As filed with the Securities and Exchange Commission on September 12, 2008
Registration No.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
THRESHOLD PHARMACEUTICALS, INC.
(Exact Name of Registrant as Specified in Its Charter)
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Delaware
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001-32979
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94-3409596
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(State or jurisdiction of
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(Primary Standard Industrial
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(I.R.S. Employer
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incorporation or organization)
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Classification Code Number)
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Identification Number)
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1300 Seaport Boulevard
Redwood City, California 94063
(650) 474-8200
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Harold E. Selick, Ph.D.
Chief Executive Officer
1300 Seaport Boulevard
Redwood City, California 94063
Telephone: (650) 474-8200
Facsimile: (650) 474-2529
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copy to:
Stephen B. Thau, Esq.
Morrison & Foerster LLP
755 Page Mill Road
Palo Alto, CA 94304
Telephone: 650-813-5640
Facsimile: (650) 251-3745
Approximate date of proposed sale to the public:
From time to time after this Registration
Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.
þ
If this Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act of 1933, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same
offering.
o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities
Act of 1933, check the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering.
o
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities
Act of 1933, check the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering.
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the
Securities Exchange Act of 1934.
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
þ
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(Do not check if a smaller reporting company)
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum
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Proposed Maximum
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Amount of
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Title of Each Class of
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Amount
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Offering Price
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Aggregate
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Registration
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Securities to be Registered
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to be Registered(1)
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per Share
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Offering Price(2)
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Fee
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Common Stock, par value $0.001 per share
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8,970,574
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$
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1.71
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$
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15,339,681.54
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$
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602.85
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Common Stock, par value $0.001 per share
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3,588,221
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(3)
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$
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1.71
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$
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6,135,857.91
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$
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241.14
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Total
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12,558,795
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$
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1.71
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$
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21,475,539.45
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$
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843.99
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(1)
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In accordance with Rule 416(a), the registrant is also registering hereunder an indeterminate number of shares that may
be issued and resold resulting from stock splits, stock dividends or similar transactions.
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(2)
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Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) under the Securities Act of
1933 based on the average of the high and low sales prices of the common stock reported on the NASDAQ Capital Market on
September 11, 2008.
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(3)
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Represents the number of shares of common stock issuable upon the exercise of warrants to purchase shares of common stock.
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The Registrant hereby amends this Registration Statement on such date or dates as may be
necessary to delay its effective date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Securities and Exchange Commission, acting pursuant to
said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. The
selling stockholders named in this prospectus may not sell these securities
publicly until the registration statement filed with the Securities and
Exchange Commission is effective. This prospectus is not an offer to sell
these securities and it is not soliciting an offer to buy these securities in
any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED SEPTEMBER 12, 2008
12,558,795 Shares of Common Stock
This prospectus relates to the sale from time to time by the selling stockholders identified
in this prospectus for their own account of up to a total of 12,558,795 shares of our common
stock, including up to an aggregate of 3,588,221 shares of our common stock issuable upon the
exercise of warrants. The selling stockholders acquired their shares in a private placement of
shares of common stock and warrants to purchase shares of common stock completed on August 29,
2008.
We will not receive any of the proceeds from the sale of shares by the selling stockholders.
However, we will receive the proceeds from the exercise of the warrants by the selling
stockholders, if any, to the extent that the warrants are not exercised on a cashless basis. See
“Use of Proceeds” beginning on page 18 of this prospectus.
Due to our recently completed reverse stock split, our common stock trades on the NASDAQ
Capital Market under the symbol “THLDD.” Effective
September 18, 2008, our common stock will
resume trading on the NASDAQ Capital Market under the symbol “THLD.” The last reported sales price
per share of our common stock as reported by the NASDAQ Capital Market on September 11, 2008 was
$1.71.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. BEFORE BUYING ANY SHARES, YOU
SHOULD CAREFULLY READ THE DISCUSSION OF MATERIAL RISKS OF INVESTING IN OUR COMMON STOCK IN “RISK
FACTORS” BEGINNING ON PAGE 4 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is September 12, 2008.
About this Prospectus
You should rely only on the information contained in this prospectus. We have not authorized
anyone to provide you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. You should assume that the information
contained in this prospectus is accurate only as of the date of this prospectus, and that
information contained in any document included in this prospectus is accurate only as of the date
of that document, regardless of the time of delivery of this prospectus or any sale of shares of
our common stock. Our business, financial condition, results of operations and prospects may have
changed since such dates.
Market data and certain industry forecasts used in this prospectus and the documents included
in this prospectus were obtained from market research, publicly available information and industry
publications. We believe that these sources are generally reliable, but the accuracy and
completeness of such information is not guaranteed. We have not independently verified this
information, and we do not make any representation as to the accuracy of such information.
In this prospectus, unless the context otherwise requires, references to “we,” “us,” “our” or
similar terms, as well as references to “Threshold Pharmaceuticals” or the “Company,” refer to
Threshold Pharmaceuticals, Inc., either alone or together with our subsidiaries.
The name Threshold Pharmaceuticals, Inc. is our trademark. Other trademarks, product names and
company names appearing in this prospectus and documents included in this prospectus or
incorporated by reference in this prospectus are the property of their respective owners.
1
PROSPECTUS SUMMARY
This summary highlights key aspects of the information contained elsewhere in this prospectus.
This summary does not contain all the information you should consider before investing in our
securities. You should read this entire prospectus carefully, especially the risks of investing in
our securities discussed under “Risk Factors” beginning on page 4 of this prospectus before making
an investment decision.
Company Information
We are a biotechnology company focused on the discovery and development of drugs targeting the
microenvironment of solid tumors as novel treatments for patients living with cancer. The
microenvironment of solid tumors is characterized by, among other things, hypoxia or lack of
oxygen, disordered blood vessel growth, and the upregulation of glucose transport. This hypoxic
environment is known to be resistant to standard chemotherapy and radiation. It is thought to be
responsible for the poor prognosis of many solid tumors and treating the hypoxic environment is
currently believed to be a significant unmet medical need. Our product candidates are designed to
selectively target the hypoxic microenvironment of tumors either by selective toxin activation in
the case of our hypoxia activated prodrug (HAP) program, including TH-302, or potentially utilizing
the consequences of increased uptake of glucose in cancer cells relative to most normal cells. Our
product candidates glufosfamide and 2-deoxyglucose (“2DG”) share certain structural characteristics
with glucose but act instead as chemotherapeutic toxins when taken up by a cell.
Our focus is on product candidates for the treatment of patients living with cancer. We have
three product candidates for which we have exclusive worldwide marketing rights:
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TH-302, which we discovered, is our lead product candidate for the
potential treatment of patients with cancer. It is a novel drug candidate that is
activated under the severe hypoxic conditions of most solid tumors. In May 2007,
we announced the filing of an investigational new drug application (“IND”) with
the FDA for TH-302, and in July 2007, we initiated a Phase 1 clinical trial
evaluating the safety of TH-302 in patients with advanced solid tumors. In July
2008, we reported top line results for this clinical trial, which has planned
enrollment completion by Q4 2008. In August 2008, we initiated a complete Phase
1/2 clinical trial of TH-302 which includes three separate treatment arms with
each arm combining TH-302 in combination with a different chemotherapeutic agent
for the treatment of patients with solid tumors. In September 2008, we also
initiated a Phase 1/2 clinical trial of TH-302 in combination with doxorubicin in
patients with advanced soft tissue sarcoma.
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•
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Glufosfamide is our most advanced product candidate for the potential
treatment of patients with cancer. In February 2007, we announced that our Phase
3 clinical trial did not reach its primary endpoint of a statistically
significant survival benefit for patients with metastatic pancreatic cancer that
relapsed following chemotherapy with gemcitabine. In the third quarter of 2007,
we presented final results including promising tumor response and survival data
from the Phase 2 stage of a clinical trial of glufosfamide plus gemcitabine for
the first-line treatment of pancreatic cancer. In 2007 we initiated a Phase 2
clinical trial of glufosfamide in soft-tissue sarcoma, platinum-resistant ovarian
cancer and recurrent sensitive small cell lung cancer. All studies have been
closed to enrollment and top-line results from each study have been reported. We
plan to partner or seek external funding for the future development of
glufosfamide.
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•
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2DG is our product candidate for the potential treatment of patients with
cancer and is being evaluated in a Phase 1 clinical trial alone and in
combination with docetaxel as a combination therapy. This clinical trial began in
the first quarter of 2004 and we completed enrollment in the first half of 2008.
We presented top-line results for this clinical trial in August 2008. We are not
planning on conducting any additional clinical trials of 2DG as we are focusing
our resources on the development of our hypoxia-activated prodrug, TH-302, and
the out-licensing of glufosfamide for the potential treatment of solid tumors.
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We are working to discover additional hypoxia activated prodrugs that will selectively target
cancer cells.
We were incorporated in Delaware on October 17, 2001. Our principal executive offices are
located at 1300 Seaport Boulevard, Suite 500 Redwood City, California, 94063. Our telephone number
is (650) 474-8200. Our website is located at
www.thresholdpharm.com
. Information contained on, or
that can be accessed through, our website is not part of this prospectus.
Reverse Stock Split
On August 18, 2008, we filed an amendment to our certificate of incorporation to effect on
August 20, 2008, a 1-for-6 reverse split of our common stock. Accordingly, all of the stock numbers
and related market and conversion and exercise prices in this prospectus have been adjusted to
reflect the reverse split.
2
THE OFFERING
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Securities Offered
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Up to 12,558,795 shares of our common
by certain selling stockholders, of
which 3,588,221 are issuable upon the
exercise of warrants.
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Manner of Offering
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The selling stockholders, either
directly or through broker-dealers or
agents, may offer and sell their
securities on a continuous or delayed
basis in the future. These sales may
be conducted in the open market or in
privately negotiated transactions and
at prevailing market prices, fixed
prices or negotiated prices. See “Plan
of Distribution” beginning on page 25
this prospectus.
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Use of Proceeds
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We will not receive any proceeds from
the sale of the shares by the selling
stockholders. Nevertheless, we may
receive proceeds from the exercise of
the warrants, if any, to the extent
the warrants are not exercised on a
cashless basis. See “Use of Proceeds”
beginning on page 18 of this
prospectus.
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Trading Symbol for our Common Stock
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Due to our recently completed reverse
stock split, our common stock trades
on the NASDAQ Capital Market under the
symbol “THLDD.” Effective September
18, 2008, our common stock will resume
trading on the NASDAQ Capital Market
under the symbol “THLD.”
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Unless specifically stated otherwise, the information in this prospectus assumes no
exercise of outstanding options or warrants.
3
CURRENT EVENTS
On August 13, 2008, the Company’s Board of Directors approved a 1-for-6 reverse split of its
common stock, following approval by the Company’s stockholders on May 13, 2008. The reverse stock
split was effective August 20, 2008. As a result, the Company’s issued and outstanding common stock
was reduced from approximately 37,460,970 to approximately 6,243,469 shares. The par value of the
common stock was not affected by the reverse stock split and remains at $0.001 per share.
Consequently, on the Company’s balance sheet, the aggregate par value of the issued common stock
was reduced by reclassifying the par value amount of the eliminated shares of common stock to
Additional Paid-in Capital. The Company will pay cash in lieu of any fractional shares to which a
holder of common stock would otherwise be entitled as a result of the reverse stock split,
including fractional shares for the in-the-money stock options. In addition, the number of
authorized shares of common stock was reduced from 150,000,000 to 50,000,000.
SELECTED FINANCIAL DATA
The selected financial data set forth below has been prepared in accordance with accounting
principles generally accepted in the United States of America and should be read together with and
is qualified by reference to “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” included in Item 7 of our Annual Report on Form 10-K for the fiscal year
ended December 31, 2007 and our audited consolidated financial statements, including the notes
thereto and our independent registered public accounting firm’s report thereon included in Item 8
of our Annual Report on Form 10-K for the fiscal year ended December 31, 2007, as well as
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in
Item 2 of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2008 and our unaudited
consolidated financial statements including the notes thereto,
included in Item 1 of our Quarterly
Report on Form 10-Q for the quarter ended June 30, 2008, except that the weighted average number of
shares of common stock and the per share information for all periods has been revised to reflect
the Company’s 1-for-6 reverse stock split of its outstanding common stock effective August 20,
2008. The selected data in this section are not intended to replace the consolidated financial
statements included in that report, except that the weighted average number of shares of common
stock and per share information for all periods has been revised to reflect the 1-for-6 reverse
stock split. As discussed in Note 9 in Item 8 “Financial Statements and Supplementary Data” of our
Annual Report on Form 10-K for the fiscal year ended December 31, 2007, on January 1, 2006, the
Company began accounting for stock options and stock purchase rights under the provisions of
Statement of Financial Accounting Standards No. 123(R),
“Share-Based Payments”
(“SFAS 123(R)”),
which requires the recognition of the fair value of stock-based compensation.
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Six Months Ended June 30,
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Years Ended December 31,
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2008
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2007
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2007
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2006
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2005
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2004
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2003
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(In thousands, except per share data)
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Revenue
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$
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718
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$
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718
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$
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1,436
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$
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1,461
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$
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690
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$
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—
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$
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—
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Operating expenses:
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Research and development (1)
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6,201
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13,334
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23,375
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46,267
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35,991
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16,327
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6,252
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General and administrative (1)
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3,723
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5,110
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10,411
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14,453
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11,235
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7,649
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2,057
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Total operating expenses
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9,924
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18,444
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33,786
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60,720
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47,226
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23,976
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8,309
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Loss from operations
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(9,206
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(17,726
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(32,350
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(59,259
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)
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(46,536
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(23,976
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(8,309
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)
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Interest and other income, net
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305
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1,109
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1,841
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3,729
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2,159
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443
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65
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Interest expense
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(39
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)
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(80
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(155
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)
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(156
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)
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(31
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)
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(33
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)
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(59
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Net loss
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(8,940
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)
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(16,697
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)
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(30,664
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)
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(55,686
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(44,408
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)
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(23,566
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)
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(8,303
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Dividend related to beneficial conversion
feature of redeemable convertible preferred
stock
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—
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—
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—
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—
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—
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—
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(40,862
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)
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Net loss attributable to common stockholders
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(8,940
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(16,697
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(30,664
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)
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(55,686
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$
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(44,408
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)
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$
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(23,566
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)
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$
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(49,165
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)
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Net loss per common share:
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Basic and diluted
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$
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(1.44
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)
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$
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(2.71
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)
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$
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(4.97
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)
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$
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(9.20
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)
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$
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(9.81
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)
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$
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(121.47
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)
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$
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(3,072.81
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)
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Weighted average number of shares used in
per common share calculations:
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Basic and diluted
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6,222
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6,155
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6,176
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6,056
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4,529
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194
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16
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(1) Includes employee and non-employee
non-cash stock-based compensation of:
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|
|
|
|
Research and development
|
|
$
|
834
|
|
|
$
|
1,195
|
|
|
$
|
2,413
|
|
|
$
|
5,008
|
|
|
$
|
5,951
|
|
|
$
|
2,960
|
|
|
$
|
313
|
|
|
General and administrative
|
|
$
|
1,068
|
|
|
$
|
1,786
|
|
|
$
|
3,496
|
|
|
$
|
5,141
|
|
|
$
|
3,470
|
|
|
$
|
3,015
|
|
|
$
|
753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
As of December 31,
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and marketable securities
|
|
$
|
13,709
|
|
|
$
|
22,693
|
|
|
$
|
52,810
|
|
|
$
|
99,654
|
|
|
$
|
28,665
|
|
|
$
|
40,818
|
|
|
Working capital
|
|
|
10,991
|
|
|
|
17,884
|
|
|
|
43,698
|
|
|
|
90,655
|
|
|
|
21,967
|
|
|
|
40,177
|
|
|
Total assets
|
|
|
16,645
|
|
|
|
25,814
|
|
|
|
57,034
|
|
|
|
102,101
|
|
|
|
32,213
|
|
|
|
41,270
|
|
|
Notes payable, less current portion
|
|
|
—
|
|
|
|
337
|
|
|
|
1,247
|
|
|
|
151
|
|
|
|
382
|
|
|
|
242
|
|
|
Total liabilities
|
|
|
4,087
|
|
|
|
6,227
|
|
|
|
12,796
|
|
|
|
12,733
|
|
|
|
8,847
|
|
|
|
1,126
|
|
|
Redeemable convertible preferred stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
49,839
|
|
|
|
49,839
|
|
|
Total stockholders’ equity (deficit)
|
|
|
12,558
|
|
|
|
19,587
|
|
|
|
44,238
|
|
|
|
89,368
|
|
|
|
(26,473
|
)
|
|
|
(9,695
|
)
|
4
RISK FACTORS
Investing in our common stock involves a high degree of risk. You should carefully consider
the risks described below, together with all other information contained in this prospectus,
including the financial statements and the related notes appearing at the end of this prospectus,
before deciding to invest in our common stock. If any of the following risks actually occur, our
business, financial condition and results of operations could suffer. In these circumstances, the
market price of our common stock could decline, and you may lose all or part of your investment in
our securities.
