UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND SPECIAL REPORTS
PURSUANT TO SECTIONS 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission File Number: 0-25544
---------------
Miravant Medical Technologies
(Exact name of Registrant as specified in its charter)
Miravant Medical Technologies
(Exact name of Registrant as specified in its charter)
Delaware 77-0222872
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
336 Bollay Drive, Santa Barbara, California 93117
(Address of principal executive offices, including zip code)
(805) 685-9880
(Registrant's telephone number, including area code)
Securities Registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section
12(g) of the Act:
Common Stock, $.01 Par Value
Common Share Purchase Rights
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes [ ]. No [X].
The approximate aggregate market value of voting stock held by
non-affiliates as of June 30, 2002 based upon the last sale price of the Common
Stock of $0.53 per share, as reported on the Nasdaq National Market
(Subsequently delisted and currently trading on the OTC Bulletin Board(R)), was
approximately $8,594,414. For purposes of this calculation only, the registrant
has assumed that its directors and executive officers, and any person, who has
filed a Schedule 13D or 13G, is an affiliate.
The number of shares of Common Stock outstanding as of March 14, 2003 was
24,272,305.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following document are incorporated by reference into Part
III of this Form 10-K: the Proxy Statement for the Registrant's 2003 Annual
Meeting of Stockholders scheduled to be held on June 12, 2003. A copy of the
proxy statement may be obtained, when available, upon written request to the
Corporate Secretary, Miravant Medical Technologies, 336 Bollay Drive, Santa
Barbara, CA 93117.
MIRAVANT MEDICAL TECHNOLOGIES
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
TABLE OF CONTENTS
PART I
Item 1. Business ...........................................................................................4
Item 2. Properties .........................................................................................23
Item 3. Legal Proceedings...................................................................................24
Item 4. Submission of Matters to a Vote of Security-Holders.................................................24
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholders Matters..............................25
Item 6. Selected Consolidated Financial Data................................................................27
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations...............28
Item 7A. Qualitative and Quantitative Disclosures About Market Risk..........................................62
Item 8. Financial Statements and Supplementary Data.........................................................62
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure................86
PART III
Item 10. Directors and Executive Officers of the Registrant .................................................87
Item 11. Executive Compensation..............................................................................87
Item 12. Security Ownership of Certain Beneficial Owners and Management......................................87
Item 13. Certain Relationships and Related Transactions......................................................87
Item 14. Controls and Procedures.............................................................................87
PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.....................................88
PART I
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements, which
involve known and unknown risks and uncertainties. These statements relate to
our future plans, objectives, expectations and intentions. These statements may
be identified by the use of words such as "may," "will," "should," "potential,"
"expects," "anticipates," "intends," "plans," "believes" and similar
expressions. These statements are based on our current beliefs, expectations and
assumptions and are subject to a number of risks and uncertainties and include
statements regarding our general beliefs concerning the efficacy and potential
benefits of photodynamic therapy; our ability to raise funds to continue our
operations; the timing and our ability to complete of our planned New Drug
Application, or NDA, filing for the use of SnET2 to treat wet age-related
macular degeneration, or AMD, with the U.S. Food and Drug Administration, or
FDA; our ability to make or negotiate new debt repayment terms for our first
debt payment due to Pharmacia Corporation, or Pharmacia, on June 30, 2003; our
ability to continue to receive the $1.0 million monthly borrowings through
November 2003 under the December 2002 Convertible Debt Agreement, or the Debt
Agreement; our ability to resolve any contingencies associated with our NDA
after it is filed with the FDA; the assumption that we will continue as a going
concern; our ability to regain our listing status on Nasdaq; our plans to
collaborate with other parties and/or license SnET2; our ability to continue to
retain employees under our current financial circumstances; our ability to use
our light production and delivery devices in future clinical trials; our
expected research and development expenditures; our patent prosecution strategy;
and our expectations concerning the government exercising its rights to use
certain of our licensed technology. Our actual results could differ materially
from those discussed in these statements due to a number of risks and
uncertainties including: failure to obtain additional funding timely, if at all;
failure to make our scheduled payment or negotiate new debt repayment terms with
Pharmacia prior to June 30, 2003 resulting in foreclosure on all our assets; we
may be unable to continue borrowing under the Debt Agreement if we fail to meet
certain requirements or if these requirements are not met to the satisfaction of
the Lenders; unanticipated complexity or difficulty preparing and completing the
NDA filing; a failure of our drugs and devices to receive regulatory approval;
other parties may decline to collaborate with us due to our financial condition
or other reasons beyond our control; our existing light production and delivery
technology may prove to be inapplicable or inappropriate for future studies; we
may be unable to obtain the necessary funding to further our research and
development activities and the government may change its past practices and
exercise its rights contrary to our expectations. For a more complete
description of the risks that may impact our business, see "Risk Factors",
included in Item 7, for a discussion of certain risks, including those relating
to our ability to obtain additional funding, our ability to establish new
strategic collaborations, our operating losses, risks related to our industry
and other forward-looking statements.
ITEM 1. BUSINESS
General
We are a pharmaceutical research and development company developing light
activated drugs and associated devices for a medical procedure called
photodynamic therapy, or PDT. PDT is a minimally invasive medical procedure that
uses drugs that are activated by light, or photoreactive drugs, to selectively
destroy abnormal cells and blood vessels. We have branded our proprietary
version of PDT as PhotoPoint(TM) PDT. PhotoPoint PDT integrates our drugs with
our light producing and light delivery devices to achieve a photochemical effect
on targeted diseased cells and blood vessels. While we currently have no drugs
or devices that have received regulatory approval, we believe that PhotoPoint
PDT is a platform technology that has the potential to be a safe and effective
treatment for a number of diseases including those in ophthalmology,
dermatology, cardiovascular disease and oncology.
The most significant company developments are as follows:
* In January 2003, we announced that we intend to file our first New
Drug Application, or NDA, for marketing approval of PhotoPoint SnET2,
a new drug for the treatment of wet age-related macular degeneration,
or AMD. Our decision came after we completed our analyses of the Phase
III AMD clinical data, which showed positive results in a significant
number of drug-treated patients versus placebo control patients, and
after holding discussions with regulatory and the U.S. Food and Drug
Administration, or FDA, consultants;
* Previously, in January 2002, Pharmacia, after an analysis of the Phase
III AMD clinical data, determined that the clinical data results
indicated that SnET2 did not meet the primary efficacy endpoint in the
study population, as defined by the clinical trial protocol, and that
they would not be filing a NDA with the FDA. In March 2002, we
regained the license rights to SnET2 as well as the related data and
assets from the Phase III AMD clinical trials from Pharmacia. In
addition, we have terminated our license collaboration with Pharmacia,
and we are currently seeking a new collaborative partner for
PhotoPoint PDT in ophthalmology;
* In August 2002, we completed a private placement financing which
consisted of the sale of unregistered shares of Common Stock for gross
proceeds of $2.5 million at $0.50 per share, based on a premium of
approximately 20% of the average closing price for the prior 10
trading days. For every two common shares acquired, the equity
purchase included a warrant to purchase one share of Common Stock at a
price of $0.50 per share, with an exercise period of 5 years from the
date of grant. A group of private investors participated in the
offering;
* In December 2002, we entered into a Convertible Debt and Warrant
Purchase Agreement, or the Debt Agreement, with a group of private
accredited investors, or the Lenders. The $12.0 million Debt Agreement
allows us to borrow up to $1.0 million per month, with any unused
monthly borrowings to be carried forward. The maximum aggregate loan
amount is $12.0 million with the last available borrowing in November
2003. The Lenders obligation to fund each borrowing request is
subject to material conditions described in the Debt Agreement. In
addition, the Lenders may terminate its obligations under the Debt
Agreement if: (i) Miravant has not filed an NDA by March 31, 2003,
(ii) such filing has been rejected by the Federal Drug Administration,
or (iii) Miravant, in the reasonable judgment of the Lenders, is not
meeting its business objectives. We have received a waiver from the
Lenders with regard to the NDA filing deadline of March 31, 2003. This
deadline has been extended to the end of the third quarter of 2003;
and
* During 2002, the trading price of our Common Stock, the size of our
market capitalization and the amount of stockholders' equity and net
tangible assets have caused us to fail to comply with certain
continued listing standards of the Nasdaq National Market System, and
in July 2002 we were delisted from Nasdaq. We currently trade on the
OTC Bulletin Board(R), or OTCBB. Management will continue to review
our ability to regain our listing status with Nasdaq, however, there
are no guarantees we will achieve this.
Based on our ability to successfully obtain additional funding, our ability
to obtain new collaborative partners, our ability to license and pursue
development and commercialization of SnET2 for AMD or other disease indications,
our ability to reduce operating costs as needed, our ability to regain our
listing status on Nasdaq and various other economic and development factors,
such as the cost of the programs, reimbursement and the available alternative
therapies, we may or may not be able to or elect to further develop PhotoPoint
PDT procedures in ophthalmology, cardiovascular disease, dermatology, oncology
or in any other indications. If we are unable to secure additional funding, or
our Lenders terminate our funding prior to November 2003, we may be unable to
continue as a going concern.
Background
Photodynamic therapy is generally a minimally invasive medical procedure
that uses photoselective, or light activated, drugs to treat disease. The
technology involves three components: photoselective drugs, light producing
devices and light delivery devices.
Our photoselective drugs have the capability to transform light energy into
chemical energy. This action is similar to that of chlorophyll in green plants.
When administered to the body, photoselective drugs tend to preferentially
accumulate in fast growing, or hyperproliferating cells. Specific diseases, such
as cancer and psoriasis, are characterized by general cellular
hyperproliferation while other diseases may also have certain hyperproliferative
components. For example, certain ophthalmic diseases are caused by a
proliferation of new blood vessels in the back of the eye and certain
cardiovascular diseases are caused by a proliferation of scar tissue within the
coronary arteries.
Photoselective drugs are inactive until exposed to a dose of light of a
specific wavelength. The dose of light represents the number of photons (light
energy) delivered over time, and the wavelength corresponds to the color of the
light. Since different drugs will respond to various doses and wavelengths of
light, we have designed our drugs to respond to the particular wavelength of
light that will best penetrate the biological environment of targeted diseased
cells. When the drug and light interact within a cell, a type of reactive oxygen
is produced that can lead to cell death. The extent of cell death may be
controlled by varying the doses of drug and light and the relative timing of
their administration. The result is a process that can potentially destroy
problem cells and blood vessels with minimal damage to surrounding normal
tissues and vessels.
Low-power, non-thermal light can be used to activate photoselective drugs.
