sv3
As filed with the Securities and Exchange Commission on
August 26, 2008
Registration
No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
Form S-3
REGISTRATION
STATEMENT
UNDER
THE SECURITIES
ACT OF 1933
EPIX
Pharmaceuticals, Inc.
(Exact name of
registrant as specified in its
charter)
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Delaware
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04-3030815
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(State or other
jurisdiction of
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(I.R.S.
Employer
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incorporation
or organization)
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Identification
No.)
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4 Maguire Road
Lexington, Massachusetts 02421
(781) 761-7600
(Address,
including zip code, and telephone number, including area code,
of registrants principal executive
offices)
Elkan Gamzu, Ph.D.
Chief Executive Officer
EPIX Pharmaceuticals, Inc.
4 Maguire Road
Lexington, Massachusetts 02421
(781) 761-7600
(Name, address,
including zip code, and telephone number, including area code,
of agent for service)
with copies to:
Edward A. King, Esq.
Goodwin Procter LLP
Exchange Place
Boston, Massachusetts 02109
(617) 570-1000
Approximate date of commencement of proposed sale to the
public: From time to time after the effective
date of this Registration Statement.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans,
please check the following
box. o
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, other than
securities offered only in connection with dividend or interest
reinvestment plans, check the following
box. þ
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
If this Form is a registration statement pursuant to General
Instruction I.D. or a post-effective amendment thereto that
shall become effective upon filing with the Commission pursuant
to Rule 462(e) under the Securities Act, check the
following
box: o
If this Form is a post-effective amendment to a registration
statement filed pursuant to General Instruction I.D. filed
to register additional securities or additional classes of
securities pursuant to Rule 413(b) under the Securities
Act, check the following
box: o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated
filer o
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Accelerated
filer þ
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Non-accelerated
filer o
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Smaller reporting
company o
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(Do not check if a smaller reporting
company)
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CALCULATION
OF REGISTRATION FEE
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Amount of
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Title of Each Class of
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Amount to be
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Proposed Maximum
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Proposed Maximum
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Registration
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Securities to be Registered
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Registered(1)
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Offering Price per Unit
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Aggregate Offering Price
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Fee
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Common Stock, par value $0.01 per share
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8,280,120
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$
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1.885(2)
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$
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15,608,026
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$
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613.40
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Common Stock, par value $0.01 per share, issuable upon exercise
of a Warrant
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400,000
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$
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2.4925(3)
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$
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997,000
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$
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39.18
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Total:
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8,680,120
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$
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16,605,026
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$
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652.58
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(1)
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This Registration
Statement shall also cover any additional shares of common stock
which become issuable by reason of any stock dividend, stock
split or other similar transaction effected without the receipt
of consideration which results in an increase in the number of
the outstanding shares of common stock of the
registrant. |
(2)
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In accordance with
Rule 457(c), the aggregate offering price of our stock is
estimated solely for the calculating of the registration fees
due for this filing. For the initial filing of this Registration
Statement, this estimate was based on the average of the high
and low sales price of our stock reported by The NASDAQ Global
Market on August 25, 2008, which was
$1.885. |
(3)
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The proposed
maximum offering price per share was determined in accordance
with Rule 457(g) under the Securities Act of 1933, under
which rule the per share price is estimated by reference to the
exercise price of the securities. |
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
The
information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not
permitted.
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SUBJECT TO
COMPLETION, DATED AUGUST 26,
2008
PROSPECTUS
8,680,120 Shares
Common
Stock
This prospectus relates to the resale of up to 8,680,120 in the
aggregate of shares of our common stock that we may issue from
time to time to the selling stockholder listed in the section
beginning on page 30 of this prospectus. The shares of
common stock offered under this prospectus by the selling
stockholder are issuable to Kingsbridge Capital Limited, or
Kingsbridge, pursuant to a common stock purchase agreement
between Kingsbridge and ourselves dated August 4, 2008 and
a warrant we issued to Kingsbridge on that date. Kingsbridge may
be deemed to be an underwriter within the meaning of
the Securities Act. We are not selling any securities under this
prospectus and will not receive any of the proceeds from the
sale of shares by the selling stockholder.
The selling stockholder may sell the shares of common stock
described in this prospectus in a number of different ways and
at varying prices. We provide more information about how the
selling stockholder may sell its shares of common stock in the
section titled Plan of Distribution on page 31
of this prospectus. We will not be paying any underwriting
discounts or commissions in this offering. We will pay the
expenses incurred in registering the shares, including legal and
accounting fees.
Our common stock is quoted on the Nasdaq Global Market under the
symbol EPIX. The last reported sale price for our
common stock on August 25, 2008 was $1.84 per share.
Investing in our securities involves a high degree of risk.
See the section titled Risk Factors on page 7
of this prospectus.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The date of this prospectus
is ,
2008.
TABLE OF
CONTENTS
Unless the context requires otherwise, in this prospectus and
the information incorporated herein by reference, the terms
EPIX, the Company, we,
us, our and similar names refer to EPIX
Pharmaceuticals, Inc. and its subsidiaries. References to
selling stockholder refer to the stockholder listed
herein under the heading Selling Stockholder on
page 30, who may sell shares from time to time as described
in this prospectus.
You should rely only on the information contained or
incorporated by reference in this prospectus. We have not, and
the selling stockholder has not, authorized any other person to
provide you with different information. If anyone provides you
with different or inconsistent information, you should not rely
on it. We are not making an offer to sell these securities in
any jurisdiction where the offer or sale is not permitted. You
should assume that the information appearing in this prospectus
is accurate as of the date on the front cover of this prospectus
only. Our business, financial condition, results of operations
and prospects may have subsequently changed.
PROSPECTUS
SUMMARY
The following summary highlights information contained in
this prospectus or incorporated by reference. While we have
included what we believe to be the most important information
about EPIX and this offering, the following summary may not
contain all the information that may be important to you. You
should read this entire prospectus carefully, including the
risks of investing discussed under Risk Factors
beginning on page 7, and the information to which we refer
you and the information incorporated into this prospectus by
reference, for a complete understanding of our business and this
offering.
Overview
We are a biopharmaceutical company focused on discovering and
developing novel therapeutics through the use of our proprietary
and highly efficient in silico drug discovery platform. We have
a pipeline of
internally-discovered
drug candidates currently in clinical development to treat
diseases of the central nervous system and lung conditions. Our
blood-pool imaging agent, Vasovist, is approved for marketing in
over 30 countries outside of the United States. We also
have collaborations with SmithKline Beecham Corporation
(GlaxoSmithKline), Amgen Inc., Cystic Fibrosis Foundation
Therapeutics, Incorporated, and Bayer Schering Pharma AG,
Germany.
The focus of our therapeutic drug discovery and development
efforts is on the two classes of drug targets known as G-protein
Coupled Receptors, or GPCRs, and ion channels. GPCRs and ion
channels are classes of proteins embedded in the surface
membrane of all cells and are responsible for mediating much of
the biological signaling at the cellular level. We believe that
our proprietary drug discovery technology and approach addresses
many of the inefficiencies associated with traditional GPCR and
ion channel-targeted drug discovery. By integrating
computer-based, or in silico, technology with in-house medicinal
chemistry, we believe that we can rapidly identify and optimize
highly selective drug candidates. We focus on GPCR and ion
channel drug targets whose role in disease has already been
demonstrated in clinical trials or in preclinical studies. In
each of our clinical-stage therapeutic programs, we used our
drug discovery technology and approach to optimize a lead
compound into a clinical drug candidate in less than ten months,
synthesizing fewer than 80 compounds per program. We moved each
of these drug candidates into clinical trials in less than
18 months from lead identification. We believe our drug
discovery technology and approach enables us to efficiently and
cost-effectively discover and develop GPCR and ion
channel-targeted drugs.
Our business strategy is to develop our internally discovered,
novel pharmaceutical product candidates through the point of
proof of clinical concept, typically completion of Phase 2
clinical trials, and then to seek third-party collaborators for
their continued development, regulatory approval and
commercialization. In certain disease areas, such as pulmonary
hypertension, where we believe we can efficiently obtain
regulatory approval and effectively market the product through a
specialty sales force, we may seek to retain certain
commercialization rights. In March 2008, we discontinued
development of one of our clinical-stage programs, PRX-00023,
due to lack of efficacy shown in a recently completed Phase 2b
trial in patients with major depressive disorder.
Our
Product Candidates
We currently have one imaging product, Vasovist, which is
approved for marketing in more than 30 countries outside of
the United States. In January 2008, based on written
confirmation from the U.S. Food and Drug Administration, or
FDA, regarding our protocol design and statistical analysis
plan, we initiated a re-read of the images obtained in prior
Phase 3 studies of Vasovist. In April 2008, we announced that we
achieved statistically significant positive results from the
blinded, independent re-read and had met all pre-specified
endpoints prospectively agreed to with the FDA. As a result, we
resubmitted a New Drug Application, or NDA, to the FDA for
Vasovist on June 30, 2008. In July 2008, we received
written confirmation from the FDA that our NDA was a complete
submission and that the FDA set a user fee goal date of
December 31, 2008 for our NDA.
1
The following summarizes the applicable disease indication and
the clinical status of our three current
clinical-stage
therapeutic drug candidates:
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Drug Candidate
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Disease Indication
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Clinical Trial Status
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PRX-03140(1)
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Alzheimers disease
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Phase 2b
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PRX-08066(2)
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Pulmonary Hypertension/COPD
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Phase 2b
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PRX-07034(3)
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Cognitive impairment
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Phase 1b
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(1) |
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In May 2008, we initiated a Phase 2b trial in Alzheimers
disease of PRX-03140 in combination with donepezil
(Aricept®).
This randomized, double-blind, placebo-controlled trial is
designed to evaluate the efficacy of PRX-03140 on cognitive
function as measured by the change from baseline in the
cognitive component of the Alzheimers Disease Assessment
Scale (ADAS-Cog) score. Patients will be randomized to one of
three trial arms: placebo, 50 mg of PRX-03140 once daily or
150 mg of PRX-03140 once daily. All patients in the trial
must be treated with 10 mg of
Aricept®
for at least four months prior to enrollment. The six month
trial is expected to enroll approximately 420 adult patients
with Alzheimers disease. |
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In May 2008, we initiated a second Phase 2b trial of PRX-03140
as monotherapy treatment of Alzheimers disease. This
randomized, double-blind, placebo-controlled trial is designed
to evaluate the efficacy of
PRX-03140
on cognitive function as measured by the change from baseline in
the ADAS-Cog score. Patients will be randomized to one of four
trial arms: placebo, donepezil
(Aricept®)
positive control, 50 mg of PRX-03140 once daily or
150 mg of PRX-03140 once daily. The three month trial is
expected to enroll approximately 240 adult patients with
Alzheimers disease. This monotherapy trial will also
include a three month optional extension. |
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We completed a Phase 2a trial of PRX-08066 in pulmonary
hypertension associated with chronic obstructive pulmonary
disease, or COPD, in August 2007. This randomized, double-blind,
placebo-controlled Phase 2 trial enrolled 71 patients with
PH associated with COPD. Patients were randomized to one of
three arms: 200 mg of PRX-08066 once-daily, 400 mg of
PRX-08066 once-daily or placebo. The
two-week
double-blind phase of the study was followed by an open label
extension in which 10 patients received 200 mg daily
for six weeks. The primary endpoints of the trial were safety
and tolerability of PRX-08066. Efficacy was measured by the
effect of PRX-08066 compared to placebo on systolic pulmonary
artery pressure, or SPAP, and included 62 evaluable patients who
completed the double-blind portion of the study. In a population
where decreases of 3 mmHg to 4 mmHg in a post-exercise SPAP
are considered clinically significant, the results showed a
statistically significant dose-response for the patients that
demonstrated a decrease of 4 mmHg or more. In the 400 mg
dose group, 45% of the patients had a reduction in post-exercise
SPAP of 4 mmHg or more versus 14% on placebo (p=0.043). An
analysis of SPAP changes in all subjects revealed a dose trend
with median reductions of 1.2 mmHg and 3.38 mmHg in the
200 mg and 400 mg dose groups, respectively, compared
with no change on placebo. PRX-08066 was generally
well-tolerated. There were no serious adverse events considered
related to PRX-08066, and the majority of adverse events were
mild or moderate in nature. One subject in the 200 mg dose
group who then continued into the six-week open-label extension
experienced a modest increase in liver enzyme levels at the end
of the extension that was believed to be drug-related. These
values returned to normal within two weeks and the subject
remained asymptomatic. |
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In August 2008, we initiated a Phase 2b right-heart catheter
study of PRX-08066 in patients with chronic obstructive
pulmonary disease and moderate-to-severe pulmonary hypertension.
The single-arm, open-label study is designed to evaluate the
mean pulmonary artery blood pressure change from baseline as
measured directly by right-heart catheterization and will also
measure the change from baseline in the standard
six-minute
walk distance test after three months of treatment. Patients
will be treated with 500 mg of PRX-08066 on day one of the
trial followed by twice-daily dosing of 300 mg of PRX-08066
for three months. |
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In October 2007, we completed a randomized, double-blind,
placebo-controlled Phase 1 trial of 21 healthy obese adults.
Findings from this study demonstrated that adults taking
600 mg of PRX-07034 twice-daily for 28 days had a
weight reduction of an average of 0.45 kg (approximately 1
pound), while adults on placebo gained 1.37 kg (approximately 3
pounds) during the same period, which was statistically |
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significant (p < 0.005). PRX-07034 appeared
well-tolerated and there were no serious adverse events
reported. An increase in corrected QT interval, or QTc, was
apparent at the dose tested, however, with a mean increase over
the duration of the study of 10.7 milliseconds for the drug
group versus a decrease of 1.7 milliseconds for the placebo
group. The corrected QTc is a measurement of the QT interval,
which is corrected for heart rate. Prolongations of the QTc are
associated with an increased risk for potentially
life-threatening
heart rhythms and so this measurement is an important index to
measure during the development of new drugs. In addition, of the
population of 21 adults, one patient on drug discontinued due to
a rash that resolved rapidly. There were no discontinuations on
placebo. In the prior Phase 1 trial where doses up to
600 mg once daily were studied for 28 days, no
clinically meaningful prolongations of the QTc were noted. |
Risks
Affecting Us
You should carefully consider the matters discussed in the
section Risk Factors beginning on page 7,
including the following, before you invest in our stock. For
example:
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a substantial portion of our future revenues will be dependent
upon our agreements with GlaxoSmithKline, Amgen Inc., Bayer
Schering Pharma AG, Germany and other third-parties with whom we
may in the future enter into a collaboration;
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we anticipate future losses and may never become
profitable; and
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we have never had a commercially available product in the United
States and we may never succeed in developing marketable
products.
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Corporate
Information
We were organized as a Delaware corporation in 1988 and
commenced operations in 1992. Our principal executive offices
are located at 4 Maguire Road, Lexington, Massachusetts 02421.
Our telephone number at that location is
(781) 761-7600.
Our website is located at www.epixpharma.com. We make available
on our website free of charge a link to our Annual Report on
Form 10-K,
Quarterly Reports on
Form 10-Q,
Current Reports on
Form 8-K
and amendments to those reports as soon as practicable after we
electronically file such material with the Securities and
Exchange Commission (SEC). The information contained
on our website is not part of this prospectus.
Equity
Financing with Kingsbridge Capital
On August 4, 2008, we entered into a Committed Equity
Financing Facility, or CEFF, with Kingsbridge, pursuant to which
Kingsbridge committed to purchase, subject to certain
conditions, up to the lesser of $50 million or
8,280,120 shares of our common stock. In connection with
the CEFF, we entered into a common stock purchase agreement and
registration rights agreement with Kingsbridge, both dated
August 4, 2008, and on that date we also issued a warrant
to Kingsbridge to purchase 400,000 shares of our common
stock at a price of $2.4925 per share. This warrant is fully
exercisable beginning six months after August 4, 2008 and
for a period of five years thereafter.
The shares of common stock that may be issued to Kingsbridge
under the common stock purchase agreement and the warrant will
be issued pursuant to an exemption from registration under the
Securities Act of 1933, as amended, or the Securities Act.
