e10ksbza
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
AMENDMENT NO. 1
(Mark one)
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Annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the Fiscal Year December 31, 2004, or
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Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission file number: 001-32157
ADVENTRX PHARMACEUTICALS, INC.
(Name of Small Business Issuer in its charter)
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Delaware
(State or other jurisdiction of
incorporation or organization)
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84-1318182
(I.R.S. Employer Identification No.) |
6725 Mesa Ridge Road, Suite 100, San Diego, California 92121
(Address of principal executive offices)
(858) 552-0866
(Issuer’s telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $0.001 per share
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 issuer was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-B 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. o
State issuer’s revenues for its most recent fiscal year: $103,042
The aggregate market value of the Common Stock held by non-affiliates of
the issuer, as of March 28, 2004 was approximately $53,056,708 based upon the closing price of the
issuer’s Common Stock reported for such date on the American Stock Exchange. For purposes of this
disclosure, shares of Common Stock held by persons who the issuer believes beneficially own more
than 5% of the outstanding shares of Common Stock and shares held by officers and directors of the
issuer have been excluded because such persons may be deemed to be affiliates of the issuer. This
determination is not necessarily conclusive.
As of March 28, 2004, 53,811,072 shares of the issuer’s Common Stock were
outstanding.
Portions of the definitive Proxy Statement to be delivered to stockholders in connection
with the 2005 Annual Meeting of Stockholders to be held May 24, 2005 are incorporated by reference
into Part III.
Certain exhibits filed with the registrant’s prior forms 10-K and forms 10-Q are incorporated
herein by reference into Part IV of this Report.
Explanatory Note
This Amendment is being filed to amend Part II Sections 6 and 13 of this report in response to
staff comments.
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TABLE OF CONTENTS
Part II
Item 6. Plan of Operations.
This Plan of Operations should be read in conjunction with the accompanying consolidated
financial statements and notes included in this report.
General
As a development-stage biomedical research company, we have not yet
generated any operating revenues from the sale of our products or otherwise. We have had no
operating earnings since inception, and have an accumulated deficit of $(35,182,194) as of December
31, 2004. Our expenses have related mainly to costs incurred in research activities for the
development of our drug candidates and from administrative expenses required to support these
efforts. We expect losses to continue for the near future, and such losses will likely increase as
human clinical trials are undertaken in the U.S. and Europe for our cancer drugs. Future
profitability will be dependent upon our ability to complete the development of our pharmaceutical
products, obtain necessary regulatory approvals and effectively market such products. Also, future
profitability will require that we establish agreements with other parties for the clinical
testing, manufacturing, commercialization and sale of our products.
Since inception, we have generally funded our operations through short-term loans and the
sale of equity securities. We will need to obtain additional financing in order to sustain our
efforts, as discussed below under “Liquidity and Capital Resources.”
Plan of Operations
We have used the proceeds from recent private placements of our capital stock primarily
to expand our preclinical and clinical efforts for CoFactor, as well as for general working
capital. At this time we are committing significantly fewer resources to the development of our
other programs.
We began a trial for metastatic colorectal cancer patients with 5-FU in a combination
therapy with our drug CoFactor in QI 2004, based upon an IND application filed in the U.S. to treat
metastatic colorectal cancer patients. In Q1 2005 we filed for clearance with the FDA to launch a
Phase III randomized controlled trial in metastatic colorectal cancer. Additionally, we filed
Clinical Trial Applications in the European Union (EU), including the United Kingdom and Germany,
and in countries outside the EU for clearance to evaluate CoFactor in a Phase IIb, international,
multi-center, randomized, controlled trial for metastatic colorectal cancer. In Q1 2005 we
received of a final advice letter from the European Medicines Agency (EMEA) for our proposed
CoFactor™ trial protocol in pancreatic cancer. Based on this information, the Company currently
plans to file a Clinical Trial Application for a pivotal Phase III multinational study in patients
with advanced pancreatic cancer in the second quarter of 2005 and will initiate the trial following
regulatory clearance.
We previously reported that we intended to file an IND application in QI 2005 to initiate a
clinical trial using Thiovir in HIV patients. Because of continued unexpected manufacturing delays
we do not currently anticipate having the issue resolved until Q4 2005.
Additional detail regarding the human trials and INDs that we plan to file are discussed
in Part I, Item 1, Description of Business, of this annual report. We currently expect to expend
the estimated amounts set forth below over the next 12 months:
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Estimated |
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Cost |
CoFactor trials |
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5,453,000 |
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Other research and development costs |
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2,875,000 |
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Total estimated research and development |
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8,328,000 |
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Estimated selling, general and administrative |
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3,058,000 |
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Total estimated costs |
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11,386,000 |
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Our current cash position of $13,032,263 is sufficient to meet our currently expected
expenditures over the next 12 months as set forth above. However, we continue to evaluate our need
to raise additional capital to execute our research and development plans and believe that we will
need to raise additional capital prior to receiving regulatory approval to sell any of our
products.
Our facility is under lease through August 2009. We do not currently believe we will need
any additional space for the remainder of 2005.
In conjunction with the additional research and development activities we expect to
conduct, we anticipate adding six development and administrative personnel in the next 12 months.
Liquidity and Capital Resources
We have incurred negative cash flows since inception, and have funded our activities
primarily through short-term loans and sales of equity securities. As of December 31, 2004 and
2003, we had cash and cash equivalents of $13,032,263 and $4,226,397. We expect our cash flow to
continue to be negative in the foreseeable future and until such time as one of our drug candidates
is approved for commercial production.
We do not have any bank or any other commercial financing arrangements. Our operations
over the last 12 months have been funded by the proceeds from private equity placements.
Our dependence on raising additional capital will continue at least until we are able to
commercially market one or more of our products at significant sales level. Depending on profit
margins and other factors, we may still need additional funding to continue research and
development efforts. Our future capital requirements and the adequacy of our financing depend upon
numerous factors, including: the successful commercialization of our drug candidates; progress in
our product development efforts; progress with preclinical studies and clinical trials; the cost
and timing of production arrangements; the development of effective sales and marketing activities;
the cost of filing, prosecuting, defending and enforcing intellectual property rights; competing
technological and market developments; and the development of strategic alliances for the marketing
of our products.
