Attached files
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| EX-31.1 - EX-31.1 - FENNEC PHARMACEUTICALS INC. | v210163_ex31-1.htm |
| EX-31.2 - EX-31.2 - FENNEC PHARMACEUTICALS INC. | v210163_ex31-2.htm |
| EX-32.1 - EX-32.1 - FENNEC PHARMACEUTICALS INC. | v210163_ex32-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
Amendment
No. 1
FORM
10-K/A
(Mark One)
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þ
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the
fiscal year ended December 31, 2009
OR
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o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the
transition period from____ to ____
Commission
File Number: 001-32295
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ADHEREX
TECHNOLOGIES INC.
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(Exact
Name of Registrant as Specified in Its
Charter)
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Canada
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20-0442384
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(State
or Other Jurisdiction of
Incorporation
or Organization
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(I.R.S.
Employer
Identification
No.)
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501 Eastowne Drive, Suite 140
Chapel Hill, North Carolina
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27514
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(Address
of Principal Executive
Offices)
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(Zip
Code)
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(919)
636-4530
(Registrant's
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act: None
Securities
registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the Registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. YES ¨ NO þ
Indicate
by check mark if the Registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. YES þ NO ¨
Indicate
by check mark whether the Registrant: (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES þ NO ¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files). YES ¨ NO þ
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. þ
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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LargLarge
accelerated filer ¨
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Accelerated
filer
¨
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Non-accelerated
filer ¨
(Do
not check if a smaller reporting
company)
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Smaller
reporting
company
þ
|
Indicated
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). YES ¨ NO þ
The
aggregate market value of the voting stock held by non-affiliates of the
Registrant, computed by reference to the closing sales price of the Common
Shares as reported by NYSE Alternext US LLC, formerly the American Stock
Exchange on June 30, 2009 (the last business day of the Registrant’s most
recently completed second fiscal quarter) was $2,078,135 based upon a total of
69,571,192 shares
held as of June 30, 2009 by persons believed to be non-affiliates of the
Registrant. For purposes of this calculation, all of the Registrant’s
officers, directors and 10% owners known to the Company are deemed to be
affiliates of the Registrant.
As of
March 16, 2010, there were 128,226,787 shares of common stock
outstanding.
Explanatory
Note
Adherex
Technologies, Inc. (the “Company”) is filing this Amendment No. 1 to its Annual
Report on Form 10-K (the “Form 10-K/A”) to amend its Annual Report on Form 10-K
for the year ended December 31, 2009, which was filed with the Securities and
Exchange Commission (“SEC”) on March 31, 2010 (the “2009 10-K”). This Form
10-K/A amends the 2009 10-K by: (i) revising our disclosure in Part I, Item 1.
(Business) under Corporate Relationships to expand our description of the
development and license agreement with GlaxoSmithKline (“GSK”); (ii) revising
our disclosure in Part II, Item 9A. (Controls and Procedures) of
management’s conclusion regarding the effectiveness of the Company’s disclosure
controls and procedures as of December 31, 2009; (iii) adding disclosure in Part
II, Item 9A. (Controls and Procedures) required by Item 308T(a) of Regulation
S-K to be included in Management’s Report on internal control over financial
reporting; (iv) revising our disclosure in Part II, Item 9A (Controls and
Procedures) of management’s conclusion in its assessment of internal control
over financial reporting; and (v) revising our certifications in Exhibits 31.1
and 31.2 to be worded exactly as required by Item 601(b)(31) of Regulation
S-K. Except as described above, no other changes have been made to
the 2009 10-K, and this Amendment No. 1 does not otherwise amend, update or
change the financial statements or disclosures in the 2009 10-K.
1
PART
I
ITEM 1.
BUSINESS.
Overview
On July
7, 2009, we announced that we intended to focus our remaining financial
resources on the development of oral eniluracil. We have terminated our
eniluracil study using our topical formulation and will focus our resources on
the development of a redesigned study combining oral eniluracil and
5-fluorouracil, or 5-FU, targeting anti-cancer indications. After a careful
evaluation of the data from the prior GlaxoSmithKline, or GSK, studies, data
from our studies and other studies using eniluracil, we believe we can design
and implement a Phase II study with eniluracil within the next three to nine
months assuming we have adequate financial resources to conduct such a study.
Additinally, throughout the remainder of 2009, we conducted an evaluation of
ADH-1 and STS. The evaluation of ADH-1 resulted in the return of all ADH-1
patents and licenses to McGill University. With regards to STS, we continue our
Phase III studies with STS for both the International Childhood Liver Tumour
Strategy Group, known as SIOPEL, and the Children's Oncology Group, or COG. Our
evaluation of STS continues to pursue strategic alternatives, including
collaborations with other pharmaceutical and biotechnology
companies.
Our
planned clinical development of eniluracil is dependent on obtaining additional
financial resources in the very near term. If we do not receive additional
financial resources in the near term, we might cease operations sooner than June
30, 2010. We currently have three employees and members of the Board of
Directors have agreed to continue to serve for the benefit of the shareholders
without further compensation. Our projections of our capital requirements into
the second quarter of 2010 and beyond are subject to substantial uncertainty.