Pursuant to the registration rights agreement, we have filed a
registration statement of which this prospectus is a part,
covering the possible resale by Kingsbridge of any shares that
we may issue to Kingsbridge under the common stock purchase
agreement or upon exercise of the warrant. Through this
prospectus, Kingsbridge may offer to the public for resale
shares of our common stock that we may issue to Kingsbridge
pursuant to the common stock purchase agreement, or that
Kingsbridge may acquire upon exercise of the warrant.
The common stock purchase agreement entitles us to sell and
obligates Kingsbridge to purchase, from time to time over a
period of three years from the first trading day following the
effectiveness of the registration statement of which this
prospectus is a part, shares of our common stock for cash
consideration up
3
to an aggregate of the lesser of $50 million or
8,280,120 shares of our common stock, subject to certain
conditions and restrictions. We may, from time to time, at our
discretion, and subject to certain conditions that we must
satisfy, draw down funds under the CEFF by selling
shares of our common stock to Kingsbridge. The purchase price of
these shares will be at a discount ranging from six to twelve
percent of the volume weighted average of the price of our
common stock for each of the eight trading days following our
election to sell shares, or draw down under the
CEFF. The discount on each of these eight trading days will be
determined as follows, and the resultant price will be used to
determine the number of shares issuable to Kingsbridge with
respect to one-eighth (1/8) of the aggregate draw down amount:
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Percent of
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(Applicable
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VWAP*
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VWAP
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Discount)
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Greater than $10.00 per share
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94
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%
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(6
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)%
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Less than or equal to $10.00 per share but greater than $5.00
per share
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92
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%
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(8
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)%
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Less than or equal to $5.00 per share but greater than $1.90 per
share
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90
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%
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(10
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)%
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Less than or equal to $1.90 per share but greater than or equal
to $1.25 per share
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88
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%
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(12
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)%
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* |
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As set forth in the common stock purchase agreement,
VWAP means the volume weighted average price (the
aggregate sales price of all trades of our common stock during
each trading day divided by the total number of shares of common
stock traded during that trading day) of our common stock during
any trading day as reported by Bloomberg, L.P. using the AQR
function. The VWAP and corresponding discount will be determined
for each of the eight trading days during a draw down pricing
period. |
During the eight trading day pricing period for a draw down, if
the VWAP for any one trading day is less than the greater of
(i) $1.25 or (ii) 90 percent of the closing price
of our common stock for the trading day immediately preceding
the beginning of the draw down period, the VWAP from that
trading day will not be used in calculating the number of shares
to be issued in connection with that draw down, and the draw
down amount for that pricing period will be reduced by
one-eighth (1/8) of the draw down amount we had initially
specified. In addition, if trading in our common stock is
suspended for any reason for more than three consecutive or
non-consecutive hours during any trading day during a draw down
pricing period, that trading day will not be used in calculating
the number of shares to be issued in connection with that draw
down, and the draw down amount for that pricing period will be
reduced by one eighth (1/8) of the draw down amount we had
initially specified.
The maximum number of shares of common stock that we can issue
pursuant to the CEFF is 8,280,120 shares. An additional
400,000 shares of common stock are issuable if Kingsbridge
exercises the warrant that we issued to it in connection with
its entry into the CEFF. We intend to exercise our right to draw
down amounts under the CEFF, if and to the extent available, at
such times as we have a need for additional capital and when we
believe that sales of stock under the CEFF provide an
appropriate means of raising capital.
Our ability to require Kingsbridge to purchase our common stock
is subject to various limitations. We can make draw downs of a
maximum amount of, at our discretion, either
(i) 1.5 percent of our market capitalization at the
time of the draw down, or (ii) the lesser of
(A) 3.0 percent of our market capitalization at the
time of the draw down and (B) the alternative draw down
amount calculated pursuant to the common stock purchase
agreement. Neither (i) nor (ii) may exceed a
$10 million limit. Unless Kingsbridge agrees otherwise, a
minimum of three trading days must elapse between the expiration
of any draw down pricing period and the beginning of the next
draw down pricing period. Kingsbridge is not obligated to
purchase shares at prices below $1.25 per share.
During the term of the CEFF, without Kingsbridges prior
written consent, we may not issue securities that are, or may
become, convertible or exchangeable into shares of common stock
where the purchase, conversion or exchange price for our common
stock is determined using a floating discount or other
post-issuance adjustable discount to the market price of the
common stock, including pursuant to an equity line or other
financing that is substantially similar to the arrangement
provided for in the CEFF, with certain exceptions.
4
The issuance of our common stock under the CEFF or upon exercise
of the Kingsbridge warrant will have no effect on the rights or
privileges of existing holders of common stock except that the
economic and voting interests of each stockholder will be
diluted as a result of the issuance. Although the number of
shares of common stock that stockholders presently own will not
decrease, these shares will represent a smaller percentage of
our total shares that will be outstanding after any issuances of
shares of common stock to Kingsbridge. If we draw down amounts
under the CEFF when our share price is decreasing, we will need
to issue more shares to raise the same amount than if our stock
price was higher. Such issuances will have a dilutive effect and
may further decrease our stock price.
Kingsbridge agreed in the common stock purchase agreement that
during the term of the CEFF, neither Kingsbridge nor any of its
affiliates, nor any entity managed or controlled by it, will
enter into any short sale of any shares of our common stock as
defined in Regulation SHO promulgated under the Securities
Exchange Act of 1934, as amended, or the Exchange Act.
Before Kingsbridge is obligated to buy any shares of our common
stock pursuant to a draw down, the following conditions, none of
which is in Kingsbridges control, must be met:
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Each of our representations and warranties in the common stock
purchase agreement shall be true and correct in all material
respects as of the date when made and as of the draw down
exercise date as though made at that time, except for
representations and warranties that are expressly made as of a
particular date.
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We shall have performed, satisfied and complied in all material
respects with all covenants, agreements and conditions required
by the common stock purchase agreement, the registration rights
agreement and the warrant to be performed, satisfied or complied
with by us.
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We shall have complied in all respects with all applicable
federal, state and local governmental laws, rules, regulations
and ordinances in connection with the execution, delivery and
performance of the common stock purchase agreement and the
consummation of the transactions it contemplates, except for any
failures to so comply which could not be reasonably expected to
have a material adverse effect on us.
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The registration statement, which includes this prospectus,
shall have previously become effective and shall remain
effective and neither we nor the selling stockholder shall have
received notice that the Securities and Exchange Commission, or
the SEC, has issued or intends to issue a stop order with
respect to the registration statement or that the SEC otherwise
has suspended or withdrawn the effectiveness of the registration
statement, either temporarily or permanently, or intends or has
threatened to do so (unless the SECs concerns have been
addressed and the selling stockholder is reasonably satisfied
that the SEC no longer is considering or intends to take such
action), and (ii) no other suspension of the use or
withdrawal of the effectiveness of the registration statement or
this prospectus shall exist.
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We shall not have knowledge of any event that could reasonably
be expected to have the effect of causing the registration
statement applicable to Kingsbridges resale of shares of
our common stock to be suspended or otherwise ineffective.
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Trading in our common stock shall not have been suspended by the
SEC, the Nasdaq Global Market or the Financial Industry
Regulatory Authority and trading in securities generally on the
Nasdaq Global Market shall not have been suspended or limited.
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No statute, rule, regulation, order, decree, writ, ruling or
injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority which prohibits
the consummation of any of the transactions contemplated by the
common stock purchase agreement.
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No action, suit or proceeding before any arbitrator or any court
or governmental authority shall have been commenced or, to our
knowledge, threatened, and to our knowledge no inquiry or
investigation by any governmental authority shall have been
threatened against us or any of our officers, directors or
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affiliates seeking to enjoin, prevent or change the transactions
contemplated by the common stock purchase agreement or seeking
damages in connection with such transactions.
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We shall have sufficient shares of common stock, calculated
using the closing trade price of the common stock as of the
trading day immediately preceding a draw down, registered under
the registration statement to issue and sell such shares in
accordance with such draw down.
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The warrant to purchase 400,000 shares of our common stock
shall have been duly executed, delivered and issued to
Kingsbridge, and we shall not be in default in any material
respect under the warrant.
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Kingsbridge shall have received an opinion from our outside
legal counsel in the form previously agreed to.
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There is no guarantee that we will be able to meet the foregoing
conditions or any other conditions under the common stock
purchase agreement or that we will be able to draw down any
portion of the amounts available under the CEFF.
We also entered into a registration rights agreement with
Kingsbridge. Pursuant to the registration rights agreement, we
have filed a registration statement, which includes this
prospectus, with the SEC relating to Kingsbridges resale
of any shares of common stock purchased by Kingsbridge under the
common stock purchase agreement or issued to Kingsbridge as a
result of the exercise of the Kingsbridge warrant. The
effectiveness of this registration statement is a condition
precedent to our ability to sell common stock to Kingsbridge
under the common stock purchase agreement. We are entitled in
certain circumstances, including the existence of certain kinds
of nonpublic information, to deliver a blackout notice to
Kingsbridge to suspend the use of this prospectus and prohibit
Kingsbridge from selling shares under this prospectus. If we
deliver a blackout notice in the 15 trading days following the
settlement of a draw down, or if the registration statement of
which this prospectus is a part is not effective in
circumstances not permitted by the registration rights
agreement, then we must pay amounts to Kingsbridge, or issue
Kingsbridge additional shares in lieu of payment, calculated by
means of a varying percentage of an amount based on the number
of shares held by Kingsbridge that were purchased pursuant to
such draw down and the change in the market price of our common
stock between the date the blackout notice is delivered (or the
registration statement is not effective) and the date the
prospectus again becomes available.
Kingsbridge may, upon one business days notice to us,
terminate the CEFF if we enter into a transaction prohibited by
the common stock purchase agreement without Kingsbridges
prior written consent or within ten trading days after
Kingsbridge provides notice to us of a material adverse event
relating to our business. Kingsbridge may also terminate the
CEFF upon one business days notice to us at any time in
the event that a registration statement is not initially
declared effective in accordance with the registration rights
agreement. We may terminate the CEFF upon one business
days notice to Kingsbridge, except that we may not
terminate the CEFF during any draw down pricing period. In
addition, either we or Kingsbridge may terminate the CEFF upon
one days notice if the other party has breached a material
representation, warranty or covenant to the common stock
purchase agreement and such breach is not remedied within ten
trading days after notice of such breach is delivered to the
breaching party.
The foregoing summary of the CEFF does not purport to be
complete and is qualified by reference to the common stock
purchase agreement, the registration rights agreement and the
warrant, copies of which have been filed as exhibits to the
registration statement of which this prospectus is a part.
6
RISK
FACTORS
We operate in a rapidly changing environment that involves a
number of risks, some of which are beyond our control. This
discussion highlights some of the risks which may affect future
operating results. These are the risks and uncertainties we
believe are most important for you to consider. Additional risks
and uncertainties not presently known to us, which we currently
deem immaterial or which are similar to those faced by other
companies in our industry or business in general, may also
impair our business operations. If any of the following risks or
uncertainties actually occurs, our business, financial condition
and operating results would likely suffer.
RISKS
RELATED TO OUR BUSINESS
We
anticipate future losses and may never become
profitable.
Our future financial results are uncertain. We have experienced
significant losses since we commenced operations in 1992. Our
accumulated net losses as of June 30, 2008 were
approximately $424.2 million. These losses have primarily
resulted from expenses associated with our research and
development activities, including preclinical studies and
clinical trials, acquired in-process research and development
from the merger with Predix and general and administrative
expenses. We anticipate that our research and development
expenses will remain significant in the future and we expect to
incur losses over at least the next several years as we continue
our research and development efforts, preclinical testing and
clinical trials. In particular, we believe that we will be
required to conduct additional clinical trials to obtain
approval from the FDA for any of our therapeutic product
candidates, which trials would be expensive and which could
contribute to our continuing to incur losses.
As a result, we cannot predict when we will become profitable,
if at all, and if we do, we may not remain profitable for any
substantial period of time. If we fail to achieve profitability
within the timeframe expected by investors, the market price of
our common stock may decline and consequently our business may
not be sustainable.
We may
need to raise additional funds necessary to fund our operations,
and if we do not do so, we may not be able to implement our
business plan.
Since inception, we have funded our operations primarily through
our public offerings of common stock, private sales of equity
securities, debt financing, equipment lease financings, product
development revenue, and royalty and license payments from our
strategic partners. Although we believe that we have adequate
funding to fund our operations through the first quarter of
2009, we may need to raise substantial additional funds for
research, development and other expenses through equity or debt
financings, strategic alliances or otherwise. Our future
liquidity and capital requirements will depend upon numerous
factors, including the following:
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the progress and scope of clinical trials;
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the timing and costs of filing future regulatory submissions;
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the timing and costs required to receive both U.S. and
foreign governmental approvals;
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the cost of filing, prosecuting, defending and enforcing patent
claims and other intellectual property rights;
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the extent to which our product candidates gain market
acceptance;
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the timing and costs of product introductions;
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the extent of our ongoing and any new research and development
programs;
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changes in our strategy or our planned activities;
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the costs of training physicians to become proficient with the
use of our product candidates; and
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the costs of developing marketing and distribution capabilities.
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If we raise additional funds through the issuance of equity or
convertible debt securities, the percentage ownership of our
stockholders could be significantly diluted, and these newly
issued securities may have rights, preferences or privileges
senior to those of existing stockholders. If we incur additional
debt financing, a substantial portion of our operating cash flow
may be dedicated to the payment of principal and interest on
such indebtedness, thus limiting funds available for our
business activities. We cannot assure you that additional
financing will be available on terms favorable to us, or at all.
If adequate funds are not available or are not available on
acceptable terms, when we desire them, our ability to fund our
operations, take advantage of unanticipated opportunities or
otherwise respond to competitive pressures would be
significantly limited.
We
significantly increased our leverage as a result of the sale of
3.0% Convertible Senior Notes due 2024, and may be unable
to repay, repurchase or redeem these notes if, and when,
required.
In connection with the sale of 3.0% Convertible Senior
Notes due 2024, we have incurred indebtedness of
$100.0 million. Each $1,000 of senior notes is convertible
into 22.39 shares of our common stock representing a
conversion price of approximately $44.66 per share. Our ability
to meet our debt service obligations will depend upon our future
performance, which will be subject to regulatory approvals and
sales of our products, as well as other financial and business
factors affecting our operations, many of which are beyond our
control. The amount of our indebtedness could, among other
things:
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make it difficult for us to make payments on the notes;
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make it difficult for us to obtain financing for working
capital, acquisitions or other purposes on favorable terms, if
at all;
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make us more vulnerable to industry downturns and competitive
pressures; and
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limit our flexibility in planning for, or reacting to changes
in, our business.
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In addition, although our 3.0% Convertible Senior Notes do
not mature until 2024, noteholders may require us to repurchase
these notes at par, plus accrued and unpaid interest, on
June 15, 2011, 2014 and 2019 and upon certain other
designated events under the notes, which include a change of
control of us or termination of trading of our common stock on
the NASDAQ Global Market. The definition of change in control
set forth in the indenture governing the notes does not include
certain mergers and similar transactions that are not deemed a
change in control. While we believe that our merger with Predix
did not constitute a change of control of us under the
indenture, we cannot assure you that we will not become
obligated to repurchase these notes, in whole or in part, as a
result of the merger. Based on the current trading price of our
common stock, we anticipate that in such event most, if not all,
of the noteholders would tender their notes for repurchase. We
may not have enough funds or be able to arrange for additional
financing to repurchase the notes tendered by the holders upon a
designated event or otherwise. Any failure to repurchase
tendered notes would constitute an event of default under the
indenture. If we are required to repurchase or redeem these
notes prior to their maturity, whether as a result of the merger
or otherwise, our financial position would be materially
adversely affected and the anticipated benefits of the merger
would be significantly diminished.
A
substantial portion of our future revenues will be dependent
upon our agreements with GlaxoSmithKline, Amgen Inc. and Bayer
Schering Pharma AG, Germany.
