Unassociated Document
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-KSB
ANNUAL
REPORT
PURSUANT
TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
(Mark
One)
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ý
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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, 2007
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OR
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o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
1934
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For
the transition period from______________________
to____________________________
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Commission
File Number: 333-139354
PIPEX
PHARMACEUTICALS, INC.
(Name
of small business issuer in its charter)
Delaware
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13-3808303
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(State
or other jurisdiction of incorporation or organization)
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(IRS
Employer Identification Number)
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3930
Varsity Drive
Ann
Arbor, MI
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48108
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code:
(734)
332-7800
Securities
registered pursuant to Section 12(b) of the Act:
None.
Securities
registered pursuant to Section 12(g) of the Act:
Common
Stock, $0.001 par value per share
(Title of Class)
Indicate by check mark whether the issuer: (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 ý
No o
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 issuer’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. ý
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes
o
No ý
State issuer’s revenues for its most recent fiscal year: $0
The aggregate market value of the issuer’s common stock held by non-affiliates
of the registrant as of March 24, 2008, was approximately $7,246,715 based on
$0.89, the price at which the registrant’s common stock was last sold on that
date.
As of March 24, 2008, the issuer had 20,472,855 shares of common stock
outstanding.
Documents
incorporated by reference: None.
Transitional
Small Business Disclosure Format (Check one): Yes o No
ý
PIPEX
PHARMACEUTICALS, INC.
FORM
10-KSB
TABLE
OF CONTENTS
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Page
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PART
I.
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Item
1.
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Business
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3
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Item
1A.
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Risk
Factors
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10
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Item
2.
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Properties
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24
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Item
3.
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Legal
Proceedings
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24
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Item
4.
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Submission
of Matters to a Vote of Security Holders
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25
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PART
II.
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Item
5.
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Market
for Registrant’s Common Equity and Related Stockholder
Matters
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26
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Item
6.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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28
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Item
7.
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Financial
Statements and Supplementary Data
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33
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Item
8.
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Changes
in and Discussions with Accountants on Accounting and Financial
Disclosure
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55
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Item
8A.
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Controls
and Procedures
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55
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Item
8B.
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Other
Information
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55
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PART
III.
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Item
9.
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Directors
and Executive Officers of the Registrant
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56
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Item
10.
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Executive
Compensation
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59
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Item
11.
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Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
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62
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Item
12.
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Certain
Relationships and Related Transactions
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64
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Item
13.
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Principal
Accountant Fees and Services
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64
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PART
IV.
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Item
14.
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Exhibits
and Financial Statement Schedules and Reports on Form 8-K
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SIGNATURES
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67
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Forward-Looking
Statements
Most of
the matters discussed within this report include forward-looking statements on
our current expectations and projections about future events. In some cases you
can identify forward-looking statements by terminology such as “may,” “should,”
“potential,” “continue,” “expects,” “anticipates,” “intends,” “plans,”
“believes,” “estimates,” and similar expressions. These statements are based on
our current beliefs, expectations, and assumptions and are subject to a number
of risks and uncertainties. Actual results and events may vary significantly
from those discussed in the forward-looking statements.
These
forward-looking statements are made as of the date of this report, and we assume
no obligation to explain the reason why actual results may differ. In light of
these assumptions, risks, and uncertainties, the forward-looking events
discussed in this report might not occur.
ITEM
1. BUSINESS
GENERAL
Pipex
Pharmaceuticals, Inc. (together with its subsidiaries, “Pipex” or the “Company”)
is a development-stage, specialty pharmaceutical company that is developing
proprietary, late-stage drug candidates for the treatment of neurologic and
fibrotic diseases. Our strategy is to exclusively in-license proprietary,
clinical-stage drug candidates that have demonstrated preliminary efficacy in
human clinical trials and to complete the further clinical testing,
manufacturing and other regulatory requirements sufficient to seek marketing
authorizations via the filing of a New Drug Application (NDA) with the FDA and a
potential Marketing Application Authorization (MAA) with the European Medicines
Evaluation Agency (EMEA).
Our drug
candidates address the following pharmaceutical market opportunities: multiple
sclerosis, fibromyalgia, Huntington’s disease, Alzheimer’s disease, dry age
related macular degeneration (AMD), neurologic Wilson’s disease and idiopathic
pulmonary fibrosis (IPF).
Below is
a table of our product candidates, therapeutic indication(s) and their
respective stage of development:
Product
|
Therapeutic
Indication
|
Stage
of Development
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TRIMESTATM
(oral,
once-daily estriol)
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Relapsing
Remitting Multiple Sclerosis
|
Phase
II/III
(on-going)
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EFFIRMATM
(oral
flupirtine)
|
Fibromyalgia
|
Phase
II
(planned)
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Oral
TTM
(oral
tetrathiomolybdate)
|
Neurologically
Presenting Wilson's Disease
|
NDA filed
Nov. 28, 2007
FDA refusal to file Jan. 28, 2008
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Oral
TTM
(oral
tetrathiomolybdate)
|
Idiopathic
Pulmonary Fibrosis (IPF)
|
Phase
II
(completed)
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Oral
TTM
(oral
tetrathiomolybdate)
|
Alzheimer’s
Disease
|
Phase
II
(initiated)
|
Oral
TTM
(oral
tetrathiomolybdate)
|
Huntington’s
Disease
|
Preclinical
Studies
(Ongoing)
|
Oral
TTM
(oral
tetrathiomolybdate)
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Primary
Biliary Cirrhosis |
Phase
II
(ongoing)
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Zincmonocysteine
(zinc-monocysteine)
|
Dry
Age Related Macular Degeneration
|
Phase
II
(completed)
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Anti-CD4
802-2
|
Prevention
of Severe GvHD
|
Phase
I
(complete)
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CORRECTATM
(clotrimazola
enema)
|
Refractory
Pouchitis
|
Phase
II
(ongoing)
|
3
Product
Summary
The
following is a summary of each of the clinical stage drug candidates that we are
developing:
TRIMESTA TM (oral, once-daily
estriol)
We are
developing TRIMESTA
TM (oral, once-daily estriol) as an oral immunomodulatory and
anti-inflammatory bio identical estrogenic agent for the North American market.
Estriol has been approved and marketed throughout Europe and Asia as a mild
estrogenic agent for over 40 years for the treatment of post-menopausal hot
flashes. Estriol is an important endogenous hormone that is produced in the
placenta by women during pregnancy. Maternal levels of estriol increase in a
linear fashion throughout the third trimester of pregnancy until birth,
whereupon they abruptly fall to near zero. Our scientific collaborator of
TRIMESTA
TM is a leading authority on the role that estriol plays in affording
immunologic privilege to the fetus so as to prevent its rejection by the mother.
It is a widely observed phenomenon that pregnant women with autoimmune diseases
(such as multiple sclerosis and rheumatoid arthritis) experience high rates of
spontaneous remission of these diseases during pregnancy (especially in the
third trimester) as well as high rates of relapse during the post-partum period
(especially in the three-month post-partum period). Based upon these insights,
our scientific collaborator of TRIMESTATM
has conducted an initial clinical trial of TRIMESTATM
in multiple sclerosis patients and has demonstrated encouraging
results.
Phase II/III Clinical Trial
of TRIMESTA
TM in
Relapsing-Remitting MS
TRIMESTATM is
currently the subject of an ongoing 150 patient double-blind phase II/III
clinical in relapsing remitting MS patients. TRIMESTATM will be
given in combination with subcutaneously injected Copaxone®, a standard
treatment for MS. The primary endpoint is evaluating effects of the treatment
combination on relapse rates using several clinical and magnetic resonance
imaging measures of disability progression. This clinical trial has received a
$5 million grant from the National Multiple Sclerosis Society (NMSS) in
partnership with the National MS Society’s Southern California chapter, with
support from the National Institutes of Health (NIH).
TRIMESTATM for
Relapsing-Remitting Multiple Sclerosis (MS)
Current Therapies for
Relapsing-Remitting MS.
There are
currently five FDA-approved therapies for the treatment of relapsing-remitting
multiple sclerosis: Betaseron ®, Rebif ®, Avonex ®, Copaxone ® and Tysabri ®. These therapies
provide only a modest benefit for patients with relapsing-remitting MS and
therefore serve to only delay progression of the disease. All of these drugs
require frequent (daily, weekly & monthly) injections (or infusions) on an
ongoing basis and are associated with unpleasant side effects (such as flu-like
symptoms), high rates of non-compliance among users, and eventual loss of
efficacy due to the appearance of resistance in approximately 30% of patients.
An estimated two-thirds of MS patients are women.
Phase II Clinical Trial
Results of TRIMESTA in Relapsing-Remitting
MS
TRIMESTATM has
completed an initial 10-patient, 16-month, single-agent, crossover, phase IIA
clinical trial in the U.S. for the treatment of MS. The results of this study
were encouraging.
Decrease in Volume and
Number of Myelin Lesions
In
relapsing-remitting MS patients treated, the total volume and number of
pathogenic gadolinium enhancing myelin lesions (an established neuroimaging
measurement of disease activity in MS) decreased during the treatment period as
compared to a six-month pre-treatment baseline period. The median total
enhancing lesion volumes decreased by 79% (p =0.02) and the number of lesions
decreased by 82% (p =0.09) within the first three months of treatment with
TRIMESTATM. Over
the next three months, lesion volumes decreased by 82% (p =0.02) and the number
of lesions decreased by 82% (p =0.02) compared to baseline. During a three-month
re-treatment phase of this clinical trial, relapsing-remitting MS patients again
showed a decrease in enhancing lesion volumes (88%) (p =0.008) and a decrease in
the number of lesions (48%) (p =0.04) compared to baseline.
Market Opportunities for
TRIMESTA
TM
Multiple
Sclerosis
MS is a
progressive neurological disease in which the body loses the ability to transmit
messages along nerve cells, leading to a loss of muscle control, paralysis, and,
in some cases, death. Currently, more than 2.5 million people worldwide
(approximately 400,000 patients in the US), mainly young adults aged 18-50, are
afflicted with MS and 66% of these patients are women. The most common form of
MS is relapsing-remitting MS, which accounts for approximately 75% of MS
patients.
4
MS exacts
a heavy toll on our healthcare system. According to a published study, the total
annual cost for all people with MS in the U.S. is estimated to be more than $9
billion. The average annual cost of MS is approximately $44,000 to $95,625 per
person. These figures include lost wages and healthcare costs (care giving,
hospital and physician costs, pharmaceutical therapy and nursing home care). The
cost of treating patients with later-stage progressive forms of MS is
approximately $65,000 per year per person. The average lifetime costs for people
with MS are more than $2.2 million per person.
During
2005, sales estimates of FDA-approved MS therapies, which include Avonex ®, Betaseron ®, Copaxone ®, and Rebif ®, totaled approximately $5.0
billion, with Avonex ®
accounting for $1.5 billion in worldwide sales ($935 million were in the
U.S.).
EFFIRMATM (oral
flupirtine)
We are
developing EFFIRMATM
(oral flupirtine), a centrally-active, non-opiate, non-addictive oral therapy
for the treatment of fibromyalgia and we plan to conduct a double blind,
placebo-controlled phase II clinical trial in this indication. Fibromyalgia is a
common, centrally-mediated pain disorder characterized by chronic diffuse pain
and other symptoms. The active ingredient of EFFIRMATM,
flupirtine, was originally developed by Asta Medica and has been approved in
Europe since 1984 for the treatment of pain, although it has never been
introduced to the U.S. market for any indication.
Our oral
flupirtine has been approved as a treatment of pain in Europe since 1984, but
has never been approved for any indication in the US. Flupirtine, a non-opiate
analgesic, has been used in Europe for more than 20 years for post-surgical
pain, cancer pain, trauma pain, pain associated with liver disease, and other
nocioceptive pain states. Preclinical data and clinical experience suggests that
flupirtine should also be effective for neuropathic pain since it acts in the
central nervous system via a mechanism of action distinguishable from most
marketed analgesics. Flupirtine is especially attractive because it operates
through non-opiate pain pathways, exhibits no known abuse potential, and lacks
withdrawal effects. In addition, no tolerance to its antinocioceptive effects
has been observed. One common link between neuroprotection, nocioception, and
flupirtine may be the NMDA (N-methyl-D-aspartate) glutamate system, a major
receptor subtype for the excitotoxic neurotransmitter, glutamate.
Flupirtine has strong inhibitory actions on NMDA-mediated
neurotransmission.
EFFIRMA
TM for
Fibromyalgia
Our
scientific collaborator has demonstrated preliminary anecdotal efficacy of
EFFIRMATM
for the treatment of Fibromyalgia in a small number of U.S. patients suffering
from fibromyalgia that were refractive to other analgesics and therapies.
EFFIRMATM
was well tolerated by patients with no untoward side effects. In addition,
substantial improvement in signs and symptoms was demonstrated in this
difficult-to-treat fibromyalgia patient population. Our scientific collaborator
filed an investigator initiated IND with the FDA to conduct a phase II clinical
trial in fibromyalgia patients with oral flupirtine. This IND was placed on hold
pending the outcome of certain chemistry, manufacturing and controls
concerns. We along with our scientific collaborator have responded to
the FDA’s concerns regarding manufacturing concerns.
Market Opportunity for
EFFIRMA
Fibromyalgia
is an arthritis-related condition that is characterized by generalized muscular
pain and fatigue. It is a chronic and debilitating condition characterized by
widespread pain and stiffness throughout the body, accompanied by severe
fatigue, insomnia and mood symptoms. It is estimated to affect between two and
four percent of the world's population and after, osteoarthritis, is the most
commonly diagnosed disorder in rheumatology clinics.
We
estimate that there are approximately 6 million Americans with fibromyalgia.
During 2007, Lyrica® which is marketed by Pfizer, is the only FDA-approved
medication for fibromyalgia, recorded $1.8 billion in sales and $1.2 billion
during its first year on the market.
oral
TTM
(oral tetrathiomolybdate)
Oral TTM
is an oral, small-molecule, anticopper agent that is highly specific for
lowering the levels of free copper in serum. Free copper in serum
represents the toxic form of copper, as opposed to the essential form of copper
which is found tightly bound to appropriate copper proteins, such as
ceruloplasmin. Free copper in serum readily crosses the blood-brain barrier
(BBB) and is generally at equilibrium with free copper levels in the
central nervous system (CNS). The brain is the organ most sensitive to the toxic
effects of free copper. By lowering the levels of toxic free copper
in serum, oral TTM demonstrated the ability to reduce toxic free copper levels
in initially presenting neurologic Wilson’s disease patients. We have also
demonstrated oral TTM’s ability to reduce levels of free copper in animal models
of other CNS diseases, such as Alzheimer’s disease and Huntington’s
disease. Oral TTM’s unique mechanism of action
and specificity for free copper may make it ideally suited for the
treatment of other CNS diseases in which abnormal serum and CNS copper
homeostasis are implicated.
5
Oral TTM for Idiopathic
Pulmonary Fibrosis (IPF)
Oral TTM
has also demonstrated an ability in various animal models to be a potent
oral antifibrotic agent. This research is based upon the observation
that the fibrotic disease process is dependent upon the availability of
endogenous free copper. Oral TTM has demonstrated the ability to
inhibit fibrosis in a number of well established animal models through the sequestration of
available copper and inhibition of key fibrotic cytokines, including secreted
protein acid rich in cysteine (SPARC), NF-kappaB, TGF-β, FGF-2, IL-1, IL-6,
IL-8, connective tissue growth factor (CTGF) and collagen.
IPF is a
fatal respiratory disease characterized by progressive loss of lung function due
to extensive fibrosis of lung tissues that are essential for respiration and
life. It affects an estimated 124,000 patients in the U.S., resulting in
approximately 30,000 deaths in the U.S. annually. This represents more deaths
annually than either breast or prostate cancer.
Phase II Clinical Trials of
oral TTM in Refractory IPF Patients
Based
upon animal experiment, a one-year, open-label, phase II clinical trial of oral
TTM was completed for the treatment of refractory IPF. The
prospectively defined primary endpoint of the study was the percentage of
patients capable of maintaining clinically stable pulmonary function as
determined by forced vital capacity (FVC), an accepted measurement of pulmonary
function in IPF. These results are being prepared for publication. This phase II
trial was partially supported by a grant from the Coalition for Pulmonary
Fibrosis, a non-profit organization.
Oral TTM for Alzheimer’s
Disease (AD)
An
increasing body of evidence points to dysfunctional copper homeostasis in the
pathogenesis of AD. Recently, a published prospective clinical study conducted
in 3718 patients in the U.S. over six years, which included subjects that
consumed a vitamin containing copper supplement (1.6mg of copper a day) when
taken together with a high saturated and trans fat diet resulted in an
equivalent of 19 years of mental decline.
A
separate European clinical study conducted in 53 patients correlated the levels
of the highly reactive “free copper” pool in serum to disease severity in AD
patients versus aged-matched control patients. These results demonstrated that
the “free copper” serum pool was highly increased in AD patients.
These
clinical studies are complemented by preclinical studies that show that AD
amyloid-a plaques when treated with copper chelating agents in-vitro loosen and
reverse fibril formation as determined by spectroscopy. Other investigations
have shown that reduction in intracellular neuronal copper levels down regulates
the expression of amyloid precursor protein (APP), a hallmark AD
protein.
