an award or
decision or as may be required by Applicable Law, neither Party may, and the Parties shall
instruct the arbitrator not to, disclose the existence, content, or results of an
arbitration without the prior written consent of both Parties. In no event shall an
arbitration be initiated after the date when commencement of a legal or equitable proceeding
based on the Arbitration Matter would be barred by the applicable New York statute of
limitations.
(v) The Parties hereby agree that any payment to be made by a Party pursuant to a
decision of the arbitrator shall be made in United States dollars, free of any tax or other
deduction. The Parties further agree that the decision of the arbitrator shall be the sole,
exclusive and binding remedy between them regarding determination of the Arbitration Matters
presented.
(b)
Accelerated Arbitration
. To the extent the Arbitration Matter involves a Dispute
that is submitted to arbitration by a Party under either Sections 5.1.3, 5.6, 5.7, 7.13, the final
sentence of Section 15.7.1 or Exhibit 3.3.2, the procedures set forth in Section 15.7.2(a) shall
apply, except that the following procedures shall also apply:
(i) For purposes of arbitration under this Section 15.7.2(b), the arbitrator shall be
appointed pursuant to Section 15.7.2(a)(i), but shall be a single
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independent, conflict-free arbitrator with the requisite licensing and pharmaceutical
industry experience (such arbitrator, the
Expert
). The Parties may select a
different Expert for each Dispute depending on the nature of the issues presented and
desired expertise.
(ii) Each Party shall prepare and submit a written summary of such Partys position and
any relevant evidence in support thereof to the Expert within thirty (30) days of the
selection of the Expert. Upon receipt of such summaries from both Parties, the Expert shall
provide copies of the same to the other Party. The Expert shall be authorized to solicit
briefing or other submissions on particular questions. Within fifteen (15) days of the
delivery of such summaries by the Expert, each Party shall submit a written rebuttal of the
other Partys summary and may also amend and re-submit its original summary. Oral
presentations shall not be permitted unless otherwise requested by the Expert. The Expert
shall make a final decision with respect to the Arbitration Matter within thirty (30) days
following receipt of the last of such rebuttal statements submitted by the Parties and shall
make a determination by selecting the resolution proposed by one of the Parties that as a
whole is the most fair and reasonable to the Parties in light of the totality of the
circumstances and shall provide the Parties with a written statement setting forth the basis
of the determination in connection therewith. For purposes of clarity, the Expert shall
only have the right to select a resolution proposed by one of the Parties in its entirety
and without modification.
(iii) The Parties further agree that the decision of the arbitrator shall be the sole,
exclusive and binding remedy between them regarding determination of the Arbitration Matters
presented. Confirmation of, or judgment upon any award rendered pursuant to this Section
may be entered by any court of competent jurisdiction. The arbitrator shall have no
authority to award punitive or any other type of damages excluded under Section 13.7.
15.7.3
No Termination Pending Dispute Resolution.
. During the pendency of any dispute
resolution proceeding under this Section 15.7, (i) this Agreement shall remain in full force and
effect, (ii) the provisions of this Agreement relating to termination for material breach shall not
be effective, (iii) the time periods for cure under Section 14.2 as to any termination notice given
prior to the initiation of arbitration shall be tolled, and (iv) neither Party shall issue a notice
of termination pursuant to such sections, until the arbitral panel has confirmed the existence of
the facts claimed by a Party to be the basis for the asserted material breach.
15.7.4
Interim Relief
. Nothing in this Section 15.7 shall preclude either Party from
seeking interim or provisional relief in a court of competent jurisdiction, including a temporary
restraining order, preliminary injunction or other interim equitable relief concerning a Dispute,
if necessary to protect the interests of such Party. This Section 15.7 shall be specifically
enforceable.
15.8
Notices
.
15.8.1
Notice Requirements
. Any notice, request, demand, waiver, consent, approval or
other communication permitted or required under this Agreement shall be in writing,
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shall refer specifically to this Agreement and shall be deemed given only if delivered by hand
or sent by facsimile transmission (with transmission confirmed) or by internationally recognized
overnight delivery service that maintains records of delivery, addressed to the Parties at their
respective addresses specified in Section 15.8.2 or to such other address as the Party to whom
notice is to be given may have provided to the other Party in accordance with this Section 15.8.
Such notice shall be deemed to have been given as of the date delivered by hand or transmitted by
facsimile (with transmission confirmed) or on the second business day (at the place of delivery)
after deposit with an internationally recognized overnight delivery service. Any notice delivered
by facsimile shall be confirmed by a hard copy delivered as soon as practicable thereafter. This
Section 15.8 is not intended to govern the day-to-day business communications necessary between the
Parties in performing their obligations under the terms of this Agreement.
15.8.2
Address for Notice
.
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If to Licensee, to:
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If to Licensor, to:
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Clovis Oncology, Inc.
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Clavis Pharma ASA
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2525 28
th
Street
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Parkveien 53B
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Boulder, Colorado 80302
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0256 Oslo, Norway
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Attention: Chief Executive Officer
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Attention: Chief Executive Officer
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Facsimile: +1 (303) 245-0361
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Facsimile: +47 24 11 09 51
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with a copy to
:
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with a copy to
:
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Willkie Farr & Gallagher LLP
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Wiggin and Dana LLP
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787 Seventh Avenue
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400 Atlantic Street
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New York, New York 10019
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Stamford, Connecticut 06911
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Attention: Peter H. Jakes, Esq.
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Attention: James F. Farrington, Esq.
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Facsimile: +1 (212) 728-8111
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Facsimile: +1 (203) 363-7676
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15.9
Entire Agreement
. This Agreement, together with the Exhibits attached hereto,
sets forth and constitutes the entire agreement and understanding between the Parties with respect
to the subject matter hereof and all prior agreements, understandings, promises and
representations, whether written or oral, with respect thereto are superseded hereby. Each Party
confirms that it is not relying on any representations or warranties of the other Party except as
specifically set forth herein. No amendment, modification, release or discharge shall be binding
upon the Parties unless in writing and duly executed by authorized representatives of both Parties.
15.10
English Language
. This Agreement shall be written and executed in, and all
other communications under or in connection with this Agreement shall be in, the English language.
Any translation into any other language shall not be an official version thereof, and in the event
of any conflict in interpretation between the English version and such translation, the English
version shall control.
15.11
Equitable Relief
. The Parties acknowledge and agree that the restrictions set
forth in ARTICLE 11 are reasonable and necessary to protect the legitimate interests of the other
Party and that such other Party would not have entered into this Agreement in the absence of such
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restrictions, and that any breach or threatened breach of any provision of ARTICLE 11 may
result in irreparable injury to such other Party for which there will be no adequate remedy at law.
In the event of a breach or threatened breach of any provision of ARTICLE 11, the non-breaching
Party shall be authorized and entitled to obtain from any court of competent jurisdiction
injunctive relief, whether preliminary or permanent, specific performance and an equitable
accounting of all earnings, profits and other benefits arising from such breach, which rights shall
be cumulative and in addition to any other rights or remedies to which such non-breaching Party may
be entitled in law or equity. Both Parties agree to waive any requirement that the other (a) post
a bond or other security as a condition for obtaining any such relief and (b) show irreparable
harm, balancing of harms, consideration of the public interest or inadequacy of monetary damages as
a remedy. Nothing in this Section 15.11 is intended, or should be construed, to limit either
Partys right to equitable relief or any other remedy for a breach of any other provision of this
Agreement.
15.12
Waiver and Non-Exclusion of Remedies
. Any term or condition of this Agreement
may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or on behalf of the
Party waiving such term or condition. The waiver by either Party hereto of any right hereunder or
of 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.
15.13
No Benefit to Third Parties
. The representations, warranties, covenants and
agreements set forth in this Agreement are for the sole benefit of the Parties hereto and their
successors and permitted assigns, and they shall not be construed as conferring any rights on any
other Persons.
15.14
Further Assurance
. Each Party shall duly execute and deliver, or cause to be
duly executed and delivered, such further instruments and do and cause to be done such further acts
and things, including the filing of such assignments, agreements, documents and instruments, as may
be necessary or as the other Party may reasonably request in connection with this Agreement or to
carry out more effectively the provisions and purposes hereof, or to better assure and confirm unto
such other Party its rights and remedies under this Agreement.
15.15
Relationship of the Parties
. It is expressly agreed that Licensor, on the one
hand, and Licensee, on the other hand, shall be independent contractors and that the relationship
between the two Parties shall not constitute a partnership, joint venture or agency. Neither
Licensor, on the one hand, nor Licensee, on the other hand, 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 written consent of the other Party to do so, such consent
not to be unreasonably withheld or delayed. All persons employed by a Party shall be employees of
such Party and not of the other Party and all costs and obligations incurred by reason of any such
employment shall be for the account and expense of such Party.
15.16
Counterparts
. This Agreement may be executed in two (2) or more counterparts,
each of which shall be deemed an original, but all of which together shall constitute one and the
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same instrument. This Agreement may be executed by facsimile signatures and such signatures
shall be deemed to bind each party hereto as if they were original signature.
15.17
References
. Unless otherwise specified, (a) references in this Agreement to any
Article, Section or Exhibit shall mean references to such Article, Section or Exhibit of this
Agreement, (b) references in any section to any clause are references to such clause of such
section and (c) references to any agreement, instrument or other document in this Agreement refer
to such agreement, instrument or other document as originally executed or, if subsequently varied,
replaced or supplemented from time to time, as so varied, replaced or supplemented and in effect at
the relevant time of reference thereto.
15.18
Construction
. Except where the context otherwise requires, wherever used, the
singular shall include the plural, the plural the singular, the use of any gender shall be
applicable to all genders. The captions of this Agreement are for convenience of reference only
and in no way define, describe, extend or limit the scope or intent of this Agreement or the intent
of any provision contained in this Agreement. The language of this Agreement shall be deemed to be
the language mutually chosen by the Parties and no rule of strict construction shall be applied
against either Party hereto.
[SIGNATURE PAGE FOLLOWS.]
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THIS AGREEMENT IS EXECUTED by the authorized representatives of the Parties as of the date
first written above.
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CLAVIS PHARMA ASA
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CLOVIS ONCOLOGY, INC.
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Signature:
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/s/ OLAV HELLEBØ
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Signature:
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/s/ PATRICK J. MAHAFFY
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Name :
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Olav Hellebø
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Name :
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Patrick J. Mahaffy
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Title :
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Chief Executive Officer
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Title :
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President and Chief Executive Officer
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- 73 -
EXHIBIT 1.1.56
FTE RATE
Internal Cost Calculations
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The following hourly rate shall be the FTE Rate for each of the corresponding four levels of
employee whether at Licensor or Licensee
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VP level and above US $*** per hour
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Director level US $*** per hour
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Manager level US $*** per hour
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Below manager level US $*** per hour
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Commencing January 1, 2011, and on January 1 of each year thereafter, each of these FTE
Rates shall be adjusted based upon changes in both the United States Department of Labor,
Bureau of Labor Statistics Consumer Price Index for All Urban Customers ( CPI-U,
1982-84=100) (the U.S. CPI) and the Norwegian Consumer Price Index (1998 = 100) as
published by Statistics Norway (Statistisk Sentralbyrå) at www.ssb.no/kpi_en/tab-01-en.html
(the Norwegian CPI) as follows:
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1.
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by multiplying the applicable FTE Rate for the
immediately preceding Calendar Year by a fraction, the numerator of which
is the average U.S.CPI rate for each of the three months ending September
30
th
of the immediately preceding Calendar Year and the
denominator of which is the average U.S.CPI rate for each of the three
months ending September 30
th
of the second preceding Calendar
Year ;
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2.
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by multiplying the applicable FTE Rate for the
immediately preceding Calendar Year by a fraction, the numerator of which
is the average Norwegian CPI rate for each of the three months ending
September 30
th
of the immediately preceding Calendar Year and
the denominator of which is the average Norwegian CPI for each of the
three months ending September 30
th
of the second preceding
Calendar Year; and
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3.
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by calculating the mathematical average between the FTE
Rate determined under clause (1) above and the FTE Rate determined under
clause (2) above. This mathematical average shall, as to each level of
employee, constitute the new FTE Rate for the year Calendar Year commencing
on such January 1.
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If the U.S. CPI and/or the Norwegian CPI is discontinued or modified in some manner so that
they no longer are appropriate, the Parties shall agree upon an alternative index to replace
the U.S. CPI or the Norwegian CPI, as applicable, in the adjustment of the FTE Rates
described above.
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A time tracking system will be adopted by each Party for people directly involved in the
project.
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EXHIBIT 1.1.91
LICENSOR PATENTS
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Title of patent
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International filing
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PCT/WO
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Description of patent
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application
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PCT number
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date
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publication number
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[ ***]
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[ ***]
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[ ***]
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[ ***]
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[ ***]
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[ ***]
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[ ***]
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[ ***]
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[ ***]
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[ ***]
|
[ ***]
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[ ***]
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[ ***]
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[ ***]
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[ ***]
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[ ***]
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[ ***]
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[ ***]
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[ ***]
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[ ***]
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EXHIBIT 1.1.96
MANUFACTURING COSTS
Manufacturing Costs
shall mean, as to any Licensed Product, Licensees cost of such
Licensed Product as determined by GAAP, consistent with Licensees current cost of goods accounting
policies, including only (a) Licensees product acquisition costs to a Third Party manufacturer of
the License Product, (b) Licensees Fully Allocated Costs of making the Licensed Product, and, in
either case, quality assurance and quality control with respect to the manufacture of such Licensed
Product and the direct costs to ship the Licensed Product to Licensees warehouses, and (c) other
than in the determination of Manufacturing Costs for the purpose of determining the royalty rate
under Section 7.2.2, direct costs of delivering the Licensed Product to customers (such as import
or VAT taxes, export fees, shipping and insurance costs, and warehousing costs) which are not paid
by the customer and excluding any allocation of any general or administrative expenses.
* * * * *
Fully Allocated Costs
shall mean the costs of labor (including allocable
employee benefits and employment taxes), material, energy, utilities or other costs directly
incurred and normal overhead (including, without limitation, administrative labor costs,
maintenance, relevant insurance, depreciation of the equipment and depreciation of the facility)
all determined in accordance with GAAP applied on a consistent basis and measured in U.S. dollars.
EXHIBIT 3.2.1
INITIAL AMERICAS/EUROPE DEVELOPMENT PLAN
[ ***]
EXHIBIT 3.2.1A
INITIAL ASIA/ROW DEVELOPMENT PLAN
[ ***]
EXHIBIT 3.3.2
Certain Development Activities to be Conducted in 2011 and Funded by
Licensor Pursuant to Section 3.3.2
Subject to the quarterly and aggregate limitations described below, Licensor shall reimburse
Licensee pursuant to Section
3.3.2
for the costs of the following studies and Development
activities, the plans for which have previously been discussed at meetings of the Joint Steering
Committee or otherwise previously disclosed by Licensee to Licensor:
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CO-101 Clinical Study 002 Retrospective Observational Study of Tissue Samples
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CO-101 Clinical Study 003 2
nd
Line Therapy Pancreatic Cancer
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CO-101 Clinical Study 004 Pharmacokinetic Study for CO-101
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Drug product supply for all CO-101 clinical studies, including drug product labeling,
packaging and distribution
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CMC development for CO-101 , including activities associated with improved drug
manufacturing scale, optimizing API concentration, drug stability batches, identification
of a second manufacturing site and related CMC development activities
|
Licensor shall not be obligated to reimburse Licensee more than $*** million of such costs in
respect of any calendar quarter on a cumulative basis (i.e. if one quarters reimbursed expenses
were $*** million, the limitation for the subsequent quarter would be $*** million) or $3.0 million
in the aggregate.
Licensee shall render a quarterly invoice to Licensor within thirty (30) days following the close
of each calendar quarter, the first such invoice to relate to the portion of the calendar quarter
commencing on the Effective Date and ending on December 31, 2010, setting forth the costs to be so
reimbursed. Unless aggregate amount of such costs are disputed by Licensor within ten (10) days of
the delivery of each such invoice, Licensor shall pay each such invoice within twenty (20) days of
the date on which it shall have been rendered by Licensee. Any dispute regarding any such invoice
shall be resolved in accordance with Section 15.7.2(b) of the Agreement, with payment to be made
within ten (10) days following the resolution of such dispute.
All such costs that Licensor shall have so reimbursed shall be excluded from any calculation of
Developmental Costs for purposes of Article 5 of the Agreement.
EXHIBIT 3.3.1
LICENSOR PRE-CLINICAL STUDIES
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CYP and PgP studies (studies with cold substance only, studies requiring
radiolabelled substance need to be considered)
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Excretion balance study in rats (with non-radiolabelled substance)
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3 or 6 mo tox, 1 or 2 species (will try to negotiate 3 mo in 1 species but may require 2
species)
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In vitro genotoxicity studies
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Combination studies (if the development plan includes combination studies in humans)
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Environmental tox study if required
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hERG study in vitro to be determined
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Study of cardiovascular effects to be included in long term tox studies
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In vivo xenograft study in hENT1 low tissue to be determined (the model does currently
not exist)
|
EXHIBIT 3.4.1
DESCRIPTION OF ON-GOING CLINICAL STUDIES
CP4126-101 A phase I Clinical Study of CP-4126 in patients with Advanced Solid Tumours
This is an ongoing, non-randomised, open-label, dose-escalation study where the primary endpoints
is to determine the maximum tolerated dose and the recommended dose of CP-4126 by infusion in
patients with advanced solid tumour. The inclusion has stopped, 43 patients have been included, and
one is still ongoing. This is a multi-centre study that has been executed at three sites.
From the dose escalation, a recommended dose has been established for further phase II studies, in
addition assessments of antitumour activity of CP-4126 in patients with measurable disease and/or
tumour markers display promising response.
CP4126-111 A Phase I Clinical Study of Oral CP-4126 in Patients with Advanced Solid Tumours
This is an ongoing, two steps, multicentre, phase I clinical study with an initial non-randomised,
dose finding step followed by a randomized, cross over step with oral CP-4126 vs. gemcitabine. In
step I of the study, the primary endpoint is to determine the maximum tolerated dose and
recommended dose for further phase II studies. In step II of the study the primary endpoint is to
compare the pharmacokinetic parameters of oral CP-4126 with intravenously administered gemcitabine.
Three sites are initiated, and the first patient was included in October 2008. 23 patients are
included, and seven dose levels are tested, from 100 mg to 3000 mg. The best antitumour response is
stable disease. The study is in the dose escalating stage (Step I), and the maximum tolerated dose
and recommended dose are not yet established.
CP4126-201 A phase II study of CP-4126 in Patients with Advanced Pancreatic Cancer
This is an ongoing open-label, randomized, multicentre phase II study to compare CP-4126 with
gemcitabine in patients with advanced pancreatic adenocarcinoma. The randomised part will follow
after completion of a pilot single agent (CP-4126) part of the study. Today, the primary endpoint
is response of the tumour marker CA 19-9; however, a new amendment is now under development where
CA 19-9 is replaced by overall survival as a primary endpoint. The effect of CP-4126 will be
compared to the effect of gemcitabine. All patients will have tumour cells
- 81 -
collected from the primary tumour or from metastasis, and the status of the human equilibrative
nucleoside transporter (hENT1) will be assessed. The effect of treatment will be assessed according
to high or low levels of hENT1.
- 82 -
Exhibit 10.2
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions
.
Amended and Restated
Strategic License Agreement
by and between
Avila Therapeutics, Inc.
and
Clovis Oncology, Inc.
