We are a biotechnology company using our expertise in the tumor microenvironment to discover and develop therapeutic agents that selectively target tumor cells for the treatment of patients living with cancer. Our lead investigational small molecule, evofosfamide (formerly TH-302), is being evaluated in two pivotal Phase 3 clinical trials, one registrational Phase 2 clinical trial, and multiple earlier-stage clinical trials. We have a global license and co-development agreement for evofosfamide with Merck KGaA, Darmstadt, Germany, with an option to co-commercialize in the United States.

Evofosfamide was discovered by our scientists based on our hypoxia-targeted therapeutics prodrug technology. Hypoxia, or abnormally low oxygen concentration, is a common feature of the tumor microenvironment in most solid tumors and in the bone marrow of patients with hematological malignancies (also known as cancers of the bone marrow, for example, leukemias and multiple myeloma). Tumor hypoxia is associated with the development of resistance to traditional anticancer treatments, including chemotherapy and radiotherapy, enhanced metastatic potential, and ultimately treatment failure. Normal healthy tissues, in contrast, are well oxygenated and typically are not hypoxic. A prodrug is an inactive compound that is converted in the human body by enzymatic processes that result in the formation of an active drug. As a prodrug, evofosfamide is designed to remain essentially inactive in normal tissues, but to activate under conditions of tumor hypoxia. Upon activation, evofosfamide releases bromo-isophosphoramide mustard (Br-IPM), a potent cytotoxin that kills cells by causing DNA to crosslink.

We believe that by virtue of targeting tumor hypoxia, evofosfamide may have broad clinical applicability across many types of solid tumors and some hematological malignancies. To explore this broad therapeutic potential of evofosfamide, we are conducting multiple clinical trials to evaluate its safety and efficacy in solid tumors and hematological malignancies in combination with currently marketed anticancer drugs, including traditional chemotherapeutic agents and antiangiogenic agents, and as monotherapy for certain cancers.

We along with our partner Merck KGaA are investigating evofosfamide in the following clinical studies, which are ongoing or recently completed:

* Sponsor indicates which company, Threshold or Merck KGaA, is responsible for a particular clinical trial.

**n-s NSCLC=non-squamous non-small cell lung cancer

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In addition, evofosfamide is the subject of the following Investigator Sponsored Trials, which are ongoing or recently completed:

We have also licensed worldwide rights to a development program from the University of Auckland based on the clinical-stage oncology compound TH-4000 (formerly referred to as PR610 or Hypoxin™), a hypoxia-targeted epidermal growth factor receptor, or EGFR, tyrosine kinase inhibitor. TH-4000 is designed to selectively release a potent, irreversible tyrosine kinase inhibitor in hypoxic tumors. Preclinical and Phase 1 clinical data suggest that plasma concentrations of TH-4000 that are active in EGFR-dependent tumor xenograft models in mice could be attained in patients with an acceptable therapeutic index. We expect to initiate a Phase 2 proof-of-concept study in a subset of molecularly-defined non-small cell lung cancer patients who we believe may be responsive to TH-4000 in the first half of 2015.

Our Strategy

We are focused on building a fully integrated biopharmaceutical company that discovers, develops, and commercializes drugs for cancer based on targeting the tumor microenvironment. We focus on prodrugs of known chemotherapeutic agents or related analogs that undergo relatively selective activation in the tumor microenvironment and potentially allow for an improved safety and efficacy profile for the drug. Key elements of our strategy are to:

Tumor Hypoxia

Tumor hypoxia, or low oxygen concentration within tumor tissue, is a result of disordered vasculature found in all solid tumors. Whereas normal healthy tissues are typically well oxygenated by virtue of having highly regular and structured arrays of blood vessels, the vasculature supporting cancerous tissues is highly disordered and irregular. Common abnormalities in tumor vasculature include a large variation in the distance between the blood vessels that carry oxygen and other vital nutrients as well as “dead-ends” and temporary occlusions. Furthermore, in tumors, the growth of malignant cells is unregulated resulting in these tissues literally outgrowing their blood supply, leading to severe deficiencies in the perfusion of oxygen and nutrients.

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Together, abnormalities in tumor vasculature and the unregulated growth of cancer cells lead to distinctive hypoxic microenvironments, which are not found in most normal tissues. The hypoxic zones of tumors are known to be resistant to standard chemotherapeutics and to radiation therapy. Hypoxia is also believed to contribute to more aggressive, invasive, and metastatic cancer phenotypes. Many traditional anticancer agents are not able to penetrate these hypoxic zones. Furthermore, cells that reside within regions of tumor hypoxia are relatively quiescent (dormant) in contrast to highly proliferative cells that are the hallmark of cancer. As many traditional cancer therapies work by blocking cell division, they are not effective in killing the non-dividing, quiescent cells within hypoxic zones. In addition, cells subjected to prolonged hypoxia are thought to accumulate the changes in their growth properties and genetic mutations that can lead to drug resistance, enhanced metastatic potential, and, ultimately, treatment failure. Tumor hypoxia correlates with poor prognosis in cancer patients and is believed to represent a significant unmet medical need.

Given its central role in tumor progression, metastasis, resistance, and ultimately treatment failure, hypoxia is emerging as a significant, high-priority target for cancer therapy.

Evofosfamide Investigational Hypoxia-activated prodrug

The introduction of therapies that preferentially target tumor hypoxia offers the potential to deliver cancer therapies selectively to tumor tissue and to expand the therapeutic options available for cancer patients across the majority of tumor types. To our knowledge, evofosfamide is the most clinically advanced hypoxia-activated prodrug in active development for the treatment of cancer. Evofosfamide is designed as a prodrug that is selectively activated under the extreme hypoxic conditions commonly found in tumors, but not typically in healthy tissues. Within regions of tumor hypoxia, evofosfamide is converted to its active form, bromo-isophosphoramide mustard (Br-IPM). Variants of IPM are clinically validated potent DNA alkylating agents, which kill tumor cells by causing DNA to crosslink thereby rendering cells unable to replicate their DNA and divide. Once activated in hypoxic tissues, Br-IPM can also diffuse into surrounding oxygenated regions of the tumor and kill cells there via a “bystander effect”.

Preclinical and clinical data suggest that evofosfamide has significant antitumor activity both alone as well as in combination with other cancer therapies that target the rapidly proliferating cells found in normally oxygenated regions of solid tumors. Because of its preferential activation in the hypoxic regions of solid tumors, we believe that evofosfamide will be less likely to produce the systemic toxicity caused by untargeted cytotoxic chemotherapies. Preclinical studies have also shown enhanced antitumor activity of evofosfamide when combined with antiangiogenic agents, which are drugs designed to disrupt the blood vessel network supplying tumors. The underlying biological rationale for this enhanced activity is based, in part, on evidence that antiangiogenic agents increase levels of tumor hypoxia. Other research suggests that the bone marrow of patients with leukemia as well as multiple myeloma is also highly hypoxic and supports the potential therapeutic utility of evofosfamide in treating these blood cancers.

Evofosfamide Clinical Development Programs

The development plan for evofosfamide is designed to investigate its safety and efficacy across a broad range of solid tumors and hematologic malignancies. We are developing evofosfamide in areas supported by preclinical and clinical data and where there is high unmet need for new anticancer agents. To date, evofosfamide has been evaluated in more than 1,500 patients with cancer.

We completed a monotherapy Phase 1 clinical trial that determined the maximum tolerated dose, dose limiting toxicities, safety, pharmacokinetics and preliminary efficacy of evofosfamide monotherapy in patients with advanced solid tumors. We expanded enrollment in this trial to investigate evofosfamide as a single agent in specific indications in which monotherapy activity had been observed as well as in some indications in which notable activity had been documented in combination with other chemotherapy drugs. We completed enrollment in two combination therapy Phase 1/2 clinical trials that determined the maximum tolerated doses, dose-limiting toxicities, safety, pharmacokinetics and preliminary efficacy of evofosfamide in combination with four currently approved chemotherapies. Data from this collection of clinical trials supported our initial randomized controlled trial of evofosfamide in first-line pancreatic cancer.

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The most advanced clinical trials of evofosfamide are two pivotal Phase 3 clinical trials: one in combination with doxorubicin versus doxorubicin alone in patients with soft tissue sarcoma, and the other in combination with gemcitabine versus gemcitabine plus placebo in patients with advanced pancreatic cancer. Both Phase 3 clinical trials are being conducted under special protocol assessments or SPAs, with the U.S. Food and Drug Administration or FDA. An SPA is a written agreement with the FDA that documents FDA’s agreement that the design and planned analysis of a study can adequately address objectives in support of a regulatory submission. However, the FDA’s determinations for marketing application approval are made after a complete review of a marketing application and are based on the entire data in the application. The FDA and the European Commission have granted evofosfamide orphan drug designation for the treatment of soft tissue sarcoma and pancreatic cancer. The FDA has also granted Fast Track Designation to evofosfamide for the treatment of advanced soft tissue sarcoma. Initiation of these Phase 3 clinical trials was supported by preclinical data in disease-specific models as well as data from Phase 2 clinical trials in the same patient populations. Merck KGaA is conducting additional studies including a Phase 1/2 dose-escalation trial of evofosfamide in combination with gemcitabine and nab-paclitaxel in patients with advanced pancreatic cancer and two studies in Japan: a Phase 2 trial of evofosfamide in combination with doxorubicin in patients with advanced soft tissue sarcoma and a Phase 1 dose-escalation trial of evofosfamide as monotherapy and in combination with gemcitabine in patients with advanced pancreatic cancer.  

In 2014, we initiated a 440-patient, randomized, double-blind, placebo-controlled trial of evofosfamide in combination with pemetrexed in patients with advanced non-squamous non-small cell lung cancer (NSCLC). The international Phase 2 trial is designed to compare the combination of evofosfamide and pemetrexed versus the combination of pemetrexed and placebo as second-line therapy in this patient population. In 2013, we also initiated a Phase 2 trial of evofosfamide monotherapy in patients with advanced melanoma. We are also conducting or have completed Phase 1/2 clinical trials of evofosfamide in patients with multiple myeloma and advanced leukemias based on research demonstrating that hypoxia in the bone marrow is characteristic of some hematological malignancies. Likewise, research has demonstrated that treatment with antiangiogenic agents can increase tumor hypoxia, providing the underlying rationale for current or completed investigations of evofosfamide in combination with four marketed antiangiogenic agents in multiple Phase 1/2 clinical trials. Threshold and Merck KGaA are conducting two additional Phase 1 trials in patients with advanced solid tumors, one being a cardiac safety study and the other being a mass balance study.

We continue to evaluate and intend to pursue additional therapeutic areas, development pathways and regulatory strategies to optimize the potential therapeutic applications of, and market opportunities for, evofosfamide.

