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EX-23.1 - REPROS THERAPEUTICS INC. | v205586_ex23-1.htm |
As filed with the Securities and
Exchange Commission on December 15, 2010
Registration Statement File No.
333-
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C.
20549
FORM S-1
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
REPROS THERAPEUTICS
INC.
(Exact name of registrant as specified
in its charter)
Delaware
|
2834
|
76-0233274
|
||
(State or other jurisdiction
of
|
(Primary Standard
Industrial
|
(I.R.S. Employer
Identification
|
||
incorporation or
organization)
|
|
Classification Code
Number)
|
|
Number)
|
2408
Timberloch Place, Suite B-7
The
Woodlands, Texas 77380
(281)
719-3400
(Address, including zip code, and
telephone number, including area code,
of registrant's principal executive
offices)
Joseph
S. Podolski
President
and Chief Executive Officer
Repros
Therapeutics Inc.
2408
Timberloch Place, Suite B-7
The
Woodlands, Texas 77380
(281)
719-3400
(Name, address, including zip
code, and telephone number,
including area code, of agent for
service)
Copies to:
Jeffrey R. Harder,
Esq.
|
Michael R. Littenberg,
Esq.
|
Winstead PC
|
Schulte Roth & Zabel
LLP
|
24 Waterway Ave, Suite
500
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919 Third
Avenue
|
The Woodlands,
Texas 77380
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New York,
NY 10022
|
APPROXIMATE DATE OF
COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this
Registration Statement becomes effective.
If any of the securities being
registered on this Form are to be offered on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act of 1933, check the following
box.
x
If this Form is filed to register
additional securities for an offering pursuant to Rule 462(b) under the
Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
¨
If this Form is a post-effective
amendment filed pursuant to Rule 462(c) under the Securities Act, check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same
offering.
¨
If this Form is a post-effective
amendment filed pursuant to Rule 462(d) under the Securities Act, check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same
offering.
¨
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See definitions of "large
accelerated filer," "accelerated filer," and "smaller reporting company" in
Rule 12b-2 of the Exchange Act.
Large accelerated
filer
|
¨
|
Accelerated
filer
|
¨
|
Non-accelerated
filer
|
¨
|
Smaller reporting
company
|
x
|
CALCULATION
OF REGISTRATION FEE
Title of Each Class of Securities to be Registered
|
Amount to
be
Registered
|
Proposed
Maximum
Offering
Price Per
Share
|
Proposed
Maximum
Aggregate
Offering
Price(1)
|
Amount of
Registration
Fee(1)
|
||||||||||||
Units,
each unit consisting of one share of Common Stock, par value $.001 per
share, and a Warrant to purchase Common Stock
|
—
|
—
|
—
|
—
|
||||||||||||
Common
Stock, par value $.001 per share, included in Units
|
—
|
—
|
—
|
—
|
||||||||||||
Warrants
to purchase Common Stock, included in Units(2)
|
—
|
—
|
—
|
—
|
||||||||||||
Common
Stock issuable upon exercise of Warrants included in
Units(3)
|
—
|
—
|
—
|
—
|
||||||||||||
Total
|
—
|
$
|
—
|
$
|
9,200,000
|
$
|
656
|
(1)
|
Estimated
solely for the purpose of calculating the registration fee pursuant to
Rule 457(o) under the Securities Act of 1933, as amended (the “Securities
Act”).
|
|
|
(2)
|
No
fee is required pursuant to Rule 457(g) under the Securities
Act.
|
(3)
|
Pursuant to Rule 416 under the
Securities Act, the shares of common stock registered hereby also include
an indeterminate number of additional shares of common stock as may from
time to time become issuable by reason of stock splits, stock dividends,
recapitalizations or other similar
transactions.
|
The Registrant hereby
amends this Registration Statement on such date or dates as may be necessary to
delay its effective date until the Registrant shall file a further amendment
which specifically states that this Registration Statement shall thereafter
become effective in accordance with Section 8(a) of the Securities Act of
1933, as amended, or until the Registration Statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a), may
determine.
The information in this prospectus is
not complete and may be changed. We may not sell these securities until
the registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and is
not soliciting an offer to buy these securities in any jurisdiction where the
offer or sale of these securities is not permitted.
Subject to Completion, Dated December
15, 2010
PROSPECTUS
SHARES OF COMMON
STOCK
WARRANTS TO
PURCHASE SHARES OF
COMMON STOCK
This prospectus relates to the offer and
sale of shares of common stock, par value $.001
per share, of Repros Therapeutics Inc. (the “Company” or “Repros” or “we,” “us”
or “our”), and warrants to purchase shares of common stock of the Company.
The common stock and warrants will be sold in units, with each unit consisting
of one share of common stock and a warrant exercisable for shares of our common stock at an
exercise price of per
share. Each unit will be sold at a price of per unit. Units will not be
issued or certificated. The shares of common stock and warrants are
immediately separable and will be issued separately. The warrants are
exercisable within from the date of issuance and
expire years from the date of
issuance. For a more detailed description of our common stock and
warrants, see the section titled “Description of Securities” beginning on page
33 of this prospectus.
Our
common stock is quoted on the Nasdaq Capital Market under the trading symbol
“RPRX.” On December 10, 2010, the last reported sale price of our
common stock on the Nasdaq Capital Market was $1.28 per share. We have applied for the
warrants to be listed on the Nasdaq Capital Market under the symbol
“ .” We anticipate that the
warrants will begin trading upon the closing of this offering. We do not intend to list
the units on any securities exchange.
Per Unit
|
Total
|
|||||||
Price
to the public
|
$ | $ | ||||||
Underwriting
discounts and commissions
|
$
|
$
|
||||||
Proceeds,
before expenses, to Repros Therapeutics Inc.
|
$
|
$
|
The underwriter also may purchase up to
an additional shares of common stock and additional
warrants to purchase up to shares of common stock from us at the
public offering price, less the underwriting discount, within 45 days after the date of this prospectus
to cover over-allotments. In addition to the underwriting
discount, we have agreed to pay up to $ of the fees and expenses of the
underwriter in connection with this offering. See “Underwriting.”
INVESTING IN OUR COMMON STOCK AND
WARRANTS INVOLVES SUBSTANTIAL RISKS. SEE THE SECTION TITLED "RISK FACTORS"
BEGINNING ON PAGE 5 OF THIS PROSPECTUS TO READ ABOUT FACTORS YOU SHOULD CONSIDER
BEFORE BUYING SHARES OF OUR COMMON STOCK AND WARRANTS.
NEITHER THE SECURITIES AND EXCHANGE
COMMISSION (“SEC”) NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The underwriter expects to deliver the
securities to purchasers on ,
Ladenburg Thalmann & Co. Inc.
The date of this prospectus
is ,
TABLE OF CONTENTS
PROSPECTUS
SUMMARY
|
1
|
|
RISK
FACTORS
|
5
|
|
FORWARD-LOOKING
STATEMENTS
|
17
|
|
USE OF
PROCEEDS
|
18
|
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CAPITALIZATION
|
19
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MARKET PRICE AND DIVIDEND
INFORMATION
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20
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DILUTION
|
21
|
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DESCRIPTION OF
BUSINESS
|
22
|
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
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31
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DESCRIPTION OF
SECURITIES
|
33
|
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UNDERWRITING
|
35
|
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LEGAL
MATTERS
|
38
|
|
EXPERTS
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38
|
|
WHERE YOU CAN FIND MORE
INFORMATION
|
38
|
|
INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE
|
38
|
|
INDEX TO FINANCIAL
STATEMENTS
|
F-1
|
You should rely only on the information
contained in this prospectus or any related prospectus supplement, including the
content of all documents incorporated by reference into the registration
statement of which this prospectus forms a part. We have not authorized
anyone to provide you with different information. If anyone provides you
with different or inconsistent information, you should not rely on it. The
information contained in this prospectus or incorporated by reference herein is
accurate only on the date of this prospectus. Our business, financial
condition, results of operations and prospects may have changed since such
date. Other than as required under the federal securities laws, we
undertake no obligation to publicly update or revise such information, whether
as a result of new information, future events or any other
reason.
Until ,
all dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This is
in addition to the dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.
i
PROSPECTUS SUMMARY
This summary highlights information
contained elsewhere in this prospectus. This summary does not contain all
of the information that you should consider before making an investment decision
with respect to our securities. You should read this entire prospectus,
including all documents incorporated by reference, carefully, especially the
"Risk Factors" section beginning on page 5 of this prospectus and our financial
statements and related notes contained in this prospectus before making an
investment decision with respect to our securities. Please see the section
titled, "Where You Can Find More Information," beginning on page 38 of this
prospectus. Unless the context indicates otherwise, references to "the
Company" or "Repros” or "we," "us" or "our" refers to Repros Therapeutics
Inc.
About Repros Therapeutics
Inc.
Repros Therapeutics Inc. ("the Company"
or “Repros” or "we," "us" or "our") was organized on August 20, 1987.
We are a development stage biopharmaceutical company focused on the
development of new drugs to treat hormonal and reproductive system
disorders.
We are
developing Androxal®, an oral therapy that normalizes testicular function, for
the treatment of low testosterone due to secondary hypogonadism. Secondary
hypogonadism is the leading cause of low testosterone in men and is commonly
associated with aging. It is estimated that 13
million men in the U.S. experience low levels of testosterone, and the condition
is becoming recognized with more frequency. In 2009, for the first
time, sales of testosterone preparations for the treatment of low testosterone
exceeded $1 billion worldwide and first tier pharmaceutical companies entered
the low testosterone marketplace as evidenced by the acquisition of Solvay
Pharmaceuticals and the subsequent active marketing of its AndroGel® product by
Abbott Laboratories. Eli Lilly and Company also recently entered into
a licensing agreement for a late stage topical testosterone
treatment.
We
believe Androxal® is highly differentiated from currently marketed testosterone
treatments or those treatments in late stage development because it treats the
cause of low testosterone in men with secondary hypogonadism, which is
inadequate pituitary hormones. Androxal® is an oral therapy and also has the
potential to maintain fertility and potentially improve overall metabolic
profiles, which we believe may improve the condition of men suffering from type
2 diabetes, a condition present in about 20% of men with secondary hypogonadism.
Retrospective analysis of completed Androxal® studies showed that Androxal®
improved fasting plasma glucose levels in hypogonadal men with Type 2 diabetes,
an improvement not seen in similar subjects using a topical testosterone or
placebo. The Company is currently conducting a Phase 2 study under an
Investigational New Drug Application (“IND”) filed with the Division of
Metabolic and Endocrine Products at the Food and Drug Administration (“FDA”) for
the use of Androxal® in the treatment of Type 2 diabetes in hypogonadal
men.
The
Company held a Type B meeting with the FDA on November 8, 2010 to discuss
protocols for Phase 3 studies for Androxal® in the treatment of
secondary hypogonadal men wishing to preserve their testicular function
(reproductive status). Though the FDA noted that the Company may proceed to
Phase 3 in the meeting, the FDA recommended that a Phase 2B study in men with
secondary hypogonadism, but naïve to testosterone treatment, be conducted if the
Company desired the FDA to review the Phase 3 protocols under a Special Protocol
Assessment. We intend to follow the FDA recommendation and
conduct the Phase 2B study commencing in the first quarter of 2011, assuming
successful completion of this offering.
We
are also developing Proellex®, an orally administered selective blocker of the
progesterone receptor in women, for the treatment of uterine fibroids and
endometriosis. Uterine fibroids and endometriosis affect millions of women of
reproductive age. We believe an effective treatment for these underserved
conditions could result in sales of a safe and effective drug easily exceeding
$1 billion in sales in the U.S. Proellex® had shown significant
success in Phase 2 studies for both endometriosis and uterine
fibroids. The Company has commenced a Phase 2B study with doses from
1 to 12 mg under a partial clinical hold by the FDA, which is intended to
determine both signals of efficacy and safety for low oral doses of the
drug. A full clinical hold was previously imposed as a result of
certain serious adverse events relating to liver toxicity observed in patients
receiving the 50 mg dose of Proellex® in our prior Phase 3 study in uterine
fibroids; however, the FDA has reduced such hold to a partial clinical hold to
allow us to proceed with the current low dose Phase 2B study. In
addition to the low dose study, the Company has commenced two related
preclinical programs: vaginal delivery of Proellex® to avoid first pass liver
effects and second generation molecules that do not possess the structures
Repros believes resulted in the liver toxicity observed.
Both of
our product candidates have exhibited strong efficacy results in every study
completed to date, and Repros believes the studies presently underway or
scheduled to start shortly will place both programs on a clear late stage
clinical development path and a solid position for
licensing.
As of September 30, 2010, we had
accumulated losses of $178.1 million, approximately $4.2 million in cash and
cash equivalents, and our accounts payable and accrued expenses were
approximately $1.4 million. The amount of cash on hand is not sufficient
to fund each of the current clinical trials for our two drug candidates,
Proellex® and Androxal®. Assuming successful completion of this offering,
we will have sufficient funding to complete all of the Phase 2 and 2B clinical
trials currently planned or underway; however, significant additional
capital will be required for us to complete development of either of our product
candidates. We continue to explore potential additional financing
alternatives (including corporate partnering opportunities) that would provide
sufficient funds to enable us to continue to develop our two product candidates
through completion of the outlined clinical trials; however, there can be no
assurance that we will be successful in raising any such additional funds on a
timely basis or at all. The foregoing and other matters raise substantial
doubt about our ability to continue as a going concern.
1
Our
Research and Development Program
Our
product development pipeline is summarized in the table below:
Product Candidate (Indication)
|
Status
|
Next Expected Milestone(s)
|
||
Androxal®
|
||||
Secondary
Hypogonadism
|
Phase
2B
|
Commence
Phase 2B study (Q1 2011)
Report
top line Phase 2B results (Q1 2012) (pending enrollment
timing)
|
||
Type
2 diabetes
|
Phase
2
|
Report
interim results (Q2 2011) (pending enrollment timing)
|
||
Proellex®
|
||||
Uterine
Fibroids/Endometriosis
|
Phase
2
|
Complete
low dose study (late 2011)
Commence
Phase 3 studies (2012)
|
||
Vaginal
Administration
|
Preclinical
|
Open
new IND (mid 2011) (pending outcome of animal studies)
Commence
Phase 3 studies (late 2012)
|
||
Second
Generation Compounds
|
|
Preclinical
|
|
Synthesize
new compounds (Q3 2010)
Complete
preclinical screen (Q3 2011)
|
Recent Developments
On
October 14, 2010, the Company effected a 1-for-4 reverse split of its common
stock. The split-adjusted shares of the Company’s common stock began trading on
the Nasdaq Capital Market on October 15, 2010. The 1-for-4 reverse stock split
converted all shares of the Company’s common stock issued and outstanding, plus
all outstanding stock options and the number of shares of common stock available
for issuance under the Company’s approved stock plans. The number of authorized
shares of common stock was not affected by the reverse split. The reverse split
enabled the Company to meet the continued listing rules of the Nasdaq Capital
Market. All share and per share
amounts described in this prospectus are presented on a post-reverse stock split
basis, except with respect to materials incorporated by reference herein which
were filed by us prior to the effective date of the reverse stock
split.
Corporate
Information
We were organized as a Delaware
corporation in August 1987. Our principal executive offices are
located at 2408 Timberloch Place, Suite B-7, The Woodlands, Texas 77380, and our
telephone number is (281) 719-3400. We maintain an Internet website at
www.reprosrx.com. The information on our website or any other website
is not incorporated by reference into this prospectus and does not constitute a part of this
prospectus.
2
The Offering
Securities offered by the
Company
|
Up to units. Each unit will
consist of one share of common stock and one warrant. Each
warrant entitles its holder to purchase
shares of our
common stock. The common stock and warrants comprising the
units will be issued separately.
|
|
Offering
price
|
$
per
unit.
|
|
Description of
warrants
|
The warrants will be exercisable
for shares of
our common stock at an exercise price of
per
share. The warrants are exercisable within
from the date of issuance and
expire years from the date of
issuance.
|
|
Common stock outstanding prior to
this offering
|
8,930,022
shares.
|
|
Common stock to be outstanding
after this offering
|
shares.
|
|
Over-allotment
option
|
Up to an additional
shares of common stock and additional warrants to purchase up
to shares of common
stock.
|
|
Use of
proceeds
|
We
intend to use the net proceeds from this offering for general corporate
purposes, including continuing our clinical trials for Androxal® and
Proellex®. See
“Use of Proceeds” for additional information.
|
|
Nasdaq Capital Market
symbols:
|
||
Common
Stock
|
“RPRX”
|
|
Warrants
|
“ ”
|
The number of shares of common stock to
be outstanding immediately after this offering is based on the number of shares
outstanding as of September 30, 2010, and does not include:
|
·
|
538,582 shares of common stock issuable
upon the exercise of outstanding options at a weighted average exercise
price of $14.10 per
share;
|
|
·
|
288,421 shares of common stock available
for future issuance under our stock option
plans;
|
|
·
|
shares
of common stock issuable upon exercise of warrants included in the units
in this offering; and
|
|
·
|
shares
of common stock and warrants issuable upon exercise of the underwriter’s
over-allotment option.
|
3
Summary Financial
Data
The
following tables summarize our financial data for the periods presented. The summary statements of operations
data for the years ended December 31, 2009, 2008 and 2007, and the balance sheet
data as of December 31, 2009 and 2008, have been derived from our audited
financial statements, which are incorporated by reference into this
prospectus. The summary statements of operations data for the years ended
December 31, 2006 and 2005, and the balance sheet data as of December 31, 2007,
2006 and 2005, have been derived from our audited financial statements, which
are not incorporated by reference into this prospectus. The summary statements
of operations data for the nine months ended September 30, 2010 and 2009, and
the balance sheet data as of September 30, 2010, have been derived from our
unaudited financial statements, which are included elsewhere in this prospectus.
The historical results are not necessarily indicative of the results to be
expected for any future periods. You should read this data together with the
financial statements and related notes incorporated by reference into this
prospectus or included elsewhere in this prospectus, as well as “Management's Discussion and Analysis of
Financial Condition and Results of Operations” and the other financial
information incorporated by reference into this prospectus.
STATEMENTS OF OPERATIONS
DATA:
Year Ended December 31,
|
Nine Months Ended
September 30,
|
|||||||||||||||||||||||||||
2009
|
2008
|
2007
|
2006
|
2005
|
2010
|
2009
|
||||||||||||||||||||||
(In thousands, except per share data)
|
||||||||||||||||||||||||||||
Revenues and Other
Income:
|
||||||||||||||||||||||||||||
Interest
income
|
$
|
4
|
$
|
433
|
$
|
1,508
|
$ |
596
|
$ |
630
|
$
|
—
|
$
|
4
|
||||||||||||||
Research and development
grants
|
—
|
—
|
—
|
—
|
4
|
|
—
|
—
|
||||||||||||||||||||
Other
income
|
547
|
—
|
—
|
—
|
—
|
138
|
—
|
|||||||||||||||||||||
Total
revenues
|
551
|
433
|
1,508
|
596
|
634
|
138
|
4
|
|||||||||||||||||||||
Expenses:
|
||||||||||||||||||||||||||||
Research and
development
|
23,062
|
22,575
|
12,420
|
11,912
|
6,101
|
1,950
|
21,765
|
|||||||||||||||||||||
General and
administrative
|
4,723
|
3,060
|
2,788
|
2,879
|
1,924
|
1,772
|
4,126
|
|||||||||||||||||||||
Total
expenses
|
27,785
|
25,635
|
15,208
|
14,791
|
8,025
|
3,722
|
25,891
|
|||||||||||||||||||||
Net loss
|
$
|
(27,234
|
)
|
$
|
(25,202
|
)
|
$
|
(13,700
|
)
|
$ |
(14,195
|
) |
(7,391
|
) |
$
|
(3,584
|
)
|
$
|
(25,887
|
)
|
||||||||
Net loss per share – basic and
diluted (1)(2)
|
$
|
(6.28
|
)
|
$
|
(7.54
|
)
|
$
|
(4.38
|
)
|
$ |
(5.60
|
) |
(3.06
|
) |
$
|
(0.46
|
)
|
$
|
(6.77
|
)
|
||||||||
Shares used in loss per share
calculation(2)
|
4,336
|
3,343
|
3,131
|
2,537
|
2,412
|
7,763
|
3,821
|
(1)
|
See "Note 2. Summary of
Significant Accounting Policies" of Notes to our Consolidated Financial
Statements incorporated by reference into this prospectus for a
description of the computation of loss per
share.
|
|
|
(2)
|
The
basic and diluted net loss per share and shares used in loss per share
calculation have been adjusted to reflect the one-for-four reverse stock
split that was effected on October 14,
2010.
|
BALANCE SHEET DATA:
Year Ended December 31,
|
Nine Months
Ended
September 30,
|
|||||||||||||||||||||||
2009
|
2008
|
2007
|
2006
|
2005
|
2010
|
|||||||||||||||||||
Cash, cash equivalents and
marketable securities
|
$
|
1,886
|
$
|
19,470
|
$
|
25,903
|
$ |
6,736
|
$ |
16,832
|
$
|
4,216
|
||||||||||||
Total
assets
|
2,960
|
22,603
|
27,599
|
7,849
|
17,682
|
|
5,567
|
|||||||||||||||||
Deficit accumulated during the
development stage
|
(174,476
|
)
|
(147,242
|
)
|
(122,040
|
)
|
(108,340
|
) |
(94,145
|
) |
(178,060
|
)
|
||||||||||||
Total stockholders'
equity
|
$
|
562
|
$
|
15,614
|
$
|
24,060
|
$ |
3,790
|
$ |
16,955
|
$
|
4,213
|
4
RISK FACTORS
An investment in our securities involves
a high degree of risk. Before you decide to invest in our securities, you should
consider carefully all of the information in this prospectus, including the
risks described below. Any of these risks could have a material adverse
effect on our business, prospects, financial condition and results of
operations. In any such case, the trading price of our common stock or warrants
could decline and you could lose all or part of your investment. You
should also refer to the other information contained in this prospectus, or
incorporated herein by reference, including our financial statements and the
notes to those statements, and the information set forth under the caption
"Forward Looking Statements." The risks described below and contained in
our other periodic reports are not the only ones that we face. Additional
risks not presently known to us or that we currently deem immaterial may also
adversely affect our business operations.
Risks
Relating to Our Business
Assuming
completion of this offering, our ability to continue as a going concern may
require that we raise additional funds by the end of the second quarter of 2012,
without which we may need to cease our business operations and begin liquidation
proceedings.
Assuming
completion of this offering, our ability to continue as a going concern is
dependent upon our ability to obtain additional financing by the end of the
second quarter of 2012 based upon our current expense and revenue
assumptions. If our expenses are greater than expected or our
revenues are less than expected, we may be required to raise additional funds
prior to that time. We will continue to explore various financing
alternatives to address our liquidity needs. No assurance can be
given that we will be successful in obtaining additional financing after this
offering on acceptable terms or at all. We anticipate that if we are
able to secure additional financing, that such financing will result in
significant dilution of the ownership interests of our stockholders and may
provide certain rights to the new investors senior to the rights of purchasers
of securities in this offering, including but not limited to, voting rights and
rights to proceeds in the event of a sale or liquidation of the
Company. The current FDA partial clinical hold of our clinical trials
for Proellex® will make it more difficult for us to obtain additional
financing. In addition, the class action lawsuits filed against us
will make our ability to raise funds even more difficult. We expect
to continue to incur significant losses for the foreseeable future, and we may
never achieve or sustain profitability. In the event that we are
unable to obtain adequate financing to conduct operations, we may need to cease
our business operations and begin liquidation proceedings. If we need to liquidate our assets, we
would likely realize significantly less from them than the values at which they
are carried on our financial statements. The funds resulting from the
liquidation of our assets would be used first to pay off the debt owed to any
secured and unsecured creditors before any funds would be available to pay our
stockholders, and any shortfall in the proceeds would directly reduce the
amounts available for distribution, if any, to our creditors and to our
stockholders. In the event we were required to liquidate, it is highly unlikely
that stockholders would receive any value for their shares.
The Company and certain of its officers
and directors were named as a party in several class action lawsuits which could
result in a material adverse affect on our business and financial
condition.
The Company and certain of its officers
were named as parties in several shareholder class action lawsuits alleging,
among other things, that the Company and such officers violated certain
provisions of the Exchange Act by issuing materially false and misleading press
releases regarding the results of clinical trials for its drug
Proellex®. Our bylaws require us to indemnify our officers in certain
proceedings, subject to certain limited exceptions. In addition, each of our
directors has an indemnification agreement with the Company providing for
certain additional indemnification benefits for such persons in the event of a
lawsuit. As a result of the class action lawsuits, we are obligated
to pay for certain costs and expenses of our officers and directors and may be
liable for substantial damages, costs and expenses if such class action is
successful. Such litigation could also divert the attention of our
management and our resources in general from day-to-day
operations. Further, it is possible that additional claims beyond
those that have already been filed will be brought by the current plaintiffs or
by others in an effort to seek monetary relief from us.
Additionally, such class action lawsuits
are covered by the Company's director and officer insurance
policy. In the event there are adverse judgments against the Company
in such lawsuits, the Company's insurance coverage may not be adequate to cover
such judgments and the Company's cash position may not be sufficient to satisfy
such judgment. Such adverse judgments could have a material and adverse affect
on the Company.
If we fail to obtain the capital
necessary to fund our operations, we may have to delay, reduce or eliminate our
research and development programs or commercialization efforts, dispose of assets or
liquidate.