As a result, there is little or no risk of thermal damage to surrounding tissue,
as with traditional high-power thermal lasers. The light is typically generated
by lasers, or for certain applications, non-coherent light sources, which have
been specifically modified for use in photodynamic therapy. The light is often
delivered from the light source to the patient via specially designed fiber
optics. These fiber optic light delivery devices produce patterns of light for
different disease applications and can be channeled into the body for internal
applications.
Industry
As early as 1900, scientists observed that certain compounds localized in
tissues would elicit a response to light. Since the mid-1970s, various aspects
of photodynamic therapy have been studied and established in humans.
Photodynamic therapy is currently being studied by a variety of companies,
physicians and researchers around the world for the treatment of a broad range
of disease applications. We believe that early on the development of the
industry had been hindered by various drawbacks, including inconsistent drug
purity and performance and costly, difficult-to-maintain lasers and
non-integrated drug and device development. We are addressing these issues as
part of our business strategy and in our development programs. In the last few
years the industry has shown some significant advancement through the approval
of several photodynamic drugs by the regulatory agencies in the United States
and abroad.
Business Strategy
Our strategy is to apply PhotoPoint PDT as a primary treatment where
appropriate or in combination with other therapies such as surgery, radiation,
chemotherapy, drug therapy or other treatments under development to achieve
superior clinical results. Although the potential applications for PhotoPoint
PDT are numerous, our primary focus at this time is to develop PhotoPoint PDT
for clinical use in the disease areas where there are large potential market
opportunities and/or unmet medical needs. We believe that commercial success
will depend upon safety and efficacy outcomes, regulatory approvals,
competition, third-party reimbursements and other factors such as the
manufacturing, marketing and distribution of our products. At this time, we
intend to develop our business as a research and development company with
limited manufacturing and marketing capabilities. For large scale manufacturing,
marketing and distribution activities, we plan to have or seek strategic
collaborations with pharmaceutical and medical device partners who already have
significant and established capabilities in the therapeutic areas.
Technology and Products
We are developing synthetic photoselective drugs together with
software-controlled, portable light producing devices and fiber optic light
delivery and measurement devices for the application of PhotoPoint PDT to a
broad range of disease indications. We believe that by being an expert in both
PhotoPoint drugs and devices, and by integrating the development of these
technologies, we can produce easy-to-use PhotoPoint PDT systems that offer the
potential for predictable and consistent results.
Drug Technology. We own and hold exclusive license rights under certain
United States and foreign patents to several classes of synthetic,
photoselective compounds, subject to certain governmental rights, as described
under the heading Patents and Proprietary Technology. From our classes of
compounds, we have selected SnET2 as our leading drug candidate and have used
SnET2 in the majority of our clinical trials to date. We have also used MV9411
in certain preclinical studies and clinical trials. We have regained control of
the license rights to SnET2 from Pharmacia and are currently pursuing other
potential collaborative partners that have expressed interest in these license
rights. We are also developing other potential photoselective drugs for
additional disease applications and future partnering opportunities.
We believe that our synthetic photoselective drugs may provide the
following benefits:
* Predictable. The synthetic nature of our photoselective compounds
permits us to design drugs with molecular structures and
characteristics that may facilitate consistency in clinical treatment
settings, as well as predictability in manufacturing and quality
control;
* Side effects. Treatments with our drug SnET2 to date have been
generally well-tolerated, with a good safety profile for the target
populations and the primary side effect being a mild, transient skin
photosensitivity in some patients; and
* Versatile. We can synthesize drugs with specific characteristics, such
as activation by a particular wavelength of light. This versatility
provides us with the potential to design our drugs for particular
disease conditions and to take advantage of semiconductor (diode)
light technology.
Light Producing Devices. We have synthesized our drugs to be activated by
light produced by reliable and affordable light sources. Our light technologies
include software-controlled microchip diodes, light emitting diode, or LED,
arrays and non-thermal lasers and lamps. We have collaborated with Iridex
Corporation, or Iridex, on the development of light producing devices for
PhotoPoint PDT in ophthalmology and have co-developed a portable, solid-state
diode light device, which was used in our clinical trials in ophthalmology.
We believe that our diode devices offer advantages over laser technology
historically used in photodynamic therapy. For example, our software-controlled
designs offer reliability and built-in control and measuring features. In
addition, our diode systems, which are about the size of a desktop computer, are
smaller and more portable than traditional high-power thermal laser systems. We
believe that our diode systems may offer light producing devices that will be
more affordable and convenient than the laser systems historically used in
photodynamic therapy.
Light Delivery and Measurement Devices. We have developed and manufactured
light delivery and measurement devices for clinical use, including a wide
variety of fiber optic light delivery devices for use in PhotoPoint PDT. Many of
these devices must be highly flexible and appropriate for endoscopic use and
must be able to deliver unique patterns of uniform, diffuse light for different
disease applications. Some of our products include microlenses that produce a
tiny flashlight beam for discrete surface lesions, the Flex(R) cylinder diffuser
which delivers light in a radial pattern along a flexible tip for sites such as
the esophagus and spherical diffusers which emit a diffuse ball of light for
sites such as the bladder or nasopharynx and endovascular catheters for use in
cardiovascular applications. Some of our light delivery devices have been used
in our clinical trials. We have also developed light measurement devices for
PhotoPoint PDT including devices that detect wavelength and fluorescence to
facilitate the measurement of light or drug uptake.
Additionally, we have developed with and without collaborators, a variety
of light devices producing various wavelengths that we use in our current
research projects and preclinical studies and that we expect to use in future
clinical trials.
Targeted Diseases and Clinical Trials
We believe that our PhotoPoint PDT technology has potential applications in
a wide range of disease indications. We have selected, based upon regulatory,
clinical and market considerations, a number of disease applications, discussed
below, on which to focus. Our decision to proceed with preclinical studies or
advance the drug or device development or to proceed to clinical trials in any
application depends upon such factors as adequate funding, corporate partner
commitment, the results of preclinical studies, governmental regulatory
communications, competitive factors, various other economic considerations as
well as our overall business strategy.
Ophthalmology
We believe that PhotoPoint PDT has the potential to treat a variety of
ophthalmic disorders, including conditions caused by neovascularization, such as
AMD, as well as other ophthalmic conditions. Neovascularization in the eye is a
condition in which new blood vessels grow abnormally under the surface of the
retina or other parts of the eye. In AMD, these fragile vessels can hemorrhage,
causing scarring and damage to the tissue which may lead to loss of vision. AMD
is the leading cause of blindness in Americans over age 50. In December 2001, we
completed two Phase III ophthalmology clinical trials for the treatment of AMD
with our lead drug candidate, SnET2. In January 2002, Pharmacia, after an
analysis of the Phase III AMD clinical data, determined that the clinical data
results indicated that SnET2 did not meet the primary efficacy endpoint in the
study population, as defined by the clinical trial protocol, and that they would
not be filing an NDA with the FDA. The primary efficacy endpoint is defined as
the proportion of AMD patients treated with SnET2 losing a specified amount of
vision at the end of two years compared to placebo patients. Patients with AMD
experience a loss of vision as the disease progresses. The vision loss is
measured with an eye chart from the Early Treatment Diabetic Retinopathy Study.
In March 2002, we regained the license rights to SnET2 as well as the related
data and assets from the Phase III AMD clinical trials from Pharmacia. In
addition, we have terminated our license collaboration with Pharmacia, and we
intend to seek a new collaborative partner for PhotoPoint PDT in ophthalmology.
During 2002, we completed our own detailed analysis of the Phase III AMD
clinical data. In January 2003, based on the results of our analysis and certain
discussions with regulatory and FDA consultants, we announced our plans to move
forward with an NDA filing for marketing approval of PhotoPoint SnET2, for the
treatment of wet AMD.
We have also conducted preclinical studies for the treatment of other
ophthalmic diseases such as corneal neovascularization, glaucoma and diabetic
retinopathy. At this time we are not pursuing treatments for these diseases, as
our current efforts focus on AMD.
Cardiovascular Disease
We are investigating the use of PhotoPoint PDT for the treatment of
cardiovascular disease, in particular for the prevention and treatment of
vulnerable plaque and restenosis. Vulnerable plaque is an unstable and
rupture-prone inflammation within the artery walls; restenosis is the
renarrowing of an artery that commonly occurs after balloon angioplasty for
obstructive artery disease. Preclinical studies with PhotoPoint PDT indicate
that certain photoselective drugs may be preferentially retained in
hyperproliferating cells in arterial walls and lipid-rich components of arterial
plaques. Data from these preclinical studies suggest that PhotoPoint PDT may aid
in the prevention and treatment of restenosis by inhibiting the aggressive
overgrowth of cells that block arteries. We are in the process of formulating a
new lead drug, MV0633, and, pending the outcome of our preclinical studies with
this and other photoselective drugs and financial considerations and other
factors, we may prepare an Investigational New Drug application, or IND, in
cardiovascular disease for MV0633 or another photoselective drugs. The timing of
the IND is dependent on numerous factors including preclinical results and
available funding and personnel.
As a result of our preclinical studies in cardiovascular disease, we are
evaluating the use of PhotoPoint PDT for the prevention and/or treatment of
stenosis in arterial-venous grafts, or AV grafts. AV grafts are placed in
patients with End Stage Renal Disease to provide access for hemodialysis.
Pending the results of our preclinical studies as well as financial
considerations, corporate collaborations and other factors, we may decide to
file an IND for the commencement of clinical trials in this field.
Dermatology
A number of dermatological, or skin, disorders have shown potential for
treatment with PhotoPoint PDT. One of these is psoriasis, a non-cancerous,
chronic and potentially debilitating skin disorder. In our dermatology program,
we use a topical gel formulation to deliver MV9411, a proprietary photoreactive
drug, directly to the skin. In July 2001, we completed a Phase I dermatology
clinical trial and, in January 2002, we commenced a Phase II clinical trial with
MV9411 for potential use in the treatment of plaque psoriasis, a chronic
dermatological condition for which there is no known cure. Plaque psoriasis is a
disease marked by hyperproliferation of the epidermis, resulting in inflamed and
scaly skin plaques. The Phase II clinical trial is currently ongoing and we
expect to complete the treatment of the patients by the second quarter 2003,
with some follow-up required. If we are unable to see any satisfactory results
from the clinical trial, we will likely put any further development on hold.