We expect that a substantial portion of our future revenues will
be dependent upon our collaboration agreements with
GlaxoSmithKline and with Amgen Inc. The agreement with
GlaxoSmithKline encompasses the development and
commercialization of medicines targeting four G-protein coupled
receptors, or GPCRs, for the treatment of a variety of diseases,
including an option to license our 5-HT4 partial agonist,
PRX-03140, and other medicines arising from the four research
programs. The agreement with Amgen encompasses the development
and commercialization of products based on our preclinical
compounds that modulate the S1P1 receptor and compounds and
products that may be identified by or acquired by Amgen and that
modulate the S1P1 receptor. We are dependent upon Bayer Schering
Pharma AG, Germany to commercialize Vasovist, our lead imaging
product candidate, in the United States and Europe. If these
collaborators were to terminate their agreements with us, fail
to meet their obligations or otherwise decrease their commitment
there
8
under, our future revenues could be materially adversely
affected and the development and commercialization of our
product candidates would be interrupted. In addition, if we do
not achieve some or any of the development, regulatory and
commercial milestones or if GlaxoSmithKline or Amgen does not
achieve certain net sales thresholds, in each case, as set forth
in the respective agreements, we will not fully realize the
expected benefits of the agreements. Further, the achievement of
certain of the various milestones under our collaboration
agreements with GlaxoSmithKline, Amgen and Bayer Schering Pharma
AG, Germany will depend on factors that are outside of our
control and most are not expected for several years, if at all.
Moreover, our receipt of revenues under our agreements with
these collaborators will be directly affected by the level of
efforts of such collaborators and we cannot control whether they
will devote sufficient resources to development or
commercialization of the technology under their respective
agreement or whether they will elect to pursue the development
or commercialization of alternative products or services. For
instance, Bayer Schering Pharma AG, Germany currently markets
imaging agents for other technologies that will compete against
Vasovist, and Bayer Schering Pharma AG, Germany will be
responsible for setting the price of the product candidate
worldwide. Accordingly, Bayer Schering Pharma AG, Germany may
not set prices in a manner that maximizes revenues for us.
Disagreements with our collaborators could delay or terminate
the continued development and commercialization of the licensed
products under our agreements or result in litigation, either of
which could have a material adverse affect on our business,
financial condition and results of operations overall. In
addition, Bayer Schering Pharma AG, Germany was recently formed
through the merger of Bayer AG and Schering AG. If the strategy
of Bayer Schering Pharma AG, Germany differs from that of
Schering AGs prior strategy with respect to the marketing
of Vasovist, our expectations regarding the marketing of
Vasovist could be negatively impacted, which could have a
material adverse effect on our imaging business. If any of our
agreements with GlaxoSmithKline, Amgen or Bayer Schering Pharma
AG, Germany is terminated prior to expiration, we would be
required to enter into other strategic relationships or find
alternative ways of continuing our product development programs.
We cannot assure you that we would be able to enter into similar
agreements with other companies with sufficient product
development capabilities to commercialize our product
candidates, and our failure to do so could materially and
adversely affect our ability to generate revenues.
We
have never had a commercially available product in the United
States and we may never succeed in developing marketable
products.
We have never had any product candidates receive regulatory
approval for commercial sale in the United States and do
not expect to have any commercial therapeutic products available
in the United States for at least the next several years, if at
all. In September 2006, results from our pivotal Phase 3
clinical trial of our PRX-00023 product candidate for
generalized anxiety disorder demonstrated that PRX-00023 did not
achieve a statistically significant improvement over placebo for
the primary endpoint with respect to generalized anxiety
disorder. Prior to obtaining results from this trial, PRX-00023
was our most advanced therapeutic drug candidate. Based on these
trial results, however, we have discontinued our development
efforts with respect to PRX-00023 in anxiety and focused our
development efforts for this product candidate in depression. In
March 2008, we discontinued development of PRX-00023 due to lack
of efficacy shown in a recently completed Phase 2b trial in
patients with major depressive disorder.
In addition, each of our current clinical-stage therapeutic drug
candidates in the United States require additional clinical
studies: PRX-08066 for the treatment of two types of pulmonary
hypertension pulmonary hypertension associated with
chronic obstructive pulmonary disease and pulmonary arterial
hypertension; PRX-03140 for the treatment of Alzheimers
disease; and PRX-07034 for the treatment of cognitive
impairment. Prior to the initiation of our Phase 2 clinical
trial, PRX-08066 had never been tested in patients with
pulmonary hypertension associated with chronic obstructive
pulmonary disease and has never been tested in patients with
primary pulmonary arterial hypertension. PRX-07034 has only been
tested in obese but otherwise healthy subjects and has never
been tested in subjects with cognitive impairment. A number of
companies in the pharmaceutical and biotechnology industries
have suffered significant setbacks in late-stage clinical trials
even after achieving promising results in early-stage clinical
development. For example,
Sanofi-Aventis
discontinued the development of its product candidate for the
treatment of Alzheimers disease designed to target the
5-HT4 protein receptor due to lack of efficacy. This compound is
believed to have the
9
same mechanism of action as PRX-03140, was more advanced in
clinical development and was more potent in vitro assays.
Accordingly, the results from the completed and ongoing studies
and trials for our product candidates may not be predictive of
the results we may obtain in later-stage clinical trials. If we
are unable to develop one or more marketable products in the
United States, or elsewhere, our results of operations, business
and future prospects would be materially harmed.
We
have never generated positive cash flow, and if we fail to
generate revenue, it will have a material adverse effect on our
business.
To date, we have received revenues from payments made under
licensing, royalty arrangements and product development and
marketing agreements with strategic collaborators. In
particular, our revenue for the six months ended June 30,
2008 was $19.8 million and consisted of $18.8 million
of product development revenue from, GlaxoSmithKline,CFFT and
Bayer Schering Pharma AG, Germany, $0.3 million of royalty
revenue related to the Bayer Schering Pharma AG, Germany
agreements, and $0.7 million of license fee revenue related
to the GlaxoSmithKline, CFFT, Bayer Schering Pharma AG, Germany
and Covidien, agreements. In addition to these sources of
revenue, we have financed our operations to date through public
stock and debt offerings, private sales of equity securities and
equipment lease financings.
Although we believe that we are currently in compliance with the
terms of our collaboration and licensing agreements, the
revenues derived from them are subject to fluctuation in timing
and amount. We may not receive anticipated revenue under our
existing collaboration or licensing agreements, these agreements
may be subject to disputes and, additionally, these agreements
may be terminated upon certain circumstances. Therefore, to
achieve profitable and sustainable operations, we, alone or with
others, must successfully develop, obtain regulatory approval
for, introduce, market and sell products. We may not receive
revenue from the sale of any of our product candidates for the
next several years because we, and our partners, may not:
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successfully complete our product development efforts;
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obtain required regulatory approvals in a timely manner, if at
all;
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manufacture our product candidates at an acceptable cost and
with acceptable quality; or
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successfully market any approved products.
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As a result, we may never generate revenues from sales of our
product candidates and our failure to generate positive cash
flow could cause our business to fail.
We
depend on our strategic collaborators for support in product
development and the regulatory approval process for our product
candidates and, if approved, for product
marketing.
Our product development programs and potential regulatory
approval and commercialization of our product candidates will
require substantial additional cash to fund expenses. Our
strategy includes collaborating with leading pharmaceutical,
biotechnology or other companies to assist us in further
developing and potentially commercializing our product
candidates requiring large commercial sales and marketing
infrastructures. We may also seek to enter into such
collaborations for our other product candidates, especially for
target indications in which the potential collaborator has
particular expertise or that involve a large, primary care
market that must be served by large sales and marketing
organizations. In addition, we depend, and expect to continue to
depend, on strategic collaborators for support in a variety of
other activities including manufacturing, marketing and
distribution of our product candidates in the United States and
abroad, if the FDA and corresponding foreign agencies approve
our product candidates for marketing. We face significant
competition in seeking appropriate collaborators and these
collaborations are complex and time-consuming to negotiate and
document.
We may not be able to enter into any such collaboration on terms
that are acceptable to us, or at all. If that were to occur, we
may have to curtail the development of a particular product
candidate, reduce or delay one or more of our development
programs or potential commercialization, or increase our
expenditures and undertake development or commercialization
activities at our own expense. For instance, on July 12,
2006,
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Bayer Schering Pharma AG, Germany notified us that it decided
not to exercise its option to exclusively license EP-2104R, our
imaging agent that has completed a Phase 2 clinical trial. As a
result, we discontinued the development of EP-2104R. If we elect
to increase our expenditures to fund development, potential
regulatory approval or commercialization activities on our own,
we will need to obtain additional capital, which may not be
available to us on acceptable terms, or at all. If we do not
obtain sufficient funds, we will not be able to complete
clinical development of our product candidates or bring our
product candidates to market. Further, our receipt of revenues
from strategic alliances is affected by the level of efforts of
our collaborators. Our collaborators may not devote the
resources necessary to complete development and commence
marketing of a product candidate in their respective
territories, or they may not successfully market product
candidates.
We
rely on third-parties to conduct our clinical trials, and those
third-parties may not perform satisfactorily, including failing
to maintain adequate diligence in the conduct of our trials and
failing to meet established deadlines for the completion of such
trials.
We do not have the ability to independently conduct clinical
trials for our product candidates, and we rely on third-parties
such as contract research organizations, medical institutions
and clinical investigators to enroll qualified patients and
conduct our clinical trials. Our reliance on these third-parties
for clinical development activities reduces our control over
these activities. Accordingly, these third-party contractors may
not complete activities on schedule, or may not conduct our
clinical trials in accordance with regulatory requirements or
our trial design. Our reliance on third-parties that we do not
control does not relieve us of our requirement to prepare, and
ensure our compliance with, various procedures required under
good clinical practices, even though third-party contract
research organizations have prepared and are complying with
their own, comparable procedures. If these third-parties do not
successfully carry out their contractual duties or regulatory
obligations or meet expected deadlines, if the third-parties
need to be replaced or if the quality or accuracy of the data
they obtain is compromised due to the failure to adhere to our
clinical protocols or regulatory requirements or for other
reasons, our preclinical development activities or clinical
trials may be extended, delayed, suspended or terminated, and we
may not be able to obtain regulatory approval for, or
successfully commercialize, our product candidates. In addition,
if our contract research organizations and other similar
entities with which we are working do not successfully carry out
their contractual duties or meet expected deadlines, we may be
required to replace them. For example, in January 2008, we had
to cease doing business with one of our third-party contract
research organizations as a result of errors in the trial
results from our Phase 2a clinical trial of PRX-03140 which were
provided by such third-party and publicly reported by us.
Although we believe that there are other third-party contractors
we could engage to continue these activities, it may result in a
delay of the affected trial. In addition, our failure to
accurately report study data, whether as a result of a failure
by a third-party or otherwise, could harm our reputation and
subject us to liability.
If
clinical trials for our product candidates are prolonged or
delayed, we may be unable to commercialize our product
candidates on a timely basis, which would require us to incur
additional costs and delay our receipt of any revenue from
potential product sales.
We may encounter problems with our completed, ongoing or planned
clinical trials for our product candidates that will cause us or
any regulatory authority to delay or suspend those clinical
trials or delay the analysis of data derived from them. A number
of events, including any of the following, could delay the
completion of, or terminate, our ongoing and planned clinical
trials for our product candidates and negatively impact our
ability to obtain regulatory approval or enter into
collaborations for, or market or sell, a particular product
candidate, including any of our current clinical-stage product
candidates:
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conditions imposed on us by the FDA or any foreign regulatory
authority regarding the scope or design of our clinical trials;
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delays in obtaining, or our inability to obtain, required
approvals from institutional review boards or other reviewing
entities at clinical sites selected for participation in our
clinical trials;
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delay in developing, or our inability to obtain, a clinical
dosage form, insufficient supply or deficient quality of our
product candidates or other materials necessary to conduct our
clinical trials;
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negative or inconclusive results from clinical trials, or
results that are inconsistent with earlier results, that
necessitate additional clinical study or termination of a
clinical program;
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serious
and/or
unexpected product-related side effects experienced by subjects
in clinical trials; or
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failure of our third-party contractors or our investigators to
comply with regulatory requirements or otherwise meet their
contractual obligations to us in a timely manner.
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Regulatory authorities, clinical investigators, institutional
review boards, data safety monitoring boards and the hospitals
at which our clinical trials are conducted all have the power to
stop our clinical trials prior to completion. Our clinical
trials for our product candidates may not begin as planned, may
need to be restructured, and may not be completed on schedule,
if at all. For example, in September 2001, after discussions
with the FDA, we expanded our initial target indication for
Vasovist from one specific body region, the aortoiliac region,
to a broader indication that included the entire bodys
vascular system, except for the heart. This expansion required
us to add two new clinical trials to our then existing Phase 3
clinical trial program. This change to the Phase 3 clinical
trial program and the associated delay in the startup of new
clinical centers resulted in an approximate
15-month
delay in our NDA submission and an increase in costs associated
with the program. Delays in clinical trials may result in
increased development costs for our product candidates. In
addition, if our clinical trials for our product candidates are
delayed, our competitors may be able to bring product candidates
to market before we do and the commercial viability of our
product candidates could be significantly reduced. In addition,
the number and complexity of clinical trials needed to achieve
regulatory approval for our therapeutic drug candidates,
including but not limited to PRX-03140, our product candidate
for the treatment of Alzheimers disease, could be
significant. Achieving primary efficacy endpoints in clinical
trials can be difficult in certain disease areas due to the
placebo effect commonly observed in trials in certain patient
populations. For example, our results from the completed Phase 3
and Phase 2b clinical studies of PRX-00023 in September 2006 and
March 2008 indicated that PRX-00023 did not achieve a
statistically significant improvement over placebo for their
respective primary endpoints with respect to generalized anxiety
disorder and major depressive disorder. Therefore, we
discontinued our development efforts with respect to PRX-00023.
Despite
our resubmission of a new drug application with the FDA for
Vasovist, we may never obtain approval to market and sell
Vasovist in the United States or monetize the potential royalty
stream therefrom, either of which would materially harm our
revenues.
Vasovist has not been approved for marketing and sale in the
United States by the FDA. In connection with a new drug
application, or NDA, that we submitted for Vasovist in December
2003, we received an approvable letter from the FDA in January
2005 in which the FDA requested additional clinical trials prior
to approval. In May 2005, we submitted a response to the FDA
approvable letter, which was accepted by the FDA as a complete
response in June 2005. In November 2005, the FDA provided us
with a second approvable letter which indicated that at least
one additional clinical trial and a re-read of images obtained
in certain previously completed Phase 3 trials will be necessary
before the FDA could approve Vasovist. After considering the
parameters of the additional clinical trials requested by the
FDA, we filed a formal appeal with the FDA asking the FDA to
approve Vasovist and to utilize an advisory committee as part of
the appeal process. In August 2006, the FDA denied our appeal
and suggested that we conduct two new clinical trials for
Vasovist. In February 2007, we filed our second formal appeal
with the FDA asking the FDA to approve Vasovist and to utilize
an advisory committee as part of the appeal process. On
June 15, 2007, we received a letter from the FDA denying
our second formal appeal, but indicated that a blinded re-read,
or reanalysis, of the images obtained in our previously
completed Phase 3 clinical trials of Vasovist could provide the
potential evidence to support approval of Vasovist if the
results of the re-read are positive. In January 2008, we
initiated the re-read of the images obtained in prior Phase 3
studies, and in April 2008 we announced that we met all
pre-specified endpoints for the re-read prospectively agreed to
with the FDA. Although we resubmitted an NDA to the FDA for
Vasovist on June 30, 2008, the approval and labeling of
Vasovist remains subject to
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significant uncertainties related to a number of factors,
including the FDAs review process and conclusions
regarding the NDA resubmission. We cannot assure you that the
FDA will approve Vasovist. If the FDA does not approve Vasovist,
we will not receive revenues based on sales of Vasovist in the
United States.
In addition, pursuant to our collaboration with Bayer Schering
Pharma AG, Germany, we are entitled to a percentage of Bayer
Schering Pharma AG, Germanys operating profit margin on
sales of Vasovist in the United States. We may seek to monetize
these potential royalties to fund our clinical pipeline. Any
failure or delay by the FDA in approving Vasovist could
materially and adversely affect our ability to enter into any
such agreements. In addition, our ability to successfully
monetize our interest in sales of Vasovist in the United States
will also be dependent on current and historical sales of
Vasovist by Bayer Schering Pharma AG, Germany outside the United
States. To date, sales of Vasovist outside the United States
have not been significant. We cannot assure you that we would be
able to enter into an agreement with a third party to monetize
such royalties, and our failure to do so could materially and
adversely affect our ability to generate revenues. In addition,
disagreements with Bayer Schering Pharma AG, Germany regarding
our collaboration or otherwise could delay or terminate our
efforts to successfully monetize our share of
U.S. royalties on Vasovist.