We expect to make additional capital
outlays and to increase operating expenditures over the next several years to
support our preclinical development and clinical trial activities, particularly
with respect to clinical trials for Androxal® and Proellex®. Assuming
completion of this offering and based on our current and planned
clinical programs, we expect to need to raise additional capital by
the end of the second quarter of 2012 or earlier if our expenses are greater or
our revenues are less than anticipated. We will continue to seek additional
funding through public or private financings, including equity or debt
financings, and/or through other means, including collaborations and license
agreements. We do not know whether additional financing will be
available when needed, or that, if available, we will obtain financing on terms
favorable to our stockholders or us. If adequate funds are not
available to us, we may be required to:
5
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delay, reduce the scope of or
eliminate one or more of our development
programs;
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relinquish, license or otherwise
dispose of rights to technologies, product candidate or products that we
would otherwise seek to develop or commercialize ourselves at an earlier
stage or on terms that are less favorable than might otherwise be
available; or
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liquidate and dissolve our
company.
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Our future capital requirements will
depend upon a number of factors, including:
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the size, complexity, results and
timing of our clinical
programs;
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the cost to obtain sufficient
supply of the compounds necessary for our product candidates at a
reasonable cost;
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the time and cost involved in
obtaining regulatory
approvals;
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the costs involved in preparing,
filing, prosecuting, maintaining, defending and enforcing patent claims;
and
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competing technological and market
developments.
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These factors could result in variations
from our currently projected operating and liquidity
requirements.
Because the data from our preclinical
studies and early clinical trials for our product candidates are not necessarily
predictive of future results, we can provide no assurances that any of them will
have favorable results in clinical trials or receive regulatory
approval.
Before we can obtain regulatory approval
for the commercial sale of any product candidate that we develop, we are
required to complete preclinical development and extensive clinical trials in
humans to demonstrate its safety and efficacy. To date, long-term
safety and efficacy have not been demonstrated in clinical trials for any of our
product candidates and in fact, our product candidate Proellex® is currently on
partial clinical hold with the FDA due to safety issues experienced in our Phase
2 and Phase 3 clinical trials for endometriosis and uterine fibroids,
respectively.
In addition, previous clinical trials
for Androxal® have been conducted only in limited numbers of patients that may
not fully represent the diversity present in larger populations. In
addition, these studies have not been subjected to the exacting design
requirements typically required by FDA for pivotal trials. Thus the
limited data we have obtained may not predict results from studies in larger
numbers of patients drawn from more diverse populations, and may not predict the
ability of Androxal® to treat type 2 diabetes. Furthermore, the only
data that we obtained to date relating to Androxal® is to treat testosterone
deficiency. We will be required to demonstrate through larger-scale
clinical trials that these product candidates are safe and effective for use in
a diverse population before we can seek regulatory approvals for their
commercial sale.
Favorable results in our early studies
or trials may not be repeated in later studies or trials, including continuing
preclinical studies and large-scale clinical trials analyzed with more rigorous
statistical methods, and our drug candidates in later-stage trials may fail to
show desired safety and efficacy despite having progressed through earlier-stage
trials. Unfavorable results from ongoing preclinical studies or
clinical trials could result in delays, modifications or abandonment of ongoing
or future clinical trials. Clinical results are frequently susceptible to
varying interpretations that may delay, limit or prevent regulatory
approvals. Negative or inconclusive results or adverse medical events
during a clinical trial could cause a clinical trial to be delayed, repeated or
terminated. In addition, we may report top-line data from time to time, which is
based on a preliminary analysis of key efficacy and safety data; such data may
be subject to change following a more comprehensive review of the data related
to the applicable clinical trial. If Androxal®, Proellex®, or any
other potential future product candidate fails to demonstrate sufficient safety
and efficacy in any clinical trial, we would experience potentially significant
delays in, or be required to abandon, development of that product
candidate. If we delay or abandon our development efforts related to
Androxal® or Proellex®, we may not be able to generate sufficient revenues to
continue operations or become profitable.
We have a history of operating losses,
and we expect to incur increasing net losses and may not achieve or maintain
profitability for some time or at all.
We have experienced significant
operating losses in each fiscal year since our inception. As of
September 30, 2010, we had accumulated losses of $178.1 million, approximately $4.2
million in cash and cash equivalents, and our accounts payable and accrued
expenses were approximately $1.4 million. We expect to continue incurring net losses and we
may not achieve or maintain profitability for some time if at all. As
we increase expenditures for the clinical development of our products, we expect
our total operating losses to increase for at least the next few
years. Our ability to achieve profitability will depend on, among
other things, successfully completing the development of our products, obtaining
regulatory approvals, establishing marketing, sales and manufacturing
capabilities or collaborative arrangements with others that possess such
capabilities, and raising sufficient funds to finance our
activities. There can be no assurance that we will be able to achieve
profitability or that profitability, if achieved, can be
sustained. The uncertainties relating to the foregoing matters raise
substantial doubt about our ability to continue as a going
concern.
6
Raising additional funds by issuing
securities or through collaboration and licensing arrangements may cause
dilution to our stockholders, restrict our operations
or require us to relinquish proprietary rights.
We may raise additional funds through
public or private equity offerings, debt financings or potential corporate
collaborations and licensing arrangements. We cannot be certain that
additional funding will be available on acceptable terms, or at
all. To the extent that we raise additional capital by issuing equity
securities, our stockholders’ ownership will be diluted. Any debt
financing we enter into may involve covenants that restrict our
operations. These restrictive covenants may include limitations on
borrowing and specific restrictions on the use of our assets, as well as
prohibitions on our ability to create liens, pay dividends, redeem capital stock
or make investments. In addition, if we raise additional funds
through collaboration and licensing arrangements, it may be necessary to
relinquish potentially valuable rights to our potential products or proprietary
technologies, or grant licenses on terms that are not favorable to
us. For example, we might be forced to relinquish all or a portion of
our sales and marketing rights with respect to Androxal®, Proellex®, or other
potential products or license intellectual property that enables licensees to
develop competing products.
Our stock price could decline
significantly based on the results and timing of clinical trials of, and
decisions affecting, our product candidates.
Results of clinical trials and
preclinical studies of our current and potential product candidates may not be
viewed favorably by us or third parties, including the FDA or other regulatory
authorities, investors, analysts and potential collaborators. The
same may be true of how we design the clinical trials of our product candidates
and regulatory decisions affecting those clinical trials. Biopharmaceutical
company stock prices have declined significantly when such results and decisions
were unfavorable or perceived negatively or when a product candidate did not
otherwise meet expectations. The final results from our clinical
development programs may be negative, may not meet expectations or may be
perceived negatively. The designs of our clinical trials (which may
change significantly and be more expensive than currently anticipated depending
on our clinical results and regulatory decisions) may also be viewed negatively
by third parties. We may not be successful in completing these
clinical trials on our projected timetable, if at all.
Failure to initiate additional clinical
trials or delays in existing clinical trials of Androxal® and Proellex® and
failure of the FDA to lift the partial clinical hold on Proellex® or any of our
other current or future product candidates, or unfavorable results or decisions
or negative perceptions regarding any of such clinical trials, could cause our
stock price to decline significantly.
We are thinly staffed and highly
dependent on a limited number of management persons and key personnel, and if we
lose these members of our team or are unable to attract and retain additional
qualified personnel, our future growth and ability to compete would
suffer.
The competition for qualified personnel
in the biopharmaceutical field is intense, and our future success depends upon
our ability to attract, retain and motivate highly skilled scientific, technical
and managerial employees. We have only 6 full-time employees at the
present time, including Joseph S. Podolski. We are highly dependent
on our professional staff for the management of our company and the development
of our technologies. Mr. Podolski has an employment agreement with
us. There can be no assurance that any of these employees will remain
with us through development of our current product candidates. The
loss of the services of any of our employees could delay or curtail our research
and product development efforts.
Our plan to use collaborations to
leverage our capabilities may not be successful.
As part of our business strategy, we
intend to enter into collaboration arrangements with strategic partners to
develop and commercialize our product candidates. For our
collaboration efforts to be successful, we must identify partners whose
competencies complement ours. We must also successfully enter into
collaboration agreements with them on terms attractive to us and integrate and
coordinate their resources and capabilities with our own. We may be
unsuccessful in entering into collaboration agreements with acceptable partners
or negotiating favorable terms in these agreements. In addition, we
may face a disadvantage in seeking to enter into or negotiating collaborations
with potential partners because other potential collaborators may have greater
management and financial resources than we do. Also, we may be
unsuccessful in integrating the resources or capabilities of these
collaborators. In addition, our collaborators may prove difficult to
work with or less skilled than we originally expected. If we are
unsuccessful in our collaborative efforts, our ability to develop and market
product candidates could be severely limited.
Our rights agreement and certain
provisions in our charter documents and Delaware law could delay or prevent a
change in management or a takeover attempt that you may consider to be in your
best interest.
We have adopted certain anti-takeover
provisions, including a rights agreement. The rights agreement will
cause substantial dilution to any person who attempts to acquire us in a manner
or on terms not approved by our board of directors.
7
The rights agreement and certain
provisions in our certificate of incorporation and bylaws and under Delaware law
could delay or prevent the removal of directors and other management and could
make more difficult a merger, tender offer or proxy contest involving us that
you may consider to be in your best interest. For example, these
provisions:
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allow our board of directors to
issue preferred stock without stockholder
approval;
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limit who can call a special
meeting of stockholders; and
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establish advance notice
requirements for nomination for election to the board of directors or for
proposing matters to be acted upon at stockholder
meetings.
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Risks Relating to Our Product
Development Efforts
Delays in the commencement of
preclinical studies and clinical trials testing of our current and potential
product candidates could result in increased costs to us and delay our ability
to generate revenues.
Our product candidates will require
continued preclinical studies and extensive clinical trials prior to the
submission of a regulatory application for commercial sales. Because
of the nature of clinical trials and our lack of sufficient capital, we do not
know whether future planned clinical trials will begin on time, if at
all. Delays in the commencement of preclinical studies and clinical
trials could significantly increase our product development costs and delay any
product commercialization. In addition, many of the factors that may
cause, or lead to, a delay in the commencement of clinical trials may also
ultimately lead to denial of regulatory approval of a product
candidate.
The commencement of clinical trials can
be delayed for a variety of reasons, including delays in:
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demonstrating sufficient safety
and efficacy in past clinical trials to obtain regulatory approval to
commence a further clinical
trial;
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convincing the FDA that we have
selected valid endpoints for use in proposed clinical
trials;
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reaching agreements on acceptable
terms with prospective contract manufacturers for manufacturing sufficient
quantities of a product candidate;
and
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obtaining institutional review
board approval to conduct a clinical trial at a prospective
site.
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In addition, the commencement of
clinical trials may be delayed due to insufficient patient enrollment, which is
a function of many factors, including the size of the patient population, the
nature of the protocol, the proximity of patients to clinical sites, the
availability of effective treatments for the relevant disease, and the
eligibility criteria for the clinical trial.
Delays in the completion of, or the
termination of, clinical testing of our current and potential product candidates
could result in increased costs to us, and could delay or prevent us from
generating revenues.
Once a clinical trial has begun, it may
be delayed, suspended or terminated by us or the FDA or other regulatory
authorities due to a number of factors, including:
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lack of adequate funding to
continue clinical trials;
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lack of effectiveness of any
product candidate during clinical
trials;
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side effects experienced by trial
participants or other safety
issues;
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slower than expected rates of
patient recruitment and enrollment or lower than expected patient
retention rates;
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delays or inability to manufacture
or obtain sufficient quantities of materials for use in clinical
trials;
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inadequacy of or changes in our
manufacturing process or compound
formulation;
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delays in obtaining regulatory
approvals to commence a trial, or “clinical holds” or delays requiring
suspension or termination of a trial by a regulatory agency, such as the
FDA, after a trial is
commenced;
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changes in applicable regulatory
policies and regulations;
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delays in identifying and reaching
agreement on acceptable terms with prospective clinical trial
sites;
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uncertainty regarding proper
dosing;
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unfavorable results from on-going
clinical trials and preclinical
studies;
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failure of our clinical research
organizations to comply with all regulatory and contractual requirements
or otherwise fail to perform their services in a timely or acceptable
manner;
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scheduling conflicts with
participating clinicians and clinical
institutions;
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failure to construct appropriate
clinical trial protocols;
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insufficient data to support
regulatory approval;
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inability or unwillingness of
medical investigators to follow our clinical
protocols;
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difficulty in maintaining contact
with subjects during or after treatment, which may result in incomplete
data;
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ongoing discussions with the FDA
or other regulatory authorities regarding the scope or design of our
clinical trials; and
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acceptability to the FDA of data
obtained from clinical studies conducted in Europe or other non-United
States jurisdictions.
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Many of these factors that may lead to a
delay, suspension or termination of clinical testing of a current or potential
product candidate may also ultimately lead to denial of regulatory approval of a
current or potential product candidate.
If we experience delays in the
completion of, or termination of, clinical testing of any product candidates in
the future, our financial results and the commercial prospects for our product
candidates will be harmed, and our ability to generate product revenues will be
delayed.
Even if we successfully complete
clinical trials for Androxal® and Proellex®, there are no assurances that we will
be able to submit, or obtain FDA approval of, a new drug
application.
There can be no assurance that, if our
clinical trials for Androxal® and Proellex® are successfully completed, we will
be able to submit a new drug application, or NDA, to the FDA or that any NDA we
submit will be approved by the FDA in a timely manner, if at
all. After completing clinical trials for a product candidate in
humans, a drug dossier is prepared and submitted to the FDA as an NDA, and
includes all preclinical studies and clinical trial data relevant to the safety
and effectiveness of the product at the suggested dose and duration of use for
the proposed indication, in order to allow the FDA to review such drug dossier
and to consider a product candidate for approval for commercialization in the
United States. If we are unable to submit an NDA with respect to
Androxal® or Proellex®, or if any NDA we submit is not approved by the FDA, we
will be unable to commercialize that product. The FDA can and does
reject NDAs and requires additional clinical trials, even when drug candidates
achieve favorable results in large-scale Phase 3 clinical trials. If
we fail to commercialize Androxal® or Proellex®, we may be unable to generate
sufficient revenues to continue operations or attain profitability and our
reputation in the industry and in the investment community would likely be
damaged.
We rely on third parties to conduct
clinical trials for our product candidates, and their failure to timely and
properly perform their obligations may result in costs and delays that prevent
us from obtaining regulatory approval or successfully commercializing our
product candidates.
We rely on independent contractors,
including researchers at clinical research organizations, or CROs, and
universities, in certain areas that are particularly relevant to our research
and product development plans, such as the conduct of clinical
trials. The competition for these relationships is intense, and we
may not be able to maintain our relationships with them on acceptable
terms. Independent contractors generally may terminate their
engagements at any time, subject to notice. As a result, we can
control their activities only within certain limits, and they will devote only a
certain amount of their time conducting research on and trials of our product
candidates and assisting in developing them. If they do not
successfully carry out their duties under their agreements with us, fail to
inform us if these trials fail to comply with clinical trial protocols, or fail
to meet expected deadlines, our clinical trials may need to be extended, delayed
or terminated. We may not be able to enter into replacement
arrangements without undue delays or excessive expenditures. If there
are delays in testing or regulatory approvals as a result of the failure to
perform by our independent contractors or other outside parties, our drug
development costs will increase and we may not be able to attain regulatory
approval for or successfully commercialize our product
candidates.
9
In addition, we have no control over the
financial health of our independent contractors. Several of our
independent contractors are in possession of valuable and sensitive information
relating to the safety and efficacy of our product candidates, and several
others provide services to a significant percentage of the patients enrolled in
the respective clinical trials in which such independent contractors
participate. Should one or more of these independent contractors
become insolvent, or otherwise are not able to continue to provide services to
us, as a result of the current economic downturn or otherwise, the clinical
trial in which such contractor participates could become significantly delayed
and we may be adversely affected as a result of the delays and additional
expenses associated with such event.
Risks Relating to Manufacturing Our
Products
We currently rely on third-party
manufacturers and other third parties for production of our product candidates,
and our dependence on these manufacturers may impair the development of our
product candidates.
Currently, we do not have the ability
internally to manufacture the product candidates that we need to conduct our
clinical trials. We terminated our supply agreement with Gedeon Richter for the
manufacturing of Proellex® due to the clinical hold imposed by the FDA in August
2009; however, we have a large supply of Proellex® currently available for our
current and planned clinical trial efforts. In the event we require
an additional supply of Proellex®, we believe that we have maintained a good
relationship with Gedeon Richter and that an agreement could be reached with
Gedeon Richter to provide such supply when and if needed, but we cannot assure
you this will be the case.
We have a five year supply agreement
with Diagnostic Chemical Limited, doing business as BioVectra, for the supply of
the bulk active pharmaceutical ingredient used in Androxal®. We have
obtained all of our supply of Androxal® to date from BioVectra. We
have not faced any material problems with BioVectra in supplying us with our
necessary quantities of Androxal® for our clinical trials and anticipate
utilizing them for commercial production if Androxal® is
approved. The Company believes that should an issue with BioVectra
arise an alternative supplier could be identified, but we cannot assure you this
will be the case.
For the foreseeable future, we expect to
continue to rely on third-party manufacturers and other third parties to
produce, package and store sufficient quantities of Androxal®, Proellex®, and
any future product candidates for use in our clinical trials. These
product candidates are complicated and expensive to manufacture. If
our third-party manufacturers fail to deliver our product candidates for
clinical use on a timely basis, with sufficient quality, and at commercially
reasonable prices, we may be required to delay or suspend clinical trials or
otherwise discontinue development and production of our product
candidates. While we may be able to identify replacement third-party
manufacturers or develop our own manufacturing capabilities for these product
candidates, this process would likely cause a delay in the availability of our
product candidates and an increase in costs. In addition, third-party
manufacturers may have a limited number of facilities in which our product
candidates can be produced, and any interruption of the operation of those
facilities due to events such as equipment malfunction or failure or damage to
the facility by natural disasters could result in the cancellation of shipments,
loss of product in the manufacturing process or a shortfall in available product
candidates.
Our product candidates have only been
manufactured in small quantities to date, and we may face delays or
complications in manufacturing quantities of our product candidates in
sufficient quantities to meet the demands of late stage clinical trials and
marketing.
We cannot assure that we will be able to
successfully increase the manufacturing capacity or scale-up manufacturing
volume per batch, whether on our own or in reliance on third-party
manufacturers, for any of our product candidates in a timely or economical
manner, or at all. To date our product candidates have been
manufactured exclusively by third parties in small quantities for preclinical
studies and clinical trials. Future clinical trials of our product
candidates, if any, will require increased quantities for future commercial sale
in the event that such product candidates are approved by the FDA or foreign
regulatory bodies. Significant scale-up of manufacturing requires
certain additional developmental work, which the FDA must review and approve to
assure product comparability. If we or our third-party manufacturers
are unable to successfully increase the manufacturing capacity for a product
candidate, the regulatory approval or commercial launch of that product
candidate may be delayed or there may be a shortage in supply of that product
candidate.
Our product candidates require precise,
high-quality manufacturing which may not be available at acceptable
costs.
Androxal® and Proellex® are novel
compounds that have never been produced in large scale. As in the
development of any new compound, there are underlying risks associated with
their manufacture. These risks include, but are not limited to, cost,
process scale-up, process reproducibility, construction of a suitable process
plant, timely availability of raw materials, as well as regulatory issues
associated with the manufacture of an active pharmaceutical
agent. Any of these risks may prevent us from successfully developing
Androxal® or Proellex®. Our failure, or the failure of our
third-party manufacturers to achieve and maintain these high manufacturing
standards, including the incidence of manufacturing errors and reliable product
packaging for diverse environmental conditions, could result in patient injury
or death, product recalls or withdrawals, delays or failures in product testing
or delivery, cost overruns or other problems that could seriously hurt our
business.
10
We may experience delays in the
development of our product candidates if the third-party manufacturers of our
product candidates cannot meet FDA requirements relating to Good Manufacturing
Practices.
Our third-party manufacturers are
required to produce our product candidates under FDA current Good Manufacturing
Practices in order to meet acceptable standards for our clinical
trials. If such standards change, the ability of third-party
manufacturers to produce our product candidates on the schedule we require for
our clinical trials may be affected. In addition, third-party
manufacturers may not perform their obligations under their agreements with us
or may discontinue their business before the time required by us to gain
approval for or commercialize our product candidates. Any
difficulties or delays in the manufacturing and supply of our product candidates
could increase our costs or cause us to lose revenue or postpone or cancel
clinical trials.
The FDA also requires that we
demonstrate structural and functional comparability between the same drug
product produced by different third-party manufacturers. Because we
may use multiple sources to manufacture Androxal® and Proellex®, we may need to
conduct comparability studies to assess whether manufacturing changes have
affected the product safety, identity, purity or potency of any commercial
product candidate compared to the product candidate used in clinical
trials. If we are unable to demonstrate comparability, the FDA could
require us to conduct additional clinical trials, which would be expensive and
significantly delay commercialization of our product
candidates.
Risks Relating to Product
Commercialization
If commercialized, our product
candidates may not be approved for sufficient governmental or third-party
reimbursements, which would adversely affect our ability to market our product
candidates.
In the United States and elsewhere,
sales of pharmaceutical products depend in significant part on the availability
of reimbursement to the consumer from third-party payers, such as government and
private insurance plans. Third-party payers are increasingly
challenging the prices charged for medical products and services. It
will be time consuming and expensive for us to go through the process of seeking
reimbursement from Medicaid, Medicare and private payers for Proellex® and
Androxal®. Our products may not be considered cost effective, and
coverage and reimbursement may not be available or sufficient to allow us to
sell our products on a competitive and profitable basis. The passage
of the Medicare Prescription Drug and Modernization Act of 2003 imposes
requirements for the distribution and pricing of prescription drugs which may
negatively affect the marketing of our potential products.
If we successfully develop products but
those products do not achieve and maintain market acceptance, our business will
not be profitable.
Even if our product candidates are
approved for commercial sale by the FDA or other regulatory authorities, the
degree of market acceptance of any approved product by physicians, healthcare
professionals and third-party payers and our profitability and growth will
depend on a number of factors, including:
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relative convenience and ease of
administration;
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the prevalence and severity of any
adverse side effects;
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availability, effectiveness and
cost of alternative
treatments;
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pricing and cost effectiveness of
our drugs;
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|
·
|
effectiveness of our or
collaborators’ sales and marketing strategies;
and
|
|
·
|
our ability to obtain sufficient
third-party insurance coverage or
reimbursement.
|
If Androxal® does not provide a
treatment regime that is more beneficial than AndroGel®, the current standard of
care for the treatment of testosterone deficiency, or otherwise provide patient
benefit, it likely will not be accepted favorably by the market. If any products
we may develop do not achieve market acceptance, then we will not generate
sufficient revenue to achieve or maintain profitability.
In addition, even if our products
achieve market acceptance, we may not be able to maintain that market acceptance
over time if:
|
·
|
new products or technologies are
introduced that are more favorably received than our products, are more
cost effective or render our products
obsolete;
|
|
·
|
unforeseen complications arise
with respect to use of our products;
or
|
|
·
|
sufficient third-party insurance
coverage or reimbursement does not remain
available.
|
11
Our liability insurance may neither
provide adequate coverage nor may it always be available on favorable terms or
at all.
Neither Androxal® nor Proellex® has been
approved for commercial sale. However, the current and future use of
our product candidates by us and potential corporate collaborators in clinical
trials, and the sale of any approved products in the future, may expose us to
liability claims. These claims might be made directly by consumers or
healthcare providers or indirectly by pharmaceutical companies, potential
corporate collaborators or others selling such products. We may
experience financial losses in the future due to product liability
claims. We have obtained limited general commercial liability
insurance coverage for our clinical trials. We intend to expand our
insurance coverage to include the sale of commercial products if we obtain
marketing approval for any of our product candidates. However, we may
not be able to maintain insurance coverage at a reasonable cost or in sufficient
amounts to protect us against losses. If a successful product
liability claim or series of claims is brought against us for uninsured
liabilities or for liabilities in excess of our insurance limits, our assets may
not be sufficient to cover such claims and our business operations could be
impaired.
We face significant competition
from many companies with substantially
greater resources than we have and other possible
advantages.
We are engaged in biopharmaceutical
product development, an industry that is characterized by extensive research
efforts and rapid technological progress. The biopharmaceutical
industry is also highly competitive. Our success will depend on our
ability to acquire, develop and commercialize products and our ability to
establish and maintain markets for any products for which we receive marketing
approval. Potential competitors in North America, Europe and
elsewhere include major pharmaceutical companies, specialty pharmaceutical
companies and biotechnology firms, universities and other research institutions
and government agencies. Many of our competitors have substantially greater
research and development and regulatory capabilities and experience, and
substantially greater management, manufacturing, distribution, marketing and
financial resources, than we do. Accordingly, our competitors
may:
|
·
|
develop or license products or
other novel technologies that are more effective, safer or less costly
than the product candidates that we are
developing;
|
|
·
|
obtain regulatory approval for
products before we do; or
|
|
·
|
commit more resources than we can
to developing, marketing and selling competing
products.
|
Our main competitors for the treatment
of testosterone deficiency are the testosterone replacement therapies currently
being marketed. The current standard of care is AndroGel®, a topical
gel for the replacement of testosterone developed by Solvay Pharmaceuticals
(which was acquired by Abbott Laboratories). Abbott is a much larger
company than we are, with greater resources and marketing
ability. Androxal® would also compete with other forms of
testosterone replacement therapies such as oral treatments, patches, injectables
and a tablet applied to the upper gum. There is another topical gel
currently marketed by Auxilium Pharmaceuticals called Testim®, and a transdermal
patch marketed by Watson Pharmaceuticals called AndroDerm®. There can
be no assurance that our product candidates will be more successful than
competitive products. In addition, other potential competitors may be
developing testosterone therapies similar to ours.
The main therapeutic products
competitive with Proellex® for the treatment of uterine fibroids and
endometriosis are GnRH agonists, including Lupron® and the use of approved
progestin-based contraceptives for the treatment of endometriosis. In
addition, surgical treatment of both uterine fibroids and endometriosis would
compete with Proellex®, if approved, by removing uterine fibroids and by
removing misplaced tissue in women with endometriosis. Furthermore,
Neurocrine Biosciences Inc. is developing a GnRH antagonist for the treatment of
endometriosis.
