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Delaware
(State or other jurisdiction of
incorporation or organization)
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45‑0705648
(I.R.S. Employer
Identification No.)
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Title of each class
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Name of each exchange on which registered
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Common Stock, $0.001 par value
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NASDAQ Stock Market
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Large accelerated filer ☐
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Accelerated filer ☐
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Non‑accelerated filer
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Smaller reporting company
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Emerging growth company
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PART IV
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F-8
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Advancing our pipeline of compounds through development and to regulatory approval;
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Pursuing targeted, differentiated preclinical and clinical stage product candidates;
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Acquiring or licensing rights to clinically meaningful and differentiated products that are already on the market for pediatric use or in late-stage development for pediatric indications; and
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Growing sales of the existing commercial products in our portfolio, including by identifying and investing in growth opportunities such as new treatment indications and new geographic markets.
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CERC
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301:
Orphan Neurological Indication.
CERC-301 is currently being developed as an adjunct therapy in Parkinson’s Disease patients suffering from nOH, which is a condition that is part of a larger category called orthostatic hypotension ("OH") also known as postural hypotension. nOH is caused by dysfunction in the autonomic nervous system and causes people to feel faint when they stand or sit up. CERC‑301 belongs to a class of compounds known as antagonists of the N‑methyl‑D‑aspartate ("NMDA") receptor, a receptor subtype of the glutamate neurotransmitter system that is responsible for controlling neurologic adaptation. We believe CERC‑301 selectively blocks the NMDA receptor subunit 2B ("NR2B") (also called GluN2B).
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CERC
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406 and COMTi Platform:
Adjunctive Treatment of Parkinson's Disease.
CERC-406 is a preclinical candidate from our proprietary platform of compounds that inhibit catechol-O-methyltransferase ("COMT") within the brain, which we refer to as our COMTi platform. We believe it may have the potential to be developed for the adjunct treatment of Parkinson’s Disease. Preclinically, CERC-406 has demonstrated a greater selectivity for Central Nervous System COMT as compared to peripheral COMT, which we believe may represent an opportunity to treat both the neuromuscular and cognitive manifestations of Parkinson's Disease while minimizing the systemic toxicities associated with the currently approved COMTi’s.
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CERC-611:
Adjunctive Treatment of Partial-Onset Seizures in Epilepsy.
CERC-611 is a potent and selective antagonist of transmembrane alpha-amino-3-hydroxy-5-methyl-4-isoxazolepropionic acid ("AMPA") receptor regulatory protein (“TARP”)-γ8-dependent AMPA currently in development as an adjunct therapy for refractory partial-onset seizures. TARPs are a recently discovered family of proteins that have been found to associate with, and modulate the activity of, AMPA receptors. TARP γ8-dependent AMPA receptors are localized primarily in the hippocampus, a region of the brain with importance in complex partial seizures and particularly relevant to seizure origination and/or propagation.
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CERC-800 Series (CERC-801, CERC-802, and CERC-803):
Substrate Replacement Therapies for CDGs.
CERC-801, CERC-802 and CERC-803 represent genetically-targeted, small molecule, substrate replacement therapies with established therapeutic utility for the treatment of CDGs. CDGs are a rapidly expanding group of rare Inborn Errors of Metabolism ("IEMs") due to defects in glycosylation. Glycosylation is the process by which carbohydrate complexes are created, modified and attached to proteins and lipids, creating glycoconjugates that are essential for cell structure and function in all tissues and organs. CDG is caused by a specific inherited mutation and more than 100 CDGs have been identified to date. CDGs typically present in infancy and can be associated with a broad spectrum of symptoms that include severe, disabling or life-threatening cases. Oral administration of CERC-801, CERC-802 or CERC-803 can replenish critical metabolic intermediates that are reduced or absent due to genetic mutation, overcoming single enzyme
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CERC-913:
ProTide Nucleotide for Mitochondrial Disorder.
CERC-913 is a genetically-targeted, small molecule substrate replacement therapy that uses a prodrug approach to overcome a single enzyme defect to treat mitochondrial DNA mtDNA depletion syndromes ("MDS"). A prodrug is a medication or compound that, after administration, is metabolized into a pharmacologically active substance. The ProTide prodrug platform is a clinically-validated approach to nucleoside monophosphate prodrugs. Some patients suffering from MDS lack a nucleoside kinase that produces nucleoside monophosphates for mtDNA synthesis. Direct substrate replacement of nucleoside monophosphates is impractical due to instability in plasma and low cell permeability. By masking a nucleoside monophosphate as a prodrug with improved drug-like properties, we can deliver the substrate to the desired subcellular compartment and bypass the missing nucleoside kinase. CERC-913 is intended for pediatric MDS patients with symptoms that manifest primarily in the liver, with 50% of patients experiencing liver failure in the first few years of life.
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Poly-Vi-Flor:
This medication is a combination product of vitamins and fluoride. It is used in infants and children to treat or prevent deficiency due to poor diet or low levels of fluoride in drinking water and other sources. Vitamins are important building blocks of the body and help keep you in good health. Fluoride is used to prevent dental cavities.
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Tri-Vi-Flor:
Multivitamins provide essential vitamins and minerals that are not taken in to the body through diet. Fluoride strengthens tooth enamel, which helps prevent dental cavities. In most major U.S. communities, fluoride is put into the water supply. Tri-Vi-Flor are used as a supplement to the diet of infants and children who do not receive adequate fluoride through drinking water. Tri-Vi-Flor are also used to prevent tooth decay in people treated with radiation, which may cause dryness of the mouth and increased risk of tooth decay.
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Millipred®:
Prednisolone is a man-made form of a natural substance (corticosteroid hormone) made by the adrenal gland. It is used to treat conditions such as arthritis, blood problems, immune system disorders, skin and eye conditions, breathing problems, cancer, and severe allergies. It decreases your immune system's response to various diseases to reduce symptoms such as pain, swelling and allergic-type reactions. Supplied in 5mg tablets and 10mg in oral solution.
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Ulesfia®:
Ulesfia® Lotion is indicated for the topical treatment of
head lice
infestation in patients six months of age and older. This product is not toxic to lice but kills them by depriving them of oxygen.
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Karbinal™ ER:
Carbinoxamine is an antihistamine used to relieve symptoms of allergy, hay fever, and the common cold. These symptoms include rash, watery eyes, itchy eyes/nose/throat/skin, cough, runny nose, and sneezing. This medication works by blocking a certain natural substance (histamine) that your body makes during an allergic reaction. By blocking another natural substance made by your body (acetylcholine), it helps dry up some body fluids to relieve symptoms such as watery eyes and runny nose.
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AcipHex® Sprinkle™:
AcipHex® Sprinkle™ or Rabeprazole is used to treat certain stomach and esophagus problems (such as acid reflux, ulcers). It works by decreasing the amount of acid your stomach makes. It relieves symptoms such as heartburn, difficulty swallowing, and persistent cough. This medication helps heal acid damage to the stomach and esophagus, helps prevent ulcers, and may help prevent cancer of the esophagus. Rabeprazole belongs to a class of drugs known as proton pump inhibitors ("PPIs").
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Cefaclor for Oral Suspension:
This medication is a second-generation cephalosporin-type antibiotic used to treat a wide variety of bacterial infections (e.g., middle ear, skin, urine and respiratory tract infections). It works by stopping the growth of bacteria. This antibiotic only treats bacterial infections. It will not work for viral infections (e.g., common cold, flu). Unnecessary use or overuse of any antibiotic can lead to its decreased effectiveness.
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Flexichamber™:
When a child is diagnosed with asthma, doctors often prescribe a metered dose inhaler ("MDI") - commonly referred to as an inhaler. Using an inhaler requires refined coordination and inhalation techniques that can be tricky, especially for small children. To ensure the child receives the optimal dose, many doctors prescribe a spacer - such as Flexichamber - to be used with an inhaler. Flexichamber was designed to overcome problems that patients commonly experience when using just an inhaler to administer their asthma medication. When used properly and as prescribed by a doctor, Flexichamber helps deliver asthma medication from the inhaler to tissue deep within the lungs, reduces the amount of medication that settles onto the child’s mouth and throat, and allows caregivers to visually monitor breathing techniques and provide additional instructions if needed.
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CERC‑301:
Orphan Neurological Indication.
We possess worldwide exclusive rights to manufacture, use, and sell certain NR2B antagonist compounds. The CERC‑301 patent portfolio consists of three patent families. The first family consists of patents that have issued in the United States, Germany, France, and United Kingdom. The patents in the first family include composition of matter claims and use claims that generically cover CERC‑301. The expiration date of the U.S. patent is June 3, 2022, not including any potential patent term extension or market exclusivity period. The second family consists of patents that have issued in United States, Australia, Canada, Germany, France, Switzerland, United Kingdom, and Japan. The patents in the second family include composition of matter and use claims of varying scope (foreign patents only), including picture claims to CERC‑301 or a pharmaceutically acceptable salt thereof. The expiration date of the U.S. patent in the second family is August 31, 2026, not including any patent term extension or market exclusivity period which may apply. The third family consists of a patent issued in the United States and patent applications in the United States, Australia, Canada, China, Europe, India, and Japan, with claims to compositions of matter, methods of use, and methods of manufacture that cover the crystalline form of CERC-301. The expiration date of the U.S. patent is December 18, 2035 and any patents
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CERC
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406 and COMTi Platform:
Adjunctive Treatment of Parkinson's Disease.
We possess worldwide exclusive rights to manufacture, use, and sell COMT inhibitor compounds. The COMT patent portfolio consists of two patent families. The first family consists of patents that have issued in the United States, Australia, Canada, China, Japan, and patent applications in Europe and India with claims to compositions of matter and methods of use. The expiration date of the United States patent in the first family, exclusive of any patent term extension, is February 28, 2031. The second family consists of patents that have issued in the United States, Australia, China, Europe, Japan, and patent applications in Canada and India with claims to compositions of matter and methods of use. The expiration date of the U.S. patent in the second family, exclusive of any patent term extension, is February 28, 2031.
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CERC-611:
Adjunctive Treatment of Partial-Onset Seizures in Epilepsy.
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e possess worldwide exclusive rights to manufacture, use, and sell LY3130481, now known as CERC‑611. The CERC-611 patent portfolio consists of two patent families. The first family consists of patents that have issued in the United States, Australia, Canada, China, France, Germany, Italy, Spain, Switzerland, United Kingdom, Japan, and a patent application in India with composition of matter and use claims for CERC-611. The expiration date of the United States patent, exclusive of any patent term extension, is November 20, 2033. The second family consists of patents that have issued in the United States, Australia, Canada, and Japan, and international patent applications in China (allowed) and India with composition of matter and use claims of varying scope for additional selective TARP γ8-dependent AMPA receptor antagonists. The expiration date of the U.S. patent, exclusive of any patent term extension, is May 21, 2035.
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CERC-913:
ProTide Nucleotide for Mitochondrial Disorder.
The CERC-913 patent portfolio consists of patent applications in the United States, Australia, Canada, China, Europe, India, and Japan with claims to compositions of matter and methods of use. Any patents issuing from these applications would expire in November 16, 2036 at the earliest, not including any potential patent term adjustment, patent term extension, or market exclusivity period.
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Flexichamber.
The Flexichamber patent portfolio consists of patents that have issued in the United States, Australia and Japan, and patent applications in the United States, Australia, Canada, China, Europe, and India with claims to the device, methods for forming the device, and methods of use. The expiration date of the U.S. patent, exclusive of any patent term extension, is June 23, 2034.
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CERC‑301:
Orphan Neurological Indication.
CERC‑301 will compete with other drugs used as therapies for the treatment of nOH. Medication management of nOH is added when patients have persistent symptoms despite these non-pharmacological approaches. Fludrocortisone is a synthetic mineralocorticoid that acts to retain sodium and water. Midodrine is an alpha-adrenergic agonist that can increase blood pressure by increasing peripheral vascular resistance. Pyridostigmine has also been used to treat nOH. Pyridostigmine is a peripheral inhibitor of acetylcholinesterase, which can cause a mild increase in standing blood pressure without significantly increasing supine blood pressure. Droxidopa (L-threo-3-4-dihydroxyphenylserine ("L-threo DOPS")) is an oral prodrug converted by decarboxylation to norepinephrine in both the central and the peripheral nervous systems.
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CERC-406 and COMTi Platform:
Adjunctive Treatment of Parkinson's Disease.
There are no approved pharmacologic treatments for cognitive impairment associated in the U.S. at this time. In March 2015, vortioxetine (Brintellix®), marketed in the United States by Lundbeck Pharmaceuticals, which was originally developed and commercialized for the treatment of MDD, received a positive opinion from the Committee for Medicinal Products for Human Use of the European Medicines Agency to expand the label to include information for cognitive function in patients with depression. A supplemental application for the addition of clinical data to the FDA approved product label for Brintellix was not approved by the FDA.
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CERC-611:
Adjunctive Treatment of Partial-Onset Seizures in Epilepsy.