Oral
TTM’s specificity and unique mechanism of action for rapidly lowering toxic free
copper levels, combined with its history of success in completed
pivotal clinical trials of neurologically presenting Wilson’s disease, may
position oral TTM as the first available therapeutic agent capable of correcting
the serum and CNS fee copper dyshomeostasis that might represent an important
fundamental cause of AD. The National Institute of Health (NIH)
granted COPREXA
TM a grant in the amount of $306,172 in February 2007 in order to support
the testing of its utility for the treatment of AD. During
November 2007, our scientific collaborator reported preliminary results of the
use of oral TTM in Alzheimer’s disease animal studies, oral TTM demonstrated a
40% reduction (p<0.05) in insoluble amyloid-beta, a key Alzheimer’s disease
protein.
During
January 2008, we initiated a phase II clinical trial with oral TTM in
Alzheimer’s disease patients. We plan to pre-select patients with elevated
levels of “free” copper. This clinical trial received partial support from the
Italian Ministry of Health. Based on the manufacturing issue raised in the
clinical hold letter, we are currently evaluating the manufacturing issues
raised within the hold letter as it relates to the oral TTM batches prepared for
this phase II study. Since receipt of the written clinical hold letter, we have
informed our clinical collaborators for this study not to enroll anyone into the
study until further notice. We cannot provide any assurances that we will be
able to readily solve the manufacturing issues in the hold letter and continue
with this clinical trial.
Oral TTM
TM in for
Neurologic Wilson’s Disease
Based
upon receipt of written clinical hold letter communicated to a collaborator's
IND from the FDA and forwarded to us on March 26, 2008, the FDA communicated
concerns previously disclosed regarding the adequacy of the evidence of clinical
efficacy, safety, study quality, data collection and overall risk/benefit
profile of oral TTM for the treatment of neurologic Wilson's disease as
represented by the two completed clinical trials of TTM for neurologic Wilson's
disease that formed the basis of the previous NDA submission. In the written
clinical hold letter for the Wilson's disease IND, the FDA raised
additional chemistry, manufacturing and controls questions, regarding the
identity, strength and purity of oral TTM that will need to be resolved to the
satisfaction of the FDA before the clinical hold is lifted. In the written
clinical hold letter the FDA also provided non-clinical hold feedback
including the reference that the clinical endpoints, design and conduct of the
dose comparator study that has enrolled 40 patients to date will not be
sufficient for a NDA of oral TTM for neurological Wilson's disease. Based
on this written FDA communication, we believe that at the present time it
appears that the FDA will not deem the three existing clinical trials of oral
TTM to be sufficient for an NDA for this indication. Pipex plans to have a
Type B meeting with the FDA to discuss next steps for oral TTM development in
neurologic Wilson's disease.
6
ANTI-CD4
802-2
We are
developing a series of small molecule and peptide based inhibitors of the T-cell
CD4 co-receptor. The CD4 co-receptor is central to a number of autoimmune
disorders such as MS.
Our lead
anti-CD4 molecule, named 802-2, has demonstrated efficacy in a number of animal
models of autoimmune disease models, and it is currently being evaluated in a
phase I/II clinical trial for the prevention of graft-vs.-host disease. Anti-CD4
802-2 may represent the first clinical stage, nonantibody-based molecule
capable of inducing immune tolerance for a variety of CD4-mediated autoimmune
diseases.
Market Opportunity for
Anti-CD4 802-2 and Small Molecule CD4 Inhibitors
From a
commercial perspective, anti-CD4 802-2 and our other anti-CD4 molecules address
an autoimmune disease market projected to be $21 billion in 2006 with an
anticipated annual growth rate of 15% thereafter. Autoimmune diseases represent
the third-largest category of illness in the industrialized world, after heart
disease and cancer. A partial list of such diseases includes MS, psoriasis, and
rheumatoid arthritis, as well as “nontypical” CD4-mediated diseases such as
allergy and asthma.
CORRECTATM
(clotrimazole enema)
We are
developing CORRECTATM, a
proprietary retention enema formulation of the widely used topical antifungal
agent clotrimazole, for the treatment of acute refractory pouchitis, a subset of
inflammatory bowel disease (IBD) and ulcerative colitis (UC) market.
CORRECTATM is
currently the subject of a double-blind, placebo-controlled, multi-center,
one-month, phase II clinical trial for acute pouchitis.
Market Opportunity for
CORRECTATM
Pouchitis
is a debilitating complication that can develop following corrective surgical
treatment of ulcerative colitis, wherein an ileal reservoir (or pouch) is
constructed to enable normal bowel movements after removal of the diseased
colon. This ileal reservoir can become inflamed, leading to debilitating
gastrointestinal symptoms including diarrhea, incontinence, bleeding, fever and
urgency. Currently, there are no approved treatments for pouchitis. Published
scientific data suggest that there are approximately 30,000 to 45,000 pouchitis
patients and between 5,000 to 10,000 refractory pouchitis patients in the
U.S.
FreeboundTM (metals diagnostic
device)
We are
developing a proprietary diagnostic device, FreeboundTM capable of measuring
levels of free and bound metals in biological samples. In order to improve the
manufacturing process of Freebound's disposable assay component while at the
same time preserving capital, in the first quarter of 2008 we suspended testing
of Freebound pursuant to the Pre-IDE protocol that we filed with the FDA in
October 2007 and have entered into a research and supply agreement with a
supplier and have initiated limited testing of these newly supplied disposable
assay components.
Intellectual
Property
Our goal
is to (a) obtain, maintain, and enforce patent protection for our products,
formulations, processes, methods, and other proprietary technologies, (b)
preserve our trade secrets, and (c) operate without infringing on the
proprietary rights of other parties, worldwide. We seek, where appropriate, the
broadest intellectual property protection for product candidates, proprietary
information, and proprietary technology through a combination of contractual
arrangements and patents.
We have
exclusively licensed from various universities issued patent and patents
applications, including foreign equivalents relating to our product candidates.
We also file patent applications for inventions invented or discovered by
us.
Some of
our products also have various regulatory exclusivities, such as “Orphan
Drug” designations including, oral TTM and CORRECTATM.
Orphan drug designations provide 7 years of market exclusivity in the U.S. and
10 years of marketing exclusivity in Europe. Specifically, we have
obtained orphan drug protection for the use of oral TTM in the treatment of
neurologic Wilson’s disease. We have also obtained orphan drug protection for
the use of CORRECTATM for the treatment of
acute pouchitis. These regulatory exclusivities combined with our patents and
patent applications provide for supplemental intellectual property protection
for our products against competitors.
7
Below is
a description of our license and development agreements relating to our product
candidates:
University
of Michigan (UM) Exclusive License Agreement
We have
entered into an exclusive worldwide license agreement with the University of
Michigan (UM) for all uses of U.S. Patent No. 6,855,340, corresponding
international applications, and a related corresponding patent application that
relates to various uses of anti-copper therapeutics, including oral TTM, to
treat inflammatory and fibrotic diseases. Pursuant to this agreement, we will
use our best efforts to commercialize oral TTM for the therapeutic
uses embodied in the issued patent and pending patent application; reimburse UM
for patent expenses; pay UM royalties equal to 2% of net sales of oral TTM for
uses covered by the UM patents; issue UM 422,314 shares of our common stock; pay
UM success-based milestone fees totaling $350,000 (the first of which
is due when we file an NDA and the second of which is due when we receive FDA
approval for oral TTM in an indication covered by the UM patents),
and indemnify UM against certain liabilities.
Collaborative
Research and Development Agreement with UM
During
September 2005, we entered into a three-year sponsored research agreement with
UM relating to expanding the therapeutic utility of oral TTM to treat other
copper mediated diseases. Pursuant to that agreement, we sponsor approximately
$450,000 per annum, payable in monthly installments. This agreement
can be extended for an additional two-year period. This agreement initially
expires August 30, 2008. As part of our corporate restructuring
during March 2008, we provided notice of termination of this
agreement.
Consulting
Agreement with Dr. George Brewer
We have
entered into a three-year consulting agreement with Dr. George Brewer, inventor
of the oral TTM technology. Pursuant to this agreement, we pay Dr. Brewer a
quarterly fee of $30,000. We also issued to Dr. Brewer options to
acquire 433,314 shares of our common stock and agreed to pay
Dr. Brewer a royalty on sales of oral TTM equal to 3% of net sales
for 17 years. This agreement has a provision for a two-year extension.
McLean
Hospital Exclusive License Agreement
We have
entered into an exclusive license agreement with the McLean Hospital, a Harvard
University hospital, relating to U.S. Patent No. 6,610,324 and its foreign
equivalents, entitled “Flupirtine in the treatment of fibromyalgia and related
conditions.” Pursuant to this agreement, we agreed to pay McLean royalties on
net sales of flupirtine equal to 3.5% of net sales of flupirtine for indications
covered by the issued patents, reduced to 1.75% if we have a license to other
intellectual property covering those indications; use our best efforts to
commercialize flupirtine for the therapeutic uses embodied in the patent
applications; reimburse back patent costs of approximately $41,830; and pay the
following milestone payments: $150,000 upon the initiation of a pivotal phase
III clinical trial of flupirtine; $300,000 upon the filing of an NDA for
flupirtine; and $600,000 upon FDA approval of flupirtine.
University
of Southern California Agreement
Through
our majority owned subsidiary Solovax we have an exclusive license agreement, as
amended, with the University of Southern California (USC) to license U.S. Patent
Application serial nos. 09/156509 and 10/773356 and its foreign equivalents
entitled “T-Cell Vaccination for the Treatment of Multiple Sclerosis.” Under
this agreement we are required to reimburse USC’s patent expenses and pay USC
royalties of 4% of net sales relating to the vaccine.
Children’s
Hospital-Boston Agreement
Our
subsidiary Effective Pharmaceuticals, Inc. (EPI), has entered into an exclusive
worldwide license agreement with Children’s Hospital Medical Corporation, an
affiliate of Children’s Hospital-Boston, relating to a certain pending patent
application covering all gastrointestinal, hepatic, and rectal uses of the
clotrimazole technology, including CORRECTATM.
Pursuant to this agreement, we owe a $150,000 upfront payment in two equal
installments, of which the first installment has been paid, as well as annual
maintenance fees, milestone payments totaling $3 million that are payable on
issuance of U.S. and European patents covering the clotrimazole technology, on
initiation of a pivotal phase III clinical trial, on filing of a New Drug
Application (NDA), and on approval of an NDA with the FDA and European Medical
Agency, as well as royalties on net sales of the clotrimazole technology covered
by the licensed patents. We may be permitted to partially pay milestone payments
in the form of equity. We also acquired rights to valuable data generated under
an investigational new drug (IND) application filing with the FDA and an orphan
drug designation. These data include all preclinical and clinical data know-how
relating to the clotrimazole technology. We would also be required to indemnify
Children’s Hospital and its employees against certain liabilities.
8
Thomas
Jefferson University License Agreement
Our
majority-owned subsidiary CD4 Biosciences Inc. has entered into an exclusive
worldwide license agreement with Thomas Jefferson University (TJU) relating to
certain U.S. and foreign issued patents and patent applications relating to all
uses of anti-CD4 802-2 and CD4 inhibitor technology. We are obligated to pay
annual maintenance fees, milestone payments upon the filing of an NDA and
approval of an NDA with the FDA, as well as royalties on net sales of anti-CD4
802-2 and other anti-CD4 molecules covered by the licensed patents. We also
received rights to valuable data generated under any IND application filing,
which includes toxicology and manufacturing information relating to anti-CD4
802-2. As partial consideration for this license, TJU was issued shares
representing 5% of the common stock of CD4 Biosciences Inc. We also agreed that
TJU would receive anti-dilution protection on those CD4 shares through the first
$2 million in financing to CD4. We also agree to indemnify TJU against certain
liabilities.
The
Regents of University of California License Agreement
We have
an exclusive worldwide license agreement with the Regents of the University of
California relating to an issued US Patent No. 6,936,599 and pending patent
applications covering the uses of the TRIMESTATM
technology. Pursuant to this agreement, we paid an upfront license fee of
$20,000, reimbursed patent expenses of $41,000 and agreed to pay a license fee
of $25,000 during 2006, as well as annual maintenance fees, milestone payments
totaling $750,000 that are payable on filing an NDA, and on approval of an NDA
with the FDA, as well as royalties on net sales of the TRIMESTA TM
technology covered by the licensed patents. If we become public or are
acquired by a public company, we may be permitted to partially pay milestone
payments in the form of equity.
Oregon
Health & Sciences License Agreement
We have
an exclusive worldwide license agreement with Oregon Health & Sciences
University relating to various doses of estrogens in combination with
immunotherapeutics for the treatment of autoimmune diseases. Pursuant to this
agreement, we paid an upfront license fee of $1,500 and reimbursed patent
expenses of $38,160. Milestone payments totaling $575,000 may be due upon the
achievement of certain milestones, as well as minimum royalty payments of
$210,000 and royalties on net sales for the technology covered by the licensed
patents. We have the ability to make these milestone payments in the form of
equity.
Maine
Medical Institute License Agreement
We have
an exclusive worldwide license agreement with Maine Medical Institute relating
to various uses of anti-copper therapies. Pursuant to this agreement, we paid in
equity, an upfront license fee of $20,000 made in two installments will
reimburse patent expenses of $45,000 over a three year period. Milestone
payments totaling $350,000 that are payable on filing an NDA, and on approval of
an NDA with the FDA, as well as royalties on net sales for the technology
covered by the licensed patents. We have the ability to make these milestone
payments in the form of equity. As part of our corporate
restructuring during March 2008, we provided notice of termination of this
agreement.
Manufacturing
We
utilize contract manufacturing firms to produce the bulk active ingredients for
oral TTM, TRIMESTATM,
Zinc-monocysteine, CORRECTATM, Anti-CD4
802-2, and EFFIRMATM in
accordance with “current good manufacturing processes” (cGMP) guidelines
outlined by the FDA. During February 2007, we leased a 17,600 square foot
facility in Ann Arbor, MI which will be used to produce oral capsule products
under GMP conditions. We have manufactured oral TTM at this
site.
Sales
and Marketing
We plan
to establish our own in-house neuroscience sales and marketing effort in the
United States to market our neurology products, specifically oral TTM and
TRIMESTA
TM. As we expand the use of our products into larger CNS
diseases, we will be able to utilize our existing marketing infrastructure to
market these products. We may choose to enter into a co-promotion or licensing
agreement for specific territories with biotechnology or pharmaceutical
companies to market CORRECTATM,
Anti-CD4 802-2, EFFIRMATM,
Zinc-monocysteine, SOLOVAX, TM and
certain uses of oral TTM.
9
ITEM
1A. RISK FACTORS
An
investment in our securities is highly speculative and involves a high degree of
risk. Therefore, in evaluating us and our business you should carefully consider
the risks set forth below, which are only a few of the risks associated with
investing in our common stock. You should be in a position to risk the loss of
your entire investment.
RISKS
RELATING TO OUR BUSINESS
We
are a development stage company. We currently have no product revenues and will
need to raise additional capital to operate our business.
We are a
development stage company that has experienced significant losses since
inception and has a significant accumulated deficit. We expect to incur
additional operating losses in the future and expect our cumulative losses to
increase. To date, we have generated no product revenues. As of December 31,
2007, we have expended approximately $17.3 million on a consolidated basis
acquiring and developing our current product candidates. Until such time as we
receive approval from the FDA and other regulatory authorities for our product
candidates, we will not be permitted to sell our drugs and will not have product
revenues. Therefore, for the foreseeable future we will have to fund all of our
operations and capital expenditures from equity and debt offerings, cash on
hand, licensing fees, and grants. We will need to seek additional sources of
financing and such additional financing may not be available on favorable terms,
if at all. If we do not succeed in raising additional funds on acceptable terms,
we may be unable to complete planned pre-clinical and clinical trials or obtain
approval of our product candidates from the FDA and other regulatory
authorities. In addition, we could be forced to discontinue product development,
reduce or forego sales and marketing efforts, and forego attractive business
opportunities. Any additional sources of financing will likely involve the
issuance of our equity or debt securities, which will have a dilutive effect on
our stockholders.
We
are not currently profitable and may never become profitable.
We have a
history of losses and expect to incur substantial losses and negative operating
cash flow for the foreseeable future. Even if we succeed in developing and
commercializing one or more of our product candidates, we expect to incur
substantial losses for the foreseeable future and may never become profitable.
We also expect to continue to incur significant operating and capital
expenditures and anticipate that our expenses will increase substantially in the
foreseeable future as we do the following:
· continue
to undertake pre-clinical development and clinical trials for our product
candidates;
· seek
regulatory approvals for our product candidates;
· implement
additional internal systems and infrastructure;
· lease
additional or alternative office facilities; and
· hire
additional personnel, including members of our management team.
We also
expect to experience negative cash flow for the foreseeable future as we fund
our technology development with capital expenditures. As a result, we will need
to generate significant revenues in order to achieve and maintain profitability.
We may not be able to generate these revenues or achieve profitability in the
future. Our failure to achieve or maintain profitability could negatively impact
the value of our common stock and underlying securities.
We
have a limited operating history on which investors can base an investment
decision.
We are a
development-stage company and have not demonstrated our ability to perform the
functions necessary for the successful commercialization of any of our product
candidates. The successful commercialization of our product candidates will
require us to perform a variety of functions, including:
· continuing
to undertake pre-clinical development and clinical trials;
· participating
in regulatory approval processes;
· formulating
and manufacturing products; and
· conducting
sales and marketing activities.