Additional capital may be required earlier than June 30, 2010 or more capital
than we had anticipated thereafter may be required. To finance our operations
beyond the second quarter of 2010, or earlier if necessary, we will need to
raise substantial additional funds through either the sale of additional equity,
the issuance of debt, the establishment of collaborations that provide us with
funding, the out-license or sale of certain aspects of our intellectual property
portfolio, or from other sources. Given current economic conditions, we might
not be able to raise the necessary capital or such funding may not be available
on acceptable terms. If we cannot obtain adequate funding, we might be required
to further delay, scale back or eliminate certain research and development
studies, consider business combinations or shut down some, or all, of our
operations.
We are a
biopharmaceutical company focused on cancer therapeutics. We are in the business
of solving problems for patients with cancer. We have two primary products in
the clinical stage of development, including: (1) Eniluracil, an oral
dihydropyrimidine dehydrogenase, or DPD, inhibitor, which may improve the
tolerability and effectiveness of 5-fluorouracil (5-FU), one of the most widely
used oncology drugs in the world; and (2) STS is a chemoprotectant being
developed to reduce or prevent hearing loss that may result from treatment with
platinum-based chemotherapy drugs.
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We
are evaluating a study design for a Phase II study in which we will dose
patients with eniluracil, 5-FU and leucovorin. Our prior eniluracil
studies have shown that the dose of eniluracil was too low and
consequently provided inadequate inactivation of DPD. We plan to increase
the dose of eniluracil and also include leucovorin in our planned clinical
trial. Leucovorin potentiates the anticancer activity of 5-FU and has been
shown to be well tolerated in patients treated with both eniluracil and
5FU. Leucovorin is uniquely appropriate to eniluracil regimens because it
greatly reduces the variability of 5-FU dosing. We are evaluating cancer
disease targets for our planned Phase II trial and are currently
considering colorectal and breast cancer, where Xeloda is indicated. The
combination of eniluracil and 5-FU has been shown to be active and well
tolerated against these diseases. However, the previous studies used
eniluracil in a ten to one ratio to 5-FU. Because such high ratios of
eniluracil to 5-FU were found to decrease the antitumor activity in
laboratory animals, our planned study will use a strategy that adequately
inactivates DPD and does not have high levels of eniluracil present when
5-FU is administered. We expect to design and commence these studies
within the next three to nine months assuming we have adequate financial
resources to conduct such a study. We will also solicit the assistance of
certain key opinion leaders for the design of these
studies.
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We
continue to enroll patients in our Phase III trials of STS with the
International Childhood Liver Tumour Strategy Group, known as SIOPEL and
the Children's Oncology Group, or COG. The SIOPEL trial is expected to
enroll approximately 100 pediatric patients with liver (hepatoblastoma)
cancer at participating SIOPEL centers worldwide and the COG study is
expected to enroll up to 120 pediatric patients worldwide in five
different disease indications.
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2
Our
current prioritization initiative focuses primarily on our clinical activities
with eniluracil, and preclinical support will be limited only to those
activities necessary to support the ongoing clinical programs.
On
January 20, 2009, we filed a notification to remove our common stock from the
AMEX and effective January 30, 2009, our common stock no longer traded on the
AMEX. Our common stock continues to trade on the Toronto Stock Exchange, or TSX,
and on the over the counter market, or pink sheets, in the U.S.
Adherex
Technologies Inc. was incorporated under the Canada Business Corporations Act
and has three wholly-owned subsidiaries: Oxiquant, Inc. and Adherex, Inc., both
Delaware corporations, and Cadherin Biomedical Inc., a Canadian
company.
Eniluracil
Eniluracil
was previously under development by GlaxoSmithKline, or GSK. GSK advanced
eniluracil into a comprehensive Phase III clinical development program that did
not produce positive results and GSK terminated further development. We
developed a hypothesis as to why the GSK Phase III trials were not successful
and licensed the compound from GSK in July 2005. We successfully completed a
clinical proof of concept study using a modified dose and schedule of eniluracil
and 5-FU. We believe that eniluracil might enhance and expand the therapeutic
spectrum of activity of 5-FU, reduce the occurrence of a disabling side effect
known as hand foot syndrome and allow 5-FU to be given orally.
Eniluracil
is an irreversible inhibitor of DPD, the enzyme primarily responsible for the
rapid breakdown of 5-FU in the body. Eniluracil is being developed by Adherex to
improve the therapeutic value of 5-FU by making it effective in cancers and
reducing the debilitating side effects.
