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, 2003
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, $0.01 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, 2003 based upon the last sale price of the Common
Stock of $1.12 per share, as reported on the OTC Bulletin Board(R), was
approximately $29,522,861. 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 15, 2004 was
29,801,765.
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 2004 Annual
Meeting of Stockholders scheduled to be held on June 24, 2004. 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, 2003
TABLE OF CONTENTS
PART I
Item 1. Business ...........................................................................................4
Item 2. Properties .........................................................................................22
Item 3. Legal Proceedings...................................................................................22
Item 4. Submission of Matters to a Vote of Security-Holders.................................................22
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholders Matters..............................23
Item 6. Selected Consolidated Financial Data................................................................25
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations...............26
Item 7A. Qualitative and Quantitative Disclosures About Market Risk..........................................57
Item 8. Financial Statements and Supplementary Data.........................................................57
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure................82
Item 9A Controls and Procedures.............................................................................82
PART III
Item 10. Directors and Executive Officers of the Registrant .................................................83
Item 11. Executive Compensation..............................................................................83
Item 12. Security Ownership of Certain Beneficial Owners and Management......................................83
Item 13. Certain Relationships and Related Transactions......................................................83
Item 14. Principal Accountant Fees and Services..............................................................83
PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.....................................84
Signatures..........................................................................................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 which are based on our current beliefs,
expectations and assumptions and are subject to a number of risks and
uncertainties, including but not limited to statements regarding our general
beliefs concerning the efficacy and potential benefits of photodynamic therapy;
our ability to raise funds to continue operations; the timing and our ability to
submit our planned New Drug Application, or NDA, 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 continue to receive the remaining $5.7
million available at $1.0 million monthly through June 2004, under the December
2002 Convertible Debt Agreement, as amended, or the 2002 Debt Agreement; our
ability to meet the covenants of the August 2003 Unsecured Convertible Debt and
Warrant Purchase Agreement, or the 2003 Debt Agreement; our ability to meet the
covenants of the February Unsecured Convertible Debt Purchase Agreement, or the
February 2004 Debt Agreement; our ability to resolve any issues or contingencies
associated with our NDA after it is submitted 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 laser 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 but not limited to: failure to obtain
additional funding in a timely manner, if at all; our ability to continue
borrowing under the 2002 Debt Agreement if we fail to meet certain requirements
or if these requirements are not met to the satisfaction of the 2002 Lenders;
our failure to meet or obtain waivers from the covenants in our 2003 Debt
Agreement and/or our February 2004 Debt Agreement which could lead to a default
under those agreements; unanticipated complexity or difficulty preparing and
completing the NDA filing for SnET2; a failure of our drugs and devices to
receive regulatory approval; other parties declining to collaborate with us due
to our financial condition or other reasons beyond our control; the failure of
our existing light production and delivery technology to prove to be applicable
or appropriate for future studies; our failure to obtain the necessary funding
to further our research and development activities; and unanticipated changes by
the government in its past practices by exercising 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 specializing in
photodynamic therapy, or PDT, a treatment modality based on drugs that respond
to light. When activated by light, these drugs induce a photochemical reaction
in the presence of oxygen that can be used to locally destroy diseased cells and
abnormal blood vessels. We have branded our novel version of PDT technology with
the trademark PhotoPoint(R). Our drugs and devices are in various stages of
development and have not yet been evaluated by the FDA for regulatory approval.
Our most advanced drug, PhotoPoint SnET2, has completed Phase III clinical
trials for the treatment of wet age-related macular degeneration, or AMD, and we
are preparing to submit a New Drug Application, or NDA, for its marketing
approval.
We believe that PhotoPoint PDT is a platform technology that has the
potential to provide safe and effective treatments for a number of diseases
including those in ophthalmology, dermatology, cardiovascular disease and
oncology. Our current objective is to develop our PhotoPoint technology for
disease indications with large potential market opportunities and/or unmet
medical needs. Our strategy is to develop PhotoPoint PDT as a primary therapy
and, where appropriate, as a combination therapy with other treatments such as
surgery or drug therapy to achieve efficacious clinical results.
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, sales and distribution of
our products. At this time, the scope of our business is research and
development with limited manufacturing capabilities. For large-scale
manufacturing, marketing, sales and distribution activities, we may elect to use
outside contractors and/or develop these capabilities internally, or seek
strategic collaborations with pharmaceutical and medical device partners in
certain therapeutic areas.
We were incorporated in Delaware in 1989 and, effective September 15, 1997,
changed our name from PDT, Inc. to Miravant Medical Technologies. Our executive
offices and the offices of our three subsidiaries, Miravant Pharmaceuticals,
Inc., Miravant Systems, Inc. and Miravant Cardiovascular, Inc., are located at
336 Bollay Drive, Santa Barbara, California 93117. Our telephone number is (805)
685-9880. Unless otherwise indicated, all references to us also include our
subsidiaries.
The following is a summary of our recent significant events:
* In December 2002, as amended in 2003, we entered into a Convertible
Debt and Warrant Purchase Agreement, or the 2002 Debt Agreement, with
a group of private accredited investors, or the 2002 Lenders. The 2002
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 June 30, 2004. The debt is due December 31, 2008 and
earns interest of 9.4% per year. The interest is payable monthly and
can be accrued, paid in cash or paid in the form of Common Stock. The
2002 Lenders may terminate their obligations under the 2002 Debt
Agreement if: (1) Miravant has not submitted a New Drug Application,
or NDA, by March 31, 2004, (2) such filing has been rejected by the
U.S. Food and Drug Administration, or FDA, or (3) Miravant, in the
reasonable judgment of the 2002 Lenders, is not meeting its business
objectives. As of March 15, 2004, we had borrowed $6.3 million under
the 2002 Debt Agreement and there was $5.7 million remaining available
to us under the 2002 Debt Agreement, subject to certain material
conditions described in the 2002 Debt Agreement. As of March 15, 2004,
we have issued warrants to purchase 3,150,000 shares of our Common
Stock with an exercise price of $1.00 and upon the execution of the
2002 Debt Agreement, we issued an origination warrant to purchase
250,000 shares of our Common Stock, with an exercise price of $0.50
per share. Warrants for the purchase of 1,575,000 shares will
terminate on August 28, 2008 and warrants for the purchase of 1,825,00
shares will terminate on December 31, 2008, unless previously
exercised;
* In January 2003, we announced our intention to submit our first 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 for two independent trials completed in December 2001
and after holding discussions with our regulatory consultants and the
ophthalmic division of the FDA. Our analyses showed positive results
in a significant number of PhotoPoint SnET2 treated patients versus
placebo control patients in the "per protocol" population. The per
protocol population consists of those patients who received the
exposure to the SnET2 treatment regimen pre-specified in the clinical
study protocol, comprising a smaller number of patients than the total
study population. We are currently in the process of preparing the NDA
and expect to have it completed and submitted on or about March 31,
2004;
* Previously, in January 2002, Pharmacia Corporation, or Pharmacia,
after a top-line review 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 as contemplated by our agreements with Pharmacia. 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.