June 16, 2011
Amended and Restated Strategic License Agreement
Table of Contents
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Page
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1.
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Definitions
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1
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2.
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Collaboration Program
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8
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3.
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Governance
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9
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4.
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Development and Commercialization
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11
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5.
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License Grants
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12
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6.
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Payments and Royalties
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14
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7.
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Ownership of Collaboration Program Know-How
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21
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8.
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Patent Prosecution and Maintenance
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22
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9.
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Patent Enforcement and Defense
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24
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10.
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Confidentiality
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26
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11.
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Warranties; Limitations of Liability; Indemnification
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28
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12.
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Term and Termination
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31
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13.
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General Provisions
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34
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Amended and Restated Strategic License Agreement
List of Exhibits and Schedules
|
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|
|
Exhibit 1.7
|
|
Avila Patents as of the Effective Date
|
|
Exhibit 1.53
|
|
Targets
|
|
Exhibit 2.1(b)
|
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Collaboration Plan
|
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Exhibit 2.1(c)
|
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Initial Agreed Compound Profile
|
|
Exhibit 8.1(a)
|
|
Proposed Prosecution and Maintenance Activities for Subject Patents
|
|
Exhibit 10.3(c)
|
|
Joint Press Release
|
Amended and Restated Strategic License Agreement
Amended and Restated Strategic License Agreement
This Amended and Restated Strategic License Agreement (this Agreement), dated as of June 16,
2011 (the A&R Date), is made by and between Avila Therapeutics, Inc., a Delaware corporation
(Avila), and Clovis Oncology, Inc, a Delaware corporation (Clovis). Each of Avila and Clovis
may be referred to herein as a Party or together as the Parties.
WHEREAS, Avila has developed and owns or has rights to certain patents and technology relating
to the discovery and development of covalent-based drugs using its Avilomics platform;
WHEREAS, Avila has previously conducted research and development to identify potential
covalent inhibitors of the Targets (as defined below);
WHEREAS, Clovis is a biopharmaceutical company focused on acquiring, developing and
commercializing innovative anti-cancer agents;
WHEREAS, the Parties are interested in collaborating together to discover and develop
preclinically covalent inhibitors of the Targets and then having Clovis develop clinically and
commercialize the lead inhibitor candidate as a drug product, all in accordance with the terms and
conditions set forth below; and
WHEREAS, the Parties entered into that certain Strategic License Agreement (the Original
Agreement) as of May 24, 2010 (the Effective Date), and the Parties now desire to amend and
restate the Original Agreement on the terms and conditions set forth below.
NOW, THEREFORE, the Parties hereby agree as follows:
1.
Definitions.
The following terms and their correlatives will have the following meanings:
1.1 Affiliate of a person or entity will mean any other entity which (directly or
indirectly) is controlled by, controls or is under common control with such person or entity. For
the purposes of this definition, the term control (including, with correlative meanings, the
terms controlled by and under common control with) as used with respect to an entity will mean
(i) in the case of a corporate entity, direct or indirect ownership of voting securities entitled
to cast more than fifty percent (50%) of the votes in the election of directors or (ii) in the case
of a non-corporate entity, direct or indirect ownership of more than fifty percent (50%) of the
equity interests with the power to direct the management and policies of such entity.
1.2 Asia will mean the Peoples Republic of China (including Hong Kong), Japan, Republic of
Korea, and Taiwan.
1.3 Asia Partnership will mean an agreement between Clovis and a Sublicensee whereby Clovis
grants to such Sublicensee at least Commercialization rights for Japan (and optionally other
countries within Asia) with respect to any Lead Candidate or Licensed Products. The grant by
Clovis of an option to such Commercialization rights may be treated by Avila at its election as an
Asia Partnership for purposes of this Agreement.
1.4 Avila Core Technology will mean all Patents, Materials and Know-How owned (in whole or
in part), in-licensed or otherwise controlled by Avila or any of its Affiliates comprising the
technology currently branded by Avila under the trademark Avilomics and improvements thereto or
any research tools used by Avila in the research, discovery or development of covalent inhibitors.
1.5 Avila Owned IP will mean any Collaboration Program Know-How, and Patents arising
therefrom, that constitute one or more of the following: (i) improvements, modifications to any
Avila Core Technology; and (ii) Research Candidates and methods of making and using the same.
1
Amended and Restated Strategic License Agreement
1.6 Avila Know-How will mean all Know-How and Materials Controlled by Avila or any of its
Affiliates, used by Avila in the Collaboration Program, and necessary or useful to discover and
Develop preclinically Research Candidates or to Develop and Commercialize the Lead Candidate and
Licensed Products. For clarity, Avila Know-How will include, if applicable, Collaboration Program
Know-How owned in whole or in part by Avila (including Avila Owned IP).
1.7 Avila Patents will mean all Patents Controlled by Avila or any of its Affiliates,
containing a Valid Claim Covering any Research Candidates or Licensed Products, and necessary or
useful to discover and Develop preclinically Research Candidates or to Develop and Commercialize
the Lead Candidate, Licensed Products and Companion Diagnostics. For clarity, Avila Patents will
include (i) Patents for occupancy probes for the Targets and (ii) if applicable, Avilas interest
in Patents within its Sole Collaboration Program IP and within the Joint Collaboration Program IP,
including Patents constituting Avila Owned IP. The Avila Patents in existence as of the Effective
Date are set forth on Exhibit 1.7.
1.8 Calendar Year will mean each successive period of twelve (12) calendar months commencing
on January 1 and ending on December 31.
1.9 Clovis Development & Commercialization Program will mean a Development and
Commercialization program for the Lead Candidate and Licensed Products and Companion Diagnostics in
the Field worldwide.
1.10 Clovis Technology will mean Know-How, Materials and Patents Controlled by Clovis or any
of its Affiliates necessary or useful for Avila to discover and Develop Research Candidates as part
of the Collaboration Program. For clarity, Clovis Technology will include, if applicable, (i)
Cloviss interest in Patents within its Sole Collaboration Program IP and the Joint Collaboration
Program IP, and (ii) Collaboration Program Know-How owned in whole or in part by Clovis.
1.11 Collaboration Program will mean the program of research and preclinical Development
that the Parties engage in under this Agreement.
1.12 Collaboration Program Know-How will mean all Know-How and Materials created, conceived
or reduced to practice in connection with activities performed pursuant to the Collaboration
Program (whether solely by one Party or jointly by the Parties, in each case optionally with their
Affiliates and subcontractors or any employees, consultants or agents of any of the foregoing).
1.13 Commercialization will mean any and all activities directed to the manufacturing,
marketing, detailing, promotion and securing of reimbursement of Licensed Products after Regulatory
Approval has been obtained (including making, having made, using, importing, selling and offering
for sale Licensed Products), and will include post-approval clinical studies, post-launch
marketing, promoting, detailing, marketing research, distributing, customer service, and
commercially selling Licensed Products, importing, exporting or transporting Licensed Products for
commercial sale, and all regulatory compliance with respect to the foregoing.
1.14 Commercially Reasonable Efforts will mean, with respect to the Development or
Commercialization of the Lead Candidate and Licensed Products, that level of efforts and resources
commonly dedicated in the research-based pharmaceutical industry by a company to the development or
commercialization, as the case may be, of a product of similar commercial potential at a similar
stage in its lifecycle, in each case taking into account issues of safety and efficacy, product
profile, the proprietary position, the then current competitive environment for such product and
the likely timing of such products entry into the market, the regulatory environment and status of
such product, and other relevant scientific, technical and commercial factors.
1.15 Companion Diagnostics will mean a diagnostic product or service to the extent sold or
used to determine whether to prescribe the Licensed Product to treat a human patient. For clarity,
no covalent
2
Amended and Restated Strategic License Agreement
inhibitor (including the Lead Candidate or any Licensed Product) or occupancy probe against
any of the Targets will be included within this definition.
1.16 The terms compound and covalent inhibitor when used herein will include the chemical
structure in question, its optical isomers, plus all solvates, salt forms and polymorphs of the
foregoing.
1.17 Control or Controlled will mean, with respect to any Know-How, Material, Patent, or
other intellectual property right, the possession (whether by ownership or license, other than by a
license granted pursuant to this Agreement) by a Party or its Affiliates of the ability to grant to
the other Party a license or access as provided herein to such Know-How, Material or Patent,
without violating the terms of any agreement or other arrangement with any Third Party, or being
obligated to pay any royalties or other consideration therefor, in existence as of the time such
Party or its Affiliates would first be required hereunder to grant the other Party such license or
access.
1.18 Covers, with reference to a Patent, will mean that the making, using, selling, offering
for sale or importing of a composition of matter or practice of a method would infringe a Valid
Claim of such Patent in the country in which such activity occurs.
1.19 Development will mean, with respect to a compound, preclinical and clinical drug
development activities, including: test method development and stability testing, toxicology,
formulation, process development, qualification and validation, manufacture scale-up,
development-stage manufacturing, quality assurance/quality control, clinical studies, statistical
analysis and report writing, the preparation and submission of NDAs and MAAs, regulatory affairs
with respect to the foregoing and all other activities necessary or useful or otherwise requested
or required by a Regulatory Authority as a condition or in support of obtaining or maintaining a
Regulatory Approval, plus pre-launch marketing, promoting, detailing, marketing research,
distributing, and commercial sales.
1.20 Distributors will mean a Third Party, other than a Sublicensee of Clovis, that (i)
purchases any Licensed Products in finished form from or at the direction of Clovis or any of its
Affiliates or Sublicensees, and (ii) has the right to Commercialize such Licensed Products in one
or more regions, or has an option to do the foregoing.
1.21 EMA will mean the European Medicines Agency and any successor agency thereto.
1.22 EU will mean the organization of member states of the European Union as it may be
constituted from time to time.
1.23 FDA will mean the United States Food and Drug Administration and any successor agency
thereto.
1.24 Field will mean all indications for human use, including all therapeutic and diagnostic
uses.
1.25 Financial Consideration will mean license fees, signing fees, option fees, milestone
payments and any other consideration (including non-monetary consideration) paid to, or otherwise
received by, Clovis or any of its Affiliates in consideration for the establishment of a
Sublicensee or Distributor relationship (and without reduction for any additional Patents or
Know-How or other intellectual property rights granted or commitments made in connection
therewith), but does not include (i) revenues from sales of Licensed Products by Clovis to
Sublicensees or Distributors; (ii) royalties metered on sales of Licensed Products by Selling
Parties, (iii) payments contractually committed to reimburse the Fully Allocated Costs of future
Development of the Lead Candidate and Licensed Products, provided that any amounts received in
excess of such costs (such as, for example, a profit share) will be treated as Financial
Consideration hereunder, and (iv) payments received to purchase securities of Clovis at fair
market value, provided that any premium paid over fair market value will be treated as Financial
Consideration hereunder with. For purposes of this definition, fair market value will be
determined on a per share basis and will mean the average closing price of Clovis common stock for
the ten (10) trading days immediately preceding the date such Sublicensee or Distributor agreement
is
3
Amended and Restated Strategic License Agreement
executed, or, if there is no trading market for the security issued, the good faith
determination of the board of directors of Clovis as to its fair market value (taking into account,
inter alia
, the pricing of other recent security issuances by Clovis).
1.26 First Commercial Sale will mean the first sale for use or consumption of any Licensed
Product in a country after all required Regulatory Approvals for commercial sale of such Licensed
Product have been obtained in such country.
1.27 First Line Therapy will mean an initial treatment or primary or induction therapy for
the treatment of patients having any of lung, breast, colon or prostate cancer.
1.28 FTE will mean a full-time person, or more than one person working the equivalent of a
full-time person, where full-time is determined by the standard practices in the
biopharmaceutical industry in the geographic area in which such personnel are working and includes
R&D activities and scientific management oversight.
1.29 FTE Rate will equal *** for twelve (12) continuous months of one (1) FTE. The FTE Rate
is the fully burdened rate for each such FTE and, for clarity, will include all standard laboratory
supplies and reagents to be used by such FTE in conducting the Collaboration Program.
1.30 Fully Allocated Costs will mean the costs of labor (including allocable employee
benefits and employment taxes), material, energy, utilities or other costs directly incurred and
normal overhead (including, without limitation, administrative labor costs, maintenance, relevant
insurance, depreciation of the equipment and depreciation of the facility) all determined in
accordance with GAAP applied on a consistent basis.
1.31 GAAP will mean U.S. generally accepted accounting principles, consistently applied.
1.32 IND will mean an investigational new drug application filed with the FDA for
authorization to commence clinical studies, and its equivalent in a foreign country.
1.33 Know-How will mean all commercial, technical, scientific and other know-how and
information, trade secrets, knowledge, technology, methods, processes, practices, formulae,
instructions, skills, techniques, procedures, experiences, ideas, technical assistance, designs,
drawings, assembly procedures, computer programs, specifications, data and results (including
biological, chemical, pharmacological, toxicological, pharmaceutical, physical and analytical,
preclinical, clinical, safety, manufacturing and quality control data and know-how, including study
designs and protocols), in all cases, whether or not confidential, proprietary, patented or
patentable, in written, electronic or any other form now known or hereafter developed.
1.34 Knowledge will mean the actual knowledge or good faith understanding of the vice
presidents, senior vice presidents, president or chief executive officer of a Party of the facts
and information then in their possession without any duty to conduct any investigation with respect
to such facts and information.
1.35 Lead Candidate will mean the Research Candidate that the Parties mutually agree
exhibits the Agreed Compound Profile, and that Clovis will Develop pursuant to this Agreement, all
as described in Section 2.1(c).
1.36 Licensed Products will mean the Lead Candidate and any pharmaceutical products
containing the Lead Candidate in any formulation.
1.37 MAA will mean a Marketing Authorization Application filed with the EMA under the
centralized European procedure (including amendments and supplements thereto).
1.38 Materials will mean any tangible chemical or biological material, including any
compounds, DNA, RNA, clones, cells, and any expression product, progeny, derivative or other
4
Amended and Restated Strategic License Agreement
improvement thereto, along with any tangible chemical or biological material embodying any
Know-How.
1.39 NDA will mean a New Drug Application or Supplemental New Drug Application filed with
the FDA (including amendments and supplements thereto).
1.40 Net Sales will mean the gross amount invoiced in arms-length transactions by the
Selling Party(ies) from or on account of the sale or distribution of Licensed Products to
non-Selling Parties, less:
(a) reasonable credits or allowances, if any, on account of price adjustments, recalls,
rejection or return of items previously sold;
(b) import taxes, export taxes, excises, sales taxes, value added taxes, consumption taxes,
duties or other taxes imposed upon and paid with respect to such sales (excluding income or
franchise taxes of any kind);
(c) separately itemized insurance and transportation costs incurred in shipping Licensed
Products to such non-Selling Parties;
(d) trade, quantity and cash discounts actually allowed; and
(e) governmental or commercial rebates, wholesaler fees, administrative fees to managed care,
group purchasing and other similar institutions, chargebacks and retroactive price adjustments and
any other similar allowances which effectively reduce the selling price,
all as determined from the books and records of the Selling Party, maintained in accordance with
GAAP.
Nothing herein will prevent a Selling Party from selling, distributing or invoicing Licensed
Products at a discounted price for shipments to Third Parties in connection with clinical studies,
compassionate sales, or an indigent program or similar bona fide arrangements in which the Selling
Party agrees to forego a normal profit margin for good faith business reasons. Except for such
discounting, no deduction will be made for any item of cost incurred in Developing or
Commercializing Licensed Products except as permitted pursuant to clauses (a) to (e) of the
foregoing sentence.
Licensed Products will be considered sold when a sale by a Selling Party is recognized in
accordance with revenue recognition policies mandated by GAAP. Sale or transfer of Licensed
Products between any of the Selling Parties will not result in any Net Sales, and Net Sales instead
will be based on subsequent sales or distribution to a non-Selling Party, unless such Licensed
Products is consumed by a Selling Party. To the extent that any Selling Party receives
consideration other than or in addition to cash upon the sale or distribution of Licensed Products,
Net Sales will include the fair market value of such additional consideration.
1.41 Patent will mean a patent or a patent application, including any additions, divisions,
continuations, continuations-in-part, invention certificates, substitutions, reissues,
reexaminations, extensions, registrations, supplementary protection certificates and renewals, but
not including any rights that give rise to Regulatory Exclusivity Periods (other than supplementary
protection certificates, which will be treated as Patents hereunder).
1.42 Patent Costs will mean the out-of-pocket costs and expenses paid to outside legal
counsel and other Third Parties, and filing and maintenance expenses, incurred in Prosecuting and
Maintaining Patents and enforcing and defending them.
1.43 Phase 2 Study will mean a clinical trial of a product, the principal purpose of which
is a determination of safety and efficacy in the target patient population, as described in 21
C.F.R. 312.21(b) (as amended or any replacement thereof), or a similar clinical study prescribed by
the Regulatory Authorities in a foreign country. For purposes of this Agreement, start of Phase 2
Study for a product will mean the first dosing of such product in a human patient in a Phase 2
Study.
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Amended and Restated Strategic License Agreement
1.44 Phase 3 Study will mean a clinical trial of a product on a sufficient number of
subjects that is designed to establish that a pharmaceutical product is safe and efficacious for
its intended use, and to determine warnings, precautions, and adverse reactions that are associated
with such pharmaceutical product in the dosage range to be prescribed, which trial is intended to
support Regulatory Approval of such product, as described in 21 C.F.R. 312.21(c) (as amended or any
replacement thereof), or a similar clinical study prescribed by the Regulatory Authorities in a
foreign country. For purposes of this Agreement, start of Phase 3 Study for a product will mean
the first dosing of such product in a human patient in a Phase 3 Study.
1.45 Prosecution and Maintenance, with regard to a particular Patent, will mean the
preparation, filing, prosecution and maintenance of such Patent, as well as re-examinations,
reissues and the like with respect to that Patent, together with the conduct of interferences, the
defense of oppositions and other similar proceedings with respect to that Patent.
1.46 Regulatory Approval will mean, with respect to a country or extra-national territory,
any and all approvals (including NDAs and MAAs), licenses, registrations or authorizations of any
Regulatory Authority necessary in order to commercially distribute, sell or market a product in
such country or some or all of such extra-national territory, but not including any pricing or
reimbursement approvals.
1.47 Regulatory Authority will mean any national (
e.g.
, the FDA), supra-national (
e.g
. the
EMA), regional, state or local regulatory agency, department, bureau, commission, council or other
governmental entity, in any jurisdiction in the world, involved in the granting of Regulatory
Approval.
1.48 Regulatory Exclusivity Period will mean any period of data, market or other regulatory
exclusivity (other than supplementary protection certificates, which will be treated as Patents
hereunder), including any such periods under national implementations in the EU of Section
10.1(a)(iii) of Directive 2001/EC/83 and all international equivalents.
1.49 Research Candidates will mean any covalent inhibitors that are designed, discovered or
tested as part of the Collaboration Program in an effort to discover and Develop a covalent
inhibitor to specifically inhibit the Targets with the properties specified in the Agreed Compound
Profile. For clarity, the Lead Candidate will be a Research Candidate hereunder.
1.50 Second Indication will mean a disease condition for which a particular Licensed Product
may be prescribed, after such Licensed Product has already been approved by such Regulatory
Authority for the treatment of a first disease condition.
1.51 Selling Party will mean Clovis and its Affiliates and Sublicensees, plus with respect
to sales or distribution of Licensed Products in or for the United States, Asia, Canada, the EU,
Norway and Switzerland, Distributors as well.