While
5-FU is a current mainstay of contemporary oncology treatment, it has some
therapeutic drawbacks and limitations:
5-FU:
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is
given by vein (intravenously) and often by prolonged, multi-day
infusions;
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produces
highly variable blood levels in patients. Low levels can reduce its
effectiveness and high levels can increase its side
effects;and
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is
broken down (catabolized) to form α-fluoro-β-alanine (F-BAL). This
compound appears to cause neurotoxicity and “hand-foot syndrome” which are
debilitating and dose-limiting side effects of 5-FU therapy. Importantly,
F-BAL also decreases the antitumor activity of
5-FU in lab animals.
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Eniluracil:
Mechanism of Action
By
inactivating DPD, eniluracil prevents the breakdown of 5-FU to F-BAL. Eniluracil
also greatly prolongs exposure of the tumor cells to 5-FU.
When
eniluracil is properly used in combination with 5-FU, it resolves many of the
therapeutic drawbacks and limitations of 5-FU noted above.
For
instance, eniluracil:
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enables
5-FU to be dosed orally;
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converts
highly variable blood levels of 5-FU to highly consistent and predictable
levels;
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3
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extends
the elimination half-life of 5-FU from about 10 minutes to about 5 hours;
and
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prevents
the formation of F-BAL, which is the apparent causative agent for
hand-foot syndrome and for 5-FU-induced neurotoxicity. F-Bal also
decreases the antitumor efficacy of 5-FU in lab
animals.
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Thus,
eniluracil has the potential to make 5-FU more effective and better
tolerated.
Eniluracil:
Clinical Development
Eniluracil
plus 5-FU was previously being developed by GlaxoSmithKline (GSK). Although the
therapy was successful in Phase I and Phase II clinical trials, it tended to
produce less antitumor activity than the control therapy in two Phase III
trials. Development was subsequently stopped.
Adherex
believes that the dose and schedule used in the previous GSK Phase III trials
may not have been optimal. Preclinical studies have shown that when eniluracil
is present in high ratios to 5-FU, it decreases the antitumor activity. In the
GSK Phase III trials, the ratio of eniluracil to 5-FU was 10 to 1.
Adherex’s
Chief Scientific Officer, Dr. Spector, is the principal inventor of
eniluracil/5-FU treatment and has 20 years experience with eniluracil. Dr.
Spector has created a revised protocol designed to avoid the problems of the
earlier GSK Phase III trials as well as those encountered in Adherex's more
recent trials. Adherex is considering disease targets and trial
designs.
Eniluracil:
Market Opportunity
Xeloda®,
a currently available oral 5-FU prodrug, has worldwide sales of over US$1
billion each year. Eniluracil + 5-FU/leucovorin could not only could compete
with Xeloda® in its currently approved indications (with either a reduced
toxicity profile, enhanced efficacy, or both) but also may open up new
indications where 5-FU (and Xeloda®) is not currently used, expanding the reach
of a drug that is already one of the world’s most widely used.
STS
STS is
currently marketed for use in humans as part of a treatment for cyanide
poisoning. We have licensed from Oregon Health & Science University (“OHSU”)
intellectual property rights for the use of STS as a chemoprotectant, and are
developing STS as a protectant against the hearing loss often caused by
platinum-based anti-cancer agents, in both children and adults. Preclinical and
clinical studies conducted by OHSU and others have indicated that STS can
effectively reduce the incidence of hearing loss caused by platinum-based
anti-cancer agents. We have received Orphan Drug Designation in the United
States for the use of STS in the prevention of platinum-induced ototoxicity in
pediatric patients.
Hearing
loss among children receiving platinum-based chemotherapy is frequent, permanent
and often severely disabling. The incidence of hearing loss in these children
depends upon the dose and duration of chemotherapy, and many of these children
require lifelong hearing aids. There is currently no established preventive
agent for this hearing loss and only expensive, technically difficult and
sub-optimal cochlear (inner ear) implants have been shown to provide some
benefit. In addition, adults undergoing chemotherapy for several common
malignancies, including ovarian cancer, testicular cancer, and particularly head
and neck cancer and brain cancer, often receive intensive platinum-based therapy
and may experience severe, irreversible hearing loss, particularly in the high
frequencies.
Investigators
at OHSU have conducted Phase I and Phase II studies which have shown STS reduces
the hearing loss associated with platinum-based chemotherapy. In one study at
OHSU, the need for hearing aids to correct high frequency hearing loss was
reduced from about 50% to less than 5%.
4
In
October 2007, we announced that our collaborative partner, the International
Childhood Liver Tumour Strategy Group (known as SIOPEL), a multi-disciplinary
group of specialists under the umbrella of the International Society of
Pediatric Oncology, had launched a randomized Phase III clinical trial to
investigate whether STS reduces hearing loss in children receiving cisplatin, a
platinum-based chemotherapy often used in children. The study initially opened
in the United Kingdom and will include SIOPEL centers in up to 33 additional
further countries. The clinical trial is expected to enroll approximately 100
children with liver (hepatoblastoma) cancer. Patients will receive cisplatin
alone or cisplatin plus STS. The study, which is being coordinated through the
Children’s Cancer and Leukemia Group in the United Kingdom, is intended to
compare the level of hearing loss associated with cisplatin alone versus the
combination of cisplatin plus STS, as well as the safety, tolerability and
anti-tumor activity in both arms of the study. Under the terms of our agreement,
SIOPEL will conduct and fund the clinical activity and we will provide drug,
drug distribution and pharmacovigilance, or safety monitoring, for the
study.