Risks Related to Drug Discovery, Development and Commercialization
We are substantially dependent upon the success of our product candidates. Clinical trials may
not demonstrate efficacy or lead to regulatory approval.
We will not be able to commercialize our drug candidates until we obtain U.S. Food and Drug
Administration, or FDA, approval in the United States or approval by comparable regulatory agencies
in Europe and other countries. To satisfy FDA or foreign regulatory approval standards for the
commercial sale of our product candidates, we must demonstrate in adequate and controlled clinical
trials that our product candidates are safe and effective. Success in preclinical testing and early
clinical trials does not ensure that later clinical trials will be successful. A number of
companies in the pharmaceutical industry, including us, have suffered significant setbacks in
advanced clinical trials, even after obtaining promising results in earlier clinical trials.
Our product candidates must undergo rigorous clinical testing, the results of which are
uncertain and could substantially delay or prevent us from bringing them to market.
Before we can obtain regulatory approval for a product candidate, we must undertake extensive
clinical testing in humans to demonstrate safety and efficacy to the satisfaction of the FDA or
other regulatory agencies. Clinical trials of new drug candidates sufficient to obtain regulatory
marketing approval are expensive and take years to complete.
We cannot be certain of successfully completing clinical testing within the time frame we have
planned, or at all. We may experience numerous unforeseen events during, or as a result of, the
clinical trial process that could delay or prevent us from receiving regulatory approval or
commercializing our product candidates, including the following:
|
|
•
|
|
our clinical trials may produce negative or inconclusive results, and we may
decide, or regulators may require us, to conduct additional clinical and/or preclinical
testing or to abandon programs;
|
|
|
|
|
•
|
|
the results obtained in earlier stage clinical testing may not be indicative of
results in future clinical trials;
|
|
|
|
|
•
|
|
clinical trial results may not meet the level of statistical significance
required by the FDA or other regulatory agencies;
|
|
|
|
|
•
|
|
enrollment in our clinical trials for our product candidates may be slower than
we anticipate, resulting in significant delays;
|
|
|
|
|
•
|
|
we, or regulators, may suspend or terminate our clinical trials if the
participating patients are being exposed to unacceptable health risks; and
|
|
|
|
|
•
|
|
the effects of our product candidates on patients may not be the desired effects
or may include undesirable side effects or other characteristics that may delay or
preclude regulatory approval or limit their commercial use, if approved.
|
Completion of clinical trials depends, among other things, on our ability to enroll a
sufficient number of patients, which is a function of many factors, including:
|
|
•
|
|
the therapeutic endpoints chosen for evaluation;
|
|
|
|
|
•
|
|
the eligibility criteria defined in the protocol;
|
|
|
|
|
•
|
|
the perceived benefit of the investigational drug under study;
|
|
|
|
|
•
|
|
the size of the patient population required for analysis of the clinical trial’s
therapeutic endpoints;
|
|
|
|
|
•
|
|
our ability to recruit clinical trial investigators and sites with the
appropriate competencies and experience;
|
|
|
|
|
•
|
|
our ability to obtain and maintain patient consents; and
|
|
|
|
|
•
|
|
competition for patients by clinical trial programs for other treatments.
|
We may experience difficulties in enrolling patients in our clinical trials, which could
increase the costs or affect the timing or outcome of these clinical trials. This is particularly
true with respect to diseases with relatively small patient populations.
5
Pre-clinical studies of our product candidates may not predict the results of their human
clinical trials.
Pre-clinical studies, including studies of our product candidates in animal models of disease,
may not accurately predict the result of human clinical trials of those product candidates. In
particular, promising animal studies suggesting the efficacy of TH-302 for the treatment of
different types of cancer may not accurately predict the ability of TH-302 to treat cancer
effectively in humans. TH-302 may be found not to be efficacious in treating cancer, alone or in
combination with other agents, when studied in human clinical trials.
We are subject to significant regulatory approval requirements, which could delay, prevent or
limit our ability to market our product candidates.
Our research and development activities, preclinical studies, clinical trials and the
anticipated manufacturing and marketing of our product candidates are subject to extensive
regulation by the FDA and other regulatory agencies in the United States and by comparable
authorities in Europe and elsewhere. We require the approval of the relevant regulatory authorities
before we may commence commercial sales of our product candidates in a given market. The regulatory
approval process is expensive and time-consuming, and the timing of receipt of regulatory approval
is difficult to predict. Our product candidates could require a significantly longer time to gain
regulatory approval than expected, or may never gain approval. We cannot be certain that, even
after expending substantial time and financial resources, we will obtain regulatory approval for
any of our product candidates. A delay or denial of regulatory approval could delay or prevent our
ability to generate product revenues and to achieve profitability.
Changes in regulatory approval policies during the development period of any of our product
candidates, changes in, or the enactment of, additional regulations or statutes, or changes in
regulatory review practices for a submitted product application may cause a delay in obtaining
approval or result in the rejection of an application for regulatory approval.
Regulatory approval, if obtained, may be made subject to limitations on the indicated uses for
which we may market a product. These limitations could adversely affect our potential product
revenues. Regulatory approval may also require costly post-marketing follow-up studies. In
addition, the labeling, packaging, adverse event reporting, storage, advertising, promotion and
record-keeping related to the product will be subject to extensive ongoing regulatory requirements.
Furthermore, for any marketed product, its manufacturer and its manufacturing facilities will be
subject to continual review and periodic inspections by the FDA or other regulatory authorities.
Failure to comply with applicable regulatory requirements may, among other things, result in fines,
suspensions of regulatory approvals, product recalls, product seizures, operating restrictions and
criminal prosecution.
Our product candidates are based on targeting the microenvironment of solid tumors, which
currently are unproven approaches to therapeutic intervention.
Our product candidates are designed to target the microenvironment of solid tumors either by
harnessing hypoxia for selective toxin activation in the case of TH-302 and our HAP program or
potentially utilizing the increased uptake of glucose or enhanced activation of glufosfamide in
cancer cells relative to most normal cells. Our product candidates glufosfamide and 2DG share
certain structural characteristics with glucose but act instead as poisons when taken up by a
cancer cell. We have not, nor to our knowledge has any other company, received regulatory approval
for a drug based on either of these approaches. We cannot be certain that our approaches will lead
to the development of approvable or marketable drugs.
In addition, the FDA or other regulatory agencies may lack experience in evaluating the safety
and efficacy of drugs based on these targeting approaches, which could lengthen the regulatory
review process, increase our development costs and delay or prevent commercialization of our
product candidates.
Our product candidates may have undesirable side effects that prevent or delay their
regulatory approval or limit their use if approved.
Certain anti-tumor drugs being developed by us, such as TH-302, glufosfamide and 2DG, are
expected to have undesirable side effects. The extent, severity and clinical significance of these
effects may not be apparent initially and may be discovered during drug development or even
post-approval. These expected side effects or other side effects identified in the course of our
clinical trials or that may otherwise be associated with our product candidates may outweigh the
benefits of our product candidates. Side effects may prevent or delay regulatory approval or limit
market acceptance if our products are approved.
Delays in clinical testing could result in increased costs to us and delay our ability to
obtain regulatory approval and commercialize our product candidates.
Significant delays in clinical testing could materially impact our product development costs
and delay regulatory approval of our product candidates. We do not know whether planned clinical
trials will need to be redesigned or will be completed on schedule, if at all. Clinical trials can
be delayed for a variety of reasons, including adverse safety events experienced during our
clinical trials and delays in:
|
|
•
|
|
obtaining regulatory approval to commence a clinical trial;
|
6
|
|
•
|
|
obtaining clinical materials;
|
|
|
|
|
•
|
|
reaching agreement on acceptable clinical trial agreement terms with prospective sites;
|
|
|
|
|
•
|
|
obtaining institutional review board approval to conduct a clinical trial at a prospective
site; and
|
|
|
|
|
•
|
|
recruiting patients to participate in a clinical trial.
|
Orphan drug exclusivity affords us limited protection, and if another party obtains orphan
drug exclusivity for the drugs and indications we are targeting, we may be precluded from
commercializing our product candidates in those indications.
In September 2006, the FDA granted orphan drug designation to glufosfamide for the treatment
of pancreatic cancer. For those drugs that meet the eligible requirements, we intend to seek orphan
drug designation for the cancer indications that our drug candidates are intended to treat. Under
the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare
disease or condition, which is defined by the FDA as a disease or condition that affects fewer than
200,000 individuals in the United States. The company that obtains the first FDA approval for a
designated orphan drug indication receives marketing exclusivity for use of that drug for that
indication for a period of seven years. Orphan drug exclusive marketing rights may be lost if the
FDA later determines that the request for designation was materially defective, or if the
manufacturer is unable to assure sufficient quantity of the drug. Orphan drug designation does not
shorten the development or regulatory review time of a drug.
Orphan drug exclusivity may not prevent other market entrants. A different drug, or, under
limited circumstances, the same drug may be approved by the FDA for the same orphan indication. The
limited circumstances include an inability to supply the drug in sufficient quantities or where a
new formulation of the drug has shown superior safety or efficacy. As a result, if our product is
approved and receives orphan drug status, the FDA can still approve other drugs for use in treating
the same indication covered by our product, which could create a more competitive market for us.
Moreover, due to the uncertainties associated with developing pharmaceutical products, we may
not be the first to obtain marketing approval for any orphan drug indication. Even if we obtain
orphan drug designation, if a competitor obtains regulatory approval for TH-302, glufosfamide or
2DG for the same indication we are targeting before we do, we would be blocked from obtaining
approval for that indication for seven years, unless our product is a new formulation of the drug
that has shown superior safety or efficacy, or the competitor is unable to supply sufficient
quantities.
Even if we obtain regulatory approval, our marketed drugs will be subject to ongoing
regulatory review. If we fail to comply with continuing United States and foreign regulations, we
could lose our approvals to market drugs and our business would be seriously harmed.
Following initial regulatory approval of any drugs we may develop, we will be subject to
continuing regulatory review, including review of adverse drug experiences and clinical results
that are reported after our drug products become commercially available. This would include results
from any post-marketing tests or vigilance required as a condition of approval. The manufacturer
and manufacturing facilities we use to make any of our drug candidates will also be subject to
periodic review and inspection by the FDA. If a previously unknown problem or problems with a
product or a manufacturing and laboratory facility used by us is discovered, the FDA or foreign
regulatory agency may impose restrictions on that product or on the manufacturing facility,
including requiring us to withdraw the product from the market. Any changes to an approved product,
including the way it is manufactured or promoted, often require FDA approval before the product, as
modified, can be marketed. We and our contract manufacturers will be subject to ongoing FDA
requirements for submission of safety and other post-market information. If we and our contract
manufacturers fail to comply with applicable regulatory requirements, a regulatory agency may:
|
|
•
|
|
issue warning letters;
|
|
|
|
|
•
|
|
impose civil or criminal penalties;
|
|
|
|
|
•
|
|
suspend or withdraw our regulatory approval;
|
|
|
|
|
•
|
|
suspend or terminate any of our ongoing clinical trials;
|
|
|
|
|
•
|
|
refuse to approve pending applications or supplements to approved applications
filed by us;
|
|
|
|
|
•
|
|
impose restrictions on our operations;
|
|
|
|
|
•
|
|
close the facilities of our contract manufacturers; or
|
|
|
|
|
•
|
|
seize or detain products or require a product recall.
|
The FDA and foreign regulatory authorities may impose significant restrictions on the
indicated uses and marketing of pharmaceutical products.
FDA rules for pharmaceutical promotion require that a company not promote an unapproved drug
or an approved drug for an unapproved use. In addition to FDA requirements, regulatory and law
enforcement agencies, such as the United States Department of
7
Health and Human Services’ Office of Inspector General and the United States Department of
Justice, monitor and investigate pharmaceutical sales, marketing and other practices. For example,
sales, marketing and scientific/educational grant programs must comply with the Medicare-Medicaid
Anti-Fraud and Abuse Act, as amended, the False Claims Act, as amended, and similar state laws. In
recent years, actions by companies’ sales forces and marketing departments have been scrutinized
intensely to ensure, among other things, that actions by such groups do not qualify as “kickbacks”
to healthcare professionals. A “kickback” refers to the provision of any item of value to a
healthcare professional or other person in exchange for purchasing, recommending, or referring an
individual for an item or service reimbursable by a federal healthcare program. These kickbacks
increase the expenses of the federal healthcare program and may result in civil penalties, criminal
prosecutions, and exclusion from participation in government programs, any of which would adversely
affect our financial condition and business operations. In addition, even if we are not determined
to have violated these laws, government investigations into these issues typically require the
expenditure of significant resources and generate negative publicity, which would also harm our
financial condition. Comparable laws also exist at the state level.
We are, and in the future may be, subject to new federal and state requirements to submit
information on our open and completed clinical trials to public registries and databases.
In 1997, a public registry of open clinical trials involving drugs intended to treat serious
or life-threatening diseases or conditions was established under the Food and Drug Administration
Modernization Act, or FDMA, in order to promote public awareness of and access to these clinical
trials. Under FDMA, pharmaceutical manufacturers and other clinical trial sponsors are required to
post the general purpose of these clinical trials, as well as the eligibility criteria, location
and contact information of the clinical trials. Since the establishment of this registry, there has
been significant public debate focused on broadening the types of clinical trials included in this
or other registries, as well as providing for public access to clinical trial results. A voluntary
coalition of medical journal editors has adopted a resolution to publish results only from those
clinical trials that have been registered with a no-cost, publicly accessible database, such as
www.clinicaltrials.gov
. The Pharmaceuticals and Research Manufacturers of America has also
issued voluntary principles for its members to make results from certain clinical trials publicly
available and has established a website for this purpose. Other groups have adopted or are
considering similar proposals for clinical trial registration and the posting of clinical trial
results. The state of Maine has enacted legislation, with penalty provisions, requiring the
disclosure of results from clinical trials involving drugs marketed in the state, and similar
legislation has been introduced in other states. Federal legislation was introduced in the fall of
2004 to expand
www.clinicaltrials.gov
and to require the inclusion of clinical trial
results in this registry. In some states, such as New York, prosecutors have alleged that a lack of
disclosure of clinical trial information constitutes fraud, and these allegations have resulted in
settlements with pharmaceutical companies that include agreements to post clinical trial results.
Our failure to comply with any clinical trial posting requirements could expose us to negative
publicity, fines, and other penalties, all of which could materially harm our business.
Risks Related to Our Financial Performance and Operations
We have incurred losses since our inception and anticipate that we will continue to incur
significant losses for the foreseeable future, and our future profitability is uncertain.
We are a development stage company with a limited operating history and no current source of
revenue from the sale of our product candidates. We have incurred losses in each year since our
inception in 2001, and we expect to incur losses for the foreseeable future. We have devoted, and
will continue to devote for the foreseeable future, substantially all of our resources to research
and development of our product candidates. For the six months ended June 30, 2008, we had a net
loss of $8.9 million and an accumulated deficit of $174.3 million. Clinical trials are costly. We
do not expect to generate any revenue from the sale of our product candidates in the near term, and
we expect to continue to have significant losses.
To attain profitability, we will need to develop products successfully and market and sell
them effectively. We cannot predict when we will become profitable, if at all. We have never
generated revenue from the sale of our product candidates, and there is no guarantee that we will
be able to do so in the future. If we fail to become profitable, or if we are unable to fund our
continuing losses, we would be unable to continue our research and development programs.
We are likely to require substantial additional funding and may be unable to raise capital
when needed, which could force us to delay, reduce or eliminate our drug discovery, product
development and commercialization activities.