1.52 Sublicensee will mean any person or entity (including Affiliates of Clovis) that is
granted a sublicense as permitted by Section 5.3(c) (or an option take such a sublicense), either
directly by Clovis or indirectly by any other Sublicensee hereunder.
1.53 Targets will mean the mutant forms of the epidermal growth factor receptor specified on
Exhibit 1.53.
1.54 Third Party will mean any person or entity other than Avila, Clovis and their
respective Affiliates.
1.55 United States or U.S. will mean the United States of America, including its
territories and possessions, the District of Columbia and Puerto Rico.
1.56 Valid Claim will mean, with respect to a particular country, (i) any claim of an issued
and unexpired Patent in such country that (a) has not been held permanently revoked, unenforceable
or invalid
6
Amended and Restated Strategic License Agreement
by a decision of a court or governmental agency of competent jurisdiction, which decision is
unappealable or unappealed within the time allowed for appeal and (b) has not been abandoned,
disclaimed, denied or admitted to be invalid or unenforceable through reissue or disclaimer or
otherwise in such country, or (ii) a claim of a pending Patent application, which claim is being
diligently prosecuted and has not been abandoned or finally disallowed without the possibility of
appeal or re-filing of the application.
Definitions for each of the following terms are found in the body of this Agreement as indicated
below:
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Defined Term
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Location
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Additional Reporting Period
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Section 4.5
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Agreed Compound Profile
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Section 2.1(c)
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Agreement
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Preamble
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A&R Date
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Preamble
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Avila
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Preamble
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Avila Indemnitees
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Section 11.6(a)
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Avila Program Director
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Section 3.1
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Clovis
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Preamble
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Clovis Indemnitees
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Section 11.6(b)
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Clovis Program Director
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Section 3.1
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Collaboration Plan
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Section 2.1(b)
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Collaboration Program Term
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Section 2.1(c)
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Competitive Infringement
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Section 9.1
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Confidentiality Agreement
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Section 10.4
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Confidential Information
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Section 10.1(a)
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Cost Estimate
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Section 6.4(e)(i)
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Disclosing Party
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Section 10.1(a)
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Drug Company
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Section 13.3
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Effective Date
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Preamble
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Expert
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Section 13.1(d)(i)
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First Line Notice
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Section 6.4(e)(i)
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Hatch-Waxman Time Period
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Section 9.2(a)(iii)
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Indemnification Claim Notice
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Section 11.6(c)
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Indemnified Party
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Section 11.6(c)
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Industry Transaction
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Section 13.3
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Issuing Party
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Section 10.3(b)
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JAMS
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Section 13.1(c)
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Joint Collaboration Program IP
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Section 7.2(b)
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JSC
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Section 3.2(a)
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Losses
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Section 11.6(a)
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Milestone Event
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Section 6.3(a)
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Milestone Payment
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Section 6.3(a)
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Other Product
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Section 5.6
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Option Exercise Notice
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Section 6.4(e)(i)
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Original Agreement
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Preamble
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Other Patents
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Section 8.1
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Party and Parties
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Preamble
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Program Directors
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Section 3.1
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Receiving Party
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Section 10.1(a)
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Release
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Section 10.3(b)
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Reviewing Party
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Section 10.3(b)
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Defined Term
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Location
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Sole Collaboration Program IP
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Section 7.2(b)
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Specific Patent
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Section 8.1(b)
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Subject Patent
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Section 8.1
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Term
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Section 12.1
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Third Party Claims
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Section 11.6(a)
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2.
Collaboration Program.
2.1
Collaboration Program Generally
.
(a)
Goals
. The objective of the Collaboration Program will be to discover and Develop
preclinically the Lead Candidate up to and through acceptance of an IND for the Lead Candidate, all
as directed by the JSC as provided herein.
(b)
Collaboration Plan
. The research and preclinical Development activities of the Parties
with respect to the Collaboration Program will be described in a Collaboration Plan, an initial
version of which is attached hereto as Exhibit 2.1(b). The Collaboration Plan will include a
budget for the remaining portion of the Calendar Year in which this Agreement is executed and the
next succeeding Calendar Year, and a projected budget for the next Calendar Year thereafter or
until the end of the Collaboration Program Term if shorter. The Collaboration Plan will be
reviewed as necessary at each meeting of the JSC, and at any other time upon the request of either
Party, and will be modified as appropriate at the direction of the JSC to reflect material
scientific, commercial and other developments. In all events, the Collaboration Plan will be
consistent and not conflict with the terms of this Agreement.
(c)
Designation of the Agreed Compound Profile and the Lead Candidate
. Attached hereto as
Exhibit 2.1(c) is the initial covalent inhibitor profile for the Targets, which will be used to
guide the discovery and Development of Research Candidates (the Agreed Compound Profile).
Pursuant to the Collaboration Plan, Avila will work to discover and Develop Research Candidates in
an effort to identify the Lead Candidate. The JSC will designate a Lead Candidate satisfying the
Agreed Compound Profile from among the Research Candidates, with reference to such other factors as
the JSC may deem relevant, including for example assessment of the complexity of chemical synthesis
of the Lead Candidate, expected amenability for manufacture of the Lead Candidate at scale,
physical forms of the Lead Candidate, physical stability of the Lead Candidate and the extent to
which strong patent Coverage could be obtained for such compound. If the JSC does not so designate
a Lead Candidate and an IND is not accepted for the Lead Candidate by July 1, 2012, then the
Parties will promptly meet and discuss the extent to which Clovis is willing to continue to fund
the Collaboration Program, and absent a commitment by Clovis to fund the Collaboration Program for
an additional period of time the Collaboration Program will terminate on October 1, 2012. The
Collaboration Program will be in effect for a period from the Effective Date until an IND is
accepted for the Lead Candidate unless ending earlier pursuant to the terms hereof (the
Collaboration Program Term).
(d)
Obligations Under the Collaboration Plan
. Each Party will use reasonable efforts to
perform (itself or through its Affiliates or by permitted subcontracting) its respective
obligations under the Collaboration Plan, and will cooperate with and provide reasonable support to
the other Party in such other Partys performance of its responsibilities under the Collaboration
Plan. The Parties acknowledge and agree, however, that no outcome or success is or can be assured
and that failure to achieve desired results will not in and of itself constitute a breach or
default of any obligation in this Agreement.
(e)
Cell Lines
. Promptly following the execution of this Agreement and during the course of
the Collaboration Program Term, and subject to Section 2.2(c), Avila will share with Clovis cell
lines in its Control relevant to the Agreed Compound Profile as well as other relevant cell lines
developed as part of the Collaboration Program (
e.g.
Target transfectants/lines) and Controlled by
Avila to aid in
8
Amended and Restated Strategic License Agreement
translational biology efforts for Research Candidates or the Lead Candidate or diagnostic
development efforts for Companion Diagnostics as part of the Clovis Development & Commercialization
Program.
(f)
Pre-IND Regulatory Interactions
. Clovis will lead all efforts with Regulatory Authorities
regarding preclinical development of the Lead Candidate, including taking full responsibility for
preparing and filing the IND for the Lead Candidate and interactions with the FDA or other
Regulatory Authority regarding such IND or its equivalent.
2.2
Collaboration Program Records, Reports and Materials
.
(a)
Records
. Each Party will maintain, or cause to be maintained, records of its activities
under the Collaboration Program in sufficient detail and in good scientific manner appropriate for
scientific, Patent and regulatory purposes, which will properly reflect all work included in the
Collaboration Program, Program for a period of at least ten (10) years after the creation of such
records. Each Party will have the right to request a copy of any such records, except to the
extent that the other Party reasonably determines that such records contain Confidential
Information that is not licensed to such Party hereunder, or to which such Party does not otherwise
have a right hereunder.
(b)
Collaboration Program Reports
. During the Collaboration Program Term and for the next
calendar quarter thereafter, each Party will furnish to the JSC, a summary written report within
thirty (30) days after the end of each calendar quarter, describing its progress under the
Collaboration Plan as part of the Collaboration Program.
(c)
Materials
.
(i) Each Party will, during the Collaboration Program Term, as a matter of course as described
in the Collaboration Plan or upon the other Partys reasonable written request, furnish to each
other samples of Materials which constitute Avila Know-How or Clovis Technology in such Partys
Control and are necessary for the other Party to carry out its responsibilities under the
Collaboration Plan.
(ii) Each Party will use such Materials only in accordance with the Collaboration Plan and
otherwise in accordance with the terms and conditions of this Agreement. Except with the prior
written consent of the supplying Party, the Party receiving any Materials will not distribute or
otherwise allow the release of Materials to any Affiliate or Third Party, except for subcontracting
or to Sublicensees in each case as permitted hereunder. All Materials delivered to the receiving
Party will remain the sole property of the supplying Party and will be used in compliance with all
applicable law. The Materials supplied under this Agreement will be used with prudence and
appropriate caution in any experimental work because not all of their characteristics may be known.
2.3
Permitted Subcontracting
. Each Party may subcontract any of its activities to be
performed under the Collaboration Plan to an Affiliate or Third Party, provided that any such
Affiliate or Third Party will have entered into a written agreement with such Party that includes
terms and conditions protecting and limiting use and disclosure of Confidential Information and
Materials and Know-How at least to the same extent as under this Agreement, and requiring such
Affiliate or Third Party and its personnel to assign to such Party all right, title and interest in
and to any Patents and Know-How and Materials created, conceived or reduced to practice in
connection with the performance of subcontracted activities. Any such subcontracting activities
will be described in the reports for the Collaboration Program required by Section 2.2(b).
3.
Governance.
3.1
Management
. Management of the Collaboration Program activities will be under the
responsibility of one person to be designated by Clovis (the Clovis Program Director) and one
person to be designated by Avila (the Avila Program Director, and together with the Clovis
Program Director, the Program Directors).
9
Amended and Restated Strategic License Agreement
3.2
Joint Steering Committee
.
(a)
Steering Committee
. As soon as practicable, the Parties will establish a Joint Steering
Committee, comprised of two (2) representatives of Avila and two (2) representatives of Clovis (the
JSC). Each Party may replace its representatives on the JSC or its Program Director at any time
upon written notice to the other Party. With the consent of the other Party (which will not be
unreasonably withheld or delayed), each Party may invite non-voting employees and consultants to
attend meetings of the JSC, subject to their agreement to be bound to the same extent as a
permitted subcontractor under Section 2.3.
(b)
Meetings
. While in existence, the JSC will meet each calendar quarter and, at a minimum,
two of such meetings each Calendar Year will be in person (which in-person meeting will be held on
an alternating basis in Waltham, MA, on the one hand, and in either Boulder, CO or San Francisco,
CA, on the other). Meetings of the JSC will be effective only if at least one (1) representative
of each Party is present or participating. Each Party will be responsible for all of its own
expenses of participating in the committee meetings. The Parties will endeavor to schedule
meetings of the JSC at least six (6) months in advance. The Parties will alternate in preparing
the meeting agenda, and the Party that was responsible for preparing the meeting agenda will
prepare and circulate for review and approval by the other Party written minutes of such meeting
within fifteen (15) days after such meeting. The Parties will agree on the minutes of each meeting
promptly, but in no event later than the next meeting of the JSC.
(c)
Responsibilities
. The JSC will oversee and supervise the overall performance of the
Collaboration Plan and within such scope will:
(i) review the efforts of the Parties and allocate those resources for the Collaboration Plan
committed by the Parties hereunder;
(ii) revise and approve any revised Collaboration Plan and its related budget regularly and in
any event at least thirty (30) days before the start of each Calendar Year during the Collaboration
Program Term;
(iii) update the Agreed Compound Profile if and when appropriate during the Collaboration
Program Term;
(iv) select Research Candidates for additional work as part of the Collaboration Program;
(v) select the Lead Candidate as set forth in Section 2.1(c);
(vi) form such other committees as the JSC may deem appropriate, provided that such committees
may make recommendations to the JSC but may not be delegated JSC decision-making authority;
(vii) address such other matters relating to the activities of the Parties under this
Agreement as either Party may bring before the JSC, including any matters that are expressly for
the JSC to decide as provided in this Agreement; and
(viii) attempt to resolve any disputes on an informal basis.
(d)
Decision-making
. The two (2) JSC representatives of each Party will collectively have one
(1) vote, and the JSC will make decisions only by unanimous consent. In the event of a dispute
between the Parties with respect to the Collaboration Program or otherwise within the scope of the
JSC, the matter will be first considered by the JSC for resolution, and if not resolved, then
referred to the dispute resolution process set forth in Section 13.1(b); provided that instead of
escalation to such dispute resolution process, (i) Avila will have the tie-breaking vote for
matters involving the design, discovery and synthesis of Research Candidates and other research
chemistry aspects of the Collaboration Program, and (ii) Clovis will have the tie-breaking vote for
the selection of the Research Candidate meeting the
10
Amended and Restated Strategic License Agreement
Agreed Compound Profile that becomes the Lead Candidate hereunder and for matters involving
regulatory aspects of the IND for the Lead Candidate.
(e)
Limits on JSC Authority
. Each Party will retain the rights, powers and discretion granted
to it under this Agreement and no such rights, powers, or discretion will be delegated to or vested
in the JSC unless such delegation or vesting of rights is expressly provided for in this Agreement
or the Parties expressly so agree in writing. The JSC will not have the power to amend, modify or
waive compliance with this Agreement (other than as expressly permitted hereunder).
Notwithstanding anything herein to the contrary, neither Party will require the other Party to
perform any activities that are materially different or greater in scope or more costly than those
provided for in the Collaboration Plan then in effect.
(f)
Term
. The JSC will cease to exist three (3) months after the end of the Collaboration
Program Term.
4.
Clinical Development and Commercialization.
4.1
Clinical Development
. Upon the end of the Collaboration Program Term, Clovis will
assume sole responsibility for Developing the Lead Candidate and Licensed Products in the Field
worldwide, and will establish a Clovis Development & Commercialization Program for that purpose.
Clovis will have sole responsibility for all costs and expenses arising from the Development and
Commercialization of the Lead Candidate and Licensed Products in the Field worldwide.
4.2
Regulatory
. Clovis will lead all efforts with Regulatory Authorities regarding
the Development and Commercialization of the Lead Candidate and Licensed Products in the Field
worldwide, including taking full responsibility for preparing and filing the relevant applications
for Regulatory Approval.
4.3
Manufacturing
. Clovis will be solely responsible for, and will bear all the costs
and expenses of manufacturing and supplying all Licensed Products for Development and
Commercialization in the Field worldwide. Avila will provide at Clovis expense (including on an
FTE-basis) background research information and technical assistance as reasonably requested by
Clovis, to support development of the active drug substance for Licensed Products in the Field
worldwide.
4.4
Clovis Diligence
. Clovis, directly or through one or more of its Affiliates,
Sublicensees or Distributors, will use Commercially Reasonable Efforts: (i) to Develop Licensed
Products in the Field and to obtain Regulatory Approvals therefor; and (ii) to Commercialize
Licensed Products in the Field after obtaining such Regulatory Approval, in the U.S., Canada, the
EU, Norway and Switzerland and in Asia, and in each other country worldwide where Commercializing
the Licensed Products would be Commercially Reasonable. Without limiting the generality of the
foregoing, Clovis will endeavor to complete an Asia Partnership within *** after first human dosing
of any Licensed Product in a clinical trial, provided, that a failure to achieve such an Asia
Partnership within such time frame will have no contractual consequence other than the imposition
of the Japan-specific development Milestones Events specified in Section 6.3(d).
4.5
Bi-Annual Update Meetings
. During each six (6)-month period from the end of the
Collaboration Program Term until the earlier of first approval of an NDA for any Licensed Product
by the FDA or first approval of an MAA for any Licensed Product by the EMA, within thirty (30) days
of Avilas written request, the Parties will meet in person at a U.S. site of Clovis for Clovis to
provide Avila with an update on the Development of the Licensed Products by Clovis and its
Affiliates and Sublicensees. During such meeting, Clovis will disclose to Avila all material
information regarding such Development and will further provide such data and information in
writing with respect thereto as Avila may reasonably request. Each Party will bear its own costs
and expenses regarding such meetings. Further, in the event that Avila exercises its option under
Section 6.4(e) regarding cost sharing of certain clinical trial expenses, at Avilas request such
meetings will occur, not only during the time period and at
11
Amended and Restated Strategic License Agreement
the frequency prescribed above, but also from Avilas option exercise until twelve (12) months
after the completion of the additional clinical trial referred to in such Section 6.4(e) (the
Additional Reporting Period), and during the Additional Reporting Period such meetings will occur
each calendar quarter instead of once every six (6) months.
4.6
Reports by Clovis
. Clovis will prepare and maintain, and will cause its
Affiliates, Sublicensees and Distributors to prepare and maintain, reasonably complete and accurate
records regarding the Development of Licensed Products, and Commercialization of Licensed Products
worldwide after Regulatory Approval therefor. Clovis will provide to Avila a reasonably detailed
report regarding such efforts at least once every two (2) calendar quarters. Such report will
contain sufficient detail to enable Avila to assess Cloviss compliance with its Development and
Commercialization obligations in Section 4.4, including information with respect to the following:
(i) the design, status and results of any animal studies and clinical trials for the Lead Candidate
and Licensed Products; (ii) any regulatory milestones, and any Regulatory Approvals achieved, for
the Lead Candidate and Licensed Products; and (ii) activities with respect to selling, promoting,
supporting, detailing and marketing of Licensed Products. In addition to the foregoing, (a) Clovis
will provide Avila with such additional information regarding any such activities as Avila may
reasonably request from time to time, and (b) Clovis will disclose to Avila as soon as practicable
any information regarding any clinical trials for any Licensed Products that Clovis intends to
disclose publicly (after complying with the terms of this Agreement with respect thereto).
Further, in the event that Avila exercises its option under Section 6.4(e) regarding cost sharing
of certain clinical trial expenses, at Avilas request such reports will be made by Clovis during
the Additional Reporting Period each calendar quarter instead of once every two (2) calendar
quarters.
5.
License Grants.
5.1
Licenses by Avila
(a)
For the Collaboration Program
. Subject to the terms and conditions of this Agreement,
Avila hereby grants to Clovis a worldwide, non-exclusive license, with the right to sublicense only
as permitted by Section 5.3, during the Collaboration Program Term, to use Avila Know-How and Avila
Patents, as needed to enable Clovis to perform its portion of the Collaboration Program.
(b)
For Development and Commercialization
. Subject to the terms and conditions of this
Agreement, Avila hereby grants to Clovis a worldwide, exclusive (even as to Avila) license in the
Field, with the right to sublicense only as permitted by Section 5.3, under Avila Know-How and
Avila Patents, to Develop the Lead Candidate, Licensed Products and Companion Diagnostics and to
Commercialize Licensed Products and Companion Diagnostics, as part of a Clovis Development &
Commercialization Program, provided that until the first Regulatory Approval of a Licensed Product,
the foregoing license to Companion Diagnostics may only be used for the Development of Licensed
Products. For clarity, the license to Commercialize granted in this Section 5.1(b) will cover only
the sale and offer for sale of Licensed Products in finished form and Companion Diagnostics, and
not the sale or offer for sale of the Lead Candidate, API for Licensed Products, or any other
product or service other than Licensed Products in finished form and Companion Diagnostics.
5.2
Licenses by Clovis
.
(a)
For the Collaboration Program
. Subject to the terms and conditions of this Agreement,
Clovis hereby grants to Avila a worldwide, non-exclusive license, with the right to sublicense only
as permitted by Section 5.3, during the Collaboration Program Term, to use Clovis Technology, as
needed to enable Avila to perform its portion of the Collaboration Program.
