PART I
Forward-Looking
Statements
The
following description of our business, discussion and analysis of our financial
condition and results of operations should be read in conjunction with the
information included elsewhere in this Annual Report on Form 10-K. In
addition to historical information, this report contains forward-looking
statements, within the meaning of Section 27A of the Securities Act of
1933, as amended (the “Securities Act”), and Section 21E of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). These statements relate
to future events or our future financial performance and involve known and
unknown risks, uncertainties and other factors that might cause our actual
results, levels of activity, performance or achievements to differ materially
from any future results, levels of activity, performance or achievements
expressed or implied by these forward-looking statements. The words “believes,”
“expects,” “intends,” “anticipates,” “may,” “might,” “will,” “should,” “plans,”
“could,” “target,” “projects,” “contemplates,” “estimates,” “predicts,”
“potential,” “continue,” the negative of these terms and similar expressions are
used to identify forward-looking statements, but their absence does not mean
that such statement is not forward-looking. You are encouraged to carefully
review the various disclosures made by us in this report and in the documents
incorporated herein by reference, in our previous filings with the Securities
and Exchange Commission (“SEC”), and those factors described under
Item 1A.”Risk Factors.” These factors, among others, could cause results to
differ materially from those presently anticipated by us. In addition, past
financial or operating performance is not necessarily a reliable indicator of
future performance and you should not use our historical performance to
anticipate results or future period trends. We can give no assurances that any
of the events anticipated by the forward-looking statements will occur or, if
any of them do, what impact they will have on our results of operations and
financial condition. Except as required by law, we undertake no obligation to
publicly revise our forward-looking statements to reflect events or
circumstances that arise after the filing of this Annual Report on
Form 10-K or documents incorporated by reference herein that include
forward-looking statements.
In this
Annual Report on Form 10-K, references to “Northwest Biotherapeutics,” the
“Company,” “we,” “us,” and “our” refer to Northwest Biotherapeutics, Inc. and
its subsidiary.
Item 1.
Business
Overview
Northwest
Biotherapeutics, Inc. was formed in 1996 and incorporated in Delaware in July
1998. We are a development stage biotechnology company focused on discovering,
developing, and commercializing immunotherapy products that safely generate and
enhance immune system responses to effectively treat cancer. Currently approved
cancer treatments are frequently ineffective, can cause undesirable side effects
and provide marginal clinical benefits. Our approach in developing cancer
therapies utilizes our expertise in the biology of dendritic cells (“DC”), which
are a type of white blood cells that activate the immune system. Our primary
activities since incorporation have been focused on advancing a proprietary
dendritic cell immunotherapy for prostate and brain cancer together with
strategic and financial planning, and raising capital to fund our
operations.
We have
two basic technology platforms applicable to cancer therapeutics: dendritic
cell-based cancer vaccines, which we call DCVax
®
, and
monoclonal antibodies for cancer therapeutics. DCVax
®
is our
registered trademark. Our DCVax
®
dendritic cell-based cancer vaccine program is our main technology
platform.
We
completed an initial public offering of our common stock on the NASDAQ Stock
market in December 2001 and an initial public offering of our common stock on
the Alternative Investment Market (“AIM”) of the London Stock Exchange in June
2007.
As
described in further detail elsewhere in this report, since 2004 we have
undergone a significant recapitalization pursuant to which (i) Toucan
Capital Fund II, L.P. (“Toucan Capital”) loaned us an aggregate of
$6.75 million, which notes payable and accrued interest thereon were
converted into shares of our Series A-1 cumulative convertible preferred
stock (the “Series A-1 Preferred Stock”) in April 2006 and subsequently
converted into common stock in June 2007; and (ii) Toucan Partners, LLC
(“Toucan Partners”) loaned us an aggregate of $4.825 million (excluding
$225,000 in proceeds from a demand note that was received on June 13, 2007
and repaid on June 27, 2007), which borrowings have, in a series of
transactions, been converted into convertible notes with an aggregate
outstanding principal of $4.825 million and related warrant coverage. In
the fourth quarter of 2007, we repaid all of the remaining outstanding principal
and accrued interest pursuant to these convertible notes in the aggregate amount
of $5.3 million to Toucan Partners.
In
addition, on January 26, 2005, Toucan Capital purchased 32.5 million
shares of our Series A cumulative convertible preferred stock (the
“Series A Preferred Stock”) at a purchase price of $0.04 per share, for a
net purchase price of $1.276 million, net of offering related costs of
approximately $24,000. In June 2007, this Series A Preferred Stock was
converted into common stock.
On
March 30, 2006, we sold approximately 2.6 million shares of common
stock at a purchase price of $2.10 per share and raised aggregate gross proceeds
of approximately $5.5 million in a closed equity financing with unrelated
investors (the “PIPE Financing”). The total cost of the offering recorded,
including both cash and non-cash costs, was approximately $837,000.
On
June 22, 2007, we placed 15,789,473 shares of our common stock with
foreign institutional investors at a price of £0.95 per share. The gross
proceeds from the placement were approximately £15.0 million, or
$29.9 million, while net proceeds from the offering, after deducting
commissions and expenses, were approximately £13.0 million, or
$25.9 million.
On May 9,
2008 the Company entered into a loan agreement with Al Rajhi Holdings, under
which the Company received $4.0 million in return for an unsecured promissory
note in the principal amount of US$4,240,000 (reflecting an original issue
discount of six percent, or US$240,000) for a period of six (6)
months.
On August
19, 2008, the Company entered into a loan agreement with Toucan Partners, under
which the Company received $1.0 million in return for an unsecured promissory
note in the principal amount of $1,060,000 (reflecting an original issue
discount of six percent, or $60,000) for a period of six months.
On
October 1, 2008 we entered into a loan agreement with SDS Capital for $1.0
million for a term of six (6) months at 12%. In connection with the loan the
Company issued SDS warrants to purchase shares of the Company’s common
stock. The warrants have a term of five years from the issuance
date.
On
October 22, 2008 we entered into a loan agreement with a group of private
investors and SDS Capital for $1.65 million for a term of six (6) months at 12%.
In connection with the loan the Company issued the private investors and SDS
warrants to purchase shares of the Company’s common stock. The
warrants have a term of five years from the issuance date.
On
December 22 2008, we entered into a loan agreement with Toucan
Partners for $500,000 with a term of six months at 12% interest. In
connection with the loan the Company issued Toucan Partners warrants
to purchase shares of the Company’s common stock. The warrants have a
term of five years from the issuance date.
On
January 16, 2009 we entered into a securities purchase agreement for $700,000
with Al Rajhi Holdings who purchased 1,000,000 shares of our common stock at
$0.70 per share.
During
March 2009, we entered into loan agreements with a group of private lenders for
$760,000 for a term of two years at 6% per annum.
On
March 27, 2009, we sold approximately 1.4 million shares of common
stock at a purchase price of $0.53 per share and raised aggregate gross proceeds
of approximately $0.7 million in a closed equity financing with unrelated
investors.
As of
April 14, 2009, we had approximately $0.47 million of cash on hand. We
will need to raise additional capital in the near future to fund our clinical
trials and other operating activities. We are in the process of finalizing a
debt financing of up to $10.0 million designed to cover our operating cash
requirements until the fourth quarter of this year. It is anticipated that up to
$3.0 million may be available to us by the end of second quarter, and the
balance may become available in third quarter . We are also negotiating
additional financing with several other parties, which we hope to complete later
this year. There can be no assurance that we will be able to complete any of the
financings, or that the terms for such financings will be attractive. Our
independent auditors have indicated in their report on our December 31,
2008 financial statements that there is substantial doubt about our ability to
continue as a going concern. See “Management’s Discussion and Analysis of
Financial Condition and Results of Operations — Liquidity and Capital
Resources” for additional information regarding our liquidity, cash flow and
financings.
Industry
Background
Incidence
of Cancer in the United States
The
American Cancer Society estimates that in the U.S., men have a one in two
lifetime risk of developing cancer, while women have a one in three lifetime
risk of developing cancer. Doctors are expected to diagnose approximately
1.44 million new cases of cancer in the U.S. during 2008. It is the
second leading cause of death in the U.S. after heart disease and is
estimated to result in approximately 565,650 deaths, or 1,550 per day, in 2008.
The direct medical costs related to treating cancer in the U.S. were
estimated to be $89.0 billion in 2007. The Company’s initial therapeutic
targets, brain and prostate cancers, cause approximately 7.1 percent of
cancer deaths in the U.S. each year. The American Cancer Society has
estimated that the incidence of new diagnosis and deaths resulting from several
common cancers during 2008 will be as follows:
Type of Cancer
|
|
New Cases
|
|
|
Deaths
|
|
Breast
|
|
|
184,450
|
|
|
|
40,930
|
|
Prostate
|
|
|
186,320
|
|
|
|
28,660
|
|
Colorectal
|
|
|
148,810
|
|
|
|
49,960
|
|
Lung
|
|
|
215,020
|
|
|
|
161,840
|
|
Liver
|
|
|
21,370
|
|
|
|
18,410
|
|
Melanoma
|
|
|
62,480
|
|
|
|
8,420
|
|
Brain
|
|
|
21,810
|
|
|
|
13,070
|
|
Ovarian
|
|
|
21,650
|
|
|
|
15,520
|
|
Incidence
of Cancer in Europe
Globocan,
(Globocan 2002 is a database of cancer prevalence as collected by the
Descriptive Epidemology Group of the International Agency for Research on
Cancer) estimates that the incidence of new diagnosis and deaths resulting from
several cancers during 2002 (the last year for which estimates are available)
would be as follows:
Type of Cancer
|
|
Estimated
New
Cases in 2002
|
|
|
Estimated
Deaths in 2002
|
|
Breast
|
|
|
360,749
|
|
|
|
129,013
|
|
Prostate
|
|
|
230,627
|
|
|
|
83,066
|
|
Colorectal
|
|
|
371,706
|
|
|
|
203,296
|
|
Lung
|
|
|
374,764
|
|
|
|
341,595
|
|
Liver
|
|
|
53,618
|
|
|
|
57,486
|
|
Melanoma
|
|
|
62,367
|
|
|
|
16,633
|
|
Brain
|
|
|
48,385
|
|
|
|
39,061
|
|
Cancer
Cancer is
characterized by aberrant cells that multiply uncontrollably. As cancer
progresses, the cancer cells may invade other tissues throughout the body
producing additional cancers, called metastases. Cancer growth can cause tissue
damage, organ failure and, ultimately, death. Many immunologists believe that
cancer cells occur frequently in the human body, yet are effectively controlled
by the immune system because these cells are recognized as aberrant. Cancer
growth occurs if this natural process fails.
Cancer
cells produce abnormal kinds and amounts of substances called antigens, which
may be distinguishable from those produced by healthy cells. The use of these
cancer-associated antigens is essential to the successful development of
products capable of stimulating the immune system to seek and destroy cancer
cells marked by these antigens.
The
Human Immune System
The
immune system is the body’s defense mechanism responsible for recognizing and
eliminating cancer cells, viruses, bacteria and other disease-causing organisms.
This system consists of populations of white blood cells whose components are
responsible for initiating the cellular immune response, and the humoral, or
antibody-based, immune response.
Dendritic
cells, a component of white blood cells, initiate the cellular immune response
by processing and displaying disease-associated antigen fragments on their outer
cell surface, where they are recognized by white blood cells, known as naive
T-cells, that have not yet been exposed to antigens. Upon exposure to these
antigen fragments, naive T-cells become disease-specific Helper T-cells or
Killer T-cells. Helper T-cells then induce Killer T-cells to locate and
potentially destroy the cells marked by the disease- associated
antigen.
B-cells
direct the immune response by binding to disease-associated antigens on the
surface of various cell types, producing disease-specific antibodies. Helper
T-cells also enhance B-cell production of disease- specific antibodies. These
antibodies bind to and initiate the destruction of cells marked by the
associated disease-specific antigens.
A small
population of activated Helper T-cells, Killer T-cells, and antibody-producing
B-cells survive for long periods of time, retaining the memory of what the
disease fragment looks like. These cells can respond very rapidly to subsequent
exposure to disease-specific antigens and fragments. The most effective natural
immune response is one in which both Killer T-cells and antibody-producing
B-cells are activated.
The
immune system response to cancer can be generally characterized by the following
sequence:
|
•
|
Step 1.
Dendritic
cells ingest cancer antigens, break them into small fragments and display
them on their outer cell surfaces.
|
|
•
|
Step 2.
Dendritic
cells bearing these cancer antigen fragments bind to and activate naive
T-cells, which become disease-specific Helper T-cells and Killer
T-cells.
|
|
•
|
Step 3.
The
activated Helper T-cells produce factors that greatly enhance the cell
division of Killer T-cells and mature their cancer-killing
properties.
|
|
•
|
Step 4.
Cancer
cells and their cancer-associated antigens are also recognized by
antibody-producing B-cells.
|
|
•
|
Step 5.
The
activated Helper T-cells produce factors that greatly enhance antibody
production by B-cells that in turn are specific for the cancer-associated
antigens.
|
|
•
|
Step 6.
The Killer
T-cells and antibodies, acting alone or in combination, destroy cancer
cells.
|
Limitations
of Current Cancer Therapies
Traditional
treatments for cancer include:
|
•
|
Surgery.
Surgery
may be used to remove cancer cells, but not all cancer cells can be
removed surgically. Surgery may also result in significant adverse side
effects such as collateral damage to healthy tissue, bleeding and
infection.
|
|
•
|
Radiation
Therapy.
Radiation therapy may be used to treat cancers, but
it can cause significant damage to healthy tissue surrounding the targeted
cancer cells. Recurrent cancers may not be treatable with further
radiation therapy. Radiation therapy may also cause additional significant
adverse side effects such as burns to treated skin, organ damage and hair
loss.
|
|
•
|
Chemotherapy.
Chemotherapy
may be used to treat cancer, but involves the use of toxic chemical
agents. These toxic chemical agents affect both healthy and diseased cells
and may cause additional significant adverse side effects such as hair
loss, immune suppression, nausea and
diarrhea.
|
|
•
|
Hormone
Therapy.
Hormone therapy may be used to treat cancer, but
involves the use of substances that chemically inhibit the production of
growth and reproductive hormones and is also limited in effectiveness.
Hormone therapy may cause significant adverse side effects such as bone
loss, hot flushes, impotence and blood
clots.
|
Current
Cancer Immunotherapy Approaches
Immunotherapy
offers a new approach to be used as an adjuvant in combination with traditional
therapies. It can stimulate and enhance the body’s natural mechanism for
destroying pathogens, such as cancer cells, and may overcome many of the
limitations of traditional cancer therapies. In recent years, two cancer
immunotherapy approaches have emerged to address the limitations of traditional
therapies, which have resulted in a number of products approved by the
U.S. Food and Drug Administration, or FDA:
|
•
|
Antibody-Based
Therapies.
Currently approved antibody-based cancer therapies
have modestly improved survival rates with partially reduced side effects
when compared with traditional therapies. However, these antibody-based
therapies can elicit an immune response against themselves because they
often contain mouse proteins or fragments of such proteins. This can limit
their effectiveness and potentially cause toxic side
effects.
|
|
•
|
Immune-Modulating
Agents.
Currently approved immune-modulating agents, such as
IL-2 and alpha-interferon, are known to have some ability to enhance the
immune system and limited efficacy to control cancer growth. However,
these therapies involve delivery of the immune modulating agent through
the blood system and therefore cannot be directed exclusively to cancer
cells. This lack of selectivity may result in significant toxicity to
healthy tissue.
|
Our
Approaches
We have
developed two proprietary approaches, DCVax
®
and
therapeutic antibodies, for stimulating and enhancing a patient’s natural
cellular and humoral or antibody immune response to cancer. Given appropriate
funding for future development, we believe that DCVax
®
and
CXCR4 antibody products may overcome certain limitations of current cancer
therapies and offer cancer patients safe and effective treatment alternatives,
alone or in combination with other therapies. Based on these technology
platforms, we have developed the following product pipeline:
The
DCVax
®
Technology
DCVax
®
is a
platform technology which we believe is applicable to most cancers. It combines
a patient’s own dendritic cells with a patient’s own cancer-related biomarkers,
or off-the-shelf antigens, to induce immune responses against a patient’s cancer
cells. The Company’s early-stage clinical trial data, and those of its
collaborators, suggest that DCVax
®
-Brain
and DCVax
®
-Prostate
may have the ability to significantly delay disease progression and
significantly prolong patient survival, while maintaining a superior quality of
life when compared with current therapies.
The
natural immune response starts with activation of a single master immune cell
type, the dendritic cell. This cell directs all ensuing activities of all
components of the immune response. When a virus, bacteria, or a cancer cell,
encounters a DC, the DC consumes the virus, bacteria or cancer cell and chops it
into small pieces. In the process, the DC becomes activated and starts traveling
to the lymph node. In the lymph node, the DC elicits a cascade of events, that
leads to an immune response. Importantly, the nature of the virus, bacteria or
cancer cell and the nature of the DC activation dictate the type of immune
response. Preparing the DC outside the body, as is done for DCVax
®
products, is intended to allow the greatest degree of control and to begin the
immune response in the natural fashion leading to an enhanced response against
the virus, bacteria or cancer cell.
In cancer
patients, the signaling through which the master immune cells are activated is
impaired. Our technology, therefore, involves delivering the necessary signals
to activate the master immune cells outside the patients’ body. We believe that
after receiving these signals, the master immune cells will be able to function
normally and mobilize the full immune response in the natural
manner.
THE
IMMUNE SYSTEM
Different
Approaches
Most
traditional immunization approaches, including traditional virus, specific
antigen or peptide vaccines, as well as some that are used for immunotherapy of
cancer, rely upon signaling inside the patient’s body to try to activate and
mobilize the already existing DCs in the body, or try to modulate only one arm
of the immune system. These approaches have worked well to address infectious
diseases, but have generally failed to work in cancer patients because such
approaches are reliant upon signaling in the patients’ bodies which, as
discussed above, is impaired in cancer patients.
In
addition, the immunogen, i.e. the virus, specific antigen, peptide or the cancer
cells used to prepare the vaccine, is in those cases injected into the body in a
formulation that aims at targeting and activating local DCs. Examples are viral,
specific antigen or peptide vaccines formulated with adjuvant, or killed tumor
cells alone or modified to produce the DC mobilizing protein GM-CSF. In these
instances, it is left to chance as to whether the immunogen arrives at the DC,
and whether the DCs are properly activated and effectively migrate to lymph
nodes to produce an effective immune response.