Developing drugs, conducting clinical trials, and commercializing products is expensive. Our
future funding requirements will depend on many factors, including:
|
|
•
|
|
the terms and timing of any collaborative, licensing, acquisition or other
arrangements that we may establish;
|
|
|
|
|
•
|
|
the progress and cost of our clinical trials and other research and development
activities;
|
|
|
|
|
•
|
|
the costs and timing of obtaining regulatory approvals;
|
|
|
|
|
•
|
|
the costs of filing, prosecuting, defending and enforcing any patent
applications, claims, patents and other intellectual property rights;
|
8
|
|
•
|
|
the cost and timing of securing manufacturing capabilities for our clinical
product candidates and commercial products, if any; and
|
|
|
|
|
•
|
|
the costs of lawsuits involving us or our product candidates.
|
We believe that our existing cash, cash equivalents and marketable securities as of August 31,
2008, will be sufficient to fund our projected operating requirements through the fourth quarter of
2009, including prosecuting our current clinical trials, conducting research and discovery efforts
towards additional product candidates, working capital and general corporate purposes. Additional
funds will be required to in-license or otherwise acquire and develop additional products or
programs. We expect to seek funds through arrangements with collaborators or others that may
require us to relinquish rights to certain products candidates that we might otherwise seek to
develop or commercialize independently. We cannot be certain that we will be able to enter into any
such arrangements on reasonable terms, if at all.
We expect to need to raise additional capital or incur indebtedness to continue to fund our
future operations. We may seek to raise capital through a variety of sources, including:
|
|
•
|
|
the public equity market;
|
|
|
|
|
•
|
|
private equity financing;
|
|
|
|
|
•
|
|
collaborative arrangements; and/or
|
|
|
|
|
•
|
|
public or private debt.
|
Our ability to raise additional funds will depend on our clinical and regulatory events, our
ability to identify promising in-licensing opportunities, and factors related to financial,
economic, and market conditions, many of which are beyond our control. We cannot be certain that
sufficient funds will be available to us when required or on satisfactory terms, if at all. If
adequate funds are not available, we may be required to significantly reduce or refocus our
operations or to obtain funds through arrangements that may require us to relinquish rights to
certain of our products, technologies or potential markets, any of which could delay or require
that we curtail or eliminate some or all of our development programs or otherwise have a material
adverse effect on our business, financial condition and results of operations.
If we are unable to secure additional financing on a timely basis or on terms favorable to us,
we may be required to cease or reduce certain research and development projects, to sell some or
all of our technology or assets or to merge all or a portion of our business with another entity.
Insufficient funds may require us to delay, scale back, or eliminate some or all of our activities,
and if we are unable to obtain additional funding, there is uncertainty regarding our continued
existence.
Our success depends in part on retaining and motivating key personnel and, if we fail to do
so, it may be more difficult for us to execute our business strategy. As a small organization we
are dependent on key employees and may need to hire additional personnel to execute our business
strategy successfully.
Our success depends on our continued ability to attract, retain and motivate highly qualified
management, clinical and scientific personnel and on our ability to develop and maintain important
relationships with leading academic institutions, clinicians and scientists. We are highly
dependent upon our senior management and scientific staff, particularly our Chief Executive
Officer, Dr. Harold E. Selick, President and Chief Medical Officer, Dr. John M. Curd and Senior
Vice President of Discovery Research, Dr. Mark G. Matteucci. We do not have employment agreements
with Drs. Selick, Curd or Matteucci. The loss of the services of Drs. Selick, Curd or Matteucci or
one or more of our other key employees could delay or have an impact on the successful completion
of our clinical trials or the development of additional product candidates.
As of August 31, 2008, we had 30 employees. Our success will depend on our ability to retain
and motivate remaining personnel and hire additional qualified personnel when required. Competition
for qualified personnel in the biotechnology field is intense. We face competition for personnel
from other biotechnology and pharmaceutical companies, universities, public and private research
institutions and other organizations. We may not be able to attract and retain qualified personnel
on acceptable terms given the competition for such personnel. If we are unsuccessful in our
retention, motivation and recruitment efforts, we may be unable to execute our business strategy.
The reduction in our work force may cause difficulties in conducting operations and
maintaining an effective work environment.
The reductions in our work force in August 2006 and October 2007 imposed significant added
responsibilities on remaining management and other employees, including the need to consolidate job
functions and to conduct operation with fewer employees. We expect that we may need to increase our
use of various third parties in order to continue and conduct some operations. Our ability to
manage our operations and outside relationships will require us to continue to improve our
operational, financial and management controls, reporting systems and procedures. If we are unable
to do this effectively, it may be difficult for us to execute our business strategy.
9
Our facilities in California are located near an earthquake fault, and an earthquake or other
natural disaster or resource shortage could disrupt our operations.
Important documents and records, such as hard copies of our laboratory books and records for
our product candidates, are located in our corporate headquarters at a single location in Redwood
City, California, near active earthquake zones. In the event of a natural disaster, such as an
earthquake, drought or flood, or localized extended outages of critical utilities or transportation
systems, we do not have a formal business continuity or disaster recovery plan, and could therefore
experience a significant business interruption. In addition, California from time to time has
experienced shortages of water, electric power and natural gas. Future shortages and conservation
measures could disrupt our operations and could result in additional expense. Although we maintain
business interruption insurance coverage, the policy specifically excludes coverage for earthquake
and flood.
Risks Related to Our Dependence on Third Parties
We rely on third parties to manufacture TH-302, glufosfamide and 2DG. If these parties do not
manufacture the active pharmaceutical ingredients or finished products of satisfactory quality, in
a timely manner, in sufficient quantities or at an acceptable cost, clinical development and
commercialization of our product candidates could be delayed.
We do not currently own or operate manufacturing facilities; consequently, we rely and expect
to continue to rely on third parties for the production of clinical and commercial quantities of
our product candidates. We have not yet entered into any long term manufacturing or supply
agreement for any of our product candidates. Our current and anticipated future dependence upon
others for the manufacture of our product candidates may adversely affect our ability to develop
and commercialize any product candidates on a timely and competitive basis.
Our contract manufacturers have produced sufficient TH-302 API and drug product for the
initial stage of our Phase 1 clinical trial, which commenced in July 2007. Additional clinical
trial material will be manufactured as required. This amount will be partially dependent on the
maximum tolerated dose of TH-302 as a single agent and as a combination agent with chemotherapy.
In addition, we will need to obtain additional supplies of TH-302 API and drug product to complete
our currently initiated Phase 1/2 clinical trials. If we are not successful in procuring
sufficient TH-302 clinical trial material, we may experience a significant delay in our TH-302
clinical program.
Our initial supplies of glufosfamide were prepared by a subsidiary of Baxter International,
Inc. and were used to initiate some of our clinical trials. We subsequently relied on new contract
manufacturers for the manufacturing of glufosfamide API and drug product. If we seek a partner to
continue development of glufosfamide, we will be dependent on contract manufacturers to produce
additional API and drug product. If we are not successful, we may experience a significant delay in
our glufosfamide clinical development program.
We rely on contract manufacturers for the manufacturing of 2DG API and drug product. If we
seek a partner to continue development of 2DG, we will be dependent on contract manufacturers to
produce additional API and drug product. If we are not successful, we may experience problems in
seeking a partner or in meeting our obligations under a potential partnership to continue
development of 2DG.
We will need to enter into additional agreements for additional supplies of each of our
product candidates to complete clinical development and/or commercialize them. We cannot be certain
that we can do so on favorable terms, if at all. The products will need to satisfy all cGMP
manufacturing requirements, including passing specifications. Our inability to satisfy these
requirements could delay our clinical programs.
If any of our product candidates is approved by the FDA or other regulatory agencies for
commercial sale, we will need to have it manufactured in commercial quantities. We may not be able
to increase the manufacturing capacity for any of our product candidates in a timely or economic
manner successfully or at all. Significant scale-up of manufacturing may require additional
validation studies, which the FDA and other regulatory agencies must review and approve. If we are
unable to successfully increase the manufacturing capacity for a product candidate, the regulatory
approval or commercial launch of that product candidate may be delayed, or there may be a shortage
of supply which could limit our sales.
In addition, if the facility or the equipment in the facility that produces our product
candidates is significantly damaged or destroyed, or if the facility is located in another country
and trade or commerce with such country is interrupted, we may be unable to replace the
manufacturing capacity quickly or inexpensively. The inability to obtain manufacturing agreements,
the damage or destruction of a facility on which we rely for manufacturing or any other delays in
obtaining supply would delay or prevent us from completing our clinical trials and commercializing
our current product candidates.
We have no control over our manufacturers’ and suppliers’ compliance with manufacturing
regulations, and their failure to comply could result in an interruption in the supply of our
product candidates.
The facilities used by our contract manufacturers must undergo an inspection by the FDA for
compliance with current good manufacturing practice, or cGMP regulations, before the respective
product candidates can be approved. In the event these facilities
10
do not receive a satisfactory cGMP inspection for the manufacture of our product candidates,
we may need to fund additional modifications to our manufacturing process, conduct additional
validation studies, or find alternative manufacturing facilities, any of which would result in
significant cost to us as well as a delay of up to several years in obtaining approval for such
product candidate. In addition, our contract manufacturers, and any alternative contract
manufacturer we may utilize, will be subject to ongoing periodic inspection by the FDA and
corresponding state and foreign agencies for compliance with cGMP regulations, similar foreign
regulations and other regulatory standards. We do not have control over our contract manufacturers’
compliance with these regulations and standards. Any failure by our third-party manufacturers or
suppliers to comply with applicable regulations could result in sanctions being imposed on them
(including fines, injunctions and civil penalties), failure of regulatory authorities to grant
marketing approval of our product candidates, delays, suspension or withdrawal of approvals,
license revocation, seizures or recalls of product candidates or products, operating restrictions
and criminal prosecution.
We rely on third parties to conduct some of our clinical trials, and their failure to perform
their obligations in a timely or competent manner may delay development and commercialization of
our product candidates.
We use clinical research organizations to oversee our clinical trials. There are numerous
alternative sources to provide these services. However, we may face delays outside of our control
if these parties do not perform their obligations in a timely or competent fashion or if we are
forced to change service providers. This risk is heightened for our clinical trials conducted
outside of the United States, where it may be more difficult to ensure that clinical trials are
conducted in compliance with FDA requirements. Any third-party that we hire to conduct clinical
trials may also provide services to our competitors, which could compromise the performance of
their obligations to us. If we experience significant delays in the progress of our clinical trials
and in our plans to file NDAs, the commercial prospects for product candidates could be harmed and
our ability to generate product revenue would be delayed or prevented.
We may rely on strategic collaborators to market and sell our products.
We have no sales and marketing experience. We may contract with strategic collaborators to
sell and market our products, when and if approved. We may not be successful in entering into
collaborative arrangements with third parties for the sale and marketing of any products. Any
failure to enter into collaborative arrangements on favorable terms could delay or hinder our
ability to develop and commercialize our product candidates and could increase our costs of
development and commercialization. Dependence on collaborative arrangements will subject us to a
number of risks, including:
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we may not be able to control the amount or timing of resources that our
collaborators may devote to the product candidates;
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we may be required to relinquish important rights, including intellectual
property, marketing and distribution rights;
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we may have lower revenues than if we were to market and distribute such
products ourselves;
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should a collaborator fail to commercialize one of our product candidates
successfully, we may not receive future milestone payments or royalties;
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a collaborator could separately move forward with a competing product candidate
developed either independently or in collaboration with others, including our
competitors;
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our collaborators may experience financial difficulties;
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business combinations or significant changes in a collaborator’s business
strategy may also adversely affect a collaborator’s willingness or ability to complete
its obligations under any arrangement; and
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our collaborators may operate in countries where their operations could be
adversely affected by changes in the local regulatory environment or by political
unrest.
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Risks Related to Our Intellectual Property
2DG is a known compound that is not protected by patents on the composition of the molecule.
2DG is a known compound that is no longer eligible for patent protection on the composition of
the molecule. A patent of this nature, known as a compound per se patent, excludes others from
making, using or selling the patented compound, regardless of how or for what purpose the compound
is formulated or intended to be used. Consequently, this compound and certain of its uses are in
the public domain.
We have an issued U.S. patent for the use of orally administered 2DG for the treatment of
cancer at certain doses and administration schedules, and we have in-licensed two issued U.S.
patents that cover the treatment of certain cancers with 2DG in combination with other specific
anti-cancer agents. We also have applications related to the issued licensed patent that cover
other 2DG combination therapies, but we cannot be certain that any other patent application under
this license will be issued. Others may
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develop and market 2DG for the treatment of cancer, however, if they develop treatments using
dosing and administration schedules or combination therapies outside the scope of our patents or in
contravention of our patent rights.
Hypoxia Activated Prodrug technology is not a platform technology broadly protected by
patents, and others may be able to develop competitive drugs using this approach.
We have not issued patents or patent applications that would prevent others from taking
advantage of Hypoxia Activated Prodrug technology generally to discover and develop new therapies
for cancer or other diseases. Consequently, our competitors may seek to discover and develop
potential therapeutics that operate by mechanisms of action that are the same or similar to the
mechanisms of action of our HAP product candidates.
Metabolic Targeting by targeting the increased uptake of glucose and the increased reliance on
glycolysis as an energy source in cancer cells is not protected by patents, and others may be able
to develop competitive drugs using this approach.
We have not issued patents or patent applications that would prevent others from taking
advantage of targeting the increased uptake of glucose and the increased reliance of glycolysis as
an energy source in solid tumors to discover and develop new therapies for cancer or other
diseases. Consequently, our competitors may seek to discover and develop potential therapeutics
that operate by mechanisms of action that are the same or similar to the mechanisms of action of
our product candidates.
We are dependent on patents and proprietary technology, both our own and those licensed from
others. If we or our licensors fail to adequately protect this intellectual property or if we
otherwise do not have exclusivity for the marketing of our products, our ability to commercialize
products could suffer.
Our commercial success will depend in part on our ability and the ability of our licensors to
obtain and maintain patent protection sufficient to prevent others from marketing our product
candidates, as well as to successfully defend and enforce these patents against infringement and to
operate without infringing the proprietary rights of others. We will only be able to protect our
product candidates from unauthorized use by third parties to the extent that valid and enforceable
patents cover our product candidates or they are effectively protected by trade secrets. If our
patent applications do not result in issued patents, or if our patents, or those patents we have
licensed are found to be invalid, we will lose the ability to exclude others from making, using or
selling the inventions claimed therein. We have a limited number of patents and pending patent
applications.
The patent positions of pharmaceutical and biotechnology companies can be highly uncertain and
involve complex legal and factual questions. No consistent policy regarding the breadth of claims
allowed in biotechnology patents has emerged to date in the United States. The laws of many
countries may not protect intellectual property rights to the same extent as United States laws,
and those countries may lack adequate rules and procedures for defending our intellectual property
rights. Changes in either patent laws or in interpretations of patent laws in the United States and
other countries may diminish the value of our intellectual property. We do not know whether any of
our patent applications will result in the issuance of any patents and we cannot predict the
breadth of claims that may be allowed in our patent applications or in the patent applications we
license from others.
The degree of future protection for our proprietary rights is uncertain because legal means
afford only limited protection and may not adequately protect our rights or permit us to gain or
keep our competitive advantage. For example:
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we or our licensors might not have been the first to make the inventions covered
by each of our or our licensors’ pending patent applications and issued patents, and we
may have to participate in expensive and protracted interference proceedings to
determine priority of invention;
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we or our licensors might not have been the first to file patent applications
for these inventions;
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others may independently develop similar or alternative product candidates or
duplicate any of our or our licensors’ product candidates;
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our or our licensors’ pending patent applications may not result in issued
patents;
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our or our licensors’ issued patents may not provide a basis for commercially
viable products or may not provide us with any competitive advantages or may be
challenged by third parties;
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others may design around our or our licensors’ patent claims to produce
competitive products that fall outside the scope of our or our licensors’ patents;
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we may not develop or in-license additional patentable proprietary technologies
related to our product candidates; or
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the patents of others may prevent us from marketing one or more of our product
candidates for one or more indications that may be valuable to our business strategy.
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Moreover, an issued patent does not guarantee us the right to practice the patented technology
or commercialize the patented product. Third parties may have blocking patents that could be used
to prevent us from commercializing our patented products and
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practicing our patented technology. Our issued patents and those that may be issued in the
future may be challenged, invalidated or circumvented, which could limit our ability to prevent
competitors from marketing related product candidates or could limit the length of the term of
patent protection of our product candidates. In addition, the rights granted under any issued
patents may not provide us with proprietary protection or competitive advantages against
competitors with similar technology. Furthermore, our competitors may independently develop similar
technologies. Moreover, because of the extensive time required for development, testing and
regulatory review of a potential product, it is possible that, before any of our product candidates
can be commercialized, any related patent may expire or remain in force for only a short period
following commercialization, thereby reducing any advantage of the patent. For glufosfamide, the
major European counterparts to the U.S. patent expire in 2009 and the U.S. patent expires in 2014.
