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Filing
Table of Contents
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2006
OR
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period from
to
Commission File Number 001-32157
ADVENTRX Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 84-1318182 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
6725 Mesa Ridge Road, Suite 100
San Diego, California 92121
858-552-0866
(Address of principal executive offices, zip code and telephone number, including area code)
San Diego, California 92121
858-552-0866
(Address of principal executive offices, zip code and telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate
by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of
accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange
Act. (Check one):
Large accelerated filer
o Accelerated filer
þ
Non-accelerated filer o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
The number of shares outstanding of the registrants common stock, $.001 par value, as of May
3, 2006 was 71,649,833.
ADVENTRX PHARMACEUTICALS, INC. AND SUBSIDIARY
FORM 10-Q QUARTERLY REPORT
For the Period Ended March 31, 2006
For the Period Ended March 31, 2006
TABLE OF CONTENTS
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10 | ||||||||
16 | ||||||||
26 | ||||||||
27 | ||||||||
28 | ||||||||
28 | ||||||||
28 | ||||||||
28 | ||||||||
29 | ||||||||
EXHIBIT 31.1 | ||||||||
EXHIBIT 31.2 | ||||||||
EXHIBIT 32.1 |
2
Table of Contents
PART I FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
ADVENTRX PHARMACEUTICALS, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
(A Development Stage Enterprise)
Condensed Consolidated Balance Sheets
March 31, | December 31, | |||||||
2006 | 2005 | |||||||
(unaudited) | ||||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 16,819,293 | $ | 14,634,618 | ||||
Accrued interest income |
13,773 | 10,214 | ||||||
Prepaid expenses |
291,052 | 255,802 | ||||||
Short-term investments |
5,194,703 | 7,958,458 | ||||||
Total current assets |
22,318,821 | 22,859,092 | ||||||
Property and equipment, net |
389,102 | 407,544 | ||||||
Other assets |
335,554 | 355,137 | ||||||
Total assets |
$ | 23,043,477 | $ | 23,621,773 | ||||
Liabilities and Shareholders Deficiency |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 694,363 | $ | 593,228 | ||||
Accrued liabilities |
1,276,202 | 930,274 | ||||||
Accrued salary and related taxes |
237,868 | 173,398 | ||||||
Warrant liability |
46,723,476 | 29,696,411 | ||||||
Total current liabilities |
48,931,909 | 31,393,311 | ||||||
Long-term liabilities |
57,078 | 57,078 | ||||||
Total liabilities |
48,988,987 | 31,450,389 | ||||||
Commitments and contingencies |
||||||||
Temporary equity: |
||||||||
Common stock subject to continuing registration,
$.001 par value; 10,810,809 shares issued and
outstanding in 2006 and 2005, respectively |
| | ||||||
Shareholders deficiency: |
||||||||
Common stock, $0.001 par value. Authorized
200,000,000 shares; issued 58,317,667 shares in 2006
and 56,529,388 shares in 2005 |
69,152 | 67,364 | ||||||
Additional paid-in capital |
55,034,292 | 52,105,329 | ||||||
Accumulated other comprehensive loss |
(2,686 | ) | (1,722 | ) | ||||
Deficit accumulated during the development stage |
(81,011,521 | ) | (59,964,840 | ) | ||||
Treasury stock, 23,165 shares at cost |
(34,747 | ) | (34,747 | ) | ||||
Total shareholders deficiency |
(25,945,510 | ) | (7,828,616 | ) | ||||
Total liabilities and shareholders deficiency |
$ | 23,043,477 | $ | 23,621,773 | ||||
See accompanying notes to unaudited condensed consolidated financial statements.
3
Table of Contents
ADVENTRX PHARMACEUTICALS, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
(A Development Stage Enterprise)
Condensed Consolidated Statements of Operations
(unaudited)
Inception | ||||||||||||
(June 12, 1996) | ||||||||||||
through | ||||||||||||
Three months ended March 31, | March 31, | |||||||||||
2006 | 2005 | 2006 | ||||||||||
Net sales |
$ | | $ | | $ | 174,830 | ||||||
Cost of goods sold |
| | 51,094 | |||||||||
Gross margin |
| | 123,736 | |||||||||
Grant revenue |
| | 129,733 | |||||||||
Interest income |
236,527 | 37,322 | 934,864 | |||||||||
236,527 | 37,322 | 1,188,333 | ||||||||||
Operating expenses: |
||||||||||||
Research and development |
2,483,858 | 1,704,797 | 18,640,610 | |||||||||
General and administrative |
1,735,172 | 1,150,033 | 19,069,471 | |||||||||
Depreciation and amortization |
37,113 | 27,126 | 10,292,674 | |||||||||
Impairment loss write off of goodwill |
| | 5,702,130 | |||||||||
Interest expense |
| 300 | 179,090 | |||||||||
Equity in loss of investee |
| | 178,936 | |||||||||
Total operating expenses |
4,256,143 | 2,882,256 | 54,062,911 | |||||||||
Loss from operations |
(4,019,616 | ) | (2,844,934 | ) | (52,874,578 | ) | ||||||
Gain (loss) on fair value of warrants |
(17,027,065 | ) | | (28,606,725 | ) | |||||||
Loss before cumulative effect of change in accounting principle |
(21,046,681 | ) | (2,844,934 | ) | (81,481,303 | ) | ||||||
Cumulative effect of change in accounting principle |
| | (25,821 | ) | ||||||||
Net loss |
(21,046,681 | ) | (2,844,934 | ) | (81,507,124 | ) | ||||||
Preferred stock dividends |
| | (621,240 | ) | ||||||||
Net loss applicable to common stock |
$ | (21,046,681 | ) | $ | (2,844,934 | ) | $ | (82,128,364 | ) | |||
Loss per common share basic and diluted |
$ | (.31 | ) | $ | (.05 | ) | ||||||
Weighted average number of common shares outstanding basic and diluted |
67,976,352 | 53,967,933 | ||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
4
Table of Contents
ADVENTRX PHARMACEUTICALS, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Condensed Consolidated Statements of Shareholders Equity (Deficit)
Inception (June 12, 1996) through March 31, 2006
Cumulative | Cumulative | Cumulative | Deficit | |||||||||||||||||||||||||||||||||||||||||||||||||
convertible | convertible | convertible | Accumulated | accumulated | Total | |||||||||||||||||||||||||||||||||||||||||||||||
preferred stock, | preferred stock, | preferred stock, | Additional | other | during the | Treasury | shareholders | |||||||||||||||||||||||||||||||||||||||||||||
series A | series B | series C | Common stock | paid-in | comprehensive | development | Stock, | equity | ||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | capital | loss | stage | at cost | (deficit) | ||||||||||||||||||||||||||||||||||||||||
Balances at June 12,
1996 (date of
incorporation) |
| $ | | | $ | | | $ | | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||||||||||||||||||
Sale of common stock
without par value |
| | | | | | 503 | 5 | 5 | | | | 10 | |||||||||||||||||||||||||||||||||||||||
Change in par value of
common stock |
| | | | | | | (4 | ) | 4 | | | | | ||||||||||||||||||||||||||||||||||||||
Issuance of common stock
and net liabilities
assumed in acquisition |
| | | | | | 1,716,132 | 1,716 | 3,224 | | (18,094 | ) | | (13,154 | ) | |||||||||||||||||||||||||||||||||||||
Issuance of common stock |
| | | | | | 2,010,111 | 2,010 | 456 | | (2,466 | ) | | | ||||||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | | (259,476 | ) | | (259,476 | ) | |||||||||||||||||||||||||||||||||||||
Balances at December 31,
1996 |
| | | | | | 3,726,746 | 3,727 | 3,689 | | (280,036 | ) | | (272,620 | ) | |||||||||||||||||||||||||||||||||||||
Sale of common stock,
net of offering costs of $9,976 |
| | | | | | 1,004,554 | 1,004 | 1,789,975 | | | | 1,790,979 | |||||||||||||||||||||||||||||||||||||||
Issuance of common stock
in acquisition |
| | | | | | 375,891 | 376 | 887,874 | | | | 888,250 | |||||||||||||||||||||||||||||||||||||||
Minority interest
deficiency at
acquisition charged to
the Company |
| | | | | | | | | | (45,003 | ) | | (45,003 | ) | |||||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | | (1,979,400 | ) | | (1,979,400 | ) | |||||||||||||||||||||||||||||||||||||
Balances at December 31,
1997 |
| | | | | | 5,107,191 | 5,107 | 2,681,538 | | (2,304,439 | ) | | 382,206 | ||||||||||||||||||||||||||||||||||||||
Rescission of acquisition |
| | | | | | (375,891 | ) | (376 | ) | (887,874 | ) | | 561,166 | | (327,084 | ) | |||||||||||||||||||||||||||||||||||
Issuance of common stock
at conversion of notes
payable |
| | | | | | 450,264 | 451 | 363,549 | | | | 364,000 | |||||||||||||||||||||||||||||||||||||||
Expense related to stock
warrants issued |
| | | | | | | | 260,000 | | | | 260,000 | |||||||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | | (1,204,380 | ) | | (1,204,380 | ) | |||||||||||||||||||||||||||||||||||||
Balances at December 31,
1998 |
| | | | | | 5,181,564 | 5,182 | 2,417,213 | | (2,947,653 | ) | | (525,258 | ) | |||||||||||||||||||||||||||||||||||||
Sale of common stock |
| | | | | | 678,412 | 678 | 134,322 | | | | 135,000 | |||||||||||||||||||||||||||||||||||||||
Expense related to stock