Treatments
that use only a single arm of the immune system may employ large amounts of
T-cells, or a single (monoclonal) antibody. We believe that the DCVax
®
products
have a clear advantage compared to this approach in that they are designed to
activate all aspects of the immune response, both cellular and antibody, thereby
potentially providing a broader and longer lasting immune and clinical response.
Our DCVax
®
products
consist of pure, activated DCs loaded with the immunogen as would naturally
occur, and that are capable of migrating to lymph nodes. The intended result is
a full immune response consisting of both a specific cellular T-cell response
and a specific antibody response against the cancer-associated antigen
consistent with our Phase I and Phase II clinical trial results for
DCVax
®
-Brain
and DCVax
®
-Prostate,
respectively, and that is translated into a potential clinical benefit — in
this case, a delay in disease recurrence and an extension of overall survival of
the patient.
Cancer
and the Immune System
Cancer
cells produce many substances that shut down the immune response, as well as
substances that suppress or block the DCs that are resident in the body. The
optimal time for controlling cancer growth by activating the immune system is,
therefore, at the time when tumor burden is low. Our DCVax
®
products
target patients with brain cancer following surgery, radiation and chemotherapy,
and hormone independent prostate cancer patients with no detectable tumor. This
approach is designed to allow induction of powerful immune responses to control
progression of the disease. However, in clinical trials, delays in cancer
progression and extension of survival have also been seen in late stage patients
treated with DCVax
®
-Brain
and DCVax
®
-Prostate.
The
DCVax
®
Process
The
DCVax
®
platform
uses our proprietary process to efficiently produce and activate DCs outside a
patient’s body. The clinical trials with DCVax
®
-Brain
and DCVax
®
-Prostate
suggest that these cells can generate an effective immune system response when
administered therapeutically. Manufacture of a DCVax
®
product
takes approximately 30 days to complete for DCVax
®
-Prostate
and approximately 10 days for DCVax
®
-Brain,
and is characterized by the following sequence:
|
•
|
Collection.
A
sample of a patient’s white blood cells is collected in a single and
simple outpatient procedure called
leukapheresis.
|
|
•
|
Isolation of
Precursors.
These cells are sent to a manufacturing facility,
where DC precursors are isolated from the patient’s white blood
cells.
|
|
•
|
Differentiation by Growth
Factors.
DC precursors are transformed in a manner that mimics
the natural process in a healthy person’s body, through the application of
specific growth factors, into highly pure populations of immature DCs
during a six-day culture period.
|
|
•
|
Maturation.
Immature
DCs are exposed to a proprietary maturation factor or maturation method in
order to maximize Helper T-cell, Killer T-cell, and B-cell
activation.
|
|
•
|
Antigen
Display.
Cancer-associated antigens, fragments of
cancer-associated antigens or deactivated whole cancer cells are added to,
ingested, and processed by the maturing DCs, causing the DCs to display
fragments of cancer-associated antigens on their outer cell
surfaces.
|
|
•
|
Harvest.
These DCs
are harvested and separated into standardized single-use DCVax
®
administration vials, frozen and
stored.
|
|
•
|
Quality
Control.
DCVax
®
product lot undergoes, according to current industry standards, rigorous
quality control testing, including sterility testing for bacterial and
mycoplasma contamination, and potency testing prior to shipment to the
administration site for injection.
|
DCVax
®
-Brain
Manufacturing Steps:
DCVax
®
—
Characteristics
The
DCVax
®
platform
combines our expertise in dendritic cell biology, immunology and antigen
discovery with our proprietary process of activating DCs outside of a patient’s
body to develop therapeutic products intended to stimulate beneficial immune
responses to treat cancer in a cost-effective manner. DCVax
®
has the
following significant characteristics, the combination of which we believe makes
it a highly attractive alternative to current therapies.
Activation
of the Natural Immune System
Our
DCVax
®
product
candidates are designed to elicit a natural immune response. Pre-clinical and
clinical trials suggest that our DCVax
®
product
candidates can train a patient’s own Killer T-cells to locate and destroy
specifically targeted cancer cells. These same clinical trials also suggest that
DCVax
®
-Prostate
stimulates the body to produce antibodies and/or Killer T-cells that bind to
cancer-associated antigens and potentially destroy cancer cells marked by these
antigens. Moreover, the clinical trials show that this immune response may be
effective in delaying time to disease progression in brain and prostate cancer,
and both may prolong survival and improve the quality of life for brain and
prostate cancer patients.
Multiple
Cancer Targets
We
believe that our DCVax
®
platform
can be applied towards the treatment of a wide variety of cancers. The platform
affords the flexibility to target many different forms of cancer through the
pairing of DCs with cancer-associated antigens, fragments of cancer-associated
antigens or deactivated whole cancer cells as well as possible direct
intra-tumoral injection of partially mature dendritic cells.
Targeting
of Serious Cancers with No Effective Treatments
DCVax
®
-Prostate
targets men with rising PSA levels while on hormone therapy, but before
metastases develop. There is currently no effective treatment for this growing
population of patients who invariably go on to develop complications from the
spread of their cancer to the bone and, eventually, succumb to their disease.
DCVax
®
-Brain
targets patients with GBM, a highly lethal form of brain cancer. In two Phase I
trials carried out at UCLA from 1999 to the present day, patients treated with
DCVax
®
-Brain
have survived more than twice as long without relapse compared to matched
concurrent controls not receiving DCVax
®
-Brain
(under “matched concurrent controls” patients received standard of care
treatment at the same time clinical trial patients were treated with standard of
care treatment together with DCVax
®
-Brain;
these control patients have been matched for the major prognostic factors for
GBM).
Low
Incidence of Significant Adverse Side Effects or Toxicity
Our
initial two DCVax
®
-Brain
Phase I trials and DCVax
®
-Prostate
Phase I/II clinical trial have shown no significant adverse side effects in over
250 administered injections. Some patients had moderate injection site
reactions, and we observed some severe injection site reactions that we believe
to be a result of immune activation. Patients treated with DCVax
®
-Brain or
DCVax
®
-Prostate
therefore might not need to take additional prescription drugs to manage
undesirable side effects as is often the case with certain current cancer
treatments. We minimize the potential for toxicity by using the patient’s own
cells to create its DCVax
®
product
candidates. Additionally, because our DCVax
®
products
are designed to target the cancer- associated antigens in the patient,
collateral damage to healthy cells is minimized.
Efficient
and Cost-Effective Manufacturing
We have
developed a second generation closed and automated device based on tangential
flow filtration (“TFF-Cell Separation System”) for manufacturing DC from patient
leukapheresis material. We have a contract with Cognate Bioservices, Inc.
(“Cognate”) for the manufacture of DCVax
®
-Brain
product for clinical use. This TFF-Cell Separation System is currently
undergoing validation. See “— Manufacturing”.
Ease
of Administration
We
initially collect a sample of a patient’s white blood cells in a single standard
outpatient procedure called leukapheresis. After patient-specific manufacturing
and quality control testing, each small dose of a DCVax
®
product
candidate is administered by a simple intradermal injection in an outpatient
setting. Dendritic cells administered by intradermal injection migrate to the
draining lymph nodes where they interact with and activate T-cells.
Complementary
with Other Treatments
Our
DCVax
®
product
candidates are designed to stimulate the patient’s own immune system to safely
target cancer cells. Consequently, we believe these products may be used as an
adjuvant to standard therapies such as chemotherapy, radiation therapy, hormone
therapy and surgery.
Our
Clinical and Pre-clinical Development Programs
The
following table summarizes the targeted indications and status of our product
candidates:
Product Candidate
|
|
Target Indications
|
|
Status
|
DCVax
®
Platform
|
|
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DCVax
®
-
Prostate
|
|
Prostate
cancer
|
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Phase
III — clinical trial cleared by the FDA for recruitment of patients
for non-metastatic hormone independent prostate cancer
|
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|
|
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DCVax
®
-Brain
|
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Glioblastoma
multiforme
|
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Phase
II — clinical trial initiated. Orphan Drug designation granted in the
U.S. in 2006 and in the European Union in 2007
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|
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DCVax
®
-LB
|
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Non-small
cell lung cancer
|
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Phase
I — clinical trial cleared by the FDA
|
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DCVax
®
-Direct
|
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Solid
tumors
|
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Phase
I — clinical trial cleared by the FDA for ovarian cancer, head and
neck cancer and two other indications (expected to be liver and pancreatic
cancers)
|
|
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DCVax
®
-L
|
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Resectable
solid tumors
|
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Phase
I/II — clinical trial currently underway at the University of
Pennsylvania
|
__________
Pre-clinical
means that a product candidate is undergoing efficacy and safety evaluation in
disease models in preparation for human clinical trials. Phase I-III clinical
trials denote safety and efficacy tests in humans as follows:
Phase I:
Evaluation of safety and dosing.
Phase II:
Evaluation of safety and efficacy.
Phase
III: Larger scale evaluation of safety and efficacy.
DCVax
®
Product
Candidates
DCVax
®
-L for
Brain Cancer
DCVax
®
-Brain
uses our DCVax
®
platform
in combination with the patient’s own glioblastoma tumor cell lysate antigens.
Our clinical collaborators at UCLA conducted two Phase I clinical trials to
assess the safety and efficacy of DC-based immunotherapy for Glioblastoma
multiforme (“GBM”). In the first Phase I clinical trial, DCVax
®
-Brain
was administered to 12 patients and in the second Phase I clinical trial it
was administered to 17 patients. The patients in both trials were treated
with DCVax
®
-Brain
being administered as an adjuvant to the standard of care.
The data
from progression and survival Kaplan Meier curves of both of these trials
together show that newly diagnosed GBM patients treated at UCLA, and matched for
the major prognostic factors, with DCVax
®
-Brain
had a delay in the median time to recurrence or progression of disease from
8.1 months with standard of care treatments in matched concurrent control
patients to 18.1 months in patients treated with DCVax
®
-Brain
(p = 0.00001;n=20). DCVax
®
-Brain
increased median overall survival from 17.0 months with standard of care in
matched concurrent control patients treatments to 36.4 months in patients
treated (and continuing as the median is not yet reached) for DCVax
®
-Brain
treated patients, again matched for the major prognostic factors (p < 0.0004;
n=20). The ‘p’ value measures the likelihood that the difference between the
treated and non-treated patients is due to chance. A p’ value less than or equal
to 0.05 (meaning there is a 5 percent or lower possibility that the
observed clinical effect is due to chance) is required for product approval by
the FDA and European regulatory authorities. The ‘p’ value of 0.0004 observed
with DCVax
®
-Brain
means that there is only a 0.04 percent possibility that the observed
effect between standard of care and DCVax
®
-treated
patients is due to chance. Eight of the 20 patients remained alive for
periods ranging, to date, from 15.9 to 103 months, with five patients
having lived for over 45 months without cancer recurrence. Similarly, in
recurrent (late stage) patients, DCVax
®
-Brain
has increased median survival from 6.4 months for those receiving standard
of care to 11.9 months for patients receiving DCVax
®
-Brain.
In
December 2006, we commenced recruiting patients with newly diagnosed GBM in a
141 patient Phase II DCVax
®
-Brain
clinical trial. We planned to carry out the study at 12 to 15 clinical sites.
The study was designed as a randomized study in which patients received either
DCVax
®
-Brain in
addition to standard of care or standard of care alone. To date, almost
50 patients have been screened at 4 clinical sites. However, patients have
been reluctant to enroll in the study when faced with a 33% chance of being
randomized into the control arm of the study under which they will receive
standard of care alone. In order to address this issue we redesigned the study
as a randomized, placebo controlled, double blinded study with a cross-over arm
allowing control patients to be treated with DCVax
®
-Brain in
the event that their cancer progresses. The study size has been increased from
141 to 240 patients and is designed to enable us to petition the FDA for
accelerated approval if the study generates results similar to those achieved in
earlier Phase I studies. In order to enable rapid enrollment, we are in the
process of enrolling 45 to 50 additional clinical sites for this trial. As of
January 1, 2009, thirteen sites are active and a further 31 sites are
at various stages of the start-up process. We are engaged in discussions with
the FDA concerning the study design and end points. Depending on trial results,
we plan to seek product approval in both the U.S. and the European
Union.
In
February 2007, we, through our legal representative, applied to the Bundesamt
für Gesundheit (“BAG” or “Office Fédéral de la Santé Publique”) in Switzerland
for an Authorization for Use (“Autorisation”). In June 2007, we, through our
legal representative, received such Autorisation from the BAG to make DCVax
®
-Brain
available at limited selected medical centers in Switzerland, as well as an
authorization (“Autorisation pour activités transfrontalières avec des
transplants”) to export patients’ cells and tissues from Switzerland for vaccine
manufacturing in the United States, and to import patients’ DCVax
®
-Brain
finished vaccines into Switzerland. These authorizations are conditional upon
certain implementation commitments which must be fulfilled to the satisfaction
of Swissmedic (“Institut Suisse des Agents Thérapeutiques”) before the product
may be made available (e.g., finalizing our arrangements for a clean-room
suite for processing of patients’ immune cells). We believe we have fulfilled
these commitments and are awaiting Swissmedic confirmation.
In the
BAG’s processing of and decision on our application and data with respect to the
authorizations described above, Swissmedic conducted an inspection of our
facilities. A comprehensive evaluation of DCVax
®
-Brain
will be conducted by Swissmedic during its processing of our Marketing
Authorization Application (“MAA”) which we filed with Swissmedic in December
2007. The assessment by Swissmedic of our MAA will include a full review by
Swissmedic of the safety and efficacy data generated in our DCVax
®
-Brain
clinical studies to date as well as review of our facilities in
Switzerland. This review could take 12-18 months from
December 28, 2007, the date on which the MAA was submitted. Until such a
Market Authorization is granted, and assuming the Company completes its
implementation commitments to the satisfaction of Swissmedic, DCVax
®
-Brain
may only be made available at the selected Medical Centers in Switzerland under
the Autorisation granted by the BAG. The term of the BAG Autorisation is five
years from June 2007.
Standard of Care:
The
current standard of care for GBM was established in a 573 patient study as
set out by Stupp et al. in N Engl J Med 352;10, and resulted in a median time to
progression of 6.9 months and a median overall survival rate of
14.6 months in patients receiving a standard of care treatment regimen. The
standard of care established in the Stupp trial for GBM patients consists of
surgery followed two weeks later by radiation therapy with concomitant Temodar
chemotherapy, followed by six monthly cycles of Temodar chemotherapy. The
DCVax
®
-Brain
treatment regimen fits between the steps of this current standard of care, and
does not require a change in clinical practices, other than one 30-day delay
after the first chemotherapy treatment.
Target Market:
The
American Cancer Society estimates that about 21,810 new cases of brain cancer
will be diagnosed in the U.S. during 2008. Deaths from newly diagnosed
malignant primary brain cancer in the U.S. are estimated to be
approximately 13,070 per year. Globocan has estimated that about 48,385 new
cases of brain cancer would be diagnosed in Europe in 2002 (the last year for
which estimates are available). Deaths from brain cancer in Europe were
estimated at 39,061 in 2002.
Current
Treatments:
Existing treatments for GBM include surgery, radiation
and chemotherapy. Such treatments are often used in various combinations and/or
sequences and have significant adverse side effects such as bleeding, seizures,
nausea and collateral tissue damage. Following initial treatment, virtually all
cases of this cancer recur, with a life expectancy of approximately six months
following recurrence. Few, if any, effective therapies exist for these patients.
We believe that DCVax
®
-Brain
has the potential to address this critical unmet medical need.
Cost Recovery:
We
submitted an application to the FDA for cost recovery for our Phase II
trial in brain cancer. Approval of this application would permit us to charge
patients or their insurers for the direct costs of manufacturing DCVax
®
-Brain
during this clinical trial. However because we have changed the study design to
include a placebo control arm we have no ability to charge patients for
DCVax
®
-Brain
without unblinding the study and as a result we have ceased pursuing the
application.
DCVax
®
-L for
Ovarian Cancer
This
trial is ongoing, and is treating “no option” patients who have already been
treated with most or all major drugs currently available for recurrent,
metastatic ovarian cancer (including carboplatin, paclitaxel docetaxel,
abraxane, gemcitabine and topotecan), and whose cancer has still continued to
progress. In other recent clinical trials testing various drugs and
drug combinations for recurrent ovarian cancer, the treated patients have
generally attained less than 3 or 4 months without progression of their cancer,
and have experienced serious side effects (including gastro-intestinal
perforation, a life-threatening condition).
In the
Company trial, the two patients who have received treatment attained 8 months
and 6 months without progression, respectively. Each of these NWBT
patients had metastases in 4 or 5 locations at the beginning of the trial and,
in both of the patients, all of their metastatic lesions responded following the
treatment regimen – either by shrinking somewhat (20-25%) or by remaining the
same size and not growing, or by disappearing. The patients did not
experience any toxicity or debilitating side effects.
Metastatic
ovarian cancer poses a particularly serious and urgent unmet medical
need. In most patients, the disease is not discovered until it is
already late stage, because ovarian cancer typically causes little or no
symptoms until it is late stage. When this cancer has metastasized,
as in the case of the no-option patients in NWBT’s trial, the cancer usually
progresses rapidly and aggressively. In other recent clinical trials
in recurrent ovarian cancer, only limited clinical responses were obtained in
the treated patients, and even those were only in a small percentage of patients
(for example, 18-28% of those treated).
DCVax
®
-Prostate
DCVax
®
-Prostate
targets hormone independent (i.e. late stage) prostate cancer. DCVax
®
-Prostate
combines our DCVax
®
platform
with the cancer-associated antigen “prostate specific membrane antigen” or
“PSMA”. PSMA is located on the surface of prostate cells. It is expressed at
very low levels on benign or healthy prostate cells, and at much higher levels
on prostate cancer cells. Because PSMA is over-expressed in virtually all
prostate cancers, it represents an effective target for prostate cancer
therapeutics. In addition, since PSMA is over-expressed in virtually all
prostate cancer tissues, we do not have to screen patients. DCVax
®
-Prostate
is designed to be used in the whole patient population. In contrast, the use of
other cancer vaccines in development may be limited to part of the patient
population and require screening of patients.
In
September 1999, we filed an application to conduct a Phase I/II clinical trial
for DCVax
®
-Prostate
to treat late-stage prostate cancer patients for whom hormone therapy was no
longer effective. This trial, which was carried out at the M.D. Anderson Cancer
Centre and at UCLA, involved the administration of DCVax
®
-Prostate
to 33 evaluable patients in order to establish the safety of three
different dosage levels of DCVax
®
-Prostate.