10
Our
operations have been limited to organizing and staffing our company, acquiring,
developing, and securing our proprietary technology, and undertaking
pre-clinical trials and Phase I/II, and Phase II and Phase III clinical trials
of our principal product candidates. These operations provide a limited basis
for you to assess our ability to commercialize our product candidates and the
advisability of investing in our securities.
Our
NDA for oral TTM has not been accepted for filing and/or we may not obtain the
necessary U.S. or worldwide regulatory approvals to commercialize oral TTM or
one of our product(s).
On
November 28, 2007, we filed a New Drug Application (NDA) with the Food and Drug
Administration (FDA) seeking approval to market oral TTM (oral
tetrathiomolybdate) for initially presenting neurologic Wilson's disease. On
January 28, 2008 representing sixty (60) days from the date of NDA filing we
received notification from the FDA that our NDA has not been accepted for
further review and the FDA issued a refusal to file letter ("RTF"). In the RTF
letter the FDA cited various deficiencies in the NDA filing, including, the
formatting and presentation of the data, preliminary assessments concerning the
adequacy and quality of the clinical evidence to support the safety and efficacy
of oral TTM, the necessity to conduct a Segment III preclinical reproductive
toxicology study as well as chemistry, manufacturing and controls issues
regarding the identity, strength and purity of oral TTM. Given the receipt of
the RTF letter, we will face substantial delays in our ability to prepare and
re-file a new NDA, if at all, and potential approval to market oral
TTM.
On
February 26, 2008, we completed a Type A meeting with the FDA to discuss the
deficiencies raised in the RTF letter. Based on this meeting with the FDA, Pipex
believes it reached an understanding with the FDA on a course of action to
resolve all of the filing issues raised in the RTF letter. Nevertheless, the FDA
raised concerns regarding the adequacy of the evidence of clinical efficacy,
safety, study quality, data collection and overall risk/benefit profile of oral
TTM for neurologic Wilson's disease as represented by the two completed clinical
trials of oral TTM for neurologic Wilson's disease that formed the basis of the
NDA. Even if Pipex is successful in preparing and filing a revised NDA, Pipex
cannot provide any assurances that a newly filed NDA will be accepted for filing
or that upon review of the NDA by the FDA, Pipex will be successful in
overcoming such FDA concerns and that oral TTM for initially presenting
neurologic Wilson's disease will be approved by the FDA. The clinical trials for
oral TTM which formed the basis of the NDA filing were conducted over a period
of 18 years from 1998 to 2005 prior to entering into our license agreement for
oral TTM and were conducted under an investigator initiated IND by our
scientific advisor and consultant, Dr. George Brewer under grant support from
various non-profit foundations and governmental agencies including the FDA’s
Orphan Products Group. In the event that we are able to prepare, file and obtain
FDA acceptance of a new NDA filing for oral TTM, we cannot provide any
assurances that after the FDA reviews our new submission, that the new NDA
submission will overcome the FDA's concerns raised in the RTF letter sufficient
for approval of oral TTM or that the FDA will not upon further review raise
additional concerns regarding manufacturing, clinical, or nonclinical which may
impact the potential approvability of oral TTM for the treatment of neurologic
Wilson’s disease.
In order
to enhance a resubmitted NDA filing for oral TTM for the treatment of neurologic
Wilson’s disease, at the February 26, 2008 Type A meeting Pipex discussed with
the FDA Pipex’s plans to schedule a Type B meeting with the FDA to discuss the
utility of providing the FDA with additional efficacy data from an ongoing
double-blind, comparator, dose optimization clinical trial of oral TTM for the
treatment of neurologic Wilson’s disease. To date, this third study has enrolled
and completed dosing in approximately 40 neurologically presenting Wilson’s
disease patients. At the Type B meeting to be scheduled, Pipex intends to
present potential, available pharmacokinetic and pharmacodynamic data (such as
and including oral TTM's effects on lowering serum free copper levels in
patients) from this third clinical trial as well as a summarization of the data
from the previously completed clinical trials with oral TTM for neurologic
Wilson’s disease. The feedback from this Type B meeting with the FDA will
determine the timing of any potential NDA resubmission for oral TTM for this
indication and may result in Pipex discontinuing the NDA refiling process for
oral TTM as well as potentially our planned MAA filing in Europe. Additionally,
depending on the analysis of additional data, the FDA may request a separate
pharmacokinetic study or additional clinical studies.
On March
17, 2008, Dr. George Brewer informed us that pursuant to a teleconference
between Dr. Brewer and the FDA of the same date, Dr. Brewer's physician
sponsored investigational new drug application (IND) for oral tetrathiomolybdate
for Wilson's disease had been placed on clinical hold pending the potential
resolution, if any, of items described in the RTF. The IND that is
the subject of the clinical hold includes an active dose optimization comparator
protocol of oral tetrathiomolybdate that to date has enrolled and treated
approximately 40 neurologically presenting Wilson's disease patients the data
from which we intend to collect, analyze and present to the FDA at a Type B
meeting to be requested to discuss a potential revised New Drug Application
submission. We cannot provide any assurance that Dr. Brewer will be successful
in lifting the clinical hold imposed by the FDA, that we will be successful in
preparing and filing a revised NDA, that any such newly filed NDA will be
accepted for filing or that upon review of any such NDA by the FDA, we will be
successful in overcoming the concerns raised by the FDA and that oral
tetrathiomolybdate for initially presenting neurologic Wilson's disease will be
approved by the FDA. Based upon receipt of a written clinical hold letter
communicated to Dr. Brewer from the FDA and forwarded to us on March 26, 2008,
the FDA detailed its issues and concerns that are required to be
addressed in order to lift the clinical hold, including chemistry, manufacturing
and control (CMC) issues concerning the identity, strength and purity of oral
TTM. We presently intend to assist Dr. Brewer in resolving the CMC issues raised
by the FDA and do not presently intend to initiate patient dosing in our Italian
clinical trial of oral TTM for Alzheimer's disease until such issues are
resolved to the satisfaction of the FDA. We cannot provide any assurance that we
will be successful in overcoming such CMC issues to the satisfaction of the FDA.
The written clinical hold letter also provided feedback not related to the
clinical hold per se including the reference that the clinical endpoints, design
and conduct of the dose comparator clinical study that has enrolled 40 patients
to date will most likely not be sufficient for a NDA of oral TTM for neurologic
Wilson's disease. Based on
this communication, Pipex plans to have a Type B meeting with the FDA to discuss
next steps for oral TTM development in neurologic Wilson's disease. Given
the issues raised by the FDA in its RTF letter of January 28, 2008 as well as
the FDA's written clinical hold letter to Dr. George Brewer forwarded to us on
March 26, 2008, at the present time it appears that the FDA will not deem the
three existing clinical trials of oral TTM to be sufficient for a New Drug
Application of oral TTM for initially presenting neurologic Wilson's disease.
Given the limited number of patients afflicted by this disease, an additional
clinical trial of oral TTM for this indication will necessarily take a
substantial amount of time and resources to plan, enroll and complete. The
design of such further study is also uncertain given that existing drugs
approved for Wilson's disease appear to be contraindicated for initially
presenting neurologic Wilson's disease or too slow acting for this critically
ill patient population. Should we elect to abandon our efforts to seek U.S.
and/or European approval of oral TTM for neurologically presenting Wilson's
disease we will most likely not have sufficient resources to pursue all of the
additional indications for oral TTM that are the subject of our research and
development, including, idiopathic pulmonary fibrosis, Alzheimer's disease,
primary biliary cirrhosis and Huntington's disease. We may elect to abandon our
efforts to develop oral TTM for any or all of these indications, including,
Wilson's disease.
11
We will
need FDA approval to commercialize our product candidates in the U.S. and
approvals from equivalent regulatory authorities in foreign jurisdictions to
commercialize our product candidates in those jurisdictions. In order to obtain
FDA approval for any of our product candidates, we must submit to the
FDA an NDA, demonstrating that the product candidate is safe for humans and
effective for its intended use and that the product candidate can be
consistently manufactured and is stable. This demonstration requires significant
research and animal tests, which are referred to as “pre-clinical studies,”
human tests, which are referred to as “clinical trials” as well as the ability
to manufacture the product candidate, referred to as “chemistry
manufacturing control” or “CMC.” We will also need to file additional
investigative new drug applications and protocols in order to initiate clinical
testing of our drug candidates in new therapeutic indications and delays in
obtaining required FDA and institutional review board approvals
to commence such studies may delay our initiation of such planned
additional studies.
Satisfying
the FDA’s regulatory requirements typically takes many years, depending on the
type, complexity, and novelty of the product candidate, and requires substantial
resources for research development, and testing. We cannot predict whether our
research and clinical approaches will result in drugs that the FDA considers
safe for humans and effective for indicated uses. The FDA has substantial
discretion in the drug approval process and may require us to conduct additional
pre-clinical and clinical testing or to perform post-marketing studies.
The
approval process may also be delayed by changes in government regulation, future
legislation or administrative action, or changes in FDA policy that occur prior
to or during our regulatory review. Delays in obtaining regulatory approvals may
do the following:
· delay
commercialization of, and our ability to derive product revenues from, our
product candidates;
· impose
costly procedures on us; and
· diminish
any competitive advantages that we may otherwise enjoy.
Even if
we comply with all FDA requests, the FDA may ultimately reject one or more of
our NDAs. We cannot be sure that we will ever obtain regulatory clearance for
our product candidates. Failure to obtain FDA approval of any of our product
candidates will severely undermine our business by reducing our number of
salable products and, therefore, corresponding product revenues.
In
foreign jurisdictions, we must receive approval from the appropriate regulatory
authorities before we can commercialize our drugs. Foreign regulatory approval
processes generally include all of the risks associated with the FDA approval
procedures described above. We cannot assure you that we will receive the
approvals necessary to commercialize our product candidate for sale outside the
United States.
We
may not be able to retain rights licensed to us by others to commercialize key
products and may not be able to establish or maintain the relationships we need
to develop, manufacture, and market our products.
In
addition to our own patent applications, we also currently rely on an exclusive
worldwide license agreement with the University of Michigan relating to various
uses of oral TTM. We also have an exclusive license agreement with the McLean
Hospital relating to the use of EFFIRMATM
to treat fibromyalgia syndrome; an exclusive license agreement with
Thomas Jefferson University relating to our anti-CD4 inhibitors; an
exclusive license agreement with the Regents of the University of
California relating to our TRIMESTATM
technology; an exclusive license agreement with the Children’s
Hospital-Boston relating to our CORRECTATM
technology and an exclusive license agreement to license our T-cell vaccine
program from the University of Southern California (USC). Each of
these agreements requires us to use our best efforts to commercialize each of
the technologies as well as meet certain diligence requirements and timelines in
order to keep the license agreement in effect. In the event we are not able to
meet our diligence requirements, we may not be able to retain the rights granted
under our agreements or renegotiate our arrangement with these institutions on
reasonable terms, or at all.
12
Furthermore,
we currently have very limited product development capabilities, and limited
marketing or sales capabilities. For us to research, develop, and test our
product candidates, we would need to contract with outside researchers, in most
cases those parties that did the original research and from whom we have
licensed the technologies.
We can
give no assurances that any of our issued patents licensed to us or any of our
other patent applications will provide us with significant proprietary
protection or be of commercial benefit to us. Furthermore, the issuance of a
patent is not conclusive as to its validity or enforceability, nor does the
issuance of a patent provide the patent holder with freedom to operate without
infringing the patent rights of others.
Developments
by competitors may render our products or technologies obsolete or
non-competitive.
Companies
that currently sell or are developing both generic and proprietary
pharmaceutical compounds to treat central-nervous-system,
inflammatory, autoimmune and fibrotic diseases include: Pfizer, Inc.,
Aton Pharma, GlaxoSmithKline Pharmaceuticals, Shire Pharmaceuticals, Plc., Merck
& Co., Eli Lilly & Co., Serono, SA, Biogen Idec, Inc.,
Achillion, Ltd., Active Biotech, Inc., Panteri Biosciences, Meda, Merrimack
Pharmaceuticals, Inc., Schering AG, Forest Laboratories, Inc.,
Attenuon, LLC, Cypress Biosciences, Inc., Novartis, Axcan Pharma, Inc., Teva
Pharmaceuticals, Inc., Intermune, Inc. Fibrogen, Inc., Rare Disease
Therapeutics, Inc., Prana Biotechnology, Inc., Merz & Co., AstraZeneca
Pharmaceuticals, Inc., Chiesi Pharmaceuticals, Inc., Targacept, Inc.,
and Johnson & Johnson, Inc. Alternative technologies or alternative delivery
or dosages of already approved therapies are being developed to treat
autoimmune inflammatory, Fibromyalgia, MS, fibrotic, Alzheimer’s and Wilson’s
diseases, several of which may be approved or are in early
and advanced clinical trials, such as pirfenidone, milnacipram,
Lyrica, Cymbalta, Effexor, Actimmune and other interferon preparations. Unlike
us, many of our competitors have significant financial and human resources. In
addition, academic research centers may develop technologies that compete with
our CORRECTATM,
TRIMESTA
TM, zincmonocysteine, anti-CD4 inhibitors, EFFIRMATM
and oral TTM technologies. We are aware that other companies are developing
competitive anti-copper therapies that are in various stages of clinical trials
or have been approved by regulatory authorities. For example, trientine,
d-pennicillamine and zinc based therapies, all FDA approved anti-copper
agents have been or are being tested in various treatment regiments for the
treatment of Wilson’s disease. Should clinicians or regulatory authorities view
these therapeutic regiments as or more effective than oral TTM in the treatment
of neurologic Wilson’s disease, this might delay or prevent us from obtaining
regulatory approval for oral TTM, or it might prevent us from obtaining
favorable reimbursement rates from payers, such as Medicare, Medicaid and
private insurers.
We
may not succeed in enforcing our orphan drug designations.
Oral TTM
has been designated by the FDA as an “orphan drug” for the treatment of Wilson’s
disease patients presenting with neurologic complications. CORRECTATM has
also been designated by the FDA as an “orphan drug” for the treatment of
pouchitis patients. We intend to file for “orphan drug” designations in the EMEA
(the European equivalent of the FDA) for both oral TTM and CORRECTATM for
similar uses. Pursuant to our agreements with our scientific inventors and
universities, we have acquired these designations. Orphan drug designation is an
important element of our competitive strategy because there are no composition
of matter patents for oral TTM a designated orphan drug for a rare disease
generally receives marketing exclusivity for use of that drug for the designated
condition for a period of seven years in the United States and ten years in the
European Union.
To be
successful in enforcing this designation, our new drug application would need to
be the first NDA approved to use oral TTM to treat Wilson’s disease. While we
are not aware of any other companies that have sought orphan drug designation
for oral TTM or its active ingredient, tetrathiomolybdate, for this indication,
other companies may in the future seek it and may obtain FDA marketing approval
before we do. In addition, the FDA may permit other companies to market a form
of tetrathiomolybdate to treat Wilson’s disease patients with neurologic
complication if their product demonstrates clinical superiority. This could
create a more competitive market for us.
Competitors
could develop and gain FDA approval of our products for a different
indication.
A
competitor could develop our products in a similar format, but for a different
indication. For example, other companies could manufacture and develop oral TTM
and its active ingredient, tetrathiomolybdate, and secure approvals for
different indications. We are aware that a potential competitor has an exclusive
license from the University of Michigan (UM) to an issued U.S. patent that
relates to the use of tetrathiomolybdate to treat angiogenic diseases
(the “Angiogenic Patent”) and is currently in phase I and phase II clinical
trials for the treatment of various forms of cancer. To our knowledge, this
competitor and UM have filed additional patent applications claiming various
analog structures and formulations of tetrathiomolybdate to treat various
diseases. Further, we cannot predict whether our competitor might obtain
approval in the U.S. or Europe to market tetrathiomolybdate for cancer or
another indication ahead of us. We also cannot predict whether, if issued, any
patent corresponding to the Angiogenic Patent may prevent us from conducting our
business or result in lengthy and costly litigation or the need for a license.
Furthermore, if we need to obtain a license to these or other patents in order
to conduct our business, we may find that it is not available to us on
commercially reasonable terms, or is not available to us at
all.
13
If the
FDA approves other tetrathiomolybdate products to treat indications other than
those covered by our issued or pending patent applications, physicians may elect
to prescribe a competitor’s tetrathiomolybdate to treat Wilson’s disease—this is
commonly referred to as “off-label” use. While under FDA regulations a
competitor is not allowed to promote off-label uses of its product, the FDA does
not regulate the practice of medicine and, as a result, cannot direct physicians
as to which source it should use for the tetrathiomolybdate they prescribe to
their patients. Consequently, we might be limited in our ability to prevent
off-label use of a competitor’s tetrathiomolybdate to treat Wilson’s disease or
inflammatory or fibrotic disease, even if we have orphan drug exclusivity. Our
competitor might seek FDA or EMEA approval to market tetrathiomolybdate for any
therapeutic indication, including Wilson’s disease or idiopathic pulmonary
fibrosis (IPF). If we are not able to obtain and enforce these patents, a
competitor could use tetrathiomolybdate for a treatment or use not covered by
any of our patents.
Since we
do not have composition of matter patent claims for oral TTM, EFFIRMA
TM, and TRIMESTA
TM, others may obtain approvals for other uses of these products. For
example, the active ingredients in both EFFIRMA
TM and TRIMESTA
TM have been approved for marketing in overseas countries for different
uses. Other companies, including the original developers or affiliates of these
products may seek to develop EFFIRMA
TM or TRIMESTA
TM for these uses in the US or any country we are seeking approval for.