The epilepsy market is crowded with current therapies targeting a variety of mechanisms, including gamma-aminobutyric acid ("GABA") receptor agonism, T-type calcium channel blockers, sodium channel modulators, synaptic vesicle protein SV2A modulation, and inhibition of GABA transaminase. More recently, a new class of AMPA receptor antagonists have been approved for the treatment of epilepsy.
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CERC
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800 series (CERC-801, CERC-802 and CERC-803):
Substrate Replacement Therapy for CDGs.
Currently there are no FDA or EMEA approved products for the treatment of CDG using the following: D-Galactose Substrate replacement therapy for PGM1 CDG (CERC-801), Mannose Phosphate Isomerase ("MPI") deficiency, also known as MPI-CDG (CERC-802), and L-Fucose Substrate replacement therapy for the treatment of Leukocyte Adhesion Deficiency Type II (LADII), also known as SLC35C1-CDG (CERC-803).
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CERC-913:
ProTide Nucleotide for Mitochondrial Disorder.
Currently there are no FDA or EMEA approved products for the treatment of Mitochondrial Depletion Syndrome MDA using a ProTide Nucleotide therapy for Mitochondrial DNA Depletion Syndrome ("MDS").
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Poly-Vi-Flor / Tri-Vi-Flor:
Poly-Vi-Flor / Tri-Vi-Flor primarily compete against generic prescription multi-vitamin fluoride market and the brands of FLORIVA and QFLORA. Our primary point of differentiation is Metafolin and that our form of Metafolin is a body-ready folate to aid in cell reproduction. As well, we offer formulations that are patient friendly in terms of size of tablet and taste of medication ensuring compliance of their daily fluoride vitamin supplementation.
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Millipred®:
Millipred® Tablets primarily compete in the generic prednisolone market. We believe our primary point of differentiation is that we offer the lowest strength prednisolone in the market place allowing HCPs greater flexibility when dosing a glucocorticoid steroid across a variety of pediatric indications. Additionally, Millipred® utilizes the proprietary double taste-masking technology to provide a pleasant grape taste with no bitterness, which makes the product easier to administer to children.
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Ulesfia®:
Ulesfia® competes in a market place that is primarily made up of step-wise therapy utilizing OTC remedies. Once into the prescription marketplace Sklice® is the market leader differentiated primarily by pricing and contracting. However, Ulesfia is the leader in providing a non-neuro toxic / non-pesticide for treating headlice.
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Karbinal™ ER:
Karbinal™ ER faces competition from OTC products such as non-sedating antihistamines, sedating antihistamines as well as nasal steroids. Karbinal’s greatest point of differentiation is our LIQUIDRX Technology that allows for extended release and flexible BID dosing. This feature makes Karbinal ER the only BID first generation antihistamine. Additionally, Karbinal has a significant anticholinergic / drying effect on the symptoms associated with seasonal, perennial, as well as vasomotor allergic rhinitis.
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AcipHex® Sprinkle™:
AcipHex® Sprinkle™ primarily faces competition from the OTC Proton Pump Inhibitors, however those products (Nexium OTC and Prilosec OTC) are not indicated for children less than 18 years of age. In the branded space the primary competition is from Nexium Packets. We clinically differentiate AcipHex Sprinkle as the only PPI that is proven to demonstrate esophageal mucosal healing as determined by endoscopy in children less than 18 years of age.
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Cefaclor for Oral Suspension:
Cefaclor for Oral Suspension faces significant competition from the generic antibiotics of amoxicillin as well as Omnicef / Ceftin. We feel our keep point of differentiation is through our clinical positioning for appropriate patients who have failed first line therapies. Cefaclor is the best first choice as a second line treatment for antibiotics that have failed patients suffering from streptococcus, urinary tract infections and otitis media. Cefaclor is a second generation antibiotic indicated against a broad range of pathogens with a broad range of indications.
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Flexichamber™:
Flexichamber™ is a patented and proprietary design that allows a patient with a necessary spacer that is conveniently portable. There are numerous competitors in the market place with the main competition being AreoChamber. Flexichamber’s collapsibility / portability is unique compared to the competition.
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identifying and validating targets;
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screening compounds against targets;
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preclinical and clinical trials of potential pharmaceutical products; and
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obtaining FDA and other regulatory clearances.
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capital resources;
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research and development resources;
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manufacturing capabilities; and
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sales and marketing.
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Phase 1 studies evaluate the safety of the drug, generally in normal, healthy volunteers;
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Phase 2 studies evaluate safety and efficacy, as well as explore dosing ranges; these studies are typically conducted in patient volunteers who suffer from the particular disease condition that the drug is designed to treat; and
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Phase 3 studies evaluate safety and efficacy of the product, at specific doses, in a large clinical trial
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The federal Medicare and Medicaid Anti-Kickback laws, which prohibit persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce either the referral of an individual, or furnishing or arranging for a good or service, for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs;
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Other Medicare laws, regulations, rules, manual provisions and policies that prescribe the requirements for coverage and payment for services performed by our customers, including the amount of such payment;
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The federal False Claims Act which imposes civil and criminal liability on individuals and entities who submit, or cause to be submitted, false or fraudulent claims for payment to the government;
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The Foreign Corrupt Practices Act ("FCPA"), which prohibits certain payments made to foreign government officials;
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State and foreign law equivalents of the foregoing and state laws regarding pharmaceutical company marketing compliance, reporting and disclosure obligations; and
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The Patient Protection and Affordable Care Act ("ACA"), which among other things changes access to healthcare products and services; creates new fees for the pharmaceutical and medical device industries; changes rebates and prices for health care products and services; and requires additional reporting and
disclosure.
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the required patent information has not been filed;
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the listed patent has expired;
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the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or
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the listed patent is invalid, unenforceable, or will not be infringed by the new product.
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delays in reaching an agreement with or failure in obtaining authorization from the FDA, other regulatory authorities or institutional review boards, or IRBs, to commence or amend a clinical trial;
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imposition of a clinical hold or trial termination following an inspection of our clinical trial operations or trial sites by the FDA or other regulatory authorities, or due to concerns about trial design, or a decision by the FDA, other regulatory authorities, IRBs or the company, or recommendation by a data safety monitoring board, to place the trial on hold or otherwise suspend or terminate clinical trials at any time for safety issues or for any other reason;
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delays in reaching agreement on acceptable terms with prospective contract research organizations ("CROs") and clinical trial sites;
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deviations from the trial protocol by clinical trial sites and investigators, or failing to conduct the trial in accordance with regulatory requirements;
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failure of our third parties, such as CROs, to satisfy their contractual duties or meet expected deadlines;
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failure to enter into agreements with third parties to obtain the results of clinical trials;
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delays in the importation and manufacture of clinical supply;
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delays in the testing, validation and delivery of the clinical supply of the product candidates to the clinical sites;
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for clinical trials in selected subject populations, delays in identification and auditing of central or other laboratories and the transfer and validation of assays or tests to be used to identify selected subjects;
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delays in recruiting suitable subjects to participate in a trial;
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delays in having subjects complete participation in a trial or return for post‑treatment follow‑up;
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delays caused by subjects dropping out of a trial due to side effects or disease progression;
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delays in adding new investigators and clinical trial sites;
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withdrawal of clinical trial sites from our clinical trials as a result of changing standards of care or the ineligibility of a site to participate in our clinical trials; or
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changes in government regulations or administrative actions or lack of adequate funding to continue the clinical trials.
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the size and nature of the subject population;
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the number and location of clinical sites we enroll;
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the proximity of subjects to clinical sites;
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perceived risks and benefits of the product candidate under trial;
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competition with other companies for clinical sites or subjects;
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competing clinical trials;
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the eligibility and exclusion criteria for the trial;
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the design of the clinical trial;
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effectiveness of publicity for the clinical trials;
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inability to obtain and maintain subject consents;
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ability to monitor subjects adequately during and after the administration of the product candidate and the ability of subjects to comply with the clinical trial requirements;
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risk that enrolled subjects will drop out or be withdrawn before completion; and
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clinicians’ and subjects’ perceptions as to the potential advantages of the drug being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating.
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our methodology, including our screening technology, might not successfully identify medically relevant potential product candidates;
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our competitors may develop alternatives that render our product candidates obsolete;
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we may encounter product manufacturing difficulties that limit yield or produce undesirable characteristics that increase the cost of goods, cause delays or make the product candidates unmarketable;
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our product candidates may cause adverse effects in subjects, even after successful initial toxicology studies, which may make the product candidates unmarketable;
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our product candidates might not be capable of being produced in commercial quantities at an acceptable cost, or at all;
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our product candidates might not demonstrate a meaningful benefit to subjects;
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our potential collaboration partners may change their development profiles or plans for potential product candidates or abandon a therapeutic area or the development of a partnered product; and
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our reliance on third party clinical trials may cause us to be denied access to clinical results that may be significant to further clinical development.
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the FDA or comparable foreign regulatory authorities may disagree on the design or implementation of our clinical trials, including the methodology used in our trial, our chosen endpoints, our statistical analysis, or our proposed product indication. For instance, the FDA may find that the designs that we are utilizing in our planned clinical trial do not support an adequate and well‑controlled study. The FDA also might not agree with the various disease scales and evaluation tools that we may use in our clinical trials to assess the efficacy of our product candidates. Further, the FDA might not agree with our endpoints and/or indications selected for our development programs;
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the FDA or comparable foreign regulatory authorities may disagree with our development plans for our product candidates;
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our failure to demonstrate to the satisfaction of the FDA or comparable regulatory authorities that a product candidate is safe and effective for its proposed indication;
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our clinical trials may fail to meet the level of statistical significance required for approval;
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we may fail to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;
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the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;
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data collected from clinical trials of our product candidates may be insufficient to support the submission and filing of an NDA, other submission or to obtain marketing approval, and FDA may require additional studies to show that our product candidates are safe or effective;
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we may fail to obtain approval of the manufacturing processes or facilities of third‑party manufacturers with whom we contract for clinical and commercial supplies; or
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there may be changes in the approval policies or regulations that render our preclinical and clinical data insufficient for approval.
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we may suspend marketing of, or withdraw or recall, such product;
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regulatory authorities may withdraw approvals of such product;
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regulatory authorities may require additional warnings on the label or other label modifications;
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the FDA or other regulatory bodies may issue safety alerts, Dear Healthcare Provider letters, press releases or other communications containing warnings about such product;
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the FDA may require the establishment or modification of a REMS or other restrictions on marketing and distribution, or a comparable foreign regulatory authority may require the establishment or modification of a similar strategy that may, for instance, require us to issue a medication guide outlining the risks of such side effects for distribution to patients or restrict distribution of our products and impose burdensome implementation requirements on us;
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regulatory authorities may require that we conduct post‑marketing studies; and
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we could be sued and held liable for harm caused to subjects or patients.
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issue Warning Letters or Untitled Letters;
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mandate modifications to promotional materials or labeling, or require us to provide corrective information to healthcare practitioners;
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require us to enter into a consent decree, which can include imposition of various fines, reimbursements for inspection costs, required due dates for specific actions and penalties for noncompliance;
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seek an injunction or impose civil or criminal penalties or monetary fines, restitution or disgorgement, as well as imprisonment;
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suspend or withdraw marketing approval;
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suspend or terminate any ongoing clinical studies;
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refuse to approve pending applications or supplements to applications filed by us;
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debar us from submitting marketing applications, exclude us from participation in federal healthcare programs, require a corporate integrity agreement or deferred prosecution agreements, debar us from government contracts and refuse future orders under existing contracts;
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suspend or impose restrictions on operations, including restrictions on marketing, distribution or manufacturing of the product, or the imposition of costly new manufacturing requirements or use of alternative suppliers; or
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seize or detain products, refuse to permit the import or export of products, or request that we initiate a product recall.
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different regulatory requirements for approval of drugs in foreign countries;
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challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States;
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foreign reimbursement, pricing and insurance regimes;
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unexpected changes in tariffs, trade barriers and regulatory requirements;
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economic weakness, including inflation, or political instability in particular foreign economies and markets;
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compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
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foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country;
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foreign taxes;
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difficulties staffing and managing foreign operations;
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workforce uncertainty in countries where labor unrest is more common than in the United States;
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potential liability under the Foreign Corrupt Practices Act of 1977 or comparable foreign regulations;
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production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and
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business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires.