warrants issued |
| | | | | | | | 212,000 | | | | 212,000 | |||||||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | | (1,055,485 | ) | | (1,055,485 | ) | |||||||||||||||||||||||||||||||||||||
Balances at December 31,
1999 |
| | | | | | 5,859,976 | 5,860 | 2,763,535 | | (4,003,138 | ) | | (1,233,743 | ) |
5
Table of Contents
Cumulative | Cumulative | Cumulative | Deficit | |||||||||||||||||||||||||||||||||||||||||||||||||
convertible | convertible | convertible | Accumulated | accumulated | Total | |||||||||||||||||||||||||||||||||||||||||||||||
preferred stock, | preferred stock, | preferred stock, | Additional | other | during the | Treasury | shareholders | |||||||||||||||||||||||||||||||||||||||||||||
series A | series B | series C | Common stock | paid-in | comprehensive | development | Stock, | equity | ||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | capital | loss | stage | at cost | (deficit) | ||||||||||||||||||||||||||||||||||||||||
Sale of preferred
stock, net of
offering costs of $76,500 |
3,200 | 32 | | | | | | | 3,123,468 | $ | | | | 3,123,500 | ||||||||||||||||||||||||||||||||||||||
Issuance of common
stock at conversion
of notes and interest
payable |
| | | | | | 412,487 | 412 | 492,085 | | | | 492,497 | |||||||||||||||||||||||||||||||||||||||
Issuance of common
stock at conversion
of notes payable |
| | | | | | 70,354 | 70 | 83,930 | | | | 84,000 | |||||||||||||||||||||||||||||||||||||||
Issuance of common
stock to settle
obligations |
| | | | | | 495,111 | 496 | 1,201,664 | | | | 1,202,160 | |||||||||||||||||||||||||||||||||||||||
Issuance of common
stock for acquisition |
| | | | | | 6,999,990 | 7,000 | 9,325,769 | | | | 9,332,769 | |||||||||||||||||||||||||||||||||||||||
Issuance of warrants
for acquisition |
| | | | | | | | 4,767,664 | | | | 4,767,664 | |||||||||||||||||||||||||||||||||||||||
Stock issued for
acquisition costs |
| | | | | | 150,000 | 150 | 487,350 | | | | 487,500 | |||||||||||||||||||||||||||||||||||||||
Expense related to
stock warrants issued |
| | | | | | | | 140,000 | | | | 140,000 | |||||||||||||||||||||||||||||||||||||||
Dividends payable on
preferred stock |
| | | | | | | | (85,000 | ) | | | | (85,000 | ) | |||||||||||||||||||||||||||||||||||||
Cashless exercise of
warrants |
| | | | | | 599,066 | 599 | (599 | ) | | | | | ||||||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | | (3,701,084 | ) | | (3,701,084 | ) | |||||||||||||||||||||||||||||||||||||
Balances at December
31, 2000 |
3,200 | 32 | | | | | 14,586,984 | 14,587 | 22,299,866 | | (7,704,222 | ) | | 14,610,263 | ||||||||||||||||||||||||||||||||||||||
Dividends payable on
preferred stock |
| | | | | | | | (256,000 | ) | | | | (256,000 | ) | |||||||||||||||||||||||||||||||||||||
Repurchase of warrants |
| | | | | | | | (55,279 | ) | | | | (55,279 | ) | |||||||||||||||||||||||||||||||||||||
Sale of warrants |
| | | | | | | | 47,741 | | | | 47,741 | |||||||||||||||||||||||||||||||||||||||
Cashless exercise of
warrants |
| | | | | | 218,493 | 219 | (219 | ) | | | | | ||||||||||||||||||||||||||||||||||||||
Issuance of common
stock to pay
preferred dividends |
| | | | | | 93,421 | 93 | 212,907 | | | | 213,000 | |||||||||||||||||||||||||||||||||||||||
Detachable warrants
issued with notes
payable |
| | | | | | | | 450,000 | | | | 450,000 | |||||||||||||||||||||||||||||||||||||||
Issuance of warrants
to pay operating
expenses |
| | | | | | | | 167,138 | | | | 167,138 | |||||||||||||||||||||||||||||||||||||||
Issuance of common
stock to pay
operating expenses |
| | | | | | 106,293 | 106 | 387,165 | | | | 387,271 | |||||||||||||||||||||||||||||||||||||||
Issuance of preferred
stock to pay
operating expenses |
137 | 1 | | | | | | | 136,499 | | | | 136,500 | |||||||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | | (16,339,120 | ) | | (16,339,120 | ) | |||||||||||||||||||||||||||||||||||||
Balances at December
31, 2001 |
3,337 | 33 | | | | | 15,005,191 | 15,005 | 23,389,818 | | (24,043,342 | ) | | (638,486 | ) |
6
Table of Contents
ADVENTRX PHARMACEUTICALS, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Condensed Consolidated Statements of Shareholders Equity (Deficit)
Inception (June 12, 1996) through March 31, 2006
CONTINUED FROM PREVIOUS PAGE
Condensed Consolidated Statements of Shareholders Equity (Deficit)
Inception (June 12, 1996) through March 31, 2006
CONTINUED FROM PREVIOUS PAGE
Cumulative | Cumulative | Cumulative | Deficit | |||||||||||||||||||||||||||||||||||||||||||||||||
convertible | convertible | convertible | Accumulated | accumulated | Total | |||||||||||||||||||||||||||||||||||||||||||||||
preferred stock, | preferred stock, | preferred stock, | Additional | other | during the | Treasury | shareholders | |||||||||||||||||||||||||||||||||||||||||||||
series A | series B | series C | Common stock | paid-in | comprehensive | development | Stock, | equity | ||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | capital | loss | stage | at cost | (deficit) | ||||||||||||||||||||||||||||||||||||||||
Dividends payable on preferred stock |
| | | | | | | | (242,400 | ) | | | | (242,400 | ) | |||||||||||||||||||||||||||||||||||||
Repurchase of warrants |
| | | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||
Sale of warrants |
| | | | | | 240,000 | 240 | 117,613 | | | | 117,853 | |||||||||||||||||||||||||||||||||||||||
Cashless exercise of warrants |
| | | | | | 100,201 | 100 | (100 | ) | | | | | ||||||||||||||||||||||||||||||||||||||
Exercise of warrants |
| | | | | | 344,573 | 345 | 168,477 | | | | 168,822 | |||||||||||||||||||||||||||||||||||||||
Sale of preferred stock at $1.50 |
| | 200,000 | 2,000 | | | | | 298,000 | | | | 300,000 | |||||||||||||||||||||||||||||||||||||||
Sale of preferred stock at $10.00 |
| | | | 70,109 | 701 | | | 700,392 | | | | 701,093 | |||||||||||||||||||||||||||||||||||||||
Conversion of preferred stock into
common stock |
(3,000 | ) | (30 | ) | | | | | 1,800,000 | 1,800 | (1,770 | ) | | | | | ||||||||||||||||||||||||||||||||||||
Preferred stock dividends forgiven |
| | | | | | | | 335,440 | | | | 335,440 | |||||||||||||||||||||||||||||||||||||||
Issuance of warrants to pay operating
expenses |
| | | | | | | | 163,109 | | | | 163,109 | |||||||||||||||||||||||||||||||||||||||
Issuance of common stock to pay
operating expenses |
| | | | | | 6,292 | 6 | 12,263 | | | | 12,269 | |||||||||||||||||||||||||||||||||||||||
Issuance of preferred stock to pay
operating expenses |
136 | 1 | | | | | | | 6,000 | | | | 6,001 | |||||||||||||||||||||||||||||||||||||||
Issuance of stock options to employees |
| | | | | | | | 329,296 | | | | 329,296 | |||||||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | | (2,105,727 | ) | | (2,105,727 | ) | |||||||||||||||||||||||||||||||||||||
Balances at December 31, 2002 |
473 | 4 | 200,000 | 2,000 | 70,109 | 701 | 17,496,257 | 17,496 | 25,276,138 | | (26,149,069 | ) | | (852,730 | ) | |||||||||||||||||||||||||||||||||||||
Dividends payable on preferred stock |
| | | | | | | | (37,840 | ) | | | | (37,840 | ) | |||||||||||||||||||||||||||||||||||||
Conversion of Series C preferred
stock into common stock |
| | | | (70,109 | ) | (701 | ) | 14,021,860 | 14,022 | (13,321 | ) | | | | | ||||||||||||||||||||||||||||||||||||
Issuance of common stock to pay
interest on Bridge Notes |
| | | | | | 165,830 | 165 | 53,326 | | | | 53,491 | |||||||||||||||||||||||||||||||||||||||
Sale of common stock at $0.40 per
share, net of issuance costs |
| | | | | | 6,640,737 | 6,676 | 2,590,656 | | | | 2,597,332 | |||||||||||||||||||||||||||||||||||||||
Sale of common stock at $1.00 per
share, net of issuance costs |
| | | | | | 3,701,733 | 3,668 | 3,989,181 | | | | 3,992,849 | |||||||||||||||||||||||||||||||||||||||
Exchange of warrants |
| | | | | | 235,291 | 235 | 49,486 | | | | 49,721 | |||||||||||||||||||||||||||||||||||||||
Issuance of common stock to pay
operating expenses |
| | | | | | 230,000 | 230 | 206,569 | | | | 206,799 | |||||||||||||||||||||||||||||||||||||||
Issuance of warrants to pay operating
expenses |
| | | | | | | | 156,735 | | | | 156,735 | |||||||||||||||||||||||||||||||||||||||
Issuance of stock options to employees |
| | | | | | | | 286,033 | | | | 286,033 | |||||||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | | (2,332,077 | ) | | (2,332,077 | ) | |||||||||||||||||||||||||||||||||||||
7
Table of Contents
Cumulative | Cumulative | Cumulative | Deficit | |||||||||||||||||||||||||||||||||||||||||||||||||
convertible | convertible | convertible | Accumulated | accumulated | Total | |||||||||||||||||||||||||||||||||||||||||||||||
preferred stock, | preferred stock, | preferred stock, | Additional | Other | during the | Treasury | shareholders | |||||||||||||||||||||||||||||||||||||||||||||
series A | series B | series C | Common stock | paid-in | Comprehensive | development | Stock, | equity | ||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | capital | Loss | stage | at cost | (deficit) | ||||||||||||||||||||||||||||||||||||||||