Additional
data from our Phase I/II DCVax
®
-Prostate
clinical trial in 33 patients with non-metastatic and metastatic hormone
independent prostate cancer indicates the following. Of a total of
33 patients who have been treated in this trial, 11 were non-metastatic
hormone independent prostate cancer patients (group A) and 22 were
metastatic hormone independent prostate cancer patients (group B). In group A,
there has been an increase in survival from 36 months for the natural
course of the disease to >54 months for DCVax
®
-Prostate
treated patients. The median had not yet been reached as of the end of 2005 (the
latest date to which long-term data is so far available). In this group the time
to metastases under the natural course of the disease is 28 to 36 weeks.
This time was lengthened to 59 weeks in patients who received DCVax
®
-Prostate.
In group A, none of the 11 patients had progressed at 28 weeks and
only five had progressed at 59 weeks. The group A patient population is the
patient population that we will focus on in our Phase III clinical
trial.
In group
B (hormone independent patients with metastases), there was an increase in
median overall survival from 18.9 months for standard of care to
38.7 months for DCVax
®
-Prostate
treated patients. Patients in this study had a six-times greater chance of being
alive at 36 months compared to patients treated with the standard of
care.
Many
cancer therapeutics elicit a clinical response in only a small fraction of
patients. In clinical trials, DCVax
®
-Prostate
has been shown to elicit a specific PSMA antibody response and a specific and
strong T-cell response in about 80 percent of patients. The Company
believes that the administration of DCVax
®
-Prostate
may enhance progression free survival relative to placebo, delay the development
of symptomatic disease and increase overall survival.
DCVax
®
-Prostate
has been cleared by the FDA for a Phase III clinical trial in about
600 patients in 50 centers. The patient population is non-metastatic
hormone independent prostate cancer. We currently intend to separate the
600 patient Phase III trial into two Phase III clinical trials in
non- metastatic hormone independent prostate cancer patients with about
300 patients per trial.
Standard of
Care.
The standard of care for metastatic hormone independent
prostate cancer was established in a 674 patient study as set out by
Petrylak et al. in
N Engl J
Med 351;15
and resulted in a median overall survival rate of
18.9 months. This standard of care consists of taxotere (chemotherapy)
being administered as a single dose every three weeks or in a weekly regime.
Other drugs, such as mitoxantrone and prednisone, are also administered to
patients for pain derived from bone metastasis. The DCVax
®
-Prostate
treatment regimen fits between the steps of current standard of care, and does
not require a change in clinical practices. There is no established standard of
care for non-metastatic hormone independent prostate cancer as there is no FDA
approved therapeutic product for this type of prostate cancer.
Target Market.
The
American Cancer Society estimates that 186,320 new cases of prostate cancer will
be diagnosed in the U.S. during 2008. Deaths from prostate cancer in the
U.S. are estimated to be 28,660 for 2008. We estimate that there is an
initial DCVax
®
-Prostate
target population in the U.S. consisting of approximately
100,000 patients per year with non-metastatic hormone independent prostate
cancer. Globocan has estimated that 230,627 new cases of prostate cancer would
be diagnosed in Europe in 2002 (the last year for which estimates are
available). Deaths from prostate cancer in Europe were estimated at 83,066 in
2002.
Current
Treatments.
Existing treatments for localized (i.e.
newly-diagnosed) prostate cancer include surgery and/or various forms of
radiation therapy. The current standard of care for treating patients who fail
primary therapy is hormone therapy through which the effect of male hormones is
blocked. Although this therapy achieves temporary tumor control, prostate cancer
patients eventually fail hormone treatments, meaning that blocking of hormones
no longer keeps the cancer under control. The United States National Cancer
Institute’s 1989-1996 five-year survival rate for metastatic prostate cancer is
only 32 percent. Moreover, hormone therapy may cause significant adverse
side effects, including bone loss, hot flushes and impotence. Disease
progression despite hormone therapy occurs on average in two years, and is then
classified as hormone independent prostate cancer. Approximately 55 percent
of patients with hormone independent prostate cancer will die within two years
of its onset. Currently, the only FDA approved treatments for hormone
independent prostate cancer are chemotherapy and radioactive pharmaceuticals,
which can alleviate cancer-related symptoms but may cause significant toxic side
effects and only prolong survival by approximately two and a half months. A
large proportion of hormone independent patients do not have objective
metastatic disease as measured by bone and CT scans. We believe that DCVax
®
-Prostate
has the potential to address this critical unmet medical need.
DCVax
®
-LB
DCVax
®
-LB is
targeting non-small cell lung cancer, the largest cause of cancer deaths in both
the U.S. and Europe. DCVax
®
-LB
combines our DCVax
®
platform
with isolated and killed lung cancer cells as antigens. The autologous DCs used
to formulate DCVax
®
-LB are
activated through a process similar to that used in the manufacturing of
DCVax
®
-Prostate.
We had an investigational new drug application cleared by the FDA in May 2006
for a Phase I clinical trial using DCVax
®
-LB in
non-small cell lung cancer.
Target Market.
The
American Cancer Society estimates that 215,020 new cases of lung cancer will be
diagnosed in the U.S. during 2008. Approximately 80 percent of these
cases are expected to be attributable to non-small cell lung cancer, the
indication that we are targeting. Deaths from all forms of lung cancer are
estimated to be 161,840 for 2008. Globocan has estimated that 374,764 new cases
of lung cancer would be diagnosed in Europe in 2002 (the last year for which
estimates are available). Deaths from lung cancer in Europe were estimated at
341,595 in 2002.
Current
Treatments.
Existing treatments for non-small cell lung cancer
include surgery and radiation therapy, which are used in various combinations.
These treatments have significant toxic side effects and have limited clinical
benefit. The American Cancer Society has reported that only 16 percent of
patients diagnosed with non-small cell lung cancer survive after five years.
Following initial treatment, virtually all cases of this cancer recur, with a
life expectancy of approximately one year following recurrence.
DCVax
®
-L
DCVax
®
-L
targets any kind of solid tumor cancer and it combines our DCVax
®
platform
with patient specific tumor lysate. Following surgery, the tumor is prepared as
a lysate (i.e. the tumor tissue is finely chopped) for loading into autologous
dendritic cells. The patient’s tumor lysate contains cancer specific biomarkers
which will be added to the patient’s own dendritic cells and subsequently
injected back into the patient to elicit a cancer specific immune response. The
company commenced a Phase I/II study using DCVax
®
-L at the
University of Pennsylvania in 2007.
Target Market:
The
American Cancer Society estimates that 21,650 new cases of ovarian cancer will
be diagnosed in 2008 and that there will be approximately 15,520 deaths from the
disease. Globocan has estimated that 63,467 new cases of ovarian cancer were
diagnosed in Europe in 2002 (the last year for which estimates are available).
Once ovarian cancer has recurred, there are currently no effective treatments
for the disease. Thus, new treatment modalities that prevent or delay cancer
recurrence are of importance in prolonging survival in women with ovarian
cancer. This study is being funded by the Ovarian Cancer Vaccine Initiative
(OCVI), a private philanthropic organization.
Current
Treatments:
Standard therapy includes surgical debulking,
followed by chemotherapy with a taxane/platinum combination for six to eight
cycles. Of the patients who present with advanced stage disease (III or IV),
70 percent will have an initial clinical remission following surgery and
chemotherapy, with no evidence of disease by physical examination, radiographic
imaging (such as CT or MRI) or normalization of the CA125 tumor marker. However,
for most of these patients, the ovarian cancer will recur within two years. The
median time to progression is approximately 20 months even for patients who
received total or near-total surgical removal of the initial tumor and is
approximately 14 months for patients with less complete surgical removal of
the initial tumor. Once ovarian cancer has recurred, it is not considered
curable and progression to death is usually inevitable, despite aggressive
chemotherapy strategies. The overall five year survival for advanced ovarian
cancer remains at only 20 to 30 percent.
DCVax
®
-Direct
DCVax
®
-Direct
uses our DCVax
®
platform
to activate DCs suitable for direct injection into solid tumors. DCVax
®
-Direct
is designed to treat cancer patients whose tumor tissue is not available or
whose tumors are considered to be inoperable. Several scientific studies have
shown that DCs injected into solid tumors in animal models can result in tumor
regression. We have demonstrated in pre-clinical animal studies the ability of
activated DCs, when injected directly into just a single tumor of mice bearing
multiple tumors, to cause all tumors to regress. In these studies, subsequent
challenge of these now tumor-free mice with the injection of additional tumor
cells was met with total rejection of tumor growth demonstrating an immunization
of the mouse against regrowth of the tumor. The DCs used in the formulation of
DCVax
®
-Direct
are activated through a process similar to that used for DCVax
®
-Brain
and DCVax
®
-Prostate
(i.e. using heat-killed and formalin-fixed BCG mycobacteria and interferon
gamma), although they are not loaded with tumor antigens prior to injection.
Rather, the antigen loading takes place
in vivo
after injection
of the DCVax
®
-Direct
DCs into the tumor tissue, typically following radiation therapy, chemotherapy,
or other treatments that kill tumor cells.
We have a
Phase I clinical trial protocol under the DCVax
®
-Direct
IND for the treatment of head and neck cancer. This clinical trial protocol was
cleared by the FDA in the third quarter of 2006. We intend to identify the most
appropriate cancers for the remaining two available trials under the DCVax
®
-Direct
IND at the appropriate time, although our present intention is to pursue liver
and pancreatic cancers.
Target markets:
The
American Cancer Society estimates that 21,650 new cases of ovarian cancer and
35,310 new cases of head and neck cancer will be diagnosed in the
U.S. during 2008. Globocan has estimated that 63,467 new cases of ovarian
cancer and 98,175 new cases of head and neck cancer were diagnosed in Europe in
2002 (the last year for which estimates are available). Deaths from ovarian
cancer and head and neck cancer in Europe were estimated at 41,024 and 43,273
respectively. Deaths from all solid tumors are estimated to be approximately
500,000 in 2008. Deaths from all solid tumors are estimated at approximately
815,000 in the E.U. in 2002 (the last year for which estimates are
available).
Current
treatments:
Current treatments for solid tumors typically involve
cytotoxic therapy aimed at killing tumor cells. Such treatments include
radiation therapy, chemotherapy, or other cell killing treatments such as
cryotherapy. These treatments can still be used along with DCVax
®
-Direct
as they can potentially prepare the tumor tissue for the injection of DCVax
®
-Direct.
The ability to still use conventional cytotoxic agents along with DCVax
®
-Direct
will enable DCVax
®
-Direct
to be adopted in the market without requiring any change of existing clinical
practice if so desired.
Therapeutic
Antibody Product Candidates
We have
been issued patent coverage by the U.S. Patent and Trademark Office which
gives us broad rights to the use of CXCR4 antibodies to treat cancer. CXCR4 is a
protein that plays a key role in the progression of primary cancers and in the
metastatic process. CXCR4 is over-expressed in more than 75 percent of
cancers including non- small cell lung cancer, breast cancer, GBM, colon cancer,
melanoma, prostate, pancreatic, kidney, ovarian, and certain blood cancers. In
all of these cancers CXCR4 is centrally involved in all three phases of disease
progression: proliferation of the primary tumor, migration of cancer cells out
of the primary tumor, and establishment of distant metastatic
sites.
We have
completed substantial research and pre-clinical testing phases with two versions
of CXCR4 antibodies. We intend to identify the most appropriate cancers for
clinical trial or multiple clinical trials using CXCR4 antibodies at the
appropriate time.
Multiple
Therapeutic Applications
Therapeutic
antibodies may be used as stand-alone products that bind to cancer-associated
antigens and potentially destroy cancer cells marked by these antigens.
Therapeutic antibodies may also enable the targeted delivery of existing
therapies such as radiation and cytotoxic agents. The inherent toxic effects of
cytotoxic agents and radioactive materials on normal tissue could be minimized
by coupling these agents to antibodies that have a high degree of specificity to
cancer cells.
We have
developed a proprietary manufacturing system that enables us to produce vaccines
for an entire multi-year course of treatments in a single manufacturing run
using the cancer patient’s own DCs and the patient’s own tumor biomarkers. This
manufacturing process results in sufficient patient-specific DCVax
®
product
for at least a course of 11 injections of DCVax
®
, which
is sufficient for three years of treatment. The product thus becomes like an
“off-the-shelf” drug after the initial manufacturing run. The advantages of this
method, compared to other cell vaccine production, include not only the
“off-the-shelf” feature of drug delivery to clinics and patients, but also the
significant reduction in product cost due to the fact that the product does not
have to be separately manufactured for each and every treatment
injection.
We have
entered into a services agreement with Cognate pursuant to which Cognate will
provide certain consulting and, when needed, manufacturing services, for our
DCVax
®
-Brain
Phase II clinical trial. In this process, DC precursor cells are isolated
from the patient’s blood and matured into new functional DCs. These DCs are
combined with a patient’s own cancer biomarkers from the patient’s tumor tissue
removed in surgery. The finished vaccine is then frozen in single-dose vials
where they can remain for many years until required for treatment of the
patient.
The
current capacity of Cognate’s existing California cGMP (clean room manufacturing
under current Good Manufacturing Practices) facility is approximately
300 patients per year, which we believe will be sufficient for our
Phase II clinical trial for DCVax
®
-Brain.
We have a plan with Cognate to accommodate an increase in production capacity
based on demand and have detailed plans and cost analysis for four modular
expansions which should increase the capacity of the current facilities from
approximately 300 patients to over 5,000 patients per year. We believe
that Cognate’s current facilities are sufficient to cover additional agreements
for our initial commercialization efforts in Switzerland, and potentially in the
United States and/or Europe, as well as to meet demands of clinical trial
activity once commenced.
We intend
to commence use of the TFF-Cell Separation System in an upcoming DCVax
®
Phase I
clinical trials. The TFF-Cell Separation System is also targeted to be
implemented into the DCVax
®
-Brain
product after bioequivalence studies have been completed. Since the product
economics are favorable even with the existing first generation manufacturing
process, the Company intends to only implement the TFF-Cell Separation System at
a time and in a manner that does not interfere with the pivotal Phase II
clinical trial for DCVax
®
-Brain,
or product approval or launch.
Marketing
In the
event that we secure adequate funding and develop an approved product, we will
then determine whether to market and sell that product ourselves, or to partner
with one or more established pharmaceutical companies. If we chose to enter into
marketing and sales agreements with partners, our collaboration with these
companies may take the form of royalty agreements, licensing agreements or other
co-marketing arrangements. However, there is a substantial likelihood that we
will choose to market and sell our products ourselves.
Intellectual
Property
We
protect our proprietary technologies through patents issued and licensed
throughout the world. We have 33 issued and licensed patents (9 in the
U.S. and 23 in other jurisdictions) and 134 patent applications pending (15
in the U.S. and 119 in other jurisdictions) which cover the use of DCs in
DCVax
®
as well
as targets for either the Company’s DC or monoclonal antibody therapy candidates
and isolation and manufacturing, handling and administration of DCVax
®
. The
issued patents expire at various dates between 2015 and 2026. We intend to
continue using our scientific expertise to pursue and patent new developments
with respect to uses, methods, and compositions to enhance our position in the
field of cancer treatment.
We have
received orphan designation in the U.S., the E.U. and Switzerland for
our DCVax
®
- Brain
product candidate applicable to gliomas, which comprise most primary brain
cancers, including GBM. Orphan designation in the U.S. entitles us to seven
years of market exclusivity for the particular indication and active ingredient
provided that the product is the first such orphan to be approved for that
indication. Orphan designation in the E.U. and Switzerland entitles us to ten
years of market exclusivity on a similar basis.
Any
patents that we obtain may be circumvented, challenged or invalidated by our
competitors. Our patent applications may not result in the issuance of any
patents, and any patents that may be issued may not offer any protection against
others who seek to practice the claimed inventions. We have obtained licenses
for certain technologies that we use, but we may be unable to maintain those
licenses and may be unable to secure additional licenses in the future. Thus, we
may be forced to abandon certain product areas or develop alternative methods
for operating in those areas.
In
addition to patents, we rely on copyright protection, trade secrets, proprietary
know-how and trademarks to maintain our competitive position. Our future success
will depend in part on our ability to preserve our copyrights and trade secrets.
Although our officers, employees, consultants, contractors, manufacturers,
outside scientific collaborators, sponsored researchers and other advisors are
required to sign agreements obligating them not to disclose our confidential
information, these parties may nevertheless disclose such information and
compromise our confidential data. We may not have adequate remedies for any such
breach. It is also possible that our trade secrets or proprietary know-how will
otherwise become known or be independently replicated or otherwise circumvented
by competitors.
Our
technologies may infringe the patents or violate other proprietary rights of
third parties. In the event of infringement or violation, we may be prevented
from pursuing further licensing, product development or commercialization. Such
a result would materially adversely affect our business, financial condition and
results of operations.
If we
become involved in any litigation, interference or other administrative
proceedings, we will incur substantial expenses and the efforts of our technical
and management personnel will be significantly diverted. An adverse
determination may subject us to significant liabilities or require us to seek
licenses, which may not be available. We may also be restricted or prevented
from manufacturing and selling our products, if any, in the event of an adverse
determination in a judicial or administrative proceeding, or if we fail to
obtain necessary licenses. In addition, any potential litigation or dispute may,
as a result of our lack of funding, require us to further reduce or even curtail
our operations entirely.
Competition
The
biotechnology and biopharmaceutical industries are characterized by rapidly
advancing technologies and a strong emphasis on proprietary products. Several
companies, such as Dendreon Corporation, Immuno-Designed Molecules,
Inc., Celldex Therapeutics, Inc., Ark Therapeutics plc, Oxford Biomedica plc,
Argos Therapeutics, Inc. and Antigenics, are actively involved in the research
and development of immunotherapies or cell-based cancer
therapeutics.
Of these
companies, we believe that only Dendreon is carrying out
Phase III clinical trials with a cell-based therapy. These clinical trials
target patients with prostate cancer, although their patient populations are
different from those targeted by our Phase III DCVax
®
-Prostate
product candidate. Celldex Therapeutics is commencing a Phase II clinical
trial, which could become a Phase II/III trial, with a peptide immunotherapy for
newly diagnosed GBM. Ark Therapeutics is in a Phase III trial with a gene
therapy for operable high grade gliomas. The clinical trial data reported to
date by these companies for brain and prostate cancer have not shown as long a
delay in disease progression, or as long an extension of survival, as have our
clinical data to date. As far as we are aware, no cell-based therapeutic product
for cancer is currently available for commercial sale.