Risks Relating to Our Intellectual
Property
There is a third party individual patent
holder that claims priority over our patent application for
Androxal®.
A third party individual holds two
issued patents related to the use of an anti-estrogen such as clomiphene citrate
and others for use in the treatment of androgen deficiency and disorders related
thereto. In our prior filings with the SEC, we have described our
request to the U.S. Patent and Trademark Office, or PTO, for re-examination of
one of these patents based on prior art. The third party amended the
claims in the re-examination proceedings, which led the PTO to determine that
the amended claims are patentable in view of those publications under
consideration and a re-examination certificate was issued. However,
we believe that the amended claims are invalid based on additional prior art
publications, and we filed a second request for re-examination by the PTO in
light of a number of these additional publications and other publications cited
by the PTO. The request was granted and all of the claims were
finally rejected by the PTO in the re-examination. The patent holder
appealed the rejections to the PTO Board of Patent Appeals and Interferences
(“the Board”) which affirmed the rejection of all of the
claims. The patent holder subsequently filed a request for rehearing,
which led the Board to reverse the rejections of several dependent claims in
view of those publications under consideration. The patent holder has
filed a Notice of Appeal to the United States Court of Appeals for
the Federal Circuit
contesting the rejections maintained by the Board. We also believe
that the second of these two patents is invalid in view of published prior art
not considered by the PTO. Nevertheless, there is no assurance that
either patent will ultimately be found invalid over the prior art. If such
patents are not invalidated by the PTO we may be required to obtain a license
from the holder of such patents in order to develop Androxal® further or
attempts may be made to undertake further legal action to invalidate such
patents. If such licenses were not available on acceptable terms, or
at all, we may not be able to successfully commercialize or out-license
Androxal®.
12
We licensed our rights to Proellex® from NIH and our inability to fulfill
our commitments and obligations under such license may result in forfeiture of
our rights.
Our rights to Proellex® are licensed
exclusively to us from NIH under a license agreement. This license
agreement contains numerous detailed performance obligations, with time
sensitive dates for compliance, relating to clinical development and
commercialization activities required by us or our designated third-party
providers, as well as additional financial milestones and
royalties. Failure to achieve the benchmarks specified in the
commercial development plan attached to the license agreement or meet payment
obligations could result in termination of the license agreement and the loss of
our rights to develop and commercialize Proellex®. We periodically
update the commercial development plan as such plans evolve. There
can be no assurance that we will be able to meet any or all of the performance
objectives in the future on a timely basis or at all, or that, if we fail to
meet any of such objectives, NIH will agree to revised
objectives. NIH has the ability to terminate the agreement for an
uncured material breach of the agreement, if we made a false statement or
willful omission in our license application, if we do not keep Proellex®
reasonably available to the public after commercial launch, if we cannot
reasonably satisfy unmet health and safety needs, or if we cannot reasonably
justify a failure to comply with the domestic production requirement unless such
requirement has been waived.
We cannot assure that our manufacture,
use or sale of our product candidates will not infringe on the patent rights of
others.
There can be no assurance that the
manufacture, use or sale of any of our product candidates will not infringe the
patent rights of others. We may be unable to avoid infringement of
the patent rights of others and may be required to seek a license, defend an
infringement action or challenge the validity of the patents in
court. There can be no assurance that a license to the allegedly
infringed patents will be available to us on terms and conditions acceptable to
us, if at all, or that we will prevail in any patent
litigation. Patent litigation is extremely costly and time-consuming,
and there can be no assurance that we will have sufficient resources to defend
any possible litigation related to such infringement. If we do not
obtain a license on acceptable terms under such patents, or are found liable for
infringement, or are not able to have such patents declared invalid, we may be
liable for significant money damages, may encounter significant delays in
bringing our product candidates to market, or may be precluded from
participating in the manufacture, use or sale of any such product candidates,
any of which would materially and adversely affect our
business.
A dispute regarding the infringement or
misappropriation of our proprietary rights or the proprietary rights of others
could be costly and result in delays in our research and development
activities.
Our commercial success depends upon our
ability to develop and manufacture our product candidates and market and sell
drugs, if any, and conduct our research and development activities without
infringing or misappropriating the proprietary rights of others. We
may be exposed to future litigation by others based on claims that our product
candidates, technologies or activities infringe the intellectual property rights
of others. Numerous United States and foreign issued patents and pending patent
applications owned by others also exist in the therapeutic areas in, and for the
therapeutic targets for, which we are developing drugs. These could
materially affect our ability to develop our product candidates or sell drugs,
and our activities, or those of our licensor or future collaborators, could be
determined to infringe these patents. Because patent applications can
take many years to issue, there may be currently pending applications, unknown
to us, which may later result in issued patents that our drug candidates or
technologies may infringe. There also may be existing patents, of
which we are not aware, that our product candidates or technologies may
infringe. Further, there may be issued patents and pending patent applications
in fields relevant to our business, of which we are or may become aware, that we
believe we do not infringe or that we believe are invalid or relate to
immaterial portions of our overall drug discovery and development
efforts. We cannot assure you that others holding any of these
patents or patent applications will not assert infringement claims against us
for damages or seeking to enjoin our activities. We also cannot
assure you that, in the event of litigation, we will be able to successfully
assert any belief we may have as to non-infringement, invalidity or
immateriality, or that any infringement claims will be resolved in our
favor.
In addition, others may infringe or
misappropriate our proprietary rights, and we may have to institute costly legal
action to protect our intellectual property rights. We may not be
able to afford the costs of enforcing or defending our intellectual property
rights against others. There could also be significant litigation and
other administrative proceedings in our industry that affect us regarding patent
and other intellectual property rights. Any legal action or
administrative action against us, or our collaborators, claiming damages or
seeking to enjoin commercial activities relating to our drug discovery and
development programs could:
|
·
|
require us, or potential
collaborators, to obtain a license to continue to use, manufacture or
market the affected drugs, methods or processes, which may not be
available on commercially reasonable terms, if at
all;
|
|
·
|
prevent us from importing, making,
using, selling or offering to sell the subject matter claimed in patents
held by others and subject to potential liability for damages;
or
|
|
·
|
consume a substantial portion of
our managerial, scientific and financial resources; or be costly,
regardless of the outcome.
|
13
Furthermore, because of the substantial
amount of pre-trial documents and witness discovery required in connection with
intellectual property litigation, there is risk that some of our confidential
information could be compromised by disclosure during this type of
litigation. In addition, during the course of this kind of
litigation, there could be public announcements of the results of hearings,
motions or other interim proceedings or developments. If securities
analysts or investors perceive these results to be negative, it could have a
substantial adverse effect on the trading price of our common stock or
warrants.
We face substantial uncertainty in our
ability to protect our patents and proprietary technology.
Our ability to commercialize our
products will depend, in part, on our or our licensor’s ability to obtain
patents, to enforce those patents and preserve trade secrets, and to operate
without infringing on the proprietary rights of others. The patent
positions of biopharmaceutical companies are highly uncertain and involve
complex legal and factual questions. There can be no assurance
that:
|
·
|
Patent applications for and
relating to our products candidates, Androxal® and Proellex®, will result
in issued patents;
|
|
·
|
Patent protection will be secured
for any particular
technology;
|
|
·
|
Any patents that have been or may
be issued to us, such as our pending patent applications relating to
Proellex® or Androxal®, or any patents that have been or may be issued to
our licensor, such as the patent(s) and application(s) underlying our
Proellex® compound, when issued, will be valid and
enforceable;
|
|
·
|
any patents will provide
meaningful protection to us;
|
|
·
|
others will not be able to design
around the patents; or
|
|
·
|
our patents will provide a
competitive advantage or have commercial
application.
|
The failure to obtain and maintain
adequate patent protection would have a material adverse effect on us and may
adversely affect our ability to enter into, or affect the terms of, any
arrangement for the marketing of any product.
We cannot assure that our patents will
not be challenged by others.
There can be no assurance that patents
owned by or licensed to us will not be challenged by others. We could
incur substantial costs in proceedings, including interference proceedings
before the PTO and comparable proceedings before similar agencies in other
countries in connection with any claims that may arise in the
future. These proceedings could result in adverse decisions about the
patentability of our or our licensor’s inventions and products, as well as about
the enforceability, validity or scope of protection afforded by the
patents. Any adverse decisions about the patentability of our product
candidates could cause us to either lose rights to develop and commercialize our
product candidates or to license such rights at substantial cost to
us. In addition, even if we were successful in such proceedings, the
cost and delay of such proceedings would most likely have a material adverse
effect on our business.
Confidentiality agreements with
employees and others may not adequately prevent disclosure of trade secrets and
other proprietary information, may not adequately protect our intellectual
property, and will not prevent third parties from independently discovering
technology similar to or in competition with our intellectual
property.
We rely on trade secrets and other
unpatented proprietary information in our product development
activities. To the extent we rely on trade secrets and unpatented
know-how to maintain our competitive technological position, there can be no
assurance that others may not independently develop the same or similar
technologies. We seek to protect trade secrets and proprietary
knowledge, in part, through confidentiality agreements with our employees,
consultants, advisors, collaborators and contractors. Nevertheless,
these agreements may not effectively prevent disclosure of our confidential
information and may not provide us with an adequate remedy in the event of
unauthorized disclosure of such information. If our employees,
scientific consultants, advisors, collaborators or contractors develop
inventions or processes independently that may be applicable to our
technologies, product candidates or products, disputes may arise about ownership
of proprietary rights to those inventions and processes. Such
inventions and processes will not necessarily become our property, but may
remain the property of those persons or their employers. Protracted
and costly litigation could be necessary to enforce and determine the scope of
our proprietary rights. If we fail to obtain or maintain trade secret
protection for any reason, the competition we face could increase, reducing our
potential revenues and adversely affecting our ability to attain or maintain
profitability.
14
We cannot protect our intellectual
property rights throughout the world.
Filing, prosecuting, and defending
patents on all of our drug discovery technologies and all of our potential drug
candidates throughout the world would be prohibitively
expensive. Competitors may use our technologies to develop their own
drugs in jurisdictions where we have not obtained patent
protection. These drugs may compete with our drugs, if any, and may
not be covered by any of our patent claims or other intellectual property
rights. The laws of some foreign countries do not protect
intellectual property rights to the same extent as the laws of the United
States, and many companies have encountered significant problems in protecting
and defending such rights in foreign jurisdictions. Many countries,
including certain countries in Europe, have compulsory licensing laws under
which a patent owner may be compelled to grant licenses to third parties (for
example, the patent owner has failed to “work” the invention in that country or
the third party has patented improvements). In addition, many
countries limit the enforceability of patents against government agencies or
government contractors. In these countries, the patent owner may have
limited remedies, which could materially diminish the value of the
patent. Compulsory licensing of life-saving drugs is also becoming
increasingly popular in developing countries either through direct legislation
or international initiatives. Such compulsory licenses could be
extended to include some of our drug candidates, which could limit our potential
revenue opportunities. Moreover, the legal systems of certain
countries, particularly certain developing countries, do not favor the
aggressive enforcement of patents and other intellectual property protection,
particularly those relating to biotechnology and/or pharmaceuticals, which makes
it difficult for us to stop the infringement of our
patents. Proceedings to enforce our patent rights in foreign
jurisdictions could result in substantial cost and divert our efforts and
attention from other aspects of our business.
Risks Related to this
Offering and our Common
Stock
We will have broad discretion as to the
use of the proceeds from this offering, and we may not use the proceeds
effectively.
We will have broad discretion in the
application of the net proceeds from this offering and could allocate the net
proceeds in ways that do not improve our results of operations or enhance the
value of our common stock or warrants. Our failure to apply these funds
effectively could have a material adverse effect on our business, delay the
development of our product candidates and cause the price of our common stock or
warrants to decline.
Purchasers in this offering will experience
immediate and substantial dilution.
As of
September 30, 2010, we had a net tangible book value of $3.1 million which
yields a net tangible book value of approximately $0.35 per share of common
stock, assuming no exercise of any warrants or options. The net
tangible book value per share is less than the current market price per
share. If you pay more than the net tangible book value per share for
common stock in this offering, you will experience immediate dilution. See the section titled “Dilution” on page
21 of this
prospectus. The exercise of outstanding options and the warrants issued in connection
with this offering will
result in further dilution in your investment. In addition, if we
issue additional equity securities in the future, the newly issued securities
may further dilute your ownership interest.
The trading price of our common stock
has been volatile and is likely to be volatile in the
future.
The trading price of our common stock
has been highly volatile. Since January 1, 2008 through November 30, 2010, the sale price of our stock price has fluctuated from a
low of $1.11 to a high of
$55.76. The market price
for our common stock and
warrants will be affected
by a number of factors, including:
•
|
the denial or delay of regulatory
clearances or approvals of our drug candidates or receipt of regulatory approval
of competing products;
|
•
|
our ability to accomplish
clinical, regulatory and other product development
milestones;
|
•
|
the ability of our product candidates, if they receive regulatory approval, to achieve
market success;
|
•
|
the performance of third-party
manufacturers and
suppliers;
|
•
|
actual or anticipated variations
in our results of operations or those of our
competitors;
|
•
|
developments with respect to
patents and other intellectual property
rights;
|
•
|
sales of common stock or other
securities by us or our stockholders in the
future;
|
•
|
additions or departures of key
scientific or management
personnel;
|
•
|
disputes or other developments
relating to proprietary rights, including patents, litigation matters and
our ability to obtain patent protection for our products;
|
•
|
trading volume of our common
stock and
warrants;
|
•
|
investor perceptions about us and
our industry;
|
•
|
public reaction to our press
releases, other public announcements and SEC and other
filings;
|
15
•
|
the failure of analysts to cover
our common stock, or changes in analysts’ estimates or
recommendations;
|
•
|
the failure by us or our
competitors to meet analysts’ projections or
guidance;
|
•
|
general market conditions and
other factors unrelated to our operating performance or the
operating performance
of our competitors;
and
|
•
|
the other factors described
elsewhere in these “Risk Factors.”
|
The stock prices of many companies in
the biotechnology industry have experienced wide
fluctuations that have often been unrelated to the operating performance of
these companies. Following periods of volatility in the market price of a
company’s securities, securities class action litigation often has been
initiated against a company. If any additional class action litigation is initiated against us, we may incur
substantial costs and our management’s attention may be diverted from our
operations, which could significantly harm our business.
Our inability to comply with the listing
requirements of the Nasdaq Capital Market could result in our
common stock and/or
warrants being delisted,
which could affect their market price and liquidity and reduce
our ability to raise capital.
We are required to meet certain
qualitative and financial tests (including a minimum closing bid price of $1.00
per share for our common stock) to maintain the listing of our common stock
and/or warrants
on the Nasdaq Capital Market. If we do not maintain
compliance with the continued listing requirements for the Nasdaq Capital Market within specified periods
and subject to permitted extensions, our common stock and/or warrants may be recommended for delisting
(subject to any appeal we would file). If our common stock or warrants were delisted, it could be more
difficult to buy or sell our common stock or warrants and to obtain accurate quotations, and
the price of our stock or
warrants could suffer a
material decline. Delisting would also impair our ability to raise
capital.
16
FORWARD-LOOKING
STATEMENTS
Some of
the statements contained (i) in this prospectus and any accompanying
prospectus supplement or (ii) incorporated by reference into this
prospectus are forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended (the “Securities Act”), and
Section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and are subject to the safe harbor created by the Securities
Litigation Reform Act of 1995. Examples of these forward-looking statements
include, but are not limited to:
|
§
|
our
ability to continue as a going concern and to raise additional capital, as
necessary, on acceptable terms or at
all;
|
|
§
|
having
available funding for the continued development of Proellex® and
Androxal®;
|
|
§
|
our
ability to successfully defend the class action
lawsuits;
|
|
§
|
the
removal of the current partial clinical hold on further clinical trials
for Proellex® by the Food and Drug Administration, or FDA, and the
reestablishment of safe dosing in clinical trials for
Proellex®;
|
|
§
|
uncertainty
related to our ability to obtain approval of our products by the FDA and
regulatory bodies in other
jurisdictions;
|
|
§
|
uncertainty
relating to our patent portfolio;
|
|
§
|
market
acceptance of our products and the estimated potential size of these
markets;
|
|
§
|
dependence
on third parties for clinical development and
manufacturing;
|
|
§
|
dependence
on a limited number of key
employees;
|
|
§
|
competition
and risk of competitive new
products;
|
|
§
|
volatility
in the value of our common stock;
|
|
§
|
volatility
in the financial markets generally;
and
|
|
§
|
any
other risks and uncertainties described under “Risk Factors” or elsewhere
in this prospectus.
|
While
these forward-looking statements made by us are based on our current intent,
beliefs and judgments, they are subject to risks and uncertainties that could
cause actual results to vary from the projections in the forward-looking
statements. You should consider the risks below carefully in addition to other
information contained in this prospectus before engaging in any transaction
involving our securities. If any of these risks occur, they could seriously harm
our business, financial condition or results of operations. In such case, the
trading price of our common stock could decline, and you may lose all or part of
your investment.
In
addition, in this prospectus, any prospectus supplement and the documents
incorporated by reference into this prospectus, the words “believe,” “should,”
“predict,” “future,” “may,” “will,” “estimate,” “continue,” “anticipate,”
“intend,” “plan,” “expect,” “potential,” “continue,” or “opportunity,” or other
words and terms of similar meaning, as they relate to us, our business, future
financial or operating performance or our management, are intended to identify
forward-looking statements. Any forward-looking statement speaks only as of the
date on which it is made, and we undertake no obligation to update or revise any
forward-looking statement to reflect events or circumstances after the date on
which the statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time, and it is not possible for us to
predict which factors will arise. In addition, we cannot assess the impact of
each factor on our business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statements. Past financial or operating performance is not
necessarily a reliable indicator of future performance and you should not use
our historical performance to anticipate results or future period
trends.
17
USE OF PROCEEDS
We expect
to receive approximately $ million in
net proceeds from the sale of the
units offered by us in this offering based on the offering price of $
per unit, or approximately
$ if the underwriter
exercises its over-allotment in full based on the offering price of
$ per unit. “Net
proceeds” is what we expect to receive after paying the expenses of this
offering, including the underwriting discounts and commissions as described in
“Underwriting” and other estimated offering expenses payable by us, which
include legal, accounting and printing fees.
We intend
to use the net proceeds from this offering for general corporate purposes,
including continuing our clinical trials for Androxal® and
Proellex®. We have not yet determined with certainty the manner in
which we will allocate the net proceeds; however, we currently anticipate
using:
|
·
|
approximately
$1.6 million to conduct our Phase 2B fertility trial for
Androxal®;
|
|
·
|
approximately
$1.6 million to complete our current Phase 2 type 2 diabetes trial for
Androxal®; and
|
|
·
|
approximately
$1.0 million to complete our current escalating low dose study for
Proellex®.
|
The
amounts described above are only an estimate of the expenses we currently
anticipate will be necessary to complete each trial. Our management
will have broad discretion in the application of the net proceeds, and investors
will be relying on the judgment of our management regarding the application of
the proceeds of this offering.
Until we
use the net proceeds of this offering, we intend to invest the funds in
short-term, investment grade, interest-bearing securities.
18
CAPITALIZATION
The following table presents a summary
of our cash and cash equivalents and capitalization as of September 30, 2010:
•
|
on an actual basis;
and
|
•
|
on an as adjusted basis, giving effect to the sale
of units to be sold in this offering at a public offering price of $ per unit, after deducting estimated
underwriting
discounts and commissions and offering expenses, and the
application of the net proceeds of this offering as described in “Use of
Proceeds.”
|
You should read the following table in
conjunction with “Management’s Discussion and Analysis of Financial Condition
and Results of Operation” and the historical consolidated financial statements
and the related notes thereto incorporated by reference into this prospectus.
|
As of September 30, 2010
(in thousands except share and per
share amounts)
|
|||||||
|
Actual
|
As Adjusted
|
||||||
Cash and cash
equivalents
|
|
$
|
4,216
|
|
$
|
|
||
|
||||||||
Stockholders’
equity
|
|
|||||||
Undesignated
preferred stock, $.001 par value: 5,000,000 shares authorized; none issued
and outstanding
|
||||||||
Common stock ((i) Actual:
75,000,000 shares authorized, par value
$0.001;
9,042,407 shares issued and 8,930,057 shares
outstanding and
(ii) As
Adjusted:
75,000,000 shares authorized, par
value $0.001;
shares issued and
outstanding)
|
|
$
|
9
|
|
$
|
|
||
Additional paid-in
capital/warrants
|
|
183,644
|
|
|||||
Cost of treasury stock, 112,350
shares
|
(1,380)
|
|||||||
Deficit accumulated during the
development stage
|
|
(178,060)
|
||||||
|
||||||||
Total stockholders’
equity
|
|
$
|
4,213
|
|
$
|
|
||
|
||||||||
Total
capitalization
|
|
$
|
4,213
|
|
$
|
|
The number of shares in the table above
excludes as of September 30, 2010:
|
·
|
538,582 shares of common stock issuable
upon the exercise of outstanding options at a weighted average exercise
price of $14.10 per
share;
|
|
·
|
288,421 shares of common stock available
for future issuance under our stock option
plans;
|
|
·
|
shares
of common stock issuable upon exercise of warrants included in the units
in this offering; and
|
|
·
|
shares
of common stock and warrants issuable upon exercise of the underwriter’s
over-allotment option.
|
19
MARKET PRICE AND DIVIDEND
INFORMATION
Our common stock is quoted on the Nasdaq
Capital Market under the symbol “RPRX”. The following table shows the high and
low sale prices per share of our common stock as reported by the Nasdaq Stock
Market during the periods presented. Prices per share of our common
stock have been adjusted to reflect the 1-for-4 reverse split of our common stock that was
effected on October 14, 2010.
Price Range
|
||||||||
High
|
Low
|
|||||||
2008
|
||||||||
First
Quarter
|
$
|
40.80
|
$
|
32.44
|
||||
Second
Quarter
|
44.36
|
32.84
|
||||||
Third
Quarter
|
40.00
|
21.24
|
||||||
Fourth
Quarter
|
45.00
|
22.72
|
||||||
2009
|
||||||||
First
Quarter
|
$
|
55.76
|
$
|
23.36
|
||||
Second
Quarter
|
33.20
|
22.80
|
||||||
Third
Quarter
|
24.04
|
2.60
|
||||||
Fourth
Quarter
|
9.92
|
2.56
|
||||||
2010
|
||||||||
First
Quarter
|
$
|
4.88
|
$
|
2.52
|
||||
Second
Quarter
|
4.52
|
1.44
|
||||||
Third
Quarter
|
2.68
|
1.12
|
||||||
Fourth Quarter (October 1st
through December 10th)
|
1.72
|
1.11
|
All of the foregoing prices reflect
interdealer quotations, without retail mark-up, markdowns or commissions and may
not necessarily represent actual transactions in the common
stock.
On December 10, 2010, the last sale price of our
common stock, as reported by the Nasdaq Capital Market, was $1.28 per share. On November 30, 2010, there were approximately
170 holders of record and approximately
3,525 beneficial holders of our common stock.
Dividend Policy
General
We have never declared or paid cash
dividends on our capital stock. We currently intend to retain our
future earnings, if any, for use in our business and therefore do not anticipate
paying cash dividends in the foreseeable future. Payment of future
dividends, if any, will be at the discretion of our board of directors after
taking into account various factors, including our financial condition,
operating results, current and anticipated cash needs.
Rights
Plan
We are
party to a rights agreement, as amended, pursuant to which a dividend consisting
of one preferred stock purchase right was distributed for each share of our
common stock held as of the close of business on September 13, 1999, and to each
share of common stock issued thereafter until the earlier of (i) the
distribution date which is defined in the rights plan, (ii) the redemption date
which is defined in the rights plan or (iii) September 13, 2015. The
rights plan is designed to deter coercive takeover tactics and to prevent an
acquirer from gaining control of us without offering fair value to our
stockholders. The rights will expire on September 13, 2015, subject to earlier
redemption or exchange as provided in the rights plan. Each right entitles its
holder to purchase from us one one-hundredth of a share of a new series of
Series One Junior Participating Preferred Stock at a price of $20.00 per one
one-hundredth of a share, subject to adjustment. The rights are generally
exercisable only if a person acquires beneficial ownership of 20% or more of our
outstanding common stock.
A
complete description of the rights, the rights plan with Computershare Trust
Company, N.A., as rights agent, and the Series One Junior Participating
Preferred Stock is hereby incorporated by reference from the information
appearing under the caption "Item 1. Description of the Registrant's Securities
to be Registered" contained in the Registration Statement on Form 8-A filed on
September 3, 1999, and as amended by amendments to such Registration Statement
on Form 8-A/A filed on September 11, 2002, October 31, 2002, June 30, 2005,
January 10, 2008, October 10, 2008 and September 9, 2010.
20
DILUTION
Our unaudited net tangible book value as of
September 30, 2010 was approximately
$3.1 million, or approximately
$0.35 per share of common
stock. Net tangible book value per share represents total
assets minus capitalized patent costs and total liabilities, divided by the
number of shares of common stock outstanding. Dilution in net
tangible book value per share represents the difference between the amount
per share paid by purchasers of common stock in this offering and the net
tangible book value per share of our common stock immediately after the
offering.