We will be required to obtain such funding through equity or debt financing, strategic
alliances with corporate partners and others, or through other sources not yet identified. We do
not believe that debt financing from financial institutions will be available until at least the
time that one of our products is approved for commercial production. We do not have any committed
sources of additional financing, and cannot guarantee that additional funding will be available on
acceptable terms, if at all. If adequate funds are not available, we will be required to delay,
scale-back or eliminate certain aspects of our operations or attempt to obtain funds through
arrangements with collaborative partners or others that may require us to relinquish rights to
certain of our technologies, product candidates, products or potential markets.
Quantitative and Qualitative Information About Market Risk
We do not engage in trading market-risk sensitive instruments and do not
purchase hedging instruments or “other than trading” instruments that are likely to expose us to
market risk, whether interest rate, foreign currency exchange, commodity price or equity price
risk. We have no outstanding debt instruments, have not entered into any forward or future
contracts, and have purchased no options and entered into no swaps. We have no credit lines or
other borrowing facilities, and do not view ourselves as subject to interest rate fluctuation risk
at the present time.
Critical Accounting Policies
Use of Estimates
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The preparation of financial statements in conformity with accounting principles
generally accepted in the U. S. requires management to make estimates and assumptions that affect
the 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 revenues and expenses during
the reporting period. Management believes that the estimates utilized in preparing our financial
statements are reasonable and prudent. Actual results could differ from those estimates.
The most significant accounting estimates relate to valuing equity transactions as
described below. The value assigned to stock warrants granted to non-employees are accounted for in
accordance with SFAS No. 123 and Emerging Issues Task Force (EITF) 96-18, Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling,
Goods or Services, which require that such costs be measured at the end of each reporting period to
account for changes in the fair value of our Common Stock until the options are vested. We value
warrants using the Black-Scholes pricing model. Common Stock is valued using the market price of
Common Stock on the measurement date as defined in EITF 96-18.
Accounting for Stock-Based Compensation
We apply Statement of Financial Accounting Standards No. 123 and related interpretations
in accounting for employee stock-based compensation and include the required footnote disclosures
thereon.
We account for nonemployee stock-based compensation in accordance with Emerging Issues
Task Force (EITF) 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees
for Acquiring, or in Conjunction with Selling, Goods or Services. Amounts are based on the fair
value of the consideration received or the fair value of the equity instruments issued, whichever
is more reliably measurable.
The value assigned to stock warrants granted to non-employees are accounted for in
accordance with SFAS No. 123 and EITF 96-18, which require that such costs be measured at the end
of each reporting period to account for changes in the fair value of our Common Stock until the
options are vested. We value warrants using the Black-Scholes pricing model. Common Stock is
valued using the market price of Common Stock on the measurement date as defined in EITF 96-18.
Revenue Recognition
We recognize revenue at the time service is performed on commercial contracts and when
ability to collect is assured. Revenue from government grants is a reimbursement for expenditures
associated with the research. We submit bills to the grant agency and revenue is recognized at the
time the reimbursement request is submitted.
New Accounting Pronouncements
In December 2004, the FASB issued Statement of Financial Accounting standards No. 123
(revised 2004), Share-Based Payment (SFAS 123R). We currently recognize our option grants and
associated expenses in accordance with SFAS 123R guidance, and therefore SFAS 123R is not expected
to have a material effect on our consolidated financial position or results of operations.
In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets, an
amendment of APB Opinion No. 29. The guidance in APB Opinion No 29, Accounting for Nonmonetary
Transactions, is based on the principle that exchanges of nonmonetary assets should be measured
based on the fair value of assets exchanged. The guidance in that Opinion, however, included
certain exceptions to that principle. This Statement amends Opinion 29 to eliminate the exception
for nonmonetary exchanges of similar productive assets that do not have commercial substance. A
nonmonetary exchange has commercial substance if the future cash flows of the entity are expected
to change significantly as a result of the exchange. SFAS No. 153 is effective for nonmonetary
exchanges occurring in fiscal periods beginning after June 15, 2005. The adoption of SFAS No. 153
is not expected to have a material impact on our financial position and results of operations.
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In November 2004, the FASB issued SFAS No. 151, Inventory Costs, an amendment of ARB No.
43, Chapter 4. This statement amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing, to
clarify the accounting for abnormal amounts idle facility expense, freight, handling costs, and
wasted material (spoilage). We currently have no inventory, sales or cost of goods, and therefore
it is not expected to have a material impact on our financial position and results of operations.
In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity.” SFAS No. 150 changes the accounting for
certain financial instruments with characteristics of both liabilities and equity that, under
previous pronouncements, issuers could account for as equity. The new accounting guidance contained
in SFAS No. 150 requires that those instruments be classified as liabilities in the balance sheet.
The adoption of this new accounting pronouncement is not expected to have a material impact on the
Company’s financial statements.
In January 2003, the FASB issued FASB Interpretation No. 46 (revised December 2003),
Consolidation of Variable Interest Entities (FIN 46R) which addressed consolidation by business
enterprises of variable interest entities that meet certain criteria. FIN 46R was effective upon
issuance, but did not have an impact on the Company’s financial position or results of operations.
Risk Factors
If any of the following risks actually occur, our business, results of operations and financial
condition could suffer significantly.
We have a substantial accumulated deficit and limited working capital.
We had an accumulated deficit of $35,182,194 as of December 31, 2004. Since we presently
have no source of revenues and are committed to continuing our product research and development
program, significant expenditures and losses will continue until development of new products is
completed and such products have been clinically tested, approved by the FDA or other regulatory
agencies and successfully marketed. In addition, we fund our operations primarily through the sale
of securities, and have had limited working capital for our product development and other
activities. We do not believe that debt financing from financial institutions will be available
until at least the time that one of our products is approved for commercial production.
We have no current product sales revenues or profits.