Oncology
Cancer is a large group of diseases characterized by uncontrolled growth
and spread of hyperproliferating cells. The treatment of cancer is called
oncology. In oncology, we continue to conduct preclinical research of our
PhotoPoint PDT to destroy abnormal blood vessels in tumors. This research
includes further exploration of the mechanism of action of PhotoPoint PDT at the
cellular and tissue level, the effect of PhotoPoint PDT on tumor vasculature and
evaluation of new photosensitizers in solid tumor models. The focus of our
preclinical research is to evaluate the utility of PhotoPoint PDT as a
stand-alone treatment, as an adjunct treatment to conventional therapies, or as
a combination therapy with experimental or approved therapies. Currently, our
research efforts focus on the use of PhotoPoint PDT in treating cancers such as
those of the brain, breast, lung and prostate. We have an existing oncology IND
for SnET2, under which we may choose to submit protocols for clinical trials in
oncology indications in the future.
Strategic Collaborations
We are pursuing a strategy of establishing license agreements and
collaborative arrangements for the purpose of securing exclusive access to drug
and device technologies, funding development activities and providing market
access for our products. We seek to obtain from our collaborative partners
exclusivity in the field of photodynamic therapy and to retain certain
manufacturing and co-development rights. We intend to continue to pursue this
strategy where appropriate in order to enhance in-house research programs,
facilitate clinical trials and gain access to distribution channels and
additional technology.
Definitive Collaborative Agreements
Pharmacia Corporation
Over time we have entered into a number of agreements with Pharmacia to
fund our operations and develop and market SnET2. In March 2002, we entered into
a Contract Modification and Termination Agreement with Pharmacia under which we
regained all of the rights and related data and assets to our lead drug
candidate, SnET2, and we restructured our outstanding debt to Pharmacia. Under
the terms of the Contract Modification and Termination Agreement, various
agreements and side letters between Miravant and Pharmacia have been terminated,
most of which related to SnET2 license agreements and related drug and device
supply agreements, side letters, the Manufacturing Facility Asset Purchase
Agreement and various supporting agreements. We also modified our 2001 Credit
Agreement with Pharmacia.
The termination of the various agreements provided that all ownership of
the rights, related data and assets to SnET2 and the Phase III AMD clinical
trials for the treatment of AMD revert back to us. The rights transferred back
to us include the ophthalmology IND and the related filings, data and reports
and the ability to license the rights to SnET2. The assets include the lasers
utilized in the Phase III AMD clinical trials, the bulk API manufacturing
equipment, all of the bulk API inventory sold to Pharmacia in 2001 and 2002 and
the finished dose formulation, or FDF, inventory. In addition, we reassumed the
lease obligations and related property taxes for our bulk API manufacturing
facility. The lease agreement expires in March 2006 and currently has a base
rent of approximately $26,000 per month. In January 2003, we sublet this
facility through December 2005.
Under the Manufacturing Facility Asset Purchase Agreement, which was
entered into in May 2001 and subsequently terminated in March 2002, Pharmacia
satisfied the following obligations:
* Pharmacia agreed to buy our existing bulk API inventory at cost for
$2.2 million. During 2001, the entire $2.2 million of the existing
bulk API inventory had been delivered to Pharmacia, recorded as
revenue and the payment had been received into the inventory escrow
account;
* Pharmacia committed, through two other purchase orders, to buy up to
an additional $2.8 million of the bulk API which would be manufactured
by us. As of December 31, 2002, we had sold $2.5 million during 2001
and 2002 of newly manufactured bulk API inventory, which had been
delivered to Pharmacia, recorded as revenue and the payment had been
received into the inventory escrow account. No further bulk API will
be sold to Pharmacia;
* Pharmacia agreed to purchase the manufacturing equipment necessary to
produce bulk API. The manufacturing equipment was purchased for
$863,000, its fair market value as appraised by an independent
appraisal firm. The payment for the purchase of the equipment was made
into an equipment escrow account;
* The interest earned by the inventory and equipment escrow accounts
accrued to us and was released in full from each escrow account in
January 2002 and March 2002, respectively. All amounts received into
escrow were recorded as accounts receivable until the amounts were
released.
The Contract Modification and Termination Agreement also modified the 2001
Credit Agreement as follows:
* The outstanding debt that we owed to Pharmacia of approximately $26.8
million, was reduced to $10.0 million plus accrued interest;
* The first payment of $5.0 million plus accrued interest was due on
March 5, 2003 and was subsequently extended to June 30, 2003. The
second payment of $5.0 million plus accrued interest is due on June 4,
2004. Interest on the debt will be recorded at the prime rate, which
was 4.75% on March 5, 2002 and 4.25% at December 31, 2002;
* In exchange for these changes and the rights to SnET2, we terminated
our right to receive a $3.2 million loan that was available under the
2001 Credit Agreement. Also, as Pharmacia has determined that they
will not file an NDA for the SnET2 PhotoPoint PDT for AMD, based upon
their overall analysis of the Phase III AMD data, we will not have
available to us an additional $10.0 million of borrowings as provided
for under the 2001 Credit Agreement. Pharmacia has no obligation to
make any further milestone payments, equity investments or to extend
us additional credit;
* The early repayment provisions were modified and many of the covenants
were eliminated or modified. Our requirement to allocate one-half of
the net proceeds from any public or private equity financings and/or
asset dispositions towards the early repayment of our debt to
Pharmacia was modified as follows:
* If our aggregate net equity financing and/or assets disposition
proceeds are less than or equal to $7.0 million, we are not
required to make an early repayment towards our Pharmacia debt.
As of March 31, 2003, our aggregate equity financings amount to
$2.5 million;
* If our aggregate net equity financing and/or assets disposition
proceeds are greater than $7.0 million but less than or equal to
$15.0 million, then we are required to apply one-third of the net
proceeds from the amount in excess of $7.0 million up to $15.0
million, or a maximum repayment of $2.7 million towards our
Pharmacia debt;
* If our aggregate net equity financing and/or assets disposition
proceeds are greater than $15.0 million but less than or equal to
$25.0 million, then we are required to apply one-half of the net
proceeds from the amount in excess of $15.0 million up to $25.0
million, or a maximum repayment of $7.7 million towards our
Pharmacia debt;
* If our aggregate net equity financing and/or assets disposition
proceeds are greater than $25.0 million, then we are required to
apply all of the net proceeds from the amount in excess of $25.0
million, or repay the entire $10.0 million plus accrued interest
towards our Pharmacia debt; and
* Any early repayment of our Pharmacia debt applies first to the
loan amount due on June 30, 2003, then to the remaining loan
amount due on June 4, 2004.
Aside from the changes made under the Contract Modification and Termination
Agreement discussed above, there were no changes made to the Warrant Agreement,
the Equity Investment Agreement and the Registration Rights Agreement with
Pharmacia.
In connection with the 2001 Credit Agreement, we granted Pharmacia warrants
to purchase a total of 360,000 shares of our Common Stock. The exercise prices
and expiration dates are as follows: 120,000 shares at an exercise price of
$11.87 per share expiring May 5, 2004, 120,000 shares at an exercise price of
$14.83 per share expiring November 12, 2004 and 120,000 shares at an exercise
price of $20.62 per share expiring May 23, 2005. Pharmacia will retain all of
its rights under the terms and conditions of the Warrant Agreement.
In February 1999, through an Equity Investment Agreement, Pharmacia
purchased 1,136,533 shares of our Common Stock at $16.71 per share for an
aggregate purchase price of $19.0 million. Additionally, in connection with the
original SnET2 license agreement in 1995, Pharmacia purchased 725,001 shares of
our Common Stock for $13.0 million. Under the terms of the Contract Modification
and Termination Agreement, Pharmacia will retain all of the shares of Common
Stock purchased from us.
In addition, as of March 5, 2003, our first payment on our debt to
Pharmacia was due in the amount of $5.0 million plus accrued interest. We have
since negotiated with Pharmacia an extension on the first payment due to June
30, 2003. In connection with the extension of the first debt payment date, we
agreed to pay a total of $250,000 payable in two installments of $125,000 each
on March 24, 2003 and April 17, 2003. This amount related to the interest
accrued through March 5, 2003 of $229,000 as well as an extension fee of
$21,000. We paid the first installment of $125,000 on March 24, 2003. If we
cannot make the scheduled payment or negotiate new terms for the debt repayment
with Pharmacia, then Pharmacia can exercise all its rights to secure all the
collateral under the agreement, which includes all our assets. There is no
guarantee that we will be able to make the scheduled payment or that new debt
repayment terms will be negotiated timely, if at all.
Iridex Corporation
In May 1996, we entered into a co-development and distribution agreement
with Iridex, a leading provider of semiconductor-based laser systems to treat
eye diseases. The agreement generally provides:
* Miravant with the exclusive right to co-develop, with Iridex, light
producing devices for use in photodynamic therapy in the field of
ophthalmology;
* We will conduct clinical trials and make regulatory submissions with
respect to all co-developed devices and Iridex will manufacture all
devices for these trials, with costs shared as set forth in the
agreement; and
* Iridex will have an exclusive, worldwide license to make, distribute
and sell all co-developed devices, on which it will pay us royalties.
The agreement remains in effect, subject to earlier termination in certain
circumstances, until ten years after the date of the first FDA approval of any
co-developed device for commercial sale, subject to certain renewal rights. The
light producing device used in AMD clinical trials was co-developed with Iris
Medical Instruments Inc., a subsidiary of Iridex, under this agreement, and any
commercialization of this device is governed in part by this agreement.
The University of Toledo, The Medical College of Ohio and St. Vincent Medical
Center
In July 1989, we entered into a License Agreement with the University of
Toledo, the Medical College of Ohio and St. Vincent Medical Center, of Toledo,
Ohio, collectively referred to as Toledo. This agreement provides us with
exclusive, worldwide rights:
* To make, use, sell, license or sublicense certain photoselective
compounds, including SnET2 covered by certain Toledo patents and
patent applications, or not covered by Toledo patents or patent
applications but owned or licensed to Toledo and which Toledo has the
right to sublicense;
* To make, use, sell, license or sublicense certain of the compounds for
which we have provided Toledo with financial support; and
* To make, use or sell any invention claimed in Toledo patents or
applications and any composition, method or device related to
compounds conceived or developed by Toledo under research funded by
Miravant.
The agreement further provides that we pay Toledo royalties on the revenues
we receive from the sales or sublicenses of product covered by this agreement.
To date, no royalties have been paid or accrued since no drug or related product
has been sold. Under the agreement, we are required to satisfy certain
development and commercialization objectives once an NDA has received approval.
This agreement terminates upon the expiration or non-renewal of the last patent
which may issue under this agreement, currently 2013. By the terms of the
agreement, the license extends upon issuance of any new Toledo patents. We do
not have contractual indemnification rights against Toledo under the agreement.