After giving effect to the sale
of units to be sold in this
offering at the offering price of $
per unit, and after deduction of
estimated underwriting discounts and commissions and offering expenses payable
by us, our pro forma net tangible book value as of September 30, 2010 would
have been approximately $
million, or $ per
share. The adjustments made to determine pro forma net tangible book
value per share are the following:
|
·
|
An increase in total assets to
reflect the net proceeds of the offering as described under “Use of
Proceeds”; and
|
|
·
|
The addition of the number of
shares of common stock included in the units offered under this prospectus
to the number of shares
outstanding.
|
The following table illustrates the pro
forma increase in net tangible book value attributable to new investors in this
offering of $ per share and the dilution (the
difference between the offering price per share and net tangible book value per
share) to new investors:
Assumed offering price per
share
|
$ | |||
Increase per share attributable to
new investors of this offering
|
||||
Pro forma net tangible book value
per share as of September 30, 2010, after giving effect to this
offering
|
||||
Dilution per share to new
investors of this offering
|
$ | |||
The number of shares in the table above
excludes as of September 30, 2010:
|
·
|
538,582 shares of common stock issuable
upon the exercise of outstanding options at a weighted average exercise
price of $14.10 per
share;
|
|
·
|
288,421 shares of common stock available
for future issuance under our stock option
plans;
|
|
·
|
shares
of common stock issuable upon exercise of warrants included in the units
in this offering; and
|
|
·
|
shares
of common stock and warrants issuable upon exercise of the underwriter’s
over-allotment option.
|
21
DESCRIPTION OF
BUSINESS
Overview
Repros Therapeutics was organized on
August 20, 1987. We are a development stage biopharmaceutical
company focused on the development of new drugs to treat hormonal and
reproductive system disorders.
We are
developing Androxal®, an oral therapy that normalizes testicular function, for
the treatment of low testosterone due to secondary hypogonadism. Secondary
hypogonadism is associated with aging and we believe it is the most common cause
of low testosterone in men. It is estimated that 13 million men in the U.S.
experience low levels of testosterone, and the condition is becoming recognized
with more frequency. In 2009, for the first time, sales of
testosterone preparations for the treatment of low testosterone exceeded $1
billion worldwide and first tier pharmaceutical companies entered the low
testosterone marketplace as evidenced by the acquisition of Solvay
Pharmaceuticals and the subsequent active marketing of its AndroGel® product by
Abbott Laboratories. Eli Lilly and Company also recently entered into
a licensing agreement for a late stage topical testosterone
treatment.
The
Company believes Androxal® is highly differentiated from currently marketed
testosterone treatments or those treatments in late stage development because it
is an oral therapy and it treats the cause of secondary hypogonadism, which is
inadequate pituitary hormones. We believe that by treating the cause
of secondary hypogonadism it also has the potential to maintain reproductive
status and potentially improve overall metabolic profiles, which we believe may
improve the condition of men suffering from type 2 diabetes. The
Company held a Type B meeting with the FDA on November 8, 2010 to discuss the
FDA’s willingness to review Phase 3 protocols under a Special Protocol
Assessment (“SPA”). Although the FDA advised the Company that it may proceed
with Phase 3 studies, the FDA recommended that a Phase 2B study in men with
secondary hypogonadism, but naïve to testosterone treatment, be conducted if the
Company desired the protocols to be reviewed under an SPA. We intend to follow
the FDA recommendation and conduct the Phase 2B study commencing in the first
quarter of 2011, assuming successful completion of this offering.
The
Company is also currently conducting a Phase 2 study of the use of Androxal® in
the treatment of Type 2 diabetes in hypogonadal men. Retrospective
analysis of completed Androxal® studies showed that Androxal® improved fasting
plasma glucose levels in men with Type 2 diabetes, an improvement not seen in
similar subjects using a topical testosterone or placebo. The Company believes
this effect is directly related to Androxal®’s ability to normalize the
hypothalamic-pituitary-testes pathway and organ function.
We are
also developing Proellex®, an orally administered selective blocker of the
progesterone receptor in women, for the treatment of uterine fibroids and
endometriosis. Uterine fibroids and endometriosis affect millions of women of
reproductive age. We believe an effective treatment for these underserved
conditions could result in sales of a safe and effective drug easily exceeding
$1 billion in sales in the U.S. Proellex® had shown statistically
significant results in Phase 2 studies for both endometriosis and uterine
fibroids. The Company has recently commenced a low dose escalating
study as permitted by the FDA, which is intended to determine both signals of
efficacy and safety for low oral doses of the drug.
Both of
our product candidates have exhibited strong efficacy results in every study
completed to date, and Repros believes the studies presently underway or
scheduled to start shortly will place both programs on a clear late stage
clinical development path and a solid position for
licensing.
As of September 30, 2010, we had
accumulated losses of $178.1 million, approximately $4.2 million in cash and
cash equivalents, and our accounts payable and accrued expenses were
approximately $1.4 million. The amount of cash on hand is not sufficient
to fund each of the current clinical trials for our two drug candidates,
Proellex® and Androxal®. Assuming successful completion of this offering,
we will have sufficient funding to complete all of the Phase 2 and 2B clinical
trials currently planned or underway; however, significant additional
capital will be required for us to complete development of either of our product
candidates. We continue to explore potential additional financing
alternatives (including corporate partnering opportunities) that would provide
sufficient funds to enable us to continue to develop our two product candidates
through completion of the outlined clinical trials; however, there can be no
assurance that we will be successful in raising any such additional funds on a
timely basis or at all. The foregoing and other matters raise substantial
doubt about our ability to continue as a going concern.
Androxal®
Product Overview
Our primary product candidate,
Androxal®, is a single isomer of clomiphene citrate and is an orally active
proprietary small molecule compound. We are developing Androxal® for men of
reproductive age with low testosterone levels. Androxal® treats the
underlying mechanism that causes secondary hypogonadism and restores normal
testicular function. Unlike testosterone replacement which suppresses testicular
function, Androxal® does not impair the reproductive status of men being treated
for low testosterone. In addition, we are conducting a Phase 2 clinical
trial of Androxal® as a potential treatment for type 2
diabetes.
22
Testosterone is an important male
hormone. Testosterone deficiency in men is linked to several negative
physical and mental conditions, including loss of muscle tone, reduced sexual
desire, and deterioration of memory and certain other cognitive functions.
Testosterone production normally decreases as men age, sometimes leading to
testosterone deficiency. The leading therapy for low testosterone is
AndroGel®, a commercially available testosterone replacement cream marketed by
Abbott Laboratories for the treatment of low testosterone, which we believe has
had and continues to have significant sales in North
America.
Based on our own clinical trial
screening data, we believe over 70% of men that have low testosterone suffer
from secondary hypogonadism, a pituitary defect which is characterized by
suboptimal levels of LH
(luteinizing hormone) and FSH (follicle stimulating hormone). LH and FSH are the pituitary hormones
that stimulate testicular testosterone and sperm production,
respectively. Men with secondary hypogonadism can be
readily distinguished from those that have primary testicular failure via
assessment of the levels of secretions of pituitary hormones, as men with
primary testicular failure experience elevated secretions of pituitary
hormones. In secondary hypogonadism, the low
levels of LH and FSH fail to provide adequate hormone signaling to the testes,
causing testosterone levels to drop to a level where we believe pituitary
secretions fall under the influence of estrogen, thus further suppressing the
testicular stimulation from the pituitary.
Androxal® acts centrally to restore
testicular function and hence normal testosterone in the
body. The
administration of exogenous testosterone can restore serum testosterone levels,
but does not restore testicular function and thereby generally leads to the cessation of or significant reduction in sperm
production. Androxal®, by
contrast, restores levels of both LH and FSH, which stimulate testicular
testosterone and sperm production, respectively.
We also believe there may be an
association between the restoration of normal pituitary function and improvement
of metabolic conditions such as type 2 diabetes. Research has been published
which demonstrates that increased insulin resistance, a characteristic
implicated in Type 2 diabetes, is associated with the onset of secondary
hypogoandism. Based on our own clinical trial screening data, we
have found hypogonadism and Type 2 diabetes to be comorbid conditions in
a significant number of men. A retrospective analysis of the clinical trial data
from our completed Androxal® studies showed that Androxal® improved fasting
plasma glucose levels in men with Type 2 diabetes, suggesting that Androxal® modifies the endocrinologic
profile in terms of both hormones and certain metabolic measures. This
improvement was not seen in similar subjects using a topical testosterone or
placebo. In a large trial conducted by Solvay Pharmaceuticals, AndroGel® was found to have no positive
effect on glycemic control in hypogonadal men who were also Type 2 diabetic
regardless of how much the exogenous testosterone concentration
increased. Contrary to the results seen with exogenous testosterone,
Androxal® did exhibit
positive effects on glycemic control, and we believe these effects are directly
related to Androxal®’s ability to normalize the hypothalamic-pituitary-testes
pathway and organ function.
We tested
Androxal in two studies designed to show that Androxal® improved testosterone
levels as well as AndroGel® in men with secondary hypogonadism. These
studies indicated that Androxal® had a superior ability to improve testosterone
levels when compared to AndroGel®, and that the improvement was statistically
significant. In a meeting held with the FDA in the fourth quarter of
2007, however, the FDA determined that improved testosterone levels alone were
not sufficient to grant approval for the drug. In the meeting held on
November 8, 2010, the FDA changed its position and determined that improved
testosterone levels would be sufficient to grant approval for the
drug.
Androxal® will be required to undergo
the full regulatory approval process, including the current Phase 2 trial,
pivotal Phase 3 trial and long-term Open Label Safety Studies as well as other
requirements. Androxal® is closely related chemically to the drug,
Clomid®, which is approved for use in women to treat certain infertility
disorders. Clomid® contains both the trans and cis isomers of clomiphene citrate; Androxal
contains only the trans isomer. The FDA has
indicated that testicular tumors, gynecomastia and adverse ophthalmologic
events, which have been reported in males taking Clomid®, are potential risks
that should be included in informed consent forms for our Androxal® clinical
trials. We do not believe that Androxal® will present with the same adverse
events given its reduced half-life in the human body as compared to
Clomid®. In our preclinical studies and our clinical trials to date, we
have observed no evidence of any of these events except for certain
ophthalmologic events in our preclinical dog study at doses significantly higher
than those administered in the clinical trials.
All clinical trial results are subject
to review by the FDA, and the FDA may disagree with our conclusions about safety
and efficacy. We caution that the results discussed herein are based on
data from non-pivotal trials and that our current Phase 2 trials, pivotal Phase
3 and long-term Open Label Safety Trial data may not agree with these results
which will be based upon significantly larger and more diverse patient
populations treated for longer periods of time.
Treatment for
Secondary
Hypogonadism in Men Wishing to
Preserve Testicular Function (Reproductive Status)
On November 8, 2010, we held a Type B
meeting with the FDA to discuss whether the FDA would review our protocols for a
Phase 3 trial of Androxal® in men with secondary hypogonadism under an
SPA. In the meeting, the FDA recommended that a Phase 2B study in men
with secondary hypogonadism but naïve to testosterone treatment be conducted
before the FDA would be willing to review Phase 3 protocols under an
SPA. The FDA further opined that such Phase 2B study would provide
for a more solid data base for design of Phase 3 studies and eventual approval
of such studies under an SPA. In our 24-patient Phase 2b
proof-of-concept clinical trial which was initiated in the second quarter of
2008, we monitored the effects of Androxal® on male fertility and testicular function in patients being
treated for low testosterone as compared to Testim®, a popular marketed topical
testosterone medication. This trial showed that Androxal® was able to
maintain sperm counts in men being treated for their low testosterone levels,
whereas Testim® resulted in suppressed sperm levels. The FDA noted that the
Company could proceed to Phase 3; however, the FDA recommended
that a Phase 2B study in men with secondary hypogonadism, but naïve to
testosterone treatment, be conducted if the Company desired the protocols to be
reviewed under an SPA.
23
The
Company’s Phase 2B trial will consist of four arms; placebo, two doses of
Androxal® and topical
testosterone. At baseline the men should exhibit morning testosterone less
than 250 ng/dl. The primary endpoint will consist of total testosterone at
the end of the three month study compared to baseline. Impact on
reproductive status (sperm counts) will be assessed as a safety endpoint. In a
study previously completed by Repros a subset of men with morning testosterone
less than 250 ng/dl was analyzed in which we found a statistically significant
improvement in morning testosterone and no deterioration of FSH in Androxal®-treated men. However, in
the men on topical testosterone, 26 out of the 41 men that completed three
months of dosing exhibited FSH levels below the reference limits for the
hormone, with 17 below the lower limit of detection.
Unlike
testosterone replacement therapies, Androxal maintains the normal daily rhythm
of testosterone peaks and valleys. We previously conducted three studies
in which 24 hour testosterone levels were obtained and, unlike topical
testosterone, morning testosterone was the maximum concentration observed,
consistent with the normal circadian rhythm in men. We intend to combine the
three studies into one analysis for FDA review. The FDA may require a short
duration trial with a lower dose than the Company has previously tested which
Repros believes will once again demonstrate the natural rhythm of testosterone
levels after administration of Androxal.
We believe the advantages of oral
delivery, maintenance of testicular function and additional metabolic benefits will be important
differentiating factors for Androxal®, should it be approved. There
can be no assurance, however, that we will be successful in implementing this
strategy or that the FDA will approve our drug for commercial
use.
Type 2 Diabetes
Our findings from a retrospective review
of the clinical data from our 200 patient non-pivotal Phase 2 clinical
trial showed that Androxal® therapy resulted in a significant reduction in mean
fasting plasma glucose levels in men with glucose levels greater than 104 mg/dL
at the outset of the trial, an outcome not seen in the placebo or AndroGel® arms
of this study. Based on these results, in April 2008, we submitted a White
Paper to the Division of Reproductive and Urology Products. The data
demonstrated that among subjects with a serum glucose of greater than or equal
to 105 mg/dL, there was a higher response rate to treatment in the Androxal®
group than the placebo or AndroGel® groups, and the reduction in fasting serum
glucose in this group was statistically significant. In November 2008, after the
FDA reviewed this paper we received guidance from them suggesting that we open a
new IND with the Division of Metabolic and Endocrine Products, or DMEP, for the
investigation of Androxal® as a potential treatment for type 2 diabetes
mellitus. In December 2009, we submitted a new IND to DMEP for the
investigation of Androxal® for such purpose. On February 1, 2010, we received
confirmation from DMEP that our new IND was accepted and, as a
result, we have initiated our Phase 2 trial. This trial will enroll 135 men with
morning testosterone levels under 300 ng/dl who also have a fasting glucose
level between 125 mg and 240 mg per deciliter and glycated hemoglobin, or
HbA1c, levels between 7% and 9.5%-levels
indicative of poor glucose control. Enrolled patients also will have
been on a stable dose of an oral hypoglycemic agent for at least 2
months. We will split the men into three arms, one placebo and two
doses of Androxal, at 12.5 and 25 mg. We will look at changes in
fasting glucose and HbA1C levels from baseline, along with
changes in testosterone level. As of November 30, 2010, six men
are enrolled in our Phase 2 trial and we anticipate that we will attain full
enrollment by the end of the second quarter of 2011. The Company
believes it has sufficient cash to complete an interim analysis of the study
around the end of the first quarter of 2011, pending enrollment rates; however,
completion of this study will be dependent upon the completion of this
offering.
Proellex®
Product Overview
Proellex®, our product candidate for
female reproductive health, is a new chemical entity that acts as a selective
blocker of the progesterone receptor and is being developed for the treatment of
symptoms associated with uterine fibroids and endometriosis. There are currently
no FDA-approved orally administered drug treatments for the long-term treatment
of either uterine fibroids or endometriosis. The National Uterine Fibroids
Foundation estimates that 80% of all women in the U.S. have uterine fibroids,
and one in four of these women have symptoms severe enough to require treatment.
According to the Endometriosis Association, endometriosis affects 6.3 million
women in the U.S. and Canada and millions more worldwide.
The current standards of care for
uterine fibroids and endometriosis consist of surgery or short-term treatment
with goanadotropin-releasing hormone (GnRH) agonists drugs, such as Lupron®.
GnRH agonists induce a low estrogen, menopausal-like state and promote bone loss
and are not recommended for use for more than six months.
24
We have conducted numerous studies with
Proellex® enrolling over 750 women, roughly 700 of whom were dosed with the
drug. All Proellex® studies completed to date exhibited strong
efficacy signals, whether in uterine fibroids or
endometriosis. In a 120 patient study of Proellex® as a treatment of uterine
fibroids conducted in the United States (roughly 40 subjects per arm), both a
12.5 and 25 mg dose of Proellex® were compared to placebo. In this study each of
the 12.5 and 25 mg doses achieved highly statistically significant results when
compared to placebo when menstrual bleeding was assessed (p< 0.0001). The two
doses also achieved highly statistically significant improvement in quality of
life measures using the Uterine Fibroid Symptom Quality of Life questionnaire
developed and validated by Georgetown University and used in the development of
device like treatments of uterine fibroids such as uterine artery embolization.
There was no statistical difference in efficacy measures between the two doses.
Importantly, in the Phase 2 U.S. trial a significant percentage of women stopped
menstruating. Proellex® resulted in the induction of amenorrhea (cessation of
menses), which we believe
is a strong surrogate signal of efficacy. Over 80% of women on both the 12.5 and
25 mg doses exhibited no menses during the three month trial, whereas all women
on placebo exhibited at least one menses.
Up until the summer of 2009, all side
effects exhibited in the studies were considered manageable and the benefit of
Proellex® far outweighed the risk. However, in Phase 3 efficacy and larger Phase
3 safety studies in diverse populations, a small number of subjects exhibited
serious adverse effects associated with elevated liver enzymes. As a result of
these findings, we elected to stop the trials and the FDA subsequently placed
Proellex® on full clinical hold. All women that experienced elevated liver
enzymes and returned for follow-up visits returned to baseline conditions with
no overnight hospitalization necessary. An analysis of all the subjects that
experienced such serious adverse effects showed that the effect only occurred in
subjects that were exposed to the 50 mg dose of the drug for any period of time.
Based on these findings, the Company petitioned the FDA to allow it to conduct a
low dose study to demonstrate both safety and signals of efficacy in low oral
doses of Proellex®, up to 12 mg administered per day. The FDA upgraded the full
clinical hold to a partial hold to allow the low dose study to be conducted,
which we have since commenced. In addition, the Company has undertaken
two related initiatives presently at the preclinical stage. The first is the
exploration of vaginal delivery as an alternative administrative route to bypass
first-pass liver effects and reduce systemic exposure. The second is the
screening of second generation molecules that do not possess the specific
structures the Company believes induced the liver toxicity exhibited at higher
doses of Proellex®.
Low Dose Study
Pursuant to the terms of the partial
clinical hold currently in place as a result of the liver toxicity exhibited by
Proellex®, the FDA is allowing us to run a single study to test low doses of Proellex® for
signals of safety and efficacy. The new study will test 5 different
doses of Proellex® (1, 3, 6, 9 and 12 mg), with 1 mg being the first dose
tested. Each dose will be compared to placebo with weekly assessments of liver
function during both the placebo and drug period. Higher doses will not be
studied until we are confident that it is safe to proceed to the next dose and
have reported the safety findings to the FDA. Subjects will be dosed with the
active drug for 10 weeks, which will allow for adequate time to determine the
impact of a given dose on trends in liver function. Each dose will be tested in
up to 12 different subjects and assessment of pharmacokinetic parameters will be
obtained at the start of dosing and the end of the dosing period to determine
overall and maximum drug exposure for a given dose. We will also monitor changes
in menstrual bleeding patterns and ovulation as well as changes in endometrial
thickness. The FDA requires that an independent Drug Safety Monitoring Board be
established and that the informed consent clearly state the liver toxicity
previously experienced with Proellex®.
We have manufactured the various doses
of Proellex® capsules and have begun dosing subjects. We
believe we can complete the trial approximately 18 months after first dose
(approximately by the end of the first quarter of 2012). Presuming a safe and
effective dose is identified and the FDA is in agreement, we anticipate that we
will be able to proceed with large efficacy trials for both uterine fibroids and
endometriosis, subject to available funds, or out-license the product to a major
pharmaceutical company. We believe that the evaluation of
ovulation and menstrual bleeding patterns in the low dose trial will provide
strong evidence for efficacy warranting further development.
Vaginal
Administration
We are
assessing vaginal administration of Proellex® to avoid first pass liver effects
and achieve higher reproductive tract concentrations of the drug while
minimizing systemic exposure. We believe that initial in vivo animal studies
look promising, and should a subsequent animal study confirm efficacy signals at
substantially lower doses than oral administration we intend to open an IND for
both uterine fibroids and endometriosis. We believe we will be able to leverage
the experience we have gained with the oral dose in the preparation of this IND,
and after a single Phase 1/2 study we will be able to test the vaginal product
in a pivotal Phase 3 study. We plan on completing our preclinical
proof-of-concept work around by the end of the first quarter of 2011, and will
then submit a new IND if warranted.
Second
Generation Compound
We
believe we understand the cause of the liver toxicity observed at high doses in
the prior Phase 3 Proellex® studies. Our hypothesis is that liver adverse events
are associated with a specific part of the chemical structure of Proellex®. To
that end we have synthesized new but related molecules that are devoid of the
specific toxicity-causing part of the chemical structure of Proellex® and
initial preclinical screening has begun. If we are successful in identifying
such a molecule, we believe we will be able to achieve high oral doses and
systemic exposure, opening the path to aggressive anti progestin therapy for
conditions such as breast cancer. We expect to have completed our screen of the
new molecules during the third quarter of 2011.
25
Other Products
We continue limited out-licensing
efforts for our phentolamine-based product candidates, including VASOMAX®, which
had previously been approved for marketing in several countries in Latin America
for the treatment of male erectile dysfunction under the brand name,
Z-Max. VASOMAX® has been on partial clinical hold in the U.S.
since 1998, and no further development activities are
planned.
Business Strategy
We plan to focus our clinical program on
the (i) new escalating low dose study for Proellex® permitted by the FDA,
(ii) Phase 2B fertility
trial for Androxal®, (iii) type 2 diabetes trial for Androxal®,
(iv) preclinical assessment of vaginal delivery of Proellex® and (v)
complete initial identification of potential second generation Proellex®
molecules. We anticipate that our current liquidity along with the
proceeds from this offering will be sufficient to complete all of these
objectives; however, significant additional capital will be required for us to
complete development of either of our product candidates. We will continue to explore corporate
partnering opportunities for assistance in the clinical development funding and
commercialization of our products, as appropriate; however, there can be no
assurance that an
acceptable corporate partnering opportunity will be successfully
completed.
Research and
Development
We have
limited resources and utilize consultants and outside entities to perform
clinical development and limited research activities in connection with
preclinical studies and clinical trials. Our primary research and development,
or R&D, expenses for 2009 and thus far in 2010 were for the payment and
contract research organizations and consultants in connection with our clinical
trials of Proellex® for the treatment of uterine fibroids, endometriosis and for
Androxal® for testosterone deficiency. We believe that these expenses will
continue to be our primary R&D expenses in the near future.
Proellex®
License Agreement with National Institutes of Health
In 1999,
we licensed rights to Proellex® from the National Institutes of Health, or NIH,
under an exclusive, worldwide license in the field of treatment of human
endocrinologic pathologies or conditions in steroid-sensitive tissues which
expires upon the expiration of the last licensed patent, currently 2017. Under
the terms of the agreement, we are obligated to meet certain developmental
milestones as outlined in a commercial development plan, which has been amended
and revised from time to time as circumstances warrant. We have
recently amended the agreement to provide us with rights to certain second
generation compounds under certain circumstances.
We
provide annual updates to the NIH on the progress of our development of
Proellex®. Based on our interaction with the NIH to date, we believe our license
and relationship with NIH are in good standing. The NIH has the ability to
terminate the agreement for lack of payment or if we are not meeting milestones
as outlined in the commercial development plan and for other reasons as outlined
in the agreement. Although we believe that we have a good working relationship
with the NIH, there can be no assurance that all of the objectives and
conditions in the commercial development plan will be met on a timely basis or
at all, or that, if we fail to meet any of such objectives, the NIH will again
agree to amend this agreement to our satisfaction. Failure to comply with the
material terms contained in the license agreement could result in termination of
such agreement, which would prohibit us from further development of Proellex®
and severely harm our business prospects. The NIH retains, on behalf of the
government, a nonexclusive, nontransferable, worldwide license to practice the
inventions licensed under the licensed patents by or on behalf of the
government. For the purpose of encouraging basic research, the NIH retains the
right to grant nonexclusive research licenses to third parties. Due to the work
that was done on Proellex® at the NIH prior to our license agreement, the
government also has certain rights to use the product in the event of a national
emergency pursuant to the Patent and Trademark Laws Amendments Act of 1980, as
amended.
Manufacturing
We have a
five year supply agreement with Diagnostic Chemical Limited, doing business as
BioVectra, for the supply of the bulk active pharmaceutical ingredient used in
Androxal®. We have obtained all of our supply of Androxal® to date from
BioVectra. We have not faced any material problems with BioVectra in supplying
us with necessary quantities of Androxal® for our clinical trials and anticipate
utilizing them for the remainder of our clinical supply and for commercial
production if Androxal® is approved for sale. Though our relationship with
BioVectra remains good, we believe that alternate manufacturers capable of
manufacturing Androxal® could be identified if necessary.
Gedeon
Richter was our third-party manufacturer of the active pharmaceutical ingredient
for Proellex® under a contract. Due to the clinical hold, we
cancelled our development and supply contract with Gedeon Richter; however, we have a large supply of
Proellex® currently available for our current and planned clinical trial
efforts. In the event we require an additional supply of Proellex®,
we believe that we have maintained a good relationship with Gedeon Richter and
that an agreement could be reached with Gedeon Richter to provide such supply
when and if needed.
For the
foreseeable future, we expect to continue to rely on third-party manufacturers
and other third parties to produce, package and store sufficient quantities of
Androxal® and Proellex®. These product candidates are complicated and expensive
to manufacture. If our third-party manufacturers fail to deliver our product
candidates for clinical use on a timely basis, with sufficient quality, and at
commercially reasonable prices, we may be required to delay or suspend clinical
trials or otherwise discontinue development and production of our product
candidates. While we may be able to identify replacement third-party
manufacturers or develop our own manufacturing capabilities for these product
candidates, this process would likely cause a delay in the availability of our
product candidates and an increase in costs. In addition, third-party
manufacturers may have a limited number of facilities in which our product
candidates can be produced, and any interruption of the operation of those
facilities due to events such as equipment malfunction or failure or damage to
the facility could result in the cancellation of shipments, loss of product in
the manufacturing process or a shortfall in available product
candidates.