Additionally,
several companies, such as Medarex, Inc., Amgen, Inc., Agensys, Inc., and
Genentech, Inc. are actively involved in research and development of monoclonal
antibody-based cancer therapies. Currently, at least seven antibody-based
products are approved for commercial sale for cancer therapy. Genentech is also
engaged in several Phase III clinical trials for additional antibody-based
therapeutic products for a variety of cancers, and several other companies are
in early stage clinical trials for such products. Many other third parties
compete with us in developing alternative therapies to treat cancer,
including:
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biopharmaceutical
companies;
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•
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biotechnology
companies;
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•
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pharmaceutical
companies;
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academic
institutions; and
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other
research organizations.
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Most of
our competitors have significantly greater financial resources and expertise in
research and development, manufacturing, pre-clinical testing, conducting
clinical trials, obtaining regulatory approvals and marketing. In addition, many
of these competitors have become more active in seeking patent protection and
licensing arrangements in anticipation of collecting royalties for use of
technology they have developed. Smaller or early-stage companies may also prove
to be significant competitors, particularly through collaborative arrangements
with large and established companies. These competitors may prevent us from
recruiting and retaining qualified scientific and management personnel, or from
acquiring technologies complementary to our programs.
We expect
that our ability to compete effectively will be dependent upon our ability
to:
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•
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secure
the necessary funding to continue our development efforts with respect to
our product candidates;
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•
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successfully
complete clinical trials and obtain all requisite regulatory
approvals;
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•
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maintain
a proprietary position in our technologies and
products;
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•
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attract
and retain key personnel; and
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maintain
existing or enter into new
partnerships.
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Governmental
Regulation
Governmental
authorities in the United States and other countries extensively regulate the
pre-clinical and clinical testing, manufacturing, labeling, storage,
record-keeping, advertising, promotion, export, marketing and distribution,
among other things, of immunotherapeutics. In the United States, the FDA
subjects pharmaceutical and biologic products to rigorous review. Even if we
ultimately receive FDA approval for one or more of our products, if we or our
partners do not comply with applicable requirements, we may be fined, our
products may be recalled or seized, our production may be totally or partially
suspended, the government may refuse to approve our marketing applications or
allow us to distribute our products and we may be criminally prosecuted. The FDA
also has the authority to revoke previously granted marketing
authorizations.
In order
to obtain approval of a new product from the FDA, we must, among other
requirements, submit proof of safety and efficacy as well as detailed
information on the manufacture and composition of the product. In most cases,
this proof requires documentation of extensive laboratory tests, and
pre-clinical and clinical trials. This testing, and the preparation of necessary
applications and processing of those applications by the FDA, are expensive and
typically take several years to complete. The FDA may not act quickly or
favorably in reviewing these applications, and we may encounter significant
difficulties or costs in our efforts to obtain FDA approvals that could delay or
preclude us from marketing any products we may develop. The FDA also may require
post-marketing testing and surveillance to monitor the effects of approved
products or place conditions on any approvals that could restrict the commercial
applications of these products. Regulatory authorities may withdraw product
approvals if we fail to comply with regulatory standards or if we encounter
problems following initial marketing. With respect to patented products or
technologies, delays imposed by the governmental approval process may materially
reduce the period during which we might have the exclusive right to exploit the
products or technologies.
After an
Investigational New Drug, or IND, application becomes effective, a sponsor may
commence human clinical trials in the United States. The sponsor typically
conducts human clinical trials in three sequential phases, but these phases may
overlap. In Phase I clinical trials, the product is tested in a small number of
patients or healthy volunteers, primarily for safety at one or more doses. In
Phase II, in addition to safety, the sponsor evaluates the efficacy of the
product in a patient population somewhat larger than Phase I clinical trials.
Phase III clinical trials typically involve additional testing for safety
and clinical efficacy in an expanded population at geographically dispersed test
sites. The sponsor must submit to the FDA a clinical plan, or protocol,
accompanied by the approval of a clinical site responsible for ongoing review of
the investigation, prior to commencement of each clinical trial. The FDA or a
clinical site may order the temporary or permanent discontinuation of a clinical
trial at any time, if the trial is not being conducted in accordance with FDA or
clinical site requirements or presents a danger to its subjects.
The
sponsor must submit to the FDA the results of the pre-clinical and clinical
trials, together with, among other data, detailed information on the manufacture
and composition of the product, in the form of a new drug application or, in the
case of a biologic, a biologics license application. The FDA is regulating our
therapeutic vaccine product candidates as biologics and, therefore, we must
submit biologics license applications, or BLA, to the FDA to obtain approval of
our products. The clinical trial process generally takes several years, and the
FDA reviews the BLA and, when and if it decides that adequate data is available
to show that the new compound is both safe and effective and that all other
applicable requirements have been met, the FDA approves the drug or biologic for
marketing. The amount of time taken for this approval process is a function of a
number of variables, including the quality of the submission and studies
presented, the potential contribution that the compound will make in improving
the treatment of the disease in question, and the workload at the FDA. It is
possible that our product candidates will not successfully proceed through this
approval process or that the FDA will not approve them in any specific period of
time.
The FDA
may, during its review of a new drug application or biologics license
application, ask for additional test data. If the FDA does ultimately approve a
product, it may require post-marketing testing, including potentially expensive
Phase IV studies, and surveillance to monitor the safety and effectiveness
of the drug. In addition, the FDA may in some circumstances impose restrictions
on the use of an approved drug, which may be difficult and expensive to
administer, and may require prior approval of promotional
materials.
Before
approving a new drug application or biologics license application, the FDA also
will inspect the facilities at which the product is manufactured and will not
approve the product unless the manufacturing facilities are in compliance with
guidelines for the manufacture, holding and distribution of a product. Following
approval, the FDA periodically inspects drug and biologic manufacturing
facilities to ensure continued compliance with manufacturing guidelines.
Manufacturers must continue to expend time, money and effort in the areas of
production, quality control, record keeping and reporting to ensure full
compliance with those requirements. The labeling, advertising, promotion,
marketing and distribution of a drug or biologic product must also be in
compliance with FDA regulatory requirements. Failure to comply with applicable
requirements can lead to the FDA demanding that production and shipment cease,
and, in some cases, that the manufacturer recall products, or to FDA enforcement
actions that can include seizures, injunctions and criminal prosecution. These
failures can also lead to FDA withdrawal of marketing approval for the
product.
We and
our partners are also subject to regulation by the Occupational Safety and
Health Administration, the Environmental Protection Agency, the Nuclear
Regulatory Commission and other foreign, federal, state and local agencies under
various regulatory statutes, and may in the future be subject to other
environmental, health and safety regulations that may affect our research,
development and manufacturing programs. We are unable to predict whether any
agency will adopt any regulation which could limit or impede on our
operations.
Sales of
pharmaceutical products outside the United States are subject to foreign
regulatory requirements that vary widely from country to country. Whether or not
we have obtained FDA approval, we must obtain approval of a product by
comparable regulatory authorities in foreign countries prior to the commencement
of marketing the product in those countries. The time required to obtain this
approval may be longer or shorter than that required for FDA approval. The
foreign regulatory approval process includes all the risks associated with FDA
regulation set forth above, as well as country-specific
regulations.
Employees
The
Company employs four full-time employees, as of April 13, 2009. Each
of our employees has signed a confidentiality and invention assignment
agreement, and none are covered by a collective bargaining agreement. We have
never experienced employment-related work stoppages and consider our employee
relations to be positive.
Available
Information
We are
subject to the informational requirements of the Exchange Act and, accordingly,
file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K, proxy statements and other information with
the SEC. You may read and copy this Annual Report on Form 10-K and the
other reports and information we file with the SEC at the SEC’s Public Reference
Room at 100 F Street, N.E., Washington, DC 20549. You may obtain
information on the operation of the public reference room by calling the SEC at
1-800-SEC-0330. The SEC maintains a web site at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the SEC.
Our
website address is www.nwbio.com. The information available on or through our
website is not part of this Annual Report on Form 10-K.
Executive
Officers of Northwest Biotherapeutics, Inc.
Our
executive officers and their ages and positions as of March 28, 2009, are
shown below. Their biographies follow the table.
Name
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Age
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Position
|
Alton
L. Boynton, Ph.D.
|
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64
|
|
President,
Chief Executive Officer, Secretary and
Director
|
Alton L.
Boynton, Ph.D.
Dr. Boynton co-founded the Company, has
served as Secretary since August 2001, has served as our Chief Scientific
Officer and a director since our inception in 1998, was appointed our Chief
Operating Officer in August 2001, was appointed President in May 2003 and was
appointed Chief Executive Officer in June 2007. Dr. Boynton has also served
as Director of the Department of Molecular Medicine of Northwest Hospital from
1995-2003 where he coordinated the establishment of a program centered on
carcinogenesis. Prior to joining Northwest Hospital, Dr. Boynton was
Associate Director of the Cancer Research Center of Hawaii, The University of
Hawaii, where he also held the positions of Director of Molecular Oncology of
the Cancer Research Center and Professor of Genetics and Molecular Biology.
Dr. Boynton received his Ph.D. in Radiation Biology from the University of
Iowa in 1972.
Item 1A.
Risk
Factors
Our
business, operations and financial condition are subject to various risks and
uncertainties, including those described below and elsewhere in this Annual
Report on Form 10-K. This section discusses factors that, individually or
in the aggregate, we think could cause our actual results to differ materially
from expected and historical results. Our business, operations or financial
condition could be materially adversely affected by the occurrence of any of
these risks.
We
will need to raise additional capital, which may not be available.
As of
April 14, 2009, we had approximately $0.47 million of cash on hand. We will
need additional capital in the near future to support and fund the research,
development and commercialization of our product candidates and to fund our
other operating activities. Specifically, we will need additional funding to
complete our current DCVax
®
-Brain
Phase II clinical trial. We are in the process of finalizing a financing of
up to $10.0 million designed to cover our operating cash requirements until
the fourth quarter of this year. It is anticipated that up to $3.0 million
may be available to us by the end of second quarter, and the balance may become
available by June. We are also negotiating additional financing with several
other parties, which we hope to complete later this year. There can be no
assurance that we will be able to complete any of the financings, or that the
terms for such financings will be attractive. If we are unable to obtain
additional funds on a timely basis or on acceptable terms, we may be required to
curtail or cease certain of our operations. We may raise additional funds by
issuing additional common stock or securities (equity or debt) convertible into
shares of common stock, in which case, the ownership interest of our
stockholders will be diluted. Any financing, if available, is likely
to include restrictive covenants that could limit our ability to take certain
actions. Further, we may seek funding from Toucan Capital or Toucan Partners or
their affiliates or other third parties. Such parties are under no obligation to
provide us any additional funds, and any such funding may be dilutive to
stockholders and may contain restrictive covenants. If we are unable to obtain
sufficient additional capital in the near term, we may cease operations at any
time.
We are likely to continue to incur
substantial losses, and may never achieve
profitability.
We have
incurred net losses every year since our formation in March 1996 and had a
deficit accumulated during the development stage of approximately
$164.6 million as of December 31, 2008. We expect that these losses
will continue and anticipate negative cash flows from operations for the
foreseeable future. Despite the receipt of approximately $25.9 million of
net proceeds from an offering of our common stock on AIM in June 2007, we will
need additional funding, and over the medium term we will need to generate
revenue sufficient to cover operating expenses, clinical trial expenses and some
research and development costs to achieve profitability. We may never achieve or
sustain profitability.
Our
auditors have issued a “going concern” audit opinion.
Our
independent auditors have indicated in their report on our December 31,
2008 financial statements that there is substantial doubt about our ability to
continue as a going concern. A “going concern” opinion indicates that the
financial statements have been prepared assuming we will continue as a going
concern and do not include any adjustments to reflect the possible future
effects on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of this
uncertainty. Therefore, you should not rely on our consolidated balance sheet as
an indication of the amount of proceeds that would be available to satisfy
claims of creditors, and potentially be available for distribution to
stockholders, in the event of liquidation.
As a company in the early stage of
development with an unproven business strategy,
our limited history of operations
makes an evaluation of our business and prospects
difficult.
We have
had a limited operating history and we are at an early stage of development. We
may not be able to achieve revenue growth in the future. We have generated the
following limited revenues: $529,000 in 2003; $390,000 in 2004; $124,000 in
2005; $80,000 in 2006; $10,000 in 2007; and $10,000 in 2008. We have derived
most of these limited revenues from the sale of research products to a single
customer, contract research and development for related parties, research grants
and royalties from licensing fees generated from a licensing agreement. Our
limited operating history makes it difficult to assess our prospects for
generating revenues.
We
may not be able to retain existing personnel.
We employ
four full-time employees. The uncertainty of our business prospects
and the volatility in the price of our common stock may create anxiety and
uncertainty, which could adversely affect employee morale and cause us to lose
employees whom we would prefer to retain. To the extent that we are unable to
retain existing personnel, our business and financial results may
suffer.
We
may not be able to attract expert personnel.
In order
to pursue our product development and marketing plans, we will need additional
management personnel and personnel with expertise in clinical testing,
government regulation, manufacturing and marketing. Attracting and retaining
qualified personnel, consultants and advisors will be critical to our success.
There can be no assurance that we will be able to attract personnel on
acceptable terms given the competition for such personnel among biotechnology,
pharmaceutical and healthcare companies, universities and non-profit research
institutions. The failure to attract any of these personnel could impede the
achievement of our development objectives.
We must rely at present on a single
relationship with a third-party contract
manufacturer, which will limit our
ability to control the availability of our product
candidates in the
near-term.
We rely
upon a single contract manufacturer, Cognate. The majority owner of Cognate is
Toucan Capital, one of our majority stockholders. Cognate provides consulting
services and is the manufacturer of our product candidates. We have an agreement
in place with Cognate pursuant to which Cognate has agreed to provide
manufacturing and other services in connection with our pivotal Phase II
clinical trial for DCVax
®
-Brain.
The agreement requires us to make minimum monthly payments to Cognate
irrespective of whether any DCVax
®
products
are manufactured. The agreement does not extend to providing services in respect
of commercialization of the DCVax
®
-Brain
product, nor for other clinical trials or commercialization of any of our other
product candidates. If and to the extent we wish to engage Cognate to
manufacture our DCVax
®
-Brain
for commercialization or any of our other product candidates (including
DCVax
®
-Prostate)
for clinical trials or commercialization, we will need to enter into a new
agreement with Cognate or another third-party manufacturer which might not be
feasible on a timely or favorable basis. The failure to timely enroll patients
in our clinical trials will have an adverse impact on our financial results due,
in part, to the minimum monthly payments that we make to
Cognate.
Problems
with our contract manufacturer’s facilities or processes could result in a
failure to produce, or a delay in production, of adequate supplies of our
product candidates. Any prolonged interruption in the operations of our contract
manufacturer’s facilities could result in cancellation of shipments or a
shortfall in availability of a product candidate. A number of factors could
cause interruptions, including the inability of a supplier to provide raw
materials, equipment malfunctions or failures, damage to a facility due to
natural disasters, changes in FDA regulatory requirements or standards that
require modifications to our manufacturing processes, action by the FDA or by us
that results in the halting or slowdown of production of components or finished
products due to regulatory issues, the contract manufacturer going out of
business or failing to produce product as contractually required or other
similar factors. Because manufacturing processes are highly complex and are
subject to a lengthy FDA approval process, alternative qualified production
capacity may not be available on a timely basis or at all. Difficulties or
delays in our contract manufacturer’s manufacturing and supply of components
could delay our clinical trials, increase our costs, damage our reputation and,
if our product candidates are approved for sale, cause us to lose revenue or
market share if it is unable to timely meet market demands.
Our
success partly depends on existing and future collaborators.
We work
with scientists and medical professionals at academic and other institutions,
including UCLA, the University of Pennsylvania, M.D. Anderson Cancer Centre
and the H. Lee Moffitt Cancer Centre, among others, some of whom have conducted
research for us or have assisted in developing our research and development
strategy. We do not employ these scientists and medical professionals. They may
have commitments to, or contracts with, other businesses or institutions that
limit the amount of time they have available to work with us. We have little
control over these individuals. We can only expect that they devote time to us
as required by our license, consulting and sponsored research agreements. In
addition, these individuals may have arrangements with other companies to assist
in developing technologies that may compete with our products. If these
individuals do not devote sufficient time and resources to our programs, or if
they provide substantial assistance to our competitors, our business could be
seriously harmed.
The
success of our business strategy may partially depend upon our ability to
develop and maintain our collaborations and to manage them effectively. Due to
concerns regarding our ability to continue our operations or the commercial
feasibility of our personalized DCVax
®
product
candidates, these third parties may decide not to conduct business with us or
may conduct business with us on terms that are less favorable than those
customarily extended by them. If either of these events occurs, our business
could suffer significantly.
We may
have disputes with our collaborators, which could be costly and time consuming.
Failure to successfully defend our rights could seriously harm our business,
financial condition and operating results. We intend to continue to enter into
collaborations in the future. However, we may be unable to successfully
negotiate any additional collaboration and any of these relationships, if
established, may not be scientifically or commercially successful.
We are involved in legal proceedings
that could result in an adverse outcome, or that
could otherwise harm our business. In
addition, future litigation could be costly to
defend or pursue and uncertain in its
outcome.
We are
party to various legal actions, as more fully described below under
Item 3.” Legal Proceedings.” These pending legal proceedings include a
dispute with Soma Partners, LLC, an investment bank, regarding certain fees Soma
claims it is entitled to under an engagement letter with us. The
patent infringement claim filed against us by Lonza Group AG alleging
infringement of certain patents relating to recombinant DNA methods, sequences,
vectors, cell lines and host cells was settled May 6, 2008 and is more fully
described below. In addition, a consolidated class action complaint has been
filed against us alleging violations of Section 10(b) of the Exchange Act,
and Rule 10b-5 thereunder, based on certain of our public announcements
regarding the status of certain regulatory approvals for our DCVax
®
-Brain
vaccine in Switzerland was also settled and more fully described below. We
also cooperated in a formal SEC investigation into the
same matter which after thorough investigation by the SEC was closed by the SEC
without action. We can provide no assurances as to the outcome of the pending
Soma Partners legal proceedings.