If we
are unable to obtain required regulatory approval of our
therapeutic product candidates, we will be unable to market and
sell our therapeutic product candidates and our business will be
materially harmed.
Our existing therapeutic product candidates and any other
product candidates we may discover or acquire and seek to
commercialize are subject to extensive regulation by the FDA and
similar regulatory agencies in other countries relating to
development, clinical trials, manufacturing and
commercialization. In the United States and in many foreign
jurisdictions, rigorous preclinical testing and clinical trials
and an extensive regulatory review process must be successfully
completed before a new product candidate can be sold.
Satisfaction of these and other regulatory requirements is
costly, time consuming, uncertain and subject to unanticipated
delays. The time required to obtain approval by the FDA is
unpredictable but typically exceeds five years following the
commencement of clinical trials, depending upon many factors,
including the complexity of the product candidate. We initiated
clinical trials for PRX-03140, PRX-08066 and PRX-07034 in
December 2004, May 2005 and June 2006, respectively, and thus
far, these therapeutic product candidates have been studied in
only a small number of patients. Early-stage clinical trials in
small numbers of patients are often not predictive of results in
later-stage clinical trials with a larger and more diverse
patient population. Even product candidates with favorable
results in late-stage pivotal clinical trials may fail to get
approved for commercialization for many reasons, including:
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our failure to demonstrate to the satisfaction of the FDA or
comparable foreign regulatory authorities that a product
candidate is safe and effective for a particular indication;
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our inability to demonstrate that a product candidates
benefits outweigh its risks;
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our inability to demonstrate that the product candidate presents
a significant advantage over existing therapies;
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the FDAs or comparable foreign regulatory
authorities disagreement with the manner in which we and
our collaborators interpret the data from preclinical studies or
clinical trials;
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the FDAs or comparable foreign regulatory
authorities failure to approve our manufacturing processes
or facilities or the processes or facilities of our
collaborators; or
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a change in the approval policies or regulations of the FDA or
comparable foreign regulatory authorities.
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The relevant regulatory authorities may not approve any of our
applications for marketing authorization relating to any of our
product candidates, or additional applications for or variations
to marketing authorizations that we may make in the future as to
these or other product candidates. Among other things, we have
had only limited experience in preparing applications and
obtaining regulatory approvals. If approval is granted, it may
be subject to limitations on the indicated uses for which the
product candidate may be marketed or contain requirements for
costly post-marketing testing and surveillance to monitor safety
or
13
efficacy of the product candidate. If approval of an application
to market product candidates is not granted on a timely basis or
at all, or if we are unable to maintain our approval, our
business may be materially harmed. It is possible that none of
our product candidates or any other product candidates we may
seek to develop in the future will ever obtain the appropriate
regulatory approvals necessary for us to begin selling them,
which would materially harm our business.
Our
clinical trials may not yield results that will enable us to
obtain regulatory approval for our product
candidates.
We will only receive regulatory approval to commercialize a
product candidate if we can demonstrate to the satisfaction of
the FDA or the applicable foreign regulatory agency, in
well-designed and conducted clinical trials, that the product
candidate is safe and effective and otherwise meets the
appropriate standards required for approval for a particular
indication. Clinical trials are lengthy, complex and extremely
expensive processes with uncertain results. For example, results
from our recently completed Phase 2b clinical trial of PRX-00023
in major depressive disorder in March 2008, which was designed
to evaluate the efficacy of PRX-00023 as measured by the change
from baseline in the Montgomery Asberg Depression Rating Scale
compared to placebo, demonstrated that PRX-00023 did not achieve
a statistically significant improvement over placebo for the
primary endpoint with respect to major depressive disorder.
Based on these results, we have discontinued our development
efforts of PRX-00023. We have limited experience in conducting
and managing the clinical trials necessary to obtain regulatory
approvals for our product candidates, including filing and
prosecuting the applications necessary to gain approval by the
FDA. Our NDA for Vasovist has not been, and may never be,
approved by the FDA and we have not submitted an NDA to the FDA
for any of our other product candidates. This limited experience
may result in longer regulatory processes in connection with our
efforts to obtain approval of our product candidates. With
respect to both our current product candidates in human clinical
trials and our research product candidates which may be suitable
for testing in human clinical trials at some point in the
future, we face risks including that:
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the product candidate may not prove to be safe and efficacious;
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the dosage form of the product candidate may not deliver
reproducible amounts of product to patients;
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patients may die or suffer other adverse effects for reasons
that may or may not be related to the product candidate being
tested;
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the results of later-stage clinical trials may not confirm the
positive results of earlier trials;
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the results may not meet the level of statistical significance
required by the FDA or other regulatory agencies for
approval; and
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the FDA or other regulatory agencies may require additional or
expanded trials.
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Of the large number of product candidates in development, only a
small percentage result in the submission of an NDA to the FDA
and even fewer are approved for commercialization. If we fail to
demonstrate the safety and efficacy of our product candidates,
we will not be able to obtain the required regulatory approvals
to commercialize these product candidates. Certain of our
preclinical and clinical product candidates have in the past and
may in the future demonstrate safety concerns. The results from
preclinical testing of a product candidate that is under
development may not be predictive of results that will be
obtained in human clinical trials. In addition, the results of
early human clinical trials may not be predictive of results
that will be obtained in larger scale, advanced-stage clinical
trials. Our current product candidates and any other product
candidates we may seek to develop in the future may never
complete the clinical testing necessary to obtain the
appropriate regulatory approvals for us to begin selling them.
14
Gadolinium-based
imaging agents, such as Vasovist, may cause adverse side effects
which could limit our ability to receive approval for these
product candidates and our ability to effectively market these
product candidates, if approved.
Vasovist is a contrast drug that contains gadolinium. In May
2006, the Danish Medicines Agency announced that it was
investigating a possible link between the use of Omniscan, an
imaging agent containing gadolinium, and the development of a
very rare skin disease, nephrogenic systemic fibrosis (NSF), in
25 patients with severely impaired renal function who had
been administered the imaging agent. Further investigations with
respect to all MRI contrast media containing gadolinium revealed
that NSF also has developed following the administration of two
other gadolinium-containing agents (OptiMARK and Magnevist). It
also has been reported that NSF may affect internal anatomy as
well as the skin. Although a causative relationship between
gadolinium-containing agents and NSF has not been definitively
established, evidence is increasing. By May 2007, the use of
Omniscan and Magnevist had been contraindicated in patients with
severe renal impairment by the EMEA (European Medicines Agency).
For all other gadolinium-containing contrast agents, safety
warnings about the potential for NSF in patients with severe
renal impairment were added to the product information. By May
2007, the FDA requested that manufacturers of all
gadolinium-containing agents add a Boxed Warning and new Warning
section that describes the risk of NSF because it is impossible
at present to definitively determine whether the extent of risks
for developing NSF are the same for all gadolinium-containing
agents. We are also aware of ongoing litigation in the United
States relating to the use of imaging agents containing
gadolinium. To date, over 250 cases of NSF have been reported
world-wide. Although we have reviewed our safety databases for
Vasovist and have found no instances of this rare disease, our
databases may be too small to show such an effect, if it exists.
In the event gadolinium-based imaging agents such as Vasovist
are directly linked to this very rare disease or other
unanticipated side effects, such safety concerns could have a
material adverse effect on our ability to obtain marketing
approval for Vasovist or any such approval for use may be
revoked. Moreover, even if a direct link is not conclusively
established, any safety concerns regarding gadolinium-based
imaging agents could also materially harm our and our
partners ability to successfully market Vasovist.
If we
encounter difficulties enrolling subjects in our clinical trials
for our product candidates, or subjects drop out of trials in
progress for our product candidates, our trials could be delayed
or otherwise adversely affected.
The timing of completion of clinical trials is dependent in part
upon the rate of enrollment of patients. Patient accrual is a
function of many factors, including the size of the patient
population, the proximity of patients to clinical sites, the
eligibility criteria for the trial, the existence of competitive
clinical trials, and the availability of alternative treatments.
Delays in planned patient enrollment may result in increased
costs and prolonged clinical development. In addition, patients
may withdraw from a clinical trial for a variety of reasons. If
we fail to accrue and maintain the number of patients into one
of our clinical trials for which the clinical trial was
designed, the statistical power of that clinical trial may be
reduced which would make it harder to demonstrate that the
product candidate being tested in such clinical trial are safe
and effective. We may not be able to enroll a sufficient number
of qualified patients in a timely or cost-effective manner. For
example, we experienced difficulty in enrolling healthy elderly
volunteers in our Phase 1 clinical trial for PRX-03140. Any
future delays in patient enrollment could result in increased
costs and longer development times. Enrollment of patients in
our clinical trials for our product candidates is affected by
many factors, including:
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the limited size of the patient population and the availability
of commercial products for certain target indications, including
pulmonary arterial hypertension and pulmonary hypertension
associated with chronic obstructive pulmonary disease;
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the nature and design of the trial protocol;
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the proximity of patients to clinical sites;
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the availability of other effective treatments for the relevant
disease (whether approved or experimental);
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the eligibility criteria for enrollment in our clinical trials;
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perceived risks and benefits of the product candidate under
study; and
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competing studies or trials.
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In addition, the FDA could require us to conduct clinical trials
with a larger number of subjects than we have projected for any
of our product candidates. If we have difficulty enrolling or
retaining a sufficient number of patients to participate and
complete our clinical trials for our product candidates as
planned, we may need to delay or terminate ongoing or planned
clinical trials. Delays in enrolling patients in these clinical
trials or the withdrawal of subjects enrolled in these clinical
trials would adversely affect our ability to develop and seek
approval for our product candidates, could delay or eliminate
our ability to generate product candidates and revenue and could
impose significant additional costs on us.
Our
therapeutic product candidates are currently
unformulated.
All of our therapeutic product candidates, including, PRX-03140,
PRX-08066 and PRX-07034, are currently unformulated. The lack of
an optimized and commercially-viable formulation during clinical
trials may have a significant impact in the overall development
and commercialization of these therapeutic product candidates,
including:
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the current dosage may not provide reproducible amounts of
product;
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the pharmaceutical development of a commercially viable
formulation may add significant cost and time to our clinical
development programs for therapeutics;
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additional trials may be required if the new formulation is not
bioequivalent to formulations already used in clinical trials;
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future clinical trials may be delayed in order to identify,
develop, optimize, manufacture and certify a commercially viable
formulation; and
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regulatory filings,
and/or
commercial launch may be delayed due to the lack of a commercial
process for cGMP manufacturing of the new formulation.
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The occurrence of any of the foregoing could materially harm our
business.
Our
prior stock option practices may result in significant
liability.
Prior to the change in our senior management in connection with
the merger with Predix Pharmaceuticals Holdings, Inc. on
August 16, 2006, certain employees, including certain of
our former senior management, participated in retrospective date
selection for the grant of certain stock options and re-priced,
as defined by financial accounting standards, certain options
during the period from 1997 through 2005. Accordingly, our audit
committee concluded that, pursuant to Accounting Principles
Board No. 25 (APB 25) and related interpretations, the
accounting measurement date for the stock option grants for
which those members of our former senior management had
retrospectively selected grant dates for certain grants awarded
between February 1997 and February 2004, covering options to
purchase approximately 1.4 million shares of our common
stock, differed from the measurement dates previously used for
such stock awards. In addition, we determined that certain of
our former senior management re-priced, as defined by financial
accounting standards, approximately 0.9 million stock
options awarded during the period between June 1999 and
March 2005, and we identified approximately
0.1 million options in which other dating errors resulted
in stock options with grant dates that failed to meet the
measurement date criteria of APB 25. As a result, we applied
revised measurement dates to the option grants with
administrative errors and option grants for which certain of our
former senior management retrospectively selected grant dates,
and, for options that were re-priced, as defined by financial
accounting standards, we revised our accounting for such
re-priced awards from accounting for the grants as fixed awards
to accounting for the grants as variable awards. As a result of
these adjustments, in connection with the filing of our 2006
Form 10-K,
we restated our historical financial statements for the years
1997 through 2005 to record an aggregate of $7.4 million in
additional stock-based
16
compensation expense for those periods. In addition, we accrued
payroll tax expense of approximately $0.9 million relating
to employer and employee payroll taxes, interest and penalties
we estimate we will owe as a result of the modifications to
exercised options previously considered incentive stock options
that should have been taxed as non-qualified stock options. Our
historical stock option practices and the restatement of our
prior financial statements expose us to greater risks associated
with litigation and regulatory proceedings. The Securities and
Exchange Commission has advised us that it has commenced an
informal investigation regarding our stock option grants. We are
cooperating with that investigation. In the event of any
litigation or regulatory proceeding involving a finding or
assertion by the Securities and Exchange Commission, other
federal or state governmental agencies, or any third-party that
our past stock option practices violated the federal securities
laws or other laws, we may be required to pay fines, penalties
or other amounts, may be subject to other remedies or remedial
actions,
and/or may
be required to further restate prior period financial statements
or adjust current period financial statements. In addition,
considerable legal and accounting expenses related to these
matters have been incurred to date and significant expenditures
may be incurred in the future.
Failure
to comply with foreign regulatory requirements governing human
clinical trials and marketing approval for our product
candidates could prevent us from selling our product candidates
in foreign markets, which may adversely affect our operating
results and financial condition.
The requirements governing the conduct of clinical trials,
product licensing, pricing and reimbursement for marketing our
product candidates outside the United States vary greatly from
country to country and may require additional testing. We have
no experience in obtaining regulatory approvals for any of our
product candidates. Although the use of Vasovist has been
approved in the European Union, as well as Canada, Iceland,
Norway, Switzerland, Turkey, Australia and South Korea,, Bayer
Schering Pharma AG, Germany is responsible for obtaining foreign
regulatory approvals for Vasovist. The time required to obtain
approvals outside the United States may differ from that
required to obtain FDA approval. We may not obtain foreign
regulatory approvals on a timely basis, if at all. Approval by
the FDA does not ensure approval by regulatory authorities in
other countries, and approval by one foreign regulatory
authority does not ensure approval by regulatory authorities in
other countries or by the FDA. Failure to comply with these
regulatory requirements or obtain required approvals could
impair our ability to develop foreign markets for our product
candidates.
Our
product candidates will remain subject to ongoing regulatory
requirements even if they receive marketing approval, and if we
fail to comply with requirements, we could lose these approvals
and the sale of any approved commercial products could be
temporarily or permanently suspended.
Even if we receive regulatory approval to market a particular
product candidate, the product will remain subject to extensive
regulatory requirements, including requirements relating to
manufacturing, labeling, packaging, adverse event reporting,
storage, advertising, promotion and record keeping. In addition,
as clinical experience with a product expands after approval
because it is typically used by a greater number of patients
after approval than during clinical trials, side effects and
other problems may be observed after approval that were not seen
or anticipated during pre-approval clinical trials. We are
required to maintain pharmacovigilance systems for collecting
and reporting information concerning suspected adverse reactions
to our product candidates. In response to pharmacovigilance
reports, regulatory authorities may initiate proceedings to
revise the prescribing information for our product candidates or
to suspend or revoke our marketing authorizations. Procedural
safeguards are often limited, and marketing authorizations can
be suspended with little or no advance notice. Both before and
after approval of a product, quality control and manufacturing
procedures must conform to cGMP. Regulatory authorities,
including the European Medicines Agency, or EMEA, and the FDA,
periodically inspect manufacturing facilities to assess
compliance with cGMP. Accordingly, we and our contract
manufacturers will need to continue to expend time, funds, and
effort in the area of production and quality control to maintain
cGMP compliance. If we fail to comply with the regulatory
requirements of the FDA, the EMEA and other applicable
U.S. and foreign regulatory authorities or previously
unknown problems
17
with any approved commercial products, manufacturers or
manufacturing processes are discovered, we could be subject to
administrative or judicially imposed sanctions or other
setbacks, including:
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restrictions on the products, manufacturers or manufacturing
processes;
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warning letters;
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civil or criminal penalties;
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fines;
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injunctions;
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product seizures or detentions;
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import bans;
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product recalls and related publicity requirements;
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unanticipated expenditures;
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total or partial suspension of production; and
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refusal to approve pending applications for marketing approval
of new products or supplements to approved applications.