Patent term extension may not be available for these patents.
We rely on trade secrets and other forms of non-patent intellectual property protection. If we
are unable to protect our trade secrets, other companies may be able to compete more effectively
against us.
We rely on trade secrets to protect our technology, especially where we do not believe patent
protection is appropriate or obtainable. However, trade secrets are difficult to protect,
especially in the pharmaceutical industry, where much of the information about a product must be
made public during the regulatory approval process. Although we use reasonable efforts to protect
our trade secrets, our employees, consultants, contractors, outside scientific collaborators and
other advisors may unintentionally or willfully disclose our information to competitors. Enforcing
a claim that a third party illegally obtained and is using our trade secrets is expensive and time
consuming, and the outcome is unpredictable. In addition, courts outside the United States may be
less willing to or may not protect trade secrets. Moreover, our competitors may independently
develop equivalent knowledge, methods and know-how.
If we are sued for infringing intellectual property rights of third parties or if we are
forced to engage in an interference proceeding, it will be costly and time consuming, and an
unfavorable outcome in that litigation or interference would have a material adverse effect on our
business.
Our ability to commercialize our product candidates depends on our ability to develop,
manufacture, market and sell our product candidates without infringing the proprietary rights of
third parties. Numerous United States and foreign issued patents and pending patent applications,
which are owned by third parties, exist in the general field of cancer therapies or in fields that
otherwise may relate to our product candidates. We are also aware of a patent that claims certain
agents, including 2DG, to inhibit the import of glucose-6-phosphate into the endoplasmic reticulum
of a cell. We do not know whether administration of 2DG for our intended uses inhibits such import.
If it does, we would be required to license the patent or risk that a claim of infringement could
be made. If we are shown to infringe, we could be enjoined from use or sale of the claimed
invention if we are unable to prove that the patent is invalid. In addition, because patent
applications can take many years to issue, there may be currently pending applications, unknown to
us, which may later result in issued patents that our product candidates or any other compound that
we may develop, may infringe, or which may trigger an interference proceeding regarding one of our
owned or licensed patents or applications. There could also be existing patents of which we are not
aware that our product candidates may inadvertently infringe or which may become involved in an
interference proceeding.
The biotechnology and biopharmaceutical industries are characterized by the existence of a
large number of patents and frequent litigation based on allegations of patent infringement. For so
long as our product candidates are in clinical trials, we believe our clinical activities fall
within the scope of the exemptions provided by 35 U.S.C. Section 271(e) in the United States, which
exempts from patent infringement liability activities reasonably related to the development and
submission of information to the FDA. As our clinical investigational drugs progress toward
commercialization, the possibility of a patent infringement claim against us increases. While we
attempt to ensure that our active clinical investigational drugs and the methods we employ to
manufacture them, as well as the methods for their use we intend to promote, do not infringe other
parties’ patents and other proprietary rights. However, we cannot be certain they do not, and
competitors or other parties may assert that we infringe their proprietary rights in any event.
We may be exposed to future litigation based on claims that our product candidates, or the
methods we employ to manufacture them, infringe the intellectual property rights of others. Our
ability to manufacture and commercialize our product candidates may depend on our ability to
demonstrate that the manufacturing processes we employ and the use of our product candidates do not
infringe third-party patents. If third-party patents were found to cover our product candidates or
their use or manufacture, we could be required to pay damages or be enjoined and therefore unable
to commercialize our product candidates, unless we obtained a license. A license may not be
available to us on acceptable terms, if at all.
Risks Related To Our Industry
If our competitors are able to develop and market products that are more effective, safer or
more affordable than ours, or obtain marketing approval before we do, our commercial opportunities
may be limited
.
Competition in the biotechnology and pharmaceutical industries is intense and continues to
increase, particularly in the area of cancer treatment. Most major pharmaceutical companies and
many biotechnology companies are aggressively pursuing oncology development programs, including
traditional therapies and therapies with novel mechanisms of action. Our cancer product candidates
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face competition from established biotechnology and pharmaceutical companies, including
Sanofi-Aventis Group, Astrazeneca PLC, Genentech, Inc., Eli Lilly and Company and Pfizer, Inc. and
from generic pharmaceutical manufacturers. In particular, our drug candidates for pancreatic cancer
will compete with Gemzar, marketed by Eli Lilly and Company, doxorubicin, cisplatin, paclitaxel,
ifosfamide, and 5-flurouracil, or 5-FU, a generic product which is sold by many manufacturers. In
addition, several drugs marketed for different indications, such as Camptosar
®
,
marketed by Pfizer, Inc., Erbitux
®
, marketed by Imclone Systems Inc. and Bristol-Myers
Squibb Company, Taxotere
®
, marketed by the Sanofi-Aventis Group, Xeloda
®
,
marketed by Roche, Avastin
®
, marketed by Genentech, Inc., Nexavar
®
,
marketed by Onyx Pharmaceuticals, Inc. and Bayer AG, and Alimta
®
, marketed by Eli
Lilly and Company, are under investigation as possible combination therapies or monotherapy for
pancreatic, ovarian, small cell lung cancers and soft tissue sarcoma. Additionally OSI
Pharmaceuticals, Inc. and Genentech, Inc. market Tarceva
®
as a combination therapy with
gemcitabine for the first-line treatment of pancreatic cancer. In addition, a number of companies,
including Novacea, Inc. and Proacta Inc., have compounds in clinical trials that target the hypoxic
zones of tumors, as our TH-302 clinical product candidate is intended to do, and Sanofi-Aventis
recently completed a Phase 3 clinical trial on Tirapazamine, a hypoxically activated prodrug, and
while Sanofi-Aventis has released rights to the compound to the innovator SRI, another company may
pursue further clinical development of the compound.
We also face potential competition from academic institutions, government agencies and private
and public research institutions engaged in the discovery and development of drugs and therapies.
Many of our competitors have significantly greater financial resources and expertise in research
and development, preclinical testing, conducting clinical trials, obtaining regulatory approvals,
manufacturing, sales and marketing than we do. Smaller or early-stage companies may also prove to
be significant competitors, particularly through collaborative arrangements with large and
established pharmaceutical companies.
Our competitors may succeed in developing products that are more effective, have fewer side
effects and are safer or more affordable than our product candidates, which would render our
product candidates less competitive or noncompetitive. These competitors also compete with us to
recruit and retain qualified scientific and management personnel, establish clinical trial sites
and patient registration for clinical trials, as well as to acquire technologies and technology
licenses complementary to our programs or advantageous to our business. Moreover, competitors that
are able to achieve patent protection obtain regulatory approvals and commence commercial sales of
their products before we do, and competitors that have already done so, may enjoy a significant
competitive advantage.
There is a substantial risk of product liability claims in our business. If we do not obtain
sufficient liability insurance, a product liability claim could result in substantial liabilities.
Our business exposes us to significant potential product liability risks that are inherent in
the development, manufacturing and marketing of human therapeutic products. Regardless of merit or
eventual outcome, product liability claims may result in:
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delay or failure to complete our clinical trials;
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withdrawal of clinical trial participants;
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decreased demand for our product candidates;
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injury to our reputation;
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litigation costs;
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substantial monetary awards against us; and
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diversion of management or other resources from key aspects of our operations.
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If we succeed in marketing products, product liability claims could result in an FDA
investigation of the safety or efficacy of our products, our manufacturing processes and facilities
or our marketing programs. An FDA investigation could also potentially lead to a recall of our
products or more serious enforcement actions, or limitations on the indications, for which they may
be used, or suspension or withdrawal of approval.
We have product liability insurance that covers our clinical trials up to an $8 million annual
aggregate limit. We intend to expand our insurance coverage to include the sale of commercial
products if marketing approval is obtained for our product candidates or any other compound that we
may develop. However, insurance coverage is increasingly expensive. We may not be able to maintain
insurance coverage at a reasonable cost or at all, and the insurance coverage that we obtain may
not be adequate to cover potential claims or losses.
Even if we receive regulatory approval to market our product candidates, the market may not be
receptive to our product candidates upon their commercial introduction, which would negatively
affect our ability to achieve profitability.
Our product candidates may not gain market acceptance among physicians, patients, healthcare
payors and the medical community. The degree of market acceptance of any approved products will
depend on a number of factors, including:
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the effectiveness of the product;
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the prevalence and severity of any side effects;
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potential advantages or disadvantages over alternative treatments;
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relative convenience and ease of administration;
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the strength of marketing and distribution support;
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the price of the product, both in absolute terms and relative to alternative
treatments; and
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sufficient third-party coverage or reimbursement.
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If our product candidates receive regulatory approval but do not achieve an adequate level of
acceptance by physicians, healthcare payors and patients, we may not generate product revenues
sufficient to attain profitability.
If third-party payors do not adequately reimburse patients for any of our product candidates,
if approved for marketing, we may not be successful in selling them.
Our ability to commercialize any products successfully will depend in part on the extent to
which reimbursement will be available from governmental and other third-party payors, both in the
United States and in foreign markets. Even if we succeed in bringing one or more products to the
market, the amount reimbursed for our products may be insufficient to allow us to compete
effectively and could adversely affect our profitability.
Reimbursement by a governmental and other third-party payor may depend upon a number of
factors, including a governmental or other third-party payor’s determination that use of a product
is:
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a covered benefit under its health plan;
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safe, effective and medically necessary;
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appropriate for the specific patient;
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cost-effective; and
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neither experimental nor investigational.
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Obtaining reimbursement approval for a product from each third-party and governmental payor is
a time-consuming and costly process that could require us to provide supporting scientific,
clinical and cost-effectiveness data for the use of our products to each payor. We may not be able
to provide data sufficient to obtain reimbursement.
Eligibility for coverage does not imply that any drug product will be reimbursed in all cases
or at a rate that allows us to make a profit. Interim payments for new products, if applicable, may
also not be sufficient to cover our costs and may not become permanent. Reimbursement rates may
vary according to the use of the drug and the clinical setting in which it is used, may be based on
payments allowed for lower-cost drugs that are already reimbursed, may be incorporated into
existing payments for other products or services, and may reflect budgetary constraints and/or
Medicare or Medicaid data used to calculate these rates. Net prices for products also may be
reduced by mandatory discounts or rebates required by government health care programs or by any
future relaxation of laws that restrict imports of certain medical products from countries where
they may be sold at lower prices than in the United States.
The health care industry is experiencing a trend toward containing or reducing costs through
various means, including lowering reimbursement rates, limiting therapeutic class coverage and
negotiating reduced payment schedules with service providers for drug products. The Medicare
Prescription Drug, Improvement and Modernization Act of 2003, or MMA, became law in November 2003
and created a broader prescription drug benefit for Medicare beneficiaries. The MMA also contains
provisions intended to reduce or eliminate delays in the introduction of generic drug competition
at the end of patent or nonpatent market exclusivity. The impact of the MMA on drug prices and new
drug utilization over the next several years is unknown. The MMA also made adjustments to the
physician fee schedule and the measure by which prescription drugs are presently paid, changing
from Average Wholesale Price to Average Sales Price. The effects of these changes are unknown but
may include decreased utilization of new medicines in physician prescribing patterns, and further
pressure on drug company sponsors to provide discount programs and reimbursement support programs.
There have been, and we expect that there will continue to be, federal and state proposals to
constrain expenditures for medical products and services, which may affect reimbursement levels for
our future products. In addition, the Centers for Medicare and Medicaid Services frequently change
product descriptors, coverage policies, product and service codes, payment methodologies and
reimbursement values. Third-party payors often follow Medicare coverage policy and payment
limitations in setting their own reimbursement rates and may have sufficient market power to demand
significant price reductions.
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Foreign governments tend to impose strict price controls, which may adversely affect our
future profitability.
In some foreign countries, particularly in the European Union, prescription drug pricing is
subject to governmental control. In these countries, pricing negotiations with governmental
authorities can take considerable time after the receipt of marketing approval for a product. To
obtain reimbursement or pricing approval in some countries, we may be required to conduct a
clinical trial that compares the cost-effectiveness of our product candidate to other available
therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if
pricing is set at unsatisfactory levels, our profitability will be negatively affected.
We may incur significant costs complying with environmental laws and regulations, and failure
to comply with these laws and regulations could expose us to significant liabilities.
Our research and development activities use biological and hazardous materials that are
dangerous to human health and safety or the environment. We are subject to a variety of federal,
state and local laws and regulations governing the use, generation, manufacture, storage, handling
and disposal of these materials and wastes resulting from these materials. We are also subject to
regulation by the Occupational Safety and Health Administration, or OSHA, the California and
federal environmental protection agencies and to regulation under the Toxic Substances Control Act.
OSHA or the California or federal Environmental Protection Agency, or EPA, may adopt regulations
that may affect our research and development programs. We are unable to predict whether any agency
will adopt any regulations that could have a material adverse effect on our operations. We have
incurred, and will continue to incur, capital and operating expenditures and other costs in the
ordinary course of our business in complying with these laws and regulations.
Although we believe our safety procedures for handling and disposing of these materials comply
with federal, state and local laws and regulations, we cannot entirely eliminate the risk of
accidental injury or contamination from the use, storage, handling or disposal of hazardous
materials. In the event of contamination or injury, we could be held liable for any resulting
damages, and any liability could significantly exceed our insurance coverage.
We may not be able to conduct, or contract with others to conduct, animal testing in the
future, which could harm our research and development activities.
Certain laws and regulations relating to drug development require us to test our product
candidates on animals before initiating clinical trials involving humans. Animal testing activities
have been the subject of controversy and adverse publicity. Animal rights groups and other
organizations and individuals have attempted to stop animal testing activities by pressing for
legislation and regulation in these areas and by disrupting these activities through protests and
other means. To the extent the activities of these groups are successful, our research and
development activities may be interrupted or delayed.
Risks Related To Our Common Stock
We may not maintain the listing of our common stock on the NASDAQ Capital Market.
Our ability to raise additional capital may be dependent upon our stock being quoted on the
NASDAQ Capital Market. Previously, we had fallen out of compliance with continued listing
requirements because our common stock did not comply with the $1.00 minimum bid price requirement
for continued listing set forth in NASDAQ Marketplace Rule 4450(a)(5). To regain compliance,
effective August 20, 2008, we implemented a 1-for-6 reverse stock split of our common stock. Since
that date, our common stock has traded above the minimum $1.00 bid price for at least ten
consecutive business days. On September 5, 2008, the NASDAQ Stock Market notified us that we had
regained compliance with the minimum bid price requirements and no further action was required on
our part. Even though we regained compliance with the minimum bid price requirement, we cannot
assure you that we will be able to maintain compliance with the minimum bid price requirement in
the future, and our failure to do so could result in the delisting of our shares from the NASDAQ
Capital Market.
The reverse stock split may have an effect on the trading market for our shares.
The reduction in the number of issued and outstanding shares occasioned by the reverse stock
split resulted in an increase in the market price of our common stock, although such price increase
is not necessarily in proportion to the ratio of the reverse stock split. The trading price of our
common stock depends on many factors, many which are beyond our control. A higher stock price may
increase investor interest and reduce resistance of brokerage firms to recommend the purchase of
our common stock. On the other hand, to the extent that negative investor sentiment regarding our
common stock is not based on our underlying business fundamentals, the reverse stock split may not
overcome such sentiment enough to increase our stock price. In addition, the liquidity of our
common stock may be adversely affected by the reduced number of shares outstanding after the
reverse stock split, and the reverse stock split will increase the number of stockholders who own
“odd lots,” which consist of blocks of fewer than 100 shares. Stockholders who hold “odd lots” may
be required to pay higher brokerage commissions when they sell their shares and may have greater
difficulty in making sales.
16
A significant number of shares of our common stock are subject to issuance upon
exercise of outstanding warrants, which upon such exercise would result in dilution to our
security holders.
As of August 31, 2008, we have issued outstanding warrants to purchase an aggregate of
3,588,221 shares of our common stock, at an exercise price of $2.34 per share. The
exercise price and/or the number of shares of common stock issuable upon exercise of the
warrants may be adjusted in certain circumstances, including certain issuances of
securities at a price equal to less than the then current exercise price, subdivisions and
stock splits, stock dividends, combinations, reorganizations, reclassifications,
consolidations, mergers or sales of properties and assets and upon the issuance of certain
assets or securities to holders of our common stock, as applicable. Although we cannot
determine at this time which of these warrants will ultimately be exercised, it is
reasonable to assume that such warrants will be exercised only if the exercise price is
below the market price of our common stock. To the extent the warrants are exercised,
additional shares of our common stock will be issued that will be eligible for resale in
the public market, which will result in dilution to our security holders. The issuance of
additional securities could also have an adverse effect on the market price of our common
stock.