Some of the research relating to the compounds covered by the License Agreement,
including SnET2, has been or is being funded in part by certain governmental
grants under which the United States Government has or will have certain rights
in the technology developed, including the right under certain circumstances to
a non-exclusive license or to require Miravant to grant an exclusive license to
a third party. For a description of governmental rights see Patents and
Proprietary Technology.
Fresenius AG
In August 1994, we entered into an SnET2 formulation and commercial supply
agreement, or Formulation Agreement, with Pharmacia to develop an emulsion
formulation suitable for intravenous administration of SnET2 in a finished dose
formulation, or FDF. Effective November 30, 1998, Pharmacia entered into an
Asset Transfer Agreement with Fresenius Kabi Nutrition AB, a subsidiary of
Fresenius Kabi AG, or Fresenius. Effective November 30, 1998, Pharmacia
simultaneously assigned its rights and obligations under the Formulation
Agreement to Fresenius and entered into its own Contract Manufacturing Agreement
for Fresenius' direct supply of SnET2 FDF to Pharmacia.
As part of the activities necessary under the Pharmacia Contract
Modification and Termination Agreement, on June 27, 2002, Pharmacia and Miravant
entered into an agreement whereby all of Pharmacia's rights and obligations
under the Contract Manufacturing Agreement were assigned to Miravant. By
operation of Fresenius' consent to the assignment, the Formulation Agreement has
been superceded by the terms of the Contract Manufacturing Agreement. The
operating terms of this agreement are as follows:
* Fresenius remains our exclusive manufacturer and supplier of our
worldwide requirements for SnET2 FDF;
* Fresenius will not develop or supply drug formulations or services for
use in any photodynamic therapy applications for any other company;
and
* The agreement term is indefinite except that it may be terminated ten
years after the first commercial sale of SnET2 FDF.
Ramus Medical Technologies
In December 1996, our wholly owned subsidiary, Miravant Cardiovascular,
Inc., entered into a co-development agreement with Ramus Medical Technologies,
or Ramus, an innovator in the development of autologous tissue stent-grafts for
vascular bypass surgeries. Generally the agreement provides us with the
exclusive rights to co-develop our photodynamic therapy technology with Ramus'
proprietary technology in the development of autologous vascular grafts for
coronary arteries and other vessels. Ramus shall provide, at no cost to us,
products for use in preclinical studies and clinical trials with all other
preclinical and clinical costs to be paid by us. The agreement remains in effect
until the later of ten years after the date of the first FDA approval of any
co-developed device for commercial sale, or the life of any patent issued on a
co-developed device, subject to certain renewal rights. Currently, there are no
co-development activities and Ramus activities are at a minimum until they raise
funding to continue operations. We do provide various services to them on an as
needed basis, which have been insignificant to date, and we have deferred Ramus'
sublease rent payments until sometime in the future.
In conjunction with the co-development agreement, we purchased a $2.0
million equity interest in Ramus, and obtained an option to acquire the
remaining shares of Ramus. We have declined to exercise this option and the
option period has now expired. Further, we have first refusal rights and
pre-emptive rights for any issuance of new securities, whether debt or equity,
made by Ramus. In April 1998, we entered into a $2.0 million revolving credit
agreement with Ramus. Between 1998 and 1999, Ramus borrowed the entire $2.0
million available under the credit agreement. In March 2000, the loan term was
extended indefinitely. It was determined that it was probable that we would be
unable to collect the amounts due from Ramus under the contractual terms of the
loan agreement. Therefore, we have established a reserve for the entire
outstanding balance of the loan receivable at December 31, 2002 and 2001. We are
currently in discussions with Ramus to convert the entire amount of the loans
receivable from Ramus, including accrued and unpaid interest to Ramus preferred
stock.
Xillix Technologies Corp.
In June 1998, we purchased an equity interest in Xillix Technologies Corp.,
or Xillix. We received 2,691,904 shares of Xillix common stock in exchange for
$3.0 million in cash and 58,909 shares of Miravant Common Stock. In conjunction
with the investment, we also entered into an exclusive strategic alliance
agreement with Xillix to co-develop proprietary systems incorporating PhotoPoint
PDT and Xillix's fluorescence imaging technology for diagnosing and treating
early stage cancer and pre-malignant tissues. The agreement provides that both
companies will own co-developed products and will share the research and
development costs associated with the development program. Xillix will receive
drug royalty payments from us based on the sale of our drugs used in conjunction
with the co-developed technology. Currently, there are no active collaborative
projects.
Additionally, during 2000 and again in 2002, we determined that the decline
in the value of our investment in Xillix was other-than-temporary. Since we made
the investment in June 1998, the value of the Xillix common stock had decreased
by approximately 70% through 2000 and approximately an additional 20% through
2002 and had been at similar levels for at least nine months prior to the
write-down. In December 2000, we recognized a loss write-down totaling $3.5
million and in December 2002 another $598,000 loss write-down was recorded, to
reduce our investment in Xillix to its estimated current fair value based on
quoted market prices as of December 31, 2002. This loss is included in "Non-cash
loss in investment" in the consolidated statements of operations, stockholders'
equity (deficit) and cash flows. As of December 31, 2002, we still hold the
2,691,904 shares of Xillix common stock received in the original investment
transaction. The adjusted cost basis in the investment is $393,000 and this
investment will continue to be classified as an available-for-sale investment
recorded at fair value with any resulting unrealized gains or losses included in
"Accumulated other comprehensive loss" in the consolidated balance sheet and
statement of stockholders' equity (deficit).
Laserscope
In April 1992, we entered into a seven-year license and distribution
agreement with Laserscope, a surgical laser company. This agreement terminated
in April 1999 and Laserscope made a final royalty settlement with us in 2001.
Laserscope now holds a fully paid-up, non-exclusive license to use in its
products dye laser technology that we developed.
Non-Definitive Agreements
Executive management is currently pursuing various potential strategic
partners in fields of ophthalmology and cardiovascular disease. In the field of
ophthalmology we entered into a non-binding letter of intent with Bausch & Lomb
in June 2002, for SnET2 for the treatment of AMD. As of October 1, 2002 the
letter of intent has expired, however, we continue to have discussions with
Bausch & Lomb regarding this opportunity. Bausch & Lomb may still continue to
pursue potential licensing opportunities with us for SnET2, or other compounds,
however, at this time we have not entered into any definitive or exclusive
agreements with them. In the field of cardiovascular disease, we are in
discussions with various potential strategic partners, but also have not entered
into any definitive or exclusive agreements. There are no guarantees that Bausch
& Lomb or any other potential strategic partner will enter into a license
agreement or provide us with any potential funding to advance our research and
development programs.
Research and Development Programs
Our research and development programs are devoted to the discovery and
development of drugs and devices for PhotoPoint PDT. These research activities
are conducted in-house in our pharmaceutical and engineering laboratories or
elsewhere in collaboration with medical or other research institutions or with
other companies. We have expended, and expect to continue to spend, substantial
funds on our research and development programs. We expended $9.5 million, $13.5
million and $20.2 million on research and development activities during 2002,
2001 and 2000, respectively.
Our pharmaceutical research programs are focused on the ongoing evaluation
of our proprietary compounds for different disease applications. Among our
outside or extramural research, we are periodically conducting preclinical
studies at various academic and medical research institutions in the United
States and abroad. We are also active in the research and development of devices
for PhotoPoint PDT. These programs include development of fiber optic light
delivery devices, as well as light sources. Device research and development are
presently conducted either in-house or in collaboration with partners.
We have pursued and been awarded various government grants and contracts.
These grants have been sponsored by the National Institutes of Health and/or the
Small Business Innovative Research Administration, which complement our research
efforts and facilitate new development.
Manufacturing
Our strategy is generally to retain manufacturing rights and maintain pilot
manufacturing capabilities and, where appropriate due to financial and
production constraints, to partner with leading contract manufacturing
organizations in the pharmaceutical and medical device sector for certain
elements of our manufacturing processes. We were licensed by the State of
California to manufacture bulk API at one of our Santa Barbara, California
facilities for clinical trial and other use. This particular manufacturing
facility was shut down in 2002 and is currently being reconstructed in our
existing operating facility. We expect to have the manufacturing facility at the
new location operational in 2003, pending any required regulatory approvals by
the State of California and federal regulatory agencies. In the original
manufacturing facility, we have manufactured bulk API for SnET2, the process up
to the final formulation and packaging step, and have in inventory what we
believe is an adequate supply for an initial commercial launch of SnET2, if and
when regulatory approval on both the facility and the existing bulk API
inventory is received, if at all. We also have the ability to manufacture, at
very small levels, light producing devices and light delivery devices and
conduct other production and testing activities to support current clinical
programs, at this location. However, we have limited capabilities, personnel and
experience in the manufacture of finished drug, and at commercial levels, light
producing and light delivery products and utilize outside suppliers, contracted
or otherwise, for certain materials and services related to our manufacturing
activities, especially large scale levels. Although most of our materials and
components are available from various sources, we are dependent on certain
suppliers for key materials or services used in our drug and light producing and
light delivery device development and production operations. One supplier is
Fresenius, which processes our SnET2 drug substance into a sterile injectable
formulation and packages it in vials for distribution. We expect to continue to
develop new drugs and new drug formulations both in-house and using external
suppliers, which may or may not have similar dependencies on suppliers. Another
supplier is Iridex, which provided the light producing devices used in our AMD
clinical trials and can be used for future commercial use in ophthalmology. As
previously discussed, we regained ownership of bulk API inventory and lasers
from Pharmacia, which are not subject to expiration dates, whereas the FDF
received has expired.
Prior to our being able to supply drugs or devices for commercial use, our
manufacturing facilities, as well as the Iridex and Fresenius manufacturing
facilities, must comply with Good Manufacturing Practices, or GMPs, with which
Iridex and Fresenius are currently manufacturing under. Prior to commercial
sales of our drug and device products, which may not be attained, these
facilities will have to be approved by the FDA. We, along with our suppliers,
are able to manufacture our drug and device products for clinical trial use and
commercial use, pending final FDA approval. In addition, if we elect to
outsource manufacturing to third-party manufacturers, these facilities also have
to satisfy GMP and FDA manufacturing requirements.
In February 1997, we received registration to ISO 9001 and EN 46001
signifying compliance to the International Standards Organization quality
systems requirements for design, manufacture and distribution of medical
devices. We chose to discontinue ISO 9001 registration as part of a cost savings
program, as it was unlikely to be used in the near future.