Additionally, in March 2002 we terminated our license collaboration
with Pharmacia;
* In August 2003, we entered into an Unsecured Convertible Debenture and
Warrant Purchase Agreement, or the 2003 Debt Agreement, with certain
private accredited investors, or the 2003 Lenders. Under the 2003 Debt
Agreement we borrowed $6.0 million, with interest accruing at 8% per
year and due and payable quarterly, with the first interest payment
due on October 1, 2003. The principal amount matures on August 28,
2006. At our option and subject to certain restrictions, we may make
interest payments in cash or in shares of Common Stock. Upon the
occurrence of certain events of default, the holders of the
convertible debentures may require that they be repaid prior to
maturity. Some of the events of default include if we fail to pay
amounts due under the debentures or to otherwise perform any material
covenant in the 2003 Debt Agreement or other related documents, if we
fail to submit our PhotoPoint SnET2 NDA to the FDA on or before
December 31, 2003, which was extended to March 31, 2004, or the
rejection of our NDA submission by the FDA, or the occurrence of
certain insolvency-related events. In connection with the 2003 Debt
Agreement, we issued warrants to each 2003 Lender to purchase a total
of 4,750,000 shares of our Common Stock each with an expiration date
of August 28, 2008 and an exercise price of $1.00 per share. As of
March 15, 2004, $2.5 million of the notes have been converted into
2,500,000 shares of Common Stock and warrants covering 1,425,000
shares of Common Stock have been exercised;
* In addition, when we entered into the 2003 Debt Agreement, we also
entered into a Termination and Release Agreement with Pharmacia AB, a
wholly owned subsidiary of Pfizer, Inc., or Pharmacia, for the
retirement of $10.6 million of debt owed by us to Pharmacia and the
release of the related security collateral, in exchange for a payment
of $1.0 million in cash, 390,000 shares of our Common Stock, and an
adjustment of the exercise price of Pharmacia's outstanding warrants
to purchase 360,000 shares of our Common Stock to $1.00 from an
average exercise price of $15.77, and an extension of the expiration
date of those warrants to December 31, 2005 from expiration dates
ranging from May 2004 to May 2005;
* In December 2003, we sold our investment in Xillix Technologies Corp.
We owned approximately 2.7 million shares of Xillix and we received
net proceeds of approximately $1.6 million; and
* In February 2004, we entered into an Unsecured Convertible Debenture
Purchase Agreement, or the February 2004 Debt Agreement, with certain
private accredited investors, or the February 2004 Lenders. Under the
February 2004 Debt Agreement we issued $2.0 million worth of
convertible debentures maturing on February 5, 2008 with interest
accruing at 8% per year, due and payable quarterly, with the first
interest payment due on April 1, 2004. At our option and subject to
certain restrictions, we may make interest payments in cash or in
shares of our Common Stock, or the interest can be added to the
outstanding principal of the note. Each convertible debenture issued
pursuant to the February 2004 Debt Agreement is convertible at the
holder's option into shares of our Common Stock at $2.00 per share. We
are obligated to file a registration statement with the Securities and
Exchange Commission, or SEC, covering the resale of the shares of
Common Stock underlying these convertible debentures no later than
April 30, 2004. Upon the occurrence of certain events of default, the
holders of the convertible debentures may require that they be repaid
prior to maturity. These events of default include our failure to pay
amounts due under the debentures or to otherwise perform any material
covenant in the February 2004 Debt Agreement or other related
documents.
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
if our lenders terminate our existing funding prior to June 30, 2004, we may be
unable to continue as a going concern.
Background
Photodynamic therapy, or PDT, is a treatment modality based on
light-activated, or photoselective drugs to locally treat diseased cells and
abnormal blood vessels. The drug and light procedures involve three components:
photoselective drugs, light producing devices and light delivery devices.
We are developing a family of medical procedures trademarked PhotoPoint
that are based on proprietary, synthetic photoselective drugs. These drugs have
the ability to transform light energy into chemical energy in a manner similar
to that of chlorophyll in green plants. When administered to the body, either
systemically by intraveneous injection or locally at the treatment site, our
PhotoPoint drugs are designed to preferentially accumulate in rapidly
reproducing, or hyperproliferating, cells and blood vessels based on the
metabolic characteristics of these tissues. Since a number of disease conditions
involve tissue and/or cellular hyperproliferation, we believe that PhotoPoint
PDT has a number of potential applications. Certain examples are abnormal blood
vessels at the back of the eye associated with macular degeneration; plaque
psoriasis that causes excessive proliferation of the epidermis; cardiovascular
diseases caused by the narrowing of coronary arteries; and the rapid growth of
cells and new blood vessels in cancer tumors.
Our photoselective drugs are inactive until exposed to a specific
wavelength and dose of visible light. The wavelength corresponds to the color of
the light, and the light dose represents the number of photons, or light energy
delivered to the target tissue over time. We have designed our drugs to respond
to various light wavelengths depending on the desired depth of light penetration
into the target tissue. When light is delivered to the treatment site and the
drug and light interact, a photochemical reaction occurs in which molecular
oxygen is consumed to produce reactive oxygen intermediates that can lead to
cell death. We can control the treatment response by varying the respective drug
and light doses and the relative timing of their administration. The result is a
localized, light-selective response that can potentially destroy diseased cells
and abnormal blood vessels with minimal damage to surrounding normal tissues and
vessels.