Evofosfamide pivotal Phase 3 program in soft tissue sarcoma: evofosfamide in combination with doxorubicin

In partnership with the Sarcoma Alliance for Research through Collaboration (SARC), we are conducting an international, randomized, pivotal Phase 3 clinical trial of evofosfamide in patients with metastatic or locally advanced unresectable soft tissue sarcoma who have not previously received chemotherapy. The trial, which we refer to as the 406 trial, is designed to evaluate the efficacy and safety of evofosfamide in combination with doxorubicin, compared to doxorubicin alone. The study is being conducted under an SPA with the FDA. The primary endpoint in the 406 trial is overall survival; secondary endpoints include efficacy measured by progression-free survival, overall response rate, overall survival at 6 and 12 months, progression-free rate at 3 months and progression-free rate at 6 months, duration of response, stable disease or better rate, change in Eastern Cooperative Oncology Group or ECOG and performance status, as well as assessments of safety and tolerability, pharmacokinetics and biomarkers. The FDA and the European Commission have granted evofosfamide orphan drug designation for the treatment of advanced soft tissue sarcoma, and the FDA has granted Fast Track Designation to evofosfamide for the treatment of this patient population.

In July 2013, we announced a protocol amendment to the 406 trial. The changes to the protocol included enrollment of 170 additional patients so that the target sample size was increased from 450 patients as originally planned to 620 patients. This increase was intended to adjust for new assumptions about the primary endpoint of overall survival, based on the latest medical findings in soft tissue sarcoma clinical research. Specifically, research in the field suggests that patients who receive standard of care treatment (the same as being used in the control arm of our study) may live longer than has historically been reported. The addition of patients to the 406 trial was required to maintain the statistical power of the study and the ability to detect a clinically meaningful effect of evofosfamide with a robust level of statistical significance. The FDA agreed to the amendment under the existing SPA. In December 2013, we announced that the target enrollment of 620 patients was achieved.

In September 2014, we announced that an Independent Data Monitoring Committee, or IDMC, completed the pre-planned interim efficacy and safety analyses of unblinded data from our 406 trial. Based on the IDMC’s analyses, which included an assessment of both benefit and risk, the IDMC recommended that the 406 trial should continue as planned to its natural conclusion. We will remain blinded to the data from the 406 trial until the primary analysis of overall survival is conducted, which is scheduled to occur after 434 deaths are reported. We currently project that the required number of events will be reached in the latter half of 2015, with the results of the primary efficacy analysis expected to be available shortly thereafter.

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This 406 trial for evofosfamide was initiated following results from a multi-center, dose-escalation Phase 1/2 trial of evofosfamide in patients with soft tissue sarcoma (which we refer to as the 403 trial). The 403 trial was designed to determine the safety, efficacy and pharmacokinetics of evofosfamide in combination with full-dose doxorubicin in patients with soft tissue sarcoma followed by evofosfamide maintenance monotherapy for patients who had not progressed after six cycles of combination therapy. Dose-limiting toxicities at an evofosfamide dose of 340 mg/m ² were Grade 4 thrombocytopenia and Grade 3 infection with Grade 4 neutropenia. The maximum tolerated dose (MTD) of 300 mg/m ² was established for evofosfamide in combination with the approved dose of 75 mg/m ² doxorubicin with prophylactic growth factor support. Enrollment was expanded at the MTD, and a total of 91 patients with advanced soft tissue sarcoma previously untreated with systemic chemotherapy were enrolled and treated at the MTD.

Final data from the Phase 2 portion of the 403 trial were published in the September 2, 2014 issue of the Journal of Clinical Oncology. The final data included median progression-free survival of 6.5 months (95% confidence interval (CI): 5.8 to 7.7 months); median overall survival of 21.5 months (95% CI 16.0 to 26.2 months); one-year survival of 73% (95% CI: 63% to 81%); two-year survival of 44% (95% CI: 33% to 54%); and overall best response (partial and complete responses, unconfirmed) of 36%.

Development activities in sarcoma planned for 2015: In anticipation of our projection that the required number of events will be reached in the latter half of 2015 with the results of the primary efficacy analysis to be available shortly thereafter, we are focused on activities to prepare for and support the potential submission of marketing applications, assuming the results are supportive.

Evofosfamide program in pancreatic cancer

In December 2012, our partner Merck KGaA opened the global pivotal Phase 3 MAESTRO clinical trial assessing the efficacy and safety of evofosfamide in combination with gemcitabine in patients with previously untreated, locally advanced unresectable or metastatic pancreatic adenocarcinoma. MAESTRO stands for evofosfamide in the treatment of M etast A tic or unr ES ectable pancrea T ic adenoca R cin O ma.

The MAESTRO trial is a randomized, placebo-controlled, international, multi-center, double-blind Phase 3 clinical trial of evofosfamide plus gemcitabine compared with placebo plus gemcitabine. In November 2014, we announced that Merck KGaA completed the target enrollment of 660 patients in the trial. The primary efficacy endpoint is overall survival; the secondary endpoints include efficacy measured by progression-free survival, overall response rate and disease control rate, as well as assessments of safety and tolerability, pharmacokinetics and biomarkers. The study is being conducted under an SPA with the FDA.

The MAESTRO trial was initiated following results from a randomized, controlled Phase 2b clinical trial of evofosfamide in combination with gemcitabine in patients with first-line pancreatic cancer (which we refer to as the 404 trial). A total of 214 patients with previously untreated, locally advanced, unresectable or metastatic pancreatic adenocarcinoma were enrolled and treated in the clinical trial at 45 sites in the U.S. Patients were randomized equally into one of three cohorts: evofosfamide at a dose of 240 mg/m ² plus gemcitabine or evofosfamide at a dose of 340 mg/m ² plus gemcitabine or gemcitabine alone. If a patient’s cancer progressed while on gemcitabine alone, the patient could crossover and be randomized into one of the evofosfamide plus gemcitabine cohorts. The primary efficacy endpoint of the trial was a comparison of progression-free survival between the two pooled combination arms and the gemcitabine alone arm. The secondary endpoints were overall response rate, overall survival, event-free survival, CA 19-9 (a serum biomarker) response rate as well as various safety parameters.

In February 2012, we announced top-line results that the primary endpoint in the 404 trial was achieved, showing a median progression-free survival of 5.6 months for patients treated with the combination of evofosfamide at 240 mg/m ² and 340 mg/m ² compared with 3.6 months for patients treated with gemcitabine alone. The progression-free survival hazard ratio comparing the evofosfamide combinations to gemcitabine alone was 0.61 (95% CI: 0.43 – 0.87), which was highly statistically significant (p=0.005).

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Final results of the 404 trial were published in the December 15, 2014 issue of the Journal of Clinical Oncology and were consistent with previously-reported results. The final results from the 404 trial showed a consistent dose effect in terms of improved progression-free survival, increased objective response rate, and decreased CA 19-9 levels in the gemcitabine plus evofosfamide (340 mg/ m ² ) arm compared with the gemcitabine plus evofosfamide (240 mg/ m ² )  and the gemcitabine-alone arms. There was a significant improvement (p=0.008) in progression-free survival associated with a 41% reduction of risk for disease progression or death for patients treated with gemcitabine plus evofosfamide (340 mg/ m ² ). This represented a 2.4-month increase in median progression-free survival for patients receiving gemcitabine plus evofosfamide (340 mg/ m ² ) compared with gemcitabine alone. The 12-month overall survival rates were also in favor of the gemcitabine plus evofosfamide (340 mg/ m ² ) treatment group compared with the control arm (38% vs. 26% (p=0.13)). Median overall survival for gemcitabine, gemcitabine plus evofosfamide (240 mg/ m ² ), and gemcitabine plus evofosfamide (340 mg/ m ² ) was 6.9, 8.7, and 9.2 months, respectively; the differences between treatment groups were not significant, which may be at least partially explained by control arm patients with progressive disease crossing over to one of the gemcitabine plus evofosfamide treatment arms. In other words, we believe that patients receiving gemcitabine alone who crossed over to receive gemcitabine plus evofosfamide upon disease progression contributed to the survival of the control arm. While not statistically significant, the improvement in median overall survival in the gemcitabine plus evofosfamide treatment arms was consistent with the improvement in median progression-free survival. The most common nonhematologic adverse events were fatigue, nausea and peripheral edema, and were similar in frequency across treatment groups. Skin and mucosal toxicities, predominantly Grade 1 and 2, and myelosuppression, were the most common adverse events related to evofosfamide and did not result in increases in treatment discontinuation. Adverse events leading to discontinuation of study treatment as well as serious adverse events were balanced across all treatment arms. All other severe adverse events were generally below 10%. There was no significant difference in the percentage of patients discontinuing treatment for adverse events across the three treatment arms.

In March 2014, we announced that Merck KGaA initiated a Phase 1 dose escalation study assessing the safety, tolerability and anti-tumor activity of evofosfamide in combination with gemcitabine and nab-paclitaxel (Abraxane ^® ) in patients with previously untreated, locally advanced unresectable or metastatic pancreatic adenocarcinoma.

Development activities in pancreatic cancer planned for 2015: Merck KGaA is responsible for conduct and execution of the MAESTRO trial in patients with advanced pancreatic cancer. Currently, we estimate that the protocol-specified events for the MAESTRO trial may be reached in the second half of 2015 with availability of the results of the primary efficacy analysis shortly thereafter. Enrollment is ongoing in the Phase 1/2 trial of evofosfamide in combination with gemcitabine and nab-paclitaxel.

Evofosfamide program in non-squamous non-small cell lung cancer

In July 2014, we announced the initiation of a 440-patient, randomized, double-blind, placebo-controlled trial of evofosfamide in combination with pemetrexed in patients with second-line advanced non-squamous non-small cell lung cancer (which we refer to as the 415 trial). This international Phase 2 trial is designed to support registration and will compare the combination of evofosfamide plus pemetrexed versus the combination of pemetrexed plus placebo as second-line therapy in this patient population. An evofosfamide dose of 400 mg/m ² will be utilized in combination with full-dose pemetrexed. Overall survival is the primary endpoint; secondary endpoints include safety and assessment of anti-tumor activity as determined by progression-free survival and objective response rate.

Development activities in NSCLC planned for 2015: Enrollment in the trial is expected to continue throughout the year and additional clinical trial sites will be opened.