Marketing, Sales and Distribution
Our strategy is to partner with leading pharmaceutical and medical device
companies for the marketing, sales and distribution of our products. In March
2002, we terminated our license agreement with Pharmacia and received back the
worldwide license rights to SnET2 and at this time we are currently pursuing a
new collaborative partner to market and sell our leading drug candidate SnET2 as
well as other potential compounds. We have granted to Iridex the worldwide
license to market and sell all co-developed light producing devices for use in
PhotoPoint PDT in the field of ophthalmology.
Where appropriate, we intend to seek additional arrangements with
collaborative partners, selected for experience in disease applications or
markets, to act as our marketing and sales arm and to establish distribution
channels for our drugs and devices. We may also distribute our products directly
or through independent distributors.
Customers and Backlog
We currently have no drug or device that has been approved for
commercialization by applicable regulatory bodies. As a result, we currently
have no customers or backlog. We have derived revenue in the past from sales of
compounds to our collaborative partner and have received governmental research
grants. We have also received limited royalty income from Laserscope for the
license of our dye laser technology.
Patents and Proprietary Technology
We pursue a policy of seeking patent protection for our technology both in
the United States and in selected countries abroad. We plan to prosecute, assert
and defend our patent rights when appropriate. We also rely upon trade secrets,
know-how, continuing technological innovations and licensing opportunities to
develop and maintain our competitive position. The following is a summary of our
current patents:
* Record owner of thirty-seven issued United States patents, primarily
device, expiring 2010 through 2021;
* Record owner of ten issued foreign patents, expiring 2012 through
2019;
* Exclusive license rights under twenty issued United States patents,
primarily pharmaceutical, expiring 2006 through 2017;
* Exclusive license rights under seven issued foreign patents, expiring
2006 through 2017;
* Co-owner or licensee of four additional issued patents, expiring 2015
through 2017; and
* Holder of a number of United States and related foreign patent
applications filed and pending, relating to photoselective compounds,
light devices and methods.
We obtained many of our photoselective compound patent rights, including
rights to SnET2, through an exclusive license agreement with Toledo. Certain of
the foregoing patents and applications are subject to certain governmental
rights described below.
The patent positions of pharmaceutical and biotechnology companies,
including ours, can be uncertain and involve complex legal, scientific, and
factual questions. There can be no assurance that our patents or licensed
patents will afford legal protection against competitors or provide significant
proprietary protection or competitive advantage. In addition, our patents or
licensed patents could be held invalid or unenforceable by a court, or infringed
or circumvented by others, or others could obtain patents that the we would need
to license or circumvent. Competitors or potential competitors may have filed
patent applications or received patents, and may obtain additional patents and
proprietary rights relating molecules, compounds, or processes competitive with
ours.
It is our general policy to require our employees, consultants, outside
scientific collaborators and sponsored researchers and other advisors to execute
confidentiality agreements upon the commencement of employment or consulting
relationships with us. These agreements provide that all confidential
information developed or made known to the individual during the course of our
relationship are to be kept confidential and not disclosed to third parties
except in specific limited circumstances. We also generally require signed
confidentiality or material transfer agreements from any company that is to
receive confidential data or proprietary compounds. In the case of employees and
consultants, the agreements generally provide that all inventions conceived by
the individual while rendering services to us, which relate to our business or
anticipated business, shall be assigned to us as our exclusive property.
Some of our research relating to certain pharmaceutical compounds covered
by the license agreement with Toledo, including SnET2, has been or is being
funded in part by Small Business Innovation Research Administration and/or
National Institutes of Health grants. As a result, the United States Government
has or will have certain rights in the inventions developed with the funding.
These rights include a non-exclusive, paid-up, worldwide license under these
inventions for any governmental purpose. In addition, the government has the
right to require us to grant an exclusive license under any of these inventions
to a third party if the government determines that:
* Adequate steps have not been taken to commercialize such inventions;
* Such action is necessary to meet public health or safety needs; or
* Such action is necessary to meet requirements for public use under
federal regulations.
Federal law requires that any exclusive licensor of an invention that was
partially funded by federal grants, which is the case with the subject matter of
certain patents issued in our name or licensed from Toledo, agree that it will
not grant exclusive rights to use or sell the invention in the United States
unless the grantee agrees that any products embodying the invention will be
manufactured substantially in the United States, although this requirement is
subject to a discretionary waiver by the government. It is not expected that the
government will exercise any of these rights or that the exercise of this right
would have a material impact on us.
Government Regulation
The research, development, manufacture, marketing and distribution of our
products are subject to regulation for safety and efficacy by numerous
governmental authorities in the United States and other countries. In the United
States, pharmaceutical products and medical devices are regulated by the FDA
through the Food, Drug and Cosmetic Act, known as the FDC Act. The FDC Act and
various other federal and state statutes control and otherwise affect the
development, approval, manufacture, testing, storage, records and distribution
of drugs and medical devices. We are subject to regulatory requirements
governing both drugs and devices.
Drug Products. The FDA generally requires the following steps before a new
drug product may be marketed in the United States:
* Preclinical studies (laboratory and animal tests);
* The submission to the FDA of an application for an IND exemption,
which must become effective before human clinical trials may commence;
* Adequate and well-conducted clinical trials to establish safety and
efficacy of the drug for its intended use; and
* The submission to the FDA of an NDA; and review and approval of the
NDA by the FDA before any commercial sale or shipment of the drug.
In addition to obtaining FDA approval for each new drug product, each drug
manufacturing establishment must be registered with the FDA. Manufacturing
establishments, both domestic and foreign, are subject to inspections by or
under the authority of the FDA and by other federal, state or local agencies and
must comply with the FDA's current Good Manufacturing Practices, or GMP,
regulations. The FDA will not approve an NDA until a pre-approval inspection of
the manufacturing facilities confirms that the drug is produced in accordance
with current drug GMPs. In addition, drug manufacturing establishments in
California must also be licensed by the State of California and must comply with
manufacturing, environmental and other regulations promulgated and enforced by
the California Department of Health Services. We were licensed by the State of
California to manufacture bulk API at one of our Santa Barbara, California
facilities for clinical trial and other use. This particular manufacturing
facility was shut down in 2002 and is currently being reconstructed in our
existing operating facility. We expect to have the manufacturing facility at the
new location operational in 2003, pending any required regulatory approvals by
the State of California and federal regulatory agencies.
Preclinical studies include laboratory evaluation of product chemistry,
conducted under Good Laboratory Practices, or GLP, regulations, and animal
studies to assess the potential safety and efficacy of the drug and its
formulation. The results of the preclinical studies are submitted to the FDA as
part of the IND. Unless the FDA asks for additional information, additional
review time, or otherwise objects to the IND, the IND becomes effective thirty
days following its receipt by the FDA.
Clinical trials involve the administration of the investigational drug to
human subjects under FDA regulations and other guidance commonly known as Good
Clinical Practice, or GCP, requirements under the supervision of a qualified
physician. Clinical trials are conducted in accordance with protocols that
detail the objectives of the study, the parameters to be used to monitor safety
and the efficacy criteria to be evaluated. Each protocol is submitted to the FDA
as a part of the IND. Each clinical study must be conducted under the auspices
of an independent Institutional Review Board, or IRB. The IRB considers, among
other things, ethical factors, the safety of human subjects and the possible
liability of the testing institution.
Clinical trials are typically conducted in three sequential phases,
although the phases may overlap.
* Phase I represents the initial introduction of the drug to a small
group of humans to test for safety, identify adverse effects, dosage
tolerance, absorption, distribution, metabolism, excretion and
clinical pharmacology and, if possible, to gain early evidence of
effectiveness;
* Phase II involves studies in a limited sample of the intended patient
population to assess the efficacy of the drug for a specific
indication, to determine dose tolerance and optimal dose range and to
identify possible adverse effects and safety risks; and
* Once a compound is found to have some efficacy and to have an
acceptable safety profile in Phase II evaluations, Phase III clinical
trials are initiated for definitive clinical safety and efficacy
studies in a broader sample of the patient population at multiple
study sites. The results of the preclinical studies and clinical
trials are submitted to the FDA in the form of an NDA for marketing
approval.
Completing clinical trials and obtaining FDA approval for a new drug
product is a long process and is likely to take several years and require
expenditure of substantial resources. If an NDA application is submitted, there
can be no assurance that the FDA will approve the NDA. Even if initial FDA
approval is obtained, further studies may be required to gain approval for the
use of a product as a treatment for clinical indications other than those for
which the product was initially approved. Also, the FDA requires post-market
surveillance programs to monitor and report the drug's side effects. For certain
drugs, the FDA may also, concurrent with marketing approval, seek agreement from
the sponsor to conduct post-marketing, Phase IV, studies to obtain further
information about the drug's risks, benefits and optimal use. Results of this
monitoring and of Phase IV post-marketing studies may affect the further
marketing of the product.
Where appropriate, we may seek to obtain accelerated review and/or approval
of products and to use expanded access programs that may provide broader
accessibility and, if approved by the FDA, payment for an investigational drug
product. For instance, we requested and received fast track designation from the
FDA for the treatment of choroidal neovascularization associated with AMD. Under
the FDA Modernization Act of 1997, the FDA gives fast track designation to drugs
and devices that treat serious or life-threatening conditions that represent
unmet medical needs. The designation means that data can be submitted to the FDA
during the clinical trial process based on clinical or surrogate endpoints that
are likely to predict clinical benefit, and the FDA can expedite its regulatory
review. Other examples of such activities include pursuing programs such as
treatment IND or parallel track IND classifications which allow expanded
availability of an investigational treatment to patients not in the ongoing
clinical trials, and seeking physician or cross-referenced INDs which allow
individual physicians to use an investigational drug before marketing approval
and for an indication not covered by the ongoing clinical trials. However, there
can be no assurance that we will seek such avenues at any time, or that such
activities will be successful or result in accelerated review or approval of any
of our products.
Medical Device Products. Our medical device products are subject to
government regulation in the United States and foreign countries. In the United
States, we are subject to the rules and regulations established by the FDA
requiring that our medical device products are safe and efficacious and are
designed, tested, developed, manufactured and distributed in accordance with FDA
regulations.
Under the FDC Act, medical devices are classified into one of three classes
(i.e., class I, II, or III) on the basis of the controls necessary to reasonably
ensure their safety and effectiveness. Safety and effectiveness can reasonably
be assured for class I devices through general controls (e.g., labeling,
premarket notification and adherence to GMPs) and for class II devices through
the use of general and special controls (e.g., performance standards, postmarket
surveillance, patient registries and FDA guidelines). Generally, class III
devices are those which must receive premarket approval by the FDA to ensure
their safety and effectiveness (e.g., life-sustaining, life-supporting and
implantable devices, or new devices which have been found not to be
substantially equivalent to legally marketed devices).