The price of our common stock has been and may continue to be volatile.
The stock markets in general, the markets for biotechnology stocks and, in particular, the
stock price of our common stock, have experienced extreme volatility.
Price declines in our common stock could result from general market and economic conditions
and a variety of other factors, including:
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adverse results or delays in our clinical trials;
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•
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announcements of FDA non-approval of our product candidates, or delays in the
FDA or other foreign regulatory agency review process;
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•
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adverse actions taken by regulatory agencies with respect to our product
candidates, clinical trials, manufacturing processes or sales and marketing activities;
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•
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announcements of technological innovations, patents or new products by our
competitors;
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•
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regulatory developments in the United States and foreign countries;
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•
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any lawsuit involving us or our product candidates;
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•
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announcements concerning our competitors, or the biotechnology or pharmaceutical
industries in general;
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•
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developments concerning any strategic alliances or acquisitions we may enter
into;
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•
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actual or anticipated variations in our operating results;
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•
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changes in recommendations by securities analysts or lack of analyst coverage;
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•
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deviations in our operating results from the estimates of analysts;
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•
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sales of our common stock by our executive officers, directors and five percent
stockholders or sales of substantial amounts of common stock;
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•
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loss of any of our key scientific or management personnel.
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In the past, following periods of volatility in the market price of a particular company’s
securities, litigation has often been brought against that company. On July 5 and July 18, 2007,
purported shareholder class action complaints alleging violations of the federal securities laws
were filed against the Company, its Chief Executive Officer Harold E. Selick and its former Chief
Financial Officer Janet I. Swearson in the United States District Court for the Southern District
of New York. On September 14, 2007, these lawsuits, which have been consolidated by the Court into
a single proceeding, were ordered transferred to the United States District Court for the Northern
District of California. In a consolidated amended complaint filed on January 15, 2008, Plaintiffs,
on behalf of an alleged class of purchasers of our common stock from the date of our initial public
offering of securities on February 4, 2005 through July 14, 2006, purported to allege claims
arising under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as amended, the
Securities Act, and under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as
amended, the Exchange Act, generally alleging that the defendants violated the federal securities
laws by, among other things, making material misstatements or omissions concerning our Phase II and
Phase III clinical trials of Lonidamine (TH-070). On July 11, 2008, the Court granted Defendants’
motions to dismiss the consolidated amended complaint but afforded Plaintiffs leave to file a
further amended complaint. The deadline for plaintiffs to file an amended complaint has not yet
expired. We believe that Plaintiffs’ claims are without merit and intend to defend against the
actions vigorously. Due to
the early stage of these actions, we cannot reasonably predict the outcome of this matter at this
time. Although we believe our directors and
17
officer’s insurance coverage is adequate, if our defense of the suit is unsuccessful, there
can be no assurances that the insurance will substantially cover any resulting claim or that the
premiums for directors and officers insurance will not be substantially higher in the future.
If our officers, directors and largest stockholders choose to act together, they may be able
to control our management and operations, acting in their best interests and not necessarily those
of other stockholders.
As of August 31, 2008, our officers, directors and holders of 5% or more of our outstanding
common stock beneficially own approximately 93.1% of our common stock. As a result, these
stockholders, acting together, will be able to significantly influence all matters requiring
approval by our stockholders, including the election of directors and the approval of mergers or
other business combination transactions. The interests of this group of stockholders may not always
coincide with the interests of other stockholders, and they may act in a manner that advances their
best interests and not necessarily those of other stockholders.
Our certificate of incorporation, our bylaws and Delaware law contain provisions that could
discourage another company from acquiring us and may prevent attempts by our stockholders to
replace or remove our current management.
Provisions of Delaware law, where we are incorporated, our certificate of incorporation and
bylaws may discourage, delay or prevent a merger or acquisition that stockholders may consider
favorable, including transactions in which you might otherwise receive a premium for your shares.
In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace
or remove our current management by making it more difficult for stockholders to replace or remove
our board of directors. These provisions include:
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authorizing the issuance of “blank check” preferred stock without any need for
action by stockholders;
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•
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providing for a classified board of directors with staggered terms;
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•
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requiring supermajority stockholder voting to effect certain amendments to our
certificate of incorporation and bylaws;
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•
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eliminating the ability of stockholders to call special meetings of
stockholders;
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•
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prohibiting stockholder action by written consent; and
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•
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establishing advance notice requirements for nominations for election to the
board of directors or for proposing matters that can be acted on by stockholders at
stockholder meetings.
|
In addition, in August 2006, our board of directors adopted a preferred shares rights
agreement, the provisions of which could make it more difficult for a potential acquirer to
consummate a transaction without the approval of our board of directors.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents we incorporate by reference in this prospectus contains
forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E
of the Exchange Act. We may, in some cases, use words such as “project,” “believe,” “anticipate,”
“plan,” “expect,” “estimate,” “intend,” “should,” “would,” “could,” “potentially,” “will,” or
“may,” or other words that convey uncertainty of future events or outcomes to identify these
forward-looking statements. Forward-looking statements may include statements about:
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our ability to commence, and the timing of, clinical trials
for our TH-302, glufosfamide, and 2DG development programs;
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•
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the completion and success of any clinical trials that we
commence;
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•
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the timing of results of our clinical trials;
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•
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the costs and timing of obtaining drug supply for our
pre-clinical and clinical activities;
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•
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our receipt of regulatory approvals;
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•
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our ability to establish and maintain intellectual property
rights in our product candidates;
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•
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uncertainties associated with obtaining and enforcing patents
and other intellectual property rights;
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•
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whether any product candidates that we are able to
commercialize are safer or more effective than other marketed
products, treatments or therapies;
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•
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our research and development activities, including
development of new product candidates, and projected expenditures;
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18
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•
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our ability to complete preclinical and clinical testing
successfully for new product candidates that we may develop or
license;
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•
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our ability to have manufactured sufficient supplies of
active pharmaceutical ingredient, or API, and drug product for
clinical testing and commercialization;
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•
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our ability to retain and hire necessary employees and
appropriately staff our development programs;
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•
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our cash needs; and
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•
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our financial performance.
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There are a number of important factors that could cause actual results to differ materially
from the results anticipated by these forward-looking statements. These important factors include
those that we discuss in this prospectus under “Risk Factors” beginning on page 4 of this
prospectus, as well those that we discuss in the documents we incorporate by reference in this
prospectus. You should read these factors and the other cautionary statements made in this
prospectus and in the documents we incorporate by reference into this prospectus as being
applicable to all related forward-looking statements wherever they appear in this prospectus or the
documents we incorporate by reference into this prospectus. If one or more of these factors
materialize, or if any underlying assumptions prove incorrect, our actual results, performance or
achievements may vary materially from any future results, performance or achievements expressed or
implied by these forward-looking statements. We undertake no obligation to publicly update any
forward-looking statements, whether as a result of new information, future events or otherwise,
except as required by law. Unless the context requires otherwise, in this prospectus the terms
“Threshold,” “Threshold Pharmaceuticals,” “we,” “us” and “our” refer to Threshold Pharmaceuticals,
Inc. Threshold Pharmaceuticals, Inc., our logo and Metabolic Targeting are our trademarks. Other
trademarks, trade names and service marks used in this prospectus are the property of their
respective owners.
USE OF PROCEEDS
We will not receive any proceeds from the sales by the selling stockholders of the shares
covered by this prospectus. The selling stockholders identified in this prospectus will receive the
proceeds from such sale of shares. If the selling stockholders exercise, on a cash basis, all of
the warrants underlying the shares being registered, we will receive approximately $8,396,437. We
will use such funds, if any, for working capital and general corporate purposes. We will not
receive any proceeds from the exercise of warrants on a cashless basis.
SELLING STOCKHOLDERS
On July 9, 2008, we entered into a Securities Purchase Agreement with the selling
stockholders, pursuant to which we sold in a private placement transaction an aggregate of
8,970,574 shares of our common stock and issued warrants to purchase up to 3,588,221 shares of our
common stock. This prospectus covers the sale or other disposition by the selling stockholders or
their transferees of up to the total number of shares of common stock issued to those selling
stockholders pursuant to the Securities Purchase Agreement plus the total number of shares of
common stock issuable upon exercise of the warrants issued to those selling stockholders pursuant
to the Securities Purchase Agreement. Throughout this prospectus, when we refer to the shares of
our common stock being registered on behalf of the selling stockholders, we are referring to the
shares and the shares underlying the warrants issued to the selling stockholders under the
Securities Purchase Agreement, and when we refer to the selling stockholders in this prospectus, we
are referring to the purchasers under the Securities Purchase Agreement.
The warrants issued to the purchasers in the private placement became exercisable on
August 29, 2008 at an exercise price of $2.34 per share and will expire on August 29, 2013. The
exercise price and/or the number of shares of common stock issuable upon exercise of the warrants
may be adjusted in certain circumstances, including certain issuances of securities at a price
equal to less than the then current exercise price, subdivisions and stock splits, stock dividends,
combinations, reorganizations, reclassifications, consolidations, mergers or sales of properties
and assets and upon the issuance of certain assets or securities to holders of our common stock, as
applicable.
We are registering the above-referenced shares to permit each of the selling stockholders and
their transferees, pledgees or other successors-in-interest that receive their shares after the
date of this prospectus to resell or otherwise dispose of the shares in the manner contemplated
under the “Plan of Distribution.”
The following table sets forth the name of each selling stockholder, the number of shares
owned by each of the respective selling stockholders, the number of shares that may be offered
under this prospectus and the number of shares of our common stock owned by the selling
stockholders assuming all of the shares covered hereby are sold. The number of shares in the column
“Number of Shares Being Offered” represents all of the shares that a selling stockholder may offer
under this prospectus, and assumes the cash exercise of all the warrants for common stock. The
selling stockholders may sell some, all or none of their shares. We do not know how long the
selling stockholders will hold the shares before selling them, and we currently have no agreements,
arrangements or
19
understandings with the selling stockholders regarding the sale or other disposition of any of
the shares. We also do not know if the selling stockholders will exercise any warrants. The
shares covered hereby may be offered from time to time by the selling stockholders.
The information set forth below is based upon information obtained from the selling
stockholders, information in our possession regarding the issuance of shares of common stock to the
selling stockholders in connection with the private placement transaction and information filed by
the selling stockholders with the Securities and Exchange Commission. The percentages of shares
owned after the offering are based on 18,802,264 shares of our common stock outstanding as of
August 29, 2008, including the shares of common stock issued in the private placement transaction
and the shares of common stock issuable upon the cash exercise of all of the warrants issued in the
private placement.
Beneficial ownership is determined in accordance with Rule 13d-3(d) promulgated by the
Securities and Exchange Commission under the Exchange Act, and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under such rule, beneficial ownership
includes any shares as to which the selling stockholders has sole or shared voting power or
investment power and also any shares, which the selling stockholders has the right to acquire
within 60 days. The actual number of shares of common stock issuable upon the exercise of the
warrants is subject to adjustment and could be materially less or more than the number estimated in
the table. However, the selling stockholders have contractually agreed to restrict their ability to
exercise their warrants and receive shares of our common stock in the event that the number of
shares of common stock held by them in the aggregate and their affiliates after such exercise would
exceed 9.9% of the then issued and outstanding shares of common stock as determined in accordance
with Section 13(d) of the Exchange Act. Accordingly, the number of shares of common stock set
forth in the table for the selling stockholders may exceed the number of shares of common stock
that the selling stockholders could own beneficially at any given time through their ownership of
shares of common stock and warrants.
Except as noted in the footnotes to the table below, the selling stockholders have not, within
the past three years, had any position, office or other material relationship with us. In
addition, except as set forth below, no selling stockholder is a broker-dealer or affiliated with a
broker-dealer.
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Shares of
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|
|
|
Common
|
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|
|
|
|
|
Stock
|
|
Number of Shares
|
|
|
|
|
|
Owned
|
|
being Offered
|
|
Shares Owned After
|
|
|
|
Prior to
|
|
|
|
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|
Warrant
|
|
Offering
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Name of Beneficial Owner
|
|
Offering (1)
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Shares
|
|
Shares
|
|
Number
|
|
Percent
|
|
Three Arch Associates III, L.P.
(2)
|
|
|
90,771
|
|
|
|
50,019
|
|
|
|
20,007
|
|
|
|
20,745
|
|
|
|
*
|
|
|
Three Arch Partners III, L.P.
(2)
|
|
|
1,688,476
|
|
|
|
930,372
|
|
|
|
372,149
|
|
|
|
385,955
|
|
|
|
2.1
|
%
|
|
HealthCare Ventures VIII, L.P.
(3)
|
|
|
2,058,823
|
|
|
|
1,470,588
|
|
|
|
588,235
|
|
|
|
0
|
|
|
|
*
|
|
|
Alta BioPharma Partners III, L.P.
(4)
|
|
|
1,604,233
|
|
|
|
1,010,201
|
|
|
|
404,080
|
|
|
|
189,952
|
|
|
|
1.0
|
%
|
|
Alta BioPharma Partners III, GmbH & Co.
Beteilgungs KG
(4)
|
|
|
107,738
|
|
|
|
67,844
|
|
|
|
27,137
|
|
|
|
12,757
|
|
|
|
*
|
|
|
Alta Embarcadero BioPharma Partners III, LLC
(4)
|
|
|
39,534
|
|
|
|
24,895
|
|
|
|
9,958
|
|
|
|
4,681
|
|
|
|
*
|
|
|
V2M Life Sciences Fund, LP
(5)
|
|
|
205,881
|
|
|
|
147,058
|
|
|
|
58,823
|
|
|
|
0
|
|
|
|
*
|
|
|
Stewart M. Kroll
(6)
|
|
|
38,330
|
|
|
|
12,254
|
|
|
|
4,902
|
|
|
|
21,174
|
|
|
|
*
|
|
|
John G. Curd, M.D.
(7)
|
|
|
63,478
|
|
|
|
24,509
|
|
|
|
9,804
|
|
|
|
29,165
|
|
|
|
*
|
|
|
Tang Capital Partners, LP
(8)
|
|
|
1,748,225
|
|
|
|
735,294
|
|
|
|
294,117
|
|
|
|
718,814
|
|
|
|
3.8
|
%
|
|
Harold E. Selick, Ph.D.
(9)
|
|
|
301,177
|
|
|
|
49,019
|
|
|
|
19,607
|
|
|
|
232,551
|
|
|
|
1.2
|
%
|
|
Mark D. Matteucci, Ph.D.
(10)
|
|
|
325,351
|
|
|
|
159,313
|
|
|
|
63,725
|
|
|
|
102,313
|
|
|
|
*
|
|
|
Baker/Tisch Investments, L.P.
(11)
|
|
|
8,279
|
|
|
|
5,914
|
|
|
|
2,365
|
|
|
|
0
|
|
|
|
*
|
|
|
Baker Bros. Investments II, L.P.
(11)
|
|
|
5,190
|
|
|
|
1,576
|
|
|
|
630
|
|
|
|
2,984
|
|
|
|
*
|
|
|
667, L.P.
(11)
|
|
|
383,812
|
|
|
|
206,533
|
|
|
|
82,613
|
|
|
|
94,666
|
|
|
|
*
|
|
|
Baker Brothers Life Sciences, L.P.
(11)
|
|
|
1,510,545
|
|
|
|
885,030
|
|
|
|
354,012
|
|
|
|
271,503
|
|
|
|
1.4
|
%
|
|
14159, L.P.
(11)
|
|
|
47,864
|
|
|
|
28,395
|
|
|
|
11,358
|
|
|
|
8,111
|
|
|
|
*
|
|
|
Capital Ventures International
(12)
|
|
|
274,509
|
|
|
|
196,078
|
|
|
|
78,431
|
|
|
|
0
|
|
|
|
*
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of
|
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
|
|
Stock
|
|
Number of Shares
|
|
|
|
|
|
Owned
|
|
being Offered
|
|
Shares Owned After
|
|
|
|
Prior to
|
|
|
|
|
|
Warrant
|
|
Offering
|
|
Name of Beneficial Owner
|
|
Offering (1)
|
|
Shares
|
|
Shares
|
|
Number
|
|
Percent
|
|
David E. Sweet
(13)
|
|
|
24,731
|
|
|
|
14,662
|
|
|
|
5,864
|
|
|
|
4,205
|
|
|
|
*
|
|
|
David L. Anderson
(14)
|
|
|
67,193
|
|
|
|
41,933
|
|
|
|
16,773
|
|
|
|
8,487
|
|
|
|
*
|
|
|
William H. Younger, Jr.