Evofosfamide program in advanced melanoma

In August 2013, we announced the start of a Phase 2 clinical trial to evaluate the efficacy and safety of evofosfamide in patients with melanoma. The study will also investigate a range of biomarkers including serum, tumor biopsy, and PET imaging hypoxia biomarkers that may predict treatment outcomes and be associated with tumor response to evofosfamide therapy. The Phase 2 clinical trial is a single-arm, multi-center study investigating the clinical efficacy and safety of evofosfamide administered at 480 mg/ m ² weekly on a 28-day cycle (three weeks on, one week off) in up to 40 patients with advanced melanoma. The primary endpoint is three-month progression-free survival. Secondary endpoints include response rate, duration of response, overall survival, safety and evaluation of potential imaging, serum, and tissue biomarkers that may be associated with tumor response and predict for efficacy and safety of evofosfamide therapy.

Development activities planned in melanoma for 2015: Enrollment in the trial will continue throughout the year.

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Evofosfamide program in hematological malignancies: leukemia and multiple myeloma

The role of hypoxia in the pathogenesis of hematological malignancies (also known as blood cancers, for example, leukemias and multiple myeloma) and its role in disease progression is an emerging area of active research in the cancer biology community. Preclinical studies have been conducted to investigate evofosfamide in models of multiple myeloma. In vitro studies demonstrated that evofosfamide induces apoptosis (programmed cell death) and has strong synergistic cytotoxic effect in combination with bortezomib, a proteasome inhibitor indicated for the treatment of patients with multiple myeloma. I n vivo models of multiple myeloma demonstrated that the combination of evofosfamide plus bortezomib was associated with statistically significant improvements in multiple disease parameters including a reduction in circulating paraprotein levels, the standard endpoint for assessing drug efficacy in multiple myeloma. Preclinical studies have also investigated evofosfamide in models of leukemia. Evofosfamide treatment resulted in marked in vitro hypoxic-specific cell death of human leukemia cells under the same conditions where traditional chemotherapeutic agents such as cytarabine and doxorubicin were not effective. In vivo , evofosfamide treatment significantly inhibited leukemia disease progression in a preclinical model of human leukemia. These studies in hematological malignancy models provide the basis for the ongoing clinical trials of evofosfamide in patients with multiple myeloma and leukemia.

TH-CR-407 Phase 1 trial in patients with advanced leukemias

In June 2010, we initiated a Phase 1 open label clinical trial of evofosfamide designed to determine the maximum tolerated dose, dose limiting toxicity, safety, tolerability, clinical activity, and pharmacokinetics of evofosfamide in patients with advanced leukemia (which we refer to as the 407 trial). The starting dose of evofosfamide was 120 mg/m ² administered daily for 5 days of a 21-day cycle. At the highest dose investigated in this study (550 mg/m ² ), two patients developed dose limiting mucosal toxicity. The maximum tolerated daily dose of evofosfamide was established at 460 mg/m ² . Early results of this trial suggested activity of evofosfamide monotherapy as evidenced by stabilization or reduction of bone marrow and peripheral blast counts in some patients. Thus, a second dosing regimen was evaluated in which evofosfamide was administered as a continuous infusion over a 5-day period.

In December 2013, updated results were presented at the 55th Annual Meeting of the American Society of Hematology (ASH). A total of 49 patients with previously treated acute myeloid leukemia, or AML (n=39), acute lymphoblastic leukemia or ALL (n=9) or chronic myeloid leukemia or CML in the blast phase (n=1) initiated therapy with evofosfamide. In the first part of the trial, a total of 38 patients received 30-minute bolus administration of evofosfamide at escalating doses of 120—550 mg/ m ² (depending on the dose cohort) daily on days 1-5 of a 21-day cycle. In the second part of the trial, a total of 11 patients received evofosfamide as a continuous infusion on days 1-5 of a 21-day cycle. Two of three patients treated with continuous infusion of evofosfamide (460 mg/ m ² /day) experienced dose-limiting toxicities of Grade 3 mucositis or Grade 3 hyperbilirubinemia; continuous administration maximum-tolerated dose was established at 330 mg/ m ² /day.

Generally, a significant rapid cytoreduction was documented early in Cycle 1, but was not maintained prior to initiation of the next cycle. Two AML patients who received 550 mg/ m ² bolus evofosfamide had complete resolution of leukemia cutis. One AML patient at 550 mg/ m ² bolus evofosfamide had a complete response with incomplete platelet recovery (CRp), and one AML patient at 440 mg/ m ² bolus evofosfamide had a complete response.

Development activities planned in leukemia for 2015: The 407 trial was completed and all patients discontinued treatment. Evaluation of evofosfamide in combination with other chemotherapies for the treatment of advanced leukemias is under consideration.  

TH-CR-408 Phase 1/2 Trial in Patients with Multiple Myeloma

In March 2012, we initiated a Phase 1/2 open label clinical trial of evofosfamide to determine the maximum tolerated dose, dose limiting toxicity, safety, tolerability, clinical activity, and pharmacokinetics of evofosfamide and dexamethasone with and without bortezomib (Velcade ^® ), a proteasome inhibitor, in patients with relapsed/refractory multiple myeloma (which we refer to as the 408 trial). The study has three parts designed to establish the maximum tolerated dose of evofosfamide in combination with dexamethasone (Part A), (evaluate the combination of evofosfamide with dexamethasone at the established maximum tolerated dose (Part B), and evaluate the combination of evofosfamide and dexamethasone with bortezomib, currently used to treat patients with multiple myeloma) (Part C).

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The dose of evofosfamide administered in the Part A dose escalation portion of the study was 240, 340, or 480 mg/ m ² (depending on the dose cohort into which a patient enrolled) given on days 1, 4, 8, and 11 of a 21-day cycle, with 40 mg dexamethasone given on the same days as evofosfamide. As presented at the annual meeting of the American Society of Hematology (ASH) in December 2013, the maximum tolerated dose of evofosfamide was established at 340 mg/ m ² . Dose-limiting toxicities of Grade 3 stomatitis were reported during the first treatment cycle for the first two patients treated at 480 mg/m ² evofosfamide; therefore, the maximum tolerated dose of evofosfamide was established at 340 mg/m ² . In May 2014, preliminary results were presented at the annual meeting of the American Society for Clinical Oncology (ASCO) on data from 24 patients in the dose-escalation and dose-expansion portions of the study who initiated treatment prior to March 1, 2014; analyses reflected the clinical database as of May 19, 2014. Of these 24 patients, 17 were treated at the maximum tolerated dose of evofosfamide. Patients had received a median of 6.5 systemic therapies prior to enrollment. The most common adverse events related to evofosfamide occurring in at least 25% of patients were nausea and fatigue. The most common Grade 3/4 hematologic adverse events related to evofosfamide were thrombocytopenia (29%) and leukopenia (25%). Of the 24 patients included in the ASCO presentation, 23 were evaluable for response. According to modified International Myeloma Working Group (IMWG) criteria, best responses included four partial responses (4 PR), two minimal responses (2 MR), and 15 stable disease (15 SD) assessments; two patients had progressive disease (2 PD). The clinical benefit rate for patients treated at the maximum tolerated dose of evofosfamide (n=16 evaluable patients) was 31% (comprised of 3 PR and 2 MR).

In July 2014, we announced initiation of the third and final part of the trial designed to investigate evofosfamide in combination with the proteasome inhibitor bortezomib (Velcade®) and low-dose dexamethasone. In December 2014, preliminary results from this portion of the trial were reported at the 56 ^th ASH Annual Meeting and Exposition, or ASH 2014. At ASH 2014, preliminary safety and efficacy analyses from 9 patients were presented. The recommended Phase 2 dose of evofosfamide was established at 340 mg/m ² and no dose limiting toxicities were observed in the 6 patients treated at this dose level. Safety data were available for 8 of 9 patients. The most common Grade 3/4 hematological adverse events were thrombocytopenia (reported in 4 patients), anemia (reported in 2 patients), and lymphopenia (reported in 2 patients). Fatigue (reported in 5 patients; one Grade 3/4) and nausea (reported in 4 patients; one Grade 3/4) were the most common non-hematological adverse events. Five serious adverse events (SAEs) were reported in 4 patients. One SAE of thrombocytopenia was considered related to evofosfamide. Skin toxicity, an adverse event of interest with evofosfamide, was limited: a Grade 2 rash resulting in treatment delay was reported at the 240 mg/m ² dose of evofosfamide, and one Grade 2 skin lesion with no impact on treatment was reported at the 340 mg/m ² dose of evofosfamide. Based on IMWG criteria and our preliminary assessment of clinical activity, partial responses (one very good partial response and one partial response) were observed in 2 of 7 (29%) evaluable patients overall and 2 of 4 (50%) evaluable patients at the recommended Phase 2 dose of evofosfamide.

Development activities planned in multiple myeloma for 2015: We plan to enroll up to 24 patients at the maximum tolerated dose of evofosfamide (340 mg/ m ² ) in combination with bortezomib and low-dose dexamethasone and expect to present preliminary findings at a medical conference in 2015.

Evofosfamide program with antiangiogenics

Antiangiogenics are a relatively new class of anticancer therapies that target the tumor vasculature. A goal of antiangiogenic therapy is to “starve” tumors by disrupting the blood vessel network supplying tumors with oxygen and nutrients needed for survival and growth. While antiangiogenics have proven to be an important new class of targeted cancer therapy, essentially all tumors eventually become resistant to these treatments. Emerging preclinical research suggests that antiangiogenics may also induce tumor hypoxia. Co-targeting tumor angiogenesis and tumor hypoxia, which is believed to be a key driver of treatment resistance, is one approach to potentially prevent or reverse this mechanism of treatment resistance. As evofosfamide is designed to be selectively activated under conditions of severe tumor hypoxia, the combination of evofosfamide with antiangiogenic therapy has the potential to be an effective anticancer treatment. Preclinical models demonstrated enhanced antitumor activity of evofosfamide when used in combination with antiangiogenic therapies (sunitinib and sorafenib), which was directly related to the amount of hypoxia induced by different doses of these antiangiogenics.

Based on preclinical studies, evofosfamide has been or is expected to be investigated in combination with antiangiogenic therapies in a variety of tumor types in human clinical trials. Current studies include the following:

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TH-CR-410 Phase 1 dose escalation trial of evofosfamide and sunitinib in patients with RCC, GIST, and pNET

The 410 trial is evaluating standard full dose sunitinib (50 mg) administered daily (Days 1 – 28 of a 6-week cycle) with evofosfamide (240 mg/ m ² to 480 mg/ m ² ) administered on days 8, 15 and 22. In 2013, preliminary data from the 410 trial were published online in the ASCO 2013 Annual Meeting Proceedings, and updated preliminary results from 12 patients were reported at the 2013 AACR-NCI-EORTC International Conference on Molecular Targets and Cancer Therapeutics. As reported at AACR-NCI-EORTC, no dose-limiting toxicities were observed in the 4 patients treated in the initial cohort at 240 mg/ m ² . One of 6 evaluable patients treated at 340 mg/ m ² had a dose-limiting toxicity of Grade 3 stomatitis. Grade 3 thrombocytopenia and neutropenia were reported in 3 (25%) and 4 (33%) patients, respectively; Grade 4 neutropenia was reported in one patient (8%). Fatigue, nausea, and vomiting were the most common nonhematologic adverse events occurring in 83%, 75%, and 67% of patients, respectively. All cases were Grade 1 or 2 except for one report of Grade 3 nausea. Partial responses were achieved by one of four (25%) evaluable GIST patients (confirmed) and three of eight (37.5%) evaluable RCC patients (one confirmed). All four patients with partial responses had received prior sunitinib.