Low-power, non-thermal visible light is used to activate PhotoPoint drugs.
The light is generated by diode lasers or, for certain applications, by
non-coherent light sources. The light is typically delivered from the light
source to the patient via fiber optic delivery devices that produce uniform
patterns of light for different disease applications. The fiber optic devices
may be designed to focus light on body surfaces such as skin or to channel into
the body via catheters for internal applications. Additional methods of light
delivery include the slit lamp adapter used with our ophthalmic device
co-developed with Iridex.
Industry
As early as 1900, scientists observed that certain compounds localized in
tissues elicited a response to light, a response that came to be known as
photodynamic therapy. Since the mid-1970s, various treatment applications of PDT
have been investigated and approved for use in humans. PDT continues to be
studied by a variety of companies, physicians and researchers around the world
to treat a broad range of disease indications. Early industry development was
hindered by issues such as drug manufacturing and purity, the use of costly and
inefficient lasers and the lack of integrated drug and device development. Since
our founding, we have endeavored to address these issues in our PhotoPoint
development programs. In the last few years, the industry has significantly
advanced and achieved regulatory approvals for several PDT drugs in the United
States and abroad.
Business Strategy
Our current objective is to develop our PhotoPoint technology for disease
indications with large potential market opportunities and/or unmet medical
needs. Our strategy is to develop PhotoPoint PDT as a primary therapy and, where
appropriate, as a combination therapy with other treatments such as surgery or
drug therapy to achieve efficacious clinical results.
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, sales and distribution of
our products. At this time, the scope of our business is research and
development with limited manufacturing capabilities. For large-scale
manufacturing, marketing, sales and distribution activities, we may elect to use
outside contractors and/or develop these capabilities internally, or seek
strategic collaborations with pharmaceutical and medical device partners in
certain therapeutic areas.
Technology and Products
Our drugs, light producing and light delivery devices have been developed
in-house and with outside collaborators and have been used in various clinical
and preclinical investigations.
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 these broad classes
we have synthesized several hundred unique photoselective compounds, which have
been characterized and screened in biological testing systems. The development
status of our key drug candidates is as follows:
* SnET2: Phase III completed, NDA submission in preparation - wet
age-related macular degeneration.
* MV9411: Phase II - plaque psoriasis.
* MV0633: Advanced preclinical - atherosclerosis, atherosclerotic
vulnerable plaque and prevention of restenosis.
* MV2101: Advanced preclincal - vascular access graft disease in
hemodialysis patients.
* MV6401: Preclinical - solid tumors (treatment of cells &
neovasculature).
Our ongoing commitment to the various programs depends upon a number of
factors, including the results of investigational studies, regulatory approvals,
financial resources, strategic business considerations, the competitive
marketing environment and potential return on investment.
Light Producing Devices. Our PhotoPoint procedures are designed to use
reliable and affordable light producing devices. Our light technologies include
software-controlled diode lasers, light emitting diode, or LED, arrays, and
non-coherent light sources. Either internally or with outside collaborators, we
have developed a variety of devices producing various wavelengths of light for
use in our investigational studies. We are collaborating with Iridex
Corporation, or Iridex, on the development of light producing devices for
PhotoPoint PDT in ophthalmology. Iridex co-developed with us and, pending
regulatory approval, will manufacture, the diode laser used in our AMD clinical
trials.
Light Delivery Devices. We have developed various configurations of fiber
optic devices to deliver uniform light to target tissues, for example, our
proprietary guidewire-compatible endovascular light catheter that is being
tested in preclinical studies for the treatment of cardiovascular disease.
Targeted Diseases and Clinical Trials
We believe that our PhotoPoint PDT technology has potential utility in a
number of disease indications. We have established certain development programs
based upon technical, regulatory, clinical, manufacturing and market
considerations. Our ongoing commitment to the various programs depends upon such
factors as adequate funding, corporate partner support, the results of
investigational studies, governmental regulatory communications, competitive
factors, potential return on investment, various other feasibility or 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 associated with neovascularization
such as AMD and diabetic retinopathy. Ocular neovascularization is a condition
in which new blood vessels grow abnormally on or beneath the surface of the
retina or other parts of the eye. We have investigated PhotoPoint PDT as a
potential treatment to selectively destroy such abnormal blood vessels, and we
have completed Phase I/II and Phase III human clinical trials of PhotoPoint
SnET2 as a treatment for wet AMD.
AMD is the leading cause of blindness in Americans over age fifty. Patients
with AMD experience distortion or loss of central vision as the disease
progresses. In advanced, or wet, AMD new blood vessels develop beneath the
retina, which leak fluid and blood that can lead to retinal lifting, scarring
and irreversible loss of central vision. Wet AMD lesions are comprised of
neovascular membranes known as "classic" and "occult" components. Some lesions
are classified as pure occult, some as pure classic and others as a combination
of classic and occult components. It is estimated that 50% of wet AMD lesions
have some presence of a classic component.
In December 2001, we completed two Phase III ophthalmology clinical trials
for the treatment of wet AMD lesions with any presence of a classic component.
The primary efficacy endpoint of the clinical studies was the percent of
patients with stabilized vision, specifically, the proportion of patients losing
less than 15 letters from baseline on a standard ETDRS eye chart. In January
2002, our ophthalmology corporate partner, Pharmacia, reviewed the top-line
Phase III AMD clinical data and determined that SnET2 did not to meet the
primary efficacy endpoint in the study population, as defined by the clinical
trial protocol. Pharmacia notified us that it would not pursue an NDA submission
for SnET2. In March 2002, we regained the license rights to SnET2 from Pharmacia
as well as the related data and assets from the Phase III AMD clinical trials.
In addition, we terminated our license collaboration with Pharmacia, and have
the opportunity to seek a new collaborative partner for PhotoPoint PDT in
ophthalmology in the future.