We have devoted our resources to developing a new generation of therapeutic drug
products, but such products cannot be marketed until clinical testing is completed and governmental
approvals have been obtained. Accordingly, there is no current source of revenues, much less
profits, to sustain our present activities, and no revenues will likely be available until, and
unless, the new products are clinically tested, approved by the FDA or other regulatory agencies
and successfully marketed, either by us or a marketing partner, an outcome which we are not able to
guarantee.
It is uncertain that we will have access to future capital.
It is not expected that we will generate positive cash flow from operations for at least the
next several years. As a result, substantial additional equity or debt financing for research and
development or clinical development will be required to fund our activities. Although we have
raised such equity financing in April 2004, we cannot be certain that we will be able to continue
to obtain such financing on favorable or satisfactory terms, if at all, or that it will be
sufficient to meet our cash requirements. Any additional equity financing could result in
substantial dilution to stockholders, and debt financing, if available, will most likely involve
restrictive covenants that preclude us from making distributions to stockholders and taking other
actions beneficial to stockholders. If adequate funds are not available, we may be required to
delay or reduce the scope of our drug development program or attempt to continue development by
entering into arrangements with collaborative partners or others that may require us to relinquish
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some or all of our rights to proprietary drugs. The inability to fund our capital requirements
would have a material adverse effect on us.
We are not certain that we will be successful in the development of our drug candidates.
The successful development of any new drug is highly uncertain and is subject to a number of
significant risks. Our drug candidates, all of which are in a development stage, require
significant, time-consuming and costly development, testing and regulatory clearance. This process
typically takes several years and can require substantially more time. Risks include, among others,
the possibility that a drug candidate will (i) be found to be ineffective or unacceptably toxic,
(ii) have unacceptable side effects, (iii) fail to receive necessary regulatory clearances, (iv)
not achieve broad market acceptance, (v) be subject to competition from third parties who may
market equivalent or superior products, (vi) be affected by third parties holding proprietary
rights that will preclude us from marketing a drug product, or (vii) not be able to be manufactured
by manufacturers in a timely manner in accordance with required standards of quality. There can be
no assurance that the development of our drug candidates will demonstrate the efficacy and safety
of our drug candidates as therapeutic drugs, or, even if demonstrated, that there will be
sufficient advantages to their use over other drugs or treatments so as to render the drug product
commercially viable. In the event that we are not successful in developing and commercializing one
or more drug candidates, investors are likely to realize a loss of their entire investment.
We have been delayed at certain times in the past in the development of our drug products by
limited funding. In addition, if certain of our scientific and technical personnel resigned at or
about the same time, the development of our drug products would probably be delayed until new
personnel were hired and became familiar with the development programs.
Positive results in preclinical and early clinical trials do not ensure that future clinical
trials will be successful or that drug candidates will receive any necessary regulatory approvals
for the marketing, distribution or sale of such drug candidates.
Success in preclinical and early clinical trials does not ensure that large-scale
clinical trials will be successful. Clinical results are frequently susceptible to varying
interpretations that may delay, limit or prevent regulatory approvals. The length of time necessary
to complete clinical trials and to submit an application for marketing approval for a final
decision by a regulatory authority varies significantly and may be difficult to predict. There is
a significant risk that any of our drug candidates could fail to show satisfactory results in
continued trials, and would not justify further development.
We will face intense competition from other companies in the pharmaceutical industry.
We are engaged in a segment of the pharmaceutical industry that is highly competitive and
rapidly changing. If successfully developed and approved, any of our drug candidates will likely
compete with several existing therapies. CoFactor, our leading drug candidate, would likely compete
against a well-established product, leucovorin. In addition, there are numerous companies with a
focus in oncology and/or anti-viral therapeutics that are pursuing the development of new
pharmaceuticals that target the same diseases as are targeted by the drugs being developed by us.
We anticipate that we will face intense and increasing competition in the future as new products
enter the market and advanced technologies become available. We cannot assure that existing
products or new products developed by competitors will not be more effective, or more effectively
marketed and sold than those we may market and sell. Competitive products may render our drugs
obsolete or noncompetitive prior to our recovery of development and commercialization expenses.
Many of our competitors such as Merck and Pfizer will also have significantly greater
financial, technical and human resources and will likely be better equipped to develop, manufacture
and market products. In addition, many of these competitors have extensive experience in
preclinical testing and clinical trials, obtaining FDA and other regulatory approvals and
manufacturing and marketing pharmaceutical products. A number of these competitors also have
products that have been approved or are in late-stage development and operate large, well-funded
research and development programs. Smaller companies may also prove to be significant competitors,
particularly through collaborative arrangements with large pharmaceutical and biotechnology
companies. Furthermore, academic institutions, government agencies and other public and private
research organizations are
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becoming increasingly aware of the commercial value of their inventions and are actively seeking to
commercialize the technology they have developed. Companies such as Gilead, Roche and
GlaxoSmithKline all have drugs in various stages of development that could become competitors.
Accordingly, competitors may succeed in commercializing products more rapidly or effectively than
us, which would have a material adverse effect on us.
There is no assurance that our products will have market acceptance.
Our success will depend in substantial part on the extent to which a drug product, once
approved, achieves market acceptance. The degree of market acceptance will depend upon a number of
factors, including (i) the receipt and scope of regulatory approvals, (ii) the establishment and
demonstration in the medical community of the safety and efficacy of a drug product, (iii) the
product’s potential advantages over existing treatment methods and (iv) reimbursement policies of
government and third party payors. We cannot predict or guarantee that physicians, patients,
healthcare insurers or maintenance organizations, or the medical community in general, will accept
or utilize any of our drug products.
The unavailability of health care reimbursement for any of our products will likely
adversely impact our ability to effectively market such products and whether health care
reimbursement will be available for any of our products is uncertain.