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The imposition on us of any of the foregoing could materially
harm our results of operations. In addition to regulations
adopted by the EMEA, the FDA, and other foreign regulatory
authorities, we are also subject to regulation under the
Occupational Safety and Health Act, the Toxic Substances Control
Act, the Resource Conservation and Recovery Act, and other
federal, state, and local regulations.
We are
focusing our therapeutic product discovery and development
efforts on G-Protein Coupled Receptor and ion channel-targeted
product candidates, which have historically had a high incidence
of adverse side effects.
Despite commercial success, many G-Protein Coupled Receptor, or
GPCR, and ion channel-targeted products have been associated
with a high incidence of adverse side effects due in part to
poor selectivity in binding to their target protein, resulting
in binding to other off-target proteins. We believe
we are designing our therapeutic product candidates to be highly
selective and as a result to have a favorable side-effect
profile. However, all of our therapeutic product candidates are
in early stages of development, and although our clinical
therapeutic product candidates have to date exhibited acceptable
side-effect profiles in clinical trials in a limited number of
subjects, we cannot assure you that these results will be
repeated in larger-scale trials. If serious side effects occur
in later-stage clinical trials of our therapeutic product
candidates, we may not receive regulatory approval to
commercialize them. Even if any of our therapeutic product
candidates receive regulatory approval, if they do not exhibit a
more favorable side-effect profile than existing therapies, our
competitive position could be substantially diminished.
The
application of our in silico therapeutic product discovery
technology and approach may be limited to a subset of
therapeutically useful proteins, which may reduce the
opportunities to develop and commercialize product candidates
against other important therapeutic targets.
To date, our technology and approach has generated clinical
therapeutic product candidates, including, PRX-03140, PRX-08066
and PRX-07034, which mimic the activity of a small molecule,
serotonin, within a class of GPCR proteins known as serotonergic
receptors. The activity is achieved through binding of the
ligand, serotonin, to a particular region of the protein that
spans the cell membrane. These GPCRs and mechanisms of
interaction represent a small subset of all known
therapeutically-relevant GPCRs. Ion channels can consist of
multiple protein subunits that have complex and subtle
mechanisms of activation and inactivation. Therefore, it may be
difficult to apply our proprietary product discovery technology
to small-molecule ion channel targets.
18
Although we believe that the in silico technology platform can
be utilized and developed to discover such small molecules, we
cannot ensure that our in silico technology and approach will
generate clinical candidates for all GPCRs and ion channels that
are important targets for therapeutic intervention.
Our
competitors may develop products that are less expensive, safer
or more effective, which may diminish or eliminate the
commercial success of any future products that we may
commercialize.
Competition in the pharmaceutical and biotechnology industries
is intense and expected to increase. We face competition from
pharmaceutical and biotechnology companies, as well as numerous
academic and research institutions and governmental agencies
engaged in product discovery activities or funding, both in the
United States and abroad. Some of these competitors have
therapeutic products or are pursuing the development of
therapeutic product candidates that target the same diseases and
conditions that are the focus of our clinical-stage therapeutic
product candidates, including the following:
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PRX-03140. If approved, PRX-03140, the drug
candidate we are developing for the treatment of
Alzheimers disease, may compete with approved products
from such pharmaceutical companies as Forest Laboratories, Inc.,
Johnson & Johnson, Novartis AG and Pfizer, Inc., and
may compete with drug candidates in clinical development from
other companies, including Myriad Genetics, Inc.,
GlaxoSmithKline plc and Neurochem Inc. We are studying PRX-03140
both as monotherapy and in combination with approved products,
such as Aricept which is marketed by Pfizer Inc. We believe that
there are over 70 therapeutic product candidates in clinical
trials for the treatment of Alzheimers disease.
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PRX-08066. If approved, PRX-08066, the drug
candidate we are developing for the treatment of pulmonary
arterial hypertension (PAH), may compete with approved products
from such pharmaceutical companies as Actelion Pharmaceuticals
Ltd., GlaxoSmithKline plc, Pfizer Inc., Gilead Sciences Inc.,
and United Therapeutics Corporation, and may compete with drug
candidates in clinical development by other companies, such as
Encysive Pharmaceuticals Inc. and Bayer Schering Pharma AG. We
believe that there are approximately ten therapeutic product
candidates in clinical trials or that have been submitted for
approval for the treatment of pulmonary arterial hypertension
and/or
pulmonary hypertension associated with chronic obstructive
pulmonary disease.
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PRX-07034. If approved for the treatment of
cognitive impairment (associated with schizophrenia or
Alzheimers disease), PRX-07034 may compete with approved
products from such pharmaceutical companies as Forest
Laboratories, Johnson & Johnson, Novartis AG and
Pfizer, Inc., and may compete with several therapeutic product
candidates in clinical development from other companies,
including GlaxoSmithKline plc, AstraZeneca and Memory
Pharmaceuticals Corp. We believe that there are over 60
therapeutic product candidates in clinical trials for the
treatment of cognitive impairment in association with
schizophrenia. If approved for the treatment of obesity,
PRX-07034 may compete with approved products from such
pharmaceutical companies as Abbott Laboratories and Roche
Holding Ltd., and may compete with several therapeutic product
candidates in clinical development by other companies, such as
Sanofi-Aventis and Arena Pharmaceuticals, Inc. We believe that
there are over 40 therapeutic product candidates in
clinical trials for the treatment of obesity.
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We expect that many patents covering commercial therapeutic
products for these indications will expire in the next four to
nine years, which will result in greater competition in these
indications resulting from companies producing generic versions
of the commercial products. Many of our competitors have
therapeutic products that have been approved or are in advanced
development and may develop superior technologies or methods to
identify and validate therapeutic product targets and to
discover novel small-molecule products. Our competitors may also
develop alternative therapies that could further limit the
market for any therapeutic products that we may develop.
In addition, there are a number of general use MRI agents
approved for marketing in the United States, and in certain
foreign markets that, if used or developed for magnetic
resonance angiography, are likely to compete with Vasovist. Such
products include Magnevist and Gadovist by Bayer Schering Pharma
AG, Germany, Dotarem by Guerbet, S.A., Omniscan by GE
Healthcare, ProHance and MultiHance by Bracco and
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OptiMARK by Covidien Ltd. We are aware of six agents under
clinical development that have been or are being evaluated for
use in magnetic resonance angiography: Bayer Schering Pharma AG,
Germanys Gadomer and SHU555C, Guerbet, S.A.s
Vistarem, Braccos B-22956/1, Ferropharm GmbHs Code
VSOP-C184, and Advanced Magnetics Inc.s Ferumoxytol.
Moreover, there are several well-established medical imaging
methods that currently compete and will continue to compete with
MRI, including digital subtraction angiography, which is an
improved form of X-ray angiography, computed tomography
angiography, nuclear medicine and ultrasound, and there are
companies that are actively developing the capabilities of these
competing methods to enhance their effectiveness in vascular
system imaging.
If the
market does not accept our technology and product candidates, we
may not generate sufficient revenues to achieve or maintain
profitability.
The commercial success of our product candidates, even if
approved for marketing by the FDA and corresponding foreign
agencies, depends on their acceptance by the medical community
and third-party payors as clinically useful, cost-effective and
safe. Market acceptance, and thus sales of our products, will
depend on several factors, including:
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safety;
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cost-effectiveness relative to alternative therapies, methods or
products;
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availability of third-party reimbursement;
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ease of administration;
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clinical efficacy; and
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availability of competitive products.
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If any of our product candidates, when and if commercialized, do
not achieve market acceptance, we may not generate sufficient
revenues to achieve or maintain profitability.
In addition, market acceptance of our imaging product candidate
will also depend on our ability and that of our strategic
partners to educate the medical community and third-party payors
about the benefits of diagnostic imaging with Vasovist-enhanced
magnetic resonance angiography compared to imaging with other
technologies. While we believe that contrast agents are
currently used in an estimated 25% to 35% of all MRI exams,
there are no MRI agents approved by the FDA for vascular
imaging. Furthermore, clinical use of magnetic resonance
angiography has been limited and use of magnetic resonance
angiography for some vascular disease imaging has occurred
mainly in research and academic centers. Vasovist represents a
new approach to imaging the non-coronary vascular system, and
market acceptance both of magnetic resonance angiography as an
appropriate imaging technique for the non-coronary vascular
system, and of Vasovist, is critical to our success.
We may
not be able to keep up with the rapid technological change in
the biotechnology and pharmaceutical industries, which could
make any of our future approved therapeutic products obsolete
and reduce our revenue.
Biotechnology and related pharmaceutical technologies have
undergone and continue to be subject to rapid and significant
change. Our future will depend in large part on our ability to
maintain a competitive position with respect to these
technologies. We believe that our proprietary therapeutic
product discovery technology and approach enables
structure-based discovery and optimization of certain GPCR and
ion channel-targeted drug candidates. However, our competitors
may render our technologies obsolete by advances in existing
GPCR and ion channel-targeted drug discovery approaches or the
development of new or different approaches. In addition, any
future therapeutic products that we develop, including our
clinical-stage therapeutic product candidates, , PRX-03140,
PRX-08066 and PRX-07034, may become obsolete before we recover
expenses incurred in developing those therapeutic product
candidates, which may require us to raise additional funds to
continue our operations.
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We are
currently focusing our imaging development efforts primarily on
Vasovist and will have limited prospects for successful imaging
operations if it does not prove successful.
Since the merger with Predix, we are focusing our imaging
development efforts on our lead imaging product candidate,
Vasovist. Accordingly, we have decided to cease work on our
research projects related to the development of EP-2104R. We are
no longer allocating resources to any imaging research or
clinical programs other than the efforts required to continue to
pursue FDA approval of Vasovist. Our efforts may not lead to
commercially successful imaging products for a number of
reasons, including the inability to be proven safe and effective
in clinical trials, the lack of regulatory approvals or
obtaining regulatory approvals that are narrower than we seek,
inadequate financial resources to complete the development and
commercialization of our imaging product candidates or their
lack of acceptance in the marketplace.
Our
product candidates require significant biological testing,
preclinical testing, manufacturing and pharmaceutical
development expertise and investment. We rely primarily on
external partners to complete these activities.
We have limited in-house biological and preclinical testing
capabilities. Therefore, we rely heavily on third-parties to
perform in vitro potency, in vivo functional efficacy,
animal toxicology and pharmacokinetics testing prior to
advancing our product candidates into clinical trials. We also
do not have internal expertise to formulate our therapeutic
product candidates. In addition, we do not have, nor do we
currently have plans to develop, full-scale manufacturing
capability for any of our product candidates, including
Vasovist. We currently rely on Aptuit, Inc. and Thermo Fisher
Scientific Inc. for our therapeutic drug product manufacturing
and testing, and on Aptuit, Inc. and Johnson Matthey Pharma
Services for the manufacture and testing of our active
therapeutic pharmaceutical ingredients. Although we believe that
we could replace these suppliers on commercially reasonable
terms, if any of these third-parties fail to fulfill their
obligations to us or do not successfully complete the testing in
a timely or acceptable manner, our therapeutic product
development efforts could be negatively impacted
and/or
delayed. We rely on Covidien as the primary manufacturer of
Vasovist for any future human clinical trials and commercial
use. Together with Bayer Schering Pharma AG, Germany, we are
considering alternative manufacturing arrangements for Vasovist
for commercial use, including the transfer of manufacturing to
Bayer Schering Pharma AG, Germany. Covidien currently
manufactures imaging agents for other technologies that will
compete with Vasovist. In the event that Covidien fails to
fulfill its manufacturing responsibilities satisfactorily, Bayer
Schering Pharma AG, Germany has the right to purchase Vasovist
from a third-party or to manufacture the compound itself.
However, either course of action could materially delay the
manufacture and development of Vasovist. Bayer Schering Pharma
AG, Germany may not be able to find an alternative manufacturer.
In addition, Bayer Schering Pharma AG, Germany may not be able
to manufacture Vasovist itself in a timely manner or in
sufficient quantities. If we experience a delay in manufacturing
of Vasovist or any of our product candidates, it could result in
a delay in their clinical testing, approval or commercialization
and have a material adverse effect on our business, financial
condition and results of operations.
If we
are unable to attract and retain key management and other
personnel, it would hurt our ability to compete.
Our future business and operating results depend in significant
part upon our ability to attract and retain qualified directors,
senior management and key technical personnel. There can be no
assurance that we will be able to retain any of our key
management and scientific personnel. Each of our executive
officers and key scientific personnel could terminate his or her
relationship with us at any time. For instance, in May 2008,
Andrew Uprichard, M.D. resigned his position as our
President, and, in July 2008,
Michael G. Kauffman, M.D., Ph.D. resigned
his position as our Chief Executive Officer. Drs. Uprichard
and Kauffman have been critical to the pursuit of our business
goals and we may experience difficulties implementing our
business strategy following their respective departures. The
loss of any of our key management and other personnel, or their
failure to perform their current positions, could have a
material adverse effect on our business, financial condition and
results of operations, and our ability to achieve our business
objectives or to operate or compete in our industry may be
seriously impaired. Competition for personnel is intense and we
may not be successful in attracting or retaining such
21
personnel. If we were to lose additional key employees, we could
spend a significant amount of time and resources to replace
them, which would impair our research and development or
commercialization efforts.
Our
research and development efforts may not result in product
candidates appropriate for testing in human clinical
trials.
We have historically spent significant resources on research and
development and preclinical studies of product candidates.
However, these efforts may not result in the development of
product candidates appropriate for testing in human clinical
trials. For example, our research may result in product
candidates that are not expected to be effective in treating
diseases or may reveal safety concerns with respect to product
candidates. We may postpone or terminate research and
development of a product candidate or a program at any time for
any reason such as the safety or effectiveness of the potential
product, allocation of resources or unavailability of qualified
research and development personnel. The failure to generate
high-quality research and development candidates would
negatively impact our ability to advance product candidates into
human clinical testing and ultimately, negatively impact our
ability to market and sell products.
If we
fail to get adequate levels of reimbursement from third-party
payors for our product candidates after they are approved in the
United States and abroad, we may have difficulty commercializing
our product candidates.
We believe that reimbursement in the future will be subject to
increased restrictions, both in the United States and in
foreign markets. We believe that the overall escalating cost of
medical products and services has led to, and will continue to
lead to, increased pressures on the health care industry, both
foreign and domestic, to reduce the cost of products and
services, including products offered by us. These third-party
payors are increasingly attempting to contain healthcare costs
by demanding price discounts or rebates and limiting both
coverage on which drugs they will pay for and the amounts that
they will pay for new products. As a result, they may not cover
or provide adequate payment for our products. We might need to
conduct post-marketing studies in order to demonstrate the
cost-effectiveness of any future products to such payors
satisfaction. Such studies might require us to commit a
significant amount of management time and financial and other
resources. Our future products might not ultimately be
considered cost-effective. There can be no assurance, in either
the United States or foreign markets, that third-party
reimbursement will be available or adequate, that current
reimbursement amounts will not be decreased in the future or
that future legislation, regulation, or reimbursement policies
of third-party payors will not otherwise adversely affect the
demand for our product candidates or our ability to sell our
product candidates on a profitable basis. The unavailability or
inadequacy of third-party payor coverage or reimbursement could
have a material adverse effect on our business, financial
condition and results of operations.
Failure by physicians, hospitals and other users of our product
candidate to obtain sufficient reimbursement from third-party
payors for the procedures in which our product candidate would
be used or adverse changes in governmental and private
third-party payors policies toward reimbursement for such
procedures may have a material adverse effect on our ability to
market our product candidate and, consequently, it could have an
adverse effect on our business, financial condition and results
of operations. If we obtain the necessary foreign regulatory
approvals, market acceptance of our product candidates in
international markets would be dependent, in part, upon the
availability of reimbursement within prevailing healthcare
payment systems. Reimbursement and healthcare payment systems in
international markets vary significantly by country, and include
both government sponsored health care and private insurance. We
and our strategic partners intend to seek international
reimbursement approvals, although we cannot assure you that any
such approvals will be obtained in a timely manner, if at all,
and failure to receive international reimbursement approvals
could have an adverse effect on market acceptance of our product
candidate in the international markets in which such approvals
are sought.
We could be adversely affected by changes in reimbursement
policies of governmental or private healthcare payors,
particularly to the extent any such changes affect reimbursement
for procedures in which our product candidates would be used.