Balances at
December 31, 2003 |
473 | 4 | 200,000 | 2,000 | | | 42,491,708 | 42,492 | 32,556,963 | | (28,481,146 | ) | | 4,120,313 | ||||||||||||||||||||||||||||||||||||||
Extinguishment of
dividends payable
on preferred stock |
| | | | | | | | 72,800 | | | | 72,800 | |||||||||||||||||||||||||||||||||||||||
Conversion of
Series A cumulative
preferred stock |
(473 | ) | (4 | ) | | | | | 236,500 | 236 | (232 | ) | | | | | ||||||||||||||||||||||||||||||||||||
Conversion of
Series B preferred
stock |
| | (200,000 | ) | (2,000 | ) | | | 200,000 | 200 | 1,800 | | | | | |||||||||||||||||||||||||||||||||||||
Cashless exercise
of warrants |
464,573 | 465 | (465 | ) | | | | | ||||||||||||||||||||||||||||||||||||||||||||
Exercise of warrants |
| | | | | | 23,832 | 23 | 27,330 | | | | 27,353 | |||||||||||||||||||||||||||||||||||||||
Issuance of
warrants in
settlement of a
claim |
| | | | | | | | 86,375 | | | | 86,375 | |||||||||||||||||||||||||||||||||||||||
Sale of common
stock at $1.50 per
share |
| | | | | | 10,417,624 | 10,419 | 15,616,031 | | | | 15,626,450 | |||||||||||||||||||||||||||||||||||||||
Payment of
financing and
offering costs |
| | | | | | | | (1,366,774 | ) | | | | (1,366,774 | ) | |||||||||||||||||||||||||||||||||||||
Issuance of stock
options to
employees |
| | | | | | | | 524,922 | | | | 524,922 | |||||||||||||||||||||||||||||||||||||||
Acquisition of
treasury stock |
| | | | | | | | 34,747 | | | (34,747 | ) | | ||||||||||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | | | (6,701,048 | ) | | (6,701,048 | ) | |||||||||||||||||||||||||||||||||||||
Balances at
December 31, 2004 |
| | | | | | 53,834,237 | 53,835 | 47,553,497 | | (35,182,194 | ) | (34,747 | ) | 12,390,391 | |||||||||||||||||||||||||||||||||||||
Comprehensive
income: |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Loss |
| | | | | | | | | | (24,782,646 | ) | | (24,782,646 | ) | |||||||||||||||||||||||||||||||||||||
Effect of change
in fair value of
available for
sale securities |
| | | | | | | | | (1,722 | ) | | | (1,722 | ) | |||||||||||||||||||||||||||||||||||||
Total
comprehensive
loss |
| | | | | | | | | | | | (24,784,368 | ) | ||||||||||||||||||||||||||||||||||||||
Par value of shares
issued in
conjunction with
mezzanine financing |
| | | | | | 10,810,809 | 10,811 | (10,811 | ) | | | | | ||||||||||||||||||||||||||||||||||||||
Exercise of warrants |
| | | | | | 2,408,316 | 2,408 | 3,071,030 | | | | 3,073,438 | |||||||||||||||||||||||||||||||||||||||
Exercise of stock
options |
| | | | | | 185,000 | 185 | 144,815 | | | | 145,000 | |||||||||||||||||||||||||||||||||||||||
Issuance of stock
options to
employees |
| | | | | | | | 994,874 | | | | 994,874 | |||||||||||||||||||||||||||||||||||||||
Issuance of stock
options to
non-employee |
| | | | | | | | 93,549 | | | | 93,549 | |||||||||||||||||||||||||||||||||||||||
Issuance of common
stock to vendor |
| | | | | | 125,000 | 125 | 258,375 | | | | 258,500 | |||||||||||||||||||||||||||||||||||||||
Balances at
December 31, 2005 |
| | | | | | 67,363,362 | 67,364 | 52,105,329 | (1,722 | ) | (59,964,840 | ) | (34,747 | ) | (7,828,616 | ) | |||||||||||||||||||||||||||||||||||
Comprehensive
income: |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Loss |
| | | | | | | | | | (21,046,681 | ) | | (21,046,681 | ) | |||||||||||||||||||||||||||||||||||||
Effect of change
in fair value of
available for
sale securities |
| | | | | | | | | (964 | ) | | | (964 | ) | |||||||||||||||||||||||||||||||||||||
Total
comprehensive
loss |
| | | | | | | | | | | | (21,047,645 | ) | ||||||||||||||||||||||||||||||||||||||
Exercise of
warrants, net of
financing costs |
| | | | | | 1,781,279 | 1,781 | 2,359,799 | | | | 2,361,580 | |||||||||||||||||||||||||||||||||||||||
Issuance of
restricted stock to
non-employees |
| | | | | | 7,000 | 7 | 30,163 | | | | 30,170 | |||||||||||||||||||||||||||||||||||||||
Issuance of stock
options to
employees |
| | | | | | | | 444,655 | | | | 444,655 | |||||||||||||||||||||||||||||||||||||||
Issuance of stock
options to
non-employee |
| | | | | | | | 94,346 | | | | 94,346 | |||||||||||||||||||||||||||||||||||||||
Balances at March
31, 2006
(unaudited) |
| $ | | | $ | | | $ | | 69,151,641 | $ | 69,152 | $ | 55,034,292 | $ | (2,686 | ) | $ | (81,011,521 | ) | $ | (34,747 | ) | $ | (25,945,510 | ) | ||||||||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
8
Table of Contents
ADVENTRX PHARMACEUTICALS, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
(A Development Stage Enterprise)
Condensed Consolidated Statements of Cash Flows
(unaudited)
Inception | ||||||||||||
(June 12, 1996) | ||||||||||||
through | ||||||||||||
Three months ended March 31, | March 31, | |||||||||||
2006 | 2005 | 2006 | ||||||||||
Cash flows from operating activities: |
||||||||||||
Net loss |
$ | (21,046,681 | ) | $ | (2,844,934 | ) | $ | (81,507,124 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||||||
Depreciation and amortization |
37,113 | 27,126 | 9,842,674 | |||||||||
Fair value of warrant liability |
17,027,065 | | 28,606,725 | |||||||||
Amortization of debt discount |
| | 450,000 | |||||||||
Forgiveness of employee receivable |
| | 30,036 | |||||||||
Impairment loss write-off of goodwill |
| | 5,702,130 | |||||||||
Expenses paid by warrants |
| | 573,357 | |||||||||
Expenses paid by preferred stock |
| | 142,501 | |||||||||
Expenses related to stock warrants issued |
| | 612,000 | |||||||||
Expenses related to employee stock options issued |
444,655 | 129,226 | 2,579,780 | |||||||||
Expense related to stock options issued to non-employee |
94,346 | | 187,895 | |||||||||
Expenses paid by issuance of common stock |
58,750 | | 978,131 | |||||||||
Expenses paid by issuance of restricted stock |
30,170 | | 30,170 | |||||||||
Equity in loss of investee |
| | 178,936 | |||||||||
Write-off of license agreement |
| | 152,866 | |||||||||
Write-off of assets available for sale |
| 108,000 | 108,000 | |||||||||
Cumulative effect of change in accounting principle |
| | 25,821 | |||||||||
Accretion of a discount |
(68,209 | ) | | (180,169 | ) | |||||||
Changes in assets and liabilities , net of effect of acquisitions: |
||||||||||||
(Increase) decrease in prepaid and other assets |
(77,976 | ) | 47,935 | (789,830 | ) | |||||||
Increase (decrease) in accounts payable and accrued liabilities |
511,533 | (56,884 | ) | 1,687,162 | ||||||||
Increase (decrease) in other long-term liabilities |
| | 57,078 | |||||||||
Increase in sponsored research payable and license obligation |
| | 924,318 | |||||||||
Net cash used in operating activities |
(2,989,234 | ) | (2,589,531 | ) | (29,607,543 | ) | ||||||
Cash flows from investing activities: |
||||||||||||
Purchase of certificate of deposit |
| | (1,016,330 | ) | ||||||||
Maturity of certificate of deposit |
| | 1,016,330 | |||||||||
Purchases of property and equipment |
(18,671 | ) | (32,304 | ) | (684,698 | ) | ||||||
Purchases of short-term investments |
(3,874,000 | ) | | (16,997,220 | ) | |||||||
Proceeds from sales of short-term investments |
6,705,000 | | 11,980,000 | |||||||||
Payment on obligation under license agreement |
| | (106,250 | ) | ||||||||
Cash acquired in acquisition of subsidiary |
| | 64,233 | |||||||||
Issuance of note receivable related party |
| | (35,000 | ) | ||||||||
Payments on note receivable |
| | 405,993 | |||||||||
Advance to investee |
| | (90,475 | ) | ||||||||
Cash transferred in rescission of acquisition |
| | (19,475 | ) | ||||||||
Cash received in rescission of acquisition |
| | 230,000 | |||||||||
Net cash provided by (used in) investing activities |
2,812,329 | (32,304 | ) | (5,252,892 | ) | |||||||
Cash flows from financing activities: |
||||||||||||
Proceeds from sale of preferred stock |
| | 4,200,993 | |||||||||
Proceeds from sale of common stock |
| | 44,152,593 | |||||||||
Proceeds from exercise of stock options |
| | 145,000 | |||||||||
Proceeds from sale or exercise of warrants |
2,425,200 | 122,250 | 5,910,228 | |||||||||
Repurchase of warrants |
| | (55,279 | ) | ||||||||
Payment of financing and offering costs |
(63,620 | ) | | (3,412,616 | ) | |||||||
Payments of notes payable and long-term debt |
| | (605,909 | ) | ||||||||
Proceeds from issuance of notes payable and detachable warrants |
| | 1,344,718 | |||||||||
Net cash provided by financing activities |
2,361,580 | 122,250 | 51,679,728 | |||||||||
Net increase (decrease) in cash and cash equivalents |
2,184,675 | (2,499,585 | ) | 16,819,293 | ||||||||
Cash and cash equivalents at beginning of period |
14,634,618 | 13,032,263 | | |||||||||
Cash and cash equivalents at end of period |
$ | 16,819,293 | $ | 10,532,678 | $ | 16,819,293 | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
9
Table of Contents
ADVENTRX Pharmaceuticals, Inc.