We cannot provide any assurances that any other company may obtain FDA approval
for products that contain EFFIRMATM
or TRIMESTATM
that might adversely affect our ability to develop and market these products in
the US.
We
rely primarily on method patents and patent applications and various regulatory
exclusivities to protect the development of our technologies, and our ability to
compete may decrease or be eliminated if we are not able to protect our
proprietary technology.
Our
competitiveness may be adversely affected if we are unable to protect our
proprietary technologies. Other than anti-CD4 802-2 and zinc-monocysteine, there
are no composition of matter patents for TRIMESTATM,
EFFIRMATM,
CORRECTATM,
Solovax, oral TTM or their respective active and zinc-monocysteine ingredients
estriol, flupirtine, clotrimazole and tetrathiomolybdate. Additionally, we do
not have an issued patent for oral TTMs use to treat Wilson’s disease, although
we do have Orphan Drug Designation for this indication. Orphan Drug Designation
provides protection for seven years of marketing exclusivity for that product in
that disease indication in the U.S. We also expect to rely on patent protection
from an issued U.S. Patent for the use of oral TTM and related compounds to
treat inflammatory and fibrotic diseases (U.S. Patent No 6,855,340). These
patents have been exclusively licensed to us. We have also filed various pending
patent applications which cover various formulations, packaging, distribution
& monitoring methods for oral TTM. We rely on issued patent and pending
patent applications for use of TRIMESTATM to
treat MS (issued U.S. Patent No. 6,936,599) and various other therapeutic
indications which have been exclusively licensed to us. We have also exclusively
licensed an issued patent for the treatment of fibromyalgia with EFFIRMATM and
have pending patent applications for our uses of CORRECTA
TM.
Our zinc-monocysteine (z-monocys) product candidate is exclusively
licensed from its inventors, David A. Newsome and David Tate. Z-monocys is the
subject of two issued U.S. patents, 7,164,035 and 6,586,611 and pending U.S.
patent application ser. no. 11/621,380.
In March
2008, we received an English translation of a Russian disclosure, Zegzhda et.
al. Chemical Abstracts Vol. 85 Abstract No. 186052 (1976) that was recently
cited by the U.S. patent examiner during our prosecution of the pending U.S.
patent application Ser. No. 11/621,390. The translation of such disclosure
appears to describe an insoluble non-zinc-salt zinc monocysteine complex which
may impact the validity of claim 1 of U.S. patent 7,164,035.
We also
expect to rely on regulatory exclusivities, such as the Orphan Drug Designation
with the FDA and EMEA (“Orphan Drug”) to protect oral TTM,
CORRECTATM and our
other future products for certain therapeutic indications. Orphan Drug
protection provides for seven years of marketing exclusivity for that disease
indication in the U.S. and ten years of marketing exclusivity for that disease
indication in Europe. We have received an Orphan Drug Designation for the use of
CORRECTATM
to treat pouchitis as well as an Orphan Drug Designation for the use of oral TTM
to treat neurologically presenting Wilson’s disease and are in the process of
filing similar designations in Europe. Orphan Drug Designation is an important
element of our competitive strategy for oral TTM and CORRECTATM.
To be successful in enforcing this designation, our NDA would need to be the
first NDA approved to use oral TTM and CORRECTATM
for that indication. While we are not aware of any other companies that have
sought orphan drug designation for oral TTM and CORRECTATM
for any indication, other companies may in the future seek it and may obtain FDA
marketing approval before we do.
After the
Orphan Drug exclusivity period expires, assuming our patents are validly issued,
we still expect to rely on our issued and pending method of use patent
applications to protect our proprietary technology with respect to the
development of oral TTM, TRIMESTATM
and CORRECTATM.
The patent positions of pharmaceutical companies are uncertain and may involve
complex legal and factual questions. We may incur significant expense in
protecting our intellectual property and defending or assessing claims with
respect to intellectual property owned by others. Any patent or other
infringement litigation by or against us could cause us to incur significant
expense and divert the attention of our management.
14
We may
also rely on the United States Drug Price Competition and Patent Term
Restoration Act, commonly known as the “Hatch-Waxman Amendments,” to protect
some of our current product candidates, specifically oral TTM, TRIMESTATM,
zincmonocystine, Anti-CD4 802-2, EFFIRMATM
and other future product candidates we may develop. Once a drug containing a new
molecule is approved by the FDA, the FDA cannot accept an abbreviated NDA for a
generic drug containing that molecule for five years, although the FDA may
accept and approve a drug containing the molecule pursuant to an NDA supported
by independent clinical data. Recent amendments have been proposed that would
narrow the scope of Hatch-Waxman exclusivity and permit generic drugs to compete
with our drug.
In July 2007 our exclusively licensed European patent covering our
multivalent T-cell vaccine, SolvaxTM, was opposed and
revoked. In order to save resources, we have elected not to appeal such ruling
and may elect to abandon the license with USC.
Others
may file patent applications or obtain patents on similar technologies or
compounds that compete with our products. We cannot predict how broad the claims
in any such patents or applications will be, and whether they will be allowed.
Once claims have been issued, we cannot predict how they will be construed or
enforced. We may infringe intellectual property rights of others without being
aware of it. If another party claims we are infringing their technology, we
could have to defend an expensive and time consuming lawsuit, pay a large sum if
we are found to be infringing, or be prohibited from selling or licensing our
products unless we obtain a license or redesign our product, which may not be
possible.
We also
rely on trade secrets and proprietary know-how to develop and maintain our
competitive position. Some of our current or former employees, consultants, or
scientific advisors, or current or prospective corporate collaborators, may
unintentionally or willfully disclose our confidential information to
competitors or use our proprietary technology for their own benefit.
Furthermore, enforcing a claim alleging the infringement of our trade secrets
would be expensive and difficult to prove, making the outcome uncertain. Our
competitors may also independently develop similar knowledge, methods, and
know-how or gain access to our proprietary information through some other
means.
We
may fail to retain or recruit necessary personnel, and we may be unable to
secure the services of consultants.
As of
March 31, 2008, we have 12 full-time employees. We have also engaged regulatory
consultants to advise us on our dealings with the FDA and other foreign
regulatory authorities. We intend to recruit certain key executive officers,
including a Chief Financial Officer and Vice President of Regulatory Affairs
during 2008. Our future performance will depend in part on our ability to
successfully integrate newly hired executive officers into our management team
and our ability to develop an effective working relationship among senior
management.
Certain
of our officers, directors, (including Mr. Stergis, our Vice Chairman of the
Board and former Chief Operating Officer, Dr. Rudick, a director and former
Chief Medical Officer, Jeffrey Kraws, a director and former VP of Business
Development, Jeffrey Wolf, a director, and Dr. Kuo, a director) scientific
advisors, and consultants serve as officers, directors, scientific advisors, or
consultants of other biopharmaceutical or biotechnology companies which might be
developing competitive products to ours. None of our directors or officers is
obligated under any agreement or understanding with us to make any additional
products or technologies available to us. Similarly, we can give no assurances,
and we do not expect and stockholders should not expect, that any biomedical or
pharmaceutical product or technology identified by any of our directors or
affiliates in the future would be made available to us.
We can
expect this to also be the case with personnel that we engage in the future. We
can give no assurances that any such other companies will not have interests
that are in conflict with our interests.
Losing
key personnel or failing to recruit necessary additional personnel would impede
our ability to attain our development objectives. There is intense competition
for qualified personnel in the drug-development field, and we may not be able to
attract and retain the qualified personnel we would need to develop our
business.
We rely
on independent organizations, advisors, and consultants to perform certain
services for us, including handling substantially all aspects of regulatory
approval, clinical management, manufacturing, marketing, and sales. We expect
that this will continue to be the case. Such services may not always be
available to us on a timely basis when we need them.
We
may experience difficulties in obtaining sufficient quantities of our products
or other compounds.
In order
to successfully commercialize our product candidates, we must be able to
manufacture our products in commercial quantities, in compliance with regulatory
requirements, at acceptable costs, and in a timely manner. Manufacture of the
types of biopharmaceutical products that we propose to develop present various
risks. For example, manufacture of the active ingredient in oral TTM is a
complex process that can be difficult to scale up for purposes of producing
large quantities. This process can also be subject to delays, inefficiencies,
and poor or low yields of quality products. Furthermore, the active ingredient
of oral TTM is known to be subject to a loss of potency as a result of prolonged
exposure to moisture and other normal atmospheric conditions. We are developing
proprietary formulations and specialty packaging solutions to overcome this
stability issue, but we can give no assurances that we will be successful in
meeting the stability requirements required for approval by regulatory
authorities such as the FDA or the requirements that our new proprietary
formulations and drug product will demonstrate satisfactory comparability to
less stable formulations utilized in prior clinical trials. We may experience
delays in demonstrating satisfactory stability requirements and drug product
comparability requirements that could delay acceptance or approval of our
planned NDA for oral TTM.
15
Our
SOLOVAX T-cell vaccine technology is complex to manufacture. The vaccine is
manufactured through the procurement of a patient’s own T-cells derived from the
patient’s plasma. This manufacturing process involves incubation of T-cells,
irradiation and refrigeration of the cells. We plan to develop a revised
manufacturing procedure which will streamline quality control of the
vaccine.
Historically,
our manufacturing has been handled by contract manufacturers and compounding
pharmacies. We can give no assurances that we will be able to continue to use
our current manufacturer or be able to establish another relationship with a
manufacturer quickly enough so as not to disrupt commercialization of any of our
products, or that commercial quantities of any of our products, if approved for
marketing, will be available from contract manufacturers at acceptable
costs.
In
addition, any contract manufacturer that we select to manufacture our product
candidates might fail to maintain a current “good
manufacturing practices” (cGMP) manufacturing facility. During February 2007, we
established a commercial manufacturing facility for oral
TTM product in Ann Arbor, MI and we have hired and trained our
employees to comply with the extensive regulations applicable to such a
facility. Upon FDA inspection our facility and/or cGMP procedures may require
changes that could delay our intended product launch of oral TTM and other
products that might develop.
The cost
of manufacturing certain product candidates may make them prohibitively
expensive. In order to successfully commercialize our product candidates we may
be required to reduce the costs of production, and we may find that we are
unable to do so. We may be unable to obtain, or may be required to pay high
prices for compounds manufactured or sold by others that we need for comparison
purposes in clinical trials and studies for our product candidates.
Clinical
trials are very expensive, time-consuming, and difficult to design and
implement.
Human
clinical trials are very expensive and difficult to design and implement, in
part because they are subject to rigorous regulatory requirements. The clinical
trial process is also time-consuming. We estimate that clinical trials of our
product candidates would take at least several years to complete. Furthermore,
failure can occur at any stage of the trials, and we could encounter problems
that cause us to abandon or repeat clinical trials. Commencement and completion
of clinical trials may be delayed by several factors, including:
· unforeseen
safety issues;
· determination
of dosing;
· lack of
effectiveness during clinical trials;
· slower
than expected rates of patient recruitment;
· inability
to monitor patients adequately during or after treatment; and
· inability
or unwillingness of medical investigators to follow our clinical
protocols.
In
addition, we or the FDA may suspend our clinical trials at any time if it
appears that we are exposing participants to unacceptable health risks or if the
FDA finds deficiencies in our submissions or conduct of our trials.
The
results of our clinical trials may not support our product candidate
claims.
Even if
our clinical trials are completed as planned, we cannot be certain that the
results will support our product-candidate claims. Success in pre-clinical
testing and phase II clinical trials does not ensure that later phase II or
phase III clinical trials will be successful. We cannot be sure that the results
of later clinical trials would replicate the results of prior clinical trials
and pre-clinical testing. Clinical trials may fail to demonstrate that our
product candidates are safe for humans and effective for indicated uses. Any
such failure could cause us to abandon a product candidate and might delay
development of other product candidates. Any delay in, or termination of, our
clinical trials would delay our obtaining FDA approval for the affected product
candidate and, ultimately, our ability to commercialize that product
candidate.
Physicians
and patients may not accept and use our technologies.
Even if
the FDA approves our product candidates, physicians and patients may not accept
and use them. Acceptance and use of our product will depend upon a number of
factors, including the following:
16
· the
perception of members of the health care community, including physicians,
regarding the safety and effectiveness of our drugs;
· the
cost-effectiveness of our product relative to competing products;
· availability
of reimbursement for our products from government or other healthcare payers;
and
· the
effectiveness of marketing and distribution efforts by us and our licensees and
distributors, if any.
Because
we expect sales of our current product candidates, if approved, to generate
substantially all of our product revenues for the foreseeable future, the
failure of any of these drugs to find market acceptance would harm our business
and could require us to seek additional financing.
We
depend on researchers who are not under our control.
We depend
upon independent investigators and scientific collaborators, such as
universities and medical institutions, to conduct our pre-clinical and clinical
trials under agreements with us. These collaborators are not our employees and
we cannot control the amount or timing of resources that they devote to our
programs or the timing of their procurement of clinical-trial data. They may not
assign as great a priority to our programs or pursue them as diligently as we
would if we were undertaking those programs ourselves. Failing to devote
sufficient time and resources to our drug-development programs, or substandard
performance, could result in delay of any FDA applications and our
commercialization of the drug candidate involved.
Our oral
TTM program is highly dependent on Dr. George Brewer, Professor Emeritus at the
University of Michigan. Dr. Brewer was the principal investigator and conducted
the clinical trials over an 18 year period on the oral TTM clinical trials which
formed the basis of our NDA filing. We have retained Dr. Brewer, age 76 as an
advisor and consultant to Pipex. In the event of Dr. Brewer’s untimely death or
disability, may significantly hamper our developement capabilities of oral
TTM.
These
collaborators may also have relationships with other commercial entities, some
of which may compete with us. Our collaborators assisting our competitors at our
expense could harm our competitive position. For example, we depend on
scientific collaborators for our TRIMESTATM,
SOLOVAXTM,
CORRECTATM,
anti-CD4 802-2, EFFIRMATM
and oral TTM development programs. Specifically, all of the clinical trials have
been conducted under physician-sponsored investigational new drug applications
(INDs), not corporate-sponsored INDs. Additionally, the clinical trials for oral
TTM for the treatment of neurologic Wilson’s disease have been conducted and
completed prior to us licensing this technology from the University of Michigan.
Due to various patient privacy regulations and other administrative
matters, we have experienced delays and/or an inability to obtain clinical trial
data relating to oral TTM. As such, this delay or inability to obtain any
data might result our inability to obtain regulatory approvals for oral TTM and
our products. We are also dependent on government and private grants to fund
certain of our clinical trials for our product candidates. For example, TRIMESTA
has received a $5 million grant from the Southern Chapter of the National
Multiple Sclerosis Society which funds a majority of our ongoing phase II/III
clinical trial in relapsing remitting multiple sclerosis. If we are
unable to maintain these grants, we might be forced to scale back development of
these product candidates. We have experienced difficulty in collecting the data
or transferring these programs to corporate-sponsored INDs. Additionally, we are
aware that all of our scientific collaborators may also act as advisors to our
competitors.
We
have no experience selling, marketing, or distributing products and do not have
the capability to do so.
We
currently have no sales, marketing, or distribution capabilities. We do not
anticipate having resources in the foreseeable future to allocate to selling and
marketing our proposed products. Our success will depend, in part, on whether we
are able to enter into and maintain collaborative relationships with a
pharmaceutical or a biotechnology company charged with marketing one or more of
our products. We may not be able to establish or maintain such collaborative
arrangements or to commercialize our products in foreign territories, and even
if we do, our collaborators may not have effective sales forces.
If we do
not, or are unable to, enter into collaborative arrangements to sell and market
our proposed products, we will need to devote significant capital, management
resources, and time to establishing and developing an in-house marketing and
sales force with technical expertise. We may be unsuccessful in doing
so.
If
we fail to maintain positive relationships with particular individuals, we may
be unable to successfully develop our product candidates, conduct clinical
trials, and obtain financing.
17
If we
fail to maintain positive relationships with members of our management team or
if these individuals decrease their contributions to our company, our business
could be adversely impacted. We do not carry key employee insurance policies for
any of our key employees.
We also
rely greatly on employing and retaining other highly trained and experienced
senior management and scientific personnel. The competition for these and other
qualified personnel in the biotechnology field is intense. If we are not able to
attract and retain qualified scientific, technical, and managerial personnel, we
probably will be unable to achieve our business objectives.
We
may not be able to compete successfully for market share against other drug
companies.
The
markets for our product candidates are characterized by intense competition and
rapid technological advances. If our product candidates receive FDA approval,
they will compete with existing and future drugs and therapies developed,
manufactured, and marketed by others. Competing products may provide greater
therapeutic convenience or clinical or other benefits for a specific indication
than our products, or may offer comparable performance at a lower cost. If our
products fail to capture and maintain market share, we may not achieve
sufficient product revenues and our business will suffer.
We will
compete against fully integrated pharmaceutical companies and smaller companies
that are collaborating with larger pharmaceutical companies, academic
institutions, government agencies, or other public and private research
organizations. Many of these competitors have therapies to treat autoimmune
fibrotic and central nervous system diseases already approved or in development.
In addition, many of these competitors, either alone or together with their
collaborative partners, operate larger research-and-development programs than we
do, have substantially greater financial resources than we do, and have
significantly greater experience in the following areas:
· developing
drugs;
· undertaking
pre-clinical testing and human clinical trials;
· obtaining
FDA and other regulatory approvals of drugs;
· formulating
and manufacturing drugs; and
· launching,
marketing and selling drugs.