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the efficacy and safety profile of our product candidates, including relative to marketed products and product candidates in development by third parties;
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prevalence and severity of any side effects of our product candidates;
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relative convenience and ease of administration of our product candidates;
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cost effectiveness of our product candidates;
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the claims we may make for our product candidates based on the approved label or any restrictions placed upon our marketing and distribution of our product candidates;
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the time it takes for our product candidates to complete clinical development and receive marketing approval;
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how quickly and effectively we alone, or with a partner, can market, launch, and distribute any of our product candidates that receive marketing approval;
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the ability to commercialize any of our product candidates that receive marketing approval;
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the price of our products, including in comparison to branded or generic competitors and relative to alternative treatments;
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potential or perceived advantages of disadvantages over alternative treatments;
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the ability to collaborate with others in the development and commercialization of new products;
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|
whether coverage and adequate levels of reimbursement are available under private and governmental health insurance plans, including Medicare;
|
•
|
the ability to establish, maintain and protect intellectual property rights related to our product candidates;
|
•
|
the entry of generic versions of our products onto the market;
|
•
|
the number of products in the same therapeutic class as our product candidates;
|
•
|
the effect of current and future healthcare laws on our drug candidates;
|
•
|
the ability to secure favorable managed care formulary positions, including federal healthcare program formularies;
|
•
|
the ability to manufacture commercial quantities of any of our product candidates that receive marketing approval;
|
•
|
acceptance of any of our product candidates that receive marketing approval by physicians and other healthcare providers; and
|
•
|
potential post-marketing commitments imposed on regulatory authorities, such as patient registries.
|
•
|
an annual, nondeductible fee payable by any entity that manufactures or imports specified branded prescription drugs and biologic agents;
|
•
|
revised the definition of “average manufacturer price,” or AMP, for reporting purposes, which can increase the amount of Medicaid drug rebates manufacturers are required to pay to states, and created a separate AMP for certain categories of drugs provided in non‑retail outpatient settings;
|
•
|
an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;
|
•
|
a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected;
|
•
|
a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% (and 70% commencing January 1, 2019) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries under their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;
|
•
|
extension of manufacturers’ Medicaid rebate liability to individuals enrolled in Medicaid managed care organizations;
|
•
|
expansion of eligibility criteria for Medicaid programs in certain states;
|
•
|
expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;
|
•
|
a new requirement to annually report drug samples that manufacturers and distributors provide to physicians;
|
•
|
a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; and
|
•
|
enacted substantial new provisions affecting compliance which may affect our business practices with healthcare practitioners.
|
•
|
decreased demand for any product candidates or products that we may develop;
|
•
|
termination of clinical trial sites or entire trial programs;
|
•
|
injury to our reputation and significant negative media attention;
|
•
|
withdrawal of clinical trial participants;
|
•
|
significant costs to defend the related litigation;
|
•
|
substantial monetary awards to trial subjects or patients;
|
•
|
loss of revenue;
|
•
|
product recalls, withdrawals or labeling, marketing or promotional restrictions;
|
•
|
diversion of management and scientific resources from our business operations;
|
•
|
the inability to commercialize any products that we may develop; and
|
•
|
a decline in our stock price.
|
•
|
the federal Anti‑Kickback Statute prohibits persons from, among other things, knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, the referral of an individual for the furnishing or arranging for the furnishing, or the purchase, lease or order, or arranging for or recommending purchase, lease or order, of any good or service for which payment may be made under a federal healthcare program such as Medicare or Medicaid;
|
•
|
the civil federal False Claims Act imposes civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent; knowingly making, using or causing to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the government; conspiring to defraud the government by getting a false or fraudulent claim paid or approved by the government; or knowingly making, using or causing to be made or used a false record or statement to avoid, decrease or conceal an obligation to pay money to the federal government. Civil False Claims Act liability may be imposed for Medicare or Medicaid overpayments, for example, overpayments caused by understated rebate amounts, that are not refunded within 60 days of discovering the overpayment, even if the overpayment was not cause by a false or fraudulent act;
|
•
|
the criminal federal False Claims Act imposes criminal fines or imprisonment against individuals or entities who willfully make or present a claim to the government knowing such claim to be false, fictitious or fraudulent;
|
•
|
the Veterans Health Care Act requires manufacturers of covered drugs to offer them for sale on the Federal Supply Schedule, which requires compliance with applicable federal procurement laws and regulations and subjects us to contractual remedies as well as administrative, civil and criminal sanctions;
|
•
|
the federal Health Insurance Portability and Accountability Act and its related regulations, collectively HIPAA, impose criminal liability for, among other actions, knowingly and willfully executing a scheme to defraud any healthcare benefit program, knowingly and willfully embezzling or stealing from a health care benefit program, willfully obstructing a criminal investigation of a health care offense, or knowingly and willfully making false statements relating to healthcare matters;
|
•
|
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and its implementing regulations, also imposes obligations on certain covered entity health care providers, health plans, and health care clearinghouses as well as their business associates that perform certain services involving individually identifiable health information, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information, as well as directly applicable privacy and security standards and requirements
|
•
|
the civil monetary penalties statute imposes penalties against any person or entity who, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent;
|
•
|
the federal Physician Sunshine Act, created under Section 6002 of the Affordable Care Act and its implementing regulations, requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to the Centers for Medicare and Medicaid Services, or CMS, information related to payments or other “transfers of value” made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, and requires applicable manufacturers and applicable group purchasing organizations to report annually to CMS ownership and investment interests held by physicians (as defined above) and their immediate family members;
|
•
|
the FCPA prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations; and
|
•
|
analogous or similar state, federal, and foreign laws, regulations, and requirements such as state anti‑kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non‑governmental third‑party payors, including private insurers; state and foreign laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers; state and foreign laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; laws, regulations, and requirements applicable to the award and performance of federal contracts and grants and state, federal and foreign laws that govern the privacy and security of health and other information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
|
•
|
our inability to recruit and retain adequate numbers of effective sales and marketing personnel;
|
•
|
inability of marketing personnel to develop effective marketing materials;
|
•
|
the inability of sales personnel to obtain access to physicians or educate adequate numbers of physicians on the clinical benefits of our products to achieve market acceptance;
|
•
|
the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines;
|
•
|
the costs associated with training sales personnel on legal compliance matters and monitoring their actions;
|
•
|
liability for sales personnel failing to comply with the applicable legal requirements; and
|
•
|
unforeseen costs and expenses associated with creating an independent sales and marketing organization.
|
•
|
collaborators have significant discretion in determining the amount and timing of the efforts and resources that they will apply to these collaborations;
|
•
|
collaborators may not perform their obligations as expected;
|
•
|
the nonclinical studies and clinical trials conducted as part of these collaborations may not be successful;
|
•
|
collaborators may not pursue development and commercialization of any product candidates that achieve regulatory approval or may elect not to continue or renew development or commercialization programs based on nonclinical study or clinical trial results, changes in the collaborators’ strategic focus or available funding or external factors, such as an acquisition, that divert resources or create competing priorities;
|
•
|
collaborators may delay nonclinical studies and clinical trials, provide insufficient funding for nonclinical studies and clinical trials, stop a nonclinical study or clinical trial or abandon a product candidate, repeat or conduct new nonclinical studies or clinical trials or require a new formulation of a product candidate for nonclinical studies or clinical trials;
|
•
|
we may not have access to, or may be restricted from disclosing, certain information regarding product candidates being developed or commercialized under a collaboration and, consequently, may have limited ability to inform our stockholders about the status of such product candidates;
|
•
|
collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;
|
•
|
product candidates developed in collaboration with us may be viewed by our collaborators as competitive with their own product candidates or products, which may cause collaborators to cease to devote resources to the commercialization of our product candidates;
|
•
|
a collaborator with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval may not commit sufficient resources to the marketing and distribution of any such product candidate;
|
•
|
disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development of any product candidates, may cause delays or termination of the research, development or commercialization of such product candidates, may lead to additional responsibilities for us with respect to such product candidates or may result in litigation or arbitration, any of which would be time consuming and expensive;
|
•
|
collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation;
|
•
|
disputes may arise with respect to the ownership or inventorship of intellectual property developed pursuant to our collaborations;
|
•
|
collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability;
|
•
|
the terms of our collaboration agreement may restrict us from entering into certain relationships with other third parties, thereby limiting our options; and
|
•
|
collaborations may be terminated for the convenience of the collaborator and, if terminated, we could be required to raise additional capital to pursue further development or commercialization of the applicable product candidates.
|
•
|
the development of certain of our current or future product candidates may be terminated or delayed;
|
•
|
our cash expenditures related to development of certain of our current or future product candidates would increase significantly and we may need to seek additional financing, which might not be available on favorable terms, or at all;
|
•
|
we may be required to hire additional employees or otherwise develop expertise, such as sales and marketing expertise, for which we have not budgeted;
|
•
|
we will bear all of the risk related to the development of any such product candidates;
|
•
|
we may have to expend unexpected efforts and funds if we are unable to obtain the results of third-party clinical trials; and
|
•
|
the competitiveness of any product candidate that is commercialized could be reduced.
|
•
|
reliance on the third parties for regulatory compliance and quality assurance;
|
•
|
the possible breach of the manufacturing agreements by the third parties because of factors beyond our control;
|
•
|
the possible misappropriation of our proprietary information, including trade secrets and know-how;
|
•
|
the possibility of termination or nonrenewal of the agreements by the third parties because of our breach of the manufacturing agreement or based on their own business priorities;
|
•
|
the disruption and costs associated with changing suppliers, including additional regulatory filings.
|
•
|
failure to satisfy their contractual duties or obligations;
|
•
|
inability to meet our product specifications and quality requirements consistently;
|
•
|
delay or inability to procure or expand sufficient manufacturing capacity;
|
•
|
manufacturing and/or product quality issues related to manufacturing development and scale-up;
|
•
|
costs and validation of new equipment and facilities required for scale-up;
|
•
|
failure to comply with applicable laws, regulations, and standards, including cGMP and similar foreign standards;
|
•
|
deficient or improper record-keeping;
|
•
|
contractual restrictions on our ability to engage additional or alternative manufacturers;
|
•
|
inability to negotiate manufacturing agreements with third parties under commercially reasonable terms;
|
•
|
termination or nonrenewal of manufacturing agreements with third parties in a manner or at a time that is costly or damaging to us;
|
•
|
reliance on a limited number of sources, and in some cases, single sources for product components, such that if we are unable to secure a sufficient supply of these product components, we will be unable to manufacture and sell our product candidates or any future product candidate in a timely fashion, in sufficient quantities or under acceptable terms;
|
•
|
lack of qualified backup suppliers for those components that are currently purchased from a sole or single source supplier;
|
•
|
lack of access or licenses to proprietary manufacturing methods used by third-party manufacturers to make our product candidates;
|
•
|
operations of our third-party manufacturers or suppliers could be disrupted by conditions unrelated to our business or operations, including the bankruptcy of the manufacturer or supplier or regulatory sanctions related to the manufacture of our or other company’s products;
|
•
|
carrier disruptions or increased costs that are beyond our control; and
|
•
|
failure to deliver our products under specified storage conditions and in a timely manner.
|
•
|
significantly delay, scale back or discontinue the development or commercialization of one or more of our product candidates or cease operations altogether;
|
•
|
seek strategic alliances for research and development programs at an earlier stage than we would otherwise desire or on terms less favorable than might otherwise be available; or
|
•
|
relinquish, or license on unfavorable terms, our rights to technologies or any future product candidates that we otherwise would seek to develop or commercialize ourselves.
|
•
|
the integration and profitability of our recently acquired commercial businesses (TRx in November 2017 and Avadel’s pediatric business in February 2018);
|
•
|
the initiation, progress, timing, costs and results of preclinical and clinical studies for our product candidates and future product candidates we may develop;
|
•
|
the outcome, timing and cost of seeking and obtaining regulatory approvals from the FDA and comparable foreign regulatory authorities, including the potential for such authorities to require that we perform more studies than we currently expect to perform;
|
•
|
the cost to establish, maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with licensing, preparing, filing, prosecuting, defending and enforcing any patents or other intellectual property rights;
|
•
|
the effect of competing technological and market developments;
|
•
|
market acceptance of any approved product candidates;
|
•
|
the costs of acquiring, licensing or investing in additional businesses, products, product candidates and technologies;
|
•
|
the cost and timing of selecting, auditing and potentially validating a manufacturing site for commercial‑scale manufacturing; and
|
•
|
the cost of expanding our sales, marketing and distribution capabilities to accommodate any of our product candidates for which we receive marketing approval and that we determine to commercialize ourselves or in collaboration with our partners.
|
•
|
exposure to unknown liabilities;
|
•
|
disruption of our business and diversion of our management’s time and attention in order to develop acquired products, product candidates or technologies;
|
•
|
incurrence of substantial debt or dilutive issuances of equity securities to pay for acquisitions or to fund the operations;
|
•
|
higher than expected acquisition and integration costs;
|
•
|
write‑downs of assets or goodwill or impairment charges;
|
•
|
increased amortization expenses;
|
•
|
difficulty and cost in combining the operations and personnel of any acquired businesses with our operations and personnel;
|
•
|
impairment of relationships with key suppliers or other counterparties of any acquired businesses due to changes in management and ownership; and
|
•
|
inability to retain key employees of any acquired businesses.