(b)
Grant-Back License
. Subject to the terms and conditions of this Agreement, Clovis hereby
grants to Avila a worldwide, fully paid-up, non-exclusive license, with the right to sublicense
through multiple tiers, to practice in full all Patents Controlled by Clovis or any of its
Affiliates and
12
Amended and Restated Strategic License Agreement
Sublicensees claiming any invention conceived or reduced to practice as part of the
Collaboration Program or the Clovis Development & Commercialization Program (including all Patents
arising from any Collaboration Program Know-How) for manufacturing purposes only, except to the
extent and for such time that the claim scope of any such Patents Covers the Lead Candidate or
Licensed Products exclusively licensed by Avila to Clovis under Section 5.1(b). For clarity, the
license granted in this Section 5.2(b) will apply to Patents only, not Know-How.
5.3
Sublicensing Rights
.
(a) The licenses granted in this Section 5 are transferable only upon a permitted assignment
of this Agreement in accordance with Section 13.12.
(b) The licenses granted in Sections 5.1 and 5.2 may be sublicensed, in full or in part, by a
written agreement as may be necessary for permitted subcontracting hereunder as provided in Section
2.3.
(c) The license granted in Section 5.1(b) may be sublicensed, in full or in part, by Clovis by
a written agreement to its Affiliates and Third Parties (with the right to sublicense through
multiple tiers), provided, that as a condition precedent to and requirement of any such sublicense:
(i) Clovis will consult with Avila when negotiating any sublicense for all or part of Asia,
including providing Avila with drafts of any proposed term sheets or agreements in sufficient time
for Avila to review and provide comments thereon, such comments to be taken into good faith
consideration by Clovis;
(ii) Clovis will provide Avila with a copy of any sublicense agreement with a non-Affiliated
Sublicensee within thirty (30) days of execution thereof;
(iii) Clovis will be responsible for any and all obligations of such Sublicensee as if such
Sublicensee were Clovis hereunder;
(iv) Any such Sublicensee will agree in writing to be bound by similar obligations as Clovis
hereunder with respect to the activities of such Sublicensee hereunder (and not with respect to the
activities of any other); and
(v) Avila will be made an express third-party beneficiary of any such Sublicensees
obligations under such sublicense agreement that relate to compliance with the terms and conditions
of this Agreement.
5.4
Distributors
. Subject to the terms and conditions of this Agreement, Clovis will
have the right to appoint by a written agreement Distributors to re-sell Licensed Products in
finished form purchased from or at the direction of Clovis, its Affiliates or Sublicensees. Clovis
will provide Avila with a copy of any agreement with any Distributor within thirty (30) days of
execution thereof. Clovis will be responsible for any and all obligations of any Distributor as if
such Distributor were Clovis hereunder. Further, any Distributor will agree in writing to be
bound by similar obligations as Clovis hereunder with respect to activities of such Distributor
in its jurisdiction under (i) Sections 4.4, 9.1, 10 and 11.6 and (ii) in addition, only for those
Distributors that are Selling Parties, Sections 4.6, 6.7(b) and 6.7(c).
5.5
Contract Manufacturers
. Subject to the terms and conditions of this Agreement,
Clovis will have the right to appoint by a written agreement contract manufacturers, meaning any
Third Party or Affiliate of Clovis that manufactures Licensed Products (or API therefor) for
re-sale, but who itself is not a Sublicensee hereunder and thereby exercises have made rights
granted by Avila under Section 5.1(b). Clovis will be responsible for any such contract
manufacturer hereunder, and further will require any such contract manufacturer to agree in writing
to comply with Sections 2.2(c), 5.7, and 10.
13
Amended and Restated Strategic License Agreement
5.6
Exclusivity
. During the Term (on a country-by-country basis), neither Avila nor
Clovis nor any of their Affiliates will intentionally Develop or commercialize ***, except as
contemplated under this Agreement; provided, however, that:
(a) with respect to a Party, the foregoing prohibition will not apply to such Party or any of
its Affiliates after the closing of an Industry Transaction of such Party, provided that ***;
(b) The Parties understand and agree that ***; and
(c) Notwithstanding anything herein to the contrary, Avila will retain the right to use alone
or with others the Lead Candidate and Licensed Products for cross-screening and analysis of
molecules against any targets to enable compliance with this Section 5.6.
5.7
No Other Licenses or Rights
. No license or other right is or will be created or
granted hereunder by implication, estoppel or otherwise. All such licenses and rights are or will
be granted only as expressly provided in this Agreement.
6.
Payments and Royalties.
6.1
Up-Front Payment
. Clovis will pay to Avila on the Effective Date a one-time
payment of Two Million Dollars (U.S.$2,000,000), which will be non-refundable and non-creditable
and not subject to set-off.
6.2
Collaboration Program FTE Support and Expense Payments
.
(a)
Collaboration Program FTE Support
.
(i) During the Collaboration Program Term, as support for work performed by or on behalf of
Avila under the Collaboration Plan, Clovis will pay Avila for FTEs at the proportionate share of
the FTE Rate for each FTE related to the time devoted by such FTE to the Collaboration Program.
Avila will establish a time tracking system for its FTEs involved in the Collaboration Program,
under which each person for whom Avila will seek reimbursement from Clovis will specify on an
every-other-week basis what percentage of his or her working time is spent on the Collaboration
Program. Avila will use reasonable efforts to manage and monitor the time of its FTEs involved in
the Collaboration Program in relation to the budget for the then Calendar Year under the
Collaboration Plan as established under Section 2.1(b) and will promptly communicate through the
JSC if any adjustment is needed to such budget during the applicable Calendar Year.
(ii) Promptly following the end of each calendar quarter during the Collaboration Program
Term, Avila will invoice Clovis for the FTEs time at the FTE Rate devoted during such quarter to
the Collaboration Program, and will provide with each such invoice a reasonably detailed
description of the proportionate share of his or her time devoted by each FTE. Clovis will pay
Avila within thirty (30) days of receiving such invoice any undisputed FTE charges. Section 6.7(c)
will apply to Avila and the FTE charges will be subject to audit by Clovis under the terms of that
Section 6.7(c).
(b)
Payment for External Expenses
. Promptly following the end of each calendar quarter during
the Collaboration Program Term, Avila will invoice Clovis for external expenses incurred by Avila
in support of the Collaboration Program and in accordance with the budget under the Collaboration
Plan and Avila will provide with each such invoice a reasonably detailed description of such
expenditures, and thereafter Avila will provide Clovis with any materials supporting such
expenditures as Clovis may reasonably request. Clovis will pay Avila within thirty (30) days of
receiving such invoice any undisputed amounts of such external expenses. In addition to the
foregoing, if any such external expense is expected to exceed One Hundred Thousand Dollars
(U.S.$100,000) from any single vendor, Avila may request that Clovis pay such expense directly or
reimburse Avila in advance of Avila incurring such expense, and in connection therewith Avila will
promptly provide Clovis with any materials describing such expense as Clovis may reasonably
request. Section 6.7(c) will apply to Avila and such external expenses will be subject to audit by
Clovis under the terms of that Section 6.7(c).
14
Amended and Restated Strategic License Agreement
6.3
Milestone Payments
.
(a)
Generally
. Clovis will make milestone payments (each, a Milestone Payment) to Avila
upon the occurrence of each of the milestones events (each, a Milestone Event) as set forth below
in this Section 6.3. Each of the Milestone Payments will be payable to Avila by Clovis within ten
(10) days of the achievement of the specified Milestone Event, and such payments when owed or paid
will be non-refundable and non-creditable (except as specified in Section 6.3(b) for Milestone
Payments W and X, and in Section 6.3(d) for Milestone Payments A, B and C), and not subject to
set-off. Each of the Milestone Payments are payable only once.
(b)
Development Milestones
.
|
|
|
|
|
|
|
Milestone Event
|
|
|
Milestone Payment
|
|
|
Upon the effectiveness of the first IND filing for Licensed Product
|
|
|
Four Million Dollars (U.S.$4,000,000)
|
|
|
Upon start of the first Phase 2 Study for Licensed Product
|
|
|
***
|
|
|
Upon acceptance of the filing of the first NDA in the United States or MAA in the EU for Licensed Product
a) First of the United States or EU
b) Second of the United States or EU
|
|
|
***
***
|
|
|
Upon the first approval of an NDA for Licensed
Product by the FDA
|
|
|
***
|
|
|
Upon the first approval of an MAA for Licensed
Product by the EMA
|
|
|
***
|
|
|
W. Upon start of the first Phase 3 Study (or, if
earlier, as such times as the first Phase 2 Study
is determined to be the pivotal study) for
Licensed Product in a Second Indication*
|
|
|
***
|
|
|
X. Upon acceptance of the filing of an NDA in the
United States or MAA in the EU for Licensed
Product in a Second Indication*
|
|
|
***
|
|
|
Upon the approval of an NDA for Licensed Product
by the FDA in a Second Indication
|
|
|
***
|
|
|
Upon the approval of an MAA for Licensed Product
by the EMA in a Second Indication
|
|
|
***
|
|
|
*If Avila elects to opt-in to pay certain Development costs and increase royalties payable
hereunder pursuant to Section 6.4(e), then Milestone Payment W is not thereafter payable
and Milestone Payment X is thereafter payable only at fifty percent (50%) of the amount
specified above (
i.e.
, ***), or, if and to the extent either or both of Milestone Payments
W and X have been previously paid, may be credited by Clovis in the full amount of
Milestone Payment W and fifty percent (50%) of the amount specified above for Milestone
Payment X (
i.e.
, ***) against the payment of future royalties or other Milestone Payments
hereunder.
If Milestone Event W or X concerning a Second Indication occurs before the Regulatory
Approval of Licensed Product for a first disease condition, then the payment of the
corresponding Milestone Payment will be due ten (10) days after Regulatory Approval of a
first disease condition for Licensed Product. For purposes of Milestones Payments, the
treatment of an approved indication as either first or second will ultimately be
determined by the actual
15
Amended and Restated Strategic License Agreement
timing of the Regulatory Approval of the indication, even if such timing is the reverse of
that contemplated by the original designation of such indications by the Parties.
(c)
Sales Milestones
.
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|
|
|
|
|
|
Milestone Event
|
|
|
Milestone Payment
|
|
|
Upon Net Sales in any Calendar Year arising from the
worldwide sale or distribution of all Licensed Products
exceeding *** for the first time
|
|
|
***
|
|
|
Upon Net Sales in any Calendar Year arising from the
worldwide sale or distribution of all Licensed Products
exceeding *** for the first time
|
|
|
***
|
|
|
Upon Net Sales in any Calendar Year arising from the
worldwide sale or distribution of all Licensed Products
exceeding *** for the first time
|
|
|
***
|
|
|
(d)
Asia Milestones
. If Clovis does not enter into an exclusive Asia Partnership within ***
after the first human dosing of a Licensed Product in a clinical trial, the following additional
Milestone Payments will be payable to Avila:
|
|
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|
|
|
|
Milestone Event
|
|
|
Milestone Payment
|
|
|
Start of a registration study for Japan for Licensed
Product (as such study is agreed with Japanese health
authorities)
|
|
|
***
|
|
|
Upon the filing of the first regulatory application for
Regulatory Approval in Japan of Licensed Product
|
|
|
***
|
|
|
Upon the first Regulatory Approval in Japan of Licensed
Product
|
|
|
***
|
|
|
If Clovis enters into such an Asia Partnership after any of the foregoing Milestone
Payments A, B or C are paid to Avila, any such Milestone Payments so paid to Avila will be
creditable against amounts owed Avila pursuant to Sections 6.4(a)(ii)(A) and 6.4(d) and
pursuant to Section 6.5 for such Asia Partnership, to reflect the equal sharing of
Financial Consideration contemplated by Section 6.5.
By way of example, (i) if Milestone Payment A has already been paid by Clovis to Avila, and
Clovis thereafter enters into such an Asia Partnership with a license fee of ***, then
fifty percent (50%) of such license fee, or ***, would have been owed Avila, and since
Clovis has already paid Avila *** as Milestone Payment A, then Clovis has a *** credit as
provided above, or (ii) if Milestone Payment A has already been paid by Clovis to Avila,
and Clovis thereafter enters into such an Asia Partnership with a license fee of ***, then
fifty percent (50%) of such license fee, or ***, would have been owed Avila, and since
Clovis has already paid Avila *** as Milestone Payment A, then Clovis owes Avila ***
payable in accordance with Section 6.7(a).
6.4
Royalties
.
(a)
Royalties and Rates
.
(i) Subject to the remainder of this Section 6.4, Clovis will pay to Avila running royalties
based on the total aggregate annual Net Sales worldwide by Selling Parties of all Licensed Products
in a given Calendar Year at the following royalty rates:
16
Amended and Restated Strategic License Agreement
|
|
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|
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|
|
|
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Annual Worldwide Net Sales
|
|
|
Royalty Rate
|
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|
of all Licensed Products
|
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|
|
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|
|
Up to ***
|
|
|
|
***
|
|
|
From *** up to ***
|
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|
***
|
|
|
From *** up to ***
|
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|
***
|
|
|
Over ***
|
|
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|
***
|
|
|
By way of example, in a given Calendar Year, if the aggregate annual worldwide Net Sales for all
Licensed Products is ***.
(ii) Notwithstanding Section 6.4(a)(i), for all Net Sales invoiced after the date that Clovis
first enters into an Asia Partnership, this Section 6.4(a)(ii) will apply instead of Section
6.4(a)(i) for those later-invoiced Net Sales:
(A)
Asia Net Sales
. Subject to the remainder of this Section 6.4, Clovis will pay to Avila
running royalties based on the total aggregate annual Net Sales for Asia by Selling Parties of all
Licensed Products in a given Calendar Year at the following royalty rates:
|
|
|
|
|
|
|
|
|
|
Annual Net Sales for Asia
|
|
|
Royalty Rate
|
|
|
|
of all Licensed Products
|
|
|
|
|
|
|
|
Up to ***
|
|
|
|
***
|
|
|
From *** up to ***
|
|
|
|
***
|
|
|
From *** up to ***
|
|
|
|
***
|
|
|
Over ***
|
|
|
|
***
|
|
|
By way of example, in a given Calendar Year, if the aggregate annual Net Sales for Asia for all
Licensed Products is ***.
(B)
Non-Asia Net Sales
. Subject to the remainder of this Section 6.4, Clovis will pay to
Avila running royalties based on the total aggregate annual Net Sales worldwide other than for Asia
by Selling Parties of all Licensed Products in a given Calendar Year at the following royalty
rates:
|
|
|
|
|
|
|
|
|
|
Annual Net Sales Worldwide Other than for Asia
|
|
|
Royalty Rate
|
|
|
|
of all Licensed Products
|
|
|
|
|
|
|
|
Up to ***
|
|
|
|
***
|
|
|
From *** up to ***
|
|
|
|
***
|
|
|
From *** up to ***
|
|
|
|
***
|
|
|
Over ***
|
|
|
|
***
|
|
|
By way of example, in a given Calendar Year, if the aggregate annual worldwide Net Sales (other
than for Asia) for all Licensed Products is ***.
(iii) For clarity, and as applied to both Sections 6.4(a)(i) and 6.4(a)(ii), with respect to
sales or distribution of Licensed Products in or for the United States, Asia, Canada, the EU,
Norway and Switzerland by one or more Distributors (as opposed to Clovis or any of its Sublicensees
or Affiliates), royalties payable under this Section 6.4(a) will be based on Net Sales of such
Distributors (and not on sales of Licensed Products to such Distributor by or at the direction of
Clovis or any of its Affiliates or Sublicensees).
(b)
Royalty Term
. Royalties under Section 6.4(a) will be payable on the Net Sales of any
Licensed Product if at least one of the following three (3) conditions apply:
(i) if one or more Valid Claims within any of the Avila Patents Covers such Licensed Product;
17
Amended and Restated Strategic License Agreement
(ii) if one or more Regulatory Exclusivity Periods apply to the manufacture, use, sale, offer
for sale or importation of such Licensed Product; or
(iii) on a country-by-country and Licensed Product-by-Licensed Product basis, for *** from the
First Commercial Sale of such Licensed Product in such country.
(c)
Royalty Reduction for the United States
. If a Licensed Product sold or distributed for
the United States is royalty-bearing only on account of Section 6.4(b)(iii), but not Section
6.4(b)(i) or 6.4(b)(ii), then the royalty rates set forth in Sections 6.4(a)(i) and 6.4(a)(ii)(B)
with respect to Net Sales attributable to such sales for the United States will be reduced by ***.
There will not be any other royalty deductions.
(d)
Royalty Adjustment for Asia
. Upon Clovis first entering into an Asia Partnership, then
with respect to Net Sales invoiced thereafter from the sale or distribution of Licensed Products
for Asia attributable to any Sublicensee(s), royalties payable to Avila on such Net Sales will be
the greater of (i) *** or (ii) *** For each calendar quarter during which an Asia Partnership is
in effect, Clovis will determine the amounts payable to Avila under both of clause (i) and (ii)
based on the aggregate Net Sales from January 1 of the applicable Calendar Year until the end of
calendar quarter in question, and will pay to Avila the greater of those two amounts in accordance
with Section 6.7(b). Within ninety (90) days after the end of each Calendar Year during which an
Asia Partnership is in effect, Clovis will perform a true-up based on clauses (i) and (ii) above,
and will thereby pay Avila by the end of such 90-day period in accordance with Section 6.7(b) an
amount equal to (x) the greater of clause (i) or (ii) based on the full Calendar Year minus (y) the
sum of what Clovis had paid to Avila under either or both of clause (i) or (ii) for the first three
(3) calendar quarters of such Calendar Year. For clarity, if Clovis or any of its Affiliates or
Distributors (but not Sublicensees) sells or distributes Licensed Product for Asia after any such
Asia Partnership goes into effect, then Net Sales for Asia attributable to Clovis, its Affiliates
and Distributors will be included in Section 6.4(a)(ii)(A) for the royalties payable to Avila
hereunder, but will not be included in the true-up calculation required by this Section 6.4(d).
(e)
Royalty Buy-In Option
.
(i) At such time, if any, as Clovis decides to pursue the Regulatory Approval in either the
U.S. or EU for the use of a Licensed Product as a First Line Therapy, it will notify Avila of such
decision and provide Avila with a reasonable summary of the clinical Development plan which Clovis
is contemplating to achieve such Regulatory Approval and, ultimately, its counterpart Regulatory
Approval in the other major region (
i.e.
, either the U.S. or EU), together with the cost estimates
(the Cost Estimate) for such a clinical Development program (the First Line Notice). Within
*** months following the delivery of the First Line Notice, Avila may exercise an option, by
delivery of notice to Clovis (the Option Exercise Notice) to pay *** of all costs incurred by
Clovis or any its Affiliates or Sublicensees in the Development effort required to achieve
Regulatory Approvals for such a First Line Therapy in the U.S. and EU, including both direct out of
pocket costs and the time of Clovis personnel devoted to the First Line Therapy Development effort,
charged on an FTE Rate basis in a manner comparable to that described in Section 6.2(a). The
Parties understand that the Development pathway for such Regulatory Approvals may be subject to
changes to meet demands of Regulatory Authorities or as a result of the need to modify clinical
trial design to conform to best medical practices or ethical considerations, or to add additional
clinical trials, and, accordingly, that the Cost Estimate provided by Clovis may well be exceeded.