Status: Enrollment in this trial has been completed, and all patients have discontinued from the trial. The recommended Phase 2 dose of evofosfamide (480 mg/ m ² ) was established and will be evaluated further in an Investigator Sponsored Trial of evofosfamide in combination with sunitinib in patients with pancreatic neuroendocrine tumors (pNET) (see below).

EMR 200592-012: A Phase 2 trial of evofosfamide in combination with sunitinib in patients with pNET

The -012 trial is an Investigator-Sponsored Phase 2 trial designed to assess the activity and safety of evofosfamide in combination with sunitinib in patients with well- and moderately-differentiated metastatic pancreatic neuroendocrine tumors (pNET) who are naïve to systemic treatment. The study is being sponsored by the Spanish Task Force in Neuroendocrine Tumors.

Status: Enrollment in this Investigator Sponsored Trial is expected to commence in 2015.

TH-IST-4003: Phase 1/2 trial of evofosfamide and bevacizumab in patients with glioblastoma (GBM) following bevacizumab failure

The 4003 trial is a U.S. investigator-sponsored Phase 1/2 clinical trial evaluating evofosfamide in combination with Avastin ^® (bevacizumab) in patients with recurrent glioblastoma (GBM) following bevacizumab failure. Surgical resection followed by concomitant radiotherapy and chemotherapy is the standard of care for patients with newly-diagnosed GBM. Single-agent bevacizumab is the only FDA-approved therapy for GBM patients with progressive disease following prior therapy. After disease progression on bevacizumab, patients may start a subsequent bevacizumab-containing regimen.

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Preliminary results from the 4003 trial were reported at the ESMO 2012 Congress, the 2013 Scientific Meeting and Education Day of the Society for Neuro-Oncology (SNO), and most recently at SNO in November 2014. As reported by Andrew J. Brenner, M.D., Ph.D., the study principal investigator at SNO 2014, a total of 23 patients in the Phase 1/2 study were treated with bevacizumab 10 mg/kg every two weeks and evofosfamide dose escalated 240 – 670 mg/m ² every two weeks (four-week cycle) until disease progression. Patients had received a median of three prior systemic anticancer regimens including both chemoradiation and bevacizumab. No Grade 4 adverse events were observed. Three Grade 3 adverse events in three patients were observed: skin ulceration at 340 mg/m ² , thrombocytopenia at 670 mg/m ² , and oral mucositis at 670 mg/m ² . Primary evofosfamide-related toxicities were mucosal, but were not dose-limiting: rectal mucositis in one of four (1/4) patients at 480 mg/m ² and all patients (13/13) at 670 mg/m ² (all Grade 1 or 2). Oral mucositis was less frequent. Best tumor responses in 22 patients evaluable by Response Assessment in Neuro-Oncology (RANO) criteria included one complete response and three partial responses for a response rate of 18%, and ten stable disease assessments for a clinical benefit rate of 64%; eight patients had progressive disease. Median progression-free survival was 2.8 months (95% confidential interval (CI): 1.9 to 3.9 months) and 4-month progression-free survival was 22% (95% CI: 3.2% to 41%). Median overall survival was 4.6 months (95% CI: 3.4 to 6.2 months).

Status: Enrollment has been completed in this investigator-sponsored trial, and the recommended Phase 2 dose of evofosfamide was established at 670 mg/ m ² in combination with 10 mg/kg bevacizumab administered every other week. In 2014, the investigator received funding from the FDA to conduct a multiple-center Phase 2 trial of evofosfamide at the recommended Phase 2 dose in combination with bevacizumab in this patient population, as described below.

TH-IST-4008: FDA-funded Phase 2 Investigator Sponsored Trial in GBM

In September 2014, the FDA, through its Office of Orphan Product Development, awarded Dr. Brenner a grant for a Phase 2 clinical trial of evofosfamide for the treatment of GBM, which we refer to as TH-IST-4008. Dr. Brenner's planned investigator-sponsored Phase 2 trial, which is designed to assess safety and efficacy of 670 mg/m ² evofosfamide in combination with bevacizumab for the treatment of recurrent GBM following prior bevacizumab failure, is expected to enroll up to 33 patients. PET imaging will also be conducted in an effort to predict which patients may benefit from evofosfamide combination therapy. Dana Farber Cancer Institute and The University of Texas at Austin will participate in the trial.

Status: Enrollment in this Investigator Sponsored Trial is planned to begin in the first half of 2015.

TH-IST-4001: Phase 1 dose escalation trial of evofosfamide and pazopanib in patients with advanced solid tumors

The 4001 trial evaluated evofosfamide in combination with pazopanib in patients with advanced solid tumors. Results were reported at the 2013 AACR-NCI-EORTC annual meeting for the 30 patients enrolled with a variety of solid tumors for whom standard therapy or palliative measures were nonexistent or no longer effective. The clinical benefit rate was 76% (n=25 evaluable patients) with three patients with partial responses (12%) and 16 patients with stable disease (64%). The partial responses were observed in patients with neuroendocrine cancer, ovarian cancer, and chondrosarcoma. Treatment-related Grade 3 hematological adverse events were reported for neutropenia (7%), thrombocytopenia (7%), and anemia (13%). Treatment-related, Grade ≥ 2 nonhematologic adverse events included vomiting/nausea/diarrhea (7% Grade 3), mucositis (7% Grade 3), hand foot syndrome (all Grade 2), and hypertension (all Grade 2). No Grade 4 adverse events have been reported.

Status: The 4001 Investigator Sponsored Trial has completed enrollment. There are no current plans for further investigation of evofosfamide in combination with pazopanib at this time.

TH-IST-4004: A Phase 1/2 Investigator Sponsored Trial of evofosfamide in combination with sorafenib in patients with advanced kidney cancer or hepatocellular cancer

Study 4004 is a Phase 1/2 Investigator Sponsored Trial designed to evaluate the safety and efficacy of evofosfamide in combination with sorafenib (Sutent®)) in patients with advanced kidney cancer or liver cancer that cannot be removed by surgery. The primary objectives of the Phase 1 portion are to determine the maximum-tolerated dose and recommended Phase 2 dosing for the combination of sorafenib and evofosfamide; overall response rate in patients with advanced hepatocellular cancer will be assessed in the Phase 2 portion.  

Status: This Investigator Sponsored Trial is currently enrolling patients in the Phase 1 portion of the study.

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TH-4000 Investigational Hypoxia-Activated EGFR Tyrosine Kinase Inhibitor

In September 2014, we licensed worldwide rights to a development program from the University of Auckland based on the clinical-stage oncology compound TH-4000 (formerly referred to as PR610 or Hypoxin™), a hypoxia-activated epidermal growth factor receptor, or EGFR, tyrosine-kinase inhibitor (TKI). TH-4000 is designed to selectively release a potent, irreversible EGFR-TKI in hypoxic tumors. Preclinical and Phase 1 clinical data suggest that plasma concentrations of TH-4000 that are active in EGFR-dependent tumor xenograft models in mice could be attained in patients with an acceptable therapeutic index. We expect to initiate a Phase 2 proof-of-concept study in a subset of molecularly-defined non-small cell lung cancer patients who we believe may be responsive to TH-4000 in the first half of 2015.

[18F]-HX4 Investigational PET Imaging Agent for Hypoxia

In March 2013, we announced the acquisition of [18F]-HX4 [flortanidazole (18F)] from Siemens Healthcare. [18F]-HX4 is an investigational Positron Emission Tomography (PET) imaging agent for hypoxia developed by Siemens Healthcare Molecular Imaging to potentially identify and quantify the degree of hypoxia in tumors in vivo . PET is a non-invasive nuclear medical imaging technique that produces three-dimensional images of certain functional processes in the entire body or selected organs and tissues. [18F]-HX4 contains a short-lived radioisotope, 18F, which can be detected in a PET scanner. PET imaging is used to help physicians diagnose and treat cancer and is routinely performed in cancer treatment centers globally. [18F]-HX4 has a 2-nitroimidazole “trigger” that is designed to be activated under the extreme hypoxic conditions generally found in tumors but not typically in normal healthy tissue, therefore it will accumulate more in these hypoxic regions. Clinical data has demonstrated the potential of [18F]-HX4 to quantify the degree of hypoxia within different tumors. Threshold initially intends to develop [18F]-HX4 to determine a patient’s tumor hypoxia profile, which may identify patients who will best respond to Threshold’s hypoxia-targeted therapeutics.

Market Opportunities

Many different approaches are used in treating cancer, including surgery, radiation and drugs or a combination of these approaches. Drugs used to treat cancer include chemotherapeutics, hormones and immune-based therapies. Traditionally, strategies for designing cancer therapies have focused on killing cancer cells that exhibit rapid division and growth. Such cells are found in regions of the tumor that have an adequate blood supply and therefore receive nutrients and oxygen essential for cell division and growth. However, the vasculature supporting tumors is highly disorganized and irregular. This results in regions of the tumor that do not receive adequate amounts of nutrients and oxygen. Low oxygen concentration within a tumor is called “tumor hypoxia”. Traditional anticancer agents fail to address tumor hypoxia.

Many traditional anticancer agents are not able to penetrate into the hypoxic zones of tumors. Furthermore, cells that reside within regions of tumor hypoxia are relatively quiescent in contrast to highly proliferative cells that are the hallmark of cancer. As many traditional cancer therapies work by blocking cell division, they are not effective in killing the non-dividing, quiescent cells within hypoxic zones. It has also been demonstrated that cells subjected to prolonged hypoxia accumulate changes in their growth properties and genetic mutations that can lead to drug resistance, enhanced metastatic potential, and, ultimately, treatment failure.

Another disadvantage of current cancer therapies that target rapidly dividing cells is their toxic side effects. Because rapidly dividing cells are also found in many healthy tissues, particularly the gastrointestinal tract, bone marrow and hair follicles, nearly all conventional chemotherapy drugs cause severe side effects which may lead to bleeding, infection and anemia, as well as other side effects, such as diarrhea and hair loss. Likewise, radiation generally cannot be administered without causing significant damage to healthy tissue surrounding a tumor.