(15)
|
|
|
84,046
|
|
|
|
49,018
|
|
|
|
19,607
|
|
|
|
15,421
|
|
|
|
*
|
|
|
Diane J. Naar
(16)
|
|
|
2,058
|
|
|
|
1,470
|
|
|
|
588
|
|
|
|
0
|
|
|
|
*
|
|
|
Yu-Ying Chen
(17)
|
|
|
4,047
|
|
|
|
2,891
|
|
|
|
1,156
|
|
|
|
0
|
|
|
|
*
|
|
|
Robert Yin
(18)
|
|
|
2,391
|
|
|
|
1,470
|
|
|
|
588
|
|
|
|
333
|
|
|
|
*
|
|
|
Sutter Hill Ventures, a California Limited Partnership
(19)
|
|
|
3,414,969
|
|
|
|
2,199,302
|
|
|
|
879,720
|
|
|
|
335,947
|
|
|
|
1.8
|
%
|
|
Yovest, L.P
(20)
|
|
|
78,757
|
|
|
|
56,255
|
|
|
|
22,502
|
|
|
|
0
|
|
|
|
*
|
|
|
Gregory P. Sands and Sarah J.D. Sands as Trustees of
Gregory P. and
Sarah J.D. Sands Trust Agreement
Dated 2/24/99
(21)
|
|
|
68,588
|
|
|
|
43,986
|
|
|
|
17,594
|
|
|
|
7,007
|
|
|
|
*
|
|
|
Patricia Tom
(22)
|
|
|
4,833
|
|
|
|
2,941
|
|
|
|
1,176
|
|
|
|
716
|
|
|
|
*
|
|
|
Andrew T. Sheehan and Nicole J. Sheehan as Trustees of
Sheehan 2003
Trust
(23)
|
|
|
41,053
|
|
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29,324
|
|
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11,729
|
|
|
|
0
|
|
|
|
*
|
|
|
Saunder Holdings, L.P.
(24)
|
|
|
46,966
|
|
|
|
27,110
|
|
|
|
10,844
|
|
|
|
9,012
|
|
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|
*
|
|
|
Tench Coxe and Simone Otus Coxe, Co-Trustees of The
Coxe Revocable
Trust U/A/D 4/23/9
(25)
|
|
|
448,000
|
|
|
|
273,593
|
|
|
|
109,437
|
|
|
|
64,970
|
|
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|
*
|
|
|
Tallack Partners, LP
(26)
|
|
|
44,344
|
|
|
|
29,324
|
|
|
|
11,729
|
|
|
|
3,291
|
|
|
|
*
|
|
|
James N. White and Patricia A. O’ Brien as Trustees of
the White
Family Trust U/A/D 4/3/97
(27)
|
|
|
113,174
|
|
|
|
73,310
|
|
|
|
29,324
|
|
|
|
10,540
|
|
|
|
*
|
|
|
Jeffrey W. Bird and Christina R. Bird as Trustees of
Jeffery W. and
Christina R. Bird Trust Agreement
Dated 10/31/00
(28)
|
|
|
100,798
|
|
|
|
58,648
|
|
|
|
23,459
|
|
|
|
18,691
|
|
|
|
*
|
|
|
G. Leonard Baker, Jr. and Mary Anne Baker,
Co-Trustees of the Baker
Revocable Trust U/A/D 2/3/03
(29)
|
|
|
68,672
|
|
|
|
35,936
|
|
|
|
14,374
|
|
|
|
18,362
|
|
|
|
*
|
|
|
Joseph Klein III, Trustee Joseph Klein III 5% Charitable
Remainder
Trust
(30)
|
|
|
34,313
|
|
|
|
24,509
|
|
|
|
9,804
|
|
|
|
0
|
|
|
|
*
|
|
|
|
|
|
|
*
|
|
Less than 1%.
|
|
|
|
(1)
|
|
The number of shares presented in this table as owned prior to this offering includes all
shares of common stock issuable upon exercise of the warrants issued in private placement of our
common stock, which closed on August 29, 2008, as evidenced by the warrant shares indicated across
from each stockholder in the column “Warrant Shares.”
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(2)
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The address is 3200 Alpine Rd., Portola Valley, CA 94028. Wilfred Jaeger, as Managing Member
of Three Arch Management III, LLC, the general partner of the selling stockholder, has voting and
investment control over these securities.
|
|
|
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(3)
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The address is 44 Nassau Street, Princeton, NJ 08542. The general partner of the selling
stockholder is HealthCare Partners VIII, L.P. (“HCP VIII), and the general partner of HCP VIII is
HealthCare Partners VIII, LLC (“HCP VIII LLC”). James H. Cavanaugh, Ph.D., Christopher Mirabelli,
Ph.D., Harold R. Werner, John W. Littlechild and Augustine Lawlor are the managing directors of
HCP VIII LLC. Each of HCP VIII, HCP VIII LLC, Dr. Cavanaugh, Dr. Mirabelli, Mr. Werner,
Mr. Littlechild and Augustine Lawlor share the power to dispose of or direct the disposition of the
shares held by the selling stockholder.
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|
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(4)
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The address is One Embarcadero Center Suite 3700, San Francisco CA 94111. Jean Deleade, Alix
Marduel, Ed Penhoet, Ed Hurwitz and Farah Chamsi of Alta BioPharma Management III LLC, have voting
and investment control over these securities.
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(5)
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The address is 121 Mount Vernon St., Boston, MA 02108. Dennis McCoy and Misha Petkevich of
Bladerock Capital, the general partner of the selling stockholder, have voting and investment
control over these securities.
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(6)
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Mr. Kroll is our Vice President of BioStatistics and Clinical Operations. The address is c/o
Threshold Pharmaceuticals, Inc., 1300 Seaport Boulevard, Suite 500, Redwood City, CA 94063.
Includes 14,084 shares issuable upon the exercise of outstanding options prior to October 31, 2008.
Of the outstanding shares, 190 shares are subject to forfeiture to our company.
|
21
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(7)
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|
Dr. Curd is our President and Chief Medical Officer. The address is c/o Threshold
Pharmaceuticals, Inc., 1300 Seaport Boulevard, Suite 500, Redwood City, CA 94063. Includes 23,748
shares issuable upon the exercise of outstanding options prior to October 31, 2008.
|
|
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(8)
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The address is 4401 Eastgate Mall, San Diego, CA 92121. Kevin C. Tang, the manager of Tang
Capital Management LLC, the general partner of the selling stockholder, has voting and investment
control over these securities. Includes 49,515 shares of common stock owned by Mr. Tang as Trustee
of the Tang Family Trust and as Trustee of the Tang Advisors, LLC Profit Sharing Plan in which Mr.
Tang is a participant. Also includes 4,716 shares of common stock held in an IRA owned by Mr.
Tang.
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(9)
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Dr. Selick is our Chief Executive Officer. The address is c/o Threshold Pharmaceuticals,
Inc., 1300 Seaport Boulevard, Suite 500, Redwood City, CA 94063. Includes 39,058 shares issuable
upon the exercise of outstanding options prior to October 31, 2008.
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(10)
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Dr. Matteucci is our Senior Vice President, Discovery Research. The address is c/o Threshold
Pharmaceuticals, Inc., 1300 Seaport Boulevard, Suite 500, Redwood City, CA 94063. Includes 14,319
shares issuable upon the exercise of outstanding options prior to October 31, 2008.
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(11)
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The address is 667 Madison Avenue, 21st Floor, New York, NY 10065. Felix J. Baker and
Julian C. Baker have voting and investment control over these securities.
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(12)
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Heights Capital Management, Inc., the authorized agent of Capital Ventures International
(“CVI”), has discretionary authority to vote and dispose of the shares held by CVI and may be
deemed to be the beneficial owner of these shares. Martin Kobinger, in his capacity as Investment
Manager of Heights Capital Management, Inc., may also be deemed to have investment discretion and
voting powers over the shares held by CVI. Mr. Kobinger disclaims any such beneficial ownership of
the shares. Heights Capital Management, Inc. is an affiliate of Susquehanna Investment Group, a
registered broker-dealer.
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(13)
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Includes securities held by Wells Fargo Bank, N.A FBO SHV Profit Sharing Plan FBO David E.
Sweet (Rollover). Does not include 1,528 shares held by Mr. Sweet, 774 shares held in a trust for
Mr. Sweet’s benefit or any securities for which Mr. Sweet may be deemed to have beneficial
ownership due to his role with Sutter Hill Ventures. Mr. Sweet is a managing director of the
general partner of Sutter Hill Ventures. Wells Fargo Bank, N.A. is directed by any authorized
signer for the SHV Profit Sharing Plan and disclaims voting and investment control over these
securities and any beneficial ownership of the securities. Wells Fargo bank, N.A., is affiliated
to a number of registered broker-dealers.
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(14)
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Includes securities held by Wells Fargo Bank, N.A FBO SHV Profit Sharing Plan FBO David L.
Anderson. Does not include 6,837 shares held in a trust for Mr. Anderson’s benefit or any
securities for which Mr. Anderson may be deemed to have beneficial ownership due to his role with
Sutter Hill Ventures. Mr. Anderson is a managing director of the general partner of Sutter Hill
Ventures. Wells Fargo Bank, N.A. is directed by any authorized signer for the SHV Profit Sharing
Plan and disclaims voting and investment control over these securities and any beneficial ownership
of the securities. Wells Fargo bank, N.A., is affiliated to a number of registered broker-dealers.
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(15)
|
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Includes securities held by Wells Fargo Bank, N.A FBO SHV Profit Sharing Plan FBO William H.
Younger, Jr. Does not include 21,507 shares held in a trust for Mr. Younger’s benefit or any
securities for which Mr. Younger may be deemed to have beneficial ownership due to his role with
Sutter Hill Ventures. Mr. Younger is a managing director of the general partner of Sutter Hill
Ventures. Wells Fargo Bank, N.A. is directed by any authorized signer for the SHV Profit Sharing
Plan and disclaims voting and investment control over these securities and any beneficial ownership
of the securities. Wells Fargo bank, N.A., is affiliated to a number of registered broker-dealers.
|
|
|
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(16)
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|
Includes securities held by Wells Fargo Bank, N.A FBO SHV Profit Sharing Plan FBO Diane J.
Naar. The SHV Profit Sharing Plan is affiliated with Sutter Hill Ventures. Wells Fargo Bank, N.A.
is directed by any authorized signer for the SHV Profit Sharing Plan and disclaims voting and
investment control over these securities and any beneficial ownership of the securities. Wells
Fargo bank, N.A., is affiliated to a number of registered broker-dealers.
|
|
|
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(17)
|
|
Includes securities held by Wells Fargo Bank, N.A FBO SHV Profit Sharing Plan FBO Yu-Ying
Chen. The SHV Profit Sharing Plan is affiliated with Sutter Hill Ventures. Wells Fargo Bank, N.A.
is directed by any authorized signer for the SHV Profit Sharing Plan and disclaims voting and
investment control over these securities and any beneficial ownership of the securities. Wells
Fargo bank, N.A., is affiliated to a number of registered broker-dealers.
|
|
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(18)
|
|
Includes securities held by Wells Fargo Bank, N.A FBO SHV Profit Sharing Plan FBO Robert Yin.
The SHV Profit Sharing Plan is affiliated with Sutter Hill Ventures. Wells Fargo Bank, N.A. is
directed by any authorized signer for the SHV Profit Sharing Plan and disclaims voting and
investment control over these securities and any beneficial ownership of the securities. Wells
Fargo bank, N.A., is affiliated to a number of registered broker-dealers.
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(19)
|
|
The address is 755 Page Mill Road, Suite A-200, Palo Alto, CA 94304. The managing directors
of the general partner of the selling stockholder have voting and investment control over these
securities. Includes 10,028 shares held by Sutter Hill Entrepreneurs Fund QP LP and 3,960 shares
held by Sutter Hill Entrepreneurs Fund AI LP. Does not include shares beneficially owned by the
|
22
|
|
|
|
|
|
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managing directors of the general partner of the selling stockholder or shares held for the benefit
of certain participants in the Sutter Hill Ventures Profit Sharing Plan.
|
|
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(20)
|
|
William H. Younger, Jr., Trustee of the Younger Living Trust U/A/D 1/20/95, the general
partner of the selling stockholder and a managing director of the general partner of Sutter Hill
Ventures, has voting and investment control over these securities. Each of David L. Anderson, G.
Leonard Baker, Jr., Jeffrey W. Bird, Tench Coxe, James C. Gaither, Gregory P. Sands, Andrew T.
Sheehan, David E. Sweet, James N. White and Robert Yin have power of attorney to act on behalf of
Mr. Younger with respect to these securities.
|
|
|
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(21)
|
|
Gregory P. Sands and Sarah J.D. Sands, as Trustees, have voting and investment control over
these securities. Includes 3,291 shares held by Mr. Sands and 4,014 shares held in a charitable
remainder unitrust of which Mr. Sands is the trustee. Mr. Sands disclaims beneficial ownership in
the shares held by each trust except as to Mr. Sands’ pecuniary interest therein. Mr. Sands is a
managing director of the general partner of Sutter Hill Ventures. Each of David L. Anderson, G.
Leonard Baker, Jr., Jeffrey W. Bird, Tench Coxe, James C. Gaither, Gregory P. Sands, Andrew T.
Sheehan, David E. Sweet, James N. White and Robert Yin have power of attorney to act on behalf of
Mr. Sands with respect to these securities.
|
|
|
|
(22)
|
|
Each of David L. Anderson, G. Leonard Baker, Jr., Jeffrey W. Bird, Tench Coxe, James C.
Gaither, Gregory P. Sands, Andrew T. Sheehan, David E. Sweet, James N. White and Robert Yin have
power of attorney to act on behalf of Ms. Tom with respect to these securities.
|
|
|
|
(23)
|
|
Andrew T. Sheehan and Nicole J. Sheehan, as Trustees, have voting and investment control over
these securities. Mr. Sheehan disclaims beneficial ownership in these securities except as to his
pecuniary interest therein. Mr. Sheehan is a managing director of the general partner of Sutter
Hill Ventures. Each of David L. Anderson, G. Leonard Baker, Jr., Jeffrey W. Bird, Tench Coxe,
James C. Gaither, Gregory P. Sands, Andrew T. Sheehan, David E. Sweet, James N. White and Robert
Yin have power of attorney to act on behalf of Mr. Sheehan with respect to these securities.
|
|
|
|
(24)
|
|
G. Leonard Baker, Jr., and Mary Anne Baker, as general partners of the selling stockholder,
have voting and investment control over these securities. Mr. Baker is a managing director of the
general partner of Sutter Hill Ventures. Mr. Baker disclaims beneficial ownership in these
securities except as to his pecuniary interest therein. Does not include 3,840 shares held by Mr.
Baker.
|
|
|
|
(25)
|
|
Tench Coxe and Simone Otus Coxe, as Co-Trustees, have voting and investment control over
these securities. Mr. Coxe is a managing director of the general partner of Sutter Hill Ventures.
Mr. Coxe disclaims beneficial ownership in these securities except as to his pecuniary interest
therein. Does not include securities beneficially owned by Mr. Coxe. Each of David L. Anderson,
G. Leonard Baker, Jr., Jeffrey W. Bird, Tench Coxe, James C. Gaither, Gregory P. Sands, Andrew T.
Sheehan, David E. Sweet, James N. White and Robert Yin have power of attorney to act on behalf of
Mr. Coxe with respect to these securities.
|
|
|
|
(26)
|
|
James C. Gaither, general partner of the selling stockholder, has voting and investment
control over these securities. Mr. Gaither is a managing director of the general partner of Sutter
Hill Ventures. Mr. Gaither disclaims beneficial ownership in these securities except as to his
pecuniary interest therein. Does not include securities beneficially owned by Mr. Gaither. Each
of David L. Anderson, G. Leonard Baker, Jr., Jeffrey W. Bird, Tench Coxe, James C. Gaither, Gregory
P. Sands, Andrew T. Sheehan, David E. Sweet, James N. White and Robert Yin have power of attorney
to act on behalf of Mr. Gaither with respect to these securities.
|
|
|
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(27)
|
|
James N. White and Patricia O’ Brien, as Trustees, have voting and investment control over
these securities. Mr. White is a managing director of the general partner of Sutter Hill Ventures.