|
•
|
our ability to generate significant product revenues, cash flows and a profit;
|
•
|
the development status of our product candidates, and when any of our product candidates receive marketing approval;
|
•
|
our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial;
|
•
|
our failure to commercialize our product candidates, if approved;
|
•
|
the success of competitive products or technologies;
|
•
|
regulatory actions with respect to our products or our competitors’ products;
|
•
|
actual or anticipated changes in our growth rate relative to our competitors;
|
•
|
announcements by us or our competitors of significant acquisitions, strategic collaborations, joint ventures, collaborations or capital commitments;
|
•
|
results of preclinical studies and clinical trials of our product candidates or those of our competitors;
|
•
|
regulatory or legal developments in the United States and other countries;
|
•
|
developments or disputes concerning patent applications, issued patents or other proprietary rights;
|
•
|
the recruitment or departure of key personnel;
|
•
|
the level of expenses related to any of our product candidates or clinical development programs;
|
•
|
the results of our efforts to discover, develop, in‑license or acquire additional product candidates or products;
|
•
|
actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;
|
•
|
the performance of third parties on whom we rely to manufacture our products and product candidates, supply API and conduct our clinical trials, including their ability to comply with regulatory requirements;
|
•
|
variations in our financial results or those of companies that are perceived to be similar to us;
|
•
|
variations in the level of expenses related to our product candidates or preclinical and clinical development programs, including relating to the timing of invoices from, and other billing practices of, our CROs and clinical trial sites;
|
•
|
fluctuations in the valuation of companies perceived by investors to be comparable to us;
|
•
|
warrant or share price and volume fluctuations attributable to inconsistent trading volume levels of our warrants or shares;
|
•
|
announcement or expectation of additional financing efforts;
|
•
|
sales of our warrants or shares of our common stock by us, our insiders or our other security holders;
|
•
|
changes in the structure of healthcare payment systems;
|
•
|
changes in operating performance and stock market valuations of other pharmaceutical companies;
|
•
|
market conditions in the pharmaceutical and biotechnology sectors;
|
•
|
our execution of collaborative, co‑promotion, licensing or other arrangements, and the timing of payments we may make or receive under these arrangements;
|
•
|
additional state and federal healthcare reform measures that could put downward pricing pressure on our products;
|
•
|
the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC and announcements relating to litigation or other disputes, strategic transactions or intellectual property impacting us or our business;
|
•
|
announcement related to litigation;
|
•
|
fluctuations in quarterly operating results, as well as differences between our actual financial and operating results and those expected by investors;
|
•
|
the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;
|
•
|
changes in financial estimates by any securities analysts who follow our warrants or shares of common stock, our failure to meet these estimates or failure of those analysts to initiate or maintain coverage of our warrants or shares of common stock;
|
•
|
ratings downgrades by any securities analysts who follow our warrants or shares of common stock;
|
•
|
the development and sustainability of an active trading market for our shares of common stock;
|
•
|
future sales of our shares of common stock by our officers, directors and significant stockholders;
|
•
|
other events or factors, including those resulting from war, incidents of terrorism, natural disasters or responses to these events;
|
•
|
changes in accounting principles; and
|
•
|
general economic, industry and market conditions.
|
•
|
the provisions of Section 404(b) of the Sarbanes‑Oxley Act of 2002, or Sarbanes‑Oxley Act, requiring that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting;
|
•
|
the “say on pay” provisions (requiring a non‑binding shareholder vote to approve compensation of certain executive officers) and the “say on golden parachute” provisions (requiring a non‑binding shareholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of the Dodd-Frank Act and some of the disclosure requirements of the Dodd-Frank Act relating to compensation of our chief executive officer.
|
•
|
the requirement to provide detailed compensation discussion and analysis in proxy statements and reports filed under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and instead provide a reduced level of disclosure concerning executive compensation; and
|
•
|
any rules that the Public Company Accounting Oversight Board may adopt requiring mandatory audit firm rotation or a supplement to the auditor’s report on the financial statements.
|
•
|
authorizing the issuance of “blank check” preferred stock, the terms of which we may establish and shares of which we may issue without stockholder approval;
|
•
|
prohibiting cumulative voting in the election of directors, which would otherwise allow for less than a majority of stockholders to elect director candidates;
|
•
|
prohibiting stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders;
|
•
|
eliminating the ability of stockholders to call a special meeting of stockholders; and
|
•
|
establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at stockholder meetings.
|
|
|
Year Ended
|
||||||
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
|
|
|
|
|
||||
|
|
(in thousands)
|
||||||
Product revenue, net
|
|
$
|
17,871
|
|
|
$
|
1,910
|
|
Sales force revenue
|
|
456
|
|
|
278
|
|
||
License and other revenue
|
|
—
|
|
|
25,000
|
|
||
Grant revenue
|
|
—
|
|
|
625
|
|
||
|
|
$
|
18,327
|
|
|
$
|
27,813
|
|
|
|
Year Ended
|
||||||
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
|
|
|
|
|
||||
|
|
(in thousands)
|
||||||
Preclinical expenses
|
|
$
|
1,886
|
|
|
$
|
1,162
|
|
Clinical expenses
|
|
1,693
|
|
|
607
|
|
||
CMC expenses
|
|
389
|
|
|
677
|
|
||
Internal expenses not allocated to programs:
|
|
|
|
|
|
|||
Salaries, benefits and related costs
|
|
1,223
|
|
|
1,476
|
|
||
Stock-based compensation expense
|
|
101
|
|
|
152
|
|
||
Other
|
|
495
|
|
|
299
|
|
||
|
|
$
|
5,787
|
|
|
$
|
4,373
|
|
|
|
Year Ended
|
||||||
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
|
|
|
|
|
||||
|
|
(in thousands)
|
||||||
Acquired in-process research and development
|
|
$
|
18,724
|
|
|
$
|
—
|
|
|
|
Year Ended
|
||||||
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
|
|
|
|
|
||||
|
|
(in thousands)
|
||||||
Salaries, benefits and related costs
|
|
$
|
3,607
|
|
|
$
|
2,433
|
|
Legal, consulting and other professional expenses
|
|
4,426
|
|
|
3,944
|
|
||
Stock-based compensation expense
|
|
2,136
|
|
|
1,001
|
|
||
Other
|
|
508
|
|
|
564
|
|
||
|
|
$
|
10,677
|
|
|
$
|
7,942
|
|
|
|
Year Ended
|
||||||
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
|
|
|
|
|
||||
|
|
(in thousands)
|
||||||
Salaries, benefits and related costs
|
|
$
|
5,571
|
|
|
$
|
303
|
|
Consulting and other professional expenses
|
|
1,458
|
|
|
140
|
|
||
Stock-based compensation expense
|
|
194
|
|
|
4
|
|
||
Advertising and marketing expense
|
|
1,161
|
|
|
71
|
|
||
Other
|
|
138
|
|
|
52
|
|
||
|
|
$
|
8,522
|
|
|
$
|
570
|
|
|
|
Year Ended
|
||||||
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
|
|
|
|
|
||||
|
|
(in thousands)
|
||||||
Amortization of intangible assets
|
|
$
|
4,532
|
|
|
$
|
404
|
|
|
|
Year Ended
|
||||||
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
|
|
|
|
|
||||
|
|
(in thousands)
|
||||||
Change in fair value of warrant liability and unit purchase option liability
|
|
$
|
25
|
|
|
$
|
(30
|
)
|
Other income, net
|
|
14
|
|
|
—
|
|
||
Interest expense, net
|
|
(812
|
)
|
|
(24
|
)
|
||
|
|
$
|
(773
|
)
|
|
$
|
(54
|
)
|
|
|
Year Ended December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
|
|
|
|
|
||||
|
|
|
||||||
GAAP Net (loss) income
|
|
$
|
(40,053
|
)
|
|
$
|
11,870
|
|
Non-GAAP Adjustments:
|
|
|
|
|
||||
Income tax expense
|
|
(34
|
)
|
|
1,967
|
|
||
Interest expense, net
|
|
812
|
|
|
24
|
|
||
Amortization of intangible assets
|
|
4,532
|
|
|
404
|
|
||
Depreciation
|
|
23
|
|
|
22
|
|
||
Inventory step-up adjustment recorded in earnings
|
|
301
|
|
|
138
|
|
||
EBITDA
|
|
$
|
(34,419
|
)
|
|
$
|
14,425
|
|
Non-GAAP Adjustments:
|
|
|
|
|
||||
Stock-based compensation
|
|
2,431
|
|
|
1,157
|
|
||
Change in fair value of contingent consideration
|
|
58
|
|
|
—
|
|
||
Change in fair value of warrant liability and unit purchase option liability
|
|
(25
|
)
|
|
30
|
|
||
Restructuring costs
|
|
533
|
|
|
1,125
|
|
||
Acquisition and integration related expenses
|
|
985
|
|
|
247
|
|
||
Impairment of intangible assets
|
|
1,862
|
|
|
—
|
|
||
Lachlan legal arbitration costs
|
|
(178
|
)
|
|
178
|
|
||
Acquired in-process research and development
|
|
18,724
|
|
|
—
|
|
||
Sale or out-licensing of Company assets
|
|
—
|
|
|
(25,000
|
)
|
||
Total Non-GAAP Adjustments
|
|
24,390
|
|
|
(22,263
|
)
|
||
Adjusted EBITDA
|
|
$
|
(10,029
|
)
|
|
$
|
(7,838
|
)
|
|
|
Year Ended
|
||||||
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
|
|
|
|
|
||||
|
|
(in thousands)
|
||||||
Net cash provided by (used in):
|
|
|
|
|
||||
Operating activities
|
|
$
|
(3,128
|
)
|
|
$
|
12,579
|
|
Investing activities
|
|
865
|
|
|
(18,912
|
)
|
||
Financing activities
|
|
10,404
|
|
|
3,737
|
|
||
Net increase (decrease) in cash and cash equivalents
|
|
$
|
8,141
|
|
|
$
|
(2,596
|
)
|
•
|
the shelf life or expiration date of each product;
|
•
|
historical levels of expired product returns;
|
•
|
external data with respect to inventory levels in the wholesale distribution channel;
|
•
|
external data with respect to prescription demand for our products; and
|
•
|
the estimated returns liability to be processed by year of sale based on analysis of lot information related to actual historical returns.
|
•
|
Portfolio approach - contracts within each revenue stream have similar characteristics and the Company believes this approach would not differ materially than if applying Topic 606 to each individual contract.
|
•
|
Modified retrospective approach - the Company applied Topic 606 only to contracts with customers which were not completed at the date of initial application, January 1, 2018.
|
•
|
Significant financing component - the Company does not adjust the promised amount of consideration for the effects of a significant financing component as the Company expects, at contract inception, that the period between when the Company transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.
|
•
|
Shipping and handling activities - the Company considers any shipping and handling costs that are incurred after the customer has obtained control of the product as a cost to fulfill a promise and will account for them as an expense.
|
•
|
Contract costs - the Company recognizes the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the Company otherwise would have recognized is one year or less.
|
|
|
Year Ended December 31,
|
|||||||||||||||
Service-based options
|
|
2018
|
|
2017
|
|
||||||||||||
Risk-free interest rate
|
|
2.51
|
%
|
|
—
|
|
3.01
|
%
|
|
1.85
|
%
|
|
—
|
|
2.38
|
%
|
|
Expected term of options (in years)
|
|
5.0
|
|
|
—
|
|
6.25
|
|
|
5.0
|
|
|
—
|
|
6.25
|
|
|
Expected stock price volatility
|
|
55
|
%
|
|
—
|
|
65
|
%
|
|
55
|
%
|
|
—
|
|
100
|
%
|
|
Expected annual dividend yield
|
|
0
|
%
|
|
—
|
|
0
|
%
|
|
0
|
%
|
|
—
|
|
0
|
%
|
|
Market-based options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Risk-free interest rate
|
|
2.84%
|
|
|
|
||||||||||||
Expected term of options (in years)
|
|
2.8
|
|
|
|
||||||||||||
Expected stock price volatility
|
|
60%
|
|
|
|
||||||||||||
Expected annual dividend yield
|
|
0%
|
|
|
|
(a)
|
Documents filed as part of this report.
|
1.
|
The following consolidated financial statements of Cerecor Inc. and Report of Ernst & Young, LLP, Independent Registered Public Accounting Firm, are included in this report:
|
2.
|
List of financial statement schedules. All schedules are omitted because they are not applicable or the required information is shown in the financial statements described above.
|
3.
|
List of Exhibits required by Item 601 of Regulation S-K. See part (b) below.
|
(b)
|
Exhibits
.
