x |
Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2010
|
o |
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period
from ____________ to ____________
|
Delaware
|
06-1245881
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
|
810 Seventh Avenue, 35th Floor, New York, NY
|
10019
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Title of Each Class
|
Name of Each Exchange on Which Registered
|
|
Common Stock, par value $0.01 per share
|
The NASDAQ Stock Market LLC
|
Yes
|
o |
No
|
x |
Yes
|
o |
No
|
x |
Yes
|
x |
No
|
o |
Yes
|
o |
No
|
o |
o |
Large accelerated filer
o
|
Accelerated filer
x
|
Non-accelerated filer
o
(Do not check if smaller reporting company)
|
Smaller reporting company
o
|
Yes
|
o |
No
|
x |
Page
|
||
PART I
|
||
Item 1.
|
Business.
|
1
|
Item 1A.
|
Risk Factors
|
10
|
Item 1B.
|
Unresolved Staff Comments
|
20
|
Item 2.
|
Properties
|
20
|
Item 3.
|
Legal Proceedings
|
20
|
Item 4.
|
Removed and Reserved
|
20
|
PART II
|
||
Item 5.
|
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
21
|
Item 6.
|
Selected Financial Data
|
23
|
Item 7.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
23
|
Item 7A.
|
Quantitative and Qualitative Disclosure About Market Risk
|
27
|
Item 8.
|
Financial Statements and Supplementary Data
|
29
|
Item 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
30
|
Item 9A.
|
Controls and Procedures
|
30
|
Item 9B.
|
Other Information
|
32
|
PART III
|
||
Item 10.
|
Directors, Executive Officers and Corporate Governance
|
33
|
Item 11.
|
Executive Compensation
|
33
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
33
|
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence
|
33
|
Item 14.
|
Principal Accountant Fees and Services
|
33
|
PART IV
|
||
Item 15.
|
Exhibits and Financial Statement Schedules
|
34
|
SIGNATURES
|
35
|
·
|
the progress and results of our research and development programs;
|
|
·
|
our estimates regarding sufficiency of our cash resources, anticipated capital requirements and our need for additional financing;
|
|
·
|
the results and timing of our clinical trials and the commencement of future clinical trials;
|
|
·
|
submission and timing of applications for regulatory approval and approval thereof;
|
|
·
|
our ability to successfully manufacture and commercialize the Delcath chemosaturation system; and
|
|
·
|
our ability to successfully negotiate and enter into agreements with strategic and corporate partners.
|
·
|
Obtain a CE Mark for the Delcath chemosaturation system for the percutaneous delivery of chemotherapeutic agent (melphalan hydrochloride) to the liver
. In December 2010, we submitted a Technical File to our Notified Body in the European Union (EU). Our application is currently under review and the Company expects CE Mark approval for the device in mid-2011. CE Mark approval will allow us to market and sell the system in the EEA.
|
|
·
|
Obtain FDA approval for use of the Delcath chemosaturation system in combination with melphalan to treat metastatic melanoma in the liver
. In December 2010, the Company submitted our §505(b)(2) NDA to the FDA, seeking an indication for the percutaneous intra-arterial administration of melphalan hydrochloride for use in the treatment of patients with metastatic melanoma in the liver. In February 2011, the Company received a Refusal to File letter from the FDA for its NDA. Based on management's current understanding of the information in the FDA's letter, the Company intends to resubmit the NDA by September 30, 2011. The Company will work closely with the FDA to fully understand the FDA's concerns and define a path forward for a successful resubmission of the application.
|
|
·
|
Commercialize the Delcath chemosaturation system in the European Economic Area
. If we obtain CE Mark approval for the Delcath chemosaturation system, the Company intends to pursue a two-pronged commercialization strategy in the EEA under which Delcath will directly market the Delcath chemosaturation system in certain markets and enter into agreements with third-party distributors in others.
|
|
·
|
Commercialize the Delcath chemosaturation system in the United States.
If we obtain FDA approval of our NDA, the Company intends to market the Delcath chemosaturation system with melphalan hydrochloride in the United States through our own sales force and focus our initial marketing efforts on major cancer centers beginning with those hospitals that participated in our Phase III clinical trial.
|
|
·
|
Establish strategic alliances
. The Company continues to pursue strategic partners to develop certain Asian markets including China, Korea and Japan, In the United States, the Company intends to pursue pharmaceutical partners to co-develop and fund other indications for the Delcath chemosaturation system.
|
|
·
|
Obtain approval to market the Delcath chemosaturation system in the United States for the treatment of other cancers in addition to metastatic melanoma in the liver.
The Company recently concluded a multi-arm Phase II trial to evaluate the Delcath chemosaturation system for the treatment of other cancers in the liver, such as tumors of neuroendocrine and adenocarcinoma origin that have spread to the liver, primary liver cancer and melanomas in the liver that received certain
|
prior regional treatment with melphalan. Upon successful conclusion of the related clinical trials, Delcath intends to apply for regulatory approval of additional indications.
|
||
·
|
Expand the application of the Delcath chemosaturation system
. The Company intends to evaluate melphalan and other drug candidates for use with the Delcath chemosaturation system to treat other liver cancers, as well as other organs and body regions.
|
·
|
Infusion catheter—an arterial infusion catheter used to deliver chemotherapy to the liver.
|
|
·
|
Isolation and aspiration catheter—a multi-lumen catheter containing two low-pressure occlusion balloons which are positioned to isolate and capture the blood flow from the liver.
|
|
·
|
Filtration circuit outside the body—a blood tubing circuit containing disposable components used with a non-disposable blood pump which push the isolated blood through the Delcath chemosaturation system's filters and deliver the filtered blood back to the patient.
|
|
·
|
Filters—external hemofiltration filters remove most of the chemotherapy agent from the isolated blood coming out of the liver before the blood is returned to the patient's general circulatory system.
|
|
·
|
Return catheter—a thin-walled blood sheath used to deliver the filtered blood from the filtration circuit outside the body back into the patient's general circulatory system.
|
|
·
|
Series of introducers and related accessories to properly place the catheters.
|
|
·
|
In the United States, melphalan hydrochloride for injection will be included with the system.
|
|
·
|
In Europe, the system will be sold separately and is intended to be used in conjunction with melphalan hydrochloride which is already commercially available from a third party.
|
·
|
surgeons who administer the Delcath chemosaturation system;
|
|
·
|
oncologists who have primary responsibility for cancer patients; and
|
|
·
|
interventional radiologists who are physicians specialized in working with catheter-based systems.
|
·
|
Coding, which ensures uniform descriptions of the procedures, diagnoses and medical products involved;
|
|
·
|
Coverage, which is the payor's policy describing the clinical circumstances under which it will pay for a given treatment; and
|
|
·
|
Payment processes and amounts.
|
·
|
our research and product development programs, including clinical studies;
|
|
·
|
the timing and costs of our various United States and foreign regulatory filings, obtaining approvals and complying with regulations;
|
|
·
|
the timing and costs associated with developing our manufacturing operations;
|
|
·
|
Timing of product commercialization activities, including marketing arrangements overseas;
|
|
·
|
the timing and costs involved in preparing, filing, prosecuting, defending and enforcing intellectual property rights; and
|
|
·
|
the impact of competing technological and market developments.
|
·
|
discuss our future expectations;
|
|
·
|
contain projections of our future results of operations or of our financial condition; and
|
|
·
|
state other "forward-looking" information.
|
·
|
adversely affect the commercialization of any products that Delcath develops;
|
|
·
|
impose additional costs on us;
|
|
·
|
diminish any competitive advantages that may be attained; and
|
|
·
|
adversely affect our receipt of revenues.
|
·
|
refusals or delays in the approval of applications or supplements to approved applications;
|
|
·
|
refusal of a regulatory authority, including the FDA, to review pending market approval applications or supplements to approved applications;
|
|
·
|
warning letters;
|
|
·
|
fines;
|
|
·
|
import or export restrictions;
|
|
·
|
product recalls or seizures;
|
|
·
|
injunctions;
|
|
·
|
total or partial suspension of clinical trials or production;
|
|
·
|
civil penalties;
|
|
·
|
withdrawals of previously approved marketing applications or licenses;
|
|
·
|
recommendations by the FDA or other regulatory authorities against entering into governmental contracts with us; or
|
|
·
|
criminal prosecutions.