In March
2008, we announced the activation of a Phase III trial with STS to prevent
hearing loss in children receiving cisplatin-based chemotherapy in collaboration
with the Children’s Oncology Group, or COG. The goal of this Phase III study is
to evaluate in a multi-centered, randomized trial whether STS is an effective
and safe means of preventing hearing loss in children receiving cisplatin-based
chemotherapy for newly diagnosed germ cell, liver (hepatoblastoma), brain
(medulloblastoma), nerve tissue (neuroblastoma) or bone (osteosarcoma) cancers.
Eligible children who are to receive cisplatin according to their
disease-specific regimen (will be one to eighteen years of age) and, upon
enrollment in this study, will be randomized to receive STS or not. Efficacy of
STS will be determined through comparison of hearing sensitivity at follow-up
relative to baseline measurements using standard audiometric techniques. The
trial is expected to enroll up to 120 patients in up to 230 COG centers in the
United States, Canada, Australia and Europe. COG will fund the clinical
activities for the study and we will be responsible for providing the drug, drug
distribution and pharmacovigilance, or safety monitoring, for the
study.
Intellectual
Property
Our
general policy is to seek patent protection in the United States, major European
countries, Japan, Canada and other jurisdictions as appropriate for our
compounds and methods. Our cadherin-based patent portfolio currently includes
patents with respect to our unique composition of matter, broad claims with
respect to modulating cell adhesion, specific claims for the use of these
compounds in various diseases and pharmaceutical formulations of these
compounds.
Currently,
we own or have licensed more than 10 issued U.S. patents. Eniluracil is
currently protected under issued composition of matter and method patents that
we exclusively licensed from GSK that expire in 2014 and 2015 (in combination
with 5-fluorouracil). STS is currently protected by method of use patents that
we exclusively licensed from OHSU that expire in Europe in 2021 and are
currently pending in the United States. None of the above expiry dates take into
consideration additional pending patent applications for eniluracil that, if
issued, could provide additional patent protection, nor possible patent term
extensions or periods of data exclusivity that may be available upon marketing
approval in the various countries worldwide. In addition, periods of marketing
exclusivity for STS may also be possible in the United States under orphan drug
status. We obtained U.S. Orphan Drug Designation for the use of STS in the
prevention of platinum-induced ototoxicity in pediatric patients in
2004.
Our
success is significantly dependent on our ability to obtain and maintain patent
protection for our product candidates, both in the United States and abroad. The
patent position of biotechnology and pharmaceutical companies, in general, is
highly uncertain and involves complex legal and factual questions, which often
results in apparent inconsistencies regarding the breadth of claims allowed and
general uncertainty as to their legal interpretation and enforceability.
Further, some of our principal candidates, including STS, are based on
previously known compounds, and candidates or products that we develop in the
future may include or be based on the same or other compounds owned or produced
by other parties, some or all of which may not be subject to effective patent
protection. In addition, regimens that we may develop for the administration of
pharmaceuticals, such as specifications for the frequency, timing and amount of
dosages, may not be patentable. Accordingly, our patent applications may not
result in patents being issued and issued patents may not afford effective
protection. In addition, products or processes that we develop may turn out to
be covered by third party patents, in which case we may require a license under
such patents if we intend to continue the development of those products or
processes.
5
Corporate
Relationships
License
Agreement with Oregon Health & Science University
In
November 2002, we acquired an exclusive license agreement with OHSU through our
acquisition of Oxiquant Inc., which had entered into the license agreement with
OHSU in September 2002. Pursuant to the license agreement, OHSU granted us an
exclusive worldwide license to intellectual property directed to thiol-based
compounds including STS and their use in oncology. In consideration, OHSU was
issued 250,250 shares of common stock of Oxiquant that were subsequently
converted upon the acquisition of Oxiquant into 382,514 shares of Adherex common
stock, and warrants to purchase shares of Adherex common stock that subsequently
expired in 2007. In addition, we are required to make the following milestone
payments: (i) $50,000 upon completion of Phase I clinical trials, (ii) $200,000
upon completion of Phase II clinical trials, (iii) $500,000 upon completion of
Phase III clinical trials, and (iv) $250,000 upon the first commercial sale for
any licensed product. We are also required to pay OHSU a 2.5% royalty on net
sales of any licensed products and a 15% royalty on any consideration received
from sublicensing of the licensed technology.
The term
of the license agreement expires on the date of the last to expire claim(s)
covered in the patents licensed to us, unless earlier terminated as provided in
the agreement. The agreement is terminable by OHSU in the event of a material
breach of the agreement by us or our sublicensees after 60 days prior written
notice from OHSU. We have the right to terminate the agreement at any time upon
60 days prior written notice and payment of all fees due to OHSU under the
agreement.