|
Exhibit
Number
|
|
Description of Exhibit
|
|
|
|
|
|
2.1*
|
|
|
|
|
|
|
|
2.2*
|
|
|
|
|
|
|
|
2.3*
|
|
|
|
|
|
|
|
2.4*#
|
|
|
|
|
|
|
|
2.5*
|
|
|
|
|
|
|
3.1
|
|
|
|
|
|
|
|
3.1.1
|
|
|
|
|
|
|
|
3.1.2
|
|
|
|
|
|
|
|
3.2
|
|
|
|
|
|
|
|
4.1
|
|
|
|
|
|
|
|
4.2
|
|
|
|
|
|
|
|
4.3
|
|
|
|
|
|
|
|
4.4
|
|
|
|
|
|
|
|
4.5
|
|
|
|
|
|
|
|
4.6
|
|
|
|
|
|
|
|
4.7
|
|
|
|
|
|
|
|
4.8
|
|
|
|
|
|
|
|
4.9
|
|
|
|
|
|
|
|
4.1
|
|
|
|
|
|
|
|
4.11
|
|
|
|
|
|
|
4.13
|
|
|
|
|
|
|
|
4.14
|
|
|
|
|
|
|
|
4.15
|
|
|
|
|
|
|
|
4.16
|
|
|
|
|
|
|
|
10.1 #
|
|
|
|
|
|
|
|
10.2 #
|
|
|
|
|
|
|
|
10.3 #
|
|
|
|
|
|
|
|
10.4 +
|
|
|
|
|
|
|
|
10.5 +
|
|
|
|
|
|
|
|
10.6
|
|
|
|
|
|
|
|
10.7
|
|
|
|
|
|
|
|
10.8
|
|
|
|
|
|
|
|
10.9 +
|
|
|
|
|
|
|
|
10.10#
|
|
|
|
|
|
|
|
10.11
|
|
|
|
|
|
|
|
10.12#
|
|
|
|
|
|
|
|
10.13
|
|
|
|
|
|
|
|
10.14.1+
|
|
|
|
|
|
|
|
10.14.2+
|
|
|
|
|
|
|
|
10.15+
|
|
|
|
|
|
|
|
10.16#
|
|
|
|
|
|
|
|
10.17+
|
|
|
|
|
|
|
|
10.18+
|
|
|
|
|
|
|
|
10.19+
|
|
|
|
|
|
|
|
10.20+
|
|
|
|
|
|
|
|
10.21+
|
|
|
|
|
|
|
|
10.22
|
|
|
|
|
|
|
|
10.23
|
|
|
|
|
|
|
|
10.24
|
|
|
|
|
|
|
|
10.25
|
|
|
|
|
|
|
|
10.26
|
|
|
|
|
|
|
|
21.1
|
|
|
|
|
|
|
|
23.1
|
|
|
|
|
|
|
|
31.1
|
|
|
|
|
|
|
|
31.2
|
|
|
|
|
|
|
|
32.1 **
|
|
|
|
|
|
|
|
101.INS
|
|
|
XBRL Instance Document.
|
|
|
|
|
101.SCH
|
|
|
XBRL Taxonomy Extension Schema Document.
|
|
|
|
|
101.CAL
|
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
|
|
101.DEF
|
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
|
|
101.LAB
|
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
|
|
101.PRE
|
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
|
|
Cerecor Inc.
|
|
/s/ Peter Greenleaf
|
Peter Greenleaf
|
Chief Executive Officer
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Peter Greenleaf
|
|
Chief Executive Officer and Director
|
|
March 18, 2019
|
Peter Greenleaf
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
/s/ Joseph M. Miller
|
|
Chief Financial Officer
|
|
March 18, 2019
|
Joseph M. Miller
|
|
(Principal Financial and Accounting Officer)
|
|
|
|
|
|
|
|
/s/ Uli Hacksell
|
|
Chairman of the Board
|
|
March 18, 2019
|
Uli Hacksell
|
|
|
|
|
|
|
|
|
|
/s/ Isaac Blech
|
|
Director
|
|
March 18, 2019
|
Isaac Blech
|
|
|
|
|
|
|
|
|
|
/s/ Steven J. Boyd
|
|
Director
|
|
March 18, 2019
|
Steven J. Boyd
|
|
|
|
|
|
|
|
|
|
/s/ Phil Gutry
|
|
Director
|
|
March 18, 2019
|
Phil Gutry
|
|
|
|
|
|
|
|
|
|
/s/ Simon C. Pedder
|
|
Director
|
|
March 18, 2019
|
Simon C. Pedder
|
|
|
|
|
|
|
|
|
|
/s/ Magnus Persson
|
|
Director
|
|
March 18, 2019
|
Magnus Persson
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Assets
|
|
|
|
|
||||
Current assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
10,646,301
|
|
|
$
|
2,472,187
|
|
Accounts receivable, net
|
|
3,157,555
|
|
|
2,935,025
|
|
||
Other receivables
|
|
5,469,011
|
|
|
427,241
|
|
||
Escrowed cash receivable
|
|
—
|
|
|
3,752,390
|
|
||
Inventory, net
|
|
1,110,780
|
|
|
382,153
|
|
||
Prepaid expenses and other current assets
|
|
1,529,516
|
|
|
703,225
|
|
||
Restricted cash, current portion
|
|
18,730
|
|
|
1,959
|
|
||
Total current assets
|
|
21,931,893
|
|
|
10,674,180
|
|
||
Property and equipment, net
|
|
586,512
|
|
|
44,612
|
|
||
Intangibles assets, net
|
|
31,239,468
|
|
|
17,664,480
|
|
||
Goodwill
|
|
16,411,123
|
|
|
14,292,282
|
|
||
Restricted cash, net of current portion
|
|
81,725
|
|
|
131,353
|
|
||
Total assets
|
|
$
|
70,250,721
|
|
|
$
|
42,806,907
|
|
Liabilities and stockholders’ equity
|
|
|
|
|
||||
Current liabilities:
|
|
|
|
|
||||
Accounts payable
|
|
$
|
1,446,141
|
|
|
$
|
1,298,980
|
|
Accrued expenses and other current liabilities
|
|
19,731,373
|
|
|
7,531,122
|
|
||
Income taxes payable
|
|
2,032,258
|
|
|
2,259,148
|
|
||
Long-term debt, current portion
|
|
1,050,000
|
|
|
—
|
|
||
Contingent consideration, current portion
|
|
1,956,807
|
|
|
—
|
|
||
Total current liabilities
|
|
26,216,579
|
|
|
11,089,250
|
|
||
Long term debt, net of current portion
|
|
14,327,882
|
|
|
—
|
|
||
Contingent consideration, net of current portion
|
|
7,093,757
|
|
|
2,576,633
|
|
||
Deferred tax liability, net
|
|
69,238
|
|
|
7,144
|
|
||
License obligations
|
|
1,250,000
|
|
|
1,250,000
|
|
||
Other long-term liabilities
|
|
385,517
|
|
|
24,272
|
|
||
Total liabilities
|
|
49,342,973
|
|
|
14,947,299
|
|
||
Stockholders’ equity:
|
|
|
|
|
||||
Common Stock—$0.001 par value; 200,000,000 shares authorized at December 31, 2018 and 2017; 40,804,189 and 31,266,989 shares issued and outstanding at December 31, 2018 and 2017, respectively
|
|
40,804
|
|
|
31,268
|
|
||
Preferred Stock—$0.001 par value; 5,000,000 shares authorized at December 31, 2018 and 2017; 2,857,143 and zero shares issued and outstanding at December 31, 2018 and 2017, respectively
|
|
2,857
|
|
|
—
|
|
||
Additional paid-in capital
|
|
119,082,157
|
|
|
83,338,136
|
|
||
Contingently issuable shares
|
|
—
|
|
|
2,655,464
|
|
||
Accumulated deficit
|
|
(98,218,070
|
)
|
|
(58,165,260
|
)
|
||
Total stockholders’ equity
|
|
20,907,748
|
|
|
27,859,608
|
|
||
Total liabilities and stockholders’ equity
|
|
$
|
70,250,721
|
|
|
$
|
42,806,907
|
|
|
|
Year Ended December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Revenues
|
|
|
|
|
||||
Product revenue, net
|
|
$
|
17,870,745
|
|
|
$
|
1,910,403
|
|
Sales force revenue
|
|
456,056
|
|
|
278,165
|
|
||
License and other revenue
|
|
—
|
|
|
25,000,000
|
|
||
Grant revenue
|
|
—
|
|
|
624,569
|
|
||
Total revenues, net
|
|
18,326,801
|
|
|
27,813,137
|
|
||
|
|
|
|
|
||||
Operating expenses:
|
|
|
|
|
||||
Cost of product sales
|
|
7,478,262
|
|
|
635,648
|
|
||
Research and development
|
|
5,786,635
|
|
|
4,372,578
|
|
||
Acquired in-process research and development
|
|
18,723,952
|
|
|
—
|
|
||
General and administrative
|
|
10,676,881
|
|
|
7,941,584
|
|
||
Sales and marketing
|
|
8,522,461
|
|
|
569,825
|
|
||
Amortization expense
|
|
4,532,448
|
|
|
403,520
|
|
||
Impairment of intangible assets
|
|
1,861,562
|
|
|
—
|
|
||
Change in fair value of contingent consideration
|
|
58,366
|
|
|
—
|
|
||
Total operating expenses
|
|
57,640,567
|
|
|
13,923,155
|
|
||
(Loss) income from operations
|
|
(39,313,766
|
)
|
|
13,889,982
|
|
||
Other (expense) income:
|
|
|
|
|
||||
Change in fair value of warrant liability and unit purchase option liability
|
|
25,010
|
|
|
(29,624
|
)
|
||
Other income, net
|
|
13,657
|
|
|
—
|
|
||
Interest expense, net
|
|
(811,621
|
)
|
|
(24,016
|
)
|
||
Total other expense, net
|
|
(772,954
|
)
|
|
(53,640
|
)
|
||
Net (loss) income before taxes
|
|
(40,086,720
|
)
|
|
13,836,342
|
|
||
Income tax (benefit) expense
|
|
(33,910
|
)
|
|
1,966,519
|
|
||
Net (loss) income after taxes
|
|
$
|
(40,052,810
|
)
|
|
$
|
11,869,823
|
|
Net (loss) income
|
|
$
|
(40,052,810
|
)
|
|
$
|
11,869,823
|
|
Net (loss) income attributable to common shareholders
|
|
$
|
(41,710,193
|
)
|
|
$
|
7,772,084
|
|
Net (loss) income per share of common stock, basic
|
|
$
|
(1.20
|
)
|
|
$
|
0.42
|
|
Net (loss) income per share of common stock, diluted
|
|
$
|
(1.20
|
)
|
|
$
|
0.42
|
|
Weighted-average shares of common stock outstanding, basic
|
|
34,773,613
|
|
|
18,410,005
|
|
||
Weighted-average shares of common stock outstanding, diluted
|
|
34,773,613
|
|
|
18,754,799
|
|
|
Stockholders’ Equity
|
||||||||||||||||||||||||||||
|
|
|
|
|
Additional
|
|
|
|
|
|
Total
|
||||||||||||||||||
|
Common stock
|
|
Preferred Stock
|
|
paid‑in
|
|
Contingently issuable stock
|
|
Accumulated
|
stockholders’
|
|||||||||||||||||||
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
capital
|
|
Amount
|
|
deficit
|
|
equity
|
||||||||||||||
Balance, December 31, 2016
|
9,434,141
|
|
|
$
|
9,434
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
70,232,651
|
|
|
$
|
—
|
|
|
$
|
(70,035,083
|
)
|
|
$
|
207,002
|
|
Issuance of common stock from sale of shares under common stock purchase agreement, net of offering costs
|
2,301,598
|
|
|
2,302
|
|
|
—
|
|
|
—
|
|
|
1,500,291
|
|
|
|
|
|
|
1,502,593
|
|
||||||||
Issuance of preferred and common stock to Armistice Capital, net of offering costs
|
2,345,714
|
|
|
2,346
|
|
|
—
|
|
|
4
|
|
|
4,559,308
|
|
|
|
|
|
|
4,561,658
|
|
||||||||
Issuance of shares in acquisition of TRx
|
5,184,920
|
|
|
5,185
|
|
|
—
|
|
|
|
|
5,853,770
|
|
|
|
|
|
|
5,858,955
|
|
|||||||||
Contingently issuable stock in acquisition of TRx
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,655,464
|
|
|
|
|
2,655,464
|
|
|||||||
Shares purchased through employee stock purchase plan
|
60,616
|
|
|
61
|
|
|
—
|
|
|
—
|
|
|
46,800
|
|
|
|
|
|
|
46,861
|
|
||||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,157,252
|
|
|
|
|
|
|
1,157,252
|
|
||||||||
Conversion of Armistice Capital preferred to common stock
|
11,940,000
|
|
|
11,940
|
|
|
—
|
|
|
(4
|
)
|
|
(11,936
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
11,869,823
|
|
|
11,869,823
|
|
|||||||
Balance, December 31, 2017
|
31,266,989
|
|
|
$
|
31,268
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
83,338,136
|
|
|
2,655,464
|
|
|
$
|
(58,165,260
|
)
|
|
$
|
27,859,608
|
|
|
Issuance of contingently issuable shares in acquisition of TRx
|
2,349,968
|
|
|
2,350
|
|
|
|
|
|
|
2,653,114
|
|
|
(2,655,464
|
)
|
|
|
|
—
|
|
|||||||||
Issuance of shares pursuant to common stock private placement, net of offering costs
|
1,000,000
|
|
|
1,000
|
|
|
|
|
|
|
3,856,106
|
|
|
|
|
|
|
3,857,106
|
|
||||||||||
Issuance of shares in acquisition of Ichorion assets
|
5,774,464
|
|
|
5,774
|
|
|
|
|
|
|
19,965,780
|
|
|
|
|
|
|
19,971,554
|
|
||||||||||
Issuance of Series B convertible preferred stock upon warrant exercise, net of offering costs
|
|
|
|
|
2,857,143
|
|
|
2,857
|
|
|
5,682,181
|
|
|
|
|
|
|
5,685,038
|
|
||||||||||
Exercise of stock options and warrants
|
370,361
|
|
|
370
|
|
|
|
|
|
|
1,083,583
|
|
|
|
|
|
|
1,083,953
|
|
||||||||||
Shares purchased through employee stock purchase plan