We
may incur substantial costs as a result of litigation or other proceedings
relating to patent and other intellectual property rights, as well as costs
associated with frivolous lawsuits.
If any
other person files patent applications, or is issued patents, claiming
technology also claimed by us in pending applications, we may be required to
participate in interference proceedings in the U.S. Patent and Trademark Office
to determine priority of invention. We, or our licensors, may also need to
participate in interference proceedings involving our issued patents and pending
applications of another entity.
We cannot
guarantee that the practice of our technologies will not conflict with the
rights of others. In some foreign jurisdictions, we could become involved in
opposition proceedings, either by opposing the validity of another’s foreign
patent or by persons opposing the validity of our foreign patents.
We may
also face frivolous litigation or lawsuits from various competitors or from
litigious securities attorneys. The cost to us of any litigation or other
proceeding relating to these areas, even if resolved in our favor, could be
substantial and could distract management from our business. Uncertainties
resulting from initiation and continuation of any litigation could have a
material adverse effect on our ability to continue our operations.
If
we infringe the rights of others we could be prevented from selling products or
forced to pay damages.
If our
products, methods, processes, and other technologies are found to infringe the
proprietary rights of other parties, we could be required to pay damages, or we
may be required to cease using the technology or to license rights from the
prevailing party. Any prevailing party may be unwilling to offer us a license on
commercially acceptable terms.
Our
ability to generate product revenues will be diminished if our drugs sell for
inadequate prices or patients are unable to obtain adequate levels of
reimbursement.
18
Our
ability to commercialize our drugs, alone or with collaborators, will depend in
part on the extent to which reimbursement is available from government and
health administration authorities, private health maintenance organizations,
health insurers, and other healthcare payers.
Significant
uncertainty exists as to the reimbursement status of newly approved healthcare
products. Healthcare payers, including Medicare, are challenging the prices
charged for medical products and services. Government and other healthcare
payers increasingly attempt to contain healthcare costs by limiting both
coverage and the level of reimbursement for drugs. Even if our product
candidates are approved by the FDA, insurance coverage may not be available, or
may be inadequate, to cover the cost of our drugs. This could affect our ability
to commercialize our products.
We
may not be able to obtain adequate insurance coverage against product liability
claims.
Our
business exposes us to the product liability risks inherent in the testing,
manufacturing, marketing, and sale of human therapeutic technologies and
products. Even if it is available, product liability insurance for the
pharmaceutical and biotechnology industry generally is expensive. Adequate
insurance coverage may not be available at a reasonable cost.
RISKS
RELATING TO OUR STOCK
We
will seek to raise additional funds in the future, which may be dilutive to
stockholders or impose operational restrictions.
We expect
to seek to raise additional capital in the future to help fund development of
our proposed products. If we raise additional capital through the issuance of
equity or debt securities, the percentage ownership of our current stockholders
will be reduced. We may also enter into strategic transactions, issue equity as
part of license issue fees to our licensors, compensate consultants using equity
that may be dilutive. Our stockholders may experience additional dilution in net
book value per share and any additional equity securities may have rights,
preferences and privileges senior to those of the holders of our common stock.
If we cannot raise additional funds, we will have to delay development
activities of our products candidates.
We
are controlled by our current officers, directors, and principal
stockholders.
Currently,
our directors, executive officers, and principal stockholders beneficially own a
majority of our common stock. As a result, they will be able to exert
substantial influence over the election of our board of directors and the vote
on issues submitted to our stockholders.
Our
shares of common stock are from time to time thinly traded, so stockholders may
be unable to sell at or near ask prices or at all if they need to sell shares to
raise money or otherwise desire to liquidate their shares.
Our
common stock has from time to time been “thinly-traded,” meaning that the number
of persons interested in purchasing our common stock at or near ask prices at
any given time may be relatively small or non-existent. This situation is
attributable to a number of factors, including the fact that we are a small
company that is relatively unknown to stock analysts, stock brokers,
institutional investors and others in the investment community that generate or
influence sales volume, and that even if we came to the attention of such
persons, they tend to be risk-averse and would be reluctant to follow an
unproven company such as ours or purchase or recommend the purchase of our
shares until such time as we became more seasoned and viable. As a consequence,
there may be periods of several days or more when trading activity in our shares
is minimal or nonexistent, as compared to a seasoned issuer which has a
large and steady volume of trading activity that will generally support
continuous sales without an adverse effect on share price. We cannot give
stockholders any assurance that a broader or more active public trading market
for our common shares will develop or be sustained, or that current trading
levels will be sustained.
Our
compliance with the Sarbanes-Oxley Act and SEC rules concerning internal
controls may be time consuming, difficult and costly.
Although
individual members of our management team have experience as officers of
publicly traded companies, much of that experience came prior to the adoption of
the Sarbanes-Oxley Act of 2002. It may be time consuming, difficult and costly
for us to develop and implement the internal controls and reporting procedures
required by Sarbanes-Oxley. We may need to hire additional financial reporting,
internal controls and other finance staff in order to develop and implement
appropriate internal controls and reporting procedures. If we are unable to
comply with Sarbanes-Oxley’s internal controls requirements, we may not be able
to obtain the independent accountant certifications that Sarbanes-Oxley Act
requires publicly-traded companies to obtain.
We
cannot assure you that the common stock will be liquid or that it will remain
listed on a securities exchange.
19
We cannot
assure you that we will be able to maintain the listing standards of the
American Stock Exchange. The American Stock Exchange requires companies to meet
certain listing criteria including certain minimum stockholders and equity
prices per share. We may not be able to maintain such minimum prices or may be
required to effect a reverse stock split to maintain such minimum
prices.
There
may be issuances of shares of preferred stock in the future.
Although
we currently do not have preferred shares outstanding, the board of directors
could authorize the issuance of a series of preferred stock that would grant
holders preferred rights to our assets upon liquidation, the right to receive
dividends before dividends would be declared to common stockholders, and the
right to the redemption of such shares, possibly together with a premium, prior
to the redemption of the common stock. To the extent that we do issue preferred
stock, the rights of holders of common stock could be impaired thereby,
including without limitation, with respect to liquidation.
We
have never paid dividends.
We have
never paid cash dividends on our common stock and do not anticipate paying any
for the foreseeable future.
RISKS
RELATED TO OUR INDUSTRY
Government
Regulation
The FDA,
comparable foreign regulators and state and local pharmacy regulators impose
substantial requirements upon clinical development, manufacture and marketing of
pharmaceutical products. These and other entities regulate research and
development and the testing, manufacture, quality control, safety,
effectiveness, labeling, storage, record keeping, approval, advertising, and
promotion of our products. The drug approval process required by the FDA under
the Food, Drug, and Cosmetic Act generally involves:
· Preclinical
laboratory and animal tests;
· Submission
of an IND, prior to commencing human clinical trials;
· Adequate
and well-controlled human clinical trials to establish safety and efficacy for
intended use;
· Submission
to the FDA of a NDA; and
· FDA
review and approval of a NDA.
The
testing and approval process requires substantial time, effort, and financial
resources, and we cannot be certain that any approval will be granted on a
timely basis, if at all.
Preclinical
tests include laboratory evaluation of the product candidate, its chemistry,
formulation and stability, and animal studies to assess potential safety and
efficacy. Certain preclinical tests must be conducted in compliance with good
laboratory practice regulations. Violations of these regulations can, in some
cases, lead to invalidation of the studies, requiring them to be replicated. In
some cases, long-term preclinical studies are conducted concurrently with
clinical studies.
We will
submit the preclinical test results, together with manufacturing information and
analytical data, to the FDA as part of an IND, which must become effective
before we begin human clinical trials. The IND automatically becomes effective
30 days after filing, unless the FDA raises questions about conduct of the
trials outlined in the IND and imposes a clinical hold, in which case, the IND
sponsor and FDA must resolve the matters before clinical trials can begin. It is
possible that our submission may not result in FDA authorization to commence
clinical trials.
Clinical
trials must be supervised by a qualified investigator in accordance with good
clinical practice regulations, which include informed consent requirements. An
independent Institutional Review Board (“IRB”) at each medical center reviews
and approves and monitors the study, and is periodically informed of the study’s
progress, adverse events and changes in research. Progress reports are submitted
annually to the FDA and more frequently if adverse events occur.
Human
clinical trials typically have three sequential phases that may
overlap:
Phase I:
The drug is initially tested in healthy human subjects or patients for safety,
dosage tolerance, absorption, metabolism, distribution, and
excretion.
20
Phase II:
The drug is studied in a limited patient population to identify possible adverse
effects and safety risks, determine efficacy for specific diseases and establish
dosage tolerance and optimal dosage.
Phase
III: When phase II evaluations demonstrate that a dosage range is effective with
an acceptable safety profile, phase III trials to further evaluate dosage,
clinical efficacy and safety, are undertaken in an expanded patient population,
often at geographically dispersed sites.
We cannot
be certain that we will successfully complete phase I, phase II, or phase III
testing of our product candidates within any specific time period, if at all.
Furthermore, the FDA, an IRB or the IND sponsor may suspend clinical trials at
any time on various grounds, including a finding that subjects or patients are
exposed to unacceptable health risk.
Concurrent
with these trials and studies, we also develop chemistry and physical
characteristics data and finalize a manufacturing process in accordance with
good manufacturing practice (“GMP”) requirements. The manufacturing process must
conform to consistency and quality standards, and we must develop methods for
testing the quality, purity, and potency of the final products. Appropriate
packaging is selected and tested, and chemistry stability studies are conducted
to demonstrate that the product does not undergo unacceptable deterioration over
its shelf-life. Results of the foregoing are submitted to the FDA as part of a
NDA for marketing and commercial shipment approval. The FDA reviews each NDA
submitted and may request additional information.
Once the
FDA accepts the NDA for filing, it begins its in-depth review. The FDA has
substantial discretion in the approval process and may disagree with our
interpretation of the data submitted. The process may be significantly extended
by requests for additional information or clarification regarding information
already provided. As part of this review, the FDA may refer the application to
an appropriate advisory committee, typically a panel of clinicians.
Manufacturing establishments often are inspected prior to NDA approval to assure
compliance with GMPs and with manufacturing commitments made in the
application.
Submission
of a NDA with clinical data requires payment of a fee (for fiscal year 2008,
$1,178,500). In return, the FDA assigns a goal of ten months for issuing its
“complete response,” in which the FDA may approve or deny the NDA, or require
additional clinical data. Even if these data are submitted, the FDA may
ultimately decide the NDA does not satisfy approval criteria. If the FDA
approves the NDA, the product becomes available for physicians prescription.
Product approval may be withdrawn if regulatory compliance is not maintained or
safety problems occur. The FDA may require post-marketing studies, also known as
phase IV studies, as a condition of approval, and requires surveillance programs
to monitor approved products that have been commercialized. The agency has the
power to require changes in labeling or prohibit further marketing based on the
results of post-marketing surveillance.
Satisfaction
of these and other regulatory requirements typically takes several years, and
the actual time required may vary substantially based upon the type, complexity
and novelty of the product. Government regulation may delay or prevent marketing
of potential products for a considerable period of time and impose costly
procedures on our activities. We cannot be certain that the FDA or other
regulatory agencies will approve any of our products on a timely basis, if at
all. Success in preclinical or early-stage clinical trials does not assure
success in later-stage clinical trials. Data obtained from pre-clinical and
clinical activities are not always conclusive and may be susceptible to varying
interpretations that could delay, limit or prevent regulatory approval. Even if
a product receives regulatory approval, the approval may be significantly
limited to specific indications or uses.
Even
after regulatory approval is obtained, later discovery of previously unknown
problems with a product may result in restrictions on the product or even
complete withdrawal of the product from the market. Delays in obtaining, or
failures to obtain regulatory approvals would have a material adverse effect on
our business.
Any
products manufactured or distributed by us pursuant to FDA approvals are subject
to pervasive and continuing FDA regulation, including record-keeping
requirements, reporting of adverse experiences, submitting periodic reports,
drug sampling and distribution requirements, manufacturing or labeling changes,
record-keeping requirements, and compliance with FDA promotion and advertising
requirements. Drug manufacturers and their subcontractors are required to
register their facilities with the FDA and state agencies, and are subject to
periodic unannounced inspections for GMP compliance, imposing procedural and
documentation requirements upon us and third-party manufacturers. Failure to
comply with these regulations could result, among other things, in suspension of
regulatory approval, recalls, suspension of production or injunctions, seizures,
or civil or criminal sanctions. We cannot be certain that we or our present or
future subcontractors will be able to comply with these
regulations.
The FDA
regulates drug labeling and promotion activities. The FDA has actively enforced
regulations prohibiting the marketing of products for unapproved uses. The FDA
permits the promotion of drugs for unapproved uses in certain circumstances,
subject to stringent requirements. We and our product candidates are subject to
a variety of state laws and regulations which may hinder our ability to market
our products. Whether or not FDA approval has been obtained, approval by foreign
regulatory authorities must be obtained prior to commencing clinical trials, and
sales and marketing efforts in those countries. These approval procedures vary
in complexity from country to country, and the processes may be longer or
shorter than that required for FDA approval. We may incur significant costs to
comply with these laws and regulations now or in the future.
21
The FDA’s
policies may change, and additional government regulations may be enacted which
could prevent or delay regulatory approval of our potential products. Increased
attention to the containment of health care costs worldwide could result in new
government regulations materially adverse to our business. We cannot predict the
likelihood, nature or extent of adverse governmental regulation that might arise
from future legislative or administrative action, either in the U.S. or
abroad.
Other
Regulatory Requirements
The U.S.
Federal Trade Commission and the Office of the Inspector General of the U.S.
Department of Health and Human Services (“HHS”) also regulate certain
pharmaceutical marketing practices. Government reimbursement practices and
policies with respect to our products are important to our success.
We are
subject to numerous federal, state and local laws relating to safe working
conditions, manufacturing practices, environmental protection, fire hazard
control, and disposal of hazardous or potentially hazardous substances. We may
incur significant costs to comply with these laws and regulations. The
regulatory framework under which we operate will inevitably change in light of
scientific, economic, demographic and policy developments, and such changes may
have a material adverse effect on our business.
European
Product Approval
Prior
regulatory approval for human healthy volunteer studies (phase I studies) is
required in member states of the European Union (E.U.). Summary data from
successful phase I studies are submitted to regulatory authorities in member
states to support applications for phase II studies. E.U. authorities typically
have one to three months (which often may be extended in their discretion) to
raise objections to the proposed study. One or more independent ethics
committees (similar to U.S. IRBs) review relevant ethical issues.
For E.U.
marketing approval, we submit to the relevant authority for review a dossier, or
MAA (Market Authorization Application), providing information on the quality of
the chemistry, manufacturing and pharmaceutical aspects of the product as well
as non-clinical and clinical data.
Approval
can take several months to several years, and can be denied, depending on
whether additional studies or clinical trials are requested (which may delay
marketing approval and involve unbudgeted costs) or regulatory authorities
conduct facilities (including clinical investigation site) inspections and
review manufacturing procedures, operating systems and personnel qualifications.
In many cases, each drug manufacturing facility must be approved, and further
inspections may occur over the product’s life.
The
regulatory agency may require post-marketing surveillance to monitor for adverse
effects or other studies. Further clinical studies are usually necessary for
approval of additional indications. The terms of any approval, including
labeling content, may be more restrictive than expected and could affect the
marketability of a product.
Failure
to comply with these ongoing requirements can result in suspension of regulatory
approval and civil and criminal sanctions. European renewals may require
additional data, resulting in a license being withdrawn. E.U. regulators have
the authority to revoke, suspend or withdraw approvals, prevent companies and
individuals from participating in the drug approval process, request recalls,
seize violative products, obtain injunctions to close non-compliant
manufacturing plants and stop shipments of violative products.
Pricing
Controls
Pricing
for products under approval applications is also subject to regulation.
Requirements vary widely between countries and can be implemented disparately
intra-nationally. The E.U. generally provides options for member states to
control pricing of medicinal products for human use, ranging from specific
price-setting to systems of direct or indirect controls on the producer’s
profitability. U.K. regulation, for example, generally provides controls on
overall profits derived from sales to the U.K. National Health Service that are
based on profitability targets or a function of capital employed in servicing
the National Health Service market. Italy generally utilizes a price monitoring
system based on the European average price over the reference markets of France,
Spain, Germany and the U.K. Italy typically establishes price within a
therapeutic class based on the lowest price for a medicine belonging to that
category. Spain generally establishes selling price based on prime cost plus a
profit margin within a range established yearly by the Spanish Commission for
Economic Affairs.
There can
be no assurance that price controls or reimbursement limitations will result in
favorable arrangements for our products.
22
Third-Party
Reimbursements
In the
U.S., the E.U. and elsewhere, pharmaceutical sales are dependent in part on the
availability and adequacy of reimbursement from third party payers such as
governments and private insurance plans. Third party payers are increasingly
challenging established prices, and new products that are more expensive than
existing treatments may have difficulty finding ready acceptance unless there is
a clear therapeutic benefit.