Before a new device can be introduced to the market, the manufacturer
generally must obtain FDA clearance through either a 510(k) premarket
notification or a Premarket Approval Application, or PMA. A PMA requires the
completion of extensive clinical trials comparable to those required of new
drugs and typically requires several years before FDA approval, if any, is
obtained. A 510(k) clearance will be granted if the submitted data establish
that the proposed device is "substantially equivalent" to a legally marketed
class I or class II medical device, or to a class III medical device for which
the FDA has not called for PMAs. Devices used by other companies for
photodynamic therapy, which are similar to our devices, have been classified as
Class III, and have been evaluated in conjunction with an IND as a combination
drug-device product. Therefore it is likely that our products will also be
treated as a combination drug-device product.
Combination Drug-Device Products. Medical products containing a combination
of drugs, devices or biological products may be regulated as "combination
products." A combination product is generally defined as a product comprised of
components from two or more regulatory categories (drug/device, device/biologic,
drug/biologic, etc.) and in which the various components are required to achieve
the intended effect and are labeled accordingly. Each component of a combination
product is subject to the rules and regulations established by the FDA for that
component category, whether drug, biologic or device. Primary responsibility for
the regulation of a combination product depends on the FDA's determination of
the "primary mode of action" of the combination product, whether drug, biologic
or device.
In order to facilitate premarket review of combination products, the FDA
designates one of its centers to have primary jurisdiction for the premarket
review and regulation of both components, in most cases eliminating the need to
receive approvals from more than one center. The determination whether a product
is a combination product or two separate products is made by the FDA on a
case-by-case basis. Market approval authority for combination photodynamic
therapy drug/device products is vested in the FDA Center for Drug Evaluation and
Research, or CDER, which is required to consult with the FDA Center for Devices
and Radiological Health. As the lead agency, the CDER administers and enforces
the premarket requirements for both the drug and device components of the
combination product. The FDA has reserved the decision on whether to require
separate submissions for each component until the product is ready for premarket
approval. Although, to date, photodynamic therapy products have been categorized
by the FDA as combination drug-device products, the FDA may change that
categorization in the future, resulting in different submission and/or approval
requirements.
If separate applications for approval are required in the future for
PhotoPoint PDT devices, it may be necessary for us to submit a PMA or a 510(k)
to the FDA for our PhotoPoint PDT devices. Submission of a PMA would include the
same clinical trials submitted under the IND to show the safety and efficacy of
the device for its intended use in the combination product. A 510(k)
notification would include information and data to show that our device is
substantially equivalent to previously marketed devices. There can be no
assurance as to the exact form of the premarket approval submission required by
the FDA or post-marketing controls for our PhotoPoint PDT devices.
Post-Approval Compliance. Once a product is approved for marketing, we must
continue to comply with various FDA, and in some cases Federal Trade Commission,
requirements for design, safety, advertising, labeling, record keeping and
reporting of adverse experiences associated with the use of a product. The FDA
actively enforces regulations prohibiting marketing of products for non-approved
uses. Failure to comply with applicable regulatory requirements can result in,
among other things, fines, injunctions, civil penalties, failure of the
government to grant premarket clearance, premarket approval or export
certificates for devices or drugs, delays or suspensions or withdrawals of
approvals, seizures or recalls of products, operating restrictions and criminal
prosecutions. Changes in existing requirements or adoption of new requirements
could have a material adverse effect on our business, financial condition and
results of operations.
International. We are also subject to foreign regulatory requirements
governing testing, development, marketing, licensing, pricing and/or
distribution of drugs and devices in other countries. These regulations vary
from country to country. Beginning in 1995, a new regulatory system to approve
drug market registration applications was implemented in the EU. The system
provides for new centralized, decentralized and national (member state by member
state) registration procedures through which a company may obtain drug marketing
registrations. The centralized procedure allows for expedited review and
approval of biotechnology and high technology/innovative product marketing
applications by a central Committee for Proprietary Medicinal Products that is
binding on all member states in the EU. The decentralized procedure allows a
company to petition individual EU member states to review and recognize a market
application previously approved in one member state by the national route. Our
devices must also meet the new Medical Device Directive effective in Europe in
1998. The Directive requires that our manufacturing quality assurance systems
and compliance with technical essential requirements be certified with a CE Mark
authorized by a registered notified body of an EU member state prior to free
sale in the EU. Registration and approval of a photodynamic therapy product in
other countries, such as Japan, may include additional procedures and
requirements, preclinical studies and clinical trials, and may require the
assistance of native corporate partners.
Competition
The pharmaceutical and medical device industries are characterized by
extensive worldwide research and development efforts and rapid technological
change. Competition from other domestic and foreign pharmaceutical or medical
device companies and research and academic institutions in the areas of product
development, product and technology acquisition, manufacturing and marketing is
intense and is expected to increase. These competitors may succeed in obtaining
approval from the FDA or other regulatory agencies for their products more
rapidly than us. Competitors have also developed or are in the process of
developing technologies that are, or in the future may be, the basis for
competitive products.
We are aware that other companies are marketing or developing certain
products to prevent, diagnose or treat diseases for which we are developing
PhotoPoint PDT. These products, as well as others of which we may not be aware,
may adversely affect the existing or future market for our products. Competitive
products may include, but are not limited to, drugs such as those designed to
inhibit angiogenesis or otherwise target new blood vessels, certain medical
devices, such as drug-eluting stents and other photodynamic therapy treatments.
We are aware of various competitors involved in the photodynamic therapy
sector. We understand that these companies are conducting preclinical studies
and/or clinical trials in various countries and for a variety of disease
indications. Our direct competitors in our sector include QLT Inc., or QLT, DUSA
Pharmaceuticals, or DUSA, Axcan Pharmaceuticals and Pharmacyclics. QLT's drug
Visudyne has received marketing approval in the United States and certain other
countries for the treatment of AMD and has been commercialized by Novartis.
Axcan and DUSA have photodynamic therapy drugs, both of which have received
marketing approval in the United States - Photofrin(R) (Axcan Pharmaceuticals)
for the treatment of certain oncology indications and Levulan(R) (DUSA
Pharmaceuticals) for the treatment of actinic keratoses, a dermatological
condition. Pharmacyclics has a photodynamic therapy drug that has not received
marketing approval, which is being used in certain preclinical studies and/or
clinical trials for ophthalmology, oncology and cardiovascular indications. We
are aware of other drugs and devices under development by these and other
photodynamic therapy competitors in additional disease areas for which we are
developing PhotoPoint PDT. These competitors as well as others that we are not
aware of, may develop superior products or reach the market prior to PhotoPoint
PDT and render our products non-competitive or obsolete.
In the photodynamic therapy sector, we believe that a primary competitive
issue will be the performance characteristics of photoselective drugs, including
product efficacy and safety, as well as availability, price and patent position,
among other issues. As the photodynamic therapy industry evolves, we believe
that new and more sophisticated devices may be required and that the ability of
any group to develop advanced devices will be important to market position. We
believe that if we obtain approval, competition will be based on product
reliability, clinical utility, patient outcomes, marketing and distribution
partner capabilities, availability, cost effectiveness, reimbursement and patent
position, among other factors.
Corporate Offices
The principal office of Miravant is located at 336 Bollay Drive, Santa
Barbara, California, 93117. Main telephone and fax numbers are (805) 685-9880
and (805) 685-7981. Miravant was incorporated in the state of Delaware in 1989.
Employees
As of March 14, 2003, we employed 72 individuals, approximately 37 of which
were engaged in research and development, 4 were engaged in manufacturing and
clinical activities and 31 in general and administrative activities. We believe
that our relationship with our employees is good and none of the employees are
represented by a labor union.
Our future success also depends on our continuing ability to attract, train
and retain highly qualified scientific and technical personnel. Competition for
these personnel is intense, particularly in Santa Barbara where we are
headquartered. Due to the limited number of people available with the necessary
scientific and technical skills and our current challenging financial situation,
we can give no assurance that we can retain or attract key personnel in the
future. We have not experienced any work stoppages and consider our relations
with our employees to be good, given our current financial circumstances.
EXECUTIVE OFFICERS
The names, ages and certain additional information of the current
executive officers of the Company are as follows:
Name Age Position
Gary S. Kledzik, Ph.D. 53 Chairman of the Board and
Chief Executive Officer
David E. Mai 58 President of Miravant
Medical Technologies,
Miravant Systems, Inc.,
Miravant Pharmaceuticals,
Inc. and Director
John M. Philpott 42 Chief Financial Officer and
Treasurer
Gary S. Kledzik, Ph.D. is a founder of the Company and has served as a
director since its inception in June 1989. He served as President of the Company
from June 1989 to May 1996. He has been Chairman of the Board of Directors since
July 1991 and Chief Executive Officer since September 1992. Prior to joining the
Company, Dr. Kledzik was Vice President of the Glenn Foundation for Medical
Research. His previous experience includes serving as Research and General
Manager for an Ortho Diagnostic Systems, Inc. division of Johnson & Johnson and
Vice President of Immulok, Inc., a cancer and infectious disease biotechnology
company which he co-founded and which was acquired by Johnson & Johnson in 1983.
Dr. Kledzik holds a B.S. in Biology and a Ph.D. in Physiology from Michigan
State University.
David E. Mai has served as President of the Company since May 1996,
President of Miravant Cardiovascular, Inc. from September 1992 to June 2001,
President of Miravant Pharmaceuticals, Inc. since July 1996 and President of
Miravant Systems, Inc. since June 1997. Mr. Mai served as Vice President of
Corporate Development for the Company from March 1994 until May 1996. Mr. Mai
became associated with the Company in July 1990 as a consultant assisting with
technology and business development. He joined the Company in 1991, serving as
New Product Program Manager from February 1991 to July 1992 and as Clinical
Research Manager from July 1992 to September 1992. Prior to joining the Company,
Mr. Mai was Director of the Intravascular Ultrasound Division of Diasonics
Corporation from 1988 to 1989. Previously, Mr. Mai served as Director of
Strategic Marketing for Boston Scientific Corporation's Advanced Technologies
Division, Vice President of Stanco Medical and Sales Engineer with
Hewlett-Packard Medical Electronics. Mr. Mai holds a B.S. degree in Biology from
the University of Hawaii.
John M. Philpott has served as Chief Financial Officer since December 1995.