|
·
|
any pre-clinical or clinical test may fail to produce results satisfactory to the FDA or foreign regulatory authorities;
|
|
·
|
pre-clinical or clinical data can be interpreted in different ways, which could delay, limit or prevent regulatory approval;
|
|
·
|
negative or inconclusive results from a pre-clinical study or clinical trial or adverse medical events during a clinical trial could cause a pre-clinical study or clinical trial to be repeated or a program to be terminated, even if other studies or trials relating to the program are successful;
|
|
·
|
the FDA can place a clinical hold on a trial if, among other reasons, it finds that patients enrolled in the trial are or would be exposed to an unreasonable and significant risk of illness or injury;
|
|
·
|
we may encounter delays or rejections based on changes in regulatory agency policies during the period in which we are developing a system or the period required for review of any application for regulatory agency approval;
|
|
·
|
our clinical trials may not demonstrate the safety and efficacy of any system or result in marketable products;
|
|
·
|
the FDA may request additional clinical trials relating to our NDA submissions;
|
·
|
the FDA may change its approval policies or adopt new regulations that may negatively affect or delay our ability to bring a system to market or require additional clinical trials; and
|
|
·
|
a system may not be approved for all the requested indications.
|
·
|
Whether our clinical trials demonstrate significantly improved patient outcomes;
|
|
·
|
Our ability to educate physicians and drive acceptance of the use of the Delcath chemosaturation system;
|
|
·
|
Our ability to convince healthcare payors that use of the Delcath chemosaturation system results in reduced treatment costs and improved outcomes for patients;
|
|
·
|
Whether the Delcath chemosaturation system replaces and/or complements treatment methods in which many hospitals have made a significant investment. Hospitals may be unwilling to replace their existing technology in light of their investment and experience with competing technologies; and
|
|
·
|
Whether doctors and hospitals are reluctant to use a new medical technology until its value has been demonstrated. As a result, the Delcath chemosaturation system may not gain significant market acceptance among physicians, hospitals, patients and healthcare payors.
|
·
|
Delcath may become liable for substantial damages for past infringement if a court decides that our technologies infringe upon a competitor's patent;
|
|
·
|
a court may prohibit us from selling or licensing our product without a license from the patent holder, which may not be available on commercially acceptable terms or at all, or which may require us to pay substantial royalties or grant cross-licenses to our patents; and
|
|
·
|
Delcath may have to redesign our product so that it does not infringe upon others' patent rights, which may not be possible or could require substantial funds or time.
|
·
|
results of our clinical trials;
|
|
·
|
regulatory delays, non-acceptance or non-approval of our product;
|
|
·
|
manufacturing difficulties;
|
|
·
|
unexpected adverse events caused by the Delcath chemosaturation system;
|
|
·
|
product recalls;
|
|
·
|
actual or anticipated quarterly variations in our operating results;
|
|
·
|
changes in expectations as to our future financial performance or changes in financial estimates, if any, of public market analysts;
|
|
·
|
announcements relating to our business or the business of our competitors;
|
·
|
a challenge to one of our patents, either in court or via administrative proceedings in the United States Patent and Trademark Office;
|
|
·
|
conditions generally affecting the healthcare and cancer treatment industries; and
|
|
·
|
the success of our operating strategy.
|
·
|
elect or defeat the election of our directors;
|
|
·
|
amend or prevent amendment of our certificate of incorporation or by-laws;
|
|
·
|
effect or prevent a merger, sale of assets or other corporate transaction; and
|
|
·
|
affect the outcome of any other matter submitted to the stockholders for vote.
|
·
|
providing for a staggered board; and
|
|
·
|
authorizing the board of directors to fill vacant directorships or increase the size of our board of directors.
|
2010
|
||||||||
High
|
Low
|
|||||||
Quarter ended March 31, 2010
|
$ | 8.41 | $ | 4.31 | ||||
Quarter ended June 30, 2010
|
16.18 | 6.34 | ||||||
Quarter ended September 30, 2010
|
8.69 | 5.53 | ||||||
Quarter ended December 31, 2010
|
11.27 | 7.20 |
2009
|
||||||||
High
|
Low
|
|||||||
Quarter ended March 31, 2009
|
$ | 1.95 | $ | 1.18 | ||||
Quarter ended June 30, 2009
|
3.98 | 1.78 | ||||||
Quarter ended September 30, 2009
|
5.05 | 2.81 | ||||||
Quarter ended December 31, 2009
|
6.19 | 4.02 |
Year Ended December 31,
|
||||||||||||||||||||
(Dollars in thousands)
|
2010
|
2009
|
2008
|
2007
|
2006
|
|||||||||||||||
Statement of Operations Data
|
||||||||||||||||||||
Costs and expenses
|
$ | 30,743 | $ | 13,536 | $ | 8,066 | $ | 6,913 | $ | 11,699 | ||||||||||
Operating loss
|
30,743 | 13,536 | 8,066 | 6,913 | 11,699 | |||||||||||||||
Net loss
|
46,684 | 22,057 | 6,865 | 3,664 | 10,952 | |||||||||||||||
Loss per share
|
(1.20 | ) | (0.82 | ) | (0.27 | ) | (0.16 | ) | (0.55 | ) |
Year Ended December 31,
|
||||||||||||||||||||
(Dollars in thousands)
|
2010
|
2009
|
2008
|
2007
|
2006
|
|||||||||||||||
Balance Sheet Data
|
||||||||||||||||||||
Current assets
|
$ | 48,898 | $ | 36,286 | $ | 11,341 | $ | 18,091 | $ | 8,760 | ||||||||||
Total assets
|
50,578 | 36,807 | 11,359 | 18,106 | 8,764 | |||||||||||||||
Current liabilities
|
21,197 | 13,049 | 1,152 | 1,677 | 670 | |||||||||||||||
Stockholder's equity
|
29,080 | 23,758 | 10,207 | 16,429 | 8,093 |
Payments Due by Period | ||||||||||||||||||||
Total
|
Less than
1 year
|
1-3 years
|
3-5 years
|
More than
5 years
|
||||||||||||||||
Operating Activities:
|
||||||||||||||||||||
Research Activities
|
$ | 1.0 | $ | 1.0 | $ | - | $ | - | $ | - | ||||||||||
Operating Leases
|
10.4 | 1.1 | 3.0 | 3.1 | 3.2 |
Financial Statements:
|
|
Report of Ernst & Young LLP - Independent Registered Public Accounting Firm
|
F-1
|
Report of CCR LLP – Independent Registered Public Accounting Firm
|
F-2
|
Balance Sheets at December 31, 2010 and 2009
|
F-3
|
Statements of Operations for the years ended December 31, 2010, 2009, and 2008 and cumulative from inception (August 5, 1988) to December 31, 2010
|
F-4
|
Statements of Stockholders' Equity, cumulative from inception (August 5, 1988) to December 31, 2010
|
F-5-F-7
|
Statements of Cash Flows for the years ended December 31, 2010, 2009, and 2008 and cumulative from inception (August 5, 1988) to December 31, 2010
|
F-8
|