Given its role in tumor progression, metastasis, resistance, and ultimately treatment failure, hypoxia is emerging as a significant, high-priority target for cancer therapy. As our prodrugs are designed to undergo selective activation under conditions of tumor hypoxia, we anticipate that they should have a favorable safety profile and produce less toxicity to normal tissues at the doses that are effective in treating tumors than is the case with traditional therapies.

We have generated clinical data with evofosfamide alone and administered in combination with multiple anticancer drugs and in multiple cancer types. Drugs that we have tested or are currently evaluating in combination with evofosfamide include chemotherapies (e.g., doxorubicin, gemcitabine, docetaxel, pemetrexed, bortezomib) and antiangiogenics (e.g., pazopanib, bevacizumab, sorafenib, and sunitinib). The current total market addressed by these drugs exceeds $10 billion. We have tested or are currently evaluating evofosfamide in indications including soft tissue sarcoma, pancreatic cancer, head and neck cancer, lung cancer, melanoma, prostate cancer, glioblastoma, kidney cancer, liver cancer, gastrointestinal stromal tumors, multiple myeloma, and leukemia. In the U.S. alone, new cases of these cancers exceed 835,000 per annum.

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The table below depicts the latest estimates from the American Cancer Society on expected 2015 incidence and deaths for cancers in the United States that we consider therapeutic areas of interest for evofosfamide.

The market opportunity for our two most advanced clinical development programs with evofosfamide in soft tissue sarcoma and pancreatic cancer are described below.

Soft Tissue Sarcoma

Sarcomas are a group of aggressive cancers originating in the supporting tissues of the body (e.g. muscle, fat, blood vessels or in any other tissue that surrounds and protects the organs of the body). There are currently limited treatment options for sarcomas. Soft tissue sarcomas are treated with surgery, chemotherapy and radiation. Usually a combination of these modalities offers the best chance to treat the disease successfully. Doxorubicin and ifosfamide are the most commonly used chemotherapeutic agents in patients with advanced soft tissue sarcoma, but response rates are generally low and toxicity can be significant. Doxorubicin administered as monotherapy is associated with an overall survival rate of approximately 8 months to 12 months, and an overall response rate of approximately 15% to 25%, but is limited in use due to cumulative cardiotoxicity. There are approximately 35,000 new cases of soft tissue sarcoma in the U.S. and European Union per annum.

Pancreatic Cancer

It is estimated that 337,872 cases of pancreatic cancer are diagnosed worldwide every year, accounting for 2.4% of all cancers. Almost 67% of cases are diagnosed in people aged 65 and over; it is uncommon in people under the age of 45. Pancreatic cancer has a low survival rate regardless of stage of disease, with 93% of patients dying from their disease within 5 years. It is estimated that there are 330,372 deaths from pancreatic cancer worldwide each year.

Gemcitabine is the current standard of care for patients with pancreatic cancer and is associated with a median overall survival of approximately 6 months and an overall response rate of approximately 8%. Two other therapeutic agents have been approved for the first-line treatment of patients with pancreatic cancer. Erlotinib is approved for the first line of treatment of patients with pancreatic cancer based on its registrational Phase 3 study in combination with gemcitabine shown to convey a median overall survival of 6.4 months and overall response rate (complete plus partial response rate) of 8.6%. Nab-paclitaxel was approved by the FDA as first–line treatment for patients with metastatic adenocarcinoma of the pancreas, in combination with gemcitabine. Approval was based on an 861-patient Phase 3 clinical trial in chemotherapy-naïve patients with metastatic pancreatic cancer. Nab-paclitaxel plus gemcitabine demonstrated a statistically significant improvement in median overall survival compared to gemcitabine alone (8.5 vs. 6.7 months) (HR 0.72, p<0.0001).

Glufosfamide

From 2004 through 2009 we conducted clinical development of glufosfamide, a drug candidate that shares certain structural characteristics with glucose but acts instead as a chemotherapeutic agent when taken up by a cell. In October 2009, we entered into an exclusive license agreement with Eleison Pharmaceuticals, Inc. or Eleison. Pursuant to the agreement we granted Eleison exclusive worldwide rights to manufacture, develop and commercialize glufosfamide for the treatment of cancer in humans and animals, and certain other uses. Under the agreement, Eleison is responsible for the development, manufacturing and marketing of glufosfamide. We and Eleison will share equally in the profits of commercialization, if the further clinical development of glufosfamide leads to regulatory approval and marketing. We have no further development plans for glufosfamide.

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In October 2013, Eleison announced that it had initiated a pivotal Phase 3 clinical trial of glufosfamide for the second-line treatment of patients with pancreatic cancer. According to their corporate news release, this pivotal trial will enroll patients with relapsed or refractory pancreatic cancer following prior chemotherapy treatment. The randomized, open-label trial is being conducted to evaluate the safety and efficacy of glufosfamide, with a target enrollment of 480 patients. The primary endpoint is overall survival with a number of pre-specified secondary endpoints. The trial will exclude insulin-treated diabetic patients. Eleison has an agreement with the FDA on an SPA for this Phase 3 clinical trial. The trial is expected to be complete enrollment in 2016.

Discovery Research

We have research programs focused on better understanding the mechanism and maximizing the effectiveness of evofosfamide in the treatment of cancer as well as identifying new therapeutic candidates that target the microenvironments of solid tumors and some hematological malignancies. The general nature of hypoxia in cancers offers the possibility for cancer therapeutics which are broadly useful in many indications with an associated large market opportunity. It is also now known that certain anticancer therapies (e.g. antiangiogenic agents) lead to an increase in tumor hypoxia and may support the combination of those therapies with hypoxia-targeted agents.

Our most advanced efforts targeting the tumor microenvironment are the design and development of novel hypoxia activated cytotoxic prodrug compounds. The prodrug concept is well established in chemotherapy and was initially only employed to modify the pharmacokinetic properties of compounds through non-specific activation processes. More recently the concept has been applied to the design of agents that are selectively activated in tumor tissues through specific activation processes. Our prodrug candidates typically have two distinct parts, a toxic portion (the chemotherapeutic toxin) and an attached trigger molecule. To prevent general toxicity, the trigger molecule masks the toxin until the prodrug is activated, for example, by the low oxygen concentration in the hypoxic zones of solid tumors and some hematological malignancies. Once activated, the toxin kills cells in its vicinity. We have designed prodrug candidates that are triggered only at the very low oxygen levels found in these hypoxic regions. Our experiments indicate that we can achieve a greater than 100-fold difference in cytotoxicity between cells in normal oxygen levels and hypoxic cells. Evofosfamide was our first product candidate from this program and we are pursuing the potential development of other hypoxia activated prodrugs as well as prodrugs activated by other tumor-specific conditions. Lead compounds have demonstrated promising in vitro activity and additional characterization, evaluation and optimization of these compounds is currently underway.

Our expertise includes broad capabilities in chemical synthesis, biological assay development and in vitro and in vivo compound evaluation, formulation development, and pharmacology. Our medicinal chemistry expertise allows us to turn initially promising compounds generated by our chemists into drug candidates. We believe that our research focus combined with our integrated drug discovery platform provides us with the capacity to optimize our chances of successfully translating our laboratory observations with evofosfamide to the clinic as well as to identify, discover and develop novel therapies for the treatment of cancer.

Manufacturing and Supply

We do not have our own manufacturing capability for the active pharmaceutical ingredient, or API, or the final drug product of evofosfamide. Under our license and co-development agreement with Merck KGaA, Merck KGaA has exclusive rights to manufacture evofosfamide for clinical and commercial use, except that we have the right to obtain clinical supply of evofosfamide for clinical trials for United States approval of evofosfamide for soft-tissue sarcoma and for any other clinical trials for which we are responsible. For these latter cases, we can obtain clinical supply directly from existing or new suppliers. To date, however, we have relied on, and we expect to continue to rely on, a limited number of third-party single source contract manufacturers and excipient suppliers for the evofosfamide API and evofosfamide drug product to meet our and Merck KGaA’s clinical supply needs of evofosfamide. We have no long-term commitments or commercial supply agreements with any of our evofosfamide suppliers.

While we have developed plans to meet our and Merck KGaA’s clinical supply needs for our ongoing clinical trials of evofosfamide, we base our estimates for the amount of drug product we will need on assumptions about trial enrollment and trial dose levels. If we are not successful in having sufficient quantities of evofosfamide API and drug product manufactured, or if manufacturing is interrupted at our single source contract manufacturers for evofosfamide API and evofosfamide drug product due to regulatory or other reasons, or consume more drug product than anticipated because of a higher than expected trial utilization or have quality issues that limit the utilization of the drug product, we may experience a significant delay in our evofosfamide clinical program. In any event, additional agreements for more supplies of each of our product candidates, including evofosfamide, will be needed to complete clinical development and/or commercialize them. In this regard, Merck KGaA may need to enter into agreements for additional supplies of evofosfamide to commercialize it or develop such capability itself. These products will need to satisfy all cGMP manufacturing requirements, including passing product specifications. Our or Merck KGaA’s inability to satisfy these requirements could delay our clinical programs. If evofosfamide or any of our other product candidates is approved by the FDA or other regulatory agencies for commercial sale, we or Merck KGaA as applicable, will need to have it manufactured in commercial quantities. It may not be possible to successfully manufacture commercial quantities of evofosfamide or increase the manufacturing capacity for evofosfamide or any of our other product candidates in a timely or economically feasible manner.

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We also expect to rely on contract manufacturers or other third parties to produce sufficient quantities of clinical trial product for any other product candidates that we may develop. In this regard, while we have obtained certain quantities of TH-4000 API and drug product from our licensor, we may determine that such API and drug product is not usable or is otherwise insufficient in order for us to commence or complete our planned Phase 2 proof-of-concept study of TH-4000 and we may need to obtain sufficient supplies of TH-4000 API and drug product from contract manufacturers prior to commencing our planned Phase 2 proof-of-concept study, which could delay the commencement or completion of the planned study, could increase our costs and could negatively impact our planned TH-4000 development program. Depending upon the duration of the clinical studies, we might need to develop a new formulation of TH-4000. It is possible that we might not be able to develop a formulation with adequate quality that meets the need for testing in our clinical trials. In any event, in order for us to commence any planned or potential future clinical trials of our product candidates, we need to obtain or have manufactured sufficient quantities of clinical trial product and there can be no assurance that we will be able to obtain sufficient quantities of clinical trial product in a timely manner or at all.

Research and Development Expenses

During the years ended December 31, 2014, 2013 and 2012, we spent $35.8 million, $29.3 million and $18.8 million, respectively, on research and development, including product development, discovery research and contract manufacturing activities.