Since March 1995, Mr. Philpott had served as Controller. Prior to joining the
Company, Mr. Philpott was a Senior Manager with Ernst & Young LLP, which he
joined in 1986. Mr. Philpott is a Certified Public Accountant in the State of
California. He holds a B.S. degree in Accounting and Management Information
Systems from California State University, Northridge.
Where You Can Find More Information
We make our annual report on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, and all amendments to such reports filed pursuant
to Section 13(a) or 15(d) of the Exchange Act, available, free of charge, on or
through our Internet website located at www.miravant.com, as soon as reasonably
practicable after they are filed with or furnished to the SEC.
ITEM 2. PROPERTIES
We currently have three leases in place for approximately 86,000 square
feet of office, laboratory and manufacturing space in Santa Barbara, California,
of which approximately 46,300 square feet has been subleased.
Our primary building, which currently houses all of our operations and
employees, represents approximately 39,700 square feet of office, laboratory and
manufacturing space. We entered into this lease in August 1996. This lease
provides for rent to be adjusted annually based on increases in the consumer
price index and the base rent is approximately $52,000 per month. In August 2002
this lease was renewed for one year, with a minimum of three months notice for
termination and has two one-year options to extend. The leased property is
located in a business park. We have the ability to manufacture our light
producing and light delivery devices and perform research and development of
drugs, light delivery and light producing devices from this facility.
The remaining two buildings under lease have been subleased. The first
building for approximately 18,900 square feet of space was leased in 1992 and
the base rent, which is adjusted annually based on increases in the consumer
price index, is approximately $26,000 per month. This lease was extended in May
2001 and expires in March 2006. The leased property is located in a business
park and is subject to a master lease agreement. In January 2003, we sublet this
facility through December 2005, for a monthly payment amount equal to our base
rent. The other building for approximately 27,400 square feet of primarily
office space was leased in July 1998 and the base rent is currently
approximately $39,000 per month. The lease expires in October 2003 and provides
for rent to be adjusted annually based on increases in the consumer price index.
We sublet this building to two separate parties in December 1999. The sublease
agreements expire in October 2003, with rent based upon the percentage of square
footage occupied. Currently rental income, which is approximately $37,000 per
month, is also subject to increases based upon the consumer price index. The
leased property is located in a business park and is subject to a master lease
agreement.
For the facility that we will likely continue to occupy, we may incur
additional costs for the construction of the manufacturing, laboratory and
office space associated with these facilities and we may at any time determine
to sublease additional space for areas that are not being fully utilized.
ITEM 3. LEGAL PROCEEDINGS
We are not currently party to any material litigation or proceeding and are
not aware of any material litigation or proceeding threatened against us.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 2002.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
Our Common Stock is traded on the OTC Bulletin Board(R), or OTCBB, under
the symbol MRVT. The following table sets forth high and low bid prices per
share of Common Stock as reported on the Nasdaq National Market based on
published financial sources. The closing price of our Common Stock as reported
on the Nasdaq National Market under the symbol MRVT.OB on March 14, 2003 was
$1.17.
High Low
2002:
Fourth quarter............................................$ 1.05 $ 0.40
Third quarter............................................ 0.99 0.19
Second quarter............................................ 1.68 0.50
First quarter............................................. 9.90 0.74
2001:
Fourth quarter............................................$ 10.20 $ 6.32
Third quarter............................................ 12.08 5.00
Second quarter............................................ 12.70 6.00
First quarter............................................. 9.69 6.25
As of March 14, 2003 there were approximately 274 stockholders of record of
the Common Stock, which does not include "street accounts" of securities
brokers. Based on the number of proxies requested by brokers in connection with
our annual meeting of stockholders, we estimate that the total number of
stockholders of the Common Stock exceeds 5,000.
We have never paid dividends, cash or otherwise, on our capital stock and
do not anticipate paying any dividends in the foreseeable future. We currently
intend to retain future earnings, if any, to finance the growth and development
of our business.
We were notified by Nasdaq on July 11, 2002 that our Common Stock would be
delisted and begin trading on the OTCBB effective as of the opening of business
on July 12, 2002. The OTCBB is a regulated quotation service that displays
real-time quotes, last-sale prices and volume information in over-the-counter
equity securities. OTCBB securities are traded by a community of market makers
that enter quotes and trade reports. Our Common Stock trades under the ticker
symbol MRVT and can be viewed at www.otcbb.com. Management continues to review
our ability to regain our listing status with Nasdaq, however, there are no
guarantees we will be able to raise the additional capital needed or to increase
the current trading price of our Common Stock to allow us to meet the relisting
requirements for the Nasdaq National Market or the Nasdaq Small Cap Market on a
timely basis, if at all.
Recent Sales of Unregistered Securities - Fourth Quarter 2002
In connection with each borrowing under the Debt Agreement, we will issue
to the Lenders a warrant to purchase one-quarter (1/4) of a share of Miravant
Common Stock for every $1.00 borrowed. The exercise price of each warrant will
be equal to the greater of $1.00 per share or 150% of the average of the closing
prices of Miravant's Common Stock for the ten (10) trading days preceding the
date of the Note. In addition, upon execution of the Debt Agreement we issued
the Lenders a warrant to acquire 250,000 shares of our Common Stock, with an
exercise price of $0.50 per share. Each warrant will terminate on December 31,
2008, unless previously exercised. We have also agreed to provide the Lenders
certain registration rights in connection with this transaction. On December 19,
2002, pursuant to the Debt Agreement, we borrowed $1.0 million, which has a
conversion price of $0.97 per share or convertible into 1,029,601 shares of
Common Stock and issued the Lenders a warrant exercisable for 250,000 shares of
our Common Stock at $1.17 per share. The convertible debt and warrants were
issued pursuant to an exemption from registration under Rule 506 promulgated
under Regulation D of the Securities Act. The proceeds are being used for
research, development and general corporate purposes. For further discussion see
Item 7 Management's Discussion & Analysis.
Equity Compensation Plan Information
The following table gives information about our Common Stock that may be
issued upon the exercise of options, warrants and rights under all of our
existing equity compensation plans as of December 31, 2002.
(a) (b) (c)
Number of Number of securities
securities to be remaining available for
issued upon Weighted average future issuance under
exercise of exercise price equity compensation
outstanding of outstanding plans (excluding
options, warrants options, securities reflected in
and rights warrants and column(a))
Plan Category rights
----------------------------------------- -------------------- ------------------ --------------------------
Equity compensation plans approved by
security holders(1)(2)................. 5,989,137 $ 2.94 3,198,985
-----------------------------------------
Equity compensation plans not approved
by security holders(3)................. 347,500 $ 9.75 --
----------------------------------------- -------------------- ------------------ --------------------------
Total.................................. 6,336,637 $ 3.32 3,198,985
----------------------------------------- -------------------- ------------------ --------------------------
(1) These plans include: The 2000 Stock Compensation Plan, or 2000 Plan,
the 1989 Plan, the 1992 Plan, the 1994 Plan and the 1996 Plan, or the
Prior Plans. The 2000 Plan has superceded the Prior Plans.
(2) The maximum amount of shares that could be awarded under the 2000 Plan
over its term is 8,000,000 shares, of which approximately 5,843,514
shares have been granted or issued and 1,042,499 shares have been
cancelled netting 4,801,015 shares, which were granted or issued under
the 2000 Plan as of December 31, 2002.
(3) Over time warrants to purchase shares of our Common Stock have been
issued to various consultants for services rendered not from an
approved equity compensation plan.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
In the table below, we provide you with summary historical financial data
of Miravant Medical Technologies. We have prepared this information using the
consolidated financial statements of Miravant for the five years ended December
31, 2002. The consolidated financial statements for the five fiscal years ended
December 31, 2002 have been audited by Ernst & Young LLP, independent auditors.
When you read this summary of historical financial data, it is important
that you read along with it the historical financial statements and related
notes in our annual and quarterly reports filed with the SEC, as well as the
section of our annual and quarterly reports titled "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Year Ended December 31,
----------------------------------------------------------------------------------
2002 2001 2000 1999 1998
--------------- --------------- --------------- --------------- ---------------
(in thousands, except share and per share data)
Statement of Operations Data:
Revenues ......................... $ 499 $ 4,683 $ 4,593 $ 14,577 $ 10,179
Costs and expenses:
Cost of goods sold............. 479 934 -- -- --
Research and development....... 9,549 13,493 20,194 29,749 29,233
Selling, general and
administrative............... 5,726 5,903 6,023 7,473 9,626
Loss in affiliate.............. -- -- -- 417 2,929
--------------- --------------- --------------- --------------- ---------------
Total costs and expenses.......... 15,754 20,330 26,217 37,639 41,788
--------------- --------------- --------------- --------------- ---------------
Loss from operations.............. (15,255) (15,647) (21,624) (23,062) (31,609)
Interest and other income (expense)
Interest and other income...... 169 798 1,370 1,240 3,546
Interest expense............... (286) (2,139) (2,254) (434) (1)
Gain on sale of assets......... 10 586 -- -- --
Non-cash loss in investment (3) (598) -- (3,485) -- --
--------------- --------------- --------------- --------------- ---------------
Total net interest and other
income (expense)............... (705) (755) (4,369) 806 3,545
--------------- --------------- --------------- --------------- ---------------
Net loss.......................... $ (15,960) $ (16,402) $ (25,993) $ (22,256) $ (28,064)
=============== =============== =============== =============== ===============
Net loss per share (1) ........... $ (.78) $ (.88) $ (1.42) $ (1.25) $ (1.94)
=============== =============== =============== =============== ===============
Shares used in computing net
loss per share (1) ............ 20,581,214 18,647,071 18,294,525 17,768,670 14,464,044
=============== =============== =============== =============== ===============
December 31,
----------------------------------------------------------------------------------
2002 2001 2000 1999 1998
--------------- ---------------- ------------- -------------- ------------
(in thousands)
Balance Sheet Data:
Cash and marketable securities (2) $ 723 $ 6,112 $ 20,835 $ 22,789 $ 11,284
Working capital (deficit)......... (5,953) 9,240 19,431 24,933 11,134
Total assets...................... 3,769 16,165 28,027 35,823 23,810
Long-term liabilities ............ 6,652 26,642 24,888 15,506 --
Accumulated deficit............... (189,529) (173,569) (157,167) (131,174) (108,918)
Total stockholders' equity
(deficit)......................... (10,110) (13,798) (164) 15,597 19,686
- -----------
(1) See Note 1 of Notes to Consolidated Financial Statements for
information concerning the computation of net loss per share.
(2) See Notes 2 and 3 of Notes to Consolidated Financial Statements for
information concerning the changes in cash and marketable securities.