Our ability to commercialize our technology successfully will depend in part on the
extent to which reimbursement for the costs of such products and related treatments will be
available from government health administration authorities, private health insurers and other
third-party payors. Significant uncertainty exists as to the reimbursement status of newly approved
medical products. We cannot guarantee that adequate third-party insurance coverage will be
available for us to establish and maintain price levels sufficient for realization of an
appropriate return on our investments in developing new therapies. If we are successful in getting
FDA approval for CoFactor, we will be competing against a generic drug, leucovorin, which has a
lower cost and a long, established history of reimbursement. Receiving sufficient reimbursement
for purchase costs of CoFactor will be necessary to make it cost effective and competitive versus
the established drug, leucovorin. Government, private health insurers, and other third-party
payors are increasingly attempting to contain health care costs by limiting both coverage and the
level of reimbursement for new therapeutic products approved for marketing by the FDA. Accordingly,
even if coverage and reimbursement are provided by government, private health insurers, and
third-party payors for use of our products, the market acceptance of these products would be
adversely affected if the amount of reimbursement available for the use of our therapies proved to
be unprofitable for health care providers.
Uncertainties related to health care reform measures may affect our success.
There have been some federal and state proposals in the past to subject the pricing of
health care goods and services, including prescription drugs, to government control and to make
other changes to U.S. health care system. None of the proposals seems to have affected any of the
drugs in our programs. However, it is uncertain if future legislative proposals would be adopted
that might affect the drugs in our programs or what actions federal, state, or private payors for
health care treatment and services may take in response to any such health care reform proposals or
legislation. Any such health care reforms could have a material adverse effect on the marketability
of any drugs for which we ultimately require FDA approval.
Further testing of our drug candidates will be required and there is no assurance of FDA
approval.
The FDA and comparable agencies in foreign countries impose substantial requirements upon
the introduction of medical products, through lengthy and detailed laboratory and clinical testing
procedures, sampling activities and other costly and time-consuming procedures. Satisfaction of
these requirements typically takes several years or more and varies substantially based upon the
type, complexity, and novelty of the product.
The effect of government regulation and the need for FDA approval will delay marketing of
new products for a considerable period of time, impose costly procedures upon our activities, and
provide an advantage to larger companies that compete with us. There can be no assurance that the
FDA or other regulatory approval for any
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products developed by us will be granted on a timely basis or at all. Any such delay in
obtaining or failure to obtain, such approvals would materially and adversely affect the marketing
of any contemplated products and the ability to earn product revenue. Further, regulation of
manufacturing facilities by state, local, and other authorities is subject to change. Any
additional regulation could result in limitations or restrictions on our ability to utilize any of
our technologies, thereby adversely affecting our operations.
Human pharmaceutical products are subject to rigorous preclinical testing and clinical
trials and other approval procedures mandated by the FDA and foreign regulatory authorities.
Various federal and foreign statutes and regulations also govern or influence the manufacturing,
safety, labeling, storage, record keeping and marketing of pharmaceutical products. The process of
obtaining these approvals and the subsequent compliance with appropriate U.S. and foreign statutes
and regulations are time-consuming and require the expenditure of substantial resources. In
addition, these requirements and processes vary widely from country to country.
Among the uncertainties and risks of the FDA approval process are the following: (i) the
possibility that studies and clinical trials will fail to prove the safety and efficacy of the
drug, or that any demonstrated efficacy will be so limited as to significantly reduce or altogether
eliminate the acceptability of the drug in the marketplace, (ii) the possibility that the costs of
development, which can far exceed the best of estimates, may render commercialization of the drug
marginally profitable or altogether unprofitable, and (iii) the possibility that the amount of time
required for FDA approval of a drug may extend for years beyond that which is originally estimated.
In addition, the FDA or similar foreign regulatory authorities may require additional clinical
trials, which could result in increased costs and significant development delays. Delays or
rejections may also be encountered based upon changes in FDA policy and the establishment of
additional regulations during the period of product development and FDA review. Similar delays or
rejections may be encountered in other countries.
Our success will depend on licenses and proprietary rights we receive from other parties, and
on any patents we may obtain.
Our success will depend in large part on our ability and our licensors’ ability to (i)
maintain license and patent protection with respect to their drug products, (ii) defend patents and
licenses once obtained, (iii) maintain trade secrets, (iv) operate without infringing upon the
patents and proprietary rights of others and (iv) obtain appropriate licenses to patents or
proprietary rights held by third parties if infringement would otherwise occur, both in the U.S.
and in foreign countries. We have obtained licenses to patents and other proprietary rights from
M.D. Anderson, University of Southern California and the National Institutes of Health.
The patent positions of pharmaceutical companies, including ours, are uncertain and
involve complex legal and factual questions. There is no guarantee that we or our licensors have or
will develop or obtain the rights to products or processes that are patentable, that patents will
issue from any of the pending applications or that claims allowed will be sufficient to protect the
technology licensed to us. In addition, we cannot be certain that any patents issued to or licensed
by us will not be challenged, invalidated, infringed or circumvented, or that the rights granted
thereunder will provide competitive disadvantages to us.
Litigation, which could result in substantial cost, may also be necessary to enforce any
patents to which we have rights, or to determine the scope, validity and unenforceability of other
parties’ proprietary rights, which may affect our rights. U.S. patents carry a presumption of
validity and generally can be invalidated only through clear and convincing evidence. There can be
no assurance that our licensed patents would be held valid by a court or administrative body or
that an alleged infringer would be found to be infringing. The mere uncertainty resulting from the
institution and continuation of any technology-related litigation or interference proceeding could
have a material adverse effect on us pending resolution of the disputed matters.
We may also rely on unpatented trade secrets and know-how to maintain our competitive
position, which we seek to protect, in part, by confidentiality agreements with employees,
consultants and others. There can be no assurance that these agreements will not be breached or
terminated, that we will have adequate remedies for any breach, or that trade secrets will not
otherwise become known or be independently discovered by competitors.
Our license agreements can be terminated in the event of a breach.
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The license agreements pursuant to which we license our core technologies for our
potential drug products permit the licensors, respectively M.D. Anderson, National Institutes of
Health and University of Southern California, to terminate the agreement under certain
circumstances, such as the failure by us to use our reasonable best efforts to commercialize the
subject drug or the occurrence of any other uncured material breach by us. The license agreements
also provide that the licensor is primarily responsible for obtaining patent protection for the
technology licensed, and we are required to reimburse the licensor for the costs it incurs in
performing these activities. The license agreements also require the payment of specified
royalties. Any inability or failure to observe these terms or pay these costs or royalties could
result in the termination of the applicable license agreement in certain cases. The termination of
any license agreement would have a material adverse effect on us.