License and Development Agreements

Agreement with Merck KGaA

On February 3, 2012, we entered into a global license and co-development agreement for evofosfamide with Merck KGaA, Darmstadt, Germany, with an option to co-commercialize in the United States. Under the terms of the agreement, Merck KGaA received co-development rights, exclusive global commercialization rights and provided us an option to co-commercialize evofosfamide in the United States. To date we have received upfront and milestone payments of $110 million. We can earn additional potential milestone payments of up to $440 million, comprised of $100 million in development and regulatory milestones and $340 million in sales-based milestones.

In the United States, we have primary responsibility for development of evofosfamide in the soft tissue sarcoma indication. We and Merck KGaA will jointly develop evofosfamide in all other cancer indications being pursued. Merck KGaA will pay 70% of worldwide development costs for evofosfamide. Subject to FDA approval in the United States, Merck KGaA will initially be responsible for commercialization of evofosfamide while we will receive a tiered, double-digit royalty on sales. Under the royalty-bearing portion of the agreement, we retain the option to co-promote evofosfamide in the United States. Additionally, we retain the option to co-commercialize evofosfamide in the United States, upon the achievement of certain sales or regulatory milestones, allowing us to participate in up to 50% of the profits in the United States depending on total sales. Outside of the United States, Merck KGaA will be solely responsible for the commercialization of evofosfamide while we will receive a tiered, double-digit royalty on sales in these territories. The agreement became effective on March 12, 2012, upon termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The agreement will continue on a country-by-country and product by product basis until the later of the last to expire patent covering such product containing evofosfamide in such country or ten years following the commercial launch of a product containing evofosfamide in such country, unless terminated earlier. Merck KGaA has the right to terminate the agreement on limited notice to us, and each party has the right to terminate the agreement following uncured material breach by the other party.

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Agreement with the University of Auckland

On September 23, 2014, we entered into an exclusive license agreement with Auckland UniServices Ltd., a wholly-owned company of the University of Auckland.  Pursuant to the agreement, we licensed exclusive worldwide rights to a development program based on TH-4000 from the University of Auckland. We expect to initiate a Phase 2 proof-of-concept study in a subset of molecularly-defined non-small cell lung cancer patients who we believe may be responsive to TH-4000 in the first half of 2015.  Under the terms of this agreement, we made no upfront payment but we are required to pay all costs of development, as well as annual license maintenance fees starting in 2017, and assuming that we determine to advance the clinical development of TH-4000 beyond our planned Phase 2 proof-of-concept study, we would be required to pay development, regulatory and sales-based milestone payments and royalties on net sales of products, including TH-4000, incorporating technology licensed from the University of Auckland.

Agreement with Eleison Pharmaceuticals, Inc.

On October 14, 2009, we entered into an exclusive license agreement with Eleison. Pursuant to the agreement we granted Eleison exclusive worldwide rights to manufacture, develop and commercialize glufosfamide for the treatment of cancer in humans and animals, and certain other uses. Under the agreement, Eleison is responsible for the development, manufacturing and marketing of glufosfamide. We and Eleison will share equally in the profits of commercialization, if the further clinical development of glufosfamide leads to regulatory approval and marketing.

Eleison will pay us 50% of its profits from commercialization on a quarterly basis, beginning on the date of first commercial sale, if any. Eleison has the right to sublicense some or all of its rights under the agreement, and will pay us 50% of amounts received under any sublicenses, including, without limitation, any royalty payments, license fee payments, milestone payments and payments for any equity or debt purchases by a sublicensee, within 30 days of the receipt of any such amounts or payments by Eleison. Eleison will bear all costs associated with development, commercialization and patent prosecution, and will control product development and commercialization. In addition, Eleison will be responsible for all royalty and milestone payments due under certain agreements pursuant to which we licensed rights related to glufosfamide. The agreement contemplates that Eleison, to satisfy its diligence obligations, will raise sufficient funds to continue clinical development activities with glufosfamide. In 2011, we received a $0.1 million payment, which represents our 50% share of an upfront payment from a sublicense by Eleison.

In the event that Eleison fails to satisfy its diligence obligations, we may, at our option, terminate the agreement for material breach or convert the license granted under the agreement to a non-exclusive license.

The agreement will remain in effect as long as Eleison continues to sell glufosfamide anywhere in the world or receives payments under any sublicenses. Each party is entitled to terminate the agreement upon the other party’s material breach after expiration of a 60-day cure period (30 days in the event of a payment breach). Each party is entitled to terminate the agreement immediately upon the bankruptcy or similar petition of the other party that is not discharged within 60 days, or the assignment for the benefit of creditors by, or the appointment of a receiver over the property of, the other party. In addition, Eleison may terminate the agreement for convenience at any time on 90 days written notice to us.

Following any termination by Eleison for convenience or by us for Eleison’s material breach, all licensed rights will revert to us. Following any termination by Eleison for our material breach, all licensed rights will fully vest in Eleison, provided that Eleison will be required to pay us 50% of the profit sharing payments it otherwise would have been required to pay us under the agreement.

Patents and Proprietary Rights

Our policy is to patent the technologies, inventions and improvements that we consider important to the development of our business. As of February 25, 2015, we owned 107 U.S. and foreign patents and patent applications relating to evofosfamide and its manufacture, formulation and use, each of which are either exclusively (e.g., those related to methods of manufacture or optional sole commercialization rights) or co-exclusively licensed to and one of which is co-owned with Merck KGaA. These include 7 issued U.S. patents expiring from 2024 to 2031 and 28 issued foreign patents expiring from 2024 to 2027 (in each case, without including any regulatory-delay based patent term extension), as well as 13 pending U.S., 1 pending Patent Cooperation Treaty and 58 pending foreign national patent applications, which, if issued, would in each case expire from 2024 to 2035 (without including any regulatory- or patent office-delay based patent term extension).

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As of February 25, 2015, we have rights to 39 U.S. and foreign patents and patent applications relating to TH-4000 and its manufacture, formulation and use, each of which are exclusively licensed by us from Auckland Uniservices Ltd. These include 4 issued foreign patents expiring in 2030, as well as 3 pending U.S., and 32 pending foreign national patent applications, which, if issued, would in each case expire from 2030 to 2035 (without including any regulatory- or patent office-delay based patent term extension).

Although we have U.S. and foreign issued patents that cover certain hypoxia-targeted prodrugs, including evofosfamide and TH-4000, we have no issued patents or pending patent applications that would prevent others from taking advantage of hypoxia-targeted prodrug technology generally to discover and develop new therapies for cancer or other diseases. Consequently, our competitors may seek to discover and develop potential therapeutics that operate by mechanisms of action that are the same or similar to the mechanisms of action of our hypoxia-targeted prodrug product candidates.

The patent positions of companies like ours are generally uncertain and involve complex legal and factual questions. Our ability to maintain and solidify our proprietary position for our technology will depend on our success in obtaining effective claims and enforcing those claims once granted. We do not know whether any of our pending patent applications will result in the issuance of any patents. Moreover, an issued patent does not guarantee us the right to practice the patented technology or commercialize the patented product. Other parties may have blocking patents that could be used to prevent us from commercializing our patented products and practicing our patented technology. Our issued patents and those that may be issued in the future may be challenged, invalidated, or circumvented, which could limit our ability or render us unable to stop competitors from marketing related products as well as shorten the term of patent protection that we may have for our products. In addition, the rights granted under any issued patents may not provide us with proprietary protection or competitive advantages against competitors with similar technology. Furthermore, our competitors may independently develop similar technologies that do not infringe our intellectual property rights. For these reasons, we may have competition for our products. Moreover, because of the extensive time required for development, testing and regulatory review of a potential therapeutic product, it is possible that, before any of our products can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby reducing any advantage of the patent. If we are not able to obtain adequate protection for, or defend, the intellectual property position of evofosfamide, TH-4000 or any other potential future product candidates, then we may not be able to retain or attract collaborators to partner our development programs. Further, even if we can obtain protection for and defend the intellectual property position of evofosfamide, TH-4000 or any potential future product candidates, we or any of our potential future collaborators still may not be able to exclude competitors from developing or marketing competing drugs. Should this occur, we, Merck KGaA, Auckland Uniservices Ltd., and potential future collaborators may not generate any revenues or profits from evofosfamide, TH-4000 or any potential future product candidates or our revenue or profit potential would be significantly diminished.

We also rely on trade secrets, technical know-how and continuing innovation to develop and maintain our competitive position. We seek to protect our proprietary information by requiring our employees and certain of our consultants, contractors, outside scientific collaborators and other advisors to execute non-disclosure and assignment of invention agreements on commencement of their employment or engagement. Agreements with our employees also forbid them from using third party trade secret or other confidential information in their work. We also require confidentiality or material transfer agreements from third parties that receive our confidential data or proprietary materials.

The biotechnology and pharmaceutical industries are characterized by the existence of a large number of patents and frequent litigation based on allegations of patent infringement. For so long as our product candidates are in clinical trials, we believe our clinical activities fall within the scope of the exemptions provided by 35 U.S.C. Section 271(e) in the United States, which exempts from patent infringement liability activities reasonably related to the development and submission of information to the FDA. This exemption does not apply to commercialization activities; however, if our product candidates are commercialized, then the possibility of a patent infringement claim against us increases. While we attempt to ensure that our clinical product candidates and the methods we employ to manufacture them, as well as the methods for their use we intend to promote, do not infringe other parties’ patents and other proprietary rights, there can be no assurance that they do not, and competitors or other parties may assert that we infringe their proprietary rights in any event.

Competition

We operate in the highly competitive segment of the pharmaceutical market comprised of pharmaceutical and biotechnology companies that research, develop and commercialize products designed to treat cancer. Many of our competitors have significantly greater financial, manufacturing, marketing, research and product development resources than we do. Large pharmaceutical companies in particular have extensive experience in clinical testing and in obtaining regulatory approval for drugs. These companies also have significantly greater research capabilities than we do. In addition, many universities and private and public research institutes are active in cancer research, some in direct competition with us. We also compete with these organizations to recruit scientists and clinical development personnel.

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Each cancer indication for which we are or may be developing products has a number of established medical therapies with which our candidates will compete. Most major pharmaceutical companies and many biotechnology companies are aggressively pursuing cancer development programs, including traditional therapies and therapies with novel mechanisms of action. Our evofosfamide product candidate for targeting the tumor hypoxia is likely to be in highly competitive markets and may eventually compete with other therapies offered by companies who are developing or were developing drugs that target tumor hypoxia. Our competitors may succeed in developing their products before we do, obtaining approvals from the FDA or other regulatory agencies for their products more rapidly than we do, or developing products that are more effective than evofosfamide. These products or technologies might render our technology obsolete or noncompetitive. There may also be product candidates of which we are not aware at an earlier stage of development that may compete with evofosfamide.