If Avila exercises this option, then from and after the date of the first of such Regulatory
Approvals for a First Line Therapy, Clovis will pay Avila an additional royalty of *** on combined
annual Net Sales of Licensed Products for the U.S. and EU in excess of *** in a given Calendar
Year. This payment will be in addition to the royalties due Avila as set forth in Section 6.4(a),
and will be subject to all of the provisions of this Agreement relating to royalties (including the
remainder of this Section 6.4).
18
Amended and Restated Strategic License Agreement
(ii) Clovis will invoice Avila each calendar quarter monthly for Avilas share of the costs of
such First Line Therapy Development effort, with the first such invoice to be for the calendar
quarter in which the Option Exercise Notice is delivered by Avila, and Clovis will provide with
each such invoice a reasonably detailed description of those costs and thereafter Clovis will
provide Avila with any materials supporting those such costs as Avila may reasonably request.
Avila will pay Clovis within thirty (30) days of receiving such invoice Avilas shares of any
undisputed costs. Section 6.7(c) will apply to Clovis and those costs for which Clovis asks Avila
to share, and those costs will be subject to audit by Avila under the terms of that Section 6.7(c).
(iii) If the aggregate costs of such First Line Therapy Development effort ultimately exceed
the Cost Estimate by more than ***, then upon ninety (90) days advance written notice to Clovis
given at any time after such threshold has been exceeded, Avila may elect to no longer pay a ***
share of such costs (beginning with any such costs first accrued after such ninetieth
(90
th
) day). Upon such election by Avila, the *** additional royalty specified in
Section 6.4(e)(i) will be reduced on a pro rata basis to reflect Avilas reduced share of such
costs, as follows: the *** in Section 6.4(e)(i) will be replaced with *** multiplied by the
fraction of (x) the amount actually paid by Avila for such Development costs, divided by (y) *** of
the aggregate of all such Development costs.
(f)
Additional Royalty Provisions
. The royalties payable under Section 6.4(a) will be subject
to the following:
(i) only one royalty will be payable hereunder with respect to each Licensed Product;
(ii) royalties when owed or paid hereunder will, except as provided in Section 6.3(b), 6.3(d)
or 6.7(c), be non-refundable and non-creditable and not subject to set-off; and
(iii) if a particular Licensed Product is sold or distributed in one country with the
intention of the Selling Party for use in one or more other countries, those other countries of
intended use as well as such country of sale will be treated as the countries of sale for purposes
of this Section 6.4. The Parties agree that the good faith estimate of such intended use by the
selling entity will be binding for such purposes.
6.5
Other Sublicensee Consideration for Asia
. Clovis will pay to Avila fifty percent (50%) of all
Financial Consideration Clovis or any of its Affiliates receives in connection with any sublicense
agreement for all or part of Asia with any non-Affiliated Sublicensees concerning the Lead
Candidate or any Licensed Products, subject to any permitted credits taken pursuant to Section
6.3(d). Any such payments to Avila will be due within ten (10) days following receipt of any such
Financial Consideration.
6.6
Other Distributor Consideration
. Clovis will pay to Avila fifty percent (50%) of all Financial
Consideration Clovis or any of its Affiliates receives in connection with any distributor agreement
with any Distributors concerning any Licensed Products. Any such payments to Avila will be due
within ten (10) days following receipt of any such Financial Consideration.
6.7
Payment Terms
.
(a)
Manner of Payment
. All payments to be made by Clovis hereunder will be made in U.S.
dollars by wire transfer to such bank account as Avila may designate.
(b)
Reports and Royalty Payments
. For as long as royalties or other payments are due under
this Section 6, Clovis will furnish to Avila a written report, after the end of each calendar
quarter, showing the amount of Net Sales and royalty due, Financial Consideration and corresponding
sublicensing payments owed under Section 6.5, and any other payments accrued during such calendar
quarter, which report will be furnished within sixty (60) days of the end of the quarter for Net
Sales generated by Clovis and its Affiliates, and within ninety (90) days of the end of the quarter
for Net Sales generated by Sublicensees and Distributors. Royalty and other payments for each
calendar quarter will be due at the same time as such written reports for the calendar quarter.
The reports will include, at a
19
Amended and Restated Strategic License Agreement
minimum, the following information for the applicable calendar quarter, each listed on a
Licensed Product-by-Licensed Product basis, and by country of sale or intended use: (i) the gross
amount received for such sales by the Selling Parties; (ii) deductions taken from Net Sales as
specified in the definition thereof, itemized by type and amount; (iii) Net Sales; (iv) royalties
owed Avila hereunder, payments under Section 6.5, Milestone Payments, any credits under Section
6.3(d), and other payments owed to Avila or already paid during such calendar quarter, listed by
category; (vi) any royalty adjustments under Sections 6.4(c), 6.4(d), or 6.4(f)(iii); (vii) any
amounts paid to Clovis by Sublicensees under clause (ii) of Section 6.4(d) and any true-up required
by Section 6.4(d); and (viii) the computations for any applicable currency conversions pursuant to
Section 6.7(c).
(c)
Records and Audits
. Clovis will keep, and will cause each of the other Selling Parties,
as applicable, to keep, and Avila will keep, adequate books and records of accounting for the
purpose of calculating all royalties and other amounts payable by either Party to the other Party
hereunder and ensuring each Partys compliance hereunder. For the three (3) years following the
end of the Calendar Year to which each will pertain, such books and records of accounting
(including those of the other Selling Parties, as applicable) will be kept at each of their
principal place of business. At the request of either Party, the other Party will, and, with
respect to Clovis, Clovis will cause each of the other Selling Parties to, permit the requesting
Party and its representatives (including an independent auditor), at reasonable times and upon
reasonable notice, to examine the books and records maintained pursuant to Section 6.2, 6.4(e) or
6.7(b). Such examinations may not (i) be conducted for any Calendar Year more than three (3) years
after the end of such year, (ii) be conducted more than once in any twelve (12) month period or
(iii) be repeated for any Calendar Year. Except as provided below, the cost of this examination
will be borne by the Party that requested the examination, unless the audit reveals a variance of
more than five percent (5%) from the reported amounts, in which case the audited Party will bear
the cost of the audit. Unless disputed as described below, if such audit concludes that additional
payments were owed or that excess payments were made during such period, the paying Party will pay
the additional royalties or amounts or the receiving Party will reimburse such excess payments,
with interest from the date originally due as provided in Section 6.7(g), within sixty (60) days
after the date on which a written report of such audit is delivered to the Parties. In the event
of a dispute regarding such books and records, including the amount of royalties owed to Avila
under this Section 6.7(c) or the calculation costs, expenses or FTE charges, Avila and Clovis will
work in good faith to resolve the disagreement. If the Parties are unable to reach a mutually
acceptable resolution of any such dispute within thirty (30) days, such dispute will be resolved in
accordance with Section 13.1(d). The receiving Party will treat all information subject to review
under this Section 6.7(c) in accordance with the confidentiality provisions of Section 10 and the
Parties will cause any auditor or arbitrator to enter into a reasonably acceptable confidentiality
agreement with the audited Party obligating such firm to retain all such financial information in
confidence pursuant to such confidentiality agreement.
(d)
Currency Exchange
. With respect to Net Sales invoiced in U.S. dollars, the Net Sales and
the amounts due to Avila hereunder will be expressed in U.S. dollars. With respect to Net Sales
invoiced in a currency other than U.S. dollars, payments will be calculated based on currency
exchange rates for the calendar quarter for which remittance is made for royalties. For each month
and each currency, such exchange rate will equal the arithmetic average of the daily exchange rates
(obtained as described below) during such calendar quarter; each daily exchange rate will be
obtained from www.OANDA.com or, if not so available, as otherwise agreed by the Parties. For
purposes of calculating the Net Sales thresholds set forth in Sections 6.3(c) and 6.4(a), the
aggregate Net Sales with respect to each calendar quarter within a Calendar Year will be calculated
based on the currency exchange rates for the calendar quarter in which such Net Sales occurred, in
a manner consistent with the exchange rate procedures set forth in the immediately preceding
sentence.
(e)
Taxes
. Clovis may withhold from payments due to Avila amounts for payment of any
withholding tax that is required by law to be paid to any taxing authority with respect to such
payments.
20
Amended and Restated Strategic License Agreement
Clovis will provide Avila all relevant documents and correspondence, and will also provide to
Avila any other cooperation or assistance on a reasonable basis as may be necessary to enable Avila
to claim exemption from such withholding taxes and to receive a refund of such withholding tax or
claim a foreign tax credit. Clovis will give proper evidence from time to time as to the payment
of any such tax. The Parties will cooperate with each other in seeking deductions under any double
taxation or other similar treaty or agreement from time to time in force. Such cooperation may
include Clovis making payments from a single source in the U.S., where possible. Apart from any
such permitted withholding and those deductions expressly included in the definition of Net Sales,
the amounts payable Clovis to Avila hereunder will not be reduced on account of any taxes, charges,
duties or other levies.
(f)
Blocked Payments
. In the event that, by reason of applicable law in any country, it
becomes impossible or illegal for Clovis (or any other Selling Party) to transfer, or have
transferred on its behalf, payments owed Avila hereunder, Clovis will promptly notify Avila of the
conditions preventing such transfer and such payments will be deposited in local currency in the
relevant country to the credit of Avila in a recognized banking institution designated by Avila or,
if none is designated by Avila within a period of thirty (30) days, in a recognized banking
institution selected by Clovis or another Selling Party, as the case may be, and identified in a
written notice given to Avila.
(g)
Interest Due
. If any payment due to either Party under this Agreement is overdue (and is
not subject to a good faith dispute), then such paying Party will pay interest thereon (before and
after any judgment) at an annual rate (but with interest accruing on a daily basis) of the lesser
of two percent (2%) above the prime rate as reported in
The Wall Street Journal
, Eastern Edition,
and the maximum rate permitted by applicable law, such interest to run from the date upon which
payment of such sum became due until payment thereof in full together with such interest.
6.8
Mutual Convenience of the Parties
. The royalty and other payment obligations set
forth hereunder have been agreed to by the Parties for the purpose of reflecting and advancing
their mutual convenience, including the ease of calculating and paying royalties and other amounts
to Avila. Clovis hereby stipulates to the fairness and reasonableness of such royalty and other
payments obligations and covenants not to allege or assert, nor to allow any of its Sublicensees,
Affiliates or Distributors to allege or assert, nor further to cause or support any other Third
Parties to allege or assert, that any such royalty or other payments obligations are unenforceable
or illegal in any way.
7.
Ownership of Collaboration Program Know-How.
7.1
Disclosure of Collaboration Program Know-How
. Each Party will promptly (and at
least on a calendar quarterly basis) disclose to the other Party any Collaboration Program Know-How
created, conceived or reduced to practice by or on behalf of such Party, and will provide such
documentation regarding same as such other Party may reasonably request.
7.2
Ownership and Inventorship
.
(a)
Avila Owned IP
. As between the Parties, Avila will solely own all right, title and
interest in and to the Avila Owned IP, and all right, title and interest in and to all Avila Owned
IP will automatically vest solely in Avila. Clovis, for itself and on behalf of its Affiliates and
subcontractors, and employees, subcontractors, consultants and agents of any of the foregoing,
hereby assigns (and to the extent such assignment can only be made in the future hereby agrees to
assign), to Avila all right, title and interest in and to Avila Owned IP (unless already owned by
Avila). Clovis will cooperate, and will cause the foregoing persons and entities to cooperate,
with Avila to effectuate and perfect the foregoing ownership, including by promptly executing and
recording assignments and other documents consistent with such ownership.
21
Amended and Restated Strategic License Agreement
(b)
Sole and Joint Collaboration Program Know-How
.
(i) Except for any Avila Owned IP, ownership of any Collaboration Program Know-How, and
Patents arising therefrom, created, conceived or reduced to practice solely by or on behalf of a
Party will be solely owned by such Party (referred to herein along with all Patents arising
therefrom, as Sole Collaboration Program IP for each Party), and if created, conceived or reduced
to practice jointly by or on behalf of the Parties will be jointly owned by the Parties (referred
to herein along with all Patents arising therefrom, as Joint Collaboration Program IP).
(ii) Each Party will have an undivided one-half interest in and to Joint Collaboration Program
IP. Each Party will exercise its ownership rights in and to such Joint Collaboration Program IP,
including the right to license and sublicense or otherwise to exploit, transfer or encumber its
ownership interest, without an accounting or obligation to, or consent required from, the other
Party, but subject to the licenses hereunder and the other terms and conditions of this Agreement.
At the reasonable written request of a Party, the other Party will in writing grant such consents
and confirm that no such accounting is required to effect the foregoing regarding Joint
Collaboration Program IP. Each Party, for itself and on behalf of its Affiliates, licensees and
sublicenses, and employees, subcontractors, consultants and agents of any of the foregoing, hereby
assigns (and to the extent such assignment can only be made in the future hereby agrees to assign),
to the other Party a joint and undivided interest in and to all Joint Collaboration Program IP.
(iii) Subject to the licenses hereunder and the other terms and conditions of this Agreement
(including Section 8 and 9):
(A) Each Party will be solely responsible for the Prosecution and Maintenance, and the
enforcement and defense, of any Patents within its Sole Collaboration Program IP, and the other
Party will have no rights with respect thereto; and
(B) The Prosecution and Maintenance, and the enforcement and defense, of any Patents within
Joint Collaboration Program IP will be jointly managed by the Parties on mutually agreeable terms
to be entered into by the Parties at the time any such Patents are first filed, and all recoveries
and out-of-pocket costs and expenses arising from those activities, absent further agreement, will
be shared equally by the Parties (provided that sufficient advance written notice of any such costs
or expenses is given to the Party not incurring same), provided that if either Party elects not to
pay any such costs or expenses for any such Patent, the Parties will meet and agree upon an
equitable way to treat such Patent.
(c)
Inventorship
. Inventorship determination for all Patents worldwide arising from any
Collaboration Program Know-How and thus the ownership thereof will be made in accordance with
applicable United States patent laws.
8.
Patent Prosecution and Maintenance.
8.1
Subject Patents
. The following provisions of this Section 8.1 will apply to Avila
Patents when subject to the exclusive licenses in Section 5.1(b), and then only with respect to the
scope of such exclusive license (each such Avila Patent, only when so subject, a Subject Patent).
Other than for Subject Patents hereunder, all Avila Patents will be referred to herein as Other
Patents.
(a)
Prosecution and Maintenance
. Avila will have the sole right to Prosecute and Maintain
throughout the world the Subject Patents, and will retain final decision making authority with
respect thereto, except as set out in the remainder of this Section 8. Avila will regularly
provide Clovis with copies of all Subject Patent applications, and all other material submissions
and correspondence with any patent authorities regarding Subject Patents, in sufficient time to
allow for review and comment by Clovis, and Avila will consider in good faith all such comments
timely made. More specifically, as of the A&R Date the Parties have agreed to pursue the
Prosecution and Maintenance activities set forth on
22
Amended and Restated Strategic License Agreement
Exhibit 8.1(a). Except as set forth in Section 8.1(b) for Specific Patents or Section 8.1(c)
or Exhibit 8.1(a), Avila will be responsible for all Patent Costs incurred by Avila for Subject
Patents.
(b)
Specific Patents
. For any Subject Patent having a specification that could reasonably
support and enable a composition-of-matter claim or a method-of-use claim in each case Covering
only the Lead Candidate or a particular Licensed Product, the following will apply: to the extent
practicable, upon Cloviss reasonable written request and provided that Avila reasonably agrees
with Clovis that the following Prosecution and Maintenance activities would not materially harm any
other Avila Patents or other Patents owned by Avila or any of its Affiliates, the Parties will file
a U.S. continuation, continuation-in-part or divisional of such Subject Patent application seeking
issuance of such composition-of-matter or method-of-use claim scope (and no other claim scope)
(each such Subject Patent, a Specific Patent). Each such Specific Patent will remain a Subject
Patent hereunder, so that this Agreement will continue to apply thereto, provided that the Parties
will jointly control the Prosecution and Maintenance thereof using patent counsel selected by
Avila, and Clovis will be solely responsible for the payment of all related Patent Costs. Neither
Party may take any action with respect to the Prosecution or Maintenance of any Specific Patent
without the consent of the other Party, such consent not to be unreasonably withheld or delayed.
If and at such time as Clovis no longer has an exclusive license to all of the claim scope of any
such Specific Patent, then any such Specific Patent will no longer be treated as such hereunder
(although it may remain a Subject Patent). Clovis acknowledges and agrees that Avila may grant
substantially similar rights to other exclusive Third Party licensees under any Subject Patents.
(c)
Election Not to Prosecute or Maintain or Pay Patent Costs
. If Avila elects not (i) to
Prosecute or Maintain any Subject Patent in any particular country before the applicable filing
deadline or continue such activities once filed in a particular country, or (ii) to pay the Patent
Costs associated with Prosecution or Maintenance of any Subject Patent, then in each such case
Avila will so notify Clovis, promptly in writing and in good time to enable Avila to meet any
deadlines by which an action must be taken to preserve such Subject Patent in such country, if
Clovis so requests. Upon receipt of each such notice by Avila, Clovis will have the right, but not
the obligation, to notify Avila in writing on a timely basis that Avila should continue the
Prosecution or Maintenance of such Subject Patent on the terms set forth above, and Clovis will
reimburse Avila for all Patent Costs thereafter incurred by Avila with respect thereto within
thirty (30) days of receiving an invoice therefor. If after making such election, Clovis elects
not to pay the Patent Costs associated with Prosecution or Maintenance of any Subject Patent, then
in each such case Clovis will so notify Avila and on the ninetieth (90
th
) day after
Avilas receipt of such notice such Subject Patent will no longer be licensed to Clovis hereunder
and will not longer be treated as a Subject Patent hereunder. Clovis will be required to
reimburse Avila for Patent Costs for such Subject Patent incurred by Avila through such ninetieth
(90
th
) day, but not thereafter.
(d)
Patent Term Extensions and Filings for Regulatory Exclusivity Periods
.
(i) Avila will consult with Clovis when considering any patent term restoration or
supplemental protection certificates or their equivalent for the Subject Patents. In the event
that any election with respect to patent term restoration or supplemental protection certificates
or their equivalent for any Subject Patent is available, Avila will decide on whether or not to
make any such election, provided that Clovis will have the right to decide whether or not to make
any such election with respect to any Specific Patents.
(ii) With respect to any Patent listings required for any Regulatory Exclusivity Periods for
Licensed Products, the Parties will mutually agree on which Avila Patents to list.
8.2
Other Licensed Patents
. Avila will have the sole right, and sole responsibility
for all Patent Costs incurred by Avila, to Prosecute and Maintain all Other Patents, and Clovis
will have no rights with respect thereto. Clovis will have the sole right, and sole responsibility
for all Patent Costs incurred by
23
Amended and Restated Strategic License Agreement
Clovis, to Prosecute and Maintain all Patents within Clovis Technology, and Avila will have no
rights with respect thereto.
8.3
Cooperation
. Each Party will reasonably cooperate with the other Party in the
Prosecution and Maintenance of the Subject Patents and any other Patents within each Partys Sole
Collaboration Program IP and within Joint Collaboration Program IP. Such cooperation includes
promptly executing all documents, or requiring inventors, subcontractors, employees and consultants
and agents of Clovis and its Affiliates, Sublicensees and Distributors to execute all documents, as
reasonable and appropriate so as to enable the Prosecution and Maintenance of any such Patents in
any country.