The
defense of these or future legal proceedings could divert management’s attention
and resources from the needs of our business. We may be required to make
substantial payments or incur other adverse effects, in the event of adverse
judgments or settlements of any such claims, investigations, or proceedings. Any
legal proceeding, even if resolved in our favor, could result in negative
publicity or cause us to incur significant legal and other expenses. Actual
costs incurred in any legal proceedings may differ from our expectations and
could exceed any amounts for which we have made reserves.
Clinical trials for our product
candidates are expensive and time consuming and their
outcome is
uncertain.
The
process of obtaining and maintaining regulatory approvals for new therapeutic
products is expensive, lengthy and uncertain. It can vary substantially, based
upon the type, complexity and novelty of the product involved. Accordingly, any
of our current or future product candidates could take a significantly longer
time to gain regulatory approval than we expect or may never gain approval,
either of which could reduce our anticipated revenues and delay or terminate the
potential commercialization of our product candidates.
We
have limited experience in conducting and managing clinical trials.
We rely
on third parties to assist us in managing and monitoring all our clinical
trials. Our reliance on these third parties may result in delays in completing,
or failure to complete, these trials if the third parties fail to perform under
the terms of our agreements with them. We may not be able to find a sufficient
alternative supplier of these services in a reasonable time period, or on
commercially reasonable terms, if at all. If we were unable to obtain an
alternative supplier of these services, we might be forced to curtail our
Phase II clinical trial for DCVax
®
-Brain.
Our product candidates will require a
different distribution model than conventional
therapeutic
products.
The
nature of our product candidates means that different systems and methods will
need to be followed for the distribution and delivery of the products than is
the case for conventional therapeutic products. The personalized nature of these
products, the need for centralized storage, and the requirement to maintain the
products in frozen form may mean that we are not able to take advantage of
distribution networks normally used for conventional therapeutic products. If
our product candidates are approved, it may take time for hospitals and
physicians to adapt to the requirements for handling and storage of these
products, which may adversely affect their sales.
We lack sales and marketing
experience and as a result may experience significant
difficulties commercializing our
research product candidates.
The
commercial success of any of our product candidates will depend upon the
strength of our sales and marketing efforts. We do not have a sales force and
have no experience in sales, marketing or distribution. To fully commercialize
our product candidates, we will need a substantial marketing staff and sales
force with technical expertise and the ability to distribute these products. As
an alternative, we could seek assistance from a third party with a large
distribution system and a large direct sales force. We may be unable to put
either of these plans in place. In addition, if we arrange for others to market
and sell our products, our revenues will depend upon the efforts of those
parties. Such arrangements may not succeed.
Even if
one or more of our product candidates is approved for marketing, if we fail to
establish adequate sales, marketing and distribution capabilities, independently
or with others, our business will be seriously harmed.
Competition in the biotechnology and
biopharmaceutical industry is intense and most
of our competitors have substantially
greater resources than us.
The
biotechnology and biopharmaceutical industries are characterized by rapidly
advancing technologies, intense competition and a strong emphasis on proprietary
products. Several companies, such as Dendreon Corporation,
Immuno-Designed Molecules, Inc., Celldex Therapeutics, Inc., Ark Therapeutics
plc, Oxford Biomedica plc, Argos Therapeutics, Inc. and Antigenics, are actively
involved in the research and development of immunotherapies or cell-based cancer
therapeutics. Of these companies, we believe that only Dendreon and Ark
Therapeutics are carrying-out Phase III clinical trials with a cell-based
therapy. To our knowledge no DC-based therapeutic product is currently approved
for commercial sale. Additionally, several companies, such as Medarex, Inc.,
Amgen, Inc., Agensys, Inc., and Genentech, Inc., are actively involved in the
research and development of monoclonal antibody-based cancer therapies.
Currently, at least seven antibody-based products are approved for commercial
sale for cancer therapy. Genentech is also engaged in several Phase III
clinical trials for additional antibody-based therapeutics for a variety of
cancers, and several other companies are in early stage clinical trials for such
products. Many other third parties compete with us in developing alternative
therapies to treat cancer, including: biopharmaceutical companies; biotechnology
companies; pharmaceutical companies; academic institutions; and other research
organizations.
Most of
our competitors have significantly greater financial resources and expertise in
research and development, manufacturing, pre-clinical testing, conducting
clinical trials, obtaining regulatory approvals and marketing than we do. In
addition, many of these competitors are actively seeking patent protection and
licensing arrangements in anticipation of collecting royalties for use of
technology they have developed. Smaller or early-stage companies may also prove
to be significant competitors, particularly through collaborative arrangements
with large and established companies. These third parties compete with us in
recruiting and retaining qualified scientific and management personnel, as well
as in acquiring technologies complementary to our programs.
We expect
that our ability to compete effectively will be dependent upon our ability to:
obtain additional funding; successfully complete clinical trials and obtain all
requisite regulatory approvals; maintain a proprietary position in our
technologies and products; attract and retain key personnel; and maintain
existing or enter into new partnerships.
Our
competitors may develop more effective or affordable products, or achieve
earlier patent protection or product marketing and sales. As a result, any
products developed by us may be rendered obsolete and
non-competitive.
Our intellectual property rights may
not provide meaningful commercial protection for
our research products or product
candidates, which could enable third parties to use
our technology, or very similar
technology, and could reduce our ability to compete
in the market.
We rely
on patent, copyright, trade secret and trademark laws to limit the ability of
others to compete with us using the same or similar technology in the United
States and other countries. However, as described below, these laws afford only
limited protection and may not adequately protect our rights to the extent
necessary to sustain any competitive advantage we may have. The laws of some
foreign countries do not protect proprietary rights to the same extent as the
laws of the United States, and we may encounter significant problems in
protecting our proprietary rights in these countries.
We have
33 issued and licensed patents (9 in the United States and 23 in other
jurisdictions) and 134 patent applications pending (19 in the United States and
115 in other jurisdictions) which cover the use of dendritic cells in DCVax
®
as well
as targets for either our dendritic cell or fully human monoclonal antibody
therapy candidates. The issued patents expire at various dates from 2015 to
2026.
We will
only be able to protect our technologies from unauthorized use by third parties
to the extent that they are covered by valid and enforceable patents or are
effectively maintained as trade secrets. The patent positions of companies
developing novel cancer treatments, including our patent position, generally are
uncertain and involve complex legal and factual questions, particularly
concerning the scope and enforceability of claims of such patents against
alleged infringement. Recent judicial decisions in the United States are
prompting a reinterpretation of the limited case law that exists in this area,
and historical legal standards surrounding questions of infringement and
validity may not apply in future cases. A reinterpretation of existing
U.S. law in this area may limit or potentially eliminate our patent
position and, therefore, our ability to prevent others from using our
technologies. The biotechnology patent situation outside the United States is
even more uncertain. Changes in either the patent laws or the interpretations of
patent laws in the United States and other countries may, therefore, diminish
the value of our intellectual property.
We own or
have rights under licenses to a variety of issued patents and pending patent
applications. However, the patents on which we rely may be challenged and
invalidated, and our patent applications may not result in issued patents.
Moreover, our patents and patent applications may not be sufficiently broad to
prevent others from using our technologies or from developing competing
products. We also face the risk that others may independently develop similar or
alternative technologies or design around our patented
technologies.
We have
taken security measures to protect our proprietary information, especially
proprietary information that is not covered by patents or patent applications.
These measures, however, may not provide adequate protection for our trade
secrets or other proprietary information. We seek to protect our proprietary
information by entering into confidentiality agreements with employees, partners
and consultants. Nevertheless, employees, collaborators or consultants may still
disclose our proprietary information, and we may not be able to protect our
trade secrets in a meaningful way. In addition, others may independently develop
substantially equivalent proprietary information or techniques or otherwise gain
access to our trade secrets.
Our success will depend substantially
on our ability to operate without infringing or
misappropriating the proprietary
rights of others.
Our
success will depend to a substantial degree upon our ability to develop,
manufacture, market and sell our research products and product candidates
without infringing the proprietary rights of third parties and without breaching
any licenses entered into by us regarding our product candidates.
There is
a substantial amount of litigation involving patent and other intellectual
property rights in the biotechnology and biopharmaceutical industries generally.
Infringement and other intellectual property claims, with or without merit, can
be expensive and time-consuming to litigate and can divert management’s
attention from our core business. For example, Lonza Group AG filed a complaint
against us in the United States District Court for the District of Maryland
alleging patent infringement which was recently settled with prejudice without
any monetary consideration (more detailed description under Legal Proceedings).
In addition, we may be exposed to future litigation by third parties based on
claims that our products infringe their intellectual property rights. This risk
is exacerbated by the fact that there are numerous issued and pending patents in
the biotechnology industry and the fact that the validity and breadth of
biotechnology patents involve complex legal and factual questions for which
important legal principles remain unresolved.
Competitors
may assert that our products and the methods we employ are covered by
U.S. or foreign patents held by them. In addition, because patents can take
many years to issue, there may be currently pending applications, unknown to us,
which may later result in issued patents that our products may infringe. There
could also be existing patents of which we are not aware that one or more of our
products may inadvertently infringe.
If we
lose a patent infringement claim, we could be prevented from selling our
research products or product candidates unless we can obtain a license to use
technology or ideas covered by such patent or we are able to redesign our
products to avoid infringement. A license may not be available at all or on
terms acceptable to us, or we may not be able to redesign our products to avoid
infringement. If we are not successful in obtaining a license or redesigning our
products, we may be unable to sell our products and our business could
suffer.
We may not receive regulatory
approvals for our product candidates or there may be a
delay in obtaining such
approvals.
Our
products and our ongoing development activities are subject to regulation by
governmental and other regulatory authorities in the countries in which we or
our collaborators and distributors wish to test, manufacture or market our
products. For instance, the FDA will regulate the product in the U.S. and
equivalent authorities, such as the European Medicines Agency (“EMEA”), will
regulate in other jurisdictions. Regulatory approval by these authorities will
be subject to the evaluation of data relating to the quality, efficacy and
safety of the product for its proposed use.
The time
taken to obtain regulatory approval varies between countries. Different
regulators may impose their own requirements and may refuse to grant, or may
require additional data before granting, an approval, notwithstanding that
regulatory approval may have been granted by other regulators. Regulatory
approval may be delayed, limited or denied for a number of reasons, including
insufficient clinical data, the product not meeting safety or efficacy
requirements or any relevant manufacturing processes or facilities not meeting
applicable requirements.
Further trials and other costly and
time-consuming assessments of the product may be
required to obtain or maintain
regulatory approval.
Medicinal
products are generally subject to lengthy and rigorous pre-clinical and clinical
trials and other extensive, costly and time-consuming procedures mandated by
regulatory authorities. We may be required to conduct additional trials beyond
those currently planned, which could require significant time and expense. For
example, the field of cancer treatment is evolving, and the standard of care for
a particular cancer could change while we are in the process of conducting the
clinical trials for our product candidates. Such a change in standard of care
could make it necessary for us to conduct additional clinical trials, which
could delay our opportunities to obtain regulatory approval of our product
candidates.
As for
all biological products, we may need to provide pre-clinical and clinical data
evidencing the comparability of products before and after any changes in
manufacturing process both during and after product approval. Regulators may
require that we generate data to demonstrate that products before or after any
change are of comparable safety and efficacy if we are to rely on studies using
earlier versions of the product. DCVax
®
-Brain
has been the subject of process changes during the early clinical phase of its
development and regulators may require comparability data unless they are
satisfied that changes in process do not affect the quality, and hence efficacy
and safety, of the product.
We plan
to rely on our current DCVax
®
-Brain
Phase II clinical trial as a single study in support of regulatory
approval. While under certain circumstances, both EMEA and the FDA will accept a
Phase II study as a single study in support of approval, it is not yet
known whether they will do so in this case. If the regulators do not consider
the Phase II study adequate on its own to support a finding of efficacy, we
may be required to perform additional clinical trials in DCVax
®
-Brain.
There is some possibility that changes requested by the FDA could complicate the
licensing application process.
Only the
data for DCVax
®
-Brain
has been discussed with European regulators. On an informal basis, a number of
European national regulators have indicated that additional pre-clinical and
clinical data could be required before the DCVax
®
-Brain
product would be approved. However, it is not clear whether such data will be
required until formal scientific advice is sought from the EMEA, which is the
regulator that will ultimately review any application for approval of this
product. Unless the EMEA grants a deferral or a waiver, we may also be obliged
to generate clinical data in pediatric populations.
The FDA
previously identified a number of deficiencies regarding the design of our
original proposed Phase III clinical trial for DCVax
®
-Prostate.
We believe we remedied these deficiencies in the new trial design for a
600-patient Phase III clinical trial, which was cleared by the FDA in
January 2005. However, we now intend to split this single 600-patient
Phase III trial into two separate 300-patient Phase III trials. These
revisions in trial design may cause delay in the development process for
DCVax
®
-Prostate.
It is not yet known whether the FDA will consider the two-trial design
sufficient for marketing approval, or whether the agency will require us to
design and carry out additional studies. If, after the Phase III studies
are carried out, the FDA is not satisfied that its concerns were adequately
addressed, those studies could be insufficient to demonstrate efficacy and
additional clinical studies could be required at that time.
Any delay
in completing sufficient trials or other regulatory requirements will delay our
ability to generate revenue from product sales and we may have insufficient
capital resources to support its operations. Even if we do have sufficient
capital resources, our ability to generate meaningful revenues or become
profitable may be delayed.
Regulatory
approval may be withdrawn at any time.
After
regulatory approval has been obtained for medicinal products, the product and
the manufacturer are subject to continual review and there can be no assurance
that such approval will not be withdrawn or restricted. Regulators may also
subject approvals to restrictions or conditions, or impose post-approval
obligations on the holders of these approvals, and the regulatory status of such
products may be jeopardized if we do not comply. Extensive post-approval safety
studies are likely to be a condition of the approval and will commit us to
significant time and expense.
We
may fail to comply with regulatory requirements.
Our
success will be dependent upon our ability, and our collaborative partners’
abilities, to maintain compliance with regulatory requirements, including
regulators’ current good manufacturing practices (“cGMP”) and safety reporting
obligations. The failure to comply with applicable regulatory requirements can
result in, among other things, fines, injunctions, civil penalties, total or
partial suspension of regulatory approvals, refusal to approve pending
applications, recalls or seizures of products, operating and production
restrictions and criminal prosecutions.
We may be subject to sanctions if we
are determined to be promoting our
investigational products prior to
regulatory approval or for unapproved uses.
Laws in
both the U.S. and Europe prohibit us from promoting any product that has
not received approval from the appropriate regulator, or from promoting a
product for an unapproved use. If any regulator determines that we have engaged
in such pre-approval, or off-label promotion, through our website, press
releases, or other communications, the authority could require us to change the
content of those communications and could also take regulatory enforcement
action, including the issuance of a warning letter, requirements for corrective
action, civil fines, and criminal penalties. In the event of a product liability
lawsuit, materials that appear to promote a product for unapproved uses may
increase our product liability exposure.
We may not obtain or maintain orphan
drug status and the associated benefits,
including marketing
exclusivity.
We may
not receive the benefits associated with orphan drug designation. This may
result from a failure to achieve or maintain orphan drug status or the
development of a competing product that has an orphan designation for the same
indication. In Europe, the orphan status of DCVax
®
-Brain
will be reassessed shortly prior to the product receiving any regulatory
approval. The EMEA will need to be satisfied that there is evidence that
DCVax
®
-Brain
offers a significant benefit relative to existing therapies for the treatment of
glioma if DCVax
®
-Brain is
to maintain its orphan drug status.
New
legislation may have an adverse effect on our business.
Changes
in applicable legislation and/or regulatory policies or discovery of problems
with the product, production process, site or manufacturer may result in delays
in bringing products to market, the imposition of restrictions on the product’s
sale or manufacture, including the possible withdrawal of the product from the
market, or may otherwise have an adverse effect on our business.
The availability and amount of
reimbursement for our product candidates and the
manner in which government and
private payers may reimburse for our potential
products is
uncertain.
In many
of the markets where we intend to operate, the prices of pharmaceutical products
are subject to direct price controls (by law) and to drug reimbursement programs
with varying price control mechanisms.
We expect
that many of the patients in the United States who may seek treatment with our
products that may be approved for marketing will be eligible for coverage under
Medicare, the federal program that provides medical coverage for the aged and
disabled. Other patients may be covered by private health plans or may be
uninsured. The Medicare program is administered by the Centers for
Medicare & Medicaid Services (“CMS”), an agency within the
U.S. Department of Health and Human Services. Coverage and reimbursement
for products and services under Medicare are determined pursuant to regulations
promulgated by CMS and pursuant to CMS’s subregulatory coverage and
reimbursement determinations. It is difficult to predict how CMS will apply
those regulations and subregulatory determinations to novel products such as
ours.
Moreover,
the methodology under which CMS makes coverage and reimbursement determinations
is subject to change, particularly because of budgetary pressures facing the
Medicare program. For example, the Medicare Prescription Drug, Improvement, and
Modernization Act (the “Medicare Modernization Act”), enacted in 2003, provided
for a change in reimbursement methodology that has reduced the Medicare
reimbursement rates for many drugs, including oncology therapeutics. Even if our
product candidates are approved for marketing in the U.S., if we are unable to
obtain or retain coverage and adequate levels of reimbursement from Medicare or
from private health plans, our ability successfully to market such products in
the U.S. will be adversely affected. The manner and level at which the
Medicare program reimburses for services related to our product candidates
(e.g., administration services) also may adversely affect our ability to market
or sell any of our product candidates that may be approved for marketing in the
U.S.
In the
U.S., efforts to contain or reduce health care costs have resulted in many
legislative and regulatory proposals at both the federal and state level, and it
is difficult to predict which, if any, of these proposals will be enacted, and,
if so, when. Cost control initiatives by governments or third party payers could
decrease the price that we receive for any one or all of our potential products
or increase patient coinsurance to a level that makes our product candidates
unaffordable for patients. In addition, government and private health plans are
more persistently challenging the price and cost-effectiveness of therapeutic
products. If third-party payers were to determine that one or more of our
product candidates is not cost-effective, this could result in refusal to cover
those products or in coverage at a low reimbursement level. Any of these
initiatives or developments could prevent us from successfully marketing and
selling any of our potential products.