During 2002, we completed a comprehensive analyses of the Phase III AMD
clinical data and held certain discussions with regulatory consultants and the
ophthalmic division of the FDA. Based on our review of the data from two
independent Phase III studies, we believe PhotoPoint SnET2 reduced the risk of
vision loss in drug-treated patients versus placebo patients. Additionally,
based on secondary efficacy analyses, relative to placebo, we believe SnET2
prevented severe vision loss and impacted the physiologic characteristics of
treated lesions by reducing leakage and fluid accumulation. Based on
retrospective analyses, we believe SnET2 demonstrated a positive treatment
response versus placebo across all compositions of wet AMD lesions, regardless
of the percentage of classic or occult components. Additionally, we believe the
SnET2 treatments were well tolerated in the study population, with a low overall
incidence of treatment-related adverse events. The most common side effect was
skin photosensitivity, or sun sensitivity, which was reported in less than 5% of
SnET2 administrations, and was predominantly mild in nature, transient in
duration and required no special treatment. Based on discussions with our
clinical investigators, we believe the photosensitivity to be a manageable side
effect that typically produces mild erythema, or redness, of the skin. In
addition, there were extremely few reports of either back pain on infusion or
acute post-treatment vision loss (less than 0.2% in both treated and placebo
patients), which have been previously reported with competitive PDT technology.
Based on our analysis of the Phase III AMD clinical data, in January 2003,
we announced our intention to submit an NDA for PhotoPoint SnET2 as a treatment
for wet AMD, specifically wet AMD lesions with any classic component, with or
without an occult component. We expect to submit the NDA on or about March 31,
2004, seeking marketing approval based on clinical results in the "per protocol"
study population. The per protocol population consists of those patients who
received the exposure to the SnET2 treatment regimen pre-specified in the
clinical study protocol, comprising a smaller number of patients than the total
study population. Although there is precedent for FDA approval of drugs based on
subgroup populations, including Visudyne(R), the currently approved competitive
PDT product for wet AMD, we cannot assure you that the FDA will grant approval
for SnET2 based on our per protocol group of patients.
If the FDA grants marketing approval based on our planned NDA submission,
we believe that the potential market for SnET2 is greater than that of
Visudyne(R) as currently approved. Visudyne(R) is approved for treatment of
lesions with predominantly classic component only, which represents
approximately 60% of the classic wet AMD market or 30% of the total wet AMD
market. We are seeking approval of SnET2 for the treatment of lesions with any
classic component, with or without an occult component, which represents 100% of
the classic wet AMD market or approximately 50% of the total wet AMD market.
A small group of patients with pure occult, no classic component, lesions
were also enrolled in the Phase III AMD clinical study. Our analyses of the
treated lesions showed, we believe, a clear beneficial trend relative to
placebo, although the result is not statistically significant due to the small
numbers of patients in the clinical trials. Given adequate financial resources
and regulatory clearances, we intend to conduct a confirmatory clinical trial in
patients with pure occult lesions, which is a large unmet medical need estimated
to be 50% of the total wet AMD market.
We have also conducted preclinical studies for the treatment of other
ophthalmic diseases such as corneal neovascularization, glaucoma and diabetic
retinopathy. Besides the planned use of SnET2 alone or in combination with other
therapies, we have identified certain next-generation drug compounds for
potential use in various eye diseases. These programs are in early stages of
development and will not likely advance until we obtain additional funding
and/or a collaborative partner in ophthalmology.
Cardiovascular Disease
We are investigating the use of PhotoPoint PDT for the treatment of
cardiovascular diseases, in particular for the treatment of atherosclerosis and
atherosclerotic vulnerable plaque, and the prevention and treatment of
restenosis. Atherosclerosis is a common condition involving complex
lipid-derived plaques within arteries that can lead to obstructive artery
disease. Clinicians have become aware that certain inflamed plaques within
artery walls are highly unstable and vulnerable to rupture. Vulnerable plaque
has been estimated to cause up to 80% of fatal heart attacks. Preclinical
studies with PhotoPoint PDT indicate that certain photoselective drugs may be
preferentially retained in hyperproliferating cells in artery walls and
lipid-rich components of arterial plaques. In preclinical studies we believe we
have demonstrated that PhotoPoint PDT has the potential to remove problematic
inflammatory cells and induce positive mechanisms of healing and repair that are
consistent with true plaque stabilization.
Restenosis is the re-narrowing of an artery that commonly occurs after
balloon angioplasty for obstructive artery disease. We believe data from
preclinical studies suggest that PhotoPoint PDT may aid in the prevention and
treatment of restenosis by inhibiting the aggressive overgrowth of cells that
cause re-narrowing, or restenosis, of arteries.
We are in the process of formulating our lead cardiovascular drug
candidate, MV0633, for clinical investigational use. Pending the outcome of our
preclinical studies, our corporate activities, financial considerations, and
other factors, we may prepare an Investigational New Drug application, or IND,
in cardiovascular disease for MV0633 or another existing photoselective drug.
The timing of the IND is dependent on numerous factors including preclinical
results, available funding and personnel. We are currently pursuing potential
strategic partners in the field of cardiovascular disease. There are no
guarantees that a strategic partner will enter into a license agreement or
provide us with any potential funding to advance our research and development
programs.
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
vascular access graft disease. Synthetic arteriovenous, or AV, grafts are placed
in patients with End Stage Renal Disease to provide access for hemodialysis.
While these grafts are critical to the health of the patient, their functional
lifetime is limited due to stenosis, or narrowing, caused by cell overgrowth in
the vein. We have held discussions with the FDA about initiating a Phase II
clinical trial. We are currently pursuing potential strategic partners in this
field to help fund these clinical studies. 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
We believe that PhotoPoint PDT may be potentially useful to treat a number
of dermatological, or skin, disorders. One of these is plaque psoriasis, a
chronic skin condition involving abnormal proliferation of the epidermis that
causes inflamed and scaly skin plaques. We are investigating PhotoPoint drug
MV9411 in a topical gel formulation for this disease indication. In July 2001,
we successfully completed a Phase I dermatology clinical trial of MV9411, and in
January 2002, commenced a Phase II dose-escalation clinical trial for the
treatment of psoriatic plaques. We expect the Phase II clinical trial to be
closed out in 2004. Analysis of the clinical results and other factors such as
available funding and personnel will determine the continuation of this program.