8.4
Patent Marking
. Clovis will mark, and will cause all other Selling Parties to
mark, Licensed Products with all Avila Patents in accordance with applicable law, which marking
obligation will continue for as long as (and only for as long as) required under applicable law.
9.
Patent Enforcement and Defense.
9.1
Notice
. Each Party will promptly notify, in writing, the other Party upon
learning of any actual or suspected Competitive Infringement of any Subject Patents by a Third
Party, or of any claim of invalidity, unenforceability, or non-infringement of any Subject Patents,
and will, along with such notice, supply the other Party with any evidence in its possession
pertaining thereto. For purposes of this Agreement, Competitive Infringement will mean any
allegedly infringing activity with respect to a Subject Patent, which activity (i) falls within the
scope then in effect of the licenses granted by Avila to Clovis as set forth in Sections 5.1(b),
and (ii) is reasonably expected to reduce the Net Sales of any Licensed Products.
9.2
Enforcement and Defense
.
(a)
Subject Patents and Competitive Infringement
.
(i) As between the Parties, and subject to Section 9.2(a)(ii), Clovis will have the first
right, but not the obligation, to seek to abate any Competitive Infringement of the Subject Patents
by a Third Party, or to file suit against any such Third Party for such Competitive Infringement.
If Clovis does not take steps to abate such Competitive Infringement, or file suit to enforce the
Subject Patents against such Third Party with respect to such Competitive Infringement, within a
commercially reasonably time (and in all events within the applicable Hatch-Waxman Time Period, as
defined below), then subject to Section 9.2(a)(ii), Avila will have the right (but not the
obligation) to take action to enforce the Subject Patents against such Third Party for such
Competitive Infringement. The controlling Party will pay all its Patent Costs incurred for such
enforcement.
(ii) Neither Party will exercise any of its enforcement rights under this Section 9.2(a)
without first consulting with the other Party, provided that this consultation requirement will not
limit either Partys rights under this Section 9.2(a), and further provided that notwithstanding
anything herein to the contrary, Clovis will have no right to enforce (including seeking to abate
any Competitive Infringement) or defend any Subject Patent (other than, for clarity, any Specific
Patents) that Covers any compound that is in Development or has been commercialized by Avila, its
Affiliates, or any licensees or sublicensees of Avila and its Affiliates.
(iii) For purposes of this Agreement, Hatch-Waxman Time Period will mean the applicable
period of time during which a patent holder or licensee has the right to file an infringement suit
to maintain certain rights and privileges upon receipt of Paragraph IV Patent Certification by a
Third Party filing an Abbreviated New Drug Application or an application under §505(b)(2) of the
United States Food, Drug, and Cosmetic Act, as amended or any replacement thereof or any other
similar Patent certification by a Third Party, or any foreign equivalent thereof.
(b)
Defense
. As between the Parties, Avila will have the first right, but not the obligation,
to defend against a declaratory judgment action or other action challenging any Subject Patents,
other than
24
Amended and Restated Strategic License Agreement
with respect to (i) any interferences, oppositions, reissues or reexaminations, which are
included in the definition of Prosecution and Maintenance and addressed in Section 8, (ii) any
counter-claims in any enforcement action brought by Clovis pursuant to Section 9.2(a), or (iii) any
action by a Third Party in response to an enforcement action brought by Clovis alleging
infringement of any Subject Patents, which defense for the foregoing clause (ii) and this clause
(iii) will be controlled by the Party controlling such enforcement action (unless the last proviso
of Section 9.2(a)(ii) applies, in which case in all events Avila will control). If Avila does not
take steps to defend within a commercially reasonably time, or elects not to continue any such
defense, then ), then subject to Section 9.2(a)(ii), Clovis will have the right (but not the
obligation) to defend any such Subject Patent.
(c)
Withdrawal, Cooperation and Participation
. With respect to any infringement or defensive
action identified above in this Section 9.2:
(i) If the controlling Party ceases to pursue or withdraws from such action, it will notify
the other Party and then, subject to Section 9.2(a)(ii), such other Party may substitute itself for
the withdrawing Party and proceed under the terms and conditions of this Section 9.2.
(ii) The non-controlling Party will cooperate with the Party controlling any such action (as
may be reasonably requested by the controlling Party), including (i) providing access to relevant
documents and other evidence, (ii) making its and its Affiliates and licensees and sublicensees and
all of their respective employees, subcontractors, consultants and agents available at reasonable
business hours and for reasonable periods of time, but only to the extent relevant to such action,
and (iii) if necessary, by being joined as a party, subject for this clause (iii) to the
controlling Party agreeing to indemnify such non-controlling Party for its involvement as a named
party in such action and paying those Patent Costs incurred by such Party in connection with such
joinder. The Party controlling any such action will keep the other Party updated with respect to
any such action, including providing copies of all documents received or filed in connection with
any such action.
(iii) Each Party will have the right to participate or otherwise be involved in any such
action controlled by the other Party, in each case at the participating Partys sole cost and
expense. If a Party elects to so participate or be involved, the controlling Party will provide
the participating Party and its counsel with an opportunity to consult with the controlling Party
and its counsel regarding the prosecution of such action (including reviewing the contents of any
correspondence, legal papers or other documents related thereto), and the controlling Party will
take into account reasonable requests of the participating Party regarding such enforcement or
defense.
(d)
Settlement
. Clovis may not settle or consent to an adverse judgment in any action
described in this Section 9.2 and controlled by Clovis, including any judgment which affects the
scope, validity or enforcement of any Subject Patents involved therewith, without the prior written
consent of Avila (such consent not to be unreasonably withheld or delayed).
(e)
Damages
. Unless otherwise agreed by the Parties, all monies recovered upon the final
judgment or settlement of any action described in Section 9.2(a), or any action described in
Section 9.2(b), will be used first to reimburse each of the Parties, and any other Third Party
licensees of Avila, on a
pro rata
basis for each of their out-of-pocket costs and expenses relating
to the action, with the balance of any such recovery to be divided as follows:
(i) To the extent the recovery reflects lost profits damages, if Clovis was the controlling
Party, Clovis will retain such lost profits recovery, less the amount of royalties payable to Avila
by treating such lost profits recovery as Net Sales hereunder, and if Avila was the controlling
Party, *** to Avila and *** to Clovis;
(ii) To the extent the recovery reflects reasonable royalty damages, if Clovis was the
controlling Party, *** to Clovis and *** to Avila, and if Avila was the initiating party, ***to
Avila and *** to Clovis; and
25
Amended and Restated Strategic License Agreement
(iii) For the remainder of any such recovery, *** to Clovis and *** to Avila.
9.3
Other Patents
. Avila will have the sole right, and sole responsibility for all
Patent Costs incurred by Avila, to enforce and defend all Other Patents, and Clovis will have no
rights with respect thereto. Clovis will have the sole right, and sole responsibility for all
Patent Costs incurred by Clovis, to enforce and defend all Patents within Clovis Technology, and
Avila will have no rights with respect thereto.
10.
Confidentiality.
10.1
Confidential Information
.
(a)
Confidential Information
. Each Party (Disclosing Party) may disclose to the other Party
(Receiving Party), and Receiving Party may acquire during the course and conduct of activities
under this Agreement, certain proprietary or confidential information of Disclosing Party in
connection with this Agreement. The term Confidential Information will mean (i) all Materials
and (ii) all ideas and information of any kind, whether in written, oral, graphical,
machine-readable or other form, whether or not marked as confidential or proprietary, which are
transferred, disclosed or made available by Disclosing Party or at the request of Receiving Party,
including any of the foregoing of Third Parties. Without limiting the foregoing, Avila Core
Technology and Avila Know-How will be considered Confidential Information of Avila, and Clovis
Technology will be considered Confidential Information of Clovis.
(b)
Restrictions
. During the Term and for ten (10) years thereafter, Receiving Party will
keep all Disclosing Partys Confidential Information in confidence with the same degree of care
with which Receiving Party holds its own confidential information. Receiving Party will not use
Disclosing Partys Confidential Information except for in connection with the performance of its
obligations and exercise of its rights under this Agreement. Receiving Party has the right to
disclose Disclosing Partys Confidential Information without Disclosing Partys prior written
consent, to the extent and only to the extent reasonably necessary, to Receiving Partys Affiliates
and their employees, subcontractors, consultants or agents who have a need to know such
Confidential Information in order to perform its obligations and exercise its rights under this
Agreement and who are required to comply with the restrictions on use and disclosure in this
Section 10.1(b). Receiving Party will use diligent efforts to cause those entities and persons to
comply with the restrictions on use and disclosure in this Section 10.1(b). Receiving Party
assumes responsibility for those entities and persons maintaining Disclosing Partys Confidential
Information in confidence and using same only for the purposes described herein.
(c)
Exceptions
. Receiving Partys obligation of nondisclosure and the limitations upon the
right to use the Disclosing Partys Confidential Information will not apply to the extent that
Receiving Party can demonstrate that the Disclosing Partys Confidential Information: (i) was
known to Receiving Party or any of its Affiliates prior to the time of disclosure; (ii) is or
becomes public knowledge through no fault or omission of Receiving Party or any of its Affiliates;
(iii) is obtained by Receiving Party or any of its Affiliates from a Third Party under no
obligation of confidentiality to Disclosing Party; or (iv) has been independently developed by
employees, subcontractors, consultants or agents of Receiving Party or any of its Affiliates
without the aid, application or use of Disclosing Partys Confidential Information, as evidenced by
contemporaneous written records.
(d)
Permitted Disclosures
. Receiving Party may disclose Disclosing Partys Confidential
Information to the extent (and only to the extent) such disclosure is reasonably necessary in the
following instances:
(i) in order to comply with applicable law (including any securities law or regulation or the
rules of a securities exchange) or with a legal or administrative proceeding;
26
Amended and Restated Strategic License Agreement
(ii) in connection with prosecuting or defending litigation, Regulatory Approvals and other
regulatory filings and communications, and filing, prosecuting and enforcing Patents in connection
with Receiving Partys rights and obligations pursuant to this Agreement; and
(iii) in connection with exercising its rights hereunder, to its Affiliates; potential and
future collaborators (including Sublicensees and Distributors where Clovis is the Receiving Party);
permitted acquirers or assignees; and investment bankers, investors and lender;
provided that (1) with respect to Sections 10.1(d)(i) or 10.1(d)(ii), where reasonably possible,
Receiving Party will notify Disclosing Party of Receiving Partys intent to make any disclosure
pursuant thereto sufficiently prior to making such disclosure so as to allow Disclosing Party
adequate time to take whatever action it may deem appropriate to protect the confidentiality of the
information to be disclosed, and (2) with respect to Section 10.1(d)(iii), each of those named
people and entities are required to comply with the restrictions on use and disclosure in Section
10.1(b) (other than investment bankers, investors and lenders, which must be bound prior to
disclosure by commercially reasonable obligations of confidentiality).
10.2
Publications
. The Parties intend to publish in scientific journals and present
at scientific conferences the results of the Collaboration Program, subject to the following
process. Notwithstanding anything to the contrary herein, either Party may propose publication of
the results of the Collaboration Program following scientific review by the JSC (if in force) and
subsequent written approval by Avilas and Cloviss management, which approval will not be
unreasonably withheld. After receipt of the proposed publication by both Cloviss and Avilas
managements, such written approval or disapproval will be provided within thirty (30) days. Both
Parties understand that a reasonable commercial strategy may require delay of publication of
information or filing of patent applications, therefore the Parties agree to review and consider
delay of publication and filing of patent applications under certain circumstances for a reasonably
limited period of time. Once publications have been reviewed by each Party and have been approved
for publication, the same publications do not have to be provided again to the other Party for
review for a later submission for publication. Expedited reviews for abstracts or poster
presentations may be arranged if mutually agreeable to the Parties. Each Party will acknowledge
the other Partys contributions in any such publication.
10.3
Terms of this Agreement; Publicity
.
(a)
Restrictions
. The Parties agree that the terms of this Agreement will be treated as
Confidential Information of both Parties, and thus may be disclosed only as permitted by Section
10.1(d). Except as require by law, each Party agrees not to issue any press release or public
statement disclosing information relating to this Agreement or the transactions contemplated hereby
or the terms hereof without the prior written consent of the other Party not to be unreasonably
withheld (or as such consent may be obtained in accordance with Section 10.3(b)), or as permitted
by Section 10.3(c). Notwithstanding the foregoing, and in addition to those disclosures permitted
by Section 10.1(d), Avila will have the right to disclose publicly the following facts: (i) payment
of Milestone Payments to Avila by Clovis but not the amounts; and (ii) the successful progression
of the Lead Candidate and Licensed Products to the next stage of clinical development or regulatory
approval.
(b)
Review
. In the event either Party (the Issuing Party) desires to issue a press release
or other public statement disclosing information relating to this Agreement or the transactions
contemplated hereby or the terms hereof, the Issuing Party will provide the other Party (the
Reviewing Party) with a copy of the proposed press release or public statement (the Release).
The Issuing Party will specify with each such Release, taking into account the urgency of the
matter being disclosed, a reasonable period of time within which the Receiving Party may provide
any comments on such Release and if the Receiving Party fails to provide any comments during the
response period called for by the Issuing Party, the Reviewing Party will be deemed to have
consented to the issuance of such Release; provided, however, that as it relates to the disclosure
of the results of any clinical trial conducted by Clovis or any
27
Amended and Restated Strategic License Agreement
health or safety matter related to a Licensed Product, Avila acknowledges that announcements
may need to be made on extremely short notice, and although Clovis will endeavor to provide Avila
adequate time for such a review, Clovis will be free to make necessary public disclosures as
promptly as it deems necessary and appropriate. If the Receiving Party provides any comments, the
Parties will consult on such Release and work in good faith to prepare a mutually acceptable
Release. Either Party may subsequently publicly disclose any information previously contained in
any Release so consented to.
(c)
Joint Press Release
. The Parties agree to issue the joint press release on Exhibit
10.3(c) promptly following the Effective Date.
10.4
Relationship to the Confidentiality Agreement
. This Agreement supersedes that
certain Mutual Confidentiality Agreement between the Parties dated July 8, 2009 (the
Confidentiality Agreement); provided that all Confidential Information disclosed or received by
the Parties thereunder will be deemed Confidential Information hereunder and will be subject to
the terms and conditions of this Agreement.
11.
Warranties; Limitations of Liability; Indemnification.
11.1
Representations and Warranties
. Each Party represents and warrants to the other
as of the Effective Date that it has the legal right and power to enter into this Agreement, to
extend the rights and licenses granted or to be granted to the other in this Agreement, and to
fully perform its obligations hereunder.
11.2
Additional Representations and Warranties of Avila
. Avila represents and
warrants to Clovis that, as of the Effective Date:
(a) Avila Controls the Patents listed on Exhibit 1.7 and the Avila Know-How, and is entitled
to grant the licenses specified herein. Avila has not caused any Patent included on such Exhibit
to be subject to any liens or encumbrances and Avila has not granted to any Third Party any rights
or licenses under such Patents or Avila Know-How that would conflict with the licenses granted to
Clovis hereunder. No Patents listed on Exhibit 1.7 are in-licensed by Avila.
(b) To Avilas Knowledge, the Patents listed on Exhibit 1.7 have been procured or are being
procured from the respective patent offices in accordance with applicable law.
(c) Avila has no Knowledge of any claim or litigation that has been brought or threatened in
writing by any Third Party alleging that the Patents listed on Exhibit 1.7 are invalid or
unenforceable.
11.3
Disclaimers
. Without limiting the respective rights and obligations of the
Parties expressly set forth herein, each Party specifically disclaims any guarantee that the
Collaboration Program or any Licensed Products or Companion Diagnostics will be successful, in
whole or in part. The failure of the Parties to successfully identify a Lead Candidate will not,
of itself, constitute a breach of any representation or warranty under this Agreement. EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, THE PARTIES MAKE NO REPRESENTATIONS AND EXTEND NO
WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO ANY AVILA PATENTS, AVILA KNOW-HOW,
CLOVIS TECHNOLOGY, RESEARCH CANDIDATES, MATERIALS, THE LEAD CANDIDATE, LICENSED PRODUCTS, COMPANION
DIAGNOSTICS, OR RESEARCH PROGRAM KNOW-HOW, INCLUDING WARRANTIES OF VALIDITY OR ENFORCEABILITY OF
ANY PATENT RIGHTS, TITLE, QUALITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR USE OR PURPOSE,
PERFORMANCE, AND NONINFRINGEMENT OF ANY THIRD PARTY PATENTS OR OTHER INTELLECTUAL PROPERTY RIGHTS.
11.4
No Consequential Damages
. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT OR
OTHERWISE, NEITHER PARTY WILL BE LIABLE TO THE OTHER OR ANY THIRD PARTY WITH RESPECT TO ANY SUBJECT
MATTER OF THIS AGREEMENT FOR ANY INDIRECT,
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Amended and Restated Strategic License Agreement
PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES, EVEN IF SUCH PARTY HAS BEEN INFORMED OR SHOULD
HAVE KNOWN OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED THAT THIS SECTION 11.4 WILL NOT APPLY TO
THE PARTIES INDEMNIFICATION RIGHTS AND OBLIGATIONS UNDER SECTION 11.6.
11.5
Performance by Others
. The Parties recognize that each Party may perform some or
all of its obligations under this Agreement through Affiliates and permitted subcontractors
provided, however, that each Party will remain responsible and liable for the performance by its
Affiliates and permitted subcontractors and will cause its Affiliates and permitted subcontractors
to comply with the provisions of this Agreement in connection therewith.
11.6
Indemnification
.
(a)
Indemnification by Clovis
. Clovis will indemnify Avila, its Affiliates and their
respective directors, officers, employees, Third Party licensors and agents, and their respective
successors, heirs and assigns (collectively, Avila Indemnitees), and defend and save each of them
harmless, from and against any and all losses, damages, liabilities, costs and expenses (including
reasonable attorneys fees and expenses) (collectively, Losses) in connection with any and all
suits, investigations, claims or demands of Third Parties (collectively, Third Party Claims)
arising from or occurring as a result of: (i) the material breach by Clovis of any term of this
Agreement; (ii) any gross negligence or willful misconduct on the part of Clovis in performing its
obligations under this Agreement; (iii) any such Third Party Claims relating to any alleged
infringement or misappropriation of Patents or other intellectual property rights by Avila as part
of the Collaboration Program based on use of Clovis Technology or with respect to the Targets; or
(iv) the Development or Commercialization by Clovis or any of its Affiliates, Sublicensees or
Distributors of the Lead Candidate or Licensed Products or Companion Diagnostics, including any
such Third Party Claims relating to any alleged infringement or misappropriation of Patents or
other intellectual property rights, except in each case for those Losses as to which Avila has an
obligation to indemnify Clovis pursuant to Section 11.6(b), as to which Losses each Party will
indemnify the other to the extent of their respective liability; provided, however, that Clovis
will not be obligated to indemnify Avila Indemnitees for any Losses to the extent that such Losses
arise as a result of gross negligence or willful misconduct on the part of an Avila Indemnitee.
(b)
Indemnification of Clovis
. Avila will indemnify Clovis, its Affiliates and their
respective directors, officers, employees and agents, and their respective successors, heirs and
assigns (collectively, Clovis Indemnitees), and defend and save each of them harmless, from and
against any and all Losses in connection with any and all Third Party Claims arising from or
occurring as a result of: (i) the material breach by Avila of any term of this Agreement; or (ii)
any gross negligence or willful misconduct on the part of Avila in performing its obligations under
this Agreement, except in each case for those Losses for which Clovis has an obligation to
indemnify Avila pursuant to Section 11.6(a), as to which Losses each Party will indemnify the other
to the extent of their respective liability for the Losses; provided, however, that Avila will not
be obligated to indemnify Clovis Indemnitees for any Losses to the extent that such Losses arise as
a result of gross negligence or willful misconduct on the part of a Clovis Indemnitee.