26
Sales and
Marketing
We have
no experience in the sales, marketing and distribution of pharmaceutical
products. We anticipate that we will outsource such activities to larger
pharmaceutical companies, who may also conduct later stage pivotal trials of our
product candidates. These companies are more capable of distributing
the products to the market place. In the normal course of business we continue
to explore possible partnerships with various pharmaceutical companies. If in
the future we fail to reach or elect not to enter into an arrangement with a
collaborative partner with respect to the sales and marketing of any of our
future potential product candidates, we would need to develop a sales and
marketing organization with supporting distribution capability in order to
market such products directly. Significant additional expenditures would be
required for us to develop such a sales and marketing organization.
Patents
and Proprietary Information
Our
ability to compete effectively with other companies is materially dependent on
the proprietary nature of our patents and technologies. We actively seek patent
protection for our proprietary technology in the United States and
abroad.
Under a
license agreement with the National Institutes of Health, we have exclusive
rights to three issued U.S. patents, which expire in 2017, two pending U.S.
patent applications, and several foreign patents and pending applications made
by the NIH regarding Proellex®. We also have five pending U.S. patent
applications, four foreign PCT applications and 45 foreign pending patent
applications that cover various formulations of Proellex® and methods for using
Proellex®.
Therapeutic
uses of our Androxal® product candidate are covered in the United States by four
issued U.S. patents and four pending patent applications. Foreign coverage of
therapeutic uses of our Androxal® product candidate includes 41 issued foreign
patents and 74 foreign pending patent applications. The issued patents and
pending applications relate to methods for treating certain conditions including
the treatment of testosterone deficiency in men, the treatment of metabolic
syndrome and conditions associated therewith, and the treatment of infertility
in hypogonadal men. Androxal® (the trans-isomer of clomiphene) is purified from
clomiphene citrate. A third party individual holds two issued patents related to
the use of an anti-estrogen such as clomiphene citrate and others for use in the
treatment of androgen deficiency and disorders related thereto. In our prior
filings with the SEC, we have described our request to the U.S. Patent and
Trademark Office, or PTO, for re-examination of one of these patents based on
prior art. The third party amended the claims in the re-examination proceedings,
which led the PTO to determine that the amended claims are patentable in view of
those publications under consideration and a re-examination certificate was
issued. However, we believe that the amended claims are invalid based on
additional prior art publications, and we filed a second request for
re-examination by the PTO in light of a number of these additional publications
and other publications cited by the PTO. The request was granted and all of the
claims were finally rejected by the PTO in the re-examination. The patent holder
appealed the rejections to the PTO Board of Patent Appeals and Interferences
(“the Board”) which affirmed the rejection of all of the claims. The patent
holder subsequently filed a request for rehearing, which led the Board to
reverse the rejections of several dependent claims in view of those publications
under consideration. The patent holder has filed a Notice of Appeal to the
United States Court of Appeals for the Federal Circuit contesting the rejections
maintained by the Board. We also believe that the second of these two patents is
invalid in view of published prior art not considered by the PTO. Nevertheless,
there is no assurance that either patent will ultimately be found invalid over
the prior art. If such patents are not invalidated by the PTO we may be required
to obtain a license from the holder of such patents in order to develop
Androxal® further or attempts may be made to undertake further legal action to
invalidate such patents. If such licenses were not available on acceptable
terms, or at all, we may not be able to successfully commercialize or
out-license Androxal®.
All of
our employees and consultants have signed assignment of invention and
confidentiality agreements, and each corporate partner we enter into discussions
with or engage to assist in our clinical trials or manufacturing process is also
required to execute appropriate confidentiality and assignment agreements
protecting our intellectual property.
Competition
We are
engaged in pharmaceutical product development, an industry that is characterized
by extensive research efforts and rapid technological progress. Many established
pharmaceutical and biotechnology companies, universities and other research
institutions with financial, scientific and other resources significantly
greater than ours are marketing or may develop products that directly compete
with any products we may develop. These entities may succeed in developing
products that are safer, more effective or less costly than products we may
develop. Even if we can develop products which should prove to be more effective
than those developed by other companies, other companies may be more successful
than us because of greater financial resources, greater experience in conducting
preclinical studies and clinical trials and in obtaining regulatory approval,
stronger sales and marketing efforts, earlier receipt of approval for competing
products and other factors. If we commence significant commercial sales of any
products, we or our collaborators may compete in areas in which we have no
experience, such as manufacturing and marketing. There can be no assurance that
our products, if commercialized, will be accepted and prescribed by healthcare
professionals.
27
Our main
competitors for the treatment of testosterone deficiency are the testosterone
replacement therapies currently being marketed. The current standard of care is
AndroGel®, a topical gel for the replacement of testosterone. AndroGel® is
marketed by Abbott Laboratories. There is another topical gel, Testim®,
currently marketed by Auxilium Pharmaceuticals, and a transdermal patch,
AndroDerm®, marketed by Watson Pharmaceuticals. In addition, other companies
such as QTRX Pharmaceuticals and Clarus Therapeutics, Inc. are developing other
products that would compete with Androxal®. We believe we can compete with
AndroGel® and the other replacement therapies because we believe that Androxal®,
besides being the only late stage oral therapy, is the only drug in development
that normalizes testicular function and may provide additional metabolic
benefits. Based on our clinical trial supply cost to date, we currently expect
that Androxal®, if approved, can compete favorably on a cost basis with current
testosterone replacement therapies.
Our main
competitors for the treatment of uterine fibroids and endometriosis are GnRH
agonists, especially Lupron®, the current therapeutic standard of care for
uterine fibroids. Lupron® is marketed by Abbott, which has far greater resources
and marketing capabilities than we have. Recently Abbott has licensed a Phase
3-ready molecule from Neurocrine Biosciences for the treatment of endometriosis.
In addition, surgical treatment of both uterine fibroids and endometriosis
competes with Proellex® by removing uterine fibroids and by removing misplaced
tissue in women with endometriosis. We believe we can potentially compete with
Lupron® and other GnRH agonists because we believe that Proellex® will not
present the same side effect of a decrease in bone mineral density given its
specific focus on progesterone inhibition, which differentiates it from GnRH
agonists that create a low estrogen state. There are additional companies
developing similar progesterone-blocking technology.
Government
Regulation
Our
research and development activities, preclinical studies and clinical trials,
and the manufacturing, marketing and labeling of any products we may develop,
are subject to extensive regulation by the FDA and other regulatory authorities
in the United States and other countries. The U.S. Federal Food, Drug, and
Cosmetic Act and the regulations promulgated thereunder and other federal and
state statutes and regulations govern, among other things, the testing,
manufacture, storage, record keeping, labeling, advertising, promotion,
marketing and distribution of any products we may develop. Preclinical study and
clinical trial requirements and the regulatory approval process take many years
and require the expenditure of substantial resources. Additional government
regulation may be established that could prevent or delay regulatory approval of
our product candidates. Delays in obtaining or rejections of regulatory
approvals would adversely affect our ability to commercialize any product
candidate we develop and our ability to receive product revenues or to receive
milestone payments or royalties from any product rights we might license to
others. If regulatory approval of a product candidate is granted, the approval
may include significant limitations on the indicated uses for which the product
may be marketed or may be conditioned on the conduct of post-marketing
surveillance studies.
The
standard process required by the FDA before a pharmaceutical agent may be
marketed in the United States includes: (1) preclinical tests; (2) submission to
the FDA of an IND application which must become effective before human clinical
trials may commence; (3) adequate and well-controlled human clinical trials to
establish the safety and efficacy of the drug for its intended application; (4)
submission of a new drug application, or NDA, to the FDA; and (5) FDA approval
of the NDA prior to any commercial sale or shipment of the drug.
Clinical
trials typically are conducted in three sequential phases, but the phases may
overlap. Phase 1 typically involves the initial introduction of the drug into
human subjects. In Phase 1, the drug is tested for safety and, as appropriate,
for absorption, metabolism, distribution, excretion, pharmacodynamics and
pharmacokinetics. Phase 2 usually involves studies in a limited patient
population to evaluate preliminarily the efficacy of the drug for specific
targeted indications, determine dosage tolerance and optimal dosage and identify
possible adverse effects and safety risks.
Phase 3
clinical trials are undertaken to further evaluate clinical efficacy and to test
further for safety within an expanded patient population at geographically
dispersed clinical study sites. Phase 1, Phase 2 or Phase 3 testing may not be
completed successfully within any specific time period, if at all, with respect
to any products being tested by a sponsor. Furthermore, the FDA or the
Investigational Review Board, or IRB, may suspend clinical trials at any time on
various grounds, including a finding that the healthy volunteers or patients are
being exposed to an unacceptable health risk. This was evidenced when Proellex®,
our product candidate for uterine fibroids and endometriosis, was placed on
clinical hold by the FDA in summer 2009 due to liver toxicity data resulting
from the Phase 3 clinical trials. Though the full clinical hold has been
upgraded to a partial clinical hold, there can be no assurance that the partial
hold will be lifted at any time.
Even if
regulatory approvals for any products we may develop are obtained, we, our
potential collaborators, our products, and the facilities manufacturing our
products would be subject to continual review and periodic inspection. The FDA
will require post-marketing reporting to monitor the safety of our products.
Each drug-manufacturing establishment supplying the United States must be
registered with the FDA. Manufacturing establishments are subject to periodic
inspections by the FDA and must comply with the FDA’s requirements regarding
current Good Manufacturing Practices, or GMP. In complying with current GMP,
manufacturers must expend funds, time and effort in the area of production and
quality control to ensure full technical compliance. We do not have any drug
manufacturing capabilities and must rely on outside firms for this capability.
The FDA stringently applies regulatory standards for manufacturing.
Identification of previously unknown problems with respect to a product,
manufacturer or facility may result in restrictions on the product, manufacturer
or facility, including warning letters, suspensions of regulatory approvals,
operating restrictions, delays in obtaining new product approvals, withdrawal of
the product from the market, product recalls, fines, injunctions and criminal
prosecution.
Before
any products we may develop could be marketed outside of the United States, they
would be subject to regulatory approval similar to FDA requirements in the
United States, although the requirements governing the conduct of clinical
trials, product licensing, pricing, and reimbursement vary widely from country
to country. No action can be taken to market any drug product in a country until
the regulatory authorities in that country have approved an appropriate
application. FDA approval does not assure approval by other regulatory
authorities. The current approval process varies from country to country, and
the time spent in gaining approval varies from that required for FDA approval.
In some countries, the sale price of a drug product must also be approved. The
pricing review period often begins after market approval is granted. Even if a
foreign regulatory authority approves any products we may develop, no assurance
can be given that it will approve satisfactory prices for the
products.
28
Our
research and development involves the controlled use of hazardous materials and
chemicals. Although we believe that our procedures for handling and disposing of
those materials comply with state and federal regulations, the risk of
accidental contamination or injury from these materials cannot be eliminated. If
such an accident occurs, we could be held liable for resulting damages, which
could be material to our financial condition and business. We are also subject
to numerous environmental, health and workplace safety laws and regulations,
including those governing laboratory procedures, exposure to blood-borne
pathogens, and the handling of biohazardous materials. Additional federal, state
and local laws and regulations affecting us may be adopted in the future. Any
violation of, and the cost of compliance with, these laws and regulations could
materially and adversely affect us.
Third-Party
Reimbursement and Pricing Controls
In the
United States and elsewhere, sales of pharmaceutical products depend in
significant part on the availability of reimbursement to the consumer from
third-party payers, such as government and private insurance plans. Third-party
payers are increasingly challenging the prices charged for medical products and
services. Should any of our product candidates be approved for any commercial
sales, it will be time consuming and expensive for us to go through the process
of seeking reimbursement from Medicaid, Medicare and private
payers.
Our
products may not be considered cost effective, and coverage and reimbursement
may not be available or sufficient to allow us to sell our products on a
competitive and profitable basis. The passage of the Medicare Prescription Drug
and Modernization Act of 2003 imposes requirements for the distribution and
pricing of prescription drugs which may affect the marketing of our
products.
In many
foreign markets, including the countries in the European Union, pricing of
pharmaceutical products is subject to governmental control. In the United
States, there have been, and we expect that there will continue to be, a number
of federal and state proposals to implement similar governmental pricing
control. While we cannot predict whether such legislative or regulatory
proposals will be adopted, the adoption of such proposals could have a material
adverse effect on our profitability.
The
Hatch-Waxman Act
Under the
U.S. Drug Price Competition and Patent Term Restoration Act of 1984, known as
the Hatch-Waxman Act, newly approved drugs and indications benefit from a
statutory period of non-patent marketing exclusivity. The Hatch-Waxman Act
provides five year marketing exclusivity to the first applicant to gain approval
of an NDA for a new chemical entity, or NCE, meaning that the FDA has not
previously approved any other new drug containing the same active ingredient.
Both of our current product candidates are considered NCEs. The Hatch-Waxman Act
prohibits approval of an abbreviated new drug application, or ANDA, for a
generic version of the drug during the five-year exclusivity period. Protection
under the Hatch-Waxman Act will not prevent the filing or approval of another
full NDA, however, the applicant would be required to conduct its own adequate
and well-controlled clinical trials to demonstrate safety and effectiveness. The
Hatch-Waxman Act also provides three years of marketing exclusivity for the
approval of new NDAs with new clinical trials for previously approved drugs and
supplemental NDAs, for example, for new indications, dosages, or strengths of an
existing drug, if new clinical investigations are essential to the approval.
This three year exclusivity covers only the new changes associated with the
supplemental NDA and does not prohibit the FDA from approving ANDAs for drugs
containing the original active ingredient or indications.
The
Hatch-Waxman Act also permits a patent extension term of up to five years as
compensation for patent term lost during product development and the FDA
regulatory review process. However, patent extension cannot extend the remaining
term of a patent beyond a total of 14 years. The patent term restoration period
is generally one-half the time between the effective date of an IND and the
submission date of an NDA, plus time of active FDA review between the submission
date of an NDA and the approval of that application. Only one patent applicable
to an approved drug is eligible for the extension and it must be applied for
prior to expiration of the patent and within 60 days of the approval of the NDA.
The PTO, in consultation with the FDA, reviews and approves or rejects the
application for patent term extension.
Employees and
Consultants
Employees
At
November 30, 2010, we had 6 full-time employees. We also utilize consultants as
well as contract research organizations and other outside specialty firms for
various services such as preclinical and clinical trial support, manufacturing,
regulatory approval advice and accounting and human resource management. We
believe our relationship with our employees is good.
Scientific Advisors and
Consultants
We
benefit from consultation with prominent scientists active in fields related to
our technology. For this purpose, we have part-time consulting relationships
with a number of scientific advisors. At our request, these advisors review the
feasibility of product development programs under consideration, provide advice
about advances in areas related to our technology, and aid in recruiting
personnel. All of the advisors are employed by academic institutions or other
entities and may have commitments to or advisory agreements with other entities
that limit their availability to us. Our advisors are required to sign an
agreement providing that, if appropriate, they are to disclose and assign to us
any ideas, discoveries and inventions they develop in the course of providing
consulting services. We also use consultants for various administrative needs.
None of our advisors are otherwise affiliated with us.
29
In
addition to the advisors described above, we continue to engage U.S. contract
research organizations to conduct our clinical trials. Under our arrangements
with these contract research organizations, we design the protocols for the
clinical trials and direct the contract research organizations in their efforts.
We own all of the data associated with the clinical trials.
Properties
We lease
our current property under a lease agreement that expires in June
2015. This lease is for approximately 7,100 square feet of our
laboratory and office space located in The Woodlands, Texas. We do not own or
lease any other property and believe that our current facilities are sufficient
for our needs for the foreseeable future.
Legal
Proceedings
Between August 7, 2009 and September 25,
2009, three class action lawsuits were filed naming the Company, Joseph
Podolski, Paul Lammers, and Louis Ploth, Jr. as defendants. The
lawsuits alleged that the defendants made certain misleading statements related
to the Company’s Proellex® drug. Among other claims, the lawsuits
contended that the defendants misrepresented the side effects of the drug
related to liver function, and the risk that these side effects could cause a
suspension of clinical trials of Proellex®. The lawsuits asserted causes of
action under the Securities Exchange Act of 1934. On October 21,
2009, the lawsuits were consolidated, and lead plaintiffs
appointed. On January 27, 2010, the lead plaintiffs filed a
Consolidated Class Action Complaint styled In re Repros Therapeutics, Inc.
Securities Litigation, Civil Action No. 09 Civ. 2530 (VDG). The
lawsuit names Repros Therapeutics, Inc., Joseph Podolski, Paul Lammers, and
Louis Ploth, Jr. as defendants. The allegations in the Consolidated
Class Action Complaint are substantially the same as those contained in the
prior complaints, and focus on the claim that the defendants deliberately
withheld information concerning the negative side-effects of Proellex® related
to liver function. Plaintiffs seek to establish a class action for
all persons who “purchased or otherwise acquired Repros common stock between
July 1, 2009, and August 2, 2009.” No discovery has yet occurred in
the matter. Defendants filed a motion to dismiss the Consolidated
Class Action Complaint on March 15, 2010. On November 17, 2010,
Magistrate Judge Mary Milloy entered a Memorandum and Recommendation on
Defendants’ Motion To Dismiss (“the Magistrate’s Memorandum”). The Magistrate’s
Memorandum concluded that the Consolidated Class Action Complaint failed to
allege with sufficient particularity that any statements by the defendants were
false when made, and that it failed to allege facts sufficient to create a
strong inference that the defendants acted with scienter. For both of those
reasons, the Magistrate’s Memorandum recommended that the District Court grant
the Defendants’ Motion To Dismiss. On December 1, 2010, plaintiffs filed
objections to the Magistrate’s Memorandum. The District Court has not yet
entered an order on this matter, and the District Court may accept, reject, or
modify, in whole or in part, the findings and recommendation of the Magistrate
Judge. An estimate of the possible loss or range of losses in
connection with the lawsuits cannot be made at this time.
On March 1, 2010, we were served with a
lawsuit where we were named as a co-defendant along with one of our clinical
regulatory service providers (“CRO”) relating to the Proellex® clinical trial
study. The lawsuit was filed in the State of Tennessee, 30th Judicial
District Chancery Court at Memphis by an investigator and claims that the CRO
did not pay it amounts owing to it relating to the
Proellex® study. We did not engage the investigator and under
our agreement with the CRO, we believe the CRO is responsible for any such
costs or damages regarding such lawsuit. Pursuant to a Settlement
Agreement and Mutual Release entered into in October 2009, such CRO, on behalf
of itself and its agents, released us from all claims which could be asserted by
them against us. We believe such release covers the claims set
forth in this lawsuit. The CRO failed to respond to the lawsuit, and
a default judgment was entered against it in the amount of
$172,901.29. We intend to vigorously defend any and all claims
asserted by the investigator. We have filed a motion for summary
judgment requesting the Court to enter a take nothing judgment in favor of the
Company. This motion is pending and is expected to be heard by the Court
during the first quarter of 2011. An estimate of the possible costs or expenses to defend
ourselves in this matter or risk of exposure under the litigation cannot be made
at this time.
See “—Patents and Proprietary
Information” for a description of judicial and regulatory proceedings involving
patent matters.
Recent Developments
On
October 14, 2010, the Company effected a one-for-four reverse split of its
common stock. The split-adjusted shares of the Company’s common stock began
trading on the Nasdaq Capital Market on October 15, 2010. The one-for-four
reverse stock split converted all shares of the Company’s common stock issued
and outstanding, plus all outstanding stock options and the number of shares of
common stock available for issuance under the Company’s approved stock plans.
The number of authorized shares of common stock was not affected by the reverse
split. The reverse split enabled the Company to meet the continued listing rules
of the Nasdaq Capital Market. All share and per share
amounts described in this prospectus are presented on a post-reverse stock split
basis, except with respect to materials incorporated by reference herein which
were filed by us prior to the effective date of the reverse stock
split.
30
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table presents certain information regarding the beneficial ownership
of our common stock as of November 30, 2010 by:
|
·
|
each
person who is known by us to own beneficially more than 5% of the
outstanding shares of common stock;
|
|
·
|
each
director;
|
|
·
|
each
named executive officer; and
|
|
·
|
all
directors and executive officers as a
group.
|
Name of Beneficial Owner
|
Amount and
Nature of
Beneficial
Ownership of
Common Stock(1)
|
Percentage
Owned Before
Offering(2)
|
Percentage
Owned After
Offering(2)
|
|||||||||
Katherine
A. Anderson, C.P.A.
|
2,874 | (3) | * | * | ||||||||
Daniel
F. Cain
|
22,689 | (4) | * | * | ||||||||
Jean
L. Fourcroy, M.D., Ph.D., M.P.H.
|
22,339 | (4) | * | * | ||||||||
Nola
E. Masterson
|
25,439 | (5) | * | * | ||||||||
Paul
Lammers, M.D., M.Sc.
|
— | (6) | * | * | ||||||||
Louis
Ploth
|
10,254 | (7) | * | * | ||||||||
Joseph
S. Podolski
|
218,632 | (8) | 2.4 | % |
|
%
|
||||||
Jaye
Thompson, Ph.D.
|
3,333 | (9) | * | * | ||||||||
Andre
van As, Ph.D.
|
2,902 | (10) | * | * | ||||||||
Ronald
Wiehle, Ph.D.
|
74,462 | (11) | * | * | ||||||||
All
directors and executive officers as a group (10 persons)
|
382,924 | (3)-(11) | 4.1 | % |
|
%
|
*
|
Does
not exceed 1%.
|
(1)
|
Unless
otherwise noted, we believe that all persons named in the table have sole
voting and investment power with respect to all shares of common stock
beneficially owned by such persons.
|
(2)
|
In
accordance with SEC rules, each beneficial owner’s percentage ownership
assumes the exercise of all options and warrants held by such person that
are exercisable within 60 days after November 30,
2010.
|
(3)
|
Includes
2,499 shares of common stock issuable upon exercise of
options.
|
(4)
|
Includes
22,189 shares of common stock issuable upon exercise of
options.
|
(5)
|
Includes
(i) 22,689 shares of common
stock issuable upon exercise of options and (ii) 2,750 shares of common
stock held by Science Futures LLC. As the managing director of
Science Futures LLC, Ms. Masterson may be deemed to beneficially own such
shares.
|
(6)
|
Based
on information contained in a Form 4 dated February 2, 2009, as Dr.
Lammers is no longer an insider having resigned as President of the
Company in October 2009.
|
(7)
|
Based
on information contained in a Form 4 dated October 7, 2008 and other
information available to the Company, as Mr. Ploth is no longer an insider
having ceased to serve as Chief Financial Officer and Vice President,
Business Development for the Company in August
2009.
|
31
(8)
|
Includes
(i) 750 shares of common stock which are held by certain of Mr. Podolski’s
family members and (ii) 167,687 shares of common stock issuable upon the
exercise of options. Mr. Podolski disclaims beneficial
ownership of the shares owned by his family
members.
|
(9)
|
Includes
3,333 shares of common stock issuable upon exercise of
options.
|
(10)
|
Based
on information contained in a Form 4 dated January 11, 2007, as Dr. van As
is no longer an insider having ceased to serve as Chief Medical Officer
and Senior Vice President, Clinical and Regulatory, in October 2009;
includes 102 shares of common stock which are held by Dr. van As’ wife as
of October 2009.
|
(11)
|
Includes
68,958 shares of common stock issuable upon exercise of
options.
|
32
DESCRIPTION
OF SECURITIES
Our
authorized capital stock consists of 75,000,000 shares of common stock, par
value $0.001 per share, and 5,000,000 shares of preferred stock, par value
$0.001 per share.
As of
November 30, 2010, we had 8,930,022 outstanding shares of
common stock and no outstanding shares of preferred stock. Our
Quarterly Report on Form 10-Q for the quarter ended September 30, 2010 reflected
that we had 8,930,057 shares of common stock outstanding as of November 4,
2010. This 35 share discrepancy was due to our uncertainty at such
time of the specific number of fractional shares resulting from the one-for-four
reverse split of our common stock on October 14, 2010.
As of
November 30, 2010, we had outstanding stock options to purchase 576,783 shares of common stock
at prices ranging from $1.33 to
$133.00. As of November 30, 2010, we had no warrants
outstanding.
Common
Stock
Subject
to any special voting rights of any series of preferred stock that we may issue
in the future, each share of common stock has one vote on all matters voted on
by our stockholders, including the election of our directors. Because holders of
common stock do not have cumulative voting rights, the holders of a majority of
the shares of common stock can elect all of the members of the board of
directors standing for election, subject to the rights, powers and preferences
of any outstanding series of preferred stock.
No share
of common stock affords any preemptive rights or is convertible, redeemable,
assessable or entitled to the benefits of any sinking or repurchase fund.
Holders of common stock will be entitled to dividends in the amounts and at the
times declared by our board of directors in its discretion out of funds legally
available for the payment of dividends.
Holders
of common stock will share equally in our assets on liquidation after payment or
provision for all liabilities and any preferential liquidation rights of any
preferred stock then outstanding. All outstanding shares of common stock are
fully paid and non-assessable.
Preferred
Stock
Our
certificate of incorporation provides that shares of preferred stock may be
issued from time to time in one or more series. Our board of directors has
authority to issue up to 5,000,000 shares of preferred stock and to determine
the price, rights, preferences, privileges and restrictions, including voting
rights, of those shares without any further vote or action by our stockholders.
The rights of holders of our common stock may be subject to, and adversely
affected by, the rights of the holders of any preferred stock that may be issued
in the future. The issuance of preferred stock may have the effect of delaying,
deferring or preventing a change of control and may adversely affect the voting
and other rights of holders of our common stock. We have no present plans to
issue any shares of preferred stock after this offering.