Mr. White disclaims beneficial ownership in these securities except as to his pecuniary interest
therein. Does not include securities beneficially owned by Mr. White except for 4,706 shares held
for his benefit in the SHV Profit Sharing Plan. Each of David L. Anderson, G. Leonard Baker, Jr.,
Jeffrey W. Bird, Tench Coxe, James C. Gaither, Gregory P. Sands, Andrew T. Sheehan, David E. Sweet,
James N. White and Robert Yin have power of attorney to act on behalf of Mr. White with respect to
these securities.
|
|
|
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(28)
|
|
Jeffrey W. Bird and Christina R. Bird, as Trustees, have voting and investment control over
these securities. Mr. Bird is a managing director of the general partner of Sutter Hill Ventures.
Mr. Bird disclaims beneficial ownership in these securities except as to his pecuniary interest
therein. Does not include securities beneficially owned by Mr. Bird except for 919 shares held for
his benefit in the SHV Profit Sharing Plan.
|
|
|
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(29)
|
|
G. Leonard Baker, Jr. and Mary Anne Baker, as Co-Trustees, have voting and investment control
over these securities. Mr. Baker is a managing director of the general partner of Sutter Hill
Ventures. Mr. Baker disclaims beneficial ownership in the securities held by the trust except as
to his pecuniary interest therein. Includes 3,840 shares held by Mr. Baker.
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(30)
|
|
Joseph Klein III, as Trustee, has voting and investment control over these
securities.
|
23
DESCRIPTION OF CAPITAL STOCK
The description below of our capital stock and provisions of our amended and restated
certificate of incorporation and amended and restated bylaws are summaries and are qualified by
reference to the amended and restated certificate of incorporation and the amended and restated
bylaws. These documents are filed as exhibits to the registration statement of which this
prospectus is a part.
Our amended and restated certificate of incorporation authorizes the issuance of up to
50,000,000 shares of common stock, par value $0.001 per share, and 2,000,000 shares of preferred
stock, par value $0.001 per share. The rights and preferences of the preferred stock may be
established from time to time by our board of directors. As of August 31, 2008, we had 15,214,043
shares of common stock outstanding, held by 109 stockholders of record as of such date. As of
August 31, 2008 there were no shares of preferred stock outstanding.
Common Stock
Each holder of common stock is entitled to one vote for each share on all matters submitted to
a vote of the stockholders, except matters that relate only to one or more of the series of
preferred stock and each holder does not have cumulative voting rights. Accordingly, the holders of
a majority of the shares of common stock entitled to vote in any election of directors can elect
all of the directors standing for election, if they so choose.
Subject to preferences that may be applicable to any then outstanding preferred stock, holders
of common stock are entitled to receive ratably those dividends, if any, as may be declared from
time to time by the board of directors out of legally available funds. In the event of our
liquidation, dissolution or winding up, holders of common stock will be entitled to share ratably
in the net assets legally available for distribution to stockholders after the payment of all of
our debts and other liabilities and the satisfaction of any liquidation preference granted to the
holders of any outstanding shares of preferred stock.
Holders of common stock have no preemptive or conversion rights or other subscription rights,
and there are no redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of common stock are, and the shares of common stock offered by us in this
offering, when issued and paid for, will be fully paid and nonassessable. The rights, preferences
and privileges of the holders of common stock are subject to, and may be adversely affected by, the
rights of the holders of shares of any series of preferred stock which we may designate in the
future.
Preferred Stock
Our board of directors is authorized, subject to any limitations prescribed by law, without
stockholder approval, to issue up to an aggregate of 2,000,000 shares of preferred stock in one or
more series and to fix the rights, preferences, privileges and restrictions granted to or imposed
upon the preferred stock, including voting rights, dividend rights, conversion rights, redemption
privileges and liquidation preferences. The rights of the holders of common stock will be subject
to, and may be adversely affected by, the rights of holders of any preferred stock that may be
issued in the future. Issuance of preferred stock, while providing flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of delaying, deferring or
preventing a change in control of us. We have no present plans to issue any shares of preferred
stock, but 200,000 shares of preferred stock have been designated as “Series A Participating
Preferred Stock” to satisfy our obligations with respect to the Rights described below.
Warrants
As of August 31, 2008, we have outstanding warrants to purchase an aggregate of 3,588,221
shares of our common stock with an exercise price of 2.34 per share. The exercise price and/or the
number of shares of common stock issuable upon exercise of the warrants may be adjusted in certain
circumstances, including certain issuances of securities at a price equal to less than the then
current exercise price, subdivisions and stock splits, stock dividends, combinations,
reorganizations, reclassifications, consolidations, mergers or sales of properties and assets and
upon the issuance of certain assets or securities to holders of our common stock, as applicable.
Rights Agreement
In August 2006, our board of directors declared a dividend of one preferred stock purchase
right, a Right, for each share of common stock outstanding as of the close of business on
August 23, 2006. The Rights currently trade with, and are inseparable from, the common stock. The
Rights will become exercisable only if a person or group (i) acquires beneficial ownership of 15%
or more of our outstanding common stock or (ii) commences a tender or exchange offer that would
result in that person or group becoming a beneficial owner of 15% or more of our outstanding common
stock. Each Right allows its holder to purchase from us one one-thousandth of a share of Series A
Participating Preferred Stock at a purchase price of $25.00 per one-thousandth of a preferred
share, subject to adjustment. The Rights expire on August 8, 2016, unless we extend the expiration
date, redeem or exchange the Rights on an earlier date or the Rights expire upon consummation of
certain mergers, consolidations or sales of assets. Effective July 10, 2008, we amended the terms
of the Rights to ensure that they would not become exercisable solely by virtue of our private
placement of securities completed on August 29, 2008.
24
Effect of Certain Provisions of our Amended and Restated Certificate of Incorporation and Bylaws
and the Delaware Anti-Takeover Statute
Amended and Restated Certificate of Incorporation and Bylaws
Some provisions of Delaware law and our amended and restated certificate of incorporation and
bylaws contain provisions that could make the following transactions more difficult:
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|
•
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acquisition of us by means of a tender offer;
|
|
|
|
|
•
|
|
acquisition of us by means of a proxy contest or otherwise; or
|
|
|
|
|
•
|
|
removal of our incumbent officers and directors.
|
These provisions, summarized below, are expected to discourage coercive takeover practices and
inadequate takeover bids and to promote stability in our management. These provisions are also
designed to encourage persons seeking to acquire control of us to first negotiate with our board of
directors.
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•
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|
Undesignated Preferred Stock
. The ability to authorize undesignated preferred
stock makes it possible for our board of directors to issue one or more series of
preferred stock with voting or other rights or preferences that could impede the success
of any attempt to change control of us. These and other provisions may have the effect
of deferring hostile takeovers or delaying changes in control or management of our
company.
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•
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|
Stockholder Meetings
. Our charter documents provide that a special meeting of
stockholders may be called only by the chairman of our board of directors or by our
president, or by a resolution adopted by a majority of our board of directors.
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|
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•
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|
Requirements for Advance Notification of Stockholder Nominations and
Proposals
. Our bylaws establish advance notice procedures with respect to stockholder
proposals and the nomination of candidates for election as directors, other than
nominations made by or at the direction of our board of directors or a committee of the
board of directors.
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•
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|
Elimination of Stockholder Action by Written Consent
. Our amended and restated
certificate of incorporation eliminates the right of stockholders to act by written
consent without a meeting.
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•
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|
Amendment of Bylaws
. Any amendment of our bylaws by our stockholders requires
approval by holders of at least 66
2
/3% of our then outstanding common stock,
voting together as a single class.
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•
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|
Staggered Board of Directors.
Our amended and restated certificate of
incorporation provide for the division of our board of directors into three classes, as
nearly equal in size as possible, with staggered three-year terms. Under our amended and
restated certificate of incorporation and amended and restated bylaws, any vacancy on
the board of directors, including a vacancy resulting from an enlargement of the board
of directors, may only be filled by vote of a majority of the directors then in office.
The classification of the board of directors and the limitations on the removal of
directors and filling of vacancies would have the effect of making it more difficult for
a third party to acquire control of us, or of discouraging a third party from acquiring
control of us.
|
Delaware Anti-Takeover Statute
We are subject to Section 203 of the General Corporation Law of the State of Delaware. This
law prohibits a publicly held Delaware corporation from engaging in any business combination with
any interested stockholder for a period of three years following the date that the stockholder
became an interested stockholder unless:
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•
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|
prior to the date of the transaction, the board of directors of the corporation
approved either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder;
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•
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upon consummation of the transaction which resulted in the stockholder becoming
an interested stockholder, the interested stockholder owned at least 85% of the voting
stock of the corporation outstanding at the time the transaction commenced, excluding
for purposes of determining the number of shares outstanding those shares owned by
persons who are directors and also officers and by employee stock plans in which
employee participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer; or
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•
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|
on or subsequent to the date of the transaction, the business combination is
approved by the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least two-thirds
of the outstanding voting stock which is not owned by the interested stockholder.
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Section 203 defines “business combination” to include:
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•
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any merger or consolidation involving the corporation and the interested
stockholder;
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25
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•
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any sale, transfer, pledge or other disposition of 10% or more of our assets
involving the interested stockholder;
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•
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in general, any transaction that results in the issuance or transfer by us of any
of our stock to the interested stockholder; or
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•
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|
the receipt by the interested stockholder of the benefit of any loans, advances,
guarantees, pledges or other financial benefits provided by or through the corporation.
|
In general, Section 203 defines an “interested stockholder” as an entity or person
beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity
or person affiliated with or controlling or controlled by the entity or person.
Limitation of Liability
Our amended and restated certificate of incorporation provides that no director shall be
personally liable to us or to our stockholders for monetary damages for breach of fiduciary duty as
a director, except that the limitation shall not eliminate or limit liability to the extent that
the elimination or limitation of such liability is not permitted by the General Corporation Law of
the State of Delaware as the same exists or may hereafter be amended.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is BNY Mellon Investor Services, 85
Challenger Road, Ridgefield Park, NJ 07660.
PLAN OF DISTRIBUTION
The selling stockholders may, from time to time, sell any or all of their shares of common
stock on any stock exchange, market or trading facility on which the shares are traded or in
private transactions. These sales may be at fixed or negotiated prices. The selling stockholders
may use any one or more of the following methods when selling shares:
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ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
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block trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to facilitate the
transaction;
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purchases by a broker-dealer as principal and resale by the broker-dealer for its
account;
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an exchange distribution in accordance with the rules of the applicable exchange;
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privately negotiated transactions;
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short sales;
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broker-dealers may agree with the selling stockholders to sell a specified number
of such shares at a stipulated price per share;
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a combination of any such methods of sale; and
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any other method permitted pursuant to applicable law.
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The selling stockholders may also sell shares under Rule 144 under the Securities Act, if
available, rather than under this prospectus.
Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from the selling
stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the
purchaser) in amounts to be negotiated. The selling stockholders do not expect these commissions
and discounts to exceed what is customary in the types of transactions involved. Any profits on the
resale of shares of common stock by a broker-dealer acting as principal might be deemed to be
underwriting discounts or commissions under the Securities Act. Discounts, concessions, commissions
and similar selling expenses, if any, attributable to the sale of shares will be borne by a selling
stockholder. The selling stockholders may agree to indemnify any agent, dealer or broker-dealer
that participates in transactions involving sales of the shares if liabilities are imposed on that
person under the Securities Act.
The selling stockholders may from time to time pledge or grant a security interest in some or
all of the shares of common stock owned by them and, if they default in the performance of their
secured obligations, the pledgees or secured parties may offer and sell the shares of common stock
from time to time under this prospectus after we have filed a supplement to this prospectus under
Rule 424(b)(3) or other applicable provision of the Securities Act supplementing or amending the
list of selling stockholders to include the pledgee, transferee or other successors in interest as
selling stockholders under this prospectus.
The selling stockholders also may transfer the shares of common stock in other circumstances,
in which case the transferees, pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus and may sell the shares of
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common stock from time to time under this prospectus after we have filed a supplement to this
prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act supplementing
or amending the list of selling stockholders to include the pledgee, transferee or other successors
in interest as selling stockholders under this prospectus.
The selling stockholders and any broker-dealers or agents that are involved in selling the
shares of common stock may be deemed to be “underwriters” within the meaning of the Securities Act
in connection with such sales. In such event, any commissions received by such broker-dealers or
agents and any profit on the resale of the shares of common stock purchased by them may be deemed
to be underwriting commissions or discounts under the Securities Act.
We are required to pay all fees and expenses incident to the registration of the shares of
common stock. We have agreed to indemnify the selling stockholders against certain losses, claims,
damages and liabilities, including liabilities under the Securities Act.
The selling stockholders have advised us that they have not entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers regarding the sale of their
shares of common stock, nor is there an underwriter or coordinating broker acting in connection
with a proposed sale of shares of common stock by any selling stockholder. If we are notified by
any selling stockholder that any material arrangement has been entered into with a broker-dealer
for the sale of shares of common stock, if required, we will file a supplement to this prospectus.
If the selling stockholders use this prospectus for any sale of the shares of common stock, they
will be subject to the prospectus delivery requirements of the Securities Act.
The anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of our
common stock and activities of the selling stockholders.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material United States federal income and estate tax
considerations relating to the purchase, ownership and disposition of shares of our common
stock, but does not purport to be a complete analysis of all the potential tax
considerations relating thereto. This summary is based upon the Internal Revenue Code and
United States Treasury Regulations, administrative rulings and court decisions thereunder
now in effect, all of which are subject to change, possibly on a retroactive basis.
This summary addresses only holders that will hold shares of our common stock as
“capital assets” (generally, property held for investment) and does not address tax
considerations applicable to investors that may be subject to special tax rules, including
financial institutions, tax-exempt organizations, insurance companies, tax-qualified
retirement plans, dealers in securities or currencies, traders in securities that elect to
use a mark-to-market method of accounting for their securities holdings, persons that will
hold the shares of our common stock as a position in a hedging transaction, “straddle” or
“conversion transaction” for tax purposes, regulated investment companies, real estate
investment trusts, United States holders that have a functional currency other than the
U.S. dollar, certain United States expatriates, controlled foreign corporations, passive
foreign investment companies, corporations that accumulate earnings to avoid United States
federal income tax or partnerships or other pass-through entities or holders of an interest
in such entities. Moreover, this summary does not discuss alternative minimum tax
consequences, if any, or any state, local or foreign tax consequences to holders of the
shares of our common stock. We have not sought any ruling from the Internal Revenue Service
(the “IRS”) with respect to the statements made and the conclusions reached in the
following summary, and there can be no assurance that the IRS will agree with such
statements and conclusions.
Investors considering the purchase of shares of our common stock should consult their
own tax advisors with respect to the application of the United States federal income and
estate tax laws to their particular situations as well as any tax consequences arising
under the laws of any state, local or foreign taxing jurisdiction or under any applicable
tax treaty.
As used in this discussion, a “United States holder” is a beneficial owner of shares
of our common stock that for United States federal income tax purposes is:
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an individual who is a citizen or resident of the United States;
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a corporation or other entity taxable as a corporation for United States federal
income tax purposes, that was created or organized in or under the laws of the United
States, any state thereof or the District of Columbia;
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an estate whose income is subject to United States federal income taxation
regardless of its source; and
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a trust (i) if it is subject to the supervision of a court within the United
States and one or more United States persons have the authority to control all
substantial decisions of the trust, or (ii) if it has a valid election in effect under
applicable United States Treasury Regulations to be treated as a United States person.
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As used in this summary, the term “non-United States holder” means a beneficial owner
of common stock who is not a United States holder.
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If a partnership (or an entity taxable as a partnership for United States federal
income tax purposes) holds the shares of our common stock, the United States federal income
tax treatment of a partner will generally depend upon the status of the partner and the
activities of the partnership. Partners of a partnership (including an entity treated as a
partnership for United States federal income tax purposes) holding shares of our common
stock should consult their own tax advisor.
United States Holders
Dividends
We do not expect to declare or pay any dividends on our common stock in the
foreseeable future. However, if we do pay dividends on our common stock, such distributions
will constitute dividends for United States federal income tax purposes to the extent paid
from our current or accumulated earnings and profits, as determined under United States
federal income tax principles. To the extent that distributions to you constitute dividends
for United States federal income tax purposes, they will be included in your gross income
as ordinary income. For individuals, amounts treated as dividends may be eligible for the
reduced tax rate (generally 15%) applicable to “qualified dividend income” of non-corporate
United States holders for tax years beginning before January 1, 2011, provided certain
holding period requirements are met. For corporations, amount treated as dividends
generally will be eligible for the dividends received deduction allowed to United States
corporations.