In the
U.S., consumer willingness to choose a self-administered outpatient prescription
drug over a different drug or other form of treatment often depends on the
manufacturer’s success in placing the product on a health plan formulary or drug
list, which results in lower out-of-pocket costs. Favorable formulary placement
typically requires the product to be less expensive than what the health plan
determines to be therapeutically equivalent products, and often requires
manufacturers to offer rebates. Federal law also requires manufacturers to pay
rebates to state Medicaid programs in order to have their products reimbursed by
Medicaid. Medicare, which covers most Americans over age 65 and the disabled,
has adopted a new insurance regime that will offer eligible beneficiarie’s
limited coverage for outpatient prescription drugs effective January 1, 2006.
The prescription drugs that will be covered under this insurance will be
specified on a formulary published by Medicare. As part of these changes,
Medicare is adopting new payment formulas for prescription drugs administered by
providers, such as hospitals or physicians, that are generally expected to lower
reimbursement.
The E.U.
generally provides options for member states to restrict the range of medicinal
products for which their national health insurance systems provide
reimbursement. Member states can opt for a “positive” or “negative” list, with
the former listing all covered medicinal products and the latter designating
those excluded from coverage. The E.U., the U.K. and Spain have negative lists,
while France uses a positive list. Canadian provinces establish their own
reimbursement measures. In some countries, products may also be subject to
clinical and cost effectiveness reviews by health technology assessment bodies.
Negative determinations in relation to our products could affect prescribing
practices. In the U.K., the National Institute for Clinical Excellence (“NICE”)
provides such guidance to the National Health Service, and doctors are expected
to take it into account when choosing drugs to prescribe. Health authorities may
withhold funding from drugs not given a positive recommendation by NICE. A
negative determination by NICE may mean fewer prescriptions. Although NICE
considers drugs with orphan status, there is a degree of tension on the
application of standard cost assessment for orphan drugs, which are often priced
higher to compensate for a limited market. It is unclear whether NICE will adopt
a more relaxed approach toward the assessment of orphan drugs.
We cannot
assure you that any of our products will be considered cost effective, or that
reimbursement will be available or sufficient to allow us to sell them
competitively and profitably.
Fraud
and Abuse Laws
The U.S.
federal Medicare/Medicaid anti-kickback law and similar state laws prohibit
remuneration intended to induce physicians or others either to refer patients,
or to acquire or arrange for or recommend the acquisition of health care
products or services. While the federal law applies only to referrals, products
or services receiving federal reimbursement, state laws often apply regardless
of whether federal funds are involved. Other federal and state laws prohibit
anyone from presenting or causing to be presented false or fraudulent payment
claims. Recent federal and state enforcement actions under these statutes have
targeted sales and marketing activities of prescription drug manufacturers. As
we begin to market our products to health care providers, the relationships we
form, such as compensating physicians for speaking or consulting services,
providing financial support for continuing medical education or research
programs, and assisting customers with third-party reimbursement claims, could
be challenged under these laws and lead to civil or criminal penalties,
including the exclusion of our products from federally-funded reimbursement.
Even an unsuccessful challenge could cause adverse publicity and be costly to
respond to, and thus could have a material adverse effect on our business,
results of operations and financial condition. We intend to consult counsel
concerning the potential application of these and other laws to our business and
to our sales, marketing and other activities to comply with them. Given their
broad reach and the increasing attention given them by law enforcement
authorities, however, we cannot assure you that some of our activities will not
be challenged.
Patent
Restoration and Marketing Exclusivity
The U.S.
Drug Price Competition and Patent Term Restoration Act of 1984 (Hatch-Waxman)
permits the FDA to approve Abbreviated New Drug Applications (“ANDAs”) for
generic versions of innovator drugs, as well as NDAs with less original clinical
data, and provides patent restoration and exclusivity protections to innovator
drug manufacturers. The ANDA
process permits competitor companies to obtain marketing approval for drugs with
the same active ingredient and for the same uses as innovator drugs, but does
not require the conduct and submission of clinical studies demonstrating safety
and efficacy. As a result, a competitor could copy any of our drugs and only
need to submit data demonstrating that the copy is bioequivalent to gain
marketing approval from the FDA. Hatch-Waxman requires a competitor that submits
an ANDA, or otherwise relies on safety and efficacy data for one of our drugs,
to notify us and/or our business partners of potential infringement of our
patent rights. We and/or our business partners may sue the company for patent
infringement, which would result in a 30-month stay of approval of the
competitor’s application. The discovery, trial and appeals process in such suits
can take several years. If the litigation is resolved in favor of the generic
applicant or the challenged patent expires during the 30-month period, the stay
is lifted and the FDA may approve the application. Hatch-Waxman also allows
competitors to market copies of innovator products by submitting significantly
less clinical data outside the ANDA context. Such applications, known as
“505(b)(2) NDAs” or “paper NDAs,” may rely on clinical investigations not
conducted by or for the applicant and for which the applicant has not obtained a
right of reference or use and are subject to the ANDA notification procedures
described above.
23
The law
also restores a portion of a product’s patent term that is lost during clinical
development and NDA review, and provides statutory protection, known as
exclusivity, against FDA approval or acceptance of certain competitor
applications. Restoration can return up to five years of patent term for a
patent covering a new product or its use to compensate for time lost during
product development and regulatory review. The restoration period is generally
one-half the time between the effective date of an IND and submission of an NDA,
plus the time between NDA submission and its approval (subject to the five-year
limit), and no extension can extend total patent life beyond 14 years after the
drug approval date. Applications for patent term extension are subject to U.S.
Patent and Trademark Office (“USPTO”) approval, in conjunction with FDA.
Approval of these applications takes at least six months, and there can be no
guarantee that it will be given at all.
Hatch-Waxman
also provides for differing periods of statutory protection for new drugs
approved under an NDA. Among the types of exclusivity are those for a “new
molecular entity” and those for a new formulation or indication for a
previously-approved drug. If granted, marketing exclusivity for the types of
products that we are developing, which include only drugs with innovative
changes to previously-approved products using the same active ingredient, would
prohibit the FDA from approving an ANDA or 505(b)(2) NDA relying on safety and
efficacy data for three years. This three-year exclusivity, however, covers only
the innovation associated with the original NDA. It does not prohibit the FDA
from approving applications for drugs with the same active ingredient but
without our new innovative change. These marketing exclusivity protections do
not prohibit FDA from approving a full NDA, even if it contains the innovative
change.
ITEM
2. PROPERTIES
Our
primary offices are located at 3930 Varsity Drive, Ann Arbor, MI 48108. We
currently rent approximately 17,675 square feet of office, laboratory and
production space for monthly rent of $14,327.62. This lease expires
on February 28, 2011 extendable at our option for an additional three years. We
believe our current offices will be adequate for the foreseeable
future. Our phone number is (734) 332-7800 and our facsimile number
is (734) 332-7878. Our website is located at www.pipexinc.com.
ITEM
3. LEGAL PROCEEDINGS
We are
not a party to any pending legal proceeding, nor are we aware of any proceeding
contemplated by any governmental authority involving us.
24
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The
following matters were submitted to a vote of our stockholders at our 2007
Annual Meeting of Stockholders held on November 2, 2007 and approved by the
requisite vote of our stockholders as follows:
1.
|
Election
of the following director nominees to serve for the following year and
until his successor is elected:
|
|
|
Number
of Shares
|
|
Nominee
|
|
For
|
|
|
Withheld
|
|
Steve
H. Kanzer
|
|
|
10,788,781 |
|
|
|
30,698 |
|
Charles
L. Bisgaier
|
|
|
10,788,781 |
|
|
|
30,698 |
|
Jeffrey
J. Kraws
|
|
|
10,788,748 |
|
|
|
30,731 |
|
A.
Joseph Rudick
|
|
|
10,788,814 |
|
|
|
30,665 |
|
Nicholas
Stergis
|
|
|
10,788,814 |
|
|
|
30,665 |
|
Jeff
Wolf
|
|
|
10,790,381 |
|
|
|
29,098 |
|
Daniel
J. Dorman
|
|
|
10,790,348 |
|
|
|
29,131 |
|
James
S. Kuo
|
|
|
10,790,348 |
|
|
|
29,131 |
|
2.
|
Approval
of the Pipex Pharmaceuticals, inc. 2007 Stock Incentive
Plan:
|
Number
of Shares
|
For
|
Against
|
Abstain
|
9,397,760
|
44,850
|
1,434
|
3.
|
Ratification
of the selection of Berman & Company, P.A. as the Company’s
independent registered public accounting firm for our fiscal year ending
December 31, 2007:
|
Number
of Shares
|
For
|
Against
|
Abstain
|
10,794,684
|
23,594
|
1,201
|
The
number of shares of our common stock eligible to vote as of the record date of
October 9, 2007 was 16,998,076 shares.
25
ITEM
5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
Our
common stock has traded on the American Stock Exchange under the symbol “PP”
since July 2007. We were previously listed on the OTC Bulletin Board under the
name “PPXP” beginning on December 18, 2006. The following table
states the range of the high and low bid-prices per share of our common stock
for each of the calendar quarters during the last two fiscal years while our
common stock was quoted on the OTC Bulletin Board and the high and sale price
while our common stock has traded on the American Stock Exchange. These
quotations represent inter-dealer prices, without retail mark-up, markdown, or
commission, and may not represent actual transactions. The last price of our
common stock as reported on the American Stock Exchange on March 24, 2008 was
$0.89 per share. As of March 24, 2008, there were approximately 386 stockholders
of record of our common stock. This number does not include beneficial owners
from whom shares are held by nominees in street name.
|
|
High
|
|
|
Low
|
|
YEAR
ENDED DECEMBER 31, 2007
|
|
|
|
|
|
|
Fourth
quarter
|
|
$ |
7.10 |
|
|
$ |
4.68 |
|
Third
quarter
|
|
$ |
8.00 |
|
|
$ |
4.30 |
|
Second
quarter
|
|
$ |
8.10 |
|
|
$ |
3.71 |
|
First
quarter
|
|
$ |
30.00 |
|
|
$ |
3.06 |
|
YEAR
ENDED DECEMBER 31, 2006
|
|
|
|
|
|
|
|
|
Fourth
quarter
|
|
$ |
6.50 |
|
|
$ |
0.56 |
|
Third
quarter
|
|
$ |
1.10 |
|
|
$ |
1.00 |
|
Second
quarter
|
|
$ |
1.60 |
|
|
$ |
1.25 |
|
First
quarter
|
|
$ |
1.02 |
|
|
$ |
0.01 |
|
Dividend
Policy
We have
not paid any cash dividends on our common stock to date, and we have no
intention of paying cash dividends in the foreseeable future. Whether we declare
and pay dividends is determined by our board of directors at their discretion,
subject to certain limitations imposed under Delaware corporate law. The timing,
amount and form of dividends, if any, will depend on, among other things, our
results of operations, financial condition, cash requirements and other factors
deemed relevant by our board of directors.
Recent
Sales of Unregistered Securities; Uses of Proceeds from Registered
Securities
From
October through November 2007, the Company issued a total of 3,274,566 shares of
our common stock to a total of 50 warrant holders pursuant to a warrant
call. These warrants had been previously issued in connection with
the Company’s 2006 private placement transaction. In connection with
this warrant call, the Company appointed Noble International Investments, Inc.
(“Noble”) as the Company’s exclusive warrant solicitation agent. The
Company paid Noble $579,569 and issued Noble 327,456 warrants to purchase
327,456 share of common stock. The Warrants have a term of five years
and are exercisable at $6.36 per share. This offering and sale of shares of
common stock qualified for exemption under Section 4(2) of the Securities Act of
1933 since the issuance did not involve a public offering. The offering was not
a public offering as defined in Section 4(2) because the offer and sale was made
to an insubstantial number of persons and because of the manner of the offering.
In addition, these investors had the necessary investment intent as required by
Section 4(2) since they agreed to, and received, share certificates bearing a
legend stating that such shares are restricted. This restriction ensures that
these shares will not be immediately redistributed into the market and therefore
not be part of a public offering. This offering was done with no general
solicitation or advertising by us. Each investor made representations regarding
his or her financial sophistication and had an opportunity to ask questions of
our management.
26
From May
17, 2007 through September 30, 2007, the Registrant issued a total of 127,406
shares of our common stock to a total of three holders of our warrants upon the
exercise of those warrants. This offering and sale of shares of common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance did not involve a public offering. The offering was not a public
offering as defined in Section 4(2) because the offer and sale was made to an
insubstantial number of persons and because of the manner of the offering. In
addition, these investors had the necessary investment intent as required by
Section 4(2) since they agreed to, and received, share certificates bearing a
legend stating that such shares are restricted. This restriction ensures that
these shares will not be immediately redistributed into the market and therefore
not be part of a public offering. This offering was done with no general
solicitation or advertising by us. Each investor made representations regarding
his or her financial sophistication and had an opportunity to ask questions of
our management.
On
January 5, 2007, the Registrant issued 795,248 shares of its common stock, and
assumed a total of 34,685 options to purchase its common stock and a total of
68,858 warrants to purchase its common stock in connection with its acquisition
of the remaining 34.53% interest in its subsidiary EPI. This offering and sale
of securities qualified for exemption under Section 4(2) of the Securities Act
of 1933 since the issuance did not involve a public offering. The offering was
not a public offering as defined in Section 4(2) because of the manner of the
offering. The investors had the necessary investment intent as required by
Section 4(2) since they agreed to, and received, share certificates bearing a
legend stating that such shares are restricted. This restriction ensures that
these shares will not be immediately redistributed into the market and therefore
not be part of a public offering. This offering was done with no general
solicitation or advertising by the Registrant. Based on an analysis of the above
factors, the Registrant has met the requirements to qualify this offering and
sale for exemption under Section 4(2) of the Securities Act of
1933.
During
October and November of 2006, the Company completed private placements of its
stock, which resulted in the issuance of 6,900,931 shares of common stock and
3,451,524 warrants. Each unit consisted of 49,508 shares of common stock and a
warrant to purchase 24,754 shares of common stock. Of the total, 2,252,506
shares were part of the share exchange in the reverse merger in connection with
the issuance of 11,333,333 shares by Sheffield. The remaining 4,648,813 shares
of common stock reflected issuances post reverse merger. The net proceeds from
the private placements were approximately $12,766,000, which was net of cash
paid as direct offering costs totaling $1,160,418. In connection with the
private placements, the Company engaged a company, which is controlled by the
Company’s Chairman and Chief Executive Officer, as the placement agent for the
transaction. Of the total $1,160,418 in direct offering costs, the Company paid
the placement agent the sum of approximately $1,033,800. Additionally the
placement agent was paid non-cash compensation of 958,277 warrants with an
aggregate fair value of $4,555,457. In December 2006, the Company filed a
Registration Statement under the Securities Act of 1933, as amended, to register
the resale of these shares by the purchasers of such shares. The Registration
Statement was declared effective by the Securities and Exchange Commission on
February 13, 2007. The proceeds are being used to fund operations, for working
capital and for general corporate purposes, which may include capital
expenditures, clinical development, research, manufacturing and/or in-licensing
of technology.
27
ITEM
6. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The
following discussion of our financial condition and results of operations should
be read in conjunction with the audited financial statements and notes thereto
for the fiscal year ended December 31, 2007, found in this report. In addition
to historical information, the following discussion contains forward-looking
statements that involve risks, uncertainties and assumptions. Where possible, we
have tried to identify these forward looking statements by using words such as
“anticipate,” “believe,” “intends,” or similar expressions. Our actual results
could differ materially from those anticipated by the forward-looking statements
due to important factors and risks including, but not limited to, those set
forth under “Risk Factors” in Part I, Item 1A of this Report.
Overview
Since our
inception during January 2001, our efforts and resources have been focused
primarily on acquiring and developing our pharmaceutical technologies, raising
capital and recruiting personnel. We are a development stage company and have
had no product sales to date and we will not have any product sales until and
unless we receive approval from the FDA or receive approval from equivalent
foreign regulatory bodies to begin selling our pharmaceutical candidates. Our
major sources of working capital have been proceeds from equity financings from
our Chairman and Chief Executive Officer and various private financings,
primarily involving private sales of our common stock and other equity
securities.
Our
company’s current corporate structure resulted from the October 2006 merger of a
newly-created wholly owned subsidiary of Sheffield Pharmaceuticals, Inc.
(“Sheffield”), a Delaware corporation incorporated in September 1993, and Pipex
Therapeutics, Inc., a Delaware corporation (“Pipex Therapeutics”). In connection
with that transaction, a wholly owned subsidiary of Sheffield merged with and
into Pipex Therapeutics, with Pipex Therapeutics remaining as the surviving
corporation and a wholly-owned subsidiary of Sheffield. On December 11, 2006,
Sheffield changed its name to Pipex Pharmaceuticals, Inc. (“Pipex”). In exchange
for their shares of capital stock in Pipex Therapeutics, the former stockholders
of Pipex Therapeutics received shares of capital stock of Sheffield representing
approximately 98 percent of the outstanding equity of Sheffield on a primary
diluted basis after giving effect to the transaction, with Sheffield assuming
Pipex’s outstanding options and warrants. In addition, the board of directors of
Sheffield was reconstituted shortly following the effective time of the
transaction such that the directors of Sheffield were replaced by our current
directors, all of whom were previously directors of Pipex Therapeutics. Further,
upon the effective time of the merger, the business of Sheffield was abandoned
and the business plan of Pipex Therapeutics was adopted. The transaction was
therefore accounted for as a reverse acquisition with Pipex Therapeutics as the
acquiring party and Sheffield as the acquired party. Accordingly, when we refer
to our business and financial information relating to periods prior to the
merger, we are referring to the business and financial information of Pipex
Therapeutics, unless the context indicates otherwise.