Oncology
Cancer is a large group of diseases characterized by uncontrolled growth
and spread of tumor cells with the associated growth of new blood vessels, or
neovascularization. In our oncology research program, we have ongoing
preclinical studies in solid tumors to target tumor cells and tumor
neovasculature. The focus of our preclinical research is to evaluate the utility
of PhotoPoint PDT as a stand-alone treatment or as a combination therapy with
experimental or conventional 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 are investigating our novel PhotoPoint drug
compound MV6401 for oncology applications. In addition, we have an existing
oncology IND for SnET2, under which we may choose to submit protocols for
clinical trials in the future.
Definitive Collaborative Agreements
Pharmacia Corporation
In August 2003 when we entered into the 2003 Debt Agreement, we also
entered into a Termination and Release Agreement with Pharmacia AB, a wholly
owned subsidiary of Pfizer, Inc., or Pharmacia, for the retirement of $10.6
million of debt owed by us to Pharmacia and the release of the related security
collateral, in exchange for a payment of $1.0 million in cash, 390,000 shares of
our Common Stock, and an adjustment of the exercise price of Pharmacia's
outstanding warrants to purchase 360,000 shares of our Common Stock to $1.00
from an average exercise price of $15.77, and an extension of the expiration
date of those warrants to December 31, 2005 from expiration dates ranging from
May 2004 to May 2005. The Termination and Release Agreement supercedes all
previous agreements.
In the past, we had 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, 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, data and assets related 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.
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 provides, among other things, the following:
* We have 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 this 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 us to grant an exclusive
license to a third party. For a description of governmental rights see "Patents
and Proprietary Technology".
Fresenius AG
We have a formulation and commercial supply agreement, or Formulation
Agreement, with Fresenius Kabi Nutrition AB, a subsidiary of Fresenius Kabi AG,
or Fresenius to develop an emulsion formulation suitable for intravenous
administration of SnET2 in a finished dose formulation, or FDF. This agreement
was originally with Pharmacia but was assigned to Fresenius effective November
30, 1998, as part of an Asset Transfer Agreement.
As part of the activities necessary under the Pharmacia Contract
Modification and Termination Agreement, we and Pharmacia entered into an
agreement whereby all of Pharmacia's rights and obligations under their Contract
Manufacturing Agreement were assigned to us. By operation of Fresenius' consent
to the assignment, the Formulation Agreement has been superceded by the terms of
the Contract Manufacturing Agreement. The material operating terms of this
agreement include the following:
* 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 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, 2003 and 2002. We have held
discussions with Ramus to reorganize their outstanding debt or to convert their
entire debt, including accrued and unpaid interest, to Ramus equity.
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 co-development agreement was
terminated in November 2003. In December 2003, we sold our entire investment in
Xillix of approximately 2.7 million shares, which had an adjusted basis of
$393,000 and received net proceeds of approximately $1.6 million, resulting in a
net gain of $1.2 million.
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.
Research and Development Programs
Our research and development programs are committed to the discovery,
development and optimization of drugs and devices for PhotoPoint PDT. These
activities are conducted in-house in our pharmaceutical and engineering
laboratories or in extramural collaborations with academic or medical research
institutions or corporations. We have expended, and expect to continue to spend,
substantial funds on our research and development programs. We expended $7.6
million, $9.5 million and $13.5 million on research and development activities
during 2003, 2002 and 2001, respectively.
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 supplement our research
efforts and facilitate new development.
Manufacturing
Our strategy is to generally retain manufacturing rights and maintain
limited manufacturing capabilities and, where appropriate due to financial and
operational constraints, to partner with leading contract manufacturing
organizations in the pharmaceutical and medical device sector for certain
manufacturing processes. We also have the limited ability to manufacture
small-scale quantities of light producing devices and light delivery devices at
this location and provide other production and testing activities to support
current clinical programs. However, we have limited capabilities, personnel and
experience in the manufacture of finished drug at commercial levels, nor light
producing and light delivery devices. We will require outside suppliers,
contracted or otherwise, for certain materials and services related to our
manufacturing activities, especially at 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 drug and 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. Another key supplier is Iridex, which
provided the light producing devices used in our AMD clinical trials and may be
used as a supplier for future investigational and commercial devices in
ophthalmology. We expect to continue to develop new drugs, new drug formulations
and light devices both in-house and using external suppliers, which may or may
not have similar dependencies.
Prior to supplying drugs or devices for commercial use, our manufacturing
facilities, as well as the Iridex and Fresenius manufacturing facilities, must
be inspected and approved by the FDA for Good Manufacturing Practices, or GMP,
compliance. Iridex and Fresenius are currently manufacturing products under the
GMP regulations, but our manufacturing facility has not yet been inspected by
the FDA for GMP compliance. Any drugs and devices manufactured by us or our
suppliers for prospective commercial use must be withheld from distribution
until FDA approvals are obtained, if at all. In addition, if we elect to
outsource manufacturing to other third-party manufacturers, these facilities
must satisfy FDA GMP requirements.
We were licensed by the State of California to manufacture bulk active
pharmaceutical ingredient, or API, at one of our Santa Barbara, California
facilities for clinical trial and other use. This particular manufacturing
facility was closed by us in 2002 and has been reconstructed and now operates in
our existing operating facility, which has not yet been inspected by the State
of California or the FDA. In the original manufacturing facility, we
manufactured bulk API for SnET2, the final process before formulation and
packaging. As previously discussed, we regained ownership of that bulk API
inventory as well as lasers from Pharmacia, which are not subject to expiration
dates, whereas the FDF received has expired. We have API inventory in quantities
that we believe will be adequate for an initial commercial launch of SnET2, if
and when we gain regulatory approval for the facility and for use of the API
inventory.