Notes to Condensed Consolidated Financial Statements
1. Description of the Company
ADVENTRX Pharmaceuticals, Inc., a Delaware corporation, (the Company), is a biopharmaceutical
research and development company focused on introducing new technologies for anticancer and
antiviral treatments that surpass the performance and safety of existing drugs by addressing
significant problems such as drug metabolism, toxicity, bioavailability and resistance. The Company
currently does not manufacture, market, sell or distribute any products. Pursuant to license
agreements with University of Southern California (USC) and SD Pharmaceuticals, Inc. the Company
has rights to drug candidates in varying stages of development.
On May 30, 2003, the Company merged its wholly owned subsidiary, Biokeys, Inc., into itself and
changed the name of the Company from Biokeys Pharmaceuticals, Inc. to ADVENTRX Pharmaceuticals,
Inc. The merger had no effect on the financial statements of the Company. In July 2004, the Company
formed a wholly owned subsidiary, ADVENTRX (Europe) Ltd., in the United Kingdom for the purpose of
conducting drug trials in the European Union.
On April 26, 2006 the Company closed its previously announced merger agreement with SD Pharmaceuticals, Inc. and issued approximately
2,100,000 shares of common stock as the merger consideration. The merger resulted in the acquisition of drug
candidates owned by SD Pharmaceuticals, Inc. that were formerly under license as well as additional drug candidates.
2. Unaudited interim financial statements
In the opinion of management, the accompanying unaudited condensed consolidated financial
statements reflect all adjustments, consisting of normal recurring adjustments, necessary to
present fairly the financial position of the Company as of March 31, 2006 and its results of
operations and cash flows for the three months ended March 31, 2006 and 2005 and for the period
from inception (June 12, 1996) through March 31, 2006. Information included in the consolidated
balance sheet as of December 31, 2005 has been derived from the audited consolidated financial
statements of the Company as of December 31, 2005 (the Audited Financial Statements) included in
the Companys Annual Report on Form 10-K (the 10-K) for the year ended December 31, 2005 that was
previously filed with the Securities and Exchange Commission (the SEC). Pursuant to the rules and
regulations of the SEC, certain information and disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted in the United
States of America have been condensed or omitted from these financial statements unless significant
changes have taken place since the end of the most recent fiscal year. Accordingly, these unaudited
condensed consolidated financial statements should be read in conjunction with the Audited
Financial Statements and the other information also included in the 10-K.
The results of the Companys operations for the three months ended March 31, 2006 are not
necessarily indicative of the results of operations for the full year ending December 31, 2006.
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
reported amounts of assets and liabilities as of the dates of the condensed consolidated balance
sheets and reported amount of revenues and expenses for the periods presented. Accordingly, actual
results could materially differ from those estimates.
10
Table of Contents
Supplementary Cash Flow Information
Noncash investing and financing transactions excluded from the condensed statements of cash flows
for the three months ended March 31, 2006 and 2005 and for the period from inception (June 12,
1996) through March 31, 2006 are as follows:
Inception | ||||||||||||
(June 12, 1996) | ||||||||||||
Three months ended March 31, | through | |||||||||||
2006 | 2005 | March 31, 2006 | ||||||||||
Issuance of warrants, common stock and preferred stock for: |
||||||||||||
Conversion of notes payable and accrued interest |
$ | | $ | | $ | 1,213,988 | ||||||
Payment of operating expenses |
| 1,482,781 | ||||||||||
Conversion of preferred stock |
| | 2,705 | |||||||||
Acquisitions |
| | 14,617,603 | |||||||||
Payment of dividends |
| | 213,000 | |||||||||
Financial advisor services in conjunction with private placement |
| 1,137,456 | ||||||||||
Settlement of claim |
| | 86,375 | |||||||||
Acquisition of treasury stock in settlement of a claim |
| | 34,747 | |||||||||
Assumptions of liabilities in acquisitions |
| | 1,009,567 | |||||||||
Acquisition of license agreement for long-term debt |
| | 161,180 | |||||||||
Cashless exercise of warrants |
13 | | 3,905 | |||||||||
Dividends accrued |
| | 621,040 | |||||||||
Trade asset converted to available for sale asset |
| | 108,000 | |||||||||
Dividends extinguished |
| | 408,240 | |||||||||
Trade payable converted to note payable |
| | 83,948 | |||||||||
Issuance of warrants for return of common stock |
| | 50,852 | |||||||||
Detachable warrants issued with notes payable |
| | 450,000 | |||||||||
Unrealized loss on short-term investments |
964 | | 2,686 |
3. Net Loss Per Common Share
Net loss per common share is calculated according to Statement of Financial Accounting Standards
No. 128, Earnings per Share, using the weighted average number of shares of common stock
outstanding during the period.
The following potentially dilutive shares were not included in the computation of net loss per
common share diluted, as their effect would have been antidilutive due to the Companys net
losses for the three months ended March 31, 2006 and 2005:
2006 | 2005 | |||||||
Warrants |
17,737,100 | 10,956,096 | ||||||
Options |
3,113,000 | 1,625,000 | ||||||
Total |
20,850,100 | 12,581,096 | ||||||
4. Stock Compensation Plans
On May 24, 2005, at the Companys annual meeting of stockholders, the Companys stockholders
approved the 2005 Equity Incentive Plan (the 2005 Plan) and the 2005 Employee Stock Purchase
Plan. The 2005 Plan is intended to encourage ownership of shares of common stock by directors,
officers, employees, consultants and advisors of the Company and its affiliates and to provide
additional incentive for them to promote the success of the Companys business through the grant of
equity-based awards. The 2005 Plan permits the Company to issue options, share appreciation rights,
restricted shares, restricted share units, performance awards, annual incentive awards and other
share-based awards and cash-based awards. The maximum aggregate number of shares of common stock
which may be issued pursuant to or subject to the foregoing types of awards granted under the 2005
Plan currently is 6,673,634. This maximum number is subject to an annual increase equal to the
lesser of (i) one percent of the number of outstanding shares of common stock on such day, (ii)
750,000 or (iii) such other amount as the Companys board of directors may specify. The 2005 Plan
is intended to comply with applicable securities law requirements, permit performance-based awards
that qualify for deductibility under Section 162(m) of the Internal Revenue Code and allow for the
issuance of incentive stock options.
11
Table of Contents
In July 2005, the Company granted options to acquire 1,625,000 shares of common stock to employees
under the 2005 Plan under pre-existing option agreements. In addition, in July 2005, the Company
granted new options to acquire 1,103,000 shares of common stock to employees under the 2005 Plan.
In December 2005, the exercise prices on 743,000 of the 1,103,000 options were increased to equal
the fair market value of Common Stock on the date of grant in July 2005. In addition, the exercise
prices on 730,000 of the pre-existing options were increased to equal the fair market value of
Common Stock on the original grant dates. The increase in the strike price of these options
resulted in a modification to these options and as such the fair value of the effected options was
re-measured as of December 23, 2005.
Prior to January 1, 2006, the Company accounted for stock-based compensation under the recognition
and measurement principles of Statement of Financial Accounting Standards (SFAS) 123, Accounting
for Stock-Based Compensation (SFAS 123). Effective January 1, 2006, the Company began recording
compensation expense associated with stock options and other equity-based compensation in
accordance with SFAS 123 (revised 2004), Share-Based Payment (SFAS 123R). The Company
recognizes these compensation costs on a straight-line basis over the requisite service period of
the award, which is generally four years; however, certain provisions in the Companys equity
compensation plans provide for shorter vesting periods under certain circumstances.
The compensation expense related to the Companys share-based compensation arrangements is recorded
as components of general and administrative expense and research and development expense. SFAS 123R
requires that cash flows resulting from tax deductions in excess of the cumulative compensation
cost recognized for options exercised (excess tax benefits) be classified as cash inflows from
financing activities and cash outflows from operating activities. Due to the Companys net loss
position, no tax benefits have been recognized in the cash flow statement.
The estimated fair value of each option award granted was determined on the date of grant using the
Black-Scholes option valuation model with the following weighted-average assumptions for option
grants during the three months ended March 31, 2006 and 2005:
March 31, | ||||||||
2006 | 2005 | |||||||
Risk-free interest rate |
4.14 -4.52 | % | 3.69-4.32 | % | ||||
Dividend yield |
0.0 | % | 0.0 | % | ||||
Volatility |
90 | % | 90 | % | ||||
Expected Life |
5 years | 5 years |
The risk-free interest rate assumption is based upon observed interest rates appropriate for the
expected term of the Companys employee stock options. The expected volatility is based on the
historical volatility of the Companys stock. The Company has not paid any dividends on common
stock since its inception and does not anticipate paying dividends on its common stock in the
foreseeable future. The computation of the expected option term is based on expectations regarding
future exercises of options which generally vest over 4 years and have a 10 year life.
As share-based compensation expense recognized in the Condensed Consolidated Statement of
Operations for the first quarter of fiscal 2006 is based on awards ultimately expected to vest, it
should be reduced for estimated forfeitures. SFAS 123R requires forfeitures to be estimated at the
time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from
those estimates. Pre-vesting forfeitures were estimated to be 3% in the first quarter of fiscal
2006 based on industry data. For fiscal periods prior to fiscal 2006, the Company accounted for
forfeitures as they occurred, as allowed under SFAS 123.