(3) See Note 10 of Notes to Consolidated Financial Statements for
information regarding the non-cash loss in investment.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This section of the Annual Report on Form 10-K contains forward-looking
statements, which involve known and unknown risks and uncertainties. These
statements relate to our future plans, objectives, expectations and intentions.
These statements may be identified by the use of words such as "may," "will,"
"should," "potential," "expects," "anticipates," "intends," "plans," "believes"
and similar expressions. These statements are based on our current beliefs,
expectations and assumptions and are subject to a number of risks and
uncertainties and include statements regarding our general beliefs concerning
the efficacy and potential benefits of photodynamic therapy; our ability to
raise funds to continue our operations; the timing and our ability to complete
of our planned New Drug Application, or NDA, filing for the use of SnET2 to
treat wet age-related macular degeneration, or AMD, with the U.S. Food and Drug
Administration, or FDA; our ability to make or negotiate new debt repayment
terms for our first debt payment due to Pharmacia Corporation, or Pharmacia, on
June 30, 2003; our ability to continue to receive the $1.0 million monthly
borrowings through November 2003 under the December 2002 Convertible Debt
Agreement, or the Debt Agreement; our ability to resolve any contingencies
associated with our NDA after it is filed with the FDA; the assumption that we
will continue as a going concern; our ability to regain our listing status on
Nasdaq; our plans to collaborate with other parties and/or license SnET2; our
ability to continue to retain employees under our current financial
circumstances; our ability to use our light production and delivery devices in
future clinical trials; our expected research and development expenditures; our
patent prosecution strategy; and our expectations concerning the government
exercising its rights to use certain of our licensed technology. Our actual
results could differ materially from those discussed in these statements due to
a number of risks and uncertainties including: failure to obtain additional
funding timely, if at all; failure to make our scheduled payment or negotiate
new debt repayment terms with Pharmacia prior to June 30, 2003 resulting in
foreclosure on all our assets; we may be unable to continue borrowing under the
Debt Agreement if we fail to meet certain requirements or if these requirements
are not met to the satisfaction of the Lenders; unanticipated complexity or
difficulty preparing and completing the NDA filing; a failure of our drugs and
devices to receive regulatory approval; other parties may decline to collaborate
with us due to our financial condition or other reasons beyond our control; our
existing light production and delivery technology may prove to be inapplicable
or inappropriate for future studies; we may be unable to obtain the necessary
funding to further our research and development activities and the government
may change its past practices and exercise its rights contrary to our
expectations. For a more complete description of the risks that may impact our
business, see "Risk Factors", included in Item 7, for a discussion of certain
risks, including those relating to our ability to obtain additional funding, our
ability to establish new strategic collaborations, our operating losses, risks
related to our industry and other forward-looking statements.
The following discussion should be read in conjunction with the
Consolidated Financial Statements and Notes thereto.
General
Since our inception, we have been principally engaged in the research and
development of drugs and medical device products for use in PhotoPoint(TM) PDT,
our proprietary technologies for photodynamic therapy. We have been unprofitable
since our founding and have incurred a cumulative net loss of approximately
$189.5 million as of December 31, 2002. As we currently do not have any sources
of revenues, we expect to continue to incur substantial, and possibly
increasing, operating losses for the next few years due to continued spending on
research and development programs, the cost of preparing and filing an NDA and
related follow-up expenses, the funding of preclinical studies, clinical trials
and regulatory activities and the costs of manufacturing and administrative
activities. We also expect these operating losses to fluctuate due to our
ability to fund the research and development programs as well as the operating
expenses of the Company. As of March 5, 2003, our first payment was due on our
debt to Pharmacia Corporation, or Pharmacia, in the amount of $5.0 million plus
accrued interest. We have since negotiated with Pharmacia an extension on the
first payment due to June 30, 2003. If we cannot make the scheduled payment or
negotiate new terms for the debt repayment with Pharmacia, then Pharmacia can
exercise all its rights to secure all the collateral under the agreement, which
includes all our assets. There is no guarantee that we will be able to make the
scheduled payment or that new debt repayment terms will be negotiated timely, if
at all.
We are continuing scaled back efforts in research and development and the
preclinical studies and clinical trials of our products. These efforts, and
along with preparing an NDA and the cost of obtaining requisite regulatory
approval, prior to commercialization, will require substantial expenditures.
Once requisite regulatory approval has been obtained, if at all, substantial
additional financing will be required for the manufacture, marketing and
distribution of our product in order to achieve a level of revenues adequate to
support our cost structure. In December 2002, we entered into a $12.0 million
Convertible Debt and Warrant Agreement, or Debt Agreement, with a group of
private accredited investors, or the Lenders, that provided us the availability
to borrow up to $1.0 million per month through November 2003. The monthly
borrowing request can be limited if certain requirements are not met or are not
satisfactory to the Lenders. As of March 15, 2003, we had borrowed $4.0 million
under the Debt Agreement. Executive management of Miravant believes that if the
remaining $8.0 million remains available to us under the Debt Agreement that we
will have sufficient resources to fund the current required expenditures through
November 30, 2003. In addition, executive management also believes we can raise
additional funding to support operations through corporate collaborations or
partnerships, licensing of SnET2 or new products and additional equity or debt
financings prior to December 31, 2003, especially due to our announcement that
we intend to file an NDA in 2003. However, there can be no assurance that we
will receive the remaining $8.0 million under the Debt Agreement, if certain
requirements are not met or are not satisfactory to the Lenders, and there is no
guarantee that we will be successful in obtaining additional financing or that
financing will available on favorable terms. If additional funding is not
available when required, management believes that we have the ability to
conserve cash required for operations through December 31, 2003 by the delay or
reduction in scope of one or more of its research and development programs and
adjusting, deferring or reducing salaries of employees and by reducing operating
facilities and overhead expenditures to conserve cash to be used in operations.
Our historical revenues primarily reflect income earned from licensing
agreements, grants awarded, royalties from device product sales, milestone
payments, non-commercial drug sales to Pharmacia and interest income. During
2001 and through January 2002, we sold approximately $4.8 million of the SnET2
bulk active pharmaceutical ingredient, or bulk API, to Pharmacia to be used in
preclinical studies and clinical trials and in anticipation of a potential NDA
filing for SnET2 for the treatment of wet age-related macular degeneration, or
AMD. The January 2002 sales of bulk API of $479,000 was the final amount sold to
Pharmacia.
Any other future potential new revenues such as license income from new
collaborative agreements, revenues from contracted services, grants awarded
and/or royalties from potential drug and device sales, if any, will depend on,
among other factors, the results from our ongoing preclinical studies and
clinical trials, the timing and outcome of applications for regulatory
approvals, including our NDA for AMD to be filed in 2003, our ability to
re-license SnET2 and establish new collaborative partnerships and their
subsequent level of participation in our preclinical studies and clinical
trials, our ability to have any of our potential drug and related device
products successfully manufactured, marketed and distributed, the restructuring
or establishment of collaborative arrangements for the development,
manufacturing, marketing and distribution of some of our future products. We
anticipate our operating activities will result in substantial, and possibly
increasing, operating losses for the next several years.
In December 2002, we entered into a $12.0 million Debt Agreement. The $12.0
million Debt Agreement allows us to borrow up to $1.0 million per month, with
any unused monthly borrowings to be carried forward. The maximum aggregate loan
amount is $12.0 million with the last available borrowing in November 2003. The
Lenders obligation to fund each borrowing request is subject to material
conditions described in the Debt Agreement. In addition, the Lenders may
terminate its obligations under the Debt Agreement if: (i) Miravant has not
filed an NDA by March 31, 2003, (ii) such filing has been rejected by the
Federal Drug Administration, or (iii) Miravant, in the reasonable judgment of
the Lenders, is not meeting its business objectives. We have received a waiver
from the Lenders with regard to the NDA filing deadline of March 31, 2003. This
deadline has been extended to the end of the third quarter of 2003.
In August 2002, we completed a private placement financing which consisted
of the sale of unregistered shares of Common Stock for gross proceeds of $2.5
million at $0.50 per share, based on a premium of approximately 20% of the
average closing price for the prior 10 trading days. For every two common shares
acquired, the equity purchase included a warrant to purchase one share of Common
Stock at a price of $0.50 per share, with an exercise period of 5 years from the
date of grant. A group of private investors participated in the offering.
In January 2002, Pharmacia, after an analysis of the Phase III AMD clinical
data, determined that the clinical data results indicated that SnET2 did not
meet the primary efficacy endpoint in the study population, as defined by the
clinical trial protocol, and that they would not be filing an NDA with the FDA.
In March 2002, we regained the license rights to SnET2 as well as the related
data and assets from the Phase III AMD clinical trials from Pharmacia. We
completed our own detailed analysis of the clinical data during 2002, including
an analysis of the subset groups. In January 2003, based on the results of our
analysis and certain discussions with regulatory and FDA consultants, we
announced our plans to move forward with an NDA filing for SnET2 for the
treatment of AMD. In addition, we are currently seeking a new collaborative
partner for PhotoPoint PDT in ophthalmology.
Executive management is currently pursuing various potential strategic
partners in fields of ophthalmology and cardiovascular disease. In the field of
ophthalmology we entered into a non-binding letter of intent with Bausch & Lomb
in June 2002, for SnET2 for the treatment of AMD. As of October 1, 2002 the
letter of intent has expired, however, we continue to have discussions with
Bausch & Lomb regarding this opportunity. Bausch & Lomb may still continue to
pursue potential licensing opportunities with us for SnET2, or other compounds,
however, at this time we have not entered into any definitive or exclusive
agreements with them. In the field of cardiovascular disease, we are in
discussions with various potential strategic partners, but also have not entered
into any definitive or exclusive agreements. There are no guarantees that Bausch
& Lomb or any other potential strategic partner will enter into a license
agreement or provide us with any potential funding to advance our research and
development programs.
We were notified by Nasdaq on July 11, 2002 that our Common Stock would be
delisted and begin trading on the OTC Bulletin Board(R), or OTCBB, effective as
of the opening of business on July 12, 2002. The OTCBB is a regulated quotation
service that displays real-time quotes, last-sale prices and volume information
in over-the-counter equity securities. OTCBB securities are traded by a
community of market makers that enter quotes and trade reports. Our Common Stock
trades under the ticker symbol MRVT and can be viewed at www.otcbb.com.
Management continues to review our ability to regain our listing status with
Nasdaq, however, there are no guarantees we will be able to raise the additional
capital needed or to increase the current trading price of our Common Stock to
allow us to meet the relisting requirements for the Nasdaq National Market or<