Our cancer product candidates face competition from established biotechnology and pharmaceutical companies and from generic pharmaceutical manufacturers. In particular, if approved for commercial sale for pancreatic cancer, evofosfamide would compete with Gemzar ^® , marketed by Eli Lilly and Company; Tarceva ^® , marketed by Roche/Genentech and Astellas Oncology; Abraxane ^® marketed by Celgene; and FOLFIRINOX, which is a combination of generic products that are sold individually by many manufacturers. If approved for sale for soft tissue sarcoma, evofosfamide could potentially compete with doxorubicin or the combination of doxorubicin and ifosfamide, generic products sold by many manufacturers. If approved for commercial sale for treatment-resistant non-small cell lung cancer, TH-4000 could potentially compete with other EGFR-TKIs currently in late-stage clinical development including AstraZeneca’s AZD-9291, Clovis Oncology’s CO-1686, and Pfizer’s dacomitinib.

Governmental Regulation and Product Approval

The manufacturing and marketing of our potential products and our ongoing research and development activities are subject to extensive regulation by the FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries.

United States Regulation

Before any of our products can be marketed in the United States, they must secure approval by the FDA. To secure this approval, any drug we develop must undergo rigorous preclinical testing and clinical trials that demonstrate the product candidate’s safety and effectiveness for each chosen indication for use. This extensive regulatory process controls, among other things, the development, testing, manufacture, safety, efficacy, record keeping, labeling, storage, approval, import, export, advertising, promotion, sale, and distribution of biopharmaceutical products.

In general, the process required by the FDA before investigational drugs may be marketed in the United States involves the following steps:

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Preclinical Testing

In the United States, drug candidates are tested in animals until adequate proof of safety is established. These preclinical studies generally evaluate the mechanism of action of the product, expose and assess the potential safety and efficacy of the product. Tested compounds must be produced according to applicable current good manufacturing practice, or cGMP, requirements and preclinical safety tests must be conducted in compliance with FDA and international regulations regarding good laboratory practices, or GLP. The results of the preclinical tests, together with manufacturing information and analytical data, are generally submitted to the FDA as part of an IND, which must be become effective before human clinical trials may commence. The IND will automatically become effective 30 days after receipt by the FDA, unless before that time the FDA requests an extension or raises concerns about the conduct of the clinical trials as outlined in the application. If the FDA has any concerns, the sponsor of the application and the FDA must resolve the concerns before the hold is lifted and before clinical trials can begin. Submission of an IND may not result in FDA authorization to commence a clinical trial. A separate submission to the existing IND must be made for each successive clinical trial conducted during product development. Investigator Sponsored Trials are INDs held by investigators that utilize investigational drugs supplied by a pharmaceutical manufacturer.  Data generated under Investigator Sponsored Trials may not be as robust as commercially sponsored IND trials. Regulatory authorities may require additional data before allowing the clinical trials to commence or proceed from one Phase to another, and could demand that the trials be discontinued or suspended at any time if there are significant safety issues. Furthermore, an independent institutional review board, or IRB, for each medical center proposing to participate in the conduct of the clinical trial must review and approve the clinical protocol and patient informed consent before the center commences the clinical trial. [18F]-HX4 [flortanidazole (18F)] will require submission of a separate IND.

Clinical Trials

Clinical trials for new drug candidates are typically conducted in three sequential phases, under Good Clinical Practices, that may overlap. Phase 1 clinical trials involve the initial introduction of the drug candidate into humans and are conducted in volunteers or in patients with a specific disease depending on the intended use of the drug and its potential safety profile. The emphasis in Phase 1 is on testing for safety (adverse effects), dosage, tolerance, absorption, metabolism, distribution, excretion, and preliminary clinical pharmacology. Phase 2 clinical trials involve a limited patient population to determine the initial efficacy of the drug candidate for specific targeted indications, to determine dosage tolerance and optimal dosage and to identify possible adverse side effects and safety risks. When a compound shows evidence of effectiveness along with an acceptable safety profile in Phase 2 clinical trials the drug is moved to Phase 3 development. Phase 3 clinical trials are undertaken to more fully evaluate the safety and efficacy and to establish the overall risk/benefit profile of the drug. These Phase 3 clinical trials are the basis for determining if the drug should be approved for commercialization. During all clinical trials, physicians monitor patients to determine effectiveness of the drug candidate and observe and report any adverse effects or safety risks that may result from use of the drug candidate. The FDA, the IRB, or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk or that the drug is not sufficiently efficacious to continue further studies.

The data from the clinical trials, together with preclinical data and other supporting information that establishes a drug candidate’s safety profile and efficacy, are submitted to the FDA in the form of an NDA or NDA supplement (for approval of a new indication if the product candidate is already approved for another indication). The cost of preparing and submitting a NDA is substantial. Under federal law, the submission of most NDAs is additionally subject to a substantial application user fee, and the manufacturer and/or sponsor under an approved NDA are also subject to annual product and establishment user fees. Under applicable laws and FDA regulations, each NDA submitted for FDA assessment is reviewed for filing within 60 days following submission of the NDA. If deemed acceptable, the FDA will “file” the NDA, thereby initiating the review clock triggering substantive review of the application. The FDA can refuse to file any NDA that it deems incomplete or not properly reviewable. The FDA has established internal goals of reviewing and acting on NDAs within six months of filing for priority NDAs (for drugs addressing serious or life threatening conditions for which there is an unmet medical need) and ten months of filing for standard NDAs. Priority review is assigned by the FDA to drugs that it determines offer major advances in treatment, or provide a treatment where no adequate therapy exists. The FDA, however, is not legally required to complete its review within these periods, and these performance goals may change over time. Following a complete review of the application the FDA will either issue an approval or a complete response letter outlining the deficiencies in the submission, which may require substantial additional testing or information for the FDA to reconsider the application. The FDA’s review of an NDA may involve review and recommendations by an independent FDA advisory committee. The FDA may deny approval of an NDA or NDA supplement if the applicable regulatory criteria are not satisfied, or it may require additional clinical data and/or an additional pivotal Phase 3 clinical trial. Risk Evaluation and Mitigation Strategies, or REMS, may be required for approval of an NDA.  Even if such data or REMS are submitted, the FDA may ultimately decide that the NDA or NDA supplement does not satisfy the criteria for approval.

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Data Review and Approval

Satisfaction of FDA requirements or similar requirements of state, local and foreign regulatory agencies typically takes several years and requires the expenditure of substantial financial resources. Information generated in this process is susceptible to varying interpretations that could delay, limit, or prevent regulatory approval at any stage of the process. Accordingly, the actual time and expense required to bring a product to market may vary substantially. We cannot be certain that we will submit applications for required authorizations to manufacture and/or market potential products or that any such application will be reviewed and approved by the appropriate regulatory authorities in a timely manner, if at all. Data obtained from clinical activities is not always conclusive and may be susceptible to varying interpretations that could delay, limit, or prevent regulatory approval. Success in early stage clinical trials does not ensure success in later stage clinical trials. Even if a product candidate receives regulatory approval, the approval may be significantly limited to specific disease states, patient populations, and dosages, or have conditions placed on them that restrict the commercial applications, advertising, promotion, or distribution of these products.

Once issued, the FDA may withdraw product approval if ongoing regulatory standards are not met or if safety problems occur after the product reaches the market. In addition, the FDA may require testing and surveillance programs to monitor the effect of approved products that have been commercialized, and the FDA has the power to prevent or limit further marketing of a product based on the results of these post-marketing programs. The FDA may also request additional clinical trials after a product is approved. These so-called postmarketing, or Phase 4 studies, may be made a condition to be satisfied after a drug receives approval. The results of postmarketing studies can confirm the effectiveness of a product candidate and can provide important safety information to augment the FDA’s voluntary adverse drug reaction reporting system. The product may be subject to withdrawal of the approval if effectiveness is not confirmed in the Phase 4 studies. Any products manufactured or distributed by us pursuant to FDA approvals would be subject to continuing regulation by the FDA, including record-keeping requirements and reporting of adverse experiences with the drug. Drug manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with good manufacturing practices, which impose certain procedural and documentation requirements upon us and our third-party manufacturers. We cannot be certain that we or our present or future suppliers will be able to comply with the cGMP regulations and other FDA regulatory requirements. If our present or future suppliers are not able to comply with these requirements, the FDA may halt our clinical trials, require us to recall a drug from distribution, or withdraw approval of the NDA for that drug. Furthermore, even after regulatory approval is obtained, later discovery of previously unknown problems with a product may result in restrictions on the product or even complete withdrawal of the product from the market.

The FDA closely regulates the marketing and promotion of drugs. Approval may be subject to post-marketing surveillance and other record keeping and reporting obligations, and involve ongoing requirements. Product approvals may be withdrawn if compliance with regulatory standards is not maintained or if problems occur following initial marketing. A company can make only those claims relating to safety and efficacy that are approved by the FDA and is specifically included in drug labeling. While physicians may prescribe legally available drugs for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA, manufacturers may only promote for the approved indications and in accordance with the provisions of the approved label. Failure to comply with FDA requirements can result in adverse publicity, warning letters, corrective advertising, and potential civil and criminal penalties.

Special Protocol Assessments

A clinical trial sponsor may submit a request for an SPA from the FDA. Under the SPA procedure, a sponsor may seek the FDA’s agreement on the design and size of a clinical trial intended to form the primary basis of an effectiveness claim. If the FDA agrees in writing, its agreement may not be changed after the trial begins, except in limited circumstances, such as when a substantial scientific issue essential to determining the safety and effectiveness of a product candidate is identified after a Phase 3 clinical trial is commenced and agreement is obtained with the FDA. If the outcome of the trial is successful, the sponsor will ordinarily be able to rely on it as the primary basis for approval with respect to effectiveness. The FDA, however, may make an approval decision based on a number of factors, including the degree of clinical benefit, and the FDA is not obligated to approve an NDA as a result of an SPA, even if the clinical outcome is positive.

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Orphan Drug Designation

Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States. Orphan drug designation must be requested before submitting an NDA. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in or shorten the duration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives FDA approval for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same drug for the same disease, except in limited circumstances, for seven years. These circumstances are an inability to supply the drug in sufficient quantities or a situation in which a new formulation of the drug has shown superior safety or efficacy or a major contribution to patient care. This exclusivity, however, also could block the approval of our product for seven years if a competitor obtains earlier approval of the same drug for the same indication.

Other Health Care Laws

In addition to FDA restrictions, other federal and state laws restrict our business practices. In the United States, we are subject to various federal and state laws pertaining to healthcare, including, without limitation, “fraud and abuse” laws such as anti-kickback and false claims laws, data privacy and security laws, and payment transparency laws.