The Companys determination of fair value is affected by the Companys stock price as well as a
number of assumptions that require judgment. The weighted-average fair value of each option granted
during the three months ended March 31, 2006, estimated as of the grant date using the
Black-Scholes option valuation model, was $3.34 per option.
A summary of the status of the Companys stock option plans as of March 31, 2006 and of
changes in options outstanding under the plans during the three months ended March 31, 2006 is as
follows :
Number of | Weighted Average | |||||||
Shares | Price Per Share | |||||||
Outstanding at January 1, 2006 |
2,457,000 | $ | 1.45 | |||||
Granted |
656,000 | 4.68 | ||||||
Exercised |
| |||||||
Terminated |
| |||||||
Outstanding at March 31, 2006 |
3,113,000 | $ | 2.13 | |||||
Options
exercisable at March 31, 2006 |
1,774,500 | $ | 1.15 | |||||
12
Table of Contents
For the three months ended March 31, 2006 and 2005, share-based compensation expense
related to stock options was $444,655 and $129,226, respectively. As of March 31, 2006, there was
approximately $3.2 million of unamortized compensation cost related to unvested stock option awards, which is
presently expected to be recognized over a remaining weighted average period of approximately 2 years.
The aggregate intrinsic value of options outstanding and exercisable at March 31, 2006 was
approximately $8.8 million and $6.7 million, respectively.
In July 2005, the Company granted 114,000 options to consultants. These option grants were valued
as of March 31, 2006 using the Black-Scholes pricing model with the following assumptions: no
dividend yield, expected volatility of 90%, risk-free interest rate 4.5% and expected life of 3 or
4 years. The Company recognized $94,346 in compensation expense for these options in the three
months ended March 31, 2006.
5. Equity Transactions
In the three months ended March 31, 2006, the Companys warrant holders exercised warrants for an
aggregate of 1,781,279 shares of common stock, with net proceeds to the Company of $2,361,580.
On April 14, 2005, the Company issued 25,000 shares of common stock as partial payment for services
rendered by a consulting firm. Those shares were recognized at fair market value as of the date of
obligation and resulted in compensation expense of $23,500 in the first quarter of 2005, when the
services were performed.
On July 13, 2005, the Company issued 100,000 shares of common stock pursuant to a consulting
agreement entered into in January 2005. Those shares were recognized at fair market value
as of the date of issuance and resulted in compensation expense of $58,750 in the first quarter of
2006.
In July 2005, the Company issued 10,810,809 shares of common stock in conjunction with a private placement which
resulted in net proceeds of $18,116,751. The net proceeds increased by $197,000 in the fourth
quarter of 2005 due to a partial refund of commissions paid. The Company also issued warrants to
purchase 10,810,809 shares of Common Stock at an exercise price of $2.26 per share with this
placement.
In March of 2006, the Company issued 7,000 shares of restricted stock to consultants for services
performed with a fair value of $30,170.
6. Fair Value of Warrants
On July 21, 2005, the Company entered into a Securities Purchase Agreement with Icahn Partners LP,
Icahn Partners Master Fund LP, High River Limited Partnership, Viking Global Equities LP, VGE III
Portfolio Ltd., North Sound Legacy Institutional Fund LLC, North Sound Legacy International Ltd.
and the Royal Bank of Canada for the sale of 10,810,809 shares of Common Stock at a purchase price
of $1.85 per share for aggregate gross proceeds of $19,999,997, and the issuance of 7-year
warrants to purchase 10,810,809 shares of Common Stock at an exercise price of $2.26 per share. The
Company received net proceeds of $18,116,751 as of July 21, 2005, which increased by $197,000 to
$18,313,751 in the fourth quarter. The private placement consisted of accredited institutional
investors.
Pursuant to the terms of the Securities Purchase Agreement entered into in connection with the
transaction, if (i) a Registration Statement covering (A) all of the Shares and the Warrant Shares
and (B) any other shares of Common Stock issued or issuable in respect to the Shares and the
Warrant Shares because of stock splits, stock dividends, reclassifications, recapitalizations or
similar events (together, the Registrable Shares) required to be covered thereby and required to
be filed by the Company was (A) not filed with the SEC on or before forty-five (45) days after the
Closing Date (a Filing Failure) or (B) if such Registration Statement was not declared effective
by the SEC on or before (1) ninety (90) days after the Closing Date (an Effectiveness Failure) or
(ii) on any day after the effective date of the Registration Statement sales of all the Registrable
Shares required to be included on such Registration Statement cannot be made (other than as
permitted during a suspension pursuant to this Agreement) pursuant to such Registration Statement
(including, without limitation, because of a failure to keep such Registration Statement effective,
to disclose such information as is necessary for sales to be made pursuant to such Registration
Statement or to register sufficient shares of Shares) (a Maintenance Failure), then, the Company
shall pay as liquidated damages (the Liquidated Damages) for such failure and not as a penalty to
any Purchaser an amount in cash determined in accordance with the following formula set forth below:
13
Table of Contents
For each 30-day period that a Filing Failure, Effectiveness Failure or Maintenance Failure
remains uncured, the Company shall pay an amount equal to the purchase price paid to the Company
for all Shares then held by such Purchaser multiplied by 1% for the first 30-day period or any
portion thereof and increasing by an additional 1% with regard to each additional 30-day period
until such Filing Failure, Effectiveness Failure or Maintenance Failure is cured. For any partial
30-day period in which a Filing Failure, Effectiveness Failure or Maintenance Failure exists but
is cured prior to the end of the 30-day period, the Company shall pay the Purchasers a pro rata
portion of the amount which would be due if the failure continued for the entire 30-day period.
For example, if the purchase price paid for all Shares then held by a Purchaser is $5,000,000,
then, (a) at the end of the 30th day, the Liquidated Damages would be 1% or $50,000, (b) at the
end of the 60th day, the Liquidated Damages for the first 30-day period would have been 1% or
$50,000 and for the second 30-day period would be 2% or $100,000, and (c) at the end of the 105th
day, the Liquidated Damages for the first 30-day period would have been 1% or $50,000, for the
second 30-day period 2% or $100,000, for the third 30-day period 3% or $150,000, and for the
final 15-day period, 4% applied pro rata to such 15 days, or $100,000.
Payments to be made pursuant to this Agreement shall be due and payable to the Purchasers at the
end of each calendar month during which Liquidated Damages shall have accrued. No Liquidated
Damages shall be due or payable to a Purchaser in any event if as of the date of the Filing
Failure, Effectiveness Failure or Maintenance Failure such Purchaser could sell all of the
Registrable Shares such Purchaser then holds without registration by reason of Rule 144(k) of the
Securities Act.
The registration statement was filed and declared effective by the SEC within the allowed time.
The Company has not yet been required to pay any liquidated damages in connection with the registration statement.
In accordance with Emerging Issues Task Force (EITF) Issue No. 00-19, Accounting for Derivative
Financial Instruments Indexed To, and Potentially Settled In a Companys Own Stock, and the
SECs December 2005 interpretation thereof, the
fair value of the warrants is accounted for as a liability, with an offsetting reduction to
additional paid-in capital at the closing date (July 21, 2005). At the end of each reporting
period, the value of the warrants will be remeasured based on the fair market value of the
underlying shares, and changes to the warrant liability and related gain or loss will be made
appropriately. The warrant liability will be reclassified to equity when the registration
statement is no longer subject to risk for Maintenance Failures.
The fair value of the warrants as of March 31, 2006 was estimated using the Black-Scholes
option-pricing model with the following assumptions: no dividends; risk-free (10-year Treasury
yield) interest rate of 4.5%; the contractual life of 7 years and volatility of 90%. The fair
value of the warrants was estimated to be $19,439,185 on the closing date of the transaction. The
difference between the fair value of the warrants of $19,439,185 and the gross proceeds from the
offering was classified as Loss on fair value of warrants in the Companys statement of
operations, and included in Warrant liability on the Companys balance sheet. The fair value
of the warrants was re-measured at December 31, 2005 and estimated to be $29,696,411 with the
increase in fair value due to the increase in the market value of the Companys common stock.
The fair value of the warrants was re-measured at March 31, 2006 and estimated to be $46,732,476.
The increase in fair value of the warrants of $17,027,065 from December 31, 2005 to March 31,
2006 was recorded as Loss on fair value of warrants in the Companys statement of operations,
and included in Warrant liability on the Companys balance sheet.
The adjustments required by EITF Issue No. 00-19 as interpreted by the SEC in December 2005 were
triggered by the terms of the Companys agreements for the private placement it completed in July
2005, specifically related to the potential penalties if the Company did not timely register the
common stock underlying the warrants issued in the transaction, and remain effective during the
registration period. The adjustments for EITF Issue No. 00-19 had no impact on the Companys cash
flow, liquidity, or business operations.
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7. Commitments and Contingencies
Litigation
In the normal course of business, the Company may become subject to lawsuits and other claims and
proceedings. Such matters are subject to uncertainty and outcomes are often not predictable with
assurance. Management is not aware of any pending or threatened lawsuit or preceding that would
have a material adverse effect on the Companys financial position, results of operations or cash
flows.
8. Subsequent Event
On April 7, 2006, the Company entered into an Agreement and Plan of Merger (the Merger
Agreeement) among the Company, SD Pharmaceuticals, Inc., a Delaware corporation (SDP), Speed
Acquisition, Inc., a Delaware corporation and a wholly-owned subsidiary of SDP, Paul Marangos and
Andrew X. Chen, each as stockholders of SDP, and Paul Marangos, as an individual acting as the
stockholder representative. Pursuant to the Merger Agreement, we acquired SPD through the merger
of Speed Acquisition, Inc. into SDP and the merger of the surviving company (SDP) into the Company.