Protecting our proprietary rights is difficult and costly.
The patent positions of pharmaceutical and biotechnology companies can be highly
uncertain and involve complex legal and factual questions. Accordingly, we cannot predict the
breadth of claims allowed in these companies’ patents or whether we may infringe or be infringing
these claims. Although we have not been notified of any patent infringement, nor notified others of
patent infringement, such patent disputes are common and could preclude the commercialization of
our products. Patent litigation is costly in its own right and could subject us to significant
liabilities to third parties. In addition, an adverse decision could force us to either obtain
third-party licenses at a material cost or cease using the technology or product in dispute.
We may be unable to retain skilled personnel and maintain key relationships.
The success of our business depends, in large part, on our ability to attract and retain
highly qualified management, scientific and other personnel, and on our ability to develop and
maintain important relationships with leading research institutions and consultants and advisors.
Competition for these types of personnel and relationships is intense from numerous pharmaceutical
and biotechnology companies, universities and other research institutions. We are currently
dependent upon our scientific staff, which has a deep background in our drug candidates and the
ongoing preclinical and clinical trials. Recruiting and retaining senior employees with relevant
drug development experience in oncology and anti-viral therapeutics is costly and time-consuming.
There can be no assurance that we will be able to attract and retain such individuals on an
uninterrupted basis and on commercially acceptable terms, and the failure to do so could have a
material adverse effect on us by significantly delaying one or more of our drug development
programs. These individuals are employed under offer letters, rather than employment agreements.
We currently have no sales capability, and limited marketing capability.
We currently do not have sales personnel. We have limited marketing and business
development personnel. We will have to develop a sales force, or rely on marketing partners or
other arrangements with third parties for the marketing, distribution and sale of any drug product
which is ready for distribution. There is no guarantee that we will be able to establish marketing,
distribution or sales capabilities or make arrangements with third parties to perform those
activities on terms satisfactory to us, or that any internal capabilities or third party
arrangements will be cost-effective.
In addition, any third parties with which we may establish marketing, distribution or
sales arrangements may have significant control over important aspects of the commercialization of
a drug product, including market identification, marketing methods, pricing, composition of sales
force and promotional activities. There can be no assurance that we will be able to control the
amount and timing of resources that any third party may devote to our products or prevent any third
party from pursuing alternative technologies or products that could result in the development of
products that compete with, or the withdrawal of support for, our products.
We do not have manufacturing capabilities and may not be able to efficiently develop
manufacturing capabilities or contract for such services from third parties on commercially
acceptable terms.
We do not have any manufacturing capacity. When required, we will seek to establish
relationships with third-party manufacturers for the manufacture of clinical trial material and the
commercial production of drug products as we have with our current manufacturing partners. There
can be no assurance that we will be able to establish relationships with third-party manufacturers
on commercially acceptable terms or that third-party
10
manufacturers will be able to manufacture a drug product on a cost-effective basis in
commercial quantities under good manufacturing practices mandated by the FDA.
The dependence upon third parties for the manufacture of products may
adversely affect future costs and the ability to develop and commercialize a drug product on a
timely and competitive basis. Further, there can be no assurance that manufacturing or quality
control problems will not arise in connection with the manufacture of our drug products or that
third party manufacturers will be able to maintain the necessary governmental licenses and
approvals to continue manufacturing such products. Any failure to establish relationships with
third parties for our manufacturing requirements on commercially acceptable terms would have a
material adverse effect on us.
We are dependent in part on third parties for drug development and research facilities.
We do not possess research and development facilities necessary to conduct all of our
drug development activities. We engage consultants and independent contract research organizations
to design and conduct clinical trials in connection with the development of our drugs. As a result,
these important aspects of a drug’s development will be outside our direct control. In addition,
there can be no assurance that such third parties will perform all of their obligations under
arrangements with us or will perform those obligations satisfactorily.
In the future, we anticipate that we will need to obtain additional or increased product
liability insurance coverage and it is uncertain that such increased or additional insurance
coverage can be obtained on commercially reasonable terms.
Our business will expose us to potential product liability risks that are inherent in the
testing, manufacturing and marketing of pharmaceutical products. There can be no assurance that
product liability claims will not be asserted against us. We intend to obtain additional limited
product liability insurance for our clinical trials, directly or through our marketing development
partners or contract research organization (CRO) partners, when they begin in the U.S. and to
expand our insurance coverage if and when we begin marketing commercial products. However, there
can be no assurance that we will be able to obtain product liability insurance on commercially
acceptable terms or that we will be able to maintain such insurance at a reasonable cost or in
sufficient amounts to protect against potential losses. A successful product liability claim or
series of claims brought against us could have a material adverse effect on us.
The market price of our shares, like that of many biotechnology companies, is highly
volatile.
Market prices for the our Common Stock and the securities of other medical and biomedical
technology companies have been highly volatile and may continue to be highly volatile in the
future. Factors such as announcements of technological innovations or new products by us or our
competitors, government regulatory action, litigation, patent or proprietary rights developments,
and market conditions for medical and high technology stocks in general can have a significant
impact on any future market for the Common Stock.
11
Item 13. Exhibits.
Exhibits.
The exhibit list called for by this item is incorporated by reference to the Exhibit Index filed
with this amended report.
12
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this amendment to report to be
signed on its behalf by the undersigned, thereunto duly authorized, on the 11th day of
August 2005.