Critical
Accounting Policies
In
December 2001, the SEC requested that all registrants discuss their most
“critical accounting policies” in management’s discussion and analysis of
financial condition and results of operations. The SEC indicated that a
“critical accounting policy” is one which is both important to the portrayal of
the company’s financial condition and results and requires management’s most
difficult, subjective or complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain. We
believe that the following discussion regarding research and development
expenses, general and administrative expenses and non-cash compensation expense
involve our most critical accounting policies.
Research
and development expenses consist primarily of manufacturing costs, license fees,
salaries and related personnel costs, fees paid to consultants and outside
service providers for laboratory development, legal expenses resulting from
intellectual property prosecution and organizational affairs and other expenses
relating to the design, development, testing, and enhancement of our product
candidates, as well as an allocation of overhead expenses incurred by the
Company. We expense our research and development costs as they are
incurred.
General
and administrative expenses consist primarily of salaries and related expenses
for executive, finance and other administrative personnel, recruitment expenses,
professional fees and other corporate expenses, including business development
and general legal activities, as well as an allocation of overhead expenses
incurred by the Company. We expense our general and administrative expenses as
they are incurred.
28
Our
results include non-cash compensation expense as a result of the issuance of
stock and stock option grants. Compensation expense for options granted to
employees represents the fair value of the award at the date of grant. All
share-based payments to employees since inception have been recorded and
expensed in the statements of operations as applicable under SFAS No. 123R
“Share-Based Payment”.
This
amount is being recorded over the respective vesting periods of the individual
stock options. The expense is included in the respective categories of expense
in the statement of operations. We expect to record additional non-cash
compensation expense in the future, which may be significant. However, because
some of the options are milestone-based, the total expense is
uncertain.
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect certain reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of expenses during the
reporting period. Actual results could differ from those estimates.
Results
of Operations
Year
Ended December 31, 2007 and 2006.
Research
and Development Expenses. For the year ended December 31, 2007, research and
development expense was $6,327,726 as compared to $2,665,555 for the year ended
December 31, 2006. The increase of $3,662,171 is due primarily to an increase in
salaries and payroll taxes of approximately $1,157,000, an increase in stock
based compensation charges of approximately $1,146,000 and an increase of
approximately $952,000 associated with payments related to further the
development of our licensed clinical drug candidates.
General
and Administrative Expenses. For the year ended December 31, 2007, general and
administrative expense was $3,810,585 as compared to $1,451,522 for the year
ended December 31, 2006. The increase of $2,359,063 is due primarily to
an increase in stock based compensation charge of approximately
$791,000, an increase to professional fees of approximately $638,000 and an
increase in salaries and payroll taxes of approximately $437,000.
Other
Income (Expense), net. For the year ended December 31, 2007, other income-net
was $245,878 compared to $17,982 for the year ended December 31, 2006. For the
year ended December 31, 2007, interest income was $298,807 as compared to
$17,982 for the year ended December 31, 2006. Interest income was higher for the
period in 2007 as compared to the same period in 2006, due to the higher levels
of cash in interest bearing accounts. For the year ended December 31, 2007,
interest expense was $52,929 as compared to $0 for the year ended December 31,
2006. Interest expense for the period in 2007 relates to interest paid on the
notes payable which did not exist for the same period in 2006. These
notes were repaid in March 2008.
Net Loss.
Net loss for the year ended December 31, 2007, was $9,892,433 as compared to
$4,099,095 for the year ended December 31, 2006. This increase in net loss is
attributable primarily to an increase in research and development expenses of
$3,662,171 and an increase in general and administrative expenses of $2,359,063
as discussed above.
Net Loss
Applicable to Common Shareholders. The net loss applicable to common
shareholders for the year ended December 31, 2007 includes a non-cash charge of
$12,409,722 related to the acquisition of Effective Pharmaceuticals, Inc
(“EPI”). The net loss applicable to common shareholders for the year ended
December 31, 2006 includes a non-cash charge of $761,000 related to Series B
Preferred Stock dividends issued from EPI. The total of the non-cash charges was
reflected through equal and offsetting adjustments to additional paid-in-capital
with no net impact on stockholders’ equity. These amounts were considered in the
determination of the Company’s loss per common share amounts for the year ended
December 31, 2007 and 2006 and for the period from January 8, 2001 (inception)
to December 31, 2007.
Liquidity
and Capital Resources
During
the year ended December 31, 2007, we had a net decrease in cash of $699,624.
Total cash resources as of December 31, 2007 was $11,492,802. During the year
ended December 31, 2007 and 2006, net cash used in operating activities was
$6,606,859 and $2,365,819 respectively. This cash was used to fund our
operations for the periods, adjusted for non-cash expenses and changes in
operating assets and liabilities.
Net cash
used in investing activities for the year ended December 31, 2007 and 2006 was
$1,965,574 and $710,833, respectively. The net cash used in investing activities
for the year ended December 31, 2007 resulted from the acquisition of property
and equipment. The net cash used in investing activities for the year
ended December 31, 2006 resulted from $665,000 paid to acquire Sheffield
Pharmaceuticals, Inc. in the reverse acquisition and $45,833 for the purchase of
property and equipment.
29
Net cash
proceeds from financing activities were $7,872,809 and $14,111,288 for the years
ended December 31, 2007 and 2006, respectively. The net cash proceeds from
financing activities for the year ended December 31, 2007 resulted from
$7,552,378 for proceeds from the exercise of warrants, less $579,569 paid as
direct offering costs. In addition, the Company raised $1,100,000 in
proceeds from notes payable under term loans, less $200,000 of repayments under
these loans. The net cash proceeds from financing activities for the year ended
December 31, 2006 resulted from proceeds from the sale of common stock and
warrants in private placement offerings of $13,926,362 less cash paid as direct
offering costs of $1,160,418 and proceeds from a related party loan of
$1,365,344, less $20,000 of repayments under the loan.
Our
continued operations will depend on whether we are able to raise additional
funds through various potential sources, such as equity and debt financing. Such
additional funds may not become available on acceptable terms and there can be
no assurance that any additional funding that we do obtain will be sufficient to
meet our needs in the long term. We will continue to fund operations from cash
on hand and through the similar sources of capital previously described. We can
give no assurances that any additional capital that we are able to obtain will
be sufficient to meet our needs.
Current
and Future Financing Needs
We have
incurred an accumulated deficit of $31,076,518 through December 31, 2007. We
have incurred negative cash flow from operations since we started our business.
We have spent, and expect to continue to spend, substantial amounts in
connection with implementing our business strategy, including our planned
product development efforts, our clinical trials, and our research and discovery
efforts. Based on our current plans, we believe that our cash will be sufficient
to enable us to meet our planned operating needs at least for the next 12
months.
However,
the actual amount of funds we will need to operate is subject to many factors,
some of which are beyond our control. These factors include the
following:
• the
progress of our research activities;
• the
number and scope of our research programs;
• the
progress of our pre-clinical and clinical development activities;
• the
progress of the development efforts of parties with whom we have entered into
research and development agreements;
• our
ability to maintain current research and development programs and to establish
new research and development and licensing arrangements;
• our
ability to achieve our milestones under licensing arrangements;
• the
costs involved in prosecuting and enforcing patent claims and other intellectual
property rights; and
• the
costs and timing of regulatory approvals.
We have
based our estimate on assumptions that may prove to be wrong. We may need to
obtain additional funds sooner or in greater amounts than we currently
anticipate. Potential sources of financing include strategic relationships,
public or private sales of our shares or debt and other sources. We may seek to
access the public or private equity markets when conditions are favorable due to
our long-term capital requirements. We do not have any committed sources of
financing at this time, and it is uncertain whether additional funding will be
available when we need it on terms that will be acceptable to us, or at all. If
we raise funds by selling additional shares of common stock or other securities
convertible into common stock, the ownership interest of our existing
stockholders will be diluted. If we are not able to obtain financing when
needed, we may be unable to carry out our business plan. As a result, we may
have to significantly limit our operations and our business, financial condition
and results of operations would be materially harmed.
30
License
and Contractual Agreement Obligations
Below is
a table of our contractual obligations for the years 2008 through 2011 as of
December 31, 2007.
|
|
Year
|
|
|
|
|
Agreements
|
|
2008
|
|
2009
|
|
2010
|
|
2011
|
|
Total
|
Research
and Development
|
|
$
|
306,333
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
306,333
|
|
Lease
Agreements
|
|
$
|
141,375
|
|
|
$
|
145,733
|
|
|
$
|
150,152
|
|
|
$
|
25,148
|
|
|
$
|
462,408
|
|
License
Agreements
|
|
$
|
223,830
|
|
|
$
|
125,000
|
|
|
$
|
130,000
|
|
|
$
|
132,500
|
|
|
$
|
611,330
|
|
Consulting
Agreements
|
|
$
|
91,661
|
|
|
$
|
3,332
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
94,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
763,199
|
|
|
$
|
274,065
|
|
|
$
|
280,152
|
|
|
$
|
157,648
|
|
|
$
|
1,475,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
Candidates
TRIMESTA TM
(oral
estriol)
In June
2007, a two year seven U.S. center, placebo controlled 150 patient phase II/III
clinical trial using TRIMESTATM for the
treatment of relapsing-remitting Multiple Sclerosis (MS) was initiated under a
$5 million grant from the Southern California Chapter of the National Multiple
Sclerosis Society and NIH. This phase II/III clinical trial builds upon our
encouraging results from an earlier phase IIa clinical trial. The primary
purpose of this study is to evaluate the safety and efficacy of TRIMESTA TM in a
larger MS patient population with a one year blinded interim analysis. The
preclinical and clinical development of TRIMESTA TM has
been primary financed by grants from the NIH and various non-profit foundations.
Through December 31, 2007, we have incurred approximately $429,000 of costs
related to our development of TRIMESTA TM of
which approximately $49,500 and $185,500 was incurred in fiscal years 2005 and
2006, respectively, and approximately $194,000 was incurred in
2007.
EFFIRMA TM (oral
flupirtine)
Our
scientific collaborator has filed an IND with the FDA to conduct a phase II
clinical trial with EFFIRMA in fibromyalgia patients. If our IND is
approved, we plan to fund the phase II clinical study. Through
December 31, 2007, we have incurred approximately $85,000 of costs related to
our development of EFFIRMA TM, all
of which was incurred during 2007.
Oral TTM (oral
tetrathiomolybate)
Through
December 31, 2007, we have incurred approximately $2,887,000 of costs related to
our development of oral TTM , of which approximately $150,000 and $1,061,000 was
incurred in fiscal years 2005 and 2006, respectively, and approximately
$1,676,000 was incurred for the year ended December 31, 2007.
During
2008, we plan to hold a Type B meeting with the FDA to discuss an approval
pathway for oral TTM. The feedback from that meeting with the FDA
will determine if we pursue an NDA filing for oral TTM in neurologic Wilson’s
disease. We plan to continue to explore additional therapeutic
indications of oral TTM through collaborative arrangements or discontinue them
altogether.
31
Anti-CD4
802-2
Through
December 31, 2007, we have incurred $1,383,000 of costs related to our
development of anti-CD4 802-2 of which $58,000, $332,000, $303,000, $295,000,
$113,000 and $161,000 was incurred in fiscal years 2001, 2002, 2003, 2004, 2005
and 2006 respectively and approximately $121,000 has been incurred in
2007.
CORRECTA TM
(clotrimazole
emema)
During
2008, we plan to continue the phase II clinical trial of CORRECTA in the
treatment of acute refractory pouchitis, a gastrointestinal disease (the
“CAPTURE study”). The primary purpose of this double blind, placebo-controlled
phase II clinical trial is to test CORRECTA’s safety and efficacy in treating
acute refractory pouchitis. The preclinical and clinical development
of CORRECTA TM has
been primarily financed by grants from the FDA’s orphan drug products group and
various non-profit foundations. Through December 31, 2007, we have incurred
approximately $246,000 of costs related to our development of CORRECTA TM of
which approximately $103,000 and $107,000 was incurred in fiscal years 2005 and
2006, respectively, and $36,000 has been incurred during 2007.
SolovaxTM (multivalent
T-cell vaccine for MS)
During
2008, we plan to further analyze the data from our phase II clinical trial of
SOLOVAX
TM in the treatment of secondary progressive MS, as well as develop a new
manufacturing procedure for SOLOVAX TM in Ann
Arbor Michigan that more closely resembles the process utilized in the initial
published clinical trial of SOLOVAX TM . On
July 11, 2007 at an opposition hearing in Munich, Germany brought by a
competitor, Opexa Therapeutics, Inc., our third auxiliary request to amend
claims to our exclusively licensed issued European patent number EP1015025 was
denied on the basis of time and as a result such patent was revoked. We intend
to vigorously continue to prosecute, defend and protect our pending
corresponding U.S. patent application and will be updating the public on our
future plans to develop SOLOVAX TM for
multiple sclerosis. On December 21, 2007 we converted our exclusive
agreement with the University of Southern California (USC) to a full exclusive
license agreement and issued to USC ten percent (10%) of the common stock of
Solovax Inc., our subsidiary that is developing our Multivalent T-cell vaccine
for MS upon issuance of the written opinion of the European Patent Office
associated with such opposition proceeding. We plan to seek a
corporate partner in the cellular therapy field to further develop the Solovax
technology.
If
successful, we may choose to initiate a phase IIb clinical study in this
disease. The preclinical and clinical development of SOLOVAX has
been primarily financed by grants from the NIH and various non-profit
foundations totaling $5.5 million. Through December 31, 2007, we have incurred
approximately $688,000 of costs related to our development of SOLOVAX of which
$107,000, $158,000, $164,000, $163,000, $67,000 and $21,000 was incurred in
fiscal 2001, 2002, 2003, 2004, 2005 and 2006, respectively, and $8,000 has been
incurred during 2007.
Z-monocys
In July
2007 licensed the rights for the manufacture, distribution and marketing of
products based on patented zinc-monocysteine complexes (“Z-monocys”). We plan to
initially develop Z-monocys as an oral treatment for dry age-related macular
degeneration (“dry AMD”). Z-monocys has completed a six month double blind
randomized placebo controlled trial in 80 dry AMD patients with statistically
significant improvements in visual acuity, contrast sensitivity and
photorecovery times. A manuscript describing these results has been submitted to
a leading peer-reviewed ophthalmic journal. Through December 31, 2007, we have
incurred approximately $154,000 of costs related to our development of Z-monocys
of which all has been incurred during 2007.
Based on
our current capital expenditures, we believe we currently have sufficient
capital to fund development activities of oral TTM, TRIMESTATM ,
anti-CD4 802-2, CORRECTA TM,
SOLOVAX TM
, Z-monocys and EFIRMATM during
2007 and 2008. However, if our business does not generate any cash flow through
corporate partnering transactions, we will need to raise additional capital to
continue development of the product beyond 2009. To the extent additional
capital is not available when we need it, we may be forced to sublicense our
rights to our product candidates, abandon our development efforts altogether, or
lose our licenses to our product candidates, any of which would have a material
adverse effect on the prospects of our business. See also the risks identified
under the section entitled “Risk Factors” in this report.
Additional
Licenses
We may
enter into additional license agreements relating to new drug candidates.
32
INDEX
TO FINANCIAL STATEMENTS
PIPEX
PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A
Development Stage Company)
TABLE
OF CONTENTS
|
|
Page
|
Report
of Independent Registered Public Accounting Firm
|
|
34
|
Consolidated
Balance Sheets
|
|
35
|
Consolidated
Statements of Operations
|
|
36
|
Consolidated
Statements of Changes in Stockholders’ Equity
|
|
37
|
Consolidated
Statements of Cash Flows
|
|
38
|
Notes
to Consolidated Financial Statements
|
|
39
|
33
Report
of Independent Registered Public Accounting Firm
To the
Board of Directors and Stockholders of:
Pipex
Pharmaceuticals, Inc.
We have
audited the accompanying consolidated balance sheets of Pipex Pharmaceuticals,
Inc. and Subsidiaries (a development stage company) as of December 31, 2007 and
2006 and the related consolidated statements of operations, changes in
stockholders’ equity and cash flows for the years ended December 31, 2007 and
2006 and for the period from January 8, 2001 (inception) to December 31, 2007.
These consolidated financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included the consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly
in all material respects, the consolidated financial position of Pipex
Pharmaceuticals, Inc. and Subsidiaries (a development stage company) as of
December 31, 2007 and 2006, and the consolidated results of their operations,
changes in stockholders’ equity and cash flows for the years ended December 31,
2007 and 2006, and for the period from January 8, 2001 (inception) to December
31 2007, in conformity with accounting principles generally accepted in the
United States of America.
/s/
Berman & Company, P.A.