U.S. and foreign governments continue to propose and pass
legislation designed to reduce the cost of healthcare. For
example, in some foreign markets, the government controls the
22
pricing of prescription pharmaceuticals. In the United States,
we expect that there will continue to be federal and state
proposals to implement similar governmental controls. In
addition, recent changes in the Medicare program and increasing
emphasis on managed care in the United States will continue to
put pressure on pharmaceutical product pricing. Cost control
initiatives could decrease the price that we would receive for
any products in the future, which would limit our revenue and
profitability. Accordingly, legislation and regulations
affecting the pricing of pharmaceuticals might change before our
product candidates are approved for marketing. Adoption of such
legislation could further limit reimbursement for
pharmaceuticals.
We
deal with hazardous materials and must comply with environmental
laws and regulations, which can be expensive and restrict how we
do business.
The nature of our research and development processes requires
the use of hazardous substances and testing on certain
laboratory animals. Accordingly, we are subject to extensive
federal, state and local laws, rules, regulations and policies
governing the use, generation, manufacture, storage, air
emission, effluent discharge, handling and disposal of certain
materials and wastes as well as the use of and care for
laboratory animals. Although we are not currently, nor have we
been, the subject of any investigations by a regulatory
authority, we cannot assure you that we will not become the
subject of any such investigation. Although we believe that our
safety procedures for handling and disposing of these materials
comply with the standards prescribed by these laws and
regulations, we cannot eliminate the risk of accidental
contamination or injury from these materials.
In the event of an accident, state or federal authorities may
curtail our use of these materials and interrupt our business
operations. In addition, we could be liable for any civil
damages that result, which may exceed our financial resources
and may seriously harm our business. Due to the small amount of
hazardous materials that we generate, we have determined that
the cost to secure insurance coverage for environmental
liability and toxic tort claims far exceeds the benefits.
Accordingly, we do not maintain any insurance to cover pollution
conditions or other extraordinary or unanticipated events
relating to our use and disposal of hazardous materials.
Additionally, an accident could damage, or force us to shut
down, our operations. In addition, if we develop a manufacturing
capacity, we may incur substantial costs to comply with
environmental regulations and would be subject to the risk of
accidental contamination or injury from the use of hazardous
materials in our manufacturing process. Furthermore, current
laws could change and new laws could be passed that may force us
to change our policies and procedures, an event which could
impose significant costs on us.
Product
liability claims could increase our costs and adversely affect
our results of operations.
The clinical testing of our products and the manufacturing and
marketing of any approved products may expose us to product
liability claims and we may experience material product
liability losses in the future. We currently have limited
product liability insurance for the use of our approved products
and product candidates in clinical research, which is capped at
$10.0 million, but our coverage may not continue to be
available on terms acceptable to us or adequate for liabilities
we actually incur. We do not have product liability insurance
coverage for the commercial sale of our product candidates, but
intend to obtain such coverage when and if we commercialize our
product candidates. However, we may not be able to obtain
adequate additional product liability insurance coverage on
acceptable terms, if at all. A successful claim brought against
us in excess of available insurance coverage, or any claim or
product recall that results in significant adverse publicity
against us, may have a material adverse effect on our business
and results of operations.
Political
and military instability and other factors may adversely affect
our operations in Israel.
We have significant operations in Israel and regional
instability, military conditions, terrorist attacks, security
concerns and other factors in Israel may directly affect these
operations. Our employees in Israel are primarily computational
chemists and are responsible for the computational chemistry for
all of our therapeutic discovery stage programs. Accordingly,
any disruption in our Israeli operations could adversely affect
our ability to advance our therapeutic discovery stage programs
into clinical trials. Since the establishment of the State of
Israel in 1948, a number of armed conflicts have taken place
between Israel and its Arab neighbors. A state of hostility,
varying in degree and intensity, has led to security and
economic problems for Israel, and in
23
particular since 2000, there has been an increased level of
violence between Israel and the Palestinians. Any armed
conflicts or political instability in the region could harm our
operations in Israel. In addition, many of our employees in
Israel are obligated to perform annual military reserve duty,
and, in the event of a war, military or other conflict, our
employees could be required to serve in the military for
extended periods of time. Our operations could be disrupted by
the absence for a significant period of time of one or more of
our key employees or a significant number of our other employees
due to military service. Furthermore, several countries restrict
business with Israel and Israeli companies, and these
restrictive laws and policies could harm our business.
RISKS
RELATED TO OUR INTELLECTUAL PROPERTY
We
depend on patents and other proprietary rights, and if they fail
to protect our business, we may not be able to compete
effectively.
The protection of our proprietary technologies is material to
our business prospects. We pursue patents for our product
candidates in the United States and in other countries where we
believe that significant market opportunities exist. We own or
license patents and patent applications on aspects of our core
technology as well as many specific applications of this
technology. As of August 18, 2008, our patent portfolio
included a total of 15 issued U.S. patents, 122 issued
foreign patents, and 270 pending patent applications in the
U.S. and other countries with claims covering the
composition of matter and methods of use for all of our
preclinical and clinical-stage product candidates. We also
exclusively license technology embodied in patent applications
from Ramot at Tel Aviv University Ltd., the technology transfer
company of Tel Aviv University. Physiome Sciences, Inc., a
predecessor of Predix, received U.S. Patent 5,947,899,
which covers a computational system and method for modeling the
heart. This patent expires in 2016. Even though we hold numerous
patents and have made numerous patent applications, because the
patent positions of pharmaceutical and biopharmaceutical firms,
including our patent positions, generally include complex legal
and factual questions, our patent positions remain uncertain.
For example, because most patent applications are maintained in
secrecy for a period after filing, we cannot be certain that the
named applicants or inventors of the subject matter covered by
our patent applications or patents, whether directly owned or
licensed to us, were the first to invent or the first to file
patent applications for such inventions. Third-parties may
oppose, challenge, infringe upon, circumvent or seek to
invalidate existing or future patents owned by or licensed to
us. A court or other agency with jurisdiction may find our
patents invalid, not infringed or unenforceable and we cannot be
sure that patents will be granted with respect to any of our
pending patent applications or with respect to any patent
applications filed by us in the future. Even if we have valid
patents, these patents still may not provide sufficient
protection against competing products or processes. If we are
unable to successfully protect our proprietary methods and
technologies, or if our patent applications do not result in
issued patents, we may not be able to prevent other companies
from practicing our technology and, as a result, our competitive
position may be harmed.
We
depend on exclusively licensed technology from Ramot at Tel Aviv
University Ltd. and Massachusetts General Hospital and, if we
lose either of these licenses, it is unlikely we could obtain
such technology elsewhere, which would have a material adverse
effect on our business.
Our proprietary drug discovery technology and approach is in
part embodied in technology that we license from Ramot at Tel
Aviv University Ltd., the technology transfer company of Tel
Aviv University. All of our current clinical-stage therapeutic
drug candidates, PRX-03140, PRX-08066 and PRX-07034, were, at
least in part, identified, characterized or developed using the
licensed technology. We are required to make various payments to
Ramot, as and when rights to any such drug candidates are ever
sublicensed or any such drug candidates are commercialized.
Because we have an ongoing obligation to pay annual minimum
royalties to Ramot and the license expires upon the expiration
of such obligation, the license may not expire. The license may,
however, be terminated upon a breach by us or our bankruptcy. In
addition, under the terms of a license agreement that we have
with MGH, we are the exclusive licensee to certain imaging
technology, which relates to royalties we receive and to
Vasovist. The license agreement imposes various
commercialization, sublicensing, royalty and other obligations
on us. The license agreement expires on a
country-by-country
basis
24
when the patents covered by the license agreement expire. The
majority of these patents expired in November 2006. One of
these patents has been extended through Supplementary Protection
Certificates for Primovist through May 2011 in certain European
countries. The license agreement does not contain a renewal
provision. If we fail to comply with our obligations under
either of these license agreements, the respective license could
convert from exclusive to nonexclusive, or terminate entirely.
It is unlikely that we would be able to obtain the technology
licensed under either of these agreements elsewhere. Any such
event would also mean that, with respect to our MGH license, we
would not receive royalties from Bayer Schering Pharma AG,
Germany for Primovist and that we or Bayer Schering Pharma AG,
Germany could not sell Vasovist and, with respect to our Ramot
license, that we would not be able to sublicense or
commercialize any of our current clinical-stage therapeutic drug
candidate, either of which would have a material adverse effect
on our business and our financial condition and results of
operations.
We may
need to initiate lawsuits to protect or enforce our patents and
other intellectual property rights, which could result in our
incurrence of substantial costs and which could result in the
forfeiture of these rights.
We may need to bring costly and time-consuming litigation
against third-parties in order to enforce our issued or licensed
patents, protect our trade secrets and know how, or to determine
the enforceability, scope and validity of proprietary rights of
others. In addition to being costly and time-consuming, such
lawsuits could divert managements attention from other
business concerns. These lawsuits could also result in the
invalidation or a limitation in the scope of our patents or
forfeiture of the rights associated with our patents or pending
patent applications. We may not prevail and a court may find
damages or award other remedies in favor of an opposing party in
any such lawsuits. During the course of these suits, there may
be public announcements of the results of hearings, motions and
other interim proceedings or developments in the litigation.
Securities analysts or investors may perceive these
announcements to be negative, which could cause the market price
of our stock to decline. In addition, the cost of such
litigation could have a material adverse effect on our business
and financial condition.
Other
rights and measures that we rely upon to protect our
intellectual property may not be adequate to protect our
products and services and could reduce our ability to compete in
the market.
In addition to patents, we rely on a combination of trade
secrets, copyright and trademark laws, non-disclosure agreements
and other contractual provisions and technical measures to
protect our intellectual property rights. While we require
employees, collaborators, consultants and other third-parties to
enter into confidentiality
and/or
non-disclosure agreements, where appropriate, any of the
following could still occur:
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the agreements may be breached;
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we may have inadequate remedies for any breach;
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proprietary information could be disclosed to our
competitors; or
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others may independently develop substantially equivalent
proprietary information and techniques or otherwise gain access
to our trade secrets or disclose such technologies.
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If, as a result of the foregoing or otherwise, our intellectual
property is disclosed or misappropriated, it would harm our
ability to protect our rights and our competitive position.
Moreover, several of our management and scientific personnel
were formerly associated with other pharmaceutical and
biotechnology companies and academic institutions. In some
cases, these individuals are conducting research in similar
areas with which they were involved prior to joining us. As a
result, we, as well as these individuals, could be subject to
claims of violation of trade secrets and similar claims.
Our
success will depend partly on our ability to operate without
infringing the intellectual property rights of others, and if we
are unable to do so, we may not be able to sell our
products.
Our commercial success will depend, to a significant degree, on
our ability to operate without infringing upon the patents of
others in the United States and abroad. There may be pending or
issued patents held by
25
parties not affiliated with us relating to technologies we use
in the development or use of certain of our contrast agents. If
any judicial or administrative proceeding upholds these or any
third-party patents as valid and enforceable, we could be
prevented from practicing the subject matter claimed in such
patents, or would be required to obtain licenses from the owners
of each such patent, or to redesign our product candidates or
processes to avoid infringement. For example, in November 2003,
we entered into an intellectual property agreement with
Dr. Martin R. Prince relating to dynamic
magnetic resonance angiography. Under the terms of the
intellectual property agreement, Dr. Prince granted us
certain discharges, licenses and releases in connection with the
historic and future use of Vasovist by us and agreed not to sue
us for intellectual property infringement related to the use of
Vasovist. We were required to pay an upfront fee of $850,000,
royalties on sales of Vasovist and approximately
88,000 shares of our common stock with a value of
approximately $2.3 million based on the closing price of
our common stock on the date of the agreement. In addition, we
agreed to supply Dr. Prince with approximately $140,000
worth of Vasovist annually throughout the patent life of
Vasovist. We cannot assure you that we will be able to enter
into additional licenses if required in the future. If we are
unable to obtain a required license on acceptable terms, or are
unable to design around these or any third-party patents, we may
be unable to sell our products, which would have a material
adverse effect on our business.
If MRI
manufacturers are not able to enhance their hardware and
software sufficiently, we will not be able to complete
development of our contrast agent for the evaluation of cardiac
indications.
Although MRI hardware and software is sufficient for the
evaluation of non-coronary vascular disease, which is our
initial target indication, we believe that the technology is not
as advanced for cardiac applications. Our initial NDA filing for
Vasovist is related to non-coronary vascular disease. Based on
feasibility studies we completed in 2001, however, the imaging
technology available for cardiac applications, including
coronary angiography and cardiac perfusion imaging, was not
developed to the point where there was clear visualization of
the cardiac region due to the effects of motion from breathing
and from the beating of the heart. In 2004, we initiated Phase 2
feasibility trials of Vasovist for cardiac indications using
available software and hardware that can be adapted for coronary
and cardiac perfusion data acquisition, and preliminary review
of the data indicates that we have not resolved the technical
issues related to this use of Vasovist. We have collaborated
with a number of leading academic institutions and with GE
Healthcare, Siemens Medical Systems and Philips Medical Systems
to help optimize cardiac imaging with Vasovist. We do not know
when, or if, these techniques will enable Vasovist to provide
clinically relevant images in cardiac indications. If MRI device
manufacturers are not able to enhance their scanners to perform
clinically useful cardiac imaging, we will not be able to
complete our development activities of Vasovist for that
application, thereby reducing the potential market for a product
in this area.
RISKS
RELATED TO OUR SECURITIES
If we
do not maintain effectiveness of the registration statement
covering the resale of the shares issued in the November 2007
private placement, we will be required to pay certain liquidated
damages, which could be material in amount.
The terms of the securities purchase agreements in connection
with the private placement would require us to pay certain
liquidated damages to the purchasers in the private placement in
the event that the registration statement does not remain
effective until the earlier of (i) 3 years after the
closing, (ii) the date on which all shares purchased by
such purchasers may be sold under Rule 144(k) of the
Securities Act of 1933, as amended, or (iii) the date that
all of the shares have been sold by such purchasers. The only
exception is our right, without incurring liquidated damages, to
suspend the use of the registration statement during three
periods of no more than an aggregate of 60 days in any
12-month
period. Subject to this exception, for each
30-day
period when the registration statement is not effective, we are
obligated to pay to each purchaser an amount in cash equal to 1%
of that purchasers aggregate purchase price, up to a
maximum of 10% of the aggregate purchase price paid by that
purchaser. The foregoing payments apply on a pro rata basis for
any portion of such
30-day
period. These amounts could be material. If we are unable to
maintain the effectiveness
26
of the registration statement (or effectiveness is suspended
other than as provided in the securities purchase agreements),
the amounts we are required to pay could materially adversely
affect our financial condition.
Our
stock price is volatile, which could subject us to securities
class action litigation.
The market prices of the capital stock of medical technology
companies have historically been very volatile and the market
price of the shares of our common stock fluctuates. The market
price of our common stock is affected by numerous factors,
including:
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actual or anticipated fluctuations in our operating results;
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announcements of technological innovation or new commercial
products by us or our competitors;
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new collaborations entered into by us or our competitors;
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developments with respect to proprietary rights, including
patent and litigation matters;
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results of preclinical studies and clinical trials;
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the timing of our achievement of regulatory milestones;
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conditions and trends in the pharmaceutical and other technology
industries;
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adoption of new accounting standards affecting such industries;
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changes in financial estimates by securities analysts;
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perceptions of the value of corporate transactions; and
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degree of trading liquidity in our common stock and general
market conditions.
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From June 30, 2007 to August 25, 2008, the closing
price of our common stock ranged from $1.32 to $5.86 per share.
The last reported closing price for our common stock on
August 25, 2008 was $1.84. Significant declines in the
price of our common stock could impede our ability to obtain
additional capital, attract and retain qualified employees and
reduce the liquidity of our common stock.
In addition, the stock market has from time to time experienced
significant price and volume fluctuations that have particularly
affected the market prices for the common stock of similarly
staged companies. These broad market fluctuations may adversely
affect the market price of our common stock. In the past,
following periods of volatility in the market price of a
particular companys securities, shareholders have often
brought class action securities litigation against that company.
Such litigation could result in substantial costs and a
diversion of managements attention and resources. For
example, in January 2005, a securities class action was filed in
U.S. District Court for the District of Massachusetts
against us and certain of our officers on behalf of persons who
purchased our common stock between July 10, 2003 and
January 14, 2005. The complaint alleged that we and the
other defendants violated the Securities Exchange Act of 1934,
as amended, by issuing a series of materially false and
misleading statements to the market throughout the class period,
which statements had the effect of artificially inflating the
market price of our securities. In January 2006, the
U.S. District Court for the District of Massachusetts
granted our Motion to Dismiss for Failure to Prosecute the
shareholder class action lawsuit against us. The dismissal was
issued without prejudice after a hearing, which dismissal does
not prevent another suit to be brought based on the same claims.