Development
and License Agreement with GlaxoSmithKline
On July
14, 2005, we entered into a development and license agreement with
GlaxoSmithKline, or GSK. The agreement included the in-license by our
Company of GSK’s oncology product, eniluracil, and an option for GSK to license
ADH-1. As part of the transaction, GSK invested $3.0 million in our
Company's common stock. On October 11, 2006, the GSK option to
license ADH-1 expired unexercised. Under the terms of the agreement
relating to eniluracil, we received an exclusive license to develop eniluracil
for all indications and GSK retained options to buy-back and assume development
of the compound at various points in time.
On March
1, 2007, the GSK agreement was amended and we purchased all of GSK’s remaining
buy-back options for a fee of $1.0 million. As a result of the
amendment to the GSK agreement, we now may be required to pay GSK development
and sales milestones and royalties. Specifically, if we file a New
Drug Application, or NDA, with the Food and Drug Administration, or FDA, we may
be required to pay development milestones of $5.0 million to
GSK. Additionally, depending upon whether the NDA is approved by the
FDA and whether eniluracil becomes a commercial success, we may be required to
pay up to an additional $70.0 million in development and sales milestones for
the initially approved indication, plus royalties in the low-double digit range
based on annual net sales. If we pursue other indications, we may
also be required to pay up to an additional $15 million to GSK for
each FDA-approved indication. The GSK agreement continues until terminated by
either party in the event of an uncured breach by the breaching party
after 60 days prior written notice.
Collaboration
Agreement with McGill University
In
February 2001, we entered into a general collaboration agreement with McGill
University. Pursuant to the terms of the agreement, McGill granted us a 27-year
exclusive worldwide license to develop, use and market certain cell adhesion
technology and compounds. In particular, McGill granted us an exclusive
worldwide license to U.S. Patent 6,031,072 covering specific compounds including
ADH-1 (composition of matter), U.S. Patent 6,551,994 covering alpha-catenin and
beta-catenin inhibiting compounds, related international filings under the
Patent Cooperation Treaty, or PCT, continuations and certain other patents and
patent applications.
In
consideration, we issued 508,416 shares of our common stock to McGill. We also
agreed to pay to McGill future royalties of 2% of any gross revenues from the
use of the technology and compounds. In addition, we agreed to fund research at
McGill over a period of 10 years totaling CAD$3.3 million. Annual funding
commenced in 2001, the first year of the agreement, for a total of CAD$200,000,
and increases annually by 10% through 2010, when the required annual funding
reaches CAD$500,000.
The
general collaboration agreement with McGill University terminated on November
19, 2009. Adherex returned all licenses to McGill University granted in the
agreement.
Competition
Competition
in the biotechnology and pharmaceutical industries is intense. We expect that if
any of our product candidates achieve regulatory approval for sale, they will
compete on the basis of drug efficacy, safety, patient convenience, reliability,
ease of manufacture, price, marketing, distribution and patent protection, among
other variables. Our competitors may develop technologies or drugs that are more
effective, safer or more affordable than any we may develop.
6
There are
a number of different approaches to the development of therapeutics for the
treatment of cancer that are currently being used and studied. These approaches
include: (i) surgery to excise the cancerous tissue; (ii) radiation therapy,
which attacks cancerous cells but does not easily distinguish between healthy
and diseased cells; (iii) chemotherapy, which works by preventing a cancerous
cell from dividing or by killing cells that quickly divide; (iv) immunotherapy,
which stimulates the body’s immune system to respond to the disease; and (v)
hormone therapy, which may slow the growth of cancer cells or even kill
them.
We are
aware of a number of companies engaged in the research, development and testing
of new cancer therapies or means of increasing the effectiveness of existing
therapies, including, among many others, Abbott Laboratories, Amgen, Antisoma,
AstraZeneca, Bayer, Bristol-Myers Squibb, EntreMed, Genentech, Merck & Co.,
NeoPharm, Novartis, Johnson & Johnson, OSI Pharmaceuticals, Onyx, OXiGENE,
Peregrine Pharmaceuticals, Pfizer, Roche, Taiho and Sanofi-Aventis. Some of
these companies have products that have already received, or are in the process
of receiving, regulatory approval or are in later stages of clinical development
than our products. Many of them have much greater financial resources than we
do. Many of these companies have marketed drugs or are developing targeted
cancer therapeutics which, depending upon the mechanism of action of such
agents, could be viewed as competitors.
There are
several potential therapies that may be competitive to eniluracil, including
capecitabine (Xeloda®) which is an oral pro-drug of 5-FU marketed by Roche that
is converted to 5-FU following absorption from the gastrointestinal tract.
Capecitabine is approved by the FDA and many other regulatory agencies worldwide
for use in breast and colorectal cancer, but eniluracil/5-FU has a potential
competitive advantage in having minimal hand foot syndrome compared to the up to
60% incidence with Xeloda®. Hand foot syndrome is a major complication of the
use of Xeloda® and there is currently no adequate treatment, with most
physicians resorting to reducing the starting dosage of Xeloda®.