Warrants
to be Issued in Offering
In
connection with this offering, we will sell common stock and warrants in units,
with each unit consisting of one share of common stock and a warrant exercisable
for
shares of our common stock. Units will not be issued or
certificated. The shares of common stock and warrants are immediately
separable and will be issued and trade separately.
The
warrants are exercisable within from the date of
issuance and expire years from the date of
issuance. The warrants will be exercisable, at the option of each
holder, in whole or in part, by delivering to us a duly executed exercise notice
accompanied by payment in full for the number of shares of our common stock
purchased upon such exercise, except in the case of a cashless exercise, as
discussed below.
The
warrants will be exercisable for
shares of our common stock at an exercise price of
per share. The exercise price is subject to appropriate adjustment in
the event of stock dividends and distributions, stock splits, stock
combinations, reclassifications or similar events affecting our common
stock.
If, at
any time during the warrant exercisability period, the fair market value of our
common stock exceeds the exercise price of the warrants, the holder may elect to
effect a cashless exercise of the warrants, in whole or in part, by surrendering
the warrants to us, together with delivery to us of a duly executed exercise
notice, and canceling a portion of the relevant warrant in payment of the
purchase price payable in respect of the number of shares of our common stock
purchased upon such exercise.
We have
applied for the warrants to be listed on the Nasdaq Capital Market under the
symbol “ .” We anticipate that the
warrants will begin trading upon the closing of this offering. The
shares of common stock underlying the warrants are expected to be listed on the
Nasdaq Capital Market.
Except as
otherwise provided in the warrants or by virtue of such holder’s ownership of
shares of our common stock, the holders of the warrants do not have the rights
or privileges of holders of our common stock, including any voting rights, until
they exercise their warrants.
No
fractional shares will be issued upon exercise of the warrants, but rather we
will pay a cash adjustment in respect of such fraction in an amount equal to
such fraction multiplied by the exercise price.
33
Rights
Agreement
Pursuant
to our rights agreement we entered into in September 1999, as amended, each
share of our common stock, including those being issued in this offering, has
one preferred stock purchase right attached to it. Each right entitles the
holder to purchase from us one one-hundredth of a share of Series One Junior
Participating Preferred Stock at a price of $20.00, subject to
adjustment.
The
rights will separate from our common stock and a distribution date will occur
upon the earlier of (i) 10 days following the date of public announcement that a
person or group of persons has become an acquiring person (defined below) or
(ii) 10 business days (or such later date as may be determined by action of the
board of directors prior to the time a person becomes an acquiring person)
following the commencement of, or the announcement of an intention to make, a
tender offer or exchange offer upon consummation of which the offeror would, if
successful, become an acquiring person (the earlier of such dates being called
the distribution date). The term “acquiring person” means any person who or
which, together with all of its affiliates and associates, shall be the
beneficial owner of 20% or more of our outstanding common stock.
The
rights are not exercisable until the distribution date. The rights will expire
on September 13, 2015.
In the
event that following the date of public announcement that an acquiring person
has become such, we are acquired in a merger or other business combination
transaction or more than 50% of our consolidated assets or earning power are
sold, proper provision will be made so that each holder of a right will
thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the right, that number of shares of common stock of
the acquiring company which at the time of such transaction will have a market
value of two times the exercise price of the right. This is known as a flip-over
right.
In the
event that a person who is not exempt becomes an acquiring person, proper
provision shall be made so that each holder of a right (other than the acquiring
person and its affiliates and associates) will thereafter have the right to
receive upon exercise that number of shares of our common stock (or, under
certain circumstances, cash, other equity securities or property) having a
market value equal to two times the purchase price of the rights. This is known
as a flip-in right. Upon the occurrence of the foregoing event giving rise to
the exercisability of the rights, any rights that are or were at any time owned
by an acquiring person shall become void.
We may
redeem the rights in whole, but not in part, at a price of $0.01 per right prior
to the earlier of the expiration of the rights or their triggering; provided,
that (i) if the board authorizes redemption on or after the time a person
becomes an acquiring person, then such authorization must be with the approval
of a majority of our directors and (ii) the period for redemption may, upon
approval of a majority of our directors, be extended by amending the rights
agreement.
The terms
of the rights may be amended by the board without the consent of the holders of
the rights at any time and from time to time provided that such amendment does
not adversely affect the interests of the holders of the rights. In addition,
during any time that the rights are subject to redemption, the terms of the
rights may be amended by approval of a majority of our directors, including an
amendment that adversely affects the interests of the holders of the rights,
without the consent of the holders of rights.
A
complete description of the rights, the rights agreement with Computershare
Trust Company, N.A., as rights agent, and the Series One Junior Participating
Preferred Stock is hereby incorporated by reference from the information
appearing under the caption "Item 1. Description of the Registrant's Securities
to be Registered" contained in the Registration Statement on Form 8-A filed on
September 3, 1999, and as amended by amendments to such Registration Statement
on Form 8-A/A filed on September 11, 2002, October 31, 2002, June 30, 2005,
January 10, 2008, October 10, 2008 and September 9, 2010.
Transfer
Agent and Warrant Agent
The
transfer agent for our common stock and warrant agent for our warrants is
Computershare Trust Company, N.A.
34
UNDERWRITING
In
accordance with the terms and conditions contained in the underwriting
agreement, we have agreed to sell to Ladenburg Thalmann & Co. Inc., which we
refer to as the “underwriter,” and the underwriter has agreed to purchase from
us on a firm commitment basis, the number of units offered in this offering set
forth opposite its name below:
Underwriter
|
Number of Units
|
||||
Ladenburg
Thalmann & Co. Inc.
|
|||||
Total
|
A copy of
the underwriting agreement will be filed as an exhibit to the registration
statement of which this prospectus forms a part.
We have
been advised by the underwriter that it proposes to offer units directly to the
public at the public offering price set forth on the cover page of this
prospectus. Any units sold by the underwriter to securities dealers will be sold
at the public offering price less a selling concession not in excess of
$ per share. The underwriter may allow, and
these selected dealers may re-allow, a concession of not more than
$ per share to other brokers and
dealers.
The
underwriting agreement provides that the underwriter’s obligation to purchase
units is subject to conditions contained in the underwriting agreement. The
underwriter is obligated to purchase and pay for all of the units offered by
this prospectus other than those covered by the over-allotment option, if any of
these securities are purchased.
No action
has been taken by us or the underwriter that would permit a public offering of
the units, common stock or warrants included in this offering in any
jurisdiction where action for that purpose is required. None of our securities
included in this offering may be offered or sold, directly or indirectly, nor
may this prospectus or any other offering material or advertisements in
connection with the offer and sales of any of our units, common stock or
warrants be distributed or published in any jurisdiction, except under
circumstances that will result in compliance with the applicable rules and
regulations of that jurisdiction. Persons who receive this prospectus are
advised to inform themselves about and to observe any restrictions relating to
this offering of the units, common stock and warrants and the distribution of
this prospectus. This prospectus is neither an offer to sell nor a solicitation
of any offer to buy units, common stock or warrants in any jurisdiction where
that would not be permitted or legal.
The
underwriter has advised us that it does not intend to confirm sales to any
accounts over which it exercises discretionary authority.
Underwriting
discount and expenses
The
following table summarizes the underwriting discount to be paid to the
underwriter by us.
|
Total, without
over-allotment
|
Total, with
over-allotment
|
||||||
Underwriting
discount to be paid to the underwriter by us for the units
( %
of gross proceeds)
|
$
|
$
|
We also
have agreed to reimburse the out-of-pocket expenses incurred by the underwriter
in connection with the underwriting, including reasonable attorneys fees and
expenses of the underwriter’s counsel retained for this purpose by the
underwriter, in an amount of up to $50,000.
The
underwriter has performed investment banking services for us for which it has
received customary fees and expenses. The underwriter may, from time to time,
engage in transactions with or perform services for us in the ordinary course of
its business. We have agreed that if, during the one year period
following this offering, we require the services of an investment banker,
financial advisor or similar professional, that the underwriter will have the
exclusive right to provide such services, subject to certain
exceptions.
Over-allotment
option
We have
granted to the underwriter an option, exercisable not later than 45 days after
the date of this prospectus, to purchase up
to units at the public
offering price, less the underwriting discount, set forth on the cover page of
this prospectus. The underwriter may exercise the option solely to cover
over-allotments, if any, made in connection with this offering. If any
additional units are purchased pursuant to the over-allotment option, the
underwriter will offer these additional units on the same terms as those on
which the other units are being offered hereby.
35
Determination
of offering price
The
public offering price of the units and the exercise price and other terms of the
warrants were negotiated between us and the underwriter, based on the trading of
our common stock prior to the offering, among other things. Other factors
considered in determining the public offering price of the units and the
exercise price and other terms of the warrants include the history and prospects
of the company, the stage of development of our business, our business plans for
the future and the extent to which they have been implemented, an assessment of
our management, general conditions of the securities markets at the time of the
offering and such other factors as were deemed relevant.
Stabilization,
short positions and penalty bids
The
underwriter may engage in over-allotment, syndicate covering transactions,
stabilizing transactions and penalty bids or purchases for the purpose of
pegging, fixing or maintaining the price of our common stock or
warrants:
|
•
|
Over-allotment
involves sales by the underwriter of units in excess of the number of
units the underwriter is obligated to purchase, which creates a syndicate
short position. The short position may be either a covered short position
or a naked short position. In a covered short position, the number of
units over-allotted by the underwriter is not greater than the number of
units that it may purchase in the over-allotment option. In a naked short
position, the number of units involved is greater than the number of units
in the over-allotment option. The underwriter may close out any short
position by exercising its over-allotment option, in whole or in part, or
purchasing shares and warrants in the open
market.
|
|
•
|
Syndicate
covering transactions involve purchases of securities in the open market
after the distribution has been completed in order to cover syndicate
short positions. In determining the source of securities needed to close
out the short position, the underwriter will consider, among other things,
the price of the securities available for purchase in the open market as
compared to the price at which it may purchase the securities through the
over-allotment option. If the underwriter sells more securities than could
be covered by the over-allotment option, a naked short position, the
position can only be closed out by buying securities in the open market. A
naked short position is more likely to be created if the underwriter is
concerned that there could be downward pressure on the price of the
securities in the open market after pricing that could adversely affect
investors who purchase in the
offering.
|
|
•
|
Stabilizing
transactions permit bids to purchase the underlying security so long as
the stabilizing bids do not exceed a specific
maximum.
|
|
•
|
Penalty
bids permit the underwriter to reclaim a selling concession from a
syndicate member when the securities originally sold by the syndicate
member are purchased in a stabilizing or syndicate covering transaction to
cover syndicate short positions.
|
These
syndicate covering transactions, stabilizing transactions and penalty bids may
have the effect of raising or maintaining the market prices of our securities or
preventing or retarding a decline in the market prices of our securities. As a
result, the price of our common stock and warrants may be higher than the price
that might otherwise exist in the open market. These transactions may be
effected on the Nasdaq Capital Market, in the over-the-counter market or on any
other trading market and, if commenced, may be discontinued at any
time.
In
connection with this offering, the underwriter also may engage in passive market
making transactions in our common stock on the Nasdaq Capital Market in
accordance with Regulation M during a period before the commencement of offers
or sales of shares of our common stock in this offering and extending through
the completion of the distribution. In general, a passive market
maker must display its bid at a price not in excess of the highest independent
bid for that security. However, if all independent bids are lowered
below the passive market maker’s bid, that bid must then be lowered when
specific purchase limits are exceeded. Passive market making may
stabilize the market price of the securities at a level above that which might
otherwise prevail in the open market and, if commenced, may be discontinued at
any time.
Neither
we nor the underwriter make any representation or prediction as to the direction
or magnitude of any effect that the transactions described above may have on the
prices of our securities. In addition, neither we nor the underwriter make any
representation that the underwriter will engage in these transactions or that
any transactions, once commenced, will not be discontinued without
notice.
36
Indemnification
We have
agreed to indemnify the underwriter against certain liabilities, including
liabilities under the Securities Act of 1933, or to contribute to payments the
underwriter may be required to make with respect to any of these
liabilities.
37
LEGAL
MATTERS
The
validity of the securities being offered hereby will be passed upon by Winstead
PC, The Woodlands, Texas. Jeffrey R. Harder, a member of the law firm
Winstead PC, beneficially owned as of November 30, 2010, an aggregate of 11,874
shares of our common stock. Mr. Harder also holds options to purchase 13,125
shares of our common stock. Certain legal matters will be passed upon
for the underwriter by Schulte Roth & Zabel LLP, New York, New
York.
EXPERTS
The consolidated financial statements
and management’s assessment of the effectiveness of internal control over
financial reporting (which is included in Management’s Report on Internal
Control over Financial Reporting) incorporated in this prospectus by reference
to the Annual Report on Form 10-K for the year ended December 31, 2009 have
been so incorporated in reliance on the report (which contains an explanatory
paragraph relating to the Company's ability to continue as a going concern as
described in Note 1 to the consolidated financial statements) of
PricewaterhouseCoopers LLP, an independent registered public accounting firm,
given on the authority of said firm as experts in auditing and
accounting.
The consolidated statements of
stockholders' equity for each of the eight years in the period ended December
31, 2001 were audited by Arthur Andersen LLP. Arthur Andersen LLP has
not consented to the incorporation of their reports on the consolidated
statements of stockholders' equity for each of the eight years in the period
ended December 31, 2001 incorporated in this prospectus by reference to the
Annual Report on Form 10-K for the year ended December 31, 2009, and we have
dispensed with the requirement to file their consent in reliance upon Rule 437a
of the Securities Act. Because Arthur Andersen LLP has not consented
to the incorporation of their reports in this prospectus, you will not be able
to recover against Arthur Andersen LLP under Section 11 of the Securities Act
for any untrue statements of a material fact contained in the financial
statements audited by Arthur Andersen LLP or any omissions to state a material
fact required to be stated therein.
WHERE
YOU CAN FIND MORE INFORMATION
We have
filed with the SEC a registration statement on Form S-1 relating to the
securities covered by this prospectus. This prospectus is a part of the
registration statement and does not contain all the information in the
registration statement. For further information with respect to us and the
securities we are offering under this prospectus, we refer you to the
registration statement and the exhibits and schedules filed as a part of the
registration statement. We also file annual, quarterly and current reports,
proxy statements and other information with the SEC. You may read and copy the
registration statement, as well as any other material we file with the SEC, at
the SEC’s Public Reference Room at 100 F Street, N.E.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330
for more information on the Public Reference Room. The SEC maintains
an Internet site that contains reports, proxy and information statements, and
other information regarding issuers that file electronically with the SEC,
including Repros. The SEC’s Internet site can be found at
http://www.sec.gov.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The SEC
allows us to "incorporate by reference" the information we file with it, which
means that we can disclose important information to you by referring you to
another document that we have filed separately with the SEC. You should read the
information incorporated by reference because it is an important part of this
prospectus. Any information incorporated by reference into this prospectus is
considered to be part of this prospectus from the date we file that document. We
incorporate by reference the following information or documents that we have
filed with the SEC which shall not include, in each case, documents, or
information deemed to have been furnished and not filed in accordance with SEC
rules:
|
·
|
Annual
Report of Form 10-K for the fiscal year ended December 31,
2009;
|
|
·
|
Quarterly
Report on Form 10-Q for the quarters ended March 31, 2010, June
30, 2010 and September 30, 2010;
|
|
·
|
Proxy
Statement on Schedule 14A filed with the SEC on April 6,
2010;
|
|
·
|
Current
Reports on Form 8-K filed with the SEC on January 11, 2010, January 19,
2010, January 26, 2010, January 27, 2010, February 2, 2010, February 8,
2010, February 19, 2010, March 3, 2010, March 4, 2010, March 11, 2010,
March 16, 2010, March 31, 2010, April 5, 2010, April 15, 2010, April 28,
2010, April 30, 2010, May 10, 2010, May 13, 2010, May 18, 2010, June 11,
2010, June 17, 2010, June 21, 2010, July 23, 2010, August 3, 2010, August
10, 2010, August 12, 2010, August 16, 2010, August 18, 2010, September 10,
2010, September 29, 2010, September 30, 2010, October 15, 2010, October
25, 2010, November 1, 2010 and November 10,
2010;
|
|
·
|
the
description of our Rights Agreement contained in our registration
statement on Form 8-A filed on September 3, 1999, as amended on
September 6, 2002, October 30, 2002, June 30, 2005, January
10, 2008, October 10, 2008 and September 9, 2010, including any amendments
or reports filed for the purposes of updating this
description; and
|
38
|
·
|
the
description of our common stock contained in our registration statement on
Form 8-A filed with the SEC on February 2, 1993, including all
amendments and reports filed for the purpose of updating such
information.
|
Information
furnished to the SEC under Item 2.02 or Item 7.01 in Current Reports
on Form 8-K, and any exhibit relating to such information, filed prior to, on or
subsequent to the date of this prospectus is not incorporated by reference into
this prospectus.
Any
statement contained in any document incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this prospectus to the
extent that a statement contained in this prospectus or any prospectus
supplement modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this prospectus.
We will
provide to each person, including any beneficial owner, to whom a prospectus is
delivered, without charge upon written or oral request, a copy of any or all of
the reports or documents that are incorporated by reference into this prospectus
but not delivered with the prospectus, including exhibits which are specifically
incorporated by reference into such documents. If you would like to request
documents from us, please send a request in writing or by telephone to us at the
following address:
Repros
Therapeutics Inc.
2408
Timberloch Place, Suite B-7
The
Woodlands, Texas 77380
(281) 719-3400
Attn:
Secretary
These
documents are posted on our Web site at www.reprosrx.com; select the “Investors
& Media” link and then the “SEC Filings” link. Any other information
contained on, or accessible through, our website does not constitute a part of
this prospectus.
39
INDEX
TO FINANCIAL STATEMENTS
Repros
Therapeutics Inc. Unaudited Financial Statements
|
Page
|
||
Unaudited
Condensed Consolidated Balance Sheets as of September 30, 2010 and
December 31, 2009
|
F-2
|
||
Unaudited
Condensed Consolidated Statements of Operations for the three months and
nine months ended September 30, 2010 and 2009 and from Inception (August
20, 1987) through September 30, 2010
|
F-3
|
||
Unaudited
Condensed Consolidated Statements of Stockholders' Equity for the nine
months ended September 30, 2010
|
F-4
|
||
Unaudited
Condensed Consolidated Statements of Cash Flows for the nine months ended
September 30, 2010 and 2009 and from Inception (August 20, 1987) through
September 30, 2010
|
F-5
|
||
Notes
to Unaudited Condensed Consolidated Financial Statements
|
F-6
|
F-1
REPROS
THERAPEUTICS INC. AND SUBSIDIARY
(A
development stage company)
CONDENSED
CONSOLIDATED BALANCE SHEETS
(unaudited
and in thousands except share and per share amounts)
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
ASSETS
|
||||||||
Current
Assets
|
||||||||
Cash
and cash equivalents
|
$ | 4,216 | $ | 1,886 | ||||
Prepaid
expenses and other current assets
|
211 | 177 | ||||||
Total
current assets
|
4,427 | 2,063 | ||||||
Fixed assets,
net
|
9 | 12 | ||||||
Other assets,
net
|
1,131 | 885 | ||||||
Total
assets
|
$ | 5,567 | $ | 2,960 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
Liabilities
|
||||||||
Accounts
payable
|
$ | 1,172 | $ | 2,043 | ||||
Accrued
expenses
|
182 | 355 | ||||||
Total
current liabilities
|
1,354 | 2,398 | ||||||
Commitments
and contingencies (note 5)
|
||||||||
Stockholders'
Equity
|
||||||||
Undesignated
Preferred Stock, $.001 par value, 5,000,000 shares authorized, none issued
and outstanding
|
- | - | ||||||
Common
Stock, $.001 par value, 75,000,000 shares authorized, 9,042,407 and
6,496,999 shares issued, respectively and 8,930,057 and 6,384,649 shares
outstanding, respectively
|
9 | 6 | ||||||
Additional
paid-in capital
|
183,644 | 176,412 | ||||||
Cost
of treasury stock, 112,350 shares
|
(1,380 | ) | (1,380 | ) | ||||
Deficit
accumulated during the development stage
|
(178,060 | ) | (174,476 | ) | ||||
Total
stockholders' equity
|
4,213 | 562 | ||||||
Total
liabilities and stockholders' equity
|
$ | 5,567 | $ | 2,960 |
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
F-2
REPROS
THERAPEUTICS INC. AND SUBSIDIARY
(A
development stage company)
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited
and in thousands except per share amounts)
From Inception
|
||||||||||||||||||||
(August 20, 1987)
|
||||||||||||||||||||
through
|
||||||||||||||||||||
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
September 30,
|
||||||||||||||||||
2010
|
2009
|
2010
|
2009
|
2010
|
||||||||||||||||
Revenues
|
||||||||||||||||||||
Licensing
fees
|
$ | - | $ | - | $ | - | $ | - | $ | 28,755 | ||||||||||
Product
royalties
|
- | - | - | - | 627 | |||||||||||||||
Research
and development grants
|
- | - | - | - | 1,219 | |||||||||||||||
Interest
income
|
- | - | - | 4 | 16,297 | |||||||||||||||
Gain
on disposal of fixed assets
|
- | - | - | - | 102 | |||||||||||||||
Other
Income
|
85 | - | 138 | - | 720 | |||||||||||||||
Total
revenues and other income
|
85 | - | 138 | 4 | 47,720 | |||||||||||||||
Expenses
|
||||||||||||||||||||
Research
and development
|
736 | 8,282 | 1,950 | 21,765 | 172,280 | |||||||||||||||
General
and administrative
|
533 | 1,962 | 1,772 | 4,126 | 43,769 | |||||||||||||||
Interest
expense and amortization of intangibles
|
- | - | - | - | 388 | |||||||||||||||
Total
expenses
|
1,269 | 10,244 | 3,722 | 25,891 | 216,437 | |||||||||||||||
Loss
from continuing operations
|
(1,184 | ) | (10,244 | ) | (3,584 | ) | (25,887 | ) | (168,717 | ) | ||||||||||
Loss
from discontinued operations
|
- | - | - | - | (1,828 | ) | ||||||||||||||
Gain
on disposal of discontinued operation
|
- | - | - | - | 939 | |||||||||||||||
Net
loss before cumulative effect of change in accounting
principle
|
(1,184 | ) | (10,244 | ) | (3,584 | ) | (25,887 | ) | (169,606 | ) | ||||||||||
Cumulative
effect of change in accounting principle
|
- | - | - | - | (8,454 | ) | ||||||||||||||
Net
loss
|
$ | (1,184 | ) | $ | (10,244 | ) | $ | (3,584 | ) | $ | (25,887 | ) | $ | (178,060 | ) | |||||
Loss
per share - basic and diluted:
|
$ | (0.13 | ) | $ | (2.64 | ) | $ | (0.46 | ) | $ | (6.77 | ) | ||||||||
Weighted
average shares used in loss per share calculation:
|
||||||||||||||||||||
Basic
|
8,875 | 3,876 | 7,763 | 3,821 | ||||||||||||||||
Diluted
|
8,875 | 3,876 | 7,763 | 3,821 |
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
F-3
REPROS
THERAPEUTICS INC. AND SUBSIDIARY
(A
development stage company)
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY
(unaudited
and in thousands except share and per share amounts)
Deficit
|
||||||||||||||||||||||||||||
Accumulated
|
||||||||||||||||||||||||||||
Additional
|
During the
|
Total
|
||||||||||||||||||||||||||
Common Stock
|
Paid-in
|
Treasury Stock
|
Development
|
Stockholders'
|
||||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Shares
|
Amount
|
Stage
|
Equity
|
||||||||||||||||||||||
Balance
at December 31, 2009
|
6,496,999 | $ | 6 | $ | 176,412 | 112,350 | $ | (1,380 | ) | $ | (174,476 | ) | $ | 562 | ||||||||||||||
Stock
based option compensation
|
- | - | 471 | - | - | - | 471 | |||||||||||||||||||||
Issuance
of 96,836 shares of common stock at $2.88 to $4.40 per share, as
settlement with trade creditors
|
96,836 | - | 370 | - | - | - | 370 | |||||||||||||||||||||
Issuance
of 2,448,572 shares of common stock at a weighted average share price of
$2.77, net of offering costs of $381
|
2,448,572 | 3 | 6,391 | - | - | - | 6,394 | |||||||||||||||||||||
Net
loss
|
- | - | - | - | - | (3,584 | ) | (3,584 | ) | |||||||||||||||||||
Balance
at September 30, 2010
|
9,042,407 | $ | 9 | $ | 183,644 | 112,350 | $ | (1,380 | ) | $ | (178,060 | ) | $ | 4,213 |
The
accompanying notes are an integral part of these consolidated financial
statements.