Future
sales of common stock by our existing stockholders and former
security holders of Predix may cause the stock price of our
common stock to fall.
The market price of our common stock could decline as a result
of sales by our existing stockholders and former Predix
stockholders in the market, or the perception that these sales
could occur. These sales might also make it more difficult for
us to sell equity securities at an appropriate time and price.
27
Certain
anti-takeover clauses in our charter and by-laws and in Delaware
law may make an acquisition of us more difficult.
Our restated certificate of incorporation authorizes our board
of directors to issue, without stockholder approval, up to
1,000,000 shares of preferred stock with voting, conversion
and other rights and preferences that could adversely affect the
voting power or other rights of the holders of our common stock.
The issuance of preferred stock or of rights to purchase
preferred stock could be used to discourage an unsolicited
acquisition proposal. In addition, the possible issuance of
preferred stock could discourage a proxy contest, make more
difficult the acquisition of a substantial block of our common
stock or limit the price that investors might be willing to pay
for shares of our common stock. Our restated certificate of
incorporation provides for staggered terms for the members of
our board of directors. A staggered board of directors and
certain provisions of our by-laws and of the state of Delaware
law applicable to us could delay or make more difficult a
merger, tender offer or proxy contest involving us. We are
subject to Section 203 of the General Corporation Law of the
State of Delaware, which, subject to certain exceptions,
restricts certain transactions and business combinations between
a corporation and a stockholder owning 15% or more of the
corporations outstanding voting stock for a period of
three years from the date the stockholder becomes an interested
stockholder. These provisions may have the effect of delaying or
preventing a change in control of us without action by the
stockholders and, therefore, could adversely affect the price of
our stock.
RISKS
RELATED TO THE COMMITTED EQUITY FINANCING FACILITY WITH
KINGSBRIDGE
The
Committed Equity Financing Facility that we entered into with
Kingsbridge may not be available to us if we elect to make a
draw down, may require us to make additional
blackout or other payments to Kingsbridge, and may
result in dilution to our stockholders.
In August 2008, we entered into the CEFF with Kingsbridge. The
CEFF entitles us to sell and obligates Kingsbridge to purchase,
from time to time over a period of three years, shares of our
common stock for cash consideration, subject to certain
conditions and restrictions. Kingsbridge will not be obligated
to purchase shares under the CEFF unless certain conditions are
met, which include a minimum price for our common stock; the
accuracy of representations and warranties made to Kingsbridge;
compliance with laws; effectiveness of the registration
statement of which this prospectus is a part; and the continued
listing of our stock on the Nasdaq Global Market. In addition,
Kingsbridge is permitted to terminate the CEFF if it determines
that a material and adverse event has occurred affecting our
business, operations, properties or financial condition and if
such condition continues for a period of ten days from the date
Kingsbridge provides us notice of such material and adverse
event. If we are unable to access funds through the CEFF, or if
the CEFF is terminated by Kingsbridge, we may be unable to
access capital on favorable terms or at all.
We are entitled in certain circumstances to deliver a blackout
notice to Kingsbridge to suspend the use of the registration
statement of which this prospectus is a part and prohibit
Kingsbridge from selling shares under this prospectus. If we
deliver a blackout notice in the 15 trading days following the
settlement of a draw down, or if the registration statement is
not effective in circumstances not permitted by the agreement,
then we must make a payment to Kingsbridge, or issue Kingsbridge
additional shares in lieu of this payment, calculated on the
basis of the number of shares held by Kingsbridge (exclusive of
shares that Kingsbridge may hold pursuant to exercise of the
Kingsbridge warrant) and the change in the market price of our
common stock during the period in which the use of the
registration statement is suspended. If the trading price of our
common stock declines during a suspension of the registration
statement, the blackout or other payment could be significant.
Should we sell shares to Kingsbridge under the CEFF, or issue
shares in lieu of a blackout payment, it will have a dilutive
effective on the holdings of our current stockholders, and may
result in downward pressure on the price of our common stock. If
we draw down under the CEFF, we will issue shares to Kingsbridge
at a discount of up to twelve percent from the volume weighted
average price of our common stock. If we draw down amounts under
the CEFF when our share price is decreasing, we will need to
issue more shares to raise the same amount than if our stock
price was higher. Issuances in the face of a declining share
price will have an even greater dilutive effect than if our
share price were stable or increasing, and may further decrease
our share price.
28
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and any accompanying prospectus supplement
(including any document incorporated by reference herein or
therein) contain statements with respect to the Company which
constitute forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of
1934, as amended. and of the safe harbor provisions of the
United States Private Securities Litigation Reform Act of 1995.
Words such as anticipate, believes,
budget, continue, could,
estimate, expect, forecast,
intend, may, plan,
potential, predicts,
project, should, will and
similar expressions are intended to identify such
forward-looking statements. Forward-looking statements involve
inherent risks and uncertainties, which are difficult to predict
and many of which are beyond our control. A number of important
factors could cause actual results to differ materially from
those in the forward-looking statements, including those factors
discussed in Risk Factors in any prospectus
supplement and in the documents incorporated by reference herein
or therein. Factors that could cause actual results to differ
from those reflected in forward-looking statements relating to
our operations and business include:
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the competitive environment in the life sciences industry;
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whether we can successfully develop new products and the degree
to which these gain market acceptance;
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the success and timing of our pre-clinical studies and clinical
trials;
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our ability to obtain and maintain regulatory approval for our
product candidates and the timing of such approvals;
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our ability to research, develop and commercialize our product
candidates;
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regulatory developments in the United States and foreign
countries; and
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our ability to obtain and maintain intellectual property
protection for our product candidates.
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We caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date they
are made. We disclaim any obligation, except as specifically
required by law and the rules of the SEC, to publicly update or
revise any such statements to reflect any change in company
expectations or in events, conditions or circumstances on which
any such statements may be based, or that may affect the
likelihood that actual results will differ from those set forth
in the forward-looking statements.
You should read this prospectus and any accompanying prospectus
supplement and the documents that we reference herein and
therein and have filed as exhibits to the registration
statement, of which this prospectus is part, completely and with
the understanding that our actual future results may be
materially different from what we expect. You should assume that
the information appearing in this prospectus and any
accompanying prospectus supplement is accurate as of the date on
the front cover of this prospectus or such prospectus supplement
only. Our business, financial condition, results of operations
and prospects may change. We may not update these
forward-looking statements, even though our situation may change
in the future, unless we have obligations under the Federal
securities laws to update and disclose material developments
related to previously disclosed information. We qualify all of
the information presented in this prospectus and any
accompanying prospectus supplement, and particularly our
forward-looking statements, by these cautionary statements.
USE OF
PROCEEDS
We will not receive any of the proceeds from the sale of shares
of our common stock by the selling stockholder pursuant to this
prospectus. Any issuance of shares by us to Kingsbridge under
the common stock purchase agreement or in connection with the
exercise of the Kingsbridge warrant will be made pursuant to an
exemption from the registration requirements of the Securities
Act. To the extent the warrant held by the selling stockholder
is exercised at its current exercise price, we would receive
approximately $977,000 in cash proceeds, unless such warrant is
exercised on a cashless basis pursuant to its terms.
29
Unless otherwise provided in the applicable prospectus
supplement, we intend to use the proceeds from our sales, if
any, to Kingsbridge for general corporate purposes, which may
include funding clinical trials, research and development,
regulatory activities and product marketing, repayment or
refinancing of existing indebtedness, investments, capital
expenditures, and acquisitions of companies, products,
intellectual property or other technology. We may also invest
the net proceeds temporarily in short-term or marketable
securities until we use them for their stated purpose.
SELLING
STOCKHOLDER
This prospectus relates to the possible resale by the selling
stockholder, Kingsbridge, of shares of common stock that we may
issue pursuant to the common stock purchase agreement we entered
into with Kingsbridge on August 4, 2008, or upon exercise
of the warrant we issued to Kingsbridge. We are filing the
registration statement of which this prospectus is a part
pursuant to the provisions of the registration rights agreement
we entered into with Kingsbridge on August 4, 2008.
The selling stockholder may from time to time offer and sell
pursuant to this prospectus any or all of the shares that it
acquires under the common stock purchase agreement or upon
exercise of the warrant.
The following table presents information regarding Kingsbridge
and the shares that it may offer and sell from time to time
under this prospectus. This table is prepared based on
information supplied to us by the selling stockholder. As used
in this prospectus, the term selling stockholder
includes Kingsbridge and any donees, pledges, transferees or
other successors in interest selling shares received after the
date of this prospectus from a selling stockholder as a gift,
pledge or other non-sale related transfer. The number of shares
in the column Number of Shares Being Offered
represents all of the shares that the selling stockholder may
offer under this prospectus. The selling stockholder may sell
some, all or none of its shares. We do not know how long the
selling stockholder will hold the shares before selling them,
and we currently have no agreements, arrangements or
understandings with the selling stockholder regarding the sale
of any of the shares.
Beneficial ownership is determined in accordance with
Rule 13d-3(d)
promulgated by the SEC under the Exchange Act. The percentage of
shares beneficially owned prior to the offering is based both on
41,421,315 shares of our common stock actually outstanding
as of August 1, 2008 and on the assumption that all shares
of common stock issuable under the common stock purchase
agreement we entered into with Kingsbridge on August 4,
2008 and all shares of common stock issuable upon exercise of
the warrant held by Kingsbridge are outstanding as of that date.
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Shares of
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Common Stock
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Shares of
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Beneficially Owned Prior to the
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Common Stock
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Offering
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Number of Shares
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Beneficially Owned After Offering
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Security Holders
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Number
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Percent
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Being Offered
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Number
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Percent
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Kingsbridge Capital Limited(1)
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8,680,120
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(2)
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17.3
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%
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8,680,120
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0
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0
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%
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(1) |
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The address of Kingsbridge is Kingsbridge Capital Limited,
Attention: Mr. Antony Garner-Hillman,
P.O. Box 1075, Elizabeth House, 9 Castle Street, St.
Helier, Jersey, JE42QP, Channel Islands. |
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(2) |
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Consists of 8,280,120 shares of common stock issuable under
the common stock purchase agreement we entered into with
Kingsbridge on August 4, 2008 and 400,000 shares of
common stock issuable upon exercise of a warrant, which warrant
is not exercisable before February 4, 2009. For the
purposes hereof, we assume the issuance of all
8,680,120 shares. Maria ODonoghue and Adam Gurney
have shared voting and investment control of the securities held
by Kingsbridge. Kingsbridge does not accept third party
investments. |
30
PLAN OF
DISTRIBUTION
We are registering 8,680,120 shares of common stock under
this prospectus on behalf of the selling stockholder,
Kingsbridge. Except as described below, to our knowledge,
Kingsbridge has not entered into any agreement, arrangement or
understanding with any particular broker or market maker with
respect to the shares of common stock offered hereby, nor,
except as described below, do we know the identity of the
brokers or market makers that will participate in the sale of
the shares.
Kingsbridge may decide not to sell any shares. The selling
stockholder may from time to time offer some or all of the
shares of common stock through brokers, dealers or agents who
may receive compensation in the form of discounts, concessions
or commissions from the selling stockholder
and/or the
purchasers of the shares of common stock for whom they may act
as agent. In effecting sales, broker-dealers that are engaged by
the selling stockholder may arrange for other broker-dealers to
participate. Kingsbridge may be deemed to be an
underwriter within the meaning of the Securities
Act. Any brokers, dealers or agents who participate in the
distribution of the shares of common stock may also be deemed to
be underwriters, and any profits on the sale of the
shares of common stock by them and any discounts, commissions or
concessions received by any such brokers, dealers or agents may
be deemed to be underwriting discounts and commissions under the
Securities Act. Kingsbridge has advised us that it may effect
resales of our common stock through any one or more registered
broker-dealers. To the extent the selling stockholder may be
deemed to be an underwriter, the selling stockholder will be
subject to the prospectus delivery requirements of the
Securities Act and may be subject to certain statutory
liabilities of, including but not limited to, Sections 11,
12 and 17 of the Securities Act and
Rule 10b-5
under the Exchange Act.
The selling stockholder will act independently of us in making
decisions with respect to the timing, manner and size of each
sale. Such sales may be made over the Nasdaq Global Market, on
the over-the-counter market, otherwise or in a combination of
such methods of sale, at then-prevailing market prices, at
prices related to prevailing market prices or at negotiated
prices. The shares of common stock may be sold according to one
or more of the following methods:
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a block trade in which the broker or dealer so engaged will
attempt to sell the shares of common stock as agent but may
position and resell a portion of the block as principal to
facilitate the transaction;
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purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this prospectus;
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an over-the-counter distribution in accordance with the Nasdaq
rules;
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ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
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privately negotiated transactions;
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a combination of such methods of sale; and
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any other method permitted pursuant to applicable law.
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Any shares covered by this prospectus which qualify for sale
pursuant to Rule 144 of the Securities Act may be sold
under Rule 144 rather than pursuant to this prospectus. In
addition, the selling stockholder may transfer the shares by
other means not described in this prospectus.
Any broker-dealer participating in such transactions as agent
may receive commissions from Kingsbridge (and, if they act as
agent for the purchaser of such shares, from such purchaser).
Broker-dealers may agree with Kingsbridge to sell a specified
number of shares at a stipulated price per share, and, to the
extent such a broker-dealer is unable to do so acting as agent
for Kingsbridge, to purchase as principal any unsold shares at
the price required to fulfill the broker-dealer commitment to
Kingsbridge. Broker-dealers who acquire shares as principal may
thereafter resell such shares from time to time in transactions
(which may involve crosses and block transactions and which may
involve sales to and through other broker-dealers, including
transactions of the nature described above) on the Nasdaq Global
Market, on the over-the-counter market, in privately-negotiated
transactions or otherwise at market prices prevailing at the
time of sale or at negotiated prices, and in connection with
such resales may pay to or receive from the purchasers of such
shares commissions
31
computed as described above. To the extent required under the
Securities Act, an amendment to this prospectus, or a
supplemental prospectus will be filed, disclosing:
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the name of any such broker-dealers;
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the number of shares involved;
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the price at which such shares are to be sold;
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the commission paid or discounts or concessions allowed to such
broker-dealers, where applicable;
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that such broker-dealers did not conduct any investigation to
verify the information set out or incorporated by reference in
this prospectus, as supplemented; and
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other facts material to the transaction.
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Underwriters and purchasers that are deemed underwriters under
the Securities Act may engage in transactions that stabilize,
maintain or otherwise affect the price of the securities,
including the entry of stabilizing bids or syndicate covering
transactions or the imposition of penalty bids. Kingsbridge and
any other persons participating in the sale or distribution of
the shares will be subject to the applicable provisions of the
Exchange Act and the rules and regulations thereunder including,
without limitation, Regulation M. These provisions may
restrict certain activities of, and limit the timing of,
purchases by the selling stockholder or other persons or
entities. Furthermore, under Regulation M, persons engaged
in a distribution of securities are prohibited from
simultaneously engaging in market making and certain other
activities with respect to such securities for a specified
period of time prior to the commencement of such distributions,
subject to special exceptions or exemptions. In addition, the
anti-manipulation rules under the Exchange Act may apply to
sales of the securities in the market. All of these limitations
may affect the marketability of the shares and the ability of
any person to engage in market-making activities with respect to
the securities.
We have agreed to pay the expenses of registering the shares of
common stock under the Securities Act, including registration
and filing fees, printing expenses, administrative expenses and
certain legal and accounting fees, as well as certain fees of
counsel for the selling stockholder incurred in the preparation
of the CEFF agreements and the registration statement of which
this prospectus forms a part. The selling stockholder will bear
all discounts, commissions or other amounts payable to
underwriters, dealers or agents, as well as transfer taxes and
certain other expenses associated with the sale of securities.
Under the terms of the Kingsbridge common stock purchase
agreement and the registration rights agreement, we have agreed
to indemnify the selling stockholder and certain other persons
against certain liabilities in connection with the offering of
the shares of common stock offered hereby, including liabilities
arising under the Securities Act or, if such indemnity is
unavailable, to contribute toward amounts required to be paid in
respect of such liabilities.