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ADVENTRX PHARMACEUTICALS, INC |
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By:
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/s/ CARRIE CARLANDER |
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Carrie Carlander |
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Chief Financial Officer |
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(currently, principal financial officer of the |
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Registrant; was serving as principal financial |
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and accounting officer of the Registrant on the |
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date of filing of the 10-KSB which this filing amends) |
13
Exhibit Index
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| Exhibit |
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Description |
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3.1(1)
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Certificate of Incorporation of Victoria Enterprises, Inc. |
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3.2(1)
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Certificate of Amendment of Certificate of Incorporation of Victoria Enterprises, Inc. |
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3.3(1)
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Certificate of Amendment of Certificate of Incorporation of BioQuest, Inc. |
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3.4(1)
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Certificate of Amendment of Certificate of Incorporation of BioQuest, Inc. |
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3.5(1)
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Certificate of Ownership and Merger
Merging Biokeys, Inc. with and into Biokeys Pharmaceuticals, Inc. |
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3.6(2)
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Amended and Restated Bylaws of Biokeys Pharmaceuticals, Inc. |
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3.7(1)
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Certificate of Amendment to the Certificate of Incorporation of ADVENTRX Pharmaceuticals, Inc. |
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3.8(3)
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Certificate of Designation of BioQuest, Inc. |
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3.9(4)
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Certificate of Designation of Series B Convertible Preferred Stock and Series C Convertible
Preferred Stock of Biokeys Pharmaceuticals, Inc. |
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4.1(5)
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Common Stock and Warrant Purchase Agreement, dated as of April 5, 2004, among the Company and
the Investors named therein |
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4.2(5)
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A-1 Warrant to Purchase Common Stock issued to Investors pursuant to the Common Stock and
Warrant Purchase Agreement with the Investors |
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4.3(5)
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A-2 Warrant to Purchase Common Stock issued to Investors pursuant to the Common Stock and
Warrant Purchase Agreement with the Investors |
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4.4(6)
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Common Stock and Warrant Purchase Agreement, dated April 8, 2004, between the Company and CD
Investment Partners, Ltd. |
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4.5(6)
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A-1 Warrant to Purchase Common Stock issued to CD Investment Partners, Ltd. |
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4.6(6)
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A-2 Warrant to Purchase Common Stock issued to CD Investment Partners, Ltd. |
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4.7(6)
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Warrant to Purchase Common Stock issued on April 8, 2004 to Burnham Hill Partners |
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4.8(6)
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Warrant to Purchase Common Stock issued on April 8, 2004 to Ernest Pernet |
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4.9(6)
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Warrant to Purchase Common Stock issued on April 8, 2004 to W.R. Hambrecht + Co., LLC |
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4.10(5)
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Registration Rights Agreement, dated as of April 5, 2004, among the Company and the Investors
named therein |
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4.11(6)
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Registration Rights Agreement, dated as of April 8, 2004, between the Company and CD
Investment Partners, Ltd. |
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4.12
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Not used |
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| Exhibit |
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Description |
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4.13
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Not used |
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4.14(7)
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Common Stock and Warrant Purchase Agreement, dated April 19, 2004, between the Company and
Franklin Berger |
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4.15(7)
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A-1 Warrant to Purchase Common Stock issued to Franklin Berger |
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4.16(7)
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A-2 Warrant to Purchase Common Stock issued to Franklin Berger |
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4.17(7)
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Registration Rights Agreement, dated as of April 19, 2004, between the Company and Franklin Berger |
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4.18(5)
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Registration Rights Agreement, dated ___, 2001, between the Company and certain stockholders |
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4.19(5)
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Warrant to Purchase Common Stock issued by the Company |
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4.20(5)
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Stock Subscription Agreement |
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4.21(5)
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Warrant to Purchase Common Stock issued by the Company |
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4.22(5)
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Warrant for the Purchase of Shares of Common Stock No. WA-2A issued June 14, 2001 to Robert J.
Neborsky and Sandra S. Neborsky, JTWROS |
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10.1(8)
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Patent and Technology License Agreement, dated June 14, 1996, among the Company, the Board of
Regents of the University of Texas System and the University of Texas M. D. Anderson Cancer Center
(Request for confidential treatment of certain data) |
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10.2(8)
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Amendment No. 1 to Patent and Technology License Agreement, dated June 15, 2000, between the
Company and the University of Texas M. D. Anderson Cancer Center(Request for confidential treatment of
certain data) |
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10.3(8)
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Option and License Agreement, dated January 23, 1998, between the Company and the University of
Southern California (Request for confidential treatment of certain data) |
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10.4(2)
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First Amendment to License Agreement, dated August 16, 2000, between the Company and the
University of Southern California (Request for confidential treatment of certain data) |
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10.5(8)
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Option and License Agreement, dated August 17, 2000, between the Company and the University of
Southern California (Request for confidential treatment of certain data) |
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10.6(9)
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Standard Multi-Tenant Office Lease — Gross, dated June 3, 2004, between the Company and George V.
Casey & Ellen M. Casey, Trustees of the Casey Family Trust dated June 22, 1998 |
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10.7(10)
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Patent License Agreement, effective August 1, 2002, between the Company and the National
Institutes of Health |
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10.9(11)
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Offer Letter, dated March 5, 2003, from the Company to Joan M. Robbins, Ph.D. |
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10.10(12)
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Amendment to Option and License Agreement, dated April 21, 2003, the Company and the University
of Southern California |
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10.11
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Offer Letter, dated March 1, 2004, from the Company to Cellia Habita, Ph.D. |
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10.12
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Offer Letter, dated November 15, 2004, from the Company to Brian Culley |
15
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| Exhibit |
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Description |
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10.13
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Offer Letter, dated November 17, 2004, from the Company to Carrie Carlander13 |
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10.14(13)
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Burnham Hill Partners Agreement |
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21.1
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Subsidiaries of ADVENTRX Pharmaceuticals, Inc. |
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23.1
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Consent of Independent Registered Public Accounting Firm |
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24.1
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Powers of Attorney (included on signature page) |
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31.1(13)
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Rule 13a-14(a)/15d-14(a) Certification |
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31.2(13)
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Rule 13a-14(a)/15d-14(a) Certification |
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32.1
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Section 1350 Certifications |
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32.2
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Section 1350 Certifications |
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Incorporated by reference to the same-numbered exhibit to the Company’s Form 8-A, filed April 27, 2004 |
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Incorporated by reference to the same-numbered exhibit to the
Company’s Registration Statement on Form 10-SB, filed October 2, 2001. |
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Incorporated by reference to Exhibit 4.1 to the Company’s Registration
Statement on Form 10-SB, filed October 2, 2001. |
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Incorporated by reference to Exhibit 4.2 to the Company’s Quarterly
Report on Form 10-QSB, filed November 26, 2002 (exhibit included in
the body of the Form 10-QSB and not filed as a separate exhibit file). |
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Incorporated by reference to the same-numbered exhibit to the
Company’s Registration Statement on Form S-3, filed June 30, 2004. |
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Incorporated by reference to the same-numbered exhibit to the
Company’s Current Report on Form 8-K, filed April 13, 2004. |
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Incorporated by reference to the same-numbered exhibit to the
Company’s Quarterly Report on Form 10-QSB, filed May 12, 2004. |
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Incorporated by reference to the same-numbered exhibit to the
Company’s Registration Statement on Form 10-SB/A, filed January 14,
2002. |
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Incorporated by reference to the same-numbered exhibit to the
Company’s Quarterly Report on Form 10-QSB, filed August 10, 2004. |
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Incorporated by reference to the same-numbered exhibit to the
Company’s Quarterly Report on Form 10-QSB, filed November 26, 2002. |
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| (11) |
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Incorporated by reference to the same-numbered exhibit to the
Company’s Annual Report on Form 10-KSB, filed April 16, 2003. |
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Incorporated by reference to Exhibit 10.6 to the Company’s Quarterly
Report on Form 10-QSB, filed August 14, 2003. |
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| (13) |
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Filed with this Amendment No. 1 to Form 10-KSB for the year ended
December 31, 2004. Unless otherwise indicated, all other exhibits
were filed with the original filing of the Form 10-KSB or are
incorporated by reference into the original report. |
17
EXHIBIT 10.14
MARCH 30, 2004
ADVENTRX Pharmaceuticals, Inc.