Distributions in excess of earnings and profits will constitute a return of capital
that is applied against and reduces (but not below zero) your adjusted tax basis in the
common stock. Any remaining excess will be treated as gain realized on the sale or other
disposition of the common stock and will be treated as described under “United States
holders — Disposition of common stock” below.
Disposition of Common Stock
Upon the sale, exchange or other disposition of common stock, you will recognize gain
or loss in an amount equal to the difference between your adjusted tax basis in such common
stock and the amount realized on the sale, exchange or other disposition. Such gain or loss
will be capital gain or loss, and generally will be long-term capital gain or loss if your
holding period for the shares of common stock exceeds one year. The deductibility of
capital losses is subject to limitations.
Information Reporting and Backup Withholding
Dividends paid to you and proceeds from the sale or disposition of shares of our
common stock may be subject to backup withholding unless you (a) are a corporation;
(b) provide a valid taxpayer identification number; or (c) establish qualification for
another exemption.
Backup withholding is not an additional tax. Rather, amounts withheld under the backup
withholding rules may be credited against your United States federal income tax liability.
Furthermore, you may obtain a refund of any excess amounts withheld by filing an
appropriate claim for refund with the IRS and furnishing any required information in a
timely manner.
Non-United States Holders
Dividends
We do not expect to declare or pay any dividends on shares of our common stock in the
foreseeable future. However, if we do pay dividends on shares of our common stock, such
distributions will constitute dividends for United States federal income tax purposes to
the extent paid from our current or accumulated earnings and profits, as determined under
United States federal income tax principles. Distributions in excess of earnings and
profits will constitute a return of capital that is applied against and reduces (but not
below zero) your adjusted tax basis in shares of our common stock. Any remaining excess
will be treated as gain realized on the sale or other disposition of shares of our common
stock and will be treated as described under “Non-United States holders — Disposition of
common stock” below. Any dividend paid to you ordinarily will be subject to withholding of
United States federal income tax at a rate of 30%, or such lower rate as may be specified
under an applicable income tax treaty. In order to receive a reduced treaty rate, you must
provide an IRS Form W-8BEN or other appropriate version of Form W-8 certifying eligibility
for the reduced rate.
Generally, dividends paid to you that are effectively connected with a trade or
business you conduct in the United States (and, if an income tax treaty applies, are
attributable to a permanent establishment you maintain in the United States) will be exempt
from the withholding tax described above and instead will be subject to United States
federal income tax on a net income basis at the regular graduated United States federal
income tax rates in much the same manner as if you were a United States holder. In such
cases, we will not have to withhold United States federal income tax if you comply with
applicable certification and disclosure requirements. In order to obtain this exemption
from withholding tax, you must provide an IRS Form W-8ECI properly certifying eligibility
for such exemption. If you are a corporate holder, dividends
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you receive that are effectively connected with your conduct of a trade or business in
the United States may also be subject to an additional branch profits tax at a rate of 30%
or such lower rate specified by an applicable income tax treaty.
Disposition of Common Stock
Generally, you will not be subject to United States federal income tax on any gain
realized on your disposition of shares of our common stock, unless (i) the gain is
effectively connected with your conduct of a trade or business in the United States (and,
in the case of an applicable tax treaty, is attributable to a permanent establishment you
maintain in the United States), (ii) if you are an individual, you are present in the
United States for 183 or more days in the taxable year of the sale or other disposition and
certain other conditions are met, or (iii) you are subject to tax pursuant to the
provisions of the Internal Revenue Code regarding the taxation of United States
expatriates. In addition, you may be subject to United States federal income and
withholding tax upon a disposition of our common stock if our stock were considered to be a
United States real property interest. We do not expect our stock to constitute a United
States real property interest.
Federal Estate Taxes
Shares of our common stock owned or treated as being owned by you at the time of your
death will be included in your gross estate for United States federal estate tax purposes,
and may be subject to United States federal estate tax, unless an applicable estate tax
treaty provides otherwise.
Information Reporting and Backup Withholding
Generally, the amount of dividends paid, the name and address of the recipient, and
the amount, if any, of tax withheld must be reported annually to the IRS. A similar report
is sent to you. Copies of the information returns reporting those dividends and amounts
withheld may also be made available to the tax authorities in the country in which you
reside pursuant to the provisions of an applicable tax treaty or exchange of information
treaty.
In general, backup withholding at the applicable rate (currently 28%) will not apply
to dividends on shares of our common stock paid to you if you have provided the required
certification and neither we nor our paying agent has actual knowledge or reason to know
that you are a United States person.
Information reporting and backup withholding generally will not apply to a payment of
the proceeds of a sale of shares of our common stock that takes effect outside the United
States by a foreign office of a foreign broker. However, information reporting requirements
will apply to a payment of the proceeds of a sale of shares of our common stock effected
outside the United States by a foreign office of a broker that (i) is a United States
person, (ii) derives 50% or more of its gross income for certain periods from the conduct
of a trade or business in the United States, (iii) is a “controlled foreign corporation” as
to the United States, or (iv) is a foreign partnership that, at any time during its taxable
year, is more than 50% (by income or capital interests) owned by United States persons or
is engaged in the conduct of a trade or business in the United States, unless in any such
case the broker has documentary evidence in its records that you are a non-United States
holder and certain other conditions are met, or you otherwise establish an exemption.
Payment of the proceeds of a sale of shares of our common stock by a United States office
of a broker will be subject to both information reporting and backup withholding unless you
certify your non-United States holder status under penalties of perjury and the broker does
not have actual knowledge or reason to know that you are a United States person, or you
otherwise establish an exemption.
Backup withholding is not an additional tax. Rather, amounts withheld under the backup
withholding rules may be credited against your United States federal income tax liability.
Furthermore, you may obtain a refund of any excess amounts withheld by filing an
appropriate claim for refund with the IRS and furnishing any required information in a
timely manner.
You should consult your own tax advisor with respect to the application of the above
rules to your ownership and disposition of shares of our common stock.
LEGAL MATTERS
The validity of the securities offered hereby has been passed upon for us by
Morrison & Foerster LLP, Palo Alto, California.
EXPERTS
The financial statements incorporated in this prospectus by reference to the Annual
Report on Form 10-K for the year ended December 31, 2007 have been so incorporated in
reliance on the report of PricewaterhouseCoopers LLP, an independent registered public
accounting firm, given on the authority of said firm as experts in auditing and accounting.
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INCORPORATION OF INFORMATION BY REFERENCE
The following documents filed with the Securities and Exchange Commission are hereby
incorporated by reference, except as superseded, supplemented or modified by this
prospectus and any future filings we will make with the Securities and Exchange Commission
under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, other than information that
was furnished and deemed by the rules of the Securities and Exchange Commission not to have
been filed:
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Our Annual Report on Form 10-K for the fiscal year ended December 31, 2007,
filed with the Securities and Exchange Commission on March 12, 2008;
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Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, filed
with the Securities and Exchange Commission on May 8, 2008;
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Our Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, filed
with the Securities and Exchange Commission on August 7, 2008;
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Our Current Report on Form 8-K filed with the Securities and Exchange
Commission on February 29, 2008;
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Our Current Report on Form 8-K filed with the Securities and Exchange
Commission on April 18, 2008;
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Our Current Report on Form 8-K filed with the Securities and Exchange
Commission on June 17, 2008;
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Our Current Report on Form 8-K filed with the Securities and Exchange
Commission on July 14, 2008;
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Our Current Report on Form 8-K filed with the Securities and Exchange
Commission on August 20, 2008;
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Our Current Report on Form 8-K filed with the Securities and Exchange
Commission on September 2, 2008; and
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Our Current Report on Form 8-K filed with the Securities and Exchange
Commission on September 11, 2008.
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All other reports and other documents subsequently filed by us pursuant to Sections
13(a), 13(c), 14, and 15(d) of the Exchange Act after the date of this prospectus and prior
to the termination of this offering shall be deemed to be incorporated by reference in this
prospectus and to be part hereof from the date of filing of such reports and other
documents.
We hereby undertake to provide without charge to each person, including any beneficial
owner, to whom a copy of this prospectus is delivered, upon written or oral request of any
such person, a copy of any and all of the information that has been or may be incorporated
by reference in this prospectus, other than exhibits to such documents. Requests for such
copies should be directed to our Investor Relations Department at 1300 Seaport Boulevard,
Suite 500, Redwood City, California 94063, Telephone (650) 474-8200.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We are a public company and file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission. You may read
and copy any document we file at the Securities and Exchange Commission’s public reference
room at 100 F Street, N.E., Washington, D.C. 20549. You can request copies of these
documents by writing to the Securities and Exchange Commission and paying a fee for the
copying cost. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for more
information about the operation of the public reference room. Our Securities and Exchange
Commission filings are also available, at no charge, to the public at the Securities and
Exchange Commission’s web site at
http://www.sec.gov
and
from our website at
http://www.thresholdpharm.com
. We have not
incorporated by reference into this prospectus the information on our
website, and you should not consider it to be part of this prospectus.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14.
Other Expenses of Issuance and Distribution
The estimated expenses payable by the Registrant in connection with the issuance and
distribution of the securities being registered are as follows:
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SEC Registration Fee
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$
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844
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Printing Expenses
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$
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1,300
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Legal Fees and Expenses
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$
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20,000
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Accounting Fees and Expenses
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$
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30,000
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Total
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$
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52,144
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Item 15.
Indemnification of Directors and Officers
Our certificate of incorporation provides that to the fullest extent permitted by the
Delaware General Corporation Law, directors of the registrant shall not be liable to it or its
stockholders for monetary damages for breach of fiduciary duty as a director. The Company is also
subject to Section 145 of the Delaware General Corporation Law, set forth below.
“Section 145. Indemnification of officers, directors, employees and agents; insurance.
“(a) A corporation shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action by or in the right
of the corporation) by reason of the fact that the person is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by the person in connection with such action, suit
or proceeding if the person acted in good faith and in a manner the person reasonably believed to
be in or not opposed to the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe the person’s conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the
person did not act in good faith and in a manner which the person reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that the person’s conduct was unlawful.
“(b) A corporation shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by reason of the fact that the person
is or was a director, officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses (including attorneys’
fees) actually and reasonably incurred by the person in connection with the defense or settlement
of such action or suit if the person acted in good faith and in a manner the person reasonably
believed to be in or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
“(c) To the extent that a present or former director or officer of a corporation has been
successful on the merits or otherwise in defense of any action, suit or proceeding referred to in
subsections (a) and (b) of this section, or in defense of any claim, issue or matter therein,
such person shall be indemnified against expenses (including attorneys’ fees) actually and
reasonably incurred by such person in connection therewith.
“(d) Any indemnification under subsections (a) and (b) of this section (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case upon a
determination that indemnification of the present or former director, officer, employee or agent
is proper in the circumstances because the person has met the applicable standard of conduct set
forth in subsections (a) and (b) of this section. Such determination shall be made, with respect
to a person who is a director or officer at the time of such determination, (1) by a majority
vote of the directors who are not parties to such action, suit or proceeding, even though less
than a quorum, or (2) by a committee of such directors designated by majority vote of such
directors, even though less
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than a quorum, or (3) if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion, or (4) by the stockholders.
“(e) Expenses (including attorneys’ fees) incurred by an officer or director in defending
any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit or proceeding upon receipt of
an undertaking by or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified by the corporation as
authorized in this section. Such expenses (including attorneys’ fees) incurred by former directors
and officers or other employees and agents may be so paid upon such terms and conditions, if any,
as the corporation deems appropriate.
“(f) The indemnification and advancement of expenses provided by, or granted pursuant to,
the other subsections of this section shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such
person’s official capacity and as to action in another capacity while holding such office.
“(g) A corporation shall have power to purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any liability asserted
against such person and incurred by such person in any such capacity, or arising out of such
person’s status as such, whether or not the corporation would have the power to indemnify such
person against such liability under this section.
“(h) For purposes of this section, references to (the corporation) shall include, in
addition to the resulting corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers, and employees or agents,
so that any person who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this section with respect to the resulting or
surviving corporation as such person would have with respect to such constituent corporation if
its separate existence had continued.
“(i) For purposes of this section, references to (other enterprises) shall include employee
benefit plans; references to “fines” shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to “serving at the request of the
corporation” shall include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants or beneficiaries; and a person
who acted in good faith and in a manner such person reasonably believed to be in the interest of
the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner “not opposed to the best interests of the corporation” as referred to in this section.
“(j) The indemnification and advancement of expenses provided by, or granted pursuant to,
this section shall, unless otherwise provided when authorized or ratified, continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
“(k) The Court of Chancery is hereby vested with exclusive jurisdiction to hear and
determine all actions for advancement of expenses or indemnification brought under this section or
under any bylaw, agreement, vote of stockholders or disinterested directors, or otherwise. The
Court of Chancery may summarily determine a corporation’s obligation to advance expenses
(including attorneys’ fees).”
Item 16.
Exhibits and Financial Statement Schedules.
(a)
Exhibits.
The following exhibits are included herein or incorporated herein by
reference:
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EXHIBIT
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NUMBER
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DESCRIPTION
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4.1(1)
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Specimen Certificate evidencing shares of common stock
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4.2(1)
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Amended and Restated Investor Rights Agreement dated as of November 17, 2003
among the Registrant and the parties listed therein
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4.3(1)
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Form of Amendment No. 1 to Amended and Restated Investor Rights Agreement among
the Registrant and certain parties to the Amended and Restated Investor Rights
Agreement
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4.4(2)
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Preferred Shares Rights Agreement, dated as of August 8, 2006, by and between
Registrant and Mellon Investor Services LLC
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4.5(2)
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Form of Rights Certificate
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5.1
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Opinion of Morrison & Foerster LLP
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23.1
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Consent of Morrison & Foerster LLP (included in Exhibit 5.1)
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23.2
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Consent of Independent Registered
Public Accounting Firm
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24.1
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Power of Attorney (included in the signature page to this registration statement)
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II-2
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(1)
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Filed as the same numbered exhibit to our Registration Statement on Form S-1, as amended
(File No. 333-114376), filed on April 9, 2004, and incorporated herein by reference.
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(2)
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Filed as the same numbered exhibit to our Current Report on Form 8-K filed on August 9,
2006, and incorporated herein by reference.
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Item 17.
Undertakings
The undersigned Company hereby undertakes to:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities
Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a fundamental
change in the information set forth in the registration statement. Notwithstanding
the foregoing, any increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was registered) and
any deviation from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than a 20 percent
change in the maximum aggregate offering price set forth in the “Calculation of
Registration Fee” table in the effective registration statement, and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any material
change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act, each
such post-effective amendment shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been advised that in the opinion of
the SEC such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred or paid by
a director, officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the Registrant has
duly caused this registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized.
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THRESHOLD PHARMACEUTICALS, INC.
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September 12, 2008
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By:
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/s/ Harold E. Selick, Ph.D.
Harold E. Selick, Ph.D.
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Chief Executive Officer
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POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Harold E. Selick, Ph.D. as his true and lawful attorney-in-fact,
with full power of substitution and resubstitution for him and in his name, place and
stead, in any and all capacities to sign any and all amendments to this registration
statement, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorney-in-fact or his substitute may lawfully do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Exchange Act, this registration statement has been signed
below by the following persons in the capacities and on the dates indicated.
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Signature
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Title
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Date
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/s/ Harold E. Selick, Ph.D.
Harold E. Selick, Ph.D.
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Chief Executive Officer
(principal executive officer)
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September 12, 2008
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/s/ Joel A. Fernandes
Joel A. Fernandes
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Senior Director, Finance and Controller
(principal financial and accounting officer)
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September 12, 2008
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/s/ Bruce C. Cozadd
Bruce C. Cozadd
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Director
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September 12, 2008
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/s/ William A. Halter
William A. Halter
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Director
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September 12, 2008
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/s/ David R. Hoffmann
David R. Hoffmann
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Director
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September 12, 2008
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/s/ Wilfred E. Jaeger, M.D.
Wilfred E. Jaeger, M.D.
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Director
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September 12, 2008
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/s/ George G. C. Parker, Ph.D.
George G. C. Parker, Ph.D.
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Director
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September 12, 2008
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/s/ Michael F. Powell, Ph.D.
Michael F. Powell, Ph.D.
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Director
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September 12, 2008
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II-4
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