The federal Anti-Kickback Law makes it illegal for any person, including a prescription drug manufacturer (or a party acting on its behalf) to, among other things, knowingly and willfully solicit, offer, receive or pay any remuneration, directly or indirectly, in exchange for, or to induce, the referral of business, including the purchase, order or prescription of a particular drug, for which payment may be made under federal healthcare programs such as Medicare and Medicaid. Violations of the law are punishable by up to five years in prison, criminal fines, administrative penalties, civil money penalties, and exclusion from participation in federal healthcare programs. Due to the breadth of these laws, and the potential for additional legal or regulatory change addressing some of our practices, it is possible that our practices or our relationships with physicians might be challenged under anti-kickback laws, which could harm us.

Civil and Criminal false claims laws and civil monetary penalties laws prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, for payment to third-party payors (including Medicare and Medicaid) claims for reimbursed items or services, including drugs, that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services. Our future activities relating to the reporting of wholesaler or estimated retail prices for our products, the reporting of Medicaid rebate information and other information affecting federal, state and third-party reimbursement of our products, and the sale and marketing of our products, are subject to scrutiny under these laws. In addition, pharmaceutical companies have been prosecuted under the federal civil False Claims Act in connection with their off-label promotion of drugs. Penalties for a violation of the civil False Claims Act, some of which may be broader in scope, include three times the actual damages sustained by the government, plus mandatory civil penalties of between $5,500 and $11,000 for each separate false claim. In addition, certain states have enacted laws modeled after the federal civil False Claims Act. If the government were to allege that we were, or convict us of, violating these false claims laws, we could be subject to substantial penalties, including, for example, potentially significant fines which may cause a decline in our stock price.

The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created new federal criminal statutes that prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.  

In addition, we may be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business.  HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and its implementing regulations, imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information

Additionally, the federal Physician Payments Sunshine Act, created under the Patient Protection and Affordable Care Act, as amended by the Health Care Education Reconciliation Act, collectively the ACA, and its implementing regulations, require certain manufacturers of drugs, devices, biological products and medical supplies to report annually information related to certain payments or other transfers of value provided to physicians and teaching hospitals and to report annually certain ownership and investment interests held by physicians and their immediate family members.  

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In addition, many states have adopted laws similar to the aforementioned laws. Some of these state prohibitions may be broader in scope and may apply to referral of patients for healthcare services reimbursed by any source, not only the Medicare and Medicaid programs. Additionally, our business operations in foreign countries and jurisdictions may subject us to additional regulation.

If our operations are found to be in violation of any of the health regulatory laws described above or any other laws that apply to us, we may be subject to penalties,  including potentially significant criminal and civil and/or administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from participation in government healthcare programs,  contractual damages, reputational harm, administrative burdens, diminished profits and future earnings,  and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

Drug Price Competition and Patent Term Restoration Act of 1984

Under the Drug Price Competition and Patent Term Restoration Act of 1984, known as the Hatch-Waxman Amendments, a portion of a product’s patent term that was lost during clinical development and application review by the FDA may be restored. The Hatch-Waxman Amendments also provide for a statutory protection, known as nonpatent market exclusivity, against the FDA’s acceptance or approval of certain competitor applications. The Hatch-Waxman Amendments also provide the legal basis for the approval of abbreviated new drug applications, or ANDAs, for generic drugs.

Patent term restoration can compensate for patent life lost during product development and the regulatory review process by returning up to five years of patent life for a patent that covers a new product or its use. This period is generally one-half the time between the effective date of an IND (falling after issuance of the patent) and the submission date of an NDA, plus the time between the submission date of an NDA and the approval of that application. Patent term restorations, however, are subject to a maximum extension of five years, and the patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years. The application for patent term extension is subject to approval by the United States Patent and Trademark Office in conjunction with the FDA. It takes at least six months to obtain approval of the application for patent term extension. Up to five years of interim one year extensions are available if a product is still undergoing development or FDA review at the time of its expiration.

The Hatch-Waxman Amendments also provide for a period of statutory protection for new drugs that receive NDA approval from the FDA. If a new drug receives NDA approval as a new chemical entity, meaning that the FDA has not previously approved any other new drug containing the same active moiety, then the Hatch-Waxman Amendments prohibit an abbreviated new drug application or an NDA where the applicant does not own or have a legal right of reference to all of the data required for approval, or a “505(b)(2)” NDA, to be submitted by another company for a generic version of such drug, with some exceptions, for a period of five years from the date of approval of the NDA. The statutory protection provided pursuant to the Hatch-Waxman Amendments will not prevent the filing or approval of a full NDA. In order to gain approval of a full NDA, however, a competitor would be required to conduct its own preclinical investigations and clinical trials. If NDA approval is received for a new drug containing an active ingredient that was previously approved by the FDA but the NDA is for a drug that includes an innovation over the previously approved drug, for example, an NDA approval for a new indication or formulation of the drug with the same active ingredient, and if such NDA approval was dependent upon the submission to the FDA of new clinical investigations, other than bioavailability studies, conducted or paid for by the sponsor, then the Hatch-Waxman Amendments prohibit the FDA from making effective the approval of an ANDA or a 505(b)(2) NDA for a generic version of such drug for a period of three years from the date of the NDA approval. This three year exclusivity, however, only covers the innovation associated with the NDA to which it attaches. Thus, the three year exclusivity does not prohibit the FDA, with limited exceptions, from approving ANDAs or 505(b)(2) NDAs for drugs containing the same active ingredient but without the new innovation.

While the Hatch-Waxman Amendments provide certain patent term restoration and exclusivity protections to innovator drug manufacturers, it also permits the FDA to approve ANDAs for generic versions of their drugs. The ANDA process permits competitor companies to obtain marketing approval for a drug with the same active ingredient for the same uses but does not require the conduct and submission of clinical trials demonstrating safety and effectiveness for that product. Instead of safety and effectiveness data, an ANDA applicant needs only to submit data demonstrating that its product is bioequivalent to the innovator product as well as relevant chemistry, manufacturing and control data. The Hatch-Waxman Amendments also instituted a third type of drug application that requires the same information as an NDA including full reports of clinical and preclinical studies except that some of the information from the reports required for marketing approval comes from studies which the applicant does not own or have a legal right of reference. This type of application, a “505(b)(2) NDA,” permits a manufacturer to obtain marketing approval for a drug without needing to conduct or obtain a right of reference for all of the required studies.

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Finally, the Hatch-Waxman Amendments require, in some circumstances, an ANDA or a 505(b)(2) NDA applicant to notify the patent owner and the holder of the approved NDA of the factual and legal basis of the applicant’s opinion that the patent listed by the holder of the approved NDA in FDA’s Orange Book is not valid or will not be infringed (the patent certification process). Upon receipt of this notice, the patent owner and the NDA holder have 45 days to bring a patent infringement suit in federal district court and obtain a 30-month stay against the company seeking to reference the NDA. The NDA holder could still file a patent suit after the 45 days, but if they did, they would not have the benefit of the 30-month stay. Alternatively, after this 45-day period, the applicant may file a declaratory judgment action, seeking a determination that the patent is invalid or will not be infringed. Depending on the circumstances, however, the applicant may not be able to demonstrate a controversy sufficient to confer jurisdiction on the court. The discovery, trial and appeals process in such suits can take several years. If such a suit is commenced, the Hatch-Waxman Act provides a 30-month stay on the approval of the competitor’s ANDA or 505(b)(2) NDA. If the litigation is resolved in favor of the competitor or the challenged patent expires during the 30-month period, unless otherwise extended by court order, the stay is lifted and the FDA may approve the application. Under the Modernization Act, the patent owner and the NDA holder have the opportunity to trigger only a single 30-month stay per ANDA or 505(b)(2) NDA.

Foreign Approvals

In addition to regulations in the United States, we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our products. Whether or not we obtain FDA approval for a product, we must obtain approval of a product by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries. The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.

Under European Union regulatory systems, we may submit marketing authorizations either under a centralized or decentralized procedure. The centralized procedure provides for the grant of a single marketing authorization that is valid for all European Union member states. The decentralized procedure provides for mutual recognition of national approval decisions. Under this procedure, the holder of a national marketing authorization may submit an application to the remaining member states. Within 90 days of receiving the applications and assessment report, each member state must decide whether to recognize approval.

The policies of the FDA and foreign regulatory authorities may change and additional government regulations may be enacted which could prevent or delay regulatory approval of our investigational drugs or approval of new diseases for our existing products. We cannot predict the likelihood, nature or extent of adverse governmental regulation that might arise from future legislative or administrative action, either in the United States or abroad.

Other Government Regulation

Our research and development activities use biological and hazardous materials that are dangerous to human health and safety or the environment. We are subject to a variety of federal, state and local laws and regulations governing the use, generation, manufacture, storage, handling and disposal of these materials and wastes resulting from these materials. We are also subject to regulation by the Occupational Safety and Health Administration, or OSHA, the California and federal environmental protection agencies and to regulation under the Toxic Substances Control Act. OSHA or the California or federal EPA may adopt regulations that may affect our research and development programs. We are unable to predict whether any agency will adopt any regulations that could have a material adverse effect on our operations. We have incurred, and will continue to incur, capital and operating expenditures and other costs in the ordinary course of our business in complying with these laws and regulations.

Revenues and Information About Geographic Areas

All of our revenues for the years ended December 31, 2014, 2013, 2012 resulted from the amortization of upfront and milestone payments received under our collaboration with Merck KGaA.  Further information on our collaboration with Merck KGaA is included in Note 3 to our consolidated financial statements.  All of our long-lived assets are maintained in the United States.  

Employees

As of December 31, 2014, we had 61 employees, including 20 who hold Ph.D. and/or M.D. degrees. 48 of our employees are engaged in research and development, and our remaining employees are management or administrative staff. None of our employees is subject to a collective bargaining agreement. We believe that we have good relations with our employees.

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Our Corporate Information

We were incorporated in Delaware on October 17, 2001. Our principal executive offices are located at 170 Harbor Way Suite 300, South San Francisco 94080. Our telephone number is (650) 474-8200.

Available Information

We file electronically with the Securities and Exchange Commission, or SEC, our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K pursuant to Section 13(a) or 15(d) of the Exchange Act. The SEC maintains an Internet site that contains reports, proxy information and information statements, and other information regarding issuers that file electronically with the SEC. The address of that website is http://www.sec.gov . The materials are also available at the SEC’s Public Reference Room, located at 100 F Street, Washington, D.C. 20549. The public may obtain information through the public reference room by calling the SEC at 1-800-SEC-0330.

You may obtain a free copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports on the day of filing with the SEC on our website at  http://www.thresholdpharm.com or by contacting the Investor Relations Department at our corporate offices by calling (650) 474-8200. The information contained in, or that can be accessed through, our website is not part of, and is not incorporated into, this annual report on Form 10-K.

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