9948 Hibert Street, Suite 100
San Diego, CA 92131
Attention: Nicholas Virca, Chief Executive Officer
This letter agreement (this "Agreement") confirms the engagement of Burnham Hill
Partners ("BHP"), a division of Pali Capital, Inc., by ADVENTRX Pharmaceuticals,
Inc. (the "Company") to act as its exclusive placement agent solely in
connection with the anticipated private placement of approximately $5 million of
shares common stock (the "Shares") and warrants (the "Warrants") to purchase
shares of common stock of the Company (the "Financing").
As compensation for certain investment banking and placement services provided
by BHP to the Company in connection with the Financing, the Company shall pay to
BHP a cash fee equal to 8% of the gross proceeds received by the Company with
respect to the Financing from investors that purchase Shares in the Financing
(the "Investors"), provided, however, that in the event the Company receives
more than $5 million of gross proceeds in the Financing, the cash fee payable to
BHP with respect to such gross proceeds over $5 million shall be reduced to 5%.
In connection with the cash exercise of the Warrants, BHP shall receive a cash
fee equal to 4% percent of the gross proceeds received by the Company if and
when such Warrants are exercised for cash.
The Company shall issue to BHP or its designated assigns warrants to purchase a
number of shares of common stock of the Company equal to 8% percent of the
number of Shares (the "Placement Agent Warrants"). The Placement Agent Warrants
shall have an exercise price equal to the "A-1 Warrant referenced in the draft
subscription agreement to be executed in connection with the Financing, shall be
non-redeemable and shall have a cashless exercise provision.
The Company shall provide to BHP periodic reimbursement of all out-of-pocket
expenses, which amount shall not exceed $5,000 in the aggregate without the
prior written approval of the Company.
Notice given pursuant to any of the provisions of this Agreement shall be given
in writing and shall be sent by recognized overnight courier or personally
delivered (a) if to the Company, to the Company's address indicated in the
heading of this letter agreement (b) if to BHP, to its office at 570 Lexington
Avenue, New York, NY 10022. Attention: Jason Adelman, Managing Director.
No advice or opinion rendered by BHP, whether formal or informal, may be
disclosed, in whole or in part, or summarized, excerpted from or otherwise
referred to except as required by law or with BHP's prior written consent. In
addition, the Company shall not, without the prior written consent of BHP,
disclose the existence or terms of BHP's engagement pursuant to this Agreement
except as required by law or if such information is or becomes generally
available to the public. Since BHP will be acting on behalf of the Company in
connection with its engagement hereunder, the Company and BHP shall enter into a
separate letter agreement, in the form of Exhibit A attached hereto, dated the
date hereof, providing for the indemnification by the Company of BHP and certain
related persons and entities.
BHP's engagement hereunder shall expire 14 days from the date of this Agreement.
Notwithstanding the expiration of BHP's engagement, BHP shall be entitled to its
full fees provided for herein in the event that at any time prior to the first
anniversary of such expiration the Company consummates a private placement of
its securities with an Investor.
BHP shall indemnify and hold harmless the Company and its affiliates, the
respective directors, officers, agents and employees of the Company and its
affiliates (collectively, "Company Agents"), from and against, and BHP agrees
that no Company Agent shall have any liability to BHP or its directors,
officers, owners, partners, parents, affiliates, security holders or creditors
for, any losses, claims, damages or liabilities (including actions or
proceedings in respect thereof) (collectively "Losses") related to or arising
out of BHP's breach of this Agreement.
In connection with this engagement, BHP is acting as an independent contractor
with duties owing solely to the Company. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
conflicts of law principles thereof. This Agreement may not be amended or
modified except in writing signed by each of the parties hereto.
This Agreement and the attached indemnification agreement contain the entire
agreement of the parties with respect to the subject matter hereof and supersede
and take precedence over all prior agreements or understandings, whether oral or
written, between BHP and the Company. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement or the attached indemnification
agreement, which shall remain in full force and effect.
We are delighted to accept this engagement and look forward to working with you
on this assignment. Please confirm that the foregoing is in accordance with the
Company's understanding by signing and returning to us the enclosed duplicate of
this Agreement.
Very truly yours,
Burnham Hill Partners
By: /s/ Jason Adelman
--------------------------
Jason Adelman
Title: Managing Director
Accepted and Agreed to as of the date first written above:
Adventrx Pharmaceuticals, Inc.