Under the Merger Agreement, the Company issued an aggregate of approximately 2,100,000 shares of
our common stock (the Merger Consideration Shares) to the stockholders of SDP. The issuance of
the Merger Consideration Shares were not registered under the Securities Act of 1933 (the
Securities Act) in reliance upon Section 4(2) of such Act.
The merger closed on April 26, 2006. Within 35 days following that date, the Company is
required to file with the Securities and Exchange Commission a registration statement on Form S-3
(the Registration Statement) covering the resale of the Merger Consideration Shares. If the
Registration Statement has not become effective under the Securities Act by June 12, 2006, the
Company would be obligated to make an aggregate cash payment of $100,000 to the stockholders of SDP
on a pro-rata basis.
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the financial statements
and related notes contained elsewhere in this report. See Risk Factors regarding certain factors
known to us that could cause reported financial information not to be necessarily indicative of
future results.
Forward Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, which include, without limitation, statements about the market for our
technology, our strategy, competition, expected financial performance and other aspects of our
business identified in this Quarterly Report, as well as other reports that we file from time to
time with the Securities and Exchange Commission. Any statements about our business, financial
results, financial condition and operations contained in this Quarterly Report that are not
statements of historical fact may be deemed to be forward-looking statements. Without limiting the
foregoing, the words believes, anticipates, expects, intends, projects, or similar
expressions are intended to identify forward-looking statements. Our actual results could differ
materially from those expressed or implied by these forward-looking statements as a result of
various factors, including the risk factors described under the heading Risk Factors and
elsewhere in this report. We undertake no obligation to update publicly any forward-looking
statements for any reason, except as required by law, even as new information becomes available or
other events occur in the future.
Overview
We are a biopharmaceutical research and development company focused on introducing new treatments
for cancer and infectious diseases that improve the performance and safety of existing drugs by
addressing significant problems such as drug metabolism, toxicity, bioavailability and resistance.
We do not manufacture, market, sell or distribute any product. Pursuant to license agreements with
University of Southern California and the acquisition in April 2006 of all assets of SD
Pharmaceuticals, Inc. (SDP), we have rights to drug candidates in varying stages of development. Our
current drug candidates are CoFactor (ANX-510), ANX-530 (vinorelbine emulsion, Selone, Thiovir
(ANX-201), ANX-513 (paclitaxel emulsion), ANX-514 (docetaxel emulsion), ANX-015 (clarithromycin
emulsion), ANX-016 (vancomycin emulsion), ANX-211 (chitosan gel), ANX-570 (beta-elemene), ANX-575
(alpha-tocopherol succinate). CoFactor, Thiovir, Selone and ANX-530 are described in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2005. The other products, including
additional rights to ANX-530, were acquired in the merger with SDP,
announced in April 2006. These products are briefly described below.
| ANX-513 is a novel emulsion formulation of paclitaxel (Taxolâ) formulated without solvents or detergents and designed to be non-allergenic. Use of ANX-513 may obviate the need for immunosuppressant premedication, which is recommended for paclitaxel therapy to reduce the incidence and severity of severe hypersensitivity reaction. Paclitaxel is approved to treat breast, ovarian and non-small cell lung cancers. | ||
| ANX-514 is a novel detergent-free docetaxel (Taxotereâ) formulation intended to eliminate the need for multiday immunosuppressant premedication, which is recommended for docetaxel therapy to reduce the incidence and severity of allergic reaction. Taxotere is approved to treat breast, non-small cell lung, prostate and gastric cancers. | ||
| ANX-015 is a novel intravenous formulation of an approved antibiotic in the macrolide family known as clarithromycin. Clarithromycin is approved for mild to moderate bacterial infections such as in community-acquired pneumonia. Only oral formulations of clarithromycin are currently available in the US. | ||
| ANX-016 is a novel formulation of vancomycin, a parenteral glycopeptide antibiotic approved to treat gram-positive bacterial infections. ANX-016 is designed to reduce the vein irritation and phlebitis associated with the IV-delivered drug. | ||
| ANX-570 is a novel formulation of beta-elemene, a small molecule anticancer agent belonging to the triterpene family. | ||
| ANX-575 is an emulsion formulation of alpha-tocopheryl succinate, a form of vitamin E which has been shown to selectively facilitate apoptosis, or cell death, in cancer cells in preclinical tests. | ||
| ANX-211 is a broad spectrum intranasal/topical anti-viral gel intended for use in cold and flu and other viral indications as an over-the- counter (OTC) product. |
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We currently plan to request pre-IND meetings with the FDA regarding proposed bioequivalency
regulatory approaches for ANX-513 and ANX-514 under section 505(b)(2) of the Federal Food, Drug &
Cosmetic Act. In addition, we currently plan to investigate regulatory strategies for ANX-015,
ANX-016 and ANX-211.
On May 30, 2003, we merged our wholly-owned subsidiary, Biokeys, Inc., into the Company and changed
our name from Biokeys Pharmaceuticals, Inc. to ADVENTRX Pharmaceuticals, Inc. The merger had no
effect on our financial statements.
In July 2004, we formed a wholly-owned subsidiary, ADVENTRX (Europe) Ltd., in the United Kingdom
for the purpose of conducting drug trials in the European Union.
We have incurred net losses since our inception. As of March 31, 2006, our accumulated deficit was
approximately $81 million. We expect to incur substantial and increasing losses for the next
several years as we continue development and possible commercialization of new products.
To date, we have funded our operations primarily through sales of equity securities.
Our business is subject to significant risks, including risks inherent in our ongoing clinical
trials, the regulatory approval processes, the results of our research and development efforts,
commercialization, and competition from other pharmaceutical companies.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations is based on our
consolidated financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States. The preparation of the consolidated financial
statements requires us to make estimates and judgments that affect the reported amounts of assets,
liabilities and expenses and the related disclosure of contingent assets and liabilities. We review
our estimates on an on-going basis, including those related to valuation of goodwill, intangibles
and other long-lived assets. We base our estimates on historical experience and on various other
assumptions that we believe to be reasonable under the circumstances, the results of which form the
bases for making judgments about the carrying values of assets and liabilities. Actual results may
differ from these estimates under different assumptions or conditions. Our accounting policies are
described in more detail in Note 1 to our consolidated financial statements included in our Annual
Report on Form 10-K. We have identified the following as the most critical accounting policy used in
the preparation of our consolidated financial statements.
Stock Compensation Plans. We grant options to purchase our common stock to our employees and directors under our 2005
Equity Incentive Plan. The benefits provided under this plan are share-based payments subject to
the provisions of revised Statement of Financial Accounting Standards (SFAS) No. 123 (SFAS
123R), Share-Based Payment. Prior to January 1, 2006 we accounted for stock-based compensation
under the recognition and measurement principles of SFAS No. 123 Accounting for Stock-Based
Compensation (SFAS 123). Effective January 1, 2006, we began recording compensation expense
associated with stock options and other equity-based compensation in accordance with SFAS 123R. We
recognize these compensation costs on a straight-line basis over the requisite service period of
the award, which is generally four years.
We estimate the value of stock option awards on the date of grant using the Black-Scholes
option-pricing model (Black-Scholes model). The determination of the fair value of share-based
payment awards on the date of grant using an option-pricing model is affected by our stock price as
well as assumptions regarding a number of complex and subjective variables. These variables
include, but are not limited to, our expected stock price volatility over the term of the awards,
actual and projected employee stock option exercise behaviors, risk-free interest rate and expected
dividends.
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If factors change and we employ different assumptions in the application of FAS 123R in future
periods, the compensation expense that we record under FAS 123R may differ significantly from what
we have recorded in the current period. Option-pricing models were developed for use in estimating
the value of traded options that have no vesting or hedging restrictions, are fully transferable
and do not cause dilution. Because our share-based payments have characteristics significantly
different from those of freely traded options, and because changes in the subjective input
assumptions can materially affect our estimates of fair values, in our opinion, existing valuation
models, including the Black-Scholes model, may not provide reliable measures of the fair values of
our share-based compensation. There is not currently no market-based mechanism or other practical
application to verify the reliability and accuracy of the estimates stemming from these valuation
models, nor is there a means to compare and adjust the estimates to actual values. Although the
fair value of employee share-based awards is determined in accordance with FAS 123R and the
Securities and Exchange Commissions Staff Accounting Bulletin No. 107 (SAB 107) using an
option-pricing model, that value may not be indicative of the fair value observed in a willing
buyer/willing seller market transaction. In addition, there are significant differences among
valuation models, and there is a possibility that we will adopt different valuation models in the
future. This may result in a lack of consistency in future periods and materially affect the fair
value estimate of share-based payments. It may also result in a lack of comparability with other
companies that use different models, methods and assumptions.
Estimates of share-based compensation expenses are significant to our financial statements, but
these expenses are based on option valuation models and will never result in the payment of cash by
us. For this reason, and because we do not view share-based compensation as related to our
operational performance, we exclude estimated share-based compensation expense when evaluating our
business performance.
Results of Operations
Three Months Ended March 31, 2006
Research and Development Expenses. Total research and development expenses were $2.5 million for
the three months ended March 31, 2006 compared to $1.7 million for the comparable period in 2005,
an increase of $779,000 or 46%. The quarter to quarter increase in research and development
expenses was primarily related to an increase of $388,000 in clinical trial expenses for our Phase
IIb clinical trials of CoFactor which commenced in May 2005. Other factors include an increase
employee stock option expense of $133,000, an increase of $159,000 in personnel costs
due to hiring related to expansion of our clinical operations, consulting fees of $181,000, and a
decrease of $116,000 in pre-clinical costs related to the license termination of some of our drug
candidates. These increases were partially offset by individually minor items.