(c)
Notice of Claim
. All indemnification claims provided for in Section 11.6(a) and 11.6(b)
will be made solely by such Party to this Agreement (the Indemnified Party). The Indemnified
Party will promptly notify the indemnifying Party (an Indemnification Claim Notice) of any Losses
or the discovery of any fact upon which the Indemnified Party intends to base a request for
indemnification under Section 11.6(a) or 11.6(b), but in no event will the indemnifying Party be
liable for any Losses that result from any delay in providing such notice. Each Indemnification
Claim Notice must contain a description of the claim and the nature and estimated amount of such
Loss (to the extent that the nature and amount of such Loss is known at such time). The
Indemnified Party will furnish promptly to the indemnifying Party copies of all papers and official
documents received in respect of any Losses and Third Party Claims.
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Amended and Restated Strategic License Agreement
(d)
Defense, Settlement, Cooperation and Expenses
.
(i)
Control of Defense
. At its option, the indemnifying Party may assume the defense of any
Third Party Claim by giving written notice to the Indemnified Party within thirty (30) days after
the indemnifying Partys receipt of an Indemnification Claim Notice. The assumption of the defense
of a Third Party Claim by the indemnifying Party will not be construed as an acknowledgment that
the indemnifying Party is liable to indemnify the Indemnified Party in respect of the Third Party
Claim, nor will it constitute a waiver by the indemnifying Party of any defenses it may assert
against the Indemnified Partys claim for indemnification. Upon assuming the defense of a Third
Party Claim, the indemnifying Party may appoint as lead counsel in the defense of the Third Party
Claim any legal counsel selected by the indemnifying Party (the indemnifying Party will consult
with the Indemnified Party with respect to a possible conflict of interest of such counsel retained
by the indemnifying Party). In the event the indemnifying Party assumes the defense of a Third
Party Claim, the Indemnified Party will immediately deliver to the indemnifying Party all original
notices and documents (including court papers) received by the Indemnified Party in connection with
the Third Party Claim. Should the indemnifying Party assume the defense of a Third Party Claim,
except as provided in Section 11.6(d)(ii), the indemnifying Party will not be liable to the
Indemnified Party for any legal costs or expenses subsequently incurred by such Indemnified Party
in connection with the analysis, defense or settlement of the Third Party Claim. In the event that
it is ultimately determined that the indemnifying Party is not obligated to indemnify, defend or
hold harmless the Indemnified Party from and against the Third Party Claim, the Indemnified Party
will reimburse the indemnifying Party for any and all costs and expenses (including attorneys fees
and costs of suit) and any Third Party Claims incurred by the indemnifying Party in its defense of
the Third Party Claim.
(ii)
Right to Participate in Defense
. Without limiting Section 11.6(d)(i), any Indemnified
Party will be entitled to participate in, but not control, the defense of such Third Party Claim
and to employ counsel of its choice for such purpose; provided, however, that such employment will
be at the Indemnified Partys own cost and expense unless (i) the employment thereof has been
specifically authorized by the indemnifying Party in writing, (ii) the indemnifying Party has
failed to assume the defense and employ counsel in accordance with Section 11.6(d)(i) (in which
case the Indemnified Party will control the defense) or (iii) the interests of the Indemnified
Party and the indemnifying Party with respect to such Third Party Claim are sufficiently adverse to
prohibit the representation by the same counsel of both Parties under applicable law, ethical rules
or equitable principles in which case the indemnifying Party will assume one hundred percent (100%)
of any such costs and expenses of counsel for the Indemnified Party.
(iii)
Settlement
. With respect to any Third Party Claims that relate solely to the payment of
money damages in connection with a Third Party Claim and that will not result in the Indemnified
Partys becoming subject to injunctive or other relief or otherwise adversely affecting the
business of the Indemnified Party in any manner, and as to which the indemnifying Party will have
acknowledged in writing the obligation to indemnify the Indemnified Party hereunder, the
indemnifying Party will have the sole right to consent to the entry of any judgment, enter into any
settlement or otherwise dispose of such Loss, on such terms as the indemnifying Party, in its sole
discretion, will deem appropriate. With respect to all other Losses in connection with Third Party
Claims, where the indemnifying Party has assumed the defense of the Third Party Claim in accordance
with Section 11.6(d)(i), the indemnifying Party will have authority to consent to the entry of any
judgment, enter into any settlement or otherwise dispose of such Loss provided it obtains the prior
written consent of the Indemnified Party (which consent will not be unreasonably withheld). The
indemnifying Party will not be liable for any settlement or other disposition of a Loss by an
Indemnified Party that is reached without the written consent of the indemnifying Party.
Regardless of whether the indemnifying Party chooses to defend or prosecute any Third Party Claim,
no
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Amended and Restated Strategic License Agreement
Indemnified Party will admit any liability with respect to or settle, compromise or discharge,
any Third Party Claim without the prior written consent of the indemnifying Party, such consent not to
be unreasonably withheld.
(iv)
Cooperation
. Regardless of whether the indemnifying Party chooses to defend or prosecute
any Third Party Claim, the Indemnified Party will, and will cause each other Indemnified Party to,
cooperate in the defense or prosecution thereof and will furnish such records, information and
testimony, provide such witnesses and attend such conferences, discovery proceedings, hearings,
trials and appeals as may be reasonably requested in connection therewith. Such cooperation will
include access during normal business hours afforded to indemnifying Party to, and reasonable
retention by the Indemnified Party of, records and information that are reasonably relevant to such
Third Party Claim, and making Indemnified Parties and other employees and agents available on a
mutually convenient basis to provide additional information and explanation of any material
provided hereunder, and the indemnifying Party will reimburse the Indemnified Party for all its
reasonable out-of-pocket costs and expenses in connection therewith.
(v)
Costs and Expenses
. Except as provided above in this Section 11.6(d), the costs and
expenses, including attorneys fees and expenses, incurred by the Indemnified Party in connection
with any claim will be reimbursed on a calendar quarter basis by the indemnifying Party, without
prejudice to the indemnifying Partys right to contest the Indemnified Partys right to
indemnification and subject to refund in the event the indemnifying Party is ultimately held not to
be obligated to indemnify the Indemnified Party.
11.7
Insurance
. Each Party will maintain at its sole cost and expense, an adequate
liability insurance or self-insurance program (including product liability insurance) to protect
against potential liabilities and risk arising out of activities to be performed under this
Agreement and any agreement related hereto and upon such terms (including coverages, deductible
limits and self-insured retentions) as are customary in the U.S. pharmaceutical industry for the
activities to be conducted by such Party under this Agreement. Subject to the preceding sentence,
such liability insurance or self-insurance program will insure against all types of liability,
including personal injury, physical injury or property damage arising out of the manufacture, sale,
use, distribution or marketing of Licensed Products or Companion Diagnostics. The coverage limits
set forth herein will not create any limitation on a Partys liability to the other under this
Agreement.
12.
Term and Termination.
12.1
Term
. This Agreement will commence as of the Effective Date and, unless sooner
terminated in accordance with the terms hereof or by mutual written consent, will continue on an
Licensed Product-by-Licensed Product and country-by-country basis, until there are no more payments
owed Avila on such Licensed Products in such country (the longest such period of time for any
Licensed Products hereunder, the Term). Upon there being no more such payments hereunder for any
such Licensed Product in such country, the licenses contained in Section 5.1(b) for Avila Know-How,
as applicable, will become fully paid up and non-exclusive with respect to such Licensed Product in
such country.
12.2
Termination by Avila
.
(a)
Breach
. Avila will have the right to terminate this Agreement in full upon delivery of
written notice to Clovis in the event of any material breach by Clovis of any terms and conditions
of this Agreement, provided that such termination will not be effective if such breach has been
cured within ninety (90) days after written notice thereof is given by Avila to Clovis specifying
the nature of the alleged breach (or, if such default cannot be cured within such ninety (90) day
period, within one hundred and eighty (180) days after such notice if Clovis commences actions to
cure such default within such 90-day period and thereafter diligently continues such actions, but
fails to cure the default by the end of such 180-days); provided, however, that to the extent such
material breach involves the failure to make a
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Amended and Restated Strategic License Agreement
payment when due, such breach must be cured within thirty (30) days after written notice
thereof is given by Avila to Clovis.
(b)
Termination for IP Challenge
. Avila will have the right to terminate this Agreement in
full upon written notice to Clovis in the event that Clovis or any of its Affiliates, Sublicensees
or Distributors directly or indirectly challenges in a legal or administrative proceeding the
patentability, enforceability or validity of any Avila Patents; provided that Avila will not have
the right to terminate this Agreement under this Section 12.2(b) for any such challenge by any
Sublicensee or Distributor if such challenge is dismissed within thirty (30) days of Avilas notice
to Clovis under this Section 12.2(b) and not thereafter continued.
12.3
Termination by Clovis
.
(a)
Breach
. Clovis will have the right to terminate this Agreement in full upon delivery of
written notice to Avila in the event of any material breach by Avila of any terms and conditions of
this Agreement, provided that such termination will not be effective if such breach has been cured
within ninety (90) days after written notice thereof is given by Clovis to Avila specifying the
nature of the alleged breach (or, if such default cannot be cured within such ninety (90) day
period, within one hundred and eighty (180) days after such notice if Avila commences actions to
cure such default within such 90-day period and thereafter diligently continues such actions, but
fails to cure the default by the end of such 180-days).
(b)
Discretionary Termination
. Beginning with the ***anniversary of the Effective Date,
Clovis will have the right to terminate this Agreement in full ninety (90) days after delivery of
written notice to Avila if the Board of Directors of Clovis concludes due to scientific, technical,
regulatory or commercial reasons, including (i) safety or efficacy concerns, including adverse
events of the Licensed Product, (ii) concerns relating to the present or future marketability or
profitability of the Licensed Product, (iii) reasons related to Patent coverage or (iv) existing
and anticipated competition, renders the Development of the Lead Candidate or the Commercialization
of the Licensed Product no longer commercially practicable for Clovis.
12.4
Termination Upon Bankruptcy
.
(a)
Termination Right
. Either Party may terminate this Agreement if, at any time, the other
Party will file in any court or agency pursuant to any statute or regulation of any state, country
or jurisdiction, a petition in bankruptcy or insolvency or for reorganization or for an arrangement
or for the appointment of a receiver or trustee of that Party or of its assets, or if the other
Party proposes a written agreement of composition or extension of its debts, or if the other Party
will be served with an involuntary petition against it, filed in any insolvency proceeding, and
such petition will not be dismissed within sixty (60) days after the filing thereof, or if the
other Party will propose or be a Party to any dissolution or liquidation, or if the other Party
will make an assignment for the benefit of its creditors.
(b)
Consequences of Bankruptcy
. All rights and licenses granted under or pursuant to this
Agreement by Clovis or Avila or their Affiliates are, and will otherwise be deemed to be, for
purposes of Section 365(n) of the U.S. Bankruptcy Code, licenses of right to intellectual
property as defined under Section 101 of the U.S. Bankruptcy Code. The Parties agree that the
Parties and their respective Affiliates, Sublicensees and Third Party sublicensees, as licensees of
such rights under this Agreement, will retain and may fully exercise all of their rights and
elections under the U.S. Bankruptcy Code and any foreign counterparts thereto.
12.5
Effects of Termination
. Upon termination by either Party under Sections 12.2,
12.3 or 12.4:
(a) Clovis will responsibly wind-down, in accordance with accepted pharmaceutical industry
norms and ethical practices, any on-going clinical studies for which it has responsibility
hereunder in which patient dosing has commenced or, if reasonably practicable and requested by
Avila, allow Clovis,
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Amended and Restated Strategic License Agreement
its Affiliates or its Sublicensees to complete such trials. Clovis will be responsible for
any costs associated with such wind-down. Avila will pay all costs incurred by either Party to
complete such studies should Avila request that such studies be completed.
(b) A termination of this Agreement, will not automatically terminate any sublicense granted
by Clovis pursuant to Section 5.3 with respect to a non-Affiliated Sublicensee, provided that (i)
such Sublicensee is not then in breach of any provision of this Agreement or the applicable
sublicense agreement, (ii) Avila will have the right to step into the role of Clovis as
sublicensor, with all the rights that Clovis had under such sublicense prior to termination of this
Agreement (including the right to receive any payments to Clovis by such Sublicensee that accrue
from and after the date of the termination of this Agreement) and (iii) Avila will only have those
obligations to such Sublicensee as Avila had to Clovis hereunder and that Avila is able to satisfy
with respect to such Sublicensee based on the provisions of Sections 12.5(d) through 12.5(f) (and
no other obligations). Clovis will include in any sublicense agreement a provision in which said
Sublicensee acknowledges its obligations to Avila hereunder and the rights of Avila to terminate
this Agreement with respect to any Sublicensee for material breaches of this Agreement by such
Sublicensee that are within the scope of Section 12.2. The failure of Clovis to include in a
sublicense agreement the provision referenced in the immediately preceding sentence will render the
affected sublicense void
ab initio
.
(c) Except as otherwise expressly provided in Section 12.5(b), all rights and licenses granted
by Avila to Clovis in Section 5 will terminate, and Clovis and its Affiliates, Sublicensees and
Distributors will cease all use of Avila Know-How and Avila Patents and all Development and
Commercialization of any Licensed Products or Companion Diagnostics.
(d) All Regulatory Approvals and other regulatory filings and communications owned (in whole
or in part) or otherwise controlled by Clovis and its Affiliates, Sublicensees and Distributors,
and all other documents relating to or necessary to further Develop and Commercialize the Lead
Candidate and Licensed Products and Companion Diagnostics, as such items exist as of the effective
date of such termination (including all related completed and ongoing clinical studies) will be
assigned to Avila, and Clovis will provide to Avila one (1) copy of the foregoing and all documents
contained in or referenced in any such items, together with the raw and summarized data for any
clinical studies (and where reasonably available, electronic copies thereof). In the event of
failure to obtain assignment, Clovis hereby consents and grants to Avila the right to access and
reference (without any further action required on the part of Clovis, whose authorization to file
this consent with any Regulatory Authority is hereby granted) any such item.
(e) Clovis hereby grants to Avila and its Affiliates, and Avila and its Affiliates will
automatically have, a worldwide, perpetual and irrevocable, royalty-free and fully paid-up,
nontransferable (except in connection with a permitted assignment of this Agreement in accordance
with Section 13.12), exclusive license, with the right to grant sublicenses through multiple tiers,
under Know-How and Patents that both (i) arise from the Collaboration Program or the Clovis
Development & Commercialization Program (including Collaboration Program Know-How and all Patents
arising therefrom) and (ii) are Controlled by Clovis or any of its Affiliates and Sublicensees
(other than those non-Affiliated Sublicensees that continue with a direct license from Avila
pursuant to Section 12.5(b)), such license effective only as of and after the effective date of
such termination, for discovering, Developing and Commercializing covalent inhibitors of the
Targets, including the Lead Candidate and Licensed Products and Companion Diagnostics. The Patents
so licensed will be subject to the Prosecution and Maintenance and enforcement and defense rights
and obligations set forth in Sections 8 and 9 as Subject Patents thereunder, with the roles of
Avila and Clovis reversed (and such other changes as are appropriate from the context).
(f) Clovis will assign (or, if applicable, will cause its Affiliates or Sublicensees to
assign) to Avila all of Cloviss (and such Affiliates and Sublicensees) right, title and interest
in and to any
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Amended and Restated Strategic License Agreement
registered or unregistered trademarks or internet domain names that are specific to the Lead
Candidate and Licensed Products worldwide (it being understood that the foregoing will not include
any trademarks or internet domain names that contain the corporate or business name(s) of Clovis).
12.6
Survival
. In addition to the termination consequences set forth in Section 12.5,
the following provisions will survive termination or expiration of this Agreement, as well as any
other provision which by its terms or by the context thereof, is intended to survive such
termination: Section 1, 2.2(a), 2.2(c)(ii), 5.2(b), 5.7, 6.7, 6.8, 7, 9.2 (for any infringement
occurring prior to termination or expiration of this Agreement), 10, 11.3, 11.4, 11.5, 11.6, 12 and
13. Termination or expiration of this Agreement will not relieve the Parties of any liability or
obligation which accrued hereunder prior to the effective date of such termination or expiration
nor preclude either Party from pursuing all rights and remedies it may have hereunder or at law or
in equity with respect to any breach of this Agreement nor prejudice either Partys right to
obtain performance of any obligation. All other rights and obligations will terminate upon
expiration of this Agreement.
13.
General Provisions.
13.1
Dispute Resolution
.
(a)
Disputes
. Disputes arising under or in connection with this Agreement will be resolved
pursuant to this Section 13.1; provided, however, that in the event a dispute cannot be resolved
without an adjudication of the rights or obligations of a Third Party (other than any Avila
Indemnitees or Clovis Indemnitees identified in Section 11.6), the dispute procedures set forth
Sections 13.1(c) and 13.1(d) will be inapplicable as to such dispute.
(b)
Dispute Escalation
. In the event of a dispute between the Parties, the Parties will first
attempt in good faith to resolve such dispute by negotiation and consultation between themselves or
the Program Directors. In the event that such dispute is not resolved on an informal basis within
twenty (20) days, any Party may, by written notice to the other, have such dispute referred to the
Avila CEO and the Clovis CEO or in either case his or her designee (who will be a senior
executive), who will attempt in good faith to resolve such dispute by negotiation and consultation
for a thirty (30) day period following receipt of such written notice.
(c)
Full Arbitration
. Unless Section 13.1(d) is applicable, in the event the Parties are not
able to resolve such dispute through mediation, either Party may at any time after such 20-day
period submit such dispute to be finally settled by arbitration administered in accordance with the
rules of Judicial Administration and Arbitration Services (JAMS) in effect at the time of
submission, as modified by this Section 13.1. The arbitration will be heard and determined by
three (3) arbitrators who are retired judges or attorneys with at least ten (10) years of
experience in the pharmaceutical and biotechnology industry, each of whom will be a neutral. Each
Party will appoint one arbitrator and the third arbitrator will be selected by the two
Party-appointed arbitrators, or, failing agreement within thirty (30) days following the date of
receipt by the respondent of the claim, by JAMS. Such arbitration will take place in New York, NY.
The arbitration award so given will be a final and binding determination of the dispute, will be
fully enforceable in any court of competent jurisdiction, and will not include any damages
expressly prohibited by Section 11.4. Fees, costs and expenses of arbitration are to be divided by
the Parties in the following manner: Clovis will pay for the arbitrator it chooses, Avila will pay
for the arbitrator it chooses, and the Parties will share payment for the third arbitrator. Except
in a proceeding to enforce the results of the arbitration or as otherwise required by law, neither
Party nor any arbitrator may disclose the existence, content or results of any arbitration
hereunder without the prior written agreement of both Parties.
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Amended and Restated Strategic License Agreement
(d)
Accelerated Arbitration
. To the extent the arbitration matter involves a dispute that is
submitted to arbitration by a Party under either Sections 6.2, 6.4(e), or 6.7(c), or any dispute
regarding the proper characterization of a dispute subject to resolution under this Section 13.1(d)
as opposed to Section 13.1(c), the following procedures will also apply:
(i) For purposes of arbitration under this Section 13.1(d), the arbitrator will be
appointed pursuant to Section 13.1(c), but will be a single independent, conflict-free
arbitrator with the requisite licensing and pharmaceutical industry experience (such
arbitrator, the Expert). The Parties may select a different Expert for each dispute
depending on the nature of the issues presented and desired expertise.