5-FU is
normally rapidly metabolized and broken down by the enzyme DPD. Eniluracil is an
irreversible inhibitor of DPD and its use with 5-FU leads to prolonged and
elevated levels of 5-FU. Uracil is a competitive inhibitor of DPD. Although not
FDA approved as a therapeutic agent, uracil has been used with 5-FU and tegafur,
a reversible DPD inhibitor (5-chloro-2, 4-dihydrozypyidine, or CDHP) for the
treatment of certain cancers. UFT is an orally active combination of uracil and
tegafur that is available in some international markets through Merck
KGaA.
S-1,
which is marketed by Taiho in Japan for gastric cancer, colorectal cancer, head
and neck cancer, non-small cell lung cancer, and inoperable or recurrent breast
cancer, is an orally active combination of tegafur and oxonic acid, an inhibitor
of phosphoribosyl pyrophosphate transferase, an enzyme that reduces the
incorporation of 5-FU into RNA. Both S-1 and UFT have been shown to have very
low levels of hand foot syndrome, but because they are reversible inhibitors of
DPD, these products would not be expected to be as successful at targeting new
product indications where DPD levels are intrinsically high, such as
hepatocellular cancer, compared to an irreversible DPD inhibitor like
eniluracil. Other reversible DPD inhibitors in development include a Roche
molecule, Ro 09-4889, which has completed a Phase I clinical study. To our
knowledge, no other irreversible DPD inhibitors are currently in
development.
We are
not aware of any commercially available agents that reduce the incidence of
hearing loss associated with the use of platinum-based anti-cancer agents, for
which purpose we are developing STS. There are several potential competitive
agents with activity in preclinical or limited clinical settings. These include:
D-methionine, an amino acid that has been shown to protect against hearing loss
in experimental settings but was demonstrated to be inferior to STS in
comparative studies; SPI-3005, an oral agent primarily being developed by Sound
Pharmaceuticals for noise and age-related hearing loss but in early Phase I
trials for chemotherapy related hearing loss, which mimics glutathione
peroxidase and induces the intracellular induction of glutathione; AHLi-11, an
siRNA compound not yet in clinical trials being developed by Quark
Pharmaceuticals aimed at silencing p53 following high dose cisplatin therapy;
N-acetylcysteine and amifostine, which have shown effectiveness (but less than
STS) in experimental systems; and Vitamin E, salicylate and tiopronin, which
have all demonstrated moderate activity in rat models to protect against
cisplatin-induced ototoxicity, but no clinical trials have been performed.
Cochlear implants, which are small electronic devices that are surgically placed
in the inner ear to assist with certain types of deafness, are utilized to offer
some relief but are often suboptimal.
7
Many
chemotherapeutic agents are currently available and numerous others are being
developed. Any chemotherapeutic products that we develop may not be able to
compete effectively with existing or future chemotherapeutic agents. Our
competitors might obtain regulatory approval for their drug candidates sooner
than we do, or their drugs may prove to be more effective than ours. However,
cancer as a disease is not currently controlled by any one anti-cancer agent,
and there is typically a need for several agents at any one time and over
time.
Many of
our existing or potential competitors have substantially greater financial,
technical and human resources than we do and may be better equipped to develop,
manufacture and market products. In addition, many of these competitors have
extensive experience with preclinical testing and human clinical trials and in
obtaining regulatory approvals. In addition, many of the smaller companies that
compete with us have formed collaborative relationships with large, established
companies to support the research, development, clinical trials and
commercialization of any products that they may develop. We may rely on third
parties to commercialize the products we develop, and our success will depend in
large part on the efforts and competitive merit of these collaborative partners.
Academic institutions, government agencies and other public and private research
organizations may also conduct research, seek patent protection and establish
collaborative arrangements for research, clinical development and marketing of
products similar to those we seek to develop. These companies and institutions
compete with us in recruiting and retaining qualified scientific and management
personnel as well as in acquiring technologies complementary to our projects.
The existence of competitive products, including products or treatments of which
we are not aware, or products or treatments that may be developed in the future,
may adversely affect the marketability of any products that we may
develop.
Government
Regulation
The
production and manufacture of our product candidates and our research and
development activities are subject to significant regulation for safety,
efficacy and quality by various governmental authorities around the
world.
In
Canada, these activities are subject to regulation by Health Canada’s
Therapeutic Products Directorate, or TPD, and the rules and regulations
promulgated under the Food and Drug Act. In the United States, drugs and
biological products are subject to regulation by the FDA. The FDA requires
licensing of manufacturing and contract research facilities, carefully
controlled research and testing of products and governmental review and approval
of results prior to marketing therapeutic products. Additionally, the FDA
requires adherence to “Good Laboratory Practices” as well as “Good Clinical
Practices” during clinical testing and “Good Manufacturing Practices” and
adherence to labeling and supply controls. The systems of new drug approvals in
Canada and the United States are substantially similar, and are generally
considered to be among the most rigorous in the world.