Notes to Financial Statements
|
F-9-F-20
|
December 31, 2010
|
December 31, 2009
|
|||||||
Assets:
|
||||||||
Current assets
|
||||||||
Cash and cash equivalents
|
$ | 45,621,453 | $ | 35,486,319 | ||||
Investments – Certificates of deposit
|
1,492,000 | – | ||||||
Prepaid expenses and other assets
|
1,784,276 | 799,416 | ||||||
Total current assets
|
48,897,729 | 36,285,735 | ||||||
Property, plant and equipment
|
||||||||
Furniture and fixtures
|
669,296 | 36,800 | ||||||
Computers and equipment
|
548,586 | 78,063 | ||||||
Leasehold improvements
|
939,518 | 431,425 | ||||||
2,157,400 | 546,288 | |||||||
Less: accumulated depreciation
|
(477,420 | ) | (24,982 | ) | ||||
Property, plant and equipment, net
|
1,679,980 | 521,306 | ||||||
Total assets
|
$ | 50,577,709 | $ | 36,807,041 | ||||
Liabilities and Stockholders' Equity:
|
||||||||
Current liabilities
|
||||||||
Accounts payable
|
$ | 610,457 | $ | 753,958 | ||||
Accrued expenses
|
2,581,853 | 1,087,522 | ||||||
Warrant liability
|
18,005,014 | 11,207,214 | ||||||
Total current liabilities
|
21,197,324 | 13,048,694 | ||||||
Deferred revenue
|
300,000 | – | ||||||
Commitments and contingencies (Note 5)
|
– | – | ||||||
Stockholders' equity
|
||||||||
Preferred stock, $.01 par value; 10,000,000 shares authorized; no shares issued and outstanding at December 31, 2010 and 2009
|
– | – | ||||||
Common stock, $.01 par value; 70,000,000 shares authorized; 43,028,146 and 36,223,097 shares issued and 42,932,460 and 36,194,997 outstanding at December 31, 2010 and December 31, 2009, respectively
|
430,281 | 362,231 | ||||||
Additional paid-in capital
|
144,782,807 | 92,835,174 | ||||||
Deficit accumulated during the development stage
|
(116,055,400 | ) | (69,371,755 | ) | ||||
Treasury stock, at cost; 28,100 shares at December 31, 2010 and December 31, 2009
|
(51,103 | ) | (51,103 | ) | ||||
Accumulated other comprehensive loss
|
(26,200 | ) | (16,200 | ) | ||||
Total stockholders' equity
|
29,080,385 | 23,758,347 | ||||||
Total liabilities and stockholders' equity
|
$ | 50,577,709 | $ | 36,807,041 |
Year ended December 31,
|
Cumulative
from inception
(August 5, 1988)
To
|
|||||||||||||||
2010
|
2009
|
2008
|
December 31, 2010
|
|||||||||||||
Costs and expenses
|
||||||||||||||||
General and administrative expenses
|
$ | 13,187,278 | $ | 3,898,705 | $ | 2,687,688 | $ | 39,865,082 | ||||||||
Research and development costs
|
17,555,698 | 9,637,050 | 5,378,335 | 56,590,164 | ||||||||||||
Total costs and expenses
|
30,742,976 | 13,535,755 | 8,066,023 | 96,455,246 | ||||||||||||
Operating loss
|
(30,742,976 | ) | (13,535,755 | ) | (8,066,023 | ) | (96,455,246 | ) | ||||||||
Derivative instrument (expense) income
|
(15,951,367 | ) | (8,567,917 | ) | 1,103,682 | (20,698,602 | ) | |||||||||
Interest income
|
10,698 | 73,833 | 299,956 | 2,871,279 | ||||||||||||
Other expense
|
— | (26,753 | ) | (202,500 | ) | (102,753 | ) | |||||||||
Interest expense
|
— | — | — | (171,473 | ) | |||||||||||
Net loss
|
$ | (46,683,645 | ) | $ | (22,056,592 | ) | $ | (6,864,885 | ) | $ | (114,556,795 | ) | ||||
Common share data:
|
||||||||||||||||
Basic and diluted loss per share
|
$ | (1.20 | ) | $ | (0.82 | ) | $ | (0.27 | ) | |||||||
Weighted average number of basic and diluted common shares outstanding
|
38,991,481 | 27,072,556 | 25,300,703 |
Common stock $.01 par value
|
||||||||||||||||||||||||||||||||||||||||||||
Issued
|
In Treasury
|
Outstanding
|
Preferred Stock $0.01 Par Value
|
Additional Paid-in capital
|
Deficit Accumulated During Development Stage
|
Total
|
||||||||||||||||||||||||||||||||||||||
|
# of Shares
|
Amount
|
# of Shares
|
Amount
|
# of Shares
|
Amount
|
# of Shares
|
Amount
|
||||||||||||||||||||||||||||||||||||
Shares issued in connection with the formation of the Company as of August 22, 1988
|
621,089 | $ | 6,211 | - | $ | - | 621,089 | $ | 6,211 | $ | - | $ | - | $ | (5,211 | ) | $ | - | $ | 1,000 | ||||||||||||||||||||||||
Sale of Class A preferred stock, August 22, 1988
|
- | - | - | - | - | - | 2,000,000 | 20,000 | 480,000 | - | 500,000 | |||||||||||||||||||||||||||||||||
Shares returned due to relevant technology milestones not being fully achieved, March 8, 1990
|
- | - | (414,059 | ) | (4,141 | ) | (414,059 | ) | (4,141 | ) | - | - | 4,141 | - | - | |||||||||||||||||||||||||||||
Sale of stock, October 2, 1990
|
- | - | 17,252 | 173 | 17,252 | 173 | - | - | 24,827 | - | 25,000 | |||||||||||||||||||||||||||||||||
Sale of stock (common stock at $7.39 per share and Class B preferred stock at $2.55 per share), January 23, 1991
|
- | - | 46,522 | 465 | 46,522 | 465 | 416,675 | 4,167 | 1,401,690 | - | 1,406,322 | |||||||||||||||||||||||||||||||||
Sale of stock, August 30, 1991
|
- | - | 1,353 | 14 | 1,353 | 14 | - | - | 9,987 | - | 10,001 | |||||||||||||||||||||||||||||||||
Sale of stock, December 31, 1992
|
- | - | 103,515 | 1,035 | 103,515 | 1,035 | - | - | 1,013,969 | - | 1,015,004 | |||||||||||||||||||||||||||||||||
Sale of stock (including 10,318 warrants, each to purchase one share of common stock at $10.87), July 15, 1994
|
- | - | 103,239 | 1,032 | 103,239 | 1,032 | - | - | 1,120,968 | - | 1,122,000 | |||||||||||||||||||||||||||||||||
Sale of stock, December 19, 1996
|
- | - | 39,512 | 395 | 39,512 | 395 | - | - | 999,605 | - | 1,000,000 | |||||||||||||||||||||||||||||||||
Shares issued (including 78,438 warrants each to purchase one share of common stock at $10.87) in connection with conversion of short-term borrowings as of December 22, 1996
|
58,491 | 585 | 98,388 | 984 | 156,879 | 1,569 | - | - | 1,703,395 | - | 1,704,964 | |||||||||||||||||||||||||||||||||
Sale of stock, December 31, 1997
|
53,483 | 535 | - | - | 53,483 | 535 | - | - | 774,465 | - | 775,000 | |||||||||||||||||||||||||||||||||
Exercise of stock options
|
13,802 | 138 | 3,450 | 35 | 17,252 | 173 | - | - | 30,827 | - | 31,000 | |||||||||||||||||||||||||||||||||
Shares issued as compensation for consulting services valued at $10.87 per share based on a 1996 agreement
|
2,345 | 23 | 828 | 8 | 3,173 | 31 | - | - | 34,454 | - | 34,485 | |||||||||||||||||||||||||||||||||
Shares issued in connection with exercise of warrants
|
21,568 | 216 | - | - | 21,568 | 216 | - | - | 234,182 | - | 234,398 | |||||||||||||||||||||||||||||||||
Sale of stock, January 16, 1998
|
34,505 | 345 | - | - | 34,505 | 345 | - | - | 499,655 | - | 500,000 | |||||||||||||||||||||||||||||||||
Sale of stock, September 24, 1998
|
3,450 | 35 | - | - | 3,450 | 35 | - | - | 56,965 | - | 57,000 | |||||||||||||||||||||||||||||||||
Shares returned as a settlement of a dispute with a former director at $1.45 per share, the price originally paid, April 17, 1998
|
(3,450 | ) | (35 | ) | - | - | (3,450 | ) | (35 | ) | - | - | (4,965 | ) | - | (5,000 | ) | |||||||||||||||||||||||||||