We currently expect that our research and development expenses will significantly increase from the
level of expenses in the quarter ended March 31, 2006 as we ramp up our Phase III pivotal clinical
trial of CoFactor for the treatment of metastatic colorectal cancer in the United States, and
continue enrolling patients in our Phase IIb clinical trial of CoFactor for the treatment of
metastatic colorectal cancer in Europe. The timing of the increase in expense will be directly
related to the launch of the Phase III trial, and the amount of increase will be directly related
to the success and speed of patient enrollment in the Phase IIb and Phase III trials.
General and Administrative Expenses. General and administrative expenses were $1.7 million for the
three months ended March 31, 2006 compared to $1.2 million for the comparable period in 2005, an
increase of $585,000 or 51%. The quarter to quarter increase in general and administrative expenses
was due to an increase of $182,000 in employee stock option expense, a $184,000 expense for options
and stock issued to non-employees, a fee of $103,000 for auditing services with respect to SOX compliance, a
$61,000 listing fee with the American Stock Exchange, LLC, and an increase of $59,000 in
compensation expense due to hiring of additional personnel in the finance and marketing
departments. The remainder of the fluctuation in general and administrative expenses was caused by
individually minor items. We currently expect our general and administrative expenses excluding
non-recurring charges to continue at approximately current levels through the second quarter.
Gain (Loss) on Fair Value of Warrants. In July of
2005 we issued 10,810,809 warrants to purchase our common stock in conjunction with a private
placement. The fair value of these warrants is re-measured at each reporting date with a resulting
gain or (loss) recorded on the statement of operations. Loss on fair value of warrants was $17.0 million for the
three months ended March 31, 2006 compared to none for the comparable period in 2005.
Interest Income. Interest income for the three months ended March 31, 2006 was $237,000 compared to
$37,000 of net interest income for the comparable period in 2005. The increase was attributable to
higher invested balances from funds received from our most recent financing in July 2005 and from
the exercise of warrants during the quarter as well as higher interest rate yield on these balances.
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Liquidity and Capital Resources
As of March 31, 2006, our principal sources of liquidity were our cash and cash equivalents and
short-term investments which totaled $22.0 million as compared to $22.6 million as of December 31,
2005. This decrease was the net of $2.4 million which was attributed to the exercise of warrants
during this period and $3.0 million used in operating activities. As of March 31, 2006 we held
$16.8 million in cash and $5.2 million in short-term investments. As of March 31, 2006, our
short-term investments consisted primarily of commercial paper and U.S. Govt Agencies.
Net cash used in operating activities was $3.0 million during the three months ended March 31,
2006, compared with $2.6 million during the three months ended March 31, 2005. The increase in net
cash used in operating activities was due to increased funding for clinical trials, and our
increased operating expenses as we added additional personnel to support our expanded research and
development activities and business development activities.
Net cash provided in investing activities was $2.8 million during the three months ended March 31,
2006 compared with net cash used by investing activities of $32,000 during the three months ended
March 31, 2005. The increase in cash provided by investing activities was caused primarily by the
sale of short-term investments made with the proceeds of our financing round which closed in July.
Net cash provided by financing activities was $2.4 million during the three months ended March 31,
2006 compared with net cash provided by financing activities of $122,000 during the three months
ended March 31, 2005. The cash flows from financing activities for the three months ended March 31,
2006 and 2005 were primarily proceeds from the exercise of warrants.
Our future capital uses and requirements depend on numerous forward-looking factors and cannot be
budgeted with any reasonable certainty. These factors include but are not limited to the following:
| the timing and results of our clinical trials; | ||
| the progress of our research activities; | ||
| the number and scope of our research programs; | ||
| the progress of our preclinical development activities; | ||
| our ability to establish and maintain strategic collaborations; | ||
| the costs involved in enforcing or defending patent claims and other intellectual property rights; | ||
| the costs and timing of regulatory approvals; | ||
| the costs of establishing or expanding manufacturing, sales and distribution capabilities; | ||
| the success of the commercialization of our products; and | ||
| the extent to which we license, acquire or invest in other products, technologies and businesses. |
To date, we have funded our operations primarily through the sale of equity securities. Through
March 31, 2006, we had an accumulated deficit of approximately $81 million, with total additional
paid-in capital of approximately $55 million. The $55 million of additional paid-in capital is
comprised of $32 million in net proceeds from the sale of equity securities, plus non-cash equity
issuances for acquisitions of $15 million, plus other non-cash equity transactions for operating
expenses of $8 million. As a result of our private placement which closed on July 28, 2005, we
believe that our existing cash and cash equivalents as of March 31, 2006 will be sufficient to meet
our projected operating requirements through March 31, 2007.
We intend to finance our operations and capital expenditure needs through the sale of additional
equity securities, debt financing or strategic collaboration agreements. We cannot be sure that
additional financing will be available when needed or that, if available, financing will be
obtained on favorable terms. If we raise additional funds by issuing equity securities, substantial
dilution to existing stockholders would likely result. If we raise additional funds by incurring
debt financing, which is not likely given our lack of
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operating revenue, the terms of the debt may involve significant cash payment obligations as well
as covenants and specific financial ratios that may restrict our ability to operate our business.
In addition, we may not be successful in obtaining collaboration agreements, or in receiving
milestone or royalty payments under those agreements. Having insufficient funds may require us to
delay, scale back or eliminate some or all of our research or development programs or to relinquish
greater or all rights to product candidates at an earlier stage of development or on less favorable
terms than we would otherwise choose. Failure to obtain adequate financing also may adversely
affect our ability to operate as a going concern.
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 $81 million as of March 31, 2006. 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 equity
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.
We do not expect to 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 equity
financing in the past, including in April 2004 and July 2005, 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, would 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
some or all of our rights to proprietary drugs. The inability to adequately and timely 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 past, we have been faced with limiting the scope and/or delaying the
launch of preclinical and clinical drug trials due to limited cash and personnel resources. We have
also chosen to terminate licenses of some drug candidates that were not showing sufficient promise
to justify continued expense and development. 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.
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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 clinical trials do not ensure that future clinical trials
will be successful or that drug candidates will receive all necessary regulatory approvals for the
marketing, distribution or sale of such drug candidates.
Success in preclinical and 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. In the past, we have terminated
licenses of drug candidates when our preclinical trials did not support or verify earlier
preclinical data. 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
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 likely 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 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.
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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, if
eventually approved for commercial distribution, 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 products 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 the 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 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
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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
the University of Southern California and SD Pharmaceuticals, Inc.
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.
The license agreements pursuant to which we license our core technologies for our potential
drug products permit the licensors, respectively the University of Southern California and SD
Pharmaceuticals, Inc., 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. In the past, we have let lapse certain licenses for
drug candidates when we determined that the expense and risk of continued development outweighed
the likely benefits of that continued development. The termination of any license agreement could
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.
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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. The loss of any of our senior executive officers, including our chief executive officer
and chief financial officer, in particular, could have a material adverse effect on the company and
the market for our common stock, particularly if such loss was abrupt or unexpected. All of our
employees are employed on an at-will basis under offer letters. We do not have non-competition
agreements with any of our employees.
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 and if 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 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 or other regulatory matters.
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 drugs 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.
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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 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 our common stock.
If we cannot satisfy AMEXs listing requirements, it may delist our common stock and we may not
have an active public market for our common stock. The absence of an active trading market would
likely make the common stock an illiquid investment.
Our common stock is quoted on the American Stock Exchange. To continue to be listed, we are
required to maintain shareholders equity of $6,000,000 among other requirements. We do not satisfy
that requirement as of March 31, 2006. The AMEX may consider delisting our common stock and suspend
trading in the common stock in which case our common stock would likely trade in the
over-the-counter market in the so-called pink sheets or, if available, the OTC Bulletin Board
Service. As a result, an investor would likely find it significantly more difficult to dispose of,
or to obtain accurate quotations as to the value of, our shares. Our ability to raise capital would
most likely also be impaired due to our ineligibility to file resale registration statements under
the Securities Act.
If our common stock is delisted, it may become subject to the SECs penny stock rules and more
difficult to sell.
SEC rules require brokers to provide information to purchasers of securities traded at less
than $5.00 and not traded on a national securities exchange or quoted on the Nasdaq Stock Market.
If our common stock becomes a penny stock that is not exempt from these SEC rules, these
disclosure requirements may have the effect of reducing trading activity in our common stock and
making it more difficult for investors to sell. The rules require a broker-dealer to deliver a
standardized risk disclosure document prepared by the SEC that provides information about penny
stocks and the nature and level of risks in the penny market. The broker must also give bid and
offer quotations and broker and salesperson compensation information to the customer orally or in
writing before or with the confirmation. The SEC rules also require a broker to make a special
written determination that the penny stock is a suitable investment for the purchaser and receive
the purchasers written agreement to the transaction before a transaction in a penny stock.
Changes in laws and regulations that affect the governance of public companies has increased our
operating expenses and will continue to do so.
Recently enacted changes in the laws and regulations affecting public companies, including the
provisions of the Sarbanes-Oxley Act of 2002 and the listing requirements for American Stock
Exchange have imposed new duties on us and on our executives, directors, attorneys and independent
accountants. In order to comply with these new rules, we have hired and expect to hire additional
personnel and use additional outside legal, accounting and advisory services, which have increased
and are likely to continue increasing our operating expenses. In particular, we expect to incur
additional administrative expenses as we implement Section 404 of the Sarbanes-Oxley Act, which
requires management to extensively evaluate and report on, and our independent registered public
accounting firm to attest to, our internal controls. For example, we have incurred significant
expenses, and expect to incur additional expenses, in connection with the evaluation,
implementation, documentation and testing of our existing and newly implemented control systems.
Management time associated with these compliance efforts necessarily reduces time available for
other operating activities, which could adversely affect operating results. If we are unable to
achieve full and timely compliance with these regulatory requirements, we could be required to
incur additional costs, expend additional money and management time on additional remedial efforts
which could adversely affect our results of operations.