(ii) Each Party will prepare and submit a written summary of such Partys position and
any relevant evidence in support thereof to the Expert within thirty (30) days of the
selection of the Expert. Upon receipt of such summaries from both Parties, the Expert will
provide copies of the same to the other Party. The Expert will be authorized to solicit
briefing or other submissions on particular questions. Within fifteen (15) days of the
delivery of such summaries by the Expert, each Party will submit a written rebuttal of the
other Partys summary and may also amend and re-submit its original summary. Oral
presentations will not be permitted unless otherwise requested by the Expert. The Expert
will make a final decision with respect to the arbitration matter within thirty (30) days
following receipt of the last of such rebuttal statements submitted by the Parties and will
make a determination by selecting the resolution proposed by one of the Parties that as a
whole is the most fair and reasonable to the Parties in light of the totality of the
circumstances and will provide the Parties with a written statement setting forth the basis
of the determination in connection therewith. For purposes of clarity, the Expert will only
have the right to select a resolution proposed by one of the Parties in its entirety and
without modification.
(iii) The Parties further agree that the decision of the Expert will be the sole,
exclusive and binding remedy between them regarding determination of the arbitration matter
so presented. Confirmation of, or judgment upon any award rendered pursuant to this Section
13.1(d) may be entered by any court of competent jurisdiction. The Expert will have no
authority to award any type of damages excluded under Section 11.4.
(e)
Injunctive Relief
. Notwithstanding the dispute resolution procedures set forth in this
Section 13.1, in the event of an actual or threatened breach hereunder, the aggrieved Party may
seek equitable relief (including restraining orders, specific performance or other injunctive
relief) in any court or other forum, without first submitting to any dispute resolution procedures
hereunder.
(f)
Tolling
. The Parties agree that all applicable statutes of limitation and time-based
defenses (such as estoppel and laches) will be tolled while the dispute resolution procedures set
forth in this Section 13.1 are pending, and the Parties will cooperate in taking all actions
reasonably necessary to achieve such a result. In addition, during the pendency of any arbitration
under this Agreement initiated before the end of any applicable cure period under Section 12.2 or
12.3, (i) this Agreement will remain in full force and effect, (ii) the provisions of this
Agreement relating to termination for material breach will not be effective, (iii) the time periods
for cure under Section 12 as to any termination notice given prior to the initiation of arbitration
will be tolled, and (iv) neither Party will issue a notice of termination pursuant to such
sections, until the arbitral tribunal has confirmed the existence of the facts claimed by a Party
to be the basis for the asserted material breach.
13.2
Cumulative Remedies and Irreparable Harm
. All rights and remedies of the Parties
hereunder will be cumulative and in addition to all other rights and remedies provided hereunder or
available by agreement, at law or otherwise. Each Party acknowledges and agrees that breach of any
of the terms or conditions of this Agreement would cause irreparable harm and damage to the other
and that such damage may not be ascertainable in money damages and that as a result thereof the non
breaching Party would be
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Amended and Restated Strategic License Agreement
entitled to seek from a court equitable or injunctive relief restraining any breach or future
violation of the terms contained herein by the breaching Party without the necessity of proving
actual damages or posting bond. Such right to equitable relief is in addition to whatever remedies
either Party may be entitled to as a matter of law or equity, including money damages.
13.3
Industry Transaction
. Notwithstanding anything to the contrary herein, no
Know-How, Materials (including covalent inhibitors), Patents or other intellectual property rights
not Controlled by Avila or any of its Affiliates prior to an Industry Transaction for Avila will be
Controlled for purposes of this Agreement after such Industry Transaction, other than (i)
Collaboration Program Know-How no matter when Controlled, and (ii) any Patent that claims priority,
directly or indirectly, to any other Patent first Controlled before the Industry Transaction will
be Controlled thereafter no matter when such Patent is filed or issued. For the purposes of this
Agreement, (a) Industry Transaction for a Party will mean that (x) such Party will have become an
Affiliate of an entity that is a Drug Company (as defined below), or (y) any sale, license or other
transfer (in one transaction or a series of related transactions, and by any means, including by
merger or consolidation) of all or substantially all of such Partys assets or that portion of its
business pertaining to the subject matter of this Agreement will have occurred to a Drug Company,
and (b) Drug Company will mean any entity that conducts R&D in the biotechnology or
pharmaceutical industry or develops or commercializes therapeutics or diagnostics.
13.4
Relationship of Parties
. Nothing in this Agreement is intended or will be deemed
to constitute a partnership, agency, employer-employee or joint venture relationship between the
Parties. No Party will incur any debts or make any commitments for the other, except to the
extent, if at all, specifically provided therein. There are no express or implied third party
beneficiaries hereunder (except for Avila Indemnitees and Clovis Indemnitees for purposes of
Section 11.6).
13.5
Compliance with Law
. Each Party will perform or cause to be performed any and
all of its obligations or the exercise of any and all of its rights hereunder in good scientific
manner and in compliance with all applicable law.
13.6
Governing Law
. This Agreement will be governed by and construed in accordance
with the laws of the State of New York, without respect to its conflict of laws rules, provided
that any dispute relating to the scope, validity, enforceability or infringement of any Patents or
Know-How will be governed by, and construed and enforced in accordance with, the substantive laws
of the jurisdiction in which such Patents or Know-How apply.
13.7
Counterparts; Facsimiles
. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, and all of which together will be deemed to
be one and the same instrument. Facsimile or PDF execution and delivery of this Agreement by
either Party will constitute a legal, valid and binding execution and delivery of this Agreement by
such Party
13.8
Headings
. All headings in this Agreement are for convenience only and will not
affect the meaning of any provision hereof.
13.9
Waiver of Rule of Construction
. Each Party has had the opportunity to consult
with counsel in connection with the review, drafting and negotiation of this Agreement.
Accordingly, the rule of construction that any ambiguity in this Agreement will be construed
against the drafting party will not apply.
13.10
Interpretation
. Whenever any provision of this Agreement uses the term
including (or includes), such term will be deemed to mean including without limitation (or
includes without limitations). Herein, hereby, hereunder, hereof and other equivalent
words refer to this Agreement as an entirety and not solely to the particular portion of this
Agreement in which any such word is used. All definitions set forth herein will be deemed
applicable whether the words defined are used herein in the singular or the plural. Unless
otherwise provided, all references to Sections and Exhibits in this Agreement are to Sections and
Exhibits of this Agreement. References to any Sections
36
Amended and Restated Strategic License Agreement
include Sections and subsections that are part of the related Section (
e.g.
, a section
numbered Section 2.1 would be part of Section 2, and references to Section 2.1 would also
refer to material contained in the subsection described as Section 2.1(a)).
13.11
Binding Effect
. This Agreement will inure to the benefit of and be binding upon
the Parties, their Affiliates, and their respective lawful successors and assigns.
13.12
Assignment
. This Agreement may not be assigned by either Party, nor may either
Party delegate its obligations or otherwise transfer licenses or other rights created by this
Agreement, except as expressly permitted hereunder or otherwise without the prior written consent
of the other Party, which consent will not be unreasonably withheld; provided that (i) Clovis may
assign this Agreement to an Affiliate or to its successor in connection with the merger,
consolidation, or sale of all or substantially all of its assets, and (ii) Avila may assign this
Agreement to an Affiliate or to its successor in connection with the merger, consolidation, or sale
of all or substantially all of its assets or that portion of its business pertaining to the subject
matter of this Agreement.
13.13
Notices
. All notices, requests, demands and other communications required or
permitted to be given pursuant to this Agreement will be in writing and will be deemed to have been
duly given upon the date of receipt if delivered by hand, recognized international overnight
courier, confirmed facsimile transmission, or registered or certified mail, return receipt
requested, postage prepaid to the following addresses or facsimile numbers:
|
|
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If to Avila:
|
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Avila Therapeutics, Inc.
|
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|
100 Beaver Street
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|
Waltham, MA 02453
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Attention: Chief Executive Officer
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Facsimile: 781-891-0069
|
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With a copy to:
|
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Goodwin | Procter LLP
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53 State Street
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Boston, MA 02109
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Attention: Kingsley L. Taft, Esq.
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Facsimile: 617-523-1231
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If to Clovis:
|
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Clovis Oncology, Inc.
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2525 28
th
Street
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Boulder, CO 80301
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Attention: Chief Executive Officer
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Facsimile: 303-245-0361
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With a copy to:
|
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Willkie Farr & Gallagher LLP
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787 Seventh Avenue
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New York, NY 10019
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Attention: Peter H. Jakes
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Facsimile: (212) 728-8111
|
Either Party may change its designated address and facsimile number by notice to the other Party in
the manner provided in this Section 13.13.
13.14
Amendment and Waiver
. This Agreement may be amended, supplemented, or otherwise
modified only by means of a written instrument signed by both Parties; provided that any unilateral
undertaking or waiver made by one Party in favor of the other will be enforceable if undertaken in
a writing signed by the Party to be charged with the undertaking or waiver. Any waiver of any
rights or failure to act in a specific instance will relate only to such instance and will not be
construed as an agreement to waive any rights or fail to act in any other instance, whether or not
similar.
37
Amended and Restated Strategic License Agreement
13.15
Severability
. In the event that any provision of this Agreement will, for any
reason, be held to be invalid or unenforceable in any respect, such invalidity or unenforceability
will not affect any other provision hereof, and the Parties will negotiate in good faith to modify
this Agreement to preserve (to the extent possible) their original intent.
13.16
Entire Agreement
. This Agreement is the sole agreement with respect to the
subject matter and supersedes all other agreements and understandings between the Parties with
respect to same (including the Original Agreement and the Confidentiality Agreement).
13.17
Force Majeure
. Neither Clovis nor Avila will be liable for failure of or delay
in performing obligations set forth in this Agreement (other than any obligation to pay monies when
due), and neither will be deemed in breach of such obligations, if such failure or delay is due to
natural disasters or any causes reasonably beyond the control of Clovis or Avila; provided that the
Party affected will promptly notify the other of the force majeure condition and will exert
reasonable efforts to eliminate, cure or overcome any such causes and to resume performance of its
obligations as soon as possible.
[
Remainder of this Page Intentionally Left Blank
]
38
Amended and Restated Strategic License Agreement
IN WITNESS WHEREOF, the Parties have caused this Strategic License Agreement to be executed by
their respective duly authorized officers as of the A&R Date.
Avila Therapeutics, Inc.
|
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By:
|
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/s/ KATRINE BOSLEY
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(Signature)
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Name:
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Katrine Bosley
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Title:
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President and CEO
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Date:
|
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June 16, 2011
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Clovis Oncology, Inc.
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By:
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/s/ PATRICK J. MAHAFFY
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(Signature)
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Name:
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Patrick J. Mahaffy
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Title:
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President and CEO
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Date:
|
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June 16, 2011
|
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|
Amended and Restated Strategic License Agreement
Exhibit 1.7
Avila Patents as of the Effective Date
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Title
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Appln
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Country
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Inventors
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Status as of the
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Type
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Effective Date
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***
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***
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a
Amended and Restated Strategic License Agreement
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Title
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Appln
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Country
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Inventors
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Status as of the
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Type
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Effective Date
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***
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***
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***
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***
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b
Amended and Restated Strategic License Agreement
Exhibit 1.53
Targets
Targets comprise, collectively, ***
Reference Sequence is ***.
a
Amended and Restated Strategic License Agreement
Exhibit 2.1(b)
Collaboration Plan
***
a
Amended and Restated Strategic License Agreement
|
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Collaboration Plan Budget (000s)
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2010
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2011
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Reimbursement for Avila FTEs
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$
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*
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**
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$
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*
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**
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Clovis Internal Expenses
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*
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**
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*
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**
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External Costs
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Discovery
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*
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**
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*
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**
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Non-clinical
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*
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**
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*
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**
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CMC
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*
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**
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*
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**
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Diagnostics
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*
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**
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*
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**
|
Clinical, Regulatory and Other
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*
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**
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*
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**
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Total
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*
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**
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*
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**
|
Amended and Restated Strategic License Agreement
Exhibit 2.1(c)
Initial Agreed Compound Profile
***
a
Amended and Restated Strategic License Agreement
Exhibit 8.1(a)
Proposed Prosecution and Maintenance Activities for Subject Patents
***
a
Amended and Restated Strategic License Agreement
Exhibit 10.3(c)
Joint Press Release
Clovis Oncology and Avila Therapeutics Sign $209 Million Partnership for the Worldwide
Development and Commercialization of EGFR Mutant-Selective Inhibitor
|
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|
Avilas oral, small molecule program targets cancer-causing mutant forms of the EGF
receptor (EGFR)
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Innovative treatment approach for non-small cell lung cancer (NSCLC) patients with
disease resistant to current therapy
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Potency against key disease mutation, T790M, while minimizing activity against the
wild-type (normal) EGFR to increase therapeutic index and avoid side effects of current
standard of care
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Clovis to lead accelerated clinical development plan including companion diagnostic to
prospectively identify T790M-positive NSCLC patients
|
Boulder, CO, and Waltham, MA, USA. May 25, 2010.
Clovis Oncology, Inc., a biopharmaceutical company focused on acquiring, developing and
commercializing innovative anti-cancer agents, and Avila Therapeutics, Inc., a biotechnology
company designing targeted covalent drugs, announced today an agreement for the development and
commercialization of Avilas epidermal growth factor receptor (EGFR) mutant-selective inhibitor
(EMSI) program, currently in pre-clinical development for the treatment of non-small cell lung
cancer (NSCLC). The EMSI program targets the T790M mutant form of the EGFR associated with
clinical resistance to Tarceva
®
(erlotinib) and Iressa
®
(gefitinib)
1
, as well as
targeting the initial activating EGFR mutations, including L858R and exon 19 deletions. It does
so while also sparing the wild-type (normal) EGFR and may thus treat refractory NSCLC while
minimizing dose-limiting side effects. Because the program targets both the sensitive activating
mutations as well as the primary resistance mechanism, T790M, it has the potential to treat both
first- and second-line NSCLC patients with EGFR mutations, for whom there is great unmet medical
need.
The T790M mutation seems to be the predominant mechanism underlying the development of resistance
of EGFR-mutant lung cancers to specific EGFR kinase inhibitors, and it may well explain why the
dramatic responses seen in these cases are of relatively short duration. The development of a drug
that is both mutant-specific and capable of irreversibly binding the enzyme is one of the most
exciting new developments in this field, said Dr. Daniel Haber, director of the Massachusetts
General Hospital Cancer Center, who led a team that initially discovered EGFR mutations in lung
cancer. Such an inhibitor could overcome this resistance mutation at dosage levels that would
spare the wild type EGFR in normal tissues. This could prove to be of major clinical significance,
he added.
Under the terms of the agreement, Avila and Clovis Oncology will collaborate on the pre-clinical
development of the EMSI product candidate. Clovis Oncology will be fully responsible for all
aspects of development and commercialization, including development of companion diagnostics to
prospectively identify patients with clinically-arising resistance mutations of the EGFR. In
addition to research support, Avila will receive an upfront fee and be eligible to receive development, regulatory and
sales-
|
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1
|
Tarceva and Iressa are registered trademarks
of F. Hoffman-La Roche and AstraZeneca, respectively.
|
a
Amended and Restated Strategic License Agreement
based milestone payments, with a total potential value of $209 million. Avila will also
receive tiered royalties on product sales and will share in selected sublicense income.
Avilas EMSI program has demonstrated very encouraging data against both the T790M resistance
mutation and the initiating activating mutations and we are very pleased to initiate this
partnership with them, said Patrick J. Mahaffy, President and CEO of Clovis Oncology. We plan to
file an IND as rapidly as possible and initiate an accelerated clinical development program,
including the use of a companion diagnostic to identify patients with NSCLC who possess the T790M
mutation. We believe that this program has the potential to meaningfully improve outcomes in
patients with EGFR-mediated non-small cell lung cancer.
Clovis Oncology is an ideal partner with whom to advance this exciting program given their deep
experience developing oncology drugs and their commitment to develop a companion diagnostic to
identify the right patients for the drug, said Katrine Bosley, President and CEO of Avila
Therapeutics. Resistance mutations in cancer-causing proteins are uniquely amenable to the
targeted covalent inhibition enabled by Avilas platform and working together with Clovis will
accelerate advancement of this program.
About Lung Cancer
Lung cancer is the most common cancer worldwide with 1.35 million new cases annually, and NSCLC
accounting for almost 85 percent of all lung cancers. NSCLC progresses rapidly with a five year
survival rate in advanced NSCLC patients of less than 5%. Activating EGFR mutations are key
drivers of NSCLC malignancy in 10-15% of patients of European descent and approximately 30% of
patients of East Asian descent.
Currently, agents for the treatment of NSCLC patients include Tarceva
®
and Iressa
®
, both
non-selective EGFR inhibitors. Both agents have significant skin-rash and diarrhea as side effects
related to inhibition of the wild-type (normal) EGFR in skin and intestine respectively. Acquired
resistance to Tarceva and Iressa occurs after a median of 12 months, driven in approximately 50% of
cases by a gatekeeper mutation called T790M. Patients with tumors containing this secondary
resistance EGFR mutation are clinically resistant to both first generation EGFR inhibitors (Tarceva
and Iressa) as well as second generation pan-ErbB inhibitors currently in clinical development.
By inhibiting both T790M and the initial activating mutations, the EMSI program offers the prospect
of effective drug treatment for first and second-line NSCLC patients with activating EGFR
mutations. With sparing of the wild-type EGFR, the EMSI program could also offer a much improved
therapeutic window compared to current therapies in a first-line setting.
About Clovis Oncology, Inc.
Clovis Oncology, Inc. is a biopharmaceutical company focused on acquiring, developing and
commercializing innovative anti-cancer agents in the U.S., Europe and additional international
markets. Clovis intends to target development programs at specific subsets of cancer populations,
and will simultaneously develop diagnostic tools that direct a compound in development to the
population that is most likely to benefit from its use. The Company is currently developing CO-101
which is in Phase 2 development for the treatment of pancreatic cancer. The Company is
collaborating with Ventana Medical Systems to develop a companion diagnostic to identify patients
with low tumor expression of hENT1 and therefore likely to benefit from CO-101. The Company is
headquartered in Boulder, Colorado, and has additional offices in San Francisco and Cambridge,
England. For more information about Clovis Oncology, please visit the Companys website at
www.clovisoncology.com.
About Avila Therapeutics
b
Amended and Restated Strategic License Agreement
Avila focuses on design and development of targeted covalent drugs to achieve best-in-class
outcomes that cannot be achieved through traditional chemistries. This approach is called protein
silencing. The companys product pipeline has been built using its proprietary Avilomics platform
and is currently focused on viral infection, cancer, and autoimmune disease. Avila is funded by
leading venture capital firms: Abingworth, Advent Venture Partners, Atlas Venture, Novartis Option
Fund, and Polaris Venture Partners. For additional information, please visit
http://www.avilatx.com.
For Further Information Contact:
For Clovis Oncology:
Scout Investor Relations
Breanna Burkart / Anna Sussman
303.907.5162 / 303.907.5358
Breanna@scoutir.com / anna@scoutir.com
For Avila Therapeutics:
Kathryn Morris
The Yates Network
845-635-9828
kathryn@theyatesnetwork.com
c