Boca
Raton, Florida
March 11,
2008
34
Pipex
Pharmaceuticals, Inc. and Subsidiaries
(A
Development Stage Company)
Consolidated Balance
Sheets
|
|
|
|
December
31,
|
|
Assets
|
2007
|
|
2006
|
|
Current
Assets
|
|
|
|
|
|
|
Cash
|
|
$
11,492,802
|
|
$
12,192,426
|
|
|
Prepaid
expenses
|
|
63,636
|
|
25,702
|
|
|
Total
Current Assets
|
|
11,556,438
|
|
12,218,128
|
|
|
|
|
|
|
|
|
Property
and Equipment, net of accumulated depreciation of $232,564 and
$32,935
|
2,063,233
|
|
297,288
|
|
|
|
|
|
|
|
|
Deposits
and other assets
|
|
13,381
|
|
-
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
13,633,052
|
|
$
12,515,416
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
$ 728,119
|
|
$ 540,120
|
|
|
Accrued
liabilities
|
|
59,409
|
|
188,899
|
|
|
Notes
payable
|
|
900,000
|
|
-
|
|
|
Total
Current Liabilities
|
|
1,687,528
|
|
729,019
|
|
|
|
|
|
|
|
|
Commitments
(See Note 6)
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity
|
|
|
|
|
|
|
Preferred
stock, $0.001 par value; 10,000,000 shares
authorized,
|
|
|
|
|
none
issued and outstanding
|
|
-
|
|
-
|
|
|
Common
stock, $0.001 par value; 100,000,000 shares
authorized,
|
|
|
|
|
20,433,467
and 16,227,971 shares issued and outstanding
|
20,433
|
|
16,228
|
|
|
Additional
paid-in capital
|
|
43,001,609
|
|
20,544,532
|
|
|
Deficit
accumulated during the development stage
|
(31,076,518)
|
|
(8,774,363)
|
|
|
Total
Stockholders' Equity
|
|
11,945,524
|
|
11,786,397
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders' Equity
|
|
$
13,633,052
|
|
$
12,515,416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to consolidated financial statements
35
Pipex
Pharmaceuticals, Inc. and Subsidiaries
(A
Development Stage Company)
Consolidated Statements of
Operations
|
|
|
|
|
|
|
|
For
the period
|
|
|
|
|
|
|
|
|
|
from
January 8,
|
|
|
|
|
|
|
|
|
|
2001
|
|
|
|
For
the years ended December 31,
|
|
|
(inception)
to December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
$ |
6,327,726 |
|
|
$ |
2,665,555 |
|
|
$ |
11,160,795 |
|
General
and administrative
|
|
|
3,810,585 |
|
|
|
1,451,522 |
|
|
|
6,845,211 |
|
Total
Operating Expenses
|
|
|
10,138,311 |
|
|
|
4,117,077 |
|
|
|
18,006,006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from Operations
|
|
|
(10,138,311 |
) |
|
|
(4,117,077 |
) |
|
|
(18,006,006 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
298,807 |
|
|
|
17,982 |
|
|
|
343,389 |
|
Interest
expense
|
|
|
(52,929 |
) |
|
|
- |
|
|
|
(52,929 |
) |
Total
Other Income, net
|
|
|
245,878 |
|
|
|
17,982 |
|
|
|
290,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$ |
(9,892,433 |
) |
|
$ |
(4,099,095 |
) |
|
$ |
(17,715,546 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Preferred stock dividend - subsidiary
|
|
|
- |
|
|
|
(761,000 |
) |
|
|
(951,250 |
) |
Less:
Merger dividend
|
|
|
(12,409,722 |
) |
|
|
- |
|
|
|
(12,409,722 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss Applicable to Common Shareholders
|
|
$ |
(22,302,155 |
) |
|
$ |
(4,860,095 |
) |
|
$ |
(31,076,518 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss Per Share - Basic and Diluted
|
|
$ |
(1.27 |
) |
|
$ |
(1.50 |
) |
|
$ |
(7.60 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
during
the year/period - basic and diluted
|
|
|
17,597,120 |
|
|
|
3,244,543 |
|
|
|
4,089,820 |
|
|
|
See
accompanying notes to consolidated financial statements
36
Pipex
Pharmaceuticals, Inc. and Subsidiaries
(A
Development Stage Company)
Consolidated Statements of
Stockholders' Equity
For the years ended December 31, 2007 and
2006 and for the period from January 8, 2001 (inception) to December 31,
2007
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
Series
A, Convertible
|
|
|
|
|
|
|
accumulated
|
|
|
|
|
Preferred
Stock
|
|
Common
Stock
|
|
Additional
|
|
during
|
|
Total
|
|
|
$0.001
Par Value
|
|
$0.001
Par Value
|
|
Paid-in
|
|
development
|
|
Stockholders'
|
|
|
Shares
|
Amount
|
|
Shares
|
Amount
|
|
Capital
|
|
stage
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
January 8, 2001 (inception)
|
|
-
|
$ -
|
|
-
|
$ -
|
|
$ -
|
|
$ -
|
|
$ -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock to founders in exchange for subcription receivable
($0.00003/share)
|
|
-
|
-
|
|
1,572,136
|
1,572
|
|
(1,222)
|
|
-
|
|
350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of preferred stock to founder for cash ($0.055/share)
|
|
5,421,554
|
5,422
|
|
-
|
-
|
|
294,578
|
|
-
|
|
300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of preferred and common stock to founder for cash -
subsidiaries
|
|
-
|
-
|
|
-
|
-
|
|
850,540
|
|
-
|
|
850,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the period ended December 31, 2001
|
|
-
|
-
|
|
-
|
-
|
|
-
|
|
(277,868)
|
|
(277,868)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2001
|
|
5,421,554
|
5,422
|
|
1,572,136
|
1,572
|
|
1,143,896
|
|
(277,868)
|
|
873,022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for compensation and consulting -
subsidiary
|
|
-
|
-
|
|
-
|
-
|
|
119
|
|
-
|
|
119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant
of stock options for consulting services - subsidiary
|
|
-
|
-
|
|
-
|
-
|
|
5,890
|
|
-
|
|
5,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 2002
|
|
-
|
-
|
|
-
|
-
|
|
-
|
|
(768,508)
|
|
(768,508)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2002
|
|
5,421,554
|
5,422
|
|
1,572,136
|
1,572
|
|
1,149,905
|
|
(1,046,376)
|
|
110,523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant
of stock options for compensation - subsidiary
|
|
-
|
-
|
|
-
|
-
|
|
17,984
|
|
-
|
|
17,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 2003
|
|
-
|
-
|
|
-
|
-
|
|
-
|
|
(719,307)
|
|
(719,307)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2003
|
|
5,421,554
|
5,422
|
|
1,572,136
|
1,572
|
|
1,167,889
|
|
(1,765,683)
|
|
(590,800)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for cash - subsidiary
|
|
-
|
-
|
|
-
|
-
|
|
50
|
|
-
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant
of stock options for consulting services - subsidiary
|
|
-
|
-
|
|
-
|
-
|
|
10,437
|
|
-
|
|
10,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 2004
|
|
-
|
-
|
|
-
|
-
|
|
-
|
|
(602,493)
|
|
(602,493)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2004
|
|
5,421,554
|
5,422
|
|
1,572,136
|
1,572
|
|
1,178,376
|
|
(2,368,176)
|
|
(1,182,806)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognition
of stock based consulting in connection with stock options
grants
|
|
-
|
-
|
|
-
|
-
|
|
59,960
|
|
-
|
|
59,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognition
of stock based compensation in connection with stock option
grants
|
|
-
|
-
|
|
-
|
-
|
|
10,493
|
|
-
|
|
10,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognition
of deferred compensation - subsidiary
|
|
-
|
-
|
|
-
|
-
|
|
14,057
|
|
-
|
|
14,057
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Series B, convertible preferred stock for cash -
subsidiary
|
|
-
|
-
|
|
-
|
-
|
|
1,902,500
|
|
-
|
|
1,902,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid as direct offering costs in connection with sale of Series
B,
|
|
|
|
|
|
|
|
|
|
|
|
|
convertible
preferred stock - subsidiary
|
|
-
|
-
|
|
-
|
-
|
|
(152,200)
|
|
-
|
|
(152,200)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10%
in-kind Series B, convertible preferred stock dividend -
subsidiary
|
|
-
|
-
|
|
-
|
-
|
|
190,250
|
|
(190,250)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 2005
|
|
-
|
-
|
|
-
|
-
|
|
-
|
|
(1,355,842)
|
|
(1,355,842)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2005
|
|
5,421,554
|
5,422
|
|
1,572,136
|
1,572
|
|
3,203,436
|
|
(3,914,268)
|
|
(703,838)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
of related party loan to common stock ($2.02/share)
|
|
-
|
-
|
|
1,665,211
|
1,665
|
|
3,273,063
|
|
-
|
|
3,274,728
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for cash - private placement ($2.02/share)
|
|
-
|
-
|
|
6,900,931
|
6,901
|
|
13,919,462
|
|
-
|
|
13,926,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid as direct offering costs in private placements
|
|
-
|
-
|
|
-
|
-
|
|
(1,160,418)
|
|
-
|
|
(1,160,418)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for license fees ($0.92/share)
|
|
-
|
-
|
|
422,314
|
422
|
|
388,269
|
|
-
|
|
388,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
of accrued expenses to contributed capital - former related
party
|
|
-
|
-
|
|
-
|
-
|
|
3,017
|
|
-
|
|
3,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deemed
issuance to shareholders of legal acquiror and
recapitalization
|
|
-
|
-
|
|
245,824
|
246
|
|
(665,246)
|
|
-
|
|
(665,000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
of Series A, convertible preferred stock to common stock
|
|
(5,421,554)
|
(5,422)
|
|
5,421,554
|
5,422
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognition
of stock based consulting in connection with stock option
grants
|
|
-
|
-
|
|
-
|
-
|
|
411,310
|
|
-
|
|
411,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recogntion
of stock based compensation in connection with stock option
grants
|
|
-
|
-
|
|
-
|
-
|
|
410,639
|
|
-
|
|
410,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10%
in-kind Series B, convertible preferred stock dividend -
subsidiary
|
|
-
|
-
|
|
-
|
-
|
|
190,250
|
|
(190,250)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30%
in-kind Series B, convertible preferred stock dividend -
subsidiary
|
|
-
|
-
|
|
-
|
-
|
|
570,750
|
|
(570,750)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 2006
|
|
-
|
-
|
|
-
|
-
|
|
-
|
|
(4,099,095)
|
|
(4,099,095)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2006
|
|
-
|
-
|
|
16,227,970
|
16,228
|
|
20,544,532
|
|
(8,774,363)
|
|
11,786,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognition
of stock based compensation in connection with stock option
grants
|
|
-
|
-
|
|
-
|
-
|
|
1,483,123
|
|
-
|
|
1,483,123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognition
of stock based consulting in connection with stock option
grants
|
|
-
|
-
|
|
-
|
-
|
|
673,271
|
|
-
|
|
673,271
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
Issuance
of common stock for consideration of common shares in EPI acquistion
($19.95/share)
|
|
-
|
-
|
|
30,161
|
30
|
|
601,682
|
|
-
|
|
601,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributed
services - related party
|
|
|
|
|
|
|
|
275,645
|
|
-
|
|
275,645
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for license fees ($6.85/share)
|
|
-
|
-
|
|
2,920
|
3
|
|
19,997
|
|
-
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for milestone payment ($4.90/share)
|
|
-
|
-
|
|
5,102
|
5
|
|
24,995
|
|
-
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock in connection with warrants exercise
($2.22/share)
|
|
-
|
-
|
|
3,401,967
|
3,402
|
|
7,548,976
|
|
-
|
|
7,552,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid as direct offering costs in private placements
|
|
-
|
-
|
|
-
|
-
|
|
(579,569)
|
|
-
|
|
(579,569)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for consideration of preferred shares in EPI acquistion
($19.95/share)
|
|
-
|
-
|
|
765,087
|
765
|
|
12,408,957
|
|
(12,409,722)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rounding
of shares due to reverse split
|
|
|
|
|
260
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 2007
|
|
-
|
-
|
|
-
|
-
|
|
-
|
|
(9,892,433)
|
|
(9,892,433)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2007
|
|
-
|
$ -
|
|
20,433,467
|
$ 20,433
|
|
$ 43,001,609
|
|
$ (31,076,518)
|
|
$ 11,945,524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to consolidated financial statements
37
Pipex
Pharmaceuticals, Inc. and Subsidiaries
(A
Development Stage Company)
Consolidated
Statements of Cash Flows
|
|
For the year
ended December
31,
|
|
|
For
the Period from
January 8, 2001
(Inception)
to December
|
|
|
|
2007
|
|
|
2006
|
|
|
|
|
Cash
Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(9,892,433 |
) |
|
$ |
(4,099,095 |
) |
|
$ |
(17,715,546 |
) |
Adjustments
to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
|
|
|
|
used
in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
1,483,123 |
|
|
|
410,639 |
|
|
|
1,936,646 |
|
Stock-based
consulting
|
|
|
673,271 |
|
|
|
411,310 |
|
|
|
1,160,987 |
|
Stock
issued as compensation in acquisition of subsidiary
|
|
|
601,712 |
|
|
|
- |
|
|
|
601,712 |
|
Contributed
services - related party
|
|
|
275,645 |
|
|
|
- |
|
|
|
275,645 |
|
Stock
issued for license fee
|
|
|
20,000 |
|
|
|
388,691 |
|
|
|
408,691 |
|
Stock
issued for milestone payment
|
|
|
25,000 |
|
|
|
- |
|
|
|
25,000 |
|
Depreciation
|
|
|
199,629 |
|
|
|
30,675 |
|
|
|
232,564 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid
expenses and other
|
|
|
(37,934 |
) |
|
|
(25,702 |
) |
|
|
(63,636 |
) |
Deposits
and other assets
|
|
|
(13,381 |
) |
|
|
- |
|
|
|
(13,381 |
) |
Accounts
payable
|
|
|
187,999 |
|
|
|
325,746 |
|
|
|
728,119 |
|
Accrued
liabilities
|
|
|
(129,490 |
) |
|
|
191,917 |
|
|
|
62,427 |
|
Net
Cash Used In Operating Activities
|
|
|
(6,606,859 |
) |
|
|
(2,365,819 |
) |
|
|
(12,360,772 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases
of property and equipment
|
|
|
(1,965,574 |
) |
|
|
(45,833 |
) |
|
|
(2,011,407 |
) |
Cash
paid to acquire shell in reverse merger
|
|
|
- |
|
|
|
(665,000 |
) |
|
|
(665,000 |
) |
Net
Cash Used In Investing Activities
|
|
|
(1,965,574 |
) |
|
|
(710,833 |
) |
|
|
(2,676,407 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from loans payable - related party
|
|
|
- |
|
|
|
1,365,344 |
|
|
|
3,210,338 |
|
Repayments
of loans payable - related party
|
|
|
- |
|
|
|
(20,000 |
) |
|
|
(220,000 |
) |
Proceeds
from note payable
|
|
|
1,100,000 |
|
|
|
- |
|
|
|
1,100,000 |
|
Repayments
of note payable
|
|
|
(200,000 |
) |
|
|
- |
|
|
|
(200,000 |
) |
Proceeds
from issuance of preferred and common stock
|
|
|
- |
|
|
|
- |
|
|
|
1,150,590 |
|
Proceeds
from sale of common stock and warrants in private
placements
|
|
|
- |
|
|
|
13,926,362 |
|
|
|
13,926,362 |
|
Proceeds
from sale of common stock in connection with warrants
exercise
|
|
|
7,552,378 |
|
|
|
- |
|
|
|
7,552,378 |
|
Cash
paid as direct offering costs in warrant call and private
placements
|
|
|
(579,569 |
) |
|
|
(1,160,418 |
) |
|
|
(1,739,987 |
) |
Proceeds
from issuance of Series B, convertible preferred stock -
subsidiary
|
|
|
- |
|
|
|
- |
|
|
|
1,902,500 |
|
Direct
offering costs in connection with issuance of
|
|
|
|
|
|
|
|
|
|
|
|
|
series
B, convertible preferred stock - subsidiary
|
|
|
- |
|
|
|
- |
|
|
|
(152,200 |
) |
Net
Cash Provided By Financing Activities
|
|
|
7,872,809 |
|
|
|
14,111,288 |
|
|
|
26,529,981 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash
|
|
|
(699,624 |
) |
|
|
11,034,636 |
|
|
|
11,492,802 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
at beginning of year/period
|
|
|
12,192,426 |
|
|
|
1,157,790 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
at end of year/period
|
|
$ |
11,492,802 |
|
|
$ |
12,192,426 |
|
|
$ |
11,492,802 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$ |
52,929 |
|
|
$ |
- |
|
|
$ |
52,929 |
|
Cash
paid for taxes
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of non-cash investing and financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange
of EPI preferred stock into Pipex common stock in
acquisition
|
|
$ |
12,409,722 |
|
|
$ |
- |
|
|
$ |
12,409,722 |
|
Pipex
acquired equipment in exchange for a loan with a related
party
|
|
$ |
- |
|
|
$ |
284,390 |
|
|
$ |
284,390 |
|
EPI
declared a 10% and 30% in-kind dividend on its Series B,
|
|
|
|
|
|
|
|
|
|
|
|
|
convertible
preferred stock.
|
|
$ |
- |
|
|
$ |
761,000 |
|
|
$ |
951,250 |
|
The
Company issued shares and warrants in connection with the
|
|
|
|
|
|
|
|
|
|
|
|
|
conversion
of certain related party debt.
|
|
$ |
- |
|
|
$ |
3,274,728 |
|
|
$ |
3,274,728 |
|
Conversion
of accrued liabilities to contributed capital - former related
party
|
|
$ |
- |
|
|
$ |
3,017 |
|
|
$ |
3,017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to consolidated financial statements
38
Pipex
Pharmaceuticals, Inc. and Subsidiaries
(A
Development Stage Company)
Notes
to Consolidated Financial Statements