Generally,
the steps required for drug approval in Canada and the United States,
specifically in cancer related therapies, include:
Preclinical Studies: Preclinical studies, also
known as non-clinical studies, primarily involve evaluations of pharmacology,
toxic effects, pharmacokinetics and metabolism of a drug in animals to provide
evidence of the relative safety and bioavailability of the drug prior to its
administration to humans in clinical studies. A typical program of preclinical
studies takes 18 to 24 months to complete. The results of the preclinical
studies as well as information related to the chemistry and comprehensive
descriptions of proposed human clinical studies are then submitted as part of
the Investigational New Drug, or IND, application to the FDA, a Clinical Trial
Application to the TPD, or similar submission to other foreign regulatory
bodies. This is necessary in Canada, the United States and most other countries
prior to undertaking clinical studies. Additional preclinical studies are
conducted during clinical development to further characterize the toxic effects
of a drug prior to submitting a marketing application.
Phase I Clinical Trials: Most Phase I clinical
trials take approximately one year to complete and are usually conducted on a
small number of healthy human subjects to evaluate the drug’s safety,
tolerability and pharmacokinetics. In some cases, such as cancer indications,
Phase I clinical trials are conducted in patients rather than healthy
volunteers.
Phase II Clinical Trials: Phase II clinical
trials typically take one to two years to complete and are generally carried out
on a relatively small number of patients (generally between 15 and 50 patients)
in a specific setting of targeted disease or medical condition, in order to
provide an estimate of the drug’s effectiveness in that specific setting. This
phase also provides additional safety data and serves to identify possible
common short-term side effects and risks in a somewhat larger group of patients.
Phase II testing frequently relates to a specific disease, such as breast or
lung cancer. Some contemporary methods of developing drugs, particularly
molecularly targeted therapies, do not require broad testing in specific
diseases, and instead permit testing in subsets of patients expressing the
particular marker. In some cases, such as cancer indications, the company
sponsoring the new drug may submit a marketing application to seek accelerated
approval of the drug based on evidence of the drug’s effect on a “surrogate
endpoint” from Phase II clinical trials. A surrogate endpoint is a laboratory
finding or physical sign that may not be a direct measurement of how a patient
feels, functions or survives, but is still considered likely to predict
therapeutic benefit for the patient. If accelerated approval is received, the
company sponsoring the new drug must continue testing to demonstrate that the
drug indeed provides therapeutic benefit to the patient.
8
Phase III Clinical Trials: Phase III clinical
trials typically take two to four years to complete and involve tests on a much
larger population of patients suffering from the targeted condition or disease.
These studies involve conducting controlled testing and/or uncontrolled testing
in an expanded patient population (several hundred to several thousand patients)
at separate test sites (multi-center trials) to establish clinical safety and
effectiveness. These trials also generate information from which the overall
benefit-risk relationship relating to the drug can be determined and provide a
basis for drug labeling. Phase III trials are generally the most time consuming
and expensive part of a clinical trial program. In some instances, governmental
authorities (such as the FDA) will allow a single Phase III clinical trial to
serve as a pivotal efficacy trial to support a Marketing
Application.
Marketing Application: Upon completion of
Phase III clinical trials, the pharmaceutical company sponsoring the new drug
assembles all the chemistry, preclinical and clinical data and submits it to the
TPD or the FDA as part of a New Drug Submission in Canada or a New Drug
Application, or NDA, in the United States. The marketing application is then
reviewed by the regulatory body for approval to market the product. The review
process generally takes twelve to eighteen months.
Any
clinical trials that we conduct may not be successfully completed, either in a
satisfactory time period or at all. The typical time periods described above may
vary substantially and may be materially longer. In addition, the FDA and its
counterparts in other countries have considerable discretion to discontinue
trials if they become aware of any significant safety issues or convincing
evidence that a therapy is not effective for the indication being tested. The
FDA and its counterparts in other countries may not (i) allow clinical trials to
proceed at any time after receiving an IND, (ii) allow further clinical
development phases after authorizing a previous phase, or (iii) approve
marketing of a drug after the completion of clinical trials.
While
European, U.S. and Canadian regulatory systems require that medical products be
safe, effective, and manufactured according to high quality standards, the drug
approval process in Europe differs from that in the United States and Canada and
may require us to perform additional preclinical or clinical testing regardless
of whether FDA or TPD approval has been obtained. The amount of time required to
obtain necessary approvals may be longer or shorter than that required for FDA
or TPD approval. European Union Regulations and Directives generally classify
health care products either as medicinal products, medical devices or in vitro
diagnostics. For medicinal products, marketing approval may be sought using
either the centralized procedure of the European Agency for the Evaluation of
Medicinal Products, or EMEA, or the decentralized, mutual recognition process.
The centralized procedure, which is mandatory for some biotechnology derived
products, results in an approval recommendation from the EMEA to all member
states, while the European Union mutual recognition process involves country by
country approval.