Exercise of stock options
|
8,626 | 86 | - | - | 8,626 | 86 | - | - | 67,414 | - | 67,500 | |||||||||||||||||||||||||||||||||
Sale of stock (including 5,218 warrants each to purchase one share of common stock at $14.87), June 30, 1999
|
46,987 | 470 | - | - | 46,987 | 470 | - | - | 775,722 | - | 776,192 | |||||||||||||||||||||||||||||||||
Shares issued in connection with exercise of warrants
|
2,300 | 23 | - | - | 2,300 | 23 | - | - | 24,975 | - | 24,998 | |||||||||||||||||||||||||||||||||
Sale of stock, April 14, 2000
|
230,873 | 2,309 | - | - | 230,873 | 2,309 | - | - | 499,516 | - | 501,825 | |||||||||||||||||||||||||||||||||
Dividends paid on preferred stock
|
690,910 | 6,909 | - | - | 690,910 | 6,909 | - | - | 992,161 | (1,498,605 | ) | (499,535 | ) | |||||||||||||||||||||||||||||||
Conversion of preferred stock
|
833,873 | 8,339 | - | - | 833,873 | 8,339 | (2,416,675 | ) | (24,167 | ) | 15,828 | - | - | |||||||||||||||||||||||||||||||
Sale of stock (including 1,200,000 warrants each to purchase one share of common stock at $6.60), October 19, 2000
|
1,200,000 | 12,000 | - | - | 1,200,000 | 12,000 | - | - | 5,359,468 | - | 5,371,468 |
Common stock $.01 par value
|
||||||||||||||||||||||||||||||||||||
Issued
|
In Treasury
|
Outstanding
|
||||||||||||||||||||||||||||||||||
# of Shares
|
Amount
|
# of Shares
|
Amount
|
# of Shares
|
Amount
|
Additional Paid-in capital
|
Deficit Accumulated During Development Stage
|
Total
|
||||||||||||||||||||||||||||
Shares issued as compensation for stock sale
|
85,000 | 850 | - | - | 85,000 | 850 | (850 | ) | - | - | ||||||||||||||||||||||||||
1,720 stock options (including 1,720 warrants each to purchase one share of common stock at $6.00), issued as compensation
|
- | - | - | - | - | - | 3,800 | - | 3,800 | |||||||||||||||||||||||||||
Sum of fractional common shares cancelled after year 2000 stock splits
|
(36 | ) | (1 | ) | - | - | (36 | ) | (1 | ) | 1 | - | - | |||||||||||||||||||||||
Stock warrants (150,000 at $7.00 and 150,000 at $6.60) issued as compensation
|
- | - | - | - | - | - | 198,000 | - | 198,000 | |||||||||||||||||||||||||||
Sale of stock on April 3, 2002
|
243,181 | 2,432 | - | - | 243,181 | 2,432 | 265,068 | - | 267,500 | |||||||||||||||||||||||||||
Repurchases of stock, November and December 2002
|
(28,100 | ) | (51,103 | ) | (28,100 | ) | (51,103 | ) | - | - | (51,103 | ) | ||||||||||||||||||||||||
Amortization since inception of compensatory stock options
|
- | - | - | - | - | - | 3,760,951 | - | 3,760,951 | |||||||||||||||||||||||||||
Forfeiture since inception of stock options
|
- | - | - | - | - | - | (1,240,780 | ) | - | (1,240,780 | ) | |||||||||||||||||||||||||
Sale of stock (including 3,895,155 warrants to purchase one share of common stock at $0.775) on May 20, 2003 including underwriter's exercise of over allotment option
|
3,895,155 | 38,952 | - | - | 3,895,155 | 38,952 | 1,453,696 | - | 1,492,648 | |||||||||||||||||||||||||||
Proceeds from sale of unit option, 2003
|
- | - | - | - | - | - | 68 | - | 68 | |||||||||||||||||||||||||||
Exercise of warrants, 2003
|
1,730,580 | 17,305 | - | - | 1,730,580 | 17,305 | 1,273,895 | - | 1,291,200 | |||||||||||||||||||||||||||
Sale of stock, 2004
|
2,793,975 | 27,940 | - | - | 2,793,975 | 27,940 | 5,622,690 | - | 5,650,630 | |||||||||||||||||||||||||||
Exercise of Warrants, 2004
|
20,265 | 203 | - | - | 20,265 | 203 | 26,547 | - | 26,750 | |||||||||||||||||||||||||||
Stock options issued as compensation, 2004
|
- | - | - | - | - | - | 5,222 | - | 5,222 | |||||||||||||||||||||||||||
Exercise of warrants, 2005
|
4,841,843 | 48,419 | - | - | 4,841,843 | 48,419 | 7,637,183 | - | 7,878,484 | |||||||||||||||||||||||||||
Exercise of stock options, 2005
|
659,000 | 6,590 | - | - | 659,000 | 6,590 | 569,180 | - | 575,770 | |||||||||||||||||||||||||||
Stock options issued as compensation, 2005
|
- | - | - | - | - | - | 8,270 | - | 8,270 | |||||||||||||||||||||||||||
Sale of stock, November, 2005
|
753,013 | 7,530 | - | - | 753,013 | 7,530 | 2,302,471 | - | 2,310,001 | |||||||||||||||||||||||||||
Shares issued as compensation, 2005
|
36,925 | 369 | - | - | 36,925 | 369 | 103,056 | - | 103,425 | |||||||||||||||||||||||||||
Deficit accumulated from inception to December 31, 2005
|
- | - | - | - | - | - | - | (24,336,562 | ) | (24,336,562 | ) | |||||||||||||||||||||||||
Balance at December 31, 2005
|
18,877,753 | $ | 188,778 | (28,100 | ) | $ | (51,103 | ) | 18,849,653 | $ | 137,675 | $ | 38,295,388 | $ | (25,835,167 | ) | $ | 12,597,896 | ||||||||||||||||||
Vesting of stock options, 2006
|
- | - | - | - | - | - | 446,000 | - | 446,000 | |||||||||||||||||||||||||||
Stock options issued as compensation, 2006
|
- | - | - | - | - | - | 505,282 | - | 505,282 | |||||||||||||||||||||||||||
Exercise of warrants, 2006
|
1,606,928 | $ | 16,069 | - | - | 1,606,928 | $ | 16,069 | 4,877,586 | - | 4,893,655 | |||||||||||||||||||||||||
Exercise of stock options, 2006
|
104,182 | 1,042 | - | - | 104,182 | 1,042 | 295,024 | - | 296,066 | |||||||||||||||||||||||||||
Shares issued in connection with settlement of Consent Solicitation lawsuit, 2006
|
100,000 | 1,000 | - | - | 100,000 | 1,000 | 305,000 | - | 306,000 | |||||||||||||||||||||||||||
Net loss, 2006
|
- | - | - | - | - | - | (10,951,605 | ) | (10,951,605 | ) | ||||||||||||||||||||||||||
Balance at December 31, 2006
|
20,688,863 | $ | 206,889 | (28,100 | ) | $ | (51,103 | ) | 20,660,763 | $ | 155,786 | $ | 44,724,280 | $ | (36,786,772 | ) | $ | 8,093,294 |
Common Stock
$0.01 Par Value
Issued and Outstanding
|
In Treasury
|
|||||||||||||||||||||||||||||||
# of Shares
|
Amount
|
# of Shares
|
Amount
|
Additional
Paid-in Capital
|
Deficit Accumulated During Development Stage
|
Accumulated Other Comprehensive Loss
|
Total
|
|||||||||||||||||||||||||
Exercise of stock options, 2007
|
715,413 | 7,154 | - | - | 1,793,029 | - | - | 1,800,183 | ||||||||||||||||||||||||
Shares issued as compensation, 2007
|
50,000 | 500 | - | - | 210,500 | - | - | 211,000 | ||||||||||||||||||||||||
Sale of stock (including 1,916,554 warrants each to purchase one share of common stock at $4.53), 2007
|
3,833,108 | 38,331 | - | - | 8,995,936 | - | - | 9,034,267 | ||||||||||||||||||||||||
Compensation expense for issuance of stock options, 2007
|
- | - | - | - | 953,610 | - | - | 953,610 | ||||||||||||||||||||||||
Net loss, 2007
|
- | - | - | - | - | (3,663,506 | ) | - | (3,663,506 | ) | ||||||||||||||||||||||
Balance at December 31, 2007
|
25,287,384 | $ | 252,874 | (28,100 | ) | $ | (51,103 | ) | $ | 56,677,355 | $ | (40,450,278 | ) | $ | - | $ | 16,428,848 | |||||||||||||||
Cashless exercise of stock options, 2008
|
970 | 10 | - | - | 1,940 | - | - | 1,950 | ||||||||||||||||||||||||
Shares issued as compensation, 2008
|