Marketing, Sales and Distribution
We are developing several plans for the marketing, sales and distribution
of PhotoPoint SnET2 for wet AMD. We may decide to license SnET2 or otherwise
partner with an established pharmaceutical company for commercialization of the
drug. If financially and logistically feasible, we may elect to retain all
rights to SnET2 and contract the marketing, sales and distribution to outside
independent contractors or develop certain internal capabilities. There are a
number of factors that will influence this decision, including partnering
opportunities, the terms and conditions, our potential return on investment,
financial resources and operational capabilities. In regard to the AMD light
device, 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.
In regard to products in longer-term development, we will consider various
avenues for commercialization as appropriate in our strategic planning and
licensing discussions.
Customers and Backlog
Our drugs and devices are in various stages of development and have not yet
been evaluated by the FDA for regulatory approval. Thus, we currently have no
marketed drugs or devices and therefore no customers or backlog. We have derived
revenue in the past from the sale of API 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-nine issued United States patents, primarily
device, expiring 2010 through 2021;
* Record owner of twelve issued foreign patents, expiring 2012 through
2019;
* Exclusive license rights under twenty issued United States patents,
primarily pharmaceutical, expiring 2006 through 2016;
* Exclusive license rights under seven issued foreign patents, expiring
2006 through 2017;
* Co-owner or licensee of three 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 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. We expect to submit an NDA for the treatment
of AMD with SnET2 with the FDA on or about March 31, 2004 and the submission is
expected to receive fast track designation.
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;
* The submission to the FDA of an NDA; and
* The 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 closed by us in 2002 and has been reconstructed and operates in our
existing operating facility, but has not yet been inspected by the State of
California or the FDA.
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. When 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.
Many of our competitors have substantially greater financial, technical and
human resources than we do, and may also have substantially greater experience
in developing products, conducting preclinical studies or clinical trials,
obtaining regulatory approvals and manufacturing and marketing and distribution.
Further, the establishment of patent protection by our competitors could harm
our competitive position. The existing competitors or other companies may
succeed in developing technologies and products that are more safe, effective or
affordable than those being developed by us or that would render our technology
and products less competitive or obsolete.
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 Pharm Inc., or Axcan, Eyetech Pharmacueticals
Inc., or Eyetech, and Pharmacyclics. QLT's drug Visudyne(R) 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) 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. Eyetech is currently completing a Phase III clinical
trial in AMD and is expected to submit an NDA at the end of 2004 or beginning of
2005. We are aware of other drugs and devices under development by these and
other 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.
Corporate Offices
Our principal office is located at 336 Bollay Drive, Santa Barbara,
California, 93117. Our main telephone and fax numbers are (805) 685-9880 and
(805) 685-7981. We were incorporated in the state of Delaware in 1989.
Employees
As of March 15, 2004, we employed 56 individuals, approximately 22 of which
were engaged in research and development, 14 were engaged in manufacturing and
clinical activities and 20 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, retain or engage highly qualified scientific and technical personnel or
consultants. 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,
attract or engage key personnel or consultants in the future. We have not
experienced any work stoppages and consider our relations with our employees to
be good.
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. 54 Chairman of the Board and
Chief Executive Officer
David E. Mai 59 President of Miravant Medical
Technologies, Miravant Systems,
Inc., Miravant Pharmaceuticals,
Inc. and Director
John M. Philpott 43 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 a month-to-month lease in place for approximately 25,000
square feet of office, laboratory and manufacturing space in Santa Barbara,
California. This building currently houses all of our operations and employees.
We entered into this lease in August 1996. During the third quarter of 2003, we
reduced our occupancy in this building from approximately 40,000 square feet to
25,000 square feet. This lease provides for rent to be adjusted annually based
on increases in the consumer price index and the base rent is currently
approximately $33,000 per month. The leased property is located in a business
park. We have the ability to manufacture our active drug ingredient, our light
producing and light delivery devices and perform research and development of
drugs, light delivery and light producing devices from this facility. At this
time we will continue to lease month-to-month until we decide that our financial
position supports a longer-term commitment. In addition, we are aware that the
lessors can give us a 30-day notice at any time requiring us to vacate.
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 2003.
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 15, 2004 was
$3.25.
High Low
2003:
Fourth quarter............................................$ 1.35 $ 0.99
Third quarter............................................ 1.44 0.90
Second quarter............................................ 1.29 0.92
First quarter............................................. 1.57 0.71
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
As of March 15, 2004 there were approximately 277 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 6,000.
Dividend Policy
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.
Nasdaq Listing
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 2003
None
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, 2003.
(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)................. 4,214,847 $ 3.06 3,092,772
-----------------------------------------
Equity compensation plans not approved
by security holders(3)................. 247,500 $ 8.59 --
----------------------------------------- -------------------- ------------------ --------------------------
Total.................................. 4,462,347 $ 3.37 3,092,772
----------------------------------------- -------------------- ------------------ --------------------------
(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) As of December 31, 2003, of the 4,214,847 stock options issued, the
number of stock options issued from the Prior Plans was 954,137 shares
and the number of stock options issued from the 2000 Plan was
3,260,710 shares. The maximum amount of shares that could be awarded
under the 2000 Plan over its term is 8,000,000 shares, of which
3,260,710 stock options have been granted or issued and 1,646,518
shares for stock awards, restricted stock and/or consultant stock
options have been issued. The total shares issued from the 2000 Plan
was 4,847,228 shares, which leaves 3,092,772 remaining shares
available for future issuance.