|
42,407
|
|
|
42
|
|
|
|
|
|
|
72,194
|
|
|
|
|
|
|
72,236
|
|
||||||||||
Stock-based compensation
|
|
|
|
|
|
|
|
|
2,431,063
|
|
|
|
|
|
|
2,431,063
|
|
||||||||||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(40,052,810
|
)
|
|
(40,052,810
|
)
|
||||||
Balance, December 31, 2018
|
40,804,189
|
|
|
$
|
40,804
|
|
|
2,857,143
|
|
|
$
|
2,857
|
|
|
$
|
119,082,157
|
|
|
—
|
|
|
$
|
(98,218,070
|
)
|
|
$
|
20,907,748
|
|
|
|
Year Ended December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Operating activities
|
|
|
|
|
||||
Net (loss) income
|
|
$
|
(40,052,810
|
)
|
|
$
|
11,869,823
|
|
Adjustments to reconcile net (loss) income (used in) provided by to net cash (used in) provided by operating activities:
|
|
|
|
|
||||
Depreciation and amortization
|
|
4,554,963
|
|
|
425,476
|
|
||
Impairment of intangible assets
|
|
1,861,562
|
|
|
—
|
|
||
Stock-based compensation
|
|
2,431,063
|
|
|
1,157,252
|
|
||
Acquired in-process research and development, including transaction costs
|
|
18,723,952
|
|
|
—
|
|
||
Deferred taxes
|
|
(16,745
|
)
|
|
(832,629
|
)
|
||
Amortization of inventory fair value adjustment associated with acquisition of TRx and Avadel Pediatric Product
|
|
300,573
|
|
|
137,900
|
|
||
Non-cash interest expense
|
|
302,882
|
|
|
20,364
|
|
||
Change in fair value of contingent consideration liability
|
|
58,366
|
|
|
—
|
|
||
Change in fair value of warrant liability and unit purchase option liability
|
|
(25,010
|
)
|
|
29,624
|
|
||
Changes in assets and liabilities:
|
|
|
|
|
||||
Accounts receivable, net
|
|
(222,530
|
)
|
|
(247,195
|
)
|
||
Other receivables
|
|
(2,277,255
|
)
|
|
(427,241
|
)
|
||
Inventory, net
|
|
(311,199
|
)
|
|
(24,276
|
)
|
||
Prepaid expenses and other assets
|
|
(241,641
|
)
|
|
(177,691
|
)
|
||
Escrowed cash receivable
|
|
3,752,390
|
|
|
(3,752,390
|
)
|
||
Accounts payable
|
|
82,451
|
|
|
96,065
|
|
||
Income taxes payable
|
|
(226,890
|
)
|
|
2,259,148
|
|
||
Accrued expenses and other liabilities
|
|
7,792,259
|
|
|
2,044,548
|
|
||
Other long term liabilities
|
|
385,517
|
|
|
—
|
|
||
Net cash (used in) provided by operating activities
|
|
(3,128,102
|
)
|
|
12,578,778
|
|
||
Investing activities
|
|
|
|
|
||||
Acquisition of TRx, net of cash acquired
|
|
—
|
|
|
(18,888,932
|
)
|
||
Acquisition of Avadel Pediatric Products
|
|
(1
|
)
|
|
—
|
|
||
Net cash acquired from acquisition of Ichorion Therapeutics, Inc.
|
|
1,429,877
|
|
|
—
|
|
||
Purchase of property and equipment
|
|
(564,415
|
)
|
|
(23,325
|
)
|
||
Net cash provided by (used in) investing activities
|
|
865,461
|
|
|
(18,912,257
|
)
|
||
Financing activities
|
|
|
|
|
||||
Proceeds from exercise of stock options and warrants
|
|
1,083,953
|
|
|
—
|
|
||
Proceeds from issuance of Series B convertible preferred stock upon warrant exercise, net
|
|
5,685,038
|
|
|
—
|
|
||
Proceeds from sale of shares pursuant to common stock private placement, net
|
|
3,857,106
|
|
|
4,649,996
|
|
||
Proceeds from sales of common stock purchased through employee stock purchase plan
|
|
72,236
|
|
|
46,861
|
|
||
Proceeds from sale of shares under common stock purchase agreement
|
|
—
|
|
|
1,693,498
|
|
||
Payment of contingent consideration
|
|
(294,435
|
)
|
|
—
|
|
||
Principal payments on term debt
|
|
—
|
|
|
(2,374,031
|
)
|
||
Payment of fractional shares upon conversion of preferred stock to common stock
|
|
—
|
|
|
4
|
|
||
Payment of offering costs
|
|
—
|
|
|
(279,247
|
)
|
||
Net cash provided by financing activities
|
|
10,403,898
|
|
|
3,737,081
|
|
||
Increase (decrease) in cash and cash equivalents
|
|
8,141,257
|
|
|
(2,596,398
|
)
|
||
Cash and cash equivalents at beginning of period
|
|
2,605,499
|
|
|
5,201,897
|
|
Cash and cash equivalents at end of period
|
|
$
|
10,746,756
|
|
|
$
|
2,605,499
|
|
Supplemental disclosures of cash flow information
|
|
|
|
|
||||
Cash paid for interest
|
|
$
|
525,000
|
|
|
$
|
72,526
|
|
Cash paid for taxes
|
|
$
|
354,000
|
|
|
$
|
540,000
|
|
Supplemental disclosures of non-cash investing and financing activities
|
|
|
|
|
||||
Debt assumed in Avadel Pediatric Products acquisition
|
|
$
|
(15,075,000
|
)
|
|
$
|
—
|
|
Issuance of common stock in TRx acquisition
|
|
$
|
—
|
|
|
$
|
5,858,955
|
|
Contingently issuable shares in TRx acquisition
|
|
$
|
—
|
|
|
$
|
2,655,464
|
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
10,646,301
|
|
|
$
|
2,472,187
|
|
Restricted cash, current
|
|
18,730
|
|
|
1,959
|
|
||
Restricted cash, non-current
|
|
81,725
|
|
|
131,353
|
|
||
Total cash, cash equivalents and restricted cash
|
|
$
|
10,746,756
|
|
|
$
|
2,605,499
|
|
|
|
Year Ended December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Prescribed dietary supplements
|
|
$
|
7,678,003
|
|
|
$
|
1,092,271
|
|
Prescription drugs
|
|
10,192,742
|
|
|
818,132
|
|
||
Sales force revenue
|
|
456,056
|
|
|
278,165
|
|
||
License and other revenue
|
|
—
|
|
|
25,000,000
|
|
||
Grant revenue
|
|
—
|
|
|
624,569
|
|
||
Total revenues, net
|
|
$
|
18,326,801
|
|
|
$27,813,137
|
•
|
Portfolio approach - contracts within each revenue stream have similar characteristics and the Company believes this approach would not differ materially than if applying Topic 606 to each individual contract.
|
•
|
Modified retrospective approach - the Company applied Topic 606 only to contracts with customers that were not completed at the date of initial application, January 1, 2018.
|
•
|
Significant financing component - the Company does not adjust the promised amount of consideration for the effects of a significant financing component as the Company expects, at contract inception, that the period between when the Company transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.
|
•
|
Shipping and handling activities - the Company considers any shipping and handling costs that are incurred after the customer has obtained control of the product as a cost to fulfill a promise and will account for them as an expense.
|
•
|
Contract costs - the Company recognizes the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the Company otherwise would have recognized is one year or less.
|
|
|
Year ended December 31,
|
||||||
Net (loss) income per share, basic and diluted calculation:
|
|
2018
|
|
2017
|
||||
Basic (loss) income per share
|
|
|
|
|
||||
Net (loss) income
|
|
$
|
(40,052,810
|
)
|
|
$
|
11,869,823
|
|
Deemed distribution to shareholder
|
|
1,657,383
|
|
|
—
|
|
||
Undistributable (loss) earnings allocable to common shares
|
|
$
|
(41,710,193
|
)
|
|
$
|
7,772,084
|
|
Undistributable (loss) earnings allocable to participating warrants
|
|
$
|
—
|
|
|
$
|
4,097,739
|
|
|
|
|
|
|
||||
Weighted average shares, basic
|
|
|
|
|
||||
Common stock
|
|
34,773,613
|
|
|
18,410,005
|
|
||
Participating warrants
|
|
—
|
|
|
9,706,458
|
|
||
|
|
34,773,613
|
|
|
28,116,463
|
|
||
Basic (loss) income per share:
|
|
|
|
|
||||
Common stock
|
|
$
|
(1.20
|
)
|
|
$
|
0.42
|
|
Participating warrants
|
|
$
|
—
|
|
|
$
|
0.42
|
|
|
|
|
|
|
||||
Diluted (loss) income per share:
|
|
|
|
|
||||
Net (loss) income attributable to common shares
|
|
$
|
(41,710,193
|
)
|
|
$
|
7,772,084
|
|
Net (loss) income reallocated
|
|
—
|
|
|
49,642
|
|
||
Undistributed (loss) earnings allocable to common shares
|
|
$
|
(41,710,193
|
)
|
|
$
|
7,821,726
|
|
|
|
|
|
|
||||
Weighted average number of shares attributable to common shareholders - basic
|
|
34,773,613
|
|
|
18,410,005
|
|
||
Effect of dilutive securities:
|
|
|
|
|
||||
Stock options
|
|
—
|
|
|
61,510
|
|
||
Contingently issuable shares
|
|
—
|
|
|
283,284
|
|
||
Potentially dilutive shares
|
|
—
|
|
|
344,794
|
|
||
Weighted average number of shares - diluted
|
|
34,773,613
|
|
|
18,754,799
|
|
||
|
|
|
|
|
||||
Diluted (loss) income per share
|
|
$
|
(1.20
|
)
|
|
$
|
0.42
|
|
|
|
December 31,
|
||||
|
|
2018
|
|
2017
|
||
Stock options
|
|
4,246,597
|
|
|
2,812,006
|
|
Warrants on common stock
|
|
4,024,708
|
|
|
4,661,145
|
|
Restricted Stock Awards
|
|
445,000
|
|
|
—
|
|
Underwriters' unit purchase option
|
|
40,000
|
|
|
40,000
|
|
|
|
|
|
|
||||||
|
|
|
|
|
||||||
|
|
At February 16,
2018 (preliminary)
|
Measurement Period Adjustments
|
At February 16,
2018 (as adjusted)
|
||||||
|
|
|
|
|
||||||
Inventory
|
|
$
|
2,549,000
|
|
$
|
(1,831,000
|
)
|
$
|
718,000
|
|
Prepaid assets
|
|
—
|
|
570,000
|
|
570,000
|
|
|||
Intangible assets
|
|
16,453,000
|
|
1,838,000
|
|
18,291,000
|
|
|||
Accrued expenses
|
|
—
|
|
(362,000
|
)
|
(362,000
|
)
|
|||
Fair value of debt assumed
|
|
(15,272,303
|
)
|
197,303
|
|
(15,075,000
|
)
|
|||
Fair value of contingent consideration
|
|
(7,875,165
|
)
|
(44,835
|
)
|
(7,920,000
|
)
|
|||
Total net liabilities assumed
|
|
(4,145,468
|
)
|
367,468
|
|
(3,778,000
|
)
|
|||
Consideration exchanged
|
|
241,000
|
|
(240,999
|
)
|
1
|
|
|||
Goodwill
|
|
$
|
4,386,468
|
|
$
|
(608,467
|
)
|
$
|
3,778,001
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
|
|
At February 16,
2018 (preliminary)
|
Measurement Period Adjustments
|
At February 16,
2018 (as adjusted)
|
Useful Life
|
||||||
|
|
|
|
|
|
||||||
Acquired Product Marketing Rights - Karbinal
|
|
$
|
6,221,000
|
|
$
|
(21,000
|
)
|
$
|
6,200,000
|
|
10 years
|
Acquired Product Marketing Rights - AcipHex
|
|
2,520,000
|
|
283,000
|
|
2,803,000
|
|
10 years
|
|||
Acquired Product Marketing Rights - Cefaclor
|
|
6,291,000
|
|
1,320,000
|
|
7,611,000
|
|
7 years
|
|||
Acquired Developed Technology - Flexichamber
|
|
1,131,000
|
|
546,000
|
|
1,677,000
|
|
10 years
|
|||
Acquired IPR&D - LiquiTime formulations
|
|
290,000
|
|
(290,000
|
)
|
—
|
|
Indefinite
|
|||
Total
|
|
$
|
16,453,000
|
|
$
|
1,838,000
|
|
$
|
18,291,000
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
||||||
|
|
At November 17,
2017 (preliminary)
|
Measurement Period Adjustments
|
At November 17, 2017 (as adjusted)
|
||||||
|
|
|
|
|
||||||
Cash
|
|
$
|
18,900,000
|
|
$
|
—
|
|
$
|
18,900,000