95,000 | 950 | - | - | 205,950 | - | - | 206,900 | ||||||||||||||||||||||||
Compensation expense for restricted stock, 2008
|
- | - | - | - | 80,666 | - | - | 80,666 | ||||||||||||||||||||||||
Compensation expense for issuance of stock options, 2008
|
- | - | - | - | 377,596 | - | - | 377,596 | ||||||||||||||||||||||||
Comprehensive loss:
|
||||||||||||||||||||||||||||||||
Net loss
|
- | - | - | - | - | (6,864,885 | ) | - | (6,864,885 | ) | ||||||||||||||||||||||
Change in unrealized loss on investments, 2008
|
- | - | - | - | - | - | (24,200 | ) | (24,200 | ) | ||||||||||||||||||||||
Total comprehensive loss:
|
- | - | - | - | - | - | - | (6,889,085 | ) | |||||||||||||||||||||||
Balance at December 31, 2008
|
25,383,354 | $ | 253,834 | (28,100 | ) | $ | (51,103 | ) | $ | 57,343,507 | $ | (47,315,163 | ) | $ | (24,200 | ) | $ | 10,206,875 | ||||||||||||||
Compensation expense for restricted stock, 2009
|
91,666 | 916 | - | - | 735,500 | - | - | 736,416 | ||||||||||||||||||||||||
Compensation expense for issuance of stock options, 2009
|
- | - | - | - | 1,578,673 | - | - | 1,578,673 | ||||||||||||||||||||||||
Sale of stock (including 1,043,478 warrants to purchase one share of common stock at $3.99), 2009
|
869,565 | 8,696 | - | - | 467,559 | - | - | 476,255 | ||||||||||||||||||||||||
Exercise of warrants
|
103,512 | 1,035 | - | - | 355,049 | - | - | 356,084 | ||||||||||||||||||||||||
Sale of stock, net of expenses, November 2009
|
9,775,000 | 97,750 | - | - | 32,354,886 | - | - | 32,452,636 | ||||||||||||||||||||||||
Comprehensive loss:
|
||||||||||||||||||||||||||||||||
Net loss
|
- | - | - | - | - | (22,056,592 | ) | - | (22,056,592 | ) | ||||||||||||||||||||||
Change in unrealized loss on investments
|
- | - | - | - | - | - | 8,000 | 8,000 | ||||||||||||||||||||||||
Total comprehensive loss:
|
- | - | - | - | - | - | - | (22,048,592 | ) | |||||||||||||||||||||||
Balance at December 31, 2009
|
36,223,097 | $ | 362,231 | (28,100 | ) | $ | (51,103 | ) | $ | 92,835,174 | $ | (69,371,755 | ) | $ | (16,200 | ) | $ | 23,758,347 | ||||||||||||||
Compensation expense for restricted stock, 2010
|
414,042 | 4,140 | - | - | 1,671,113 | - | - | 1,675,253 | ||||||||||||||||||||||||
Compensation expense for issuance of stock options, 2010
|
- | - | - | 3,839,320 | - | - | 3,839,320 | |||||||||||||||||||||||||
Exercise of warrants and options, common stock surrendered upon restricted stock vesting
|
1,206,007 | 12,060 | - | - | 3,830,071 | - | - | 3,842,131 | ||||||||||||||||||||||||
Fair value of warrants reclassified from liability to additional paid-in capital upon exercise
|
- | - | - | - | 9,153,567 | - | - | 9,153,567 | ||||||||||||||||||||||||
Sale of stock, net of expenses, August 2010
|
5,185,000 | 51,850 | - | - | 33,453,562 | - | - | 33,505,412 | ||||||||||||||||||||||||
Comprehensive loss:
|
||||||||||||||||||||||||||||||||
Net loss
|
- | - | - | - | - | (46,683,645 | ) | - | (46,683,645 | ) | ||||||||||||||||||||||
Change in unrealized loss on investments
|
- | - | - | - | - | - | (10,000 | ) | (10,000 | ) | ||||||||||||||||||||||
Total comprehensive loss:
|
- | - | - | - | - | - | - | (46,693,645 | ) | |||||||||||||||||||||||
Balance at December 31, 2010
|
43,028,146 | $ | 430,281 | (28,100 | ) | $ | (51,103 | ) | $ | 144,782,807 | $ | (116,055,400 | ) | $ | (26,200 | ) | $ | 29,080,385 |
Year ended December 31,
|
Cumulative from inception (August 5, 1988) to
|
|||||||||||||||
2010
|
2009
|
2008
|
December 31, 2010
|
|||||||||||||
Cash flows from operating activities:
|
||||||||||||||||
Net loss
|
$ | (46,683,645 | ) | $ | (22,056,592 | ) | $ | (6,864,885 | ) | $ | (114,556,795 | ) | ||||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||||||||||
Stock option compensation expense
|
3,839,320 | 1,578,673 | 379,546 | 10,778,259 | ||||||||||||
Restricted stock and warrant compensation expense
|
1,675,253 | 736,416 | 287,566 | 3,555,947 | ||||||||||||
Depreciation expense
|
472,291 | 7,981 | 5,861 | 532,034 | ||||||||||||
Amortization of organization costs
|
— | — | — | 42,165 | ||||||||||||
Loss on disposal of equipment
|
6,730 | 3,442 | — | 10,172 | ||||||||||||
Derivative liability fair value adjustment
|
15,951,367 | 8,567,917 | (1,103,682 | ) | 20,698,602 | |||||||||||
Non-cash interest income
|
(3,831 | ) | — | — | (11,735 | ) | ||||||||||
Changes in assets and liabilities:
|
||||||||||||||||
Increase in prepaid expenses and other assets
|
(991,029 | ) | (438,070 | ) | (5,894 | ) | (1,760,445 | ) | ||||||||
Increase in accounts payable and accrued expenses
|
1,350,830 | 1,137,991 | 578,211 | 3,192,310 | ||||||||||||
Deferred revenue
|
300,000 | — | — | 300,000 | ||||||||||||
Net cash used in operating activities
|
(24,082,714 | ) | (10,462,242 | ) | (6,723,277 | ) | (77,219,486 | ) | ||||||||
Cash flows from investing activities:
|
||||||||||||||||
Purchase of equipment, furniture and fixtures
|
(1,637,695 | ) | (515,440 | ) | (8,313 | ) | (2,222,387 | ) | ||||||||
Proceeds from sale of equipment
|
— | 200 | — | 200 | ||||||||||||
Purchase of short-term investments
|
(3,235,000 | ) | — | (200,710 | ) | (44,646,452 | ) | |||||||||
Purchase of marketable equity securities
|
— | — | (46,200 | ) | (46,200 | ) | ||||||||||
Proceeds from maturities of short-term investments
|
1,743,000 | 4,048,614 | 9,878,700 | 43,162,356 | ||||||||||||
Organization costs
|
— | — | — | (42,165 | ) | |||||||||||
Net cash (used in) provided by investing activities
|
(3,129,695 | ) | 3,533,374 | 9,623,477 | (3,794,648 | ) | ||||||||||
Cash flows from financing activities:
|
||||||||||||||||
Net proceeds from sale of stock and exercise of stock options and warrants
|
37,347,543 | 35,475,954 | — | 125,481,261 | ||||||||||||
Repurchases of common stock
|
— | — | — | (51,103 | ) | |||||||||||
Dividends paid on preferred stock
|
— | — | — | (499,535 | ) | |||||||||||
Proceeds from short-term borrowings
|
— | — | — | 1,704,964 | ||||||||||||
Net cash provided by financing activities
|
37,347,543 | 35,475,954 | — | 126,635,587 | ||||||||||||
Increase in cash and cash equivalents
|
10,135,134 | 28,547,086 | 2,900,200 | 45,621,453 | ||||||||||||
Cash and cash equivalents at beginning of period
|
35,486,319 | 6,939,233 | 7,886,937 | — | ||||||||||||
Cash and cash equivalents at end of period
|
$ | 45,621,453 | $ | 35,486,319 | $ | 10,787,137 | $ | 45,621,453 | ||||||||
Supplemental cash flow information:
|
||||||||||||||||
Cash paid for interest
|
$ | — | $ | — | $ | — | $ | 171,473 | ||||||||
Supplemental non-cash activities:
|
||||||||||||||||
Cashless exercise of stock options and shares surrendered upon restricted stock vesting
|
$ | 700,478 | $ | — | $ | 1,950 | $ | 1,244,594 | ||||||||
Conversion of debt to common stock
|
$ | — | $ | — | $ | — | $ | 1,704,964 | ||||||||