PART
II
ITEM 9A. CONTROLS AND
PROCEDURES
Conclusion
Regarding the Effectiveness of Disclosure Controls and Procedures
In
connection with the preparation of this annual report on Form 10-K/A, an
evaluation was carried out by the Company’s management, with the participation
of the Chief Executive Officer and the Chief Financial Officer, of the
effectiveness of the Company’s disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934
(“Exchange Act”)) as of December 31, 2009. Disclosure controls and
procedures are designed to ensure that information required to be disclosed in
reports filed or submitted under the Exchange Act is recorded, processed,
summarized, and reported within the time periods specified in Securities and
Exchange Commission rules and forms and that such information is accumulated and
communicated to management, including the Chief Executive Officer and the Chief
Financial Officer, to allow timely decisions regarding required
disclosures. In designing and evaluating our disclosure controls and
procedures, management recognizes that any controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives. Based on that evaluation,
the Company’s management concluded, as of the end of the period covered by this
report, that the Company’s disclosure controls and procedures were not effective
as a result of (i) management’s incomplete report on internal controls over
financial reporting in this annual report on Form 10-K, as originally filed on
March 31, 2010, and (ii) having identified two material weaknesses in our
internal control over financial reporting, as described in further detail
below.
9
Management’s
Report on Internal Control over Financial Reporting
This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the Company’s registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the Company to provide only management’s report
in this annual report.
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Securities Exchange Act of 1934, as amended. The Company’s
internal control over financial reporting is a process, under the supervision of
the Chief Executive Officer and the Chief Financial Officer, designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of the Company’s financial statements for external purposes in
accordance with United States generally accepted accounting principles
(GAAP). The Company’s management conducted an assessment of the
effectiveness of the Company’s internal control over financial reporting as of
December 31, 2009, based on the criteria established in Internal Control –
Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission, or COSO. Based on the aforementioned criteria,
our management concluded in its assessment of internal control over financial
reporting that our internal control procedures, as of December 31, 2009, was not
effective, as a result of having identified two material weaknesses in our
internal control over financial reporting, as described in further detail
below.
Our
management has identified a control deficiency because we lack sufficient staff
to segregate accounting duties. We believe the control deficiency
results primarily because we have one person performing all accounting and
financial reporting duties. As a result, we do not maintain adequate
segregation of duties within our critical financial reporting applications, the
related modules and financial reporting processes. This control
deficiency could result in a misstatement of balance sheet and income statement
accounts in our interim or annual financial statements that would not be
detected. Accordingly, management has determined that this control
deficiency constitutes a material weakness.
Our
management has also identified another control deficiency that it believes
constitutes a material weakness in our control over financial reporting. We did
not maintain sufficient personnel with an appropriate level of technical
accounting knowledge, experience, and training in the application of U.S. GAAP
commensurate with our complexity and our financial accounting and reporting
requirements. This control deficiency could result in a misstatement of the
financial statements including disclosure that would not be prevented or
detected on a timely basis. We have not, therefore, timely prepared our
consolidated financial statements and filed our periodic reports with the
SEC. While we strive to ensure we have appropriate accounting
personnel as well as an appropriate segregation of duties as much as
practicable, we currently have insufficient financial resources to justify
additional staff. The Company continues to seek solutions to
improve internal control over financial reporting. As a result, these
significant internal control deficiencies are not expected to be remediated
until we secure additional financial resources.
Changes
in Internal Control over Financial Reporting
There was
no change in our internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act) identified in connection with
the evaluation of our internal control over financial reporting that occurred
during the last fiscal quarter covered by this Annual Report that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
10
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
Adherex
Technologies Inc.
|
|||
|
Dated
February 4, 2011
|
By:
|
/s/ Rostislav Raykov | |
|
Rostislav
Raykov
|
|||
|
Chief
Executive Officer and Director
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated:
|
Signature
|
Title
|
Date
|
||
| /s/ Rostislav Raykov |
Chief
Executive Officer (principal executive officer) and
Director
|
February
4, 2011
|
||
|
Rostislav
Raykov
|
||||
| /s/ Robert Andrade |
Chief
Financial Officer (principal financial officer and
principal
|
February
4, 2011
|
||
|
Robert
Andrade
|
accounting
officer) and Director
|
|||
| /s/ Robert W. Butts |
Chairman
of the Board
|
February
4, 2011
|
||
|
Robert
W. Butts
|
||||
| /s/ William G. Breen |
Director
|
February
4, 2011
|
||
|
William
G. Breen
|
||||
| /s/ Claudio F. Bussandri |
Director
|
February
4, 2011
|
||
|
Claudio
F. Bussandri
|
||||
| /s/ David Lieberman |
Director
|
February
4, 2011
|
||
|
David
Lieberman
|
||||
| /s/ Arthur T. Porter |
Director
|
February
4, 2011
|
||
|
Arthur
T. Porter
|
|
|
11