|
|
Common stock (including contingently issuable shares)
|
|
8,514,419
|
|
—
|
|
8,514,419
|
|
|||
Contingent payments
|
|
2,576,633
|
|
(1,210,000
|
)
|
1,366,633
|
|
|||
Total consideration transferred
|
|
$
|
29,991,052
|
|
(1,210,000
|
)
|
28,781,052
|
|
|
|
|
|
|
||||||
|
|
|
|
|
||||||
|
|
At November 17,
2017 (preliminary)
|
Measurement Period Adjustments
|
At November 17, 2017 (as adjusted)
|
||||||
|
|
|
|
|
||||||
Fair value of assets acquired:
|
|
|
|
|
||||||
Cash and cash equivalents
|
|
$
|
11,068
|
|
$
|
—
|
|
$
|
11,068
|
|
Accounts receivable, net
|
|
2,872,545
|
|
—
|
|
2,872,545
|
|
|||
Inventory
|
|
495,777
|
|
—
|
|
495,777
|
|
|||
Prepaid expenses and other current assets
|
|
134,281
|
|
—
|
|
134,281
|
|
|||
Other receivables
|
|
—
|
|
2,764,515
|
|
2,764,515
|
|
|||
Identifiable Intangible Assets:
|
|
|
|
—
|
|
|||||
Acquired product marketing rights - Metafolin
|
|
10,465,000
|
|
1,522,000
|
|
11,987,000
|
|
|||
PAI sales and marketing agreement
|
|
2,334,000
|
|
219,000
|
|
2,553,000
|
|
|||
Acquired product marketing rights - Millipred
|
|
4,714,000
|
|
342,000
|
|
5,056,000
|
|
|||
Acquired product marketing rights - Ulesfia
|
|
555,000
|
|
(555,000
|
)
|
—
|
|
|||
Total assets acquired
|
|
21,581,671
|
|
4,292,515
|
|
25,874,186
|
|
|||
|
|
|
|
|
||||||
Fair value of liabilities assumed:
|
|
|
|
|
||||||
Accounts payable
|
|
192,706
|
|
—
|
|
192,706
|
|
|||
Accrued expenses and other current liabilities
|
|
4,850,422
|
|
3,764,515
|
|
8,614,937
|
|
|||
Deferred tax liability
|
|
839,773
|
|
78,840
|
|
918,613
|
|
|||
Total liabilities assumed
|
|
5,882,901
|
|
3,843,355
|
|
9,726,256
|
|
|||
Total identifiable net assets
|
|
15,698,770
|
|
449,160
|
|
16,147,930
|
|
|||
Fair value of consideration transferred
|
|
29,991,052
|
|
(1,210,000
|
)
|
28,781,052
|
|
|||
Goodwill
|
|
$
|
14,292,282
|
|
$
|
(1,659,160
|
)
|
$
|
12,633,122
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
|
|
At November 17,
2017 (preliminary) |
Measurement Period Adjustments
|
At November 17, 2017 (as adjusted)
|
Useful Life
|
||||||
|
|
|
|
|
|
||||||
Acquired product marketing rights - Metafolin
|
|
$
|
10,465,000
|
|
$
|
1,522,000
|
|
$
|
11,987,000
|
|
15 years
|
PAI sales and marketing agreement
|
|
2,334,000
|
|
219,000
|
|
2,553,000
|
|
2 years
|
|||
Acquired product marketing rights - Millipred
|
|
4,714,000
|
|
342,000
|
|
5,056,000
|
|
4 years
|
|||
Acquired product marketing rights - Ulesfia
|
|
555,000
|
|
(555,000
|
)
|
—
|
|
|
|||
Total
|
|
$
|
18,068,000
|
|
$
|
1,528,000
|
|
$
|
19,596,000
|
|
|
|
|
|
||||
|
Year Ended December 31,
|
|||||
|
2018
|
2017
|
||||
|
Pro forma
|
Pro forma
|
||||
|
|
|
||||
Total revenues, net
|
$
|
20,031,801
|
|
$
|
51,288,212
|
|
Net loss
|
$
|
(40,919,015
|
)
|
$
|
5,963,853
|
|
Basic and diluted net (loss) income per share
|
$
|
(1.18
|
)
|
$
|
0.21
|
|
|
|
|
•
|
Level 1—inputs to the valuation methodology are quoted prices (unadjusted) for an identical asset or liability in an active market.
|
•
|
Level 2—inputs to the valuation methodology include quoted prices for a similar asset or liability in an active market or model‑derived valuations in which all significant inputs are observable for substantially the full term of the asset or liability.
|
•
|
Level 3—inputs to the valuation methodology are unobservable and significant to the fair value measurement of the asset or liability.
|
|
|
December 31, 2018
|
||||||||||
|
Fair Value Measurements Using
|
|||||||||||
|
Quoted prices in
|
|
Significant other
|
|
Significant
|
|||||||
|
active markets for
|
|
observable
|
|
unobservable
|
|||||||
|
identical assets
|
|
inputs
|
|
inputs
|
|||||||
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|||||||
Assets
|
|
|
|
|
|
|
||||||
Investments in money market funds*
|
|
$
|
7,324,932
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Liabilities
|
|
|
|
|
|
|
||||||
Contingent consideration
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,050,564
|
|
Warrant liability**
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,950
|
|
Unit purchase option liability**
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,216
|
|
|
|
December 31, 2017
|
||||||||||
|
Fair Value Measurements Using
|
|||||||||||
|
Quoted prices in
|
|
Significant other
|
|
Significant
|
|||||||
|
active markets for
|
|
observable
|
|
unobservable
|
|||||||
|
identical assets
|
|
inputs
|
|
inputs
|
|||||||
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|||||||
Assets
|
|
|
|
|
|
|
||||||
Investments in money market funds*
|
|
$
|
471,183
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Liabilities
|
|
|
|
|
|
|
||||||
Contingent consideration
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,576,633
|
|
Warrant liability**
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,185
|
|
Unit purchase option liability**
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
26,991
|
|
|
|
|
|
|
|
|
|
|
Warrant
|
|
Unit purchase
|
|
Contingent
|
|
|
||||||||
|
|
liability
|
|
option liability
|
|
consideration
|
|
Total
|
||||||||
Balance at December 31, 2017
|
|
$
|
8,185
|
|
|
$
|
26,991
|
|
|
$
|
2,576,633
|
|
|
$
|
2,611,809
|
|
Issuance of contingent consideration
|
|
—
|
|
|
—
|
|
|
7,920,000
|
|
|
7,920,000
|
|
||||
Payment of contingent consideration
|
|
—
|
|
|
—
|
|
|
(294,435
|
)
|
|
(294,435
|
)
|
||||
Purchase price allocation measurement period adjustment of contingent consideration
|
|
—
|
|
|
—
|
|
|
(1,210,000
|
)
|
|
(1,210,000
|
)
|
||||
Change in fair value
|
|
(5,235
|
)
|
|
(19,775
|
)
|
|
58,366
|
|
|
33,356
|
|
||||
Balance at December 31, 2018
|
|
$
|
2,950
|
|
|
$
|
7,216
|
|
|
$
|
9,050,564
|
|
|
$
|
9,060,730
|
|
|
|
Warrant
|
|
Unit purchase
|
|
Contingent
|
|
|
||||||||
|
|
liability
|
|
option liability
|
|
consideration
|
|
Total
|
||||||||
Balance at December 31, 2016
|
|
$
|
5,501
|
|
|
$
|
51
|
|
|
$
|
—
|
|
|
$
|
5,552
|
|
Issuance of contingent consideration
|
|
—
|
|
|
—
|
|
|
2,576,633
|
|
|
2,576,633
|
|
||||
Change in fair value
|
|
2,684
|
|
|
26,940
|
|
|
—
|
|
|
29,624
|
|
||||
Balance at December 31, 2017
|
|
$
|
8,185
|
|
|
$
|
26,991
|
|
|
$
|
2,576,633
|
|
|
$
|
2,611,809
|
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Raw materials
|
|
$
|
11,392
|
|
|
$
|
—
|
|
Finished goods
|
|
1,427,935
|
|
|
560,499
|
|
||
Inventory reserve
|
|
(328,547
|
)
|
|
(178,346
|
)
|
||
Inventory, net
|
|
$
|
1,110,780
|
|
|
$
|
382,153
|
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Furniture and equipment
|
|
$
|
133,229
|
|
|
$
|
58,126
|
|
Computers and software
|
|
122,065
|
|
|
96,133
|
|
||
Leasehold improvements
|
|
463,381
|
|
|
—
|
|
||
Total property and equipment
|
|
718,675
|
|
|
154,259
|
|
||
Less accumulated depreciation
|
|
(132,163
|
)
|
|
(109,647
|
)
|
||
Property and equipment, net
|
|
$
|
586,512
|
|
|
$
|
44,612
|
|
Balance at December 31, 2016
|
|
$
|
—
|
|
|
Goodwill from acquisition of TRx Pharmaceuticals
|
|
14,292,282
|
|
|
|
Balance at December 31, 2017
|
|
$
|
14,292,282
|
|
|
Goodwill from acquisition of Avadel's pediatric products
|
|
3,778,001
|
|
|
|
Goodwill purchase price allocation measurement period adjustment from acquisition of TRx Pharmaceuticals
|
|
(1,659,160
|
)
|
|
|
Balance at December 31, 2018
|
|
$
|
16,411,123
|
|
|
Balance at December 31, 2016
|
|
$
|
—
|
|
|
Additions
|
|
18,068,000
|
|
|
|
Amortization
|
|
(403,520
|
)
|
|
|
Balance at December 31, 2017
|
|
$
|
17,664,480
|
|
|
Additions
|
|
18,441,000
|
|
|
|
Purchase price allocation measurement period adjustments
|
|
1,527,998
|
|
|
|
Amortization
|
|
(4,532,448
|
)
|
|
|
Impairment
|
|
(1,861,562
|
)
|
|
|
Balance at December 31, 2018
|
|
$
|
31,239,468
|
|
|
|
|
December 31, 2018
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Impairment Loss
|
|
Net Carrying Amount
|
|
Weighted-Average Remaining Life
|
||||||||
|
|
|
|
(in years)
|
||||||||||||||
Acquired Product Marketing Rights
|
|
$
|
33,656,998
|
|
|
$
|
(4,080,767
|
)
|
|
$
|
—
|
|
|
$
|
29,576,231
|
|
|
9.45
|
Sales and Marketing Agreement
|
|
2,553,000
|
|
|
(691,438
|
)
|
|
(1,861,562
|
)
|
|
—
|
|
|
—
|
||||
Acquired Developed Technology
|
|
1,677,000
|
|
|
(145,013
|
)
|
|
—
|
|
|
1,531,987
|
|
|
9.25
|
||||
Acquired Assembled Workforce
|
|
150,000
|
|
|
(18,750
|
)
|
|
—
|
|
|
131,250
|
|
|
1.75
|
||||
Total Intangible Assets
|
|
$
|
38,036,998
|
|
|
$
|
(4,935,968
|
)
|
|
$
|
(1,861,562
|
)
|
|
$
|
31,239,468
|
|
|
9.41
|
|
|
December 31, 2017
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Impairment Loss
|
|
Net Carrying Amount
|
|
Weighted-Average Remaining Life
|
||||||||
|
|
|
|
(in years)
|
||||||||||||||
Acquired Product Marketing Rights
|
|
$
|
15,734,000
|
|
|
$
|
(257,645
|
)
|
|
$
|
—
|
|
|
$
|
15,476,355
|
|
|
11.20
|
Sales and Marketing Agreement
|
|
2,334,000
|
|
|
(145,875
|
)
|
|
—
|
|
|
2,188,125
|
|
|
1.90
|
||||
Total Intangible Assets
|
|
$
|
18,068,000
|
|
|
$
|
(403,520
|
)
|
|
$
|
—
|
|
|
$
|
17,664,480
|
|
|
10.05
|
|
|
Estimated
|
||
|
|
Amortization
|
||
For the Years Ending December 31,
|
|
Expense
|
||
|
|
|
||
2019
|
|
$
|
4,315,318
|
|
2020
|
|
4,296,568
|
|
|
2021
|
|
4,082,334
|
|
|
2022
|
|
2,976,322
|
|
|
2023
|
|
2,976,322
|
|
|
Thereafter
|
|
12,592,604
|
|
|
Total future amortization expense
|
|
$
|
31,239,468
|
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Sales returns
|
|
$
|
3,972,510
|
|
|
$
|
3,478,349
|
|
Medicaid rebates
|
|
2,237,269
|
|
|
350,681
|
|
||
Minimum sales commitments, royalties payable, and purchase obligations
|
|
9,662,901
|
|
|
743,010
|
|
||
Compensation and benefits
|
|
1,953,065
|
|
|
1,401,514
|
|
||
Research and development expenses
|
|
278,132
|
|
|
299,480
|
|
||
General and administrative
|
|
1,112,378
|
|
|
1,001,454
|
|
||
Sales and marketing
|
|
235,721
|
|
|
—
|
|
||
Other
|
|
279,397
|
|
|
256,634
|
|
||
Total accrued expenses and other current liabilities
|
|
$
|
19,731,373
|
|
|
$
|
7,531,122