In the
E.U., 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 such products to consumers. The approach taken
varies from member state to member state. Some jurisdictions operate positive
and/or negative list systems under which products may only be marketed once a
reimbursement price has been agreed. 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, as exemplified by the role of the
National Institute for Health and Clinical Excellence in the U.K. which
evaluates the data supporting new medicines and passes reimbursement
recommendations to the government. In addition, in some countries cross-border
imports from low-priced markets (parallel imports) exert commercial pressure on
pricing within a country.
DCVax
®
is our
only technology in clinical development.
Unlike
many pharmaceutical companies that have a number of products in development and
which utilize many technologies, we are dependent on the success of our
DCVax
®
platform
and, potentially, our CXCR4 antibody technology. While DCVax
®
technology has a number of potentially beneficial uses, if that core technology
is not commercially viable, we would have to rely on the CXCR4 technology, which
is at an early pre-clinical stage of development, for our success. If the CXCR4
technology also fails, we currently do not have other technologies to fall back
on and our business could fail.
We
may be prevented from using the DCVax
®
name in
Europe.
The EMEA
has indicated that DCVax
®
may not
be an acceptable name because of the suggested reference to a vaccine. Failure
to obtain the approval for the use of the DCVax
®
name in
Europe would require us to market our potential products in Europe under a
different name which could impair the successful marketing of our product
candidates and may have a material adverse effect on our results of operations
and financial condition.
Competing
generic medicinal products may be approved.
In the
E.U., there exists a process for the approval of generic biological medicinal
products once patent protection and other forms of data and market exclusivity
have expired. If generic medicinal products are approved, competition from such
products may reduce sales of our products. Other jurisdictions, including the
U.S., are considering adopting legislation that would allow the approval of
generic biological medicinal products.
We may be exposed to potential
product liability claims, and insurance against these
claims may not be available to us at
a reasonable rate in the future, if at all.
Our
business exposes us to potential product liability risks that are inherent in
the testing, manufacturing, marketing and sale of therapeutic products. Our
insurance coverage may not be adequate to cover claims against us or may not be
available to us at an acceptable cost, if at all. Regardless of their merit or
eventual outcome, product liability claims may result in decreased demand for a
product, injury to our reputation, withdrawal of clinical trial volunteers and
loss of revenues. Thus, whether or not we are insured, a product liability claim
or product recall may result in losses that could be material.
We store,
handle, use and dispose of controlled hazardous, radioactive and biological
materials in our business. Our current use of these materials generally is below
thresholds giving rise to burdensome regulatory requirements. Our development
efforts, however, may result in our becoming subject to additional requirements,
and if we fail to comply with applicable requirements we could be subject to
substantial fines and other sanctions, delays in research and production, and
increased operating costs. In addition, if regulated materials were improperly
released at our current or former facilities or at locations to which we send
materials for disposal, we could be liable for substantial damages and costs,
including cleanup costs and personal injury or property damages, and incur
delays in research and production and increased operating costs.
Insurance
covering certain types of claims of environmental damage or injury resulting
from the use of these materials is available but can be expensive and is limited
in its coverage. We have no insurance specifically covering environmental risks
or personal injury from the use of these materials and if such use results in
liability, our business may be seriously harmed.
Toucan Capital and Toucan Partners
beneficially own a majority of our shares of
common stock and, as a result, the
trading price for our common stock may be
depressed and these stockholders can
take actions that may be adverse to the
interests of other
investors.
As of
April 14, 2009, Toucan Capital, its affiliate, Toucan Partners and its managing
member, Ms. Linda Powers, collectively beneficially owned an aggregate of
21,872,196 shares of our common stock, representing
approximately 48.5 percent of our outstanding common stock. In
addition, as of April 14, 2009, Toucan Capital may acquire an aggregate of
approximately 22.0 million shares of common stock upon exercise of warrants
and Toucan Partners may acquire an aggregate of approximately 9.0 million
shares of common stock upon the exercise of warrants. This significant
concentration of ownership may adversely affect the trading price of our common
stock because investors often perceive disadvantages in owning stock in
companies with controlling stockholders. Toucan Capital has the ability to exert
substantial influence over all matters requiring approval by our stockholders,
including the election and removal of directors and any proposed merger,
consolidation or sale of all or substantially all of our assets. In addition, a
managing member of Toucan Capital is a member of the Board. In light of the
foregoing, Toucan Capital can significantly influence the management of our
business and affairs. This concentration of ownership could have the effect of
delaying, deferring or preventing a change in control, or impeding a merger or
consolidation, takeover or other business combination that could be favorable to
investors.
Our Certificate of Incorporation and
Bylaws and stockholder rights plan may delay or
prevent a change in our
management.
Our
Seventh Amended and Restated Certificate of Incorporation, as amended (the
“Certificate of Incorporation”), Third Amended and Restated Bylaws (the
“Bylaws”) and stockholder rights plan contain provisions that could delay or
prevent a change in our management team. Some of these provisions:
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authorize
the issuance of preferred stock that can be created and issued by the
Board without prior stockholder approval, commonly referred to as “blank
check” preferred stock, with rights senior to those of the common
stock;
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allow
the Board to call special meetings of stockholders at any time but
restrict the stockholders from calling special
meetings;
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authorize
the Board to issue dilutive common stock upon certain
events; and
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provide
for a classified Board.
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These
provisions could allow our Board to affect the rights of an investor since the
Board can make it more difficult for holders of common stock to replace members
of the Board. Because the Board is responsible for appointing the members of the
management team, these provisions could in turn affect any attempt to replace
the current management team.
There
may not be an active, liquid trading market for our common stock.
Our
common stock is currently listed on the Over-The-Counter Bulletin Board, or
OTCBB, and on AIM, which are generally recognized as being less active markets
than NASDAQ, the stock exchange on which our common stock previously was listed.
You may not be able to sell your shares at the time or at the price desired.
There may be significant consequences associated with our stock trading on the
OTCBB rather than a national exchange. The effects of not being able to list our
securities on a national exchange include:
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limited
release of the market price of our
securities;
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limited
interest by investors in our
securities;
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volatility
of our stock price due to low trading
volume;
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increased
difficulty in selling our securities in certain states due to “blue sky”
restrictions; and
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limited
ability to issue additional securities or to secure additional
financing.
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The resale, or the availability for
resale, of the shares placed in the PIPE
Financing could have a material
adverse impact on the market price of our common
stock.
The PIPE
Financing, completed in March 2006, included the private placement of an
aggregate of approximately 2.6 million shares of common stock and
accompanying warrants to purchase an aggregate of approximately 1.3 million
shares of common stock. In connection with the PIPE Financing, we agreed to
register, and subsequently did register, the resale of the shares of common
stock sold in the PIPE Financing and the shares underlying the warrants issued
in the PIPE Financing. The resale of a substantial number of the shares placed
in the PIPE Financing or even the availability of these shares for resale, could
have a material adverse impact on our stock price.
Because our common stock is subject
to “penny stock” rules, the market for the common
stock may be
limited.
Because
our common stock is subject to the SEC’s “penny stock” rules, broker-dealers may
experience difficulty in completing customer transactions and trading activity
in our securities may be adversely affected. Under the “penny stock” rules
promulgated under the Exchange Act, broker-dealers who recommend such securities
to persons other than institutional accredited investors must:
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make
a special written suitability determination for the
purchaser;
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receive
the purchaser’s written agreement to a transaction prior to
sale;
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provide
the purchaser with risk disclosure documents which identify certain risks
associated with investing in “penny stocks” and which describe the market
for these “penny stocks” as well as a purchaser’s legal
remedies; and
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obtain
a signed and dated acknowledgment from the purchaser demonstrating that
the purchaser has actually received the required risk disclosure document
before a transaction in a “penny stock” can be
completed.
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As a
result of these rules, broker-dealers may find it difficult to effectuate
customer transactions and trading activity in our common stock may be adversely
affected. As a result, the market price of our common stock may be depressed,
and stockholders may find it more difficult to sell our common
stock.
The
price of our common stock may be highly volatile.
The share
price of publicly traded biotechnology and emerging pharmaceutical companies,
particularly companies without earnings and consistent product revenues, can be
highly volatile and are likely to remain highly volatile in the future. The
price at which our common stock is quoted and the price which investors may
realize in sales of their shares of our common stock will be influenced by a
large number of factors, some specific to us and our operations and some
unrelated to our operating performance. These factors could include the
performance of our marketing programs, large purchases or sales of the shares,
currency fluctuations, legislative changes and general economic conditions. In
the past, share class action litigation has often been brought against companies
that experience volatility in the market price of their shares. Whether or not
meritorious, litigation brought against us following fluctuations in the trading
price of our common stock could result in substantial costs, divert management’s
attention and resources and harm our financial condition and results of
operations.
Our
business could be adversely affected by animal rights activists.
Our
business activities have involved animal testing. These types of activities have
been the subject of controversy and adverse publicity. Some organizations and
individuals have attempted to stop animal testing by pressing for legislation
and regulation in these areas. To the extent the activities of such groups are
successful, our business could be adversely affected. Negative publicity about
us, our pre-clinical trials and our product candidates could have an adverse
impact on our sales and profitability.
The requirements of the
Sarbanes-Oxley Act of 2002 and other U.S. securities laws
reporting requirements impose cost
and operating challenges on us.
We are
subject to certain of the requirements of the Sarbanes-Oxley Act of 2002 in the
U.S. and the reporting requirements under the Exchange Act. These laws
require, among other things, an attestation report of our independent auditor on
the effectiveness of our internal control over financial reporting, currently
expected to begin with our annual report for the year ended December 31,
2009, as well as the filing of annual reports on Form 10-K, quarterly
reports on Form 10-Q and periodic reports on Form 8-K following the
happening of certain material events. To meet these compliance deadlines, we
will need to have our internal controls designed, tested and operational by
early 2009 to ensure compliance with applicable standards. We initiated the
process of documenting and evaluating our internal controls and financial
reporting procedures in early 2008. This process is ongoing and will continue to
likely be time consuming and will result in us having to significantly change
our controls and reporting procedures due to our small number of employees and
lack of governance controls. Most similarly-sized companies registered with the
SEC have had to incur significant costs to ensure compliance. Moreover, any
failure by us to comply with such provisions would be required to be disclosed
publicly, which could lead to a loss of public confidence in our internal
controls and could harm the market price of our common stock.
Our management has identified
significant internal control deficiencies, which
management and our independent
auditor believe constitute material weaknesses.
In
connection with the preparation of our financial statements for the year ended
December 31, 2008, certain significant internal control deficiencies became
evident to management that, in the aggregate, represent material weaknesses,
including:
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lack
of a sufficient number of independent directors on our audit
committee;
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lack
of a financial expert on our audit
committee
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insufficient
segregation of duties in our finance and accounting function due to
limited personnel;
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insufficient
corporate governance
policies; and
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inadequate
approval and control over transactions and commitments made on our behalf
by related parties.
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As part
of the communications by our independent auditors with our audit committee with
respect to audit procedures for the year ended December 31, 2008, our
independent auditors informed the audit committee that these deficiencies
constituted material weaknesses, as defined by Auditing Standard No. 5, “An
Audit of Internal Control Over Financial Reporting that is Integrated with an
Audit of Financial Statements and Related Independence Rule and Conforming
Amendments,” established by the Public Company Accounting Oversight Board, or
PCAOB. We intend to take appropriate and reasonable steps to make the necessary
improvements to remediate these deficiencies but we cannot be certain that we
will have the necessary financing to address these deficiencies or that we will
be able to attract qualified individuals to serve on our Board and to take on
key management roles within the Company. Our failure to successfully remediate
these issues could lead to heightened risk for financial reporting mistakes and
irregularities and a further loss of public confidence in our internal controls
that could harm the market price of our common stock.
Item 1B.
Unresolved Staff
Comments
None.
Item 2.
Properties
On
March 21, 2008, we executed a sublease agreement with Toucan Capital
Corporation, an affiliate of Toucan Capital and Toucan Partners, for our new
corporate headquarters located at 7600 Wisconsin Avenue, Suite 750,
Bethesda, Maryland 20814. This sublease agreement is effective as of
July 1, 2007 and expires on October 31, 2016, unless sooner terminated
according to its terms. Previously, we had been occupying our Bethesda
headquarters under an oral arrangement with Toucan Capital Corporation, whereby
we were required to pay base rent of $32,949.10 per month through
December 31, 2007. Under the Sublease Agreement, we are required to pay
base rent of $34,000 per month during the year 2008, which monthly amount
increases by $1,000 on an annual basis, to a maximum of $42,000 per month during
2016, the last year of the term of the lease. In addition to monthly base rent,
we are obligated to pay operating expenses allocable to the subleased premises
under Toucan Capital Corporation’s master lease.
Item 3.
Legal
Proceedings
From time
to time, we are involved in claims and suits that arise in the ordinary course
of our business. Although management currently believes that resolving any such
claims against us will not have a material adverse impact on our business,
financial position or results of operations, these matters are subject to
inherent uncertainties and management’s view of these matters may change in the
future. In addition to any such claims and suits, we are involved in the
following legal proceedings.
SOMA
Arbitration
We signed
an engagement letter, dated October 15, 2003, with Soma Partners, LLC, or
Soma, a New Jersey-based investment bank, pursuant to which we engaged them to
locate potential investors. Pursuant to the terms of the engagement letter, any
disputes arising between the parties would be submitted to arbitration in the
New York metropolitan area. A dispute arose between the parties. Soma filed an
arbitration claim against us with the American Arbitration Association in New
York, NY claiming unpaid commission fees of $186,000 and seeking declaratory
relief regarding potential fees for future transactions that may be undertaken
by us with Toucan Capital. We vigorously disputed Soma’s claims on multiple
grounds. We contended that we only owed Soma approximately
$6,000.
Soma
subsequently filed an amended arbitration claim, claiming unpaid commission fees
of $339,000 and warrants to purchase 6% of the aggregate securities issued to
date, and seeking declaratory relief regarding potential fees for future
financing transactions which may be undertaken by us with Toucan Capital and
others, which could potentially be in excess of $4 million. Soma also
requested the arbitrator award its attorneys’ fees and costs related to the
proceedings. We strongly disputed Soma’s claims and defended
ourselves.
The
arbitration proceedings occurred from March 8-10, 2005 and on May 24, 2005,
the arbitrator ruled in our favor and denied all claims of Soma. In particular,
the arbitrator decided that we did not owe Soma the fees and warrants sought by
Soma, that we would not owe Soma fees in connection with future financings, if
any, and that we had no obligation to pay any of Soma’s attorneys’ fees or
expenses. The arbitrator agreed with us that the only amount we owed Soma was
$6,702.87, which payment we made on May 27, 2005.
On
August 29, 2005, Soma filed a notice of petition to vacate the May 24,
2005 arbitration award with the Supreme Court of the State of New York. On
December 30, 2005, the Supreme Court of the State of New York dismissed
Soma’s petition.
On
February 3, 2006, Soma filed another notice of appeal with the Supreme
Court of the State of New York. On December 6, 2006, we filed our brief for
this appeal and on December 12, 2006, Soma filed its reply brief. On
June 19, 2007, the Appellate Division, First Department of the Supreme
Court of the State of New York, reversed the December 30, 2005 decision and
ordered a new arbitration proceeding. On July 26, 2007, we filed a Motion
for Leave to Appeal with the Court of Appeals of the State of New York and on
August 3, 2007 Soma filed its reply brief. On October 16, 2007, the
Court of Appeals of the State of New York denied our motion to appeal. A new
arbitration hearing is scheduled in New York for May 13-15, 2009. We
intend to continue to vigorously defend ourselves against the claims of
Soma.
Lonza
Patent Infringement Claim
On
July 27, 2007, Lonza Group AG (“Lonza”) filed a complaint against us in the
United States District Court for the District of Delaware alleging patent
infringement relating to recombinant DNA methods, sequences, vectors, cell lines
and host cells. The complaint sought temporary and permanent injunctions
enjoining us from infringing Lonza’s patents and unspecified damages. On
November 27, 2007, the complaint was dismissed from the United States
District Court for the District of Delaware. Also on November 27, 2007, a
new complaint was filed by Lonza in the United States District Court for the
District of Maryland. The new complaint alleged the same patent infringement
relating to recombinant DNA methods, sequences, vectors, cell lines and host
cells by the Company’s DCVax
®
.
On April
14, 2008, we and Lonza entered into a binding agreement to settle the dispute.
Under the terms of the settlement, we did not pay any monetary or other
consideration to Lonza nor did we acquire any license from Lonza. The only
action to which we agreed was to destroy any recombinant modified prostate
specific membrane antigen or cell lines using Lonza’a GS Expression System
currently in our possession which had been manufactured by and purchased from
Medarex Inc. more than six years ago, as well as any documentation received from
Medarex on know–how regarding the use of the GS Expression System and cell
lines. On May 14, 2008 the parties filed a Joint Stipulation of Dismissal of the
Lawsuit with Prejudice, including all claims and counterclaims
therein.
Stockholder
Class Action Lawsuits
On August
13, 2007, a complaint was filed in the U.S. District Court for the Western
District of Washington naming the Company, the Chairperson of its Board of
Directors, Linda F. Powers, and its Chief Executive Officer, Alton L. Boynton,
as defendants in a class action for violation of federal securities laws. After
this complaint was filed, five additional complaints were filed in other
jurisdictions alleging similar claims. The complaints were filed on behalf of
purchasers of the Company’s Common Stock between July 9, 2007 and July 18, 2007
and allege violations of Section 10(b) of the Exchange Act and Rule 10b-5
thereunder. The complaints seek unspecified compensatory damages, costs and
expenses. On December 18, 2007, a consolidated complaint was filed in the U.S.
District Court for the Western District of Washington consolidating the
stockholder actions previously filed. The putative securities class action
lawsuit,
In re Northwest
Biotherapeutics, Inc. Securities Litigation
, No. C-07-1254-RAJ was
settled with prejudice January 8,2009. The Company has agreed to pay
in settlement US$1 million. In accordance with the stipulation the
insurance company has directly deposited the $1,000,000 in a court
controlled escrow account. The settlement must be approved by the
Court. Additional details about the settlement can be found in the
formal settlement documents, which are available from the United States District
Court for the Western District of Washington. The case alleged that
the Company misrepresented certain facts that resulted in the artificial
inflation of the price of Northwest Biotherapeutics publicly-traded common stock
between April 17, 2007 and July 18, 2007. The Company disputes the
allegations of the lawsuit, and denies that there was any such misrepresentation
or that the shares of Northwest Biotherapeutics common stock were artificially
inflated. Nevertheless the Company is settling the lawsuit to avoid
potentially expensive and protracted litigation.