By: /s/ Nicholas Virca
---------------------------
Name: Nicholas Virca
Title: Chief Executive Officer
EXHIBIT A
TO: Burnham Hill Partners
A division of Pali Capital Inc. Date: March 13, 2004
570 Lexington Avenue
New York, NY 10022
In connection with Burnham Hill Partners ("BHP" or "you") engagement by
ADVENTRX Pharmaceuticals, Inc. (the "Company" or "we") pursuant to the letter
agreement (the "Engagement Letter") of even date herewith (the "Engagement"), we
agree to indemnify and hold harmless BHP) and its affiliates, the respective
directors, officers, partners, agents and employees of BHP and its affiliates
(collectively, "Indemnified Persons"), from and against, and we agree that no
Indemnified Person shall have any liability to us or our owners, parents,
affiliates, security holders or creditors for, any losses, claims, damages or
liabilities (including actions or proceedings in respect thereof) (collectively
"Losses") (A) related to or arising out of (i) our actions or failures to act
(including statements or omissions made, or information provided, by us or our
agents), or (ii) actions or failures to act by an Indemnified Person with our
consent or in reliance on our actions or failures to act, or (B) otherwise
related to or arising out of the Engagement or your performance thereof, except
that this clause (B) shall not apply to any Losses to the extent that are
finally judicially determined or agreed to have resulted from BHP's or any
Indemnified Person's bad faith, recklessness or negligence or breach of this
agreement or the Engagement Letter. If such indemnification is for any reason
not available, we agree to contribute to the Losses involved in such proportion
as is judicially determined or agreed to be appropriate to reflect equitable
considerations such as the relative fault of us on the one hand and of you on
the other hand. Relative benefits to us, on the one hand, and you, on the other
hand, with respect to the Engagement shall be deemed to be in the same
proportion as (i) the total value paid or proposed to be paid or received or
proposed to be received by us or our security holders, as the case may be,
pursuant to the transaction(s), whether or not consummated, contemplated by the
Engagement bears to (ii) all fees paid or proposed to be paid to you by us in
connection with the Engagement.
We will reimburse each Indemnified Person for all expenses (including
reasonable fees and disbursements of counsel) as they are incurred by such
Indemnified Person in connection with investigating, preparing for or defending
any action, claim, investigation, inquiry, arbitration or other proceeding
("Action") with respect to any matter for which we would be obligated to
indemnify such Indemnified Person pursuant to the preceding paragraph, whether
or not in connection with pending or threatened litigation in which any
Indemnified Person is a party, and whether or not such Action is initiated or
brought by you, provided, however, that we will have no obligation to reimburse
any Indemnified Person for any expenses if our board of directors determines in
good faith that there is no bona fide basis that would obligate the Company to
indemnify such Indemnified Person for any Losses arising out of or related to
such Action. We further agree that we will not settle or compromise or consent
to the entry of any judgment in any pending or threatened Action in respect of
which we are obligated to indemnify an Indemnified Person (whether or not an
Indemnified Person is a party therein) unless we have given you reasonable prior
written notice thereof and used all reasonable efforts, after consultation with
you, to obtain an unconditional release of each Indemnified Person from all
liability arising therefrom.
In the event that we are called or subpoenaed to give testimony in a court
of law, you agree to pay our reasonable expenses related thereto. Our
obligations hereunder shall be in addition to any rights that any Indemnified
Person may have at common law or otherwise. Solely for the purpose of enforcing
this Agreement, we hereby consent to personal jurisdiction and to service and
venue in any court in which any claim which is subject to this Agreement is
brought by or against any Indemnified Person. We acknowledge that in connection
with the Engagement you are acting as an independent contractor with duties
owing solely to us. YOU HEREBY AGREE, AND WE HEREBY AGREE ON OUR OWN BEHALF AND,
TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF OUR SECURITY HOLDERS, TO
WAIVE ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM, COUNTER-CLAIM OR
ACTION ARISING OUT OF THE ENGAGEMENT, YOUR PERFORMANCE THEREOF OR THIS
AGREEMENT.
The provisions of this agreement shall apply to the Engagement (including
related activities prior to the date hereof) and any modification thereof and
shall remain in full force and effect regardless of the completion or
termination of the Engagement. This agreement and any other agreements relating
to the Engagement shall be under seal, governed by and construed in accordance
with the laws of the state of New York, without regard to conflicts of law
principles thereof.
Very truly yours,
Accepted and Agreed:
Burnham Hill Partners Client: Adventrx Pharmaceuticals, Inc.
By: /s/ Jason Adelman By: /s/ Nicholas Virca
Jason Adelman Nicholas Virca
--------------------------- -----------------------------------
Name: Jason Adelman Name: Nicholas VIrca
Title: Managing Director Title: Chief Executive Officer
EXHIBIT 31.1
CERTIFICATION
I, Evan Levine, certify that:
1. I have reviewed this annual report on Form 10-KSB of ADVENTRX
Pharmaceuticals, Inc., as amended by Amendment No.1 thereto;
2. Based on my knowledge, this annual report, as amended by Amendment No.1
thereto, does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect
to the period covered by this annual report.
3. *
4. *
5. *
Date: August 11, 2005
By: /s/ EVAN LEVINE
-------------------------
Evan Levine
Chief Executive Officer
* Response omitted per Question 4 in "Division of Corporation Finance:
Sarbanes-Oxley Act of 2002 - Frequently Asked Questions" November 8, 2002
(revised November 14, 2002) and n. 154 to Release 34-47986 (June 5, 2003).
EXHIBIT 31.2
CERTIFICATION
I, Carrie E. Carlander, certify that:
1. I have reviewed this annual report on Form 10-KSB of ADVENTRX
Pharmaceuticals, Inc., as amended by Amendment No.1 thereto;
2. Based on my knowledge, this annual report, as amended by Amendment No.1
thereto, does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect
to the period covered by this annual report.
3. *
4. *
5. *
Date: August 11, 2005
By: /s/ CARRIE E.
CARLANDER
-----------------------
Carrie E. Carlander
Chief Financial Officer
* Response omitted per Question 4 in "Division of Corporation Finance:
Sarbanes-Oxley Act of 2002 - Frequently Asked Questions" November 8, 2002
(revised November 14, 2002) and n. 154 to Release 34-47986 (June 5, 2003).