At any time a particular offer of the shares of common stock is
made, a revised prospectus or prospectus supplement, if
required, will be distributed. Such prospectus supplement or
post-effective amendment will be filed with the SEC, to reflect
the disclosure of required additional information with respect
to the distribution of the shares of common stock. We may
suspend the sale of shares by the selling stockholder pursuant
to this prospectus for certain periods of time for certain
reasons, including if the prospectus is required to be
supplemented or amended to include additional material
information.
REGISTRATION
RIGHTS
In connection with establishing the CEFF, we entered into a
registration rights agreement with Kingsbridge. Pursuant to the
registration rights agreement, we have filed a registration
statement, which includes this prospectus, with the SEC relating
to the resale by Kingsbridge of any shares of common stock
purchased by Kingsbridge under the common stock purchase
agreement or issued to Kingsbridge as a result of the exercise
of the Kingsbridge warrant. The effectiveness of this
registration statement is a condition precedent to our ability
to sell common stock to Kingsbridge under the common stock
purchase agreement. We are entitled in certain circumstances,
including the existence of certain kinds of nonpublic
information, to
32
deliver a blackout notice to Kingsbridge to suspend the use of
this prospectus and prohibit Kingsbridge from selling shares
under this prospectus. If we deliver a blackout notice in the 15
trading days following the settlement of a draw down, or if the
registration statement of which this prospectus is a part is not
effective in circumstances not permitted by the agreement, then
we must pay amounts to Kingsbridge, or issue Kingsbridge
additional shares in lieu of payment, calculated by means of a
varying percentage of an amount based on the number of shares
held by Kingsbridge pursuant to such draw down and the change in
the market price of our common stock between the date the
blackout notice is delivered (or the registration statement is
not effective) and the date the prospectus again becomes
available.
LEGAL
MATTERS
The validity of the securities offered hereby will be passed
upon for us by Goodwin Procter LLP, Boston, Massachusetts.
EXPERTS
The consolidated financial statements of EPIX Pharmaceuticals,
Inc. appearing in EPIX Pharmaceuticals, Inc.s Annual
Report (Form 10-K) for the year ended December 31, 2007, and the
effectiveness of EPIX Pharmaceuticals, Inc.s internal
control over financial reporting as of December 31, 2007 have
been audited by Ernst & Young LLP, independent registered
public accounting firm, as set forth in their reports thereon
included therein, and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by
reference in reliance upon such reports given on the authority
of such firm as experts in accounting and auditing.
WHERE YOU
CAN FIND MORE INFORMATION
We are a public company and file annual, quarterly and current
reports, proxy statements and other information with the
Securities and Exchange Commission. You may read and copy any
document we file at the SECs Public Reference Room at
100 F Street, N.E., Room 1580,
Washington, D.C. 20549. You can request copies of these
documents by writing to the SEC and paying a fee for the copying
cost. Please call the SEC at
1-800-SEC-0330
for more information about the operation of the public reference
room. Our SEC filings are also available to the public at the
SECs web site at
http://www.sec.gov,
or at our web site at
http://www.epixpharma.com.
In addition, our stock is listed for trading on The NASDAQ
Global Market. You can read and copy reports and other
information concerning us at the offices of the National
Association of Securities Dealers, Inc. located at
1735 K Street, Washington, D.C. 20006.
This prospectus is only part of a Registration Statement on
Form S-3
that we have filed with the SEC under the Securities Act of
1933, as amended, and therefore omits certain information
contained in the Registration Statement. We have also filed
exhibits and schedules with the Registration Statement that are
excluded from this prospectus, and you should refer to the
applicable exhibit or schedule for a complete description of any
statement referring to any contract or other document. You may:
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inspect a copy of this prospectus, including the exhibits and
schedules, without charge at the public reference room;
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obtain a copy from the SEC upon payment of the fees prescribed
by the SEC; or
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obtain a copy from the SEC website.
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INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference
information from other documents that we file with them, which
means that we can disclose important information in this
prospectus by referring to those documents. The information
incorporated by reference is considered to be part of this
prospectus, and information that we file later with the SEC will
automatically update and supersede the information in this
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prospectus. We incorporate by reference the documents listed
below and any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended. The documents we are
incorporating by reference as of their respective dates of
filing are:
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our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007;
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our Quarterly Reports on
Form 10-Q
for the quarters ended March 31, 2008 and June 30,
2008;
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our Current Reports on
Form 8-K,
filed with the Commission on February 22, 2008,
March 20, 2008, March 28, 2008, April 7, 2008,
May 21, 2008, May 28, 2008, June 3, 2008,
June 19, 2008, July 28, 2008 and August 5, 2008;
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those portions of our Definitive Proxy Statement on
Schedule 14A, filed with the Commission on April 1,
2008 incorporated by reference into our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007; and
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The description of our common stock contained in
Description of Capital Stock in the registration
statement on
Form S-4
filed with the SEC on April 25, 2006 (File
No. 333-33513)
and any amendments or reports filed to update such description.
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All documents and reports filed by us with the SEC pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
(other than Current Reports on
Form 8-K
containing only Regulation FD or Regulation G
disclosure furnished under Item 9 or 12 of
Form 8-K,
unless otherwise indicated therein) after the date of this
prospectus and prior to the termination of the offering made
hereby shall be deemed to be incorporated by reference into this
prospectus and to be a part hereof from the date of filing of
such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of
this prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein or in any
prospectus supplement modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this
prospectus.
We will provide, without charge to each person, including any
beneficial owner, to whom this prospectus is delivered, upon
written or oral request of such person, a copy of any or all of
the documents incorporated herein by reference other than
exhibits, unless such exhibits specifically are incorporated by
reference into such documents or this document. Requests for
such documents should be addressed in writing or by telephone to:
EPIX
Pharmaceuticals, Inc.
4 Maguire Road
Lexington, Massachusetts 02421
Attention: Kim Cobleigh Drapkin, Chief Financial Officer
(781) 761-7600
You should rely only on the information contained in this
prospectus, any prospectus supplement or any document to which
we have referred you. We have not authorized anyone else to
provide you with information that is different. This prospectus
and any prospectus supplement may be used only where it is legal
to sell these securities. The information in this prospectus or
any prospectus supplement is current only as of the date on the
front of these documents.
34
PART II
INFORMATION
NOT REQUIRED IN PROSPECTUS
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ITEM 14.
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OTHER
EXPENSES OF ISSUANCE AND
DISTRIBUTION
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The following table sets forth the costs and expenses payable by
us in connection with the offerings described in this
registration statement.
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SEC Registration Fee
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$
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652
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NASDAQ Global Market Listing Fee
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*65,000
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Printing Expenses
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*10,000
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Accounting Fees and Expenses
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*20,000
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Legal Fees and Expenses
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*100,000
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Miscellaneous
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*9,348
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TOTAL
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$
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205,000
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* |
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Estimated pursuant to Item 511 of
Regulation S-K |
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ITEM 15.
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INDEMNIFICATION
OF DIRECTORS AND OFFICERS
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Our Restated Certificate of Incorporation, as amended (the
Restated Certificate) provides that we shall
indemnify to the fullest extent authorized by the Delaware
General Corporation Law (DGCL), each person who is
involved in any litigation or other proceeding because such
person is or was a director or officer of us or is or was
serving as an officer or director of another entity at our
request, against expenses (including attorneys fees),
judgments, fines and amounts reasonably incurred in connection
therewith. The Restated Certificate provides that the right to
indemnification includes the right to be paid expenses incurred
in defending any proceeding in advance of its final disposition;
provided, however, that such advance payment will only be made
upon delivery to us of an undertaking, by the director or
officer, to repay all amounts so advanced if it is ultimately
determined that such director or officer is not entitled to
indemnification.
Section 145 of the DGCL permits a corporation to indemnify
any director or officer of the corporation against expenses
(including attorneys fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred in
connection with any action, suit or proceeding brought by reason
of the fact that such person is or was a director or officer of
the corporation, if such person acted in good faith and in a
manner that he or she reasonably believed to be in, or not
opposed to, the best interests of the corporation, and, with
respect to any criminal action or proceeding, if he or she had
no reason to believe his or her conduct was unlawful. In a
derivative action, (i.e., one brought by or on behalf of the
corporation), indemnification may be made only for expenses,
actually and reasonably incurred by any director or officer in
connection with the defense or settlement of such an action or
suit, if such person acted in good faith and in a manner that he
reasonably believed to be in, or not opposed to, the best
interests of the corporation, except that no indemnification
shall be made if such person shall have been adjudged to be
liable to the corporation, unless and only to the extent that
the court in which the action or suit was brought shall
determine that the defendant is fairly and reasonably entitled
to indemnity for such expenses despite such adjudication of
liability.
Pursuant to Section 102(b)(7) of the DGCL, the Restated
Certificate eliminates the liability of a director or the
corporation or its stockholders for monetary damages for such
breach of fiduciary duty as a director, except for liabilities
arising (i) from any breach of the directors duty of
loyalty to the corporation or its stockholders, (ii) from
acts or missions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL, or (iv) from any transaction
from which the director derived an improper personal benefit. We
have obtained insurance policies insuring our directors and
officers against certain liabilities that they may incur in
their capacity as directors and officers.
We have entered, or intend to enter, into indemnification
agreements (the Indemnification Agreements), with
each of our directors and certain of our officers. The
Indemnification Agreements provide that we will, to
II-1
the fullest extent permitted by law, pay any attorneys
fees and all other costs, expenses and obligations paid or
incurred by the indemnitee in connection with claims against him
or her related to the fact that he or she was a director or
officer of the company or serving at our request in such
capacity with another corporation, partnership, joint venture,
employee benefit plan, trust or other enterprise. The payments
to be made under the Indemnification Agreements include
expenses, judgments, fines, penalties and amounts paid in
settlement (including all interest, assessments and other
judgments, fines, penalties or amounts paid in settlement) of
such claims. If requested by the indemnitee, we shall advance
all expenses to the indemnitee. Any payments made by us under
the Indemnification Agreements are subrogated to all of the
rights of recovery of the indemnitee. The rights of the
indemnitee are in addition to such rights the indemnitee may
have under our Restated Certificate, our by-laws and the DGCL.
Pursuant to the Agreement and Plan of Merger by and among us,
Predix Pharmaceuticals Holdings, Inc. (Predix) and
EPIX Delaware, Inc. dated as of April 3, 2006, as amended,
we agreed to fulfill and honor the obligations of Predix which
existed prior to the merger to indemnify Predixs present
and former directors and officers. The certificate of
incorporation and by-laws of EPIX Delaware, Inc. after the
merger provide for the indemnification and elimination of
liability for monetary damages to the same extent as set forth
in Predixs certificate of incorporation and by-laws and
such provision may not be amended, repealed or otherwise
modified for a period of six years after the completion of the
merger in any manner that would adversely affect the rights of
the directors or officers of Predix at the time of the
completion of the merger. We have agreed to guarantee the timely
payment of all funds owing by, and the timely performance of all
obligations of EPIX Delaware, Inc. relating to these
indemnification obligations.
(a) Exhibit Index
A list of exhibits filed with this registration statement is set
forth on the Exhibit Index and is incorporated in this
Item 16(a) by reference.
(b) Financial Statement Schedules
None.
The undersigned registrant hereby undertakes:
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by
section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to
Rule 424(b) (§ 230.424(b) of this chapter) if, in
the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set
forth in the Calculation of Registration Fee table
in the effective registration statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
II-2
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
provided, however, that paragraphs (a)(1)(i), (a)(1)(ii)
and (a)(1)(iii) do not apply if the information required to be
included in a post-effective amendment by those paragraphs is
contained in reports filed with or furnished to the Commission
by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the registration statement or
is contained in a form of prospectus filed pursuant to
Rule 424(b) that is part of the registration statement.
(b) That, for purposes of determining liability under the
Securities Act of 1933 to any purchaser, each prospectus filed
by the registrant pursuant to Rule 424(b)(3) shall be
deemed to be part of this registration statement as of the date
the filed prospectus was deemed part of and included in the
registration statement.
(c) That, for purposes of determining liability under the
Securities Act of 1933 to any purchaser, each prospectus
required to be filed pursuant to Rule 424(b)(2), (b)(5), or
(b)(7) as part of a registration statement in reliance on
Rule 430B relating to an offering made pursuant to
Rule 415(a)(1)(i), (vii), or (x) for the purpose of
providing the information required by section 10(a) of the
Securities Act of 1933 shall be deemed to be part of and
included in the registration statement as of the earlier of the
date such form of prospectus is first used after effectiveness
or the date of the first contract of sale of securities in the
offering described in the prospectus. As provided in
Rule 430B, for liability purposes of the issuer and any
person that is at that date an underwriter, such date shall be
deemed to be a new effective date of the registration statement
relating to the securities in the registration statement to
which that prospectus relates, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof. Provided, however, that no statement made
in a registration statement or prospectus that is part of the
registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement
or prospectus that is part of the registration statement will,
as to a purchaser with a time of contract of sale prior to such
effective date, supersede or modify any statement that was made
in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately
prior to such effective date.
(d) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act
of 1933, each filing of the registrants annual report
pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plans annual report pursuant to
Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by the controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on
Form S-3
and has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the
Town of Lexington, Commonwealth of Massachusetts, on
August 26, 2008.
EPIX PHARMACEUTICALS, INC.
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By:
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/s/ Kim
Cobleigh Drapkin
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Kim Cobleigh Drapkin, CPA
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
The registrant and each person whose signature appears below
constitutes and appoints Elkan Gamzu and Kim Cobleigh Drapkin
and each of them singly, his, her or its true and lawful
attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him, her or it and in his, her or its
name, place and stead, in any and all capacities, to sign and
file any and all amendments (including post-effective
amendments) to this Registration Statement, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as
fully to all intents and purposes as he, she, or it might or
could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or
his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
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Signature
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Title
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Date
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/s/ Elkan
Gamzu
Elkan
Gamzu, Ph.D.
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Chief Executive Officer (Principal Executive Officer)
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August 26, 2008
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/s/ Kim
Cobleigh Drapkin
Kim
Cobleigh Drapkin
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Chief Financial Officer (Principal Financial Officer and
Principal Accounting Officer)
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August 26, 2008
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/s/ Frederick
Frank
Frederick
Frank
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Chairman of the Board of Directors
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August 26, 2008
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/s/ Michael
Gilman
Michael
Gilman, Ph.D.
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Director
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August 26, 2008
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/s/ Mark
Leuchtenberger
Mark
Leuchtenberger
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Director
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August 26, 2008
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/s/ Robert
J. Perez
Robert
J. Perez
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Director
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August 26, 2008
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/s/ Gregory
D. Phelps
Gregory
D. Phelps
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Director
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August 26, 2008
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/s/ Ian
F. Smith
Ian
F. Smith, CPA, ACA
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Director
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August 26, 2008
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II-4
EXHIBIT INDEX
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Exhibit
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No.
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Description
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4
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.1
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Specimen certificate for shares of Common Stock of the Company
(filed as Exhibit 4.1 to the Companys Quarterly
Report on
Form 10-Q
for the period ended September 30, 2006 and incorporated
herein by reference).
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4
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.2
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Warrant issued to Kingsbridge Capital Limited, dated as of
August 4, 2008 (filed as Exhibit 4.1 to the
Companys Current Report on
Form 8-K
on August 5, 2008 and incorporated herein by reference).
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5
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.1*
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Legal Opinion of Goodwin Procter LLP.
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10
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.1
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Common Stock Purchase Agreement between the Company and
Kingsbridge Capital Limited, dated as of August 4, 2008
(filed as Exhibit 10.1 to the Companys Current Report
on
Form 8-K
on August 5, 2008 and incorporated herein by reference).
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10
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.2
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Registration Rights Agreement between the Company and
Kingsbridge Capital Limited, dated as of August 4, 2008
(filed as Exhibit 10.2 to the Companys Current Report
on
Form 8-K
on August 5, 2008 and incorporated herein by reference).
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23
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.1*
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Consent of Ernst & Young LLP, Independent Registered
Public Accounting Firm of the Company.
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23
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.2*
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Consent of Goodwin Procter LLP (included in the opinion filed as
Exhibit 5.1).
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24
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.1*
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Power of Attorney (included on signature page to this
Registration Statement).
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