F-4
REPROS
THERAPEUTICS INC. AND SUBSIDIARY
(A
development stage company)
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited
and in thousands)
From Inception
|
||||||||||||
(August 20, 1987)
|
||||||||||||
through
|
||||||||||||
Nine Months Ended September 30,
|
September 30,
|
|||||||||||
2010
|
2009
|
2010
|
||||||||||
Cash
Flows from Operating Activities
|
||||||||||||
Net
loss
|
$ | (3,584 | ) | $ | (25,887 | ) | (178,060 | ) | ||||
Gain
on disposal of discontinued operations
|
- | - | (939 | ) | ||||||||
Gain
on disposal of fixed assets
|
- | - | (102 | ) | ||||||||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||||
Noncash
financing costs
|
- | - | 316 | |||||||||
Noncash
inventory impairment
|
- | - | 4,417 | |||||||||
Noncash
patent impairment
|
- | 989 | 2,614 | |||||||||
Noncash
other income
|
(138 | ) | - | (685 | ) | |||||||
Noncash
decrease in accounts payable
|
- | - | (1,308 | ) | ||||||||
Depreciation
and amortization
|
60 | 51 | 4,014 | |||||||||
Noncash
stock-based compensation
|
471 | 1,110 | 7,112 | |||||||||
Common
stock issued for agreement not to compete
|
- | - | 200 | |||||||||
Series
B Preferred Stock issued for consulting services
|
- | - | 18 | |||||||||
Changes
in operating assets and liabilities (net effects of purchase of businesses
in 1988 and 1994):
|
||||||||||||
Increase
in receivables
|
- | - | (199 | ) | ||||||||
Increase
in inventory
|
- | - | (4,447 | ) | ||||||||
(Increase)
decrease in prepaid expenses and other current assets
|
(34 | ) | 1,114 | 91 | ||||||||
Increase
(decrease) in accounts payable and accrued expenses
|
(536 | ) | 5,246 | 9,502 | ||||||||
Net
cash used in operating activities
|
(3,761 | ) | (17,377 | ) | (157,456 | ) | ||||||
Cash
Flows from Investing Activities
|
||||||||||||
Change
in trading marketable securities
|
- | - | (191 | ) | ||||||||
Capital
expenditures
|
(6 | ) | - | (2,377 | ) | |||||||
Purchase
of technology rights and other assets
|
(297 | ) | (424 | ) | (4,569 | ) | ||||||
Proceeds
from sale of PP&E
|
- | - | 225 | |||||||||
Cash
acquired in purchase of FTI
|
- | - | 3 | |||||||||
Proceeds
from sale of subsidiary, less $12,345 for operating losses during 1990
phase-out period
|
- | - | 138 | |||||||||
Proceeds
from sale of the assets of FTI
|
- | - | 2,250 | |||||||||
Increase
in net assets held for disposal
|
- | - | (213 | ) | ||||||||
Net
cash used in investing activities
|
(303 | ) | (424 | ) | (4,734 | ) | ||||||
Cash
Flows from Financing Activities
|
||||||||||||
Proceeds
from issuance of common stock, net of offering costs
|
6,394 | 869 | 162,399 | |||||||||
Exercise
of stock options
|
- | 9 | 372 | |||||||||
Proceeds
from a shareholder transaction
|
- | - | 327 | |||||||||
Proceeds
from issuance of preferred stock
|
- | - | 23,688 | |||||||||
Purchase
of treasury stock
|
- | - | (21,487 | ) | ||||||||
Proceeds
from issuance of notes payable
|
- | - | 2,839 | |||||||||
Principal
payments on notes payable
|
- | - | (1,732 | ) | ||||||||
Net
cash provided by financing activities
|
6,394 | 878 | 166,406 | |||||||||
Net
increase (decrease) in cash and cash equivalents
|
2,330 | (16,923 | ) | 4,216 | ||||||||
Cash
and cash equivalents at beginning of period
|
1,886 | 19,470 | - | |||||||||
Cash
and cash equivalents at end of period
|
$ | 4,216 | $ | 2,547 | $ | 4,216 |
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
F-5
REPROS
THERAPEUTICS INC. AND SUBSIDIARY
(A
development stage company)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September
30, 2010
(Unaudited)
NOTE
1 — Organization, Operations and Liquidity
The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and the rules and
regulations of the Securities and Exchange Commission for interim financial
reporting. Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management, all
adjustments (which include only normal recurring adjustments) considered
necessary for a fair statement of the interim periods presented have been
included. The year-end balance sheet data was derived from audited financial
statements, but does not include all the disclosures required by accounting
principles generally accepted in the United States of America. Operating results
for the three month and nine month periods ended September 30, 2010 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2010. For further information, refer to the financial statements
and footnotes thereto included in the Repros Therapeutics Inc. ("the Company",
"Repros," or "we," "us" or "our") Annual Report on Form 10-K for the year ended
December 31, 2009.
The
Company was organized on August 20, 1987. We are a development stage
biopharmaceutical company focused on the development of oral small molecule
drugs for major unmet medical needs that treat male and female reproductive
disorders.
Our
portfolio of products includes:
Androxal®
|
·
|
As
a treatment for men of reproductive age with low testosterone levels that
spares fertility, unlike testosterone replacement therapy;
and
|
|
·
|
As
a treatment for type 2 diabetes
|
Proellex®
|
·
|
As
a treatment of symptoms associated with uterine fibroids and
endometriosis, subject to the current FDA partial clinical hold on the
Proellex® clinical trials; however, the FDA has allowed us to run a single
study to explore both safety and signals of efficacy in an escalating dose
fashion. The new study will test 5 different doses of Proellex® (1, 3, 6,
9 and 12 mg) with 1 mg being the first dose
tested.
|
As of
September 30, 2010, we had accumulated losses of $178.1 million, approximately
$4.2 million in cash and cash equivalents, and our accounts payable and accrued
expenses were approximately $1.4 million. The amount of cash on hand is not
sufficient to fund the (i) escalating dose study for Proellex® permitted by the
FDA, (ii) Phase 2B and upcoming Phase 3 hypogonadism trials for Androxal®,
(iii) type 2 diabetes trial for Androxal®, (iv) preclinical assessment of
vaginal delivery of Proellex® and (v) second generation Proellex®
molecules. Based on these current and planned clinical trials, we will need
to raise additional capital no later than the first quarter of 2011. We
continue to explore potential additional financing and capital raising
alternatives to provide additional funds to enable us to continue to develop our
two product candidates through completion of clinical trials; however, there can
be no assurance that we will be successful in raising any such additional funds
on a timely basis or at all. Significant additional funding will be
required for us to continue development of either of our product candidates.
Additionally, as discussed in Note 5, we have various pending legal proceedings
that could adversely impact us. The foregoing and other matters raise
substantial doubt about our ability to continue as a going concern.
On
October 14, 2010, the Company effected a one-for-four reverse stock split of its
common stock. The split-adjusted shares of the Company’s common stock began
trading on the Nasdaq Capital Market on October 15, 2010. The one-for-four
reverse stock split converted all shares of the Company’s common stock issued
and outstanding, plus all outstanding stock options and the number of shares of
common stock available for issuance under the Company’s approved stock
plans. The number of authorized shares of common stock was not affected by
the reverse split. The reverse split enabled the Company to meet the
continued listing rules of the Nasdaq Capital Market as evidenced by the
Compliance Letter received from Nasdaq on October 29, 2010. All share and per
share amounts have been retroactively adjusted to reflect the reverse stock
split for all periods presented.
We also
continue to maintain our patent portfolio of our phentolamine-based products for
the treatment of sexual dysfunction and in order to create value from these
assets in various ways which includes product out-licensing.
F-6
NOTE 2 — Patents
and Patent Applications
As of
September 30, 2010, the Company had approximately $1.1 million in capitalized
patent and patent application costs reflected on its balance sheet. This
entire amount relates to patent and patent application costs for
Androxal®.
Should
the Company not continue development of Androxal® or should the Company not
continue as a going concern, the remaining capitalized patent and patent
application costs may not be recoverable, which would result in charges to
operating results in future periods.
NOTE 3 — Accrued
Expenses
Accrued
expenses consist of the following (in thousands):
September 30, 2010
|
December 31, 2009
|
|||||||
Personnel
related costs
|
$ | 103 | $ | 181 | ||||
Other
|
69 | 159 | ||||||
Patent
costs
|
10 | 15 | ||||||
Total
|
$ | 182 | $ | 355 |
NOTE
4 — Loss Per Share
Basic
loss per share is computed by dividing net loss by the weighted average number
of shares of common stock outstanding during the period. Diluted loss per
share is computed using the average share price for the period and applying the
treasury stock method to potentially dilutive outstanding options. In all
applicable periods, all potential common stock equivalents were antidilutive
and, accordingly, were not included in the computation of diluted loss per
share. Additionally, on October 14, 2010, the Company effected a one-for-four
reverse stock split of its common stock. The split-adjusted shares of the
Company’s common stock began trading on the Nasdaq Capital Market on October 15,
2010. All share and per share amounts have been retroactively adjusted to
reflect the reverse stock split for all periods presented.
The
following table presents information necessary to calculate loss per share for
the three month and nine month periods ended September 30, 2010 and
2009 (in thousands, except per share amounts):
Three Months Ended Sept. 30,
|
Nine Months Ended Sept. 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Net
Loss
|
$ | (1,184 | ) | $ | (10,244 | ) | $ | (3,584 | ) | $ | (25,887 | ) | ||||
Average
common shares outstanding
|
8,875 | 3,876 | 7,763 | 3,821 | ||||||||||||
Basic
and diluted loss per share
|
$ | (0.13 | ) | $ | (2.64 | ) | $ | (0.46 | ) | $ | (6.77 | ) |
Other
potential common stock of 538,582 and 552,402 common shares underlying stock
options for the periods ended September 30, 2010 and 2009, respectively, were
excluded from the above calculation of diluted loss per share because they were
not dilutive.
NOTE
5 — Commitments and Contingencies
Therapeutic
uses of our Androxal® product candidate are covered in the United States by four
issued U.S. patents and four pending patent applications. Foreign coverage of
therapeutic uses of our Androxal® product candidate includes 40 issued foreign
patents and 75 foreign pending patent applications. The issued patents and
pending applications relate to methods for treating certain conditions including
the treatment of testosterone deficiency in men, the treatment of metabolic
syndrome and conditions associated therewith, and the treatment of infertility
in hypogonadal men. Androxal® (the trans-isomer of clomiphene) is purified
from clomiphene citrate. A third party individual holds two issued patents
related to the use of an anti-estrogen such as clomiphene citrate and others for
use in the treatment of androgen deficiency and disorders related
thereto. In our prior filings with the SEC, we have described our request
to the U.S. Patent and Trademark Office, or PTO, for re-examination of one of
these patents based on prior art. The third party amended the claims in the
re-examination proceedings, which led the PTO to determine that the amended
claims are patentable in view of those publications under consideration and a
re-examination certificate was issued. However, we believe that the amended
claims are invalid based on additional prior art publications, and we filed a
second request for re-examination by the PTO in light of a number of these
additional publications and other publications cited by the PTO. The
request was granted and all of the claims were finally rejected by the PTO in
the re-examination. The patent holder appealed the rejections to the PTO
Board of Patent Appeals and Interferences (“the Board”) which affirmed the
rejection of all of the claims. The patent holder subsequently filed
a request for rehearing, which led the Board to reverse the rejections of
several dependent claims in view of those publications under
consideration. The patent holder has filed a Notice of Appeal to the
Federal Circuit contesting the rejections maintained by the Board. We also
believe that the second of these two patents is invalid in view of published
prior art not considered by the PTO. Nevertheless, there is no assurance
that either patent will ultimately be found invalid over the prior art. If such
patents are not invalidated by the PTO we may be required to obtain a license
from the holder of such patents in order to develop Androxal® further or
attempts may be made to undertake further legal action to invalidate such
patents. If such licenses were not available on acceptable terms, or at
all, we may not be able to successfully commercialize or out-license
Androxal®.
F-7
On August
7, 2009, R.M. Berry filed a putative class action lawsuit naming the Company,
Joseph Podolski, Paul Lammers, and Louis Ploth, Jr. as
defendants. The lawsuit is pending in the United States District
Court for the Southern District of Texas, Houston Division. The
lawsuit, styled R.M. Berry, on Behalf of Himself and all Others Similarly
Situated v. Repros Therapeutics, Inc., Joseph Podolski, Paul Lammers, and Louis
Ploth, Jr., alleges that the defendants made certain misleading statements
related to the Company’s Proellex® drug. Among other claims, the
lawsuit contends that the defendants misrepresented the side effects of the drug
related to liver function, and the risk that these side effects could cause a
suspension of clinical trials of Proellex®. The lawsuit seeks to establish a
class of shareholders allegedly harmed by the misleading statements, and asserts
causes of action under the Securities Exchange Act of 1934. On August
14, 2009, a lawsuit making similar allegations and naming the same defendants
was also filed in the United States District Court for the Southern District of
Texas. This suit is styled Josephine Medina, Individually and On
Behalf of all Others Similarly Situated v. Repros Therapeutics, Inc., Joseph
Podolski, Paul Lammers, and Louis Ploth, Jr. On September 25, 2009, a
lawsuit also making allegations similar to those in the Berry action, and naming
the same defendants, was filed in the United States District Court for the
Southern District of Texas. That lawsuit is styled Shane Simpson,
Paul Frank and Clayton Scobie, on Behalf of Themselves and all Others Similarly
Situated v. Repros Therapeutics, Inc., Joseph Podolski, Paul Lammers, and Louis
Ploth, Jr. The lawsuits have now been consolidated, and lead
plaintiffs appointed. On January 27, 2010, the lead plaintiffs filed a
Consolidated Class Action Complaint styled In re Repros Therapeutics, Inc.
Securities Litigation, Civil Action No. 09 Civ. 2530 (VDG). The lawsuit
names Repros Therapeutics, Inc., Joseph Podolski, Paul Lammers, and Louis Ploth,
Jr. as defendants. The allegations in the Consolidated Class Action
Complaint are substantially the same as those contained in the prior complaints,
and focus on the claim that the defendants deliberately withheld information
concerning the negative side-effects of Proellex® related to liver
function. Plaintiffs seek to establish a class action for all persons who
“purchased or otherwise acquired Repros common stock between July 1, 2009, and
August 2, 2009.” No discovery has yet occurred in the matter. Defendants
filed a motion to dismiss the Consolidated Class Action Complaint on March 15,
2010. Briefing has been completed on that motion, but the court has not yet
ruled on it. An estimate of the possible loss or range of losses in
connection with the lawsuits cannot be made at this time.
On
March 1, 2010, we were served with a lawsuit where we were named as a
co-defendant along with one of our clinical regulatory service providers (“CRO”)
relating to the Proellex® clinical trial study. The lawsuit was filed
in the State of Tennessee, 30th Judicial District Chancery Court at Memphis by
an investigator and claims that the CRO did not pay it amounts owing to it
relating to the Proellex® study. We did not engage the
investigator and under our agreement with the CRO, we believe the CRO is
responsible for any such costs or damages regarding such
lawsuit. Pursuant to a Settlement Agreement and Mutual Release
entered into in October 2009, such CRO, on behalf of itself and its agents,
released us from all claims which could be asserted by them against
us. We believe such release covers the claims set forth in this
lawsuit. The CRO failed to respond to the lawsuit, and a default judgment
was entered against it in the amount of $172,901.29. We intend to
vigorously defend any and all claims asserted by the investigator. An
estimate of the possible costs or expenses to defend ourselves in this matter or
risk of exposure under the litigation cannot be made at this time.
NOTE
6 — Other Recent Events, Including Subsequent Events
Between
November 30, 2009 and March 31, 2010, we entered into settlement agreements and
mutual releases (the “Prior Settlement Agreements”) with certain of our
creditors, pursuant to which we issued an aggregate of 352,459 shares of common
stock and paid an aggregate of $140,572 in cash as payment in full for our
then-outstanding liabilities to such creditors. On April 8, 2010, we
entered into an additional settlement agreement and mutual release (together
with the Prior Settlement Agreements, the “Settlement Agreements”) with a
creditor, pursuant to which we issued 34,885 shares of common stock (together
with the shares issued under the Prior Settlement Agreements, the “Settlement
Shares”) and paid $8,721 in cash as payment in full for our then-outstanding
liability to such creditor. The Settlement Shares were issued by the Company
pursuant to Section 4(2) and /or Rule 506 of Regulation D promulgated under the
Securities Act of 1933, as amended. Pursuant to the Settlement Agreements, we
filed a registration statement to register the Settlement Shares on June 9,
2010, which was declared effective by the SEC on June 25, 2010, and we agreed to
use our best efforts to maintain such registration statement until all such
Settlement Shares registered thereunder to such creditors have been sold or for
a period of one year, whichever comes first.
In
addition to the Settlement Agreements, we settled with several of our creditors
during the second and third quarter of 2010, in an amount less than our
then-outstanding liabilities to such creditors. These settlements resulted in
recognition of $85,000 and $138,000 in other income for the three and nine month
periods ended September 30, 2010, respectively, on the Condensed Consolidated
Statement of Operations.
F-8
On
February 12, 2010, we entered into an Equity Distribution Agreement (the “Equity
Distribution Agreement”) with Ladenburg Thalmann & Co. Inc. (“Ladenburg”),
pursuant to which we may issue and sell from time to time through Ladenburg, as
sales agent and/or principal, shares of our common stock having an aggregate
offering price of up to $10 million (the “ATM Shares”). Ladenburg is not
required to sell on our behalf any specific number or dollar amount of the ATM
Shares, but Ladenburg, upon acceptance of written instructions from us, agreed
to use its commercially reasonable efforts consistent with its customary trading
and sales practices, to sell the ATM Shares up to the amount specified, and
otherwise in accordance with the terms of a placement notice delivered to
Ladenburg. We have no obligation to sell any ATM Shares under the Equity
Distribution Agreement, and may at any time suspend sales under the Equity
Distribution Agreement, provided that such suspension shall not affect either
party’s obligations with respect to the ATM Shares sold prior to the receipt of
notice of such suspension. Ladenburg receives a commission of 4% of the gross
sales price of all ATM Shares sold through it under the Equity Distribution
Agreement. The ATM Shares are issued pursuant to our shelf registration
statement on Form S-3, as amended (File No. 333-163648). Between July 1,
2010 and September 30, 2010, we have sold an aggregate of 277,164 ATM Shares at
a weighted average share price of $1.51, for proceeds of approximately $401,000,
net of expenses. Cumulative through September 30, 2010, we have sold 2,448,572
ATM Shares at a weighted average share price of $2.77, for proceeds of
approximately $6.4 million, net of expenses. Pursuant to General Instruction
I.B.6. of Form S-3, we may not sell more than one-third of the aggregate market
value of our common stock held by non-affiliates during a period of 12 calendar
months immediately prior to, and including, the date of such sale of such common
stock. Due to this limitation, we announced on August 3, 2010 that we have
suspended this ATM offering of Company securities.
On
November 1, 2010, we were notified by The Department of the Treasury that our
application submitted requesting certification for qualified investment in a
qualifying therapeutic discovery project under section 48D of the Internal
Revenue Code was accepted. As a result, we have been awarded a grant in the
amount of $244,479. It is anticipated that proceeds from this grant will be
received late in November 2010.
On
November 8, 2010, we had a Type B meeting with the FDA. In that meeting the FDA
recommended that we conduct a Phase 2B study in men with secondary hypogonadism
but naïve to testosterone treatment before moving into Phase 3. The
FDA opined further that such a Phase 2B study would provide for a more solid
data base for design of Phase 3 studies and eventual approval of such studies
under a Special Protocol Assessment (“SPA”). The FDA did note “the Division
agrees in general with the outline of your program for the development of
enclomiphene” (Androxal®).
F-9
SHARES
OF COMMON STOCK
WARRANTS
TO PURCHASE
SHARES
OF COMMON STOCK
PROSPECTUS
,
Ladenburg
Thalmann & Co. Inc.
Part
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
13. Other
Expenses of Issuance and Distribution
The
following table lists the costs and expenses payable by the Company in
connection with the sale of the common stock and warrants covered by this
prospectus other than any sales commissions or discounts. All
amounts shown are estimates except for the SEC registration fee, and all of the
fees and expenses will be borne by the Company.
SEC
registration fee
|
$ | 656 | ||
Nasdaq
listing fees*
|
||||
FINRA
fee
|
1,420 | |||
Legal
fees and expenses
|
100,000 | |||
Accounting
fees and expenses
|
50,000 | |||
Printing,
transfer agent and miscellaneous expenses
|
10,000 | |||
Total*
|
$ |
* To be completed by
amendment.
Item
14. Indemnification
of Directors and Officers
Section
145 of the Delaware General Corporation Law, or Delaware law, inter alia,
empowers a Delaware corporation to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding (other than an action by or in the right of the corporation)
by reason of the fact that such person is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
other enterprise, against expenses (including attorneys’ fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Similar indemnity is
authorized for such persons against expenses (including attorneys’ fees)
actually and reasonably incurred in connection with the defense or settlement of
any such threatened, pending or completed action or suit if such person acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, and provided further that (unless a court of
competent jurisdiction otherwise provides) such person shall not have been
adjudged liable to the corporation. Any such indemnification may be made only as
authorized in each specific case upon a determination by the stockholders or
disinterested directors or by independent legal counsel in a written opinion
that indemnification is proper because the indemnitee has met the applicable
standard of conduct.
Section
145 further authorizes a corporation to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145. We maintain
policies insuring our officers and directors against certain liabilities for
actions taken in such capacities, including liabilities under the Securities
Act.
Our
Restated Certificate of Incorporation and Restated Bylaws require us to
indemnify our directors to the fullest extent permitted under Delaware law or
any other applicable law in effect, but if such statute or law is amended, we
may change the standard of indemnification only to the extent that such amended
statute or law permits us to provide broader indemnification rights to our
directors. We must indemnify such officers and employees in the same manner and
to the same extent that we are required to indemnify our directors under our
Restated Certificate of Incorporation and Restated Bylaws. Our Restated
Certificate of Incorporation limits the personal liability of a director to us
or our stockholders to damages for breach of the director’s fiduciary duty.
Pursuant to indemnification agreements we entered into with each of our
directors, we are further required to indemnify our directors to the fullest
extent permitted under Delaware law and our Restated Bylaws; provided that each
such director shall enjoy the greater of (i) the advancement and indemnification
rights permitted under our Restated Certificate and Restated Bylaws for
directors and officers as of the date of such indemnification agreement or (ii)
the benefits so afforded by amendments thereto.
Item
15. Recent
Sales of Unregistered Securities
Between
November 30, 2009 and March 31, 2010, we entered into settlement agreements and
mutual releases (the “Prior Settlement Agreements”) with certain of our
creditors, pursuant to which we issued an aggregate of 352,459 shares of common
stock and paid an aggregate of $140,572 in cash as payment in full for our
then-outstanding liabilities to such creditors. On April 8, 2010, we entered
into an additional settlement agreement and mutual release (together with the
Prior Settlement Agreements, the “2010 Settlement Agreements”) with a creditor,
pursuant to which we issued 34,885 shares of common stock (together with the
shares issued under the Prior Settlement Agreements, the “2010 Settlement
Shares”) and paid $8,721 in cash as payment in full for our then-outstanding
liability to such creditor. The 2010 Settlement Shares were issued by the
Company pursuant to Section 4(2) and /or Rule 506 of Regulation D promulgated
under the Securities Act of 1933, as amended. Pursuant to the 2010 Settlement
Agreements, we filed a registration statement to register the 2010 Settlement
Shares on June 9, 2010, which was declared effective by the SEC on June 25,
2010, and we agreed to use our best efforts to maintain such registration
statement until all such 2010 Settlement Shares registered thereunder to such
creditors have been sold or for a period of one year, whichever comes
first.
II-1
On
October 29, 2009, we entered into a Master Settlement Agreement and Releases
(the “October Settlement Agreement”) with certain trade creditors, pursuant to
which we issued 5,361,194 shares of our common stock, at $1.10 per share, and
paid approximately $2.77 million in cash to such creditors as payment in full
for our then-outstanding liabilities of approximately $8.7 million and for the
release of the claims held by and the dismissal of the litigation commenced by
such creditors against the Company. Pursuant to the October Settlement
Agreements, we filed a registration statement to register the such shares on
December 4, 2010, which was declared effective by the SEC on January 7, 2010,
and we agreed to use our best efforts to maintain such registration statement
until all such shares registered thereunder to such creditors have been sold or
for a period of one year, whichever comes first.