SEC
Inquiry
On
August 13, 2007, we were notified that the SEC had initiated a non-public
informal inquiry regarding the events surrounding our application for Swiss
regulatory approval and related press releases dated July 9, 2007 and
July 16, 2007. On March 3, 2008 we were notified that the SEC had
initiated a formal investigation regarding this matter. We cooperated
with the SEC in connection with the inquiry, and after a thorough investigation
by the SEC the formal investigation was closed without any action.
Item 4.
Submission of Matters to
a Vote of Security Holders
There
were no matters submitted for stockholders’ approval in the quarter ended
December 31, 2008.
PART III
Item 10.
Directors, Executive
Officers and Corporate Governance
Our
directors and their ages and positions, as of April 13, 2009, are as
follows. Ms. Powers’ biography follows the table.
Dr. Boynton’s biography is included under “Executive Officers of
Northwest Biotherapeutics, Inc.” in Part I of this report.
Name
|
|
Age
|
|
Position
|
Alton
L. Boynton, Ph.D.
|
|
64
|
|
President,
Chief Executive Officer, Secretary and Director
|
Linda
F. Powers
|
|
53
|
|
Director,
Chairperson
|
Linda F.
Powers.
Ms. Powers has served as the Chairperson of our
Board of Directors since her appointment on May 17, 2007. Ms. Powers
has served as managing director of Toucan Capital Corporation, a provider of
venture capital since 2001. She has over 15 years experience in corporate
finance and restructurings, mergers and acquisitions joint ventures and
intellectual property licensing. Ms. Powers is a board member of M2GEN,
an affiliate of Moffitt Cancer Center (the third largest cancer center
in U.S.), a board member of the Trudeau Institute, well known for its
specialization in immunology. She was the Chair of the Maryland Stem
Cell Research Commission for the first two years of the state’s stem cell
funding program. Ms. Powers has been appointed to three Governors’
commissions created to determine how to build the respective states’ biotech and
other high-tech industries. She served as the Deputy Assistant Secretary of
Commerce in the George H. W. Bush, Sr. administration. She was co-lead
negotiator for the U.S. on the North American Free Trade Agreement
financial sector agreement, which opened banking, securities, insurance, pension
fund and related opportunities in Canada and Mexico. Ms. Powers serves on
the steering committee of the National Academy of Sciences evaluating Federal
grant programs, and on the Advisory Board of the US Department of Commerce NIST
Advanced Technology Program. Ms. Powers also serves on the boards of
directors of six private biotechnology companies. Ms. Powers holds a B.A.
from Princeton University, where she graduated magna cum laude and Phi Beta
Kappa. She also earned a JD, magna cum laude, from Harvard Law School.
Ms. Powers is also a member of the Audit Committee, Compensation Committee
and Nominations Committee.
For
information pertaining to our executive officers, refer to “Executive Officers
of Northwest Biotherapeutics, Inc.” included in Part I, Item 1 of this
Annual Report on Form 10-K.
Board
of Directors
Our Board
of Directors consists of one non-employee director and one director who is
currently employed by us. The Board has established the following
committees:
Audit
Committee
The Audit
Committee has responsibility for recommending the appointment of our independent
accountants, supervising our finance function (which includes, among other
matters, our investment activities), reviewing our internal accounting control
policies and procedures, and providing the Board such additional information and
materials as it may deem necessary to make the Board aware of significant
financial matters which require the attention of the Board. The Audit Committee
provides the opportunity for direct contact between our independent registered
public accounting firm and the Board. The Board has adopted a written charter
for the Audit Committee and its current member, Linda F. Powers, is a
non-employee director.
Compensation
Committee
The
Compensation Committee is responsible for determining the overall compensation
levels of our executive officers and administering our stock option plans. The
Board has adopted a written charter for the Compensation Committee and its
current member is Linda F. Powers a
non-employee.
Nominations
Committee
The
Nominations Committee is responsible for identifying and nominating members of
the Board, recommending directors to be appointed to each committee of the Board
and the chair of such committees, and overseeing the evaluation of the Board.
The Board has adopted a written charter for the Nominations Committee and its
current member is a non-employee director Linda F. Powers. The
Nominations Committee will consider nominees recommended by stockholders
pursuant to the procedures outlined in the Company’s Bylaws and as set forth
herein. No Nominations Committee meetings were held during the year ended
December 31, 2008.
It is the
Board’s intention to appoint additional independent non-executive directors to
these committees in due course.
We have
adopted a code of ethics meeting the definition of “Code of Ethics” as defined
in Item 406 of Regulation S-K. Our Code of Ethics is applicable to the
chief executive officer, the chief financial officer, the principal accounting
officer or persons performing similar functions. Our code of ethics is posted on
our website and may be accessed at www.nwbio.com/about_code.php. We will post to
our website any amendments to our code of ethics and any waivers granted under
the code to any of our directors or executive officers.
None of
our directors meet the definition of an “audit committee financial expert” as
defined by the SEC. We intend to recruit one or more additional non-executive
directors in due course, including one person who qualifies as an audit
committee financial expert but may not be able to do so.
Item 11.
Executive
Compensation
Compensation
Discussion and Analysis
Our
Process
Typically,
our executive compensation is comprehensively assessed and analyzed annually;
however, given our limited funding since 2002, our executives have received
infrequent increases in their compensation. During 2007, our Chief Technical
Officer received an increase in base salary based on performance and in order to
take steps to be more competitive in the market. During 2007, our executives
also received equity based incentives. No salary
increases or equity based incentives were granted during
2008.
Normally,
the review process includes, but is not limited to, the following
steps:
|
·
|
The
Compensation Committee reviews the performance of the Chief Executive
Officer and other senior
executives;
|
|
·
|
The
current annual compensation of senior management and long-term
compensation grants made over the past few years are
reviewed;
|
|
·
|
The
appropriate performance metrics and attributes of annual and long-term
programs for the next year are considered and
discussed;
|
|
·
|
The
entirety of our compensation program is
considered;
|
|
·
|
For
our top officers, if peer group compensation is available for their
position, we use a blend of survey and peer compensation for comparison,
as we compete not only in our own market, but nationally and across
industries, for talent;
|
|
·
|
The
compensation practices of our peer companies are reviewed, including their
practices with respect to equity and other grants, benefits and
perquisites;
|
|
·
|
The
compensation of our management team from the standpoint of internal
equity, complexity of the job, scope of responsibility and other factors
is assessed; and
|
|
·
|
Management’s
stock ownership is reviewed.
|
Management
has the following involvement with the executive compensation
process:
|
·
|
The
Chief Executive Officer reviews recommendations from the Chief Financial
Officer regarding salaries, annual and long-term incentive targets, and
plan amendments and design before recommendations are submitted to the
Compensation Committee for
approval; and
|
|
·
|
The
Chief Executive Officer and Chief Financial Officer are both involved in
establishing and recommending to the Compensation Committee financial
goals for the incentive programs based on management’s operational goals
and strategic plans.
|
Compensation
Goals
Our
philosophy regarding executive compensation is to attract and retain highly
qualified people by paying competitive salaries, and to link the financial
interests of our senior management to those of our stockholders by tying
compensation to the achievement of operational and financial objectives. Our
compensation package for our officers includes both short-term and long-term
features in the forms of base salary and equity-based incentives in the form of
stock options, which are granted periodically at the discretion of the
Compensation Committee.
Elements
of Executive Compensation
Base
Salaries
Base
salaries for all executive officers are reviewed annually. The Compensation
Committee reviews the compensation of the President and Chief Executive Officer.
The President and Chief Executive Officer reviews the compensation of the other
executive officers. The Compensation Committee also consults with the President
and Chief Executive Officer with respect to the compensation package for all
other executive officers. In evaluating salaries, each officer’s individual
performance during the prior year, as well as salary levels in the biotechnology
industry for comparable positions, are considered. In determining how the
respective officer contributes to the Company, current corporate performance, as
well as the potential for future performance gains, are considered. No specific
weight is attributed to the foregoing for purposes of determining base
salaries.
Equity-Based
Incentives
We
provide our executive officers with long-term incentives through our 1998 Plan,
1999 Plan, 2001 Plan, Employee Plan and beginning in 2007, our 2007 Stock Option
Plan (each, as defined under “— Equity Plans” below), all described in more
detail below. On June 22, 2007, we amended the 1998 Plan, 1999 Plan, 2001
Plan and Employee Plan such that no further stock option grants may be made
under any of such plans. The primary objective of these plans is to provide an
incentive for employees, including our executive officers, to make decisions and
take actions that maximize long-term stockholder value. The plans are designed
to promote this long-term focus by using discretionary grants and long-term
vesting periods. Subject to the terms of the plans, the Compensation Committee
determines the terms and conditions of options granted under the plans,
including the exercise price, which is based on fair value of our stock on the
date of grant. For various motivation and retention considerations, option
awards granted subsequent to our initial public offering in December 2001
generally vest over four years. The Compensation Committee believes that stock
options provide an incentive for employees, allowing us to attract and retain
high quality management and staff. Stock options were issued to our executives
in 2007. No stock options were issued to executive officers in
2008.
Employee
and Executive Benefits
Our
executives participate in many of the same employee benefit programs as our
other employees. The core employee benefit programs include a tax-qualified
retirement plan, medical coverage, dental coverage, life insurance, disability
coverage, and vacation. The tax qualified retirement plan is a 401(k) plan. We
made matching contributions to each employee’s 401(k) plan account of $0.50 for
each dollar contributed on the first $3,000 of compensation contributed to the
plan. Our matching contribution policy was terminated effective March 2006. All
of these matching contribution amounts to our Named Executive Officers are shown
in the
All Other
Compensation
footnote to the
Summary Compensation Table following this section.
Perquisites
Historically,
we have offered only a very limited number of perquisites to our executives as
an incremental benefit to recognize their position within the Company. No
perquisites of any kind were offered to executives in 2008.
Compensation
of the President and Chief Executive Officer
In
assembling the compensation package for our President and Chief Executive
Officer, the Compensation Committee considers our annual and long-term
performance, the performance of the President and Chief Executive Officer, and
our cash resources and needs. Although the Committee’s overall goal is to set
the President and Chief Executive Officer’s salary at the median level for
competitors that are similar in industry size and performance, the actual level
approved by the Committee may be higher or lower based upon the Committee’s
subjective evaluation of the foregoing. Consistent with the foregoing, the
Compensation Committee set the base salary for the President and Chief Executive
Officer at $331,250 for fiscal 2008. The President and Chief Executive Officer
did not receive an increase in salary or a bonus for 2008. In connection with
our initial public offering on AIM, in December 2007, the Board of Directors
granted the President and Chief Executive Officer an option to purchase shares
of our common stock.
Accounting
for Stock-based Compensation
Effective
January 1, 2006, we measure and recognize compensation expense in
accordance with SFAS 123(R), which requires that compensations expense
relating to share-based payment transactions be recognized in the financial
statements based on the fair value of the equity or liability instruments
issued.
Prior to
January 1, 2006, we accounted for our stock-based compensation plans under
the measurement and recognition provision of APB 25, and related
interpretations. Under this method, stock option awards generally did not result
in compensation expense, since their exercise price was typically equal to the
market price of our common stock on the date of grant.
The
Compensation Committee considers the accounting treatment of equity and
performance based compensation when approving awards.
REPORT
OF THE COMPENSATION COMMITTEE
1
We, the
Compensation Committee of the Board of Directors, have reviewed and discussed
the Compensation Discussion and Analysis (“CD&A”) within the Executive
Compensation section of this Annual Report on Form 10-K with the management
of the Company. Based on such review and discussion, we have recommended to the
Board of Directors that the CD&A be included in the Company’s Annual Report
on Form 10-K for the year ending December 31, 2008.
Submitted
by the Compensation Committee of the Board of Directors:
Linda F.
Powers
Summary
Compensation
The
Company granted options to its executive officers and management in December
2007. We did not issue any option or stock awards to our executives in the year
ended December 31, 2008.
1
The
material in this report is not “soliciting material,” is not deemed “filed” with
the SEC, and is not to be incorporated by reference into any of our filings
under the Securities Act or the Exchange Act, whether made before or after the
date hereof and irrespective of any general incorporation language contained in
such filing.
Summary
Compensation Table
The
following table sets forth certain information concerning compensation paid or
accrued to our named executive officers (the “Named Executive Officers”) during
the years ended December 31, 2008, 2007 and 2006.
Name and Principal Position
|
|
Year
|
|
Salary
|
|
|
Bonus
|
|
|
Option
Awards(3)
|
|
|
All Other
Compensation(1)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alton
L. Boynton, Ph.D.
|
|
2008
|
|
$
|
331,250
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
504
|
|
|
$
|
331,754
|
|
President,
Chief Executive
|
|
2007
|
|
$
|
331,250
|
|
|
|
—
|
|
|
$
|
2,011,680
|
|
|
$
|
1,828
|
|
|
$
|
2,344,758
|
|
Officer,
Chief Scientific Officer and Secretary(2)
|
|
2006
|
|
$
|
330,802
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
2,993
|
|
|
$
|
333,795
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthony
P. Deasey (4)
|
|
2008
|
|
$
|
215,331
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
378
|
|
|
$
|
215,709
|
|
Senior
Vice President and Chief Financial Officer
|
|
2007
|
|
$
|
63,462
|
|
|
|
—
|
|
|
$
|
115,268
|
|
|
|
—
|
|
|
$
|
178,730
|
|
|
|
2006
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jim
Johnston(5)
|
|
2008
|
|
$
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
Chief
Financial Officer and
|
|
2007
|
|
$
|
96,718
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
96,718
|
|
General
Counsel
|
|
2006
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marnix
L. Bosch, Ph.D., M.B.A.
|
|
2008
|
|
$
|
250,000
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
672
|
|
|
$
|
250,672
|
|
Chief
Technical Officer
|
|
2007
|
|
$
|
224,980
|
|
|
|
—
|
|
|
$
|
471,661
|
|
|
$
|
482
|
|
|
$
|
697,123
|
|
|
|
2006
|
|
$
|
167,021
|
|
|
|
—
|
|
|
$
|
1,344
|
|
|
$
|
982
|
|
|
$
|
169,347
|
|
(1)
|
All
Other Compensation for the years ended December 31, 2008, 2007 and
2006 consisted of Company-paid premiums on term life insurance coverage up
to 1.5 times the employee’s annual salary and earned but unpaid accrued
vacation payments. Additionally in 2006, we provided matching
contributions to the employee’s 401(k) plan accounts up to a maximum of
$3,000.
|
(2)
|
Dr. Boynton
was appointed as our Chief Executive Officer in June 2007.
Dr. Boynton served as our Chief Operating Officer and our principal
executive officer during 2006.
|
(3)
|
Represents
the amount recognized for financial statement reporting purposes for 2008,
2007 and 2006 in respect of outstanding option awards in accordance with
SFAS 123(R), excluding any impact of assumed forfeiture rates. The
assumptions made in valuing option awards reported in this column are
discussed in Note 3, Stock-Based Compensation Plans to our
consolidated financial statements for the years ended December 31,
2008, 2007 and 2006, included elsewhere in this Annual Report on
Form 10-K.
|
(4)
|
Effective
October 1, 2007, we named Anthony P. Deasey as our Chief Financial
Officer. Mr. Deasey resigned from this position effective
August 12, 2008.
|
(5)
|
Effective
March 1, 2007, we named Jim Johnston as our Chief Financial Officer
and General Counsel. Mr. Johnston
resigned from these positions
effective August 28,
2007.
|
Given our
financial status, there are no regularly scheduled increases in
compensation.
Grants
of Plan-Based Awards in 2008
The
following table provides information about equity awards granted to the Named
Executive Officers during the year ended December 31, 2008. We did not
grant any stock options, stock appreciation rights or restricted stock to Named
Executive Officers during the fiscal year ended December 31,
2008.
Outstanding
Equity Awards at Fiscal Year-End
The
following table shows outstanding stock option awards classified as exercisable
and unexercisable as of December 31, 2008.
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
(e)
|
|
|
|
Number of Securities
|
|
|
Number of Securities
|
|
|
Option
|
|
|
|
|
|
Underlying Unexercised
|
|
|
Underlying Unexercised
|
|
|
Exercise
|
|
Option
|
|
|
|
Options (#)
|
|
|
Options (#)
|
|
|
Price
|
|
Expiration
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
($)
|
|
Date
|
|
Alton
L. Boynton
|
|
|
11,014
|
(1)
|
|
|
0
|
|
|
$
|
12.85
|
|
11/16/09
|
|
|
|
|
5,286
|
(1)
|
|
|
0
|
|
|
|
18.75
|
|
04/18/11
|
|
|
|
|
6,666
|
(1)
|
|
|
0
|
|
|
|
1.35
|
|
2/18/13
|
|
|
|
|
125,142
|
(2)
|
|
|
1,251,420
|
|
|
|
0.60
|
|
12/31/11
|
|
Anthony
P. Deasey(3)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
Jim
Johnston(6)
|
|
|
1,667
|
|
|
|
0
|
|
|
|
3.15
|
|
3/18/15
|
|
Marnix
L. Bosch
|
|
|
1,000
|
(4)
|
|
|
0
|
|
|
|
12.75
|
|
5/16/10
|
|
|
|
|
333
|
(4)
|
|
|
0
|
|
|
|
18.75
|
|
11/14/10
|
|
|
|
|
333
|
(4)
|
|
|
0
|
|
|
|
18.75
|
|
09/20/11
|
|
|
|
|
833
|
(4)
|
|
|
0
|
|
|
|
75.00
|
|
01/10/12
|
|
|
|
|
3,194
|
(4)
|
|
|
139
|
|
|
|
1.35
|
|
2/18/13
|
|
|
|
|
4,000
|
(4)
|
|
|
1,333
|
|
|
|
1.80
|
|
12/01/13
|
|
|
|
|
273,502
|
(5)
|
|
|
558,038
|
|
|
|
0.60
|
|
12/31/11
|
|
(1)
|
These
options were granted under the 1999 Plan, the 2001 Plan and under
Dr. Boynton’s previous employment agreement. Each of these option
grants vests over a four year period. One-fourth of each option grant
vests on the first anniversary of the grant date and the remaining
three-fourths of each grant vests in equal monthly installments over the
remaining three year vesting
period.
|
(2)
|
This
option was granted under the 2007 Stock Option Plan. This option grant
vests over a three and one-half year period. Approximately 29% the option
grant was vested immediately upon grant with respect to prior service
performed. Approximately 17% vests on the first anniversary of the AIM
offering (June 22, 2008) and the remaining portion vests in
equal monthly installments over the remaining three year vesting period.