Common stock issued for preferred stock dividends
|
$ | — | $ | — | $ | — | $ | 999,070 | ||||||||
Conversion of preferred stock to common stock
|
$ | — | $ | — | $ | — | $ | 24,167 | ||||||||
Common stock issued as compensation for stock sale
|
$ | — | $ | — | $ | — | $ | 510,000 | ||||||||
Fair value of warrants issued
|
$ | — | $ | 2,190,979 | $ | — | $ | 6,459,979 | ||||||||
Fair value of warrants reclassified from liability to additional paid-in capital upon exercise
|
$ | 9,153,567 | $ | — | $ | — | $ | 9,153,567 |
(1)
|
Description of Business and Summary of Significant Accounting Policies
|
(2)
|
Investments
|
(3)
|
Stockholders' Equity
|
Number of Options
|
Exercise Price
per Share
|
Weighted Average
Exercise Price
|
Weighted
Average
Remaining
Life
(Years)
|
||||||||||||||
Outstanding at December 31, 2007
|
1,140,000 | $ | 1.88–7.14 | $ | 4.54 | 3.96 | |||||||||||
Granted
|
525,000 | 1.23–3.45 | 1.76 | ||||||||||||||
Expired
|
(190,000 | ) | 1.88–7.14 | 5.54 | |||||||||||||
Exercised
|
(15,000 | ) | 1.88 | 1.88 | |||||||||||||
Outstanding at December 31, 2008
|
1,460,000 | $ | 1.23–6.18 | $ | 3.44 | 3.68 | |||||||||||
Granted
|
1,885,000 | 1.24-6.09 | 3.94 | ||||||||||||||
Expired
|
— | ||||||||||||||||
Exercised
|
— | ||||||||||||||||
Outstanding at December 31, 2009
|
3,345,000 | $ | 1.23–6.18 | $ | 3.72 | 6.58 | |||||||||||
Granted
|
700,650 | 5.28-15.54 | 9.81 | ||||||||||||||
Expired
|
(120,000 | ) | 2.78-3.59 | 3.25 | |||||||||||||
Forfeited
|
(25,000 | ) | 4.12-6.18 | 4.81 | |||||||||||||
Exercised
|
(140,000 | ) | 1.43-6.18 | 3.52 | |||||||||||||
Outstanding at December 31, 2010
|
3,760,650 | $ | 1.23-15.54 | $ | 4.88 | 6.65 | |||||||||||
Exercisable at December 31, 2010
|
2,398,334 | $ | 4.03 | 5.31 |
Non-Vested Options
|
|||||||||
Number of Options
|
Weighted Average
Fair Value
|
||||||||
|
|||||||||
Non-vested at January 1, 2010
|
1,516,916 | $ | 4.09 | ||||||
Granted
|
599,400 | 9.38 | |||||||
Vested
|
(729,000 | ) | 4.12 | ||||||
Forfeited
|
(25,000 | ) | 4.81 | ||||||
Non-vested at December 31, 2010
|
1,362,316 | $ | 6.39 |
Restricted Stock Activity
|
|||||||||
Number of Shares
|
Weighted Average
Grant Date Fair Value
|
||||||||
|
|||||||||
Non-vested at January 1, 2010
|
307,910 | $ | 5.23 | ||||||
Granted
|
56,132 | 11.16 | |||||||
Vested
|
(296,452 | ) | 6.02 | ||||||
Forfeited
|
— | ||||||||
Non-vested at December 31, 2010
|
67,590 | $ | 6.71 |
The Plans
|
|||||||||||||||||
Warrants
|
Exercise Price
per Share
|
Weighted Average
Exercise Price
|
Weighted Average Remaining Life
(Years)
|
||||||||||||||
Outstanding at December 31, 2007
|
2,480,587 | $ | 1.02–4.53 | $ | 4.27 | 4.13 | |||||||||||
Issued
|
– | ||||||||||||||||
Exercised
|
– | ||||||||||||||||
Expired
|
(16,500 | ) | 1.02–1.28 | 1.15 | |||||||||||||
Outstanding at December 31, 2008
|
2,464,087 | $ | 3.01–4.53 | $ | 4.30 | 3.15 | |||||||||||
Issued
|
1,650,760 | 3.44–3.60 | 3.54 | ||||||||||||||
Exercised
|
(103,512 | ) | 3.44 | 3.44 | |||||||||||||
Expired
|
(265,151 | ) | 3.01 | 3.01 | |||||||||||||
Outstanding at December 31, 2009
|
3,746,184 | $ | 3.44–3.91 | $ | 3.52 | 3.08 | |||||||||||
Issued
|
– | ||||||||||||||||
Exercised
|
(1,159,000 | ) | 3.44–3.91 | 3.52 | |||||||||||||
Expired
|
(74,250 | ) | 3.91 | 3.91 | |||||||||||||
Outstanding at December 31, 2010
|
2,512,934 | $ | 3.44-3.60 | $ | 3.51 | 2.70 |
(4)
|
Income Taxes
|
Year Ended December 31,
|
|||||||||||||
2010
|
2009
|
2008
|
|||||||||||
Income taxes using U.S. federal statutory rate
|
$ | (15,872,439 | ) | $ | (7,643,253 | ) | $ | (2,334,061 | ) | ||||
State income taxes, net of federal benefit
|
(4,276,370 | ) | (674,624 | ) | (410,495 | ) | |||||||
Valuation allowance
|
15,040,948 | 5,671,082 | 3,226,441 | ||||||||||
Derivative charge
|
5,423,465 | 2,913,092 | (375,252 | ) | |||||||||
Research and development credits
|
(519,128 | ) | (345,404 | ) | (211,208 | ) | |||||||
Other
|
203,523 | 79,107 | 104,575 | ||||||||||
$ | – | $ | – | $ | – |
2010
|
2009
|
||||||||
Deferred tax assets:
|
|||||||||
Employee compensation accruals
|
$ | 3,345,000 | $ | 1,507,000 | |||||
Accrued liabilities
|
231,000 | – | |||||||
Research tax credits
|
1,076,000 | 557,000 | |||||||
Other
|
14,000 | – | |||||||
Net operating losses
|
29,868,000 | 17,417,000 | |||||||
Total deferred tax assets
|
34,534,000 | 19,481,000 | |||||||
Deferred tax liability:
|
|||||||||
Total deferred tax liabilities
|
– | – | |||||||
Valuation allowance
|
34,534,000 | 19,481,000 | |||||||
Net deferred tax assets
|
$ | – | $ | – |
(5)
|
Commitments
|
Year Ended December 31:
|
|||||
2011
|
$
|
1,109,016
|
|||
2012
|
1,079,815
|
||||
2013
|
967,168
|
||||
2014
|
995,931
|
||||
2015
|
1,006,795
|
||||
$
|
5,161,600
|
(6)
|
Research and Distribution Agreement
|
(7)
|
Assets and Liabilities Measured at Fair Value
|
Level 1
|
Level 2
|
Level 3
|
Balance at
December 31, 2010
|
||||||||||||||
Assets
|
|||||||||||||||||
Marketable equity securities
|
$ | 20,000 | $ | — | $ | — | $ | 20,000 | |||||||||
Money market funds
|
45,407,058 | — | — | 45,407,058 | |||||||||||||
Liabilities
|
|||||||||||||||||
Derivative instrument liabilities
|
$ | — | $ | — | $ | 18,005,014 | $ | 18,005,014 |
Fair Value Measurements Using Significant Unobservable Inputs
(Level 3)
|
Derivative
|
|||||
Beginning balance
|
$
|
11,207,214
|
|||
Total increase in the liability included as a charge to earnings
|
15,951,367
|
||||
Total liability reclassified to additional paid in capital upon exercise of warrants
|
(9,153,567)
|
||||
Ending balance
|
$
|
18,005,014
|
(8)
|
Quarterly Financial Data (Unaudited)
|
2010 Quarters Ended
|
||||||||||||||||
(in thousands except per share amounts)
|
March 31
|
June 30
|
September 30
|
December 31
|
||||||||||||
Operating loss
|
$ | (5,487 | ) | $ | (8,305 | ) | $ | (7,421 | ) | $ | (9,529 | ) | ||||
Derivative instrument income (expense)
|
(8,688 | ) | 635 | (2,112 | ) | (5,787 | ) | |||||||||
Net loss
|
(14,174 | ) | (7,668 | ) | (9,530 | ) | (15,312 | ) | ||||||||
Basic and diluted loss per share
|
(0.39 | ) | (0.21 | ) | (0.24 | ) | (0.36 | ) |
2009 Quarters Ended
|
||||||||||||||||
(in thousands except per share amounts)
|
March 31
|
June 30
|
September 30
|
December 31
|
||||||||||||
Operating loss
|
$ | (1,936 | ) | $ | (2,442 | ) | $ | (3,733 | ) | $ | (5,425 | ) | ||||
Derivative instrument income (expense)
|
(562 | ) | (3,904 | ) | (3,831 | ) | (271 | ) | ||||||||
Net loss
|
(2,445 | ) | (6,328 | ) | (7,586 | ) | (5,698 | ) | ||||||||
Basic and diluted loss per share
|
(0.10 | ) | (0.25 | ) | (0.29 | ) | (0.18 | ) |
(9)
|
Subsequent Events
|
·
|
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
|
|
·
|
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
|
|
·
|
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.