Item
16. Exhibits and Financial Statement Schedules
The
following exhibits are filed as part of, or incorporated by reference into this
registration statement:
Exhibit Number
|
Identification Of Exhibit
|
|
1.1*
|
Form
of Underwriting Agreement
|
|
3.1(a)
|
Restated
Certificate of Incorporation. Exhibit 3.3 to the Company's Registration
Statement on Form SB-2 (No. 33-57728-FW), as amended ("Registration
Statement"), is incorporated herein by reference.
|
|
3.1(b)
|
Certificate
of Amendment to the Company's Restated Certificate of Incorporation, dated
as of May 2, 2006. Exhibit 3.1 to the Company's Current Report
on Form 8-K as filed with the Commission on May 2, 2006 is incorporated
herein by reference.
|
|
3.1(c)
|
Certificate
of Designation of Series One Junior Participating Preferred Stock dated
September 2, 1999. Exhibit A to Exhibit 4.1 to the Company's
Registration Statement on Form 8-A as filed with the Commission on
September 3, 1999 (the "Rights Plan Registration Statement"), is
incorporated herein by reference.
|
|
3.1(d)
|
Certificate
of Amendment to Restated Certificate of Incorporation, dated as of
December 16, 2008. Exhibit 3.1(d) to the Company’s Current
Report on Form 8-K as filed with the Commission on December 23, 2008 is
incorporated herein by reference.
|
|
3.1(e)
|
Certificate
of Amendment to Restated Certificate of Incorporation, dated as of
November 18, 2009. Exhibit 3.1(e) to the Company’s Current Report on
Form 8-K dated November 19, 2009 is incorporated herein by
reference.
|
|
3.1(f)
|
Certificate
of Amendment to Restated Certificate of Incorporation, dated October 14,
2010. Exhibit 3.1(f) to the Company’s Current Report on Form 8-K dated
October 14, 2010 is incorporated herein by reference.
|
|
3.2
|
Restated
Bylaws of the Company. Exhibit 3.4 to the Registration Statement is
incorporated herein by reference.
|
|
4.1
|
Specimen
Certificate of Common Stock, $.001 par value, of the Company. Exhibit 4.1
to the Registration Statement is incorporated herein by
reference.
|
|
4.2
|
Rights
Agreement dated September 1, 1999 between the Company and
Computershare Investor Services LLC (as successor in interest to Harris
Trust & Savings Bank), as Rights Agent. Exhibit 4.1 to the Rights
Plan Registration Statement is incorporated herein by
reference.
|
|
4.3
|
First
Amendment to Rights Agreement, dated as of September 6, 2002, between
the Company, Harris Trust & Savings Bank and Computershare Investor
Services LLC. Exhibit 4.3 to Amendment No. 1 to the Rights Plan
Registration Statement on Form 8-A/A as filed with the Commission on
September 11, 2002 is incorporated herein by
reference.
|
|
4.4
|
Second
Amendment to Rights Agreement, dated as of October 30, 2002, between
the Company and Computershare Investor Services LLC. Exhibit 4.4 to
Amendment No. 2 to the Rights Plan Registration Statement on
Form 8-A/A as filed with the Commission on October 31, 2002 is
incorporated herein by reference.
|
|
4.5
|
Third
Amendment to Rights Agreement, dated as of June 30, 2005, between the
Company and Computershare Trust Company, Inc. (as successor in interest to
Computershare Investor Services, LLC). Exhibit 4.4 to the
Company's Current Report on Form 8-K as filed with the Commission on June
30, 2005 is incorporated herein by
reference.
|
II-2
4.6
|
Fourth
Amendment to Rights Agreement, dated as of January 9, 2008, between the
Company and Computershare Trust Company, Inc. (as successor in interest to
Computershare Investor Services, LLC). Exhibit 4.5 to the
Company's Current Report on Form 8-K as filed with the Commission on
January 10, 2008 is incorporated herein by reference.
|
|
4.7
|
Fifth
Amendment to Rights Agreement, dated as of October 10, 2008, between the
Company and Computershare Trust Company, Inc. (as successor in interest to
Computershare Investor Services, LLC). Exhibit 4.6 to the
Company’s Current Report on Form 8-K as filed with the Commission on
January 10, 2008 is incorporated herein by reference.
|
|
4.8
|
Sixth
Amendment to Rights Agreement, dated as of September 9, 2010, between the
Company and Computershare Trust Company, Inc. (as successor in interest to
Computershare Investor Services, LLC). Exhibit 4.7 to the
Company’s Current Report on Form 8-K as filed with the Commission on
September 10, 2010 is incorporated herein by reference.
|
|
4.9
|
Form
of Rights Certificate. Exhibit B to Exhibit 4.1 to the Rights Plan
Registration Statement is incorporated herein by
reference.
|
|
4.10*
|
Form
of Warrant
|
|
4.11*
|
Warrant
Agreement between the Company and Warrant Agent
|
|
5.1*
|
Opinion
of Winstead PC
|
|
10.1+
|
Amended
and Restated 1993 Employee and Consultant Stock Option Plan. Exhibit 10.3
to the Registration Statement is incorporated herein by
reference.
|
|
10.2+
|
First
Amendment to the Repros Therapeutics Inc. Amended and Restated 1993 Stock
Option Plan. Exhibit 10.22 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1999 is incorporated herein by
reference.
|
|
10.3+
|
1994
Employee and Consultant Stock Option Plan. Exhibit 4.2 to the Company's
Registration Statement on Form S-8 (File No. 033-83406) as filed with the
Commission on August 29, 1994 is incorporated herein by
reference.
|
|
10.4+
|
2000
Non-Employee Directors' Stock Option Plan. Appendix B to the Company's
Definitive Proxy Statement filed on April 26, 2000 is incorporated
herein by reference.
|
|
10.5+
|
First
Amendment to the Repros Therapeutics Inc. 2000 Non-Employee Directors'
Stock Option Plan. Exhibit 10.21 to the 2000 Form 10-K is incorporated
herein by reference.
|
|
10.6+
|
Second
Amendment to 2000 Non-Employee Directors' Stock Option Plan. Exhibit 10.6
to the Company's Annual Report on Form 10-K for the year ended
December 31, 2002 (the "2002 Form 10-K") is incorporated herein by
reference.
|
|
10.7+
|
Repros
Therapeutics Inc. 2004 Stock Option Plan. Exhibit 10.17 to the
Company's Registration Statement on Form S-1 (No. 333-119861), as amended,
is incorporated herein by reference.
|
|
10.8+
|
Employment
Agreement between the Company and Joseph S. Podolski. Exhibit 10.5 to the
Registration Statement is incorporated herein by
reference.
|
|
10.9+
|
First
Amendment to Employment Agreement between the Company and Joseph S.
Podolski. Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended March 31, 2001 is incorporated herein by
reference.
|
|
10.10+
|
Second
Amendment to Employment Agreement between the Company and Joseph S.
Podolski. Exhibit 10.17 to the 2002 Form 10-K is incorporated herein by
reference.
|
II-3
10.11+
|
Third
Amendment to Employment Agreement dated effective March 11, 2009,
between the Company and Joseph S. Podolski. Exhibit 10.1 to the
Company’s Current Report on Form 8-K as filed with the Commission on March
17, 2009 is incorporated herein by reference.
|
|
10.12+
|
Fourth
Amendment to Employment Agreement effective March 10, 2010 between the
Company and Joseph S. Podolski. Exhibit 10.1 to the Company’s
Current Report on Form 8-K as filed with the Commission on March 11, 2010
is incorporated herein by reference.
|
|
10.13+
|
Consulting
Agreement dated October 29, 2009 by and between the Company and Katherine
Anderson. Exhibit 10.2 to the Company’s Current Report on Form
8-K as filed with the Commission on November 3, 2009 is incorporated
herein by reference.
|
|
10.14
|
Lease
Agreement dated May 11, 2004 between the Company and Sealy Woodlands,
L.P. Exhibit 10.14 to the Company's Annual Report on Form 10-K
for the year ended December 31, 2004 is incorporated herein by
reference.
|
|
10.15
|
Amendment
to Lease Agreement between the Company and Sealy Woodlands, L.P., dated
May 17, 2006. Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 2006 is
incorporated herein by reference.
|
|
10.16
|
Second
Amendment to Lease, effective as of July 1, 2010, between the Company and
Columbia Texas 2408 Timberloch Industrial, L.P. Exhibit 10.1 to
the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2010 is incorporated herein by reference.
|
|
10.17++
|
Letter
Agreement dated July 15, 2002 between the Company, Schering Plough
Ltd. and Schering-Plough Corporation. Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 2002 is incorporated herein by reference.
|
|
10.18++
|
PHS
Patent License Agreement dated April 16, 1999 between the Company and
certain agencies of the United States Public Health Service within the
Department of Health and Human Services, with amendments. Exhibit 10.1 to
the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2003 is incorporated herein by
reference.
|
|
10.19
|
Waiver
to PHS Patent License Agreement, as amended, dated March 8, 2007 between
the Company and certain agencies of the United States Public Health
Service within the Department of Health and Human
Services. Exhibit 10.2 to the Company’s Current Report on Form
8-K as filed with the Commission on March 19, 2007 is incorporated herein
by reference.
|
|
10.20++
|
Sixth
Amendment to PHS Patent License Agreement, as amended, dated July 7, 2009
between the Company and certain agencies of the United States Public
Health Service within the Department of Health and Human
Services. Exhibit 10.1 to the Company’s Current Report on Form
8-K/A as filed with the Commission on December 22, 2009 is incorporated
herein by reference.
|
|
10.21++
|
Seventh
Amendment to PHS Patent License Agreement, as amended, dated October 28,
2009 between the Company and certain agencies of the United States Public
Health Service within the Department of Health and Human
Services. Exhibit 10.21 to the Company’s Annual Report on Form
10-K as filed with the Commission on March 15, 2010 is incorporated herein
by reference.
|
|
10.22
|
Master
Settlement Agreement and Releases dated October 29, 2009 by and among the
Company and its creditors signatory thereto. Exhibit 10.1 to
the Company’s Current Report on Form 8-K as filed with the Commission on
November 3, 2009 is incorporated herein by reference.
|
|
10.23
|
Securities
Purchase Agreement dated October 7, 2009, among the Company and the
purchasers identified on the signature pages thereto. Exhibit
10.1 to the Company’s Current Report on Form 8-K as filed with the
Commission on October 14, 2009 is incorporated herein by
reference.
|
|
10.24
|
Securities
Purchase Agreement between the Company and Enable Growth Partners LP dated
September 8, 2009. Exhibit 10.1 to the Company’s Current Report
on Form 8-K as filed with the Commission on September 10, 2009 is
incorporated herein by
reference.
|
II-4
10.25
|
Form
of Indemnification Agreement entered into between the Company and each of
its directors. Exhibit 10.1 to the Company’s Current Report on
Form 8-K as filed with the Commission on May 20, 2009 is incorporated
herein by reference.
|
|
10.26
|
Equity
Distribution Agreement dated February 12, 2010 between the Company and
Ladenburg Thalmann & Co. Inc. Exhibit 10.1 to the Company’s
Current Report on Form 8-K as filed with the Commission on February 19,
2010 is incorporated herein by reference.
|
|
23.1**
|
Consent
of PricewaterhouseCoopers LLP
|
|
23.2*
|
Consent
of Winstead PC (included in Exhibit 5.1)
|
|
24.1
|
Power
of Attorney (included on signature page to this registration
statement)
|
*
|
To
be filed by amendment.
|
**
|
Filed
herewith.
|
+
|
Management
contract or compensatory plan.
|
++
|
Portions
of this exhibit have been omitted based on a request for confidential
treatment pursuant to Rule 24b-2 of the Exchange Act. Such omitted
portions have been filed separately with the
Commission.
|
Item
17. Undertakings
(a) The
undersigned registrant hereby undertakes:
(1) To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to
include any prospectus required by Section 10(a)(3) of the Securities
Act;
(ii) to
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
a prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate,
the change in volume and price represents no more than a 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) to
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement.
(2) That,
for the purpose of determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at the time shall be deemed to be the initial bona fide offering
thereof.
(3) To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
(4) That,
for the purpose of determining liability under the Securities Act to any
purchaser, each prospectus filed pursuant to Rule 424(b) as part of a
registration statement relating to an offering, other than registration
statements relying on 430B or other than prospectuses filed in reliance on Rule
430A shall be deemed to be part of and included in the registration statement as
of the date it is first used after effectiveness. Provided, however, that no
statement made in a registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed incorporated
by reference into the registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of contract of sale
prior to such first use, supersede or modify any statement that was made in the
registration statement or prospectus that was part of the registration statement
or made in any such document immediately prior to such date of first
use.
II-5
(5) That,
for the purpose of determining liability of the undersigned registrant under the
Securities Act to any purchaser in the initial distribution of the securities,
the undersigned registrant undertakes that in a primary offering of securities
of the undersigned registrant pursuant to this registration statement,
regardless of the underwriting method used to sell the securities to the
purchaser, if the securities are offered or sold to such purchaser by means of
any of the following communications, the undersigned registrant will be a seller
to the purchaser and will be considered to offer or sell such securities to such
purchaser:
(i) Any
preliminary prospectus or prospectus of the undersigned registrant relating to
the offering required to be filed pursuant to Rule 424 under the Securities
Act;
(ii) Any
free writing prospectus relating to the offering prepared by or on behalf of the
undersigned registrant or used or referred to by the undersigned
registrant;
(iii) The
portion of any other free writing prospectus relating to the offering containing
material information about the undersigned registrant or its securities provided
by or on behalf of the undersigned registrant; and
(iv) Any
other communication that is an offer in the offering made by the undersigned
registrant to the purchaser.
(b) The
undersigned registrant hereby undertakes to deliver or cause to be delivered
with the prospectus, to each person to whom the prospectus is sent or given, the
latest annual report to security holders that is incorporated by reference in
the prospectus and furnished pursuant to and meeting the requirements of Rule
14a-3 or Rule 14c-3 under the Exchange Act; and, where interim financial
information required to be presented by Article 3 of Regulation S-X are not set
forth in the prospectus, to deliver, or cause to be delivered to each person to
whom the prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such interim
financial information.
(c) The
undersigned registrant hereby undertakes that:
(i) For
purposes of determining any liability under the Securities Act of 1933, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(ii) For
the purpose of determining any liability under the Securities Act of 1933, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(d) Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers, and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer, or controlling person of the registrant in the successful defense of
any action, suit, or proceeding) is asserted by such director, officer, or
controlling person connected with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-6
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in The Woodlands, Montgomery County,
State of Texas, on December 15 , 2010.
REPROS
THERAPEUTICS INC.
|
||
By:
|
/s/ Joseph S. Podolski
|
|
Joseph
S. Podolski
|
||
President
and Chief Executive Officer
|
||
By:
|
/s/ Katherine A. Anderson
|
|
Katherine
A. Anderson
|
||
Chief
Accounting Officer, Principal
Financial
Officer and Principal
Accounting
Officer
|
POWER
OF ATTORNEY
KNOW ALL PERSONS BY THESE
PRESENTS, that each person whose signature appears below constitutes and
appoints each of Joseph S. Podolski and Katherine A. Anderson as true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for them and in their name, place and stead, in any and all capacities, to sign
any and all amendments (including pre-effective and post-effective amendments)
to this registration statement and any additional registration statements filed
pursuant to Rule 462, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission (the “SEC”), and generally to do all such things in their names and
behalf in their capacities as officers and directors to enable the Company to
comply with the provisions of the Securities Act of 1933 and all requirements of
the SEC, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as he
or she might or could do in person, ratifying and confirming all that said
attorney-in-fact and agent, or their or his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed below by the following persons in the capacities and on the
dates indicated.
Signatures
|
Title
|
Date
|
||
/s/ Joseph S.
Podolski
|
President,
Chief Executive Officer
|
December
15, 2010
|
||
Joseph S. Podolski
|
and
Director
|
|||
/s/ Katherine A.
Anderson
|
Chief
Accounting Officer, Principal Financial
|
December
15, 2010
|
||
Katherine A. Anderson
|
Officer
and Principal Accounting Officer
|
|||
|
||||
/s/ Nola Masterson
|
Chairman
of the Board
|
December
15, 2010
|
||
Nola Masterson
|
||||
/s/ Daniel F. Cain
|
Director
|
December
15, 2010
|
||
Daniel F. Cain
|
||||
/s/ Jean L. Fourcroy, M.D., Ph.D.,
M.P.H.
|
Director
|
December
15, 2010
|
||
Jean L. Fourcroy, M.D., Ph.D., M.P.H.
|
||||
/s/ Jaye Thompson,
Ph.D.
|
Director
|
December
15, 2010
|
||
Jaye Thompson, Ph.D
|
S-1
EXHIBIT
INDEX
The
following exhibits are filed as part of, or incorporated by reference into this
registration statement:
Exhibit Number
|
Identification Of Exhibit
|
|
1.1*
|
Form
of Underwriting Agreement
|
|
3.1(a)
|
Restated
Certificate of Incorporation. Exhibit 3.3 to the Company's Registration
Statement on Form SB-2 (No. 33-57728-FW), as amended ("Registration
Statement"), is incorporated herein by reference.
|
|
3.1(b)
|
Certificate
of Amendment to the Company's Restated Certificate of Incorporation, dated
as of May 2, 2006. Exhibit 3.1 to the Company's Current Report
on Form 8-K as filed with the Commission on May 2, 2006 is incorporated
herein by reference.
|
|
3.1(c)
|
Certificate
of Designation of Series One Junior Participating Preferred Stock dated
September 2, 1999. Exhibit A to Exhibit 4.1 to the Company's
Registration Statement on Form 8-A as filed with the Commission on
September 3, 1999 (the "Rights Plan Registration Statement"), is
incorporated herein by reference.
|
|
3.1(d)
|
Certificate
of Amendment to Restated Certificate of Incorporation, dated as of
December 16, 2008. Exhibit 3.1(d) to the Company’s Current
Report on Form 8-K as filed with the Commission on December 23, 2008 is
incorporated herein by reference.
|
|
3.1(e)
|
Certificate
of Amendment to Restated Certificate of Incorporation, dated as of
November 18, 2009. Exhibit 3.1(e) to the Company’s Current Report on
Form 8-K dated November 19, 2009 is incorporated herein by
reference.
|
|
3.1(f)
|
Certificate
of Amendment to Restated Certificate of Incorporation, dated October 14,
2010. Exhibit 3.1(f) to the Company’s Current Report on Form 8-K dated
October 14, 2010 is incorporated herein by reference.
|
|
3.2
|
Restated
Bylaws of the Company. Exhibit 3.4 to the Registration Statement is
incorporated herein by reference.
|
|
4.1
|
Specimen
Certificate of Common Stock, $.001 par value, of the Company. Exhibit 4.1
to the Registration Statement is incorporated herein by
reference.
|
|
4.2
|
Rights
Agreement dated September 1, 1999 between the Company and
Computershare Investor Services LLC (as successor in interest to Harris
Trust & Savings Bank), as Rights Agent. Exhibit 4.1 to the Rights
Plan Registration Statement is incorporated herein by
reference.
|
|
4.3
|
First
Amendment to Rights Agreement, dated as of September 6, 2002, between
the Company, Harris Trust & Savings Bank and Computershare Investor
Services LLC. Exhibit 4.3 to Amendment No. 1 to the Rights Plan
Registration Statement on Form 8-A/A as filed with the Commission on
September 11, 2002 is incorporated herein by
reference.
|
|
4.4
|
Second
Amendment to Rights Agreement, dated as of October 30, 2002, between
the Company and Computershare Investor Services LLC. Exhibit 4.4 to
Amendment No. 2 to the Rights Plan Registration Statement on
Form 8-A/A as filed with the Commission on October 31, 2002 is
incorporated herein by reference.
|
|
4.5
|
Third
Amendment to Rights Agreement, dated as of June 30, 2005, between the
Company and Computershare Trust Company, Inc. (as successor in interest to
Computershare Investor Services, LLC). Exhibit 4.4 to the
Company's Current Report on Form 8-K as filed with the Commission on June
30, 2005 is incorporated herein by reference.
|
|
4.6
|
Fourth
Amendment to Rights Agreement, dated as of January 9, 2008, between the
Company and Computershare Trust Company, Inc. (as successor in interest to
Computershare Investor Services, LLC). Exhibit 4.5 to the
Company's Current Report on Form 8-K as filed with the Commission on
January 10, 2008 is incorporated herein by reference.
|
|
4.7
|
Fifth
Amendment to Rights Agreement, dated as of October 10, 2008, between the
Company and Computershare Trust Company, Inc. (as successor in interest to
Computershare Investor Services, LLC). Exhibit 4.6 to the
Company’s Current Report on Form 8-K as filed with the Commission on
January 10, 2008 is incorporated herein by reference.
|
|
4.8
|
Sixth
Amendment to Rights Agreement, dated as of September 9, 2010, between the
Company and Computershare Trust Company, Inc. (as successor in interest to
Computershare Investor Services, LLC). Exhibit 4.7 to the
Company’s Current Report on Form 8-K as filed with the Commission on
September 10, 2010 is incorporated herein by
reference.
|
4.9
|
Form
of Rights Certificate. Exhibit B to Exhibit 4.1 to the Rights Plan
Registration Statement is incorporated herein by
reference.
|
|
4.10*
|
Form
of Warrant
|
|
4.11*
|
Warrant
Agreement between the Company and Warrant Agent
|
|
5.1*
|
Opinion
of Winstead PC
|
|
10.1+
|
Amended
and Restated 1993 Employee and Consultant Stock Option Plan. Exhibit 10.3
to the Registration Statement is incorporated herein by
reference.
|
|
10.2+
|
First
Amendment to the Repros Therapeutics Inc. Amended and Restated 1993 Stock
Option Plan. Exhibit 10.22 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1999 is incorporated herein by
reference.
|
|
10.3+
|
1994
Employee and Consultant Stock Option Plan. Exhibit 4.2 to the Company's
Registration Statement on Form S-8 (File No. 033-83406) as filed with the
Commission on August 29, 1994 is incorporated herein by
reference.
|
|
10.4+
|
2000
Non-Employee Directors' Stock Option Plan. Appendix B to the Company's
Definitive Proxy Statement filed on April 26, 2000 is incorporated
herein by reference.
|
|
10.5+
|
First
Amendment to the Repros Therapeutics Inc. 2000 Non-Employee Directors'
Stock Option Plan. Exhibit 10.21 to the 2000 Form 10-K is incorporated
herein by reference.
|
|
10.6+
|
Second
Amendment to 2000 Non-Employee Directors' Stock Option Plan. Exhibit 10.6
to the Company's Annual Report on Form 10-K for the year ended
December 31, 2002 (the "2002 Form 10-K") is incorporated herein by
reference.
|
|
10.7+
|
Repros
Therapeutics Inc. 2004 Stock Option Plan. Exhibit 10.17 to the
Company's Registration Statement on Form S-1 (No. 333-119861), as amended,
is incorporated herein by reference.
|
|
10.8+
|
Employment
Agreement between the Company and Joseph S. Podolski. Exhibit 10.5 to the
Registration Statement is incorporated herein by
reference.
|
|
10.9+
|
First
Amendment to Employment Agreement between the Company and Joseph S.
Podolski. Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended March 31, 2001 is incorporated herein by
reference.
|
|
10.10+
|
Second
Amendment to Employment Agreement between the Company and Joseph S.
Podolski. Exhibit 10.17 to the 2002 Form 10-K is incorporated herein by
reference.
|
|
10.11+
|
Third
Amendment to Employment Agreement dated effective March 11, 2009,
between the Company and Joseph S. Podolski. Exhibit 10.1 to the
Company’s Current Report on Form 8-K as filed with the Commission on March
17, 2009 is incorporated herein by reference.
|
|
10.12+
|
Fourth
Amendment to Employment Agreement effective March 10, 2010 between the
Company and Joseph S. Podolski. Exhibit 10.1 to the Company’s
Current Report on Form 8-K as filed with the Commission on March 11, 2010
is incorporated herein by reference.
|
|
10.13+
|
Consulting
Agreement dated October 29, 2009 by and between the Company and Katherine
Anderson. Exhibit 10.2 to the Company’s Current Report on Form
8-K as filed with the Commission on November 3, 2009 is incorporated
herein by reference.
|
10.14
|
Lease
Agreement dated May 11, 2004 between the Company and Sealy Woodlands,
L.P. Exhibit 10.14 to the Company's Annual Report on Form 10-K
for the year ended December 31, 2004 is incorporated herein by
reference.
|
|
10.15
|
Amendment
to Lease Agreement between the Company and Sealy Woodlands, L.P., dated
May 17, 2006. Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 2006 is
incorporated herein by reference.
|
|
10.16
|
Second
Amendment to Lease, effective as of July 1, 2010, between the Company and
Columbia Texas 2408 Timberloch Industrial, L.P. Exhibit 10.1 to
the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2010 is incorporated herein by reference.
|
|
10.17++
|
Letter
Agreement dated July 15, 2002 between the Company, Schering Plough
Ltd. and Schering-Plough Corporation. Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 2002 is incorporated herein by reference.
|
|
10.18++
|
PHS
Patent License Agreement dated April 16, 1999 between the Company and
certain agencies of the United States Public Health Service within the
Department of Health and Human Services, with amendments. Exhibit 10.1 to
the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2003 is incorporated herein by
reference.
|
|
10.19
|
Waiver
to PHS Patent License Agreement, as amended, dated March 8, 2007 between
the Company and certain agencies of the United States Public Health
Service within the Department of Health and Human
Services. Exhibit 10.2 to the Company’s Current Report on Form
8-K as filed with the Commission on March 19, 2007 is incorporated herein
by reference.
|
|
10.20++
|
Sixth
Amendment to PHS Patent License Agreement, as amended, dated July 7, 2009
between the Company and certain agencies of the United States Public
Health Service within the Department of Health and Human
Services. Exhibit 10.1 to the Company’s Current Report on Form
8-K/A as filed with the Commission on December 22, 2009 is incorporated
herein by reference.
|
|
10.21++
|
Seventh
Amendment to PHS Patent License Agreement, as amended, dated October 28,
2009 between the Company and certain agencies of the United States Public
Health Service within the Department of Health and Human
Services. Exhibit 10.21 to the Company’s Annual Report on Form
10-K as filed with the Commission on March 15, 2010 is incorporated herein
by reference.
|
|
10.22
|
Master
Settlement Agreement and Releases dated October 29, 2009 by and among the
Company and its creditors signatory thereto. Exhibit 10.1 to
the Company’s Current Report on Form 8-K as filed with the Commission on
November 3, 2009 is incorporated herein by reference.
|
|
10.23
|
Securities
Purchase Agreement dated October 7, 2009, among the Company and the
purchasers identified on the signature pages thereto. Exhibit
10.1 to the Company’s Current Report on Form 8-K as filed with the
Commission on October 14, 2009 is incorporated herein by
reference.
|
|
10.24
|
Securities
Purchase Agreement between the Company and Enable Growth Partners LP dated
September 8, 2009. Exhibit 10.1 to the Company’s Current Report
on Form 8-K as filed with the Commission on September 10, 2009 is
incorporated herein by reference.
|
|
10.25
|
Form
of Indemnification Agreement entered into between the Company and each of
its directors. Exhibit 10.1 to the Company’s Current Report on
Form 8-K as filed with the Commission on May 20, 2009 is incorporated
herein by reference.
|
|
10.26
|
Equity
Distribution Agreement dated February 12, 2010 between the Company and
Ladenburg Thalmann & Co. Inc. Exhibit 10.1 to the Company’s
Current Report on Form 8-K as filed with the Commission on February 19,
2010 is incorporated herein by reference.
|
|
23.1**
|
Consent
of PricewaterhouseCoopers LLP
|
|
23.2*
|
Consent
of Winstead PC (included in Exhibit
5.1)
|
24.1
|
Power
of Attorney (included on signature page to this registration
statement)
|
*
|
To
be filed by amendment.
|
**
|
Filed
herewith.
|
+
|
Management
contract or compensatory plan.
|
++
|
Portions
of this exhibit have been omitted based on a request for confidential
treatment pursuant to Rule 24b-2 of the Exchange Act. Such omitted
portions have been filed separately with the
Commission.
|