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Failure to implement effective control systems, or failure to complete our assessment of the
effectiveness of our internal control over financial reporting, may subject us to regulatory
sanctions and could result in a loss of public confidence, which could harm our operating results.
Pursuant to Section 404 of the Sarbanes-Oxley Act, beginning with our fiscal year ending
December 31, 2005, we are required to include in our annual report our assessment of the
effectiveness of our internal control over financial reporting. Furthermore, our independent
registered public accounting firm is required to issue an opinion on whether our assessment of the
effectiveness of our internal control over financial reporting is fairly stated in all material
respects and separately report on whether it believes we maintained, in all material respects,
effective internal control over financial reporting on an annual basis.
If we fail to remedy any material weaknesses which are uncovered, fail to timely complete our
assessment, or if our independent registered public accounting firm cannot timely attest to our
assessment, we could be subject to regulatory sanctions and a loss of public confidence in our
internal control. In addition, any failure to implement required new or improved controls, or
difficulties encountered in their implementation, could harm our operating results or cause us to
fail to timely meet our regulatory reporting obligations.
We have engaged in and may continue to engage in further expansion through mergers and
acquisitions, which could negatively affect our business and earnings.
We have engaged in and may continue to engage in expansion through mergers and
acquisitions. There are risks associated with such expansion. These risks include, among others,
incorrectly assessing the asset quality of a prospective merger partner, encountering greater than
anticipated costs in integrating acquired businesses, facing resistance from customers or
employees, and being unable to profitably deploy assets acquired in the transaction. Additional
country- and region-specific risks are associated with transactions outside the United States. To
the extent we issue capital stock in connection with additional transactions, these transactions
and related stock issuances may have a dilutive effect on earnings per share and share ownership.
Our earnings, financial condition, and prospects after a merger or acquisition depend in part
on our ability to successfully integrate the operations of the acquired company. We may be unable
to integrate operations successfully or to achieve expected cost savings. Any cost savings which
are realized may be offset by losses in revenues or other charges to earnings.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The primary objective of our investment activities is to preserve principal while maximizing the
income we receive from our investments without significantly increasing the risk of loss. Some of
the investable securities permitted under our cash management policy may be subject to market risk
for changes in interest rates. To mitigate this risk, we maintain a portfolio of cash equivalent
and short-term investments in a variety of securities which may include investment grade commercial
paper, money market funds, government debt issued by the United States of America, state debt,
certificates of deposit and investment grade corporate debt. Presently, we are exposed to minimal
market risks associated with interest rate changes because of the relatively short maturities of
our investments and we do not expect interest rate fluctuations to materially affect the aggregate
value of our financial instruments. We manage the sensitivity of our results of operations to these
risks by maintaining investment grade short-term investments. Our cash management policy does not
allow us to purchase or hold derivative or commodity instruments or other financial instruments for
trading purposes. Additionally, our policy stipulates that we periodically monitor our investments
for adverse material holdings related to the underlying financial solvency of the issuer. As of
March 31, 2006, our investments consisted mostly of cash, commercial paper and U.S. government
debt. Our results of operations and financial condition would not be significantly impacted by
either a 10% increase or decrease in interest rates due mainly to the short-term nature of our
investment portfolio. We have not used derivative financial instruments in our investment
portfolio. Additionally, we do not invest in foreign currencies or other foreign investments.
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Item 4. Controls and Procedures.
Evaluation of disclosure controls and procedures.
As of the end of the period covered by this report, we conducted an evaluation, under the
supervision and with the participation of the principal executive officer and principal financial
officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934 (the Exchange Act)). Based on this evaluation, the
principal executive officer and principal financial officer concluded that our disclosure controls
and procedures are effective to ensure that information required to be disclosed by us in reports
that we file or submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules and forms and is
accumulated and communicated to our management, including the principal executive and principal
financial officer, or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure. There was no change in our internal control over financial
reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of
the Exchange Act that occurred during the period covered by this report that has materially
affected, or is reasonably likely to materially affect, our internal control over financial
reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In the normal course of business, we may become subject to lawsuits and other claims and
proceedings. Such matters are subject to uncertainty and outcomes are often not predictable with
assurance. We are not aware of any pending or threatened lawsuit or proceeding that would have a
material adverse effect on our financial position, results of operations or cash flows.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Sales of unregistered securities for the three months ended March 31, 2006, for the period
from April 1, 2006 through April 6, 2006 and the shares of common stock issued in conjunction with
the merger with SDP, have been reported by the Company in previous SEC filings. Between April 7,
2006 and May 2, 2006 we issued 282,867 shares of common stock to warrant holders in connection
with their exercise of outstanding warrants. We received $461,282 gross proceeds upon exercise of
these warrants. Pursuant to the terms of an agreement we entered into with Burnham Hill Partners,
a division of Pali Capital, Inc., in March 2004, we are obligated to pay a 4% cash commission on
each cash exercise of warrants issued in a financing that we consummated in April 2004. In
accordance with this obligation, we owe Burnham Hill approximately $11,653 in connection with the
exercise of warrants from April 7, 2006 through May 2, 2006. No other commission or
remuneration was paid or given directly or indirectly in connection with these warrant exercises.
The issuances of shares of common stock upon exercise of these warrants were not registered under
the Securities Act of 1933 in reliance upon Section 4(2) of such Act.
Item 6. Exhibits.
An Exhibit Index has been attached as part of this quarterly report and is incorporated herein by
reference.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ADVENTRX Pharmaceuticals, Inc. | ||||||
Date: May 10, 2006
|
By: | /s/ Evan M. Levine | ||||
President and Chief Executive Officer (principal executive officer) | ||||||
ADVENTRX Pharmaceuticals, Inc. | ||||||
Date: May 10, 2006
|
By: | /s/ Carrie Carlander | ||||
Carrie Carlander | ||||||
Chief Financial Officer, Vice President, Finance Secretary and Treasurer (principal financial officer) |
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Exhibit Index
Exhibit | Description | |
31.1
|
Rule 13a-14(a)/15d-14(a) Certification | |
31.2
|
Rule 13a-14(a)/15d-14(a) Certification | |
32.1
|
Section 1350 Certifications |
30
Exhibit 31.1
CERTIFICATION PURSUANT TO RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Evan Levine, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ADVENTRX Pharmaceuticals, Inc. (the
Company);
2. Based on my knowledge, this report 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
report;
3. Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the Company as of, and for, the periods presented in this report;
4. The Companys other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the Company, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b. Evaluated the effectiveness of the Companys disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such evaluation; and
c. Disclosed in this report any change in the Companys internal control over financial reporting
that occurred during the Companys most recent fiscal quarter (the Companys fourth fiscal quarter
in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the Companys internal control over financial reporting; and
5. The Companys other certifying officer and I have disclosed, based on our most recent evaluation
of internal control over financial reporting, to the Companys auditors and the audit committee of
the Companys board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal
controls over financial reporting which are reasonably likely to adversely affect the Companys
ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a
significant role in the Companys internal control over financial reporting.
Date: May 10, 2006
/S/ EVAN LEVINE
Evan Levine
Chief Executive Officer and President
Evan Levine
Chief Executive Officer and President
EXHIBIT 31.2
CERTIFICATION PURSUANT TO RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Carrie Carlander, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ADVENTRX Pharmaceuticals, Inc. (the
Company);
2. Based on my knowledge, this report 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
report;
3. Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the Company as of, and for, the periods presented in this report;
4. The Companys other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the Company, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b. Evaluated the effectiveness of the Companys disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such evaluation; and
c. Disclosed in this report any change in the Companys internal control over financial reporting
that occurred during the Companys most recent fiscal quarter (the Companys fourth fiscal quarter
in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the Companys internal control over financial reporting; and
5. The Companys other certifying officer and I have disclosed, based on our most recent evaluation
of internal control over financial reporting, to the Companys auditors and the audit committee of
the Companys board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal
controls over financial reporting which are reasonably likely to adversely affect the Companys
ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a
significant role in the Companys internal control over financial reporting.
Date: May 10, 2006
/S/ CARRIE CARLANDER
Carrie Carlander
Chief Financial Officer, Vice President, Finance, Treasurer and Secretary
Carrie Carlander
Chief Financial Officer, Vice President, Finance, Treasurer and Secretary
Exhibit 32.1
CERTIFICATION OF CEO AND CFO FURNISHED PURSUANT TO
18 U.S.C. § 1350,
AS ADOPTED PURSUANT TO
§ 906 OF THE SARBANES-OXLEY ACT OF 2002
18 U.S.C. § 1350,
AS ADOPTED PURSUANT TO
§ 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of ADVENTRX Pharmaceuticals, Inc. (the
Company) for the quarterly period ended March 31, 2006 as filed with the Securities and Exchange
Commission on the date hereof (the Report), each of Evan Levine, Chief Executive Officer and
President of the Company, and Carrie Carlander, Chief Financial Officer, Treasurer and Vice
President, Finance, of the Company, hereby certify, pursuant to 18 U.S.C. § 1350, as adopted
pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to the best of his knowledge, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the
financial condition and result of operations of the Company.
Date: May 10, 2006 /S/ EVAN LEVINE
Evan Levine
Chief Executive Officer and President
Evan Levine
Chief Executive Officer and President
Date: May 10, 2006 /S/ CARRIE CARLANDER
Carrie Carlander
Chief Financial Officer, Vice President, Finance, Treasurer and Secretary
Carrie Carlander
Chief Financial Officer, Vice President, Finance, Treasurer and Secretary
This certification accompanies this Report pursuant to § 906 of the Sarbanes-Oxley Act of 2002 and
shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, or otherwise required,
be deemed filed by the Company for purposes of § 18 of the Securities Exchange Act of 1934, as
amended.