|
|
Number of shares
|
|
Exercise price
|
|
Expiration
|
||
underlying warrants
|
|
per share
|
|
date
|
||
22,328*
|
|
$
|
8.40
|
|
|
October 2020
|
2,380*
|
|
$
|
8.68
|
|
|
May 2022
|
4,000,000
|
|
$
|
12.50
|
|
|
June 2024
|
4,024,708
|
|
|
|
|
||
|
|
|
|
|
||
*Accounted for as a liability instrument (see Note 5)
|
|
|
|
|
|
|
Year Ended December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Research and development
|
|
$
|
101,000
|
|
|
$
|
156,047
|
|
General and administrative
|
|
2,135,710
|
|
|
1,001,205
|
|
||
Sales and marketing
|
|
194,353
|
|
|
—
|
|
||
Total stock-based compensation
|
|
$
|
2,431,063
|
|
|
$
|
1,157,252
|
|
|
|
Options Outstanding
|
|||||||||||
|
|
Number of shares
|
|
Weighted average exercise price
|
|
Grant date fair value of options
|
|
Weighted average remaining contractual term (in years)
|
|||||
Balance at December 31, 2017
|
|
2,823,489
|
|
|
$
|
3.93
|
|
|
|
|
|
7.29
|
|
Granted
|
|
1,639,860
|
|
|
$
|
3.85
|
|
|
$
|
3,737,728
|
|
|
|
Exercised
|
|
(243,115
|
)
|
|
|
|
|
|
|
||||
Forfeited
|
|
(473,637
|
)
|
|
$
|
2.77
|
|
|
$
|
1,109,083
|
|
|
|
Balance at December 31, 2018
|
|
3,746,597
|
|
|
$
|
4.16
|
|
|
|
|
|
7.79
|
|
Exercisable at December 31, 2018
|
|
1,997,468
|
|
|
$
|
4.71
|
|
|
|
|
|
6.62
|
|
|
Options Outstanding
|
|||||||||||
|
|
Number of shares
|
|
Weighted average exercise price
|
|
Weighted average remaining contractual term (in years)
|
|
Aggregate intrinsic value (1)
|
|||||
Balance at December 31, 2017
|
|
—
|
|
|
|
|
|
|
|
||||
Granted
|
|
500,000
|
|
|
$
|
4.24
|
|
|
|
|
|
||
Balance at December 31, 2018
|
|
500,000
|
|
|
$
|
4.24
|
|
|
9.24
|
|
$
|
—
|
|
Exercisable at December 31, 2018
|
|
—
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|||||||||||
Service-based options
|
|
2018
|
|
2017
|
|
||||||||
Risk-free interest rate
|
|
2.51%
|
|
—
|
|
3.01%
|
|
1.85%
|
|
—
|
|
2.38%
|
|
Expected term of options (in years)
|
|
5.0
|
|
—
|
|
6.25
|
|
5.0
|
|
—
|
|
6.25
|
|
Expected stock price volatility
|
|
55%
|
|
—
|
|
65%
|
|
55%
|
|
—
|
|
100%
|
|
Expected annual dividend yield
|
|
0%
|
|
—
|
|
0%
|
|
0%
|
|
—
|
|
0%
|
|
Market-based options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-free interest rate
|
|
2.84%
|
|
|
|
||||||||
Expected term of options (in years)
|
|
2.8
|
|
|
|
||||||||
Expected stock price volatility
|
|
60%
|
|
|
|
||||||||
Expected annual dividend yield
|
|
0%
|
|
|
|
•
|
Risk‑free interest rate: The Company bases the risk‑free interest rate on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the assumed expected option term.
|
•
|
Expected term of options: Due to lack of sufficient historical data, the Company estimates the expected life of its stock options with service-based vesting granted to employees and members of the board of directors as the arithmetic average of the vesting term and the original contractual term of the option for service-based options. The expected life of stock options with market-based vesting is derived from a Monte Carlo simulation which is the valuation technique used to value such awards.
|
•
|
Expected stock price volatility: The Company estimated the expected volatility based on actual historical volatility of the stock price of other publicly‑traded biotechnology companies engaged in lines of business that are the same or similar to the Company’s. The Company calculated the historical volatility of the selected companies by using daily closing prices over a period of the expected term of the associated award. The companies were selected based on their enterprise value, risk profiles, position within the industry, and with historical share price information sufficient to meet the expected term of the associated award. A decrease in the selected volatility would decrease the fair value of the underlying instrument.
|
•
|
Expected annual dividend yield: The Company estimated the expected dividend yield based on consideration of its historical dividend experience and future dividend expectations. The Company has not historically declared or paid dividends to stockholders. Moreover, it does not intend to pay dividends in the future, but instead expects to retain any earnings to invest in the continued growth of the business. Accordingly, the Company assumed and expected dividend yield of
0.0%
.
|
|
|
Non-vested RSAs Outstanding
|
||||||
|
|
Number of shares
|
|
Weighted average grant date fair value
|
|
|||
Non-vested RSAs at December 31, 2017
|
|
—
|
|
|
|
|
||
Granted
|
|
445,000
|
|
|
$
|
4.27
|
|
|
Non-vested RSAs at December 31, 2018
|
|
445,000
|
|
|
|
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Current:
|
|
|
|
|
||||
Federal
|
|
$
|
(53,281
|
)
|
|
$
|
2,309,285
|
|
State
|
|
36,116
|
|
|
489,863
|
|
||
Total Current:
|
|
(17,165
|
)
|
|
2,799,148
|
|
||
|
|
|
|
|
||||
Deferred:
|
|
|
|
|
||||
Federal
|
|
(52,235
|
)
|
|
(789,274
|
)
|
||
State
|
|
35,490
|
|
|
(43,355
|
)
|
||
Total Deferred
|
|
(16,745
|
)
|
|
(832,629
|
)
|
||
Net income tax (benefit) expense
|
|
$
|
(33,910
|
)
|
|
$
|
1,966,519
|
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Deferred tax assets:
|
|
|
|
|
||||
Net operating losses
|
|
$
|
4,421,423
|
|
|
$
|
716,819
|
|
Accrued compensation
|
|
465,430
|
|
|
271,437
|
|
||
Deferred rent
|
|
15,373
|
|
|
4,051
|
|
||
Tax credits
|
|
252,095
|
|
|
—
|
|
||
Stock-based compensation
|
|
1,922,736
|
|
|
1,291,230
|
|
||
Installment sale
|
|
508,291
|
|
|
—
|
|
||
Other reserves
|
|
262,260
|
|
|
72,881
|
|
||
Basis difference in tangible and intangible assets, net
|
|
2,968,764
|
|
|
2,019,272
|
|
||
Total deferred tax assets
|
|
10,816,372
|
|
|
4,375,690
|
|
||
Deferred tax liabilities:
|
|
|
|
|
||||
Prepaid expenses
|
|
(160,474
|
)
|
|
—
|
|
||
Installment sales
|
|
—
|
|
|
(358,844
|
)
|
||
Total deferred tax liabilities
|
|
(160,474
|
)
|
|
(358,844
|
)
|
||
Deferred tax asset, net
|
|
10,655,898
|
|
|
4,016,846
|
|
||
Less valuation allowance
|
|
(10,725,136
|
)
|
|
(4,023,990
|
)
|
||
Net deferred taxes
|
|
$
|
(69,238
|
)
|
|
$
|
(7,144
|
)
|
|
|
December 31,
|
||||
|
|
2018
|
|
2017
|
||
Federal statutory rate
|
|
21.00
|
%
|
|
34.00
|
%
|
Permanent Adjustments
|
|
(0.37
|
)%
|
|
0.17
|
%
|
Built-in-loss
|
|
(0.33
|
)%
|
|
1.52
|
%
|
State taxes
|
|
4.43
|
%
|
|
27.91
|
%
|
Research and development credit
|
|
0.61
|
%
|
|
(1.04
|
)%
|
Change in statutory rate due to Tax Cuts and Job Act
|
|
—
|
%
|
|
15.82
|
%
|
NOL adjustment per § 382
|
|
—
|
%
|
|
126.82
|
%
|
Non-deductible IPR&D expense
|
|
(9.84
|
)%
|
|
—
|
%
|
Other
|
|
(0.04
|
)%
|
|
0.04
|
%
|
Change in valuation allowance
|
|
(15.37
|
)%
|
|
(191.03
|
)%
|
Effective income tax rate
|
|
0.09
|
%
|
|
14.21
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019*
|
|
2020*
|
|
2021
|
|
2022
|
|
Total*
|
|
|
|
|
|
|
|
|
|
|
|
Minimum Purchase Obligations
|
|
1,257,326
|
|
1,265,378
|
|
—
|
|
—
|
|
$2,522,704
|
Minimum Royalties
|
|
3,000,000
|
|
3,000,000
|
|
—
|
|
—
|
|
6,000,000
|
Total
|
|
4,257,326
|
|
4,265,378
|
|
—
|
|
—
|
|
$8,522,704
|
|
|
|
||
|
|
Minimum Lease Payments
|
||
2019
|
|
$
|
—
|
|
2020
|
|
155,815
|
|
|
2021
|
|
169,510
|
|
|
2022
|
|
173,748
|
|
|
2023
|
|
178,092
|
|
|
Thereafter
|
|
1,183,290
|
|
|
Total
|
|
$
|
1,860,455
|
|
Entity Name
|
Jurisdiction
|
Ichorion Therapeutics, LLC
|
Delaware
|
TRx Pharmaceuticals, LLC
|
North Carolina
|
Zylera Pharmaceuticals, LLC
|
North Carolina
|
Zylera Pharma Corp.
|
North Carolina
|
Consent of Independent Registered Public Accounting Firm
|
We consent to the incorporation by reference in the following Registration Statements:
(1) Registration Statement (Form S-1 No. 333-204905) as filed on June 12, 2015, and amended on September 8, 2015, September 22, 2015, October 1, 2015, and October 13, 2015,
(2) Registration Statement (Form S-8 No. 333-207949) pertaining to the 2015 Omnibus Incentive Compensation Plan,
(3) Registration Statement (Form S-8 No. 333-211490) pertaining to the 2016 Equity Incentive Plan,
(4) Registration Statement (Form S-8 No. 333-211491) pertaining to the 2016 Employee Stock Purchase Plan,
(5) Registration Statement (Form S-1 No. 333-213676) as filed on September 16, 2016,
(6) Registration Statement (Form S-3 No. 333-214507) as filed on November 8, 2016, and amended on December 1, 2016,
(7) Registration Statement (Form S-3 No. 333-218252) as filed on May 26, 2017,
(8) Registration Statement (Form S-8 No. 333-226767) pertaining to the Amended and Restated 2016 Equity Incentive Plan,
(9) Registration Statement (Form S-3 No. 333-227227) as filed on September 7, 2018, and amended on October 2, 2018, and
(10) Registration Statement (Form S-3 No. 333-229283) as filed on January 17, 2019;
of our report dated March 18, 2019, with respect to the consolidated financial statements of Cerecor Inc. included in this Annual Report (Form 10-K) of Cerecor Inc. for the year ended December 31, 2018.
|
|
1.
|
I have reviewed this Annual Report on Form 10-K of Cerecor Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: March 18, 2019
|
/s/ Peter Greenleaf
|
|
Peter Greenleaf
Chief Executive Officer
(Registrant’s Principal Executive Officer)
|
|
|
1.
|
I have reviewed this Annual Report on Form 10-K of Cerecor Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: March 18, 2019
|
/s/ Joseph M. Miller
|
|
Joseph M. Miller
Chief Financial Officer
(Registrant’s Principal Financial and Accounting Officer)
|
|
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition at the end of the period covered by the Report and the results of operations of the Registrant for the periods covered by the Report.
|
Date: March 18, 2019
|
By:
|
/s/ Peter Greenleaf
|
|
Name:
|
Peter Greenleaf
|
|
Title:
|
Chief Executive Officer
(Registrant’s Principal Executive Officer)
|
|
|
|
Date: March 18, 2019
|
By:
|
/s/ Joseph M. Miller
|
|
Name:
|
Joseph M. Miller
|
|
Title:
|
Chief Financial Officer
(Registrant’s Principal Financial and Accounting Officer)
|
|