|
DELCATH SYSTEMS, INC.
|
|
/s/ Eamonn P. Hobbs
|
|
Eamonn P. Hobbs
|
|
President and Chief Executive Officer
|
|
(Principal Executive Officer)
|
|
Dated: March 8, 2011
|
Signature
|
Title
|
Date
|
||
/s/ Eamonn P. Hobbs
|
President and Chief Executive Officer, and Director (Principal Executive Officer)
|
March 8, 2011 | ||
Eamonn P. Hobbs
|
||||
/s/ David A. McDonald
|
Chief Financial Officer (Principal Financial Officer)
|
March 8, 2011 | ||
David A. McDonald
|
||||
/s/ Barbra C. Keck
|
VP, Controller (Principal Accounting Officer)
|
March 8, 2011 | ||
Barbra C. Keck
|
||||
/s/Harold S. Koplewicz
|
Chairman of the Board
|
March 8, 2011 | ||
Harold S. Koplewicz, M.D.
|
||||
/s/ Laura Philips
|
Director
|
March 8, 2011 | ||
Laura Philips, Ph.D.
|
||||
/s/ Douglas Watson
|
Director
|
March 8, 2011 | ||
Douglas Watson
|
||||
/s/ Robert Ladd
|
Director
|
March 8, 2011 | ||
Robert Ladd
|
||||
|
||||
/s/ Pamela Contag
|
Director
|
March 8, 2011 | ||
Pamela Contag, Ph.D.
|
||||
/s/ Roger Stoll
|
Director
|
March 8, 2011 | ||
Roger Stoll, Ph.D.
|
||||
Exhibit
No.
|
Description
|
|
3.1
|
Amended and Restated Certificate of Incorporation of the Company, as amended to June 30, 2005 (incorporated by reference to Exhibit 3.1 to Company's Current Report on Form 8-K filed June 5, 2006 (Commission File No. 001-16133).
|
|
3.2
|
Amended and Restated By-Laws of the Company (incorporated by reference to Exhibit 3.2 to Amendment No. 1 to Company's Registration Statement on Form SB-2 (Registration No. 333-39470)).
|
|
4.1
|
Rights Agreement, dated October 30, 2001, by and between the Company and American Stock Transfer & Trust Company, as Rights Agent (incorporated by reference to Exhibit 4.7 to the Company's Form 8-A filed November 14, 2001 (Commission File No. 001-16133)).
|
|
4.2
|
Form of Warrant to Purchase Shares of Common Stock dated June 15, 2009 issued pursuant to the Subscription Terms dated as of June 9, 2009 between the Company and Capital Ventures International (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed June 10, 2009 (Commission File No,. 001-16133)).
|
|
10.1
|
*
|
2004 Stock Incentive Plan (incorporated by reference to Appendix B to the Company's definitive Proxy Statement dated April 29, 2004 (Commission File No. 001-16133)).
|
10.2
|
*
|
2009 Stock Incentive Plan (incorporated by reference to Appendix B to the Company's definitive Proxy Statement dated April 30, 2009 (Commission File No. 001-16133)).
|
10.3
|
*
|
Form of Incentive Stock Option Agreement under the Company's 2004 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-QSB for the quarter ended June 30, 2005 (Commission File No. 001-16133)).
|
10.4
|
*
|
Form of Nonqualified Stock Option Agreement under the Company's 2004 Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-QSB for the quarter ended June 30, 2005 (Commission File No. 001-16133)).
|
10.5
|
*
|
Form of Stock Grant Agreement under the Company's 2004 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-QSB for the quarter ended June 30, 2005 (Commission File No. 001-16133)).
|
10.6
|
Settlement Agreement, dated as of October 8, 2006, by and between the Company, Laddcap Value Partners LP, Laddcap Value Advisors LLC, Laddcap Value Associates LLC, any affiliate of the foregoing, and Robert B. Ladd (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed October 12, 2006 (Commission File No. 001-16133)).
|
|
10.7
|
Modification Agreement dated April 9, 2007 between the Company, Laddcap Value Partners, LP, Laddcap Associates, LLC (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed April 16, 2007 (Commission File No. 001-16133)).
|
|
10.8
|
Form of Warrant issued to investors in connection with the Company's September 2007 registered direct offering (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed September 24, 2007 (Commission File No. 001-16133)).
|
|
10.9
|
†
|
Cooperative Research and Development Agreement dated as of March 29, 2007 between the Company and the National Cancer Institute (incorporated by reference to Exhibit 10.21 to the Company's Annual Report on Form 10-K for the year ended December 31, 2009 (Commission File No. 001-16133)).
|
10.10
|
Form of Indemnification Agreement dated April 8, 2009 between the Company and members of the Company's Board of Directors (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed April 10, 2009 (Commission File No. 001-16133)).
|
|
10.11
|
*
|
Separation and General Release Agreement dated as of July 5, 2009 between the Company and Richard L. Taney (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed July 7, 2009 (Commission File No. 001-16133)).
|
10.12
|
*
|
Employment Agreement dated as of July 1, 2009 between the Company and Eamonn P. Hobbs (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed July 7, 2009 (Commission File No. 001-16133)).
|
10.13
|
*
|
Employee Stock Option Grant Letter dated as of July 6, 2009 between the Company and Eamonn P. Hobbs (incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed September 17, 2009 (Commission File No. 001-16133)).
|
10.14
|
*
|
Employee Stock Option Grant Letter dated as of July 6, 2009 between the Company and Eamonn P. Hobbs (incorporated by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed September 17, 2009 (Commission File No. 001-16133)).
|
10.15
|
Lease with Option to Purchase between Fitzgerald Brothers Beverages, Inc., and the Company, dated as of September 1, 2009 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed September 3, 2009 (Commission File No. 001-16133)).
|
|
10.16
|
*
|
Employment Agreement dated as of September 13, 2009 between Delcath Systems, Inc. and David A. McDonald (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed September 17, 2009 (Commission File No. 001-16133)).
|
10.17
|
*
|
Employee Stock Option Grant Letter dated as of September 14, 2009 between the Company and David A. McDonald (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed September 17, 2009 (Commission File No. 001-16133)).
|
10.18
|
*
|
Restricted Stock Agreement dated as of September 14, 2009 between the Company and David A. McDonald (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed September 17, 2009 (Commission File No. 001-16133)).
|
10.19
|
*
|
Employment Agreement dated as of September 30, 2009 between the Company and Krishna Kandarpa, M.D., Ph.D. (incorporated by reference to Exhibit 99.2 to the Company's Current Report on Form 8-K filed October 5, 2009 (Commission File No. 001-16133)).
|
10.20
|
*
|
Employee Stock Option Grant Letter dated October 20, 2009 between the Company and Krishna Kandarpa, M.D., Ph.D. (incorporated by reference to Exhibit 10.34 to the Company's Annual Report on Form 10-K for the year ended December 31, 2009 (Commission File No. 001-16133)).