(3) Over time warrants to purchase shares of our Common Stock have been
issued to various consultants for services which were not issued from
a stockholder 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, 2003. The consolidated financial statements for the five fiscal years ended
December 31, 2003 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,
----------------------------------------------------------------------------------
2003 2002 2001 2000 1999
--------------- --------------- --------------- --------------- ---------------
(in thousands, except share and per share data)
Statement of Operations Data:
Revenues ......................... $ -- $ 499 $ 4,683 $ 4,593 $ 14,577
Costs and expenses:
Cost of goods sold............. -- 479 934 -- --
Research and development....... 7,616 9,549 13,493 20,194 29,749
General and administrative..... 4,620 5,726 5,903 6,023 7,473
Loss in affiliate.............. -- -- -- -- --
--------------- --------------- --------------- --------------- ---------------
Total costs and expenses.......... 12,236 15,754 20,330 26,217 37,639
--------------- --------------- --------------- --------------- ---------------
Loss from operations.............. (12,236) (15,255) (15,647) (21,624) (23,062)
Interest and other income (expense)
Interest and other income...... 76 169 798 1,370 1,240
Interest expense............... (5,649) (286) (2,139) (2,254) (434)
Gain on sale of assets......... 62 10 586 -- --
Gain on sale of investment
in affiliate(1)............... 1,196 -- -- -- --
Gain on retirement of debt (2). 9,086 -- -- -- --
Non-cash loss in investment in
affiliate (1)................. -- (598) -- (3,485) --
--------------- --------------- --------------- --------------- ---------------
Total net interest and other
income (expense)............. 4,771 (705) (755) (4,369) 806
--------------- --------------- --------------- --------------- ---------------
Net loss.......................... $ (7,465) $ (15,960) $ (16,402) $ (25,993) $ (22,256)
=============== =============== =============== =============== ===============
Net loss per share (3) ........... $ (0.30) $ (0.78) $ (0.88) $ (1.42) $ (1.25)
=============== =============== =============== =============== ===============
Shares used in computing net
loss per share (3) ............ 24,703,543 20,581,214 18,647,071 18,294,525 17,768,670
=============== =============== =============== =============== ===============
December 31,
----------------------------------------------------------------------------------
2003 2002 2001 2000 1999
--------------- ---------------- ------------- -------------- ------------
(in thousands)
Balance Sheet Data:
Cash and marketable securities (4) $ 1,030 $ 723 $ 6,112 $ 20,835 $ 22,789
Working capital (deficit)......... (664) (5,953) 9,240 19,431 24,933
Total assets...................... 2,405 3,390 16,165 28,027 35,823
Long-term liabilities ............ 7,440 6,273 26,642 24,888 15,506
Accumulated deficit............... (196,994) (189,529) (173,569) (157,167) (131,174)
Total stockholders' equity
(deficit)......................... (7,027) (10,110) (13,798) (164) 15,597
(1) See Note 10 of Notes to Consolidated Financial Statements for
information regarding the gain on sale of investment in affiliate and
non-cash losses in investment in affiliate.
(2) See Note 2 of the Notes to Consolidated Financial Statements for
information regarding the gain on retirement of debt.
(3) See Note 1 of Notes to Consolidated Financial Statements for
information concerning the computation of net loss per share.
(4) See Notes 2 and 3 of Notes to Consolidated Financial Statements for
information concerning the changes in cash and marketable securities.
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 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 which are based on
our current beliefs, expectations and assumptions and are subject to a number of
risks and uncertainties, including but not limited to statements regarding our
general beliefs concerning the efficacy and potential benefits of photodynamic
therapy; our ability to raise funds to continue operations; the timing and our
ability to submit our planned New Drug Application, or NDA, 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 continue to receive the remaining
$5.7 million available at $1.0 million monthly through June 2004, under the
December 2002 Convertible Debt Agreement, as amended, or the 2002 Debt
Agreement; our ability to meet the covenants of the August 2003 Unsecured
Convertible Debt and Warrant Purchase Agreement, or the 2003 Debt Agreement; our
ability to meet the covenants of the February Unsecured Convertible Debt
Purchase Agreement, or the February 2004 Debt Agreement; our ability to resolve
any issues or contingencies associated with our NDA after it is submitted 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 laser 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 but not limited
to: failure to obtain additional funding in a timely manner, if at all; our
ability to continue borrowing under the 2002 Debt Agreement if we fail to meet
certain requirements or if these requirements are not met to the satisfaction of
the 2002 Lenders; our failure to meet or obtain waivers from the covenants in
our 2003 Debt Agreement and/or our February 2004 Debt Agreement which could lead
to a default under those agreements; unanticipated complexity or difficulty
preparing and completing the NDA filing for SnET2; a failure of our drugs and
devices to receive regulatory approval; other parties declining to collaborate
with us due to our financial condition or other reasons beyond our control; the
failure of our existing light production and delivery technology to prove to be
applicable or appropriate for future studies; our failure to obtain the
necessary funding to further our research and development activities; and
unanticipated changes by the government in its past practices by exercising 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.
Overview
We are a pharmaceutical research and development company specializing in
photodynamic therapy, or PDT, a treatment modality based on drugs that respond
to light. When activated by light, these drugs induce a photochemical reaction
in the presence of oxygen that can be used to locally destroy diseased cells and
abnormal blood vessels. We have branded our novel version of PDT technology with
the trademark PhotoPoint(R). Our drugs and devices are in various stages of
development and have not yet been evaluated for regulatory approval. Our most
advanced drug, PhotoPoint SnET2, has completed Phase III clinical trials for the
treatment of wet age-related macular degeneration, or AMD, and we are preparing
to submit a New Drug Application, or NDA, for its marketing approval.
We have been unprofitable since our founding and have incurred a cumulative
net loss of approximately $197.0 million as of December 31, 2003. We expect to
continue to incur significant, and possibly increasing, operating losses over
the next few years, and we believe we will be required to obtain substantial
additional debt or equity financing to fund our operations during this time as
we seek to achieve a level of revenues sufficient to support our anticipated
cost structure. Our independent auditors, Ernst & Young LLP, have indicated in
their report accompanying our December 31, 2003 consolidated financial
statements that, based on generally accepted auditing standards, our viability
as a going concern is in question.