These options were granted in recognition of past service to the Company
and have an exercise price of $0.60 per share, which is equal to the
conversion price of warrants issued to Toucan Partners under the
Conversion Agreement. In accordance with Dr. Boynton’s option agreement as
options to 1,430,846 shares had not been exercised as of December 31,
2008 such options were
forfeited.
|
(3)
|
Mr. Deasey
resigned on August 12, 2008 and in accordance with his option agreement
all of his vested and unvested options were
forfeited.
|
(4)
|
These
options were granted under the 1999 Plan and the 2001 Plan. Each of these
option grants vests over a four year period. One-fourth of each option
grant vests on the first anniversary of the grant date and the remaining
three-fourths of each grant vests in equal monthly installments over the
remaining three year vesting
period.
|
(5)
|
This
option was granted under the 2007 Stock Option Plan. This option grant
vests over a three and one-half year period. Approximately 19% of the
option grant was vested immediately upon grant with respect to prior
service performed. Approximately 21% vests on the first anniversary of the
AIM offering (June 22, 2008) and the remaining portion vests in
equal monthly installments over the remaining three year vesting period.
These options were granted in recognition of past service to the Company
and have an exercise price of $0.60 per share, which is equal to the
conversion price of warrants issued to Toucan Partners under the
Conversion Agreement. In accordance with Dr. Bosch’s option agreement as
options to purchase 250,000 shares had not been exercised as of December
31, 2008 such options were
forfeited.
|
(6)
|
These
options were granted prior to Mr. Johnston’s employment with us and are
fully vested.
|
Option
Exercises and Stock Vested
No
options were exercised by and no stock awards vested for the Named Executive
Officers during 2008.
Pension
Plans, Deferred Compensation and Severance Agreements
We do not
currently offer any such plans or compensation or have any such agreements in
place.
Director
Compensation
The
following table sets forth certain information concerning compensation paid or
accrued to our non-executive directors during the year ended December 31,
2008.
Name
|
|
Year
|
|
Fees Earned
or Paid
in Cash
|
|
|
All Other
Compensation(1)
|
|
|
Total
|
|
Linda
F. Powers
|
|
2008
|
|
$
|
73,860
|
|
|
$
|
—
|
|
|
$
|
73,860
|
|
R.
Steve Harris
|
|
2008
|
|
$
|
33,744
|
|
|
$
|
—
|
|
|
$
|
33,744
|
|
Only
non-employee directors receive director fees. Effective June 22, 2007,
we are required to pay Linda F. Powers, as Chairperson and a non-executive
member of the Board of Directors, £50,000 (approximately $100,000) per annum for
her services. Also effective June 22, 2007, we were required to pay R.
Steve Harris, as a non-executive member of the Board of Directors, £30,000
(approximately $60,000) per annum for his services. R. Steve Harris resigned as
a director on June 30, 2008.
Compensation
Committee Interlocks and Insider Participation
From
January 1, 2007 to June 22, 2007, Dr. Boynton was the sole member
of our Compensation Committee and served as our President, Chief Operating
Officer and Chief Scientific Officer. In addition, as discussed further under
“Transactions with Related Persons” below, in 2006, Dr. Boynton exercised
warrants and convertible loans covering 126,365 and 146,385 shares of our
common stock, respectively. In June 2007, Dr. Boynton was replaced by Linda
F. Powers and R. Steve Harris as members of the Compensation Committee. During
2008, none of our executive officers served as a member of the compensation
committee (or other committee serving an equivalent function) of any other
entity, one of whose executive officers served as a director on our Board or as
a member of our Compensation Committee. None of our executive officers served
during 2008 as a director of any other entity, one of whose executive officers
served as a director on our Board or as a member of our Compensation
Committee.
Equity
Plans
The
Company maintains several plans under which our directors and employees may be
granted equity awards, generally in the form of stock options. A brief
description of these plans follows. Effective June 22, 2007, the Company
amended the 1998 Stock Option Plan, the 1999 Executive Stock Option Plan and the
2001 Stock Option Plan such that no further option grants may be made under
those plans.
1998
Stock Plan
The 1998
Stock Plan (the “1998 Plan”) was adopted by our Board of Directors in July 1998
and approved by our stockholders in February 1999. This plan provided for the
grant to our employees, including officers and employee directors, of “incentive
stock options” within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the “Code”), and for the grant of non-statutory stock
options to our employees, officers, directors, including non-employee directors,
and consultants. To the extent an optionee would have the right in any calendar
year to exercise for the first time one or more incentive stock options for
shares having an aggregate fair market value, under all of our plans and
determined as of the grant date, in excess of $100,000, any such excess options
will be treated as non-statutory options. A total of 27,535 shares of our
common stock have been reserved for issuance under this plan and, as of
December 31, 2007, net of forfeitures, a total of 23,783 of such shares
remained available for additional option grants.
The
Compensation Committee of our Board of Directors serves as the administrator of
our 1998 Stock Plan. Subject to the terms of this plan, the administrator
determines the terms of options granted, including the number of shares subject
to the option, exercise price, term and exercisability. The exercise price of
all incentive stock options granted under this plan must be at least equal to
the fair market value of our common stock on the date of grant. The exercise
price of any incentive stock option granted to an optionee who owns stock
representing more than 10% of the total combined voting power of our outstanding
capital stock, or a 10% Stockholder, must be at least equal to 110% of the fair
market value of our common stock on the date of grant. The exercise price of all
non- statutory stock options cannot be less than 85% of the fair market value of
our common stock on the date of grant, and in the case of 10% Stockholders, the
exercise price cannot be less than 110% of the fair market value of our common
stock. The term of options granted under this plan may not exceed 10 years,
and the term of an incentive stock option granted to a 10% Stockholder may not
exceed five years. An option may not be transferred by the optionee other than
by will or the laws of descent or distribution. Each option may be exercised
during the lifetime of the optionee only by such optionee. Generally, each
option granted under this plan becomes exercisable as to 25% of the total number
of shares subject to the option after the first anniversary following the date
of grant, with subsequent equal monthly vesting over three years, subject to the
optionee’s continued relationship with us as an employee, director or
consultant, as the case may be.
Our Board
of Directors has the authority to amend or terminate this plan, but such action
will not adversely affect any outstanding option without the optionee’s consent.
If not terminated earlier, this plan will terminate in July 2008.
1999
Executive Stock Plan
The 1999
Executive Stock Plan (the “1999 Plan”) was adopted by our Board of Directors in
November 1999. This plan provided for the grant of non-statutory stock options
to our employees, officers, directors, including non-employee directors, and
consultants. A total of 39,078 shares of our common stock have been
reserved for issuance under this plan, and, as of December 31, 2007, net of
forfeitures, a total of 28,064 shares remained available for granting under
this plan.
The
Compensation Committee of our Board of Directors serves as the administrator of
this plan. Subject to the terms of this plan, the administrator determines the
terms of options granted, including the number of shares subject to the option,
exercise price, term and exercisability. The exercise price of options under
this plan cannot be less than 85% of the fair market value of our common stock
on the date of grant and, in the case of 10% Stockholders, the exercise price
cannot be less than 110% of the fair market value of our common stock on the
date of grant. The term of options granted under this plan may not exceed
10 years. An option may not be transferred by the optionee other than by
will or the laws of descent or distribution. Each option may be exercised during
the lifetime of the optionee only by such optionee. Each option granted under
this plan becomes exercisable as to 25% of the total number of shares subject to
the option on the first anniversary following the date of grant, with subsequent
equal monthly vesting over three years, subject to the optionee’s continued
relationship with us as an employee or consultant.
Our Board
of Directors has the authority to amend or terminate this plan, but such action
will not adversely affect any outstanding option without the optionee’s consent.
If not terminated earlier, this plan will terminate in November
2009.
2001
Stock Plan
The 2001
Stock Plan (the “2001 Plan”) was both adopted by our Board of Directors and
approved by our stockholders in June 2001. A total of 120,000 shares of our
common stock have been initially reserved for issuance under this plan. This
plan was intended to provide for the grant to our employees, including officers
and employee directors, of “incentive stock options” within the meaning of
Section 422 of the Code and for the grant of non-statutory stock options to
our employees and consultants. The number of shares available for grant under
this plan is subject to an automatic annual increase in an amount equal to the
lesser of (i) 15% of the aggregate number of shares available for granting
for the immediately preceding year; or (ii) 20,000 shares. As of
December 31, 2007, net of forfeitures, a total of 162,603 shares
remained available under this plan.
The
Compensation Committee of our Board of Directors serves as the administrator of
this plan. Subject to the terms of this plan, the administrator determines the
terms of options granted, including the number of shares subject to the option,
exercise price, term and exercisability. The exercise price of all incentive
stock options granted under this plan must be at least equal to the fair market
value of our common stock on the date of grant. The term of incentive stock
options granted under this plan generally may not exceed
10 years.
Our Board
of Directors has the authority to amend or terminate this plan, but such action
may not adversely affect any outstanding option previously granted under the
plan. If this plan is not terminated earlier, no incentive stock options can be
granted under the plan on or after the later of June 2011 or the
10th anniversary of the date when our Board of Directors adopted, subject
to approval by our stockholders, the most recent increase in the number of
shares available for grant under the plan.
2001
Non-employee Director Stock Incentive Plan
The 2001
Non-employee Director Stock Incentive Plan (the “Directors Plan”) was adopted by
our Board of Directors in June 2001. This plan provided for the automatic grant
to each of our non-employee directors of a nonstatutory stock option to purchase
333 shares of our common stock on the third business day following each
annual meeting of our stockholders. A total of 13,333 shares of common
stock have been reserved for issuance under this plan and, as of
December 31, 2007, net of forfeitures, a total of 10,500 shares
remained available under this plan.
This plan
is administered by the Compensation Committee of our Board of Directors. The
exercise price of each option granted pursuant to this plan is the fair market
value of the underlying shares of our common stock on the date of grant. Each
option granted pursuant to this plan generally becomes exercisable upon six
months after the date of grant, subject to certain limitations. Our Board of
Directors has the authority to amend or terminate this plan, but such action may
not adversely affect any outstanding option without the optionee’s
consent.
Employee
Stock Purchase Plan
Our
Employee Stock Purchase Plan (the “Employees’ Plan”) was adopted by our Board of
Directors and approved by our stockholders in June 2001. A total of
33,333 shares of common stock have been reserved for issuance under this
plan and, as of December 31, 2007, 958 shares have been issued under
this plan.
This plan
is administered by the Compensation Committee of our Board of Directors and
provides a mechanism for eligible employees to purchase shares of our common
stock. To facilitate these purchases, eligible participants are assigned plan
accounts, to which they may contribute funds via payroll deduction. The
purchases are accomplished through the use of six-month offering periods.
Purchases pursuant to this plan are made at a price equal to the lower of
(i) 85% of the fair market value of our common stock on the last trading
day in the offering period; or (ii) 85% of the fair market value of our
common stock on the last trading day before the commencement of such offering
period. No participant may purchase more than 67 shares of our common stock
during any offering period. Additionally, purchases under the plan are limited
such that no participant may purchase under the plan, in any offering period
that commenced in that calendar year, shares with a fair market value in excess
of $25,000 minus the fair market value of any shares that the participant
previously purchased in that calendar year. In the case of shares purchased
during an offering period that commenced in the preceding calendar year, the
limitation is $50,000 minus the fair market value of any shares that the
participant purchased during the calendar year of the purchase and the calendar
year immediately preceding such purchase.
Our Board
of Directors has the authority to amend or terminate this plan at any time.
Amendments to the plan are subject to approval by our stockholders to the extent
required by applicable law.
2007
Stock Option Plan
We
established a stock option plan, which became effective on June 15, 2007
(the “2007 Stock Option Plan”). In April 2008, the Company increased the number
of shares reserved for issuance under the 2007 Stock Option Plan by 519,132
shares of its common stock for an aggregate of 6,000,000 shares of its common
stock, par value $0.001 per share (“Common Stock”), reserved for issue in
respect of options granted under the plan. The plan provides for the grant to
our employees, as well as parent company, if any, and subsidiaries, including
officers and employee directors, of “incentive stock options” within the meaning
of Section 422 of the Code and for the grant of non-statutory stock options
to our employees, officers, directors, including non-employee directors, and
consultants, as well as parent company, if any, and subsidiaries. To the extent
an optionee would have the right in any calendar year to exercise for the first
time one or more incentive stock options for shares having an aggregate fair
market value, under all of our plans and determined as of the grant date, in
excess of $100,000, any such excess options will be treated as non-statutory
options. As of December 31, 2008, net of forfeitures, a total of
2,888,566 shares remained available for issuance under this
plan.
Item 12.
Security
Ownership of Certain Beneficial Owners and Management
and Related
Stockholder Matters
The
following table presents information regarding the beneficial ownership of our
common stock as of April 13, 2009 by:
|
·
|
each
person, or group of affiliated persons, who is known by us to own
beneficially 5% or more of any class of our equity
securities;
|
|
·
|
each
of our named executive officers, as defined in Item 402(a)(3) of
Regulation S-K; and
|
|
·
|
our
directors and executive officers as a
group.
|
The
applicable percentages of ownership are based on an aggregate
of 45,069,872 shares of common stock issued and outstanding on April
13, 2009. In computing the number of shares of common stock beneficially owned
by a person and the percentage ownership of that person, we deemed shares of
common stock subject to options, warrants, convertible preferred stock or
convertible notes held by that person that are currently exercisable or
exercisable within 60 days of April 13, 2009.
We have
determined beneficial ownership in accordance with the rules of the SEC. Except
as indicated by the footnotes below, we believe, based on the information
furnished to us, that the persons and the entities named in the table have sole
voting and investment power with respect to all shares of common stock that they
beneficially own, subject to applicable community property laws.
Except as
otherwise noted, the address of the individuals in the following table below is
c/o Northwest Biotherapeutics, Inc., 7600 Wisconsin Avenue, Suite 750,
Bethesda, MD 20814.
Name of Beneficial Owner
|
|
Number of Shares
Beneficially Owned
|
|
|
Percentage(1)
|
|
Officers
and Directors
|
|
|
|
|
|
|
Alton
L. Boynton, Ph.D.(2)
|
|
|
536,877
|
|
|
|
1.2
|
|
Anthony
P. Deasey
|
|
|
—
|
|
|
|
—
|
|
Marnix
L. Bosch, Ph.D., M.B.A.(3)
|
|
|
441,626
|
|
|
|
1.0
|
|
Linda
F. Powers(4)
|
|
|
52,872,326
|
|
|
|
69.5
|
|
R.
Steve Harris
|
|
|
—
|
|
|
|
—
|
|
All
executive officers and directors as a group
(5 persons)(5)
|
|
|
3,551,213
|
|
|
|
7.8
|
|
5%
Security Holders
|
|
|
|
|
|
|
|
|
Toucan
Capital Fund II, L.P.(6)
|
|
|
41,334,575
|
|
|
|
61.6
|
|
7600
Wisconsin Avenue, Suite 700, Bethesda, MD 20814
|
|
|
|
|
|
|
|
|
Toucan
Partners, LLC(7)
|
|
|
8,965,041
|
|
|
|
16.6
|
|
7600
Wisconsin Avenue, Suite 700, Bethesda, MD 20814
|
|
|
|
|
|
|
|
|
Al
Rajhi Holdings
|
|
|
5,500,000
|
|
|
|
12.2
|
|
Rue
Maurice 3 1204 Geneve Switzerland
|
|
|
|
|
|
|
|
|
IS
Partners Investment Solutions
|
|
|
|
|
|
|
|
|
AG
Helium Special Situations Fund
|
|
|
2,302,632
|
|
|
|
5.1
|
|
Limmatquai 2
8001 Zurich PO Box 463 8024 Zurich Switzerland
|
|
|
|
|
|
|
|
|
(1)
|
Percentage
represents beneficial ownership percentage of common stock calculated in
accordance with SEC rules and does not equate to voting
percentages.
|
(2)
|
Includes
356,778 shares of common stock issuable upon exercise of options that
are exercisable within 60 days of April 13,
2009.
|
(3)
|
Includes
376,199 shares of common stock issuable upon exercise of options that
are exercisable within 60 days of April 13,
2009.
|
(4)
|
Includes
(i) 19,299,486 shares of common stock held by Toucan Capital;
(ii) 22,035,089 shares of common stock currently issuable upon
exercise of warrants that are exercisable within 60 days of April 13,
2009 held by Toucan Capital; (iii) 8,965,041 shares of common
stock currently issuable upon exercise of warrants that are exercisable
within 60 days of April 13, 2009 held by Toucan Partners.
Ms. Powers is a managing member of Toucan Management, LLC, which is
the manager of Toucan Capital, and is a managing member of Toucan
Partners. Ms. Powers disclaims beneficial ownership as to all such
shares of common stock.
|
(5)
|
Includes
734,144 shares issuable to officers and directors upon exercise of
options that are exercisable within 60 days of April 13, 2009.
Excludes 50,299,616 shares of common stock as to which
Ms. Powers disclaims beneficial ownership. See Note 4
above.
|
(6)
|
Includes
22,035,089 shares of common stock currently issuable upon exercise of
warrants that are exercisable within 60 days of April 13, 2009 held
by Toucan Capital.
|
(7)
|
Includes
8,965,041 shares of common stock currently issuable upon exercise of
warrants that are exercisable within 60 days of April 13, 2009 held
by Toucan Partners.
|
Equity
Compensation Plan Information
The
following table sets out information regarding our common stock that may be
issued upon the exercise of options, warrants and other rights granted to
employees, consultants or directors under all of our existing equity
compensation plans, as of December 31, 2009:
Plan category
|
|
Number of Shares
to be Issued Upon
Exercise of
Outstanding Options
and Warrants
|
|
|
Weighted-Average
Exercise Price of
Outstanding Options
and Warrants
|
|
|
Number of Shares
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans approved by security holders
|
|
|
3,192,240
|
|
|
$
|
0.72
|
|
|
|
2,855,566
|
|
Total
|
|
|
3,192,240
|
|
|
|
|
|
|
|
2,855,566
|
|
Item 13.
Certain
Relationships and Related Transactions, and Director
Independence
Toucan
Capital and Toucan Partners
Toucan
Capital loaned the Company an aggregate of $6.75 million during 2004 and
2005. On January 26, 2005, the Company entered into a securities purchase
agreement with