|
10.35
|
Form of Restricted Stock Agreement (Consultants) under the Company's 2009 Stock Incentive Plan (incorporated by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed December 20, 2010 (Commission File No. 001-16133)).
|
|
10.36
|
*
|
Form of Non-Statutory Stock Option Grant Letter under the Company's 2009 Stock Incentive Plan (incorporated by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K filed December 20, 2010 (Commission File No. 001-16133)).
|
10.37
|
Form of Non-Statutory Stock Option Grant Letter (Non-Employee Directors) under the Company's 2009 Stock Incentive Plan (incorporated by reference to Exhibit 10.7 to the Company's Current Report on Form 8-K filed December 20, 2010 (Commission File No. 001-16133)).
|
|
10.38
|
Form of Non-Statutory Stock Option Grant Letter (Consultants) under the Company's 2009 Stock Incentive Plan (incorporated by reference to Exhibit 10.8 to the Company's Current Report on Form 8-K filed December 20, 2010 (Commission File No. 001-16133)).
|
|
23.1
|
**
|
Consent of Ernst & Young LLP
|
23.2
|
**
|
Consent of CCR LLP
|
31.1
|
**
|
Certification by Principal executive officer Pursuant to Rule 13a 14.
|
31.2
|
**
|
Certification by Principal financial officer Pursuant to Rule 13a 14.
|
32.1
|
** |
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
32.2
|
** |
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
†
|
Portions of this exhibit have been redacted and are subject to a confidential treatment request filed with the Secretary of the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.
|
|
*
|
Indicates management contract or compensatory plan or arrangement.
|
|
**
|
Filed herewith.
|
(1)
|
Registration Statement (Form S-3 No. 333-165677) of Delcath Systems, Inc., and
|
(2)
|
Registration Statement (Form S-8 No. 333-166956) pertaining to the 2004 Stock Incentive Plan and the 2009 Stock Incentive Plan of Delcath Systems, Inc.;
|
DATE March 8, 2011
|
/s/ Eamonn P. Hobbs
|
Eamonn P. Hobbs
|
|
President and Chief Executive Officer
|
|
(Principal Executive Officer)
|
1)
|
I have reviewed this annual report on Form 10-K of Delcath Systems, Inc;
|
||
2)
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
||
3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
||
4)
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
||
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
||
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
||
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
||
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5)
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
||
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
||
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
DATE March 8, 2011
|
/s/ David A. McDonald
|
David A. McDonald
|
|
Chief Financial Officer
|
|
(Principal Financial Officer)
|
DATE March 8, 2011
|
/s/ Eamonn P. Hobbs
|
Eamonn P. Hobbs
|
|
President and Chief Executive Officer
|
|
(Principal Executive Officer)
|
DATE March 8, 2011
|
/s/ David A. McDonald
|
David A. McDonald
|
|
Chief Financial Officer
|
|
(Principal Financial Officer)
|
1.
|
Term and Duties.
|
3.
|
Compensation
.
|
|
3.3
|
Stock Option Grant
.
|
|
3.4
|
Restricted Stock.
|
|
3.5
|
Special One-Time Bonus
.
|
4.
|
Benefits
.
|
5.
|
Termination
.
|
|
5.4
|
Release; Exclusive Remedy
.
|
|
5.5
|
Certain Defined Terms
.
|
|
5.8
|
Section 409A and Sarbanes-Oxley
.
|
6.
|
Protective Covenants
.
|
|
6.1
|
Confidential Information; Inventions
.
|
11.
|
Governing Law; Arbitration; Waiver of Jury Trial
.
|
Delcath Systems, Inc.
|
|
Rockefeller Center
|
|
600 Fifth Avenue, 23rd Floor
|
|
New York, NY 10020
|
|
Facsimile: (212) 489-2102
|
|
Attn
: Chief Executive Officer
|
|
with a copy to:
|
|
Gregory J. Champion, Esq.
|
|
Bond, Schoeneck & King, PLLC
|
|
111 Washington Ave., 5
th
Floor
|
|
Albany, NY 12210
|
|
Facsimile: (518) 533-3299
|
“COMPANY”
|
||
Delcath Systems, Inc.
|
||
By:
|
/s/ Eamonn P. Hobbs | |
Name:
|
Eamonn P. Hobbs | |
Title:
|
President and CEO |
“EXECUTIVE”
|
|
/s/ Agustin Gago | |
Agustin Gago
|
Agustin Gago
|
|
Print Name: _____________________________________________________
|
DELCATH SYSTEMS, INC., a Delaware corporation
|
By:
|
||
Name:
|
|
|
Title:
|
Print Name: __________________________
|
1.
|
Term and Duties.
|
3.
|
Compensation
.
|
|
3.3
|
Stock Option Grant
.
|
4.
|
Benefits
.
|
5.
|
Termination
.
|
|
5.4
|
Release; Exclusive Remedy
.
|
|
5.5
|
Certain Defined Terms
.
|
|
5.8
|
Section 409A and Sarbanes-Oxley
.
|
6.
|
Protective Covenants
.
|
|
6.1
|
Confidential Information; Inventions
.
|
11.
|
Governing Law; Arbitration; Waiver of Jury Trial
.
|
Delcath Systems, Inc.
|
|
Rockefeller Center
|
|
600 Fifth Avenue, 23rd Floor
|
|
New York, NY 10020
|
|
Facsimile: (212) 489-2102
|
|
Attn
: Chief Executive Officer
|
|
with a copy to:
|
|
Gregory J. Champion, Esq.
|
|
Bond, Schoeneck & King, PLLC
|
|
111 Washington Ave., 5
th
Floor
|
|
Albany, NY 12210
|
|
Facsimile: (518) 533-3299
|
“COMPANY”
|
||
Delcath Systems, Inc.
|
||
By:
|
/s/ Eamonn P. Hobbs | |
Name:
|
Eamonn P. Hobbs | |
Title:
|
President and CEO |
“EXECUTIVE”
|
|
Peter J. Graham
|
|
/s/ Peter J. Graham | |
Executive Vice President and General Counsel
|
“Executive”
|
|
Print Name: Peter J. Graham
|
DELCATH SYSTEMS, INC., a Delaware corporation
|
By:
|
||
Name:
|
|
|
Title:
|
Print Name: Peter J. Graham
|
If, to Synerx/Bioniche, to:
|
Synerx Pharma, LLC
100 North State Street
Newtown, PA 18940
Attn: Douglas S. Hamilton, President
Fax: (215) 895-9629
Synerx Pharma, LLC
100 North State Street
Newtown, PA 18940
Attn: Walter G. Jump, Vice President
Fax: (215) 895-9629
|
and to:
|
Bioniche Pharma
Inverin, County Galway
Ireland
Attn: Damien Kelly, CFO
Fax: +353 91 593228
With a copy to:
Mylan Inc.
1500 Corporate Drive
Canonsburg, PA 15317
Attn: Global General Counsel
Fax: (724) 514-1972
|
If to Synerx, to:
|
Synerx Pharma, LLC
100 North State Street
Newtown, PA 18940
Attn: Douglas S. Hamilton, President
Fax: (215) 895-9629
|
If to Bioniche Pharma, to:
|
Bioniche Pharma
Inverin, County Galway
Ireland
Attn: Damien Kelly, CFO
Fax: +353 91 593228
With a copy to:
Mylan Inc.
1500 Corporate Drive
Canonsburg, PA 15317
Attn: Global General Counsel
Fax: (724) 514-1972
|
SYNERX PHARMA, LLC
|
||
By:
|
/s/ Douglas S. Hamilton
|
|
Name: Douglas S. Hamilton
Title: President
|
||
BIONICHE TEORANTA
|
||
By:
|
/s/ Damien Kelly
|
|
Name: Damien Kelly
Title: CFO
|
||
DELCATH SYSTEMS, INC.
|
||
By:
|
/s/ David McDonald
|
|
Name: David McDonald
Title: CFO
|
Contract Year
|
1
|
2
|
3
|
4
|
5
|
6
|
7
|
Minimum Binding Purchase Commitment (No. of vials)
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
Price Per Vial*
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|