Although we continue to incur costs for research and development,
preclinical studies, clinical trials and general corporate activities, we have
continued to adhere to our cost restructuring program we implemented in 2002
which has helped reduce our overall costs. Our ability to achieve sustained
profitability depends upon our ability, alone or with others, to receive
regulatory approval on our NDA submission for SnET2 in AMD, to successfully
complete the development of our proposed products, obtain the required
regulatory clearances and manufacture and market our proposed products. No
revenues have been generated from commercial sales of SnET2 and only limited
revenues have been generated from sales of our devices. Our ability to achieve
significant levels of revenues within the next few years is dependent on the
timing of receiving regulatory approval, if at all, for SnET2 in AMD and our
ability to establish a collaboration, with a corporate partner or other sales
organization, to commercialize SnET2 once regulatory approval is received, if at
all. Our revenues to date have consisted of license reimbursements, grants
awarded, royalties on our devices, SnET2 bulk active pharmaceutical ingredient,
or bulk API sales, milestone payments, payments for our devices, and interest
income. We do not expect any significant revenues until we have established a
collaborative partnering agreement, receive regulatory approval and commence
commercial sales.
Our significant funding activities over the last eighteen months have
consisted of the following:
* A $2.0 million convertible debt financing completed in February 2004;
* Warrant exercises through March 15, 2004 providing proceeds of $1.4
million;
* The sale of our investment in an affiliate, Xillix Technologies Corp.,
or Xillix, in December 2003, providing net cash proceeds of $1.6
million;
* A $6.0 million convertible debt financing completed in August 2003;
* Settlement of our $10.0 million debt with Pharmacia AB, a wholly owned
subsidiary of Pfizer, Inc., or Pharmacia, that required a cash payment
of $1.0 million; and
* A $12.0 million convertible debt financing which provides for monthly
borrowings through June 2004 under which we have borrowed $6.3 million
through March 15, 2004.
We believe we can raise additional funding to support operations through
corporate collaborations or partnerships, through licensing of SnET2 or new
products and through public or private equity or debt financings prior to June
30, 2004. If additional funding is not available when required, we believe that
as long as we receive the remaining $5.7 million available to us under the 2002
Debt Agreement and our debt does not go into default and become immediately due,
then we have the ability to conserve cash required for operations through
December 31, 2004 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.
However, there can be no assurance that we will receive the remaining $5.7
million under the 2002 Debt Agreement, if certain requirements are not met or
are not satisfactory to the 2002 Lenders and there is no guarantee that we will
be successful in obtaining additional financing or that financing will be
available on favorable terms.
Ongoing Operations
We have continued our scaled back efforts in research and development and
the preclinical studies and clinical trials of our products. Our primary efforts
in 2003 have been in preparing a submission of an NDA for marketing approval in
AMD for SnET2. We expect over the next year or so, our likely activities and
costs to consist of the following:
* Continuation of work related to our NDA, once submitted and accepted
for filing by the U.S. Food and Drug Administration, or FDA;
* Commencement of pre-commercialization activities such as pre-marketing
and possible drug and device manufacturing prior to receiving
regulatory approval;
* Increasing our development activities for our cardiovascular program;
and
* Review and follow-up of our Phase II dermatology clinical trial.
The extent of each of these activities will depend on the available funding
and resources. Additionally, once requisite regulatory approval has been
obtained for SnET2, if at all, substantial additional funding 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 ophthalmology, our primary focus during 2003 through March 31, 2004, has
been the preparation of our NDA for submission for marketing approval of
PhotoPoint SnET2, a new drug for the treatment of AMD. In January 2003, we
announced our plans to move forward with preparing our first NDA submission of
SnET2, for the treatment of AMD. Our decision came after we completed our
analyses of the Phase III AMD clinical data, which we believed showed positive
results in a significant number of PhotoPoint SnET2 treated patients versus
placebo control patients, and after holding discussions with regulatory
consultants and the ophthalmic divsion of the FDA. Previously, in January 2002,
Pharmacia, after a top-line review 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 preparing 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. Additionally,
in March 2002 we terminated our license collaboration with Pharmacia. We expect
to submit the NDA on or about March 31, 2004, seeking marketing approval based
on clinical results in the "per protocol" study population. The per protocol
population consists of those patients who received the exposure to the SnET2
treatment regimen pre-specified in the clinical study protocol, comprising a
smaller number of patients than the total study population. Although there is
precedent for FDA approval of drugs based on subgroup populations, including
Visudyne(R), the currently approved competitive PDT product for wet AMD, we
cannot assure you that the FDA will grant approval for SnET2 based on our per
protocol group of patients. Besides the possible use of SnET2 alone or in
combination with other therapies, we have identified potential next generation
drug compounds for use in various eye diseases. These drugs are in the early
stage of development and will not likely begin further development until we
obtain additional funding, and/or a corporate partner or other collaboration in
ophthalmology.
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 expected to be closed out in 2004 with
analysis of the clinical trial results. Our continuation of the dermatology
development program will depend on the results of the clinical trials and other
factors such as available funding and personnel.
We are also conducting preclinical studies with new photoselective drugs
for cardiovascular diseases, in particular for the prevention and treatment of
vulnerable plaque and restenosis. Vulnerable plaque, or VP, is an unstable,
rupture-prone inflammation within the artery walls, and restenosis is the
renarrowing of an artery that commonly occurs after balloon angioplasty for
obstructive artery disease. We are in the process of formulating a new lead
drug, MV0633, and, pending the outcome of our preclinical studies, our corporate
activities, financial considerations, and other factors, we may prepare an
Investigational New Drug application, or IND, in cardiovascular disease for
MV0633. The timing of the IND is dependent on numerous factors including
preclinical results, available funding and personnel. We are currently pursuing
various potential strategic partners in the field of cardiovascular disease.
There are no guarantees that potential strategic partners will enter into a
license agreement or provide us with any potential funding to advance our
research and development programs.
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
vascular access graft disease. Synthetic arteriovenous, or AV, grafts are placed
in patients with End Stage Renal Disease to provide access for hemodialysis.
While these grafts are critical to the health of the patient, their functional
lifetime is limited due to stenosis, or narrowing, caused by cell overgrowth in
the vein. We are currently pursuing potential strategic partners in this field.
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.
In our oncology research program, we have ongoing preclinical studies in
solid tumors to target tumor cells and tumor neovasculature. The focus of our
preclinical research is to evaluate the utility of PhotoPoint PDT as a
stand-alone treatment or as a combination therapy with experimental or
conventional 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 the future. We are investigating our
novel compound MV6401 for oncology applications.
Below is a summary of